Articles in Category: Supply & Demand

lithium-ion battery

Olivier Le Moal/Adobe Stock

An Indian agency has reported evidence that shows the presence of a lithium deposit of about 1,600 tons in the southern province of Karnataka.

It may be a small find. Still, it is important, especially with the world moving away from fossil-fueled vehicles to electric vehicles.

Lithium deposit in India

Initial surveys by the Atomic Minerals Directorate for Exploration and Research (AMD), an arm of India’s Department of Atomic Energy has shown the presence of lithium in igneous rocks of the Marlagalla-Allapatna region of Karnataka, according the Indian Express.

Lithium is a vital ingredient of the lithium-ion rechargeable batteries that power electric vehicles (EVs), laptops and smartphones. Furthermore, they are even used in military products.

The lithium find is comparatively small. Reserves in Bolivia are 21 million tonnes), the Indian Express notes, with significant deposits in Argentina (17 million tonnes), Australia (6.3 million tonnes) and China (4.5 million tonnes).

Nonetheless, it has given hope to Indian authorities as they look to move away from lithium imports, on which the country is now 100% reliable.

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The Raw Steels Monthly Metals Index (MMI) increased by 16.5% this month, as steel prices showed strength in December.

January 2021 Raw Steels MMI chart

U.S. steel events

The American Iron and Steel Institute, the Steel Manufacturers Association, the United Steelworkers union, the Committee on Pipe and Tube Imports and the American Institute of Steel Construction sent a letter to Joe Biden urging him to keep the 25% national security tariffs on steel imports that were imposed in 2018.

The industry groups emphasized that the tariffs are essential “to ensure the viability of the domestic steel industry in the face of this massive and growing excess steel capacity.”

“Removing or weakening of these measures before major steel producing countries eliminate their overcapacity — and the subsidies and other trade-distorting policies that have fueled the steel crisis — will only invite a new surge in imports with devastating effects to domestic steel producers and their workers,” the letter continued.

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electric vehicle charging

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Automotive producers the world over are facing challenges, but the U.K. automotive industry is arguably in the most challenging environment of all.

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U.K. automotive sector faces headwinds

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.

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iron ore

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Iron ore — or at least iron ore producers — have had a pretty good pandemic.

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Recovering iron ore output

In Brazil, historic environmental restrictions and, at least in Q1 2020, heavy rains hampered Vale’s operations. In addition, the miner faced an ongoing impact on its workforce due to the spread of the virus in South America.

However, output came back as 2020 progressed.

Output averaged 4.48 million tons per month in the first half of 2020. However, output increased to 6.10 million tons per month in the second half, according to SPG Global estimates.

Australia’s iron ore sector and China tensions

 

Meanwhile, Australia had fewer environmental and pandemic-related challenges.

However, the country has been fighting an ongoing trade war with China. The conflict stems from Australian suggestions that China should investigate and publish details on the cause and early spread of the COVID-19 virus from Wuhan.

Beijing has reacted negatively to those suggestions. In turn, it has applied sanctions on Australian thermal coal and other commodities in a bid to get them to retract the demand.

As a result, China has tried to dissuade purchases from Australia. However, with supply out of Brazil hampered, Australia still secured the lion’s share, amounting to some 60% of Chinese iron ore imports.

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The oil price is caught between a short-term recovery and the medium-term prospect of peak oil, as countries ramp up programs to decarbonize by switching power generation sources and banning internal combustion engines (ICE).

The oil price has been seesawing between vaccine optimism and pandemic pessimism. Yet, it has managed a gradual recovery from its lows last year to around $50 a barrel now.

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Oil price recovers … but outlook remains muted

However, the oil price is nowhere near where most OPEC+ members would like it to be. It’s also not where shale producers need it to be to sustain capital raising for a return to growth.

However, the oil price could arguably have been a lot less. The price owes its current position to stoic management by OPEC+’s leading producers, Saudi Arabia and Russia.

Consumption still hasn’t recovered to a pre-pandemic level. Furthermore, it doesn’t have any prospect of reaching the levels projected for 2021 global consumption this time last year.

Demand destruction

Demand destruction has come from three main areas, the Financial Times notes, none of which are likely to turn around anytime soon.

The first factor is jet fuel. Air travel is severely depressed and is unlikely to fully recover for several years. Current consumption is some 2.5 million barrels per day below pre-pandemic levels.

Meanwhile, the second factor is gasoline and diesel consumption, which will likely recover more quickly. Even so, it will likely not see 2019 levels this year.

The final hit is from a wider loss of industrial activity and lower levels of goods shipped by sea.

