LONDON: Palladium prices hit 13-year highs on Friday, driven by expectations that South African supply will remain constrained after a lengthy strike and that demand from Chinese and US carmakers will improve.
Spot palladium hit a high of $865 an ounce, its highest since February 2001, and was up 0.9 per cent at $862.25 an ounce.
Holdings of palladium-backed exchange-traded funds - popular investment vehicles which issue securities backed by physical metal - have risen to a record 2.55 million ounces this week, suggesting investors’ appetite for the metal is firm.
Inflows have been particularly strong into the South Africa-listed AfricaPalladium ETF launched by Standard Bank in March.
South Africa, the second-largest producer of palladium after Russia, was hit by a five-month miners’ strike earlier this year, the longest in its history, which helped support prices of both palladium and its sister metal platinum.
Interest in the metal, used in catalytic converters in vehicle engines, has also been buoyed by firm car sales data from China and the United States, analysts said.
“Data from the United States this week was very reassuring, showing car sales continued to be strong,” Mitsubishi analyst Jonathan Butler said. “That’s a gasoline market, so strength in vehicle sales almost directly translates to strong palladium demand.”
Gasoline-powered vehicles carry a heavier loading of palladium in their catalytic converters.
A report on Tuesday showed US auto sales in June hit levels not seen since before the financial crisis that led to the bankruptcy of two US automakers.