Articles in Category: Minor Metals

Rainbow Rare Earths, which owns a rare earths mining project in Burundi, was listed on the London Stock Exchange at the end of January, according to the Financial Times. This has prompted speculation in mining and trading circles that China’s dominance may finally be challenged. We’re not holding our breaths, and China likely isn’t either, but it wouldn’t be the first time that the abundance of resources in Africa had been underestimated.

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The U.S. Geological Survey said in 2015 that China’s annual production of the key battery, magnet and conductor elements was slightly more than 100,000 metric tons. Australia came in second with 10,000 mt. Only three other countries produce more that 1,000 mt of rare earths a year. The US produced 4,100 mt but that’s sure to go down after the 2016 closure of the Mountain Pass mine, Russia produced 2,500 and Thailand checked in with a respectable 1,100 mt contribution to the production of cell phones, military hardware and wind turbines.

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The FT points out that despite China’s dominant market position in refined exports, the same is not true of rare earth deposits. It’s estimated that China has no more than 30% of global deposits of the quite abundant, despite their name, elements. The problem that all new rare earths projects run into is the cost of bringing new deposits into production and the ability of one country with such a dominant position to flood the market and bring down prices, hitting the viability of new projects.

What’s Left of China’s Previous Challengers

Remember what happened to Molycorp, Inc. and how the Japanese threw a lifeline to Australia’s Lynas Corp.? Yet, the fact that Lynas is still trudging along and investment is still being made by a Japanese government and industrial culture that wants nothing to do with China’s rare earths industry may, paradoxically, be what sets Africa apart and its low-cost resource sector apart from others who have taken on the dragon.

Japan was de facto banned by the Chinese government from receiving any shipments of rare earths back in 2011 after the Japanese Navy detained a China fishing trawler captain. Since then, Japanese industry has not only aggressively replaced rare earths in its supply chains, depriving China of customers, but also supported Lynas and other non-Chinese manufacturers even to the point of keeping them in business. There is little doubt that both public and private Japanese money would automatically flow into African projects if significant deposits of rare earths are found.

Grudge Match

That China has lifted export quotas and prices have fallen to a low range means little to nothing to Japanese businessmen and women who remember having their supply chains cut off in 2011.

According to the FT, it is widely acknowledged that, outside North America and Australia, southern and eastern Africa offer the greatest potential for rare earth production, especially in South Africa, Tanzania, Malawi, Mozambique, Kenya, Burundi, Zambia and Namibia.

Rainbow Rare Earths’ IPO is premised on its Gakara project in Burundi. The project is not yet producing and further exploration will be needed. The risks described in the IPO prospectus are a reminder of the difficulties of developing such projects, including pricing and environmental challenges and the need to produce ore at the required levels of concentration.

Rainbow raised $9.77 million (₤8 million) at its IPO.

The Rare Earths MMI broke eight straight months of flat performance and increased 1 point (5.9%) to 18 this month.

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We have long lamented that while solar energy production is a mature generation technology that should be used in nearly the entire U.S., the inability of our electronic grid in much of the country to store solar-generated energy limits its use to when the sun is shining. This almost always requires a backup (usually burning natural gas) for those hours when the sun does not shine.

Renewables MMIIt’s been a few years since we last talked about the baseline load problem that causes utilities that have abundant solar generation, particularly subsidized photovoltaic silicon panels on homeowners’ roofs, to bring energy costs down to zero during the day while the complete lack of generation at night forces them to give much of their short-term stored energy away before the sun goes down.

California Dreamin’: Solar for All

The Wall Street Journal recently reported that, stepping in where government and university research have failed to deliver solutions, for-profit California utilities — including PG&E Corp., Edison International and Sempra Energy — are testing new ways to network solar panels, battery storage, two-way communication devices and software to create “virtual power plants” that manage green power and feed it into California’s power grid. In California, real-time wholesale energy prices often hit zero during the day while the need for energy at night can spike them to as high as $1,000 a megawatt hour.

