Trade disputes threaten decarbonization: IMF

: Crude oil, Emissions, Metals, Natural gas
23/10/03

The ongoing confrontation between China and the west over the control of critical minerals vital for the energy transition risks derailing global decarbonization efforts, the IMF says.

Partial commodity market fragmentation is already a reality in global oil and gas markets following the war in Ukraine, as a result of Moscow's decision to curtail gas exports to Europe and the G7 import bans on Russian oil. But the effects of potentially fragmenting global markets for critical minerals will be significantly higher than for fossil fuels, because of more highly concentrated mining and refining resources for those metals, the IMF said in a study released today as part of its World Economic Outlook report.

Success of decarbonization depends on the ability to scale mining and processing of metals for electric vehicles, batteries and power grid transmission lines. The IEA projects that demand for lithium would have to increase by more than 40 times by 2040 under a scenario that would enable global emitters to meet Paris Agreement climate goals. Demand for graphite, cobalt, nickel and copper also will have to increase significantly, but resource concentration is significantly higher for minerals than for fossil fuels.

For any type of critical minerals, the top three producers on average account for 70pc of global output — a much bigger share than for oil, gas and coal, the IMF said. Mineral refining is just as concentrated, with China accounting for a 66pc share in cobalt and graphite and 58pc in lithium, consultancy Lazard says.

Potential fragmentation of global markets for critical minerals is not a hypothetical prospect. China's dominance of mineral refining is of the highest concern to the US, which plans to subsidize domestic processing capacity and partner with allies to invest in critical mineral supply chains that do not depend on China. The EU likewise is looking to form a "Critical Raw Materials Club" that brings together producers and consumers of batteries and green technologies, also in the name of securing global supply chain.

But imposing restrictions on China's ability to import critical minerals will be a net loss for the world because it would affect Chinese refining capacity immediately, while similar industries elsewhere will take decades to build, the IMF says. Global net investment in renewable technology and production of electric vehicles would be roughly 20pc lower in such a scenario, compared with continued free trading of critical minerals, it estimates.

By Haik Gugarats

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25/12/23

Viewpoint: New mines to raise BHP, Rio iron ore grades

Sydney, 23 December (Argus) — UK-Australian mining firm Rio Tinto expects production from its new Simandou mine in Guinea to lift its overall iron ore grades in the coming years, while the ramp-up of fellow resources firm BHP's Samarco mine in Brazil could produce similar results. Rio Tinto's average realised iron ore grade fell to a decade low of about 60.5pc this year, data from its 2025 Capital Markets Day presentation show. But the company expects the high-grade Simandou mine in Guinea to increase its average product ore grades to around 61.7pc by 2032. The company downgraded the specification of its Pilbara Blend fines ore from 61.6pc Fe to 60.8pc Fe in May. It also increased its sales of lower-grade SP10 ore, which has lower iron and higher impurity levels, over 2024. BHP is in a similar situation to Rio Tinto. The company's typical Australian ore grades have declined over recent years, dropping below 62pc Fe. But increased production at the higher-grade Samarco operations in 2025 likely supported its overall ore grades. BHP has not announced any longer-term ore grade forecasts. But a planned increase in its Samarco production, which it expects to average 67pc Fe in the current financial year, is likely to boost grades. Simandou Rio Tinto opened Simandou in November and shipped its first load of ore in early December. It will increase production at the site to 60mn t/yr — equivalent to about 18pc of its 2024 Western Australian ore output — by 2028. The company expects to sell 5mn-10mn t of high-grade ore from the mine in 2026, before ramping up production to 60mn t/yr by 2028. Simandou will account for about 15pc of Rio Tinto's total output at that stage, with production from the company's increasingly mid-grade Pilbara mines and Canadian plants accounting for the rest. Samarco BHP aims to produce 7mn-7.5mn t of 67pc Fe ore pellets at Samarco during the 2025-2026 financial year to 30 June, before ramping up capacity to 30mn t/yr by 2028. The company's entire equity-basis production growth in July-September came from Samarco. It produced 2.1mn t of ore over the quarter, up from 1.3mn t a year earlier. The Samarco ramp-up should lift BHP's average iron ore grade over the next few years, despite the Pilbara grade declines. Samarco will also diversify BHP's customer base. Close to 90pc of its major Australian iron ore shipments went to China in 2024, estimates from marine tracking platform Kpler show, making it vulnerable to economic and policy changes in the country. But Samarco's 2024 sales were split between the Middle East and Africa, Asia, Europe, and the Americas. A third of the mine's customers were in the Americas, with another quarter in Africa and the Middle East, according to Samarco's 2024 financial statement. Grade gains BHP and Rio Tinto offset grade declines at their Pilbara mines in 2025 by selling more lump and fewer fines . This has helped the companies maintain stable realised prices despite falling iron ore grades. But this trend is being driven by what are potentially temporary demand-side factors. Chinese steelmakers began to favour lower-grade lump this year because of concerns about sintering restrictions. This is not guaranteed to continue. Instead, Rio Tinto and BHP's overseas mines could provide a more stable path to offsetting grade declines than increasing lump sales, given uncertainty over demand. By Avinash Govind Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Chile watchdog clears SQM-Codelco deal

