Mark Latham Commodity Equity Intelligence Service

Tuesday 18th April 2017
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    Steel, stimulus drive China's strongest economic growth since 2015

    China's economy grew faster than expected in the first quarter as higher government infrastructure spending and a gravity-defying property boom helped boost industrial output by the most in over two years.

    Growth of 6.9 percent was the fastest in six quarters, with forecast-beating March investment, retail sales and exports all suggesting the economy may carry solid momentum into spring.

    But most analysts say the first quarter may be as good as it gets for China, and worry Beijing is still relying too heavily on stimulus and "old economy" growth drivers, primarily the steel industry and a property market that is overheating.

    "The Chinese government has a tendency to rely on infrastructure development to sustain growth in the long term," economists at ANZ said in a note.

    "The question is whether this investment-led model is sustainable as the authorities have trouble taming credit. We need to watch closely whether China’s top leadership will send a stronger signal to tighten monetary policy shortly."

    Even as top officials vowed to crack down on debt risks, China's total social financing, a broad measure of credit and liquidity in the economy, reached a record 6.93 trillion yuan ($1 trillion) in the quarter -- roughly equivalent to the size of Mexico's economy.

    Spending by the central and local governments rose 21 percent from a year earlier.

    That helped goose the pace of growth in the first quarter well above the government's 2017 target of around 6.5 percent, and pipped economists' forecasts of 6.8 percent year-on-year.

    Such a strong bolt from the gate could see Beijing once again meet its annual growth target, even if activity starts to fade later in the year, as many analysts widely expect.

    "Main indicators were better than expected...which laid a good foundation for achieving the full-year growth goals," statistics spokesman Mao Shengyong said at a news conference.


    Once again, China's policymakers leaned on infrastructure and real estate investment to drive expansion. Growth in both areas has accelerated from last year and helped offset slightly weaker growth in the services sector.

    "Faster growth in industrial output is the primary factor in the first quarter surprise, and due mostly to higher value-added growth related to supply-side consolidation in heavy industry," said Brian Jackson, China economist at IHS Global Insight.

    Fixed asset investment rose 9.2 percent on-year, trouncing estimates, but IHS believes the growth was due entirely to faster spending in industry and construction.

    Real estate investment remained robust, expanding 9.1 percent, while new construction quickened despite intensifying government measures to cool soaring home prices.

    Most analysts agree the heated property market poses the single biggest risk to China's growth, but predict the cumulative weight of property curbs will eventually temper activity, not produce an outright crash.

    "Sales (growth) has started falling, which means tightening measures are starting to take effect," said Shen Jianguang, an analyst at Mizuho Securities in Hong Kong.

    More than two dozen cities announced property cooling measures in recent weeks, after curbs late last year appeared to have little lasting effect.

    The construction boom has helped fuel the best profits for China's industrial firms in years, giving them more cash flow to pay down debt or invest in more efficient plants.

    Buoyed by a near 12 percent increase in housing starts, China produced a record amount of steel in March, Reuters data showed. But analysts say warning signs are flashing.

    Rising inventories and recent falls in steel prices suggest output is growing faster than China's demand, raising worries of a glut later in the year, which could heighten trade tensions with the U.S. and other major trading partners.


    There were also positive signs on the consumer front.

    After slowing for five quarters, disposable income growth picked up to 7.0 percent, the fastest since late 2015.

    Retail sales rebounded 10.9 percent on-year as consumers shelled out more for appliances and furniture for new homes.

    Auto sales also showed signs of recovering after weakening early in the year after the government reduced subsidies.

    Analysts are closely watching for signs that consumption is accounting for a greater share of China's economy, which would

    make growth more broad based but also reduce the need for more debt-fueled stimulus and reliance on "smokestack" industries.

    Another bright spot was a further rebound in private investment, which had cooled in recent years, leaving the government to bear more of the burden of supporting the economy.

    Private investment growth accelerated to 7.7 percent.


    Though policymakers have pledged repeatedly to push reforms to head off financial risks, the government is keen to keep the economy on an even keel ahead of a major leadership transition later this year.

    China's central bank has gingerly shifted to a tightening policy bias in recent months, and is using more targeted measures to contain risks after years of ultra-loose settings.

    It has nudged up short-term interest rates several times already this year and further modest increases are expected, especially if U.S. rates continue to rise, which could risk a resurgence in capital outflows from China.

    "I think China should be directing the economy to slow down its growth in the long term...but on the contrary, growth is accelerating," said Hidenobu Tokuda, senior economist at Mizuho Research Institute in Tokyo.

    "This is good for now but it makes it difficult to see how China's economic slowdown will land in the future. Uncertainties remain high."
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    China: Coal

    Protection of the Ministry of Atmospheric Administration issued the "Beijing-Tianjin-Hebei and the surrounding area 2017 air pollution prevention and control work program" (hereinafter referred to as "work program"), Beijing-Tianjin-Hebei air pollution transmission channel Beijing, Tianjin and Hebei, Shanxi, Shandong, Henan 4 provinces of 26 cities. Among them, 26 cities are: 8 cities in Hebei Province (Shijiazhuang, Tangshan, Langfang, etc.); Shanxi Province 4 cities (Taiyuan, Yangquan, Changzhi, Jincheng City); Shandong Province 7 cities (Jinan, Zibo, etc.) Zhengzhou, Kaifeng, Jiaozuo, etc.).

    The above "work program" clearly requires the implementation of special emission limits for sulfur dioxide, nitrogen oxides and particulate air pollutants discharged from all steel and coal-fired boilers in the "2 + 26" urban administrative area by the end of September; Tianjin, Hebei and the ring The end of October before the end of the city to complete the illegal "small scattered pollution" enterprises to ban and small coal-fired boilers "cleared by the end of October, the city of Bohai, "Work, Beijing, Tianjin, Langfang, Baoding to complete the" coal forbidden zone "construction tasks, the other completed every city to 50,000 to 100,000 to coal or coal on behalf of the coal on behalf of the coal; before the end of December, 28 cities are required to install 10 sets (sets) left and right fixed vertical remote sensing equipment, 2 sets (sets) mobile remote sensing equipment.

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    US Bond Yield follows EU bonds.

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    Confucius on politics

    When the Master went to Wei, Zan Yu acted as driver of his carriage.
    2. The Master observed, 'How numerous are the people!' :
    3. Yu said, 'Since they are thus numerous, what more shall be done for them?' 'Enrich them,' was the reply.

    4. 'And when they have been enriched, what more shall be done?' The Master said, 'Teach them.' 
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    Trump says U.S. not to label China as currency manipulator

    U.S. President Donald Trump said on Wednesday that his administration won't label China as currency manipulator, and complained that the U.S. dollar is too strong.

    In an interview with Wall Street Journal on Wednesday, Trump said "they (China) are not currency manipulators," according to the report.

    Trump during the election campaign had accused China of manipulating its currency to gain from exports, while many economists have argued that the Chinese currency, RMB, has been at equilibrium level in recent years.

    The International Monetary Fund declared the RMB as no longer undervalued in 2015.

