The price of palladium has dipped below that of platinum for the first time in five years, signaling a significant shift in the precious metals market. On Thursday, palladium experienced a notable decline of 2.8%, reaching $869.6 per troy ounce, marking its lowest level in half a decade. Meanwhile, platinum maintained a slightly higher price at $874.5 per ounce.
This reversal comes after palladium underwent a substantial 39% drop in 2023. The surge in prices observed from 2018 to 2022 prompted the automotive sector, which accounts for 80% of palladium demand, to seek alternatives such as the cheaper platinum for catalytic converters.
Adding to the challenges facing palladium is the increasing adoption of electric vehicles (EVs), which eliminate the need for emission treatment systems, further dampening demand for the metal. Henrik Marx, head of precious metals trading at Heraeus, commented, “That means that demand will shrink while supply will remain more or less stable.”
Analysts at Citi echoed these sentiments, highlighting the potential for palladium prices to experience sporadic spikes due to supply-related news. However, they cautioned against viewing such rallies as indicators of a long-term positive trend, citing the overall negative outlook for palladium.
The bulk of palladium production is derived from mines where it is extracted alongside other metals, limiting producers’ ability to adjust output solely based on market prices. South Africa and Russia jointly contribute 80% of global palladium production, with North America accounting for the remainder. While Russia’s main palladium miner, Nornickel, anticipates a slight reduction in production for the year, no further cutbacks are planned.
Despite the price decline, major palladium producers in South Africa have signaled their intent to maintain production levels. However, the impact of falling prices has already been felt by some companies. Impala Platinum Holdings Ltd. and Anglo American Platinum Ltd. reported significant declines in profits, with Impala Platinum’s fiscal second-half profit expected to plummet by over 85%. Anglo American Platinum’s 2023 profit suffered a similar fate, dropping by as much as 79%.
The market response to this shift has been evident in the stock performance of leading PGM (platinum group metals) miners in South Africa. Shares in Amplats, Implats, Northam Platinum Holdings Ltd., and Sibanye Stillwater Ltd. all experienced declines in Johannesburg trading, reflecting investor concerns about the challenging palladium market conditions.
As the palladium-platinum price dynamic continues to evolve, industry stakeholders remain vigilant, navigating through a sector marked by changing demand patterns, supply dynamics, and market volatility.
