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Copper price resumes rally as Fed rate signals boost industrial metals

Bloomberg News | March 21, 2024 |

Stock image.

Copper resumed a rally that saw it hit an 11-month high this week, after the Federal Reserve’s signals on future rate cuts bolstered risk appetite and weakened the US dollar.


The metal has gained more than 10% over the past six weeks, boosted by supply risks, along with a generally more positive global economic outlook. Open-interest, or the number of outstanding contracts, for copper on the Shanghai Futures Exchange has soared to a record of more than 500,000 since last week as investors increased bullish bets.




The US dollar steadied following a decline on Wednesday, as Fed policymakers kept their outlook for three cuts this year and moved toward slowing the pace of reducing their bond holdings, suggesting they aren’t alarmed by a recent uptick in inflation. A weaker greenback makes commodities from copper to iron ore cheaper to other currency holders.

The copper market remains very tight, Goldman Sachs Group Inc. said in a note. “The combination of record low copper stocks, our expectation of peak mine supply next year, rapid green demand growth, and low price elasticity of both demand and supply will, in our view lead to copper scarcity pricing in 2025,” analysts led by Lina Thomas said.

Copper climbed 0.8% to $8,998.50 a ton on the London Metal Exchange by 11:35 a.m. local time, after rising as much as 1.8% earlier. Zinc rose 1.3% after Glencore Plc said it temporarily ceased operations at its McArthur River zinc and lead mine in northern Australia due to a cyclone.

Rainfall at the site this week exceeded a previous record set in 1974, according to a statement from Glencore. The company is monitoring flooding in the area and assessing impacts on its operations.

Graphic: Congo overtakes Peru on copper output, still behind on exports

Reuters | March 22, 2024 | 

Mining trucks at Glencore’s Katanga copper mine in the Democratic Republic of Congo. Credit: Glencore.

The Democratic Republic of the Congo overtook Peru as the world’s second largest copper producer in 2023, though it still lags the South American country in exports, official data from both nations show.


Congo produced about 2.84 million tons of copper last year, the country’s central bank reported. Peru’s output was 2.76 million tons, the Andean country’s mining and energy ministry said.

Congo has been reeling in Peru’s No. 2 copper spot over recent years, with flagging mining investment in Peru linked to red tape and recent political turmoil and protests. Chile remains the distant top producer of the red metal.

Peru, however, is hanging onto its lead over Congo on copper exports. Peru exported some 2.95 million tons of the metal last year, more than its annual production due to sales of stocks held over from previous years.

Rómulo Mucho, Peru’s minister of energy and mines, said in early March he expected copper production to increase to 3 million tons in 2024. The ministry did not immediately respond to a request for comment.

Peru’s Andes are home to major mining firms including Freeport-McMoRan, MMG, BHP, Glencore, Teck Resources, Japan’s Mitsubishi, and Southern Copper of Grupo México.

(By Marco Aquino and Felix Njini; Editing by Adam Jourdan and Richard Chang)

CHILE

Antofagasta launches desalination plant for Los Pelambres mine

Reuters | March 21, 2024 | 

Los Pelambres completed expansion will add 60,000 tonnes of copper a year to the company’s overall production once in full operation. (Image courtesy of Antofagasta plc.)

Chilean miner Antofagasta Minerals on Thursday inaugurated a more than $2 billion desalination plant for its flagship copper mine in Chile, Los Pelambres, aimed at relieving the effects of severe drought that has hit production.


The mine is the first to operate with desalinated water in an area of the country that has suffered a 15-year drought, sucking water from reservoirs and sparking concern over the fresh water supply.

Chilean President Gabriel Boric praised the project, saying the situation in the Coquimbo region, where Los Pelambres is located, is concerning.

“Especially with the climate change crisis, we must be not only a mining country, but also a country at the cutting edge of responsible, sustainable mining,” he said at the inauguration for the plant, which is at coast in Los Vilos, a city within Coquimbo.

Antofagasta began construction in 2019 for the plant, and plans to pump 400 liters of water per second for use at Los Pelambres, located about 55 km inland.

The company plans to supply another 400 liters of water per second in a second phase slated for completion in 2027, which it says would relieve pressure on the nearby Choapa river.

Chile’s historic drought has impacted nearly ever aspect of life in the nation that is the world’s top copper producer. Mining companies outside Coquimbo are already using seawater, particularly in Antofagasta, a northern desert region home to most of Chile’s mining activity.

(By Natalia Ramos and Alexander Villegas; Editing by Daina Beth Solomon and David Evans)

IMPERIALIST RIVALRY

UAE conglomerate seeks to gatecrash China’s JCHX Zambian copper deal

Reuters | March 22, 2024 | 

Lubambe mine, Zambia – Image courtesy of ZCCM – IH

A unit of International Holding Company, Abu Dhabi’s most valuable company, is interested in acquiring Zambia’s Lubambe copper mine, an asset that China’s JCHX Mining has already agreed to buy, three sources familiar with the details told Reuters.


International Resources Holding recently told EMR Capital that it is interested in bidding for the private equity manager’s 80% stake in the Lubambe copper project, which is up for sale, a development that may complicate a sale process that’s already underway, two of the sources said.

The IHC unit’s interest in Lubambe, with potential to be among Zambia’s largest copper mines, comes after Shanghai-listed JCHX, a mine servicing and contracting firm, entered into a deal to buy EMR’s 80% stake in Lubambe in January.

The sale process requires approval from the Zambian government, which is pending and unclear at the moment, one of the sources said.

The Zambian government owns a 20% stake in Lubambe through state-firm ZCCM-IH.

The IHC unit’s interest is spurred by an aggressive push by cash-rich oil majors United Arab Emirates and Saudi Arabia to secure critical metal supply in Africa, as they bid to diversify their economies and engage with energy transition.

