The palladium market is experiencing some turbulence as the lease rate for the precious metal has spiked in recent weeks. Analysts at RMB Morgan Stanley suggest that this increase could indicate a floor price for palladium, ranging from $975/oz to $1,000/oz. This comes as net short positions on the Nymex futures exchange have reached record levels earlier this year, providing support for the metal’s price.
However, the outlook for palladium remains uncertain due to conflicting market signals. One major concern is the supply of palladium from Russia, the world’s largest producer of the metal. Following the invasion of Ukraine, there has been a shift in metal flows, with the US embargoing Russian imports and redirecting them to China. This has led to a decrease in Chinese imports of palladium, although the US still allows imports of palladium sponge, a form often used in the industrial sector.
Sibanye-Stillwater, a major player in the palladium market, has been lobbying against US imports of palladium sponge, as it could impact the company’s production from the Stillwater mine in Montana. If the mine were to be mothballed, the price of palladium could potentially rise to $1,200/oz, according to Morgan Stanley.
Additionally, the proposed launch of a platinum and palladium futures market by the Guangzhou Futures Exchange could further impact the market by providing an outlet for Russian material. However, there are concerns about the potential launch, as issues faced with a similar lithium futures market could contribute to more confusion in the palladium market.
Overall, the future of palladium remains uncertain as market dynamics continue to shift.
