Author Archives: Stuart Burns

You often hear conflicting stories about Chinese steel production.

Outright production capacity has been reduced as older facilities were closed under orders from Beijing in 2016-18, while much illegal or non-approved low-quality steel mills, whose output never appeared on reported results, have been forcibly closed.

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Domestic demand is also said to be down with new-automobile unit sales were down on a year-over-year basis for 14 consecutive months through August, a report in the Nikkei Asian Review states.

The drawn-out trade war with the U.S. has also sapped China’s consumer appetite, the article advises, illustrated by underperforming sales of appliances.

With the China National Day holiday looming mills in Hebei and Shandong have ordered by the provincial governments to reduce their steel output by up to 50% in the run-up to the holidays in a bid to improve air quality.

Five mills in Shandong were ordered to suspend varying shares of steel production capacity, last week and this week, coming with a loss of around 29,000 mt/d of steel output. Hebei is still awaiting its closure orders, but some mills have already cut output of pig iron.

Yet despite this gloomy production and demand scenario, the Nikkei Asian Review reports short-term closures aside, China is poised to produce over 1 billion tons of steel this year, with the industry producing 577 million tons of crude steel in the first seven months of the year.

Fears are therefore rising that China could be on track to create a glut this winter despite the now normal winter closures.

China’s rivals in southeast Asia are looking on warily concerned that rising exports will further depress regional prices as the domestic market fails to absorb the anticipated record output.

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That’s not good news for the rest of the world.

Even markets protected by high tariffs like the U.S. will be dragged down by lower global prices and imports undercut domestic U.S. mills.

That’s good news for consumers as demand and growth in the U.S. cools next year; lower prices will allow consumers to cope with softer sales prices for their own products.

When you see the words “trade deal,” we instantly think of China, but the U.S. has embarked on a multitude of trade disputes with longtime trading partners.

To a greater or lesser extent, some progress is being made on most of them.

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One trade deal on which it was hoped there would be some progress before next year’s presidential elections is the not oft-covered but still meaningful deal with India.

According to the advisory firm Stratfor’s recent Worldview report, the U.S.’s bilateral trade with India totaled $142.1 billion last year.

But as with the U.S.’s trade balance with most emerging markets, the balance of trade is in favor of the developing nation.

India exported $83.2 billion worth of goods and services to the United States and imported $58.9 billion, resulting in a $24.3 billion surplus for India.

Rather implausibly, President Donald Trump has called Indian Prime Minister Narendra Modi the “tariff king,” demanding that New Delhi reduce its trade surplus with Washington and lower tariff barriers for U.S. commerce in India.

Expectations of a deal were boosted by comments Trump made and tweets about a meeting between U.S. Trade Representative Robert Lighthizer and Indian Commerce Minister Piyush Goyal on the sidelines of the U.N. General Assembly this month.

However, despite a mix of hype and threats, the two sides could not reach an agreement.

According to Stratfor, the U.S. is looking for concessions by India on information and communication technology, dairy, pharmaceuticals, agriculture, e-commerce, and data localization – a pretty full list. However, the U.S. failed to get much movement on any of these issues.

India, on the other hand, is anxious to avoid any escalation in tensions. In particular, India is looking to avoid a U.S. investigation under Section 301 of the Trade Act of 1974, which could bring even higher tariffs on Indian products and, potentially, over a wider range of goods.

Companies sourcing from or looking to source product from India will be disappointed that both sides look like they will retain high tariffs for now.

The article reports that in June, President Trump revoked India’s tariff benefits under the Generalized System of Preferences after receiving complaints from the U.S. medical devices and dairy sectors about difficulties in accessing the Indian market. That move prompted India to institute tariffs in June against 28 U.S. goods, hurting apple exporters from Washington state and almond exporters from California (among others).

Like most trade disputes, this will likely go through a series of tit-for-tat moves until such time as both sides are ready to make some compromises. While India is not known for stealing intellectual property in the way China has so blatantly done for much of this century, its policy of protecting domestic producers behind import tariffs is deeply entrenched.

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It will take considerable patience and time to achieve wholesale change to the current tariff structure.

For now, U.S. consumers should probably reconcile themselves to the current cost structure — at least until this side of the election.

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Environmentalists are horrified by the impact of global warming on the Greenland ice sheet.

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According to the Financial Times, temperatures have risen more than twice as fast in Greenland as the rest of the planet because the Arctic sea ice is retreating and pollution is darkening the arctic ice, reducing its ability to reflect sunlight.

