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In This List

Volatility, trade war concerns further punish base, bulk metals

Greenhouse gas and gold mines Nearly 1 ton of CO2 emitted per ounce of gold produced in 2019

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Volatility, trade war concerns further punish base, bulk metals

The announcement of further tariffs and an escalation of protectionist sentiment from the U.S. last week continued to put pressure on metals prices.

While numerous trading partners managed to secure an exemption from proposed U.S. tariffs on steel and aluminum imports, concerns over tit-for-tat measures by China and the potential implications for the wider global economy weighed heavily on investor sentiment.

In a statement issued at the conclusion of the G20 Finance Ministers and Central Bank Governors meeting in Argentina, IMF Managing Director Christine Lagarde called on leaders of the 20 most powerful economies to make growth more resilient and more widely shared.

"In my discussions over the past two days, I have emphasized that now is an opportune moment to implement reforms to make growth more solid, sustainable, balanced and inclusive," Lagarde said. "I joined others in reiterating that we should avoid the temptation of inward-looking policies and, rather, work together to reduce trade barriers and resolve trade disagreements without resorting to exceptional measures."

In the U.S., a government shutdown was again on the horizon after President Donald Trump signaled he could veto a US$1.3 trillion spending bill, saying he disliked some of the legislation.

In Russia, President Vladimir Putin was re-elected, while the U.K. and allies including Europe and the U.S. joined forces to punish the Russian government over the alleged poisoning of a former spy in Britain. Both sides have expelled numerous officials, and further sanctions are pending.

Price ring

Iron ore was down 4.5% to US$64.50/tonne, 24% lower than 12 months ago.

Dropping 3.1%, copper and nickel took the biggest hits, closing at US$6,653/t and US$13,146/t, respectively. Zinc dropped 1.9% to US$3,201/t, and lead fell 1.6% to US$2,378/t, while aluminum dipped a marginal 0.5% to US$2,059/t.

Precious metals saw a boost from safe-haven investors, pushing gold up 2.7% to US$1,350/oz and silver up 1.5% to US$16.60/oz.

Talking points

Potential levies on aluminum scrap imports China is said to be pondering in response to U.S. tariffs will have limited impact on the global aluminum market, according to analysis by UBS.

China is allegedly planning to impose a 25% tariff on recycled aluminum imported from the U.S.

In 2017, China's imports of the material amounted to 2.2 million tonnes, of which 620,000 tonnes, worth about US$800 million, originated in the U.S.

Depending on grade, contained aluminum from the U.S. to China amounts to 300,000 to 500,000 tonnes annually, commodities strategist Daniel Morgan said in a March 23 note. However, he said this is tiny relative to about 65 million tonnes circulating in global trade each year and to China's domestic production of 36 million tonnes per year.

"There are numerous offsets, (including) the scrap trade being diverted to third countries, greater metal production in China or lower exports of metal," Morgan said. "Of course, a global trade war could be a bigger deal if this were to continue to escalate. That would result in lower global trade and economic growth and therefore demand for aluminum."

For now, production outages at Norsk Hydro ASA's Alunorte operation in Brazil could cause bigger headwinds to aluminum trade, according to Morgan.

"The world's largest alumina refinery with 6 million tonnes per annum of capacity is running at 50% run-rate due to tailings issues and environmental compliance," Morgan said. "This refinery produces 5% of global production, or 10% of ex-China supply. By itself this tightens the seaborne alumina trade substantially and threatens 1.5 million tonnes per annum of downstream aluminum production."

"This outage is looking more prolonged by the day (i.e. months). A prolonged outage also may reduce the ability of the U.S. to lift domestic production of aluminum."

Financings

Saudi Arabian Mining Co., or Ma'aden, is in the process of refinancing about US$1 billion of bank debt raised for its 74.9%-owned Ma'aden Bauxite & Alumina Co. joint venture. BNP Paribas and National Commercial Bank are said to have been hired for the transaction, which is set to complete by the end of the second quarter.

Gran Colombia Gold Corp. downsized its planned gold-linked debt offering to US$95 million from US$152 million to align with investor appetite for lower debt levels. Instead of repaying notes due in 2018, 2020 and 2024, the company now seeks to use the proceeds to refinance the 2020 and 2024 senior secured notes and offer 2018 debt holders some cash — 19% of the principal amount — and shares worth 81% of the principal amount based on a conversion of US$1.95 per share.

U.S. Steel Corp. cut debt by US$483.9 million following a cash tender offer to buy back its 8.375% senior secured notes due 2021. An additional US$15.2 million of the notes remain subject to guaranteed delivery procedures, and the company will redeem the remaining outstanding notes April 12.

Vedanta Ltd. looks to raise up to 45 billion Indian rupees by issuing secured, nonconvertible debentures. The move is in line with a July 2017 shareholder vote.

Glencore PLC launched an offering of US$500 million cash-settled convertible bonds due 2025 to purchase cash-settled call options on its shares in a bid to hedge the potential exercise of conversion rights included in the bonds. Each bond will have a nominal value of US$200,000 and will not bear interest. The bonds will be issued at 93.25% to 98.25% of their nominal value and will be redeemed at par March 27, 2025.