Key Takeaways

• Persistent Deficits: The platinum market is facing its third consecutive year of major supply deficits, threatening to deplete above-ground inventories within three years.
• Constrained Supply: Production challenges (especially in South Africa) along with limited recycling and no major new mines, are capping supply growth despite rising prices.
• Rising Demand: Demand is surging across automotive, jewelry, industrial and investment sectors, with notable growth in Chinese jewelry and investor interest amid slowing electric vehicle (EV) adoption.
• Price Catalyst Building: With inventories dwindling and demand outpacing constrained supply, platinum may be nearing a tipping point that could trigger a significant repricing.

Platinum, one of the rarest precious metals, has been overshadowed by its more glamorous cousin, gold, for more than a decade (see Figure 4). Yet beneath platinum’s tepid price action lies a compelling story of supply constraints, surging demand and an unsustainable structural deficit that could propel platinum prices to new heights. According to the World Platinum Investment Council’s (WPIC) Platinum Quarterly Q1 2025 report,¹ the platinum market is grappling with a third consecutive year of significant deficits, projected at 966,000 ounces for 2025 — a shortfall representing a staggering 12% of global demand. This deficit, coupled with a lack of new supply and robust demand growth across multiple sectors, sets the stage for a potentially sustained price surge. We posit that the tipping point for platinum may be nigh. 

The Structural Deficit: An Unsustainable Imbalance

At the heart of platinum’s bullish case is the persistent and deepening structural deficit in the market. The WPIC reports that the platinum market recorded a 992,000-ounce deficit in 2024, following an 896,000-ounce shortfall in 2023, and now forecasts a 966,000-ounce deficit for 2025 (see Figure 1).

If the platinum deficit persists, inventories may be depleted in three years.

If the deficit forecast proves accurate, this will be the third consecutive year of significant undersupply. The WPIC describes this deficit as “embedded” and “unsustainable,” signaling that the market cannot continue to operate under such strain without a significant price response.

Structural deficits occur when supply consistently fails to meet demand, depleting above-ground stocks and creating upward pressure on prices. In platinum’s case, above-ground stocks are projected to dwindle to just 2.5 million ounces in 2025 — a critically low level. To put this in perspective, if deficits persist at this rate, global platinum inventories could be effectively exhausted within three years, a scenario that would force prices to rise dramatically to balance the market. Unlike temporary imbalances, this structural deficit is driven by fundamental supply and demand dynamics that show no immediate signs of resolution, making it a potentially powerful catalyst for price appreciation.

Figure 1. Platinum Supply-Demand Gap (koz²) (2014-2025F)

Source: SFA Oxford (2014-2018), Metals Focus (2019-2025f).

A Constrained Project Pipeline Points to Continued Deficits

One of the most critical factors underpinning the platinum deficit is the severe constraint on new supply. According to the WPIC, mine supply is projected to decline by 6% for 2025, with global production in Q1 2025 falling 13% to its lowest level since 2020, largely due to power outages and disruptions in South Africa. South Africa is the single most dominant mining jurisdiction for platinum, accounting for nearly 80% of global mined platinum output.

We believe platinum’s supply ceiling is likely to support higher prices. 

Depending on the year in question, for every 17-18 ounces of gold that is mined, we extract a single ounce of platinum. Platinum is significantly rarer than gold, occurring at very low concentrations in the earth’s crust (see Figure 2). All the platinum ever produced (approximately 8,000 tonnes) would fill just one Olympic-sized swimming pool to ankle depth. This rarity makes scaling up platinum production a formidable challenge.

Figure 2. The Amount of Platinum That Has Been Mined

Sources: Best available data as of 12/31/2024. USGS, How much silver has been found in the world?. The World Gold Council, Gold Above-Ground Stock. Note: “m” refers to meters. For instance, approximately 216,265 tonnes of gold would fit inside a cube 22 meters in length, width and height. 

Bringing new platinum mines online is a capital-intensive and time-consuming process, often taking over a decade. Platinum’s supply is slow to react to price signals, unlike other commodities with shorter production cycles. South African producers face additional hurdles, including seasonal weaknesses and infrastructure challenges, as seen in Q1 2025. Recycling, another key supply source, is also underperforming, with only a modest 2% increase in 2024 and 1% in 2025, far below what is needed to offset mining declines. Even with a sharp rise in platinum prices, the supply side will take considerable time to deliver the metal.

