Palladium is now the most valuable of the four major precious metals, with an acute shortage driving prices to a record. A key component in pollution-control devices for cars and trucks, the metal’s price doubled in little more than a year, making it more expensive than gold.
1. What is palladium?
It’s a lustrous white material, one of the six platinum-group metals (along with ruthenium, rhodium, osmium, iridium and platinum itself). About 85% of palladium ends up in the exhaust systems in cars, where it helps turn toxic pollutants into less-harmful carbon dioxide and water vapor. It is also used in electronics, dentistry and jewelry. The metal is mined primarily in Russia and South Africa, and mostly extracted as a secondary product from operations that are focused on other metals, such as platinum or nickel.
2. Why is it getting more expensive?
Supply hasn’t responded to growing demand. Usage is increasing as governments, especially China’s, tighten regulations to crack down on pollution from vehicles, forcing automakers to increase the amount of precious metal they use. In Europe, consumers bought fewer diesel cars, which mostly use platinum, and instead chose gasoline-powered vehicles, which use palladium, following revelations that makers of diesel cars cheated on emissions tests.
A shortage of palladium has sent prices soaring
Data: Bloomberg
3. Why is supply so tight?
Palladium’s status as a byproduct to platinum or nickel mining means output tends to lag price gains. In fact, the amount produced is projected to fall short of demand for an eighth straight year in 2019. That’s helped drive prices to successive records. While some obscure metals are still more valuable, palladium traded above gold for most of this year.
Growing Shortage
Palladium has been in deficit since 2012
Source: Metals Focus
Read More: Elements That Go Boom and Bust
4. Are speculators driving up the price?
Partly. Since August 2018, hedge funds have increased bets that prices will rise. Yet palladium for immediate delivery trades at a premium to material for delivery later, suggesting manufacturers are scrambling for supply. And palladium-backed exchange-traded funds saw net-outflows this year as investors withdrew metal, then leased it to users at lucrative rates. There has also been anecdotal evidence of stockpiling in China, the biggest buyer in the automotive sector.
5. Who are the winners