Articles in Category: Minor Metals

A while back I was called by a journalist at a prominent paper and asked what I thought about the lithium market. Was it another rare earth metals story – limited supply and rapidly escalating demand? Or, worse, was the world simply going to run out of lithium in the face of surging battery demand and, either way, where did I see prices going?

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My position was the world is not short of lithium. It is abundant as an element — it is, or was at the time, just short of scaled-up extraction projects. So no, I did not see the world running out of lithium but that a healthy run-up in prices would encourage more investment and, hence, increased supply – maybe a less dramatic version of the financing that became available for Mountain Pass after the run-up in REM prices.

Interestingly, the journalist did not print any of my comments — fair enough, as they did not support his position that the world is running out of lithium.

Since then, the prices have indeed doubled. The Financial Times reports the price for lithium carbonate from South America has hit $14,500 a ton over the past two years, quoting Benchmark Minerals Intelligence.

Source: Benchmark Minerals Intelligence via the Financial Times

Much of the excitement is due to the rise in electric vehicles (EVs) and hybrids, and although there is no futures market in Lithium – prices are set in long term contracts – buyers have to contend with a bullish supply market as battery makers scramble to cover forward under long term agreements, as the rise in prices affirms.

Indeed, not only product prices but the share prices of producers is set in large part by predictions on the uptake of electric and hybrid cars.

Back to the main thrust of the Financial Times article, Sociedad Química y Minera de Chile (SQM) is up for sale following regulators enforcement of a sale by parent PotashCorp as a prerequisite of aquiring its Canadian rival Agrium. SQM accounts for more than 20% of the world’s lithium supply, making it one of five companies that dominate the global market alongside China’s Ganfeng, Tianqi Lithium, FMC and Albemarle, while its lithium division accounts for 60% of SQM’s profits – arguably a high price regulators are demanding PotashCorp pay to acquire Agrium. But that depends very much on what price the market puts on SQM, which in turn depends on how bullish bidders feel about the prospects for electric and hybrid transport.

PotashCorp could conceivably be getting out at the peak.

According to the Financial Times, quoting consultancy Wood Mackenzie, if electric vehicles reach 5% of car and light truck sales globally by 2025 from their current level of 2%, then lithium prices will fall to $6,900 a metric ton by 2025. However, if that share, including plug-in hybrids, climbs to 12% by 2025, lithium prices will remain at current levels and then move toward a long-term price of $13,600 a ton, the consultancy forecasts. This suggests lithium prices and the share prices of major lithium producers are highly dependent on a very uncertain metric.

Source: Frost & Sullivan via the Financial Times

Uptake of electric cars has consistently underperformed expectations, so exceeding SQM’s current valuation of about $4.7 billion requires a big and bold bet on EVs and hybrids. The Financial Times quotes Ben Isaacson, an analyst at Scotiabank in Toronto, who said SQM’s share price reflects lithium prices well above the marginal costs of production, “which isn’t realistic.” The lithium price will fall to a long-term average of between $8,000 and $10,000 a ton, he forecasts. “This should be bought at a discount (to the current lithium price) — this should not be bought at a premium,” he said.

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With new projects coming onstream in Australia, the U.S. and elsewhere, supply will increase, but so too, of course, will demand. But at current prices, the money is chasing new resource development and EV uptake appears to be lagging.

As one investor is quoted by the Financial Times as saying, “Why would you buy a $5 billion stake in a resource that is geologically abundant?”

Well, my point exactly.

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This morning in metals news, the U.K. is looking to be a low-carbon player in the post-Brexit world, Chinese steel mills get a win and the City of Chicago files a lawsuit against U.S. Steel related to toxic spills into Lake Michigan by the company last year.

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U.K. Devotes Funds for Satellite Research

As the U.K. prepares for the world after Brexit, it is looking to develop its low-carbon industry. One way in which that is being manifested is by a $1 million investment in satellite research to find new deposits of minerals, like lithium (used in lithium-ion batteries), according to Reuters.

According to the report, other entities involved in the project are the British Geological Survey, the Camborne School of Mines and environmental consultancy North Coast Consulting.

Chinese Steel Mills Get a Win in 2018 Pricing

Chinese steel mills got a victory as domestic iron ore price indices will be included in some 2018 annual supply contracts with global miners, according to Reuters.

The move is expected to boost the confidence of Chinese buyers, according to the report.

