The raw material used in autocatalysts has soared in the opening weeks of 2020 amid a sustained global deficit, with the extraordinary rally seeing prices hit records day after day before a pullback on Tuesday. Over the past 15 years, mine supply of palladium has shrunk by 1 million ounces, or 12%, while demand has risen 4 million ounces, or 57%, according to estimates from UBS Group AG. Palladium’s sister metal, rhodium, has jumped too.
“Commodity prices can completely disconnect from their marginal cost of production when inventories run down to critical levels, and this is precisely what is occurring in palladium and rhodium at present,” Citi said. “Palladium has for some time now presented the hallmarks of a genuinely tight market, including an extreme backwardation.”
Another day, another $100+ advance in palladium. This speed of the acceleration since the announcement of the trade deal is nothing short of historic. There has been a lack of a supply response to date not least because of the uncertainty about the trajectory of global growth. If the continued supply of liquidity has the desired effect of confirming the trough in global growth, it will both be a boon for palladium demand but will also encourage additional supply into the market.Click HERE to subscribe to Fuller Treacy Money Back to top