Phoenix Global Mining Share Discussion Threads

[le couteau tombant] 18/6/2008 15:18

Tim, Have Started putting Palladium Producer charts in Thread Header, obviously Norilsk Nickel MSE:GMKN is the biggest.

[le couteau tombant] 18/6/2008 14:51

Tim/Sahara,

Now that Palladium September Futures contract PAU08 has gone up US$58 from US$417.50 to US$475.50 in last 8 to 10 days I agree it time to look at the equities, I am going to start with the Liquid North American stocks North American Palladium Limited TSE:PDL, AMEX:PAL then move on to Stillwater Mining Company NYSE:SWC

These are both likely to start big moves north now I would think.

Off to do some numbers.

[le couteau tombant] 18/6/2008 14:32

Sahara,

Superb comparative Chart and very Interesting, thank you!

Re your Oil/Palladium comment, yes quite Probably, As Palladium hits US$475.50 toz in September 2008 Future I would point out that Palladium has always been in a different cycle from other PMs it tends to perform well when TMT NASDAQ/Techmark shine, however it is catching up on annual Oil's Annual ROCE refer following Data:-



PAU8 - PALLADIUM September 2008 (NYMEX) [Realtime Prices]
[ Daily Quotes ] [ Weekly Quotes ] [ Monthly Quotes ]

Trade commodities at Lind-Waldock and save $$.
Date Open High Low Last Change
06/18/08 463.00 475.50 462.00 472.00 +8.15
06/17/08 467.00 470.00 456.30 463.85 -0.60
06/16/08 454.25 466.95 450.00 464.45 +10.00
06/13/08 441.00 457.65 436.10 454.45 +12.80
06/12/08 431.25 445.90 426.50 441.65 +8.65


-- Period -- -- High -- -- Low -- -- Percent Change --
5-Days 475.50 on 06/18/08 426.50 on 06/12/08 +6.87% since 06/12/08
20-Days 475.50 on 06/18/08 417.50 on 06/05/08 +2.40% since 05/22/08
65-Days 479.15 on 04/11/08 403.00 on 05/01/08 +5.31% since 03/20/08
100-Days 593.70 on 02/28/08 401.30 on 01/31/08 +17.62% since 01/31/08
260-Days 593.70 on 02/28/08 342.25 on 08/22/07 +20.10% since 07/19/07
Year to Date 593.70 on 02/28/08 370.85 on 01/22/08 +21.29% since 01/02/08



For The Last Made New High Percent From Made New Low Percent From
5-Days 5 time(s) -0.74% 1 time(s) +10.67%
20-Days 4 time(s) -0.74% 7 time(s) +13.05%
65-Days 5 time(s) -1.49% 6 time(s) +17.12%
100-Days 12 time(s) -20.50% 1 time(s) +17.62%
260-Days 18 time(s) -20.50% 13 time(s) +37.91%
Year to Date 18 time(s) -20.50% 7 time(s) +27.28%

[sahara] 18/6/2008 14:13

Is it that palladium will do what oil did in 2003 as palladium corrected, when Oil corrects? As funds from one type of commodity find a home elsewhare.



S.

[tim] 18/6/2008 13:39

LCT

Looks like the PM rise is across the board, but no change in teh dollar!

I shall be keeping a firm eye on PAL.

[le couteau tombant] 18/6/2008 13:37

Spot Palladium now up US$9.00 US$457 to US$466 1.97% Spot Platinum now up US$44 US$2053 to US$2097 2.14%

Is it time to now look at the Equities of PGM Miners again?

[le couteau tombant] 18/6/2008 12:34

Spot Palladium already up US$4.00 toz and Moving Fast!
Interested by CBOT/NYMEX Open.

[le couteau tombant] 18/6/2008 11:13

Tim,

Basically in 2007 it appears Automotive sector grew at 20% pa but commercial vehicle sector grew at 60% pa.

In summary after Beijing Motor show this market is grewing very fast indeed.

That is likely to mean that Catalytic Demand/Consumption, and usage of Palladium will have been far higher than expectations.

It is pretty obvious that in lead up to Shanghai/Beijing Olympics in October this year that these figures are likely to go off the Richter Scale.



I can easily imagine a situation where physical supply gets tight suddenly and market panics.

Usually Palladium reacts very fast to changing supply/demand perceptions due to comparative illiquidity of both Palladium and Platinum comparative to Gold or other Commodity markets.

