Platinum and palladium often go head to head in the precious metals market due to their shared automotive applications. With enormous price discounts and increased availability, platinum may reign supreme in 2023, with palladium following closely behind.
Until the last two years, palladium acted as the traditional emissions purifier in gasoline-powered cars, while platinum was the go-to critical component in catalytic converters for diesel-powered vehicles. These industry standards began shifting in recent years as platinum prices became more appealing.
In March of 2022, palladium reached an all-time high of over $3,440, while platinum traded at just a third of the price, at around $1,240. The urge for platinum to replace palladium in vehicle parts also stems from concerns over palladium’s top producer, Russia, decreasing supply, which will only increase prices. As car manufacturers want to cut costs but palladium only gets more expensive, platinum has become the new hot topic.
Craig Miller, the finance director at Amplats, predicts that as much as one million ounces of palladium may be replaced by platinum in the upcoming five years.
S&P Global’s closing analysis for 2022 also supports such predictions. “Platinum was the best-performing precious metal price over the course of 2022, rising 12%, compared with a 1.7% fall for palladium and 4.8% and 1.3% rises for silver and gold, respectively. With Russia normally a major supplier of platinum group metals, or PGMs, supply risks remain, as its invasion of Ukraine has prompted consumers in sanctions-imposing countries to divert supply chains away to other sources.”
The World Platinum Investment Council predicts a 303 Koz deficit in the supply of platinum as global demand increases by 19% (7,770 Koz), but supply only rises by 2% (7,466 Koz). “Supply constraints, combined with increased bar and coin demand, have seen the market surplus forecast for 2022 revised downwards by 17% (-170 Koz) to 804 Koz. The profound swing in market balances between the 2022 surplus and the 2023 deficit is forecast to be more than 1.1 million ounces.”
The council predicts that the increased production in passenger vehicles, stricter legislations on heavy-duty vehicle emissions in China and India, and the expanding popularity of replacing platinum with palladium explain the recent increases in demand. In 2022, platinum substituted approximately 340 Koz of palladium, and the council predicts this figure to increase to 500 Koz in 2023, which more than doubles the 2021 figure of 240 Koz.
In 2022, the council estimated that automotive demand for platinum would increase by 11% (324 Koz), jewelry demand would remain the same at 1,953 Koz, and industrial demand would decrease by 14%. In 2023, the council predicts similar growth in automotive demand but much more promising increases in the industrial industry, with a “forecast to be the second strongest year for industrial demand on record, climbing 10% to 2,316 Koz,” as the glass industry increases demands.
Some analysts still believe palladium has a chance to grow in the coming year. “North American palladium autocatalyst demand is estimated to have grown moderately in 2022 to 1.5 Moz, and it has the potential to grow again in 2023 if regional sales recover,” according to Heraeus Precious Metals.
The company explains that while vehicle prices continue to rise, December 2022 showed 1.3 million unit sales, displaying the first sign of recovery for vehicle inventories post-COVID-19 shortages.
Bank of America predicts platinum to rise from $977 to $1,322 per ounce, with palladium to decrease from $2,126 to $1,865 per ounce in 2023. ANZ Research forecasts platinum rises to $1,220 in 2023 and $1,300 in 2024, with palladium rising to $2,150 by December of this year, before falling again to $1,600 by December of 2024.
“We reiterate our preference for platinum, which is likely to benefit from the advance in gold prices and better auto growth prospects. Furthermore, auto manufacturers are substituting palladium with platinum given the structural deficit, on top of palladium’s supply exposure to Russia,” ANZ explains.
Platinum’s all-time high was in March of 2008 at $2,290, when palladium valued at just $595, while palladium only recently reached its record high in March of 2022 at $3,440, when platinum cost $1,240.
The two precious metals take turns in the lead as demand pressures sway from various external factors. While many predict platinum to take the lead for 2023, different support and resistance zones could still push palladium into favor. Both options may still show promising long-term growth. Platinum currently offers a lower investment purchase price with high potential gains.