Nornickel Forecasts Palladium Surplus Through 2027, Nickel Oversupply Widens
1h ago|4 min readStandard
Fazen Markets Editorial Desk
Collective editorial team · methodology
palladiumnickel
Fazen Markets Editorial Desk
Collective editorial team · methodology
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Russian mining giant Nornickel announced on 23 June 2026 that it forecasts a continued structural surplus for palladium and nickel through the end of 2027. The company projects the global palladium market will see a surplus of 300,000 troy ounces this year, expanding to 600,000 ounces in 2027. For nickel, the estimated surplus for 2026 is 200,000 tonnes, with persistent oversupply expected to pressure prices. The forecasts signal a prolonged period of market imbalance for two key industrial metals, driven by shifting demand dynamics and resilient production.
The last time palladium entered a sustained surplus was in 2019-2020, when a multi-year deficit reversed into a 1.2 million ounce oversupply amid auto sector disruption. The current macro backdrop features the Bloomberg Commodity Index down 4.5% year-to-date, with industrial metals underperforming growth-sensitive assets. The catalyst for Nornickel's updated forecast is a faster-than-expected adoption of thrifting and substitution in automotive catalysts. Automakers are accelerating the reduction of palladium loadings per vehicle and shifting some gasoline models to platinum-rich catalysts to manage costs. Concurrently, a wave of new nickel laterite projects in Indonesia, which added over 1.5 million tonnes of annual capacity from 2023-2025, continues to ramp up despite softer demand from the electric vehicle battery sector.
Nornickel's forecast implies a significant shift from prior years. Palladium averaged a deficit of nearly 800,000 ounces annually from 2020-2022. The projected 2027 surplus of 600k ounces equates to roughly 7% of the estimated annual market size of 8.5 million ounces. Spot palladium traded at $810 per ounce following the announcement, a 68% decline from its all-time high of $2,550 in March 2022. The London Metal Exchange nickel cash price was $16,500 per tonne, down 60% from its 2022 peak above $48,000. Comparative data shows a stark divergence: while copper faces a projected 2026 deficit of 300,000 tonnes, nickel's oversupply is larger. The S&P GSCI Industrial Metals Index is down 12% year-to-date, underperforming the S&P 500's 8% gain.
| Market Metric | 2022-2023 Avg. Balance | 2026 Forecast | 2027 Forecast |
|---|---|---|---|
| Palladium Surplus/(Deficit) | (800,000 oz) | 300,000 oz | 600,000 oz |
| Nickel Surplus/(Deficit) | 100,000 t | 200,000 t | 180,000 t (est.) |
The primary second-order effect is margin pressure for primary producers. For palladium, producers like Sibanye-Stillwater (SBSW) and Anglo American Platinum (AMS) may see earnings erode by an estimated 15-25% if prices remain near current lows, as palladium contributes a significant portion of their revenue basket. For nickel, high-cost producers outside Indonesia, such as those in Western Australia and Canada, face existential challenges. A counter-argument is that demand shocks could be overstated; a rapid reacceleration in global ICE vehicle sales or slower substitution rates could tighten the palladium balance quicker than forecast. Market positioning data from the CFTC shows money managers hold a net short position in NYMEX palladium futures exceeding 10,000 contracts, the most bearish stance since 2018. Flow is moving out of pure-play palladium and nickel equities and into diversified miners with copper exposure, aligning with the divergent fundamentals for base metals.
Key catalysts include the Q2 2026 earnings reports from major automakers (Ford on 24 July, General Motors on 25 July) for updated guidance on catalyst metal procurement and thrifting progress. The next World Platinum Investment Council market report, due 12 August 2026, will provide critical data on the platinum-for-palladium substitution rate. For nickel, monitor monthly production data from the Indonesian Ministry of Energy, with the July release on 5 August being critical for supply-side validation. Technical levels to watch include palladium's multi-year support at $780 per ounce; a sustained break below could target the $700 area. Nickel's LME price faces resistance at its 100-day moving average, currently near $17,200 per tonne. A move above this level would require a coordinated supply cut announcement from a major producer group.
A sustained surplus typically reduces the cost of catalytic converters for automakers and the aftermarket. The palladium content in a standard gasoline catalyst can represent 30-50% of its raw material cost. With prices down sharply, material costs for converters could fall 10-15%, improving margins for parts manufacturers like Tenneco (TEN) and Standard Motor Products (SMP). However, this benefit may be partially offset by automakers' fixed long-term supply contracts.
Nickel's structural oversupply contrasts with a more balanced outlook for cobalt and a persistent surplus in lithium. Cobalt faces a projected 2026 deficit of 5,000 tonnes due to supply constraints from the Democratic Republic of Congo. Lithium carbonate prices remain under pressure from a 200,000 tonne surplus, but the rate of inventory build is slowing. The divergence highlights varying stages of the EV battery raw material cycle, with nickel experiencing the most severe capacity overbuild.
The 5-year rolling correlation between palladium and platinum prices has averaged +0.75 but has broken down recently, turning negative in 2025. This decoupling is driven by their opposing fundamentals: palladium is moving into surplus while platinum remains in a slight deficit. This creates a unique arbitrage opportunity for industrial users and a challenge for investors in broad precious metals ETFs, which typically hold both metals.
Nornickel's forecast confirms a regime shift for palladium and nickel from scarcity to structural surplus, with price implications for producers and industrial consumers.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. CFD trading carries high risk of capital loss.
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