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Russia, South Africa Seek to Create OPEC-Style Platinum Bloc

March 27, 2013

Russia, South Africa Seek to Create OPEC-Style Platinum Bloc

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

Russia and South Africa, countries that hold about 80 percent of platinum group metal reserves, plan to set up an OPEC-type trading bloc to coordinate exports.

“It can be called an OPEC,” Russian Natural Resources Minister Sergey Donskoy said late yesterday in an interview in Durban. “Our goal is to coordinate our actions accordingly to expand the markets. The price depends on the structure of the market, and we will form the structure of the market.”

South Africa mines 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 Plc (JMAT) said in a 2012 report. Other nations would be able to join the group. The U.S., Zimbabwe and Canada are among producers of the metals. The Organization of Petroleum Exporting Countries is an oil cartel.

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

“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.”

South African Mines 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.”

Biggest Producers

Anglo American Platinum Ltd. (AMS), the biggest producer, fell 2.3 percent by 12:36 p.m. in Johannesburg after a 1.8 percent gain yesterday. OAO GMK Norilsk Nickel, the No.1 in palladium, slid 0.4 percent in Moscow after a 1.5 percent jump yesterday.

“We will give access to minerals and then incentivize companies to add value locally,” Lionel October, director general of South Africa’s Trade Ministry, said today in an interview in Durban. “The rest is market driven.”

Platinum today fell 0.4 percent and palladium 1.2 percent.

“We view this announcement as supportive for PGM prices but also as somewhat of a long shot,” Albert Minassian, an analyst at Investec Ltd., 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.”

To contact the reporters on this story: Ilya Arkhipov in Moscow at iarkhipov@bloomberg.net; Franz Wild in Johannesburg at fwild@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net


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