Weekly Metals News Digest – Feb 3-7

US Eyes Ukrainian Rare Earths in Exchange for Continued Support

US President Donald Trump has expressed interest in securing access to Ukraine’s rare earth metals in return for ongoing American assistance. This proposal aligns with a broader strategy unveiled by Ukrainian President Volodymyr Zelensky, who presented a plan for joint development of Ukraine’s rare earth deposits to Trump and Republican lawmakers ahead of the US presidential election in October 2024.

Ukraine’s Ministry of Environmental Protection and Natural Resources reported in 2022 that the country holds about 5% of the world’s reserves of critical raw materials, including rare earth elements such as scandium, yttrium, and lanthanum. However, the actual extent of these reserves remains a subject of debate, with some deposits now located in regions controlled by Russia following territorial changes.

The extraction of rare earths in Ukraine has historically been limited due to the complexity and high costs involved. Even before the onset of Russia’s special military operation, these challenges deterred both domestic and foreign investment in the sector. Given the current geopolitical landscape, it is unlikely that either Ukrainian or American companies will move forward with development projects in these regions.

A map compiled by the Dixi Group highlights the distribution of rare earth reserves across Ukraine, with some complex deposits in the western part of the country containing scandium. However, reserves have not been officially calculated, and other minerals such as lithium, beryllium, vanadium, strontium, tantalum, and niobium are also present, though not classified as rare earths. For many of these minerals, reserve estimates remain undefined.

Trump’s statements may reflect a broader foreign policy strategy, positioning himself as a strong leader capable of leveraging US support to extract concessions from Ukraine. His remarks also signal to Zelensky that American aid will come with strings attached, particularly access to valuable resources.

Rare earths are critical for US industries, from metallurgy to advanced instrumentation. The US produces between 40,000 and 43,000 tonnes of rare earths annually, compared to 240,000 tonnes in China, which dominates the global market with a total output of 350,000 tonnes. American production falls short of domestic needs, necessitating imports—primarily from China, despite escalating tensions between the two nations. Both the Biden and Trump administrations have sought ways to reduce this dependency on Chinese rare earths.

Even if a deal between the US and Ukraine materializes, it is unlikely to significantly impact the global rare earth market, where China’s dominance is expected to continue in the coming years.

China Builds Railway to Unlock Burundi’s Massive Nickel Deposit

Tanzania’s state-owned Tanzania Railways has signed contracts worth $2.15 billion with China Railway Engineering Group and China Railway Engineering Design and Consulting Group to construct the Uvinza-Musongati railway. This new rail line will facilitate the export of nickel ore from the Musongati deposit in Burundi.

The African Development Bank, which is financing the project, estimates that the Musongati deposit contains 180 million tonnes of laterite ore, ranking it among the world’s top ten nickel reserves due to its high metal content.

Discovered in 1972, the Musongati deposit underwent extensive geological exploration funded by the United Nations. In 2005, development rights were granted to Burundi Musongati Mining, a company jointly owned by the Burundian government (15%) and Burundi Mining Metallurgy International (85%). Plans included building a mine, concentrator, and metallurgical plant capable of processing 1 million tonnes of nickel annually, alongside three hydroelectric power plants to supply electricity. However, the project stalled, and the development license was revoked in 2022.

In 2023, the Burundian government sought a foreign investor to revive the project, ultimately securing Chinese investment. Once operational, the railway will transport up to 3 million tonnes of nickel ore annually to the port of Dar es Salaam in Tanzania for export to Chinese metallurgical plants.

Lead and Zinc Markets Shift Toward Balance

Global zinc and lead markets are undergoing significant shifts, according to data from the International Lead and Zinc Study Group. The global zinc deficit narrowed to 52,900 tonnes in November 2024, down from 65,400 tonnes in October. Over the first eleven months of 2024, the zinc market recorded a deficit of 33,000 tonnes, reversing a surplus of 312,000 tonnes during the same period in 2023.

The zinc shortage followed a sharp price drop in 2023, when prices fell to $2,355 per tonne in June, down from a peak of $4,422 per tonne in March 2022. The price slump led to mine shutdowns worldwide. However, prices have since rebounded to $2,750 per tonne, and several mines are expected to restart in 2025, potentially creating a surplus of 148,000 tonnes.

Conversely, the global lead market has shifted from a surplus to a deficit. A surplus of 8,900 tonnes in October 2024 turned into a deficit of 154,000 tonnes in November. Over the first eleven months of 2024, the lead market registered a modest surplus of just 1,000 tonnes, down from 115,000 tonnes in 2023, which had followed a deficit of 187,000 tonnes in 2022.

China, the world’s largest producer and consumer of both metals, plays a significant role in these market dynamics. In 2024, Chinese zinc production fell by 4% to 6.8 million tonnes, while lead production rose by 1% to 7.6 million tonnes. Reductions in vehicle production with internal combustion engines—common in China, the EU, and the US—have decreased demand for lead, while zinc demand has surged due to increased production of galvanized steel.

UK Enters the Lithium Race with New Extraction Projects

US engineering firm KBR has secured a contract from Weardale Lithium to build a demonstration plant for lithium extraction from underground brines in the UK. The contract includes the design, construction, and commissioning of the plant, as well as licensing for KBR’s PureLi® technology and Geolith's patented Li-Capt® technology, which allows direct extraction of lithium chloride from brines.

The demonstration plant, to be built in County Durham, will produce up to 10,000 tonnes of battery-grade lithium carbonate annually. The site has historical significance as a former coal mining region and home to the Blue Circle cement works. Boreholes drilled in 2004 and 2010 revealed hot groundwater with high lithium concentrations.

The UK currently has no active lithium mining operations, but the government is supporting initiatives like Weardale Lithium and Cornish Lithium, which aims to extract lithium from geothermal sources and minerals such as lepidolite and zinnwaldite. These projects represent the UK’s effort to join the global lithium supply chain, despite current low prices and market volatility.

Indonesia Mulls Nickel Production Cuts Amid Market Concerns

Indonesia’s non-ferrous metals industry is facing uncertainty following US President Donald Trump’s decision to withdraw incentives for electric vehicle (EV) production in the US. This policy reversal, which suspended a mandate requiring 50% of new cars sold in the US to be electric by 2030, could reduce EV production, battery demand, and subsequently, nickel orders.

While US companies have limited investment in Indonesian laterite ore projects, the market is dominated by Chinese firms, with Tsingshan Holding Group and Jiangsu Delong Nickel Industry controlling 75% of the country’s nickel production capacity.

Indonesia’s Ministry of Mines has announced plans to cut laterite ore mining quotas from 240 million tonnes in 2024 to 200 million tonnes in 2025. The Indonesia Nickel Miners Association also supports limiting new mining permits to control production growth.

In 2024, Indonesia consumed 256 million tonnes of laterite ore, with 176 million tonnes used by nickel pig iron producers, 49 million tonnes for mixed nickel hydroxide in batteries, and 29 million tonnes for nickel matte production. A reduction in production quotas could significantly impact global nickel supply and prices.