UBS has revised up its near-term palladium price forecasts, reflecting what the bank characterizes as a tighter physical market for the metal even as it retains a cautious stance on palladium's longer-term prospects. The bank increased its December 2026 and March 2027 forecasts by $200 per ounce and raised its June 2027 forecast by $100 per ounce.
The move follows stronger-than-expected price performance for palladium, underpinned by fundamentals that point to supply tightening. UBS notes that global palladium demand fell only modestly in 2025 and is projected to be broadly stable through 2026, a profile that contrasts with some earlier expectations for a faster demand unwind.
Automotive demand remains a central factor in the bank's assessment. UBS highlights a slower-than-anticipated transition away from internal combustion engine - or ICE - vehicles, with continued uptake of hybrid models in gasoline-oriented markets, including the United States, Brazil and parts of Asia. That pattern has supported autocatalyst consumption and therefore palladium demand.
Relative metal economics are also playing a role. Palladium's widening discount to platinum has improved the financial case for reintroducing palladium into autocatalysts for gasoline-powered vehicles, which can increase palladium intensity per vehicle compared with substitution away from the metal.
Despite the nearer-term tightening, UBS maintains a negative long-term demand outlook for palladium, citing transport electrification and an expected decline in ICE vehicle production as structural headwinds that will reduce demand over time.
On the supply side, global mine output declined in 2025 and is expected to contract again in 2026. The bank points to specific supply pressures: Russian production is being affected by declining ore grades, while South African producers are prioritizing capital discipline rather than seeking volume growth. Recycling flows have improved, but UBS says recycling offsets only part of the shortfall from mined supply.
Taken together, UBS argues the tighter supply backdrop will likely limit the downside for palladium prices this year, even as the bank continues to view the metal with caution over a longer horizon.
Key takeaways:
- UBS raised December 2026 and March 2027 palladium forecasts by $200/oz, and June 2027 by $100/oz.
- Demand fell only modestly in 2025 and is expected to be broadly stable in 2026, supported by slower ICE decline and hybrid adoption in gasoline-heavy markets.
- Mine production fell in 2025 and is forecast to contract in 2026; recycling improves but does not fully offset mined supply weakness.
Sectors affected: automotive manufacturing, mining and metals, and commodity markets.