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metalworking

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Before we head into the penultimate weekend of 2020, let’s take a look back at the week that was and some of the metals storylines here on MetalMiner, including: research findings related to organic molecules’ impact on machinability; gold prices; and the arrival of an allocation market for steel-buying organizations, as explained by MetalMiner CEO Lisa Reisman:

Week of Dec. 14-18 (machinability, gold prices and steel allocation market)

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Not so long ago on a fall night here in Chicago, I had the opportunity to meet up with a couple of folks from a steel producer. 

What they told me then sounded a little scary — they suggested the “A” word — but not nearly as scary as current market conditions suggest. 

In metals markets, the “A” word does not contain three letters. 

It does, however, connote something far worse for many metal buying organizations: allocation!

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Dreaded allocation

Allocation markets cause sleepless nights for procurement professionals because, without material, lines get shut down and businesses fail to operate profitably. 

Undoubtedly, the dreaded “A” word is upon us, particularly for steel markets.

Back in May of this year, toward the end of the last COVID-19 “surge,” MetalMiner contemplated what could happen to steel prices once demand came back onstream.

MetalMiner saw two scenarios: a gradual increase in demand followed by panic buying or a rather dramatic increase in demand led by the automotive industry, combined with slow mill restarts and historically low starting inventory levels held by service centers. 

We assumed the first scenario, but obviously the second ensued.

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Steel production

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Keeping future demands in mind, Nippon Steel Corp. has decided to focus more on markets like the United States and India.

At the same time, it is reducing focus on Japan for the medium term.

The aim, according to a top-level executive of the Japanese steel company, is to capitalize on overseas profit which. At present, uptake in the global automobiles sector is largely driving that profit.

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Nippon looks overseas

News agency Reuters quoted Nippon Steel’s Executive Vice President Katsuhiro Miyamoto as saying they were looking at increasing the production capacity overseas, where demand is expected to go up.

Incidentally, Nippon, Japan’s biggest steelmaker and ArcelorMittal, the world’s largest steelmaker, had jointly bought India’s bankrupt Essar Steel, which has an annual capacity of 9.6 million tons.

Miyamoto also told the news agency during his interview that Nippon Steel was actively contemplating a plan to construct an electric furnace at its U.S. joint venture with ArcelorMittal in Calvert, Alabama. It will have a furnace of 1.5 MT of annual output capacity as a first step.

ArcelorMittal announced in September this year it would sell most of its U.S. assets to Cleveland-Cliffs Inc. The sale did not include the Calvert facility.

As for new venture ArcelorMittal Nippon Steel India, he said there are plans to increase capacity to between 12 million and 15 million tons in the future.

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solar power

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This morning in metals news: the Energy Information Administration (EIA) released its Short-Term Energy Outlook; the China Iron and Steel Association (CISA) wants to know why iron ore prices are soaring; and the CEO of Cleveland-Cliffs touted the company’s plans for steel in the region after its acquisition of ArcelorMittal USA.

Cut-to-length adders. Width and gauge adders. Coatings. Feel confident in knowing what you should be paying for metal with MetalMiner should-cost models.

EIA releases Short-Term Energy Outlook

The EIA released its Short-Term Energy Outlook last week, noting the average Brent crude price in November rose by about $3 per barrel compared with the previous month.

Furthermore, the EIA forecast an average crude price of $49 per barrel in 2021, up from the expected average of $43 per barrel in Q4 2020.

The outlook also offered an update on renewables.

“EIA forecasts that planned additions to wind and solar generating capacity in 2020 and 2021 will contribute to increasing electricity generation from those sources,” the EIA said. “EIA expects the U.S. electric power sector will add 23.0 gigawatts (GW) of new wind capacity in 2020 and 9.5 GW of new capacity in 2021. Expected utility-scale solar capacity rises by 12.8 GW in 2020 and by 14.0 GW in 2021.”

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bulk cargo iron ore

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This morning in metals news: the iron ore price is surging amid a Pilbara Ports Authority cyclone warning; Steel Dynamics shares jumped; and Rio Tinto declared a maiden ore reserve at a project in western Serbia.

Cut-to-length adders. Width and gauge adders. Coatings. Feel confident in knowing what you should be paying for metal with MetalMiner should-cost models.

Iron ore price supported by cyclone warning off Australian coast

As Stuart Burns explained earlier this week, iron ore has been the star of 2020 in terms of upward price mobility.

The price is looking primed to make further gains. Australia’s Pilbara Ports Authority, which oversees the world’s largest iron ore export terminal, on Thursday issued cyclone alerts in which it advised it would clear the port and anchorages of the Port of Port Hedland of all large vessels.

“As of 0800 (WST), a tropical low is located some 740 kilometres/400 NM South East of Christmas Island,” the Pilbara Ports Authority wrote in its first alert Thursday.

In a subsequent alert, it announced it had completed clearing of the port and anchorages.

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