Filter article by
Go Reset

ECONOMIC OVERVIEW September 2017
Sturdy First Half Bumps Expectations

Chinese economic activity has been solid heading further into the second half of 2017. August PMI data was stronger suggesting the manufacturing sector maintained strength. Activity was buoyed by a year-long construction surge, solid retail figures and a rise in exports. The continuing fall of the US currency is an encouraging factor for China and could boost export-oriented sectors in the September quarter. Market tensions soared as North Korea launched a missile over Japan on the 29th of August, with markets expected to closely scrutinize the actions of the US President over the coming months.

READ MORE

METALLURGICAL COAL September 2017
A Precariously-Placed PCI Market

With nearly 8Mt of low-volatile pulverised coal injection (LVPCI) export capacity forecast to exit the market by 2025, a lack of committed new supply exists to replace the exhausted reserves. This impending shortage would increase LVPCI prices relative to hard coking coals, resulting in improved cash margins for producers. In 2017, the top five exporters of LVPCI are expected to account for 45% of the global market, with all holding assets in the Bowen Basin of Queensland, Australia.

READ MORE

LNG September 2017
Dissecting India's LNG Market

India’s increasing demand for natural gas in the fertilizer and power generation sectors has driven prospective buyers to consider new LNG import projects on both the country’s east and west coasts. However, India’s gas operators typically face more downstream risk due to heavy price regulation. This means that India’s LNG spot market, while increasingly liquid since 2015, is highly price sensitive.

READ MORE

ZINC September 2017
Ready to Restart

With the zinc mining industry in a third consecutive year of concentrate deficits, miners are looking to the past to fill the supply gap. Between 2017 and 2019, 1.63Mt of additional capacity will commission. Even with the start up of the MMG’s 170ktpa Dugald River and Vedanta’s 250ktpa Gamsberg mines, 53% of the additional capacity will come from restarted operations. The restarts will depend on each resolving problems relating to processing circuits, orebody challenges or debt levels.

READ MORE

ALUMINIUM September 2017
Sparking Interest in US Smelters

The last few years have seen the US primary aluminium production facing significant cost pressures as depreciating currencies conspire with old technology and high power costs to make producers in other countries more cost effective primary aluminium producers. Which begs the question – is there still hope for US aluminium smelters? The recent interest in capacity restarts from both Century Aluminium and Alcoa, highlights the importance of power cost in the viability of reviving smelting operations, despite outdated technology in use.

READ MORE

NICKEL September 2017
Last of the Giants?

The era of discoveries of large, high-grade nickel sulphide provinces appears to be over. It has been a century since the giant discoveries of Sudbury or Norilsk, each containing nickel approaching 20Mt. The last large, high-grade province discovered was Kambalda in Western Australia in the 1960s, with 5Mt of contained nickel. Recent nickel sulphide discoveries are either low-grade and large or high-grade, small, and very difficult to discover. So where will future nickel come from?

READ MORE

THERMAL COAL September 2017
Indian Summer

The Indian government would like the country to cease importing thermal coal by 2020 and rely exclusively on domestic thermal coal. To this end, Coal India, India’s main producer, plans to reach the ambitious target of 908Mt total production by 2020 up from 580Mt in 2017. This scenario is unlikely, since land acquisitions, environmental clearances and, most importantly, logistics regularly cause Coal India to fall short of its targets, creating an opportunity for 100Mt of imported thermal coal.

READ MORE

COPPER September 2017
Dealing with Impurities

Producers are seeking innovative site-specific methods to remove arsenic and other impurities from copper concentrates, rather than simply blending out the impurities. Codelco has installed an arsenic-removing roaster at its Ministro Hales mine, while Dundee has expanded its specialised Tsumeb smelter, one of the few plants set up for high-arsenic concentrates. Development of hydrometallurgical techniques may offer means of removing arsenic with reduced environmental impacts and capital costs.

READ MORE

IRON ORE September 2017
What's on the Menu?

The iron ore fines spot index prices (CFR North China basis) for 58% Fe and 62% Fe have diverged sharply since the fourth quarter of 2016. The spread ranged from 5% to 15% between 2010 and mid 2016 when it started to climb. Over H1 2017 it has averaged 25% and it has been argued that this new level may be permanent. Of the major iron ore fines exporting countries, Australia produces the largest proportion of the lower grade fines. Analysis of Mineral Resource and Ore Reserve statements of the three big Australian producers indicates their exposure to the spread.

