Nornickel’s Global Palladium Fund launches physically-backed ETC for EV metals

The launch of this exchange-traded commodity will be one of the first exchange-traded products offering carbon-neutral nickel

Global Palladium Fund (GPF), a metals provider founded by Russian miner Nornickel, has announced the launch of the Global Palladium Fund Physical Electric Vehicle Metals.

This exchange-traded commodity (ETC) is intended to offer investors exposure to metals, as well as a hedging opportunity for investors against metal equities outside of broad-based indexes for futures, GPF said on Tuesday, February 1.

The index is made up of metals based on their use across four electric vehicle types: battery, hybrid, plug-in hybrid and fuel cell.

Metals weights (capped at a maximum of 40%) in the index basket are: copper (40%), palladium (28.13%), nickel (18.65%), cobalt (11.45%), and platinum (1.77%). These metals will be stored in London Metal Exchange warehouses in Rotterdam, and in London Platinum & Palladium Market (LPPM) vaults in London and Switzerland.

The ETC is backed by physical metal and will track the performance of the Solactive GPF Electric Vehicle Index.

The index will be re-balanced annually in July, the release said, to reflect the evolving use of metals across the different sectors, and includes the scope to introduce additional metals subject to use and availability.

The launch of this ETC follows the release of a carbon-neutral nickel ETC by the GPF in November 2021.

This was one of the first exchange-traded products offering carbon-neutral nickel, potentially opening a door for the stainless-steel and battery ingredient to follow the path of aluminium in offering premiums for low-carbon products to consumers.

“The growth in consumer appetite for electric vehicles in recent years has been phenomenal,” Alexander Stoyanov, chief executive officer at Global Palladium Fund, said.

“When approaching this theme, it can be hard for investors to know which equities to select, particularly when valuations are stretched and it is unclear which technologies or companies will be the winners. GPF is providing investors with an innovative, physically-backed solution that offers a unique and diversified risk-and-return profile, compared with traditional equity-based investments,” he added.

“Physically backed exchange-traded funds [ETFs] are the way to go,” SP Angel analyst John Meyer told Fastmarkets, taking the example of how they are widely used to hedge other commodities. “Gold ETFs now support [about] $180-billion-worth of investments, far greater than anyone would have imagined when they were first envisaged.”

But Meyer voiced concerns regarding supply of some of these metals.

“We have to wonder how they are going to source sufficient cobalt in a market where cobalt is already relatively scarce, and China controls much of the world’s production - around 40% of cobalt production coming out of the [Democratic Republic of Congo], and also more than 80% of global refining of cobalt sulfate and oxides,” he said.

The Global Palladium Fund Physical Electric Vehicle ETC is being launched with $10 million of seed capital, and will list initially on the Borsa Italiana. Listings on Deutsche Börse, London Stock Exchange and SIX will be announced in the coming weeks, GPF said.

Callum Perry in London contributed to this report.

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