Weekly Metals News Digest – March 4-8
Imminent Copper Shortage Alert
An imminent shortage of copper on the global market is expected within the next year, according to Mark Kay, Vice President for Markets and Economic Analysis at BHP Billiton Corporation. This anticipated scarcity raises concerns for industries reliant on this essential metal.
Key factors contributing to the potential copper shortfall include the closure of the Cobre Panama mine and revised downward production forecasts from several mining companies. These developments have expedited the expected deficit timeline, initially projected for closer to 2030.
The balance of copper's supply and demand will significantly influence the magnitude of the shortage. Factors at play include the copper price trends and the strategic choices between pursuing lower-margin projects in established mining regions versus venturing into highly profitable but riskier projects in new or developing areas.
The World Bureau of Metals Statistics has reported a tangible shortage of copper in the global market, which, by the end of 2023, reached nearly 66 thousand tons. Last year's copper production stood at 27.626 million tons, with consumption slightly outpacing this at 27.692 million tons, underscoring the tightness in the market.
Antam's Strategic Production Increase Amid Market Fluctuations
The Indonesian mining giant Aneka Tambang (Antam) has announced its ambitious plans for the forthcoming year, focusing on the extraction and processing of non-ferrous metal ores. This move comes at a time when global prices for metals like nickel and aluminum have shown volatility, making Antam's strategy particularly noteworthy.
Antam aims to boost its low-grade nickel (ferronickel) production by 5%, reaching 22,464 thousand tons, with sales projected to increase by 12% to the same figure. This modest growth underscores the company's confidence in the nickel market's resilience.
The production of nickel ore is set to see a remarkable surge of 53%, aiming for 20.58 million tons, while sales are expected to leap by 60% to 18.75 million tons.
In the realm of bauxite production, Antam projects a 72% increase to 3.47 million tons, with sales anticipated to more than double, growing by 103% to 3.05 million tons. Despite maintaining alumina production at 160 thousand tons, sales to third-party customers are expected to rise by 16% to 170 thousand tons.
Mitsubishi's Strategic Move into Canadian Lithium
Mitsubishi, the renowned Japanese corporation, is setting its sights on Canada's lithium resources by forming a joint venture with the Canadian company Frontier Lithium. This partnership aims to develop a vertically integrated complex for the extraction and processing of lithium raw materials, highlighting Mitsubishi's strategic focus on securing a stable supply of lithium for its electric vehicle (EV) and battery manufacturing operations.
The centerpiece of this collaboration is the PAK project, which envisions the establishment of both a mine and a lithium processing plant. This initiative marks a significant step towards enhancing lithium availability for Mitsubishi's expanding EV and battery production lines.
Under the agreement with Frontier Lithium, Mitsubishi will initially acquire a 7.5% stake in the PAK project for $18.4 million. This stake has the potential to increase up to 25% following the completion of a detailed feasibility study. Frontier Lithium will take the lead in managing the joint venture, ensuring the project aligns with both parties' strategic objectives.
The PAK project boasts considerable lithium reserves, estimated at 6.7 million tonnes with an average metal grade of 2.02%, and inferred resources of 2.7 million tonnes at an average lithium content of 2.29% (both measured in terms of lithium oxide).
The Tin Market in Review: 2023 and Beyond
The global tin market experienced a relatively stable year in 2023, as observed by the International Tin Research Institute. The total worldwide production of tin saw a slight decrease of 2.1%, totaling 370.1 thousand tons. This reduction was primarily attributed to a drop in the demand for the metal, which was influenced by challenging macroeconomic conditions globally. Consequently, the market ended up with a surplus of 9.7 thousand tons of tin.
In China, the impact on tin production was less pronounced compared to the global average, with a marginal decline of 1.3% bringing its output to 177 thousand tons. A notable factor in this outcome was the 15% decrease in tin concentrate exports from Myanmar to China. However, this was somewhat offset by a 5% increase in imports from other countries.
Yunnan Tin: Leading the industry, the Chinese giant Yunnan Tin managed to buck the trend by boosting its production by 3.9%, reaching 80.1 thousand tons.
Minsur: In contrast, Peru's Minsur faced a decrease in production by 3.1%, with a total output of 32.7 thousand tons.
Yunnan Chengfeng: Another Chinese company, Yunnan Chengfeng, showed notable growth by increasing its production by 5.8% to 20.6 thousand tons, positioning itself close behind Minsur.
The outlook for 2024 points towards potential challenges in the tin market, particularly with expected disruptions in supply from major producers like Indonesia and Myanmar. Such interruptions could lead to a widening shortage of tin, affecting the market dynamics further.
Potential Aluminum Trade Conflict: EU vs. USA
The European Union is currently contemplating a significant move that could reshape the aluminum market dynamics: banning aluminum imports from Russia. Annually, the EU imports around 500 thousand tons of what's colloquially known as "winged metal" from Russia, a decision now under scrutiny given the geopolitical landscape.
As the EU looks for alternative aluminum sources, the Middle East emerges as a prominent contender. Last year, countries from this region produced 6.2 million tons of aluminum, with 2 million tons finding its way to both European and American markets. This pivot hints at a strategic realignment in sourcing essential metals but introduces complexities in global trade dynamics.
The potential embargo on Russian aluminum by the EU could have significant repercussions for its economy. Given the high electricity prices, European metallurgical firms face hurdles in ramping up aluminum production. This challenge underscores a stark reality: the difficulty in swiftly addressing any potential aluminum deficit.
Similarly, the US relies heavily on aluminum imports to satisfy domestic demand, a need its non-ferrous metallurgy sector cannot fully meet. This dependency sets the stage for heightened competition for aluminum resources, particularly if the EU moves forward with its import ban.
This brewing competition for aluminum between the EU and the US may escalate into a full-fledged trade war, an outcome that underscores the strategic importance of aluminum in various sectors. Intriguingly, even the combined aluminum production capacities in the Middle East might fall short of fulfilling the cumulative demands of the EU and US markets.
Implications of a European Embargo on Russian Aluminum: A Transatlantic Ripple Effect
The European Union's consideration of an embargo on Russian aluminum imports presents a complex challenge. The EU's aluminum production falls short of meeting its consumption needs, leading to significant imports from a diverse set of countries including Russia, China, and Middle Eastern nations. A halt in imports from Russia could trigger a sharp increase in aluminum prices within the EU, adversely affecting industries reliant on this crucial metal.
The embargo's immediate consequence would likely be a surge in aluminum prices in the EU market, placing a strain on industries that depend heavily on aluminum, such as automotive, aerospace, and construction. To compensate for the loss of Russian aluminum, European enterprises might turn to suppliers in the Middle East or China, inadvertently provoking global price increases due to heightened demand.
Increasing aluminum imports from China poses economic and political challenges for the EU. Past instances of the EU imposing protective duties on Chinese foil highlight the complex trade relations between the two economies. Moreover, sourcing aluminum from China could further strain European metallurgical plants already battling high electricity costs—critical for aluminum electrolysis processes.
The embargo could have far-reaching effects beyond the immediate industries, impacting a wide array of sectors across both Europe and America. The escalated cost of aluminum might lead to decreased production in sectors like automobile manufacturing, aircraft production, and construction materials, including window and door profiles.