If California wants to stand as a land of free-flowing solar without even the need of the fossil fuel industries that the Trump administration says it wants to re-energize, then it will need a way to store its solar power, particularly if it wants to retire its last nuclear plant in 2025. Power company AES brought 400,000 lithium-ion batteries online last month in Escondido, Calif., (near San Diego) where Sempra plans to use them as a “virtual power plant” to smooth out its energy flows over the 24-hour service day.

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Electric car manufacturer Tesla, Inc. is supplying batteries to Los Angeles area network that will serve Edison International, to create the largest storage facility in the world if no one builds a bigger one by 2020 when it’s slated to be completed. The facility will be able to deliver 360 mw/h to the grid for a full day on short notice.

The 2,2000-mw Diablo Canyon nuclear plant is owned by PG&E, which wants to retire it by 2025 to meet stringent state energy codes as well avoid costly upgrades to the aging plant. Its first unit began churning out power in 1986 for the company then known as Pacific Gas & Electric.

Many utilities avoid building lithium-ion battery virtual plants because they remain considerably more expensive to build and set up than traditional power plants. California’s state laws make them more desirable there because of both environmental policies (read, climate change goals) and the regulatory hurdles and costs of just building a new plant in the Golden State. Of course, that hasn’t stopped the state from approving and building them, but the utilities that have shuttered plants early are now turning to the virtual plants to shore up their own bottom lines. PG&E Is testing batteries, software and several technologies to upgrade its grid and replace Diablo Canyon.

Intermittency, What is it Good For?

If Tesla, PG&E, Sempra and Edison can solve the grid intermittence problem in California then economies of scale could reduce the costs of virtual plants elsewhere and incentivize grid modernization via market prices rather than regulation. The costs of energy from a virtual plant will still likely cost more per mw/h than those of a new gas peaker plant, but only experimentation in cost reduction from actual working plants providing energy 24/7 can bring down those costs and deliver the innovation necessary to both optimize and right-size battery-based virtual plants. The utilities deserve praise from both customers and investors for boldly going where none have gone before. Once again, the market provides.

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The Renewables MMI inched up 1.9% this month in the very mature actual metals market.

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Investors are running up cobalt prices as automakers and suppliers stock up on the raw material for lithium-ion batteries as they prepare for an increase in electric vehicle production.

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Reuters reported that Shanghai Chaos Investments and Switzerland-based Pala Investments as two of the companies that invested heavily in cobalt last year, although the amount they’ve stockpiled is unknown.

On Dec. 1, cobalt was just around $30,000 per metric ton on the London Metal Exchange. As of Monday, one mt of cobalt was trading around $49,000. That’s an increase of 63% in three months.

Report: Trump Will Scrap EPA Clean Power Plan Next Week

President Trump is expected to issue orders next week that will begin the process of striking the Clean Power Plan and ending a moratorium on new coal mining on federal lands.

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The plan was largely opposed by manufacturers and metals producers. Its end will most likely bring a sigh of relief from utilities with coal-dominated generation mixes, as well, since they won’t have to alter their generation mixes within any deadlines.

We warned last month that the mostly small losses the prices our MetalMiner IndX experienced were caused by investors taking profits.

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Our suspicions were confirmed when almost all of our sub-indexes had big price rebounds this month. The Automotive MMI jumped 12.2% Raw Steels 8% and Aluminum 6%. Even our Stainless Steel MMI only dropped 1.7% and has taken off since February 1 as nickel supply is even more in question now with both the Philippines and Indonesia’s raw ore exports in question.

The bull market is on for the entire industrial metals complex. Last month’s pause was necessary for markets to digest gains but the strong positive sentiment for both manufacturing and construction shows no signs of ebbing in the U.S. and Chinese markets.

California’s Mountain Pass mine, the sole significant developed source for rare earths elements in the U.S., will go on the auction block in March, according to papers filed in late January in the U.S. Bankruptcy Court in Wilmington, Del.

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Up for sale is land and some equipment at the mine which cost former owner Molycorp, Inc. roughly $1 billion to develop, according to the court. Mineral rights at the site belong to an entity called Secured Natural Resources LLC, which is owned by creditors of Molycorp including JHL Capital Group LLC.

