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New Emissions Standards Good News For Platinum Group Metals

Tickers in this article: PAL SWC

Platinum bullion has been trending in a range between $1,525 and $1,725 since September, while palladium has pushed up from $600 in October to around $770 in March.  While platinum is known for its use in jewelry, the biggest demand for platinum and palladium are for autocatalyst, which control vehicle exhausts and emissions of hydro-carbons and carbon monoxide.

As countries around the world introduce environmental legislation, the demand for platinum and palladium will continue to rise in order to help new automobiles meet stricter emission standards like the new emission proposal announced by the Obama administration.

A recently announced trading bloc for platinum group metals could help coordinate exports and keep prices high in the near future. Russia and South Africa have announced that they plan to set up an OPEC style group with the goal of, “[coordinating their] actions to expand the markets.” The trading bloc is being formed to help counter an oversupply of platinum.

South Africa holds 70% of the world’s platinum while Russia has 40% of the world’s palladium and both countries are very vested in the success of the industry. Although just a “framework” has been signed, the trading bloc should be finalizing details over the summer.

Business Ideas: Investing Solutions

It may be a good time for you to diversify your portfolio and tap into precious metals like palladium and platinum. As environmental regulation tightens, and with a new trading block for the platinum metals group emerging, demand could be shooting up with supply being kept at a steady level.

We have generated a list of platinum group metals companies below. Although the past year has been rough on the group, keep an eye out for a reversal. We have also included the quality (Gross Profit / Total Assets) and price-to-book values for each stock.  Stocks with a quality ratio above .33 and a price-to-book value below 1.7 have been found to outperform the overall market by 4% annually. [More on Quality: Healthcare Sector: High Quality Stocks at a Great Value]

Impala Platinum (IMPUY): Imapala has operations in South Africa and Zimbabwe and has a quality ratio of .09 and a P/B of 1.52

Stillwater Mining Company (SWC): Stillwater’s platinum group metals operations are in the U.S. and Stillwater has a quality ratio of .13 and a P/B of 1.41.

North American Palladium (PAL): North American Palladium’s mines are mostly in Canada and it has a quality ratio of  .12 and a P/B of .99.

Nick Sousa, Kapitall Contributor