Middle East investors are pitted against Chinese companies in Africa, including state backed firms, also aggressively pursuing deals in Africa to strengthen China’s grip on minerals required to power a rapidly expanding domestic electric vehicle manufacturing sector.

EMR Capital’s binding deal agreed directly with JCHX technically precludes it from entertaining any new offers, one of the sources said. Still, EMR is aware that IRH is interested in buying the assets and that the UAE firm has officially informed the Zambian government and ZCCM-IH of its interest, two sources said.

While its interest is now widely known within the Zambian government circles, the UAE firm hasn’t presented a formal offer to EMR on the Lubambe stake, one source said.

EMR declined to comment. IRH and IHC didn’t immediately respond to emailed questions.

IRH has gatecrashed once before. It staged a last minute buyout of a 51% stake in Zambia’s Mopani Copper Mines last month, its first mining deal in Africa’s second-largest producer of the metal that is key to products from power lines and industrial machinery to electric vehicles.

The Abu Dhabi firm became the Zambian government’s preferred investor for Mopani mines ahead of Sibanye Stillwater and China’s Zijin Mining Group, which had been short listed for the assets after a protracted selection process.
Cashing out

EMR, which has owned the Lubambe mine since 2017, wants to exit the project as its funds mature, after Covid delayed its development, the sources said. It also sold a 51% stake in adjacent Mingomba copper project for a sizeable amount to California-based start up KoBold Metals.

EMR still holds a 28% stake Mingomba, alongside Zambia’s ZCCM.

Lubambe, previously owned by African Rainbow Minerals and Vale SA, produced about 15,000 tons of copper last year but needs to raise output to about 2,500 tons a month to become sustainable, it says on its website.

JCHX in January said it proposed to pay $1 for EMR’s 80% stake, and another $1 to take over the project’s $857 million debt.

JCHX did not respond to emailed questions.

Zambia’s ministry of mines did not immediately respond to emailed questions.

(By Felix Njini, Julian Luk, Clara Denina, Melanie Burton, Chris Mfula and Hadeel Al Sayegh; Editing by Veronica Brown and David Evans)

Human rights court orders Peru to pay damages to mining town

Reuters | March 22, 2024

Railway Station of the peruvian mining city of La Oroya. 

Photo by Maurice Chédel, Wikimedia Commons.

The Inter-American Court of Human Rights on Friday ordered Peru to pay damages to residents of an Andean town for violations of their right to a healthy environment from years of air, water and soil pollution from a nearby mine.


The court ruled the state failed to comply with its duty to regulate and supervise La Oroya Metallurgical Complex, which was active for nearly a century before debts and environmental regulations forced it to close in 2009.

The court said it corroborated that exposure to lead, cadmium, arsenic and sulfur dioxide posed a significant risk to at least 80 local residents, who did not receive adequate medical attention from the government when they became ill.

The court decided they should receive at least $30,000 each in damages, with the most vulnerable receiving $50,000.

A further $65,000 each should be paid to the legal beneficiaries of two victims who died from diseases caused by the pollution.

Officials from Peru’s government and its mining ministry did not immediately respond to Reuters’ request for comment.

La Oroya partially resumed operations in 2023, managed by Metalurgica Business Peru SAC, a firm that counts former workers among its shareholders and promised to comply with environmental standards.

Peru is the world’s second largest copper producer and mining makes up 60% of its total exports.

The court ordered the government to assess the current state of contamination in La Oroya and provide cash and free medical aid to the victims.

(By Marco Aquino, Aida Pelaez-Fernandez and Sarah Morland; Editing by Cynthia Osterman)

Lifezone shares rise on $50 million funding, licence for Tanzania refinery

Staff Writer | March 22, 2024 | 

Kabanga nickel project in Tanzania. Credit: Lifezone Metals

A consortium of marquee mining investors are backing Lifezone Metals (NYSE: LZM) and the development of its flagship Kabanga project in northwest Tanzania, which it said is on track to reach the definitive feasibility stage later this year.


On Thursday, an investor group led by Harry Lundin (Bromma Asset Management) and Rick Rule signed a binding agreement with the company for a $50 million debenture financing. The debentures will bear annual interest equal to the secured overnight financing rate (currently 5.3%) plus 4%, and are convertible into Lifezone’s common shares.

The nickel developer went public last July following a business combination between special purpose acquisition company – GoGreen Investments – and Lifezone Holdings Ltd. At the time, the combined entity was valued at $1 billion by the SPAC.

The New York-listed Lifezone pairs one of the world’s largest and highest-grade undeveloped nickel sulphide deposits in Kabanga with a proprietary processing technology, known as Hydromet, to produce cleaner metals in support of growing demand for batteries.

The company acquired the rights to the Kabanga project in early 2021, and in the same year, was awarded a mining licence by the Tanzanian government, a key partner on the project alongside BHP, which has committed financial backings of $100 million.

Kabanga’s previously owners include Barrick Gold and Glencore, which had spent $293 million on exploration prior to having their retention licence revoked in 2018.

Since taking over, Lifezone continued with drilling at Kabanga, leading to high-grade discoveries and a significant mineral resource update in late 2023. The deposit is now estimated to contain 881,000 tonnes of nickel metal within 43.6 million tonnes of measured and indicated resource grading 2.02% nickel. Another 391,000 tonnes (17.5 million tonnes at 2.23% nickel) are in the inferred resource category.

The company also made advancements in the metallurgical refining testwork using its Hydromet technology, which is said to have lower carbon footprint than the conventional pyrometallurgical smelting method. Test results showed nickel recoveries of over 98.5%.
Refinery licence

On the same day of the $50 million financing, Lifezone announced it has received a multi-metals processing licence from the government for its facility at Kahama, located approximately 340 km southwest of Kabanga.

The site, situated within a newly established special economic zone, stands to benefit from the legacy infrastructure of Barrick’s former Buzwagi gold mine nearby.

