September Newsletter – 23.09.19
Policy changes fueling outlook for coal in China
Measures to limit emissions and diversify China’s economy are having real results on the nation’s coal usage.
This is according to Sarah Liu, Deputy General Manager of Fenwei Energy.
Liu says that China had taken steps to reduce coal consumption to meet its goal of reducing its proportion in its energy mix to below 58% by 2020.
“China is very close to meeting its emissions target,” says Liu.
“Coal accounted for 59% of China’s overall energy consumption last year, with gas, nuclear power and renewable energy making up around 22%.”
Liu’s address in IMARC’s Global Opportunities stream in October will examine the latest changes in China policy and the impact on global markets.
She will be one of several speakers and panellists examining successful Chinese partnerships and Chinese investment and operations in Australia.
The Global Opportunities stream will also discuss challenges and opportunities in Africa, Latin America, Mongolia, Canada and Australia.
Liu’s comments are also relevant to IMARC’s energy conference, one of five concurrent conferences, looking at clean and renewable energy and critical minerals supply.
While coal’s slice of the energy mix is shrinking in China, the world’s biggest coal consumer still used more of the resource last year in absolute terms than in 2017, according to China’s National Bureau of Statistics.
These numbers reflect a changing economy and a shift towards cleaner energies according to Liu.
“China is promoting power replacement for coal in the form of gas and renewables. China is also supporting the usage of clean coal technologies,” says Liu.
Brazil to lay criminal charges against Vale, auditor in dam burst
Brazilian authorities will lay criminal charges against iron ore giant Vale (NYSE: VALE), 13 of its employees and German auditor TÜV SÜD, accusing them of fraud in relation to a deadly dam burst at the company’s Córrego do Feijão mine in January.
Police said the companies presented fake documents backing the stability of the dam, which collapsed, killing nearly 250 people and unleashing a gush of mining waste on nearby towns.
Penalties for these kinds of crimes can be of up to 18 years in jail.
POLICE SAID THE COMPANIES PRESENTED FAKE DOCUMENTS BACKING THE STABILITY OF THE DAM THAT COLLAPSED IN JANUARY
The Rio de Janeiro-based company reacted to the news by saying it was “aware of the police investigation,” but wouldn’t comment further until it analyzes “the full content of the report.”
Police also said it didn’t rule out the possibility of taking executives from both Vale TÜV SÜD to court on accusations of homicide and environmental damage in coming days, local O Globo reported.
Seven people from Vale and six from Tüv Süd are being indicted, according to the paper. By law, police can only formally accuse suspects. It’s up to prosecutors the filing of charges before a judge.
Brazilian market regulator CVM has also opened at least two different administrative probes into Vale’s handling of the disaster, while the company faces more than one class action in the US.
One of them, led by a group of investors, argues that Vale did not disclose information about risks facing the dam in question to the market, even though it was aware of it.
Earlier this year, the world’s top iron ore producer announced a $107-million compensation (400 million Brazilian real) to workers impacted by the rupture of the dam and said it would spend R$1.8 billion ($471 million) by 2023 on several projects to stabilize remaining structures at the Córrego do Feijão mine.
Other programs include reducing tailings flow into the Paraopeba river and ensuring proper disposal of tailings and rebuilding public facilities. The projects are expected to generate around 2,500 jobs.
None of Vale’s top executives at the time of the tailings dam burst, the company’s worst crisis in its 76-year history, have been charged.
Philippines suspension likely to bolster nickel, says BMO
Nickel prices could be set to rise further after one of the Philippines’ key producing regions suspended extraction operations, Canadian investment bank BMO said in a note this week.
The government of Bangsamoro Autonomous Region in Muslim Mindanao (BARMM) suspended activities of all four mining companies in its jurisdiction, Reuters reported early Monday, quoting Bangsamoro’s natural resources minister Abdulraof Abdul Macacua.
Macacua said the suspension was in preparation for the implementation of a new responsible mining law.
BMO said the move “potentially removes a further source of nickel ore supply from the market as the scramble to secure raw material units ahead of the end-of-year Indonesian ore ban continues, and is likely to further bolster nickel ore prices”.
The bank said there was no indication exports had been halted, so it anticipated Filipino material would still flow to China in the next two months. “Beyond this, however, ore supply may be affected should the mining suspension remain in place.”
The bank said the announcement would hinder its projection that nickel contained in ore exports from the Philippines to China would rise by 50,000 tonnes in 2020, “particularly if the SR Languyan operation on Tawi Tawi island (one of the mines affected by this suspension) ceases operation due to ore depletion, as is now widely expected”.
“Removing the affected supply from our model would see about 40ktpa of further reduction in Chinese NPI output next year and about 55kt additional drop in 2021. While we now model faster Indonesian NPI output ramp up, we see the refined market in deficit over the next two years,” BMO said.
Nickel prices have risen sharply of late after the Indonesian government confirmed late August a ban on nickel ore exports would come into at the beginning of 2020.
Cobalt price boost as electric vehicle loadings surge
After hitting near decade highs in March last year within a stone’s throw of $100,000 per tonne, cobalt prices fell off a cliff.
Glencore’s decision last month to mothball the world’s largest cobalt mine breathed new life into the market, but so far the response has been relatively muted with the metal still trading in the mid-$30,000s.
Even at these levels, cobalt is a pricy raw material for electric vehicle manufacturers and battery makers have been working hard to find a substitute for cobalt, or at least reduce the required loading.
First generation Nickel-Cobalt-Manganese (NCM111) batteries had a chemical composition of 1 part nickel, 1 part cobalt and 1 part manganese. NCM batteries with lower cobalt content (622, 523 chemistries) are quickly becoming the standard in China, which is responsible for half the world’s electric car sales, and a much greater proportion of EV battery manufacture.
