Articles in Category: Environment

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This morning in metals news, copper prices were up slightly Monday, Tokyo Steel held prices steady for the fourth straight month and Rio Tinto responds to criticism about carbon emissions stemming from its customers’ operations.

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Copper Prices

LME copper traded up 0.4% on Monday, Reuters reported, reaching $6,458 per ton.

Citing Society Generale analyst Robin Bhar, the report notes the second quarter of the year typically features conditions conducive to price support for copper.

Holding Steady

Japan’s Tokyo Steel has announced it is holding prices steady for its steel products for the fourth straight month, according to another Reuters report.

Kiyoshi Imamura, managing director of Tokyo Steel, was quoted as saying that domestic construction demand was “sluggish due to higher inventories and delays in some projects because of shortage of labour and some materials.”

Rio Answers Emissions Criticism

Rio Tinto has faced some criticism from environmental activists, who have called for the iron ore miner to bear more responsibility for the emissions caused by the miner’s customers.

Rio, however, says it can’t be held responsible for what customers do with their iron ore, the Australian Financial Review reported.

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Rio Tinto Chairman Simon Thompson wrote a letter to shareholders in which he explained that responsibility lies “within the control of our customers, not Rio Tinto,” he was quoted as writing.

Cutting through the polarized hype on climate change is one of the toughest challenges for firms trying to position themselves and their enterprises for the future.

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On the one hand there is a broad green or environmental lobby, which rightly shouts out the risks of rising global temperatures and the link greenhouse gases play in that rise.

Unfortunately, at the same time, many in that lobby claim a switch to a zero-carbon future would be simple.

On the other hand there are complete naysayers who do not even accept there is a climate change issue to address, let alone have any interest in finding less environmentally polluting options.

Governments rarely help; in fact, the U.S. is actively rolling back previous legislation, apparently in a perverse belief that if you say something is fake news enough, it actually does become fake news.

In many other countries, governments act with varying degrees of commitment, but at times appear to promote one solution while still supporting another cause of pollution in a different part of the economy. As a result, policies are not joined up.

Oil majors can hardly be said to be neutral in this debate, but their periodic reports are the subject of so much scrutiny that they have to be reasoned and their assumptions have to be logical or they would suffer ridicule.

So, when Andy Brown, Shell’s upstream director, told The Telegraph that zero net emissions are technologically and economically possible by 2070, his comments at least bare scrutiny.

He went on to add electric power would have to jump fivefold by that time. Wind and solar would have to increase by 50 times. It would require 10,000 Carbon Capture Sequestration (CCS) projects able to sequester six gigatons of carbon each year, accompanied by sweeping reforestation for such a goal to be reached, even over such an extended timeframe.

In the intervening decades, global temperatures may well have risen past the point of no return.

Ranged against that goal is the relentless demand for autos around the world. The same article points out a chilling statistic: Americans have roughly 900 cars per thousand head of population, yet the current figure is closer to 150 for China and 25 for India — and these rising nations aspire to The American Dream as much as anyone.

However, we should not fall into the same trap as many when looking at global warming; automobiles plays their part, but it is a relatively small part. Transportation — trucks and ships — play a bigger role, and the agricultural industry is even larger. If humans were to switch to a plant-based diet, we would buy ourselves decades to combat climate change.

Even so, for the energy industry, transportation and petrochemicals remain the focus. In an industry that operates on decade-long investment planning, it is no surprise that firms are changing priorities with increasing speed.

Saudi Aramco plans to switch 2 million to 3 million barrels per day to petrochemical production over the next 10 years, and potentially 7 million barrels per day over two decades. This is a staggering amount, The Telegraph observes — Saudi Arabia’s entire oil exports in January were 7.2 million barrels per day.  The Kingdom is also launching a $150 billion dash for lower-polluting natural gas, with plans for production to reach 23 billion cubic feet per day within a decade, equal to 60% of today’s global market for liquefied natural gas.

The following graph, courtesy of The Telegraph, illustrates the motivation for the shift in priorities.

Source: The Telegraph

Rarely has the energy industry been at such a crossroads and never has the oil industry faced such an uncertain future. Even in the febrile market of the early 1970s following what was then deemed an energy crisis did oil companies seriously doubt there would be a need for their product in the decades to come.

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But today there are genuine questions facing planners about what product mix oil companies should optimize for by the middle of this century, let alone what the landscape will look like 10 years from now.

Climate change and its effects are of great concern — governments are aiming to hit short- and long-term clean energy targets and curb pollution, many individuals are striving to live greener lives and automakers are beginning the transition toward electric vehicles.

