When the Mud Slides…

12 10 2010

The Hungarian caustic sludge spill last week has gathered international attention. While we wonder if 2010 should be remembered as the year of the spill, let’s just see how red mud can be handled to reduce reliance on stockpiling and storage, which has unfortunately shown its limits. 

Red mud is produced during the transformation process of bauxite into alumina during the Bayer process. About 1.5 to 2 tonnes of red mud is generated for every tonne of alumina produced. This residue is highly alkaline (high pH, that is) and contains traces of various metal substances and other minor or trace amounts of heavy metals and radioactive isotopes. 

It has been estimated that in 2000, the global inventory of bauxite residue stood at about 2 billion tonnes and is likely to reach 4 billion tonnes by 2015 unless improved means of storage, rehabilitation and re-use options are developed in large scale.

Current Means of Disposal

For now, red mud is often stored on land for future rehabilitation or uses (with or without neutralising its toxicity).  This is done through either lagooning or dry stacking and accounts for 90% of alumina refineries surveyed by this study.  Red mud can also be discharged into mid-sea.  This accounts for less than 10% of cases surveyed by the study. The practice has steadily declined steadily since the 60s. The move towards dry stacking has been economically motivated by the need to reduce the land required for storage, minimise risks of caustic liquor release while maximising the recovery of liquor for the refinery.

The next big thing has a fancy name. Hyperbaric steam filtration is an emerging technology which discharges residue as a dry, granular material of low soda content. This gives red mud properties that allow long term storage, remediation and re-use.  This method is not economically viable at the moment but is undergoing trials in refineries in Germany, Japan and Venezuela.

Re-Uses

Re-using red mud into new applications would solve the problems arising from its disposal and would create economic incentives to treat its toxicity. Since the 60s, several hundreds of researches have sought new end uses for red mud but emissions of radon coming from the mud as well as the low value of materials that red mud could be substituting have hindered its economic viability. Red mud can be used in metallurgy (for the recovery of iron, vanadium, chromium, rare earths and titanium dioxide), catalysis, and soil remediation.

The most promising uses would be in construction materials such as cement, bricks, roofing tiles and glass ceramics. A few examples include the Jawaharlal Nehru Aluminium Research Design and Development Centre’s work on ceramics and Jamaica’s National Work’s Agency’s reliance on geopolymers in order to use red mud in road construction. Other uses can be found here.





This Entry Talks About Copper

6 01 2010

Well this does not get any more obvious isn’t it? If you are interested in reading about the outcome of the strike at the two Codelco mines in Chile, click here. If you are interested in reading about China’s bid for Corriente, click here.And if the possibility of Novagold’s Galore Creek project resuming is making you happy, clap your hands. Otherwise, let’s get serious.

Where is copper heading this year? In 2009 copper prices increased 140%. Is it fair to expect such a performance to be continuing in the New Year? It depends what factors you are willing to taking into consideration.

It seems the Chinese are still buying copper from the LME and that overall there is a sentiment that this could continue for months. This begs the question: how strong is the Chinese copper demand? Since stockpiling a significant inventory of copper through the State Reserve Bureau in the first half of 2009 and imports have since then slowed down despite the deployment of infrastructure projects.

China is known to be price sensitive and, as prices rose, is suspected to have switched to importing scrap. Considering these factors (namely stockpiling and substitution), assessing the Chinese demand for copper can be tricky.

So far, one assumes that the stockpiles estimated to 400,000-500,000 tonnes are still in storage and have not been released yet. Still firms like GFMS are relying on the production of semi-finished copper products as proxy for Chinese demand for copper. According to GMFS such production has increased by 17% y/y towards the end of 2009 which could indicate that lower copper purchases by China are only temporary.

Reports of China planning on exporting copper have emerged. Some distributors cannot find buyers for refined copper as the local scrap supply is improving. Big players such as the Xi’an Maike Metal International Group have had to re-route some of their inventories to LME warehouses in Korea and analysts at CRU International see this as a continuing trend.

I don’t mean to be overly bleak but if China’s reduced its copper imports by dipping into its inventories, which is what Chile’s Copper Commission is expecting, China’s apparent demand could reduce by 17%. Now if it is re-exports copper, I don’t think that the increasing demand from recovering OECD countries will be enough to sustain copper prices. After all, a major part of the rally in commodities came from Chinese stimulus buying.





Not in your League?

