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Gold prices up for a fourth day amid US debt worries
The gold price rose for a fourth consecutive session on Thursday. It reached a two-week-high as investors sought refuge in the metal of safety amid concerns about the U.S. government’s growing debt burden and its fiscal outlook. As of 0705 GMT spot gold rose 0.3% to $3,324.91 per ounce after reaching its highest level since the morning session. U.S. Gold Futures increased 0.4% to $3326.30. Investors are concerned about the US fiscal situation. "The rally in gold began last week following Moody's downgrade, and continued into this week as the decision was made to pay this large tax bill," Ole Hansen said, head of commodity strategies at Saxo Bank. The dollar is also weak. The gold price correction that has been attempted over the past few weeks or last month seems to have run its course. Moody's lowered the top sovereign credit rating of the United States by one notch, citing its growing debt pile of $36 trillion. The sale of U.S. Treasury Department bonds for 20 years, valued at $16 billion, was met with a lackluster demand by investors on Wednesday. This impacted the risk-taking attitude among Wall Street investors. Market participants are also concerned that the U.S. debt will increase by trillions of dollar if Congress passes Donald Trump's tax-cut proposal. During times of political or financial instability, gold is used to store value. Dollar index is near a two-week low. This makes bullion attractive to other currency holders. Trump's tax and spending bill passed a critical hurdle on Thursday. The House of Representatives voted along party lines in order to start a debate which should lead to an approval vote later that morning. Other than that, silver spot rose 0.3%, to $33.49 per ounce. Platinum rose 0.2%, to $1078.16, and palladium fell 0.7%, to $1030.28.
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Andy Home: US Aluminium smelters compete with Big Tech to get scarce power.
In the United States, it's been 45 years since anyone has built a primary aluminum smelter. Alumax opened the Mt Holly plant, in South Carolina, in 1980. The country now had 33 smelters with a combined capacity of nearly five million metric tonnes of aluminium per year. Six is the number today. Two have been completely curtailed. Mt Holly and two other plants are operating below capacity. The annual production has dropped to 700,000 tonnes. Emirates Global Aluminium is hoping to turn the tide in Oklahoma with a new facility. The new plant joins Century Aluminum which received federal funding from the Joe Biden Administration for a "green" low carbon smelter in the Ohio/Mississippi River Basin. Both projects are facing the same problem. The high power prices have killed most of the country's metal smelters, and the lack of affordable power has discouraged anyone from building a smelter since the turn of the century. The fact that tech companies are willing to pay anything for their data centres, which consume a lot of electricity, makes it difficult for any smelter projects to compete with them for power. No power, no metal Since ancient times, aluminium compounds have been used as dye fixers by the Egyptians and for pottery by the Persians. It wasn't until early in the 19th century, however, that someone figured out how to refine it into metal. Even then it was still a costly curiosity. In 1869, the global production of aluminium was only two tons and it was worth more than gold. Charles Martin Hall, in the United States, and Paul Heroult, in France, independently discovered a solution that involved electrolysing an intermediate product known as alumina. Hall-Heroult is the dominant process for producing metals that are ubiquitous in vehicles, buildings and consumer packaging. It also requires a large amount of power. According to the U.S. Aluminum Association, it takes 14,821 Kilowatt-hours to produce a ton aluminium. A smelter of modern size with an annual capacity of 750,000 tonnes requires more electricity than a city of the size of Boston. It's a huge challenge for primary aluminum producers in the United States, given that the Energy Information Administration has estimated the country to be facing a deficit of energy of 31 million megawatt hours by 2030 and 48 millions by 2035. ALUMINIUM VERSUS AI Matt Aboud is Senior Vice President for Strategy & Business Development, Century Aluminum. He says that the power to build a U.S. aluminum smelter is now available. He explained the problem at last week's CRU Aluminium Conference, held in London. It is that there is no fixed price for a long time, and a smelter would need that to secure its profitability, as well as pay off construction costs which will reach billions of dollars. According to the Aluminum Association, a new U.S. aluminum smelter needs a minimum of a 20-year contract for power at a cost not exceeding $40 per MWh in order to be financially viable. Every smelter is competing with Big Tech. They are both on the hunt for energy in order to power their next-generation artificially intelligent data centres. According to the Aluminum Association report released on rebuilding U.S. Supply Chain Resilience, tech companies are "not limited in what they will pay" for reliable 24/7 electricity. Microsoft reportedly paid Constellation Energy $115 per megawatt hour in order to restart Three Mile Island Nuclear Plant in Pennsylvania. It warned that even reactivating idle aluminium lines would be difficult, given that the average price of electricity in 2023 will be $73.42 per megawatt hour (MWh) for the four states where smelters are located. "WHERE the wind sweeps down the plain" EGA has not yet signed a deal to provide electricity for its 600,000-ton smelter project in Oklahoma. According