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Sanctions Against Russia
Gold prices have risen on the back of market uncertainty around the Russian invasion of neighboring Ukraine, increasing 8.7% month over month. Coupled with the devaluation of the Russian ruble, gold margins are expected to increase for Russian gold miners this year. Total cash margins of primary Russian gold operations in local currency are estimated to increase 46.3% year over year in 2022. Between Feb. 23 and March 4, the value of Russian currency decreased from 80.95 rubles to 108.19 rubles per U.S. dollar, because of international sanctions being imposed after the invasion.
In 2021, Russia produced an estimated 9.87 million ounces of gold, making it the world's third-largest gold producer. Significant gold mines include PJSC Polyus' Olimpiada, Kinross Gold Corp.'s Kupol and Nord Gold PLC's Gross. Since 2017, an increasing number of Russian mines have shifted to the lower quartiles of the cost curve on a total cash cost, coproduct basis, with Olimpiada regularly appearing in the 10 lowest-cost gold mines rankings.
The Russian Central Bank raised its key interest rate from 9.5% to 20% Feb. 28, in an attempt to raise deposit rates as a countermeasure to inflationary risks. This puts a squeeze on day-to-day spending in the country, as local costs such as labor, fuel and materials become more expensive. Despite this, we expect most mine sites to continue operating and to absorb these price hikes. As gold prices remain buoyant, mines will continue to benefit from elevated cash margins. The Bank of Russia has confirmed it will resume buying gold on the domestic market. This should enable Russian gold miners to keep operating with the buyer of last resort. This has happened previously, when international sanctions were imposed after Russia annexed Crimea in 2014; the Bank of Russia increased its domestic gold purchases in this manner.
As Russian stocks crash, investors look for safe assets
While current developments do not suggest blanket sanctions directed towards the country's mining sector, markets have reacted negatively to Russia-focused mining companies listed on the London Stock Exchange. Gold miner Polymetal International PLC and steel company Evraz PLC will be removed from the FTSE 100 index March 21 in the first review of 2022.
The share price of Petropavlovsk PLC has also declined significantly, and, along with Polymetal, both companies have had a combined £4.3 billion wiped off their market capitalization in a span of a week. On the back of this drop in share value, BlackRock Inc. has increased its stake in Polymetal to 10%.
Emerging Markets Monthly Highlights: Russia-Ukraine Conflict Causes A Storm Across Commodity Markets
S&P Global Ratings believes that there’s a wide range of channels through which the conflict in Ukraine may affect emerging markets (EMs).READ THE FULL REPORT
Australian Ban of Alumina Exports to Russia to Leave Rusal Scrambling
Australia's March 20 ban on alumina exports to Russia will leave aluminum major UC Rusal IPJSC with a raw material deficit that even alumina giant China will not be able to offset, setting the stage for a worsening global aluminum shortage.READ THE FULL ARTICLE
U.K. Raises Tariffs for Russia's Key Metals, but Minor Impact Expected
The UK introduced additional 35% tariffs on imports of a few Russian metals March 15, which should remove from its market or replace with other origins 720 mt of Russian copper, 3,900 mt of aluminum, 7,600 mt of lead, just over 700,000 mt of iron ore and 110,000 mt of steel.READ THE FULL ARTICLE
Russian Steel Majors Lean on Cost Advantages, Pandemic Experience to Navigate Sanctions
In the face of stiff sanctions, Russian steel companies are capitalizing on experiences gained during the coronavirus pandemic, urgently stepping up their marketing in Turkey and the Middle East, building ties in atypical markets such as Asia and looking for spare parts from outside Europe.READ THE FULL ARTICLE
EU Adds Russia Sanctions to Ban Imports of Key Iron/Steel Products
The European Union and its G7 partners plan to ban the import of key goods in the iron and steel sectors from Russia as part of a fourth wave of sanctions to further isolate Russia and drain the resources used to finance its war in Ukraine, European Commission President Ursula von der Leyen said in a statement March 11.READ THE FULL ARTICLE
Investors Pressure Metals, Mining Companies with Ties to Russia
Investors selling off Russia-focused metals and mining entities following the country's invasion of Ukraine have sharply lowered valuations, while companies with fewer direct ties to Russia have started evaluating their own investments.READ THE FULL ARTICLE
U.S. domestic HRC mill spreads managed to gain some ground on March 18, even with soaring scrap prices during the March buy week. But service centers that were in the spot market were only buying to fill gaps in inventories to meet demand.
