The era of dazzling palladium rallies may be coming to a close, according to analysts who point to increasing supply and stagnant demand as factors causing prices to erode for the metal primarily used in neutralizing vehicle exhaust emissions.
Once the least expensive major precious metal, palladium soared from under $500 per ounce in 2016 to over $3,400 last March, outpacing platinum and gold. The surge was powered by growing demand from automakers needing more palladium per vehicle to meet strict emissions standards, creating significant deficits in the market.
However, the landscape is shifting. The rise of electric vehicles, which do not require palladium, and automakers substituting cheaper platinum for palladium in combustion engine vehicles are impacting demand. Additionally, an increase in the supply of recycled palladium from end-of-life vehicles is contributing to the shift.
Palladium prices have fallen to around $1,700 per ounce, with analysts forecasting further declines in the coming years. Bank of America’s Michael Widmer stated, “Palladium is a one trick pony. Demand relies pretty much 90% on the auto industry.”
While projections suggest a surplus of nearly a million ounces in the market by 2027, there is still potential for short-term price increases. Russia’s Norilsk Nickel, a major player in palladium supply, recently announced a decrease in output for the year, which could have an impact on the market.
As uncertainty surrounding supply persists due to the ongoing conflict in Ukraine, experts caution that any constraints on Russian palladium could lead to a spike in prices. While the future of palladium remains uncertain, the current trends indicate a shift in the market dynamics for this precious metal.
