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Bars

Heraeus Precious Appraisal

  • Edition 4 - 18 February 2019

Visible palladium stocks have fallen by 75%

This year palladium ETF holdings have started to rise in the US (+10 koz) and South Africa (+28 koz). If investors continue to add to their ETF holdings then this will tighten the palladium market further. Most primary producers’ output is sponge for industrial users, not bars needed to back physical ETFs. A rapid increase in ETF demand could further tighten the supply of available metal, pushing up lease rates and the palladium price.

Physical palladium ETF holdings have fallen by 2.2 moz, from a peak of 2.9 moz in 2014 to 0.7 moz at the end of 2018, so visible stocks have shrunk significantly. Given the substantial market deficits of the last few years, a large proportion of this metal is likely to have been used for industrial purposes. The high lease rates over the last 18 months indicate that there is little metal available to be leased out.

However, there are other sources of stock. Nornickel has created a palladium fund with metal acquired from thirdparty sources that has delivered over 1 moz to its customers on top of its mine production in 2017-2018.

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