Insight Magazine: 2021 Global Metals Awards

Livent unveiled a slate of production expansion projects across its global operations May 3 that could increase total lithium hydroxide capacity to 55,000 mt/year by the end of 2025 and its lithium carbonate capacity to 100,000 mt/year by the end of 2030. The lithium carbonate projects are focused on Livent's existing operation in Argentina, which has a current capacity of 20,000 mt/year and is undergoing a first phase expansion to add another 20,000 mt/year by the end of 2023, according to the company's first-quarter earnings statement. Livent said in February it would proceed with a second phase expansion in Argentina to expand output by another 20,000 mt/year in 2025. However, the company said May 3 that the second expansion would now include an additional 10,000 mt/year. The lithium producer also said it was now evaluating a third expansion in Argentina to lift capacity again by 30,000 mt/year by 2030. "By re-engineering the use of freshwater, the second expansion will not require access to any additional fresh water," the company said. "It also allows Livent to improve overall lithium yields and reduce water use intensity for current and future operations." "[The third expansion] in Argentina would add up to 30,000 mt of additional lithium carbonate capacity," Livent added. "This expansion would deploy a more conventional pond evaporation-based process and require significantly less capital versus prior expansions." In its lithium hydroxide portfolio, the Philadelphia-based company said it expects to add 15,000 mt/year of capacity in China at a "new location" by the end of 2023. It also plans to build a battery recycling facility in either North America or Europe that will produce secondary lithium hydroxide, it added. "The company is exploring multiple opportunities for partnership and funding and believes the new facility could be in operation by the end of 2025, with production capacity of at least 10,000 mt/year," Livent said. By the end of this year, Livent said it expects to complete its previously announced 5,000 mt/year lithium hydroxide capacity expansion in the US at its Bessemer City, North Carolina, facility. The global lithium hydroxide capacity target for 2025 does not include the potential 34,000 mt/year of production that Nemaska Lithium could bring online in Quebec in 2025. Livent increased its ownership stake in Nemaska to 50% from 25% May 2. Projects follow strong quarter Livent's string of announcements follow a strong quarter for the company as revenue climbed amid escalating lithium prices. "Strong lithium demand growth has continued in 2022," CEO Paul Graves said in the statement. "Published lithium prices in all forms have increased rapidly amid very tight market conditions and Livent continues to achieve higher realized prices across its entire product portfolio." S&P Global Commodity Insights assessed the price of seaborne lithium hydroxide at $80,000/mt CIF North Asia April 29, up sharply from $31,700/mt at the beginning of 2022 and $9,000/mt at the start of 2021. Meanwhile, lithium carbonate on the same basis was assessed at $75,000/mt, rising from $33,800/mt at the start of 2022 and from $6,350/mt at the start of 2021. Livent reported a Q1 net income of $53.2 million on revenue of $143.5 million, compared with an $800,000 loss on sales of $91.7 million in Q1 2021. For 2022, Livent said it now projects revenue to be in the range of $755 million to $835 million.

Russia's alumina imports from China rose sharply in March as the country sought to replace its two major suppliers Australia and Ukraine, which made up over two-thirds of its alumina inflows a year ago. Russia purchased 9,950 mt of alumina from China in March, up from just 105 mt in the same period a year ago, the latest data from Chinese customs showed. China's alumina supplies to Russia were at 10,650 mt over January-March, compared with 330 mt in Q1 2021. The Q1 2022 volume from China was about five times higher than the whole of 2021. S&P Global Commodity Insights assessed Chinese alumina at $445.770/mt ex-works April 29, down $6.78/mt on the day. China's alumina supplies have helped partially offset a combined 275,000 mt/month that Russia imported from Australia and Ukraine prior to Ukraine's invasion on Feb. 24, with Rusal as the key recipient of the volumes, according to S&P Global estimates. Rusal's Nikolaev refinery in Ukraine, which produced 1.77 million mt of alumina in 2021 and typically supplies its entire output to Rusal's Russian smelters, halted operations days after the Russian invasion. Australia stopped exports of aluminum ores, including bauxite, alumina, and related products, to Russia on March 20 as part of its wider sanctions on the country. Australia was the second biggest alumina supplier to Russia after Ukraine in 2021 with volumes at 1.52 million mt. "Between December 2021 and February 2022, Australia recorded approximately 422,000 mt [140,000-141,000 mt/month] of alumina exports to the Russian Federation, accounting for 10% of Australia's total exports, by weight, during this period," a representative of Australian foreign minister told S&P Global in an email on May 3. The representative said Australia has banned both direct and indirect exports of aluminum ores to Russia. S&P Global estimates that the ban also likely affected possible Australian supplies to Rusal-owned refineries outside Russia, including the Aughinish alumina refinery in Ireland. It is not known if Rusal has ramped up imports from other alumina producing countries, such as Kazakhstan, and Rusal-owned refineries in Ireland, Jamaica, and Guinea, which exported 26%, 36% and 70% of their alumina production, respectively, to Russia in 2021. Rusal did not respond to S&P Global's request for comment. Russian Customs Service no longer publishes the country's foreign trade statistics. Rusal has said it cut its May aluminum prices for domestic buyers by 9% month on month, in line with the London Metal Exchange. The LME aluminum spot price fell to roughly $3,040/mt April 29, from $3,480/mt April 1.

