Articles in Category: Green

Brazilian mining company Vale SA will not financially support Samarco, a joint venture with BHP Billiton, if the company is not able to resume operations, Vale’s head of investor relations said on Thursday.

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Rogerio Nogueira told analysts at an event in Sao Paulo that he did not believe Samarco would need financial support, but that in the event its mine was unable to get permission to restart — there was a major disaster at the dam last year when a tailings dam failed last year —  Vale would not fund Samarco. The joint venture’s iron ore mine closed in November.

Vale received a favorable decision this week when a Brazilian judge ruled it would not have to defend itself against a $5.7 billion civil suit in the matter.

A new $20-million U.S.-India Clean Energy Finance (USICEF) initiative will invest up to $400 million to provide clean and renewable electricity to up to 1 million households by 2020, the White House said this week during a visit by Indian Prime Minister Narendra Modi.

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Another $40-million U.S.-India Catalytic Solar Finance Program will provide financing for small-scale renewable energy investment. Modi’s visit is one of the last opportunities the Obama administration will have to pledge tax dollars to its green energy goals and the opportunity for solar development in India is, indeed, a ripe one.

Renewables_Chart_June-2016_FNL

Cumulative solar installations in India crossed the 7.5 gigawatt mark in May 2016. About 2.2 gw of new capacity has been installed so far this year and it is more than total solar capacity installed in 2015. India’s solar project pipeline has now surpassed 22 gw with 13 gw under construction and 9 gw in the request for proposal process.

India’s Solar Mission

This is all part of Modi’s long-term plan to have 100 gw of solar capacity powering India by 2022. The investments by the Obama administration are also a goodwill gesture that’s designed to get U.S.-based solar panel companies and multinationals with a large presence in the U.S. specified as providers in India’s massive solar park projects. Both governments have been trying to iron out differences that earlier came to a head with the U.S. winning a WTO dispute panel.

The Renewables MMI fell 1.8% this month to 54 from 55 in May. It was one of many slight movements in a tight range for the sub-index that’s not shown much prince movement since September of 2015. The steel metals in the sub-index were also affected by the wild swings between U.S. and foreign steel prices, too.

It doesn’t seem like the pattern of a slow price decline interrupted only sporadically by small periods if increase will change much in the rest of year. Just like it didn’t in the previous three.

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As such, investments such as those being made in India will still take years to come to fruition and the markets for solar silicon, neodymium and pretty much everything but the steel components of wind turbines and solar panels will remain niche markets for the foreseeable future.

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The Supreme Court sided with a company that wants to appeal a Clean Water Act determination claiming private land is “waters of the U.S.” and Iran has found shipping partners to bring its oil to international markets.

SCOTUS Rules Against Clean Water Act

The Supreme Court recently ruled against the Obama administration in a case regarding water pollution permits.

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The nation’s highest court ruled unanimously that a landowner can appeal through the federal court system a determination from the Army Corps of Engineers that a water body is subject to federal jurisdiction and permit requirements under the Clean Water Act.
The court’s eight justices agreed in Army Corps of Engineers v. Hawkes Co. Inc. that the Corps’ final “jurisdictional determination” regarding a peat mining company’s wetlands is a “final agency action,” so the company can challenge it like any regulation. The case is likely to have consequences for the federal government’s entire enforcement of the Clean Water Act, the main law regarding pollution control.

Iranian Oil Coming to Market Faster Than Expected

More than 25 European and Asian-owned supertankers are shipping Iranian oil, data seen by Reuters shows, allowing Tehran to ramp up exports much faster than analysts had expected following the lifting of sanctions in January.

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Iran was struggling as recently as April to find partners to ship its oil, but after an agreement on a temporary insurance fix more than a third of Iran’s crude shipments are now being handled by foreign vessels.

The U.S. International Trade Commission has officially started an inquiry into the hacking and theft of trade secrets from U.S. Steel Corp., allegedly by Chinese hackers. China’s largest steel-producing province has ordered production cuts due to air pollution.

ITC Launches Hacking Probe

U.S. regulators on Thursday officially launched an investigation into complaints by United States Steel Corp. that Chinese competitors stole its secrets and fixed prices, in the latest trade spat between the two countries. The International Trade Commission said in a statement that it has not made any decisions on the merits of the case.

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The commission identified 40 Chinese steel makers and distribution subsidiaries as respondents, including Baosteel Group, Hebei Iron and Steel Group, Wuhan Iron and Steel Co Ltd., Maanshan Iron and Steel Group, Anshan Iron and Steel Group and Jiangsu Shagang Group.

U.S. Steel has accused Chinese hackers of stealing proprietary data to manufacture and sell dual-phase 980, a high-strength automotive steel alloy.

Tangshan Orders Steel Cuts

China’s top steelmaking city of Tangshan has ordered mills in and near the area to cut production for five days from Friday to ease air pollution, according to a notice from the local government.

