Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21
CISCO 2020 Dot com Bubble Stock vs 2021 Bubble Tech Stocks Warning Analysis - 6th Oct 21
Precious Metals Complex Searching for a Bottom - 6th Oct 21
FB, AMZN, NFLX, GOOG, AAPL and FANG+ '5 Waves' Speaks Volumes - 6th Oct 21
Budgies Flying Ability 10 Weeks After wings Clipped, Flight Feathers Cut Grow Back - 6th Oct 21
Why Silver Price Could Crash by 20%! - 5th Oct 21
Will China's Crackdown Send Bitcoin's Price Tumbling? - 5th Oct 21
Natural Gas News: Europe Lacks Supply, So It Turns to Asia - 5th Oct 21
Stock Market Correction: One More Spark to Light the Fire? - 5th Oct 21
Fractal Design Meshify S2, Best PC Case Review, Build Quality, Airflow etc. - 5th Oct 21
Chasing Value with Five More Biotech Stocks for the Long-run - 4th Oct 21
Gold’s Century - While stocks dominated headlines, gold quietly performed - 4th Oct 21
NASDAQ Stock Market Head-n-Shoulders Warns Of Market Weakness – Critical Topping Pattern - 4th Oct 21
US Dollar on plan, attended by the Gold/Silver ratio - 4th Oct 21
Aptorum Group - APM - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 3rd Oct 21
US Close to Hitting the Debt Ceiling: Gold Doesn’t Care - 3rd Oct 21
Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
Original Oculus VR HeadSet Rift Dev Kit v1 Before Facebook Bought Oculus - 3rd Oct 21
Microsoft Stock Valuation 2021 vs 2000 Bubble - Buy Sell or Hold Invest Analysis - 1st Oct 21
How to profit off the Acquisition spree in Fintech Stocks - 1st Oct 21
�� Halloween 2021 TESCO Shopping Before the Next Big Panic Buying! �� - 1st Oct 2
The Guide to Building a Design Portfolio Online - 1st Oct 21
BioDelivery Sciences International - BDSI - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 30th Sep 21
America’s Revolving-Door Politics Behind the Fall of US-Sino Ties - 30th Sep 21
Dovish to Hawkish Fed: Sounds Bearish for Gold - 30th Sep 21
Stock Market Gauntlet to the Fed - 30th Sep 21
Should you include ESG investments in your portfolio? - 30th Sep 21
Takeda - TAK - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 29th Sep 21
Stock Market Wishing Away Inflation - 29th Sep 21
Why Workers Are NOT Returning to Work as Lockdown's End - Wage Slaves Rebellion - 29th Sep 21
UK Fuel PANIC! Fighting at the Petrol Pumps! As Lemmings Create a New Crisis - 29th Sep 21
Gold Could See Tapering as Soon as November! - 29th Sep 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Automakers Flash Warning over Supplies of Critical Metals

Commodities / Metals & Mining Aug 06, 2019 - 11:27 AM GMT

By: MoneyMetals

Commodities

While motorists continue to enjoy the benefits of a longstanding supply glut in crude oil, car manufacturers are becoming increasingly worried about shortages. Not in liquid fuels, but in metals.

The automotive industry requires certain strategic, rare, and precious metals. Without them, batteries for electric cars wouldn’t function and catalytic converters for gasoline engines wouldn’t work.

Many of the metals that play a critical role in both conventional and electric vehicles now face potential supply shortfalls.

Electric vehicle maker Tesla warned recently of “looming challenges for the metal components used to make EV batteries.” Specifically, supplies of lithium, cobalt, copper, and nickel are failing to keep pace with exponential demand growth for batteries used in cars, solar power systems, and handheld devices.


Producers of conventional gasoline and hybrid vehicles are concerned about supply scarcity in another critical metal: palladium.

Palladium’s Supply Deficit Expands

Automakers use palladium (and/or its sister metal platinum) in emissions control devices known as catalytic converters.

In recent years, most car catalytic converters have been engineered for palladium. It made a lot of sense to favor palladium when prices were low and supplies seemed plentiful enough.

Now the auto industry’s dependence on palladium is backfiring. Since 2016, prices for the specialty metal have more than tripled as supply deficits have widened.

The global palladium market ran a deficit of 600,000 ounces in 2018.

The deficit is expected to rise to 800,000 ounces this year as palladium consumption reaches 11.2 million ounces while mining production lags and iffy Russian stockpiles dwindle.

Since automobile production accounts for close to 80% of total palladium demand, the industry can’t expect thrifting from other industries to close the deficit. Some industry leaders have suggested investing directly in the metals mining supply chain in order to ensure adequate supplies of palladium and other metals.

At present, just a few politically turbulent countries have near total control of the market for some key “energy” elements: China (rare earths), Democratic Republic of Congo (cobalt), South Africa and Russia (palladium and platinum).

Because these markets are so region-specific, industry-specific, and thinly traded by the public, they are difficult to forecast. The decision of a single large company could drive an entire boom/bust cycle.

This actually happened to the palladium market when it surged from the late 1990s into 2001 (hitting a record high that stood until 2018) on stockpiling by Ford Motor Company. Ford brought forward so much future demand that palladium prices spiked, then crashed.

In retrospect, it was a dumb move by the automaker. But fears of shortages and higher prices could again drive companies to make rash decisions.

Which Energy Metal Will Provide the Best Catalyst for Investors?

The question for long-term investors is which metal represents the best value. Which is cheapest on a fundamental basis, has the greatest opportunity to appreciate, and has the least likelihood of crashing?

Between palladium and platinum, the one that stands out clearly as being undervalued is platinum.

Since both metals have similar properties, are similarly scarce geologically, and perform the essentially same function in auto catalysts, we shouldn’t expect palladium to sustain a large premium over platinum.

This July, the palladium price rose to a historically large premium of 2 times the platinum price before retreating.

For most of their history, palladium has sold at a discount to platinum. Platinum is used more in jewelry and is generally regarded as a more prestigious metal.

What ultimately matters for relative price trends, though, is whether the auto industry begins switching back to platinum.

Platinum’s Road Less Traveled

Can cheaper platinum simply be substituted for pricier palladium? Yes…and no.

In theory, yes, platinum can be used instead of palladium in catalytic converters. But in practice, making such a substitution would require big up-front costs. And in some cases, larger quantities of platinum would be needed per retrofitted device than the quantities of palladium now used.

Catalytic converters in electric and hybrid vehicles also require higher quantities of palladium than traditional cars.

Some proponents of electric vehicles imagine that lithium and cobalt will be the metals of the future, with battery technology rendering catalytic converters unnecessary.

However, there is a big problem with that scenario – namely, that electric vehicles are uneconomic versus gas-powered vehicles. Worse (from the standpoint of environmentalists), studies have shown that higher-cost EVs leave an even bigger environmental footprint. Rising costs for battery metals will only exacerbate their disadvantages.

Moreover, hybrid gas/electric vehicles actually require more palladium/platinum, on average, than gas-only vehicles!

Palladium is projected to remain in a supply deficit for at least three more years. During that time, a price spike is possible.

Over a longer timeframe, the forces of supply and demand will likely work in favor of platinum. Patient investors who buy assets while they are historically undervalued and hold for the long run tend to do better than those who chase hot stories.

Stefan Gleason is President of Money Metals Exchange, the national precious metals company named 2015 "Dealer of the Year" in the United States by an independent global ratings group. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC, and his writings have appeared in hundreds of publications such as the Wall Street Journal, Detroit News, Washington Times, and National Review.

© 2019 Stefan Gleason - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in