It will be the Prime Mover that benefits when the Reality hits Financial Markets.

[tim] 18/6/2008 11:03

LCT

Yes I think people still have a very US/UK centric view of the world, which I suppose is understandable, because that was the case until very recently.

When exports to the US/UK become less and less significant to China, look for them to let their currency go. Then each and every Chinaman will suddenly become much much more wealthy, and the worlds goods and services will suddenly seem cheap to them, whilst simultaneously becoming astronomic to us in the west. Then much of teh wealth transfer will be complete and the world's resources will be freed up to the productive half of teh world. Kind of poetic justice don't you think?

[le couteau tombant] 18/6/2008 11:02

Growing demand in tier-2 and tier-3 cities drives China's auto industry
An exclusive interview with China Representative, Global Insight (part 1)
From:Gasgoo.comFebruary 21, 2008

John Zeng
Senior Market Analyst
China Representative
Global Automotive Group
Global Insight




Gasgoo.com: Mr. Zeng, could your share with us your views on China's auto market in 2007?

John Zeng: In 2007, China's auto market continued to grow about 20% after a rapid growth in 2006. With a growth rate like this, China will be able to catch up with the United States or replace it as the world's biggest auto producer in a few years.

There are two prominent phenomena in China's passenger vehicle market last year: The first thing is the rise of Japanese auto makers, especially Toyota, and the second thing is that China's local auto makers are losing market shares. Even before coming to China market, Toyota had established its auto parts supplying system in south China regions. Once Toyota decided to produce cars in China, it could quickly find suitable suppliers.

Many people might also be stunned to learn an over 20% growth in China's commercial vehicle market and over 60% in heavy duty commercial vehicle market. Many buyers rushed to buy these commercial vehicles because they know that a mandatory State III emission standards (similar to EU-III standards) which Chinese government vows to put in place in 2008, would drive up commercial vehicle prices. In addition to that, the construction of stadiums for 2008 Olympic Games has also stimulated market demands for commercial vehicles, especially heavy duty trucks. The first month of this year continues to see a rapid growth in the commercial vehicle market, but it is unlikely to see a similar growth rate as last year, because a large number of commercial vehicles have been purchased prior to 2008 and secondly, market demand for commercial vehicles will come down after the completion of the Olympic constructions.

Gasgoo.com: In the Chinese passenger vehicle market last year, China's local automakers are losing market shares; part of the reason is that local players are trying to enter higher market segment, whereas joint venture automakers are expanding to lower segment.

John Zeng: You are right. A good example is that the price of Livina produced by Dongfeng Nissan has been reduced to only RMB 70,000-80,000. As for local auto makers like Chery and Geely, there is no room left for more price cuts. Without this price advantage, they have no strength to compete with the foreign brands. Though Chery has achieved a spectacular growth in overseas market last year, its sales record in domestic market is much less impressive, a moderate growth of 5% from one year earlier. As you know, Chery's enormous successful in overseas markets has much to do with China's export tax rebate policy. If there were no such policy for Chery last year, could you imagine its enormous success abroad? It is simply unimaginable.

Gasgoo.com: It's much easier for the foreign automakers to expand to lower segment market than for China's local automakers to enter higher segment. Is that right?

John Zeng: Foreign automakers also face many challenges. Like their local counterparts, foreign automakers have many considerations before launching a new model in Chinese market. Can this model become profitable in the market? Would the model promote or damage its product image? I bet they would not like lower their standards in order to better compete in the lower segment market.

Gasgoo.com: Some joint venture automakers seem to have been determined to explore the lower segment. For example, Shanghai GM has lowered the price of Lova to less than RMB 60,000. And BMW is also planning to bring its 1 Series to the China market and finally to realize its production here. That clearly indicates their determination to enter the lower level segment in China. China is fast growing market. The foreign automakers are more interested in grabbing market shares than making profits. Do you agree with me?

John Zeng: General Motors is very much good at multi-brand operations, and its Chevrolet is positioned at the middle and lower level market, so it's not surprising to see Lova price down. The foreign brand companies will not be interested in A segment vehicle market until they find a growing market demand in the tier 2 and tier 3 cities driven by the soaring oil price. And if the fuel tax is put in place in 2008, A segment vehicles would become the best choice for the second and third tier city buyers. But it is not easy for foreign brands to squeeze in the market where China's local players like Chery, Geely, Haima, Changcheng and BYD have already held a big market share. Last year some A segment vehicles like Chery QQ experienced a negative growth due to the lack of new models.

