The Renewables MMI rose seven points in August, reaching a reading of 84.
Meanwhile, in the topsy-turvy world of grain-oriented electrical steel (GOES), the U.S. GOES price jumped 7.3%.
Of the nine metals in the sub-index, only one (U.S. steel plate) posted a drop in price as of Sept. 1. Chinese silicon, cobalt and neodymium all also posted price gains.
Charged Up for Cobalt
Last month, we wrote about cobalt, which is in high demand for its application in electric vehicle batteries. Cobalt is mined predominantly in the Democratic Republic of Congo, which has been shaken by violence and political instability this year.
The instability there has seen production in the DRC decrease this year, yielding significant price increases in the metal. As we wrote last month, the instability of cobalt (not to mention growing ethical concerns vis-a-vis child labor at mines) has some battery makers looking to adjust their metal formulas, in some cases suggesting the use of more nickel, instead.
According to a Reuters report, however, cobalt has been boosted by projections touting a rise in purchases of electric vehicles. According to the report, UBS forecasted electric vehicles will account for 3.1% of global car sales in 2021 and 13.7% in 2025, up from 1% this year.
In addition, cobalt listings have skyrocketed, the report says. As of the end of July, 100 companies that explore or mine for cobalt were listed on the Toronto Stock Exchange and TSX Venture Exchange, up from fewer than 30 in 2015, according to SNL Financial.
In short, despite issues of supply volatility — and, thus, material cost — cobalt’s profile continues to rise in tandem with the rise of electric vehicles.
What About U.S. Steel Plate?
Like the rest of the U.S. steel industry, steel plate producers are anxiously awaiting the Trump administration’s determination in its Section 232 investigation of steel imports.
The investigation, announced in April, has a January deadline. The investigation picked up steam earlier on in the summer, but has seemingly been put on the backburner for the time being. As such, initial optimism from U.S. steel producers regarding potentially imminent trade action stemming from the investigation began to wane.
In a letter to the Trump administration last week, the American Line Pipe Producers Association (ALPPA) urged the president to take action, also mentioning steel plate in the process.
“The ALPPA strongly supports the imposition of tariffs to address this crisis,” wrote Timothy Brightbill, counsel to the ALPPA. “With tariffs in place, we could quickly return to full capacity, adding hundreds of direct jobs in addition to upstream and downstream jobs as well.
“However, in order for tariffs to be effective for our industry, steel pipe must be included in any tariff covering steel coil and plate, as failure to do so would be devastating for domestic large diameter line pipe producers and workers.”
Actual Metal Prices and Trends
Before you get into your planned Labor Day festivities, let’s take a look back at some of the stories here on MetalMiner from the past week:
- After a somewhat stagnant run, aluminum had a strong August — why? Our Stuart Burns covered aluminum’s upward momentum last week.
- Ah, the North American Free Trade Agreement (NAFTA), the deal that’s stayed in the news for much of the year. President Donald Trump recently renewed rhetoric threatening the 23-year-old trade agreement on the heels of the completion of the first round of negotiating talks held in Washington, D.C. We recapped the recent developments in the ongoing talks held by trade representatives of the U.S., Canada and Mexico.
- Speaking of trade agreements, talks are also underway between the U.S. and South Korea on KORUS, the free trade deal the two countries began in 2012.
- China was reportedly amenable to making further significant cuts to tackle excess capacity, which has been a major talking point, not just for the U.S., but the global market. However, President Trump rejected China’s proposal. Burns offered his analysis on the situation.
- It’s been a mostly good year for base metals — but not every metal has joined in on the fun, as our Irene Martinez Canorea wrote last week.
- Hurricane Harvey inflicted a severe toll on the people of southeast Texas and southwest Louisiana. Now, there’s a long road ahead to recovery, both in terms of the humanitarian and economic impacts of the storm.
- Burns looked to the the so-called “lucky country” of Australia, which is rich in iron ore. But what happens when iron ore reserves are exhausted? Answering the question briefly: look to the sun.
Australia is sometimes called “the lucky country.”