READ MORE

OIL & GAS September 2017
How E&Ps are Adjusting to Low Oil Prices

At US$40-50 per barrel, the global oil and gas industry is not exactly thriving, but three years since the price collapsed it can evidently survive with oil prices around, or even under, that range. International oil companies, however, are still struggling to demonstrate they can cover both the investments needed for stabilizing output and returning dividends to investors, without relying on net asset disposals.

READ MORE

STEEL September 2017
Winter is Coming

The Chinese Central Government’s 2017-2018 Beijing, Tianjin and Hebei Winter Air Pollution Plan mandates a 50% reduction in steel production and a 30% reduction in coke production, based off installed plant capacity. Operations in 26 nominated cities surrounding Beijing and Tianjin, will be ramped up in the coming months to offset the anticipated lost production. In the long term, continued pollution actions will deter greenfield project investment in provinces neighbouring Beijing.

READ MORE

NICKEL August 2017
Trouble in Paradise: New Caledonia

Just over a decade ago, the tropical island of New Caledonia was seen by many as the key to future finished nickel supply. Blessed with abundant nickel resources and the highest average grades of any nickel laterite producing country, major players in the global nickel industry Inco and Falconbridge invested heavily in new capacity. Fast forward to today, and New Caledonia’s nickel industry is on the ropes, with high hopes yet to be realised. How did it get to this?

READ MORE

IRON ORE August 2017
Status of the Iron Ore Pellet Market

The Atlantic Pellet Premium has been less volatile than the Chinese Pellet Premium over the last year and a half. The Atlantic premium gradually increased over 2016, before a step change up in 2017, and has been stable ever since. However, the Chinese pellet premium has seen greater volatility, and in late 2016, it was near the Atlantic Premium due to a shortage of domestically produced pellets in China following a shortage of domestic ferrous feed suitable for blast furnace pellet production. The Chinese Pellet Premium instead generally tracks with the Chinese Lump Premium as blast furnaces in China can often adapt their burden blend to substitute these two products.

READ MORE

THERMAL COAL August 2017
Steaming Along

At 2.8Bt, China’s thermal coal production fell only 2.5% in 2016, although the gap between demand and domestic supply was sufficient to increase imports by 29%. Domestic production is mainly in Inner Mongolia and Shanxi in the north and Xinjiang in the west, whereas coal-fired generation capacity is largest in the eastern and northern provinces. The mismatch results in domestic coal being transported up to 2000km at up to ~US$31/t and competing with cheaper imported coal.

READ MORE

ALUMINIUM August 2017
UC RUSAL - The Aluminium Bear

From 2010 to 2014, United Company RUSAL was the largest aluminium producer in the world. However, after the aggressive expansion of large Chinese companies over the last few years, RUSAL now ranks third for primary aluminium production, but remains the largest non-Chinese producer globally. The company has curtailed old capacity over the last few years but recently has been looking forward to restarting its new smelter project developments using latest in-house high-amperage reduction technology.

READ MORE

COPPER August 2017
Mining the Red Metal Giants

Among the very large copper resources yet to be exploited, Zijin and Ivanhoe’s Kamoa-Kakula in the DRC is expected to be the first to enter production, due to the high copper grades and project momentum. Metalloinvest’s Udokan in eastern Russia is the next most likely project to be developed. Other red metal giant resources are likely to remain undeveloped in the medium term due to environmental, political and technical factors.

READ MORE

ZINC August 2017
Grade Expectations

After a period of steady decline, the average weighted zinc grade of primary zinc mines is expected to increase, from 4.9% in 2017 to 5.2% in 2030. This rise in zinc grade is a function of large low-grade operations closing, such as Sumitomo’s 275ktpa San Cristobal, and the commencement of higher grade operations including Vedanta’s 250ktpa Gamsberg and MMG’s 170ktpa Dugald River. This rise in zinc grade is in contrast to the declining grade trends for both copper and nickel.

READ MORE

METALLURGICAL COAL August 2017
Is History Repeating Itself?

With the premium HCC price forecast to increase 68% in 2017, there are signs operators are prioritising production volumes over cost control. When prices rose during 2009–2011, the largest coal producers employed a similar strategy, resulting in exaggerated cash margin reductions of up to 90% when prices dropped in 2012. With significant 1H 2017 cost increases being reported, will this latest price rise be a case of lessons learned or history repeating itself?

READ MORE

LNG August 2017
A New Market for Downscaled LNG

The recent announcement that Australia’s Pluto LNG would be expanded to meet the small scale onshore market via modular LNG trains, highlights the growing interest in small scale Liquefied Natural Gas (LNG) options. Small scale, modular LNG ranges in size from less than 0.250Mtpa up to 1.5Mtpa per train. What is interesting about Pluto is that the expansion will be situated at the existing Pluto LNG site, providing a number of synergies and infrastructure savings.

