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Palladium Spikes 23% on South Africa COVID-19 Lockdown

March 25, 2020 at 16:31 by Andrew Moran

Palladium futures are eyeing their biggest daily gain since 2001 after cratering as much as 30% during last week’s market crash. Despite the demand for the metal deteriorating, palladium is skyrocketing primarily on the 21-day lockdown in South Africa and the suspension of a major exploration program in Finland. It joins the broader market rally in the middle of the trading week as most major asset classes are enjoying a rally.

June palladium futures soared 399.40, or 22.35%, to $2,186.30 per ounce at 16:12 GMT on Wednesday on the Comex division of the New York Mercantile Exchange. It is on track for its best single-day performance in about 20 years. Palladium has surged more than 50% since last week’s market rout that saw prices plummet to as low as $1,355. Year-to-date, it remains up 15%.

Platinum, the sister commodity to palladium, is also climbing midweek. May platinum futures advanced $22.90, or 3.26%, to $724.60 an ounce. Platinum prices have also been cut in half during the financial crisis.

On Monday, South African President Cyril Ramaphosa announced that the country would be on lockdown for 21 days due to the rising number of coronavirus cases. The latest data show that the nation’s confirmed cases of COVID-19 have topped 700. The government will deploy the army and police for three weeks to ensure that 57 million citizens are complying with the order.

South Africa accounts for more than one-third of palladium supplies and it produces more than 70% of platinum worldwide. With the lockdown to impact as much as 4% of global inventories, prices are reacting favorably.

Palladium One Mining announced on Wednesday that it will suspend its exploration program in Finland.

The COVID-19 pandemic and its repercussions are continuing to evolve. The duration of capital market volatility is unclear. Suspending our exploration program early allows the Company to maintain a robust liquidity position. We will continue to monitor the situation and plan to resume the exploration program when appropriate

Palladium has become an integral metal for the automobile industry, representing about 85% of overall demand. The commodity is used in catalytic converters in gasoline-powered vehicles. By installing palladium into cars, automakers can abide by the government’s tighter emission standards. With demand outpacing supplies, palladium had been reaching all-time highs prior to the market mayhem.

If the global economy can recover, then palladium could meet earlier forecasts of $3,000.

In other metal markets, June gold futures tumbled $31.40, or 1.89%, to $1,629.40 per ounce. May silver futures added $0.0335, or 2.35%, to $14.59 an ounce. May copper futures tacked on $0.03, or 1.3%, to $2.21 per ounce.

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