Rhodium Price Surges 100% in a Year, Driven by AI Demand

In the first half of this year, the most notable commodity was undoubtedly platinum, often referred to as the "gold substitute," due to its over 40% surge in price. However, there is another lesser-known precious metal that has seen an even more dramatic increase in value. This metal is rhodium, a member of the platinum group metals, which has nearly doubled in price over the past year, reaching $800 per ounce. This surge has outpaced the gains of other commodities, including gold and silver.

Rhodium's price is now almost at its 2021 peak and is just shy of its all-time high of $870 per ounce, set 18 years ago. The metal's scarcity is a significant factor in its price increase. Rhodium is naturally rare and is often found in minute quantities in the earth's crust, primarily as a byproduct of platinum mining. Last year, the global production of rhodium was a mere 30 tons.

The recent surge in rhodium's price is driven by its unique applications, particularly in the context of the ongoing artificial intelligence revolution. Rhodium is highly valued for its exceptional hardness and wide range of applications in electronics, energy storage, and chemical manufacturing. One of its key uses is in increasing the recording capacity of hard drives, where it exists in the form of an ultra-thin film, less than one nanometer thick. This property makes rhodium indispensable in the production of high-density data storage solutions.

As the demand for data storage grows with the proliferation of AI, the need for cost-effective and efficient storage technologies has become paramount. Analysts note that while other metal elements could potentially replace rhodium, the current technologies relying on rhodium remain prohibitively expensive. This situation is likely to persist until more affordable alternatives are developed, ensuring that the demand for rhodium will continue to rise.

The market for rhodium is expected to face a shortage next year, with demand outstripping supply. This is largely due to the increasing use of rhodium in hard drive production, driven by the growth of cloud computing. The International Data Corporation (IDC) predicts that the global hard drive market will grow by 16% this year, further boosting the consumption of rhodium.