Mark Latham Commodity Equity Intelligence Service

Tuesday 14th July 2015
Background Stories on

News and Views:

Attached Files


    Iran’s Return From Exile Poses Fresh Challenge for U.S., Allies

    Iran is back. Its agreement with world powers to curb its nuclear program will ease its isolation as an international pariah and let the oil-rich nation resume participation in global commerce.

    That prospect presents new challenges to U.S. President Barack Obama’s administration, which pursued the nuclear accord while vowing not to ease pressure on the Islamic Republic as a supporter and bankroller of international terrorism.

    The chance that the nuclear deal will become a historical inflection point in Iran’s relations with the U.S. and other nations depends first on whether Iran honors the nuclear agreement and then what choices it makes once it’s able to return to global oil markets and the international financial system after years of isolation, according to U.S. Iran-watchers.

    While relief will be phased in over months to come after Iran meets its obligations under the accord, it stands to gain access to as much as $150 billion in frozen assets and to be freed from sanctions that reduced its crude exports by more than half. Banks including Goldman Sachs Group Inc. and Barclays Plc estimated before the deal that it would take six to 12 months for the holder of the world’s fourth-largest crude reserves to revive production by about 500,000 barrels a day after sanctions are lifted.

    Obama and others have expressed hope that Iran’s reintegration into the global economy will strengthen its middle class and young people and ultimately temper their government’s support for terrorism and subversion.

    “I don’t think the deal itself will lead to a fundamental transformation of Iran itself, but I think it could be a first step,” said Alireza Nader, a senior international analyst at the Rand Corp.

    The deal is likely to provide a major political boost to Iranian President Hassan Rouhani, a relative moderate, and will help set in motion economic changes that could lead to eventual political reforms, Nader said.

    Others say the billions of dollars flowing in over time will only underwrite the ambitions of Iranian’s hard-liners to be the dominant power in the Persian Gulf and the wider Middle East.

    “We must all bear in mind that Iran is not a status quo power,” James Jeffrey, a former U.S. ambassador to Iraq, told the Senate Foreign Relations Committee last month. He said Iran is determined to assert its influence in the region and won’t play by the rules.

    The nuclear talks have rattled America’s allies in Israel and the Persian Gulf, in part because there’s no longer a Sunni Arab counterweight to a reinvigorated Shiite Persian Iran. Egypt is consumed by internal problems; Saudi Arabia has been unable to quell an uprising in neighboring Yemen; and Iraq is struggling to combat Islamic State with support from Iran’s Islamic Revolutionary Guard Corps.

    Doubters such as Israel and Saudi Arabia view Iran as a hegemonic power and have been adamant in opposing a deal that would lift sanctions. In the U.S., some lawmakers have expressed skepticism or preemptive opposition to the deal, which must be reviewed by Congress before Obama can take action to ease U.S. sanctions against Iran.
    Back to Top

    Oil and Gas

    OPEC sees more balanced oil market in 2016

    The global oil market should be more balanced next year as China and the developing world increase oil consumption while supply of shale oil from North America and other regions grows more slowly, OPEC said on Monday.

    In its monthly report, the Organization of the Petroleum Exporting Countries said it expected world oil demand to increase by 1.34 million barrels per day (bpd) in 2016, up from growth of 1.28 million bpd this year.

    World oil demand growth should outpace any increase in oil supply from non-OPEC sources and ultra-light oils such as condensate, increasing consumption of OPEC crude oil, it said.

    "This would imply an improvement towards a more balanced market," OPEC's in-house economists said in the report.

    OPEC said it expected demand for its own crude oil to rise by 860,000 bpd in 2016 to 30.07 million bpd. But it cut its estimate of demand for its crude this year by 100,000 bpd to 29.21 million bpd.

    Oil prices are now around half their levels of a year ago with global crude oil benchmark Brent trading at around $58.50 a barrel by 1100 GMT on Monday, down from a peak above $115 in June 2014.

    Lower prices have squeezed high-cost oil producers and brought a sharp fall in the number of oil exploration rigs in operation, particularly across North America.

    OPEC said supply of oil from non-OPEC producers was expected to grow by only 300,000 bpd in 2016, down sharply from growth of 860,000 bpd this year.

    U.S. oil output, which has seen rapid increases over the last five years thanks to the development of huge shale resources by "fracking", is expected to log much more modest supply growth in 2016.

    "Total U.S. liquids production is expected to grow by 330,000 bpd, just one third of the growth of 930,000 bpd expected this year," it said.