25/12/22

Chile watchdog clears SQM-Codelco deal

Sao Paulo, 22 December (Argus) — Chile's comptroller general's office (CGR) formally acknowledged on 19 December the legality of lithium mining contracts between the country's economic development firm Corfo and a planned joint venture between Codelco and SQM, clearing the way for the partnership to proceed with conditions. Corfo's mining lease and project contracts are a key legal step in allowing state-owned miner Codelco to partner with private company SQM to mine lithium in the Atacama desert under the national lithium strategy of President Gabriel Boric, who leaves office in March. Even though it acknowledged the legality of the transaction, CGR imposed a set of conditions that need to be resolved before the deal can be finalized, all of which must happen before 31 December. The acknowledgement comes after Corfo withdrew and resubmitted a legal resolution that CGR flagged for inconsistencies on early December. CGR said the effectiveness of the approved contracts hinges on Codelco submitting documentation related to the creation of its lithium subsidiary, Minera Tarar, for retroactive legal review. CGR noted that the Codelco-SQM joint-venture agreement includes a clause tying its closing to a US Securities and Exchange Commission (SEC) investigation into SQM being "substantially finished," a condition the watchdog said must be waived or modified for the deal to proceed. Corfo and Codelco must send proof to CGR by year-end proving that they complied with all conditions imposed by the watchdog. The CGR has also set some ongoing guardrails to the deal, including a mechanism that ensures Codelco — under the national lithium strategy — remains the majority owner and controller of the Atacama lithium assets unless the watchdog approves a change of ownership. It also said that payments to regional government bodies must follow strict standards and may be audited. SQM-Codelco joint-venture moves forward By acknowledging the deal's legality, the CGR paves the way for the joint venture between Chilean private company SQM and state-owned Codelco to move to its closing stages, pending the resolution of the watchdog's conditions. CGR's approval was the last necessary external sign-off needed for the agreement to materialize, according to Codelco. Chile's exiting economy minister Nicolas Gráu celebrated CGR's nod, saying that it will play a big part in "allowing Chile to double lithium production in the next decade". Codelco said it will now move forward with SQM to finalize the joint-venture, an indication that it will meet and work to resolve all of CGR's conditions. The state-owned miner said that only the final legal and administrative steps are left for the deal to close. The partnership agreement, which will allow both companies to extract lithium from the Atacama salt flats from 1 January 2031 to 31 December 2060, has been undergoing a lengthy approval process since May 2023. Eight countries and over 20 Chilean regulatory bodies signed off on the deal. CGR is still performing an audit on "certain operations associated with" the SQM-Codelco tie-up , including Codelco's financial advisory contract with investment bank Morgan Stanley, as well as Codelco's operations, to determine whether public resources are being used appropriately. It will also review claims from a congressional investigative commission regarding the transparency of the negotiation process, SQM's tax situation, and a clause that relates to Codelco's obligation to sell 100pc of extracted potassium to SQM under the partnership. The Atacama desert's brines, from which the joint venture will produce lithium, contain potassium that is precipitated and extracted alongside lithium. If the CGR identifies legal issues in its audit, it can order corrective measures, seek internal disciplinary action within the parties and refer its findings to prosecutors, though it lacks the authority to void the deal, leaving full responsibility with SQM and Codelco to finalize the partnership. By Pedro Consoli Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Viewpoint: CSAPR sentiment bearish despite coal use

