Articles in Category: Commodities

You do not have to look too hard to find failures of state-run economies around the world. Since the collapse of the Soviet Union, there is less enchantment with the model — outside China, anyway —  than there once was.

But what we remain plagued with is the idea government has a role in the ownership, operation and pricing of “strategic assets.”

We wrote recently about power rationing in China due in part to a political spat with Australia. As a result, Beijing decided it was a good idea not to buy Australian coal. In turn, it deprived the country’s power sector of a major source of supply.

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India coal crisis

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This week, we cover India. The state’s ownership of the monolithic Coal India mining company has for years led to underperformance, underinvestment and inefficiency.

A Reuters article paints a dire picture of the perilous state of the Indian electrical generating sector.  Coal stocks have gotten so low that many generators risk running out of supplies.

As of Sept. 29, the post reports, 16 of India’s 135 coal-fired power plants had zero coal stocks, quoting Central Electricity Authority (CEA) data. Over half of the plants had stocks that would last fewer than three days. Meanwhile, over 80% had less than a week’s stock left.

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This morning in metals news: new orders for manufactured goods ticked up by 1.2% in August; meanwhile, Nucor affiliates announced two acquisitions; and, lastly, the WTI crude oil price inched upward last week.

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New orders for manufactured goods rise

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New orders for manufactured goods rose by 1.2% in August, the Census Bureau reported today.

New orders for the month reached $515.7 billion. The August jump marked the 15th monthly increase in the last 16 months.

Meanwhile, new orders for manufactured durable goods increased by 1.8% in August.

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Much is being made of Beijing’s efforts to meet its environmental emissions targets — the country states it will hit peak emissions before 2030 and carbon neutrality by 2060 — and its restricted steel and aluminium production.

But a recent Reuters post by John Kemp suggests output is being impacted more by a widening electricity crisis than by enforced shutdowns to meet environmental goals.

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China’s energy crisis

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Kemp explains that China is in the grip of a severe shortage of both coal and electricity. Coal output has not kept up with rising electricity demands from a rapidly recovering economy.

China’s electricity generation increased by 616 Terawatt-hours (13%) in the first eight months of 2021 compared with the same period last year. The largest rises came from the service sector and primary industries.

However, most of the increase has been supplied by thermal generators, principally coal-fired power stations, Kemp explains. Those generators increased output by 465 TWh (14%) in the first eight months.

Other power sources, such as hydro-electric output, have actually fallen slightly this year due to water shortages. Unfortunately, nuclear in China is a tiny fraction of power generation, dwarfed even by renewables like wind and solar.

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Europe’s drive to reduce carbon emissions is taking many forms, from government support for R&D to investment in electric vehicle (EV) charging structures, hydrogen fuel technology and infrastructure, to name just a few.

So much for the carrots.

On the stick side, the E.U. has a carbon emissions trading scheme that grants credits to major emitters. However, it still raises the cost of electricity for both industrial and residential consumers.

Rising steel prices have sounded like a broken record. As we get closer to 2022, will we ever see them peak? Sign up for the next installment in the MetalMiner webinar series on Thursday, Sept. 30. MetalMiner experts will discuss the steel market outlook, contracting mechanisms, buying guidance and more. 

Polish copper producer looks to nuclear power

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For those countries most reliant on coal-fired power production, the problem is most acute.

Poland, with 70% of its power generation dependant on coal, is one of the hardest hit.

It’s not surprising, then, that major consumers are looking to diversify their power sources.  However, rather than the obvious choice of natural gas — or renewables like wind and solar — Poland’s second-largest power consumer, copper producer KGHM, is turning to nuclear.

In an interview with the Financial Times, the firm outlined plans to partner with NuScale Power of the U.S. to develop an initial four small modular nuclear reactors (SMR). Each would be capable of producing 77 MW of power and would be operational from 2029.

In total, the project could entail up to 12 SMRs with a total installed capacity of 1 GW. The intention is to make the firm completely grid-independent and guarantee stable, low-cost power in the long term.

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This morning in metals news: Rio Tinto said it had reached an agreement with the union representing workers at its BC Works; the Census Bureau reported new orders for manufactured durable goods increased in August; and, lastly, oil prices rose last week.

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Rio Tinto, BC Works union reach deal

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After a work stoppage at its BC Works, Rio Tinto announced it had reached an agreement in principle with the union representing workers there.

“Both parties are satisfied that the proposed Agreement will provide a foundation for respect in the workplace and underpin a competitive and sustainable future for BC Works, benefitting employees and their families, the company, and the broader community,” Rio Tinto said.

“In addition to the CLA, the parties have also reached an agreement in principle for a Memorandum of Understanding on a new way of working together and on a return to work protocol.”

About 900 workers went on strike at the plant in late July. The two parties returned to the negotiating table late last month.

BC Works has capacity of 329,000 tons of aluminum per year.

