Articles in Category: Environment
steel

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This morning in metals news: Liberty Steel will make over 100 layoffs at its Georgetown steel mill; U.S. energy-related carbon dioxide emissions fell in 2019; and, lastly, a new airport has opened at Rio Tinto’s Gudai-Darri mine.

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Liberty Steel to make layoffs at Georgetown mill

Liberty Steel will make over 100 layoffs after Christmas at its Georgetown steel mill, Myrtle Beach Online reported.

The company filed a WARN notice with the state of South Carolina for the layoffs, which will total 104 workers. According to the notice, the layoffs will take effect Dec. 28.

Energy-related carbon dioxide emissions down

In addition to the Liberty Steel news, U.S. energy-related carbon dioxide emissions fell last year, the Energy Information Administration (EIA) reported.

“After rising by 3% in 2018, energy-related carbon dioxide (CO2) emissions fell 3% in the United States in 2019,” the EIA reported. ”

Total energy-related CO2 emissions in 2019 were about 150 million metric tons (MMmt) lower than their 2018 level.

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London Metal Exchange

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Readers of a recent Financial Times article reporting the opposition of major primary aluminum producers Norsk Hydro and Hindalco Industries to the LME’s proposed “green aluminum” contract may feel the primary producers are swimming against the tide of history.

Aluminium is a core material needed for increasing efficiency and lowering carbon dioxide emissions by reducing weight and improving recycling. (Copper and lithium also fall under this category.)

Exhibiting low-carbon footprints themselves is increasingly becoming a deciding factor for manufacturers choosing one supply source over another.

Stop obsessing about the actual forecasted aluminum price. It’s more important to spot the trend. See why.

‘Green aluminum’ contract

The LME’s proposed “green aluminum” or low-carbon aluminum contract intends to help determine to what extent the global market is willing to pay a premium for aluminum that meets an as yet undetermined carbon threshold. That threshold is mooted in the LME’s Sustainability Discussion Paper, available here, to be about 4.5 kg of CO2 per kg of aluminum.

By contrast, the average for Europe is 8.6 kg. For China – where much of primary production is based on coal-fired power production – it is about 20 kg.

To be fair, the LME does not appear totally wedded to the idea yet.

It is consulting with the market to test the appetite for voluntary disclosure of a producing mill’s product. As such, a mechanism can be developed to measure the willingness of consumers to pay a premium for warrants that met a lower carbon content. Russia’s Rusal or En+ material and — ironically you may think in light of the opening paragraph — Norsk Hydro’s metal typically meets this low-carbon threshold. Much of their production is based on hydropower, with carbon contents estimated to be even below 4 kg.

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nickel

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Before we head into the weekend, let’s take a look back at the week that was and the metals storylines here on MetalMiner, including: the nickel market; aluminum prices on the SHFE and LME; China’s metals rebound; and much more.

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Week in Review, Oct. 12-16 (nickel market, China’s metals rebound and more)

The MetalMiner 2021 Annual Outlook consolidates our 12-month view and provides buying organizations with a complete understanding of the fundamental factors driving prices and a detailed forecast that can be used when sourcing metals for 2021 — including expected average prices, support and resistance levels.

October 2020 MMI trends chartThis morning in metals news: the October Monthly Metals Index (MMI) report is out; the E.U. is reportedly considering imposing carbon border fees; and Alcoa released its third-quarter financial earnings.

The MetalMiner 2021 Annual Outlook consolidates our 12-month view and provides buying organizations with a complete understanding of the fundamental factors driving prices and a detailed forecast that can be used when sourcing metals for 2021 — including expected average prices, support and resistance levels.

October 2020 MMI report is out

For followers of our MMI series, the October 2020 MMI report is out and available for download.

The report covers 10 indexes: Automotive, Construction, Rare Earths, Renewables, GOES, Global Precious, Aluminum, Copper, Stainless Steel and Raw Steels.

To download the report, visit the MMI landing page.

E.U. mulls carbon border fee

Aside from the October 2020 MMI report, as Stuart Burns alluded to in his report earlier today, the E.U. is considering carbon border fees, Reuters reported.

Citing a senior official, Reuters reported the fees would apply to polluting goods for steel, cement and electricity.

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According to the Financial Times, China’s President Xi Jinping surprised the global community by announcing last month a hugely ambitious plan to improve China’s environment and make the country carbon-neutral by 2060.

In addition, he said the country’s emissions would peak before 2030.

But does this really mean anything? If it does, what impact will it have on the country’s massive steel industry? The steel industry, of course, is the source of a significant proportion of the country’s carbon emissions?

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China’s environment and emissions figures

Firstly, let’s look at the scale of the proposition.

China is the world’s largest emitter of greenhouse gases (such as carbon dioxide and methane).

Last year, China’s emissions accounted for roughly 27% of the global total. The country’s total accounted for more than the U.S., Europe and Japan combined, the Financial Times reported.

