Since the beginning of 2020, market prices for palladium in the world have grown by 45% and renewed their historical maximum. According to the London Metal Exchange (LME), the peak value was reached on February 27, when the cost of the metal reached $ 2795 per troy ounce. Now the figure is near the mark of $ 2675.
Note that precious metal in the global market has been growing almost continuously since 2016, only in 2019 prices rose by 54%. At the same time, palladium managed to bypass gold ($ 1620 per troy ounce) and platinum ($ 880).
According to RT analysts surveyed, the main reason for the skyrocketing prices was the global palladium deficit. Lack of raw materials on the market has been observed since the beginning of the 2010s. According to the Norilsk Nickel (the largest producer of palladium in the world), in 2019 the demand for metal exceeded production by 550 thousand ounces, and in 2020 this value can almost double - up to 900 thousand.
“Now the demand for palladium significantly exceeds supply, since metal is actually mined only in two countries of the world - Russia and South Africa. As a result, investors began to pay closer attention to the asset, which made the metal more attractive than gold, ”said Yegor Klopenko, creator of the venture investor club iTLEADERS, in an interview with RT.
According to the analyst, recently the situation around the coronavirus has also had a positive effect on the cost of palladium. Against the backdrop of the uncertainty arising from the infection in the global economy, investors began to buy precious metals more often as a reliable means of saving money.
According to the forecast of the analytical publication Wallet Investor, by the end of 2020, the price of palladium could reach $ 2850 per troy ounce, after which it will continue to grow. As expected, in 2021 quotes will fluctuate in the range of $ 2,900-3,300 per troy ounce, and in 2024 they may exceed $ 4,800.
Price engine
Palladium is most actively used in the automotive and chemical industries, in the electric power industry, as well as in the manufacture of jewelry and medical equipment. Moreover, about 80-90% of the global demand for precious metals falls on the auto industry. As explained by RT, investment strategist at BCS Premier Alexander Bakhtin, palladium is used in the catalysts of gasoline vehicles for burning exhaust gases.
“Demand for palladium continues to be kept at a high level in the context of the ongoing tightening of environmental standards in the automotive industry around the world and especially in Europe,” the expert emphasized.
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In addition, the high demand for palladium is caused by the growing popularity of gasoline cars and a decrease in demand for diesel cars. The so-called dieselgate of 2015 played a key role in changing consumer priorities. This was told to RT by the head of the analytical research department of the Higher School of Financial Management Mikhail Kogan.
“The demand for gasoline engines began to grow after the scandal surrounding Volkswagen. In 2015, it turned out that the concern underestimated the data on emissions of harmful substances in diesel engines where platinum is used. Now platinum is three times cheaper than palladium, ”the source said.
According to Kogan, in 2019, almost 84% (more than 300 tons) of the total industrial palladium consumption in the world accounted for the production of catalysts that are used in gasoline engines. According to the analyst, over the next three years, the figure will increase.
Big booty
According to the US Geological Survey, today Russia accounts for 40% of global palladium production. The second largest producer of precious metals - South Africa - occupies no more than 32% of the global market.
High demand for palladium could be a positive factor for the Russian industry, as the main supplier of metal to international markets. This view is shared by Anna Bodrova, senior analyst at Alpari IAC.
“In the long run, palladium prices will be stable, which could have a positive effect on the country's performance. In addition, the world is growing and the consumption of nickel, which is actively mined by Russia. This metal can also be used in engines as a cheaper alternative, ”said Bodrova RT.
According to analysts, in the coming years, Russia may further increase its share in the global market by developing the Arctic Palladium project. The reserves of the field are estimated at 770 million tons, and the production volume at it is planned to be increased to 21 million tons per year.