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. Last Updated: 07/27/2016

Fears of Russia's Intentions Help Drive Metal Prices Up




LONDON -- Growing demand from car manufacturers and market jitters over Russia's export intentions have pushed spot palladium and rhodium prices to near contract highs, dealers and analysts said Wednesday.


"Palladium has had a fear factor built into it because of the Russian export situation, but it's becoming less of a Russian story and more of a car company story as time goes on," Ross Norman of Precious Metals Research said.


Spot palladium, used in the production of catalytic converters for car exhausts, equalled its Dec. 30, 1999, all-time high of $453 a troy ounce Wednesday morning in Europe and was subsequently fixed at $450 in London.


The price has risen in the past three years because major supplier Russia has not signed necessary export licenses until the second half of the year.


Russian metal was available in the second half of last year and continues to be offered, but increasing car sales have left manufacturers clamoring for more metal in recent months.


"Car manufacturers couldn't have forecast the sustained level of sales they're enjoying," Norman said.


Around 4.5 million ounces of palladium were used in production of autocatalysts in 1998. Total world supply of the metal was 8 million ounces, 5 million of which came from mines and 3 million from Russian strategic stockpiles.


"Industrial demand is so strong that I think palladium will go to $470 before it reaches a plateau and drifts back," a dealer in London said.


"All we can do is focus on the big round numbers, and $500 is the next obvious one," Norman said.


Rhodium was offered at $1,050 a troy ounce by Johnson Matthey on Wednesday morning, its highest since late 1993.


Rhodium is used along with palladium in autocatalysts, so is being driven higher by the same demand factors.


But Russian material was absent from international markets for much of 1999 because of a badly worded law which inadvertently banned exports of platinum and rhodium.


Russia's acting President Vladimir Putin cleared the way for exports to begin again last week, but metal has yet to appear.


"I would have expected to see Russian rhodium by now, but even when it appears the strong demand should keep prices at high levels," a dealer said.