Outlook for the Price of Platinum
Introduction
The aim of this report is to forecast the future price of platinum using both macroeconomic and mircoeconomic principles. The factors influencing supply and demand of platinum will be looked at, and a regression analysis forecast done.
Factors Affecting Supply
As shown in graph 1, South Africa is the largest producer of Platinum (79%) followed by Russia (12%) and North America (5%). Supply from regions outside of South Africa has remained relatively stable over the past ten years, with any increase in supply primarily driven by South Africa. For this reason, only factors influencing South Africa’s ability to supply the market will be looked at
We expect global platinum supply deficit to increase in 2008 in light of the current skills shortage and energy crisis in South Africa. Metals analyst at HSBC, Victor Flores, predicts that global platinum supply deficit will increase in 2008 by approximately 0.5 million to 2 million ounces (Hill L, 2008, “Platinum deficit will likely widen in ’08”, Mining Weekly, 3 March).
Labour Shortage
CEO of Impala Platinum - David Browne stated in an interview that the biggest challenge facing the mining industry currently is a skills shortage. 2007 saw the first year on year decrease in Platinum supply since 2000 with a drop in production of platinum from 6,7 million ounces to 6,6 million ounces. Anglo Platinum and Impala Platinum - the two major suppliers of Platinum in South Africa, both reported difficulties in achieving higher levels of supply due to the shortage of skilled labour. This shortage has been exacerbated by increasing commodity prices forcing previously mothballed operations to be reopened.
It is unlikely...
... middle of paper ...
...rs, the overall price of Platinum is expected to increase to USD 3,373 by the end of 2008
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...ts to the U.S., the market clearing price of steel in the U.S. would be expected to fall in the future. Matthews mentioned that there was a 4% increase in steel imports to the U.S. in May, which might indicate that foreign steel firms also anticipated increased demand for steel in the U.S.
Some of the highest producing diamond mines are countries in Africa. Countries that had some of the highest rate of conflict were Angola, The Democratic Republic of Congo, Sierra Leone, and Liberia. The ...
Peter Munk, the founder of American Barrick had after experience and past failures come to the belief that high liquidity and low leverage were key tenets in a successful business. The increased flexibility obtained by following these guidelines should provide the company with opportunities that less hedged companies did not have. If gold prices were to fall then the company would not be affected by the distress costs that other competing companies would experience, giving the company an edge during times of low prices. During this time they would have additional cash reserves available to invest while other companies might be struggling to gain expensive debt financing. This is one of the major competitive advantages a gold company can have because the major costs in this industry is exploration and acquisition costs. Because of their strong financials and stability the company was also more likely to enter into more favorable contracts. The risk management program was meant to provide in...
An estimated 1 million diamond miners in Africa earn less than $1 a dollar a day (Brilliant Earth n.d.) Children as young as 8 forgo school for daily wages ranging between $0.15- $0.60 (The International Human Rights Clinic at Harvard Law School 2009). According to Adele Farquhar, a man fighting for legal ownership of a diamond mine, the problem isn’t people mining for precious diamonds, it’s those buying the diamonds originating in conflict areas; "People think it's a Zimbabwe problem but they forget that there is huge international complicity. You can't stop the Zimbabweans until you stop the money men. The people in Zimbabwe are getting next to nothing for these diamonds. The guy with the pick and shovel is literally earning $5. The guy to go and find is the one making $1,000. Go and look at the money and see who else is benefiting. That's why there's no momentum to stop this thing” (Cahill 2009). According to Time, the owner of the mines usually takes around 70% of the value when diamonds are sold to
Diamonds have been identified as being precious but expensive gems for many decades. Diamonds were extremely rare, only found in India and Brazil until the late nineteenth century (Vogelsang, 2005: 5). After the discovery of diamonds in South Africa, the diamond industry began to flourish. Diamonds then became very abundant and cheap to produce. In order for the value of diamonds to remain as high as they were during the phase in which they were still rare, a diamond cartel was introduced. A cartel is defined as a group of firms that gets together to make output and price decisions (Cartel Theory of Oligopoly, n.d.). Hence, the diamond cartel aimed to maintain high prices to maximise the profits of the suppliers by restricting the supply. This essay will analyse the history of the diamond cartel, including diagrams that illustrate what the price of diamonds would be with or without the use of a cartel. The notion that diamonds are the only suitable stone that can be used in engagement rings will also be commented on. Furthermore, specific attention will be placed on the role of the diamond cartel in determining the price of diamonds.
According to Mike Peng in Global Strategy at page 229, it all started when Cecil John Rhodes founded De Beers Mines in South Africa in 1875. Rhodes is said to have realized that, as South Africa was the then only significant producer, the supply of diamonds needed to be limited and controlled. The diggers or producers had little control over the quality or the quantity of their output and the buyers or merchants had no control over the security of supply. According to Peng, “Rhodes’s solution was to create an ongoing agreement between a single producer and a single buyer in which the supply was kept low and prices high.” (Peng, 2006)
i. India is the largest consumer of gold in the world to be followed by China and Japan. India is emerging as world's largest trading centre of this commodity with a target of US$ 16 bn. set for 2010.
The price of diamonds has been controlled, up until recently, by cartels. Cartels are formed when suppliers of a particular product or service formally agree not to compete with one another. Cartel agreements usually determine the price, output and supply levels as well as where and to whom the product will be distributed to. De Beers is one of the commonly heard names with regard to diamonds. Up until recently De Beers controlled the diamond industry. It both created and lost the most powerful monopoly in history. Through a discussion of how the cartels operate and the laws of demand and supply, one will be able to determine whether the price of diamonds is too high.
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Gold mining in South Africa has a large impact on the environment, the economy and social structure in South Africa. The environmental impact of gold mining on the environment includes water, air and noise pollution. The mining industry in South Africa is one of the largest in the world. It provides jobs for hundreds of thousands of people in the mining industry alone. The mining industry also indirectly provides jobs for about 400 000 with the goods and services that the mines require to run successfully.
The mining industry is a billion dollar industry that has been around for years. In calendar your 2016 a net profit of $US20 billion was the aggregated profit for global miners. The year before, 2015, the mining industry had a record high gearing ratios, 49%. The industry took advantage of better operation conditions to pay down debt, reducing the gearing ratios to 41%. Many company front line executives took advantage to reduce debt and fortify their company balance sheets. The results of reducing company debts resulted in minimum funds for capital expenditure
Williams, Laurence O. An End to Global Warming. Ohio: Pergamno, 2012. Web 13 May 2015