EU to sanction Russian palladium and platinum?

The United States government is encouraging the European Union to sanction and prohibit the import of Russian palladium and titanium. The EU has not as yet taken a decision in this regard, given the strategic importance of these materials. Titanium is a key material for the aviation and nuclear industries, while palladium is used in the production of chips and automobile catalysts. The question remains whether politics will prevail over economics in this instance,given that the EU has always caved in to US demands on sanctions even when they are seriously harmful to the industries of the European countrties

A source who requested anonymity revealed that Biden administration officials raised the issue during a meeting of deputy finance ministers from the Group of Seven countries in Washington, D.C. Last week, financial officials from around the world gathered in the U.S. capital for the annual meetings of the International Monetary Fund and the World Bank.

The United States has already " forced  Europe" to stop its reliance on  Russian gas, causing serious problems in a number of countries in the region. These countries have been forced to buy American LNG at exorbitant prices, which has led to a major deindustrialisation across counties like Germany. Now, the issue has arisen with regard to important metals.
Europe is seriously dependent on imported metals,many of them from Russia  and has previously demonstrated a reluctance to impose sanctions against them. In order to impose such sanctions, the European countries of the "Big Seven" – Germany, France, and Italy – will also require the support of the other 24 members of the European Union.
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Now Palladium is a soft, silvery-white metal used primarily in the manufacture of catalytic converters for ffossile fueled-vehicles, electronics, dentistry, medicine, hydrogen purification, the chemical industry, groundwater purification and jewellery.

The unique physical and chemical properties of palladium make it the metal of the future and one of the key elements of the hydrogen economy, says Nikolai Pereslavsky, head of economic research at CM Service. Unlike other platinum group metals, palladium has the unique property of being permeable to only one element - hydrogen. 

Because of this property, palladium membranes can also be used to produce ultra-pure hydrogen. Another promising area is the storage and transport of hydrogen. Palladium can also be used to make hydrogen recombiners, which capture hydrogen from the air and combine it with oxygen, converting flammable hydrogen into safe water vapour. In the future, palladium may be used in electrolyzers and fuel cells.

The largest producers of palladium are Russia and South Africa (70-80% of world production), followed by the United States, Canada and Zimbabwe. Palladium futures are traded on the London Platinum and Palladium Exchange and the New York Mercantile Exchange.
Nikolai Pereslavsky, head of the economic research department at CM Service, asserts that the distinctive physical and chemical attributes of palladium position it as a pivotal component in the hydrogen economy. Palladium is distinguished from other platinum group metals by its unique ability to be permeable to only one element: hydrogen. 

Western countries have been seeking to impose more  sanctions on Russia that would impact the metals trade. The price of palladium increased by 12% in December, driven by speculation that the metal could be subject to restrictions following the imposition of sanctions on the purchase of certain Russian metals by the UK based metals exchanges .
Norilsk Nickel accounts for 40% of global palladium production. Additionally, Russia is the third largest producer of titanium, with a share of six percent, after China and Japan. VSMPO-Avisma Corporation controls approximately a quarter of the global market for products manufactured from this metal.
Russia supplied titanium to Boeing (US), Airbus (Europe) and Embraer (Brazil) as follows: 30%, 45% and 90% respectively.
Alexey Ravinsky, CEO of Zapusk Group, notes that while deliveries to the US fell fivefold last year, to $47 million, imports to Europe remained strong, at a level of almost $250 million.The US figure is because it buys it from third counties to get aroun dht sanctions
The sanctions will have a significant impact on the high-tech industries of France, Germany, and Great Britain, particularly aircraft manufacturing, space technology, and the automobile industry. If London is able to replace Russian titanium by expanding the development of deposits in Canada and Australia, then Germany and France will have to source from alternative suppliers at a higher cost, according to Svetlana Sazanova, deputy head of the Department of Institutional Economics at the State University of Management.

In the case of palladium, the EU source is primarily Russia. The bans will result in a significant shortage of raw materials for catalytic converters, according to Petr Chuvakhin, associate professor of the Department of Legal Regulation of the Fuel and Energy Complex at MGIMO MID.
It is no longer sufficient for Europe to rely on traditional suppliers. The continent can explore alternative options, such as diversifying its trade relationships with countries like South Africa, Zimbabwe, or Canada. However, their capabilities are constrained, and in the near term, they will be unable to offset the lost import volumes, Chuvakhin notes.
China is the global leader in titanium production, with an output of 110 thousand tons per year, representing 46% of the world total. However, the majority of this is consumed by the domestic market. Japan (40 thousand tons, 17%) is also unable to rapidly increase supplies to Europe, according to Vadim Petrov, a member of the Intersessional Financial Advisory Group (IFAG) of the IOC UNESCO.

The market has already responded with a price increase of almost 25%, with palladium reaching $1,240 per troy ounce for the first time this year. Analysts have indicated that the sanctions will result in a further price increase of approximately 50%. This will have corresponding consequences for the industry.
Production lines will be halted. The projected delay to aircraft production is estimated to be between six and twelve months.
While palladium can be theoretically replaced by platinum, this is associated with technological difficulties and increased costs. Mr. Petrov notes that expanding the processing and recycling of metals also requires time and investment.
The Western economy is already facing significant challenges due to the impact of anti-Russian sanctions, with signs of deindustrialisation emerging. Energy-intensive industries have shrunk by 10-15%. The largest countries are experiencing a recession. According to Eurostat, from July 2023 to July 2024, industrial output in the eurozone decreased by 2.2%, in the EU by 1.7%.
Further bans will undoubtedly lead to further economic difficulties and recession on the continent.
In terms of Russia, it is unlikely that it will be left without a sales market. The subject was discussed at the BRICS summit in Kazan. Russia is currently in negotiations with other BRICS members with the aim of establishing an international precious metals exchange. This initiative, as outlined by Russian Finance Minister Anton Siluanov, is designed to ensure fair pricing and facilitate growth in trade. "The mechanism will include the creation of price indicators for metals, standards for the production and trade of bullion, as well as tools for the accreditation of market participants, clearing and auditing within the BRICS framework," he said.

The BRICS precious metals exchange will provide a competitive alternative to Western trading platforms such as the London Metal Exchange, offering protection for trade from Western sanctions on BRICS members Russia and Iran. Concurrently, Norilsk Nickel, one of Russia's largest companies, is the world's largest supplier of palladium, accounting for 40% of global production. The majority of its sales are to China, with exports also made to the United States. 

There is a tangible demand for this product. Yesterday, Norilsk Nickel published statistics for the third quarter of this year. In its latest statement, the company revealed that it had produced 676 thousand ounces of palladium over the reporting period, representing a 2% increase compared to the previous year. Norilsk Nickel attributed the increase in palladium production over the first nine months of this year to measures aimed at enhancing production efficiency and expan