A cargo of Russian pig iron sailing to Mobile, Alabama, and destined for Steel Dynamics Inc. is the last in a supply contract since nullified by SDI in a declaration of force majeure, the steelmaker has told S&P Global Commodity Insights. The 56,810 dwt Marshall Islands-flagged ore carrier LMZ Vega shipped out of Novorossiysk, Russia, on April 16 with the cargo and is set to arrive in May 10-13 in Mobile, according to Platts' cFlow ship and commodity tracking software. S&P Global reported April 29 that a US buyer had booked the first cargo of Russian pig iron since mid-March, but the buyer could not be confirmed. The US and other countries have responded to Russia's Feb. 24 invasion of Ukraine with economic sanctions, including an import ban on multiple raw materials, though Russian pig iron has not been banned. Fort Wayne, Indiana-based SDI, in response to Russia's war in Ukraine, was reviewing its options regarding its contracts with Russian pig iron producers when the cargo was shipped, a spokesperson said. "We are disputing a contract with one of these producers and have communicated force majeure on the remaining shipments," SDI's Tricia Meyers said in a email. "However, the shipment arriving mid-May 2022 was shipped during the period of time when we were determining our options regarding contract cancellations." Russia was the top exporter of pig iron to the US at 2.07 million mt in 2021, but the US has not received a pig iron cargo from Russia since 53,200 mt of Russian pig iron arrived in Charleston, South Carolina, on March 17, according to Panjiva, the trade analysis unit of S&P Global Market Intelligence, SDI has used the Novorossiysk-to-Mobile route extensively to bring Russian pig iron for use to its Columbus, Mississippi, electric arc furnace, including a 48,651 mt cargo that arrived on March 3 and a 50,341 mt cargo that arrived on Feb.12. In 2021, there were eight identifiable cargoes of pig iron shipped to SDI using this route, totaling 418,791 mt, with the listed shipper identified as Russia's Metalloinvest Trading, according to Panjiva data. SDI CEO Mark Millett said April 21 that the company was able to cover its pig iron needs for the rest of 2022 by sourcing from Brazil and India, while also lowering overall pig iron requirements to about 14% of the mill input compared to the typical level of 22% by developing a higher-quality scrap mix. "We are currently in the process of pursuing opportunities to become even more pig iron self-sufficient for the future," Millett said during the company's first-quarter conference call. The disruption to Russian and Ukrainian cargo flows caused pig iron prices to surge from $563/mt CIF New Orleans on Feb. 18 to a multi-year peak at $1,030/mt on the same basis on March 18. Platts' last weekly pig iron import price assessment $940/mt CIF New Orleans on April 29.

May 2022 Nashville, Tennessee, USA As the steel industry expands to meet growing demand, decarbonization, sustainability, and modernization are all growing priorities for the world's largest producers. Join us this May in the music city, where we will bring together industry leaders to network and discuss how scrap, new technology, and new projects coming online are building the groundwork for the steel industry's future.The agenda for the Steel Markets Conference is currently in production. Sign up to get updates as the program develops. Get insight into: -Decarbonization of the steel industry -Modernization and technology developments -Scrap and raw materials market update -Price and risk management And much more.Click HERE for more info.

