Exxon Mobil XOM -1.21%decrease; is bracing for a future far less dependent on gasoline by drilling for something other than oil: lithium.
The Texas oil giant recently purchased drilling rights to a sizable chunk of Arkansas land from which it aims to produce the mineral, a key ingredient in batteries for electric cars, cellphones and laptops, according to people familiar with the matter.
Lithium is far removed from the fossil-fuel business, which has powered Exxon’s XOM -1.21%decrease; red down pointing triangle profits for more than a century, and signals the company’s assessment that demand for internal combustion engines could soon peak, the people said. It would also mark a return for the company to an industry it helped pioneer almost 50 years ago.
Exxon bought 120,000 gross acres in the Smackover formation of southern Arkansas from an exploration company called Galvanic Energy, according to some of the people. The price tag was more than $100 million, people familiar with the matter said, a relatively small transaction for a company of Exxon’s size.
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The new venture doesn’t amount to a significant strategic shift for Exxon, which has said it is confident that oil and gas will be needed for decades. But Exxon is looking to gain a foothold in a region believed to contain vast lithium reserves, both to produce the mineral and to test the viability of extraction technologies.
Exxon could begin drilling on the prospect in the coming months, people familiar with the matter said, and could expand its operations if it proves profitable.
Galvanic said last year that a third-party consultant it hired estimated the prospect could have 4 million tons of lithium carbonate equivalent, enough to power 50 million EVs. Extracting lithium from brine involves drilling for, piping and processing liquids, processes in which oil-and-gas companies have long developed expertise, making them well suited to produce the mineral, lithium and oil executives said.
Exxon projected last year that light-duty vehicle demand for internal combustion engine fuels could peak in 2025, while EVs, hybrids, and vehicles powered by fuel cells could grow to more than 50% of new car sales by 2050. The company has also projected the world’s fleet of EVs could climb to as much as 420 million by 2040, up from 3 million in 2017.
Exxon Chief Executive Darren Woods said last year that fossil-fuel demand would remain robust for decades, driven by the production of chemicals and heavy transportation and industry.
Lithium production would also diversify Exxon’s portfolio and expose it to a rapidly growing market. The company is positioning other parts of its business to accommodate electric vehicles. Exxon executives have said many of its chemical products supply EV manufacturers, whose cars are made with plastics and other petroleum products.
https://www.zacks.com/stock/news/2098143/exxonmobil-(xom)-acquires-drilling-rights-in-arkansas-land
MGL Comment - Tue 08:49, May 23 2023Back to Top
I've substituted the original WSJ story, which ran Friday, as an 'exclusive'.
Here's the acreage:
Note Albemarle is immediately next door. Exxon maybe experimenting, but Albemarle knows a thing or two about Lithium.
Let us understand this clearly:
We're used to two distinct extraction methods:
~Salars
These are lakes, in deserts, that happen to be full of Lithium salts. Typical of Chile/Argentina.
~Hard Rock
This is the Pilbara mine in Western Australia, and this produces spodumene.
But Lithium has long been known in wastewater production from Oil and Gas wells:
However, mostly it is low grade:
If you can economically extract the brine, then the industrial process to extract the Lithium is little different from that which Albemarle and Soquimich use already.
In 2011, Albemarle actually announced the Magnolia project:
But nothing happened, and Albemarle now list Magnolia as a 'resource', and list it as a Bromine asset:
The proplem here: the smackover is 325ppm, the Chilean salars are 1500ppm, so the economics have not favoured the smackover.
Nevertheless, at these lithium prices, 4m mt of resource, easily accessible via existing wells, is not to be sniffed at, using silly math, there's $160bn of revenue in the ground. No wonder Exxon is piqued.
Asia to drive oil demand growth in second half, says Vitol
(Reuters) - Asia will lead oil demand growth of around 2 million barrels per day (bpd) in the second half of the year, a senior executive at Vitol said on Monday, an increase that could potentially lead to a shortage of supply and drive up prices.
International benchmark Brent crude has fallen to around $75 a barrel from a peak of nearly $140 in March last year, just after the disruption caused by oil producer Russia's invasion of Ukraine.
Prices have drawn support from surprise voluntary output cuts by some members of the Organization of the Petroleum Exporting Countries and allies, including Russia (OPEC+) announced in April. The group meets again on June 4 to review output policy.
"We are going into the second half of the year where, largely thanks to Asian demand growth, the world is going to need about 2 million bpd more than it needs now," Mike Muller, Vitol Asia president, told the Middle East Petroleum & Gas Conference in Dubai.
"For those of you asking whether OPEC+ needs to take more off the market or not, I will then let you draw your own conclusions," he said.
Muller's view echoes remarks from the International Energy Agency, which shortly after OPEC+ announced its output cut in April, said the producer group risked exacerbating an oil supply deficit expected in the second half of the year.
Also speaking at the Dubai conference, Fereidun Fesharaki, chairman of the FGE energy consultancy said the world could face a supply problem as Western sanctions on Russian oil curtail production growth if demand growth rises as predicted.
Russia can maintain production at around 10 million to 11 million bpd, he said, but would be unable to contribute sufficiently to ensure 2 million bpd of future growth given Western sanctions imposed on Russia following its invasion of Ukraine.
Fesharaki said he saw OPEC behaving very differently from when U.S. shale oil was its main threat and the grouping sought to limit price growth to discourage expensive shale projects from coming online.
