I posted it in the short seller charged for fraud thread, but...

I posted it in the short seller charged for fraud thread, but doesn’t belong there, so I shift it here:

Gina/HP is buying intoRare earths, for me part of the answer is iron ore consumption in the future.Certainly the biggest driver of Gina's interest is to build a monopoly in REE outside of China. But as far as iron ore is concerned:Iron ore consumption is highly dependent on China.Australia is the largest iron ore exporter in the world, more than 82% of its production goes to China. Australia exported $87.9 billion worth of iron ore. The main destinations of Australia exports on iron ore were China ($72.5B), Japan ($6.49B), South Korea ($5.15B), taiwan ($ 1.78B) and Vietnam ($876M).Now, in a very long process, the world is moving from blast furnaces to DRI (direct reduction in steel), which affects coal consumption because you don't turn ore into iron with coal-based energy, but with hydrogen. Secondly, the iron production worldwide is turning to electric arc furnaces (EAF). This does not affect the European world, as the USA has already installed a large number of EAFs a long time ago (based on the low price of electrical energy, this has historically been very attractive to US companies and ultimately gives them a competitive advantage over European steelmakers). Anyway, electric arc furnaces melt scrap iron! They don't use iron ore to make steel, they use scrap.The electric arc furnace (EAF) process turns old metal into new steel. Scrap is placed in a furnace and heated with a very strong electric current until it melts. This protects the climate and the environment. It is a classic recycling process that does not require the energy-intensive reduction of iron ore. To promote the costly transformation of the European steel industry and at the same time protect it from climate-damaging competition from overseas, the EU is relying on a new piece of legislation: the so-called Carbon Border Adjustment Mechanism (CBAM). It will be phased in over time and take full effect in 2026. By then, Chinese companies exporting steel to the EU will likely have to pay fees for the CO2 emissions of their production. In this way, the EU wants to ensure that products manufactured outside the single market under less stringent environmental regulations are subject to an additional levy when imported into the EU.Two effects: scrap dealers became very important to secure the source of scrap, and secondly, less iron ore was consumed.Back to China and Australia: China's steel production has stayed above 1 billion tons since it first crossed the mark in 2020, when a record 1.053 billion tons were produced.Since the all-time high, Beijing has set an informal target that annual steel output should not exceed the previous year's output. Construction accounts for about 35% of China's steel demand, and the sector has been plagued this year by liquidity crunches at major developers (EVERGRANDE) and falling sales, with sales by area down 7.8% in the first 10 months of the year from the same period in 2022. Chinese infrastructure spending was the main driver in the past. Now, if infrastructure and construction is weak, so will iron ore consumption.Also, the Supply Chain Due Diligence Act (LkSG), which requires companies to conduct appropriate human rights and certain environmental due diligence in their supply chains, will have an impact on suppliers globally as European companies are forced to have maximum transparency in their supply chain.This is driving not only the importance of non-Chinese REE, but also the importance of non-Chinese steel or more "clean steel".https://www.fastmarkets.com/insights/chinas-2024-blue-sky-war-to-add-uncertainty-to-iron-and-steel-markets/Another effect is a law in China that aims to improve air quality. Specifically, a key goal of the air quality improvement plan is to reduce the PM2.5 density (the density of particulate matter in the air) in major cities by 10% by 2025 compared to 2020, Steel producers in Hebei Province (the largest steel producing area is 200 million tons) are classified as grades A to C. Production cuts often hit grade C producers.The new guidance also continues to ban new steelmaking capacity (not processing or steelmaking as in the list below), encourages the reduction of independent coke plants, pellet plants, sinter plants, and supports the shift from blast furnace (BF) steelmaking to electric arc furnace (EAF) steelmaking.The country aims to increase the ratio of EAFs to blast furnaces to 15% by 2025."It won't be easy to switch from blast furnace and basic oxygen furnace (BOF) to EAF because the latter is not very profitable and the supply of good quality steel scrap is not sufficient," an industry analyst told Fastmarkets.In short, iron ore is out of fashion, and the transition will take forever, if it happens at all on this scale. But you have to prepare.