Palladium: Challenges in 2023

Trading palladium may not be as popular as trading gold or silver. Still, palladium remains an important metal that helps to manufacture many products that we use in our everyday life. A large number of applications and limited palladium supply draw investors’ attention.

In this blog, we will share with you some information that could improve your knowledge about palladium.

Palladium fundamentals

Palladium (Pd) was discovered in 1802 by William Hyde Wollaston, an English chemist that sought to analyse platinum ore samples obtained from South America. Wollaston named the metal after the asteroid 2 Pallas, which had been discovered two months earlier (March 1802).

Palladium is a silvery-white metal belonging to the family of platinum group metals (PGMs). It is ductile and easily worked. Palladium’s primary use is in car catalytic converters which help convert carbon monoxide to water and carbon dioxide. The metal is also used in jewellery, electric contacts etc.   

The largest palladium deposits are found in Russia, South Africa, Zimbabwe and the state of Montana in the US. Russia-based Nornickel produces the majority of the world’s palladium. More than 50% of all the palladium mined in a year is turned into catalytic converters.

Trading Palladium: Price fluctuations

At the end of July 2022, palladium’s price reached $2,021 per ounce, almost $300 more expensive than gold at that time. The metal's price surge in 2022 forced some automakers to replace it with cheaper platinum.

The last three months haven’t been favourable for palladium prices. In December 2022, palladium prices dropped by 3% while January was worse, losing even more ground (-9%).

February could be the third straight month that palladium prices retreat as up until February 23rd they have lost almost 8% in value. It should be noted that, on February 14th, palladium prices touched $1,468.94, the lowest level recorded since August 2019.

Nornickel forecasts lower palladium production in 2023

On February 10th, Nornickel announced that it expects its palladium production to drop in 2023 due to planned refurbishment at its Nadezhda metallurgical plant. A report by Reuters said that the company’s palladium output is likely to fall by 8%-14% than in 2022 in the range of 2,407-2,562 koz. Nornickel’s palladium production surged by 7% in 2022, on an annualised basis.

Commenting on 2022 production figures, Nornickel’s analysts noted that “we increased the output of all key metals: copper and platinum production was in line with the guidance, while nickel and palladium output outperformed it.” The revised report released by the company (Feb. 10) suggested that “we expect palladium production/consumption balance to shrink to 0.3 moz deficit this year.”

Electric cars put a strain on palladium’s demand

Commerzbank’s economists suggest that demand for palladium could decrease as “palladium is being increasingly substituted by platinum and the number of electric cars is growing, less palladium is likely to be needed to produce the new vehicles.”

The London Bullion Market Association (LBMA) 2023 Precious Metals Survey notes: “Palladium prices are set to drop this year according to the analysts, with an average price forecast of $1,809.8 for 2023 – a not insignificant drop of 14.3% compared to the actual average price in 2022."

Trading palladium and risk management

You may be wondering if trading palladium is worth the trouble or if it is risky. Trading financial instruments involves risk; trading palladium could not be an exception. Rapid market movements against your forecasts or inaccurate market assessment on your behalf could lead to losing your hard-earned funds. Loss of money could result in endangering your financial plans.

How can you make sure that trading palladium or any other instrument won’t jeopardise your goals? The answer could be a combination of education and utilising the risk management tools at your disposal. Watching a webinar hosted by trading experts or reading detailed blogs related to trading techniques or even tips on how to build your strategy could help you become the trader you would like to be. Filtering information is imperative.

Brokers support traders by providing risk management tools to help them reduce their losses in case of a downturn. For example, stop/loss orders or maximum drawdown help you improve your personal risk management while you build strategies that could bring you closer to achieving your financial goals. Trading palladium or any other instrument does require not only knowledge and inspiration, but also comprehensive preparation. 

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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.