The Prospect of a Palladium Shortage

The prospect of a palladium shortage has some users worried. The biggest source of the metal is Russia, which has not signed an agreement with the West, and Johnson Matthey, which supplies catalysts for the fuel-cell industry, is concerned about a possible end to shipments from the country. But the company is working with other suppliers and is sure there won’t be a shortage.

Russia

Palladium users are worried that the supply from Russia is coming to a halt. The country is the world’s largest producer of the metal. But the current situation in Ukraine has increased the uncertainty around shipments. A recent flight ban in Europe has made it difficult for the metal to be transported by air. Norilsk Nickel is exploring alternative routes to supply the metal.

The shortage has already hurt prices. However, the price is currently extremely low and analysts are predicting a rally next year. This is despite the fact that palladium is likely to experience a long-term decline as the production of electric vehicles grows. Analysts are pointing to this low supply as an opportunity to buy.

Western Europe

There are a few factors that are contributing to the palladium shortage in Western Europe. First of all, the auto industry is recovering more slowly than anticipated, so the recovery is being delayed. Also, the Russian refineries have been taken off the London and Zurich precious metals exchanges. This could make it even harder for people in Western Europe to buy the metal.

The next factor is the rise of electric vehicles, which is a huge threat to palladium. Last year, automakers shifted their resources to the development of battery electric cars and hybrids. This was prompted by the strong demand for zero-emission cars and the need to meet carbon targets. These vehicles use double the number of semiconductors as their internal combustion counterparts. By 2021, hybrids and battery-electric cars are projected to account for 14% and 6% of global passenger car production, respectively.

South Africa

The shortage is a growing concern for global automakers as supply is already low. Some automakers have already closed plants in Russia to meet demand, but the situation could become even worse. Several large suppliers, including Russia, are implementing export restrictions. This could complicate the process of switching to alternative sources.

In the short term, South Africa isn’t producing enough palladium. Even if the country could increase production, the process is extremely delicate. For example, one ounce of palladium could take six weeks to reach the market. Without a substantial increase in production, the supply would be insufficient to meet the demand.

The prolonged supply deficit is also a threat to global economic growth. South Africa is the second-largest producer of palladium after Russia. It is an important input for electronics and automobiles. The country is also a significant exporter of gold. Rising global gold prices have supported the rand, the currency of South Africa.

China

The biggest threat to palladium is electric vehicles. The automotive industry has redirected resources toward electric cars in recent years due to the strong demand for zero-emission vehicles and the need to meet carbon targets. Electric cars require more semiconductors than conventional internal combustion engines. By 2021, battery-electric and hybrid vehicles are expected to account for 14% of global passenger vehicle production.

Although the global demand for palladium is expected to increase, the supply remains a problem. Despite a gradual recovery of the auto industry, palladium has yet to reach pre-Russian production levels. And even though Russia is the world’s largest producer, the supply in that country remains a serious concern. The country’s efforts to reach net zero could curtail the long-term demand for precious metals, including palladium. Long-term demand for palladium could also be slowed down by making more electric and hybrid vehicles and making less diesel vehicles.

U.S.

The United States has been experiencing a palladium shortage since August. The metal is a precious metal that is used in electric vehicles. There is a deficiency of 446,000 ounces this year, and another 176,000 ounces will be needed to meet the demand. This year’s shortage is expected to continue through 2024, when the market will turn to surpluses.

The metal is mostly used in automobiles and other light-duty vehicles. In fact, the automotive industry accounts for 80% of palladium demand. This is because of its high efficiency and ability to improve the performance of gasoline-powered engines. However, the supply of the metal is constrained by the lack of inventories and the inability of producers to ramp up production. The largest producers of palladium are Russia and South Africa.