    World oil supply has grown much faster than demand this year, led by OPEC as its core members in the Middle East Gulf attempt to build market share, leading to higher inventories.

    Saudi Arabia, in particular, has pushed up its oil production to record highs, industry sources say.

    OPEC estimated, based on figures from secondary sources, that its own group crude oil output rose 283,000 bpd to 31.38 million bpd in June, led by Iraq, Saudi Arabia and Nigeria.

    It said Saudi Arabia had told it that it pumped 10.56 million bpd last month, up 231,000 bpd from May.
    Back to Top

    Saudi Arabia faces falling foreign reserves as oil prices still lackluster

    Could falling foreign reserves emerge as a challenge to Saudi oil policy?

    Holding a war chest of assets, Saudi Arabia calculated it could withstand lower oil prices better than its competitors, pushing high-cost producers out of the market and grabbing market share.

    That strategy has been playing out as across the globe, but to reach its conclusion, the Saudis cannot blink even as it burns through foreign reserves.

    Coffers are hardly depleted, but the pace of decline has been impressive. Foreign reserves were 2,537 billion riyal ($677 billion) in May, down 9% from August, according to the Saudi Arabian Monetary Agency.

    The biggest monthly decline during that stretch came in March when foreign reserves plummeted 59 billion riyal.

    With government revenue slashed by lower oil prices, Saudi Arabia has been forced to dip into its rainy day fund to cover budget holes.

    The country’s budget deficit is forecast by the IMF to equal 20% of GDP this year, quite a turnaround from recent years of surpluses.

    The impact of low oil prices on Saudi Arabia’s budget is stark. In 2015, government revenue in expected to equal 700 billion riyals, down from 1,044 billion riyals in 2014, according to Riyadh-based Jadwa Investment.

    The outflow of government deposits could slow because the government is anticipated to start issuing debt as another means to finance the deficit, Tim Callen, the IMF’s mission chief to Saudi Arabia, said in June.

    Regardless, deficits will remain a fact of life unless the arithmetic changes.

    All of this begs the question whether the pressure of budget deficits and dwindling foreign reserves will sway official thinking behind Saudi Arabia’s oil policy.

    Might patience run dry while waiting for market forces to weed out high-cost producers? If so, will the Saudis reverse course and lobby for OPEC members to lower their output target in order to prop up prices?

    Such a move would come as a shock to those who interpreted the kingdom’s decision last November to hold OPEC production steady as a permanent break from its traditional role as the world’s balancer of supply and demand.

    In fact, says scholar F. Gregory Gause, the Saudi decision was perfectly consistent with its guiding principle followed since the mid-1980s of cutting production only if others do the same.

    “In 1986, the Saudis decided that they were done playing the patsy,” Gause said in a policy briefing for the Brookings Doha Center. “If other oil producers were not going to bear the costs of cutting production to put a floor under prices, neither were they.”

    In 2014, the Saudis opted to use their financial reserves to withstand low prices and put pressure on competitors, including the North American shale producers, he said.

    Now that lower oil prices have begun hurting many oil producers, and the Saudis to a lesser degree, the stage may be set for cooperation, Gause said
    Back to Top

    Halliburton, Baker Hughes agree to extend antitrust review deadline on merger

    Baker Hughes and Halliburton have entered into a timing agreement with the antitrust division of the US DOJ (Department of Justice).

    It means the period for the DOJ’s review of the takeover will now be completed at the end of November, 90 days after both companies have certified compliance.

    A deal has also been reached between Baker Hughes and Halliburton to extend the time period for closing the acquisition to no later than December.

    Both companies expect to certify compliance with the DOJ’s second requests by mid-summer.

    A spokesman said Halliburton and Baker Hughes continue to be in discussions with the DOJ, the European Commission and other competition enforcement authorities with regard to the acquisition.
    Back to Top

    Argentina brings the curtain down on energy tax credits

    Argentina ended some financial incentives today that were intended to boost energy investment in its huge shale oil and gas deposits, even as it seeks to narrow an energy trade gap.

    The government announcement in an official gazette comes as Argentina seeks to develop its its vast but barely tapped Vaca Muerta shale deposits, to help it trim a $6billion trade deficit in oil, gas and electrical energy supply.

    Launched in 2008, the incentive programme grants tax credits for investments directed toward boosting reserves and increasing oil production from shale and conventional deposits.

    Oil company officials privately complain that President Cristina Fernandez’s unorthodox policy-making is often unpredictable and makes doing business in Latin America’s third largest economy difficult.