The open-pit mining operation was part of Molycorp’s plan to have both production and processing capability for rare earths, at a time when prices were high (early in this decade)… but as our Rare Earths MMI chart shows, prices have been flat for eight consecutive months now and low for much, much longer. The prices of the 2011 rare earths market, strongly affected by Chinese supply disruptions, appear to be nothing more than a distant memory at this point.

A switch in trade policy in early 2015 — prompted by losing a World Trade Organization case — ended export quotas placed on Chinese producers effectively killed any chance Molycorp had to compete based on costs of production. Molycorp’s rare earths processing business, with operations mainly in Asia, emerged from the bankruptcy as the core of a reorganized company, Neo Performance Materials, but Mountain Pass and its high cost of production were left behind in the reorganization.

According to the Wall Street Journal, a Swiss investment fund linked to Russian-born billionaire Vladimir Iorich is part of a buyout group that has made an offer to take over Mountain Pass. Pala Investments Ltd., Iorich’s investment firm, is a partner in a buyout group’s $40 million offer for the assets. Joining Pala is Novatrek Capital GmbH, a private-equity firm founded by Pala alumnus Joseph Belan, as well as Sole Source Capital of Los Angeles, according to filings with the bankruptcy court.

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Efforts to sell Mountain Pass out of bankruptcy had struggled because the mine carries with it national security concerns, due to its ability to produce rare earths for high-tech military equipment, and might catch the eye of international trade regulators. The Committee on Foreign Investment in the U.S., or CFIUS, is likely to take an interest in new owners, according to courtroom discussions during the bankruptcy case, the Wall Street Journal reported. CFIUS is an interagency body tasked with reviewing transactions that could result in control of a U.S. business by a foreign person to determine if the deal would have affect the national security of the U.S.

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After filing for chapter 11 bankruptcy protection last year and subsequently being declared “hopelessly insolvent” by a judge, U.S. energy giant SunEdison Inc. is winding down its operations in India.

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SunEdison is exiting its India business by selling 1.7 gigawatts of wind and solar farms to Greenko Energies Pvt.

Foreign Investment

Greenko is backed by the sovereign wealth funds of Abu Dhabi and Singapore. The two sites include one with 440 megawatts of capacity already operating and another 1,200 mw of projects still under development including a 500 mw solar project. Reports pegged the projects total assets value at about $500 million. Read more

It looks as if European Union tariffs on Chinese solar materials will last a little longer.

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In a presentation of the preliminary results of its anti-dumping and anti-subsidy investigation into the import of Chinese solar modules and photovoltaic cells into the E.U., the European Commission has proposed an extension of the current tariffs on Chinese solar panel raw materials for two more years once the current tariffs expire in March.

Based on confidential documents Reuters reviewed, the Commission said ending the measures would likely lead to a continuation of Chinese subsidies for the solar sector and a significant increase in dumped imports of solar cells and modules.

So, no lucrative European markets without tariffs for China, but some in the European solar industry are also blanching at a continuing lack of competition for solar projects.

SolarPower Europe president Oliver Schaefer told PV Magazine that the Commission’s recommendation to maintain the trade measures for another two years is the wrong decision, stressing that the organization will look to E.U. member nations to redress some of what it calls the “inaccuracies reported.”

“Opening ex-officio interim reviews on the minimum import price mechanism is simply tinkering at the edges of a profound issue of European-wide importance,” Schaefer said.

European manufacturers of the panels, however, were all for continuing the tariffs. EU ProSun, a manufacturers’ group that includes Germany’s SolarWorld said there is no shortage of competitively priced cells and modules in Europe and that the depressed E.U. market was due to political decisions, such as to reduce payments for green energy, not the import measures.

The EC report, itself, said turning back the tariff measures would only have a limited effect on demand and that comparisons between the 50,000 people working in importing and installation and the 5,000 to 10,000 in manufacturing were not appropriate. Job gains in the former could be outweighed by losses in the latter, the report stated.

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Demand for solar panels in Europe is certainly stronger than North America right now, but both industries still rely heavily on government subsidies and prices, as a result, have stabilized at the low level we’ve observed for over three years now. The Renewables MMI was up one point this month.