to a Memorandum of Understanding, signed by the state governor Kevin Stitt, the final go-ahead depends on an agreement "power solution framework" based on a Special Rate Offer from Public Service Company of Oklahoma. According to the EIA, Oklahoma produces almost three times as much energy as it consumes. In 2023, natural gas will account for around half of the electricity generated in Oklahoma. Wind power will make up another 42%. Oklahoma is actually the third-largest wind power state, after Texas and Iowa. To run an aluminum smelter using intermittent wind power, it would require a large amount of grid storage, so gas would be a part of the energy mix. It's better than coal, but it isn't ideal for an industry that collectively tries to reduce its carbon footprint in order to produce "greener" aluminium. DO NOT CHANGE IT! Even if EGA is able to secure a long-term, viable power deal, it will take until the end of this decade for the project to produce its first hot metal. According to projections by the Aluminum Association, by then, 14 new remelt facilities would have been established, bringing the U.S. scrap aluminum demand to 6.5 millions tons. Recycling uses much less energy, usually around 5%, than it does to produce new metal. It also has a lower capital cost. The shortage of scrap is the main obstacle to growth in secondary production in the United States. Only 43% of beverage cans are recycled in the country. This equates to 800,000 tonnes of aluminum thrown away every year. Also, it exports large amounts of scrap aluminium. Exports will increase by 17% annually to 2.4 millions tons in 2024. Most of these are destined for China which is hungry for recyclable materials. To reduce import dependence of a metal classified by all U.S. government agencies as critical, capturing more recyclable material and sending less abroad is a complementary approach. This is also more cost-effective and faster than waiting to find out if EGA or Century will win the fight with Big Tech to get enough power for a new primary melter. These are the opinions of the columnist, who is also an author. Mark Potter edited this article
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Reliance, India's largest solar manufacturer, will start manufacturing modules this year.
Reliance Industries, owned by Indian billionaire MukeshAmbani, will begin production of solar photovoltaic panels this year. A company executive announced the news on Thursday. Partha P. Maitra, Reliance Industries' President of Strategy and Initiatives, said: "We are building three larger factories... to meet the clean energy needs." India is scrambling to reach its clean energy target after failing in 2022. Global Energy Monitor's report shows that the country has increased investments in this sector over the last year. However, it needs to double the capacity additions within the next five to reach its goal of 500 GW of non-fossil energy capacity by 2030. Maitra stated that Reliance plans to increase solar module production to 20 GW annually. He said that the factory's micro-power electronics and battery production will begin next year. If it happens, we will be No. The world's second largest solar PV manufacturer. The executive stated that we will be producing 14% of the total number of solar PV modules outside China. Reporting and writing by Nidhh Verma, Bengaluru; editing by Mrigank Dahniwala.
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Investor's letter: Vietnam cuts retroactively subsidies for solar and wind farms
According to a petition from investors, Vietnam's state-owned power utility has reduced the subsidised prices that it pays for electricity generated by solar and wind farms. These farms now face defaulting on their bank debts. The document was sent to Vietnam's highest authorities on May 16, and follows a letter from the majority of signatories in which they warned that billions of dollars were at risk due to retroactive changes made by Vietnamese authorities to subsidies, even though they were targeting a massive expansion of solar energy capacity. Documents show that, starting with invoices for January, a subsidiary EVN's Vietnam power utility "unilaterally" withheld a part of its payments. It did this by applying a tariff provisional of its own. The report added that "this has caused us breach our commitments to local and international banks, as well as to face the risk default due to monthly debt repayments and cash shortages." The 16 signatories include the private equity fund Dragon Capital and the Vietnamese subsidiary ACEN energy group of the Philippines, as well as investors from Thailand Portugal the Netherlands South Korea Singapore and China. The letter was also signed by dozens of Vietnamese projects. The Southeast Asian nation has seen a boom of renewable energy investments in recent years. This is due to generous feed-in-tariffs (FiTs) where the state agreed to buy electricity at inflated prices for a period of 20 years. Nevertheless, in response to allegations that FiTs were being abused and that EVN was losing money from the subsidy program, the authorities have frozen or reduced some subsidies. EVN did not immediately comment on the second complaint, but in recent weeks it said that preferential pricing could no longer be extended for projects that violated regulations. It was not specified whether the rules had been changed retroactively or which projects were in violation of regulations. Reporting by Francesco Guarascio, Editing by Hugh Lawson
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India's imports of finished steel fell 11.3% in April due to slow China and Japan shipments
