Industry Demands to Drive Palladium Demand in 2021

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Palladium ingots are all set to witness increased demands among investors as the demand for the precious metals are set to rise further in the face of increasing demand in the automobile industry and depleting supplies among key manufacturers.

New York: While 2020 was the year when gold ruled the precious metals commodity markets, hitting an all-time high in August 2020; 2021 is going to bet the year for platinum group metals. In the face of last year’s pandemic uncertainties where we witnessed massive lockdowns, which in turn to the economic slowdown, especially hitting the automobile sector from where the primary demand for palladium arises. However, for this year, analysts are positing an optimistic outlook as the global economy has geared into recovery mode and the vaccines for coronavirus is being dispersed. If you look at the palladium bar price online, you will note that while the price of 10 oz palladium bullion bars was US$ 16,019 in March 2020, they are currently pushing US$ 25,000 as of Jan 2021.

The Covid-19 Effect

In February 2020, Palladium prices reached historic highs and in 30 days sunk to a five-month low. This Covid-19 led nosedive was short-lived but managed to create a 41% decline in palladium prices taking it from US$2,614 per ounce to US$1,522. The price of 1-gram silver and gold quickly rebounded, and palladium and platinum prices followed eventually. The investment in these metals were driven by the safe-haven allure. South Africa is the leading supplier of all platinum-based metals and their mining sector was restricted heavily to control the virus spread which has heavily affected the supply. Coupled by the demand from the automobile sector and precious metals investors, palladium prices recovered quickly.

Global Environmental Reforms

Palladium is primarily used in autocatalytic converters which convert the carbon monoxide released from cars into liquid form which is cleaner for the environment. As global emissions standards have been tightened, the pressure on automobile industries to improve vehicle performance has also raised. This in turn has led to a rise in demand for palladium among automobile manufacturers. However, supply continues to struggle to keep up with the rising demand for the metal. There was renewed interest for the metal among investors after Joe Biden won the American presidential race as economists and market analysts expect the Biden administration to tighten environmental regulations. As the focus on green energy technology rises, the demand for palladium will also surge.

China will set the road to recovery

According to a prediction from Metal Focus, palladium prices will hit the all-time high of US$ 3000 an ounce this year and in the next five years, it is likely to breach the US$ 4000 mark. A major contributing factor to this spike will be the rising demand for automobiles in China. While Europe and the USA will continue to witness the slowdown of demand for automobiles for the next few years, in China, automobile sales will grow faster in 2021. China is the second-largest consumer of Palladium after the USA although it doesn’t produce any. In 2019, China introduced the New Vehicle Emission Standards which are the strictest in the world. Hence, the new cars will have to come equipped with very good catalytic converters, which means 30% more palladium for each new car. The US dollar is also expected to lose some of its value in 2021, which implies that dollar-backed metal such as palladium will witness a nominal price rise.  

Considering all the above factors and the fact that palladium is a rare precious metal among the platinum-based metals group, investors can rely on palladium bar price rise at an incremental rate at least till 2030.

 

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