News Bureau

February 17, 2020

Palladium Rally driven by Fundamentals

TD Securities published an update below on the palladium market this morning. Palladium prices continue to make fresh all-time highs based on a fundamentally driven supply/demand crunch. The Waterberg PGM Project has the potential to be one of the largest and potentially lowest cash cost underground PGM mines globally as confirmed by a recently completed Definitive Feasibility Study (DFS).

The spot metal basket price per 4E ounce for the Waterberg Project has increased by an aggregate of approximately 25% since spot prices for the DFS were measured on September 4, 2019. The market outlook for strong palladium demand and the potential for continued palladium supply deficits indicate a bright future for Waterberg's dominant metal.

Highlights from the TD Securities report with a link to the full report below:

Increasingly tight emissions control regulations will see South Korea, India, China, and Europe all raise their standards in 2020. These regulatory changes are part of a growing global trend toward sustainability (ESG), which will continue to increase demand for emission control devices containing palladium.

A potential rebound in auto sales, after one of the most prolonged periods of contraction on record, could also drive demand higher. South African power outages and unavailability of inventory represent upside risks. Given the improved demand outlook, the chronic deficit is likely to get worse and make it difficult for the market to clear at lower prices.

We see little evidence of excesses in spec activity, which suggests the rally is fundamentally-driven, despite the parabolic move. In fact, our dry-powder analysis suggests that traders hold a below-average total position and positions per-trader are also below-average, thereby reducing the risk of a sharp reversal. We think the rally has room to run, as periods of extreme scarcity send prices sharply higher. No substitutes imply that near-term demand will not be destroyed.

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