Happy Sunday to everyone…

The term (1) —esperpento— aptly encapsulates the harsh realities of contemporary existence.  We underestimate the underlying causes of natural disasters, such as the hurricanes devastating Florida and the persistent wildfires globally.  These calamities are a poignant reminder of humanity's insufficient stewardship of the environment. Furthermore, the devastating bombings in the Middle East have profoundly affected millions, reversing years of progress and weak stability.  The plight of migrants, who undertake perilous sea voyages in pursuit of improved living conditions, is often overlooked; many who survive these treacherous journeys are confined in detention centres.  What a fucking fate.  We must acknowledge that most individuals today are immigrants or descendants of immigrants.  The disturbing imagery associated with these issues evokes the warped reflections produced by concave mirrors in amusement parks, yet the reality depicted is profoundly troubling.  What lies ahead?

(1) Esperpento is a captivating literary style that emerged in Spanish literature, pioneered by the talented Ramón María del Valle-Inclán, a multifaceted author born in Pontevedra on October 28, 1866, and who later passed away in Santiago de Compostela on January 5, 1936. As a playwright, poet, and novelist, Valle-Inclán was a key figure in the modernist movement. His unique approach employs twisted portrayals of reality to offer sharp critiques of society, delving into profound themes such as death, the grotesque, and the unsettling transformation of humans into mere objects.

Today…

Gas looks beyond the Middle East and turns its steps off from oil…

As winter approaches in the northern hemisphere, gas consumption is growing rapidly. Despite a slight price increase this Thursday, the cost of fuel for industry and heating in Europe remains almost unchanged from last week.

The shadow of Hormuz or why oil prices finally react to the Middle East turmoil…

Iran’s retaliation for Israeli attacks on Lebanon fuels fears that the political crisis will spread to the crude oil market

El Pais by Ignacio Fariza, Madrid 4 - 11 OCT 2024 

Brazilian Vale appointed Gustavo Pimenta as president, effective October 1, 2024…

The succession process showed Vale’s strong integrity, transparency, and governance. "We are confident in Gustavo Pimenta as Vale's leader," Stieler stated.

Source: FORBES, August 28, 2024

The shift towards sustainable energy will rely heavily on essential minerals and metals...

Source: Media

Gratitude is a vital aspect of our existence...

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Gas looks beyond the Middle East and turns its steps off from oil…

As winter approaches in the northern hemisphere, gas consumption is growing rapidly. Despite a slight price increase this Thursday, the cost of fuel for industry and heating in Europe remains almost unchanged from last week.

El Pais by Ignacio Fariza, Madrid - 11 OCT 2024 

Oil and gas rarely move in different directions: their prices tend to go together—almost always, but not always. Recent days are a vivid example of this cyclical asynchrony: the recent rise in the price of Brent has barely moved—to the surprise of many—to the main reference of the natural gas market in Europe, the Dutch TTF, which has been much less shaken by developments in the Middle East.

At the gates of the cold season in the northern hemisphere, when gas consumption grows exponentially, and despite the rise recorded this Thursday, the price of fuel in industry and heating in the Old Continent is almost the same level as at the beginning of last week.

It was as if Iran, the world's seventh-largest gas producer and second in reserves, had not wholly entered the conflict. As if the fear of an Israeli attack on its infrastructure-"a significant risk, though less likely than an attack on military facilities," in the words of Fernando Ferreira, geopolitical risk director at Rapidan Energy Group-is not a real option.

At the gates of the cold season in the northern hemisphere, when gas consumption grows exponentially, and despite the rise recorded this Thursday, the price of fuel in industry and heating in the Old Continent is almost the same level as at the beginning of last week. As if Iran, the world's seventh-largest gas producer and second in reserves, had not wholly entered the conflict. As if the fear of an Israeli attack on its infrastructure-"a significant risk, though less likely than an attack on military facilities," in the words of Fernando Ferreira, geopolitical risk director at Rapidan Energy Group-is not a real option.  And as if the closure of the Strait of Hormuz—a key enclave for the transit of hydrocarbons that passes through 20% of liquefied natural gas (LNG, which travels by boat) that moves every day in the world—would not have ceased to be a remote option to become something still far away but already plausible.

