UPDATE 1-Strong demand helps rhodium to record high

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By Pratima Desai

LONDON, Jan 10 (Reuters) - Prices of precious metal rhodium surged to a record high of $7,025 an ounce on Thursday as consumers in the glass-making and auto industries scrambled for scarce supplies, traders said.

Dealers said rhodium RHOD-LON was quoted at $7,000/$7,050 an ounce, a gain of more than 25 percent since January last year and compared with the previous record high of $7,000 seen in 1980. On Wednesday it was quoted around $6,975/$7,025 an ounce.

Most rhodium is used by car makers in catalytic converters to limit carbon emissions, where regulations have become much stricter and contributed to rising demand for the metal.

Traders say that has been a major factor behind rhodium's price rise over the last two years. Another is growing demand from glass makers ramping up production of flat panel screens used for televisions and computers.

"The glass makers leased the metal. They refused to buy it because they thought it was too expensive," a London-based trader said.

"When lease rates went up to 33/35 percent in June they switched tactics and started buying."

Lease rates, the cost of borrowing rhodium, have since slipped to between 8 and 12 percent.

South Africa is the world's biggest producer of rhodium, which is a by-product of platinum. Supply disruptions in the country in recent months also have boosted rhodium prices.

Platinum and rhodium together create an alloy used for the production of molten glass, which is extremely corrosive.

During the manufacturing process, the molten glass is fed through a trough that is made out of the alloy, which can stand extreme heat and won't melt.

Major glassmakers include Japan's Nippon Electric Glass (5214.T) and Asahi Glass (5201.T) and U.S.-based Corning (GLW.N).

Last December Corning announced capital expenditure between $1.5 billion to $1.7 billion to build additional capacity to meet growing demand for large flat-panel televisions.

Corning also said it anticipates adding capacity to its existing liquid crystal display (LCD) glass manufacturing facilities in Taiwan.

"We expect that the LCD glass market will continue to grow into the next decade," said James B. Flaws chief financial officer at Corning said on the company's website.