With regulations getting more stringent as the global movement towards cleaner energy gains momentum, its driving demand palladium which is used in emissions control devices like catalytic converters. China, in particular, is stepping up its demand for palladium as new regulations are forcing more consumption of the precious metal.
“The jump in demand is due to new regulations in China that will require at least 30 percent more palladium per vehicle, according to Reuters,” an article by Chris Teague noted in The Drive. “This adds extra weight to the already strong global demand that is expected to hit 10 million ounces this year and next. Supply is projected to fall 10 percent short of that number, as one of the world’s largest suppliers of palladium cuts back on output. South Africa produces roughly 40 percent of the world’s palladium supply and is reportedly reducing output by 13.5 percent.”
#Palladium hits record high amid South Africa power cuts
— 𝕮𝖍𝖎 🛢️ (@chigrl) December 12, 2019
As simple economics cause supply to diminish while demand heightens, this bodes well for the price of palladium and its investors. ETF investors who want to get in on the palladium action can look to the Aberdeen Standard Phys PalladiumShrs ETF (NYSEArca: PALL).
PALL seeks to reflect the performance of the price of physical palladium, less the expenses of the Trust’s operations. The fund is designed for investors who want a cost-effective and convenient way to invest in palladium with minimal credit risk. Based on Morningstar performance numbers, PALL is up 43%.
Key features of the fund per PALL’s fact sheet:
- Physically-Backed: Cost-effective and convenient access to physical palladium.
- Transparency: The metal is held in allocated bars and a bar list is posted daily on aberdeenstandardetfs.us
- Pricing: The metal is priced off the LPPM’s specifications for Good Delivery, which is an internationally recognized and transparent benchmark for pricing physical palladium.
- Vault Location: Metal is held in London, United Kingdom at a secured vault of J.P. Morgan Chase Bank, N.A.
- Vault Inspection: Inspectorate International, a leading physical commodity auditor, inspects the vault twice per year (including once at random).
Capitalizing on Lithium Demand
Another byproduct of this shift to meet stricter emissions regulations is a move to electric-powered vehicles. As such, investors may also want to look at the Global X Lithium & Battery Tech ETF (NYSEArca: LIT).
Lithium-ion battery capacity is vital because one of the primary factors car buyers consider when evaluating electric vehicles is how long those vehicles can run on a single charge. Tesla’s dominance in the booming electric vehicle market will also move the demand for lithium.
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