Hottest Commodity of 2017 Climbs to Record Amid Shrinking Supply

(Bloomberg) -- There's no stopping the palladium rally.

The metal used to curb pollution from gasoline-fueled engines climbed to a record on the New York Mercantile Exchange as the dollar weakened for a fifth straight session, boosting the appeal of raw materials as an alternative investment. Palladium inventories in warehouses tracked by Nymex shrank 25 percent in December, capping a fourth straight annual decline, the longest streak since 2000.

Palladium climbed 55 percent in 2017, the best performance among 34 most-actively traded commodity futures tracked by Bloomberg. Prices surged as robust auto sales added to demand, with supplies of the metal expected to tighten further. Palladium production will continue to lag behind consumption until at least 2022, Morgan Stanley analysts forecast in a report Dec. 11.

“People are worried about shortages,” Peter Thomas, a senior vice president at Zaner Group LLC in Chicago, said by telephone. “The market took off on short supply, good demand and a weak dollar, and ran into some monstrous amounts of stops and popped and rallied.”

Palladium futures for March delivery settled 2.5 percent higher at $1,087.35 an ounce at 1:05 p.m. on Nymex after touching $1,090.45, the highest for a most-active contract in records going back to 1986.

To contact the reporter on this story: Luzi Ann Javier in New York at ljavier@bloomberg.net.

To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net, Joe Richter

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