Palladium has traded in a range between $900 and $1,100 per ounce for most of 2024, with the exception of a short-duration spike in palladium prices in October when the USA was reported to be going to tighten sanctions on Russia’s precious metals. The consensus is not optimistic for 2025 either, as most experts agree that the demand from automotive industry that is crucial for palladium will decline in 2025 as the market share of internal combustion engine (ICE) vehicles is inferior to that of battery electric vehicles (BEVs). The growing use of trimetal gasoline autocatalysts, in which platinum has partially replaced palladium, has limited the growth of demand for palladium even taking into account the growing sales of new passenger cars, notes Heraeus, forecasting a price between $800 and $1,200.
However, palladium has already seen some surprising transformations in its history, and stakeholders believe that the situation may happen again. The World Platinum Investment Council (WPIC), a platinum lobbyist, admits that the potential for replacing palladium with platinum has been exhausted. British Johnson Matthey (JM), the world’s largest manufacturer of materials for the production of autocatalysts, draws attention to the wider use of palladium in a number of catalysts where it is more effective than non-ferrous metals, as well as in fuel cells. Norilsk Nickel expects to replace the lost demand for palladium in the auto industry by 2030 by introducing products in new areas of application to the market.
LBMA forecast
The average forecast of analysts surveyed by the LBMA assumes the average palladium price of $991 per ounce in 2025. This is only 0.75 percent higher than the actual average value of $984 in 2024, which was much lower compared to the average price of $1,337 per ounce in 2023.
The general consensus among experts is that palladium prices will likely remain held down due to concerns about oversupply and weak demand.
Joni Teves (UBS) is leading among the ‘bulls’ with an average price target of $1,090 per ounce. “Palladium prices are likely to continue consolidating within a broad range, with scope for interim spikes. Demand should stabilise over the next couple of years before resuming modest declines,” she said.
UBS estimates that palladium price below $900 looks low, while it looks high above $1,200. At the same time, high short positions increase the risk of short squeezes, especially given the inventory decrease over the past few years.
Short positions on the Chicago Mercantile Exchange (CME) remain at over 1 mn ounces, which is very high, and unwinding of short positions could support prices, says HSBC’s James Steele, who maintains a moderately optimistic forecast of $1,002 per ounce.
“Declines in auto demand due to electric vehicle encroachment and substitution with platinum are eroding palladium’s principal source of demand, and we look for further declines in that regard this year. Other forms of industrial demand are not inspiring. Investor sentiment is less negative, however, as ETFs are accumulating metal once more,” says Steele.
On the supply side, the HSBC analyst expects further production cuts in North America, while low prices are holding back supply globally, including in South Africa, but the metal supplies from Russia are still made to the market.
The key driver of potential change could be the lifting of restrictions on Russia’s metal supplies (and the resulting decreased physical shortages in Europe and the USA) after ending the conflict in Ukraine, says Jonathan Butler of Mitsubishi, who is also mildly bullish ($1,025).
The author of the most pessimistic forecast, Rhona O’Connell (StoneX Financial Ltd), predicts an average price of $906. “Palladium remains the poor relation among the precious metals,” says O’Connell, explaining this by the delays in the ‘green transition’ timing, threats to its ambitious goals, and resistance from consumers.
The leadership of plug-in hybrid electric vehicles (PHEVs) that were ahead of BEVs in 2024 and have higher PGM loadings than ICE vehicles, has benefited all three major PGMs, she acknowledges, but this situation is temporary. “Unless there are significant technological developments over the next few years, palladium continues to face a sombre future,” O’Connell said.
Market is back to balance
Last year, Norilsk Nickel initially expected a significant deficit of 900 thousand ounces in the palladium market (after a deficit of 400 thousand ounces in 2023). But towards the end of the year, it became clear that the palladium production would be higher than expected, including due to its production growth in Russia due to completing the overhaul works at the Nadezhda Metallurgical Plant (NMP) ahead of schedule, and demand turned out to be overestimated. As a result, the market was balanced.
