What is Palladium?

December 16, 2008 | By | Reply More

Palladium is one of a group of six metals known as Platinum Group Metals or PGMs. It is a by-product of other mining operations.

The others are

Palladium is more rare than platinum which is 15 times rarer than gold.

All the platinum ever mined will fit into a 25 cubic foot room.

Both platinum and palladium have very high melting points and both are effective catalysts in chemical reactions.

Palladium can tolerate more heat than platinum and that has some added importance to the auto industry.

In 2005 approximately 40% of total platinum demand and approximately 58% of palladium demand came from the worldwide motor industry.

Both are used in catalytic converters to reduce auto emissions to meet increasing clean air standards.

As both metals can be used in catalytic converters more or less as effectively as each other, auto manufacturers will use whichever metal is cheapest.

The downside being the time taken to retool when switching from one metal to the other.

In 2001 palladium reached a high of US$ 1090.00 an ounce while platinum was trading at circa $620 an ounce.

Also in 2000-2001 the Ford Motor Co. stockpiled 1,800,000 ounces of palladium.

This created a price bubble which eventually cost Ford nearly $US1 billion.

Other auto manufacturers retooled to use platinum and as the demand went up so did the price whilst the price of palladium dropped to as low as $184.00 an ounce as demand slackened.

The latest designs call for the catalytic converter to be located nearer the engine and that will suit the higher tolerance that palladium has to heat.

The two largest producers of palladium are Russia, which accounts for circa 50%, and South Africa and both have kept the market fully supplied for several years.

As the US dollar declines and if Russia continues to grow wealthier and less dependent on overseas earnings, and in particular dollar earnings, so the temptation to restrict supplies to push up the price may become greater.

As China and India become wealthier so their burgeoning motor industry will continue to manufacture more and more cars all of which will be required to meet rigorous emission standards and that will of necessity mean a growing demand for palladium when the present economic problems are eventually overcome.

China is the worlds fastest growing motor market

Currently Palladium is trading circa US$ 178.00 an ounce against platinum at circaUS$ 840.00.

If you want to get in on a palladium play you can check out on-line for a quoted miner that produces the metal which will most likely be as a by product, or a more speculative play would be to find a miner that claims to have found a source and expects to be in production soon.

Be aware that rising production costs and the slackening of demand during the ‘credit crunch’ that has seriously affected the auto manufacturing industry is resulting in the closure of marginal producers.

To directly invest in the metal it is possible to purchase one ounce premier palladium bullion bars issued by Credit Suisse a major Swiss bank and PAMP or one ounce premier palladium coins produced by the Royal Canadian Mint.

It is important to first check out the premiums charged before purchasing as there is a likely to be a variation.

Again go on-line to find a dealer for your trade  and to provide information.

We think that this is the simplest and best route to take to gain exposure to the palladium market.

This is not a recommendation to buy, sell or stay out of the palladium market, we keep our opinions to ourselves.

We hope that or postings will give you food for thought and encourage you to investigate further, to draw your own conclusions and take the action you consider to be appropriate.

There is no substitute for doing your own research.

Be wary of tipsters

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Category: Platinum Group Metals

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