In the ranks of metals, gold shines brightest for most investors. But this week’s gathering of the gold industry in Barcelona was dominated by palladium, the hottest metal for many at the moment.
The silvery-coloured metal used in catalysts for petrol cars is up 40 per cent this year to $952 an ounce, compared with a 12 per cent rise for gold.
“The consensus was gold isn’t going anywhere for the foreseeable future in terms of being a narrative because equities are too strong,” says Adrian Ash, director of research at BullionVault. “But that’s the great thing with palladium, the fundamentals are supportive.”
No matter the strong buzz around electric vehicles, demand for palladium reflects a rebound in global car sales, tighter emissions standards as well as a consumer preference for larger sport utility vehicles.
Also helping is a backlash against diesel cars in Europe, which has seen petrol vehicles gain a bigger market share. Delegates at the London Bullion Market Association conference forecast that palladium’s run will continue, with price forecast to reach $1,150.35 this time next year, equating to a further rise of 21 per cent.
The price rise also reflects a belief that pure electric vehicles, which have no catalysts, will not challenge the share of petrol cars in the near-term.
“They’re [electric vehicles] growing from a low base so it’s not really a threat to the palladium market for the next 10 years,” Denis Sharypin, head of commodity research at Norilsk Nickel, the world’s largest producer of palladium, said this week in Barcelona. Sales in electric cars, including plug-in hybrids, are growing rapidly and have risen 41 per cent year-to-date, according to Macquarie.
But the decline of diesel’s market share in Europe has more than offset the rise of EVs on gasoline vehicles. While total car sales are up 3.7 per cent this year in Europe, gasoline sales have jumped 13 per cent as diesel sales have fallen by 5.8 per cent, according to the bank.
“The blow is being cushioned by an ongoing switch to gasoline-powered cars from diesel, which in Europe alone has offset all of the negative impact of EVs,” says Matt Turner, an analyst at Macquarie.
Growth in global car sales means the market will require an additional 2.5m ounces of palladium through to 2025, according to Mr Sharypin.
Global market demand last year was 6.3m ounces. “The overall rate of increase in [palladium] demand is going to be faster than the rate of increase of overall supply in the next three to five years,” says David Jollie, market analysis manager at miner Anglo American.
Palladium could also benefit from growth in hybrid cars, which use both a battery and an engine. Hybrids need catalysts that can cope with a sudden starting of the combustion engine when it takes over from the battery, according to Peter Duncan at Johnson Matthey, a maker of catalysts.
Source: www.ft.com
