Palladium prices surged to a new record high this week, jumping above USD 2’500/Oz.

The price of the metal was up 54% in 2019, while it jumped by more than 30% since the beginning of this year reaching an all-time high of USD 2’577/Oz on 20 January.

The main driver for this rally remains supply/demand fundamentals pushed by a global shortage of supply and increasing demand in China in the car industry.

The palladium market is running on a ten year long physical deficit (2018 physical deficit is estimated at 1.7 Moz equivalent of 53 tonnes).

Rarer than gold, silver, and its nearest periodic table peer, platinum, palladium represents the smallest market in the four precious metals.

Palladium’s largest use comes from the auto industry’s green push to curb harmful emissions, as the precious metal is used in palladium-rich catalytic converters in gasoline run-cars which aids in the oxidation of hydrocarbons, as opposed to platinum which is used in diesel run vehicles.

The key question for carmakers would be to substitute palladium for cheaper platinum. In the near term, it seems that no meaningful substitution is expected before at least 2022.