April Newsletter – 03.04.2023

  • Chinese lithium producers set price floor as demand evaporates, sources say
  • ERG commissions water reticulation system in the DRC
  • UN to start taking deep-sea mining applications this July
  • Saudi awards 2230 mining permits
  • Saudi Arabia Allocates Sand, Landfill Site for Mining Activities
  • China’s strong demand for commodities to exceed post-2008 crisis, mining giant says
  • LME launches sweeping plan to revive nickel contract
  • OPEC+ makes shock million-barrel cut in new inflation risk

Chinese lithium producers set price floor as demand evaporates, sources say

BEIJING, March 31 (Reuters) – China’s top lithium producers agreed this week to set a floor price of 250,000 yuan ($36,380) per tonne of lithium carbonate, six people familiar with the matter said, in an effort to slow a plunge in the price of the battery raw material.

The price was agreed on Tuesday by around 10 companies including Tianqi Lithium (002466.SZ) and Ganfeng Lithium (002460.SZ) that met on the sidelines of a conference in Nanchang in southern China, said one person who attended the meeting and five others briefed on the discussions.

The people declined to be named because of the sensitivity of the topic, which was discussed in a closed-door meeting.

Ganfeng said in a response to Reuters that no discussions on a floor price had taken place.

“Ganfeng always insists that product prices should be determined by the market, and will never take the initiative to control prices to influence the market,” a company representative said in an email.


ERG commissions water reticulation system in the DRC

As the global community celebrates World Water Day, Eurasian Resources Group has commissioned the Amenshi E Bumi meaning (Water is life in Bemba) water reticulation system in Sakania, DRC.

The commissioning of the Amenshi E Bumi water reticulation was celebrated in a ceremony attended by his Excellency the Governor of the Province of Haut-Katanga, Jacques Kyabula Katwe, various provincial ministers, local representatives, community groups and Frontier mine management in December 2022.

Frontier mine initiated the project in 2020 to address the water supply issue that had arisen due to the population of Sakania surpassing the original town water supply capacity. The Amenshi E Bumi water reticulation project kicked off with short-and medium-term solutions including the repair of water pumps, drilling of additional wells, rehabilitation of boreholes in the Sakania vicinity and the installation of solar pumps to deliver water to the community in the interim.

During the commissioning ceremony, Xavier Thérin, General Manager at Frontier mine, said: “We take great pride in this project for its contribution to the sustainable development and welfare of our communities.

“The residents of Sakania now have a constant supply of water, and with the reticulation system’s many access points, no one in the community needs to venture further than 250 metres to gain access to clean water.”


UN to start taking deep-sea mining applications this July

The International Seabed Authority will start accepting applications in July from companies that want to mine the ocean’s floor, a decision that came after the UN body spent the past two weeks debating standards for the new and controversial practice.

Deep-sea mining would extract cobalt, copper, nickel, and manganese – key battery materials – from potato-sized rocks called “polymetallic nodules” on the ocean’s floor at depths of 4 to 6 km (2.5 to 4 miles). They are abundant in the Clarion-Clipperton Zone (CCZ) in the North Pacific Ocean between Hawaii and Mexico.

The ISA’s governing council formulated a draft decision on Thursday after meeting in Jamaica that allows companies to file permit applications starting on July 9, a deadline set in motion by actions the island nation of Nauru took in 2021, according to a copy seen by Reuters.

The ISA’s staff would then have three business days to inform the council. The council plans to meet virtually before July to debate further whether approval of such applications could be delayed once received, according to the document.

“This deeply irresponsible outcome is a wasted opportunity to send a clear signal … that the era of ocean destruction is over”, said Louisa Casson of Greenpeace, which opposes the practice due in part to concerns it could harm whales and other wildlife.

The Metals Co, which has a deal to supply metals to Glencore Plc, is one of the most prominent voices advocating for the practice. Its executives have repeatedly said they believe deep-sea mining would have less impact than traditional mining for battery metals on land.


Saudi awards 2230 mining permits

Saudi Arabia has awarded 2,230 permits for stone and metal mining as part of its drive to expand the non-oil industrial base, according to official data.

A report released on Sunday by the Industry and Mineral Resources Ministry showed the world’s largest oil exporter awarded 178 permits for the exploitation of minerals.

Most of those permits were issued after the Kingdom began enforcing a new law to attract local and foreign capital into its massive metal industry, which is official estimated at nearly 5 trillion Saudi riyals ($1.33 trillion).

The report showed Riyadh also issued 42 new permits for exploration of metals, mainly gold, zinc, copper, silver and other metals.

The other permits covered mines for the production stone and other substances used in the manufacture of building materials, according to the report.