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Climate change has already had — and will continue to have — major impacts on our lives and ecosystems around the world.

Of course, as a result of all this, climate change will also have a significant impact on trade and the flow of goods (which, from a metals perspective, can only serve to drive up prices).

A 2009 report by the World Trade Organization and the United Nations Environment Programme included a brief section identifying two primary impacts of climate change on trade.

“First, climate change may alter countries’ comparative advantages and lead to shifts in the pattern of international trade,” the 2009 report states. “This effect will be stronger on those countries whose comparative advantage stems from climatic or geophysical reasons. Countries or regions that are more reliant on agriculture may experience a reduction in exports if future warming and more frequent extreme weather events result in a reduction in crop yields.”

The report also noted climate change’s impact on supply chains: “Second, climate change may increase the vulnerability of the supply, transport and distribution chains upon which international trade depends. … Extreme weather events (such as hurricanes) may temporarily close ports or transport routes and damage infrastructure critical to trade. Transportation routes in permafrost zones may be negatively affected by higher temperatures, which would shorten the length of time that roads would be passable during winters.”

Fast forward almost a decade, when the recent National Climate Assessment outlined the impact of climate change on various aspects of life, including transportation, air quality, land use and water, among other categories. The assessment is mandated by the Global Change Research Act of 1990, which requires the U.S. Global Change Research Program to submit a report to Congress and the president no less than every four years.

As many are by now aware, the ramifications of climate change — and inaction in the face of it — are dire.  

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This morning in metals news, global aluminum production jumped in September, Germany’s steel sector warns against an abrupt withdrawal from coal-fired electricity and Tokyo Steel’s prices hold steady again.

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Aluminum Output Rises

Global aluminum output jumped 2.5% year over year in September, according to an International Aluminum Institute (IAI) report.

September output hit 5.3 million metric tons.

MetalMiner’s Take: World aluminum production rose 2.5% in September, reaching 5.3 million metric tons. January-September production for the base metal is also up by 0.3%. While both Chinese aluminum production (up by 3.6% year over year) and European production (up 0.8% year over year) are rising, North American production is down 4.3% down on a year-over-year basis.

Therefore, buying organizations may continue seeing scarcity in the North American aluminum market, which will lead to a higher U.S. Midwest premium. North American companies are currently struggling with aluminum supply, despite the increase in world production.

However, one of the great failings of “fundamental analysis,” in particular the study of supply and demand fundamentals, involves statistics such as those recently released from the IAI highlighting rising primary production on a year-over-year basis.

Yet ask any U.S. buyer of semi-finished material if they think that rise in primary production has led to or will lead to the easing of supply for semi-finished materials and rest assured you won’t find a single supporter.

MetalMiner seeks to study and analyze the specific underlying metal price trends and exchange-traded volumes — along with trends in the broader industrial and commodities markets — to assess potential price direction for underlying metals.

Rising primary production levels have little to no correlation with material availability and, in some respects, even primary aluminum ingot prices.

Not So Fast

With respect to coal-fired electricity, Germany’s steel sector is arguing against an abrupt withdrawal from the power generation method, Reuters reported.

According to Hans Juergen Kerkhoff, the head of Germany’s steel association, withdrawal from the power source would result in an increase in electricity costs for steelmakers of at least $161 million per year, per the Reuters report.

MetalMiner’s Take: The German steel sector should protest from the mountaintops about the country’s withdrawal from coal-fired electricity. With the phaseout of nuclear power by 2022, the loss of coal-fired energy will make the largest economic power in the European Union even more dependent on natural gas and oil imports.

Besides Germany’s steel-producing sector, access to competitively priced energy units goes well beyond basic steelmaking industries. The irony of Germany’s move to curtail the production of coal-fired electricity is that steel consumers will need to source finished goods like steel elsewhere —  likely to countries with even poorer environmental track records.

Tokyo Steel Holds Prices Steady

Prices of Tokyo Steel products will hold steady for the ninth straight month, Reuters reported.

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The firm last altered its prices in February, according to the report.

The Renewables Monthly Metals Index (MMI) lost one point this month, falling for an October MMI reading of 103.

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Rare Earths Removed From Final Tariff List

The U.S. Trade Representative’s office announced a list of Chinese products worth $200 billion that would be targeted for tariffs, a list that included a number of important materials for high-tech applications (including cobalt, cobalt oxides, cobalt sulfates and cobalt chlorides).

The final list, however, which went into effect late last month, did not include a number of rare earths materials that showed up on the original list.

However, a number of cobalt products remained on the final list.

Harnessing the Power of the Sea

As interest and demand in renewable energy continues to grow, so, too, is innovation in the field.

