Platts Iron Ore and Metallurgical Coal Specifications Tree

First truckloads of bagged copper concentrate left the Kamoa-Kakula mine in the Democratic Republic of Congo (DRC) on July 17 for export to international markets via to the Port of Durban in South Africa, Ivanhoe Mines said July 19.

The company said that the first truckloads of Kamoa-Kakula’s blister copper ingots, containing approximately 99% copper, are scheduled to be exported from the Lualaba Copper Smelter in the DRC to international markets this week.

Joint venture partners Canadian mining firm Ivanhoe Mines and Chinese resource explorer and developer Zijin Mining said in a statement that their DRC subsidiary, Kamoa Copper, received all necessary authorizations from the DRC government to export copper concentrate and blister copper on June 8.

“As Kamoa-Kakula’s Phase 1 concentrator plant ramps up toward steady-state production, the mine now is producing more concentrate than the nearby Lualaba Copper Smelter can process,” said Ivanhoe Mines president and CFO Marna Cloete.

As such, Kamoa-Kakula has begun exporting its copper concentrates to international smelters, Cloete said.

Kamoa-Kakula produced first copper concentrate on May 25 and made its first delivery of bulk concentrates from Kamoa-Kakula to the Lualaba Copper Smelter on June 1. Since then, deliveries to the smelter have been occurring on a daily basis, the company said.

In June, Kamoa Copper signed offtake agreements with Hong Kong based firms, CITIC Metal and Gold Mountains International Mining Company, a subsidiary of Zijin, for 50% each of the copper products from Kamoa-Kakula’s phase 1 production. CITIC Metal and Zijin are purchasing the copper concentrate at the Kamoa-Kakula mine and the blister copper at the Lualaba Copper Smelter on a free-carrier basis and will be responsible for arranging freight and shipment to the final destination, initially via the Port of Durban.

Phase 1 of Kamoa-Kakula, currently ramping up to steady-state production, is expected to produce about 200,000 mt/year of copper, while the combined phases 1 and 2 are forecast to produce approximately 400,000 mt/year of copper.

North American renewable energy power purchase agreement prices continued to increase in the second quarter, LevelTen Energy said July 19, citing solar power industry supply chain hiccups and steel price increases pushing up wind power project costs.

P25 Index prices for solar PPA offers rose 0.3% in the second quarter, while P25 wind prices increased by 8.5%, and the technology-blended Index rose by 4.3%, the renewable energy transaction infrastructure provider said in its latest PPA Price Index report.

The P25 price — the price at which 25% of the offers submitted were lower than and 75% were higher — is used to show the most competitive 25th percentile offer prices.

Year over year, the technology blended P25 Index of wind and solar PPA offer prices rose 14.4%, or $4.07/MWh, the report said.

“Much like we’re seeing supply constraints in other areas of the economy, the most desirable [renewable energy] projects are going fast,” Rob Collier, vice president of developer services at LevelTen, said in the report.

“The key takeaway for organizations with fast-approaching emissions reductions targets is to act now to capture high-value PPAs in the market,” Collier said, adding that “as demand from public and private entities escalates and barriers to interconnection and permitting remain, delaying procurement will only result in less choice in the market.”

Rising project costs

The US solar power industry, which was hit with project delays related to the coronavirus pandemic, hit another potential snag June 24 when the Biden administration took enforcement action on solar products from China’s Xinjiang region due to concerns about the use of forced labor. The US has accused China of genocide against Uyghurs and other Muslim minorities in Xinjiang.

In response to the reports, many solar power project developers and module suppliers began shifting their supply chains away from certain producers, LevelTen said.

With solar module costs already on the rise, increasing 18% this year, this issue could push prices higher, as Xinjian produces 45% of the world’s polysilicon supply, according to the report.

According to a Q2 survey of developers with solar projects on LevelTen’s Energy Marketplace, 73% of the respondents said they are increasing PPA prices because of the rising cost of polysilicon and solar modules.

With increasing supply chain constraints and PV module price increases, a rise in solar PPA prices was expected for Q2, LevelTen said. And although the P25 Blended Solar Index only increased 0.3% during Q2, the rise was more significant in some of the regional power markets.

The solar P25 Indices ranged from $27.20/MWh in the Electric Reliability Council of Texas market to $35.90/MWh in PJM Interconnection.

Only 12% of developers said they are delaying projects, no survey respondents said they are planning fewer projects and almost one-third plan to lower their own rate of return, “likely in an effort to stay price-competitive among other renewable projects in the market,” LevelTen said.

Southwest Power Pool solar PPA prices continued increasing for the sixth consecutive quarter, rising by 1.7% during Q2 2021, and year over year, P25 solar prices in SPP have risen by 15.4%, the report said.

P25 Index prices for wind projects ranged from $20.90/MWh in ERCOT to $51.60/MWh in the California Independent System Operator market.

