Palladium Hits the Pause Button After 23% Rebound

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Palladium futures are taking a breather on Thursday after their remarkable 23% rebound in the middle of the trading week. The industrial metal had plummeted more than 50% during the broader market selloff, but with global supplies anticipated to fall and demand levels are subsiding, prices pared most of their losses from a week ago. Can palladium hit its $3,000 price target this year?

June palladium futures plunged $56.80, or 2.53%, to $2,190.80 per ounce at 16:58 GMT on Thursday on the Comex division of the New York Mercantile Exchange. Palladium recorded its best one-day performance since 2001 as it soared more than 23%. Over the last five sessions, the metal has spiked 41%, lifting its year-to-date gain to about 15%.

Due to the rising number of COVID-19 cases, South Africa announced that the nation would be on lockdown for 21 days beginning Friday. To stop the spread of the coronavirus, President Cyril Ramaphosa confirmed that his government would deploy the military and police for three days to make sure that its 57 million citizens are complying with the mandates.

Health experts are warning that South Africa could be bracing for a wave of coronavirus cases. The latest number of confirmed cases sits at 709, and the death toll has reached 16. While the virus outbreak has been slow to arrive on the continent, officials say the coronavirus is spreading rapidly.

Ultimately, this is a huge development for a country that is integral in global mining. South Africa produces 35% of the world’s palladium supplies and accounts for more than two-thirds of platinum. Analysts say that the lockdown will affect approximately 4% of global stockpiles in the near-term.

A recent report suggests that the palladium market could slip into a massive surplus by the end of the year. Since automobile manufacturers have suspended production, the demand for the industrial metal will be weaker in the second quarter. As governments impose tighter emission standards, palladium has become a crucial element for automakers in recent years. The auto industry accounts for about 85% of overall demand since it is used in catalytic converters to reduce emissions. For the last several years, supplies failed to keep up with demand, but since output has been halted, the metal could catch up.

Natixis Global Markets Research Senior Commodities Analyst Bernard Dahdah told S&P Global Platts:

I wouldn’t be surprised to see an 80% drop in Europe and the US in terms of car sales and to have depressed sales for at least till June, and wouldn’t be surprised if this year will potentially be in a [palladium] surplus as a whole.

In other metal commodities, May gold futures rose $19.00, or 1.16%, to $1,652.40 per ounce. June silver futures tumbled $0.12, or 0.8%, to $14.75 an ounce. May copper futures slipped $0.025, or 1.17%, to $2.178 a pound. May platinum futures shed $9.80, or 1.31%, to $735.70 an ounce.

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