Pd at record high as strong demand hastens supply woes

Palladium prices rose to a record high this week as renewed consumer demand, particularly from the automotive sector, could heighten supply pressure.

The precious metal reached $2,866/oz on 22 April, according to UK speciality chemicals producer Johnson Matthey, the highest since the firm started publishing prices in 2000. Prices have risen by 15.5pc from $2,481/oz on 4 January.

Palladium's price rally came after the introduction of higher greenhouse gas emissions standards in China and Europe that buoyed demand from the automotive industry worldwide. Metals such as palladium, rhodium and platinum are used in catalytic converters to reduce harmful nitrous oxide emissions.

The recent run was also because of market concerns that rising demand could worsen the growing supply deficit faced by the market. Palladium supply has remained in deficit in recent years and worsened in 2020 owing to lower mining and refining rates, mainly in the largest producing nation, South Africa, as the Covid-19 pandemic restricted production activity.

Total demand of 6.77mn oz in 2020 outstripped overall primary supply, which fell to 6.12mn oz from 7.12mn oz in 2019 because of the loss in mining. But palladium supply is likely to recover this year as mining activity in most places, including South Africa, is expected to resume to near full capacity.

Large producer Anglo American Platinum reported a sharp recovery in its refining volume, which had taken a major toll because of converter plant outages last year — an important factor given the relatively few refiners in the region.

Russia's Nornickel also upped its palladium production by around 40pc to 766,000oz in the first quarter, from around 548,000oz a year earlier. The miner said higher volumes were driven by the "full ramp-up of a new line for production of precious metals from chlorine leaching residues at Kola MMC".

But palladium's high price could deter further consumer buying and encourage substitution with platinum for auto loadings.

Platinum prices for 99.5pc min were pegged at $1,216/oz on 22 April but were up by less than palladium in the year-to-date, Johnson Matthey data show. Platinum prices were 9.3pc higher than the $1,113/oz on 4 January. The world platinum investment council highlighted this week that palladium's premium is making platinum more attractive for original equipment manufacturers, suggesting that "one gram of platinum provides almost the same catalytic effect as one gram of palladium".

By Yusuf Khan

Palladium min 99.95% Johnson Matthey $/oz