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South32 awards R158m coal contract to 100% black-owned mining firm

JOHANNESBURG – Diversified mining company South32 has awarded a three-year, R158-million contract at the Wolvekrans Middelburg Complex to 100% black-owned Modi Mining, which aims to source up to 90% of its labour from the nearby communities.

The award marks an advance on the ASX- and JSE-listed company’s plans for a more inclusive supplier landscape.

“Transformation is central to our efforts to make a meaningful contribution to the social and economic development of South Africa,” said South32 president and COO Africa Mike Fraser in a release to Mining Weekly Online.

In an Investing in African Mining Indaba address in February, Fraser emphasised the need for a supportive legislative, regulatory and administrative environment for inclusive growth solutions to realise their full potential.

He expressed the view at the Indaba that while mining still represented a significant vehicle for driving inclusive growth, it remained legislatively challenged, with above-inflation costs rendering high-quality resources less accessible.

“If we don’t get on the same playing field and face the same goal, then regardless of the country’s natural endowments, South Africa’s mining industry is at risk of not realising its potential,” Fraser warned in his pre-Mining Charter Three address.

The triple-listed South32, with operations in Australia, Southern Africa and South America, produces coal, manganese ore, manganese alloy and aluminium locally.

Source : Mining Weekly

 

Iron seen in low-$40s by Citi as supply grows, demand peaks

SINGAPORE – Iron-ore may extend a slump into the low-$40s as supplies swell and demand reaches a short-term peak amid steel mill restarts and ramp-ups in China, according to Citigroup, which cut its forecasts by as much as 20% over the next year.

The nadir in prices may occur in six to eight months, analysts including Tracy Liao wrote in a report received Monday. Iron-ore is seen at $51 a metric ton in the third quarter compared with a previous estimate of $64, and at $48 in the final three months of the year, down from $60.

The raw material has sunk by more than a third since rising to almost $95 in February as global output increases, with miners such as Vale SA in Brazil and Australia’s Roy Hill Holdings Pty boosting capacity, and China’s efforts to curb financial leverage hurt demand. The pullback in iron-ore is in contrast to surging prices of steel reinforcement bar, and Citigroup estimates that mills have ramped up output to a maximum because of the robust margins.

“Chinese blast furnace utilization and its associated iron-ore demand reached a near-term peak,” the bank said in the report dated June 19. “We foresee more downside risks to iron-ore prices and anticipate the near-term trough to occur in the fourth quarter and first quarter.”

Ore with 62% content at Qingdao was at $56.30 a dry ton Monday, up from $53.36 on June 13, the lowest in almost a year, according to Metal Bulletin.

Even with prices dropping, global supply continues to rise, according to Citigroup, which forecasts a surplus of 118-million tons in 2017 after a glut of more than 60-million tons last year. Ongoing expansion by large miners, notably Vale’s biggest project S11D and Roy Hill, will probably contribute about 60-million tons of additional supply this year, the bank estimates.

Iron-ore will probably trade at about $55 for the next few months, according to Barclays, which said in a note on Monday that the momentum behind the sell-off has abated and further stabilisation in the benchmark price is likely. Futures in Singapore and China extended gains.

Citigroup reduced its price targets for BHP Billiton and Rio Tinto Group while keeping buy ratings on both, according to a separate report received Monday. The bank downgraded Fortescue Metals Group to sell from neutral, saying the producer faces a “double whammy” of lower prices and higher discounts for low-grade products.

Miners’ shares were mixed in Sydney. Rio’s shares fell 0.1% to cap a fifth straight day of declines, while BHP was little changed. Fortescue gained 1.3%. The trio are Australia’s largest shippers.

Source : Mining Weekly

Copper production growth to accelerate to 2021

JOHANNESBURG – Global copper production growth will be supported by key markets with low operating costs and strong project pipelines in the next four years, according to research firm BMI’s copper outlook report, released Monday.

Global copper mine production, supported by markets and low operating costs, is forecast to increase by an average yearly rate of 4.1% between 2017 and 2021, as many major projects come on line.

“In terms of volume, we expect global copper output to climb from 20-million tonnes in 2017 to 23.7-million tonnes by 2021,” said BMI in a statement.

