Cobalt

The Renewables MMI jumped 6.9% to 77 for our August reading, as prices jumped for nearly every metal in the renewables basket sub-index.

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Of eight metals listed in this sub-index, seven posted price jumps last month. Steel plate from Japan, Korea, China and the U.S. jumped up, as did Chinese neodymium, silicon and cobalt.

The lone metal to fall this past month was U.S. grain-oriented electrical steel (GOES) coil, which fell  2.8%.

It was a much stronger July for this basket of metals than June was, when only four of the seven metals moved up in price (Chinese steel plate, neodymium, cobalt cathodes and silicon).

Cobalt Prices Have Asian Battery Makers Looking Elsewhere

As mentioned earlier this week, Reuters reported rising cobalt prices have forced battery makers in Asia to consider alternatives — namely, nickel.

According to the report, makers of lithium-ion batteries are looking to add more nickel to their battery formulas instead of the increasingly costly cobalt.

As the report notes, electric vehicle demand is set to grow significantly in the coming years. As such, automakers will be looking to cut their production costs. According to Reuters, the price of cobalt has doubled over the last year, a product of high demand and supply shortage.

Political Instability, Violence in Congo

Speaking of supply, most of the world’s cobalt is mined in the Democratic Republic of Congo, according to the United States Geological Survey (USGS). According to USGS data, an estimated 66,000 metric tons of cobalt were mined in Congo in 2016 — or 54% of the 123,000 metric tons mined worldwide. China came in second last year of cobalt mined (7,700 metric tons), followed by Canada (7,300 metric tons).

However, the unstable political situation in Congo could continue to affect supply, making the metal even pricier. Political unrest recently led to a wave of bloodshed in the country, sparking fear of a return to the civil wars of the 1990s, The Guardian reported.

This is all without even getting to the ethical concerns present in the Congolese cobalt mining world. As noted by numerous media reports, significant chunks of mining revenue tend to go missing via corruption linked to President Joseph Kabila. All in all, the rising demand in cobalt has not benefited the Congolese people. A 2015 IMF report showed the country was experiencing significant economic growth, but poverty reduction lagged behind.

On top of all this, the conditions for Congolese cobalt miners add another ethical concern to the mix, one which big multinational brands will have to answer to with respect to their supply chains. For example, a Sky News report revealed workers as young as 4 working in the Congolese cobalt mines in deplorable conditions.

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While the status of cobalt on the marketplace is obviously not the most important takeaway from the grim situation in the DRC, cobalt production has fallen this year amid the unrest, The Guardian reported, leading to a 90% rise in the price of the metal and a peak of $61,000/ton in July.

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This morning in metals news, some think copper’s hot 2017 could run out of steam, copper stabilized after hitting a two-year peak recently and Asian battery makers are looking to use more nickel instead of cobalt.

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Copper Outlook for Second Half of 2017

It’s not unreasonable to wonder whether or not copper can continue its robust run throughout the remainder of the calendar year.

The metal recently hit its two-year peak. Some, however, think the metal is due to fall off its current pace.

According to a report in Barron’s, there are numerous red flags indicating copper could reverse course — with a particular focus on China.

“Analysts believe regulatory tightening will soon weigh on growth, cooling demand for copper and other industrial metals in the months ahead,” writes Ira Iosebasvili. 

If the Chinese economy hits a period of slower growth — as many in recent months have warned will happen — then the copper market will certainly be affected.

For Now, Copper Holds Steady

Although many analysts are predicting a course correction for the metal throughout the rest of the year, copper is holding steady.

A rally in Chinese steel and iron ore prices painted a positive positive in China, the world’s largest metals consumer, Reuters reported.

Trading in Cobalt for Nickel?

For makers of batteries in Asia, cobalt is getting a little pricey — so much so that some battery makers are turning to even more nickel.

A rise in cobalt prices has inspired battery makers in Asia to adjust their battery ingredient formula, according to a report from Reuters.

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Cobalt prices have shot up over the last year on high demand and supply disruptions, Reuters reports. In fact, Reuters reports the price of cobalt rose to six times that of nickel in July.

Cobalt and lithium have big roles in the burgeoning electric-vehicle market, but they’re still subject to price volatility. scharfsinn86/Adobe Stock

This morning in metals news, demand for cobalt and lithium will only grow with the electric car industry, but price ups and downs are likely in the offing, too; London copper took a dip after the U.S. Federal Reserve’s interest rate hike announcement Wednesday; and the U.S. coal industry, in a world with less demand for coal as an energy product, might have to get creative. One writer suggests mining for coal — not for coal itself, but for rare-earth metals contained within it.

