Articles in Category: Supply & Demand

China has previously been cast in a sinister role with respect to restricting the production and export of critical rare earth metals, usually salts, used to produce a host of products. Those products include magnets for consumers electronics and electric cars, defense equipment and advanced ceramics.

But while the country deliberately created a near monopoly position in the global rare earths refining market, it created a horrendous environmental problem in the process.

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Rare earths consolidation and rising prices

rare earths loaded on cargo ship in China

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In an effort to clean up its environmental act and to gain better control over what had become a wild west mining and refining landscape, Beijing engineered consolidation in the industry to fewer but larger entities.

However, that’s when the criticism started, as China capped exports, causing a spike in prices.

That was largely short-lived. Prices returned to earth after a spike in 2017. However, prices have been rising strongly again this year due to surging demand, both within China and without.

Prices are up between 20-50% this year alone. Surging demand has fueled a bidding war for supplies in a constrained market. With China holding some 85% of global refining capacity and the only mine to refined products supply chain, it not only has a unique position but a unique responsibility in the market.

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Much is being made of Beijing’s efforts to meet its environmental emissions targets — the country states it will hit peak emissions before 2030 and carbon neutrality by 2060 — and its restricted steel and aluminium production.

But a recent Reuters post by John Kemp suggests output is being impacted more by a widening electricity crisis than by enforced shutdowns to meet environmental goals.

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China’s energy crisis

coal barge in China

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Kemp explains that China is in the grip of a severe shortage of both coal and electricity. Coal output has not kept up with rising electricity demands from a rapidly recovering economy.

China’s electricity generation increased by 616 Terawatt-hours (13%) in the first eight months of 2021 compared with the same period last year. The largest rises came from the service sector and primary industries.

However, most of the increase has been supplied by thermal generators, principally coal-fired power stations, Kemp explains. Those generators increased output by 465 TWh (14%) in the first eight months.

Other power sources, such as hydro-electric output, have actually fallen slightly this year due to water shortages. Unfortunately, nuclear in China is a tiny fraction of power generation, dwarfed even by renewables like wind and solar.

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This morning in metals news: U.S. steel capacity utilization reached 85.2% for the week ending Sept. 25; meanwhile, most planned U.S. battery storage additions in the next few years will be paired with solar; and, lastly, unemployment rates in August declined in nearly all metropolitan areas.

Steel prices have been rising for over a year, leaving many to wonder: when will they peak and start to come back down? In the next installment of the MetalMiner webinar series at 11:30 a.m. CDT, Thursday, Sept. 30, MetalMiner experts will overview the steel market and delve into contracting mechanisms, buying guidance and more. Visit the MetalMiner Events page for more information and to register to attend. 

Steel capacity utilization rises to 85.2%

hot rolled steel

niteenrk/Adobe Stock

U.S. steel capacity utilization rose to 85.2% for the week ending Sept. 25, the American Iron and Steel Institute reported.

The rate increased from 84.9% the previous week.

Meanwhile, steel production for the week reached 1.88 million net tons, up 0.3% from the previous week. For the year to date, steel output reached 69.54 million net tons at a capacity utilization rate of 81.0%. The total marked an increase of 20.2% year over year.

Battery storage additions to be paired with solar

Battery storage additions in the U.S. over the next three years will mostly be paired with solar, the Energy Information Administration reported.

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U.S. housing starts overall picked up in August, the Census Bureau reported this month.

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Housing starts overall rise, but single-family starts drop

housing starts

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Privately owned housing starts rose to a seasonally adjusted annual rate of 1,615,000. The August rate jumped by 3.9% from the previous month.

The August 2021 rate increased by 17.4% compared with August 2020.

However, the rate for single-family housing starts reached 1,076,000, down 2.8% from the previous month.

Permits rise 6%

Meanwhile, privately owned housing units authorized by building permits in August rose by 6.0% in July to a seasonally adjusted annual rate of 1,728,000 in August. The August rate increased by 13.5% from August 2020.

Single‐family authorizations rose 0.6% to 1,054,000. Authorizations of units in buildings with five units or more reached a rate of 632,000.

Residential construction spending

U.S. residential construction spending dipped from March-May 2020, marking the first dip since a generally down 2018.

Since last May, however, spending has enjoyed an uninterrupted rise.

According to the Census Bureau, residential construction spending reached a seasonally adjusted annual rate of $782.1 billion in July. The rate jumped from $777.9 billion in June and $618.2 billion in July 2020.

Meanwhile, lumber, for which prices skyrocketed to all-time highs earlier this year, has cooled.

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As has been well documented by now, demand for a wide variety of materials plunged on the heels of the onset of the COVID-19 pandemic last year.

E.U. flag

Andrey Kuzmin/Adobe Stack

Among those materials, of course, is steel.  Consumer demand for steel-using products declined and construction projects came to a halt.

However, data from the European Steel Association show demand picking back up among EU28 nations this year.

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EU steel demand shows signs of recovery

Earlier this month, the European Steel Association (EUROFER) said apparent steel consumption in the EU28 rose by 3.6% in Q4 2020. In Q1 2021, apparent steel consumption rose by 0.9%.

