London copper prices slipped for a second straight day on Monday in thin pre-holiday trade, as a rally fuelled by optimism over the ‘phase one’ trade deal between the United States and top metals consumer China began to run out of steam.

The London Metal Exchange will remain closed on Dec. 25-26 for the Christmas holiday.

FUNDAMENTALS

* COPPER: Three-month copper on the London Metal Exchange dipped 0.3% to $6,158 by 0259 GMT, after closing down 0.6% in the previous session. The most-traded February copper contract on the Shanghai Futures Exchange fell 0.6% to 48,950 yuan ($6,981.79) a tonne.

* CHINA TARIFFS: China will lower import tariffs on over 850 products from Jan. 1, the finance ministry said.

* CODELCO: Chile’s state copper miner Codelco said on Friday it would cancel a contract awarded in November to a consortium led by Japanese firm Marubeni to construct a desalination plant to feed its northern mines.

* SCRAP: China’s imports of scrap metal in November rose by 6.3% from the previous month to 170,000 tonnes, data released by the General Administration of Customs showed on Monday.

* MERCURIA: Commodity trading giant Mercuria has axed up to a quarter of its Shanghai trading team, including base metal and petrochemical traders, as it looks to reduce the risk in its portfolio, according to three sources with knowledge of the matter.

* ICBC: ICBC Standard Bank has abandoned proposals to shut its base metals business and instead plans to merge it with the precious metals unit to cut costs, the bank told Reuters in an emailed statement.

* RARE EARTHS: The U.S. military plans to stockpile rare earth magnets used in Javelin missiles and F-35 fighter jets, according to a government document seen by Reuters.

Indian shares were largely unchanged in early trade on Monday, with the broader NSE Nifty 50 index hovering near its all-time high, while metals and mining stocks led gains.

Indian stock indexes hit record intraday highs on Friday driven by gains in state-run banks and amid optimism that the United States and China would soon sign a trade deal.

On Monday, the Nifty was up 0.02% at 12,273.65 around 0425 GMT, while the benchmark S&P BSE Sensex was lower by 0.04% at 41,666.38.

“On (the) domestic front, market (is) likely to stay rangebound while FIIs flows, trade deal and domestic reforms (are) likely to set the momentum going ahead,” analysts at Motilal Oswal Financial Services Ltd wrote in a report.

The Nifty metal index climbed 0.77%. Shares in Vedanta Ltd rose 1.9%, while JSW Steel Ltd gained 2% and Tata Steel Ltd added 1%.

GAIL’s stock fell 0.6% after the Economic Times newspaper reported here that India’s department of telecommunications was seeking 1.72 trillion rupees ($24 billion) in past statutory dues from the state-run gas utility.

Shares in oil-to-telecoms conglomerate Reliance Industries Ltd fell 2%.

A court has asked the company and British Gas to disclose their assets after India’s government sought to restrain them from disposing assets, including Reliance’s planned sale of a 20% stake in its refining and petrochemicals business to Saudi Aramco, according to media reports.

Can battery giants recycle half of all precious battery metals?

December 23, 2019 By News Team

Swedish firm Northvolt says it plans to combine mass production of battery cells with recycling. The company, managed by former Tesla manager Peter Carlsson, has created the Revolt programme to achieve this goal.
As a first step, Northvolt is building a pilot plant at the Northvolt Labs site in Västerås. The new site is scheduled to go into operation at the start of next year – with an initial recycling capacity of 100 tonnes per year, handling NMC and NCA lithium-ion chemistries.

Northvolt will also commission a large recycling plant in Skellefteå, where its battery cell factory is located, in 2022. The aim is to recycle around 25 000 tonnes of battery cells a year at this site.

Company ceo Peter Carlsson says both projects are meant to help realise Northvolt’s ambition to use at least 50% of recycled battery materials in new cells by 2030. He adds that EIT InnoEnergy has invested EUR 5.8 million in the Revolt recycling programme.

‘The pilot plant will build on work undertaken over the last two years and provide us the necessary tools to take us to the next level – from research laboratories into the real-world,’ comments Emma Nehrenheim, Northvolt’s chief environmental officer.

She points out the innovative hydrometallurgical treatment was tested and enhanced in close collaboration with researchers at Chalmers University of Technology. This process will be able to extract valuable battery metals like lithium, nickel, manganese and cobalt.

‘It is clear that recycling batteries at end-of-life is critical to delivering a comprehensive model for sustainable lithium-ion batteries,’ Carlsson reasons. ‘With this programme, Northvolt will be able to recover valuable materials from cells and return them to manufacturing flows. Recycling will reduce the need for mining raw materials, improve security of supply and lower the environmental footprint of Northvolt cells by reducing mining-related emissions.’

Beside nickel – which is up more than 20 per cent over 2019 – battery metals like lithium, cobalt and graphite have struggled for traction this year.

