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It's Time to Consider Palladium for Electronics Plating -- Again.

Posted by Tim Lynch | 6/1/10 10:52 AM

Author:  Vince Azzano, Director of Technical Sales, Precision Plating Company

Fabricated gold prices are at an all-time high, and traders and analysts are still largely bullish on gold’s outlook for the foreseeable future. It is clearly time to once again consider palladium and palladium/nickel for electronics plating applications.

Let’s talk a little history. As some of us recall, the late 70’s and early 80’s brought significant increases in the price of gold. These increases spawned a frantic search for suitable, more economic substitutes for gold in electronic applications. As a result of this search, palladium emerged as the most suitable alternative.  Here’s why:

The fabricated price for palladium is less than half the price of fabricated gold.

Although palladium is a precious metal and is traded as a commodity, the price of palladium is largely based on economic supply and industrial demand and is not as greatly influenced by investor speculation as is gold.

Palladium is 40% less dense than gold, which means that it takes 40% less palladium weight to provide a plating thickness equal to that of gold.

The lower price of palladium together with its lower density provides for a considerable cost savings over gold.

Palladium’s material properties make it superior to hard gold in many electronics applications.

The higher hardness of electroplated palladium provides for better wear resistance and the lower porosity of palladium and palladium alloys enhance the corrosion resistance of plated contacts.

Analysts anticipate that supply of palladium will continue to exceed demand in the foreseeable future.

Many of us remember that palladium’s cost per troy ounce moved above that of gold in the 1990’s. The reason for this increase was simple supply and demand. The automotive industry’s use of palladium for catalytic converters increased from just under 1 million troy ounces per year in 1994 to nearly 6 million troy ounces in 1999. Palladium’s use as a replacement for gold in connector and integrated circuit manufacturing was also growing at a precipitous rate. During this period, when palladium demand was peaking, political factors in Russia related to export legislation began restricting palladium supplies to the world industrial markets. Prior to 2001, 68% of the world palladium supply came from Russia. As a result of limited supply, palladium prices soared.

Today the supply and demand market factors that resulted in the dramatic price increase of palladium in the 1990’s are gone. Russia’s export legislation problems seem to have been resolved and supplies of palladium from Russia have been steadily increasing. When Russian export problems began driving up the price of palladium, the automotive industry reacted by optimizing their catalytic converter designs to reduce the required palladium load. The industry also began stockpiling a strategic reserve of palladium as a hedge against fluctuations in supply. In addition, the recycling of palladium has increased dramatically in recent years. Based on these factors, palladium supply is no longer an issue.

Not surprisingly, recent increases in gold prices have many companies once again considering palladium’s economical and technical advantages over gold. Unfortunately, the industry, for the most part, has been slow to react. However, there are a few well-informed engineers and purchasing agents, particularly in the integrated circuit industry, that have taken advantage of market conditions and switched back to palladium.

With gold prices hitting new all time highs every week, everyone should be asking themselves whether they can afford to delay their investigations into how palladium and palladium alloys can help them to reduce their precious metal costs. Those that are quicker to react to this trend could find themselves with a significant cost advantage over those that continue to delay.

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