Posted by: mystressm | May 6, 2007

Platinum and Air Care

I have an 18-year old car.

Not a beater, but the kind that second-hand teen aged car shoppers dream of getting their hands on – a one owner, immaculately maintained, low-mileage car.

Every year, all the car owners that live in the lower mainland region of Vancouver, BC are forced to undergo a government mandated emissions test. The official purpose of the test is to reduce air pollution by refusing to license vehicles that fail the designated emissions benchmarks.

This year my baby failed.

So I took it to a hand-dandy mechanic right next to the AirCare center to get it fixed. It is there that I learned some little known facts about AirCare.

AirCare has been changing the goal posts. At random intervals it raises the passing criteria. In fact, I was told, it has halved the emission requirements not once, but twice. So it is getting harder and harder, if not impossible, for older cars that met the previous government emissions standards to actually pass. Even if they are in perfect running order and meet the previously mandated specs.


I went all over AirCare’s web site. It is definitely silent on this political strategy. What a convenient way for the politicians to avoid alienating the unwitting owners of perfectly healthy older cars and gain kudos for themselves with the popular anti air-pollution cause.

And even better, apparently there are never any warnings on the web site that these new standards are about to be slipped into place. Interesting. Then they get to really rake the older cars off the road and “improve” their pollution stats. I’m all for that!

But does it really have that net effect?

My car is worth far more than the measly $1,000 that I would get from the government’s “Scrap-it” program. So if I can’t drive my car here, what do you think that I am going to do? — Sell it outside of the Lower Mainland. Just move the pollution to someone else’s jurisdiction.

And two seconds later what do you think that I am going to do?

Well, buy a new car.

Hmmm…… let’s see. To make a new car, that means that the ore has to be mined. It has to be shipped to a smelter. Then the ingots are shipped to a manufacturer in Japan or the States or somewhere else. Then it is turned into a low-polluting car and shipped back to Vancouver where I will buy it. All this time, workers are commuting back & forth to the mine & factory to make my new car. Trains, ships and ore trucks are humming along daily to facilitate the creation.

I know that the politicians must be following the advice of scientific studies that indicate that it would create a net benefit to get rid of an old polluting car rather than keep on driving it. So I guess that it’s much cheaper to pollution-wise to get rid of my car early and start fresh with a new one rather than to keep running it for a few more years. I’m glad that I could help our politicians achieve the NYMBY carbon shuffle award.

I just hope their math improves.

Which brings me to platinum. It is an absolute necessity in catalytic converters for pollution control on all new vehicles. As of May 5 it was trading at a spot price $1,329 US @ oz. This represents an increase of 254% on investment in 10 years.

Platinum gained roughly 15% in the last year based on the 25% increase in car sales in China alone.

Platinum is among the world’s rarest metals. Most of it comes from South Africa (approx 76%) and most of the rest of it comes from Russia. For the purposes of investment, these localities are not politically and legally secure for investment purposes.

It’s sister metal palladium can also be used. But there is a catch.

Car manufacturers must retool their production lines – an extremely costly and time consuming undertaking to accommodate the less costly metal so there is extreme resistance to casually switching back and forth between the metals. The other feature is that the cost of the metal is a relatively small part of the total price of the vehicle, so the price of both metals can soar significantly further before demand erosion will start to occur. The other feature is that both metals are nearly equally as scarce so switching from one to the other would simply make cause the price of the less costly metal to rapidly soar in the near future.

Besides being a necessary component of pollution control in all new vehicles, it is soaring in popularity as high-end jewelry and increasing numbers of uses are being found for it in electronics and high-demand drugs like cancer drugs.

Like gold and silver – platinum has all the essential harbingers of money. It is valuable, portable, storable and exchangeable. And as a result, several countries have started minting this metal as a store of value in their country’s coins. Canada and the US being two of them.

How to invest?

Exchange Traded Funds are starting to crop up. Currently there are two available – one in Europe which is restricted to traders in one country and one in London. As of May 4, the London ETF Securities Ltd. announced that it had accumulated over 6,000 ounces of the metal. This is a very significant amount of metal to be taken off the market. Another ETF is likely to become available in the next few weeks on the New York Exchange.

The accumulation of metal in these ETF’s is likely to push the price of platinum even higher. A recent example of this type of price push recently occurred with the appearance of Uranium Participation & Molybdenum Participation by Sprott Asset Management. These funds in and of themselves escalated the demand for their respective metals and have caused the spot price to soar.

I believe that Platinum is a metal to watch in the future.

PS: Watch your car. Catalytic converters are become an appealing target for thieves who know their way around under the hood.


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