Exchange-traded funds (ETFs) are often cited as a potential supply source to alleviate deficits, but we believe this assumption is flawed. The WPIC notes that ETF holders are not price-agnostic; they seek returns and are unlikely to sell unless prices rise significantly above their acquisition costs. Thus, ETFs are not a viable long-term solution to the supply crunch.

With no major new mines on the horizon and recycling growth stunted, the platinum market faces a supply ceiling that amplifies the impact of growing demand.

Surging Demand: A Multi-Sector Renaissance

With supply stagnant, demand for platinum is experiencing a resurgence across multiple sectors, further tightening the market. According to the WPIC, robust growth in automotive, jewelry, industrial and investment demand is contributing to the structural deficit.

• Automotive Demand: Platinum’s role in catalytic converters for internal combustion engines remains critical, especially as the adoption of electric vehicles (EVs) faces headwinds. WPIC projects automotive demand to reach an eight-year high of 3,245,000 ounces in 2025, a 2% increase from 2024, despite market uncertainties. Recent policy shifts, such as U.S. President Donald Trump’s rollback of environmental commitments and “green” incentives, are expected to slow the adoption of battery electric vehicles (BEVs), boosting the demand for platinum in traditional ICE (internal combustion engine) vehicles. WPIC estimates that each 1% reduction in BEV market share increases platinum group metal (PGM) demand by 25,000 ounces annually. 
• Jewelry Demand: The jewelry sector is witnessing a renaissance, particularly in China, where platinum demand surged 300% year-over-year in Q1 2025. Globally, jewelry demand is forecast to grow by 5% in 2024 and 2% in 2025, driven by strong fabrication in India and platinum’s enduring appeal as a symbol of love and strength. Platinum’s rarity and durability make it a premier choice for high-end jewelry, and cultural shifts in key markets are amplifying its allure.
• Industrial Demand: While industrial demand is expected to decline 9% in 2025 to 2,216,000 ounces due to tapering capacity expansions, it remains above the 10-year average, reflecting platinum’s critical role in applications like hydrogen fuel cells and chemical manufacturing. Platinum’s use in green technologies, such as hydrogen production, positions it as a cornerstone of the energy transition, ensuring sustained industrial demand even in a slower-growth environment.
• Investment Demand: Perhaps the most striking development is the 300% surge in investment demand highlighted by WPIC, driven by strong Chinese bar and coin demand and a doubling of speculative net long positions. Investment demand is forecast at 688,000 ounces in 2025, marking the third consecutive year of net positive investment. This shift reflects growing investor recognition of platinum’s undervaluation, especially as prices break a 15-year downtrend and speculative interest pivots from short to long positions.

Figure 3. Platinum Uses

The primary driver of demand for platinum is the automotive industry. Platinum is a key element in manufacturing catalytic converters, which help reduce toxic emissions from automotive exhaust. Rising car production (especially in emerging economies) and tightening emissions standards worldwide have fueled steady growth in the use of catalytic converters.

Source: PGM Market Report May 2024. May not add up to 100% due to rounding.

The Price Catalyst: Why Platinum Is Poised to Move

From 2016 to 2021, palladium enjoyed a strong run from just under $600 per ounce to over $3,100, catalyzed by factors we highlighted above. While we are not sticking our necks out for a similar move in platinum over a similar time frame, we would like to point out that recent market activity is reflecting optimism and momentum for platinum, with prices reaching $1,100 in May 2025, which we see as a significant climb from recent lows. 

Platinum is showing fresh signs of strength and momentum.

Platinum has been overlooked for far too long. Amidst widespread inflation, finding something priced similarly to two decades ago is remarkably rare. Yet this is the current situation with platinum. What has shifted over time is the cost of mining the metal, which ties into the challenges of initiating new production. Although we are bullish in our outlook on the platinum market in 2025, we expect markets to be volatile given the fluctuating tariffs and trade policies in the U.S. and the consequent impact this may have on the global economy. 

Finally, above-ground stocks are near historic lows, and deficits continue to erode inventories. The confluence of structural deficits, constrained supply and robust demand has created a perfect storm for platinum prices. We believe the platinum market is approaching a tipping point where supply scarcity could trigger a sharp repricing. 

