A recent surge in the price of palladium, a precious metal primarily used to help lower vehicle emissions, has investors looking at how to play the sector to potentially reap future gains.
The spot price for the metal hit a record high of US$1,565.09 on Tuesday amid threats of a strike at a number of mines in South Africa, one of the world’s top palladium-producing countries. A work stoppage would further reduce the supply of the commodity which is already tight as demand for the metal continues to increase. While the price of palladium has retreated from its high earlier in the week, it has increased by more than 20 per cent so far this year.
About 85 per cent of palladium production goes toward manufacturing catalytic converters, which help to reduce emissions from automotive exhaust. Demand has soared amid tightening emissions standards around the world, particularly in emerging markets.
South Africa and Russia together account for about three-quarters of global palladium production, while other sources are from Canada and Zimbabwe.
Norilsk Nickel of Russia is the world’s largest palladium producer, while other large and small mining companies have exposure to the metal. Toronto-based North American Palladium Ltd. describes itself as the world’s only pure-play palladium producer with its Lac des Iles mine near Thunder Bay, Ont., which produces about 2 per cent of the metal globally.