Industry News

A US mining industry association said today it was considering legal action in response to tighter greenhouse gas rules unveiled by the Obama administration.

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The final version of the EPA Clean Power Plan, envisioned last year, sets a goal of cutting emissions of carbon dioxide, a potent greenhouse gas, by 32% of their 2005 baseline by 2030, 9% more than in the original proposal.

The Clean Power Plan would require states to meet specific emission reductions based on state-by-state energy consumption criteria. National Mining Association President and Chief Executive Officer Hal Quinn said the onus rests with state governors, who can choose between accepting a “flawed plan” or rejecting the EPA’s mandate.

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“NMA filed a request today with EPA to stay the rule while the courts have the opportunity to determine the lawfulness of the agency’s attempt to commandeer the nation’s electric grid,” he said in a statement. “If EPA denies our request we will ask the courts to do so.”

The American Iron and Steel Institute also warned that the regulations would put US steel producers at a competitive disadvantage.

“This rule puts the affordability and reliability of electricity for steel producers at serious risk,” said Thomas J. Gibson, president and CEO of AISI. “The leading steel producing states in the US are heavily dependent on coal for electricity production. This rule will have a disproportionate impact on coal-fired utilities and, in turn, impede economic growth for steelmakers.”

Gibson added that the steel industry competes with steel producers in countries where energy costs are often subsidized. He said, therefore, “Limitations on CO2 emissions instituted in the US must also apply at the same level of stringency to other major steel producing nations, such as China. Otherwise, steel production and manufacturing jobs will shift to other nations with higher rates of greenhouse gas emissions.”

The Metals Service Center Institute also released a statement saying the rule would create larger energy costs for consumers.

“While we appreciate the EPA’s efforts to give industry and US states more time to comply with this rule, the agency also significantly altered the emissions reduction targets and other major parts of the proposed rule it offered last year,” the MSCI statement read. “Studies showed that the earlier proposal would have increased consumer energy costs and made US businesses less competitive on the global stage. It’s likely this final regulation will have an even greater negative impact on families and job creators and, for this reason, MSCI will fully support efforts to challenge this rule in the US courts.”

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Vale SA returned to profitability for the first time in a year today and low prices have led to a copper scrap and concentrate shortage in China.

Vale Posts Profit

Brazil’s Vale SA, the world’s largest iron ore producer, returned to profit in the second quarter, bolstered by higher output and cost cuts as it kept up pressure on Australian rivals in the fight for market share.

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The miner overcame a slump in iron ore prices to report a net profit of $1.68 billion on Thursday, moving into the black for the first time in a year. That was a leap of 17.3%from the same quarter a year ago, and more than four times the average forecast of $408 million of six analysts in a Reuters poll.

Copper Scrap Shortage in China

Chinese copper smelters may not get enough raw material after domestic mines and scrap providers scaled down sales because of low prices, which may force some smelters to trim production in the third quarter, industry players said told ThomsonReuters on Wednesday.

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EU Upholds Stainless Steel Anti-Dumping Duties on China and Taiwan. More anti-dumping duties on Chinese and Taiwanese stainless steel have been upheld, this time in Europe. A major nickel producer is also slashing output.

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A major miner announced more layoffs and steel imports were down this month, according to preliminary data.

Anglo-American Layoffs

Global mining company Anglo-American PLC said on Friday it will shed thousands of jobs in the next couple of years and might put up more assets for sale as it battles an accelerating slump in metals prices that has dragged its shares down to a 13-year low.

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The company posted a steep fall in first-half profit after a rout in prices of metals from platinum to iron ore, and said the next six months could be even worse. Anglo-American is the fifth-biggest diversified global mining group by stock market capitalization. The statement said it would cut about 6,000 of its almost 13,000 office-based and other non-production roles globally, 2,000 of which will be transferred through the sale of some assets.

Steel Imports Starting to Fall

Based on preliminary Census Bureau data, the American Iron and Steel Institute (AISI) reported recently that the US imported a total of 3,049,000 net tons (NT) of steel in June 2015, including 2,458,000 NT of finished steel (down 10.3% and 10.7%, respectively, vs. May final data). Year-to-date total and finished steel imports are 21,670,000 and 17,833,000 NT, respectively, up 3% and 14% respectively, vs. the same period in 2014.