China's largest steelmaker Baowu Group is taking majority control of a steel company in the Jiangxi province, fast-tracking the company's consolidation plan and boosting production capacity at time of heightened emphasis on decarbonization. The Jiangxi province has agreed to transfer a 51% stake in Xinyu Iron & Steel Group (Xingang Group) to the steel giant, according to a statement from Xingang Group's Shanghai-listed arm on April 25. The move will take Baowu one step closer to its annual crude steel output target of 200 million mt by 2025. The transaction marks the first such deal in 2022 in China's steel industry, following an eventful 2021 that saw a series of combinations in the industry. Consolidation has accelerated in China's steel industry in line with the country's decarbonization goals that got a major push in 2021, giving the industry more negotiating power over raw material and prices. China's top 10 steelmakers are likely to account for about 46% of the country's production by end-2022, up from about 41% at the end of 2021 and 37% at the end of 2020, S&P Global Commodity Insights calculations showed. Baowu transaction The Jiangxi provincial government will hold the remaining 49% stake in Xingang Group after Baowu takes the majority share, according to the company statement. Xingang Group produced about 11 million mt of crude steel in 2021 that will take Baowu's annual crude steel production to about 131 million mt. Baowu, which is also the world's largest steelmaker, remains at the forefront of consolidation efforts by China's steel industry. The company is also in the process of taking over state-owned Shandong Iron & Steel Group (Shangang Group) with annual crude steel production of about 28 million mt. Baowu's steelmaking entities will span eight provinces and two municipalities following the absorption of Xingang Group and Shangang Group, with annual crude steel output of about 160 million mt, accounting for 15%-16% of China's total steel production, up from 12% currently. Baowu's target of achieving 200 million mt/year of crude steel output by 2025 suggests its acquisition spree will likely continue over the coming years. Deals spree China's steel industry consolidation is expected to maintain a healthy pace in 2022, with some potential mergers and acquisitions in sight. Privately-owned Fangda Steel Group has been in negotiations to take over an 80% stake in state-owned Anyang Iron & Steel in northern China's Henan province. The takeover, if successful, will take Jiangxi-headquartered Fangda's annual crude steel output to 31 million mt/year, from 20 million mt/year currently, elevating it to the position of the seventh biggest steelmaker in China, up from 10th. China's steelmaking hub Hebei province in February also urged leading local steel mills to form several mega steel companies through cross-province or cross-border mergers and acquisitions. China's steelmakers are expected to expand through mergers and acquisitions to gain market share and maintain healthy profit margins, with the country's steel production capped due to its decarbonization efforts, and steel demand at a plateau as urbanization nears completion, market sources said. Small steelmakers that are facing rising environmental protection costs and shrinking market shares are also looking to partner with big companies to survive.

Electric vehicle maker Tesla equipped almost half of the EVs manufactured in the first quarter of 2022 with nickel and cobalt-free lithium iron phosphate, or LFP, batteries, it said in its first-quarter results presentation April 20. The company is using LFP batteries in most of its standard range vehicle products, it said, as well as in commercial energy storage applications, noting that a Model 3 Tesla with an LFP battery pack could still achieve a 267-mile range, due to its energy efficient motors. "Diversification of battery chemistries is critical for long-term capacity growth, to better optimize our products for their various use cases and expand our supplier base," it said. Tesla announced in October 2021 that it would be shifting to LFP cells for all its standard range vehicles globally. LFP batteries have been increasing in popularity, with recent technology breakthroughs at the battery pack level increasing the driving range of these batteries without compromising price and safety advantages. Tesla said earlier in April that total Q1 EV production rose 69.4% year on year to 305,407 units. Of the production total, 14,218 were the Model S/X, up from zero produced in Q1 2021, and 291,189 were Model 3/Y vehicles, rising 61.5% year on year. It also delivered a record 310,048 vehicles in the first quarter, up 67.8% year on year, of which 14,274 were Model S/X units, well above the 2,020 units sold in Q1 2021, and 295,324 were Model 3/Y units, up 61.6% year on year. The EV maker plans to grow its manufacturing capacity as quickly as possible and said in the results that it expected to achieve 50% average annual growth in vehicle deliveries, although the rate of growth would depend on its equipment capacity, operational efficiency and the capacity and stability of the supply chain. Supply chain challenges Like most automakers, Tesla also continued to experience supply chain challenges. "In addition to chip shortages, recent COVID-19 outbreaks have been weighing on our supply chain and factory operations," Tesla said. It said its factories had been running below capacity for several quarters, with the supply chain the main limiting factor and it expected this to continue through the rest of 2022. Gigafactory Shanghai was particularly affected, with the company noting that, while weekly production in Shanghai was strong in the first quarter, a spike in COVID-19 cases had resulted in a temporary shutdown at its factory as well as parts of the supply chain. It had restarted limited production at Shanghai since, but was continuing to monitor the situation closely, the company said. During the first quarter, the company started deliveries of Model Y vehicles from its Gigafactory Texas and Gigafactory Berlin-Brandenburg and said it was also "putting significant efforts into in-house cell production, raw material procurement and supplier diversification." It said the pace of production ramps a the two new gigafactories would be affected by the successful introduction of new product and manufacturing technologies in new locations and ongoing supply chain related challenges. "Factory ramps take time, and Gigafactory Austin and Gigafactory Berlin-Brandenburg will be no different," Tesla said. Higher raw material costs The company said it had also been affected by prices of some raw materials increasing "multiple-fold" in recent months. "The inflationary impact on our cost structure has contributed to adjustments in our product pricing, despite a continued focus on reducing our manufacturing costs where possible," it said. Battery metal prices have been moving from strength to strength in 2022, with S&P Global Commodity Insights Platts lithium carbonate gaining 128% since the start of the year to be assessed at $77,000/mt CIF North Asia April 20 and the lithium hydroxide assessment also gaining 159% over the same period to $82,000/mt CIF North Asia. The 30% Co cobalt hydroxide assessment closed at $34/lb CIF China April 20 for spot cargoes aligned to Platts methodology, loading 15-60 days out, up 23% since 2022 began, according to S&P Global.

