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Eyes on tightening palladium/platinum price differential, parity unlikely: sources

London — The platinum/palladium discount is in focus this week, with palladium creeping closer to platinum in dollar-terms, although parity is unlikely near-term, according to sources.

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As of 1005 GMT Wednesday morning, palladium was spot bid at $742/oz with platinum at $938/oz.

This is the tightest the two prices have been in over five years. The last time they traded at parity was back in 2000.

Palladium traded above platinum in 2000/2001 when it spiked to more than $1,000/oz after Russian exports were suspended.



Russia is the world's number one palladium producer, as a byproduct of nickel.

One banker told S&P Global Platts Wednesday morning that, looking at graphs, parity was unlikely even though palladium remains well bid.

An industrial source said that looking at palladium sponge rates, the raw material used in the autocatlyst metal and a signal of true fundamentals, that if anything rates had loosened, indicating an ease in real demand.

"I can't see it getting to parity anytime soon, why would it?" he said.

Palladium sponge rates were heard around $0-2/oz Wednesday, from $3/oz two-months ago. Platinum was heard around $0-$1/oz.

Commerzbank said of the metals, "palladium climbed to $750/oz yesterday despite further ETF outflows, thereby achieving its highest level since June 2015."

The German bank said that the main driver is speculative financial investors.

"As a result of the recent rapid surge in price -- palladium has gained by 20% since the beginning of the month -- the price gap to platinum has dwindled to below $200/oz, and at times was at its lowest level since July 2002. The price differential was still around $380 in early November," Commerzbank added.

German trading house Heraeus said of recent performance, "the change in lease rates [that at which refined metal is used as collateral, or loans] for palladium, which rose sharply last week, came as a surprise. Rumor has it that a big trading house leased palladium on a large scale, leading to [tightness] of short-term availability of ingots. The general outlook for palladium remains positive."

HSBC senior analyst James Steel backed positive sentiment, "the platinum-palladium spread has narrowed substantially, from $375/oz before the US election. This reflects clearly tighter underlying fundamentals for palladium."

--Ben Kilbey, ben.kilbey@spglobal.com
--Edited by James Leech, james.leech@spglobal.com