Palladium is an interesting metal to say the least. It is one of the six metals that make up the Platinum Group of Metals or PGM. It is used in all sorts of production but particularly in the automotive industry. As demand for palladium has increased, the supply has not been able to keep pace and the world leaders in palladium production are not at the most stable they’ve ever been.
Disruptions in production in the two top producers – Russia and South Africa – have deterred long-term investors and leave much mystery around the stable production of palladium. Sanctions against Russia, which have thus far had little effect on the vitally important mining industry still raise questions with investors and a five-month long strike at the world’s largest mine, the Bushveld Complex in South Africa caused a lost of over $2 billion in revenue.
Recent actions by Russia’s Norilsk Nickel regarding a potential purchase from the Russian Central Bank further indicates a shortage from Norilsk, Gokhran and the Central Bank itself.
“In a statement released to investors, Norilsk Nickel expressed their intent to purchase $4 billion worth of palladium from the Central Bank on the grounds that in 2014 consumption is expected to increase by 2% and the supply deficit is to double. Furthermore, Gokhran, Russia’s precious metals and gems repository will likely begin purchasing palladium from miners in 2015.”
While there is still speculation about the exact levels of reserves in Russia, Norilsk Nickel’s purchase attempt indicates that their reserves are diminishing if not diminished. Furthermore, it is unlikely that new players will be entering their field anytime soon as the initial and sustained cost of PGM mining is quite high. This means that whatever happens in Russia and South Africa happens to the PGM industry as a whole.
As a person reliant on my car which is in turn reliant on palladium, it is important to note that continued sources of the metal or continued support of the companies that mine it is extremely important. While South Africa and Russia have been facing adversity in the global landscape lately as the world’s two main producers, they are still the only two horses in the race to bet on.