Platinum and palladium prices notched lower over the last few weeks – these are two of the very few commodities that didn’t sustain the price rises caused by the conflict in Ukraine. Unlike oil, gas, and most of the base metals which are trading at new highs, platinum and palladium prices slipped recently, mainly because until now they have not been put on a sanctions list.
But this is about to be disrupted by new UK trade measures against Russia introduced this week. The UK plans on increasing tariffs on platinum and palladium imports from Russia and Belarus in a new series of sanctions targeting £1.7 billion ($2.1 billion) of trade. The UK said these sanctions are intended “to further weaken Putin’s war machine.”Russia is the world’s second largest producer of both platinum and palladium, second only to South Africa. While Belarus is not a significant producer of either of the metals the country has in the past been used as a conduit for trade which couldn’t happen directly with Russia.
The UK plays a key role in the PGM market as it is both a major importer and a major exporter of platinum and palladium. The new import tariffs will cover £1.4 billion worth of goods and bring the total value of products that have been subjected to full or partial import and export sanctions to more than £4 billion.
It remains to be seen how Russia will handle these trade measures because the country is clearly keen to keep its sales going. For instance, Putin signed a law in April requiring all Russian companies to delist their shares abroad in order to protect themselves from having too much foreign ownership, but Nornickel, the country’s giant nickel producer which produces platinum, palladium, rhodium and other precious metals as a byproduct of its nickel output, was the first Russian company granted permission to keep its foreign listing for another year.
“Going forward, markets may take a more measured approach to pricing in a geopolitical risk premium in both metals if the war continues given the situation remains volatile,” says ETF specialist WisdomTree in its monthly commodities report.
WisdomTree also notes that beyond the conflict, focus in terms of PGM metals demand will be on the automobile industry and how quickly the supply of semiconductor chips can be restored, a problem that has prevailed since last year. The tightness in the semiconductor market is slowly easing as some of the Covid-related supply chain disruptions are being resolved but things are not fully back to the pre-Covid normal. Overall, however, an increase in automobile manufacturing will bode well for demand for both metals.
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