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By: Liam Tassone | lut80@psu.edu | January 17, 2019
While many of us view gold to be the resource with the most monetary value, a silvery white metal known as palladium was recently dubbed more valuable. The value and future prices of palladium have been increasing over the past couple of years, and future prices have increased 10% as of recently. The new value of palladium is in response to it’s decreasing and already very limited supply, as there are only four mines in the world for the metal. Contrasting the low supply of palladium is its high demand, as 8.5 million ounces were demanded from the automotive industry in just last year. Additionally, the demand for the metal is only increasing, as it has been proven beneficial in terms of pollution control within cars, done so through catalytic converters. Henceforth, as more companies strive to be more eco-friendly, they will likely demand more palladium, a natural resource of very low quantity. Therefore, it seems likely that the value of palladium will continue to increase, with the demand increasing and supply subsequently decreasing.
The March future contract for palladium settled at $1,348.20, being another record setting settlement. The future prices are only expected to rise, as they experienced a 13% increase in 2018 alone. It's increase in value yielded these statistics, with its value surpassing that of gold for the first time since 2002. The monetary value of the two are fairly similar, as palladium is traded only a few dollars above gold, yet for perspective purposes, costs $500 an ounce above platinum.
As expected, the supply for palladium will likely be non-existent in the near future. With this, and the cheaper price of platinum, automakers are likely to look for ways to replace palladium with platinum when making pollution regulated catalytic converters. Various transitional costs have to be taken into account, perhaps the biggest is found in trade. Executives will have to consider uncertainty of obtaining either palladium or platinum with a potential of trade war resulting due to demand; a decrease in automotive sales would come as a result. While switching from palladium to platinum presents many risks, none of them are immediate, yet in the near future. With this, executives in the automotive industry must find a solution as to which product they will move forward with, which will then affect the future value of both platinum and palladium.
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