Now he said OPEC would seek to monetize oil resources before demand for fossil fuel peaks as many countries shift towards low carbon energy.
Fesharaki said he saw "a desire to keep oil prices above $80 a barrel and a willingness to go over $100 if the market tightens".
OPEC Secretary General Haitham Al Ghais, who attended the event, did not discuss the short term, but reiterated a warning that underinvestment in the oil and gas sector in the long term could cause market volatility.
He also said the world needs to focus on reducing greenhouse gas emissions rather than replacing one form of energy with another, and that major investments were needed in all energy sectors.
"That is the truth that needs to be spoken," Al Ghais said.
MGL Comment - Tue 08:29, May 23 2023Back to Top
"We are going into the second half of the year where, largely thanks to Asian demand growth, the world is going to need about 2 million bpd more than it needs now,"
I hope he is right, but right now, demand looks pretty sad. Most Chinese import demand seems to head straight out the door as product exports.
Nevertheless, Singapore crack margins are holding up better than I would have expected:
Data source: U.S. Energy Information Administration, U.S. Energy Information Administration, Short-Term Energy Outlook , May 2023
We lowered our crude oil price forecast for the rest of 2023 and for 2024 in our May Short-Term Energy Outlook (STEO) because of relatively rapid declines in the crude oil price since April. Between April 12, 2023, and May 4, 2023, the Brent crude oil price fell $16 per barrel (b) to $73/b; the West Texas Intermediate crude oil price fell $15/b to $69/b. We expect that a drop in OPEC production and increases in demand will lead to relatively moderate price increases over the next few months.
The recent price declines are caused by a combination of supply and demand market factors. On the demand side, news of a decrease in China’s manufacturing Purchasing Managers’ Index, an indicator of economic conditions, added to market concerns about China’s economic growth and a possible U.S. recession. Concerns about the banking sector after First Republic Bank was closed and subsequently sold also added to concerns about global economic growth and oil demand.
On the supply side, oil flows from Russia have remained higher than expected, increasing global oil supply and putting downward pressure on crude oil prices. However, in April 2023, OPEC+ members agreed to cut oil production through 2023. In our May STEO, we forecast that OPEC total production of liquid fuels will decline from 34.0 million barrels per day (b/d) in April to average 33.7 million b/d for the rest of 2023.
In addition to our expectation that OPEC+ countries will adhere to voluntary production cuts, recent disruptions to crude oil exports from Iraq and a force majeure limiting crude oil exports from Nigeria have also reduced our near-term OPEC liquid fuels production forecast. We expect that these supply constraints will put upward pressure on crude oil prices. In 2024, we expect OPEC liquid fuels production will increase by 0.7 million b/d to 34.4 million b/d, driven by an end of the currently agreed upon OPEC+ production cuts in 2023.
We expect the Brent crude oil price will increase from $74/b in May 2023 to $79/b in September before declining slightly to average $78/b in the last three months of 2023. We expect the West Texas Intermediate price will follow a similar path.
Principal contributor: Matthew French
MGL Comment - Tue 08:19, May 23 2023Back to Top
We lowered our crude oil price forecast for the rest of 2023 and for 2024
Arithmetic requirement, there's not enough months left in 23 for the current forecast to be credible.
On the supply side, oil flows from Russia have remained higher than expected,
Now you tell us, thanks!
Oil futures: Crude prices drift sideways as US debt ceiling talks stall
Quantum Commodity Intelligence – Crude oil futures Monday were drifting sideways after debt ceiling talks between Democrats and Republicans broke down last week, prompting fears that a drawn-out confrontation could stunt US economic growth.
Jul23 ICE Brent futures were trading at $75.97/b (1630 BST) compared to Friday's settle of $75.47/b.
At the same time, Jul23 NYMEX WTI was trading $71.54/b, versus Friday's close of $71.69/b.
It came as futures traded in a tight range at the start of the week, with focus remaining on the debt ceiling standoff in the US that remained unresolved over the weekend.
US President Joe Biden attended the G7 summit in Japan over the weekend and US House Speaker Kevin McCarthy said he is not seeing progress while the President is away, adding the White House "moved backwards".
Comments from both sides "could suggest more fraught negotiations to occupy market attention this week," said Edward Bell, Senior Director at NBD, noting that Treasury Secretary Janet Yellen reiterated the Treasury might run out of funds as early as 1 June.
However, markets took some comfort after Federal Reserve chair Jerome Powell said the Fed could "afford to look at the data" ahead of the mid-June FOMC meeting, watering down anticipation that the Fed could again lean toward another hike in interest rates.
Ministers from OPEC+ producers will be closely watching developments ahead of the 4 June meeting amid speculation the group could consider further cuts.
"If oil is in its current price range or potentially even lower at the OPEC meeting next month, then OPEC is prepared to take additional action. They believe they have to support the market until more fundamental factors reassert themselves," said Helima Croft, the chief commodities strategist at Canadian broker RBC Capital Markets.
OPEC Secretary General, Haitham Al Ghais, gave few clues in his speech at Monday's MPGC conference in Dubai, focusing instead on the longer term.
"OPEC has been very clear in highlighting the real and dangerous consequences of under-investment in the oil industry. The reality is that oil and gas will continue to be an integral part of the energy mix for the foreseeable future," he said.
Speaking at the same forum Mike Muller, head of Asia at Vitol, said the 'risk premium' in the market had been largely eliminated as Russian barrels continue to flow.