Physics World recently reported on the development of a device that serves to triple the amplitude of a water wave.

According to the report, the circular device deploys vertical metal sheets to concentrate the wave in a shallow space.

Renewable Momentum

Speaking of interest in renewable energy, a Stratfor report surveys the rise in interest at the corporate level.

While listing corporations that have announced intentions to shift toward renewable energy (or have already done so), the report name drops a couple of metals industry players.

“For instance, metals giant Alcoa sources 75 percent of the energy required for its smelters from renewables, while mining giant Rio Tinto acquires just under half of its energy from such sources,” the report states.

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Actual Metal Prices and Trends

Japanese steel plate fell 2.1% to $755.73/mt. Korean steel plate fell 0.2% to $675.67/mt. Chinese steel plate also posted a slight drop, falling to $716.11/mt.

U.S. steel plate fell 0.5% to $992/mt.

U.S. grain-oriented electrical steel coil dropped 10.3% to $2,478.

Chinese neodymium fell 0.4% to $59,311.60/mt. Chinese silicon also fell, down to $1,499.17/mt. Chinese cobalt cathodes fell 0.4% to $96,790.80/mt.

In recent years China’s steel sector — particularly the large, state-owned steel mills — have benefited from the enforced closure of capacity on environmental grounds during the winter heating season.

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Contrarian as it may at first sound, closure of private mills largely — on the basis they are unregulated  and are supposedly the most polluting steel mills — was a boost to larger competitors.

About 140 million tons of “illegal” production was closed last year, Reuters reports, only for capacity to be further restricted by Beijing’s war on smog during the winter heating season. The forced closure of steel mills in 26 cities around Beijing and Tianjin hit national output, accordig to the report, contributing to a year-on-year contraction in output during November and December last year.

Demand, however, remained buoyant. As a result, prices rose and exports, the relief valve for excess capacity, fell.

Source: Reuters

It should be no surprise that steel mills in the rest of the world all benefited from less competition and, as a result, higher prices (long before America’s 25% steel import tariffs lifted prices further). Indeed, cumulatively, strong domestic demand and state meddling on environmental grounds have allowed China’s steel sector to make good money and focus on the buoyant domestic market for the last two years.

That may be about to change.

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The Renewables Monthly Metals Index (MMI) dropped one point this month, falling for a September reading of 104. 

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Making the Desert … Green?

Forms of renewable energy, like wind and solar, have gained momentum in recent years, both in practice and in popular support.

One place that could benefit from a renewable revolution? The Sahara Desert.

According to a BBC report, researchers claim installation of wind turbines and solar panels in the desert there could have the effect of doubling the amount of rainfall it receives, ultimately yielding more plants and life of all kinds.

The researchers published their study in the journal Science.

“In this study, we used a climate model with dynamic vegetation to show that large-scale installations of wind and solar farms covering the Sahara lead to a local temperature increase and more than a twofold precipitation increase, especially in the Sahel, through increased surface friction and reduced albedo,” the study’s abstract states. “The resulting increase in vegetation further enhances precipitation, creating a positive albedo–precipitation–vegetation feedback that contributes ~80% of the precipitation increase for wind farms. This local enhancement is scale dependent and is particular to the Sahara, with small impacts in other deserts.”

E.U. Lifts Ban on Solar Panels from China

The E.U. has opted to lift a restriction on imports of solar panels from China, the South China Morning Post reported.

The 28-member bloc initially imposed duties on the solar panels in 2013, but the European Commission announced it would not extend them. The duties expired at midnight on Sept. 3.

“After considering the needs of both producers and those using or importing solar panels the Commission decided it was in the best interests of the EU as a whole to let the measures lapse,” the European Commission release states. “This decision also takes into account the EU’s new renewable energy targets.”

Actual Metal Prices and Trends

Japanese steel plate rose 7.8% month over month to $54.01/mt. Korean steel plate fell 0.8% to $108.36/mt. Chinese steel plate rose 1.4% to $121.96/mt.

U.S. steel plate jumped 1.1% to $309.07/st.

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Chinese cobalt dropped 0.5% to $2,915.02/mt.

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This morning in metals news, customers reportedly are set to avoid Rusal during a crucial upcoming industry gathering in Berlin, Tata Steel announces a new sustainable steelmaking procedure and NAFTA negotiations pick up again today after a long Wednesday night of talks.

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Cold Shoulder

According to a Reuters report, customers plan to avoid Rusal during an upcoming industry gathering in Berlin, during which firms lock up 2019 aluminum supply deals.

