Palladium prices have soared 80% this year to record highs as financial sanctions on Russia, which produces 25%-30% of global supply, disrupt shipments and worsen a supply shortage, Reuters reported.

Palladium is a key material for exhaust catalysts used to reduce emissions.

From around US$1,900 an ounce at the start of 2022, palladium surged to $3,440.76 on Monday, passing 2021’s record $3,017.18, the news agency said.

Other Russian-produced resources used by the auto industry, including oil, aluminium and nickel have also spiked as sanctions imposed by countries including the US and the EU prompt many banks and shippers to stop handling Russian goods.

The closure of much of Europe to flights from Russia has also complicated airborne transport of palladium.

“I expect prices to go much higher still,” Commerzbank analyst Daniel Briesemann told Reuters. With worsening conflict in Ukraine raising the risk of more sanctions, “the sky is the limit,” he added.

“There’s no lending, there’s no liquidly,” a trader in London told the news agency. “Everybody is sitting on metal and waiting.”

Most Russian palladium is mined in Siberia by Norilsk Nickel (Nornickel) which has not been sanctioned, Reuters said.

According to Reuters, many analysts expect palladium prices to come down once supply chains adapt to sanctions.

“Our base case assumes that these issues (of restricted supply) last no longer than a month, and alternative ways to ship metal are found,” Citi analysts told Reuters, predicting average prices of $2,200 an ounce in the fourth quarter.

Citi has forecast the roughly 10m ounces a year market would see deficits of 446,000 ounces this year and 176,000 ounces in 2023 and a surplus of 28,000 ounces in 2024.

In the longer term, palladium demand is expected to fall as the market share of zero-emission electric vehicles rises, Reuters noted.