Palladium prices to increase, despite Russia Ukraine invasion

If Russia invades Ukraine, the mining industry might target economic penalties. An invasion may push palladium prices as high as $2,700 an ounce. In terms of palladium supply, Russia’s mining industry is “critical,” with the country’s mine output accounting for around 40 percent of worldwide mine production, according to statistics spanning back to 2010.

Palladium prices to increase, despite Russia Ukraine invasion

Experts predict that the Palladium price will continue to increase regardless of whether Russia, the world’s biggest producer of the metal, invades Ukraine or not soon. Palladium futures have risen to their highest level in more than four months.  After annexing Crimea in 2014, there are rumors that Russia is planning another invasion of its neighbor.  Russia has stockpiled over 100,000 soldiers on the Ukrainian border, increasing fears of a new attack.

Factors determining Palladium price

In the next week, palladium futures are expected to post a rise of almost 13 percent, and they are already trading about 24 percent higher year to date.  The sort of sanctions on Russia that are applied will determine how high the metal price (Palladium price) will rise.  Suppose financial sanctions are imposed on Russian entities that restrict their access to European and American banks and payment systems and vice versa.  In that case, this will undoubtedly result in friction, delays, bottlenecks, and an increase in the cost of purchasing Palladium from Russian producers.  The metal would “still be able to come out of the nation” towards the end of the day, and Palladium prices would get a “limited lift” as a result, he added, which would ultimately be countered by profit-taking by investors who are riding the present boom.

While “blanket prohibitions” that prevent European and North American companies from purchasing Russian Palladium, which seem improbable, would have “exceptionally high price upside” for Palladium.  They would have an “exceptionally strong Palladium price downside.” Because Palladium is used in automobile parts, if that were to happen, there would also be a “genuine risk” to vehicle production volumes, which would be highly detrimental to the automotive industry in the Western world.  As a result, it is unlikely that something as dramatic as this would occur.  However, even if there is no all-out confrontation between Russia and Ukraine, Palladium prices would continue to rise more slowly and with more volatility than expected.

Supply Shortage affecting Palladium Prices

Palladium has been suffering from a supply shortage for some years, contributing to the metal’s general price increase during the previous six years.  Last year, however, was an anomaly, with futures prices for the metal falling by around 22 percent.  They are credited to a reduction in global manufacturing, especially car manufacturing, due to COVID-19.  South Africa, another significant palladium producer, is experiencing infrastructural difficulties.  The nation’s infrastructure, including electrical supply, is deteriorating.  This has a substantial impact on the mining industry and its output.  This has a severe influence on the mining sector and its production.

Meanwhile, the notion that the transition to electric vehicles would result in a surplus of palladium supplies for the foreseeable future is a “gross miscalculation,” according to the report.

Due to rising tensions between Ukraine and Russia, the top metal producer gathered soldiers along the border; Palladium, a metal primarily used in catalytic converters, rose to its highest price in four months, with merchants scrambling to secure supply.

The metal gained 8.3% during the session, increasing the year’s gain to almost 25%.  Russia said it would not attack Ukraine’s territorial integrity and independence.  Since last year, Palladium’s fortunes had taken a dramatic turn when it was the worst-performing major commodity.  This year’s Palladium price decline was due to the effect of the semiconductor shortage on auto manufacture.

Fluid trading resulting in rapid Palladium price changes

This suggests that supply is becoming constrained.  Palladium trading is fluid, resulting in rapid price changes.  As a result of the recent shift, hedge funds trading New York palladium futures may have also been caught off guard, with trading commitment data as of Tuesday last week indicating short interest approaching its highest level since 2018.  Market participants seeking to settle their holdings would be obliged to purchase the metal at much higher costs.

Russia accounts for around 40% of the world’s newly mined Palladium.  A confrontation involving Ukraine is not expected to result in restrictions against metal exports, and there is no sign that this will be the case.  Further sanctions on Russia’s top banks are considered by the United States and the European Union.  The country’s capacity to convert rubles into US dollars in the case of an invasion is also being considered, which might impact exports.

An effort is also being made at the diplomatic level to avert any possible dispute.

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