However, the research firm noted that a few developments will pose considerable risks to the copper mine outlook for 2017, namely labour unrest in Latin America and Freeport McMoRan’s negotiations with the Indonesian government to resume copper exports from the Grasberg mine, which could result in lower-than-expected output.

The Democratic Republic of Congo’s (DRC’s) copper production will return to solid production growth in 2017, supported by continued investment in high-grade reserves, the report says.

“The DRC will regain global copper ore market share of 5% by 2021, after falling to 4.7% in 2016.”

Chile, meanwhile, is expected to remain the leading global copper producer by a wide margin, though the nation’s copper sector will face ongoing challenges, declining ore grades, freshwater shortages and labour unrest.

“Chile will account for a gradually declining share of the global total, from 27.2% in 2017 to
24.7% in 2021,” said BMI.

“We forecast Chile to produce 5.4-million tonnes of copper in 2017, down slightly from 5.5-million tonnes the previous year, and to return to gradual production growth thereafter,” the statement said.

BMI further noted that China’s copper sector will post steady production growth as miners contend with declining ore grades and a slow copper price recovery.

“We forecast China’s copper production, which accounts for 9% of global output, to increase from 1.8-million tonnes in 2017 to two-million tonnes by 2021.”

Peru’s copper sector, meanwhile, continues to post strong production growth as projects in the country come on line. Its total output exceeded two-million tons in 2016, thereby overtaking China as the world’s second-largest copper producer.

“Peru’s copper production will increase from 2.6-million tonnes in 2017 to 3.7-million tonnes by 2021, averaging 10.2% yearly growth.”

BMI added that competitively low operating costs and high-grade reserves will underpin Peru’s copper production as copper prices remain subdued by historical standards.

US copper production will increase from 1.4-million tonnes this year to 1.6-million tonnes in 2021.

“Environmental deregulation under US President Donald Trump will encourage project development in the copper sector,” the report said.

Source : Mining Weekly

Steel industry needs to pull together to fight import risks

In light of the recently implemented safeguard duty on hot-rolled steel, continued collaboration among stakeholders is necessary to protect the steel industry against the influx of steel imports, said consulting firm XA International Trade Advisors director Donald Mackay on Tuesday.

Speaking at a steel industry workshop, in Johannesburg, focusing on the safeguard tariff, Mackay added that the industry needed to focus on solutions that would benefit the entire sector.

From July, South Africa aims to put emergency safeguard tariffs on flat hot-rolled steel product imports, which will be introduced in addition to the 10% duty already in place for hot-rolled steel. This will raise overall protection for the product to 22% for a three-year period.

The safeguard tariff will fall from 12% in the first year to 10% in the second year and 8% in the third.

This tariff proposal was based on a final determination by the International Trade Administration Commission of South Africa (Itac) announcing that domestic production had suffered significant damage from an unforeseen surge in imports.

Mackay explained that duties were normally applied to the end product, which means that the benefit flowed upstream.

“What we see here is the duty being imposed upstream. Because it is done out of sequence, it is creating a disproportionate amount of pressure, more than industry would normally have,” he told Engineering News Online on the side lines of the workshop.

Mackay noted that it was an unusual situation as hot-rolled steel was an upstream product.

“The duty declined in the tube and pipe sector, which is a product much further downstream. We now have a situation where, after implementation of the safeguard, hot-rolled coil will have an effective duty of 22%, while the pipe industry will have 10% duty.”

Mackay explained that the duty on the raw material was therefore more than double that of the duty on the final product, creating a large incentive to import the pipe instead of coil.

He added that the sustainability of the steel sector – both upstream and downstream – was integral to achieving the country’s economic and development goals.

Mackay noted, however, that for South Africa to survive the infiltration of international competition, it required synchronised efforts from all involved domestically.

“We need to focus on what can be done in the short term while a bigger strategy is being looked at,” he said.

Also speaking at the workshop, South African institute of Steel Construction (Saisc) CEO Paolo Trinchero admitted that the industry had made “a lot of mistakes”.

“We need to work with tariffs and companies need to learn how to apply them, it is one of the practical things we can do that can influence what is currently happening in the industry,” he said.

Trinchero noted that Saisc had identified import threats from China almost a decade ago.

“We saw China as a real issue. In 2015/16 the commodity cycle played a very important role in the industry and the slowdown in China resulted in excess steel capacity and imports becoming a real challenge.”