"Gas prices initially responded to the escalation of tension in the Middle East, but unlike oil, they settled later," says Tom Marzec-Manser, head of analysis for the gas market at the British consultancy ICIS. However, he recalls, "an increase in Egyptian demand, which is heavily dependent on Israeli gas, could reduce availability in Europe.

A reduction in Iranian production would impact the pipeline supply to Turkey, which would also strain the continental LNG market.  "He is reassured, however, by the recent meeting between the Iranian and Qatari authorities to try to ensure the normal flow of gas exports from the emirate regardless of what happens in the geopolitical arena.

Risk premium…

There are some possible explanations for the fact that gas, an asset usually more nervous and volatile than crude oil, has yet to follow in the footsteps of its older brother.  The first and perhaps most important is that methane prices remained strong while oil prices languished in summer.  For example, we need to respond more effectively to the complete filling of underground deposits in the 27 (95% today) or to still weak European demand.  Internalizing, instead, the meteorological models that foreshadowed a winter colder than last by the phenomenon of La Niña.

This higher starting point in the gas price already implied a higher risk premium for geopolitics. Both by Russia and Ukraine and to a lesser extent by Israel, Gaza, Lebanon and now also Iran. This is how Pedro Cantuel, an energy analyst at the Ignis Group, sees the recent upheaval in the Middle East "internalized" in the gas market.  "The fundamentals remain robust, and the strong speculative exposure in the European market is already known...  This higher starting point in the gas price already implied a higher risk premium for geopolitics. Both by Russia and Ukraine and to a lesser extent by Israel, Gaza, Lebanon and now also Iran. This is how Pedro Cantuel, energy analyst of the Ignis group, sees the recent upheaval in the Middle East "internalized" in the gas market. "The fundamentals remain robust, and the strong speculative exposure in the European market is already known...  That, coupled with the instability in areas affecting LNG routes, keeps prices high, too, "sums it up. " Another thing", he adds, "would be to escalate the conflict in the Middle East even further".

Unlike oil, where most projections point to a clear stagnation of demand in the coming years, with the EU and China having already left behind their peak consumption for natural gas, most projections still point to a long decade of global growth. Hence, the expected landing of prices will come somewhat later.

No impact on the price of electricity…

The current situation has little to do with the immediate aftermath of the Russian invasion of Ukraine. Not only because of the scale of the price crisis-still very incipient today, the biggest in the history of the Old Continent a couple of years ago because now the earthquake's epicentre is located in the crude and not in the gas. " The biggest current risk in the gas market is a cold winter in Europe," Marzec-Manser said.

This shift in the balance also has a sectoral impact: the oil boom affects mainly transport, while gas affects both industry and retail consumers. This was the case in the disastrous 2022 when they saw the cost of heating their homes and their electricity bill skyrocket.

Far from rising, the wholesale price of electricity is even lower today than a couple of weeks ago. This is not only because gas has not followed the footsteps of crude oil, but also because of the greater contribution of renewables. Wind and rain, in particular, have significantly boosted the generation of electricity in much of the European continent, providing an optimistic outlook for the future of energy economics. This increased reliance on renewables acts as an important buffer that limits the channels of contagion on families and SMEs.

The shadow of Hormuz or why oil prices finally react to the Middle East turmoil…

Iran’s retaliation for Israeli attacks on Lebanon fuels fears that the political crisis will spread to the crude oil market

El Pais by Ignacio Fariza,  Madrid - 03 OCT 2024 

Oil is no longer immune to the powder magazines of the Middle East. After several weeks of general anaesthesia, with the price of crude oil at a low for almost three years, Iran’s entry into the conflict has rekindled latent fear: the regional clash will eventually result in an Israeli retaliation on Iranian wells or even an attack by Tehran on Saudi deposits or refineries, as happened in September 2019. The most extreme scenario, and feared for its consequences, would be the closure of the Strait of Hormuz, an absolutely crucial route that flows one-fifth of the world’s crude oil. The closure of this route between Iran and Oman, which is only 34 kilometres long at its most narrow point, would significantly blow the price balance.

