Toyota's new technology a blow for platinum, palladium price

Toyota sold more than 10 million vehicles last year placing it in a virtual tie with Volkswagen as the world's number one automaker.

Stricter pollution regulations around the world and intense competition mean that top priority for  traditional car companies is to cut costs and reduce emissions.

A new technology unveiled by Toyota on Wednesday is win for the Japanese company on both counts. Toyota announced the availability of a new, smaller catalyst that uses 20% less precious metal in approximately 20% less volume, while maintaining the same exhaust gas purification performance.

Toyota's "world's first integrally-molded Flow Adjustable Design Cell (FLAD)" is not the first time researchers have found innovative ways to reduce pricey platinum group metals in exhaust systems. But those technologies seldom make it all the way to the assembly line.

What sets Toyota's FLAD apart is that the company says it's ready to start mass producing the catalyst. The first vehicle to sport the the new catalytic converter, Toyota's luxury flagship Lexus LC 500h, will get it later this year. Volume models further down the ranks will gradually follow says the company.

Roughly 75% of palladium demand is from the autocatalyst sector while application of platinum is more evenly spread with jewellery and other industrial uses making up more than half the total. 85% of rhodium is used in the auto sector, but it's a tiny market –  about 30 tonnes produced in good years.

Clearly it will take a long time for FLAD to work its way through to PGM markets. If at all; events in South African and Russia which together is responsible for 80% of the world's PGM output generally have the biggest impact (not to mention the vexing issue of the real amount of above ground stocks).

Nevertheless, a 20% cut is substantial, and the automakers have a long history of copying each others' technology.

On Wednesday, the palladium price was trading down with Nymex contracts exchanging hands for $767 an ounce, down 1.5% on the day. Last week palladium hit a 21-month high just shy of $800 and the precious metal is trading 14.5% for the better so far in 2017.

Platinum has  gained nearly 12% year-to-date, exchanging hands for $1,002 an ounce on Wednesday after hitting its highest level since August earlier this month.

Rhodium has traded as high as $10,000 an ounce a decade ago, but could be picked up mid-2016 for less than $600 an ounce. It has recovered since then, quoted at $825 recently.

Toyota taketh away, but giveth too

Toyota launched its first mass-produced fuel cell car – the Mirai or "future" in Japanese – for the European market in Volkswagen's back yard in October 2015.

Toyota has the backing of Tokyo for its push into hydrogen. In Japan the government will give you $25,000 – nearly half the total cost – if you buy a fuel cell vehicle. The country also has a program to install hydrogen fuel cells into 10% or 5.3m Japanese households to replace grid electricity by 2030.

The hydrogen society is probably further into the future than its promoters want you to believe but it’s impact on platinum could be enormous.

There’s a simple reason – today's fuel cell cars need a full ounce of platinum versus a 2 – 4 grams PGM loading for your average gasoline or diesel vehicle.

Given fuel cell cars' still hefty price tag, Toyota is spending billions on research to reduce that requirement. But even if they manage to cut it in half we are looking at 12-15 grams per vehicle.