Green steel still decades away: BlueScope

Spanish Market: Coking coal, Hydrogen, Metals
15/08/22

Australia-based steel producer BlueScope Steel believes green steel is decades away, as Shell withdraws investment from a renewable hydrogen hub at the 2.1mn t/yr Port Kembla steelworks in the Illawarra region of New South Wales (NSW).

BlueScope will continue to work with other potential investors to investigate building a 10MW pilot-scale renewable hydrogen electrolyser to test the use of green hydrogen in its blast furnace at Port Kembla. Shell is still supportive but has decided not to invest in the project, BlueScope chief executive Mark Vassella said.

Bluescope will continue to investigate hydrogen production, including as a potential feed for a pilot direct reduced iron (DRI) plant at Port Kembla, as part of the firm's tie-up with UK-Australian mining firm Rio Tinto to investigate green steel production. But commercial steel production using hydrogen instead of coking coal is still decades away with no commercially viable options available anywhere in the world, Vassella said.

One of the major drags on green steel developments is the global energy crisis, particularly in Europe, because green steel requires significantly more electricity than traditional steelmaking methods, he added. This is also a problem in Australia, where an unstable energy market is starting to hollow out the manufacturing sector.

BlueScope's plans to develop a hydrogen hub in the Illawarra region is in part to take advantage of the NSW government's A$3bn ($2.13bn) state-funded investment plan to develop green hydrogen hubs.

BlueScope will invest A$150mn to cut greenhouse gas (GHG) emissions over the next five years. But it is also moving forward with the A$700mn-800mn reline of its blast furnace at Port Kembla, which implies a 20-year commitment to traditional steelmaking using iron ore and coking coal, albeit with some tweaks to minimise emissions.

It plans to initially replace pulverised coal injection (PCI) grade coking coal with gas from its coke ovens, which contain 60pc hydrogen. It has also teamed up with the federal government's Commonwealth Scientific and Industrial Research Organisation (CSIRO) to work on the pilot hydrogen electrolyser at Port Kembla to supplement coke oven gas.

BlueScope is also partnering with CSIRO to use charcoal produced from the pyrolysis of organic material, or biochar, as another replacement for a portion of the metallurgical coal used in the blast furnace.

BlueScope has set a goal of net-zero GHG emissions by 2050.

By Jo Clarke

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20/12/24

Viewpoint: Copper volatility, uncertainty ahead in 2025

Houston, 20 December (Argus) — US copper prices are expected to remain volatile in 2025 because of uncertain market conditions, including Chinese demand, electric vehicle (EV) rollouts and falling borrowing costs. Following a two-year downturn prompted by China's economic slowdown in the wake of the Covid-19 pandemic, the next active price on the Chicago Mercantile Exchange (CME) hit an all-time record high of $5.106/lb on 21 May 2024. Expectations of increased demand in China, the prospect of looming US interest rate cuts, and projected ramped-up demand for copper in EVs and the green energy sector fueled copper price gains into the mid-year. These expectations proved partly exaggerated, leading copper to fall back to an average of $4.33/lb over the second half of 2024. US copper market participants expect those same factors, albeit to varying degrees, to retain a prominent role in determining prices for 2025. Macroeconomic uncertainties Suppliers and consumers widely expect volatility to persist in the global copper trade as broader macroeconomic factors — chiefly Chinese demand and stimulus, US Federal Reserve interest rate decisions — and delayed US EV ramp-up plans pull the market in diverging directions. President-elect Donald Trump's pledge to implement import tariffs have further complicated the picture for US participants, with likely retaliatory tariffs clouding the picture even more. Trade disagreements and tariffs would not only raise costs but also curb demand as the flow of various goods is dented, market sources said. Meanwhile, US Federal Reserve policymakers on 18 December signaled they are likely to cut the target rate by only 50 basis points next year, paring back their expectations from a prior 100 basis points as inflation remains sticky. The DXY dollar index, which tracks the greenback against six major currencies, surged after the Fed announcement to its highest in two years. A strong dollar puts downward pressure on copper prices because it tends to weaken demand from holders of other currencies. Tariffs are also expected to spur inflation and may prompt the Fed to further slow the pace of rate cuts, or even hike rates, effectively lending support to the dollar, making it more expensive for holders of other currencies to buy into copper. The US Dollar index, DXY, surpassed 108.2 on 19 December, the highest since November 2022. Goldman Sachs has forecast that the greenback will remain strong in the near-term. Automakers slow EV transition Although the green energy transition — generally covering solar, wind, and EV markets for copper markets — is expected to contribute to US consumption of copper, automakers have signaled their interest in delaying EV deployments. Wind and solar markets are widely expected to remain growth sectors with US projects and installations scheduled to rise next year . Still, the picture for EVs, which could ultimately contribute to copper demand heavily, is murkier. EVs utilize copper in motor coils for engines, and the cabling for charging stations among other components, and each EV requires 183 lbs of copper, nearly four times more than equivalent internal combustion engine vehicles. Several automakers, including GM, Ford and Toyota, have either delayed EV plans or shifted more towards hybrids instead this year. Price outlooks diverge Market participants broadly expect the copper market to slide into a deficit by 2026, chiefly because of growing demand from the renewable sector but until then are split on the direction of prices. The CME next active month price through November averaged $4.24/lb in 2024, up from a $3.86/lb average for the same time period in 2023. Investment bank Goldman Sachs said copper prices will average $4.61/lb for 2025, forecasting upside risk from potential further stimulus while simultaneously seeing downside risk from likely US-China trade tensions. Other financial organizations have forecast copper to range from $3.97-4.99/lb in 2025. Citigroup forecast copper at $3.97/lb, Bank of America dropped its outlook to $4.28/lb while UBS was at $4.76-$4.99/lb. Most copper traders and analysts agree that 2025 will likely be a year of transition for the red metal market, buffeted by ongoing uncertainty. By Mike Hlafka Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: PGM demand from hydrogen sector to rise

