“Heavy Metal Lurks in the Shadows” – Wall Street Journal, 27 December 2013

Across the world, millions of tons of metals — aluminum, copper, nickel and zinc — are being kept in secretive “shadow warehouses”, facilities that have gone unchecked and that don’t reveal their assets to the public. These warehouses function separately from the London Metal Exchange (LME), the long-established system for housing such metals.

Anywhere from 7-10 million tons of aluminum are being kept in shadow warehouses, both in the states and abroad, in places like Malaysia and the Netherlands; while a scant 5.5 million tons of aluminum are currently stored in LME warehouses.

Because producers and consumers don’t know how much metal actually exists on the market, it has become more and more challenging for experts to determine market pricing. If large quantities of metals surface onto the market from shadow warehouses, then it can become more costly to create everyday goods; conversely, mine and smelter production could be curbed if pricing falls beneath production expenses.

Shadow warehouses can be more profitable for companies involved in the metals markets: the unregulated facilities cost 10 times less than LME warehouses, while also providing companies with information that the general public doesn’t know. Yet, companies involved in the shadow warehouse system may have to pay higher bank interest rates, since LME warehouses are thought to be more stable.

In November, LME set new guidelines that obligate LME warehouses to ship out more metal than they receive, for deliveries with 50+ day wait times. Many LME warehouses have been experiencing massive bottlenecks, which the new rules address. The rules will begin on April 1.

Shadow warehouses exhibit the dark side of capitalism, where metals are stored and hoarded for profit making, and where market supply and demand dynamics are being artificially controlled.

See also:
Metals Logjam Benefits Producers
Aluminum Probe Focuses on Costs to Users
A Shuffle of Aluminum, but to Banks, Pure Gold

Developed and Written by Dr. Subodh Das and Tara Mahadevan

December 29, 2013

Phinix LLC

Copyright 2013. All rights Reserved by Phinix, LLC.

www.phinix.net    skdas@phinix.net

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Should the US eliminate the penny?

As recently reported by Fox news, due to production costs surpassing its monetary value, beginning in the fall, the Canadian government will discontinue its penny. Even though the US Mint previously reported that making a penny costs more than the penny itself — 2 cents — the US it still clinging to its penny. It also costs Canada more than 1 cent to make its penny — 1.6 cents.

According to a CNN’s video, “Canadian Penny is Going Away”, in order to make room for the changes, Canadian businesses will still accept pennies. Most businesses will round up or down to the nearest nickel, but won’t give pennies out in change.

Cutting the US penny might be a helpful way to cut governmental spending. It is estimated that penny production costs the US $44 million a year. Several countries have already phased out the penny, including Australia, Finland, New Zealand, Norway, the Netherlands and Sweden.

A Fox poll from February 4 offers the following information, “The U.S. Mint reported last year that each penny costs the federal government 2 cents, which includes the price of production, transportation and the rising cost of zinc, the one-cent coin’s main ingredient.” Then the poll asks, “Should the US eliminate the penny?”

Since February 4, 61.26% have voted, “Yes, it has lost its usefulness and its value”; 24.35% have voted, “No, the penny still has plenty of merit”; and 14.39% have voted, “Maybe, but it would do little to fix our fiscal problems.”

In our opinion, it’s time for us to retire the US copper penny, which, metallurgically speaking, is actually a copper-zinc alloy.

Please also see our other coin-related entries:
The Trillion Dollar Coin
Coin Hoarders — A New Class of Investors

Developed and Written by Dr. Subodh Das and Tara Mahadevan

February 6, 2013

Phinix LLC

Copyright 2013. All rights Reserved by Phinix, LLC.

www.phinix.net    skdas@phinix.net

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Coin Hoarders – A New Class of Investors

Stocks and bonds are the normative routes people take to invest their money, sometimes also investing in metals that are traded everyday, such as silver and gold. However, a new class of metals investor is on the rise: the coin hoarder.

Why the sudden obsession with coins in America? American coins are composed of various base metals. Before 1965, the US Mint forged dimes and quarters from silver; but, silver costs soon skyrocketed, compelling the US Mint to employ a cheaper metal. Before 1982, pennies were mostly made from copper, until zinc became the replacement metal. Nickels are the hoarder’s favorite: they have always been composed of 25% nickel and 75% copper. In addition to nickels, pennies are the hoarder’s other preferred coin — both are still largely composed of copper.