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Before we head into the weekend, let’s take a look back at the week that was and some of the metals storylines here on MetalMiner:

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Week of Sept. 20-24 (China’s property market and steel prices, global copper mine production and much more)

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• ArcelorMittal announced plans to invest $800 million toward expanding its iron ore production in Liberia.
• Meanwhile, Rio Tinto aims to triple solar capacity at its Weipa bauxite mine.
• Global copper mine production rose by 4.9% during the first half of the year, the International Copper Study Group reported.
• Nucor is evaluating locations for a new sheet mill with capacity of 3 million tons.
• Stuart Burns on skyrocketing natural gas prices and the implications for steel producers.
• Iron ore prices have taken a sharp fall since earlier this year.
• Ford Motor Co. is collaborating with battery materials company Redwood Materials on closed-loop battery recycling and development of a domestic battery supply chain.
• U.S. steel capacity utilization fell to 84.9% last week, the American Iron and Steel Institute reported. While the pace of gains has slowed, U.S. steel prices continue to rise.
• Burns took a look at the precarious situation at Chinese real estate developer Evergrande Group and what it could mean for steel prices.
• Alcoa will restart an aluminum smelter in Brazil that had been idled since 2015. Aluminum prices this week soared to a 13-year high.
• Single-family housing starts fell in August, the Census Bureau reported.
• Lastly, Mercedes-Benz, Stellantis and TotalEnergies are each taking a 33% stake in battery cells manufacturer Automotive Cells Company.

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This morning in metals news: Mercedes-Benz, Stellantis and TotalEnergies will each take a 33% stake in Automotive Cells Company; meanwhile, the Semiconductor Industry Association offered its reaction to the Biden administration’s recent meeting on the semiconductor supply chain; and, lastly, the Energy Information Administration expects a rise in natural gas consumption in 2021 and 2022.

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Automakers team up to scale battery project

Electric car lithium battery pack. (Nischaporn/ Adobe Stock)

Mercedes-Benz is collaborating with Stellantis and TotalEnergies to scale up production of the Automotive Cells Company.

Each partner will have a 33% stake in the battery cells manufacturer.

The project will cost more than €7 billion ($8.2 billion), Mercedes-Benz estimated.

“On its path toward an all-electric future, Mercedes-Benz is taking an equity stake in European battery cell manufacturer Automotive Cells Company (ACC) to scale up development and production of next-generation high-performance battery cells and modules,” Mercedes-Benz said. “As announced in July 2021, Mercedes-Benz will be ready to go fully electric by the end of the decade – wherever market conditions allow.”

To reach that goal, the German automaker said it will need battery production capacity of more than 200 Gigawatt hours.

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U.S. housing starts overall picked up in August, the Census Bureau reported this month.

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Housing starts overall rise, but single-family starts drop

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Privately owned housing starts rose to a seasonally adjusted annual rate of 1,615,000. The August rate jumped by 3.9% from the previous month.

The August 2021 rate increased by 17.4% compared with August 2020.

However, the rate for single-family housing starts reached 1,076,000, down 2.8% from the previous month.

Permits rise 6%

Meanwhile, privately owned housing units authorized by building permits in August rose by 6.0% in July to a seasonally adjusted annual rate of 1,728,000 in August. The August rate increased by 13.5% from August 2020.

Single‐family authorizations rose 0.6% to 1,054,000. Authorizations of units in buildings with five units or more reached a rate of 632,000.

Residential construction spending

U.S. residential construction spending dipped from March-May 2020, marking the first dip since a generally down 2018.

Since last May, however, spending has enjoyed an uninterrupted rise.

According to the Census Bureau, residential construction spending reached a seasonally adjusted annual rate of $782.1 billion in July. The rate jumped from $777.9 billion in June and $618.2 billion in July 2020.

Meanwhile, lumber, for which prices skyrocketed to all-time highs earlier this year, has cooled.

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This morning in metals news: Alcoa said it plans to restart its Alumar aluminum smelter in Brazil; meanwhile, the Energy Information Administration forecasts hydropower generation will fall by 14% this year; and, lastly, European automakers are looking to bypass China in their rare earths supply chains.

Are you under pressure to generate aluminum cost savings? Make sure you are following these five best practices. 

Alcoa to restart Alumar smelter

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Alcoa this week announced plans to restart its Alumar aluminum smelter in Brazil.

The smelter has been fully curtailed since 2015. The facility has annual capacity of 268,000 metric tons.

“The process to restart the idle capacity will begin immediately,” Alcoa said. “The first molten metal is expected in the second quarter of 2022, and the full 268,000 mtpy of capacity is expected to be operational in the fourth quarter of 2022. By 2024, the Alumar smelter will be powered with 100 percent renewable energy.”

Hydropower hit by drought

Speaking of renewable energy, the EIA forecasts hydropower generation to decline by 14% this year.

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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.

John/Adobe Stock

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.

Are you prepared for your annual steel contract negotiations? Be sure to check out our five best practices. 

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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