The HRC spot market again saw tradable values increasing as mills have raised their prices at the mill, ranging from $1,300-$1,400/st for April production with offers ticking up with the escalation of the Russia-Ukraine conflict affecting input costs and capping imports giving domestics mills a stronger hand again.
Domestic prices were impacted by the import arbitrage situation and have been under strong competition but with price volatility globally the arb has closed and some planned import shipments to the U.S. have been canceled
Lead times have also continued to hold below the 10-year average.
Margins for electric-arc furnace mills in the Midwest have trended down from the start of 2022, as HRC spot prices fell by $200/st during the same time period, as prime and shredded scrap prices both rose by triple digits during the scrap buy week with skyrocketing pig iron prices due to the supply from Russia/Ukraine being cut off and global scrap demand has been improving with the push to decarbonize.
Both busheling and shredded scrap prices were in focus as export prices rose by 43.4% from the start of the year. The Platts HRC-MW No. 1 busheling scrap spread bounced back to $670.54/st and HRC-MW shredded scrap spread rose to $755.36/st. Margins are still down by 30.5% and 26.4% from the start of 2021, respectively.
As the market eyes growth in future scrap consumption from EAF capacity expansions and the push to decarbonize and utilize more scrap in basic oxygen furnaces, demand for flat-rolled steel has continued to outpace supply, and prices have held firm in the Midwest.
Steelmakers Face Soaring Scrap Prices as U.S. Aluminum Supply Remains Tight
U.S. domestic HRC mill spreads managed to gain some ground on March 18, even with soaring scrap prices during the March buy week. But service centers that were in the spot market were only buying to fill gaps in inventories to meet demand.READ THE FULL ARTICLE
Brazilian Steelmakers to Hike April Prices Up to 20% for Flats, Longs
Brazil steelmakers are moving to recover lost margins after a rapid rise in the price of raw materials and semi-finished steel seen since Russia's invasion of Ukraine.READ THE FULL ARTICLE
Thyssenkrupp Warns War May Thwart Stand-Alone Solution for Steel Unit
Germany's Thyssenkrupp said March 16 it expects an impact on its business development as a result of direct and indirect effects of the war in Ukraine.READ THE FULL ARTICLE
China's Jan-Feb Finished Steel Exports Fall 18.8% on Year to 8.234 Mil mt
China's finished steel exports over January-February fell 18.8% year on year to 8.234 million mt, General Administration of Customs data showed March 7.READ THE FULL ARTICLE
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The discount of China's iron ore portside prices to seaborne prices has narrowed $5.87/wmt in a month and was likely to continue shrinking in the second half of March amid lower-than-expected seaborne demand, despite high stock levels at major Chinese ports and expectations of a recovery in domestic steel production in the second quarter.
The spread between port and seaborne prices, after normalizing to the same specifications, stood at $3.49/dmt March 16 after narrowing steadily from $9.36/dmt Feb. 14.
The port price of 62% Fe Iron ore was assessed at Yuan 966/wmt FOT East China March 16, equating to $141.96/dmt on an import parity basis, and the seaborne benchmark 62% Fe IODEX assessed at $145.45/dmt CFR China.
In contrast, the portside market had traded at an average premium of $3.29/dmt to the seaborne market on a 62% Fe basis for seven months in 2021, from late April to early November, and hit a record high of $19.69/dmt on May 10.
The slide from premium to discount coincided with portside stocks rising to 160 million mt in the current quarter from below 120 million mt in Q2 2021, based on observations by market sources, and the spread ended 2021 at a discount of $1.51/dmt.
The portside market has now been in discount to the seaborne market for four months, but that spread was likely to narrow in H2 March as seaborne demand, while strong, was proving weaker than market expectations.
"China iron ore port stocks have started to accumulate since Q4 2021 and reached a peak level in mid-February after the Lunar New Year holiday, at above 160 million tons, which has been the highest level since May 2018 and close to the all-time high of around 163 million tons in 2018," a steel mill source based in Beijing said. "The import loss reached the peak at the same time,"
End-users have mostly deferred port market commitments since the Lunar New Year holiday due to sufficient supply of most iron ore brands, and were mostly now buying on a hand-to-mouth basis.
"We'd like to have traders and re-sellers build stocks on the port for us instead of transferring the title to us to save cost and capital usage," the source said.
