By Alden Bentley
NEW YORK, May 19 (Reuters) - Global use of platinum in catalytic converters soared in 2002 due to toughening pollution rules and price volatility in sister-metal palladium, but car makers preferred existing inventories to new purchases, platinum group metals (PGM) specilist Johnson Matthey Plc said Monday.
In its Platinum 2003 review, Johnson Matthey, a metals refiner and chemical company, said the amount of platinum used in 2002 in automobile antipollution systems jumped 17 percent over 2001.
But the amount the auto sector bought in global markets only went up 3.6 percent to 2.61 million ounces. It fell just behind jewelry as the single largest source of platinum demand, which totaled 6.54 million ounces in 2002.
"The discrepancy was due to the use of significant volumes of stockpiled platinum by U.S. auto manufacturers as they focused on minimizing costs," the report said.
Johnson Matthey estimated that palladium demand slumped 29 percent last year to 4.78 million ounces, its lowest level for nine years. Purchases by the automobile industry dropped 39 percent, due to "thrifting," the reduction of palladium loadings without the loss of effectiveness, and the draw on stockpiles.
Catalytic converters remove noxious hydrocarbons, carbon monoxide and oxides of nitrogen from vehicle exhausts. Johnson Matthey said the average car uses 5-6 grams of PGM, in combinations varied by the search for an economic mix.
Car makers in North America, Europe and Japan have to keep pace with the phase-in of stringent low and ultra-low emission vehicle guidelines. Some accumlated huge PGM hoards during the platinum and palladium price rallies of 2000-2001.
European auto companies tend not to stockpile the metals. Europe posted its third year of double-digit growth in auto demand for platinum. Sales increased by 17 percent to 1.24 million ounces, mainly due to the popularity of diesel cars.
Diesel fuel is cheaper than gasoline in many countries and diesel cars tend to be more fuel efficient. In the United States, where fuel is less costly, gas-guzzling sport utility vehicles have been extremely popular.
Diesel engines can only use platinum in their emission control units, though research is being done to make palladium work. In Europe, nearly 40 percent of car sales are diesel.
"If you look at Europe, you are talking about a huge number of diesel vehicles which are expected to grow," Ellen Zadoff, Johnson Matthey's U.S. research director, said at a presentation.
"Diesel is only 40 percent of the market. We believe it could go to 50 percent in the next 3-4 years and we've heard estimates it could go to 60-70 percent," she said. "In some markets it's already there."
In North America, autocatalyst use of platinum rose 14 percent, but purchases fell 28 percent to 570,000 ounces.
The amount of palladium used by North American car companies fell 21 percent in 2002 as they reverted to platinum, which can be interchangable with rhodium and palladium in gasoline motors, though palladium is most efficient.
"Despite this, consumption of palladium remained in excess of 2 million ounces," Johnson Matthey said. "Purchases of the metal, however, crashed to just 635,000 ounces."
At $160 an ounce, palladium is priced at its lowest since April 1997, before it soared to around $1,095 in early 2001. Johnson Matthey sees it trading from $120 to $180 in the next six months. Platinum, now at $653 an ounce, is seen between $590 and $690.