Trinchero stated that the industry had assumed that this would only last for two to three years, but that it was clearly not what was happening.

“Many European producers estimate that China’s overcapacity will be in place for over a decade,” he said.

Trinchero further highlighted that the safeguard tariff had the potential to influence the steel sector’s thinking, and that it had to be carefully considered by all companies active in the industry.

He noted that the downstream industry was not well prepared regarding the tariffs.

“There are many different sectors and lots of competition. People don’t get on. Looking at tariffs, it is important to work together as an industry. This has been one of our major shortcomings,” he said.

Source : Engineering News

Eskom downgrade has AMSA CEO worried about steel

With ratings agency Moody’s Investors Service cutting State power utility Eskom’s credit to two notches below investment grade on Wednesday, ArcelorMittal South Africa (AMSA) CEO Wim de Klerk expressed his concern about the downgrade’s impact on the local steel industry.

Addressing delegates at a steel industry workshop focused on the 12% safeguard tariff on hot-rolled coil, starting in July, De Klerk highlighted that the economy was in trouble.

“I spend a lot of time talking to government, trying to find out where the major projects are. Money is needed to fund those projects,” said De Klerk, adding that the downgrade would result in government funds having to be set aside for guarantees to secure loans for Eskom.

He further highlighted that China’s steel capacity was a global issue also affecting South Africa’s steel industry.

“Globally, China is the largest steel producer with a massive oversupply. It is also the world’s largest steel exporter [and is] taking away South Africa’s traditional export markets . . . We can’t beat China’s prices,” he said.

De Klerk further noted that 18 countries had trade cases against Chinese steel imports, while 27 countries had started trade investigations into the Asian nation.

The AMSA CEO added that, in South Africa, Chinese imports were up six-fold in six years.

“In a stagnant economy, these imports have been at the cost of local production,” he said, adding that, without a primary steel producer and downstream manufacturing being impacted, South Africa would become a consuming nation.

He also said that there was no margin in the industry.

“There’s a belief that trade is making money and that is not true. Government is aware of these problems, trends and job losses,” said De Klerk.

He added that government wanted the steel industry to come up with solutions, citing that the intent was there but that implementation was lacking.

Addressing the upcoming safeguard tariff implementation, De Klerk said AMSA made a mistake while negotiating two years ago.

“We started safeguard tariff negotiations to protect ourselves . . . without thinking of the industry as a whole. We didn’t ensure that knock-on effects were felt downstream,” he said.

De Klerk further noted that AMSA had broadened its approach from this initial strategy, which focused primarily on securing protection for products produced by AMSA.

The intention is to collaborate with downstream customers for industrywide protection.

De Klerk further highlighted how important it was for industry to work together, noting that AMSA was ready to assist industry participants in pursuing greater protection for the downstream industry. He also insisted that additional safeguards were required to protect the domestic steel industry – upstream and downstream – as the current levels of protection were not enough to stem the influx of imports.

Source : Engineering News

Glencore doubles down on coal as mining rivals head for the exit

LONDON – Glencore is doubling down on coal, even as rivals BHP Billiton and Rio Tinto Group move away from the world’s dirtiest fossil fuel.

The company, run by former coal trader Ivan Glasenberg, made a surprise eleventh-hour $3.5-billion bid for a huge patch of thermal coal-rich ground on Australia’s east coast controlled by Rio Tinto Group and Japan’s Mitsubishi Corp. Rio is considering the proposal, which trumps an agreement made with a unit of China’s

The move puts Glencore at odds with most peers as coal loses ground to renewable sources in the global energy mix. The Swiss commodity trader and biggest exporter of thermal coal, used mainly for power stations, has consistently said coal is essential to the needs of the developing world in the long term, thanks to growing demand in Asia.

“The fact that they are obviously choosing to grow that business while everyone else is running in the opposite direction — either they are geniuses or they are buying into stranded assets for the longer term, which will incur hefty costs,” Ben Davis, a mining analyst at Liberum Capital in London, said by phone.

In recent years, shareholders have pushed miners like Glencore for more disclosure on future costs related to fossil-fuel assets as the world moves to limit global warming and tackle the goals of the Paris climate agreement of 2015.

The concept of “stranded assets” has gained traction with some investors who are concerned that owners of coal or oil assets may one day hold reserves that are unable to be extracted. Some large investors, including Norway’s $950-billion sovereign wealth, France’s biggest insurer and the Church of England, have sold some holdings in coal producers to reduce that risk.