“CAISO’s high wind PPA prices are primarily driven by project siting and permitting challenges, a lower wind resource than the wind belt in SPP, MISO, and ERCOT, and to a lesser extent, solar curtailments,” Collier said in an email.

“Many of the best wind sites in California have already been built out because the state was such an early leader in onshore wind production and California also has stringent permitting regulations that further restrict where wind projects can be developed in the state,” he said.

Midcontinent Independent System Operator P25 Index wind prices jumped by 19.4% during Q2 2021 to reach $33.90/MWh.

North American wind PPA offer prices increased 19.1% year over year in Q2, the report said, which could be related to the phase-out of production tax credits and recent steel cost increases.

Wind turbine-makers Vestas Wind Systems and Nordex SE said in May that higher steel prices will translate into more expensive machines in the medium term, with limited willingness from the manufacturers to tweak margin requirements to accommodate the higher cost.

Steel prices increased by more than 70% in some global markets earlier this year, Vestas CEO Henrik Andersen said during a Q1 earnings call.

The increase was driven in part by an increased infrastructure investment drive from countries spending their way to recovery after the pandemic, which has been boosting commodity prices for iron ore, the material used to make steel.

Global ferrous scrap prices, including in India, remain comparatively weak to iron ore, as the London Metal Exchange launches India scrap futures, allowing increased risk management with iron ore, scrap, coking coal and steel futures available through multiple exchanges.

Scrap to iron ore ratios have remained weak, following sustained high iron ore demand in China throughout the coronavirus pandemic and record high prices in May.

While scrap import demand in India has recovered from last year, prices of Platts TSI Shredded Scrap CFR Nhava Sheva and 58% Fe iron ore fines see ratios remaining close to the all-time low in October 2020 of 1.82 scrap to iron ore, according to S&P Global Platts analysis July 19.

The ratio moved higher alongside a recovery in scrap prices since the fourth quarter and averaged at 2.05 scrap to iron ore in June. Platts TSI Shredded Scrap CFR Nhava Sheva averaged $517.50/mt in June, and moved up to $530/mt CFR July 16.

The ratio last peaked in February 2020, at 2.9 scrap to iron ore. The ratio uses 58% Fe fines China CFR prices netback to West India, and scrap and iron ore is adjusted to a 100%-Fe basis.

Major scrap importer India relies more on domestic iron ore resources, which help the nation to minimize iron ore imports. India competes for scrap imports with regional buyers such as Pakistan, buying from the Persian Gulf, the US and other markets.

Platts assessment is based on containerized shredded ferrous scrap at the port of Nhava Sheva, near Mumbai, complying with ISRI 211 classification or equivalent, specifying homogeneous and magnetically separated iron and steel scrap originating from automobiles, No.1 and No.2 steel, and miscellaneous baling and sheet scrap, with an average density of 70 lb/square foot.

Shredded and HMS scrap prices in Turkey, India and the US have tracked long steel and billet prices, which have been weaker than flat steel prices, as collection rates and industrial activity improved after the initial pandemic hit global markets in early 2020.

The comparative low prices for scrap to iron ore — at high outright prices for both — compares to a six-to-eight price multiple for shredded scrap CFR Nhava Sheva over 58%-Fe iron ore fines during 2017, when iron ore was depressed.

While Turkey typically imports deep sea scrap cargoes, India’s scrap prices have become a reference, along with those traded in China, Taiwan, South Korea and Japan. The LME’s Steel Scrap CFR India cash-settled futures contract, which started trading July 17, settles on Platts TSI Shredded Scrap CFR Nhava Sheva, and is traded on 10 mt lots.

India steel volumes

India was the second-largest steel producer in 2020, after China. India produced 100.3 million mt of crude steel, a tenth of China’s 1.06 billion mt, and India turned into a net steel exporter after consumption fell during the pandemic.

Over half of India’s steel is from the electric arc furnace and induction furnaces route, with 45.5% via the basic oxygen furnace route in 2020, according to World Steel Association data. Flat steel in India is typically produced by blast furnaces using BOFs, while some investments have gone into scrap-fed EAF flat mills.

India produced 33.6 million mt of direct reduced iron (DRI) and sponge iron in 2020, using thermal coal and natural gas, relying on ferrous scrap for the balance.

India’s iron ore demand has risen with higher steel prices and recovery since the fourth quarter. Iron ore exports were affected in the second quarter as Indian ports declared force majeure and slowed exports, while China implemented measures slowing receivals. China’s iron ore imports from India in May dropped 2.7 million mt month on month to 3.6 million mt.

Demand for low-grade fines has started to increase from a low level as steel prices and margins weakened in June and supply from Brazil increased, which may aid blending. Relative prices of 58%-Fe fines to benchmark 62%-Fe TSI IODEX fines weakened at higher iron ore prices.

China will continue to release metals stocks from its reserves in batches in the upcoming months in a bid to alleviate pressure on downstream processors and fabricators, the National Development and Reform Commission said in a press conference July 19.

