This palladium article may be of interest...
Mining Journal - July 17, 1998, Volume 331. No.8489
Lead Story:
Russia banks on palladium
"Russia's central bank chairman Sergei Dubinin revealed this week that a procedure has been worked out (agreed by the government and President Yeltsin) whereby Russia can use its reserves of palladium and other precious metals as collateral for raising money.
Russia provides around two-thirds of world palladium supply and its stockpile of the metal, held by the central bank, is believed to be very large. Clear limits have been set as to how much palladium can be used as collateral and for what period, and Mr. Dubinin said that using the metal for this purpose would enable the central bank to top up its hard currency reserves quickly.
He emphasised, however, that the strategy had been carefully worked out so as not to destabilise the palladium market. At present the central bank is selling roubles and buying hard currency from commercial banks and Mr Dubinin expects this to continue - using palladium as collateral would be an emergency measure only. He noted that the central bank does not include palladium when assessing Russia's gold and currency reserves.
World demand for palladium has doubled over the past six years with global offtake in 1997 amounting to 7.46 moz. Demand has been driven, mainly by the rapid growth in palladium's use in autocatalysts (3.1 Moz last year compared with 0.35 Moz in 1991) and a 25% increase in its use in electronics (2.5 Moz). The spot price in 1997 climbed to an 18-year high of US$245/oz but earlier this year, free market palladium soared to a record US$417/oz, mainly because Russia was withholding metal from the market, reportedly because of 'bureaucratic confusion'.
Russia's precious metals export agency, Almazjuvelirexport, did make some offers during the first week of June and July but the agency has yet to propose prices and conditions for long-term sales contracts with its main customers, the Japanese (who account for more than 30% of total demand), and traders in Tokyo now doubt that it will do so. They anticipate that Russia will prefer to use palladium as loan collateral rather than sell the metal on term contract at unsatisfactory prices.
Despite glasnost, Russia's palladium production and exports remain a closely guarded state secret. It is known, however, that exports have risen steeply during this decade. Johnson Matthey, the leading Western refiner of platinum group metals, estimates that palladium exports have increased from less than 2 Moz in 1990 to a peak 5.6 Moz in 1996.
Last year, it estimates that Russia contributed around 4.8 Moz or approximately 66% of the world's palladium supply. There is only one significant primary producer in Russia, Norilsk Nickel, and Johnson Matthey suspects that its annual production is around 2 Moz. Hence the balance of Russian supply last year must have been derived from stocks. Since 1996, the central bank has held most of the stockpile, which is believed to hold sufficient metal to sustain exports at recent levels for several years to come.
If, as suspected, Russia chooses not to enter into long-term sales contracts with its major customers this year, the supply uncertainty should ensure that the palladium market remains firm. However, most traders doubt that the market will overheat. They note that Japan's demand in the electronics sector fell by 10-15% in the first half of 1998 as a result of an ailing economy and the high palladium price, and whilst price support is expected at US$250/oz, any rise above US$350/oz is deemed unlikely. The current spot price is around US$300/oz."
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