Palladium is a rare metal belonging to the Platinum group, which also includes metals such as platinum, rhodium, osmium, ruthenium, and iridium. These metals are known for their high heat and corrosion resistance, making them valuable in various industries.
Unfortunately, during the first half of 2022, palladium’s value significantly decreased by more than 32%, making it one of the worst-performing commodities of that period. In my July 6 report on the precious metals sector, I highlighted how palladium continued to decline in Q2 and the first six months of 2023. Additionally, I noted that rhodium, a PGM only traded in the physical market, experienced an even more significant percentage drop of nearly 69% over the first six months of 2023. As of June 30, rhodium was valued at $3,700 per ounce, while nearby palladium futures were valued at $1,222 per ounce.
Although prices have slightly increased in Q3, they remain close to the year’s Q2 closing levels and lows.
Palladium production is low in Russia, and despite it being the leading producer of precious metal, the annual output of palladium in Russia is not as high as one might expect. When comparing the production levels of the world’s leading palladium-producing countries in 2022, it is clear that there is room for improvement.
Find more statistics at Statista
According to the chart, Russia and South Africa are the top producers of palladium in the world. Together, they produced 80% of the total 210 tons of palladium in 2022, with Russia producing slightly more than South Africa.
Palladium is mainly produced in Russia as a byproduct of nickel mining in the Norilsk region of Siberia. In 2022, gold was the leading precious metal produced globally, with a total output of 3,612 metric tons. Palladium production, on the other hand, accounted for less than 6% of the overall gold output.
The ongoing war in Ukraine, sanctions imposed on Russia, and Russia’s retaliatory actions against countries supporting Ukraine are all contributing to the instability of palladium supplies. Additionally, South Africa is part of the BRICS group, which controls 80% of the world’s palladium supplies through their cooperation.
Although the price of palladium has decreased, and the trend in August 2023 remains bearish, it is approaching a crucial technical support level. Given the limited supply and industrial demand, it is anticipated that the price of palladium will soon reach its lowest point and begin to recover.
Palladium has many industrial uses:
Despite being a precious metal, palladium plays a crucial role in various industrial sectors. Its unique properties make it ideal for use in the electronics and automotive industries, particularly in reducing exhaust fumes. Most of the palladium consumption is for catalytic converters. Palladium is also necessary for producing jewelry, dentistry tools, watches, aircraft spark plugs, surgical instruments, and blood sugar strips.
The goal for net zero and the electrification of vehicles are posing long-term challenges for palladium. Even if the goals for 2030 and 2040 are not achieved, there will be an imbalance in supply and demand by the turn of the decade due to the absence of scalable uses for palladium in electric vehicles. If optimistic goals are achieved, the automotive industry, which accounts for more than 80% of palladium demand, might become a net provider of the metal by 2040. Currently the second-largest producer of refined palladium, the scrapped autocats industry has the potential to overtake South Africa and take a third position if its problems are rectified.
These long-term concerns have been affecting market sentiment, causing Palladium to struggle. From the beginning of the year to the start of August, palladium prices fell by 34%, and by 56% from the peak in March 2021 (excluding the early 2022 spike). There has been recent activity toward a challenge of $1,300, which we will cover more in next month’s review.
Palladium Long (Buy)
Enter At: 1308.75
T.P_1: 1385.02
T.P_2: 1432.70
T.P_3: 1493.05
T.P_4: 1541.34
T.P_5: 1613.77
T.P_6: 1686.20
T.P_7: 1762.66
T.P_8: 1823.02
T.P_9: 1879.35
T.P_10: 1935.69
T.P_11: 1996.05
T.P_12: 2056.41
S.L: 1105.68
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