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Palladium Short Squeeze: 20% Of Global Production Is Halted

Mar. 09, 2021 4:09 AM ETPalladium Futures (XPDUSD:CUR)NILSY, PALL31 Comments
Russian Rocket profile picture
Russian Rocket


  • An accident at the mines of Nornickel, a major palladium producer in the world, has halted production of 20% of global palladium supply.
  • Palladium market is already in short supply, but the situation at Nornickel will further worsen the market equilibrium.
  • Regardless of how the situation at the mines will be resolved, the market may experience a price shock.


Nornickel (OTC:NILSY) is the major world’s palladium (Commodity:XPDUSA) and high-quality nickel producer and also a major producer of platinum and copper. The company produced a total of 2,826 thousand ounces of palladium (80115 kg) in 2020, that accounts for 40% of palladium world production.

On February 24, it became known that operations at two of Nornickel’s largest mines, Oktyabrsky and Taimyrsky, were halted due to flooding by natural groundwater.

Oktyabrsky and Taimyrsky produced 36% of all Nornickel’s output in 2020. These two mines are the largest copper-nickel deposits and key assets of Nornickel, with a combined production of 9.5 million tons of ore per year.

To date, the company has not provided details on the extent of the incident. One of the risks is that the Oktyabrsky and Taimyrsky mines may be completely lost. Due to the constant increase in water inflow, there is a high probability that the sinking cannot be eliminated, a rumour that is currently being discussed in the Russian market.

Palladium market overview

Source: Statista.com, company data

This infographic displays the distribution of palladium production in the world by producer. Global output of palladium in 2020 declined by 7%, however Nornickel is again the major palladium producer with output of 80,115 kg cumulatively accounting for 40% of global palladium production and $6.5 billion. The Oktyabrsky and Taimyrsky mines, which were reportedly flooded, account for roughly 50% of the company’s palladium output. The influence of these mines on palladium price dynamics is huge, so any negative news about further production recovery will immediately be reflected in the price (Palladium production global distribution by company 2019 | Statista).

Palladium production as well as sales declined by about 7% in 2020 on the background of industrial demand decrease due to Covid-19, however already now many industries are on a recovery

This article was written by

Russian Rocket profile picture
The other side of the investment analysis in Russia. We write the way banks, brokers and newspapers don't.

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Comments (31)

What is causing the pop today?

"What is causing the pop today?"

About dam time! Seemed like oil and palladium everybody was willing to look the other way for weeks now.

I thought maybe the mine was determined to be a complete lose. Has anybody heard updates on the mine situation?

This is helping Norilsk Nickel have higher profits, as the palladium price is rising. They will sell their palladium to China, and through other places besides the London Exchange.
Will palladium get over $2800 this week, and over $3,000 in April?
Tommy Goula profile picture
Glad I own ValOre Metals Corp. $KVLQF
"China's auto sales surge" ,

Learner16 profile picture
It is surprising that there is no price movement yet
good info, ty!
autofocus111 profile picture
It's strange that the metals markets has not reacted to the NILSY news. Ni is likely down due to the recent announcement from China producer Tsingshan (even though the supply-demand balance is unaffected). No spike in Pd or Pt even though ANGPY still has problems with their converter equipment. Is the market waiting for confirmation from NILSY about the severity of the problem and time to recovery? If the mines are not re-opened for an extended period it will be a big hit to production.


autofocus111 profile picture
I decided today to sell a quarter position in NILSY and rolled the proceeds into SBSW. NILSY is my preferred holding in the PGM space due to their strong base metals production (Pd+Ni is an ideal hedge in regards to the automotive space), but I am wary of negative headline risks if those mines remain offline for an extended period. I may reverse the trade once there is more clarity.
Thank you for the informative article.
I guess SBSW would benefit.
The US is pressing intensly on Germany and Russia for Nord Stream 2. But, they have no problem in buying their palladium. US should stop buying metals and oil freom Russia before pressing on other countries.
What are companies set to profit from this?

"What are companies set to profit from this?"

Look at SBSW. They mine palladium both in the US and in South Africa.
@6228371 I already own that one, mostly as a hedge against inflation (through rising gold prices). Good to know that that one is doubly good now, thanks!

There is also IMPUY.
Igor Sechin profile picture
Bought some PA futures for my ROSN baby.
demirad profile picture
Great thank you. I've only been in Norilsk for a year but have been recently adding on this pullback as I prefer buying miners into short-intermediate term setbacks than when metal prices are ripping to all time highs. Do you have any commentary in general on the safety operations at Norilsk? This is now the 3rd major industrial or environmental accident they've have in a year and I know they let go of the COO recently.
“By now, one of the mine workings has been filled with hardening backfill mixture. In the coming week, once the mixture will harden, water valves will be shut and the inflow of groundwater should stop”, said Senior Vice President, Head of Norilsk Division, Nikolay Utkin.

The Company is planning to consider the recovery schedule of the two mines once the current initiatives are completed by March 16th.
Russian Rocket profile picture
@GRLong thank you for your comment. The company has indeed commented on the production halt: www.nornickel.com/...

This confirms our initial point of view about possible palladium price hike, since the company provided no details about when the mines could be restarted.

We have contacted Seeking Alpha editorial team to update the article.
krauch023 profile picture
Many underground mines pump thousands of gallons of groundwater per minute to the surface to prevent flooding. The video didn't look catastrophic. They will probably add more pumps and avoid that area of the mine until the excess water subsides. I expect the mines to reopen soon.
I'm long $MNOD, which is already 6% up today.

There is no official announcement yet, but the price movement so far suggests it's going to be positive.
Back up the SBSW truck!! 🚚
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