Palladium climbs over 3% on 2026 demand outlook

Palladium prices rose during Monday’s trading session, supported by continued positive expectations for strong demand for the industrial metal this year.

Amid sustained demand for platinum group metals (PGMs), BofA Securities’ global research team raised its 2026 price forecast for platinum to $2,450 per ounce from a previous estimate of $1,825, and lifted its palladium forecast to $1,725 per ounce from $1,525.

Key takeaways from the bank’s weekly Global Metals Markets report, dated January 9, showed that trade-related disruptions to PGM flows continue to keep markets tight, particularly the platinum market. The report also noted that Chinese platinum imports are providing additional price support.

While a supply response is likely, the bank expects it to be gradual, citing what it described as “production discipline and limited mine supply elasticity.”

These forecasts come as platinum and palladium prices continue to rise this year, with spot prices reaching $2,446 per ounce for platinum and $1,826 per ounce for palladium.

Both metals have now exceeded the bank’s previous forecasts, prompting the upward revision in price estimates.

In comments to Mining Weekly, the bank said it continues to expect platinum to outperform palladium, supported by persistent market deficits.

The bank noted that US tariffs have had a clear impact on several metals markets, and that the risk of additional tariffs continues to loom over PGMs.

This has been one of the factors behind rising inventories at the Chicago Mercantile Exchange, alongside a surge in exchange-for-physical (EFP) activity.

Palladium EFPs have been particularly strong, driven largely by growing concerns over the potential imposition of US tariffs on Russian palladium, amid ongoing anti-dumping and countervailing duty investigations.

In this context, the bank said the US Department of Commerce has estimated the dumping margin for unworked Russian palladium at around 828%.

The bank added that the imposition of tariffs on as-yet-unspecified Russian volumes could push local prices higher, given Russia’s role as a key palladium supplier.

Chinese import demand adds further price support

Outside the United States, China has provided additional support to prices. Early in 2025, a sharp recovery in jewellery sector activity drew more ounces into the Chinese market. With gold prices at record highs, this development is particularly significant, as substituting as little as 1% of gold jewellery demand could widen the platinum deficit by around one million ounces, equivalent to roughly 10% of total supply.

In the second half of 2025, the launch of physically backed platinum and palladium futures contracts on the Guangzhou Futures Exchange (GFEX) provided further support to prices.

These contracts represent China’s first domestic hedging tools for PGMs, denominated in renminbi, and allow for physical delivery of both bars and sponge metal. The bank said improved physical liquidity was a key driver behind the sharp price rally seen in December.

China’s palladium imports have also quadrupled since September compared with the previous year, a development the bank described as difficult to explain on fundamental grounds given the ongoing shift away from internal combustion engines. It suggested the surge is largely linked to the launch of palladium futures on the Guangzhou exchange.

Gradual supply response expected

With PGM prices now trading above marginal production costs and incentive prices for investment, markets are closely watching the potential supply response.

The bank said it expects any response to be measured, noting that producer margins — particularly in South Africa and North America — have remained under pressure over the past two years, which may encourage caution in expanding output.

New supply additions are also likely to emerge only gradually, reflecting long lead times from development to steady-state production.

Many ongoing projects represent incremental expansions or phased increases, rather than sources of rapid, large-scale supply growth.

On the supply side, production challenges in South Africa tightened the platinum market in 2025. Mine output in the country fell by around 5% year on year between January and October 2025, mainly due to operational issues such as flooding and plant maintenance in the first quarter. The bank expects a modest recovery in South African platinum output this year, but not enough to eliminate the market deficit.

In Russia, the world’s largest palladium supplier, production has also faced challenges as Norilsk Nickel transitioned to new mining equipment and dealt with changes in ore composition. As a result, the company’s platinum output fell 7% year on year and palladium output declined 6% during the first nine months of 2025. As these temporary disruptions fade, Russian PGM production is expected to recover this year, potentially capping the pace of palladium price gains.

While higher prices can incentivize increased supply, the bank believes additional volumes are more likely to come from life-of-mine extensions and project restarts rather than rapid capacity expansions.

In practice, most new supply requires several years to move from construction to full production, and many projects currently under development are expansions or phased increases rather than immediate sources of large additional volumes.

The bank noted that two major new projects — Ivanhoe Mines’ Platreef project and Wesizwe’s Bakubung project in South Africa — are progressing toward production and are expected to add a combined 150,000 ounces of platinum and 100,000 ounces of palladium this year.

Other expansion projects remain longer-term and depend on final investment decisions. Among them is Valterra Platinum’s Sandsloot underground project at the Mogalakwena mine, which is not expected to reach an investment decision before 2027, with underground ore production unlikely to begin before 2030.

In trading, March palladium futures rose 3.25% to $1,931 per ounce by 16:21 GMT.