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Rhodium is most likely being driven by China 6 implementation in Jan '21 for light vehicles and then heavy duty vehicles in July. Add to that the European emissions are tightening and an increase in Hybrids which all have higher Rhodium loadings.
You could read that as once stocks are higher then the price will stabilise / drop, however Rhodium remains in deficit so those stocks won't last and supply and demand will find a balance for the price. Who knows where that will be but we may find that with increasing yearly deficits, the higher pricing range is here to stay. Let's hope so !
Re Rhodium price - might be that auto makers are stock piling which is what is driving the price up. Surely if (eg) Nissan decide they need (x) Rh for the year they might be buying it now to ensure they have the stocks in case of another Covid outbreak & possible supply disruption. IF this is the case then surely when they have their stock pile for the year they will stop buying & price will retrace.
Just a theory
Just to add, I asked myself the question how much rhodium is in a typical car, and how much is buying it costing the car companies?
It seems (courtesy of JMAT) the answer is that a vehicle contains between 1g (light gasoline car) and 15g (truck) of PGMs, with rhodium representing roughly 1/8th of that amount. This (ballpark) puts the value of the rhodium in a light car at $120 at a $30,000 / oz rhodium price, and at about $1,800 for a truck. So even at this price it's affordable for car manufacturers, if not exactly a welcome increase in costs.
And, after the Dieselgate scandal, the penalties for cheating emissions regulations are very high...
Hi Sotolo!
Rhodium (IMO) isn't a speculative investment bubble, like Bitcoin. Rhodium is an incredibly rare and irreplaceable industrial metal whose use in vehicles is effectively legally mandated (China 6, Europe 6 clean air regulations), and which has been in chronic deficit for years. Thanks to growing Chinese auto production and problems with South African supply last year (from Covid and the Amplats shutdown), this deficit has now reached crisis proportions. Rhodium is directly traded, so there is no futures or conventional spot market on which traders can speculate on the price, and the one Rhodium ETF is tiny (Heraeus estimates it holds only 25k oz. of rhodium). This is all about industrial supply and demand - in particular, a supply which can't grow quickly or easily, if at all, and a demand which is legally enforced.
I do think that South African rhodium supply will increase in the next few months - Amplats came back online in December, so the effect of that may still be working through the market. And you may be right that the market will retrace at $30,000 - it dipped back at $20,000 before. But I do believe rhodium prices will stay high for some time. For how long? Well, the demise of the ICE (internal combustion engine) is much predicted, but looked at from a world point of view, it's a process that will take at least a decade. Apart from anything else, a mass change over to EVs would require enormous work on the electricity grid. And a lot of new lithium mines.
IMO, much the same "industrial" argument (but in a less acute form) goes for palladium.
Platinum is affected by the gold price and investment demands, as well as its industrial ones - hence, its current price drop.
Long term, of course, the hope is that the demand from fuel cell technology (particularly for platinum and iridium) will replace the demand from ICE vehicles. If that's right, platinum will once again be "the rich man's gold".
Chrome demand (i.e. demand for stainless steel) is also predicted to grow through the next decade at c. 5% p.a. All has gone quiet on the suggested chrome export tax front, and it wasn't mentioned in the recent SA budget.
So, no, I don't think the current PGM basket price is a one-off never-to-be-repeated bonanza for Tharisa. BUT, even if this was a one-off bonanza that enabled Tharisa to pay off its debts and to cover the $50m Capex for Vulcan and to build up a cash pile, wouldn't Tharisa still be underpriced?!? Business has never been better for Tharisa (by a country mile), but this share is still trading at well below its all-time high (c. 160p). That's a nonsense. Or, IMO, an opportunity.
On another note isn’t it likely that rhodium will have at least a bit of a retrace at $30000 which is a big figure. At this price our 15k annual ounces would be worth an amazing $450k less extraction costs which are only a small proportion at this price, overhead and tax, leaving maybe half our capitalisation to be earned this year from rhodium alone IF price holds up. Of course chrome another matter with potential export tax. How far can Rhodium bubble go, it is chasing Bitcoin
Great upsides Tiger However Isn’t Rhodium getting wildly overbought, and aren’t platinum and palladium on way down already with PM’s. I agree our forward PE is ridiculously low but if the metals start falling it may keep a lid on the price despite that. Plus worries will come in about the increasingly fast reduction in internal combustion engines….?
TBTT
Thanks for the updates. Amazing to see the values increase so rapidly. THS must be clapping their hands with excitement!
Iridium hit a new all-time high of $5,000 / oz this morning (JMAT).
Not buying iridium rounds last year at $1,500 / oz is going to turn out to be an expensive mistake for me, but I just couldn't stomach the 50% buy-sell spread! Based on its unique catalytic properties, particularly in the production of green hydrogen, I predict a $10,000 / oz iridium price in a couple of years.
THS produce about 6K ounces of iridium a year as part of their 6E PGM production (i.e. 4.3% of 160K), so iridium alone is worth around $30m per year in revenue to them.
Rhodium also hit a new all-time high this morning at $29,200 / oz (JMAT).