Public Policy

The new Senate Energy Bill released to the public this week promises to help miners by modernizing federal permitting processes, but what, exactly, is in the bill for the domestic industries?

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We asked the National Mining Association to detail exactly how the bill would help miners and their manufacturer customers.

One of the biggest changes it would make is requiring the federal government to come up with a definition of what “critical minerals” are.

  • The bill amends Section 3 of the National Materials and Minerals Policy, Research and Development Act of 1980 to modernize the congressional declaration of federal mineral policies.
  • It requires the secretary of the interior, acting through the director of the US Geological Survey, to establish a methodology for the designation of critical minerals based on the potential for supply disruptions and the importance of their use. Requires the list of critical minerals to be reviewed and updated at least every three years.
  • Requires the Secretary of the Interior, in coordination with state geological surveys, to identify and quantify critical mineral resources throughout the US within four years. Requires a report on the status of geological surveying for any mineral on which the US is more than 25% import dependent, but which is not designated as a critical mineral.
  • Permitting: Outlines a series of performance improvements and reporting requirements to reduce delays in the federal permitting process for mines that will produce critical minerals. Requires the development of a performance metric to evaluate progress made in improving permitting efficiency.
  • Directs the Office of Management and Budget to include mining projects on the Federal Infrastructure Projects Permitting Dashboard. Requires a report from the Small Business Administration on regulations affecting the critical minerals industry.
  • Requires Federal Register notices to be completed within 45 days, prepared at the organization level of the agency, and transmitted from the office in which the documents or meetings are held or the activity is initiated.
  • Directs the Secretary of Energy to conduct a program of research and development to promote the efficient production, use, and recycling of critical minerals throughout the supply chain, and to develop alternatives to critical minerals that do not occur in significant abundance in the US.
  • Analysis and forecasting: Directs the Secretary of the Interior, in consultation with Energy Information Administration, to establish a forecasting capability for critical mineral reliance, production, price, recycling and related factors. Requires a new “Annual Critical Minerals Outlook” and protects proprietary data.
  • Education and workforce: Provides for a workforce assessment, curriculum development and programs related to critical minerals at institutions of higher education.
  • Reauthorizes the National geological and geophysical data preservation program
  • Administration: Repeals the National Critical Materials Act of 1984, makes conforming amendments, and provides two savings clauses related to the effect of critical minerals.

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The leaders of the Senate Energy and Natural Resources Committee unveiled an energy reform package Wednesday that includes major policy priorities from both Republicans and Democrats.

Sen. Lisa Murkowski (R-Alaska), chairwoman of the panel, released the Energy Policy Modernization Act of 2015 Wednesday along with Sen. Maria Cantwell (D-Wash.), the committee’s top Democrat.

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The bill would set a deadline for the federal government to decide whether to approve or deny applications to export liquefied natural gas, indefinitely renew the government’s conservation funding program and push toward an electric grid that is better prepared for cyber security and renewable energy, among other provisions.

Mine Permitting Reform Included

Among them was an overhaul of the federal mine permitting process. The bill also includes budget increases for geological surveying. The committee repeatedly emphasized the bipartisan nature of the compromise, which avoided hot-button issues like exporting crude oil, a priority for republicans but something that democrats have previously staunchly opposed.

The bill would achieve republican priorities such as eliminate outdated or redundant mandates such as the long mine permitting process, and deliver on democratic priorities such as encouraging energy efficiency in federal and commercial buildings, modernizing the electric grid and shoring up its ability to adjust to an increase in renewable energy, among other policies.

The bill was announced on the same day that the House voted to approve its own energy package, a bipartisan bill that is much less ambitious than the Senate version. It is believed that the bills could be reconciled in a House-Senate conference.

A Game Changer for US Industry

The mining and energy modernization aspects of the bill are not just necessary, but crucial to the survival of both metals and manufacturing businesses. Changing the federal permitting process has long been the objective of US-based miners such as Molycorp and federal dollars for upgrades of regional energy grids has the potential to greatly expand renewable energy generation. If this bill can secure the bipartisan votes it was designed to capture then it can be a real game changer for US energy and manufacturing.

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This is part two of an analysis of how China’s recent stock market crash affects neighboring India.

The Indian arm of global credit rating agency Fitch said with soft demand in China, base metal prices had gone down in the range of 2-21% in the first six months of 2015.

