August 15, 2013

Palladium’s last bubble was just over a decade ago, but in the minds of Ford executives, the memory may still feel fresh. Ford took a $1 billion write-down due to the last event and despite R&D’s best effort, Ford has continually increased its demand for Palladium. In addition, so have the other major automotive companies. China and the United States’ auto market use gasoline fueled engines that rely on Palladium for converters. Both markets have seen substantial and consistent growth over the last few years, causing an increased demand for Palladium.

The Russian government possesses a significant stockpile which has produced about 15% of the world’s supply, some have speculated it could be dwindling.

Lastly, mining production will take six to seven years to ramp up. Leaving a window where demand will continually overshoot supply.

One remote, but rather frightening possibility that could lead to higher prices is the possibility of an OPEC-style alliance between South African and Russian miners, which produce about 75% of the world’s Palladium supply.

Alexander Fleiss serves as Chairman and Chief Investment Officer of Rebellion Research Partners LP, a Global Macro hedge fund and financial advisory that invests across all asset classes and is ...