Europe: Countries of the bloc sound out strategies to avoid the commodities trap

 After the rude awakening caused by the military aggression by Russia on Ukraine and the assessment of the overwhelming dependency of countries - especially Germany - on gas supply from Russia, thinktanks in the EU reflect about how not to repeat the same mistake with other commodities such as rare earths, titanium or graphite, writes WELT:

The Ukraine war and the gas crisis are causing politicians to view Europe's heavy dependence on a few raw material suppliers with greater concern than before. When it comes to mining and processing strategically important raw materials, countries such as China hold quasi-monopolies – and of all things when it comes to the materials on which the European energy and mobility transition depends.

The business-oriented think tank Center for European Politics (CEP) has now investigated how dependent the EU is on such raw materials. Germany and other European economies are therefore too dependent on raw materials from a few countries for future key technologies and should end this dependency as quickly as possible. "The chances of survival of the European economic and social model are also decided on the international commodity markets," says the unpublished study, which is available to WELT.

For the study, the researchers specifically identified resources that are indispensable for future technologies, but whose supply situation is critical. To do this, they brought together two analyses: on the one hand, a study by the German Raw Materials Agency (DERA), which identifies groups of raw materials that are essential for the energy transition and digitization, and on the other hand, a list from the European Commission of 30 raw materials for which there are supply risks.

The researchers have identified twelve substances that are equally promising and supply-critical. The list includes materials such as lithium, cobalt and rare earths, which also dominate the public debate about the scarcity of raw materials. However, substances such as titanium, graphite and more exotic substances such as scandium and vanadium also appear.

They are in wind turbines, solar systems, batteries for electric cars, fuel cells, electric motors or in microchips, displays and fiber optic cables. And for all the substances examined, a few or even just individual countries dominate the global supply.

"Not only is a large part of the relevant raw material deposits outside of one's own sphere of influence," says study author André Wolf. “The global markets are currently also predominantly dominated by countries that represent strategic rivals or that do not share the environmental and social standards that are essential for the EU’s self-image. The move away from fossil resources threatens to replace old dependencies with new, unwanted ones.”

The dominance of China is particularly striking: The country was the most important sponsor of eight of the twelve substances examined in 2020. If one also takes into account the processing of raw materials, China's dominance is likely to be even greater.

And the leadership in Beijing has shown in the past that it is willing to use this power. At the end of 2010, China had stopped exports of rare earths to Japan because of a diplomatic dispute in order to extort concessions from Tokyo.

The realization is not new, but Brussels and national capitals have been alarmed since Russia invaded Ukraine. The fact that geopolitical upheavals are jeopardizing the supply of raw materials is suddenly no longer an abstract danger.

“Russia is blackmailing us. Russia uses energy as a weapon,” said Ursula von der Leyen, President of the European Commission recently. There is concern in her authority and in the national capitals that such a scenario could happen again.

Because geopolitically the world threatens to split into two blocs again: on the one hand the western world, on the other hand countries like Russia, China and other authoritarian systems. Against this background, the EU states want to secure the supply of critical raw materials and end one-sided dependencies.

Two years ago, Industry Commissioner Thierry Breton's staff presented an action plan on raw materials, but it was relatively non-binding. Since the outbreak of the Ukraine war, the agency has tightened its course. In March von der Leyen announced a law on critical raw materials. The draft should be available by the end of the year.

One of the things discussed in Brussels is that companies or even states should build up strategic stocks of important raw materials. The increased mining of critical raw materials in Europe should also make the EU more independent from the rest of the world.

However, the CEP experts warn that the Commission's plans could overshoot the mark. In particular, the scientists consider plans to mine critical raw materials in Europe to be misleading. "Massive state support for the mining of future raw materials in the EU area would be a questionable strategy from an economic policy point of view," says the study.

The EU does have significant deposits of lithium and rare earths, for example. States like China are not only so dominant on the raw materials markets because of the deposits there, but also thanks to state subsidies, low wages and low environmental standards. “The EU cannot and should not copy such a strategy.”

Instead, in the short term, Europe should look around for new sources of raw materials in friendly countries that have large deposits, good infrastructure and share Europe's values. Norway, Canada and the USA in particular are ideal partners.

In fact, the EU is striving for such strategic raw material partnerships, but so far it has only agreed on two: with Canada and, of all places, Ukraine. However, a sense of proportion is required for the agreements, after all, new one-sided dependencies must not arise.

