Palladium prices are rebounding strongly lately on news that global car sales are bouncing back to record levels.
Palladium and platinum are much better plays compared to silver because they have real industrial demand components.
BMW in particular is increasingly relying on palladium catalysts for cleaner-burning car engines. This means that as car sales climb around the world, the current supply shortage of this metal can only increase.
Palladium markets have benefited in recent years from massive sales of stockpiles from the Russian government.
Otherwise, supply of the element — a close chemical relative of platinum sometimes considered a precious metal — is expected to fall 5.7% this year while demand from the car industry alone is expected to climb 6.2%.
This creates a fundamental shortfall of 1.31 million ounces of palladium, just this year. Throw in jewelry sales and other applications — not to mention speculative interest in palladium ETFs like Physical Palladium Shares ETF (NYSE:PALL) — and the shortage can only increase.
Obviously you can play this story simply via PALL and similar funds.
But while palladium miner Stillwater (NYSE:SWC) has bounced 12% off its bottom on this news, the stock is still 21% off its top:
And Norilsk (NILSY.PK), the world’s biggest palladium producer, provides substantial exposure to the metal price as well — along with platinum, nickel and the underlying strength of the Russian ruble.
Emerging Money provides insightful and timely information about the increasingly important world of Emerging Market investments. CNBC Emerging Markets Contributor Tim Seymour leads the team of Emerging Money to bring you cutting edge global news and analysis.
About Tim Seymour: Tim is a founder of Emerging Money. He is a founder and Managing Partner at Seygem Asset Management, and The Emerging Markets Contributor to CNBC. Seygem Asset Management focuses on investing throughout the global emerging markets asset class. With a view that emerging and developing economies will continue to outpace the economic growth and advancement of developed economies, Seymour has devoted a career to investing in the dominant markets of tomorrow, today. Seymour’s career has included significant experience in both alternative asset management (hedge funds) and capital markets, having launched two hedge funds, and built the largest Russian broker dealer in the USA. Seymour started his career at UBS, focusing on international credit (cash, swaps, forex) in a specialized hedge fund group (New York). Seymour completed the firm’s training program after graduating with an MBA in international finance from Fordham University. Seymour received his undergraduate degree at Georgetown University.