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Why is rhodium so expensive?
What is the use of rhodium?
Rhodium market losses
Rhodium prediction: What is the next step for precious metals?
The difference between trading assets and CFD
Rhodium prices have remained stable for the past month after recovering from a sharp crash in mid-September. According to data from Johnson Matthey, a major product manufacturer that includes platinum group metals (PGM), the latest transaction price of the metal was US$14,100 per troy ounce on November 1, compared to US$14,000 a week ago. Flat.
Until 2021, as several automakers announced production cuts due to semiconductor shortages, prices are still under pressure from auto production restrictions.
After hitting a record high earlier this year, where will the market go? Read this analysis to learn more about the outlook for rhodium in 2021-2025.
Rhodium is the rarest of the platinum group metals and a by-product of platinum mining. It occurs in ores mixed with other metals such as palladium, silver, platinum and gold. Metal is corrosion-resistant because it is not affected by air and water, and the temperature is as high as 600°C.
The price of rhodium is higher than other platinum group metals because of the rarity of this metal and the complex industrial extraction process required to produce it. Rhodium ore is rare, and more than 80% of the world’s ore is concentrated in South Africa, followed by Russia. According to the Small Metals Trade Association (MMTA), the world's annual output is only about 25 tons. The increased demand for metals in a tight supply situation has further pushed up the price of rhodium.
Some of the largest exchange-traded rhodium mining company stocks are Anglo-America (NGLOY), Implats (IMPUY), Sibanye-Stillwater (SBSW) and Russian Nornickel (GMKN).
Rhodium is mainly used in automobile catalytic converters to reduce toxic gas emissions. Of the global rhodium supply, more than 80% is used in the automotive market. Platinum and rhodium are also used as a catalyst for the production of nitric acid, which is a key raw material for fertilizers.
As demand exceeds supply, the metal hit a record high in March this year. Precious metals opened at US$17,300 per troy ounce in 2021 and reached an all-time high of US$29,800 on March 23.
Due to the decline in automobile production, the price of metals was revised downwards in the second quarter. The reduction in automobile production has led to a reduction in the production of catalytic converters, which puts pressure on the demand for rhodium. As a result, the price has been falling since mid-May and fell to US$11,250 on September 16, the lowest level in 2021. Since then, as the consumption of anti-catalysts has improved, prices have rebounded.
Although the price of rhodium has fallen by more than 50% from this year's market high, the precious metal is still significantly higher than the price of the past ten years, when prices were mostly between US$1,000 and US$1,500 per ounce.
As precious metals increase the profits of producers and become the largest source of income, the high prices benefit rhodium stocks.
The surge in metal prices also highlights the investment value of rhodium, leading to increased interest in rhodium exchange-traded funds (ETFs). Since the price of rhodium peaked earlier this year, many investors took profits by liquidating their ETF positions. According to Johnson Matthey, a consumer of major platinum group metals, as of May this year, there are still about 14,000 ounces of rhodium in the ETF.
According to data from Johnson Matthey, although rhodium production is expected to return to normal this year, it is expected that there will be a shortage of 31,000 ounces in the global market in 2021.
South Africa's mining and refining operations were interrupted in 2020 due to the Covid-19 lockdown measures. But this will basically be resolved in 2021. Although South Africa suffered the third wave of Covid-19 infections in the third quarter, producers still maintained operations without significant disruption.
More than 60% of the world's rhodium supply comes from primary production, and recycling accounts for the remaining production.
Anglo-America and Sibanye-Stillwater, the largest producers of platinum group metals, expect a shortage of rhodium in the next few years.
Kleantha Pillay, Senior Vice President of PGM Sales and Marketing at Sibanye-Stillwater said:
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Many countries in the world have implemented stricter automotive emission standards as part of their long-term net zero carbon goal, which has increased the demand for automotive catalytic converters, which in turn promoted the industry's consumption of rhodium.
Despite the recent drop in rhodium prices, manufacturers remain optimistic in the short to medium term as restrictions on the automotive supply chain ease.
Sibanye-Stillwater wrote in its 2021 third quarter results released on October 28:
According to the manufacturer's research, as the output of internal combustion engines (ICE) declines, the demand for rhodium is expected to increase in the next few years and then gradually decrease at the end of the decade. Sibanye-Stillwater predicts that the demand for rhodium will reach 1.2 million ounces in 2022, and consumption will continue to rise in the next seven years, and then decline in 2030 as ICE production declines.
Despite increasing sales of pure electric vehicles (BEV) and automakers investing heavily in BEV development, Stillwater said that internal combustion engine production may continue to dominate the automotive market and will reach a peak of 88 million vehicles in 2027 .
Kleantha Pillay, senior vice president of PGM sales and marketing at Sibanye-Stillwater, stated on the company's investor day in September:
Johnson Matthey’s research also shows that demand for automobiles is growing. Data show that in 2021, the consumption of rhodium automotive catalysts will increase by 11% to 1.051 million ounces, a record high.
Due to the high price, rhodium consumers are looking for ways to reduce the amount of metal used in products. Johnson Matthey said that this frugal approach is not expected to have a significant impact on demand in 2021, but technological advances in the automotive industry have contributed to an "active frugal plan."
"In the automotive industry, this led to a clear cycle of rising rhodium loads during the tightening of legislation, followed by aggressive thrift programs for high prices," it added.
The high price of precious metals and frugal practices may inhibit the rhodium spot market. "At current price levels, the company may choose to postpone purchases as much as possible," Johnson Matthey said.
Data show that global demand for rhodium in 2021 is expected to be 1.157 million ounces, a year-on-year increase of 13.5%.
The rhodium price forecast will depend to a large extent on automotive demand, as the industry is a major consumer of precious metals. However, due to the unpredictability of automobile demand, rhodium spot price forecasts have a wide range.
The main assumptions made by the consulting agency Fitch Ratings for rhodium are: US$19,352 per ounce in 2021, US$7,500 in 2022, US$6,000 in 2023 and US$4,500 in 2024. At the same time, South African producer Sibanye-Stillwater used a less bullish price assumption of 8 USD in 2021 and 5,650 USD in the following year to estimate the return of its K4 project in Maricana, South Africa.
It should be noted that this article does not constitute financial or investment advice. Before investing in any company related to electric vehicles, be sure to conduct your own research and remember that your decision should be based on your attitude towards risk, your expertise in the market, the distribution of your investment portfolio, and your loss Feelings. Never invest more than you can afford to lose.
Yes, rhodium is a precious metal, one of the six elements of platinum group metals (PGM).
Both rhodium and gold are precious metals. At the same time, rhodium is an industrial metal and is not used as a safe-haven asset like gold. Whether rhodium is better than gold depends on your investment objectives.
Compared with platinum, the consumption of rhodium in the market is much smaller. Precious metals are not traded on exchanges. Most transactions take place in the physical market, where consumers (such as car manufacturers) buy metals from suppliers. Rhodium is also traded in the form of exchange-traded funds (ETFs) backed by physical entities, and investors do not hold physical assets.
In the past year, the price of rhodium has been fluctuating. Although it rose in early 2021, it also fell sharply in the second quarter. Whether it is right for you depends on your investment goals and risk profile. You should do your own research and never invest in losses that you cannot afford. And, as always, remember that past performance is not an indicator of future returns.
Rhodium prices are driven by factors such as supply and demand. When demand exceeds supply, prices may rise, and vice versa. Automotive demand trends also have an impact on rhodium demand, because the industry is the largest consumer of metals.
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