Whereas copper, aluminum and other ferrous metals have languished due to oversupply, the tin price has risen steadily and robust demand has met a constrained supply market. According to the World Metal Statistics August report, the tin market recorded a deficit of 7,200 metric tons during January to June 2016. That’s less of a deficit than in the equivalent period in 2015, true, but still a deficit and with no DLA deliveries during the period total reported stocks fell by 2,600 mt during June. In spite of rising production of refined metal in Asia, a 12.6% increase in demand from top consumer China kept the market under pressure.
Against such a backdrop, the reopening of previously abandoned mines is not unexpected. What does raise an eyebrow is the tactics of one junior miner in employing the image of the hit UK BBC period drama “Poldark” in trying to entice investors onto its $150 million fund.
Strongbow Exploration is invoking the romance of the series set in the 18th century mining industry of northern Cornwall to buy-a-bit-of-history, according to the Telegraph. The TV series featuring the dashing Aiden Turner and delectable Eleanor Tomlinson has been a massive hit here in the U.K. — and may prove equally popular to the “Downton Abbey” series once it’s rolled out around the world. It’s just starting its second series (or “season” to you Americans) with even higher viewing numbers.
“One Day, this will all be yours.” “What, the curtains?” “No, all that you bloody see!” Poldark is taking audiences by storm and igniting memories of romantic tin mining. Image courtesy of PBS/Masterpiece.
Strongbow may well raise its capital on the romantic idea of buying into a 400-year-old mining tradition, but hard-nosed investors may like to know that with modern recovery technologies, Strongbow’s South Crofty mine has at least a 10-year lifespan.
Those are the words of MetalMiner Co-Founder Stuart Burns writing last month about how efficient and cost-effective energy storage could allow intermittent power sources such as renewables to play a baseload role in energy delivery. The U.S. Department of Energy is funding 75 projects developing electricity storage, funding research at Harvard, MIT, Stanford, and the elite Lawrence Livermore and Oak Ridge national labs in a bid for achieve a breakthrough. But haven’t we heard this all before?
Research has long been touted as the key to unlocking the potential of renewables for at least a decade now. There are plans for hydrogen bromide, zinc-air batteries, storage in molten glass, next-generation flywheels, to name but a few with many claiming “drastic improvements” that can slash energy storage costs by 80–90%, but it will be — at best — years before we see any of these technologies and work.
Our Renewables MMI dropped a point to 52 this month, reflecting the general low-demand market the specialty and rare earth metals used in solar panels and wind turbines are in. We remain skeptical that, even with such a research investment, that a breakthrough in energy storage is imminent. Existing technologies — such as Tesla’s powerwall home batteries — hold the most potential for renewable energy storage right now.
India’s Solar Panel Turnabout
Meanwhile, in an example of turnabout is fair play, India has decided to take its case against U.S. solar subsidies of photovoltaic panel companies to the World Trade Organization and the world’s largest democracy, honestly, has a good chance of winning.
The complaint alleges the states of Washington, California, Montana, Massachusetts, Connecticut, Michigan, Delaware and Minnesota prop up their renewables sector with illegal subsidies and domestic content requirements – an obligation to buy local goods rather than imports.
India lost a case at the WTO earlier this year after the U.S. complained about local supplier requirements to provide silicon photovoltaic panels for India’s massive new national solar power initiative. We said, at the time, that the U.S. might want to rethink taking the case to the WTO and even accepting the win.
Now, India is saying what’s good for the goose has to be good for the gander, and that the U.S. shouldn’t be able to subsidize its solar industry at the expense of Indian panel importers. It’s difficult to see how our nation will argue the exact opposite of what it said about free trade and market forces just one year ago when U.S. panel manufacturers were salivating over the prospect of providing of the 4,5000 megawatts of panels needed for three phases of India’s massive. Jawaharlal Nehru National Solar Mission and didn’t want India’s local subsidies to keep them out.