25/12/22

Viewpoint: CSAPR sentiment bearish despite coal use

Houston, 22 December (Argus) — Expectations for lower prices is likely to persist in the federal Cross-State Air Pollution Rule (CSAPR) allowance markets next year as they remain oversupplied, even with higher levels of coal-fired generation. The seasonal NOx markets have been more active this year compared to 2024, when prices essentially flatlined due to regulatory and legal uncertainty brought about by a barrage of lawsuits filed against the US Environmental Protection Agency (EPA) for its "good neighbor" plan. That plan, which the agency finalized in 2023 under former president Joe Biden, sought to help downwind states meet the 2015 national air quality standards for ozone. The plan imposes more stringent ozone season NOx caps for power plants in more than 20 upwind states, as well as setting new limits on some industrial facilities. But the plan is now essentially defunct after the US Supreme Court halted its implementation in June 2024. This led the EPA to return to less-rigorous NOx emissions limits tied to older ozone standards and reshuffle the participating states into the Group 2 and "expanded" Group 2 markets. Argus launched its assessment of the latter in February 2025. EPA said in March it intends to reconsider the good neighbor plan in order to give states more freedom in developing their own ozone reduction plans. The announcement led to the US District of Columbia Circuit Court of Appeals pausing a lawsuit challenging the legality of the good neighbor plan until the agency completes its reconsideration, and which could culminate in new regulations by fall 2026. But those developments did little to move the seasonal NOx markets, which have already been sluggish due to oversupply and weak compliance demand, leading to more dramatic price fluctuations when trades do occur. Argus has assessed Group 2 allowances at $875/short ton (st) since 1 December and expanded Group 2 allowances at $850/st since 24 October. It is unclear how US president Donald Trump's current hostility towards environmental regulations will affect the administration's attitude towards the existing CSAPR allowance trading markets, but it seems likely that they are here to stay. The EPA likely is "digging into the air transport modeling that they have to understand what their options are," and which could potentially echo its determination during Trump's first term that states had adequately addressed downwind pollution, said Carrie Jenks, executive director of Harvard Law School's Environmental and Energy Law Program. "The EPA is committed to advancing cooperative federalism and working with states on state implementation plans (SIPs) to provide clean air for all Americans," the agency said in December. But extensive case law suggests that the EPA has little room to give states more power to manage emissions as they see fit. Both the DC Circuit Court and the US Supreme Court have made it clear that the EPA must intervene if a state does not sufficiently lower its emissions, Jenks said. "So the EPA's hands, regardless of who's in the White House, are really tied," she said. As a result, the EPA will likely try to prolong the issue by giving states more time to draw up their own ozone-reduction plans. The debates over those plans could revolve around how the modeling of emissions is conducted and interpreted. Even if that modeling is challenged in the courts, it can take years for litigation to get resolved. More coal, more emissions Despite the continued dearth of activity in the seasonal NOx markets, increases in coal-fired generation, a significant source of NOx and SO2 emissions, have buoyed the outlook in those markets, heightening expectations for higher emissions. During the past year, stronger power demand and higher natural gas prices have allowed coal to take a larger market share, which has resulted in increased coal-fired power in grids that serve states covered by CSAPR. But NOx emissions during this year's ozone season, which ran from May through September, were lower than expected, according to market participants. Cumulative emissions in the Group 2 and expanded Group 2 markets rose by just 1pc and 4.2pc, respectively, and remained well below their overall limits. It was likely more cost-effective for power plants to run their NOx controls than to purchase or surrender additional allowances for compliance. Still, given the Trump administration's pro-coal agenda, it remains to be seen for how long increases in coal generation will continue and to what extent that will affect the CSAPR markets. Conversations over ballooning data center demand have also bled into the seasonal NOx markets as the Trump administration seeks to leverage coal to power that boom. There are currently a lot of moving parts that make it difficult to make predictions, including how competitive coal is compared to other energy sources such as renewables, where data centers get built, their demand flexibility, and the federal and state regulatory landscapes in the coming years, Jenks said. By Ida Balakrishna Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Viewpoint: US, European LNG spread may narrow in 2026

