Palladium price likely to average $1,019 an ounce in 2018

December 4, 2017

Toronto (Dec 4)  The Canadian investment bank, TD Securities looks for Palladium prices to average $1,019 an ounce during the year 2018.

 Looking ahead, TD Securities sees Palladium to average the first and second quarter of 2018 around $1,100 an ounce and the third and fourth quarter around $1,150 an ounce.

 After showing a gain of some forty-five percent since the beginning the year, Palladium has been a star performer, beating the well performing base metals and leaving its rival, platinum , in the dust.

 The strong performance has recently made palladium more valuable than its much better-known peer platinum for the first time in sixteen years, as investors looked for ways to capitalize on the developing electrification trends emerging in the automotive industry and take a position in a precious metal which is not as highly correlated to gold.

 At nearly $1000 an ounce, Palladium is currently trading some $45 an ounce higher than platinum despite the fact both metals have significant primary supply constraints. Palladium and platinum are both used to reduce harmful fumes from cars powered by gasoline and diesel, respectively.

 But there are a few key differing trends that have developed for each of them. For platinum, the trend has been negative as drivers in Europe started to switch from diesel to gasoline cars (particularly the small vehicles) because of concerns over particulate matter, NOx production and risk of driving bans in cities such as Paris and London. In sharp contrast, palladium has been benefiting from strong US and emerging markets auto sales, which typically use gasoline engines and palladium -loaded autocatalysts.

 An additional positive trend for palladium is the expected growth in appetite for electric vehicles (EVs), which tend to be gasoline engine hybrids and have higher loadings than traditional vehicles. Less diesels means relatively lower demand for platinum.

 Meanwhile, strong US and emerging auto sales, along with EVs, suggest stronger Pd demand and tighter supply-demand conditions. However, with spot palladium trading near a sky-high $1,000/ oz and platinum at just $950/oz, autocatalyst fabricators may well already have the financial incentives to substitute one metal for another.

 This could include the re-engineering of diesel engines to emit less of the offending gases and the substitution away from palladium and towards platinum loadings in pollution control systems used in gasoline powered vehicles.

 Indeed, it is our understanding that industrial users who are concerned about the cost and stability of palladium supply are already doing this aggressively — reducing temperatures and oxygen in diesel engines and using different designs to intensify platinum use in catalysts. Substitution away from palladium and into platinum is likely a required strategy for auto manufacturers.


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