Lots of politics; A deeper look into Scandium; China Rare Earth Group expands; Who is Astron?; More IAC approved in Malaysia; Prices drop, and more.
Rare Earth 8 January 2024 #136
A Happy and Rare-Earthy New Year to our esteemed readers!
Every year there are these forecasts of those supposedly in the know. And as certain is an Amen is in church, fund managers and consultants were out there naming the Best and Worst Commodities for 2024.
Only one fund manager mentions rare earths:
We beg to differ.
China is by far the largest steel producing nation on the planet, and thereby also the worlds largest iron ore buyer. China’s economy is struggling, primarily because it suffers from a real estate crisis. This crisis sent new investments and construction activity south. About 50% of China’s steel output is steel for construction and the steel market in China turns increasingly sour. So it is reasonable to forecast a bad year for iron ore.
However, the same logic as for iron ore applies to rare earths as well. In terms of value, China’s domestic market accounts for most of the world rare earth market. If China’s economy is not doing well, rare earths can’t be doing well either. As all rare earth prices worldwide ultimately base China’s domestic prices, no matter how detached and irrelevant, the impact of decreased domestic rare earth prices in China is global.
Unfortunately, in our view the 2024 outlook for rare earth is not anywhere near “hot”.
China’s Sophisticated Spy Attacks
Ranking the Chinese cyber hackers at par with the Russians, German security agencies say that the Chinese employ less brute force, lest they attract unwarranted attention. Instead of splashy moves, Chinese cyber spies would stealthily enter the systems and stay put for several years, gleaning sensitive information. As per Spiegel, numerous companies listed on Germany’s blue-chip stock index, the DAX, have been targeted by Chinese cyberattacks, such as BASF and Daimler.
According to a recent poll, 730 out of over 1,000 organizations said they were the target of cyberattacks in the previous year. Forty-two percent have confirmed that at least one assault had its origins in China.
China is of course not the only one keenly interested in collecting free information.
Most rare earth companies have company secrets to protect. Since most hacking attacks are remote from distant places with no physical access or proximity to the hacking target, we strongly recommend keepng proprietary designs, R&D related data, etc. on air-gapped computers, i.e. computers that are not connected to the internet and which are also not accessible from simultaneously internet-connected computers.
In terms of e-mail security, to maintain authenticity of our e-mails, we use S/MIME certificates, also useful for encryption of e-mails.
Switzerland’s smart move
Abolition of industrial tariffs
By choosing 1 January 2024, the Federal Council selected a date for the entry into force that keeps transitional costs as low as possible for economic actors and administrative authorities. All concerned therefore have sufficient time to make the necessary technical and organisational preparations.
Goods and services cost significantly more on average in Switzerland than in neighbouring countries. A number of factors make the country particularly expensive compared with its neighbours. One is its high wages and costs, which drive up prices. Another, however, is the variety of tariff and non-tariff trade barriers that have the effect of isolating the Swiss market, allowing companies to charge higher prices here than abroad. SECO previously examined the impact of these barriers in a series of studies. With a view to reducing trade barriers, the Federal Council adopted a package of import facilitation measures on 20 December 2017. One of these is the lifting of tariffs on industrial goods.
This concerns the tariff numbers under the headings 25 to 97, which includes basically everything except agricultural produce, food, drink, livestock and tobacco.
Switzerland is located at the heart of the EU, but it is not a member. Consequently, EU trade action does not apply to goods for imported to Switzerland. That means, all goods under EU antidumping or anti-subsidy legislation enter Switzerland duty-free.
Expect EU antidumping and anti-subsidy circumvention attempts by certain countries, using Switzerland.
Not fruitful
IRTC24: Raw materials in a changing world
….the 2024 IRTC conference focuses on new approaches to criticality to face the challenges of a changing geopolitical configuration and the material needs to combat the climate crisis – looking at emerging policies, new ideas for criticality mitigation, and novel forms of collaboration between sectors and countries to foster supply security and sustainability.
