As the investment market is scrambling away from stocks and into commodities, especially metals, the market for rhodium is showing bullish signs. Already the world’s most expensive metal, rhodium is currently floating around the $2,400 range per troy ounce, which is over twice the price of gold.
A report by the CPM Group Platinum Group Metals Yearbook 2010 said last week that price support will be buoyed by the metal’s supply and demand graph. Since about 72 percent of rhodium is mined in South Africa, a disruption in resources there could hamper supply, cramping it even more and pushing prices higher.
“A shortfall of resources such as electricity, water and labor, however, could compromise mining activity in South Africa,” CPM said. The same happened in 2008, which pushed rhodium to a record high that year.
Most of the demand for rhodium goes into auto catalysts, which help decrease pollution from automobiles and increase fuel mileage. Advances in technology are likely to up the demand there as well.
"After weakening over the past two years, the global auto market is expected to show strength this year,” the report was quoted as saying. “This, coupled with the global tightening of emission standards focused on reducing NOx emissions, is expected to boost fabrication demand for the metal during 2010 and beyond.”
NOx emissions are otherwise known as nitric oxides and have an adverse effect on health and air quality. The worldwide supply of rhodium is extremely small, at just over 30,000 kilograms worldwide, making it the rarest precious metal on Earth.
Even so, and considering the production problems that have plagued South Africa over the past few years, the growth rate for the production or rhodium has outstripped that of palladium and platinum.
Interestingly, other precious metals iridium and ruthenium have slumped the past two years. Investors are saying that the public is apathetic about these metals, but this may change if stocks continue to do badly and the public looks for other sources of physical investment away from government-backed currency.
Physical investments of these metals are hard to come by, one of the reasons interest has not piqued yet, though one Canadian retailer of precious metals this year began offering one ounce, five ounces and ten ounces of pure rhodium. “There is a possibility that the investment market for this metal will expand following this move,” the report said.
