We’ve spoken extensively about the car industry over the last eighteen months. Many key factors impact the industry, including worker strikes and low inventories. However, they’ve essentially resulted in about two core themes. 👇
The first is that the demand side of the market is being impacted by higher financing costs and record prices, crushing affordability. While on the supply side, low used vehicle inventories and a slow ramping up of new vehicle production have caused dealers to struggle.
As a result, we’ve seen effects on the stock prices of automakers, car part retailers, car retailers (or rental companies), and many other related businesses. 🚗
One area that’s not been talked about as much is the palladium market. The commodity plays a significant role in new vehicle production, being used to make catalytic converters that transform toxic gasses into less harmful substances. ♻️
With that said, the commodity has been under pressure because of several factors. The first is the new car market’s slow recovery from its pandemic supply chain issues. Additionally, automakers switching to platinum as a cheaper alternative has reduced demand. And lastly, the electric vehicle industry is eating into the market for light vehicles, where palladium plays its most significant role.
These factors have led to a nearly 70% decline in palladium futures, which peaked in March 2022 and have been trending lower since. 📉
Prices recently attempted to stabilize but were unsuccessful and are now trading at five-year lows. It’s unclear what it will take for this trend to reverse, mainly because it’s a thin market dominated by commercial users and speculators who primarily employ trend-following strategies. 🤷
