Sentiment across the precious metals industry towards palladium remained shaky at best this week, as the metal continues to feel the pressure shared by the wider commodities rout, sources said.
Palladium is a key ingredient in autocatalysts built for gasoline-fuelled engines.
"It's bleak," said one physical trader. "Still when I started in the business palladium was around $83/oz, so from that perspective $500 is pretty good."
The London Bullion Market Association Palladium Price settled at $547/troy oz on the morning of January 4, the first trading day of 2016.
On Thursday morning, the latest data point available on the London Metal Exchange website which administrates the price settlement, it was $493/oz with an afternoon auction price of $497/oz.
"Every time I think I've picked the bottom end of the price, it goes lower," said one banker.
It has been a rocky start for not only commodities, but equities too, in 2016.
In a quarterly report ICBC/Standard Bank strategist Tom Kendall added to the bearish tone for the metal.
"Relative to spot prices we are most bearish palladium. The demand outlook has deteriorated, supply is inelastic, inventories are large, and investor conviction is shaky. Palladium is more likely to trade in the $300s than $600s this year," he said.
On a positive note, brokerage SP Angel said reports the Russian Central Bank believes the palladium price is too low, and wants to sell stockpiled metal to Norilsk Nickel, should help underpin the price.
Palladium is a byproduct metal of both platinum and nickel production.
Russia's Norilsk is a major producer of both nickel, and in-turn palladium.
By selling to Norilsk, less material is thought likely to be available to the international market.
"The statement indicates that regular stock sales will be stalled pending better prices," SP Angel said in a research note.
Despite the depressed start to 2016 continuing the price declines from 2015, some, including Macquarie, are starting to see flickers of light for palladium, with a growing deficit on the cards, the bank said Wednesday.
During the course of 2015 the palladium dollar price fell around 30%.
"So far in 2016 things have gotten even worse, with palladium shedding another 10% to well below $500/oz. The price is now no higher than it was in 2010 and, indeed, 2008," said Macquarie.
As recently as September 2014 it was more than $900/oz.
But the Australian investment bank is forecasting the price to break above $600/oz by the end of the year.
It sees a deficit of 625,000 oz in 2016, up from 425,000 oz in 2015.
But Kendall differed. "It is clear that there is no lack of metal, no issues with short-term availability, and so palladium continues to trade closely in line with Chinese economic sentiment," he said.
China's GDP grew 6.8% on the year in Q4, down from 6.9% in Q3 and 7% in H1; slightly lower than market expectations of 6.9%.
"In response to near-term downside risks, we expect fiscal policy to be proactive in both name and action. Without demand-boosting policies, we estimate that China's self-sustaining growth rate is around 6%," Standard Chartered said in a research note.
HSBC senior analyst James Steel was slightly more upbeat on the precious metals sector in general.
"We still view these [platinum/palladium] markets as oversold, but may be subject to further declines based on weakness in other commodities and global economic concerns, notably over China.
Still it appears the PGMs are putting in price bottoms, and will advance as the year unfolds, based on gradually tightening fundamentals," Steel said.