China’s domestic aluminum prices have been on the rise in recent weeks, as major smelters curbed output in the face of power supply shortages, propping up material prices that posed challenges to end-users.

In the first batch, China released metals stocks, including 200,000 mt of copper, 500,000 mt of aluminum and 300,000 mt of zinc. The stock release was arranged through an open-bidding process on July 5.

NDRC said that the stock release reached a preliminary target that called for stabilizing of market prices. It also helped downstream users replenish their inventories at lower costs.

More than 200 nonferrous metals processors participated in the open bidding and the transaction price was 3%-9% lower than the intraday market price, according to sources.

Volatile prices

China’s domestic aluminum prices came under pressure July 19, taking the cue from the latest NDRC statement, and amid market chatters that 100,000 mt of aluminum ingot will be released during the second batch.

The most-active aluminum contract for September delivery on the Shanghai Futures Exchange, or SHFE, closed at Yuan 19,275/mt ($2,972/mt) on July 19, down Yuan 195/mt, or 1%, from the previous close.

The contract has been hovering at a key resistance level of Yuan 19,000/mt since July 9, staying firm due to tight market situation.

Market sources expect domestic aluminum prices to remain volatile at elevated levels in the near term. However, further price rise could be limited due to the upcoming slow seasonal demand, they added.

Tight supply

Smelters in Yunnan province may postpone their plans to resume production from mid- or late-July, sources said. New projects are also expected to run into hurdles due to electricity shortages in the summer season.

Primary aluminum smelters in Yunnan have shut down nearly 900,000 mt/year capacity due to power supply shortages and are yet to resume production, sources said.

Meanwhile, smelters in Inner Mongolia were maintaining their output curbs as part of their plans to meet energy consumption targets. Some primary aluminum smelters in Inner Mongolia were asked to lower their power load during the peak consumption hours at night, as power supply remains tight due to rising thermal coal prices.

Stock depletion has been an ongoing affair in the domestic markets, despite some signs of weakening demand.

As of July 16, copper stocks across the SHFE warehouses decreased 1,602 mt from a week earlier to 265,945 mt, declining for the ninth straight week since May 21.

General Motors will pause production at four of its North American automobile assembly plants for two weeks as the industry continues to be affected by the global shortage of semiconductor chips, a spokeswoman for the company said July 16.

Production at the company’s Spring Hill assembly plant in Tennessee and Lansing Delta Township assembly plant in Michigan will be down beginning the week of July 19 and continuing through the week of July 26.

Additionally, the company is taking two weeks of downtime at its San Luis Potosi assembly plant and Ramos assembly plant in Mexico through the week of July 26.

“These most recent scheduling adjustments are being driven by temporary parts shortages caused by semiconductor supply constraints from international markets experiencing COVID-19 restrictions,” GM spokeswoman Kristen Ackerman said in a statement. “We expect it to be a near-term issue.”

GM also has extended previously announced downtime at its CAMI assembly plant in Ontario, Canada, which builds the Chevy Equinox, Ackerman said. The outage at the plant, which was originally scheduled for July 19 through the week of July 26, will be extended through the week of Aug.16.

“The global semiconductor shortage remains complex and very fluid, but GM’s global purchasing and supply chain, engineering and manufacturing teams continue to find creative solutions and make strides working with the supply base to maximize production of high-demand and capacity-constrained vehicles,” Ackerman said.

The company is leveraging every available semiconductor to build and ship out full-size trucks and SUVs, she said.

Chevrolet Colorado and GMC Canyon mid-size pickups built at the company’s Wentzville Assembly in Missouri increased by about 30,000 total units from mid-May through July 14 as the team completed dynamic vehicle testing on units held at the plant because of semiconductor disruptions, Ackerman said.

Shipments of production of Colorado and Canyon models at Wentzville will resume as planned on July 19 following its scheduled launch-related downtime to prepare for the next-generation mid-size trucks, she said.

Global automotive production has been challenged by the shortage of semiconductor chips throughout 2021.

At the start of July, Ford significantly cut its production for the month as it said it was prioritizing customer vehicles that were assembled without certain parts due to the industry-wide semiconductor shortage.

US flat-rolled steel market participants have been keeping a close eye on updates about auto shutdowns as hot-dipped galvanized sheet prices have reached fresh all-time highs each week and those shutdowns would at least help mills catch up with their backlogs and stabilize prices, sources said. Buyers, however, noted no immediate relief in the marketplace as HDG spot availability remained very limited and mills continued to push prices higher for such products.

The daily Platts TSI US HDG-HRC index rose $43.50 over the week to $2,043.50/st July 16, while the daily Platts TSI US HDG-CRC index was up by $31.50 at $2,036.75/st within the same time frame. HDG prices have risen by roughly $900/st year to date, as a supply-demand imbalance has continued for those products.