With the licence, the company will be able to produce finished metals in-country, potentially reducing capital and operating costs, as well as reducing costs associated with transport of concentrate or other intermediate products.

“With the receipt of our Kabanga special mining licence, and now the Kahama refinery licence, we have a clear path to delivering a direct-to-metal solution and enabling the production of nickel, copper and cobalt in Tanzania,” Lifezone CEO Chris Showalter said in a news release.

Shares of Lifezone Metals gained 3.2% to $8.19 by 10:00 a.m. Friday in New York, giving the company a market capitalization of $639.3 million.

Almost $500 million granted by US government to clean energy projects on mine land

Staff Writer | March 22, 2024 |

US President Joe Biden. (Image by Gage Skidmore, Flickr.)

The US Department of Energy (DOE) announced up to $475 million in funding for five projects in Arizona, Kentucky, Nevada, Pennsylvania, and West Virginia to accelerate clean energy deployment on current and former mine land.


In a media statement, the DOE said that this funding—made possible by the Bipartisan Infrastructure Law—will support a variety of locally-driven projects that range from solar, microgrids, and pumped storage hydropower to geothermal and battery energy storage systems and that can be replicated in other mining communities across the country.

“President Biden believes that the communities that have powered our nation for the past 100 years should power our nation for the next 100 years,” Jennifer M. Granholm, the US Secretary of Energy, said in a statement.

“Thanks to the President’s Investing in America agenda, DOE is helping deploy clean energy solutions on current and former mine land across the country—supporting jobs and economic development in the areas hit hardest by our evolving energy landscape.”

Three projects are on former Appalachian coal mines, thus supporting economic revitalization and workforce development on land that is no longer viable for industrial purposes. In the West, two projects seek to displace fossil-fuel use by ramping up net-zero mining operations and providing the critical materials needed for a domestic clean energy supply chain. These projects are also expected to create more than 3,000 construction and operations jobs.

From geothermal to PV

In Graham and Greenlee Counties, Arizona, a project led by Freeport seeks to deploy direct-use, geothermal, clean heat combined with a battery energy storage system at two active copper mines, helping decrease the mines’ reliance on onsite thermal backup generators while supporting the annual extraction of 25 million pounds of copper.

In Bell County, Kentucky, Rye Development proposes converting former coal mine land to a closed-loop, pumped-storage hydroelectric facility with the potential to dispatch up to eight hours of power when needed, such as during times of peak demand or extreme weather events. This project will support the increase of local tax revenues that have decreased steadily since the 1970s and create approximately 1,500 construction and 30 operations jobs.

In Elko, Humboldt and Eureka Counties, Nevada, a project led by Nevada Gold Mines aims to develop a solar photovoltaic facility and accompanying battery energy storage system across three active gold mines.

“By shifting to clean energy, this project could demonstrate a replicable way for the mining industry to reach net-zero operations, while meeting growing demands for minerals across multiple sectors—including the clean energy supply chain,” the DOE’s release states.

In Clearfield County, Pennsylvania, Mineral Basin Solar Power, a subsidiary of Swift Current Energy, plans to repurpose nearly 2,700 acres of former coal mining land to support the largest solar project in Pennsylvania. At 402 MW, Mineral Basin will generate enough clean energy to power more than 70,000 homes. This project is expected to increase regional access to clean energy and fill a critical electricity generation gap following the closure of the Homer City coal plant.

The initiative is also expected to provide $1.1 million in annual tax revenue to Goshen and Girard townships, Clearfield County and the Clearfield County School District.

In Nicholas County, West Virginia, a project led by Savion, a company that’s part of Shell, plans to repurpose two former coal mines with a utility-scale, 250 MW solar PV system that would power approximately 39,000 West Virginia homes. These two inactive mine sites provide land and access to existing energy infrastructure that will transmit the clean, solar energy the project generates to the grid.

“The Clean Energy Demonstration Program on Current and Former Mine Land will help provide the mining industry with a range of ways to decarbonize their operations and minimize environmental impacts and air pollutants, abating greenhouse gas emissions and disturbances to fragile, surrounding ecosystems,” the brief reads.

“Simultaneously, replicating clean energy technologies like these on other current and former mines will help maximize local workforce development and community opportunities for generations.”

US backs Australian, Brazil rare earths projects for up to $850 million

Reuters | March 21, 2024 

Caldeira rare earth project in Brazil. 

Image from Meteoric Resources.

The United States has backed two Australian-listed rare earths projects with up to $850 million of funding as Western nations build a supply chain for the strongly magnetic metals used in sectors from renewable energy to defence.


Australian Strategic Materials ASM.AX said on Thursday it has received a letter of interest (LoI) for a debt funding package of up to $600 million from the U.S. Export-Import Bank (EXIM) to support construction of its Dubbo rare earths project northwest of Sydney.

The bank has also offered up to $250 million in preliminary support for Australian-listed Meteoric Resources MEI.AX, which is developing its Caldeira rare earths project in Brazil, Meteoric said on Thursday.

Shares in ASM surged as much as 39% to A$1.65 before paring gains to $1.40 while Meteoric shares were up 1% at A$0.2425.

“When it comes to rare earths, there is a priority for critical minerals and the U.S. supply chain being developed domestically using feedstock and raw materials supply from allied nations,” said Dylan Kelly of fund manager Terra Capital.

“They are putting their money where their mouth is and effectively backing high-probability projects,” he added.

Backing by a government authority is seen as key to attract commercial lenders and private investment to the sector given a recent drop in prices and complex, often costly production requirements.

ASM is due to make a final investment decision by year-end on the Dubbo project that will produce light and heavy rare earths oxides. It already has A$200 million ($132.24 million) of initial support from the Australian government.

In December 2021, it said the plant would cost A$1.68 billion, but construction costs have since surged. It also operates a processing plant in South Korea.

Meteoric is targeting an investment decision late next year for Caldeira which will produce light rare earths neodymium, praseodymium (NdPr) and heavy rare earths dysprosium and terbium.