Non-consequential debating club that largely misses the point.
Lack of validation
Years after policies have been decided, edged in stone and being implemented, the question of any form of validation arises:
Workshop A: Research needs to support policies on critical and strategic raw materials: a workshop organized by the Joint Research Centre
Policy proposals should be vetted for their feasibility before being turned into policies. Post-implementation validation of policy would sound very Soviet Union instead of European Union.
“Sustainable development”
There is the illusion created by the 2015 Paris Agreement that “sustainable development” (read: “sustainable growth”) should be possible. “Sustainable development” appears 16 times in the short document, to make the contents attractive for the majority of potential signatories, economic growth-hungry third world countries.
Electricity
What these events avoid is the elephant in the room, which is the world’s growing electric power demand.
“Sustainable development” increases world demand for electricity substantially, for example electricity devouring e-mobility and AI-data centers. There is no “sustainable” way of catering to this increase within the short time ranges offered.
Politicians seem to be trying to play down this problem. Also this IRTC24 event does not address it in its program. It would be like pouring ice-cold water into a pleasantly warm sustainability bath.
Consequence of short-supply
A number of countries continue to build new coal-fired power plants, in order to deal with the short term increase of demand for electric power, for processing from minerals to charging electric vehicles.
Even super-environmentalist Germany under a green-socialist government had to authorise more electricity generation from the dirtiest of all energy resources, brown coal. In terms of brown coal output Germany is second only to China.
Infrastructure
Every electric vehicle owner wants/needs to have his/her own “gas station” at home. This aspiration does not commensurate with the reality of the power grid of practically all countries. The same owners of EV oppose the expansion of the grid, for “green” concerns and for not-in-my-backyard reasons.
An optimistic guess is, that expansion of the power grids will need more than 10 years. In Germany permitting alone takes 8-10 years.
A questionable swap
We swap extraction of fossil fuels for extraction of non-ferrous metals. This under the guise of illusionary “sustainable development”.
The projected demand increase of non-ferrous metals in order to meet political targets is absurdly high. Had politicians considered this, they would have arrived at the term “unsustainable” rather swiftly.
Among the select few who called out this unpleasant truth were Adamas Intelligence during their epic North American Critical Minerals Days.
Unsustainable targets
No-one questioned the government targets for tens of millions of electric vehicles on the road by 2030-2035 with a simultaneous ban on combustion engine vehicle sales, .
These political targets were not tested for feasibility, in any aspect, and without divine intervention they will just fail.
How would satisfying such enormous demand growth relate in any way to “responsible mining”, let alone “sustainable growth”?
Example: Nickel
Almost half of the world’s nickel output originates in Indonesia:
At current mining rates, Indonesia’s nickel reserves will be depleted in about 6 years, according to the Indonesian Nickel Miners Association on 2 October 2023. A more optimistic estimate by Japanese-invested Nickel Asia Corp is 9 years.
Indonesia’s nickel smelters are enabled by electricity from coal-fired power plants, by the way.
Pushing carbon output from the developed world to the third world
All this is not about combatting the climate crisis. It is simply about maintaining economic growth by alternate means, while pushing carbon output from the industrialised countries to the developing countries.
This way the electorate in industrialised nations can feel renewably energised and wonderfully sustainable. In reality ever more of the world’s dirt-work, overexploitation and carbon output has been pushed to the developing countries, and the overall carbon-output numbers may not improve.
The good news
All forecasts base on currently known technologies, even though these are somewhat likely to be replaced during the forecast period. Be it batteries, be it magnets, perhaps even new ways of power generation.
There still is an opportunity to do the right thing, scrapping the non-feasible political targets and look for a more sustainable way to sustainability, this time perhaps with the pain being distributed according to national GDP.
The not so good news
For achieving a measurable impact on climate change soonest, some experts demand that the world should ideally substantially reduce electricity output.
That, however, would be tantamount to abandoning economic growth.
Neither capitalism nor socialism can exist without economic growth. There is no functioning economic model for zero economic growth.
