Russia Palladium Reserve Seen by Johnson Matthey Almost Gone

Palladium reserves in Russia, the world’s largest producer of the metal, are “pretty much exhausted” and sales this year may be only 3 metric tons, according to Johnson Matthey Plc.

Russian inventory sales dropped 68 percent to 250,000 ounces last year from 775,000 ounces in 2011, according to Johnson Matthey. Sales from state stockpiles are expected to range from “zero to several tons” in 2013, Anton Berlin, deputy chief of ZAO Normetimpex, OAO GMK Norilsk Nickel’s sales arm, told RBC TV yesterday.

“Maybe 3 tons this year, and that will be it,” Peter Duncan, general manager of market research at Johnson Matthey, told reporters in London today. Three tons is equivalent to 96,452 troy ounces. “Russian state stockpiles have been dwindling and are now pretty much exhausted.”

Shrinking Russian stockpiles at a time when output is falling helped send the metal into the biggest shortage in 12 years. Output in South Africa, the second-biggest producer, was disrupted by labor disputes and strikes, while lower grades contributed to a decline in Russia.

Palladium for immediate delivery gained 0.5 percent to $731.50 an ounce by 3:44 p.m. in London, rebounding from losses earlier today of as much as 0.6 percent. Palladium, last quarter’s best-performing precious metal, has risen 3.9 percent this year after advancing 7.5 percent in 2012.

Supply Disruptions

Palladium supply declined 12 percent in 2012 to 6.48 million ounces on the South African disruptions, Duncan said. That compared with 6.57 million ounces forecast by Johnson Matthey in a Nov. 13 report, when the company said supply would lag demand by 915,000 ounces in 2012, the most since 2000.

Platinum supply dropped 10 percent to 5.68 million ounces because of declines in top producer South Africa, coming to less than the 5.84 million ounces forecast in November, according to Johnson Matthey, which publishes research on platinum and related metals and produces catalysts that use the metals to reduce harmful auto emissions. Zimbabwe was the only major producing nation to increase output, Duncan said.

Platinum supply probably will be curbed further because of difficulties in South Africa, while autocatalyst demand is expected to stay “flat” this year, before a “much stronger” 2014, Duncan said. Platinum use in off-road vehicles will expand from about 100,000 ounces a year to several hundred thousand ounces in coming years, he said.

Global net demand for platinum grew by about 4 percent to 6.17 million ounces, down from the previously forecast 6.24 million ounces, Duncan said. Gross automotive industry demand was steady at 3 million ounces in 2012 despite Europe’s economic slump, he said.

Platinum, up 9.3 percent since the start of the year, was little changed at $1,682.99 an ounce in London today.

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