Palladium prices have continued to climb today – closing in on $2,500 per ounce following a nine per cent spike last Friday.
There are renewed concerns over supply shortages following the London Platinum and Palladium Market (LPPM) responded to Russia’s invasion of Ukraine by suspending two state-owned Russian refiners that produce platinum group metals (PGMs).
The refiners were taken off the good delivery list, with material produced by these refiners since last Friday April no longer being accepted in London and Zurich.
This follows already imposed restrictions on newly produced gold and silver bars from Russia, which can no longer be traded in London.
Russia is a key producer of palladium – with the precious metal used in jewellery and watch-making, alongside practical roles such as catalytic converts, dentistry, and aircraft spark plugs.
Commerzbank analyst Daniel Briesemann explained: “The suspension of the Russian PGM refiners has sparked growing supply concerns among market participants. Russia accounts for just short of 40 per cent of global palladium production, making it the second-largest producer.”
UBS Strategist Giovanni Staunovo suggested palladium, which was undersupplied from 2012 to 2020, is very sensitive to supply disruption risks.
He suggested palladium’s low above-ground inventories, underwhelming trading volumes and small market size, meant only investors with a high risk tolerance should consider trading it.
Commenting on future market movies, Stauvono said: “As global trade flows shift, we expect some of the supply concerns to vanish over time and reduce the risk premium. We also think the surge in palladium prices is likely to accelerate the shift from palladium to platinum for use in catalytic converters. Hence, we still hold a negative outlook over the next 12 months “