Author Archives: Sohrab Darabshaw

Amid a deepening energy crisis, China has begun construction on a massive wind and solar project in the desert.

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China announces plans for renewable energy project

renewables

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President Xi Jinping said via video link last week at a United Nations Biodiversity Conference that China has started building a massive renewable energy project.

The project would be bigger than all of the wind and solar power in India, Bloomberg reports.

Construction on the first phase, comprising 100 gigawatts of wind and solar, in the desert has begun, according to Bloomberg.

In order to accelerate its transition to carbon neutrality in advance of global climate talks, the nation is undertaking an initiative that is at least twice the size of the next-largest global development. Furthermore, it would be able to generate four times as much power as the Three Gorges Dam, according to Bloomberg.

China’s premier Li Keqiang had earlier questioned the pace of the nation’s energy transition. Li’s remarks followed directly on the heels of the president’s remarks. As the energy crisis continues, executing the country’s path to carbon neutrality is becoming more difficult ahead of COP26, the 26th conference on climate change. The conference will begin Oct. 31 in Glasgow, Scotland.

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Steel prices in India have nearly doubled over the last year, reflective of rising steel prices across the globe.

But for India, several factors such as a steep rise in the prices of raw material like iron ore — and of late, coking coal — have contributed to the steep hike.

Due to China’s decision to cut steel production and exports, India is also experiencing a price increase. High domestic demand had led China to remove rebates and impose export taxes on certain steel products this year to discourage exports. Steel production is also set to be capped in order to reduce carbon dioxide emissions.

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Indian steel prices on the rise

India

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India’s steel industry has been impacted by the price hike in various ways.

For some major steel manufacturers, it has led to large profits. For many small and medium enterprises that manufacture steel and engineered products, it has led to losses.

Protests have been lodged with the Indian government due to the shortage of raw materials. After China, India is the world’s second-largest steel-producing country. The price escalation in India started in the second half of 2020-21 and has continued nearly unabated since then.

In June, for example, the wholesale price of hot rolled coils (HRC) shot up by approximately US $40 (Rs 3,000) to be approximately $1,533 (Rs 69,000) per ton. Cold rolled coils shot up by about $66 (Rs 5,000) to sell at approximately $1,146 (Rs 86,000) per ton. Prices of both HRC and CRC were nearly half in the same period in 2020. These forms of steel are used in the automobile, construction and transport sectors.

Domino effect

Because it is steel, the price hike has had a cascading effect on consumer goods, construction and other activities, too.

Steel plants in the country have hiked steel prices by around $80 (Rs 6,000) per ton in just the last eight days.

CNBC TV18 reported JP Morgan India was of the view that Indian steel prices were still about 15% discounted to imported steel prices. When the busy season post festivals, starts in India, post-festive season, demand could go up, leading to some increase in local steel prices.

The sudden rise in steel demand once the COVID lockdown had ended caught Indian steel companies off guard. The uptick in steel consumption along with a renewed focus on infrastructure and government initiatives (such as “Make in India”) have led to an increase in steel demand.

In 2017, as part of the national steel policy, the Indian government announced India would try to reach 300 million tons per year year of crude steel production capacity by 2030.

Coal crisis

Furthermore, a local coal crisis, which some experts predict could last for quarters, has hit the steel sector.

Like China, India is also staring at a power crisis due to coal shortage. Over 70% of India’s power still comes from coal-powered plants.

As of Oct. 6, 80% of India’s 135 coal-powered plants had less than eight days’ worth of supplies left, according to BloombergQuint.

There are several reasons for the coal shortage. Among them, India has reduced its investment in the fossil fuel as it gives priority to renewable energy to meet its climate change targets.

BloombergQuint cited JSW Steel Ltd. officials, who have gone on record to state that the coal shortage is likely to lead to steel price hikes for the next few quarters.

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Investing $2 trillion over the next decade in sustainable infrastructure can greatly reduce Southeast Asia’s greenhouse gas emissions, according to a new report from Bain & Company, Microsoft and Singapore’s Temasek Holdings.

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Southeast Asia infrastructure needs

Southeast Asia map

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The report, titled “Southeast Asia’s Green Economy: Opportunities on the Road to Net Zero,” emphasized investments in areas such as renewable energy, electric vehicles, and waste management.

According to the report, green investments totaled only U.S. $9 billion last year. The report’s authors said Southeast Asia’s corporate, public, and philanthropic sectors must work together to attain the $2 trillion investment figure, the report noted.

Southeast Asia is highly vulnerable to climate change, as it suffers from disproportionately large numbers of climate disasters.

Road to net-zero

Though fighting COVID-19 currently remains a high priority for most governments, a lot of attention in Southeast Asia last year went to climate actions and thinking about what entails a green economy, according to Dale Hardcastle, co-director of Bain’s global sustainability innovation center.

The report found that about 90% of Southeast Asia’s carbon emissions can be addressed by transitioning away from fossil fuels to cleaner energy sources like wind and solar, valuing nature and making the region’s agricultural production of food more efficient.