Figure 4. Platinum Prices vs. Gold and Palladium (2006-2025)

Source: Bloomberg. Data as of 5/28/2025. Platinum is measured by the XPT Curncy (USD) index. Palladium is measured by the XPD Curncy (USD) index. Gold is measured by the GOLDS Comdty (USD) Index. Past performance is no guarantee of future results.  

Footnotes

1	World Platinum Investment Council’s (WPIC) Platinum Quarterly Q1 2025 Report.
2	“Koz” refers to 1,000 troy ounces.

Source: https://sprott.com/insights/platinum-is-on-track-for-a-status-upgrade/

As one of the key platinum group metals, Palladium is a highly prized commodity. It commands more monetary value than gold and is 30 times as rare, with industrial demand outstripping supply for the last decade.

Being a fairly young element discovered in the early 1800s, palladium nonetheless plays a vital role in civilization as a means of reducing harmful emissions from vehicle exhaust systems. Although platinum is also used for this purpose, palladium is by far the more effective metal at emissions reduction, with the vast majority of worldwide production being employed in catalytic converters for this very purpose.

Because of these characteristics, palladium is also the premier choice for hybrid electric vehicle exhaust systems, making it an essential component of the new green economy.

Palladium is named after a massive asteroid called Pallas, also the Greek goddess of wisdom, which was discovered just before palladium.

In the world of jewelry, palladium’s unique properties make it ideal in the creation of white gold and its ability to absorb 900 times its volume in hydrogen makes it invaluable in the field of chemistry. 

Originally put to use as a marketing gimmick to make a quick buck by a brilliant but somewhat unscrupulous British chemist, palladium’s journey since its humble beginning has been nothing short of extraordinary.

On today’s episode, we seek to clear the air and provide the facts on one of the most vital platinum group metals. It’s palladium, on Commodity Culture.

What is Palladium?

Palladium’s atomic number is 46, it has an atomic mass of 106.42, a melting point of 1554 degrees Celsius, and a boiling point of 2963 degrees Celsius. It is the least dense and has the lowest melting point of all the platinum group metals. It is named after a massive asteroid called Pallas, also the Greek goddess of wisdom, which was discovered just before palladium.

Palladium is a shiny, silvery-white metal that is resistant to corrosion, extremely ductile and easily worked. It remains untarnished by the atmosphere at ordinary temperatures and so can serve as a substitute for platinum in jewelry and electrical contacts.

Palladium is also a key ingredient in the creation of white gold jewelry. 24 karat gold, the purest form of the metal, is too soft and malleable to form into jewelry and so other metals must be added to it, which allows it to become solid. Traditional yellow gold is typically mixed with copper, brass, or zinc, at a ratio of 75% gold and 25% of the other metals.

The purest form of white gold, however, is 75% gold and 25% palladium and is generally finished off with a coating of rhodium, another platinum group metal, to give it a beautiful sheen, although some prefer their white gold natural and uncoated.

The main use of palladium, much like its sibling platinum, is in the construction of catalytic converters in internal combustion vehicles. Palladium serves as a catalyst that converts polluting carbon monoxide, nitrogen oxide and hydrocarbons in the exhaust into water, carbon dioxide and nitrogen.

Palladium is also used to manufacture springs for watches, surgical instruments, and dental fillings and crowns.

Because palladium can absorb up to 900 times its volume of hydrogen, it is very effective in hydrogenation and dehydrogenation processes. As the name implies, this involves adding or removing hydrogen from a substance and is a widely used reaction in synthetic chemistry.

Palladium finds additional use in Multilayer Ceramic Capacitors, which act as a ‘dam’ that temporarily charges and discharges electricity by regulating a current’s flow in a circuit and preventing electromagnetic interference between components.

Ceramic capacitors are used in various circuits for noise removal, supply voltage smoothing, and filters and are essential components for realizing advanced functions in mobile phones and televisions.

In terms of its value as a precious metal, palladium has historically maintained a price per ounce higher than gold. However, unlike gold, this has nothing to do with monetary value and everything to do with industrial demand. At the moment, palladium is preferred to platinum for catalytic converters in petrol-driven vehicles and mandates are being implemented around the world that force manufacturers to ensure a certain level of emissions reductions before their vehicles can go to market. To put into perspective just how important palladium is in this role, in 2019, 84% of supply was used in automotive emissions control.