    In the interview, Trump again complained that the U.S. dollar is too strong. "I think our dollar is getting too strong, and partially that's my fault because people have confidence in me. But that's hurting -- that will hurt ultimately," Trump said.
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    Oil and Gas

    S Korea looks towards US, Russian crudes amid Middle East squeeze

    South Korean oil refiners are stepping up purchases of US and Russian crudes, in the wake of a squeeze in supplies of Middle Eastern grades after output curbs by the Organization of the Petroleum Exporting Countries.

    The country's fourth-biggest refiner Hyundai Oilbank said Monday that it had purchased 2 million barrels of US Southern Green Canyon crude oil, the country's first import of the grade.

    "We have purchased 2 million barrels of US Southern Green Canyon from Shell, and they will arrive in South Korea from next month," a company official told S&P Global Platts. The first and second cargoes will arrive in May and June, respectively, he said.

    The company official said there would be no problems using Southern Green Canyon at its crude distillation units, which are equipped to run sour and heavy crudes.

    Hyundai Oilbank, the only South Korean refiner that can run very heavy, sour crudes without the need for blending, is focused on procuring heavy grades and is not interested in light, sweet crudes.

    The refiner currently runs two crude distillation units with a combined capacity of 390,000 b/d at its Daesan complex on the west coast. In addition, Hyundai Oilbank began commercial operations at its 130,000 b/d condensate splitter in November last year, which had raised its overall refining capacity to 520,000 b/d.

    "We purchased the US crude due to weaker prices and low freight rates. We have no immediate plans to import more crude from the United States, but we will seek to import from sources other than the Middle East as part of diversifying supply sources," the official said.

    Another Hyundai Oilbank official said the company might consider importing Eagle Ford from the US for the condensate splitter, if it can be co-loaded with Mexican Maya. It has a term deal with Pemex to import Mexican Maya crude to the tune of 50,000-60,000 b/d.

    The narrowing quality spread between low sulfur crudes in the West against high sulfur crudes in the Middle East has made low sulfur crudes more economically viable to non-traditional buyers in the East.

    The quality spread, typically measured through the Brent/Dubai Exchange of Futures for Swaps, averaged at $1.33/b in March -- the lowest since August 2015, when it averaged at 79 cents/b, Platts data showed. The EFS was last assessed at $1.24/b on Monday.

    Related video:Asian refiners diversify crude oil supplies to reduce impact of OPEC-related output cuts


    South Korea's second-biggest refiner, GS Caltex, also plans to import 500,000 barrels of Eagle Ford crude in June.

    GS Caltex imported 2 million barrels of Eagle Ford over November-December, the country's first purchase of American crude other than condensate and Alaskan crude since Washington lifted a 40-year restriction on crude exports in late 2015.

    GS Caltex is monitoring costs and economics of US cargoes on a per cargo basis, according to a company source. GS Caltex is a 50:50 joint venture between South Korea's GS Group and US' Chevron.

    South Korea's top refiner SK Innovation is scheduled to receive 1 million barrels of Russian Urals it purchased earlier this year, as part of its diversification efforts.

    "The cargo of the Urals crude is expected to arrive in South Korea as early as this week or next week," a company official said, adding that the volume is the refiner's first purchase of Urals in 10 years.

    It is very unusual for South Korea to buy Russian Urals because of the shipping cost and the size of the vessel.

    The Urals, typically loading from the Black Sea port of Novorossiisk, are transported on Suezmax or smaller vessels as VLCCs which can carry a full cargo of 280,000 mt are unable to pass through the Suez canal. A Suezmax, with a maximum load of 140,000 mt, will be able to easily pass through the Suez canal.

    Urals can be one of the alternatives to South Korean refiners as the OPEC-led production cuts had reduced exports of Middle Eastern sour crudes, pushing up their price differentials, the SK Innovation official said.

    Despite the OPEC-led production cuts from January, South Korea's crude imports from the Middle East climbed 4.1% year on year to 154.41 million barrels in the first two months of this year, from 148.4 million barrels a year earlier, according to data from state-run Korea National Oil Corp.

    The proportion of Middle East crude in the refiners' total crude imports further increased to 84.7% over January-February, from 82.7% in the same period last year, highlighting South Korea's deep dependence on Middle Eastern crude.

    "The proportion is expected to decline when volumes from the US and Russia arrive in South Korea, while refiners are making more efforts to diversify crude supply sources," a KNOC official said.
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    UK's Rough gas storage unable to inject for 2017-18 storage year: CSL

    Injection services into the UK's only long-range natural gas storage facility, Rough, will be unavailable until May 2018 at the earliest, owner- operator Centrica Storage Ltd. said Wednesday.

    "CSL has concluded that...based upon the results of its well testing program, Rough cannot safely re-commence injection operations in the 2017-18 Storage Year," the company said in a statement.

    CSL said the decision was made in addition to having "extensive discussions" with independent technical well advisors, with the well testing program drawing to a close after CSL established the condition of two-thirds of the wells.

    "CSL will continue to conduct such further testing and analysis as it considers appropriate on a number of wells in order to allow CSL to make an assessment of the future pathway for commercial operation of the facilities," the company said.

    CSL will continue to offer withdrawal services for the 2016-17 Storage Year (May 1, 2016, to April 30, 2017), with the Rough reservoir having begun Tuesday's gas day with 387 million cu m in stock, 155 million cu m down on the year and 654 million cu m shy of the five-year average.


    Market participants cited both imports from Continental Europe and LNG supplies as key heading towards the Winter 2017-18 delivery period to make up the loss from the Rough reservoir.

    "LNG is a question mark, the key is the price spreads [between the UK and Continental Europe] for pipeline flows," said one UK-based gas trader. "The spreads will have to widen in order for the UK to get the last bits."

    The ZEE/NBP Winter 17 basis was assessed at 2.10 pence/therm Tuesday -- the TTF/NBP Winter 17 basis was assessed at 3.537 p/th Tuesday.

    The UK saw an increased reliance on imports through both the BBL and Interconnector pipelines last winter, importing a gross 5.24 Bcm compared to the gross 3.13 Bcm from the Winter 2015-16 delivery period, National Grid figures showed.

    This was in part due to the lower gross storage withdrawals, 3.31 Bcm last winter against 4.13 Bcm in Winter 2015-16, but mostly because of weaker LNG regasification levels. LNG regas during Winter 2016-17 totaled 1.93 Bcm, a drop of 70% compared to the 6.44 Bcm from Winter 2015-16.

    With little extra room for an increase in supply from both the Norwegian and UK Continental Shelves following strong flows last winter (40.41 Bcm), as with last winter, NBP Winter 17 pricing look set to track the TTF and ZEE hubs closely, with the NBP premium set to be influenced by the amount of LNG regas levels from the UK's three LNG terminals.
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    Libya's Wafa oil and gas field reopens, force majeure lifted - NOC

    Libya's National Oil Corporation (NOC) has lifted force majeure on production from the Wafa field after an armed group reopened oil and gas pipelines leading to the Mellitah terminal, the company said in a statement on Wednesday.

    Production of oil, gas and condensates had been interrupted at Wafa by a shutdown that started on March 26 near the town of Nalut. Wafa is operated by Mellitah Oil Co, a joint venture between NOC and Italy's ENI.

