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PLATINUM INVESTING
Market structure
Article # : platinum118
Market structure
Platinum market fundamentals are very tight. While demand is continuously increasing, supply is extremely limited. Sources of platinum production are quite scarce. In fact, more than 90% of world platinum production is concentrated in just two areas in South Africa and Russia. Additionally, there are not more than ten significant platinum mining companies in the world.
The Bushveld Complex in South Africa is the main producer area, with the company AMPLATS as the industry leader. The other significant area is the Norilsk region in Russia. Russia is also the only country with significant stockpiles of platinum, although it is believed that their level has decreased. Russian Government export policies have influenced platinum supply volatility considerably. Platinum is also mined in smaller deposits in United States, Canada and Zimbabwe. According to some estimates, if platinum mining were to stop today, existing above ground reserves would last about one year. However, in order to respond to increasing demand, most mining companies are developing expansion plans.
Platinum mining industry is capital intensive. Companies need large amounts of money to build production facilities and long-term survival requires heavy expenditures in order to finance exploration and production. Processing of the ore through milling, flotation and smelting to form a matte that contains the PGM is normally undertaken at the mines. Further refining may take place in refineries on the mine property or in other countries.
Main actors in the platinum industry are big corporations with a large degree of vertical concentration. Since platinum is both a precious metal and an industrial metal, these companies have different divisions which deal with refining, assaying, fabricating, trading, researching in new applications or even with investment activities.