This has pushed the price of palladium up massively, to where it now sits at around $2,300 US per ounce. Although platinum is much cheaper and could technically be used for the same purpose, it is generally preferred for diesel-powered vehicles and changing the design of current catalytic converters would entail a massive investment of both money and time that wouldn’t be economically feasible when all is said and done.

Let’s now take a look at the mining methods employed to extract it from the earth.

How is Palladium Mined?

Palladium is generally mined alongside the other platinum group metals. Platinum group metals occur mainly as a byproduct of nickel sulfide mines, often with some copper and cobalt which can also be economically extracted, along with some precious metals as well.

Russia is the world’s largest producer of palladium, followed by South Africa, Canada, and the United States. A vast amount of the palladium used commercially is extracted from copper-nickel deposits in South Africa and Canada.

Palladium is mined using both surface and underground mining methods, depending on the nature of the deposit.

Near surface deposits of platinum group metals are mined using the open-pit method. Firstly, the overburden, a layer of soil above the deposit, is detonated with explosives to break it up into smaller chunks of rock. Special quarry machinery then collects and moves the rocks into trucks, which then transport them to be processed.

For deposits that lie deeper beneath the earth, mechanical extraction methods to get down to the lower levels of the earth’s surface and haul it out are employed. This will depend on the primary metal being extracted, but generally involves the classic underground mining technique of using timed explosives to detonate the rock beneath the surface, before bringing it above ground to be taken to a processing facility.

The process of separating palladium from the other metals is a key factor in producing pure palladium and is an extraordinarily complex multi-step process.

First, the extracted rocks need to be ground into a fine powder, to try and liberate the individual minerals. This reduces the rock into talcum powder-sized grains.

Next, the minerals are concentrated via floatation, which pushes the rocks into a concentrate.

The concentrate is then dried and smelted through a process called “pyrometallurgy” which means melting and heating. This is done in a large furnace of which there are several types, depending on the minerals in the ore and which minerals you want to focus on extracting. This process produces either something called a “matte” for the copper and nickel or, after more cooking, an anode.

Next is refining which increases the purity of the metals and looks to separate the anode into individual elements.

This commonly involves electroextraction first to separate nickel into cathodes and make a platinum group metals rich anode slime.

From here, the work to separate this slime into individual metals is a mostly chemical process.  The bullion is leached with acids, then extracted into salts, which can then be turned into pure palladium in the form of ingots.

Only the biggest mines are able to complete all these steps on site, as the capital to build smelters and refineries is very high. In most cases, the extracted ore will be concentrated and sold to special smelters and refiners, equipped to carry out the remaining steps to produce pure palladium.

The History of Palladium

The origins and uses of palladium don’t go back nearly as far as many of the other commodities we’ve covered in this series. In fact, palladium’s very first use after its discovery was purely commercial as it was simply sold as a curiosity by the man who discovered it, William Hyde Wollaston.

Wollaston discovered palladium around 1802 in crude platinum ore from South America. He dissolved the ore in aqua regia, neutralized the solution with sodium hydroxide, and precipitated platinum as ammonium chloroplatinate with ammonium chloride before adding mercuric cyanide to form the compound palladium cyanide. This compound was then heated to extract the very first palladium metal known in the world.

Instead of rushing out and publishing this incredible discovery to make it known to the scientific community, he instead kept his find a closely guarded secret and decided he could better profit off his work by marketing and selling it before others would be able to replicate the process of producing palladium themselves.

He cut a deal with a Mr. Forster, who owned a small curiosity shop in Soho in London’s West End, to sell the metal exclusively. The marketing angle was simple, palladium was dubbed the new silver and leaflets were posted and distributed naming its characteristics. These included descriptions such as:

“The greatest heat of a blacksmith’s fire would hardly melt it.” and “If you touch it while hot with a small bit of sulfur, it runs as easily as zinc.”

The palladium was sold in small quantities and priced at 5 shillings, a half guinea, and a full guinea.

This truly unprecedented decision to market and sell a newly discovered element without reporting it to the scientific community caused a wave of skepticism and speculation. Keep in mind, in advertising and selling palladium, Wollaston never revealed himself and so most scientists assumed it was some kind of trickery to turn a quick profit. Had Wollaston attached his name to it, some may have taken it more seriously, as he was a known chemist at the time.