The Church of England, which owns some Glencore shares, says its reviewing the company’s coal bid. It filed a climate disclosure resolution at the company’s annual shareholder meeting last year that passed with 98% support from investors.

“Fossil fuels will continue to be an important component in the global energy mix for several more decades,” a spokesman for the church said in an emailed statement on Monday. “The key is that it will be a declining component and companies will need to manage that transition and we intend to play our part in encouraging and supporting companies to do so. We retain the right to disinvest if companies are unresponsive.”

Rio Tinto started dismantling its energy division and selling coal mines in 2015 and BHP Billiton offloaded some coal assets as part of its South32 spinoff the same year. Producers face a combined $10-billion risk to their earnings if carbon pricing tightens in the wake of the Paris climate accord, according to a report from UK non-profit organisation CDP.

Still, prices for thermal coal have recovered, surging 62% from the start of 2016.

“Global energy demand will be driven by developing economies in Asia and will be largely met by fossil fuels to 2030,” Glencore said in its annual sustainability report last month. “While it is clear that the relative share of renewable energy will grow, the absolute volume of fossil fuels will also grow due to overall growth of energy demand.”

Glencore owns coal mines in South Africa and Colombia, plus 17 operations in Australia where it produced 93-million metric tons last year.

To complete a deal for Rio’s Australian coal assets, the company has said it would sell at least $1.5-billion of assets, prioritizing coal operations, to help offset the cost of the deal.

“Investors are often skeptical about M&A in mining given the industry’s record and concerned about coal outlook,” analysts at UBS Group wrote in a report Monday. However, Glencore’s “M&A record is decent and demand for high-quality coal is robust.”

Global coal usage dropped the most on record in 2015, falling 1.8%, as the US and other major economies started turning away from the most polluting fossil fuel, according to BP’s annual review of energy trends last year.

Coal demand fell most in the US and China, with declines of 13% and 1.5% respectively. Consumption increased in India and Indonesia, where the fuel is still so cheap that utilities prefer it to natural gas for electricity generation.

Source : Mining Weekly

EU sets duties on hot-rolled steel imports from China

The European Union has set duties of up to 35.9% on imports of hot-rolled steel from China to counter what it says are excessively low prices and unfair subsidies.

The European Commission, which conducted an investigation on behalf of the 28 EU members, found that a number of companies had benefited from preferential lending from state-owned banks, grants, tax deductions and the right to use industrial land.

The EU has imposed anti-dumping duties on several Chinese steel products such as cold-rolled flat steel and stainless steelcold-rolled flat products.

The companies include Benxi Group with duties of 28.1%, Hesteel Group with a rate of 18.1% and Jiangsu Shagang at 35.9%.

The duties, which typically apply for five years, will take effect from Saturday, the EU’s official journal said.

Source : Engineering News

China says Zambia let go 31 Chinese held for illegal mining

BEIJING – Dozens of Chinese nationals who had been held for illegal mining in Zambia have departed the African country to return home, China’s Foreign Ministry said on Wednesday.

China had complained that Zambia provided no strong evidence of crimes committed by the 31 arrested in the copperbelt town of Chingola, including a pregnant woman and two victims of malaria.

But Zambia’s immigration chief had told Zambian media the Chinese would have to be deported for violating the law.

“After repeated representations by China’s Foreign Ministry and its embassy in Zambia, on the afternoon of June 6, the 31 Chinese citizens that had been seized and detained, boarded a plane and left Zambia smoothly, to return home,” ministry spokesperson Hua Chunying said.

In a letter, the 31 had expressed their “satisfaction” with the Chinese embassy’s efforts on their behalf, Hua told a regular news briefing.

Chinese companies have invested more than $1-billion in copper-rich Zambia, but there has been animosity, with some Zambian workers accusing firms of abuses and underpaying.

In 2012, Zambian miners killed a Chinese supervisor and seriously wounded another in a pay dispute at a coal mine. Zambian police charged two Chinese supervisors at the same coal mine with attempted murder two years earlier, after the shooting of 13 miners in a pay dispute.

Resource-hungry China is investing heavily in Africa, a supplier of oil and raw materials, such as copper and uranium, but critics have warned its companies take with them their poor track record on workers’ rights and environmental protection.

