Palladium futures rose to a 33-month high as South African supply concerns spurred demand for exchange-traded products backed by the metal used in jewelry and pollution-control devices in cars.
In South Africa, the world’s second-biggest producer, workers at the top three mining companies have been on strike since late January, crippling output. Investors boosted their holdings of ETPs to a record 86 metric tons on May 19, data compiled by Bloomberg show. Futures have climbed 16 percent this year.
Global production deficits of palladium and platinum this year will be the most in more than three decades, Johnson Matthey Plc said yesterday. The U.S. and the European Union have vowed to tighten sanctions on Russia, the top palladium supplier, if it disrupts Ukraine’s May 25 election.
“We could see prices shooting higher with the fundamentals being very strong,” Edward Meir, an analyst at INTL FCStone in New York, said in a telephone interview. “The threat of sanctions remain, so people are still worried that supplies from Russia could be interrupted.”
Palladium futures for June delivery rose 0.6 percent to settle at $830.45 an ounce at 1:17 p.m. on the New York Mercantile Exchange. Earlier, the price reached $834.50, the highest for a most-active contract since Aug. 2, 2011. Trading more than doubled compared with the 100-day average, data compiled by Bloomberg showed.
Anglo American Platinum Ltd., Impala Platinum Holdings Ltd. and Lonmin Plc and the main union at their South African mines started mediation to end the pay dispute.
Passenger-vehicle sales in China, the biggest market, rose 13 percent last month to 1.5 million units, an industry group said on May 9.
“The potentially devastating long-term damage to the industry amid ongoing strikes in South Africa is to, in any case, keep a floor under platinum-group metals prices,” Andrey Kryuchenkov, an analyst at VTB Capital in London, said in a report. “Palladium is far better positioned to benefit from rising U.S. and China car sales.”
Platinum futures for July delivery rose 0.4 percent to $1,474.90 an ounce. South Africa is the biggest producer. Holdings in ETPs backed by the metal climbed to a record, according to Bloomberg data. The metal has gained 7.4 percent this year.