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Andy Home: China tightens its grip on global nickel supplies with Anglo's sale
Anglo American’s sale of its Brazilian Nickel business to China’s MMG Ltd. is a win-win for both companies. Anglo delivers on its shareholders' promise to simplify its portfolio, and pockets up to $500m. MMG, a producer of zinc, copper and cobalt, can diversify and grow its geographical footprint by expanding into Brazil. The market for nickel is one of the few that has shown signs of resilience in the face of a glut. It's not good news for western countries that want to escape China's tightening of the global nickel supply chains. China already controls around 75% the refining capacity of Indonesia, which is rapidly emerging as the world's biggest supplier. China's dominance of the nickel market could grow even more as two other Western producers look to sell their nickel operations because of low prices. Price Devastation Anglo's Brazilian assets include two mines and processing plants, with a combined annual capacity of 40,000 tons of nickel. The two plants produce ferronickel, a metal that is used in the production of stainless steel. Stainless steel remains the biggest consumer of nickel, despite its increasing use in batteries for electric vehicles. The nickel market in this segment was the first to be affected by the Indonesian production boom. This initially took the form of nickel pig iron, a stainless steel competitor. These Class II Nickel products are always sold at a lower price than the Class I high purity refined metal that is traded on the London Metal Exchange. According to MMG's investor presentations on the deal, Indonesia's production boom caused the discount from LME prices to soar from an average of 8.4% in 2001 up to 27.2% by 2023. The LME was also falling, which was bad news for Class II producers. According to Macquarie Bank's Jim Lennon, around half of ferronickel production in the world outside of China or Indonesia has been suspended. CARBON EDGE Anglo-Brazilian operations is among the survivors. The nickel price on the London Metal Exchange has fallen to a four-year low of less than $16,000 per tonne. Anglo's Ferronickel is sold at a higher price than other Class II products because of its superior quality and environmental credentials compared to Indonesian NPI. The carbon footprint has become more important in the stainless steel sector. Carbon Border Adjustment, a tax on imports with higher carbon content, will be implemented by the European Union next year. TURNAROUND The Class II nickel market has turned around, even as the LME Nickel price continues to fall under the weight rising inventories, largely Chinese and Indonesian. According to MMG, the discount on the LME Nickel price has decreased by an average of 25% in the first half last year. The discount for Anglo nickel material has decreased to 15.9%, down from 20.8% by 2023. The closure of large capacity in the West, as well as a shift in product mix in Indonesia have both impacted the supply. Many Indonesian operators switched from producing NPI in the stainless steel sector, to either producing nickel matte or mixed hydroxide in the battery sector. Macquarie’s Lennon believes that the Class II segment was best balanced in the last year, as the surplus Indonesians transferred to the Class 1 segment. This glut can be seen in the LME warehouse stock, which has risen by 30,000 tons this year, bringing it to 192 828 tons. STRATEGIC METHAL MMG believes that the glut of stainless steel will not last past this decade. This is when the combination of a steady increase in global production and a surge in demand for batteries will lead to soaring supply deficits. The company would be in a good position to reap the benefits if it did. Anglo's Nickel assets are located on the third largest nickel resource in the world, which could transform MMG into the largest producer of the metal outside of Indonesia. Although the Brazilian operations produce ferronickel at the moment, they could easily be re-configured in the same way as the Indonesians and produce battery components. China still views nickel as a strategic metal, even though its lustre has diminished in the West. Vale, a Brazilian company, has announced a $1.4bn impairment on its Thompson Nickel operations in Canada. Vale also launched a review of their business. Thompson nickel is not the only nickel-related asset that could be acquired by Chinese investors. South32, an Australian miner, also plans to sell off its Cerro Matoso ferronickel operation in Colombia in response to "structural changes in the nickel markets", it stated in its Q4 report for 2024. These structural changes were brought about by Chinese investments in Indonesia. China is now able to double down on the long-term bet it has made that nickel will still be a key metal in the energy transition due to the supply tsunami and price crash. The author is a columnist at
