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November 17, 2019

Palladium becomes more expensive than platinum

PalladiumDespite the widespread use of electric cars, the palladium used in car engines continues to appreciate on the commodity markets. The metal reached price of 1,094.51 USD per ounce during trading on Tuesday, bringing it close to a 16-year high. And although it lowers on Wednesday, it remains attractive to investors. For the past 2017, the price of palladium has risen by 55%, this being the best performance among the 34 most traded goods on the futures market.

Since in 2009 the palladium was trading for one fifth of the platinum price, but now surpassed it. On the spot market platinum is exchanged for 946.13 USD per ounce.

In order to clarify the market situation, it is worthwhile to look at the Vokswagen diesel scandal and more and more attention to the problem of air quality in European cities due to the use of diesel fuel.

Palladium takes its place in the commodity markets because of its use in vehicle catalysts. In the 1960s, it was perceived as an exotic but useless alternative to platinum, both of which met in the same mines in South Africa, Russia and North America. At that time, palladium was used, for example, in the wedding ring of Marilyn Monroe.

As a raw material for the production of catalysts it was used first in the 1970s, reducing the effect of harmful gases. Because of its properties the metal becomes more and more valuable.

Scarce use of palladium by jewelers and investors means that it looks more like copper, nickel and zinc than gold or silver. About 80% of global palladium consumption in 2017 is due to its implementation in catalysts and the other 20% is used in industrial plants. On the other hand, 40% of platinum demand is due to investors and jewelers.

The palladium is used in the catalysts of almost all types of gasoline cars, but it does not do that well in reducing diesel pollution – the use of platinum is predominant. As a result, withdrawing from diesel cars for one reason or another could also lead to a change in metal prices.

In London and Paris, the sale of petrol cars is already ahead of that of diesel. By comparison, in France and Spain, in 2011, the diesel cars accounted for 70% of the personal transport of the population, but today their share is below 50%. As a result, the market is definitely not conducive to platinum-producing companies.

The last time platinum was cheaper than palladium was in the late 1990s, but the situation quickly changed with the diesel boom in Europe.

Thanks to recycling, every year 2 million ounces are added to platinum supplies globally, compared to 3 million used in automotive catalysts. At the same time, the boom of diesel cars in Europe was reached in mid-2000, and the withdrawal from them is now the beginning of the end of their lives. And, respectively, the transmission of the catalysts and platinum into them for scrap.

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