Palladium risks tripping up as prices stampede higher – by Jan Harvey(Reuters U.S. – January 16, 2018)

LONDON, Jan 16 (Reuters) – Palladium, the hottest property in the precious metals deck last year, is tipped for a record performance in 2018 even among bearish forecasters, but the metal could become a victim of its own success.

The prospect of sharply higher prices could well prompt substitution of the metal for cheaper platinum in autocatalysts and higher recycling volume.

The metal has posted a string of deficits in recent years, fuelled by strong gains in autocatalyst demand. That helped send prices above $1,000 an ounce last year for the first time since 2001, and to a record $1,138 this week.

Carmakers, who use the metal in catalytic converters, are expected to account for some 80 percent of palladium offtake this year, up from 56 percent in 2007. That leaves palladium particularly exposed to shifts in auto demand.

So far, pressure on palladium’s two most important car markets – the first drop in U.S. auto sales since the financial crisis last year, and slower car sales growth in China after tax cuts on small vehicles were phased out – has been offset by a move away from diesel engines in Europe and growth elsewhere.

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