After scandal, copper price could follow iron ore over cliff |
- After scandal, copper price could follow iron ore over cliff
- Nigeria, South Africa partner on artisanal gold mining
- Copper price slump tilts Zambian economy into crisis
- Obama's climate plan is leaking methane
- Brent Cook: Exploration sector hasn't hit bottom yet
| After scandal, copper price could follow iron ore over cliff Posted: 08 Jun 2014 03:58 PM PDT
 The copper price dropped 3.5% last week after a weaker than expected gauge on manufacturing activity in China together with a probe into the use of metals in trade finance deals rattled the market. July copper futures in New York ended the week at $3.0585 a pound ($6,700 a tonne), down from $3.37 at the outset of 2014. Chinese authorities have begun an investigation into allegations that several companies pledged the same copper and other industrial metals held at the port of Qingdao as collateral for loans to different banks. Beijing is stepping up efforts to curb the country's vast shadow banking system and the revelations could see a further clampdown on this lending practice which have been a key part of the commodities trade – particularly in iron ore and copper – for years. As these deals are being unwound it could lead the dumping of copper onto the market that would otherwise have been tied up in financing deals leading to sharply lower prices. China consumes 42% of the world's copper. The process is already playing itself out in iron ore which has slumped 20% over the past month. Iron ore was hit first because apart from the credit clampdown China is also targeting the steel industry's chronic overcapacity and environmental impact as part of its "war on pollution". While iron ore at the China's ports continues to be stockpiled at record levels, official copper inventories have been sharply reduced over the past couple of months. However, while deliverable stocks held by the Shanghai Futures exchange has dropped to 92,000 tonnes it is estimated that China's unofficial copper stocks used in financing could be as high as 700,000 tonnes according to a new report by Capital Economics meaning the tightness in the market has been artificial. While iron ore imports slowed to 77.4 million tonnes in May, down 7.2% and copper imports fell 15.6% from a month ago to 380,000 tonnes, year on year imports are still expanding at a rapid rate. Should stockpiles of iron ore of more than 110 million tonnes and the "off-market" copper warehouse inventories be released, both commodities have further to fall. Iron ore has recovered somewhat after falling to a 21-month low of $92 a tonne end of May and copper is still trading well above near four-year lows of $2.92 hit in March. Copper plummeted 8% over just three trading days during the March slump which was prompted by China's first ever corporate bond default and markets could now be entering a particularly rough patch as banks start to call in dubious loans. Capital Economics sees the correction this way: "If the historic relationship between copper and iron ore prices is to be restored, it is likely to take the form of a renewed fall in copper prices." The research house predicts "another leg down in the copper price" to $5,800 per tonne ($2.63 per pound) by the end of the third quarter, while the iron ore price is forecast to end the year at $90 per tonne.  Source: Capital Economics Image of Beijing Temple of Confucius by Wild Pixels  |
| Nigeria, South Africa partner on artisanal gold mining Posted: 08 Jun 2014 01:16 PM PDT South Africa was the world's top gold producer for decades until 2007 when it was overtaken by China. From a peak of more than 1,000 tonnes during the African nation's heyday as a gold producer in the 1960s and 1970s, production has now fallen to around 140 tonnes. Nigeria does not even feature in the top 50 countries when it comes to the production of gold, with official figures pegged at 200 kilograms in 2006 While official figures are tiny, a 2012 report suggested an estimated 10 tonnes of gold are illegally extracted in Zamfara State of Nigeria alone using unsafe practices and employing child labour. Nigeria's Leadership Newspaper reports the two countries are now partnering to promote the development of artisanal and small-scale gold mining in Nigeria according to Minister of Mines and Steel Development, Musa Sada. In the capital Abuja, Sada said the ministry would procure mining machinery and expertise from South Africa with a focus on gold because of the many artisanal miners operating in the sector: "We realised that we are wasting a lot of resources and not getting as much as we should from mining. So, we need to improve on our mining technology and commodity pricing," he said. After a recalculation of the Nigeria's gross domestic product numbers to better reflect the West African country's vast informal sector, Nigeria leapt past South Africa in terms of the size of its economy this year. Nigeria's nominal GDP was $510 billion in 2013, 89% larger than previously estimated and $190 billion more than South Africa's. Nigeria's population is estimated at roughly 170 million people versus 52 million for South Africa. Image of mosque in Abuja, Nigeria's capital by Kipp Jones |
| Copper price slump tilts Zambian economy into crisis Posted: 08 Jun 2014 11:45 AM PDT
The "recent steep depreciation of the kwacha is raising inflationary pressures and expansionary fiscal policy has created large budgetary imbalances," according to a statement, after a visit by an IMF team to the country. Zambia is Africa's second biggest copper producer and the red metal accounts for 70% of its export earnings. The copper has declined more than 9% this year, making servicing of the country's foreign debt more costly. Copper last traded at $3.06 a pound in New York after a steep slide for the week as worries mount over growth in China, which buys half of all Zambia's copper. Zambia scrapped restrictions on the use of foreign currencies this year as it tried to halt the slide in its currency. The forex measures were introduced by populist leader Michael Sata after becoming the country's president in 2011. An IMF delegation will return to the Southern African country in early September to discuss an economic support programme. Africa's number two gold producer Ghana is facing similar problems to Zambia, but so far the West African nation has resisted IMF assistance.