    The reopening would allow Mellitah to restore production of about 450 million cubic feet of gas, 9,000 barrels per day (bpd) of oil, and 7,500 bpd of condensate, NOC said.

    Earlier on Wednesday, an engineer at the Al-Rwais power plant that gets gas from Wafa said the gas pipeline had reopened, and a source at Nalut municipality told Reuters two pipelines had been reopened after local elders negotiated an accord with the armed group.

    The NOC has also been pushing to end a stoppage at the major Sharara oil field that began on Sunday, just one week after a previous, week-long shutdown at Sharara had been lifted.

    Sharara had been producing about 220,000 bpd, out of total national production of some 700,000 bpd.

    The NOC faces another blockade at El Feel, a southwestern field, which pumps oil to Mellitah. A blockade there by the Fezzan branch of Libya's Petroleum Facilities Guard (PFG) that began on Dec. 20 has cost more than $460 million in lost revenue, according to the NOC.

    "We are still exerting pressure to reopen it," NOC Chairman Mustafa Sanalla said on Wednesday.

    Libya's national output remains well below the 1.6 million bpd it was producing before the country's 2011 uprising.

    Along with Nigeria, Libya is exempted from recent production cuts agreed by the Organization of the Petroleum Exporting Countries, but the NOC faces complex political, financial and security challenges in its efforts to revive output.

    An armed group has again blocked gas pipelines from Libya's Wafa oilfield to a local power plant and the Mellitah gas export terminal on the coast, a source from state energy firm NOC said on Friday. The NOC earlier this week lifted a force majeure on Wafa and said its pipelines were open

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    After years of soaring growth, Asia's fuel demand falters

    After years of often explosive growth, fuel consumption in Asia's biggest economies is stuttering, undermining efforts led by the Organization of the Petroleum Exporting Countries (OPEC) to end a global supply glut and lift prices.

    Gobbling up over a third of global supplies, Asia is the world's biggest and fastest growing region for oil consumption, and its seemingly insatiable fuel thirst has long been a core support for prices.

    Now, some say that picture of buoyant growth in demand is crumbling.

    "The signs of growing demand aren't quite what they seem. Chinese fuel growth is at a three year low, Japanese fuel demand is down," said Matt Stanley, a fuel broker at Freight Investor Services (FIS) in Dubai. "Considering the sheer volume of product available... sooner or later I think we could see some distressed sellers."

    Brent crude oil futures LCOc1 have risen by around 5.5 percent this month to $55.75 per barrel as traders bet on a broader commodity market recovery and price in a Middle East risk premium after the U.S. missile attack on Syria last week.

    But in a sign that there remains an abundance of oil available to buyers and that the more opaque physical oil market is not as convinced by the rally in financial markets, top exporter Saudi Arabia this month lowered the price for its May crude for Asian customers by 30 cents versus April, and to a discount of 45 cents compared with the benchmark Oman/Dubai average.

    It is showing up in various parts of the region's economy. China's gasoline exports in February climbed to their second-highest monthly level on record as refiners increasingly turned to exports to Asian markets to drain a domestic supply glut that almost wiped out imports altogether.

    Even India, which is often touted as the next driver of global demand growth, fuel consumption fell 0.6 percent in March from a year earlier.

    "The stutter in Indian demand may have been caused due to the effects of demonetization," said Sukrit Vijayakar, director of energy consultancy Trifecta.

    With little notice, India abolished the then existing 500 and 1,000 rupee notes late last year, which made up the bulk of the country's cash in circulation. That crimped consumption, affecting many consumers and disrupting many businesses.

    And while India's annual fuel demand is still expected to grow this year, analysts say, it is unlikely to recover enough to fully offset the demonetization impact.

    M. K. Surana, chairman of Hindustan Petroleum Corp, said he expects India's fuel demand to rise by 5.5 to 6 percent this year. Though that is still a high growth rate by global standards, it is a far cry from 2016's refined product demand growth of more than 10.9 percent.


    Consumption in other major Asian oil buyers is in terminal decline.

    Countries like Japan and South Korea face major demographic problems because of low birth rates and an aging population. A Japanese government agency this week forecast that the nation’s population will fall nearly a third by 2065. Add in improving fuel efficiency and the longer-term picture for oil producers trying to sell to Japan appears to be bleak.

    "Because of structural factors such as the improvement of vehicle fuel economy, domestic demand has been weakening... and that is continuing," said a spokesman for JXTG Nippon Oil & Energy Corp, which has a 50 percent share of Japanese gasoline sales.

    Japan's oil demand is expected to fall by more than 1.5 percent per year on average over the next five years, forecasts by the government's energy committee show.

    In South Korea, oil products demand fell by 0.4 percent in January-February from a year earlier, according to data from Korea National Oil Corp.

    "This year's overall domestic oil products demand growth is expected to slow," said Lee Seung-moon, a research fellow at the state-run Korea Energy Economic Institute.

    The longer-term trend in South Korea is similar to that in Japan, as rising efficiency, alternative fuels, and an aging population take their toll on oil demand.


    With demand faltering in Asia's four biggest oil consuming countries, efforts led by OPEC and Russia to cut output by 1.8 million bpd during the first half of the year to rein in a global fuel supply overhang could be undermined, resulting in calls by Saudi Arabia to extend the cuts into the second half of 2017.

    Goldman Sachs said in a note to clients on Wednesday that its long-term forecast for benchmark U.S. crude is $50 per barrel CLc1 versus the current price of $53.08 per barrel.

    Data from Thomson Reuters Eikon shows that global oil supplies on average exceeded demand by 680,000 bpd in 2016, and that 2017 will still see oversupply, albeit of less than 100,000 bpd, excluding stored oil.

    Still, lots of fuel remains stored on tankers in Asia's oil trading hub around Singapore. Eikon data shows that around 20 supertankers are currently sitting offshore Singapore and southern Malaysia, filled with oil.

    While this figure is slightly lower than a month ago, it is a sign of continuing oversupply.

    Keeping oil on tankers is only profitable if fuel prices for future delivery are significantly higher than those for imminent discharge.

    Yet the forward price curve for Brent crude futures <0#LCO:>, the international benchmark for oil prices, shows only a slight increase of 90 cents in prices between now and a peak in November, at $57.20 per barrel.

    "That's not enough to make it profitable to store oil on tankers," one ship broker said on condition of anonymity.

    What's worse, Brent prices start falling from November onward, back toward $56 a barrel for delivery toward the end of 2018 and into 2019.

    Such a price curve, “makes it commercial suicide to store oil on tankers, so the only reason to do that is if you have nowhere else to put it," the broker added.

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    China's March shale gas output surges 50pct YoY

    China's shale gas output surged in March, and natural gas production also expanded, indicating improved energy structure as the country shifts away from reliance on traditional energy sources, Xinhua News Agency reported on April 17.

    Shale gas output jumped 50.4% year on year to 1.15 billion cubic meters in March, showed data from the National Bureau of Statistics (NBS).

    In the first quarter, shale gas output stood at 2.67 billion cubic meters, up 17.4% year on year, data showed.

    The fast growth was mainly due to the increased production by the Changning-Weiyuan national-level shale gas pilot zone in southwest China's Sichuan province, run by the country's oil and gas giant China National Petroleum Corporation.

