Demand for palladium from the automotive industry — the largest offtaker with more than 80 percent — is expected to decline next year as fuel-cell vehicles continue to lose market share to electric vehicles (EVs), according to a newly released 2025 precious metals forecast released on Tuesday.

Palladium, a key member of the platinum-group metals, has long been a critical component in catalytic converters for internal combustion engines. However, the report by Heraeus Precious Metals highlights a shift in market dynamics.

While new vehicle sales are projected to rise in 2025, the growth in EV market share is anticipated to outpace overall market expansion, which will likely result in a slight decline in sales of internal combustion engine vehicles and, consequently, a reduction in palladium demand.

The adoption of tri-metal catalysts—where platinum has increasingly been substituted for palladium—has also curbed palladium's demand growth. As a result, palladium prices are expected to remain under pressure, with projections ranging between $800 and $1,200 per troy ounce in 2025, according to the report.

The report also examines the outlook for rhodium, another metal integral to catalytic converters in fuel-cell vehicles. Rhodium prices are heavily influenced by demand from the automotive industry and are predicted to fluctuate between $4,400 and $5,400 per troy ounce next year. A modest market deficit is expected, although improvements in refined production and a slight increase in supply from secondary sources are expected to help offset rising demand, thereby mitigating the deficit, it said.