PALL ETF

Sibanye Stillwater's confirmed production cut of 200k oz/year from 2025 may balance the palladium market and trigger a short-covering rally in prices. The abrdn Physical Palladium Shares ETF holds over 292 million oz of palladium, tracking the metal's price, which has declined due to reduced automotive demand. Given the record short position in palladium futures, Sibanye's production curtailment could prompt a short squeeze, making PALL a speculative buy.

Palladium has been the worst-performing precious metal in the past few years due to declining demand in automotive applications. Auto accounts for 80-85% of palladium demand. Recently, Sibanye Stillwater hinted it may shutter its U.S. operations as palladium prices are not sufficient to cover mining costs. If Sibanye follows through on its threat, we could see a short squeeze in palladium markets, as palladium futures short-positioning is at historic levels.

Palladium futures reached a record high in March 2022 but have since experienced a significant decline. Russia's role as the leading palladium producer and the war in Ukraine has influenced the metal's price. There is potential for a substantial recovery in the palladium market due to technical factors, demand for catalytic converters, and green initiatives.

Palladium benefits from stringent emission regulations and technological advancements, making it a potential hedge against inflation and currency devaluations. The abrdn Physical Palladium Shares ETF offers a cost-effective and convenient way to invest in palladium, backed by physical palladium held in vaults. China's economic growth and demand for palladium are pivotal, but limited domestic reserves and geopolitical risks highlight potential vulnerabilities to supply disruptions.

Platinum traded higher than palladium this month for the first time in nearly six years, with expectations for a back-to-back annual supply shortage and rising demand for platinum boosting prospects for higher prices.

Palladium's bull market peaked in March 2022 at $3,380.50 per ounce, coinciding with Russia's invasion of Ukraine. Russia and South Africa are the leading producers of palladium, causing supply concerns due to the war in Ukraine. Palladium prices have dropped below $1,000 per ounce in November 2023, creating a potential buying opportunity for abrdn Physical Palladium Shares ETF.

Palladium has been the worst-performing precious metal in the past few years due to declining demand in automotive applications. Auto accounts for 80-85% of palladium demand. Palladium is usually produced as a byproduct of mining other metals like silver and copper. Supply is price-inelastic. This was a blessing when demand exceeded supply, leading to squeezes. However, in the coming years as palladium for catalytic converters is phased out, the blessing will turn into a curse as supply of palladium will not decrease with lower prices.

abrdn Physical Palladium Shares ETF allows investors to track the dynamics of palladium without going into the precious metal. Palladium has a strong underlying demand from the automotive sector due to the tightening emission standards. Despite the recovery in vehicle registrations, I would rather Hold the shares of PALL, as the economic slowdown is weighing on industrial metals demand.

PALL has continued to bleed since we published our constructive thesis on February 15. Speculators have established a record net short position in palladium on Nymex, indicative of an excessively bearish sentiment. If potential supply constraints from Russia materialize later this year, a significant short-squeeze could ensue, pushing palladium prices and PALL up.