The price of Rhodium is now between 32,000 and 35,000 US dollars per kilogram, just below that of gold. There was a time when this metal unusual peaked at more than $ 300,000 a kilo, or 10 times more than today !
From the family of platinum metal group, it’s 100 times rarer than gold.
In 2008, the Rhodium has reached a historic high of $ 321,000 per kilo, making it then win the prize for the most expensive ever known precious metal. Soon after, its price has plummeted, while making it very volatile.
Why has been so expensive and how to explain these fluctuations lightning ?
A metal very rare and difficult to extract.
There is no rhodium mines strictly speaking. It’s simply a by-product from the extraction of PGMs mines (platinum, palladium, rhodium, osmium, ruthenium and iridium).
Its annual production is extremely limited. About 25 tons per year (against 2350 tons of gold). Less than 10 mines worldwide extract significantly this metal. The main is located in South Africa, that country alone provides over 80% of global demand. Next comes Russia with about 8%.
Its extraction requires a lot of equipment and energy. Part of the production of rhodium is therefore moving gradually towards catalytic converters recycling process.
A balance between supply and demand very difficult.
Platinum group metals in a metal ore sample.
Rhodium finds its main application in the automotive industry (80-90%). Used in the manufacture of catalytic converters (associated with Platinum and Palladium), it reduces the toxicity of gases from exhaust pipes. It is also used in jewelry as a finishing material.
It is also found in the S-type thermocouples and the catalysts used in chemical plants for the production of oil and cracking acids. In addition, current environmental coercions support the request. This is not a coincidence if Japan is the largest consumer for this type of application.
When the amounts of rhodium produced (or the capacity to extract it) are low, and therefore the supply can not meet global demand, then the price of the metal increases drastically. Likewise in the opposite direction, when demand increases more in proportion to the amount of rhodium that can be produced. Its price then drop as fast as demand will drop. The current weakness of the automotive market thus explains the low prices of metals of platinum group.
And speculation on the metal ?
As you may have realized, the Rhodium is therefore closely linked to the evolution of the automotive market. The graph above demonstrates this.
After a price spike above the $ 9,000 an ounce, the 2008 financial crisis has severely affected the automotive market. Rhodium has suffered the same fate, losing in just a few months more than 90% of its value to fall to $ 760 an ounce.
This fact is explainable by geopolitical circumstances in South Africa. Strikes and social conflicts in nuclear power station in the country in 2008 caused stress and fear of shortage of the metal, helping to make the course of Rhodium up (Because the extraction of PGMs need a lot of energy and there was the rise of the automobile market in the same year). As the strike of mineworkers Association, demanding an increase in their wages.
Rhodium price is fixed only twice a day in the US market by Johnson Matthey Corporation. Buy Rhodium is not an easy task. As a convenience, it’s not tradable on financial markets. Also, buy a physical form for his personal investment be complicated.
Due to its extreme hardness, the traditional techniques of minting bullion don’t work for Rhodium.
To my knowledge, there is only one entity that since 2009 has developed a process for producing rhodium bullion end 999 : The Cohen Mint.
Also in 2011, Deutsche Bank launched a fund exchange traded 100% backed by physical rhodium.
But although this metal does not have an official spot, it remains just as precious metals subject to the madness of speculation !