Meanwhile, speculators remain negative towards the market, with the net speculative long in ICE Brent falling by 6,020 lots over the last reporting week to 106,722 lots as of last Tuesday, the smallest position speculators have held in 2023.
MGL Comment - Tue 07:51, May 23 2023Back to Top
"If oil is in its current price range or potentially even lower at the OPEC meeting next month, then OPEC is prepared to take additional action."
The situation is normal. OPEC has to defend the price.
Here's market share vs price from the 1970's to 2014:
And now, add the data to 2021:
Given Russia is basically running wild right now. (Kremlin swears blind it is cutting, meanwhile producers just sell all the volume they can). We're at 28% market share, and OPEC alone (no plus) is in the weakest market share position it has seen for a decade. All the major recoveries took place when market share was above 40%.
If you are suggesting a Netzero secular, then it's here already, with ~20-25 dollars of supply constraint 'in the price'.
May 22 (Reuters) - Oil production in Iraq's Kurdistan region continues to drop as export flows to Turkey's Ceyhan port show few signs of restarting after a stoppage that has lasted almost two months.
Turkey halted Iraq's 450,000 barrels per day (bpd) of northern exports through the Iraq-Turkey pipeline on March 25 after an arbitration ruling by the International Chamber of Commerce (ICC).
The ICC ordered Turkey to pay Baghdad damages of $1.5 billion for unauthorised exports by the KRG between 2014 and 2018.
The 59-day stoppage is estimated to have cost the Kurdistan Regional Government (KRG) more than $1.5 billion.
The halt, coupled with limited storage space in the region, sent most of the region's 450,000 bpd of production offline within weeks. Fields that had continued producing are now offline or operating with reduced output.
The 4,500 barrel per day (bpd) Taq Taq field is no longer producing into storage, said a spokesperson at operator Genel Energy.
The Khurmala field is now producing at about 50,000 bpd, according to a source familiar with field operations.
This is a reduction from 100,000 bpd a month ago and 135,000 bpd before the pipeline stoppage.
Resulting lost revenue for the KRG stands at more than $1.5 billion, according to Reuters estimates based on exports of 375,000 bpd, the KRG's historic discount against Brent crude and 59 days of outages.
Iraq asked Turkey this month to resume pipeline flows and loading operations at Ceyhan on May 13.
Turkish pipeline operator BOTAS said it needed more time to check the technical feasibility of the pipeline to resume flows, an Iraqi oil official said.
However, BOTAS has yet to receive instruction from Turkish authorities, the source said, citing unofficial contact with Turkish energy officials.
"We're talking about weeks, not days, as an expected time frame to resume exports. This issue is more political now than technical," the source said.
Representatives of Iraq and Turkey's energy ministries were not immediately available for comment.
Iraqi government officials previously told Reuters they blamed elections for the delay.
Turkey held presidential elections on May 14 but neither of the two main candidates exceeded the required 50% of the cotes and a run-off is scheduled for May 28. (Reporting by Rowena Edwards in London and Ahmed Rasheed in Baghdad Additional reporting by Can Sezer in Istanbul Editing by Bernadette Baum and David Goodman)
MGL Comment - Tue 07:41, May 23 2023Back to Top
Turkey halted Iraq's 450,000 barrels per day (bpd) of northern exports through the Iraq-Turkey pipeline on March 25
Add in the Canadian wildfires and some Nigerian issues, and we're pocket-change out of 1mbpd outages, and it's not supporting Oil. Thats worrying.
EIA Reports a Build Smaller Than Anticipated
Stockpiles held in underground storage in the lower 48 states rose 99 billion cubic feet (Bcf) for the week ended May 12, below the guidance of 106 Bcf addition per a survey conducted by S&P Global Commodity Insights. The increase compared with the five-year (2018-2022) average net injection of 91 Bcf and last year’s growth of 87 Bcf for the reported week.
https://www.zacks.com/stock/news/2097910/last-week-was-a-good-one-for-natural-gas-market-this-is-why
MGL Comment - Tue 09:32, May 23 2023Back to Top
Natural Gas rallied some 20% last week on this news, mostly short covering I fear.
Even EQT saw a nice lift:
But then the natural gas rig count was published friday, flat, and the supply contracting story evaporated.
Signage at the entrance of the Chevron Park campus in San Ramon, Calif. (David Paul Morris/Bloomberg News)
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Chevron Corp. agreed to buy Denver-based oil and gas producer PDC Energy Inc. in a $6.3 billion all-stock deal as it seeks to expand amid what’s expected to be a busy year of mergers and acquisitions in U.S. shale.
Chevron will pay $72 a share, a roughly 14% premium on a 10-day average based on May 19 closing prices, according to a statement May 22. The deal will increase Chevron’s production by just under 10% and expand the oil giant’s holdings in the Colorado and West Texas shale basins. Separately May 22, Exxon Mobil Corp. agreed to sell assets in the Williston Basin to Chord Energy for $375 million.
Though a small deal by Chevron’s standards — the price is less than the company’s first-quarter cash flow from operations — PDC falls into CEO Mike Wirth’s strategic plan to grow prudently in areas that fit with its existing assets rather take on large, transformative acquisitions. Chevron was widely praised for buying Noble Energy for $5 billion in a similar bolt-on deal in the midst of the pandemic in 2020 but has come under scrutiny recently about its lack of growth relative to Exxon Mobil Corp.
