UBS Lifts Palladium Price Forecasts on Tighter Supply Outlook

UBS has increased its price forecasts for palladium for late 2026 and early 2027, attributing the revision to a tighter-than-expected physical market. The bank noted that the precious metal, primarily used in automotive catalytic converters, has performed better than anticipated due to a combination of resilient demand and constrained production.

The Revised Forecasts

In a research note, the Swiss bank lifted its price targets for the white metal, citing current market fundamentals. The new forecasts are:

• December 2026: Increased by $200 per ounce
• March 2027: Increased by $200 per ounce
• June 2027: Increased by $100 per ounce

The upward revision reflects a market that is proving tighter than the bank had previously projected.

Resilient Demand Meets Supply Constraints

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On the demand side, a slower-than-anticipated transition away from internal combustion engine (ICE) vehicles has provided support for palladium. According to UBS, global demand declined only modestly in 2025 and is expected to remain broadly stable in 2026. The continued adoption of hybrid vehicles in key gasoline-heavy markets such as the U.S., Brazil, and parts of Asia is sustaining consumption in autocatalysts.

Furthermore, UBS noted that palladium's widening price discount to platinum is improving the economic case for automakers to substitute it back into gasoline vehicle catalysts. However, the bank maintains a negative long-term demand outlook, tied to the eventual rise of transport electrification and the structural decline of ICE vehicle production.

Global Production Issues

Supply-side dynamics are a critical part of the bank's revised outlook. Global mine production, which declined in 2025, is forecast to contract again in 2026. Key factors include declining ore grades affecting Russian output and a focus on capital discipline over volume growth among South African producers.

While recycling efforts are improving, they are only partially offsetting the weakness in mined supply. UBS concluded that this constrained supply backdrop is likely to limit price downside for palladium through the end of the year.