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The Rare Earths Monthly Metals Index (MMI) dropped one point for a November MMI reading of 20.

Lynas Signs Deal with Malaysia’s MARA

Australia-listed rare earths firm Lynas Corporation, the largest rare earths firm outside of China, announced Nov. 4 it had signed a memorandum of understanding (MOU) with Malaysia’s MARA Corporation through which the parties would “work collaboratively on several key projects, including attracting downstream industries and downstream customers to Malaysia.”

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In August, the Malaysian government granted Lynas a six-month license renewal for its rare earths processing plant in the country. The decision came after months of back and forth between the firm and the government, primarily focused on the environmental impact of radioactive waste stemming from cracking and leaching processes at the plant.

“Lynas is delighted to be partnering with MARA Corporation on this exciting initiative,” Lynas CEO Amanda Lacaze said. “MARA Corporation is a strong and important local partner as we grow our global business from Malaysia. We have always strived to be an excellent foreign direct investor in Malaysia and this joint project is another way that we can facilitate economic development and jobs for Malaysians.”

Launched in 2016, MARA aims to create and develop “investments in key sectors to deliver scalable and sustainable financial returns that shape industries and deliver socio-economic outcomes,” according to its website.

“Creating economic opportunities in Malaysia, especially for the Malay and Bumiputra population is at the heart of MARA Corporation’s business,” said Akhramsyah Muammar Ubaidah Bin Sanusi, chairman of MARA Corporation. “We have followed the impressive progress of Lynas Malaysia as it has grown to become a major global player in the rare earth industry with a strong core of Malay technical professionals driving its progress. We are fortunate to have a key component of this supply chain already operating in Malaysia, and it is time to develop opportunities to further enhance Malaysia’s green and high-tech industries in line with the Pakatan Harapan government’s new Shared Prosperity Vision 2030.”

According to Lynas, it will work with MARA on a number of initiatives, including: attracting downstream industries and downstream customers to Malaysia; education and training initiatives; commercialization of NUF residues from the Lynas Malaysia plant, including making soil conditioner products available to Malay farmers; and design and fabrication work related to the Lynas 2025 Project.

Australia Mulls Funding Rare Earths Exploration

Major economies — notably, the U.S. — are aiming to wean themselves off of dependence on China for rare earths, as China wields overwhelming control of the rare earths mining and processing sector.

However, among the other places with potentially promising sources of rare earths minerals is Australia, which has drawn interest from the U.S. in the form of potential partnerships.

Matt Canavan, Australia’s resources minister, was quoted by Reuters as saying the government might consider underwriting projects to develop the country’s reserves of rare earths minerals.

Canavan underscored the importance of developing those mineral reserves during a speech at the International Mining and Resources Conference late last month.

“The government is also supporting the broader minerals sector with its $100 million Exploring for the Future program,” Canavan said. “That program is using the latest seismic and aeromagnetic techniques to try to find new discoveries. Some great work has already been done especially in the south Nicholson Basin that straddles the Queensland and Northern Territory borders.

“This work is especially important because there has never been a greater need for the mining industry. The mining industry has always been important. The Ancient Roman historian Alexander Demandt once compiled 210 reasons for the fall of the Roman Empire. One of the 210 reasons was the depletion of its mineral resources, especially those at the ancient mines at Rio Tinto.

“Just like in Roman times, the future health of our economy and society will depend on continuing access to high quality mineral resources.”

Free Partial Sample Report: 2020 MetalMiner Annual Metals Outlook

Actual Metal Prices and Trends

Chinese yttrium ticked up 1.6% month over month to $31.98/kg as of Nov. 1. Chinese terbium oxide fell 7.5% to $500.24/kg.

Chinese neodymium oxide fell 6.7% to $41,710/mt.

Chinese europium oxide fell 0.7% to $30.55/kg. Chinese dysprosium oxide fell 16.4% to $218.14/kg.

A recent Platts report offers a worrying picture of overcapacity in the Chinese steel market, which could have ramifications for steel prices worldwide.

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When Europe or the U.S. has an overcapacity issue, domestic producers suffer and domestic prices are depressed, but the effects rarely ripple much beyond the region’s borders.

But in part because of China’s dominance in the steel sector — producing over half the world’s steel — and in part because Chinese producers use exports to dump excess production when the country produces more than it consumes, the rest of the world feels the impact through increased exports of low-cost steel products.

China has been engaged in a multiyear program to shutter outdated, more polluting steel capacity. New additions have been authorized only on a replacement basis, but Platts’ analysis suggests plants that have been closed for some years but not pulled down have been allowed to count towards the construction of new, far more efficient steel plants.

