Minor Metals

MM-IndX_TRENDS_Chart_July-2015_FNL

There’s no reprieve from the bearish metals environment in this month’s MMI Report.

More Analysis: The July Metal Price Forecast

With the exception of the very specialized grain-oriented electrical steel (GOES) market and the Renewables MMI®, all of our indexes lost ground in June and could not gain traction amid falling commodity prices and a strong US dollar.

The one index that was steady from last month, which tracks raw material inputs of the renewable energy sector, has been stagnant for two years and, until trends show otherwise, its steadiness is more a measure of a lack of market activity than anything close to a turnaround or a new trend toward increasing prices.

The Stainless MMI is flirting with two-year lows and our Raw Steels index is up against lows not seen in years as well. Weakness in the Chinese stock market has put additional pressure on metals that were already reeling from the effect of the strong dollar. This is bad news for steelmakers, miners, refiners and smelters by itself, but coupled with increased supply in most of the metals we track, it’s become a real deterrent to profitability.

Moreover, both Europe and the US have higher-than-normal inventories of semi-finished products at service centers. Mill lead times remain short suggesting weak demand. Weak demand will continue to place downward pressure on prices.















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July 2015 Monthly Metal Buying Outlook copy

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After months of rancorous trade battles, a funny thing happened to the crystalline silicon solar photovoltaic panel market. Prices in market leader Europe suddenly went up. For the first time in a decade.

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Prices for solar panels in the European spot market have risen by about 6% so far this year, according to pvXchange, a solar market consultancy based in Bremen, Germany.

Renewables_Chart_July-2015_FNLFlat is the New Up!

Our monthly Renewables MMI® doesn't track panel prices per se, only the silicon raw material that goes into them, but still registered a value of 58 in July, on par with June's value. Flat is the new up in this bearish commodity market.

Despite the modesty of the increase, it's a huge turning point for European solar as the increase represents an abrupt reversal of historical trends. In 2011, the average price of a solar panel in Europe fell by nearly one-third compared to the previous year. In 2012, solar panel prices in Europe plunged by nearly another third. Just last year, the price of a solar panel in Europe fell by more than 14% compared to the previous year.

What's even more astounding is that this increase could have been caused by the real price of silicon finally being quoted in a majority of European retailers. We have long lamented that government subsidies for both silicon exports in China and for local solar installation in destination markets have artificially eroded the price of silicon.

Tariffs to the Rescue?

A trade war was waged in the US largely between Germany's Solarworld, Inc., and small Chinese manufacturers who received government support for silicon exports at home and possible kickbacks abroad from installers who specified their thin-film products over higher-quality silicon products from companies such as SolarWorld. The real price fight, though, was always in Europe where solar could make up 12% of power generation by 2030.

The European Commission renewed their own tariffs on Chinese silicon recently and it looks like those duties were finally enough to keep the cheap imports out of their markets. A robust European solar market is good news for silicon refiners and producers such as Solarworld as higher prices mean more profitability for them.

It's too early to tell if this turnaround will ever be felt in the highly subsidized the US market, but it's certainly a good sign.

The Renewables MMI® collects and weights 8 metal price points used extensively within the renewable energy industry to provide a unique view into renewable energy metal price trends over a 30-day period. For more information on the Renewables MMI®, how it's calculated or how your company can use the index, please drop us a note at: info (at) agmetalminer (dot) com.

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Substitution continues to plague the rare earths market as our high-tech metals index fell from its already low, entrenched lull.

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Many manufacturers have found non-rare earth elements to use in battery, magnet and other applications or found a way to reuse and extend the life of the rare earths they already buy.

Rare-Earths_Chart_July-2015_FNL

Rare Earths Light

Lanthanum, dysprosium, cerium oxide and europium oxide have all steadily fallen in price since 2011. These lighter rare earths were certainly helped down the slope by China ending its export quotas for rare earths but, honestly, the slide happened way before that thanks to substitution and reuse.

Cerium, for instance, is used to polish glass and silicon wafers commonly used in photovoltaic solar panels. Solar manufacturers have found ways to collect it and reuse it. Simple reuse has cut demand for cerium by 70%. This has been happening since roughly 2012 and cerium's price has fallen in lockstep as purchasers stretched their cerium further.

The monthly Rare Earths MMI® registered a value of 24 in July, a decrease of 7.7% from 26 in June and close to its all-time low of 23 last year. Yes, our lowest index fell nearly 8%.

Molycorp Files Chapter 11

This substitution problem is the bane of the only US-based rare earths miner, Molycorp, Inc., whose business is based almost entirely on light rare earths. The heavy rare earths, such as yttria, are scarcer and have more specific uses. It came as no surprise, then, to regular MetalMiner readers that Molycorp filed for chapter 11 bankruptcy protection this month.

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Molycorp has secured interim financing and is still operating, paying employees and selling product to clients such as Siemens AG for its wind turbines, but, long-term, it will need to sell products that can't be as easily substituted or reused if it is to survive.

Actual Rare Earths Prices, Light and Heavy

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While everyone has focused on Greece, the falling Chinese stock market might be the bigger threat to commodities. Also, a major US rare earths producer has been granted interim funding.

