Platinum and Palladium ETFs: Boom or Bust?

April 27th at 12:00pm by Tom Lydon

Platinum and palladium exchange traded funds (ETFs) are up big since their January launch. Do the fundamentals support a sustained run or will we see a pullback? Let’s take a look at some of the facts.

According to Olivier Ludwig of Index Universe, ETF Securities will be expanding the number of shares available for its platinum and palladium ETFs in response to strong investor demand. In a filing with the SEC, ETF Securities requested to increase the number of shares not yet purchased in Physical Platinum Shares ETF’s (NYSE Arca: PPLT) to 7.82 million and in Physical Palladium Shares ETF (NYSE Arca: PALL) to 12.11 million.

Here are the facts from Commodity Online:

Platinum

Global mine production slipped by less than 2% to a six-year low of 6.04 million ounces with South Africa, Canada and Russia all posting sizable declines.
Scrap supply fell 36% to 1.22 million ounces, led by a 50% drop in Japanese jewelry recycling.
Auto-catalyst demand fell 28% to 2.6 million ounces, due to low demand for automobiles.
Jewelry demand surged 38% to 2.26 million ounces on the back of strong Chinese demand for platinum jewelry.
ETF Securities added 264,000 ounces to its portfolio while ZKB added 120,000 ounces on strong investor demand.

Palladium

Global mine production fell 1% to 6.31 million ounces despite a 5% increase from South Africa. This was because of a 50% drop in output from Canada.
Scrap supply fell due to lower auto-catalyst recovery. The supply from jewelry scrap also declined to the tune of 71,000 ounces, mainly a result of depressed prices in Japan.
Auto-catalyst demand fell by a modest 14%, compared to platinum, to 3.91 million ounces. The drop in automobile demand was offset by a 43% increase in Chinese vehicle production and European scrap incentive schemes in favor of vehicles using palladium.
Every area of demand, minus retail, fell last year, impacted by strong competition from platinum in China and the fall-out of the global recession.
ETFs grew by 507,000 ounces, almost entirely on the back of ETF Securities’ London fund, which reached 665,000 ounces by year-end.

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