Ironic? S.A. & Russia to “influence” platinum market “without cartel”

Russia south_africa

South Africa and Russia plan to “influence” global platinum market “without cartel” — [it escapes the author how this is possible].

Russia and South Africa, who together hold approximately 80% of worldwide platinum reserves, have signed a provisional agreement to co-ordinate efforts to control the global platinum market. Details of the plan emerged at the fifth summit of emerging economies of Brazil, Russia, India, China and South Africa (“BRICS”), held in Durban, South Africa last week.

South Africa is the world’s largest producer of platinum, controlling approximately 70% market share, whilst Russia is the world’s top palladium producer, accounting for approximately 40% of the palladium market; Russia notably also holds a further 10% of the platinum market. The two countries jointly possess almost complete market dominance over platinum. The only other significant reserve of platinum that has been extracted outside of Russia and South Africa is in Canada’s Yukon territory, accounting for approximately 3% of the worldwide reserves. In recent years, platinum producers have faced rising production costs and a drop in prices, due to poor demand for the metal.

Therefore, as Russian Natural Resources Minister Sergey Donskoy explained the purpose of the provisional agreement, “Our goal is to co-ordinate 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 African Mining Minister Susan Shabangu confirmed the plan with Russia, saying: “We’re not really controlling the market” and We want to contribute without creating a cartel, but we want to influence the markets.” The South African Department of Trade and Industry Director-General, Lionel October, said, in support of other comments by Shabangu that “We will give access to minerals and then incentivise companies to add value locally.”

Russia and South Africa’s plans may be derailed due to competition concerns, however.  For example, previous attempts at consolidation within the platinum industry have raised red antitrust flags and were ultimately abandoned. In 1996, Lonmin and Gencor lost an appeal against a European Commission decision blocking the planned merger of their South African platinum mines (Case No. IV/M.619, Commission decision of April 24, 1996). This was the first E.C. decision prohibiting a merger on collective dominance grounds. The Court of First Instance (now called the EU’s General Court) upheld the decision of the Commission, validating its concerns that the merger would result in collective global platinum market dominance (Case T-102/96).

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