LONDON (Commodity Online): Platinum and palladium markets received some good news this week with the auto sales zooming in India and China.
Platinum and palladium, two metals used in the high end car exhausts to cut pollution, prices depend mostly on the auto sales across the globe. With India and China reporting huge car sales in April, the prices of platinum and palladium are set to gain from this news.
Indian automobile industry continued its growth momentum of 2009 into April 2010 as well, with passenger car sales registering their highest growth in a decade. Total passenger car sales in the country surged 39.5 per cent last month at 1,43,976 units, as against 1,03,227 units during the same month last year. This is the highest growth in car sales in April in the last 11 years. Car sales had grown 50.3 per cent in 1999.
Sales of Maruti Suzuki India went up 22.1 per cent at 68,668 units in April 2010 as compared to 56,228 units the same month last year, while its closest rival Hyundai Motor India posted a jump of 28.1 per cent at 28,501 units last month vis-à-vis 22,241 units, and sales of Tata Motors went up 76.4 per cent at 19,762 units, as compared to 11,202 units during the same month last year.
April passenger vehicle sales in China grew 33 percent over last year, the lowest rate during the past 12 months, indicating that China's booming automobile market has returned to healthy and rational development.
China sold 1,064,545 cars, multi-purpose vehicles, sports-utility vehicles and minivans in April, up 32.7 percent from a year earlier.
China's passenger vehicle sales in the first four months reported brisk growth of 52 percent over a year earlier. Total automobile sales growth also slowed to 34 percent in April, with 1.56 million vehicles sold, but still much higher than the US figures.
In the US, auto sales continued to recover in April, up 20 percent over a year earlier to 982,302 units, with most major automakers posting double-digit gains. Japanese automaker Toyota also reported 24 percent growth as it launched massive incentives to offset recall costs.
The price of palladium has skyrocketed 237% since December 2008, driving up the share prices of producers and explorers and reminding investors that there is more to precious metals than gold and silver.
Palladium has a number of industrial uses. It's often found in electronics - including computers, mobile phones, and LCD televisions.
But roughly half of the global supply of palladium is used in the manufacturing of automobile catalytic converters, which convert up to 90% of harmful gases from auto exhaust like carbon monoxide into less harmful substances.
As such, the demand for palladium is generally correlated to the health of the global auto industry, which has rebounded from the brink of collapse. Automakers around the world have recently been reporting strong sales figures as the industry continued to see signs of recovery.
At a time when the demand for palladium is increasing, supply looks like it could potentially be constrained.
The world's sources of palladium are extremely limited. Approximately 80% of the world's supply of palladium comes for just two sources: energy constrained South Africa and potentially unreliable Russia.
Half of the world's palladium supply comes from just three sources in Russia: Norilsk Nickel, the Russian State Precious Metals and Gemstones Repository and the Russian Central Bank.
Norilsk Nickel is the world's largest producer of nickel and palladium. Each year the company produces about 2.5 million ounce of palladium. But this isn't enough to meet the world's growing demand, so Russia fills the deficit from Gokran and the Russian Central Bank. However, there are rumors that these stockpiles are rapidly becoming depleted; the actual level of Russian palladium stockpiles is a state secret.
Rising demand and a potential for supply constraints has spurred heavy investment interest.