Greenland is blanketed in an ice sheet about a mile deep that covers 81% of its land area — four times the size of California, the Financial Times reported.

The environmental impact of a melting Greenland ice is not the topic today for a MetalMiner article, however significant implications will be for low-lying areas such as Florida and Bangladesh.

They say every cloud has a silver lining. For Greenland, as the ice retreats and the land is exposed, the vast island’s natural resources hold the potential for significant new sources of minerals and hydrocarbons (albeit from an environment that still holds considerable challenges).

President Donald Trump’s interest in Greenland was not misplaced, merely the approach he used.

A recent report by the Brookings Institution explores both the opportunities and challenges in exploiting an area rich in iron ore, lead, zinc, diamonds, uranium, oil and, crucially, rare earth minerals.

The population’s decision to support autonomous self-rule government in June 2009 was based in part on the belief that the country could move beyond fishing and tourism to generate enough GDP to replace the financial support of Denmark.

That such an assessment was made at a time of sky-high commodity prices is now history. Since then, both mineral and oil prices have halved; what appeared to be a potentially economically viable opportunity in 2008 seems not so viable today.

Sources: Brookings Institute

As the map from the Brookings Institute shows, there are significant potential reserves of oil and gas offshore. Nonetheless, despite the shortening winter season, the technical challenges of operating offshore oil rigs in such a hostile arctic environment make exploitation in the short-term economically unviable.

Quantifying Greenland’s mineral resource potential is still so sketchy that the U.S. Geological Survey (USGS) still consolidates Greenland’s results with Denmark’s, but the country already has a successful gold mine in Nalunaq and a ruby mine opened in 2015.

As some 80% of the landmass is still covered in ice, there is of course a vast area still unsurveyed, but the most attractive resource, from a strategic perspective, is undoubtedly rare earths.

A recent Financial Times report estimates Greenland holds 38.5 million metric tons of rare earth oxides, compared to total reserves for the rest of the world of 120 million tons.

It is no secret — and the cause of considerable anxiety in Western boardrooms — that China dominates the global production of these rare earths. More than 70% of rare earths are mined, and an even higher percentage processed, in China.

Beijing has used the threat of cutting off or restricting supplies in recent standoffs with Japan and clearly would not be above doing the same with the U.S. or Europe.

Two companies are already active in Greenland. One, Greenland Minerals, with extensive Chinese involvement, is making some progress. The other, Tambreez, a privately held Australian miner, has had its license application bogged down for years in bureaucratic delays but remains optimistic it has a viable resource (free of the contaminants so often found in Chinese deposits).

The Chinese have shown themselves willing to play the long game, investing now for a return much further down the road or for the sake of strategic positioning (as opposed to purely economic calculation).

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The U.S. has signed a memorandum to cooperate with Greenland on rare earth mining. However, the U.S. is playing catch-up and probably needs deeper government pockets than those available to U.S. rare earth miners, who have struggled to make a success out of U.S. resources in much more benign locations.

It is hardly surprising that En+, owners of Russian aluminum producer Rusal, are pressuring the LME to force other aluminum producers to disclose their carbon footprint.

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Rusal finds itself in the fortunate position of all its smelting capacity being powered by renewable hydroelectric power. When by fair means or foul En+ came to acquire much of Russia’s primary aluminum assets in the years after the collapse of the Soviet Union, the fact the majority of its power came from hydro was of little consequence beyond the benefit it was a reliable power source and one not subject to fluctuating global energy prices in the way that coal, natural gas or oil can be.

But in those days, global warming and corporate environmental responsibility was in its infancy. Now, the producer’s carbon footprint is a very significant contributor to its brand strength — either a huge asset, if it is near zero, or a huge negative if the firm has a significant negative carbon footprint.

Rusal has made efforts in recent years to close its few aging coal-powered generating facilities and invested in its hydro plants, both for energy security and because it had the vision to see that a total reliance on near zero-emission hydropower was a potential major brand strength.

Firms are demanding their supply chain measure and report their carbon footprint and are becoming increasingly sensitive to the contribution this makes to the carbon footprint of their own products and services.

With the vast energy demands inherent in aluminum production, aluminum consumers are often more aware than other industries about these metrics. Some producers, like Rusal and Norsk Hydro, can supply material with a very low-carbon signature because of their primary smelters’ power sources, while Novelis’s scrap-based supply chain has a significantly lower carbon footprint than semi-finished manufacturers sourcing raw material from most conventional primary supply chains.