“The LoI represents a material step in ASM’s project funding strategy and is recognition of the strong engagement the Company has experienced from government, investors, and industry groups in North America,” ASM said in an exchange filing.

The U.S. has already offered support to Australia’s Lynas Rare Earths (ASX: LYC) for its processing facilities in Texas that are under construction.

The U.S. and Australia last year set up a critical minerals taskforce as Australia looks to drum up investment for minerals processing from allied nations as an alternative to top producer China, which accounts for more than 80% of global supply.

EXIM’s support for both projects is linked to the potential U.S. content in equipment, goods and services.

ASM last year agreed to sell neodymium iron boron alloy from its South Korean metals plant to U.S.-based rare-earth magnet maker Noveon Magnetics Inc from material sourced from Vietnam.

Australia last week said it would provide up to A$840 million ($550 million) for a combined rare earths mine and refinery in the country’s Northern Territory, owned by Arafura Rare Earths ARU.AX.

($1 = 1.5124 Australian dollars)

(Reporting by Ayushman Ojha and Melanie Burton in Melbourne; Editing by Josie Kao, David Gregorio and Jamie Freed)

STAKEHOLDERS VS THE PLANET
More investors push Glencore to keep coal post-Teck deal

Reuters | March 22, 2024 |

Mt Owen coal mine in Australia’s New South Wales. (Image courtesy of Glencore.)

A growing group of Glencore investors are keen for it to keep mining coal instead of spinning out the soon-to-be enlarged unit, with one eye on its financial outlook and another on the environmental benefits of keeping the fuel in-house.


Echoing a demand last week by activist Tribeca Investment Partners, investors said the polluting fossil fuel would be a lucrative option – for a decade or two at least – even as it is phased out in favour of renewable energy.

The Swiss-based miner and trader is set to see its coal unit grow sharply after it completes a $6.9 billion deal to buy the majority of Canadian miner Teck’s one, but said it plans to list the combined assets separately in New York.

Glencore is already a top producer of thermal coal with output of around 110 million tonnes a year, and also has coking coal assets.

By buying Teck’s business, in a deal set to close by the third quarter this year, it will add 20 million tons of annual steelmaking coal capacity and create a powerhouse that analysts say should generate $5-$6 billion a year in free cash flow.

A greater focus on climate risk in recent years has seen a number of pension and investment funds, financiers and insurers cut support for coal companies, leading some including Rio Tinto and Anglo American to sell or spin theirs out.

While doing so can lead to a share price bump, critics say the assets are often shifted into the private markets and run for longer with no investor oversight, potentially leading to a worse climate outcome.

For a long time, Glencore had adopted the same line, and said ditching coal would do little to cut its emissions, only to change its mind after the Teck deal was agreed, with chief executive Gary Nagle saying it would consult shareholders for their views on spinning off once the acquisition is concluded.

Ahead of any vote on the plan, though, three top-15 investors spoken to by Reuters said they would oppose the attempt to spin off its coal assets.

One top-10 shareholder said they ‘strongly disagree’ with the idea and had already told the company. The shareholder declined to be named as they are not authorised to speak publicly.

Andrew Mason, head of active ownership at Abrdn, which holds shares in Glencore, said: “In most circumstances, we do not believe that simply divesting as quickly as possible will achieve the best outcome.”

“Companies need to have credible strategies that support real-world decarbonisation,” he said, adding that a timed phase-out would facilitate a “just transition” to a greener future that minimised the impact on workers and communities.


A responsible wind down of coal is better than a divestment, given the “rapidly diminishing” global carbon budget, the emissions allowed before the world breaches its goal of capping global warming at 1.5 degrees Celsius, said Naomi Hogan at non-profit climate group Australasian Centre for Corporate Responsibility (ACCR).

“Fundamentally, good corporate governance requires Glencore to take responsibility for the emissions from its coal portfolio,” Hogan added.

Glencore’s carbon emissions rose 8.8% in 2023 from the previous year partly due to higher coal production, but were still down 21.8% from a 2019 baseline, according to its annual report.

“This is an extremely concerning step backwards for Glencore,” Hogan said in a note.

According to the Climate Action 100+ investor group, Glencore’s efforts to-date are mixed, as it failed to meet or partially meet their climate expectations on issues including capital expenditure and decarbonisation strategy.

Data from LSEG, however, places it among the best-performing of its peer group on a range of environmental, social and governance-related metrics, ranking it 4th out of 455 companies.

As well as the environmental argument, Tribeca said the coal assets would continue to be profitable as long as they were active and could benefit the rest of the portfolio – something the top-10 investor echoed, citing a likely surge in demand for cheap electricity from data centres in the years ahead.

Ian Woodley, portfolio manager at Old Mutual, agreed: “The likelihood is in 10 to 12 years, we’ll have another big upcycle, maybe once, maybe twice. And you see just how much cash the assets generate.”

After hitting an all time high above $400 a ton in 2022 when countries sought alternatives to Russian gas after the start of the war in Ukraine, thermal coal prices now trade around $130, while coking coal rose to above $300 a ton last year.

“In a private company, that would be paid out as dividends, but Glencore can take that cash and invest it in the rest of their portfolio,” Woodley added.

(By Clara Denina and Simon Jessop; Editing by Veronica Brown and David Evans)

China coal industry group expects output growth to slow in 2024

Reuters | March 20, 2024 

Stock image.

China’s coal output is expected to increase 36 million metric tons, or 0.8%, to about 4.7 billion tonnes in 2024, a Chinese coal industry group said on Wednesday, slower than last year’s 2.9% growth.


The projection comes on the back of record output in 2023, when the world’s largest coal consumer mined 4.66 billion tons of the polluting fossil fuel.

The China Coal Transportation and Distribution Association (CCTD) expects domestic coal prices to decline at an accelerated pace, partly due to weakness in its real estate markets, said Feng Huamin, senior analyst at CCTD’s research department.

