The price of palladium fell below that of platinum for the first time since April 2018 on Thursday, as growing demand concerns and bets on stable supply weighed on the metal.
Spot palladium retreated 2.8% to $869.6 per troy ounce, its lowest in five years, while platinum stood at $874.5.
Palladium fell by 39% in 2023 after rising prices from 2018 to 2022 caused the auto sector, which accounts for 80% of demand, to start replacing it with the cheaper platinum in autocatalysts.
The rising adoption of electric vehicles, which do not require any off-gas treatment system, further worsened the metal’s prospects.
“That means that demand will shrink while supply will remain more or less stable,” said Henrik Marx, head of precious metals trading at Heraeus.
“Palladium prices could easily spike on major supply headlines given the thin liquidity. But we consider such rallies as opportunities for producers to add more hedging positions and for speculators to open fresh short positions, as the long-term outlook remains very negative,” Citi said in a recent research note.
The majority of mined palladium production comes in a basket with other metals, limiting producers’ ability to slow palladium output even when the market price is below their costs.
South Africa and Russia account for 80% of global palladium mined output, with the rest mined in North America. Russia’s main miner, Nornickel, will produce slightly less palladium this year, but no further reductions are planned, it said in January.
“South Africa and America are not going to shut down production. That’s the main conclusion,” a source at a major miner told Reuters.
Two South African producers already reported tumbling earnings following the collapse in prices.
Impala Platinum reported that its fiscal second-half profit likely fell by more than 85% and wrote down the value of assets in South Africa and Canada. Anglo American Platinum said its 2023 profit sank by as much as 79%.
Shares in the four companies that mine most PGM metals in South Africa all fell in Johannesburg trading. Amplats dropped 6.8%, Implats slid 1.9%, Northam Platinum declined 5.2% and Sibanye Stillwater was down 4.6% as of 10:43 a.m. local time Thursday.
