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https://www.wsj.com/articles/coronavirus-spurs-demand-for-niche-raw-materials-11581511671

Drop-off in Chinese production boosts prices for thermal coal, vanadium and manganese as consumers scramble to secure supplies

The coronavirus outbreak originating in China that has weighed on demand for crude oil, copper and soybeans is prompting a rally in some niche commodity markets.

For raw materials including thermal coal, which is burned to generate electricity, or alloys of vanadium and molybdenum, used to toughen up steel, the drop in Chinese output has outweighed any decline in demand. The same goes for manganese, a specialty metal used by steelmakers as well as producers of fertilizer.

The prices of these commodities have climbed as buyers in China and elsewhere try to secure supplies, underlining the country’s complex position in the world economy as a major consumer, supplier and processor of raw materials.

Prices have risen even further in smaller commodity markets where Chinese producers dominate global output.

That includes ferrovanadium, an alloy of iron and vanadium used by steelmakers to improve resistance to heat and corrosion.

Vanadium is also used by aircraft makers in jet engines when it is mixed with titanium and aluminum instead of iron.
China produced around 70% of the world’s vanadium alloys in 2019, according to Timothy Wood-Dow, an analyst at BMO Capital Markets. The spread of coronavirus has knocked out around 40% of Chinese ferrovanadium production and pushed prices up world-wide.

A pound of ferrovanadium cost $13 in the U.S. last week, according to commodities consulting firm CRU Group, 20% more than at the start of the year. In Europe, ferrovanadium prices have jumped 26% to $28.70 a kilogram.

“China supplies most of the global market,” said Greg Smart, an analyst at CRU, adding that there were already some shortages of vanadium before the start of the coronavirus outbreak. “Most of it is produced in China, and as a result there’s been quite a shock to the market.”

https://www.utilitydive.com/news/utility-regulators-need-to-look-beyond-cash-flow-when-assessing-storage/571976/

We've made that turn away from lithium and vanadium

Notably absent from Sunday's discussion on electric reliability and resilience was baseload power, far from discussions in 2018 around subsidizing fuel secure resources such as nuclear and coal.

Instead, Walker touted the benefits of storage, encouraging regulators to analyze the technology more holistically, and take advantage of the investor-owned utility model and its ability to make big investments and depreciate those costs over time.

"The problem is when we do the analysis for storage, we don't really identify and capture all the benefits that can be utilized or gleaned from storage," said Walker.

"There are things that we gloss over in the industry that don't help the pro forma analysis for storage specifically," including black start capabilities, ancillary services, frequency control, undervoltage and black start loading.

He pointed to lessons learned in Puerto Rico, where a significant portion of the U.S. territory's economy comes from manufacturing, and outages can be devastating.

"For us to sit in this industry today and talk about a four minute and 59 second outage not being an outage is fairly disingenuous," he said.

"And so I think we've got to evaluate this model a little bit. [In] Puerto Rico, it turns out storage is one of the most fantastic opportunities for investment because of the significant impact on manufacturers that go unnoticed because of the way we look at reliability."

Energy storage and microgrids are expected to become an increasingly important component of national security and the overall reliability of the grid, he said.

His office, in conjunction with national labs, has been focused on quickening the pace of deployment, with $5 million earmarked this year, $40 million next year and $30 million the year after that. Specifically, research in the DOE labs has been focused on using minerals and chemistries that use domestic components, such as molten salt storage or zinc manganese dioxide, part of its broader efforts to establish a domestic supply chain of energy storage by 2030.

"I tell my team that if you want to make it as cheap as dirt, start with dirt," he said.

Part of the challenge from moving away from lithium has been that you don't get the same power density in other technologies, but working with the Pacific Northwest National Laboratory has allowed them to look beyond those limitations.

"It doesn't matter if you pick something that has less power density upfront, because we can do the R&D, we can do the engineering to actually make it work and get what we need," said Walker.

"Basically, we've broken this tie that has existed through lithium batteries of capacity and power density. Now we can actually control them separately, which enables us to really take a look at a lot of different capabilities

Logistics - The Chinese government has imposed restrictions on the movement of people and goods, and extended the holiday period until Monday February 10. It will be hard to deliver cargoes anyway, because most logistics companies haven’t resumed operations. There are fears that cargoes transiting through East Asian territories, such as Hong Kong or Taiwan, may also face logistical restrictions and cause delays in discharging at their ports of call

Force Majeure - Market participants have not ruled out the possibility of steel mills declaring force majeure if they cannot deliver on their contracts, especially if prices are on a downward trend. The China Council for the Promotion of International Trade said on January 30 that businesses affected by the coronavirus outbreak can apply for the certificate.