Feng pointed to government orders to suspend infrastructure projects in some heavily indebted provinces as one of the key reasons for the pressure on prices.

Declines in property investment and sales in China have slowed amid government efforts to arrest a protracted downturn in the sector, but analysts were wary of calling an end to the pain in the fragile housing markets just yet.

Output from non-fossil sources will add to pressure on thermal output this year, with power output expected to grow in line with its 5% economic growth forecast, Feng said.

“A large portion of forecasting institutions believe that hydropower generation will see clear improvement this year,” Feng said, adding that higher solar and wind installations could help address about 70% of the expected growth in power demand.

Drought-like conditions in key generating regions resulted in China headlining an alarming decline in hydroelectricity output in Asia last year, as its output plunged at the steepest pace in decades.

Some miners have paused production for longer after the Lunar New Year break, sources familiar with the matter said. Feng said a few mines are already at risk of hitting their storage limits due to high inventory levels.

Separately, the top coal producing hub of Shanxi is expected to cut output by 40 million tons this year, partly due to a slew of accidents in the recent past, Feng said.

Shanxi saw mine accident-related deaths surge over 50% in 2023, pushing the mining safety regulator to issue a notice last month asking mines to curb overproduction to prevent accidents.

However, power use by industries during the first two months of 2024 grew at a surprisingly high 9.7%, Feng said, a trend which could push stockpiles lower if it continues.

(By Colleen Howe and Sudarshan Varadhan; Editing by Jacqueline Wong and Miral Fahmy)

Australian coal miners woo private capital as banks get leery

Bloomberg News | March 20, 2024 | 

Credit: Whitehaven Coal

Australian coal producers are increasingly dabbling in high-interest private loans as lenders look to replace reluctant banks that are held back by ESG concerns.


Sydney-based coal miner Whitehaven Coal Ltd.’s deal last month to secure a $1.1 billion loan for buying two mines attracted 17 private credit lenders and only one bank. A consortium led by Golden Energy and Resources Pte Ltd. also is sounding out private credit funds, as well as banks, to secure financing for its $1.65 billion acquisition of a coal mine in Australia, according to people familiar with the matter.

Their talks reflect the growing prominence of private credit, which has ballooned to a $1.7 trillion market worldwide by taking on riskier projects with attractive margins. Private credit firms’ forays into the coal business signify more battles ahead for ESG proponents even while banks back away from environmentally questionable projects.

“There’s different forms of private capital, family office money and other individuals who don’t have the same ESG obligations or pressures as what some of the big funds do,” said Nick Sims, co-head of investment banking, Australia & New Zealand at Goldman Sachs Group Inc. “There’s a role for them and they have been playing that role.”

More broadly, private credit is one of several alternative funding sources that the energy industry has tapped in recent years as ESG-based lending metrics hamper banks. Private equity firms have been more active in the business amid the retrenching. Asset-backed bonds, supported by oil and gas reserves, have also come into play.

Another funding source for coal miners is to sell a minority stake to their customers, such as steel manufacturers, who want to ensure their supply can be sustained, according to Rory Simington, principal analyst for Asia Pacific thermal coal research at analytics firm Wood Mackenzie. JSW Steel’s reported talks to buy a 20% stake in a Whitehaven-owned coal mine may be an example, he said.

Higher borrowing costs

Whitehaven’s reception from private credit firms is in sharp contrast to its struggles last year. The company had to pull a A$1 billion ($653 million) loan refinancing due to banks’ unwillingness to extend the loan, the Sydney Morning Herald reported.

Some of Australia’s major banks — Australia & New Zealand Banking Group Ltd., Commonwealth Bank of Australia, National Australia Bank Ltd. and Westpac Banking Corp. — all have committed to limit or refrain from lending to thermal coal miners.

Whitehaven’s new pool of lenders are mainly international funds, such as Hong Kong-based Asia Research & Capital Management Ltd, Farallon Capital Management LLC and Sona Asset Management Ltd.

Its deal also underscores the fact that alternative lenders would be typically more expensive. Whitehaven is paying 650 basis points over SOFR for the debt.

“Mainstream lenders do not want to finance coal, so they have to go to higher cost hedge funds and family offices,” said Patrick Marshall, head of private credit at Federated Hermes.

Private credit could also come in handy as coal miners transition into new business lines. Whitehaven’s private credit loan refinances a $900 million bridge loan to back the takeover of two mines for metallurgical coal, a key ingredient in steel manufacturing and considered less environmentally threatening than thermal coal.

“If you can badge your project or your company as metallurgical coal rather than thermal coal, it makes a huge difference in terms of who you can talk to or who’s able to finance,” Simington at Wood Mackenzie said.

(By Sharon Klyne and Megawati Wijaya)

 

U.S. Releases More Details of Floating "Port" for Gaza

An Improved Navy Lighterage System (INLS) "discharge facility" in action. The modular barge acts as a landing point for ro/ro cargo, which is then transloaded onto a ferry for transport to a floating pier (U.S. Navy file image)

PUBLISHED MAR 21, 2024 11:15 PM BY THE MARITIME EXECUTIVE

 

 

The Pentagon has released new details of its plan to set up a temporary floating pier in northern Gaza, where food aid is needed to stave off an impending famine. 

The logistical challenge is substantial. Gaza lacks any real seaports of its own, and its northern and eastern borders have been closed by the Israeli government. Aid trucks are currently allowed past the southern border checkpoints at a rate of about 200 per day, about 40 percent of the pre-conflict traffic volume. 

To make up the difference, the U.S., the EU and the government of Cyprus have formulated a plan to set up a sealift corridor from Larnaca to northern Gaza. Since the territory lacks maritime infrastructure, U.S. Army and Navy forces will construct a mile-long floating causeway extending out from the beach into the open waters of the Mediterranean. 