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Minister: Nuclear power projects supported by the US in Romania should not be included in election disputes
Romania's Energy Minister said that recent criticisms from members of the Trump administration regarding a cancelled elections should not affect Romanian nuclear projects supported by U.S. firms. The Romanian top court annulled the presidential elections in December on the suspicion of Russian interference, which Moscow denied. Elon Musk, a tech billionaire and vice president of the United States, singled out Romania in a broader criticism of Europe that points to possible policy shifts. Nuclearelectrica, a Romanian nuclear power company owned by the Romanian government, signed a 3.2-billion euro contract for main engineering to build two nuclear reactors of 700 MW each before 2032. The consortium included four companies including U.S. Fluor Corporation as well as Sargent & Lundy. Nuclearelectrica plans to build a small modular nuclear reactor (SMR) by 2029, possibly for the first time ever in Europe. The technology will come from NuScale Power. The U.S. EXIM Bank, and International Development Finance Corporation committed funding for the project. When asked if the criticism from the United States of Romania would affect ongoing projects, Energy minister Sebastian Burduja replied: "Not in our view." He said: "These projects are involving large American companies, and we believe it's in the best interest of the United States to continue these projects regardless of any political context." Burduja announced that Romania will hold a second auction for 3.5 GW solar and wind projects, funded by a Contract for Difference (CFD) scheme supported by European Union funds. The tender is expected to take place in the first six months of this year. The Modernisation Fund is a program under the European Green Deal that supports 10 EU member states with lower incomes to upgrade their energy systems. (Reporting and editing by Kirby Donovan; Luiza Ilie is the reporter)
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90 % of LME Aluminium inventories are controlled by a single party
According to LME data released on Monday, one party controls up to 90% (or half a billion dollars) of the available London Metal Exchange aluminium inventories. The exchange doesn't reveal the identities of those who hold large positions. However, investors and traders often keep inventories in order to take advantage of looming shortages, or to fulfill commitments made to customers. Alastair Muuro, senior strategist for base metals at broker Marex, said: "It would seem a reasonable assumption that the trader is looking to fill a short of metal. Munro said that this is reflected by a recent spate of new cancellations at LME warehouses - 32 175 metric tonnes in one week - where owners have given notice of their plans to remove the metal. LME positioning data (0#LMEWHL>) showed that between 80% to 90% of LME inventories for metals used in transport, packaging and building were held by a single party as of 20 February. Hong Kong Exchanges and Clearing, which owns the LME, did not respond immediately to a comment request. The total LME stock of aluminium is 535,900 tonnes, but LME's position data is based on the inventory that has not been cancelled, i.e., those that are earmarked for shipment, which amounts to 208,400 tonnes. At the LME Cash Price, 90 percent of these stocks were worth $505 million. The benchmark LME three-month aluminium price reached its highest level in almost nine months, at $2 736 per ton on Friday. This was in response to a European Union decision to ban Russian primary aluminum imports. LME Stocks Overall Since May of last year, the price of aluminium has halved. This suggests a tighter market. The premium for cash LME Aluminium over the benchmark contract of three months is also reflected. On February 17,, the price of a ton reached $38. This was the highest closing price since May 2023. The premium (also known as backwardation) usually indicates a shortage of short-term inventory on the LME. LME data showed that between 80 and 90 percent of zinc inventories were held by a single party on February 20th, worth approximately $370 million. However, the LME zinc spread did not show any backwardation. The LME inventory of the main metal used for galvanizing iron has fallen Analysts have predicted a global surplus for this year. (Reporting and editing by David Evans; Additional reporting by Polina Devtt, Pratima Dasai, and Eric Onstad)
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Meloni, an Italian company, has secured a pledge of investment worth 40 billion dollars from the UAE.
