Author Archives: Stuart Burns

If you can’t beat them, then join them? That may be the gist of UC Rusal’s latest proposal for dealing with Chinese aluminum overproduction: an OPEC-like organization for the global aluminum industry.

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In a Reuters article the world’s largest aluminiu producer outside of China was quoted by the TASS news agency at an economic conference in Russia’s Black Sea resort of Sochi as suggesting that Industry ministers should get together and explore ways and means of creating a producers club.

Liquid metal

The Chinese aluminum industry has been able to cut costs by essentially selling liquid metal to nearby product manufacturers. Source: Adobe Stock/Kybele.

The trade minister quoted by TASS, Denis Manturov, talked of creating a single policy in the area of standards and technology but, in reality, there would be little to be gained if that was the sole purpose. More attractive to western smelters in general, and Rusal in particular, would be any mechanism that curbed China’s growing dominance of the primary aluminum market.

Rusal was, until a few years ago the world’s largest aluminum producer. In 2016 Rusal produced 3.685 million metric tons, according to Reuters, but China now produces over half the world’s aluminum with Chinese producers overtaking the Russian firm. China’s Hongqiao is now the world’s biggest aluminum producer overtaking Rusal in 2015 and again in 2016. Read more

Those not involved in the steel industry tend to look at large, integrated blast furnace steel plants as dated technology light-years from the gleaming glass and concrete operations of IT or electronics. However, steelmakers are constantly striving for technological improvements.

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In fact, the very marginal nature of steel production in the western world means that constant innovation is a necessity for a firm’s survival. Comparisons between U.S. Steel and Nucor Corp. illustrate this point. When U.S. Steel was focused on cost reduction and rationalization at the turn of the century, Nucor was innovating and investing not just in alternative electric arc furnaces, but in direct casting and other downstream technologies. As a result, Nucor is now North America’s most successful steel company but they’re not alone in looking to technology for their future prosperity.

Continuous Casting

An interesting article in the Economist details efforts at a number of steel producers around the world to find a better alternative to the traditional blast furnace. The slab casting and re-rolling route is epitomized by the likes of U.S. Steel and the major Asian steel mills. For years, the only real challenger to this process was the electric arc furnace which enjoys the benefits of scrap as a raw material and greater flexibility and economies of scale allowing it to operate profitably on a fraction of the cost required throughout for a traditional blast furnace-based integrated steel plant.

Liquid steel.

Innovation in steelmaking is coming from novel uses of liquid metal. Source: Adobe Stock/Photollug.

One of the major attractions most EAF plants have is that they produce final product by the continuous casting route. The liquid metal is taken from the refining vessel and, for flat-rolled products, continuously cast into 80-120-mm thick slabs, which can then be further rolled to thinner gauges. Read more

As one might misquote Mark Twain, we have been here before.

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In 2016, analysts were queued up to predict the iron ore price was going to collapse only for it continue its relentless rise. The recent pull back from $90 per metric ton has brought a fresh crop of dire predictions. Yet maybe, just maybe, there is more validity this time around for caution as to future price direction. There are a number of factors, each of which individually does not signal a price reversal but collectively suggests iron ore prices later this year could be lower than they have been in the first quarter.

Why Iron Ore Prices Might Really Fall

An article in the Australian Financial Review quotes analysts saying, the strength of recent pricing is encouraging Chinese domestic production to increase. In the first half in 2016 it was averaging a 220 million mt per year run rate, but rose to 280 mmt per year in the second half of the year. At the same time, global supply continues to rise with not just increased shipments from Australia but also number three miner Vale SA expanding supply from its $14 billion S11D mine. Read more

I know it sounds a bit geeky, but we at MetalMiner love to hear about new applications for aluminum. This latest development is not exactly going to change the global demand-supply balance for aluminum but it does showcase one of the many qualities the metal possesses, one which is sometimes overshadowed by aluminum’s lightweight or easy formability.

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Aluminum’s use in batteries is nothing new. Aluminum–air batteries have been a topic of research for some time and work by producing electricity from the reaction of oxygen in the air with aluminum. They have one of the highest energy densities of all batteries, but they are not widely used because of problems with high anode cost and by-product removal when using traditional electrolytes. Read more

Just a few weeks ago, the future looked bright for the oil price. Back in November, the Organization of Petroleum Exporting Countries and a number of non-OPEC producers agreed to cutbacks intended to reign in surplus global oil stocks and, in so doing, support the oil price.

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Initially, the agreement met with considerable success. Hedge funds and speculative investors went long on oil and the price rose. But, this week several comments and statistical reports coincided to remove some of that optimism and resulted in steep price falls. The West Texas Intermediate benchmark fell under $50 for the first time since December while Brent Crude was also down to $52.41 a barrel, its lowest level since November.

Source: The Financial Times.

