Greener cars are boosting this metal’s price over platinum

September 29, 2017, 12:10am

Tougher emissions standards in China, the world’s largest auto market, are helping drive the price of palladium, a rare emissions-reducing metal, to new highs in recent weeks.

In fact the price of palladium topped that of its better-known cousin, platinum, for the first time since 2001 this week.

The two metals, which are similar chemically, are used in the manufacture of catalytic converters to help reduce toxic exhaust from cars and trucks. Palladium is usually used in gasoline-burning vehicles, which are currently gaining the upper hand over diesel vehicles, which tend to use more platinum.

Most hybrid vehicles — a category that speculators are betting will grow from its presently modest base — burn gasoline. And Volkswagen’s scandal involving rigged emissions data in some of its diesel vehicles in 2013 has also hurt demand for diesel vehicles in Europe and other markets where that fuel is used for passenger transportation. (In the U.S., diesel is largely an industrial fuel.)

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Those dynamics all favor palladium, the preferred metal for gasoline vehicles’ converters. Global palladium demand for catalytic converters hit 7.4 million announces in 2016, a fifth straight record high. Meanwhile, usage of platinum has been relatively weak, with that market expected to see a global supply surplus this year for the first time in six years, according to the commodity research firm Johnson Matthey.

In New York trading on Wednesday, palladium rose 0.8 percent to trade at $935.65 per ounce. Platinum slipped 0.7 percent to $918.80 per ounce.

Other key details:

  • Palladium deposits are somewhat scarcer than platinum in nature. But platinum, which is also a popular material in jewelry, has traditionally traded higher because it has both consumer and industrial applications.
  • Nearly 80 percent of palladium demand comes from the car industry. It’s also used in computer chips, wiring, and several other industrial applications.
  • Bullish bets on palladium hit a three-year high at the New York Mercantile Exchange earlier this month, according to Dow Jones Newswires.

That said, some Wall Street observers believe palladium’s newfound ascendancy in the metal markets might not last long. As happened in the early 2000s, high palladium prices could eventually prompt industry demand to tip back in platinum’s favor as a cheaper substitute where possible.