Before we head into the weekend, let’s take a quick look back at the week that was and the metals storylines here on MetalMiner, including the release of the January 2021 MMI, a look at what might happen to the iron ore price and much more.
Inauguration Day draws near for President-elect Joe Biden, leaving metals industry groups to wonder what happens next for President Donald Trump’s signature metals policy: Section 232 tariffs on steel and aluminum imports. Whether Biden ultimately chooses to maintain those measures or do away with them remains to be seen, but metals watchers will be eyeing those developments closely.
As for metals prices, some price gains slowed down amid the festive season, but some have resumed their upward ascent in early 2021. Copper, for example, crossed the $8,100 per metric ton threshold earlier this month.
This morning in metals news: Rio Tinto and Meridian Energy have reached a deal that will allow New Zealand’s Aluminum Smelter to continue operating the Tiwai Point aluminum smelter; BHP unveiled plans to build a new wind fence; and the Energy Information Administration (EIA) forecasts U.S. oil and natural gas production will fall this year.
Rio Tinto, Meridian Energy reach deal on Tiwai Point aluminum smelter
Miner Rio Tinto announced it had reached a deal with Meridian Energy that will allow New Zealand’s Aluminum Smelter to continue operating the Tiwai Point aluminum smelter until 2024.
“The extension provides certainty to employees, the local community and customers while providing more time for all stakeholders to plan for the future,” Rio Tinto said in a release.
The agreement with Meridian helps make the smelter “economically viable and competitive,” Rio Tinto added.
This morning in metals news: several industry groups urged President-elect Joe Biden to continue existing steel tariffs and quotas; Germany’s OGE and Thyssenkrupp and Norwegian energy company Equinor are collaborating to mitigate emissions; and Norsk Hydro and Nuvosil are working on aluminum and silicon recycling technology.
Industry groups urge Biden to keep steel tariffs
President Donald Trump in 2018 used Section 232 of the Trade Expansion Act of 1962 to impose steel tariffs of 25%.
The steel tariffs remain in place, as does the 10% tariff on aluminum.
President-elect Joe Biden is set to take office next week. As such, many have wondered how the former vice president’s trade policy will differ from Trump’s approach.
In a joint letter, the American Iron and Steel Institute (AISI), Steel Manufacturers Association (SMA), the United Steelworkers union (USW), The Committee on Pipe and Tube Imports (CPTI) and American Institute of Steel Construction (AISC) urged Biden to keep the steel tariffs in place.
“Continuation of the [steel] tariffs and quotas is essential to ensuring the viability of the domestic steel industry in the face of this massive and growing excess steel capacity,” the statement reads.
The letter adds that removing or weakening the measures will invite a “new surge” in imports.
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OGE, Thyssenkrupp, Equinor work together to curb Duisburg emissions
According to Reuters, German firms OGE and Thyssenkrupp and Norwegian energy company Equinor will work together to curb emissions from Thyssenkrupp’s plant in Duisburg, Germany.
The Renewables Monthly Metals Index (MMI) rose 2.7% this month, as Toronto-based First Cobalt signed multiple refinery feedstock agreements. (Editor’s note: This report also includes coverage of grain-oriented electrical steel, or GOES.)
First Cobalt signs refinery feedstock agreements
Toronto-based First Cobalt announced Tuesday it has achieved a “key milestone” with new refinery feedstock agreements reached with Glencore AG and IXM SA.
The cobalt hydroxide deals will see First Cobalt receive a total of 4,500 tonnes per year beginning in 2022. The feedstock will come from Glencore’s KCC mine and China Molybdenum Co.’s — parent company of IXM SA — Tenke Fungurume mine.
The agreements represent 90% of projected capacity for the Canadian refinery. Furthermore, the deals will yield “22,250 tonnes per year of battery grade cobalt sulfate,” per the company’s announcement.
“This is a pivotal moment for our North American cobalt refining strategy,” First Cobalt President and CEO Trent Mell said. “Our globally competitive cost structure and industry-leading ESG credentials put us in a strong position for a rapidly growing EV market. With feedstock arrangements in place, we can continue to advance our vision to create a new cobalt supply chain in North America.
“Electric vehicle sales in Europe were up more than 100% in 2020 and the U.S. will be the next large market to take off.”
