Rhodium Will Continue To Shine After Recent Production Cuts
(Kitco News)- For most precious metals investors, 2018 has been afrustrating year, especially in the last four months as gold prices havedropped 10%.
However, for some bullish investors, the year has beenfantastic as there is one metal that has been the bright star in the preciousmetals marketplace, and some analysts see potential for even higher prices inthe long-term.
So far this year, rhodium, which is a precious metal withinthe platinum group metals, has rallied more than 38%, last trading at $2,185 anounce, its highest level since April 2011. The metal is up 280% from its 2018multi-year low. The precious metal
Looking ahead, some analysts see potential for the precious metalas there could be a supply crunch on the horizon. Earlier this week, SouthAfrican miner Impala Platinum, also known as Implats, announced productioncuts. The company said that over the next two years it plans to reduce platinumproduction to 520,000 ounces, down from the current production of 750,000ounces.
Rhodium is mined as a byproduct of platinum and palladiumand some analyst say that this could have an impact on supply. the main sourceof demand for rhodium is from the auto sector as it is a critical component of catalyticconverters.
“The market remains tight and is only going to get tighter with productioncuts,” said Jonathan Butler, precious metals strategist at MitsubishiCorporation. “All of this adds up to lower rhodium supplies in the future, andimplies greater market deficits.”
Peter Hug, global trading director at Kitco.com, also sees the Implatsnews as bullish for rhodium market.
However, he added that investors should temper their expectations; hesaid that he doesn’t see the metal heading back to its historic highs at$10,000 an ounce.
“Rhodium does the have potential to explode because of supply issues,”he said. “We think if prices can get above $2,300 an ounce then we think it hasa chance to hit our upside target of $3,000 by 2019.”
Bernard Sin, head of trading at MKS Pamp Group, said that although themarket has potential to move higher because of low production, it’s difficultto predict rhodium price action as it is such an opaque market.
Rhodium only trades in over the counter markets with little dataavailable to investors.
“It’s hard to tell just how much supply there is in the marketplace,” hesaid. “There is potential for prices to go higher but it won’t happenovernight.”
Sin added that global economic growth concerns could keep rhodium pricesin check in the near-term. He noted that platinum has seen little movementfollowing Implats’ announcement as prices remain near a multi-year low.
October platinum futures last traded at $837 an ounce, up 0.63% from theprevious week.
But not all analysts are bullish on rhodium. Simona Gambarini, commoditieseconomist at Capital Economics, said that her firm sees the metal ending theyear at $1,950 an ounce.
“While rhodium isstill likely to outperform its sister metals this year, we think that slowereconomic growth in China and softer auto sales in other core markets will leadto lower prices over the coming months,” she said in a report last month. “The reason why we are not morenegative on prices is that supply is getting tighter.”
By Neils ChristensenFor Kitco News
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nchristensen@kitco.comwww.kitco.com Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.