Extraordinary Rare And Extremely Expensive

Rhodium price jumped 95 percent in the year to February 13 and was one of the best-performing commodities in this period. What could be the reason for this? This metal “with the symbol Rh and atomic number 45” is extraordinarily rare, silvery-white, hard, corrosion-resistant–wrote Wikipedia. But also extremely expensive. The price of Rhodium (XRH:COM) per troy ounce was $21,790 last time. This is 12x the price of gold, 17x of platinum, and 9x of palladium.

An update about rhodium prices here 

As you see on the chart, rhodium prices exploded, grew exponentially. In only two years, it jumped eight times higher, to $21,790 from approximately $2,750.

Rhodium Price is Very Volatile

A big part of rhodium demand (approximately 70-80% of global production) comes from the car industry. Because it is used, together with palladium and platinum, as catalysts in the three-way catalytic converters of engines. “Much of the world supply of rhodium is obtained from recycled catalytic converters obtained from scrapped vehicles”–wrote Wikipedia.

5 Futures Prices Jumping More Than Rhodium in 12 Months:

(Rhodium: +95%)

1. Bitcoin Futures: +356%
2. US Midwest Steel: +119%
3. UK Natural Gas (ICE): +117%
4. US Lumber (LB): +117%
5. UAN FOB NOLA (Fertilizer): +102%

The rhodium price is very volatile, even more than the silver price used to be. Since the market is not liquid enough, volumes are low. This is because much of the trades are conducted independently of any commodity exchange, between a few producers and the large manufacturers. Some companies also produce rhodium bullion and coins, jewelry. But this is only a small slice of the market, only reaches 1-3 percent of the production.

Investments Tracking Rhodium Price

The simplest method for average investors to invest in rhodium is buying the ETC (Exchange-traded commodity) of Deutsche Bank Group. This product is traded in some exchanges in Europe and on the OTC (over-the-counter) market in the USA. Another product is the AfricaRhodium ETF (ETFRHOJ) listed in Johannesburg (South Africa). 

The Difficulty of Rhodium Miner Stocks

If you prefer miners over the commodity itself, you won’t find any pure “rhodium miner”. Because rhodium can be found mostly in platinum or nickel ores, together with other “platinum group metals” (PGMs). So, you can buy only the stocks of a complex mining or commodity producer company, which makes only a minor part of its income from rhodium.

Still, major exchange-listed PGM miners are Anglo American Platinum, Impala Platinum, Sibanye Stillwater in South Africa, and Norilsk Nickel in Russia.

The Big Rhodium Picture

The future of rhodium price depends on the car industry. Sure, electric cars will reduce demand for this uncommon metal gradually in the future. Although, not this year or next year. So, because of its extreme scarcity, the steep rise of rhodium can continue for other years.

But the risks are also high, someday the price explosion may suddenly stop and turn around. That happened already. Namely, the price fell very low, quickly to $1,700/oz in November 2011, from approximately $10,000 in June 2008.

Main sources: Wikipedia, Barchart.com, Miningmx.com, Stooq.com, ETF.com, ETFsa

Cover photo credit: Wikimedia Commons, By Alchemist-hp, www.pse-mendelejew.de, Purpy Pupple, CC BY-SA 3.0

Disclaimer

I’m not a certified financial advisor nor a certified financial analyst, accountant nor lawyer. The contents on my site and in my posts are for informational and entertainment purposes and reflecting my collection of data, ideas, opinions. Please, make your proper research or consult your advisors before making any investment or financial or legal decisions.

I’m long in gold miner stocks. silver, platinum, large energy holdings, Anglo American, and cryptocurrencies. Short in Brent crude, and the German DAX at the time of writing.

(Photos: Pixabay.com.)