A Primer On Palladium

Palladium is one of the rarest metals on earth, about 15 times more rare than platinum and 30 times more rare than gold. Belonging to the platinum group of metals, around 80% of the world's palladium production comes from two countries: Russia and South Africa. In fact, Russia alone accounts for roughly half of the world's production, which is estimated to be 200,000 ounces per year. This can create cause for concern as any decrease in exports from these countries can contribute to volatility in palladium prices.


In comparison to platinum, palladium shares similar chemical properties but is less dense and has a lower melting point.


SEE: Futures Fundamentals


Uses of Palladium

With this in mind, it is important to take a look at the various uses of the metal. The unique composition of palladium makes it ideal for the auto industry, dentistry, electronics and fuel cell production. However, the most important use of palladium by far is the auto industry. Used in catalytic converters, the auto industry accounted for over 60% of the demand in 2010. To put this in perspective, about 80 million vehicles will be produced in 2011 and on average each catalytic converter requires about 1/20th of an ounce of palladium or platinum. Jewelry and industrial use, which comprises of dentistry and electronics, are the next highest users with approximately 29 and 7% of the demand in 2010 respectively.


SEE: A Beginner's Guide To Precious Metals


Supply and Demand

Because Russia controls roughly 50% of the worldwide palladium pricing, and South Africa around 30%, palladium prices can be quite volatile. Between 2005 and 2011, palladium has gone from a low of about $168 per ounce to approximately $858 per ounce, settling around $630 per ounce as of Dec. 29, 2011.


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