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jk · January 19, 2011, 08:37 PM

Re: palladium?

happened to come across this at kuppy's website and thought i'd pass it on fwiw:

Might palladium be a sound alternative to silver? The chart look kind of "bubblish," but the demand-supply equation is more promising than silver's:
- Industrial demand is relatively inelastic to price, because China needs catalytic converters for its growing auto fleet. There are no cheap substitutes to palladium for this purpose.
- Investor demand not yet euphoric. PALL ETF only holds 848 million. There's a similar sized ETF in London and somewhat larger long-term holdings in Zurich, but nothing like the world-wide visibility enjoyed by gold, silver, or even platinum. However, U.S. Palladium Eagle coins, to be minted this year, could stimulate additional demand.
- Supply is forecast to lag demand for the near future. Production is capital intensive, with long lead times, and only two major production areas. Norilsk's production peaked a couple decades ago, and new investments will not increased output for years to come. South African producers have their own issues - electricity and water constraints, for example. Moreover, the key fact is that Norilsk's palladium output is a byproduct of nickel production. Similarly, the Bushveld complex produces palladium in a relatively constant ratio to platinum. So in both cases production is not uniquely responsive to palladium prices.
- Inventories are the question mark. Russia's inventories are a state secret, but the common wisdom among analysts is that the world has been consuming in excess of production since 1989, and the Russian inventories are nearly exhausted (admittedly, this sounds speculative).
- At current prices, recycled catalytic converters represent "inventory on wheels," but U.S. and European recycling markets are already pretty efficient (Belgium's Umicore, for example). China's young car fleet doesn't yet offer a deep source for recycled palladium.

Investments? Norilsk is tempting, with an inside track to supplying China with Nickel and Palladium (and now with direct shipping via the arctic route), but Putin and Russian opacity make me wary, so my investment here is small. Impala, Stillwater, and other miners have issues with costs (Norilsk just sold it's investment in Stillwater). Anyway, you've taught me that mining is a lousy business. Recyclers are more appealing, and I own a little UMICORE, but it comes with Euro risk. Maybe Mr. Market will offer me a bargain over fears of a Euro break up. Meanwhile, a small, cheap, PM recycler would be a gem of a find. In the meantime, PALL offers an easy-to-manage investment, a hedge against Putin, and a store of value to protect against money printing. Based on the above, I plan to hold onto my PALL shares a while yet. What do you think? Does palladium offer the supply-demand-inventory-price criteria that silver lacks?
--------
I think you just answered your own question. That's a big quantity of data that you already have. I don't know the details anywhere as closely as you do. It sounds like you've already done a lot of the work on this. I would just caution that it has made a huge move in the past few months. Wish I could be more helpful. Figured I should post this as other readers may get as much benefit from it as I have.

http://adventuresincapitalism.com/askkuppy.aspx

**touchring** · January 20, 2011, 02:30 AM

Re: palladium?

Great, who bought natural gas? :|

**renewable** · January 20, 2011, 08:10 AM

Re: palladium?

Originally posted by mikedev10 View Post

anyone else in this market? any reason to keep holding onto it? i bought a few oz when i did because i thought it would be cool another type of metal that had some neat properties. i also couldn't afford platinum. i bought around 425, watched it go to something like 295, and then didn't look at the price again until i saw this chart. i have 3 or 4 oz sitting around and i'm wondering if i should sell them or keep holding on! unlike the strong thesis i have to keep me holding gold and silver, i am holding these for no particular reason outside of thinking that they would be cool to have.

I'm in pretty much exactly the same position as you (quantities, prices, etc). I bought it because of it's hydrogen absorption properties. Haven't looked at the prices for ages, until your post - thanks!

I can't see myself selling any time soon. The widescale use of hydrogen is a long way off, and if I did sell I can't think of anything that seems a significantly better bet than just holding. It's difficult to get hold of physical for anywhere near spot, so it would be very hard to trade/replace.

**mikedev10** · January 22, 2011, 12:02 PM

Re: palladium?

Originally posted by renewable View Post

I'm in pretty much exactly the same position as you (quantities, prices, etc). I bought it because of it's hydrogen absorption properties. Haven't looked at the prices for ages, until your post - thanks!

I can't see myself selling any time soon. The widescale use of hydrogen is a long way off, and if I did sell I can't think of anything that seems a significantly better bet than just holding. It's difficult to get hold of physical for anywhere near spot, so it would be very hard to trade/replace.

that's one of the things i thought was cool! and what if i spill hydrogen all over my garage? this stuff will absorb way more than paper towels.

**mikedev10** · January 22, 2011, 12:04 PM

Re: palladium?

Originally posted by jk View Post

happened to come across this at kuppy's website and thought i'd pass it on fwiw:

Might palladium be a sound alternative to silver? The chart look kind of "bubblish," but the demand-supply equation is more promising than silver's:
- Industrial demand is relatively inelastic to price, because China needs catalytic converters for its growing auto fleet. There are no cheap substitutes to palladium for this purpose.
- Investor demand not yet euphoric. PALL ETF only holds 848 million. There's a similar sized ETF in London and somewhat larger long-term holdings in Zurich, but nothing like the world-wide visibility enjoyed by gold, silver, or even platinum. However, U.S. Palladium Eagle coins, to be minted this year, could stimulate additional demand.
- Supply is forecast to lag demand for the near future. Production is capital intensive, with long lead times, and only two major production areas. Norilsk's production peaked a couple decades ago, and new investments will not increased output for years to come. South African producers have their own issues - electricity and water constraints, for example. Moreover, the key fact is that Norilsk's palladium output is a byproduct of nickel production. Similarly, the Bushveld complex produces palladium in a relatively constant ratio to platinum. So in both cases production is not uniquely responsive to palladium prices.
- Inventories are the question mark. Russia's inventories are a state secret, but the common wisdom among analysts is that the world has been consuming in excess of production since 1989, and the Russian inventories are nearly exhausted (admittedly, this sounds speculative).
- At current prices, recycled catalytic converters represent "inventory on wheels," but U.S. and European recycling markets are already pretty efficient (Belgium's Umicore, for example). China's young car fleet doesn't yet offer a deep source for recycled palladium.

Investments? Norilsk is tempting, with an inside track to supplying China with Nickel and Palladium (and now with direct shipping via the arctic route), but Putin and Russian opacity make me wary, so my investment here is small. Impala, Stillwater, and other miners have issues with costs (Norilsk just sold it's investment in Stillwater). Anyway, you've taught me that mining is a lousy business. Recyclers are more appealing, and I own a little UMICORE, but it comes with Euro risk. Maybe Mr. Market will offer me a bargain over fears of a Euro break up. Meanwhile, a small, cheap, PM recycler would be a gem of a find. In the meantime, PALL offers an easy-to-manage investment, a hedge against Putin, and a store of value to protect against money printing. Based on the above, I plan to hold onto my PALL shares a while yet. What do you think? Does palladium offer the supply-demand-inventory-price criteria that silver lacks?
--------
I think you just answered your own question. That's a big quantity of data that you already have. I don't know the details anywhere as closely as you do. It sounds like you've already done a lot of the work on this. I would just caution that it has made a huge move in the past few months. Wish I could be more helpful. Figured I should post this as other readers may get as much benefit from it as I have.

http://adventuresincapitalism.com/askkuppy.aspx

thanks for the posted response. think i may just sit for a while.

**touchring** · January 22, 2011, 01:17 PM

Re: palladium?

thanks for writing about this. is there an etf for palladium? how does one trade in palladium?

note: i found this - http://seekingalpha.com/symbol/pall

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