LONDON - Auto-catalyst material rhodium was set for its biggest one-week percentage gain since August 2008, as users top up stocks of the metal in what may be a tentative signal of moderation in the global economic crisis.

Platinum group metals, used heavily in the manufacture of auto catalysts, fell sharply as global economic growth sank, with rhodium losing more than 90 percent since the middle of last year to its 2009 low.

Prices have plumbed lows ever since, but analysts say auto industry initiatives -- including Germany's scrapping scheme to encourage new car purchases -- have enticed end-users to replenish stocks of the metals.

"These prices are at bargain basement levels, reflecting the dire economic outlook," said Ross Norman, managing director of TheBullionDesk.com. "Carmakers may think it would be prudent to top up the stocks a little at these levels."

Rhodium has risen 30 percent since last Friday to $1 500 an ounce, and is up 15 percent from its Thursday level. However, prices are still significantly below the record high above $10 000 an ounce they hit in June 2008.

Ruthenium, used in electronics applications, was at $75 an ounce, up from $70.

"This price rise is all on good physical demand from industrial buyers," an industry source said.

"The volumes of buying are so good, it's not being met by supply and there's a struggle to fill the orders -- we're seeing that in rhodium and the same can be said for ruthenium."

Q2 RECOVERY?

Standard Chartered said in February it expected rhodium prices to pick up in the second half of this year as the auto sector starts to recover.

The bank saw prices of rhodium averaging $1 500 an ounce in the second half of this year and $2 500 an ounce next year.

About four-fifths of rhodium is consumed by the auto industry. Global car demand has been boosted by a spate of schemes in which governments offer incentives to car owners to scrap old vehicles in favour of new models.

A 40 percent rise in German car sales in March was attributed to the country's "cash-for-clunkers" scheme.

However, signs of recovery in the car market are far from definitive, and a dearth of demand is likely to prevent further significant rises in the rhodium price, some dealers said.

Rhodium consumption by the car industry, net of recycling, fell nearly 9 percent to 645 000 ounces in 2008 from 707 000 ounces the year before, according to figures produced by metals consultancy Johnson Matthey.

"Prices might go up a little further, but they are still limited because car sales have not risen that much -- not enough to justify (prices) beyond $1 450," one London-based rhodium trader said.