New Car Part Design Sparks Platinum Fall

Platinum prices tumbled Thursday after Japanese auto maker Nissan said it had developed a new way to remove pollutants from car exhausts without using the rare metal--a major component of such systems until now.

Catalytic converters--used on cars to remove harmful emissions--now account for 40% of the platinum consumed in the West.

But Nissan’s new catalytic converter relies on palladium, which costs about one-quarter of the price of platinum and a fraction of rhodium, another rare metal now used. Catalytic converters currently account for 80% of the West’s rhodium consumption.

South Africa produces about 75% of all platinum and the Soviet Union is the world’s second-biggest exporter. Both are leading suppliers of rhodium. The Soviet Union, however, is dominant in palladium.

Nissan Motor Corp.’s disclosure that it has developed a platinum-free catalytic converter, the box-like device that transforms auto pollutants to harmless byproducts, sent the platinum contract for July delivery tumbling the daily limit of $25 an ounce on the New York Mercantile Exchange. But the price recovered a bit during the session, closing $20.50 lower at $376.70 an ounce by the closing bell.

Trading in rhodium ground to a halt in London as the spreads between buyers and sellers widened to more than $1,000 in a range of $2,250 to $3,475 an ounce.

The alternative metal, palladium, shot up $5.80 to close at $98.50 an ounce on the New York Mercantile Exchange.

Some analysts played down the announcement, saying a major change would be years in the making.

“Since the production of any new converter is at least three to four years away, a cynic might suggest that today’s price moves are very much future shocks,” said metals analyst Andy Smith of the Union Bank of Switzerland.

Others questioned the feasibility of a switch from platinum and rhodium to palladium.

They said that palladium’s life could be shortened by any trace of lead that passes through the catalyst. Platinum’s makeup lends it to be less susceptible to damage by lead.

“It’s a question of durability. The announcement suggested that the fellows hadn’t yet tested durability,” said John Brimelow, director of international research with Keane Securities in New York. “Earlier it was proven impossible to make a durable catalyst out of other metals.”

Economic sanctions on South Africa long ago forced auto makers to search for an alternative metal.