The metal will likely gain as outputof automobiles recovers in 2022
The outlook for palladium, one of the biggest gainers in the commodities basket after Russia’s decision ordering its troops into Ukraine, is bullish for this year despite the positive impact of geopolitical tensions. Palladium pared its gains after hitting a six-month high of $2680 an ounce. But on Friday, it shed 0.73 per cent to close at $2384.76.
Nevertheless, palladium is one of the major gainers in the commodity basket this year, up over 30 per cent year-to-date. This is in contrast to its last year’s performance, when it was one of the commodities that performed badly.
Demand to rise post-Covid
According to Ines Ferre of Yahoo Finance, there has been a demand for palladium irrespective of the Russia-Ukraine stand-off. The Ukraine crisis only raised concerns that supply constraints could aggravate.
According to Johnson Matthey (JM) 2021 PGM (Platinum Group Metal) Market report, palladium demand will rise strongly, with a post-Covid rebound in vehicle production, and record use in the chemicals sector. This holds good for this year, say experts.In its outlook for palladium, Umicore precious metals management said palladium surged sharply on consumer concerns that supply might tighten as the Russia-Ukrain conflict escalates.
But it pointed out that no commodity-related sanctions have been imposed, especially by the NATO group, and all movements are based on speculation. Trading, too, remains tense due to the geopolitical risk.
Umicore sees resistance for palladium, which has increased by over 200 per cent in the last five years, at $2,700 and support at $2,300.Bruce Ikemizu of ICBC Standard Bank sees supply constraint arising mainly out of the fact that the production of palladium, a by-product of nickel in Russia and platinum in South Africa, cannot be increased.
“We cannot expect palladium supply and demand situation changes in near future. That is, either we have sharply more supply or sharply lower demand,” he said in his outlook for the Singapore Bullion Market Association.
Russia’s hold on metal
Palladium is reacting to the developments in Russia since it is the largest miner of the precious metal. In particular, the platinum group metal is used as catalytic converter in the exhaust system of automotive vehicles.
In 2021, Russia accounted for 40 per cent (2.6 million ounces) of the total production across the world.
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