Newsworthy

Metals, trading

LME nickel report finds outsized positions were involved

A report by U.K.-based consultancy Oliver Wyman commissioned by the London Metal Exchange (LME) in the wake of its nickel market shutdown of March 2022 says the price spike was caused in part by “the buildup of large positions that trigger and end up on the wrong side of a major market move, thereby causing cascading client defaults.”

In the report, the consultancy writes, “Over the course of three trading days in March 2022, the price of nickel on the LME increased by over 270 percent from $27,080 per metric ton to $101,365 per metric ton. … The events in nickel were a short squeeze, [when] rising prices create pressure on holders of short positions by increasing their margin call requirements.”

The consultancy spells out the bull versus bear positions that existed in that market prior to Russia’s invasion of Ukraine, with bulls focusing on “strong projected growth in electric vehicle manufacturing and consequent increased demand for nickel in batteries, along with generally strong demand growth as the global economy recovered from COVID-19 disruption.”

Bears, meanwhile, saw growing nickel pig iron (NPI) supply likely leading to an oversupply in the global nickel market, especially if reported advances in technology allowing NPI to be converted into battery material took place.

“Positions on both sides were large and concentrated when compared to nickel trading volumes,” the report states, referring to an imbalance between nonphysical and physical positions in the market at the time Russia invaded Ukraine, raising doubts about the global nickel supply situation.

Per the report, “One financial client with no material existing nickel position started to accumulate a long position on the exchange that reached over 2,000 lots [12,000 metric tons] by end of day. This represented 13 percent of net buying on March 7.” At that same time, “Counterparties, including some of the biggest short holders, started to miss large bilateral margin payments on over-the-counter (OTC) positions.”

The report says a contributing factor to the spiking price and the eventual freeze in LME nickel trading was an “absence of a diverse range of participants willing to take opposite positions. There were relatively few participants able and willing to profit-take as the nickel price rose, with various aspects of market structure seen as deterring participation on the exchange. The withdrawal and absence of liquidity led to outsized impacts of trading from March 4 onwards and price acceleration. This in turn triggered record margin calls, further increasing pressures on major short positions.”

The report concludes that the LME’s price volatility controls did not work during the events and points out that effective controls could have provided market participants with time to reflect, secure financing or seek ways to manage large positions off-exchange.

Oliver Wyman lays out seven objectives for the LME, including extending its risk and control functions to explicitly cover identification and prevention of market distortions, and upgrade capabilities accordingly.

Another objective asks LME staff to monitor significant risks in the OTC market to manage risks of LME market distortions. That ties into another objective urging staff to calibrate position limits based on the LME market size and traded volumes so that they become effective protection against speculative positions causing extreme price fluctuations.

The 44-page report can be accessed at www.lme.com/Trading/Initiatives/ Nickel-market-independent-review and does not mention names of LME customers involved in the March 2022 incident, other than a chart referring to a February Bloomberg news item identifying China-based stainless steel producer Tsingshan Holding Group as one of several companies holding a large short position on nickel on the LME. The client that traded 2,000 lots of nickel March 7 is not mentioned.

Metals, Financial

Aurubis capex plans include added US capacity

Germany-based copper producer and recycler Aurubis AG has listed a doubling of capacity at its smelter in Richmond, Georgia, among its capital expenditure (capex) plans for the company’s current fiscal year.

Aurubis says it achieved operating earnings before taxes (EBT) of 532 million euros ($565 million) in its fiscal year 2021/22, which closed at the end of September 2022. For the 2022/2023 fiscal year, the firm sees somewhat narrower profits in the 400 million euros ($425 million) to 500 million euros ($531 million) range, which would represent a decline in EBT ranging from 6 percent to 24 percent.

The overall profitable conditions have prompted Aurubis to say it is moving forward with several capex plans the company announced earlier this decade as well as three additional capex projects.

“The company continues to consistently implement its ‘Driving Sustainable Growth’ strategy,” Aurubis says. It cites “examples such as the recycling project ASPA (‘innovative recycling of metals from residues’) and BOB (increase in recycling capacity for the important industrial metals nickel and copper) at the two Belgian locations, plus the United States plant Aurubis Richmond in Georgia, all of which are currently being implemented.”

Aurubis decided on three further strategic projects with an investment volume of roughly 530 million euros ($563 million). The first involves investing to expand the modular recycling system at the U.S. site in Georgia. With a second recycling module, Aurubis will double its processing capacities at the Georgia location.

“Further investment adjustments for infrastructure requirements and inflation were also approved for the ongoing project,” the company adds.

In Germany, Aurubis’ Complex Recycling Hamburg (CRH) project will now include “extensive investments in the processing capacity of complex recycling materials and intermediate products at the group’s headquarters in northern Germany. CRH will continue to optimize material flows at the Hamburg site and form the basis for additional strategic projects in the plant.”

The third newly announced expenditure concerns an expansion of an existing solar park at the Aurubis site in Pirdop, Bulgaria.

Aurubis says it is “very well-positioned—financially and operationally” and that it “remains optimistic for the new 2022/23 financial year, despite the general economic slowdown and higher burdens from rising energy prices.”

