Mark Latham Commodity Equity Intelligence Service

Thursday 21st May 2015
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    HSBC Flash China PMI contracts

    Activity in China’s manufacturing sector has contracted for the third month in a row, according to a private survey.

    The HSBC Flash China Manufacturing PMI rose less than expected to 49.1 in the flash reading for May, up from 48.9 in April.

    The reading fell short of a Reuters poll which had the result at 49.3. A reading above 50 on the survey points to expansion, while a reading below 50 indicates contraction.

    Economist at Markit Annabel Fiddes said that softer client demand and job cuts may make it difficult for the sector to expand in the near-term.

    However Fiddes said that deflationary pressures remained strong “leaving plenty of scope for the authorities to implement further stimulus measures if required”.

    The flash reading is a preliminary estimate based on around 85-90 per cent of survey responses from over 420 small-to-medium-sized manufacturing firms.
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    China Jan-Apr rail investment up 22 pct for economy stabilizing

    China’s fixed-asset investment on rail industry surged 22% on year to 132.1 billion yuan ($21.6 billion) over January-April, as the government accelerated investment to help stabilize economy.

    Of this total, 117.2 billion yuan was injected into railway construction, up 20% on year.
    As Chinese authorities adapt to the country's plateauing economy, the National Development and Reform Commission (NDRC) said earlier this year that it would "increase management of investment" in 2015 and give investment a "key role in stabilizing economic growth" .
    And Ma Kai -- vice premier of the State Council -- said that China planned to put over 800 billion yuan into rail construction and build rail lines with total length of 8,000 km.
    On May 18, China's top economic planner – the NDRC -- approved the construction of six railways stretching more than 1,000 km and likely to cost about 250 billion yuan.
    The projects include four high-speed railway lines in eastern provinces of Shandong and Jiangsu, and in northeastern province of Liaoning, and two urban rail transits in the southwestern cities of Chengdu and Nanning.
    China has been promoting public-private partnerships to attract private capital into infrastructure construction and public enterprises, such as in railway investment and fund-raising.
    Though rail investment accelerated, transport demand seemed to decline amid a slowing economy, with 870 million tonnes of rail cargo shipment recorded for the first quarter, down 9% on year, the NDRC said.
    Poor sales led to a high debt ratio of 66.2% for China Railways Corporation (CRC) by end-March, with a total debt of 3.747 trillion yuan, up 1.95% from the end of last year.
    The CRC’s rail transport cost totaled 653.27 billion yuan in 2014, up 9.3% on year.
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    For Caterpillar, This Is What The "Second Great Depression" Looks Like

    According to the latest CAT retail sales data, Caterpillar has now reported an unprecedented 29 months of declining global retail sales, with the month of April seeing a 16% Y/Y collapse in China (after a 25% plunge in 2014 and a 20% plunge the year before), while Latin America just suffered an epic 44% Y/Y crash, the biggest going back to 2009, after a 28% drop the year before.

    Or as far as the industrial and heavy equipment bellwether is concerned, the emerging markets (or BRICS) are in an unprecedented economic collapse.

    To put Caterpillar's ongoing second great depression in context, during the Great Financial Crisis, CAT suffered "only" 19 months of consecutive retail sales declines. As of April 2015, this number is now 29, and there is no hope in sight of seeing an annual re-bounce any time soon.
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    Oil and Gas

    Saudi Arabia, partners turn down Chinese requests for extra oil

    Saudi Arabia and its main Middle East OPEC partners are turning down Chinese requests for extra oil as they hold back fuel for their own refineries just as demand from the world's biggest crude importer hits new records.

    While the Saudi and other refusals for additional crude supplies may not be part of a new pricing strategy, the rejections to their biggest client help explain a 40 percent rise in oil prices this year as Chinese importers have had to seek more oil from other suppliers in what analysts say is still an oversupplied market.

    Senior Chinese oil traders told Reuters the Saudis have turned down requests from Chinaoil and Unipec - the respective trading arms of PetroChina and Sinopec - for extra cargoes of crude for May and June loadings, forcing them to seek supplies from producers in West Africa, Oman and Russia.

    Saudi Arabia "used to provide as and if we asked for extra cargoes on top of contract during the first four months of the year, but not for May and June," said a trader with one of China's biggest oil importers on condition of anonymity as he had no permission to talk to media.