    Even so, the scrapping of the tax credits, which were introduced when the government-controlled price for locally produced oil was significantly below the global market price, is not expected to damage the industry as domestic crude prices are now higher than those of world markets.

    “The state now is looking to pay its debts from the programme, which worked well as it maintained activity in the sector,” an oil company official said on condition of anonymity.

    Oil producers in Argentina currently receive $77 per barrel, while Brent crude was today trading at $57.70.

    Other Argentine incentives remain in place. In January, the government unveiled a stimulus that guaranteed producers a maximum $3 per barrel subsidy when quarterly output exceeds a government-set base level. Exporters receive up to an additional $2 per barrel for every barrel of crude shipped abroad.

    Developing Vaca Muerta, a formation that covers an area similar to Belgium, will cost up to $200billion over the next 10 years, state-controlled energy firm YPF says.
    Back to Top

    Argentina Plans Up to $784.3 Million in Bonds for Oil Companies

    Argentina Plans Up to $784.3 Million in Bonds for Oil Companies

    Argentina plans to issue as much as $784.3 million of bonds to pay debt owed to oil producers that participated in a program designed to encourage companies to boost output.

    The government will offer two different bonds to cancel the debt under the Petroleo Plus program created in 2008 and unpaid since 2012, according to a decree published Monday in the official gazette. Among companies holding credits under Petroleo Plus are Pan American Energy LLC and Pluspetrol SA.

    Argentina will issue mostly new debt maturing in 2024, the same bond it used last year to compensate Madrid-based Repsol SA for the 51 percent stake in oil producer YPF that President Cristina Fernandez de Kirchner expropriated in 2012.

    The government hopes the settlement “will pave the way for investments in its oil and natural gas industry,” according to the decree.

    Oil producers will get at least 20 percent of the amount owed by the government in Bonad 2018 bonds with a 2.4 percent coupon and as much as 80 percent in Bonar 2024 bonds, with a 8.75 percent coupon.

    The outstanding Bonar 2024 slipped 0.18 cent to 97.78 cents on the dollar, pushing the yield up 0.04 percentage point to 9.41 percent, data compiled by Bloomberg show.

    The companies will have 30 days to submit bond preferences and agree to terms, according to the decree, which said the government discontinued Petroleo Plus. The government established the program as an incentive to bolster declining production but stopped paying in 2012.
    Back to Top

    Rosneft and Statoil complete pilot drilling at the North-Komsomolskoye Field

    Rosneft and Statoil ASA completed drilling works as part of the Pilot Project at the PK1 layer of the North-Komsomolskoye field. During 2015 the companies jointly drilled 2 horizontal exploitation wells.

    Using best global practices Rosneft and Statoil ASA implemented extended logging, including core and fluid samplings. Also, for the first time onshore in Russia, a well was completed using 'openhole gravel packing' in a horizontal section of 1,000 m.

    Rosneft and Statoil plan to hold wells testing and determine further prospects and methods of PK1 layer development based on the testing results.

    Implementation of the Project may allow effective development of about 600 mln tons of geological oil in place at the North-Komsomolskoye field in the short term.

    Commenting on the drilling completion, Igor Sechin said:

    'Creation of partnerships for technologically complex projects' development is one of the strategic dimensions of the Company's evolvement. The pilot drilling at the North-Komsomolskoye field opens a new stage of the joint work of Rosneft and Statoil. The companies are working actively and continue developing the long-term cooperation.'
    Back to Top

    Oil output from U.S. shale plays seen down for fourth month -EIA

    Oil production from U.S. shale in August is expected to fall by the most since at least 2007, according to the U.S. agency tasked with tracking oil output, the latest sign a price rout will shrink the nation's crude output.

    Oil production from the largest U.S. shale plays will plunge in August for a fourth consecutive month, forecasts from the U.S. Energy Information Administration showed on Monday.

    Output was expected to decline by 91,000 barrels per day, 12 percent over July's forecast production decline, to 5.4 million bpd, the lowest level since November for the seven shale plays tracked in EIA's productivity report.

    Energy firms fired thousands of workers and cut back on new drilling after U.S. crude futures collapsed 60 percent from over $107 a barrel in June 2014 to near $42 in March on oversupply concerns and lackluster world demand.

    Despite the cuts, however, U.S. production averaged 9.6 million bpd during the week ended July 3 for a seventh week in a row, its highest level since the early 1970s, according to the most recent government data.

    Several energy firms decided to return to the well pad during May and June when prices averaged $60 a barrel after rebounding off the March lows. The firms have not publicly changed those new drilling plans even though crude prices fell last week and were now trading around $52 a barrel.