India's steel imports in April fell by 11.3% on an annual basis to 0.5 millions metric tons, following a drop in shipments to India from China and Japan. India, which is the second largest crude steel producer in the world, imposed in April a temporary tariff of 12% on certain steel imports. This was locally known as "a safeguard duty" to stop a rush of cheap shipments, primarily from China. The shipments of finished steel from China in April fell by 26.5% to 0.1 metric tons. The data revealed that imports from Japan fell to 85,600 tons, a 60% drop from the previous year. Nitin Kbra, Director Sales and Marketing, Bhagyalaxmi Rollering Mill Pvt. Ltd., a Maharashtra based producer, said: "China's imports have definitely decreased." China's crude output of steel in April fell 7% compared to March. This was contrary to analysts' expectations, who expected a rise due largely to healthy profits and robust international exports. However, production remained high. Data shows that in April, South Korea exported the most finished steel to India. Imports reached 0.15 million metric tonnes, an increase of 2.4% over the previous year. The government reported that the price of India's hot-rolled coils "inched higher" in April due to the imposition the temporary tariff. The data also showed that finished steel imports to France and Germany experienced a sharp increase in April. The imports of finished steel from Germany increased by more than five-fold to 30,600 metric tonnes, while those imported from France increased by 10 times to 30300 metric tonnes. The data shows that India imports most of its plates from France and Germany. Plates are used primarily in heavy machinery manufacturing, construction and transportation. New Delhi was a net steel importer in April. The data revealed that finished steel exports fell by 25.7% to 0.4 millions metric tons in April. The data shows that Europe is the biggest destination for Indian steel. However, shipments to Belgium fell 6% year-on-year in April while exports of finished steel to Italy dropped 60.4%. India's April finished steel production was 12.4 million tons, and crude steel output at 12.9 millions tons.
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Johnson Matthey gains on Honeywell's $2.4 billion unit purchase
Johnson Matthey, a UK chemicals company, announced on Thursday that it had agreed to sell the catalyst technologies division to Honeywell International, for 1.8 billion pound ($2.4 billion), which includes debt. This news pushed its shares by a third. Early trading saw the share price of the company rise 33.6%, to 1856 pences, setting it up for its largest one-day gain yet. Johnson Matthey will streamline the company following pressure from an activist investor and focus on two of its main businesses, which are making pollution filters for automobiles and processing platinum group metals. The company to be sold manufactures and designs catalysts that are used in the production and use of sustainable aviation fuels, fertilisers, and paints. Liam Condon, Chief Executive of Johnson Matthey, said: "We are now going to fundamentally reshape Johnson Matthey and make it a leaner and more focused business." Condon was appointed in 2021, shortly after the company had exited its battery materials division and issued a profit warning. Since then, it has sold its medical devices components business. Catalyst Technologies accounted for about 19% in Johnson Matthey’s total sales during the year ending March 2025. Standard Investments - one of the largest shareholders - urged Standard Investments last December that it should conduct a strategic review, and overhaul its board. JM changed its Finance Director in February and launched a pay review for its executives in January. The British company stated that the deal will generate net proceeds in the region of 1.6 billion pounds. It added that approximately 88% of this amount would be returned to the shareholders.
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Dalian iron ore is a rangebound product as traders consider China's demand and higher shipments
The prices of Dalian Iron Ore Futures fluctuated within a narrow range on Thursday, as investors balanced the resilient demand in China for this steelmaking ingredient against increasing shipments by leading producers Australia and Brazil. The September contract for iron ore on China's Dalian Commodity Exchange ended the daytime trading 0.14% higher, at 727 Yuan ($100.93). As of 0704 GMT, the benchmark June iron ore traded on Singapore Exchange was down by 0.56% to $99.25 per ton. Galaxy Futures, a broker, said in a recent note that the end-user demand is resilient, especially in the manufacturing industry, which continues driving high growth in steel consumption. Hexun Futures said that the capacity utilisation of 104 electric kilns increased by 1.2% on a week-to-week basis to 40.4%. The daily consumption of scrap metal also increased by 3.1%, reaching 245,400 tonnes. Everbright Futures, an iron ore broker, reported that hot metal production, which is typically used as a gauge of demand, was high at 2,4477 million tonnes this week. Hexun said that the total stock of imported iron ore at 47 Chinese ports is 146.28 millions tons, a decrease of 1.74% from week to week. According to consultancy Mysteel, on the supply side the volume of iron ore shipped from mining companies in Australia and Brazil increased by 11.7% over the past week, reaching 27.1 million tonnes. Coking coal and coke, which are both steelmaking ingredients, also fell, by 1.66% each and 0.85% respectively. Mysteel, in a separate report, citing GACC data on May 20, said that China exported 447.800 tons of stainless in April, which represents a 14.1% increase year-on-year. The benchmarks for steel on the Shanghai Futures Exchange remained unchanged. Hot-rolled coils edged up by 0.09%, stainless steel grew by 0.04% while rebar and wire rod declined 0.03%.