"The port market and seaborne market represent slightly different fundamentals, as the port market links to prompt demand and seaborne indices are referring to the cargoes arriving a few weeks ahead," a trader in south China said.
"The port market can move much faster than the seaborne side when the demand surges. Due to the small parcel at typically 5,000 mt to 20,000 mt per deal on port side, the deals are concluded quickly, and the prices can be very volatile during the day," the trader said.
Industrial-Grade Lithium Carbonate Sees Improving Liquidity in Chinese Market
Industrial-grade lithium carbonate saw liquidity improving in the domestic Chinese market for the first time in several weeks as salt lake producers began offering their inventories, market sources said.From the Full Article
Chinese Nickel Sulfate Prices Fall as LME Resumes Nickel Trading
Chinese nickel sulfate offers fell to around Yuan 50,000/mt ($7,870/mt) on March 17, down Yuan 15,000/mt week on week as three-month nickel prices on the London Metal Exchange (LME) stabilized below $50,000/mt on March 16 on newly imposed daily limits.READ THE FULL ARTICLE
China Copper Concentrate TCs Spike on Rising Supply, Smelter Reselling
China spot copper concentrate treatment charges surpassed $70/mt in the week of March 17 after smelter Shandong Xiangguang Group cut production and heavy offers for March-May loading shipments pushed up spot trade levels.READ THE FULL ARTICLE
China's Tsingshan Enters Deal With Bankers to Resolve Nickel Trade Position
China's Tsingshan group, the company in the center of a historic short squeeze on the London Metal Exchange in the week to March 11, said March 15 that it had reached a deal with its bank creditors that would buy the company time to resolve its trading position that forced the LME to halt nickel trading.READ THE FULL ARTICLE
Russian Invasion of Ukraine May Drive EU Back to China as Source for Rare Earths
Russia's war on Ukraine could undermine efforts by the European Union to bolster its rare earth mineral supply and break China's hold on the market.READ THE FULL ARTICLE
Russian Metals Industry's Reliance on China Set to Rise as Sanctions Disrupt Supplies
Russia's metals industry is expected to lean on China as an export market following sanctions for its invasion of Ukraine.READ THE FULL ARTICLE
An energy price spike triggered by Russia's invasion of Ukraine has laid bare supply chain vulnerabilities that could curb global growth in the near term.
Flows of Russian oil, natural gas and coal have been disrupted, driving up prices for available energy commodities. Russian metals and mining companies have continued to make shipments and avoid sanctions despite broad global opposition to their government's war on Ukraine, but higher energy costs have battered Europe's aluminum, nickel and steel sectors, as well as South Africa's platinum miners. Russia's invasion came as prices for many metals were already increasing due to supply tightness for commodities such as aluminum, nickel and coal.
Some metal producers in less affected parts of the world such as the U.S. and Canada benefit from relatively lower energy costs, but they may be unable to quickly compensate for decreased production from higher-cost countries. Mining companies may also be reluctant to expand amid sudden price surges due to the expensive, years-long development process to grow production. The combined commodity and energy inflation is poised to diminish demand for metal-intensive consumer products and drive down global growth, analysts and companies said, though it may also accelerate a move away from fossil fuels by some companies.
"This whole war in Ukraine is going to fuel prolonged and severe inflation globally," said Tom Mulqueen, head of research at Amalgamated Metal Trading Ltd.
Steel, aluminum, nickel get pricey
Recent spikes in energy prices could push more European metals such as aluminum out of the market, analysts and industry experts said. European metal producers are subject to fluctuations in electric costs, which often follow natural gas prices as the region is heavily dependent on Russian supply. Eurometaux, which represents major European metal producers including Glencore PLC and Norsk Hydro ASA, sounded the alarm in a Jan. 18 letter about rising energy costs and resulting cuts to aluminum and zinc production. European gas prices leaped to $67.92 per MMBtu in early March, up 139% from the start of the year.
"Europe is probably the place in the world that will be by far the most impacted," said Jean Simard, president and CEO of the Aluminum Association of Canada. "It's unfortunate, given the situation in Ukraine, but Canada is benefiting."
For steelmakers, the squeeze from rising fuel costs is coming on two fronts as the energy-intensive sector primarily uses either blast furnace or electric arc furnace technology. The former relies heavily on metallurgical coal, while the latter requires other energy inputs such as electricity from a grid.
