TPT May 2011

G lobal M arketplace and Keihin plants; and Sumitomo Metal Industries Ltd’s Kashima works on Tokyo Bay. Citing sources in Shanghai, Steel Index’s director Tim Hard told Diana Kinch of Dow Jones Newswires (12 March) that the plants had all sustained structural damage and their port facilities had been rendered inoperable. Assuming a six-month hiatus, Mr Hard said that some 22.2 million metric tons of iron ore demand could be subtracted from the seaborne market. He noted that the five Japanese mills are on contract with Brazilian miner Vale SA for their supplies, and that they also buy ore on the Australian spot market. The Steel Index director told Ms Kinch that, in addition to the integrated steel mills centred on Tokyo Bay, there is also “a host of minimills and dockside scrap-storage facilities nearby which will have been affected, not to mention the port and sea-bordering infrastructure.” In Mr Hard’s view, the cancelled shipments to the affected mills should not have a major direct impact on iron ore prices, as they represent a comparatively small percentage of the billion tons of iron ore shipped by sea each year. › Japan is of course a large consumer as well as major producer of steel. Its demand for steel can be expected to recede as it digs out and assesses damage. But, in the long term, the rebuilding of ravaged Japanese cities could have the effect of boosting steel demand and prices. An Australian-built refinery going up in Malaysia may break China’s near-monopoly of rare earths The race is on in Malaysia to finish the world’s largest refinery for rare earth metals – the first such processing plant to be built outside China in nearly three decades. If the colossal construction project is completed, and meets expectations, it could mean the end of China’s virtually exclusive command of the strategic materials vital to high-tech manufacturing. But, as reported by Keith Bradsher in the International Herald Tribune , for Malaysia as well as for the world’s most advanced technology companies the project represents a gamble that the processing can be done safely; or, at least, safely enough. Mr Bradsher wrote, “As Malaysia learned the hard way a few decades ago, refining rare earth ore usually leaves thousands of tons of low-level radioactive waste behind.” (“Taking a Risk for Rare Earths,” 8 March) Wariness about the process helps explain why countries with rare earth ore deposits can be less than eager to build their own refineries. A US mining company, Molycorp, plans to reopen an abandoned mine near Death Valley in California. But first it must address environmental concerns by rebuilding the adjacent refinery. While rare earths were not in short supply, the problematic work of refining could be left to the under-regulated Chinese processing factories that have created vast toxic waste sites. Last September, however, a territorial dispute prompted China to impose a two-month embargo on rare earth shipments to Japan. And, for a short time, shipments to Europe and the US were also blocked. These alarms, together with Beijing’s lowering of the export

limit on its rare earths, has helped push world prices of the material to record highs – and pushed industrial countries to seek alternatives. Heeding the call, the giant Australian mining company Lynas has set as many as 2,500 construction workers to finishing a $230 million rare earth refinery in the industrial port city of Kuantan, on the shores of the South China Sea. As reported by Mr Bradsher, the plant will refine slightly radioactive ore from the Mount Weld mine deep in the Australian desert, 2,500 miles away. The ore will be trucked to the Australian port of Fremantle and transported by container ship from there. Within two years, Lynas expects the refinery to be able to meet nearly a third of the world’s demand for rare earth materials – excluding China, which has its own abundant supplies. › Lynas’s executive chairman Nicholas Curtis told the Herald Tribune that building and operating such a refinery would cost four times as much in Australia, which has much higher labour and construction costs. Australia is also home to a politically influential “green” party. Despite the potential hazards, the government at Kuala Lumpur was eager for the Lynas investment, even offering a 12-year tax holiday. If rare earth prices stay at current lofty levels, Mr Bradsher noted, “the refinery will generate $1.7 billion a year in exports starting late next year, equal to nearly one per cent of the entire Malaysian economy.” This is not to say that Malaysia takes a casual attitude toward potential environmental hazards. Raja Dato Abdul Aziz bin Raja Adnan, the director general of the Malaysian Atomic Energy Licensing Board, said his country approved the Lynas project only after commissioning an inter-agency review. The results indicated that the imported ore and subsequent waste would have low enough levels of radioactivity to be manageable and safe. Elsewhere in metals . . . › The projected merger of the London Metal Exchange (LME) and the TMX Group, parent company of the Toronto Stock Exchange, would unite two of the world’s favoured venues for raising capital in the mining and metals businesses. If approved by shareholders, the combined exchange would form probably the largest market anywhere for mining and natural resources stocks. The deal, announced 9 February, calls for LME shareholders to own 55% of the merged company to be based in London and Toronto. TMX shareholders will own around 45% of the combined group, hold seven of 15 board seats, and have a say in filling executive roles other than CEO, which goes to current LME chief Xavier Rolet. If the combined exchange goes forward, it will include an impressive array of public mining companies ranging from Xstrata (with headquarters in Switzerland and Britain), the British-Australian group Rio Tinto, and Swiss-based Glencore International, to smaller enterprises with an attraction to financiers focused on natural resources. But foreign involvement in domestic companies connected to natural resources is politically sensitive in Canada, and the Conservative government at Ottawa is likely to review the transaction under its Investment Canada Act. As recently as last November, this legislation was invoked to block a $38.6bn bid from Australia’s BHP Billiton for the Potash Corp of Saskatchewan.

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M ay 2011

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