The platinum-group metals market is undergoing a structural realignment as platinum and palladium, long linked through their use in vehicle emissions systems, face increasingly different supply-and-demand conditions. For most of the decade before 2024, palladium was selling at a large premium to platinum. The result of tighter emissions regulations for gasoline vehicles and limited production from mines was a continuous shortage of palladium and a sharp rise in prices. This situation is now changing.
Platinum is now entering a phase of ongoing supply shortages, with its stocks decreasing and demand becoming more varied. On the other hand, palladium is expected to reach a surplus, as the main area of consumption for this metal is being weakened by battery-electric vehicles and the supply is being increased by greater amounts of recycled catalytic converters. The divergence suggests platinum is positioned to outperform palladium over the medium to long term, although both metals remain exposed to economic cycles, geopolitical disruption, and volatile investment flows.
Industry estimates indicate that platinum posted a deficit of approximately 951,000 to 1.08 million ounces in 2025, marking one of the deepest shortfalls in available data and extending a multiyear period in which demand exceeded mine and recycled supply. Even though the general level of demand is expected to fall in 2026 as the unusually heavy investment buying slows down, the analysts still anticipate a deficit of about 240,000 to 317,000 ounces. Forecasts over the longer term indicate that shortfalls will continue until 2029, possibly amounting to more than 700,000 ounces per year.
These deficits are steadily drawing down above-ground stocks. Inventories could fall to about 1.75 million ounces by the end of 2026, equivalent to less than three months of global consumption. When platinum prices are so low, they become more sensitive to disruptions in supply; for example, power outages in South Africa, the closure of mines, labor disputes, or trade restrictions can have a large effect since the amount of stock available is only limited. The market is therefore shifting from one primarily influenced by incremental changes in demand to one increasingly constrained by the availability of physical metal.
Palladium is moving in the opposite direction. After a 13-year period of recurring shortages, the market is forecast to shift from a deficit of about 416,000 ounces in 2025 to a surplus of between 214,000 and 300,000 ounces in 2026. The main drawback is that it does not have a varied demand. About 85% of palladium consumption is due to the automotive industry, mainly as a result of its use in catalytic converters for petrol vehicles. Since battery-electric vehicles do not need exhaust aftertreatment systems, their increasing market share means that there is permanent destruction of demand for palladium.
Palladium demand as a whole is expected to decrease by around 9 percent in 2026, while the amount supplied through recycling is increasing since more end-of-life vehicles are being scrapped, especially in China, where trade-in incentives are speeding up the retirement of older gasoline vehicles, which have a relatively high content of palladium. The global recycled palladium supply is projected to rise from about 2.9 million ounces in 2025 to more than 3.1 million ounces in 2026. That increase is arriving just as automotive consumption weakens, bringing forward the expected transition into surplus.
Palladium could still experience sharp rallies if Russian supply is disrupted. However, without stronger end-user demand, such gains are likely to be less durable than in the previous decade.
The limited ability of miners to increase production in response to higher prices reinforces the bullish case for platinum. South Africa and Russia dominate global PGM mining, and both regions face significant constraints. Bringing a new deep-level mine or shaft into production requires substantial capital, complex permitting, and years of development. Producers have also generally prioritized cost control, debt reduction, and shareholder returns over aggressive expansion.
South Africa, which is the biggest producer of platinum, is still having to deal with an aging electricity system, high labor and energy costs, and ever more difficult conditions down in the underground mines. Even though the extent of the planned power cuts has varied, the power grid remains susceptible to sudden failures in generation. Estimates made by the industry indicate that for every 1,000 gigawatt-hours of electricity that is curtailed, refined platinum-group metal production in South Africa will be reduced by about 2%. Another difficulty relates to operating expenses. Although the most efficient mines can produce at all-in sustaining costs of nearly $1,000 per three-element PGM ounce, a large part of the industry operates at costs between $1,250 and $1,500 per ounce. Analysts estimate that 5% to 7% of South Africa's capacity lies in a high-risk section of the cost curve. Marginal shafts are consequently being restructured or closed. Such decisions can have lasting effects because deep underground mines are expensive to maintain and even more costly to dewater and reopen after being placed on care and maintenance.
