Industry News

Reports in the media that natural gas prices in the U.K. have more than quadrupled over the last year to highs of 180p per therm from around 40p per therm this time last year are making headlines. This is largely because of the impact on small, startup gas suppliers who have been forced out of business over recent weeks.

However, natural gas — and energy prices, broadly — have been rising strongly. This has been the case, not just in the U.K. but across Europe for much of this year.

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Power prices on the rise

natural gas tap

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In part, this is weather-related. Exceptionally low winds are failing to generate sufficient renewable energy. However, the situation is also due to the rise of natural gas prices, globally and specifically in Europe.

Demand from China and severe weather in Texas have led to increasing demand and constrained supply. As such, those have created the perfect conditions for speculators to drive prices higher.

Another less talked about contributor is the failure of Russia to supply more than its minimum contractual requirements to the European market for some months. The move is widely seen as the Russian authorities trying to apply pressure on Europe for the approval of the Nord Stream 2 gas pipeline.

According to The Guardian newspaper, around half of the U.K.’s electricity is generated by natural gas-fired power plants.

The situation is exacerbated by unplanned outages of nuclear power plants this year. Furthermore, fire shut down a main power cable importing electricity from France just this month.

Natural gas surge

The U.K. relies heavily on natural gas for both residential and industrial use. The resulting rise in prices has already led to the closure of two major U.K.’s fertilizer plants.

This has had the knock-on effect of crimping CO2 production. Ir is made as a byproduct and is the source of some 80% of the UK’s supply. CO2 is needed for a wide variety of industrial and agricultural applications.

Steel impact

The U.K.’s second-biggest steel producer, British Steel, is quoted by the Financial Times as saying that the U.K.’s power prices are spiraling out of control.

The company is on variable electricity prices. British Steel has warned it could have to close production in the face of unprecedented price increases.

Electricity costs can represent up to 20% of the cost of converting basic raw materials into steel. The company is quoted as saying it is facing a maximum price at peak times of up to £2,500 per MWh.

Meanwhile, it saw an average of £50 per MWh in April.

Spot prices in excess of £1,000 per month MWh are becoming increasingly common this month after wholesale prices in the U.K. rose dramatically.

Nor is the UK well served with reserves of natural gas. It has just 1% of Europe’s total storage after failing to invest in storage facilities over the last 10 years. So, if supplies from Russia do not increase as the winter season approaches, the U.K. is probably the worst-placed of all European markets in having no alternatives to limited supply and rising prices.

While European steel producers are more protected in terms of energy prices by state rules and long-term agreements, producers in Italy are voicing worries. Rising power costs are said to be behind the current price of steel products in southern Europe, which had expected to decrease on falling scrap input costs but were being hampered by record power costs.

With winter approaching, the situation is likely to get much worse before it gets better.

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This morning in metals news: Nucor Corporation this week said it is evaluating locations for a new 3-million-ton capacity sheet mill; meanwhile, the Department of Commerce announced changes to its anti-dumping and countervailing duty regulations; and, lastly, British Steel warned about surging power prices.

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Nucor Corporation to build new sheet mill

Nucor logo

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Nucor Corporation this week said it is evaluating locations for a new sheet mill that will have a capacity of 3 million tons.

The steelmaker said it is looking at possible locations in Ohio, Pennsylvania and West Virginia.

“The new mill will be geographically situated to serve customers in the Midwest and Northeast markets and will have a significantly lower carbon footprint than nearby competitors,” Nucor said.

The steelmaker said the new mill will cost approximately $2.7 billion. The mill will produce hot-rolled sheet products with downstream processing. Furthermore, the facility will also have a tandem cold mill, annealing capabilities and two galvanizing lines.

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Global copper mine production picked up by 4.9% during the first half of the year, the International Copper Study Group said this week.

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Copper production gains

copper mine

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Broken down further, concentrate production rose by 6.4% during the six-month period. Meanwhile, solvent extraction-electrowinning fell by 1.5%.

Chile, the world’s top copper producer, saw its copper production fall 1.2% during the first half of the year.

Meanwhile, Peru, the second-biggest copper producer, saw its output bounce back by 14% year over year. However, its half-year output remained down 9% from H1 2019 levels.

As a result of rising output at the Grasberg mine, Indonesia’s output rose by 69% year over year.

Refined production up 3.2%

Meanwhile, on the refined side of the picture, production rose by 3.2% year over year, the ICSG reported.

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This morning in metals news: Rio Tinto said it plans to triple solar capacity at its Weipa bauxite mine in Australia; meanwhile, the Aluminum Association said the Department of Commerce had issued final affirmative determinations regarding imports of aluminum foil; and, lastly, U.S. Steel is reportedly looking for a site to build a $3 billion mini-mill.

