In the 1990s, it was unlikely that sisters and tennis sensations Venus and Serena Williams would be mentioned without referencing their father and coach at the time, Richard Williams.
Richard Williams was always present when his daughters played, which can be likened to platinum having carried palladium and rhodium well into the twenty-first century. Palladium and rhodium can also not be mined without platinum being extracted simultaneously.
Serena Williams’ being hailed as one of the best female tennis players – if not the best – can be likened to rhodium’s position in the platinum group metals (PGMs) basket. The metal is the world’s rarest and most precious metal, surpassing gold and silver.
The rhodium price has increased steeply over the past two years, and market research company Noah Capital Markets mining analyst Rene Hochreiter predicts that it will reach $7 000/oz by year-end.
“Rhodium is set for quite an increase in price, as there are no rhodium surface stocks. Platinum and palladium are interchangeable and can be substituted for each other in various proportions. With rhodium, this is impossible, as it is a reduction reaction, as opposed to oxidation reactions with palladium and platinum,” he adds.
This results in the so-called value- in-use price ratio, particularly when compared with palladium, where a much smaller volume of rhodium by mass can create the same reactions relative to palladium, says PGMs producer Impala Platinum refining and marketing group executive Sifiso Sibiya.
Hochreiter says rhodium is the only metal that is suitable for nitrogen oxide emission control in petrol autocatalysts.
As there is increased focus on reducing carbon dioxide and nitrogen oxide emissions in Europe and China with the advent of real-world emission standards, rhodium loadings in emission control technologies are expected to increase, comments Nedbank CIB Market Research mining analyst Arnold van Graan.
“There is limited scope for substitution and thrifting, so this should lead to an increase in rhodium demand,” states Van Graan.
Despite rhodium’s outstanding performance in recent times, the current price is still a long way from the 2008 highs of more than $10 000/oz.
“If the commodity can maintain its current pricing, it would have done really well. There will most likely be some short-term correction along the way, partly owing to profit taking from the investment component of the market, as well as an increase in the price of its obvious substitutes in the industrial component of the market,”independent mining and metals analyst Percy Takunda tells Mining Weekly.
Meanwhile, PGMs producer Royal Bafokeng Platinum CEO Steve Phiri noted at the company’s results presentation in August that, while the platinum price remained subdued, owing mainly to antidiesel sentiment in Europe, as well as the switch to battery electric vehicles, in particular, the prices of palladium and rhodium had increased.
Rhodium outperformed palladium in the six months to June 30, rising to $2 840/oz from $2 188/oz a year ago.
“We are . . . seeing rhodium prices of about $3 350/oz and we hope that they will remain largely at those levels for the rest of the year,” said Phiri.
Supply and Demand
While the rhodium market is largely an “over-the-counter” market, it shares more attributes with palladium on the demand side and more attributes with platinum on the supply side, says PGMs mining and marketing company Anglo American Platinum PGMs sales and market insights head David Jollie.
“Typically, producers always think of platinum and palladium first, as those markets are about ten times bigger than the rhodium market. For the miner, that can be very important, even for consumers, given that rhodium is also going into the automotive market,” Jollie advances.
Amplats PGMs marketing executive head Hilton Ingram states that the rhodium market primarily comprises two major aspects on the supply side and two major aspects on the demand side.
“On the supply side, primary supply is largely from South Africa, which accounts for 80% of primary supply and about 60% of total supply. Recycling accounts for the other 30%. The demand side is dominated by autocatalysis and the glass industry, with very small amounts required in the chemicals industry,” he explains.
Van Graan notes that rhodium supply in South Africa is constrained by operational challenges, rising costs and a lack of capital investment.
“The production of PGMs, including rhodium, is not a tap which can easily be turned on or off. Despite the recent increase in rhodium prices, we do not expect a sudden increase in output,” he says.
Ingram explains that, on the demand side, there has been yearly growth of about 6% from the automotive industry, which accounts for 85% of rhodium demand. Moreover, the glass industry has grown at about 8% a year, largely on the back of capital investment in the fibreglass industry.
He points out that established automotive companies are buying PGMs in advance to meet demand.
“If you take the forward purchasing into consideration, it will be a while before those price impacts work themselves through the system,” adds Ingram.
While demand for rhodium is set to increase materially over the next four years, forward purchasing to stock the manufacturing pipeline – together with fears regarding mine supplies – has likely resulted in some inventory accumulation by industrial users and physical investors, says Sibiya.
“There is some strong demand from China, with forward buying in anticipation of a stimulus for its automotive industry . . . This is the nature of a market such as rhodium, where short-term supply-demand imbalances and other market factors can send prices substantially higher or lower,” Ingram explains.
Sibiya tells Mining Weekly that secondary flows from automotive recycling have been affected by capacity constraints in the northern hemisphere, which has further tightened the market.
Ingram anticipates that, as recyclers use this time of the year for maintenance, this may lead to a short-term reduction in supply. This is due to the northern hemisphere’s small, thinly traded sector, where not all the players are in the market all the time.
“There has been some growth in the recycling business and quite substantial growth efficiencies in collections, which have improved over time, as rhodium loadings peaked,” he says.
“If you take away the recycling aspect, the rhodium price will probably be closer to $10 000/oz or $15 000/oz. It is a very strange market, where it is almost completely used in autocatalysts – and there is no replacement for it. That is what makes it so important.”
The outlook for the rhodium market is positive on the back of increasing demand and supply constraints, Van Graan suggests.
“The rhodium price will increase at five times the price of palladium – as a maximum – as some original-equipment manufacturers (OEMs) have contracted to pay no more than five times the palladium price for rhodium,” says Hochreiter.
Consequently, expectations for future rhodium demand from the automotive sector have been adjusted upwards by automotive OEMs, says Sibiya.
“Supply has been curtailed, owing to mine closures and depleted reserves on the South African upper group two (UG2) reefs, which are the dominant global source of rhodium,” he points out.
Van Graan also states that the rhodium market is a very thin one and that any material supply disruptions in South Africa could further impact on the price.
One potential disruption is the effect of last week’s announcement that multinational precious metals mining company Sibanye-Stillwater had started retrenchment consultations at its Marikana operation, in the North West.
Van Graan emphasises that only a few orebodies can be specifically targeted for rhodium production; however, the UG2 reef orebodies are generally more rhodium rich, compared with Merensky reef orebodies.
“A high rhodium price will, therefore, improve the economics of UG2 mining and help to make up for the lower grade of these orebodies,” adds Van Graan.
The rhodium market – which is substantially smaller than the palladium market – is an illiquid market that is sensitive to changes in demand in the short term, Ingram maintains.
“Ultimately, we need to ensure a balance between supply and demand for platinum, palladium and rhodium to ensure the sustainability of their demand outlook,” concludes Sibiya.