Growth of palladium prices to record level caused talks about possible switch to less expensive platinum to be used in pollution-control devices by auto producers, Bloomberg writes. Experts of the sector think that it is not an easy switch.

Platinum was widely used in diesel engines, this is why with decline in popularity of those engines, prices fell as well. Palladium price growth was caused by tensions between the US and Russia, which is the top supplier, as well as by forecasted supply deficit.

In August the platinum price reached the lowest level in a decade and was traded for $833 per ounce on Tuesday. It is more than $250 lower than palladium price, which is $1089 per ounce.

But even though manufacturers can substitute palladium with platinum, re-equipment of factories is quite expensive, while metal is a very small part of unit cost. This is why such switch will take up to two years. It is important that prices would not change direction during that time, since it might eliminate any benefits of such switch. Moreover, analytics assume that palladium price growth is unstable, as global demand for cars is declining, especially in China. Experts at Bank Julius Baer Group Ltd forecast that price can drop to $950 per ounce in next three monhs and to $900 per ounce in next twelve months.