    Another source with a Chinese refinery that takes Saudi oil said Saudi heavy crude was "a bit tight" in May and June.

    Reuters pricing and trade flow data show a 40 percent rise in Brent crude since January has coincided with a more than 10 percent fall in overall Middle East supplies to China C-CN-ME-FZ, although in historical terms they remain high.

    "Our analysis shows that Saudi flows to China have fallen quite a bit in May and their overall market share in China has also fallen," said Yan Chong Yaw, Director of Thomson Reuters Oil Research and Forecasts in Asia.

    The research group's latest China crude report shows Saudi Arabia's share of Chinese imports dropped to just over 30 percent in May from 36.5 percent in April.

    Saudi Aramco, which was not available for comment, had already reduced contractual supplies to some Japanese and South Korean customers in April.

    The trader with one of China's big importers said requests for more crude to Kuwait and the United Arab Emirates - Saudi Arabia's closest partners in the Organization of the Petroleum Exporting Countries (OPEC) - were similarly turned down.

    Behind the stingier responses to requests for more oil lie mostly domestic factors. Saudi Arabia has traditionally been an exporter of crude oil but an importer of refined products.

    That's changing. Its new 400,000 bpd Yasref refinery became fully operational in April, taking in Saudi heavy crude oil to produce and export petroleum coke, diesel and gasoline.

    Saudi Aramco started up its Jubail refinery of the same size last year and also plans to build a third 400,000 bpd facility by 2018.

    Other Middle Eastern producers such as the UAE's Abu Dhabi National Oil Co are also ramping up refineries, and the region is entering its peak burning season in which it uses more crude to generate power for air-conditioning.

    "Over the summer, Middle East producers, particularly Saudi Arabia and Abu Dhabi, will have limited additional barrels for sale as new refineries continue their ramp up and increased summer burn absorbs supply," said U.S.-based research and analysis provider Pira Energy.
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    Total starts gas, condensate production from Russian Arctic field

    Total SA has started production of gas and condensate from onshore Termokarstovoye field in the Yamalo-Nenets autonomous district in the Russian Arctic. The field will produce 6.6 million cu m of gas and 20,000 b/d of condensate, or a combined 65,000 boe/d, the company said.

    Total’s Arctic-adapted infrastructure in the field includes a gas gathering network, a gas treatment plant, a gas condensate de-ethanization plant, and export pipelines.

    Total developed Termokarstovoye field under a joint venture with OAO Novatek, Russia’s largest independent gas producer (OGJ Online, June 25, 2009). The JV company, Terneftegas, operates the field with Novatek holding 51% and Total 49%.
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    ExxonMobil encouraged by oil discovery offshore Guyana

    ExxonMobil recently discovered hydrocarbons offshore Guyana, while drilling the Liza-1 exploration well at the Stabroek block, located approximately 120 miles offshore Guyana. The oil discovery is significant, Exxon said.

    According to Exxon, the well was drilled to 17,825 feet (5,433 meters) in 5,719 feet (1,743 meters) of water with the Deepwater Champion drillship. Stabroek Block is 6.6 million acres (26,800 square kilometers).

    It was drilled by ExxonMobil affiliate, Esso Exploration and Production Guyana Ltd., and encountered more than 295 feet (90 meters) of high-quality oil-bearing sandstone reservoirs.

    “I am encouraged by the results of the first well on the Stabroek Block,” said Stephen M. Greenlee, president of ExxonMobil Exploration Company. “Over the coming months we will work to determine the commercial viability of the discovered resource, as well as evaluate other resource potential on the block.”

    The well was spud on March 5, 2015 and the well data will be analyzed in the coming months to better determine the full resource potential, the company said in the press release.

    Esso Exploration and Production Guyana Ltd. holds 45 percent interest. Hess Guyana Exploration Limited holds 30 percent interest and CNOOC Nexen Petroleum Guyana Limited holds 25 percent interest.
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    Woodside sees Browse LNG opening in 2021 at earliest

    Woodside Petroleum expects the long-delayed Browse gas project off Australia to be commissioned in late 2021 at the earliest, after pushing out a final investment decision to the second half of 2016, its chief executive said.

