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Supply chain disruption bigger issue to platinum, palladium than production risks

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(Kitco News) – Risks of production issues for Platinum Group metals remain relatively low. Still, the sector will continue to face significant supply disruptions because of Russia’s ongoing war with Ukraine, according to some analysts.

Tuesday, the London Platinum and Palladium Market (LPPM) said it would maintain its accreditation of two Russian precious metals refineries. According to comments from the LPPM, both JSC Krastsvetmet and the Prioksky Plant of Non-Ferrous Metals will be allowed to sell metal in the London market, the world’s largest.

“Following a meeting of the Management Committee of the LPPM last night, there will be no changes to our Good Delivery list,” the LPPM’s Chief Administrative Officer, Jane-Anne Wardley, said in a comment to Reuters. “We will obviously continue to monitor and review the situation.”

The LPPM’s move came a day after the London Bullion Market Association (LBMA) suspended the membership of six Russian precious metals refiners and removed them from the Good Delivery Lists. The LBMA made the move following strict sanctions imposed on Russia by Western countries.

Although the LPPM’s decision has reduced production risks for platinum and palladium, commodity analysts said that the precious metals still face significant challenges.

Daniel Ghali, senior commodity strategist at TD Securities, said that the production of PGMs has never been an issue. The market’s biggest problem is supply, as Russian planes cannot transport the precious metals to refineries around the world.

“The supply chain is being disrupted because of sanctions limiting transportation,” he said.

palladium surged to a new all-time high above $3,380 an ounce as Russia’s war in Ukraine has crippled the metal’s supply chain.

However, prices have come back down from their recent highs, falling below $3,000 an ounce. June palladium futures last traded around $2,975 an ounce, roughly unchanged on the day.

Investors have been paying close attention to the
palladium market as Russia represents 40% of the total global supply. The precious metal remains in a supply deficit as demand remains strong.

The supply crunch in the palladium market has the most significant impact on the automotive industry. The metal is a critical component for autocatalytic converters, used to reduce harmful emissions in gasoline-powered engines.

The conflict in Eastern Europe has had less impact on
platinum as Russia controls about 10% of the world’s supply.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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