Rhodium, the scarcest precious metal used in making catalytic converters, is outperforming platinum and palladium for the first time in seven years as global car sales rise to a record.
The metal, used with palladium and platinum in pollution-control devices, rose 16% this year, about three times the increase of the other two ingredients and 20 times more than the benchmark commodities index. Output will trail demand for four more years after the first deficit since 2007 last year, eroding inventories, Standard Bank Plc’s SBG Securities (Pty) Ltd. unit forecasts.
Prices are climbing because global car sales will rise 2.7% to 83.1 million this year, according to LMC Automotive Ltd., a research company in Oxford, England. Stricter emission laws will require even more of the metal. Rhodium will climb another 10% to average $1,375 an ounce in the fourth quarter and $1,550 next year, the median of eight analyst estimates compiled by Bloomberg show.
“You haven’t had another year of surpluses adding to the stockpiles,” said Grant Sporre, an analyst at Deutsche Bank AG in London. “As that inventory comes down, the price will gradually start easing upwards as rhodium becomes a little bit more difficult to get hold of.”
Prices rose to $1,250 in London this year after falling to $1,080 on Dec. 14, the lowest since January 2009, according to Johnson Matthey Plc. Platinum is up 3.3% to $1,590.50 an ounce this year while palladium has advanced 4.4% to $734.83. The last time rhodium outperformed both metals at this time of the year was in 2006.
The Standard & Poor’s GSCI index of 24 commodities added 0.8 percent since the start of January and the MSCI All-Country World Index of equities rose 4.5%. Treasuries lost 0.4%, a Bank of America Corp. index shows.
Palladium will advance 12% to an average $825 in the fourth quarter and platinum will jump 11% to $1,770, according to the median of 11 analyst estimates compiled by Bloomberg.
About 80% of rhodium is used in catalytic converters and the rest is mainly for glass-making equipment and chemical manufacturing, according to London-based Johnson Matthey. Total demand will rise 6.1% this year and 7.9% in 2014, SBG Securities said in a Jan. 29 report. Some 81% of supply comes from South Africa and is mined with platinum and palladium.