At the beginning of the year, palladium became the most expensive precious metal overtaking gold. It is believed that further reductions in emissions combined with supply concerns drove the market to all-time highs.
According to an article in CMC markets online, ‘in excess of 80% of the world’s palladium is put to use in catalytic converters’, Russia being the largest producer of palladium in the world, has added to supply tightening by declaring a ban on exporting scrap and tailings of precious metals from May until November.
The climate change debate has been heating up in recent years and attitudes are changing, and there has been an increased push to reduce exhaust emissions. The EU has pledged to cut emissions by 2030. In March 2018, China announced that it met its 2020 carbon intensity target – well ahead of schedule, but the scheme was a scaled-back version of what was originally planned. Overall, a decline in emissions is where we are headed.
Stricter regulation has dented the sale of diesel cars in recent years. For example, in March 2019, UK diesel car sales dropped by 21% when compared with March 2018, and total UK car sales dropped by 3.4%. As well as low diesel sales, Brexit uncertainty has had a part to play here too.
As for electric vehicles (EVs) and hybrid cars, they use palladium, along with cobalt and nickel in their batteries (metals which are likely to see an increase in demand in the future) and are likely to challenge vehicle sales in the coming years. In 2016 hybrid car sales accounted for 3% of the global market and JP Morgan Chase predicts it will increase to 23% in 2025.
But changes are not just down to attitudes to emissions but also consumer habits. For example, Last Year, China, the second largest economy, saw car sales drop by 3%, its first yearly decline in 20 years. Apart from China’s need to reduce the level of pollutants, another factor contributing to this sales drop is their trade dispute with the US. The China Association of Automobile Manufacturers (CAAM) predicts that the car market will be flat in 2019, and that the rise in electric car sales might offset the weaker petrol and diesel sales.
Consumer patterns and trading relationships fluctuate, but the push toward a more eco-friendly world takes precedence. Other precious metals may see an increase, and although ‘Palladium will run hot and cold like any market, but between growing demand, and tight supply, the metal is likely to continue its wider bullish run.’
‘The metal has been in a strong upward trend since mid-August 2018, and if the bullish run continues it might target the $1,600 area. Moves to the downside, might find support in the $1,200 to $1,158 (200-day moving average) region.’