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On a year-to-date basis, Chinese domestic hot-rolled coil steel prices declined by 21%. London Metal Exchange nickel prices are down by about 12%, LME copper prices by 9% and China alumina prices by about 10%. In the last one month, iron ore prices dropped by 20%, Shanghai steel prices by 16.4%, and zinc prices by 7%.

What’s This Mean for Steel?

In reference to India’s steel sector, rating agency Ind-Ra pointed out that Indian manufacturers were already struggling with low capacity utilization, and lukewarm domestic demand was unlikely to benefit the margins of manufacturing units in the short term.

So was there any silver lining at all for India where the Chinese downturn is concerned? Depends who you listen to or talk to. Here’s what a report in the Business Standard claimed — the economic downturn would be good for smart cities. The rationale — copper is trading at a 6-year-low and China is the world’s top copper consumer, accounting for 40% of global consumption.

How About Aluminum?

Similarly, aluminum is trading at new lows and was already trading at prices below cost of production of many Chinese companies. For India, as a consumer, this is good news as the cost of constructing new infrastructure, especially smart cities, would reduce.

And that extends to a lower price for a technology innovation dear to almost everyone in the world, according to the report. Mobile phones will be cheaper, it predicted. If the Chinese really devalued their currency, world markets will be flooded with Chinese goods at low prices affecting exports of other countries, including India.

As for the rest, such as automobile manufacturers, it could possibly get only worse in the coming days.

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The author, Sohrab Darabshaw, contributes an Indian perspective on industrial metals markets to MetalMiner.

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The Senate, on Tuesday, unveiled a bipartisan bill containing three years of funding for America’s highways, bridges and rail systems but it quickly ran into a roadblock that could force Congress to settle for a shorter-term fix already approved by the House.

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The legislation would provide $130 billion for surface transportation investments through 2018 and, if passed, would be the first multi-year highway bill in more than decade. It is expected to dominate Senate deliberations into next week as Republicans and Democrats work against a July 31 deadline to keep the national Highway Trust Fund from running out of money. Lawmakers avoided an increase in the national gasoline tax and instead cobbled together funding totaling $47 billion. Funding sources include $9 billion in oil sales from the Strategic Petroleum Reserve and $16.3 billion from a cut in Federal Reserve dividends to large banks.

However, opposition to the bill in both parties.

“Based on my conversations with the Democrats in the House (of Representatives) and their conversations with Republican leaders, I don’t think there’s a chance in the world they’re going to take up this bill,” Senate Minority Leader Harry Reid (D.-Nev.) told Reuters.

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Senate Democrats on Tuesday shot down an initial push to begin debate on the bipartisan legislation, saying Republican leaders had not provided enough time to review the 1,030-page bill. In the House, Majority Leader Kevin McCarthy (R.-Calif.) criticized the bill for only providing three years of funding when the overall Senate infrastructure plan calls for six years of spending. McCarthy said senators should pursue another short-term bill now and work toward six-year legislation “that you actually pay for.”

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The US House voted last Wednesday to approve a short-term, $8 Billion extension of federal transportation funding, which will last until December.

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House Ways and Means Committee Chairman Paul Ryan (R-Wis.) has called on the Senate to pass the House’s $8 billion transportation funding patch “without any unrelated measures.”

Exports, Imports are Not Infrastructure

Ryan said after the temporary patch was approved on a 312-119 vote in the House, that the Senate should follow suit and send the lower chamber back a clean highway funding extension with no “unrelated measures.” Ryan was referring to a Senate plan to include an extension of the US Export-Import Bank’s charter in the upper chamber’s version of a new highway bill.

Ex_Im_bank_550

The US Export-Import Bank is closed for business and House republicans don’t want a new charter for it attached to a Highway bill.

The Ex-Im Bank’s charter was recently allowed to expire and House republicans have soured on the credit institution for US exporters. Many conservative groups view the bank as an outdated federal bureaucracy ready to be thrown on the scrap heap of government innovation and streamlining, believing that private banks can provide loans for exporters as they can for any other financial transactions. The Ex-Im Bank’s supporters claim it’s a vital institution needed to support US export competitiveness.

