LONDON (Commodity Online): Barclays forecast deficit for the palladium market remains sizable at 681koz for 2013, and the market is set to remain in deficit, should mined and recycled supply not be supplemented with stock releases.

“We retain our positive view on the palladium market and believe that it has the most constructive fundamentals across the precious metals” the report from Bank noted.

The most supportive news for palladium has come from the 2012 Swiss trade data. They showed that palladium imports from Russia had fallen 72% y/y to 154.6koz, their lowest levels since 1990. The year -end spike in shipments to meet quotas did not materialise, and December shipments were consistent with recent months at 6.4koz.

In its “Platinum Interim Review 2012”, Johnson Matthey estimated palladium state stock releases at 250koz in 2012 and expects releases to the magnitude of about 3 tonnes (96koz) for 2013. Barclays' balance allows for a conservative estimate, and we forecast stock releases t o slow to 200koz in 2013 and 150koz in 2014.

Palladium prices have had a strong start to the year and have continued to extend those gains, exceeding $770/oz. Since dipping below $600/oz in November last year, prices have hit levels last seen in September 2011.

Although there are still some pockets of weakness in the fundamental picture, the longer - term story still looks constructive.

The two key concerns are: weak imports into China (although we believe that these should start to bottom out); and perhaps more importantly, extended investor interest.

However, although speculative positioning is at a record high, ETP holdings are still below their peak.