Palladium Breaks More Records - November 2019
The bumper year for palladium shows no sign of stopping with another record high price level of $1824.50 per troy ounce recorded recently. Year to date, this represents an increase of over 42%. This is astonishing given the average price for palladium since 1994 (unadjusted for inflation) is just $500 an ounce. For reference, the performance of the four main precious metals this year so far is as follows:
This relentless rise in the palladium price is being driven by a number of factors. Clearly, the effects of the emissions scandal in the motor industry are still being felt today, with demand for petrol/hybrid vehicles higher than diesel vehicles due to new regulations and laws. This has contributed to these rising palladium prices because petrol and hybrid cars use palladium-intensive catalytic converters. Indeed, as a result of this price boom palladium catalytic convertors have become the scrap metal thief’s new target of choice.
The bulk of palladium production is largely concentrated in Russia and South Africa, with both countries controlling nearly 90% of world production. We suggested in March that the palladium price could be impacted further due to the ban on the export of precious metals scrap and tailings in Russia. No doubt this has also contributed significantly to the price bubble, but of note is this export restriction is supposedly coming to an end in November (Reuters, 19/3/19).
How could this impact the palladium price? If the Russian government is true to its word, this bubble could finally burst. Then again, Russia's Nornickel mining company has raised doubts about its ability to replenish its Global Palladium Fund. We believe it is impossible to tell - with China apparently beginning to enforce emission regulations on its motor industry and uncertainty around how much palladium is actually stockpiled in Russia, only a fool would predict where the price will end up.
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