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In metal news today, Molycorp, Inc. is sitting a little bit prettier in its chapter 11 reorganization and South Africa’s Lonmin PLC is warning that layoffs could come from mine closures soon.

Molycorp Secures Financing

Molycorp, Inc., the only US-based producer of rare earth minerals, recently moved forward with its chapter 11 bankruptcy reorganization process and received court approval for an improved debtor-in-possession financing package provided by Oaktree Capital Management LP.

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The approved DIP facility of new net financing of $130 million. Molycorp said the new funding will include additional liquidity, reduced costs, and additional time to develop a plan of reorganization that would be in the best interest of all parties.

Lonmin Warns of Layoffs

South African platinum producer Lonmin said on Friday it was planning to close or mothball several mine shafts, putting 6,000 South African jobs at risk, because of depressed metal prices. Platinum’s spot price is at 6-1/2 year lows less than $1,000 an ounce, while power and labour costs in South Africa have risen sharply.
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Architecture billings hit an eight-year high this month and several large, Asian sell orders triggered the big gold sell-off on Monday.

ABI Strong in All Sectors

Paced by continued demand for projects such as new education and healthcare facilities, public safety and government buildings, the Architecture Billings Index (ABI) increased in June following fluctuations earlier this year. An economic indicator of construction activity, the ABI reflects an approximate nine-to-twelve month lead time between architecture billings and construction spending.

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The American Institute of Architects (AIA) reported the June ABI score was 55.7, up substantially from a mark of 51.9 in May. This score reflects an increase in design services (any score above 50 indicates an increase in billings).

This is the highest score for the ABI since 2007.

  • Regional averages: Midwest (57.2), South (54.9), West (50.7) Northeast (50.4)
  • Sector index breakdown: institutional (59.1), mixed practice (54.7), commercial / industrial (51.6) multi-family residential (47.0)
  • Design contracts index: 52.5

How Gold Dropped Below $1,100 an Ounce

In early Asian trading hours on Monday, when typically only tens of contracts of gold are traded, investors dumped more than $500 million worth of bullion in New York in four seconds, triggering the market’s biggest rout in years.

The sell-off began when one or more massive sell orders hit the price of gold on the CME Group‘s Comex futures index in New York a tenth of a second after 9:29 a.m. in Shanghai, triggering turnover of almost 5,000 lots of gold. That equates to 13 metric tons of gold, more than typically trades in hours this early in the day. The sales knocked the price almost $20 to $1,100 per ounce during those four seconds.

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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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Gold miners saw their stock values plummet with the price of the yellow metal on Monday. BHP Billiton is investing $240 million in its Western Australia iron ore tug boat and port business.

Gold Sell-Off Hits Miners Hard

The steep sell-off in shares of gold miners, tracking a plunge in the metal’s price, wiped out more than $8 billion from their combined market value on Monday and pushed a global index of gold stocks to a six-and-a-half-year-year low.

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The Thomson Reuters Global Gold index slumped 8.5% to its lowest since late 2008, the biggest one-day percentage drop in two years, after gold prices sank.

BHP Investing in Infrastructure

BHP Billiton said today it will spend $240 million upgrading its marine iron ore facilities in Western Australia. The funds will be used to purchase six tug boats and build a new tug harbor in Port Hedland’s inner harbor, with construction due to be completed in September 2016.

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Gold hit a fresh five-year low today and China’s top steel-producing city is getting serious about enforcing pollution standards.

Gold Keeps Falling

Gold stretched its losing skid to six sessions and made a fresh five-year low in early trading Monday. At its low point Monday, an ounce of gold dipped below $1,100 to $1,080 — its lowest level since February 2010 — and was down 4.6% before recouping some of its steep losses.

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About 8:30 a.m. ET, an ounce of gold was down $18.80, or 1.7%, to $1113.10. Last week, gold tumbled more than 2%.

Our Lead Forecasting Analyst, Raul De Frutos predicted the yellow metal had further to fall last week.

Tangshen to Crack Down on Pollution

China’s top steel producing city of Tangshan will punish steel companies if they fail to meet tough new pollution standards over the next three months, according to new industry guidelines. This could force closures and help ease a severe capacity glut. China is using tougher environmental rules to help tackle a severe glut of steel capacity that has depressed prices.

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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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