Is This “Crisis Metal” Today’s Best Resource Opportunity?

I talked earlier this week about potential supply problems in platinum for leading producer Zimbabwe. And new data this week suggest that an even-deeper crisis may be brewing for a related metal: palladium.

Platts reported yesterday that analysts from Barclays have just compiled some full-year numbers for palladium supply during 2014. And the picture is bleak.

Barclays notes that the availability of palladium globally took a big dive during the past year. Because of one critical factor: the world’s top-producing nation, Russia.

Data show that Russian palladium shipments into major trading hub Switzerland plummeted in 2014. Falling 64% to 184,000 ounces–down from over 517,000 ounces in 2013.

In other parts of the world, the pattern was similar. With Russian palladium shipments into China showing a 45% drop on the year, to just under 97,000 ounces.

The fall-off is almost certainly due to tightening sanctions against Russia. Perhaps combined with Russian unwillingness to part with this strategic resource amid the current uncertain political environment.

Whatever the reason, this is a major shift in the global palladium market. Russia is by far the largest producer here–having put out a full 43% of worldwide mined supply during 2014.

And there aren’t a lot of other suppliers to step up and fill the gap. In fact, the world’s only other major palladium producer is South Africa (32% of mine production in 2014), which has been seeing difficulties of its own of late in the mining sector.

Overall, Barclays sees the palladium sector as being in a significant shortfall. With analysts here estimating that the supply deficit during 2014 may have reached as much as 1.65 million ounces–one of the biggest supply shortages seen today in any metals market.

The bank expects that situation to continue in 2015. Forecasting a supply deficit of nearly 560,000 ounces this year.

This tightness created a good run in palladium prices during 2014–with the metal gaining as much as 28%, to over $900 per ounce. Those gains, however, have largely ebbed since September. Leaving the price at a current $790.

Watch for supply problems to potentially cause another run–which would be great news for producers in other parts of the world, like Canada and the U.S. It may also help spur exploration for new PGM deposits outside of traditional hotspots.

Here’s to seeking alternatives,

Dave Forest

dforest@piercepoints.com / @piercepoints / Facebook

Add a Comment

Your email address will not be published. Required fields are marked *