Others based on coal and using older technologies can produce up to 20 tons of carbon dioxide for every ton of aluminum, according to the Financial Times.

Nor is the aluminum industry alone.

Just last month, Forbes listed 101 corporations pledging to improve their environmental credentials, notably their carbon footprint (but also sustainability in various forms).

These firms and their shareholders are not, on the whole, spending hard-earned dollars to achieve such goals out of altruism; they are an example of the old idiom nothing gets done unless someone can make money out of it.

These firms see burnishing their image by such means as likely to boost sales. Whether they are part of the minority that denies we even have a climate change problem is not, from a business perspective, relevant. The vast majority of their customers do increasingly believe we have a problem and are willing to make purchases decisions on the basis of their supplier’s image as a sustainable and environmentally responsible company.

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So, En+ lobbying the LME is a move to maximize what they rightly see as an opportunity to position themselves as the lowest carbon content major supplier in the marketplace. To the extent that they are successful, it will translate directly to the bottom line in enhanced sales and security as a preferred supplier.

They are not alone in their exploitation of such opportunities, but you have to admire the way they are showing much of the rest of the industry the way.

Much was made during the U.K.’s Brexit referendum campaign from those eager for separation from the E.U. about the ease of reaching free trade deals with the rest of the world.

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Misguided as these promises have proved, those involved are not alone in seeing the theoretical benefits of forging free trade agreements, while also ignoring the practicalities of trade and countries’ relative industrial strengths and weaknesses.

The U.K., for example, along with the rest of Europe and the U.S., has a very powerful agricultural lobby that demands and receives considerable protections.

There is some argument in support of this. A country is dangerously exposed if it is totally reliant on imports of that most basic of needs – foodstuffs. We can maybe live without avocados, but could we live without our cereals and vegetables?

With the looming possibility of an exit from the E.U. on Halloween (Oct. 31) – either with some kind of framework deal or, more likely, without – the U.K. is finally, after three years of near-paralysis, making plans for what a post-Brexit tariff landscape it may go for.

It is an interesting situation, as countries are rarely faced with the opportunity for a wholesale change in tariffs; usually, such changes happen gradually and as part of bipartisan negotiations over many years.

Carolyn Fairbairn, director-general of the U.K.’s CBI business lobby group, was quoted as saying this is “the biggest change in terms of trade this country has faced since the mid-19th century, with no consultation with business, no time to prepare.”

But the U.K. may have to unilaterally decide what tariffs to impose (or not), as it will probably be bereft of its free trade arrangement with the E.U. and, at the same time, with the E.U.’s trade agreements with third countries, like Canada, in a matter of weeks.

When the U.K. exits the E.U., if it has no agreement in place it will automatically leave all of the E.U.’s trade agreements forged with countries around the world — marking a revision to so-called WTO rules.

Canada is a case in point.

Prime Minister Boris Johnson and his supporters breezily asserted during their campaign that they would rapidly roll over the E.U.’s free trade deal with Canada to apply to a newly separate U.K.

Well, when push comes to shove and faced with the choice, Canada has politely declined, according to the Financial Times.

The reason is because, as it stands, the U.K. is planning to remove all tariffs — or at least on some 87% of imports — making Canada’s terms with the U.K. in such a scenario better than the terms it enjoys with the E.U.

Tariffs are being periodically reviewed; for example, a proposed 22% tariff on heavy HGV trucks was recently revised to 10%, the same rate as cars, following fierce lobbying from the road transport lobby. With that caveat in mind, the U.K. would only impose tariffs on some 13% of goods, said to include meat and dairy products, vehicles, ceramics, and fertilizers. The sectors chosen are said to support farmers and certain manufacturers.

Interestingly, automotive parts would not face tariffs in a bid to support the continuation of just-in-time automotive supply chains between the U.K. and mainland Europe that have become so highly integrated over the last 20 years. As such, some fear the wholesale collapse of the U.K. automotive sector in the event of a hard Brexit.

There remain a few weeks for interested parties to lobby for special status or protection from such a zero-tariff policy — you can bet there will be plenty that do just that.

The government is set to increase tariffs on bioethanol after the domestic industry complained that low tariffs on imports could threaten its future. Likewise, ministers are also expected to increase the tariffs charged on imports of textiles; although the U.K.’s textiles industry is relatively small, it may be part of a wider policy to limit rises in costs for consumers as a result of Brexit.

