Updated - 5th October 2007

The announcement by Nissan (in July 2007) of its plans to introduce new, lower pgm, autocatalyst technology on its gasoline vehicles in late 2008 or early 2009 gathered considerable attention from market commentators and from the media. In October 2007, Mazda also announced new technology which it also believes will, eventually, allow it to cut its autocatalyst metal loadings. Mazda did not announce any date for the possible introduction of this technology, suggesting it is still quite some distance away. Importantly, the catalysts mentioned in both of these announcements use platinum group metals as the active component and we do not expect that their introduction will affect automotive sector pgm usage.

There are three competing trends relating to platinum group metal usage in the automotive industry:

1:/ Emissions legislation is continuing to tighten all around the world. Whenever new regulations are enacted somewhere, average precious metal loadings on catalysts tend to rise in response. If this were the only trend, it would lead to continual increases in metal usage for this application.

2:/ The number of vehicles manufactured globally is also rising. As almost every vehicle now fits at least one catalyst, rising production volumes drives the number of catalysts higher, and increases the amount of precious metal required by the car industry.

3:/ Opposing these two trends, all of the car companies, in partnership with Johnson Matthey and other catalyst manufacturers, are continually working to improve the performance of automotive catalytic converters. This equates to designing catalysts that convert the same amount of pollutants but require a lower precious metal content to do so. Many of the announcements on new, lower-loaded catalyst technology are simply a recognition of the effectiveness of this thrifting process which has been ongoing since the first autocatalysts were used in the 1970s.

This third trend has the opposite effect from the others and this cost control or thrifting process (the removal of precious metal) has been able to keep the growth in platinum group metal requirements from the automotive industry to manageable levels. Attempts to thrift are ongoing and Johnson Matthey expects them to continue in coming years. Our view on both of these recent announcements is therefore that they represent something like the degree of thrifting that could be possible over a short to medium term timescale. However, we do not expect either to materially affect the positive outlook for increasing platinum group metal demand in the automotive sector.