Steel Exports - It is difficult to predict if any reduction of exports from China will have a major impact on prices. Buyers with high exposure to Chinese imports are considering imports from other sources in Asia, such as Taiwan, South Korea, India and Japan

Steel Prices - A significant and prolonged slowdown of manufacturing and construction activity across all major cities in China would push HRC and rebar prices down and prevent a price recovery until late in the second quarter of the year. Slowdown in demand is likely to dampen the traditional price uptrend over March and April, as steel mills and traders would be willing to offer discounts in order to reduce their stock levels.

CISA Prediction - China Iron & Steel Association said that overall steel market situation is expected to improve in the second quarter when the virus spread is within control or completely defeated. CISA said “The impact of the virus will hit the steel sector mainly in the first quarter, more so on the downstream users than on the steel producers, and decreases in the prices of raw materials and steel, thus, are expected. However, both steel production and sales will show signs of improvement in the second quarter when the virus is under control or completely defeated and the impact recedes accordingly, and the domestic steel demand will revive substantially when Beijing further enhances its efforts in counter-cycle adjustments and local authorities are able to execute their economic stimulating measures.”

https://steelguru.com/steel/coronavirus-early-signals-for-steel-industry/555925

Inventory Build-up - Blast furnaces continue to operate during the Lunar New Year break, leading to a build-up of stocks through the supply chain. As soon as end-users return to the market, stocks normally start to fall rapidly and stronger demand pushes prices higher. But this year the reopening of many construction sites and manufacturing companies has been postponed, and warehouses and mills will be left holding increased amounts of inventories. Inventory levels are also expected to increase as steel mills are not able to deliver cargoes to end users. Exporters are also not able to bring cargoes from steel mills to ports for export.

Consumption - China's finished steel consumption in February would reduce due to lesser activity in construction and manufacturing activity Migrant workers in most parts of China are due back at work on February 10, but will likely be made to undergo a further 14 days of quarantine to prevent outbreaks at factories and construction sites. This would put the actual return to work no earlier than February 24. Some migrant workers may also shun returning to cities where there is a rising number of infected people. There is a shortage of protective masks, and manufacturing and construction companies are unlikely to secure enough masks for their workers so it may not be possible for them to fully resume operations. Rebar producers expected to be the worst hit because building and construction sites are at complete standstill and China's rebar is almost totally domestically-consumed. This is due to the fact that construction sites typically have many workers working in close contact with each other.

Production - The full scale of the impact on the Chinese steel market is starting to emerge as more information trickles. Four major provinces Shanxi, Shaanxi, Sichuan and Gansu have declared a cut in production rates for their steel industries to ensure that transport and human movements are reduced to contain the spread of the virus. Steelmakers in central China may have to sharply trim output or even shut, if Hubei province remains locked down through March amid the epidemic outbreak. In 2019, crude steel capacity in Hubei and Hunan amounted to around 70 million tonnes, accounting for 5.8% of the nationwide total. Some Chinese steelmakers have decided to curtail production amid the coronavirus outbreak, including Maanshan Iron & Steel in Anhui, Laigang Yongfeng, Shiheng Special Steel and Rizhao Steel in Shandong, and mills in Shaanxi, Shanxi, Gansu and Sichuan.

https://finance.yahoo.com/news/memorandum-understanding-delectrik-systems-private-210000814.html

VANCOUVER , Feb. 4, 2020 /CNW/ - VanadiumCorp Resource Inc. (TSX-V: "VRB") (the "Company") is pleased to announce it has signed a Memorandum of Understanding ("MOU") with Delectrik Systems Private Limited ("Delectrik"). VanadiumCorp and Delectrik share a vision to develop integrated energy storage solutions through the development of vanadium redox flow battery ("VRFB") technologies.

The MOU allows the companies to collaborate on a number of key strategic initiatives including:

VRFB high power stack and electrolyte development
Development of intellectual property
Production of VRFB systems with integrated technology
Production of VRFB systems for evaluation by third parties
Engineering, commissioning and logistics framework relating to the production of VRFB Systems
Assess and model manufacturing of VRFB integrated solutions
Assess all cost reduction possibilities and requirements for scaled manufacturing
Potential commercialization of high power stack and electrolyte
Application modeling for many different use cases
Assess collaboration, partnership or joint venture possibilities

Upon a successful VRFB demonstration, VanadiumCorp and Delectrik will enter into a definitive agreement which may include manufacturing rights and other considerations supporting scaling commercial production.

