Articles in Category: Public Policy
renewables

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This morning in metals news: Nucor Corporation has signed a power purchase agreement with EDF Renewables North America; the Pilbara Ports Authority reported an 11% year-over-year increase in throughput in October; and, lastly, Minnesota’s mining rules are getting another look.

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.

Nucor signs power purchase agreement with renewables firm

Steelmaker Nucor has signed a power purchase agreement with EDF Renewables for 250 megawatts of new solar energy in Texas.

The agreement is for 15 years.

“Nucor is one of the most efficient and cleanest steel producers in the world, and we are always looking for ways to reduce our carbon footprint. That is why we are proud to make our production process even cleaner by supporting the development of this solar energy project,” said Leon Topalian, president and CEO of Nucor Corporation. “We are already North America’s largest recycler, and supporting the addition of more clean power to the regional grid via this agreement further demonstrates Nucor’s commitment to sustainable steelmaking.”

Pilbara Ports Authority reports October activity

The Pilbara Ports Authority reported monthly throughput of 62.5 million tonnes in October.

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The Rare Earths Monthly Metals Index (MMI) held flat once again this month.

November 2020 Rare Earths MMI chart

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.

China export control law to take effect Dec. 1

China’s legislature last month approved a new export control law that will go into effect Dec. 1, the state-run Xinhua news agency reported last month.

“China may take countermeasures against any country or region that abuses export-control measures and poses a threat to China’s national security and interests, according to the law,” Xinhua reported.

“The law also clarifies that technical documentation related to the items covered by the law is also subject to export-control stipulations.”

The law could impact exports of rare earths, for which China overwhelmingly dominates the global market.

As we have noted in this column before, the U.S. — especially the Pentagon — has long sought to diversify its rare earths supply chain. The U.S. earlier this year approved Phase 1 contracts with MP Materials and Lynas Corporation for work to develop rare earths separation facilities in the U.S.

South Korean-Australian joint project produces praseodymium, neodymium

Continuing the theme of various countries’ efforts to wean themselves off of rare earths dependence on China, Forbes recently reported on a joint venture between South Korea and Australia that has showed some promise.

The joint mineral processing project, Forbes notes, has so far produced neodymium and praseodymium. The two elements are used in permanent magnets in electric vehicles and, for praseodymium, renewable energy apparatus, like wind turbines.

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E.U. and U.S. flags

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As poll workers continue to count the final votes in the U.S. presidential election, it looks like we have a Biden victory — not by the landslide he and many of his supporters had hoped for, but a victory nevertheless.

There will be ongoing legal arguments, demands for recounts, and claims of fraud. However, the U.S. voting system is one of the most robust in the world: fraud is, in reality, not an issue.

Furthermore, the legal challenges are not intended to change the outcome. They are more about setting the scene for the post-Trump landscape, for what the then-ex-president does next. Even a Trump-stuffed Supreme Court knows it answers to the constitution first and the president second.

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Market implications of the presidential election

So, now we have a better idea of the political outcome, does that change our election day review of the implications for markets?

Yes and no.

Most of us in business would take comfort from the fact a more constrained government is one that is less able to do anything radical. Markets generally don’t like radical, at least from politicians.

The prospect of a Democrat presidency and a Republican-controlled senate could be a positive for equities. Such an arrangement reduces the possibility that regulation and corporation tax can be increased.

Market sentiment turned a little cautious overnight. For example, new environmental laws are likely to be more limited, helping those sectors that had been sold down in the run-up to the election.

But others have declined that might have benefited from the proposed stimulus program. A split executive and house likely reduces the size and scope of any future fiscal stimulus package in the U.S.

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Europe

Andrey Kuzmin/Adobe Stack

Global stock markets took a battering last week.

Investors finally woke up to the resurgence of COVID infections in Europe and the series of national lockdowns. British Prime Minister Boris Johnson announced a one-month lockdown over the weekend. The U.K.’s lockdown adds to those already in place in the other parts of the U.K. and to those of Belgium, France, Spain, and elsewhere across the E.U.

Source: The Financial Times

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Europe lockdowns return

Governments seem surprised by the speed with which this second wave has spread through the populations. This comes despite medical experts predicting as far back as the spring that this is exactly what would happen as the colder weather drove people indoors in the fall.

According to the Financial Times, COVID-19 cases have risen across Europe but prevalence is still much higher in some countries than others.

