Capnote’s Weekly Spotlight: Is Palladium In A Death Spiral?

Welcome to Capnote’s Weekly Spotlight for 13 November 2023. Sign-up for free (no credit card required) to access Capnote – an ecosystem of AI tools, intelligence and experts dedicated to improving your financial performance.

In this edition: 

  • Find out which precious metal is in a death spiral with reasons & implications
  • Discover top gaining and losing trends last week including big moves in Crypto

Trending Now In Finance 

Moves In Key Sentiment Markers: 

So far this year, the S&P 500 is up 15% and the Hang Seng index is down -14%, perhaps revealing the difference in economic sentiment between the US and China. Over the last week, moves in the key indicators below appear to reveal selective optimism.  

  • US 10 year treasury +2.79%
  • S&P 500 +1.31%
  • Hang Seng -2.61%
  • Crude Oil (Brent) -3.79%
  • US dollar index (DXY) +0.74%
  • Gold -1.47%
  • Bitcoin +7.43% 

However, it is worth noting that the S&P 500 has had 113 up days and 102 down days this year, which highlights how much of a rollercoaster sentiment has been on.

Read more.  

Top Gainers & Losers Last Week 

Capnote regularly tracks industry, company and indicator performance in moving windows.

 Cryptocurrency: Over the last week, key Cryptocurrency indicators were up with ETH +13.39% and BTC  +7.43%. With year to date gains of 123% and last close price of $37,313.97 Bitcoin prices are ‘high’ compared to 5-year averages of $23,250. This growth appears to be driven by investor optimism that cryptocurrency ETFs will receive approval soon. Read more

 Semiconductors: Despite a volatile year for this industry, it has continued to gain with AI as a key driver. The iShares Semiconductor ETF (Ticker: SOXX) i gained 4% last week and is up 44% year to date. The Semiconductor Industry Association (SIA) stated global sales of semiconductors totaled $134.7 billion during Q3, an increase of 6.3% over Q2. AMD also gave the sector a boost last week with strong projections for 2024. Read More.

 Precious Metals: Over the last week, precious metal prices continued their downward trend with Palladium -13.91%, Platinum -10.44% and Gold -1.47%.  However, Citigroup has highlighted the risk of Russia weaponizing its exports of metals such as aluminium and palladium which could lead to price rises. Read more.

 Energy: Crude Oil (Brent) -3.79%, Natural gas -14.11%, Heating Oil -6.01%, and Coal -11.24%. This dip is tied to increased supply from the easing of sanctions on Venezuela as well as economic demand concerns. However, note that with last close of $81.67, crude oil prices are still considerably high relative to 5-year average of $70.15. Read more.

Premium subscribers on Capnote can request a full list of industry, company or indicator performance levels.

Also Read; Key Learnings From Big Oil Earnings

Upcoming Events

This week, keep an eye on the CPI which may cause market movements. In addition, its a big week for the Retail and Cybersecurity industries with leaders releasing earnings. 

  • 2023-11-14 CPI data release
  • 2023-11-15 Earnings – Target Corp
  • 2023-11-15 Earnings – Palo Alto Networks, Inc.
  • 2023-11-16 Earnings – Gap Inc.
  • 2023-11-16 Earnings – Walmart Inc.
  • 2023-11-16 Earnings – Macy’S, Inc.

Capnote automatically generates a personalized portfolio timeline for you so that you never miss a key event again .

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Tip Of The Week: Is Palladium In A Death Spiral?

Palladium is a precious metal used primarily in the automotive industry to make catalytic converters. It also has applications in electronics and jewelry. Below is an illustration of approximate historic usage. 

As can be seen in the below chart from Trading Economics, Palladium’s price has been under downward pressure, declining 52% over the last year.

In 2021, Palladium climbed to all time highs driven by increasing environmental regulation as well as the Russia-Ukraine war. However, prices now sit at 5 year lows and have developed long-term bearish sentiment. What’s been responsible for this sharp reversal?

Below are two trends which continue to contribute to this price collapse.

  • Electric Vehicles Growth: Battery powered electric vehicles do not require the use of catalytic converters or palladium. Edward Meir, an analyst from Marex has stated,  “If…electric vehicle sales increase as a share of total vehicle sales from 14% in 2022 to 18% this year and more than 20% next year then this spells troubles for ICE vehicles and palladium demand.”
  • Recycling of Palladium: Reuters reports that, demand from automakers will fall by around 400,000 ounces between 2022 and 2027, while supply from recycling of vehicles will increase by 1.2 million ounces. This will shift the market to a surplus of nearly a million ounces by 2027, according to analysts at Morgan Stanley.

In the near term, there could be some respite. The largest producer of Palladium, Russia’s Norilsk Nickel, which holds 40% of global supply has stated that its palladium output will fall 8%-14% this year. In addition, analysts have warned of the risk that Russia could limit its exports of metals and cause a price increase. 

Downward pressure on Palladium prices may benefit automakers who are also under pressure to reduce vehicle prices. Electronics manufacturers may also see a benefit. However, these trends may increase risks associated with metal producers.

Written by Ikenna Ene


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