A few important numbers relative to Palladium:
The global supply of Palladium equates roughly to 8 million ounces per year.
The production of Palladium comes mainly from Russia (49.6%), with 35.3% from South Africa and 10.5% from Northern America.
Demand equates to around 7 million ounces per year. This is mainly divided between Western Europe, which uses around 22% of the global production, Northern America, which uses around 20%, and finally China and Japan that use around 19.6% of the production.
Palladium, as with many other commodities, is traded on the London market, specifically the LPPM (London Platinum and Palladium Market). It is quoted in American Dollars per ounce.
How and where is Palladium produced?
Palladium is a metal extract from the ground that is not found everywhere. In fact, its production is limited to only a few zones worldwide, mainly Russia and South Africa which generates the major part of the Palladium produced. It should be noted though that South Africa has the largest Palladium stocks with 90% of the global reserve located there.
However the international stocks of Palladium comprises not only that from mine production which accounts for 75% of the available stock, 14% of the stock comes from recycling and 11% of the stock is from Russia that has a surplus.
Who uses Palladium, and what for?
The demand for Palladium is mainly from the international industrial sector. This metal, similar in many respects to Platinum, is generally used by the same sectors of activity as the latter and the two metals can be easily interchanged.
We can therefore see that nearly half the global production of Palladium is used in the manufacture of petrol driven vehicles, but it is also used as a replacement for Platinum for the manufacture of diesel driven vehicles as it is used in the manufacture of catalytic converters.
A small part of the Palladium is used in the jewellery sector, especially for creating white gold, but some is also used in the electronics and dentistry sectors.
How the price of Palladium has adjusted over time:
Over the last few years, the demand for Palladium has slightly fallen which has created a slight fall in the price. The reason for this fall lies primarily in the reduced activity of the automobile industry and we can therefore see that the price of this metal is closely linked to the demand in this industry, notably in the European and American sectors.
However, over the last few months and due to the momentum of the Asian automobile sector, particularly the Chinese, demand is rising again which creates the opportunity for substantial profits. In a period of crisis, Palladium is often used as a replacement for Platinum due to its lower cost.
Therefore, to trade Palladium, it is best to create an inverse correlation with Platinum and watch closely the European and Asian automobile industry results as well as the planned production of vehicles over the medium term.