Happy New Year 2024
And welcome to this year’s first edition of the Crucible. As we look forward to 2024, new regulations are already coming into play that encompass critical raw materials and their markets, carbon emissions pricing and ESG, among others.
We look forward to bringing you more news as these unfold and helping guide you through the risks and challenges they entail for the metals trade industry.
In this issue and the next , we broaden our focus to developments in markets beyond minor metals but that impact their end applications, including analysis from Benchmark Minerals Intelligence on graphite, in light of Chinas new export regulations, CPM Group on pgms and Project Blue on polysilicon for solar panels.
If you are looking to deepen your insight into battery materials, we would like to remind that as an MMTA member you are entitled to a 15% discount to all Benchmark Mineral Intelligence events, including their Giga Europe 2024 conference in Stockholm, Sweden on 12-13 March 2024. Please see the Member Benefits page for your discount code.
And we are proud to support MMTA member Fastmarkets’ Asian Battery Raw Materials Conference in Seoul, South Korea on 22-23 April.
The MMTA International Minor Metals Conference 2024 and AGM is taking part this year in the Asian trading hub of Singapore. See the conference page for the agenda and visit our conference partner Metal Events event page to register. Early bird rates of £1,000 for MMTA members and £1,350 for non-members apply until 29 February 2024.
After the successful return of the MMTA New York Dinner to the Cornell Club in Manhattan in January , more information and networking events are being planned later this year. Watch this space!
CBAM comes into force
If you are an importer in Europe affected by the Carbon Border Adjustment Mechanism (CBAM), for which the first deadline is 31 January 2024, you really need to be familiar with requirements of this new legislation. The European Commission has produced a handy checklist. The Commission has also published an updated list of National Competent Authorities (NCAs) through which importers can request access to the CBAM Transitional Registry to report their greenhouse gas emissions on imports of iron and steel, aluminium, fertilisers, hydrogen, electricity and cement. You can find guidance and training materials on he EU Carbon Border Adjustment Mechanism (CBAM) reporting here .
To help you navigate this process and manage carbon reporting, the MMTA has partnered with carbon tracking platform CarbonChain, with MMTA entitled to a 10% discount off the first year of their services. We will be working with CarbonChain and more widely to help support and educate you through traceability requirements (see also the article on smart tags for a sustainable supply chain in this issue).
MMTA’s EU-based partner association CRM Alliance has produced a helpful memorandum on the impact of CBAM on aluminium pricing, which you can read here.
Risks becomes real in the Red Sea
The Israel-Hamas war in the Gaza Strip has impacted the Red Sea shipping routes as Houthi rebels in the neighbouring Yemen have targeted western-owned ships to put pressure on Israel’s allies, in turn prompting retaliation strikes by the US-UK alliance that has pledged to protect trade routes.
Commodity traders and shipping firms had been at loggerheads since October over rerouting cargo ships away from the Red Sea and the Gulf of Aden the longer and costlier way around Africa’s southern coast. But on 24 January the US Maritime Administration (MARAD) expressly advised US flag and US commercial vessels to avoid the Red Sea route. And risk truly became real after a vessel carrying oil for Trafigura, termed by Houthis “a British oil ship”, was struck by a missile that set it aflame two days later. Trafigura promptly rerouted. “No further vessels operating on behalf of Trafigura are currently transiting the Gulf of Aden and we continue to assess carefully the risks involved in any voyage, including in respect of security and safety of the crew, together with shipowners and customers,” the company said the next day. At least one other oil company followed suit as Lloyds List reported a drop in Red Sea shipping activity. Saudi Araba’s Aramco did not.
The charterers are navigating not just risks and ship owners’ reluctance to take them but also rising war risk insurance premiums, contract terms and evolving legal guidance, On which note, a judgement by the UK Supreme Cour in mid-January highlighted the limitations of war risk clauses.
