Palladium, used mostly in catalytic converters for vehicles, beat most other commodities this week after US car sales expanded at the fastest pace in more than two years.
The metal rose 3.7 per cent to $654.25 an ounce yesterday in London, taking its weekly gain to 15 per cent, the most among 80 commodity contracts tracked by Bloomberg. Four of the six largest automakers by US sales beat expectations in November, boosting industry sales to a 13.6 million seasonally adjusted annualized rate, Autodata Corporation reported yesterday.
Palladium declined 18 per cent this year on mounting concern that slowing growth will curb consumption just as a glut of metal emerged. Barclays Capital anticipates shortages next year as demand expands 7.8 per cent and supply contracts 7.6 per cent. The International Monetary Fund predicts global economic growth of 4 per cent in 2012, unchanged from this year, signaling no slump in consumer demand. The US will expand 1.8 per cent, compared with 1.5 per cent in 2011, the IMF forecasts.
“Palladium depends very crucially on the global automotive demand,” said Peter Fertig, the owner of Quantitative Commodity Research in Hainburg, Germany. “From yesterday’s data in the US it became clear that the US is not heading into recession.”
Auto catalysts, canisters with honeycomb-like surfaces that convert emissions into less harmful substances, account for 67 per cent of palladium demand, according to Johnson Matthey, which has supplied one in three of the devices ever made. Electronics make up 17 per cent, the London-based company estimates. The metal is also used in the chemical, dental and jewelry industries.
Increasing demand for auto catalysts will lead the gain in consumption next year, rising 5.3 per cent to almost 6.23 million ounces, according to Barclays. The devices contain about 4 gm (0.13 troy ounces) of platinum, palladium or rhodium, according to Johnson Matthey. Palladium accounts for 90 per cent to 95 per cent of precious metals used in gasoline catalytic converters and about 25 per cent in diesel devices.
That expansion is coming at a time when mining companies are struggling to maintain output as labor and power costs increase and reserves are depleted. South African production, accounting for 37 per cent of the total, will decline for a second consecutive year in 2012, Barclays estimates.
Supply is also being constrained by a decline in sales of Russia stockpiles. The nation is the world’s biggest palladium producer and its stockpiles are a state secret. Sales from inventories that were at 1.49 million ounces in 2007 will probably decline to 150,000 ounces in 2012, Barclays predicts.