Does Anyone Know Anything about Rhodium?

It is rarer than gold, more expensive than platinum (over $10,000 per ounce two years ago) and the three types of people to know anything about it are select investors, metallurgists and car mechanics.

So, what is rhodium, and why is it so valuable? When I took chemistry all I can remember were clear liquids, white powders and silvery solids. Well, Rhodium is an inert porous silvery solid. Actually, it looks a bit like platinum and is part of the Platinum Group Metals – platinum, palladium, osmium, iridium, ruthenium and rhodium. (Find gold and silver on a periodic table and hang a left three spots on both rows.)

Like platinum, most of this metal (~80%) is produced in South Africa as a byproduct from platinum and palladium. The remaining production is from Russia and extremely minimally from Sudbury, Ontario. However given Russia’s fire sale of its palladium stockpiles of recent years, I believe most product will remain in the country. The aggregate production is only about 25 tonnes, compared to 125 tonnes of platinum (the rich man’s gold!) Moreover, there are no pure rhodium mines in the world. Further, as this is a byproduct, the production is contingent on the economics of the ‘main’ metal in question.

With production so minimal and so isolated, one may ask why is rhodium important and can’t we find a substitute. It is important because it is resistant to a greater range of chemicals than other precious metals (and it is mined anyway with the more known metals.) This corrosion resistance makes it idea as a component for catalytic converters and in nuclear reactors and as a plating material for alloys like white gold.

There is a recycling market, but that is almost exclusively from catalytic converters. Globally, more cars are being produced than recycled. Citizens of China, India, Brazil are all driving more with the emergence of a greater middle class.

Here is the million dollar question, how does one buy this? I have found two ways. One may purchase this through scientific procurement websites in wire or foil form. This means has a few problems. How and to whom would you sell it back? How would you insure this? One would also pay a premium on this as the metal has been manufactured into an end use product or close to one.

The second way is the only way I have come across for investors. Kitco.com has developed a physical rhodium exchange. The company has packaged 99.999% pure rhodium in 1, 5 and 10 ounce ‘cells.’ The product can be bough them and held at through their ‘Kitco Rhodium Chain of Integrity.’ More importantly, it can be sold back to them as they provide the only current market for such small amounts and are in essence creating a speculative environment. All of Kitco’s information may be found at kitco.com/rhodium.

This is an interesting metal that has ranged from $300 to $10,000 and ounce. It t prone to wild swings and has almost only industrial use, but it is another medium for investing and there is now a channel to do so.