In the long term, the EU must expand the recycling of strategically important raw materials in order to secure supplies, write the CEP researchers. The EU Commission is also in favor of this. According to a study by the authority, the recycling rate for cobalt and platinum metals, which are mainly used for electric motors, was 20 percent in the EU in 2020. In the case of iridium or lithium, however, the quotas would be close to zero.

China: energy savings decree cause magnesium shortage in Germany

 As previously reported, China's Dual Control of Energy Consumption decree forces magnesium producing facilities to phase down their activity, leading to a shortage of magnesium in the world. A severe blow for germany automotive industrie who depend heavily on this chemical element, writes german newspaper WELT:

On a Monday in mid-September in Yulin County, Fugu County, People's Republic of China, the county's "Development and Reform Commission" sent out a decree. Subject: "Double control of energy consumption."

In Germany, this inconspicuous arrangement by a distant authority triggers a nervous, almost panic-like reaction. The reason: the decree temporarily prevents magnesium deliveries to the Federal Republic.

The Federal Ministry of Economics and the Foreign Office in Berlin are now dealing with the events in the Chinese province. Because the Yulin Decree threatens the supply of raw materials to the entire metal industry at a particularly sensitive weak point. There is a threat of a production stop in large German plants before Christmas.

China: Power supply crunches menace supply chains

 CNN reports:

A growing power supply crunch in China is triggering blackouts for households and forcing factories to cut production, threatening to slow the country's vast economy and place even more strain on global supply chains.

Companies in the country's industrial heartlands have been told to limit their energy consumption in order to reduce demand for power, state media has reported. And supply has been cut to some homes, reportedly even trapping people in elevators.

An "unexpected and unprecedented" power cut hit three northeastern provinces on Monday, according to the Global Times, a state-run tabloid. The newspaper reported Tuesday that power rationing in Heilongjiang, Jilin and Liaoning provinces has "resulted in major disruptions to the daily lives of people and business operations."

Power shortages have also hit the southern province of Guangdong, a major industrial and shipping hub. Local officials said Monday that many firms are trying to reduce demand by working two or three days per week.

You can read the rest of the piece via the below link:

https://edition.cnn.com/2021/09/28/economy/china-power-shortage-gdp-supply-chain-intl-hnk/index.html

China: a listing of failing chinese technology

 Legal Insurrection writes: 

The Chinese mishandling of infectious agents is merely one in a long list of potentially deadly scientific missteps. There have been several news stories in the last few weeks and months that show disturbing and potentially catastrophic failures of many engineering projects.

Last year, experts questioned the massive Three Gorges Dam’s safety, warning that it could collapse at any moment due to summer rains. Unfortunately, we do not know if anyone resolved the engineering issues associated with that structure with the summer rainy season approaching.

More recently, officials evacuated and closed the 1,167-feet SEG Plaza in the southern Chinese city of Shenzhen as the skyscraper began to wobble.

The Shenzhen government said on its microblog that no additional swaying had been detected since Tuesday, when the moving building caused objects on desks in the building to move and workers were evacuated from the tower.

Panicked pedestrians could be seen fleeing the area after the rocking began in videos shared to social media. Several nearby buildings were also evacuated, as police and fire crews sealed off the surrounding area.  

“Based on an analysis, any seismic event has been ruled out as a possible cause,” the Shenzhen government said, adding that the building’s infrastructure, windows and other architectural features appeared undamaged and there were no signs of cracks in the surrounding streets.

You can read the rest of this piece via the below link:

https://legalinsurrection.com/2021/05/a-disturbing-review-of-stolen-and-failing-chinese-technology/?utm_source=rss&utm_medium=rss&utm_campaign=a-disturbing-review-of-stolen-and-failing-chinese-technology

 

Gazprom: many fires to fight

As the future of sanction-impacted pipeline Nord Stream 2 lies in the dark, Gazpromy faces problems on china-bound pipelines and struggles with low gas prices and liabilities, writes german newspaper WELT:

Just a few years ago, nobody at the Russian gas giant Gazprom suspected that a ship laying pipelines could become a symbol of the risk and instability of entrepreneurial success. “Fortuna” - the term used by the ancient Romans for the changeable fate - is the name of the Russian barge that is supposed to complete the controversial Baltic Sea gas pipeline Nord Stream 2.

