By the legendary Mike Maharrey
While the world was focused on the stock market’s bulls and bears, the price of palladium surged by a whopping 8 percent on Thursday (Oct 24).
In fact, palladium has skyrocketed by approximately 27 percent since earlier this month, jumping from $922 an ounce to over $1,195 today.
Unveiling the Mystery of Palladium
Palladium is a rare silver-white metal belonging to the platinum group metals (PGMs). Discovered by the brilliant English chemist William Hyde Wollaston in 1802, palladium plays a crucial role in catalytic converters for gasoline-powered vehicles, with the auto sector consuming about 85 percent of palladium production.
Its exceptional conductivity and durability also make palladium perfect for small electronic components like multilayer ceramic capacitors (MLCCs) found in devices such as cell phones, laptops, and televisions. Additionally, like its cousin platinum, palladium is used in jewelry making.
Palladium is a scarce metal, approximately 30 times rarer than gold, with global mines producing around 200 tons of palladium annually compared to 3,000 tons of gold. The majority of palladium production is a byproduct of nickel and platinum mining, with Russia and South Africa being the primary producers.
Among these, Russia stands out as the largest palladium producer, with MMC Norilsk Nickel PJSC leading the way.
The Threat to Palladium Supply
In the spring of 2022, palladium prices soared above $3,000 an ounce due to concerns over supply disruptions following Russia’s invasion of Ukraine. As demand in the automobile industry waned, prices gradually declined, settling in the $900 to $1,000 range over the past year.
However, the recent spike in palladium prices can be attributed to reports that the U.S. is urging G-7 countries to impose sanctions on Russian palladium. This move has reignited buying activity fueled by fear of potential supply disruptions.
While the effectiveness of such sanctions remains uncertain, the threat has tightened the palladium market, exacerbating existing supply shortages. With demand outpacing supply for three consecutive years and a projected 358,000-ounce market deficit in 2024, the palladium market is in a precarious position.
The Future of Palladium
With dwindling supply and increasing demand, palladium prices are poised for growth. Although a return to $3,000 palladium seems unlikely in the near future due to various limiting factors, including a shift towards platinum in catalytic converter production, the outlook for palladium remains bullish.
As China explores ways to stimulate its economy, the demand for palladium is expected to rise, further propelling prices upward. With China accounting for a significant portion of global palladium demand and the ongoing supply challenges, the palladium market is set for exciting developments in the coming months.
Stay tuned for more updates on the thrilling world of palladium and how it can shape your investment decisions!