Public Policy

With Iran and the US coming to terms over the Islamic Republic’s nuclear program, India finds itself in an enviable position where all the players in the game have aligned on the same side – one big “Us,” Israeli protests not withstanding.

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Moving forward, India will be more than willing to sign on the dotted line on several deals in the pipeline with Iran, especially in the steel sector. In March, Iran’s Deputy Industry Minister, Mehdi Karbasian, was quoted by Azer News saying Iran was ready to accept Indian investment in the steel sector, and “planned to start activity in the country.”

Along with India, a large number of other foreign mining companies including some from Kazakhstan had already visited Iran in the past year, looking for similar investment opportunities.

New SAIL Facility

At the start of 2015, India’s state-run Steel Authority of India (SAIL) had announced a proposal for a multimillion dollar, nearly 2 million-metric-ton integrated steel plant in Iran.

SAIL has already asked the Iranians to provide 500 hectares of land near the country’s Bandar Abbas port and another 500 hectares of contiguous land for future expansions.

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US Sen. Lisa Murkowski, (R-Alaska), last week, introduced the American Mineral Security Act of 2015, a bill that promises “to prevent future mineral supply shocks and boost the competitiveness of our energy, defense, electronics, medical, and manufacturing industries.”

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The AMSA would require that the director of the US Geological Survey establish a list of minerals critical to the American economy and provide a comprehensive set of policies to address issues associated with their discovery, production, use, and reuse. It also would require that the federal government establish a methodology for the designation of critical minerals, based on potential supply disruptions and the importance of their use, and require the list to be reviewed and updated at least every two years.

Critical Minerals

There are also changes in permitting, the Federal Register process and the bill would extend an executive order issued by President Obama in 2012, regarding the permitting of important infrastructure projects, to mines that produce critical minerals and critical mineral manufacturing projects. The full bill is available online at the Senate website.

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This week, the 3-month LME nickel price fell to its lowest level since 2009. It’s certainly not the first industrial metal to hit a 6-year low this year.

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There has been a lot of talk about Nickel’s supply side. Indonesian authorities have not changed their minds about refusing to export raw ore and the ensuing ban on exports of nickel ore to China continues. There is no flow of material between the two countries.

NPI Demand Drops

However, it’s important to remember that China’s nickel pig-iron producers had built up significant quantities of stocks prior to the January 2014 ban, compensating for the supply decrease. At 2 million metric tons, imports of Philippine ore this year are slightly higher than last year but are still nowhere near enough to offset the loss of Indonesian supply.

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Here at MetalCrawler the crude oil production and mining news broke fast and furious today. The implications for our metal markets are abundant when it comes to domestic gas drilling and mining.

New Record for Oil Production

Domestic oil production grew last year by the highest margin since the federal government started keeping records in 1900.

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Crude oil output averaged 8.7 million barrels per day, an increase of 1.2 million barrels per day, which is the largest increase since record-keeping began, the Energy Information Administration (EIA) reported Monday.

The EIA attributed the record increase to tight oil from shale formations and said production will likely increase this year and next, as well, although not as much.

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We may all think we are headed into the sunny uplands of growth and prosperity, but this year could see more volatility than we bargained for.

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One area of concern is governments’ monetary policies and the impact they have on foreign exchange rates. Low energy costs, low inflation and cheap imports on the back of slowing emerging market growth and the strong dollar have made us feel as if things are finally going our way. Not to pour cold water on a number of encouraging trends, but that strong dollar is already causing problems and those problems will get worse.

It’s not just exporters such as Caterpillar and Boeing that can be hurt by a stronger dollar, domestic firms also face increased competition from overseas suppliers buoyed by a lower currency. The steel industry is a case in point. Broadly speaking, for the economy as a whole there is likely to be more winners than losers but it will be highly selective and firms exposed to foreign exchange affected costs will face the biggest challenges.

Most economies will face gradual monetary tightening before the end of the decade, but the US could lead the rest of the world by at least a year. Many economists predict that as the Federal Reserve starts to raise rates in the second half of this year. Even other strongly growing economies such as the UK are not likely to join in raising central bank rates for at least a further 12 months. That will exacerbate the US dollar’s strength, particularly against economic regions like the European Union, which is embarking on quantitative easing to the tune of €60 billion per month up to a current limit of €1 trillion, but some are already predicting could reach twice that amount.

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Some countries in Europe already have negative interest rates, Denmark and Switzerland’s are at -0.5% and -0.75% respectively, charging clients for the pleasure of holding their money, in an effort to stave of safe-haven status vs the euro.

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Royal Bank of Scotland Research is not predicting base rates in euro-land or Japan to rise from 0.1% in 2015 or 2016, and in the UK they are predicted to only rise from 0.5 to 1.0% next year. That is a reflection of an almost deflationary environment and such weak growth that the risks to inflation are non-existent.

