Since reaching an all-time high of US$3,002 per ounce in February 2022 palladium has been in a continuous downward trend. More than 80 percent of the platinum group element’s (PGE) demand comes from the auto sector.
There, it is used in the production of catalytic converters, but high prices saw parts makers reduce the amount of palladium in their products for cousin PGE platinum, which has traded at lower price points.
Although the price of palladium has come down and even stabilized in 2024, it’s still trading at a premium to platinum, US$953.50 per ounce vs US$932.70 as of January 15, 2025.
It largely traded in the US$900 to US$1,100 for most of 2024, but saw a short term spike to US$1,200 in October as the US Treasury called for stricter sanctions on Russian precious metals. Russia is one of the world’s top supplier of Palladium and other PGE metals.
Given its reliance on the auto sector, what does it mean for palladium as more auto companies make the switch from internal combustion (ICE) to electric (EV) and hybrid drive train vehicles?
What factors will impact palladium in 2025?
In CPM Group’s 2025 Gold and Silver Outlook, Jeffrey Christian, the firm’s managing director, said he expects both platinum and palladium to stay rangebound in 2025, albeit with a downward bias.
He expects that bias to be more pronounced for palladium due to weakening demand from the auto sector.
Because palladium catalyzes toxic engine emissions into less-toxic exhaust gases, the auto sector is critical to supporting palladium pricing. While overall car sales are expected to rise 1.7 percent to 89.6 million cars in 2025, an increasing share will be electric, which doesn’t require any palladium load-outs.
However, while EV demand is still growing, the speed at which EVs are gaining greater market share is slowing. According to S&P data, EVs are expected to reach a 16.7 percent market share of light vehicle sales versus 13.2 percent in 2024 and 7 percent in 2023.
The slowing demand is in part due to market saturation and is also attributed to consumer fears around the availability of charging infrastructure and the overall range of electric vehicles. Additionally, broader electrical grid requirements may be stymied by a lack of necessary resources like copper to provide upgrades needed to handle an influx of new vehicles.
Another issue that may influence the auto industry in 2025 is the effect of the policy proposals of the incoming Trump administration.
In December, Donald Trump proposed sweeping 25 percent tariffs on the US’s largest trading partners, Canada and Mexico. Such tariffs would have an outsized impact on the North American auto sector, as vehicles and parts would face a 25 percent cost increase every time they entered the United States. Without carve-outs, the move could decimate new light vehicle demand in all three countries.
However, during the election, the president also proposed eliminating subsidies for new EV sales, effectively pushing the price of new vehicles up by as much as US$7,500.
It remains to be seen how and when these promises will be implemented. It’s also uncertain how much influence Tesla (NASDAQ:TSLA) CEO Elon Musk will have, especially over EV policy, but he has already endorsed rolling back the subsidies.
Palladium supply and demand in 2025
The auto sector accounts for 80 percent of palladium demand, making it by far the most important driver.
According to a report from CPM Group, auto demand is expected to recover to pre-pandemic levels in 2025, rising to 8.5 million ounces. However, this will be offset by demand from the jewelry and industrial sectors, which will decline to around 2 million ounces.
On the supply side, palladium is forecast to enter a surplus in 2025 and reach just under 1 million ounces over the next two years. The increase in supply is attributable to an additional 1.2 million ounces of recycled palladium entering the market due to the scrapping of end-of-life vehicles. This would create a total yearly recycled amount of 3.5 million ounces by 2025.
In addition to scrap material, both Russian and South African mines are forecast to return to historic output levels, further supporting an oversupplied palladium market.
What is the palladium price outlook for 2025?
Christian’s prediction of a sideways palladium price suggests a range of US$900 to US$1,000.
This viewpoint is supported by a recent report from Heraeus Precious Metals. It suggests the metal is likely to trade between US$800 and US$1,200, also based on increasing supply and weak demand.
Overall, the consensus seems to be that the palladium market will be weaker in 2025.
Securities Disclosure: I, Dean Belder, hold no direct investment interest in any company mentioned in this article.