Investing in Platinum, Palladium, Rhodia in 2016

Platinum (Pt), Palladium (Pd) and Rhodium (Rh) may not be among the precious metals discussed as such as gold and silver, but as these are precious metals primarily used in industry, their investment potential today, when deflationary pressures are being created on commodities, it is, to put it mildly, huge in the foreseeable future. Of course, all the positives are opposed by the negatives, which is why it is good to look at this issue more closely in order to maximize your profits in the future.

Current use of precious metals Pt, Pd, and Rh

All three mentioned metals are similar in terms of high temperature tolerances, their catalytic properties, and at the same time in terms of their corrosion resistance. It is these properties that predispose Platinum, Palladium and Rhodium to be used in the automotive industry, where they are applied in catalysts in order to reduce emissions and to transform pollutants into substances with less negative impact on human health and nature. For now, let's ignore the demand for these three metals in the dental industry, where Palladium, for example, is used as part of amalgam seals, where Rhodium is part of aircraft engine turbines, or where Platinum is taken as a jewel in the jewelry industry. What matters today is the automotive industry, in which the vision of mass-used electricity propulsion is only a utopia for 15 years. It does not matter at the moment whether we consider the transition trends to electric cars to be eco-terrorism or whether we are in favor of green technologies, the fact remains that the drive will remain on the shoulders of oil and derived products in the near future.

World car sales are growing, below is an estimate of development according to http://www.statista.com/statistics/267128/outlook-on-worldwide-passenger-car-sales/

We do not have to be trend experts to realize that the demand for transport will increase with the population. Should there be a significant economic crisis in the next 5 or 10 years, there will still be a number of markets where cars will find employment. At the same time, the aging fleet, which will become extinct over time and in which not all cars may have catalytic converters, will be renewed and the supply cycle for new cars will only increase the number of new catalysts produced. In order to put the argument of the economic downturn into practice, in the case of the said downturn, of course, the purchase and production of new cars would not be completely suspended.

On the contrary, it is likely that only large and more costly products would see a drop in sales, and at the same time low-cost brands would expand, as in the case of air transport. Once flying was the prerogative of only those who simply had it, today air travel is in some cases cheaper and more comfortable than land transportation. It is still true that, although with smaller cubic capacity and dimensions, the pressure to reduce emissions would hardly cease, and therefore the metals we mention are an integral part of the near future of the car industry.

Regardless of economic developments, it is possible that efforts to continuously reduce emissions will increase the pressure to eliminate harmful fumes in such a way that Platinum, Palladium and Rhodium will be used even more in the automotive industry than they are today.

 

Price history of Platinum, Palladium and Rhodia

Platinum prices (source: http://www.infomine.com/investment/metal-prices/platinum/all/)

Rhodium prices (source: http://www.infomine.com/investment/metal-prices/rhodium/all/ )

Palladium prices (source: http://www.infomine.com/investment/metal-prices/palladium/all/)

As can be seen from the graphs, the prices of these commodities moved in different directions, but the largest increase and decrease was recorded by Rhodium. An investor who is waiting for the lowest price has the opportunity to buy Rhodium at such low prices that they have no parallel in the last ten years. It is appropriate to ask whether the future will bring up a rise in prices or whether the prices of this precious metal will continue to fall. If the price of Rhodium were to fall even lower, it would probably become financially disadvantageous to continue to use substitutes - ie Palladium and Platinum - in the production of catalyst components, and manufacturers would return to Rhodium.

Occurrence in nature

The best in terms of occurrence in the earth's crust is to compare the amounts of precious metals with each other, ideally with silver, as it is, compared to the elements mentioned in this article, relatively abundant in nature. Using data on http://periodictable.com/Properties/A/CrustAbundance.an.html you come to the following conclusion:

There is 25.48 less gold in nature than silver. Palladium is 12.53 times less than silver (ie, according to the source, palladium is present in nature in greater quantities than gold). Rhodium is 11.28 times less than silver. Platinum is only 2.13 times less than silver. But if we compare, for example, silver and Ruthenium, we find that Ruthenium is up to 79.79 times less than silver!

In this way, you can compare the volumes of metals in the earth's crust with their prices, using the metals in industry, and you can correct your decision on the right investment based on the data obtained in this way.

Mining

The technology in the future is based on current prices, which applies not only to Pd, Pt and Rh, but also to gold and silver. It is similar to demography, where according to today's developments you can predict future developments in the area.

Where prices are low, nowadays it is not only worth mining, but also to conduct a survey of deposits. For this reason, there may be shortages of metals in the future, which are unattractive today as an investment.

Mining of these metals is largely in Canada, Russia, South Africa and Zimbabwe, which until 2016 overcame problems due to the weakening of their own currencies against the EUR and USD. It doesn't matter if you identify with US-European politicians or look at the issue as propaganda, the truth remains that low commodity prices do not feed producers, which ultimately led to protests (eg in South Africa: http://www.sahistory.org.za/article/2014-south-african-platinum-strike-longest-wage-strike-south-africa).

Data on the amount of extracted metal per year are available at several localities, but at the beginning of 2016, these quantities logically depend on the price and the amount of available raw material in the earth's crust. That is, Palladium is mined the most, followed by Platinum, and Rhodia is the least mined. For example, according to http://blog.goldeneaglecoin.com/investing-rhodium/ only 25 tons of Rhodium were mined in 2009, compared to 2,350 tons of gold.

VAT

One of the disadvantages of buying Platinum, Palladium and Rhodia is the need to pay VAT. It is possible to circumvent this step by shopping in some countries, but in general you will not avoid paying VAT when you buy these metals.

Surcharge

The second big disadvantage is the too high surcharge, which at weights of one troy ounce reaches 20%. If you add VAT to this, at a theoretical price of 1,000 EUR / 1 troy ounce on the stock exchange, you will pay up to 1,440 EUR for the final product, which means an increase of up to 44 percent. In order to at least make money on such a metal, the price would have to rise to EUR 1,441 per troy ounce.

Liquidity

In 2016, it is not common to trade in these metals to the same extent as compared to gold and silver, but it should be noted that we have long had the opportunity to sell commodities through auctions on ebay.com, and the like.

Conclusion

If you expect the prices of one of the commodities to rise to ten times the current market value, then neither the mark-up nor the VAT should have a significant effect on the purchase. If your beliefs need more time, or if you are waiting for lower prices, it is worth the wait. You never have a guaranteed return and it could easily happen that over time, thanks to new technologies, prices will move in the same direction as in the case of Ruthenium (see chart below, originally from http://www.infomine.com/investment/metal-prices/ruthenium/all /)

And maybe 2016 is ideal for buying Ruthenium, only time will tell which decision was right and which did not bring profit. Ruthenium, even if you pay VAT and a surcharge, is covered by these two items the least (they are negligible), as it is almost free.

About the author

The author of the article, Ján Hvižďák, operates the site https://zlatostriebro.com/ , which is dedicated to investing in gold and silver.

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