• Iron ore majors spiral amid choppy prices and news out of China
  • General Motors gives struggling lithium narrative half a lift
  • Global coal demand set to soar, with India to be main driver of growth 

 

Iron giveth and iron taketh, and the metal is certainly taking at the moment with iron ore prices falling more than 4% overnight before clawing back some ground today.

Things aren’t likely to be getting better anytime soon with Westpac’s Robert Rennie noting that while Chinese steel production of 77.07Mt in September had exceeded his forecast of 76Mt, it was still the weakest September since the pandemic.

He added that China had clearly passed peak steel production and that continued high imports explained why its iron ore port inventory remained close to all-time highs, limiting upside on prices.

The news and iron’s prospects predictably sent iron ore majors spiralling into the red with BHP (ASX:BHP) down 2.16% to $42.06, Rio Tinto (ASX:RIO) shedding 0.85% to $117.62 and Fortescue (ASX:FMG) tumbling 1.86% to $19.54.

With three of the heavyweights down, it is unsurprising that broader Material index is also down 1.63%.

 

Lithium, coal movements

While the local bourse was relatively subdued going into the weekend, there was news flow streaming through from overseas.

General Motors is keen to secure supplies of lithium and has moved to establish a US$625m joint venture with Lithium Americas Corp.

Under the JV, which replaces a previous planned equity investment, the giant carmaker will provide up to US$430m in cash and US$195m in credit to support development, construction and operation of the Thacker Pass lithium carbonate mining operation in Nevada in exchange for a 38% stake in the project.

Thacker Pass is a clay-hosted lithium operation that started construction in 2023 and has a resource of 19.1Mt.

Phase 1 of the development is expected to produce 40,000tpa of battery-grade lithium carbonate, all of which has been locked up by GM for 20 years, while Phase 2 will increase capacity to 80,000tpa with GM committing to pick up 38% of Phase 2 output and the right of first offer on the remaining volumes.

Meanwhile, global coal demand is forecast to hit a new high this year thanks to increased use in the power sector from Asian nations such as China, India and Indonesia that more than offset cuts in the EU.

In its World Energy Outlook, the International Energy Agency said that global coal demand increased by over 100Mt to about 6Bt in 2023 and is expected climb a little bit higher this year.

While China’s growing use of renewables is expected to lead to less coal use in China, India is expected to be the main drive for future demand growth.

Amidst this positive news for coal plays, Yancoal Australia (ASX:YAL) has flagged that it has increased its cash balance by $430m to $2bn during Q3 2024 after increasing coal production by 26% to 17.6Mt.

This is expected to keep the company on track to meet its production guidance of between 35-39Mt.

Yancoal also realised an average coal price of $170/t during the quarter.

Making gains 🚀

Yancoal Australia (ASX:YAL) (coal) +3.97%
Westgold Resources (ASX:WGX) (gold) +3.69%
De Grey Mining (ASX:DEG) (gold) +1.64%
Vulcan Steel (ASX:VSL) (iron, etc) +0.98%

Eating losses 😭

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