Palladium Price Up 8%; lifts precious metals as London bans PGM refineries in Russia
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(Kitco News) – The auto sector is facing a major palladium supply crisis as two Russian refiners were banned from western markets.
On Friday, the London Platinum and Palladium Market (LPPM) announced that it had suspended the Krastsvetmet non-ferrous metals plant in Gulidov Krasnoyarsk and the PZCM non-ferrous metals plant in Prioksky from its good-delivery lists, effective immediately.
“Due to the events in Ukraine, the LPPM’s Management Committee has reviewed its good delivery lists,” the LPPM said in a press release. “These two refineries will no longer be accepted for LPPM Good Delivery in the London/Zurich precious metals market until further notice.”
The new sanction on the precious metals market comes a month after the LMBA removed six Russian refiners from its Good Delivery List. However, the recent move is expected to have a much more significant impact on the precious metals sector.
Most of the gold and silver that Russia produces stays in the country. However, Russia represents up to 30% of the world palladium supply; it also represents about 10% of global platinum supply.
“Our immediate and conservative estimate of the magnitude of this disruption indicates that more than 102 tons of PGM production will be disrupted as a result of this decision, considering the epic size of these refineries,” said commodity analysts at TD Securities.
The supply disruption has pushed palladium prices significantly higher. June palladium futures were last traded at $2,420.50 an ounce, up 8.88% on the day. Analysts have said there is room for palladium prices to move higher.
“This type of disruption will significantly affect palladium. Prices will only rise if auto companies do everything they can to secure their supplies of the metal,” said Phillip Streible, chief market strategist at Blue Line Futures.
Streible added that April was also a positive seasonal month for PGMs.
While the shock may push palladium prices higher in the short-term, analysts at TDS also noted that the long-term impact may be limited as Russia enjoys good trading ties with China.
“China is among the largest consumers of palladium, suggesting a smaller impact on flows than the massive scale of the refinery’s production suggests,” the analysts said.
Palladium’s rally comes as the precious metal struggled after rallying to an all-time high of over $3,400 an ounce last month. The precious metal rallied at the start of the Russian invasion of Ukraine. Many investors expected Russia to hold back supplies as Western governments slapped the country with tough economic sanctions.
Platinum prices see less lift. July platinum futures last traded at $975.2 an ounce, up nearly 2% on the day. Platinum prices are struggling to regain above $1,000 an ounce as analysts expect the precious metal to be in substantial surplus this year.
Palladium was already facing a significant supply deficit before these new sanctions were imposed on Russia.
The two precious metals are vital to the auto sector. They are used in auto catalytic converters to reduce harmful emissions from gasoline and diesel engines.
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