Palladium is trading at $1,265/oz in early July 2026, a market that looks very different from its tight-supply peak years. After trading above $3,000/oz in early 2022, palladium has been in a structural downtrend. 2026 marks the year the fundamental balance tips from deficit toward surplus.
The World Platinum Investment Council projects palladium recording a small deficit in 2025 before transitioning to a small surplus in 2026. Heraeus Precious Forecast characterizes 2026 as a wider surplus as supply outpaces demand. The shift is gradual but significant.
Approximately 82% of palladium demand comes from automotive catalytic converters. China electric vehicle exports surged 49% year-on-year, accelerating the demand shift away from palladium used in catalytic converters. Every percentage point of ICE market share lost to EVs directly erodes palladium demand.
The substitution dynamic with platinum has been key. From 2020-2025, automakers substituted platinum for expensive palladium in gasoline catalysts, reducing palladium demand by an estimated 640-700 koz/year. With palladium now trading below platinum at roughly $1,265 vs $1,635/oz, the economic incentive for further substitution has diminished.
On supply, Norilsk Nickel expects output to decline 2% in 2026 due to lower ore grades. However, autocatalyst recycling across all PGMs is forecast to rise 11% to 4.4 Moz in 2026, with Chinese scrappage programs boosting supply.
Metals Focus projects palladium averaging $1,570/oz in 2026. The $1,200-1,300 range has acted as a floor, supported by Russian supply concerns. The deficit has narrowed from 566 koz in 2024 to 367 koz in 2025, expected to shrink to 178 koz in 2026 before flipping to surplus.
Bull case: Reverse substitution accelerates as palladium remains cheaper than platinum, Chinese stimulus boosts ICE vehicle sales. Bear case: EV penetration accelerates faster than expected, the surplus widens. Base case: Palladium trades $1,100-1,500 through H2 2026 with cautious downward bias.
Procurement teams should treat palladium as the PGM most exposed to structural demand erosion. For automotive buyers, the case for long-term fixed-price contracts is weaker than for platinum. Consider shorter-term contracts of 3-6 months with price-adjustment mechanisms. A break below $1,200 could trigger a rapid move toward $1,000 if the surplus narrative crystallizes. The key risk to the downside view is a Russia supply shock.