Russia's removal of precious metal export quotas will eliminate the threat of supply disruptions from Norilsk Nickel, the world's largest palladium miner, industry officials and analysts said on Monday.
The scrapping of export quotas clears the way for Norilsk to continue shipments after the expiry on December 31 of a five-year quota on platinum, rhodium and ruthenium, while also removing a barrier to Russia's entry to the World Trade Organization. „It's good news for Norilsk Nickel. It removes the bureaucratic red tape and any possibility that delays in renewing quotas will happen in the future,” Deutsche UFG metals and mining analyst Olga Okuneva said. Russian President Vladimir Putin has signed a decree allowing unlimited exports of platinum group metals (PGMs), uncut diamonds and other precious metals and ores, subject to a license from the economy ministry. Previously, long-term quotas were set. As well as the expired five-year platinum quota, Norilsk has a 10-year quota to export palladium that expires in 2008. The company does not disclose the volumes of these quotas. „We consider this news positive for Norilsk Nickel, for which PGMs account for 20% of total revenues,” Alfa Bank said in a research note.
Norilsk accounts for 12% of the world's mined platinum and more than half its palladium, a metal used in jewelry and vehicle exhausts that rose 30% in value last year. Market sources said platinum exports had not been disrupted by the lapse in the quota at the end of 2006. „The company continues to carry out export activity and fulfil its production obligations to customers,” Norilsk's press service said in a written reply to questions. Norilsk called the removal of quotas a „very important and positive step toward the full liberalization of the precious metals market, which until now has remained one of the most conservative and was regulated as it was in Soviet times.” But although no longer subject to quotas, all Russian PGM exports - including Norilsk's - will continue to be booked through state diamond trader Almazyuvelirexport. „This hasn't changed,” Sergei Gorny, Almazyuvelirexport's deputy general director, told Reuters. „The system existed under Soviet rule and afterwards. All platinum group metals sold abroad, irrespective of where they're produced - and we have several producers, though none as big as Norilsk - are exported through our group by law,” Gorny said. Analysts said the removal of quotas was a step toward Russia's planned accession to the WTO.
„It's the eradication of one of the last bits of Soviet-era legislation, which makes for a more transparent market,” said Rob Edwards, director of mining and metals research at Renaissance Capital. „It's strongly linked to the WTO. You can't have a WTO member pulling strings on precious metals exports, particularly on platinum and palladium, which don't have a wide liquid market and where Russia features very highly in terms of world supply.” Russia is expected to join the WTO this year after signing a bilateral deal with the US in November, clearing the last major obstacle in its bid to join the global trade body. Analysts say world palladium supply is expected to outstrip demand for the seventh successive year in 2007, although commodity speculators could still send the metal up 7-10% in value this year. Johnson Matthey Plc. says global palladium demand fell nearly 6% to 6.85 million ounces in 2006, while supply rose 0.8% to 8.48 million ounces, leaving a market surplus of 1.63 million ounces. Norilsk's latest 2006 output targets for palladium and platinum, announced in October, were 3.15-3.19 million ounces and 750,000-760,000 ounces respectively. The company has yet to release last year's production data. (Reuters)