Everybody and their brother seems to agree that PAL will rally! I have attached bull and bear arguments (see below article in Mineweb and a reply from unidentified but apparently reasonably well informed reader).
Please also see long term elliott wave chart which points to another leg down.
As fatr as that June contract, open interest is only 1100 contracts, volume is very low (yesterday 22?). march contract only 667! So this market is easy influenced by sentiment and could indeed go much higher if retail catches on.
Watch out!
>Palladium catches fire
By: Daniel Thole
Posted: 2004/01/26 Mon 18:03 ZE2 | © Mineweb 1997-2004
JOHANNESBURG – Palladium has made strong gains over the last week as speculative demand has returned to the small, illiquid market, powering it to faster gains than its sister metal, platinum.
The metal had been languishing under $200/oz for much of last year, following a massive slide from the $1100/oz level as 2001 started. But in the last few weeks palladium has outpaced platinum - which seems to have leveled out around the $860/oz level – trading up to $235/oz after gaining 13 percent during Thursday and Friday trade.
Ray Nessim, the chief executive of US precious-metals retailer Manfra, Tordella & Brookes, speculated that industrial demand for the metal outside of the dominant autocatalyst application may increase demand for palladium this year.
“Most of the current focus of the palladium industry is to find new industrial uses for the metal,” Nessim said. He said palladium was being increasingly used for dental equipment, watch-making and surgical instruments, and the momentum for a switch back into palladium by automakers who cannot handle higher platinum prices may be imminent.
Palladium is now one-quarter the price of platinum – after being twice as expensive as its sister metal two years ago.
Peter Ryan, a platinum-group-metals analyst at minerals consultancy GFMS, said it was likely that autocatalyst demand would be the driver for the palladium price this year, and not the smaller industrial categories, such as dental and electrical demand. He said it was possible that the price was running in expectation of a switch back to palladium by major automakers, although there was no real fundamental support for such a move.
Ryan said Russia, the largest producer of palladium, was due to release information on its production and stockpiles of the metal for the first time this year. “Any information the market received on the state of Russia’s palladium will be positive for the market, we had no clarity before,” he said.
Russia delivered just under half of the world’s 6,3-m ounces of palladium in 2003, but Ryan said the market had its own data on Russia’s influence on the palladium market, and the data that was released would be unlikely to have any major effect on the palladium price. “Russia will not be a shock to the market, not a total surprise – people in the market know where the Russians are,” Ryan said.
However, Ryan said that at least one major US auto manufacturer was known to have built up massive stockpiles of the metal when the price was at higher levels, and it was these massive inventories that were keeping the price subdued.
PGM refiner Johnson Matthey estimated that total palladium demand recahed 5,7-m ounces in 2003, while supply reached 6,3-m ounces.
Autocatalyst demand accounted for 59 percent of total demand for the metal, with electrical demand the second-largest component of demand at 17 percent. Dental demand made up 14 percent of demand, and jewellery and chemical demand made up 4 percent each.
but other people claim:
is due virtually entirely to speculative buying. Attention is being directed to precious metals as a broader sector of the investment market belatedly takes notice primarily of gold and secondarily of platinum. The downside for palladium over the next few years is considerable. There will be some recovery in autocatalyst and other uses from the past years low demand levels, but a very robust jump indeed would be necessary to accommodate future abundant supply. When the rand weakens against the dollar and Mugabe retires or dies in the not too distant future, watch for a major revival in PGM projects in Southern Africa, buoyed by high platinum prices. Also, let us not forget recovered metal!! In our 2001 report, "PGM: World Resources, Economics and The Future", we pointed out that there was 32 million ounces of palladium in existing auto catalysts and that many of these cars (15 year life) would be being scrapped in burgeoning quantities after 2010. We stunned the industry with a conservative estimate of 4 million oz a year recovered by 2015. I say "stunned" because some of by friends stopped talking to me and Stillwater and North American Palladium pointedly refused to buy the report which I sent to them on speculation! Altogether, when the rand recovers and recovered metal becomes an ever growing part of supply, Russia is going to become a distant second largest producer of palladium and what they do or don't do will become less relevant. Bold palladium strategies that might have been adopted by Norilsk to some effect a year or two ago are now non starters despite recent announcements that they are partnering with the Academy of Sciences to do fuel cell research. I'm personally looking for the right time to short the hell out of this metal.
