BHP, partners to build $3.4 billion iron ore mine in Australia
BHP on Thursday approved $2.9 billion in spending to build a new iron ore mine in Australia, the top global miner’s biggest investment commitment in seven years.
The South Flank mine in the state of Western Australia is due to produce its first ore in 2021, replacing the 80 million tons-per-year Yandi mine.
The move is set to improve the quality of ore offered by BHP as it looks to earn more from China, the world’s biggest buyer of the steelmaking commodity.
Mining executives say China is increasingly demanding high quality ore, which commands a premium and limits pollution as less ore needs to be processed, although an analysis of Reuters data shows the country is struggling to obtain it.
“We wanted to target an opportunity that would allow us to play to that continued strength in demand for higher quality ore,” BHP’s Minerals Australia President Mike Henry told reporters on a conference call from London.
Henry said BHP had long anticipated that shift in demand for higher quality iron ore and coking coal, as China moved its steelmaking blast furnaces to the coast, relied more on bigger blast furnaces and focused on the environment.
Ore from South Flank would have an average iron content of 62-63 percent compared to Yandi’s 58 percent, lifting the proportion of BHP’s output of higher valued lump product to 35 percent, Henry said. It would also have lower amounts of phosphorus, an impurity that fetches a discount.
BHP has an 85-percent stake in the South Flank project.
Its Japanese partners Itochu Corp, with an 8 percent stake, and Mitsui & Co Ltd, with 7 percent, will spend $270 million and $240 million respectively, bringing the total development cost to $3.4 billion, they said.
The investment comes at the same time as Rio Tinto, the world’s No.2 iron ore miner, is expected to decide soon on whether to build its Koodaideri mine in Australia at an estimated cost of $2.2 billion.
Fortescue Metals Group has just approved development of a $1.3 billion project, Eliwana.
Henry said BHP had a slight head start in securing equipment for its project.
“We are going to see a bit of pressure in the market as a result of multiple projects being pursued at the same time. We’re pretty well positioned, given the timing of our full sanction,” he said.
Japan to join EU in WTO talks on U.S. steel tariffs
Japan is seeking to join the European Union in its push to set up dispute resolution talks with the United States over Washington’s steel and aluminum tariffs, under the World Trade Organization framework, a government source said.
The Japanese government source, who has direct knowledge of the matter, said it has informed the WTO about its intention to take part.
The source, who did not want to be named, also said Japan has told the WTO it wants to participate in similar consultations requested by Canada and Mexico as it looks to join forces with countries affected by U.S. tariffs.
“We are in the same situation as the other countries, so we want to participate in the talks and share information,” said the source.
“Our ultimate goal is to get the U.S. to repeal these tariffs.”
Holding consultations is the first step in the WTO’s dispute settlement process, but it is uncertain whether the United States will agree to the request for talks.
The United States has upset its closest allies by imposing a 25 percent tariff on steel imports and 10 percent tariff on aluminum imports.
The U.S. says the tariffs are needed to protect national security and U.S. workers. Many countries say their steel exports pose no threat to U.S. national security and the tariffs are really aimed at curbing China’s excess steel capacity.
Disagreement over the tariffs spilled into the open at a Group of Seven leaders’ summit last week as U.S. President Donald Trump backed out of signing a joint communique that appeared to reach a fragile consensus on trade policy.
The EU, Canada, and Mexico have prepared retaliatory tariffs against U.S. imports, raising the chance of a full-blown trade war.
So far, Japan has not taken similar steps, but there is lingering concern in Tokyo over whether Washington will try to curb Japanese imports to lower the U.S. trade deficit.
Southern Copper sees Michiquillay mine in Peru starting operations in 2022
Southern Copper Corp said on Tuesday that it plans to start building its proposed $2.5 billion copper mine Michiquillay in Peru next year and will likely start operations in 2022 – three years earlier than previously forecast.
Southern’s chief executive, Oscar Gonzalez, added that the company will need to reach detailed agreements with residents near the deposit in the northern Andean region of Cajamarca before construction can begin.
Gonzalez estimated talks with communities would take a year and construction another three years.
“It’s expected operations will start by 2022,” Gonzalez told journalists after signing the Michiquillay contract with government officials. “Hopefully we can do that once communities and the Cajamarca region give social approval of the project.”
Southern, which is controlled by Grupo Mexico, said in late April that production at Michiquillay would likely begin in 2025. The proposed mine is expected to churn out 225,000 tonnes of copper per year for an initial mine life of more than 25 years.
Securing a so-called social license is one of the biggest hurdles to investing in Peru, the world’s No. 2 copper producer and home to dozens of disputes over natural resource extraction in poor provinces.
