Palladium Recovers from One-Year Low

Palladium futures rose above $1,200 per ounce, rebounding from a near one-year low hit at the end of June, as resilient hybrid vehicle demand more than offset expectations of a global market surplus. Demand for hybrid electric vehicles (HEVs) remained robust as major automakers expanded the use of software-defined technologies to HEVs, which continue to support palladium consumption through their use of catalytic converters. On the other hand, Nornickel, the world’s largest palladium producer, expects a global surplus in 2026, as rising electric vehicle adoption weighs on long-term demand and keeps prices below levels last seen at the start of the year. The Russian miner also plans to relocate its refining operations to Monchegorsk, a move expected to improve production efficiency and increase mined output. Meanwhile, expectations of at least one more Federal Reserve rate hike by year-end reduced demand for non-yielding assets, limiting further price gains.

Palladium hovered around $1,260 per ounce, giving back recent gains as escalating tensions between the US and Iran lifted oil prices and reinforced expectations that the Federal Reserve would keep interest rates elevated. Brent crude remained near a more than one-month high after Iran's Revolutionary Guards said they had struck US military assets across the Middle East, while Yemen's Iran-aligned Houthis declared a naval blockade against Saudi Arabia, fueling inflation concerns. Higher US Treasury yields and growing expectations of another Federal Reserve interest rate hike also added pressure to the broader precious metals complex, with traders raising the probability of a December rate increase to 83% from 73% a week earlier. Losses were capped by expectations of another annual market deficit, with South African mine supply remaining constrained by elevated operating costs, including higher electricity tariffs. Despite the latest moves, palladium remained down 22.81% year to date.

Palladium hovered near $1,260 an ounce, remaining slightly above its October lows, as traders assessed the metal's supply and demand outlook amid renewed escalation in Middle East tensions, which pushed oil prices higher and heightened market uncertainty. On the supply side, Sibanye-Stillwater announced plans to advance seven platinum group metals mining projects in South Africa, with the first phase ahead of schedule and production expected to begin in March next year. However, current mine output in South Africa remains constrained, as elevated energy costs continue to pressure producers' margins and are set to rise further with higher winter electricity tariffs. On the demand side, resilient sales of hybrid vehicles continue to support palladium consumption, although battery electric vehicle registration continues to rise.