Belgium is the worst-affected of the 31 nations comprising the European Economic Area and the U.K. Its 14-day cumulative number of 1,600 COVID-19 cases per 100,000 people is more than 30 times that of Finland. France had 706 cases. Meanwhile, the U.K. had 438 and Germany had 182.

Waning public support

Public support is more limited than in the spring.

Objections to a perceived denial of individual rights has in part fueled demonstrations in Barcelona, Paris and Berlin. However, the demonstrations also stem from worries about the economic impact.

A separate Financial Times article reports economist predictions of a 2.3% contraction in the fourth quarter across the E.U. That would mark a sharp reversal from the 12.7% growth in the third quarter – albeit that was from a severely depressed first half, when Eurozone output fell by 15%.

The new lockdown measures are not as severe as in the first half. We have all learned a lot about the transmission of infections and it is believed, with adequate precautions, schools, universities and manufacturing can remain open.

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steel plate

Source: Nucor

This morning in metals news: Nucor began work Friday on its new Kentucky steel plate plant; several members of Congress wrote to Secretary of Commerce Wilbur Ross asking the Trump administration not to impose Section 232 tariffs on electrical steel; and BHP released its quarterly operational review.

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.

Nucor begins work on Kentucky steel plate plant

Nucor began work Friday on its new Kentucky steel plate plant, WDRB reported.

The $1.7 billion steel plate manufacturing plant will be in Brandenburg, Kentucky. The plant is scheduled to open in 2022.

Members of Congress on electrical steel tariffs

Several members of Congress wrote a letter to Secretary of Commerce Wilbur Ross to express opposition to Section 232 tariffs on electrical steel imports, a release by the Core Coalition noted.

“The prosperity of this country depends on the reliable supply of low-cost electricity to business and consumers throughout the United States,” the letter reads. “The outcome of this investigation threatens to undermine that supply.”

BHP releases operation review for quarter ending in September

Miner BHP released its quarterly 2020 operational review, reporting copper output of 413 kt, flat compared with the previous quarter. In addition, copper output at the Escondida mine reached 285 kt, down 3% from the previous quarter.

Furthermore, iron ore output totaled 66 million tonnes, down 1% from the previous quarter.

Nicket output reached 22 kt, down 7% from the previous quarter.

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miners in Bolivia

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What does Bolivia’s socialist Movimiento al Socialismo (Mas) party’s return to power mean for the country’s resource exploitation prospects?

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.

Political background in Bolivia

In November 2019, a police-military coup overthrew then-Mas president Evo Morales. Afterward, it installed the right-wing evangelical Jeanine Áñez as president.

A year of repression and persecution of minorities followed. that destabilized the country and led many to believe democratic elections would never return.

But to the autocratic president Áñez’s credit, although twice delayed, elections were held this month. Furthermore, on Oct. 18, Luis Arce, finance minister during the Morales administration, was handed the position of president. In addition, his party retained its majorities in both houses of congress.

Ex-president Morales remains in exile in Argentina. He fled following allegations of voting fraud last year, allegations that have largely been disproved now. With the success of the party, Arce may herald Morales’ return at some stage soon.

Rich in resources

While rich in natural resources, Bolivia has struggled to develop to its potential over the years.

Will a return to a socialist party with a strong nationalist agenda hinder development compared with the outgoing interim neoliberal administration of Áñez?

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The Rare Earths Monthly Metals Index (MMI) posted no movement for this month’s index reading, as President Donald Trump signed an executive order that aims to strengthen the domestic mining industry and mitigate dependence on foreign sources of critical minerals.

October 2020 Rare Earths MMI chart

 

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New executive order again takes aim at U.S. import dependence

Late last month, President Donald Trump issued an executive order that seeks to curb U.S. dependence on foreign sources of critical minerals.

Chief among those foreign sources is China, which controls an overwhelming majority of the world’s rare earths mining and processing.

“Our dependence on one country, the People’s Republic of China (China), for multiple critical minerals is particularly concerning,” the executive order reads. “The United States now imports 80 percent of its rare earth elements directly from China, with portions of the remainder indirectly sourced from China through other countries.”

The order calls for the U.S. to enhance its mining and processing capacity, including some minerals not identified as critical.

“By expanding and strengthening domestic mining and processing capacity today, we guard against the possibility of supply chain disruptions and future attempts by our adversaries or strategic competitors to harm our economy and military readiness,” the order continues.

Furthermore, the report calls for the Secretary of the Interior to consult with several other department heads. They will investigate the U.S.’s reliance on foreign sources for critical minerals. After the investigation, the Secretary of the Interior will submit a report to the president within 60 days.

