Platinum is an important precious
metal in the automotive industry. It is used as a catalytic converter in
vehicles. As a converter, the metal is used to reduce carbon emissions in
automobiles. Indeed, most of the palladium is used for this purpose.
The metal is found deep inside
the earth’s crust and is mined by a few companies. Unlike other metals,
palladium is not mined whole. Instead, it is a byproduct of the platinum and
nickel mining. As a result, most of the metal comes from Russia and South
Africa. The biggest miner of palladium in the world is Norilsk Nickel, a
Russian company that controls more than 40% of the market.
The reason why the price of palladium
has continued to rise is that more people are now moving to petrol cars after
the Volkswagen carbon emission scandal a few years ago. As the world
transitions to a more carbon-neutral place, the demand for these cars is
increasing. In fact, the new carbon standards in China and Europe favor the
The biggest risk to the price of
palladium is the fact that most people are now considering moving to electric
vehicles. Cars like Tesla and Nissan leaf have become more popular. In
addition, charging systems have become more popular. In the just concluded auto
show in Detroit, all the manufacturers that exhibited said they were investing
billions to electric vehicles. Warren Buffet on the other hand has invested
billions in lithium extraction as he tries to capture the market. Therefore,
since almost 80% of all palladium mined is used for this purpose, it
potentially places the metal at a lot of risks.
To survive, the palladium
companies must now transition to the jewellery industry when its price is still
hot. This is how the price of diamond has remained high due to De Beers focus
on the price.
In recent days, the price of
palladium has declined from a high of $1440 to a low of $1337. In the coming
days, traders may watch out the ongoing
negotiations between US and China. A positive outcome will likely provide a
boost to its price.