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.