Chinese rates are predicted to fall from 6% last year to 5.6% this year and 5.3% in 2016. Likewise, India, which could fall to 7% this year from 7.8% last year, will likely only rise to 7.3% in 2016. Far from just being faced with the risk of a Greek exit, the European Union is facing exceedingly weak growth in France and Italy, the currency bloc’s second- and third-biggest economies.

Weak Growth Throughout

These are situations that would be more readily addressed by a significant loosening of policy in Germany to boost demand rather than Europe-wide quantitative easing, but that’s another matter. The risk is as much political, both Spain and Portugal have elections this year with aggressive minority parties keenly watching developments in Greece, as economic.

The EU can’t afford to allow Greece to default on its debts because it will immediately fuel demands from other quarters for the same treatment. Even France is being sanctioned by the EU for repeatedly exceeding its 3% of GDP budget deficit limits. France, too, would love to be let out of the German-led fiscal straitjacket constricting some European markets.

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Today in MetalCrawler we’re hoping that if we don’t acknowledge the Monday, the Monday won’t acknowledge us. President Obama signed an executive order limiting carbon dioxide emissions for the federal government, Chilean copper production went down and Federal Reserve Chairwoman Janet Yellen warned of economic stagnation.

Federal Government Emissions Limit Cut

President Obama signed an executive order calling for the federal government to cut its greenhouse gas emissions 40% from 2008 levels over the next decade.

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The action also calls for an increase in the share of renewable energy in the federal government’s electricity supply to 30% during that same period. In step with the President’s action, federal suppliers including Honeywell, IBM, General Electric, and other major US firms are pledging to reduce their own carbon footprint by 5 million metric tons over the next 10 years compared with 2008 levels.

Chilean Copper Production Falls

World No. 1 copper producer Chile produced 447,810 tons of copper in February , a 1.1% decrease from a year earlier, due to plant maintenance at a key project, the government said on Monday.

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This week we examined several metal/currency movements which were not what they’d outwardly appear to be.

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Whether it’s the supposed zinc deficit, the seemingly sharp fall of the US dollar or the USA dropping to fourth in steel production, our reaction was largely “We know better than to panic about that.”

All the more reason for you to trust MetalMiner for all your metals’ sourcing needs. We won’t steer you wrong 😉

Honey, I Shrunk the Zinc Deficit

This week, my colleague Stuart Burns asked where that supposed zinc deficit is? As recently as January major bank HSBC was insisting that the zinc market was in deficit. Even The World Bureau of Metal Statistics said in their February report that the zinc market was in deficit by 262,000 metric tons during the January to December 2014 period, compared to a 95,000-mt surplus for 2013.

Yeah, not so much.

Burns deftly explains how the London Metal Exchange’s Commitments of Traders Report (COTR) shows that longs have moved to shorts, suggesting not just that investors switched when they saw the prices fall, but may well have created the fall by bailing out of long positions they had built up in the expectation of supply shortages that were not materializing.

Stick with us and you’ll know which deficits and surpluses are real and which ones are phantoms.

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The new March 2015 edition of Roskill’s Rare Earth Report said that has said the global RE industry was expected to undergo “significant changes” by the end of 2015 as new sources of supply come online.

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According to a report by CBS’ “60 Minutes” about Rare Earths on March 22, the federal government, as well as manufacturers of everything from smartphones to fighter jets, are highyl concerned about the security of RE supply from China. Following the airing of the program, shares in Molycorp, one of only a few North American producers of REs, leapt 22% premarket on Monday, the morning after the program.

While China and some of the other Asian nations are either consolidating or finding new avenues for RE mining, non-Asian players such as Molycorp and Lynas Corp. are reportedly floundering. Molycorp just reported fresh losses, as reported by MetalMiner. It reported net revenues for the last quarter of 2014 at $116.2 million, a 6% decrease from the third quarter. Full year 2014 net revenues were $475.6 million, a 14% decrease as compared to 2013. A combination of low RE prices and a high debt burden led to the lowest stock prices in 2014 for Lynas.

Clearly, there’s major churn happening the RE world, from Pacific to the Indian Ocean.

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Last week, the Federal Reserve scaled back on its plans to hike interest rates this year. The potential for a delay has taken steam out of the dollar’s rally and contributed to a bounce in commodity markets.

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Higher US interest rates usually help boost demand for the dollar, which helps the dollar to appreciate against other currencies. The dollar gained significantly last Summer. This dollar’s strength makes it harder for US companies to sell goods overseas and to compete against imports, as Fed Chairwoman Janet Yellen pointed out in the last meeting. For this reason, the Fed might not want to raise rates until the dollar cools down.

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