abrdn Palladium ETF Trust Annual Report Summary - PALL's 2025 Performance

Considering an investment in the abrdn Palladium ETF Trust (PALL)? This guide offers a clear, investor-friendly breakdown of its performance, structure, and the palladium market dynamics for the year ended December 31, 2025.

Business Overview: What is the abrdn Palladium ETF Trust (PALL)?

The abrdn Palladium ETF Trust is an investment vehicle offering exposure to the price of physical palladium. Unlike traditional companies, PALL does not produce goods or services; it simply holds physical palladium bullion in secure vaults. Buying PALL shares (traded on NYSE Arca under the symbol PALL) gives you an undivided interest in that physical metal, without the complexities of direct ownership, storage, or insurance.

• Core Objective: PALL aims to reflect the price of physical palladium, minus its operating expenses.
• Passive Management: PALL is not an actively managed fund. It simply holds the metal; no team attempts to predict market movements or trade palladium for profit.
• How Palladium is Utilized: The Trust uses its physical palladium primarily for:
  • Paying the Sponsor's fee (currently 0.60% annually of the Trust's net asset value), which it covers by selling a small amount of palladium.
  • Facilitating share creation and redemption by large institutional investors (Authorized Participants) in exchange for physical palladium.
  • Covering other Trust expenses, or for sale if the Trust liquidates.
• Why Invest This Way? PALL offers an accessible, cost-effective way to gain palladium exposure. Directly buying, transporting, assaying, insuring, and storing physical palladium is expensive and logistically challenging; PALL streamlines this process.
• Key Benefits:
  • Ease of Access: Investors trade PALL shares through standard brokerage accounts, just like stocks.
  • Transparency: Its value directly links to the spot price of physical palladium, and it reports exact holdings daily on its website.
  • Reduced Counterparty Risk: PALL largely avoids the credit risks of complex financial derivatives by holding physical metal.
• Key Risk: Palladium's price volatility is the most significant factor influencing your investment.

Key Details About Your Investment:

• Trading Symbol: PALL
• Exchange: NYSE Arca
• Annual Expense Ratio: 0.60%
• Key Participants:
  • Sponsor: abrdn ETFs Sponsor LLC (manages and administers the Trust).
  • Trustee: The Bank of New York Mellon (holds the Trust's assets and performs administrative duties).
  • Custodian: ICBC Standard Bank Plc (physically stores palladium bullion in secure London vaults).

Financial Performance

The year 2025 proved challenging for palladium investors. The Trust's performance directly mirrored the underlying metal's price decline, after accounting for expenses.

• Net Asset Value (NAV) Performance: PALL's Net Asset Value (NAV) per share decreased by approximately 25.5% for the year ended December 31, 2025. This reflects the significant downturn in palladium prices during the period, compounded by the Trust's 0.60% annual expense ratio.
• Palladium Price Trends in 2025:
  • Palladium opened 2025 trading at approximately $1,200 per troy ounce.
  • By December 31, 2025, the price fell to approximately $900 per troy ounce, a 25% decline for the year.
  • This continued a noticeable downward trend from its early 2022 all-time high of around $3,000 per troy ounce and its $2,342/oz closing price at the end of 2020. The market has experienced a sustained correction since those peaks.
• Market Value and Shares Outstanding: As of December 31, 2025, the Trust's total market value was approximately $450 million, with approximately 7.2 million PALL shares outstanding.

Management Discussion and Analysis (MD&A) Highlights

This section highlights the Trust's performance and the key factors influencing its results during the reporting period, primarily focusing on palladium market dynamics.

Palladium Market Dynamics: Supply and Demand (2024 Data)

• Overall Supply (2024): Total palladium supply (from mining and recycling) modestly increased by 1.4% in 2024, reaching approximately 9.59 million ounces, up from 9.46 million ounces in 2023.
  • Mining: Key producers, Russia and South Africa, collectively accounted for over 77% of global mine supply in 2024, and both slightly increased output.
  • Recycling: Recycled palladium from end-of-life products, particularly automotive catalytic converters, also contributed to the supply increase.
• Overall Demand (2024): Total palladium demand slightly decreased by 2.6% in 2024, falling to approximately 10.10 million ounces from 10.37 million ounces in 2023.
  • Automotive Industry (Autocatalysts): This sector remains the dominant consumer, representing roughly 84% of total demand. However, automotive demand decreased by 3.5% in 2024 compared to 2023, primarily due to platinum substitution in catalytic converters and a slowdown in global auto production.
  • Investment Demand: In contrast, investment in physical palladium significantly jumped by 275% in 2024, increasing to 229,000 ounces from 61,000 ounces in 2023, indicating growing investor interest in holding the physical metal.
• Market Balance (2024): Despite increased supply and decreased demand, the palladium market remained in a deficit in 2024, meaning consumption outstripped production. However, this deficit shrank considerably by 44.8%, from 908,000 ounces in 2023 to 501,000 ounces in 2024. This suggests the market is moving closer to equilibrium, which can pressure prices downward. The significant 2025 decline in palladium prices can be attributed to the continued unwinding of the market deficit, persistent substitution trends, and broader macroeconomic concerns.