The US' domestic beverage industry has paid more than $1.4 billion in aluminum tariffs since they were implemented in 2018, which has subsequently inflated prices for producers and consumers, the Beer Institute said April 14. "The fastest way to alleviate these high prices on American businesses and families is to repeal the tariffs," Beer Institute CEO Jim McGreevy said in a statement, adding that the need to remove the duties has now become more critical as Americans face the strain of higher costs for gas and groceries. The Beer Institute said aluminum smelters and rolling mills, including domestic producers, continue to factor tariffs into higher pricing for sales to downstream users regardless of whether their metal is subject to the duty, according to research commissioned by the trade group. "That means US beer and beverage companies, along with many other users of aluminum, are being charged a higher price for the metal, driving up the cost of doing business in the US and making consumer goods more expensive," the institute said. The Beer Institute said the domestic beverage industry paid $1.4 billion in tariffs from March 2018-February 2022 for 7.1 million mt of aluminum. The institute's research showed that only about 8% of those proceeds went to the US Treasury, while North American aluminum producers received the remaining balance "by charging end-users such as US brewers a tariff-burdened price," it added. The Platts spot 99.7% P1020 US Aluminum Transaction Premium was assessed at 40 cents/lb plus LME cash, delivered Midwest, net 30-day payment terms, April 14, according to data from S&P Global Commodity Insights. The premium averaged 26.38 cents/lb in 2021, almost triple the average of 9.01 cents/lb in 2017 before the tariffs were implemented, according to S&P Global data. Beverage producers are exposed to aluminum pricing as they rely on the metal for can packaging. "Imported primary aluminum and can sheet are critical to the US beer industry as more than 74% of all beer produced in the United States is packaged in aluminum cans and bottles," the Beer Institute said. "In 2020, brewers bought more than 41 billion aluminum cans and bottles, making aluminum the single largest input cost in American beer manufacturing." Former US President Donald Trump enacted the 10% tariff on aluminum imports from most countries, along with a 25% steel tariff, in 2018 under Section 232 of the Trade Expansion Act. Since then, some countries have been exempted from the tariff or granted an annual quota allowance for a certain volume of duty-free imports.

Most of market participants expect Brazilian finished steel prices to inch up further in April due to higher costs, increasing export allocations from mills, data from the monthly steel sentiment survey by S&P Global Commodity Insights showed. In the survey of Brazilian producers, distributors, traders and end-customers conducted from late March to the beginning of this month, the index for finished steel price development stood strong at 80 points -- flat from March -- influenced by 76% of respondents expecting additional hikes. In general, readings above 50 are interpreted as bullish, and readings below 50 are interpreted as bearish. A reading of 50 means no change. While producers have cited increasing costs as the reason for the 15% price hikes announced for flats and longs finished steel products, consumers said that in addition to that, mills have also increased their attention and volumes to the export market. The Platts Brazilian domestic HRC price was assessed April 14 at Real 6,275/mt, or $1,335.11/mt, ex-works, excluding taxes, based on a range of Real 6,150-6,400/mt. The Platts Brazil domestic 10 mm rebar price was assessed at Real 4,900/mt, or $1,042.55/mt, ex-works, taxes excluded, based on a range of Real 4,800/mt-Real 5,000/mt. Moreover, sources said mills are already discussing the possibility of a second price increase for mid-April or early May. "Mills are keeping an eye on China to prevent a flood of imported products," one market participant said. As of raw materials, about 70% of respondents also see scrap and coal prices rising further in April, with a general index of 80 points -- down 2.72 points from March. Producers were notably confident on such increasing costs with an index reading of 90. Brazilian ferrous scrap grades have risen 10%-20% since the start of April, while imported coking coal/coke has been limited and subject to Australian and Chinese market fluctuations, S&P Global data showed. "Freight continues to weigh on dealers' operations, and the decrease in supply of automotive scrap contributes to the scenario of lifting prices amid firm procurement," one participant said. As for finished steel production, the index slipped 0.65 to 65.71 -- with 45% of respondents forecasting slightly higher output rates in April. Respondents expected finished steel inventory levels to remain stable in the market chain, with an index reading of 51.81 points, compared with 64.76 in March. "Consumers tried to anticipate purchases in March, aware of the hikes to come in April and possibly in May," one participant said. One buyer confirmed that he replenished his inventories in February-March and thus was not planning any purchases this month.