20/12/24

Viewpoint: PGM demand from hydrogen sector to rise

London, 20 December (Argus) — Demand for platinum and iridium from the hydrogen industry will rise in 2025, albeit at a slower pace than anticipated because of delays to hydrogen project development. Demand from the hydrogen industry for platinum group metals (PGM) has increased significantly in recent years. The World Platinum Investment Council (WPIC) reported a 123pc increase in demand for platinum from hydrogen applications year on year on 26 November, from a small base. The WPIC anticipates a further 32pc growth in 2025. PEM electrolysers and hydrogen fuel cells both utilise platinum and iridium, opening up a new end-market for some PGMs. Demand from hydrogen applications may offset falling autocatalyst demand from the automotive industry in the long term. Hydrogen industry demand for platinum, iridium and ruthenium will also support demand for palladium, even though palladium is not utilised in hydrogen applications. As demand for platinum from the hydrogen industry increases, palladium will increasingly be substituted for platinum in internal combustion engine (ICE) vehicles, increasing automotive palladium demand and lifting PGM prices overall. More than $300bn in global hydrogen investments are earmarked through to 2030. Many governments seeking to reach their ambitious climate goals are investing in hydrogen, with 61 governments adopting hydrogen strategies as of 2024. "We know that all areas of the world will not shift to hydrogen in the same way as Europe, but we see technology advancing and costs falling, which gives us confidence that the hydrogen economy will be a big driver for platinum and iridium demand in the future," Heraeus Precious Metals Germany head of trading Dominik Sperzel told Argus . According to the WPIC, 11pc of global platinum demand will come from hydrogen application in 2030, totalling 900,000oz. By the late 2030s hydrogen energy production is expected to be the largest end-market for platinum, with 3.5mn oz of demand expected by 2040. "We have seen the hype over the past four to five years. Iridium prices started to increase in 2020 because of supply disruptions and on the demand side, people were excited about new technology announcements and projects entering the pipeline," Sperzel said. Johnson Matthey iridium prices increased by 285pc from the start of 1 June 2020 to 1 June 2021, reaching a peak of $6,300/troy ounce (toz). But they have since fallen by 29pc to $4,450/toz on 12 December as hydrogen demand failed to meet expectations. The development of the hydrogen economy has underperformed in recent years relative to expectations, and expected demand for PGMs has not yet materialised, according to PGM market participants. Many hydrogen projects remain unfinanced, and much of the hype has since abated. There are several challenges inhibiting the development of a widespread hydrogen economy, including the lack of existing infrastructure for hydrogen delivery. Another has been the availability of government subsidies, as significant funds have been earmarked for hydrogen investment but not yet disbursed. "Since 2022 to this year, subsidies available for green hydrogen projects have gone from $50bn to $300bn, but the funds haven't been flowing until early this year. It was only in June that the first of the European subsidies really began to be distributed to support the construction of these facilities. Now that subsidies are beginning to flow, development will accelerate quickly, driving consumer demand for fuel cell electric vehicles," World Platinum Investment Council research director Edward Sterck told Argus . The outlook for hydrogen as an energy source is improving, particularly in Europe and China, as a result of public sector investment and policy focus. The EU in April included over €100mn in grant funding for the construction of hydrogen refuelling stations across seven EU countries, including Poland, in a larger package of €424mn for zero-emission mobility. The EU in May 2024 adopted its hydrogen and gas decarbonisation package, which introduced a regulatory framework for dedicated hydrogen infrastructure. According to the Hydrogen Council, in July 2024 alone, six European hydrogen projects reached final investment decision (FID) status. Investment in hydrogen projects reaching FID globally has increased sevenfold since 2020 from 102 committed projects to 434 in 2024. "We remain positive about the project pipeline and PGM demand. The open question is if the push will happen in the next year, or take longer," Sperzel said. By Maeve Flaherty Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: EU at crossroad on H2 rules, competitiveness

