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Carmaker Hype Sends Palladium To Highest Against Gold In 10 Years

Tyler Durden's picture




 

Gold is trading at the lowest level relative to palladium since 2004 as Bloomberg notes that prospects for a record shortage has lured investors to the metal used in pollution-control devices for cars amid concern that supply will be disrupted. As the chart below shows an oz of gold buys only 1.54 oz of palladium (less than a 3rd of the 5oz gold could buy in 2009) as supply problems (mining strikes and Russian sanctions) collide with demand expectations (the 'recovery' of the global car market). Despite GM's problems, record levels of channel-stuffed inventories, and a still stagnant consumer (showing no interest in big purchases), IHS expects a record level of auto sales this year at 85 million. Seems like this ratio is an interesting derivative play on the excessive exuberance in the world's car market expectations.

 

 

As Bloomberg notes,

Russia and South Africa are the world’s biggest producers of palladium.

A 17-week strike over pay at the South African mines of Anglo American Platinum Ltd., Impala Platinum Holdings Ltd. and Lonmin Plc, the largest producers, has squeezed supplies while western nations threaten Russia with sanctions for its actions in Ukraine. Johnson Matthey Plc predicts palladium’s shortage will expand to 1.61 million ounces in 2014 from 371,000 ounces last year. That would be the biggest shortfall since at least 1980, based on data on the company’s website.

"Beside the currently most important triggers for the price of palladium, namely the tense strike situation in South Africa as well as possible sanctions towards Russia in the Crimea crisis, global demand from the automobile industry should not be neglected,” Sonia Hellwig, senior manager for sales and marketing at Heraeus Metals Germany GmbH & Co. in Hanau, Germany, said by e-mail. “Furthermore the palladium ETFs continuously create positive impulses for the palladium price.”

...

IHS Automotive predicts that global auto sales will climb to a record 85 million this year. Usage by automakers increased 3.6 percent to a record 6.91 million ounces in 2013, according to Johnson Matthey, which makes about one in three of the world’s catalytic converters.

 

Just ignore this...

 

And this...

 

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Thu, 05/22/2014 - 21:27 | 4787120 TeamDepends
TeamDepends's picture

One word:  Palladium.  Mrs. Robinson....

Thu, 05/22/2014 - 21:42 | 4787158 swanpoint
swanpoint's picture

Second word: Bitchez. Palladium Bitchez

Thu, 05/22/2014 - 21:53 | 4787180 Urban Roman
Urban Roman's picture

Just grind up some of that excess inventory. Palladium will be cheap again.

Unless you've already stolen the converters off all those ghost cars.

Thu, 05/22/2014 - 22:41 | 4787269 Pinto Currency
Pinto Currency's picture

 

S.Africa produces 4.5M oz. of platinum per year (70% of global platinum mining production).

Platinum was headed for an 800k oz. shortage before the S. African platinum & palladium mines shut in January due to strikes.

Then there's the Russian situation with Russia producing 40% of global palladium production.

Now after the mines are shut for 4 months, and it will take another 3 - 5 months to restart them, Johnson & Matthey are predicting a 1.2M oz. shortage this year. 

And Kitco hasn't posted the Pt and Pd lease rates for a week.

http://www.kitco.com/charts/pd_leaserates.html

http://www.kitco.com/charts/pt_leaserates.html

And here is what happened the last time there was a Pd and Pt physical shortage:

http://www.gold-eagle.com/article/two-down-two-go

All good in the PGM market. 

Russia is sure to be resolved and who knows about S.Africa.

And most important of all, after all that money printing by c.b.'s, there is NO INFLATION.

But it looks like NFLX, GOOG, NFLX, CMG are going to run hard on the recovery fundamentals.

Thu, 05/22/2014 - 23:41 | 4787397 Never One Roach
Never One Roach's picture

Great article in that last link...Thanks!

Fri, 05/23/2014 - 00:09 | 4787452 Pinto Currency
Pinto Currency's picture

No prob NOR.

And subtract one NFLX and add one AMZN.

And add one WEN, RRGB, SBUX, WFM, FWM, BBY, CSCO, etc.

Looking good.

Fri, 05/23/2014 - 02:25 | 4787568 Arius
Arius's picture

tell me one market that cares about fundamentals ??? everything rigged ...

 

Everything Peged .... living a couple of games for the real suckers ... one time is bitcoin, then palladium, next who knows ...

 

good luck!

