Palladium Eclipses Gold As Most Valuable Precious Metal

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In 2018 palladium was one of the top performing commodities surging past gold in value.

Throughout the past year many of the metals found in automobiles like steel or aluminum have struggled in the market due in part to tariffs and a global economic slowdown but one that rose to the top is palladium. In fact, palladium has passed gold in value for the first time in more than a decade.

Palladium is a precious metal and part of the platinum-group of metals specifically. It is actually mostly produced as a byproduct of platinum or nickel that is mined in Russia or South Africa. The price per ounce of palladium rose by more than 50 percent in the second half of 2018 making it one of the best performing commodities of the year.

As mentioned in Scrap Metal Market: December 2018, the price of palladium surpassed gold as the most valuable precious metal. For the near future, palladium value is expected to remain above the traditional metals: gold, silver and platinum, that it used to lag behind of.

By The New York Times | Source: SP Angel

What is palladium used for and what led to its rise to the top?

Platinum and palladium are both part of the noble metal family. The attribute this family on the periodic table is known for is being resistant to corrosion and oxidation. About 80% of this rare metal used in the world is found in catalytic converters in your automobiles engine. The reason being is it converts toxic pollutants into less harmful chemicals that can be released through a cars exhaust system.

Regulations on tailpipe emissions have been the leading factor in automakers demand for more palladium. Coinciding with the increased demand for the metal has been a shift away from diesel vehicles. Three years ago, regulators found Volkswagen diesel engines were violating the Clean Air Act and forced to recall hundreds of thousands of cars worldwide. In the first half of 2018, the market share of the diesel engine in European auto market (where diesel cars are more commonly found) was down to a 38% market share from over 50% just two years ago.

Diesel engines rely more heavily on platinum and the change in consumer preference has led to a much greater demand for its lesser known cousin. From the New York Times, “Demand for palladium has steadily increased for eight years and is expected to outstrip supply by 1.2 million ounces in 2018.” The issue here being that in order to mine palladium it also requires more platinum mining which could pose a problem as there is already more than enough to meet the world demand.

Demand for Palladium, Platinum - Bloomberg Article
Source: Johnson Matthey, Bloomberg Opinion calculations

Hybrid cars projected to drive demand for palladium through the near future.

Going forward, some analysts say that due to the high price of palladium automakers may revert back to using platinum in their catalytic converters. Some are also making the bet that the growing market share of electric vehicles (which don’t use the precious metals) will curb demand.

While growth of electric vehicles is certainly skyrocketing so is the hybrid vehicle market. These environmentally friendlier vehicles that also require precious metals represent a massive amount of demand for the metals in the future. Representing just 3% of global market share in 2016, hybrid sales are projected to reach 23% of new car sales by 2025, according to Bloomberg.

Going forward there is both positive and negative speculation for the future value of palladium. For now it remains more valuable than gold, a thought that must sound so foreign to the average American. Though when you dig into the environmentally conscious auto industry and basics of supply and demand it’s not hard to see where the meteoric rise came from.

At its current value, auto recyclers have to be thrilled with the 2018 performance of palladium. For more on this and other news from the industry stay tuned into our Market & Metals blog.

Zack LaskyPalladium Eclipses Gold As Most Valuable Precious Metal

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