The spread between platinum and palladium has fallen to a 12-year low on an outperformance by palladium, says Mitsubishi. Palladium hit a 2 ½-year high late last week. The catalysts were a surprise announcement from Standard Bank that it would launch a physically backed palladium exchange-traded fund in South Africa Monday, swiftly followed by an announcement from Absa Bank that its planned South African palladium ETF would begin trading on Thursday. “Together with rumors that Norilsk’s palladium output suffered a severe fall in February, the ongoing South African mining strike and growing speculation about the impact of possible economic sanctions against Russia, and an unprecedented degree of tightness in the palladium sponge market, investors piled in and the platinum/palladium spread moved to a new 12-year low of 1.82,” Mitsubishi says.

By Allen Sykora of Kitco News; asykora@kitco.com

UBS: ‘Perfect Storm’ Sends Premium For Palladium Sponge Higher Monday March 24, 2014 8:11 AM

“A Perfect Storm has been brewing for palladium this month,” pushing the premium for sponge (metal in powder form) to $8 last week, says UBS. Palladium has been underpinned by the planned start of two exchange-traded funds in South Africa this week, a strike against producers of platinum group metals in the country and worries about potential trade sanctions against Russia.  “With demand for palladium sponge and ingot high right now, premiums should only rise and so too could lease rates,” UBS says. “And if no resolution is found in SA in the next few weeks, we think metal tightness will only intensify if producers are forced to source metal in the market. April could be a very interesting month for palladium, and platinum also.” Spot palladium peaked at $800.20 an ounce overnight, its strongest level since August 2011.

By Allen Sykora of Kitco News; asykora@kitco.com

Barclays: Strong Chinese Grid Spending Bodes Well For Copper Demand. Monday March 24, 2014 8:10 AM

Spending on China’s power grid started the year strong, which should mean a pickup in copper demand once this investment translates into new orders, says Barclays. Investment by China’s grid companies rose 22% year-on-year during the first two months of 2014, the bank says. “Other indicators were also healthy; grid companies added 11% more transmission lines in the same time period and 61% more transforming capacity,” Barclays says. “To be sure, absolute levels are seasonally low at the beginning of the year, with the first two months usually accounting for less than 10% of the annual total. However, the strong performance could help dispel some doubts over copper demand.” The bank notes, however, that feedback received from cable producers seems to belie this strength, with some reporting slowdowns in orders in the first two months. “Part of the reason is the abrupt reversal from last quarter’s highs,” Barclays says. “In addition, grid spending and equipment orders may not always occur in lockstep.” Nevertheless, the bank later adds, “As orders are executed…copper demand could begin to improve sequentially.”

By Allen Sykora of Kitco News; asykora@kitco.com

 Morgan Stanley: Worries About Russian Sanctions Support Nickel Monday March 24, 2014 8:09 AM

Nickel has fared better than the other base metals lately amid concerns about possible Western economic sanctions against Russia over the Ukraine crisis, says Morgan Stanley. Nickel hit a high of $16,385 a metric ton last week that was its strongest level since April 2013, while base-metal bellwether copper hit its lowest level since 2010. “The dust has settled after copper’s rout last week and it appears to have settled in a new lower range,” Morgan Stanley says. “Although fundamentally the outlook remains positive, the weight of short positioning could keep the price range-bound in the near term. Investor interest in nickel remains high, with the recent leg up likely on the back of concern that sanctions against Russia could limit nickel availability to Europe, given the country is responsible for 20% of global production.”

By Allen Sykora of Kitco News; asykora@kitco.com