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Metals and Mining Corporate Earnings Critical Crystal Ball for November 2010

Companies / Metals & Mining Nov 02, 2010 - 06:31 AM GMT

By: Anthony_David


The global steel industry has had to bear the brunt of the uneven global economy and quite unlike the upbeat expectations harbored at the beginning of the year, both sale and price of steel is on the decline while raw material cost is on the upswing. The failure of the construction industry to regain its pre-recession status is adversely affecting the steel market although the auto and appliance industries have reflected a surge in growth. Global leader ArcelorMittal’s Q3 results reported a drop of 21% from Q2, although it reflected a 48% jump in profits YoY. The company expects steel shipments to increase in Q4 but selling prices are expected to fall.

In its October 2010 short-range outlook (SRO) for 2010 and 2011, the World Steel Association forecasts that apparent steel use will go up by 13.1% to 1,272 million tonnes in 2010 after dropping by –6.6% in 2009. The new number is 35 million tonnes higher than the April SRO for 2010. The association expects world steel demand to peak at a record 1,340 million tonnes in 2011, a growth of 5.3%.

The growth of the steel market cannot be disconnected from China’s GDP growth, since it is connected to the country’s large-scale infrastructure projects catering to a rapidly urbanizing society. And this directly affects the molybdenum market as well. China spent all of 2009 building its stocks of molybdenum. The trend declined in 2010 when the nation gradually worked down the stockpiles. In fact, in Q2 of 2010, China became a net exporter of the metal. As a reflection of this trend, analysts expect the demand for molybdenum to start increasing in Q2 of 2011. Molybdenum prices have fallen to about $15 a pound from $18 a pound in April, but demand has not declined enough to create worry lines.

The West African nation of Gabon is the second largest producer of manganese, another critical ingredient of the steel industry, but declining demands saw production fall to 2.2 million tonnes in 2009 after touching a peak of 3.1 million tonnes before the recession. The country has now joined hands with Chinese mining company CITIC Dameng and plans to mine over 26 million tonnes of the metal over the next 25 years from Gabon’s M’Bembele mine.

Meanwhile, South Africa’s Exxaro Resources Limited has announced a partnership with compatriot manganese mining company Assmang Limited to commercialize its AlloyStream technology that is aimed at the beneficiation of manganese ore into high-carbon ferromanganese. The technology, if found commercially feasible, would significantly lower power consumption and the need to use discrete fine feed materials. The technology would also allow the use of lower quality coal as a reducing agent. General Manager Ernst Venter of Exxaro said, “We are of the opinion that massive value-unlocking potential exists within South Africa and the rest of the world with the application of this technology.”

At the InCar Project for automotive innovations, ThyssenKrupp demonstrated that a magnesium car roof was 62% lighter than one made from conventional steel. The lighter weight would consequently bring down carbon dioxide emissions by over 50% as well. For such an innovation to be effective, large size magnesium sheets must be made available at affordable rates. Perhaps, as a small step in this direction, ThyssenKrupp subsidiary Magnesium Flachprodukte GmbH has signed an agreement of cooperation with South Korean steel maker POSCO in the production of magnesium sheets. The purpose of the partnership is to ensure security of supply for the auto industry.

By Anthony David

The mission of the Critical Strategic Metals Web Site

is to serve as a monthly compass for those who take a fundamental view of investment regarding the Molybdenum, Manganese and Magnesium metals markets, are concerned with the emerging critical under-supply of these strategic metals to Western nations and wish to profitability chart their course. Each month we will research and provide, in as short and concise a manner as possible, the most applicable information available on resources that will have the biggest impact on our day to day lives. Click here to sign-up for our FREE monthly report

© 2010 Copyright  Anthony David- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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