Can Palladium Make a Comeback?

published 26 May 2006

Most raw materials have jumped in price over the past few years, but palladium has fallen sharply and is now languishing at below $200 an ounce, says Emanuel Balarie of Wisdom Financial on Gold-eagle.com. So is the metal, used in industries ranging from electrical components to surgical instruments, worth a look?

The primary industrial application for palladium is in the automobile sector, where, like platinum, it is used in catalytic converters. With platinum vastly more expensive at more than $900 an ounce, car makers should switch back to palladium to produce catalytic converters.

This process appears to be beginning demand for platinum from US car-makers slid 10% last year, while palladium demand jumped by 20%. Chinese demand for palladium jewellery as a substitute for the more expensive platinum has also risen, says Canada's Scotiabank.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Nevertheless, a sustained upswing could still be years away. A technology allowing palladium to be used in catalysts for diesel motors (as platinum is now) may not be marketable for a few years, says FAZ.net, but the key problem for palladium is a supply overhang that, according to Johnson Matthey, is 15% of annual demand.

And this won't be eroded quickly, as mine output is expanding. Supply is set to expand by about 7% in 2006 and 2007, while the respective figures for demand are 10% and 9%. Johnson Matthey forecasts an average price of $180 next year.

Don't count on palladium catching up with other commodities any time soon.

Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.

After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.

His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.

Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.