“PDC’s attractive and complementary assets strengthen Chevron’s position in key U.S. production basins,” Wirth said in the statement. “This transaction is accretive to all important financial measures and enhances Chevron’s objective to safely deliver higher returns and lower carbon.”
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Chevron will increase its capital expenditure budget by $1 billion per year, after realizing about $400 million in cost savings once the transaction closes by the end of the year, pending regulatory and PDC shareholder approval. Its new global spending range will be $14 billion to $16 billion a year through 2027.
Oil and gas producers are flush with cash after raking in record profits over the past year, leaving the U.S. energy patch ripe for a takeover boom. Companies are looking to bulk up and consolidate, particularly in the Permian Basin of West Texas and New Mexico, the most prolific U.S. shale play.
PDC shares climbed as much as 8.5% before the start of regular trading in New York. Chevron shares fell 0.7%.
The total enterprise value, which includes debt, of the deal is $7.6 billion. PDC shareholders will receive 0.4638 shares of Chevron for each PDC share. Chevron said it expects the tie-up to add about $1 billion in annual free cash flow at $70 per barrel of Brent oil and Henry Hub natural gas at $3.50 per thousand cubic feet. Morgan Stanley and Evercore advised Chevron, while JPMorgan advised PDC.
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MGL Comment - Tue 08:33, May 23 2023Back to Top
PDC takeout numbers are sobering:
3.6x eps.
<3x EV/EBITDA.
60% discount to calculated NPV at the 2022 year end on SEC disclosure.
The company never recovered from Colorado's permit and land development restrictions crackdown.
Chevron said it expects the tie-up to add about $1 billion in annual free cash flow at $70 per barrel of Brent oil and Henry Hub natural gas at $3.50 per thousand cubic feet.
Simply by issuing its expensive stock.
Despite a marked decline in benchmark natural gas prices in Europe this year, the continent is “not out of the woods” yet as three factors could worsen the European energy crisis later this year, Fatih Birol, the executive director of the International Energy Agency (IEA), told CNBC this weekend.
“Europe countries did a good job... last winter,” Birol told CNBC’s Martin Soong on the sidelines of the G7 summit in Japan, adding that the region avoided gas and energy supply shortages thanks in part to milder winter weather.
Despite the absence of most of Russia’s pipeline natural gas, Europe didn’t go into recession this winter and managed to keep the lights and heating on, the IEA’s head said.
“Europe was able to transform its energy markets, reduce its share of Russian gas to less than 4%, and its economy still didn't go through a recession,” Birol noted.
However, expected higher LNG demand in China after the reopening, the possibility of a U.S. default, and the remaining dependence on Russian gas are three reasons why Europe shouldn’t be complacent ahead of the 2023/2034 winter, the IEA’s top executive warned.
Commenting on the ongoing talks on raising the U.S. debt ceiling, Birol told CNBC,
“This issue in the United States will be dealt with and common sense will prevail. And I don't see a major risk for the global oil markets. But of course, oil markets are always involved with risks.”
Europe’s natural gas prices have returned to the pre-war levels, while gas inventories in the EU are at their highest for the spring in at least a decade.
The front-month futures at the TTF hub, the benchmark for Europe’s gas trading, have dropped below the $32.49 (30 euros) per megawatt-hour (MWh) mark and traded at $32.34 (29.86 euro) per MWh as of 12:23 p.m. GMT on Monday.
As fears of a natural gas crunch did not materialize this past winter, pulling European gas prices down, Europe shouldn’t count on another warmer-than-usual winter and less competition from Asia as it prepares for the 2023/2024 winter, according to analysts.
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MGL Comment - Tue 05:55, May 23 2023Back to Top
Here's Dutch Gas:
Recall, we started this surge in gas pricing with Netzero policy, which all but closed down Europe's gas replacement, and in part closed large domestic gas sources, notably Groningen:
The final deadline has been set for 1 October 2024, although shutdown could occur in October 2023, depending on levels of European gas supply, according to a spokesperson for State Secretary for Mining Hans Vijlbrief.24 Jan 2023
Then Putin decided to take advantage, invading Ukraine and cutting EU gas supply in half:
MOSCOW, July 25 (Reuters) - Russia tightened its gas squeeze on Europe on Monday as Gazprom (GAZP.MM) said supplies through the Nord Stream 1 pipeline to Germany would drop to just 20% of capacity.
The European response has been twofold:
Liquefied natural gas (LNG) import capacity in the European Union (EU) and the United Kingdom (UK) will expand by 34%, or 6.8 billion cubic feet per day (Bcf/d), by 2024 compared with 2021, according to the International Group of Liquefied Natural Gas Importers (GIIGNL) and trade press data. Expansions of import, or regasification, capacity will total 5.3 Bcf/d by the end of next year and grow further by an additional 1.5 Bcf/d by the end of 2024.
Add in some critical debottlenecking:
MADRID/BRUSSELS, Oct 20 (Reuters) - Spain, Portugal and France said on Thursday they will build a sea-based pipeline to carry hydrogen and gas between Barcelona and Marseille, substituting plans to extend the so-called MidCat pipeline across the Pyrenees that France opposed.
