How the Russia-Ukraine conflict impacts the global essential metals market

Within a mere few weeks, the Russia-Ukraine war has upended global political dynamics, economies and created a distressing humanitarian crisis. Amid these times, we have kept our eyes on Platinum Group Metals (PGMs) commodity prices and the market for these precious metals to ensure that our core business units, networks and operations remain unaffected.

PGMs are the world’s platinum, palladium, rhodium, iridium, osmium and ruthenium, with platinum, palladium and rhodium particularly known for their purity and unique catalytic characteristics.

The Russia-Ukraine conflict has impinged on the global palladium market. As Russia produces about 40% of the world’s mined palladium, sanctions and boycotts against Russia have caused palladium prices to soar to an all-time high of almost US$3500/oz.

That said, the London Platinum and Palladium Association announced that Russian refiners can continue selling platinum and palladium in London, mollifying supply fears and reducing palladium prices down to US$3000/oz.

“So certainly I think going forward, depending on what’s going to happen with sanctions, there could be a significant short supply of palladium in the market,” predicted Johan Odendaal, a PGM mining expert and managing director designate of unlisted Southern Palladium of South Africa.

South Africa is the only country that contends with Russia in its palladium output. Combined, the two countries produce around 80% of the world’s mined ounces. 

However, the platinum output is the dominating leader, producing around 70% of the global supply.

As a result of the Russia-Ukraine conflict, Odendaal foresees a shift back to South Africa for expanding and exploring PGM operations. 

“So what I believe is certainly going to happen is certainly a renewed focus in expanding existing operations, and also a new interest in exploration and particularly in South Africa where there are still projects available.

“Definitely we’re going to see a focus back into South Africa and into the other areas as well,” he added.

Odendaal adds that substitution for palladium is already beginning to happen due to exorbitant prices.

“I think we’re going to see certainly the move away from palladium use, (carmakers are) going to try to reduce demand for palladium to make themselves less dependent on Russia. 

“And that means that there is certainly going to be increased demand in platinum.

“Because of the palladium price, which is so high, we are starting to see a lot of what we call thrifting. So we see palladium being replaced again by platinum in the internal combustion engine, and particularly petrol engines.

“So, the overall perception is that eventually we will see both platinum and palladium trading on par because both will be applied in the internal combustion engine.”

Additionally, Metals Focus, a precious metals research consultancy believe that “the consequence of war and sanctions could see consumers rethink large new purchases, adding further uncertainty to what should have been a year when both automotive production and palladium and rhodium demand enjoy strong recoveries.”

Despite this ambiguity in the market, Odendaal still believes that internal combustion engines will remain a significant part of the car market in coming years. 

“But I think the internal combustion engine is still going to be with us for many, many years albeit that you’ll start to see slower demand from 2030 onwards, but some of the analysts look at out up to 2040, that we will still see the internal combustion engine being used in vehicles.”

Majestic Corporation has been a leading precious metals recyclers, non-ferrous metals and Catalytic converter provider for around three decades. With a presence in the United States, United Kingdom, Malaysia, Italy, Mexico, Australia, Hong Kong and more, as well as a network of precious metals refineries around the world, we work with major customers and partners in a transparent and discrete manner and only offer the highest quality services at competitive prices. 

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