Weapon of choice? China rare earth prices soar on their potential... - Reuters

BEIJING (Reuters) - Chinese rare earth prices are set to climb further beyond multi-year highs hit following a flurry of state media reports that Beijing could weaponize its supply-dominance of the prized minerals in its trade war with Washington.

Workers transport soil containing rare earth elements for export at a port in Lianyungang, Jiangsu province, China October 31, 2010. REUTERS/Stringer

Rare earths, a group of 17 elements that appear in low concentrations in the ground, are used in a wide-range of products stretching from lasers and military equipment to magnets found in consumer electronics.

China supplied 80% of the rare earths imported by the United States from 2014 to 2017, with Chinese state newspapers last month reporting Beijing could use that as leverage in the ongoing trade dispute between the two.

“(Magnet-related rare earths) are the ideal materials to weaponize ... because they are so critical to high-demand, highly-competitive, price-sensitive industries,” said Ryan Castilloux, managing director of Adamas Intelligence, a consultancy that tracks rare earths markets.

“(Such rare earths) are collectively responsible for over 90% of the demand market’s value each year ... (so they) will yield the most juice for the squeeze,” Castilloux said by email from Toronto, adding that prices were set to keep rising.

Prices of dysprosium metal, used in magnets, high-powered lamps and nuclear control rods, are currently assessed by Asian Metal at their highest since June 2015 at 2,025 yuan ($292.98) per kg.

That is up nearly 14 percent from May 20, the day Chinese President Xi Jinping visited a rare earth plant, sparking speculation the materials could be the next front in the Sino-U.S. trade war.

(GRAPHIC: Rare earth export prices perk up after China rattles trade war saber - tmsnrt.rs/2KjEK74)

The price of neodymium metal, critical to the production of some magnets used in motors and turbines, has risen to its highest since last July at $63.25 a kg, up about 30% since May 20, according to Asian Metal.

The price of gadolinium oxide, used in medical imaging devices and fuel cells, is up 12.6 percent from May 20 at 192,500 yuan a tonne, the highest in five years.

Asian Metal is a research and price reporting agency that covers rare earth elements.

Chinese rare earth prices started to move “right after China announced the import ban” on rare earths from Myanmar, said Helen Lau, an analyst at Argonaut Securities in Hong Kong.

The state-run Securities Times reported on May 13 that customs in the southwestern province of Yunnan would ban imports of rare earths from neighboring Myanmar, a key supplier of middle-heavy rare earth feedstock, from May 15.

“But then a couple of days later, you can see a big movement in the prices - so that was mainly because of this possible weaponizing of rare earths,” Lau said.

“If China indeed weaponizes rare earths, the U.S. will not have enough supply because it needs some lead time to build their own processing capacity, which currently is zero,” she added.

Another analyst, who asked not to be identified due to the sensitivity of the matter, said that six major rare earth producers in China held the most stocks in the spot market, giving them power over prices.

The six major producers are China Minmetals Rare Earth Co, Chinalco Rare Earth & Metals Co, Guangdong Rising Nonferrous, China Northern Rare Earth Group, China Southern Rare Earth Group and Xiamen Tungsten.

Reporting by Tom Daly and Shivani Singh; Editing by Joseph Radford

Our Standards:The Thomson Reuters Trust Principles.

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https://www.reuters.com/article/us-usa-trade-china-rareearths/weapon-of-choice-china-rare-earth-prices-soar-on-their-potential-role-in-trade-war-idUSKCN1T70IB

2019-06-06 06:15:00Z
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Fiat Chrysler withdraws proposed merger with Renault - CNN

The company said Wednesday that it "has become clear that the political conditions in France do not currently exist for such a combination to proceed successfully."

Earlier in the day, Renault (RNLSY) said that the French government had requested its board of directors postpone the vote on the merger.

France, which owns 15% of Renault and is the company's largest shareholder, previously indicated that it would support a merger if the companies protect French jobs and auto plants.

Shares in Renault plunged nearly 7% in Paris on Thursday after the proposal was withdrawn. Fiat Chrysler stock dropped 1.6% in Milan.

Renault could not be reached for further comment Wednesday.

