Palladium is a precious metal that is used in a wide range of industries which should make it an appealing investment option for stock traders.
However, investor demand has remained relatively small even as the price of palladium has outperformed other metals in recent years.
The simple reason for the relative obscurity of palladium stocks is that other precious metals like gold and silver simply (forgive the pun) outshine palladium as an investment. But palladium’s rise in demand combined with a deficit of supply is starting to attract people to the commodity stock.
So let’s start with a simple question…
What is Palladium?
This precious metal is often compared to platinum, thanks to its popularity within the chemical and electrical industries, as well as its uses in jewelry and dentistry.
It’s mainly found in Russia and South Africa, with a handful of deposits found in the United States and Canada. There is a relatively few number of palladium companies that handle the mining, production, and manufacture of palladium around the globe.
Palladium is highly coveted thanks to its many uses within the automotive industry, specifically in the production of catalytic converters. These devices are designed to control exhaust emissions that help minimize the amount of pollutants produced by automobiles. Now, even though the auto industry has seen a decline thanks to the coronavirus pandemic, the international supply of palladium has slowed so drastically that demand continues.
Perhaps ironically, as global environmental standards increase, the need for mining palladium may grow. Markets like China and the United States – two of the largest auto markets on the planet – have begun to implement regulations to control emissions in order to fight climate change, making devices like catalytic converters highly coveted. That includes their key component: palladium.
Why Invest In Palladium?
Palladium can be a good play for any investors looking to hedge against inflation or looking to diversify their commodity portfolios. This can help reduce risk and provide potential growth opportunity at the same time.
Many experts agree that precious metals should be included in any well-diversified portfolio. Not only should a strong investment portfolio include different types of assets, one can also diversify within different asset classes.
So, while gold and silver may be the more well-known options, palladium and other metals can help broaden a portfolio’s scope.
However, palladium is a relatively small play. There are only a few companies around the world that can provide exposure to the precious metal alongside gold, platinum, and similar metals
How Does Palladium Traditionally Perform?
Gold is usually viewed as a safe haven investment during volatile times. When things around the world start to go topsy-turvy, investors are usually found dumping their money into gold.
That said, palladium prices have generally trended higher than other metals like gold.
Still, there isn’t much certainty in palladium’s market performance thanks to its tight supply and the volatility of its price throughout 2020. Looking at the metal’s performance over the last four years, palladium has nearly quadrupled in value. Going back further tells a more interesting story.
Palladium’s record low price was way back in 1982, when it traded for $47.46 per ounce. In the ensuing years the precious metal price remained relatively flat, trading at an average of $100 an ounce.
Then, in December 1996, the commodity started climbing spurred by the demand for catalytic converters. It hit $1,077 an ounce at the end of January 2001. Then the Great Recession hit and prices saw another drop. But since December 2008, the value of palladium has trended upward. Earlier this year it was trading at highs of over $2,700 per ounce.
An interesting thing to note: the palladium mining process comes as a byproduct of other metals like nickel and platinum, so it usually moves in conjunction with those commodities. Comparing it to platinum (a sometimes substitute for the precious metal), palladium has seen a fair amount of price tension.
However, it may be palladium’s diversity of uses that make it a wise investment. After all, gold and silver have few uses outside of jewelry. There just isn’t much industrial demand for these shiniest of commodities. But palladium has practical uses as well as its use in jewellry. And with more than half of palladium’s demand coming from the key car component of catalytic converters, prices are expected to rise.
That makes a strong case for investment in palladium mining stocks.
Now, if you’re looking for a list of penny gold mining stocks, this isn’t the place. But we’ve included a few palladium penny plays further down.
With all of that in mind, here are a few palladium plays that might be worth your attention.
1. Impala Canada ($IMPUY)
Canadian company North American Palladium was recently acquired by South Africa-based Impala Platinum Holdings $758 million, creating Impala Canada.
The newly formed company is one of the world’s foremost palladium producer, and the company is looking to grow. Its primary operations are focused on Canada and South Africa.
People can invest their money in Impala Canada through the parent company Impala Platinum Holdings, and this palladium stock symbol can be found on the NYSE under the ticker IMPUY. Impala Platinum Holdings has a market cap of $8.967 billion.
