This morning in metals news: U.S. Steel released its second-quarter earnings results; Nucor Corporation also reported its own financial earnings; and the Federal Reserve opted to maintain its federal funds rate.
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.
This morning in metals news: ArcelorMittal expressed some optimism in its markets for the remainder of the year; tin prices made significant gains in July; and Anglo American released its financial results for the first half of the year.
[Editor’s Note: This article was edited Friday, July 31, to reflect that the U.S. government had reached separate agreements with Lynas and MP Materials, not a joint venture deal. The article also now includes an analysis of the materials Lynas processes and information regarding the possibility of a new Kalgoorlie plant.]
Potentially the biggest shakeup to the U.S. rare earths market in years was announced this month, in a move by the U.S. to bolster the country’s rare earth supply chain that has been almost totally reliant on an increasingly belligerent China.
But the reality is an agreement has been cooking for months.
Road to a Lynas deal
Last year, the Australian government earmarked funding to help raise investment for new rare earths mines in the country. Fifteen have been identified as being commercially viable.
However, it wasn’t until this year that plans for the refining operation in the U.S. finally came together.
According to the Financial Times, in April the U.S. Department of Defense approved funding for two heavy rare earth processing operations, the first a joint venture between Australian listed Lynas Corp. and Blue Line in Texas to process the full range of rare earths that Lynas currently produces at the Lynas Advanced Materials Plant in Malaysia.
Lynas processes lanthanum (La), cerium (Ce), praseodymium (Pr) and neodymium (Nd) in Malaysia. It would be logical for Lynas to send the balance of its rare earths — otherwise known as SEG concentrate, short form for Samarium (Sm)/Europium (Eu)/ Gadolinium (Gd) concentrate — to the new facility it is building in San Antonio.
The real value here is in the terbium (Tb) and dysprosium (Dy) content, along with the gadolinium (Gd), according to this post in Investor Intel.
Currently, the only market for the SEG is China. China is the only real producer of heavy rare earth elements in the world, presently with 97% control of this market segment.
By doing this with Blue Line, Lynas will be able to capture the full value of the Tb and Dy market internally.
The agreement also holds out the possibility of funding for a new plant to be built in Kalgoorlie, Australia, a resource the Australian government is also willing to support in developing.
However, the Pentagon subsequently put the funding on hold pending review. Congressional lawmakers argued only U.S. companies should receive funding. Lynas is the only major non-Chinese producer of rare earth intermediates after the 2015 collapse of the debt-laden Mountain Pass refining operation in California.
Eventually, common sense carried the day and the project has been given the go-ahead.
The second DoD investment is with U.S.-based MP Materials, owner of the California Mountain Pass mine, to develop refining facilities it was building out before Mountain Pass hit the buffers in 2015. Now, MP exports some 26,000 tons a year of concentrate to China for refining, on which the Chinese have levied a 25% tariff during the current trade war.
Lynas nearly suffered a similar fate, in 2016, shareholders, including state-owned Japan Oil, Gas and Metals National Corporation, agreed to a debt restructuring of Lynas, saving it from collapse.
The challenge for Western miners and refiners is China’s dominance of the market (at over 80%).
If China chooses to raise production or flood the export market, rare earths prices collapse and challengers are bankrupted.
Although RE’s are in reality not rare, the processing is environmentally and technically challenging. In short, it’s expensive.
But the metal oxides are so critical to so many key industries and technologies. As such, it is inconceivable in an increasingly hostile trade environment that the West cannot support and subsidize, if necessary, its own supply chain.
As such, Australia and Lynas make an ideal partner.
The country holds a sixth of global rare earths deposits. The Australian government is making investments to support the mining of at least nine of the 15 rare earth elements.
Combined with Mountain Pass, a wider suite of light and heavy could be available. Both firms have prior refining experience on which to build.
India’s first scrap-based steel plant will soon come online.
Tata Steel has set up the new plant in Haryana in central India. The plant is expected to have an annual capacity of 500,000 tons, the Hindu Business Line reported.
Tata has set up the plant in collaboration with Aarti Green Tech Ltd, a subsidiary of Aarti Steel.
This morning in metals news: Rusal released its Q2 2020 production results; Norsk Hydro has signed a memorandum of understanding for potential use of natural gas at its Alunorte refinery in Brazil; and Rio Tinto announced the discovery of a new zone of gold mineralization.
This morning in metals news: the gold price has surged to an all-time high; China is eyeing changes to its steep capacity swap rules; and Northern Dynasty Minerals has received an environmental impact study for its Pebble copper-gold-molybdenum project in Alaska.
This morning in metals news: U.S. steel imports fell in June; Freeport-McMoRan reported its Q2 and first-half results; and Norsk Hydro’s underlying EBIT for the second quarter gained compared with Q2 2019.
This morning in metals news: U.S. Steel plans to restart another blast furnace at its Gary Works; imports of blooms, billets and slabs from Japan have seen a significant jump this year; and silver prices have surged to a seven-year high.
This morning in metals news: Chilean firm Antofagasta announced its second-quarter production results; Brent crude oil prices were down 20% in Q1 2020 compared with Q1 2019; and Alcoa announced a new deal to supply low-carbon rolling slabs.