Palladium price hits fresh highs: record deficit predicted

May 21, 2014

Johannesburg-S.A.  (May 21)  A 17-week strike at South Africa's PGM mines and a stand-off between the West and Russia have pushed the palladium price up nearly 16% this year.

The price of palladium hit fresh three-year highs on Wednesday, despite encouraging signs that labour action in South Africa may be nearing a conclusion and news that tensions on Ukraine's border may be easing.

June palladium futures jumped 1% to $834.45 an ounce in New York, the highest level since March 2011, before easing slightly to $830.60 an ounce in afternoon trade. Palladium hit a record high of $865 in February 2011.

South Africa and Russia combined account for close to 80% of global supply of palladium which is mainly used to clean emissions in automobiles.

More than 70,000 workers at the world's three largest platinum and palladium producers, Anglo American Platinum (LON:AAL), Impala Platinumm (OTCMKTS:IMPUY) and Lonmin (LON:LMI), went on strike January 23.

In South Africa a judge of the country's labour court ordered mine management and the militant Amcu labour union into three days of mediated talks on Thursday, seen as the best chance to end the bitter dispute.

According to a website set up by producers the companies' have lost combined revenue of R18.8 billion (some $1.7 billion) while striking workers have lost more than $800 million in forfeited wages.

Roughly 10,000 ounces of platinum production and 5,000 ounces of palladium are lost each day the strike drags on. Even when strikers do return to work it would take up to three months to restart production.

At the same time Russia ordered its troops amassed on the border with Ukraine to withdraw to "create favourable conditions for Ukraine's presidential vote and end speculations," according to President Putin.

Near perfectly timed launch of South African palladium ETFs has boosted total holdings by 30% since April

A huge factor boosting the the palladium price has been the launch of two new physical palladium-backed exchange traded funds in Johannesburg in late March.

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