Furthermore, the country consumes more coal than the rest of the world put together. In addition, China continues to commission new coal power plants.

On the one hand, China also leads the world in the deployment of solar power, wind power and electric vehicles. Its energy-efficiency policies are ambitious and successful. Significantly, there are no known climate change deniers in the Chinese leadership.

But is the pledge meaningful?

It contrasts poorly with that made by almost 70 countries and the E.U. Those countries have already pledged to make their economies “net-zero” greenhouse gas emitters by mid-century, or 10 years earlier than China’s pledge.

And the 2030 peak emissions date is a rehash of a commitment made back in 2014, suggesting peak emissions could be reached well before 2030 and the authorities are simply back-sliding.

Difficult changes

The scale of the challenge vis-a-vis China’s environment and emissions is considerable.

More than 85% of China’s primary energy last year came from coal, oil, and natural gas, all of which produce carbon dioxide. This came despite massive investment in solar and wind.

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Europe’s steel industry appears to be at a crossroads.

Hurting before the coronavirus pandemic-induced lockdowns, the industry struggled with overcapacity, high costs, weak demand and competition from lower-cost sources (like China and Russia).

The lockdowns decimated demand. Major consumers, like the automotive sector, which takes something like 20% of European production of flat-rolled steel, according to the Financial Times, have now largely reopened.

Even so, auto sales are not expected to recover to pre-pandemic levels until 2025, according to major European component supplier Continental.

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

Could M&A be the answer for European steelmakers?

Mergers and consolidation have traditionally been posed as solutions. Bigger is better and economies of scale will solve the challenge of profitability, the argument goes.

However, many are arguing European steelmakers should worry less about consolidation and more about rationalization.

Furthermore, politicians are among those reluctant to consider job losses in their own regions.

The steel industry employs some 330,000 people across the continent. About 40% of the workforce is currently on some form of short working or under threat of redundancies.

However, if the government does not support closures with retraining and regional enterprise policies to support alternative employment opportunities, the European steel industry will limp on with, at best, marginal profitability and poor capacity utilization.

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cars on the road in Shanghai, China

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Before we head into the long Labor Day weekend, let’s take a look back at the week that was in the world of metals.

Automakers released August sales reports, mostly showing sales remain down compared with 2019 levels.

Meanwhile, for the week ending Aug. 29, U.S. steel mills’ capacity utilization fell compared with the previous week, interrupting an extended stretch of weekly capacity increases.

In other news, President Donald Trump took aim at steel imports from Brazil and Mexico. With respect to Brazil, Trump opted to cut Brazil’s semi-finished steel quota for the remainder of the year down to 60,000 tons from 350,000 tons.

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Week of Aug. 31-Sept. 4

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Europe

Andrey Kuzmin/Adobe Stack

Despite the economic and political challenges related to the coronavirus pandemic, the European metals industry is becoming increasingly vocal in trying to form the arguments around its own survival.

Are you under pressure to generate aluminum cost savings? Make sure you are following these 5 best practices!

 

Making the case

A recent article in the Financial Times — penned, it must be said by the president of Eurometaux, the European Association of non-ferrous metals producers — should not be dismissed as just a PR attempt to lobby Brussels.

The arguments made are repeated across the European metals sector. The arguments nod to social trends supported across the region to tackle climate change issues while trying to protect jobs and local economies.

Europe may not be able to set the world’s agenda. Collectively, however, the E.U. can set Europe’s agenda. In so doing, it can set an example other countries are already showing some interest in adopting.

Lost market share

As the post points out, since the 2008 financial crisis, Europe has lost a third of its primary aluminum production. Meanwhile, China has grown to produce some 60% of the world’s market.

Europe has lost market share for other base metals, too, missing the early boat for the cobalt, lithium and rare earths (used in electric cars).

Like the U.S., Europe has come to realize its dependency on foreign countries for strategic resources comes at its peril.

“The era of a conciliatory or naive Europe that relies on others to look after its interests is over,” Thierry Breton, the E.U. industry commissioner, is quoted by the Financial Times as saying.

Mining and refining in Europe has slashed its collective carbon footprint by more than 60% in the past two decades due to far higher and better-enforced standards in the region. Yet, not surprisingly, Europe’s metals sector cannot compete with subsidized imports from China and other regions.

A level playing field

But drawing on parallel commitments to achieve carbon neutrality by 2050, the region’s industry is making the case for creating a level playing field. That level playing would come not simply by imposing quotas but by applying a financial cost to imports that come with significantly higher carbon and environmental costs.

The wider industry is buying into the idea of products having a lower carbon footprint as a brand strength.

The LME is launching a low-carbon aluminum spot contract to promote and facilitate growing demand for metal with a definable carbon footprint.

Some producers are already onboard.

Rusal is at the forefront of promoting its primary metal as coming wholly from renewable (hydroelectric) sources. European metals producers may not have such a clear advantage in terms of power supply. However, a combination of technologies, practices and power sources means each ton of metal Europe produces emits on average eight times less carbon than its equivalent from China.

