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Flash Report: Palladium & Titanium Sanction Risk

  • The US proposed sanctions on Russian palladium and titanium during a G7 meeting of Finance Ministers. 

  • The imposition of sanctions is not yet guaranteed, as Europe relies heavily on Russian supplies of the metals. However, prices are already surging on the prospect of potential shortages.


WHAT’S HAPPENING 

The US proposed sanctioning Russian palladium and titanium exports during a meeting of G7 finance ministers. 

  • The Biden administration aims to put more pressure on Vladimir Putin over the war in Ukraine. 

  • Despite existing onerous sanctions on Russia – including on goods like metals (e.g., aluminum, copper, and nickel) – there are no restrictions on importing these metals. 

  • Russian firm Norilsk Nickel is the world’s largest producer of palladium. It controls about 40% of global output.  

  • Russia is also a top titanium exporter. 


RISK ASSESSMENT 

The imposition of sanctions is not guaranteed, as Europe relies heavily on Russian supplies. However, prices are already surging due to the threat of supply shortages. 

Reaching an EU-wide agreement on the sanctions will be challenging, but the US may succeed in pressuring EU member governments to impose sanctions. 

  • All 27 EU member states would need to support the sanctions package. 

  • Key EU economies like France and Germany rely on Russian supplies of the metals. For example, German automakers use palladium in catalytic converters, and France’s Airbus is heavily dependent on Russian titanium. 

  • However, there are few remaining areas for the EU to sanction Russia. The US may succeed in pushing the EU toward new sanctions, especially if the state of the conflict demands more action from the West or if a Kamala Harris victory in the US election results in renewed efforts to pressure Russia. 


The metals are used in a wide array of manufacturing, including: 

Palladium 

Titanium 

  • Semiconductors, other electronic components (e.g., capacitors, connectors) 

  • Automotive catalytic converters 

  • Hydrogen storage and fuel cells 

  • Certain chemical processes 

  • Aerospace manufacturing 

  • Medical devices 

  • Automotive parts 

  • Consumer electronics (e.g., phone cases) 

  • Wide-ranging industrial applications 

  

The impacts of new restrictions would be significant. 

  • Spot and futures prices for the metals jumped 5-10% on the reports that the sanctions were proposed. Much larger increases are likely if sanctions are imposed. 

  • Given the crucial role of the metals, production disruptions, especially in Europe, are possible due to shortages. 


 Act now

  • Review exposure to palladium and titanium cost rises across the supply chain

  • Assess the risk of supply interruptions from Russian suppliers across the supply chain

  • Speak with suppliers about exposure to these measures


Monitor

  • US/EU negotiations over sanctions packages

 

 

 

 

 

 

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