    In the Bakken shale play, for example, North Dakota regulators said the state's well count hit a record high in May with producers deciding to hydraulically fracture more freshly drilled wells, bucking a trend to mothball them. Drilling permit applications also spiked.

    Oil production in the Bakken in North Dakota and Montana was expected to fall 22,000 bpd to 1.2 million bpd in August, while Eagle Ford oil production in South Texas was expected to drop 55,000 bpd to 1.5 million bpd.

    Oil production in the Permian play of West Texas and New Mexico, the biggest U.S. shale oil play, however, was expected to rise 5,000 bpd to 2.0 million bpd.
    Back to Top

    DOE grants additional export volumes to Cameron LNG

    The United States Department of Energy issued an order granting a 20-year authorization to export liquefied natural gas to Cameron LNG equivalent to approximately 515 billion cubic feet per year to free trade agreement countries.

    Cameron LNG requested the additional export authorization from existing LNG terminal in Cameron, Louisiana, the notice reveals. The additional export volume will be produced at the company’s two new liquefaction trains to be constructed on the site.

    DOE previously authorized Cameron LNG to export 772 billion cubic feet per year of natural gas from the first three liquefaction trains. This new authorization brings the total authorized FTA volume to 1,287 billion cubic feet per year.

    The company has also been authorized to export up to 620 billion cubic feet of natural gas to non-FTA countries for a period of 20 years.

    Cameron LNG expects to have the first liquefaction train completed and put into service in 2017 with second and third coming online in 2008 bringing the capacity up to 14,95 Mtpa of LNG.

    Trains four and five would increase the LNG production capacity by 9.97 million metric tons per annum raising Cameron LNG’s total export capacity to 24.92 Mtpa.
    Back to Top

    U.S. Natural Gas Production in June Fell Slightly From May: Bentek

    Natural gas production in the lower 48 United States averaged 72 billion cubic feet per day (Bcf/d) in June, down about 0.6 Bcf/d from the May average, according to Bentek Energy®, an analytics and forecasting unit of Platts. On a month-over-month basis, June natural gas production was down less than 1% from May.

    The U.S. Energy Information Administration (EIA) will publish its domestic production estimates for April on or around July 31, 2015.      

    "The month-on-month U.S. production decline observed in June was largely attributed to continued maintenance events in the Northeast," said Sami Yahya, Bentek energy analyst. "The combination of reduced drilling and completion costs, as well as considerable efficiency gains in the field, has helped producers across most regions better cope with the distressed commodity prices."

    According to Bentek's data analysis, the average cost of service companies is down about 20% since last year. Also down are drill times, which have declined, on average, by three to five days this year in multiple regions.

    "This translates into the ability of producers to utilize less rigs but drill more wells," said Yahya. He pointed to the fact that some producers have indicated that in the past they tended to drill and complete a cluster of wells within an area and move on to the next cluster. But now, they say they are more likely to drill all of the clusters first and come back only later to complete those wells—saving money by not bringing completion rigs back and forth.

    "This can also be viewed as completion deferment," Yahya noted.  "It's also worth noting that high-grading - or focusing on higher initial production rate areas - remains the primary trend in most areas."

    Bentek data analysis suggests 2015 U.S. natural gas production will average approximately 72.8 Bcf/d (which has recently been reduced from 73 Bcf/d due to persistent maintenance and outages), with growth occurring throughout the year, driven almost exclusively by continued production gains in the Northeast.

    The Bentek data analysis is based on an extensive sample of near real-time production receipt data from the U.S. lower 48 interstate pipeline system. Platts' Bentek production models are highly correlated with and provide an advance glimpse of federal government statistics from the U.S. EIA.
    Back to Top

    MPLX to buy MarkWest for $15.63 bln, creating 4th-largest MLP

    Marathon Petroleum Corp's master limited partnership, MPLX LP, will buy natural gas processor MarkWest Energy Partners LP for about $15.63 billion, a deal that will create the fourth-largest MLP by market value.

    The acquisition, which will create an MLP with a market value of $21 billion, will add natural gas processing facilities to MPLX's crude-heavy portfolio.

    The deal comes less than a month after Energy Transfer Equity's unsolicited $48 billion offer for Williams Cos Inc.

    Tax-advantaged MLPs have found favour with investors because they pay out most of their cash flow as dividends. To grow their dividends, MLPs use acquisitions to expand their asset base.

