Rhodium has risen 114% in 2020 and is at its highest price since 2008

The price of rhodium has increased by 114% so far in 2020. It is trading at its highest level since 2008. The drop in supply and the growing demand by the automotive industry has been the determining factors for this rise.

Rhodium is one of the metals of the platinum group. Silver-white in appearance, it is a chemical element manufacturers highly prize for its high resistance to corrosion. It is mined as a by-product of platinum and palladium.

The notable increase in the metal’s price increase is due to the approval of new regulations on polluting emissions in China and Europe. Companies used rhodium in the manufacture of catalytic converters that reduce toxic emissions in exhaust systems.

More than 80% of the demand for rhodium comes from the automotive industry. At the same time, on the supply side, some problems compromise the availability of the metal and cause a deficit.

Between 80 and 90% of rhodium production comes from platinum mines in South Africa. It represents less than 10% of the total of the metals extracted in the mines. Therefore, the evolution of the price of rhodium hardly has a limited impact when investing in new mining projects.

The metal is undersupplied in the market

According to Neal Brewster, head of strategic consulting at Roskill, the drop in the price of platinum has led to a reduction in investment in new mining projects that could also produce rhodium. He stated that demand for rhodium by catalyst manufacturers had outstripped supply, especially in the last 12 months. It caused the prices to skyrocket. The current spot price is above $13,000 an ounce. However, in 2017, the average price was less than $1,000.

The temporary closure by Anglo American Platinum of its processing plant in Rustenburg (South Africa) will also influence the availability of rhodium. Anglo American Platinum’s production of the metal represents approximately a quarter of the world’s total supply.

Analysts think that the market will continue to be in a supply deficit for rhodium, at least until the middle of the decade. 

If the price remains high (rhodium is now worth 13 times more than platinum), the mining industry could eventually plan to move it from by-product to primary metal, encouraging investment in the exploitation of the metal.

South African mining companies are currently producing a basket of platinum group metals, including 57% platinum, 33% palladium, and 8% rhodium, plus a mixture of gold and other minor minerals. However, rhodium accounts for 40% of the total value of the basket.