Industry Forecast - Platinum: Production Growth To Stagnate - APR 2018

BMI View: Russia's platinum output growth will stagnate because of declining ore grades and a weak project pipeline. The country will lose market share to other platinum-producing countries, such as Zimbabwe, over the long term.

Latest Developments

  • The country's platinum production over the coming years will struggle due to both declining ore grades and a lack of new projects coming online. We expect Russia's platinum production to gradually increase from 0.75moz in 2018 to 0.81moz by 2027.
Headwinds To Curb Growth
Russia - Platinum Mine Production & Growth
e/f = BMI estimate/forecast. Source: USGS, BMI
Russia - Largest Platinum Projects
Company Mine Status Year
na = not available. Source: BMI, Company announcements
Urals Alluvial Platinum West Kytlim Work Commenced in Q316 na
Urals Alluvial Platinum Monchetundra Preliminary scanning na

Structural Trends

Norilisk Nickel To Remain Largest Producer

Russia's platinum sector is highly consolidated, with Norilsk Nickel accounting for around 80% of total output at present. Over 2017, Norilsk Nickel's output grew by 6% y-o-y to 670koz. The increase in platinum output was mostly due to the processing of concentrate purchased from Rostec, processing of work-in-progress material stored at Polar division and decrease of work-in-progress material in transit due to the completion of downstream configuration. This supports our view that Norilsk continues to have significant production potential with total Russian and probable reserves of approximately 16.2moz in 2013. In addition, OJSC's alluvial platinum deposit remains active, producing 120koz per annum (kozpa) on average, since production started in 1984.

Russia To Gain Market Share
Select Countries - Platinum Mine Production (moz)
e/f = BMI estimate/forecast. Source: USGS, BMI

Despite the sector's sparse pipeline of projects, a number of exploration projects are currently in development. For instance, Urals Alluvial Platinum could support production as the company undertakes exploration work on alluvial mining in the Ural Mountains. However, the timescale of these projects is uncertain and they are unlikely to provide much of a boost to production in the medium term. We believe declining ore grades at existing underground and open-pit mining operations will halt output growth over the coming years. Furthermore, increasing cash costs will continue to put downward pressure on miners' profit margins, although this should be offset somewhat by the prospect of rising prices in 2018.

Russia - Platinum Production
Indicator 2017 2018f 2019f 2020f 2021f 2022f 2023f 2024f 2025f 2026f 2027f
e/f = BMI estimate/forecast. Source: USGS, BMI
Platinum Mine Production, moz 0.74 0.75 0.74 0.75 0.77 0.77 0.77 0.78 0.79 0.80 0.81
Platinum Mine Production Volumes, % y-o-y -8.75 1.70 -1.20 1.00 2.00 0.00 1.00 1.00 1.00 1.00 1.00

Russia To Lose Market Share

Russia's stagnant output growth will result in the country losing market share to other platinum producing countries, including Zimbabwe, where significant reserves are rapidly being developed and brought online. Zimbabwe has the second largest platinum reserves in the world, more than double that of Russia. We expect Russia's share of global platinum to remain stable at 16% over 2018-2027, while Zimbabwe's share will increase from 8% to 9% over the same period. However, there are numerous risks to the development of Zimbabwe's platinum sector, which could prevent Zimbabwe from overtaking Russia's share of global platinum output beyond our forecast period.

Russian Production To Keep Second Place
Select Countries - Platinum Mine Production Share Of Global (%), 2016
Source: BMI, USGS