Palladium: A Must-Have Metal in the Global Economy Under Pressure
You’ve probably heard plenty about gold and silver and how they fit into the overall global economy. Well, those are major precious metals, but there’s one you probably haven’t heard much about unless you’ve been in a certain field or happened to buy some very high-end jewelry.
That metal is known as palladium.
Palladium is a must-have part of the global economy, as it facilitates the manufacturing of the top electronics, many of the most important industrial processes, and several other economic factors.
However, this rare metal is currently going through some major pressure thanks to current geopolitical factors.
Today, we’re going to go over what palladium is, why it’s important, and what is currently happening to the palladium market that can have wide-reaching effects on the rest of the global market.
Let’s get started.
What is Palladium?
Palladium is a precious metal found within the Earth’s crust. This metal is one of the rarest metals available, as it is 30% rarer than gold, and it’s used for a number of crucial applications.
What is Palladium Used for?
Unlike the next rarest metal, gold, palladium’s main use isn’t superficial. It has some superficial uses, but the vast majority of palladium reserves are used in various industries for very practical and functional reasons.
You can find palladium being used in the automotive industry for catalytic converters, electronic devices, dental prosthetics and crowns, photography equipment, and even some of the most advanced computer systems available.
However, it is also used for some superficial things such as jewelry; albeit, the jewelry it's turned into tends to be on the high-end side.
The Rarity of Palladium
As we briefly mentioned, palladium is one of Earth’s rarest metals. In fact, it is 30% more rare than gold; the accepted standard for rare precious metals.
This extreme rarity, paired with its extreme versatility, has given it an average price of roughly $2850 in terms of US currency. That is astronomical, and given its high demand in several industries, palladium can be a highly fruitful resource for any country that produces it.
The Importance of Palladium
As you saw, palladium is used for numerous things that drive modern society or make life easier. Without it, you can’t get the high-quality dental crowns that give people their smiles back and protect their teeth from further damage. You couldn’t get many of the electronic devices that you have today, as many of the key components utilize palladium for its conductive properties.
However, there’s another major use for it that is even more important.
Vehicles are a part of life that we’re simply never going to get away from at this point. Even in cities or countries with well-developed public transport, personal vehicles are still required to some extent. If you look at more suburban or rural environments, the need for vehicles grows dramatically due to long work commutes and unreasonable commutes for on-foot travel.
Coincidentally, palladium is used to make catalytic converters.
Catalytic converters help reduce the carbon footprint of vehicles big and small dramatically. They have been a major reason why modern vehicles give off a fraction of the toxic exhaust that they used to, and they are crucial for creating vehicles that facilitate day-to-day travel that humanity relies upon without causing undue damage to the environment; an issue that many are very familiar with.
While catalytic converters are only a small part of cutting back on humanity’s carbon footprint, they are an important one.
Without a steady supply of palladium to create catalytic converters and equip modern vehicles with them, the work towards lowering the footprint of personal vehicles can be nearly completely undone. That’s simply not acceptable after we’ve spent decades trying to perfect vehicular technology and come such a long way.
Unfortunately, the palladium supply is in fact in danger.
A Major Geopolitical Threat to Palladium
Now, you know what palladium is, what it’s used for, and why it’s such an important metal for the global economy and even the ecosystem. Well, that crucial metal is currently in danger. No, it’s not running out or being destroyed. This isn’t a problem similar to the rainforest where trees are being burned faster than they can grow.
No, this is a political problem, and it’s highly likely that you’ve heard quite a bit about what’s causing it in recent months.
The palladium supply is in danger because it comes mostly from Russia.
Russia is the largest exporter of palladium on the planet. It produces 91 metric tons of palladium annually, and the vast majority of industries source their palladium from Russia due to lower-than-average costs and high availability.
On February 24th, 2022, Russia invaded Ukraine much to the chagrin of NATO-affiliated countries, and even most of the non-NATO countries in the world.
At first, the invasion was met with swift condemnation and harsh words by various world leaders, but that did little to sway Russia from continuing, and even intensifying, its efforts.
As such, all NATO countries, and some countries outside of the group, have begun issuing sanctions against Russia.
These sanctions have blocked various forms of trade with Russia, prevented Russian officials and citizens alike from accessing basic online services, effectively cut off the majority of banking in Russia, and damaged the value of the Russian currency dramatically. Essentially, Russia has been cut off from the vast majority of trade it was once capable of.
At first glance, you probably don't see anything wrong with that. However, just because it's a move to end the violence doesn't mean it comes without consequences. With Russia being the largest supplier of palladium in the world, and its trade being cut off nearly entirely, that spells disaster for the companies depending on palladium to manufacture their must-have products and industrial machinery.
As palladium inventories begin to run out, and Russia is unable to trade its palladium, numerous key industries will begin to see major delays in manufacturing or even complete shutdowns if they can’t produce their products.
Even further down the road, it can produce a lack of crucial items on the commercial market and in the professional sphere such as dentistry, and the investment market for numerous industries can be expected to take a fairly large dip.