LME rethinks cobalt contract for electric vehicle sector

Date Mar 12 2018 15:22:16 Source:Reuters

    LONDON, March 9 (Reuters) - The London Metal Exchange has abandoned plans for a cobalt sulphate contract for the electric vehicle battery supply chain because pricing for the chemical has historically been based on the metal it is derived from, cobalt industry sources said.

    The exchange is instead looking at offering a cash-settled cobalt metal contract, which will trade alongside its physically deliverable metal contract launched in 2010.

    Interest in battery metals such as cobalt, nickel and lithium has soared over the past year on the automotive industry's ambitious plans to produce electric cars and cut noxious fumes from vehicles powered by fossil fuels.

    However, prices of cobalt sulphate, which alongside nickel sulphate and lithium are used to make the rechargeable batteries used to power electric vehicles, are typically based on the metal plus or minus a dollar amount.

    "The amount depends on whether the sulphate market is in surplus or deficit; there is no fixed formula," one cobalt industry source said.

    "The LME's existing cobalt contract isn't very liquid. A  cash-settled contract could have more success, but there's no reason why we can't two have contracts."

    LME Chief Executive Matt Chamberlain told Reuters last year that the exchange's new cobalt contract was likely to be for cobalt sulphate. 

    "We are investigating the possibility of a cash-settled cobalt contract to expand our offering in battery metals," an LME spokesperson said in response to a request for comment.

    "If we were to launch a new cash-settled cobalt contract it would not be until the end of 2018 or early 2019." 

    The LME recently asked companies that assess traded cobalt metal prices -- Metal Bulletin, Argus Media and CRU Group – to submit proposals to supply prices that can be used as a reference for a cash-settled contract, sources said.  


    "Metal is a smaller part of the cobalt market than chemicals, but this is how the industry has developed over the years," one cobalt producer said.

   Consultants CRU Group estimate that cobalt metal accounted for 36.8 percent of nearly 104,000 tonnes of consumption last year, with the remainder going to chemicals for batteries used in mobile devices and electric vehicles.

    CRU expects the metal component to fall to 32 percent, or about 46,000 tonnes, in 2021 in a market it estimates will total more than 144,000 tonnes.

    Growing dominance of chemicals is mainly due to electric vehicles.

    Volkswagenfor example, last November approved a five-year spending plan to further the German group's goal of transforming itself into a leading force in electric cars.

    Volkswagen is planning spend more than 34 billion euros ($41.80 billion) on electric cars, autonomous driving and new mobility services by the end of 2022. 

    Such ambitious moves by the car sector are why the LME has been consulting with companies in the supply chain – metal producers as well as chemicals, battery and car companies -- about what the industry needs and what is feasible.

    One source said the LME was still looking at lithium, in which the choice is between carbonate and hydroxide, but that the idea of a nickel sulphate contract had been shelved because,as with cobalt sulphate, pricing is based on the metal rather than the compound.   

($1 = 0.8133 euros)


Edited by SHMET

Gold prices flat as rate hike worries ease

Date Mar 12 2018 15:11:39 Source:Reuters

   March 12 (Reuters) - Gold prices were steady on Monday as the U.S. dollar inched lower, with the latest U.S. jobs report easing fears of inflation and faster U.S. rate hikes.

    Spot gold was flat at $1,323.07 per ounce at 0315 GMT. U.S. gold futures  GCcv1  for April delivery were little changed at $1,323.70 per ounce.

    The dollar index  .DXY  against a basket of currencies was down 0.1 percent at 90.038.   

    "The labour report that we saw in the U.S. on Friday has spilled over into this week ... Slowdown in the growth of wages last month has certainly eased concerns about more aggressive rate hikes," said ANZ analyst Daniel Hynes.

    Inflation worries faded after U.S. data on Friday showed nonfarm payrolls jumped by 313,000 jobs last month, but annual growth in average hourly earnings slowed to 2.6 percent after a spike in January.

    Money market traders stuck to bets that the U.S. Federal Reserve would raise interest rates three times this year, with only around a one-in-four chance seen for a fourth rate hike in 2018. 

    A relief rally swept across Asian share markets on Monday in the wake of the jobs report. 

    Inflation concerns generally boost gold, which is seen as a safe-haven against rising prices. But expectations the Fed could raise interest rates to fight inflation make gold less attractive because it is not interest-yielding.

