JOHANNESBURG (miningweekly.com) – With strong demand for platinum group metals (PGMs) continuing, Bank of America Securities Global Research has raised its 2026 platinum price forecast to $2 450/oz from $1 825/oz and its 2026 palladium price forecast to $1 725/oz from $1 525/oz.

Key takeaways from the bank’s latest Global Metals Weekly dated January 9 are that the dislocations of PGMs from trade disputes are keeping markets tight, especially in the case of platinum. In addition, China’s platinum imports are adding support.

While a supply response is likely, the bank expects this response to be gradual owing to what it describes as “production discipline and inelastic mine supply”.

The forecasts arise amid platinum and palladium prices continuing to rally this year, with spot prices reaching $2 446/oz for platinum and $1 826/oz for palladium.

As such, both metals have now exceeded the bank’s prior projections, thus the forecast of increased prices.

“We continue to expect platinum to outperform palladium, underpinned by persistent market deficits,” the bank stated in a release to Mining Weekly.

The bank reports that US tariffs have had a pronounced impact on a range of metal markets and the risk of duties is still hanging over the PGMs.

This is one reason why Chicago Mercantile Exchange inventories have risen and exchanges for physical (EFPs) have spiked.

Palladium EFPs have outperformed, heavily influenced by growing concern that the US could impose duties on Russian palladium under ongoing anti-dumping and countervailing duty investigations.

Putting some concrete numbers behind that, the bank reports that dumping margin of unwrought Russian palladium was estimated by the US Department of Commerce at about 828%.

Duties on yet-to-be-announced Russian ounces could, the bank reports, drive domestic prices even higher, given the country is a key supplier.

CHINESE IMPORT DEMAND ADDS FURTHER SUPPORT

Outside the US, China has also given price support. Earlier in 2025, a sharp rebound of activity in its jewellery sector drew more ounces into China and with gold prices at record highs, this is worth following as a substitution of just 1% in gold jewellery demand could raise the platinum deficit by nearly one-million ounces, or about 10% of supply.

Meanwhile, through the second half of 2025, the launch of physically backed platinum and palladium futures contracts by China’s Guangzhou Futures Exchange (GFEX) has added further price support.

As context, these contracts are China's first domestic, Renminbi‑denominated hedging instruments for PGMs and allow physical delivery of both ingot and sponge metal. The sourcing of physical liquidity is cited as a key factor behind December's rally.

Palladium importation has also quadrupled since September compared with last year, which the bank notes is fundamentally hard to explain given the phase-out of combustion engine vehicles and looks to be heavily influenced by the launch of the GFEX futures contract.

GRADUAL SUPPLY RESPONSE EXPECTED

With PGM prices now trading above both marginal costs and incentive prices, the supply response is coming into focus.

“We expect any response to be measured. Producers' margins – particularly in South Africa and North America – have been under sustained pressure over the past two years, so they may take a cautious approach to expanding production,” the bank noted.

As for new supply, additions are likely to emerge only gradually, given the long lead times from development through to the steady‑state output.

Many projects underway represent incremental expansions or phased ramp‑ups rather than sources of large, near‑term increases in supply.

Switching to supply, production issues in South Africa also contributed to a tighter platinum market in 2025. To that point, mined output from South Africa contracted by about 5% year-on-year from January to October 2025, largely driven by operational issues, for example flooding and plant maintenance) in the first quarter. The bank expects a moderate recovery in South African platinum output this year, albeit not enough to ease the platinum deficit.

In Russia, the world’s largest palladium supplier, output was also challenged given Norilsk Nickel’s transition to new mining equipment and changes in the composition of mined ore. As a result, this Russian mining company’s platinum output was down 7% and palladium down 6% year-on-year in the first nine months of 2025. As these temporary hiccups normalise, PGM output from Russia is expected to recover this year, which could put a cap on palladium price rallies.

While higher prices can trigger a supply response, the bank’s view is that incremental supply increases are likely to involve life‑extension measures and project restarts, rather than rapid, large‑scale capacity expansion.

In practice, most new supply requires several years to progress from construction through to full production, and many of the projects currently advancing are expansions or phased ramp‑ups rather than immediate sources of meaningful incremental volumes.

The two main greenfield projects advancing toward production – Ivanhoe Mines' Platreef and Wesizwe's Bakubung in South Africa – are expected to contribute a combined 150 000 oz of platinum and 100 000 oz of palladium this year, the bank reports.

Other expansion projects remain longer‑dated and contingent on final investment decisions. One of these is Valterra Platinum's Mogalakwena underground Sandsloot project, which is only expected to reach an investment decision around 2027, with first underground ore unlikely before 2030.