Zinc hits 10-year high for second day on China output woes

9/10/17

The price of zinc hit a 10-year high on Wednesday as the industrial metal continues its steep climb following supply cuts from mining companies and continued strong demand out of China. Analysts predict further gains, but that depends on whether producers, in particular Glencore PLC, will take advantage of the appreciation in value of this metal and quickly ramp up production.

Since mid-June, London Metal Exchange three-month zinc futures have gained more than 24%, and were recently trading at $3,081 a metric ton. That is their highest level since October 2007.

Global copper and aluminum production figures for June were 23% and 35% higher than they were six years earlier, around when prices started to drop, according to figures provided by ING. Zinc production has lagged behind, growing only 3.4% in June.

Prices are getting a further boost from a seasonal third-quarter uptick in China’s steel industry. Zinc is used to coat steel to stop it from rusting. Production from the Chinese automotive sector, though weaker than last year, has helped zinc demand, while China’s better-than-expected second-quarter gross domestic production growth of 6.9% has boosted metals across the board, S&P Global said in a recent report.

Investors and analysts are betting that prices will move higher still. Wood Mackenzie, a commodities-industry consultancy, estimates prices averaging $3,500 a ton between 2018 and 2020. London-based brokers Marex Spectron predict Zinc will hit somewhere between $3,143 and $3,227 a ton in the short term. Vivienne Lloyd, a base-metals analyst at Macquarie Group, sees the metal staying over $3,000 a ton during the fourth quarter of this year and the first quarter of next year.

Key to the rosy outlook is a belief that mining companies will wait for a sustained period of higher prices before really boosting production and for those that do, the process may take time.

Glencore, the metal’s biggest producer, will be particularly key. In October 2015, the Switzerland-based company reduced its zinc mining by 500,000 tons a year, amounting to 4% of global production. Zinc prices jumped 7% that day.

In its first-half results, released earlier this month, Glencore said it increased zinc production by 13% from the same period last year.

But in those results, Glencore also made no change to a May statement that, “there are currently no plans to restart idled capacity in Australia and Peru.”

Glencore “has maintained a degree of price discipline so far, and can be expected to do so even through a ramp-up,” said John Meyer, mining analyst at S.P. Angel.

Some miners have started to fire up shuttered mines and shafts.

Among those, Minerals and Metals Group’s Australian Dugald River mine is on target to begin production in early 2018, adding 170,000 tons to global annual zinc supply. Vedanta Resources PLC’s Gamsberg mine in South Africa will reintroduce 250,000 tons back into the market from early 2019.

“There’s a whole list of what we call reactivation projects which are now on ‘care and maintenance’ and which could be restarted,” said Chris Parker, zinc markets research director at Wood Mackenzie.

But little of this will happen this year.

Mr. Parker also calculates that this list would provide up to 250,000 tons of extra zinc a year, which “falls well short” of the 2 million tons of incremental supply needed to meet forecasts of global demand by around 2020.

Instead, tonnage from so-called green field sites, or new production, would be needed to really ramp up production, he said.

Analysts expect that Chinese supply will also be curtailed as environmental directives — aimed at tackling water contamination from heavy-metals mining — kick in this winter, stymieing zinc production. The country is responsible for 40% of global zinc supply.

Over a longer-term period, mining firms “are not going to simply ramp straight back up, they’re going to need sustained high prices in order to do so,” said Alastair Munro, a broker at Marex Spectron.

Source: Fox Business

BahriBunge Dry Bulk: New joint venture plans to ship over 5 million metric tons of dry bulk commodities in its first year of operation

Following the announcement of the joint venture agreement by Bahri, a global leader in transportation and logistics, and Koninklijke Bunge B.V. (“Bunge”), a wholly-owned subsidiary of Bunge Limited, a global agribusiness and food company, the two companies recently inaugurated the offices of BahriBunge Dry Bulk Ltd. in Dubai, UAE.

In celebration of the occasion and reveal of the new company’s logo, Mr. Abdulrahman M. Al-Mofadhi, Chairman of Bahri hosted a special ceremony at Burj Al Arab in the presence of several Bahri board members, top industry high-level executives, representatives from Bunge, heads of Bahri’s business units, in addition to a number of officials representing major multinational companies.

With plans to ship over 5 million metric tons of dry bulk commodities in its first year, the new company will step up the import and export of dry bulk goods and ocean freight material in and out of the Middle East while strengthening the operations of Bahri Dry Bulk, a business unit within Bahri.

‎BahriBunge Dry Bulk Ltd. and the vessels chartered under its domain will provide exclusive freight transportation services to international customers, with a key focus on mobility of freight in the Middle East. As part of the agreement, Bahri Dry Bulk will own 60% of the shares in the venture and Bunge will own the remaining 40%.

The joint venture, which is financed pro rata by Bahri Dry Bulk and Bunge, will charter and commercially operate SUPRAMAX and/or PANAMAX (and/or other suitably-sized dry bulk vessels) initially from the fleet currently owned or managed by Bahri Dry Bulk, and subsequently from third parties. Headquartered in Dubai, the new company plans to ship over five million metric tons of dry bulk commodities in its first year of operation, with aims to gradually increase operations for the volume figures to touch double-digits.

Source: BahriBunge Dry Bulk Ltd.

First driverless freight train makes debut in Australia

Mining company Rio Tinto has completed its first fully autonomous train journey by hauling a load of iron ore along a 100km stretch of track in the Pilbara region of Western Australia.

The train travelled from Wombat Junction to Paraburdoo monitored by engineers and government officials in a control room in Perth.

The company is trying to remove people from mining operations and believes autonomous trains will be quicker and safer.

Rio Tinto has been running trials of its proprietorial AutoHaul technology with human drivers present since the beginning of the year. It plans to put the system into full operation next year if it passes safety tests.

The Anglo-Australian company is a major train operator in its own right. It runs about 200 locomotives on more than 1,700km of track in the Pilbara, transporting ore from 16 mines to four ports.

Chris Salisbury, the chief executive of Rio Tinto Iron Ore, said in a press statement: “This successful pilot run puts us firmly on track to meet our goal of operating the world’s first fully autonomous heavy-haul, long-distance rail network, which will unlock significant safety and productivity benefits for the business.”

The company says trains driven by computers are able to travel faster and closer together than is possible with human drivers.

As well as trains, “mine of the future” technology championed by Rio Tinto and others seeks to automate as many mining jobs as possible.

One example is the autonomous dumper trucks made by Japanese equipment manufacturer Komatsu (pictured). These vehicles have no cabs and can operate with 3D terrain models compiled from drone photographs.

Salisbury added that Rio Tinto was looking to retrain its workforce “to ensure they remain part of our industry”.