Market fundamentals are sufficient to support rhodium prices near the current $1,000/oz level, despite reduced usage in automobile catalytic converters, according to analysts with A-1 Specialized, one of the largest recyclers of platinum-group metals in the US.
"Underlying fundamentals for rhodium appear sufficient to justify a longer-term floor in the price of the metal near current levels, values also reached at the trough of this cycle in late-2008," A-1 analysts said in a report.
"But a positive prognosis for rhodium to recover from current levels remains problematic as sluggish world economic growth, particularly across the EU, and the apparent availability of ample stocks of metal continue to cap any attempts at a rally."
Like platinum and palladium, rhodium is used in automobile catalytic converters to reduce greenhouse gas emissions, particularly nitrogen oxide.
But rhodium is far more dependent on auto sector demand than are platinum and palladium, which have other retail and industrial uses.
After rhodium prices reached $10,000/oz in June 2008, catalytic converter manufacturers began reducing the amount of rhodium in favor of palladium. Whatever supply requirements remain have probably been filled at the current price levels, thereby limiting the likelihood of any near-term demand increase, A-1 analysts said.
Nevertheless, the steady growth in global auto sales, particularly in the larger markets of China and the US, should be sufficient to maintain current consumption levels for rhodium in the automotive sector, they added.
Rhodium consumption is also likely to be supported by the Euro VI emissions standards for light vehicles, due to take effect on September 1, 2014, A-1 analysts said. The standards call for a 50% cut in nitrogen oxide emissions to 80 mg/km, while Euro VI standards for heavy duty vehicles, which began last January, call for an 80% decrease in nitrogen oxides and a 66% drop in particulate matter emissions.
Moreover, rhodium demand from the glass sector continues to rise due to demand from the electronics sector, A-1 analysts said. Demand from glass manufacturers, which accounts for 7-10% of rhodium's annual consumption, is expected to rise modestly this year due to rising sales of smart phones, tablets and other electronic devices, they said.
Corning, the world's largest manufacturer of specialty glass products, in late July reported a mid-single digit gain in second-quarter display glass sales from the previous quarter, and a 20% year-on-year increase for its Samsung Corning Precision Materials subsidiary. The gains in LCD glass volumes are expected to continue as demand for increasingly larger televisions expands, the company said in its earnings statement.
In addition, Corning's Specialty Glass division recorded a 17% gain on the previous quarter and a 33% rise over the same year-ago period as sales for hand-held devices and new touch screen computers supported growing demand, the company said.
Rhodium prices could rise in the short term to $1,200 due to labor-related production losses in South Africa, the new European emissions standards and indications of a possible bottoming in car sales volumes in the European Union, A-1 analysts said.
