Battery Metals

Gold futures ended higher Friday for a third consecutive session to book a weekly advance of more than 1%, with geopolitical turmoil and broader equity market weakness helping to underpin gains.

The yellow metal found a haven-related lift from geopolitical worries surrounding Britain’s planned exit from the European Union.

“Gold looks vulnerable to weakness in the very short term from a technical perspective,” said Mark O’Byrne, research director at Dublin-based GoldCore. However, geopolitical risk “should support gold and lead to gains into year end and in 2019.”

Gold for December delivery GCZ8, +0.58% on Comex rose $8, or 0.7%, to settle at $1,223 an ounce, scoring a gain of roughly 1.2% for the week. December silver SIZ8, +0.89% added 11.9 cents, or 0.8%, to $14.382 an ounce, with marking a 1.7% weekly rise.

Palladium futures PAZ8, +1.89% meanwhile, continued their advance to a new all-time high, with the December contract up 1.5% to finish at $1,154.60 an ounce, a day after logging a record close.

“While we remain positive on gold prices going toward and into 2019, gold still seems to lack clear price directionality for the time being, but global jitters are certainly emerging,” said Christopher Louney, analyst at RBC Capital Markets, in a note.

Gold’s moves follow a tumble by equity markets, a recent plunge by oil, growing worries about stresses in the global economy, continued trade tensions and uncertainty over longer term growth trends, Louney noted.

However, while the U.S. dollar remains the strongest and most consistent factor for gold, “it’s likely in our view that correlations with other asset classes will begin to strengthen and re-emerge over the next 6-12 months and thus reassert themselves in gold’s favor,” Louney said. “While new positions may not appear entirely attractive at the moment, they are likely prudent over the longer-term.”

The ICE U.S. Dollar Index DXY, -0.70% a measure of the U.S. currency against a basket of six major rivals, was down 0.4% Friday and for the week. Gold and the dollar often have an inverse relationship.

As for a palladium, R. Michael Jones, chief executive officer of Platinum Group Metals Ltd., pointed out that global vehicle sales are expected to reach 100 million in 2019 and China is “leading that growth with small gasoline engines.” That requires more palladium, he said, which is used in pollution-control catalytic converters on gasoline-powered vehicles.

Still, analysts at Commerzbank argued that palladium’s price rise, pushing the metal up nearly 40% since mid-August, was “excessive.” For the week, it was up 5.2%.

“Thanks to its strong upsurge yesterday, the palladium price has come to within a good $30 of the gold price for a time, something we would not have believed possible just a few months ago,” they said, in a note.

In other metals trade, January platinum PLF9, +0.32% added nearly 0.2% to $846.60 an ounce, while December copper HGZ8, +1.60% rose 1.9% at $2.799 a pound.

Among exchange-traded funds, the SPDR Gold Shares GLD, +0.74% added 0.7%, on track for a weekly increase of 1%.

Over the last two decades, the introduction of lithium-ion batteries has transformed the consumer electronics and electric transport industry. With increasing numbers of e-scooters and e-bikes hitting our streets as well as more vehicles switching to electric power, the lithium mining industry is predicted to struggle to meet this increasing demand. Now scientists are taking a lesson from a Nobel prize in cell biology to try and find new sources for the valuable metal.

Named after the Greek word “lithos” meaning stone, lithium is the lightest metal in the periodic table. Soft and silvery-white, it is a highly reactive and light material, which makes it great for batteries but also means that it doesn’t exist in a solid elemental form. Instead, lithium is mostly found bonded to minerals from which it has to be separated.

Mining for lithium is still a relatively new industry when compared to other mining industries such as gold and copper. Current mining volumes of about 200,000 tonnes per year will need to be ramped up to more than 1 million tonnes by 2025 putting pressure on the mining industry around the world.

Battery grade lithium needs to be of much higher quality than the lithium used in industrial chemicals and producing this high-quality product requires more energy intensive processes, which are expensive to manufacture.

Although there is no shortage of lithium left in the ground to mine, the environmental and economic impact of extraction is starting to become more public. With the concentration of most of the global resource of lithium being available in only a small number of countries, geopolitical factors and relationships between nations are likely to become a factor.

