Commodities Roundup: Magnesium shortages sting; US-EU tariffs deal; OPEC+ holds firm on output plan

Here’s a quick rundown of news and thoughts from particular commodity sectors, including magnesium shortages and their impact on a number of sectors as well as the US-EU deal for a partial rollback of the Trump-era Section 232 tariffs on steel and aluminum.

MetalMiner, a sister site of ours, scours the landscape for what matters. This week:

Magnesium shortages impact metals producers

Among the latest developments rippling across supply chains is the shortage of magnesium, impacting steel and aluminum production, not to mention the automotive sector.

In short, China is responsible for approximately 90% of global production. Surging energy costs and power outages have impacted industrial operations. However, China’s National Development and Reform Commission recently announced plans to intervene in the coal market to stabilize prices.

MetalMiner’s Stuart Burns outlined the impact of rising magnesium prices on the European steel sector.

“Unlike the U.S., which enjoys both primary and secondary magnesium domestic production, China supplies 95% of Europe’s magnesium demand,” he wrote. “Last year, this totaled 155,000 tons, according to Reuters. Rolling power cuts in China — some due to coal scarcity but most due to provincial governments mandating lower power consumption — have forced 25 production plants in the main magnesium production hubs of Shaanxi and Shanxi to close. Another five are operating at half capacity.”

US, EU reach deal on Section 232 tariffs

In a step toward easing trade tensions between the US and EU, the parties recently reached a deal that would see to at least a partial rollback of the Section 232 tariffs on steel and aluminum imposed by former President Donald Trump in 2018.

Using Section 232 of the Trade Expansion Act of 1962, Trump cited national security when imposing the duties of 25% for steel and 10% for aluminum.

However, this week the Department of Commerce announced a deal that would instead install tariff-rate quotas effective Jan. 1, 2022, for both steel and aluminum. The steel quota is 3.3 million metric tons covering 54 product categories. The Section 232 tariff of 25% will still apply to imports in excess of the quota.

Meanwhile, the quota for unwrought aluminum is 18,000 metric tons under two product categories. Furthermore, the quota for semi-finished (wrought) aluminum is set at 366,000 metric tons under 14 product categories. Imports in excess of the quotas will be subject to the Section 232 aluminum tariff of 10%.

In turn, the U.S. will avoid a scheduled Dec. 1 doubling of E.U. tariffs on U.S. goods.

Aluminum price plunges

After peaking in mid-October, the aluminum price has plunged since.

“The aluminum price has been undermined by falling coal prices in China following efforts by regulators to curb excessive speculation, hoarding and profiteering from what remains a tight domestic thermal coal market,” Burns explained.

“If coal prices continue to fall, the aluminum price is expected, for the time being at least, to follow.

“The SHFE price is already down to 19,870/mt according to Shanghai Metal Markets (SMM). At one point it hit 19,200/mt, the lowest level since July.”

‘Greener’ mining

The transition to cleaner, less environmentally destructive forms of energy comes with a catch.

Mining processes behind acquiring needed materials for those forms of energy are environmentally destructive themselves.

However, as Burns explained this week, some companies are working on new processes to mitigate environmental damage from mining.

“Carbon capture and storage was hailed as the savior of the coal industry many years ago, holding out the hope that the carbon dioxide by-products could be captured and buried underground in depleted oil or gas fields,” he wrote. However, the economics have proved hard to overcome. “Few projects have lasted more than a few years. Those that have made it have received significant levels of subsidies.

“But Reuters outlined a process more akin to nature’s process, albeit sped up – years rather than millennia.

“The post explains how rocks dissolved by rainwater flow into rivers, picking up other minerals such as calcium and magnesium along the way before combining with carbon dioxide and settling on the ocean bed as carbonate minerals, such as limestone. Such rock weathering absorbs around 1 gigaton of carbon dioxide each year, the post explains, although the process plays out in painfully slow geological time.”

Icelandic firm Carbfix is implementing a method that mirrors natural processes, albeit at a far greater speed.

“One company in Iceland has found a way to speed this up by injecting as much carbon dioxide as possible into water before pumping it underground into basalt formations,” Burns added. “There, the acidic water reacts with the rock to form stable carbonate formations over a two-year period.

“The company, Carbfix, has already captured 73,000 tons of carbon dioxide this way since 2014 emitted by a geothermal power station at Hellisheidi in Iceland.”

WTI crude price falls

Oil prices have continued to surge over the last two-plus months, adding to a long list of energy-related woes for buyers.

The WTI crude oil price closed Wednesday at $80.86 per barrel, the Energy Information Administration reported. The closing price marked a drop of $1.80 per barrel from a week ago.

However, WTI remained up by $43.20 per barrel from a year ago.

Meanwhile, OPEC+ held its 22nd OPEC and non-OPEC Ministerial Meeting on Thursday. Despite pressure from the U.S., the oil body agreed to stick to its production schedule. OPEC+ affirmed plans to increase output by 0.4 million barrels per day for December 2021.

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