Palladium used to be the hottest commodity in the market back in early 2019. Prices ended up surging in what quickly became a bubble that burst a little bit into the year.
However, while the speculative element pushing prices up ended up disappearing for the most part, the fundamentals driving the demand for palladium remain strong as ever. As a result, the world’s largest palladium producer reported record jumps in profits as global deficits for the precious metal continue to grow.
Nornickel (OTC: NILSY), a Russian-based mining giant, saw its net profits jump by 81 percent. Despite growing macroeconomic fears that would otherwise hinder growth, back by the consistently growing demand for palladium, the miner report strong financial results in their recent quarterly earnings report despite these concerns.
“The first half of 2019 was marked by weak global macro environment as investors’ sentiment was dominated by concerns over the slowdown of global economy and unfavorable outcome of the US-China trade negotiations. Therefore, prices on all our key metals except for palladium went substantially down,” said Nornickel President Vladimir Potanin in a press release. “Amid these challenging market conditions, our Company managed to deliver solid financial performance owing to operating efficiency gains, which were further supported by strong palladium market. Output and sales of all our key metals increased and, importantly, the operating cost inflation was maintained below the Russian CPI.”
London palladium prices rose by 40 percent so far despite the initial plunge in price seen earlier this year, having recently hit a three-week high on Tuesday. Higher prices for the precious metal helped offset the decline in prices for nickel, platinum, and copper amidst worries over U.S.-China trade negotiations.
At the moment, Nornickel expects that the global palladium deficit will grow to 600,000 ounces in 2019 thanks to the ever-increasing demand from the auto sector. Palladium is used mainly in emission-reducing catalytic converters for cars, an area that is seeing significant growth in demand.
Palladium production comes mainly from Russia and South Africa, producing multiple times more output annually than their next closest competitor, Canada. However, palladium is produced mainly as a by-product from mining other metals like nickel. As such, it becomes difficult for producers to ramp up output to keep up with demand.
Shares of Nornickel, at least on the American over-the-counter (OTC) markets, were up 2.6 percent in response to this good piece of news. Over the past few months, shares of the Russian miner have been moving erratically within a narrow range, always staying between $21 and $24 per share.
Nornickel Company Profile
Mining and Metallurgical Company NORILSK NICKEL PJSC (Nornickel) is a Russian producer of base and precious minerals. The company is organised into five operating segments: GMK Group; Group KGMK; NN Harjavalta; other mining; and other non-metallurgical.
The majority of Nornickel’s revenue is derived from the GMK Group segment. Nickel sales comprise the greatest portion of Nornickel’s revenue, followed by sales of copper and palladium. More than half the company’s consolidated revenue is derived from Europe, with sales to Asia having the next contribution. – Warrior Trading News