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It was not clear how much capacity is affected but Tangshan is the biggest city in Hebei province, which accounts for more than 20% of China’s steel output.

In a blatant case of posturing ahead of inevitable compensation negotiations, lawyers —acting on behalf of Brazil’s public prosecutors — are said to have lodged claims totaling $44 billion ($155 billion Brazilian Reais) against mining companies Vale SA and BHP Billiton for the collapse of a dam at their Samarco joint venture last year.

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Needless to say, shares in both companies promptly tanked about 6% even though the prosecutor’s office has a habit of claiming big and settling small. As a measure of just how absurd the figure is, the Financial Times states the 155 billion Reais claim is equivalent to twice Vale’s market value and, if enforced, would bankrupt the company leaving no one to clear up the environmental mess. You can bet the funds would disappear into government coffers, not for the clean-up.

Demands as Negotiation Starting Points

By comparison, the FT reports UBS analysts and others who pointed to the 2011 oil spill off the coast of Rio de Janeiro — that prompted prosecutors to claim $11 billion in damages from Chevron and its drilling partner Transocean — was eventually settled for only $42 million.

Indeed, if Brazil was to genuinely pursue the claim through to its logical settlement it would end up shooting itself in the foot. Samarco is a 50/50 joint venture and so would be the settlement costs but, where Vale is a wholly Brazilian company with 154,000 employees in the country, BHP is listed in London and Sydney with comparatively little else at risk in Brazil.

BHP has already written down its Brazilian asset from $1.2 billion to zero, meaning if it walked away it would lose nothing more, according to Reuters.

Samarco Disaster vs. BP Oil Spill

There is no disputing the dam burst was a disaster and there is widespread belief it could have been avoided. The torrent not only killed 19 people but also obliterated Bento Rodrigues, a town of 800, inundated another larger town with mud, and polluted almost 1,000 km (600 miles) of the Rio Doce.

According to Reuters, the disaster killed fish, contaminated water used for agriculture, and left at least 250,000 people without running water for weeks. It was always going to be expensive but BHP and Vale had already agreed to pay a government-estimated $5.6 billion (R20 billion Reais) over 15 years to cover and repair damages and the firms had thought that was an end to the claims process.

Comparisons have been made with claims against BP over their gulf oil spill naturally enough, but in reality there is little to link them. U.S. prosecutors had BP over a metaphorical barrel with its extensive investments in the U.S. market and could take them to the cleaners with impunity. Arguably, they would not have done the same to a U.S. company.

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Brazil would lose more in the long run doing the same to Vale than they would in ensuring the firm survives and, effectively, clears up the mess. So, while I don’t knowingly hold shares in either company I would be more likely to sell them over anxiety about the firm’s medium-term future in an oversupplied market than the damage overzealous prosecutors are likely to do their profits.

The broad commodities rally even helped our normally moribund Renewables MMI increase at least a little (2%) this month.

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The sub-index is still range-bound but it’s in the upper portion of the range we’ve seen it inhabit for the last year.

Renewables_Chart_May-2016_FNL

The steel plate products in the IndX were mainly responsible for the increase. Magnetic rare earth electric motor metal neodymium and silicon actually saw their prices decrease this month.

Rather than bore you with my regular disclaimer on how difficult it is to gauge what exactly is going on at the U.S. consumer level with renewables, due to rebates and subsidies, let’s talk about recent initiatives that could move the needle on solar.

The Department of Energy recently announced $25 million in available funding through an effort called Enabling Extreme Real-Time Grid Integration of Solar Energy (ENERGISE) to help software developers, solar companies, and utilities accelerate the integration of solar energy into the grid.

How to Capture Solar Power?

It’s been a long-term gripe from many in the power generation business that solar, at least here in the U.S., has been great for homeowners and businesses using crystalline silicon photovoltaic panels to feed energy directly into their appliances, laptops, lights and TVs, but much more difficult to transfer it back into the nation’s grid.

$25 million might seem like a lot, but it’s actually a rather small sum considering how long this problem has confounded some of the greatest engineering minds out there.

The initiative specifically seeks to develop software and hardware platforms for utility distribution system planning and operations that integrate sensing, communication, and data analytics to help utilities manage solar and other distributed energy resources on the grid. Its products will, supposedly, be data-driven, easily scaled-up from prototypes, and capable of real-time monitoring and control.

We’ve been promised similar systems in the past so we’re not holding our breath or anything. Still, the expected 10-15 solutions developed with the new funding will be field-tested by utilities to demonstrate their performance and value in real-world operating environments so there’s some rigor to the program.

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As always, we’ll monitor what comes out of this program and how the solutions could impact metals markets for products such as steel plate and silicon.

What This Means for Metal Buyers

While the broad rally has visited steel, the Renewables MMI is still rangebound.

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U.S. shredded scrap prices started 2015 at $350 per long ton delivered to Midwest steel mills.