Markets have been highly anticipating steel demand recovery and more economic stimulus in the coming months, driving China’s steel prices up since mid-March. However, the latest wave of COVID-19 infections in the country poses more challenges to domestic steel demand than steel production. China’s steel production is expected to rise in April, but supply chain disruptions and logistics hurdles across may parts of the country could continue to undermine end-user steel demand. Here are six things to watch in China’s steel sector at a time when the market remains over-optimistic about demand recovery. Steel production to continue rising in April The resurgence of COVID-19 infections in China that started around mid-March and spread across several provinces has not weighed on the country’s steel production prospects in April. China Iron & Steel Association estimated China’s daily crude steel output in March 21-31 to have increased by 4.9% from mid-March to 2.788 million mt/day. Daily crude steel output in March increased to 2.709 million mt, up 1.2% from the average level in January-February despite Tangshan’s city-wide lockdown since March 19. Market sources said the uptrend in China’s steel production will continue in April, especially as Tangshan, China’s steelmaking hub, gradually eased city-wide lockdown since March 28. Tangshan fully lifted social restrictions on April 11, and its steel production is now expected to resume an upward trend, adding extra momentum to China’s steel output growth. “If it were not for the COVID outbreaks, China’s crude steel output in early April should have already reached the level [3.26 million mt/day] of a year ago,” one source said, adding the uptrend in China’s steel output could accelerate in the coming months. New blast furnaces adding fuel to soaring supply Over January-March, China commissioned eight new blast furnaces with a combined 16.64 million mt/year pig iron making capacity, through capacity swaps. But as some replaced blast furnaces have been closed years ago, the commissioning of these new facilities has still led to a net capacity growth of around 6 million mt/year. Surge in China’s steel exports unsustainable Due to strong export order bookings received in March amid the Russia-Ukraine conflict, China’s finished and semi-finished steel export volume were expected to rise in March from February’s 3.91 million mt, market participants said. In April, those export volumes are expected to see a much sharper growth, jumping to around 7 million-8 million mt. But even with the improvement in overseas demand, overall steel exports in April would be just around the level seen a year ago, providing limited upward momentum to the domestic market. In April 2021, China’s overall steel exports were at 7.97 million mt. Moreover, export orders for June shipments have dwindled, as rising Chinese prices have become less attractive and European buyers have now purchased sufficient inventories. COVID-19 restrictions hit domestic steel demand... The latest lockdowns in the COVID-19-affected cities and regions have compounded China’s supply chain and logistical challenges: transportation has been disrupted, workers remain in isolation, and construction activities have been either halted or reduced. This situation is likely to continue as China is adhering to a zero-Covid policy. In northern China’s Beijing and southern China’s Guangdong province, some local sources said transactions of construction steel in early April were just about 80%-90% of the levels of a year ago. With the ongoing city-wide lockdown in Shanghai, the year-on-year decline in steel transactions in eastern China could only be greater than that in Beijing and Guangdong. ... while zero-COVID approach to offset stimulus effect Market chatter indicated China might cut reserve requirement ratio or even interest rate in April, but as the zero-Covid policy continues, restrictions on mobility and transportation could reduce the effect of new stimulus. This was clearly reflected in March when the manufacturing activity contracted for the first time in four months due to the pandemic. China’s debt-laden property sector bites into demand Even without the COVID-19 outbreaks, the slowdown in China’s property sector was already pinching the country’s overall steel demand and it was expected to weigh throughout 2022. More than 60 cities have largely eased restrictions on home buying in early April, but some sources believe property sales were unlikely to bottom out at least until after the first half of this year, and new home starts in 2022 could drop by as much as 20%-30% on the year. Some of the sources also said due to lack of traditional infrastructure projects and high local government debt, the growth rate of China’s infrastructure investment in 2022 was likely to be just at low single digit, far from enough to offset the slowdown in property steel demand. China’s excavator sales in the domestic market, an indicator of construction activity for upcoming months, dropped 63.6% on the year in March, deteriorating from a 30.5% year-on-year drop in February, data from China Construction Machinery Association showed April 8. Despite more favorable polices expected to aid steel demand, factors such as rising steel production in hubs like Tangshan, uncertainty around pandemic-related restrictions and a lackluster improvement in the property sector will remain key indicators of what could be in the store for steel markets in the upcoming months.