In Australia, lithium is produced by mining hard rocks like granite which contain lithium bonded to other minerals. The rock is crushed then high temperature and chemicals are used through a hydrometallurgical process to separate and extract the lithium from the rock. As rock mining entails clearing land, digging mines and leaving waste rock, a significant amount of energy and land are required to mine lithium.

Known as the “lithium triangle” South American countries produce lithium from naturally occurring salt flats which span across Chile, Argentina and Bolivia.

The salt flats are pumped up out of the ground and left in large pools so evaporation can take place producing a brine.

After a few months, the lithium compound separates out from the other minerals and can then be purified and processed to the quality needed for batteries. Pumping out brine sources has been shown to impact water supplies in desert areas and also requires chemicals and more water for purification.

With these expensive purification processes as well as the limited number of plants that can process the mined lithium product, the worldwide supply chain for battery quality lithium is highly susceptible to bottlenecks.

Now researchers are developing a new type of membrane that can filter lithium out of seawater providing a new way to supply the industries ever increasing demand. Based on the biological cell research on how water and ions are transferred into and out of cells that won the Nobel prize in 2003, the researchers are able to use a sponge-like crystal material with tiny holes that can capture, store and release selected metal ions, including lithium from sea and wastewater. While still in its prototype stage, these new metal-organic framework sponges could help to reduce the

environmental impact of mining for lithium while providing a better and more sustainable way of extracting lithium ions to help meet global demand for an ever-growing industry.

More evidence of softening lithium prices has emerged, with the operators of Western Australia’s Mount Marion mine revealing they will be paid 13 per cent less for their product in the final three months of 2018 than in the previous quarter.

While prices remain strong by historical standards, the $US930 per tonne price agreed for Mt Marion’s spodumene concentrate in the final three months of 2018 was well below the $US1070 per tonne price achieved in the three months to September 30.

It was also weaker than the $US961 per tonne agreed for the same product, which contains 6 per cent lithium, in the three months to June 30.

Industry sources said the prices paid for Mt Marion’s spodumene concentrate were likely to be better than most other Australian spodumene concentrate exporters were getting, given that Mt Marion’s major customer, Chinese company Ganfeng, is also a 43.1 per cent shareholder in the company that operates the mine.

Chris Ellison’s Mineral Resources also owns 43.1 per cent of Mt Marion, while Neometals owns 13.8 per cent.

Disclosure of the price paid for Mt Marion’s product confirms that steep falls in prices for lithium carbonate in China during 2018 have flowed through to the prices paid for spodumene concentrate, which is produced by all of Australia’s seven lithium mines.

Strong demand

Galaxy Resources stopped reporting realised prices for its spodumene concentrate in its quarterly reports this year, but confirmed in October that its “cash margin per tonne of concentrate sold” in the three months to September 30 was lower than the two previous quarters.

The softer prices also come after one of the world’s biggest lithium producers, Chilean company SQM, predicted in August that prices for lithium would slide by up to 10 per cent in the final six months of 2018.

Upon making that prediction, SQM said demand would remain strong but would be overwhelmed by booming supply of lithium from Australia.

Macquarie forecasts that spodumene with 6 per cent lithium will average $US893 per tonne in fiscal 2019 but fall to $US677 per tonne in fiscal 2020, and other analysts expect spodumene to fetch about $US700 per tonne in 2019.

Price transparency in the spodumene concentrate market should improve in 2019, given that three ASX-listed companies have started exporting the product in the past six months.

But with several of those companies selling 100 per cent of their production on long-term contracts, there is unlikely to be a clear daily market or “spot” price for the battery mineral any time soon.

Kidman Resources and SQM may bring Australia’s next lithium mine into production at Mt Holland, so long as the company is successful in an appeal process in WA that is questioning its title over the project.

Kidman chairman John Pizzey was quizzed by shareholders on Thursday over the matter, which under a worst-case scenario could see the company lose ownership of the asset which triggered a 29-fold increase in the value of Kidman shares in the two years to May 2018.

Crucial crossroads

The stock has since lost 45 per cent of its value on uncertainty over its tenure at Mt Holland.