Source : Mining Weekly

The hard-to-believe steel shortage that’s unfolding in China

SINGAPORE – The world’s top steelmaker may have a shortage of steel. China has a lack of rebar, according to iron-ore miner Fortescue Metals Group, which says a shortfall of the key product helps to explain a divergence between the price of the commodity it digs up with the alloy it’s made into.

There’s a shortage of rebar, Fortescue’s CEO Nev Power said in a Bloomberg Television interview in Beijing on Monday, citing closures in China of some steel producers, especially operators of induction furnaces. Rebar, or reinforcement bar, is a basic item used to reinforce concrete.

China makes half of the world’s steel, and in recent years it’s been more associated with excess production, soaring steel exports, and sinking prices. That pain has spurred the government – egged on by Group of Seven policy makers – to press on with shutdowns of outdated plants, promote consolidation and clean the air that’s polluted by smokestacks. Over the past year, the closure of induction furnaces, which use electricity, has been a focus.

“Induction furnaces typically make rebar and as those furnaces are closed down, it’s created a shortage of rebar and the prices have gone up,” Power told Bloomberg Television. “The margins that are being made in rebar at the moment we don’t believe are long-term and as new production comes in, we’ll see those margins comes back to normal.”

While iron has tumbled this year amid concerns about supply, as well as projections demand may slow in China, rebar by contrast has soared. That’s a divergence from the pattern in recent years when they’ve moved in tandem, with Shaw and Partners and Liberum Capital flagging the shift. Spot ore with 62% content was at $57.79 a dry ton on Friday, down 27% this year, according to Metal Bulletin.

There are signs of a possible shortfall with nationwide stockpiles or rebar in retreat, although analysts say that the trend may now be easing as other producers boost supply. Inventories of rebar in China have shrunk every week since mid-February and are now at the lowest since December.

‘SHORTAGE OF REBAR’
“The elimination of some induction furnaces has indeed led to a shortage of rebar in China,” said Xu Huimin, an analyst at Huatai Futures in Shanghai. “However, we may be reaching an inflection point as demand has started to weaken and supply is expected to increase.”

Shifts in China’s policy on coking coal have also been behind the split between iron and steel, according to Power, who said he’s seen a “significant change” in the relationship between the two. When coal surges, as happened last year, mills can respond by using more higher-grade iron ore to boost efficiency.

Iron-ore’s slump this year has come as supplies increased, including from top producers Australia and Brazil, with Vale SA beginning a four-year ramp-up of its biggest project S11D. In April, Australia’s government said it expects output from the biggest miners to top demand, hurting prices.

Power cited stockpiles of ore held at China’s ports among factors that had hurt iron ore. “As the port stocks come down that will keep a lid on prices,” he said. “But once things return to normal, we should see it trade somewhere around where the global supply curve is.”

Source : Mining Weekly

China says 31 nationals detained in Zambia for illegal mining

BEIJING – Zambia has detained 31 Chinese nationals for illegal mining in the African country’s copper belt but has failed to provide strong proof of their crimes, a senior Chinese diplomat said as he lodged a complaint.

Lin Songtian, the Chinese Foreign Ministry’s director-general for African affairs, told a Zambian diplomat in Beijing that China understands and supports actions to crack down on illegal mining, the ministry said in a statement late on Sunday.

However, Zambia had not only not provided strong proof of the crimes of the 31 detained but had also detained a pregnant woman and two others with malaria, Lin said.

“China expresses serious concern and resolute opposition to this,” the ministry cited Lin as saying.

China hoped that Zambia could handle the incident appropriately and as soon as possible, and release those who are innocent, Lin said.

Chinese companies have invested more than $1-billion in copper-rich Zambia but there has been animosity, with some Zambian workers accusing firms of abuses and underpaying.

In 2012, Zambian miners killed a Chinese supervisor and seriously wounded another in a pay dispute at a coal mine.

Zambian police charged two Chinese supervisors at the same coal mine with attempted murder two years earlier after the shooting of 13 miners in a pay dispute.

Resource-hungry China is investing heavily in Africa, a supplier of oil and raw materials like copper and uranium, but critics have warned that its companies are taking with them their poor track record on workers’ rights and environmental protection.

Source : Mining Weekly