Cobalt, lithium markets growing with EVs, but could see fluctuation

One thing is certain: the electric-car industry is growing rapidly.

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According to a Reuters story Thursday by Andy Home, the number of electric cars on roads worldwide doubled last year to 2 million — but only accounted for 0.2% of the global total. However, estimates indicate that number will grow to 3% as soon as 2021 and 14% in 2025.

With that growth comes a need for certain kinds of metals, like cobalt and lithium.

But with a still relatively young electric-vehicle industry, what will demand for these metals look like in the near future?

Cobalt and lithium, for example, are on the “front-line” of the “green transport revolution, Home writes. But that means, to an extent, being subject to the whims of an industry in its early stages.

Large price hikes in lithium late last year and early this year have leveled off. Home added there could be further price volatility, as producers, analysts and traders try to construct consensus demand models.

Copper falls to one-week low

Copper on the London Metal Exchange (LME) dropped to a one-week low Thursday, on the heels of the U.S. Federal Reserve’s decision to hike interest rates for the second time this year, Reuters reported.

Copper fell to $5,462 per ton, according to the report.

Financial uncertainty in the U.S. and a slowing of the Chinese economy will put selling pressure on metals, according to a Kingdom Futures report quoted by Reuters.

Coal industry mining for … rare earths

Global coal production has declined each of the last three years. With a decline in demand, coal-mining operations have to adapt to a world increasingly powered by green energy.

The solution for some might be mining for coal, not for coal’s energy-producing properties, but for the rare-earth metals found within them, according to an article Thursday in Quartz. Per the article, China currently produces 90% of the world’s rare-earth metals.

It’s an interesting idea, even if author Akshat Rathi writes that his three ideas for extraction of rare-earth metals from coal are currently not economically feasible.

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But, as mentioned in yesterday’s This Morning in Metals post, producers have to adapt with the times. Whether we’re talking about copper producers looking for new markets for their copper or coal-mining operations mining for rare-earth metals found within coal, producers have to adjust or risk being left behind.

Ford Motor Company has bet the farm on electric and driverless cars, to borrow a phrase from an article this week.

The appointment of Ford’s new boss, Jim Hackett — who previously headed Ford’s Smart Mobility subsidiary from March 2016 but prior to that, was boss of Steelcase, a business furniture company — illustrates more graphically than words that Ford has read the runes for the internal combustion engine and the current automotive business model, and decided it needs a radical shake-up in its thinking and approach.

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A rethink of where the industry is going over the next 10 years has prompted not just the hiring of this talented outsider, but also, earlier this year, Ford’s $1 billion investment in Argo AI, an artificial intelligence company that, it is hoped, will produce the software needed for a new generation of self-driving cars.

Self-driving cars, though, are dependent not just on developing new technologies but a host of legal, insurance policy and regulatory changes that will take time to evolve.

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Investors are running up cobalt prices as automakers and suppliers stock up on the raw material for lithium-ion batteries as they prepare for an increase in electric vehicle production.

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Reuters reported that Shanghai Chaos Investments and Switzerland-based Pala Investments as two of the companies that invested heavily in cobalt last year, although the amount they’ve stockpiled is unknown.

On Dec. 1, cobalt was just around $30,000 per metric ton on the London Metal Exchange. As of Monday, one mt of cobalt was trading around $49,000. That’s an increase of 63% in three months.

Report: Trump Will Scrap EPA Clean Power Plan Next Week

President Trump is expected to issue orders next week that will begin the process of striking the Clean Power Plan and ending a moratorium on new coal mining on federal lands.

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The plan was largely opposed by manufacturers and metals producers. Its end will most likely bring a sigh of relief from utilities with coal-dominated generation mixes, as well, since they won’t have to alter their generation mixes within any deadlines.

An interesting article in the Financial Times recently reviewed the acquisition by China Molybdenum of the Tenke copper-cobalt mine in the Democratic Republic of Congo from Freeport-McMoRan.

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As the FT points out the purchase at a price of $2.65 billion is the largest single private investment in the DRC’s history and will be the largest purchase of copper assets since China’s purchase of Glencore’s Las Bambas mine in Peru for $6 billion in 2014.

