Palladium set to exceed $1,000 per ounce

Thomson Reuters GFMS - Platinum Group Metals Survey 2018 (June 7 report) claimed that the price of the metal Palladium is set to exceed US$1,000 per ounce in the second half of the year. Even platinum price will get in a recovery phase in the second half of the year 2018.

In the year 2017, platinum declined due to low capital expenditure on the metal, which led to the closure of some of the projects and operations in platinum. Fall in retail investments in the precious metals, low industrial demand and fall in jewellery demand led to the decline in price of precious metals.

Gold and silver are popular precious metals and are more expensive as compared to palladium but not to platinum. Platinum is one of the rarest metals and its price exceeds silver. It is widely used in automotive industries, oxygen sensors, electronic devices and jewellery. 

Platinum mine production reduced in the year 2017 due to various other factors – mine suspension, disruption in maintenance and safety risks, and this decreased the total production significantly.  Its utility in auto catalyst applications rose in the last year 7.1 per cent, and in the previous year, Europe was the largest consumer of platinum.

Comparing platinum to palladium

Both Platinum and Palladium offer attractive ways to diversify portfolio. These are tangible and hold value well over time.

There has been a market surplus and low industrial demand of platinum. Even the jewellery demand for platinum lowered in the year by 5 per cent to 2.20 million ounces.  Demand for platinum fell in Europe from 2 per cent to 1.4 per cent million ounces. Platinum demand reduced due to fewer sales of diesel automobiles, while, the older being scraped from the markets in China.

Thomson Reuters GFMS report states the physical deficit for palladium reduced to 1.2 million ounces in 2017.  Automobile based environmental pollution led to the increase in demand for palladium, which is needed to reduce pollution as per some of the new regulations in polluted cities of South–East Asia.

In 2018, Palladium demand grew due to the rise in need for devices used for exhaust fume cleaning.  China had a double digit increase in consumption of palladium.  It is assumed the price will increase as consumption is expected to increase from 174,000 ounces to 8.565-million ounces.

Higher output from North American mines will increase total supply. The mine production of palladium increased 3 per cent as compared to last year to 6.74 million ounces. The output increased in the US, South Africa and Russia but reduced in Canada. A price of over $1 000 per ounce can be registered in the coming year. It is assumed the price of palladium will exceed platinum on an average annual basis, in the current year, although, the price of platinum as compared to gold already appears stretched.

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