Palladium is facing significant supply deficits in 2014, more so than other metals. This is a follow on from last year when it is thought to have had a supply deficit equivalent to 9% of total annual demand.
In their interim 2013 report, Johnson Matthey estimated that the palladium market would be in a supply demand deficit of 740,000 ounces, an improvement on the 1.15 million in 2012 thanks to reduced ETF demand. However, the deficit is expected to cause greater problems as investment demand climbs this year.
The palladium supply demand deficit is estimated to go on for so long, that for BMO Capital Markets the metal is its 'top pick' in the metals sector for 2014. They anticipate 'a deficit market for palladium for many years, which should support prices.'
How was demand for palladium met in 2013? From a rundown of above-ground stock inventories. However the pressure on these stocks will become more acute in 2014.
Last year the world supply of primary palladium fell by 1.5% to 6.43 million ounces, thanks to the fall in Russian stocks. Supply from State Russian stockpiles is expected to fall to as little as 100,000 ounces, a significant drop from the 1 million ounces in 2010. Some analysts are even predicting the supply from this source to be as little as zero.
Some of the deficit projections palladium in for 2014 range between 1 million ounces to 1.277 million ounces. Citigroup forecast a supply deficit of 1.139million ounces this year. They also note that the above ground supply for palladium has fallen by 36% since 2008.
I am still long Sylvania Platinum, which is the South African dump processor I profiled last summer. A runup in PGM's would benefit them as they are a low cost producer and have little mining risk.
Disclosure: I am long SAPLF, PALL, .