Chinese Stock Market Dragging Down Commodities

China’s falling stock market is injecting more stress into a global commodity sector already reeling from the Greek debt crisis. Prices of copper, coal, natural gas and iron ore are all falling toward their 2015 lows.

July Metal Price Forecast

The Chinese economy growing at its slowest pace in a generation. The country’s ongoing stock market turmoil – which has seen a 30% plunge in the benchmark CSI300 index since mid-June – is threatening to pull the entire commodity complex into the red. Stronger performers such as oil and solar are now being dragged down by the lack of Chinese demand, as well.

Molycorp, US Bankruptcy Court Agree on Interim Financing

Molycorp, Inc., a producer of rare earth products, recently received approval from US Bankruptcy Court on $22 million in interim debtor-in-possession (DIP) financing provided by an affiliate of Oaktree Capital Management. The new funds will support operations going forward for an interim period while Molycorp continues to negotiate with Oaktree and a group representing its secured 10% noteholders, both of which represent secured creditors that have presented competing DIP lending proposals.

This September: SMU Steel Summit 2015

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Metals, especially copper, experienced plummeting prices Monday as the world reacted to Greece’s no vote on whether or not to accept more austerity measures from the European Union. The Organization for Economic Cooperation and Development (OECD) also came no closer to phasing out coal subsidies for member nations.

Greek Debt Crisis Hurts Metals, Other Commodities

Most commodity prices suffered on Monday after Greece rejected terms for a bailout and top consumer China unleashed emergency measures over the weekend to prevent a full-blown stock market crash.

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“The thing to watch is the Euro/Dollar exchange rate. If the dollar starts going up as a result of what happened, that would exacerbate an already bearish commodities and metals markets,” said MetalMiner Executive Editor and Co-Founder Lisa Reisman.

Brent crude fell below $60 per barrel on Monday, to levels last seen in April. Chinese steel prices are now at their lowest since the peak of the global financial crisis in 2009, with futures down 70% to around 2,000 CNY per metric ton.

“A lot of bad news out of China will be very bearish as well and we don’t yet know how much of that crisis has been factored into the current market,” Reisman added.

Three-month copper on the London Metal Exchange hit its weakest since mid-March at $5,640 a mt, down by 2%.

“The longer term question of Greece is also one that goes unanswered – what is the long term health of the European Union? That could have a long term impact but not a short term one,” Resisman said.

OECD No Closer to Ending Coal Subsidies

A decision on phasing out a form of coal subsidy is unlikely to come soon but discussions among members of the Organization for Economic Cooperation and Development continue ahead of UN climate talks, the OECD’s secretary-general said on Friday.The OECD has been trying for a year to get an agreement from its 34 member nations on ending export credits for technology used to produce coal, the most polluting of the fossil fuels.

This September: SMU Steel Summit 2015

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Screen Shot 2015-07-01 at 11.56.49 AMIt’s been a wild ride, but after three months of adding, subtracting, nip/tucking and perfecting, we are finally at the July metal buying outlook – the third and final complimentary MetalMiner™ Monthly Metal Buying Outlook – the only July metal price forecast and market commentary you will ever need.

Lisa Reisman, CEO, Azul Partners and executive editor, MetalMiner, is back with her tool kit and expert insight into the industrial metals aluminum, copper, nickel, lead, zinc, tin and steel (HRC, CRC, HDG, Plate) so you can formulate your short- and long-term buying strategy.

While this is the last complimentary Monthly Metal Buying Outlook, we are excited to announce the launch of the commercial product on Aug. 1.

Beginning in August, we will offer the Monthly Metal Buying Outlook for $899/year. That’s less than $75/month for 12 reports, or an annual subscription.

Check out the complimentary July report!

More About Lisa

A third-generation metals enthusiast, Lisa Reisman founded MetalMiner in 2007 – 13 years after she began trading semi-finished aluminum metals and 3 years after she was tasked by the CEO of a Tier 1 automotive company to save his company some money on their direct material spend. Lisa is an ex-big 5 consultant who built MetalMiner into the largest online publication for metal-buying organizations, and has the experience and depth of insight to produce this one-of-a-kind invaluable monthly report to impact your industrial metals purchasing strategy.

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A recent study by SNL Metals & Mining reported that delays in the US mine permitting process diminish the value of minerals and mining projects – underscoring a need for a streamlined permitting process.

This September: SMU Steel Summit 2015

The study, “Permitting, Economic Value and Mining in the United States,” commissioned by the National Mining Association, found that duplicative permitting processes can delay mining projects a decade or longer and those processes, both federal and state, are hindering US mining industry’s ability to meet a rising demand for minerals.

SNLstudyimage

It can take three to five times as long to receive a mining permit in the US than in Canada or Australia. Source: NMA/Minerals Make Life.

Some mining projects lost as much as half of their value while awaiting state or federal approval. Three domestic mines in Arizona, Alaska and Minnesota served as case studies for the research. In one example, SNL found that after eight years of delay the value of Arizona’s Rosemont mine dropped by $3 billion. Alaska’s Kensington mine suffered 20 years of mining delays, while the capital cost of building the mine increased by 49%.