The deal would have created the world's third largest carmaker behind Volkswagen (VLKAF) and Toyota (TM). General Motors (GM) would have fallen to fourth in the global ranking.

The proposal was the latest example of established automakers seeking partnerships to share the costs of developing new technologies including electric vehicles and autonomous driving systems.

Fiat Chrysler (FCAU) owns brands including Jeep, Dodge, Alfa Romeo and Maserati. Among its top markets is North America, where Renault does not have a significant presence.

When it first made the merger proposal last month, Fiat Chrysler said a combination would produce annual cost savings of more than €5 billion ($5.6 billion). The company said no plants would be closed as a result of a merger.

Renault is already part of a major global alliance with Japanese automakers Nissan (NSANF) and Mitsubishi Motors. Renault and Nissan both own major stakes in one another.

That alliance was put under pressure when Carlos Ghosn, the architect of the partnership and the former chairman of Nissan and Renault, was arrested last year in Japan and accused of financial wrongdoing.

Nissan declined to comment on Fiat Chrysler's withdrawal.

Nissan, Renault and Mitsubishi Motors together employ more than 470,000 people in nearly 200 countries. They sold more than 10.6 million cars worldwide in 2018.

All three alliance members renewed their commitment to one another last year after Ghosn was arrested, but tensions linger among the partners.

Fiat Chrysler was itself formed as a merger of two struggling automakers. Fiat bought a controlling stake in Chrysler following the US government bailout of the company in 2009. They were formally merged in 2014.

Fiat Chrysler is a distant fourth in US sales and eighth globally. The company has also trailed its competitors in adopting electric vehicle and self-driving technology.

Sergio Marchionne, its former CEO who passed away a year ago, had spoken openly of the need to merge Fiat Chrysler with a larger automaker to give it the scale and resources to compete.

He had even sought a merger with General Motors, only to be rebuffed. He had been far more blunt than other auto executives about the threat to the industry that new entrants such as Google (GOOGL) posed to automakers.

- Chris Isidore and Sherisse Pham contributed to this report

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2019-06-06 08:14:00Z
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Why Europe needs to monitor China's rare earths threat - CNBC

Workers transport soil containing rare earth elements for export at a port in Lianyungang, Jiangsu province, China October 31, 2010.

Stringer | Reuters

European manufacturers will need to keep an eye on China's "near-monopoly" on the extraction and supply of rare earth minerals as they move toward electric power, experts have told CNBC.

Rare earths — minerals found in a wide range of everyday consumer electronics — hit the headlines over the past week as China hinted at stopping the export of rare earths to the U.S., after Washington increased tariffs on $200 billion worth of Chinese goods.

The group of 17 minerals aren't actually rare, but are produced in fairly scarce quantities compared with abundantly mined metals like copper. They have grown in prominence in recent years due to their use in high-tech equipment, defense manufacturing and electric vehicles.

China extracted 70% of the world's rare earths in 2018.

Martin Eales, CEO of London-listed Rainbow Rare Earths, which runs an ongoing mining project in Burundi, told CNBC that China may not opt for an outright export ban but rather a reduction in its production quota, which "by definition would reduce the amount of rare earths material available for export and potentially create supply problems for rest-of-the-world users."

The automotive revolution

The long-term concern for European manufacturers, however, will be the increased volume of rare earths required, according to the British Geological Survey's Science Director for Minerals, Andrew Bloodworth.

As the automotive sector moves from internal combustion engines to electric vehicles, many of those electric motors will rely on high field strength electric magnets which contain rare earth components.

"This isn't going to happen overnight, but as the automotive sector moves from petrol and diesel power to electric, you can make a very efficient small powerful electric motor using high field strength magnets," Bloodworth told CNBC.

"The difference there is just that the volumes required to manufacture the millions and millions of cars every year are going to change the game, because they're going to up that demand for materials."

Vertical integration

Bloodworth suggested that the Chinese are aware of the changing portfolio of materials required by the auto industry, adding that they are "particularly interested in selling the global automotive sector motors or even finished cars rather than rare earths."

"So we may see the market operating in a sense that if this demand does ramp up quickly, prices will rise, therefore some of these projects which are kicking around in the rest of the world will come to pass because they will become more attractive to investors," he said.

