Industry News

The Trump administration announced this week it was considering the imposition of tariffs on $11 billion worth of European Union imports, said by the Financial Times to include such diverse products as passenger helicopters, Roquefort cheese, olive oil and wines.

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The move is said to be in response to harm the administration claims is being caused to Boeing by E.U. subsidies for Airbus. U.S. Trade Representative Robert Lighthizer is said to have a list of E.U. products on which he intends to levy tariffs as retaliation for long-running U.S. complaints about European aircraft development cost subsidies to the Airbus Group.

Airbus, it must be said, counters that Boeing has received, in one form or another, similar subsidies and support, an argument that has brought temporary truces over this issue in the past. This time, however, the argument appears to be swept aside by the current administration, maybe because Boeing is under intense pressure over the 787 Max grounding and new build cancelations.

Although no friend of the World Trade Organization (WTO), the Trump administration has pointed out the organization has ruled Airbus’ past payments illegal under a May 2018 ruling regarding Airbus subsidies, but Airbus claims it has since cleaned up its act and no longer follows the practices ruled against in the report.

The move by the Trump administration comes on the heels of a separate WTO ruling establishing that the U.S. had itself illegally subsidized production of Boeing aircraft — a decision that incensed U.S. officials, according to the Financial Times.

So, are we clear on who is at fault?

Read more

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This morning in metals news, the Wall Street Journal reported the Brazilian government plans to file charges in relation to the fatal Vale SA tailings dam collapse earlier this year, Tata Steel’s European workers are having doubts about the proposed Thyssenkrupp merger, the U.S. and China reportedly made a breakthrough this week in their ongoing trade talks.

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Brazil to File Charges After January’s Dam Collapse

The Wall Street Journal this week reported the Brazilian government plans to file charges in connection with the collapse of one of miner Vale SA’s tailings dams in January (which left hundreds dead).

The collapse occurred in late January at Vale’s Corrego do Feijao mine in Brumadinho, located in the southeastern state of Minas Gerais.

Second Thoughts

Some Tata Steel employees in Europe are questioning the balance of the planned merger with German firm Thyssenkrupp, Bloomberg reported.

The merger, which is under review by Europe’s competition authorities, would yield Europe’s second-largest steelmaking entity.

“The EWC will continue to support the joint venture only if we consider it to be in the best interests of the workforce at all our sites,” Tata’s work council said in a statement, as quoted by Bloomberg. “Due to these recent developments, we are now unconvinced the joint venture is the best option for Tata Steel Europe.”

U.S.-China Trade Talks

Trade talks between the U.S. and China continued this week, as the two sides aim to reach a resolution to the conflict that boiled over last year to the tune of a total of $360 billion in tariffs on each other’s goods.

The question for many, however, has been about enforcement — whatever deal was reached on paper, the U.S. has sought assurance of compliance.

In that vein, this week the two sides reached an agreement regarding the setup of trade enforcement offices.

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“We’ve pretty much agreed on an enforcement mechanism,” U.S. Treasury Secretary Steven Mnuchin said on CNBC, as quoted by Bloomberg. “We’ve agreed that both sides will establish enforcement offices that will deal with the ongoing matters. So this is something that both sides are taking very seriously.”

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This morning in metals news, the International Monetary Fund (IMF) released a slightly more positive 2019 growth forecast for China, a fire led to damages at one of Rio Tinto’s Pilbara iron ore operations, and Polish copper producer KGHM said it may freeze operations in Canada and the U.S.

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IMF Sees 6.3% Growth in China This Year

The IMF has revised its 2019 growth forecast for China, up to 6.3% from 6.2%, CNBC reported.

The world continues to wait for some sort of resolution to the ongoing trade talks between the world’s preeminent economic powers, the U.S. and China.

Growth has been slowing around the world, and China was no exception, posting its lowest growth level in 28 years, CNBC reported.