Where Have Exploration Dollars Gone?

“Why aren’t we attracting the exploration dollars we should be? Back in the mid-’90s we attracted about 20% of the worldwide exploration budget for mining. Now, it’s only about 7% and I do think it’s this delay on the return on investment that makes a big difference,” said Katie Sweeney, senior vice president, legal affairs, and general counsel at the NMA. “Are you going to put your money in Australia where you can get a permit in a couple of years or here where it’s 7 to 10? The process is definitely broken.”

The study details a veritable alphabet soup of permitting processes in all three states as well as the federal process. It quantifies incremental, production and additional risk. There is a comparison with the processes in Australia and nearby Canada in the report as well, one that’s not favorable to the US as both clock in with an average permit time of two years compared to seven or more for US projects.

The timeline for the government to respond is more clearly outlined in those countries, the permitting agency leading the process is identified from the outset and responsibility for preparing a well-structured environmental review is given to the mining company, not the government. In the US not only is a primary permitting agency not defined, but several groups with competing interests could be lining up for review.

New Legislation

There are bills pending in both the US House and Senate to streamline federal processes.

“On the House side we should see the bill move through. It’s passed the lower chamber the last two congresses so I would anticipate it will get through this congress as well,” Caswell said. “On the Senate side we think there is more opportunity than in previous congresses. Senator Lisa Murkowski (R. Alaska) is a champion of this bill and with her in position as Chairman of the Energy and Resources Committee, she has more opportunity to promote moving this bill forward. When she held the last hearing on this bill there seemed to be wide support among the committee members present. We are hopeful of making progress in the Senate this time.”

Free Download: Latest Metal Price Trends in the June MMI Report

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Yesterday, the only US-based rare earths miner — Greenwood, Colo.-based Molycorp, Inc. — filed for chapter 11 bankruptcy protection as part of a reorganization of the company's debt.

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This has been expected since Molycorp missed a debt payment early this month. In a statement, Molycorp President and CEO Geoff Bedford said, "The actions we have taken today are important steps toward achieving a restructuring of our $1.7 billion debt with our major creditor constituencies. In doing so, the company expects to exit Chapter 11 with an appropriate financing framework to support our business going forward."

Rare-Earths_Chart_June-2015_FNL

We have documented the long stock price slide Molycorp has experienced and how many manufacturers have simply found substitutions for the light rare earths they offer. As with any bankruptcy, Molycorp's shares will be removed from the New York Stock Exchange and move to the OTC pink sheets.

While it's difficult to say if Molycorp will be able to emerge as quickly as Bedford's prediction, it will take recovery in the overall rare earths market for it to succeed. Our MetalMiner Indx has documented a steady slide in rare earths prices over the last two years.

What This Means for Rare Earths Buyers

China eliminating quotas and opening its rare earth products up to foreign markets is depressing prices overall. Right now rare earths are in surplus and less production or greater demand will be necessary to bring prices back to 2011 levels.

Free Download: Latest Metal Price Trends in the June MMI Report

The Rare Earths MMI® collects and weights 14 global rare earth metal price points to provide a unique view into rare earth metal price trends. For more information on the Rare Earths MMI®, how it's calculated or how your company can use the index, please drop us a note at: info (at) agmetalminer (dot) com.

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President Obama and congressional republicans won a battle for trade authority in congress and a major rare earths restructured and sought bankruptcy protection.

Trade Promotion Authority Passes Senate

The US Senate voted Wednesday to give President Barack Obama “fast track” authority to negotiate trade deals—one of the final steps in a long political battle that pitted the White House against House Democrats in a battle over trade authority for the president. Fast track means deals such as the Trans-Pacific Partnership, which will be debated later this year, must be given an up or down vote by the Senate.

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The bill—which passed 60-38 in the Senate—will be sent to the president’s desk. Separate bills to provide assistance to American workers displaced by trade deals, known as Trade Adjustment Assistance, and to provide tougher anti-dumping enforcement protections from US Customs and Border Protection, particularly for the steel industry, are expected to follow and possibly be signed by the president simultaneously.

Molycorp Files for Chapter 11

Molycorp, Inc. filed for chapter 11 bankruptcy protection today.

The only US miner and producer of rare-earth elements—15 elements used in magnets, batteries, catalytic converters and other high-tech products—said it had secured an agreement with creditors to restructure its $1.7 billion in debt. The deal also provides $225 million in new financing to continue operations.

Molycorp and 20 subsidiaries filed chapter 11 petitions in the U.S. Bankruptcy Court in Wilmington, Del. The company said it expects to exit chapter 11 before the end of 2015. The restructuring support agreement is with creditors that hold over 70% of the aggregate principal amount of the company’s 10% senior secured notes.

The Company’s operations outside of North America, with the exception of non-operating companies in Luxembourg and Barbados, are excluded from the filings. Molycorp Rare Metals (Oklahoma), LLC, with operations in Quapaw, Oklahoma, also is excluded from the filings as it is not 100% owned by the Company.

Free Download: Latest Metal Price Trends in the June MMI Report

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