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Environmental damage caused by mining and refining processes like smelting are not uncommon.

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In the last two years alone, one site lists 10 major tailings dam failures alone; environmental damage from tailing ponds is only the thin end of the wedge when it comes to the wider remit of potential environmental consequences arising from mineral extraction.

Yet not one of those events listed was in China, despite half the world’s metals being refined and produced there, and a sizable proportion of the world’s mines being in China.

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The Rare Earths Monthly Metals Index (MMI) ticked up one point for a January reading of 20.

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Malaysian regulators opt not to increase Lynas’ processing limit

Lynas Corp., the largest rare earths firm outside of China, announced in December that Malaysian regulators did not increase the firm’s lanthanide concentrate processing limit for calendar year 2019.

The Australia-based miner and processor operates a refinery in Kuantan, Malaysia. Last year, the Malaysian government granted Lynas a six-month renewal of its license to operate in the country.

However, regulators opted not to extend the firm’s permitted lanthanide concentrate processing limit for 2019.

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What is driving the recent tentative trade agreements — and what does it all mean?

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

Trade remains critical to President Donald Trump for two reasons. For one, he loves chasing a deal more than anything else. Second, he has staked his reelection on his ability to deliver trade deals that improve the U.S.’s economic position, but not necessarily large trade wins.

Voters will likely see trade improvements as a win. It will take six months to see any actual results after the ratification and implementation of any deal.

And six months from now will show results just in time for the election.

How should metal buyers view the USMCA deal today?

Many companies have already taken steps to prepare for this deal.

In other words, businesses made changes to their operations in anticipation of the ratification of the deal.

The International Trade Commission estimates the deal will impact real GDP by 0.35%, or $68.2 billion. Some estimates suggest growth can reach 0.6%.

With some of the restrictions already lifted on steel and aluminum, it remains unclear how much growth has already occurred. U.S. dairy farmers, for instance, will gain access to certain segments of the Canadian market previously closed off due to strict regulations.

The true impact involves creating business certainty.

Any expansions or investments on the sidelines waiting for the final rules can now proceed as planned. However, that appears likely to have only a marginal impact on any of the countries involved.

Is the China trade deal the end to all trade deals?

The president has asked for sweeping change from China. Specifically, Trump has sought solutions to currency manipulation, intellectual property protection for U.S. companies, continued purchases of farm goods, the curbing of subsidies to state-owned companies, and access to the Chinese market for some U.S. tech companies (such as Google and Facebook).

It appears as though the deal will address some of these, particularly currency manipulation, rules around intellectual property and farm purchases. Critics say it doesn’t go far enough to address the state subsidies and blocking of U.S. tech companies.

In exchange, the U.S. will roll back some tariffs and not implement new ones. This could have an impact on hundreds of billions of dollars and would change trade patterns globally.

With the implementation of tariffs, companies developed alternative sources. Some of those sources have proved better than previous options and some less so. Trade between the U.S. and China will return, but not to pre-tariff levels. Any new, efficient supply chains will remain in place.

They say timing is everything

The flurry of activity likely comes down to the election cycle. At this point, the president can’t wait any longer and has to take the wins where he can get them.

These two trade deals could also force Europe to come to the table with its own agreement. If this happens, the “trade World War” will come to a cease-fire, with no country left financially crippled and also no monumental victor. This will provide global stability for several markets — always a positive sign.

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The actual result of the individual trade deals appears marginal but still serves as an improvement on existing multidecade-long trade deals. The culmination of the deals could strengthen the world economy.

Tariffs created significant headwinds to growth in virtually all corners of the world. We know these trade deals will serve as Trump’s “big win.” His showmanship will ensure he will take credit, whether fact-based or otherwise.

The world will decipher fact from fiction during the second half of 2020.

Don Hauser joined MetalMiner’s commercial team in November 2019 after more than a decade as a cost management specialist and global supply base manager at John Deere. 