Fire Hits Rio Tinto Iron Ore Mine

Miner Rio Tinto announced a fire had damaged one of its Pilbara iron ore operations in Australia, Reuters reported.

According to the report, the fire broke out Saturday night at the miner’s East Intercourse Island port operation.

Recently, Rio Tinto declared force majeure on some contracts after Tropical Cyclone Veronica battered the northwest Australian coast, damaging the Cape Lambert A port terminal.

KGHM Could Freeze U.S., Canada Mines

Polish silver and copper producer KGHM said it doesn’t have plans to sell its assets abroad, but it would consider freezing its mines in Canada and the U.S. if they require major investments, Reuters reported.

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“We are not currently thinking about selling foreign assets. We’re considering strategies for the next few years,” KGHM Chief Executive Marcin Chludzinski told Reuters.

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The Rare Earths Monthly Metals Index (MMI) picked up one point, rising to a value of 19.

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Lynas Considers Initial Ore Processing at Home Amid Pressure in Malaysia

Australian rare-earths miner Lynas Corp., as we’ve noted in previous Rare Earths MMI reports, has been facing regulatory pressure in Malaysia of late.

The Malaysian government has issued two conditions for renewal of the miner’s license in the country, which expires in September, related to disposal of two types of waste. Last month, Lynas appealed one of the conditions put forth by the government related to disposal of water leached purification residue.

As such, the miner is considering building out initial ore processing near its Australian mine, Reuters reported.

“We have been giving great consideration to … our future industrial footprint,” CEO Amanda Lacaze was quoted as saying during an analyst and investor call. “We remain confident that we can agree a path forward with the Malaysian government which is good for Malaysia and good for our business.”

Lynas is the biggest miner of rare earths outside of China.

“We see value in operating alternative cracking and leaching processing close to our resource, and therefore the primary locations that we have been considering for growth are in Western Australia,” the miner said in a statement posted to its website. “Part of this planning has been to scope our future industrial footprint. Our preference has always been to add to our Malaysian capability, not replace it. Our Malaysian cracking and leaching operations are performing very well as a result of the IP our Malaysian team has developed and owned – IP which others cannot use – and the hard work of all the Lynas team. We remain committed to supporting the Malaysian economy and protecting our people’s jobs. However, this same work means we are well placed to deal with any change in Malaysian government policy.”

The company received a shock last Friday following comments by Malaysian Prime Minister Mahathir Mohamad, who indicated the miner’s Malaysian operations were being put up for buyers who can make good on cleanup of the radioactive waste.

“With regard to Lynas, we have imposed an extra condition, that is they must take away the waste,” Mohamad said. “But they want to take away the waste to where? They want to take it to Australia, but Australia doesn’t want to accept it, so they can’t do it anyway.

“So what we have done is we have opened up the business to other people, and there are other companies willing to buy up or somehow or other acquire Lynas, they have given us a promise that in future before sending the raw material to Malaysia they will clean it up first, they will crack it and decontaminate it in some way with regard to radioactivity, so that when the raw material comes here, the volume is less and the waste from that raw material is not dangerous to anybody.”

The comments came just over a week after Lynas rejected a $1.5 billion takeover bid from Australian conglomerate Wesfarmers.

Meanwhile, in perhaps promising news for Lynas, the Sydney Morning Herald reported the government of Western Australia has indicated it would consider offering assistance if the company should decide to build a new processing plant in the state.

China Becomes Top Rare Earths Importer

Speaking of China, the country exerts an overwhelming dominance in the rare earths market, which includes materials used in a wide variety of high-tech capacities, from smartphones to laptops and more.

Now, China is also the world’s top rare earths importer, Reuters reported.

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Citing data from consultancy Adamas Intelligence, China’s imports of rare earths surged 167% last year. In addition, China became a net importer of at least seven rare earths, including praseodymium and yttrium, for the first time in more than 30 years.