    "We still are somewhat wary on gold short-term as we suspect that the precious metal will struggle on account of a stronger dollar, which we expect to start perking up as we head closer to the (next) Fed meeting," INTL FCStone analyst Edward Meir said in a note. The central bank is due to meet from March 20.

    Spot gold may revisit its March 9 low of $1,312.99 per ounce, as suggested by a double-top and a retracement analysis,  according to Reuters technical analyst Wang Tao.

    Meanwhile, speculators raised their net long position in gold by 4,178 contracts to 161,812 contracts, Commodity Futures Trading Commission (CFTC) data showed.

    Among other precious metals, silver fell 0.1 percent to $16.58 per ounce.

    Palladium was down 0.1 percent at $994.72 per ounce, while platinum  XPT=  was flat at $964.50 per ounce.

Edited by SHMET

China steel exports may fall further in 2018 - top executive

Date Mar 12 2018 15:07:46 Source:Reuters

    BEIJING, March 10 (Reuters) - Chinese exports of steel products may continue to fall this year due to strong domestic demand and reductions in capacity due to environmental commitments, the chairman of state-owned mill Fujian Sangang Group Co Ltd said.

    The prediction follows a 30.5 percent plunge in Chinese steel exports last year to 75.43 million tonnes, as strong domestic prices and high profits at home led to a drop in shipments abroad.

    The supply and demand trends are now more in line following the supply-side reforms "while most of the downstream sectors have shown signs of recovery", Li Lizhang told Reuters on the sidelines of China's annual parliament session on Saturday.

    Demand from property, infrastructure, manufacturing and shipbuilding sectors will increase, he said, while steel supply would also see small pick-up this year compared to 2017.

    China, the world's top steel maker, produced 831.73 million tonnes of crude steel last year. It aims to eliminate around 30 million tonnes of excess capacity as part of Beijing's steadfast effort to curb air pollution.

    Cities across the country are carrying out stringent measures to lower fine particulate matter (PM2.5) readings. The steelmaking hub of Tangshan in Hebei province said it will extend production restrictions for another eight months after current curbs expire next week. 

    Li said production curbs would not be limited to the smog-prone region of Beijing-Tianjin-Hebei: "Other regions will also see restrictions if pollution levels exceed the limits."

    Despite this, steel prices would not see a big fluctuation, he said, as steel mills have already prepared for "the new normal".

    Fujian Sangang, the biggest producer in southeastern China, has a total capacity of 11 million tonnes. It produced 11.19 million tonnes of steel products last year, and plans to produce 10.8 million tonnes in 2018.


Edited by SHMET

China says trade war with U.S. will only bring disaster to global economy

Date Mar 12 2018 15:03:59 Source:Reuters

  BEIJING, March 11 (Reuters) - Any trade war with the United States will only bring disaster to the world economy, Chinese Commerce Minister Zhong Shan said on Sunday, as Beijing stepped up its criticism on proposed metals tariffs by Washington amid fears it could shatter global growth

    After pressure from allies, the United States has opened the way for more exemptions from tariffs of 25 percent on steel imports and 10 percent on aluminium that U.S. President Donald Trump set last week. 

    On Saturday, the European Union and Japan urged the United States to grant them exemptions from metal import tariffs, with Tokyo calling for "calm-headed behaviour." 

    But the target of Trump's ire is China, whose capacity expansions have helped add to global surpluses of steel. China has repeatedly vowed to defend its "legitimate rights and interests" if targeted by U.S. trade actions.

    Zhong, speaking on the sidelines of China's annual session of parliament, said China does not want a trade war and will not initiate one.

    "There are no winners in a trade war," Zhong said. "It will only bring disaster to China and the United States and the world."

    China can handle any challenges and will resolutely protect its interests, but the two countries will continue to talk, he said.

    "Nobody wants to fight a trade war, and everyone knows fighting one harms others and does not benefit oneself."

    Trump's announcement on tariffs underlined concerns about rising U.S. protectionism, which has sparked bouts of turmoil in global financial markets over the past year as investors feared a damaging trade spat will shatter a synchronized uptick in world growth.

    China's metals industry issued the country's most explicit threat yet in the row, urging on Friday for the government to retaliate by targeting U.S. coal - a sector that is central to Trump's political base and his election pledge to restore American industries and blue-collar jobs. 

