Palladium shortage looms on low sales

Russia, the world’s largest palladium producer, may sell the smallest amount of the metal from state stockpiles in at least eight years, creating shortages at a time of record demand from carmakers.

An 80 percent plunge in Russian inventory sales to 150,000 ounces will mean a deficit of 275,000 ounces in 2012, Barclays Capital estimates. Demand will exceed supply until at least 2015, Credit Suisse Group predicts. The price of palladium, used in autocatalysts, may climb as much as 27 percent to $882.50 an ounce this year, the highest since February 2001, according to the median of 28 analyst estimates.

The metal already rallied 29 percent from a one-year low in October on signs that economies may skirt recession. Autocatalysts are fitted to 95 percent of new cars and PricewaterhouseCoopers estimates that global light-vehicle production will reach a record for a third consecutive year. Carmakers will use 6.22 million ounces in 2012, twice the amount a decade ago, as supply drops for the first time since 2009, Barclays estimates.

Buying Spree

“The supply-demand fundamentals are quite strong and that’s very much driven by autocatalysts,” said Bart Melek, the head of commodity strategy at TD Securities in Toronto and the most accurate price forecaster tracked by Bloomberg Rankings in the past eight quarters. “When we look at the Russian official stockpiles, they’re depleting. Higher prices beget more investment interest and that takes supply off the line.”

Investors now own 52.8876 tons, equal to about seven months of Russian mine production and valued at about $1.2 billion at today’s price of $692.75 an ounce. Holdings fell for eight consecutive months through December.

Palladium extended its rebound this year, advancing 5.8 percent, compared with a 2.6 percent gain in the Standard & Poor’s GSCI gauge of 24 commodities. Shares of Norilsk Nickel, the world’s biggest palladium producer, rose 15 percent in Moscow trading this year.

Russian inventories, whose size is a state secret, were created during a glut in the 1970s and 1980s, according to the United Nations Conference on Trade and Development. Stockpile sales that averaged about 1 million ounces a year over the past decade will probably drop to 150,000 ounces this year and the next and then stop, Royal Bank of Scotland Group estimates.

Sales won’t exceed 4.5 tons (144,680 ounces) this year or next and may end in 2014, Interfax reported in October, citing an unidentified Finance Ministry official linked to Gokhran, which manages the reserves. Stockpiles may be “virtually exhausted” already, Commerzbank said in a Jan. 16 report.

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Posted by admin on Jan 29 2012. Filed under Palladium. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry