October Newsletter – 25.10.2021


  • EU in talks with China to avoid “catastrophic” magnesium crunch
  • US plan would block Minnesota copper-nickel mine
  • Indonesia plans to ‘hit the brakes’ on raw commodity exports
  • The World Is Nowhere Near to Kicking Its Dirtiest Habit
  • NE China coal producer opens new mines to boost energy supply
  • China Takes the Brakes Off Coal Production to Tackle Power Shortage
  • Goldman’s Jeff Currie: It’s a Commodities Supercycle, and We Still Haven’t Hit Max Pain
  • How China’s energy crisis has sent commodity markets reeling

EU in talks with China to avoid “catastrophic” magnesium crunch

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Volkswagen plant in the 1960’s.
European leaders, worried about the effect a global shortage of magnesium will have on the European Union’s industrial recovery from the pandemic, have open talks with China, which supplies the block with about 95% of the silvery-white metal used to make aluminum.
Local companies, including Norway’s Norsk Hydro, have stopped producing magnesium because they were unable to compete with lower costs at Chinese producers.
That would not have been a problem should Beijing not have recently ordered roughly 35 of its 50 magnesium smelters to close until the end of the year to conserve power supplies. This means current European inventories will be exhausted by the end of November, Germany’s association of metals producers WVM warned on Tuesday.


US plan would block Minnesota copper-nickel mine
The U.S. Forest Service on Wednesday proposed a 20-year ban on mining in Minnesota’s Boundary Waters region, a step that would block Antofagasta Plc’s Twin Metals copper and nickel mine project.

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Sunset over Pose Lake, a small lake located inside the Boundary Waters Canoe Area Wilderness.
The announcement reversed a decision by former President Donald Trump and set off a review of how mining could affect the popular outdoor recreational area. It freezes issuance of new mining leases or permits in the region for two years.
The proposed underground mine would become a major U.S. supplier of copper for electric vehicles (EVs), which use twice as much of the red metal as those with internal combustion engines.
Environmentalists have long feared mining would destroy the Boundary Waters Canoe Area Wilderness, a 1 million acre (405,000 hectare) preserve on the U.S.-Canada border.


Indonesia plans to ‘hit the brakes’ on raw commodity exports
Indonesia is planning to “hit the brakes” on the export of all raw commodities in an effort to attract investment in onshore resource processing and create jobs, President Joko Widodo said on Tuesday.
Indonesia has banned a number of unprocessed ore exports including nickel, tin and copper in a bid to encourage downstream industries, including producing batteries for electric vehicles and aluminum industry, among others.
The government is currently conducting a study for the downstreaming of other commodities with a long-term goal of no longer selling just raw materials, the president, who is popularly known as Jokowi, said in an interview in the village of Bebatu on Borneo island.


The World Is Nowhere Near to Kicking Its Dirtiest Habit
(Bloomberg) — Never in human history has a ton of coal cost more. Governments and utilities across the globe are willing to pay record sums to literally keep the lights on. That’s the bruising reality that global leaders must face at the high-stakes climate talks in Glasgow this month as hopes fade for a deal to end the world’s reliance on the dirtiest fuel.

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The burning of coal represents the biggest single obstacle to meeting the Paris Agreement goal of limiting warming to 1.5C. UN Secretary-General Antonio Guterres calls it a “deadly addiction,” and COP26 president Alok Sharma has urged leaders to “consign coal to history.”
There’s been some progress already — the global pipeline of new coal-fired power plants has shrunk almost 70% since 2015. President Xi Jinping announced last month China will stop building coal-fired power plants abroad, while Germany now wants to end its use of coal by the end of this decade and more than 40 countries have committed to “no new coal.” Renewable-energy is expanding sharply.
But the dramatic rally in prices in recent weeks shows ever more clearly that it’s nowhere near enough. Humanity remains deeply dependent on coal.

