Weekly Metals News Digest (November 27– December 1)

Red metal shortage subsides

The deficit on the global copper market is beginning to gradually subside. The shortage, which stood at almost 100,000 tons in August this year, had fallen to 17,000 tons by September. The trend was identified using statistics provided by the International Copper Study Group.

Judging by this recent move, the deficit of the red metal on the world market may completely disappear in the coming months, giving way to a surplus. This is likely to pile the pressure on quotes at the London Metal Exchange, which are currently rising after the October slump that saw the price of copper reach $7,823 dollars per ton. It stands at more than $8,200 today.

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Sodium poses threat to lithium

The use of lithium ion batteries for electric vehicles and electronic devices may be reduced in the future thanks to the possibility of using sodium.

Sodium is much more abundant in nature than lithium and can be obtained from rock salt deposits, which are found in many countries around the world. In contrast, lithium is only extracted from salt lakes in Latin America and the rare mineral spodumene.

At the same time, batteries using sodium have a low energy density, which prevents them from being used in trucks, though they can be used in electric cars with a short range.

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Germany’s non-ferrous metals industry suffers from high electricity prices

Workers from the Nordenham zinc smelter held a protest in the German capital of Berlin with more than 100 people organizing a rally in front of the government building, calling for a reduction in the price of electricity consumed by industrial enterprises.

Electricity prices rose in Germany a year after it began to reject imports of coal, natural gas and oil from Russia. Since Germany’s wind and solar power plants do not fully meet demand, importing fossil fuels from other countries instead of Russia caused the cost of electricity to rise for businesses.

Since electricity prices have not significantly decreased since then, there is a real threat that Nordenham will be shut down and mothballed, with its staff laid off en masse.

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South Africa on the verge of major upheaval

A spectre is haunting South Africa – the spectre of unemployment. Massive layoffs of miners are expected in the next couple of months, with the National Union of Mineworkers estimating that about 10,000 people are in danger of losing their jobs.

The main concerns are related to platinum and palladium mining companies, including Anglo American Platinum, Wesizwe Platinum, Impala Platinum and Sibanye-Stillwater.

At the same time, the trend in prices for precious metals continues to disappoint: palladium has fallen in price by 40% and platinum by 11% since the beginning of this year. If this continues, the threat of mass layoffs will become a reality.

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London Metal Exchange wins court war

The final stage in the legal battle between the London Metal Exchange and two US financial institutions, which demanded compensation of $472 million for the cancellation of nickel transactions, has been reached. The High Court of London recognized the exchange’s actions as being completely legal.

On 8 March 2022, nickel prices at the London Metal Exchange soared 3.5 times and exceeded $100,000 per ton. Taking into account such a sharp rise in prices, the management of the London Metal Exchange decided to cancel deals involving nickel worth almost $4 billion that had been made that day.

However, hedge fund Elliott Associates and market maker Jane Street Global Trading accused London Metal Exchange of making hasty and illegal decisions. The court rejected their claims outright.

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Forecast: Possible tectonic shifts in non-ferrous metals trading

The legal proceedings around the London Metal Exchange bring to mind other scandals. For example, in the spring of 2023, a serious shortage was discovered in the exchange’s warehouse in the port of Rotterdam when, according to accounting documents, bags which should have contained nickel actually contained ordinary rocks.

As a result of this unpleasant discovery, nine warrants – warehouse certificates confirming ownership of a total of 54 tons of nickel – had to be invalidated.
The paradox of the situation is that the London Metal Exchange does not own the warehouses, instead certifying sites belonging to various traders who undertake to accept and release metals from them in accordance with its rules.

The participants of London Metal Exchange transactions are mainly banks, financial organizations, traders and, to a lesser extent, metallurgical companies. As a result, there are numerous “mind games” being played on the trades.

The abovementioned trends and the scandal unfolding around the London Metal Exchange could threaten its seemingly unshakable positions and cause tectonic shifts in global non-ferrous metals trading, leading to “sprawl” across regional centres in the form of the Chicago Mercantile Exchange and Shanghai Futures Exchange, or even the refusal of metallurgical companies to cooperate with exchange platforms. icon

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