Actual Metal Prices and Trends

The yttrium price fell 0.3% month over month as of April 1, down to $33.52/kg. Terbium oxide rose 4.7% to $465.52/kg.

Neodymium oxide dropped 5.2% to $43,573/mt.

Europium oxide fell 0.3% to $38.73/kg. Dysprosium oxide jumped 15.4% to $218.98/kg.

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History abounds with examples of the E.U.’s incompetence, particularly around its lawmaking.

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But an absolute corker is going on this year over automotive emission targets.

From 2021, the E.U.’s target for average carbon dioxide emissions from cars is 95 grams per kilometer, in an effort to force innovation in more efficient power units and to lower environmental pollution – a pragmatic and, most would agree, sensible objective.

Carmakers can pool the emissions from models across their range in order to achieve an average below this level to avoid fines. For example, Volkswagen can offset lower emissions models from their VW, Seat and Skoda ranges against those from higher emission models made by Porsche and Audi cars.

It’s a debatably acceptable compromise. Ultimately, it does little to increase incentives to improve gas-guzzling, top-of-the-range models, but it does satisfy the E.U.’s objective to reduce average new car emissions, and so still offers an incentive for the improvement of small- and medium-size models and the rollout of electric vehicles.

So when does a good idea deteriorate into a farce?

When competing manufacturers can strike agreements to pool their vehicle ranges, is the answer.

Witness the sham outlined in the Financial Times this week of Fiat Chrysler Automobiles (FCA) agreeing to pay Tesla hundreds of millions of euros so the electric carmaker’s vehicles are counted in FCA’s fleet in order to avoid FCA being hit by some $2 billion in fines.

Last year, FCA’s fleet — which includes Jeep, Alfa Romeo and Maserati, alongside smaller models by Fiat — averaged 123 grams per kilometer in emissions, according to UBS, while Tesla obviously registered zero with a fully electric lineup.

It must be said, this is not a solely E.U. wheeze.

The U.S. authorities allow Tesla to sell zero-emission credits to other carmakers; the automaker made $103.4 million in this way last year, the Financial Times reports.

But you have to ask: what is the point in setting a target only to let carmakers wriggle out of meeting it by buying credits from a competitor?

Regulators will argue the incentive remains because the carmaker now has a real financial cost attached to those emissions that will act as a spur to reduce the average in the future.

But does it, really?

The pressure is off FCA, as they pay a few hundred million to Tesla and avoid a $2 billion fine in 2021. Indeed, FCA has announced that while it will continue to work toward lowering its average emissions. However, the narrow definition of fuel consumption measured as grams of carbon dioxide per kilometer means the group will continue to sell diesel vehicles that produce less carbon dioxide than petrol models, but vastly more carbon particulate emissions.

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The only golden lining to this sorry tale is you will continue to be able to buy the Ferrari reworked petrol-powered Maserati Ghibli, even if it does pump out a whopping 223 g/km – just so long as there is a Tesla or two somewhere saving the planet for you.

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This morning in metals news, the U.S. steel sector’s capacity utilization rate for the year through April 6 reached 81.9%, the zinc price fell on easing supply concerns and miner Glencore is becoming a bigger and bigger player in the copper market.

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Steel Capacity Utilization Update

The American Iron and Steel Institute (AISI) released its weekly production report Monday, showing the sector’s capacity utilization rate for the year through April 6 had reached 81.9%.

Production during that time by volume reached 26.1 million tons, up 6.8% from the 24.5 million tons produced during the same time frame in 2018.

Meanwhile, for the week ending April 6, domestic raw steel production hit 1.9 million net tons at a capacity utilization rate of 82.8%, up from 1.8 million net tons and 76.3% for the same week in 2018. 

Zinc Price Dips

The price of zinc fell Tuesday based on the prospect of increased supplies of the metal, Reuters reported.

The LME zinc price dropped 1.6% to $2,860.50 per ton Tuesday, according to the report.