Then double the pace of wind/solar development:
The agreement raises the EU's binding renewable target for 2030 to a minimum of 42.5%, up from the current 32% target and almost doubling the existing share of renewable energy in the EU. Negotiators also agreed that the EU would aim to reach 45% of renewables by 2030.30 Mar 2023
Which, of course, exacerbates some problems; here's Germany's electricity pricing last month:
One of the most important changes in sentiment that have occurred over the crisis is that prior, we had a shock at negative electricity prices; today, we have a growing chorus of industrialists tinkering with their industrial process designs to exploit being paid to make stuff. This theme has legs and has yet to really surface as an investment idea, but trust me, it will!
But, by and large, the crisis is over, and even the policymakers have grudgingly accepted gas's role as a transition fuel.
G7 alarms climate activists over support for gas investments
In detailed remarks over the past few months, we've noted that previously dormant large gas/LNG developments have now been restarted. Qatar is the largest, with a 50% increase underway, but Mozambique, the Eastern Med, and large US LNG export plants are all under construction now.
“Europe was able to transform its energy markets, reduce its share of Russian gas to less than 4%, and its economy still didn't go through a recession,” Birol noted
Russian pipe has been seized, nationalised and reversed across Europe, with former Gazprom pipe reversed and carrying supply from the LNG regas facilities deep into Eastern Europe. The Nordstream 2 terminal is now in the process of being converted to a regas facility. That is permanent. Gazprom, meanwhile, is building out capacity eastbound to China.
Rich in phosphates and cobalt deposits, Morocco is poised to attract investments in the fields of electric batteries and environment-friendly vehicles as it pushes to achieve industrial sovereignty and expands high-tech manufacturing.
The country’s officials have on multiple occasions mentioned an active quest to attract investors to build a gigafactory that will lure other EV manufacturers and car part makers to the country.
This comes at a context the EU, Morocco’s largest auto-industry market, prepares for total shift to electric vehicles starting from 2035.
Morocco’s growing automotive sector, which has topped Morocco’s industrial exports with 10 billion dollars in 2022, should therefore prepare the ground for its transformation in line with the market’s future requirements.
The country’s mining sector could help make the transition easier by fostering Morocco’s competitive edge. The availability of high-quality cobalt and phosphates could offer investors cost-effectiveness.
Morocco could also easily import lithium- another key metal for EV batteries- in view of its good commercial ties with exporting countries such as the DRC and Chile.
Morocco’s largest mining company Managem is already operating a factory in Guemassa to produce sulfate cobalt as it also has prospects elsewhere in the country for cobalt and other rare metals.
Renault and BMW have already started sourcing cobalt from Managem’s mines to supply their EV battery plants.
Morocco’s cobalt enjoys high purity, unlike in the DRC where the metal is extracted as a byproduct of mostly copper.
In a recent report, Morocco’s social and economic council (CESE) said the country had 7 of the world’s 24 most strategic and rare metals, key to high-tech industries.
The report urged the government to develop plans to transform these metals at home instead of exporting them raw, to the exception of cobalt and phosphates.
These metals are also vital for Morocco’s quest to achieve its industrial sovereignty.
The mining sector’s output rose to 40.5 million tons in 2021, including 38 million tons of phosphates. The sector accounts for 10% of Morocco’s GDP and 26% of its exports and employs 50,000 people, according to the report.
MGL Comment - Tue 07:28, May 23 2023Back to Top
The report urged the government to develop plans to transform these metals at home instead of exporting them raw, to the exception of cobalt and phosphates.
This is the Indonesian recipe.
Which has comprehensively wrecked the Nickel market. Which market will Morocco wreck? Expect the normal cocktail of subsidies, tax holidays and what have you.
GOLD PRICES edged lower on Monday, losing $15 from Friday's $30 bounce off 7-week lows after speculators cut their bullish position on Comex futures and options at the fastest pace since early March but Federal Reserve Chair Jerome Powell then said the US central bank may be finished raising interest rates, writes Atsuko Whitehouse at BullionVault.
With talks continuing between President Biden and Republican Speaker McCarthy over a a debt-ceiling deal ahead of June's x-date for a US default, the Dollar index – a measure of the US currency's value versus its major peers – edged lower after snapping a six-day winning streak, pulling back from Friday's early 6-month peak ahead of Powell's comments.
Ten-year US Treasury yields – a benchmark rate for government as well as many finance and commercial borrowing costs – meantime recovered a dip to rise back to 3.69%, the highest since mid-March.
"[The Fed's] policy rate may not need to rise as much as it would have otherwise to achieve our goals," Powell said Friday in a discussion with former Fed chief Ben Bernanke, "[because] developments in the banking sector are contributing to tighter credit conditions and are likely to weigh on economic growth, hiring and inflation."
Hedge funds and other leveraged speculators in Comex gold futures and options cut their bullish betting 6% on gold as a group in the week-ending last Tuesday, according to the latest data from US regulators the CFTC.
That 'managed money' group also grew its bearish betting by 17% to the highest since the week ending 21 March – back before gold prices reached $2000 for a third time – and overall, that pushed the net long position of Managed Money traders down 10%, the steepest retreat in 10 weeks after reaching the largest since early March 2022, when gold prices jumped amid US and European sanctions against Russia over the Kremlin's invasion of Ukraine.
Speculators last week also cut their net bullish betting on silver, slashing it in half as the more industrially-useful precious metal dropped nearly 7% in price.
The price of silver , which finds around 50% of its annual demand from industrial uses, also cut Friday's rally from 7-week lows in half on Monday, back down to $23.70 per ounce.
