Russia Unlikely to Sell Palladium Stocks in 2009, Norilsk Says

By Maria Kolesnikova and Yuriy Humber

Oct. 15 (Bloomberg) -- Russia, accounting for half the world’s palladium supply, appears unlikely to sell any of its stockpiles of the metal this year, OAO GMK Norilsk Nickel said.

No stockpile sales appear to have been made so far, said Anton Berlin, head of Norilsk’s department for analysis and market developments, citing the “indirect evidence” of customs data. Even if the government chose to make sales now, the metal would be unlikely to reach the market until next year, he said in a phone interview from London yesterday.

In terms of possible explanations for the apparent lack of sales this year, “Russia may have run out of stockpiles, the government decided to refrain from selling or the government is waiting for better prices,” Berlin said.

Norilsk mined 2.82 million ounces of palladium last year, equal to 39 percent of global supply estimated at 7.31 million ounces by Johnson Matthey Plc.

Palladium surged 74 percent this year in London trading, outpacing gains in gold, silver and platinum. The metal, used mostly in autocatalysts and electronics, is still trading at less than a third of the record $1,125 an ounce reached in 2001. Supply has outpaced demand every year since 2001, according to Johnson Matthey.

Russia was expected to sell 40.4 metric tons (about 1.3 million troy ounces) of palladium from state stockpiles this year, up from 39.8 tons in 2008, Peter Ryan from London-based researcher GFMS Ltd. said this month. Russia doesn’t disclose its stockpiles of metals.

Palladium Demand

Demand for palladium was buoyed this year by “cash for clunkers” programs in countries including the U.S. and U.K., which shored up demand for cars. Still, that may have just moved demand from 2010 to this year, Berlin said.

Norilsk also produced 299,700 tons of nickel last year, making it the world’s biggest producer of the metal used in stainless steel. The metal rose 58 percent this year in London trading, on expectations that demand will rebound as the world recovers from its worst recession since the 1930s. Nickel consumption will slump 7.6 percent this year, before expanding by 16 percent next year, Barclays Capital estimates.

“It’s probably too early to be very optimistic, because we see that consumers remain very cautious and restrained,” Berlin said. “Some big consumers have returned to pre-crisis levels, which is an optimistic signal, while some smaller companies continue to operate, depending on the country and the industry, at some 30 to 70 percent of capacity.”

To contact the reporters on this story: Maria Kolesnikova in Moscow at mkolesnikova@bloomberg.net, Yuriy Humber in Moscow at yhumber@bloomberg.net