    Browse is one of four key growth projects for Woodside alongside the Kitimat LNG project in Canada and Wheatstone LNG off Australia, which it bought with some oil assets from Apache Corp this year for $3.6 billion.

    Woodside and its partners last December postponed a decision on the Browse floating liquefied natural gas (FLNG) to mid-2016. On Thursday it said a sign-off is now expected in the second half of next year.

    Some costs on Browse, previously estimated at $45 billion when it was designed as a land-based project, have been cut by between 15 and 30 percent, the company said.

    Chief Executive Peter Coleman said Woodside was well positioned to pounce on opportunities like the Apache deal in contrast to most companies in the industry that are reining in spending and selling assets to cope with an oil price slump.

    "We're in a great situation here at Woodside with our balance sheet and the activities in front of us to put some real distance between ourselves and our peers over the next couple of years," Coleman said.

    Alongside Browse, Kitimat and Wheatstone, Woodside is speeding up work on its Greater Enfield project, a development of some oil fields off Western Australia that were previously seen as uneconomic, but which can now be developed more cheaply as rig and subsea hardware costs have fallen.

    The company now aims to make a final investment decision on Greater Enfield in 2016.

    It is also stepping up exploration, with drilling off South Korea, Myanmar and Cameroon, to help rebuild its reserves and improve the balance of oil and gas in its portfolio, which is heavily skewed to gas.

    "We've got lots of choices in front of us," Coleman said.
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    BP settles oil spill-related claims with Halliburton, Transocean

    BP Plc has settled with oilfield services provider Halliburton Co and contract driller Transocean Ltd cross claims related to the 2010 Gulf of Mexico oil spill, the worst offshore disaster in U.S. history.

    BP still faces a potential fine of up to $13.7 billion under the U.S. Clean Water Act.

    Transocean, which owned the Deepwater Horizon rig, had settled its Clean Water Act liability for $1 billion. The U.S. government never sued Halliburton under the Act, one person familiar with the case said.

    "We have now settled all matters relating to the accident with both our partners in the well and our contractors," BP spokesman Geoff Morrell said in an email.

    Transocean said BP would pay the company $125 million in compensation for legal fees it incurred, adding the companies will mutually release all claims against each other.

    The company added BP will also discontinue its attempts to recover as an "additional insured" under Transocean's liability policies that will accelerate the company's recovery of about $538 million in insurance claims.

    Transocean also said it would pay about $212 million to a fund set up to pay out claims to people and businesses harmed by the spill, subject to the approval by U.S. District Court for the Eastern District of Louisiana.

    "We applaud Transocean for adding to the settlement funds established in the Halliburton settlement to help compensate people and businesses for their losses," said co-lead plaintiffs' attorneys, Stephen Herman and James Roy.

    Transocean said it intends to make the payments using cash on hand.

    In September, a U.S. judge ruled that BP was mostly at fault and that Transocean and Halliburton were not as much to blame.

    Halliburton, which did the cementing work for BP's well, had earlier blamed BP's decision to use only six centralizers for the blowout that spilled millions of barrels of oil for 87 days.

    Halliburton said in September that it reached a $1.1 billion settlement for a majority of claims related to its role in the oil spill.

    London-based BP has already taken $43.8 billion in pretax charges for clean-up and other costs.
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    Venezuelan Investors Seek to Block Alfa Bid for Pacific Rubiales

    A group of Venezuelan investors known as the O’Hara Administration say they may buy additional shares in Pacific Rubiales Energy Corp. to block a bid for the company by Alfa SAB and Harbour Energy Ltd.

    “In opposing the proposed acquisition, O’Hara may take any and all actions it considers advisable, including acquiring additional common shares of Pacific Rubiales, communicating with other shareholders, soliciting proxies and retaining its own financial, legal and proxy solicitation advisers,” the group said Tuesday in a statement released on Marketwired.

    O’Hara and its partners, who own about 19.5 percent of the issued and outstanding common shares of Pacific Rubiales, said it doesn’t currently plan its own bid for the company. The group opposes the C$6.50 a share bid from Alfa and Harbour, which it says is too low.