    China has been making efforts to improve its energy structure, shifting away from traditional energy sources such as coal. Breakthroughs have been made in shale gas capacity and drilling techniques, making China one of the top shale gas suppliers in the world.

    By 2020, the proved reserves of shale gas will surpass 1.5 trillion cubic meters, according to plans released by authorities at the beginning of the year.
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    US rig count expands yet again in 13th weekly gain

    US rig count expands yet again in 13th weekly gain

    Helmerich & Payne motor man Michael Palmer, left, and floor hand Travis Palmer, right, move equipment as a section of pipe is drilled into the ground for oil and gas extraction on a Diamondback Energy lease Wednesday, Sept. 14, 2016 outside of Midland. 

    Oil companies set up more drilling rigs in U.S. oil fields over the past week, expanding the nation’s rig count for the thirteenth consecutive week, Baker Hughes said Thursday.

    All told, drillers dispatched 11 oil rigs and idled three natural gas rigs, lifting the fleet by eight to 847, a figure more than twice the rig count’s multi-decade low point reached in May.

    Eight oil rigs went to the Permian Basin in West Texas, and another three went to the Eagle Ford Shale in South Texas. Four more rigs were placed in Oklahoma, Colorado and North Dakota. Some were removed from fields Baker Hughes doesn’t name.

    The drilling surge is especially stark in Texas, home to about a third of the nation’s oil production. The state’s rig count has climbed from 173 in May to 419 this week.
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    EnerCom Effective Rig Count Rises to 1,765

    EnerCom Effective Rig Count Rises to 1,765

    EnerCom released its EnerCom Effective Rig Count today. Launched in January, the Effective Rig Count seeks to account for improved productivity from recent development. New technologies and techniques have allowed wells to be drilled faster and produce more hydrocarbons. Each rig yields greater production now than it did before the downturn.

    Based on the Effective Rig Count, rigs in the Utica have seen the greatest productivity increase, yielding 4.4x as many barrels of oil equivalent on an individual basis in March 2017 (the last month with available data for both rigs and production) than rigs in the region were producing in January 2014, when oil prices were at their peak in the triple digits.

    Significant productivity gains are also seen in the Permian and Niobrara. 347 rigs were active in these two basins in March, but increased productivity means these rigs are creating production equivalent to 1,193 rigs from early 2014.

    Nationally, rigs are producing 3.1x more production than they were before the crash. While 541 rigs are currently active in the major basins, increased productivity means that 1,765 January 2014 rigs would be required to yield the same amount of production that 541 rigs generate in 2017.
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    May U.S. shale oil output seen rising most in over two years

    U.S. shale production in May was set for its biggest monthly increase in more than two years, government data showed on Monday, as producers stepped up their drilling activity with oil prices hovering at over $50 a barrel.

    May output is set to rise by 123,000 barrels per day to 5.19 million bpd, according to the U.S. Energy Information Administration's drilling productivity report. That would be the biggest monthly increase since February 2015 and the highest monthly production level since November 2015.

    In the prolific Permian play located in West Texas and New Mexico, oil production is forecast to rise by nearly 76,000 bpd to 2.36 million bpd, data showed, a new record for the largest U.S. shale play.

    In the Eagle Ford region, output is set to rise by 39,000 bpd to 1.22 million bpd, the third monthly increase. Production in the Bakken is forecast to drop 1,400 bpd to 1.02 million bpd, the third consecutive monthly decline.

    U.S. natural gas production was projected to increase to a record 50.1 billion cubic feet per day (bcfd) in May. That would be up about 0.5 bcfd from April and be the seventh monthly increase in a row.

    The EIA projected gas output would increase in all of the big shale basins in May.

    Output in the Marcellus formation in Pennsylvania and West Virginia, the biggest shale gas play, was set to edge up to a record high near 19.0 bcfd in May, a seventh consecutive increase. Production in the Marcellus was 18.0 bcfd in the same month a year ago.

    EIA also said producers drilled 854 wells and completed 743 in the biggest shale basins in March, leaving total drilled but uncompleted wells (DUCs) up 111 at 5,512, the most since March 2016.
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    Fracking Comes To Alaska, Triggering New Oil Boom

    Hydraulic fracturing is coming to Alaska, and one professor thinks it could change global politics in favor of U.S. interests.

    Companies have discovered in the last year at least 5 billion barrels of recoverable oil on Alaska’s North Slope — a 14 percent increase in U.S. proven reserves. These finds could significantly increase U.S. oil production, changing the global energy game in the U.S.’s favor.

    “If these new discoveries become producing fields, the Alaskan Arctic will write a new chapter in the U.S. oil industry’s dramatic ascent,” Dr. Scott L. Montgomery, a professor of international relations at the University of Washington, wrote in an op-ed for The Conversation. “It will increase our leverage over [Organization of Petroleum Exporting Countries] OPEC and may help to counter Russia’s geopolitical influence.”

    “This prospect raises a new question: How will we will use our clout as the world’s most important new oil power?” Montgomery wrote.

    Montgomery argued fracking for Alaskan oil will make the U.S. a major oil exporter. Montgomery says Alaskan oil will be sold to Asia and undercut OPEC’s share of that market.

    “Oil remains our one unreplaceable energy source,” Montgomery wrote. “Global mobility and a modern military are, as yet, inconceivable without it. Growth in global demand, centered in developing Asia, will continue for some time, as it did even from 2010 through 2014 when prices were above $90 per barrel.”

    The U.S. is the world’s largest and fastest-growing producer of oil and natural gas, surpassing both Russia and Saudi Arabia. U.S. oil production grew 80 percent higher than it was in 2008.

    Companies recently found massive untapped oil deposits in Alaska that could be access through fracking. Major oil companies like Conoco are purchasing Alaskan land and developing cost effective methods of fracking in remote regions.

    Fracking in Alaska could accelerate as oil prices rise. Fracked Alaskan oil could be profitable to drill at $50 a barrel, which is just under current crude prices.

    The Trump administration also has plans to open up the Beaufort and Chukchi seas to offshore drilling, reversing an Obama-era order largely making those areas off-limits to drilling.

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    Dakota Access Pipeline to start interstate service May 14

    The controversial Dakota Access Pipeline will begin interstate crude oil delivery on May 14, according to a filing with the U.S. Federal Energy Regulatory Commission.

    Energy Transfer Partners LP on Thursday filed what is known as a tariff, which lays out details about the line and the oil to be delivered.

    The 1,172-mile (1,885-km) Dakota Access line runs from western North Dakota to Patoka, Illinois. The $3.8 billion project became a focus of international attention, drawing protesters from around the world, after a Native American tribe sued to block completion of the final link of the pipeline through a remote part of North Dakota.

    The Standing Rock Sioux tribe said the pipeline would desecrate a sacred burial ground and that any oil leak would poison the tribe's water supply.

    Thousands of protesters demonstrated in North Dakota and Washington, D.C., many staying to support the tribe in a makeshift camp near the pipeline's construction site last fall. Many opponents also said reliance on the pipeline and the petroleum it was intended to carry would exacerbate climate change.

    The outgoing administration of Democratic President Barack Obama said it would reconsider the permits issued for the pipeline's route near tribal lands, delaying the project by several months.