Boris Johnson’s government is desperate for Brexit to appear a success to the general populace. As such, one of its top priorities is that voters should not experience a bruising rise in living costs, such as may result from tariffs being imposed on imports (Britain is a net importer of goods by a wide margin).

How long this status would be maintained remains to be seen — maybe the other side of an election, the cynic would suggest, but the proposal seems to be the tariff structure should last at least 12 months.

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For exporters selling to the U.K. who currently face E.U. tariffs, life could be about to get easier selling into a tariff-free, post-Brexit U.K. economy.

As a wider experiment on the impact of tariffs on an economy, it will be interesting to see whether a zero- and low-tariff mix environment has the galvanizing impact some free-trade economists have promoted.

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The drone and cruise missile strikes on Saudi Arabian oil installations this week caused a massive spike in oil prices as the market reacted with surprise to the news — but should it have been such a surprise?

The strike said to have been made by some 20 drones and a dozen cruise missiles on the world’s largest oil installation — a separation plant at Abqaiq, southwest of Dharan in Saudi Arabia — came after a smaller but similar strike on the main East-West pipeline in May and another on the Shaybeh field just last month.

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Source: Strafor WorldView

Iran has denied involvement in the attacks. Meanwhile, the U.S. and Saudi Arabia point the finger at Iran, saying it or one of its proxies is responsible, even if the attack may not have been sanctioned by the more conciliatory camp in Iranian politics led by President Hassan Rouhani. Speculation is it could have been the hard-line Revolutionary Guards and/or factions seeking to disrupt any prospects of a deal being made between the U.S. and Iran. If that was the intention, it has met with some success; there is no chance now of President Donald Trump meeting with Rouhani in New York, as was mooted just a week ago.

More to the point, consumers will be keen to understand what the likely direction of prices will be from here: will they drop back or is this just the start of an ongoing guerrilla war, in which repeat strikes over the coming months further escalates the chances of military action and greater supply disruption?

Source: Financial Times

The oil market probably isn’t pricing in further disruption, according to Capital Economics in the Telegraph. They priced out three scenarios: 1) Aramco manages rapid repairs and a return to normal in a week, causing oil prices to settle at $60 a barrel 2) the disruption drags on for months, pushing oil to $85 per barrel and 3) this escalates to full military conflict and precipitates a spike to $150 per barrel by the end of the year.

Brent crude oil prices rose by almost $12/barrel to near $72/barrel when the market opened on Monday, then closed at $69.02/barrel, a 14.6% jump, the Financial Times reported. Trading volume across New York and London smashed daily records, with the equivalent of more than 5 billion barrels changing hands. The price is currently around $68.15/barrel, suggesting that, for now at least, the markets are relatively sanguine about an immediate escalation.

If there are no further strikes and neither Saudi Arabia nor the U.S. escalates the situation with retaliatory military action, the oil market can cope with the loss of 5% of global supply as a result of the damage caused to the Abqaiq and Khurais processing facilities.

The kingdom has some 188 million barrels in storage and can therefore cover the loss of the 5.7 million barrels of production for some 35 days. The U.S. Strategic Petroleum Reserve has 650 million barrels but a de facto floor nearer 380 million barrels, The Telegraph reported.

The OECD states together have stocks of 2,931 million barrels. This is above the five-year average and enough to cover 60.5 days of demand; individually, not all countries are that buffered. China, for example, is still building storage and is correspondingly not so well-covered. Broadly speaking, though reserves are adequate, Trump has not shown any willingness to engage in military action during his presidency despite often bellicose language; his actions speak more of a president who prefers economic, rather than military, warfare.

The markets may therefore have it right. At $68/barrel, the price reflects a slightly tighter market, less willingness for exporters to discount prices or chase sales. It does not reflect an outright shortage, provided none of the parties take the decision to escalate hostilities or carry out more than a token retaliatory action.

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Economically, the price increase only brings oil back to where it was in the early summer and will not have a detrimental impact on oil importers’ balance of payments or global growth.

Let’s hope cooler heads prevail. Many economies — Europe’s, in particular — are not in a strong position to weather significantly higher oil prices, with growth already under pressure.

All of this makes for an interesting fall.

Lacking a Trumpian figure in overall charge of such measures, import controls take time to be worked out in Europe, as they require consensus among E.U. members that often have conflicting priorities.