“The company, before I arrived, had very strong legal advice that defending this case was almost a certainty to put it bluntly, and that the warden would find in our favour,” said Mr Pizzey.

“There was an enormous amount of confidence within the corporation and that was valid, that confidence.

“That did not occur, the warden voted against us.”

Mr Pizzey conceded that clarification of tenure at Mt Holland was a crucial crossroads for Kidman.

“There is no doubt that it is a very important issue for the company, because if the minister decides against us, which he could, that sets off another train of events,” he said.

“We have had very good advice, we are optimistic.”

Kidman shares closed 5.5 per cent lower on Thursday, Mineral Resources shares closed 2 per cent lower but Neometals shares closed 2.17 per cent higher.

From the pots and pans on the stove to the wires suspending bridges, metal composites need to account for a variety of strength, malleability, and durability to meet human need. Now, researchers from the Nagoya Institute of Technology (NITech) in Japan have applied three-dimensional crystallography to visualize how individual particles shape up the composites – and how they might be manipulated to make better versions of themselves

“Strength of the composite is controlled by size, spatial distribution, and three-dimensional shape of the particles”, said Dr. Hisashi Sato, an associate professor in the Graduate School of Engineering and in the Frontier Research Institute for Materials Science. He collaborated on this research with Prof. Yoshimi Watanabe.

In making the composites, such as drawing out metal alloys to make suspension wire for bridges, the materials are pressed and stressed to break apart the particles. The particles are then drawn out into a thinner rearrangement, but they must be carefully controlled to avoid losing strength or becoming brittle. This process, called Equal Channel Angular Pressing (ECAP), is referred to as “deforming” the particles of the composite from their original state.

According to Dr. Sato, no one had examined the particle distribution change by images in the deformed composite in three dimensions. Dr. Sato and Prof. Watanabe used 3D microstructural observation and crystallographic analysis to investigate how the particles changed in shape, size, and placement in aluminum-based composites.

They found that the deformed fragments re-distributed on how the scaffolding – the matrix – underlying the composite was broken apart and put back together, such as particles rearranging closer together as suspension wire is drawn out because the surface area is reduced. More than that, Dr. Sato said that the particle distribution in the deformed composite could actually be controlled based on material flow of its matrix.

The researchers also investigated the effects of shearing patterns, or changing the direction of the specimen for each ECAP pass. In attached figure, Route A is the case of specimen with no rotation, and Route Bc is the case of 90-degree rotation, and Route C is the case of 180-degree rotation with 4 passes. They found Route Bc produces the smallest Al-Al3Ti particle fragment.It is considered that the Al3Ti intermetallic particle preferentially fragments at a specific location in the deformation process, which offers another level of control to create better grain.

Previously, according to Dr. Sato, researchers saw that the deformation process for the Al-Al3Ti composite created better grain refiner for the Al casting, but they didn’t understand the mechanisms underlying the improved outcomes. Now, researchers and engineers may be able to design better grain refiner for Al casting with precise control.

“Strength and ductility of the metal-based composite strongly depend on the particle size and the spatial distribution of the particle”, Dr. Sato said. “Understanding the relationship between the particle size, the particle spatial distribution, and the mechanical properties of the composite is important in order to design the composite with higher strength and ductility”.

Copper prices rose for the third consecutive session Thursday, lifted by strong Chinese housing data and hopes for a trade deal between the world’s two largest economies.

Copper for December delivery climbed 1.6% to $2.7525 a pound on the Comex division of the New York Mercantile Exchange. Prices have risen this week, though they are about 16% off their June four-year highs on worries that a slower Chinese economy will crimp demand for materials widely used in manufacturing and construction.

Data released on Thursday showed Chinese housing prices rose in October, though, and some investors think copper consumption will stay relatively steady, potentially leading to supply shortages and higher prices.

“The outlook for copper demand in the mid- to long-term remains robust despite current trade frictions between China and the United States,” said John Meyer, an analyst at SP Angel.

Recent reports that China and the U.S. are making progress on resolving a monthslong tariff fight have led to some optimism in metals markets.

Elsewhere in base metals, aluminum for delivery in three months on the London Metal Exchange fell 0.4% to $1,935 a metric ton. Zinc rose 2.9% to $2,573.50, tin was up 0.5% at $19,400 and nickel added 1.1% to $11,430. Lead dipped 0.2% to $1,949.

