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IPMI and Industry News: Minor PGM's Market News

Rhodium Aiming at USD10,000/Oz

Monday, January 6, 2020   (0 Comments)
Posted by: Matt Watson
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Rhodium Aiming at USD10,000/Oz

Written by Luke Burgess
Posted January 6, 2020

Energy and Capital

Oil and gold have rallied amid steaming tensions between the United States and Iran.

Crude for forward-month delivery has increased by almost 5% to more than $63 per barrel, while gold has risen by over 3% to more than $1,580 an ounce since news of the Soleimani assassination broke.

But there's another very special commodity that's rallying even more while quietly sitting in the background: rhodium.

The price of rhodium has increased by over 80% from $3,400 to $6,150 an ounce over the last six months.

What is rhodium?

Rhodium is a member of a group of metals known as the platinum group metals (PGMs). These metals have similar physical and chemical properties and include platinum, palladium, ruthenium, iridium, osmium, and rhodium.

Rhodium is an important industrial metal used in specialty optical instruments, electronics, aircraft turbine engines, and as a jewelry finish. If you've ever bought “white gold,” it's likely you've bought rhodium. White gold jewelry is gold jewelry that has been electroplated with rhodium.

The primary application for rhodium, however, is catalytic converters — specifically three-way catalytic converters that convert harmful hydrocarbon gases from auto exhaust into substances with lower environmental impact.

In fact, over 80% of all rhodium production will end up in a catalytic converter somewhere. So demand from the automobile industry is critical for rhodium.

Thing is, rhodium is quite rare. It's so rare that an entire year's worth of total world supply could fit onto the back of three pickup trucks.

In fact, there are less than 10 mines in the entire world that produce any significant amounts of rhodium. Almost every one of those mines is located in a single country: South Africa.

There's no such thing as a mine that only produces rhodium. Like many other metals, rhodium is produced as a by-product of larger PGM operations.

Some 80% of the world's rhodium supply comes from South Africa, which has been a problem.

In 2008, supply shortfalls as a result of mining strikes in the country caused rhodium prices to spike to over $10,000 an ounce.

The financial crisis of 2008 eventually caught up with rhodium, and prices collapsed after the South African mines reopened.

The price of rhodium recovered a bit following the price collapse, but rhodium is often recycled from old catalytic converters. An increase in recycling beginning in 2008 actually led to an oversupply in the market — eventually pushing prices all the way down to $750 an ounce.

And it still could be headed to $10,000 an ounce from here.

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