Since the start of 2020 gold prices have increased by one-quarter, silver prices are up by 50% and the price of palladium up a respectable 14%. What then of platinum, the poor cousin to the other stellar performers in the precious metals space? Down 2.5% year to date!
The expectation by many investors betting on a rebound in platinum prices is that it will eventually play catch-up versus palladium as auto-catalyst manufacturers substitute expensive palladium, for cheaper platinum.
One way of determining whether this is happening is to analyse trade data. Recall from earlier articles on this that in 2010 refiner Johnson Matthey (LON:JMAT) opened a diesel auto-catalyst plant in North Macedonia. Unlike other countries that manufacture catalysts we know that North Macedonia only imports platinum group metals (PGMs) for use in that sector. Any evidence of a substitution effect away from palladium and towards platinum should be picked up in North Macedonia’s import data.
The chart below shows the decline in demand – for both metals – that occurred in the early part of 2020 as the lockdown and frozen supply-chains closed the plant and prevented imports from taking place.
Chart 1: North Macedonia PGM imports (kg)
The second chart is more revealing. Far from there being any sign of a substitution effect away from palladium it continues to show that the trend is gathering force. The share of palladium in total PGM imports even surged to two-thirds in January.
Chart 2: Palladium as a % of total North Macedonian platinum/palladium imports
In the battle to control emissions from the cars of the future palladium remains among ‘the Tesla stock of commodities’.