Articles in Category: Public Policy

China’s rare earth (RE) oxides market is a controlled market — or at least it is today.

There was a time it was the mining equivalent of the wild west with multiple operators. There were once zero controls and, as a result, the sector’s operations led to massive environmental damage.

The authorities stepped in, consolidated the operators and enforced licences.

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Managing the rare earth oxides market

rare earths loaded on cargo ship in China

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Today, Beijing’s Ministry of Industry and Information Technology (MIIT) with the Ministry of Natural Resources sets quotas every half year for how much can be produced.

Market prices remain volatile, though. A half yearly quota set by government officials is not the optimal system to match supply, demand and prices. As the economy bounced back last year, the rare earths market was caught on the hop and prices rose strongly.

Some light rare earths, like praseodymium-neodymium (PrNd) oxide, reached multiyear highs.

As a result, the MIIT relaxed quotas this year. It raised the quota from 66,000 tons in the second half of 2020 to 84,000 tons in the first half of 2021. Prices continued to rise as global demand roared back. China’s exports are also controlled (the country still produces something like 90% of global supply). Grateful producers elsewhere have made up the shortfall.

MetalMiner tracks Chinese rare earths prices on a daily basis and produces a rare earths Monthly Metals Index (MMI) displayed above. After rising strongly in Q1, the index took an unexpected reversal in April and again in May, as my colleague Fouad Egbaria posted at the time.

The index has dropped again for the start of June. This suggests the MIIT’s loosening of production limits has had the desired impact and availability is proving sufficient to meet demand.

Last year, rare earth element refiners operated at just 45% of capacity, the Global Times reported. Even with higher output this year, there is still substantial spare capacity. With exports likewise controlled, producers’ enjoyment of higher output permits look like they will be mitigated by lower prices.

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This morning in metals news: US personal consumption expenditure rose in April; meanwhile, Norsk Hydro is teaming up on an offshore wind project in the Norwegian North Sea; and, lastly, the United Steelworkers asked the Biden administration for clarification on its domestic mining stance.

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US personal consumption expenditures rises 0.5% in April

personal consumption expenditure

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US personal consumption expenditure increased by $80.3 billion in April, or by 0.5%, the Bureau of Economic Analysis reported.

However, personal income decreased by $3.21 trillion, or 13.1%.

Meanwhile, disposable personal income (DPI) decreased by $3.22 trillion, or 14.6%.

Norsk Hydro, Equinor, RWE team up on offshore wind

Oslo-based Norsk Hydro announced it is teaming up with Equinor and RWE on a new offshore wind project in the Norwegian North Sea.

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Before we head into the weekend, let’s take a look back at the week that was here on MetalMiner, which included coverage of the Section 232 tariffs, the recent metals price pullback, China’s warning to commodity speculators and much more:

Each month, MetalMiner hosts a webinar on a specific metals topic. Explore the upcoming webinars and sign up for each on the MetalMiner Events page.

Week of May 24-28 (Section 232 tariffs, price pullback and more)

tariffs overlaid on US currency

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Over three years later, analysis, assessments and calls for removal or maintenance continue to pour in with respect to the former Trump administration’s Section 232 tariffs on steel and aluminum.

In 2018, former President Donald Trump used Section 232 of the Trade Expansion Act of 1962 to impose tariffs on steel and aluminum of 25% and 10%, respectively, citing national security concerns. The administration sought to boost domestic industry and bring capacity utilization rates up to around 80% (considered a barometer of industry health).

With respect to aluminum, the Economic Policy Institute (EPI), in a white paper released this week, argues for the success of the Section 232 aluminum duty.

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EPI: Section 232 aluminum tariff spurred investment, jobs growth

tariffs overlaid on US currency

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Among its primary conclusions, the EPI white paper argues the 10% duty has led to job growth in the sector and increased production.

“Projects, investments, jobs, and capacity are on the rise since the initiation of the Section 232 aluminum tariffs,” the EPI argued. “At least 57 new and expansion projects are in downstream aluminum industries producing extruded (rod and bar, pipe and tube, and extruded shapes) and rolled (sheet and plate) products. These new and expanded facilities will employ more than 4,500 additional workers, generate $6 billion in new investments, and add more than 1.1 million metric tons of annual rolling and extrusion capacity to the downstream domestic aluminum industry.”

Furthermore, the EPI argued US primary aluminum production increased on the heels of the Section 232 tariff.

US primary aluminum production increased by 37.6% from March 2018-February 2020 compared with the previous two-year period, the EPI said.

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It is no secret that, on the whole, Europe was backing a Joe Biden win in the 2020 US presidential election.

A few eastern European countries, like Hungary and Poland, rather warmed to former President Donald Trump’s narratives. However, on the whole, socialist Europe saw more of a kindred spirit in Biden. In that vein, it expected his election would see a thawing of US-EU trade relations.

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US-EU relationship under Biden

US and EU flags

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To some extent, Biden has not disappointed.

A rapid return to the 2016 Paris climate change agreement and last week’s removal of sanctions on the company behind the all-but-completed NordStream 2 gas pipeline from Russia were expected and welcomed.

But two linked and particularly thorny issues remain.