It remains to be seen whether he will ultimately be able to build the 100 or more kilometers of pipeline that are still missing. On December 28, the ship completed the 2.6-kilometer section in German waters. In the middle of January the plan is to continue in Danish waters.

But the US, which had been hindering the work with threatened sanctions for the whole of last year, has prepared further sanctions so that Gazprom's European allies can stop the project. Europe would become too dependent on Russian gas, they say in Washington. The US also wants to sell its own gas in Europe.

Destination China: Iran secretly transfers oil to other vessels on the high seas

 Radiofarda writes: 

"TankerTrackers.com, a company that tracks and reports shipments and storage of crude oil says Iran probably exports twice as much oil as estimated.
In its latest report, the online service has referred to India's tanker Giessel that recently received its cargo from an Iranian oil tanker in the Sea of Oman and delivered it to China.
Various cases of transferring Iranian oil shipments to other tankers in the middle of oceans have been reported. Such operations are aimed at covering up the source of oil shipments and movements of tankers.
Based on the data provided by Kpler, an international data intelligence company, Giessel's case was first reported by Radio Farda on August 6.2

 You can read the rest of the piece via the below link:

https://en.radiofarda.com/a/iran-s-real-oil-exports-might-be-much-higher-than-estimated/30773893.html

China: Record oil imports from KSA

Reuters writes: 

"Saudi, however, delivered bigger oil cuts from June and raised crude prices as a plunge in oil prices weighed on the kingdom’s budget.

China, the world’s biggest crude oil importer, took in a record 53.18 million tonnes last month, according to customs data.

China also boosted inflows from Brazil, Norway and Angola, said Emma Li, analyst from Refinitiv. 

Brazil, whose massive offshore projects are coming online, offered Asian refiners competitive deals on relatively high-quality oil just as China and other Asian countries contained the coronavirus and reopened their economies.

Analysts expect China to see another record amount of crude imports in July as some May-loading cargoes are still underway while swelling oil inventory at major Chinese ports slows new arrivals."

   

How China distorts the stainless steel market

A very interesting article by Elisabeth Braw in Foreign Policy:

"The Indonesian plant, owned and operated by the Chinese stainless-steel firm Tsingshan, opened in 2017. The choice of location was no coincidence: Indonesia has the world’s largest reserves of nickel, a key component of stainless steel. More than two-thirds of the world’s nickel is used to make stainless steel. (Regular steel consists almost exclusively of iron, while stainless steel also contains nickel and chromium.) And the plant’s construction was supported by the Chinese government; indeed, it falls within China’s global Belt and Road Initiative.

Then, when the plant had operated for less than two years, the Indonesian government suddenly announced that it would ban exports of nickel starting in January of this year. Predictably, the move caused global nickel prices to skyrocket. But thanks to its Indonesian plant, Tsingshan is shielded from the nickel hike.

 

In the past two decades China has conquered the stainless-steel market. Though stainless steel may seem unsexy, it’s vital to virtually every other sector, and production is growing faster than that of other metals such as lead, copper, and aluminum. Weaponry, pipelines, ships, and washing machines all contain stainless steel.
 And in the past couple of decades, the production of steel—the main component of the stainless kind—has shifted dramatically.

In 2004, the world’s top 10 steel producers included only one Chinese company, Shanghai Baosteel; the other top firms were American, European, Indian, and South Korean. Back then, just 25.8 percent of the world’s steel was made in China. In 2018 (the latest year with data available), six of the world’s largest steel companies were Chinese, some of them government-owned, and China accounted for 51.3 percent of global steel production—a figure that doesn’t capture production by Chinese companies in other countries).

On the global top 10 list, South Korea, a former steel giant, is represented only by Posco. In stainless steel, the development is even more stark: in 2005, China produced 12.9 percent of the world’s stainless steel, while Europe produced 34.8 percent and the United States 9.2 percent. By 2018, China had more than quadrupled its share to 52.6 of the world’s stainless steel, while Europe’s share had shrunk to 15.6 percent and the United States had just a 5.5 percent share."

