Analysts and traders have sharply lowered their price forecasts for platinum and palladium after a chip shortage forced auto makers to cut production of vehicles containing the metals, a Reuters poll showed on Thursday.
Auto makers account for some 40% of platinum demand and 80% of palladium demand, embedding them in exhaust systems to neutralise harmful emissions.
The chip shortage worsened over the summer and is expected to continue through next year.
It helped drag platinum prices from a seven-year high of $1,336.50 an ounce in February to as low as $901.30, while palladium dropped from an all-time peak above $3,000 an ounce in May as far as $1,841.93.
Prices of both metals have regained some ground, with platinum trading around $1,010 an ounce and palladium around $2,000 on Thursday, but further gains will be limited, the poll of 27 analysts and traders this month found.
It returned median forecasts for platinum to average $1,000 an ounce in the final three months of 2021 and $1,110 in 2022.
For palladium, it predicted averages of $2,050 an ounce in the fourth quarter of 2021 and $2,150 in 2022.
A similar poll three months ago forecast averages for platinum of $1,137.50 in the fourth quarter and $1,228 in 2022 and for palladium of $2,800 in the fourth quarter and $2,625 in 2022.
Analysts said demand should improve as the chip shortage eases and car makers may even overproduce to replenish stockpiles when they can -- potentially lifting prices.
Two of the three who predicted supply-demand balances said palladium would be in deficit next year, and two of the three said platinum would be oversupplied.
Longer term, the phasing out of combustion engines will be worse for palladium because platinum is less dependent on the auto industry and is used in hydrogen fuel cells, said StoneX analyst Rhona O'Connell.
"With fuel cells finally getting political backing for vehicles, especially heavy duty (vehicles), the outlook (for platinum) is very promising," she said.
For palladium, she said, "the longer-term outlook is bordering on bleak".