Glencore Ramps up Copper Buying

Copper is predicted by many to see a continued rise in demand as the world makes the move over to electric vehicles (EV).

One firm looking to snap up as much copper as it can is miner Glencore.

According to a Bloomberg analysis, Glencore was Chilean copper miner Codelco’s No. 1 customer in 2018.

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Illustrative of the miner’s increased emphasis on copper, the report notes Glencore did not even make the top 10 list of Codelco copper customers as of five years ago.

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This morning in metals news, the U.S. and China’s trade negotiations march on, China’s Tewoo Group sells copper at below market value and a U.S. aluminum executive says tariffs aren’t the answer.

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Work to Do

After the latest round of trade talks between U.S. and China late last week, there remains “significant work” on the road to a deal, Reuters quoted the U.S. Trade Representative as saying in a statement.

Meanwhile, Chinese state media hailed “new progress” in the talks.

Tewoo Group Sells Copper at Less than Market Value

According to a Bloomberg report, Chinese commodity trader Tewoo Group is selling copper at less than market value.

Per the report, the trader sold some copper to other trading houses at a premium of $10 per ton, compared with the $54 per ton premium in Yangshan.

Aluminum Executive Pans Tariffs

Lee McCarter, CEO of JW Aluminum, thinks tariffs are not the answer to the domestic industry’s challenges.

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According to a report in The Post and Courier, McCarter called for an end to the tariffs and for the U.S. not to simply replace tariffs on Canadian and Mexican steel and aluminum with quotas.

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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:

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This morning in metals news, Russian investors are interested in Nevada copper, iron ore is booming and Vietnam’s steel sector looks to build on a record-setting 2018.

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Nevada Copper

Among other metals, copper will become increasingly important as electric vehicles gain market share.

As such, it’s no surprise that copper mining is heating up in many places, including the state of Nevada, according to a report by the High Country News.

The report notes a copper mine financed by a Russian oligarch is set to open this year, approximately 60 miles away from Tesla’s so-called Gigafactory.

Iron Ore Soars

Amid recent supply-side disruptions in Brazil after Vale SA’s tailings dam breach and in Australia (stemming from port damage as a result of the recent Tropical Cyclone Veronica), the iron ore price is rising fast.

According to the Hellenic Shipping News, the iron ore price rose above $92/ton this week, its highest level in over two years.

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Vietnam Steel Sector Could Grow Further

The Vietnam Steel Association is optimistic the country’s steel sector will continue to grow, even after a productive 2018, S&P Global Platts reported.

Vietnam’s crude steel production in 2018 hit a record 14.1 million tons, which marked a 23% year-over-year increase.

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This morning in metals news, the copper price fell again, stocks picked up Thursday as U.S.-China trade talks continued and shares of Reliance Steel are up 31% this year.

Has Copper Hit a Wall?

The London copper price had been enjoying an upward trajectory from the start of the year through most of February, but that trend seems to have run out of steam.

LME copper price. Source: LME

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Since late February, the metal has been trading mostly sideways, but on Thursday’s session fell again on weak German manufacturing data, Reuters reported.

In addition, the situation at the Las Bambas copper mine in Peru escalated, as a judge ordered jail time for lawyers who represented indigenous villagers who blockaded the mine in protest, according to the Reuters report.

Stocks Up on U.S.-China Talks

The ongoing trade talks between the U.S. and China continued this week in Washington following last week’s sessions in Beijing; once again, markets are showing great sensitivity to any semblance of good (or bad) news out of the negotiations.

Stocks were mostly slightly up Thursday, MarketWatch reported.

Reliance Steel Shares on the Rise

Metals service center operator Reliance Steel has seen its shares surge 31% in the year to date, according to Zacks Equity Research.

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According to the Zacks analysis, the company has benefited from its focus on high-margin products, and has seen strong demand in the aerospace and automotive markets.