One issue they do seem to agree on, though, is the need to protect Europe from rising imports of cheap steel products.

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The E.U. has had in place temporary measures for a year now, according to a Reuters report. The bloc has had in place for a year a system of “safeguard” measures to control the incoming steel following Washington’s imposition of 25% steel import tariffs.

The measures set quotas for 26 grades of steel, including stainless, and were set at the average level of imports in 2015-2017, plus 5%. They allowed for a further 5% hike due in July and the same again in July 2020.

Following complaints that Europe’s steel market is too weak to absorb the planned increase in quotas, the European Commission has proposed that this year’s hike should be 3% effective from Oct. 1.

The figures seem to support this complaint.

Reuters reported that the E.U. steel association EUROFER estimates apparent steel consumption, which includes inventory changes, will fall by 0.6% this year and rise by 1.4% in 2020.

Set this weak demand position against last year’s imports — imports of finished steel products rose by 12% in a market that grew by only 3.3%, effectively increasing import penetration and depressing prices for domestic producers.

The revised measures also involve limiting any one country to a 30% share of imports of hot-rolled flat steel during a quarter, a move that may hit Germany before any other (it being the region’s largest consumer by some margin).

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Close neighbor Turkey is cited as one likely casualty of the move as a significant supplier of steel products, along with stainless steel from Indonesia.

GDP figures may be holding up well, but metal consumption in China suggests the global slowdown and the ongoing trade war with the U.S. are taking their toll on China’s manufacturing sector.

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Reuters reported top state primary aluminum producer Chalco is quoted as filing an 8% fall in output, with primary aluminum output of 1.89 million tonnes in the first half of the year, down from 2.06 million tons compared with the first half of 2018.

Overall, revenue actually rose 15% to 94.9 billion yuan, despite a 10% drop in the primary aluminum segment, helped by rising alumina output. Alumina output increased 3.2% year-on-year to 6.82 million tons, fueling a trading revenue increase of 23%.

But higher primary metal costs and weak prices in the primary sector hit profits. In the second quarter alone, Chalco’s net profit dropped 52.7% from a year earlier, while revenue was up 11.3% year on year.

In a separate Reuters article, the news source reported exports have also been hit, falling 4.3% in August from the previous month despite a weaker yuan. Unexpected production outages at two key smelters meant there was less metal available for overseas shipments following flooding at Hongqiao’s premises earlier last month and a separate outage in Xinjiang.

Last month, China exported 466,000 tons of unwrought aluminum, including primary metal, alloy and semi-finished products. The total was the lowest since February and was also down 9.9% from August 2018.

Supporting the aluminum picture, imports of unwrought copper — including anode, refined and semi-finished copper — products into China stood at 404,000 tons last month, Reuters reported, down 3.8% from the 420,000 tonnes in July and also down 3.8% year on year. The article went on to state the decline came despite copper prices in China being mostly high enough in August for traders to make a profit by buying on the London Metal Exchange, the global price benchmark, and selling on China’s Shanghai Futures Exchange (encouraging bookings of physical copper imports into China).

The blame for the drop in demand is laid at China’s bruising trade war with the United States, driving a fourth straight month of contraction in factory output in August, according to an official survey.

China is not alone, of course.

U.S. manufacturing output has remained positive, albeit slower than a year earlier. However, early indicators, like the Institute for Supply Management survey, showed a contraction in August — the first since 2016, according to Bloomberg. That suggests at least parts of the manufacturing landscape are facing rising headwinds; we would be complacent to think the consequences of the trade war are falling solely on China.

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Western Europe is also slowing fast. German manufacturing is arguably already flirting with recession as a consequence of a slowing Chinese economy.

Just as a rising tide lifts all boats, falling global GDP correspondingly depresses prospects for all.

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No one would argue that Thyssenkrupp has had its fair share of challenges in recent years.

Formed from a merger in 1999 between steelmaking giants, Krupp and Thyssen, a recent Sky News article observed, makes them both older than the country of Germany.

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Krupp was instrumental in the creation of railways in the country that became Germany and pioneered the Bessemer process, the first way of mass producing steel. During the 1900s, it expanded into heavy manufacturing. Both companies contributed to the miracle of German resurgence after World War II.

Once twin jewels in the German industrial crown, the combined company made a string of what proved to be bad investment decisions in Brazil with a major plate mill and in the U.S. with downstream processing operations.

