When on 7 March, the London Bullion Market Association (LBMA) suspended 6 Russian precious metals refiners from the London Good Delivery Lists for Gold and Silver, and within the course of blocked from the London market any new gold and silver bars produced by these refiners, one unanswered query was whether or not the London Platinum and Palladium Market (LPPM) was going to observe go well with and likewise droop Russian valuable metals refiners from its Good Supply Lists for Palladium and Platinum.
This was greater than a theoretical query as a result of two of the refiners excluded from the gold and silver Good Supply Lists by the LBMA have been JSC Krastsvetmet (positioned in Krasnoyarsk) and Prioksky Plant of Non-Ferrous Metals, and each Krastsvetmet and Prioksky have been additionally accredited refiners on the LPPM’s Good Delivery List for both Platinum and Palladium .
For anybody studying BullionStar Blogs, this LBMA – LPPM conundrum was not a shock since we highlighted it on 28 February, saying that:
“Observe too that the LBMA additionally administers the London Platinum and Palladium Market (LPPM), and tlisted here are two Russian refineries on each the present LPPM Good Supply Listing for Platinum and the LPPM Good Supply Listing for Palladium, particularly “The Gulidov Krasnoyarsk Non-Ferrous Metals Plant” and the “Prioksky Plant of Non-Ferrous Metals” (a.ok.a. Krastsvetmet and Prioksky).
To make issues worse, because the CME Group (operator of the COMEX) kind of clones the LBMA Good Supply Lists and had the 6 Russian refiners on the COMEX “Approved Brands” lists, this pressured the COMEX to observe the LBMA’s lead on 7 March and exclude the identical 6 Russian valuable metals refiners from these ‘Authorised Manufacturers’ lists for gold and silver, whereas leaving the Krastsvetmet and Prioksky refiners on the COMEX Authorised Listing for Platinum and leaving Krastsvetmet on the COMEX Authorised Listing for Palladium.
For the way might the LBMA in London, because it said in its press release on 7 March, droop the 6 Russian refiners “with speedy impact” and “in mild of UK/EU/US sanctions”, whereas its sister group, the LPPM in London, did nothing about Krastsvetmet and Prioksky?
And the way might the Commodity Trade (COMEX) additionally on 7 March “efficient instantly“ and “till additional discover”, droop “the accredited standing for warranting and supply” of the 6 Russian refiners for his or her gold and silver manufacturers, whereas leaving Krastsvetmet and Prioksky on its Platinum/Palladium accredited manufacturers lists?
The reply is in fact about cash, and the truth that sanctions are a political weapon which could be ignored in hypocritical closed doorways conferences within the Metropolis of London and Chicago/New York when it impacts the underside line an excessive amount of.
LBMA and LPPM – Similar Individuals, Totally different Hats
As Reuters’ Peter Hobson identified in a 8 March article titled “London market green-lights Russia’s palladium while blocking its gold”:
“The London Platinum and Palladium Market (LPPM), an business affiliation, mentioned it will maintain the 2 Russian refiners it accredits on its “good supply” record of companies whose materials is eligible to commerce in London.
“Merchants and analysts mentioned elimination of the palladium refiners from London buying and selling would have worsened worries over Russian provide which have despatched costs to document highs.”
On 8 March, the LPPM additionally – with a straight face – added a hypocritical press release to its web site, which mentioned:
LPPM GOOD DELIVERY PLATINUM AND PALLADIUM UPDATE
Because of the horrible occasions going down in Ukraine, the LPPM has reviewed its Good Supply record and the US, EU and UK sanctions. Following that assessment it has determined to make no adjustments to the Good Supply record.
We are going to nonetheless proceed to observe and assessment the state of affairs.”
In different phrases, as a result of, within the phrases of the LPPM, “horrible occasions” in Ukraine, the LPPM determined to do nothing, all as a result of Russian palladium and platinum are too vital to sanction.