Cobalt Control

The article examines the risks not to the copper market but to the co-product produced at Tenke, cobalt. The article focuses on risks to the cobalt supply chain of China gaining a dominant position in the global chain for this increasingly critical metal. Read more

The British National Health Service has banned the use of metal-on-metal (MOM) hip replacements, after evidence of unacceptably high failure rates. Regulators insist that the NHS stop using any hip replacment implants with a failure rate higher than 5% over five years.

According to the Telegraph, the warning from the National Institute for Health and Care Excellence (Nice) was issued after research uncovered failure rates as high as 43% among some of the implants. MOM resurfacing models made by the likes of DePuy, Smith and Nephew, and Zimmer (including the Adept, Cormet 2000, Durom, Recap Magnum, and Conserve Plus) have been banned, in addition to the Corail/Pinnacle ceramic on metal devices.

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The British Medical Journal has been much absorbed by this topic and has an interesting paper on its website. According to the BMJ, the conventional total hip replacement consists of a metal head with a polyethylene cup. But these joints don’t last forever. Over time the plastic cup wears away against the hard metal head. Younger, more active people are especially likely to require early revision surgery to replace the worn-out joint.

So attention turned to more durable MOM joints that use a combination of cobalt and chromium. And the fear that metal ion would contaminate the bloodstream and damage  surrounding tissues was countered by assertions that more precise engineering around the sphericity, surface finish, and metallurgy would mitigate the risks. Cobalt ions in particular have been shown to be carcinogenic and to cause destruction of tissue and bone around the joint between the head and stem of the implant.

DePuy (a division of Johnson & Johnson) is quoted as saying that in patients with well functioning devices, levels should be no higher than 2 μg/L. However, studies show that blood cobalt concentrations generated through wearing these newer MOM total hip prostheses can reach over 300 μg/L. This is 600 times higher than physiological levels of cobalt (most healthy people have about 0.5 μg/L of cobalt in their blood).

More than 60,000 patients in England and Wales have received metal-on-metal devices since 2003, when the National Joint Registry first began to record procedures. In the US, the figure is closer to a million, and although manufacturers knew of these toxicity issues as far back as 2007, the procedure was still being marketed up to 2012.

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LME volumes base and minor metals

Source: Reuters

Compared to molybdenum and cobalt contracts, as we laid out in Part One, the loser has been the steel billet contract (see graph above) — loser in the sense that while both steel and molybdenum contracts have declined, steel is the largest globally traded metal and as such, demand for a hedging product should be widespread.

For the LME to have lost traction and be slipping so badly suggests the contract is failing to meet the industry’s needs.

Worse for the LME, competitors are on their heels.

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Could we be seeing the beginning of the end of the LME billet contract?

It may be a little early to call time on the oft-maligned steel billet contract — it is by some measures the fourth-most traded product in the ferrous space after the Shanghai rebar contract, SGX iron ore swaps and CME’s iron ore portfolio, according to a Reuters article.

And arguably, as two of those at least are raw materials for which physically traded volumes are almost by definition larger, the LME contract could be said to be doing rather well. The main problem, though, is that volumes are heading in the wrong direction.

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Continued from Part One.

The MOM surfaces are cast and then machined to size and finally polished to a mirror finish to create a perfect fit. The idea is, a perfect fit means the surfaces should never touch each other, according to Dr. Timothy Wright, Kirby Chair of Orthopedic Biomechanics: “Just like the cylinder in an engine block,” he said.

But controversy has also arisen about the way surgeons fit these devices. The femoral head may be polished to a mirror surface, but then the ball surface is hammered into the thigh bone with a mallet, raising the question: how perfect is that fit going to be on assembly of the ball into the socket after such a process?

Nor is the problem confined to full hip replacements. The “replacement light” option of applying a metal coating to the patient’s existing femur and a metal lining to the pelvic socket has suffered similar problems of metallic ion contamination of the blood, suggesting heavy-handed surgery work on the full hip replacements is, at best, only part of the problem.

The use of MOM hip replacement devices has been dramatically reduced with DuPuy’s ASR model, along with others, since being removed from the market in September 2010. The worry for the industry is toxicity caused by MOM joints may cause a backlash against use of metal components and hasten development of ceramic and plastic alternatives. Already new ceramic materials are far less brittle than earlier types, opening up the prospect of extremely close tolerance viable ceramic joints in place of metal on plastic designs.

Joint manufacturers and the medical profession knew of these problems as far back as 2006 and have since done little more than monitor rejections and failures; so one has to say, if the repercussion is a dilution of a metals-dominant role, the medical industry will have done the metals industry a considerable disservice.