Yet, there’s a catch. In 2006, the US government placed a ban on melting pennies and nickels. This has stopped hoarders from reaping the benefits from their investments; the value of their hoarded stash remaining hypothetical, at best.

Those who have taken a liking to coins come in two breeds: investor and hoarder. But make no mistake — there is most certainly a discernible difference between the two. While the hoarder is patiently waiting for the government to revoke the melt ban as to cash in on the value of the base metals, and continuing to amass as many coins as possible; the investor is collecting coins that are scarce and rich in history.

Though metal prices fluctuate daily, and sorting can be a time-consuming task for hoarders, there is no gamble in this investment. American coinage has yet to see an impact from coin hoarding, unlike other countries, such as Argentina and the Philippines, which are both experiencing coin shortages. If the US ever faced a similar shortage, then the US Mint could easily forge more coins, though it might be hesitant since it is an expensive process.

Unless individual metals can be economically and environmentally extracted from the coins, the best economic value is still the coins. No technologies exist right now to separate individual metals (such as copper from zinc in pennies, and copper from nickel in nickels) in coins. If the US Mint has to produce more coins due to a coin shortage, it could add costs to US Treasury’s budget; and we all know too well that we need to cut spending and not go over the fiscal cliff. Coins should be collected as a hobby and not hoarded as an investment.

(source)

Developed and Written by Dr. Subodh Das and Tara Mahadevan

January 3, 2013

Phinix LLC

Copyright 2013. All rights Reserved by Phinix, LLC.

www.phinix.net    skdas@phinix.net

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URBAN MINING

Introduction

Urban mining is the practice of recovering elements, compounds and materials from products, buildings and waste. Many metals can be mined, including, aluminum, copper, magnesium, titanium, lead, tin, and zinc and rare earths.

Little research exists about urban mining, and the method is one that hasn’t been exceedingly exposed to the public. The best way to clarify urban mining is to provide a paradigm.

Many everyday items contain elements that can be reused. For example, aluminum cans, or used beverage cans (UBC), are a very “refined form of bauxite ore”. Bauxite is an ore that is our key resource for aluminum. Our ecosystem is limited, decreasing and materially closed; and consumers are often unaware of how valuable this metal is, and the environmental and economic repercussions that can occur if we do not properly recycle UBCs.

Although the US aluminum can recycling rate is improving, it still hovers around 55%. This implies that almost half of all cans produced are lost to the recycle stream and end up in a landfill. It is practical for us to explore urban mining concepts to recover lost and buried aluminum cans. Our current efforts to gather aluminum UBC waste include the collection of “clean” UBCs; the collection of UBCs as commingled waste; and mining a preexisting landfill. Urban mining only supplements and complements these methods, and can help produce a desirable recycling rate of 95%.

Barriers

Much research and preliminary testing needs to be done before attempting to mine a landfill. First, we must seek a site with practical and profitable exploration, and recovery potentials; in order to fully exercise our methods, the landfill must contain an above average amount of UBC. Best methods and costs to loosen and separate material from soil still needs to be researched. In addition, we need to find solutions to:

 

  • the degree of packing and overburden in the landfill;
  • the amount of drying and cleaning required for UBC;
  • the landfill timeline and the potential capital and operating costs;
  • the potential value of the recovered aluminum;
  • the economic, environmental and legal requirements and costs for opening and resealing the landfill following the recovery process.

Economic and Environmental Impacts

It is estimated that, nationwide, there are 20 million tons of UBCs that are sitting in landfills. Assuming a metal price of $2,500 per ton, this signifies a loss of $50 billion. If these cans were recycled, then the aluminum industry would gain 909,000 tons of metal per year. The advent of this metal would prevent the aluminum industry from having to build new bauxite mines, alumina refiners and aluminum smelters that extract metal from its ore through a process of mining, refining and smelting.  Additionally, recycling will lower capital and energy costs, as well as environmental releases of CO2.

The aluminum industry—the use of smelters—leaves a large carbon footprint; contrarily, recycling only uses 5% of this energy.

Path Forward

All options should be explored in order to lessen the aluminum industry’s carbon footprint, and ensure better carbon neutrality for the global aluminum industry. Urban mining is currently one of our best unexplored options which must be rigorously bolstered with more in-field research.

Conceived, Developed and Written by Dr. Subodh Das and Tara Mahadevan , May 3, 2012

All rights Reserved by Phinix, LLC

www.phinix.net    skdas@phinix.net

 

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