Sir William Hyde Wollaston was an English physicist and chemist, and he’s famous for discovering palladium and rhodium. While palladium has gone on to become a highly tradable commodity in the world market, rhodium is less well known. Yet it too is quite valuable to society as well as in finance.
After it was discovered back in 1804, scientists of the time didn’t really have much use for it. It’s very rare, for one thing. Another problem with rhodium is that it is very difficult to shape. It isn’t malleable and it has a high melting point.
But as the years passed, it was used as electroplating for jewelry and for corrosion-resistant coating. And when the catalytic converter was invented in 1976, demand for the metal increased substantially, as it was deemed necessary for the manufacture of this new vital automotive component.
Below is the historical Rhodium price per troy oz.
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Price History of Rhodium
Every new car today has a catalytic converter that contains this metal and so the value of rhodium is very much associated with the demand from the automotive industry. As new markets emerge and sales of new cars grow, so does the demand (and therefore the price) for the metal.
But the price can also be affected by the level of supply. Oversupply has led to lower prices. This was demonstrated when South Africa increased its production to take advantage of high prices during the 1980s. South Africa is the world’s largest producer of the metal, as it accounts for about 60% of the world’s supply. The country’s decision to boost production has kept the price low during the 1990s.
At the same time, any threat to the supply can boost the price. The second largest producer is Russia, and sometimes the stability of that supply line has boosted the price of the metal. A mining strike in South Africa also propped up prices, but when it ended the country boosted production which dropped prices immediately afterwards.
Historically, the price is very volatile. In 2007 the metal was about 8 times more valuable than gold, 450 times more than silver, and an astounding 27,250 times more than copper in terms of per troy ounce. At some point in 2008 its price even reached over $10,000 per ounce. These prices, however, declined during the global financial crisis that started during this time.
As of March 9, 2016, the price stands at about $685 per troy ounce. It’s still relatively expensive because it is very rare. It is 100 times rarer than gold and more than 150 times rarer than silver.
Rhodium as an Investment
It actually wasn’t possible to invest in the metal until just recently. It couldn’t be purchased using futures contracts or by purchasing stocks in exchange-traded funds that dealt with the metal. It also wasn’t physically available for the world market.
That changed in 2009 when investment-grade (0.999-fine) bullion bars and rounds became available. Today, you can even buy various fractional bars with options ranging from 5 ounces to 0.1 ounce. In 2011, an ETF was also launched by Deutsche Bank that was back by physical bars of the metal.
Thus, you can always buy the metal itself and you can store it for a time until the prices again increase. That may come soon, as regions across the world are enacting tighter emission controls. This increases the growth of the emission control catalyst market, the worth of which is projected to reach $14 billion.
Purposes Used For
The most common use for this metal is for the production of catalytic converters. Of the 30 tons consumed worldwide in 2012, more than 80% went into this use. It reduces nitrogen oxides in exhaust gases.
Other uses include:
- Glass industry. This is the second most common use for the metal, as it is used to produce flat-panel glass and fiberglass.
- Rhodium flashing is when it is electroplated on platinum or white gold so it has a reflective surface, which wears a way after a time. It can also coat sterling silver to protect it from tarnishing. Sometimes it can even denote a truly special award, when gold, silver, and bronze are deemed insufficient.
- Industrial catalyst. It has also been used this way for the chemical reactions of acetic acid, nitric acid, and hydrogenation reaction.
- Alloying agent. It is used with other metals like palladium and platinum. Its properties make these alloys tough and resistant to corrosion. These alloys can be found in the electrodes in aircraft spark plugs, thermocouple elements, furnace windings, and lab crucibles.
- Electrical contact. This is because the metal has high corrosion resistance, low electrical resistance, and low and stable contact resistance.
- Plated rhodium. In this form, it is extremely hard. It is used for optical instruments.
- Mammography systems. It produces X-rays that make it suitable as a filter in mammography systems.
- Neutron detectors. There are 305 rhodium neutron detectors in the 3 Palo Verde nuclear reactors.
As an investor, you simply need to keep track of new automotive sales to gauge the demand for rhodium.