In 2009, palladium may very likely extend its price decline

By Leia Michele Toovey- Exclusive to Palladium Investing News

Prices of precious metals platinum, palladium and silver are expected to slump next year as demand sags in line with economic growth. This is tough news, considering how much of a price decline the metals have already witnessed in 2008.  How much more of a hit will palladium take?

An industry report compiled by Johnson Matthey, the world’s top platinum refiner, stated that over the next six months palladium may drop as low as $125 per ounce, and will likely range between $125 and $300 per ounce. At $125, this is the lowest level palladium has seen since early 1997.  If this theory proves correct, at the current price of $US175.65 the metal has more downside potential.

Platinum and palladium have been singled out, taking an especially big hit in ’08. Thinner markets and poor automobile sales quite poor automobile data are battering prices.  Data that came out last week about auto sales in Japan and Europe contributed to the recent downside. But, there also are worries about the U.S. auto industry as executives prepare to make another pitch to Congress for bailout money. The health of the global industry is especially important for platinum group metals due to their use in the manufacturing of catalytic converters.

The world’s top producer of palladium, Norilsk Nickel will cut output of the metal this and next year. As demand falls amid the global financial crisis, Norilsk’s primary objective in 2009 will be to conserve cash without compromising future growth. The company will intentionally curb  palladium output to 2.764 million ounces from the earlier forecast 3.00-3.05 million ounces.  The company is expecting that even further reduction in platinum group metals production in 2009 will come as a result from falling PGM content in ore

On Monday, Norilsk’s board approved a list of 23 candidates for a new 13-member board to be elected on Dec. 26, after its main shareholders settled their differences last month. The board recommended minority shareholders to support only two independent candidates proposed by Interros: Gerard Holden, head of an investment unit of Barclays Capital, and Brad Mills, CEO of Lonmin Plc. The new board will be chaired by one of three independent directors. Interros and UC RUSAL would put forward four candidates each to join Chief Exectuive Officer (CEO) Vladimir Strzhalkovsky and a state representative on the 13-person board.

The upper house of the Russian parliament, the Federation Council, has approved a bill abolishing government trading agent Almazyuvelirexport’s monopoly on the export of platinum group metals. Once the bill is signed by President Dmitry Medvedev, it will be considered law.  Currently all Russian platinum producers are only allowed to export platinum via Almazyuvelirexport.  Almazyuvelirexport takes up to 1.5 per cent of the final price as commission. Russian PGM miners are thrilled with the announcement “We regard it as a further step towards the liberalization of PGM exports,” a Norilsk spokeswoman said. “The move is positive for the company because after the law is implemented Norilsk won’t pay the commission and will use its own sales companies to sell the metals.”