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Barring a very brief rally in June, the price fell every month over the year and dropped to $170/long ton in December. Indeed, if we look at the chart, U.S. ferrous scrap prices have been in a downtrend since late 2013.

U.S. Shredded Scrap Prices ($/long ton delivered US Midwest Mill)

steel_insight_scrap_300_050116

Source: Steel-Insight.

When prices fall every month, scrap yards and steel mills reduce their purchases to the bare minimum as they expect to be able to procure material at a lower price the very next month. Read more

New investigations of cut-to-length steel plate from several countries were announced Friday and the Texas Supreme Court rejected a new law that, the court said, preceded the state’s authority to enforce its own air quality laws.

Steel Plate Anti-Dumping Investigation

The Commerce Department has initiated anti-dumping duty investigations of imports of carbon and alloy steel cut-to-length plate from Austria, Belgium, Brazil, China, France, Germany, Italy, Japan, South Korea, South Africa, Taiwan, and Turkey and countervailing duty Investigations of imports of carbon and alloy steel cut-to-length plate from Brazil, China, and Korea.

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The petitioners are ArcelorMittal USA LLC, Nucor Corporation and SSAB Enterprises, LLC. The products covered by these investigations include carbon and alloy steel hot-rolled or forged flat plate products (not in coils), whether or not painted, varnished, or coated with plastics or other non-metallic substances (cut-to-length plate).

Texas Supreme Court Rejects Houston Air Quality Law

The Texas Supreme Court said Friday that the heart of a Houston air quality law is preempted by the state’s Clean Air Act, handing a victory to an industry group including ExxonMobil Corp. and ConocoPhillips.

Attorneys for the city of Houston argued that the city was simply trying to enforce the standards set out by the Texas Commission on Environmental Quality, a state agency, by putting in place a parallel enforcement mechanism that would impose fines on the companies even if the Commission chose not to act.

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In an 8-1 ruling, the justices made it clear that they disagreed, writing that if the Commission chose not to enforce any given law, that did not clear the way for Houston authorities to do so.

China has a dilemma.

On the one hand, popular protests due to increasing levels of pollution are an expression of growing unrest among China’s rising middle classes, all conscious of environmental issues.

Too Much Pollution

Pollution is a source of international shame that has prompted Beijing to take the drastic steps of closing down coal-fired power generation and coal-consuming heavy industry around cities hosting major events such as the Olympic games and flower festivals, so that the People’s Republic can show a clean face to the world.

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On the other hand, that same coal is mined by some 5 million coal workers who have already come onto the streets to protest loudly and publicly about proposed rationalization in the industry and Beijing is nothing if not sensitive to public protest.

Could 2015 be the beginning of the end for coal-fired power in the US? Source: Adobe Stock/Snap Happy

Coal-fired power continues to dominate Chinese power  generation. Source: Adobe Stock/Snap Happy

So, what to do? close coal mines and coal-fired power stations or keep them open and suffer the atmospheric pollution and health hazards that involves?

Pollution Exports

The answer, as with so much else in China, is export it so it’s someone else’s problem. In this case, the policy appears to have been to export the pollution and hence the problem westwards and centrally to less-affluent and less-populated areas.

According to the Financial Times, pollution has decreased in Beijing and Shanghai while it has increased in the interior. Beijing’s smog has been lifting, the average concentration fine particulate pollution (PM2.5) is down 28% year-on-year in the first three months of this year. Read more

Just a month after BMW proudly announced it was shifting its development strategy toward more all-electric vehicles (EVs) and autonomous technology in order to address a “new era” in the industry, the company was rocked by the defection of the core development team of its i3 and i8 electric vehicle lineup.

The embarrassing part is the defection isn’t to another automotive major but to Future Mobility Corp., a Chinese startup backed by Tencent Holdings, a Chinese investment company. The move underlines how established “old world” firms in the automotive sector are struggling to compete with start-ups and newcomers in the EV and hybrid market.

Who Left BMW for Future Mobility?

The WSJ reports that Carsten Breitfeld, a 20-year BMW veteran who developed the company’s i8 plug-in hybrid sports car, left the Munich-based automaker last month to become chief executive of the Chinese electric car company. Now, three key executives from the “BMW i” electric car group are following him. Dirk Abendroth, who developed electric powertrains for the i-series, Benoit Jacob, who was head of design at BMW i, and Henrik Wenders, head of BMW i product management.

AdobeStock_ joel_420_electric_car_550_042016

BMW is betting on electric cars for its future, but Future Mobility just poached its entire i team. Source: Adobe Stock/Joel 420.

One would like to think they are not being simply lured by money, creative professionals of this caliber will be more motivated by being at the cutting edge of development and technology than euros in the pocket and BMW, for all their media hype, have failed to make a success of their electric vehicles division.

BMW Slows Electric Car Development

According to the WSJ, BMW has slowed development of future models. Last year, BMW sold 24,057 i3 models, and 5,456 i8 models, a 66% increase in BMW i division sales but paltry by the standards of a volume automaker. Read more