    MPLX expects the combined company's dividend to grow by 25 percent through 2017, Chief Executive Gary Heminger said. The company maintained its target of 29 percent dividend growth for 2015.

    "MPC's strong balance sheet and liquidity will enable MarkWest to accelerate organic growth in some of the nation's most economic and prolific liquids-rich natural gas resource plays," Heminger said.

    MarkWest, which processes and transports natural gas, has gained from the U.S. shale boom, operating in fields such as Pennsylvania's Marcellus shale and Oklahoma's Utica shale, among others.

    MPLX operates a network of crude oil and product pipelines in the U.S. Midwest and Gulf Coast regions.

    MarkWest unitholders will get 1.09 common units of MPLX and $3.37 in cash for every unit held.

    MarkWest's shares were trading at $71.29 before the bell, below the offer price of $78.64. The offer price is a premium of about 32 percent to MarkWest's Friday close.

    Marathon Petroleum, which set up MPLX in 2012, will contribute $675 million to fund the cash component of the deal.

    MPLX will also assume MarkWest's debt of about $4.2 billion, giving the combined company an enterprise value of $20 billion, the companies said.

    MPLX also said on Monday it would "indefinitely" defer its planned acquisition of Marathon Petroleum's marine transportation assets.
    Back to Top

    Flotilla Protesters Buoyed by Delay to $1.7 Billion LNG Plant

    While the proponent of a Howe Sound liquefied natural gas plant has pushed pause on the $1.7-billion project, area residents haven't suspended their campaign against it.

    More than three-dozen power and sail boats -- as small as a rigid inflatable and as big as a yacht -- travelled around Bowyer Island midday July 11, blowing horns, displaying signs and banners and chanting "No LNG, No LNG!" under ominous clouds.

    The company behind the project, which has stated it would pay $2 million in local taxes a year and employ 100 full-timers, announced a six-month delay to the review on June 30 after the Squamish Nation Chiefs and Council issued 25 conditions for approval.

    The Squamish Nation worries the plant, proposed at a former pulp and paper mill, would pollute the air, land and water, and it wants insurance coverage in the event of a spill or explosion. The nation's conditions are similar to the 18 issued by the District of Squamish on April 30.

    "As expected, the conditions reflect Squamish Nation's commitment to protecting land, water and heritage and our focus now is to take the time to review them and work with Squamish Nation to understand their conditions," said Woodfibre LNG vice-president Byng Giraud in a June 30 news release.

    Woodfibre LNG proposes to produce 2.1 million tonnes of LNG a year with a 250,000 square-metre storage facility.

    Natural gas supplier FortisBC, which built a pipeline in 1990 for the Sunshine Coast and Vancouver Island, proposes a 52-kilometre long, 20-inch diameter gas pipeline from north of the Coquitlam watershed to Squamish that would feed the plant.

    Owner Pacific Oil and Gas Ltd. is part of Indonesian billionaire Sukanto Tanoto's empire.

    Plant would fire up 2018

    Woodfibre LNG still hopes to get regulatory approval and begin construction before the end of the year, but the plant wouldn't be in full operation until 2018, the year after the next provincial election.
    Back to Top

    Train lobby bids to weaken safety rule

    Train lobby bids to weaken safety rule

    Senate Republicans bid to weaken new regulations to improve train safety in the $2.8 billion crude-by-rail industry, a key cog in the development of the vast North American shale oil fields.

    A series of oil train accidents, including the July 2013 explosion of a train carrying crude in Lac-Megantic, Quebec, that killed 47 people, led U.S. and Canadian regulators to announce sweeping safety rules in May. Among other things, U.S. oil trains are required to install new electronically controlled pneumatic (ECP) brakes.

    But in late June, the Republican-controlled Senate Commerce Committee approved a measure to drop that requirement, and order years of new research to confirm the safety benefits of ECP brakes.

    On Wednesday, the panel will decide whether to send the measure to the full Senate, setting the stage for a fight with Democrats who say the repeal would delay the use of feature that can help avoid catastrophic derailments and minimize the consequences of accidents that do occur.

    The looming debate pits Democrats, federal regulators, safety advocates and environmentalists against the crude-by-rail industry, which claims that installing the brakes would slap an unnecessary $3 billion cost on railroads, oil refiners and other owners of rolling stock, and potentially jeopardize safety.
    Back to Top

    Alternative Energy

    The price of solar power drops to an incredible new low (again)

    A new record low price for solar project bids has been reached, making it the second time this month that previous cost barriers were shattered. This time, the news comes from NV Energy, a Berkshire Hathaway-owned utility company serving the state of Nevada. The utility has signed a PPA to purchase electricity from the 100 MW Playa Solar 2 power plant at the amazingly low price of $0.0387/kWh. This beats the previous record set just a few weeks ago in Austin, Texas, by just a fraction of a penny per kWh. What’s clear is that, as competition heats up to provide less expensive solar power to the grid, we’re looking at a greener future.

