The palladium has had a good year, even if the price has dipped recently. Speaking to Bloomberg earlier this year, Tai Wong, BMO Capital Markets’ head of metals derivatives, said: “It’s a confluence of factors that are driving palladium. Fundamentally, there’s going to be a material deficit this year and automakers need to restock.”
Although motor manufacturers are moving towards electric vehicles, palladium is used in hybrid vehicles, which are enjoying growing demand while companies get their EVs ready for mass consumption.
The recent gains in the palladium market are also the result of broader economic peaks and troughs. After losing over 49% in 2008 during the recession, the palladium price recovered in line with the global economy.
Automakers account for some 40% of platinum demand and 80% of palladium demand, embedding them in exhaust systems to neutralize harmful emissions.
The chip shortage worsened over the summer and is expected to continue through next year.
Palladium dropped from an all-time peak above $3,000 an ounce in May as far as $1,841.93.
Analysts said demand should improve as the chip shortage eases and carmakers may even overproduce to replenish stockpiles when they can — potentially lifting prices.
As the world desperately attempts to curb carbon emissions and the appetite to buy new cars returns after the Covid-19 hiatus, it is expected that demand for platinum and palladium in catalytic converters will continue rising.
Considering that a standard catalytic converter is made up of between 3 and7 grams of platinum/palladium (depending on the manufacturer and model) and that the world will continue purchasing vehicles according to more stringent emission standards (which requires more converters) there will be a sustained and consistent supply of spent converters in the future.
According to Greg Pendura, CEO of Mineworx, there will be a mind-boggling 27 million spent diesel catalytic converters per year only in the U.S. Even more outrageous is that only 3% of those converters will eventually be recycled. It means that there are unthinkable amounts of platinum and palladium locked up in these catalytic converters. Pendura says that close to 50% of the annual global platinum and palladium production is used in diesel catalytic converters.
Palladium Long (Buy)
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