15 12 2009

Just a few years ago companies were bleeding themselves out to acquire aluminium production capacity based on the assumption that demand from China and the increasing importance of aluminium in transportation were solid fundamentals. In September (late in the news, I’m so sorry), Alberto Calderon chief commercial officer from BHP Billiton, said that aluminium was losing its appeal adding that it was “clearly the house view is that aluminium is not in the league of coking coal, iron-ore, copper, potash or petroleum,”.

The reason for such a lack of optimism is the growing production capacity in China. Despite its intention to crack on oversupply, China is self-sufficient in aluminium and will become a net-exporter in the long-term as well. While this does not prevent aluminium production from being a good business, it certainly limits its potential in the short and longer-term. Especially as China has had record production for the last three months as it races to meet annual output targets for non-ferrous metals.

Still, not being in the league of potash is harsh. Potash has faced the most serious decline in its history this year. A recovery is even been postponed to some time in 2010 as farmers are still reluctant to buy and use fertilizers as they still expected prices to fall further in Q3. In the meantime PotashCorp’s Penobsquis mine, one of Canada’s largest potash deposits, will face its fourth eight-week shutdown in January 2010.





Olympic Dam: Official Assessment out today

21 10 2009

BHP Billiton declared force majeure following a mechanical failure on October 6th of Olympic Dam haulage system. The company released its damage assessment today along with its September quarter production report and Australia’s work safety’s officials’ probe. Causes of the incident are yet unknown as the investigation is not yet completed however damages have been assessed.

BHP Billiton confirmed today that it expects months of outage at Olympic Dam as the mine will continue to function at a 25 percent ore-haulage capacity until the first quarter of 2010. This announcement confirmed most analysts’ preliminary assessments as in most expected the mine to operate only at 20% capacity which would reduce the supply of copper by approximately 50 000 tonnes this year as the situation was expected to take up to six months to return to normal. BHP Billiton could have had to purchase copper and uranium to meet contractual obligations however declaring force majeure frees the company from any liability if cannot supply its customers.

Olympic Dam’s copper is sold in Europe, Australia and Asia under contracts negotiated annually based on monthly LME cash settlement prices. Its uranium is sold in Britain, France, Sweden, Finland, Belgium, Japan, South Korea, Canada, the United States and Spain.

On October 6th, the haulage system in the Clark Shaft brings the ore from underground to surface processing facilities. Due to the system derailing, BHP has restarted a smaller shaft capable of maintaining just 20% of the mine’s usual capacity since the incident took place.

Olympic Dam is the world’s largest uranium resource, the world’s fourth largest copper and gold play. The mine became an asset of BHP Billiton when the company acquired WMC Resources in 2005. Expansion plans at Olympic Dam were given the green light in late 2008 with the Stage 1 being in production by 2013. The expansion will lead to a five-fold increase in the ore volume extracted.

Click here for more.





Zeniths & Abysses

20 10 2009

The mining and metals community, since the beginning of the year, has had love for copper and gold only. Other metals unless they bottomed tragically were left outside news coverage as average performances are a bore to report on. It now seems that copper and gold may have reached their zenith as other metals and minerals are ready to take off

Gold: its 15 minutes could soon be over…

With gold reaching a new record price almost everyday, how dare I tell you that the fun may be over? With speculation being the sole driver of price increases, the enthusiasm of some will eventually deflate. Investor switching out of gold exchanged traded funds is indicating that to some degree. Since Q1 inflows in gold ETFs followed by Reuters has been steadily decreasing. In Q3 inflows amounted to just over 697,000 ounces in Q3, against 995,000 ounces in the second quarter. The weak physical demand is worrisome and leads to question the sustainability of current gold prices although they are expected to remain around the US $1000 level for the next few months as USD remains low.

Copper: feeling the pinch?

Are prices running ahead of demand? 5-month record high LME inventories can give an indication of that.  Chinese stockpiling, improving macro data and new investor cash have helped copper prices more than double this year but Chinese demand for the metal has been declining for three consecutive months as stockpiling slows. Freeport-McMoRan Copper & Gold Inc said on Monday (Oct 12th) that the copper market’s prospects for next year are as yet uncertain and a strong Chinese economy will be key to demand.

Silver: in no way second.

Like I mentioned about a month ago silver is doing well and will continue to do so. This year silver has taken much of its price direction from gold (and copper to some extent), With half of the demand for silver coming from industrial uses, the expected economic recovery will further propel prices for the metal.  Silver prices have already increased 87% this year while gold prices have increased 48%.

Diamonds.