On the identical day, Reuters printed one other model of its 8 March article – which is now solely accessible on the NASDQ web site and is titled ”Russian refiners nonetheless OK to commerce, says London Platinum and Palladium Market”, through which Peter Hobson wrote that:
“Following a gathering of the Administration Committee of the LPPM…, there might be no adjustments to our Good Supply record,” the LPPM’s Chief Administrative Officer, Jane-Anne Wardley, mentioned.
So now we all know that it was the LPPM Administration Committee which made the choice to ‘make no adjustments’ to the LPPM Good Supply Lists, regardless of what they referred to as the ‘horrible occasions’ in Ukraine.
It’s A Massive Membership & You Ain’t In It!
And what or who is that this LPPM Administration Committee?
From the LPPM web site administration committee page we see that the LPPM Administration Committee contains people representing 9 heavy weight entities that are concerned within the world platinum and palladium market, 4 of that are financial institution entities. These 9 entities and their representatives are:
Chairman – John Cullen, Johnson Matthey Plc (US/UK refinery)
Members – Vincent Domien, HSBC (financial institution)
Thomas Kendall, ICBC Customary Financial institution (financial institution)
Anton Down, Royal Financial institution of Canada (financial institution)
Vikas Chamaria, T D Securities (financial institution)
John Metcalf, BASF Metals Restricted (dealer – be aware BASF which took over the previous Engelhard)
Andy Daniel, Heraeus Metals Germany GmbH (German refinery)
Joe Stefans, MKS Pamp SA (Swiss refinery)
David Jollie, Anglo Platinum Advertising Ltd (a part of Anglo American Platinum, miner)
Observe – Vincent Domien, now of HSBC, was a SocGen director of the London Gold Market Fixing Restricted (the previous London Gold Fixing) till 30 August 2019.
Seven of those Administration Committee members are Full Members of the LPPM, particularly HSBC, ICBC Customary, Toronto Dominion (TD), Johnson Matthey, Heraeus, MKS PAMP, and BASF Metals. The opposite two, Royal Financial institution of Canada and Anglo Platinum, are affiliate members of the LPPM.
As there are solely 14 Full Members of the LPPM, the opposite 7 full members of the LPPM which aren’t on the LPPM Administration Committee are 4 banks – Goldman Sachs, JP Morgan Chase, UBS, and Customary Chartered Financial institution, and three valuable metals refiners – Metalor (Swiss), Valcambi (Swiss) and Tanaka Kikinzoku Kogyo (Japanese).
As well as, the ‘Market Making’ members of the LPPM (whose buying and selling desks make two-way markets in palladium and platinum) are Goldman Sachs, HSBC, ICBC Customary Financial institution, JP Morgan Chase, Customary Chartered Financial institution, Toronto-Dominion Financial institution, and UBS.
And there’s extra. Every enterprise day in London, a gaggle comprising Goldman Sachs, HSBC, ICBC Customary, Johnson Matthey, BASF Metals, together with StoneX, participate within the every day LBMA platinum and palladium auctions in order to ‘set up’ benchmark costs for the every day LBMA Platinum Price and the LBMA Palladium Price (value knowledge which by the best way is intellectually owned by Treasured Metals Costs Restricted – which is a subsidiary of the LBMA).
And at last, these LBMA Platinum and Palladium auctions, that are run for the good thing about the LPPM’s ‘market’ (a market which is behind the scenes administered by the LBMA), are run each day by the London Metal Exchange (LME).
As George Carlin as soon as mentioned “It’s A BIG Membership & You Ain’t In It!”
Shockingly, the LPPM’s resolution to maintain the Russian refiners Krastsvetmet and Prioksky on the LPPM Good Supply Lists for Palladium and Platinum comes even supposing the LPPM’s personal ‘Accountable Sourcing program” which is overseen by the LPPM Administration Committee, has a “Sanctions Policy” which says:
Failure to satisfy the requirements required might have critical implications for LPPM Good Supply refiners. Sanctions might embrace suspension topic to decision or being transferred to the Former Listing with speedy impact.”
