The country's palladium stockpiles are a "state secret," according to William Tankard, mining research director at GFMS. However, he explained in the presentation accompanying the release of the survey that GFMS believes "Russian sales from historical inventory halved last year, and speculate[s] that 2013 could well mark the end of this source of metal."2013 outlook Commenting on GFMS' 2013 outlook for palladium, Tankard said, "[s]upply will remain constrained and demand will benefit from ongoing strength in the automotive sector." The "key outstanding bear factor" will be investor sentiment toward above-ground stocks, which sit at about 10 million ounces. Based on those factors, GFMS expects palladium to average about $725 per ounce and to see a deficit of between 800,000 to 900,000 ounces in 2013, Bloomberg's report notes. Other analysts concur GFMS is not the only entity predicting a palladium deficit for 2013. As Palladium Investing News reported in January, Ross Norman, owner of Sharps Pixley, predicts that there will be a 450,000-ounce shortfall, while Barclays Capital expects consumption to exceed production by 511,000 ounces. Deutsche Bank's forecast of a 900,000-ounce deficit falls closest in line with that of GFMS. Similarly, Rick Rule, chairman of Sprott US Holdings, recently used $280 million to buy equal amounts of platinum and palladium through the Sprott Physical Platinum and Palladium Trust (ARCA:SPPP). He told The Metals Report in a recent interview that though he expects "a lot of [price] volatility," investors should "understand that the supply-and-demand thesis for platinum and palladium is compelling and simple: The price must rise because the industry does not earn its cost of capital, and the price can rise due to the incredible utility the metals deliver." As with GFMS, these predictions largely rest on expectations of Russian stockpile depletion and continued unrest in South Africa. Palladium closed at $694 per ounce in New York on Monday.
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article. Related reading: Russian Data Supports Palladium Supply Concerns The Palladium Market Without Russia Analysts Bullish on Palladium Johnson Matthey's Palladium Deficit Forecast Sparks Rally Palladium Likely to Remain in Deficit Next Year, GFMS Says from Palladium Investing News