Rhodium Seen by Deutsche Bank Benefiting Over Palladium in CarsAlex Pashley
The lowest price of rhodium relative to palladium in at least 12 years will encourage carmakers to switch the mix of precious metals used in catalytic converters in favor of rhodium, according to Deutsche Bank AG.
An ounce of rhodium bought 1.3 ounces of palladium on July 24, the lowest since at least January 2001, according to data compiled by Bloomberg. Deutsche Bank said the ratio was the lowest in 20 years. Rhodium fell 8.3 percent this year to $990 an ounce while palladium rose 5.1 percent to $739.88 an ounce.
Stricter emissions laws globally will require more precious metals in catalytic converters, and rhodium may benefit next year when Europe targets harmful nitrous oxide gases. About 80 percent of rhodium is used in catalytic converters, says Johnson Matthey Plc, the London-based manufacturer of the devices.
“Given that rhodium is much better than palladium at treating nitrous oxide gases and given that the ratio has gone close to parity, it makes sense if you’re an auto manufacturer and want to capitalize to add more rhodium to the mix,” said Grant Sporre, an analyst at Deutsche Bank in London, in an interview. “Rhodium does look interesting at these levels.”
Auto catalysts are canisters with honeycomb-like surfaces that convert car emissions into less harmful substances.
Rhodium is less available than other precious metals used in the auto catalysts. About 22.5 metric tons of rhodium will be mined this year, compared with 177 tons of platinum and 199 tons of palladium, according to SBG Securities in Johannesburg.
Assets in Deutsche Bank’s rhodium-backed exchange-traded products have climbed 62 percent this year, the bank said in an Aug. 2 report. Palladium ETPs rose 20 percent, according to data compiled by Bloomberg.
Deutsche Bank introduced the ETPs since May 2011 in London and Frankfurt and they now hold 87,000 ounces valued at about $86 million, according to data from the Frankfurt-based bank. That compares with the 2.25 million ounces of palladium and 2.2 million ounces of platinum held in ETPs globally, data compiled by Bloomberg show.
Auto manufacturers curbed rhodium usage because of high prices in 2005 to 2008, when the metal surged to $10,100 an ounce. Usage dropped to 0.292 grams per vehicle in 2011 from 0.415 grams in 2006, according to Deutsche Bank.
Rhodium will average $1,170 an ounce this year, up from $1,124 an ounce so far, according to Deutsche Bank. It will average $1,200 in the fourth quarter, the bank said. Palladium will average $743 an ounce this year, it said. The metal has averaged $727 an ounce so far.