Articles in Category: Minor Metals

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

Over the holidays, we are republishing and revisiting some of our most well-read posts of 2016. While this one technically doesn’t fall into the 2016 (it was initially published December 14, 2015) but we are still looking back at it anyway since it deals with predictions about metal prices for the year we’re about to leave behind. It also gathered the second-most traffic of any post we published in 2016 despite predating the year by a few weeks.

At the time, my colleague Raul de Frutos wrote “Currently, some key Chinese indicators we are tracking are giving us no reason to expect higher metal prices in 2016.”

Yet, we have seen higher metal prices in 2016 and we are now in a full metals bull market. The reason we are is because of everything Raul cited in his post. He was 100% right that “the longer it takes China to clean up its mess, the later metal prices will hit bottom.”

China cleaned up its mess, hit bottom early in 2016 and turned global commodities demand around remarkably fast, all things considered. This reminds us that markets can make a turn around quickly. The future is unpredictable and we need to take the market day by day. Just four months after this post, we went from bearish to completely bullish on industrial metals.  Enjoy the second of our Best of MetalMiner in 2016 series. -Jeff Yoders

As you well know, the main cause of the commodities meltdown has been China’s slowdown. Since China makes up half of the world’s demand for commodities, the economic slowdown means lower demand which has led to a situation where a glut of materials can’t find a home.

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The role that China plays in commodity prices is so big that the future of metal prices is totally dependent on China. The longer it takes China to clean up its mess, the later metal prices will hit bottom. Currently, some key Chinese indicators we are tracking are giving us no reason to expect higher metal prices in 2016.

Trade Surplus

Imports to China dropped 8.7% to $143.14 billion in November from a year earlier, extending a slump in imports to a record 13 months, suggesting that government stimulus measures are failing to boost growth.

China Imports (millions $) Source: trading economics.com

China Imports (millions $) Source: TradingEconomics.com from Customs Administration Data.

Meanwhile, Chinese exports declined 6.8% to $197.24 billion in November from a year earlier, marking the fifth straight falling month. The fact that China is struggling to increase its exports demonstrates that global demand is weak and that China will have to find a more painful solution to balance its surplus. The trade surplus and the inability to find a home for the excess of materials flow will continue to keep a lid on China’s growth, depressing commodity prices.

China Exports (millions $). Source: tradingeconomics.com

China Exports (millions of dollars). Source: TradingEconomics.com

 Yuan Falls To Four-Year Low Against The Dollar

Chinese authorities want to see a smooth depreciation of the yuan/renminbi as China faces external pressure not to devalue its currency too quickly. A sharp depreciation would probably hurt the country’s credibility at the same time China wants to attract more foreign capital. In addition, it would raise criticisms that China is keeping its currency artificially low to encourage more exports.

Yuan versus dollar. Source: yahoo finance

Yuan versus dollar. Source: Yahoo Finance.

Recently, China’s central bank cut its reference rate to the lowest level since 2011. The yuan fell against the dollar to the lowest level since 2011. Although China has said that it has not allowed the yuan to slide to boost the economy or increase exports, it seems that the market is taking these developments as desperate actions from China’s government to help the economy, raising concerns among investors that the country’s slowdown might worsen.

China’s Equity Markets’ Slump Continues

We believe that equity markets are the best benchmark for the performance of China’s economy, or at least investors’ sentiment about China. We’ve analyzed before the link between China’s stock market and commodity prices. Currently, this link is even more noticeable.

China FXI ishares

China FXI shares continue to fall. Source: @StockCharts.com.

After the huge slump this summer, equity prices mildly recovered, but since October we see that equities are heading south again. The poor performance of Chinese stocks demonstrates that investors are still worried about the future of the country and not lured by its government actions.

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Contrary to what others are saying, we suspect that the slump in China’s stock market could continue, resulting in more fears and more sell-offs in commodities/metals markets.

MM-IndX_TRENDS_Chart_December2016_FNL-TOPVALUE100If you read MetalMiner, it’s no surprise to you that the industrial metals bull run took off in a major way this month. Copper rose nearly 17% to edge out the Raw Steels MMI (up 14%) as our December big winner, but even the metals that lost a little ground (aluminum and our global precious index) pared their losses below 3% on the MetalMiner Indx.

The industrial metals picture looks a lot more upbeat than it did just two months ago, but markets are fluid things. When will commodities and the surging U.S. dollar (the dollar index hit a new high Thursday) uncouple? Can the optimism last? What will higher interest rates mean in the new year?

We hope you made your purchases before prices took off and we’ll be here in 2017 and beyond to advise you on how to buy industrial metals in this bull market.

 

India has brought the world’s largest solar power plant online.

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At the end of November, the world’s biggest solar power plant was completed in the southern part of India and its already generating power.