U.S. Protects its Interests in India
SolarWorld and several other U.S. panel manufacturers cried foul and the Commerce Department and International Trade Administration appealed the case all the way to the WTO and won. Now, those chickens have come home to roost. By filing the complaint, India has triggered a 60-day window for the U.s. to settle the dispute, after which India could ask the WTO to adjudicate.
California’s clean energy law, alone, has some of the richest solar subsidies in the world. Not only does the state offer cash back for installation of panels, it also doesn’t include rooftop generation by homeowners as mw that go toward meeting the state’s ambitious energy targets (50% of all energy from renewable sources by 2030). That means utilities creating their own solar parks get more impact toward meeting government goals, and rewards and lawmaker consideration, than homeowners and businesses do. Ratepayers essentially subsidize utility companies toward meeting the state’s renewable goals.
21 states and the District of Columbia include rooftop solar panels in their mandates for clean energy but not California.
What Does This Have to do With Renewables?
California’s subsidies for providing panels to solar projects are also quite rich. The California Solar Initiativeoffers rebates to buyers of the panels whether they are installed on homes, businesses or in utilities’ solar parks. The value of each rebate is defined by a complicated equation, but if India can prove those subsidies are against WTO — especially considering how much more consideration big buyers like utilities receive than homeowners and businesses — the case could be a serious slam dunk against U.S. solar subsidies.
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Comments from the most recent Steel Market Update summit at the end of August suggest it may be hard to “buck the trend.”
What are these macro trends?
Steel demand looks weak overall and overcapacity will continue unabated. According to Tony Taccone, Partner at First River Consulting, “global steel demand has stalled and there will be no growth going forward.” In addition, Taccone indicated the world has 700 million metric tons of overcapacity and the problem is set to become worse.
Trade cases will put the kabash on Chinese export growth. China has produced too much steel at unsustainable prices and has exported materials at the marginal cost of production, according to Taccone.
Automotive demand may have peaked and aluminum demand may weaken steel demand.
Despite weak demand in some sectors, others paint a more positive picture. According to Alan Beaulieu, Principal of the Institute for Trends Research, many factors look more positive for demand including light vehicle production, U.S. industrial machinery production (recently turned positive), a booming office building construction market, a stabilized oil and gas extraction market and healthy global demand for crude oil.
In addition, Beaulieu pointed to rising mining, electricity generation and manufacturing sectors, that certainly bodes well for power equipment production and demand.
With the loss of Allegheny Technologies, Inc. capacity for GOES, the uptick in electricity generation and construction, and the more bullish outlook for other commodities and non-ferrous metals, we might expect GOES prices to creep up accordingly.
Though the macro trends paint a slightly more negative picture for steel prices in general (negative for producers, positive for buying organizations) for the near term, GOES markets don’t cleanly align with steel markets. September marks the second month of a rising price trend.
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The sole major U.S. rare earths mine will stay safely mothballed even as its former owner, Molycorp Inc., exits chapter 11 bankruptcy freed by the process of the obligations of owning it, likely ending for some time any attempt by a U.S.-based company to locally produce the specialized battery and magnetic elements on a mass scale.
We believe in you, Texas Mineral Resources Corp., but we’re waiting on the results like the rest of the country. Also, we love the new name.
Molycorp failed to sell its Mountain Pass mine in San Bernardino County, Calif., as part of its bankruptcy case. Molycorp became Neo Performance Materials after it exited bankruptcy and no longer has any connection to the Mountain Pass mine and facility where it shut down production a little more than a year ago.
Paul Harner, the chapter 11 trustee in charge of the mine, warned recently there was no point in continuing a separate bankruptcy for it as there was no money to do anything with the property even if the trustees wanted to.
Zombie Mine Lease
Lexon Insurance Co. offered to lend Mountain Pass’ estate $4.2 million to maintain the mine and continue the search for a buyer. The mine still costs money to keep in a safe condition and California environmental authorities are watching. Until the maintenance fund runs out — or prices change enough to make it able to reopen and don’t take that bet (see below) — Mountain Pass will exist in a state limbo, neither fully closed nor able to be restarted.
