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Environmental legislation
Russian exports and reserves policy
Mining policy in South Africa
Palladium demand depends heavily on the evolution of environmental regulations and standards, particularly in the autocatalysts sector. In the context of the Kyoto Protocol and its follow up, stricter environmental regulations on emissions standards are being implemented in many countries. Indeed, the Kyoto protocol adopted in December 1997 under the auspices of the United Nations decided to apply a reduction to six greenhouse gases, the main one being carbon dioxide. In particular, it was agreed to cut emissions of this gas by 2012. Under the Kyoto document, the Clean Development Mechanism allows developed countries to invest in clean technology for developing countries, which can be transformed into emission credits on behalf of the developed countries. The reduction of carbon dioxide may give additional impetus to further develop catalyst solution which is expected to favor the use of palladium in this process.
For example, in United States the National Low Emission Vehicle Standards were introduced in 1999 and in the European Union Stage III emissions standards came into force in January 2000 . Some auto makers are even planing to switch directly to Stage IV which will enter into force in 2005. More stringent emission standards are being introduced in emerging countries as well. Demand for palladium will continue to grow in the future as a consequence of stricter clean air and anti-pollution regulations.
Information on emission standards regulations in the European
Union may be obtained from http://europa.eu.int
and in United States from http://www.epa.gov.
Russian exports and reserves policy
Russian palladium shipments are of the greatest importance for world palladium markets. The Russian Federation dominates world palladium production and supply through Norilsk Nickel output and strategic state stockpile sales. These Russian palladium stockpiles were built in times of excess supply, during the seventies and eighties, and used in order to balance the market.
Accordingly, palladium world market has been extremely influenced by Russian exports quotes and reserves policy in the recent past. Palladium record price increases in 2000 are the result of uncertainties about the reliability on Russian palladium supply. Since palladium market fundamentals are very tight, any cutback from Russian palladium may mean an extremely significant disruption in the market
As stated by Norilsk Nickel, with a view to stabilizing palladium world price and guaranteeing stable supplies, the company intends to deliver significant quantities of palladium to Japan in regular shipments, under long-term contracts, starting in January 2001. The intention of the company is to give the best support to consumers of precious metals for long-term stability. Actually, according to Johnson Matthey, Norilsk Nickel continued to export palladium steadily in 2000, using a ten-year quota and license granted by presidential decree in March 1999.
When Norilsk Nickel production can not meet growing palladium demand, the gap is filled by State stockpiles from Gokhran, the Russian precious metals agency (which is part of the Ministry of Finance), and the Russian Central Bank. Sales from these stockpiles have been erratic in 2000. Reasons stated by Johnson Matthey for the lack of sales from stockpiles in 2000 were a delay in granting an export license to the Central Bank and the indication that much of the stockpile was transferred from the bank back to the Ministry of Finance. In 2002, Norilsk only honored its contracts and did not sell to the spot market. Reasons stated by Johnson Matthey were debts reimbursment to the Russian Ministry of Finance in kind and a deposit in a London vault to buy shares of Stillwater Mining.
The actual level of Russian stockpiles of palladium is a closely guarded State secret. However, it is believed that Russian stocks of palladium might have fallen to very low levels. It is also widely believed that much of the Russian palladium may already be in the hands of western banks as a result of collateral deals for loans. Following Russian irregular releases of stockpiles, palladium supply is very erratic and price volatility has increased considerably in the recent years.
Since South Africa is the second world's major producer of palladium, this country's mining policies are also of great importance for the palladium industry. South African economy as well as local and international circumstances have changed recently, leading to changes in mining legislation. A White Paper on Minerals and Mining Policy for South Africa was released in 1998. This White Paper may be obtained from the Department of Minerals and Energy (http://www.dme.gov.za).
South African system of mineral rights used to be a dual one in which ownership was distributed between the state and private ownership. However, the South African Government's long-term objective is for all mineral rights to be vested in the State. The intention of the Government is to promote mineral development through the "use it or lose it/use it and keep it" principle, in order to achieve equality. The mineral legislation which became a law in May 2004 could be seen as the first step in this direction. It is expected that the implementation of the new Act will lead to increased investment and a competitive business environment.
The involvement of the State in the mineral industry is seen as a complement and support in order to provide sound legal and fiscal environment and efficient physical infrastructure. The Department of Minerals and Energy administers the Minerals Act which regulates prospecting, optimal exploitation, processing and utilization of minerals as well as health and safety issues and rehabilitation of disturbed land.
Recent geophysical and geochemical mapping programmes have shown that there are possibilities of exploration and expansion in the Bushveld Complex. The new mining expansion projects of the South African platinum mining companies might meet the Government's purpose of encouraging mining companies to develop their reserves. Otherwise there would be a risk that the Government revoke mineral rights and relocate them to new ownership. The Government is also encouraging small-scale mining.
