Investors pile into palladium and platinum ETFs – Financial Times

Holdings of physically backed palladium and platinum exchange traded funds have surged to record highs on the back of concerns over supply fr om Russia and South Africa and hopes of stronger industrial demand.
Investor interest in palladium, which is mainly used in autocatalysts, was boosted by the launch of new ETFs in late March by South African banks ABSA and Standard Bank. The funds, which use inflows to purchase palladium and thus offer investors direct exposure to the market price, have already pulled in about 14 tonnes of the metal. This has boosted the total holdings in palladium ETFs globally to 85 tonnes, a 30 per cent increase since the start of April, according to Bernard Dahdah, precious metals analyst at Natixis.
The investment demand has offered further support for the palladium price, which rose 1.2 per cent in London on Tuesday to $822.60 a troy ounce. The price has now increased 16 per cent this year to a three-year high. The market was already worried about possible sanctions affecting supply from Russia, the world’s top producer, because of the tensions with Ukraine and the west. Meanwhile the improving economy in the US has encouraged expectations of increased consumer demand for cars – and catalysts.
Inflows into platinum ETFs have been more modest, but have still increased 6 per cent over the past two months. The four-month strike in South Africa, the dominant producer of the metal, has severely curtailed supply, though the effect on prices has been mitigated by the large above-ground stocks. The platinum price rose 0.2 per cent on Tuesday to $1,466.50, and is up 7 per cent for the year.
In its six-monthly review of the platinum group metals, released on Tuesday, Johnson Matthey said the global deficit for platinum would grow to 38 tonnes this year, up from 29 tonnes in 2013. This would be the biggest shortfall since 1975, when supply and demand data were first recorded. With South African industrial action also hitting palladium production, its deficit is expected to quadruple to a record 50 tonnes.
With prices rising, producers elsewh ere are smiling.
“It’s a pretty good time to be in platinum group metals at the moment,” said Mick McMullen, chief executive of Stillwater Mining, a US company, in a telephone interview on Monday.