Commodity Online
Palladium has enjoyed a similar rally to platinum, fixing at $217/oz on 18th February, its highest since November 2008. There is a solid reason for the recovery -- production is being cut at many mining companies, and Norilsk reiterated its much-reduced output forecast for 2009.

However, as with platinum, the price has little to cheer on the demand front. Chinese car (sedan) sales in January were 610,600 units, up from 584,600 in December but down 7.99% on a year-on-year basis. US car sales were 795,667 units on a seasonally adjusted basis, down 37.6% year-on-year.

Other emerging markets, which also tend to be gasoline-fuelled and hence predominantly palladium using, also suffered steep declines.

US trade data is now in for all of 2008, and this reveals that imports of palladium were 113.7t (3.6 Moz), up from 101.5t in 2008. Russia was the main source, supplying 65t. However, the figures are somewhat distorted by the huge import of 27.4t (0.9 Moz) in November from Russia, making 31.7t of imports in total that month. Otherwise imports had been on a downward trend (see 2nd chart) and one that reasonably closely matched falling car production in the US; the November data in the chart excludes all but a more --normal--1.5t from Russia.

This suggests the bulk of that export was taken up by sectors other than the automotive, possibly investors.

Certainly the palladium ETFs have seen a pickup in recent weeks. The ETF Securities product, based in London, had added 45,203 oz in February 2009 as of the 15th. Another 28,921 oz have gone into the ZKB Swiss product. This rate of buying is equivalent to perhaps 400,000 new cars, roughly the same amount fewer cars that the US bought in January 2009 than January 2008, and in only half a month.

Outlook
So what are the compelling reasons for palladium investors now? It's cheap? It's cheap compared with platinum? Car companies can live off their stocks of palladium for only so long? Jewellery demand is likely to gain from more expensive gold? It may be all of these factors, but for now the price is holding up remarkably well.

Further gains however towards $250/oz seem unlikely until we see some concrete evidence that the car market is stabilising. Short-term London fix: $185/oz-$225/oz.

Why Palladium is booming as a precious metal
Palladium is a rare and lustrous silvery-white metal that was discovered in 1803 by William Hyde Wollaston, who named it palladium after the asteroid Pallas, which in turn, was named after the epithet of the Greek goddess Athena, acquired by her when she slew the giant Pallas.

Futures contracts on palladium are actively traded on the NYMEX Exchange. Palladium is the other major metal of the platinum group. It is mined with platinum, and resembles it in many respects, yet there are important differences between the two metals.
Palladium is also produced as a by-product of nickel mining. Russia supplies about 67% of production, South Africa, 23%; and North America, 8%. Annual production runs approximately 8.1 million ounces.

Automotive catalysts are the largest consuming sector, accounting for 63% of demand. Electronic equipment accounts for 21%; dental alloys, 12%; and jewelry, 4%.

Palladium, along with platinum, rhodium, ruthenium, iridium and osmium form a group of elements referred to as the platinum group metals (PGMs). Platinum group metals share similar chemical properties, but palladium has the lowest melting point and is the least dense of these precious metals.

With inputs from Fortis Metals Monthly

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