UBS Lowers Palladium Forecast to $1,100 on Expected Market Surplus

UBS has lowered its price forecast for palladium, anticipating the market will shift into a surplus and place downward pressure on the precious metal. The investment bank now expects palladium prices to fall to $1,100 per ounce.

Surplus Looms for Palladium Market

Analysts at UBS attribute the bearish outlook to a projected supply and demand imbalance. The bank forecasts a palladium surplus of approximately 200,000 ounces this year, a significant shift that is expected to weigh on prices through the remainder of the year.

The surplus is driven by a combination of factors on both sides of the market ledger. According to the bank's analysis:

• Supply: While mine output is expected to decline compared to 2025, this will be more than offset by an increase in higher scrap supply.
• Demand: Both investment demand and industrial demand from the autocatalyst sector are projected to weaken.

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Interpreting Demand Signals

UBS noted that palladium imports into China reached record levels in the first half of this year. However, the bank does not view this as a sign of robust industrial consumption.

Instead, analysts attribute the surge in imports primarily to the launch of a new exchange, rather than strong underlying demand for catalytic converters. Palladium's primary use is in these devices, which reduce harmful emissions in gasoline-powered vehicles, making its price highly sensitive to shifts in automotive production and environmental policy.