LONDON • It is five times more costly than gold and hit US$8,200 per ounce last week. Rhodium, mainly used in autocatalysts for cars, has surged 32 per cent this month and 225 per cent year on year, touching the highest since 2008.
Stricter emission rules have fuelled a multi-year rally in the world's most precious metal and there is speculation that investors are also jumping in. Rhodium rallied 12-fold in the past four years on rising demand from the car sector. This rise is mainly owing to manufacturers having to use greater metal loadings per car to meet tightening automotive emission standards.
Like palladium, the metal is mined as a byproduct of platinum and nickel, but it is a much smaller market and so is liable to big price moves when supply or demand changes.
"Rhodium is subject to crazy volatility," said head of analysis and market development Anton Berlin at Russia's MMC Norilsk Nickel, which mines about 10 per cent of all rhodium. Supplies are tight and speculators stepped up buying the metal after large industrial users secured volumes late last year, he said.
Rhodium was at US$7,975 an ounce on Friday. This month's gain also came after investors turned to precious metals, seeking a haven from Middle East tensions and pushing palladium up 9 per cent.
"The main driver by the beginning of January was physical demand from Asia, which might be also automotive related," said trader Andreas Daniel at refiner Heraeus Holding. "Buying triggered more buying and in an unregulated market the effect was massive, with a price move which is seen only maybe every 10 years."
Although pullbacks are possible this year, rhodium could top the record US$10,100 set in 2008, said head of trading Afshin Nabavi at refiner MKS PAMP Group in Switzerland. Still, lofty prices a decade ago prompted autocatalyst makers to switch to platinum and palladium.
It is much harder to invest in rhodium than in other precious metals. Rhodium is not traded on exchanges and most deals are between suppliers and industrial users. Global production is equal to a little more than a 10th of platinum or palladium output.
Higher rhodium prices are good news for South African producers, which account for over 80 per cent of global output. But South Africa's dominance also means production risks hang over the market. Power shortages last year temporarily interrupted some mining operations and there have been long strikes over pay in previous years.