The demand outlook for palladium in the gasoline engine-based automotive industry remains strong amid electric vehicle production and the possibility of palladium-to-platinum substitution in vehicle autocatalysts, Grid Metals CEO Robin Dunbar said Friday.
“The current deficit in the palladium market is about 1 million oz,” Dunbar said during a webcast presentation to investors, adding that palladium demand has outpaced physical supply. Palladium is superior to platinum for use in gasoline engine autocatalysts, which prevents the metal from being immediately replaceable, he added.
Palladium is a primary metal used in gasoline engine auto catalysts to lower emissions, but platinum has been used in diesel engines for the same purpose. Stricter emissions standards in China and the EU in recent years have raised demand for more efficient gasoline engines and palladium-based autocatalysts.
“Platinum is sitting around $950/oz whereas palladium is around $2,400/oz, so the big thing that people are potentially worried about is substitution, but palladium has better qualities,” he said. “It works at higher temperatures, which is important, and the risk of substitution is fairly low. There could be some risk to palladium from substitution by platinum, but that takes time, and the market really hasn’t seen that yet.”
Dunbar said palladium demand in the general automotive industry was also insulated from trends in the EV market.
“Of course, the switch to EVs is definitely happening, and that is going to occur over the next few years, but I don’t think the internal combustion engine is going to disappear anytime soon,” Dunbar said. “One aspect that many people often don’t realize is that the full and mid-hybrids use an excess amount of palladium because the emission standards have to kick in when the engine is cold and palladium is good at that as well.”
Grid Metals is a Toronto-based exploration-phase junior mining company developing copper, nickel and palladium projects in Canada.
Nickel is “key” for EV batteries
Demand for nickel may get the biggest boost as EV production continues to grow globally, according to Mark Frohnmayer, CEO of EV producer Arcimoto.
“One of the things that is worth mentioning is that nickel is really the key on the battery side for electric vehicles,” said Frohnmayer, who spoke at Grid’s investor meeting. The push to replace cobalt with nickel in EV battery electrodes positions nickel as “the ultimate hedge” in the battery market, he said.
If adoption rates of EVs come anywhere near the consensus forecast, they are going to need a lot more nickel, according to Dunbar.
“And it’s going to be a real stretch to find the amount of nickel globally that will be required,” he said. “That will mean that the prices are going to be higher.”
Nickel and rechargeable battery demand will continue to increase as EV technology becomes more economically competitive with gas engine vehicles, Frohnmayer said.
“We are now at a point in the battery production world where within a couple of years, electric vehicles are going to be at a cost parity with gas-powered vehicles, and that is going to be a major inflection point in the demand globally for batteries,” he said. “Once that cost parity point is hit, the demand for the resources that go into the battery is going to outstrip the supply that the marketplace currently has, and the rate of production that the marketplace currently has.”