Andrey Kuzmin/Adobe Stack

This morning in metals news, the European Steel Association (EUROFER) offered its reaction to the new European Green Deal, China’s steel output could fall next year and China’s imports of iron ore dropped in November.

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EUROFER lauds carbon border adjustment mechanism in European Green Deal

This week, the E.U. unveiled the European Green Deal, which EUROFER largely supported in a statement Wednesday.

“We welcome the aims of the European Green Deal,” said Axel Eggert, EUROFER director general. “In charting a series of sectoral and specific policy plans, it is clear policymakers take seriously the need to transition to a carbon-neutral future with industry, rather than without it.”

EUROFER also highlighted the initiative’s carbon-neutral ambitions, particularly through the lens of steelmaking and competition against lower-lost, less “green” steel producers.

“It is now of utmost importance to develop a regulatory framework that creates markets for CO2-neutral products: these have significantly higher production costs, for example because of the use of highly-priced hydrogen instead of coking coal in the steelmaking process,” Eggert said. “Policymakers must establish – jointly with us – how ‘green’ steel can compete against carbon-intense, low-cost steel imports that have a significantly higher CO2 footprint than EU-made steel.

“The EU seeks to make Europe the first carbon-neutral continent by 2050, which is a high ambition. The steel industry is already working on a range of low- and carbon-neutral solutions that could lead to reductions in CO2 emissions from steelmaking by up to 95% in 2050 under an optimum regulatory framework. It is why a partnership on clean steel – as well as other means to ensure the steel industry remains competitive even as it becomes carbon-lean – is so essential.”

China’s steel output to drop in 2020?

Despite mandated winter production cuts over the past few cold seasons, China’s steel output has continued to ascend.

Next year, however, the country’s steel output is expected to come down from its record high set this year, according to the China Metallurgical Planning and Research Institute.

According to Reuters, the institute forecasts steel output will fall to 981 million tons next year, down from 988 million tons this year.

China’s iron ore imports drop

In other China news, the country’s imports of iron ore fell in November, Reuters reported.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

China imported 90.65 million tons of the steelmaking material last month, down 2.4% from the October import total, according to the report.

The Stainless Steel Monthly Metals Index (MMI) dropped again this month, by thirteen points to 74, the third and largest consecutive monthly drop, with nickel prices correcting significantly.

LME nickel prices finally corrected, now back to levels last seen in late July. While prices held on to higher levels for a few months based on supply concerns, sluggish demand ultimately trumped supply concerns during Q4.

Source: MetalMiner analysis of the London Metal Exchange (LME) and FastMarkets

Prices have now dropped below the average year-to-date value of $13,960/mt.

Later in the month, price declines stalled out around the $14,500/mt level before continuing to plunge toward long-term support levels.

Source: MetalMiner analysis of the London Metal Exchange (LME) and FastMarkets

Based on nickel’s uptrend since 2016, prices may soon begin to find support once more, rather than continuing to fall.

SHFE nickel prices drop back significantly

SHFE nickel prices also showed significant corrections this month, dropping by nearly 20% during November. Values now look back in line with prices from earlier in 2019.

Source: MetalMiner analysis of FastMarkets

Based on a longer-term look at the price trend, like LME nickel prices, SHFE nickel prices look close to finding support once more. Therefore, from a technical perspective, we can anticipate the price to strengthen once more as we move into 2020.

If prices cannot hold at long-term support, this will be due to poor demand, which could indicate sustained bear market conditions during Q1 2020.

China’s property sector may be the key to where prices head in Q1 2020

Long-term expansionary monetary policy fueled real estate growth in China, as explained in this recent article by MetalMiner’s Stuart Burns.

Beginning in 2017, the Chinese government began putting measures in place to reduce speculative investments in real estate, toward preventing future bubble markets.

In spite of these efforts — and due to extended negative real interest rates continuing to drive strong demand for real estate investments — real estate market prices continue to appear inflated.

As such, China looks susceptible to a real estate market downturn that could send nickel prices below long-term support levels.

