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View Full Version : Why everyone is pessimistic on Palladium



acer500ex
03-18-2009, 09:08 PM
With palladium prices so low (and platinum kinda low as well) a lot of miners are barely making any profit on their mining. If you look at the cost of producing palladium for many mining companies it is actually more than its spot price. Thats why so many PGM miners are showing record losses:

http://www.platinum.matthey.com/media_room/union_threatens_strikes_over_south_african_mine_jo b_cuts_18998415.html

When the reduced supply starts trickle down, the price will rise. People don't realize that if miners aren't making any profit eventually they will significantly reduce production, however, they don't do this right away because it is costly to shut down mines and have equipment sitting idle, so for the short-term they produce at a loss.

Jewelery demand for Palladium is really starting to pick up (although slowly) in Asia and even in North America as people realize how much cheaper it is than platinum and equal if not better in other aspects (for example it is less dense which is a good thing in jewelry). Palladium wasn't popular before in jewelry because it was difficult to cast, but new technology has eliminated this problem. Jewelry currently only accounts for a fraction of how mined palladium is used but that should change in the future.

Automakers are replacing their platinum with palladium even in diesel catalysts as much as they can, since its so much cheaper they can use 5 ounces of palladium to replace 1 ounce of platinum if they have to, new techonology is making this profitable and often times the ratio is only 1:1 so they have a five fold savings:

http://www.miningweekly.com/article/palladium-stands-to-gain-from-growing-pgm-interchangeability-stillwater-ceo-2009-03-17

Granted the market is slow and demand for cars now is down temporarily (except in China), but in a few years, probably not more than 5 (perhaps much sooner), palladium should double (at least $400 ounce). I can't say that for gold, platinum or silver, yes silver may hit close to $20 again, but honestly it has a lot more risk to fall than palladium, and I don't see it tripling any time soon, whereas palladium has some chance of tripling in a few years. Silver may go back down to 8, but Palladium hasn't spent much time below $180 in the past five or six years. Gold is near highs and I am pretty sure when it sees $2000, palladium will be at least $500.

To summarize, as people realize platinum is not greater than palladium anymore in jewelry or industry at 5 times the cost, palladium will get more expensive. Any thoughts?

If you really want to learn about the palladium market I suggest you read this (and previous years too to get "educated"):

http://www.platinum.matthey.com/uploaded_files/Pt%202006%20Int/pdint08.pdf

Zedotsix
03-18-2009, 09:10 PM
I guess I am because I started buying it in 2002 for $388oz and had to do A LOT of trading to get my average down to $234oz for the bullion I hold. No one seems to care about air pollution in Asia and until they do, Palladium will sit and be neglected.

acer500ex
03-18-2009, 09:20 PM
China definitely started caring about air pollution:

"Due to rapidly expanding wealth and prosperity, the number of coal power plants and cars on China's roads is rapidly growing, creating an ongoing pollution problem. China enacted its first emissions controls on automobiles in 2000, equivalent to Euro I standards. They were upgraded again in 2005 to Euro II. More stringent emission standard, National Standard III, equivalent to Euro III standards went into effect on July 1, 2007.[6] Plans are for Euro IV standards to take effect in 2010. Beijing introduced the Euro IV standard in advance on January 1, 2008, became the first city in mainland China to adopt this standard.[7]"

http://en.wikipedia.org/wiki/Emission_standard#China

These standards affect new cars. So yes new cars are using a lot more palladium than before, but all the old cars are polluting. As even more stringent standards take effect (Euro IV 2010), more palladium will be used. India started caring as well, but this takes time and sometimes it takes even longer for the market to respond.

I feel your pain though, I just bought palladium so I didn't pay too much per ounce. I was watching over the summer and learning a bit, but then I stopped paying attention so I missed the chance to buy at December lows. But $234 an ounce for physical is not bad at all, you could sell those on Ebay for a minor profit. For non-physical its a bit high, most people however, don't have the patience to wait a few years. Investment demand is real high now and they only way to pay the lowest premium ($30 an ounce) is to buy from tulving but you need to buy 20 ounces minimum (when he's in stock), or buy now from NWT Mint, but you have to wait a few months for delivery.

Coldtrader
03-18-2009, 10:31 PM
It's because it's staying low, not moving in tandem with other metals, and mainly used in cars. Although China may care about the environment, I am sure they will be not be as stringent as the rest world, hence requiring less pd/pt. If there is massive inflation, can it's price increase? Sure. But what commodity won't?

ajnock
03-19-2009, 03:45 AM
i been watchin pal - north american palladium - closed $1.30 today

Scrap Metal
03-19-2009, 08:15 AM
I am not pessimistic...I'm more disinterested. Canada discontinued production of palladium Maple Leaf coins beacuse there was no demand. My guess is that palladium is still considered to be strictly an industrial metal. If it goes well in the coming years as a jewelery metal we may see more interest. I'm not even that big on platinum. Some day there will be green cars that do not need catalytic converters. Gold and silver will still be valuable.