Clean Bill Requested

Either way, Ryan is sending a clear message that the House views infrastructure as an issue that should not be dependent on passage of a new Ex-Im Bank charter or other issues. Unlike the six-year, $275-billion Senate plan, Ryan’s December extension of the Highway Trust Fund is entirely paid for. The House Bill relies on $3 billion in savings from Transportation Security Administration fees (the ones you pay when you buy an airline ticket) and $5 billion in tax compliance measures to fund road projects through Dec. 18.

The Senate has yet to detail how it would pay for the $275 billion, six-year plan. Congress has been fighting over how to fund highway projects since 2005. The 18.4 cents-per-gallon federal gas tax is the main source of funding for the Highway Trust Fund, which will run out of money by the end of the month without another extension, but the tax has not been increased since 1993 and more fuel-efficient cars have eroded its power as a tax. The federal government typically spends about $50 billion per year on transportation projects, but the gas tax only brings in approximately $34 billion annually.

How to Fund Highway Projects?

Most House republicans oppose a gas tax increase and argue that the current economy is still hurting American consumers and any increase would further discourage travel and purchases, even with relatively low prices at the pump. Many republican senators agree, but influential democrats such as House Minority Leader Nancy Pelosi (D.-Calif.) have gone on the record saying that we should hike the federal gas tax.

With Ryan’s stand, though, it would seem that the House leadership will not even begin discussing a tax increase, or another funding mechanism for a long-term highway bill, unless it is in a standalone bill and will not allow other issues, such as the Ex-Im Bank, to be a part of those negotiations. The highway funding ball is now in the Senate’s court.

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The US stock market is demonstrating resilience against economic worries such as the Greek Crisis, falling oil prices, weakness in emerging markets and the recent Chinese market sell-off.

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Some argue that the bull market has already run for too long, and that concerns outside the US are putting enough pressure to make the stock market tumble. However, the opposite might be true.

The Tenacity of the US Stock Market

The unwillingness of domestic stocks to fall is a sign of strength and we could see stocks rise even further, especially if things start to calm down globally.

Dow Jones Industrial Average Index 1 year out

Dow Jones Industrial Average Index, one year out. Graph: MetalMiner.

Major market indexes like the Dow Jones Industrial Average, S&P 500 and the New York Stock Exchange remain range-bound since February. We recently pointed out that this trendless period was causing investors to hesitate. It was hard to tell whether the market is going to roll over or continue on its way up. Some new clues are pointing to the latter.

Nasdaq Composite Index 1 year out

NASDAQ Composite Index, one year out. Graph: MetalMiner.

The fact, that US stocks held their values well while Chinese markets plunged proves that Chinese financial news can only weigh on US stocks in the short term. In the longer term, China does not lead the US and its recent troubles do not appear to affect markets here that much.

What This Means for Metal Buyers

Moreover, the NASDAQ (a technology-focused index) recently hit an all-time high. The fact that technology stocks are leading the market is a positive sign. Lower oil and commodity prices are hurting the shares of energy and commodity producers, which helps explain why the other indexes are still range-bound. But, good earnings reports from leading tech companies are increasing the appetite of funds to buy stocks.

In conclusion, the US market is not immune to what happens outside the US. Further bearish news from outside could weigh on US shares, but, so far, things are looking good for US stocks in the second half of the year.

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Old Chinese proverb: when a giant in a race with another falters, the other, without a doubt, wins.

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Actually, I made that up. Ignore it. Still, when China’s economy started showing signs of a meltdown, some in India “predicted,” in a knee jerk reaction, that it was a “welcome development” for neighbor India.

No need to reiterate here how the two nations, with the largest populations and the largest economic growth rates, were in competition with each other in almost every sector.

A few days later, after the fog cleared, warning bells were rung by analysts and ratings agencies that if China was to lose the race, it would be tough for India, too. Even a tiny spill, such as the one China’s stock market felt last week, was bad enough. There would really be no winners in the race.

China’s economic troubles could have a significant impact on India, particularly in sectors like IT and steel, according to India’s trade and industry body, The Associated Chambers of Commerce and Industry of India (Assocham).

The adverse economic developments may have a directionally negative impact on the Indian metals industry as well as on sectors with an export focus, claimed another agency, India Ratings and Research (Ind-Ra) in a statement.