Gold prices in the US Dollar fell to $1969 per ounce, while wholesale bullion in the spot market slipped 0.3% for UK and 0.6% for Euro investors to £1585 and €1823 respectively.
"Markets are seeing a deal on the debt limit and at the same time the Fed pushing back on rate cuts which is ultimately proving positive for the Dollar," said one FX strategist to Reuters.
The last time the USA came this close to default thanks to arguing over the debt limit was in summer 2011, also with a Democrat president and Senate with a Republican-led House.
https://www.bullionvault.co.uk/gold-news/gold-price-052220232
MGL Comment - Tue 07:32, May 23 2023Back to Top
Too much stuff. Too much tech.
LONDON, May 22 (Reuters) - Copper prices fell on Monday as the market focused on a deteriorating demand picture in top consumer China, rising supplies and climbing inventories in LME-approved warehouses.
Benchmark copper CMCU3 on the London Metal Exchange (LME) was down 1.1% at $8,157 a tonne by 1006 GMT.
Prices of the metal used in the power and construction industries fell below the 200-day moving average on May 11 and have since traded in a narrow range.
"May is seasonally a slow month for industrial metals demand. Copper demand looks weak, orders from wire rod plants are poor," said Dan Smith, head of research at Amalgamated Metal Trading. "We are also seeing a pick-up in supplies."
China's CMOC 603993.SSrecently reached an agreement on royalties with Democratic Republic of Congo's state miner, paving the way for copper exports to resume.
Copper production in Peru jumped in March as large mines resumed operations after stoppages caused by social protests.
Stocks of copper MCUSTX-TOTAL in LME warehouses have risen by 80% since the middle of April to 92,250 tonnes. This has eased worries about supplies on the LME market and widened the discount for the cash contract over the three-month copper MCU0-3 to about $50 a tonne.
Industrial metals prices are also being influenced by negotiations over the U.S. debt ceiling. Investors are concerned about the possibility of the US federal government falling behind on its debt payments, which could trigger a default and spark chaos in financial markets.
Elsewhere, zinc CMZN3 fell to 2-1/2-year lows of $2,426 a tonne. Prices of the metal used to galvanise steel for construction have dropped 30% over the past four months.
The sell-off was triggered by sliding activity in China, where new construction starts measured by floor area fell 21.2% year on year in the January-April period, having been 19.2% down in the first three months.
Three-month zinc CMZN3 fell 1% to $2,454 a tonne.
In other metals, aluminium CMAL3 ceded 1.1% to $2,259, lead CMPB3 was up 0.1% to $2,095, tin CMSN3 lost 1.5% to $25,065 and nickel CMNI3 gained 1.1% to $21,525.
https://www.nasdaq.com/articles/metals-copper-pressured-by-poor-demand-prospects-and-higher-supply
MGL Comment - Tue 08:45, May 23 2023Back to Top
Copper prices fell on Monday as the market focused on a deteriorating demand picture in top consumer China, rising supplies and climbing inventories
Toxic brew.
Pendulum theory suggests $7k as lows.
One of central India's leading steelmakers, Godawari Power and Ispat Limited (GPIL), has announced its 2022-2023 (FY23) results. Notably, the company has posted its highest ever annual iron ore mining volumes as well as pellet production and sales in the preceding fiscal.
Performance highlights:
Total steel billet output for the financial year was largely stable at 0.32 mnt compared with 0.33 mnt in the previous fiscal.
Other highlights:
Average pellet sales realisation falls: GPIL's average sales realisation stood at INR 9,409/t in FY23, a decrease of 24% y-o-y from INR 12,390/t in FY22.
EBIDTA down y-o-y: The company's EBIDTA was recorded at INR 1,133 million (mn) in FY23, down significantly by 39% y-o-y as against INR 1,864 mn in FY22. EBIDTA crashed mainly due to sharp drop in pellet realisation.
Production guidance for FY24: The company has kept its production guidance for iron ore pellets at 2.6 mnt in FY24.
Iron ore capacity to increase: The company has announced that the existing iron ore mining capacity of its Ari Dongri mine in Chhattisgarh is slated to increase to 6 mnt from the current 2.35 mnt and an iron ore beneficiation plant with capacity of 6 mnt will be set up, which is estimated to be completed by Q3FY24. However, the company does not intend to sell the raw material in the open market as it will be consumed for captive purposes, mainly to cater to GPIL's enhanced production capacity. The company has applied to MoEF for environmental approval for expansion of iron ore mining which is under consideration.
Enhancing high-grade pellet capacity: GPIL has proposed to enhance its high-grade pellet production capacity to 5.7 mnt from the current 2.7 mnt by setting up an additional plant within an estimated 36 months. The application for the same is also under consideration of the concerned ministry.
Steel billets production capacity to rise: GPIL has proposed to enhance its steel billets capacity to 0.5 mnt by setting up two additional furnaces. The project shall be completed by the end of Q2FY24.
MGL Comment - Tue 08:22, May 23 2023Back to Top
Notably, the company has posted its highest ever annual iron ore mining volumes as well as pellet production and sales in the preceding fiscal.
India was once described to me as an elephant. Slow to change to direction. Slow to accelerate. But once moving, powerful and unstoppable.
Is India the straw that breaks iron ore?
The Malaysia-based PMB Technology Bhd will invest significantly in its Phase 3 plant project in Samalaju Industrial Park, Bintulu, increasing the output capacity of metallic silicon by 50 per cent annually.