25/12/22

Viewpoint: US, European LNG spread may narrow in 2026

Houston, 22 December (Argus) — The spread between US and European LNG prices will likely narrow further in 2026, but forward prices indicate US LNG supply under long-term contracts will remain comfortably profitable in international spot markets until at least summer 2027 as a wave of new supply comes on line. A recent rally in the US natural gas market highlighted US LNG's tightening margins. The indicative long-term LNG contract price — 115pc of US benchmark Henry Hub plus a $3/mn Btu liquefaction fee — surpassed the Argus Gulf coast (AGC) spot fob price in early December for the first time in more than two years amid cold weather in the US, mild weather in Europe and high Atlantic basin freight rates. But the premium over the spot price was brief and caused no change to export schedules. The front-month Henry Hub contract quickly shed its gains on warmer weather, falling to $3.89/mn Btu on 16 December from a nearly three-year high of $5.29/mn Btu on 5 December. Prices hovered around $4/mn Btu through 19 December. The impact was solely on profit margins rather than fundamentals. Customers of US LNG facilities did not need to cancel cargoes under take-or-pay provisions because a profit incentive to maximize exports remained. Liquefaction costs are considered sunk, and the spread between Henry Hub and European LNG prices remained wide enough to more than cover shipping costs. Though rising exports may add to domestic pricing volatility during cold winter weather through the end of the decade, US and European gas futures today indicate long-term offtake from US LNG terminals will remain profitable until the summer of 2027, assuming freight rates of $80,000/d and a 50¢/mn Btu discount to the European benchmark TTF for northwest European deliveries. At that time, contracts with $3/mn Btu liquefaction fees could surpass delivered LNG prices in northwest Europe, though the arbitrage for US gas would remain open for contracts with lower fees (see chart) . Fees now range between $2.50-2.80/mn Btu for US supply coming on line toward the end of the decade. Contracts with fees on either end of that range remain below European LNG prices until summer 2029 and summer 2028, respectively, assuming freight rates of $80,000/d. But cargo cancellations are not always necessary when long-term US LNG contract prices surpass international prices. Terminal operators and their customers finalize annual delivery plans as well as upward and downward delivery tolerances before the start of each year, leaving less flexibility later in the year. If a customer wishes to cancel a cargo, they typically must notify the terminal up to two months in advance, which would likely only happen in an environment where the cost of 115pc of Henry Hub plus freight stabilizes above European LNG prices. The spread between Henry Hub and delivered European prices is wide enough to absorb freight costs through winter 2030-31. If an offtaker opts for a lower quantity in its delivery tolerance or cancels a cargo, the volume returns to the terminal operator, which could still market and sell the cargo on the spot market. This effectively shifts the seller of a cargo from the LNG customer to the LNG terminal operator. The likelihood of cancellations beyond 2027 may be higher in the spring and autumn shoulder seasons, when demand in Europe is typically lower. Depending on the previous winter, this may be more likely to occur in autumn, given the annual rebuild of Europe's underground gas inventories that begins in the spring. Additional liquefaction capacity has already helped tighten margins for US LNG since Europe's conflict-driven volatility in 2022 . The AGC fob's premium over the long-term indicative contract averaged $3.95/mn Btu through 19 December this year, down from $4.63/mn Btu, $5.37/mn Btu and $20.13/mn Btu in 2024, 2023 and 2022, respectively. But the anticipated convergence of US and European LNG is not guaranteed. Geopolitical conflict could disrupt existing trade patterns. And lower prices in Europe will be contingent on new LNG projects, led by the US and Qatar, maintaining their timelines, which are prone to delays from supply chain issues and workforce constraints. This would add upside risk to international prices and downside risk for Henry Hub if the delays are in the US. By Tray Swanson European LNG spot prices vs long-term US LNG $/mn Btu Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Viewpoint: Price battle pushes Brazil HRC lower in 2025