“While we are seeing many encouraging changes in Southeast Asia’s Green Economy and the overall trend is positive, there is still much more to be done,” said Dale Hardcastle, a partner in Bain & Company’s Singapore office and co-director of the firm’s Global Sustainability Innovation Center (GSIC). “Southeast Asia presents specific conditions which provide both challenges and opportunities for a full-scale sustainability transformation. The region needs to act now and take three steps to translate these opportunities into tangible results: define its road to Net Zero, catalyze the journey and outcomes together, and unlock capital flows.”

Achieving net-zero as a region demands individual action by businesses, investors, governments, and communities, as well as collective action at an ecosystem level.

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Chinese moves to clean up their heavy-polluting industrial sector has triggered a swift collapse in iron ore prices for the first time since July 2020.

Prices last Friday and Monday dipped below the $100 per ton mark.

iron ore stockpile

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According to a draft guideline released on Thursday, the Ministry of Ecology and Environment intends to monitor 64 regions during its winter air pollution campaign.

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Evergrande crisis sparks concerns over Chinese economy

Iron ore, copper and other commodities may be further hammered following news of the crisis at Chinese developer Evergrande. Markets across the globe fell sharply Monday as Evergrande, one of the biggest property developers in the country, Evergrande threatened to default on loans worth U.S. $300 billion.

This has sparked off worries about the economy. It could also cause downturns in construction and demand for raw materials.

Iron ore’s fall

Since May, iron ore prices have fallen by more than half. China, the world’s biggest steelmaker, has tightened production curbs. Furthermore, China’s property market is experiencing a sharp downturn.

MetalMiner has previously reported on China’s move to cut down its steel production to curb pollution.

The Chinese government has announced plans to scale down the steel industry, which accounts for between 10-20% of its carbon emissions. The country has also raised tariffs on steel-related exports, effective as of Aug. 1, 2021.

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ArcelorMittal and Liberian President George Weah have announced a 25-year commitment to stay in Liberia. Through the deal, the steelmaker will triple its iron ore production in the country and invest an additional $800 million. The steelmaker said it has invested $1.7 billion in the country over the last 15 years.

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ArcelorMittal invests in Liberia

ArcelorMittal logo

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The steel and mining company had initially signed a 25-year agreement with Liberia in 2005. It shipped the first iron ore from its Yekepa mine in 2011.

During the newly signed first phase of expansion, annual production would reach 15 million tons (MT), with the potential of reaching 30 MT a year, ArcelorMittal Executive Chairman Lakshmi Mittal said at the signing ceremony.

ArcelorMittal will provide the government with a total of $65 million from the production of 15 million MT of iron ore in three years. Since the end of a 1989-2003 civil war, the mining and agriculture potential of Liberia has attracted billions of dollars in resource investments. However, the country’s infrastructure remains underdeveloped and the majority of its 5 million people live in poverty.

Going green

Of late, the UK-headquartered ArcelorMittal has been in the global headlines for its determined drive on the “green steel” and clean energy fronts, joining the trend of steelmakers foraying into green hydrogen and increasing the footprint in renewable power generation.

Just last week, Germany pledged to offer funding of $65 million toward of ArcelorMittal’s investment of 110 million euros ($131 million) in a hydrogen plant powered by renewable electricity.

German Environment Minister Svenja Schultze said Berlin would pay 55 million euros — subject to EU approval — toward a new direct reduced iron (DRI) plant. The plant will use green hydrogen to reduce iron ore in a CO2-free steelmaking process.

By 2025, ArcelorMittal Hamburg’s Chief executive Uwe Braun expects his company to produce 100,000 tons of DRI for steelmaking with green hydrogen from the plant.

ArcelorMittal invests in Indian solar power

Elsewhere, in India, ArcelorMittal plans to invest in solar energy in the Indian provinces of Rajasthan & Gujarat.

According to a report by pv magazine, Group Chairman Lakshmi Niwas Mittal met representatives of the local governments in Rajasthan and spoke of setting up a 4.5 GW solar park at an investment of about U.S. $2,586 million (Rs 19,000 crore) in the province. The plant is to be set up by ArcelorMittal arm HPCL-Mittal Energy Limited.

In another meeting with the Gujarat officials, Mittal also expressed his intention of investing about U.S. $6,809 million in Gujarat’s solar energy, wind energy and hydrogen gas production sectors.

ArcelorMittal currently produces DRI using grey hydrogen, which comes from natural gas. In a green hydrogen system, the hydrogen is produced by using renewable energy sources, like wind or solar power, and then run through an electrolyzer.

ArcelorMittal would have achieved its goal of expanding output to 15 MT per year would have been accomplished much earlier, but the Ebola outbreak in 2014 disrupted its expansion plans in Liberia, for which it declared force majeure.

ArcelorMittal said the project will generate more than 2,000 new jobs during the construction phase.

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Diplomatic relations between China and Australia have been strained over the past year.

However, that does not seem to have affected trade between the two nations.