RoadLizard
03-19-2009, 10:32 AM
I am not pessimistic...I'm more disinterested. Canada discontinued production of palladium Maple Leaf coins beacuse there was no demand. My guess is that palladium is still considered to be strictly an industrial metal. If it goes well in the coming years as a jewelery metal we may see more interest. I'm not even that big on platinum. Some day there will be green cars that do not need catalytic converters. Gold and silver will still be valuable.

The reasons you list are why I've decided to not to add Palladium to my PM stack. I just dont see a tremendous upside. The catalytic converter thing is not a long-term need either. They had better come up with more uses for PD than just that!

Just my 2 cents...

MT Freeman
03-19-2009, 05:32 PM
The reasons you list are why I've decided to not to add Palladium to my PM stack. I just dont see a tremendous upside. The catalytic converter thing is not a long-term need either. They had better come up with more uses for PD than just that!

Just my 2 cents...

Please don't forget that the lunatics are now running the asylum. They (not me) voted for Barak. Barak is hell bent to turn this country upside down. Why not harsher clean air standards? Why not start putting catalytic converter on everything that burns fossil fuels? Hold onto Pd for a couple years and see where these lunatics go with Capt. Planet and the Planeteers.

hugo_danner
03-19-2009, 06:19 PM
I had a choice between 8 ounces of platinum or 40-something ounces of palladium. I chose palladium, now I kind of wish I'd have gotten platinum. The grass is always greener, I guess!:eek:

acer500ex
03-19-2009, 07:25 PM
Just wait, platinum is having a little run today big whoop dee doo. Yes platinum has been up more from its 3rd quarter lows last year than paladium. But wait a few years for funamentals to kick in (assuming your in it for the long-term) and palladium will show some strong gains while platinum stagnates or maybe even falls.

The only good arguement against palladium is the end of the fossil fuel car. About half (NOT ALL) of all palladium mined is used in auto catalysts. But the fossil fuel car should be around for at least a couple of decades in good numbers. The battery technology is not there yet to make electric cars cheap or feasible, and the electric infrastructure is not there either. There is plenty of oil to last a while just not cheap oil under $60 a barrel. If oil stays above 120 for a couple of years you will so that there are a lot of places that can produce oil at $100 a barrel such as Canada. They will come on line. Yes cheap oil will run out eventually, but mid-priced oil will be around for a while. And until electric cars can be practical and save people more money than a gasoline car (or hybrid) when gas is below $4 a gallon, catalytic converters will be needed in abundance. Yes there is a risk of electric cars becoming somewhat popular within 10 years, but even then all the developing countries will still be using cheaper fossil fuel cars. In America cars cost maybe an average of 30k per car. In china/india its probably less than 10k. A 10k electric car is far far away. And a practical 30k electric cars is at least ten years. I'll have plenty of time to sell my palladium before then, if I have to, but I do agree that is a small risk to palladium upside, but on the other hand if gold/platinum stay high, palladium will be becoming a lot more popular as jewelry real soon. China already has a strong palladium market.

Think about it, even when oil was at $140 and unsustainable level, gas was $4/ gal, and it would take years to break even after buying a hybrid car to recoup the premium over a regular one. I don't see oil above $140 for more than a year anytime in the next 10 years. Again when people see they can sell oil at $140 a barrel you would be surprised how many countries (LIKE CANADA) will start running more oil fields that weren't worth it before. Its basic economics. And the battery cost for all electric cars is very high. It should fall some due to economies of scale and they will get slightly better technology, but the batteries will always be expensive because they are made out of a commodity (lithium-ion). The most popular all electric car, the tesla roadster costs 100k and the battery alone is about 20k and only last 100,000 miles. This is the most practical car as it has a driving range over 200 miles, but look how unreasonable it is for most people. $100k and after 100k miles you need a new battery? Even if those costs fall to half, it is still very unreasonable considering you can have a new car in America for 10k, that lasts more than 100k miles and with that left over tens of thousands of dollars you can buy a butt load of gasoline.

Also consider that hybrid cars and regular ones (which still need catalytic converters) will be competing strongly with electric cars once they start getting popular. They will be offering better MPG and be cleaner because they have competition. They will have the advantage of being a lot cheaper initially and not taking hours to charge, you can fill up anywhere at a gas station. Finally if electric cars get more popular electric demand will increase a lot. More electricity means more oil/coal burned to produce it which requires palladium to make it less polluting. So palladium could fall in a worse case scenario but not as much as the other PGMs which are all near unprecedented levels historically. Anyway, I've done a lot of research on this before diving into buying some bullion and these are the conclusions I've come to. Of course no one can predict the market, but palladium is very rare and I can't see myself losing too much in a worse case scenario especially considering that the population of modern people continues to increase everyday and they demand to consume cars, jewelry and electronics all of which use palladium.

To be honest I really just wanted to post up here, so that other people would benefit from doing some real research on palladium. That and I want to come here in a few years and say I TOLD YOU SO! (hopefully)

goldiebob
03-19-2009, 08:32 PM
I am not pessimistic...I'm more disinterested. Canada discontinued production of palladium Maple Leaf coins beacuse there was no demand. My guess is that palladium is still considered to be strictly an industrial metal. If it goes well in the coming years as a jewelery metal we may see more interest. I'm not even that big on platinum. Some day there will be green cars that do not need catalytic converters. Gold and silver will still be valuable.

