Rhodium prices are up 42% since the start of the year to $1315/oz. Looking across all commodities only Coffee has seen a sharper price increase (up 74%). In comparison prices of Platinum and Palladium (sourced from the same mines and also often used in the same applications, e.g. catalytic converters) are up 3% and 24% respectively. According to Deutsche Bank there is an increasingly strong fundamental picture emerging for rhodium.
Not only is rhodium the most effective of the platinum group of metals (PGM) at treating NOx emissions it is also benefiting from the rapid gains in palladium prices which increase the appeal of rhodium on a price comparison basis. The lengthy strike to hit South Africa’s mining sector earlier in the year is set to lead to a permanent destruction of its productive capacity, leading to lower output across the PGMs.
We noted earlier in the year that the rhodium market tends to be characterised by inelastic supply, where higher demand can result in sharply higher prices as supply is unable to respond. While rhodium inventories are high currently, strong demand growth and supply curtailments mean they are forecast to hit critically low levels by 2016.