The spot price of palladium increased 45% year on year in the first half of 2017, making it the best-performing commodity in Russian miner Norilsk's portfolio, the company said Tuesday.
The price averaged $792/oz over H1, according to the miner's data.
"Strong demand from the automotive industry -- up 4% on year -- driven by increase in SUV sales globally, ongoing shift away from diesel to gasoline engines in Europe and tightening emission legislation" were factors in the price firmness, Norilsk said.
Still, the real boost came from a tight spot market, possibly exaggerated by a dominant position.
"Most importantly an extreme tightness [that] emerged on the physical spot market, as a five-year-long apparent market deficit started to impact the availability of price-elastic above-ground stocks," it said. "Owing to the limited availability of physical palladium, the leasing rates dramatically increased, taking the palladium market into backwardation of approximately 5-10%/year."
Looking ahead, 2017 palladium consumption is expected to reach a new all-time high of 10.8 million oz with [the] market deficit exceeding 1 million oz.
On the supply side, Norilsk, which is the world's number one primary palladium producer., doesn't anticipate any major upside surprises "as the capital investments of major PGM producers is running at its lowest level for the past six years."
Palladium was spot bid at $888/oz as of 1350 GMT.
The London Bullion Market Association Palladium Price, administrated by the London Metal Exchange, started the year at $684/oz on January 3.