Southern’s $1.4 billion Tia Maria copper project in southern Peru has been on hold because of local opposition for years. Newmont Mining Corp shelved its proposed $4.8 billion gold-and-copper mine in Cajamarca after deadly protests in 2011.
Alberto Necco, the head of Peru’s investment promotion agency, Proinversion, said residents near Michiquillay were not opposed to mining but expected jobs, training and other benefits from the company, some of which were outlined in the contract.
Southern Copper won the public auction for Michiquillay in February by offering the government $400 million and a 3 percent royalty rate – beating out Compania Minera Milpo.
Steel maker SSAB plans possible small factory closure in Finland
Sweden-based steel maker SSAB is planning a possible closure of its steel tube factory in Lappohja, Finland, with 115 employees, the company said on Monday.
SSAB said it would focus on its other tube manufacturing sites in Finland and renew their production lines. Steel tubes are used in construction, machine engineering, automotive industry and furniture.
“Co-operation negotiations will be started at Lappohja factory regarding possible workforce reduction.. the result of the negotiations might be to close the factory,” SSAB said in a statement.
China May aluminum, steel exports rise despite rumbling trade row
China’s aluminum exports rose to their highest in almost 3-1/2 years in May, as a favorable price arbitrage saw more shipments overseas despite U.S. tariffs, while steel exports were the most since July 2017, helped by a recovery in global demand.
China is the world’s biggest producer of steel and aluminum, which have both been subject to 25 percent and 10 percent import tariffs, respectively, in the United States, the world’s largest economy, since March 23.
Unwrought aluminum and aluminum product exports came in at 485,000 tons last month, China’s General Administration of Customs said on Friday. [ACNEXPALUM]. That’s the second-highest figure in customs’ records, behind only the 542,700 tons exported in December 2014.
Shipments were up 7.5 percent from 451,000 tons in April and up 12.8 percent from 430,000 tons in May 2017.
Steel product exports came in at 6.88 million tons for May, customs said, up 6.2 percent from 6.48 million tons in April but down 1.4 percent on a year ago.
The numbers showed China’s aluminum exports were holding up “against the odds,” amid the U.S. import tariff and other U.S. duties on Chinese aluminum foil, said Paul Adkins, managing director of consultancy AZ China.
This was largely thanks to higher London aluminum prices after U.S. sanctions on Russian producer United Company Rusal, he noted.
“You had the bounce with the Rusal sanctions and the metal price getting up to $2,700 [a ton], so there was always that opportunity,” to export, he said. “It also comes at a time when they can’t export foil and the 10 percent tariffs.”
Last month also saw Washington slap steep import duties on steel products from Vietnam that originated in China, while Canada initiated a preliminary dumping inquiry into steel imported from China, South Korea and Vietnam.
Kevin Bai, an analyst at CRU in Beijing, said the steel export numbers were broadly in line with his forecast.
“This export volume is still not a very significant level compared with the past peaks so this indicates that the domestic steel industry is still doing great. The profitability of domestic steel mills remains quite high,’ he said.
“I think the gradual increase may be because the demand in the overseas market is recovering, but still not comparable with the better performance in the domestic market.”
EU says first steel safeguard measures could come in July
The European Union could impose preliminary measures to safeguard its steel and aluminum industries as early as July, although a full investigation will take nine months, EU Trade Commissioner Cecilia Malmstrom told Reuters on Monday.
“We can take pre-measures in July already. This is what we are going to discuss. We want to see the preliminary outcomes of the investigation. It is possible,” she said, adding that there was already anecdotal evidence of steel intended for the U.S. market being diverted to Europe by U.S. tariffs.
Under WTO rules, the EU could impose “provisional safeguard” tariffs for up to 200 days if it makes a preliminary finding that increased imports have caused or are threatening to cause serious injury to its steel and aluminum sectors.
The European Commission, which oversees trade policy for the 28-member European Union, launched a study in late March into whether U.S. import tariffs warranted action to prevent mainly Asian producers flooding Europe with steel.
The U.S. tariffs of 25 percent on incoming steel and 10 percent on aluminum came into effect on March 23 and have also been imposed on EU producers since last Friday.
The EU is also retaliating against the tariffs, which it sees as “safeguards” under the World Trade Organization rules, by imposing its own tariffs on a list of U.S. goods.
“Everything we do is – by the comma – WTO compatible, as opposed to some others,” Malmstrom said.
Trade wars were neither good nor easy to win, as U.S. President Donald Trump appeared to think, and the last few days had shown he had taken “a dangerous road”, she said.
