Russia is the main player on the market for platinum-group metals (Platinum, Palladium, Rhodium, Iridium, Osmium and Ruthenium), as it accounts for 70 percent of the world’s supply of palladium and 20 percent of the world supply of platinum. The leading positions, however, impose certain obligations on the country, and the market of platinum metals is extremely sensitive to the slightest oscillations in Russia’s economic climate as well as to any information that directly or indirectly concerns possible changes in the production and export of these metals. Having made almost all information on precious metals top-secret, Russia time and again falls victim to information campaigns staged by its competitors.

In the near future, many of the Russia’s specific problems will probably vanish. The president is about to sign a draft decree "On the Procedure of Export and Import of Precious Metals and Precious Stones" which provides for liberalization of Russia’s market for precious metals.

Strength test

In late April, the American agency Platt’s Commodity News reported that Russia plans in the near future to revise its policy of exporting platinum metals toward reduction of their supply to the world market. According to the agency’s information, this is being done in order to replenish the country’s precious-metal reserves. Therefore, according to the agency’s version of events, Russian producers of platinum metals will be obliged to sell platinum and palladium first to the state and only then to foreign buyers. Of course, they will sell to the state at a lower price than that on the London Metal Exchange. According to Platt’s, a decree to that effect has already been signed by the Russian Prime Minister and the ppppresident will sign it in May. The information was released simultaneously with Platt’s by the South African newspaper Business Day and, later, by other media sources.

Russia’s platinum metals come to the market from the following three major sources: The Central Bank, Gokhran (State Vault) and RAO Norilsk Nickel, the latter’s share being the biggest at 60 percent of the total. In 1998, Norilsk Nickel obtained a 10-year quota for palladium export, and since then all export supplies have been made in compliance with this quota.

A source in Gokhran told Fokus that "nobody had heard about the preparation of a decree that would reduce exports of platinum metals." The same source confirmed that state reserves of precious metals, including gold, are currently smaller than they were, say, in the 1950s. It has only been since a few years ago that these reserves began to increase.

Look for the one who benefits

In order to understand what is going on, one has to recall that Russia’s main competitor on the market for platinum metals is the Republic of South Africa. According to Canadian brokerage firm Cannacord Capital, during the last seven years South Africa’s annual platinum output has increased by 2.5 million ounces and palladium output has increased by 800,000 ounces (2.7 million ounces per year). It is beneficial for Pretoria to demonstrate to world buyers of palladium how Russia’s legislation is unstable and how dangerous it is to deal with an unpredictable partner that can cut export supplies at any moment regardless of circumstances. It was precisely the South African paper that emerged among the first to actively disseminate this information, citing anonymous sources in Moscow. The releases by Business Day and Platt’s repeat one another almost word for word.

Russia is a very special player on the world’s market of platinum metals. All information on production volumes, quotas, reserves, exports and other relevant data are classified as state secrets. In fact, these secrets are to a certain extent "open secrets" because Western analysts can, albeit roughly, calculate Russia’s output and forecast the next year’s figure on the basis of customs statistics.

Being unable to operate with figures that are public information all over the world, Russian exporters are looking quite ridiculous on the world market. Not to mention the fact that the law "On State Secrets" does not permit Russia to comment on the situation that has formed on the market with arguments and to refute the rumors disseminated by other players. Of course, this affects market situation to Russia’s detriment.

Given Russia’s monopoly positions on the market for platinum and palladium, the present situation with Russia’s export policy looks worse than unattractive. The situation is determined not by competition between individual companies but by a complex of factors, such as company-government relations, company prestige, the general political and economic situation and state programs for supBeing a major supplier of platinum metals, Russia does not have the opportunity to control prices because the quota system of export regulation exerts pressure first of all on Russia’s exporters themselves. As a result the only factor affecting prices are delays in the issuance of quotas. This applies primarily to platinum. As things stand, yearly quotas on platinum are usually issued in early March and it takes another two weeks for Almazyuvelirexport to obtain an export license. As a result, Russia is not present on the market during the first two-and-a-half months of every year. Russian exporters are deprived of the opportunity to maneuver: They cannot hold the metal while the price is weak and sell it when the price gets stronger. At the same time, Russia gives excellent opportunities to the market’s other participants. Not to mention the fact that the unpredictability of Russia’s export policy provides market players the opportunity to use "information technologies" to downgrade Russia’s credibility rating. This causes Russia to lose in both money and reputation. Moreover, in this situation Russia has no opportunity to sign long-term deals with the biggest buyers of platinum metals. The new decree will probably improve the situation.

Russkiy Fokus