Growing demand in tier-2 and tier-3 cities drives China's auto industry
An exclusive interview with China Representative, Global Insight (part 1)
From:Gasgoo.comFebruary 21, 2008


Gasgoo.com: Which car segment do you think has a better performance?

John Zeng: C segment remains the mainstream of China auto market. It's very much different from other Asian countries like India and Japan. In 2007, the fastest growth still falls in the C segment, which is followed by D segment, B segment. The SUV and MPV market also grow significantly. Only A segment is flat.

Gasgoo.com: A segment's flat performance is due to the lack of new models in 2007 as you mentioned. I think another important reason might be our government hasn't really encouraged the development of small displacement vehicles.

John Zeng: It's true. The government has to have a thorough consideration. The prices of small displacement vehicles are usually so low that most families can afford to buy, but a vehicle is not only a personal property, but also takes up much public transportation resources, uses oil resource and affects public environment. The government has to consider if encouraging small displacement vehicles purchasing, the capacity of public transportation system can afford or not. The world's cheapest car "Nano" in India also incurs some opposition.

Gasgoo.com: But large displacement vehicles have greater impact on the public transportation and environment.

John Zeng: Yes, but the cost of buying and maintaining a large displacement vehicle is much higher, so it will not become very prevalent.

Gasgoo.com: Maybe that is also because the regulatory and legal system is not well established in China. In the densely populated Europe, public transportation resources is also rather limited, yet Europe has very high per capita car ownership and small displacement vehicles gain great popularity.

John Zeng: Although China has lower per capita car ownership, broader city roads and four-lane highways, the actual capacity of transportation is relatively small compared with the developed countries, because our law and regulation system and transportation notions still fall behind.

Gasgoo.com: what drives the rapid growth of China auto market in 2007?

John Zeng: A basic issue is that the main vehicle consumption in China has changed from government-owned vehicles to privately-owned vehicles. There are still too many driving license holders preparing to buy a car. After the passenger vehicles in tier-1 cities like Beijing and Shanghai are almost saturated, tier-2 and tier-3 cities gradually become the main destination of vehicle consumption.

Gasgoo.com: Does the growth of tier-2 and tier-3 city vehicle consumption contribute to the sales of C segment vehicles?

John Zeng: Yes. Now in China, a car is still a symbol of social status. In tier-2 and tier-3 cities, a C segment vehicle has been good enough to show the buyer's status. While in tier-1 cities, D segment vehicle consumption is the mainstream.

Gasgoo.com: Would Chinese people's vehicle consumption notion change in future?

John Zeng: I think it will. The rapid growth of new car ownership will generate a large used car market. When used car buying becomes popular, a car would only be regarded as a transportation tool, not a symbol of social status. But it may take five to ten years for the symbolism significance to fade away in China.

Gasgoo.com: A unique phenomenon in China auto market is that the best selling cars are always the oldest models. In 2007 the oldest Volkswagen models put into China -- Santana and Jetta are the No.1 and No. 2 best selling cars. What do you think of that?

John Zeng: It is related with the growth of vehicle consumption in tier-2 and tier-3 cities. In those cities, most car buyers are buying their first car. They wish their first car be cheap both in the sales and after sales stages. And Santana and Jetta just match the needs. Santana and Jetta are much cheaper than the new models in the same segment. Having been in China market for over 20 years, it is much easier to find an aftermarket service for Santana and Jetta, and the repair cost is much lower than the new models.

Gasgoo.com: In the China auto market, there are too many brands competing, and many new models put into market. But not many are remembered by the consumers.

John Zeng: Yes. Almost all the auto makers have entered the China market, and China itself has dozens of auto makers. Consumers have little recognition on so many brands, and brand loyalty is relatively low.

Gasgoo.com: Could you give us a forecast on the 2008 China auto market?

John Zeng: Our forecast on the 2008 China auto market is more conservative than last year. The growth rate of overall vehicle market would be about 17%, in which commercial vehicle market would grow slower. But even with this speed, China's auto sales in 2008 would be over 10 million.

Note:
In China, tire-1 cities in China usually refer to biggest cities in China -- Beijing, Shanghai, Guangzhou, and Shenzhen.
Tier-2 cities usually refer to the other provincial-level cities such as Chongqing, Tianjin, Chengdu, Nanjing, Wuhan, and the sub-provincial-level cities, such as Dalian, Qingdao, Ningbo, Xiamen.
Tier-3 cities usually refer to the prefectural-level cities and the smallest level cities -- county-level cities.