Demand for the metal last year (excluding investment) fell by 6 percent, to 9.1 mn ounces, mainly due to a 3-percent reduction in the production of ICE passenger cars, to 77.5 mn units. “The slowdown in the introduction of fully electric vehicles has a positive effect on the share of hybrid electric vehicles and increases demand for palladium, but the significant reducing of PGM loadings by automotive catalyst manufacturers in China, Japan, and the United States has offset the positive effect,” Norilsk Nickel explained.
Production fell by 1 percent, to 9.1 mn ounces, as a result of a 5-percent reduction in autocatalyst recycling volumes amid stagnation in primary metal output. A decline in recycling in the USA and Europe outweighed the increase in autocatalyst recycling in China stimulated by a nationwide trade-in program.
Norilsk Nickel believes that the market will also be balanced in 2025. Demand will not grow and will remain at the 2024 level of 9.1 mn ounces, but primary production will decline by 3 percent (to 6.2 mn ounces) due to North America and South Africa. The Stillwater mine in the USA is expected to be shut down due to high costs, which will reduce supply by 200 thousand ounces, and additional optimization is possible at the projects in South Africa, Norilsk Nickel reminds. These factors will only be partially offset by the expected growth of palladium supplies (by 9 percent, to 2.9 mn ounces) from secondary sources due to increased recycling volumes, including due to the extension of the trade-in program in China.
Norilsk Nickel has also foreseen the possibility of demand recovery in 2025. This could happen in response to lower interest rates in Western countries, a less aggressive program for the transition to BEVs under the new administration in the United States, as well as new incentives to support the economy in China. In the United States, France, Germany, and Canada, the governments have curtailed tax incentive programs for the purchase of battery electric vehicles. “In addition, the tariffs imposed by the EU on the imports of China’s BEVs will deprive the European buyers of cheap electric vehicle models, which will make the prices of ICE vehicles even more attractive,” Norilsk Nickel notes.
Long-term forecasts
WPIC estimates that the palladium surplus will increase from 2025 to reach 897,000 ounces by 2027, driven by increased recycling volumes. The vehicles under the government’s car and van scrappage scheme tend to have higher palladium content as they were put into service during a period of stricter emissions standards. As a result, the volume of recycled palladium from autocatalysts is expected to increase by 52 percent by 2027 compared to 2022 levels, it means by 1.2 mn ounces to reach 3.5 mn ounces. In addition to increased recycling volume, primary palladium production in Russia and South Africa will return to record historical levels, WPIC expects.
Palladium demand will grow rather modestly, to 8.5 mn ounces, which is still below the pre-COVID level of 9 mn ounces. Demand for palladium to be used for industrial purposes and in jewelry will decline altogether, WPIC believes.
According to WPIC, the situation with platinum will be radically different because a stable platinum shortage is expected due to participation in the ‘hydrogen economy’, and the scale of shortage will grow from 353 thousand ounces in 2024 to 851 thousand ounces in 2027.
At the same time, as WPIC admits, an important factor in this advantage - the replacement of palladium with platinum in autocatalysts - will reach its peak in 2025, exceeding 1 mn ounces, and then this process is expected to begin declining. Since there will be a stable deficit of platinum, and on the contrary, a surplus of palladium, the difference in price will finally be leveled out, and starting from 2025, the ‘reverse’ substitution will begin and palladium will replace platinum in catalysts. According to WPIC estimates, this will result in an increased demand for palladium by about 366 thousand ounces by 2027.
Norilsk Nickel’s long-term forecast until 2030 assumes an annual decline in consumption by 0.4 percent on average with the production growth of 2.3 percent. Thus, palladium will be in a stable surplus, unlike platinum, the production and consumption of which will fall evenly by 1.1-1.2 percent annually until 2030.
Promising areas
Norilsk Nickel’s forecast for palladium does not take into account the promising use of the metal in new areas of application. The company producing over 40 percent of the world’s palladium is actively developing new products that will replace the lost demand for this metal in autocatalysts. Currently, over 80 percent of the demand for palladium comes from catalysts for ICE vehicles, the demand for which is declining due to the growing transport electrification.
Note: 1. A process, in which methane reacts with a mixture of oxygen and water, that does not require additional methane consumption to heat the reactor.
