Rhodium Sees Demand as Price Lingers Near Lows

by on February 12, 2014 3:43 am BST

Demand for rhodium, a precious metal in the platinum group, is being bought up by car manufacturers and chemical companies as prices have remained stable since the 2008 top of $10,100 per ounce.  In the fourth quarter, rhodium prices climbed 4.8 percent to average $1,100 per ounce, a 91 percent decline from the 2008 high. Rhodium is primarily used in catalysts to clean auto emissions, and demand is expected to exceed output by the most in three decades. Goldman Sachs forecasts continued demand through 2017.

“Rhodium is back on the up, and industrial buying has really driven prices,” said Jonathan Butler, a precious metals strategist for Mitsubishi Corp. International. Rhodium was left behind as manufacturers in order to cut costs, but lower prices have caused a move back into the metal. A rally in rhodium will help producers seeing a squeeze on the bottom line, including many of the platinum miners in South Africa.

There is also a small production of rhodium because it is a secondary find for miners as they mine for gold and platinum, and rhodium is a bi-product of this mining. According to Deutsche Bank last month, supplies are forecasted to decline .7 percent, while demand will jump 5.8 percent to 1.09 million ounces on data provident by world renowned refiner Johnson Matthey.

About 78 percent of the metal’s demand is in the auto industry, and new laws on cleaner emissions is likely to further increase demand. On an average gas catalyst there is 10 percent rhodium, 80 or 85 percent palladium and the rest made up of platinum. “Rhodium hasn’t had enough time for less supply to catch up with the demand growth in a way that it will drive prices higher,” said Albert Minassian, an analyst at Investec PLC.

There is a small speculative market for investing in rhodium. The rather small market makes it an illiquid one, but after a four-year decline prices could be on the up as demand increase. Furthermore, recycling of these metals in manufacturing are on the decline, so it is likely consumption of rhodium will increase in industry.

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