Is Platinum or Palladium a Good Investment?

Is Platinum or Palladium a Good Investment?

Figure data from: Macrotrends Data Download

Platinum and Palladium are mainly used in the three-way catalyst in the exhaust system of gasoline vehicles as an automobile exhaust catalyst. Therefore, the demand for platinum and palladium mainly come from gasoline vehicles. The consumption of platinum, palladium per vehicle and the production and sales of gasoline vehicles will be the main factors affecting the demand for platinum and palladium. Palladium is a cheaper alternative to platinum.

The auto industry consumes about 85% of supply, but automakers may turn to cheaper platinum due to cost concerns. 

Based on environmental requirements, U.S. light-duty vehicle Tier 3 emission standards from 2017 to 2025. And EPA Tier 3 standards implementing in phases, as a result emission standards become stricter each year. Together with the sales of new energy vehicles have increased significantly in last years, from May 2021 to December 2021, the price for Platinum and Palladium decreased significantly. It reflected that the demand and the investment sentiment for Platinum and Palladium are low.

However, the situation has changed by 2022. The war between Russia and Ukraine happened at the beginning of the year. Due to market expectation about restrictions on Russian palladium exports (Russia accounts for 40% of total global palladium production), the price of Platinum and Palladium dramatically increased from January to May. As prices react to market expectations, the rise in these months became strongly influenced by market anticipatory sentiment.

However, there are indications that Russian palladium exports will not be hit as hard as initially thought. And Russia’s MMC Norilsk Nickel PJSC (the world’s largest palladium producer). Said that they can re-route the cargo through other routes, the price of palladium begins to retreat. And demand for these metals has fallen as many factories shut down in China as a result of the Covid-19 outbreak, this further led to lower prices of platinum and palladium. Also, factory shutdowns in China lead to shortages in car chip manufacturing. Which lead to U.S. auto sales also fell in the second quarter. 

In conclusion, these factors have led to the decline of platinum and palladium prices.

In addition, according to the News from Bloomberg on July 1st “Car Sales in the US Slow on Rising Sticker Prices and Scant Supplies”, So I think there may still be downside risks to platinum and palladium prices in the near term.

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Is Platinum or Palladium a Good Investment?