Rarest of Rare Iridium Gains as Growth Spurs Demand: Commodities

Iridium, the rarest of the seven precious metals traded internationally, is showing signs of life as economic growth fuels demand for the commodity used in spark plugs and light-emitting diodes for televisions.

After plunging 62 percent last year, the biggest slump since 2002, iridium rose 21 percent since the end of December to a three-month high of $485 an ounce yesterday, Johnson Matthey Plc data show. Prices remain 55 percent below a 2011 record. There’s been “good buying” from industrial users, and prices should keep rising in the “near future,” Heraeus Metals Germany GmbH & Co. said in a report e-mailed Feb. 17.

The least-abundant precious metal in the earth’s crust is also found in asteroids, including one that scientists say crashed about 65 million years ago and caused the extinction of the dinosaurs. The metal is so resistant to corrosion that it was alloyed with platinum in 1889 to make the kilogram bar used as the international standard of mass and stored at the Bureau International des Poids et Mesures near Paris.

“What we’ve seen in the first few months of 2014 is that some consumers have taken advantage of the fairly low price,” said Mark Bedford, managing director for precious metals at Johnson Matthey in Royston, England. “In a relatively thin market, that amount of buying interest is going to move the price up.”

Top Metal

Iridium’s rebound this year is the biggest among precious metals, after most plunged in 2013 as investors shunned them as a store of value. Gold, which dropped 28 percent last year, the most since 1981, is up 9.2 percent in 2014 on renewed demand for a haven amid signs the U.S. economy isn’t recovering in line with expectations. Silver advanced 11 percent, platinum increased 3.2 percent, and palladium rose 2.7 percent. Ruthenium climbed 14 percent and rhodium jumped 11 percent to an eight-month high of $1,085 an ounce, Johnson Matthey data show.

The Standard & Poor’s GSCI gauge of 24 commodities gained 2.9 percent, led by double-digit gains in coffee and natural gas, while the MSCI All-Country World Index of equities lost 1.3 percent. The Bloomberg U.S. Treasury Bond Index increased 1.6 percent.

Iridium is mined alongside other metals and about 60 percent of global output comes from South Africa, according to the U.S. Geological Survey. More than 70,000 workers have been on strike over wages since Jan. 23 in the country, the largest platinum producer.

Asteroid Impact

An “anomalously high concentration” of iridium occurs in a thin layer of clay that was deposited at the end of the Cretaceous period, when dinosaurs are said to have become extinct, the U.S. Geological Survey says. That metal is thought to have originated from an asteroid or comet that hit the earth and formed an ash cloud that blocked out sunlight, the U.S. Interior Department agency said.

The metal is used in spark plugs, which ignite compressed fuel or air by sending electrical current from ignition systems to combustion chambers. Iridium is found in crucibles to grow crystals that the electronics industry needs for LED lighting and used by chemical companies for chlorine production. It’s also been used in fountain-pen tips.

An alloy of 10 percent iridium and 90 percent platinum was used to make the international prototype of the kilogram (32 ounces) that’s held by the BIPM in Sevres, France.

Oversupplied

Prices declined in 2012 and 2013, touching $400 in December, the lowest since February 2007, in part because the metal was oversupplied, Johnson Matthey said in November. The company, which makes about one in three of the world’s catalytic converters, doesn’t provide figures on supply.

“The price came down quite a long way last year,” after touching a high of $1,085 in September 2011, Bedford said. “It’s industrial buying. They quite like the price at this level and have taken the opportunity to lock in.”

Precious metals also have gotten a boost from U.S. reports since last week showing New York manufacturing data trailed estimates and factory output fell. Concern the recovery is weakening pushed the Bloomberg Dollar Spot Index to a two-month low this week. Expansion in China, the biggest user of industrial metals, will slow to 7.5 percent this year, the least since 1990, economist estimates compiled by Bloomberg show.

Iridium is mostly bought by industrial users, and speculative holdings are more limited than for other larger precious-metals markets. While investors can buy gold, silver, platinum, palladium and rhodium through physically-backed exchange-traded products, no such funds exist for iridium. Those wishing to hold a position would have to buy through an account with a broker.

Estimated Supply

While most mining companies don’t report how much iridium they produce, output is estimated from about 129,000 ounces to 322,000 ounces each year, the U.S. Geological Survey said. Johnson Matthey said in November that iridium demand probably rose 2.1 percent to 198,000 ounces last year.

The electrochemical industry accounted for 30 percent of iridium demand last year, with electrical companies buying 18 percent of the metal and chemical usage making up 10 percent, according to Johnson Matthey. Total consumption was as much as 338,000 ounces in 2010, it estimates. Demand is increasing on higher sales of gasoline-powered cars, the company said.

Car Sales

European car sales gained 5.2 percent in January, rising for a fifth consecutive month, the Brussels-based European Automobile Manufacturers Association said Feb. 18. Sales of cars and light commercial vehicles will rise 5 percent to a record 88.4 million units this year and gain another 5.4 percent in 2015, estimates LMC Automotive Ltd., a research company in Oxford, England.

Global economic expansion will accelerate to 2.9 percent this year, from 2 percent in 2013, according to economist estimates compiled by Bloomberg. Iridium more than doubled in the two years through 2011, when the world economy grew by at least 3 percent.

“Although it’s a very niche metal, it does have a pretty wide range of applications,” said Ross Norman, chief executive officer of Sharps Pixley Ltd., a brokerage handling physical bullion in London. “Perhaps some uptick in demand could be related to greater industrial output, but I suspect that there would be one application in particular that would be driving the price.”

To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net

To contact the editors responsible for this story: Steve Stroth at sstroth@bloomberg.net; Claudia Carpenter at ccarpenter2@bloomberg.net

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