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Metal Takes Big Hit on News of Japanese Platinum-Free Catalytic Converter

May 30, 1991

NEW YORK (AP) _ The music industry might have to abandon ″going platinum″ to describe a best-selling record. The price of the precious metal plunged Thursday on word that the Japanese have invented a cheap way to eliminate its use in pollution- control devices on cars.

Nissan Motor Corp.’s disclosure that it has developed a platinum-free catalytic converter, the boxlike device that transforms pollutants to harmless byproducts, sent the platinum contract for July delivery tumbling the daily limit of $25 a troy ounce on the New York Mercantile Exchange.

But the price recovered a bit during the session on unconfirmed rumors that the converter would fail to pass either U.S. Environmental Protection Agency or European emmission control standards, and therefore would be used only in Japan.

Further, it was rumored that the converter would be placed only in Japanese minicars.

″So the actual use for this catalytic converter, should it ever get to commerical use, is very limited,″ said Bob Ascher, a first vice president at Merrill Lynch Futures Inc.

The July contract settled at $376.70 a troy ounce, off $20.50. The contract for immediate delivery, which is not limited in movement, was off $31 at $364 an ounce.

Still, the move was significant and underscores that platinum trades ″more and more like an industrial commodity and no longer like a precious metal,″ which is swayed more by emotion than economic fundamentals, Ascher said.

Nissan, which set no timetable for commercial introduction of the new device, estimated that about 40 percent of the platinum consumed in the world is used by carmakers.

In conjunction with certain other metals, platinum acts as a catalyst in chemical reactions that convert harmful exhaust pollutants into carbon dioxide and water. The converters have been required since 1975 on all cars sold in the United States.

The market for platinum is extremely thin, and any news tends to have a dramatic effect.

In December 1988, when Ford Motor Co. announced it was testing a platinum- free catalytic converter, the metal’s price plunged nearly $100 an ounce.

Thursday’s tumble was one of the worst since the Ford announcement, though platinum has been declining in price for nearly a year because of the recession, analysts said. Before the Iraqi invasion of Kuwait last August, platinum was trading just under $500 a troy ounce.

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