Palladium prices have skyrocketed following the United States’ proposal to the Group of Seven (G7) nations for sanctions on Russian minerals to cut off Russia’s war funds.
This price surge is attributed to heightened market anxiety and increased demand due to concerns over supply restrictions.
As of Friday, industry sources report that palladium prices rose by 9.5% after the U.S. requested the G7 to consider sanctions on Russian palladium and titanium on October 22.
The Biden administration introduced this sanction proposal during a G7 deputy finance ministers’ meeting in Washington, D.C., on October 22. It is seen as an effort to pressure the Russian economy further as the invasion of Ukraine extends into its third year.
However, the actual implementation of these sanctions remains uncertain, given that palladium and titanium are essential minerals used across various industries. Western nations have expressed concerns over potential disruptions in the raw materials market and the risk of supply chain breakdowns.
G7 members like Germany, France, and Italy would need to secure agreement from other European Union (EU) nations to enforce these sanctions. While the U.S. has already included Russian palladium on its sanctions list, many sectors still depend heavily on it. For example, Russia is the world’s leading palladium producer, accounting for 44% of global production last year. Due to its low production costs, the Russian company Nornickel retains its dominant position in the global market. Palladium is primarily used as a catalyst to reduce automobile exhaust emissions, making it a vital resource for the automotive sector.
In response to the potential sanctions, stock prices of South Africa’s four major palladium producers surged by over 10%. South Africa is the second-largest palladium producer globally.
Sibanye-Stillwater, a leading South African firm, recently announced plans to cut production at its U.S. mines due to declining palladium prices. Since early last year, palladium prices have plummeted by approximately 37%, driven by the global economic slowdown and manufacturers’ depleting inventories.
However, Daniel Ghali, a senior commodity strategist at TD Securities, noted that the risk of sanctions has “reignited buying activity,” with commodity traders increasingly taking bullish positions on palladium. Dan Smith, head of research at Amalgamated Metal Trading, predicted that South Africa and other major producers would face difficulties filling the gap that Russian palladium left. He warned that the potential absence of Russian palladium from the market could significantly pressure the industry.
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