Palladium. 123RF/ALEXMX
Palladium. 123RF/ALEXMX

London/Moscow — Palladium’s premium to platinum has jumped to a record, building on its ranking as the best-performing metal of 2018.

Shortages of the metal used in automotive catalysts for petrol-fueled vehicles sent its price to yet another all-time high, widening the price difference with rival platinum to more than $500/oz on Tuesday. Most analysts don’t see supply relief for palladium anytime soon.

Image: Iress

Both metals are used in catalytic converters to reduce vehicle emissions. Platinum, the more expensive of the two for most of this century, has seen usage decline from its key consumers, diesel-powered car makers. Demand slid as consumers turned away from diesel vehicles in the wake of Volkswagen’s (VW) emissions cheating scandal.

Platinum is now trading near a 10-year low, at about $821.35/oz, while palladium is near its highest, at $1,325.13/oz.

The widening price gap has spurred speculation that petrol-powered car makers may switch from palladium to cheaper platinum. Anton Berlin, head of analysis and market development at Russia’s Norilsk Nickel (Nornickel), says this is unlikely. Palladium has some features that make it more suitable for petrol or hybrid cars, such as better resistance to higher temperatures.

Switching to platinum would take at least two years and would need additional work and costs to adjust engines and car-exhaust systems, said Berlin, whose company is the world’s biggest palladium miner and fourth in platinum. Manufacturers also need to use more of the precious metal than is needed with palladium, he said.

Berlin believes that overall demand for platinum will recover anyway. The market may even face a deficit if investment demand is sufficient, including bar and coin sales, he said. The World Platinum Investment Council predicted in November that platinum will remain in surplus in 2019, albeit a smaller one than last year.

Bloomberg