Learn About Futures Insider for December 22, 2011: Palladium

Contract Size: 100 troy ounces

Price Quote & Tick Size:US Dollars and cents per ounce; minimum tick size is $0.05 (5¢) per troy ounce ($5.00 per contract).

Contract Months: Trading is conducted over 15 months, beginning with the current month and the next two consecutive months before moving into the quarterly cycle of March, June, September, and December.

Trading Specs: Open outcry trading is conducted from 8:30 AM until 1:00 PM ET. Electronic trading is conducted from 6:00 PM until 5:15 PM ET via the CME Globex® trading platform, Sunday through Friday. There is a 45-minute break each day between 5:15PM (current trade date) and 6:00 PM (next trade date).

Daily Price Limit: As of date of initial publishing, there were no daily limits; however, it is wise to consult the exchange.

Trading Symbols: PA
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Past performance is not indicative of future results.
***chart courtesy of Gecko Software

Palladium Facts

This precious metal is one of six metallic elements collectively known as platinum group metals (PGM). The other five members of PGM include ruthenium, rhodium, palladium, osmium, and iridium.

The official discovery of palladium is attributed to William Hyde Wollaston in 1803, who named the element after an asteroid – Pallas. Palladium is found in ore deposits in Russia, Australia, South and North America. Palladium may often be tied closely to nickel production in places like South Africa, Siberia, and Ontario, Canada. It can also be found in gold or copper ores.

Palladium sources on a global level are illustrated as follows:
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Palladium is soft and silver-white like platinum and does not tarnish in air. It is harder and lighter than platinum.

Where commercial deposits are concerned, the largest estimated deposits – over 90% of the world total – occur at the Bushveld Igneous Complex in South Africa and in Norilsk in Siberia. Palladium can also be recycled. According to the USGS, nearly 10,400 kilograms of platinum group metals were recovered from scrap in 2006.
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*Data courtesy of the USGS

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*Data courtesy of the USGS

Price highlights for this market include:

Reports on metals in the late 1970s showed glimmers of support for prices depressed by supply gluts as bills were put forth for government purchases to boost strategic supplies. Original proposals by President Carter included purchasing 1.19 million troy ounces of palladium. Prices which had once been well below $100 per ounce started to move higher.
The metals price boom in 1980 helped pull palladium higher. Soaring gold prices also helped trigger substitutive demand for platinum group metals at this time as manufactured items and dental alloys were switched to less pricey products. Prices would hit fresh highs above $300 per ounce before collapsing through the end of the year.
Prices would remain under the $100 per ounce level through 1982 before trending higher on economic woes in 1983.
In 1991, Nissan Motor Company announced that they had developed a catalytic converter using palladium instead of platinum, boosting prices on substitutive demand. On the day of the news release, platinum prices would fall around $20 an ounce while palladium would rise by $6. The next trading session saw prices move back towards $96 per ounce.
Prices would not break above $200 per ounce until 1997 when supply fears would spike the market. Throughout 1998, concerns over exports from Russia's Norilsk Nickel mine would deliver higher prices. By January of 2001, palladium would hit record high prices above $1,000 per troy ounce as Russian supplies dried up.
Within a year, prices would collapse, dipping to four-year lows as Russia's palladium producer invested in Stillwater and supplies were seen as stabilizing. Forecasts for a surplus of platinum and palladium in 2003 would trim prices again. Demand forecasts were trimmed as North America's economy slowed.
Palladium prices found support under $200 per ounce, rising through $300 in early 2004, dipping back, and then rebounding above $400 per ounce in 2006. This price volatility would remain as 2008 saw a range with highs approaching $600 and lows around $160 per ounce.

Key terms for palladium include:

Bushveld Igneous Complex - location of an important palladium mine in South Africa.
Auto Catalysts - one of the primary uses of palladium, precious metals act as catalysts in catalytic converters to reduce emissions from internal combustion engines.
Annealing - in metallurgy, a means to alter the strength or hardness properties of a material with a heat treatment.

Key Uses

Palladium is hypoallergenic and can be used in jewelry manufacture, wearing better than white gold. In fact, it has been employed as a jewelry metal since 1939. However, the primary destination for nearly 50 percent of palladium is automobile catalysts. Palladium absorbs large quantities of hydrogen and can also be used to store the same. It is also used as plating for electronics, dental alloys, watch making, surgical instruments, and blood sugar test strips.

Key Concerns

Regional Concentration: Like platinum, a huge percentage of current palladium mining is also confined primarily to South Africa and Russia, leaving the door open for the possibility that any political concerns or regional activity could affect supply. An excellent example of this could be the recent sales of palladium from Russian stockpiles, since the overall stockpiles held by the central bank and state are unknown.

Perceived Scarcity: As with other platinum group metals, the possible or perceived global availability of palladium may impact forecasts for future supply.

Applications: New applications, as well as an increase in the existing technologies which employ platinum group metals, could shift the supply and demand dynamics rather quickly. The continued efforts to control emissions are significant especially with a possible shift to palladium rather than platinum.

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