NE China coal producer opens new mines to boost energy supply
HARBIN, Oct. 20 (Xinhua) — Longmay Mining Holding Group Co. Ltd, the largest coal producer in northeast China’s Heilongjiang Province, started to build four new mines on Wednesday in an effort to meet the rising energy demand, as winter heating season began in the northernmost province.
Sun Chengkun, board chairman of the company, said that the new projects in Jixi, Shuangyashan, Hegang and Qitaihe cities would add more than 4 million tonnes of annual coal production capacity.
Thermal power still takes up a large share of China’s energy output, accounting for about 70 percent of its power generation. The heating season has added pressure to the power supply in north China.
The country is making all-out efforts to ensure power supply after power outages halted factory production and hit families in some regions.
The provincial government of Heilongjiang has approved funds worth 200 million yuan (about 31 million U.S. dollars) to assist Longmay in smart mining technical upgrading.

China Takes the Brakes Off Coal Production to Tackle Power Shortage
Beijing orders more output and price cuts, highlighting the difficulty of balancing carbon goals with energy needs to keep economy humming.

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The Haizhou Open Pit Coal Mine in Liaoning province, China. China has ordered all coal mines to operate at full capacity to help ease high prices.
HONG KONG—China is pulling out the stops to ease its worst power crunch in two decades, reversing course on earlier ambitions to curb coal use as it sets new policies to revive production and loosen imports of the electricity-generating fuel.
As winter looms, the nation’s top economic planner this week said it would use “all necessary means” to roll back record-high coal prices, including by using domestic laws that allow the government to limit profit and prices for key goods. It has ordered all coal mines to operate at full capacity even during holidays, issued approvals for new mines and ordered major coal production bases in north and northwestern China to lower prices by 100 yuan a metric ton from Tuesday.
Coal futures on Chinese bourses fell to their lower trading limits on Tuesday and Wednesday after the announcement.
China’s rollback of restrictions on mining and imports of coal might help stem soaring global fuel prices that were driven up by factors including a post-pandemic economic recovery, transport bottlenecks and low stocks. Beijing’s push to meet tougher environmental targets, stepped up this summer, aggravated the shortage of coal, of which the country consumes half the world’s supply.

Goldman’s Jeff Currie: It’s a Commodities Supercycle, and We Still Haven’t Hit Max Pain

The analyst who called the rally has been taken aback by the strength in commodities

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Molten copper pours into ceramic molds to form plates at the Southern Copper Corp. smelter facility

Back in January, we spoke with Jeff Currie, the Global Head of Commodities Research at Goldman Sachs. At the time, he was bullish on the commodities complex for several reasons. Since then, of course, we’ve seen several markets go on an absolute tear and to a degree that’s taken even him by surprise. The bad news for commodities consumers? We still haven’t hit max pain. On this episode, we speak again with Jeff about what’s driving prices higher and why he sees stronger price increases over the next several months.

How China’s energy crisis has sent commodity markets reeling
Environmental policy swerves make metal prices more volatile, unpredictable
TOKYO — China’s curbs on carbon-intensive industries and the ensuing energy crisis have scrambled supply and demand calculations for some of the world’s key commodities, sending prices on a wild ride that market players say may not yet be over.
Directives from Beijing this year have crashed prices for iron ore and inflated those for aluminum, among others, but disruption in the country’s industrial heartland and concern about the property sector leave some predicting more policy swerves.
With the government of President Xi Jinping determined to cut carbon intensity and emissions across industry — and achieve net zero emissions by 2060 — “attention will focus on China and how policy evolves from now on,” said Tatsufumi Okoshi, a senior economist at Nomura Securities.
A central focus for traders is the steel industry, which has been a main target of environmental policy action and whose fate is tied up with a construction boom that looks in jeopardy. The price of iron ore, steel’s main ingredient, surged over 40% between the start of the year and mid-July, only to slump by almost half before a low at the start of this month.



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