EV Revolution: Will Electric Vehicles Crash the Rhodium Market?

The electric vehicle (EV) revolution is rapidly transforming the automotive industry, with projections estimating the global EV market to reach $2.5 trillion by 2034, exhibiting a compound annual growth rate (CAGR) of 11% from 2025 to 2034. This monumental shift raises a critical question: What will happen to the demand for rhodium, a precious metal primarily used in catalytic converters of internal combustion engine (ICE) vehicles? Currently, rhodium is valued at $248.61 per gram.

Rhodium’s Role in Catalytic Converters

Rhodium is a critical component in catalytic converters, devices that reduce harmful emissions from gasoline and diesel vehicles. It is approximately 150 times rarer than gold. Specifically, rhodium is highly effective in reducing nitrogen oxides (NOx), major contributors to air pollution and smog, into harmless nitrogen and oxygen. Studies by the Environmental Protection Agency (EPA) have shown that modern catalytic converters can reduce harmful emissions by up to 90%.

The average catalytic converter contains about 1-2 grams (0.0353 – 0.0705 ounces) of rhodium, along with platinum and palladium. Due to its high melting point (around 1,964°C or 3,567°F) and chemical stability, rhodium can withstand the extreme conditions within a car’s exhaust system, making it indispensable for reducing emissions.

The Rise of EVs and Potential Impact on Rhodium Demand

As the EV market expands, the demand for ICE vehicles is expected to decline, potentially leading to a decrease in the demand for rhodium. Electric vehicles, powered by batteries or fuel cells, do not require catalytic converters, thus eliminating the need for rhodium.

However, the transition to EVs is not happening overnight. Several factors could sustain rhodium demand in the short to medium term:

Hybrid Vehicles: Hybrid electric vehicles (HEVs) still utilize ICEs and, therefore, require catalytic converters, albeit potentially smaller ones. The continued production and sales of HEVs could cushion the blow to rhodium demand.
Stringent Emission Regulations: Governments worldwide are implementing stricter emission standards for ICE vehicles. For example, the adoption of Euro 6 and China 6 emission standards has significantly increased the use of rhodium in numerous countries. These regulations may persist even as EV adoption grows, driving demand for rhodium in the remaining ICE vehicle market.
Slower EV Adoption in Some Regions: While EV sales are increasing globally, the pace of adoption varies by region. Some emerging economies may continue to rely on ICE vehicles for longer, sustaining rhodium demand.
Recycling: Rhodium can be recovered from recycled catalytic converters, providing a secondary supply source. Recycling efforts can mitigate supply shortages and reduce the environmental impact of mining.

Market Dynamics and Price Trends

The rhodium market is characterized by extreme volatility due to its rarity, industrial demand, and concentrated supply. Approximately 80% of the global rhodium supply originates from South Africa, making the market susceptible to supply disruptions caused by political instability, labor strikes, or natural disasters.

Price Volatility: Rhodium prices have experienced significant fluctuations in recent years. In 2021, prices hit an all-time high, surpassing $29,000 per ounce due to supply constraints and rising global emission standards. However, prices have since decreased, reaching around $248.61 per gram in October 2025.

Factors Influencing Rhodium Prices:

Automotive Industry Demand: The automotive industry’s reliance on rhodium for emission control is a major driver of demand and price.
Supply Disruptions: Disruptions in major producing regions can significantly impact global supply and push prices higher.
Environmental Regulations: Stricter emission standards increase the demand for rhodium in catalytic converters.
Economic Conditions: Global economic conditions and investor interest in precious metals can influence rhodium prices.

Alternative Uses and Future Demand

While the EV revolution poses a threat to rhodium demand in catalytic converters, the metal’s unique properties could lead to new applications in other sectors:

Hydrogen Fuel Cells: Platinum is used as a catalyst in hydrogen fuel cells. Fuel cell electric vehicles (FCEVs) use hydrogen as a fuel to generate electricity. Platinum’s durability ensures a longer lifespan for these vehicles.
Electronics and Chemical Industry: Rhodium’s resistance to corrosion and high melting point make it desirable in the chemical industry for producing fine chemicals and in the electronics sector as a vital component in electrical contacts.
Other Industrial Applications: Rhodium is also used in the production of electrical contacts, mirrors, and jewelry.

Investment Strategies for Rhodium

Investing in rhodium can be a lucrative opportunity, but it requires a careful approach due to its volatility and niche market. Here are some strategies for investors:

Physical Rhodium: Investors can purchase rhodium in the form of bars or coins. However, storage and insurance costs should be considered.
Rhodium-Backed ETFs: Exchange-traded funds (ETFs) offer exposure to rhodium without the hassles of storage and insurance.
Diversification: Allocating a portion of an investment portfolio to rhodium can be part of a broader strategy to gain exposure to precious metals, but it should be done with caution.
Mining Stocks: Investing in mining stocks can provide indirect exposure to rhodium.
Hedging: Using hedging contracts can help mitigate price risks.

Environmental and Ethical Considerations

The rhodium supply chain is associated with environmental, social, and governance (ESG) risks, including pollution, negative biodiversity impacts, and corruption. Mining activities can lead to habitat disruption and water contamination. It is important to source rhodium from responsible and sustainable sources. Recycling rhodium from used catalytic converters is a more sustainable alternative to mining.

Conclusion

The EV revolution presents both challenges and opportunities for the rhodium market. While the demand for rhodium in catalytic converters may decline as EVs gain market share, the transition is likely to be gradual, and other factors could sustain demand in the short to medium term. Moreover, new applications in hydrogen fuel cells, electronics, and other industries could offset the decline in automotive demand.

Investors should carefully consider the risks and opportunities associated with rhodium and seek advice from financial professionals before making any investment decisions. Diversification, hedging, and responsible sourcing are key to navigating the volatile rhodium market.

Call to Action: Contact us today for a consultation to explore strategic investment opportunities in precious metals and learn how to navigate the evolving market landscape.