[le couteau tombant] 18/6/2008 10:56

This Is How Fast Chinese Automotive Demand is rising:-



2008 Beijing Motor Show: VW Introduces Bora and Lavida
Volkswagen AG, the second-largest overseas vehicle maker in China, unveiled two models designed specifically for the market as it bids to fend off rising competition with cars tailored to local tastes.

The models are the Bora, a sedan to be built with China FAW Group Corp., and the Lavida, which will be built with SAIC Motor Corp., the Wolfsburg, Germany-based company said in a statement at the Beijing car show today.

Volkswagen, Hyundai Motor Co. and other overseas automakers plan to add China-specific models to stand out in the country's increasing competitive vehicle market. A new or revamped passenger car was introduced every three days in China in the first quarter, as local and overseas carmakers wrestled for sales in the world's fastest growing major auto market.

China has, and indeed merits, its own specific strategy as opposed to being wrapped up in a generic Asia strategy,'' said Stephen Pope, chief global strategist at Cantor Fitzgerald in London. ``Given that the U.S. is clearly slowing, China represents a key prize.''

Volkswagen's has speeded up the introduction of new models in China since 2005, when an aging line-up caused its first loss in the country. This year, sales surged 33 percent in the first quarter to 268,200, helped by demand for the Santana Vista, a new version of China's bestselling car.

The German automaker, which added at least six new models in China last year, aims to boost sales in the country by at least 10 percent this year to more than 1 million cars. It sold 103,200 vehicles in China in March, the first time it topped 100,000 cars in a single month in the country.

Yesterday, Volkswagen's Audi AG luxury-car unit gave a global debut to the Q5 sport-utility vehicle at an event in Beijing. It also introduced the A5 sedan to the Chinese market.

[le couteau tombant] 17/6/2008 16:19

TSE:PDL AMEX:PAL Beginning to stir, NYSE:SWC still no move, but at least looking at HUI/XAU Life returning to mining sector, and PGM shares.

[le couteau tombant] 17/6/2008 14:00

We had better cover the Fuel Cell and Hydrogen Storage plus Coin Demand Criteria, this is old, but still relevant.

Palladium really does seem to me to have most usages of any PGM, it really does seem to win in Automotive, and Power/Energy Sectors whichever way people go, even with portable FCT Units with Hybrids.




WHAT ABOUT PALLADIUM?
by Eric Englund
January 24, 2006


When you think about precious metals, what elements come to mind? To be sure, gold, silver, and platinum come to the forefront. What about palladium? It is a precious metal, a platinum group metal, and a noble metal. Palladium was discovered by the British chemist William Hyde Wollaston in 1803. He named this precious metal, in 1804, after "Pallas" the ancient Greek goddess of wisdom whose name had also recently been given to the second asteroid ever discovered. Few people have heard of this precious metal in spite of its myriad uses, a couple of headline-grabbing stories, and what may be quite an interesting future as to helping us break free of our petroleum-energy dependence – perhaps even interesting enough to buy a few ounces for your portfolio.
Palladium is predominantly mined in Canada, Russia, South Africa, and the United States (Montana). To give you an idea of how rare this metal is, about 6.8 million ounces of palladium were mined in 2004. This compares to 79.2 million ounces of gold and 620 million ounces of silver mined in the same year. Platinum is slightly rarer with 6.4 million ounces produced in 2004.

Before delving further into palladium, I would be remiss not to mention a bullish contrarian indicator as to why precious metals are in the early stages of a bull market. As a surety bond underwriter, I analyze hundreds of personal financial statements every year. Bar none, real estate is where most people are "investing" their money. Equities (i.e. publicly traded stocks) come in a distant second place. Cash and bonds, of course, commonly occupy the asset side of a personal balance sheet as well. When it comes to precious metals, however, this asset class is completely off the radar screen. Maybe one in every two hundred personal financial statements will list precious metals (mostly gold and silver) as an asset. So when you hear the talking heads say "gold and silver have had a nice run but the party is over" don't believe it. When the common man comes to realize that the Federal Reserve is debasing the dollar at breakneck speed, he is going to jump into precious metals with a vengeance. This is when the real fireworks will begin. We're not even close to this point yet and that's why I'm bullish on precious metals.