In this week's highlights: Oil markets to focus on monthly reports from OPEC and the International Energy Agency, uncertainties around Russian gas continue to preoccupy European markets, and the coal embargo piles feedstock pain on the power sector. OPEC and IEA monthly reports this week (00:10) Russia gas worries continue for Europe (01:00) Coal embargo piles feedstock pain on power market (02:09)

This report is part of the S&P Global Commodity Insights' Metals Trade Review series, where we dig through datasets and digest some of the key trends in iron ore , metallurgical coal , copper , alumina, and steel and scrap. We also explore what the next few months could bring, from supply and demand shifts, to new arbitrages, and to quality spread fluctuations. Prices in Asia's hot-rolled coil, rebar and ferrous scrap markets are likely to remain strong in the second quarter, after surging in Q1, as supply chains are gradually restored and markets continue to price in the impact of Russia's invasion of Ukraine. Suppliers in India, Japan and South Korea have increasingly focused on European steel markets in the wake of the invasion, while Chinese mills are emerging as dominant suppliers in Asia. This trend is likely to continue in Q2 after the EU increased quota volumes for HRC imports from India by 62% and from South Korea by 27% from April 1. The absence of Russian and Ukrainian-origin coils is estimated at around 19% of global supply, analysis of S&P Global Commodity Insights' spot market data for SAE1006 HRC in 2021 showed. Given the absence in the Asian flat steel market of material from Russia, Ukraine, India and South Korea, the return of Chinese HRC in a dominant position is highly likely in Q2. India and South Korea accounted for 10% of observed HRC offers into Asia in Q2 2021, S&P Global data showed, and their shift in export focus in the current quarter is likely to see Chinese cargoes filling the gaps. Another reason supporting the growth in Chinese HRC exports is weak domestic steel demand due to a property market slump that has been exacerbated by a COVID-zero strategy, along with logistical disruptions that have weighed on the manufacturing sector. The spread between Chinese HRC export and domestic prices widened to $52.59/mt March 31 from minus $17.55/mt on Jan. 4, S&P Global price assessments showed, indicating prices were considerably more attractive in the export market. SS400 HRC export prices surged $123/mt or 16% over the same period, outpacing the $52.43/mt or 6.5% rise in domestic prices. Despite lockdowns in Tangshan and Shanghai, the impact on steel production, which has steadily climbed since the Winter Olympics in February, has so far been limited. Do you think Asia's hot-rolled coil, rebar and ferrous scrap prices will remain strong in Q2? #steel #metals #Russia #Ukraine #China #COVID19 — S&P Global Commodity Insights Metals (@SPGCIMetals) April 11, 2022 In addition to expectations of a strong seaborne market in Q2, the outlook for Chinese HRC prices is bullish as domestic demand was expected to increase after the COVID-19 restrictions ease. Nonetheless, demand recovery and prices remain subject to any further supply-chain disruptions from the war in Ukraine and China's handling of COVID-19. Lower supply to sustain billet prices In the billet market, unabated supply concerns and higher production costs due to the jump in energy prices will define prices in Q2. Billet prices in Tangshan rose 13% from the start of Q1 to near the end, while soaring 33% on a CFR Southeast Asia basis over the same period. Seeking to avert risks and sanctions associated with buying Russian billet and the shipping risk with Ukraine billet from the Black Sea, Asian buyers have had to seek alternatives. This led to the number of observed CIS trades dropping to just one in March from three in February and six in January, spot data compiled by S&P Global showed. While domestic steel supply in Q1 was trimmed during the Winter Olympics, pandemic lockdowns in a number of Chinese cities have since led to reductions in overall activity and disrupted logistics. Market participants expect a proper recovery in demand to take place in Q2, if the pandemic situation improves. Given the Russia-Ukrainian conflict has not shown signs of easing, billet market participants are expecting supply tightness to continue in Q2, at a time when construction and infrastructure demand is recovering in parts of Asia. Resistance grows to scrap price hikes The Asian scrap market is poised to see further resistance to price increases in Q2 as steelmakers are squeezed between rising melt costs and limited downstream product demand. Sentiment in the scrap market is set to be further dampened in Q2 by volatile freight prices, spiking energy costs and the upcoming rainy season from late May that are all expected to weigh on construction steel demand across Asia. The higher buy-side resistance in Q2 follows the price of Japanese scrap surging 39.3% quarter on quarter in Q1, with the Platts H2 grade FOB Japan assessment rising to Yen 65,500/mt March 31 from Yen 47,000/mt on Dec. 31, 2021. Rising demand at the start of the year supported the initial spike in Asian scrap prices in Q1, before Russia's invasion of Ukraine on Feb. 24 added more fuel to the upsurge. Shipment delays for western-origin containerized cargoes also increase regional demand for Japanese material, given the latter's advantage of shorter delivery lead times. The weakening of the Japanese Yen against the US dollar in the latter half of Q1 as the US moved to rein in high inflation made Japanese scrap even more attractive for East Asian buyers. Notably, the price of heavy scrap material from Japan was observed to have flipped and unusually become cheaper than lighter scrap material from the US. Likewise, scrap prices in the US and Turkey were also shaken up following the invasion of Ukraine, with exporters of US material eventually eyeing higher price levels from buyers in Asia. The Platts deepsea bulk HMS 80:20 CFR East Asia price surged to a 14-year high of $665/mt CFR March 16, up 33% from Dec. 31, 2021.

