A fun example of why this economic planning is so damn hard

Palladium, a silvery metal used in catalytic converters for petrol cars, has become one of the star commodities of the year, hitting $1,000 an ounce for the first time since 2001.

The metal, mined primarily in South Africa, Zimbabwe and Russia, has risen 48pc this year, making it the best performing precious metal.

Palladium has added $70 an ounce in the last week alone, and rose 2pc in Monday morning trade in London to break the $1,000 mark.

Palladium’s strong run is linked to surging sales of petrol cars globally, in part because consumers are turning their backs on diesel vehicles.

A slew of negative publicity around diesel pollution, combined with wavering support from governments that had previously encouraged motorists to buy diesel, and the emissions data scandal that engulfed Volkswagen, has resulted in the fuel falling out of favour.

It’s not entirely cut and dried but Pt tends to be used in diesel catalysts, Pd in petrol. So, if the new car fleet is now to swing, in Europe at least, from diesel to petrol, which version of the wise and omniscient planner is going to delve down enough layers in the supply chain to tell the miners to adjust? Crack on with really optimising that extraction process for the Pd not the Pt (you do tend to be getting both from the same mineral flow)?

And another level, out into the scrap recycling chain. Catalysts are indeed collected and processed for their scrap. We want a change in prices at the collection end, to make sure that more attention is paid to those formerly less valuable petrol ones. The refiners of the catalyst material also need to be optimising their process for Pd not Pt recovery (the catalysts are processed together, for there are many mixed types as well). And from memory, although I’d not want to swear to it, the scrap feed back into the industry is somewhere between large and a majority of supply.

So let us imagine that planner, some Level III in the bowels of the Ministry of Metals. Then compare with markets that stimulate the lust for the gilt and pelf of profits, that near immediate, by comparison at least, dissemination of that information out through the economy.

Even to the silicon chip makers. Certain types will use Pd, Pt and even at times Nb to do something well beyond my ken. Each solve the problem but with varying success, the choice dependent upon two things, whether the problem really, really, needs to be solved perfectly or whether changing prices make any one of the three good enough. Without the price mechanism how does that information get to the chip designers and specifiers, that we need more Pd over here, not in chips?

Planning’s hard which is why we let markets take the strain.

12 thoughts on “A fun example of why this economic planning is so damn hard”

  1. We’re definitely exhausting Pd supply. It was so cheap and plentiful in the old days they used to make buildings out of it.

  2. Bloke no Longerin Austria

    Tony Stark is buying up all of the world’s palladium for his ARC reactor and production line Iron Man suits.

  3. Indeed so, I’ve even talked with the lady scientist about it all. Not exactly entirely profitable at present. You most certainly wouldn’t go out to sweep the roads to get it. But if you are sweeping the roads, why not spend a little trying to figure out how to economically extract?

    The problem coming that at some point you’ve got to concentrate. Admittedly, a few years back, but they were still – 1000 x off the concentration they would need to pass the stuff along to a refinery (you are not, not, going to build your own). Somewhere between probably and possibly solvable but as far as I know at least not done yet. From memory, so don’t quote, but they were recording ppbs of the metals, something under ppm at least, they need tens to hundreds of ppm concentration.

    There’s no doubt it’s there and it can be done. It’s the “economic” bit still lacking. The actual catalysts are 0.1% (100 ppm – again from memory, 1 gramme Pt per 500 g or 1,000 g material, this sort of range) or so and that’s what the refiners want.

  4. So Much For Subtlety

    Hallowed Be – “We’re definitely exhausting Pd supply. It was so cheap and plentiful in the old days they used to make buildings out of it.”

    That is actually pretty funny. I could swear I used to have a recording of the Clash at the Palladium.

    I wonder what happened to it.

  5. What you’re forgetting is that socialist central planning usually only has to concentrate on turnip production and bread making. Anything more complex is beyond the needs of the socialist workers paradise. Of course they fuck even that up but hey, socialism has failed every time its been tried so lets try again comrades!

  6. “socialism has failed every time its been tried so lets try again comrades”. You’ll find that real socialism has never actually been tried.

    According to socialists anyway.

  7. @ monoi
    I have yet to be told that Pol Pot wasn’t a Socialist accompanied by some reason why he wasn’t. So ask them why he wasn’t.
    [Nobody has told me why Haile Mengistu Mariam wasn’t a Socialist either – they just pretend not to know what I am talking about]

  8. Thanks, Tim. That would have been my uneducated guess, but it’s always good to hear from one who knows.

Leave a Reply

Your email address will not be published. Required fields are marked *