less costly palladium a bigger role in the treatment of The story gets better, if a little less certain, at this

NOx, diesel and even gasoline engine emissions. point, as much of the underlying data is still proprietary. In the past PGM substitution usually required using Treatment of NOx emissions to date has been the near exclusive domain of rhodium, but new research larger amounts of palladium to replace a given amount has highlighted the potential to substitute palladium of platinum or rhodium. Switching to palladium from platinum, for example, has generally been thought in some NOx applications. Similarly, diesel emissions treatment, initially almost the exclusive domain of to require about 1 ½ times as much palladium in platinum, is now shifting toward increasing proportions conventional applications. Recent breakthroughs suggest of palladium in well established applications, with the ratio is now closer to a 1-to-1 replacement ratio of such use being rapidly expanded – especially as auto palladium for platinum in many applications. Switching from rhodium to palladium for NO reduction has been manufacturers struggle to reduce costs. Japanese auto x manufacturers, which until now have been reluctant to discussed in terms of needing 4 to 8 times as much switch from platinum to palladium for treating gasoline palladium to get the same catalytic result. But that, too, engine emissions, in the face of high platinum prices now may be getting closer to a 1-for-1 replacement ratio. and financial challenges generally, are now switching And while a substitution ratio at 1-to-1 will require fewer toward palladium, as well. The added demand for grams of palladium in each application than before, such improved substitution ratios make switching to palladium palladium in these applications is substantial and even more affordable, which is yielding a net increase presumably will continue to grow. in palladium demand. All other things being equal, we But the palladium growth story doesn’t end there. would expect palladium’s price to rise as a result. Catalytic converter requirements for motorcycle, small So, if the metals are becoming interchangeable, equipment, and off road engine emissions are emerging why is the price of palladium not more in line with that of primarily using palladium – again with substantial and platinum and rhodium? increasing volume requirements. One important reason continues to be the random and So, again, why palladium and why now. unpredictable nature of sales out of government palladium Technologically, virtually all automotive catalysis is inventories from Russia. Some of this Russian physical made possible using a combination of three PGMs. inventory is held in Switzerland, some recently came to the From a technical standpoint, platinum, palladium and U.S., and some remains to be exported in the future. But rhodium are increasingly becoming interchangeable – we also conclude that the interchangeability of PGMs in because the three metals fall within the same catalysis basket, and because research continues to uncover new catalytic applications and the cost-driven shift to palladium ways to substitute each metal for the others in many may not yet be fully recognized by the market. Thus, for applications. Importantly, however, beyond this basket of prices to come into greater alignment, the market needs a metals – palladium, platinum and rhodium – there are no clearer understanding of the dynamics of this technology- commercially feasible alternatives to PGMs for treating based price shift, or the Russian inventories overhanging the auto, truck, bus and other engine emissions, and such market must be further depleted – or both. engines cannot move off the assembly line without a Personally, I would expect that, once these factors catalytic converter. So, in effect, the use of PGM catalysts become clear, market prices for PGMs will adjust fairly in automotive applications is mandated by law. quickly to reflect the changed outlook. As a result of this growing technological AUTO BUILD to GROW WORLDWIDE - The recent interchangeability, the choice of metal to use in any challenges to automotive demand first emerged in particular application is driven more and more by the price association with the sharp increase in crude oil prices that relationship among palladium, platinum and rhodium. Thus, began in 2007 and carried over into 2008. Demand the same economic factors that led to the technical ability for vehicles – and particularly for the SUVs and light to switch to palladium in the 1990s are again driving trucks that are the mainstay of the U.S. auto companies research into ways to do even more with palladium. – declined sharply as oil prices in mid-2008 rose to

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