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Rio Tinto to triple solar capacity at Weipa

Rio Tinto sign

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Rio Tinto said it aims to triple its solar capacity at its Weipa bauxite mine in Australia.

“Under the plans, EDL has been contracted to build, own and operate a 4MW solar plant and 4MW/4MWh of battery storage at Weipa,” Rio said in a release. “Work on the battery facilities will start this year, with construction of the whole project expected to be complete by late 2022.

Aluminum Association praises aluminum foil ruling

The Department of Commerce issued final affirmative determinations in its anti-dumping and countervailing subsidy review of aluminum foil imports from Armenia, Brazil, Oman, Russia, and Turkey, the Aluminum Association said Friday.

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ArcelorMittal and Liberian President George Weah have announced a 25-year commitment to stay in Liberia. Through the deal, the steelmaker will triple its iron ore production in the country and invest an additional $800 million. The steelmaker said it has invested $1.7 billion in the country over the last 15 years.

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ArcelorMittal invests in Liberia

ArcelorMittal logo

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The steel and mining company had initially signed a 25-year agreement with Liberia in 2005. It shipped the first iron ore from its Yekepa mine in 2011.

During the newly signed first phase of expansion, annual production would reach 15 million tons (MT), with the potential of reaching 30 MT a year, ArcelorMittal Executive Chairman Lakshmi Mittal said at the signing ceremony.

ArcelorMittal will provide the government with a total of $65 million from the production of 15 million MT of iron ore in three years. Since the end of a 1989-2003 civil war, the mining and agriculture potential of Liberia has attracted billions of dollars in resource investments. However, the country’s infrastructure remains underdeveloped and the majority of its 5 million people live in poverty.

Going green

Of late, the UK-headquartered ArcelorMittal has been in the global headlines for its determined drive on the “green steel” and clean energy fronts, joining the trend of steelmakers foraying into green hydrogen and increasing the footprint in renewable power generation.

Just last week, Germany pledged to offer funding of $65 million toward of ArcelorMittal’s investment of 110 million euros ($131 million) in a hydrogen plant powered by renewable electricity.

German Environment Minister Svenja Schultze said Berlin would pay 55 million euros — subject to EU approval — toward a new direct reduced iron (DRI) plant. The plant will use green hydrogen to reduce iron ore in a CO2-free steelmaking process.

By 2025, ArcelorMittal Hamburg’s Chief executive Uwe Braun expects his company to produce 100,000 tons of DRI for steelmaking with green hydrogen from the plant.

ArcelorMittal invests in Indian solar power

Elsewhere, in India, ArcelorMittal plans to invest in solar energy in the Indian provinces of Rajasthan & Gujarat.

According to a report by pv magazine, Group Chairman Lakshmi Niwas Mittal met representatives of the local governments in Rajasthan and spoke of setting up a 4.5 GW solar park at an investment of about U.S. $2,586 million (Rs 19,000 crore) in the province. The plant is to be set up by ArcelorMittal arm HPCL-Mittal Energy Limited.

In another meeting with the Gujarat officials, Mittal also expressed his intention of investing about U.S. $6,809 million in Gujarat’s solar energy, wind energy and hydrogen gas production sectors.

ArcelorMittal currently produces DRI using grey hydrogen, which comes from natural gas. In a green hydrogen system, the hydrogen is produced by using renewable energy sources, like wind or solar power, and then run through an electrolyzer.

ArcelorMittal would have achieved its goal of expanding output to 15 MT per year would have been accomplished much earlier, but the Ebola outbreak in 2014 disrupted its expansion plans in Liberia, for which it declared force majeure.

ArcelorMittal said the project will generate more than 2,000 new jobs during the construction phase.

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Before we head into the weekend, let’s take a look back at the week that was and some of the metals storylines here on MetalMiner, including stainless steel consumption’s impact on nickel prices, surging aluminum prices and much more:

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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.

Week of Sept. 13-17 (stainless steel drives nickel, aluminum prices rise and more)

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This morning in metals news: U.S. Steel released its third-quarter guidance yesterday; U.S. petroleum exports just edged out imports in the first half of the year; and, lastly, unemployment rates fell in 15 U.S. states in August.

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U.S. Steel releases Q3 guidance

U.S. Steel logo

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On Thursday, U.S. Steel released its Q3 2021 financial guidance, forecasting EBITDA of $2.0 billion, up from $1.3 billion in the second quarter.

“We expect the third quarter to be a quarter of records for U. S. Steel,” U. S. Steel President and CEO David B. Burritt said. “Supported by strong reliability and quality performance, sustained customer demand, and continued increases in steel selling prices, we expect our Best for All℠ business model to generate record quarterly adjusted EBITDA and EBITDA margins, demonstrating the power of our strategy.”

Burritt added U.S. Steel is bullish that market fundamentals “will support a stronger for longer steel market.”

