UBS has raised its near-term price forecasts for palladium, arguing that a tighter-than-expected supply picture will put a floor under the metal even as its long-term prospects darken.
The Swiss bank said prices had held up better than it had anticipated, with palladium recently trading at $1,327 an ounce.
To understand why that matters, it helps to know what palladium actually does.
The silvery-white metal is a workhorse of the car industry, where it sits at the heart of catalytic converters, the devices that scrub harmful gases from the exhausts of petrol vehicles.
Roughly four-fifths of global palladium demand comes from this single use, which ties the metal’s fortunes tightly to the health of the car market and to environmental rules on emissions.
That also makes it a barometer for two of the biggest forces reshaping the global economy: the shift to electric vehicles and the tug-of-war over industrial supply chains.
The metal is unusually concentrated, mined mainly in Russia and South Africa, which leaves the market exposed to disruption in just a handful of places.
On the supply side, UBS said the squeeze was intensifying. Global mine output fell in 2025 and is expected to shrink again this year, hit by declining ore quality in Russia and by South African producers holding back on investment to protect cash.
Better recycling is helping, but only partly plugs the gap. Demand, meanwhile, has proved stickier than feared.
The rise of hybrid cars, which still run petrol engines, is propping up consumption in markets such as the United States and Brazil.
Palladium’s growing discount to sister metal platinum is also tempting carmakers to switch back to it in petrol engines.
Together, UBS reckons those forces are keeping the market balanced to slightly undersupplied, rather than in the surplus it had once expected.
It lifted its December 2026 and March 2027 forecasts by $200 an ounce each, and its June 2027 forecast by $100.
The longer-term view stays gloomy, however, as the slow march of electric vehicles gradually erodes palladium’s core market for good.
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