* Supply constrained by strike among S.African miners
* Buyers speculate that Ukraine stand-off may hit Russian
* Launch of two palladium ETFs in South Africa lifts metal
(Adds background, comment)
By Jan Harvey
LONDON, March 21 The price of autocatalyst metal
palladium hit its highest since August 2011 on Friday as a
miners' strike in South Africa ground on and concerns grew that
the standoff between major producer Russia and the West over
Ukraine could escalate.
Between them, Russia and South Africa produce nearly 80
percent of the world's palladium.
The metal has also benefited from the launch this week of
two palladium-backed exchange-traded funds in South Africa. A
similarly structured platinum fund launched in Johannesburg last
year saw hefty inflows of palladium's sister metal.
Spot palladium hit a high of $791.50 an ounce, its
strongest level in more than 2-1/2 years, and was up 3.5 percent
at $789.75 an ounce at 1141 GMT.
"We have two potentially large new demand areas for
palladium in an already undersupplied market, and with continued
uncertainty over the South African supply situation and some
speculative movements around Russia, we could see palladium
holding these gains," Mitsubishi analyst Jonanthan Butler said.
"If the $800 an ounce level gets tested, we could be in a
totally different paradigm," he said.
Miners have been on strike at three South African producers
of platinum group metals - Anglo American Platinum,
Impala Platinum and Lonmin - since Jan. 23.
The strike by the Association of Mineworkers and
Construction Union (AMCU) is the biggest on the mines since
apartheid ended in South Africa in 1994 and has cost the
companies more than 9 billion rand ($825 million) in lost
Threats to supply may pique investment interest in the
metal, analysts said.
Standard Bank announced on Wedesday that it was due to
launch a physically backed palladium ETF on the Johannesburg
Stock Exchange on Monday. Absa Capital, which operates the
world's largest platinum ETF, said the following day it was also
launching a palladium fund.
Investors buy ETFs, which issue securities backed by
physical metal, to gain exposure to the underlying commodity
price without having to store and insure the material itself.
Palladium ETFs currently hold some 1.634 million ounces of
metal, worth around $1.29 billion at today's prices.
"We believe interest will be healthy from institutional
investors, and possibly more than the usual one-third of the
circa 1 million ounces of platinum taken up in the South
Africa-based platinum ETF," Standard Bank analyst Walter de Wet
said in a note this week.
"Palladium fundamentals look healthier on a 3- to 5-year
view, which implies a bias towards the metal."
(Editing by William Hardy)