Palladium provides a welcome windfall
Palladium, a platinum by-product has jumped 10percent since the beginning of this year. Spot palladium rose as much as 0.4 percent to $2206 an ounce yesterday, after rising for the tenth consecutive day. Palladium is more expensive than gold, with the bullion price at $1551.89 an ounce and platinum at $977.86 an ounce.
Palladium has continued its growth momentum, having rallied 60percent in 2019 in dollar terms on the introduction of legislation to curb pollution in China and Europe.
Rhodium, which is also a platinum by-product, was 31percent higher this year. Rhodium is in a thin market, with most of the world’s rhodium produced in South Africa.
Seleho Tsatsi, an investment analyst at Anchor Capital, said yesterday that there was no stopping for palladium, and South Africa’s PGM producers would likely benefit from the price boost.
Tsatsi said that companies - including Impala Platinum (Implats) and Sibanye-Stillwater, Northam Platinum and Anglo American Platinum - would reap the fruits of the continued upswing in the palladium price.
“Income statements of local companies will get a further injection on the back of the increase. South Africa and Russia are the biggest producers of palladium,” Tsatsi said.
Implats increased its exposure to palladium when it acquired a 100percent stake in Canada’s North American Palladium in December. Sibanye-Stillwater is the majority owner of Stillwater, a palladium producer in the US.
“The platinum miners are trading at relatively low earnings multiples, given the strength we’ve seen in platinum group metals prices,” Tsatsi said.
Last year Anglo American chief executive Mark Cutifani reportedly said that the rapid rise in the precious metal’s price had created a “bubble”, but that its value was likely to remain high for some time.
Northam Platinum chief executive Paul Dunne said last year that the group believed dollar pricing would continue to be led by palladium in the immediate future. “Rhodium will follow, because the 6's legislation (Euro VI, China VI) focuses on carbon dioxide and oxides of nitrogen (NOx). However, it is biased towards the NOx and the only true solution for that is rhodium,” said Dunne last year.
Johnson Matthey, a multinational speciality chemicals and sustainable technologies company said in 2019 the average palladium and rhodium prices were up 52 and 58percent respectively, while platinum was up 1 percent.