Image of maintenance crew in Zambia copper mill in 2007 by mm-j |
| Obama's climate plan is leaking methane Posted: 08 Jun 2014 10:51 AM PDT The Environmental Protection Agency's new regulations aimed at reducing carbon emissions by 30 percent will no doubt lead to a cleaner economy. But the road there will be paved with methane. By requiring reductions in the energy intensity per megawatt-hour of electricity generation, utilities will have the ability to choose from an array of options for how to meet the targets. Energy efficiency will likely be the first choice. Renewable energy will certainly play a big part, as well. But one of the major ways utilities will comply with EPA rules is by fuel switching from coal to natural gas. By the EPA's own estimate, coal generation will decline by 20 percent to 22 percent by 2020. That will create an opening for natural gas, which could rise by up to 45 percent, jumping from 22 billion cubic feet per day to 32 bcf/d. The Obama administration has bet its climate legacy on this trend, which was already underway before the EPA regulations. This is why the administration chose 2005 as a baseline, when emissions were near a peak. 2005 predated the shale gas revolution, which led to significant reductions in carbon dioxide emissions as cheap natural gas displaced coal. By 2013, the U.S. had already achieved about a 10 percent reduction in emissions since 2005 – meaning we are already well on our way to the 2030 goal. Since natural gas burns much cleaner than coal, producing about half as much carbon dioxide, making the switch from coal to gas can go a long way to achieving the rest of the remaining reductions, the administration seems to be thinking. The big problem is that we don't know what's happening with methane emissions. Natural gas, which is essentially methane (CH4), may burn cleaner than coal, but what happens when it isn't burned? As a greenhouse gas, methane emitted into the atmosphere is more than 20 times as potent as carbon dioxide over a 100-year period. Natural gas production leaks methane along its entire supply chain – from drilling to storing, processing to distributing. The EPA estimates that methane emissions have actually declined over the past 20 years as technology has improved. And this needs to be true for the EPA's assumptions to work out with its climate plan. The problem is that many scientists dispute those claims. Robert Howarth of Cornell University believes that methane leakage could be much higher than the government says, which would mean pushing utilities to switch from coal to natural gas may not be constructive. He has conducted studies that conclude methane leakage far exceeds EPA estimates. "Converting to natural gas plants, which is what this latest rule is likely to do, will actually aggravate climate change, not make things better," Howarth told Bloomberg News. "It's well enough established to suggest the EPA is on the wrong side of the science." The natural gas industry has aggressively pushed back against Howarth's findings, pointing to other studies that show lower methane leakage. But the problem is that the science just isn't all there yet – we don't know exactly how much methane is leaking. Nevertheless, the Obama administration is ploughing forward. In its regulatory analysis for the new carbon rule, the EPA recognized the methane problem, but has punted on the issue for now. "The EPA is aware that other GHGs such as nitrous oxide (N2O) (and to a lesser extent, methane [CH4]) may be emitted from fossil-fuel-fired EGUs…The EPA is not proposing separate N2O or CH4 guidelines or an equivalent CO2 emission limit because of a lack of available data for these affected sources," the report said. Natural gas may still have a climate benefit over coal. And even if it doesn't right now, methane leakage could turn out to be a very fixable problem, as engineers figure out how to plug the leaks in the supply chain. But for now, President Barack Obama's climate plan hinges on this uncertainty. Source: http://oilprice.com/Energy/Energy-General/Obamas-Climate-Plan-Is-Leaking-Methane.html By Nicholas Cunningham of Oilprice.com |
| Brent Cook: Exploration sector hasn't hit bottom yet Posted: 07 Jun 2014 12:02 PM PDT One of the sector's most respected voices, Brent Cook from Exploration Insights chats with Cambridge House Live anchor Vanessa Collette about the state of the junior mining sector and what investors should know as we enter into the second half of 2014. |
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