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‘Green’ technologies |
· Catalysts - obtaining ‘green’ hydrogen |
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· Tubular membranes - obtaining ultra-pure hydrogen |
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· Catalyst for hydrogen-air fuel cell - extracting the energy from hydrogen and converting it into electrical energy |
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· Photocell for solar panels - transformation of solar radiation into electrical energy |
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High-tech materials |
· OLED (Organic Light-Emitting Diode) structure for displays |
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· Coatings in printed circuit boards, contacts and electronic components |
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Traditional applications |
· Fiberglass Spinneret |
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· Electrode for obtaining chlorine and alkali, for nickel extraction, and for copper extraction |
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· Catalyst for steam methane reforming, autothermal methane reforming1, for hydrogenation of fats |
Source: data provided by Norilsk Nickel
The talk is primarily about the products in the hydrogen energy generation, ‘green’ chemistry, microelectronics, and solar energy. For example, in the hydrogen energy generation, palladium can be used throughout the entire chain, starting from the production of hydrogen using electrolyzers and obtaining ultra-pure hydrogen (palladium is used in membranes to purify hydrogen) to its transportation, as well as its use directly in fuel cells, says Norilsk Nickel’s Vice President for Innovation Vitaly Busko. Norilsk Nickel’s developments can account for 25 to 40 percent of the hydrogen energy generation market, the company expects.
The company has also developed a palladium-based anode for disinfecting water for water utilities and swimming pools and is currently discussing the use of the technology in industry jointly with Chinese partners, Busko says.
Norilsk Nickel is also involved in fundamental research in the production of superconductors and supercapacitors for energy storage and transportation; the research is aimed at building up a market as large as a catalyst one is now.
According to Norilsk Nickel that is going to invest about $100 mn in this area, the introduction of over 100 new materials from the company’s portfolio to the market by 2030 is expected to create new demand. The company estimates it at minimum 40 thousand tons (1.41 mn ounces) of palladium annually.
As Norilsk Nickel notes, palladium can be a more effective alternative to platinum group metals or other metals.
Substitution in favor of palladium
Palladium suffered greatly in recent years due to replacement with platinum has an important potential to replace other metals in industrial use, Johnson Matthey (JM) writes in its study “The PGM opportunity”.
This is happening as the traditional paradigm changes, which assumed priority in the use of ‘earth-abundant metals’ over ‘rare metals’. The situation is changing now as consumers of ‘earth-abundant metals’ are facing a supply shock amid the energy transition, while the price of ‘rare metals’, including PGMs, has declined.
For example, palladium can actively replace nickel in catalysts for the processing of pyrolysis fuels into more valuable products due to the difference in its efficiency and recyclability, notes JM. Traditionally, nickel catalysts have been used for this purpose, but they are not recyclable unlike palladium ones, which are recycled with almost 100-percent efficiency. Due to unlimited recycling, the total cost of ownership of PGMs and their impact on the carbon footprint are reduced, according to the JM’s study.
Among the new markets for palladium, JM highlights solid oxide fuel cells (SOFCs) running on gas, which use palladium catalysts to purify the fuel. Palladium membranes are used in hydrogen energy generation, competing with platinum catalysts during hydrogen filtration. Palladium has a unique ability to selectively adsorb hydrogen, which also makes it useful for hydrogen measurement applications, JM points out.
A new life in jewelry?
As a precious metal, palladium has relatively little use in jewelry manufacturing compared to other metals, but the rising gold price and the falling palladium price is opening up opportunities for designers to use palladium’s qualities, the Financial Times (FT) reports. Palladium is sought after by London jewelers for its low density, making it lighter than platinum, and its unique color characteristics, allowing the metal to be alloyed with gold in bespoke designs. Another common use is to coat jewelry items to prevent tarnishing.
The number of palladium items hallmarked by the UK’s four assay offices in the first four months of 2024 rose 81.8 percent year-on-year, albeit from a low base, according to the data given by Will Evans, managing director of the London Assay Office to the FT.
Sergey Bondarenko for Rough&Polished
