In the platinum group metals (PGM) we offer platinum and palladium. It is not only investors and jewellers that buy PGM’s, the majority of PGM demand comes from the automotive industry as both platinum and palladium are a key component in catalytic converters which convert toxic exhaust emissions into non-toxic substances.
In the early 2000’s the automotive industry accounted for 72% of global palladium demand. At this time palladium was subject to supply disruptions form the world’s largest producer, Russia. Subsequently palladium prices increased in the space of one year from $450 to $1,100. The incredibly price competitive automotive industry had an incentive to switch from palladium to platinum in order to reduce their costs. Following this new imbalance, industry switched to the comparatively cheap platinum and palladium prices fell below $200 per troy ounce.
In the event of geopolitical tensions with, or supply disruptions from Russia, it is anticipated we may see similar aggressive moves in palladium prices. Platinum prices have more than doubled in recent years and there is a belief that these higher prices many motivate the car industry to move away from platinum and buy palladium instead.
PGMs are still precious metals and they can also be used by investors as a store of value and as a hedge against the same financial uncertainties that gold and silver protect against. This diversification and the emission restrictions place on nations as a result of the Kyoto agreement, investors should look to hold some platinum, palladium or both as part of a diversified metals portfolio.