Platinum, palladium ride on China’s car sales data

It seems in the new decade everything in the global market is decided by China. With China this week announcing that it has become the largest auto market in the world, platinum and base metal prices have seen a surging tendency.

A Chinese report said 13.6 million vehicles were sold last year in China, which would make it the world’s biggest car market, ahead of the US.

Platinum, which like palladium, is used predominantly in producing catalytic converters in vehicles, immediately responded to this report witnessing a rise at $1,600 an ounce.

Earlier, platinum and palladium prices were boosted by the launch of the platinum and palladium ETFs in the US. To add to that the Chinese data has further lifted the platinum prices to a 17-month high on optimism that vehicle demand in China will continue to grow as the country leads the recovery from the global recession. Palladium rose to the highest since July 2008.

Platinum futures headed for the longest rally in more than two years after China’s vehicle sales jumped 46 per cent in 2009, overtaking the US. Automakers account for almost two-thirds of global platinum consumption.

Platinum group metals are a necessary component in construction of catalytic converters for cars.

One ounce of platinum costs about $459 more than an ounce of gold, a spread not seen since September 2008, when Lehman Brothers Holdings’ bankruptcy filing dragged the global economy down. Platinum prices dipped briefly to less than gold for the first time in 12 years in December 2008.

Platinum holdings held in ETF Securities Ltd’s exchange-traded commodities products increased 158 ounces to a record 440,388 ounces on January 8.

Palladium for immediate delivery gained as much as 1.1 per cent to $439.13 an ounce, while futures in New York added as much as 1.9 per cent to $440 an ounce. Both levels are the highest since July 16, 2008.