Those who follow the daily energy markets have been absorbed for weeks, wondering how it was possible that the price did not react even minimally to the escalation in the Middle East, home to one out of every three barrels extracted daily on the planet. What we were seeing was something extraordinary in historical terms,” reflects Jorge León, vice president and head of oil analysis at the consultancy Rystad Energy, after many years as a senior analyst for OPEC.

Some rubbed their eyes: “A year ago, just with the conflict between Israel and Lebanon, the price of oil would have gone to triple digits [100 dollars]”, wrote Norbert Rücker, head of economic studies at the Swiss investment bank Julius Baer. A few hours before, Iran whipped up the regional hornet’s nest with two hundred missiles fired over Israeli soil and raised the price of Brent by four dollars in just two days.

The markets were confident that the shock would not be too great and that the large capacity or (surplus) capacity of the Organization of Petroleum Exporting Countries (OPEC), at a maximum for many years, would compensate for any possible cut in production. But this fragile balance has been blown up by the Iranian attack on Israel, a move with consequences yet to be deciphered. Thus, the so-called geopolitical fatigue said goodbye: the false sense of security after not a single barrel had been sold in the almost 12 months since the Hamas attacks on Israel.

The current situation marks the first time someone has inquired about its limits. What is Israel’s response now? And what is Iran’s possible response? Will other [regional] actors be involved?” Trafigura chief economist Saad Rahim rhetorically asks in statements to Bloomberg. His voice is not light: Trafigura is one of the world’s largest commodity traders.

However, one thing is clear: “The oil market came from a stage of extreme complacency about geopolitical risk,” summarizes Bob McNally, former energy advisor to the US administration during the time of George W. Bush. “That risk premium will grow whether the market perceives that escalation directly impacts energy infrastructures or flows, or if Israel attacks infrastructure critical to the [Iranian] regime”.

When will the oil demand reach its peak? IEA and OPEC War of Numbers…

Despite the twist of the script in recent days, it is essential to put the climb into perspective. Even after two consecutive days of rising, which brought Brent to around $75 per barrel levels at the beginning of September, the European benchmark remains close to its annual lows.

And it remains, at least for now, a worrying element amid interest rate declines on both sides of the Atlantic. It would have to rise much more to become an inflationary factor again.

The second hot spot has to do with the significant change in the world market structure in recent years. Saudi Arabia, the UAE and even Kuwait have a significant spare capacity they could put on the market if needed: about eight million barrels per day, four of them in a very short time (less than 60 days). A significant buffer, superior to what Iran, the world’s seventh largest producer of crude oil, puts on the market every day: 3.2 million barrels, 4% of the total.

That should calm the market,” Leon says on the phone. China, a market where consumption is showing signs of weakness and where the electrification of transport clearly pushes down medium—and long-term forecasts, has already left its peak production behind. According to the calculations of the International Energy Agency (IEA), a theoretical surplus will start next year and reach its zenith in 2030.

Radical shift in market structure…

The world bazaar of crude oil has little to do with that of a decade ago. Although still significant, the weight of the Persian Gulf countries is noticeably lower, which reduces the proportion of oil subject to geopolitical turmoil. The other side of this coin is increasing production in Western countries or the Western orbit: Canada, Brazil, Guyana and, above all, the United States, which has managed to become the first extractor of crude oil on the planet at the back of hydraulic fracturing (fracking), a technique that has revolutionized the sector. The result of both forces is a greater volume of crude oil in the face of geopolitical upheaval.

There’s more. The second day of increases in crude oil prices coincided with the telematic meeting between members of the OPEC cartel, with the still-alive prospect of ending, as from December, the unilateral supply cuts they have tried to sustain prices in recent years. A step that, if taken, would push down the cost of crude oil.

