Rhodium takes the world by storm with a 30% price surge in 1 month

by Ina King (Potgieter) January 30, 2020

How will South Africa's PGM Mines Respond to Rhodium's Price Surge?

The value of rhodium soared in the first few weeks of 2020, hitting a spot price of $8 750/oz on 17 January – the first time it had reached such a high since 2008. As the world's largest producer of this precious metal, how will South Africa's mining industry respond to higher demand? Ina King discusses…

While a steady increase in value began as early as 2018, the major spike was seen from December 2019, a trajectory it has maintained to date. It is now 5 times more expensive than gold!

What's driving rhodium's surge?

Rhodium, palladium and platinum are the chief precious metals used in three-way catalytic converters to reduce toxic gas emissions from auto exhaust systems.

Such metals help to convert toxic gases (carbon monoxide / dioxide and nitrogen oxide) into less destructive substances leaving the tailpipe.

Following the introduction of stricter emissions standards across the world, the demand for these noble metals from auto manufacturers has increased significantly.

Stimulated by demand from China and Europe, the value of rhodium is expected to rise even more in the near future.

On the supply side, rhodium is notoriously rare. Over 80% of primary rhodium supply is produced in South Africa, yet there isn't a single dedicated rhodium mine; it is found only in the ores of other metals like platinum and nickel.

As such, its supply is intrinsically linked with the production of these other mined metals industries.

What does this mean for South Africa?

Given this delicate mine-to-market environment of rhodium, any strategic expansion in production of the precious metal needs to consider not only its primary market value, but also the subsequent effect on other PGM markets.

Prominent South African PGM miners such as Sibanye Gold and Impala Platinum are reluctant to increase rhodium production, unwilling to risk negatively affecting the price of their main metal, platinum.

It's critical that any plan to increase supply of rhodium to meet its renewed demand must be underpinned by a comprehensive Definitive Feasibility Study.

This is especially important given the much-publicised challenges facing the South African mining industry, such as operational difficulties and variability of mined materials; the rising costs of mining and reduced capital investment; energy issues; labour challenges; and ongoing questions surrounding the industry's regulatory environment.

Given that the increasing pressures of climate change are likely to amplify rhodium demand, a shake-up of the metals' production infrastructure could be a possibility in the years to come.

Such changes will likely be driven from South Africa's PGM miners, and it will be interesting to monitor how these companies grapple with this shifting supply and demand dynamic.