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Palladium Surges To 14 Year High; "Can Go To $1,000" On Miner Strikes

Tyler Durden's picture




 

Palladium prices last traded this high in March 2001. The recent price spike has been driven by investors' concerns that a mining strike in no.2 producer South Africa could chock off supplies at the same as an over-exuberant auto manufacturing world drives demand for the car-exhaust metal. Palladium's industrial uses, and the dependence on South Africa for supplies, have helped keep the metal aloft even as other precious metals stumbled this year. Miners in South Africa went on strike in January for the second time in two years, demanding higher wages and better working conditions. As WSJ reports, the walkout has sharply reduced palladium exports from South Africa, leaving global palladium inventories have dwindled and are now sufficient to meet only 16 weeks of demand and investors exclaiming... "There is no reason to sell palladium right now," said Frank Lesh, a broker at Future Path Trading. "This thing can go to $1,000." But not everyone's so bullish.

 

The strike began at the start of 2014 - when the price spike began...

 

Via WSJ,

Miners in South Africa went on strike in January for the second time in two years, demanding higher wages and better working conditions. The walkout has sharply reduced palladium exports from South Africa, which produces 40% of the world's supplies.

 

Global palladium inventories have dwindled and are now sufficient to meet only 16 weeks of demand, according to CPM Group, a consulting firm. Palladium is usually mined together with platinum, a more expensive metal.

The lower supplies go, the higher prices will rise, investors say. "If there's not much supply, it all just gets sucked up" by manufacturers and other palladium consumers, said Frank Holmes, CEO of U.S. Global Investors, which manages about $1 billion.

 

...

 

The miners' strike, which involves some 70,000 workers, is the longest ever in South Africa. After Monday's talks ended without an agreement, newly appointed South African Mining Minister Ngoako Ramatlhodi said he would exit from the talks.

 

Meanwhile, palladium users have few other places to turn for supply. Russia exports more palladium than South Africa, but relies on Cold War-era stockpiles to supplement production. Many analysts think those extra supplies are running low. No other country is a significant palladium producer.

But there are technical issues too...

Some investors and analysts see ETFs playing a role in driving up palladium prices. The amount of metal these funds hold has risen this year after two new funds were launched. Total holdings of palladium by ETFs stood just shy of 2.8 million ounces at the end of May, exceeding the annual production of Russia.

But not everyone is so exuberant...

To be sure, prices would likely drop if the walkout ends. Prices fell nearly 5% in the month after the last major mining strike was resolved in September 2012, though they later recovered. Demand from the auto industry, though improving, may not be strong enough to keep prices high without supply concerns also lending support, analysts say.

 

"Investors will have every excuse to sell above $850 per ounce," said Rohit Savant, an analyst with CPM Group. "Breaking much further above that won't be easy."

While, for now, it appears fundamental supply and demand characteristics are still in place, we suspect this is yet another ETF/synthetic tail wagging the physical commodity dog...

 

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Wed, 06/11/2014 - 11:46 | 4844873 uno
uno's picture

did you mean no supply = price crash, it works for copper, gold and silver

Wed, 06/11/2014 - 12:07 | 4844899 Pinto Currency
Pinto Currency's picture

 

 

 

Russia's state metal's agency Gokhran is entering the palladium market to buy physical palladium.

There is going to be stress in the physical palladium market for the paper trading London banks who are shorting the physical market.

'We will respond but sanctions are not our way.' - Putin

http://www.bloomberg.com/news/2014-05-16/russia-plans-palladium-purchases-from-norilsk-interfax-says.html

 

Here's what happened last time there was a palladium shortage in London:

"Think of it, so soon into a market move (palladium for a few months, platinum for a few weeks), emergency discussions were held in London last week to work out the "problem". Interest rates of 300% were quoted on palladium one month leases (60% on platinum), before the lease market just shut down..."

 

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

Wed, 06/11/2014 - 12:45 | 4845124 DoChenRollingBearing
DoChenRollingBearing's picture

Palladium (Pd) is a great speculation and worth a good shot as a long-term holding, especially if "technology goes the right way".

It is VERY speculative now though.  "Physical Bitcoin", LOL.

Wed, 06/11/2014 - 11:51 | 4844902 wallstreetapost...
wallstreetaposteriori's picture

Looks just like the NASDAQ chart!  Go figure....

Wed, 06/11/2014 - 11:54 | 4844912 jcpicks
jcpicks's picture

Not to go off topic (or perhaps join the party late), but DoChenRollingBearing just previously had an ask regarding fake GAE.....see attached:

http://www.timesunion.com/local/article/Two-charged-with-selling-fake-coins-5542193.php#photo-6429872

Wed, 06/11/2014 - 12:33 | 4845095 DoChenRollingBearing
DoChenRollingBearing's picture

Excellent reporting, thank you!  It is my opinion that this problem will become worse in the future.