Spread over 2,500 acres in the Tamil Nadu province, the new solar plant replaces the Topaz Solar Farm in Riverside County, Calif., as the largest solar power farm in one location in the world. The Indian solar farm can generate 648 megawatts of green electricity, while Topaz generates 550 mw. India aims to power about 60 million homes by using solar energy by 2022. The Tamil Nadu plant, built by Adani Power, can light up about 150,000 homes. India aims to produce 40% of its electricity from renewables by 2022. Read more

The Chinese government is attempting to support domestic businesses by shoring up rare earths market conditions.

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This includes stepped up enforcement of environmental rules at rare-earth metal plants and crackdowns on illegal mining and smuggling.

Rare-Earths_Chart_December-2016_FNL

Beijing carried out a series of spot inspections on environmental measures at factories last summer. Teams of experts tested wastewater and examined pollution-reduction measures at rare-earths smelting and separation plants. Operations at facilities that did not meet standards were suspended.

Those inspections covered a total of eight provinces and regions, such as Inner Mongolia, Heilongjiang and Jiangsu.

Japan is still wary of Chinese production due to a 2011 unofficial boycott of selling raw rare earths to the islands by Chinese producers. So much so that the Japanese have taken an interest in keeping Australian rare earths miner Lynas Corp. alive and helped it restructure its debts last month.

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The Rare Earths MMI did not move for the sixth consecutive month, showing just how much the market has stabilized since the last China-Japan rare earths dust up.

Correction: A previous version of this post referenced a patent expiration this month for neodymium and cobalt motors. That patent expired in 2011 and was later rejected outright. We regret the error.

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The world is not short of tin yet tin prices are still rising. Not short in the total-percent-present-in-the-earth’s crust kind of way, anyway.

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It is also relatively well distributed: the five largest producing countries are China 35%, Russia 12%, Australia 8%, Indonesia 7% and Brazil 6%, according to Platts. These mines are not in unstable or war-torn regimes. Some mines in places such as Myanmar and the Democratic Republic of the Congo are less savory, sure, but as a percentage of the whole they are not mission critical to global ore supply.

Yet, ore grades are falling and much of what is left will require a progressively higher price to be economically extractable. Falling London Metal Exchange and Shanghai Futures Exchange inventories are signalling that real or apparent demand remains strong and the rise by tin to become the second-most actively traded metal on the LME this year as the price has surged underlies strong investor interest.

After falling to the lowest level since 2009 to $13,085 a metric ton in January, tin is now trading at $21,400 per mt. Investor appetite has been insatiable, particularly in China, driven in part by a perception that demand is outstripping supply. BMI Research is forecasting the global tin market will see a supply shortfall deepen to 9,400 mt in 2020.

“This is mainly due to higher average tin consumption than production, as a result of depleting ore reserves,” the research group is quoted by the FT as saying.

But before we all get too carried away, the industry is getting twitchy about the price and that should ring alarm bells. Although the FT says “visible” stocks held in LME or SHFE warehouses are at their lowest level since at least 2000, there is a “high level of under-reported stocks in China.”

Yunnan Tin, suppliers of over one-quarter of global refined tin output, called for a “sustainable recovery” in the market, “rather than volatility caused by hot money or speculation in futures markets.”

While ITRI warned that “…money flows from the investment funds, could be the determining factor in metals price.”

A warning from both that supply-demand is not currently driving prices and therein lies an inherent risk.

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That doesn’t mean to say the price hasn’t got further to go. There is no shortage of liquidity in the Chinese investment market and speculators this year have pushed not just tin but copper and other metals to annual highs. Tin’s fundamentals aren’t bad by any means but the FT reports that nearly 30% of Chinese smelter capacity sits idle today, a warning sign that high prices may not be matched by downstream demand.

Our November metal price trends report showed an industrial metals complex buoyed by strong Chinese demand and bullish on the future, thanks to the election of republican presidential candidate Donald Trump who promises to curtail regulations on metals producers and the energy suppliers that provide power for smelting, steelmaking and mining.

MM-IndX_TRENDS_Chart_November2016_FNL-TOPVALUE100

While some of the metals turned in a flat performance during the month of October, almost all quickly took off after the election. Now, as our lead forecasting analyst, Raul de Frutos, recently wrote, the industrial metal bulls are in full charge.

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The minor metals remained flat, but that’s no surprise to any buyer at this point. The fact that rare earth miner Lynas Corp. received a lifeline from a hedge fund and a Japanese state-owned enterprise was a minor (metals) surprise itself.

It’s a good time to be a producer of base metals as it looks like the bulls may continue to run in 2017. For more information on how to plan your purchases well into the New Year, consult our monthly metal buying outlook.