According to the Financial Times, Wednesday’s decline came after the Energy Information Administration said inventories of U.S. crude stocks climbed by 8.2 million barrels, far more than analysts expected, as refinery oil purchases declined. If the rise in inventory was solely down to refineries slowing or delaying purchases, the impact would not have been as dramatic but the fear among investors is U.S. shale production is roaring back.

Reshalience Explained

Even Saudi Arabia’s oil minister, Khalid al-Falih, is quoted as saying OPEC’s agreement and the corresponding price increase has helped the U.S. shale market to recover and, perversely, undermined efforts to stabilize crude prices. U.S. shale producers have responded to low crude prices by innovating and cutting costs. Breakeven for many is now $40 a barrel, with some said to be as low as $25. Rig counts have doubled since the Spring of last year and output has continued to rise, contributing to the increase in WTI inventories.

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The oil price faces two major headwinds the FT reports. The first is little or no evidence the global oil market is really coming into balance as signatories to the agreement continue to cheat, and the second is an overhang of speculative length in the futures market. Part of this week’s price falls are said to be due to speculators bailing out of long positions after the realization that the market may not be coming back into balance as hoped late last year.

Where to, Brent?

Where the oil price goes from here is anyone’s guess but with even Saudi Arabia threatening not to renew the cutback agreement in the summer if global inventories do not fall back as expected — if other members of the agreement continue to cheat — the probability is the market overhang could get worse in the second half of the year.

U.S. shale oil producers appear to be enthusiastically ramping up production which will likely add do U.S. oil inventories and further depress the price. The oil price has a level which realistically reflects supply and demand but it’s almost certainly below $50 a barrel in today’s market.

It is rare that companies with a professional reputation like those of Thomson Reuters and the CME Group compete for the privilege of running such an important price benchmark as the London Silver Fix, a global benchmark that has been in place 117 years and has its origins in the London coffee shops of the 1700s. Even more rare? To announce after three short years they are stepping down from providing that service.

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CME Group and Thomson Reuters assumed control of executing the daily Silver Price Fix on Aug. 14, 2014, from the London Silver Market Fixing Company. CME Group has been providing the electronic auction platform on which the price is calculated and Thomson Reuters has been responsible for administration and governance of the LBMA silver price both our own Jeff Yoders and Reuters reported. So why, once a suitable replacement can be found, are the two firms stepping down from their respective roles in running the LBMA Silver Auction?

The simple truth seems to be that they are not making any money out of it. According to MarketWatch, new European legislation set for implementation in January 2018 will regulate the provision of, contribution to and use of a wide set of benchmarks which are highly regulated and deeply scrutinized, the site quotes Ross Norman Chief Executive Officer of Sharps Pixley Ltd. as saying.

“It follows there is much work and cost, but for very modest commercial reward, plus the ever-present danger of legal action or reputational damage — whether guilty or not.” Norman said. ‘Few sensible or sane people would want to create a financial benchmark — and, yet, it is absolutely necessary for the normal functioning of markets.”

You should ask, if that is the case, and Ross Norman probably knows better than anyone, who is going to take it on?

One site valued the total of above-ground silver holdings at approximately 1 billion ounces, putting the physical value at some $17 billion, but Bloomberg assessed the total silver-based financial market at closer to $5 trillion, much of which takes its price cue from the London Fix. It seems inconceivable that one of the major banks, or a number of them in cooperation, that currently contribute to the LBMA silver price will not step in to take over.

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If they don’t, the Silver Fix could conceivably migrate to Shanghai in the same way that the center of gravity for gold price-fixing has been gradually migrating east over the last decade.

After rising aggressively, some would argue that lithium prices have already peaked.

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Reuters quotes Paul Robinson, director at consultancy CRU Group saying that prices have little upside because demand growth has been met with aggressive supply build up, similar to rare earths and vanadium in past cycles. Even though demand is projected to soar 60% to 300,000 metric tons of lithium carbonate equivalent (LCE) annually by 2020, the newspaper quotes a National Bank Financial report saying new players could flood the market.

Strong Demand is Company, 60% Growth is a Crowd

“It’s crowded, no doubt about it, and it will get culled,” said Jon Hykawy, president of Stormcrow Capital, calling lithium, the “latest bubble sector.”

An indication of extent to which lithium fever has gripped investors and junior miners is illustrated in a Bloomberg article which reports that in the wake of President Mauricio Macri’s decision to remove currency and capital controls and taxes introduced by his predecessors, about 40 foreign companies began to consider opportunities in Argentina’s mining industry. More than half of those planning to mine lithium. Read more

The serial entrepreneur is never shy of making bold claims, and recently he announced plans for Space X to fly two private citizens on a mission around the moon by late 2018.

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The journey would take about a week and the astronauts will travel deeper into space than any human has ventured before, the Washington Post reports. Let’s think about this. Space X has never flown people before and in the last two years has had two rockets blow up on the launch pad or in flight. Even more challenging is that the mission would require the untested Falcon Heavy Rocket which has yet to fly and a modified Dragon Capsule which is also, as yet, untested in space.

