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Thursday, February 7, 2019

Strategic CSR - Palladium

The article in the url below reports that gold is no longer the world's most precious metal:
"Last week, an obscure and far less sexy rival called palladium swung ahead, for the first time in 16 years. Gold briefly retook the lead, but spot palladium prices have beaten out gold prices for the past three days. Palladium hit a record high on Wednesday before settling in at $1,255.12 an ounce at the market close in London on Thursday. … Gold was $1,243.02 an ounce."
Both gold and palladium are relevant to the CSR debate. Gold is used in electronic consumer devices, due to its properties as an efficient conductor of electricity (it is also malleable and does not tarnish). But, gold is dirty to mine and becomes part of the massive amounts of e-waste that our societies currently generate. Palladium is similarly useful for consumer electronics, but is mostly used in catalytic convertors to scrub the exhaust fumes generated in fuel-based combustion engines:
"Until recently, palladium was perhaps best known for sharing a name with several popular entertainment venues and for powering the fictional arc reactor mechanism hooked up to Iron Man's heart. Its primary purpose is far less glamorous: More than 80 percent of the world's palladium is used in the catalytic converters that help vehicles manage their pollutant output."
Of course, these uses are what propel the prices of these different metals; it is also what will determine their 'efficient' allocation. What is interesting, though, is the sudden nature of the rise in interest in palladium:
"Palladium is one of the best-performing commodities of 2018. Its price has surged more than 50 percent in the past four months."
The article contains a brief history of the metal and hints (but is not particularly clear) as to why the price has surged suddenly – it seems to be a mix of greater demand (higher sales of gasoline cars, which use catalytic converters, and lower sales of diesel cars, which don't) and tighter supply (from dodgy places like Russia), even in the face of greater efforts to recycle. As a result:
"Demand for palladium has steadily increased for eight years and is expected to outstrip supply by 1.2 million ounces in 2018, and Metals Focus has forecast 'further, sizable deficits to come.' As supply tightens, palladium's price has climbed. … Experts expect it to stay elevated for at least a few months."
Either way, I'm guessing the market for palladium jewelry will take a little more time to develop.
Take care
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Pricier Than Gold, and in Your Engine
By Tiffany Hsu
December 14, 2018
The New York Times
Late Edition – Final