    But that move was quickly reversed after the inauguration of Republican President Donald Trump in January.

    Among Trump's first acts in office was to sign an executive order that reversed a decision by the Obama administration to delay approval of the pipeline.

    The tribe also lost several lawsuits aimed at stopping the pipeline.
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    Blackstone Bets There's Gas Money to Be Made in the Oil Patch

    With its $2 billion takeover of EagleClaw Midstream Ventures LLC, Blackstone Group LP on Monday became the latest company to bet on gas in a basin better known for its oil reserves. Its interest lies in “associated gas” -- a term used to describe the gas that comes out of an oil well along with the crude. Gas volumes will rise fivefold in five years on the EagleClaw system, said David Foley, chief executive officer of Blackstone Energy Partners LP.

    Gas output from the Permian, which accounts for more than a quarter of America’s oil production, has risen to a record every month this year, government data show. That’s driving deals in the region, including Targa Resources Corp.’s purchase of gas pipelines from Outrigger Energy and a deal by Williams Cos. to exchange its stake in a Texas gas-gathering system with Western Gas Partners LP-owned networks in Pennsylvania.

    Drilling for Permian oil is covering a bigger area and moving south, boosting gas volumes, Foley said.

    “We’ve got beachfront property, basically,” Foley said by phone. “And the beach is continuing to extend. We’ve already got, existing or under construction, three-quarters of a billion cubic feet per day of processing capacity” for natural gas.

    Gas Exports

    Blackstone says it’s targeting the Permian Basin because crude production there is linked to global oil prices. In contrast, natural gas prices in eastern U.S. basins, such as the Marcellus shale, have been weighed down by a glut of supply.

    Permian gas may be easily exported to Mexico via pipeline and as liquefied natural gas from terminals on the Gulf of Mexico, he said. Texas gas also sells at less of a discount to the benchmark Henry Hub in Louisiana, compared with Marcellus supplies, according to data compiled by Bloomberg.

    “Export is the single biggest source of growth in natural gas demand in the U.S., and this asset is next door,” Foley said.
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    ConocoPhillips sells San Juan basin assets for $3 bln

    ConocoPhillips said on Thursday it would sell natural gas-heavy assets in San Juan basin, spanning New Mexico and Southwestern Colorado, to an affiliate of privately held Hilcorp Energy Co for about $3 billion.

    Conoco will receive $2.7 billion in cash.

    The deal also includes a contingent payment of up to $300 million.

    Hilcorp has a partnership with private equity firm Carlyle Group LP to acquire and develop North American oil and gas properties.
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    Alternative Energy

    Stability of Renewables.

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    European clean energy investment down sharply in Q1 at 2006-low: BNEF

    European investment in clean energy fell sharply in the first quarter to $7.9 billion, the lowest quarterly level since 2006 and down 62% compared with the first quarter of 2016 which was boosted by a number of large offshore wind projects, the quarterly report by Bloomberg New Energy Finance (BNEF) shows.

    Germany and France doubled their clean energy investment, while the UK was down 91% at $1.2 billion mainly as there was no new offshore wind financing to rival last year's crop, BNEF said.

    The financial close for the 479 MW Ho he See offshore wind project in the North Sea lifted German investment 96% on the year to $3 billion, while French clean energy investment jumped 145% on year to $1.1 billion with the two nations alone now accounting for over half of Europe's total investment, the BNEF data showed.

    Worldwide, clean energy investment totaled $53.6 billion in the first quarter, down 17% from Q1 2016, BNEF said.

    "Q1 this year reflects, once again, the declines in average capital costs per megawatt for wind and solar. This trend means that year-by-year it's possible to finance equivalent amounts of capacity in these technologies for fewer dollars," Bloomberg New Energy Finance CEO Jon Moore said, adding that a 60% drop in offshore wind investment decisions and lower investments in the two biggest markets -- the US and China -- added further downward pressure.

    The US saw $9.4 billion invested in Q1, down 24%, and China $17.2 billion, down 11%, BNEF said. BNEF analysts are currently expecting both wind and solar to see similar -- or higher -- numbers of megawatts added this year than last, it said.

    According to BNEF, the quarterly data does not include certain categories of investment such as energy storage projects, which will only be reflected in the annual report.

    Last year, global investment in renewable energy already fell 18% after reaching a record $329 billion in 2015, the data showed.

    According to Platts European Renewable Power Tracker, installed wind and solar capacity in Europe's five biggest markets -- Germany, the UK, France, Spain and Italy -- is now approaching 200 GW with output from those wind turbines and solar panels reaching a new monthly record of over 30 TWh in March.

    Attached Files
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    Shell lobbies Dutch government to quadruple offshore wind target by 2030

    Anglo-Dutch oil major Royal Dutch Shell said it has urged the Dutch government to come up with bolder offshore wind targets and quadruple the goal for installed capacity to 20 gigawatts (GW) by 2030.

    Europe's biggest oil company, which has traditionally invested little in green energy sources, is ramping up renewable energy investments to $1 billion a year by the end of the decade after pressure from shareholders to do so and as it sees governments turning to less carbon intensive and more flexible fuels.

    Some of its recent activities in renewable energy include winning a contract, as part of a consortium, to build a wind farm off the coast of the Netherlands and bidding for an offshore wind licence in the United States.

    In the Netherlands, where it is by far the largest listed company, it is lobbying the government to raise its long-term offshore wind target to give investors clarity on priorities further out.

    "We need to lower the costs of development, but we would also want the Dutch government to come up with the policy for a further rollout of 10-15 GW in capacity for the period until 2030," said a spokeswoman for Shell in the Netherlands.

    The Netherlands is lagging other European countries in renewable energy investments and was ordered by a district court in The Hague in 2015 to cut carbon emissions by 25 percent within five years after losing a court case brought by environmental campaigners.

    The government has since launched a programme to speed up renewable energy projects, including tenders to build 4.5 GW of offshore wind farm capacity and more beyond that.

    As part of a group of the Netherlands' largest companies, Shell has called on policymakers making up the next Dutch government to adopt a comprehensive climate law that will help the country meet targets set out in the 2015 Paris climate accord.

    Shell said in its sustainability report published on Wednesday that it is "helping" policymakers in the Netherlands to find an energy mix that allows reducing greenhouse gas emissions.

    The oil major, which operates the Netherlands' largest operating gas field in Groningen jointly with Exxon Mobil, is also pushing for the use of gas to complement erratic renewable energy production.

    The Dutch government has capped the amount of gas that can be produced from the Groningen field because of related earthquakes and wants to continue winding down output as part of its emissions-cutting plans.

    "The largest contribution Shell can make to reducing emissions globally in the near term is to continue to grow the role of natural gas," Shell Chief Executive Ben van Beurden said at an industry event last month.
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    Chinese energy giant to build world's largest offshore wind farm

    The State Power Investment Corporation (SPIC), one of the top five power generators in China, is making swift progress in raising its planned 800 MW wind power farm off the coast of eastern China's Yancheng, Jiangsu province, China Daily reported on April 13.

    Once completed, the farm will eclipse the 630 MW London Array as the world's largest offshore wind farm. It is set to enter full operation in 2018.