Although the phrase is usually meant positively to reflect its bountiful natural resources (and sometimes to its isolation from conflict and strife elsewhere in the world), the original meaning was not so complimentary.
At the start of the last chapter of Donald Horne’s book “The Lucky Country,” a passage reads “Australia is a lucky country run mainly by second rate people who share its luck. It lives on other people’s ideas, and, although its ordinary people are adaptable, most of its leaders (in all fields) so lack curiosity about the events that surround them that they are often taken by surprise.”
Personally, my experience of Australians has been very favorable: there is no one we like better beating at sports, they have a good sense of humor and are one of the few societies that have maintained a reasonable work-life balance.
But maybe part of that comes from those bountiful natural resources, much like Norway and a few other mature but resource-rich economies. The country is partially supported by exports of commodities they have in abundance. The Reserve Bank of Australia estimated in 2014 that household incomes across the country were 13% higher than they would have been without the mining boom and real wages were 6% higher.
Just like a Norway without oil and gas, without iron ore, coal, natural gas and other natural resources Australia’s economy would have to work a whole lot harder to just tread water.
The Renewables MMI, which tracks metals and materials going into the renewable energy industry, moved up by a single point for our July reading, up to 72 from last month’s 71.
For just the second time this year, U.S. steel plate posted a price drop, falling 3.7% for this month’s reading. U.S. grain-oriented electrical steel (GOES) also fell, by 1.2%. GOES had alternated between price drops and rises all year until this month, when GOES dropped in price for the second month in a row.
Meanwhile, Chinese steel plate rose 1%. Chinese neodymium, cobalt cathodes and silicon also posted price increases.
Japanese and Korean steel plate both posted price drops, by 1.1% and 5.9%.
The renewable metals market is potentially in for a jolt in the coming years, especially in light of the direction of the automotive industry.
Last week, Volvo announced that “every Volvo it launches from 2019 will have an electric motor, marking the historic end of cars that only have an internal combustion engine (ICE) and placing electrification at the core of its future business.” While the reviews are mixed regarding how revolutionary the announcement actually was, it is certainly a long-term boon for the metals used in electric vehicles.
In other automotive news, Tesla is preparing to debut its Tesla Model 3. According to a Reuters report Tuesday, the new sedan model is expected to increase Tesla’s sales by 500%.
While Tesla’s sales currently represent a tiny fraction of the sales of the traditional automotive heavyweights, its sales are on the rise.
According to Autodata Corp sales figures released earlier this month, Tesla’s U.S. sales in June amounted to 3,900 units, up by 25.8% from June 2016, and year-to-date sales in 2017 (23,550) were up 42.7% from the same time frame in 2016.
However, a Washington Post report earlier this week notes that electric-vehicles sales hit a wall in Hong Kong once tax breaks there expired.
In the short term, the same thing could happen as sales pick up in the U.S.
Currently, a maximum total credit of $7,500 is afforded for consumers who purchase plug-in electric vehicles. That credit, however, begins to be phased out once a manufacturer sells more than 200,000 vehicles in the U.S.
On a macroscopic scale, despite President Donald Trump’s decision to remove the U.S. from the Paris climate accord, renewable energy, in general, has picked up momentum.
While clearly a long-term goal, France announced it will ban the sale of petroleum- or diesel-fueled vehicles by 2040. Also, the U.S. Conference of Mayors voted in late June to approve a resolution to help cities establish a “community-wide target of powering their communities with 100 percent clean, renewable energy by 2035.”
Actual Metal Prices
Swedish carmaker Volvo is betting the farm on electric vehicles.
In an announcement this week, Volvo cars said beginning in 2019, it will no longer launch new car models powered only by an internal combustion engine. According to the Financial Times, pure and electric hybrid cars will be the only game in town for the Swedish carmaker.
Following hot on the heels of Tesla’s launch of its most affordable mass-produced Model 3 — which, since March last year, has taken nearly 400,000 pre-orders, a remarkable vote of confidence in what has become one of the most exciting brands in the automotive industry — does Volvo’s announcement spell the end of the internal combustion engine?
Regardless of the headlines, Volvo is not turning its back on petroleum and diesel engines just yet.
