As talks broke down in the longest-ever mining strike across South Africa, the palladium exchange traded fund inched toward a three-and-a-half year high.
The ETFS Physical Palladium Shares (NYSEArca: PALL) was up 0.7% Wednesday. PALL has increased 19.5% year-to-date.
The palladium spot price was hovering around $860 per ounce Wednesday.
Palladium reached its highest level since early 2011 on concerns about the future supply of the precious metal after a setback in negotiations over an end to the mining strike in South Africa, the world’s second-largest producer of palladium. [More Supply Deficits Seen for Platinum, Palladium]
Anglo American Platinum, Impala and Lonmin, the world’s top three producers of the precious metal, said that they would “now review further options” as five-month long strike over pay continues, MetalMiner reports.
Palladium prices have jumped 14% since the picket lines formed in January as the diminished supply bolstered prices – South African producers generate about 40% of the world’s palladium, reports Ira Iosebashvili for the Wall Street Journal. Citigroup now estimates that global palladium inventories can last up to 14 weeks of demand, down from 37 weeks at the start of the year. [Macro Woes Could Hamper South Africa ETF]
“There is no reason to sell palladium right now,” Frank Lesh, a broker at Future Path Trading, said in the WSJ article. “This thing can go to $1,000.”
However, traders could see a swift correction if the strikes end. For instance, prices plunged 4.8% in the month after the last major mining strike was concluded in September 2012. Analysts argue that autocatalyst demand from automakers will not be enough to keep prices elevated without producer supply uncertainty.
ETFS Physical Palladium Shares
For more information on palladium, visit our palladium category.
Max Chen contributed to this article.