China’s steel industry facing increasing environmental constraints

Abhi — Mon, 8 Nov 2021 04:27:15 +0000

Many areas, industries (including the China steel sector) and, indeed, societies are under threat from pollution.

In many emerging markets, economic growth has come at the stark price of appalling levels of pollution.

But the Financial Times suggested that in China , home of the largest steel and aluminum industries in the world by far, steel output is under threat from Beijing’s “war on pollution.”

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China steel and the ‘war on pollution’

During the winter season in recent years, power production that runs on coal and polluting industries such as steel and cement, many of which are not only large emitters themselves but also draw electricity from polluting sources of power generation, have been closed in phased programs to reduce air pollution.

But this is much more than those short-term remedies to peak smog levels.

The Financial Times suggests Beijing’s new Five Year Plan focuses on pollution. The plan will require legislation that will result in an unavoidable decline in steel output.

Apparently, local governments have already begun to impose curbs.

Seven blast furnaces are under pressure to shut by next week in the city of Tangshan. The news raises fears that reduced output will result in higher steel prices. In turn, it will increasingly drive Chinese producers further up the value chain.

As a result, they would venture into technically more sophisticated product areas to which Western producers had retreated in the face of relentless competition from China at the commodity end of the market.

A boon for Chinese mills

The China steel sector’s success in these moves and prospects for higher prices have already led to Chinese steel mills’ share prices rising.

Those larger mills will likely to be able to respond to tightening environmental controls and will ultimately be benefactors from this process.

That will happen as they find ways to reduce their carbon footprint. Some might invest in more scrap-based, electric arc furnace (EAF) steel production associated with renewable energy power sources. Mills could also switch blast furnaces to direct reduced iron (DRI) and possibly even hydrogen-based heating (rather than carbon-intensive coke).

In the short term, buoyed by better margins, the China steel sector will likely cope by using higher 67% purity iron ore.

This would further extend a trend that has been developing for some years. In short, low-grade iron ore continues to trade at a widening discount to the highest grades.

Copper MMI: Traders take profits after copper price surges to 10-year high

Abhi — Mon, 8 Nov 2021 04:21:50 +0000

The Copper Monthly Metals Index (MMI) picked up by 12.6% for this month’s reading, as the copper price surged to a 10-year high last month.

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Copper price rise

The copper price picked back up in February after China’s Lunar New Year celebration (a traditionally slower time of year for economic activity in the country).

The LME three-month price surged to $9,563 per metric ton, reaching an approximately 10-year high.

Since then, however, the price has pulled back. The three-month price closed Thursday at $9,048 per metric ton.

“This is a classic overbought market in which traders sought to take some profits,” MetalMiner CEO Lisa Reisman explains. “With the exception of tin, all of the non-ferrous metals traded down. And though nickel looks weaker (as does lead), most of the non-ferrous metals remain in their uptrend, as does the ferrous metals complex.”

Earlier today, MetalMiner’s Stuart Burns touched on the trajectory of oil prices. As readers of our Annual Outlook — for which we released our March update earlier this week — know, oil prices are a key economic factor MetalMiner considers when analyzing commodities markets.

“Copper has taken much of its cue from oil prices, which remain at or around $65/barrel along with strong demand buoyed by the stimulus package just passed in the US House of Representatives,” Reisman adds. “Moreover, copper has very strong fundamentals — strong demand and not as much supply — which forms the basis of the copper narrative.”

Copper mine production slips 0.2%, supporting copper price

Last month, the International Copper Study Group reported global copper mine production fell by 0.2% through the first 11 months of 2020.

Concentrate production rose by 0.4%, while solvent extraction-electrowinning dropped by 2.2%.

Chile, the top copper producer, saw its output relatively unchanged from the previous year.

Peru, meanwhile, the No. 2 copper producer, saw significant impacts from the COVID-19 pandemic earlier in the year. Peruvian copper mine production dropped by 13.5% during the first 11 months of the year.

Refined copper production, however, rose by 1.8% during the aforementioned period.

As the rest of the world ramps up its economic recovery, demand for copper will only increase (as its strength over the last year is in large part derived from China’s economic recovery).

According to consulting company GlobalData, however, copper mine production will likely bounce back this year. In turn, this could depress the copper price.

GlobalData forecast copper production to rise by 5.6% in 2021, in part due to growth in Chile, Peru, Australia, Indonesia and the US.

In Peru, the pandemic disrupted activity at the Antamina mine, which sat in active during April and May. Production at Antamina fell 23.6% year over year during the first nine months of 2020, GlobalData reported . Meanwhile, Freeport-McMoRan idled the Cerro Verde mine for nearly three weeks between March and April.

Glencore copper output flat; BHP forecasts tight market

Meanwhile, miner Glencore reported its 2020 copper output would have been flat when excluding its Mutanda operation, which it placed on care and maintenance.

In total, however, Glencore’s copper output reached 1,258.1 kt, or down 8% year over year.

“Own sourced copper production of 1,258,100 tonnes was 113,100 tonnes (8%) lower than 2019, mainly reflecting Mutanda being on care and maintenance in 2020 (partly offset by Katanga’s successful ramp-up), with Covid-19 related suspensions being a much smaller factor,” Glencore said.

Elsewhere, miner BHP last month released its fiscal year 2020 economic and commodity outlook. The miner expects the demand-supply balance for copper to remain “relatively tight.”

“The storyline for copper in the first half of calendar 2020 was a balanced blend of industry specific fundamental factors and swings in broader macro sentiment,” BHP’s outlook notes. “The second half was less balanced, with specific fundamental factors taking a relative back seat to general macroeconomic tailwinds.

“Copper demand trends in China (roughly half of refined demand) have been starkly different to the rest of the world. Chinese semis demand was flat in calendar 2020, while ex–China markets declined by –9 per cent.”

Actual metals prices and trends

China copper scrap fell 0.6% month over month to $5,929 per metric ton as of March 1. China primary cash copper rose by 16.1% to $10,466 per metric ton.

The LME three-month copper price surged by 15.8% to $9,121.

Copper producer grades 110 and 122 rose by 12.1% to $4.92 per pound. Grade 102 rose by 11.5% to $5.14 per pound.

CX Insider