(Bloomberg) -- Palladium extended gains after the suspension of two state-owned Russian refiners by bourses in London and Chicago added to concerns about supply disruptions from a key producing country.
The precious metal’s latest rise, following an 8.7% surge on Friday, comes after the invasion of Ukraine and the sanctions that followed saw prices soar to a record last month. Russia produces about 40% of the world’s freshly mined palladium, which is mostly used in automobile catalytic converters.
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On Friday, the London Platinum & Palladium Market suspended Krastsvetmet and Prioksky Plant of Non-Ferrous Metals from its goods-delivery and sponge-accreditation lists. The LPPM’s announcement reverses its decision a month ago to continue letting the Russian plants supply precious metals to the trading hub. The CME then suspended the approved status for warranting and delivery of certain platinum and palladium brands from the two refiners until further notice.
“These two exchanges represent large trading markets for platinum and palladium, and the two refiners are material suppliers to these exchanges,” Morgan Stanley (NYSE:MS) analysts led by Christopher Nicholson said in an emailed note. The analysts expect a “near-term impact on spot market liquidity.”
Meanwhile, the Japan Exchange Group said the Osaka Exchange is considering revoking Russia’s good delivery designation for platinum and palladium brands in its futures market following the LPPM’s move. If the designation is canceled, it’s expected that open interest in the contracts will decrease “sharply,” and liquidity will decline for some time, it said.
“Palladium supply was already under significant pressure as a result of strong vehicle sector demand and inventory concerns related to the Russia-Ukraine conflict,” said Gavin Wendt, senior resource analyst at MineLife Pty. “The latest suspension of Russian refiner output will further exacerbate market concerns and fuel even more price upside.”
Spot palladium rose 0.2% to $2,436.39 an ounce at 4:30 p.m. in New York after rising as much as 4.9% earlier, bringing this year’s gain to 28%. Prices hit an all-time high of $3,442.47 on March 7. Palladium for June delivery slipped 0.1% to settle at $2,416.80 on the Nymex.
In other precious metals, spot gold rose 0.2% to $1,951.73 an ounce. Bullion climbed for a fourth day as political and economic risks weighed on sentiment, putting pressure on stocks and bond markets.
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