China virus outbreak weighs on iron ore prices

: Metals
20/01/23

The iron ore price outlook has weakened ahead of a major Chinese holiday on fears that a coronavirus strain outbreak could delay the spring restart of construction projects.

In Asia afternoon trade, SGX prompt-month 62pc Fe fines futures fell by $3.70/t to $90.65/t, its lowest level this year. The Dalian Commodity Exchange (DCE) May 62pc iron ore futures fell by 2.3pc to 649.5 yuan/t ($93.70/t).

Chinese authorities have banned travel from the city of Wuhan, the epicentre of the outbreak, in attempt to slow the spread of the disease just as millions start to travel for the 24-30 January lunar new year holiday.

The Argus ICX 62pc index has remained above the $90/dry metric tonne (dmt) cfr Qingdao level since early December. This was because of rains that curbed supply from Brazil and Australia, and Beijing stimulus shoring up construction demand. Traders stocked up on seaborne cargoes ahead of the holiday on expectations of stronger demand into March, but the Wuhan threat has them rethinking such an outlook. The outbreak could delay the return of workers to construction sites, delaying iron ore and steel demand, so traders are taking out short positions to hedge the physical positions, said an iron ore trader based in Singapore.

"There are traders who stocked up on a lot of cargoes earlier, now hurrying to hedge by shorting on SGX or DCE. They expect the Wuhan virus outbreak could last for a few months if it is like the Sars in 2003," the trader said.

The virus could reduce consumption of consumer goods, which will reduce demand for flat steel used in manufacturing autos and appliances. China produced nearly 1bn t of steel in 2019, with 2019 consumption estimated at 875mn t. Autos and appliances accounted for 66mn t of consumption.

China-based steel traders have mostly left the market, travelling for the holiday. They said they are not focused on the market but are trying to stay safe from the virus. The virus will, of course, affect the spring drawdown of steel inventories, they said.

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24/11/27

US import tariffs would lift steel, scrap costs

Pittsburgh, 27 November (Argus) — President-elect Donald Trump's plans to introduce a 25pc tariff on all imports from Mexico and Canada could increase costs for US steelmakers and manufacturers, but so far lacks clarity on its application around existing steel tariffs and trade agreements. Trump pledged on social media earlier this week to use an executive order to implement a widespread tariff on imports from both countries on 20 January, along with an additional 10pc tariff on all imports from China. The import tax on Canada and Mexico could have sweeping ramifications on the steel and manufacturing industries across the three North American countries. The additional import tax on China, which could lift current tariffs to as high as 60pc for all steel imports, would likely have minimal effects on US steel and scrap markets because of already-low import volumes from the nation. Despite the potential havoc the tariffs could have on supply chains, many market participants are waiting to react until more details about the plan are formalized. Some market participants expect that the list will be refined, and others view the pledge as a negotiating strategy for broader trade agreements, but some US scrap importers are beginning to lightly sketch out what the tariff would mean for sourcing raw materials. Lacking clarity Trump's announcement did not specify how the proposed import tax would interact with the existing Section 232 tariffs on steel and aluminum, which were imposed by his first administration in 2018 under national security concerns. Canada, Mexico and a few other key countries have remained exempt from the Section 232 tariffs, while other countries have seen tariffs removed and a non-tariffed quota system imposed. Similarly, if the US implemented tariffs on imports from Canada and Mexico it would be in violation of the US-Mexico-Canada Agreement (USMCA) that was also put in place by Trump's first administration in 2020. The proposed tariffs would equate to $2.1bn in additional costs for volumes of steel products imported this year, based on the latest preliminary data from the US Department of Commerce, and analysis of Canada and Mexico volumes. Canada and Mexico have exported 6.87mn metric tonnes (t) of steel products for consumption to the US with a value of $8.25bn year to date October, down from the 7.8mn t of products with a $9.65bn value imported the same period a year earlier, according to the latest available preliminary data from the US Department of Commerce. Scrap impact The import tax could have a significant impact on some US steelmakers' raw material pricing and sourcing strategies because Canada and Mexico are the two largest shippers of ferrous scrap into the country. The US has imported about 5mn t/yr of ferrous scrap over the last three years and ferrous scrap import volumes year to date September have so far totaled 3.5mn t, down 8pc from the same period last year. Canada has shipped 75pc of all ferrous scrap exports into the US, including stainless scrap and alloy scrap, over the last 10 years, while Mexico has shipped 12pc of the total over the same period. US steelmakers in the upper Midwest and Detroit region would be particularly impacted by the import tax because of the volume of prime and shred sourced from Canada. The US has imported a monthly average of 60,000t of #1 bundles and 44,000t of shred from the country since 2013. One US steelmaker said prime grades could see the greatest disruption because they are traded through longer-term, index-based contracts which might not have provisions regarding boarder tax changes because of assurances under the USMCA. Some Canadian traders said that if the tariff went into effect, the costs would be passed through to US steelmakers which would likely prompt them to cut back on volumes. This would increase regional demand for scrap in the US and could support a shift in flows from the east coast inland. Meanwhile, the timing of the US domestic ferrous scrap trade and the potential implementation of the import tax could also create challenges for some mills in January. One US steelmaker said that it would initially try to split the costs with Canadian dealers in January but work to establish a more formal agreement for the remainder of 2025 if the tariff were implemented. By Brad MacAulay and Rye Druzchetta Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