City of Chicago Files Lawsuit Against U.S. Steel Related to Toxic Spills

On the heels of two toxic spills into Lake Michigan last year, the City of Chicago filed suit against U.S. Steel, the Chicago Sun-Times reported.

“We will not stand idly by as U.S. Steel repeatedly disregards and violates federal laws and puts our greatest natural resource at risk,” Chicago Mayor Rahm Emanuel was quoted as saying in a press release.

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Chicago accused U.S. Steel of violating the Clean Water Act by allowing the discharge of nearly 300 pounds of hexavalent chromium into Lake Michigan last spring and failing to notify downstream users of the impacted waters, according to the Sun-Times.

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While tantalum and lithium aren’t materials we often talk about in this space — even so, founder and Executive Editor Lisa Reisman’s 2011 post on tantalum prices remains one of MetalMiner’s most-viewed posts — they are metals that could see their stock rise in the coming years, according to a recent report.

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According to a report by London-based market research firm Technavio, the global tantalum market is expected to grow by a compound annual growth rate (CAGR) of more than 3% from 2017-2021.

Tantalum was discovered by the Swedish chemist Anders Gustaf Ekeberg in 1802 and named after the Greek mythological figure Tantalus. It is highly resistant to corrosion by acids, boasts a high melting point, and is a good conductor of heat and electricity.

While that’s all very interesting to you, you might be wondering: what is it actually used for?

Applications of Tantalum

According to the research report, tantalum will see its stock rise as a result of global penetration by the smartphone market. Smartphone shipments will increase by 1.3 billion units in the next few years, according to the report, as smartphone technology and internet functionality become more prevalent in developing countries.

Tantalum capacitors are used in automotive electronics, mobile phones and personal computers, according to the U.S. Geologic Survey (USGS).

However, when it comes to the U.S., it has had to get its tantalum from elsewhere.

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Another month has come and gone — now it’s time to take a look back at what’s happened in the world of metals. 

In August, all 10 of our MMIs saw upward movement. That changed the following month, when eight of 10 MMIs fell (albeit several of them fell by small amounts).

For our November MMI (tracking October’s activity), four of the MMIs moved up, five moved down and one held flat (the Automotive MMI).

Hitting some of the high points:

  • It was a big month for stainless steel. The Stainless MMI surged by seven points, hitting 70, up from the October reading of 63.
  • Aluminum also had another strong month, continuing what has been a very strong 2017 for the metal. The Aluminum MMI hit its highest reading, 99, in the history of the MMI series.
  • The doctor was in the house this past month (Dr. Copper, that is). The Copper MMI jumped four points.

You can read about all of the aforementioned — and much more — by downloading the November MMI report below.

The Rare Earths MMI dropped for the second consecutive month, losing a point to hit 21. The November reading of 21 marks the lowest reading since June, when it also hit 21.

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This basket of metals, dominated by China, featured heavier hitters like yttrium and dysprosium oxide posting price increases.

However, europium oxide, terbium oxide and terbium metal all dropped for the month. The biggest drop of the bunch came from neodymium oxide, which fell 14.1%.

Rising Demand

Rare-earth metals are used in a number of high-tech capacities: smartphone, laptops and electric vehicle (EV) batteries, among other things.

Cobalt, which is drawing increasing demand in the EVs sector, is one of those metals. As our Stuart Burns reported earlier today, the metal is heating up.

“Plug-in vehicle sales grew 20 times faster than the overall market, justifiably causing concern that cobalt supply could be strained by this one market application,” Burns wrote. “Worryingly for cobalt, the fastest-growing market is also the largest.

“Driven by government subsidies, the Chinese market, at some 351,000 units last year, also grew at 84% over 2015. The switch to EV and PHEV cars is part of Beijing’s drive against pollution, so incentives are not likely to be relaxed anytime soon. Growth of this magnitude dwarfs the 13% and 36% growth rates in Europe and the U.S., respectively.”

Growth of the U.S. Market

While it is indeed true that China overwhelmingly dominates the global rare-earths market, the U.S. is working to increase its presence in the global market vis-a-vis rare earths.

According to a Wards Auto report, research at Purdue University could boost U.S. extraction of rare-earth elements (REEs) while also recycling the U.S.’s 1.5 billion tons of accumulated coal ash.

