PALLADIUM VS PLATINUM DEMAND AND SUBSTITUTION
Explore the dynamics between palladium and platinum demand, their industrial uses, and the factors influencing substitution in the precious metals market.
Industrial demand: palladium versus platinum
Palladium and platinum are both part of the platinum group metals (PGMs), sharing similar chemical properties but differing in market demand and applications. The primary industrial market for both metals lies in catalytic converters, devices that reduce harmful emissions in vehicle exhaust systems. However, the global shift in automotive technology and emissions legislation significantly impacts the demand trajectory for each.
Palladium has experienced a surge in demand over the past decade, largely due to its use in catalytic converters for gasoline-powered vehicles. As emerging and developed markets introduced stricter emissions standards, particularly in China and Europe, automakers increased palladium loading in catalytic systems to meet these regulations. This drove up prices, leading to record highs in recent years and shifting investment focus.
Platinum, historically used in diesel vehicle catalytic converters, saw declining demand following the "Dieselgate" scandal and a broader move away from diesel engines, especially in European markets. However, platinum is gaining renewed interest in various sectors, including hydrogen fuel cells, green energy technologies, and industrial applications such as glassmaking, chemical processing, and electronics where its resistance to corrosion and high melting point prove valuable.
The automotive industry still represents the lion’s share of demand for both metals. According to Johnson Matthey and the World Platinum Investment Council (WPIC), automotive applications accounted for roughly 85% of palladium consumption in 2023, compared to just over 30% for platinum, which benefits from a more diversified demand profile.
Jewellery remains a key demand driver for platinum, especially in Asian markets such as China and India, where it competes with gold. Palladium's role in the jewellery industry is limited, though used occasionally as an alloy in white gold and high-end watches.
In addition, investment demand differs between the two. Platinum has a more developed physical and financial investment market, with ETFs and other instruments available globally. Palladium’s speculative market is smaller and often more volatile due to relatively tighter supply constraints.
As both metals contend with fluctuating demand across industries, their roles in technological innovation and green energy transitions continue to evolve. Policymakers and automakers' responses to climate goals will play a central role in shaping demand trajectories over the next decade.
Substitution between palladium and platinum
The substantial price divergence between palladium and platinum over recent years has revived discussions around substitution—specifically, whether platinum can be feasibly used in place of palladium in key applications such as automotive catalytic converters. The viability of substitution depends on several factors including technological compatibility, cost, regulatory compliance, and refining capabilities.
Historically, platinum was the preferred material in autocatalysts for both gasoline and diesel vehicles. However, as palladium proved more suited for gasoline engines due to its better durability and performance under high-temperature conditions, it gained favour. As a result, starting in the early 2000s, automakers began switching from platinum to palladium for gasoline exhaust systems. This trend coincided with the rise of gasoline engine popularity, further reinforcing palladium's dominance.
Substitution challenges stem from technical requirements. Manufacturers design catalytic converters specific to each metal’s properties, making retroactive substitution complex and costly. Additionally, changing from palladium to platinum typically necessitates considerable reengineering of catalyst systems, supply chains, and testing procedures to ensure regulatory emission standards continue to be met.
Nevertheless, cost incentives are now reversing these dynamics. The price of palladium rose significantly between 2016 and 2022, reaching over double that of platinum at its peak. This has triggered increased research and development aimed at platinum-based substitutes. Leading catalyst manufacturers have reported early successes in transitioning back to platinum-rich formulations for gasoline autocatalysts, particularly in price-sensitive vehicle segments such as compact and mid-range cars.
Hybrid catalyst systems using a blend of platinum and palladium are being tested and deployed, helping mitigate cost without compromising performance. The extent of worldwide substitution, however, is currently modest, with the WPIC estimating that just under 10% of palladium demand in 2023 was replaced by platinum. Over the mid to long term, more extensive substitution is possible, contingent upon continued price differentials and technical advances.
Outside of the automotive sector, substitution is less common due to the specific chemical roles each metal plays in industrial processes. In electronics, dental alloys, and chemical catalysts, the metals are typically not interchangeable. Furthermore, supply constraints and geopolitical factors—such as Russia’s dominance in palladium mining—may push manufacturers and governments to favour more diversified and sustainable sources, potentially encouraging platinum use where feasible.
In summary, while substitution from palladium to platinum within the catalytic converter market is technically and economically challenging, persistent price disparities and innovation are making it increasingly viable. The pace and scale of this shift will depend heavily on investment in R&D, regulatory flexibility, and the long-term price trajectories of both metals.
Trends shaping the future demand landscape
Looking ahead, several macroeconomic and industry-specific factors are poised to influence the balance between palladium and platinum demand. Key among these are the global energy transition, vehicle electrification, supply chain resilience, and shifting investment preferences.
Electric vehicle (EV) adoption plays a pivotal role in future PGM demand. Battery electric vehicles (BEVs), which do not use internal combustion engines, eliminate the need for catalytic converters and thus reduce palladium and platinum demand alike. However, hybrid vehicles—which still use combustion engines—continue to require autocatalysts, with palladium being predominant in these systems. Therefore, while a rise in BEVs may diminish overall demand, a strong hybrid market could provide continued support for palladium use in the medium term.
Hydrogen fuel cell technologies, where platinum acts as a central catalyst, could create a renaissance in platinum demand. Supported by decarbonisation policies and investment in green hydrogen infrastructure, platinum could regain its industrial relevance, particularly in heavy-duty transport, stationary power systems, and emerging markets such as Japan, South Korea, and parts of Europe.
Supply-side trends will also shape future pricing and availability. Russia (for palladium) and South Africa (for platinum) dominate production, making both metals vulnerable to geopolitical tensions, labour unrest, and logistical disruptions. Diversification of supply sources and increased recycling efforts are emerging as key strategies to mitigate these risks. High prices may further incentivise urban mining and the recovery of PGMs from end-of-life vehicles and industrial scrap.
Investment demand for platinum has rebounded in recent years, particularly due to its undervaluation relative to palladium and gold. Platinum ETFs and physical coin offerings have seen increased inflows as investors seek portfolio diversification, inflation hedging, and exposure to the green transition. Palladium, on the other hand, faces a more speculative investment landscape, with higher volatility influenced by tight supplies and industry dependence.
Technological innovation continues to be a wildcard. As research into new catalyst designs, nanomaterials, and low-load PGM systems continues, the efficiency of these metals—and the amount needed per vehicle—may change, affecting both demand and substitution trends. Moreover, legislative developments related to emissions, recycling mandates, and clean energy targets will directly impact how industries use these metals.
In conclusion, while palladium currently enjoys dominant demand in the automotive sector, platinum appears well-positioned for long-term resurgence through substitution, hydrogen economy integration, and industrial innovations. Strategic sourcing, price dynamics, technological adaptability, and evolving environmental targets will determine how the balance between these critical metals unfolds across global markets.