Reading between the lines, the pledge is to launch five new models between 2019 and 2021, all of which will have petrol and diesel hybrid options, plus electric vehicle EV) versions, not five new models which are EV only. Although Volvo is owned by Chinese manufacturer Geely — and as such does not have to report to shareholders on a quarterly basis, giving greater flexibility to invest today for the longer term — the Swedish carmaker is still not saying it can achieve this on its own.
Rather, Volvo’s announcement is saying to the market it is seeking cooperation among battery manufacturers and infrastructure providers to provide solutions to the two biggest challenges EVs face: limited range and limited charging infrastructure.
The first challenge, range, requires continued massive investment in research and development to drive down battery costs and increase power density. The latter challenge requires a massive investment, not just in charging points, but also in configuring electricity grids to cope with demand if EVs achieve scale.
Volvo’s Chinese ownership probably influenced these strategic goals in another way.
This morning in metals news, copper slipped from its two-month high on the London Metal Exchange (LME), Canadian researchers have discovered a way to make metals processing greener and nickel hits its lowest price in a year.
Copper Falls in Anticipation of Federal Reserve Interest Rate Decision
Copper fell from a two-month high on the LME — and dropped 1.1% on the Shanghai Futures Exchange — ahead of the U.S. Federal Reserve’s decision this week regarding raising the interest rate (which many expect it to do), Reuters reported.
The decision is scheduled to be announced Wednesday afternoon, after the conclusion of a two-day policy meeting.
An uptick in the interest rate is expected to shore up the dollar, making dollar-based commodities more expensive for holders of other currencies and leading to a dip in demand, Reuters reported.
Researchers Announce Environmentally Friendlier Way to Process Metals
A Canadian team of researchers recently announced a new method for processing metals without toxic chemicals or reagents, Science Daily reported.
The team outlined its approach in a recently published article in Science Advances. Through their method, the scientists seek to perfect a process that curbs the negative environmental impacts of processing metals, using easily recyclable compounds instead of toxic materials.
The discovery was the result of a collaboration between Jean-Philip Lumb and Tomislav Friscic at McGill University in Montreal, and Kim Baines of Western University in London, Ont.
As demand for electric vehicles grows and green initiatives become more visible, it’s not surprising to see movement toward making the entire production process going green — for example, from the processing of raw metals all the way to a final product itself (a “green” vehicle).
Nickel Falls to One-Year Low
It isn’t a good time for nickel, which fell to its lowest price in a year Tuesday in a climate of falling Chinese steel prices and a weak forecast for the Chinese economy, Reuters reported.
As the Chinese government tackles credit debts — the nation was recently downgraded by rating agency Moody’s for the first time since 1989 — many expect growth to slow in the second half of the year. That prediction has already been borne out by weak April and May Chinese economic data, according to the article.
Caroline Bain, chief commodities economist at Capital Economics in London, told Reuters that China’s efforts to rein in credit growth and curb excessive behavior on the property market is “bad news” for metals.
Editor’s Note: This is the second of two posts — the first of which ran yesterday — from our Sohrab Darabshaw on renewable energy in India.
India saw nearly $10 billion invested, both in 2015 and in 2016, in renewable energy projects. Last year, $1.9 billion of green bonds were issued. India’s solar targets alone need $100 billion of debt.
Posting in the Bloomberg View opinion section, columnist Mihir Sharma, however, struck a slightly skeptical note.
“India is not like China, or the U.S., or Australia or Germany when it comes to meeting its Paris pledges,” he wrote. “In India, hundreds of millions of people still live without electricity — a big part of what keeps them desperately poor. India also has a shrunken manufacturing sector, partly because electricity is so expensive (relatively) and its supply so variable. No democratically accountable Indian government can ever favor an international agreement over fixing these two problems.”
Sharma added coal “looks bad” in India at the moment because “its economy is struggling and because it is so services-intensive. Over the past few years, coal plants have used less and less of their capacity as growth has slowed.”
But, if India’s economy does take off, Prime Minister Narendra Modi might indeed be faced with such a choice.
Editor’s Note: This is the first of two posts from our Sohrab Darabshaw on the renewables industry in India. Check back tomorrow for Part 2.