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China-Australia trade

China and Australia flags

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After posting record exports in May and June 2021, Australia recently announced a new record in July. Exports of iron ore, coal and liquefied natural gas exports all rose strongly, giving Australia a record trade surplus, plus a boost to mining profits and tax revenue.

“Non-rural goods rose $2,275m (7%), driven by other mineral fuels, metal ores and minerals and coal, coke and briquettes,” the Australian Bureau of Statistics reported.

“The increases in other mineral fuels and coal, coke and briquettes were driven by LNG and thermal coal, respectively. Increased exports to Northern Asian countries coincided with an unseasonably warm northern summer.

“The increase in metal ores and minerals was driven by iron ore on the back of strong demand from China.”

In July, total exports, including services, reached a record of A$45.95 billion.

The Australian Bureau of Statistics reported the trade surplus climbed to A$12.1 billion (US $8.91 billion) in July. The surplus reached an already high A$11.1 billion in June.

Overall, exports were up 5% because of strong demand from Asian countries for LNG and thermal coal, combined with higher prices for iron ore, Reuters reported.

Imports rose 3% to $33.8 billion, largely due to a sharp increase in parts and accessories for telecommunications equipment.

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One of India’s foremost steel companies, Jindal Steel & Power Ltd., has announced plans to invest U.S. $2.4 billion to increase capacity over the next six years as recovery from the COVID-19 pandemic boosts steel demand.

“Domestic steel prices have recovered from the lows of the COVID-induced volatility and are increasing spurred by improving demand prospects,” the firm said in its August investor presentation.

Volatility is the name of the game. Do you have a steel buying strategy that can handle the ups and downs?

Jindal Steel to ramp up capacity

India

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The steelmaker will increase its total capacity to 15.9 million tons (MT) by March 2025 from 8.6 MT, it said in an investor presentation recently. According to the statement, the company plans to more than double pellet production capacity to 21 million tons by 2024.

On Monday, in a statement to the stock exchanges, the steel company announced that its board had approved fundraising measures that include issuing non-convertible, senior, unsecured, fixed rate or LIBOR notes worth U.S. $1 billion.

JSPL’s plan includes raising money as part of its long-term goal of becoming debt-free and increasing production capacity to 15.9 MT by FY 2024.

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While the world looks on with growing concern at the political play unfolding in Afghanistan with the takeover of the Taliban, another sidebar to this developing story that is slowly creeping into public consciousness is the vast treasure-trove of minerals in that country, and how the Taliban government will exploit it.

One estimate by the U.S. Geological Survey (USGS) given years ago had pegged the worth of Afghanistan’s untapped mineral resources at U.S. $1 trillion. Some Afghan officials have said the actual figure could be three times more.

Afghanistan on a map

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Afghanistan’s mountains contain a wide range of critical resources, including: copper, gold, oil, natural gas, uranium, bauxite, coal, iron ore, rare earths, lithium, chromium, lead, zinc, gemstones, talc, sulphur, travertine, gypsum and marble.

However, even before the U.S. entered its borders 20 years ago, Afghanistan had struggled to tap those reserves.

Two decades later, the situation is not very different.

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Continuing with its acquisition of the U.S. natural gas assets, the Bangkok-based Banpu has now agreed to purchase a combined cycle gas-fired power plant in Texas.

According to Forbes , Banpu, controlled by billionaire Isara Vongkusolkit, will buy the power plant for U.S. $430 million.

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Banpu looks to the future

mergers and acquisitions

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For some time now, Banpu has been investing in sustainable projects as it steers a new course.

Last year, it established Banpu Next, which includes its energy technology businesses. Those include electric vehicles, renewable energy plants and electric ferries.

The company may not exit the coal mining business altogether for another decade or so because of the continued demand for coal. However, it has said it will no longer invest in new coal assets, preferring to put money into renewable energy.

In an interview with CNBC, Chief Executive Somruedee Chaimongkol — sometimes referred to as “Asia’s first lady of coal” — said the firm wanted to make half of its earnings from green energy by 2025.

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Demand for cobalt is rising globally because of its use in electric vehicle batteries.

As such, China Molybdenum (CMOC) is planning to invest as U.S. $2.51 billion to further augment output from its Tenke Fungurume mine in the Democratic Republic of the Congo (DRC), Reuters reported, citing the company’s announcement.

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China Molybdenum to make $2.5B investment in DRC

China Molybdenum website logo

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CMOC is the second-largest global cobalt feedstock producer after Switzerland’s Glencore. Its TFM mine producing 15,400 tons of cobalt & 182,600 tons of copper in 2020.

The new project will come up at its Tenke Fungurume copper-cobalt mine (TFM) in the Congo. China Molybdenum has an 80% stake in Tenke Fungurume, one of the world’s largest copper-cobalt deposits. The DRC’s Gecamines owns 20%.

News agency Reuters reported the Chinese firm had stated in a filing that the investment will go toward building three ore production lines. As a result, average annual copper output at the mine would rise by 200,000 tons. In addition, cobalt output would rise by 17,000 tons.

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