 

 

Fri, 05/23/2014 - 03:18 | 4787610 BrosephStiglitz
BrosephStiglitz's picture

Bitcoin isn't rigged.  The price of bitcoin was pushed up by overzealous buyers.  Short-term bubble based on new technology hitting the mainstream.

Palladium and Platinum are probably rising based on supply issues.  That's pretty fundamental too. 

Gold and silver, being a potential currency alternative could well be rigged.  I will agree there. 

Fri, 05/23/2014 - 10:02 | 4788314 Pinto Currency
Pinto Currency's picture

Platinum and palladium are real assets with intrinsic value.

Historically, Pt has move up before gold and silver to signal coming consumer goods price inflation:

http://www.safehaven.com/article/7291/platinum-dark-horse-bright-future

Sat, 05/24/2014 - 19:50 | 4792127 BrosephStiglitz
BrosephStiglitz's picture

Thanks for the link chief.  I am a laggard to the PMs game, and I am especially clueless about Platinum and Palladium.  This will be good to read.

Fri, 05/23/2014 - 05:49 | 4787720 BigJim
BigJim's picture

 Great article in that last link...Thanks!

Yes, Butler's written an excellent introduction to the subject there, and should help people understand what's going on with gold and silver.

What's interesting is... it was published back in 1997! And its predicted implosion of the Au/Ag markets still hasn't happened!

I've been observing this shite for 7 years and it's doing my head in. Butler's been clearly worrying the subject like a junkyard dog for at least 20 years... how has he stayed sane?

Fri, 05/23/2014 - 08:15 | 4787953 Fuh Querada
Fuh Querada's picture

nothing that an infinite supply of paper Pd for future delivery can't cure.

Thu, 05/22/2014 - 21:31 | 4787133 NoWayJose
NoWayJose's picture

Sounds like someone is pimping this metal. I'll take the 'under' bet on their car sales number.

Thu, 05/22/2014 - 21:36 | 4787145 Me.Grimlock
Me.Grimlock's picture

This is because the world is running out of gold

 

... or something

Thu, 05/22/2014 - 21:37 | 4787147 finametrics
finametrics's picture

idiots still stuck on the car thing despite being put to shame by:

 

http://jalopnik.com/that-zero-hedge-article-on-unsold-cars-is-bullshit-1...

Fri, 05/23/2014 - 05:51 | 4787721 BigJim
BigJim's picture

Hey Tyler (s), it would be nice to see either a clarification or a retraction on this subject.

Thu, 05/22/2014 - 21:40 | 4787153 disabledvet
disabledvet's picture

http://www.thefreelibrary.com/Idaho+Consolidated+Metals+Confirms+Platinu...

Don't forget Idaho and Montana. I think General Motors shut their mine down (yes, they personally owned their own Palladium mine) after the collapse in 2008.

Of course "who used palladium when you have zero emissions vehicles." We don't even need transmissions, drive shafts, crank shafts, cylinders" etc, etc.

http://seekingalpha.com/symbol/TSLA?s=tsla

Thu, 05/22/2014 - 23:20 | 4787356 WillyGroper
WillyGroper's picture

You're thinking too small. 

All those WPRT semi's use 8X the platinum & palladium as a conventional.

Thu, 05/22/2014 - 21:40 | 4787157 Miss Expectations
Miss Expectations's picture

The next big thing...palladium mining.  All you need is a creeper and a wrench.

Thu, 05/22/2014 - 21:49 | 4787170 10mm
10mm's picture

Muricans love their car ass.

Thu, 05/22/2014 - 21:55 | 4787186 Dr. Gonzo
Dr. Gonzo's picture

I'd venture a guess we've broken out and it's $1000+ soon.

Thu, 05/22/2014 - 22:22 | 4787240 Acidtest Dummy
Acidtest Dummy's picture

One oz. Pd ballerinas are like that on Ebay presently.

Fri, 05/23/2014 - 07:57 | 4787917 lakecity55
lakecity55's picture

How do you verify them on EB?

I got mine one day when my ANA dealer had 1 Ballerina in the shop.

Thu, 05/22/2014 - 22:09 | 4787205 Dr. Gonzo
Dr. Gonzo's picture

and Rhodium is near an all time low under $1100 spot...

 

http://www.golddealer.com/baird-rhodium-bar-1-oz/

Fri, 05/23/2014 - 07:56 | 4787914 lakecity55
lakecity55's picture

Yep, there is a dealer who has 1-oz Rhodium bars, I may get 1 or 2.

