Palladium bulls rule as prices hit record on tight supply

NEW YORK – Palladium bulls are having a party.

The metal used to curb pollution from gasoline-fueled engines climbed to a record in the spot market amid signs of robust demand. In China, Honda Motor Co.’s vehicle sales climbed 16% to a record last year. General Motors Co.’s sales in the Asian nation, the company’s biggest retail market, exceeded four-million units last year for the first time.

Palladium climbed 56%in the spot market in 2017, while its counterpart in the futures market beat returns of 33 other most-actively traded commodities tracked by Bloomberg. Supplies of the metal are expected to tighten further. Palladium production will lag behind consumption until at least 2022, Morgan Stanley analysts said in a December 11 report.

Palladium inventories in warehouses tracked by the New York Mercantile Exchange shrank 25% in December, capping a fourth straight annual decline, the longest streak since 2000.

The precious metal for immediate delivery climbed as much as 3.9% to $1 128.68/oz in New York, surpassing the record $1 125 set 17 years ago, according to Bloomberg generic pricing. Palladium traded at $1 123.48 at 2:46 p.m. in New York, on Friday. On the Comex, the metal for March delivery settled at $1 105.35, after extending its climb to an all-time high.

“It’s the same supply-and-demand story that’s been driving palladium since last year,” Bob Haberkorn, a senior market strategist RJO Futures in Chicago, said in a telephone interview. “It’s the better outlook for demand, from an industrial standpoint, and the squeeze in supply” that’s making palladium outperform other metals, he said.