Russia, South Africa Plan ‘OPEC Style’ Platinum Bloc: Report
Please note that we are not authorised to provide any investment advice. The content on this page is for information purposes only.
Russia and South Africa, who hold nearly 80 percent of the world’s platinum-group metal reserves combined, could create an ‘OPEC-like’ trading bloc in order to control exports of the precious metal, reported Bloomberg News on Wednesday.
Russia and South Africa, who hold nearly 80 percent of the world’s platinum-group metal reserves combined, could create an ‘OPEC-like’ trading bloc in order to control exports of the precious metal, reported Bloomberg News on Wednesday.
The plan would see the two nations “coordinate our actions accordingly to expand the markets,” said Russian Natural Resources Minister Sergey Donskoy in an interview in Durban; while the U.S., Zimbabwe and Canada are likely to be welcomed into the group as well.
Donskoy though added that a “framework” accord had only been reached at this point and details must still be decided on the consortium.
[quote]“It can be called an OPEC,” he said. “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.”[/quote]“We are now forming working groups to work out joint actions on this market. There will be a meeting in the summer to discuss mechanisms in detail,” he added.
South African Mines Minister Susan Shabangu told Bloomberg that the new bloc would seek to counter oversupply of platinum, possibly through taxes and incentives.
[quote]“We’re not really controlling the market,” she said. “We want to contribute without creating a cartel, but we want to influence the markets.”[/quote]According to Mark O’Byrne, executive director at GoldCore, in an interview with MarketWatch, the concept is “plausible and seems logical – especially given heightened resource nationalism around the world.
Jeffrey Wright, managing director at Global Hunter Securities, however warned that a “cartel” may eventually be formed in the long-run.
“It looks like a cartel concept would be formed to, over the long run, control supply, promote price stability at a premium to current platinum prices,” Wright said.
[quote]“Both South Africa and Russia need to allocate capital to their respective mining industries and believe through greater control of platinum-palladium markets they can achieve higher prices, which would result in securing the capital required to maintain production.”[/quote]Related: 5 Major Geopolitical Risks Facing Commodity Markets In 2013
Related: Could a Commodity Market Crash be Imminent?: Michael Pettis
South Africa mines about 70 percent of the world’s platinum and Russia about 40 percent of its palladium – a metal from the same group used to cut car pollution – according to Bloomberg. The price of Palladium rose 0.8 percent yesterday to $763.50 after Donskoy’s comments. Platinum has also risen 2.3 percent this year because of increased demand from the auto industry and after supply disruptions at mines.
