JOHANNESBURG (miningweekly.com) – Standard Bank will on Friday list the continent’s first rhodium-backed exchange-traded fund (ETF), to complete its suite of available ETFs across the platinum-group metals (PGMs) sector.

The AfricaRhodium ETF, which was backed by the physical precious metal and designed to track the rhodium US dollar spot price in rand, was  the second such ETF to hit global markets.

Standard Bank head of client solutions, business development Johann Erasmus said the introduction of the latest ETF meant that investors seeking exposure to the complete basket of locally produced PGMs would now have the option to do so at competitive prices.

”We are the only local bank that provides the full value chain for investing in PGMs,” he added.
 
South Africa is the largest producer of PGMs in the world and produces about 80% of the world’s rhodium supply.

Local PGM producers extracted a mix of PGM metals – the PGM basket – comprising roughly of 60% platinum, 30% palladium and 10% rhodium.

Although different standards could apply to foreign traded ETFs, local ETFs had to acquire the physical PGMs and store it within custodian. AfricaRhodium ETF required only 1 oz of physical metal to be held for every 100 ETF investment units listed.
 
Erasmus believed that, despite the current pressure experienced in global commodity markets, taking a long-term view on the PGM pricing cycle remained a sound investment, adding that, although a lot of emphasis was placed on the drop in platinum prices, the metal only formed one part of the local PGM story.
 
“By completing the PGM ETF offering, we not only provide investors access to rhodium, but the ability to invest in the full PGM basket as well.

“It makes it possible for investors to manage their respective views and market expectations within the PGM mix,” he said.

Rhodium, like palladium and platinum, was mainly used in catalytic converters to clean vehicle emissions into less harmful gases. It was also used in the glass industry, specifically liquid crystal display screens for televisions and touchscreen devices. But unlike its better known siblings, rhodium was rarer and with a smaller market it could be subject to more erratic price swings.

Further, even though rising car sales in the US and China could boost demand for palladium, some vehicle manufacturers might shift to using more rhodium in their catalytic systems, as, at the current price, it might be viable to increase rhodium loading owing to its efficiency.

“If one invests directly into the underlying basket of PGM metals, you can manage such expectations by playing around with ratios across the value chain,” Erasmus pointed out.

He added that the popularity of Standard Bank’s previously issued PGM-backed products had further benefit as a local currency hedge, as the ETFs were priced in rand but tracked the dollar metal price.

The fact that investors did not have to tap into exchange control allowances to obtain access to the precious metal market dynamics made the offering even more attractive.  

Erasmus said the next step after the rhodium ETFs' debut on the JSE would be the possible secondary listings in other jurisdictions where sufficient investor demand warranted it.