At a Rome bilateral summit, the United Arab Emirates announced that it plans to invest 40 billion dollars in Italy. The two countries did not give a timeframe. Since taking office as Italian Prime Minister in 2022 Giorgia Mello has sought to strengthen ties with Gulf nations, ignoring the concerns raised by political rivals over human rights. Italy under her leadership lifted the arms embargoes imposed on the UAE and Saudi Arabia by previous governments in connection with the Yemen war. Meloni received Sheikh Mohammed bin Zayed Al Nahya, President of the UAE, on Monday during his state visit to Rome. The pair also pledged to continue working towards a “Comprehensive Strategic Partnership." In a joint press release, the two governments stated that "the UAE has committed $40 billion in investment in Italy in key sectors". The report added that "over 40 new agreements have been signed" in areas such as economic cooperation, investment, defence, nuclear, and space affairs. The names of the companies were not disclosed. Eni, the Italian energy giant, announced separately that it had signed a separate letter of intent with UAE-based companies MGX G42 for the development of data centres in Italy powered by natural gas plants using carbon capture technology. Eni has also signed an agreement with Masdar, the state-controlled renewables energy company in the UAE. Taqa Transmission will give Eni the status of preferred off-taker of renewable energy produced by Albania as part of a Italo-UAE and Albanian deal announced in January. Eni also signed a Memorandum of Understanding with Abu Dhabi’s sovereign wealth fund ADQ for cooperation on the critical mineral supply chain. Meloni said at the Italy-United Arab Emirates Business Forum held in Rome that "it is a historical day, another landmark in our relationship." She added, "We chose to focus our partnership on strategic axes such as artificial intelligence (AI), data centres, research in space, renewable energy, and rare earths." The joint statement emphasized enhanced military and safety cooperation through "joint manufacturing, technology transfer and the development defense manufacturing facilities." The report also called for a closer collaboration with international partners, such as the United States, on the issue of ransomware and joint cybersecurity exercises. Meloni announced a strategic partnership strengthened with Saudi Arabia last month. The deal was accompanied by a series of business deals valued at around $10 billion. (Reporting and editing by Gavin Jones, Christina Fincher and Alvise Armellini)
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Rusal, a Russian company, cancels bond placings following EU sanctions
Market sources reported that Rusal, the Russian aluminium manufacturer, cancelled on Monday a placement of Yuan and Rouble bonds after the EU banned imports of primary aluminium from Russia in a new package of sanctions. The European Council included an aluminium ban as part of its 16th package of sanctions against Russia, but also introduced a quota to facilitate the transition. This quota is 275,000 tons per year for aluminum imports from Russia. In 2024, the EU imported approximately 344,000 tons (or aluminimum) from Russia. In 2024, the EU Commission reported that Russian aluminium only accounted for 6% of all metal imports, down from 16% in 2010. Rusal, a Hong Kong-listed company, planned to offer investors bonds in the amount of 500 million yuan ($68.97million) with settlements made in roubles as well as 10 billions roubles (113.74million) in roubles. Rusal declined to comment. It is the largest aluminum producer in the world outside of China. Rusal, a company that is not directly sanctioned by the West, has sought to diversify its sales to Asian markets. Rusal saw its share of revenues from Europe fall to 22% in the first half 2024. This is down from 31%. The 16th package is likely to have a significant impact on the finances of the company, according to Renaissance Capital debt analyst Vladimir Vasilenko. Bonds offer Russian companies more attractive rates of interest than bank loans. Bank loans have become unaffordable after the central banks raised its key rate to 21% in 2011.
