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
"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
"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
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
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.