Palladium prices surged to a new record on Friday, jumping by 10 per cent to over $2,500 an ounce, in a move that adds pressure on carmakers to switch to other metals for their catalytic converters.
The precious metal has risen by over 25 per cent this year, due to a global shortage of supply and increased demand in China, where carmakers have to meet more stringent air pollution standards.
The rising palladium price has led to a rise in thefts of catalytic converters around the world and concerns about future supply for carmakers.
Rising prices will make it “more difficult for palladium consumers to obtain the material they need,” analysts at Commerzbank said.
Palladium is a critical ingredient in catalysts for petrol and hybrid cars that convert toxic emissions such as carbon monoxide and nitrogen oxide to carbon dioxide, water and nitrogen.
“It’s the same old broken record with the rally being driven by momentum and tight supply with no one at this point daring to go against it,” Ole Hansen, head of commodity strategy at Saxo Bank Group, said.
Still Max Layton, an analyst at Citi, said carmakers are reluctant to switch catalytic converter technology due “to global growth uncertainty and pressure to invest in EV technology.”
The rising price is a boon for some mining companies such as Anglo-American, which mines palladium in South Africa. At current prices Anglo American’s Platinum business could generate earnings before interest, tax, depreciation and amortisation of more than $3.4bn this year, from $1.95bn in 2018, according to analysts at UBS.