By Tim Seymour
Palladium prices are rebounding strongly of late on news that global car sales are bouncing back to record levels.
Palladium and platinum are much better plays compared to silver, because they have real industrial demand components. BMW in particular is increasingly relying on palladium catalysts for cleaner-burning car engines. This means that as car sales climb around the world, the current supply shortage of this metal can only increase.
Palladium markets have benefited in recent years from massive sales of stockpiles from the Russian government. Otherwise, supply of the element — a close chemical relative of platinum sometimes considered a precious metal — is expected to fall 5.7% this year, while demand from the car industry alone is expected to climb 6.2%.
This creates a fundamental shortfall of 1.31 million ounces of palladium just this year. Throw in jewelry sales and other applications — not to mention speculative interest in palladium ETFs like PALL — and the shortage can only increase.
Obviously you can play this story simply via PALL and similar funds. But while palladium miner Stillwater (SWC) has bounced 12% off its bottom on this news, the stock is still 21% off its top:
And Norilsk (NILSY.PK), the world’s biggest palladium producer, provides substantial exposure to the metal price as well — along with platinum, nickel and the underlying strength of the Russian ruble.