Eventually, Thyssenkrupp managed to extricate itself with considerable losses. However, buoyed by healthy profits from its industrial products divisions — such as elevators, ships and high-speed trains — it struggled on amid growing demands for change.

But after its bid to hive off its steelmaking division into a joint venture with Tata Steel was recently blocked by the European Commission, talk of the group breaking up has again resurfaced, as its bonds are trading at junk status, according to Reuters. Credit cover is being reduced or withdrawn in some markets for parts of its troubled empire.

The group’s shares will this month be relegated from the DAX after more than 30 years of trading on the country’s flagship blue-chip index (Thyssen was one of the founding members).

The group has scant hope it will ever regain its former status as it seeks to sell off its more lucrative divisions to raise cash.

The latest prospect is the elevator division. Even though it may be the smallest of the quartet that makes up two-thirds of the world’s lifts — along with U.S. firm Otis, Swiss group Schindler and Finland’s Kone — Thyssenkrupp is equally well-regarded.

The most likely buyer at present seems to be Kone; the combined business would be the world’s largest elevator manufacturer, making up 28% of the market. The downside, however, would be a source of profitable revenue would be lost to a group that is currently losing €2.7 million a day ($2.9 million) and has net debts of €5 billion ($5.4 billion) – equal to twice the company’s market value, according to Sky News.

For both suppliers and customers of the group, the most worrying development must be the gradual reduction in credit rating. If suppliers cannot insure their debt, they cannot in many instances supply, thus forcing the group to diversify and fragment its supply base.

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The group has survived many trials and tribulations over the decades. It will no doubt survive the current period, but it will be a different, much reduced Thyssenkrupp that emerges in the decade ahead.

Following a decade of hype, there remains huge debate about the viability of carbon capture as a solution to carbon emissions from coal-fired power stations.

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A recent article in the Financial Times lays out both sides of the argument. On the one hand, there is the one put forward by the coal lobby, broadly drawing on the work of coal miners in the form of Coal21, an industry body in Australia backed by 26 mining groups (including BHP, Anglo American and Glencore). On the other hand, there is a more disparate group of academics, research bodies and NGOs who rubbish the miners’ position as untenable.

Coal21, however, is pouring a considerable amount of money into research, lobbying and, most controversially, marketing in an effort to influence the debate in its favor.

The industry club has invested $4 million in advertising to promote the prospects for carbon capture and sequestration (CCS) as a solution to coal’s carbon emissions. That comes in addition to some $400 million BHP has pledged over five years to reduce its emissions and those of its customers.

Meanwhile, Glencore, the world’s largest coal exporter, is building a pilot plant to capture and store carbon emissions from a nearby coal-fired power station in the Surat basin in Australia, funded in part by Coal21. The plan is to capture some 200,000 tons a year of carbon, but commercial projects in Canada and the U.S. are said to be running at 50% efficiency, at best (in one case, little more than 5%). Glencore will need new technology if it hopes to reach the 90% efficiency CCS plants are headlined to achieve.

Even then, grave doubts remain as to their economic viability for coal-fired power generation.

Source: Financial Times

CRU research is cited by the FT estimates the technology is only viable if the carbon dioxide (CO2) can be sold to other industries as a commercial source of CO2. Generally, it is either simply stored underground or used to boost oil field production by pumping sequestered CO2 back into oil reservoirs.

Without the value generated by selling CO2 to other industries, the cost of the technology needs to fall by 50% to make pure CO2 storage economical, the Financial Times reports. Cynics suggest miners’ focus on CCS as a solution has more to do with countering what they see as an increasingly negative view of coal use as the consequences of rising CO2 levels is more widely accepted.

Coal miners may be facing a losing battle, regardless of public perceptions.

The article reports that in many parts of the world, solar, wind and battery storage produces electricity at lower cost than coal, not to mention the advantages of lower CO2 producing natural gas and the latter’s greater flexibility to provide swing production to balance renewables’ lower predictability.

Although huge sums have been poured into CCS research and multiple pilot plants have been set up around the world, the technology is still less efficient than necessary and more expensive to operate than required if it is to be economical (certainly for coal-fired power generation).

But there are other industries where large quantities of CO2 are generated. The arguments for CCS may be on a firmer footing for industries like cement, steel, and oil and gas.

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If the technology can be further refined to reduce emission from these industries, that would be a huge gain — but for coal-fired power stations, CCS looks like a lost cause.