One of the main skeptics of the scheme was an Irish analytical chemist named Richard Chenevix. To investigate further, he bought up all the palladium remaining in the shop and set about conducting a series of experiments to prove the fraud he assumed he saw in plain sight.

Despite Chenevix’s discovery that the metal did indeed possess all the properties advertised, he simply couldn’t accept that a new metal could be revealed in such a crass commercial manner, and so announced to the local scientific community that the metal was most likely an amalgam of platinum and mercury.

The other scientists didn’t attempt their own experiments and took Chenevix at his word, after all, to them it was already obvious that the whole thing was a scam.

To counteract this false conclusion, Wollaston anonymously published an advert in a chemistry journal offering anyone who could recreate the palladium he was selling a reward of 20 pounds, not an insignificant sum in the early 1800s. No one was able to rise to the challenge and in the meantime, Wollaston went ahead and also discovered another new platinum group metal, rhodium.

Deciding that this time he’d actually like to be recognized for his accomplishment, he wrote a paper on rhodium and published it in 1804. He waited a little longer to reveal that he was the one who discovered palladium, perhaps feeling a little ashamed to have broken with the status quo of the scientific community, but in 1805 he explained himself in a publication, leaving no more doubt amongst his fellow scientists and the world at large.

The Future of Palladium

Despite the cries for a new green economy and the electrification of all the vehicles in the world, the reality is that this idealized future is very far away if it ever even fully comes to pass. In the meantime, palladium will continue to remain a vital component of catalytic converters in internal combustion vehicles and with automobile tailpipe emissions standards tightening around the globe, including in developing nations like China and India, palladium’s demand will only continue to rise in the years ahead.

We are also seeing an increase in hybrid vehicle production, including hybrid vehicle fleets in the transportation industry, and that means more palladium will be required. In fact, hybrid vehicles are expected to account for roughly 23 percent of the market by 2025 and will likely continue to rise in popularity, giving palladium a great deal of longevity as an industrial commodity.

The sale of new automobiles, hampered by supply chain issues due to the pandemic, particularly related to chip shortages, is expected to come roaring back and along with it, increased demand for palladium, which has already been in a supply deficit for nearly a decade.

Add to all this the fact that the majority of the world’s palladium is produced in Russia, which now faces strict sanctions from around the world due to its invasion of Ukraine, and you have the perfect storm for reduced supplies and increased prices.

Until now, platinum has often eclipsed its lesser-known sibling in the eyes of the general public and even the investment community, but with peak demand for palladium estimated to be sometime between 2027 and 2030, this noble metal has a long way to go as it claims its rightful place in the global commodity hierarchy.

Jesse Day is not an employee or an affiliate of Sprott Asset Management LP. The opinions, estimates and projections (“information”) contained within this content are solely those of the presenter and are subject to change without notice. Sprott Asset Management LP makes every effort to ensure that the information has been derived from sources believed to be reliable and accurate. However, Sprott Asset Management LP assumes no responsibility for any losses or damages, whether direct or indirect, which arise out of the use of this information. Sprott Asset Management LP is not under any obligation to update or keep current the information contained herein. The information should not be regarded by recipients as a substitute for the exercise of their own judgment. Please contact your own personal advisor on your particular circumstances. Views expressed regarding a particular company, security, industry or market sector should not be considered an indication of trading intent of any investment funds managed by Sprott Asset Management LP. These views are not to be considered as investment advice nor should they be considered a recommendation to buy or sell.

Important Disclosure

Sprott Physical Platinum and Palladium Trust (the “Trust”) is a closed-end fund established under the laws of the Province of Ontario in Canada. The Trust is available to U.S. investors by way of a listing on the NYSE Arca pursuant to the U.S. Securities Exchange Act of 1934. The Trust is not registered as an investment company under the U.S. Investment Company Act of 1940.

The Trust is generally exposed to the multiple risks that have been identified and described in the prospectus. Please refer to the prospectus for a description of these risks. Relative to other sectors, precious metals and natural resources investments have higher headline risk and are more sensitive to changes in economic data, political or regulatory events, and underlying commodity price fluctuations. Risks related to extraction, storage and liquidity should also be considered.

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