"It's almost like it's a double whammy," said Ronnie Cecil, an analyst with S&P Global Commodity Insights' Metals and Mining Research team. "You can't escape from this either way. If you're a coal-based steelmaker, you're going to be hit by the massive increase in coking coal prices. If you're an electric arc furnace steelmaker, particularly in Europe, you're going to be fried by the power costs."
In a March 8 note, B. Riley Securities analysts Lucas Pipes and Matthew Key increased share price targets on coal companies producing metallurgical coal due to rising prices.
Tin Soars to Record High, Dives as Investors Cash In and Supply Worries Ease
Tin prices hit record highs March 8 but quickly gave up their gains, mirroring the volatility in the broader commodities market amid Russia's invasion of Ukraine.READ THE FULL ARTICLE
LME Nickel Market Chaos Clouds Pricing, Chills Investment
The London Metal Exchange's two-week-long inability to facilitate the free flow of nickel trades has locked up the nickel market from investment and sowed uncertainty across the metal's supply chain.READ THE FULL ARTICLE
Stuttering LME Nickel Trade Throws Confusion Over Physical Market
Trade in the physical nickel market has slowed down with market participants unsure about how to price deliveries after the London Metal Exchange halted nickel trading and on resumption saw breaker limits hit for several days.READ THE FULL ARTICLE
Consensus Price Forecasts – Russian Invasion of Ukraine Drives Up Metals Prices
Metals and energy markets were shaken by the escalating tensions between Russia and Ukraine throughout February, culminating in Russia's large-scale invasion of its neighbor Feb. 24.Read the Full Article
Russian Govt Directs Metal Companies to Cut Profits, Keep Domestic Prices Low
The Russian government has directed steel and other metal producers to reduce their profit margins on domestic sales to a maximum of 20%-25% in order to keep local prices low, according to a meeting between Russia's deputy minister for industry and steel companies' representatives on March 10.READ THE FULL ARTICLE
China Eyes Nonferrous Metal Exports as Seaborne Prices Soar Amid Ukraine Conflict: Sources
Some China-based producers and traders of nonferrous metals are seeking export opportunities after seaborne prices rose sharply due to the Russia-Ukraine conflict, while losses widened on imports, industry sources said March 4.READ THE FULL ARTICLE
Recent turmoil in the nickel market has been complicated for electric vehicle car manufacturers, spurring EV price rises and encouraging market growth for LFP (lithium iron phosphate) batteries which don't contain nickel, participants at the FT Commodities Global Summit said March 22.
There will be "a significant increase in demand" for cell chemistries that do not contain nickel, said Orral Nadjari, CEO of UK battery-maker start-up Britishvolt. It's possible to foresee a 50:50 mix in battery types between LFP and NMC (lithium nickel manganese cobalt oxide) battery types in Europe by 2030 due to regulatory frameworks being imposed, he said.
"The geopolitical situation means we need to reinvent the supply chain," Nadjari said. "We don't have the supply chain for LFP today in Europe and Europe is struggling with supply chains for NMC at the moment. We're seeing a 25%-35% shift from NMC going forward to LFP chemistry in batteries," he estimated.
More manganese could be added to LFP batteries in order to address market requirements, Nadjari said.
Nickel, which registered a global deficit in 2021, started to experience a price surge after Russia invaded Ukraine Feb. 24. 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.
The nickel market has doubled in size since 2015, with an extra 1 million mt/year out of a 3 million mt/year market coming onto the market from Indonesia, but with this being a type of nickel that cannot be traded on exchanges, said Socrates Economou, head of nickel and cobalt trading, Trafigura.
Electra Battery Materials Looks to Provide Sustainable Nickel Sulfate to North American Battery Value Chain
Electra Battery Metals is looking to provide sustainable nickel sulfate from Canada to the North American battery value chain, which has become increasingly important as battery makers and automakers look for alternative and domestic sources of the metal.READ THE FULL ARTICLE
Around The Tracks: Parts Shortages Stifle Vehicle Production Amid Cutbacks in Russia
The global semiconductor shortage continued to affect vehicle markers production into early 2022.READ THE FULL ARTICLE
Nickel Price Spike During Russia-Ukraine Conflict Could Drive Up EV Costs
Nickel prices jumped after Russia, a top global nickel producer, invaded Ukraine on Feb. 24, threatening to drive up electric vehicle battery costs that were already under pressure from rising raw material prices.READ THE FULL ARTICLE
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