Vehicle sales drive up rhodium prices to dizzying levels

A recovery in global auto sales and tightening emission standards have driven rhodium prices to dizzying levels over the last month, propelling platinum to levels not seen in a decade.

Last month autocatalyst manufacturer Johnson Matthey said the rhodium demand of roughly one million ounces a year was under-supplied by 84 000 ounces in 2020 – and that shortfall will likely continue in 2021 as global vehicle sales are expected to record a sharp bounce after a slump in 2020.

Global vehicle sales are expected to rise almost 9% in 2021 after recording a 15% decline in 2020 because of Covid-related disruptions.

Rhodium, palladium, and platinum are essential in cleaning exhaust emissions in vehicles. Rhodium is also used to reinforce glass for consumer electronics products.

It accounts for a relatively small proportion of total mining output, but is a significant cash earner due to rising demand and prices.

Platinum prices are down by nearly half over the last 12 years, having been eclipsed by what were previously considered by-product metals – rhodium and palladium.

Ironically, platinum fell victim to its own success, having traded at a high of over $2 200/oz in 2008 during the commodity super-surge.

Royal Bafokeng Platinum’s share price is up 553% from its March 2020 low.

Its 2020 annual results are due out this week, and the market is expecting a maiden dividend from the platinum producer, adding a bit of extra spice to the price move.

Impala Platinum (Implats) is up 380% and Anglo American Platinum (Amplats) 354% over the last 12 months.

South Africa is the world’s major source of PGMs and the Covid-related disruption to supply in 2020 accounts for the supply shortage in all three metals.

Johnson Matthey says the seven- to eight-million-a-year platinum market was undersupplied by nearly 400 000 ounces in 2020, while the 10 million-ounce-a-year palladium market was undersupplied by about 600 000 ounces.

Supply was further hit by an explosion at an Amplats processing plant in 2020, which contributed to a 42% drop in refined production for the last financial year.

Overall, PGM production was down 14% to 3.8 million ounces.

Implats rebounded sharply after the shutdown earlier in 2020, reporting a 29% increase in production over the same period in 2019.

Though rhodium accounts for a small percentage of total ounces mined, it has an outsized impact on overall financial results.

The average price achieved for rhodium sales at Implats for the six months to December was $12 454/oz, a figure which will be substantially higher in the current period.

This article first appeared on Moneyweb and was republished with permission.

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