Spot palladium prices hit an all-time high of $3,440.76 an ounce on Monday amid supply concerns over the escalating conflict between Russia and Ukraine. As of press time, the commodity index turned down more than 1%.
Russia accounts for 40 per cent of the world's palladium production and most European airspace is closed to Russian aircraft, making it harder for MMC Norilsk Nickel PJSC, the world's largest palladium producer, to ship the metal.
Giovanni Staunovo, commodities analyst at UBS, said the airspace closure had disrupted Russian palladium exports and investor - and consumer-led buying could further support prices.
Palladium has been in short supply for nine years until 2020, Staunovo added, as it is sensitive to the risk of supply disruptions due to low aboveground stocks.
Analysts at Commerzbank further warned that palladium supply disruptions could not be made up elsewhere and that the market was at risk of a major shortage.
Premiums for sponge palladium, used by industrial consumers, are soaring, with some buyers last week paying $15 an ounce more than spot prices, according to industry sources.
However, Analysts at Goldman Sachs said Russian palladium exports were unlikely to face much disruption unless the country voluntarily restricted exports. The metal could easily be exported to Asia and then re-exported to other parts of the world.
Ross Norman, an independent analyst, expects the rally to continue in the medium term as developments in Ukraine and Russia lead to further shortages.
