PALL: It May Lag The Broader Precious Metals Group

The author maintains a cautious outlook on the abrdn Physical Palladium Shares ETF (PALL), expecting it to underperform other precious metals as EV adoption threatens palladium's dominant autocatalytic-converter use. PALL is down approximately 36% year to date and nearly 50% over five years, with the author saying cyclical headwinds have yet to fully take effect.

Analysis

The key asymmetry is that the EV transition erodes palladium demand gradually, while supply can tighten abruptly: much palladium is produced alongside other metals, so low prices may not promptly induce a matching supply response, but producer curtailments or disruptions could move the market sharply. Hybrid adoption and a slow turnover of the installed ICE fleet also make EV penetration a lagging proxy for near-term catalyst demand. The bearish structural case is strongest over 6–18 months, not necessarily over the next few weeks.

Relative value is more compelling than an outright short: platinum may gain from substitution in catalysts and has different demand drivers, though substitution requires engineering and qualification time. A sharp prior decline also raises the risk that the obvious EV narrative is already reflected in positioning. Before adding exposure, verify ETF holdings/flows, exchange and visible inventories, lease or forward-market tightness, automaker production mix, and evidence of catalyst substitution; the article supplies none of these. A shift toward hybrids, resilient ICE production, tighter physical availability, or mine curtailments would challenge the short thesis.

Key Decisions for Investors

• Consider a small, risk-defined relative-value position favoring platinum over palladium rather than an outright PALL short; phase entry over weeks and reassess as auto-production and physical-market data arrive. The trade can lose if palladium supply tightens or substitution expectations disappoint.
• Treat PALL as a watchlist short, not a high-conviction immediate trade. Add only if physical indicators remain loose and autocatalyst demand or producer guidance weakens; avoid assuming EV sales alone establish near-term palladium consumption.
• Set thesis checks for the next 1–3 months: visible inventory and lease-market tightness, automaker hybrid/ICE mix, and producer output or curtailment announcements. Persistent physical tightness or a meaningful recovery in ICE/hybrid production falsifies the near-term bearish setup.
• Do not extrapolate the fund's past decline into further downside. If palladium stabilizes while the platinum/palladium relative price strengthens, reduce or close the relative-value exposure; that would suggest structural substitution is already priced or supply is becoming the dominant driver.