Specifically, the report states China’s net crude steel capacity expansion will total 37.65 million mt per year over 2019-23, of which 34.88 million mt per year is due to come online in 2019. This will take China’s total crude steel capacity to around 1.2 billion mt per year by the end of this year.

In the September-October period of this year alone, China approved eight steel capacity replacement projects, Platts reports, which will see 17.18 million mt per year of pig iron and 13.56 million mt per year of crude steel capacity commissioned in the next 3-4 years.

The new projects are predicated on closures of 19.52 million mt per year of pig iron and 15.21 million mt per year of crude steel capacity (5.18 million mt per year of pig iron and 2.16 million mt per year of crude steel capacity were already closed before the end of 2018).

This means there will be just 14.39 million mt per year of pig iron and 13.04 million mt per year of crude steel capacity closed during 2020-23, resulting in a net increase of 2.79 million mt per year of pig iron and 0.51 million mt per year of crude steel capacity over the period.

The problem is further exacerbated by actual output from new facilities being even higher than headline capacity, Platts reports. The new facilities can produce up to 20% more than the stated installed capacity, possible through improved production technologies — by adding more scrap into the iron and steelmaking process — and by using higher-grade iron ore, the article states.

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Steel demand in China, at least from the construction sector, has been robust this year.

But worrying signs are appearing that supply is exceeding demand.

Rebar margins have fallen to just $29/mt during July-September from $159/mt in the same period last year.

Manufacturing is depressed, particularly in the automotive sector. The property sector is expected to weaken next year as new plants come onstream looking to run at 100% capacity to recoup investment; increased exports may be the inevitable result.

The U.S. Department of Commerce. qingwa/Adobe Stock

This morning in metals news, the U.S. Department of Commerce announced rulings in investigations of stainless steel kegs from China and Germany, copper prices rose on labor tensions in Chile, and the UAW’s strike continues as it mulls ratification of a tentative deal with General Motors reached last week.

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DOC Makes Final Determinations on Stainless Steel Keg Imports

The U.S. Department of Commerce on Friday announced it had made affirmative final determinations in its anti-dumping and countervailing duty investigations of imports of stainless steel kegs from China and Germany.

The DOC determined the countries sold the kegs at less than fair values, ranging from 0 to 77.13% and 7.47%, respectively.

The DOC also determined that exporters from China received countervailable subsidies at rates ranging from 16.21% to 145.23%.

Copper Rises on Chile Labor Developments

LME copper reached a one-month high amid strikes at Chilean copper mines operated by Antofagasta and Teck Resources, Reuters reported.

LME three-month copper rose as much as 0.5% Monday, Reuters reported, up to $5,837.50 per ton.

GM Awaits UAW Vote on Deal

Last week, General Motors and the United Auto Workers (UAW) union announced they had reached a tentative deal that could potentially end the strike that has lingered for well over a month.

However, the strike continues, for now, as UAW members must vote on the deal.

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If the deal is approved, talks will then shift to Ford and Fiat Chrysler, the Detroit Free Press reported.

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This morning in metals news, Rio Tinto released its third-quarter production figures, India has proposed an anti-dumping duty on flat-rolled steel from China and other countries, and copper prices dropped after a strike was averted at Chile’s Antofagasta.

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Rio Tinto Posts Strong Third Quarter

Miner Rio Tinto posted third-quarter iron ore production of 87.3 million tons, marking a 6% increase on a year-over-year basis and a 10% increase compare with Q2 2019.

Bauxite production increased 9% year over year, while aluminum production fell 3%.

“We have delivered improved production across the majority of our products in the third quarter, with a solid result at our Pilbara mines driving increased sales of iron ore into robust markets,” Rio Tinto CEO J-S Jacques said. “Our strong value over volume approach, coupled with our focus on operational performance and disciplined allocation of capital, will continue to deliver superior returns to shareholders over the short, medium and long term.”

India Proposes Anti-Dumping Duty on Chinese Flat-Rolled Steel

The Indian government Tuesday proposed a new flat-rolled steel anti-dumping duty on imports from China, Vietnam and South Korea, Reuters reported.

The duty, once implemented, will be effective for six months, according to the report.

Copper Drops on Antofagasta News

After Chilean copper miner Antofagasta reached a new 36-month contract with laborers at its Los Pelambres mine, copper prices moved downward, Reuters reported.

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Three-month LME copper dipped 0.2% Wednesday to $5,764 per ton, according to the report.

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This morning in metals news, the U.S. steel sector’s capacity utilization rate inched down another tenth of a percentage point, the U.S. raised its steel tariffs on Turkey to 50% and Chinese iron ore futures fell Tuesday.

