The World Platinum Investment Council predicted in May that global demand for palladium would outpace supply in the short term, leading to a shortage this year and next. The market has recently shifted focus from gold and silver to palladium, which has seen its international price rise by approximately 20% since October, reaching over $1,200 for the first time in nearly a year. This marks a nearly 50% recovery from August's yearly low, spurred by news that the U.S. urged G7 allies to explore restricting palladium exports to pressure Russia, the world's largest producer.
Palladium is one of the rarest precious metals, with much of its demand driven by the automotive industry. Over 85% of global demand is tied to the automotive sector due to stricter emission standards requiring palladium in catalytic converters. From 2018 to 2022, this drove the metal's price up by over 400%. Key production regions include Russia and South Africa, with Russia accounting for about 38% of production and over 40% of supply considering recycling.
Last week, concerns over supply disruptions led to a nearly 15% intraday jump in international palladium prices. The U.S. is reportedly pushing for G7 sanctions on Russian palladium and titanium. Senior commodity strategist Daniel Ghali noted that supply threats have reignited buying activities, leading to speculative bets as "fear triggers trades." South African palladium producers saw their stock prices increase by more than 10% over two trading days.
In 2022, international palladium prices surged past $3,000 per ounce due to supply chain fears linked to the Russia-Ukraine conflict. As these concerns eased, prices slowly declined, hovering between $900 and $1,000 per ounce over the past year. The International Energy Agency anticipates a 30% surge in global electric vehicle sales this year, with the share of such vehicles expected to exceed 20% of total automotive sales by 2024. This trend is likely to suppress palladium demand further.
Reports indicate that global palladium remains in short supply, with demand surpassing supply for three consecutive years and a forecasted deficit of over 300,000 ounces in 2024. Saxo Bank highlights that surface palladium stocks are nearly exhausted, and sanction threats could exacerbate supply anxiety in an already deficit market.
Despite the current supply-demand imbalance, the long-term outlook for the palladium market remains uncertain. The World Platinum Investment Council foresees a shift beginning in 2026. ING commodity strategist Warren Patterson suggests that palladium's news-driven price spikes are tempered by a long-term decline in demand for the metal. Given Russia's dominance as a supplier, it's challenging to align other countries against Russian sanctions.
Bullion Vault's research suggests that global efforts toward net-zero emissions by 2050 could signal the gradual phasing out of internal combustion engines, reducing palladium demand. Unlike platinum, palladium lacks widespread alternative uses. While short positions in NYMEX futures have prevailed over the past two years, significant price adjustments may still create profitable opportunities as supply shocks disrupt the market. Palladium's fundamentals will likely continue to pressure prices in the long term.