Palladium's Uses

Much like silver, palladium is a precious metal whose demand is derived chiefly from industrial users. It is a versatile metal, which is ductile and is resistant to both oxidation and high temperature corrosion. Here is a list of notable applications:

Automobile Catalytic Converters: Palladium is used as a primary component in autocatalysts that reduce vehicle exhausts emissions of hydro-carbons, carbon monoxide, oxides of nitrogen, and particulate. Autocatalysts convert most of these emissions into less harmful carbon dioxide, nitrogen, and water vapor.

Dentistry: Palladium-based alloys are used in dentistry for dental crowns and bridges. This noble metal is compatible with human tissue.

Electronics: Palladium has a number of electronic applications. For example, palladium's chemical stability and electrical conductivity make it an effective and durable alternative to gold for plating in electronic components.

Fine Instruments: Palladium is used in the manufacturing of fine instruments such as watches and some surgical instruments.

Jewelry: Palladium is lighter than platinum having about the same density as silver. In jewelry, it is principally used as an alloy with platinum to optimize platinum's working characteristics and wear properties. However, due to platinum's current high price, palladium is gaining popularity as a primary metal in jewelry – especially in China. It is also used as an alloy to make white gold.

Manufacturing and refining: Palladium is an important part of the refining of nitric acid, and plays a significant role in the production of synthetic rubber and nylon. It is a critical catalyst in the manufacture of polyester and serves important functions in catalytic reactions that are used in various stages of petroleum refining.

Photography: Palladium is used in an historic photographic printing process that is considered to be superior to conventional silver in tonal quality and archival longevity.

Headline-Grabbing News

On March 23, 1989, palladium became an integral part of headline news around the world. For on this date, at a news conference, Stanley Pons and Martin Fleischmann (both of the University of Utah) reported experimental results in which energy was generated via a "cold fusion" process. Thermonuclear reactions occur when temperatures are in the millions of degrees Celsius. To bring about nuclear fusion, using a simple table-top apparatus, was stunning news. Pons and Fleischmann's apparatus essentially consisted of an electrolysis cell containing heavy water (dideuterium oxide) and a palladium cathode which rapidly absorbed the deuterium produced during electrolysis. What Pons and Fleischmann found was that the device's energy output exceeded the energy input. In other words, they had discovered a process to bring about nuclear fusion at room temperature – or so they believed.

Palladium was the key component in this experiment. Fleischmann and Pons hypothesized that palladium may catalyze fusion due to this noble metal's special ability to absorb large quantities of hydrogen (including its deuterium isotope). Similar experiments, conducted soon thereafter, produced disappointing results. Hence, a Department of Energy panel concluded: "Nuclear fusion at room temperature, of the type discussed in this report, would be contrary to all understanding gained of nuclear reactions in the last half century; it would require the invention of an entirely new nuclear process."

Alas, palladium had its day in the sun as a "miracle" metal that could safely bring us nuclear energy at a very low cost. For those who still believe, keep in mind that unexplained experimental results do not mean that Pons and Fleischmann's experiment was wrong. Superconductivity, after all, was first observed in 1911 and explained theoretically decades later in 1957. There is mounting evidence that Pons and Fleischmann were on to something big.

In January of 2002, Ford Motor Company made business headlines by announcing a staggering net loss of $5.5 billion for fiscal-year 2001. What is so startling here pertains to the fact that $1 billion of this loss was related to Ford Motor Company's panic-buying of palladium – which, as mentioned above, is used in automobile catalytic converters. Due to supply problems emanating from Russia, the price of palladium spiked to over $1,000 an ounce. Instead of switching back to using platinum as the catalyst metal, Ford stockpiled massive amounts of palladium at near-peak prices. As demand for palladium dropped and Russian supplies began coming back onto the market, the price of palladium plunged to about $400 an ounce. Ford Motor Company, consequently, had to mark down the value of its palladium inventory by the aforementioned $1 billion; thus writing another embarrassing chapter of American automotive history.

Hydrogen Fuel Cells and Palladium

A fuel cell operates very much like a battery given that it produces power in the form of electricity. Unlike a battery, it does not run down or need recharging because it produces energy as long as fuel is supplied to it. Hydrogen-rich fuels, that have been successfully utilized, include biodiesel, diesel, ethanol, kerosene, methane, methanol, natural gas, propane, and others. If fuel cell technology becomes commercially viable, then the internal combustion engine will be replaced by fuel cells and the global dependence on petroleum – as an energy source – will diminish markedly.

