Why the insanely high paladium price is not sustainable
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While gold is often the first thing that comes to mind when precious metals is mentioned, another member of that family, palladium, has also been driving forward at breakneck speed.
The price of the metal, which is mainly used in the catalytic converters of internal combustion cars to reduce polluting emissions, soared from $US1,836 ($2,693) per ounce a month ago to a record breaking $US1,900 an ounce.
This was due in no small part to South African miners, who collectively rank as the world’s second largest source of palladium production, shutting down operations in response to the country’s power cuts.
Saxo Bank head of commodity strategy Ole Hansen was quoted by Bloomberg as saying that tight palladium supplies could get even tighter due to production problems in South Africa, which could send the price even higher.
However, the longer-term prospects of palladium may not be quite that rosy.
Independent analyst Martin Duriska, who previously forecast that palladium was in for a long decline caused by electric vehicles, continues to be bearish about the long-term prospects of the precious metal.
“It is all about when the EV wave actually swells up into a tsunami large enough to slow down the production of internal combustion engines and when the price of palladium becomes high enough to warrant recycling the stuff that is in catalytic converters,” he told Stockhead.
“I just can’t see the price being sustainable in the long-term when 50 per cent or 55 per cent of the use of palladium is in internal combustion engine catalytic converters.”
Major car manufacturers are spruiking their electric vehicles, which don’t need catalytic converters, in a big way, with Volkswagen planning to invest about €33 billion ($53.7 billion) in electric mobility between 2020 and 2024 and roll out 75 completely electric models and 60 hybrid vehicles over the next decade.
Here’s a list of ASX companies with exposure to palladium and how they performed in past six months and a year