Battery Metals

The benchmark September iron ore on the Singapore Exchange slid 2.81% to $93.5 a ton, as of 0713 GMT, the lowest since November 2022.

Property investment in China fell 10.2% in the first seven months from a year earlier, after dropping 10.1% in January-June. New construction starts measured by floor area fell 23.2% on year, after a 23.7% drop in the first half of the year, official data showed.

The property market remains China’s largest steel consumer despite the sector’s falling share amid the protracted crisis since 2021.

“We think ore prices will have further downside room in terms of valuation given that it has already broken through a key support level of $100 a ton,” analysts at Shengda Futures said in a note.

Steel benchmarks on the Shanghai Futures Exchange posted further losses with sharp price falls souring sentiment, analysts said.

Rebar lost 0.16%, hot-rolled coil fell 1.71%, wire rod dropped 0.83% and stainless steel was flat.

China’s crude steel output in July fell for a second month, declining by 9.5% from June, as many steelmakers carried out maintenance work amid a widening of already negative profit margins.

That brought the total in the first seven months to 613.72 million tons, a year-on-year fall of 2.2%.

Other steelmaking ingredients on the DCE somewhat recovered following sharp declines on Wednesday, with coking coal and coke up 3.52% and 1.18%, respectively.

($1 = 7.1552 Chinese yuan)

Bullion has now rebounded after dropping 0.5% last week and remains in touching distance of an all-time high. For the year, the precious metal has gained almost 20%, largely on expectations of a Fed rate cut this year.

The recent easing of price pressures has boosted policymakers’ confidence that they can start to lower borrowing costs while refocusing their attention on the labor market, which is showing greater signs of cooling.

Markets are pricing in a 49% chance of a 50 basis point rate cut by the Fed in September, the CME Group’s FedWatch tool shows.

However, Fed Governor Michelle Bowman said Saturday that she still sees upside risks for inflation and continued strength in the labor market, signaling she may not be ready to support a rate cut in September.

Investors are preparing for both US producer price and consumer price index numbers due this week, both of which will shed light on inflation in the world’s largest economy. While CPI is expected to show price increases picked up modestly in July, the annual metrics should continue to rise at a slow pace, analysts said.

Along with the rate-cut expectations, gold has also been supported by firm central bank buying globally and robust demand from Chinese consumers.

Gold remains “supported by geopolitical risks and anticipated Federal Reserve rate cuts amid heightened tensions” involving Iran and Israel as well as Ukraine, according to a Monday report from Saxo Bank A/S.

“Every way you look at it, gold now screens as a well-populated trade. The Street is unanimously bullish, but macro fund positioning may now be tapped out without an imminent recession,” TD Securities said in a note.

Following a review prompted by weak lithium prices, Albemarle suspended construction of the A$900 million Train 3 and will idle Train 2, shifting its focus to the ramp-up of Train 1.

Other market players have had their quota of challenges. Tianqi Lithium and IGO Ltd. (ASX: IGO) have struggled to ramp up their Kwinana hydroxide plant, in an industrial area outside Perth, since it was restarted in late 2021.

IGO CEO Ivan Vella told reporters on the sidelines of the Diggers & Dealers Mining Forum in Kalgoorlie this week that although Kwinana’s performance has improved, it remains a difficult operation.

“If we look into the industry, and obviously Albemarle’s decision, it shows you just how challenged it is,” Vella said. “The margins are very low, and there’s a lot of stress on the industry.”

Canaccord Genuity analyst Tim Hoff told MINING.COM other downstream sectors, including nickel and alumina, had felt the same stress.

“I think that’s going to remain really difficult in Australia. We simply don’t have the right cost structures,” he said. “We simply don’t have the right industry structures to really succeed and place our players well.”

Importance of good partners

Liontown Resources (ASX: LTR), which produced in July its first spodumene from its Kathleen Valley mine in Western Australia, is collaborating with LG Energy Solution and Sumitomo on building a downstream facility.

“We are still strong with that element of our strategy,” Liontown managing director Tony Ottaviano said. “We still believe it’s the value-maximizing pathway.”

Ottaviano said the outcome was dependent on partnerships, location of the plant and the product it produced, pointing to Albemarle’s concerns around WA product not being compliant with the US Inflation Reduction Act.

“We won’t have that issue,” he said.

Vella said he wasn’t nervous about the prospect of IGO being blocked from receiving subsidies due from its Chinese partner.

“What we’re trying to do is build Australian assets for Australia, Australian jobs, Australian supply chain, Australian industry that has strength and longevity,” he said.

“Where that capital comes from shouldn’t really be a big determinant of how the government might contribute towards it – that will be something they’ll work through.

“But fundamentally, we have to make the decisions based on a good business case and it has to be competitive on its own right, so if you really live and die on some subsidy, I think that’s a very dangerous place to be.”

Sector’s wish list

While not in lithium, Lynas Rare Earths (ASX: LYC) has recently commissioned a cracking and leaching plant in Kalgoorlie.

CEO Amanda Lacaze identified two key areas governments could address to assist with Australia’s competitiveness and ensure it became a “critical minerals superpower”.

“Uninterruptible power and plenty of it at low costs at low prices in Kalgoorlie is the absolute top of my list,” Lacaze told reporters at a news conference.

“Number two on my list is once again related to here in Kalgoorlie, which is some really significantly improved logistics.”

Vella said the three must-haves were low-cost and reliable green power, good shared infrastructure and productive workforces.

“And the government should be putting real money on the table to help build out that set of energy sources and all of the relevant infrastructure,” he said.

Cannacord’s Hoff said subsidies or handouts weren’t the answer, but there were four things he wanted the government to address: infrastructure, power, mining education and tax reform.

“We need a new port here in WA. We need power to be secure. We don’t need the cheapest power in the world, but we need reliable power where people can build 20-year projects and know that they’re going to have consistent power pricing,” he said.

“We do need some tax reform, and I think there is some room to manoeuvre there, and that’s really the financial incentives we want to see that establishes a strong industry – not just a bubble.”

Innovate to survive

Pilbara Minerals managing director Dale Henderson described Albemarle’s decision as a setback.

“The industry’s got a lot more maturing and evolution to come,” he said.

While Pilbara has a stake in a hydroxide plant in South Korea, it is still working on what it calls a “mid-stream” product, or a lithium salt.

“That’s all about chemical processing at the mine site and bringing onshore value but stopping short or some of the complexity which comes with the full chemical process,” Henderson said.

“There’s more innovation, I think, to come and I think Australia should keep working hard on doing what it can to bring value onshore.”