UBS Lifts Palladium Price Forecasts on Tighter Supply Outlook

UBS has upgraded its price forecasts for palladium for late 2026 and early 2027, attributing the revision to a tighter supply-demand balance in the physical market. The bank noted that palladium prices have performed better than previously anticipated, supported by contracting global supply and resilient demand fundamentals.

Forecasts Revised Upward

In a recent note to clients, UBS detailed specific adjustments to its price targets, reflecting a more bullish near-term outlook. The bank's revised forecasts are:

• The December 2026 and March 2027 price targets were each increased by $200 per ounce.
• The June 2027 forecast was raised by $100 per ounce.

UBS analysts believe the increasingly tight supply backdrop will help limit significant downside risk for palladium prices throughout the current year.

Supply Constraints Meet Steady Demand

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The more constructive view on palladium is underpinned by developments on both sides of the market equation. Global mine production, which declined in 2025, is projected to shrink further in 2026. Key producers face headwinds, with Russian output impacted by falling ore grades and South African miners prioritizing capital discipline over expanding production.

On the demand side, a slower-than-expected transition from internal combustion engine (ICE) vehicles to electric vehicles (EVs) is providing support. The continued popularity of hybrid vehicles, particularly in gasoline-dominant markets like the U.S., Brazil, and parts of Asia, sustains the need for palladium in automotive catalytic converters. Furthermore, UBS noted that palladium's widening price discount to platinum is increasing the economic incentive for its use as a substitute in gasoline catalysts.

Cautious Long-Term Outlook

Despite the near-term strength, UBS remains cautious about palladium's long-term demand prospects. The bank expects the ongoing global shift toward transportation electrification and an eventual decline in ICE vehicle production to ultimately weigh on the metal's demand. While improved scrap recycling is helping to offset some of the shortfall in mine supply, it is not expected to fully close the gap.