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Palladium soars on Russian supply fears

By Paul Solman in London - 15 Feb 2000 09:15GMT

Palladium, the precious metal used in catalytic converters for the motor industry, traded at an all-time high of more than $600 an ounce yesterday, almost twice its value a year ago.

The metal part of the platinum group that includes rhodium, the world's most expensive industrial metal has surged in recent months because of fears about supplies from Russia.

At the same time, increased environmental legislation is boosting motor industry consumption of palladium, platinum and rhodium, which are essential in catalytic converters to clean exhaust fumes.

Palladium stood at a little more than $320 an ounce in January 1999, but has headed steadily upwards since July.

Last month, it began to climb more sharply as traders' fears grew about Russian deliveries, and it has added $160 in the past four weeks, overtaking platinum, historically a more expensive metal.

Yesterday afternoon in London, palladium was quoted at $607 an ounce, up almost $20 from the previous trading session on Friday. Platinum was $539, having hit an 11-year high of $548 last week.

World demand for palladium was 8.3m ounces last year against 4.9m ounces in 1994, with autocatalyst applications accounting for 60 per cent of the total, according to Johnson Matthey, the precious metals and chemicals group.

Russia is by far the largest palladium producer, providing about 70 per cent of the world's supplies, but political instability and bureaucracy have disrupted shipments.

Legal problems have also halted shipments of platinum, propelling its rise. But, because Russia produces only about a fifth of the world's platinum, the run-up in prices has been less marked.

Analysts said the motor industry's insatiable appetite for palladium was causing panic-buying by traders.

"Industrial demand for palladium is extremely robust, and it seems it's that, rather than froth caused by speculators, that is continuing to boost the market," one said yesterday.

-- Jim McAteer (jim_mcateer@hotmail.com), February 15, 2000