So far, palladium prices have risen to multi-month highs amid the Russia-Ukraine war. What are the best palladium stocks to buy amid the worsening conflict between Russia and Ukraine?
Palladium is part of the Platinum Group Metals (PGMs), which are a group of precious metals with industrial use. Apart from palladium, platinum, rhodium, osmium, iridium, and ruthenium form part of PGMs.
Where is palladium used?
Palladium is used as a catalytic convertor and most of it goes into gasoline cars. Diesel vehicles mainly use platinum. Globally, most palladium is produced as a byproduct while mining other minerals.
Russia is the world’s second-largest palladium producer.
Russia was the world’s largest palladium producer in 2020 but South Africa took over the crown in 2021. In 2021, Russia produced around 40 percent of the total world palladium production. Together, South Africa and Russia control over 80 percent of the world palladium production.
Along with palladium, Russia is among the major aluminum producers. It's the third-largest energy producer and exports between 5 million barrels and 6 million barrels of oil daily. Russia and Ukraine are also major steel and wheat producers. The prices of all these commodities have spiked amid Russia’s invasion of Ukraine and the resulting sanctions imposed by Western countries.
Palladium prices have risen.
While palladium prices have risen to multi-month highs, they're still below their 2021 highs and trade below the 50-day simple moving averages. This might sound intriguing since while energy prices are at multi-year high levels and aluminum has hit a new record high, palladium is still below its 2021 highs, despite a high share of Russian production in the global production mix.
Palladium is more expensive than gold.
Palladium is more expensive than gold. Shaun Murison, a senior market analyst at IG, thinks that the rising price of palladium could lead to demand destruction. Companies would shift to alternative catalytic convertors like platinum.
Which company is the largest palladium producer?
Nornickel, which is a Russian company, is the largest palladium producer globally. In yet another indication of how Putin’s war is leading to financial losses for Russians, Nornickel stock has lost 90 percent of its value over the last month despite an increase in palladium prices.
What are best palladium stocks to buy?
The following look like the best palladium stocks to buy amid the Russia-Ukraine war:
- Anglo American Platinum
- Ivanhoe Mines
- Platinum Metals Group
Of these, Platinum Metals Group trades on the U.S. stock market, while the remaining two trade in the OTC markets.
Anglo American Platinum is a South African mining company. It has an NTM EV-to-EBITDA multiple of 7x and also pays a dividend. Ivanhoe Mines is based in Canada and has an NTM PE multiple of 15.1x.
Platinum Metals Group stock is a Canadian mining company. It's a penny stock with a market cap of under $200 million. It's a loss-making company and doesn't pay a dividend.
Overall, while palladium prices have risen to multi-month highs and we could see some more upside if Western countries keep imposing crippling sanctions against Russia, in the medium to long term, its demand will come down. Unfortunately, palladium isn't needed in electric cars. As the world transitions towards electric vehicles, palladium demand will eventually taper down.