So how does a fuel cell work? Hydrogen fuel is fed into the anode of the fuel cell. Oxygen (or air) enters the fuel cell through the cathode. Encouraged by a catalyst, the hydrogen atom splits into a proton and an electron, which take different paths to the cathode. The proton passes through the electrolyte. The electrons create a separate current that can be utilized before they return to the cathode, to be reunited with the hydrogen and oxygen forming a molecule of water. Indeed, the main emission from the fuel cell is water vapor (which, by the way, is a greenhouse gas – this is something you won't hear from environmentalists).

Fuel cells perform best when the hydrogen fuel is free of impurities. This is where palladium shines. Using a palladium membrane hydrogen purifier, pressurized hydrogen is diffused across the palladium membrane – keep in mind that only hydrogen possesses the ability to diffuse through palladium. As hydrogen passes through the palladium membrane, hydrogen loses its electron to the palladium structure and diffuses through the membrane as an ion (or proton). At the exit surface, the reverse process occurs. Therefore, the process can be described as follows: (1) adsorption, (2) dissociation, (3) ionization, (4) diffusion, (5) reassociation, (6) desorption. Once the hydrogen gas passes through the palladium membrane, an ultra-pure hydrogen gas may be fed into the fuel cell – thus preventing the anode catalyst, in the fuel cell, from being poisoned by trace impurities. There are fuel cell manufacturers using palladium for this exact purpose.

Another possible use for palladium, associated with hydrogen fuel cells, concerns hydrogen storage. At room temperature and atmospheric pressure, palladium can absorb up to 900 times of its own volume of hydrogen. One way to envision this is to imagine a sponge soaking up hundreds of buckets of water. From a safety standpoint, it may be more desirable to store hydrogen in a palladium bed (at room temperature and atmospheric pressure) than storing an equal volume of hydrogen in a highly pressurized tank.

Fuel cell power systems are already in use. They are being employed in hospitals, hotels, nursing homes, office buildings, schools, utility power plants, and an airport terminal – either providing primary or backup power. Likewise, they are being used as primary and backup power sources in homes. It is also quite exciting that DaimlerChrysler, Ford, General Motors, Honda, Nissan, and Toyota each have working fuel cell powered cars. Optimists claim that fuel cell powered cars might be commercially available by 2010.

Conclusion

As fuel cell technology progresses, the day may come where we are weaned off of our petroleum dependence. In turn, conceivably, a more peaceful world will emerge. And with palladium's future intertwined with the fuel cell, maybe we can make a buck or two by purchasing a few ounces of this hard-working precious metal. At $273 an ounce, palladium may be a bargain today.

For your information, I do eat my own cooking. Here are pictures of one of my recent purchases.




© 2006 Eric Englund
Editorial Archives

Eric Englund has an MBA from Boise State University and lives in the state of Oregon. He is the publisher of The Hyperinflation Survival Guide by Dr. Gerald Swanson. You are invited to visit his website.

CONTACT INFORMATION
Eric Englund

[le couteau tombant] 17/6/2008 13:53

The Concept is clearly going to spread globally anyway, which logically has to be good for Palladium



Honey, I Shrunk The Car
Gas costs are up. So is Third World consumer demand. The result: a new breed of cars that are cooler, cheaper and incredibly small. Goodbye, Hummer.

Keith Naughton
NEWSWEEK
Updated: 4:47 PM ET Mar 14, 2008
When gas prices began to shoot up last summer, Millie Richardson became fed up with her minivan. So the Lawrenceville, N.J., mom traded in her Dodge Caravan for a $17,000 Nissan Versa, a subcompact that gets more than 30 miles per gallon. Richardson, 55, likes spending less at the pump, but she's most excited about how roomy her little car is. "My son is 6-foot-6, and he drove it," she marvels. "So it's small, but it's big-does that make sense?" What's even more appealing to Richardson, though, is a $2,500 car she's heard about that was introduced in India last month: the Tata Nano. Though there are no plans yet to bring it to America, Richardson is ready. "Oh, boy, would I ever love to drive one," she says. "I would look at it as a disposable car. It would be so cheap, you could always afford a new one."

