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Dollar slips, stocks fall as Trump's tax cuts fuel fiscal concerns
Investors worried about the fiscal outlook of major developed economies, and the lack progress in trade agreements. The result was a muted stock market and a weaker dollar on Wednesday. After a CNN report that Israel was planning a strike against Iranian nuclear facilities, oil prices increased by more than 1%. This raised supply concerns outside of the Middle East's key producing region. It also brought geopolitical issues back into focus. Investor sentiment is fragile after Moody's downgraded United States' credit ratings last week, fueling concerns about the country's debt pile of $36 trillion. U.S. president Donald Trump has proposed tax cuts which could increase the debt by up to $5 trillion. The lack of progress in U.S. Trade Talks is also a concern, as trading partners are pressing Washington to reduce or eliminate tariffs. Early trading saw the STOXX index of major European stocks fall by 0.2%, while U.S. futures showed a lower opening on Wall Street. Treasury yields are still high, and the 30-year Treasury bond yield has reached 5%. The dollar was not spared as investors fled to safer currencies such as the Swiss franc and the Japanese yen. "People are considering moving capital outside the U.S., and while it is not a mass-exodus, people are once again looking at opportunities in other markets," said Chris Weston. Investors looked for these opportunities in Asia. MSCI's broadest region index outside Japan rose 0.8% to a new seven-month high. Dollar selling in Asia accelerated, pushing the yen and euro to their highest levels in two week. The pound reached a new high of three weeks and bought $1.3428 at the last exchange rate. The British inflation rate jumped from 2.6% to 3.5%, a higher than expected annual rate. The markets were also watching the Group of Seven Finance Ministers' meeting currently taking place in Canada, for any indications that a weaker currency could help advance trade discussions. Investors on the Japanese bond markets remained nervous after the steep drop in super-long debts during the previous session. The yields on longer-dated debt hovered at record highs Wednesday. Questions were raised about how the country would fund new fiscal stimuli, as the central bank tried to normalise its monetary policy. Data released on Wednesday revealed that Japanese exports to the U.S. rose in April, even though shipments fell. This highlights the impact President Donald Trump's new tariffs may have on Japan's fragile economic recovery. Analysts say that any progress in trade deals between the U.S. with its trading partners could increase risk appetite. However, there are concerns Trump’s policies may still harm the global economy. Officials from the U.S. Federal Reserve said on Tuesday that prices are rising due to higher U.S. tariffs. They advised patience before making interest rate decisions. The dollar fell on Wednesday, and investors moved to safer assets. Gold spot was up 0.7% to $3,311 an ounce. This is the highest price in over a week. (Reporting from Lawrence White in London and Johann M Cherian in Singapore. Editing by Jamie Freed and Sonali Paul. Sharon Singleton).
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Iron ore prices rise on the back of a softer US Dollar and steady demand
Iron ore futures were up on Wednesday due to a weaker dollar and a resilient demand for this steelmaking ingredient. However, weakness in China's real estate sector limited gains. The daytime trading price of the most traded September iron ore contract at China's Dalian Commodity Exchange was 728.5 yuan (US$101.10) per metric ton. As of 0704 GMT, the benchmark June iron ore traded on Singapore Exchange was trading at $99.85 per ton. Hexun Futures, a broker, said that the demand for iron ore exceeded expectations. This is due to the fact that steel mills are still operating at a high level. According to Mysteel a consultancy, the number of blast-furnace mills that are profitable is increasing. 60% of them reported profits last week. The U.S. Dollar, which has been falling for the past two days, also helped to support iron ore prices. The greenback is cheaper to those who hold other currencies. The market was also weighed down by China’s disappointing retail sales and slowing manufacturing output, as well as the stagnation of new home prices. "While a sustained rebound looks unlikely on the medium-term, the sharp contraction of the Chinese property market seems to have slowed," stated ANZ. It said: "This bodes very well for steel demand in peak construction season." In China, spring is the peak season for construction. This is before rains begin in June. Mysteel reported that the volume of iron ore shipped from mines in Australia and Brazil increased by 11.7% on a weekly basis to 27.1 millions tons. Coking coal and coke, which are both steelmaking ingredients, fell by 0.36% and 0.14 %, respectively, on the DCE. The Shanghai Futures Exchange saw a rise in most steel benchmarks. The Shanghai Futures Exchange saw a 0.2% increase in hot-rolled coil, 0.08% for stainless steel, and 0.07% for rebar.
