Anglo American evaluates BHP combination proposal


London-based mining company Anglo American confirmed on Thursday it is evaluating a combination proposal received from Australian mining giant BHP, Kallanish reports.

The unsolicited, non-binding and “highly conditional” deal comprises an all-share offer for Anglo American by BHP, Anglo explains. It would be preceded by separate demergers by Anglo of its entire shareholdings in Anglo American Platinum and Kumba Iron Ore to Anglo shareholders. The two parts of the proposal would be inter-conditional.

The potential takeover could still face antitrust hurdles in copper, as the red metal is a critical mineral. The business is also the most desirable within Anglo, as it consists of Tier-1 assets in low-risk jurisdictions, with organic growth, Jefferies analysts point out in a note.

“It is not clear that the merged company would have non-core copper assets to divest as a proposed remedy. Los Bronces has operational upside, and BHP is clearly unlikely to sell its recently formed Copper South Australia business. Collahuasi, Quellaveco, Escondida, Pampa Norte, and Antamina would almost certainly be core as well,” they add. “We would assume there would be multiple interested parties in this business.”

Anglo said in a statement its board is currently reviewing the proposal with advisers, though it noted that there can be no certainty that any offer will be made. The company has not disclosed the value of the offer, and said a further announcement will be made “as and when appropriate.”

BHP has said that Anglo shareholders would receive 0.7097 BHP shares, as well as Anglo’s shares in Kumba and Amplats in a deal that values Anglo American at £31.1 billion ($38.9 billion) or £25.08 per Anglo share based on the current BHP share price.

Christopher LaFemina, chief financial analyst at Jefferies, and his team estimate a “fair value” to get Anglo’s attention would be £28/share, which equates to a $42.6 billion equity value. “This is 28% above the most recent Anglo share price, and we believe it is a reasonable starting point in estimating what price might be enough to get a deal across the finish line,” he adds.

As per the UK Takeover Code’s “put up or shut up” deadline, BHP has until 5pm on 22 May to disclose its intention to make an offer. If the Australian miner continues to pursue the deal, Jefferies expects other bidders to emerge.

Potentially, Anglo could also propose demerging Amplats and Kumpa, spin off De Beers (diamond), sell met coal, sell Minas Rio (iron ore), and then sell the copper assets (along with nickel and manganese). This could unlock significant value, says LaFemina. “None of this is simple, but we believe there is value in Anglo that is not currently fully reflected in its share price,” he concludes.

“Copper is in demand for the energy transition, and BHP will be trying to tie their share price to the energy transition with the bid for Anglo. BHP benefited from a similar macro trend with iron ore and Chinese industrialisation in the 2000s; it makes sense to try and repeat this,” comments Andy Leyland, co-founder of SC Insights. “Both companies have deep expertise in the copper sector, and some great assets. Hopefully a tie-up will increase, not decrease, much needed capital investment in the sector.”

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Italian wire rod producers are mulling increases from next week, by some €40/tonne ($42) compared to asking prices in April. Local sellers are taking advantage of EU import quota exhaustion and the long delivery times buyers will have to face before clearing imported material through customs, sources tell Kallanish.

A wire rod buyer says he is decreasing his prices as consumption downstream continues to be extremely unreliable. Another buyer believes hikes will not stick and re-rollers will continue to buy very low volumes in May. This is a quiet week in Italy and no contracts are being concluded. Several executives in the steel sector are already on holiday due to the Italian bank holiday on 25 April and Labour Day on 1 May.

A wire rod mill source reports low demand in April and “a dead market this week”. Some activity is seen restarting after Labour Day. “If we are lucky, they [buyers] will start asking for material from Monday 6 May,” another source comments.

Meanwhile, a trader says there is demand for imported wire rod despite the import quota exhaustion. However, lead times are long and buyers are only willing to wait to clear material through customs if prices are sensibly lower than domestic values.

Another trader says he sold good volumes of Asian wire rod at the Tube & Wire tradeshow in Dusseldorf last week for lower-than-domestic values. No large contracts were agreed between buyers and Italian mills in Dusseldorf. “Nothing concrete has happened,” the wire rod mill notes.

High-carbon steel wire rod sales volumes continue to be higher versus low-carbon drawing-quality material. Domestic values for drawing-quality material are now at €610-630/t ex-works on average. Domestic mills are considering pushing up their asking prices to €670/t ex-works, sources say.

Northern European wire rod prices are flat again amid low demand. Domestic transaction prices for drawing-quality wire rod are at €650/t ex-works and mesh-grade wire rod is at €620/t (see Kallanish 19 April).

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Lynas holds back inventory amid low rare earths prices


Australia-based Lynas Rare Earths said Wednesday it is holding its inventory instead of selling amid plummeting rare earth prices, Kallanish reports.

The miner decided to hold all inventory of mixed heavy rare earths (SEG) and around 500 tonnes of neodymium and praseodymium (NdPr) during the third quarter of financial 2024, ending 31 March 2024.

“The market continues to be less than kind to us and to anybody else in rare earth,” Lynas ceo Amanda Lacaze told analysts during an earnings call. She believes the “slight” improvement in prices in April “will probably continue to firm, but not at a significantly accelerated rate.”

As a result, the company decided to hold some of its inventory “rather than having it sitting in other people's warehouses, appreciating as the price goes up,” Lacaze says. “There’s a general consensus that the current price is below cost for many Chinese producers and that the Chinese economy is starting to pick up momentum again,” she continues.

