MMTA CONF 2018: Key talking points ahead of the conference

With the annual Minor Metals Trade Association conference kicking off on Wednesday April 11 in Montreal, Canada, Metal Bulletin looks at some of the key topics that are influencing the minor metals markets.

There is a general bullishness in the minor metals markets heading into the conference this year. Globally, the macroeconomic picture has been improving in terms of demand for key industries requiring minor metals, with prices picking up over the past few months and slowly recovering from their 2015/2016 lows.

Most of the minor metals prices have moved up dramatically, hitting fresh highs since the beginning of the year.

Selenium is now trading at its three-year high, as are indium, gallium and germanium. Meanwhile cadmium is trading at levels last since in 2011.

But while the mood is generally upbeat, market participants are wondering if this is just temporary volatility or if they in for a long bull cycle.

Here, Metal Bulletin covers four of the key talking points going into the conference.

China’s crackdown on pollution
China’s crackdown on pollution has been one of the key factors influencing fundamentals and prices in the minor metals markets since last year.

The nationwide campaign against environmental violations has forced some smaller miners, smelters and flotation plants across 30 different Chinese provinces to close since the beginning of last year.

Chinese President Xi Jinping has said that clear rivers and green mountains are as valuable as mountains of gold and silver, so environmental inspections in 2018 will be even stricter.

Indium has been one of the metals particularly hit by the environmental checks. The minor metal, which had lacked price momentum since the collapse of China’s Fanya Metal Exchange in mid-2015, staged a remarkable turnaround late last year.

Metal Bulletin assessed indium in-warehouse prices at $340-370 per kg on Friday April 6 – the metal is now trading at levels last seen in July 2015.

Indium prices started to creep up in October last year, propelled by tighter supply of crude indium – the raw material of ingot.

Indium’s output fell remarkably in 2017 because of supply disruptions in zinc mining in China – indium is recovered as a byproduct of lead and zinc smelting.

The nationwide crackdown on polluting industries in China prevented more than 1,000 zinc mines across the country from ramping up production in 2017.

China’s indium output dropped by around 20% in 2017 on an annual comparison, according to China Non-ferrous Industry Association (CNIA).

And the positive mood among indium market participants doesn’t show signs of abating, with the environmental inspections in China set to continue this year.

Where is the potential cobalt supply?

With rising global awareness and measures taken against pollution generated by gasoline-powered vehicles, a mega ramp-up of electric vehicle (EV) production is expected in the next few decades. Bullish sentiment surrounding EV development and adoption is therefore driving mounting demand for battery raw materials, with cobalt one of them in the spotlight.

Cobalt is key in the production of lithium-ion batteries, but mined a byproduct of copper and nickel and frequently found in the Democratic Republic of Congo, it is no quick or easy task to bring substantial new volumes on stream. And while new production is expected to arrive from ERG’s Roan Tailings Reclamation project and Glencore’s Katanga, market players have concerns over whether cobalt production will keep pace with the EV boom.

EV manufacturers, as a result, have expressed significant interests or approached cobalt suppliers directly or indirectly to secure cobalt unit for the next few years, with the supply-demand picture expected to keep cobalt price elevated in the coming years.

“Our view is that the cobalt boom is guaranteed for the next seven to 10 years,” Tony Southgate, head of strategic cobalt marketing at ERG, told Metal Bulletin on the sidelines of Mining Indaba in Cape Town earlier this year.

Cobalt prices have stormed past $40/lb – where next?
When cobalt prices pushed through the $40 per lb resistance level in March, there were concerns it could lead to a destruction of demand and the peak of the price rally. Instead, the $40 mark proved only a psychological barrier, and prices for both low- and high-grade metal have since moved above $44 per lb.

Material availability below $43 is thin on the ground, and traders report increasing difficulty replacing their sold units. Meanwhile, inquiries for fixed-price, fixed-term contracts multiple years ahead refuse to go away, while tightness for briquettes and broken cathode, the preferred choice of battery manufacturers, is particularly acute.

Consequently, market participants were eyeing $45 per lb within the next few weeks, and $50 this year, almost as soon as the $40 level was smashed. Such prices would put cobalt prices into territories last seen in early 2008, with underlying fundamentals generally considered much stronger than they were 10 years ago.

Reach after Brexit
There is just over a month to go until the European Chemicals Agency’s (ECHA) chemical control system that requires every substance used or produced in Europe to be registered comes into force, to permit it to be produced, imported into or used in the European Economic Area (EEA) – except for tonnages below 1 tpy.

Some traders are still unregistered and grappling with paperwork to meet the deadline for the Registration, Evaluation, Authorisation and Restriction of Chemicals (Reach) program of May 31, 2018. But most are concerned about what will happen to Reach after Brexit.

The United Kingdom’s Department for Environment, Food & Rural Affairs (Defra) said it will establish a separate UK regulatory system for chemicals rather than be subject to the European Chemicals Agency’s (ECHA) chemical control system which requires every substance used or produced in Europe to be registered.

The UK is scheduled to leave the European Union on March 29, 2019, less than one year after the Reach deadline for all EU metals companies, although the UK will continue to comply with EU law during the transition period to the end of December 2020.

Traders in the UK may have to deal with an added level of complexity following Brexit, but how Reach will apply in the UK will not be fully known until after the process is completed in 2019.

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