Platinum deficits have been significant since 2023, with fundamental strength expected to persist into 2026. Platinum has led the PGM rally in both timing and extent, and is favored for forward balances. By 2026, platinum fundamental deficits will have been four years in a row, unlike palladium, which is expected to see a balanced to modestly oversupplied market in 2026.
The report starts with the view that continued platinum fundamental deficits should eventually make their way into the price, though timing was initially more doubtful. Factors supporting this include high autocat demand versus the 2018-22 rate and positive plug-in hybrid sales compared to BEVs. The rally has been supported by (a) a narrative around jewellery fabricator substitution from gold into platinum, (b) the rally in lease rates, which is taken as a sign of physical shortage, and (c) the possibility that consecutive years of deficit have eroded industrial stocks to the point where some re-stocking would be required.
The operating premise is that economic and supply chain rationales exist behind industrial users' significant inventory of PGMs and their ability to absorb surpluses and deficits within limits. The low cost of storage relative to metal value would factor into this calculus. However, no visibility on the level of these stocks means caution is warranted regarding the inference that re-stocking would be required.
Upside risk to forecasts comes from the relationship between physical fundamentals and PGM prices, which is fraught with hazard. Palladium offers a more rational and stronger historical relationship, as palladium prices tend to drive secondary supply from autocatalysts. Reading from the ratio of model-implied stocks to gross demand, the real palladium price remains substantially below the polynomial regression line. Extrapolating from the 2006-24 historical pattern, the report thinks there is upside to the 2026 palladium price target of USD 1,250/oz, with a palladium price of USD 1,400/oz in 2026 not seeming very much out of place, implying potential for platinum to rise to USD 1,550/oz versus the forecast of USD 1,400/oz in 2026.
Caution is advised due to the renaissance in platinum jewellery fabrication possibly not being representative of a similar rebirth in end-user demand, a concern shared by Johnson Matthey and SFA Oxford. Historically, strong platinum jewellery demand has been marked by strength in platinum prices relative to gold. Another observation is that the weakness in South African mined PGM volumes may be temporary, as there are seasonal aspects of Q1 weakness which should subside in Q2 and Q3. Heavy rains during February have affected output, and miners have maintained guidance with margins over AISC set to improve from 10% to 15% based on the year-to-date 6E basket.
