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The cut to Nornickel’s production guidance will support a higher price for palladium but ultimately, demand-side factors are why economists at Capital Economics think it will outperform platinum. They expect the palladium price to rise a touch, but the platinum price to drop back.  

Key quotes

“Supply of both PGMs is still expected to recover this year, but we now expect the rebound in palladium supply to be slower. We think that production of both precious metals will return to around 93% of 2019 levels this year.”

“Given that we now expect production of both metals to recover at roughly the same rate, we doubt that supply will have a major influence on the relative prices of platinum and palladium over the next year or so.”

“We think that the trend of falling platinum and rising palladium autocatalyst demand looks set to continue, especially as vehicle production recovers.”

“We expect investment demand for platinum to ease back. We expect investment demand for both gold and industrial metals to fall over the course of this year. Accordingly, platinum is unlikely to benefit from investor buying, with negative implications for its price. In contrast, investors’ holdings of palladium are already negligible, so any changes are unlikely to have much of an impact on its price.”

“The price of palladium will rise to $2,700 per ounce (from $2,630 currently) by end-2021 and $2,800 by end-2022. In contrast, we expect the price of platinum to fall to $900 per ounce (from $1,180 currently) by end-2021 and $800 by end-2022.”