Where do you find info on their stopping the Palladium Maple due to no demand.
They always seemed to be sold out. There may be other reasons they stopped
making them. They are now a high premium item.

marscrumbs
03-20-2009, 07:35 PM
I also like gallium and other strange metals. I'd buy more if it was cheap.

marscrumbs
03-23-2009, 07:04 PM
Not holding my deuterium breath for palladium catylsised fusion.

I'm more optimistic about lunar helium 3 fusion or boron-proton fusion.

http://www.focusfusion.com

zartan
03-23-2009, 10:34 PM
Why everyone is pessimistic on Palladium?

we mostly lost on it so far, if sold, but i think most here are looking over a 10-20 year mind frame. it just makes you mad when you bought it at 300 and it sells for 200, while the technology we thought would occur has not developed.

on a brighter note, it is 1/5 -1/6 the price of it's rock star cousin, the russian's are not talking and production has all but stopped.

place your bets.

acer500ex
03-23-2009, 11:48 PM
Yes feral child I read that, cold fusion is a joke. If you bought palladium hoping for cold fusion forget about. Sure it might happen (like 1 in a million), but it is highly unlikely and the scientific community is not really working on it, because they don't believe in it.

What is far more likely is hydrogen cars, but even then I don't think those are the cars of the future and even if they were they wont have to use palladium and if they did there wouldnt be enough of it, so there wouldnt be enough hydrogen cars using palladium to replace current fossil fuel vehicles. None of my investment decisions on palladium are based on cold fusion or even hydrogen. (The car of the future (at least 20 years) will probably run on batteries charged with electricity). My investment decision is based on supply and demand fundamentals and their current use in industry and jewelry and that fact that it is a very rare (compared to gold) and relatively cheap metal (compared to platinum).

The reality is we have pretty cheap energy via nuclear power plants and other renewable energy sources. Now we are just waiting for battery technology to get cheaper and the infrastructure for electric cars to be viable en masse. The fact of the matter is gasoline is way too cheap to start trading in for electric cars. When oil gets expensive and stays there that when these cars will become popular and this should take at least 15 years.


Frank Close, a professor of theoretical physics at the University of Oxford, says that the far greater problem with cold fusion claims is that results from any given study have never been independently verified - a problem that plagued that first announcement.

Professor Close said that many inexplicable phenomena have arisen in the 20 years since Pons' and Fleischmann's announcement that have been tagged with the "cold fusion" moniker.

"If I come up with a weird phenomenon and call it cold fusion, I know that reporters will be interested. Convincing the scientific community is another matter entirely."

http://news.bbc.co.uk/1/hi/sci/tech/7959183.stm

Sure it'd be sweet if cold fusion was real and palladium went to $10,000 an ounce, but I try to be realistic, there is no hard science or real studies to back it up. The only reason this was in the news is because its the anniversary of their discovery in 1989.

If you are interested in energy this is an interesting article:
http://www.cbc.ca/money/story/2008/08/27/f-forbes-saudisolar.html

Mrpublic
03-24-2009, 01:01 AM
If Obama gets his energy bill, this may increase the need for palladium. It is true that mass production of say fuel cell vehicles will likely not use palladium (or much smaller amounts then needed now), but the 10 year or so lead up may consume a lot of palladium. Just 50,000 research fuel cells, plus maybe Obama buying 10,000-50,000 fuel cell cars for the federal government (and maybe a few states doubling that), plus maybe another 50,000-100,000 specialty cars for the private sector could chew up a lot of palladium if they use current technology (requiring palladium hydrogen membranes). If they ever start producing cars, even on small scale (say 1,000,000 per year or so) based on palladium, watch out!

Al Chemy
03-24-2009, 01:14 PM
I feel pd is currently at very attractive levels & given the current environment is probably positioned the best it ever has been as regards the likelihood of research seeking a use for its hydrogen retention properties. I think the comments I've read within this website about pd falling to zero in the event of cars being powered by batteries are slightly short sighted. To believe that automobile use will be pds only role in the future is very dismissive of our technological advancement over the past 20 years... I envisage there will be a demand for pd regardless of whether we are plugging in our cars at night. It is a noble metal and in a financial environment that is becoming increasingly commodity focussed its rareity factor will at some point be highlighted as an alternative potential store of wealth once gold has taken off beyond most people's means...Where will pd be if gold hits $2000?

hugo_danner
03-24-2009, 06:42 PM
It is a noble metal and in a financial environment that is becoming increasingly commodity focussed its rareity factor will at some point be highlighted as an alternative potential store of wealth once gold has taken off beyond most people's means...Where will pd be if gold hits $2000?

I read the other day that the historical price of palladium to platinum is 2:1. I'm not sure what the historical price of gold to platinum is. Normal price of silver to gold seems to be somewhere between 40/50:1. That might serve as a rough price guide. Does anyone know the historical price of gold to platinum? Granted tho, we are in anything but NORMAL financial times.