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When you hear about precious metals, the first things that come to mind are gold and silver. This, however, is changing now as the Platinum Group Metals or PGMs have become more and more relevant. PGMs include ruthenium, rhodium, platinum, palladium, iridium and osmium. Among this precious metals group, Rhodium is in particularly high demand due to its role in the reduction of vehicle emissions.
Rhodium cleanses vehicle exhaust fumes of nitrous oxides, which play a vital role in tightening emissions regulations across the globe. Recently, automakers have been forced to use more and more of the metal to meet global environment safety standards.
This surge in the demand for rhodium lifted the price of the metal to $10,165 in January, which was also the highest recorded price of this PGM member. As of 2016, it was worth only $615 an ounce.
The impressive rally in the rhodium price was possible only because of the high demand in the automobile sector. Rhodium supplies still do not equal the current market demand. Throughout 2020, the price of gold increased because gold is considered a safe bet during uncertain times, and investors rush towards it whenever the market is uncertain.
This happened during the coronavirus pandemic, and worldwide lockdowns caused the demand for metals to fluctuate. Since March last year, the prices of PGMs has remained volatile due to the shutting down of mining operations, while demand continued to increase.
The jewellery and automotive industries also saw a slowdown in sales last year. However, things now seem to be returning to normal, and consumption of rhodium in factories continues to rise as factories run at full capacities to make up for losses during the lockdown. seem to be responding to this change.
Rhodium is mainly mined and produced in South Africa. The producers in South Africa are hopeful of increased production of rhodium amid a highly anticipated demand. This doesn’t mean that the supply will meet the demand.
The PGM metals show a tight supply even in normal times. In 2019, the deficit for rhodium stood at 22,000 troy oz. This deficit surged to 55,000 troy oz. in 2020. The other metals of PGM groups also remained in deficit during this period.
The price of Rhodium just surpassed the psychological barrier of $10,000 to reach an all-time high of $20,000, and its increasing demand is still increasing. We are still in a gasoline environment, and tightening emission regulations in China and the EU means that Rhodium prices are set to increase even more.
Even though most experts agree that Rhodium is irreplaceable in its job as a catalytic converter, if the price of Rhodium keeps increasing, experts fear that manufacturers may substitute rhodium with palladium or platinum. We have not yet seen a surge in EVs, which means that Hybrid-electric cars will keep the market under their control in the medium term.
Hybrid cars also use an internal combustion engine, and in order to meet the strict legislative demand, they need palladium or rhodium for their catalytic converter. More rhodium is required in hybrid cars than in regular combustion engines.
South Africa is going into lockdown again, but the mining industry should not be affected heavily by it this time. Governments across the globe are adopting a smart approach this time, by imposing smart lockdowns where industry and production aren’t affected.
One other way to produce rhodium is to recycle it. Recycling activity has also slowed down amid Covid-19 due to tougher temporary restrictions.
Despite all the efforts to bring back the supply of PGMs and other precious metals, the supply is expected to be short for all PGMs, and palladium and rhodium in particular. This may cause the prices to remain firm or even to surge further in the coming months.