Palladium has just had its best week in four years, rising by more than 9% in the five days to 25 September. The bounce came off a five-year low, and could herald the start of a longer uptrend, says Rhiannon Hoyle in Barron’s. Around 75% of palladium supplies are used in catalytic converters for petrol engines, while sister metal platinum is used for the same purpose in diesel engines. VW’s woes thus caused a slide in platinum prices and a bounce for palladium as investors anticipated a switch to petrol engines.
Longer term, the demand picture looks promising too. Petrol engines predominate in China and America, while diesel is more common in Europe, accounting for more than 50% of new car sales. US consumers are buying cars at the fastest pace in a decade. Chinese car sales have been falling on an annual basis, but recent stimulus measures could bolster growth and fuel consumer confidence. The government is also getting tougher on pollution.