The Johnson Matthey (JM) rhodium London base price climbed to new six-month high, up 9% week on week and 36% month on month, with the price as of 0800 GMT September 7 standing at $13,300/oz.
With the Sept. 7 JM base price $500/oz shy of the all-time record of $13,800/oz March 10, the price climb appears to be on the back of fresh buying interest combined with limited physical metal availability, Mitsubishi Corporation precious metals strategist Jonathan Butler said in a research note Sept. 7.
Last week, one US dealer who put the range of physical deals at $12,300-$13,200/oz said: "I didn't see any South African producers. But I did see European, US, and Chinese automotive buying."
"Summer break is over, people are back in the market in earnest. And some of the auto companies have back orders to fill," he added.
Nearly 80% of the annual demand for rhodium comes from the global automotive industry, which uses the metal in catalytic converters to control emissions of greenhouse gases and pollutants.
The precious metal is expected to be affected more than platinum or palladium in 2020, not only due to its chemistry which means that the refining process takes longer than for platinum or palladium, but also due to the slow ramp-up of deep-level labor-intensive conventional mines in South Africa, as a result of strict compliance with COVID-19 protocols, which in turn had resulted in limited rhodium production.
In 2019, rhodium was the least diversified geographically metal with over 80% of supply coming from South Africa.
Sibanye output slumps
South African platinum group metal (PGM) producer Sibanye-Stillwater -- the world's largest primary producer of platinum and rhodium -- said Aug. 27 its rhodium production dropped 49% quarter on quarter to $18,554/oz.
Precious metal refiner Heraeus said Sept. 7: "Overall South African rhodium output is estimated to fall by 19% this year. However, South African mines are now operating at 80-90% of full capacity. As mines approach full operating capacity in Q3, small PGM production is recovering."
"Rhodium ETF holdings have dropped by 1,000 oz in South Africa on profit-taking as the price has exceeded Rand 200,000/oz ($11,952/oz) for only the second time. The rhodium price has continued to climb and is back above $13,000/oz," Heraeus said.
Mitsubishi's Butler said it remained to be seen if such continuous buying stayed at these levels.
"There may be an element of speculative positioning which tends to run out of steam above $10,000/oz," Butler said.
"However, with supplies extremely limited despite the lifting of force majeure at many South African mines, and demand for rhodium in NOx emissions control continuing to rise as Euro 6 and its equivalents are introduced and tightened around the world, this year's rally has a solid fundamental underpinning."
This is echoed by South African research house Afriforesight which said the rhodium price increase is on the back of "expectations of slow supply recovery and strong demand outlook on tightening emissions."
Sibanye-Stillwater said it expected a reduced deficit in rhodium over 2020 and 2021, and "overall, for 2020 we expect to see the rhodium market [to] move into balance."
