Palladium ETF Strengthens on Predictions of a Global Deficit
A palladium exchange traded fund shined on Monday as the precious metal is expected to slip back to a deficit this year.
The abrdn Standard Physical Palladium Shares ETF (NYSEArca: PALL) increased 4.9% on Monday while the palladium spot price was up 4.9% to $2,041.6 per ounce.
Lifting palladium prices, Autocatalyst maker Johnson Matthey warned that the palladium markets are likely to move back into a deficit. Palladium is used in autocatalysts to reduce harmful emissions from vehicle engines.
Tightening supplies of palladium have helped drive up prices in the precious metal over the years.
Johnson Matthey argued that while palladium demand fell alongside automobile production in response to a shortage of semiconductors, supply remains under pressure, especially with the ongoing Russia-Ukraine war and Western sanctions, Reuters reports.
Automakers "can't react that quickly on the amount of metal they use this year or even next year, but if the situation (in Ukraine) continues, they may have some flexibility to substitute a little bit quicker than they had previously planned," Johnson Matthey researcher Rupen Raithatha said.
Russia accounts for about 25% to 30% of the world's supply of palladium and around 8% to 10% of global platinum supplies.
There is no sign that Western sanctions on Moscow have impeded Russian exports in response to the invasion of Ukraine. However, with the war dragging on, more companies could begin to boycott Russian metal, and governments could impose more significant restrictions.
"The substitution effort has gone up hugely," Trevor Raymond, the World Platinum Investment Council's head of research, told Reuters. "The amount of savings an automaker can make are massive. What's been added on top of that is concerns about availability (of palladium)."
Consultant Metals Focus projected that the roughly 10 million ounces per year palladium market could go back from a first surplus in 10 years for 2021 to a deficit of 521,000 ounces in 2022. The consulting agency also predicted palladium prices would average $2,290 an ounce this year.
Palladium was trading at a record high of $3,440.76 per ounce earlier this year.
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