The rise of Tesla Motors’ electric cars won’t be enough to change the market for conventional vehicles or dent demand for the precious metals used to filter exhaust fumes, says GMK Norilsk Nickel PJSC.
The lack of infrastructure to charge them and the pressure on power grids means that in the long term, the vehicles may comprise just 15 per cent of the total car market, says Anton Berlin, head of analysis and market development for Norilsk. In the next five years, the market’s size will be limited to about 2 per cent.
Norilsk is the world’s biggest producer of palladium, which are used along with platinum in catalytic converters that reduce car pollution. The company would lose some business if electric cars, which don’t produce toxic emissions, become a big part of the car industry, but it would benefit from more demand for nickel, which is used in the batteries.
“We do not expect the scale of electric car production to be large enough to replace the cars with internal combustion engines in the foreseeable future and to affect the platinum group of metals market,” Berlin said in an interview from Moscow.
RUSH TO INTRODUCE ELECTRIC CARS
Volkswagen and General Motors are rushing to introduce electric cars and Tesla this month unveiled its most ambitious plan to produce 500,000 of the vehicles every year starting in 2018. That’s 10 times the number of vehicles it produced last year. Some analysts see the rise of electric cars as a long-term risk to the platinum and palladium industry.
The car industry will remain the main driver for the platinum and palladium demand, which will keep rising by 2 per cent to 5 per cent per year, Berlin said. Even if total manufacturing of electric vehicles reached 1 million units a year, it would still be just 1 per cent of the market, he said.
New standards of emission testing and other vehicles like hybrid, which combine gas and electric engines, would increase demand for platinum and palladium, Berlin said.
Norilsk expects a palladium market deficit of 500,000 ounces this year and shortage of up to 200,000 ounces in platinum, Berlin said. Future market balances depend on stockpiles, which are not transparent, and investment demand, he said.
Palladium’s deficit may widen to 700,000 ounces next year, while platinum’s may narrow to 130,000 ounces, Norilsk said in a presentation on Monday. The company registered a palladium fund and planned to buy “several tons” of the metal this year, Sergey Dubovitskiy, the vice president for strategical planning, told reporters.
Platinum prices are up 18 per cent this year and palladium has advanced 5.4 per cent.
Mining of the metals in South Africa, a major producer, will likely fall, Berlin said. The local mines have been under-invested since 2008 and low prices kept about half of the output in Africa unprofitable in the first quarter, according to a presentation from Norilsk. He said there was also a risk of strikes as talks over labour contracts begin.