The spot price for Palladium has set further record prices this week, peaking today at $1,419.37 per ounce - $100 per ounce more expensive than gold and up by $152.37 per ounce since New Year’s Day – a 12% rise in value.
The precious metal is subject to massive shortages of supply, and with high demand from the automotive industry the price gains are showing no signs of letting up. As the three-month chart below shows, the price of palladium is on a sharp upwards trajectory, having made gains of $309.46 per ounce within the past 12 weeks (27.95% increase).
In January we reported that palladium’s price was $500 per ounce more than that of rival metal platinum, which traditionally has had a higher value than palladium. Today the price difference is even higher – now $800 per ounce more for palladium than platinum.
Given the rarity of palladium compared to the other metals, and the majority of it residing in Russia, it’s not expected that the palladium price will come down any time soon, and given that the cost of switching from palladium to platinum in the automotive industry will cost so much – at a time when car demand is slowing down – it’s not feasible that major manufacturers will abandon the expensive palladium to engage in the laborious and costly process of switching to the cheaper metal; a long term benefit, but a costly initial expenditure that companies simply cannot risk in the face of economic uncertainty such as the US/China trade war, the Eurozone struggles, and wider protectionist behaviours.
Metals experts Johnson Matthey released a report this week detailing their analysis of the platinum and palladium markets in 2018, and their forecasts for 2019. On palladium, the company said:
“The deficit in the palladium market looks set to widen dramatically in 2019, with stricter emissions legislation forecast to stimulate double-digit rises in palladium demand from European and Chinese automakers.
“Although recoveries from autocatalyst scrap should rise again, the rate of growth in secondary supplies is likely to be lower than in 2018, while primary shipments are expected to be flat. With remaining ETF holdings having fallen to 730,000 oz at the end of last year, these funds no longer hold enough metal to bridge the gap between industrial demand and supplies.”
The research document concluded by saying: “Excluding investment, the underlying ‘structural’ deficit in palladium is forecast to approach 1 million oz in 2019: even if all remaining ETF holdings were liquidated, this would not be sufficient to fill the shortfall.”
You can read the full Johnson Matthey platinum document HERE.