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Heraeus Precious Appraisal

  • Edition 23 - 06 July 2020

Fast and furious: rhodium outperforms in H1 with market tightening in H2

Rhodium outperformed the other PGMs in the first half of the year, climbing 126% to a record high of $14,150/oz in March. The COVID-19-induced sell-off saw it plummet 58% in a week, followed by rapid price swings. The price has now settled at a historically high level. The market remains tight so any supply shortfall could see it jump, but for the price to remain firm automotive demand also needs to be maintained.

End-user demand held up and supported ruthenium and iridium prices. While other metals’ prices gave way to the supply and demand shocks associated with COVID-19, ruthenium and iridium held steady and are up 18% and 10% respectively. Despite the risks of slower economic growth, certain applications (such as electrochemical production of chlorine for disinfectant) for ruthenium and iridium have performed better than expected in the year to date.

Balanced palladium market puts price at risk of further falls. The palladium price is down slightly since the start of the year (-1.5%), but 31% below its record level in February. However, the outlook has changed from a deficit to a balanced market so further price weakness is expected. China has recovered to pre-virus levels of vehicle sales, but the US and Europe are in a much more precarious state. Emergency financial aid programmes have cushioned the economic impact of unemployment so far, but they are only temporary. In the US, consumer confidence is still relatively high despite the huge increase in unemployment. When additional support payments expire at the end of July, consumer confidence could drop further. In the past when consumer confidence has fallen sharply (1990 and 2007), auto sales and PGM demand followed it lower.

Platinum underperformance likely to continue in H2. Platinum underperformed all the other PGMs in the first half of the year (-15%). This was expected because platinum had the weakest fundamental outlook at the start of the year. Even though investors took advantage of the low price to stock up on bars and coins in H1, the events of the first half have not changed platinum’s outlook and so the price is likely to continue to decline.

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