Jan. 14 (Bloomberg) -- Palladium may extend a rally this year as surging car sales in China boost demand, while supply from top exporter Russia may drop as stockpiles dwindle, the head of commodity trading in Japan at Standard Bank Plc said. The metal, used in pollution-control devices, may reach $1,000 an ounce for the first time since 2001, when the price jumped to an all-time high of $1,125, said Bruce Ikemizu, who’s traded commodities for more than 24 years. Palladium traded at $808.75 an ounce today. Precious metals have advanced as the European Union bailed out Greece and Ireland, prompting investors to seek a haven against weaker currencies and financial turmoil. Last year, gold rallied 30 percent, silver 83 percent, platinum 21 percent and palladium almost doubled as the Federal Reserve kept borrowing costs low and bought bonds to boost growth. “Car sales expansion will boost palladium as the industry is the biggest consumer,” Ikemizu said in a Jan. 12 interview in Tokyo. “Supply may become unstable as stockpiles of the metal held by the Russian government may have almost depleted.” Palladium for immediate delivery touched $823.95 an ounce yesterday, the highest level since March 2001. The price, which has quadrupled in the past two years, advanced as the global economy recovered from recession, boosting industrial demand. Vehicle Sales The metal will extend a rally as a recovery in U.S. vehicle sales adds to continued expansion in emerging markets, including China and India, boosting demand amid uncertainty about Russian shipments, Ikemizu said. China’s vehicle sales will grow by about 10 percent to 15 percent this year after jumping 32 percent to 18.06 million units in 2010, according to the China Association of Automobile Manufacturers. Russian supply increased 2.1 percent to 3.71 million ounces last year, representing 52 percent of global supply, according to a November report from Johnson Matthey Plc, a London-based refiner. Of Russia’s total, 1.01 million ounces was drawn from stockpiles, the company estimated. OAO GMK Norilsk Nickel, the world’s biggest palladium producer, said last month it expects Russia’s state repository Gokhran to sell “insignificant” amounts in 2011 before exiting from the global market in 2012. The company may also supply the metal to exchange-traded funds, it said. “Russia is said to be completing palladium sales from the state reserves,” Ikemizu said. “There are concerns about supply” as the nation’s shipments may become as small as its production level, he said. 2001 Record Palladium soared to a record in January 2001 as disruption to Russian shipments spurred speculators on the Tokyo Commodity Exchange to buy back contracts. The bourse was the largest for palladium futures at the time. The most-active contract jumped to an all-time high of 3,710 yen a gram on Jan. 29, 2001. It rose 2 percent to 2,178 yen yesterday. Palladium supply exceeded demand by 45,000 ounces last year, the smallest amount since a shortage in 2000, according to the Johnson Matthey report. Sales from Russian state stockpiles were the third-biggest contributor to world supply after mine output from Russia and South Africa, it said. Electric Cars “Palladium may drop to around $750 if the U.S. government takes steps to promote sales of electric vehicles, which do not emit exhaust gases and do not require palladium-based auto- catalysts,” Kazuhiko Saito, chief analyst at Tokyo-based broker Fujitomi Co., said by phone. Ford Motor Co., the second-largest U.S. carmaker, introduced its first electric car this month, following rival products from Nissan Motor Co. and General Motors Co. last year. Sales growth for conventional, fuel-powered vehicles may also boost platinum to as high as $2,000 an ounce this year, Ikemizu said. The price, which was at $1,804.38 an ounce today, gained to $1,829.50 yesterday, the highest level since July 2008. Platinum is unlikely to drop to less than $1,600 an ounce given the costs to produce the metal in South Africa, the world’s biggest supplier, he said. The metal is mainly used for catalysts in diesel vehicles, which are popular in Europe. “Palladium will benefit more from car-sales growth as it is more affordable than platinum,” said Saito at Fujitomi. “Platinum isn’t used much as an auto catalyst in China, where demand for jewelry fabrication is strong.”

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