Palladium Surges to One-Year High Amid Russia Supply Concerns

Palladium traded near a one-year high as the U.S. and its allies threaten sanctions against Russia, the world’s biggest supplier of the metal used in pollution-control devices for cars.

President Barack Obama authorized financial sanctions, and left the imposition of more restrictions open to protest Russia’s moves in Ukraine. The supply threat comes as miners vowed not to back down from a strike that started in January in South Africa, the second-biggest palladium producer. The nations accounted for almost 80 percent of global output last year, London-based Johnson Matthey Plc estimates.

The political tension and labor unrest are adding to a tightening supply outlook as demand is set to top production by 783,000 ounces this year, according to Barclays Plc. Concerns that the hostility in Crimea will disrupt raw-materials shipments and spur sanctions have boosted prices of commodities from corn to crude oil. Germany, Europe’s largest economy, relies on Russia for 35 percent of its gas and oil imports.

“There is a potential for supplies to be crippled should sanctions be levied,” Frank Lesh, a trader at FuturePath Trading LLC in Chicago, said in a telephone interview. “There is a lot of nervousness in the market.”

Palladium for June delivery traded at $781 an ounce on the New York Mercantile Exchange at 12:14 p.m. in Singapore from $781.15 yesterday, when futures rose to $785, the highest level for a most-active contract since March 8, 2013.

Supply Situation

“People are worried about the supply situation,” David Lee, a vice president at Heraeus Precious Metals Management in New York, said in a telephone interview. “There is a lot of uncertainty because of the Ukraine-Russia” tension, he said.

Prices have risen 8.8 percent this year. Investor holdings of the metal through exchange-traded products climbed 0.4 percent this week, heading for the biggest increase since mid-January.

Obama said that the U.S. and its allies will keep raising pressure on Russia to back down in Ukraine. He spoke at the White House after his administration restricted visas for Ukrainian officials and others, including Russians, who it says are threatening Ukraine’s sovereignty.

“All depends on the kind of sanctions,” Michael Haigh, the head of commodities research at Societe Generale SA in New York, said in a telephone interview. “There is definitely a lot of concern in the market.”

Also on the Nymex, platinum futures for April delivery were 0.1 percent lower at $1,485.60 an ounce today, after rising to $1,489 on March 5, the highest since September.

South Africa’s Association of Mineworkers and Construction Union has been on strike for six weeks. The group and Anglo American Platinum Ltd., Impala Platinum Holdings Ltd. and Lonmin Plc remain far apart in negotiations over pay demands, the state mediator said this week. The companies account for more than two-thirds of mined supplies globally.

To contact the reporter on this story: Debarati Roy in New York at droy5@bloomberg.net

To contact the editor responsible for this story: Millie Munshi at mmunshi@bloomberg.net

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