The Russian aluminum giant was hit with U.S. sanctions in April, which sent the aluminum market into shock and yielded skyrocketing prices.

Prices came back down when the U.S. Treasury Department extended the deadline for firms to unwind business with Rusal by Oct. 23.

However, according to the Reuters report, some customers aren’t optimistic that that sanctions will in fact be lifted.

Sustainable Steelmaking

Tata Steel on Thursday announced a new steelmaking process that it claims will cut carbon dioxide emissions stemming from the steelmaking process by half, the Economic Times reported.

The firm conducted testing at its Ijmuiden site in the Netherlands, according to the report.

NAFTA Talks Resume

NAFTA renegotiation efforts are set to continue today after what was reportedly a long night of talks on Wednesday.

Canadian Prime Minister Justin Trudeau recently commented that “No NAFTA is better than a bad NAFTA deal.”

Meanwhile, on Saturday President Trump tweeted: “There is no political necessity to keep Canada in the new NAFTA deal. If we don’t make a fair deal for the U.S. after decades of abuse, Canada will be out. Congress should not interfere w/ these negotiations or I will simply terminate NAFTA entirely & we will be far better off…”

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The U.S. and Mexico have already reached an agreement in principle on certain provisions of NAFTA; following that, the U.S. and Canada picked up talks last week in an effort to bring the latter into the fold.

Who would have thought wind’s transformation from subsidy-supported to self-financing power source would happen so quickly – not this publication, that’s for sure.

Apart from diehard environmentalists, most consumers have been opposed to renewables on the basis they cost significantly more and turbines are an eyesore on the landscape.

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But in the span of less than 10 years, public opposition has declined. Opposition has not gone away entirely, but it has softened as we have become more familiar with the sight of slowly rotating turbine blades on the horizon and with the realization that its costs are falling dramatically.

A recent article in The Telegraph reports on how the cost of power production from onshore wind farms has dropped so far it undercuts conventional coal, natural gas and nuclear options.

The below graph from 2015 shows onshore wind as the cheapest option; costs have come down further since then.

Source: Wikipedia

Calling it the “subsidy-free revolution,” the Telegraph article reflects our own surprise at how quickly the change has taken place.

To be fair, offshore power still requires some subsidy because of the greater cost of installation and maintenance. Even here, costs continue to fall and subsidy is a route the authorities prefer to entertain because of public opposition to what was seen as the blight of onshore turbines dotting the landscape.

In large part, this is because turbine sizes have increased and, as a result, efficiencies have increased.

Source: The Telegraph

The industry is seeing it as a major investment opportunity, generating jobs while at the same time reducing the country’s overall carbon emissions.

A figure of £20 billion covering both onshore wind and solar over the next 10 years is mooted, all of which would be subsidy-free.

The latest figures are sounding the death knell for nuclear power in the U.K., but as usual the government hasn’t caught up with the numbers.

Nuclear power is costing a massive £92.50 per megawatt hour and is partly justified on the basis that a base load of power is always required to fill in renewables variability.

However, battery parks like Glassenbury in Kent are springing up that can meet gaps in demand, but nothing like a 2 GW nuclear power plant; still, a few MW here and there is slowly adding up.

But, like renewables, costs will need to come down for investment to flow into battery parks. That is, they’ll need to come down to the extent required to negate the need for quick fireup of conventional power sources to fill in gaps during cold snaps or, as renewables rise, as a percentage of the whole to fill in for periods of low wind or at night for solar.

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Still, a low-carbon future, at lower power costs and with the benefit of economic growth from investments – what’s not to like?

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This morning in metals news, Tata Steel completed its buy of the bankrupt Bhushan Steel, Chinese steel mills are turning to scrap and Turkey is preparing to respond over the U.S. tariffs on aluminum and steel.

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Tata Steel Buys Bhushan Steel

Indian firm Tata Steel completed its purchase of the bankrupt Bhushan Steel for $5.2 billion, Reuters reported.

Bhushan has an annual steelmaking capacity of 5.6 million tons, according to the report.

Scrapping Plans

Amid environmental rules, Chinese steel mills are looking to use more scrap, according to a report by the South China Morning Post.

The recycling of material comes as the government continues to crack down on “smoke-stack industries,” according to the report.

Turkey Plans Response on Section 232 Tariffs

Turkey is among the many countries not to have won an exemption from the U.S.’s Section 232 tariffs on steel and aluminum; unsurprisingly, Turkey is planning a response, according to one report.

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Turkey plans to impose tariffs worth about $266.5 million on U.S. products, including coal, paper, walnuts, almonds, tobacco and unprocessed rice, among other items, according to a report by the Hurriyet Daily News.