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By Alden Bentley
NEW YORK, Nov 18 (Reuters) - Platinum purchases by U.S. car companies will rise 54 percent in 2003, reflecting decisions made before prices for the metal rose to 23-year highs this year and palladium crashed from all-time peaks in 2001, refining and chemical company Johnson Matthey said Tuesday.
"Given the price differential between platinum and palladium, it is likely that some auto makers are going to switch into palladium-rich catalysts in gasoline engines," Ellen Zadoff, Johnson Matthey's market research manager said in a presentation of its Platinum 2003, Interim Review.
"However, we expect to see that switch occur slowly over time as new models are introduced," she continued.
U.S. car makers bought a total of 880,000 ounces of platinum for use in catalytic converters, an increase of 310,000 ounces over 2002, the research report said.
"Platinum demand in the U.S.A. has continued to benefit this year from decisions taken in 2000 and 2001 to switch certain emissions systems from palladium-rich to platinum-rich catalyst formulations," the company said in its report.
The manufacture of pollution-control devices for vehicles powered by internal combustion engines is the major source of platinum and palladium demand.
Both metals are used in gasoline engines and combinations can be adjusted. Only platinum is used in diesel engines, which are less popular in the United States than in Europe.
Automotive sales of platinum in 2003 outstripped jewelry for the first time since 1994. Prices are at their highest in 23 years, hitting $779 an ounce Tuesday at the New York Mercantile Exchange.
"In North America we expect a moderate increase in demand this year but that is very dependent on strong sales in December, which many analysts are forecasting," Zadoff said.
Car makers in the United States, Europe and Japan face increasingly strict emissions rules and are using more platinum and palladium in catalytic converters. The popularity of large sport utility vehicles in the U.S. market has contributed to the trend.
The surge in U.S. platinum sales led a 20 percent jump in global platinum demand from the auto sector, to a record of 3.18 million ounces.
Car makers used far less platinum from inventories than in 2002, the report said. They are slated to increase their palladium purchases to 1.31 million ounces in 2003, from 640,000 ounces last year, Johnson Matthey said.
But it said they would draw down 1 million fewer ounces from stocks.
"The volatility of the metal's price in 2000 and 2001 resulted in (platinum group metals) thrifting programs being accelerated ... where there had been relatively intensive use of palladium on autocatalysts," the report said.
Palladium rose to almost $1,100 an ounce in early 2001 but presently is worth just under $200 an ounce.