Why Is Palladium So Expensive?- Know More

Palladium is a soft, silvery-white, metal, discovered in the 1800s that is of immense value and has found wide use in the various industries but most importantly in the automotive industry where it is used as a pollution-reductive material. Its significance is greatly tied to the way it is used for various purposes including its use as an industrial catalyst. It is also used in the jewellery and electronics industry. Let us know ‘Why Is Palladium So Expensive?’.

The high cost of palladium may be largely due to regulations by governments and organisations on the industry. Rarity of the metal and is importance as an alternate to currently utilised metals may also contribute to the high value of palladium. More details are given below.

Reasons Why Palladium Is Expensive

1. Value: Palladium has become one of the most precious of the four major precious metals. This is due to its use as an important component in pollution-control machinery in cars and trucks. A large percentage (more than 80%) of palladium is used in the automobile industry for catalytic converters. These devices are installed between the engine and tailpipe of vehicles and convert as much as 90% of the hydrocarbons, nitrogen dioxide and carbon monoxide emitted from the vehicles into less harmful carbon dioxide, nitrogen and water vapour. Without catalytic converters affixed to cars, vehicle emissions which have been recognised as a leading cause of global emissions, there would be even more pollution and risks associated with it.
2. Regulations: Huge economies like China have placed tightening regulations on the palladium industry with an aim to tackle pollution. This has caused a search for alternatives such as palladium in the production of machineries with an aim to reduce pollution. This has further driven the price of the precious metal upwards.
3. Supply: Current supply of palladium has not corresponded to the demand for the metal. The metal is mined in few places around the world while it has found wide use in numerous industries especially the automotive industry. The global supply of palladium in 2020 was pegged at 6 million ounces, a significant drop from figures collected from previous years.
4. Availability: Palladium is usually found alongside other precious metals such as platinum and gold and even copper and nickel. Hence, it is often extracted as a by-product, like silver. It being a by-product means response to changes in price by producers is not as quick as expected. A secondary product of platinum and nickel, miners have lesser flexibility and influence to increase output of the precious metal in response to increase in prices.
5. Speculation: Hedge funds have also been implicated in the rising cost of palladium due to them placing bets that its price will rise but this factor has only been partly blamed.
6. Demand: Due to recent technological advances, demand for palladium has been heavily dependent on the demand from the automotive industry. It is also demanded for use in the aviation, electronics and healthcare industries, chemical applications and for machineries used in the treatment of groundwater. However, it is used in these industries in trace amounts.
7. Consumer behaviour: European consumers are now buying fewer diesel-powered cars, which are mainly dependent on platinum, and opting for gasoline-powered vehicles which are dependent on palladium. This might have been due to recent revelations that producers of diesel cars cheated on emission tests and the intensification of concerns about diesel pollution.
8. Rarity: Palladium deposits are rare worldwide. Major mines are found in South Africa, Russia, Montana and Ontario. The amount of palladium held in reserves around the world have been estimated to be about 110,000 tons with South Africa accounting for holding about 70,000 tons. This implies that recycling of the metal is an important source. About 121 tons of platinum and rhodium, another precious metal, were reported to have been recovered globally from scrap in 2017.
9. Natural disturbances: The recent pandemic affected industries worldwide and the palladium mining industry was not spared. The coronavirus and disruptions resulting from lockdowns issued by governments in mining countries disrupted operations at palladium mines. Flooding in Arctic mines in February also exacerbated supply concerns.

Conclusion

The rise in the price of palladium can be attributed to many factors but mainly to the push for the use of materials that drastically or totally reduce pollution. This has pushed palladium to the forefront of precious metals in demand and this status is sure to increase in coming years. Its use has been projected to increase as governments push for more technology that focus on development of devices and resources that take into account the negative effect current technologies have on the climate and the natural environment at large.

Frequently Asked Questions

1. What is palladium used for?

It is used in the automotive industry for the production of engine catalytic converter. Catalytic converters are part of a car’s exhaust system which controls emissions and are mainly found in petrol and hybrid vehicles. Older cars used platinum catalytic converters but due to concerns voiced over the use of platinum coated catalytic converters and their contribution to pollution, palladium coated catalytic converters have been championed as a better replacement. It has also found use, albeit in small quantities, in the medicine, dentistry, aviation and jewellery industries.

2. Is palladium more expensive than gold?

Yes. As at April 2022, 1 ounce of palladium costs up to $2,440.75 while the same amount of gold costs $1799.95. 

3. Where is palladium found?

Palladium is mainly mined from few deposits around the world. These deposits are found in Russia, Montana, Ontario and South Africa

4. What other industries use palladium?

Palladium is preferred to platinum in the production of jewellery due to it not reacting upon exposure to oxygen. Palladium is also an important part of hydrogen fuel cells, which has been recognised as an emerging technology that has the capacity to completely replace all vehicles based on fossil fuels and may even usurp electric cars, which have been praised for their environmental sustainability.