Near-term scrap futures contracts on the London Metal Exchange fell sharply in the week to April 7, while trading volumes declined. Platts April contract, as assessed by S&P Global Commodity Insights, was down $8.75/mt at $636.50/mt on April 7. The May contract fell $30.75/mt to $609.50/mt, while the June contract fell $35/mt to $599.50/mt. The backwardated structure over the April-June portion of the forward curve strengthened, suggesting that futures traders on April 7 continued to expect physical scrap prices to soften in the near term. Spot prices for physical imports of premium heavy melting scrap 1/2 (80:20) increased 25 cents/mt week on week to $654/mt CFR Turkey on April 7, as most mills continued to hold back from buying, with limited deals heard at largely unchanged levels. "The market is stable but still silent so that's why prices can decrease a little bit in my opinion, if we don't receive any demand from mills next week -- I think it will be clear next week," a Turkish agent said. LME scrap futures trading volumes in the week to April 7 totaled 22,790 mt, down from 85,690 mt a week earlier. Trading volumes for March totaled 470,890 mt, the highest since May 2020, when they totaled 557,250 mt, as sharp pricing volatility due to Russia's invasion of Ukraine boosted futures activity. Near-term rebar futures contracts also saw strong losses over the week to April 7, in line with scrap. The Platts assessed April contract was down $10.50/mt at $939.50/mt. The May contract fell $16/mt to $929.50/mt, while the June contract dropped $11/mt to $919.50/mt. The backwardation over the April-June portion of the forward curve strengthened over the week, also suggesting that futures traders still expect prices to soften in the near term, albeit still at elevated levels. Turkish physical rebar export prices were stable week on week at $960/mt FOB on April 7, maintaining a range of $955-$960/mt FOB throughout the week, as market participants continued to note that buyers in Europe were willing to accept high prices compared with other export markets. Overall demand was slow as the European safeguard import quota period opened, and European buyers focused on clearing shipments. The total country-specific quota of 86,412 mt for Turkish-origin rebar imports was completely exhausted, while 2,287 mt was awaiting allocation at around 6 pm London time April 6. The ongoing Islamic holy month of Ramadan also put pressure on export demand from regular, non-European markets. Rebar futures weekly trading volumes in the week on the London Metal Exchange totaled 6,460 mt on April 7, down from 14,140 mt the previous week. Trading volumes for March totaled 201,650 mt, the highest since the contract launched, surpassing the earlier record high of 149,700 mt traded in February. The daily outright spread between Turkish export rebar and import scrap was assessed at $306/mt April 7, down 25 cents/mt week on week. Elsewhere, Indian scrap futures, which settle basis the Platts CFR Nhava Sheva shredded scrap assessment, traded 120 mt over the week to April 7, down from 150 mt traded the previous week. The contract has seen a total volume of 4,380 mt traded since its launch in late July 2021.

S&P Global Commodity Insights assessed the second-quarter premium for imported primary aluminum at $172/mt plus London Metal Exchange cash, CIF main Japanese ports, on April 8, down 2.8% from $177/mt in the previous quarter, as demand for the metal in Japan remained weak S&P Global's Platts specifications are for all quarterly settlements on a CIF main Japanese port basis, negotiated before the quarter between two unaffiliated counterparties, for P1020/P1020A 99.7% primary aluminum ingot, with payment in cash against documents, for volumes of 500 mt/month or more under annual frame contracts. The Q2 assessment was on the basis of at least 11 concluded settlements at $172/mt plus LME cash CIF Japan for seaborne P1020/P1020A ingot for loading over April to June, for a volume of at least 500 mt/month. The 11 concluded deals were reported between March 31 to April 6, and the total volume of these trades amounted to a minimum of 19,000 mt/month. There were also 13 settlements reported done in the range of $135-$167/mt between March 10 to April 7. These trades were not deemed repeatable by the close of negotiations, whereby most of the deals reported in April were concluded at $172/mt. The total volume of the 13 trades reported came to a minimum of 9,500 mt/month. In addition, two deals reported closing at $150/mt March 28, as part of the annual frame contract, for less than 500 mt/month were excluded from the Q2 assessment as neither of the deals fulfilled S&P Global's minimum volume requirement of 500 mt/month. The lower Q2 premium versus Q1 was largely attributed to weaker Japanese aluminum demand amid a persistent shortage of semiconductor chips, which has prompted automotive producers in the country to announce production cuts in the upcoming quarter. Also, supply of aluminum in Asia has remained high as China started exporting aluminum coils in late March, market sources said. Downstream demand for aluminum in other parts of Asia has been similarly low. In addition, the Chinese import arbitrage window has remained closed since October 2021, contributing to the lack of support of premiums in the Asian aluminum market. Platts assessed CIF Japan spot premium for 99.7% P1020/P1020A aluminum ingot at $100-$110/mt plus London Metal Exchange cash, CIF Japan, on April 8, up $1/mt on the day.