At the moment, non-Chinese mines are a difficult proposition for investors owing to the scale of Chinese dominance, but Bloodworth suggested any imposition of tariffs or restrictions would be "nuanced," as it would not be in Chinese interests to hike prices in a way that encourages alternative supply sources to enter the market.

Eales agreed that an added interest for companies like Rainbow, operating non-Chinese mines, is "speculation as to how it may fit into a future supply chain that attempts to bypass China entirely."

"There is going to be so much demand from the vehicle market for rare earths that some of these projects will come to pass anyway," said Bloodworth.

"They may be acquired by Volkswagen or Toyota for instance — they will be buying supply and vertically integrating. "

He suggested that Europe was becoming more concerned about the raw material supply chain, owing to its role as a major producer of finished vehicles and the threat that Chinese monopolization of the supply chain poses.

The British Geological Survey has been communicating to the British government the importance of understanding this shifting tide for global manufacturing.

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2019-06-06 05:07:44Z
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Bombardier in talks with Japan’s Mitsubishi on sale of regional jet program - The Globe and Mail

Bombardier Inc. is in talks to sell its Canadair Regional Jet line to Japan’s Mitsubishi Heavy Industries Ltd. in a deal that would bring to a close the Montreal plane maker’s commercial-aviation ambitions after a three-decade expansion.

Canada’s biggest transportation manufacturer confirmed in a statement Wednesday it is in discussions with Mitsubishi on its CRJ program but declined to comment on the nature of the talks. Mitsubishi also confirmed talks are underway but provided no details.

The discussions centre on a sale, said a person familiar with the situation who was granted anonymity because they were not authorized to speak publicly about the negotiations.

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The CRJ family is Bombardier’s last remaining line of commercial airplanes. Divesting the business would mark the end of 33 years of commercial aerospace history that began when the company bought Canadair from the Canadian government in 1986 for $120-million.

Celebrated as the planes that launched Canada into commercial aircraft manufacturing in the 1990s, the CRJ program has been largely neglected in recent years as Bombardier concentrated its resources on bringing the C Series airliner to market. The plane maker has won firm orders for more than 1,900 CRJ aircraft, but sales have slowed and the company now loses money on each unit it builds.

Industry experts say Bombardier made a strategic error in pushing ahead with the larger C Series instead of developing an all-new regional jet to replace the aging CRJ. The company never had sufficient resources to market and support the C Series aircraft and compete with giants Boeing and Airbus, according to trade publication Aviation Week. Bombardier has since handed control of the C Series to Airbus.

The CRJs are small and narrow regional jets seating between 50 and 104 passengers with a maximum range of roughly 3,000 kilometres. The CSeries, rebranded as the A220, are larger planes that can fly twice that distance and designed specifically for the 100 to 150-seat market.

Others say Canada’s ambivalence about supporting a domestic aerospace industry also plays a role. The world’s commercial airline business is dominated by international players that enjoy tens of billions of dollars in backing from their national governments, and although Bombardier has won taxpayer support over the years, Canada hasn’t committed that level of support, says Mehran Ebrahimi, an aerospace specialist and professor at the University of Quebec at Montreal.

“This is sad but it was inevitable,” Prof. Ebrahimi said, adding Canada is a victim of its own contradiction. “Canadians say they want an aerospace industry but they don’t want to commit the significant sums of public money required to fund it. We’ve never made that collective choice.”

Bombardier’s management still needs to complete additional review and analysis before sending the matter to the board for approval and Mitsubishi also has to complete its due diligence review and approval process, Bombardier said. An agreement is not certain, the company said.

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The plane maker had said it was exploring strategic options for its CRJ line, which was orphaned after Bombardier handed control of its C Series airliner program to Airbus SE and sold its turboprop business to Canada’s Viking Air. It is now widely expected to get out of the commercial-aviation business – meaning building planes that haul passengers on a scheduled basis.

Bombardier shares soared on the news, jumping as much as 15 per cent in afternoon trading on the Toronto Stock Exchange before sliding back to close at $2.15, a 10-per-cent gain from the previous day.

Chief executive officer Alain Bellemare was brought in to put Bombardier back on track after development of the C Series nearly drove it into bankruptcy. He is now trying to reposition the company by focusing on luxury jets and trains – product lines he believes have the best profitability and growth prospects.