    Maturing technology and increasing competition have helped to reduce costs, making offshore power increasingly competitive. The push to expand offshore has been driven by the fact that many major economic hubs in China are located near the coast, analysts said.

    The construction of Yancheng project will occur in three phases. The first 100 MW installed capacity consists of twenty-five 4 MW Siemens turbines. By March 2017, this portion of the project had generated 190 GWh of electricity.

    The second phase of construction is currently underway, set to boost installed capacity by another 400 MW by October 2017 using 100 wind turbines.

    The third phase of the project will start in the second half of 2017, and is expected to complete in 2018. Wind turbines with capacity of 300 MW will be erected in the water at a depth of 18 meters, 36 kilometers from the shore.

    SPIC is a global green energy provider with a total installed capacity of 117 GW. It is engaged mainly in coal, aluminum, logistics, finance, environmental protection and advanced technology industries.
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    New study on Monsanto weedkiller to feed into crucial EU vote

    Results of a new animal study into possible health risks of the weedkiller glyphosate will be published in time to inform a key EU re-licensing vote due by the end of 2017, according to the researcher leading the trial.

    A row over possible effects of glyphosate - an ingredient in Monsanto's big-selling herbicide Roundup - has prompted investigations by congressional committees in the United States and forced a delay in Europe to a decision on whether it should be banned or re-licensed for sale.

    Giving details and preliminary findings of the latest study to Reuters, Italian scientist Fiorella Belpoggi said experimental rats exposed to the herbicide at levels equivalent to those allowed in humans showed no initial adverse reaction.

    "Exposed animals had no evident differences from non-exposed animals," Belpoggi, who is director of the Cesare Maltoni Cancer Research Centre at the Ramazzini Institute in Italy, said in a telephone interview.

    "But this tells us very little at the moment, because the examinations of key parameters that could be affected by exposure are still being done (and) we are waiting for those results," Belpoggi added.

    Those parameters include any genetic changes, as well as potential toxic effects on measures related to fertility, such as sperm, embryo development and offspring growth, she said.

    Argument over glyphosate centers on whether it is carcinogenic. Scientists at the International Agency for Research on Cancer (IARC) say it probably does cause cancer, putting them at odds with scientists at the European Food Safety Authority, the U.S. Environmental Protection Agency and multiple other safety and regulatory agencies around the world, who say it likely doesn't.

    Congressional committees in the United States have raised questions about the work and funding of IARC, which is based in Lyon, France, and the Ramazzini Institute, based in Bologna.

    IARC and Ramazzini defend the independence of their work and say their research is conducted to the highest scientific standards.


    A spokesman for Monsanto said: "There are nearly a thousand scientific studies from decades of research that are already available to every regulatory agency in the world, which have all concluded that glyphosate is safe to use."

    According to data published by IARC, glyphosate was registered in more than 130 countries as of 2010 and is one of the most heavily used weedkillers in the world. Analysts have estimated Monsanto could lose out on up to $100 million of sales if glyphosate were banned in Europe.

    Belpoggi said her team decided to conduct their trial to produce fresh, independent results in an effort to settle differences over glyphosate's health effect.

    But she stressed that due to time constraints, the study is not able to analyze the weed killer's potential carcinogenicity, which would take several years to research properly, given the time any tumors might take to develop and grow.

    "We are focused on reproductive and developmental issues, in other words, whether glyphosate ... affects the development of embryos, fetuses and pups," she said.

    Chemicals that can affect hormones and reproduction are known as endocrine disruptors and, like carcinogens, are subject to strict regulations in the European Union.

    This study involves scientists working at five laboratories, Belpoggi's and one other in Italy, and three outside the country. "This was to ensure we would have the best experts analyze each end point," Belpoggi said. The study is funded by the Ramazzini Institute, a research cooperative of around 28,000 members who are its co-owners and raise funds for its work.

    Using laboratory rodents known as Sprague Dawley rats, the researchers exposed them to low levels of glyphosate and its formulation Roundup in their diet, equivalent to U.S. Acceptable Daily Intake (ADI) levels permitted in humans.

    The U.S. ADI for glyphosate is 1.75 milligrams per kilogram of body weight per day while the European Union ADI for consumers is 0.5 milligrams per kilogram of body weight.

    Full results should be available by June, Belpoggi said, and will be submitted in a paper for peer review and publication in a scientific journal. A draft copy of the results will be sent at the same time to the European Commission.

    The Commission has said it expects to restart talks with EU member states by August on re-approving the use of glyphosate in herbicides. A decision is due before the end of 2017.

    "We would like to have the results in time to help regulators have a good judgment about this chemical," Belpoggi said. "If it is negative (no effect), then I will be happy because I am also exposed. But if there is some damage, then we would like everyone to know."
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    Precious Metals

    Gold vs Fear.

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    Base Metals

    Labour action threatens Chile's Chuquicamata copper mine

    Chile, the world's biggest copper producer, faced a fresh threat of labour action in the sector on Wednesday when a union at the large Chuquicamata mine said it had blocked access as a "warning" over planned changes to job opportunities.

    Mine owner Codelco said the union's action, which affected the early shift, was "illegal." It ended by 9 am and the impact on production was being evaluated, it said in a statement.

    Earlier, Codelco said output had been unaffected as workers from the previous shift had continued to keep operationsgoing.

    The state-run company signed new 27-month contracts with its six Chuquicamata unions in December after relatively rapid talks.

    However, union No 1 said Wednesday that the contracts were not being fulfilled, as Codelco was making changes that were reducing the possibility of promotion.

    "They are cutting off the careers of Chuqui workers, particularly the youngest," union leader Jaime Graz told Reuters. "This is a warning action until they commit to comply with what was agreed."

    Codelco said it was complying with the agreed contract terms. "It is not possible to open up and hire for positions that are not needed by the business," it said, adding that it was inviting "constructive dialogue."

    The union's move came less than a month after the end of a six-week strike at BHP Billiton's massive Escondida coppermine, which was the longest strike in the country's mininghistory and which ended without a real resolution.

    Chuquicamata, a century-old pit which is being expanded underground, produced 302 000 t of copper last year, out of world No 2 copper miner Codelco's 1.8-million tonnes total.
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    Copper production jumped by a million tonnes last year

    Copper production jumped by a million tonnes last year

    The latest report by the International Copper Study Group which includes full year 2016 estimates shows world mine copper production jumped by 5.3%, or 1 million tonnes last year to 20.16 million tonnes.

    According to the report the increase was mainly due to a 38% (650,000 tonnes copper) rise in Peruvian concentrate output that benefitted from new and expanded capacity brought on stream in the last two years; a recovery in production levels in Canada, Indonesia and the US, and expanded capacity in Mexico, and low frequency of supply disruptions due to strikes, accidents or adverse weather conditions.

    However overall growth was partially offset by a 3.8% (220,000 tonnes) decline in production in Chile, the world’s biggest copper mine producer, and a 4.5% decline in the Democratic republic of the Congo where output is being constrained by temporary production cuts.

    On a regional basis, production rose by 6% in the Americas and 11.5% in Asia but declined by 3.5% in Africa while remaining essentially unchanged in Europe and Oceania.

    ICSG estimates world refined production increased by about 2.5% (530,000 tonnes) in 2016 with primary production (electrolytic and electrowinning) increasing by 3% and secondary production (from scrap) declining by 2%.

