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Global palladium market to face deficit in 2022 due to growing demand from automotive industry

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(Kitco News) - Mining giant Norilsk Nickel (Nornickel) estimates that the global palladium market was in a small deficit of 0.2 moz in 2021, which will widen to 0.3 moz in 2022 on the back of growing demand from automotive industry.

The company said that the average palladium price in 2021 increased 9% y-o-y to USD 2,398 per troy ounce as palladium demand grew by 4% y-o-y to 10 moz mainly on the back of the recovery of automotive consumption.

According to the report, palladium supply in 2021 increased by 3% to 9.8 moz as temporary suspensions of operations in Norilsk - which caused a significant decrease in the Russian output - were completely offset by South African miners, which recovered from the COVID-related disruptions and started releasing their work-in-progress material accumulated in 2020.

At the same time, recycling was subdued, Nornickel said, as the low availability of new vehicles impacted negatively the number of old cars hitting the scrapyards.

“As a result, the market was in a small deficit of 0.2 moz in 2021,” the authors of the report noted.

Nornickel said that in 2022, the palladium market is expected to run a 0.3 moz deficit as chip shortage easing should boost palladium demand by 7% y-o-y while supply to grow by 5% y-o-y mostly on the back of Nornickel returning to normal production and additional secondary supply.

In 2022, Nornickel expects that industrial palladium consumption to increase 6% y-o-y to 10.6 moz. The automotive industry will be the main driver of this growth as the chip shortage is expected to ease in 2H 2022.

“Offtake in other industries, such as electronics and chemical industry, will remain unchanged, in our view,” the company pointed out.

Global palladium output is anticipated to increase 5% to 10.3 moz in 2022 as primary supply from South Africa and Nornickel is expected to return to normal as the work-in-progress material stocks are depleting in the former, whereas operations of the latter have already returned to full capacity.

The company also forecasts that recycling will resume its growth as new car availability to improve in 2H 2022.

"As a result, we expect a mild (relative to the recent history) deficit of 0.3 moz in 2022," Nornickel concluded.

Norilsk Nickel is a diversified mining and metallurgical company, the world’s largest producer of palladium and high-grade nickel and a major producer of platinum and copper. The company also produces cobalt, rhodium, silver, gold, iridium, ruthenium, selenium, tellurium, sulphur and other products.

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