READ MORE

OIL & GAS August 2017
Challenges Faced by Australia's East Coast

Australia’s east coast natural gas market has been irrevocably transformed over the past seven years. Facing an unprecedented demand surge from liquefied natural gas (LNG) export plants, producers and consumers have experienced a rapid break from the stable gas market that has ruled for decades. High gas exploration and production costs, and exposure to international markets have had the effect of doubling domestic gas prices from US$4/GJ in 2014 to around US$8/GJ in 2017.

READ MORE

STEEL August 2017
The Induction Reduction

The Chinese Government has enforced the closure of all Induction Furnace (IF) steelmaking capacity, contributing to a spike in Chinese rebar prices. AME estimates that 30-50Mtpa of unreported IF production has been eliminated, which will result in official production numbers rising in the second half of the year. The top 10 producers in China account for less than 30% of total production.

READ MORE

ECONOMIC OVERVIEW August 2017
Summer Slowdown Approaching

Commodity markets were stronger in July, buoyed by stronger China and US data, and a weaker US dollar. However, the outlook for August looks mixed. The northern hemisphere summer holiday period will slow activity and the Chinese construction season will pass its peak. We expect visible inventories to start to build, which should trigger profit-taking, particularly in some of the stronger performing commodities in the bulks and base metals market.

READ MORE

OIL & GAS July 2017
Nuclear's Decline is Good for Gas

Nuclear power accounts for about 20% of electricity generation in the United States. Yet, the sector is facing its biggest decline in years, with an increasing number of nuclear units being retired on economic and environmental concerns. However, bad news for the nuclear power sector means good news for natural gas producers.

READ MORE

METALLURGICAL COAL July 2017
US Resurgence

Spurred by a resurgence in coal prices, US metallurgical coal exports rose 34% in the six months prior to the March Quarter of 2017, and are expected to rise ~10% to 41Mt in 2017. However, other exporting countries have also ramped up their production, resulting in a likely oversupply of metallurgical coal in 2018–2019, and subsequent decline in coal prices. As a higher cost producer at an average of US$86/t in 2017, US mines will be most vulnerable to price falls.

READ MORE

ECONOMIC OVERVIEW July 2017
Late Bounce in June Buoys Sentiment

Commodity markets were somewhat volatile in June, but recovered late in the month as Chinese demand prospects improved and the US dollar weakened. Investor sentiment was a lot more cautions for most of the month, due to disappointing May Chinese manufacturing data. However, the mood dissipated, with a bounce in June activity and a pickup in external demand.

READ MORE

THERMAL COAL July 2017
The Big Five

Almost 25% of thermal coal traded on the international market in 2017 will be sourced from the five largest-volume producers. These companies, led by Glencore, have operations in an array of supply regions, targeting a variety of products and demand markets. While Russian miner SUEK possesses a cost advantage over its competitors, it is the cornering of key demand markets based on product specifications and geographical advantages that has allowed these companies to flourish.

READ MORE

IRON ORE July 2017
Estimating Magnetite Processing Costs

AME’s innovative EVO methodology captures the major segments of each site’s process flowsheet and allows detailed analysis of crushing, milling, gangue rejection and consumable costs and energy consumption. We have compared processing costs by region and segment within a set of 107 magnetite projects globally.

READ MORE

LNG July 2017
US Seeks the Throne

The US is rapidly adding liquefaction capacity and has the potential to dethrone Australia as the world’s top LNG producer by the mid-2020s. Two years ago, the US had essentially zero export capacity, but is now currently on track to possess a liquefaction capacity of 138Mtpa by 2025. The US LNG flood appears imminent, but when and where will it arrive?

READ MORE

ALUMINIUM July 2017
Vale US Primary Aluminium

Historical US primary aluminium production peaked at 4.7Mtpa in 1980, being 30% of global supply. Declines have been continuous, with the current remaining US smelting capacity of 0.8Mtpa on notice from a combination of older technology and uncompetitive power tariffs from 3rd party suppliers. Without intervention, the Trump presidential term may witness the last gasp of the primary US aluminium industry.

READ MORE

COPPER July 2017
Latin American Copper Frontiers

Panama and Ecuador are all set to join the ranks of mined copper producers in 2018. In Panama, First Quantum is developing the 320ktpa Cobre mine and in Ecuador, a Chinese consortium is building the 95ktpa Mirador mine. Ecuador, in particular, is an emerging mining frontier with its copper and gold potential attracting substantial exploration and development investment.