“REEs have many important applications in things such as permanent magnets in power generation and electric cars, batteries, petroleum refining catalysts, phosphors in color televisions, and many electronics including cellphones,” said Linda Wang, inventor of the technology and Purdue’s Maxine Spencer Nichols Professor of Chemical Engineering, in a Purdue University release. “The demand for REEs is predicted to grow dramatically over the next several decades. REEs used in the U.S. are primarily imported from China, which controls over 90 percent of the supply, with wide implications on the U.S. economy and national security.”

Wang underscored the importance of developing the domestic market as a means of weathering the volatile rare-earths market.

“For example, after China reduced the export quotas in 2010, the costs of rare earth magnets for one wind turbine increased from $80,000 to $500,000,” she added. “After China relaxed the export restrictions 18 months later, the prices returned to lower levels than in 2010. It’s highly desirable to develop the capacity to produce REEs in the U.S. and to become independent of foreign suppliers.”

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Actual Metal Prices and Trends

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The Rare Earths MMI inched one point higher, reaching 22 points in July. This sub-index increased almost 5% from the previous reading.

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Rare earth prices have continued their uptrend that began in March.

Samarium oxide rose by 8.5%, while terbium oxide increased by 5.9%. Meanwhile, the dysprosium oxide price continued to fall slightly, posting a price drop for the second straight month. 

What’s Going On in the Background?

China currently produces around 85% of rare earth metals. Supply is, therefore, restricted to Chinese production and environmental policies.

With growing demand due to the investment in renewable sectors, such as electric cars and wind turbines, investment in rare-earth metal production remains critical.  

South Africa could play a strategic role in rare-earth metals supply.  The Steenkampskraal mine claims to have the highest grades of rare-earth elements in the world. Moreover, the mine had previously been in operation between 1952-1963, according to its website, and appears to be putting in place all of the equipment and permits needed to bring the mine to production. Rising prices will help. Nevertheless, China remains the global price setter for rare earths. 

In addition to South African rare-earth production, Canada’s Mkango Resources confirmed its  plans to start mining from its Songwe Hill mine in Malawi within three years.

By 2021, the mine will produce about 3,000 tons per year of rare earths. The mine will produce  1,000 tons of praseodymium, neodymium, dysprosium and terbium, according to a recent Reuters article.

The Mountain Pass mine, located in California, is struggling to reopen due to a long-running fight between distressed debt investors. Since Molycorp filed for bankruptcy, due to spending on an experimental ore-processing system, its mine has been caught between the feuding creditors.

The court process remains in its early stages— depending on the outcome, Molycorp could lose its rights to run this mine.

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What This Means for Industrial Buyers

Rare-earth metals seems to show signs of a bullish narrative. However, dysprosium oxide finished June weaker than it finished May, which potentially points to a good opportunity to buy.

Actual Rare Earth Metals Prices and Trends

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Here’s What Happened

  • Our Rare Earths MMI, tracking 14 rare earth metal and mineral prices, ticked up to 21 for the June 1 reading, a whopping 10.5% increase from May.
  • We write “whopping” mainly because the Rare Earths MMI has held below the value threshold of 20 since August 2015 — a full 22 months ago. As we wrote last month, that’s when the stock market had its worst month in 5 years.
  • Rare earths prices on the whole, however, seem to be recovering from their 2016 lows. Terbium oxide, for example, rose 11.8% from May to June. Europium oxide, for its part, spiked up 16.7% in the same period.
  • Meanwhile, the dysprosium oxide price has fallen off slightly month-on-month.

What’s Going On in the Background?

  • “The REE mining process is intensive and requires highly toxic processing, which reduces competitiveness,” according to this article. “Because of lighter restrictions on mining and—especially—processing, China remains the world’s top supplier of rare earths.” But a considerable knock-on effect on rare earths prices could be the environmental pollution curbs that China has been (at least publicly) committing itself to as a developing economy. The environmental pressure has likely filtered down to the rare earths processing industry, constricting output enough to squeeze prices upward.
  • Outside China, these exact environmental worries have hamstrung any viable production models (or at the very least, profitable ones) — and Exhibit A is the Molycorp/Mountain Pass debacle. The Mountain Pass mine in California, which used to the the Western Hemisphere’s best bet to unburden its markets from reliance on Chinese REEs, is now being buffeted about by investors battling for the scraps.