Bombardier employs some 1,600 people working on the CRJ, about 40 per cent of them in Quebec. The final assembly site is in Mirabel, Que., in factory space leased from Airbus.

For Mitsubishi, buying the CRJ program would boost its capability in plane making by giving it access to Bombardier’s patents, support network and installed base of customers. The company is trying to revive Japan’s dormant commercial-aviation industry by launching the Mitsubishi Regional Jet (MRJ), a 90-seat aircraft that competes with the CRJ and planes from Brazil’s Embraer SA.

“This is like a protein shake for Mitsubishi,” said Addison Schonland of boutique aerospace consultancy AirInsight. “It’s a cup brimming with all kinds of goodness right there for the taking. It won’t be cheap, but there’s really nothing better on the menu for them. For Bombardier, it’s a great way out.”

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Selling the CRJ line would allow Bombardier to further simplify its aviation business while unlocking more capital to strengthen its balance sheet, analysts said. The company last month pared back its expectations for 2019 sales and profit, citing challenges in its rail unit.

A sale could fetch net proceeds in the range of $250-million for Bombardier, AltaCorp Capital analyst Chris Murray estimates.

The fact Mitsubishi is the potential buyer is notable because the two companies are suing each other in the United States in a dispute over trade secrets. A sale could be a creative way out of that legal battle.

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June 05, 2019 at 11:58PM

John Ivison: Indigenous bids for Trans Mountain offer 'reconciliation through economic development' - National Post

Amazon: We are not too big - Business News - Castanet.net

Photo: The Canadian Press

An Amazon executive said Wednesday that the online shopping giant isn't too big and shouldn't be broken up, but added that large companies deserve to be examined.

Amazon and other big tech companies are facing scrutiny from government agencies that are looking into their business practices. In addition, Democratic presidential candidate Elizabeth Warren has called for the breakup of large tech companies like Amazon.

"I think that substantial entities in the economy deserve scrutiny,'" said Jeff Wilke, who runs Amazon's retail business and reports to CEO and founder Jeff Bezos. "Our job is to build the kind of company that passes that scrutiny."

Wilke made the comments during a meeting with reporters at an Amazon conference in Las Vegas focused on artificial intelligence.

He also defended the company from criticism that it hurts its sellers by creating competing Amazon private-label products. The company has developed many private-label goods, including Solimo paper towels and Amazon Basics batteries. But Wilke said that no one inside Amazon shares seller data to create new products and said that its private-label brand business accounts for less than 1% of sales.

"It's a tiny fraction of our business," he said. "Most of our competitors have much larger percentage of their sales in private label.

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June 06, 2019 at 07:51AM

Loonie will 'ratchet higher' if Poloz doesn't follow Fed on rate cuts: Rosenberg - BNNBloomberg.ca

If the U.S. Federal Reserve cuts interest rates, the Bank of Canada will follow suit, says David Rosenberg, who also warns that the loonie will surge if it doesn’t.

“My sense is that Poloz seems to be very confident and wants to keep interest rates stable here,” the chief economist and strategist at Gluskin Sheff + Associates told BNN Bloomberg in an interview Wednesday. “But think about what the risks are if the Fed eases, and the Bank of Canada operates policy here in a vacuum and doesn’t follow suit. What ends up happening is the Canadian dollar is going to ratchet higher.”

Rosenberg warned that a higher loonie is “the last thing” Canada’s manufacturers and resource producers need right now, and that the fundamentals don’t support the Canadian dollar heading toward 80 cents US.  

Rosenberg said he expects the Fed will decrease rates at least twice this year and that the Bank of Canada would follow with cuts within the next couple of months. That’s despite an optimistic economic tone from Canada’s central bank in its latest interest rate decision, when it left rates steady at 1.75 per cent and pointed to “accumulating evidence” of an economic recovery.

“Canada, I think, may lag the U.S. on cutting rates,” Rosenberg said. “But if the U.S. is cutting rates because of a darker global economic outlook and downward revisions to growth, it’s hard to believe we’re going to escape that.”

“I don’t think the bank’s going to sit on its hands for six-to-12 months and see what happens.”   

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June 05, 2019 at 11:59PM