Supply fear drives palladium to 13-year high

Commodities , Europe , Metals , Palladium , Precious metals , Russia , Ukraine , USA Sep 02, 2014 No Comments

Palladium - Supply fearPalladium for immediate delivery added as much as 0.4 percent to $908.83 an ounce, and traded at $906 by 11:30 a.m. in Singapore, advancing for a fourth day, Bloomberg generic pricing show.

The metal climbed to $909.35 on Aug. 29, the highest since February 2001, and capped a seventh month of gains that was the longest streak since January 2011.

Tensions rose after Ukraine called for full membership in NATO, its strongest plea yet for Western military help after accusing Russia of sending in armored columns that have driven back its forces in support of pro-Moscow rebels.

Palladium has gained nearly 27% this year, also boosted by strong car sales and mine strikes in South Africa that curbed supplies. “Prices hit their highest since 2001 as supply concerns mounted amid the prospect for further sanctions against Russia,” ANZ analyst Victor Thianpiriya said in a note. “Palladium is well positioned for further gains.”

Ukrainian President Petro Poroshenko warned a “full-scale war” was imminent if Russian troops continued an advance in support of pro-Moscow rebels as Europe and the United States threatened Russia with new sanctions, with the European Union slated to discuss the situation in Ukraine at a summit in Brussels on Saturday.

Russian President Vladimir Putin called on Sunday for immediate talks on the “statehood” of southern and eastern Ukraine, although his spokesman said this did not mean Moscow now endorsed rebel calls for independence for territory they have seized.

“At least 4,445 people including 46 children have been wounded and 1,830 people including 28 children were killed in eastern Ukraine as of 27 August,” stated the latest Office of the UN High Commissioner on Human Rights (OCHA) situation report on Ukraine.

Saxo Bank senior manager Ole Hansen told Reuters: “The potential for additional sanctions, which could also hit palladium producers depending on how great the longer-term impact will be, is supporting the metal […] There have seen some new momentum buyers coming in as we broke $900/oz … the recent longs will not be showing any signs of concern unless we break below that level again.”

Ukrainian president Petro Poroshenko said he would like to see a political solution to the escalating crisis. He is scheduled to meet representatives from Russia, Belarus and the Organization for Security and Cooperation in Europe (OSCE) in Belarus today with a view to discussing the possibility of a ceasefire in eastern Ukraine.

Russia is the world’s top palladium producer, contributing roughly 40 per cent of the world’s supply. “If Russia stops shipping, you’re talking about a supply-side disaster,” said Philip Gotthelf, president of Equidex Inc., a commodities investment management firm in Closter, N.J. Mr. Gotthelf has recommended his clients buy palladium on any pullbacks and expects prices to reach as high as $940 to $945 an ounce.

With the Labor Day holiday today in the US, markets are expected to be quieter than usual, but given that it’s now September, the remainder of the week is set to see higher volumes and more market activity as traders return and refocus following what is traditionally considered the holiday month of August.

The last time palladium traded above $900, in 2001, prices had rallied after Russia halted its exports of the metal.

Pascal Blanc

Pascal has implemented numerous software solutions in the areas of procurement, sourcing, spend management, supplier evaluation and performance. His clients include Fortune 500 companies in Europe, Asia and North America. He is a co-founder of Source & Procure.

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