No government can sell zero or negative growth to its electorate anyway, even communists can’t sell it to their voice-less, non-voting subjects.
While these debating clubs about economic growth….pardon…”sustainable” development continue, climate change proceeds unabated.
China wants role in US-Vietnam rare earths plan
Following the conclusion of President Xi Jinping’s Hanoi trip earlier this week, China has claimed itself to be Vietnam’s best choice for trade and diplomatic partnerships in the Asia Pacific region.
Perhaps, but the proof will be in the pudding. Will Vietnam directly export its rare earths, as the US hopes, or send them for processing in China? Chinese pundits want to know.
“Pundits” in China should perhaps educate themselves about the regulatory landscape in their very own country. It would help.
Plain, straight and simple:
Export processing of rare earths, i.e. the import of raw material and the export of the resulting finished product for a tolling fee, has been illegal in China for the longest time.
So, the answer must be “no sending for processing to China”, because it is illegal in China.
Same goes for MP Material’s spin of “sending for processing to China” - they are lucky, that U.S. media are so terribly superficial, so they would never question such statements.
On Wednesday, China and Vietnam signed 36 agreements, covering the Belt and Road Initiative, development cooperation, digital economy, green development, transportation, inspection and quarantine, defense and law enforcement and maritime cooperation. But Vietnamese media said Beijing and Hanoi have failed to reach agreements on nine other issues, including metals and rare earths mining.
During his own trip to Hanoi in September, US President Joe Biden signed deals with Vietnam on semiconductors and rare earths. He encouraged US investment in rare earth exploration in Vietnam – which is ranked third in the world in its rare earths potential – to counter China’s world domination of the minerals.
USGS fails in recognising sizeable rare earth resources in South East Asia, while possibly overestimating others.
Up to 1.7 million TEUs to be needed for rerouting Africa
According to analysts, an additional 1.45 to 1.7 million TEUs will be needed for the planned diversions from the Suez Canal to the Cape of Good Hope on the Asia-Europe route.
The rerouting will account for 5-6% of the global capacity. It will reduce the current overcapacity in the shipping market but will also increase the freight rates. The impact on container shipping rates will appear after four weeks, and the delay will also be as long as up to four weeks due to the ship diversions.
Peter Sand, Xeneta’s chief data analyst, said that the rerouting will lead to an extra 3,000 miles to go around Africa to Europe, and an additional US$1 million in fuel costs per vessel will be passed onto customers.
Some shipping companies, such as Hapag-Lloyd and Maersk, have started charging a war risk surcharge of US$20 to US$100 per container, and ZIM charges more for longer routes around Africa.
This is only half of the impact. The other half is:
Longer shipping periods increase net-working capital requirements of importers, at currently high interest rates;
If 5-6% of global shipping capacity can charge higher rates, the rest will sure try to follow;
Carbon output and related charges increase.
Myanmar, China agree to kickstart stalled vital port project
While work on the Kyaukphyu Port and KP SEZ began in 2010, the Covid pandemic and the military or ‘Tatmadaw’ takeover became a spanner and the project got stalled.
On completion, the $7.3 billion project will enable China to access the Indian Ocean for direct trade links with West Asia, Europe and the Atlantic region by connecting the seaport with Kunming, the capital of Yunnan province, by a rail and road link which will be a part of the 1,700-km China-Myanmar Economic Corridor (CMEC).
The Kyaukphyu Port is only one of several China-controlled points in the region which includes a naval base in Cambodia, Hambantota in Sri Lanka and Gwadar in Pakistan besides a naval station at the port of Djibouti.
Kyaukphyu is located in the sea across the restive Rakhine province where the ‘Tatmadaw’ is battling the Arakan Army. Rakhine is also the homeland of the Rohingyas, a persecuted Muslim community in Myanmar.
Where that is:
Lao gov't to review effectiveness of mining projects: media report
The Lao government will review the effectiveness of approved mining projects due to the poor performance by nearly 70 of the more than 90 companies authorized to carry out pilot mining operations in the Southeast Asian country, local media reported on Thursday.