The Lahontan Regional Water Quality Control Board, part of California’s network of water safety overseers, said that it least wants to keep the lights on, the gates locked and the pumps running.
Pumps at Mountain Pass confine groundwater contaminated with barium, nitrate, radium and uranium.
Low Prices = Closed Mines
The open-pit mine was the sole U.S. source of rare earths. When rare earths prices were high back in 2011, Molycorp plowed $1.5 billion into the Mountain Pass facility but shut it down last year as prices continued to erode for both light and heavy rare earths. Before declaring bankruptcy, Molycorp vowed to focus its production on its operations in Estonia.
Prices have stayed low for the last three years so it’s no surprise that Molycorp and the bankruptcy court couldn’t find a buyer. Our Rare Earths MMI registered another 17, charting pretty much the same flat course it’s coasted through for the last three years.
China removed export quotas on producers of the magnetic and battery metals at the end of 2014 and — while demand from cell phone, computer and defense manufacturers has remained steady to up ever since — supply of heavy rare earths from China and Australia’s Lynas Corp. has more than filled the gap.
Other nations are still interested in developing their own rare earth resources as no one wants to experience a Japan-style Chinese producer boycott, which actually happened in 2011 when Chinese producers cut off their neighbor with no official statement or explanation why. The boycott ended just as mysteriously as it began, but one thing it did do was inspire major Japanese manufactures such as Honda Motor Corp. to find substitutes for heavy rare earths so they could scale back reliance on their testy neighbor.
Why Didn’t Molycorp Fail Earlier?
Molycorp probably stayed alive longer than it should have due to such sentiment. It even got kid-glove treatment on 20/20 in a last-ditch effort to avoid bankruptcy, one that MetalMiner Co-Founder and Executive Editor Lisa Reisman poked several holes in when it happened. The concern over rare earths was actually a market distortion caused by hype and not a reflection of the actual availability and abundance of the materials.
Canada’s Rare Earth Quest
Yet, in Canada — as with TMRC’s Round Rock, Texas, deposit — exploration is continuing and there is plenty of investor interest in providing manufacturers with a source of yttria, neodymium and dysprosium oxide.
Quest Rare Earth Minerals, a Canadian company, has vision for a mine at Strange Lake, on the Labrador-Quebec border, and it inched a bit closer to reality this month after submitting environmental impact statements to the Canadian government.
The company hopes to mine rare earths there and process them in a facility they will construct very similar to the what Molycorp did at Mountain Pass. Yes, they’re planning to do the exact same thing Molycorp did only with a government that will likely place even more restrictions and market disadvantages on the project than the U.S. federal government slapped on Molycorp. There are caribou where Quest wants to mine, so hold onto your wallets, investors!
Quest President Dirk Naumann, however, acknowledged that the market environment might be a bigger hurdle than any environmental hurdle such as local caribou paths.
“The economy around the globe (as far as) mining and resources is concerned, faces lots of difficulty,” he said.
If that’s not the understatement of the year, he should also note the difficulty the PARTICULAR rare earths market faces. Being able to produce and refine its own rare earths is a laudable goal for any nation’s government, just as supporting local manufacturing and enough farm capacity to feed all its people in case of a disaster is, but to blindly throw money into an oversupplied market in hopes of prices coming up someday in the future?
That’s just called bad economics. Check out that chart. We usually expert our price curves to, well… curve. It really does all come down to the third rule of acquisition.
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Titanium sponge is a key raw material to produce ATI’s titanium products. While global titanium-sponge production has increased significantly in the last couple of years, the global industrial-grade titanium market has continued to be weak. As a result of these two factors, ATI is now able to purchase titanium-sponge in the global market at prices below Rowley’s cost of production.
Titanium sponge is now available at lower costs on the open market than for ATI to produce it themselves. Titanium cluster image courtesy of AdobeStock/Tomatito26.
