The ETFS Physical Palladium Shares (NYSEArca: PALL) gained nearly 3% last week, extending a run that saw the lone palladium-backed exchange traded fund surge more than 57% in 2017.
Among the largest contributors of industrial demand, robust global auto sales fueled greater demand for the precious metals as part of catalytic converters to diminish harmful gas emissions. About 40% and 75% of annual demand for platinum and palladium, respectively, apply to autocatalysts in combustion engines.
“The spot price for the precious metal only needs to climb by another 1.6 percent in London trading to push past an all-time high that’s stood for 17 years. At the current pace of gains, that could happen within days,” reports Bloomberg. “New York futures for the metal, used to cut car exhaust fumes, already touched the highest for a most-active contract in records going back to 1986.”
Other critics also contend that the popularity of ride sharing platforms indicate a peak in auto demand, which may reflect the weak U.S. auto sales among the Millennial demographic favoring a sharing based economy. This trend may actually spur higher total miles driven and reduce average vehicle lives. The shifting demand to higher total miles driven could potentially reshape the cyclical nature of the industry.
Still, palladium is expected to be in a supply deficit this year, which bodes well for prices.
“The metal is forecast to be in a deficit of about 835,000 ounces this year, according to Citigroup Inc.,” according to Bloomberg. “The bank expects autocatalyst consumption to continue to rise, breaching 8 million ounces this year, although to some degree offset by sizeable increases in autocatalyst scrap, according to a report last month.”
Palladium demand is growing on an international scale, but, and this is important for PALL, supply is again having problems meeting that demand. The global palladium market has been in a supply deficit for six consecutive years.
Russia and South Africa are the two largest palladium-producing countries and it is widely believed Russian supplies of the metal are declining.
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