Palladium Tops $1,900 as South Africa Power Cuts Fuel Supply Woe
South Africa, the world’s biggest producer of platinum and No. 2 palladium supplier, is facing a sixth day of rolling blackouts.
Palladium surged to a record, topping $1,900 an ounce, after South African mining companies halted operations in response to the country’s power cuts. Platinum also rose.
South Africa, the world’s biggest producer of platinum and No. 2 palladium supplier, faced a sixth day of rolling blackouts Tuesday. State utility Eskom Holdings SOC Ltd. is struggling with breakdowns at plants and heavy rains that have soaked coal used as fuel.
“Tight supply that potentially could get even tighter due to production problems in South Africa helps provide the underlying support,” said Ole Hansen, head of commodity strategy at Saxo Bank A/S.
Palladium may “pause at $1,900 given some technical resistance, but overall the price could go higher,” he said.
A spokesman for miner Sibanye Gold Ltd. said the company resumed some mining operations Tuesday afternoon while some power shortages remain. Impala Platinum Holdings Ltd. said it resumed mining operations after power was restored.
Palladium rose to as high as $1,905 an ounce on Tuesday in the spot market before paring gains to $1,898.96 at 5 p.m. in New York, according to Bloomberg generic pricing. Prices climbed for 13 straight days through Tuesday, the longest stretch since mid-2014. Futures for March delivery on the New York Mercantile Exchange rose 0.7% to settle at $1,869.10.
Spot platinum surged 3% to $921.90 an ounce. Gold and silver also rose.
Palladium’s Records
Palladium has smashed through new records over the past two years because of limited supply and higher demand for the metal, which is used in autocatalysts that reduce emissions from gasoline-fueled vehicles. The car industry has boosted purchases to meet stricter air-quality rules, sending prices up about 50% this year.
Automakers are not that price sensitive given how little palladium contributes to their total costs, said Hansen.
“The demand has been really strong on palladium, and any kind of hiccup in supply coming on line has been a knee-jerk reaction for palladium prices,” Phil Streible, senior market strategist at RJO Futures, said by phone Tuesday.
Citigroup Inc. sees palladium prices jumping to $2,500 by mid-2020 because of a persistent supply deficit. There are no signs of substitution with cheaper platinum or significant amounts of scrap metal coming to market, the bank said.
Analysts have been less bullish on the outlook for platinum, given weaker demand for the metal, mainly used in autocatalysts for less popular diesel vehicles. Prices are up 16% this year, helped by investment buying.
Longer term, platinum may benefit from Asia’s push for fuel-cell electric vehicles, which use platinum catalysts in the electrodes, according to a report this week from precious metals refiner Heraeus Holding GmbH.
--With assistance from Ranjeetha Pakiam, Justina Vasquez and Steven Frank.
To contact the reporters on this story: Elena Mazneva in London at emazneva@bloomberg.net;Justina Vasquez in New York at jvasquez57@bloomberg.net
To contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net, Joe Richter, Luzi Ann Javier
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