It has been reported that the company is investing RM350 million in the Phase 3 unit of the smelter, which would have a capacity of 36,000 tonnes per year. According to PMB Technology, the project is expected to be accomplished by Q3 2023.
The 2022 annual report of the company pronounces, "With both Phase 1 and Phase 2 up and running now, the group's combined annual installed capacity is 108,000 tonnes, supplied by a total power of 129 megawatts (MW)."
The subsidiary PMB Silicon Sdn Bhd carries out metallic silicon manufacturing. On October 31, 2022, the group began constructing the Phase 3 project after securing an extra 25MW of electricity from Syarikat Sesco Bhd.
Silicon is added to aluminium to lower the melting point and increase fluidity. Chemically, silicon is an abundant, non-toxic element. Silicon, when combined with aluminium, increases the metal alloy's fluidity without causing it to degrade at high temperatures.
With Press Metal Aluminium Holdings Bhd as its largest shareholder, PMB Technology entered the metallic silicon business five years ago by constructing the Phase 1 plant, which can produce 36,000 tonnes of metallic silicon annually.
When the Phase 2 facility was accomplished and put into service in 2020, the production capacity was increased to 72,000 tonnes annually. With a smelting capacity of 1.08 million tonnes per year from its industrial sites in Samalaju Industrial Park and Mukah, Press Metal is South-East Asia's largest integrated aluminium smelter.
The Company stated, "The (metallic silicon) plant's expansion plays an important role in the production by way of cost reduction and increased operational efficiency when it comes to leveraging workforce and raw material management, especially during routine plant maintenance."
“However, to remain in the global competition, the business can acquire significant quantities of raw materials at a cheaper cost. In the longer run, the group is optimistic about achieving a more excellent economy of scale in production. Besides that, the automation of certain production processes is also one of the group's approaches to sustain this relatively tight labour market."
MGL Comment - Tue 06:47, May 23 2023Back to Top
This is the Bintulu industrial park in Sarawak:
It has a unique attribute, access to one of the largest unused hydropower projects in the world.
It was finally completed in 2016:
A ceremony held earlier this week marked the official opening of the 944-MW Murum hydroelectric plant in Malaysia’s Sarawak state.
The commissioning was attended by a number of local dignitaries, who said Murum‘s completion will help be a catalyst for economic and social growth within the region.
“Sarawak is a such a big state that in order to attract big investments for industrialization, we need to be able to offer abundant electricity,” Governor Tun Abdul Taib Mahmud said. “We also need to ensure we can offer electricity at cheap rates. In order to do this hydropower is the answer. So, the successful completion of Murm will go a long way in propelling us forward.
The project was developed by state-owned Sarawak Energy Bhd as part of the Sarawak Corridor of Renewable Energy (SCORE) initiative.
Sarawak Energy announced that its second plant to be developed under SCORE — the 1,285-MW Baleh — had received formal approvals from the state for its construction.
Readers should note that OCI (the large Korean polysilicon maker) has a factory next door and is likely cost competitive with the best that China can do in polysilicon. OCI is currently suspended pending the completion of an unnecessarily complex Korean style chaebol reorganisation.
Polysilicon prices are, of course, currently tanking:
Normal story, too much capacity coming online too fast etc.
SHANGHAI, May 22 (SMM) - Stainless steel prices remained low last week, with spot #304 quotes dipping about 300 yuan/mt WoW. Last Wednesday, a stainless steel mill in east China suspended the cold-rolled coil shipments to the Wuxi market and cut the shipments to the Foshan market. Besides,with the digestion of warrant goods, social inventory of cold-rolled coil declined a little.. In terms of hot-rolled coils, a mill in east China reduced its shipment volume to the market last week, allowing the social inventory to drop slowly. High-grade NPI prices were low last week. Some holders slightly cut their quotes when the downstream demand was lower than expected. SMM predicts that the short-term NPI prices will fall in the short term as the stainless steel mills will carry out overhauls. Prices of ferrochrome rose slightly during the week amid the producers’ intention to raise their quotes before the bid price release, but the transactions were slack because of the wait-and-see approach taken by buyers. Ferrochrome prices will run steadily before the bid price release. In general, the stainless steel supply and demand both decreased last week. Spot stainless steel prices are expected to drop this week.
https://news.metal.com/newscontent/102223296/Spot-Stainless-Steel-Prices-Stood-Low-Last-Week/
MGL Comment - Tue 08:25, May 23 2023Back to Top
Stainless breaking lower now. Again, with NPI at $12k equivalent per tonne, and demand weak, we're seeing discounts emerge.
TOKYO : Japan's JFE Steel said on Monday it will go ahead with a 46 billion yen ($341 million) plan to triple production capacity of electrical steel sheet at its Kurashiki plant in western Japan to meet growing demand for electric vehicles (EVs).
The move comes after its bigger rival Nippon Steel Corp said earlier this month it would spend 90 billion yen to boost its capacity to make high grade non-oriented electrical steel sheet at two of its domestic steel works.
JFE, the flagship unit of JFE Holdings Inc, had flagged the potential expansion in electrical steel sheet, a key material used in primary motors of EVs, in February.
The latest investment follows its 2021 decision to spend 49 billion yen to double capacity at the plant by September 2024.
After the second expansion is completed by March 2027, output capacity will triple from current levels.