Based on the most recent data available from the International Stainless Steel Forum, during 2019, only China saw sustained stainless steel demand growth, while demand contracted in the rest of the world. However, growth in stainless output outpaced demand growth in that country, according to recent press reports.

Excess stainless steel stocks built up as a result, reflected in weaker stainless prices recently, as represented by falling SHFE stainless steel futures prices.

Vale to divest New Caledonian nickel mine assets

Vale announced plans to divest its New Caledonian operations due to technical difficulties, according to press reports. However, the company plans to boost mining operations in Indonesia.

The company plans to boost Indonesian mine production by 70% into the foreseeable future with joint venture partners. Expansion will target ramped up output of 360,000 tons per year, with no deadline to hit the target given.

Domestic Stainless Steel Market

Source: MetalMiner data from MetalMiner IndX(™)

Stainless 304 and 316 NAS surcharges dropped this month, following from recent corrections to nickel prices. Surcharges for 304 dropped to $0.68/pound, similar to the September rate of $0.66/pound. NAS 316 surcharges dropped back to $0.94/pound for December, comparable to September’s rate of $0.97/pound.

Both surcharges will likely see further corrections back to August levels at a minimum, which were at $0.57/pound and $0.86/pound, respectively.

What This Means for Industrial Buyers

Nickel prices retraced significantly once again, with the retracement progressing at full steam during November. While prices look close to stabilizing, further price weakness cannot be ruled out as 2020 arrives.

Buying organizations interested in tracking industrial metals prices with greater ease will want to request a demo of the all-new MetalMiner Insights platform.

Buying organizations seeking more insight into longer-term industrial metals price trends may want to read MetalMiner’s Annual Metal Buying Outlook.

Download your free Partial Sample Report: 2020 MetalMiner Annual Metals Outlook now.

Actual Stainless Steel Prices and Trends

The LME primary 3-month nickel price finally showed a significant correction following the speculative price increase a few months back, losing 17% this month, based on a value of $13,915/mt, compared to $16,800/mt in October.

Primary nickel prices in China and India showed similar price corrections – of 18% and 17% respectively. China’s nickel price dropped to $15,890/mt compared to $19,356/mt last month, while India’s price dropped to $14.0/kilogram compared to $16.9/kilogram last month.

Other Chinese prices in the index generally dropped. FeMo lumps dropped by 6.1% this month to $15,215/mt, and FeCr lumps dropped 10.3% to $1,479/mt. Stainless steel scrap prices held flat.

The U.S. 316 and 304 Allegheny Ludlum stainless surcharges fell by 11.1% and 7.1% respectively, to $0.97/pound and $0.72/pound.

Indexed Korean prices dropped 1% with stainless steel coil 430 CR 2B and 304 CR 2B at $1,523/mt and $2,454/mt, respectively.

The Copper Monthly Metals Index (MMI) held at last month’s value of 73 based on November price data. 

LME copper prices took a sideways turn during November as uncertainty over the strength of the global economy continued to constrain copper prices.

Source: MetalMiner analysis of London Metal Exchange (LME) and FastMarkets.

The price continued to trade below $6,000/mt throughout November, averaging a value of $5,877/mt for the month.

SHFE copper prices continued firmly sideways

SHFE copper prices continued to move sideways once again in November, with the trading range continuing to move tightly around the CNY 47,000/mt price level.

Source: MetalMiner analysis of FastMarkets. 

Like LME prices, SHFE prices continued to look slightly stronger by remaining higher than values seen a couple of months ago.

China’s increased smelting capacity pushes 2020 TC/RCs lower

China copper smelting capacity will increase by an estimated 900,000 tons this year,  according to press reports, plus another 350,000 tons during 2020.

As a result, competition for concentrate drove down treatment charges this year. Therefore, official TC/RCs recently set for 2020 contract negotiations remain lower at $62 per ton for smelting and $0.062 cents/pound for refining.

Demand for copper in China could start to pick up in 2020

China’s manufacturing sector could be rebounding, based on positive PMI readings for November, with both the official and private Caixin/Markit readings coming in higher than expected.