What Metal Buyers Should Look Out For

  • While we’re by no means at a market top for the rare earths sector, keep a close eye on “hot” REEs such as dysprosium, as we mentioned last month. New ventures that are getting folks’ attention, such as this one in Australia, are creating a lot of bullish narratives. As we mentioned before, however, in the short term, dysprosium does not look as strong as some of the other constituent metals and minerals, dropping in price between May 1 to June 1.

Key Price Movers and Shakers

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Here’s What Happened

  • The Rare Earths MMI held steady for the month of May at a value of 19.
  • That makes two straight months at 19 for this sub-index, which has slowly crept up over the past quarter and now stands at its highest since August 2015 — back when the Dow had its worst month in 5 years.
  • Several Chinese rare earths price points fell over the month, with increases from neodymium oxide, europium oxide and dysprosium oxide doing their part to keep the ship steady overall.

What’s Going On in the Background?

  • When was the last time you heard the term “stalking horse bidder?” Turns out someone loved Molycorp and its Mountain Pass mine in California, the only source of rare earths production in this hemisphere, enough to buy it. As MetalMiner reported, ERP Strategic Minerals, LLC, part of the ERP Group of companies, has agreed to purchase the salient assets and surface property rights.
  • As leading REE analyst Jack Lifton commented on our story, it would essentially be cheaper to build a new plant in Tanzania rather than reboot existing operations at Mountain Pass. (Check out the story and the comment thread here.)
  • As for rare earths end-use markets, the clean energy and other high-tech applications that rely on REEs aren’t going anywhere anytime soon.

What Metal Buyers Should Look Out For

  • According to this InvestorIntel article, buyers may need to keep a closer eye on dysprosium, used in high-tech industrial magnets, since Northern Minerals Ltd is well on its way to starting the largest dysprosium production operation outside China.

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Here’s What Happened

  • The Renewables MMI spiked upwards for the month of May (but not a terribly huge spike in the scheme of things; see the bullet below), ending at a value of 71.
  • * Editor’s note: We’ve recalibrated the index to better take into account cobalt price fluctuations, hence the spike from 54 in April to 71 in May.
  • However, the Big Heavy of our sub-index that tracks metals and materials going into the renewable energy industry is the U.S. steel plate price. That price point took a 4.8% dive.

What’s Going On in the Background?

  • Several stories from the solar sector have been making waves lately. “Growth has slowed in the rooftop solar industry in the past year,” writes Jessica Goodheart in this piece, “but many see the evolution of battery storage technology and vehicle electrification as promising for the long-term health of the residential solar industry.”
  • And the policy picture? “Industry leaders have been cautiously optimistic that Republicans will leave be the federal Solar Investment Tax Credit (ITC), a major policy driver of rooftop solar, in spite of Trump’s efforts to roll back the Clean Power Plan,” Goodheart notes.

What Metal Buyers Should Look Out For

  • Keep an eye out on steel plate’s raw material inputs — iron ore prices surged in April, as we reported in our May Monthly Buying Outlook, while coking coal prices swelled due to supply disruptions in Australia.

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Few metals have as controversial a supply side as tin. Cobalt also springs to mind, largely due to the relative importance of the Democratic Republic of Congo as a supply source. But tin likewise seems to come from areas prone to military unrest, where illegal mining of the ore provides an opportunity to fund said unrest. Even in established producing countries like Indonesia, supply is hampered by extensive illegal mining, and the authorities have been engaged in a long running struggle to control illegal mining, principally to avoid environmental damage that occurs at unregulated mines.

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Tin has benefitted from a broader commodity rebound this year. Prices are rising and LME inventory is falling as demand from the electronics industry, particularly in China, remains solid. However, one of the key supply-side variables is Myanmar, China’s new source of supply. As the graph below from Thomson Reuters shows, Myanmar is the only significant global source that has been on the rise in recent years. All others by and large have remained static or fallen.

Source: Thomson Reuters

Indonesia has the potential to export more concentrate. Its drive to control illegal mining and encourage greater domestic value-added refining has limited export volumes in recent years, encouraging China to increase imports from neighbouring Myanmar.

Reuters reports that almost all Chinese tin ore and concentrate imports now come from Myanmar, following the 2013 discovery of high grade reserves at Man Maw in northeast Myanmar. Annual production is now estimated at about 33,000 tons of tin concentrate, which Reuters reports is more than 10% of the metal’s global output. Read more