Rhodium – The Most Precious Precious Metal?
August 24, 2009 by goldguru · Leave a Comment
By Mark O’Byrne, GoldSeek
The Platinum Group Metal With Very Interesting Fundamentals
Introduction
While gold and it’s very attractive little sister silver have attracted the attention of some investors of late, there is a metal that is far, far rarer and has fundamentals that merit investment consideration. Some consider it the ultimate symbol of wealth—above and beyond gold, silver or platinum—because of its price and very significant rarity.
The metal in question is rhodium. Rhodium is only an infant compared to the ancient monetary metals of gold and silver. It was discovered along with palladium by British chemist and physicist William Wollaston in 1803. Together with platinum and palladium, rhodium belongs to the platinum group metals (PGM). Besides being a key component in the world automobile industry, some of rhodium’s other principal uses are in glass making and as a finish for mirrors and jewellery, in electrical connections and in aircraft turbine engines.
More recently, rhodium has been used for prestigious honours, or to symbolize wealth, when silver, gold, or platinum are deemed insufficient. Interestingly, the Guinness Book of World Records gave Paul McCartney a rhodium-plated disc for being history’s all-time best selling recording artist and songwriter in 1979.
Price Performance
Rhodium’s price performance has been very volatile in recent years (see chart above and below). Its average price in 2003 was some $530/oz. Supply demand deficits led to a massive move up in price until 2008 when it briefly reached just over $10,000/oz.
Rhodium’s primary use is in catalytic converters in automobiles and with the sharp decline of the global automobile industry, the metal fell very sharply in price. It fell by more than 90% and today rhodium is trading at less than $1,600/oz.
Importantly, the average nominal price of rhodium over the last 40 years is some $1,500/oz which means that rhodium costs today not much more than its average price over the last 40 years (see chart below). And this despite a huge amount of rhodium having been used in industry and consumed during that period.
Supply Demand Fundamentals
Annual world production of rhodium is extremely small. Johnson Matthey estimated that rhodium supply in 2007 was 696,000 troy ounces and fell to 574,000 troy ounces (nearly 22 tonnes) in 2008. CPM, the respected precious metals consulting firm expect rhodium supply to be down 3.1% from last year. In comparison, the world production of gold has been around 2,500 tonnes per annum in recent years. Thus there is only roughly 1/100th the amount of rhodium produced annually as there is gold (rhodium’s annual production is some 1% of gold’s) and yet the price of rhodium is only some 50% more than gold (some $1,600/oz versus some $940/oz for gold).
