Fundamentals Support Palladium, Platinum ETFs | ETF Trends

Given the production halts weighing on the supply side and strengthening global economy supporting the demand side, strong fundamentals will continue to support palladium and platinum exchange traded funds.

HSBC’s James Steel and his team believe the platinum group metal prices are being bolstered by tighter fundamentals, reports Teresa Rivas for Barron’s.

Specifically, labor strikes in South Africa, one of the largest producers of the metals, has crimped supply. [Platinum ETF Physical Holdings at Record High on S. Africa Strikes]

“A little more than 60% of South Africa’s platinum production – representing c45% of global output – has been idled since late January, due to industrial action against the three largest South African platinum producers,” the analysts wrote in a note. “The strikes are further aggravating already tight production from South Africa and contributing to the market’s production/consumption deficit.”

A recovering global economy and rising auto sales will increase industrial demand for the metals. Palladium and platinum are used in autocatalysts for diminishing toxic gases from automobile emissions.

“We expect good demand from the European auto sector where the more popular diesel-powered engines require heavier platinum loadings, than gasoline engines,” the analysts said.