Russia’s top producer will benefit from higher palladium and platinum prices
Russia is the world’s largest producer of palladium and the world’s second largest producer of platinum. South Africa holds the first place of producer of platinum and the second place of palladium. Both countries will be the main beneficiaries of the current Russian aggression in Ukraine which is driving up the prices of the two key components of catalytic converters, jewelry and a host of other products.
Uncertainty surrounding events unfolding in Ukraine is driving up prices for most Russian-produced commodities, but palladium and platinum prices rarely get the same treatment as, say, oil or natural gas . Consumers, however, will feel the pain of inflation when buying jewelry or automobiles for some time to come, largely due to rising prices for the two precious metals that are primarily used for industrial purposes.
Russia and its oligarchs will benefit greatly from the current additional price increases, as long-term production or sales of either metal are unlikely to be significantly disrupted by events in Ukraine. Even if economic sanctions and boycotts against Russia are implemented by the US, EU and their allies, there will still be plenty of buyers (think China) ready to pick up much-needed materials for use in catalytic converters, medical supplies, electrical equipment. components and, of course, jewelry.
Aside from jewelry, items containing palladium and platinum are too vital to human and economic health not to be produced; thus, buyers will pay what they owe, and buy from whom they owe, in order to ensure their supply. Russia will find plenty of willing buyers at some point, but South Africa will likely have new buyers competing for its production, buyers willing to sign long-term supply contracts to source from a source considered more politically correct, and perhaps more stable in the long term than those purchased in Russia.
High prices will eventually lead to increased supply of the two precious metals, and other major producers like Zimbabwe and Canada will likely increase their production rates over time and also benefit greatly from the sustained and growing demand for platinum. and palladium.
Ultimately, however long the unrest in Ukraine lasts, overall platinum and palladium production inside and outside Russia will increase from what it is now, as high demand and high prices are always the incentive to produce more of any commodity. Current producers of both metals will benefit greatly along the way, especially South Africa and Russia.