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Battery shifts to nickel and cobalt as a result of the energy storage boom
Fidra Energy's plan to convert a 55-acre patch of countryside in northern England into Europe's biggest energy storage facility, a 1,45 gigawatt one once complete, was far from finalized when it acquired the land in 2023. Chris Elder, CEO of the Edinburgh-based firm, said, "We struggled to make economics work." The cost of the batteries used in this project has been roughly halved over the last 18 months. Fidra plans to begin installing battery units in its Thorpe Marsh 600-million-pound ($800 million) project next year. LFP batteries have fueled a boom in energy-storage projects, which - in terms of percentage - has now surpassed the growth in electric vehicle sales. UBS estimates that total storage capacity will have to grow eight-fold before the end of the decade, and 34-fold until 2050 in order to keep pace with the growth of renewable energy. According to an energy transition consultancy, Rho Motion, while EVs will still dominate the battery market, energy storage is expected to make up a fifth of it by 2030. Analysts say that tariff uncertainty will cause growth in the U.S. to slow down in the coming years. The U.S. is the second largest energy storage market in the world, and it's still dependent on Chinese imports. But the long-term growth remains intact. This is good news for renewables and should help national power grids maintain a balanced supply of electricity as they transition to cleaner sources of energy, avoiding the type massive blackouts that briefly crippled Spain in the last month. LFPs are a much more affordable alternative to traditional batteries, and they do not contain cobalt or nickel. This rapid adoption is sending shockwaves throughout the markets that already have a depressed state. Martin Jackson, a commodities consultant at CRU, said: "You have seen a truly massive shift in the intensity of use for nickel and cobalt as compared to battery demand." NICKEL AND COBALT DECLINE Analysts predicted for years that the battery industry would require huge amounts of cobalt and nickel to make high-powered batteries that allow EVs travel long distances without charging. This forecast sent EV prices soaring for a while. Production increased in anticipation of a surge in demand, especially for the top nickel exporter Indonesia and cobalt-exporting Democratic Republic of Congo. The lack of affordable EVs and the slow deployment of charging infrastructure has slowed EV adoption among consumers outside China. This has led some automakers to scale back on their electrification plan. Oversupply has caused nickel prices to fall by half over the last three years, while cobalt prices have fallen by 60%. Global EV sales grew by 23% in 2018. According to Rho Motion the demand for storage battery has risen by 51% and is expected to grow by 40% in 2019. LFP batteries are the most common type of energy storage. They're essential for greener power grids, which will help governments achieve their net-zero goals. These batteries are increasingly used by Chinese EV manufacturers, including BYD - which last year surpassed Tesla to become the largest seller of EVs in the world. According to CRU data, as a result of this, the use of nickel in batteries for EVs, consumer electronics and storage batteries has decreased by nearly a third during the next four years, and by about two-thirds with cobalt. Prices for both metals are likely to be further impacted by the increasing pace of LFP adoption. Lithium could, however, see a rise. Iola Hughes, from Rho Motion, said: "The share that stationary storage plays in the battery demand picture has grown very significantly. It is becoming increasingly important to lithium players as EV demand is slower than expected." This has not yet translated into a stronger market, as the oversupply is pushing down already low lithium carbonate prices by another 20% this year. Beyond Price LFP batteries are not just about price. Fidra's Elder stated that recent technological advancements in LFP batteries have resulted in Thorpe Marsh LFP batteries having a life expectancy of 20 years. This is up from the previous 10-15 years. Lars Christian Bacher CEO of Norway's Morrow Batteries said that the change is also driven by concerns about the carbon intensity and rights issues relating to the cobalt mined in Congo. He said that there are high expectations for battery suppliers to be able to trace the origins of their products. "Some of these mineral have been historically associated with... countries which have some questions related to human right issues, child labor." Lithium also faces increasing scrutiny due to indigenous rights and environmental concerns, although this hasn't garnered as much attention from the public as nickel and cobalt. Morrow plans to produce 3 million cells, or 1 gigawatt-hour of capacity, per year. According to the British energy regulator, fully charged, this is roughly enough to run 1 million homes an hour. Batteries are being produced by existing manufacturers. LG Energy Solution, a South Korean company, is expanding its business in energy storage to offset the slowdown of EV demand across North America. An industry source in Asia said that the company plans to stop producing EV batteries containing Nickel at one U.S. facility and repurpose them for LFP battery manufacturing. Analysts expect that the shift to LFPs will only strengthen China's grip on the sector. 90 percent of the energy storage batteries in the United States are imported from China. Analysts say that Washington's tariffs against Chinese batteries - which are currently 41% during this 90-day truce in the trade war - will likely affect short-term demand. Fidra's Elder said that while Europe also wants to reduce its dependency on China, governments must be pragmatic. His Thorpe Marsh project, which uses batteries manufactured by China's Sungrow Power Supply company, relies on Sungrow Power Supply's Sungrow Power Supply batteries. He said that if the British government is serious about achieving its net-zero target for the UK – and I believe it is – it will have to work pragmatically with China.