The company’s primary asset is in Lac des Iles mine in Ontario, Canada, which has grown considerable in recent years.
The company owns just a single mining asset, the Lac des Iles mine in Ontario, Canada, which has seen considerable growth in the past few years. Over the past quarter, the facility produced 56,121 ounces of palladium, giving the company a record-setting quarterly revenue. Annual output ran at about a 237,000 ounce rate. Net income came in at $28 million, a roughly 160% increase from the $10.8 million reported during Q2 2018.
Estimates on the mine's palladium reserves show approximately 36 million metric tons of ore. But that number could be as 40.9 million metric tons, which would extend the life of the mine and the company that controls it.
2. Sibanye-Stillwater ADR (SBSW)
Headquartered in Westonaria, South Africa, SBSW has operations in the United States and South Africa. It is actually the world’s second-largest producer of palladium, and is looking to expand its production.
Most of its palladium comes from assets that Sibanye acquired when it bought the Stillwater Mining Company, a Montana-based palladium mining company that, historically, is the largest producer of palladium in the United States.
Sibanye-Stillwater has been developing relationships with various exploration companies to help grow its mining efforts. It has also been seen investing in new technologies that would make mining more efficient and sustainable.
The company has a market cap of $10.83 billion and its stock saw a big boost at the beginning of December.
Technically, SBSW produces more gold than palladium through its operations in South Africa but its palladium assets have experienced the most growth in recent years.
However, that diversification in commodities should also inspire confidence in investors looking to buy palladium stock.
3. Platinum Group Metals Ltd. ($PTM)
If you’re looking for precious metals penny stocks, this may be a good play.
This Canadian exploration-stage company is primarily focused on South Africa, where it is exploring and doing the initial engineering on the Waterberg platinum deposit. It also has a hand in the production at the Maseve Mine.
The Waterberg Project is an underground deposit in northern South Africa, discovered by the PTM. According to the company, it has the potential to be a low-cost producer of palladium, platinum, rhodium, and gold.
The company is relatively small. In fact, at a little over $3 per share, it may be considered one of the precious metals penny stocks. And with a market cap of $222 million, if it is able to see positive results from its Waterberg mine, this palladium company could see a lot of upward movement in the near future.
4. Aberdeen Standard Physical Palladium Shares ETF ($PALL)
This ETF (Exchange Traded Fund) is a good play for investors who may wany exposure to palladium but don’t want to risk investing in palladium mining companies.
This ETF is a physically-backed fund with palladium holdings in London and Zurich, making it the most popular ETF for tracking exposure to palladium. It is well-situated for investors, and many analysts have placed a “buy” rating on this particular fund.
This can be a good play for anyone who wants to avoid exposure to palladium miners while still getting involved in the commodity as a whole.
When looking to invest, commodities are usually seen as a safer bet than traditional company stocks. However, most people think of gold and silver when they’re considering investing in precious metals. But palladium certainly has its uses.
As discussed, the catalytic converter is driving much of the demand for palladium. And given that world governments are increasingly cracking down on car emissions, this demand won’t likely fade any time soon.
Additionally, palladium is used as part of many dental fixtures including fillings, crowns, and bridges. It has replaced mercury-based materials in many cases, given that it is more versatile and lasts longer.
It is highly resistant to corrosion from the types of substances that might be found in a person’s mouth and can resist tarnishing and discoloration more than past solutions. And people will always need work on their teeth, so if palladium is useful in this area it will likely remain a good investment for many years to come.
The rise in value of palladium has not been bolstered solely by investor speculation. Rather, the laws of supply and demand have come into play. Since 2012, it’s estimated that there has been a total deficit of more than 5 million palladium ounces. This has placed increased pressure on the market as it looks for more available caches of the precious metal. If a company is able to find those stores, it will likely see big gains in its stock price.
As palladium becomes rarer, prices will rise. And the supply of palladium is tightening thanks to socio-political problems in the areas where it’s mined alongside a difficult manufacturing process. The output of palladium tends to follow price gains. In 2019, palladium production lagged demand for the eighth consecutive year.
Remember, for any investment, do your research. This article should serve as a jumping off point for potential investments, not as dyed in the wool advice. When looking at any company, make sure to look at their debt, their history, and their competency before laying down your hard-earned money.