Palladium and platinum rally on Russia

Kanish Chugh

Global X ETFs Australia

As Russia’s war in Ukraine continues, investors are starting to wonder what global trade without Russia will look like.

In particular, investors are wondering what will happen in commodities markets where Russia is often a crucial player. Palladium and platinum are two common queries.

Russia is the most important producer of platinum and palladium. Moscow mining giant Nornickel is the world’s biggest producer of both elements. Last year, Russia produced 40% of global palladium, and 10% of global platinum. (South Africa is the largest producer of platinum, with Russia coming second).

Source: US Geological Survey, 2021

Their chemical properties – high melting points, inert – mean platinum and palladium are extensively used in industry. Their biggest use is in car catalysts, where they scrub pollutants from car exhaust fumes. But other uses include electrolysers, where platinum catalysts help break down water into hydrogen and oxygen. Dentistry, where palladium is used to make crown and bridge restorations. And semiconductors, thanks to platinum’s high electrical conductivity.

Not only are they widely used, platinum and palladium are difficult to replace or substitute.

While rhodium can be used in car catalysts in place of palladium, rhodium is less commonly mined, and making the substitution requires carmakers to alter their manufacturing processes. Aside from rhodium, there are no clear substitutes for car catalysts.

Given Russia’s central role in their production, ejecting Russia from global trade could impact supply and ultimately prices—especially of palladium. The repercussions could be felt throughout the value chain, effecting everything from the car industry to glass making to medical equipment. 

Source: Bloomberg, data from 1 January – 3 March 2022

More problematically, sanctions could create opportunities for countries that do not comply – possibly China, which abstained on the UN Security Council vote – to scoop Russian palladium and platinum up on a discount.

It is too early to know the full extent of sanctions NATO countries will apply to Russian companies, and how they may effect Russian platinum and palladium exports long term. And too early to know which countries will fully comply with whatever the final list of sanctions turns out to be. (India, for example, ignored US sanctions on Iran for years, creating windfall profits for Indian companies). But markets are reacting nonetheless.

Palladium has rallied strongly this year and is up 35% in Aussie dollars as of 28 February. This constitutes a sharp reversal of fortune from 2021, where it was among the worst performing commodities. Platinum has posted a more modest 12% rally year to date, again in Aussie dollars.

Should the war drag on or escalate, supply and prices could be further impacted.

Investment options

For those wishing to trade platinum or palladium, ETFS provides two ETFs, which are 100% physically backed by platinum and palladium. They are the only products of their kind in Australia.

ETFS Physical Platinum (ASX code: ETPMPT)

ETFS Physical Palladium (ASX code: ETPMPD)

ETFS Metal Securities Australia Limited (MSAL) is a Corporate Authorised Representative (CAR No: 001274650) under the ETFS Management (Aus) Limited AFSL. (AFSL No: 466778). ETFS Metal Securities Australia Ltd is a member of the ETFS Capital Group and is the issuer of the Prospectus for the ETFS Physical Platinum (ETPMPT) and ETFS Physical Palladium (ETPMPD). Before considering an investment in these products, investors should obtain a copy of the Prospectus from ETFS Management (Aus) Limited. Investments in any product issued by the ETFS Capital Group are subject to investment risk, including possible delays in repayment and loss of income and principal invested. Neither ETFS, ETFS Capital Limited, ETFS Metal Securities Australia Ltd nor any other member of the ETFS Capital Group nor any of their respective directors, employees or agents guarantees the performance of any products issued by the ETFS Capital Group or the repayment of capital or any particular rate of return therefrom. The value or return of an investment will fluctuate and an investor may lose some or all of their investment. Past performance is not a reliable indicator of future performance. Livewire gives readers access to information and educational content provided by financial services professionals and companies (”Livewire Contributors”). Livewire does not operate under an Australian financial services licence and relies on the exemption available under section 911A(2)(eb) of the Corporations Act 2001 (Cth) in respect of any advice given. Any advice on this site is general in nature and does not take into consideration your objectives, financial situation or needs. Before making a decision please consider these and any relevant Product Disclosure Statement. Livewire has commercial relationships with some Livewire Contributors.

Kanish Chugh
ETF Specialist & Head of Distribution
Global X ETFs Australia

Kanish Chugh is responsible for distribution covering sales and marketing strategy for institutional, intermediary and retail clients. He joined Global X ETFs Australia in 2015 and has previous experience with Fidelity International, BlackRock and...

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