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As any good rare earths buyer knows, China produces more than 85% of the global supply of rare earths and the country is also the largest consumer.

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What if China was to become a net rare earths importer? A recent report by Adamas Intelligence, a rare metal research firm says that China will, eventually, become just that.

The report reiterates how substitution and replacement have hurt demand over the last six years. It says 30,000 metric tons of annual rare earth oxide demand were lost due end-users’ growing concerns over supply security. On top of that more than 20,000 mt were lost as a result of the ongoing phase out of mature technologies such as fluorescent lamps, some nickel-based batteries, and hard disk drives used in PCs.

This isn’t news to anyone following our Rare Earths MMI. It’s been flat for the last three years and has remained steady at 17 for the seventh straight month.

However, they will eventually recover. According to Adamas, following a lengthy and painful adjustment, the rare earths market will return to strong global demand growth for a number of rare earth elements including neodymium, praseodymium, dysprosium, and lanthanum by 2020. The resulting rise in price will help “sustain the profitability and growth of today’s dominant producers, and incentivize continued investment in exploration and resource development globally”

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Rare earths demand will boom from 2020 onwards as growth rates of top end-use categories such as electric vehicles, wind turbines and other high-tech applications accelerate. One of Adamas’ key takeaways is that as China’s insatiable demand for rare earth elements continues to grow over the next decade, China’s domestic production will struggle to keep up in all scenarios, leading the nation to become a net importer of certain rare earths at the expense of the rest of the world’s supply security. In fact, by 2025 China’s domestic demand for neodymium oxide for permanent magnets alone, Adamas believes, will be poised to exceed total global production of neodymium oxide by 9,000 mt.

So, even if the market looks essentially flat for the next nine years, the promise of renewed rare earths demand is still there.

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Japanese electronics company Panasonic and U.S. electric car maker Tesla said today they plan to begin production of solar cells at a factory in Buffalo, New York.

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The two companies said they finalized an agreement calling for Tokyo-based Panasonic to pay capital costs for the manufacturing. Palo Alto, California-based Tesla made a “long-term purchase commitment” to Panasonic.

Their statement gave no financial figures. The factory in Buffalo is under development by SolarCity Corp., a San Mateo, California-based solar panel company owned by Tesla. The photovoltaic cells and modules will be used in solar panels for non-solar roof products and solar glass tile roofs that Tesla plans to begin making, the announcement said.

LME Names New Clearing Executive

The London Metal Exchange has appointed James Proudlock as deputy chief executive of its clearing system, the exchange said last week.

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Proudlock, who has 30 years experience in commodities, will join LME Clear in April next year.”Prior to joining LME Clear, James worked at JP Morgan Securities for 10 years where he was a managing director and commodity product lead for Futures and Options and most recently markets execution,” the LME said.

About a year ago I was interviewed by a columnist from a leading economic newspaper about the prospects for the lithium market.

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The gist of the article was the question of will lithium demand from electric vehicles unsustainably drive up prices due to supply shortages? I said no. I expected the market to rise as demand increased, but that there was no shortage of lithium in the world and supply would rise in response to price increases and demand.

Well, the paper went on to report that supply shortages would constrain the market and the lithium price was set to boom. That’s okay. I don’t expect everyone to take my advice as gospel and, to some extent, you could say the author was right, the price has risen as this graph from CRU illustrates.

Source CRU Group

Source: CRU Group

But the same CRU article goes on to explain that to every price rise there is a response. The extent to which the market responds with new capacity or expansion to existing capacities varies with the commodity, the market during the time frame involved and any number of other issues. We will come back to CRU’s modelling of the lithium market a little later but, for now, how has the lithium industry responded to this rise in demand and what effect has the rising price had?

Lithium Investing

Well, Reuters leads an article with “stampede to invest in lithium mines threatens price gains” and goes on, as the title suggests, to say a rush to invest in new and expanded mines for lithium means material will flood the market just as demand for lithium batteries is due to soar, curbing prices. Read more