Supply/Demand Issues to Boost Palladium ETF


"Demand from automakers, production issues pose an opportunity."

Increased demand from global automakers and supply issues are expected to pose an opportunity in palladium and its exchange traded funds.

Palladium, similar to its much more expensive sister platinum, is used in vehicle exhaust catalysts to control emissions in automobiles. Demand for palladium is expected to be supported from a recovery in automotive sales as well as the passage of stricter emissions and regulations on automobiles in the United States, Europe and Asia. In Europe, the region is moving to fully implementing regulation on emissions from diesel engines and in Asia sales of automobiles are expected to remain healthy.

On the supply forefront, production issues in the world's second largest producer of palladium, South Africa, have started to emerge. Recently, production challenges in South Africa have been caused by deadly accidents and other safety issues that surround the metals and mining industry. As for the future of South Africa's palladium production, inadequate investment in infrastructure, frequent labor disputes in the metals and mining industry and the possibility of the passage of unfavorable changes in mining legislation are reasons that supply aren't expected to grow. To further add to the supply woes that the palladium is witnessing, stockpiles of the metal in Russia, the world's largest producer of the metal, have depleted.

In a nutshell, supply for palladium is not expected to keep up with demand, resulting in positive price support for the metal. An easy way to gain access to the metal is through the ETFS Physical Palladium Shares ETF (PALL), which seeks to reflect the performance of the price of Palladium bullion.

Disclosure: No Positions

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