EU Defence Spending to Boost PGM Demand Despite Supply Constraints

EU Defence

Increased Military Investment Drives Strategic Metal Consumption

European defence spending is set to increase platinum group metal (PGM) demand across aerospace and military sectors. The EU's ReArm Europe plan commits €800 billion toward modernizing and strengthening defence capabilities, directly supporting specialty metal consumption. However, tangible increases in PGM demand are expected only by Q2 2026 as procurement cycles mature.

PGMs are essential for advanced defence systems due to their heat resistance and electronic performance. Platinum, rhodium, and iridium are used in missile nose cones, aircraft engines, and protective coatings. Meanwhile, palladium and ruthenium play critical roles in capacitors, chip resistors, and optical technologies.

Prices Take Backseat in Military Applications

Unlike commercial sectors, the defence industry continues to use high-cost PGMs due to performance requirements. For example, palladium remains dominant in military-grade capacitors despite cheaper nickel substitutes in consumer electronics. This divergence underscores how strategic needs override price sensitivity in defence procurement.

Supply Limitations Raise Strategic Concerns

PGM supply remains tight, with platinum entering a third consecutive deficit year in 2025. South African producers, responsible for the bulk of PGM output, are cutting production amid low prices and high operating costs. Nato’s recent designation of platinum as critical reflects rising geopolitical concern over concentrated supply chains.

Nevertheless, the industry retains a robust PGM recycling infrastructure that softens the impact of mine-side disruptions. Experts note that economic factors—not physical scarcity—are currently the main constraint on supply expansion.

The Metalnomist Commentary

As Europe ramps up defence investment, PGMs will become increasingly indispensable to national security and technology platforms. Price will remain a secondary factor for defence buyers, but supply-side volatility could create procurement friction. Watch for policy interventions that enhance recycling and diversify sourcing to stabilize the PGM market over time.