Palladium rises above $1,000 on supply concerns – Commerzbank

The price of palladium rose 8 percent on Wednesday, breaking above $1,000 per troy ounce for the first time in two months, notes Carsten Fritsch, commodities analyst at Commerzbank.

The bullish price reaction seems justified

“At $1,060, the price hit a five-month high in the morning. The trigger for this development was Russian President Putin’s comments about possible restrictions on the export of certain metals in retaliation for Western sanctions. Although palladium was not explicitly mentioned, nickel was. Because palladium is a by-product of nickel in Russia, palladium would be indirectly affected if Russia were to cut nickel production as a result.”

“There has been speculation since the start of the war in Ukraine 2 1/2 years ago about possible retaliatory measures by Russia to Western sanctions, and palladium has often been in the spotlight. With around 40% of the global mine supply, Russia is the largest producer of palladium, just ahead of South Africa. Therefore, a reduction in Russian supply would quickly lead to a shortage in the market.”

“The fact that this has not happened so far should not be taken as a guarantee for the future. Therefore, the palladium market would be well advised not to ignore this risk entirely. Therefore, the price reaction is justified, although it was probably also influenced by the covering of short positions.”