The first is as much commercial as political. We’ve covered it before: the decades-long dispute between Boeing and Airbus over claims and counter-claims of unfair state support and subsidy rumbles on.

In March, the EU and US agreed to suspend all retaliatory tariffs on EU and US exports imposed in the Airbus and Boeing disputes for a four-month period. The pause allows both sides to focus on resolving the dispute.

Arguably, Trump’s hard-nosed approach is what ultimately brought both sides to the table. Biden’s approach may find a solution. Neither side has gained from the sanctions since 2018.

As such, a solution is to everyone’s benefit.

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The phrase “be careful what you wish for” is often used by those who smirk at an unexpected outcome from a decision.

But some in the British Conservative party’s so-called Red Wall – those former Labour or center-left voters who swung behind the Conservative, or center-right, party in supporting Britain’s departure from Europe — must be wondering why the land of milk and honey is not by now the norm.

The industrial middle and north of England overwhelmingly voted for Brexit, as it quickly became termed. Those voters narrowly swinged the vote in favor of leaving, over the wishes of London, the southeast, Wales and Scotland.

But those same voters are increasingly facing several changes that threaten their livelihoods.

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Protectionism and UK steel

First up is a preliminary decision by the UK Department for International Trade to remove a number of products from so-called import “safeguards” adopted from Britain legacy rules in the European Union. The safeguards aimed to protect domestic producers from cheap imports.

The system sets quarterly quotas for steel products that come in with nominal duty. When the country reaches the quota, a massive 25% tariff comes into play to dissuade larger volumes.

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Before we head into the weekend, let’s take a look back at the week that was and the metals storylines here on MetalMiner, including copper price developments, an upcoming MetalMiner webinar and more:

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copper mine

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Week of May 17-21 (copper prices, MetalMiner webinar and more)

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The Democratic Republic of Congo is undertaking a huge, and potentially significant, experiment,  Reuters reported recently.

The effort aims to clean up the DRC’s appalling reputational image as a supplier tainted with all manner of human rights abuses and lack of supply chain transparency. Reuters reports the state, in the guise of a new enterprise called the Enterprise Generale du Cobalt (EGC), aims to assume total control of the artisanal cobalt mining sector. That includes monopoly rights to buy all production.

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Congo and the artisanal cobalt mining sector

map of Africa with Democratic Republic of the Congo highlighted

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The government is working with PACT, a non-governmental organization that works globally to improve the lot of artisanal miners (among other underrepresented communities and minorities).

The model has been piloted at the Mutoshi mine. With PACT’s assistance, some 5,000 artisanal miners have been integrated into a formal structure.

Creating a sustainable and transparent supply chain would certainly remove a barrier to the DRC’s acceptability as a long-term supply source for the world’s major corporations. Ethics of supply chain sustainability is becoming an increasingly critical issue.

There are reputable cobalt suppliers from the DRC, of course.

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This morning in metals news: consultancy GlobalData forecast copper production from the top 10 copper mining companies will rise by up to 3.8% this year; meanwhile, the US Senate Committee on Homeland Security and Governmental Affairs advanced a bill that aims to strengthen Buy American requirements; and, lastly, US import prices rose in April.

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GlobalData: copper production from top 10 companies to rise by up to 3.8% in 2021

copper mine

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Amid a run of record copper prices, increased copper production this year could take some of the steam out of the market.

According to London-based consultancy GlobalData, copper production from the top 10 copper mining companies in the world could rise by up to 3.8% this year.

Meanwhile, output from the 10 companies — which includes Glencore, Antofagasta, BHP and Freeport-McMoRan — fell by 0.2% in 2021, GlobalData reported Thursday.

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The Rare Earths Monthly Metals Index (MMI) fell by 9.8% for this month’s reading.

May 2021 Rare Earths MMI chart

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Biden’s DOE awards $19M in funding for rare earths, critical minerals production initiatives

As MetalMiner contributor Sohrab Darabshaw explained this week, the Department of Energy has awarded $19 million toward 13 initiatives geared toward rare earths and critical minerals production.

“The very same fossil fuel communities that have powered our nation for decades can be at the forefront of the clean energy economy by producing the critical minerals needed to build electric vehicles, wind turbines, and so much more,” Secretary of Energy Jennifer M. Granholm said. “By building clean energy products here at home, we’re securing the supply chain for the innovative solutions needed to reach net-zero carbon emissions by 2050 – all while creating good-paying jobs in all parts of America.”

The DOE’s Office of Fossil Energy’s National Energy Technology Laboratory (NETL) will manage the 13 projects.

The projects cover 12 areas of interest. They correspond to “selected U.S. basins that have the potential to produce rare earth elements and critical minerals.”

The project leaders include Pennsylvania State University, Virginia Polytechnic and State University, the New Mexico Institute of Mining and Technology, and the University of North Dakota, among others.

Electrification and cobalt

Earlier this month, MetalMiner’s Stuart Burns delved into the shift toward electrification in the automotive market.

Namely, he zoomed in on rising EV demand’s impact on materials prices — particularly for critical battery metals, like cobalt. Cobalt prices, like many other metals, surged in Q1 2021.

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