Energy experts, the domestic media, research organizations and even representatives of other governments seem pretty sure that India is the next green-energy giant in the making (U.S. President Donald Trump’s recent assertions notwithstanding).
Trump, while announcing his country’s intention to withdraw from the Paris climate accord, justified it on the grounds that the agreement was unfair to the U.S., and that it was skewed unfairly in favour of developing countries, such as India.
In the wake of that move, many in the Indian media have pointed out that a fact that the Trump administration seemed to have missed was that while India was the third-largest contributor to carbon emissions today, the U.S. was the second. The U.S.’s per capita carbon emission was still significantly higher than other large countries, according to data from the World Bank, and far higher than that of both India and China, according to a report in the online publication Scroll.
Not many within or outside the country are doubting India’s stated aim of ensuring that 40% of energy used would come from non-fossil fuels and rapidly developing renewable energy sources by 2030.
After a 17-point leap in our Renewables MMI from April to May, the sub-index — which tracks metals and materials going into the renewable energy industry — posted no movement for our June reading, standing at 71.
(A quick note: Last month, the sub-index rose to 71 after a recalibration of our index to better account for cobalt price fluctuations.)
But that doesn’t mean there were not big swings within the sector — far from it.
U.S. steel plate, the heavy hitter of this group, posted a 4.8% drop last month — but that quickly reversed itself.
This time around, U.S. steel plate bounced back, posting a 2.7% increase. The bounceback followed a trend of exclusive growth for U.S. steel plate in 2017, as the 4.8% drop reflected by the May 1 price marked the only month-to-month drop of the year thus far.
Unlike steel plate, U.S. grain-oriented electrical steel (GOES) went in the other direction, posting a price drop that nearly erased previous the April-May price increase. This month, GOES dropped 6.2%, one month after prices rose by 9.1%. (More on how GOES does/doesn’t trend along with broader steel markets in the section below.)
Abroad, steel plate also had good months in China and Japan. Chinese steel plate rose by 2.8%, while Japanese steel plate got a 0.7% boost.
What’s the Deal With GOES?
As MetalMiner’s Executive Editor Lisa Reisman wrote Thursday, GOES prices have been on a “roller coaster ride” so far this year.
“GOES prices do not tend to follow general steel price trends, nor does simple fundamental (supply and demand) analysis help explain price trends,” Reisman wrote.
Globally, however, GOES prices are on the rise. Why? That has been driven by an increased demand for electric cars and GOES producers in the U.S., Korea and Japan securing tonnage at a $400-500/metric ton increase over previously contracted prices.
Domestically, while prices for GOES — metals used in electrical transformers — went down this month, Reisman predicted that likely won’t become a trend throughout the remainder of the year.
“It’s hard to see any outcome not resulting in rising U.S. GOES prices for the second half of the year,” she wrote.
Again, looking to the global picture, good news for this sector is the growth of the renewable energy industry overall.
The BBC reported the U.K. has set renewable energy production records this year. In the U.S., CNBC reported even in states like Kansas — which two years ago repealed a renewable energy mandate that called for 20% of the state’s electrical power to come from renewable sources by 2020 — have ramped up renewable energy production.
Actual Metal Prices
This doubtful week, a Stanford economist made the bold proclamation that electric vehicles will completely displace their petrol and diesel counterparts by 2025, and India’s plan to triple steel production by 2030 was met with more than a few raised eyebrows.
Speaking of India, its ascent as a promising market for renewable energy has been truly impressive. Consultancy EY recently published its 2017 Renewable Energy Country Attractiveness Index (RECAI), and India took the number two spot, beating out the U.S., which slipped to third place.
India had been number nine in 2013, before Narendra Modi, who views developing renewable energy to wean India off coal as a top priority, became prime minister. Modi aims to boost India’s renewables capacity to 175 GW by 2022 (currently capacity stands at 57 GW).
India has similarly high ambitions for steel, as Sohrab Darabshaw reported earlier this week. The country aims to triple its steel production capacity by 2030, which would mean adding 182 million tons of capacity. Read more