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The Price of palladium recently reached a new all-time high of over $3,000 per troy ounce. The price of the precious metal has risen to record highs this year, due to increasing demand from the industry and tight supply. Palladium is an important raw material in car catalytic converters, which reduce the emission of harmful exhaust gases. Due to strict environmental requirements and an improving economy, car manufacturers are using more of this precious metal, while the supply is limited. Investors fear that a flood in two large mines of the Russian company Nornickel will reduce palladium on the market.
Russia is the main producer of palladium, together with South Africa. Together, these two countries account for about 80% of the world's Global Manufacturing. The rest come almost entirely from Canada, the United States and Zimbabwe. Due to this strong concentration, production problems in one of these countries can have a major impact on the total supply of palladium. The Russian Mining Company expected that its production will be 15 to 20 percent lower this year due to the flooding. Nornickel is the largest producer of palladium in the world.
Due to the tightness in the palladium market, many speculators are also diving into the precious metal. For example, the Palladium price has risen more than 25% since the beginning of this year. A large part of this price increase was seen on 16 March, the day the mines flooded. According to Jeffrey Christian of the CPM Group, the price of palladium could remain at this high level for a while. Opposite Reuters he said the following: "The automotive industry is buying more palladium and the electronics industry is buying more palladium, hence the tightness in the market. We are now mainly seeing a speculative increase in demand. That could go on for a while and keep prices high."
Car manufacturers mainly use palladium for gasoline cars, while they use platinum for diesel cars. Due to stricter environmental requirements, the demand for petrol cars has increased in recent years, while the demand for diesels is lagging behind. This is also reflected in the price development of both precious metals. While palladium is becoming more and more expensive, the platinum price has lagged behind in recent years. This dynamic may change over time, as car manufacturers can technically switch to platinum for use in gasoline cars. Platinum is more than half the price of palladium at the current price of $1,249 per troy ounce. The demand for palladium may also decrease due to the transition to electric cars, because they do not contain a catalytic converter.
If we look at the price development of the four most important precious metals, we see that palladium has been by far the most expensive precious metal for some time now. That hasn't always been the case, because ten years ago the roles were reversed. At that time, platinum cost much more than palladium and was even the most expensive precious metal for a while. On balance, gold and palladium are now about six times more expensive than they were at the beginning of this century, while silver is now worth five times as much.
Platinum is relatively much cheaper, as this precious metal currently costs only 2.5 times as much as it did at the turn of the century. This makes platinum potentially an interesting alternative for investors. Especially as more car manufacturers switch to platinum, the demand for platinum jewelry increases and more investors discover platinum as an alternative to gold and silver.
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