The global supply of palladium is expected to remain in deficit this year, as it was last year, Thomson Reuters GFMS said.
The consultancy, in its annual Platinum & Palladium Survey 2012, said this week that in 2011 palladium's gross deficit almost halved to 313,000 ounces.
This owed much to a relatively subdued 2 percent rise in global fabrication, which nonetheless reached an 11-year high, the consultancy said in a statement.
This featured a solid 5 percent lift for palladium autocatalyst demand -- also an 11-year peak -- driven by firmer demand in gasoline applications and substitution-related gains at the expense of platinum.
However, the survey also showed that these gains were partially offset by weaker offtake in most other areas of palladium fabrication demand, with the heaviest losses having emerged in jewelery, principally in China, which declined to an eight-year low.
As a result, this relatively modest increase in global palladium fabrication was comfortably outstripped by a 5 percent rise in supply, which climbed to a record.
In addition to a lift of more than 3 percent in mine production, this was a function of robust gains in autocatalyst recycling which continued to benefit from the historical escalation in palladium autocatalyst demand during the late 1990s/early 2000s, the consultancy said.
Despite a smaller gross deficit, substantial liquidations from exchange-traded fund (ETF) holdings and a reduction in investors' long positions on futures markets, palladium prices still posted a record high annual average in 2011 of $734.
This followed a dramatic rise in prices during late 2010 and early 2011. And even though last year saw palladium prices fall by 20 percent on an intra-year basis, the decline was limited to the last four months, and driven very much by profit taking, Thomson Reuters GFMS said.
Palladium prices are also likely to benefit from the favourable investor climate towards precious metals, while the downside may be limited as palladium's demand base in autocatalyst is less exposed to Europe and is quite broadly based geographically, Philip Klapwijk, Global Head of Metals Analystics at Thomson Reuters GFMS, said in a statement.
Overall, therefore, palladium is forecast to trade in a range of $575 to $775 through to end-2012.
The most actively traded palladium contract on the Comex closed down $8.10 to $661.35.