Last updated on 9 de April de 2023
Trading above $8,000 per ounce, Rhodium is the most expensive metal in the world. We discuss why that is, its applications, and how you can invest in rhodium.
Content
- What is Rhodium?
- Rhodium Applications
- Historical Rhodium Prices
- Ratio between the prices of Rhodium and Gold & Platinum
- How to Invest in Rhodium
- Conclusion
What is Rhodium?
Rhodium is a silvery-white looking precious metal. It is part of the platinum mineral group (PMG) and was discovered in 1803 by English chemist William Hyde Wollaston, who had discovered palladium shortly before.
It is the second scarcest element, only behind osmium. There are 0.0002 rhodium particles per million on the planet.
Rhodium has historically been one of the most expensive precious metals, a title it has held since 2017. While its price can be very volatile at times, it trades much higher than the more common precious metals, such as gold, platinum or palladium.
A transition metal, of great durability, non-corrosive and that melts at very high temperatures, above 2,000 degrees Celsius, rhodium has certain properties that make it unique and irreplaceable.
Its annual production is about one million ounces, or 30 tons, and highly inelastic. That means its production cannot be increased just because prices go up. This is because rhodium is mined as a byproduct of other metals, mainly palladium and nickel.
As a result, its price can rise dramatically if there is just a small increase in demand. It also means it can tank quickly if demand drops.
Rhodium production is highly concentrated in South Africa, which accounts for 80% of global production. In second place is Russia, with 12% of the market. The rest comes from a few mines in Canada, Zimbabwe and the United States:
Due to the importance of South Africa in rhodium production, the risk of supply chain disruptions due to social or geopolitical issues is high. This is something both investors and consumers have to consider.
As we will see later, the price of rhodium is extremely volatile. It is possible to make a fortune investing in it at the right time, but we are also exposed to large losses if our timing is poor.
Another aspect that contributes to rhodium price volatility is the state of the global economy.
Rhodium Applications
Rhodium is mainly used for industrial purposes. It has applications in various sectors:
Automotive Industry
The production of catalytic converters accounts for 80% of all global rhodium consumption. Catalytic converters are used in internal combustion engine cars, both gasoline and diesel, to reduce the level of emissions. It should be noted that catalytic converters also contain platinum and palladium, two other precious metals of the PMG family.
Due to the tightening regulations on the automobile market, the demand for rhodium has increased significantly in recent years.
On top of that, the total number of vehicles manufactured tends to increase every year. And forecasts about the future remain very favorable.
China has already become the world’s most important automobile market, ahead of the United States, and countries like India are expected to see their car fleet increase dramatically in the upcoming decades.
Thus, an increase in the production of cars and tougher environmental regulations indicate that demand for rhodium in the future is likely to remain strong.
Jewelry Products
Although we may not be aware of it, rhodium is present in many products that we use on a daily basis. Many silver objects are actually coated with rhodium. This is to prevent the oxidation of the metal. For example, most silver jewelry and even silver cutlery are coated in rhodium.
Similarly, white gold jewelry tends to be coated with rhodium as well. White gold is a mixture of gold and another metal, commonly silver, nickel or palladium. Jewelry made with platinum may also contain a portion of rhodium.
Chemical, Medical and Electronic Products
Finally, rhodium is also in high demand in the chemical and electronics sectors. It is used in metering devices for nuclear power plants, X-ray machines, electronic connection devices, and even prescription glasses.
Investment Products
One aspect to keep in mind about rhodium is that the amount of metal that goes into investment products is very small. Unlike other precious metals, mainly gold and silver, and to a lesser extent platinum and palladium, rhodium is not considered an investment product at all.
For this reason, we must bear in mind that investing in rhodium is a very niche thing, due to the small market size and price volatility.
Historical Rhodium Prices
The price of rhodium has been incredibly volatile over the past few decades. For example, it rose from $500 in 2003 to more than $10,000 in 2008, only to fall to $1,000 in a matter of a couple of months.
In mid-2021, it reached a high of almost $30,000 per ounce. As of 2023, rhodium is trading in the range of $8,000-12,000.
The following graph shows the price of rhodium since the beginning of the year 2000:
We can draw the following conclusions from looking at the chart.
- Investing in rhodium at the right time can generate incredible profits, multiplying the value of our investment by 20 or even 25 in a matter of just a few years.
- Investing in rhodium at the wrong time can lead to heavy losses, of more than 90% of our investment, and that can occur either quickly or over several years.
- As a result, investing in rhodium is not for everyone. If you are considering allocating some capital to it, be aware of the risks and do not forget diversification.
Ratio between the prices of Rhodium and Gold & Platinum
Precious metals investors frequently analyze ratios between different metal prices. They expect ratios to mean-revert in the long run.
Being able to see trends is very powerful, as it allows us to identify which metals are trading relatively expensive and which ones are relatively cheap.
Let us look at the ratio between the prices of rhodium and gold:
At the end of 2020, the ratio between rhodium and gold was above 8. This means that one ounce of rhodium would buy more than 8 ounces of gold. In historical terms, if we look at the last 20 years, that ratio is at a high point.
If we believe in mean reversion, we would bet on gold rather than rhodium. But remember that such predictions are very difficult to make and time correctly.
It is interesting to see that, at the end of 2016, the ratio was below 0.5. That means rhodium increased by a factor of 16 compared to gold. Of course, in US Dollar terms, its price has gone up 25 times.
Next, we have the ratio between the prices of rhodium and platinum:
In this case, the ratio was clearly at all-time highs at the end of 2020.
Between 2000 and 2008, the ratio ranged from 0.5 to 5, with a lot of volatility. At the end of 2016, the ratio was again at 0.5. However, it then went up to 16. That means one ounce of rhodium costs the same as 16 ounces of platinum.
Rhodium had never been this expensive relative to platinum. Again, if we believe in this ratio reverting to mean, we would bet on platinum. On the other hand, if we believe that the current trend will continue, we will favor rhodium.
How to Invest in Rhodium
Let us discuss the different options we have to invest in rhodium:
Physical Rhodium
As with other precious metals, rhodium is also available as an investment product. However, the supply is much lower.
Only a few denominations are available, the most common being one-ounce and five-ounce bullion bars. This is because investors only became interested in storing rhodium in 2008.
The British company Baird & Co. is the largest manufacturer of rhodium bars in the world. PAMP in Switzerland also produces some. You will be able to find such products websites like Money Metals and Swiss Bullion (not sponsored links).
Rhodium ETF
For those who want to invest in rhodium without having to leave their home or putting in more than $8,000 to buy a single ounce, there is one ETF available. DWS, the asset management subsidiary of Deutsche Bank, makes the db Physicial Rhodium ETC available to retail investors.
The fund is backed by 100% physical rhodium, stored in secured vaults in London. Each share of the fund represents 0.1 ounces of rhodium less the accumulated management fees accrued since 2011.
Rhodium Mining Companies
The third we have is to invest in shares of rhodium mining companies. Most of them are in South Africa, although you may also find some in Canada and Russia.
It is worth highlighting that most of the largest rhodium mining companies in the world derive a high percentage of their revenue from mining other PGM metals, such as palladium and platinum. As a result, our exposure to rhodium would only be partial.
Conclusion
Rhodium is the most expensive precious metal in the world. It is also one of the most volatile, capable of making us a lot of money or causing us great losses, depending on how well we time our trades. For this reason, we should consider it if we can stomach the volatility.
Demand for rhodium is likely to increase over the next decade. But remember that it is a very niche market, and this tends to go together with a few insiders being able to benefit disproportionately from it.
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