REGRETS AND THREATS
Trump has justified the metals tariffs by citing national security, which Malmstrom described as “very innovative”, since she could not see how EU trade could possibly be a threat.
She regretted that Washington and Brussels had not managed to come to a settlement.
“We offered a constructive agenda, a way forward, discussions on trade irritants, on issues that were of concern to the U.S., and also said that we could sit and look at a minor tariff-only trade agreement, including cars and car parts. And the U.S. rejected that. Now the ball is in their court.”
The United States is also considering putting a similar tariff on cars, which Malmstrom said could lead to an “even bigger” retaliation than on steel.
“If that were to happen it would be extremely unfortunate. It would have major consequences, not only in Europe but across the world.”
WTO PLAN B
Trump has also caused a crisis in the WTO by blocking the appointment of appeals judges, which Malmstrom said would eventually stop the dispute system from functioning.
“If that is what they are intending to do they are on the right track,” she said, adding she had spoken to U.S. Trade Representative Robert Lighthizer about finding a solution, but so far the United States had not been willing to engage.
If the dispute system breaks down, the rest of the WTO members would need a workaround without the United States, she said.
“There could be a possibility to move towards a Plan B but I think we’re not really there yet. We want to make sure all the plan A possibilities are exhausted because we would like very much the U.S. to be part of this system.”
One long-running dispute that Washington does want to talk about is the row over subsidies for planemakers Boeing (BA.N) and Airbus (AIR.PA). The Airbus half of the dispute appeared to near the end of a 14-year litigation last week.
Malmstrom said she wanted to get the Boeing judgment on the table too before starting any negotiation.
“We have always said we want to talk,” she said.
Mexico firms eye workaround on U.S. metals tariffs; consumers in bind
Mexican firms will need to cut deals with suppliers and consider buying goods elsewhere once a conflict over U.S. steel and aluminum import tariffs starts to bite, even as consumers are seen ultimately picking up the tab from any higher prices.
Company executives are braced for increased costs, while holding out hope that U.S. President Donald Trump’s tariffs are more of a negotiating tactic to pressure Mexico and Canada in talks to rework the North American Free Trade Agreement.
“Of course, it’s a very serious distortion in the industry, because all the supply chains that use these types of materials are impacted every time they cross the border,” said Jose Ramon Elizondo, chairman of manufacturer Vasconia Group.
One of Vasconia’s units produces aluminum sheets, more than half of which are exported to the United States.
“We’re going to have a series of negotiations and discussions with clients who have to absorb this tax,” Elizondo told Reuters.
Japanese auto safety products maker Ashimori Industry Co Ltd, whose plant in the central city of Silao in Mexico’s automotive heartland makes seat belts and air bags for the likes of Honda, Nissan, Mazda and Subaru, is in a similar bind.
“We aren’t aluminum manufacturers but we are in the industry, so at some point we’re going to have to absorb the price increases,” said Hiroyuki Namba, president of Ashimori Mexico. “I hope the (measures) aren’t definitive.”
Critics of the U.S. move say the escalating dispute could drive firms in Mexico to buy steel and aluminum elsewhere.
“Once we hit them and close U.S. imports, we will have to source from third markets,” said a Mexican official, who asked not to be named.
Mexico’s government said it would retaliate with targeted tariffs on pork legs, apples, grapes and cheeses, plus steel.
The Mexican official said once the retaliatory measures were put in place, the situation could backfire for Trump and end up hurting American producers.
It is “economics 101 for dummies,” the official added.
Mexico expects to publish the list of specific U.S. products it will hit on Tuesday or Wednesday, the Economy Ministry said.
Trump’s tariffs are aimed at allowing the U.S. steel and aluminum industries to increase capacity utilization rates above 80 percent for the first time in years. Still, Mexico already has a trade deficit in those metals with the United States.
Alfredo Arzola, head of the automotive industry cluster in the central state of Guanajuato, said many auto parts makers in Mexico could be exempt from the U.S. tariffs because their steel and aluminum imports from the United States are temporary.
“The steel and aluminum that stays in the domestic market for sale will be affected and the (higher) prices will be passed on to the consumer,” said Arzola.
But most auto parts makers import metals to turn them into value-added products that are shipped back to the United States as part of automakers’ cross-border value chains.
If those products comply with regional content rules under NAFTA, they are exempt from the tariffs, Arzola said.