Nonetheless, on this event, the LPPM Administration Committee appears to have thrown its sanctions coverage out of the window, hoping that nobody would discover.
The Criticality of Russian Palladium Provide
Whereas South Africa is answerable for 75% of world Platinum mining provide, with Russia accounting for simply over 10% (Russia is forecast to generate a 2022 provide of 661 koz out of a world complete of 6119 koz in line with the World Platinum Funding Council (WPIC)), it’s within the Palladium market the place Russiaan provide is important, since Russia accounts for 40% of the worldwide palladium provide. See the most recent WPIC presentation slide desk (dated March 2022) here.
In Russia, mined palladium is a by-product of nickel mining, with almost all Russian palladium provide being mined by the mammoth MMC Norilsk Nickel The subsequent greatest palladium producer is the South African-US mix Sibanye-Stillwater.
In response to the most recent Heraeus “Palladium Customary” report from September 2021 (produced by SFA Oxford), Russian palladium manufacturing in 2021 was forecast to be 2350 koz out of a world complete of 6,770 koz (or 35% of world palladium mine provide).
Nonetheless, in 2021, Russian palladium provide was lower than regular as a result of mine flooding and a concentrator accident, which diminished provide by about 365 koz. So in a traditional yr, Russian palladium provide is about 2800 koz, or about 40% of world annual provide of 7000 koz. See the Heraeus ‘Palladium Customary’ report here.
On the demand facet, palladium is important for the worldwide vehicle business (together with platinum), the place each metals are utilized in auto-catalytic converters that scale back exhaust emissions – as each palladium and platinum are glorious catalysts and are considerably substitutable. Each palladium and platinum are additionally used extensively in business, e,g. in laptop chips and digital gadgets.
Moreover, each metals have a big demand driver within the type of jewellery and importantly, platinum and palladium are each funding valuable metals, with each metals are held in bodily backed Trade Traded Funds (ETFs), and each metals are fabricated into investment platinum and investment palladium bars and cash.
So now you may see how vital Russian palladium is to the LPPM commerce group, and to the banks, merchants, and refiners of the LPPM.
If Russian palladium stopped flowing to market, there could be critical issues, particularly for the worldwide auto and laptop chip industries. And the identical, to a lesser extent, goes for Russian platinum provides.
And because the LPPM might hardly sanction Russian platinum with out sanctioning palladium as this might draw much more consideration to the double requirements and political nature of the sanctions, therefore the LPPM put its head within the sand and sanctioned neither, hoping that it will all blow over.
Which can be why the US/UK/EU sanctions have prevented sanctioning the ‘remaining boss’, the enormous Norilsk Nickel. As a result of Norilsk Nickel, the world’s largest palladium producer and a serious producer of platinum is, because the Wall Road Journal put it not too long ago, ‘Too Big to Sanction’.
So now you may see why the LPPM Administration Committee threw its sanctions ebook out the window when confronted with having to sanction the Russian palladium and platinum refiners Krastsvetmet and Prioksky, regardless of what the LPPM referred to as the ‘horrible occasions” in Ukraine. As a result of, on the earth of the bullion financial institution managed palladium and platinum markets within the Metropolis of London and on COMEX, cash talks whereas the whole lot else walks.
And which is why on 24 March, when UK prime minister Boris Johnson, forward of the NATO-G7-EU conferences in Brussels, talked about “tightening the economic vice” on Vladimir Putin, and “ what we will do to cease Putin utilizing his gold reserves”, whereas not surprisingly failing to say the LPPM and the double requirements of the Metropolis of London in terms of palladium and platinum.
As a result of “tightening the financial vice” on Russian palladium and platinum, would seize up the worldwide auto business and will discover Boris having to experience his bike to work every day as a substitute of being chauffeured in a 2022 emissions pleasant Bentley.