VanadiumCorp and Delectrik both recognize the importance of strategic vanadium supply, cost effective vanadium electrolyte and VRFB architecture in the development of XRG® technology. Both parties may endeavor to establish supply pathways including VanadiumCorp Electrochem process technology and wholly owned mineral resources. The parties agree to explore unique and alternative business relationships which may further the party's objectives.

Delectrik Systems Private Limited is an established vanadium redox flow battery producer based in Gurgaon, India . Delectrik's products are based on patented stack and system design using a proven and mature vanadium redox flow battery chemistry. Delectrik systems are designed to offer a highly scalable and flexible Energy Storage solution based on customer needs and consist of standard VRFB building blocks of 40 kWh and 200 kWh capacity. These systems can be customized and connected together to build capacities ranging from 20 kilowatt hours to several megawatt hours. With expertise in manufacturing and deploying VRFBs spanning decades, Delectrik is expanding its operations with strategic partners and is focused on providing sustainable and affordable electricity to businesses and individuals via decentralized electric systems.

That said, if a member State does take that course of action, lawyers might argue against any penalties on the grounds that there is no basis in the regulations for imposing them.

While the US rules are limited to minerals sourced from the Democratic Republic of Congo (DRC) and contiguous countries, the EU rules cover all countries exporting 3TG minerals into the EU – a broader scope, but one which seems slightly meaningless given the lack of penalties for infringement, the partners note.

However, the EU regulations expressly limits its scope to "tin, tantalum and tungsten, their ores, and gold".

Another positive from an ethical perspective is that the EU has the opportunity to review the legislation and toughen it up before the January 1, 2023, compliance deadline.

According to the law firm, the regulation was passed by the previous EU Commission, so “it is possible that the new Commission, which took office on December 1, 2019, under the Presidency of Ursula von der Leyen, may decide to take a firmer stance on this issue”.

The law firm, however, mentions that “this will be no easy task” given the struggle to pass the legislation initially and the numerous concessions that were made to industry to get the regulations over the line.

More broadly, the regulation has brought the matter of conflict minerals to the attention of EU consumers, the partners say, adding that the regulations “still have room to become tougher”.

Harder-hitting provisions will most likely be effected in response to pressure from civil society, as opposed to regulators – a trend that is already manifesting itself in the rise of ethical consumerism and investor emphasis on environmental, social and corporate governance (ESG) credentials.

While many multinational organisations will already be more than prepared for the EU's conflict minerals regulations, the law firm says “there are undoubtedly businesses which will have to develop the necessary compliance procedures for the first time”.

Fortunately, the partners believe there is enough guidance and expertise available from existing voluntary initiatives, industry bodies and professional advisers to make this a relatively smooth process.

Companies will also understand the commercial sense in complying with and demonstrating their compliance with the regulations in light of the ever-increasing focus by customers and investors on good ESG practice.

The law firm notes that ESG in the mining sector is expected to be among the most important topics to be discussed at this year’s Investing in Mining Indaba event, being held in Cape Town, South Africa, this week.

http://www.miningweekly.com/article/eu-conflict-minerals-legislation-set-to-strengthen-2020-02-03

The European Union’s (EU’s) new conflict minerals regulation is due to come into force on January 1, 2021, almost four years after the text of the legislation was initially published in May 2017.

Law firm Fieldfisher partners Laurent Ruessman, Jonathan Brooks and Andrew Hood say the new regulations “aims to boost corporate transparency and encourage companies to embrace a more sustainable approach to sourcing four key metals”, namely tin, tantalum, tungsten and gold (3TG).

The new regulations also avoids supporting conflicts in areas where these minerals are produced.

With less than a year to go until the regulation’s implementation deadline, the Fieldfisher partners note that scrutiny of the legislation is increasing, and its shortcomings “are being laid bare”.

Some of these shortcomings have been cited as the EU has only just started to catch up in the area of conflict minerals, while a number of mining industry initiatives have already been developed in response to the Organisation for Economic Co-operation and Development’s Guidance for Conflicted Affected and High Risk Areas.

In response, standards introduced by the mining industry include the International Tin Supply Chain Initiative, the Responsible Gold Mining Principles and the responsible sourcing protocols, as launched by the London Metal Exchange.

With many mining companies having already adopted one of these voluntary initiatives, the Fieldfisher partners note that companies “will therefore have existing systems and procedures”, as well as the right corporate ethos, in place to enable them to implement the requirements of the EU regulation.

However, it is currently unclear as to what extent there will be consequences for noncompliance, they point out.

Additionally, they note that, as with other EU regulations, enforcement will take place in member States, but “there is currently no basis under the regulations for member States to impose penalties for infringement”.

