Rhodium Poised for Biggest Monthly Advance Since 2009

Rhodium advanced to the highest price in 16 months and is set for the biggest monthly gain since 2009 as demand from carmakers increased amid restricted supply.

The metal, used in catalytic converters to curb harmful emissions, has rallied 40 percent since reaching a nine-year low of $890 an ounce in December. Prices will be “well supported” as more usage in cars reduces above-ground inventories that total about 1 million ounces, Mitsubishi Corp. International (Europe) Plc wrote in a report earlier this month.

Rhodium, mined alongside platinum and palladium, is set for the biggest annual supply shortage since 2005, according to Johnson Matthey Plc. Output has been curbed by a five-month mine strike that ended in June in South Africa, the largest producer, while European car sales rose for a 10th month in June.

There’s “industrial demand in combination with limited supply,” Heraeus Metals Germany GmbH & Co. said in a report e-mailed today. “Dealers are selling only small quantities in the market, with the intention of letting the price run up.”

Rhodium climbed to $1,250 an ounce on July 25, the highest since March 26, 2013, Johnson Matthey data on Bloomberg show. It was at that price by 11:17 a.m. in London, up 12 percent in July for the biggest monthly gain since November 2009.

Demand will beat supply by 60,000 ounces this year for a second straight deficit, London-based Johnson Matthey estimates. Output will drop 3.8 percent and car companies, which account for about 80 percent of demand, will boost usage 4.1 percent.

Car Sales

European car sales rose in June for the longest stretch of gains in four years, the Brussels-based European Automobile Manufacturers’ Association said July 17. Rhodium’s surge to a record $10,100 in 2008 forced manufacturers to use more platinum and palladium, which have similar properties needed for cleaning auto emissions.

About 80 percent of production comes from South Africa, according to Johnson Matthey. More than 70,000 workers downed tools in the nation from January to June in a pay protest.

Rhodium has gained 28 percent this year. It’s set for the first annual increase since 2009, when prices doubled.

“Despite strong fundamentals, we do not rule out a short-term reversal in rhodium,” Heraeus said. There will be some traders “who will want to take profits.”

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