Palladium Rising on Coming Shortage
Source: Bloomberg, Nicholas Larkin and Maria Kolesnikova (5/31/11)
"The long-term story is excellent. . ."
Palladium's biggest shortage in three decades means this year's worst-performing precious metal may rebound as growth spurs record car sales and prompts Goldman Sachs Group to say the commodities bull market is intact.
The 1.6 Moz. deficit seen by Standard Bank Plc explains why prices for the metal used in catalytic converters will rise 23% by Dec. 31, based on the median estimate in a Bloomberg survey of 24 analysts and traders. Autocatalysts are fitted to 95% of new cars and global sales will rise 5.1% to 76 million this year, according to Oxford, England- based J.D. Power Automotive Forecasting.
While commodities plunged the most since 2008 in the first week of May, prices are rebounding, with demand for cars signaling that the global economy is still expanding. The supply crunch in palladium is mirrored in copper, corn and crude oil, prompting Goldman Sachs to predict a 20% return from commodities in 12 months and Morgan Stanley to forecast the highest-ever oil prices.
"The long-term story is excellent," said Robin Bhar, a London-based analyst at Credit Agricole SA and the most accurate of 20 palladium forecasters surveyed by the London Bullion Market Association in 2009. "With any commodity that gets a very restricted supply base, you're always going to get worries. We will see stronger growth."