U.S. Navy and Army personnel assemble the end of a floating causeway offshore (USN file image)

Five U.S. Army landing ships departed Virginia earlier this month on a long transatlantic journey, and three Military Sealift Command cargo ships - USNS Roy P. Benavidez, 2nd Lt. John P. Bobo, and 1st Lt. Baldomero Lopez - are set to follow suit soon. 

The deep-draft ships cannot pull up to the causeway directly, as the water alongside is still too shallow. Instead, they will offload their cargo onto a "roll-on, roll-off discharge facility," a barge-like modular platform measuring 72 feet wide by 270 feet long. This mini-dock will be stationed about three miles offshore and will receive aid cargoes. 

Shallow-draft "causeway ferries" operated by Naval Beach Group 1 will take on the cargo, then shuttle it to the floating pier. At this point the aid will be offloaded and driven to shore. The overall system should have enough capacity to deliver two million meals a day. 

The Joint Logistics Over The Shore (JLOTS) causeway system is a joint Army/Navy capability, supported by Seabees, Sealift Command civilian mariners and U.S. Army mariners (the Army's term for its maritime servicemembers). It should be operational within 60 days, according to the Pentagon - though Cypriot officials have hinted that it could be in service sooner. 

"Our capabilities mesh well, and we have already coordinated at the tactical level how we will implement the movement of cargo," a Navy official said. "This is a routine mission for us, and we're just falling in together in step." 

One challenge could be shoreside security. The White House insists that there will be no need for U.S. troops to step foot on shore, and Israel has agreed to provide needed security on the ground. However, Israel has quietly floated the idea of hiring in a private security contractor to fulfill that service, potentially using U.S. nationals serving as guard contractors, White House officials told NBC. The Biden administration is concerned at the prospect of having American civilians on the beach in Gaza and has objected to this plan. 

 BALOCHISTAN/PAKISTAN

Militants Attack Government Building at China's Port of Gwadar

PUBLISHED MAR 21, 2024 3:57 PM BY THE MARITIME EXECUTIVE

 

 

Pakistan has been fighting back an ethnic insurgency in the southeastern province of Baluchistan for decades, and the arrival of an unpopular Chinese megaproject has exacerbated tensions. On Wednesday, 10 were killed in an insurgent attack on a port authority building near the Chinese port complex at Gwadar, a flash point for local complaints about the foreign presence. 

At about 1600 hours Wednesday, a suicide bomber blew up a car bomb near the Gwadar Port Authority building, a local police official told AP. Militants armed with guns and hand grenades attacked just after. Two security officers were killed, and all eight militants died in the exchange of fire. 

The Majeed Brigade of the Baluchistan Liberation Army (BLA) claimed responsibility for the attack and said that more details would be coming soon. 

"We strongly condemn this terrorist attack and express our grief for Pakistani personnel," said Chinese foreign ministry spokesman Lin Jian. "China opposes all forms of terrorism, firmly supports Pakistan's national development and social stability, and firmly supports Pakistan's fight against terrorism."

The BLA has directly attacked Chinese interests in Balochistan. In August, two BLA fighters shot at a convoy of Chinese engineers who were on their way to the Port of Gwadar. 

Gwadar is the Chinese-operated maritime terminus for the China Pakistan Economic Corridor (CPEC), the $45-60 billion centerpiece of China's Belt and Road Initiative. The massive CPEC project connects the Chinese province of Xinjiang to the sea with a network of new roads, rail lines and pipelines. The Pakistani government hopes that it will boost GDP by two percent and add two million jobs to the economy - but local businesses (and even Chinese officials) have expressed concern about whether it will succeed, given political hurdles and local opposition. While awaiting CPEC's completion and promised economic success, Pakistan faces pressure on its strained federal budget to service the multibillion-dollar loans it took out to build CPEC projects.

 

Report: India Turning Away Russian Tankers Due to Fears From U.S. Sanctions

Sovcomflot acknowledged challenges in its financial report this week (file photo)

PUBLISHED MAR 22, 2024 1:35 PM BY THE MARITIME EXECUTIVE

 

 

India which emerged as one of Russia’s largest oil customers in the two years since the invasion of Ukraine appears to have formally decided to turn away Russian tankers due to fears of the increased U.S. sanctions. There had previously been individual reports of India delaying tankers or Russian vessels turning around after they were sanctioned since the U.S. began late in 2023 increasing enforcement of the price cap on Russian oil imposed by the West.

Reliance Industries, India’s largest private refiner, was reported earlier in the week by Bloomberg and Reuters to have begun closely scrutinizing the ownership of the tankers transporting oil purchases. The company was reported to be refusing shipments carried on the vessels of Sovcomflot, which the U.S. officially sanctioned in February following earlier individual actions.

The unofficial ban on oil coming to India aboard Sovcomflot or other vessels subject to the U.S. sanctions has been expanded to all of India’s largest buyers Bloomberg reports today. They are citing “people familiar with the matter,” saying that the ownership of the tankers is being reviewed for exposure to the sanctions.

The U.S. began sanctioning individual tankers and managers based in Dubai and elsewhere citing instances of transporting Russian oil above the price cap. Then in February, they specifically listed Sovcomflot and 14 tankers for violations of the price cap. 

This week’s reports from Bloomberg and Reuters follow a statement from Sovcomflot acknowledging the mounting challenges to transport crude oil. Sovcomflot on Monday issued 2023 financial results saying it had stable income from existing long-term contracts and strong market conditions. They however also commented, “The company's activities are subject to the influence of geopolitical factors and illegally imposed sanctions from unfriendly countries. The company carries out systematic work aimed at overcoming emerging challenges.” 

After earlier actions, Sovocmflot sold tankers and vessels were moved to third-party managers based in the UAE and elsewhere. Reports have also cited instances of tankers changing flags to lesser registries. Lloyd’s List is reporting today that a dozen tankers from the shadow fleet jumped so far this year from registries in the Marshall Islands and Liberia to lesser flags including Antigua and Barbuda. Another flag that saw growth was Gabon.