Apparently the coin dealers ("LCS") can detect fakes pretty easily.  It NEVER hurts to have a friend and ally or two in the PM business.

Wed, 06/11/2014 - 13:08 | 4845246 jcpicks
jcpicks's picture

Agreed!  ALWAYS verify what you stack.

Wed, 06/11/2014 - 13:26 | 4845329 MeMongo
MeMongo's picture

The quality of those fakes are horrendous! Mongo would suggest anyone who bought those should seriously brush up on their identification techniques!

Wed, 06/11/2014 - 11:47 | 4844877 Grande Tetons
Grande Tetons's picture

Figures...out of the 4 major PMs...this is the one I do not own. Fuck me and my shitty luck. 

Wed, 06/11/2014 - 11:56 | 4844922 Soul Glow
Soul Glow's picture

Thus why the CFTC didn't think they short double leverage short it.  Gensler FTMFW!

Wed, 06/11/2014 - 11:58 | 4844934 Grande Tetons
Grande Tetons's picture

I am going to need a translation on that one. 

Wed, 06/11/2014 - 12:13 | 4845011 Soul Glow
Soul Glow's picture

The PTB didn't need to short it because those of us who own PMs don't own palladium.  We don't tell people to "Buy Palladium" and the price action will not make the news.

Thus why GS/JPM/etc didn't need to short it.

Wed, 06/11/2014 - 12:38 | 4845120 DoChenRollingBearing
DoChenRollingBearing's picture

Palladium Maples are fairly hard to find, but if you look around (esp. at big LCS´s) they are there.  I own a small amount.

Palladium is an interesting metal with interesting properties.  It will ZOOM if hydrogen fuel cells and similar hydrogen technology ever take off.

However, there may be tears shed if you buy at these lofty heights with the idea of quick profits (ask Ford when Pd was at $1000).  

I am NOT selling mine.  Like Au, Pt, Ag and BTC, I am NOT a seller!

Strong handz, fishez!

Wed, 06/11/2014 - 13:04 | 4845217 Sashko89
Sashko89's picture

I own a NGC 69, 1/2 oz 1991 Russian Paladium Balerina:), However, thats all the palladium that I have :

 

I bought it when Palladium was trading at 700 dollars spot price and the coin cost me 450 on Apmex. It is NGC Certified though, so its a collectible, thus the relative premium from the spot..

 

:)

Wed, 06/11/2014 - 13:17 | 4845287 DoChenRollingBearing
DoChenRollingBearing's picture

The ballerinas are pretty coins, I have not seen one in a long time.

Never let her go!  :)

Wed, 06/11/2014 - 11:49 | 4844889 manofthenorth
manofthenorth's picture

Why does my computer keep locking up every time I get on Zero hedge ??????

Cyber -herpes from NSA ????

Is this just the rabid invasive advertising bullshit or some more insidious police state crap ??

Thoughts from the ZH brain trust.

I like checking in on the ZH feed but I am tired of my computer crashing EVERY FUCKING TIME I come here now.

Wed, 06/11/2014 - 11:52 | 4844906 Soul Glow
Soul Glow's picture

Save the economy and buy a new computer.

/Sarc

Wed, 06/11/2014 - 11:57 | 4844927 Incubus
Incubus's picture

time to clean out your computer, or upgrade.

I've got no issues viewing ZH and I'm on a computer that's 5 years old.  (I don't need to upgrade anymore since all I do is academic work and "web browsing" (cough))

Wed, 06/11/2014 - 12:55 | 4845187 lakecity55
lakecity55's picture

I maxed out the RAM on this machine and it really improved.

I am maxing the RAM on the next one.

Wed, 06/11/2014 - 12:11 | 4844997 29.5 hours
29.5 hours's picture

 

 

This site has all sorts of advert crap on offer, depending on your browser and plug-ins. One of the Adobe Flash advert popups, for instance, has no way to click it away *if* you are using the latest Firefox with a Flash killer. Figure that...

 

 

Wed, 06/11/2014 - 12:19 | 4845039 manofthenorth
manofthenorth's picture

added the new add-blocker and running much better now.

Wed, 06/11/2014 - 14:03 | 4845502 Four chan
Four chan's picture

ad blocker is the only way to surf the interweb

Wed, 06/11/2014 - 12:34 | 4845100 Cthonic
Cthonic's picture

turn off flash

Wed, 06/11/2014 - 12:58 | 4845201 knukles
knukles's picture

Because you're the only guy in the world who has never met everybody, but everybody hates you.
Capiche?

Wed, 06/11/2014 - 13:22 | 4845312 DoChenRollingBearing
DoChenRollingBearing's picture

Oh.  I always thought that was me, knuks!

Wed, 06/11/2014 - 11:52 | 4844903 Soul Glow
Soul Glow's picture

Damn it Yellen, get to work and call the CFTC!  Get them to double short this metal stat!  We can't have any holes in our "Precious metal has no value to investors" meme.

