- The EU’s decision to soften its 2035 ICE ban while tightening emission norms has boosted demand for catalytic converters, driving a historic surge in platinum prices and impacting automakers’ costs.
A shift in Europe’s emissions policy is rippling through the global automotive supply chain, pushing platinum prices toward their strongest monthly rally in nearly 40 years and underscoring the continued relevance of combustion engines in the transition era. In December, the European Union effectively softened its proposed 2035 ban on new internal combustion engine cars, opting instead for an open-ended extension while mandating even tighter tailpipe emission limits.
Carmakers and suppliers received a clear message: internal combustion engines will remain on the road longer than expected, and they must adopt cleaner exhaust systems to meet future standards.
Tighter norms, higher catalyst costs
The policy pivot has lifted demand expectations for platinum group metals (PGMs), particularly platinum and palladium, which are used in catalytic converters to cut harmful exhaust emissions from petrol and diesel vehicles. Industry analysts say tougher standards will require higher precious metal loadings per vehicle, directly linking regulation to rising raw material costs for automakers.
Also Read : UK’s Electric Vehicle goals at risk as EU weakens emission targets
“The EU’s plan is effectively a steroid jab for PGMs, prolonging their use in catalytic converters,” analysts at Mitsubishi said, noting that tighter emission thresholds will inevitably increase platinum demand across vehicle segments.
Prices surge on regulatory clarity
Platinum prices are up 33 per cent in December alone, their biggest monthly gain since 1986, according to LSEG data. The metal recently touched a record high of $2,478.50 per ounce and is on course for a 146 per cent rise for the year. Other emission-critical metals have followed suit, with palladium and rhodium gaining 80 per cent and 95 per cent, respectively, in 2025.
While electric vehicles remain a long-term threat to autocatalyst demand, the EU’s recalibration has eased near-term concerns, reinforcing the role of hybrids and cleaner ICE models in Europe’s emissions roadmap.
What it means for automakers
For car manufacturers, the rally comes at a delicate moment. Many brands are banking on hybrids and highly efficient combustion engines to bridge the gap to full electrification. Rising PGM prices could add pressure to vehicle costs, especially in high-volume segments where meeting stricter emission norms without significant price hikes is already a challenge.
Suppliers of exhaust after-treatment systems may also face margin pressure as automakers seek to balance compliance costs with competitive pricing.
Also Read : EU Considers Softening 2035 Combustion Ban as Automakers Seek Breathing Space
Supply risks and global policy impact
Supply-side constraints are adding to the bullish momentum. Physical availability of platinum and palladium has tightened in some regions due to defensive stock-building and metal flows to the U.S., after Washington added PGMs to its critical minerals list. Market participants are now awaiting clarity on U.S. tariff policy, expected in January.
China has emerged as another key factor. The start of platinum group metals futures trading last month has attracted strong speculative interest, providing the first domestic hedging mechanism for PGMs in the world’s largest automotive market and biggest consumer of these metals.
“If Chinese spot import buying remains elevated, the major test for platinum group metals will come after there is clarity on U.S. tariffs,” Macquarie analysts said.
As Europe tightens emissions rules while delaying an outright ICE phase-out, the auto industry is once again shaping the trajectory of platinum prices, highlighting how regulatory decisions on tailpipe pollution can still move global commodity markets.
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First Published Date: 31 Dec 2025, 08:40 am IST
