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Palladium Tops $2,000 as Record-Breaking Rally Boosts Miners

CommoditiesDec 17, 2019 08:17AM ET
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(Bloomberg) -- Palladium rose above $2,000 an ounce for the first time, extending a powerful annual advance driven by a sustained global deficit.

Palladium has gained 57% this year, with market watchers saying the shortfall will be hard to fill. That’s great news for producers of the metal, used mainly in autocatalysts, which have seen their shares surge.

No. 1 miner (OTC:MMC Norilsk Nickel PJSC) has gained 51% in 2019. The effect has been even more dramatic for South African platinum producers, which dig up palladium alongside their primary metal. The FTSE/JSE Africa Platinum Mining Index has tripled this year, the biggest-ever annual gain.

On the other hand, higher prices don’t affect carmakers too much, because palladium is only a small part of the overall production cost, said Ole Hansen, head of commodity strategy at Saxo Bank A/S.

“The mining companies and speculators both reap the reward from the continued surge,” he said.

Spot palladium climbed as much as 1.1% to $2,000.35 an ounce, before paring gains to trade little changed at $1,976.68 at 6:49 a.m. in New York.

Palladium has surged to unprecedented levels in 2019 as tighter emissions rules spurred demand, while supply hasn’t yet been able to respond. Citigroup Inc (NYSE:C). forecasts the move upward now has the potential to see prices gain to $2,500 in the first half of next year. Power outages in major producer South Africa hurt mine operations this month, fueling gains.

“In most cases, the cure for high prices is high prices, but not for palladium,” Tai Wong at BMO Capital Markets, said before the $2,000 level was taken out. That refers to the notion in raw materials that a rally induces fresh output, triggering the conditions that then roll back the advance.

“There doesn’t seem to be any new, ready supply at any reasonable price,” Wong said. “So, it could continue to move higher from here, though perhaps with more volatility.”

Many raw materials gained this week after the breakthrough between the U.S. and China to forge an initial trade agreement, bolstering prospects for global economic growth and auto demand.

Other precious metals edged higher Tuesday, with spot gold adding 0.2% to $1,479.31 an ounce.

Palladium Tops $2,000 as Record-Breaking Rally Boosts Miners
 

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