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ONS: UK inflation jumps higher than expected to 3.5% in April
Official figures released on Wednesday showed that British inflation rose to 3.5% annually in April, up from 2.6%. In a poll of economists, a reading of 3,3% was predicted for April. The Bank of England had projected an inflation rate of 3.4% earlier in the month. Gas, water, and electricity prices all increased in April, along with taxes for employers. In a recent statement, the BoE stated that inflation will peak at 3,5% in this year. Some central bank officials disagree with the key assumption, that the rise in inflation won't have long-term effects on pricing behavior. Huw Pill, BoE's Chief Economist, said that the rate of interest rate reductions had been too rapid given the still high wage pressures and inflation. However his vote to hold borrowing costs this month was more likely to be a "skip" than a stop. Interest rate futures indicate that there is an 85% probability that the BoE won't cut interest rates next month. By the end of the year, less than two 0.25-percentage-point cuts are priced in. In a split vote on May 8, the BoE cut interest rates by one quarter point, to 4.25%. Two members of its Monetary Policy Committee voted for a larger cut and two, including Pill, voted against it. (Reporting and editing by MuvijaM; Andy Bruce)
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IEA: Low diversity of critical mineral markets can hurt the industry
The IEA warned in a Wednesday report that the concentration of the mineral market, especially in the refining, processing and export restrictions sectors, could lead to painful disruptions. In recent years, the use of critical mineral has increased due to energy transition projects, such as electric cars, battery storage, renewables, and grid networks. The industry has also consolidated into a few large players. Fatih Bibil, Executive Director of the IEA, said: "Even if a market is well-supplied, supply shocks can still be a problem, whether they are caused by extreme weather conditions, a failure in technology or trade disruptions." He said that a supply-shock can have a far-reaching impact, leading to higher prices for consumers as well as a reduction in industrial competitiveness. The IEA stated that the average share of top three suppliers will decline marginally to 82% by 2035, returning effectively to the levels of concentration seen in 2020. China, which is the dominant player in the industry, will continue to expand its refining capability at a faster rate than the rest the world until 2035. It has also added to the global battery recycling capacities by two thirds since 2020. The IEA stated that this high concentration of minerals increases the supply shock risk on the global market, particularly with the increasing number of export controls on critical mineral. The mining industry is also expected to follow a similar trend. Copper, nickel, and cobalt are likely to be less diverse, while lithium, graphite, and rare earths will see fewer concentrations. The IEA stated that the current copper mine project pipeline could lead to a 30% shortfall in supply by 2035, due to declining ore grade, increasing capital costs, limited resources discoveries, and long lead time. The rapidly increasing demand for lithium as part of the energy transformation is expected to push market deficits by 2030. However, the prospects for developing new projects are better than those for copper.
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Energy Minister: Turkey is in talks with Candu about nuclear plants
Alparslan Bayraktar, Turkish Energy Minister, said that Turkey has been in discussions with Candu Energy of Canada and other companies about plans to build Turkey's second and third nuclear plants. Bayraktar, who spoke to journalists during a trip to southeast Turkey Monday, said that Turkey wanted to "put names" on the projects it planned for this year. "Russia, South Korea, and China are all interested in the second or third power plant. He said that in addition to the countries and companies mentioned above, we were also in negotiations with other nations. Canada is one of them. "The Candu company," added he. Candu didn't immediately respond to an inquiry for comment. Rosatom, the Russian state-owned nuclear energy company is building Turkey's very first nuclear power plant at Akkuyu, in the Mediterranean province Mersin, under a 20 billion dollar agreement from 2010. The Turkish government plans to build two nuclear plants in the Black Sea region Sinop, and one in the northwestern region Thrace. (Reporting and writing by Nevzat Dvranoglu, Daren Butler, Jonathan Spicer, Christian Schmollinger).
