Russian Palladium Flows to Switzerland Jump on Sanction Concerns

Russia’s palladium exports to Switzerland climbed to an 11-month high in April, a month after the biggest supplier of the metal annexed Crimea in a standoff that sparked warnings of tougher sanctions from western nations.

Switzerland imported 2,158 kilograms (2.2 metric tons) of palladium from Russia in April, the most since May 2013, data sent today by the Swiss Federal Customs Administration show. That compares with 201 kilograms in March. Increased exports from Russia may continue, according to John Meyer, an analyst at SP Angel Corporate Finance LLP in London.

Palladium climbed to the highest price since 2011 this month as a strike since January in second-largest producer South Africa curbed output and as the U.S. and European Union threatened Russia with additional sanctions. Russia, which typically exports the metal to Switzerland for storage, has probably ended sales from government stockpiles that accounted for as much as 14 percent of total supply four years ago.

“The rise in exports out of Russia was in anticipation of potential sanctions,” Meyer said today by phone. “Not just industrial buyers, but investors were all very keen to get ahead of potential sanctions. There still may be sanctions.”

Palladium for immediate delivery climbed 16 percent to $831.25 an ounce in London this year, according to Bloomberg generic pricing. It reached $839 on May 22, the highest since August 2011. The metal is mainly used alongside platinum in pollution-control devices in vehicles.

Russian Standoff

While the EU in the last two months has frozen assets of scores of Ukrainians and Russians accused of fueling unrest and two energy companies that were expropriated by Russia when it annexed Crimea, Europe hasn’t imposed any sanctions that would block trade with Russia. Petro Poroshenko’s victory in Ukraine’s May 25 presidential election relieved the immediate pressure on the U.S. and the EU to impose tougher penalties.

Russian mine output will decline 1.6 percent this year and the country won’t sell any palladium from state stockpiles, Johnson Matthey Plc estimates. Sales from the inventories, a government secret, totaled as much as 1 million ounces (31 tons) in 2010, according to the London-based company. Russia is preparing to buy metal from local producers, Interfax reported on May 16, citing the head of the state metals depositary.

Swiss palladium imports from Russia averaged about 224 kilograms a month from June to March, and totaled 4,861 kilograms in May last year, the Swiss customs data show. Swiss inbound shipments of platinum were 201 kilograms last month and were little changed since February.

ETP Holdings

Holdings in palladium- and platinum backed exchange-traded products climbed to records last week, data compiled by Bloomberg show. Standard Bank Group Ltd. and Absa Bank Ltd. listed the first palladium-backed funds in South Africa in March and source the metal locally.

“We expect there to be an increase in investment demand into platinum and palladium ETFs,” Meyer said. Demand for palladium may also have increased because of stricter European emissions standards, he said.

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