Russia, South Africa Seek to Create OPEC-Style Platinum Bloc
By Ilya Arkhipov & Franz Wild - Mar 27, 2013 2:43 PM GMT+0530
Russia and South Africa, which together control about 80 percent of the world’s reserves of platinum group metals, plan to create a trading bloc similar to OPEC to control the flow of exports.
“Our goal is to coordinate our actions accordingly to expand the markets for realization of these metals,” Russian Natural Resources Minister Sergey Donskoy said yesterday in an interview at a summit of leaders from Brazil, Russia, India and South Africa in Durban. “The price depends on the structure of the market, and we will form the structure of the market.”
South African Mines Minister Susan Shabangu said, “We want to contribute without creating a cartel, but we want to influence the markets.” Photographer: Rodger Bosch/AFP/Getty Images
March 27 (Bloomberg) -- Alicia Garcia-Herrero, chief economist for emerging markets at Banco Bilbao Vizcaya Argentaria SA in Hong Kong, talks about the outlook for emerging-markets. The so-called BRICS nations, Brazil, Russia, India, China and South Africa, have been studying the viability of a new development bank for a year, and their leaders are due to sign an accord on its establishment at a summit today. Garcia-Herrero speaks with Rishaad Salamat on Bloomberg Television's "On the Move." (Source: Bloomberg)
Platinum, used to make autocatalysts and jewelry, has risen 2.7 percent this year on increased demand from the auto industry and amid supply disruptions at mines, after slumping 21 percent last year. Photographer: Nadine Hutton/Bloomberg
South Africa mines about 70 percent of the world’s platinum, while Russia leads in palladium, a platinum group metal used in autocatalysts, with about 40 percent of output, according to a 2012 report by Johnson Matthey Plc.
Palladium rose 0.8 percent yesterday to $763.50 after Donskoy’s comments, reversing declines to reach the highest level since March 18. Platinum, used to make jewelry and autocatalysts, has risen 2.3 percent this year because of increased demand from the auto industry and after supply disruptions at mines. The price jumped yesterday in the hour after Donskoy’s comments, narrowing yesterday’s decline.
South African Mines Minister Susan Shabangu confirmed that the two countries aimed to counter oversupply of platinum, and said possible measures could include taxes and incentives.
“We’re not really controlling the market,” she said in an interview in Durban. “We want to contribute without creating a cartel, but we want to influence the markets.”
Other producers will be invited to join the bloc, which will be similar to the Organization of Petroleum Exporting Countries, Donskoy said. The aim will be to open up new markets rather than limit exports, he said.
Zimbabwe, Canada, and the U.S. are among other major platinum group metals producers.
Russian and South African officials signed a memorandum of understanding today to cooperate in the industry.
“We are now forming working groups to work out joint actions on this market,” and aim to coordinate export volumes, Donskoy said. “There will be a meeting in the summer to discuss mechanisms in detail.”
Anglo American Platinum Ltd (AMS) is the world’s largest producer of platinum, while Russia’s OAO GMK Norilsk Nickel is the largest producer of palladium globally.
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"South African Mines Minister Susan Shabangu confirmed that the two countries aimed to counter oversupply of platinum, and said possible measures could include taxes and incentives."
“We want to contribute without creating a cartel, but we want to influence the markets.”
And with Russia involved, this obviously involves more than just Pt.
So my guess is SA PGM producers are not going to have an easy time shutting in production by laying off thousands of employees (social pressures for needed employment) even though that might be the expected response so Amplats, Lonmin et al are between a rock and hard place.
Will they also face higher taxes even though they are struggling as it is? (I think so)
Also, I'm thinking that if ever any doubt as to much more Pd from Russian stockpiles , this news just has to put that to rest even if there were more in inventory.
This cartel thing was floated last year by the South Africans. The Russians bought the DeBeers cartel and it is thus a natural. With this announcement, they are moving on this all much faster and better than I thought.
So we now have the Russians aligning with the South Africans and Chinese. There are a lot of moving parts to this but I think it is amazing they have gotten this far.
THE BIG QUESTION: What does this do to the pt/pd markets and SWC and PAL? Logically I think they should rise greatly being outside the cartel. Or BE BOUGHT OUT to keep their supplies off market!