Rhodium leaves everything else behind

The price of Rhodium has increased by 31% this month, matching its record since 2008. The precious metal is applied in autocatalysts and it is five times more expensive than gold. 

In the past four years, rhodium outperformed all major commodities since the demand from the automotive sector has increased. The metal is mined as a byproduct of platinum and nickel. However, it has a much smaller market. Also, it is subject to significant price moves when supply or demand changes. 

According to Anton Berlin, the head of analysis and market development at MMC Norilsk Nickel PJSC, the precious metal is liable to crazy volatility. This Russian nickel and palladium mining company mines about 10% of all the rhodium in the world. Berlin states that supplies of the commodity are tight. Speculators stepped up buying rhodium after large industrial users acquired volumes late last year. 

Rhodium prices reached $7,925 by Monday. Middle East tensions supported the investors’ turn to precious metals. Palladium prices have seen a boost of about 9%.

Andreas Daniel, a trader at refiner Heraeus Holding GmbH, said that by the beginning of January, the main driver was physical demand from Asia. This might be automotive related. Buying caused more buying and in an unregulated market, the impact was massive. The price move rhodium has seen is only possible maybe every 10 years. 

Rhodium could hit $10,100 this year

Afshin Nabavi, the head of trading at refiner MKS PAMP Group in Switzerland, believes that pullbacks are possible this year. However, the precious metal could beat the record of $10,100 it established in 2008.

Investing in rhodium is much more difficult than in other precious metals. The precious metal is not traded on exchanges. The market for bars or coins is very small as compared to gold and silver. Besides, most deals are between suppliers and industrial users. The global output of rhodium is almost equal to a tenth of platinum or palladium production.

More expensive rhodium prices are good news for South African producers. They produce more than 80% of global output. Last year, gains in platinum-group metals supported a stock index for the nation’s miners to triple in 2019, touching the highest rates since 2011.

On the other hand, South Africa’s dominance means that production risks harm the market. Last year, power shortages suspended some mining activities. Also, in the previous year, there have been extended labor strikes, with workers requiring higher salaries.