20/12/24

Viewpoint: EU at crossroad on H2 rules, competitiveness

London, 20 December (Argus) — The new team of EU commissioners will enter 2025 bent on reversing the bloc's economic stagnation and the flight of industry to cheaper parts of the globe, which have been salient themes in 2024. Hydrogen industry participants will keenly monitor Brussels' choice of interventions, which promise to restart the sector's engine, but must avoid undermining faith in rules. Pledges from re-elected president Ursula von der Leyen to tackle overcomplexity and "structurally high energy prices" both concern hydrogen, and her notion of a pivotal moment for the EU rings true for the hydrogen market because of its connection to industry and because stubborn costs and underwhelming growth in 2024 undermined confidence. Frequent vows for urgency, simplicity and speed have worn thin, and the European Commission's latest reformist push could flatter to deceive. But multiple warning shots fired last year — including from the European Court of Auditors and respected former Italian prime minister and president of the European Central Bank Mario Draghi — pile on pressure to tweak hydrogen policy in 2025. The auditors' report urged a "reality check" and strategy review, cautioning Europe could spectacularly miss its targets, while Draghi stressed cost-efficient decarbonisation to protect European industry — a view shared by member states and energy-intensive companies. Von der Leyen's "Clean Industrial Deal", promised inside 100 days of her new term, could set the tone. But some, like chemicals firm BASF, have already voted with their feet by relocating jobs outside Europe. For hydrogen, the commission's easiest reform might be setting realistic 2030 targets to replace the 20mn t/yr renewable hydrogen supply, since industry deems it impossible and the commission's own notes predict a 3mn-6mn t/yr market. But this is hardly the most pressing change and would not help morale. A more radical move would be to somehow relax the renewable hydrogen definition, which many market participants consider overly burdensome. The bloc's biggest economy, Germany, put its weight behind changes in September, saying "reality has now shown these requirements were still too high". Berlin's volte-face could hand Brussels an easier climb down. But reopening that can of worms would dent the investment climate and distract from the low carbon hydrogen rules coming in 2025. All this makes radical change risky, but postponing certain aspects might be slightly more palatable. Brussels must also decide to maintain or soften its 2030 mandates for renewable hydrogen. Several countries and companies want openness to hydrogen from other low-carbon production pathways, which are backed in the US, Canada, the UK and others. Some have more fundamentally urged freedom to find the cheapest route towards cutting CO2. The first interpretation of the industry mandates from the Netherlands highlights the difficulty balancing mandates with fair competition versus competitors inside and outside the bloc. But loosening rules would frustrate first movers that took pains to comply. Moreover, some firms champion the EU's forte of creating demand via rules over subsidies that cannot last forever nor compete with the US. "Don't blink, because people will invest money against 2030 mandates," Spanish integrated Moeve's director and chief executive Maarten Wetselaar urged Brussels recently. EU policymakers accept they must cut hydrogen costs and are weighing options with member states. "The market has changed, and we are probably more technology neutral and more colour friendly than we used to be... this is realism," commission deputy director general for energy Mechthild Worsdorfer said in November. But Worsdorfer opposed "changing anything right now" after the "intense" debates to settle definitions. Commission and members will "find the right balance", Worsdorfer said, but hydrogen participants need clarity sooner rather than later. By Aidan Lea Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

US Congress passes waterways bill

19/12/24

US Congress passes waterways bill

Houston, 19 December (Argus) — The US Senate has passed a bipartisan waterways infrastructure bill, providing a framework for further investment in the country's waterways system. The waterways bill, also known as the Water Resources and Development Act (WRDA), was approved by the Senate in a 97-1 vote on 18 December after clearing the US House of Representatives on 10 December. The WRDA's next stop is the desk of President Joe Biden, who is expected to sign the bill. The WRDA has been passed every two years, authorizing the US Army Corps of Engineers (Corps) to undertake waterways infrastructure and navigation projects. Funding for individual projects must still be approved by Congress. Several agriculture-based groups voiced their support for the bill, saying it will improve transit for agricultural products on US waterways. The bill also shifts the funding of waterways projects to 75pc from the federal government and 25pc from the Inland Waterways Trust Fund instead of the previous 65-35pc split. "Increasing the general fund portion of the cost-share structure will promote much needed investment for inland navigation projects, as well as provide confidence to the industry that much needed maintenance and modernization of our inland waterway system will happen," Fertilizer Institute president Corey Rosenbusch said. The bill includes a provision to assist with the damaged Wilson Lock along the Tennessee River in Alabama. By Meghan Yoyotte Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Q&A: Xcelsior aims to derisk minor metals investment

