Palladium: A Buy?
Dave Forest
Pierce Points
Oct 13, 2010
We've had a lot of news about gold and silver the last few weeks.
But the biggest coming story in precious metals may be palladium.
Global platinum group metal leader Norilsk Nickel said on Friday it expects Russian government stockpiles of palladium to run out next year. Speaking at a company briefing, deputy CEO for sales and distribution Viktor Sprogis said, "This year will be the last year when any substantial quantity from this [government] stock has any chance to enter the market."
If true, this is big news for palladium. Russian government sales have been a significant dampener on the market for the past decade.
PGM-meisters Johnson Matthey estimate that Russian Pd sales from stockpile totaled 960,000 ounces in 2009. Global mine production in 2009 was 6.9 million ounces. Meaning Russian stockpiles supplied over 10% of the world's palladium output last year.
Figures from the U.S. Geological Survey show the story has been much the same during previous years. In 2008, Russian stockpile sales likely supplied at least 670,000 ounces of palladium. In 2007, 433,000 ounces.
This is a significant amount. Johnson Matthey estimate that without Russian stocks, the palladium market would have been undersupplied by 200,000 ounces last year.
Norilsk expects such a deficit may materialize in 2011. Said Sprogis, "We expect a small deficit in production versus consumption."
Of course, actual figures on Russian stockpile levels are a highly-guarded secret. It remains to be seen whether the supposed end to government sales actually materializes.
But if stock sales truly are over, it would be a big boost for a precious metal whose price has underperformed platinum for the last decade, despite having a very similar market and production/consumption profile.
Here's to the other platinum group metal.
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Oct 12, 2010
Dave Forest
email: dforest@piercepoints.com
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