Globally, producers have seen billions of dollars collectively wiped from their market caps.

Countless explorers have put battery metals projects on ice and moved on to more palatable commodities, like gold.

Year to date, Benchmark Mineral Intelligence’s lithium, graphite and cobalt price indexes are down 12.4 per cent, 19 per cent and ~38 per cent, respectively.

Vanadium has also well and truly fallen from those lofty +$US35/lb highs from late 2018, last fetching around $US6.8/lb on the Chinese spot market.

But despite the short-term negative outlook for most battery metals going into 2020 (emphasis on short term) there’s still a number of quality small cap players who are successfully swimming against the tide.

Here are some highlights for 2019.

Liontown Resources (ASX:LTR) +239%

Liontown wants to spearhead the next generation of Australian hard rock lithium producers, timing development to benefit from the next tsunami of lithium demand.

Liontown has pencilled in first production for 2024, about the time lithium demand is expected to climb strongly out of its current malaise.

There’s still a lot of work to do, but the numbers from an early December pre-feasibility study (PFS) looked solid.

Liontown says that it expects to improve on these economics even further as part of an upcoming definitive feasibility study (DFS).

Archer Materials (ASX:AXE) +111%

The Archer chart was looking pretty healthy even before the ‘quantum computing/health tech/lithium-ion battery’ play found space in its jam-packed portfolio for a new halloysite-kaolin clay project in September.

Halloysite-kaolin is an aluminous clay used to create high purity alumina (HPA) — among many other things — which is in demand because it helps stop lithium-ion batteries from catching fire.

But that’s probably not Archer’s main game right now.

Over the next 12 months the company aims to accelerate the quantum computing stuff toward commercialisation; patent and develop its graphene biosensors; and progress its Campoona graphite project in South Australia towards development.

Walkabout Resources (ASX:WKT) +102%

Like Liontown, Walkabout has battled weak market sentiment as it progresses the high-grade, high-margin Lindi Jumbo graphite project in Tanzania towards production.

Walkabout has been busy over the past 12 months, signing two binding offtake term sheets and an additional sales, purchase and marketing agreement covering all annual production.

It has also kicked off procurement and manufacture of long lead equipment and started the on-site earth works.

In 2020, the plan is to lock down financing for project development — estimated at a very manageable $US27.6m.

Black Rock Mining (ASX:BKT) +49%

Another Tanzanian graphite play on a very similar path to production – although start up capex for phase 1 is higher at $US116m.

By January this year, Black Rock had secured offtake deals with three customers, representing 85 per cent of proposed steady state annual production of 240,000 tonnes.

Like Walkabout, it’s all about raising development capital in 2020.

Black Rock says a “financing round” will commence in the coming months.

“A number of options are being evaluated including project level equity, conventional African-domiciled debt financing, convertible/hybrid structures and offtake-related financing proposals,” the company says in its September quarterly.

The nickel price bubble is slowly deflating but bears would be advised to tread carefully with a sharp fall in LME inventory threatening a repeat of the time-spread turbulence that rocked the London market in late September.

London Metal Exchange (LME) nickel surged to a five-year high of $18,850 on Sept. 2, from $12,000 per tonne at the start of July, as Indonesia brought forward to a ban on exports of nickel ore to January.

But the exuberance has dissipated with short-term fund money pulling out to leave LME three-month metal around $13,100 per tonne currently.

While nickel may be on the electric vehicle (EV) investment grid because of its use in lithium-ion batteries, an old driver is reasserting itself – namely the state of the stainless steel market.

STAINLESS STAND-OFF

Demand for stainless steel, which accounts for most of the world’s nickel usage, has been “depressing” everywhere but China, analysts at JP Morgan said. (“Metals Quarterly”, Nov. 22, 2019)

The bank is forecasting that stainless steel production in the rest of the world will fall 1.7 million tonnes this year, a contraction of 7% and the sharpest year-on-year decline since 2009.

China appears to be a bright light with production growing 12.6% in the first nine months of 2019, but the only problem is, according to JP Morgan, that production is outpacing demand growth.

Stainless steel stocks are building at China’s exchanges and along the supply chain and prices are falling. Since launching in late September the Shanghai Futures Exchange stainless steel contract has dropped from 15,575 yuan per tonne to today’s close at 13,830.

Chinese production margins have been negative almost the entire year, according to Goldman Sachs, but producers are caught in a “prisoner’s dilemma” and aren’t cutting production to balance the market because each fears losing market share if others don’t join in. (“Metals: The ‘prisoner’s dilemma’ of China’s stainless steel industry”, Dec. 4, 2019).

Capacity utilisation therefore remains high, as does demand for nickel units, a big factor in its outperformance this year relative to its base metal peers.