US cobalt supply set to tighten under Trump tariffs

24/11/27

US cobalt supply set to tighten under Trump tariffs

London, 27 November (Argus) — US president-elect Donald Trump's plan to impose new tariffs against China, Mexico and Canada appears set to tighten cobalt metal supplies in the US, as one of the three western brands accepted for most aerospace uses will likely be affected. Trump on the evening of 25 November wrote on his Truth Social platform that he would impose a new 10pc tariff on Chinese goods in addition to a pre-existing 25pc duty on Chinese cobalt, and 25pc duties on Canadian and Mexican goods entering the US. While the impact of the tariff on Chinese metal entering the US would be largely "irrelevant", according to trading firms, the tariff on Canadian cobalt metal could tighten its supply to the US' aerospace market. Brazilian mining group Vale produces cobalt and nickel at its operations in Port Colborne and Long Harbour in Canada's Ontario province. Vale produced 2,300t of cobalt metal last year. The other two large western suppliers of cobalt metal, Sumitomo Metal Mining (SMM) in Japan and Glencore's Nikkelverk in Norway, produced 3,800t and 3,500t, respectively, comprising a combined western total of 9,600t. "If Canadian (cobalt) now clocks a 25pc duty, that makes SMM and Nikkelverk much more valuable," a trading firm said, adding that some suppliers may have negotiated a tariff clause in contracts this year to avoid any potential impact from the US election. Annual contract negotiations for cobalt have extended longer this year because of uncertainty stemming from the US election in early November. "[Sellers will] have an issue on their long-term contracts if they don't include a tariff clause," a market participant said. Indonesian supply to increase A potential source of cobalt metal that could fill the gap left by the potential absence of Canadian material is Indonesia, which until now has avoided Trump's attention. "The 25pc duty on Canadian imports will impact Vale, basically puts them in a similar status as Chinese, so [we] could see a dramatic drop in imports," a trading firm said. "Normally, this would tighten the market further, but I think this will be easily compensated by the influx of Indonesian metal that will hit the US market." Many ASEAN countries, including Indonesia, have a delicate balancing act to play with Trump. They must navigate between maintaining their relationship with their largest trading partner — in most cases China — and benefiting from US-based global corporations' moves to diversify supply chains away from China. Nowhere is Indonesia's unsteady equilibrium clearer than in the battery market, where several nickel projects, a few which also produce cobalt, are in development thanks to investments from both Chinese and western companies. Some of this cobalt is heading to the US, and several trading companies are confirmed by Argus to have Indonesian material on the water. The new supplies, produced by PT Lygend in Indonesia, are shipped to a warehouse in Ningbo, China, then packaged and sent onwards to the US. Across August and September, Indonesia exported 180t of cobalt metal to China, much of which was shipped to the US. Cut cathodes and that with quality similar to Chinese brands recently have sold on the international market at either side of $10/lb. Similar prices could see Indonesian cobalt compete with existing brands in the US, but it will take "up to two years" to become qualified for use in aerospace applications, a trading source said. Indonesia's trade with the US last year amounted to $23bn, making it the country's second-largest trading partner after China at $65bn. Indonesia's trade with China has grown at a compound annual growth rate of 20pc over the past 10 years, while trade with the US grew at 4.59pc. Indonesia's combined trade with the rest of the world climbed by 7pc over the same period, data show. US investments in Indonesia totalled $67bn from 2014-23, according to a report by the US Chamber of Commerce. "Jakarta's view will continue to be how to extract the most out of both powers and engage more partners for Indonesia's own interest," said research group ASEAN Wonk Global chief executive and founder Prashanth Parameswaran in a recent report for US congressional think-tank the Wilson Center. Trump has clearly indicated a desire to impose tariffs on imports from much of the world, hoping to isolate countries and renegotiate trade deals on terms that are favourable to the US. There is a risk that Indonesia may end up on this list, as fellow ASEAN country Vietnam discovered in 2019, when Trump labelled it the "worst abuser" of US trade policy. But at this point, there is no clear indication either way, and cobalt trading companies are looking to use this opportunity while it lasts. By Thomas Kavanagh Indonesian foreign trade Cobalt metal suppliers t Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Australia's BOM forecasts severe cyclone season

