In early 2020, the price of rhodium surged by as much as 55 percent within the first 3 weeks of January, and its value continues to climb. One ounce of rhodium is currently worth more than 10 times than an ounce of gold.
If you’re thinking of investing in or selling rhodium, here is an analysis of rhodium and its role in the world economy to help you understand the factors driving up its value as well as some predictions for the future.
Factor #1: Chinese Auto Demand
As the world’s largest market, Chinese economic growth continues to gather strength in 2020. Their auto demand coupled with tightening emissions standards is driving the need for rhodium, which is a key element in the production of catalytic converters that reduce pollutants and toxic gases in exhaust gas.
Factor #2: Rhodium Supply Stoppages
Chinese growth is driving a commodity boom for rhodium. Stoppages at Anglo American Platinum (amplats) have slashed the supply of rhodium by 16% in 2020, according to Reuters. The COVID-19 pandemic will only continue to tighten the market as outbreaks trigger lockdowns in South Africa, the top producer of rhodium. Additional issues such as a lack of reliable energy-generating infrastructure and months-long strikes in South Africa also seriously affect production, so it is important to keep an eye on production there. While rhodium’s price could continue to rise in the near future, its significant premium to palladium and platinum could eventually impact prices and demand.
Although rhodium is currently experiencing growth, it is important to remember that its prices are historically volatile. As such, miners will still be hesitant to ramp up production for rhodium when its value suddenly changes. Without new production, the supply shortage for rhodium is likely to continue for at least 3 to 4 more years.
It is also predicted the value of rhodium will eventually decline as combustion engines are replaced by batteries to power vehicles, but it is expected for this happen many years into the future.
Rhodium is currently experiencing tremendous growth, but it is important to be well-informed about the factors driving its value before deciding to invest in or sell rhodium. Historically, rhodium has been a volatile precious metal to invest in, so do your research on sectors driving its value to see where it might be headed in the future.