JP Morgan thinks the Chinese stainless steel stand-off is unsustainable and expects mills to start curtailing production into 2020, while Goldman Sachs is not so sure, arguing that only small high-cost producers will be washed out of the market.

While the two banks agree that what happens next in China’s giant stainless sector is the key to nickel’s fortunes, Goldman expects LME nickel prices to rebound near term but JP Morgan’s view is that fair value over the next year would be $12,000-13,000.

INDONESIAN NUMBERS GAME

The answer to the Chinese question lies at least partly in Indonesia, where the accelerated export ban threatens supplies of a key raw material for China’s stainless mills.

The market is scrambling to work out the impact on supply, given offsetting factors such as higher ore output in the Philippines and higher nickel pig iron (NPI) output in Indonesia itself.

The clue is in China’s monthly trade figures where it is already evident that Chinese buyers, unsurprisingly, are rushing to stock up ahead of the January 2020 ban.

China’s nickel ore imports from Indonesia surged to 2.5 million tonnes in September and to 3.1 million in October from 1.6 million in August.

Imports from the Philippines have also been strong, averaging 3.9 million tonnes per month since August, while those from New Caledonia, another potential replacement supplier, jumped to 341,000 tonnes in November from 187,000 tonnes in October.

Ferronickel imports have more than doubled this year thanks to high-volume flows of Indonesian NPI — classified as ferronickel by China’s customs department — but the buying spree hasn’t extended to refined nickel, of which China was a net exporter in October for the first time since 2014.

Imports of 12,100 tonnes in October were the lowest since March, while exports of 20,400 tonnes were an all-time high, albeit with the caveat that everything that left did so under an “entrepot” customs code, suggesting it had been sitting in a bonded warehouse and was simply re-exported.

LME STOCKS AT CRITICAL LEVELS

The two main destinations for China’s outbound nickel shipments in October were Taiwan (12,300 tonnes) and Singapore (6,900 tonnes).

Both are LME good delivery locations and extreme time-spread tightness at the end of September would have acted as a powerful magnet for physical deliveries into the exchange’s warehouse system.

LME cash nickel was commanding a decade-high premium of $240 per tonne over three-month metal at the start of October, sucking almost 82,000 tonnes of metal into LME warehouses since the start of September, although even more has been leaving.

Headline exchange inventory has fallen to 68,922 tonnes from 152,604 tonnes. Moreover, 42% of that is awaiting physical load-out leaving a mere 39,588 tonnes of what the LME terms “live” tonnage.

Citi analysts note that is very low relative to futures positions. (“Nickel – why you might consider trying to catch the falling knife”, Nov 20, 2019).

“Each LME 3rd Wednesday expiry will be tense since on average the open positions left to roll…are 1.2x the current warrant supply,” the bank said, warning that spread volatility was a new structural reality for nickel.

Nickel is once again being pulled in two different directions with stainless steel demand pushing outright prices down, while EV demand continues to empty LME warehouses.

Time-spreads are where these conflicting forces will likely meet. The LME benchmark cash-to-three-months spread has returned to calm contango over the last couple of weeks but that looks unlikely to last.

Copper prices edged down on Thursday due to some profit taking and caution by investors after a recent rally, boosted by an interim Sino-U.S. trade deal and hopes of improving demand in top consumer China.

Benchmark three-month copper on the London Metal Exchange (LME) fell 0.1% to $6,170 a tonne by 0248 GMT, having gained in eight out of the last 11 sessions. The contract hit its highest in seven months on Tuesday.

The most traded copper contract on the Shanghai Futures Exchange (ShFE) dipped 0.2% to 49,020 yuan ($6,964.16) a tonne.

China’s factory activity showed surprising signs of improvement in November, while the United States and China reached an preliminary agreement to resolve their 17-month-long trade war that hurt global economic growth and metals demand.

However, both outlook for further trade negotiations and China’s longer-term economic performance remained uncertain, capping further gains in copper prices.

FUNDAMENTALS

* COPPER STOCKS: Copper prices were supported by depleting copper stocks in warehouses approved by the LME MCUSTX-TOTAL, which fell to a nine-month low at 160,825 tonnes.

* OTHER PRICES: LME aluminium rose 0.1% to $1,779 a tonne, nickel advanced 0.2% to $13,895 a tonne, zinc rallied 0.5% to $2,313.50 a tonne and lead gained 0.5% to $1,935 a tonne.

* SHANGHAI PRICES: ShFE aluminium rallied 0.6% to 14,140 yuan a tonne, nickel fell 0.8% to 109,170 yuan a tonne, zinc eased 0.1% to 17,890 yuan a tonne while lead climbed 1.1% to 15,040 yuan a tonne.

* ANTOFAGASTA: Chile’s Antofagasta said on Wednesday it had kicked off the environmental permitting process for its $1.7 billion Twin Metals copper, nickel and platinum mining project in the United States.