Palladium

Haven’t heard of palladium before?  Don’t feel bad; I suspect most investors haven’t either. 

Palladium is one of a group of six metals often referred to as PGM’s, which stands for Platinum Group Metals.  This group includes the well-known platinum and the relatively obscure metals called rhodium, iridium, ruthenium and osmium.  Platinum is 15 times more rare than gold.  All the platinum man has ever mined, for example, would fit into a 30-cubic-foot room.  And palladium is as rare or rarer than platinum.

Palladium has another advantage over platinum.  A catalytic converter works only when hot, but 90% of tailpipe emissions occur before it heats up.  To cut warm-up times, carmakers have moved the converter closer to the engine.  Palladium, which is more heat tolerant than platinum, is better suited to this design.

Palladium has unique physical properties that are used in diverse industrial applications and in jewelry.  The unique characteristics of this group include strong catalytic properties, excellent conductivity and ductility, resistance to corrosion, strength and durability, and a high melting point.

Palladium production is typically a by-product from platinum mining operations.  South Africa is currently responsible for approximately 38 percent of world mine production.  Norilsk Nickel’s mines in Russia account for approximately 41 percent of world mine production and North America contributes approximately 14 percent to the world’s supply.

Palladium is currently trading at over $1,900 an ounce and is projected to remain strong in the coming years as the supply deficit is expected to persist in the future.  The outlook for palladium over the next ten years predicts a return to historically high prices, strong fabrication and investment demand, and constrained supply.

Palladium is a rare precious metal with only a few palladium producing regions worldwide and even fewer ore bodies where it is economically feasible to mine and extract the metal.  As mentioned earlier, Russia and South Africa account for almost 80 percent of global mine palladium production.  However these regions are known to be higher-risk jurisdictions.