Palladium Price Update: H1 2024 in Review

Auto sector demand key for palladium price

Palladium and platinum are both used for investment, but have important industrial uses that claim the majority of demand. Auto sector demand has a strong impact on palladium in particular as it has few other uses.

According to a May report from the World Platinum Investment Council (WPIC), auto demand for palladium will remain steady in 2024 at 8.45 million ounces, while demand from all sources is projected to be 10.03 million ounces.

What factors drove palladium supply and demand in H1 2024?

The WPIC says the increase in recycled palladium supply is coming as a higher number of "PGM-rich vehicles" reach the end of their lives. These are expected to boost annual palladium recycling by over 1.3 million ounces by 2028.

Because platinum and palladium are interchangeable, manufacturers will often swap one out for the other as they try to find the best price. After breaking above US$3,000 in February 2022, palladium has been on a downward slide as auto manufacturers did exactly that, opting to use platinum, which was trading at around the US$1,000 per ounce level.

Though the two metals are now trading at near parity, there hasn’t been any desire to swap the two, even as platinum begins to edge higher. These dynamics are creating further headwinds in the palladium market.

In a mid-July platinum-group metals webinar hosted by CPM Group, Rohit Savant, CPM’s vice president of research, explained that given the costs associated with changing chemistries, the disparity between palladium and platinum prices will need to increase and be sustained before manufacturers consider a swap.

Savant went on to say that even though vehicle sales are expected to remain strong in 2024, gas-powered cars continue to lose market share to electric vehicles (EVs), which don’t require palladium.

This has been particularly impactful in the Chinese market, where there is higher EV demand.

“Even though you are seeing a substantial increase in vehicle sales, it may not necessarily translate into stronger demand for palladium," Savant commented during the webinar. "That’s primarily because of the ongoing strength in the EV market share in China, and also the government incentivizing the Chinese market to either buy EVs or to buy smaller passenger vehicles, both of which are not supportive of palladium demand."

What will happen to the palladium price in 2024?

Although some palladium demand comes from electronics production and investment, the auto industry is the metal's primary driver. As increased recycling and higher supply begin to take hold, the price is not likely to increase; in addition, substitution isn't likely to occur unless the price of platinum rises more substantially.

However, while near-term prospects don't look strong, palladium's low price may provide less risk-averse investors with opportunities, especially if the precious metal's price continues to retreat.