UBS Cuts Palladium Forecast on Expected Shift from 14-Year Deficit to Surplus

UBS lowered its palladium forecast to $1,400/oz across all tenors, citing expectations of surplus in 2026 after 14 consecutive years of deficits. The shift is driven by declining ICE production and rising scrap from China's vehicle trade-in scheme.

Spot fell to $814/oz in late May, the lowest since August 2024, though still 43% higher YoY. Heraeus expects surplus with $950-1,500/oz range. The surplus is expected to widen as automotive demand declines and recycling volumes increase.

The transition is not without risks. Russia and South Africa account for ~75% of global production, creating geopolitical vulnerability. US tariff threats on Russian palladium remain a key upside risk. Canadian supply is under pressure with Lac des Iles expected to close by mid-2026.