Travels In The Fourth Dimension (Time): The Future Of The Platinum Group Metals In The OEM Automotive Industry

by Jack Lifton on November 3, 2008

in Batteries, Hybrids & EVs, Platinum Group

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Without any major new discoveries of non-platinum group metal (PGM) technologies, for the control of exhaust emissions from internal combustion engine, hydrocarbon fuel (ICHF)-powered vehicles, the total demand for PGMs by the global OEM automotive industry will depend on the percentage of the total of such vehicles built that will continue to use ICHF power trains. Currently all indications are that this percentage will decline from today’s 99% beginning in the very near future.

It is noteworthy that in the near term this percentage decline may not matter much in determining the total demand for PGMs for exhaust emission control use. This is because the total number of motor vehicles built annually, is poised to climb sharply when the Brazil-Russia-India-China (BRIC) economies resume their journey to improve their populations’ standards of living. Thus if the total number of vehicles built, climbs more rapidly than the rate of conversion of vehicle power trains to non-ICHF types,  then the demand for PGMs by the global OEM automotive industry would increase until or if the rate of conversion surpasses the increase in total vehicles.

The irony of this situation is that the use of PGMs by the OEM automotive industry, came about as a first attempt to control the degradation of the atmosphere by toxic and acid-rain forming gases, namely carbon monoxide, unburned hydrocarbons, and nitrogen oxides. Today’s ICHF cars, equipped with PGM-based catalytic converters, emit only water vapour, nitrogen, and carbon dioxide exactly as planned. Unanticipated was the finding that carbon dioxide was the biggest man-made contribution to global warming. Thus, the PGM industry’s largest demand is for building devices that are believed today to highlight the reason – the production of only carbon dioxide (and water) – that the ICHF engine must be eliminated from mass use as soon as possible.

Notwithstanding the foregoing irony, it is also true that economics plays a very large part in the slow growth of alternate power train technologies. If personal vehicles are to be practical and universal, then current technology requires that they be powered by ICHF engines. Unless governments want to severely damage their economies, their goal must be to reduce carbon dioxide emissions from ICHF engines, while trying to find the best way to replace them in mass production.

This agenda has only been operating for the last few years and it has spawned the development of several alternate power train systems with much lower emissions and a few with zero emissions, at least of carbon dioxide.

The reduction or elimination of PGM usage to control the emissions of ICHF burning engines – so that the emissions consist of only water, nitrogen, and carbon dioxide – will, I believe, continue to apply to the bulk of the production of personal motor vehicles for most of the next human generation. Reduction of usage can only occur when the average global consumer accepts smaller cars with smaller engines, needing less emission control. Total elimination of usage of PGMs for exhaust emission control, can only occur if all vehicles are powered solely by batteries or economical fuel cells. Alternatively, if a hydrogen production and distribution network is globally constructed, an internal combustion engine, using hydrogen as a fuel, as well as a fuel cell using hydrogen, will emit only water vapour as an exhaust.

The question of the future of the demand for PGMs by the OEM automotive industry thus becomes “how soon is it likely that the percentage of vehicles built with non-ICHF engines, will begin to grow at such a rate, that one can accurately predict the end of the need to use PGMs for exhaust emission control?’

The answer to this question is fluid, because it will change each time a new technology is put into production. Additionally, this question will be thrown out as a statement of inevitability, each time a new power train motive technology is tested by one investor-sector: short sellers and other speculators. They know that as long as the public understands the impact of non-ICHF power train motive technologies on the use of PGMs, it will buy and sell the shares of PGM producers and end product fabricators upon each announcement of the success or failure of an experimental power train. One current example, is the plug-in re-chargable lithium-ion battery, supposedly to be ready by 2010-11 for the Chevrolet Volt.

No one nation is going to stop the building of ICHF-powered personal vehicles and simply substitute unproven, expensive, resource limited technologies in its place. However,  institutional investors are going to now be permanently hesitant to fund long term new production of or, I think, exploration for PGMs, or even research into the utilization of lower grades of ore or the recovery of PGMs that exist as very low grade byproducts.