    The U.S. is the world's biggest importer of steel, purchasing 35 million tonnes of raw material in 2017. Of those imports, South Korea, Japan, China and India accounted for 6.6 million tonnes.

    Trade tensions between China and United States have risen since Trump took office. China accounts for only a small fraction of U.S. steel imports, but its massive industrial expansion has helped create a global glut of steel that has driven down prices.

    The dispute has fuelled concerns that soybeans, the United States' most valuable export to the world's second largest economy, might be caught up in the trade actions after Beijing launched a probe into imports of U.S. sorghum, a grain used in animal feed and liquor. 



    Zhong said U.S. official trade deficit figures had been over-estimated by about 20 percent, and in any case would be a lot lower if the United States relaxed export restrictions on some high-tech goods.

    He also reiterated a previous pledge that China would lower import tariffs on consumer goods including automobiles, as part of an effort to boost domestic consumption.

    Trump believes the tariffs will safeguard American jobs, though many economists say the impact of price increases for users of steel and aluminium, such as the auto and oil industries, will destroy more jobs than curbs on imports create.

    Nonetheless, there is growing bipartisan consensus in Washington, and support within some segments of the U.S. business community, for the U.S. government to counter what are seen as Beijing's predatory industrial policies and market restrictions on foreign firms.

    Trump's administration has said the United States mistakenly supported China's membership in the World Trade Organization in 2001 on terms that have failed to force Beijing to open its economy.

    Diplomatic and U.S. business sources say the United States has frozen a formal mechanism for talks on commercial disputes with China because it is not satisfied Beijing has met its promises to ease market restrictions.

Edited by SHMET

Shanghai steel skids to 3-1/2 mth low after Trump sets tariffs

Date Mar 09 2018 15:49:05 Source:Reuters

    MANILA, March 9 (Reuters) - Chinese steel futures slumped to their weakest since November on Friday after steel and metals associations in China called on Beijing to retaliate against the United States for slapping hefty tariffs on steel and aluminium imports.

    Steelmaking ingredients - iron ore and coke - were also sold off, each dropping about 5 percent.

    While steel shipments from China account for a small portion of U.S. steel imports, any retaliatory action from China and other countries would not bode well for the global economy, analysts say.

    The Chinese steel and metals industry groups appealed to their government "to take resolute measures against imports of some U.S. products" after U.S. President Donald Trump set a 25 percent tariff on steel and 10 percent on aluminium to counter cheap imports, especially from China. 

    "This tit-for-tat situation is not good for the global economy. Across the board, these trade barriers will affect global economic growth," said Helen Lau, analyst at Argonaut Securities.

    The most-active rebar on the Shanghai Futures Exchange fell as much as 4.9 percent to 3,663 yuan ($578) a tonne, its weakest since Nov. 20. It closed down 3.7 percent at 3,709 yuan.

    Trump's move risks setting off a global trade war that could see other countries responding with similar trade barriers on products that may hit the U.S. economy, analysts say.

    "What worries the whole market and investors is what if this is just a beginning? Other countries can implement counter-policies that can make things worse," said CLSA analyst Daniel Meng.

    Apart from trade tensions with the United States, Argonaut's Lau said there are worries over Chinese steel demand.

    "People are also jittery about demand after March," said Lau. "Inventory has built up quite fast and after March a lot of construction activity will resume, so if demand is slower than expectations, there will be further pressure on prices."

    Inventories of construction steel product reached 7.13 million tonnes on Feb. 23, the most since March last year, data compiled by SteelHome consultancy showed.  

    A separate inventory by Mysteel consultancy showed steel stocks at Chinese traders topping 10 million tonnes on March 1.

    Along with steel, the most-traded May iron ore on the Dalian Commodity Exchange lost 5.2 percent to end at 483.50 yuan a tonne, after hitting 481 yuan, its lowest since Nov. 20.

    Amid slow demand, stocks of iron ore at China's major ports reached a record high 159.1 million tonnes on March 2, SteelHome data showed.

    Iron ore for delivery to China's Qingdao port slid 3.4 percent to $73.23 a tonne on Thursday, its weakest since Feb. 1, according to Metal Bulletin.    

    Coking coal futures dropped 3.1 percent and coke fell 4.7 percent.


    ($1 = 6.3406 Chinese yuan)


Edited by SHMET