“Most Severe Market Imbalance For A Decade” In This Metal

More signs this week that one metal may be a developing sleeper story. With tight supply and shifting market fundamentals coming together (quietly) to create a potential bull run.

That’s in palladium.

Platts reports that precious metals experts GFMS have just flagged a major supply shortage in the global palladium market. With the group estimating that this metal was in deficit by 1.58 million ounces in 2014.

GFMS further noted that this was one of the worst shortages in the palladium market for years. With the group calling last year’s deficit “the most severe market imbalance for more than a decade”.

Notably, analysts here estimate that the palladium market has now been in deficit since 2007. Meaning that we’ve seen seven years of demand running ahead of supply. 

That’s a situation unique amongst the metals complex today. With no other commodities having seen a supply shortage running anywhere close to this length. 

All of which suggests that major opportunities may be unfolding here. With tightening supply creating the potential to drive prices higher —  as with the 30% gains palladium enjoyed in mid-2014, when strikes in the South African mining sector threatened one-third of world supply. 

Prices have since levelled off — falling from a high of over $900 per ounce in August 2014, to a current level near $780. But any new threats to supply could trigger another run, given the precarious state of the market. 

Threats like attempts by Russia to corner the market with buying through special investment funds — a strategy that’s recently been put forward by top players in that country’s mining industry (see “Is This $2 Billion Buy A Sign Of Opportunity In Palladium?” – Pierce Points: April 9, 2015). 

The big question is: how to position for such a move? Toward that end, members of the Pierce Points Discovery Network will be receiving new research next week on global project opportunities in the PGM space. (If you’re not already a member of the Discovery Network, simply apply by updating your subscription preferences.) 

Watch for these observations on how to profit from this undercurrent trend — and for more events affecting supply in the global palladium space, particularly in top producers Russia and South Africa.  

Here’s to scarcity,

Dave Forest

dforest@piercepoints.com / @piercepoints / Facebook

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