During the March quarter, the NdPr oxide China domestic price was $47/kg, down around 47% from $88/kg in Q3 FY23. From $50/kg in January this year, the price also dropped to $43/kg in March, according to the company’s quarterly report.

While holding its inventories has led to lower revenue for the quarter, the company expects the decision to help it “achieve better value over time.”

The Australian miner’s quarterly sales revenue fell to AUD 101.2 million ($65.64m), compared to AUD 242.8m a year earlier. Its realised price dropped 11.3% to AUD 43.8/kg. Meanwhile, it produced 1,724 tonnes of NdPr, with the production remaining roughly flat compared to 1,725 t produced in Q3 FY23.

Lynas ceo notes that the company will not accelerate production at its Malaysian operations “until we see some further improvement in the market.” Meanwhile, the Mt Weld expansion project in Western Australia remains on track, with construction activities progressing as planned. In addition, the company is expecting to start earthworks at its Texas processing plant by the end of this calendar year.

“As Lynas’ project pipeline comes to fruition, it is increasingly faced with strategic optionality,” Jefferies analysts wrote in a note on Wednesday. “That said, it is currently faced with soft NdPr and SEG markets, into which it is rationally holding back inventory rather than selling into.” 

“Rare earths prices remain subdued, albeit improving, but we remain positive on the medium-to-longer-term outlook,” they add. “Rare earths markets are going through a period of stabilisation as demand catches up with the supply growth of recent years. As we move through 2024, we look for improved commodity prices, as well as progress with production ramp-ups and growth projects to support Lynas.”

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"We’ve heard that the Chinese government has launched an investigation into HRC trade without VAT, which has prompted trading companies to keep their distance from such practices to avoid being caught on the radar," a trading company official explains.

Towards the end of last week, ex-China HRC offers gained $5-10/t compared to the beginning of the week, and price stability has been largely maintained in the GCC market as of Tuesday.

This week, the region's largest re-roller issued an enquiry for 25,000 tonnes of HRC and 10,000t of cold rolled full hard (CRFH) for July arrival.

Initial offers for 2mm re-rolling grade (SAE 1006) HRC from Chinese tier-one mills are at $575-585/t for end-June/July load-readiness, $585/t ex-Taiwan for July shipment, and $580-590/t ex-Japan for July dispatch.

Meanwhile, the Chinese major's 1.2mm SPHT-1 grade offer from its ESP line is hovering at around $615/t for end-May shipment, while its Chinese rival is at $605/t for June shipment. Similarly, the ex-China offer for 0.35mm+ CRFH is at $605/t for June loading.

All prices are based on cfr Dammam, Jebel Ali or Abu Dhabi ports.

"Monitoring domestic market sentiment in China and buying appetite in Europe, Türkiye, and other major consuming countries, Far Eastern mills are focusing on sales in export deals in Asia. I expect price volatility in HRC to continue with ups and downs, but not to exceed $580-590/t cfr GCC ports from Chinese and non-Chinese suppliers," comments an experienced trading source.

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EV outlook remains robust despite near-term challenges: IEA


The International Energy Agency (IEA) shared on Tuesday a bullish outlook for electric vehicles, despite recognising “near-term challenges” in some markets, Kallanish reports.

Its newly released Global EV Outlook 2024 report finds that global electric car sales are set to remain “robust” this year, reaching roughly 17 million units. That would mean a just over 20% on-year increase, from the nearly 14m electric cars sold last year. In 2023, EV sales were up 35% y-o-y or by 3.5m units, bringing the global electric car fleet to 40m cars.

Despite the slower growth rate and “legitimate uncertainties and concerns,” the IEA says data shows the EV momentum continues. “The number of electric cars sold globally in the first three months of this year is roughly equivalent to the number sold in all of 2020,” it notes.

“Rather than tapering off, the global EV revolution appears to be gearing up for a new phase of growth,” says IEA executive director Fatih Birol. “The wave of investment in battery manufacturing suggests the EV supply chain is advancing to meet automakers’ ambitious plans for expansion. As a result, the share of EVs on the roads is expected to continue to climb rapidly.”

The outlook estimates more than one in five new cars sold globally this year will be electric. Over the next decade, the IEA expects “surging demand” to remake the global auto industry and significantly reduce oil consumption for road transport.

Based on today’s policy settings alone, by 2030, almost one in three cars on the roads in China will be electric; and nearly one in five both in the US and the European Union.

Birol has acknowledged that the recent slowdown in sales growth is related to incentive changes in some markets. When queried about the potential need for countries with more mature EV penetration rates to reinstate subsidies to boost sales growth, he told Kallanish: “government policies do play an important role in the pace of penetration of electric cars.”

The director highlighted that any change in policies such as restarting subsidies or cutting them altogether should reflect a nation’s ambitions to remain competitive. These uncertainties are rising with elections across the globe, including in the US, where Donald Trump is running for President again.

“In many countries, there is a huge competition for the next chapter of the industrial sector, which is clean energy technology manufacturing. I think in the US or in Europe, or elsewhere, even if there is a change in the government policies not to be so friendly or supportive of the clean energy policies; if those countries and industries want to still be competitive, vis-à-vis China and other countries, they have to continue to push for the clean energy technology manufacturing,” he says.

“This is an industrial policy. This is not directly related to climate change concerns. If a government, economy wants to be competitive in the future, if an industry sector wants to be competitive in the future, they still need to push ahead with the electric cars and other clean energy technology manufacturing,” Birol concludes.

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