READ MORE

NICKEL July 2017
Nickel Mine Grade Decline

The last decade has seen the average grade of nickel sulphide ore (excluding ore from PGM mines) decline from 1.19% to 0.89%. Grades have declined at existing operations, and low-grade resources such as Talvivaara in Finland have been developed. The only reasonable scenario that could reverse this trend would be the discovery of a new, large-scale, high-grade nickel province.

READ MORE

ZINC July 2017
Big Boppers

The zinc mining industry has seen few large-scale developments since Goldcorp’s 170ktpa Peñasquito mine was commissioned in 2009. This is all set to change in the near term as four projects with capacities between 120ktpa and 400ktpa are poised to be commissioned. However, there are no certainties, as changes in the zinc price, capital expenditure, geotechnical issues and financing could cause further project delays, leaving the market to continue to rely on production from existing mines.

READ MORE

STEEL July 2017
Has POSCO Shown Us Their Hand?

In their failed bid for Arrium, a Korean consortium of Newlake Alliance Management and JB Asset Management flagged their intentions to use POSCO’s alternate ironmaking technology, FINEX. We believe that POSCO planned to convert the Whyalla blast furnace to create a full scale FINEX proof of concept. This article will introduce FINEX technology, explore the benefits of its integration with existing ironmaking infrastructure, and outline the benefits POSCO could reap from ageing ironmaking facilities.

READ MORE

STEEL June 2017
Can POSCO bring FINEX to the mainstream?

A Korean consortium, including POSCO, has emerged as the preferred bidder for Arrium’s steelmaking assets. Arrium has been under the administration of KordaMentha since April 2016. Whilst specific details are yet to emerge, we do know that POSCO plans to invest up to US$1bn to modernise the plant and introduce its patented FINEX technology to Australia.

READ MORE

COPPER June 2017
Capital Intensity of New Copper Mines

The big new Las Bambas, Cobre Panamá, Aktogay and Bozshakol mines have high capital intensities of more than US$7.8/lb of annual copper capacity. Las Bambas has a capital cost of US$6.6bn due to its remote location and the need to construct a new town, while Cobre Panamá’s US$5.48bn capex includes a new power plant and port facility, and processing low-grade ores. Aktogay and Bozshakol also have low-grade ore, which requires greater ore volumes to be processed per tonne of copper.

READ MORE

ALUMINIUM June 2017
Price Volatility and Environmental Scrutiny

Since early May, over 4Mtpa of refining capacity in China has been announced as curtailed, or planned to be curtailed. These stoppages are due to poor profitability in the face of three primary issues—firstly, the falling alumina price with weakening smelter demand; secondly, increasing bauxite sourcing issues and raw material prices; and thirdly, increased environmental scrutiny as inspection teams begin assessing province emissions.

READ MORE

NICKEL June 2017
The Battle to Regain Lost Ground

Australia’s nickel industry is in decline, losing market share as production declines, reserves are exhausted, and operations lose cost competitiveness. Recent times have seen several major closures as operations have been unable to remain economic in a period of depressed nickel prices. Will Australia’s nickel industry retreat quietly into insignificance, or will it find new ways and opportunities to regain lost ground?

READ MORE

ZINC June 2017
Mississippi Valley Type Zinc Deposits

Mississippi Valley Type (MVT) zinc deposits have long been a stable source of high-quality, high-grade zinc concentrate, accounting for 5% of global mined zinc. However, over the next 15 years, AME expects many large long life MVT mines to close, reducing the amount of clean zinc concentrate available. New mines on MVTs are not expected to replace the lost production as a lack of suitable deposits and high operating costs limit the number of MVTs being developed.

READ MORE

LNG June 2017
Spreads Tighten as Gas Markets De-Link from Oil

The oil price crash has reduced the gas spread between Europe, Asia and the US over the past few years. Going forward, the rise of hub-priced US LNG will keep gas spreads closely aligned to Henry Hub prices going forward. We expect smaller spreads will benefit companies with geographically diverse and flexible portfolios as arbitrage profits shrink.

READ MORE

IRON ORE June 2017
Status of South African Iron Ore Production

South African production is derived from four deposits in the Northern Cape, with a unique and complex history of formation. High site and transport costs to export markets are partially offset by the quality of the products. However, replacement of these deposits remains a crucial issue for the long-term sustainability of the industry.

READ MORE

THERMAL COAL June 2017
Optimism Renewed

With price increases in excess of 15% in 2016, and global export thermal coal demand anticipated to rise 5% in 2017, optimism has returned for thermal coal producers eyeing expansion plans in order to take maximum advantage. Export capacity additions are forecast to total 155Mt over the next three years, with over 75% destined for the Asian market. The two largest thermal coal exporters, Indonesia and Australia, are expected to remain dominant, accounting for ~60% of capacity additions from 2017–2019.

