Palladium ETFs Supported By Supply and Demand Imbalance

Imbalances in supply and demand continues to push the price of palladium up, as the metal hit an intraday trading high of $804 a troy ounce, the highest levels in nearly ten years, giving positive support to the ETFS Palladium Shares ETF (PALL) and the ETFS Physical White Metal Basket Shares (WITE).

On the demand side, demand is expected to remain healthy and elevated in the near-term future getting support from a recovery in the global automotive sector. As both the developing and developed economies of the world witness economic growth, automobile sales are expected to follow.  Most recently, the China Association of Automobile Manufacturers reported that sales of passenger vehicles rose 33 percent to a whopping 13.76 million units last year.   Further demand support is expected to come from the passage of stricter emissions and regulations on automobiles around the world.  Palladium demand is expected to rise with increased automobile sales, due to the vital role it plays in vehicle exhaust catalysts to control emissions in automobiles.   

On the supply side, production in the world’s largest and second largest palladium producing nations, which combined account for nearly 90 percent of global palladium production, is expected to take a major hit.  In Russia, the world’s largest producer of the metal, state stockpiles have been exhausted to underpin the effects of higher prices of the metal.  Furthermore, production challenges in the South Africa, the world’s second largest palladium producer has resulted in depletion in ground stockpiles and no immediate relief seems to be in sight.  Inadequate investment in infrastructure, safety issues surrounding the metals and mining industry in the nation and frequent labor disputes make the outlook for increased palladium production in South Africa relatively bleak. 

In a nutshell, demand for palladium is on the rise and global supply doesn’t appear to be able to keep up, providing positive price support to the precious metal.  As mentioned above, some ways to play palladium include:

  • ETFS Palladium Shares ETF (PALL), which seeks to replicate the performance of palladium bullion and is backed by physical palladium.
  • ETFS Physical White Metal Basket Shares (WITE), which seeks reflect the performance of the price of silver, platinum and palladium bullion, less the expenses of the Trust’s operations.  WITE allocates a fixed percentage of its assets to each of the mentioned metals and is highly impacted by the price fluctuations in palladium.

Disclosure: No Positions

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About etftutor
Kevin Grewal is the founder, editor and publisher of ETF Tutor and serves as the editor at www.SmartStops.net, where he focuses on mitigating risk and implementing exit strategies to preserve equity. Additionally, he is the editor at The ETF Institute, which is the only independent organization providing financial professionals with certification, education, and training pertaining to exchange-traded funds (ETFs). Prior to this, Grewal was a quantitative analyst at a small hedge fund where he constructed portfolios dealing with stock lending, exchange-traded funds, arbitrage mechanisms and alternative investments. He is an expert at dealing with ETFs and holds a bachelor's degree from the University of California along with a MBA from the California State University, Fullerton. He is contributing author on The Street - his articles can also be found published on various sites including Yahoo! Finance, The Globe and Mail , Daily Markets, MSN Money, Seeking Alpha, Fidelity Investments, Traders Library, and Minyanville. Prior to this, Mr. Grewal was an analyst at a small hedge fund where he constructed portfolios dealing with stock lending, exchange-traded funds, arbitrage mechanisms and alternative investments. He is an expert at dealing with ETFs and holds

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