About 80% of global palladium production comes from two countries – Russia and South Africa. And since March, the turmoil in these regions has pushed prices from $780 to $880 per ounce. In fact, palladium is up about 22% year to date, and is now trading at a 13-year high.
Yet palladium isn’t solely a supply side story, as demand from the emerging world is also having a big effect on prices.
Like so many other commodities, palladium is in high demand in China. Estimates show that Chinese imports will account for a stunning 15% of global palladium mine supply in 2014. The main driver of this demand is the vehicle market.
In addition, China is taking steps to match the emissions standards already in place in the United States. That will lead to higher required PGM (platinum group metals) loadings for vehicles, which translates to more palladium used per vehicle.
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