Friday, August 25, 2017

Questions America Wants Answered: "Could the Palladium Rally Lead to Changes in the Auto Industry?"

From the WSJ's MoneyBeat blog:

Could the Palladium Rally Lead to Changes in the Auto Industry?
Platinum bulls are hearing footsteps—the precious metal’s close relative palladium is hot on its heels.
Palladium has been a standout even amid the recent boom in industrial metals like copper, surging to its highest levels since 2001 amid a yearslong deficit and closing the gap on platinum. For the year, prices are up more than 35%, and some analysts and investors think palladium soon costing more than platinum could lead to changes in the auto industry.

Technically a precious metal, palladium often behaves like a base metal because of its use in the catalytic converters that filter car emissions in engines.

Many manufacturers began substituting palladium for platinum because it was widely available and cheaper in the early 2000s, but a continued palladium rally could lead them to consider switching back to platinum, said Pete Duncan, director of market research at Johnson Matthey.

Johnson Matthey expects palladium to soon cost more than platinum, Mr. Duncan said, as demand from China and other global markets has kept the recent rally going despite concerns about slowing U.S. auto sales.

“The whole situation is coming to a head,” said Shree Kargutkar, portfolio manager at Sprott Asset Management, adding that manufacturers considering switching back to platinum “makes a ton of sense.”

Investors have continued to wager on further gains even with palladium’s rapid run up. Net long positions by hedge funds and other speculative investors on palladium futures totaled 24,194 contracts in the week ended Aug. 15, near this year’s high of 24,755 from mid-June, data from the Commodity Futures Trading Commission show. The June high was the largest since 2013....MORE