The industry is now fast moving towards even higher nickel content at the expense of cobalt and manganese with the market share of NCM811 increasing rapidly although it still only represents a tiny portion.
Tesla is a proponent of nickel-cobalt-aluminium (NCA) technology which requires less than a third the amount of cobalt and the EV pioneer says the batteries in its latest model already match NCM811.
A new report by Adamas Intelligence suggest despite the ongoing thrifting of cobalt in batteries deployed by EV manufacturers, the per vehicle loading of cobalt jumped by 45% in the first half of this year compared to H1 2018.
The Toronto-based research company, which tracks EV registrations and battery chemistries in more than 80 countries says cobalt deployed per vehicle has gone from 2.1 kg in 2018 H1 to 3.1 kg in 2019 H1.
Strong battery electric vehicle sales relative to hybrids, plus the Chinese industry’s growing adoption of NCM cathode chemistries in place of lithium ion phosphate (LFP) was behind the increase says Adamas.
Overall in 2019 H1, 7,200 tonnes of battery-grade cobalt were deployed globally in batteries of all newly-sold passenger EVs combined, an increase of 81% over last year according to the report.
LEGAL AND REGULATORY
US, Australia to unveil plan to improve rare earth supply
U.S. President Donald Trump and Australian Prime Minister Scott Morrison are set to release a plan on Friday aimed at securing the supply of rare earth minerals, a senior administration official said, as concerns grow that China could cut off shipments of the prized commodities.
The plan will be unveiled during a state visit by Morrison to the White House, where space cooperation and plastic waste management will also be discussed, the official said on Thursday.
“Both countries share an interest in making sure the global supply of rare earths is stable and secure,” the official said. The goal of the plan, he added, was to pool expertise and resources “to make sure there’s a stable and secure global market that’s not easily disrupted by shocks and outside influences.”
Rare earths are a group of 17 chemical elements used in everything from high-tech consumer electronics to military equipment. China is the world’s largest processor and producer of the minerals, accounting for more than 80 percent of global processing capacity.
Chinese negotiators are in Washington for talks as the world’s two largest economies try to bridge deep policy differences and find a way out of a protracted trade war.
After talks broke down in May, Chinese President Xi Jinping visited a rare earths plant, sparking speculation that China would use its dominant position as an exporter of rare earths to the United States as leverage in the trade dispute.
A Pentagon official said in August the Defense Department was in talks with Australia to host a facility that would process rare earth metals. The White House official did not respond on Thursday when asked if the plan set to be unveiled would involve such facilities.
Sirius slows project development as funding fails
London-listed Sirius Minerals will reduce the rate of development across its North Yorkshire polyhalite project and pulled a planned $500-million offering, after the UK government denied a request for financial support for the project.
The company’s share price plunged by 50% to 4.99p each by 9:00 in London.
The cancellation of the bond issue follows an earlier postponement and is the result of “poor bond market conditions”, with Sirius noting that it was not aware of any significant new issuer in the B/B- credit range that had come to the market.
The bond was a condition of the $2.5-billion revolving credit facility that the firm entered into in April this year.
“Due to the ongoing poor bond market conditions for an issuer like Sirius we have not been able to deliver our Stage 2 financing plan. As a result, we have taken the decision to reduce the rate of development across the project in order to preserve funding to allow more time to develop alternatives and preserve the significant amount of inherent value in this world-class project,” said MD and CEO Chris Fraser.
INNOVATION AND TECHNOLOGY
Fuel cells offer emission-free electricity in decarbonising world
Proton exchange membrane (PEM) fuel cells, which use platinum catalysts, are the consensus fuel cells of choice for road transport because of their low operating temperatures, high efficiencies, light weight and small volume.
These modular fuel cells can be stacked in series to create higher power output, emit zero greenhouse gases (GHGs) and enjoy the high energy density that hydrogen provides.
Fuel cell electric vehicles (FCEVs) using PEM fuel cells can refuel in three to five minutes.
They provide consistent power output until the hydrogen fuel runs out and FCEVs are best suited initially to applications where there is a demanding duty cycle that requires prolonged energy output and high asset use in a zero-emission environment.
Virtually every automotive manufacturer in the world is considering FCEVs in the knowledge that everything that transports goods over long distance will have to be fuel-cell driven to meet global decarbonisation yardsticks.
National governments, notably those of China, Japan and Korea, are positioning themselves four-square behind hydrogen fuel cell travel and private-sector venture capital companies are investing in the new technology.
One of these is a venture capital fund called AP Ventures, which has major cornerstone investors in Anglo American Platinum, the Public Investment Corporation of South Africa, Mitsubishi Corporation of Japan and the SPARX Mirai Fund, which includes Toyota Motor Corporation and Sumitomo Mitsui Banking Corporation.
Uganda to invite companies to redevelop former copper mine
Uganda is attempting to reopen an idled mine estimated to contain 4 million tonnes of ore by inviting international firms to present bids for a production sharing deal.
Once a major copper and cobalt producer, the Kilembe copper mine was abandoned by Canadian firm Falconbridge in the 1970s, as the East African nation’s economy deteriorated under the leadership of dictator Idi Amin Dada.
This is not the first time the Uganda has tried to revive the mine, near the border with the Democratic Republic of Congo. Previous efforts, however, were thwarted by a commodities downturn and a failed 2013 deal with a group led by China’s Tibet Hima Mining, which had vowed to invest $175 million in the asset.
The government cancelled the 25-year concession in 2013 on grounds that Tibet Hima had failed to execute its mandate as outlined in the permit. The Chinese firm sued the government and is seeking compensation of at least $33 million in damages.
The country decided to retry bringing Kilembe back to life in April this year. At the time, authorities said 28 companies had expressed interest in the project.
With files from Bloomberg