Higher steel prices into adjusted contracts and spot selling prices, plus strong customer demand, will contribute to record EBITDA in the company’s flat-rolled segment, the guidance report indicated.

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A deal is not a deal until it is done, goes the old adage.

Mining projects are notorious for falling afoul due to presuming agreed terms will be played out as expected.

The Financial Times reports on the conundrum BHP and Rio Tinto face in developing the Oak Flat copper ore body in Arizona.

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Oak Flat copper project faces challenges

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Oak Flat, 65 miles east of Phoenix, is home to a giant underground ore body. The ore body holds enough copper to satisfy 25% of U.S. demand for 40 years, the Financial Times reports.

That is a very sizeable asset to the U.S. economy and a strategic resource if ever there was one in a world of increasingly strident resource nationalism.

But Resolution Copper, a joint venture between Rio and BHP that wants to mine it, has been facing opposition from the San Carlos Apache Tribe, for whom the site is said to have special religious significance.

That is not an unusual situation in democracies the world over, with indigenous tribes whose rights are respected and enshrined in law.

Nor, it must be said, does Rio have a great track record here.

Just last year, it wilfully destroyed a 46,000-year-old sacred Aboriginal site in Australia to make way for a mine extension. For Rio, the action became a public relations disaster (not to mention an archaeological disaster). It is something that will takes years for it to overcome.

However, in this instance, the joint venture Resolution Copper, 55% owned by Rio and 45% by BHP, had an agreement signed in 2014 that would grant the miners right to develop the resource. That deal includes some 2,400 acres of national forest land including Oak Flat, in exchange for 5,400 acres of land owned elsewhere.

Land swap

The problem is, in part, that the recipients of this land swap is not the tribes, but Uncle Sam.

According to National Geographic, early this year the government receives the 5,400 acres considered of equal monetary value. However, there appears to have been no account of the area’s historical significance to local people. That land swap was contingent, the Financial Times reports, on the U.S. Forest Service completing a Final Environmental Impact Study (FEIS), which would assess the potential effects of the mine development. Again, though, it doesn’t appear to have considered the loss of the tribal lands.

The FEIS released the report and gave its approval in the final days of the Trump presidency. That approval, however, now been rescinded by the Biden administration. As such, the development is now in jeopardy as the government considers the concerns raised by tribes and the public.

Tribal, public opposition

Both tribal and public opposition remains widespread.

The underground mine is some 7,000 feet below the surface. The gradual removal of the ore body over 40 years — although mined via shafts underground, not open cast — would still result in a two-mile wide crater and the loss of water resources in the area, according to ABC15 news, As such, it could potentially devastate the local environment, opponents say.

Unfortunately, ore bodies can only be mined where they exist. There is only so much high-grade copper in the world. Compromises often must be made. Whether a solution will be found in the case of the Oak Flat copper project that will allow the massive ore body’s eventual exploitation remains to be seen.

Rio and BHP have invested $2 billion into survey work so far. They may have to invest much more before the project sees the light of day.

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This morning in metals news: U.S. import prices declined by 0.4% in August; the Energy Information Administration surveyed the disruption to electricity customers as a result of Hurricane Ida; and, lastly, the European Steel Association commented on the European Union’s proposed Green Deal.

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US import prices fall

imports

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Running against the recent trend, U.S. import prices fell by 0.4%, the Bureau of Labor Statistics reported.

Import prices had jumped by 0.4% in July and 1.1% in June.

“The August downturn was led by lower fuel and nonfuel prices,” the BLS reported. “In contrast, prices for U.S. exports advanced 0.4 percent in August, after increasing 1.1 percent in July.”

Hurricane Ida impact on electricity customers

After Hurricane Ida made landfall in New Orleans in late August, many were left without power.

According to the Energy Information Administration, the storm caused at least 1.2 million electricity customers to lose power. The outages spread out over eight states.

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This morning in metals news: the U.S. steel capacity utilization rate rose to 85.3% for the week ending Sept. 11; Norsk Hydro signed an energy deal; and, lastly, aluminum prices have continued to skyrocket.

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Steel capacity utilization rises to 85.3%

steelmaking in an EAF

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The U.S. steel capacity utilization rate picked up to 85.3% for the week ending Sept. 11, the American Iron and Steel Institute (AISI) reported.

U.S. steel production during the week totaled 1.88 million net tons. Production for the week rose by 0.9% from the previous week. Furthermore, output jumped by 22.4% year over year.

For the year to date, production totaled 65.8 million net tons at a capacity utilization rate of 80.8%.

Hydro signs natural gas deal

Oslo-based Norsk Hydro said it had signed a 15-year deal for the supply of liquefied natural gas (LNG) to its Alunorte alumina refinery in Brazil.

Hydro signed the supply deal with New Fortress Energy.

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