At the government's open meeting held here on Dec. 26-27, Lao Prime Minister Sonexay Siphandone instructed related departments to conduct a study on which minerals to be reserved and which mining projects to be suspended, a Vientiane Mai newspaper report said.
The meeting attended by the mayor of Vientiane, provincial governors and representatives of state agencies decided to take immediate actions to deal with ineffective mining projects that have caused great losses to the country.
Over the past two and a half years, the Lao government licensed more than 37,678 hectares of land for pilot mining operations. The pilot mining scheme was intended to find new revenue sources to help Laos tackle financial and economic challenges.
Chinese rare earth mines in Laos on the chopping board?
Jordan
Kharabsheh inspects mineral exploration projects in southern Jordan
The minister, during his tour at a project in the Wadi Araba region, observed geochemical survey operations, well drilling, and rock sample collection, the Jordan News Agency, Petra, reported.
Kharabsheh said that the ministry focuses on identifying essential mineral and ores types in the region, including accompanying metals such as lead, lithium, zinc, and rare earth elements. The minister also reviewed the progress of the exploration operations, along with the timeline of the project.
There is monazite from Jordan’s phosphate rock operations.
Vietnam
Company directors probed for smuggling $320,000 worth of rare earth to China
Tran Duc, director of the Duong Lieu Logistic Company, and Nguyen Thanh Doan, director of the Truong Son War Invalids Company, were put under investigation by the police from the Ministry of Public Security on Friday for smuggling.
Doan was forbidden from leaving his residence, while Duc was detained.
A Chinese man named Liu Dehua was also put under an investigation for the same charge, but he has left Vietnam. He is wanted by the authorities.
They were accused of illegally exporting rare earth batches worth VND7.8 billion to China through various measures, including deception and false customs procedures.
The arrests were made as police expanded investigation into the illegal mining, manufacturing and processing of rare earth and iron ores in Yen Phu Commune of Yen Bai Province in northern Vietnam.
Also on Friday the police put Nguyen Anh Son, director of the Son Anh Phu Tho Trading Company; Doan Hai Nam, head of the material department under the Hoa Phat Hai Duong Steel company; and Do Khanh Toan, vice director of the Atexim Company, under investigation for accounting violations regarding the case.
The amount may sound small, but from a Vietnamese viewpoint this is big.
Malaysia
MB: Negeri Sembilan approves SOP for non-radioactive rare earth elements mining starting this year
The Negeri Sembilan state government has approved the standard operating procedures (SOP) for the mining of non-radioactive rare earth elements (NR-REE), which is expected to commence this year, said Menteri Besar Datuk Seri Aminuddin Harun.
He said all developments involving these earth elements should include collaboration with the state government’s subsidiary, Menteri Besar Incorporated (MBI), with the aim of monitoring progress and ensuring that the outcomes are not mishandled.
All except one Malaysian state have reported IAC rare earth deposits.
Xi’s Solution for China’s Economy Risks Triggering New Trade War
The US and European Union have recently stepped up warnings on China’s overcapacity. Europe initiated a series of trade investigations, leading China last week to launch an anti-dumping probe into EU liquor products like brandy — a move analysts saw as targeted at France, the main backer of the bloc’s action on Chinese electric vehicle subsidies. US President Joe Biden has also tightened measures to deny China advanced technology, and a presidential race this year likely to feature Donald Trump could see protectionist policies ramp up even further.
Developing countries are also impacted. While China's strategy can lower the cost of capital goods, its efforts to retain lower-end industries narrows the space for nations like Vietnam and Indonesia that would otherwise benefit from China’s move up the value chain. Other countries seeking to attract more sophisticated industries, including Turkey and India, are increasing protectionism aimed at China.
Almost all brandy/cognac China imports from the EU is from France. Chinese connoisseurs will not be amused.
The scandium market - a bit of meat on the bone
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