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Stausholm, CEO of Rio Tinto, to retire in 2025
Rio Tinto CEO Jakob Stausholm is stepping down in the second half of this year, once a new CEO is named, the company announced on Thursday. A selection process is currently underway. Stausholm was named as the company's top boss for 2020, despite legal, investor and public concerns over the destruction of 46,000-year old Juukan Gorge cave rock shelters. Stausholm replaced Jean-Sebastien Jacques, who had been ousted by Rio Tinto for its handling of the scandal. He will remain at the top of the company until a new leader is appointed. Glyn Lawcock, an analyst at Barrenjoey Sydney, said that the announcement caught the market off guard. Stausholm had only been in office for five years and tenures typically last six. Lawcock stated that "He has done a great job in the soft areas." He said that these included rebuilding relationships following the Juukan Gorge disaster, advancing Rio Tinto’s Oyu Tolgoi Copper Project in Mongolia and restoring its relationship with Chinalco after tensions over their Simandou joint project had strained it. Among the candidates for the top position are expected to be Bold Baatar, current Chief Commercial officer and Simon Trott, head of iron ore. Rio announced in a London Stock Exchange statement that "a rigorous selection process has already begun, led by the Nominations Committee." Stausholm, a Danish businessman, has held positions of leadership at A.P. Shipping Company and Rio. He was also a member of IBM's board of advisors. Moller - Maersk. (Reporting and editing by Savio D’Souza and Jan Harvey; reporting by Rishav Chaterjee and Melanie Burton from Melbourne, and Clara Denina from London.
The global sustainability head at RPT-HSBC Asset Management will depart
HSBC announced on Friday that the top executive in sustainable finance at its asset management division will be leaving the company. This is the latest departure from the bank during a period of restructuring under the new chief executive.
Erin Leonard's departure as global head of sustainability for HSBC Asset management follows that of Celine Herweijer who left the bank at the end last year. The bank is reassessing its environmental, social, and governance policies under Georges Elhedery, CEO.
Both before and after Donald Trump's election, there has been a growing pushback in the United States against ESG. HSBC is one of the mid-sized banks that focuses on international corporations. Many financial firms have reduced their commitments to climate change and other issues. Leonard was the head of HSBC Asset Management’s Sustainability Office. This office, created in 2021, is responsible for managing its sustainable investment efforts and strategy. She was also in charge of the company's diversity, equity and inclusivity initiatives.
A spokesperson for the asset manager stated that the responsibilities of this office had been spread across other businesses in the asset management division. Other sustainability-related initiatives have been consolidated under the Responsible Investment team led by Cathrine de Coninck-Lopez, the spokesperson added. Leonard was also a member of asset manager's Management Committee, but it is unclear if she has been removed. HSBC refused to comment. Elhedery, who assumed the role of CEO six months ago, has made a number of changes to the bank. He has reduced the number senior managers in the bank and reorganized operating divisions.
By the end of 2026, the bank will have saved $1.5 billion annually. This is equivalent to 8% of its total staff costs.
HSBC angered campaigners by abandoning its goal of achieving net-zero emission across its businesses by 2030 due to the slow pace in which the real economy is changing. The bank said on Friday that it is still committed to becoming a zero-emission bank by 2050. It has also begun to review its emission targets and policies.
The bank also hired new executives including Danny Alexander, a former UK politician to lead a new unit that focuses on infrastructure financing and project finance related to the low carbon transition. In 2024, HSBC Asset Management will manage $179 billion of ESG and sustainable investments strategies. It is also a signatory to the Net Zero Asset Management initiative, a U.N. backed group of asset management companies working to align investment to net zero. (Reporting and editing by Virginia Furness, Simon Jessop, and Nia William)
(source: Reuters)