Geomega Resources Inc., Montreal, says it has secured additional debt financing of nearly $1.33 million to use toward building a rare earth magnet recycling demonstration plant in St. Bruno, Quebec. According to a news release from Geomega Resources, project financing will be provided by Investissement Quebec, which will act as an agent on behalf of the Quebec government to secure funding for the project.

Geomega Resources reports that this financing is in addition to the first tranche amount of $1.72 million that was announced Feb. 7. The debt financing now amounts to nearly $3.05 million and will have the same favorable terms as the first tranche, including that the debt is noninterest-bearing.

The increased amount of debt financing amount is based on an updated project evaluated at $4.8 million, including capital costs and working capital, which was previously estimated at $3.2 million. Geomega says the increased cost results from internal evaluations by the company based on the completed engineering work and adjusts for delays, associated restrictions imposed by the COVID-19 pandemic and engineering work as well as higher costs of engineering and construction.

Geomega says the funds will be used toward the purchase of equipment as well as engineering and construction of the demonstration plant.

Kiril Mugerman, president and CEO of Geomega, says the company is “very grateful” for the support from the Quebec government.

“The Quebec government is working hard to help establish clean and innovative production of the critical metals that will simultaneously create jobs and produce materials needed for the industries of tomorrow,” Mugerman says. “Its commitment to transformation and recycling of rare earth elements will help attract further downstream industries and establish a clean and sustainable rare earths refining industry in Quebec. With this funding portion now complete, we are looking forward to the completion of pilot testing, which we began in August 2020, and then proceed to finalize engineering and begin construction.”

While Venezuela’s economy has been spiraling downward even before COVID-19 arrived, its neighbor Colombia had largely been free of recession since the Financial Crisis of 2008 and 2009.

The impacts of COVID-19 changed Colombia’s fortunes, with the International Monetary Fund (IMF) now predicting the nation’s gross domestic product (GDP) will shrink by 8.2 percent in 2020. The nation’s previous good economic standing, however, has allowed it to boost its access to a Flexible Credit Line (FCL) established with the IMF.

In late September, the IMF executive board approved a request from Colombia to increase its FCL by about $6.2 billion, to a total of $17.2 billion.

According to Hamid Faruqee, the FCL mission chief for Colombia, the nation’s government took many of the correct steps in dealing with both COVID-19 and the economic impacts that followed.

“The government reacted quickly to protect its people and its economy from the shutdown’s impact,” says Faruqee in an interview published online by the IMF. “The central bank cut interest rates and provided liquidity and credit. The fiscal rule was suspended for two years so the government has more room to support vulnerable households and businesses.”

The FCL, says Faruqee, is “a flexible instrument [that] will help address both actual and potential balance of payments needs. Combined with Colombia’s comfortable level of international reserves, it provides the added insurance against heightened external risks.”

Faruqee continues, “If the country uses them, these resources will help finance a budget deficit that has almost doubled since May. Tax revenue declined sharply because of the drop in economic activity, while spending increased to pay for health services and support vulnerable people and businesses. These funds will support the authorities’ spending plans on health (for example, more intensive care beds); support vulnerable households, unemployed and informal workers; help firms with payroll support; and meet the country’s financing needs.”

In the basic materials and recycling sectors, Colombia is generally in a second-tier in volume in South America along with Chile and Peru, but behind Brazil and Argentina. In copper, of course, Chile rises to the top.

According to Brussels-based Worldsteel, in the first eight months of 2020, Colombia produced about 710,000 metric tons of steel. That figure was well behind output in Brazil and Argentina, just slightly less than the 730,000 metric tons of output in Chile, and ahead of the less than 500,000 metric tons produced in Peru.

In the first five months of 2020, United States Census Bureau statistics posted to the United States Geological Survey (USGS) website do not show Colombia listed as importing any ferrous scrap from the United States in that timeframe. The U.S. exported 129 tons of aluminum scrap to Colombia in the first half of 2020, according to the USGS.