READ MORE

OIL & GAS June 2017
What Can Shale E&Ps Oil Hedging Positions Tell Us

US E&P companies have increased crude oil hedging by almost 50% from 2Q 2016 to 1Q 2017. Indeed, the majority of US companies have hedged part of their production for 2017. The increase in shale production in recent years can be seen in the WTI futures market. While open interests reach record high levels, long-term future contracts are steadily falling.

READ MORE

ECONOMIC OVERVIEW June 2017
China Stabilising after Strong March Quarter

Macro conditions looked mixed in May, but a ramp-up in June Quarter construction activity saw most indicators point to better demand conditions. The data looked blurred because of a strong Chinese March Quarter, stimulated by near record loan activity in the December Quarter of 2016. On the flipside, the US started to recover from a slow March Quarter, and the Euro economies breathed a sigh a relief from a conformist French election win.

READ MORE

METALLURGICAL COAL June 2017
Resource Reservations

China’s metallurgical coal imports are expected to rise 10% in 2017 to 65Mt. In 2016, the country produced 1Bt of ROM metallurgical coal, mainly higher volatile semi-soft and semi-hard coking coals. Despite export prices rising sharply in 2016, China’s hard coking coal (HCC) ROM production was proportionally less than either its HCC coke mix requirements, or its HCC resources, indicating China is importing to conserve its own resources or obtain better quality and lower cost coal.

READ MORE

STEEL June 2017
Modi-fying India’s Steel Industry

India recently released its National Steel Policy 2017, highlighted by a significant downgrade to its forecast of steel production growth. The new production target of 300Mtpa of capacity by 2030 brings India’s vision in line with AME’s forecast that we have maintained for the past 2 years. However, even if this ambitious target is met, India will still fall well short of the average steel production and consumption rates expected of a developing economy.

READ MORE

COPPER May 2017
Rising Energy Costs

Despite producer efforts to improve energy efficiency and reduce costs, energy use in copper mining is rising. As global mined copper output increases, ore grades decline, open pits get deeper, ore gets harder and use of seawater is more widely adopted, total energy demand and energy used per tonne of copper produced are increasing. BHP Billiton’s Escondida faces higher energy demand when its new desalination plant is commissioned and three concentrators are operating from late 2017.

READ MORE

NICKEL May 2017
The Changing Shape of China’s NPI Industry

China’s NPI Industry has proven very resilient in the face of low prices over the past two years, despite NPI operations being widely considered marginal swing producers. While this is somewhat true, many of the larger and more integrated operations have continued operations as smaller higher cost operations have left the market, leading to industry consolidation in the face of increasing challenges including declining ore grades.

READ MORE

ALUMINIUM May 2017
Changing Landscape of Alumina

China’s increased aluminium smelting capacity over the last 15 years has been supported by the development of significant domestic alumina capacity to satisfy the Smelter Grade Alumina (SGA) demand. This change in geographic aluminium production, along with energy costs and raw materials supply sources, has had a major impact on alumina producers outside China. The last few years have seen these competitive pressures lead to curtailments and product changes in a number of previously established SGA suppliers.

READ MORE

ZINC May 2017
In the Penalty Box

The 2017 benchmark zinc treatment charge is US$172/t of concentrate. Spot treatment charges are US$30-40/t. The global zinc concentrate market is forecast to be in a 108kt deficit in 2017. Chinese smelters are threatening extended maintenance periods. These market dynamics are causing pain for smelters as they try to secure concentrate feed. The last point of negotiation for concentrate deals could be concentrate penalties.

READ MORE

COAL May 2017
Glencore Settles with Tohoku at US$85/t

Reports have come out today that Glencore and Tohoku Electric have concluded contract negotiations for the 2017–2018 Japanese financial year, at US$85/t FOB Australia. Tohoku previously settled contracts with other miners at US$81–84/t. Settlement talks were delayed as the market awaited clarity following Cyclone Debbie, and while Glencore held out for a price above US$90/t. Glencore conceded, but should still be satisfied.

READ MORE

OIL May 2017
Nigeria's Oil Uncertainties

Nigeria’s oil production still 1Mbpd below 2011 peaks despite increased production in Q1 2017. Political deadlock about the new Petroleum Industry Bill has seen capital investment levels and number of new projects decrease since 2008. Proposed greenfield developments in the pipeline require a break-even price of US$60¬90/bbl. Currently, there is 800kbpd in future projects that remain unsanctioned.

READ MORE