The Caixin/Markit manufacturing index edged up to 51.8, from 51.7 last month.

The official PMI manufacturing reading of 50.2 also crossed 50 this month.

This brings both indexes back into expansionary territory.

Rio Tinto extends Kennecott project through 2032 with $1.5 billion investment

Rio Tinto approved a plan to invest $1.5 billion in its Kennecott copper site in the U.S. The investment will allow mining in a new area of the ore body, which will extend Kennecott operations through 2032. As a result, the company expects to mine close to one million tons of copper from 2026 through 2032.

Kennecott operations presently supply close to 20% of annual U.S. copper production, according to the company.

What this means for industrial buyers

Copper prices moved predominantly sideways of late — with prices generally holding value rather than dropping back, even with slowed Q4 demand growth. Industrial buying organizations need to stay alert for further signs of price increases, in case a pickup in manufacturing impacts prices into the new year.

Want an easier solution to tracking industrial metals prices and trade news? Request a demo of the MetalMiner Insights platform.

Buying organizations seeking more insight into longer-term copper price trends may want to read MetalMiner’s Annual Metal Buying Outlook.

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Actual copper prices and trends

Copper prices showed mixed movements this month, but the majority of prices in the index increased mildly.

U.S. producer copper grade 110 and grade 122 increased by 1.5%, the largest increase this month, both now at $3.47 per pound. U.S. producer copper grade 102 increased 1.4% to $3.69 per pound.

China’s copper bar prices increased by 1.0% to $6,729/mt. China’s primary cash and copper wire prices both increased, by 0.8% and 0.9% respectively, to $6,736/mt and $6,732/mt, respectively. China’s copper #2 price held nearly flat at $5460/mt.

Japan’s primary cash price fell by 1.0% – following last month’s 4.0% jump – now at $6,090/mt.

The LME primary 3-month price stayed relatively flat with a 0.5% increase, now at $5,877/mt.

Korean copper strip fell by 1.9% to $7.92 per kilogram.

Indian copper cash prices fell by 1.8% to $6.06 per kilogram.

Global aluminum production in October totaled 5.39 million tons, according to a recent report by the International Aluminum Institute.

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Global production through the first 10 months of the year reached 53.04 million tons, down 0.9% from the 53.51 million tons produced during the first 10 months of 2018.

Of that total, China produced 3.01 million tons, which marked a decline from the 3.13 million tons produced in October 2018. However, China’s October production jumped compared with September’s 2.92 million tons.

Elsewhere, production in the Gulf Cooperation Council (GCC) countries totaled 494,000 tons in October, up from the 478,000 tons in September and the 450,000 tons produced in October 2018.

North American production totaled 316,000 tons, up 1.9% from the 310,000 produced in September but down from 323,000 tons in October 2018.

Western European production totaled 286,000 tons in October, up from 276,000 tons the previous month and down from 321,000 tons in October 2018.

Production in east and central Europe totaled 356,000 tons in October, up form 344,000 tons in September and 343,000 tons in October 2018.

MetalMiner’s Stuart Burns weighed in on aluminum demand and prices last month.

“China’s gross domestic product growth slowed again to 6.0% year over year in the third quarter, its weakest pace in almost three decades, Aluminium Insider reports,” Burns wrote. “Citing a Reuters poll, the report notes industrial activity is expected to have shrunk for the sixth month in October, quoting a Reuters poll, suggesting hardly any relief from slowing global demand and the trade war.

“The latest economic data from the E.U. and the U.S. also indicate slowing growth, with Germany flirting with a recession in the manufacturing sector. Although the aluminum market was estimated to be in deficit last year and this, a Reuters poll suggests it is likely to flip into a surplus of 304,000 metric tons next year — almost a 1 million ton turnaround from the 658,500-ton estimate for this year.”

Despite slowing growth and lagging demand around the world, aluminum prices had previously shown signs of upward momentum, surging past the $1,800/mt threshold in the first half of November.