Wed, 06/11/2014 - 12:05 | 4844905 ParkAveFlasher
ParkAveFlasher's picture

Wow, no supply.  Too bad there is no demand either!  (not that fundamentals make a difference, just sayin') 

Uh yeah, there is more palladium and platinum parked on a 100-acre lot in Elizabeth, NJ than in anyone's warehouse, methinks.  Automobiles are like little mobile warehouses for certain materials.

You can have any color you want, btw, and if you buy now with GMAC Financing, you get credit towards luxury add-ons like a granite dashboard!

Wed, 06/11/2014 - 11:54 | 4844913 Incubus
Incubus's picture

Nevermind that shit. We've got hopium.

Wed, 06/11/2014 - 12:00 | 4844940 SheepDog-One
SheepDog-One's picture

The gold miners should take notes here and stage mining strikes, gold $5,000 overnite.

Wed, 06/11/2014 - 12:03 | 4844952 alexcojones
alexcojones's picture

Silver . . .

The Standard & Poor man's Palladium

AG not AC

Wed, 06/11/2014 - 12:03 | 4844959 PAWNMAN
PAWNMAN's picture

Curious how the lesser metals such as Palladium and Platinum continue to rise. At the same time the headline metals like Gold and Silver can't get off the mat. Obviously, the Fed is picking it's battles. If this keeps up can a Palladium smack down be in our future?

Wed, 06/11/2014 - 12:09 | 4844989 Devotional
Devotional's picture

is it me or does this smell like Gold in 2011? Watch out below, this is not a time to buy the physical. Wait for the ETF crash and then BUY the metal.

Wed, 06/11/2014 - 12:12 | 4845002 Quinvarius
Quinvarius's picture

Platinum value mined per year: 8.5 billion

Palladium value mined per year: 5.4 billion

Silver value mined per year: 12.5 billion

Increase in debt per day: 2.7 billion

 

Wed, 06/11/2014 - 12:13 | 4845007 Devotional
Devotional's picture

good grief o_O

Wed, 06/11/2014 - 12:17 | 4845024 29.5 hours
29.5 hours's picture

 

 

Let's see...silver is for poor people; gold is for aspirants to the middle class; and palladium is for effete lackeys of the ruling elite. Do I have this right?

 

 

 

 

Wed, 06/11/2014 - 12:21 | 4845038 JPMorgan
JPMorgan's picture

The mining strikes don't appear to be effecting the Platinum price as much though.

Which is kind of strange considering South Africa and Russia are the two largest sources for Platinum production as well.

Wed, 06/11/2014 - 12:53 | 4845182 lakecity55
lakecity55's picture

I bet they are working 3 shifts at SWC!

Wed, 06/11/2014 - 13:21 | 4845305 DoChenRollingBearing
DoChenRollingBearing's picture

Yeah, I hope so!  Making hay and all...

Wed, 06/11/2014 - 12:25 | 4845054 Cacete de Ouro
Cacete de Ouro's picture

The London Platinum and Palladium Market (LPPM) fix is in!

http://www.lppm.com/contentitem.aspx?cid=19

Wed, 06/11/2014 - 12:33 | 4845094 Fuh Querada
Fuh Querada's picture

Pd is traded on a futures markets for fuck's sake. There is no relationship between supply/demand and paper price.

Wed, 06/11/2014 - 12:34 | 4845097 Spungo
Spungo's picture

Why don't they just print more palladium?

Wed, 06/11/2014 - 12:41 | 4845128 Fuh Querada
Fuh Querada's picture

look at the price chart. big fucking deal if you bought any in the last 3 years (physical or paper) . Average profit around 15%?

Wed, 06/11/2014 - 12:48 | 4845155 MeelionDollerBogus
MeelionDollerBogus's picture

No one ever dumps palladium by pretending supply is short.

I no be fooled is this time, comrade!

Wed, 06/11/2014 - 13:21 | 4845303 Billy Shears
Billy Shears's picture

What about all that above ground Palladium being stored in all those millions of unsold cars being warehoused around Europe and other locales? Epic collapse coming; every commodity on the face of the globe has been deformed beyond price discovery recognition, totally FUBAR!

Wed, 06/11/2014 - 15:12 | 4845762 lasvegaspersona
lasvegaspersona's picture

If I were a miner I'd start in some of those over flowing car parks where they keep the channel stuffings. It looked like there might be a million exhaust systems already at ground level. There does not seem to be any other use for those vehicles...except to goose GDP numbers of course.

 

oops Billy Shears beat me to the punch(line)

Wed, 06/11/2014 - 16:59 | 4846135 malek
malek's picture

Create a mini-Ponzi in Palladium, similar to the $50 Silver one, and after all is over you will have only a handful of folks still contemplating to invest (in the true meaning of the word, i.e. not speculating) in it...

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