In short, it tells us that any change in automotive demand greatly impacts rhodium prices. On Monday, the Midwest Federal Reserve released some numbers and according to this press release, the Chicago Fed’s Midwest Manufacturing Index fell 0.3% for June despite an improvement in automotive output up 1.4% for June. In addition, regional car production was still down 42.6% versus June 2008, while auto output nationwide fell 24.5% for the year, and despite these numbers, rhodium managed to increase 5.4% yesterday.
As one can see the price had actually risen higher than its current level back in April but appears to be breaking through its 60-day ceiling. The chart below tracks rhodium for the prior six months:
There are two interesting trends to watch within the Rhodium market. The first, and more obvious one relates to overall automotive demand. Because rhodium is primarily used in catalytic converters to remove NOx gases, with few to no substitutes, when automotive demand picks up, so too does rhodium. And yesterday, the federal government’s Cash for Clunkers program went into effect. We will be reporting on sales over the coming months. Auto output likely increased to support sales as a result of the program. Stimulus programs such as these could most certainly impact rhodium prices. The second trend to watch relates to increased emissions standards for cars and specifically, tailpipe emissions.
Once demand does pick up, we can expect rhodium demand to also increase.