The price of rhodium, a metal used in car pollution-control devices, surpassed that of more-widely used platinum for the first time in 31 months as a mine strike in South Africa reduced supply amid rising demand.
The CHART OF THE DAY shows rhodium surging to $1,475 an ounce on Aug. 14, surpassing platinum for the first time since 2011 after overtaking gold, according to price data compiled by Bloomberg. Rhodium was at $1,400 as of Aug. 22, up 57 percent from its nine-year low in December.
About 80 percent of production of rhodium, extracted as a by-product of platinum and nickel mining, comes from South Africa, according to Johnson Matthey Plc, a London-based specialty chemicals and auto catalyst maker. A supply deficit this year may more than double from 28,000 ounces in 2013 due to a five-month mine strike in the African nation, said Peter Duncan, general manager for market research at Johnson Matthey.
“The market is a lot tighter than it was,” Duncan said. “The effects of the strike are still being felt because producers are continuing to operate well below optimal capacity and they’re ramping up to full production. There’s strong industrial demand. The car market is quite strong and that’s generating real purchasing for rhodium.”
Total automobile sales in China, the largest car market, rose about 8 percent to 13.3 million units in the first seven months of 2014, according to China Automotive Information Network data. In the U.S., sales through July indicate the best year since 2006. Auto catalysts account for 79 percent of gross demand for rhodium, compared with 38 percent for platinum, according to Johnson Matthey data.
Rhodium’s supply was 705,000 ounces in 2013, or 12 percent of platinum’s, the data shows. “It’s a relatively small market compared to the major platinum-group metals and that’s why you tend to get more price volatility.” Anglo American Platinum Ltd. and Impala Platinum Holdings Ltd., both based in South Africa, are among the largest producers. Rhodium is seen rising to $1,500 by the second quarter of 2015, while platinum is forecast at $1,562 and gold at $1,220, according to analyst estimates compiled by Bloomberg.