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U.S. Steel Capacity Utilization Rate Falls to 80.3%

The U.S. steel sector’s capacity utilization rate for the year through Oct. 12 reached 80.3%, down from 80.4% the previous week.

Steel production for the year through Oct. 12 reached 76.1 million tons, up 2.9% on a year-over-year basis.

Trump Raises Turkey Steel Tariffs

In yet another turn in U.S.-Turkey relations, President Donald Trump signed an executive order halting trade negotiations with Turkey and raising the tariff on Turkish steel imports to 50%.

Last year, the Trump administration raised its Section 232 steel tariff on Turkish steel to 50% amid a row over Turkey’s detention of American pastor Andrew Brunson; the U.S. eventually brought the tariff back down to the standard 25% rate.

However, after the U.S. announced a withdrawal of its forces from Syria, followed by Turkey’s military offensive in the region, Trump released a statement announcing the U.S. would sanction Turkish government officials and “any persons contributing to Turkey’s destabilizing actions in northeast Syria.”

Chinese Iron Ore Futures Down Amid Vale Production Uptick

Chinese iron ore futures dropped to an over two-week low amid Brazilian miner Vale’s announcement of elevated third-quarter production, Reuters reported.

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The most-traded iron ore contract on the Dalian Commodity Exchange fell 1.2% on Tuesday, down to 644 yuan ($91.05) per ton, according to the report.

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This morning in metals news, the U.S. and China are working toward a partial trade deal, the largest copper mine in Ecuador has curbed operations amid protests and China’s copper imports hit an eight-month high.

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U.S., China Talks Could be Working Toward Partial Deal

As with anything else, there are two sides to every story.

While a wider understanding on trade between the U.S. and China is still far off, the two countries appeared to have made some progress toward a partial trade deal.

According to Reuters, the U.S. agreed to delay a scheduled October tariff increase, and Treasury Secretary Steven Mnuchin said the two countries have a “fundamental understanding” on many of the critical issues.

However, the deal is far from done. In addition, comments from the Chinese side were far less effusive than those of President Donald Trump.

“We have made substantial progress in many fields. We are happy about it. We’ll continue to make efforts,” Vice Premier Liu He was quoted as saying.

Ecuador Protests Impact Copper Activity

Ecuador’s largest copper mine has curbed its activity amid protests in the country, Bloomberg reported.

Protestors rallied against a proposed fuel price hike, ordered by the government in an effort to secure a loan from the IMF.

China Copper Imports Jump

F0r those of the mind that copper indeed lives up to its “Dr. Copper” moniker, China’s consumption is a critical piece of the copper puzzle.

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According to Reuters, China’s copper imports surged 10.15% in September on a month-over-month basis to its highest level in eight months.

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Aluminum consumers have watched the primary ingot price drift gradually lower since the beginning of this year.

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There have been peaks and troughs, of course, as the price is buffeted by trade news, mill outages or exchange rate movements.

Broadly speaking, however, our sideways market has been one of gradual decline.

As the price approaches the psychologically significant $1,700 per metric ton level, some will be wondering: can we expect resistance and a floor, or could prices continue down?

Read more

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If there is a silver lining to the current trade war with China, it could be that it has focused the U.S.’s attention on the perilous state of its raw material supply chain.

This is particularly relevant for the U.S. military, but equally for a range of high-tech industries, from consumer electronics to automobiles, battery storage and wind turbines.

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Many will recall, and not a few lament, the failure to support California’s Mountain Pass mine, source of the country’s rare earth metals, as an example of how exposed the U.S. has become.

According to the Defense Visual Information Distribution Service (DFIDS), the U.S. was largely self-sufficient for most of the 20th century, with all of its rare-earth needs being met by the Mountain Pass mine.

However, following a free trade deal between the U.S. and China in the 1990s, lower labor costs and regulatory requirements meant China could undercut Mountain Pass. Combined with problems over water supply pollution and stricter regulations, Mountain Pass was forced to shut down.

The rest, as they say, is history.

China has gone on to dominate some 80% of mining and over 90% of refining this particular segment of metals.

But it wasn’t until the specter of China weaponizing its dominance of these minerals by suggesting it could restrict supply, first in 2010 with Japan and again this year over the trade dispute with the U.S., that the wakeup call was finally taken seriously.

Now, the U.S. is seeking cooperation from potential supply countries outside of China — notably Australia, but also Greenland, Botswana and Peru. The U.S. is looking to develop not just alternative raw material supply but, more importantly, to develop refining facilities, too.

A new body, the U.S. Development Finance Corporation, is set to play a significant role in facilitating the U.S. government’s efforts to take equity positions in mining projects and encouraging private sector investment, according to Frank Fannon, the U.S. assistant secretary of state for energy resources, according to Reuters.

