It could be time for the palladium exchange traded fund to shine as mine strikes, safety stoppages and supply cuts create the biggest palladium shortage in over a decade.
Labor disputes in South Africa and production cuts and depleting inventories in Russia will lead to a supply deficit of 915,000 ounces of palladium, the largest disparity between supply and demand since 2000, reports Nicholas Larkin for Bloomberg. In comparison, there was a 1.26 million ounce surplus in 2011.
“It’s unlikely that supplies of either platinum or palladium are going to rise,” Jonathan Butler, publications manager at Johnson Matthey, said in the article. “We’re assuming that demand is going to remain robust for both metals. Overall, we’re positive on investment demand, that conditions will remain favorable.”
Palladium futures rose 4.6% during Tuesday trading on the new data.
Palladium is used in gasoline automobile for autocatalysts to convert emissions into less harmful substances.
“For palladium, we see some further growth in autocatalyst demand,” specialist chemicals company Johnson Matthey, the maker of one in three autocatalysts, said in the article, projecting autocatalyst demand for palladium will rise 7.5% to a record 6.48 million ounces this year.
Johnson Matthey estimates palladium prices will average $650 per ounce over the next six months, with a range of $550 to $750 per ounce, Platts reports. Palladium currently sits at around $634 per ounce.
“Supplies will contract mainly because of lower sales of Russian state stocks, forecast to drop by over 500,000 oz compared with last year, to 250,000 oz, while recycling will be constrained by subdued PGM prices,” Johnson Matthey said in a report. “Gross palladium demand is predicted to rise to 9.73 million oz, driven by a return to positive net physical investment and higher autocatalyst purchasing.”
The ETFS Palladium ETF (NYSEArca: PALL) was up 4.5% over the past three months but down 7.3% year-to-date.
For more information on palladium, visit our palladium category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.