Palladium, a lustrous silvery-white metal, has seen its value skyrocket in recent years, surpassing even gold. This surge in price begs the question: What Is Palladium Used For, and what factors are contributing to its increased demand?
What is Palladium?
Palladium belongs to the platinum group of metals (PGMs), which also includes platinum, ruthenium, rhodium, osmium, and iridium. It’s primarily sourced from Russia and South Africa, where it’s extracted as a byproduct of mining other metals, most notably platinum and nickel.
What is Palladium Used For? Key Applications Explained
The primary application of palladium lies in its use as a crucial component in catalytic converters. These devices, found predominantly in gasoline and hybrid vehicles, are essential for controlling harmful emissions.
Alt: A mechanic removing a catalytic converter from the exhaust system of a sport utility vehicle (SUV) in an auto repair shop.
Specifically, over 80% of the world’s palladium supply is utilized in catalytic converters. These devices facilitate chemical reactions that convert toxic gases, such as carbon monoxide and nitrogen dioxide, into less harmful substances like nitrogen, carbon dioxide, and water vapor. Due to their precious metal content and ease of removal, catalytic converter theft has become an increasingly common issue worldwide.
Beyond catalytic converters, palladium also finds applications, although to a lesser extent, in electronics, dentistry, and jewelry.
Why is the Price of Palladium Rising?
The fundamental reason behind palladium’s soaring price is a consistent supply deficit, where demand outpaces available supply. This has been the case for several years. As a byproduct of platinum and nickel extraction, palladium production is limited in its ability to respond quickly to price increases.
Adding to the supply constraints, South Africa, a major producer accounting for around 40% of the global supply, recently reported a decrease in platinum group metal output, including palladium.
Alt: A palladium bullion bar at the Gulidov Krasnoyarsk Non-Ferrous Metals Plant, highlighting its precious metal status and industrial importance.
On the demand side, several factors have contributed to increased palladium consumption, particularly from the automotive industry.
- Tightening Emissions Regulations: Governments worldwide, particularly in China, are implementing stricter regulations to combat air pollution from gasoline-powered vehicles. This necessitates the use of more palladium in catalytic converters.
- Diesel Emissions Scandal: The “Dieselgate” scandal in Europe led to a shift away from diesel vehicles (which primarily use platinum in their catalytic converters) towards gasoline vehicles, thereby increasing the demand for palladium.
- US-China Trade Deal: The trade agreement between the US and China has boosted market confidence, with expectations that it will alleviate pressure on global economic growth and potentially reverse the decline in Chinese car sales, further driving palladium demand.
In conclusion, the confluence of constrained supply and rising demand from various sectors, particularly the automotive industry, has propelled palladium’s price to unprecedented levels. As long as these factors persist, the price of palladium is likely to remain elevated.
