Palladium rockets to 13-year high

The price of palladium surged above $905 an ounce this week, its highest level since February 2001. It has gained 25% since the start of the year, and 468% since late 2008, when it hit a low of $187. Palladium is used mainly in catalytic converters in petrol-powered cars, and is also used for jewellery.

What the commentators said

That has shifted the spotlight on to supply from Russia, comprising about 35% ofthe market. Investors have been concerned that Russian output couldbe hit by sanctions.

Meanwhile, demand looks set to grow steadily for years. Both the US and China are fast-growing car markets for petrol-powered vehicles. Low car penetration and increasingly stringent emission standards mean that China will account for almost half the growth in palladium demand between 2013 and 2020, reckoned Deutsche Bank.

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Nonetheless, the rally looks overdonein the short term, said Capital Economics. For one thing, both theWest and Russia would suffer if the market was disrupted.Western sanctions would deprive carmakers of a key raw material, while Russia's Norilsk Nickel, the world's biggest palladium producer, would need to find new markets.

Moreover, "there are growing sources of secondary supply", such as recycled autocatalysts. Stockpiles also appear reasonably healthy.