Automotive and jewelry sector drive demand for platinum in China

According to market observers, China’s demand for platinum has recently seen positive signs of momentum. The introduction of stricter government emission standards for vehicles and jewelers has succeeded in attracting Chinese customers to these markets.

According to the WPIC, in the first quarter of the year, blockades imposed in China reduced platinum jewelry sales and demand across the country. Due to a decline in major segments, the WPIC forecast a surplus of 247,000 ounces for the global platinum market in 2020. The demand will likely drop to 6.95 million ounces by 18% from the previous year. Globally, the two most significant contributors to the demand for the metal are the automotive and jewelry sectors.

According to analysts, stricter environmental regulations will potentially increase the Chinese vehicle sector’s use of platinum autocatalysts. They will then use them to reduce carbon emissions.

Xu Ruoxu, a commodities analyst at Shenwan Hongyuan Securities in Shanghai, hopes that the gradual introduction of China’s new vehicle emission standards will boost platinum consumption in the auto sector. The country committed to producing more vehicles with fuel cells powered by hydrogen.

The WPIC report also noted that they estimate the demand for platinum will grow 14% in China this year. Meanwhile, the global demand for cars should drop by 14%.

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The metal has growth potential if it would substitute palladium

China’s Ministry of Ecology and Environment has implemented Stage 6 emission standards for light and heavy vehicles. The first phase of the new rules will be in implementation starting July 1. Automakers in some regions will be given a six-month transition period to upgrade their technologies or sell remaining inventories of vehicles equipped with the old models.

Xu Rouxu explained that government policies continue to show a determination to reduce carbon emissions this year. Measures, such as new emission standards and incentive subsidies for buyers who buy fuel cell vehicles, will increase demand from the automotive market for platinum catalysts.

Metals like platinum and palladium are used in catalytic converters to reduce emissions of a typical vehicle. Fuel cell vehicles use more than twice as much platinum as internal combustion engine vehicles. In recent years, automakers have considered substituting palladium for platinum in autocatalysts to cut costs, as palladium prices have increased significantly.

Samson Li, a precious metals analyst at Refinitiv GFMS, stated that platinum has the potential for growth in the Chinese auto sector if automakers start to substitute the metal for palladium in autocatalysts widely. However, industrial development will still depend on the use of palladium over platinum. Palladium prices are facing downward pressure after years of gains. Besides, supply and demand for the metal are entering equilibrium this year.

On the other hand, analysts expect an annual decline in China’s jewelry sector by 2020. 

Compared to the automotive segment, demand for platinum in the jewelry sector was created primarily through marketing.

According to the WPIC report, due to the coronavirus outbreak, platinum jewelry manufacturing in China fell by 45%.