Australia

Home sales surged in May and major producer Australia cut its iron ore forecast further.

US Home Sales Hit 9-Year High

Contracts to buy existing homes in the US rose in May to their highest level in over nine years, boosting the housing market and the broader economic outlook.

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The National Association of Realtors said on Monday that its pending home sales index, based on contracts signed last month, increased 0.9% to 112.6, the highest level since April 2006. Contracts have now increased for five straight months.

Australia Cuts Iron Ore Price Forecast

Australia, on Tuesday, cut its price forecast for iron ore in 2015 by 10% to $54.40 a metric ton, citing a weak outlook for the commodity’s main market, China’s steel sector. The forecast by the Department of Industry and Science is a sharp decrease from the $60.40 per mt predicted three months ago and is way off the $94 a mt touted in January.

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A major aluminum producer challenged a US regulator’s authority to intervene in a foreign warehousing dispute and another nation placed tariffs on Chinese silicon this week.

Alcoa Challenges CFTC’s Authority

Alcoa Inc. on Monday challenged a federal commodities regulator’s authority to intervene in the contentious overhaul of the London Metal Exchange‘s warehouse policy that has caused an unprecedented drop in aluminum prices.

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In March, the Commodity Futures Trading Commission deferred a decision about the LME’s 2012 application to be registered as a “foreign board of trade,” telling the exchange it should do more to address concerns about long waiting queues.

Alcoa has questioned whether the agency even has the legal authority to intervene, and on Monday filed a request under the Freedom of Information Act (FOIA) to find out what had caused the CFTC to delay its decision on the LME.

“Our goal is to learn the extent to which the CFTC has engaged in substantive discussions with the London Metal Exchange,” Alcoa said in a statement. “The CFTC should examine any LME aluminum contract performance issues only through an open, inclusive and transparent process where all affected market participants have the opportunity to present their views,” it said.

The CFTC declined to comment.

Australia Puts Tariffs on Chinese Silicon

Australia has issued an anti-dumping notice on silicon metal exported from China after an investigation into dumping and subsidization.

Following the investigation the Australian Government Anti-Dumping Commission set dumping and subsidy margins for Hua’an Linan Silicon Industry Co. Ltd., and Guizhou Liping Linan Silicon Industry Co. Ltd. at 18.3% and 6.3% respectively. Both companies will be subject to an effective rate of combined interim countervailing duty and interim dumping duty of 12%, according to a statement by the MOC trade remedy and investigation bureau.

The commission announced dumping margin and subsidy margin for “uncooperative, and all other exporters” of 27% and 37.6% respectively, with an effective rate of combined interim countervailing duty and interim dumping duty of 58.3%.

Australia began its investigation in February last year after allegations of dumping and subsidization of silicon metal goods that originated from China with a total value of $12.78 million dollars, according to the MOC statement.

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It is one of those delicious ironies of life that India, the world’s largest consumer of gold, has very little to show when it comes to actually mining the yellow metal.

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That’s poor form because India sits on very large resources of gold, revealed by several geological studies in the past. One such study pegged India’s primary gold resources at about 491 metric tons. Despite its 6,000-year mining history, the country mines just around a pitiful 25 mt of gold annually.

Imports Flourishing

India is one of the biggest importers of gold, despite a punitive 10% import tax. In the financial year ended March 31, gold imports had touched 900 mt, up 36% from a year ago.

Perhaps keeping all this in mind, and the fact that gold mining could mean earning some big bucks, Western Australia recently expressed interest in developing gold mines in India, as part of the bilateral cooperation in minerals and energy sectors between the two nations.

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A beleaguered Indian Government finds itself with its back to the wall where the supply of iron ore to the local steel ministry is concerned.

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The fluidity of the import-export situation vis-à-vis the mining of iron ore has left it walking a tightrope.

