The metal palladium is used in many types of manufacturing processes, especially in the electronics industry. It can also be used in medicine and dentistry, in jewellery, for groundwater treatments, and in certain chemical applications. Many fuel cells and solar energy devices include palladium that has been rolled into sheets. A palladium sheet can be as thin as 1/250,000 of an inch.
The largest industrial use for palladium is the production of catalytic converters, and the price of palladium is therefore impacted by how well the automobile industry is going. In general, you can expect a car´s catalytic converter to contain somewhere between 2 grams and 7 grams of palladium.
A majority of the palladium that enters the world market comes from mines in the South Africa, Russia, Canada, United States, and Zimbabwe. In the year 2021, South Africa was the main producer (80 metric tons of palladium) followed by Russia (74 metric tons), Canada (17 metric tons), United States (14 metric tons), and Zimbabwe (13 metric tons). The rest of the world only produced 2.8 metric tons of palladium that year, so these five players are very dominating.
Investing in palladium
Palladium is rare in the Earth´s crust, much rarer than gold, and it is not easily substituted for other more commonly occuring metals. This has drawn the attention of investors, especially as demand for palladium is expected to continue to increase.
On March 7, 2022, the spot price of palladium reached a new record high as it went up to 3,172.22 USD per ounce. This is believed to have been partly fueled by investors being concerned over the Russia-Ukraine conflict.
The price of palladium was fairly stabled in the 1980s and 1990s, typically staying within the $100-$150 range per ounce. In 2001, the price spiked, and the price of palladium became more volatile from that point. In 2016, the price started to go more steadily upwards, and in February 2019 it surpassed $1,500 per ounce.
Owning physical palladium
Physical palladium bullion are available for investors who prefer to own metal outright. Downsides of owning bullion are the costs associated with transporting, storing and insuring the palladium. It can also be more complicated to find a suitable buyer, compared to closing a position for an exchange-traded security.
One way of getting exposure to the palladium price is to invest in stock companies in the palladium production industry. It is difficult to find stock companies that focus only on palladium mining, so you are likely to end up with exposure to more than just the palladium market.
Here are some examples of companies in the palladium mining industry:
- Norilsk Nickel
- Anglo American Platinum (Amplats)
- Impala Platinum (Implats)
- ARM (African Rainbow Minerals)
There are exchange-traded funds (ETF:s) that track the palladium price. Some of them own physical palladium, while others invest in stocks and/or palladium futures contracts.
Two ETF:s that both old physical palladium are:
- Sprott Physical Platinum and Palladium Trust (SPPP), traded on NYSE Arca
- Abrdn Physical Palladium Shares (PALL), traded on NYSE Arca
Sprott Physical Platinum & Palladium Trust (SPPP) is a closed-end investment trust. It invests in both physical palladium and physical platinum, so you will be exposed to both if you invest in SPPP. The company was founded in December 2011, and is based in Toronto, Canada.
Sprott Physical Platinum and Palladium Trust (SPPP) is a better choice if you don´t want exposure to platinum. The PALL shares are issued by the arbrd Palladium ETF Trust, and the investment objective for the trust is for the shares to reflect the price performance of palladium, minus the trust´s expenses.