UNITED STATES June 20 2017 1:51 PM
NEW YORK (Scrap Register): Palladium hit a 16-year high on June 9 amid market tightness, although prices have eased since on profit-taking, said Mitsubishi.
The metal rose early in the month on buying by investors and industrial users alike, pushing the forward market into backwardation. This is where nearby prices are higher than the deferred, which is the opposite of the norm, indicating buyers are willing to pay a higher price to get ahold of the commodity right away.
“While the market has eased somewhat due to investor profit taking, metal for immediate delivery continues to trade at a premium to forwards,” said Mitsubishi.
A notable feature about the recent market tightness is that it has predominantly affected ingot, which has traded at a premium to sponge in a reversal of the normal situation – this indicates that it is investment, rather than industrial demand, that is the main driver.
The firm said that the tightness in the palladium market has been building for months. This is ultimately the result of fundamental supply-demand factors; after five years of deficits and the drawdown of above-ground stocks to bridge these shortfalls, as well as projections of sustained deficits for the next several years, there have been relatively few willing sellers of palladium ingot.
However, sentiment now seems to be turning as investors look to book profit, and as some industrial users choose to purchase rather than borrow palladium – thus easing conditions in the forward market while supporting the spot price.
As of 8:01 a.m. EDT, spot palladium was up $4.90 for the day at $869.40 an ounce, although down from early-month highs above $900 an ounce.