What Drives Palladium Price Volatility: Supply Tightness and Shifting Palladium Demand in 2026

Palladium experienced a dramatic turnaround in 2025, climbing over 83 percent by mid-December after enduring three years of decline. The metal reached US$1,675.50 per ounce on December 17. However, the outlook for palladium in 2026 remains complex, shaped by competing forces on both the supply and demand fronts.

Supply-Side Pressures: The Tightening Grip on Production

Russia and South Africa dominate global palladium production, together accounting for over 75 percent of worldwide output. Both regions face mounting challenges that could sustain tight market conditions.

In Russia, palladium extraction occurs primarily as a byproduct of nickel and copper operations. Following the Ukraine invasion, sanctions and trade restrictions have created severe logistical bottlenecks across the entire supply chain. Russian refiners were delisted from the London Platinum and Palladium Market’s “Good Delivery Lists,” further complicating international transactions. Despite representing 26 percent of global palladium supply, Russia’s export capabilities remain significantly constrained.

South Africa’s mining sector confronts an equally daunting landscape. Heavy rainfall and flooding ravaged platinum- and palladium-mining operations throughout 2025. The nation’s chronic energy crisis, characterized by recurring power outages, has compounded operational difficulties. More fundamentally, aging mineral deposits are becoming increasingly expensive to extract, while insufficient capital investment has stalled new project development.

A critical development emerged mid-2025 when American producer Sibanye-Stillwater filed an anti-dumping petition against Russian palladium. The US International Trade Commission determined that dumped and subsidized Russian palladium does threaten domestic industry. A Department of Commerce determination on tariffs or quotas is expected in January 2026, with the ITC investigation concluding by May 2026. Such measures could substantially reshape palladium supply dynamics and potentially incentivize substitution toward platinum in catalytic converters.

According to the World Platinum Investment Council (WPIC), palladium supply is forecast to contract at a 1.1 percent compound annual growth rate through 2029. The organization projects supply deficits for both 2025 and 2026, though this outlook depends entirely on recycling supply growth materialization. Should recycling fail to expand as anticipated, palladium deficits could persist indefinitely, materially altering price expectations.

Palladium Demand: EV Slowdown Meets Manufacturing Recovery

Palladium demand fundamentals shifted notably in 2025, primarily driven by automotive sector dynamics. Over 80 percent of palladium consumption originates from this industry, specifically in catalytic converters for internal combustion engines.

Global electric vehicle adoption decelerated sharply. EV sales rose just 6 percent in November—the slowest pace since February 2024—as North American sales plummeted 42 percent following the elimination of US tax credits. This slowdown proves strategically favorable for palladium, as prolonged reliance on combustion engines extends demand for autocatalyst metals. Slower electrification essentially delays the substitution away from palladium-intensive technologies.

Germany and China revealed contrasting but complementary demand signals. In Germany, factory orders rose 1.5 percent while industrial production jumped 1.8 percent in October, suggesting manufacturing-led inventory restocking that typically supports autocatalyst metals. China’s situation proved more nuanced: domestic passenger car sales fell 8.1 percent year-on-year in November, while new-energy vehicle sales grew merely 4.2 percent—undershooting expectations and confirming cooling domestic EV momentum. However, Chinese auto exports surged 52 percent to 601,000 units, maintaining elevated production levels and sustaining global palladium demand through foreign-supply chains.

Looking ahead to 2026, S&P Global projects that light vehicle production will hinge on shifting US trade policies and emission standards. Tariff-induced cost increases may depress consumer demand, pointing toward flattish global production trends. This scenario maintains steady but unspectacular palladium demand growth.

Premium Reversal: A Structural Shift in Metal Substitution

A major development unfolded in late 2025: palladium’s historical price premium to platinum reversed. Platinum began commanding a premium exceeding US$250 per ounce by December 17—a dramatic shift from palladium’s typical position.

This reversal opens the door to substitution dynamics that could reshape catalyst compositions. Carmakers may increasingly swap palladium for platinum when economic conditions favor such switches. The WPIC expects reverse substitution (replacing palladium with platinum) to reach 250,000 ounces by 2029, with palladium benefiting from China’s upcoming Class 7 emission legislation implementation forecast for 2028 onward.

Price Forecasts: A Wide Range Reflects Market Uncertainty

Precious metals forecasters project divergent scenarios for 2026, reflecting genuine uncertainty about palladium’s trajectory.

Heraeus Precious Metals forecasts trading ranges between US$950 and US$1,500, acknowledging that expanding battery electric vehicle adoption could generate surplus pressures and depress prices. Simultaneously, rallies in platinum prices might provide offsetting support.

Bullion Exchanges projects a base case of US$1,300 to US$1,600. Their bearish scenario, triggered by accelerating EV adoption, targets US$1,100. Conversely, should supply deficits deepen and Russian palladium face intensified sanctions restrictions, their bullish case envisions prices surging above US$1,800.

The palladium market’s notorious volatility—driven by economic swings, geopolitical disruptions, and substitution dynamics—makes precise forecasting inherently challenging. Supply-side investigations, Chinese production trends, and global EV adoption trajectories will collectively determine whether palladium prices consolidate, retreat, or surge during 2026.