ATI stated that it is able to procure from qualified global producers even aerospace-quality sponge under long-term agreements. ATI has entered into competitive long-term agreements with qualified producers for both standard and premium titanium sponge. The Rowley facility will be idled by the end of 2016 in a manner that allows the facility to be restarted in the future if a reopening is supported by market conditions.
In addition to the idling of Rowley, higher cost titanium hot-working operations in Albany, Ore., will be consolidated into other operations. Read more
Historically low food commodity prices are causing mayhem for farmers and equipment manufacturers as the decreasing returns on investment are keeping older equipment in the field and China has started stockpiling rare metals again.
The trend is being fueled by an excess supply of dairy products, meat, grains and other staples and less demand for many of those same products from China and elsewhere due to the strong dollar.
Deere & Co. (maker of John Deere tractors and farm equipment) plans to cut additional production of its trademark green tractors and harvesting combines this fall in response to the continued downturn in the global farm economy as farmers are making due with their current machines due to low ROI on their crops.
The world’s largest maker of farm equipment by sales said the cuts will affect plants in Illinois and Iowa, blaming weak demand in North America and markets in Europe and South America for the moves.
China’s Stockpiling Rare Metals Again
China is stockpiling rare metals and curbing output to tighten global markets, pushing up prices of some materials despite sluggish underlying demand.
The metalloid antimony went for around $7,100 a metric on the London spot market in early August. This marked a climb of a little over 10% from a recent low in early June, as well as a one-year high.
Over the past year, antimony has for the most part traded at $5,000 to $7,000 per mt, weighed down by sluggish demand and overproduction. China, which produces roughly 80% of the metalloid worldwide, has cracked down on smuggling and in early spring began using environmental regulations to halt operations at major producers. But this resulted in only a slight upturn in prices on the international market.
On the one hand there are the passionate environmental believers for whom the inflated subsidies were an irrelevance in the face of saving our planet, and on the other were naysayers for whom the arguments about global warming were a plot by the far left to raise taxes or run some kind of tree-hugging environmental agenda at the expense of business and consumers.
Neither polarized position was fair, of course, and the quiet majority in the middle have watched the technologies become progressively more efficient and costs fall dramatically while the extremes of global warming horror stories have been discredited, but the hard science of gradually rising carbon levels has been widely accepted.
Who Cares Why The Temperature is Rising?
In the process, a wider acceptance has gained ground that global temperatures really are rising and whether it is part of a natural cycle or man-made is not a risk we can afford to take. Ultimately, action to reduce carbon emissions will be cheaper than many possible downside scenarios if left unchecked and most people would accept we are making a mess of our environment and really should behave more responsibly.
Meanwhile, politicians have been plowing our taxpayer money into supporting wind, solar and a number of other “renewable” technologies, with some degree of success. Costs for the major energy sources — solar and wind — have fallen, partly as a result of technology improvements and partly due to economies of scale, to the point now where private firms are signing up to invest in major wind projects for a tariff of just $100 per MegWatt/Hour (€90 per mw/h). Indeed, in Europe all the extra power capacity added since the mid ’90s has been renewable.
Source: Telegraph Newspaper
The biggest hurdle renewables now have to overcome is not the cost of production, but the curse of intermittency. Where does the power come from when the wind doesn’t blow or the sun doesn’t shine? Read more
We rarely see such positive growth in metal prices as we did in the August MMI Price Trends Report.
All the metals we track were up save for Aluminum, which fell only 1.3%, and renewables and rare earths, which held flat. The Stainless Steel MMI increased 9% amid uncertainty about Chinese nickel ore supply after mining crackdowns in top supplier, the Philippines.
Meanwhile, the most bullish of bull runs continued for our Global Precious MMI which added a 7.2% increase to its jump last month to knock on the door of the top 10% of the IndX. The platinum group metals had strong increases along with gold and silver this month.
“Hey metal buyers, remember me?” Wall Street bull courtesy of iStock.
Palladium, particularly, made higher highs and stumbled to lower lows in classic bull market fashion.
