Welcome to the Investors Trading Academy talking glossary of financial terms and events.
Our word of the day is “Palladium”.
Palladium is an important component in electronics, and is used in many new technologies such as fuel cells. As a commodity, it has drawn the attention of investors because it is not easily substituted, and is an important component of catalytic converters.
Palladium, platinum, rhodium, ruthenium, iridium and osmium form a group of elements referred to as the platinum group metals. It is a metal used in many types of manufacturing processes and is found in electronics and industrial products. Palladium is an element found in the periodic table (atomic number 46), and is considered to be rare. The majority of the world's supply comes from mines located in the United States, Russia, South Africa and Canada.
More than half the annual global demand of about 10 million ounces for palladium is from the automobile sector, while a quarter is used in other industries and in dentistry. Physically backed exchange-traded funds account for some demand, and about 4% of demand comes from jewelry.
Car sales in China, the world's biggest auto market, are expected to grow by 11% this year to reach 24 million units out of the global total of 88.5 million, according to industry consultancy Frost & Sullivan. It expects U.S. sales to climb about 4% to almost 16 million.
Barclay’s analysts say the Chinese government's plans to phase out 6 million old and environmentally unfriendly vehicles will create demand for 1.5 million passenger cars this year, which would further support the price of palladium. Palladium is also used in cars powered by natural gas, which is a growing niche offering in emerging markets such as India. Brazil, India and Russia are expected to experience robust auto-sales growth this year. India car sales in 2014 are expected to rise 10% to 3.2 million units.
By Barry Norman, Investors Trading Academy