PGMs: Rhodium prices jump on rising demand

Rising demand from original equipment manufacturers (OEMs) has pushed up rhodium prices sharply since the start of January, as automakers strive to raise output as the global chip shortage starts to ease.

Rhodium prices hit $17,500/toz today – their highest since 1 September 2021 and up by a total of $14,250/toz or 22pc since 4 January, according to UK specialty chemicals firm Johnson Matthey.

The rise is largely underpinned by increasing demand from OEMs, which use rhodium in automotive catalytic converters to help combat nitrous oxide emissions. In the spot market, offers are now seen in excess of $17,000/toz, up from $14,500/toz at the start of last week and $14,100/toz at the end of 2021, market participants said, with one pointing toward a rise in "OEM demand as well as Chinese industrial interest".

Some automakers note that the global chip shortage is starting to ease, suggesting that vehicle production will start to recover after 2021's cutbacks, pushing up demand for automotive catalysts and rhodium along the way. Last year's vehicle production cuts weighed heavily on rhodium prices, which peaked at $29,800/toz in March but then fell by 54pc to $13,700/toz by 26 November.

"In 2022, we plan to take advantage of the strong economy and anticipated improved semiconductor supplies to grow our sales and share," Detroit-based General Motors (GM) said on 4 January as it expects an improvement in "total light industry sales from around 15mn in 2021 to around 16mn in 2022".

"The key constraint for sales continues to be reduced inventory levels as a result of the semiconductor shortage. Those inventory levels are beginning to recover against a backdrop of strong fundamental demand conditions," GM's chief economist Elaine Buckberg said.

Traders note that rhodium supply is tighter than expected, with global production expected to be flat this year. "The supply angle is perhaps tighter than some had thought and it appears that producers are well sold," a trader said, adding that "there is a healthy amount of bullish speculation being mixed with genuine good early year demand which caused the market to move higher. As soon as it did that all offers clammed up, and with producers already well sold, we have got ourselves into this massive move higher."

A platinum group metals (PGMs) producer commented that South African production is "certainly not thriving". "We always knew the supply/demand side of things would settle, it is just the question of when," the producer said, adding that Anglo American's inventories – which had built up in 2020 during convertor outages – are likely to decline in early 2022, further squeezing the supply base.

By Yusuf Khan