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Palladium is Africa’s Modern-Day Vibranium

Palladium is Africa’s Modern-Day Vibranium

By CultureBanx Team

  • Palladium is one of the best-performing commodities of 2018

  • 40% of palladium comes as a byproduct of platinum mining in South Africa

Palladium, usually ignored in favor of gold, silver and platinum has recently eclipsed them all, and is one of the best-performing commodities of 2018. The metal is typically used in cars along with jewelry and is on track to become more valuable than gold for the first time in 16 years. About 40% of palladium supply comes as a byproduct of platinum mining in South Africa.

Platinum & Palladium.jpg

Why This Matters: Over the past two decades, the metal has been slowly replacing platinum as a lower-cost material for the pollution-control of catalytic converters on gasoline-powered vehicles. More than 80% of the world’s palladium is used for this purpose.

It can basically perform the same function as platinum, at half the cost. In 2018, auto demand for palladium, rose to a record high of nearly 8.6 million ounces.

Sister metal platinum is more commonly used in catalytic converters for diesel engines, but demand for diesel cars has “plummeted in recent years,” partly a result of the Volkswagen emissions scandal, according to Zaner Metals.

Platinum mining in South Africa has been declining on the back of escalating costs and low labor productivity

The historical, long-term relationship between the metals is that gold is usually priced two to three times higher than palladium. However, the current ratio is a little over one. Platinum Group Metals noted palladium could climb to $1,200 this year and $1,400 next year and wouldn’t need a new “catalyst” to get there.

One of the easiest palladium plays is through the ETFS Physical Palladium Shares, which is backed by the physical metal and stored in vaults in London and Zurich. In the wake of the recent gains for palladium, the ETFS Physical Palladium Shares has climbed nearly 18% year to date.

Situational Awareness: Platinum mining in South Africa has been declining on the back of escalating costs and low labor productivity. The New York Times reported there’s been contentious wage negotiations with unionized miners and complaints about hazardous working conditions that have sometimes slowed production. Many mining companies are loaded with debt and trying to cut costs, analysts said.

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