Among precious metals, gold for December delivery edged up 0.3% to $1,214.20 a troy ounce. A stronger dollar and higher interest rates have hurt the precious metal throughout the year, pushing it down about 7%. A stronger U.S. currency makes commodities denominated in dollars more expensive for overseas buyers, while higher Treasury yields make gold less attractive because it offers no yield.

Most-active silver futures added 0.5% to $14.145 a troy ounce. Platinum was up 0.3% to $836 and palladium fell 0.2% to $1,108.30.

Palladium futures rallied Thursday, notching a third consecutive session climb and their highest settlement on record as growing global demand for the industrial metal continued to highlight the potential for tighter supplies.

Gold prices, meanwhile, ended higher, shaking off pressure from a stronger dollar to hold on to a week-to-date gain as U.S. and European equities declined.

December palladium PAZ8, +0.09% added $27.20, or nearly 2.5%, to settle at $1,137.40 an ounce. The finish was the highest based on FactSet records dating back to November 1984, topping the previous record settlement of $1,122.80 from Oct. 23.

Sister metal, January platinum PLF9, +0.00% ended at $845.30 an ounce, up $11.50, or 1.4%.

“China needs for palladium is starting to show up,” R. Michael Jones, chief executive officer of Platinum Group Metals Ltd., told MarketWatch Thursday. “We have been predicting this for some time. Look out gold.”

Palladium prices have significantly narrowed their gap with gold prices this year — down to less than $77 an ounce. Earlier this year, gold had traded closer to $500 more than palladium.

On Thursday, December gold GCZ8, +0.02% added $4.90, or 0.4%, to settle at $1,215 an ounce, now up over $13 since Tuesday’s finish at $1,201.40 marked the lowest for a most-active contract in over a month, according to FactSet data.

“We were so focused on [palladium for the electric vehicle market] — 1% of the car market — we forgot about the metals for 99% of the car market,” said Jones. Palladium is widely used in the pollution-control catalytic converters on gasoline-powered vehicles.

Jones pointed out that “palladium is mostly produced as a by product of platinum or nickel,” so “we don’t expect any supply side response quickly to the increasing demands.”

As for gold, the December contract “appears to have rejected the $1,200 level, as it probed below there on Tuesday and Wednesday but managed to close back above it each of those days,” analysts at Zaner Precious Metals said in a daily note. “The rate-hike theme may have played itself out.”

The SPDR Gold Shares GLD, +0.11% traded 0.2% higher.

December silver SIZ8, +0.12% tacked on 18.3 cents, or 1.3%, to $14.263 an ounce, while December copper HGZ8, +0.33% rose nearly 1.4% to $2.747 a pound.

Read: Billion-dollar monthly boost in exchange-traded fund gold holdings offer ray of hope for downbeat metal

The ICE U.S. Dollar Index DXY, -0.11% a measure of the U.S. currency against six major rivals, rose 0.3% at 97.06. The dollar strengthened against the pound as Brexit uncertainty boiled up anew as more senior members of U.K. Prime Minister Theresa May’s cabinet resigned, signaling more turmoil and ahead for her leadership and casting fresh doubts on an orderly exit from the European Union.

The dollar index’s push above 97.57 earlier this week was its highest level since June of 2017, according to FactSet data. The gauge has climbed about 5.5% year to date, partly boosted by expectations for further tightening by the Federal Reserve. The Fed is expected to raise rates next month and has signaled three more increases in 2019. Higher interest rates can boost the dollar and dull demand for dollar-denominated commodities.

Gold, however, has shown resilience, trading 0.5% higher so far this week. Declines in benchmark U.S. and European stock indexes week to date have also helped to boost the precious metal’s investment appeal.

“Reports that the U.S. will hold off on automotive import tariffs for now could be seen as a boost to free trade and therefore supportive to the global economy, and this is supportive to commodities in general,” said analysts at Zaner Precious Metals in a daily note.

“There were also reports of central bank buying, and as we have mentioned earlier this week, ETF holdings are at their highest levels since July, which is longer-term bullish, the analysts said.