Palladium futures (PA) at CME Group are an important and growing part of the global metals market.
This silver-white metal shares many of the chemical properties of platinum and has been a popular alternative in industrial settings to its pricey cousin.
Additionally, palladium is malleable, resistant to corrosion and has a relatively low melting temperature—all properties that point to additional industrial and commercial use going forward.
The Contract
Each NYMEX Palladium futures contract represents 100 troy ounces of deliverable palladium, with a minimum price fluctuation per contract of $50.00. The contract trades electronically nearly around the clock, six days a week, and traders are able to leverage substantial margin efficiencies when gaining exposure to this liquid market.
Supply and Demand
Much like platinum, palladium production is extremely concentrated, with Russia and South Africa collectively producing nearly 80% of the metal. With such a controlled supply, producers in the past have intentionally squeezed the market for political or economic gain, so investors are consistently on the lookout for supply shocks.
Half of the demand for palladium comes from the manufacturing of pollution-reducing catalytic converters. Consequently, palladium is poised to climb as governments take additional efforts to curtail environmental degradation.
Consumer products such as jewelry, electronics and dentistry services also demand the metal. Because transportation and consumer goods are manufactured and consumed globally, palladium, like all industrial metals, is sensitive to broad economic headwinds, particularly out of China and emerging economies.
Investors who trade this industrial base metal are well advised to monitor such broad market trends in addition to automobile manufacturing patterns that may place changing demands on palladium’s use.