However, since hitting $1,820/mt as of Nov. 8, the LME three-month aluminum price has lost some steam. The LME three-month aluminum price dropped to $1,738/mt in the run-up to Thanksgiving, according to MetalMiner IndX data.

Alumina production

Meanwhile, the International Aluminum Institute also released alumina production figures Nov. 26.

China’s estimated production of alumina — a key aluminum making material — totaled 6.08 million tons in October, up from 5.88 million tons in September but down from the 6.16 million tons produced in October 2018.

Free Partial Sample Report: 2020 MetalMiner Annual Metals Outlook

Global alumina production totaled 110.3 million tons through the first 10 months of 2019, up 1.9% from 108.2 million tons produced during the equivalent period in 2018.

Global crude steel production took a fall in October, including in No. 1 steel producer China.

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According to statistics compiled by the World Steel Association — using data from 64 data-reporting countries — global steel production fell 2.8% in October on a year-over-year basis.

October production from the reporting countries totaled 151.5 million tons, down from the 155.8 million tons produced in October 2018.

China’s production contracts

China’s crude steel production for the month dropped 0.6% year over year to 81.5 million tons.

In September, China’s production growth reached 2.2% year over year, while August growth reached 9.3%.

With the Chinese winter heating season underway, it remains to be seen how much steel capacity is shuttered for the season.

As MetalMiner’s Stuart Burns recently noted, the government is taking a closer look at new capacity starts.

“Demand in top consumer China remains surprisingly robust, yet inventories are falling — suggesting producers are struggling to keep up with demand,” Burns wrote.

“If that were not enough, Reuters reported new starts are being more vigorously investigated and the approval process reviewed, leading the industry to think supply will be curbed further during the winter heating period this year.

“A notice jointly issued by the National Development and Reform Commission, Ministry of Industry and Information Technology (MIIT) and the National Bureau of Statistics urges local governments and the State-owned Assets Supervision and Administration Commission (SASAC) to verify the steel firms’ capacity, production and fixed-asset investments.”

No. 2, 3 producers see production declines

Meanwhile, No. 2 producer India put out 9.1 million tons, down 3.4% year over year. Japan produced 8.2 million tons, marking a 4.9% decline.

South Korean production reached 6.0 million tons, down 3.5% year over year.

U.S. production totaled 7.4 million tons, which marked a 2.0% decline compared with October 2018. The U.S. steel sector’s capacity utilization rate remains above the important 80% mark (identified as a marker of industry health when the Trump administration first rolled out Section 232 tariffs on imported steel and aluminum).

The American Iron and Steel Institute (AISI) recently reported the U.S. steel sector’s capacity utilization rate for the year through Nov. 23 reached 80.3%, having now held at that level over the past month and a half.

In the E.U., Germany produced 3.3 million tons, marking a year-over-year decline of 6.8%, as overall recession concerns loom in the E.U.’s industrial stalwart.

Italy produced 2.2 million tons, down by 3.7%. France’s production fell 10.6% to 1.2 million tons, while Spain’s fell 7.6% to 1.2 million tons.

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October steel production in Brazil, Turkey and Ukraine was all down by double-digit percentages in each country — 19.4%, 15.0% and 12.7%, respectively.

In previous downturns, Beijing has taken a range of stimulus measures to keep the economy growing robustly; as a result, it has contributed positively to global GDP and commodity prices.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

But this time around Beijing seems to have a greater tolerance for slowing growth.

While stimulus measures are expected as early as December, the Financial Times reported, they are not expected to be on the scale of those seen in 2008-2009 and 2015-2016.

Freya Beamish, an analyst at Pantheon Macroeconomics, is quoted by the Financial Times as saying China’s stimulus in the 2018-2019 period will be equivalent to about 7% of GDP over the two-year period. Measures taken in 2015 and 2016 were worth 10% of GDP, while the 2008-09 stimulus amounted to 19% of GDP, according to an OECD estimate.

Beijing appears constrained by a number of factors, policy-driven and economic, in what it can do and how far it can go.