    Admittedly, this report has us feeling a bit of deja vu, and it’s justified. Less two weeks ago, we reported Austin, Texas had become the site of the lowest solar power bids on earth at just under $0.04/kWh, beating out the previous low price set in Dubai. And it was true, until it wasn’t. The new, new low price of $0.0387/kWh is approximately 68 percent cheaper than the national average electricity price, according to Clean Technica. Here’s what this means for regular folks: as public utility companies begin seeking out better deals on solar projects—and then hopefully see those prices actually fulfilled in procurement—a massive savings will be passed on to consumers.

    Even adjusted to account for federal tax subsidies, the Austin and Nevada prices beat that mark, coming in at less than $0.0571kWh. The way we see it, if the experts in the global solar power market couldn’t predict these early and staggeringly low prices, anything is possible for this rapidly growing industry.

    Attached Files
    Back to Top

    Andhra Pradesh State to get 250 MW solar power this fiscal

    The State will have an additional 250 MW energy from renewable sources by March next year if the plans of the Energy department materialise.

    Works on setting up of the 1,000 MW solar park in Anantapur and other districts had commenced and solar projects with 250 MW installed capacity are set to be commissioned before the end of the current financial year. Works on the remaining 750 MW are likely to be completed by the end of the next financial year.

    The works have been commissioned following the decision to promote an ultra mega solar power plant at N.P. Kunta in Anantapur to overcome power shortages in the long term.

    The government had also proposed development of a 1,000 MW solar park in Kurnool district owing to the potential it offered and the bids for the project had already been invited.

    “The bids will be opened by July 30, and it will be followed by entrustment of work to the prospective bidders soon,” Energy Secretary Ajay Jain told The Hindu . The two projects formed part of the government’s plans to promote 5,030 MW solar and 4,150 MW wind power projects in the next five years.

    The Union Government, according to Mr. Jain who accompanied Chief Minister N. Chandrababu Naidu during the latter’s visit to Japan, had announced its willingness to dedicate the entire 1,000 MW capacity of solar plant in Kurnool district to Andhra Pradesh.

    This will be the second project after the 1,000 MW Simhadri power plant to be dedicated exclusively to meet the State’s requirements.

    According to Mr. Jain, the government had also directed the energy utility APGenco to explore the scope for setting up of another 500 MW renewable energy plant for tapping the existing potential in the State and efforts were under way to identify the location and mode of generation in this direction.
    Back to Top

    Solar Paper is World's Thinnest Sun-Powered Charger

    Solar chargers are appealing, but they can also be bulky and heavy. Not the case with Solar Paper, a new project seeking funds on Kickstarter to commercialize what sponsors claim is the thinnest and lightest solar panel for your phone or camera.

    It's about as wide and tall as a big smartphone like an iPhone 6+ or Galaxy Note 4, but only 1.5 millimeters thin — that's "stick of gum" territory. It's thin enough to fit between the pages of a notebook or planner — just unfold the panels and plug in your phone to start charging. Of course, you'll want to be outside in the sun for the best results, though partial or indoor sunlight could also work — check the built-in meter to make sure your device is getting enough power.

    The basic two-panel version, currently going for $69, is enough to charge a phone or other small device, but tablets and cameras might need a third or fourth panel to increase the wattage. These can be bought separately and snapped on magnetically.

    Yolk, the company behind Solar Paper, was asking for $50,000 to finalize the product. It has already received over $200,000 from backers, so there's no risk the product won't be funded. Assuming all goes will in the manufacturing stage, the first chargers should ship in September.
    Back to Top

    Base Metals

    Alcoa shines a light on China's "fake semis" trade

    China exported 2.5 million tonnes of unwrought aluminium and aluminium products in the first half of this year. That was 35 percent, or 650,000 tonnes, higher than the same period of 2014.

    Most of what leaves China is in the form of semi-manufactured products. The rest is largely aluminium alloy with a very small amount in the form of primary metal, the stuff that's traded on the London Metal Exchange.

    China has long penalised exports of primary metal with a 15 percent export duty. Exports of "semis" are not only exempt from the tax but qualify for a refund of value added tax (VAT). The policy is intended both to reward producers for investing in value-add product capacity and to prevent the export of an energy-intensive commodity from a country short of energy.

