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Metals
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Metals

  #1 (permalink)
Legendary Market Wizard
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Metals

It is interesting to note that the price for Palladium almost reached the price for Platinum. At some point it might be interesting to buy the 2*PL-PA spread.

The reason for the relative strength of Palladium is not clear to me.

Both metals are used for catalysators in car engins. The advantage of Palladium was the lower price, whereas Platinum showed technological advantages. Currently the prices of Palladium and Platinum are approx. the same. Thus, the advantage of Palladium has disappeared.

The spread Palladium minus Platinum improves continuously since 2010. Thus, short-term supply problems or short-term political decisions cannot be the reason behind. The Volkswagen scandal started later.

Does anyone have an explanation ?

Only once since 1983 - in 2000 - the spread moved beyond zero. It is tempting to sell the spread PA - 2 * PL with a stop at a close above 0. The longterm potential is enormous. The value of the spread was below -$120,000 in 2010.

Any comments are appreciated.

Best regards, Myrrdin

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  #3 (permalink)
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myrrdin View Post
The reason for the relative strength of Palladium is not clear to me.

Hydrogen fuel cell use as well as the known catalysis, all rare earth metals seem to be flying on the back of electric/non-oil car futures.

Cheers

Travel Well
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  #4 (permalink)
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myrrdin View Post
It is interesting to note that the price for Palladium almost reached the price for Platinum. At some point it might be interesting to buy the 2*PL-PA spread.

The reason for the relative strength of Palladium is not clear to me.

Both metals are used for catalysators in car engins. The advantage of Palladium was the lower price, whereas Platinum showed technological advantages. Currently the prices of Palladium and Platinum are approx. the same. Thus, the advantage of Palladium has disappeared.

The spread Palladium minus Platinum improves continuously since 2010. Thus, short-term supply problems or short-term political decisions cannot be the reason behind. The Volkswagen scandal started later.

Does anyone have an explanation ?

Only once since 1983 - in 2000 - the spread moved beyond zero. It is tempting to sell the spread PA - 2 * PL with a stop at a close above 0. The longterm potential is enormous. The value of the spread was below -$120,000 in 2010.

Any comments are appreciated.

Best regards, Myrrdin

basis price driver : supply / demand

did you look at the COT for both ?

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  #5 (permalink)
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rleplae View Post
basis price driver : supply / demand

did you look at the COT for both ?

It is obvious that the price drivers are supply and demand. But whose supply and demand in this case ?

Funds are long, commercials are short.

Best regards, Myrrdin

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  #6 (permalink)
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ratfink View Post
Hydrogen fuel cell use as well as the known catalysis, all rare earth metals seem to be flying on the back of electric/non-oil car futures.

Cheers

The number of fuel cells built since 2010 is limited, isn't it ? The number of car enginies should be significantly higher.

And why does the price of Platinum not rise ?

Best regards, Myrrdin

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myrrdin View Post
It is interesting to note that the price for Palladium almost reached the price for Platinum. At some point it might be interesting to buy the 2*PL-PA spread.

Why 2:1 is that a calculated hedge ratio?

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  #8 (permalink)
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I was wondering whether the German Diesel Engine Fiasco had anything to do with it but wikipedia implies Diesel Catalytic converters use both. Of course the quantities used could be vastly different.

https://en.wikipedia.org/wiki/Catalytic_converter
Diesel engines
For compression-ignition (i.e., diesel engines), the most commonly used catalytic converter is the diesel oxidation catalyst (DOC). DOCs contain palladium, platinum and aluminium oxide, all of which serve as catalysts to oxidize the hydrocarbons and carbon monoxide with oxygen to form carbon dioxide and water.

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  #9 (permalink)
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SMCJB View Post
Why 2:1 is that a calculated hedge ratio?

The Palladium contract is for 100 troy ounces, the Platinum contract for 50 troy ounces. Price quotation for both is in Dollars and Cents per troy ounce.

Best regards, Myrrdin

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  #10 (permalink)
Legendary Market Wizard
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SMCJB View Post
I was wondering whether the German Diesel Engine Fiasco had anything to do with it but wikipedia implies Diesel Catalytic converters use both. Of course the quantities used could be vastly different.

https://en.wikipedia.org/wiki/Catalytic_converter
Diesel engines
For compression-ignition (i.e., diesel engines), the most commonly used catalytic converter is the diesel oxidation catalyst (DOC). DOCs contain palladium, platinum and aluminium oxide, all of which serve as catalysts to oxidize the hydrocarbons and carbon monoxide with oxygen to form carbon dioxide and water.

As far as I know, the Palladium share in Otto engines is higher than in Diesel engines for technological reasons. For some years it was the target to develop catalysators for a high Palladium share because of the lower price of this metal But if both have the same price it would be a technological advantage to only use Platinum.

A problem might be that the development of a new catalysator based only on Platinum takes some time.

But why did the price of Palladium rise compared to Platinum in early 2010 ? The Volkswagen fiasco was later. A reason could be the growing number of cars in China. In this country Otto engines are more popular than Diesel engines, whereas in Germany and the rest of Europe Diesel engines are more popular.

But in my opinion, if we only look at catalysators for car engines, there should be a price advantage for Platinum in the long term due to technological reasons.

Best regards, Myrrdin

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