Office space is at an all-time high in some Chinese cities, forcing the delay and cancellation to high-profile skyscraper projects and more general office developments, the Financial Times reported.

Following a surge in new residential housing starts earlier this year, growth has since moderated and is expected to slow further in 2020. Beijing seems reluctant to undermine the currency by further monetary easing and is particularly sensitive to avoiding property price rises by stoking demand.

The Financial Times reports that Chinese states and municipalities are already heavily indebted and banks are reluctant to increase bad debts. While infrastructure lending is the most likely form of stimulus, it will probably not be on the same scale as previous measures.

A former Chinese bank official is quoted as saying that due to previous infrastructure investments, “Cities and provinces are having trouble financing new projects as they must spend a significant portion of their cash-paying off debt.” Possibly as a result of this, investment spending grew by only 3.4% in the first three quarters of this year.

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This moderation in appetite for further stimulus coming on top of the cooling housing market undermines the case made in a recent article we reviewed suggesting steel prices could be set for a recovery, extrapolating on the apparent recovery of the Chinese steel sector.

If the Financial Times is correct in its analysis above, any current strength in Chinese — and, by extension, southeast Asian — steel prices could be relatively short-lived.

Photo Courtesy of Supply Dynamics

This morning in metals news, Supply Dynamics took home a national award in the Microelectronics Supply Chain Provenance Challenge, China is investigating steel excess capacity and the Indian Supreme Court has given the green light to ArcelorMittal’s acquisition bid of Essar Steel.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

Supply Dynamics Takes Home National Award

Supply Dynamics, along with its U.K. partner Brunel University London, recently took home a national award in the Microelectronics Supply Chain Provenance Challenge, which featured 22 companies and more than 75 applicants.

The challenge, which brought companies to Las Vegas earlier this year to showcase their innovations, was hosted by the Air Force Research Labs (in partnership with AFWERX).

“The winning Supply Dynamics/Brunel solution combined the advanced scanning, X-ray, segmentation, and OCR capabilities of Brunel’s HISTEED and VISION technologies with Supply Dynamics’ web-based, multi-enterprise platform, SDX,” Supply Dynamics said in a release. “SDX is currently used by large manufacturing companies in Aerospace, Automotive, Oil and Gas, and Heavy industry to track, trace, classify, and report common raw materials that flow into their products from thousands of sub-tier suppliers.”

The Challenge solicited applications for “non-destructive methods, techniques, and tools to trace the parts of any COTS assembly (hardware and software) to prove provenance and suitability for use in military applications in a cost-effective manner.”

For more information, visit the Challenge’s website.

China to Probe Steel Capacity

According to a Reuters report, the Chinese government is investigating the country’s steel capacity amid surging output.

Despite capacity cuts in recent years on environmental grounds, China’s steel output has continued to rise. China’s steel production through the first 10 months of the year jumped 7.4% on a year-over-year basis, Reuters reported.

According to the World Steel Association, China’s September production rose 2.2% year over year.

Supreme Court Approves ArcelorMittal’s Essar Resolution Plan

The Indian Supreme Court has approved ArcelorMittal’s resolution plan for the distressed Essar Steel, the former said Monday.

“ArcelorMittal announces that, following receipt and review of the formal written order, ArcelorMittal India Private Limited’s (‘AMIPL’) resolution plan for Essar Steel India Limited (‘ESIL’) has been unconditionally approved by the Indian Supreme Court,” ArcelorMittal said. “Supreme Court approval of AMIPL’s resolution plan is the final procedural step in ESIL’s corporate insolvency process.

“Completion of the transaction is now expected before the end of the year. After completion, ArcelorMittal will jointly own and operate ESIL in partnership with Nippon Steel Corporation (‘Nippon Steel’), Japan’s largest steel producer and the third largest steel producer in the world, in-line with the joint venture formation agreement signed by the two companies.”

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Essar Steel is one of a dozen large Indian companies that were thrown into India’s insolvency proceedings in 2017.