Daily Management Review

Palladium deficit is pushing prices up


On Thursday, palladium prices updated a one and a half month high, rising to the level of $ 1,440 per troy ounce. China’s plans to stimulate demand for cars, tougher environmental emission requirements, and a structural metal deficit in the market are contributing to higher prices. Against the background of low stocks of palladium in exchange-traded funds, its value may update the historical maximum in the coming months, breaking the level of $ 1600 per ounce.

Kreepin Deth
Kreepin Deth
After a strong fall, palladium prices rose sharply in early spring in June. According to Reuters, on Thursday the price of the precious metal rose 2.4% to $ 1,440 per troy ounce.

For six days, palladium added more than 8% in price, and its quotes returned to the values of a month and a half ago.

The remaining precious metals cannot boast of such an increase in value. Thus, the price of gold rose only by 0.6%, to $ 1,338 per ounce, silver fell in price by 0.2%, to $ 14.88 per ounce, platinum fell by 1.2%, to $ 810 per ounce.

Recovery of prices for palladium occurs against the backdrop of China’s plans to support the country's economy. Last week, the State Committee for Development and Reform issued a plan to boost demand for cars and household appliances. On Monday, the PRC State Council announced new measures that allow local authorities to use special bonds to finance infrastructure projects.

According to Johnson Matthey agency, in 2019, the palladium deficit was 809 thousand ounces versus 121 thousand ounces a year earlier. During the previous few years, the lack of metal on the market was compensated by exchange-based funds oriented towards investing in palladium. But since mid-2015, assets of such funds have decreased fivefold - from 3 million ounces to less than 0.6 million ounces, according to data from Bloomberg. "Metal stocks in the ETF stabilized in the first quarter after four years of decline, but they can no longer cover the difference between industrial consumption and supply," says Johnson Matthey’s study.

In such circumstances, analysts expect further growth in prices for palladium. “Chinese emissions legislation will come into force in 2020 at the national level, but in some provinces and cities new standards will be introduced in July of this year in accordance with the Blue Sky Protection Plan,” said Johnson Matthey in a report. This will lead to a gradual increase in the use of palladium in Chinese cars.

source: reuters.com