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Don’t expect a U-turn in palladium’s epic rally
- The silver-white metal, used to remove toxic emissions from the exhaust fumes of petrol and hybrid cars, has surged more than 200 per cent over the past five years and last month hit a record of more than $2,500 an ounce
Neil Hume, Natural Resources Editor
Correlation may not be proof of causation but it is difficult to see any other explanation for London’s catalytic-converter crime wave than the record-breaking rally in palladium prices. The silver-white metal, used to remove toxic emissions from the exhaust fumes of petrol and hybrid cars, has surged more than 200 per cent over the past five years and last month hit a record of more than $2,500 an ounce. At the same time, thefts of catalytic converters in the UK capital jumped — from 867 in 2015 to 8,248 in 2019, according to the Metropolitan Police.
The force has urged car owners to be vigilant and consider buying protective sleeves for their catalytic converters. After nearly a decade of undersupply, the world is now critically short of palladium and its sister metal rhodium. In part, this reflects sluggish supply. Production of these metals is constrained because they are mined as a byproduct of platinum and nickel — commodities where new projects have been few and far between.
At the same time, demand is booming. Tougher emissions legislation and stricter vehicle-testing regimes in the wake of Germany’s “Dieselgate†scandal saw the automotive industry buy a record 9.7m ounces of palladium last year, according to Johnson Matthey, a producer of catalysts. That is why industry executives say talk of a palladium bubble is misplaced. “I don’t want to mention a name but there has been a senior car company that has experienced a real shortage in rhodium,†Neal Froneman, chief executive of producer Sibanye-Stillwater, told the Financial Times last week. “You can’t run deficits and consume surface stockpiles and inventories for ever and a day.
At some point that turns into a real shortage. And that’s what happened in rhodium and I dare say it could happen in palladium.†Johnson Matthey reckons demand outstripped supply by 1m ounces last year and says a further rise in automotive demand will push the 11.5m ounce-a-year palladium market deeper into deficit. While a coronavirus-induced slowdown in the Chinese car sector could reduce the size of the shortfall, most analysts expect the market to remain undersupplied. Standard Chartered estimates China’s car production would have to plummet 28 per cent before the market deficit is eroded by declining demand. Assuming that does not happen, prices look set to push higher unless there is a sudden mobilisation of stockpiles. These include a stash of the metal owned by Russian miner Norilsk Nickel.
It was purchased from the country’s central bank many years ago and Johnson Matthey reckons 1m ounces there might be available, but no one is really sure. For nervous car owners, a protective device for their catalytic converters still looks like a sound investment.
Source: https://www.ft.com/content/557a69f4-4e4c-11ea-95a0-43d18ec715f5
