Editor’s note: This is an updated article we first published back in early December. The metal breaking through $20,000 an ounce is very noteworthy as the number itself serves as an important psychological barrier, shows COVID-19 supply distributions are still affecting prices of vital materials… and hints at potential growth in similar materials going forward.
Supply disruptions stemming from the COVID-19 pandemic have sent prices of this precious metal skyrocketing to over $20,000 an ounce — that’s more than 10 times higher than gold right now and 800 times more expensive than silver.
Prices have increased some 400% in the past 12 months alone. And they still could be headed higher from here.
I’m talking about rhodium.
You may not be familiar with its name, but there’s no doubt rhodium is around you right now in some of the products you use every day.
Rhodium is a member of a group of metals with similar physical and chemical properties known as the platinum group metals (PGMs). This gang includes platinum, palladium, ruthenium, iridium, osmium, and the star of today’s show: rhodium
Here’s what it looks like:
It’s not so exciting in person, I’ll admit. But rhodium is a very important industrial metal used in specialty optical instruments, electronics, aircraft turbine engines, and as a jewelry finish. If you’ve ever bought “white gold” at a jewelry store, you’ve bought rhodium. White-gold jewelry is made with a mixture of pure gold and white metals like silver or platinum that have been electroplated with rhodium.
The primary application for rhodium, however, is catalytic converters in cars and trucks. In fact, over 80% of all rhodium production will end up in a catalytic converter somewhere. So demand from the automobile industry is critical for rhodium.
Thing is, rhodium is very rare. It’s so rare there are fewer than 10 mines in the entire world that produce any significant amounts of rhodium.
An entire year’s worth of total world supply could be hauled by two 55-foot flatbed trucks.
The majority of the world’s rhodium is mined in only one country: South Africa. South Africa accounts for about 80% of the total global supply of rhodium — and that’s a problem.
The problem isn’t that rhodium production is concentrated in South Africa, per se. The problem is simply that the world’s rhodium resources are rare and concentrated in one area. The world would have similar rhodium supply issues if resources were concentrated anywhere else.
And that’s simply because any kind of disruption to mine production can have a significant impact on supplies. In 2008, mining strikes in South Africa caused shortfalls, which drove prices to over $10,000 an ounce.
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The disruption in mine production and distribution due to the COVID pandemic is clearly the driver behind the current rise in rhodium prices. But if you were thinking about investing in rhodium to ride momentum higher, there are many things to consider.
First of all, prices are already high. At over $20,000 an ounce, the price of rhodium is 50% higher than its previous all-time high. It’s trading off the charts… literally:
Buying today is buying at the absolute top to date. But even if you were absolutely confident that rhodium was still headed much higher, you’d run into problems investing.
Investing in rhodium is not easy. There are no public mining companies with a lot of exposure to rhodium mining. Again, there are fewer than 10 mines in the entire world that produce the stuff in any significant amounts. And the mines that do also produce other valuable metals like platinum and palladium.
Fact is, rhodium is only produced as a coproduct. There is really no such thing as a rhodium mine. There are mines that produce platinum, palladium, iridium, ruthenium, osmium, and rhodium at the same time. That said, the two largest public rhodium producers are the two largest public platinum and palladium producers: Anglo American Platinum (OTCMKTS: AGPPF) and Impala Platinum Holdings (OTCMKTS: IMPUY).
There is no futures market for rhodium, and few exchange-traded products. There is a rhodium ETF listed on the South African exchange and an ETC (which is better-known) listed on the London exchange: Xtrackers Physical Rhodium ETC (LSE: XRH0).
You can buy physical rhodium bullion — that is, you can, but you probably shouldn’t.
In 2009, the Cohen Mint was the first to produce 0.999 fine rhodium bullion rounds and bars. More recently, Baird & Co. and Pamp Suisse have introduced a line of physical rhodium bars that are available in 1- and 5-ounce bars and fractional sizes of one-tenth, one-quarter, and one-half ounce.
So there are physical bullion options. But on top of high premiums, physical rhodium bullion is quite liquid.
It’s going to be difficult to sell an investment-size rhodium holding when it comes time to divest. So if you do decide to buy rhodium as an investment, make sure you know where you’re going to sell it first.
At the end of the day — and despite soaring prices — there are really just no great rhodium investing options. The metal is just too rare.
Until next time, As an editor at Energy and Capital, Luke’s analysis and market research reach hundreds of thousands of investors every day. Luke is also a contributing editor of Angel Publishing’s Bull and Bust Report newsletter. There, he helps investors in leveraging the future supply-demand imbalance that he believes could be key to a cyclical upswing in the hard asset markets. For more on Luke, go to his editor’s page.
Luke Burgess