Today’s articles do not indicate that India has stopped buying Russian oil, but instead that it is placing additional restrictions on the transport of the oil. 

This week it was also reported by Reuters that Turkey’s Dortyol terminal operated by Global Terminal Services had also decided to turn away Russian oil. China however remains a large customer for both Russia and Iran despite the U.S. specifically citing transactions and shipments. China has also been indirectly linked to illegal ship-to-ship transfers in Asia as tankers seek to hide the transportation of sanctioned cargoes bound for China.

Bloomberg compiled data showing that so far in March shipments of Russian oil are about a third of the levels in January and February. This comes after the U.S. and UK both increased sanctions including new efforts targeted at the oil trade.

 

IMO Moves Forward (Slowly) With Framework for Net-Zero Fuels and Fees

MEPC concluded a week of debate developing a framework for GHG emission regulations (IMO)

PUBLISHED MAR 22, 2024 3:14 PM BY THE MARITIME EXECUTIVE

 

 

The eighty-first session of the Maritime Environment Protection Committee (MEPC) of the International Maritime Organization concluded on Friday after a week of meetings in London with what at best was being called a “step forward” or “progress toward the goals” for reducing shipping’s carbon emissions. While the meeting was not for the adoption of the regulations, many are still saying the progress is slow and highlights that much still needs to be done between now and the next MEPC meeting in the fall which calls for steps adopting the initiatives outlined in 2023.

Member States met this week to debate and raise concerns about the key elements of the MEPC strategy adopted in July 2023. The IMO hailed last year’s efforts highlighting broad agreement for the climate roadmap that calls for reaching net-zero emissions "by or around, i.e. close to, 2050." The specific targets in the agreement include a 20 percent cut in emissions by 2030 and a much deeper 70 percent cut by 2040 (relative to 2008 levels).

In the nine months since then, the IMO has been working on a framework for the key elements while consensus emerged that the 2030 target was achievable. Many in the industry point to technical improvements that can be made to ships, better use of weather and route planning, slow steaming, and emerging fuels to get to the first hurdle, but the view is that the later goals are aspirational without clear steps and require additional support.

IMO General-Secretary Arsenio Dominguez, who himself had served as the director of the Marine Environment Division before his election last year, hailed the MEPC efforts saying “This week you made very important progress.” The IMO in its communications called the actions “agreement of a possible draft outline” and steps in the legal process towards adopting global regulations. They however noted that the framework could still be amended.

The key issues included a goal-based fuel standard regulating the phased carbon emission reductions and an economic mechanism to support the transition. They said this week’s meeting provided a starting point for consolidating several different proposals that are still being considered.

 

Five days of meeting concluded with a broad framework and a long list of tasks ahead (IMO)

 

At the conclusion of the sessions, the International Chamber of Shipping, which has been a strong advocate for the fees and a fund, said it welcomed the progress this week during “intensive negotiations.” The international trade association said, “We have gained a better understanding of the concerns of those governments who still have questions.”

The meeting concluded with a very early draft of the new chapter for the MARPOL regulations with most feeling there was a growing consensus on the broad parameters while much debate remains in the details. There was support for the concept of a pricing mechanism while some countries continue to argue against a flat price mechanism. The agreements left open elements on the final shape, timing, and scope of the regulations as well as the enforcement tools.

They agreed to launch a comprehensive impact assessment and formed groups tasked to develop a work plan on the development of a regulatory framework for the use of onboard carbon capture systems and to investigate Tank-to Wake methane and nitrous oxide emissions.

Some are coming away with a more positive view of the results and progress of the session. Consultancy UMAS issued a statement from Dr, Tristan Smith, Director of UMAS and Associate Professor at UCL Energy Institute, saying, “This meeting’s development of a new MARPOL chapter, and good progress and momentum towards a timely and robust implementation of robust IMO policy, including an effective GHG levy, seriously questions the wisdom of commercial strategy of ‘wait and see’, or that is dependent on IMO not delivering what it committed to in 2023.”

The meeting did have some specific achievements including approving new Emissions Control Areas in the Canadian Arctic and Norwegian Sea areas. They also approved new recommendations for the transport of plastic pellets after disastrous pollution events such as the loss of the X-Press Pearl off Sri Lanka. The meeting also endorsed a plan to develop guidelines for hydrogen and ammonia as fuels, reducing underwater noise and ballast water management.

MEPC gave itself a long list of tasks to complete in the next few months. The next session is scheduled to convene from September 30 to October 4 where the hope is to finalize details and move to adoption of the emission and pricing regulations.

Sustainable Shipping Fuels to Reach Cost Parity with Fossil Fuels by 2035

T

he report‘Sustainable fuels for shipping by 2050 – the 3 key elements of success’, provides a roadmap for the future of sustainable fuels, identifying how the industry can more rapidly and affordably scale these fuels and achieve full decarbonisation by

PUBLISHED MAR 22, 2024 2:23 PM BY THE MARITIME EXECUTIVE

 

[By: Wärtsilä]

Sustainable shipping fuels could reach cost parity with fossil fuels as early as 2035 with the help of decisive emissions policy such as carbon taxes and emissions limits, according to a new report launched today by technology group Wärtsilä.

The report, titled ‘Sustainable fuels for shipping by 2050 – the 3 key elements of success’, reveals that the EU Emissions Trading Scheme (ETS) and FuelEU Maritime Initiative (FEUM) will see the cost of using fossil fuels more than double by 2030. By 2035, they will close the price gap between fossil fuels and sustainable fuels for the very first time.

Transporting 80% of world trade, shipping is the engine room of the global economy. However, despite being the most efficient and environmental way to transport goods, it emits 2% of global emissions, equivalent to the annual emissions of Japan. Without action, this could increase by more than 45% by 2050.

