Dear PGM Capital Blog readers,
In this weekend’s blog edition, we want to discuss, the resent price development and Outlook for Palladium.
Palladium is a rare and lustrous silvery-white metal, that, together with platinum, rhodium, ruthenium, iridium and osmium, form the group of elements known as the platinum group metals.
Palladium is one of four metals to be assigned and ISO currency code (XPD and 964). The other three metals are of course gold, silver and platinum. Investing in palladium is done via purchasing palladium bullion coins and bars.
On thursday, may 22nd, Palladium climbed to US$ 836.00 an once to close at US$ 832 an ounce its highest closing price since August 2011.
Below chart shows the palladium price development on May, 21st, 22nd and 23rd , 2014.
Palladium found support from both the ongoing strikes in South Africa against platinum producers and tensions between Russia and Ukraine. Together, South Africa and Russia produce nearly 80% of the world’s palladium output. Additionally, auto sales are rising in the U.S. and China, where palladium is used in autocatalysts for pollution control.
Members of the Association of Mineworkers and Construction Union, the biggest labor organization at Anglo American Platinum Ltd., Impala Platinum Holdings Ltd. and Lonmin, have been on strike in South Africa since Jan. 23.
Workers were prevented from reporting for duty at Lonmin as the producer reopened mines, a union not participating in the strike said.
Palladium advanced 15 percent this year on concern that the strike in South Africa may add to a supply shortage and as western nations threated top producer Russia with additional sanctions over Ukraine.
Palladium for June delivery rose 0.8 percent to $824 an ounce by 7:43 a.m. on the New York Mercantile Exchange. It touched US$ 825, the highest since Aug. 3, 2011. Futures trading volume was 66 percent higher than the average for the past 100 days for this time of day, data compiled by Bloomberg showed. The metal for immediate delivery gained 0.8 percent to $824.16 in London, according to Bloomberg generic pricing.
PLATINUM:
Platinum for July delivery climbed 1.2 percent on Thursday, May 22nd, to US$1,473.60 an ounce in New York. it reached $1,474.50, the highest since March 17, earlier today, as can be seen from below 3-day chart.
South Africa is the biggest platinum producer.
RHODIUM:
Rhodium a silver-white metallic element, also a member of the Platinum Group, is highly resistant to corrosion, and is extremely reflective.
Its being used in:
- Electric connections and is alloyed with platinum for aircraft turbine engines.
- Jewelry.
- Manufacturing of nitric acid and used in hydrogenation of organic compounds.
- Automotive catalyst applications where it is used together with platinum and palladium to control exhaust emissions.
Rhodium, prices increased last week with US$ 105.00 an ounce or 10.29 percent to close the week at US$ 1125.00 an ounce as can be seen from below chart.
South Africa is the major source, accounting for almost 60% of the world’s rhodium supply Russia is the second largest producer.
PGM CAPITAL COMMENTS:
As can be seen from below 5 year-chart, Palladium is the best performing precious metal which is the only Precious Metal, that hasn’t gone through a correction last year.
Rhodium, Palladium and Platinum, based on their behaviour and geological systems are also subdivided, as the Palladium Platinum Group of elements.
As can be seen from below map, 80 percent of the supply of these elements comes from high risk jurisdictions, Russia and South Africa.
Secondary supply is derived from recycling (which is estimated to have contributed approximately 2.2 million ounces in 2012), and from a Russian government stockpile. There has been considerable speculation about the current holdings of the Russian government’s palladium stockpile, which historically has been an overhang on the market.
Demand for Palladium Platinum Group continues to grow, driven primarily by the automotive sector which consumes approximately 67% of world palladium supply for the manufacture of catalytic converters (also referred to as mufflers) in cars which help reduce toxic emissions into the environment.
See below chart for a breakdown of the industrial demand for these elements:
The demand in the automotive industry has more than doubled in the last ten years due to an increase in global automotive production and the tightening of emissions standards worldwide, resulting in steady growth in the use of catalytic converters.
Besides their above mentioned industrial usage, almost 40 percent of all, Palladium Platinum Group of Metals, is being used as an asset protection vehicle, in the form of fine Palladium, Platinum and Rhodium, coins and bars stored in vaults, mainly in Switzerland.
Due to this, holdings in exchange-traded products backed by platinum and palladium climbed to records this week, data compiled by Bloomberg show.
Based on the above, since January 2009, we have a STRONG BUY rating on the Palladium Platinum Group of elements.
Last but not least, before following any investing advice, always take your investment horizon and risk tolerance into consideration and keep in mind that the price of Precious metals as well as the stocks of their producers can be very volatile and that sharp corrections may happen in the short term.
Yours sincerely,
Eric Panneflek