    World refined copper balance for 2016 indicates a deficit of around 50,000 tonnes, mainly because of a 2.5% increase in Chinese apparent demand. The refined copper market balance for the month of December 2016 showed a small surplus of around 20,000 tonnes.

    Preliminary production by the top 10 copper mining companies totalled nearly 9.5m tonnes last year, a 4% increase compared to 2015, and some 45% of global production.

    Six out of 10 companies increased their copper output while four of them declined. All companies in the Top 10 that disclose production costs reported significant reduction in copper unit costs.
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    China Aluminium: Weiqiao rumbles on.

    Development and Reform Commission on the "clean up the electrolytic aluminum industry illegal project action program" or recently announced

          16 evening, the printing out of the "Development and Reform Commission Office [2017] No. 656 - on the issuance of" clean up the electrolytic aluminum industry illegal project action program "notice. At this point, spread more than two months to the production capacity of rumors or will be landing, the file or in the recent disclosure in the official website, please pay attention to investors.

    Xinjiang halted the three electrolytic aluminum project aluminum supply side is expected to gradually stronger reform

    0 Comments2017-04-17 10:16:00 Source: Securities Market Red Weekly See the main force to buy what!

      Xinjiang Changji government issued a notice on the 14th, decided to stop the three companies in Changji City, illegal construction of electrolytic aluminum production capacity projects, with a total capacity of 200 million tons. It is reported that one of the 800,000 tons project is not approved by the first building, has been completed. Although Xinjiang has a low price advantage, but the local is also facing water shortage and other issues.

      Since the beginning of this year, all levels of government departments have expressed in different occasions on the positive side of the reform of the supply side of electrolytic aluminum . With the establishment of the new security zone, green environmental protection is becoming the focus of the Beijing-Tianjin-Hebei region, the market supply of aluminum policy on the introduction of the policy is expected to gradually warming.

      Institutional research report that if the supply side to reform the production capacity to reach 300 to 500 million tons, and then consider deducting part of the zombie production and heating season production, supply will tend to tight balance, and may even be in short supply.Coupled with the recent global aluminum stocks continued to decline, aluminum prices are now easy to rise or difficult to fall.

    Commodity Intelligence- Weiquiao (9).pdf

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    Steel, Iron Ore and Coal

    Coking coal price jumps to six-year high of $314/t

    The price of coking coal gapped higher again on April 13 with the industry benchmark price surging 4.6% to $314/t due to continued supply outages following tropical storms in Australia, according to Steel Index tracking data.
    It's the highest price for Australia FOB premium hard coking coal since the second quarter of 2011. That price spike was also the result of flooding in Queensland that saw quarterly contract prices negotiated at an all time high of $330.
    Coking coal has more than doubled in two weeks on the back of disruption to Australia's coal exports associated with Cyclone Debbie which caused serious damage to key rail lines serving mines in the state of Queensland.
    Three lines are set to reopen by the end of this week according to operator Aurizon but large sections of the Goonyella railroad in the centre of the network could be still closed until May.
    Roughly 12–13 million tonnes of Australian met coal cargoes destined for China, India and Japan could be delayed.
    Customs data released on April 12 show Chinese imports of coal (both thermal and metallurgical coal) in March rose 12.2% from year on year and 25% from February to 22.1 million tonnes.
    The global met coal market is around 300 million tonnes per year with premium hard coking coal or PHCC constituting more than a third of the total market. More than half of PHCC seaborne coal come from Australian producers, according to TSI data.
    A reduction in allowable work days at China's coal mines last year sparked a massive rally in coal prices, lifting met coal prices to multi-year high of $308.80 per tonne by November from $75 a tonne earlier in 2016. But the speculative rally fizzled soon fizzled out with the commodity hitting a 2017 low of $150.10 a tonne last month.
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    Australia's Aurizon slashes profit guidance, coal tonnage after cyclone

    Australian coal railway line operator Aurizon Holdings Ltd on Tuesday slashed its annual profit guidance by up to 16 percent and said as much as 21 million tonnes less coal would be carried to ports as a result of Cyclone Debbie.

    The cyclone in the northern state of Queensland led to the temporary closure of four of Aurizon's haulage lines in the world's largest coking coal export region.

    Three of the lines have reopened already. Goonyella, the largest in terms of export tonnage, is expected to open on April 26 - about 1-1/2 weeks ahead of an earlier forecast - though with speed restrictions and reduced capacity, Aurizon said.

    Aurizon said its latest forecast for underlying earnings before interest and tax was for A$800 million ($605 million) to A$850 million for the year ending June 30, down from previous guidance of A$900 million to A$950 million before the cyclone. The lower guidance accounts for lost revenue and flood repair costs, it said.

    Aurizon shares fell by as much as 4.5 percent on Tuesday after it exited a trading halt to disclose the revised forecast.

    Aurizon's major customers include coal miners BHP Billiton , Glencore PLC, Peabody Energy Corp , Rio Tinto and Anglo American PLC .

    Aurizon said it expected to haul between 12 million and 14 million tonnes less coal in the year to June 30 as a result of the cyclone. Overall tonnage for the year, including that hauled by other operators on Aurizon lines, is expected to fall by 19 million to 21 million tonnes.

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    Shaanxi found lax in cutting coal use, troubled by poor air quality

    Shaanxi province was found lax in reducing coal burns and upgrading industrial structure, which caused a worsening air quality in Xi'an and other cities last year, environmental inspectors sent by the central government said.

    During the one-month environmental inspection that started on November 28 last year, officials identified 1,309 pollution problems in the province, said Li Jiaxiang, head of the inspection team.

    As of end-February, 222 polluting companies had been shut down and 26 people responsible for pollutions were detained, the Ministry of Environmental Protection said in a statement.

    In addition, 492 government officials from the province were summoned to talk with the inspectors and 938 officials were held accountable for poor performance in pollution controls, the ministry said.

    It is the first province that had received results in the second round of environmental inspections. The other six regions, including Beijing, Shanghai and Chongqing, will receive their results in the coming days.

    The teams of central inspectors, headed by ministerial-level officials, set out on a pilot one-month inspection in Hebei province on Jan 4, 2016. Over January 4-December 30, they have held two rounds of inspections covering another 15 provincial-level regions.

    "In these 16 provincial regions, over 6,300 government officials were summoned for talks and another 6,400 were held accountable," Chen Jining, minister of Environmental Protection Ministry, said last month. The inspectors will visit the remaining 15 provincial-level regions this year, he added.

    Shaanxi province was expected to cut coal consumption by 3 million tonnes in 2015, while the reduction was only 110,000 tonnes. Meanwhile, three coal-fired power plants in Xianyang that had been required to reduce coal consumption actually increased coal use by over 180,000 tonnes.

    In 2014, the province cut coal consumption in large companies by 2.95 million tonnes, far less than the targeted 10 million tonnes, according to the ministry's statement on Tuesday.

    The ministry blamed the worsening air quality in Xi'an and Xianyang last year on weak controls over coal consumption and other poor implementation of pollution control policies.
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    Arch looking to cash in on surging high-vol A export prices: CEO

    By leveraging its large-output, high-vol A mines, Arch Coal is better positioned to take advantage of the latest surge in metallurgical export prices than most US miners, the company's CEO said Wednesday at the Coal Transportation Association's Spring Conference.