19/12/24

Q&A: Xcelsior aims to derisk minor metals investment

London, 19 December (Argus) — When UK-based Xcelsior Capital started exploring the investment landscape in the mining industry it noticed a significant interest in base metals but a lack of attention toward the lesser-known minor metals. These critical materials are often opaque and complex, leaving investors uncertain about where to start. Argus spoke with chief executive Liam Farley about Xcelsior's partnership with trading firm Wogen, the opportunities and risks associated with its investments, the influence of geopolitics, and Xcelsior's recent involvement in the Hillgrove antimony mine in Australia. What is Xcelsior Capital, and what is its investment model? Xcelsior is primarily a private credit investor that focuses on providing senior secured loans and working capital facilities and prepayments. As a financing partner of a physical commodity trader, Wogen Resources, we aim to establish a long-term sales and distribution agreement or offtake as part of our transactions. We work with mining companies entering production, expanding existing mine operations, or establishing new or existing processing and recycling facilities. We built Excelsior around Wogen's 50-year heritage of being integrated into more than 30 critical metals from upstream, concentrates, intermediate products and finished metals. As a result, we have a solid grasp of the risk-reward on the market side and strong relationships with end-users. This provides a great insight to derisk some of those market and value chain challenges and now allows us to focus on identifying opportunities and the operational risk as a key component. What are the main risks of investing in critical minerals? There is a lot of appetite for financing mineral projects in well-understood markets like gold, copper or iron ore. However, there is a lack of financing and understanding when it comes to critical commodities like antimony or tungsten. Minor metals have multiple end-uses, each with its different market dynamics. You must have a very deep understanding of the commodities themselves, the pricing mechanism, and the material specifications… these supply chains can be opaque. They can be very complex and fast-changing. Being able to navigate them is quite challenging for a lot of more generalist investors. It fundamentally creates a market risk component for critical metals, which can be a barrier. Additionally, many larger mining companies have traditionally avoid these markets because the assets are smaller and may not yield the expected revenue and profits compared with larger copper or iron ore mines. Which metals are on your radar? We are looking very closely at all the major commodities where Wogen has a prominent trading platform, including antimony, tungsten, vanadium, mineral sands, chrome and magnesium. We also are very interested in cobalt, but more on the recycling and processing side. In base metals, we are looking at tin. We focus on those commodities with energy transition links to new demand centres. New demand from sources like solar in small markets can significantly impact overall percentages and returns. For instance, electrification drives substantial demand growth for larger markets like copper, but its impact is smaller than that of markets like antimony. You recently signed an antimony deal with Larvotto Resources in Australia. Could you tell us more about it? We have signed a binding agreement with Larvotto Resources, whose subsidiary owns the brownfield antimony/gold Hillgrove project in New South Wales, Australia. We provided a $4mn loan in return for a seven-year production offtake agreement with Wogen, which will obtain the antimony concentrate from the mine and sell it globally through its customer base. Antimony prices have soared this year in part because of China's export restrictions. Do geopolitics play a significant role in investment decisions? There are large opportunities arising from the dislocation of value chains caused by geopolitics. We're now seeing this almost bifurcation in any material classified as dual-use in China like gallium, germanium and now antimony. This will result in increased volatility. The challenge is that you always want to underwrite projects based on long-term fundamentals, and we still do that. But we see the geopolitical shifts as an upside where we can capture that volatility in our investment strategy rather than rely on it as the sole basis for success. As global trade become more complex, do you see a need for more collaboration across different actors in the value chain? Private-public partnerships in critical metals are an absolute must for the success of western supply chains. One of our big focuses is to work with western groups, including government agencies, to facilitate the reshoring of critical metals and to figure out ways to incentivise new processing downstream. As a standalone investment, they can be challenging. They require very niche capital with great understanding. We are also looking for long-term partnerships with end-users and OEMs to form alliances and secure the supply of materials. There is a big opportunity in this area, but it takes a partnership approach, and that's something that everyone in our industry should prioritise in the next five to 10 years. By Cristina Belda Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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