Rhodium moves into overdrive owing to “insatiable demand” from Asia, supply fears

INSATIABLE demand from Asia and fear of diminishing supply were factors behind the latest surge in the rhodium price, said Reuters citing analysts.

The metal, which is part of the platinum group metal (PGM) family, has increased 40% in value in the past three weeks having made important gains throughout 2019.

It is nearing record highs. Prices have rocketed to $9,975 an ounce from $6,040/oz at the start of January. This is ten times its value through the mid-2010s and within a whisker of an all-time high of $10,050/oz achieved in 2008, said Reuters.

Rhodium is used to neutralise nitrous oxides in car exhausts, and increasingly stringent emissions regulations, particularly in China, are forcing auto makers to use more of the metal. Demand is expected to outstrip supply this year and supplies are being disrupted by power outages at South African mines which produce more than 80% of mined rhodium.

“It’s being driven by insatiable demand from Asia,” Scotiabank analyst Nicky Shiels told Reuters. “There is also a supply side trigger with power cuts in South Africa. That injects a certain amount of fear into the market and in a small, opaque market that can have a huge impact,” she said.

Rhodium does not trade on an exchange, and producers who mainly sell through long-term contracts are releasing little into the spot market and creating a lack of liquidity, a trader in London said. “There’s very little material around. It’s trading to illiquidity, not to fundamentals … There is the incessant thought that prices are going to go higher, so every offer is taken,” the trader said.

Rhodium has rallied in parallel with palladium, another precious metal in increasing demand to neutralise engine emissions and whose price has risen 25% this year. Unlike palladium, the roughly 1.1 million ounce a year rhodium market has seen small surpluses in recent years, according to specialist manufacturer Johnson Matthey.