Platinum and palladium are not performing as well as expected this year, and major producers Russia and South Africa have decided to do something about it. Bloomberg reported last Wednesday that the two countries will meet next month to discuss their mutual interest in the white metals, and the possibility of bolstering prices.

Deutsche Bank estimates that platinum palladium and rhodium production in South Africa will be down 29%, 37% and 26% respectively in 2014 compared to our estimates at the start of the year. Moreover, Deutsche Bank sees a permanent reduction in South African productive capacity following strike action.

As a result, South African PGM production is unlikely to return to pre-strike levels and consequently Deutsche Bank views market deficits in platinum, palladium and rhodium as being larger and more durable than before.

The company that runs platinum and palladium fixings in London is seeking a new administrator for the price-setting process after similar changes were proposed for rituals in gold and silver.

The London Platinum & Palladium Fixing Company Ltd. will “shortly” start a request-for-proposals exercise for firms interested in assuming responsibility for the procedure that takes place each business day at 9:45 a.m. and 2 p.m. by phone, it said today in a statement. BASF Metals Ltd., Goldman Sachs Group Inc., HSBC Holdings Plc and Standard Bank Plc conduct the fixings, the London Platinum & Palladium Market website shows

South African output of platinum-group metals sank the most on record in May after a strike halted production at the world’s three biggest producers.

Production of the metals plunged 49 percent from a year earlier as total mining output fell 6.5 percent,

Independent research house Capital Economics says what will keep prices robust is strong demand from the auto sector (see chart) and the substantial risks to supply that still exist.

South Africa’s mines have been struggling with profitability and productivity for a while. Indeed, Anglo American had signalled its intention to sell its South African platinum mines even before the latest strike. Companies will be forced to restructure and mechanise in order to enhance competitiveness. Redundancies – and further union protests – appear inevitable.

South Africa and Russia combined account for close to 80% of global supply of palladium and 70% of platinum output which are mainly used to clean emissions in automobiles.

Regardless of Monday’s announced end of the South African platinum strike, New York-based commodities research firm, CPM Group, forecasts that the platinum market is expected to record the largest deficit ever this year, as the shortfall of total supply of newly-refined platinum relative to fabrication demand is estimated at 818,823 ounces this year.

Six weeks was all it took for the palladium market to get spooked into a panic.

When a major mining strike in South Africa shutdown all palladium production in the country on January 23rd, the clock started ticking on the palladium price, with analysts expecting a sharp rise in value if the strike wasn’t resolved quickly.

Well it wasn’t resolved quickly, and six weeks later on March 4th the inevitable happened… palladium punched through its upper resistance of $760 an ounce held in place throughout the previous 12 months. It has kept right on climbing ever since, rising to a multi-year high of $860 yesterday for a jump of 15% since the strike began, with plenty more upside expected.

“We believe the market is working under a structural production/consumption deficit,” chief precious metals analyst at HSBC, James Steel, revealed. “We are therefore bullish medium to longer term.”

Just what is behind palladium’s “structural production/consumption deficit”? Will this be enough to set palladium apart from the other precious metals that have been stuck in the mud for over two years?

Palladium prices surged to a three-year high, reflecting investors' concerns that a mining strike in No. 2 producer South Africa will choke off supplies.

"If there's not much supply, it all just gets sucked up" by manufacturers and other palladium consumers, said Frank Holmes,

The miners' strike, which involves some 70,000 workers, is the longest ever in South Africa. After Monday's talks ended without an agreement, newly appointed South African Mining Minister Ngoako Ramatlhodi said he would exit from the talks.

Meanwhile, palladium users have few other places to turn for supply. Russia exports more palladium than South Africa, but relies on Cold War-era stockpiles to supplement production. Many analysts think those extra supplies are running low. No other country is a significant palladium producer.

"There is no reason to sell palladium right now," said Frank Lesh, a broker at Future Path Trading. "This thing can go to $1,000."

"We probably have another 6-8 weeks to go before producers run really low on material they've stockpiled," said Standard Bank analyst Walter de Wet. "Lonmin have come out to say that they have some stuff in the pipeline that they are processing, and it seems there is some material at Impala and Anglo, too. Anglo on average probably has the most metal compared to the other two."