Spot palladium hit an all-time high on bets that rebounding economies will fuel demand from automakers, exacerbating supply shortages for the precious metal.
Palladium, used in catalytic converters to reduce emissions in gasoline-powered vehicles, rose 4.8% to $ 2,895.96 per ounce on Wednesday, breaking the previous record set in February 2020. Prices rose further. by 17% this year, building on five consecutive annual gains.
The palladium market has been in production deficit for several years and stricter pollution standards in Europe and China are stimulating demand for metal from car manufacturers. The disruptions at Russian mines run by MMC Norilsk Nickel PJSC, the world’s largest producer, have exacerbated supply problems.
“It’s a confluence of factors that fuel palladium,” said Tai Wong, head of metal derivatives at BMO Capital Markets. “Basically there will be a big deficit this year and automakers have to restock.”
Palladium, on track for a third consecutive monthly gain, also benefited from the outlook for low interest rates and accelerating global growth. Federal Reserve Chairman Jerome Powell reiterated his dovish stance on US monetary policy last week, and recent US and Chinese economic reports have fueled optimism.
“There is nothing but positive winds behind palladium at the moment,” said Jay Tatum, portfolio manager at Valent Asset Management. “With a global economic recovery underway and the expected increase in auto production speaking in favor of palladium, what are the chances that it will be lower in three to four months?”
Analysts expect automakers that have slowed production amid a global semiconductor shortage to restock their supplies in the second half of this year and next, adding to the bullish outlook.
The “catch-up” when chip supply recovers and auto inventories are replenished will be significant, ”Citigroup Inc. analysts, including Oliver Nugent, said in a note. “It will be optimistic for the physical balances of palladium in particular.” It is likely that speculative purchase prices will recover in advance, they said.
Nornickel increased its production of platinum and palladium in the first quarter even as two of its largest Arctic mines battled flooding that forced the Russian mining company to lower its annual targets.
Spot palladium rose 4.3% to $ 2,879.86 an ounce at 2:14 p.m. in New York. Futures delivered in June on the Nymex rose 4.3% to $ 2,875.60 an ounce. Other precious metals also advanced. Gold climbed to 1.1%, hitting a seven week high and trading at $ 1,792.35 an ounce, while silver rose for a second straight day. Platinum also won.
– With the help of Ranjeetha Pakiam.
© 2021 Bloomberg