In 2001 there was a true supply/demand imbalance, and the price of palladium shot up to $1100 oz. Some precious metal miners are seeing strong indicators in the current market that are mirroring events which caused the panic in 2001, but this time, palladium may not come back down to the prices of today.
Palladium is a precious metal that is also used for industrial purposes in many industries, most notably in the manufacturing of catalytic converters for the automotive market. The electronics industry, fuel cell technologies, and the continuing efforts in Cold Fusion all require the beneficial characteristics of the PGM metal, palladium. With global leaders working together to obtain cleaner emission standards for automobiles, personal electronics demanding longer battery life, and hydrogen fuel celled vehicles already on today’s roads, it is hard to fathom that the price of Palladium will not increase in the not so distant future.
No matter what the media says, China has the fastest growing middle class in the world, and this middle class no longer wants to take public transportation, or ride their bikes. Based on this fact, many in China are buying their first and second vehicles, finally allowing them to surpass the United States in automotive sales for the first time in history. New car sales have increased 71% year over year for the Chinese in the first quarter alone, and if, as some predict, the Yuan is revalued, it will make the purchase of palladium so cheap, it would be a no brainer for the Chinese to stock pile palladium at any price below $500/oz. Actions speak louder than words! When China’s government blocked Chinese automobile manufacturer’s purchase of the hummer brand from GM, it screamed the need for catalytic converters, and proved the dedication of the Chinese to cleaner emission standards.
Another automotive fact, that many do not know is; Germany has just completed a cash for clunkers program similar to that which was done in the US with great success. We do not have the hard numbers on how many economical vehicles were added to the roads in Germany, but we can safely compare. GM has announced that they will be keeping factories open through the summer and adding a third shift to increase production. All facts that point to an increased usage of palladium.
Palladium is just as scarce as it is precious, coming out of only four regions of the world. Russia (40%), South Africa (40%), Montana (10%) and Canada (10%)? Palladium performs the same job as Platinum ($1,430/oz) and Rhodium ($3000/oz) but sits far below in price at roughly $450/oz, as of this writing. Which would you use? Frank McAllister, CEO of Still Water Mining caught our attention when he stated that
“The difference between the prices for platinum and palladium will likely continue to decrease,”
McAllister also told analysts and investors that he has no expectations for parity between the two metals, but suggested palladium could potentially increase to half the price of platinum.
With all the indicators above pointing to an increased usage of palladium, rumors flying about Russia’s stockpile dwindling, and the fact that their palladium mines will not supply a sufficient amount of the precious metal forever, palladium is looking like the Cinderella metal, that so many like to call it.