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Don’t misread the rhodium rally

Workers walk past a Lonmin's Marikana platinum mine, June 24, 2014. Differences over possible job cuts in South Africa's platinum mines emerged on Tuesday as mining union AMCU prepared to sign a three-year wage deal with the world's top producers of the metal to end a crippling five-month strike. The Association of Mineworkers and Construction Union (AMCU) on Monday declared an end to the longest and costliest strike in South African history. REUTERS/Skyler Reid
Reuters/Skyler Reid
Lonmin’s Marikana platinum mine in South Africa. Platinum operations have been at the heart of widespread strikes in recent months.
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Prices for rhodium, the precious metal used in the catalytic converters that curb harmful automotive emissions, are on a run. Bloomberg reports that they’re at their highest in 16 months and are poised for their best monthly gain since 2009.

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Is this as sign of a resurgence of the global auto demand? Maybe. Auto sales have been buoyant in the US. And Europe, which has been a drag in recent years, shows signs of a long-hoped-for bounce.

But prices are always a mix of supply and demand. And supply shortages have really been the story with rhodium and other platinum group metals. Roughly 80% of the world’s rhodium comes from South Africa, where a five-month strike that ended in June has crippled production, Bloomberg reports.

With demand recovering and a scanty supply, prices for rhodium seem set for something of a recovery. But be careful not to make too much of it. Rhodium prices remain roughly 90% below their 2008 peak of more than $10,000 a troy ounce, set back in June of 2008.

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