Palladium Market

MARKET OVERVIEW

Platinum group metals (PGMs) are rare precious metals with unique physical properties that are used in diverse industrial applications. Palladium, like gold, silver and platinum, is a precious metal, as well as one of the six PGMs, which also include platinum, rhodium, ruthenium, iridium and osmium.

The unique physical characteristics of PGMs include:

  • Strong catalytic properties;
  • Excellent conductivity and ductility;
  • High level of resistance to corrosion;
  • Strength and durability; and
  • A high melting point.

Palladium’s primarily used as a thin coating on ceramic filters insider of catalytic converters in automobile engines. It acts as a catalyst to convert carbon monoxide to carbon dioxide and converts hydrocarbons and oxides of nitrogen into pure oxygen, nitrogen and water. Demand for palladium is expected to exceed supply over the next few years, driven primarily by the continued growth in automobile sales.

SUPPLY

As a rare precious metal, there are very few palladium producing regions worldwide and few known economically viable ore bodies.

Forecasts indicate that Russia (38% share) and South Africa (40% share) will account for three-quarters of global palladium mine production, with important contributions coming from North American (14%) and Zimbabwe (6%) (source Johnson Matthey, 2016).

Growth in mine supply is constrained, largely owing to:

  • Political, infrastructure and cost issues in South Africa;
  • Relatively constant palladium production in Russia; and
  • The very small number of new projects on the horizon in the near future.

DEMAND

Demand for palladium continues to grow, driven primarily by the automotive sector that consumes nearly 80% of world palladium supply for the manufacture of catalytic converters in cars that help reduce toxic emissions into the environment.

The demand for palladium in the automotive industry has more than doubled in the last ten years due to an increase in global automotive production and the tightening of emissions standards worldwide, resulting in steady growth in the use of catalytic converters.

The primary driver of growth in the automotive sector is from the emerging economies, especially Asia, where there is emerging affluence, very low penetration of vehicles per capita, and where the affordability factor is high due to low interest rates and leasing programs. In addition, the recent recovery of the US auto sector has also strengthened demand for palladium.