    Because hidden somewhere in that flow of products out of China is a stream of "fake semis", metal that has been minimally transformed with the sole purpose of gaming the export tax differentials.

    But with aluminium prices once again pressuring producer margins, U.S producer Alcoa has decided to speak out publicly about the "fake semis" trade.

    China's exports of "fake semis" are "the major driver" of lower aluminium prices, according to Klaus Kleinfeld, Alcoa chairman and CEO, talking to analysts on the company's Q2 financials conference call.

    What irks Alcoa and other non-Chinese producers is the fact that they have been steadily shuttering capacity only to see the resulting supply-demand deficit filled by Chinese exports.

    The company has revised upwards its estimate of global surplus this year by 400,000 tonnes to 760,000 tonnes.

    But the headline figure masks two very different market dynamics. In the world outside China Alcoa forecasts a deficit of 1.465 million tonnes. In China itself, though, the outlook is for a surplus of 2.227 million tonnes.

    It is, after all, an illegal trade, "stealing money away from the Chinese people," as Kleinfeld bluntly expressed it.

    The key distribution channels appear to be other Asian countries such as Vietnam and Malaysia with analysts poring over import and export data for evidence that in part they are no more than transhipment points for remelted Chinese metal that will ultimately enter the primary supply chain elsewhere.

    Unless that changes, what leaves China is going to be a growing problem for every other producer. "Fake semis" may be a particularly egregious development but they are only the illegal tip of a bigger problem for the rest of the world.
    Back to Top

    Steel, Iron Ore and Coal

    China June coal imports jump 16.5% on month to 16.6 million mt

    China's coal imports, including lignite, thermal and metallurgical coal, totaled 16.6 million mt in June, up 16.5% from May, according to preliminary data released Monday by the General Administration of Customs.

    "Coal trade data showed a positive reversal with imports picking up in June. They have been on a steady decline since hitting a high of 35Mt [million mt] in early 2014," ANZ analysts wrote in a note to clients on Monday.

    China's June imports were, however, down nearly 34% year on year.

    ANZ analysts noted that weak hydro output in June partly supported demand for coal.

    "Imports have also found support from a widening spread between Australian Newcastle and Chinese domestic prices which continues to favor imports," they added.

    Over January-June, the country imported a total of about 99.87 million mt of coal, down 37.5% year on year, with the total value of the imports nearly halving to $6.37 billion, the data showed.

    Over January to June, China exported about 2.34 million mt of coal, down about 26% from the same period last year, with the total value of exports slumping about 38% year on year to about $248.10 million.
    Back to Top

    China’s Jun coal imports from Gladstone hit one-yr high

    China’s Jun coal imports from Gladstone hit one-yr high
    China’s coal imports from Gladstone port in the Australian state of Queensland doubled from May to a one-year high of 1.48 million tonnes in June, Gladstone Ports Corp. said on July 8.

    In the fiscal year ended June 30, China imported 12.93 million tonnes of coal from Gladstone port, down 31.4% year on year from 18.86 million tonnes of coal sent to China in fiscal 2013-2014.

    India was the destination for 13.49 million tonnes of Gladstone’s coal exports in the June-ended fiscal year, up 9.4% from 12.33 million tonnes in the preceding fiscal year.

    Last month’s coal shipments to India were the highest recorded since Platts started tracking Gladstone coal exports data in July 2013, and the previous monthly record was 1.44 million tonnes in May 2014.

    Japan maintained its offtake of coal exports from Gladstone port at 22.58 million tonnes in the fiscal year ended June, compared with 22.25 million tonnes in fiscal 2013-2014, with June imports at 2.01 million tonnes, down from 2.42 million tonnes in May.

    South Korea received 10.35 million tonnes of coal exports from Gladstone coal shippers in the June-ended fiscal year, up 10.8% year on year; while Taiwan imported 2.99 million tonnes in fiscal 2014-2015, down 2% from 3.06 million tonnes a year earlier.
    Back to Top

    Peabody Energy to sell Wilkie Creek mine

    Peabody Energy to sell Wilkie Creek mine

    Peabody Energy has entered into a sale and purchase agreement with Sekitan Resources, a wholly owned subsidiary of Exergen Pty, to sell its Wilkie Creek mine and various associated assets in Queensland’s Surat Basin.

    This transaction will be worth up to US$75 million and is expected to close in 3Q15, subject to meeting certain conditions.