Earlier this month, the government had affirmed its resolve in not banning, or even limiting, exports of iron ore as demanded by domestic steel majors. There was a massive shortage of ore in India following the more than 2-year long, court-imposed ban on mining, partially lifted a few months ago. Mining was not yet back to 100%, leading to a shortage in the supply of ore. What worsened the situation was that until about a couple of months ago, much of the ore mined was being exported due to better prices available internationally, leaving very little for local steel makers.

But the tables have turned now with almost no exports of ore in October and November due to the global price slump. The price of ore was already down about 50% this year, and then it touched a new low (since 2009) last week.

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After India and Australia signed a civil nuclear deal in September, Australia’s uranium industry may be able to start sending trial shipments to India next year.

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Australian Prime Minister Tony Abbott and his Indian counterpart, Narendra Modi, discussed this during the latter’s visit to Australia. On Tuesday Abbott addressed the federal parliament saying if everything went to plan, uranium exports from Australia to India with suitable safeguards would start, “because cleaner energy is one of the most important contributions that Australia can make to the wider world.”

The move follows the signing of a safeguards agreement in New Delhi, as reported by MetalMiner after years of a ban on uranium exports to India.

India plans to use uranium to fuel its nuclear reactors to take care of about 25% of its total electricity needs by 2050.

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Yesterday, Sohrab Darabshaw explained how Australia and India have agreed to a new nuclear and coal energy supply pact. This story explains how the two nations plan to work together toward supplying their energy needs.

All uranium is welcome for India, which currently has 20 small nuclear reactors within six plants but operates only a few. The government’s stated goal is to raise its nuclear energy capacity to 63,000 million watts by 2032.

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But a section of the Australian media and even the international press have launched a scathing attack against Australian Prime Minister Tony Abbott over his uranium supply pact with India. The Courier Mail, for example, did not pull any punches when one of its analysis pieces said, “It is foolish and dangerous to sell uranium to a country that is actively expanding its nuclear weapons arsenal and refuses to sign the Nuclear Non-Proliferation Treaty.

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“I do want Australia to be an energy superpower in the years ahead. We have large reserves of uranium. We have massive reserves of coal. We have extensive reserves of gas. We are the world’s second largest thermal coal exporter. India has an absolutely impeccable non-proliferation record……..it (India) has been a model international citizen. India threatens no one.”

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Australian Environment Minister Greg Hunt has been a strong advocate of Adani Group’s recently signed $15.5 billion deal to mine and export coal from the Carmichael area to Adani’s native India.

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He tried to counter protests from environmentalists by explaining in great detail how the project would boost Australian economy. He explained that at full export capacity, the project was expected to contribute almost $930 million to the Mackay region’s gross regional product and $2.97 billion to the Queensland economy each year for the next 60 years. The mining project will generate an estimated 2475 construction jobs and a further 3,920 jobs during the operations phase.

For India, on the other hand, it would mean securing the energy needs for millions.

Cabinet colleague and Australia’s Trade and Investment Minister Andrew Robb, too, hailed Hunt’s decision to grant environmental approval to Adani Mining, the subsidiary of Adani Group, the company that bagged the contract. He said the project demonstrated the enormous potential that remained in Australian resources and energy, in this case coal, to help drive continued economic growth and job creation. The move will help support the opening of Australia’s first new mineral province in 40 years..

Posco Engineering & Construction Co., a unit of South Korean steel giant Posco, will help build the railway tracks for transporting coal from the mine being developed by Adani. Together with the rail project, overall, the Queensland project is expected to generate over 10,000 jobs in Australia.

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

While India’s Adani Group has occasionally stirred up controversy, its proposal to mine coal close to Australia’s Great Barrier Reef, and rail-transport then ship it thousands of miles to India, has had Australian environmentalists and Queensland locals howling in protest. Some industry experts there have even expressed doubts about the project’s economic viability because of the recent drop in global coal prices.

