LONDON, Aug 29 (Reuters) - Supply of autocatalyst metal palladium from Russia is expected to fall 2 percent this year, GFMS analysts said on Friday, but the impact of potential sanctions over the Ukraine conflict is likely to be minimal.
Speculation that the stand-off between Moscow and the West over Ukraine could hurt output from Russia has helped prices of the metal hit 13-1/2 year highs this month at $905 an ounce. Russia is the number one source of palladium, accounting for more than 40 percent of supply last year.
"In a nutshell, Russia needs the money, the EU needs the metal; it all boils down to politics, but the base case is business as usual," GFMS analyst Johann Wiebe told the Reuters Global Gold Forum on Friday.
GFMS is a division of Thomson Reuters.
"We don't expect any stock sales, therefore the bulk of supply will come from Russian mine output," Wiebe said. "We forecast for this year Russian output of palladium to amount to 2.54 million ounces. This is down by 40,000 ounces from 2013, or 2 percent, and is based on Norilsk Nickel's own guidance."
Norilsk said in January it expected its 2014 Russian output of palladium to be 2.5 million to 2.6 million ounces, compared to 2.7 million ounces in 2013. Russia's Norilsk is the world's top nickel and palladium producer.
Fighting between government forces and pro-Russian rebels erupted in eastern Ukraine earlier this year after Russia annexed Ukraine's Crimean peninsula in response to the toppling of a pro-Moscow president in Kiev.
Both the United States and European Union have since imposed sanctions on Moscow, targeting its energy, banking and defence sectors. Palladium prices have rallied more than 12 percent since April.
As well as being the leading source of mine output of palladium, Russia has supplied the market via sales from its state stocks over the last decade.
Those sales have dwindled in recent years, leading to speculation inventories may have been depleted.
Palladium was the best performing of the major precious metals in August, rising 4 percent compared to a 2.3 percent drop in platinum. Prices of palladium have risen for seven straight months, its longest run of monthly gains in 3-1/2 years. (Reporting by Jan Harvey; editing by Keiron Henderson)