Palladium to gain on jewelry promotion, auto boom, tight supply

Gold  |  2011-03-07 05:01:28   |   By

Palladium prices witnessed a surge in 2010 on supply concerns and ETF demand, auto sector boom and jewelry promotion will boost the metal further in the coming years

LONDON (Scrap Monster): After registering a 103% growth in prices in 2010, Palladium looks set for bigger gains this year thanks to global supply concerns, auto sector demand, promotion as jewelry metal and ETF investment demand. Last week palladium rose to $817 from $785 here due to tensions in Middle East and North Africa that raised the safe haven demand for precious metals. The metal may gain upto $950 or $1000 levels this year,
according to analyts.

Supply concerns have emerged from Russia, historically, the largest producer of palladium as its inventories are dwindling while rising labour and electricity costs may hamper output in South African mines,the second largest producer of the precious metal. Palladium is used in automobiles to make catalytic converters that reduce emissions while there is healthy demand from electronics sector for use in semiconductors.

Automobile sales have picked up in recent months in USA, China and India which augurs well for the palladium markets. Strong investment demand from bullion-based ETFs would would boost palladium prices in the next couple of years, CTV News quoting Rohit Savant, a senior commodity analyst of New York based CMP Group said.

Investment demand, amount-ing to about 440 000 oz judging by the listing of platinum and palladium exchange-traded funds (ETFs) in North America, has resulted in the price not always reflecting demand and supply fundamentals, he says. Platinum and palladium ETFs have been driven by investment and increased buying, owing to concerns about the weakness in the dollar, a hedge against inflation, a recovery in the auto industry and supply concerns over Russian sales of palladium.

The outperformance of palladium ETFs over platnum shows that the driving force is a supply issue, rather than one of demand, and that palladium will benefit more from the strong vehicle sales in China owing to its preference for petrol-driven vehicles, which require palladium autocatalysts, says Hatziandreou. As such, palladium demand will also be affected by China's economic and industrial growth, according BP Bernstein stockbroker Menelaos Hatziandreou quoted in the Mining Weekly.

Meanwhile, efforts are on to promote palladium as a metal jewelry with the Palladium Alliance International (PIA) tie-up with Vivienne Westwood and award winning actress Christina Hendricks which has launched the 'Get a Life' Palladium jewelry collection promoting environmental themes. This is the first time in history Palladium will be actively marketed to consumers as a precious jewelry metal, according to PIA.

Formed in March 2006, PAI is the world's first organization dedicated to establishing Palladium as a luxurious, precious and distinctive metal. Since its inception, PAI has spearheaded a global communications program with the jewelry trade that includes a range of online and offline initiatives, VIP events, seminars and advertising efforts.

In recent mining developments, Toronto-based North American Palladium reported that palladium production from its Lac des Iles mine, in Ontario, will increase 75% this year. NAP produced 95 100 oz of palladium in 2010 and is forecasting output of between 165 000 oz and 175 000 oz this year. Scoping study is underway in The Bauba project, situated on the eastern limb of the Bushveld Igneous Complex, in Limpopo, represents a large targeted resource of 138-million ounces of platinum-group metals (PGMs) , according to Bauba Platinum, the PGM exploration company.