In other company news, First Cobalt signed a letter of intent with Kuya Silver Corporation to sell “a portion of its silver and cobalt mineral exploration assets in the Canadian Cobalt Camp and form a joint venture to advance the remaining mineral assets.”
Over the last year, COVID-19 restrictions have closed showrooms. Furthermore, Brexit has raised the prospect of trading tariffs with Europe. In addition, the government has repeatedly moved the goal posts on the sale of internal combustion engines toward the end of the decade.
A new trade deal with the E.U. allows tariff free access to the U.K.’s largest automotive export market. The announcement of the new deal on Christmas Eve proved a massive relief for the industry, according to Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders (SMMT), an industry body, as quoted in the Financial Times.
However, tariff-free does not mean barrier-free. Additional safety certification and much more onerous paperwork involved in the movement of goods between the U.K. and the E.U. will increase complexity for a U.K. supply chain intimately entwined with the E.U.
New clarity in 2021 for U.K. automotive industry
Nevertheless, the U.K. automotive industry is at least starting 2021 with better clarity than it endured through much of last year.
But one looming crisis the SMMT identified is the incomplete nature of the U.K.’s electric vehicle supply chain.
Specifically, the FT reports, the U.K. is going to need far more battery factories if it is to sustain a switch to electric vehicles in the decade ahead.
This morning in metals news: Turquoise Hill Resources offered an update on the Oyu Tolgoi copper mine expansion project; renewable power generation will continue to rise this year in the U.S.; and the aluminum price has traded sideways over the last month.
The fate of the Oyu Tolgoi copper mine expansion project is up in the air, as it could face termination from the Mongolian government.
Turquoise Hill Resources, which is majority-owned by miner Rio Tinto, jointly owns the massive project with the Mongolian government. The parties reached a financing plan for the project in 2015.
However, the Mongolian government appears to be concerned about runaway costs for the project.
“In addition, the Government of Mongolia has advised Rio Tinto that it is dissatisfied with the results of the Definitive Estimate, which was completed and delivered by Rio Tinto and publicly announced by the Company on December 18, 2020, and is concerned that the significant increase in the development costs of the Oyu Tolgoi project has eroded the economic benefits it anticipated to receive therefrom,” Turquoise Hill said in a statement. “The Government of Mongolia has indicated that if the Oyu Tolgoi project is not economically beneficial to the country, it would be necessary to review and evaluate whether it can proceed.”
“According to the U.S. Energy Information Administration’s (EIA) latest inventory of electricity generators, developers and power plant owners plan for 39.7 gigawatts (GW) of new electricity generating capacity to start commercial operation in 2021,” the EIA reported. “Solar will account for the largest share of new capacity at 39%, followed by wind at 31%. About 3% of the new capacity will come from the new nuclear reactor at the Vogtle power plant in Georgia.”
Aluminum trends flat
After surging throughout most of the second half of 2020, the aluminum price has slowed down of late.
The LME three-month aluminum price is up just 0.22% over the last month. The price closed Friday at $2,032 per metric ton.
This morning in metals news: the American Iron and Steel Institute released its first report on U.S. raw steel production for 2021; Nippon Steel eyes its net-zero emissions goals; and, lastly, the U.S. hot-rolled coil price continues to surge.
This morning in metals news: the U.S. announced it will adjust its tariffs on E.U. products imposed last year; the U.S.’s renewable energy consumption surpassed that of coal for the first time since before 1885; and metals prices have retraced slightly this week.
Last year, a WTO ruling authorized the U.S. to impose up to $7.5 billion worth in tariffs on E.U. products. The ruling came as a result of the long-running saga over government subsidies for Airbus in Europe.
Yesterday, the United States Trade Representative (USTR) announced the U.S. will adjust the previously announced tariffs, citing the scope of the E.U.’s countermeasures that hit against U.S. subsidies of Boeing.
“In September, 2020 the EU was authorized to impose tariffs affecting $4 billion in U.S. trade as a result of related WTO litigation,” the USTR said in a release. “In implementing its tariffs, however, the EU used trade data from a period in which trade volumes had been drastically reduced due to the horrific effects on the global economy from the COVID-19 virus. The result of this choice was that Europe imposed tariffs on substantially more products than would have been covered if it had utilized a normal period. Although the United States explained to the EU the distortive effect of its selected time period, the EU refused to change its approach.”