It did not mention their value but said investment in industrial permits in the largest Arab economy totalled 1.4 trillion riyals ($373 billion) at the end of January.


Saudi Arabia Allocates Sand, Landfill Site for Mining Activities

The Saudi Ministry of Industry and Mineral Resources said on Thursday it will allocate the sand and landfill site in the Khulais Governorate, west of the Kingdom, which extends over an area of 39.6 square kilometers, for a mining complex.

Deputy Minister of Industry and Mineral Resources visits a national ceramic manufacturing factory in Saudi Arabia on Thursday. (Asharq Al-Awsat)

The ministry is working to develop the areas adjacent to the mining sites by providing residents with job opportunities, raising the proportion of purchases from the local markets, and developing plans for effective communication, in addition to adhering to the environmental requirements necessary to preserve the wellbeing of communities.

Jarrah Al-Jarrah, the official spokesperson at the Ministry of Industry and Mineral Resources, explained that the recent decision would contribute to preserving the mining sites and protecting them from transgressions.

Meanwhile, the Ministry of Industry and Mineral Resources, in cooperation with the Custodian of the Two Holy Mosques Scholarship Program, launched the Promising Path – a program that aims to train, empower and qualify national cadres to meet the requirements of the Saudi labor market and raise the efficiency of human capital in industry and mining.

The program focuses on providing training that supports private sector institutions in promising activities, and contributes to matching the requirements of the industrial and mining market with the qualifications and skills of national cadres.


China’s strong demand for commodities to exceed post-2008 crisis, mining giant says

BO’AO, China — China’s post-pandemic reopening will boost demand for commodities more significantly than it did when the country emerged from the 2008 financial crisis, according to Andrew Forrest, executive chairman of Fortescue.

The Australian iron ore giant began business in China with a 180,000-metric ton shipment of iron ore in 2008, according to the company’s website.

At that time, China managed to avoid a prolonged recession with a massive stimulus program that supported infrastructure development — which drove up demand for commodities.

“It’s like that, but this time it’s only going to be bigger in volume,” Forrest told CNBC on Wednesday, when asked how China’s post-Covid demand might compare.

“Probably around the same or a little less in percentage,” he said on the sidelines of the Boao Forum for Asia. Government leaders and business executives are at the high-profile conference held annually in Hainan province and sometimes likened to the Asian version of the World Economic Forum’s annual event in Davos, Switzerland.


LME launches sweeping plan to revive nickel contract

The London Metal Exchange (LME) on Thursday launched sweeping measures to revive its flagging nickel contract, including plans to cut waiting times and scrap fees for new brands of nickel that can be delivered against its contract.

The world’s largest and oldest metals trading venue, owned by Hong Kong Exchanges and Clearing (HKEx), announced a long list of measures that include moves to address low inventory levels and boost liquidity in electronic trading.

The 146-year-old LME plans to work with China’s Qianhai Mercantile Exchange (QME), also owned by HKEx, to launch trading in lower nickel grades – such as nickel matte – that make up a growing portion of global output.

A disconnect between the LME high-grade nickel and surging production of low-grade nickel was a key driver of the chaotic price action on March 8, 2022, which forced the LME to annul nickel trades and suspend trading for the first time since 1988.

The exchange plans to make permanent the daily price limits imposed on all metals after last year’s nickel swings, though it will tighten the caps on main metals copper and aluminum to 12% from 15%.

The LME “action plan” came in response to January’s report by management consultants Oliver Wyman, which advised the LME on how to prevent market distortions and improve risk monitoring.


OPEC+ makes shock million-barrel cut in new inflation risk

Saudi Energy Minister Prince Abdulaziz bin Salman.

OPEC+ announced a surprise oil production cut of more than 1 million barrels a day, abandoning previous assurances that it would hold supply steady and posing a new risk for the global economy.

It’s a significant reduction for a market where — despite the recent price fluctuations — supply was looking tight for the latter part of the year. Oil futures soared as much as 8% at the open on Monday, adding to inflationary pressures across the world that may force central banks to keep interest rates higher for longer and crimp economic growth.

Saudi Arabia led the cartel by pledging its own 500,000 barrel-a-day supply reduction. Fellow members including Kuwait, the United Arab Emirates and Algeria followed suit, while Russia said the production cut it was implementing from March to June would continue until the end of the 2023.

“OPEC+ clearly want a higher price,” said Gary Ross, a veteran oil consultant turned hedge fund manager at Black Gold Investors LLC. The group “is following through on being proactive and ahead of the curve, and is trying to rip oil prices from the grip of” macro sentiment.

The surprise move could once again flare tensions between the US and Saudi Arabia, a regional partner whose relationship with President Joe Biden’s administration has been tense. The White House said that the new cuts were ill-advised.