China’s Chinalco starts $1.3 bln expansion of Peru copper mine
Aluminum Corp of China , known as Chinalco, at the weekend said it had started work on a $1.3 billion expansion of its Toromocho copper mine in central Peru. The investment will increase the mine’s copper output by 45 percent by 2020, with the value of production exceeding $2 billion annually, Chinalco Chairman Ge Honglin said at a groundbreaking ceremony in Peruvian capital Lima late last week, according to a company statement issued on Saturday.
The statement gave no tonnage figures, but China’s official Xinhua news agency said Chinalco wanted the expansion to take Toromocho’s copper concentrate processing capacity to 157,000 tonnes a day and annual refined copper output to 300,000 tonnes.
China is the world’s biggest copper consumer, while Peru, whose President Martin Vizcarra also attended the ceremony, is the second-biggest producer of the metal after South American neighbour Chile.
Chinalco is China’s largest state-owned aluminium producer but also has some copper assets, including in China’s southwestern Yunnan province.
It took control of Toromocho in 2007, bringing the project on stream in late 2013. The company had agreed a preliminary deal in November 2016 to take the development into a second phase through the $1.3 billion expansion.
The project, which is mined for silver and molybdenum as well as copper, contains 1.526 billion tonnes of ore, according to Chinalco’s local unit Minera Chinalco Peru. The average copper content is 0.48 percent.
Canada to retaliate against U.S. steel and aluminum tariffs
Canada will impose retaliatory tariffs here on C$16.6 billion ($12.8 billion) worth of U.S. exports and challenge U.S. steel and aluminum tariffs under the North American Free Trade Agreement and the World Trade Organization, Canadian Foreign Minister Chrystia Freeland said on Thursday.
“We have to believe that at some point, common sense will prevail,” Canadian Prime Minister Justin Trudeau said at a news conference, hours after the United States said it will impose tariffs on aluminum and steel imports from Canada, Mexico and the European Union. “Unfortunately, the actions taken today by the American government do not seem to be headed in that direction,” Trudeau said.
U.S. to slap tariffs soon on steel, aluminum from EU
The United States will announce plans to impose tariffs on steel and aluminum from the European Union as early as Thursday morning, two people briefed on the matter said, confirming a report in the Wall Street Journal.
The decision would land ahead of a Friday expiration deadline for exemptions to the planned metals tariffs amid stalled trade talks with the EU and would likely prompt retaliation from the bloc.
The two sources said an announcement was planned for Thursday morning in Washington but that the timing could still change.
The U.S. Commerce Department and U.S. Trade Representative’s Office did not immediately respond to requests for comment.
President Donald Trump on March 23 imposed a 25 percent tariff on steel imports and a 10 percent tariff on aluminum, but granted temporary exemptions to the EU, Canada, Mexico, Brazil, Australia and Argentina.
Trump invoked a 1962 trade law to erect protections for U.S. steel and aluminum producers on national security grounds, amid a worldwide glut of both metals that is largely blamed on excess production in China.
The European Commission, which coordinates trade policy for the 28 EU members, has said the bloc should be permanently exempted from the tariffs since it was not the cause of overcapacity in steel and aluminum.
The Commission has said the EU will set duties on 2.8 billion euros ($3.4 billion) of U.S. exports, including peanut butter and denim jeans, if its metals exports to the United States worth 6.4 billion euros ($7.5 billion) are subject to tariffs.
The tariffs, which have increased friction with U.S. trading partners worldwide and prompted several challenges before the World Trade Organization, are aimed at allowing the U.S. steel and aluminum industries to increase their capacity utilization rates above 80 percent for the first time in years.
Economists say the standoff with the EU could tip toward a trade war, particularly after Trump last week launched another national security investigation into car and truck imports that could lead to new U.S. tariffs.
The Trump administration has given permanent metals tariff exemptions to several countries including Australia, Argentina and South Korea, but in each case set import quotas.
Friday’s deadline for exemptions also affects Mexico and Canada, which are in contentious negotiations with the United States on the North American Free Trade Agreement that Trump has said he wants to revamp, or abandon if the talks fail.
U.S. auto import curbs would have major impact on Japan steel demand
Japanese steel firms are worried that potential U.S. auto import curbs could have a major impact on demand for their products, the new head of an industry group said on Friday.
The Trump administration has launched a national security investigation into car and truck imports that could lead to new U.S. tariffs similar to those imposed on imported steel and aluminum in March.
“I was really shocked by the U.S. move,” Japan Iron and Steel Federation Chairman Koji Kakigi told a news conference.
“If Japanese auto exports of about 1.7 million units are shut out by the U.S. market, it will have significant impact on Japanese steel demand,” said Kakigi, who is also president of JFE Steel which is under JFE Holdings Inc.