South African palladium reserves are almost depleted
It takes six weeks from ore mining to refined palladium. Assuming a very favourable assumption, that the mines were able to keep other than front line producers like drillers and blasters productively engaged refining, smelting, etc.; they have to be at the point where they will be running out of source material to get palladium out of. Now let’s further assume the mine owners were very smart, a huge assumption, and stockpiled another 6 weeks of source ore. I doubt they can stockpile more than this because of obvious factors such as size, storage capacity, costs moving it around, cost of capital, etc. Ok, so they will be drawing down on this. That leaves us with refined reserves. How much could that be? Another 6 weeks? Ok, let’s also assume that Johnson and Matthey, who produce more than one third of the cat converters has a nice stash too. Add in another 6 weeks. Add in another 6 weeks of reserves by other parties. That gives us 24 weeks or 6 months at the outside. Even taking Europe out of the equation and assuming the US car production continues at a torrid pace and China so-so; 6 months is nothing when you consider that as supplies become tighter those with hoards will be less likely to feed pd into the industrial production stream when they know that it can only go up as an investment vehicle. Same thing as recycling.
And I just came across an interesting tidbit in Barron's about H.Wayne Huizenga, the noted financier and gazillionire who always seems to find very large and undiscovered market opportunities. He is buying car junk yards like crazy! Again, the value of the pd/pt in used cat converters can only go up and is icing on the cake to the primary junk yard business.
In short, pd prices have to start moving up sooner rather than later.