    Wilkie Creek ceased operations in 2013. The transaction will release certain guarantees in place for reclamation activities.
    Back to Top

    Brazil's Vale starts replacing higher-cost production

    Vale's head of iron-ore said on Monday the Brazilian miner is replacing 25-million tonnes per year of higher-cost iron-ore production with new, cheaper tonnes, which should lower Vale's costs as it battles a slump in the price of iron-ore. 

    Despite removing higher-cost production, Vale is maintaining its 2015 output target of 340-million tonnes, executive Peter Poppinga said on the sidelines of a steel conference in Sao Paulo. "That is our target. ... We will try to reach 340-million tonnes," he told reporters. 

    The news drove Vale's preferred shares, the company's most traded stock, up 5%. Analysts at Citi said the comments indicated a potential upside to Vale's results and lower overall production costs. "Lower-cost mines are exceeding estimated production allowing for high-cost closures without reducing targets," Citi analysts Alexander Hacking and Thiago Ojea said in a note. 

    The market was wrong, however, to interpret Vale's move as reducing supply in order to balance the iron ore market, which touched an all-time spot price low of $44.10/t last week, analysts at Banco BTG Pactual SA said. "Vale is not cutting its volumes guidance... so essentially there is no supply and demand impact," 

    The 25-million tonnes being substituted are from the south system and "a little" from the southeast system in Minas Gerais, as well as from third parties, Poppinga said. The company later said in a securities filing that the higher-cost production being replaced was between 25-million and 30-million tonnes per year of high-silica iron-ore.
    Back to Top

    China iron ore imports go into reverse, new normal...RTZ

    Iron ore imports by China shrank in the first six months of the year, highlighting weakness in demand in the world’s largest buyer as mills sold a record amount of production overseas amid a domestic glut.

    Inbound cargoes of iron ore totaled 452.9 million metric tons between January and June, 0.9 percent lower than the same period a year earlier, according to customs agency figures released on Monday. Overseas sales of steel products surged 28 percent to 52.4 million tons in the six months, the agency said.

    The stagnating trade in iron ore and simultaneous jump in steel-product exports show the extent of the slowdown in China’s steel industry, which is grappling with a property slump, overcapacity and losses. Benchmark iron ore prices collapsed last week to the lowest level since at least 2009, while steel rebar sank to a multiyear low in China. Rio Tinto Group said on Monday that iron ore had declined to a so-called new-normal level, which may persist through to 2020.

    “China’s iron ore imports shrank in the first half, indicating that the country’s steel consumption obviously peaked last year,” Xu Xiangchun, chief analyst at Mysteel Research, said by phone from Beijing on Monday. “Mills won’t be able to sustain losses at the current level and will gradually reduce production, and reduce their need for iron ore.”

    In June, iron ore imports were 74.96 million tons compared with 70.87 million tons in May, the agency said. Steel-product exports were 8.89 million tons in June from 9.2 million tons the month before, according to the agency.

    While iron ore market conditions have changed, fundamentals remain robust, Michael Gollschewski, managing director of Rio’s Pilbara mines, said in a presentation on Monday. The London- based company, Australia’s largest shipper, declined to offer precise figures or define its “new normal” closely.
    Back to Top

    Chinese steel exports in H1 crosses 50 million tonne mark

    According to statistics from the General Administration of Customs, China exported 8.89 million tonnes of steel in June 2015, an increase of 1.82 million tonnes or 25.7 percent year on year, and a decrease of 0.31 million tonnes from May volume.
    Back to Top
    Commodity Intelligence LLP is Authorised and Regulated by the Financial Conduct Authority

    The material is based on information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. Opinions expressed are our current opinions as of the date appearing on this material only.

    Officers and employees, including persons involved in the preparation or issuance of this material may from time to time have "long" or "short" positions in the securities of companies mentioned herein. No part of this material may be redistributed without the prior written consent of Commodity Intelligence LLP.

    Company Incorporated in England and Wales, Partnership number OC334951 Registered address: Highfield, Ockham Lane, Cobham KT11 1LW.

    Commodity Intelligence LLP is Authorised and Regulated by the Financial Conduct Authority.

    The material is based on information that we consider reliable, but we do not guarantee that it is accurate or complete, and it should not be relied on as such. Opinions expressed are our current opinions as of the date appearing on this material only.

    Officers and employees, including persons involved in the preparation or issuance of this material may from time to time have 'long' or 'short' positions in the securities of companies mentioned herein. No part of this material may be redistributed without the prior written consent of Commodity Intelligence LLP.

    © 2018 - Commodity Intelligence LLP