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Norilsk Nickel sees palladium deficit in 2012 due to low supply
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Saturday, 03 Dec 2011
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Reuters reported that Norilsk Nickel expects auto catalyst metal palladium to be in a deficit in 2012 due to sharply lower Russian supplies.

Mr Anton Berlin marketing director at Norilsk Nickel told Reuters that in addition, global mine output has slowed due to rising production costs and insufficient mining capacity. The stockpile owned by Russia, the world's No 1 supplier of the industrial metal, is dwindling. He added that "We believe that the stock is almost depleted."

Mr Berlin said that his view was based on a Russian media report earlier this year. The report cited a Ministry of Finance source who forecast Russian exports to be 150,000 ounces annually for both 2012 and 2013, which would be small amounts.

Russia does not disclose the size of its palladium stockpile. Market speculation about any alleged Russian palladium shipment or the lack of it often leads to volatile price swings.

In May 2011, Russia's Gokhran state repository said it had sufficient palladium stocks to continue exports in 2012, and it also planned to melt down some reserves to improve their quality.

Mr Berlin said that "For 2012, we will be in a deficit. The biggest driver is the government stockpile, which is being withdrawn from the equation. It's an important part of the supply."

Platinum group metals specialist and refiner Mr Johnson Matthey said in November 2011 that palladium will enter 2012 in a deficit. That is in contrast to 2011, which has the biggest market surplus in four years as supply exceeded demand.

Mr Berlin said that he expects the growth of palladium consumption to roughly double that of mine supply during the next five to 10 years. Falling industry supply is highlighted by the fact that it takes about 18 months to turn the raw metal ore into refined palladium. In addition, some palladium mining companies are not profitable or operating very close to the cost of production after the metal's recent pullback.

On the state of the global auto industry, Mr Berlin said that it has recovered from the economic crisis of 2008. Norilsk is forecasting a 5 % industry growth. Consumption by the auto industry represents more than half of global demand in 2011.

Mr Berlin said that industrial demand could receive a boost if sales of new products such as Blue ray DVDs improve. Each Blue ray DVD consumes a trivial amount of palladium.

(Sourced from www.reuters.com)

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