Palladium Price Plunge: In the fast-paced world of metals, palladium’s recent tumble to five-year lows below $1,000 an ounce marks a significant retreat, propelled by the electric vehicle surge and automakers favouring cost-effective platinum for their catalytic converters.
The metal, a crucial component for reducing emissions in car exhausts, has seen a staggering 70% decline from its peak after Russia’s invasion of Ukraine. Currently down 45% for the year, palladium is charting its steepest annual losses since the 2008 financial crash.
Russia’s Nornickel, a major palladium producer, anticipates a market swing to a surplus of 300,000 ounces in 2024, a stark contrast to the 200,000-ounce deficit projected for 2023. The driving force behind this shift lies in the expectation that supplies, buoyed by recycling efforts, will outpace demand. SP angel analyst John Meyer notes, “Prices look set to collapse further below $1,000/oz with little support in a market driven lower by worsening demand.”
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Palladium faces dual pressures: the global push to reduce carbon emissions from internal combustion engine (ICE) cars and the accelerating adoption of battery-powered electric vehicles. As Marex analyst Edward Meir points out, “If… electric vehicle sales increase as a share of total vehicle sales from 14% in 2022 to 18% this year and more than 20% next year, then this spells troubles for ICE vehicles and palladium demand.” This year, global electric car sales are expected to surge 35%, reaching 14 million units, according to the International Energy Agency.
Adding to the challenges is the substantial combined inventory at fabricators and manufacturers. Metals Focus forecasts above-ground palladium stocks of about 11.64 million ounces in 2023, indicating ample supplies compared to previous years. In March 2022, palladium was trading at more than double the price of platinum, prompting automakers to shift preferences.
While short-term prospects may see a rebound, driven by improving demand and extended investor short positions, the longer-term outlook, according to Nikos Kavalis, Managing Director at Metals Focus, remains bearish on palladium. The metal finds itself at a crossroads, navigating a changing automotive landscape and economic realities.