With palladium oversold and platinum’s attractive fundamentals, both metals have upside

In the near-term palladium prices are likely to be volatile as investors continue to cover short positions, with two short squeezes since December 2023 alone. In addition, there are some supply risks to palladium’s move into surplus; palladium recycling supply is expected to grow by ~1 Moz p.a., but with the recycling industry facing a number of challenges, should this supply not materialise in full it could make palladium markets much more balanced or even keep them in deficit. However, it is more pertinent to understand why platinum, with its better outlook, did not see prices converge upwards towards palladium. From a sentiment perspective, platinum, as a non-yielding asset, was hampered by tightening monetary policy undertaken by central banks to contain inflation through 2022 and 2023. While physical platinum purchases were impacted by reduced automaker purchases after a period of large inventory accumulation as a result of under-producing vehicles during COVID-19 and the semiconductor shortage. There are early signs that automakers are returning to normalized purchasing patterns. This comes as platinum is forecast to enter the second year of a protracted period of market deficits, arguably boding well for upward pressure on prices and investor returns.

• WPIC research indicates the platinum market entering a period of consecutive supply deficits from 2023.

• Platinum supply remains challenged, both from primary mining and secondary recycling.

• Automotive platinum demand growth should continue through 2024 due principally to substitution of platinum for palladium in gasoline vehicles.

• Platinum is a critical mineral in the global energy transition underpinning a key role in the hydrogen economy.

• The platinum price remains historically undervalued and significantly below both that of gold.

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