Why This Precious Metal Has More Than Doubled in Value This Year
It may play a large part in the present, and future, of car manufacturing
When looking through the prices of your favorite commodities, some things stand out. Oil and gas have plummeted this year. Gold and silver are way up. Cheese and rubber are killing it while lithium is not.
There’s one commodity that soars above the crowd in year-to-date gains, however: rhodium.
As with many commodities, you may have never heard of rhodium. Rhodium is an ultra-rare precious metal found mostly in North and South America as well as South Africa. It is very reflective and for that reason used as a finish for jewelry and mirrors. Its high-temperature threshold makes it popular in aircraft engines as well as furnaces.
Perhaps rhodium’s most important use, and the one sending its value to the moon in 2020, is in car engines.
In an age where the emissions from internal combustion engines are monitored more than any other, the catalytic converter becomes one of the more important elements of a car. The catalytic converter controls exhaust emissions and reduces the toxic gases and pollutants that a car emits.
The catalytic converter is one of the more expensive pieces of a car, running from $1,000-$2,500 for replacement. This part is so expensive because of its precious metals inside, including rhodium.
Of all the precious metals, rhodium is considered the best when it comes to removing the toxic emissions of nitrogen oxides (NOx), hydrocarbons (HC), and carbon monoxide (CO) from the engine’s exhaust. It is also resistant to corrosion once it becomes an alloy (combined with other metals for increased strength).
All these incredible uses for rhodium make it a seemingly perfect precious metal. Perfection comes at a cost, though.
Rhodium has always been expensive, running from $1,000 an ounce in 2012 to $2,900 in March 2019. In one year, rhodium went from that $2,900 mark to $13,600 an ounce in March 2020 — a 369% gain in value. In a week, it had fallen all the way back down to $5,300 and then climbed its way back to today’s mark of $13,650.
All that crazy activity equates to a 125% gain in value for rhodium in 2020.
That leaves an obvious question: why has rhodium seen such crazy activity leading to such a drastic gain this year?
There have been a few factors impacting the rise in the price of rhodium — and another precious metal in palladium, also used in catalytic converters. The largest is the automotive industry, which makes up 80% of the demand for these precious metals. With global emissions standards rising, automakers have no choice but to spend big on rhodium.
Mine strikes in South Africa in 2019 were another reason prices shot up — a simple supply-and-demand issue.
In a small market, rhodium can be very volatile, as shown with the price swings above. High demand will send the price sky-high, like it is now, whereas the price could fall quite far once the needs of the market are satisfied.
Electric vehicles, which don’t use catalytic converters, won’t be in mainstream use for quite some time. As automakers continue seeking the best environmental version of gasoline-driven vehicles, catalytic converters will continue to be in demand, meaning rhodium will continue to be in demand.
Once the internal combustion engine is off the road for good, though, rhodium will still have its place on rings and necklaces.