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SA, Russia plan to sew up platinum market

Plans by South African and Russian resource regulators to set up an Opec-type block to co-ordinate exports could be beneficial for platinum firms.

“It could be positive for platinum producers, especially Anglo American Platinum (Amplats), which is planning to review its operations, as it will limit supply,” said Tyler Broda, the vice-president for European metals and mining equity research, at Nomura International.

A saleswoman displays platinum rings. Credit: REUTERS

The two countries, which hold about 80 percent of platinum group metal reserves, plan to set up an Opec-type trading bloc to co-ordinate exports.

“It can be called an Opec,” Russian Natural Resources Minister Sergey Donskoy said in Durban yesterday. “Our goal is to co-ordinate our actions… to expand the markets. The price depends on the structure of the market, and we will form the structure of the market.”

South Africa mined about 70 percent of the world’s platinum and Russia 40 percent of its palladium, a metal from the same group used to cut car pollution, Johnson Matthey said in a 2012 report. The US, Zimbabwe and Canada also produce the metals.

Platinum and palladium prices rose following yesterday’s comments by Donskoy. South Africa and Russia had signed only a “framework” accord, he said, with details yet to be decided.

The platinum price gained $10 to fix at $1 575 an ounce in London yesterday afternoon and palladium added $3 to $760.

“We are now forming working groups to work out joint actions on this market,” Donskoy said. “There will be a meeting in the summer to discuss mechanisms in detail.”

Mineral Resources Minister Susan Shabangu said the deal sought to counter oversupply of platinum, possibly through 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.”

Amplats, the biggest producer, fell 3.74 percent to R386.90 on the JSE after a 1.8 percent gain on Tuesday.

“We will give access to minerals and then incentivise companies to add value locally,” Lionel October, the director-general of the Trade and Industry Department, said. “The rest is market driven.”

“We view this announcement as supportive for platinum group metal prices but also as somewhat of a long shot,” Albert Minassian, an analyst at Investec, said in a note. “Ultimately only a reduction in supply can push prices up sufficiently to maintain investment in the industry, on any practical horizon.”

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