You can read the rest of the piece via the below link:

https://foreignpolicy.com/2020/05/19/dont-let-china-steal-your-steel-industry/ 

 

Chinas's manoevering between iranian oil imports ans US sanctions

China has to tack between the need for crude and impeding US sanctions, The Diplomat:

"Chinese tankers are reported to have turned off their transponders, automatic identification systems, prompting warnings from U.S. officials. And reports surfaced not long after the sanctions waivers terminated that Iranian tankers were supplying China, sometimes also switching off their transponders. They are believed to engage in the practice while allegedly conducting ship-to-ship  (STS) transfers to China-bound vessels off the Malaysian coast. Bloomberg research revealed that STS deliveries had risen sharply in September, three times more than the previous month. Although the provenance of the oil was said to be unclear, the agency quoted an analyst suggesting it could be Iran or Venezuela.  

The scale of Beijing’s alleged clandestine supplies has yet to be determined, but given the reported marked increase in volume of disguised cargoes last year it might be receiving more than its declared imports. The U.S. has sought to deter China’s suspected sanctions evasion by targeting non-compliant companies and their officials. There have been a flurry of penalties since the American waivers ended. In September, two oil tanker subsidiaries of COSCO, a major Chinese shipping and logistics company, were blacklisted, and the action reportedly sent world freight costs to record highs and disrupted the global shipping market.  

The sanctioning of the shippers threatened to complicate U.S.-China trade negotiations. A “Phase One” deal was eventually achieved in January, and on the eve of the agreement it was reported that US officials were working behind the scenes with independent Chinese refiners to prevent purchases of Iranian crude. Just days after the breakthrough in the trade talks, Washington lifted sanctions against one of the COSCO subsidiaries. 

The aim of the move appears to have been twofold: easing the impact of the original black-listings; and retaining leverage over China’s oil trade with Iran. A senior Chinese official reportedly complained about the sanctioning of the COSCO units in the trade talks which, coupled with the steep drop in official Chinese imports of Iranian crude, suggests American penalties have real deterrence value, even if some degree of sanctions evasion continues."

You can read the rest of the piece via the below link:

https://thediplomat.com/2020/05/us-sanctions-prompt-china-to-cut-most-iran-oil-supplies-officially-at-least/ 

 

China buys up cheap oil in large amount

Oilprice.com reports:

"While the rest of the world is tentatively coming out of lockdowns, China is taking advantage of the cheapest crude oil in years to stock up as demand is starting to return in the world’s largest oil importer, Bloomberg reported on Friday, citing tanker-tracking data it has compiled. At present, a total of 117 very large crude carriers (VLCCs) – each capable of shipping 2 million barrels of oil – are traveling to China for unloading at its ports between the middle of May and the middle of August. If those supertankers transport standard-size crude oil cargoes, it could mean that China expects at least 230 million barrels of oil over the next three months, according to Bloomberg. The fleet en route to China could be the largest number of supertankers traveling to the world’s top oil importer at one time, ever, Bloomberg News’ Firat Kayakiran says.

Many of the crude oil cargoes are likely to have been bought in April, when prices were lower than the current price and when WTI Crude futures even dipped into negative territory for a day."

You can read the rest of the piece via the below link:

https://oilprice.com/Energy/Energy-General/A-Huge-Fleet-Of-117-Tankers-Is-Bringing-Super-Cheap-Crude-To-China.html 

US Republicans: proposal to end dependency on Rare Earths from Chian

Bloomberg writes:

Senator Ted Cruz said he plans to introduce legislation on Tuesday that aims to end U.S. reliance on China for rare earth elements used in the manufacturing of products including consumer electronics, electric vehicles and fighter planes. The bill is part of a push in Congress to shift supply chains, particularly in industries critical for national defense, away from China and back toward the U.S.

(...)

"China provided 71% of the global rare earth elements produced in 2018 and was the top supplier to the U.S. that year, according to the Congressional Research Service. Some members of Congress have been pushing for years for the U.S. to reduce its reliance on China for the elements, particularly after trade restrictions in 2010 that sent prices spiking around the world.

The U.S. was once a major producer of rare earth elements -- which are relatively abundant but difficult to extract -- until China became a major low-cost producer in the mid-1980s, according to the CRS. Cruz and others in Congress have argued that Chinese state subsidies allowed that industry to flourish, killing off American competition."

You can read the rest of the peace via the below link:

https://www.bloomberg.com/news/articles/2020-05-12/cruz-seeks-to-end-u-s-dependence-on-china-for-rare-earth-metals