Palladium prices fell by 3% on Thursday as concern the take-up of electric vehicles will destroy long-term demand unravelled some of the December gains that followed Britain’s expansion of sanctions on other Russian metal trade.
Commodity analysts said technical factors also played a part as palladium fell by 3% to USD 1,033 a troy ounce by 1859 GMT, its lowest since Dec. 14 when the UK restrictions were announced and the market was concerned about their possible expansion in future.
Russia, which is being punished by widening western sanctions for its invasion of Ukraine in 2022, is home to Nornickel. It has not been directly targeted by the sanctions so far, but it mines 40% of the world’s palladium.
“We had quite a big rally in palladium before the holiday, However, the price rally did not really catalyse as prices are reversing now,” Ryan McKay, a commodity strategist at TD Securities.
“Speculators, physical traders and CTAs are holding onto their short positions,” he said, referring to Commodity Trade Advisor (CTA) investment funds, which are largely driven by computer programmes.
TD Securities sees palladium prices at USD 1,050 per ounce in the first quarter.
In 2023, palladium prices fell by 39%, the metal’s deepest yearly fall since 2008.
The use of palladium in catalytic converters to reduce harmful emissions from internal combustion engines currently accounts for 80% of global demand for the metal.
The shift to battery vehicles could massively reduce demand for palladium, although some miners are working on the development of products that could boost consumption.