If Israel’s [Iran’s] response is not too aggressive, markets might consider that both countries prefer to scale down after a short hostile exchange for the second time this year,” says Francesco Pesole of Dutch bank ING. “Leon’s Trench, referring to the potential closure of the Strait, the last weapon in the Iranian arsenal to damage the West economically and whose activation would elevate the conflict to another dimension. “The consequences on global supply would be huge, similar to the one that had the Russian invasion of Ukraine in 2022”—said soon.

Brazilian Vale appointed Gustavo Pimenta as president, effective October 1, 2024.

Source: FORBES, August 28, 2024

The board of directors of Brazilian Vale has unanimously elected Gustavo Pimenta as the company’s next president, replacing Eduardo Bartolomeo on October 1, as the company reported to the market in the early hours of last Monday.

The appointment was made following a rigorous selection process supported by an international standard company by Vale’s bylaws, corporate policies, board rules, and applicable legislation.

As the board chairman, Daniel Stieler, has pointed out, Pimenta has the skills to aim for a new virtuous circle for the company, with great potential for generating value for all its stakeholders.

“The succession process demonstrated the high level of integrity, transparency and solidity of Vale’s governance. We are very happy and confident with the choice of Gustavo Pimenta to lead Vale”, has defended Stieler.

The newly appointed president of Vale has thanked the council for their confidence in leading the company through this new cycle. “Let us walk this path together, intensifying dialogue with all our stakeholders and prioritizing the safety of people, operations and the environment. I am confident that we will continue to advance our mission, focusing on generating and distributing value, elevating Vale to even higher levels,” he said.

The outgoing president, Eduardo Bartolomeo, has been “very optimistic” with his replacement, whom he considers “a professional with recognized competence and commitment”.” With Gustavo Pimenta, I believe that Vale will continue firmly on its path towards leadership in sustainable mining and value creation for all stakeholders”, he noted.

Extensive experience in the financial, energy and mining sectors…

Pimenta is a global executive with experience in the financial, energy, and mining sectors and a career that has developed over twenty years in Brazil, the United States, and Europe.

In 2021, he took over as executive vice president of Finance and Investor Relations at Vale, where he also served as head of the Purchasing, energy, and Decarbonization areas.

Prior to joining Vale, Pimenta was an executive at AES for twelve years, accumulating extensive experience as global finance director, director of planning and strategy, and vice president of performance and services for the company, as well as Vice President of Strategy and M&A at Citigroup in New York.

The manager has a degree in Economics from the Federal University of Minas Gerais and a master’s in Finance and Economy from Fundação Getúlio Vargas.

The shift towards sustainable energy will rely heavily on essential minerals and metals...

Source: Media / Editing by Germán & Co.

Throughout the tapestry of human history, the quest for minerals and metals has woven a rich narrative, beginning with our early education on the epochs of civilization: the Stone Age, Bronze Age, and Iron Age. These eras mark the passage of time and spotlight our ingenious advancements in harnessing the earth's treasures, underscoring our deep-rooted reliance on these natural resources.

In the Stone Age, our ancestors crafted tools from an array of stones—flint, chert, basalt, and sandstone—starting with a simple rock collection before evolving into more sophisticated open-pit and underground mining techniques. The Neolithic flint mines near Mons, Belgium, stand as a testament to this journey, showcasing the shift from surface to underground extraction. These early miners toiled for survival, fashioning essential tools and storage vessels. However, as their skills flourished, they began to explore the artistic and spiritual dimensions of earth materials, discovering that certain minerals could be transformed into vibrant paints.

The stunning cave paintings hidden beneath the Pyrenees, some of the finest remnants of the Paleolithic era, reveal a mastery of composition, perspective, and colour that still captivates us today. The reasons behind these artistic expressions remain mysterious—were they for storytelling, spiritual rituals, or something else entirely? What is clear is that cave painters cherished the vivid hues of ochre minerals, often embarking on long journeys to procure these pigments, which they frequently found near their artistic sanctuaries.

