Palladium scales $2,500 on tight supply, strong autocatalyst demand

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2020.01.18

Friday was the day to be trading palladium, with the catalytic converter ingredient punching up to heights not seen since 2008. 

Spot palladium ran nearly 10% to $2,539 an ounce, continuing over a week of straight gains that has commodity traders saying the platinum-group metal has “gone parabolic”, meaning the chart pattern, shown below, shows prices rising with an increasingly steeper slope. 

The futures market was on fire as well, hitting a record high on Friday, nearing $2,300/oz. 

Why the enviable price performance? 

Palladium has been in deficit for eight straight years, because of low mine output and smoking-hot demand for catalytic converters in gasoline-powered vehicles, as smog-belching diesel cars and trucks get phased out to meet tighter air emissions standards particularly in Europe and China. 

Palladium is the dominant autocatalyst ingredient in gas-fueled internal combustion engines, whereas more platinum than other metals is found in ICEs run on diesel. 

Matching mine production with demand has become particularly problematic in South Africa, where palladium is mined as a byproduct of platinum. Mining companies face higher costs per ounce as mines get depleted and they have to go deeper. Frequent labor unrest has also hobbled production. 

Amid this very encouraging palladium market, our pick in the palladium space, Palladium One (TSX-V:PDM), has kicked off its 2020 exploration program with an extensive geophysical survey of its flagship LK copper-nickel-PGE project in Finland. 

“Our Phase 1 program includes both IP geophysics and up to 5,000 meters of diamond drilling,” said Derrick Weyrauch, Palladium One’s President and CEO, in a news release.

The survey is expected to begin in the next few days, with diamond drilling to follow. 

And while we see Palladium One’s LK project as very exciting, we have another palladium play we are going to introduce to our readers next week. Stay tuned for the details.

 

Richard (Rick) Mills
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