25/12/22

Viewpoint: Price battle pushes Brazil HRC lower in 2025

Sao Paulo, 22 December (Argus) — Brazilian hot-rolled coil (HRC) prices declined throughout 2025, despite solid economic growth and steady demand in most sectors, with prices ending the year lower because of pricing competition between domestic and imported HRC. Argus - assessed imported HRC cfr Brazil dropped to $515-550/metric tonne (t) on 11 December, down from $535-555/t on 2 January. Argus -assessed HRC ex-works fell to R3,600-3,900/t ($655.80-702.80/t) in the latest assessment compared with R4,000-4,300/t at the start of the year. Brazilian mills resisted pressure from a rising influx of lower-priced imports stemming from an oversupply in China, holding prices steady for the first five months of the year. But mills yielded to price cuts in June, when price spreads were as much as 38pc higher than imports. Buyers were able to secure deals below R3,400/t in July, market participants told Argus . Tighter safeguard measures around the world and anti-dumping actions targeting Chinese material helped redirect steel to countries with looser trade defenses, including Brazil. Imports hit an all-time high of 6mn t in the year through Novembe r , up by 7pc from the same period last year, industry chamber Aço Brasil said. These volumes added to domestic production and boosted apparent consumption — the sum of production and imports minus exports — by 2.5pc to 24.8mn t year-to-date November. Service centers and trading companies took advantage of the lower import prices to build up their inventories. High stock levels ultimately weighed on demand and dragged down offer levels. Domestic and import sellers were forced to slash prices in June to spur buying interest in an already oversupplied market. Import HRC prices slipped below $500/t in July. Sales up The Brazilian real strengthened by 14.2pc against the dollar year-to-date mid-December, boosting import competitiveness for 2025. Imports offered another advantage beyond pricing: lower financial costs from international trading firms. Brazilian mills rarely operate on credit, and even if they did, borrowing costs in Brazil reached their highest level in 20 years in 2025. Brazil's 15pc target interest rate, which spurs higher commercial lending rates, has dampened end-user demand, but not enough to slow steel consumption significantly. Despite the rising import flows, domestic sales remained stable on the year at 19mn t year-to-date November, Aço Brasil said. Full-year 2025 domestic sales are expected to match the high-21mn t level of a year earlier, which was the highest since a demand surge during the pandemic. Brazil's gross domestic product grew by an annualized 2.7pc through September, Brazil's statistics bureau IBGE said, on track to beat the central bank's full-year growth forecast of 2.25pc. The solid economic growth has supported steel demand, especially in the construction and automotive sectors. Real estate construction starts jumped to 307,366 units year-to-date September, up by 8.4pc compared with the same period in 2024, the Brazilian construction industry chamber (CBIC) said. Real estate sales rose 4pc to 312,240 properties over the same period, CBIC data show. The Minha Casa Minha Vida low-income housing program accounted for nearly half of both sales and new units. Brazil produced 2.46mn vehicles in January-November, up by 4.1pc year-on-year, automaker association Anfavea said. Registrations rose 1.4pc to 2.1mn units over the same period, while automobile exports surged by 39pc to 510,130 units, driven by higher shipments to Argentina, Colombia and Chile. The annual drop in HRC prices in Brazil was driven less by demand and more by fierce competition between domestic producers and import suppliers, which pushed prices lower despite stable consumption. Brazilian HRC prices are expected to remain under pressure in early 2026 as high inventories and competitive import offers persist, a trader said. A modest recovery is expected in the second half of the year, depending on stronger domestic demand and potential trade defense measures, market participants told Argus . By Isabel Filgueiras Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

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