According to Bloomberg news, the US is seeking joint sanctions from G7 countries on Russian exports of palladium and titanium, which pushed the price of palladium up by more than 9 per cent in intraday trading on Thursday, with the spot palladium price above $1,150 an ounce, having recorded a cumulative gain of nearly 16 per cent this month.
It is known that Russia is one of the major producers of palladium and titanium, with palladium supply accounting for 41 per cent of global supply. Due to its huge influence in the platinum group metals market, palladium and titanium are excluded from Western sanctions following Russia’s invasion of Ukraine in 2021.
In the short term, the risk of sanctions against Russia has fuelled supply anxiety in a market still in deficit, said Ole Hansen, head of commodities strategy at Saxo Bank. In May, global palladium refiner Johnson Matthey said it expected a 358,000-ounce shortfall in the palladium market this year.
Daniel Ghali, senior commodity strategist at TD Securities, described the palladium price action as a fear trade that may not be sustainable. He noted that European countries have rejected this US demand before. However, he added that momentum could push prices higher in the short term.
While the palladium price attracted a lot of attention on Thursday, some analysts warned investors that it has been in a strong long-term downtrend, retreating sharply from its July 2022 highs of more than $3,000 an ounce. The palladium market is continuing to shrink as car companies switch to cheaper platinum.
Michael Widmer, commodities strategist at Bank of America, said that while palladium prices will remain volatile in the short term, the market needs to see a fundamental shift to support higher prices in the long term. He explained in Thursday’s report that investors should remain cautious and do not see the rally as sustainable as palladium’s demand fundamentals set to continue to weaken through 2025 unless more production cuts occur.
Head of research at Amalgamated Metal Trading Dan Smith said that if Russian palladium were to exit the market, the palladium market could tighten as South Africa and other major producers would not be able to fill the gap, which should support prices in the longer term.