Palladium to Platinum: Automakers Switch
The article to follow will discuss palladium’s rise and fall over the years 2018 to 2024, including the move away from palladium to platinum. The extreme rise in price of palladium and its later sharp decline tells a story of politics, economics, and industry’s response to these powerful forces.
Updated: May 2024
What is palladium?
Palladium is a silvery-colored metal within the platinum family. One of palladium’s primary uses is within catalytic converters to limit the pollution caused by internal combustion engines. The metal’s malleability and resistance to corrosion, as well as its ability to catalyze chemical reactions, lends itself to this use. Outside of the automotive industry, it is also used in electronics, jewelry, and dentistry.
The metal is a secondary product from mining nickel and copper and is mostly sourced from Russia and South Africa.
Palladium versus gold prices: 2016-2021
To understand the extent of demand for palladium in the late 2010’s, one need only to look at its price per oz in comparison to gold. An explanation of the forces that came together to cause this increase in value can be found in the section to follow.
Why did palladium prices spike?
The price of palladium has always been volatile in comparison to gold and silver prices. The limited amount of palladium mined each year by so few suppliers is another factor causing increased price volatility.
In 2019 there was a close to 60% increase in the price of palladium. Demand was outpacing supply at this point. This was largely due to increased demand from the automotive industry, who were acting in accordance with stricter limits on emissions globally.
This upwards trend in price continued until it peaked in early 2022, amidst Russia’s February invasion of Ukraine. In March, palladium’s price per oz was around $3,440. At this time, platinum was trading at around $1,149 per oz. Concerns surrounding Russia, who was and is the largest exporter of palladium, hastened automakers transition from using palladium to platinum as automotive catalysts.
The switch to platinum by automakers started to bring down the price of palladium. As the laws of economics go, decreased demand causes increased supply which further brings down price.
Palladium to platinum: the former's performance in 2024
As automakers have switched their focus towards EVs in recent years, the demand for palladium continues to decline.
The late 2023/2024 faltering demand for EVs and renewed interest in hybrids, could slow down price decreases. Still, most automakers are now using platinum for automotive catalysts, so palladium demand is not expected to fully recover to 2019 prices. Today (7 May 2024) palladium is trading at $974.80/oz, which is down since the beginning of 2024.
The upside of the lower commodity value of palladium is the decrease in catalytic converter thefts throughout 2023. This may also be due to other factors, such as more careful considerations and anti-theft measures by drivers.
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