The report, the order reads, will summarize the investigation’s conclusions and recommend executive action. Potential actions include tariffs, quotas and import restrictions against China and other “non-market foreign adversaries.”

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aluminum ingot stacked for export

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Just the rumor that producers in the United Arab Emirates and Bahrain could win a Section 232 aluminum tariff exemption was enough to ease prices for U.S. consumers.

The Trump administration imposed the 10% tariff under Section 232 back in March 2018. Now, however, the removal ostensibly comes as a reward for the two Arab states establishing formal ties with Israel.

The benchmark U.S. Midwest physical delivery premium collapsed from $335 per ton in mid-September to $263 per metric ton on the back of the rumor, according to Reuters.

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.

Section 232 tariff exemption for major producers

Both countries are significant aluminum producers and suppliers to the U.S. market.

Bahrain’s Alba mill produced more than 1.36 million tons of aluminum last year. The mill supplied 11%, or 150,000 metric tons of its output (mainly billets) to the U.S. market.

Of its sales last year, 44% were value-added products (or VAPs, as they are termed in the trade). Those products include rolling slab, billet, primary foundry alloy and wire rod.

Primary mills try to boost their output of VAPs over standard ingot because they earn higher returns, over and above the cost of manufacture. For their customers, VAPs avoid the need to remelt ingot and cast into those forms before they can consume the primary mill’s products, saving energy and, hence, costs.

Emirates Global Aluminium (EGA) sold a total of 2.60 million tons of cast metal in 2019, of which 87.4% was VAPs, according to Reuters. Although they declined to be specific, their U.S. value-add exports have been estimated at about 550,000 tons last year.

U.A.E., Bahrain producers could gain market share

The fall in the MW premium is good news for consumers. However, U.S. producers will not view it as positively, as they are already facing a significant resumption of Canadian imports.

Usually, when government grants an exemption — as Canadian producers enjoy — it will impose a quota to prevent a flood of metal from the newly tariff-exempted supplier.

That will likely be the case for EGA and Alba. As such, the sharp drop in the MW premium is reflecting an expectation that the two substantial producers will be in a position to use their newfound competitiveness to take market share.

If, for example, EGA has a quota set at last year’s 550,000 tons, it could export 750,000 tons and pay the 10% duty on the excess amount. As a result, it would effectively incur only a 2.7% duty overall.

If the mill felt long-term positioning would be helped by greater market share, the tradeoff may be considered acceptable.

What’s next for domestic mills?

Domestic mills, whether aluminum or steel, generally position themselves at or around the import price when the government imposes tariffs.

Generally, however, they do not seem to add more capacity to take long-term advantage of the extra margin the tariff provides. Why? Possibly because they do not expect the tariffs to exceed more than one or, at most, two cycles of administration.

They only lasted a little over a year and a half under the Bush administration from 2002 to 2003. While they have lasted two and half years under Trump, their efficacy at stimulating a resurgence of domestic production has been limited.

Last year Canada remained the U.S.’s largest external aluminum supplier in all forms, with China coming in second.

Chinese supply, however, has been falling rapidly with tariffs and duty action over recent years. As a result, the actions of third-placed U.A.E. and sixth-placed Bahrain have become progressively more important in influencing market prices. It is a role in which it looks like they just got helped to have even more impact.

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mining

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This morning in metals news: President Donald Trump signed an executive order declaring a national emergency for the mining industry; Vale this week announced the suspension of one of its iron ore operations; and the site of an old steel plant in Chicago is getting a new look.

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Trump signs executive order to boost mining

President Trump announced the signing of an executive order that declares a mining industry national emergency.

“Today, President Trump is signing an Executive Order and declaring a National Emergency to expand the domestic mining industry, support mining jobs, alleviate unnecessary permitting delays, and reduce our Nation’s dependence on China for critical minerals,” the executive order reads.

The order sets the stage for the Department of the Interior to use the Defense Production Act to fund mineral processing.

Furthermore, the action will cut down on “unnecessary delays in permitting actions,” the order says.

In 2017, Trump signed an order laying out a federal strategy to ensure the U.S.’s supply of critical minerals.

The U.S. has long sought to curb its dependence on China for a wide variety of critical minerals. China, for example, dominates the global rare earths mining and processing sectors. More than 80% of global rare earths output comes from China.

Vale suspends Viga operations

In addition to Trump’s executive order, Earlier this week, Brazilian miner Vale announced the suspension of operations at its Viga concentration plant.

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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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