NORTH AMERICAN LEADER IN PGM AND LITHIUM EXPLORATION
River Valley PGM Project with 2.9Moz Palladium Equivalent (Measured & Indicated) Advancing to Pre-Feasibility Study
Message: Palladium: the next hot commodity?
Commentary: Demand still soaring as supply tightens
NEW YORK (MarketWatch) — With declining supply and rising demand, palladium looks like a good investment, says an expert.
While gold and silver typically hog commodities headlines, one under-the-radar precious metal with plenty of upside is palladium.
So said North American Palladium (US:PAL) CFO Jeff Swinoga when he presented at last week’s Euro Pacific Capital investor conference. Swinoga obviously has a vested interest in pushing palladium, but he made sure to back up his claims with evidence. Related article, read Famed Broker Warns: Worry About America, Not Europe
“The future outlook for palladium is excellent as it continues to benefit from positive supply and demand fundamentals,” he said.
Currently, the global mine supply of palladium is about 6.8 million ounces worldwide, with most of it coming from Russia and South Africa. In North America, Stillwater Mining (US:SWC) and North American Palladium are the big guns of palladium mining.
Swinoga points out that an increase in palladium supply does not look likely.
“In South Africa, there are issues associated with unions, the tax structure they’re putting in place, infrastructure problems and the electricity price increases [power utility] Eskom is putting in place. A lot of South African companies now are in fact talking about curtailing their production in order to save their balance sheets.”
“You’ve got declining palladium production in Russia. There are no new mines that I’m aware of on the horizon,” said Swinoga, who added that the CPM Group projected for palladium production going forward to be “relatively flat.”
The other remaining supply of palladium is a Russian stockpile from the Cold War era, which reached about 18 million to 20 million ounces. Back in the 1980s, Russia believed it required palladium for cold fusion. However, Swinoga explained that the country started selling off palladium over time when it realized that cold fusion does not really work. The stockpile contributed about 1 million ounces to the market in the last two years, he said.
“The good news is that that stockpile as far as we and others are aware, is gone. That the stockpile is not significant anymore is going to be a game changer, with prices being able to rise since then,” Swinoga asserted.
While palladium supply will likely stagnate, demand for the metal is only going to increase, with the primary driver continuing to be the automotive sector, which currently consumes about 60% of world palladium production.
Palladium is used in catalytic converters for gasoline engines, and as Swinoga noted, the growth of car demand in BRIC countries, with citizens there getting increasingly affluent, will only push palladium demand up. Related content: Major Cycle Bottom in Gold and Commodities
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