Palladium not written off the road yet, miners say

The price of palladium may gain in the short term if constraints on recycling tighten and car buyers remain wary of electric vehicles (EVs) because of high interest rates, the World Platinum Investment Council says.

The supply of the metal, which is used in catalytic converters for pollution control on internal combustion engine (ICE) autos, is expected to be in a deficit of 1.3 million oz. this year, said the council, which represents miners of platinum group metals.

Palladium’s shortfall may ease to about 200,000 oz. in 2025 before swinging into a surplus the following year and to as much as 700,000 oz. by 2028, the London-based council says in a new report.

However, the forecast surplus is based on growth in recycling and depends on resolving several challenges, it said. These include ICE vehicles being used for longer due to higher interest rates, consumer skepticism of EVs, tax changes in China hindering recycling growth, and concerns that converters stolen from cars are fuelling the recycling market.

“Any delays to solving these could slow the pace of the growth in recycling supply, resulting in deeper and more persistent deficits and further postpone the surplus,” the council said. “This would in turn feed into value expectations and provide upward support for the palladium price.”

Platinum deficit

Platinum is also expected to remain in a deficit as motorists keep ICE cars for longer because of high interest rates. However, platinum benefits from a more diversified demand base and significant growth potential from an emerging hydrogen economy, the authors said. They forecast the platinum market to remain in deficit for the foreseeable future.

The price of palladium has fallen 16% this year to US$936.27 per oz. on Wednesday, according to Mining.com. Platinum has risen 9% over the same period to US$998.34 an ounce.

Contrary to a common perception, palladium surpluses won’t be the result of a rapid decline in ICE demand, says the council. It represents Anglo American (LSE: AAL), Northam Platinum, Impala Platinum Holdings (JSE: IMP), Sedibelo Platinum Mines, and Tharisa (JSE: THA).

Indeed, automotive demand for palladium may decline by just 1% compounded annually to 2028, the council said. Palladium is being substituted for platinum while sales of more hybrid vehicles are offsetting lower pure ICE demand, it said.

Revised outlook

The report updates a September forecast by lengthening the time the palladium market remains in deficit to 2026 instead of a year earlier, because of the recycling challenges.

Palladium may also benefit from demand in developing countries adopting fossil fuel autos offsetting some EV gains but recycling is the main driver, according to the report.

“Secondary supply will be the major contributing variable in shifting palladium markets into a structural surplus,” the council said. “As such, the timing and extent of the recovery of scrap supply chains is key. With this uncertainty in mind there is scope for medium-term palladium market strength and short covering.”