LONDON (Reuters) – A squeeze in ready availability of automotive metal palladium has driven up already record-high prices by 25% in just two weeks, accelerating a four-year rally and stoking expectations for further gains, analysts said.
A long-term supply deficit has led prices of the metal, used mainly in engine exhausts to curb harmful emissions, to double over the last year.
Consumers’ immediate needs are often met in the lending market, in which holders of metal put their stocks to work for a profit. However, rates charged to lease palladium have spiked in recent weeks, suggesting availability is tight.
In the futures market, prices of metal for near-term delivery have also moved sharply above those for later-dated contracts – a situation known as backwardation, which also indicates buyers fear a lack of ready supply.
Spot palladium broke above $2,500 an ounce on Friday – its highest ever – from less than $500 in January 2016. Before this rally began, palladium prices had never exceeded $1,100.
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