Palladium has become the hottest commodity in the market at the moment. Reaching historically high prices that even surpassed gold in value, this meteoric rise has been driven by a variety of factors. Most significantly is the expected supply shortage to be seen in 2019, as demand for the precious metal rises with increasing catalytic converter demand from automakers.
However, there are indications that the forecasted supply shortage could be even worse than first anticipated. The world’s leading palladium miner, the Russian based Norilsk Nickel, said on Tuesday that the palladium deficit would grow even more throughout the year.
According to Reuters, the company said on Tuesday that increase emission regulations across major markets including China would increase the demand for electric vehicles. Palladium, used mainly by automakers for catalytic converters, has reached a record price today as prices continue to rise without a sign of slowing down. Nornickel expects the deficit to grow to 800,000 ounces, with global consumption increasing by 500,000 ounces. Overall, the total deficit in the market is forecasted to increase by 33 percent in comparison to what it was in 2018.
“The spot palladium market practically dried out” in 2018 said the company. “We believe that EV (electric vehicle) penetration growth will remain the key driver,” for precious metal demand in the coming year. Nornickel currently produces around 40 percent of the world’s palladium in Russia, with the second largest producer in South Africa seeing potential strikes from mineworkers jeopardizing an already tight supply.
The prediction comes as the company posted its financial figures, which showed a 28 percent increase in year-over-year revenue based largely on the improved metal prices. Overall, the companies EBITDA for 2018 was $6.2 billion, the highest it’s been since 2011. Nornickel also competes with other miners such as Brazil’s Vale SA for the title as the world’s largest nickel producer.
The general consensus on Wall Street is that the precious metal could hit prices as high as $1,600 per ounce within the next few months. Some contrarian opinions are emerging, however, as some begin to wonder whether a correction could be possible. One risk for palladium prices comes from the possibility that auto manufacturers will switch to using more platinum in their batteries. However, some experts have said that such a switch will take time in the form of R&D as well as patenting the resulting technology, a delay which would take at least a couple of years.
At the moment, palladium’s rise in price seems to be a sure thing in the coming months
Nornickel Company Profile
Norilsk Nickel Harjavalta Oy manufactures and supplies nickel metals and chemicals. Its products include nickel cathodes, briquettes, chemicals, sulphate, hydroxide, and hydroxide carbonate; and cobalt and ammonium sulphate. Norilsk Nickel Harjavalta Oy was formerly known as OMG Harjavalta Oy. The company was founded in 1960 and is based in Harjavalta, Finland with an additional office in Espoo, Finland. As of March 1, 2007, Norilsk Nickel Harjavalta Oy operates as a subsidiary of Public Joint Stock Company Mining and Metallurgical Company Norilsk Nickel. – Bloomberg