“Although the general economic recovery in the EU appears to be uneven and exposed to risks, the recovery in steel-using industries and in steel demand should continue through 2021,”EUORFER Director General Axel Eggert said. “This is being driven by the stronger-than-expected recovery of industrial sectors, whose output is recovering the losses experienced during the pandemic.”

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While the world looks on with growing concern at the political play unfolding in Afghanistan with the takeover of the Taliban, another sidebar to this developing story that is slowly creeping into public consciousness is the vast treasure-trove of minerals in that country, and how the Taliban government will exploit it.

One estimate by the U.S. Geological Survey (USGS) given years ago had pegged the worth of Afghanistan’s untapped mineral resources at U.S. $1 trillion. Some Afghan officials have said the actual figure could be three times more.

Afghanistan on a map

Zerophoto/Adobe Stock

Afghanistan’s mountains contain a wide range of critical resources, including: copper, gold, oil, natural gas, uranium, bauxite, coal, iron ore, rare earths, lithium, chromium, lead, zinc, gemstones, talc, sulphur, travertine, gypsum and marble.

However, even before the U.S. entered its borders 20 years ago, Afghanistan had struggled to tap those reserves.

Two decades later, the situation is not very different.

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Unusually, the global steel market is diverging in the opposite direction from “normal.”

Historically, China would show signs of strength driven by robust construction activity while Europe and the U.S. struggled, facing more mature markets and relatively higher levels of foreign penetration.

The U.S. continues to power ahead. There, mill lead times remain stubbornly protracted.

Meanwhile, China is showing all kinds of uncertainty — much of it self-inflicted.

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China’s emissions efforts

China steel plant

gui yong nian/Adobe Stock

Although much was made of China’s ambitions to reduce emissions over the coming decade, after an initial flurry of anxiety the industry settled back to assume changes would be eased in gradually.

Indeed, Beijing even sought to play down the rate at which changes would be imposed following a sudden spike in prices as expectations of steel shortages took hold.

But over the last couple of weeks, it is becoming clear that cutbacks are happening. Output in the second half of the year is expected to be considerably less than the record first half.

Iron ore has taken a cue from both the message and the reality of cooling demand. Prices for 62% iron ore has dropped from the low 1,500s RMB/metric ton in early July to the mid-1,100s today on the Dalian exchange.

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semiconductor and automobile

Maxim_Kazmin/Adobe Stock

This morning in metals news: The global semiconductor shortage may continue into the next year or more. In other news, after failing to reach an agreement Thursday on the $1 trillion infrastructure bill, the U.S. Senate aims to finalize it Saturday. Also in the news, South Korea plans to raise its stockpiles of 35 “critical metals.”

Receive the latest short-term and long-term outlook for the full range of industrial metals (base and ferrous) at the annual MetalMiner Forecasting Workshop on Aug. 25.

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The world’s largest steel producer and exporter, China, is actively contemplating adding more curbs to halt environment pollution which, most likely, will reduce its steel output and dampen exports.

That’s good news for some of China’s neighbors steel-producing rivals, India and Japan.

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

Steel cuts

Chinese steel factory

fanjianhua/Adobe Stock

The China Iron and Steel Association (CISA) warned on its Wechat channel last Sunday of impending cuts in crude steel output along with government-led environmental checks.

Daily crude-steel output at major mills fell 5.6% in the first 10 days of July from June, Bloomberg reported. These were at steel plants in Shanxi, Hubei and Hebei provinces, and mills including China Baowu Steel Group and HBIS Group.

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The Rare Earths Monthly Metals Index (MMI) fell 2.7% for the July MMI reading.

July 2021 Rare Earths MMI chart

Each month, MetalMiner hosts a webinar on a specific metals topic. Explore the upcoming webinars and sign up for each on the MetalMiner Events page.

First shipment establishes new US-EU rare earths supply chain

Energy Fuels Inc. and Neo Performance Materials Inc. announced that they have executed the first shipment of mixed rare earth carbonate from a mill in Utah to a separation facility in Estonia.

On July 7, Energy Fuels announced the first shipment, containing approximately 20 metric tons of the mixed rare earth carbonate, from the White Mesa Mill in Utah. The material was en route to Neo Performance Materials’ rare earths separation facility.

The announcement represents the start of a fledgling U.S.-E.U. rare earths supply chain. Both the U.S. and the E.U. have long sought to mitigate dependence on China, which dominates an overwhelming majority of rare earths mining and refining.

The shipment marked the first of an expected 15 containers of carbonate to be sent to the Estonia facility, Energy Fuels said in the July 7 announcement.

“Additional shipments of RE Carbonate are expected as Energy Fuels continues to process natural monazite sand ore mined in Georgia (U.S.) by Chemours for both the rare earth elements and naturally occurring uranium that it contains,” Energy Fuels said.

Monazite is produced as a byproduct of existing heavy mineral sands mining, Energy Fuels said. The material also contains naturally occurring uranium that Energy Fuels recovers for use in the generation of carbon-free nuclear energy, the company added.

Furthermore, the companies announced the signing of a contract for a definitive supply agreement.

“Under the Agreement, Colorado-based Energy Fuels will ship all or a portion of its RE Carbonate to Neo’s Silmet rare earth separations facility,” Energy Fuels added. “Neo will then process Energy Fuels’ RE Carbonate into separated rare earth materials for use in rare earth permanent magnets and other rare earth-based advanced materials.”

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