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Rheinmetall converts German factories for defence equipment
Rheinmetall, Europe’s leading ammunition manufacturer, plans to convert two of its German automotive plants to make primarily defence equipment. This will highlight the impact of a surge in expected spending in the area amid U.S. concerns over the Ukraine War. Last week, the EU's political leaders were gathered at the Munich Security Conference to discuss their own defence strategy. The defence expansion of Rheinmetall affects its Berlin and Neuss factories, where it currently manufactures automotive parts. This business has been challenged as German carmakers struggle with high costs and foreign competition. According to the plans that are still being finalised, both plants would become part Rheinmetall's Weapon and Ammunition division and function as hybrid plants. This will ensure some automotive production is still possible. The group said in an emailed statement that "above all, these plants will benefit from industrial strength of the Rheinmetall Group as a major supplier of military equipment, as well as the high demand by customers in Germany and around the world." The company stated that no final decisions have been made about the new structure. The company also stated that no explosives will be processed on the sites, but they will produce mechanical and protection components for military purposes. After U.S. president Donald Trump stated that Europe must increase its investment in military resources, shares of European weapons makers have soared on the expectation of a spending boom. Last week, the STOXX Aerospace and Defence Index hit new highs as investors bet that the governments of the region will need to spend more money on military equipment and weapons as the U.S. is preparing to pull back. It could also boost German manufacturing at a moment when traditionally strong sectors are cutting thousands of jobs and capacity, including automakers like Volkswagen. Germany's weak economy was the main complaint of voters during weekend elections. RETOOLING Rheinmetall is the second defence company to announce plans for converting existing manufacturing capacity in a month. The first was defence group KNDS, which agreed to buy a plant from French trainmaker Alstom. KNDS is a 50-50 joint venture between Wegmann & Co GmbH in Germany and the French government. The site will be used to manufacture military equipment, such as the LEOPARD II battle tank and PUMA infantry combat vehicle. Since the Russian invasion of Ukraine, Rheinmetall's value has increased. The company was promoted to the blue-chip DAX 30, Germany's stock market, two years ago. It is now valued at about 39 billion euro ($40.8 billion), based LSEG data. This value was almost doubled before Trump won. DEFENCE SPENDING The defence budget needs to be increased as only 23 out of the 32 NATO member countries reached their 2% national production target last year. Analysts at Deutsche Bank stated that it is easy to understand why additional spending of hundreds of billions may be needed over the remainder of this decade. The economists at Deutsche Bank calculated that it would cost around 800 billion euros to correct 10 years of underspending among NATO members in order to achieve the 2% target. Trump has asked NATO members to raise their spending to 5% GDP. Deutsche Bank analysts said that only 40 billion euro of the 200 billion euros Europe will spend on defense equipment by 2022 went to EU providers. Investors are also more interested in defence-related assets. Thyssenkrupp is preparing a spinoff of its Warship Division TKMS while KNDS will explore a stock exchange listing by the end of 2025. "We're well prepared, and we don’t need to be timid - action is needed now for the security of Europe," Rheinmetall CEO Armin Pappger said earlier this month. He added that the company expects to grow faster than originally thought. In the first nine-month period of 2024, Rheinmetall's profit from its weapons and ammunition division nearly doubled, reaching 339 million euro, while its profits in its automotive division dropped 3.8%, to 74 millions euros, as it announced in November. Hensoldt, Renk and other Rheinmetall rivals could also benefit from the expected increase in defense spending. (1 euro = 0.9558 dollars) Reporting by Christoph Steitz, Matthias Inverardi and Josephine Mason; editing by Jane Merriman, Rachel More and Josephine Mason
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Copper prices fall on Chinese inventories and tariff threats
Copper prices fell on Monday, as traders focused their attention on U.S. president Donald Trump's threats to impose tariffs and the changing demand signals coming from China, the top copper consumer. By 1236 GMT, the benchmark copper price on London Metal Exchange (LME), was down by 0.5% to $9,507 per metric tonne. It was up 8% from the beginning of the month, on the hope of a stronger demand in China following the Lunar New Year holidays. Trump plans to impose tariffs to encourage producers to manufacture aluminum and copper in the United States. "Tariffs are a drag on growth and demand," said Bank of America's Michael Widmer. "The last time Trump imposed tariffs, in 2018, many investors concluded that shorting metals was an attractive trade." The Shanghai Futures Exchange (ShFE), which monitors copper stocks, has also been monitoring the stockpiles of this metal in warehouses. The total amount of coal produced in the first half of this year has risen to over 260,000 tonnes, up from about 83,000 tons. Shanghai's bond warehouses Since mid-January, the copper inventory has more than doubled. The International Copper Study Group's (ICSG) data also weighed on the copper market. It showed that the market had a surplus of 301,000 tons last year, compared to a shortfall of 52,000 tons in 2023. Copper stocks in LME approved warehouses are up 12% since February 12 to 267,225 tonnes. The LME's cancellations (metal earmarked for shipment) of 84,400 tonnes suggest that a large amount of copper is likely to be shipped out in the coming days and even weeks. Many traders expect that much of the copper will end up in COMEX storage facilities in the United States. Prices have surged compared to the LME due to fears over tariffs on imports of copper. Other metals saw a 1.2% decline in aluminium at $2655 per ton. Zinc fell by 1.8% to 2,876, while lead dropped 0.2% to $2,000, and tin declined 0.3% to $33,575; nickel rose 0.2% to $15,550.