In 2023, the International Maritime Organization (IMO) set a target of achieving net zero emissions by 2050. Existing decarbonisation solutions, such as fuel efficiency measures, could cut up to 27% of emissions. Wärtsilä's report argues that sustainable fuels will be a critical step in eliminating the remaining 73% but radical action is needed to scale them. The industry suffers from a “chicken and egg” challenge – ship owners won’t commit to a fuel today that is expensive, only produced in small quantities, and may be usurped by another fuel that scales faster and more affordably. Meanwhile, it is difficult for suppliers to scale production without clear demand signals.

Wärtsilä has produced new modelling that shows a timeline of which fuels are likely to become widely available on a global scale, when and at what cost. To accelerate this timeline, the report argues that decisive policy implementation, industry collaboration, and individual operator action must coalesce to scale the production of these fuels.

Roger Holm, President of Wärtsilä Marine & Executive Vice President at Wärtsilä Corporation says: "Achieving net zero in shipping by 2050 will require all the tools in the toolbox, including sustainable fuels. As an industry, we must focus on coordinating action across policymakers, industry and individual operators to bring about the broad system change required to quickly and affordably produce a mix of sustainable fuels. Policy in Europe is showing just how impactful action at the international level can be, closing the cost gap between fossil- and low-carbon fuels for the first time.”

Decisive Policy: Wärtsilä’s modelling shows sustainable fuels will be 3-5 times more expensive than today’s fossil fuels in 2030. As ETS and FEUM show, policy is key to closing the price gap. The report argues that policymakers should:

• Maximise certainty: Set an internationally agreed science-based pathway for phasing out fossil fuels from the marine sector, in line with IMO targets.
• Boost cost competitiveness: Adopt a global industry standard for marine fuel carbon pricing.
• Collaborate: Increase global collaboration between governments on the innovation and infrastructure necessary to deliver sustainable fuels at scale worldwide.

Industry collaboration: The sector must collaborate with stakeholders from inside and outside shipping. The report calls on industry to: 

• Pool buying power: Initiate sector-wide procurement agreements to pool demand from multiple shipping operators.
• Collaborate with other sectors: Convene with leaders in aviation, heavy transport, and industry to establish a globally recognised framework for the production and allocation of sustainable fuels.
• Share skills: Establish an industry-wide knowledge hub for the purpose of sharing expertise, skills and insights.

Individual actions: Every euro an operator saves in fuel costs at today's prices, could be worth 3-5 times that by 2030. That means companies such as Carnival Corporation, which made a 5-10% efficiency gain through its Service Power Upgrade Program, could cut its fleetwide fuel costs by as much as $750 million per year in 2030. All operators can benefit from improving the efficiency of their vessels – the technology is readily available today.

Holm adds: “If there is one take away from our report, it is that smaller operators need not feel powerless. They have a major role in accelerating towards net-zero emissions shipping. Taking steps to improve fuel efficiency and invest in fuel flexibility can deliver immediate returns, reducing both emissions and operating costs. But action must be swift – we have the lifecycle of just a single vessel to get this right.”

Investing in fuel flexibility is the most financially viable way to avoid the risk of stranded assets. Wärtsilä has been developing multiple fuel options. Most recently, Wärtsilä launched the first commercially available 4-stroke engine for ammonia fuel, which can immediately reduce emissions by over 70%, compared to diesel.

The report provides a roadmap for the future of sustainable fuels, identifying how the industry can more rapidly and affordably scale these fuels and achieve full decarbonisation by mid-century – within the lifetime of just a single vessel. You can access and download the report here.

The products and services herein described in this press release are not endorsed by The Maritime Executive.

Rem Orders First Methanol-Fueled Offshore Construction Vessel

Rem Offshore ordered the first methanol dual-fuel offshore construction vessel

PUBLISHED MAR 21, 2024 7:31 PM BY THE MARITIME EXECUTIVE

 

The applications for methanol-fueled vessels meeting the future requirements for zero emissions continue to grow with offshore construction and services company Rem Offshore joining the expanding list of shipowners ordering dual-fuel methanol vessels. They are highlighting the vessel they are calling an Energy Subsea Construction Vessel as the first of the next generation due to the versatility of its design.

REM is returning to Norway’s Myklebust Verft for the construction of the vessel which is due to be delivered in 2026. The shipyard has delivered newbuilds to Rem in the past. Rem Offshore, which was incorporated in 2017 in Norway, currently has a fleet consisting of 19 vessels in operation and one vessel under construction. Rem also has an option to build one more ship at Myklebust.

The new vessel, which was designed by Skipsteknisk, is said to be the first of its kind because, in addition to the dual-fuel methanol engines, it is designed to perform heavy construction work in both offshore wind and subsea with net zero emissions.

“This is a big milestone for Rem Offshore. We are ordering our first net zero-emission vessel and taking a big step into the future. We are looking forward to being able to offer the vessel to the market, and believe that our customers will appreciate the opportunity for more efficient and sustainable operations,” said Lars Conradi Andersen, CEO of Rem Offshore.

The newbuilding is also designed to employ several solutions where energy consumption is almost halved compared to comparable tonnage in today's market, as well as meeting future requirements for zero emissions from end to end. In combination with the dual-fuel methanol engines, the ship will also have battery packs. All offshore lifting equipment, including a 250-tonne crane, will be electric and regenerates power to the batteries. The working deck will be over 1,400 m2, and it is also prepared for the installation of an offshore gangway for use in offshore wind.

The orderbook for methanol dual-fuel and methanol-ready vessels now stands at 236 ships due for delivery over the next five years according to data from DNV’s Alternative Fuels Insights database. While the majority of the orders are for containerships, as well as chemical tankers, bulkers, and car carriers, the offshore sector is also beginning to adopt methanol. The first orders have been placed for service vessels for the offshore sector and last year Boskalis even placed an order for a methanol-ready mega-sized hopper dredge.