Palladium Prices Retrace; shortage of semiconductors persists
the Monthly Automotive Metals Index (MMI) rose 8.1% as palladium prices surged earlier this month and renewed COVID-related restrictions in China impacted automotive business.
COVID restrictions in China curb production
As many parts of the world have begun rolling back COVID-related restrictions, a resurgence of cases in parts of China has led Beijing to step up mitigation efforts.
In line with its zero COVID policy goals, the cities of Changchun and Shenzhen have shut down in response to an increase in COVID cases.
MetalMiner covered the shutdowns in this week’s weekly newsletter.
“China has announced additional COVID-related lockdowns, in particular half of Shanghai being closed now (the other half is set to close on April 1),” MetalMiner CEO Lisa Reisman and Vice-President Don Hauser explained. President of Business Solutions. “Additionally, the country has shut down manufacturing in Shenzhen and Changchun City. Tesla announced that it would stop for four days in Shanghai. Lockdowns slow economic growth, as exports will slow (despite keeping ports open).
Be sure to keep up to date with metal commentary and analysis from the MetalMiner team in the weekly newsletter.
The closures have affected a number of automakers that operate there, including Toyota and volkswagen.
Palladium prices soar in early March
As we continue to follow the impacts of the Russian-Ukrainian war, one metal we have focused on is palladium.
Palladium (and platinum) are essential components for automotive exhaust systems. In addition, Russia accounts for around 40% of the world’s palladium production.
The price of palladium jumped to nearly $3,200 an ounce in early March on the heels of Russia’s invasion of Ukraine.
While countries around the world have imposed various sanctions on Russia, the London Platinum and Palladium Market has not announced any changes to its Good Deliveries list.
“Due to the terrible events unfolding in Ukraine, the LPPM has reviewed its Good Delivery List and US, EU and UK sanctions,” the LPPM said in a statement on March 8. “As a result of this review, it has decided to make no changes to the Good Delivery list.
“We will, however, continue to monitor and review the situation.”
Since then, however, the price has pulled back significantly. The price of palladium fell by almost a third, closing at $2,165 per troy ounce last week.
MetalMiner co-founder Stuart Burns spoke about the impact of war on the automobile.
“For example, Renault closed its Moscow plant due to a lack of parts,” Burns wrote. “Many manufacturers have voluntarily closed factories in Russia, including Toyota, Mercedes-Benz, hyundai, Ford and BMW. Cross-border trade in auto parts is rapidly drying up.
“At some point, carmakers in Western Europe could also be affected by a lack of palladium supply. Russia produces around 40% of the world’s supply. South Africa is the second largest producer. However, South Africa does not have the capacity to scale up to cover the deficit.
“Inventories are also not large enough to support industrial users during an extended outage. A shortage of semiconductors hit global car production last year. However, automakers have increased production by finding workarounds. Some customers have taken delivery of new found vehicles with compromised capabilities from the specifications ordered.
Rise in semiconductor sales in early 2022
Despite reports of a continued shortage of semiconductors, global semiconductor sales rose year-over-year in January.
Global semiconductor sales reached a value of $50.7 billion in January, the Semiconductor Industry Association reported. This represents a 26.8% year-over-year increase. However, the January total was down 0.2% from December 2021.
“Following record sales and units shipped in 2021, global semiconductor sales remained strong at the start of 2022, reaching the second-highest monthly total on record in January,” said John Neuffer, president and chief executive officer. the management of SIA.
While global sales were robust in January compared to a year ago, the continuing shortage of semiconductors continues to hamper auto production.
Unfortunately for automakers, semiconductor supply chain challenges are unlikely to be resolved any time soon.
“The duration of the chip shortage comes down to one overriding factor: a significant increase in demand, driven by digital transformation and accelerated by the pandemic,” Deloitte said in a December 2021 review of the semiconductor shortage. . “And consumer devices aren’t the only thing, or even the main one, driving that demand. Every mechanical product in industry is becoming more and more digital and every vertical sector is becoming more and more dependent on digitalization.
As for the timing, Deloitte expects the shortage to continue at least this year.
“Deloitte Global predicts that many types of chips will still be in short supply throughout 2022, and with some component delivery times pushing into 2023, meaning the shortage will have lasted 24 months before subsiding, similar to the duration of the 2008-2009 chip shortage,” the consultancy reported.
Real metal prices and trends
The price of scrap metal in the United States rose 26.4% month-over-month to $609 per short ton on April 1. At the same time, the price of HDG in the United States increased by 20% to reach $1,805 per short ton.
Speaking of palladium prices, US palladium bars closed down 10.8% at $2,190 an ounce after surging earlier in March. Platinum fell 3.9% to $980 an ounce.
Korean 5052 coil premium over 1050 increased 5.8% to $4.76 per kilogram.