EDITORIAL & OPINION — FACTS ‘N’ FIGURES — Russian palladium supplies up

Supplies of palladium from Russia rose by 1.15 million oz. to a record 8.4 million oz. in 1998. Meanwhile, exports of palladium from that same country rose by 1 million oz. to reach 5.8 million oz. — the highest annual total ever recorded, despite a gap in sales of nearly four months at the beginning of the year.

When deliveries resumed in late April, they were sporadic, and prices remained volatile. Regular shipments of palladium commenced in mid-year and, thereafter, state-exporter Almaz appeared to adjust sales in response to price movements. As a result, palladium settled into the US$270-$300 range for the second half of the year.

Russian sales eased in early December, but Almaz was an active seller in the final two weeks of the year. Despite this, the price rose during this period. We believe some of the metal was sold to consumers building stocks in anticipation of supply problems in 1999, and a significant amount of palladium was taken off the market by speculators. Official statistics later revealed that just over 1 million oz. of palladium had been shipped to Switzerland in December, though it is not clear if all of this metal was sold during 1998.

Supplies from Russia last year came overwhelmingly from two sources: current production at Noril’sk Nickel and stocks held by the central bank. As in 1997, Noril’sk Nickel was granted its own export quota and permitted to sell its palladium output directly to consumers, using Almaz as its agent. However, production, estimated at 2.5 million oz., exceeded the initial quota.

Last year, we estimate that sales from stocks held by the central bank exceeded 3 million oz. Since 1996, when the bank acquired most of the government’s palladium reserves, withdrawals have totalled at least 9 million oz. There was further disruption to supplies in early in 1999, but steps are being taken to reduce the likelihood of interruptions in the future.

— The preceding appeared in Platinum 1999, a publication of metals analyst Johnson Matthey.