October 17, 2017 / 6:23 PM / 7 months ago

Palladium rallies as U.S. consumers replace autos lost in hurricanes

    By Renita D. Young
    NEW YORK, Oct 17 (Reuters) - Palladium        rallied to a
16-year high this week and may rise even further, industry
participants said, as consumers replaced vehicles damaged by
hurricanes in the United States and on rising auto sales in
    Hurricane Harvey destroyed up to half a million cars when it
deluged the U.S. state of Texas in August.              Two
weeks later, Hurricane Irma slammed into Florida, adding another
200,000 vehicles to the year's storm toll, according to auto
industry estimates.             
    Demand for cars drives demand for palladium, because the
principal use for the metal is in catalytic converters that
reduce pollution from gasoline-fueled engines.
    Strong demand is likely to continue for months as consumers
replace vehicles lost to the storm, so palladium may rally
further, said Dan Pavilonis, senior market strategist at RJO
Futures in Chicago.
    Palladium touched a high of $1,010.50 per ounce on Monday,
the highest level since 2001. The metal gave up some ground on
Tuesday to trade at $971.15 an ounce. Last month, palladium
prices rose above platinum        for the first time since 2001.
    "Palladium is technically a strong market and experiencing
demand, but not just from autos," Pavilonis said. Funds were
among those buying the metal, he added.
     U.S. new vehicle sales rose in September, the first monthly
gains in 2017. The value of receipts at auto dealerships rose by
the highest level in 2.5 years, contributing to a surge in
overall U.S. retail sales.             
    Last month's auto sales in the Houston area, which suffered
extensive flooding, rose 109 percent in September over August
2017, and lead Texas to a 34 percent jump for the same time
period, according to automobile sales website Edmunds.com. 
    Strong sales are expected to continue for several months as
consumers receive insurance payouts and replace vehicles damaged
in the storms, said Jessica Caldwell, senior analyst at Edmunds.
    In China, the world's largest vehicle market, sales in
September rose 5.7 percent on the year and were up 4.5 percent
in the first nine months of 2017.             
    In Europe, gasoline-fueled cars are also getting a boost
from a shift away from diesel-fueled vehicles after the scandal
involving Volkswagen. The manufacturer underestimated emissions
from its diesel vehicles.             
    A stronger global economy and overall positive consumer
sentiment are driving the automotive industry worldwide, said
Charlie Chesbrough, senior economist at Cox Automotive. 
    "For the first time in five years, we have all five major
economies going in a positive direction," which boosted interest
in vehicles, Chesbrough said.

 (Reporting by Renita D. Young in New York; Editing by Simon
Webb and Matthew Lewis)
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