So far Musk’s Space X has operated unmanned missions in a long-running partnership with NASA, to fly cargo to the International Space Station. The program to run manned missions has been delayed but the company still claims it will happen by the middle of next year.

Most, therefore, expect the end 2018 deadline for the lunar mission to be delayed but SpaceX has earned itself a reputation for setting and mostly achieving ambitious targets. It was the first private company to fly to the ISS and the first ever to land the first stage of a rocket that had lifted its payload into orbit. Along with Boeing, Space X has worked closely with NASA to develop reusable launch systems that not only service the space station but could ultimately go to Mars. Maybe spurred by this pace, the private sector is setting the agenda for space exploration. NASA recently announced that it is considering adding astronauts to the first flight of its Space Launch System rocket and Orion crew capsule the Post reports.

Interestingly, the change of administration in the White House has also had an impact on space exploration. Bob Richards, the chief executive of Moon Express, a private company that plans to land a robotic spacecraft on the moon this year is quoted as saying “With the new administration, regardless of what you think politically, comes a new sense of commercial partnerships which is good for us in the space industry. I feel, as many do, a lunar tide rising. The political environment is catching up with logic. With the moon as an important step for even deeper space exploration.”

As the Trump administration looks for a big win in space exploration, somewhat like Kennedy’s promise to send a man to the moon over 50 years ago, there is a new willingness to commit dollars. Some, particularly outside the U.S., look back on that decade in the 1960’s as America’s greatest hour, when the country achieved something no one else dared or could develop the technology to do.

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Not just for that generation, but in the years that followed it was an inspirational program that developed technologies and advanced science for decades to follow. Maybe it is with one eye on history and a fondness for private enterprise that the new administration is looking at the private sector to again take America to new goals. One man who does not lack the ambition to fulfill such ambition is Elon Musk. We should applaud it.

President Donald Trump’s address to Congress this week included a defense department budget request which it claimed was historic.

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“I am sending Congress a budget that rebuilds the military, eliminates the defense sequester and calls for one of the largest increases in national defense spending in American history,” he is quoted by the New York Times is saying.

What’s a Few Hundred Billion?

While claims that the proposed increase to the defense budget is historic might be stretching the truth, Trump’s proposal to add $54 billion to the Pentagon’s budget is said to amount to a 10% increase, a significant rise — If it was true. Unfortunately, the New York Times is not alone in questioning numbers. We have little interest here in making claims about fake news, but we’re more concerned about those communities and industries that rely on military spending for their livelihoods.

You want F-35 fighter jets with those carriers? Better add about $500 billion to that budget. Source: Adobe Stock/Spacekris.

Questions have been raised in recent years about the readiness of today’s U.S. military. After fighting two major wars in Afghanistan and Iraq, troops are said to be exhausted and supplies depleted. Even so, the U.S. spends more money on its military than the next seven countries combined. Read more

“The eagles are coming.” – J.R.R. Tolkien

Is it a case of the cash-strapped French military turning to a cheaper option or is it some kind of quasi-environmental option to train eagles in a counter drone role?

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A ZDnet article explains that the French military turned to eagles to counter the threat of terrorist or insurgent drones, faced by a nation that considers itself almost under siege from terrorist attacks.

D'Artagon goes drone hunting

D’Artagnon may not have been a full Musketeer, but, trust him, you don’t want none, terrorist drones! Source: Youtube/French military.

At the Mont-de-Marsan military base in southwestern France, the four eagles under training, named after the fictitious four (Athos, Porthos, Aramis and D’Artagnan) heroes of Alexandre Dumas fame, have been undergoing training since June of last year. The article explains that since the November 2015 Paris attacks, France is on high alert for any kind of threat including those from unmanned aerial vehicles or drones feared for their potential to drop small bombs on civilian or even military targets.

In a demonstration at the base one eagle (D’Artagnan) took out an approaching drone at 200 meters in less than 20 seconds, earning himself a food treat. Indeed, food seems to be the key incentive. The young birds are trained from three months of age by serving food on the top of drone wreckage creating an association between UAVs and food, the article explains.

It would seem the French are not alone. Dutch law enforcement officers have also been experimenting with the use of eagles to take out drones. The Dutch police explained the attraction of the birds of prey is that they could takeout drone threats without the need to deploy weaponry which could injure innocents.

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But what about larger drones you may ask? Nevermind those little handheld models available in high street stores or online from hobby shops. Well, the French have a plan. Apparently, they intend to kit out their eagles with leather and kevlar mittens to protect the birds’ talons.

But, you have to ask, what could you reasonably put a 5-kg golden eagle up against before it became unfair competition? Terrorists are unlikely to get their hands on the monsters deployed by major armed forces like the U.S. Army but even category 2 UAVs, like Boeing’s ScanEagle which is used largely for reconnaissance, weigh in at about 20 kg and travel at up to 150km/hr That’s tough opposition for a 5-kg eagle, even if it can match it for top speed and may enjoy Kevlar mitts!