The palladium price jumped on Thursday as Russian forces invaded Ukraine after President Vladimir Putin authorized what he called a special military operation.
Spot palladium added 2.7% to $2,549.01 an ounce, having earlier reached its highest since August 2021.
(Click here for an interactive chart of palladium prices)
Moscow-based Nornickel is the world’s largest producer of palladium and platinum, both of which are used in catalytic converters to clean car exhaust fumes.
Russia produced 2.6 million troy ounces of palladium last year, or 40% of global mine production, and 641,000 ounces of platinum, or about 10% of total mine production.
While it was “still too early” to tell if supply issues would materialize, “if we see a set of sanctions that reduce financing and free flow of the material to the rest of the world, we could see a significant tightening of conditions for palladium probably in the not too distant future,” said Bart Melek, head of commodity strategies at TD Securities.
Platinum group metals could see a “pretty significant rally” with palladium likely to reach record highs seen last year over $3,000 an ounce, Melek added.
It’s a sharp reversal in fortune for palladium, which was the worst-performing major commodity in 2021. The impact of the semiconductor shortage on car production soured the demand outlook, causing prices to plummet in the second half of the year. Only iron ore, hit by China’s property market crisis, and silver have come close in terms of losses.
Shares in mining companies with operations in Russia were among the first to feel the impact of Moscow’s wide-ranging attack on Ukraine on Thursday, while oil topped $105 a barrel and investors rushed to buy gold and other safe havens.
(With files from Reuters and Bloomberg)