Thu, 05/22/2014 - 22:10 | 4787210 WilliamShatner
WilliamShatner's picture

Articles like this make me smile, as I am sitting on over 60 ounces of palladium that I got by unloading most of my gold and silver over the past year.

Will start swapping back to gold & silver once palladium starts moving close to 1,000.

:-)

Fri, 05/23/2014 - 03:09 | 4787604 BrosephStiglitz
BrosephStiglitz's picture

Nice.  I will admit that I considered palladium for a while back in 2010, but the fundamentals just didn't look fantastic.  Didn't plan on the geopolitics with Russia and issues with mining in  S. Africa.

Fri, 05/23/2014 - 07:55 | 4787913 lakecity55
lakecity55's picture

Good move, Bill. I had a lot of 1 equity losing $$ so I put it all into SWC, about 3 mos ago. I just got moar SWC.  I have a couple of fizz OZ of Pd at the lake, but I will keep them.

Thu, 05/22/2014 - 23:13 | 4787236 cowdiddly
cowdiddly's picture

Well I might consider a new car if it did not have a preinstalled tracking device and a data recorder keeping tabs of every time I might exceed the speed limit by one mile. Guess Ill just keep my old one, it will outlast affordable oil anyway. Im sure the rest of the world just loves those new features too. I don't know how we sell any of our products anymore, who would want them? GMO corn anyone? Cisco router? No? how about Microsoft 8? A cell Phone with built in goodies that will turn it self on in the middle of the night? How bout a nice facebook account? IT's free! Oh my.

But we have gold, yes,yes sell that. All at once as soon as markets open.

Thu, 05/22/2014 - 22:38 | 4787273 deflator
deflator's picture

 All those cars are waiting for catalytic converters?

Fri, 05/23/2014 - 07:44 | 4787886 lakecity55
lakecity55's picture

No, that is a lot of prime Pd you see sitting on that lot. What say we visit tonight and score some?

Thu, 05/22/2014 - 22:41 | 4787281 SilverIsMoney
SilverIsMoney's picture

This has more to do with Gold suppression than anything else...

Thu, 05/22/2014 - 22:46 | 4787287 deflator
deflator's picture

 A cell Phone with built in goodies that will turn it sell on in the middle of the night?

 I have a Windows phone and it sucks up  bandwidth from my router even if wi-fi is turned off. I go to admin and it shows the device not connected but the light on the router blinks really fast constantly. If I shut off the phone the light stops blinking.

Fri, 05/23/2014 - 01:29 | 4787537 StychoKiller
StychoKiller's picture

"Ahh agent 008, it's good to hear from you again!"

Fri, 05/23/2014 - 07:53 | 4787905 lakecity55
lakecity55's picture

I had an update wanting to load on mine. It said "New: Can turn the camera on or off at any time."

I unloaded all of it.

Thu, 05/22/2014 - 23:15 | 4787346 BenderTheOffender
BenderTheOffender's picture

I see cash4clunkers 2.0 comming right around the corner

Fri, 05/23/2014 - 01:49 | 4787551 StychoKiller
StychoKiller's picture

Yo, hello there handsome, you look familiar! :>D

Thu, 05/22/2014 - 23:43 | 4787403 Never One Roach
Never One Roach's picture

You can bet every single one of those Middle Easterners, Pakis, Indians, Chinese, and so on are more jealous of our Suburbans then they are of our so-called "Freedom."

Fri, 05/23/2014 - 07:23 | 4787838 orangegeek
orangegeek's picture

Palladium is up because record high numbers of new cars being made are being parked in farmers' fields to rot.

 

Meanwhile back at the ranch, everyone was feeling Mary - and Mary laughed.

 

ONWARD!!!!!!!!!!!!

Fri, 05/23/2014 - 07:51 | 4787900 lakecity55
lakecity55's picture

Any criminals or suspicious guys come down this road soldier?

No sir, commander of the guard. Just two guys in a truck loaded with catalytic converters. I guess they were junk collectors.

Fri, 05/23/2014 - 09:47 | 4788264 prudent1nvestor
prudent1nvestor's picture

Why is Tyler linking to the BULLSHIT unsold car article AGAIN? http://jalopnik.com/that-zero-hedge-article-on-unsold-cars-is-bullshit-1578124255 

It's BULLSHIT. the pictures are years old. ZH lost a lot of credibility on that

Fri, 05/23/2014 - 10:37 | 4788422 Atomizer
Atomizer's picture

If you like your catalytic converter, you'll be able to keep your catalytic converter, unless we have a recall.

Do NOT follow this link or you will be banned from the site!