24/11/27

Australia's BOM forecasts severe cyclone season

Sydney, 27 November (Argus) — Australia's Bureau of Meteorology (BOM) expects the country to experience 11 tropical storms over the next few months, threatening the country's mineral-rich Pilbara region and coal infrastructure in Queensland. The number of storms is in line with historical averages, but BOM warns that rising ocean temperatures could increase their severity. The state weather agency believes that four of these storms will make landfall from late December, and that a La Nina event could start later this year, although it may not last very long. La Nina events are associated with high levels of cyclonic activity. BOM's forecasts suggest that five of the storms are likely to form around Western Australia's mineral-rich Pilbara region, which houses more than 40 operating iron ore mines and two lithium mines. Over the last three months, sea surface temperatures around Pilbara have exceeded historical averages by 1.2–2°C, warming more than in any of the country's other cyclone-prone regions. On the other side of the country, four tropical storms could form around Queensland's cattle and coking coal producing regions, although these are likely to be less severe than the Pilbara storms. Temperatures across most of Queensland are forecast to exceed historical averages by 0.4–1.2°C in October-December. Cyclonic weather in Pilbara could disrupt iron shipping and mining activity in the region. Australia's three largest iron export ports sit along the region's coast. In 2019, Cyclone Veronica forced the closure of Pilbara's three major ports and multiple mines operated by mining company Rio Tinto, prompting the firm to cut its production forecasts for the year. Harsh storms in Queensland have previously damaged vital coal transport links in the state, hampering exports. In 2017, Cyclone Debbie damaged rail lines linking coal mines to the ports of Gladstone, Hay Point, Dalrymple Bay, and Abbott Point, which handle most of the state's coking coal exports. More recently, severe weather also halted deliveries to Mackay port . Queensland and Pilbara are also home to major LNG terminals at Dampier and Gladstone ports that sit within cyclone-prone zones. The two terminals together export over 3mn t/month of LNG . By Avinash Govind Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Q&A: Boston Metal Brazil’s sales to start in early 2025

24/11/26

Q&A: Boston Metal Brazil’s sales to start in early 2025

Sao Paulo, 26 November (Argus) — Metals technology company Boston Metal expects to start commercialisation in Brazil in early 2025. The company, which has developed molten oxide electrolysis (MOE) technology to improve metals extractions, initially will focus on extracting so-called "high-value" metals from tin slags at its plant in Minas Gerais state. The move is part of the company's effort to offer greener metals to the market and comes at the time when the company is developing MOE technology in the US to produce green steel. Metals reporter Carolina Pulice talked with Boston Metal's Brazil commercial director Gustavo Macedo about MOE technology and the company's plans for the future. The interview has been translated from Portuguese. Can you explain what MOE technology is? MOE technology was developed at the Massachusetts Institute of Technology in the 1980s. It uses the electrolysis process on metals, a process that has been known for a long time. What is different about MOE is that its platform can be used to separate an infinite number of metals. Our company started to use MOE technology in iron ore to make it greener. After it has gone through the electrolysis process, iron is practically pure and releases only oxygen and then [you have] green steel. The great advantage of this process on iron ore is that you can use the metal with any grade, different from the hydrogen route that demands high contents of iron ore. And what will the operation in Brazil be like? Our focus in Brazil is to extract three metals from local tin slags — tantalum, niobium and tin — from our plant in Minas Gerais state. It is a rich region and has plenty of cassiterite, with a lot of mining waste available. At our new plant in Minas Gerais, we will start producing ferro-tin and a ferro-tantalum niobium alloy. We are already operating our pilot and demonstration plants. We plan the first commercialisation at the beginning of 2025. Our main market is likely to be China, where we will export our material to be used in the electronics industry. The move comes at a time when more consumers are demanding greener supply chains. And this is an advantage for us because Minas Gerais state can already secure 100pc renewable electric energy. The global tantalum chain is very complex because more than half of this metal comes from conflict regions in Africa. Can you tell us a bit more about Boston Metal's operations in the US? Our goal there is to develop MOE technology for the production of green steel. Steelmakers would add this process to their operations by replacing their blast furnaces with MOE technology, allowing them to produce pure iron by utilising electricity instead of coking coal. Our headquarters in the US is already at the stage where they are building our first demonstration plant. MOE technology at present demands 4MWh of energy per tonne of steel. Electric arc furnaces that process scrap currently have consumption of 0.5-0.8MWh/t. By Carolina Pulice Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

