The price of Palladium has risen today to a record high of £885.04 per ounce, driven by a supply shortage and concerns that the United States might withdraw from the INF (Intermediate-Range Nuclear Forces) treaty, as cited by Commerzbank who believe Russia would limit palladium supplies in retaliation if America withdrew from the treaty.
As we reported recently, demand was already heightened courtesy of Chinese imports, with manufacturers and investors keen to acquire palladium before the US could apply trade tariffs should the trade war continue between America and China.
Palladium has since settled around £881 per ounce, but it was only last autumn that the precious metal matched its record high – set at the beginning of 2001 at £711.85. The gold to palladium ratio is currently 1.09, having been around 3 on average.
Palladium’s gains (per ounce):
- £56.43 in the past week
- £77.64 in the past month
- £192.12 in the past 3 months
- £431.11 in the past 3 years
- £757.45 in the past decade
Typically, it was platinum that proved expensive, even surpassing gold on many occasions as the most valuable precious metal, but the sharp decline in demand following the Volkswagen diesel emissions scandal has seen palladium steadily climb in value. The reason is that both palladium and platinum are used in catalytic converters; palladium for petrol vehicles and platinum for diesels. As diesel vehicle demand has shrunk significantly, so has platinum demand, with petrol and hybrid vehicles picking up the slack and thus palladium demand increasing, driving up prices.
Robin Bhar, Head of Metals Research at Société Générale, was quoted last autumn saying there was “a fairly deep deficit for palladium”, with the financial services firm projecting a 1.8 million ounce deficit in 2017 and a 1.9 million ounce deficit this year.
“Palladium, it can be argued, is the most industrial of the precious-metals complex with more than half of demand coming from the auto-catalyst sector,” Bhar said to reporters. “Therefore, it is behaving almost like a base metal. So the factors driving copper and the other base metals higher are also pushing palladium up.”
Thomson Reuters GFMS suggested a slightly smaller deficit of 1.661 million ounces in 2017, and stated in January 2018 that the increasing levels of recycled palladium entering the market would help bring the deficit down in 2018 to 1.545 million ounces – still a large deficit but a positive sign for prices to stabilise for industrial purposes.
2001: A Palladium Odyssey
A shortage of palladium was also the issue when the metal peaked in 2001. The value of palladium rose rapidly in the late 1990s as supplies became less certain. Issues in Russia with shipments and delayed dispatches led to a sharp price rise, overtaking both gold and platinum, but Russia had been using its stockpiles to smooth things over – until these stockpiles ran dry. Speculation about how much or how little was left caused a price hike, peaking at £711/$1100 as 2001 began.
The scarcity of palladium led to the nickname ‘unobtanium’ – a reference used in the sci-fi films The Core and Avatar. Such was the determination to acquire palladium that one group, the hedge fund Tiger Management, bid to purchase all of Russia’s palladium stock in 1998 but were declined.