The industry wants the E.U. establish a coherent framework to assess, regulate and penalize imports that do not meet the same level of environmental responsibility. That could include a carbon tax on imports that would help level the playing field.

Ultimately, consumers always pay for taxes. However, at least this approach may have the benefit of helping to ensure a sustainable regional metals industry. It could encourage producers elsewhere to lower their environmental impact. Furthermore, it could reduce the supply chain risk of a growing dependence on countries like China that play by a different set of rules.

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U.S. and Canada

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This past week’s metals news covered everything from silver price movements to the copper price rise’s slowdown to the reimposition of tariffs on some Canadian aluminum.

We also broke down President Donald Trump’s recent proclamation with respect to reimposing the Section 232 tariff on some Canadian aluminum. MetalMiner’s Stuart Burns delved into the concern expressed by Ontario Premier Doug Ford: could Trump target Canadian steel next?

As our readers know well by now, Trump imposed Section 232 tariffs on imported steel and aluminum of 25% and 10%, respectively, in 2018. During the course of negotiations with Canada and Mexico over the United States-Mexico-Canada Agreement (USMCA) — the successor to NAFTA — the U.S. rescinded the tariffs in May 2019.

Now, at least for unalloyed aluminum from Canada, the tariff is back.

The Aluminum Association called the tariffs the “wrong approach.”

Furthermore, the tariff comes in a time when beverage makers are struggling with an aluminum can shortage.

For the buyers out there, if you are under pressure to generate cost savings in aluminum, steel or anything else, make sure you are following these five best practices.

But the tariff storyline is but one thread in the world of metals.

Before we head into the weekend, let’s take a look back at the week that was:

MetalMiner Week in Review, Aug. 10-14

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green energy

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Most of the focus on the upcoming presidential election has been around the handling of the coronavirus pandemic, choice of running mates and candidates’ reactions to protests centered around the BLM movement.

Not surprisingly, such issues attract the headlines and, of course, matter for society at large.

Policy has not taken center stage to the extent it has in previous campaigns. However, we should be aware that some policy ideas coming out of the Biden camp could have profound implications in the years ahead (if the polls are proved right and he enters the White House in January 2021).

Want more from MetalMiner? We offer exclusive analyst commentary in our weekly, monthly, or quarterly updates – all metals, no sales fluff.

Net-zero emissions by 2035?

In a far-reaching policy initiative, the presidential hopeful would set the U.S. on the path of cutting net carbon emissions from the country’s electricity production to zero by 2035, according to the Financial Times.

Achieving that goal would mean all power comes from either one of two sources. On the one hand, power would come from clean energy sources such as nuclear, hydro, solar or wind. Aside from that, any carbon emitted by fossil fuels sources, such as coal or natural gas, is captured and stored (e.g., carbon sequestration).

As the post observes, that would be no mean feat in just 15 years.

Last year, 61% of U.S. electricity came from either coal or natural gas. Nuclear and renewables accounted for 37%.

Implications, changes Biden’s plan would bring

Such a policy would require a number of fundamental changes with far-reaching implications for industry and consumers.

Net-zero would require, on the one hand, a massive ramp-up in renewable capacity. While economically viable in terms of power costs, that is already facing opposition from groups opposing huge wind or solar farms.

On the other hand, to counter variability it would create huge opportunities for power storage, such as power banks and pump storage schemes. It would also require a dramatic upgrading of the U.S.’s aging power distribution network to handle distribution and fluctuating supply.

But most controversially it would require — for the moment, at least — the subsidy of carbon capture and sequestration technology. Despite numerous, largely government-sponsored trials around the world, it still remains stubbornly uneconomic at current carbon prices.

Even worse, most carbon dioxide so captured is used to recharge depleted oil wells for enhanced recovery. That application will decline as quickly as renewables rise to take its place in generating power for electrification of the automotive sector.

Cost, cost, cost

While we are not passing judgment on the desirability of such an ambitious target, we should not lose sight of the cost.

California has driven the green narrative in the U.S. in recent years.

The state has the most aggressive decarburization goals. California has also seen a dramatic increase in the cost of electricity. Electricity costs are rising five times faster in California than in the rest of the U.S.

Despite being an early adopter in the vanguard of renewables, California’s experience has been more costly than wider adoption across the country would prove in the future. The goal requires newer technology and a countrywide upgrading of transmission infrastructure. Realistically, it also requires zero-carbon assumes carbon capture and sequestration.

Unless there is a technological game-changer to reduce the cost and find a market for the 1.6 billion tons of carbon dioxide produced it’s hard to see how these costs won’t be passed on to consumers.

Undoubtedly, there will be tremendous opportunities for firms. With the development of new technologies that such ambitious targets will create, there will be winners and losers.

Let’s hope the former outweighs the latter.

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