It may well be that PGMs have the highest grade recoveries from scrap of any industrial metal today. I believe that this business will continue to be funded, since automotive scrap catalytic converters are far richer in PGMs than any natural ore and a significant percentage of this scrap is still lost or wasted. The European OEM automotive industry is petitioning the EU to place an upper limit on how long a motor vehicle can be used before it must be scrapped. It is doing this to maintain production volumes at sustainable levels. Such a program – on a worldwide basis – would also insure that a significant amount of PGMs could be recovered and reused, and this would effectively increase the amount of PGMs available without the need for further mining.

I am preparing a graph for a talk I am giving at the World Platinum Congress in London on November 18, and I will share it with Resource Investor readers a few days later. The graph will show the total PGMs mined since the advent of the catalytic converter. It will also identify the total amount now above ground that is recycled annually. And it will compare it to the average amount used per vehicle, to illustrate what size ICHF OEM automotive industry can be sustained indefinitely and then compare those figures with future production projections.

Below is a chart of the alternate power train motive technologies now in use, or under development. It is important to consider limitations on the production of the critical raw materials needed, to make any of them economically practical for mass production. The column title below that says “Mass Producible?” means “Could such a power train be produced today, in a volume that could make it possible to replace and eliminate a substantial percentage of the vehicles now using only an ICHF power train?”

Power Train Technology Key Component Critical Raw Material Mass Producible?
Hybrid Battery Nickel metal hydride No
Battery Lithium-ion Perhaps
Battery Only Battery Lead-acid Yes
Battery Lithium-ion Perhaps
Battery Lithium-ion Perhaps
Fuel Cell Catalyst Platinum, palladium No

Interestingly enough the one battery technology that is not now natural resource-limited for its critical raw material, is the lead-acid system. It was originally chosen as a power source for motor vehicles, when it looked as if gasoline and kerosene (diesel fuel) would not be available cheaply in wide distribution. The other factor that sold the car makers on going with hydrocarbon fuels, was the fact that such vehicles had more power, higher attainable speeds, and longer range than electric cars. Today that is still true; however if the general public could be weaned off of performance, then motor vehicles with zero emissions with a range of 100 miles on a charge at 60 mph could be quickly built again. Such a vehicle was built as a market test in the late 1990s by GM. It was called the EV1 and was quickly withdrawn, over the howls of its lessees, when California repealed its requirement of 2% ‘zero emission’ vehicles for the year 2000, for any company marketing new cars in California.

There is little likelihood of anything other than a slow decline in the percentage of total motor vehicles built using only an ICHF engine or a combination of an ICHF engine and a battery or fuel cell system, i.e. a hybrid, for the very long term. Therefore the total demand for PGMs will grow due to the sheer volume of vehicle production.

Prior to the market decline. it was projected that as many as 65 million motor vehicles would be built globally in 2008. It has been also projected that China will be building 20 million motor vehicles per year by 2015. in a global economy producing 125 million motor vehicles per year. Internal projections by OEM American car makers, predict that the global ‘build’ of hybrids and electric cars in 2015 will be at most 6 million. Therefore, the number of ICHF-powered vehicles built in 2015 could be nearly twice as many as today. Even with a global average of 4 cylinders per vehicle, the demand for PGMs must begin to go up soon and to continue going up for the next decade or more.

Unless the investment community takes into account the fact that the demand for PGMs must return to last year’s levels soon, and then grow to surpass past maximum levels, there will be a severe supply crisis of PGMs before 2015. It takes a long time to develop PGM mines, because, due to the low concentrations (ore grade) of platinum, palladium and rhodium found in their ‘primary’ ore bodies and their low concentrations as byproducts of ‘base metal mining,’ such as, for example, that of nickel. When mined together, as occurs with rhodium – which is mainly recovered as a product of platinum mining – enormous amounts of ore must be brought up from great depths.

To establish such operations is expensive and time consuming, and such projects cannot be sped up easily. They must now be under way in order to stave off a potential crisis. This is not the time to reduce or eliminate investment.

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