Palladium deficit to widen as junkyards sit on scrap

US scrap palladium supplies have tightened as junkyards, hoping to capitalise on higher prices, held onto used autocatalytic converters, fuelling fears about a widening market deficit as a strike in South Africa dragged on, recyclers said this week.

Falling supplies of spent autocatalysts, the biggest source of palladium after mine output, come as heightened geopolitical tensions in Russia and South Africa’s longest-ever strike reinforce concerns about a widening deficit. The two countries are the top two producers.

“At least in the short term, the strikes in South Africa may be prompting some scrap dealers to hold back their shipments of autocatalysts in the belief that higher prices are inevitable,” said Greg Roset, the manager of smelting and recycling at Stillwater Mining, the only US platinum group metals (PGMs) mine and a major recycler of the precious metals.

Yesterday, spot palladium rose for a fifth day to a near three-year high at about $840 (R8 690) an ounce, within striking distance of a 13-year high at $860. While palladium is widely used to clean exhaust fumes in petrol vehicles, pricier platinum is often the required autocatalyst fitted in diesel engines.

Bob Hansen, corporate operations manager at PGM refiner Sabin Metal, said he expected collectors sitting on spent autocatalysts to take advantage of the rally in prices, boosting secondary supply. – Reuters