Asia’s carbon markets are on a trajectory of rapid growth as demand for carbon offsets rises and regional governments work towards net-zero commitments. While turmoil in global energy markets has temporarily shifted attention to energy security, commodity trading hubs like Singapore are pushing ahead with plans to become a carbon trading powerhouse. Eric Yep and Roman Kramarchuk of S&P Global Commodity Insights discuss with Mikkel Larsen , CEO of Climate Impact X, a Singapore-based carbon exchange, on what lies ahead for Asia's carbon markets. More listening options: No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor's Financial Services LLC or its affiliates (collectively, S&P).

With the sheer volume of battery terawatt-hours required to transition the world away from fossil fuels, it is going to require both increased mining and advances in battery recycling to meet demand, a panel of battery industry researchers and executives said March 29.A complete transition to electric transportation will require on the order of 10 TWh of battery production in the next decade, according to Vineet Mehta, director of battery technology and system architecture at Tesla. Taken a step further, to think about getting the entire planet off of fossil fuel consumption, including primary energy consumption, will put total demand close to 350 TWh, Mehta said while moderating a panel at Cambridge EnerTech's International Battery Seminar and Exhibit.At the rate of 15 years in service for a battery, this would require the yearly rate of battery production to be about 15 TWh/year, he noted.Jeff Dahn, a professor at Dalhousie University, said that from a primary production standpoint, all there is to work with to build better batteries is the periodic table and the scale of demand for batteries in the coming years and decades is "mind-boggling" from a natural resource demand perspective.Part of the key to achieving a more sustainable future is working now to create cells that can last longer, as they would not have to be recycled as often and would eventually require less battery production on a yearly basis, he said.Jeff Spangenberger, director of the ReCell Center at Argonne National Laboratory, said that building out this new battery supply chain requires looking at the big picture and designing for sustainability from the start given the demand for resources.ReCell and the Department of Energy are working to see if they can take away some of the obstacles in direct cathode recycling, with a focus on developing cost-effective processing technologies to extract as much value as possible from current and future battery chemistries.JB Straubel, the CEO of battery materials company Redwood Materials, said he sees the future battery supply chain ultimately as a closed loop where recycling is key, but it is still going to require the blending of virgin raw materials to meet demand.Redwood announced in February a partnership with Ford and Volvo to recycle electric vehicle batteries."We can't recycle our way, unfortunately, to 350 [TWh] of installed battery storage on the planet; there just aren't that many of these metals already in the economy that we could recycle to achieve that," Straubel said. "It's going to be a long process of basically overlapping new material mining mixed with ever-growing recycled material content." Challenges with supply chains, metals prices It is going to take a lot of effort to scale up the battery supply chain, particularly from a North American perspective, as with today's cathode supply chain for EVs, almost all refining and material manufacturing is centered in Asia, Straubel noted."The status quo that we have today is not really scalable to where we need to go, not even close I'd say," he said.Additionally, volatility in metals pricing, particularly nickel and lithium, creates challenges to manufacturers as they are looking to reduce the cost of EVs for consumers."You can't predict what the price of nickel will be within 100% these days, so that's definitely a headwind," Straube said.Nickel, which registered a global deficit in 2021, started to experience a price surge after Russia invaded Ukraine in late February. This spiraled into a 250% gain within three days on the London Metal Exchange to reach more than $100,000/mt before the LME intervened March 8 to stop trading, reopening days later in a market subject to price limits. The rapid price spike was attributed to investor speculation.Lithium prices, meanwhile, have seen a steady rise since early 2021 on the back of rapidly increasing demand from the EV batteries sector.Platts assessed lithium carbonate at $74,000/mt March 29, up $1,000 on the day and $2,000 week on week, while lithium hydroxide surged $4,000 on the day and $4,500 week on week to $78,000/mt, according to S&P Global Commodity Insights data.