Russia, the world's leading producer of platinum group metal palladium, intends to reduce sales to foreign markets due to lower output by its sole producer, Norilsk Nickel.
"Palladium supplies from primary mining in Russia are forecast to decline to 2.60 million ounces in 2009 from 2.70 million ounces in 2008," Johnson Matthey said on Tuesday in its review.
It said it expected supplies from state stocks to be flat this year at 960,000 ounces.
Norilsk last month raised its palladium output forecast for this year to 2.850 million ounces from previous estimate of 2.685-2.710 million ounces, without giving a reason.
Johnson Matthey believes falling ore grades will cut Norilsk's palladium output roughly to 2.60 million ounces from 2.70 million ounces in 2008.
"Although there do not seem to have been any significant shipments of palladium from Russian state stocks, we believe that 960,000 ounces of the metal, which was shipped outside Russia during 2008 is likely to be sold to investors this year," Johnson Matthey said.
Johnson Matthey said supplies of sister metal platinum from Russia were likely to decline to 745,000 ounces this year from 810,000 ounces in 2008 due to lower output by Norilsk and minor producers.
It believed Norilsk was likely to cut its platinum output this year to some 600,000 ounces, although Norilsk itself expected it to rise to 668,000 ounces from 659,000 ounces in 2009.
Russia is the world's second-largest platinum producer after South Africa. Besides Norilsk, which produces most platinum in the country as a by-product of other metals, several companies produce it from alluvial deposits.
The biggest of these deposits is operated by Koryakgeoldobycha, controlled by billionaire Viktor Vekselberg, and Amur, a miner owned by Moscow-based Alliance Group.
Several companies, including Vekselberg's UralPlatinum Holding and Canadian miner Barrick Gold Corp., are developing new potentially prospective platinum group metals deposits on the Kola peninsula in northwest Russia.
Johnson Matthey said it expected Russian rhodium supplies to decline to 65,000 ounces this year from 85,000 ounces in 2008.
Reuters has contributed to the report.