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(Kitco News) - An auto catalyst using trace amounts of gold to improve performance has gone into commercial production, meaning a potential new source of demand for the metal while at the same time helping clean the environment.

However, record gold prices lately may temper immediate demand for the catalysts, said Pankaj Dhingra, president and chief executive officer of Nanostellar Inc., which has developed the technology.

“We are excited about this innovation from a technical perspective,” Dhingra said. “When we designed this material, the commercial potential was huge. But since then, because of the relative platinum, palladium and gold prices, the commercial potential has gone down somewhat. But the technical innovation and quality is still quite high.”

Nanostellar, based in California’s Silicon Valley, said in 2007 that it had developed the NS Gold catalyst for use in diesel-powered vehicles. The company then spent the last few years testing its durability, Dhingra said. The catalyst has now gone into commercial production. It is being used in one diesel-powered passenger car model in Europe, with the likelihood that a handful of others also will use it in the next two years.

Historically, catalysts for diesel-powered vehicles were associated with platinum and for gas-powered cars with palladium. However, recently, new technology allowed some substitution toward less-expensive palladium in diesel vehicles. Johnson Matthey’s Platinum 2011 report estimated that in Europe, where diesel cars are most popular, the proportion of platinum to palladium in diesel-vehicle catalysts is around three parts to one.

One challenge for the use of palladium in catalysts for diesel vehicles is that the metal becomes “oxidized” quickly and then deactivates, Dhingra said. Nanostellar is using gold atoms to form the core of nanoparticles, while palladium atoms form the shell. The gold atoms in the second layer protect by not allowing oxygen to penetrate below the top layer of palladium atoms.

“Gold is able to keep palladium in a metallic state, and therefore palladium can act as a very good catalyst and not get oxidized,” Dhingra said.

By adding gold to the mix, the catalyst reduces the amount of the dominant precious metal in diesel-vehicle catalysts, which is platinum, but not significantly, Dhingra said. In fact, Dhingra said, this is not even the major objective of his company’s clients. Instead, they are looking for improved catalyst performance, particularly as global emissions standards tighten.

In particular, the goal is to improve the functioning of catalysts while they are still at low temperatures when vehicles are first started. This is when most harmful emissions occur since the catalysts are not yet fully “active,” Dhingra said.

He estimated that gold lowers the catalyst-activation temperature by roughly 20%, although this can vary based on a number of variables.

“When you turn the vehicle on first thing in the morning, the catalytic converter doesn’t warm up and get started working for the first 10, 20 or 30 seconds,” said Richard Holliday, director of technology for the World Gold Council, which has provided financial support to help Nanostellar advance the catalyst. “So a lot of emissions come out at that early stage of the journey. Gold is very good at being active when it’s cold.”

In particular, manufacturers aim to reduce carbon monoxide, which is a poisonous gas, and hydrocarbons, which are unburned or partially burned fuels that are toxic, Dhingra said. Once the catalyst becomes “active,” it turns the substances into carbon dioxide and water. “CO2 is also harmful to the environment, but not to the extent that hydrocarbons are,” Dhingra said.

Gold, PGM Prices To Play A Role In Demand For New Catalyst

Trace amounts of gold would be used in each catalyst, as is the case with the platinum group metals. One troy ounce of gold equals 31.1 grams. The amount of gold used would vary by the auto and catalyst, but Dhingra estimated that one ounce might be enough for somewhere between 20 and 30 vehicles.

While only small amounts of gold might be used per vehicle, there is still potential for this to become a meaningful source of gold demand since millions of cars are produced worldwide annually.

Ultimately, however, the amount of gold consumed for catalysts may end up hinging on the relative prices of the yellow metal and platinum group metals, Dhingra said.

“We have one (car) model in production and maybe a few more models coming in, but there is not a rush to this technology even though a lot of major manufacturers have already tested and validated it,” Dhingra said.

Current gold prices above $1,600 an ounce have left manufacturers shying away from the technology for now due to its cost effectiveness. It was considered more cost effective back when gold was in the $700s and palladium in the $300s, he said.

Further, if gold price were to drop but palladium skyrocket, the same problem would exist, Dhingra said. If manufacturers began moving away from palladium in diesel engines, they would not need the gold to protect the palladium from oxidation.

Conversely, however, if platinum soars “through the roof,” this would make use of gold/palladium catalysts financially more attractive for diesel vehicles as an alternative, Dhingra said.

Holliday also said metals prices will have an impact on the ultimate demand, but said other factors also will play a role.

“Yeah, if you look at where the precious metals prices were two or three years ago, platinum was as high as it is now and gold was much lower,” he said. “So gold then had attractiveness as a cheaper metal.

“But price isn’t the whole story. The metals do have different technical characteristics.”

Manufacturers will have to make “very complex” judgments about the cost of various formulations, expectations for prices of metals themselves and the technical needs based on engines in various car models, he said. Further, new regulations could make a difference. For instance, he said catalysts generally are not required on heavy construction equipment around the world, but likely will be in the not-too-distant future.

The World Gold Council, a market-development organization for the gold industry, has teamed up with Nanostellar under a program in which the WGC is also helping fund other start-up companies’ promising technology that involves gold.

The Council considers Nanostellar’s progress so far to be “significant,” Holliday said. Besides the potential for increased industrial demand for gold, those in the gold industry can gain a certain satisfaction in knowing that their product is helping to reduce auto emissions from the environment.

“We think it could make a useful contribution to the overall supply/demand dynamics of the industry,” Holliday said. “But I think equally important, if not more, is the story that it tells about gold. Some people say gold doesn’t have a use outside of money or as adornment. Well, actually, there is a whole stack of things that gold is used for, and that is going to increase.”

By Allen Sykora of Kitco News; asykora@kitco.com