4 Best Rhodium Stocks to Watch in 2022
One of the rarest and most valuable metals on earth, rhodium has an environmental angle. One of its primary functions is to remove toxic pollutants from car exhaust fumes. However, supplies are under threat due to sanctions imposed on Russia, the world’s second-largest rhodium supplier. Learn more about this precious metal and how to invest in companies that mine for it.
Matt Johnston Updated May 6th, 2022
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Why invest in rhodium stocks?
A silver-colored metal, rhodium is the rarest among the platinum group of metals (PGMs). The other PGMs are platinum, palladium, ruthenium, iridium, and osmium. Rhodium is highly resistant to corrosion and extremely reflective. As a result, it serves a finish for both jewelry and mirrors.
But its main function is in catalytic converters, which reduce toxic emissions from cars. Rhodium is great at converting toxic gases, such as carbon monoxide and nitrous oxides, into gases like carbon dioxide and nitrogen, which are harmless to breathe.
Demand for rhodium has increased as governments worldwide continue to enact stricter car emissions regulations and testing. However, rhodium supply is typically unresponsive to demand as the metal is mined as a byproduct of other metals, such as platinum, palladium, and gold. Most rhodium mining takes place in South Africa alongside mining for other metals.
The number one source of rhodium in the world, South Africa, accounted for 624,000 ounces of rhodium in 2021. Russia was second, producing 55,000 ounces during the year. Rhodium prices spiked in early 2022 after Russia began the war in Ukraine and got hit by sanctions.
Rhodium prices have increased from $14,000/oz to $17,500/oz in 2022
However, rhodium prices are volatile and lower than the peak in 2021. The rhodium market is small compared to the gold market, for example. The total production in 2021 was under one million ounces. Compare this to 3,000 metric tons of gold mined in 2021.
The small size of the market and concentrated supply create massive price swings in response to small changes in demand. There’s not been major investment in new mining projects over the past several years, while tighter regulations around emissions in Europe and Asia have increased demand. There is also no futures market for rhodium, which adds to the volatility in the metal’s price.
Most rhodium consumers can’t easily substitute rhodium with another metal when prices spike, even though past price peaks have encouraged automakers to innovate to reduce rhodium use. The rise of electric vehicles (EVs), which don’t produce toxic emissions, could also reduce the demand for rhodium in the future, though the transition to EVs will not happen straight away.
How can I invest in rhodium?
You don’t have many options if you want to invest in rhodium. Some refiners will produce bars of the metal for investors. But these often come with high premiums when buying and large discounts when selling.
You can’t trade rhodium futures because the metal has no futures market. There is one active exchange-traded fund — 1nvestRhodium ETF (JSE: ETFRHO) — but it is exclusively listed on the Johannesburg Stock Exchange in South Africa, making it inaccessible to most U.S.-based investors.
Other than that, there are a handful of mining company stocks that you can invest in. None of them provide pure-play exposure, however, as rhodium is generally mined as a byproduct of metals like platinum and palladium.
Rhodium stock list
- Anglo American Platinum ADR (ANGPY)
- Sibanye-Stillwater Ltd (SBSW)
- Impala Platinum Holdings (IMPUY)
- Zimplats Holdings (ZMPLF)
Read more about each company.
1. Anglo American Platinum ADR (ANGPY)
- Market capitalization: 454 billion ZAR
- 2022 return: -6%
Anglo American Platinum Ltd. is the platinum group metal business of the mining giant Anglo American, which holds an effective 79.2% interest in the company. The company is a leading producer of rhodium as well as the other PGMs.
The company operates within the Bushveld Complex in South Africa, known to have the biggest PGM deposit in the world. It also has operations at the Great Dyke in Zimbabwe.
Anglo American Platinum is a huge and profitable business, with 215 billion ZAR ($13 billion) in 2021 sales. The company sold 324,000 ounces of rhodium during the year, which generated 92.9 billion ZAR. Thanks to a spike in rhodium prices, revenue from the metal grew by 183.2% compared to 2020.
However, stock performance is more about expectations, so Anglo American Platinum is down 6% so far this year. The stock is currently trading at a forward price to earnings (P/E) ratio of about 10.1x using an estimate for 2022 earnings.
2. Sibanye-Stillwater Ltd (SBSW)
- Market capitalization: $9.1 billion
- 2022 return: -4%
Sibanye-Stillwater Ltd is a multinational mining and metals company domiciled in South Africa. Along with being a leading producer of rhodium, it is also a top-tier gold producer and one of the world’s largest producer of platinum and palladium. Sibanye-Stillwater also mines iridium, ruthenium, chrome, copper, and nickel.
The company has mining and processing operations, projects, and investments across five continents. Its platinum group metal (PGM) operations, which include rhodium, are located in South Africa and Zimbabwe. In 2021, rhodium comprised 9% of the company’s production at these locations.
Sibanye-Stillwater generated profits of R33.8 billion in 2021, up 10.4% compared to the previous year. Revenue grew 35.2% to R172.2 billion for the year. The company’s rhodium production generated R59.8 billion in revenue, doubling from 2020.
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- IMPUY market capitalization: 159 billion ZAR
- IMPUY 2022 return: -15%
- ZMPLF market capitalization: 3.4 billion AUD
- ZMPLF 2022 return: 36%
Impala Platinum Holdings Ltd, which does business under the name Implats, is a metals mining company headquartered in South Africa. It is a leading producer of PGMs with six separate mining operations and a refining services business.
The company operates in two of the most abundant PGM-bearing regions of the world—the Bushveld Complex in South Africa and the Great Dyke in Zimbabwe. It also has mining operations in Canada.
Implats generated record headline earnings of R36.4 billion in its 2021 fiscal year, which ended June 30, 2021. That’s up 125.5% compared to the previous fiscal year. Revenue expanded 85.5% to R129.6 billion. Thanks to a spike in rhodium prices, rhodium sales comprised 41% of total revenue in FY 2021 compared to just 25% in FY 2020.
The ADRs are trading at a forward P/E ratio of about 5.6x based on an estimate of the company’s earnings for the fiscal year that ends in June 2023.
Implats owns an 87% interest in Zimplats Holdings Ltd. (ASX: ZIM; OTCMKTS: ZMPLF). Its mining operations are located on Zimbabwe’s Great Dyke. Zimplats contributed R4.5 billion in headline earnings to Implats in FY 2021. Its U.S.-listed shares are up more than 47% over the past year and 36% in 2022 year-to-date.
The market for rhodium is small and volatile. You can gain exposure to the metal while reducing some of the volatility by investing in one of the companies above, all of which offer diversified exposure to a variety of metals.
NOT INVESTMENT ADVICE. The content is for informational purposes only; you should not construe any such information as investment advice.