By John Helmer in Moscow
Russian PGM sales controller complains market reaction isn’t cricket.
A one-line decree, issued by Russian Prime Minister Victor Zubkov, has stumped Russia’s platinum producer, Norilsk Nickel; the state agency for export sales of platinum, Almazjuvelirexport; and the government body in charge of issuing export licences, the Ministry for Economic Development and Trade.
Whether Zubkov was warned to anticipate the market impact or not, international spot trading in platinum has driven the metal price up 6% this week to a record high approaching $1,520/ounce.
Traditional Soviet practice in the precious metals was to avoid spot market speculation. During the rundown of Soviet stockpiles by corrupt Yeltsin-era officials, abrupt halts to shipments and protracted licensing delays were ploys to draw additional cash out of the market.
This time, a Russian government move has coincided with mine problems in South Africa, and end-of-the-year book closing and inventory stocking in Switzerland. The Russian market driver is governmental decree, No. 1524, with Zubkov’s signature dated October 31. The order was gazetted the next day.
In one sentence, albeit a very long sentence composed in poor syntax, the decree abolishes the current multi-year licensing system for platinum and palladium first decreed in June 2001; and in its place institutes an annual system. This decree also appears to eliminate the differential handling which has been recent Russian practice between platinum, palladium, rhodium and other metals of the platinoid group; as well as between the forms in which the metals have been licensed for export since 2001 — as ingots, powders, granules, concentrates, ores, or as raw materials containing the platinum group metals.
It has taken more than a month for this news to reach the market. Once it did, the only officials in Moscow directly concerned have disappeared. A Norilsk Nickel sales executive said that he isn’t “informed” about what is happening. He also insisted that this couldn’t be attributed to him by name.
Sergei Gorny, the executive in charge of platinum dealings at Almazjuvelirexport, has made a precarious but distinguished career arbitraging between the interests of Norilsk Nickel to sell to the market without him; and the interests of rival state bodies to hang on to their traditional regulatory powers, and turn them to account. During the Yeltsin years of spot price spikes, and protracted delays in shipments, Gorny would keep mum without letting on he was doing so. His secretary would always take calls, and promise a call-back when he returned. He never returned. This week, when Mineweb enquired, Gorny was at a meeting, according to his secretary. He is still there.
The Trade Ministry spokesman, Anastasia Zimonina, told Mineweb she could not say who in her ministry is responsible for implementing the decree, and how and when the new annual licenses will take effect.
Today Norilsk Nickel told Mineweb the problem has been cleared up. The annual licenses for the export of PGM have been authorized, and assigned to Almazjuvelirexport, the company said.
The Interfax news agency then quoted Gorny as declaring: “The government, the Ministry of Finance and Trade Ministry operate like clockwork. For us all, no problems are evident. We have an order of the government from October 31st, signed by Zubkov, where it is proposed to give out all licenses on time. And no problems with licences exist with us. Actually, all that is happening [in the market] is a gamble on Russian bears. But with us, everything is normal.”
In what is a rhetorical flourish of unprecedented length, Gorny went on to complain publicly that the volume of Russia platinum deliveries is not large enough to “dictate the situation in the world market.” Terming $1,500/oz platinum and $355/oz palladium to be “unfair”, he added: “we will consider this in the marketing policy”.
If this was an elliptical threat from Gorny to sell a volume of state stockpiled platinum or palladium into the market to bring down the price, no-one appears to have heeded him. And he continues to be unavailable to respond to requests for clarification of his remarks.
With annual production of 890,000 oz of platinum last year, Russia (predominantly Norilsk Nickel) supplied 13% of the world market. This year, Russian deliveries are down to 820,000 oz, according to the Johnson Matthey projection, amounting to a 12.3% market share. A decade ago, when Russia was mining and destocking much more platinum, deliveries amounted to 1.3 million oz, or about 24% of the market.