News reports, quoting metal analysts, claimed that while it was true that a drop in commodity prices linked to China’s slow demand was a positive for India, it was not really “good news” for a host of metal and iron ore producers such as Steel Authority of India, Tata Steel, and upstream oil producers.

The fall in ore, steel and copper prices hit Indian manufacturers as hard as any other company in the world, so what’s there to cheer about?

A paper prepared by Assocham said that in today’s global economy, where India’s economy — like any other — is plugged into the rest of the world’s, the China downturn was bound to impact India. China, incidentally, was the number one merchandise trader in the world with over $4.16 trillion worth of trade, followed by the US with $3.9 trillion, as claimed by Assocham.

But the more pertinent point made by Assocham was that the kind of cost competitiveness which the Chinese companies provided to manufacturing semi-process industries — such as electronics, electrical and telecom equipment — would disappear from the global supply chain. This is without even mentioning the inability of India to fill any of those spaces vacated by the Chinese companies.

Another news report quoted Hitesh M. Avachat, Deputy Manager at CARE Ratings, as saying that China accounted for more than 30% of the overall consumption of metals globally. For Indian metal producers, the price collapse meant their landed price in India would go down further, thereby pressuring companies to reduce prices. Because of the likely Chinese dump of its surplus goods, India’s export demand may also fall, he added.

Jayant Acharya, Director, Commercial and Marketing, JSW Steel Ltd., quoted in the same report, said if prices kept falling, margins would get impacted.

The Indian arm of global credit rating agency Fitch said with soft demand in China, base metals prices had gone down in the range of 2-21% in the first six months of 2015. On a year-to-date basis, Chinese domestic hot-rolled coiled steel prices had declined by 21%, London Metal Exchange nickel prices by about 12%, LME copper metal prices by 9% and China alumina prices by about 10%. In the last month, alone, iron ore prices dropped by 20%, Shanghai steel prices by 16.4%, and zinc prices by 7%.

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The author, Sohrab Darabshaw, contributes an Indian perspective on industrial metals markets to MetalMiner.

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Price volatility hit metals markets hard last week and now some are calling for new rules to regulate the London Metal Exchange. In India, South Korean steelmaker POSCO may pull out of a planned plant because of a new law that would increase the price of its raw material, iron ore.

New LME Rules?

The LME may have to introduce new rules to rein in extreme price volatility to conform with other exchanges and regulatory regimes, industry sources told Reuters.

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Prices of industrial metals have fallen fast in recent months on worries about demand growth in top consumer China, with concerns reinforced last week as China’s stock market plunge pulled copper down to a six-year low of $5,240 a metric ton.

POSCO May Scrap India Steel Project

South Korean steelmaker POSCO might scrap plans for a $12 billion project it agreed to set up in India a decade ago, after a new law made it costlier to source iron ore for the plant, a company spokesman told Reuters. The US-listed shares of POSCO fell as much as 3.3% to their lowest in more than six and a half years after the report.

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MM-IndX_TRENDS_Chart_July-2015_FNL

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

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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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The stock and finance trade is investing in Japanese aluminum again and republicans in the US House unveiled an $8.1 billion infrastructure bill.

Big Banks Investing in Aluminum Again

Aluminum stocks at major Japanese ports fell for the first month in more than a year in June as western banks started snapping up metal in Asia after spot premiums fell to two-year lows.

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Aluminum stocks held at three major Japanese ports fell 0.5% to 499,900 metric tons at the end of June from a month earlier, trading house Marubeni Corp. said on Wednesday.

It was the first decline since March last year.

Prior to June’s fall, stocks had risen to record levels over several months due to rising exports from China and lackluster Asian demand.

Republicans Unveil Infrastructure Bill

Republicans in the US House of Representatives on Monday unveiled an $8.1 billion plan to fund highway and rail transit projects through the end of 2015, paid for by extending an airport security fee increase and tax rule changes.

Congress faces a July 31 deadline to renew federal transportation spending authority and avoid a major slowdown in road construction projects nationwide.

The five-month funding extension would replenish the Highway Trust Fund for five months. It was introduced by House Ways and Means Committee Chairman Paul Ryan (R.-Wis.) and House Transportation Committee Chairman Bill Shuster (R.-Pa.).

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Both Republicans and Democrats have said they would prefer a longer, six-year transportation bill, but lawmakers have not been able to agree on a funding mechanism for the nearly half-trillion dollar cost.

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