Platinum Vs Palladium: Investment and Rarity

Platinum and Palladium are precious metals found naturally in the Earth’s crust. They both are members of the platinum group metals (PGMs), in addition to Ruthenium, Rhodium, Iridium, and Osmium. They are often mined together because they share similar chemical properties. The two metals are quite rare, with spot prices that are currently high, and there are a limited number of mines currently extracting these metals from the ground. Supply is low, and prices tend to rise over time. This article will look at Platinum and Palladium as investments from the perspective of their history, usage in industry, relative rarity, and desirability as commodities.

Palladium

Palladium is a chemical element and a noble metal that appears silver-white and shiny. It has the atomic number 46 and its chemical symbol is Pd.

One of the rarest elements on Earth, palladium has been an alloying metal for platinum since the early 20th century. It was discovered that adding palladium to platinum increases its hardness and resistance to corrosion. When platinum jewelry is worn or damaged, it is sometimes repaired by replacing the Platinum with Palladium.

The price of palladium remained fairly steady throughout the first half of the last ten years, with the price breaking out to the upside after late 2018. One reason for this is that the demand for palladium has grown much faster than the supply. Another reason is that the automotive industry has been using more of the metal recently.

Sources of Palladium

South Africa (with its Mogalakwena mine) and Russia (with the Oktyabrsky mine and Taimyrsky mine owned by Nornickel in Siberia) are two of the largest producers of extracted palladium. There are only a few mines operating currently where palladium is extracted in uncombined form. One common non-extracted source of palladium is as a nickel refinement byproduct. Other sources include scrap metal, industrial waste, and recycled electronic components.

How to invest in Palladium?

There are many ways to invest in Palladium. Aside from holding the physical metal, you can purchase shares in a company that produces Palladium or trade futures contracts in the metal. Futures contracts allow you to speculate on future prices without owning any physical palladium.

Palladium rarity

Palladium is one of the rarest metals on Earth with Statista reporting “in 2021, the global supply of palladium was forecast to be 6.74 million ounces”.
This is only up slightly from 6.4 million ounces worldwide in 2020. Some of this drop in supply stems from the auto industry and the increasingly strict environmental and emissions policies it operates under.
Some analysts estimate that palladium is rarer than platinum by a factor of 15, which is saying a lot since platinum is quite rare itself.

Palladium price history

From 2000 to 2010, the price of Palladium traded roughly sideways between ~$200 and ~$1000. Since 2011, however, the price increased to a higher price plateau and breaking out over the $1000 per ounce mark in 2018. Since late 2019, its spot price has fluctuated widely on a monthly basis. Currently, the price of palladium is around $2,000 USD per ounce.

Its value comes from its rarity but also because it’s hard to mine. Palladium mining requires high-tech equipment and substantial amounts of energy. As a result of this and other factors, palladium prices tend to fluctuate wildly.

Future of Palladium

Analysts have predicted that the price of Palladium should fall over the next few quarters, from Q4 of 2022 and into Q1 of 2023. The main reasons for this decline are:

  • Reduced demand from the current global economic slowdown
  • Policy changes that are unfavorable to auto manufacturers have been dragging down platinum autocatalyst demand
  • Increased production of other precious metals such as gold and silver.
  • More efficient technology for producing these metals.
  • Political instability in some parts of the world.
  • Increased production of Palladium from China
  • Reduction in demand for Palladium in cars

Platinum

Platinum is a shiny silver-grayish-white metal and a chemical element with the symbol Pt and atomic number 78. It is a silvery-white transition metal found in nature only in small quantities.

Where does Platinum come from?

Most Platinum is extracted from the ore. The ore contains both Platinum and another metal called iridium. Iridium is usually present at low concentrations (less than 0.1%). Therefore, separating the Platinum before refining the ore into purer forms is necessary.

Platinum mining methods

The two primary methods of extracting Platinum from ore are pyrometallurgy and hydrometallurgy.

Pyrometallurgical process

This method involves heating the ore until the iridium melts. Then, the molten iridium is separated from the Platinum using gravity. The first step in pyrometallurgy is called smelting. It is where the iron-bearing ores are heated to high temperatures (up to 1,500 degrees Celsius) to separate the valuable metals. To ensure the metal doesn’t oxidize during smelting, the furnace must be kept under a blanket of inert gas, such as argon. Once the metal has been separated, it’s time to refine it into its purest form. It is done by adding chemicals to the molten metal, which react with impurities and leave behind only the desired product. After refining, the metal is cooled and then cast into ingots. These ingots are used to create new alloys, which are then melted down again and refined.

