Platinum prices fell overnight following yesterday’s ruling in the German courts that cities in Germany had the right to ban older diesel vehicles in order to tackle air pollution, with the DAX stock index falling sharply as shares in Volkswagen, Daimler and BMW all suffered in response to the news.

Local courts in Stuttgart and Dusseldorf approved the ban but appeals by the states of North Rhine-Westphalia and Baden-Württemberg meant the matter was escalated to the Federal Administrative Court in Leipzig. The Federal Court met yesterday and upheld the local court rulings opposing the ban, ruling that Stuttgart and Dusseldorf can legally ban these older cars if they wish.

Stuttgart authorities have already confirmed that they intend to ban diesel vehicles that do not meet the conditions of the Euro 6 directive on pollution levels by the 1st September 2019. The ruling is expected to lead to many other German cities announcing plans for bans against older diesel cars, with Hamburg already confirming this, but Paris, Madrid, Athens and Mexico City have all pledged similar bans against diesel vehicles in their cities by the later date of 2025, while the Mayor of Copenhagen has announced they wish to ban all diesel cars from the city as soon as 2019.

Why the ban?

The ban came about following pressure from environmental groups in Germany campaigning to cut air pollution caused by diesel cars. The campaign began in earnest following the Volkswagen emissions scandal in 2015 and ramped up its intensity in 2017, with Chancellor Merkel agreeing to double the federal clean-air fund from €500 million to €1 billion in September.

The move failed to satisfy ClientEarth and the DUH (Deutsche Umwelthilfe – German Environmental Aid), who provided case studies that around 70 German cities exceeded the European Union’s nitrogen oxides limits.

Speaking to the media after the ruling, Jürgen Resch, the Federal Managing Director of the DUH, said: “It’s a great day for clean air in Germany”, while ClientEarth lawyer Ugo Taddei described it as “an incredible result for people’s health.”

A diagram of a car exhaust system, featuring a catalytic converter

The state of Platinum:

Prices at their lowest were down £8.90 per ounce of platinum in the last week, which equates to a 1.23% drop. Platinum is used in the autocatalyst market for catalytic converters in exhausts and accounts for more than 40% of user demand for the metal globally.

The drop in value follows what was a strong month for platinum as the precious metal bounced back from a tough end to 2017. Platinum suffered depressed prices in 2017 due to oversupply, but a cutback on spending and mining in South Africa – which accounts for 70% of the world’s current platinum resources – has meant that the supply/demand balance has been redressed, pushing prices back up.

Market prices are slowly starting to climb but the risk for the market is the decline of the diesel car industry. Retrofitting cars could be away to sustain some interest in diesel and thus keep demand for platinum high, but it’s an expensive process and one that car manufacturers are keen to avoid. Some manufacturers like Porsche (and Toyota) going as far as to announce a move away from diesel completely in the years to come, which could result in a marked drop from that 40% demand figure.

The Aftermath:

The ban is a mixed result for Germany. On the one hand, cleaner air can only be seen as a good thing, but the damage done to the diesel automotive industry could hurt the national economy. The other impact is on people with these older diesel cars; people who only a few years ago were incentivised to buy diesel as a cleaner option than petrol with regards air pollution.

Fortunately, newer diesel cars already meet the EU’s guidelines, so they won’t be affected, but the negative press in general will dissuade people even more from buying diesel. Matthias Wissmann, President of the Association of the German Automobile Industry, was critical of the court ruling and said that reductions in air pollution were “achievable without driving bans”.

There are approximately 10 million people in Germany who own a diesel vehicle, and Germany’s environment minister Barbara Hendricks tried to reassure them, saying: “Driving bans can be avoided, and my goal is and will remain that they do not come into force”, while Chancellor Merkel stressed that the ban is “not about the entire country and all car owners.”

The initial response of the German government has been to suggest alternatives for its cities, such as free public transport, while the car makers themselves have pledged to improve software in diesel cars and are beginning to offer trade-in incentives for older vehicles.