Palladium Prices Set for a Major Breakout

Few people are familiar with the element palladium, but it is firmly anchored in our everyday lives, namely in catalytic converters of cars, which convert the pollutants in the exhaust gases into harmless substances. It is also one of the rarest elements in the world. Like the other platinum group elements, palladium belongs to precious metals, which is why it has recently been used as an investment like gold or silver.

Palladium Usage

Source: Johnson Mathey, WPIC Research/ Sprott

However, the main use of palladium is still in the automotive sector.

Now the supply on the market could tighten significantly, which could cause the palladium price to skyrocket. Already last week, palladium prices received an initial boost from the LME, which removed the only two Russian palladium smelters from trading. Russia produces about 40% of the world’s palladium making it the second biggest palladium producer after South Africa.

That, along with little investment in new mining projects, will keep supply tight in the market over the next few years, which in turn will mean a price boost for palladium, says Nico Muller, the chief executive officer at Impala Platinum Holdings Ltd.

“We are in a different structural environment at the moment. I believe that the fundamental market dynamics are going to provide strong price support for our metals for at least the next four or five years, potentially even longer,”

stated Muller.

For now, however, he sees buyers continuing to rely on Russian palladium. In the future, the focus could be on South African palladium.

“I am convinced that there are some customers right now in the world that say we have no option, but to get palladium from Russia, but do so reluctantly. In time you are going to see, as soon as a company has defined an alternative supply source, that you may start seeing shifts in supply contracts.”

Palladium prices have risen by just over 20% over the past year but also received a brief boost following the invasion of Ukraine by Russian troops, when prices briefly shot up by 70%. However, the price fell again in early March and currently stands at $2,386.23 per ton.

Those who want to invest in the palladium sector can do so with the shares of the major platinum producers. For example, Sibanye Stillwater Limited (ticker SBSW), is one of the largest producers. The stock has already gained 35.8% in the last year. Another alternative is Anglo American Platinum Limited (ANGPY) or Impala Platinum Holdings (IMPUY).

Those who want exposure to the physical metal but don’t want to stockpile it can do so with Sprott Physical Platinum and Palladium Trust (SPPP, NYSE Arca).

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