Hydrometallurgical process

This method involves dissolving the ore in water. The dissolved Platinum is then precipitated by adding an acid. This method is used when the mineral contains large amounts of gold, silver, copper, zinc, nickel, cobalt, molybdenum, manganese, iron, titanium, tungsten, etc. It also works well with minerals containing small amounts of metals such as aluminum, beryllium, cadmium, chromium, gallium, germanium, indium, lithium, magnesium, niobium, phosphorus, rhenium, selenium, tellurium, tin, vanadium, zirconium, yttrium, and others.

Largest Producers of Platinum

South Africa dominates the global market for Platinum. However, there is also significant production in Canada, Australia, and Zimbabwe.

Platinum Price History

Platinum became famous as a precious metal after World War II when its scarcity meant it had great value. It is used in dentistry, electronics, and even space exploration. NASA uses platinum-based alloys in its spacecraft heat shields. Its rarity and various uses within industry have influences on its price.

In 2012 the metal’s spot price hovered around $1500 USD per ounce, and then dropped between mid-2014 and early 2016 where it found a plateau in the $800 – $1000 USD per ounce range. Since 2020 it has seen more price fluctuation going from the mid-$500s in March 2020 up to a height of $1348 in February of 2021. Today, the spot price of platinum is just around $900 per troy ounce.

Future of Platinum

Many analysts are predicting that the price of platinum will increase gradually over the next five years. This rise is expected to be driven primarily by increasing demand for platinum catalysts used in fuel cells. The World Platinum Investment Council wrote in a recent quarterly newsletter that “despite considerable headwinds in 2022, pockets of platinum demand strength, particularly in the automotive, jewellery and industrial sectors are promising in both the near- and long-term.”

How do Platinum and Palladium differ?

  • These two metals look very similar to each other and one can be easily mistaken for the other to an untrained eye. They also react similarly as catalysts to the same elements and chemicals which means, among other things, they will not tarnish and will tend to keep their color and brightness with time.
  • Aside from differing in price, platinum is much denser and thus weighs more (almost twice more at 21.45g/cm3) than palladium which is 12.0g/cm3.
  • The global supply of palladium in 2021 was “forecast to be 6.74 million ounces” (Statista) – this is compared to the early figures for 2022 indicating a “global platinum supply of around 5.2 million ounces” (Statista).
via Statista
  • Both Palladium and Platinum have similar properties. They are soft, ductile, malleable, and resistant to corrosion. They can withstand high temperatures. Both are good conductors of electricity and also excellent electrical insulators.
  • Palladium is harder than platinum, and has a hardness of ~4.75 on the Mohs scale, whereas platinum has a hardness of ~4.25, meaning that platinum can thus be scratched by palladium.
  • Palladium melts at a lower temperature, 2,826 °F, compared to the 3,215 °F melting point for Platinum.
  • Palladium currently trades at a higher price (currently around $2000 USD per ounce) as compared to platinum (about $900 USD per ounce today).
  • Palladium is more difficult to refine than platinum. Palladium can be purified using mercury or sodium cyanide, but platinum must be purified using hydrochloric acid.

Investment Risks

Both Platinum and Palladium have their unique risks associated with them. These include:

Supply risk: If there is insufficient supply for investors to buy, the price will likely be affected. It could happen if there is a shortage of one or both of these metals due to mining problems or political instability.

Demand risk: If demand increases, then the price will likely increase relative to existing supply. It could happen if the market sees an increase in use of platinum or palladium products such as jewelry.

Political risk: If governments change, the new government may institute policies which cause the price to swing more widely than was expected previously.

Market manipulation risk: Some companies try to manipulate the market by buying large amounts of platinum or palladium. This causes the price to go up artificially.

Uses of Platinum and Palladium

Platinum and palladium’s ability to withstand high temperatures makes them useful in many industrial applications. For example, Platinum is often used in automobile exhaust systems, catalytic converters, fuel cell components, some gas sensors, certain medical implants, and jewelry because of its corrosion resistance. At the same time, Palladium is commonly used for jewelry and medical implants, in addition to its use as an oxidizing catalyst within industry.

In conclusion, we can say that both Platinum and Palladium are essential elements and metals. Both are precious metals but have different uses. So, if you want to invest in one of them, do your own research and choose based on your goals. When you buy precious metals, you purchase something that has had value over a long time frame historically. They have also been chosen by investors as a haven during economic uncertainty. If you plan to invest in gold, silver, platinum, or palladium, get clear on the time horizon of your investment, because prices rise and fall and you may need to wait longer than expected to see anticipated returns.

Disclaimer: This page is intended for informational purposes only. It should not be considered as investment or financial advice. You should speak to a certified financial professional prior to any investment to determine the best investments and investment mix for your specific goals and situation.