The UK Supreme Court case, Herculito Maritime Ltd and others v Gunvor International BV and others involved PT Polar, a vessel chartered back in September 2010 to carry oil from Russia to Fujairah or Singapore. On 30 October 2010, the vessel was seized by Somali pirates whilst she was transiting the designated “High Risk Area” in the Gulf of Aden and then held captive for ten months until the shipowder paid a $7.7mln ransom. Under the general average principle that apportions extraordinary expenses needed to save ship and cargo between respective owners, the shipowner claimed $5.9mln from the recipients of the six bills of landing for the cargo (“cargo interests”). After the ship owner successfully appealed the arbitration tribunal that had ruled in the cargo interests’ favour, the cargo interests’ appeal in turn ultimately reached the Supreme Court — which on 17th January 2024 dismissed it. You can read the full judgement here. But in essence the court rejected the argument that the parties could look solely to insurers and not to each other for the costs of the hijacking; that the material parts of the war risk clauses were incorporated into the bills of landing; and that there was nothing to stop the shipowner from claiming the costs not covered by their war risk insurance premium from the bill of landing holders.
In short, war risk clauses are not exhaustive. And the immediate outcome of all this, for charterers, shipowners and cargo owners alike, is to read the small print and carry out thorough risk assessments. Especially if the vessel to be chartered is sailing under a flag that makes volatile conflict actors drawn to the world stage, armed with missile launch capabilities and significant external funding, consider it fair game.
On which note, a reminder that Aon Commodity Trade Insurance and Marsh experts in insurance and risk, HFW and Pennington Manches Cooper, experts international trade and marine law are MMTA members and are the teams to contact for any insurance risk and legal queries.
China protects its REE knowhow
At the end of 2023, China formally enshrined in law export restrictions on rare earths technologies and machinery, protecting its leadership in the industry.
On 21 December, China’s Ministry of Commerce announced that it added rare earth magnet production technology and machinery to its list Export Prohibited and Restricted Technologies. Among others, the list includes technologies and equipment for: rare earth extraction and separation, including ionic leaching of HREE ores; the production of rare earth metals and alloys; production of neodymium iron boron (NdFeB), samarium cobalt and cerium magnets; and the production of boric acid and calcium oxide, both raw materials in in the production of NdFeB magnets.
EU adopts CRM Act
In December, the European Parliament voted to adopt the Critical Raw Materials Act in its final version. This legal framework is targeted at making the European Union less reliant on imports of raw materials critical to growing industries such as green energy or strategic to defence and advanced manufacturing. It supports, including through investment schemes in member states and selected partner countries, the EU’s aims to expand its capacity to mine at least 10%, process at least 40% and recover from recycling at least 25% of its annual consumption of strategic raw materials by 2030.
It also aims to diversify the EU supply chain from third party countries so that no single non-EU country provides more than 65% of the EU’s annual consumption of each strategic raw material. The raw materials defined as strategic are:
Bauxite/Alumina/Aluminium; Bismuth; Boron – metallurgy grade; Cobalt; Copper; Gallium; Germanium; Lithium – battery grade; Magnesium metal; Manganese – battery grade; Graphite – battery grade; Nickel – battery grade; Platinum Group Metals (PGMs), Rare Earth Elements for magnets (Nd, Pr, Tb, Dy, Gd, Sm, and Ce); Silicon metal; Titanium metal; Tungsten.
UK confronts supply and energy risks
In the next issue, we will cover the UK’s Critical Imports and Supply Chain strategy, launched in January in response to recognition of growing geopolitical risk and fragmented supply chains for critical imports, including minerals. The aim of this is to recognise vulnerabilities and address them, including by removing trade barriers with friendly partners and building domestic manufacturing resilience.
But at the same time the UK is about to become the only country in Europe without its own primary steel production, as Tata Steel has announced the proposed closure of both blast furnaces at its Port Talbot steelworks with a loss of 2,800 jobs as it looks to switch to electric-arc furnaces, which will operate on recycling scrap. And technical and cost overruns are threatening to delay construction of UK’s Hunkley Point nuclear power station, even while the government has boosted its investments in Sizewell C nuclear plant and small modular reactors (SMR) to boosts its energy self-sufficiency.