In addition, the obligations within the regulations do not apply to all actors in the supply chain but sit solely with the importer of the offending minerals, and only if they exceed certain thresholds.

This makes the regulation something of an anomaly in EU legislation, the partners point out, adding that it begs the question as to why the EU has “gone to the trouble of adopting regulations that cannot be enforced”.

Despite its limitations, there are a number of reasons for proponents of greater supply chain transparency to be cheerful about the EU regulations, the partners say, pointing out that if a member State wants to impose meaningful penalties on a company that fails to comply, there is nothing in the regulations stopping them from doing so.

“Companies that do better on environmental and social metrics also do better in financial terms. What you might lose in one quarter, you make up over the medium term, as demonstrated by growing empirical evidence. Instead of aiming at stakeholder capitalism to replace shareholder capitalism, we should rather aim to create a social market economy, rather than a free market economy or a socialist economy,” Tshabalala said.

AFRICAN TRENDS FOR 2020
Deloitte emerging markets and Africa MD Dr Martyn Davies, meanwhile, discussed the global attention on Africa's infrastructure development, the threats that climate change poses for the continent, the rise in demand for electric vehicles (EVs) and the continent's plans for implementing the African Continental Free Trade Agreement.

With Africa’s population set to reach 1.5-billion people in the next decade, most people are expected to be vulnerable to climate change and slow economic growth.

Davies questioned whether Africa was leveraging the “new scramble” for the continent. “There is significant geopolitical and geo-economical interest in Africa from both emerging and traditional partners, but are these countries taking advantage of this to the best effect?”

He mentioned that 320 embassies were opened in Africa in the last six years, mostly by Turkey and India. He asked how businesses should be thinking about this opportunity and leveraging it.

Further, EVs are disrupting the metals and mining sector, with battery-related commodity markets set to face disruption. Davies said this could result in the geo-economics of mining changing, especially for base metals such as copper and cobalt.

In addition, Davies pointed out that the African Continental Free Trade Area was aimed at creating a single market valued at $3-trillion and integrating 1.2-billion people for the free movement of goods and services.

“This regional organisation will be the world’s largest free trade area since the formation of the World Trade Organisation. How can Africa benefit most from this liberalised trade?”

http://www.engineeringnews.co.za/article/companies-do-not-have-to-wait-for-govt-reforms-says-standard-banks-tshabalala-2020-01-30

With the International Monetary Fund predicting a growth rate of 3.5% this year for sub-Saharan Africa, Standard Bank CEO Sim Tshabalala says South Africa will not be one of the region’s star performers until it works on a few issues.

Speaking at consultancy Deloitte’s Africa Outlook 2020 event on Thursday, he pointed out that while Ethiopia was forecast to grow at 7%, Kenya at 6% and Ghana at 5%, South Africa was anticipated to grow at only 0.8% this year.

Tshabalala noted that South Africa might reach a 2% gross domestic product growth rate, at best, if the country is able to resolve the financial challenges facing State-owned South African Airways; improve the operational performance at power utility Eskom; effect a more certain round of procurement for new electricity generation capacity and allow more self-generation by large firms; undertake short-term reforms for multiyear visas and ensure efficient provision of e-visas for visitors; and complete the broadband spectrum auction.

“The political barriers to achieve some of these reforms does not seem insurmountable. In the meantime, companies have shown that you do not need to be passive and wait for reforms to happen; there are opportunities to improve performance and stimulate South Africa’s growth by focusing on expanding operations into more dynamic environments in [the rest of] Africa and China.”

For example, Tshabalala pointed out that Standard Bank, in 2019, took a group of small and medium-sized enterprises to the China Import Expo, in Shanghai, after which they returned with full order books. The bank had also been able to promote exports to China with help from digital platforms, where manufacturers are able to sell their products on Chinese e-commerce platforms.

“Businesses with operations beyond South Africa have the ability to generate jobs within South Africa and [in other countries in which they operate]."

Moreover, Tshabalala said capitalism had created benefits for centuries, including the affluence of Western nations and China’s transition from poverty to an economic powerhouse in one generation.

“However, many of the world’s problems are consequences of shareholder capitalism, which is a way of doing business that is focused on maximising short-term profits and shareholder value. But we need a shift in style in which corporates provide staff with fair wages, better opportunities for skills development, dealing ethically with suppliers, adding value to communities in which you operate, minimising negative impacts on society and the environment, as well as transparently account for all the company’s impacts.

“For Africa, as with climate change, immediate consequences are not apparent but one should continue to lead companies in ways that aim to maximise inclusion and sustainability as well as long-run profits.

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