Recognizing the direction of flow and going with it is certainly a good survival tactic, particularly with respect to diesel engines.
So the move by European truck makers to tackle the challenge of a continent-wide commitment to decarburization should be seen as a refreshing attempt to mold the narrative and future landscape rather than refusing to acknowledge the direction of travel.
Diesel engines, electric vehicles and lower emissions
The European Union has plans to reduce CO2 emissions by 50% by the end of the decade.
Transport will play a big part in that.
Automotive car manufacturers, driven by challenging targets, have and continue to invest billions to develop viable electric vehicles. In some cases, they are also exploring alternatives such as fuel cells.
However, the truck industry has so far concentrated on producing ever more fuel-efficient, lower-emission diesel engines.
Daimler, Scania, Man, Volvo, Daf, Iveco and Ford have signed a pledge to phase out traditional combustion engines and focus on hydrogen, battery technology and clean fuels.
The report says the industry will spend between €50 billion and €100 billion on new technologies to achieve this goal. First, they plan on introducing biofuels, which have a carbon capture and storage component. Having already taken CO2 out of the atmosphere, they are said to be more carbon neutral than fossil fuels. However, they will migrate over the next twenty years to hydrogen fuel cells and batteries — or, likely, a combination of both depending on how technologies and investment in infrastructure develops.
Under the coordination of the E.U. carmakers’ association ACEA, they are working with the German-funded Potsdam Institute for Climate Impact Research to consider the best technologies and approaches to follow – and, no doubt, where to lobby for state support to aid the process.
Carbon tax disincentive
One key area already identified is a higher carbon tax in the E.U. The industry says that to realistically incentivize investment they have to disincentivize the advantages currently enjoyed by internal combustion engine (ICE) systems. “If politicians continue to subsidize fossil fuels, it will be very difficult for us, we need to change the behavior of our customers, and of our customers’ customers,” Scania chief executive Henrik Henriksson told the Financial Times.
It goes without saying that, in the meantime, the customer is going to end up paying for this. A higher carbon tax will be borne by the trucking industry and its users, not by truck manufacturers.
As costs rise for ICE engine systems (e.g., diesel), the industry will find demand will fall for ICE engines. In turn, demand will rise for EV or fuel cell alternatives. Of course, that will only happen if they are deemed viable in terms of range, reliability and speed of refueling.
As a trucker observed to me the other day, “I covered 250,000 miles in the last three years, if I went electric it would currently take me six years because I would spend half my time sitting in truck stops recharging!”
That’s why many believe the future for heavy transport will be hydrogen fuel cells with battery back-up or support.
However, two challenges need to be resolved.
The first is an adequate infrastructure of refuelling stations, at least on major roads and motorways.
The other is the development of clean energy electrolysis splitting water. Currently, most hydrogen comes from natural gas making it essentially a fossil fuel.
Still, as we have seen with auto EVs, first technology needs to be developed. Then, costs have to be reduced. Gradually, the most viable solutions emerge.
At least Europe’s truck makers are trying to coordinate investment and agree on a common direction — that’s an encouraging sign.
Has the time for the “fuel of the future,” green hydrogen, arrived?
Recently, some of the world’s biggest green hydrogen project developers and partners joined hands to launch the “Green Hydrogen Catapult” initiative that aims to drive down costs to below U.S. $2 per kg to help change energy across carbon intensive industries, including steel.
The seven founding partners include the Saudi-based ACWA Power, CWP Renewables, Envision, Iberdrola, Ørsted, Snam and Yara.
The Green Hydrogen Catapult initiative will try to scale green hydrogen 50-fold in the next six years. The initiative will leverage the support of the Rocky Mountain Institute, a U.S.-based nonprofit organization.
The race to zero emissions is aiming for the deployment of 25 gigawatts through 2026 of renewables-based hydrogen production.
Green hydrogen has been regarded for many years as an alternative fuel to decarbonize emissions-intensive heavy industry and supply chains.
It is produced by using renewable energy — wind and solar — to power electrolysis that splits water into its constituent parts.
With global warming becoming a serious threat, governments have been contemplating the use of hydrogen to “decarbonize” several industries. Those industries include steel, petroleum, transport, industrial heating and others. In addition, they are looking to its role in energy security.
The idea is to have a serious alternative to fossil fuels.