Platinum and Palladium: A Fundamental Shift
By Jeff Clark, Senior Precious Metals Analyst
Platinum is a precious metal, as is palladium, though to a lesser degree. However, like silver, both are also industrial metals. Unlike silver, ...
Platinum and Palladium: A Fundamental Shift
By Jeff Clark, Senior Precious Metals Analyst
Platinum is a precious metal, as is palladium, though to a lesser degree. However, like silver, both are also industrial metals. Unlike silver, it's their industrial use that is the primary price driver for both platinum and palladium – and that use is undergoing a fundamental shift.
The largest source of demand for platinum and palladium is the automotive industry, for use in autocatalysts. In turn, the fortunes of the auto industry are sensitive to the health of the world's major economies. We've been bearish on platinum-group metals for years, primarily because we weren't convinced a healthy – much less roaring – world economy could be sustained when so many governments continue spending beyond their means.
We reconsidered the market last year, when strikes in South Africa – home to 75% of global platinum production and 95% of known reserves – threatened supplies. But as we wrote last December, the strikes ended without great impact on long-term supply.
Since then, however, the fundamentals of this market have changed. Others may disagree with our economic outlook, which is still bearish, but it's due to supply issues – not demand – that our interest is now drawn to these metals, and particularly to palladium.
Here's a look at global supply against auto-industry demand for both metals.
Approximately 55% of platinum and the bulk of palladium supply was used