US’ Peabody to buy Anglo’s Australian met coal assets

24/11/25

US’ Peabody to buy Anglo’s Australian met coal assets

Singapore, 25 November (Argus) — US coal producer Peabody Energy has agreed to acquire the bulk of coking coal assets that UK-South African mining firm Anglo American is seeking to divest as it exits the coal sector. Peabody plans to buy Anglo's majority stakes, at up to $3.8bn, in four metallurgical coal mines — Moranbah North, Grosvenor, Aquila and Capcoal — located in Australia's Bowen Basin, with the transaction expected to close by mid-2025 and subject to customary closing conditions, the producer said in a statement. With the acquisition of coal mines, Peabody's combined US-Australia production will rise from 10.6mn short tons/yr at present, to an estimate of 11.3mn st/yr (10.25mn t) by 2026, according to Peabody, strengthening the producer's position in the premium hard coking coal (PHCC) market. Moranbah North, Grosvenor and Aquila are PHCC mines, while Capcoal produces a combination of PHCC, pulverised coal injection (PCI) and other coal grades. At present, Australian low volatile hard coking coal, or tier-2 coking coal, accounts for 55pc of Peabody's 7.4mn st in coking coal sales, but the acquisition of new assets will bring PHCC's share up to 51pc and reduce its tier 2 coal to 24pc. Peabody also produces high volatile A coal in the US, accounting for 12pc of sales this year. In addition to the sale of assets to Peabody, Anglo has agreed to sell the Dawson mine in Central Queensland to Indonesian mining company PT Bukit Makmur Mandiri Utama (BUMA) for $455mn. Earlier this month, Anglo agreed the sale of its 33pc share of the Jellinbah Group coking coal joint venture to partner Australia-based Zashvin at $A1.6bn ($1.04bn). In May, Anglo announced plans to exit its coal, platinum, nickel and diamond businesses shortly after rejecting repeated takeover bids from Australian resources firm BHP. These deals come against a backdrop of a challenging price environment for steel making and subsequent weakness in coking coal prices, implying tight margins for coal producers. After reaching a high of $336.50/t fob Australia, the premium low volatile coking coal fell steadily throughout this year to reach $176.50/t in September, before recovering to remain in the $201-208/t range for most of November. In addition to a less than friendly investment climate for coal projects, Australia's Queensland state and New South Wales (NSW) state governments increased royalties on coal sales in 2023 and 2024 respectively, putting further strain on Australian miners already facing inflationary pressure from wages, equipment and fuel costs. Lower coking coal prices this year have translated to reduced royalty payments, but have yet to stem the tide of consolidations and asset sales as mining companies exit the sector. In August, Australia-based diversified metals producer South32 completed the sale of its Illawarra coking coal operations in NSW to an entity owned by Singapore-based Golden Energy and Resources (Gear) and Australia's M Resources for $1.65bn. In the US, rising mining costs and weak seaborne prices for most of this year led to the closure of smaller high-cost operations and mergers such as that of Arch Resources and Consol Energy to form Core Natural Resources , expected to close by the first quarter of 2025. In July, trading firm Glencore completed its acquisition of a majority stake in Elk Valley Resources, the coking coal division of Canadian mining firm Teck Resources, growing the former's thermal and coking coal production to 130mn t/yr. By Siew Hua Seah Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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