It’s among the scarcest metals on the planet.

There’s only one large above-ground store, a strategic reserve the Soviet Union spent 50 years accumulating. Russia decided to put the stockpile up for sale in 1990 when it was estimated to total 27 million ounces. Since then, buyers have withdrawn about 25 million ounces.

The remaining balance is a state secret. But comments from Russian mining conglomerate MMC Norilsk Nickel indicate the reserve is nearly spent. Most analysts estimate the reserve is now just 2 million ounces — about a three-month supply.

Meanwhile, the metal is exceedingly scarce; annual production rates are less than one-tenth that of gold. About 90% of the world’s supply is locked up in just two spots (Siberia and South Africa).

This is exactly the sort of scarcity that can drive up prices. All that’s needed is demand. And we’re seeing that too…

Mines around the world yielded a total of 6.3 million ounces last year. Meanwhile, post-recession demand rebounded to 7 million ounces.

No, I’m not talking about silver or even platinum. And you know I’m not talking about gold, either. Gold climbed 30% last year. That was bested by silver, but both metals trailed the 97% gain of this one.

It’s the reservoir for palladium that’s running dry and there’s about to be some thirsty buyers.

Congress has authorized a palladium coin. Exchange-traded funds from New York to Zurich now have more than 2.5 million ounces of physical bullion in their vaults.

The versatile metal has a multitude of uses beyond simple investment; most notably in the dental, jewelry and electronics fields. But demand from the auto sector is greater than all of those combined — the metal is used in catalytic converters. And despite decades of research, carmakers have never found a viable substitute.

According to automotive forecaster CSM Worldwide, global auto production is forecast to reach 75 million vehicles this year, 80 million next year and nearly 90 million by 2014. That means a lot more catalytic converters.

As supplies get squeezed, automakers are already doing their best to stockpile. General Motors (NYSE: GM) recently signed an agreement with Stillwater Mining (NYSE: SWC) to buy future supplies of palladium — without fixed floor or ceiling prices. This contract is akin to a blank check. GM just wants the metal, regardless of what it has to pay.

And here’s the best part. There are only a small handful of companies splitting this rich jackpot.

One of them is the aforementioned Stillwater Mining. Stillwater is the only palladium miner in the United States. The company plies the Beartooth Mountains of southern Montana, home to the planet’s richest concentrations of high-grade palladium ore.

Action to Take –> I think 2011 is poised to be one of Stillwater’s most successful years ever. The scarcity of palladium gives the metal what it takes to continue its powerful run, perhaps racing another 25% to retake the $900/oz. mark.

That would be welcome news for Stillwater.

[Note: This is precisely the sort of situation I look for… dwindling supply and soaring demand mean rising share prices. And if you haven’t seen it already, be sure to watch my free webcast discussing other areas where scarcity is rearing its head and offering investors an opportunity to profit. Click here to watch.]