iNVEZZ.com Saturday, March 22: The price of palladium yesterday hit its highest since August 2011, propelled by a strike in South Africa, the Russia-Ukraine conflict and the launch of two palladium ETFs.
Miners have been on strike at three South African miners – Impala Platinum, Lonmin and Anglo American Platinum – since January 23. The walkout by the Association of Mineworkers and Construction Union (AMCU) is the biggest on the mines since 1994 and has cost the companies more than $825 million (₤500 million) in lost revenue.
Meanwhile, US president Barack Obama ordered on Thursday a second round of sanctions against Russian officials, raising the stakes in the Ukrainian conflict. Some investors are fearful that Russia may retaliate by cutting back the exports on some of its commodities. The country is the world’s biggest producer of palladium, delivering 42 percent of the global supply, while South Africa produces 37 present.
Two of South Africa’s biggest banks, Absa Capital and Standard Bank Group, have said that next week they would launch palladium exchange-traded funds, potentially boosting demand for the metal. According to the Wall Street Journal, a platinum ETF that launched in South Africa last year took large amounts of the metal into its reserves, reducing global supplies. “If the palladium ETF follows the same course as Absa Capital’s platinum ETF, which was launched at the end of April 2013, a great deal of supply could be stripped from the market, thereby contributing to a noticeable increase in the price of palladium,” Commerzbank said in a research note.
“They’re launching an ETF on palladium when there are serious questions about the two largest suppliers of the world’s palladium [Russia and South Africa],” said Peter Hug, global trading director at Kitco Metals. “It just looks like the market is getting squeezed in a very big way.”
Palladium ETFs currently hold about 1.634 million ounces of the metal, worth about $1.3 billion (₤788 million) at yesterday’s peak price of $791.50. Absa’s NewPalladium ETF and Standard’s AfricaPalladium ETF will be listed on the Johannesburg Stock Exchange.
**ETFS Physical Palladium Shares (NYSEArca:PALL)**
PALL is a palladium ETF trading in the US with total assets under management of $481 million (₤292 million). The fund returned 1.11 percent to investors in 2013 and 4.82 percent so far this year. Its market price has surged by about 2.5 percent over the last five trading days.
**As of Friday, March 21 buy ETFS Physical Palladium Shares at $77.31.**
**As of Friday, March 21 sell ETFS Physical Palladium Shares at $77.29.**