LONDON: Palladium has the best chance of rebounding after a rapid sell-off of precious metals used by the auto industry, but the longer a chip shortage hinders vehicle production, the weaker its recovery may be, analysts say.
Palladium, rhodium, and platinum are built into vehicle exhausts to reduce harmful emissions, and prices have plummeted as manufacturers unable to get enough chips cut production, reducing their need for metals. .
Palladium went from a record high of over $ 3,000 an ounce in May to around $ 2,000, rhodium from a record high of nearly $ 30,000 an ounce in March to $ 12,000 and platinum d ‘a seven-year high of $ 1,336.50 an ounce in February at $ 950.
More losses are possible in the short term, but a rebound could be on the horizon in 2022 and 2023, especially for palladium which, unlike platinum and rhodium, has suffered years of supply shortages, Oliver Nugent said. , analyst at Citi.
Automakers have run out of stocks of finished vehicles to meet demand and to replenish them when chips are available, they will need to overproduce, Nugent said.
“There is an almighty resupply awaiting this industry,” he said. “If you want to play this, palladium is the way to do it.”
Automakers consume about 80% of the roughly 10 million ounces of palladium used each year, 90% of the 1 million ounce rhodium market, and 40% of the 8 million ounce per year platinum demand. which makes platinum less vulnerable to chip shortage.
About 7 million fewer light vehicles will be produced this year than initially expected, LMC Automotive consultants estimated in a report released Thursday by precious metal refiners and traders Heraeus.
Most of them would have contained a combustion engine. Each million of these vehicles uses about 100,000 to 150,000 ounces of palladium, 40,000 to 50,000 ounces of platinum and 8,000 to 10,000 ounces of rhodium, said Wilma Swarts at consultants Metals Focus.
However, automakers are working to save money by replacing palladium with cheaper platinum and moving towards electric vehicles that don’t have exhaust gases to clean up.
This means the longer the shortage takes to resolve, the less likely palladium and rhodium are likely to return to their all-time highs, said Nicky Shiels of MKS PAMP GROUP, an industrial and commercial services company.