Rhodium backs off $30,000/oz; supply concerns still main issue
Excerpt from S&P Global Metals Daily Volume 9/ Issue 47/ March 9, 2021
– Filip Warwick
- Positive outlook in auto sector
- Sharp declines not expected
- Long term may see $15,000-$20.000/oz range
Rhodium base prices eyed $30,000/oz last week before easing off, though the main price drivers continued to be the short supply from mines and secondary recyclers as well as strong industrial demand
from Europe and the US, market sources said.
Assessed on March 4, the Platts New York Dealer price range rose to $26,850-$29,200/oz for Feb. 26 to March 4 from $23,200- $26,500/oz in the week prior.
On March 9, Johnson Matthey — the largest secondary PGM refiner in the world — said its rhodium base price stood at $28,500/oz, down 1.7% on March 8, while refiner Engelhard Materials Services (BASF) stood at $28,850/oz, down 1.2%. Heraeus Precious Metals rhodium industrial price stood at $29,750/oz, unchanged from March 8.
Tight market
CPM Group’s head of precious metals research, Rohit Savant, said that aside from the tight market conditions and the small size of the rhodium market, there was a positive outlook in the auto sector and global economic growth as well as a period of seasonal strength during the first quarter and the early part of the second quarter of 2021.
“Based on these factors rhodium prices could remain strong and potentially rise for at a few more weeks,” Savant said. “Prices could soften some during the summer, but sharp declines are not expected as fabricators use any softness in prices as an opportunity to build inventory.”
In terms of seeing more upside potential for rhodium in 2021, Heraeus global head of trading, Henrik Marx, said market fundamentals appeared to be unchanged over the past couple of weeks.
“Everyone is looking for physical metal,” Marx said. “Market is still in a deficit and will probably remain in this situation for a few more weeks, maybe months.”
Echoing that view was StoneX Group’s head of market analysis for EMEA and Asia regions, Rhona O’Connell, who said the notable upside was “due to tightening NOx emissions limits on the horizon in China”.
Rhodium’s robust demand has been largely tied to increasing nitrogen oxide (NOx) legislation globally, particularly in China. The Chinese auto market is the largest gasoline market in the world, with China’s light vehicle sales being about 90% gasoline engines.
Nearly 80% of annual rhodium demand comes from the global automotive industry, which uses the metal in catalytic converters to control emissions of nitrous oxides and other greenhouse gases.
Next four years
On the subject of the ‘new normal’ for rhodium and where the metal is likely to trade until 2025, Heraeus’s Marx said the the market was likely to remain tight, though he expected the price to soften slightly and come down to range of $15,000-$20.000/oz in the long term.
“Making a forecast especially in such a narrow market is extremely difficult and small events can have a big impact,” Marx said.
“[Which] means this shall be considered as a very rough indication from today’s point of view which needs to be re-evaluated basically on a weekly (sometimes even daily) basis these days.”
CPM Group’s Savant echoed the view that, on average, rhodium prices “should be around $18,000/oz during this time frame”.
NOAH Capital Markets and Sieberana Research analyst Rene Hochreiter said the metal may trade between $20,000-$30,000/oz
during the period, “though I have heard estimates of $50,000/oz – if happens then switching [substituting rhodium for platinum or palladium] must come”.
StoneX’s O’Connell said that more or less for the next year “it may well stay elevated but when the market finally comes to terms with the likelihood that by 2031 the auto sector will be a net supplier to the market as opposed to accounting for over 80% of demand” a change in the market dynamic may be noted.