Palladium futures historical price charts have demonstrated some price volatility extremes due to the small number of supplier nations.
In 2000, palladium spiked from the low 400’s to over 1000, based on political pressures within Russia due to unmet export quotas. When the spike first went to 800, the NYMEX and the Tokyo Commodities Exchange (TOCOM) both attempted to address the speculation by requiring margin increases and contract liquidations.
Prices dropped to the mid 600’s, but then Russia announced no deliveries would be made in 2001, forcing prices to spiral to 1090. The Ford Motor Company was one of the biggest victims of the price whipsaw in historical palladium prices, registering a reported $1 billion trading loss.
What Are Palladium Futures
Discovered in the early 1800’s, palladium is a rare earth metal that is silvery white in color and is classified, along with osmium, rhodium, iridium, ruthenium, and platinum, as a member of the platinum group metals (PGM).
Palladium futures trade on the New York Mercantile Exchange (NYMEX) under the ticker “PA” and contracts are in United States dollars per troy ounce. A single NYMEX palladium contract is for 100 troy ounces. Like other precious metals, deliveries must include a purity not less than .9995, and no single piece can weigh under 10 ounces.
Contracts can be comprised of plates or ingots, which must include standard assay hallmark information, including bar number, weight, symbol, grade, and assayer logo. A tick is equal to five cents ($.05) per troy ounce, or $5.00 per contract, and deliveries are made every month annually.
The last trading day is on the third business day before the end of each delivery month. Palladium futures trade both in the pit on Open Outcry and electronically on the CME Globex. Palladium bullion is one of only four precious metals (the others being gold, silver and platinum) to carry an ISO currency code. Palladium’s codes are XPD and 964.
Palladium Futures Historical Price Charts Show Strong Demand
Palladium has a range of uses. In electronics, palladium is used in manufacturing electrodes, connector plating, ceramic capacitors, fuel cells, and soldering materials. Carbon monoxide detectors, spark plugs used in aircraft engines, some groundwater treatment systems, and membrane reactors for producing pure hydrogen also use palladium.
In medicine, palladium is a component in producing diabetes test strips, as well as in crafting surgical instruments and in dentistry. Since 1939, palladium has been utilized in the jewelry industry for watchmaking and as a prime ingredient in creating white gold alloys, which are used as a plating for other metals, especially for its hypo-allergenic qualities.
In photography, palladium is still used on occasion for fine print photography printing in place of silver. Transverse flutes, used by musicians around the globe, also include palladium, in part for their plating finishes.
By far, the most predominant use of palladium is in the manufacture of catalytic converters for automobiles. With palladium’s unique properties in being able to convert hydrocarbons into water vapor, nitrogen and carbon dioxide, over half of global output is diverted to producing catalytic converters.
Palladium Futures Historical Price Charts Show Supply Disruptions
Close to 85% of global production comes from Russia and South Africa, with the only other mining of significance being sourced from Canada and the United States. As a result, political events in Russia and South Africa, along with automobile industry fluctuations, can dramatically affect the supply and demand for palladium on commodity markets.
Palladium Price Movement In 2011 And Beyond
While palladium prices have dropped precipitously this year, increased demand for automobiles in China and Brazil, along with improved global auto emission standards, are expected to contribute to rising palladium prices in the future. China’s push towards cornering certain parts of the rare earth metals markets earlier in 2011 certainly demonstrate their anticipation of higher prices.
Conversely, some analysts believe that waning Russian stockpiles have already been factored into current prices and that further drops are possible, so speculators should be wary of volatility in either direction.
|Standard Palladium Contract|
|Per Contract Size||100 troy ounces|
|Price Quotation||U.S. Dollars and Cents per troy ounce|
|Minimum Price Fluctuation||$0.05 per troy ounce|
|Termination of Trading||Trading terminates on the third last business day of the delivery month.|