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The Economic Times quoted Tim Buckley, Director of Energy Finance Studies, Australasia, for the Institute for Energy Economics and Financial Analysis (IEEFA), as saying: “It’s not surprising that minister Hunt is going along with Premier Newman and Prime Minister Abbott’s desire to facilitate foreign firms in their efforts to try to prop up Australia’s declining coal industry. Ironically, if this project proceeds, it will actually accelerate the longer-term destruction of Australia’s coal export industry by dramatically expanding the capital invested whilst at the same time driving coal prices down globally. Our analysis forecasts that this would drive down thermal coal export prices a further 10-20 percent, thereby squeezing coal sector profit margins which are already down to zero.”

The same news report also talked of how Greenpeace was another major opponent of the project. The Carmichael coal mine in Queensland’s Galilee Basin, would be the biggest-ever in Australia. It would include six open cut pits and five underground mines, spread over 28,000 hectares. Just to give some perspective, the mine would be seven times the area of Sydney Harbor. Environmentalists, thus, question the impact of the dumping of three million cubic meters of sea-bed dredged up from inside the World Heritage Area into the Great Barrier Reef Marine Park, saying, at a minimum, it would be detrimental to the Reef, but could even destroy it completely.

An article in the Huffington Post by David Fogarty, Editor, Climate Change Specialist, includes a quote by Senator Larissa Waters, the Australian Greens environment spokesperson, as saying, history would look back on Prime Minister Tony Abbott’s government’s decision today “as an act of climate criminality.”

So, clearly, the stage is set for a showdown between the environmentalists on the one side, and the industrial/mining lobby and the Australian Government, on the other. Earlier in the week, for example, Australian model Robyn Lawley posted a nude photo of herself on social networking site Instagram to protest against the project. This, say some, only reflects the concerns raised by environmentalists. The 25-year-old Lawley alleged that Adani had a “dirty track record” and was responsible for ‘destroying protected mangrove areas in India. Adani, till the time of the writing of this report, had offered no response to this allegation.

Australian Environment Minister Hunt, on the other hand, tried to counter such apprehension by explaining in great detail how the project would boost the Australian economy. He explained that at full export capacity, the project is expected to contribute almost $930 million to the Mackay region’s gross regional product and $2.97 billion to the Queensland economy each year for the next 60 years. The mining project will generate an estimated 2,475 construction jobs and a further 3,920 jobs during the operations phase.

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

Just weeks before Australian Prime Minister Tony Abbott’s first visit to India, the Australian government, earlier in the week, conditionally cleared a long-pending coal mining project from India’s Adani Group, sparking protests in Australia.

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Australia approved the approximate $15.5-billion (AUS $16.5 billion) Carmichael coal project in Queensland that could yield up to 60 million tons of coal per year, but only after imposing “strict conditions to protect the environment.”

Australian Environmental Minister Greg Hunt said in a statement reported in many Indian newspapers that the decision was taken after “undertaking a thorough assessment and consideration under the national environment law.”

The Carmichael Coal Mine and Rail Infrastructure project was subject to Adani meeting 36 conditions. Hunt added that “the absolute strictest” of conditions had been imposed to ensure environmental protection with a focus on groundwater preservation.

Clearly, there were signs of this announcement coming. Some months ago, the Adani Group had threatened to pull out of the project if the required sanctions did not materialize soon. Then, on July 17, the Australian Parliament repealed a 2011 carbon tax to limit pollution, helping coal exporters, including the Adani Group, ship coal overseas at lower cost. The Prime Minister is also known for his pro-mining stance, and has been its biggest Australian voice for employment creation and economic growth.

The Adani Group, in response to the clearance, said it was committed to adhering to the strict regulatory and environmental approval processes.

In India, the Australian Government’s decision is being viewed as a major achievement for Adanis, as the much-needed coal will now be available for use in steel production. It will also propel the Adani Group — perceived to be close to Indian Prime Minister Narendra Modi in some quarters here as both Gautam Adani, Group Chairman, and Modi hail from the Indian state of Gujarat — into a different league. MetalMiner, had, in May, reported how Adani was one of India’s fastest growing conglomerates and Modi’s election was thought to be good for the conglomerate.

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