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Rhodium

Merits Investment Consideration

While gold and silver have attracted the attention of some investors of late, there is a metal that is far, far rarer and has fundamentals that merit investment consideration. Some consider it the ultimate symbol of wealth – above and beyond gold, silver or platinum – because of its price and very significant rarity.

The metal in question is rhodium.

The world’s finite natural resources, including its precious metals, are being used up at an unprecedented rate. And in the same way that the phenomenon of peak oil has been recognised in recent years, so too will the reality of peak metals be realised in the coming years. This should lead to the price of the earth’s precious finite metals rising to higher prices – possibly much higher.

History

Discovered along with palladium by British chemist and physicist William Wollaston in 1803, rhodium belongs to the platinum group metals (PGM) together with platinum and palladium.

Performance

Rhodium’s price performance has been very volatile in recent years (see chart above and below). Its average price in 2003 was some $530/oz. Lack of supply led to a massive move up in price until 2008 when it briefly reached just over $10,000/oz.

In 2018/2019 the price of rhodium has risen nearly 250% to touch a price of $2500/oz from a low of just over $500/z not to long ago back in 2015/2016.

Supply

With 82% of world rhodium supply coming from South Africa and 14% from Russia, resource nationalism could become an issue. Russia has been increasingly flexing its muscles on the world stage and has been using its gas reserves as geopolitical leverage. The Russians temporarily stopped palladium shipments in 2001, resulting in palladium surging in value.

South Africa has recently seen a change of government and there is a shift to the left in South African politics. The powerful mining unions are becoming increasingly militant and there have been calls for national strikes and nationalisation of mines. There is also the matter of South Africa’s extremely poor national electricity infrastructure, which has led to power outages and rationing of electricity. Analysts warn of continuing significant risks to mine production from these power issues.

Resource nationalism, protectionism and the threat of nationalisation could lead to export duties and export controls being introduced and thus the supply of rhodium could be greatly hampered.

Besides being a key component in the car industry, some of rhodium’s other principal uses are in glass making; as a finish for mirrors and jewellery; in electrical connections; and in aircraft turbine engines.

Rhodium’s primary use is in catalytic converters in automobiles which has fuelled also the substantial price rise in Palladium over the last 2 years.

Market Intelligence

EBLN DMCC offer clients exclusive and proprietary research and analysis through EBLN DMCC’s custom client research portal.

Precious Metals Stored On An Allocated Basis

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