So buy quickly before prices increase more, right? Wrong. Our Raw Steels MMI posted a healthy 4% increase, but it’s still heavily dependent on China’s stimulus programs to keep demand up in the largest global consumer of steel products. If there is a pullback in stimulus, prices could fall dramatically. The same is true for copper.
Unlike diamonds, bullish trends in commodities and industrial metals don’t last forever. Continue to make informed buying decisions in this thriving market — watch China’s stimulus program and the strength of the U.S. dollar post- Brexit — and remember that today’s price strength might be tomorrow’s carpet getting pulled out from under your feet.
Dr. Christopher Bayer, Ph.D., of the Payson Center for International Development of Tulane University Law School, recently responded to an e-mail interview with MetalMiner Editor Jeff Yoders about the recent Conflict Mineral Benchmarking Study he led of Dodd-Frank Conflict Minerals compliance.
More than three years after U.S. companies began filing reports about their efforts to find conflict minerals linked to armed militias in Africa in their supply chains, 65% say they still can’t make a determination about what minerals are in those chains. Bayer explained more in this MetalMiner Q&A.
Chris Bayer. Image: Tulane University.
Jeff Yoders: Analysis of the reports shows that conflict-minerals reports are boosting supply-chain transparency for many of these companies. Is that an added benefit to reporting?
Chris Bayer, PhD: Yes, a company can use Dodd-Frank Section 1502 to gain insight into its own supply chain, to a degree that would probably not have been previously possible. Whether and how companies may leverage that to their advantage is up to them, but without question, information is power. Quite a number of companies are weeding out non-performing suppliers in their supply chain according to their defined parameters on conflict minerals.
JY: 10% Of all filers said, or implied, they had conflict-free products. What did you and your team’s research tell you about these claims?
CB: First off, it is in fact an extraordinary claim for a company to make. A whole lot of work would go into ruling out the possibility that the company is indeed not — through its procurement practices — fueling conflict in the Democratic Republic of the Congo. Your due diligence inquiry is, by definition, very involved, given the sheer amount of tiers and suppliers to traverse on average. But as per the Securities and Exchange Commission, a company should take care not to designate is products as DRC conflict-free unless it can also provide independent assurance that would lend credibility to such a claim.
JY: Incomplete reports were still an issue. How long do you think it will be until companies can, at least, fill out complete reports?
CB: Since many companies are already able to achieve full compliance — including reporting smelter Or Refiner (SOR) and Country of Origin (COO) data — the we-need-more time argument becomes less plausible.
JY: More companies underwent product audits this year. Are outside product audits necessary for full compliance?
The low price of rare earths did not come about because of export quotas being struck down in China or the World Trade Organization loss that precipitated the quotas’ end. In China, heavy rare earths production became more stable, but that wasn’t the reason either. What has caused the rare earths market to essentially collapse is substitution on a large scale and better recycling of the high-tech minerals.
Rare earths demand has fallen because manufacturers sought to eliminate the threat of a national blockade, the likes of which Japan felt after Chinese rare earths producers essentially blacklisted the country in 2011.
Companies such as Siemens, Samsung and Honda have accelerated research on how to use less of the minerals, especially the “heavy” rare earths such as lanthanum and dysprosium. In that way, China hurt its own monopoly by forcing their customers to apply more ingenuity and brains to eliminating or limiting the scarce elements in their supply chains. Honda even produced a hybrid car engine, the first ever, that doesn’t rely on heavy rare earths.
Honda’s apparent turning point was a partnership with fellow Japanese firm Daido Steel in 2011, prompted by China’s squeeze. The result today is a new technique for designing crucial engine magnets that avoid heavy rare earths and are 10% cheaper and 8% lighter, Honda told the Wall Street Journal.
The world will still likely need rare earth elements, particularly for renewable energy products such as solar panels and wind turbines, but the evidence of the damage done by China’s attempt to corner the market on heavy rare earths is now overwhelmingly apparent and a recovery in prices will not happen in the short term.
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