The value of copper on global exchanges has been volatile but trending upward through much of 2020. Despite COVID-19-related turmoil, several economic trends appear to favor the red metal in the forecasts of economists and analysts.

This carries good news for scrap recyclers and traders but does not always provide comfort when during any given week or month the predicted boom for copper has not seemed to trickle down to bids being made for scrap purchases. The separate issue of China’s attempt to wean itself off imported red metal scrap has been the culprit this year.

Driving around the corner

Copper’s value in future financial quarters and years was a topic of discussion for a panel convened for the Trading Asia event, hosted by Euromoney’s Global Investor Group and conducted online Sept. 17. The discussion included updates on energy and agricultural commodities, but copper also received considerable attention.

When asked by moderator John Browning of Shanghai-based BANDS Financial whether commodities could be headed for another “supercycle” heading out of the COVID-19-related downturn, panelist Saad Rahim of Netherlands-based Trafigura said it was feasible, “with the obvious caveat that it depends on how demand recovers.”

In the metals sector, Rahim cited “an underinvestment on the supply side” as being a factor that could affect pricing in late 2020 and into 2021. Concerning mining, in particular, Rahim said, “We haven’t really seen that reinvestment that is needed going forward.”

He said that was particularly true for metals such as copper and nickel that have a sizable presence in “electric vehicles (EVs) and grid buildout and robotics. All require more copper and nickel in particular.” The demand in those growing markets could be enough to boost prices, especially weighed against the still low levels “of supply that we see committed,” added Rahim, who is Trafigura’s chief economist.

If EV sales return to the growth trend they had before COVID-19, that would be a foremost factor, said Rahim. “An EV requires four to five times more copper than an internal combustion engine vehicle,” he remarked. “The amount of wiring that goes into [an EV makes it] effectively a computer on wheels.”  

Considering that, plus a copper-heavy copper infrastructure, and the nickel that goes into EV batteries, “We’re looking for that incentive price to come in [to spur mining projects, or] there is a deficit that starts to emerge” in mined supply, said Rahim. “Stimulus efforts in China and Europe in particular focus on new energy; that is going to be copper intensive,” he added.

Sachin Patel, who works from Singapore for Chicago-based CME Group, described copper’s journey in 2020 from below $2 per pound in the spring to above $3 per pound in September as “amazing.” The price recovery, he said, “seems to have been driven by China itself” on the demand side, along with “some supply difficulty and positioning [issues].”

On the demand side, “China’s Imports for the past two to three months have been a sight to behold,” he commented. Patel said if any additional demand recovery emerges from North America and Europe, it would put considerable upward pressure on the price of copper.

Matthias Rietig of the Japan-based JPX commodity exchange said the commodities market could become even more volatile in the near- and medium-term future. He expressed concern about “all the money that’s been printed, [which] is in a way scary.” Rietig added, “We can be bullish on metals, but it’s going to be quite choppy.”

Moderator Browning expressed enthusiasm for new global trading contracts emerging from China, including one for copper that could come online as soon as October. “We feel it could overtake the current contracts, in time, to be the benchmark [in] trading copper,” he said of the BANDS Financial viewpoint.

Finding the furnaces

Global price support is encouraging, but for scrap recyclers who were accustomed to robust demand from buyers in the People’s Republic of China, that nation’s government has caused a former seller’s market for red metal scrap to shrink considerably.

With China’s economy the first to rebound from COVID-19, that nation’s copper and brass producers have needed metal units from other parts of the world in mid-2020. With a national scrap quota import system in place, Chinese buyers ended up bringing in more cathode.

Government statistics cited by Shanghai Metals Market (SMM) show that in August 2020, red metals producers and other importers brought in 62.8 percent more cathode compared with August 2019.

Year-to-date, the cathode imports have added up to 2.95 million metric tons in the first eight months of 2020, amounting to a 37.7 increase from the same period last year, according to SMM.

Copper scrap imports, along with those of aluminum, paper and ferrous scrap, have been subject to quota restrictions in China in 2020. The 12 batches or sets of quotas issued thus far have fluctuated in volume, seemingly dependent on the health of the overall economy or metals sector.

