America’s renewed love affair with the automobile is tightening global supplies of palladium, a metal rarer than gold.
While each car requires only a few grams of palladium, demand in 2015 will probably exceed supply for a fourth consecutive year, according to Johnson Matthey Plc, a maker of catalytic converters for automobiles that use the metal to reduce harmful tailpipe emissions. Global car sales rose 3.4 percent last year to a record 81.6 million vehicles, Macquarie Group Ltd. said in a report last week.
The lowest oil prices in five years and cheap bank loans are helping to extend a rebound in automobile sales that began in 2009, boosting demand for everything from catalytic converters to Alcoa Inc. (AA)’s aluminum sheets and Goodyear Tire & Rubber Co.’s wheels. Even after palladium prices soared to a 13-year high in September, Morgan Stanley and Deutsche Bank AG remain bullish because car parts account for 70 percent of the metal’s use.
“Palladium is an exciting place to be because of its exposure to gasoline,” Scott Winship, a fund manager at Investec Asset Management, which oversees about $112 billion, said by telephone from London. “U.S. auto demand is incredibly strong and might even surpass previous peaks that we saw before the financial crisis.”
Palladium, used mostly in gasoline-fueled vehicles that dominate markets in North America and China, is approaching a bear market after falling 3.3 percent this month to $770.75 an ounce in London. The Bloomberg Commodity Index is down 2.7 percent in January, after touching a 12-year low last week. The Bloomberg Dollar Index has risen 1.1 percent, and the MSCI All-Country Index of world equities slid 1.4 percent.
Interest rates near zero and a strengthening job market are providing a boost to U.S. auto sales, which in November rose to an annualized rate of 17.2 million vehicles, the highest since November 2003, according researcher Autodata Corp. December was slightly less at 16.9 million, based on data adjusted for seasonal trends.
Cheaper fuel “might attract some drivers to buy a car when they otherwise wouldn’t have,” said Jonathon Poskitt, the head of sales forecasting for Europe at Oxford, England-based researcher LMC Automotive Ltd.
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