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Sasol leaves coal export market and focuses on improving quality
Executives from the South African petrochemical company Sasol announced on Monday that it is leaving the coal export market and starting a de-stoning program to improve the quality of the feedstock for its synthetic fuels and chemicals business. Sasol manufactures fuel and chemicals using coal and gas and exports about 2 million tonnes of fossil fuel each year. The quality of coal used in Sasol's Secunda operation has been low for many years due to the high content of stones. The company has been producing lower volumes of chemicals and fuels, consistently underperforming its historical output levels. Simon Baloyi, CEO of the company, said that it is redesigning its coal export plant to reduce stone content in order to solve the problem. Baloyi stated that the quality of coal produced by its mines was "no longer export quality", adding that the project to de-stone the coal would restore fuel production and chemical production at historical levels. Walt Bruns, Sasol's Finance Director, said in an interview that they make more money by beneficiating the coal and turning it into fuels and chemicals rather than selling it for export. Bruns said that Sasol will lease out its coal export quotas at the Richards Bay Coal Terminal, to other miners. Sasol announced earlier on Monday that its headline earnings per share had fallen by 31% to 14,13 rand ($0.7712) for the six-month period ending December 2024 from 20,37 rand previously, due to a decline in oil prices as well as lower sales volumes. The company did not declare dividends because its negative free cash flow was 1.1 billion rands, and its net debt was $4.3 billions. This exceeded the levels of its capital allocation policy.
Iraq announces it will update its Overproduction Compensation Plan
Iraq reaffirmed Monday its commitment to the OPEC+ Agreement and said that it would present an update plan to compensate any overproduction from previous periods.
Baghdad said that its oil minister Hayan Abdul-Ghani spoke with Saudi Arabian Energy Minister Prince Abdulaziz bin Salman and OPEC Secretary-General Haitham Al-Ghais.
Iraq has said that it will continue to make efforts to compensate for the overproduction, while also taking into consideration the expected handover of oil from the Kurdistan Regional Government.
OPEC+, a grouping of members of the Organization of Petroleum Exporting Countries (OPEC) and their allies, such as Russia is scheduled to increase its supply in April.
OPEC+ has agreed to reduce its output by 5,85 million barrels a day (bpd), which is about 5.7%, in a series steps that have been taken since 2022.
The group has extended its most recent layer of cuts until the first quarter 2025. This is the latest delay due to weak demand, and increased supply outside of the group.
Baghdad awaits the approval of Turkey to resume oil flow from the Iraqi Kurdistan Region after a two year halt that began in March 2022, when the International Chamber of Commerce ordered Ankara pay Baghdad damages of $1.5 billion for unauthorised exports in the period between 2014 and 2018.
Sources have confirmed that the Trump administration has put pressure on Iraqi officials to allow Kurdish exports of oil to resume or else face sanctions along with Iran. Later, an Iraqi official denied the pressure and threat of sanctions.
A senior Iraqi official in the oil ministry told reporters earlier that around 185,000 barrels of oil per day will be exported through the Iraq-Turkey oil pipeline from Kurdistan once oil shipments resume.
Iraq and Kazakhstan both promised compensation cuts in order to compensate for overproduction. Reporting from Jana Choukeir, Baghdad; Ahmed Rasheed, Dubai; writing by Mahal Dahan; editing by Kirby Donovan
(source: Reuters)