    In his presentation, John Eaves highlighted the dramatic price increases seen off the US East Coast since Cyclone Debbie blew through Australia and washed away infrastructure to disrupt transportation to ports.

    He noted that with expected railroad delays of up to five weeks in Australia, US met export prices are rising so fast that figures used in his presentation pulled from indexes just days earlier were already out of date.

    "In the last couple weeks we've seen a pretty significant uptick," Eaves said. "Prices are up $15 to $25 a day and continue to run. We don't think that's sustainable, but were trying to capture some of that value as we see that happen."

    High-vol A prices gained another $10 on Wednesday to increase to $285/mt. High-vol A pricing has surged $122.50, or 75.4%, since March 31 and surpassed the year-ago high of $265/mt seen in mid-November.

    Arch's Leer mine is the largest high-vol A mine in the US, and its Sentinel mine ranks fifth in output. Both mines are in West Virginia.

    US Mine Safety and Health Administration data showed Leer produced almost 3.6 million st last year and about 830,000 st in the first quarter this year, while Sentinel's output totaled 1 million st in 2016 and 347,000 in Q1 this year, which marked its highest quarterly output in five years.

    While Arch is able to increase production from longwalls at Leer, many other US producers would likely struggle to ramp up output to meet new demand, especially of high-vol A grades, Eaves said.

    Central Appalachia has lost about 30 million st/year of met production since 2013, the CEO said, and while Arch expects output to increase about 7 million st this year to 66 million st because of the seaborne market, a majority of the coal coming online will be of lower quality.

    Much of current met production has already been committed to deals made in the past eight months since the revitalization of the market, and companies looking to hire employees, even Arch, have struggled to find skilled workers as many miners laid off during coal's downturn have left the business altogether, Eaves noted.

    "It's going to be tough, but people are going to bring any meaningful production online," Eaves said. "Everybody's going to look at what they can do -- but we see a real high-vol A scarcity."

    In what has become a much more balanced global met market, Eaves said that in the past few years miners have learned "when there is a real interruption in transportation or production -- up or down -- it can have a real impact on prices."

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    M&As to gather pace in China coal sector

    Mergers and restructuring among China's coal sector are accelerating, with about ten enterprises producing more than 100 million tonnes of coal annually projected to be established by 2020, Economic Information Daily reported on April 13.

    Related departments have been asked to issue guidance on promoting the sector's mergers, restructuring, transition and upgrade. Small coal mines based in different regions will implement mergers and restructuring within two years, meanwhile, about ten big companies will be set up by 2020, the newspaper said.

    The government also encouraged enterprises to strengthen trans-regional cooperation to cut overcapacity through stock swap.

    China will reduce coal production by at least 150 million tonnes this year, Premier Li Keqiang said.

    The government pledged to make more use of market- and law-based methods to address the problems of "zombie enterprises" and encourage enterprise mergers, restructuring and bankruptcy liquidations.

    Last year, six enterprises' production exceeded 100 million tonnes, while in 2015, it was eight, Zhang Hong, deputy secretary-general of China National Coal Association, told the newspaper.

    The State-owned Assets Supervision and Administration Commission earlier said that the number of centrally administered State-owned enterprises (SOEs) will be reduced to no more than 100, which now stands at 102.

    The government also promised measures such as introducing a mixed ownership system and more efforts to make SOEs leaner and healthier, especially in the steel, coal and power sectors.

    There will be about 3,000 coal enterprises in 2020, mostly large companies, running about 6,000 collieries nationwide, with large-capacity coal mines the majority, according to the coal industry 2016-2020 development plan.
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    Beijing warns China steelmakers it plans 'year of attack' on mill overcapacity

    China's steel mills need to prepare for an even tougher assault on overcapacity this year as the government bids to make "fundamental" progress in reforming the sector, an official from the country's top planning body told an industry meeting.

    "Although capacity reduction targets were achieved early last year, the overcapacity problem in China's steel sector has not fundamentally been improved," said Xia Nong, supervisor at the industry department of the National Development and Reform Commission (NDRC).

    Xia described 2017 as a "year of attack" and said the state would make even bigger efforts, warning a gathering of industry officials and executives in Beijing on Thursday that they should plan in advance. Officials at the meeting insisted last year's 65 million tonnes of capacity cuts were already substantial.

    "Do not delay, don't play wait and see," Xia said.

    The world's biggest steel producing country vowed last year to reduce annual crude steel capacity by 100-150 million tonnes within three to five years.

    It aims to close 50 million tonnes this year, and has also vowed by the end of June to completely eliminate low-grade steel furnaces, responsible for as much as 100 million tonnes of illegal substandard production every year.

    "We don't permit leaving things to chance, and we don't permit lying low during the crackdown on low-grade steel capacity," Xia said.

    Environmental group Greenpeace estimated earlier this year that actual capacity in operation increased by 35 million tonnes in 2016, with much of the closure programme focusing on already defunct plants.

    China's steel output increased 1.2 percent to 808.4 million tonnes in 2016, and Greenpeace said the country needed to consider cutting production rather than capacity in order to rein in the sector.

    Luo Tiejun, supervisor of the raw materials department at China's Ministry of Industry and Information Technology, rejected that notion, saying Beijing was still committed to letting the market decide production levels.

    "China will only cut steel capacity and will not set a level for output," he said. "It is wrong to say that China's steel capacity is increasing."

    However, the central government has already launched an investigation into steel firms in the city of Tangshan in Hebei province, focusing on mills that have "cut capacity but actually increased output".

    Tangshan, home to dozens of private steelmakers, produced 88.3 million tonnes of steel in 2016, up 6.8 percent on the year - and more than the whole of the United States.

    Steel prices rose 76.5 percent in 2016, boosting profit margins and helping mills turn losses into gains, according to data from the China Metallurgical Industry Planning and Research Institute.

    With output up 6 percent in the first two months this year, industry watchers say the price recovery may have encouraged some mills to overproduce.

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    POSCO says Q1 operating profit more than doubled

    South Korean steelmaker POSCO said on Tuesday that its first-quarter operating profit more than doubled from the same period a year earlier, beating its own earlier estimate, as solid demand in China boosted steel prices.

    The world's fourth-largest steelmaker said consolidated operating profit for January-March was 1.37 trillion won ($1.20 billion), compared with a preliminary estimate it issued in late March of 1.2 trillion won, and 659.8 billion won reported a year ago.
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    China March steel products exports down 24.2% on year

    China exported 7.56 million tonnes of steel products in March, down 24.2% year on year but up 31.5% from the previous month, showed the latest data from the General Administration of Customs (GAC).

    The year-on-year decline was mainly owing to weakening price edge of China's steel products in the international market and increasing anti-dumping investigation from other countries.

    Total steel products exports amounted to 20.73 million tonnes over January-March, decreasing 25% from the year-ago level.

    China imported 1.3 million tonnes of steel products in March, climbing 2.4% from the preceding year. From January to March, total steel products imports reached 3.48 million tonnes, gaining 11.3% year on year.
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