Russian supply is also limited. Norilsk Nickel has forecast a reduction in its palladium output as its operations move into areas with lower-grade ore. Sanctions and the possibility of further tariffs on Russian metals add another element of uncertainty. It is possible that the restrictions will not eliminate Russian supply to the international market, but they might split up the trade flows, leading to higher prices in Western markets and lower prices in Asia. Together, South Africa and Russia account for the large majority of mined palladium and an important share of platinum production. This geographic concentration exposes both metals to disruption, but the effects are likely to be more pronounced for deficit-bound platinum.
Recycling is the most responsive part of PGM supply. Higher prices increase the value of used catalytic converters and encourage scrapyards and aggregators to process lower-grade material that might otherwise remain uneconomic. Recycled platinum supply is forecast to rise by about 8% in 2026 to approximately 1.8 million ounces. Even so, the increase is not expected to eliminate the market deficit. With regard to palladium, recycling has a more negative impact. Since older gasoline vehicles usually have fairly high amounts of palladium, phasing them out is causing the metal to enter a market where demand from new automobiles is already falling. As a result, the secondary supply is accelerating palladium's move toward surplus rather than just alleviating a shortage.
Automotive demand remains essential to both metals. It accounts for close to 40% of platinum use and as much as 85% of palladium consumption. Platinum has for a long time been the metal of choice in diesel systems, whereas palladium has been the one used in gasoline catalysts. But the sharp increase in the price of palladium between 2018 and 2022 caused vehicle manufacturers to review their formulations.
The tri-metal catalyst technology developed by BASF in collaboration with Sibanye-Stillwater and Impala Platinum enabled car manufacturers to replace some of the palladium with a less costly kind of platinum in vehicles that run on gasoline without having to compromise on their emissions performance. This change is estimated to have increased annual platinum demand by 150,000 to 250,000 ounces.
In theory, the fall in palladium's price has given car manufacturers a reason to reverse that substitution, but the process is not likely to be quick. Catalyst systems have to go through many years of testing and certification, and the formulations are generally set well before a vehicle goes on the market. Moreover, the car manufacturers are still careful not to depend too much on palladium after having seen its serious price fluctuations and supply risks. As a result, platinum’s gains in gasoline catalysts are likely to prove relatively sticky, even if palladium remains cheaper for an extended period.
The consensus forecasts indicate that platinum will be roughly in the range of $1,550 to $1,670 per ounce in 2026, with more substantial gains possible if supply disruptions occur at the same time as ongoing inventory depletion. Continued deficits until the end of the decade would support the metal's long-term upside.
The long-term range of palladium is usually regarded as being between $950 and $1,500 per ounce; although there could be temporary increases due to Russian supply problems, sanctions, or speculative short covering, a continuous rise would need either a slower rate of adoption of electric vehicles, more extensive mining, or the appearance of a major new use.
The platinum outlook is also subject to risks. A global recession might reduce consumption in the automotive, jewelry, and industrial sectors. If the adoption of battery-electric vehicles is faster than expected, the scenario could lead to lower demand for catalysts, while the slower development of green hydrogen would postpone an important area of growth. Furthermore, stronger recycling or a greater tendency to substitute palladium for platinum could also alleviate the expected deficits of platinum.
The relative balance is still in favor. Platinum benefits from restricted mine production together with low inventories, steady demand from the automotive sector, established industrial use, investment demand for precious metals, and involvement in hydrogen technologies. In contrast, palladium is still overwhelmingly reliant on a market for gasoline vehicles, which is experiencing long-term contraction.
The PGM complex can therefore no longer be best seen as consisting of a single trade; platinum is increasingly acting as a scarce precious-industrial transition metal, while palladium is becoming a more narrowly focused automotive commodity and is heading towards structural oversupply. If the present demand trends do not change significantly, the divergence should still tend to benefit platinum over the rest of the decade.