As the Stone Age gracefully transitioned into the Bronze Age, the advent of smelting techniques unlocked new possibilities for working with metals and ores. During this period, they also birthed a flurry of theories regarding the origins of ore deposits, primarily from Greek and Roman thinkers who spun tales steeped in myth and superstition rather than relying on empirical evidence. They envisioned the earth as a living entity, with ores sprouting from metallic exhalations or growing from seeds buried deep within. By the 16th century, alchemists speculated that celestial forces influenced ore formation. This notion was later scrutinized and refined by the German scholar Georgius Agricola in his seminal work, De Re Metallica.  Thus, the saga of humanity's relationship with minerals and metals unfolds, a story of survival, creativity, and the relentless pursuit of knowledge.

A renewable energy transition will increase demand for critical minerals and metals, such as lithium, copper, manganese and rare earth elements. The market for key energy transition minerals has already doubled over the past five years, and the total demand for these materials in clean energy technologies is expected to increase between twofold or fourfold by 2040.

While continued growth will require more materials mining, the total amount of extraction needed to build a world that runs entirely on green energy by 2040 is far lower than that needed to maintain a fossil-fuelled energy system. In addition, energy production from fossil fuels needs continuous supply flows for combustion and is non-recyclable, whereas critical materials for energy transition are installed in equipment that can be used for years and then recycled at end of product life. While the renewable energy transition will lead to a decrease in extracted materials, it is vital that we ensure these metals are mined responsibly.

One key metal for which demand will grow more than most others in absolute terms is copper. This is due to its wide range of applications, unique conductive properties and ubiquitous use in electrification technologies. Consequently, annual copper demand is forecast to increase from 25 million tonnes currently to 55.1 million tonnes in 2050 under a 1.5°C scenario. New supplies will be needed to close the demand gap and avoid the worst impacts of the climate crisis.

Availability of metals…

The good news is that the required volumes of many metals are geographically well-distributed in known terrestrial reserves. Copper is distributed across Chile (23.6%), Peru (10%), the Democratic Republic of Congo (10%), China (8.6%), the United States (5.9%), and several other countries.

In the short term, the volumes of copper and most metals will come primarily from the same countries that mine them today, as it typically takes 10+ years to open new commercial mining operations. Processing capacity can be geographically diversified much faster than finding new mining locations with sound investment conditions and infrastructure. The US and the EU are implementing new initiatives and standards to promote the development of domestic mining operations and are also establishing strategic partnerships with other countries to build up new supply.

Mining’s social license…

Mining can disrupt large amounts of land, impacting biodiversity and ecosystems. It also uses vast quantities of water and creates tailings. In some cases, there have been catastrophic events that have had a major impact on human and environmental health, including the tailings dam failures at Samarco in 2015 and Brumadinho in 2019, both in Brazil.

In certain instances, both mining and processing can create emissions that can be harmful to the environment and human health. Mining is inherently regional – you can’t change where the deposit is, and the vast majority of mines are located within or adjacent to Indigenous Peoples territories or local communities. Just over 50% of the metals required for renewable energy transition are on or near Indigenous lands.

Health and safety, opportunities for employment and procurement, and protecting the rights of local and Indigenous Peoples are paramount. If these issues aren’t managed properly, they can create pushback by impacted communities.

Mining the responsible way

The first way to do responsible mining is through robust internal management systems, strong corporate governance and a well-established process for dialogue and grievances. The second is by implementing and getting external assurance against recognized standards.

There are a number of standards currently in practice: for example, the Mining Association of Canada’s Towards Sustainable Mining programme, covering biodiversity, climate change, crisis management, mine closure, Indigenous and community relations, among others.

Another standard is the Initiative for Responsible Mining Assurance (IRMA), which was developed by a multistakeholder board and is being implemented in South America and Africa. A final example is the CopperMark, an independent assurance framework to promote responsible practices across the copper, molybdenum, nickel and zinc value chains.

While these standards differ in their approach, they all share the same intent of improving the state of mining around the world. Regardless of the evaluation method, one fundamental aspect to responsible mining for the energy transition is transparency and reporting, with a new GRI standard for mining to guide the way. End users of metals can also take action to work towards more responsible practices by increasing supply chain transparency and promoting responsible mining practices.