Why Rhodium Has Stretched A Rally That Made Metal Prices Nearly Triple Last Year

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There is one commodity that has seen a phenomenal price spike this year that some investors may have overlooked: the value of rhodium is up more than 50%, extending a rally that saw metal prices nearly triple in 2020 more attention to the phenomenal rise of rhodium because it is not publicly traded, says Nick Johnson, senior markets editor at S&P Global Platts. “It has less visibility for most commercial houses and banks.”

The market is also much smaller than that of platinum PLN21, + 1.90% PL00, + 1.90% and palladium PAM21, + 1.87% PA00, + 1.87%, which are part of the platinum group of metals (PGM) such as rhodium, so there are fewer people exchanging it, he says. Rhodium is known as the rarest of the PGMs and is used primarily in automotive catalytic converters that control emissions, but also as an electrical contact material and as a catalyst in nitric acid production. Spot prices for the metal hit a record March 23 at $ 29,800 an ounce, according to data from John Matthey. It gained about 180% last year.

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Peter Thomas, senior vice president at Zaner Precious Metals, attributes the metal’s rally to processing challenges, including its high melting point of 3,567 degrees Fahrenheit, as well as strong demand that has outstripped supplies. Rhodium posted a supply deficit of 84,000 ounces in 2020, nearly doubling its deficit since 2019, as supply shortages “far outpaced” declines in demand for industrial and automotive catalysts, according to Johnson Matthey. Tightening emission standards in China, Europe, India and elsewhere requires more rhodium in catalytic converters to control greenhouse gas emissions, Johnson says. Meanwhile, production in South Africa slowed as miners were forced to shut down over the past summer to stop the spread of Covid-19, it says. The Covid-19 shutdowns caused delays in cargo flights from South Africa, exacerbating the situation, Johnson says. In 2020, two Anglo American Platinum ANGPY converter plants, + 1.21% required extensive repairs, one of which will be rebuilt this year. The company was forced to enter the spot market in late 2020 and early 2021 to secure additional supply to meet its contractual obligations to Asia, which contributed to the rise in the metal’s price, Johnson says. Rhodium prices are trading 57% higher so far this year, having fallen in recent days to $ 26,700 on April 1, 10% less than their recent peak, according to data from Johnson Matthey. Market sources say Asian consumers of the metal are very price sensitive and “were not aggressive buyers” as prices approached $ 30,000, Johnson says. Global demand for cars may be rebounding, but the shortage of semiconductor chips has forced auto makers to cut or cut production at certain plants, which could affect demand for rhodium in the short term, he says. As 2030 approaches, the production, affordability and popularity of battery and fuel cell electric vehicles is likely to increase, which, Johnson says, “does not require catalytic converters.” Still, the metal is likely to be a key component in automotive catalysts for gasoline and diesel vehicles in the short term, given rising global emissions standards, he says. For those who wish to invest in the market, the options are limited given the rarity of rhodium. While the metal is not traded on a futures exchange, product XRH0, Xtrackers Physical Rhodium’s publicly traded product, + 3.41% on the London Stock Exchange, tracks the metal’s spot prices in US dollars. Some distributors sell rhodium rods from refineries like PAMP, based in Switzerland. Prices still have room to go up this year, and Zaner Precious Metals’ Thomas sees an increase to $ 30,000 as a “real possibility” by the end of the year, and more if the infrastructure bill is approved in the US.