Financial Health

As an investment trust holding physical palladium, the Trust does not borrow and therefore carries no debt. It funds operations by selling palladium to cover the Sponsor's fee and other expenses. The Trust maintains minimal cash balances, primarily for short-term operational needs; its primary asset is physical palladium bullion. Its liquidity comes from its ability to create and redeem shares for physical palladium with Authorized Participants, and from the market liquidity of its shares on NYSE Arca.

Future Outlook

The Trust's strategy remains passive: it holds physical palladium bullion and reflects the spot price of palladium, less expenses. Therefore, the Trust's future performance will depend entirely on palladium's future price movements. Factors that could influence the palladium market in the future include:

• Automotive Demand: Continued automotive industry trends, including electric vehicle adoption rates, ongoing substitution of palladium with platinum in catalytic converters, and global vehicle production volumes.
• Supply Dynamics: Potential disruptions to mine supply, particularly from major producing regions like Russia and South Africa, and trends in recycling volumes.
• Economic Conditions: Global economic growth, which affects industrial demand for palladium.
• Geopolitical Events: Geopolitical instability can affect both supply chains and investor sentiment towards safe-haven assets or commodities.

The Trust's objective is not to anticipate or react to these trends, but rather to provide a direct and transparent investment vehicle for physical metal exposure.

Competitive Position

The abrdn Palladium ETF Trust offers investors a distinct way to gain palladium exposure, setting itself apart from other investment avenues:

• Direct Physical Ownership: Unlike direct physical palladium ownership, PALL eliminates the complexities and costs of storage, insurance, assaying, and transportation. However, direct ownership provides direct control over the physical asset.
• Futures Contracts: PALL avoids the complexities of futures markets, such as margin calls, contract rollovers, and potential contango/backwardation issues. While futures contracts offer leverage, they also carry higher risks and management requirements.
• Other Palladium ETFs/ETNs: While other exchange-traded products may exist, PALL's competitive advantages typically include its specific expense ratio and the reputation and experience of its Sponsor and Custodian. Its structure as a grantor trust holding physical metal also offers specific tax implications (e.g., 'collectibles' tax treatment in the U.S.) that differentiate it from other structures like ETNs (Exchange Traded Notes), which carry issuer credit risk. The Trust's transparency regarding its physical holdings and daily reporting is a key feature.

Risk Factors

While PALL offers a straightforward investment, understanding its inherent risks is crucial:

• Palladium Price Volatility: This is the primary risk. Palladium prices are highly sensitive to global economic health, industrial demand (especially from the auto industry), mining supply disruptions, geopolitical events (given Russia's significant role as a producer), and platinum substitution in industrial applications. A decline in palladium prices directly reduces your investment's value.
• Custodian Risk: Although PALL holds physical palladium, risks exist with its custodian, ICBC Standard Bank Plc. These include potential loss or theft of palladium, or the custodian's insolvency. While the custodian generally maintains insurance, no guarantee exists that it would cover all losses.
• Liquidity Risk: While PALL shares trade on a major exchange, low trading volume may occur, making it difficult to buy or sell shares at your desired price.
• Operational Risks: The Trust relies on various service providers (Sponsor, Trustee, Custodian). Any operational failure or breach by these parties could negatively impact the Trust.
• Regulatory and Tax Risks: Changes in regulations or tax laws related to commodity investments or physical metals could affect the Trust's operations or your investment's tax treatment (PALL is generally taxed as a "collectible" for U.S. federal income tax purposes, which can have a higher capital gains tax rate).

This summary provides a detailed overview of PALL and the 2025 palladium market. Always conduct your own thorough research and consult with a financial advisor to ensure any investment aligns with your personal financial goals and risk tolerance.