Around the automotive world, small is the new big. Driven by earning power in emerging markets, along with rising gas prices and global-warming concerns in developed countries, small-car sales are soaring. By 2012, forecasters expect consumers to buy a record 38 million small cars annually, up 65 percent from a decade earlier. Even in the United States, land of the large, sales of small cars are expected to grow 25 percent by 2012 to a record 3.4 million while SUVs and pickup trucks continue to tank. Daimler had 30,000 orders in hand even before it launched its nine-foot-long Smart Fortwo model in the United States in January. "This is not a fad," says Smart USA president Dave Schembri. "It's a trend."

But the car generating the most buzz hasn't even hit the road: the $2,500 Nano. A car for the price of a laptop PC is transformational. Before it even goes on sale in India later this year, the Nano is changing the rules of the road for the auto industry and society itself. Millions of emerging-market commuters can now own four-wheel transportation, creating unheard-of mobility for the masses. But the Nano and its expected rivals will also lead to more traffic congestion, more global warming, more highway fatalities and more demand for oil. As the world approaches 1 billion vehicles, the Nano and its ilk raise a daunting prospect for society: global gridlock. If the rest of the world begins buying cars at the same rate as America, the global parking lot will swell to 5.6 billion vehicles, figures Sean McAlinden of the Center for Auto Research in Ann Arbor, Mich. "The Nano is the 21st-century equivalent of the Model T," says Global Insight analyst John Wolkonowicz. "The Nano will put the Third World on wheels, and that will have far-reaching implications."

It's already shaking up the industry. All the major car companies dispatched teams to the New Delhi Motor Show in January to snap photos and build a dossier on the new Nano. The little car from India could lead to an overhaul in the global auto industry, which was always geared to earn big profits from big cars. Now the car czars will have to learn to make a business out of selling lots of little cars that make less money. Detroit is going through a wrenching overhaul as it retools its product line to offer more small gas-sippers and fewer big guzzlers. General Motors, which lost $38.7 billion in 2007, doesn't make money at home, but turns a tidy profit in Asia selling smaller cars. "The whole story in the auto industry today is that the profits are shifting to the developing markets," says Renault-Nissan CEO Carlos Ghosn, who is working with the Indian motorcycle maker Bajaj to try to develop a $3,000 car to go against the Nano.

Meanwhile, a new generation of consumers, weaned on cell phones and iPods, equates small with high tech-not cheap. This is where the West parts company with the Nano. Today's car buyers in developed nations expect small cars to have all the accouterments they enjoyed in their XL rides. The hot-selling Mini Cooper is a prime example: sporty and stylish, it's loaded with luxurious items like a 10-speaker stereo. The new Mini Clubman S starts at $24,600-or roughly the price of 10 Nanos. "I don't think Americans are looking for a car with less safety features and fewer windshield wipers," says Mini U.S. chief Jim McDowell.

Indeed, the Nano, which has only one windshield wiper, is more akin to the econo-boxes like the Ford Pinto that boomers drove during the '70s energy crisis. "To Gen Y, something without power windows or door locks is not a real car," says Toyota U.S. chief Jim Lentz. "Most wouldn't know what this crank thing in the door does. It's like a rotary phone."

What this new generation does get is small as a way to reduce its carbon car-print. The irony is that as millions of small cars clog the planet, they'll only add to global warming. GM chairman Rick Wagoner recently warned that the world is already consuming 1,000 barrels of oil per second, and demand is on track to rise 70 percent more by 2030. By 2015, 100 million households in the developing world will be able to afford cars priced between the Nano and the $6,000 Renault Logan, predicts the Boston Consulting Group. "Even if they are very clean cars, collectively it will lead to emissions that will only add to local pollution," says Indian climatologist Rajendra K. Pachauri. He's chairman of the Intergovernmental Panel on Climate Change-which shared the Nobel Peace Prize with Al Gore last year-and he's critical of the climate consequences of the Nano. "Before we unleash this kind of animal on the streets of India, we ought to explore the public-transportation options." Others hope the rise of the small car in emerging economies will accelerate alternative-fuel vehicles elsewhere. "We'll be driving $40,000 electric vehicles or hydrogen-powered cars while people in India and China are using the remaining gasoline," says Wolkonowicz.

Until Tata chairman Ratan Tata rolled out his "people's car" in New Delhi on Jan. 10, nobody believed anyone could produce a $2,500 car. At first glance, the Nano doesn't look like much: no radio or AC, a top speed of about 60 miles per hour and a motorcycle-like engine. But its spartan simplicity has captured the world's attention. To save weight and money, there are no tubes in the tires. To ease assembly, body panels are glued instead of welded. "We look closely at anything we regard as a breakthrough," says GM product-planning VP John Smith, with diagrams of the Nano spread out in his Detroit office.