Rough diamonds prices have been picking up in the past weeks (Rio Tinto raised its prices by 15%) and companies have restarted mines and processing capacity which is good news after  prices falling 65% this year.

 It is unclear if demand is rising in developed countries as producers are unsure whether the increase in sales is due to restocking ahead of Christmas or to genuine demand growth. That is what we will find out after Christmas. In the meantime, strong growth in demand can be seen in China and India.

All things considered, it could be secondary to determine whether demand is really picking up as the supply of diamonds is at so tight a price bubble may be expected according to RBC Capital Markets’ report titled “Diamonds – Where Will All the Rough Come From?”. The bubble-potential stems from the top diamond producers reducing their output significantly this year whilst new mines will be operational in 2011, at best. Leading to 2011, we expect African and Russian mines, which are older, to start producing less.

Nickel: your ultimate underdog

Word on the street is that nickel prices may have turned the corner. Nickel now has a new floor price and will be a top performer in an upcoming commodity supercycle underpinned by growth in Chinese demand. This is what was reported from the Australian Nickel Conference. Those conclusions sound like echoes from a previous commodity boom, just as if a consultant recycled content from a 2007 presentation.

Still, it can be interesting to have a look at nickel in light of its longer-term prospects due to its uses in new alternative energy forms such as nuclear, solar and wind that could help broader nickel uses beyond stainless steel which accounts for two-third of nickel demand. Despite stainless steel output rising 24.5% from Q1 to Q2, nickel prices have remained significantly low as LME inventories remained high as the LME is the market of last resort for nickel and does not deliver ferronickel, the material of choice for stainless steel. With idled capacity resuming operations, the next big move for nickel is expected to be on the downside.

Conclusion
Shortages or tight supply is expected to be an issue for commodities as idled capacity could take time to restart. Prospects are uncertain for many commodities as Chinese imports are expected to lower for the second part of this year although this does not make consensus. Of note, Goldman Sachs is cutting its exposure to commodities as other banks like JPMorgan Chase have increased their exposure steadil throughout the year. More on that here.





China cracks down on over capacity. World rejoices.

5 10 2009

China has announced this week that it would deal with over capacity with regards to steel, cement, aluminium, and wind power. At present China is only being mindful that the economic recovery is fragile and hopes to avoid the drastic factory closures and job losses that over capacity could lead to. China’s will to resolve this problem is not new and its pledge to attack the problem is only a reiteration of previous policy goals whose application have not always been consistent.

China’s industrial policy goal for the aluminium sector has for long aimed at consolidating around fewer greener and more efficient facilities while phasing out smaller inefficient smelters. Between 80 and 130 smelters, some of which with nameplate capacity of only 20 000 tonnes per year, are assumed to be in operation in China. The Cabinet repeated pledges announced in May to ban for three years new capacity and to remove small plants scaled at 800,000 tonnes per year or below, according to Reuters. Such a high threshold for nameplate capacity is surprising as no smelters with a capacity above 800 000 tonnes per year has been reported in China by Light Metal Age. A smelter above 800 000 of capacity can only be found in Russia and the Middle East. In sum, the meaning of the Cabinet statement is at best nebulous.

In the case of steel, China has decided to crack down on the 10 per cent output capacity that it deems illegitimate, It has also decided to no longer support new projects or expansion plans of current facilities. Not authorising new projects is not a guarantee that output will be reduced as some regions have illegitimacy approved construction as local authorities are not always following Beijing.

As the targeted industry sectors are energy intensive, the only affected party to China’s decision to reduce industrial output may be Australia who has been benefitting from China’s surge of coal imports. For the countries that have had to set up safeguards, impose corrective tariffs and file WTO cases, this comes as good news. Western steel mills restarting capacity are also benefitting from this move. So is Noranda who just restarted capacity at its Evansville smelter.





Manufactured Landscape: Aluminium Smelters

24 09 2009

A friend gave me harsh comments last week for the good reads post. Apparently it was a little bit too lean on substance. Well, this week I think it is necessary to make a post whose substance is tied to another blog as I think that it is about time that I provide a little bit of visual content.

When browsing the web last week end, I found a blog that explores extreme man made structures and landscapes using google maps. As I am writing posts exclusively on aluminium this week, this link is extremely appropriate. There’s even a picture of the Evansville smelter in Indiana on the page but I will admit with certain degree of chauvinism as I really like the picture of Aluminerie Alouette. I started writing a post on this international consortium months ago and it is still in draft form. I will try to publish it this week