The government of China has set a goal of prohibiting imported scrap materials from entering the nation at all starting in 2021, although it has received pushback from overseas trade associations such as the Washington-based Institute of Scrap Recycling Industries (ISRI) and, almost certainly, from its own manufacturing sector.

Within China, trade groups led by the China Nonferrous Metals Industry Association’s Recycling Metals Branch (CMRA) have been setting up a system to allow high grades of nonferrous scrap that can meet a set purity level to be imported in 2021 and beyond. These materials are being classified as a “resource” rather than a “waste.” No “scrap” classification appears to exist in the nation’s customs or environmental lexicon.

Just a few years ago, the People’s Republic of China imported record-setting amounts of aluminum, copper, paper and plastic scrap. Trade figures posted to the ISRI website show that in 2017 China imported more than 3.5 million metric tons of copper-bearing scrap. Ten years earlier, in 2007, the nation brought in more than 5.5 million metric tons.

To what extent China’s metals sector is impacted by its nonferrous scrap import barrier next year could depend on the health of its overall economy. As of late August, SMM reports, “Domestic copper consumption weakened in the third quarter, while domestic refinery supply increased month on month. The Yangshan copper premium [an index price tied to imported refined copper at a specific port in South China] kept falling in tepid trading. The liquidity of the whole foreign trade market dropped to a low point.”

An economic down cycle is a circumstance scrap recyclers in North America and Europe can endure as a reason to watch an end market get smaller, as is the increase in China’s own scrap generation. Shutting off a trade flow by government dictate meets with less understanding from the private sector in all corners of the market.

Greensboro, North Carolina-based Mack Trucks says it has completed an $84 million renovation project called “Reborn” at its Lehigh Valley Operations (LVO) in Macungie, Pennsylvania. According to Mack, the “comprehensive project revitalized the facility’s infrastructure, equipment, systems and processes to create a modernized Lean Manufacturing environment delivering even greater production quality, safety and efficiency.”

“Mack’s Lehigh Valley Operations has built high-quality heavy-duty trucks that our customers depend on for 45 years,” says Martin Weissburg, president of Mack Trucks. “This investment in the plant, our people and new processes allows us to continue delivering on Mack’s legendary durability through integrated, modern manufacturing.”

The company says thousands of upgrades were made to the plant’s manufacturing operations, including a 300,000-square-foot expansion to improve material handling and flow; installation of new equipment and tooling; implementation of new manufacturing IT systems; and construction of a new audit building equipped with stalls and CNG test pads for quality checks on completed vehicles.

The site also added a new 20,000-square-foot building for a Customer Adaptation Center and to support the Mack LR Electric model that will be commercialized in 2021.

Among the products made at the LVO complex postrenovation will be Mack LR Electric refuse model, to be equipped with what it calls a fully electric integrated Mack drivetrain. Orders for the LR Electric will open in the fourth quarter of 2020, with deliveries beginning in 2021.

Mack says a major component of the project was the insourcing of complete chassis assembly to better manage and streamline the manufacturing process. The company also says the “entire facility was given a fresh coat of paint and new, efficient lighting, offering customers and employees an enhanced experience.”

LVO added a new lobby and visitor welcome center, a remodeled Mack Shop merchandise store, redesigned cafeteria and office spaces, plus increased restroom capacity. Parking capacity also was expanded and a new logistics building was added to the campus.

“LVO has been completely transformed compared to the day I arrived in 2016,” says Rickard Lundberg, who as vice president and general manager of LVO led the project. “The physical space has been renovated to allow the openness for employees to learn together and embrace our Lean Manufacturing approach. Without the great people who are part of the LVO team, we could not have created this culture, this spirit of Mack Trucks that is reflected in each vehicle that rolls off the assembly line.”

Mack’s Lehigh Valley Operations produced its first trucks in 1975. The 1 million-square-foot facility assembles all heavy-duty Mack trucks built for the North American market and for export, according to the firm.