Palladium Falls to 5 1/2-Year Low as Supplies Seen Rising

Palladium fell to its lowest in more than 5 1/2 years on faltering demand from carmakers, the biggest consumers, and expectations supplies will rise because of new mining projects and recycling.

U.S. sales of cars and light trucks may drop 6.3 percent in March, after shedding 7 percent in February, a report tomorrow is expected to show. Forecasts for higher production in South Africa, the biggest supplier last year, and more scrap availability is also hurting prices, analysts said.

There is a ``distinct lack of consumer interest,'' said Ingrid Sternby, an analyst at Barclays Capital in London. ``Prices are likely to remain depressed in the near term.''

Carmakers switched to using more platinum after palladium prices soared to $1,110 an ounce in January 2001. Automakers use palladium to make pollution-control devices.

Demand from automakers was expected to decline to its lowest since 1996 last year, according to Johnson Matthey Plc, the largest precious metals marketer. Total demand from carmakers, dentists and electronics, chemicals and jewelry manufacturers was expected to fall to its lowest since 1994.

New platinum group metal mining in the east of South Africa's Bushveld is expected to increase palladium supplies because the ores contain higher levels of the metal than previous projects. The Bushveld holds about 90 percent of the world's known platinum group metal reserves, J.P. Morgan said in a note last week.

Russia is the world's biggest palladium producer. OAO GMK Norilsk Nickel, the world's top palladium miner, in October said it expects to stay away from spot markets for the metal until at least the end of next year, sticking to long-term contracts with end-users. Bloomberg