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* Investors doubt a price recovery is on the cards
* Paris, London mayors take measures against diesel
* Penetration of petrol, hybrid, electric cars set to grow
* More than 1/3 of platinum supply from scrap by 2020
* Graphic on platinum prices: http://link.reuters.com/vat46s
By Silvia Antonioli and Ed Stoddard
LONDON/JOHANNESBURG, Feb 20 (Reuters) - Platinum producersstruggling back from South Africa's longest-ever mining strikeare now contending with threats to a long-awaited pricerecovery, notably Europe's emerging dislike of diesel engines.
The world's largest platinum miners, crippled by afive-month stoppage in 2014, have said their companies will dobetter this year, largely because they expect a strong pricerecovery from six-year lows.
But growing concerns about diesel engines, which useplatinum to limit emissions, are denting demand while increasedrecycling of platinum is eating into the miners' market share.
Amplats said it can hit the profitability targetset by its parent company Anglo American in three yearsif prices rise as it expects.
Its rival Lonmin, having plunged into the red lastyear, also expects higher prices, betting the European CentralBank's move to print more money to revive a flagging economywill stimulate car sales.
Investors and analysts beg to differ.
"Producers are in denial," said Investec portfolio managerHanré Rossouw. "They are forecasting a strong recovery in pricesbut with manufacturers relying more on recycling and Europestarting to turn against diesel engines, there isn't anyindication prices are going to rise."
Europe promoted fuel efficient diesel over gasoline enginesfor decades, aiming to cut carbon emissions.
Catalysts in diesel cars can use roughly 4 times moreplatinum than those in gasoline cars and have been the majorsource of demand growth for the white metal.
More recently however, health researchers, including theWorld Health Organisation, found diesel cars are not thatenvironmentally-friendly after all: they emit less carbon, buthigher levels of other pollutants such as nitrogen oxides whichhave been linked to asthma, cancer, lung disease and respiratoryillnesses.
Late last year, Paris announced plans to ban diesel carsfrom the French capital by 2020 to cut air pollution, whileLondon mayor Boris Johnson plans to double charges for dieselcars in congested areas.
Diesel engines might be in part replaced by direct-injectiongasoline cars, which use more platinum than regular petrolvehicles. But catalyst-free electric cars and hybrid cars --mostly powered by gasoline engines -- are set to steal a largechunk of market share.
"The EU carbon regulatory ratchet is tightening so much thatcar makers will have to push electric vehicles harder fromhere," Liberum analyst Adam Collins said in a note.
Autocatalyst producers, such as Johnson Matthey and Umicore,are hedging their bets by focusing on battery business forelectric and hybrid vehicles.
RECYCLE AND CONQUER
To cut reliance on mined platinum, catalyst makers aregrowing their recycling capacity.
BASF, one of the largest, is expanding itsCinderford autocatalyst recycling operation in the UnitedKingdom, for example.
"In line ... with our expectation for increased volumes ofscrapped autocatalysts coming to market in the years ahead, wewould also expect to increase our use of recycled platinum," acompany spokesman said.
Recycling today represents more than a quarter of theplatinum metals groups that come to market -- ranking as thesecond largest source of supply behind mining. That percentageis expected to grow to more than one third by 2020, he added.
Other factors such as scarce availability of energy in SouthAfrica are also contributing to create "the perfect storm" forthe platinum industry, said Paul Smith at Chinese-backedplatinum mine developer Wesizwe.
With some 50 percent of platinum mines losing money, he saidoutput cuts might be the only way to boost prices -- a viewshared by other industry observers.
"The simple fact that the huge strike last year didn't moveprices tells you just how much oversupply there is," said NikStanojevic at British wealth manager Brewin Dolphin.
"People are going to have to close mines. Until that happensI can't see things getting better." (Additional reporting by Nina Chestney and Clara Denina inLondon; Editing by Veronica Brown and Ruth Pitchford)
