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On the 24th of October, the USA reportedly approached its G7 counterparts and proposed a ban on Russian titanium, and, palladium.
The reasons why are obvious.
Russia’s invasion of Ukraine is ongoing, Moscow keeps bombing apartment buildings in Kyiv, and sales to G7 countries of Russian titanium are, in a way, funding that war effort.
All in all, just another sanction on Russia.
This sounds familiar…
We’ve seen a U.S.-led move to ban Russian commodity imports help another staple surge in relatively recent history – uranium.
While Kazatomprom production issues really helped the prices soar, it was that first U.S. move to ban Russian uranium that helped get excitement cooking.
This is despite significant loopholes in that legislation that actually permit the U.S. to buy it up to 2028.
An announcement from Canada’s Cameco that it would boost production in turn helped to end the intensity of the uranium bull rally in early CY2024, though, as of late October, prices on the NYMEX for uranium are still up 8% YoY and well above pre-COVID levels.
(And while related only slightly, let’s not forget about former-flavour-of-last-month antimony.)
So what about this latest move?
The reaction on commodity markets for titanium and palladium have both been very different. Let’s start with the former.
Titanium prices – which exist in a somewhat opaque market as far as live pricing goes – haven’t really shifted.
But stocks on the Moscow Exchange have.
Russia’s largest publicly listed titanium producer, a company called VSMPO-AVISMA Corp PJSC, saw its shares fall around -10% since the news dropped on October 24.
The VSMO share price as line chart over 1mth. Source: TradingView
Its month on month returns are now down -12%, according to TradingView.
That’s fairly straightforward: If the G7 bans Russian titanium, then its largest producer will make less profits in such a world. Cue the sell-off.
Australia not set to gain
But there’s a catch for ASX-watchers.
Were there to be an established, listed player in Australia producing titanium metal, we’d probably have seen share price action Down Under.
But as a country, we don’t actually produce titanium metal, despite having mammoth reserves of the stuff – we tend to produce titanium dioxide instead.
We are not a country of converting rutile into titanium sponge using chlorine; the stuff that gets melted down into titanium metal.
(Compared to smelting gold, titanium is an entirely far more complex process.)
But then there’s palladium
Palladium prices, however, have not been so quiet.
As of Wednesday October 30 at 2.30pm Sydney time, palladium prices have jumped +12.45% in the last week. Looking at Month on Month (MoM) price action, palladium prices have soared just over +22%.
Take a look at the six month chart:
Palladium prices as a line chart. Source: TradingEconomics
So, there’s something that might feel more intuitive against our hotly tense geopolitical backdrop.
If you were just looking at titanium prices, you’d think nobody was paying attention to U.S.-Russia trade moves.
But palladium is a different story.
That’s because according to the United States International Trade Commission Russia is responsible for two fifths of global palladium supply, and in 2021, over one third of U.S. imports came from Russia.
So that’s good news for ASX palladium companies, right?
ASX exposure limited
Well, if it is, we aren’t seeing it yet. And to make matters worse, nobody is truly producing.
Chalice Mining (ASX:CHN) believes it has globally significant amounts of palladium at its Gonneville project in WA, but the shares didn’t really budge on the news.
Chalice recently sold off its workers’ camp – an indication any fieldwork is still a while away.
Then again, the company’s project has won strategic project status from both the WA Government and Canberra. But recent upside to the share price has come from its latest quarterly, and not geopolitics.
(Ironically, Chalice surged when Russia threatened to ban nickel exports not that long ago – but not for long, given we’re awash in Indonesian nickel.) Chalice may need higher nickel prices to make mining palladium economic.
So who else has palladium?
It may or may not surprise you to know former lithium darling Liontown Resources (ASX:LTR) also has some palladium alongside its larger battery metals shtick.
But as Chalice pointed out in early 2024, with prices where they were at that time, around half of the world’s palladium projects wouldn’t make any money.
And given Liontown was on Wednesday smashed by a poorly received quarterly, it’s unlikely this latest push from the U.S. to ban Russian palladium – should that come into force – will turn around Liontown’s share price.
That’s especially true given its larger exposure to an even-worse-off lithium.
And from there, the story doesn’t get much better.
Small selection underscores critical need
In fact, looking around at ASX companies who are “in” palladium, if you will, only four companies are in the green on a YoY basis.
One is Chalice, but that’s because of its quarterly report.
Impact Minerals (ASX:IPT) believes it has palladium but it’s years away from production and the company’s good 1Y returns don’t come from any recent price action relating to geopolitics.
Podium Minerals (ASX:POD) appears like a beneficiary of the proposed palladium ban news, but a close inspection of its chart shows that, by chance, the stock began rocketing earlier in October.
After the 24th, there was actually a decline – and I’m going to go ahead and assume microcap Podium Minerals don’t have a direct line to Washington.
That then leaves Lachlan Star (ASX:LSA) as the last palladium-exposed microcap with 1Y returns in the green, but again, the chart shows none of that comes from the US-Russia news.
A meaningful ban that becomes U.S. legislation could change the game.
But for ASX-watchers hoping to jump on a rollercoaster, unfortunately, it looks like palladium hype could be a missed opportunity for domestic shareholders.
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