Palladium hit a fresh all-time high on Friday on persistent worries about supply from South Africa and prospects of a pickup in demand in China.
Nymex Palladium futures gained 1.5% to $1,636.60 an ounce in New York in morning trading before easing back. Palladium’s gains for the year now top 40% or $477 per ounce.
The threat of labour unrest in South Africa, which together with Russia are responsible for more than 80% of global platinum group metal output, loomed large again on Friday after the militant union Amcu re-elected its firebrand leader.
Amcu rose to prominence in 2012 when clashes between police and striking workers at the Marikana mine in the African nation’s prolific platinum belt left 34 dead.
More than three-quarters of palladium ends up in catalytic converters for gasoline engines and the rise in the precious metal comes despite a severe slowdown in vehicle sales around the world.
Top consumer China has seen sales drop for 14 out of the last 15 months, and in August 9.9% fewer cars and truck rolled off lots compared to last year. Annual sales in the world’s no 2 market – the US – are also expected to come in below 2018’s total.
What has lifted palladium is greater average loadings per vehicle as more stringent emissions standards are implemented in China and Europe. BMO Capital Markets in a recent note said “any signs of stimulus from the Chinese auto market could lead to additional upside price potential.”
Sister metal rhodium is also on a roll, more than doubling in price so far this year. Rhodium, also used mainly in autocatalysts, exchanged hands at $5,400 an ounce on Friday in New York, the highest in 11 years.
Due to rarity, the small size of the market and concentrated supply, prices are typically volatile.
Rhodium (and sister metal ruthenium) stand out when it comes to price swings – rhodium touched $10,025 an ounce just before the 2008 financial crisis hit, but would drop 90% before the end of that tumultuous year.
Platinum was trading flat on Friday at $945.10 after briefly scaling $1,000 an ounce two weeks ago. Given the historically weak price, some investors are using the opportunity to stock up on the metal.
ETF holdings of platinum have expanded rapidly this year, reaching 3.3m ounces last week, up 38% or 916,000 ounces in 2019.
In contrast, palladium ETF vaults have been emptying as investors lock in some of the gains. Palladium-backed ETF holdings total 655,000 ounces, down 120,000 ounces year to date.