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Platinum and palladium are two of the rarest metals. However, traditionally palladium is the comparatively rarer and cheaper one of the two metals. The main buyers of palladium are China and Europe and palladium is critical for the automobile industry. It is used to manufacture engines. Due to the flooding in its main mines, Norilsk Nickel (the leading producer of palladium and refined nickel) is faced with a shortage in its supply of palladium. The recent flood induced a supply shortage which in turn triggered a rise in the value of Palladium in the London Platinum and Palladium Market. Despite the fact that the flood hindered the production of both nickel and palladium, the value of palladium was affected significantly more than the value of nickel.
However, the scenario has become very serious, as the palladium marketing is currently expanding, while the supply is shrinking. This contradiction between the trends of demand and supply of palladium is inducing intense shortages in Palladium. This has created a need to look for an alternative that is readily available. Hence, manufacturers are shifting back to platinum, given the greater abundance of its supply and lower prices.
Palladium is used in the automobile industry for its economic-friendly and sustainable nature. Given the fact that platinum is very similar to palladium and it more readily available, Automobile manufacturers are becoming more inclined to use platinum. The shortage of palladium has significantly increased the reliance of businesses on platinum.
Being one of the major users of palladium, China may suffer due to immensely high palladium spot prices. It is used extensively in the automobile industry and China is one of the largest producers of engines and cars. The constant increases in the spot price of palladium will eventually be passed on to the consumer. This may reduce demand for automobiles, but it also may lead to a further increase in palladium prices. Another major user of palladium is by the petroleum industry in Europe, which has shifted to hybrid or gasoline engines. These are produced by using palladium rather than platinum. In order to counter this palladium shortage the automobile industry is shifting back to Platinum for traditional vehicles.
To sum up, platinum demand was very low over the last several years, but is now increasing. The growing demand is already apparant.