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Reports that Israel could attack Iran cause supply concerns
The price of oil jumped by more than 1% after Israel was reported to be preparing an attack on Iranian nuclear facilities. This sparked fears that the conflict could disrupt supply in this key Middle East region. Brent futures rose by 97 cents or 1.5% to $66.35 per barrel at 0330 GMT. U.S. West Texas Intermediate Crude Futures for July rose 96 cents or 1.6% to $62.99. The WTI contract for June expired at $62.56 on Tuesday. CNN reported Tuesday that the United States has received new intelligence suggesting that Israel is planning to attack Iranian nuclear facilities. CNN cited multiple U.S. government officials who are familiar with the issue. CNN, citing officials, added that it was unclear whether Israeli leaders had made a decision. On Wednesday, ING commodities analysts said that such an escalation could put Iranian oil supply in danger. It would also be a threat to other parts of the region. An attack by Israel could disrupt the flow of oil from Iran, the third largest producer in the Organization of Petroleum Exporting Countries. Iran may also retaliate, blocking oil tanker traffic through the Strait of Hormuz, a chokepoint in the Gulf through which Saudi Arabia Kuwait Iraq and United Arab Emirates export crude and fuel. This year, the U.S. has held multiple rounds of talks with Iran over its nuclear program. U.S. president Donald Trump is reviving his campaign to increase sanctions on Iranian crude oil exports in order to force them to abandon their nuclear ambitions. Ayatollah Ali Khamenei, the Iranian Supreme leader and U.S. officials made statements on Tuesday that both sides are still far from a solution. If successful, indirect nuclear talks are taking place between the U.S.A. and Iran. This could lead to further gains for the market. These talks seem to be losing steam, according to ING analysts. There were still some signs that crude supply was improving. Market sources cited American Petroleum Institute data on Tuesday to say that U.S. crude stockpiles rose last week, while gasoline and distillate stocks fell. Sources, who spoke on condition of anonymity, said that crude stocks in the U.S. - the world's largest oil consumer - rose by 2.5m barrels during the week ending May 16. Investors will be watching the Energy Information Administration's report on U.S. government oil stocks later this Wednesday. A source in the industry said that Kazakhstan's oil output has risen by 2% since May. This is a significant increase, which defies the pressure of OPEC+ to reduce Kazakhstan's production. (Reporting from Houston by Georgina McCartney and Jeslyn Lerh; Editing by Christian Schmollinger).
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Mubadala Energy is ready to sell South Andaman Gas to Indonesia at the right price
A senior executive at Mubadala Energy said that the company would be happy to provide all of the natural gas produced in its South Andaman Block for Indonesian domestic consumption, and do so at the best possible price. Indonesia wants producers of gas to increase their supplies to domestic consumers as the demand is increasing. The producers have been focusing on exports of LNG and asked the government to revise price caps for domestic gas. They argue that it is not a good business decision when spot LNG prices are so high. Abdulla Bu Ali (President Director of Mubadala Energy Indonesia) told reporters at the Indonesia Petroleum Association Conference that Mubadala Energy Indonesia was interested in both exports as well as selling to Indonesia. He said that domestic gas prices must be competitive, but declined to provide a specific figure. The United Arab Emirates explorer anticipates that gas production will begin at Tangkulo-1, in its South Andaman Block, in late 2028. It signed an initial contract to supply gas to the state fertiliser manufacturer Pupuk Indonesia on Tuesday. Indonesia sets domestic gas prices at $6.50 to $7 per million British thermal unit (mmBtu) for certain industries and electricity plants. Spot LNG Prices in Asia Last week, mmBtu was $11.75 Reporting by Dewi Curniawati, Florence Tan and Edwina Gibbs; Writing by Florence Tan.
Ex-Lundin, Glencore executives launch firm to hunt for copper and gold assets
Former Glencore executives and Lundin executives set up a mining shell company in order to buy gold, silver, and copper assets across the Americas. The aim is to tap into estimated $15 billion of capital available held by private equity firms.
Matthew Rowlinson was the head of copper business at Glencore and Kololian is a former chief financial officer for Toronto-listed Lundin Gold. Together, they have set up Moranda Metals.
The potential for shortages of minerals, which are seen as essential for the energy transformation, has been exacerbated by years of underinvestment.
Kololian said, "We are sat with high commodity prices but at the same we have all-time high investor apathy in the mining sector."
"And we can see that there is approximately, if you want to say, over $15 billion in dry powder. So, capital is readily available today."
He said that the estimated $15 billion capital included money held by mining companies and mining finance companies.
In recent years, the mining industry has seen an increase in mergers and purchases (M&As), partly due to strong commodity prices and a need to invest in more projects.
Kololian stated that Moranda will initially target businesses with a value of between $200 million to $500 million.
He said that the firm was in discussions with some firms who may be interested in selling off non-core assets at a lower value, or whose management teams might need new capital to refocus and rebrand their strategy.
He added, "There's no silver platter of assets, but there are some very exciting opportunities, particularly in copper and gold." (Reporting and editing by David Holmes; Clara Denina)
(source: Reuters)