Norilsk Nickel Taking Action to Prevent Palladium Deficit

Norilsk Nickel plans to increase its purchases of palladium from Russian central bank reserves due concerns about a shortage.

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Norilsk Nickel (MCX:GMKN) plans to increase its purchases of palladium from Russian Central bank reserves due to concerns about a shortage.  

The company has a fund through which it buys palladium from Russian central bank reserves and other suppliers, not to stockpile but to fill orders.

Markus Meurer, the company’s head of global sales and marketing, told Reuters on Monday (November 20) that Norilsk’s 2017 purchases will increase to about 600,000 ounces compared to 160,764 ounces in 2016 to “make the metal available to our key industrial users.” 

He added that “the market is very tight.” Indeed, the price of palladium, which is used in the autocatalysts of gasoline-powered vehicles, has risen 45 percent in 2017. The metal’s price broke $1,000 per ounce in October, and rose above its sister metal platinum in September for the first time since 2001; in contrast, the platinum price has risen only 5 percent so far this year. 

Earlier this year, Johnson Matthey (LSE:JMAT) forecast that global auto demand for palladium will exceed 8 million ounces for the first time in 2017, widening the supply deficit to 792,000 ounces. Anton Berlin, Norilsk’s head of strategic marketing, reportedly said the global market deficit will reach 1.8 million ounces in 2018.

In a presentation last Friday (November 17), Norilsk, which is the world’s top palladium producer, said it is completing a feasibility study for its South Cluster project, which could add more supply to the market. 

According to the company, South Cluster has the potential to become one of the top five producers of platinum-group metals in six to seven years’ time based on its reserve base. A final investment decision on South Cluster is expected in H1 2018.

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Securities Disclosure: I, Melissa Shaw, hold no direct investment interest in any company mentioned in this article.

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