Palladium is a massively sought-after precious metal that often goes under-looked by investors due to its shiny, popular sibling: gold. Yet, recent forecasts from Global Palladium Market show that investors should be paying a bit more attention to the low-density, low-melting-point, silvery-white precious metal. Projections from the Global Palladium Industry report place palladium at a growing rate of 3.8% over the years 2022 to 2030, allowing it to potentially reach $11.1 billion in the next seven years.
So, what is palladium, and why might it grow so much over the next decade? Palladium is a lustrous silvery-white chemical element that’s approximately 30 times rarer than gold, creating the perfect landscape for delicate supply and demand battles. The precious metal has unique defining properties, such as its malleability, oxidation stability, and ductility, making it perfectly suitable for jewelry.
One of palladium’s primary jewelry use cases is its mixture of white gold products. White gold pieces weighing over one gram typically contain large percentages of palladium, thanks to its excellent properties.
Palladium can also absorb over 900 times its own weight in hydrogen, leading us to its next use case: fuel cells. Fuel cells convert fuel sources into energy for things like motor vehicles, which people around the globe rely on daily. Palladium’s role in catalytic converters (in automobiles) is one of the primary causes behind its enormous growth projections in the coming years.
Vehicle manufacturers can use a few different materials when creating catalytic converters, though palladium can reduce harmful emissions by as much as 90%. With the worldwide movement toward protecting the environment, more car manufacturers are opting for the green choice: palladium catalytic converters.
The other large demand sector in the palladium market is EFTs (exchange-traded funds). Between the automobile industry continuing to improve emissions, industrial sectors, jewelers, and EFT investors, palladium demand continues skyrocketing.
So what about supply? Most of the world’s palladium supplies come from South Africa, Russia, the United States, and Canada. The manufacturing process of palladium involves by-products of other metals, such as nickel, copper, or zinc, which can make meeting demand quite complex.
In 2020, Canada’s Palladium One started a drilling program in Finland to recover an expected 635,600 palladium-equivalent ounces. Additional large players in the palladium market include Nornickel, Anglo-American Platinum, Impala Platinum, and Sibanye-Stillwater.
In 2020, mines across the globe produced a total of 217,000 kilograms of palladium. In 2021, the production rate dropped to 200,000 kilograms, depicting a drop in the supply and a spike in prices.
While demand continues rising for palladium, supply rates struggle to keep up, creating the perfect environment for the projected rise in prices for the next seven years.
As global tensions rise and economies around the world suffer, many expect to see more supply chain disruptions in the coming years that will only worsen the level of available precious metals, including palladium. High inflation rates, climbing interest concerns, investment fears, and low capital expenditures all lead to recession fears that prevent companies from taking the big steps necessary to meet demand rates.
With this growing tension comes market volatility and few stable investment classes. Many investors will choose more stable options, like precious metals, to protect their purchase power.
Global Palladium Industry report projections show palladium will increase from its 2022 global market value of $8.2 billion to $11.1 billion by 2030. A few of its largest markets will include the United States, China, Japan, Canada, Australia, India, and South Korea, all showing excellent growth trajectories over the next seven years, ranging from 1% to 6.6% growth rates.
For further information on growth trajectories, investors can read the Global Palladium Industry report or the Global Palladium Market report. Precious metals provide an excellent opportunity to invest in a tangible asset amid severe economic uncertainty.
When investing in palladium, buyers have a few options. Palladium coins and bars offer physical ownership, though additional complexity for shipping, storage, etc. Conversely, palladium EFTs and stocks eliminate the need for physical storage, though they come with much higher market-related risks.
Palladium IRAs offer retirement account funding with precious metals rather than fiat money, which provides simpler storage, though only long-term investing. Investors should consider that most precious metals, including palladium, typically yield the strongest results when held long-term. With IRAs, investors can enjoy tax-advantaged withdrawals on their investments.
As always, investors should consult their financial advisors before making any portfolio decisions. You may also review the reports discussed above for further information.
