The recent price lows of Rhodium ($1200 an ounce) suggest that investors are worried about its future needs in car manufacturing. Rhodium, a noble metal, is primarily used in catalytic converters for combustion engine vehicles. Because of the recent down-turn in the auto industry, investors have stayed away from the metal over concerns of reduced usage in manufacturing. The price of platinum has been affected for similar reasons.
But new technologies being developed by Honda and other manufacturers may bring Rhodium prices to late 2008 levels ($10,000 an ounce) in the next 2 – 5 years. Fuel cell stacks, which are used in Hydrogen powered vehicles like the Honda FCX, require rhodium, platinum and palladium for converting fuel into electricity.
With energy costs set to rise in the near future and governments world-wide pumping billions of dollars into alternative energy green initiatives, it is likely that fuel cell vehicles will become popular products, and while they may not replace combustion engines in the next 10 years, we should see them pick up more market share from their fossil fuel burning counterparts.
Another plus that favors Rhodium and Platinum is the fact that catalytic converters still require these metals. China and India, with nearly 2 billion people, should start seeing a rise in vehicle consumption in the coming years as well. And while these markets don’t focus too much on environmentalism right now, it is likely that they will also begin requiring catalytic converters on their vehicles in the future.
It is difficult to pinpoint an exact time frame for when car manufacturing and consumption will begin to increase again. But one thing can be reasonably ascertained – when sales of cars pick up worldwide, we’ll see a price increase in these metals.
Rhodium is not for the faint of heart, especially if you are looking to trade it short term. But if you are looking for a longer term hold for a small portion of your precious metals portfolio, Rhodium may provide some nice returns over the next 5 years.
Unfortunately, there are no mints that strike Rhodium coins or pour bars because the powdery substance is quite brittle, so investing in it will need to be done via your commodities broker or a pool account. Well known precious metals dealer, Kitco, offers Rhodium trading via their pool accounts. Click here toÂ view historical spreads and learn more about investing via the Kitco pool account.