NEW YORK The palladium market will likely be tight next year due to growing global automotive production, supply setbacks in South Africa due to labor disruptions and a shrinking Russian government stockpile of the material, according to a top executive at Norilsk Nickel USA Inc., a subsidiary of Russias OAO MMC Norilsk Nickel.
"We see growth continuing in the automobile market, certainly," vice president Bob Lapple told AMM on the sidelines of ETF Securities Ltd.s annual precious metals conference in New York, with higher output in the United States and emerging economies offsetting an expected decline in European production.
At the same time that automotive output is expected to grow, production of palladiumthe main industrial use of which is in catalytic convertershas been constricted this year due to labor disruptions at South African platinum producers, who mine palladium as a by-product.
"If you look at freshly mined metal plus recycling and subtract out demand, you have a deficit," Lapple said.
Bart Melek, head of commodity strategy at Toronto-based TD Securities Inc., estimated in late October that about 600,000 ounces of precious metal group production has been lost this year due to the strikes in South Africa, with the result that the market will be in a deficit this year and next, according to AMM sister publication Metal Bulletin.
In past years, a stockpile of the metal held by the Russian government added significantly to world supply, but Lapple said indications are that those stocks are falling.
"Theres been less and less delivered (from the stockpile). The guess is, its dwindling," he said.
Palladium production from Norilsks nickel mines, where the metal is mined as a by-product, is expected to be steady in 2013, according to Lapple.
The company produced 1.38 million ounces of palladium during the first half of 2012, according to its latest production report.
While Lapple declined to give a price forecast, he said the expectation is of a "firm" market next year.
Russia and South Africa are the largest producers of palladium, estimated at 2.73 million ounces and 2.51 million ounces, respectively, in 2011, according to data from the U.S. Geological Survey.