LONDON – The price gap between palladium and its sister metal platinum needs to shrink as number one platinum producer South Africa requires a higher price for the metal to keep investing in new supply, Russia's Norilsk Nickel said.
Norilsk is the number one producer of palladium, accounting for more than 40% of global output, and is also a leading supplier of platinum. Both metals are used to curb harmful emissions from cars.
While palladium prices have soared by more than a third in the last five years, platinum has slumped by more than 40%. It is now around $490 an ounce cheaper than palladium, against an average premium over the last 30 years of $435.
Neither metal is likely to see any major growth in global supplies within six years, after which new projects from Nornickel and other miners will start producing, the Russian firm said.
"There is some growth in production from 2025, while consumption will be rising for all upcoming years," Anton Berlin, head of Nornickel's marketing department, told Reuters.
More than half of global platinum group metals (PGMs) come from ore containing a mix of other minerals such as copper, nickel, gold and silver, like that found in Nornickel's Arctic assets. Their production cannot be increased sharply.
Growth in PGMs demand from autocatalyst makers will continue over the coming years, Berlin said.
He expects hybrid cars, which use catalysts in their internal combustion engines, to further support demand along with tougher emissions regulation in China and Europe.
On the subject of stockpiles, a long-standing wild card in the palladium market, Berlin said the status of a significant proportion of above-ground palladium stock remained opaque.
Accumulated stockpiles around the world are difficult to estimate because the Soviet Union, which ceased to exist in early 1990s, did not disclose its production, domestic consumption or exports.
According to some analysts' estimates, a significant amount of the Soviet stockpile was sold abroad by the Russian government in the 1990s to raise cash.
Estimates of global palladium stocks vary from 2.5 million troy ounces to 25 million ounces, Berlin said, though no-one could pinpoint them for sure.