Now the race is on. Chrysler is looking at developing a sporty sprite called the Dodge Hornet with China's Chery Automobile. GM vice chairman Bob Lutz says his company could engineer a Nano competitor with its Chinese partner Wuling. And GM is working on a new car that would rival Renault's $6,000 Logan, says Smith. GM recently canceled plans for a new line of big V-8 engines and is pouring that money into developing small cars.

One key country hasn't bought into small-is-cool: China. SUV sales there rose 51 percent last year, big Buicks are all the rage, and small cars go begging. Tata predicted a Chinese automaker would be first to match the Nano's price, but analysts doubt it. "In China, image is more important than function," says analyst Michael Dunne of J.D. Power. "Nobody wants to be seen on the bottom of the totem pole."

The biggest roadblock facing small cars is fear about safety. U.S. statistics on highway fatalities show the smallest cars have death rates 2.5 times higher than the biggest. In Europe, small cars, which are driven mostly at slower speeds in cities, have lower death rates, but are in more crashes than big cars. "It comes down to physics," says Adrian Lund, president of the Insurance Institute for Highway Safety. "If you're in a smaller vehicle out there, you're at greater risk." To overcome small-car phobia, automakers are working to burnish their safety bona fides. In every U.S. showroom for the Smart car, for example, you'll find the car's protective steel skeleton on display.

The more features automakers can stuff into small cars-safety, style or stereos-the better for the bottom line. This is the formula Japan and Europe have used to develop a lucrative small-car market. Typically, an automaker earns about a 5 percent profit on a car. That comes to about $125 on a Nano or $1,250 on a Mini Cooper. The problem comes in convincing drivers in America that they should pay more for less. "Space and weight equal value for most buyers," says McAlinden. "It's a dollar-per-pound concept."

We may like to think that the recent spike in small-car sales is driven by altruism. But auto executives say it's a pocketbook issue: U.S. gas prices have doubled this decade. "The worst thing that could happen to us now is if gas prices fell back, because that would take the pressure off," says Ford executive chairman Bill Ford Jr. "We've all started down this path now." And there's no turning back. Forecasters predict oil prices, global warming and emerging-market desire for cars will continue to rise. As long as those factors drive demand, small cars will rule the road.

URL: 2008

[riggerbeautz] 17/6/2008 13:44

Agree. Now i really am going away to do some more reasearch!

[le couteau tombant] 17/6/2008 13:38

Riggerbeautz, everybody's concern I might add, but if Dollar Collapses, Commodities go up, and people become very price conscious, ie Palladium substitution in catalytic converters in a highly competitive global automotive sector.

[riggerbeautz] 17/6/2008 13:34

Ok...look on GEI, there is a thread but nobody wanted to say much, i've been following sector since early in the year. My concern is the far east india/ boom in cars may not materialise despite population, due to global economy going into reverse. Peak oil etc.

Rhodium also interests me but again it's knowing where to start.

[tim] 17/6/2008 13:27

Rigg

No not atall - the lol was to LCT about some history, not aimed at you. I'm no expert, but LCT is a veteran. Pls stay, its not like we are crowded here lol.

Imho PD could be a great play for 2008/12 for lots of reason, we have not even mentioned its hedge against money supply growth imho a significant issue.

[le couteau tombant] 17/6/2008 13:27

Rhodium (also used in Autocatalysts) is now US$9,935 a troy ounce!

[tim] 17/6/2008 13:06

Rigg

"Come look in on GEI"

Lol heh Ash!

[tim] 17/6/2008 13:05

LCT Rigg

The very fact that climate change researchers didn't forecast the Nano will undoubtably be the reason that PD demand will also be vastly understated. Assuming the car is a success which at the moment looks a given, then PD demand could rocket and then demand forecast for automotive PD will look much much too small.

Automotive growth in Asia was all about price. Pre Nano it was going to take much longer for your average citizen to have the wealth to spend on a car, the desire was alaways there. My guess is a lot of calcs from Co2 to PD to aluminum demand is now going to be out by a large factor, not to mention infrastructure spending in India, oh and of course oil.

[riggerbeautz] 17/6/2008 12:59

Ok. Come look in on GEI, you might find a few like minded people, lots of expertise in different sectors. Much quieter than ADVFN and some stories like the Palladium thread go quiet. But sense you could contribute if it appeals.