WHAT'S DRIVING THE PRICE OF RHODIUM? HERE ARE SOME KEY FACTORS YOU NEED TO UNDERSTAND
POSTED BY PRADIPA (TA)
Rhodium, a precious metal that is both incredibly valuable and versatile, is not just another commodity on the market. Traders who have a keen understanding of how diverse factors impact its price can benefit from fluctuations in the metal's value.
One of the most significant drivers of the rhodium market is supply and demand. When the demand for rhodium outstrips the limited supply, the price of this valuable metal skyrockets. Conversely, when there is a glut of rhodium in the market, the price drops like a stone.
In 2007, the price of rhodium soared due to a temporary shortage in supply, which was caused by a power crisis in South Africa. As the largest global producer of rhodium, South Africa experienced electricity shortages that disrupted mining operations, leading to a reduced supply of rhodium. This South Africa power crisis persists to this day, with a direct impact on the market. Therefore, potential traders in the industry should exercise caution and stay informed about the situation.
Economic conditions also play a significant role in determining the price of rhodium. During times of economic recession, the demand for luxury goods, including rhodium-based jewelry, decreases, causing the price to drop. Conversely, during times of economic growth, the demand for luxury goods increases, leading to a rise in the price of rhodium.
During the 2008-2009 global financial crisis, the automotive industry, which is a significant consumer of rhodium, suffered from reduced demand for automobiles. This had a severe impact on the price of rhodium, which dropped drastically from a record high of over $10,000 per ounce in mid-2008 to a low of $950 towards the end of the year.
Rhodium's price is also influenced by unpredictable geopolitical events. Political instability and conflicts in rhodium-producing regions can disrupt the supply chain, resulting in a sudden spike in the metal's price. This volatility makes rhodium a thrilling investment for those who love living on the edge.
Furthermore, the industrial applications of rhodium have a significant impact on its price. Rhodium is an essential component in the manufacture of catalytic converters for automobiles and reflective surfaces for aerospace technology. When the demand for these products increases, so does the demand for rhodium, causing its price to soar.
As part of the Paris Agreement, countries such as Europe, the US, India, China, and Japan have made a commitment to decrease their hazardous emissions and have implemented strict regulations to combat air pollution. In 2019, the automotive industry faced a supply deficit while striving to meet increasingly stringent emission standards.
Johnson Matthey PLC, a British multinational corporation specializing in sustainable technologies and specialty chemicals, reported that the primary supplies contracted, resulting in a doubling of the deficit in the rhodium market in 2020.
In early 2021, the rhodium market experienced significant volatility due to a severe supply shortage caused by disruptions to primary rhodium shipments in 2020. These disruptions were a result of outages at Anglo American Platinum’s converter plant (ACP), which led to repeated surges in the price of rhodium, reaching highs of around $30,000 with weekly price fluctuations exceeding $3,000. The rebound in demand for rhodium, coupled with the recovery in world car production following the Covid-19 disruptions, also contributed to the price surge. Given the continued unpredictability of the global situation, Heraeus has offered some predictions regarding the Precious Metals Forecast for 2023.
Last but not least, the advent of investment instruments like mutual funds and ETFs has made the market for precious metals increasingly volatile. The demand for rhodium can fluctuate wildly based on investor sentiment and market trends, making it a fascinating commodity to watch.
We, at Ecotrade Group, understand the importance of staying informed about market prices. That's why we offer a convenient service to keep you updated on metal prices at all times.
To sum up, rhodium is a precious metal that deserves a place in any trader's portfolio. By keeping a keen eye on supply and demand, economic conditions, geopolitical events, industrial usage, and investment trends, traders can potentially benefit from the rapid fluctuations in the price of this alluring metal. So, fasten your seatbelt and get ready for a wild ride in the exciting world of rhodium investment!
