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Investing in palladium stocks

It’s rare and in high demand, but electric vehicles could pose a serious threat.

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This high-value metal is tricky to source and in high demand — especially from car manufacturers. But with a history of volatility and the electric vehicle market booming, there’s no guarantee it will continue to hold its value.

What is palladium?

Palladium is a bright, silver-white metal primarily mined in Russia and South Africa. It’s typically produced as a byproduct of mining other materials, like nickel and platinum. It is one of the six platinum-group metals—a group that includes iridium, osmium, platinum, rhodium and ruthenium.

We’re most likely to encounter palladium when driving a vehicle, as nearly 85% of mined palladium finds itself in the exhaust systems of cars. It’s a vital component of the catalytic converters responsible for transforming toxic pollutants into carbon dioxide, nitrogen and water vapor. Palladium is also used in dentistry, electronics, medicine and jewelry manufacturing.

Palladium stocks are stocks from companies that produce palladium — mining companies, mostly. Unfortunately, there are few pure-play palladium stocks, as this metal is typically produced as the mining byproduct of other materials, like platinum.

Why invest in palladium stocks?

Palladium is 30 times rarer than gold and as demand for this material continues to rise, so do its prices.

The cost of palladium has been on the rise since 2016, hitting an astonishing high of USD $2,714 per ounce in February 2020. For comparison, gold was trading at USD $1,575.95 per ounce at that time.

Why is palladium on the rise? In short: demand. Anytime the demand for a commodity outpaces its supply, the price of that commodity rises. And palladium supplies have been unable to meet global demand since 2012.

And the good news for investors is that the demand for this metal looks like it will continue its upward trajectory. With our heavy reliance on palladium in catalytic converters and rising global pressure to ditch high-emission vehicles, car markers need more palladium than ever. And since the metal isn’t easily replaced, palladium demand is high.

The bottom line? Palladium is valuable, and trends in global demand for this metal are poised to drive its value higher still.

Risks of investing in palladium

Despite palladium’s rising price tag, this commodity hasn’t always been such a hot commodity. In fact, the metal has a history of volatility and is only valuable so long as it’s needed.

While car manufacturers have yet to find a palladium workaround, a replacement isn’t exactly out of the question. And with palladium being so rare and cumbersome to produce, it’s quite possible that an alternative could be found — especially given the failure of palladium miners to meet increasing global demand.

Another threat to consider is the rising popularity of electric vehicles. The electric vehicle market is growing — fast. And this could act as a significant market disruptor for palladium since electric vehicles don’t require catalytic converters.

Palladium stocks

There are few pure-play palladium stocks, as most of the palladium that’s manufactured is produced as a byproduct of other metals. So if you plan to invest in this commodity, prepare to back mining companies that produce other materials too, like platinum.

  • Canadian Palladium Resources Inc. (CSE: BULL)
  • Eastern Platinum Limited (TSX: ELR)
  • Platinum Group Metals Ltd. (TSX: PTM)
  • Palladium One Mining Inc. (TSXV: PDM)
  • Sienna Resources Inc. (TSXV: SIE)
  • Grid Metals Corp. (TSXV: GRDM)
  • Generation Mining Limited (TSX: GENM)
  • Sprott Physical Platinum and Palladium Trust (TSX: SPPP)
  • Sibanye Stillwater Limited (NYSE: SBSW)
  • New Age Metals Inc. (TSXV: NAM)
  • Impala Platinum Holdings Limited (OTC Markets, Pink Sheets: IMPUY)

What ETFs track the palladium category?

Of the three ETFs that contain palladium exposure, the Aberdeen Standard Physical Palladium Shares ETF (NYSEArca: PALL) is the closest to a pure-play, as it tracks the performance of palladium with over 130,000 ounces stored in a secured JPMorgan Chase & Co vault in London.

  • Aberdeen Standard Physical Palladium Shares ETF (NYSEArca: PALL)
  • Aberdeen Standard Physical Precious Metals Basket Shares ETF (NYSEArca: GLTR)
  • Sprott Physical Platinum and Palladium Trust (NYSE: SPPP)

Palladium performance

This graph shows the spot price per ounce of palladium. The prices shown are in US dollars.

Compare trading platforms

You need a brokerage account to invest in palladium stocks. Compare your platform options by features and fees to find the account that best meets your needs. The dollar amounts shown in the table below are in Canadian dollars.

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Bottom line

Palladium plays an important role in the automotive industry as a key component of catalytic converters. But its value could be at risk if a substitute metal were found to take its place.

Before you purchase palladium, review your trading platform options to find the brokerage account that can help you meet your investment goals.

Frequently asked questions

Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

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