Legislation & Regulations, Electronics

New York governor signs Digital Fair Repair Act

New York Gov. Kathy Hochul has signed the Digital Fair Repair Act into law, making New York the first state to guarantee the right to repair, according to the governor’s office, and protecting consumers from anti-competitive efforts to limit repair. The New York State Senate approved the act in June by a vote of 145-1.

The law requires original equipment manufacturers (OEMs) to make diagnostic and repair information for digital electronic parts and equipment available to independent repair providers and consumers if such parts and repair information are also available to OEM-authorized repair providers and servicers. According to a news release from Hochul’s office, the legislation aims to protect consumers and open the digital repair market to competition.

“As technology and smart devices become increasingly essential to our daily lives, consumers should be able to easily fix the devices they rely on in a timely fashion,” Hochul says. ”This legislation will empower consumers with better options to repair their devices, thereby maximizing the lifespan of their devices, saving money and reducing electronic waste.”

New York is the first state to require diagnostic and repair information for digital electronic parts and equipment from OEMs, according to the announcement from Hochul’s office.

“This new Right to Repair law, the first of its kind in the United States, will not only provide greater choice and affordability for consumers if they choose to repair their electronic devices but also significantly reduce the amount of electronic waste while providing more opportunities for small businesses,” New York Sen. Neil Breslin says.

The proposed legislation originally included provisions for agricultural equipment, public service equipment and home appliances, but its scope was narrowed last year to focus on devices such as computers, phones and tablets.

Plastics

ExxonMobil starts operations at advanced recycling plant in Texas

ExxonMobil Corp., Irving, Texas, has started operations at its advanced recycling facility in Baytown, Texas, that can process 80 million pounds of plastic scrap annually. The facility uses proprietary technology to break down hard-to-recycle plastics and turn them into raw materials for new products.

“We’ve proven our proprietary advanced recycling technology at Baytown, and now we’re leveraging our scale and integration to increase production of certified circular plastics to meet growing demand,” says Karen McKee, president of ExxonMobil Product Solutions Co.

McKee adds that the company is collaborating with government, industry and communities to scale up collection and sorting of end-of-life plastics that will improve recycling rates and help ExxonMobil customers around the world meet their sustainability goals.

ExxonMobil began pilot operations at the Baytown facility in 2021 and says it has since recycled about 15 million pounds of plastic scrap using its proprietary Exxtend technology.

ExxonMobil says it has commercial contracts to sell its certified circular plastics to customers around the world for use in food-safe plastic packaging. The company has collaborations with Sealed Air and Ahold Delhaize USA, Berry Global and Amcor.

ExxonMobil helped form Cyclyx International LLC, a joint venture to collect and sort large volumes of plastic scrap, and is investing in a plastic scrap processing facility in Houston to help supply the Baytown plant.

The company also plans to build advanced recycling facilities at many of its other manufacturing sites around the world, which it says could give it the capacity to process up to 1 billion pounds of plastic scrap annually by the end of 2026. ExonMobil says it is assessing facilities in Baton Rouge, Louisiana; Beaumont, Texas; Joliet, Illinois; Belgium; the Netherlands; Singapore; and Canada.

The company adds that it is collaborating with third parties to assess the potential for large-scale use of advanced recycling technologies and opportunities to support improvements to plastic scrap collection and sorting in Malaysia and Indonesia.

Batteries, Financial

Redwood Materials selects South Carolina for production site

Nevada-based Redwood Materials has announced the selection of a site near Charleston, South Carolina, as the future home of a 600-acre campus dedicated to the production and recycling of battery materials for electric vehicles (EVs) and other applications.

“At Camp Hall in Berkeley County, Redwood will recycle, refine and manufacture anode and cathode components on more than 600 acres, creating more than 1,500 jobs and investing $3.5 billion in the local community,” the company says.

Redwood has partnered with several battery producers and manufacturers in the past two years to position itself as a provider of battery-grade lithium, cobalt, nickel and copper and has agreements in place with Toyota, Ford, Volkswagen, Volvo and Panasonic.

If it reaches its initial planned capacity, the South Carolina campus will be able to produce 100 gigawatt hours (GWh) of cathode and anode metals per year. Redwood says the site also provides it with the potential to expand operations to several hundred GWh annually to meet future demand.

Redwood says it plans to break ground on its new campus in the first quarter of 2023 and to have its first recycling process running by year-end. The company indicates it also will be processing virgin materials at the facility, which will be served by rail access.

Redwood adds, “When paired with the benefits of the recent Inflation Reduction Act, this strategic location also allows us the opportunity to invest more heavily at home while potentially exporting components in the future, allowing the United States to become a global leader in this manufacturing capability.”

The firm continues, “Unless metals like lithium and nickel are produced and refined and remain in-country for domestic anode and cathode manufacturing at scale, these American battery cell facilities will have to continually source the majority of their components [from overseas], predominantly from Asia. This will send most (50 to 75 percent) of the economic value and job creation overseas.”

Redwood says it combines recycling, refining and remanufacturing to produce and return battery materials to U.S. battery cell manufacturers, adding, “We take in end-of-life batteries, break them down to their basic metals (like nickel, copper, cobalt and lithium) and then rebuild those metals into cathode and anode products.”