ÿFull story Russia palladium producer wants long-term contracts
06:42 a.m. Jul 03, 1998 Eastern
By Aleksandras Budrys
MOSCOW, July 3 (Reuters) - The group controlling Russia's sole palladium
producer, Norilsk Nickel, wants Russia to deposit its stocks of the
metal abroad and use them for long-term supply contracts, a senior group
manager told Reuters.
Term contracts should stabilise the market, which has been highly
volatile recently. Under current arrangements, contracts are signed
annually, but bureaucratic delays kept supply off the market completely
for months in 1997 and again this year.
As a result prices soared to over $400 per ounce earlier this year, and
Russia is keen to reduce the price instability.
The manager at Interros financial-industrial holding group said that
Interros was discussing the scheme with Russia's central bank, the only
institution which holds palladium stocks.
Interros is a major holding company which controls UNEXIM bank, SIDANKO
oil company and other companies as well as Norilsk Nickel.
''Although we understand the central bank has a generally positive
attitude towards our proposal, we haven't had a definite answer yet,''
he said.
The head of the central bank's precious metals department, Sergei
Kyshtymov, told Reuters he had no knowledge of the plan.
Russia is the world's largest palladium producer, accounting for 66
percent of supply. All exports go through sales agency
Almazjuvelirexport, part of the Ministry of Finance.
Last Thursday Kyshtymov was quoted as saying that the bank might use
some of its palladium reserves for loan collateral rather than direct
sales this year.
When asked by Reuters whether the bank had concrete plans to
collateralise its stocks, Kyshtymov declined to comment.
The Interros manager said such a scheme would hardly be profitable.
''If palladium is deposited in a bank, the central bank would not get
more than $1 or $2 billion as it would get the lowest price for the
collateral, say around $130 per ounce,'' he said.
He added the bank would have difficulty marketing the palladium in the
event of a default, as few bodies wanted such large stocks.
''It is impossible to sell hundreds of tonnes of palladium in a short
period of time, in case of default,'' he said.
He said that Interros was trying to persuade the central bank to deposit
its stocks in a ''triple-A institution, perhaps a bank in a neutral
country.''
If the plan works the central bank could attract credits, backed by
receipts for sales agreed but not yet paid for.
At the same time Interros expected a steady increase in the price of
palladium as stocks were depleted. ''The stock volume should be kept
secret, but we would discuss concrete purchase values with concrete
consumers,'' he said.
Current central bank stocks were estimated to last from two to six
years, he said.
He added that it was in Russia's interests that the search for
substitutes for palladium should stop.
The absence of secure palladium supplies from Russia has made markets
treat the country as unreliable, and end-users have invested big sums
into research for substitutes for the metal.
''We cannot prevent the appearance of cheaper substitutes, but we see no
reason for using more expensive alternatives and there is a risk that if
the uncertainty with palladium supplies continues, the market will be
gone,'' he said.
Palladium is used mostly to produce catalysts for cars, as well as in
electronics and dentistry.
The palladium market only came into existence in the mid-1990s, when
catalytic converters for cars were invented.
The strong price of palladium is some compensation to Norilsk for the
fall in base metals prices, which it also produces.
Yuri Filippov, deputy CEO of Norilsk combine, Norilsk Nickel's main
unit, said recently that Norilsk planned to raise output of both nickel
and copper by eight to nine percent this year and platinum group metals
by 15 percent from 1997 levels.
The manager at Interros said world palladium demand was currently double
the 225 tonnes supplied annually.
Norilsk sells all its output, but this was not enough to meet demand, so
some had to be sold from central bank stocks.
Copyright 1998 Reuters Limited. |
