Palladium – how will the skyrocketing price affect you?

Palladium

Palladium is currently the most valuable of the four major precious metals, 80% more expensive in February 2020 than it was a year ago. For almost a decade demand has outstripped supply, and this now-acute shortage is causing prices to soar to record highs.

The automotive sector is driving demand, with both platinum (used in diesel-powered vehicles) and palladium (petrol-powered vehicles) being key components in pollution-control devices for cars and trucks. Almost 90% of palladium ends up in vehicle exhaust systems, and this figure is set to rise as governments strive to combat climate change by forcing automakers to increase the amount of precious metal they use. Following VW’s (and others) diesel emissions scandals, which resulted in hefty fines and tighter regulations, many big name brands have announced that diesel motors will be phased out in the upcoming years. The negative outlook for diesel cars has reduced the platinum price, and should continue to do so, as more vehicle manufacturers turn to petrol models.

While analysts believe that the palladium price will correct, it should remain at current higher levels – compared to historic prices – for the next five years. There is no suitable substitute in sight for catalytic converters, and new lithium battery technologies currently being developed utilise palladium. It is also getting more difficult and costly to mine both platinum and palladium in South Africa, with mines getting ever deeper.

So what does this mean for manufacturing jewellers?

A stronger Rand?
In theory, the higher palladium price should boost the Rand by improving South Africa’s export performance, since we produce 40% of the world’s palladium, and precious metals represent about a fifth of all exports. If you’re importing components for your commissions, this could be great news. If you’re mostly servicing overseas clients, you may need to look at raising your prices to maintain profit margins.

Platinum or Palladium for your jewellery commissions?
Both luxurious and extremely hardwearing metals are brilliantly white in colour and require no rhodium plating, are hypoallergenic and resistant to corrosion, tarnishing and oxidation. So given the explosion in the palladium price – which one is better for your purposes?

Arguments against palladium:

  • Palladium jewellery requires specialised and expensive equipment – it’s difficult to cast and becomes brittle if heated incorrectly
  • Resizing palladium rings can only be done with a laser welder

Arguments for palladium:

  • CPM offers casting services in palladium, so if you’re determined to break into this market without the equipment costs and associated risks, contact our casting department for advice before proceeding with a design for a client. Since both palladium and platinum are difficult metals to work with, not all designs are possible to cast.
  • Palladium is 40% lighter in weight than platinum, so even though it costs more per gram, you’ll use substantially less of it, so the material costs may almost even out.
  • If you deal with high-end clientele that keep an eye on the markets and want the most expensive option available – palladium is a good material to push (and to add a large mark up onto).
  • Most available research indicates that palladium is at least 10 times more rare than platinum, so if your market is concerned with exclusivity, palladium is a good choice.

Arguments for platinum:

  • For middle-of-the-road customers, platinum has historically been seen as the most prestigious metal so unless your clients are investors with an ear to the ground, this perception may work in your favour when your quote for a platinum item seems reasonably affordable.
  • Building on the above point, many consumer studies have shown that heavier items have a higher perceived value, so platinum may feel more expensive and appear to be of superior quality or more durable, even though it’s currently cheaper.
  • It’s easier to work with than palladium!

Arguments for an alternative:
The majority of consumers can’t tell the difference between palladium and platinum. If your clients are on tighter budgets, or you don’t have permits in place, or are inexperienced with either metal, another material to consider is Argentium Silver. While certainly not as durable or valuable as PGMs, Argentium is much easier to work with. This superior, high performance and brilliant white metal has the longest-lasting shine, and is much more tarnish resistant than Sterling. Read our article on this antibacterial, hypoallergenic and eco-friendly alternative.

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