Recent surge in rhodium prices are expected to work against the precious metal in the medium to long term, CPM Group's head of precious metals research told S&P Global Platts.
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"I think the high prices that we are seeing right now are probably one of the worst things that can happen to rhodium demand long-term," Savant said in an interview.
"When we saw a similar spike in the 2008 period, you saw over the years a reduction in the amount of rhodium being loaded in every catalyst."
Rhodium prices rose during August and into early September, hitting an all-time high in mid-September of $14,750/oz, according to Heraeus, one of the world's largest platinum group metals refiners, while base prices posted by leading European PGM refiners Johnson Matthey (JM) of the UK and Engelhard Materials Services (BASF) of Germany reached record highs of $14,500/oz and $14,600/oz, respectively.
As of Sept. 28, the JM rhodium London base price was down 3.5% week on week to $13,700/oz, due to the strong dollar and profit-taking, said South African research house Afriforesight.
"The manufacturers are always trying to reduce the amount of precious metal that they load into any application and when you see price spikes, like in rhodium and palladium, there is a further effort that is made to reduce the amount of metal going into whatever application that is being discussed," Savant said.
Standard Chartered Bank precious metals analyst Suki Cooper said rhodium loadings in auto-catalysts appear at present to be at a minimum.
Nearly 80% of the annual demand for rhodium comes from the global automotive industry, which uses the metal in catalytic converters to control emissions of greenhouse gases and pollutants. South Africa accounts for around 80% of global rhodium mined supply.
With South Africa recovering from COVID-19 related underground mine shutdowns earlier this year, Savant said there is the an "added threat" of disruptions to supply from power outages.
Rhodium substitution in auto catalyst
On the subject of auto catalysts and emissions, rhodium is much more effective in reducing NOx emissions, while platinum and palladium are better oxidation catalysts, though rhodium can command a price premium just based on its fundamental catalytic properties.
Savant said in terms of rhodium's chemical properties for reducing NOx emissions, the metal cannot be substituted with platinum or palladium, although there is other technology which does not use rhodium, or other PGMs, called the SCR (Selective Catalytic Reduction) catalyst.
"It is commercially available, it is proven to be effective, it is primarily used in commercial vehicles and it is not used in passenger vehicles," Savant said.
SCR systems reduce NOx emissions by adding ammonium into the exhaust gas stream upstream of a catalyst. Nitrogen oxides react on the surface of the catalyst to form nitrogen and water.
"If you have [rhodium] prices at these levels and you have the constant threat of supply [from South African mines and Eskom], they are going to develop technologies which makes it more effective cost wise as well as in terms of accommodating it in passenger vehicles," Savant said.
"And that's going to eventually hurt rhodium demand because with prices this high it becomes vulnerable to being substituted or accelerates the thrifting per unit reduction in usage."