While the world witnesses different commodities like metals, cryptocurrencies, and oil resources go through a surge in their prices, we see another metal that has outperformed even Bitcoin this year, posing a challenge for investors to purchase it. Iridium is a rare precious metal that is mined as a combined by-product of platinum and palladium. This metal has surged 131%, thus beating the 85 percent gain of Bitcoin. Heraeus Group said that Iridium has rallied on supply disruptions in the past year and with its increased use in electronic screens, the demand for the metal has also shot up.
What is Iridium?
A by-product of platinum and palladium extraction, Iridium is an important component in the electronics and chemical industries. It is extremely hard in nature and possesses a very high melting point along with resistance to corrosion. Vincent Donnen, at the top School of Mines in the eastern French city of Nancy, stated that South Africa, "accounts for some 80 per cent of the six to eight tonnes of iridium mined each year."
John Plassard, an analyst with investment house Mirabaud comments that Iridium is well applicable for several industrial purposes "because of its high melting point, hardness and resistance to corrosion." These characteristics of the metal make it suitable to be used in mobile phones especially where the demand for 5G technology is high. It is also employed in hydrogen fuel cells, which is potentially a key component in the transition to electric vehicles.
Why is the metal so expensive?
A troy ounce (31 grams) of iridium currently costs about $6,000, and due to the large deficiency in supply, the rate has tripled over the past four months. This scarcity is due to the technical problems at South Africa's Anglo-American Platinum mining group last year along with the pandemic and the lockdown that curbed the operations.
"The market for iridium... is not very liquid so its price can shoot up if there are no sellers", German refiner Heraeus says.
The market of Iridium is much smaller than its other sister metals, and thus production issues can create a devastating impact on prices. It is also difficult to bet on it as the demand is dominated by industrial users and the metal is not traded on a bourse or via exchange-traded funds. Ingots are traded by retail buyers from a few limited dealers and a few major investors, and the dealings in it go directly to the producers.
“The lead time on the supply side is too long to increase supply in a timely fashion,” said Jay Tatum, a portfolio manager at Valent Asset Management. “The only near-term solution is higher prices to get people to sell their existing holdings.”
The limited investment in platinum production which is utilized in autocatalysts to curb emissions has enhanced the appeal of Iridium. Investors are also looking at potential increases in platinum demand from new hydrogen technologies against a shift to electric vehicles.
Economic Times reported, “The outlook for tight supply also helped drive up prices of other platinum-group metals. Palladium is about 9% below an all-time high, rhodium reached a record $29,800 an ounce this week and ruthenium has rallied to an almost 13-year high.”