The prices of rhodium have been very volatile. The metal’s price increased from$1,870 to peak at $12,700 in early March 2020. In the last 23 days, rhodium saw a drop in price of $6500. Since early March, the rates of the metal have halved.
The demand for rhodium comes from the automotive industry. It is critical for catalytic converters used by automakers to reduce harmful emissions.
According to Paul Dunne, the CEO of Northam, the rhodium deficit increases by 20% annually.
Experts believe that the lack of primary rhodium mines will continue to affect the growth potential of the supply of this metal. The new extraction projects for platinum group metals, currently under development, foresee a deficient production of rhodium.
Analysts believe that the supply deficit is going to continue in the short and medium-term, until the end of the decade. The surplus will return when the market share of electric cars has exceeded its critical point.
In the last two years, price of the metal increased manifold. Now, the imminent risk presented in the automobile market is the drop in demand in the short term caused by the Covid-19 pandemic. In February alone, vehicle sales in China declined by 80% compared to last year. The destruction of demand pulled the prices down. However, the rates were much higher than their levels two years ago. Experts say the fall is temporary and they will boom again as demand returns.
The drop in demand for catalytic converters will not affect the long-term demand for both palladium and rhodium, as long as manufacturers do not substitute them for other metals. Companies like Fiat Chrysler already have teams working to avoid the cost increase originating from the rhodium price rally. However, they have not been able to find a substitute that offers similar performance.