The trade dispute has pushed the U.S. to reappraise China’s aggressive forays into mineral-rich countries around the world and wake up to the implications of allowing this to continue unchallenged.

DFIDS reports China has also become a significant player in Latin America. China-Latin America trade increased from almost negligible levels in 1990 to $10 billion in 2000 and $270 billion in 2012. In 2012, an $8.4 billion rare-earth deposit was discovered in Brazil; over the past few years, China has become Brazil’s undisputed top trade partner.

As the South China Morning Post reports, although China contains only a third of the world’s rare earth reserves, it accounts for 80% of U.S. imports of the minerals because it controls nearly all of the facilities to process the material.

Even MP Materials, the only existing U.S. rare earths facility, ships its ore to China for processing and has bizarrely been subject to a 25% tariff since the escalation of the trade war with China.

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A wholesale realignment of the U.S. critical metals supply chain would likely take a decade or more to achieve, while the mine development stage alone can take up to 10 years.

But the sooner the process starts, the more secure the U.S. will become.

Better late than never.

You often hear conflicting stories about Chinese steel production.

Outright production capacity has been reduced as older facilities were closed under orders from Beijing in 2016-18, while much illegal or non-approved low-quality steel mills, whose output never appeared on reported results, have been forcibly closed.

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Domestic demand is also said to be down with new-automobile unit sales were down on a year-over-year basis for 14 consecutive months through August, a report in the Nikkei Asian Review states.

The drawn-out trade war with the U.S. has also sapped China’s consumer appetite, the article advises, illustrated by underperforming sales of appliances.

With the China National Day holiday looming mills in Hebei and Shandong have ordered by the provincial governments to reduce their steel output by up to 50% in the run-up to the holidays in a bid to improve air quality.

Five mills in Shandong were ordered to suspend varying shares of steel production capacity, last week and this week, coming with a loss of around 29,000 mt/d of steel output. Hebei is still awaiting its closure orders, but some mills have already cut output of pig iron.

Yet despite this gloomy production and demand scenario, the Nikkei Asian Review reports short-term closures aside, China is poised to produce over 1 billion tons of steel this year, with the industry producing 577 million tons of crude steel in the first seven months of the year.

Fears are therefore rising that China could be on track to create a glut this winter despite the now normal winter closures.

China’s rivals in southeast Asia are looking on warily concerned that rising exports will further depress regional prices as the domestic market fails to absorb the anticipated record output.

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That’s not good news for the rest of the world.

Even markets protected by high tariffs like the U.S. will be dragged down by lower global prices and imports undercut domestic U.S. mills.

That’s good news for consumers as demand and growth in the U.S. cools next year; lower prices will allow consumers to cope with softer sales prices for their own products.

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Copper prices have been sliding this year, with the average LME cash price in August of $5,707.98/mt down 3.9% from a July average of $5,939.85/mt.

Global copper mine production is also down.

Through the first half of 2019, copper mine production was down 1.4% compared with the first half of 2018, according to a report by the International Copper Study Group (ICSG).

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Solvent production fell 1% during the period, while extraction-electrowinning production fell 3.5%.

The half-year decline was paced by declines in Chile and Indonesia.

Chilean production was down by 2.5% due to lower copper head grades, according to the ICSG. Meanwhile, Indonesian concentrate production plunged 55% as the country transitioned two major mines to new ore zones.

Production in the Democratic Republic of the Congo and Zambia was about flat compared with 1H 2018 levels, while production in No. 2 producer Peru, Australia, China and Mongolia ticked up.

Meanwhile, refined copper production was estimated to have declined 1% in the first half of the year compared with 1H 2018. Production production fell 1.5%, while production from scrap increased 1%.

Chile’s refined output declined by 38% “due to power supply interruptions, smelter outages and the introduction on 1st January 2019 of a 5% custom duty on copper concentrate imports constraining smelter feed.” Meanwhile, the ongoing closure of Vedanta’s Tuticorin smelter — dating back to April 2018 — saw India’s production fall by 33%.

However, output increased in China, Iran, Poland, Brazil and Australia, according to the ICSG.

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Apparent refined usage declined by 1% in 1H 2019. China saw its net refined copper imports decline by 16% during the period, but its usage increased 3% on the back of increased domestic output.

As MetalMiner’s Stuart Burns noted, China’s falling aluminum and copper imports can be attributed in large part to the ongoing trade war with the U.S.; on that front, the two countries are scheduled for principal-level talks in early October (on the heels of last week’s deputy-level talks).

According to the ICSG, copper stocks held at major metal exchanges as of the end of August were up 48% compared with stock levels at the end of December 2018.

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