Palladium smashes record as concern over Russian supply mounts

The metal, mostly used in devices that curb pollution from gasoline cars, extended this year’s gain to 76%.
Image: Bloomberg

Palladium surged past an all-time high on mounting concerns that exports from top producer Russia could be disrupted by sanctions imposed following the invasion of Ukraine.

The metal, mostly used in devices that curb pollution from gasoline cars, extended this year’s gain to 76%. With President Vladimir Putin reiterating over the weekend that he will continue his assault on Ukraine, there are growing concerns about supply from Russia, which accounts for about 40% of all mined production. Most of Europe’s airspace is closed to Russian jets, making it more difficult for top miner MMC Norilsk Nickel PJSC to ship palladium.

“The airspace closure is disrupting exports of Russian palladium,” said Giovanni Staunovo, a commodity analyst at UBS Group AG’s global wealth management unit. “Further price support is likely coming from investor-and-consumer-led buying trying to secure physical palladium.”

Putin said again on Sunday the war will continue until Ukraine accepts his demands and halts resistance, dimming hopes for a negotiated settlement. The US is now considering an embargo on Russian oil supplies as it tries to ratchet up pressure on the Kremlin.

“With low above-ground inventories, palladium, which was under-supplied for nine years until 2020, is very sensitive to supply disruption risks,” Staunovo said.

Already premiums on sponge palladium — used by industrial users — are surging. One buyer was paying as much as $15 an ounce over the spot price last week, according to a person familiar with the matter

Still, shipments from Russia are unlikely to face much disruption unless the country potentially restricts its own exports, according to Goldman Sachs Group Inc. The metal can easily be redirected to Asia and then re-exported to other parts of the world, analysts including Mikhail Sprogis and Jeff Currie said in a report dated March 4.

Hedge funds trading Nymex palladium futures turned net-bullish last week for the first time since September. Still, some short positions were still maintained, providing fuel for the rally as they’re squeezed out of the market.

Spot palladium climbed as high as $3 442.47 an ounce, surpassing a previous record set in May 2021. The metal traded up 11% to $3 353.23 an ounce at 9:52 a.m. in London.

In other precious metals markets, spot gold topped $2 000 an ounce for the first time since August 2020. Bullion is extending gains after posting its biggest weekly advance since July 2020 amid mounting concerns that the raft of penalties against Russia could dim global growth and further stoke inflation. Silver and platinum advanced.

© 2022 Bloomberg

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