Palladium and platinum are both precious metals often mentioned together, and for good reason. These metals are frequently used in similar industrial applications, such as in catalytic converters for cars. What's interesting is that the price development of palladium and platinum is closely intertwined. When the price of palladium rises, it often has a direct effect on the demand for and price of platinum. In this article, we delve deeper into the relationship between palladium and platinum prices and explore how they influence each other.

Platinum and palladium belong to the group known as platinum group metals. They share similar properties, such as high resistance to corrosion and excellent catalytic properties, making them popular in industrial applications. Both metals are primarily used in the automotive industry, where they are crucial for reducing emissions in catalytic converters.

Although they have similar applications, there are also important differences. Palladium is mainly used in catalytic converters for gasoline vehicles, while platinum is more commonly used in diesel vehicles. However, the industrial demand for both metals fluctuates depending on technological developments, regulations, and economic conditions.

The price of palladium rose sharply between 2016 and 2022, mainly due to the increasing demand in the automotive industry, where stricter emission standards led to higher usage of palladium in catalytic converters for gasoline cars. Palladium became scarcer due to limited mining capacity and the inability of production to keep up with rapidly growing demand.

In 2021, the price of palladium reached a historic peak, even higher than gold and platinum. This raised concerns about the availability of palladium for manufacturers, putting pressure on the automotive industry to look for alternatives, including platinum.

Three years later, in 2024, the price of palladium has dropped by more than 50% to €27,000 per kilogram.

When the price of palladium rises, platinum often becomes more attractive as an alternative. This has several effects on the platinum market:

• Substitution Effect: Due to their similar properties, platinum is an obvious substitute for palladium, especially in industrial applications like catalytic converters. When the price of palladium becomes excessively high, manufacturers begin to switch to platinum to save costs. This leads to increased demand for platinum, driving up its price. Historically, this substitution effect has been a significant driver of platinum price increases.
• Limited Mining: Both platinum and palladium are scarce and are primarily mined in South Africa and Russia. The mining of these metals is complex and expensive, meaning that production cannot be quickly ramped up to meet rising demand. As a result, price fluctuations in palladium can lead to similar movements in the platinum market, as both metals are available in limited quantities.
• Influence of the Automotive Industry: The automotive industry is one of the largest consumers of both palladium and platinum. When palladium prices become too high, manufacturers try to switch to cheaper alternatives like platinum. This shift can significantly increase the demand for platinum, thereby driving up its price. Additionally, regulations on emission standards play a major role in the demand for both metals. As governments impose stricter emission standards, the demand for catalytic converters, and consequently for palladium and platinum, increases.

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The relationship between palladium and platinum is complex but clearly present. When the price of palladium rises, it often leads to greater demand for platinum, positively influencing the price of platinum. This interaction makes platinum an interesting investment, especially in times of high palladium prices.

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