Sibanye, Implats and BASF create catalyst to ease palladium deficit
The partial substitution of palladium with platinum in petrol engine antipollution devices is finally a reality, potentially addressing a global deficit
German chemical group BASF, backed by two major SA platinum group metals (PGM) miners, has launched a new petrol engine antipollution device that uses less palladium.
The biggest talking point in the global PGM industry is the shortage of palladium and rhodium, the two metals used in petrol engine exhaust catalysts, their high prices and when platinum will be used to substitute a portion of palladium.
The new catalyst will replace between 20% and 50% of the palladium in these devices, which use between 4g and 15g of palladium and rhodium depending on the size of the engine. Palladium is by far the biggest source of metal.
“We assume 300,000oz-500,000oz of palladium per annum is replaced by platinum, mainly in the lower temperature part of the catalyst,” BMO Capital Markets analyst Colin Hamilton said in a note.
“This is enough to solve for the medium-term palladium deficit following Nornickel’s forthcoming South Cluster expansion, and highlights again that economics generally work over time in commodity markets,” Hamilton said, referring to the new mining project at Russia’s Norilsk Nickel, the largest palladium producer.
“We see this substitution as healthy for the PGM industry as a whole, as auto needs will be better aligned to mine output ratios.”
In the results presentations of all SA’s large PGM miners in recent weeks, every CEO was asked about progress in the vehicle industry regarding adopting platinum, which is mainly used to make catalysts in diesel engines.
The one common thread from their responses was that carmakers and companies making catalysts had to consider the use of platinum to partially substitute palladium as the best solution to prolonged deficits of palladium and rhodium and their high prices.
The platinum market is in a surplus and prices are resolutely stuck below $900/oz, with blips above that level during the past year. Palladium has increased 57% over the past 12 months to about $2,350/oz, while rhodium has risen to record highs above $11,000/oz from $3,000/oz a year ago.
Sibanye-Stillwater CEO Neal Froneman told analysts that the company was working closely with BASF and that a solution to a degree of substitution in petrol engine catalysts was much closer than the 18-24 months most other CEOs were talking about.
Sibanye and Impala Platinum, the biggest and the third-largest PGM producers, have sponsored BASF’s research into the development of a catalyst that uses platinum, palladium and rhodium, coming up with a product called a tri-metal catalyst.
“Innovative technology enables partial substitution of palladium with platinum, enabling a reduction in catalytic converter costs and partially alleviating sustained palladium deficits,” the three companies said in a joint statement on Tuesday.
“Widespread adoption of this technology will facilitate rebalancing of global PGMs demand and alignment with current global supply ratios, furthering sustainability of the PGM markets,” they said.
Petrol engine catalysts use about 9.7-million ounces of palladium and 1-million ounces of rhodium a year. Diesel engines use 3-million ounces of platinum, with jewellery, industrial applications and investment making up another 5.5-million ounces of demand.
BASF, according to its website, is the second-largest supplier of mobile emissions catalysts.
One of the biggest reasons given for the lack of substitution to date, despite years of supply deficits for palladium, is that car makers are heavily focused on not falling foul of emissions regulations and ensuring their antipollution devices stand up to real-world driving standards instead of laboratory levels.
This is after German car maker Volkswagen was caught lying about its emissions tests and the efficacy of its devices in diesel engines, prompting a slowing demand for diesel vehicles, compounding problems for the platinum market.
To put a catalyst with a new recipe of metals needs extensive testing, driving conditions and certainty that it will not fall foul of tough emissions regulations, SA’s PGM CEOs said.
Asked about the timeline for the rollout of the new catalysts, the parties said: “This will be a phased approach as automakers must test and certify the technology meets government emission regulations on each vehicle.
“Initial implementation is mainly targeted for model year 2023. Some vehicle platforms may apply this technology for model year 2022,” they said.
Technical hurdles overcome
However, BASF, Sibanye and Implats feel they have ticked this box.
“To date, this new technology has successfully met technical customer specifications during extensive development and testing undertaken by BASF,” they said.
Another technical hurdle was the high-temperature environment for these catalysts, which are placed near the engine block and operate at about 1,000ºC. Palladium and rhodium can function at these temperatures and it’s one of the closely watched aspects of including platinum.
“This new catalyst technology contains platinum to sustain high temperatures and meet emission regulations,” the partners said.
The new catalyst will help ease concerns in the market.
“The tri-metal catalyst is intended to create greater supply certainty for our customers and potentially reduce their costs,” said Matthias Dohrn, senior vice-president of precious and base metal services at BASF.
Froneman said Sibanye was “delighted with the availability of this technology”.
“As a company, we are committed to investing in market development opportunities that will meaningfully ensure the sustainability of the PGM industry for the benefit of all our stakeholders, including the end users of our metals,” he said.
Froneman did warn in February, however, that the risks to platinum supply from SA stemming from erratic and expensive electricity supply by Eskom, fractious labour and regulatory uncertainty were making car manufacturers wary of using the metal.
For SA producers, the largest source of platinum, with 4.4-million ounces of mined production against 6-million ounces from other countries. It is a narrow second behind Russia in palladium supply, generating 2.65-million ounces out of 6.9-million ounces.
In rhodium, SA is the undisputed leading source, accounting for 621,000oz of 746,000oz of mined supply.
“We believe the outlook for our primary products remains robust, especially when demand projections are more closely aligned to the ratio in which our metals are produced,” Implats CEO Nico Muller said.
He said this new catalyst was a solution that would “normalise longer-term demand with supply” to the benefit of all players in the industry.