Weekly Metals News Digest – August 5-9
SPIMEX Proposal for Aluminum Exchange Trading in Russia
Introduction of Exchange Trading for Rusal's Aluminum
The St. Petersburg International Mercantile Exchange (SPIMEX) has proposed launching exchange trading for primary aluminum produced by Rusal. This proposal comes in response to recent restrictions imposed by the U.S. and British authorities, which have banned Rusal from trading its aluminum at CME Group and London Metal Exchange (LME) warehouses. These restrictions have significantly narrowed Rusal's export opportunities, forcing the company to sell its aluminum at higher prices domestically than those quoted on the LME.
Potential Impact on the Russian Market
The proposal to launch exchange trading of aluminum in Russia has been discussed numerous times but has yet to materialize. If implemented, SPIMEX could attract both domestic and international consumers of aluminum, provided that its prices are lower than those on the LME. Russian consumers, including producers of aluminum rolled products and profiles, depend heavily on Rusal's sales policy, so they would benefit only if SPIMEX offers competitive pricing. Similarly, foreign buyers would consider SPIMEX as a viable option if the prices are favorable.
Concerns Over Fair Pricing
There are concerns about ensuring fair pricing on the exchange. If bidders associated with Rusal dominate the market, they might influence prices to favor the company, undermining the interests of other market participants. Ensuring transparency and fairness in pricing will be crucial to the success of SPIMEX in attracting a diverse range of participants.
Lithium Nevada Project Receives Pentagon Grant
Support for Critical Materials Production
The U.S. Department of Defense has awarded a nearly $12 million grant to Lithium Nevada Corporation for its Thacker Pass project. This funding aligns with the National Defense Industrial Strategy's goal of expanding domestic production of critical materials. The Thacker Pass project aims to mine lithium feedstock and produce lithium carbonate from a unique deposit located in the extinct McDermitt volcano in Nevada.
Strategic Importance of Thacker Pass
Geologists have identified high concentrations of lithium in clay deposits within the McDermitt volcano crater, with inferred resources estimated at 18.3 million tons, making it the world's third-largest deposit of its kind. Once operational, the project is expected to produce 40,000 tons of lithium annually, with plans to double this output in the future.
Meeting U.S. Industry Demand
The U.S. industry, particularly the defense sector, has a strong demand for high-capacity lithium batteries. The government's support for lithium extraction and processing aligns with its strategy to secure essential raw materials for battery production, reducing reliance on foreign imports and enhancing national security.
Glencore Halts Cobalt Stockpiling
Shift in Cobalt Market Strategy
International mining giant Glencore has stopped stockpiling cobalt, a strategy it had employed since August last year to support cobalt prices. Glencore had voluntarily restricted cobalt supply to the global market, although it has not disclosed the size of its accumulated stockpile.
Oversupply and Market Outlook
Currently, there is a surplus of cobalt in the global market, a trend expected to continue for the next 18-20 years due to increased production, primarily from the Democratic Republic of Congo (DRC). In 2023, the DRC accounted for 77% of global cobalt output.
Price and Demand Dynamics
According to Macquarie estimates, the cobalt surplus could reach approximately 28,000 tons this year and 24,000 tons next year. The transition of electric vehicle (EV) production to batteries that do not require cobalt is likely to reduce demand for the metal, preventing prices from returning to the highs of 2018 and 2022.
Lithium Producers Reassess Projects Amid Price Decline
Industry-Wide Revisions
The global lithium industry is experiencing a downturn, prompting mining companies to revise investment plans due to unfavorable price dynamics. For example, Australian company Arcadium Lithium announced a revision of development plans for its Mount Cattlin mine, a key supplier of spodumene concentrate to the global market.
Impact on Major Producers
This move follows Albemarle's decision to cut jobs at its lithium hydroxide plant and abandon its capacity expansion program. The current market situation does not indicate any price recovery, with spodumene concentrate prices in China at $940 per ton, the lowest level in three years.
Future Price Projections
Analysts at Goldman Sachs predict that spodumene concentrate prices could fall to $800 per ton by 2025. This price decline reflects the challenging conditions faced by lithium producers, necessitating a reassessment of project parameters and timelines.
Aluminium Bahrain and Daiki Aluminium's Slag Recycling Initiative
Recycling of Aluminum Slag
Aluminium Bahrain, one of the world's largest primary aluminum producers, has partnered with Japanese company Daiki Aluminium to establish a facility for recycling waste from aluminum electrolysis. The collaboration aims to recycle aluminum slag, which contains 60-80% aluminum and offers a potential source for the aluminum industry.
Potential Applications and Benefits
Recycling aluminum slag can reduce the use of natural raw materials (bauxite) and support sustainable production practices. Known technologies for utilizing aluminum slags enable their use as raw materials in construction, metallurgy, and chemical industries, providing various environmental and economic benefits.
Daiki Aluminium's Innovative Technology
Daiki Aluminium has developed a technology with a high degree of aluminum recovery, which Aluminium Bahrain plans to utilize. This technology is essential for efficiently extracting aluminum from slag, supporting the company's efforts to reduce waste and enhance sustainability.
Forecast: Market Dynamics in the Lithium Industry
Shifts in the Global Market
The global lithium market has been experiencing a downturn since 2022, following a period of record-high prices driven by China's booming electric vehicle production. However, the withdrawal of government subsidies in China led to rising EV costs and a decline in sales both domestically and internationally.
Impact on EV and Hybrid Car Sales
In recent years, the production and sales of electric vehicles have slowed, with 4.4 million EVs sold in the fourth quarter of 2023 and 3.2 million in the first quarter of 2024. The rise in hybrid car sales has further influenced market dynamics, as consumers continue to favor vehicles with both electric and internal combustion engines.
Industry Restructuring and Future Outlook
The decline in EV production and sales has contributed to a collapse in lithium prices, impacting the profitability of many mining companies. As a result, the industry is undergoing a restructuring process, shedding companies that entered the market seeking quick profits. The market is expected to stabilize with the remaining low-cost producers, ensuring a more sustainable and competitive landscape in the long term.
