Spot palladium prices hit an all-time high of $3440.76 an ounce on Monday amid supply concerns over the escalating conflict between Russia and Ukraine.
Russia accounts for 40 per cent of global palladium production, and Russian aircraft are banned from flying in most European airspace, making it harder for MMC Norilsk Nickel PJSC, the world's largest palladium producer, to transport palladium.
Giovanni Staunovo, a commodities analyst at UBS, said the airspace closure had disrupted Russia's palladium exports and that investor and consumer-led buying could further support palladium prices.
Staunovo added that palladium was in short supply for nine years up to 2020 because of its low aboveground stock, which was sensitive to the risk of supply disruptions.
Analysts at Commerzbank further warned that the disruption in palladium supply could not be remedied elsewhere and that the market could fall into a massive supply shortage.
The premium for sponge palladium used by industrial consumers is soaring, with buyers paying $15 an ounce higher than spot prices last week, according to industry insiders.
However, analysts at Goldman Sachs say Russia's palladium exports are unlikely to face much disruption unless the country takes the initiative to restrict exports. The metal can be easily exported to Asia and then re-exported to other parts of the world.
Independent analyst Ross Norman expects palladium to be further short and rising in the medium term as events unfold in Ukraine and Russia.
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