Japan's second-biggest steelmaker also said it and Indian partner JSW Steel Ltd have reached a basic agreement to form a joint venture to produce electrical steel sheets used in power plant transformers.
Under the plan, which was also flagged in February, the new factory will start operating by March 2028.
A spokesperson at JFE Steel declined to comment on an expected investment cost.
($1 = 135.0500 yen)
MGL Comment - Tue 06:38, May 23 2023Back to Top
JFE Steel said on Monday it will go ahead with a 46 billion yen ($341 million) plan to triple production capacity of electrical steel sheet at its Kurashiki plant in western Japan to meet growing demand for electric vehicles (EVs).
It's been a very long time since we saw Japanese steel capacity expansion.
By Enrico Dela Cruz
May 22 (Reuters) - Benchmark futures prices of steel and steelmaking ingredients including iron ore fell on Monday, surrendering some of their last week's gains on persistent worries about China's sluggish property sector.
The most-traded September iron ore on China's Dalian Commodity Exchange DCIOcv1 ended morning trade 1.6% lower at 724 yuan ($104.74) a tonne.
On the Singapore Exchange, the most-active June iron ore contract SZZFM3 dropped as much as 2.7% to $102.55 a tonne, its weakest since May 15.
Prices of the steelmaking ingredient climbed 6% last week in Singapore, marking their biggest weekly gain in seven, as hopes grew for more policy stimulus to shore up top steel producer China's patchy economic recovery.
China will take more targeted measures to expand domestic demand and stabilise external demand in an effort to promote a sustained economic rebound, Premier Li Qiang was quoted by state radio as saying on Thursday.
"One of the main problems with sentiment-driven rallies is that they're incredibly fragile unless fundamentals play catch up sooner rather than later - which is highly unlikely for now," said Navigate Commodities managing director Atilla Widnell.
A slower pace of home price gains in China, along with last week's bearish data showing a sharp fall in property investment and sales, has raised doubts about the strength of recovery in the real estate sector, a key driver of steel demand and crucial to the health of China's economy.
"We expect steel production in China to fall in coming months due to a lack of growth in new construction activity. This will weigh on iron ore demand, just as supply disruptions ease," ANZ commodity strategists said in a note.
Coking coal DJMcv1 and coke DCJcv1 on the Dalian exchange slumped 3.4% and 3.1%, respectively.
Rebar on the Shanghai Futures Exchange SRBcv1 dipped 1.8%, hot-rolled coil SHHCcv1 shed 1.7%, wire rod SWRcv1 lost 2.5%, and stainless steel SHSScv1 dropped 0.8%.
https://www.nasdaq.com/articles/iron-ore-other-ferrous-futures-fall-on-china-property-blues
MGL Comment - Tue 08:23, May 23 2023Back to Top
persistent worries about China's sluggish property sector.
This goes to our fret that China's population is not as advertised.
TOKYO: Tokyo Steel Manufacturing Co , Japan's top electric-arc furnace steelmaker, on Monday said it would hold steel product prices steady in June to ensure hikes implemented earlier this year would be absorbed by the market.This is the second month the company will keep prices unchanged for all of its steel products, including its main H-shaped beams. Tokyo Steel raised prices for some products in March and April.For June, prices for steel bars, including rebar, will remain at 103,000 yen ($763) a tonne while H-shaped beams will also stay at 127,000 yen a tonne.Tokyo Steel's pricing is closely watched by Asian rivals such as South Korea's Posco and Hyundai Steel , and China's Baoshan Iron & Steel Co Ltd (Baosteel) .($1 = 135.0500 yen) (Reporting by Yuka Obayashi , Editing by Bernadette Baum
MGL Comment - Tue 07:20, May 23 2023Back to Top
Tokyo Steel trying to hold the line here, but Mr Market ain't interested:
According to the Vietnam Steel Association, over 735,000 tons of construction steel were sold in April, the second-lowest monthly sales figures since 2022.
The sale was down 15% against the same period last year.
Over 710,000 tons of construction steel were produced, posting the smallest monthly output since 2022, and a year-on-year drop of 37%.
According to Hoa Phat Group, which holds one-third of the market share for construction steel, demand remained weak worldwide, so it sold only 214,000 tons of construction steel in April, down 28%.
To spur sales, Hoa Phat on May 19 reduced the price of rebar by VND200,000 (US$8.50) to VND15.09 million per ton. Other steel makers lowered the price by VND150,000-250,000.
Since early April, steel prices have decreased six times. At present, the average price of most common products is around VND15 million per ton, similar to that in October 2022 when steel demand started to plummet.
According to Vietcombank Securities Company, steel prices started to fall in late April when prices of input materials such as iron ores, steel scrap and coke went down.
Construction steel prices are likely to drop further in the coming time because of weak demand, the company said, noting that real estate developers and people are discouraged to build houses amid economic difficulties with high lending interest rates.
According to the World Steel Association, the global steel demand is likely to increase by 2.3% to 1.82 billion tons this year, and by 1.7% to more than 1.85 billion tons next year. However, the demand will still be affected by high leading interest rates.
https://www.retailnews.asia/construction-steel-sales-fall-15-in-april/
MGL Comment - Tue 07:13, May 23 2023Back to Top
Over 710,000 tons of construction steel were produced, posting the smallest monthly output since 2022, and a year-on-year drop of 37%.
Vietnam growth story over maybe? We had expected this to be a better number.