    Pacific, which trades in both Toronto and Bogota, said May 5 that Alfa and Harbour had offered to buy all of the issued and outstanding common shares not owned by Alfa for about C$2.1 billion ($1.7 billion).

    The two sides have held exclusive talks as Alfa, a San Pedro Garza Garcia, Mexico-based conglomerate, seeks to expand its oil business as its home nation opens production to foreign investment.
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    Wintershall ceases activities in Qatar due to lack of access to local infrastructure

    Wintershall is ceasing its activities in Qatar and is returning Block 4 North near the North Field off the Qatari coast on 25 May 2015. Wintershall's office in Doha will be closed. In 2013, Wintershall made the 'Al Radeef' gas discovery off the cost of Qatar.

    'During the development planning, it was always clear to us and our partners that an economic development of the discovery, including the processing of the gas, would only be possible if we have access to local infrastructure. This access was not granted. That is why we have decided to take this step', explains Wintershall Board Member Martin Bachmann, who is responsible for exploration and production in Europe and the Middle East.

    Further activities in the Middle East region are not affected by the withdrawal from Qatar. The current focus of Wintershall is on the United Arab Emirates. 'We are also closely following the developments in other countries in the region', explains Bachmann. 'The challenges in the region are increasing with local energy consumption growing rapidly. In order to maintain production in the long term, fields must be exploited more efficiently and technically more complex fields need to be developed.'

    Wintershall has considerable experience in deploying 'Enhanced Oil Recovery' (EOR) technology, which is used to increase the yield from complex reservoirs, especially in mature fields in Germany and Europe. 'In combination with modern exploration techniques, it is precisely this experience that we want to increasingly utilise in the Middle East region.'
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    Shale 2.0: The Coming Big-Data Revolution in America’s Shale Oil Fields

    With petroleum prices down 50 percent over the past year, many analysts and pundits are predicting the end of America’s shale oil boom.

    It is true that the oil-price collapse was caused by the astonishing, unexpected growth in U.S. shale output, responsible for three-fourths of new global oil supply since 2008. And as lower prices roil operators and investors, the shale skeptics’ case may seem vindicated. But their history is false: the shale revolution, “Shale 1.0,” was sparked not by high prices—it began when prices were at today’s low levels—but by the invention of new technologies. Now, the skeptics’ forecasts are likely to be as flawed as their history. Continued technological progress, particularly in big-data analytics, has the U.S. shale industry poised for another, longer boom, a “Shale 2.0.”

    John Shaw, chair of Harvard’s Earth and Planetary Sciences Department, recently observed: “It’s fair to say we’re not at the end of this [shale] era, we’re at the very beginning.” He is precisely correct. In recent years, the technology deployed in America’s shale fields has advanced more rapidly than in any other segment of the energy industry. Shale 2.0 promises to ultimately yield break-even costs of $5–$20 per barrel—in the same range as Saudi Arabia’s vaunted low-cost fields.

    Shale’s spectacular rise is also generating massive quantities of data: the $600 billion in U.S. shale infrastructure investments and the nearly 2,000 million well-feet drilled have produced hundreds of petabytes of relevant data. This vast, diverse shale data domain—comparable in scale with the global digital health care data domain—remains largely untapped and is ripe to be mined by emerging big-data analytics.

    Shale 2.0 will thus be data-driven. It will be centered in the United States. And it will be one in which entrepreneurs, especially those skilled in analytics, will create vast wealth and further disrupt oil geopolitics. The transition to Shale 2.0 will take the following steps:

    1. Oil from Shale 1.0 will be sold from the oversupply currently filling up storage tanks.

    2. More oil will be unleashed from the surplus of shale wells already drilled but not in production.

    3. Companies will “high-grade” shale assets, replacing older techniques with the newest, most productive technologies in the richest parts of the fields.

    4. And as the shale industry begins to embrace big-data analytics, Shale 2.0 begins.

    In recent decades, developed nations have spent hundreds of billions of government dollars trying, and failing, to invent a cost-effective replacement for petroleum. Yet without taxpayer largesse, American entrepreneurs invented a new method to extract astounding quantities of oil from rock, upending the global hydrocarbon trade in the process. In a world where oil still powers 95 percent of air and ground miles and will remain dominant for decades, this represents a very positive development.
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    Summary of Weekly Petroleum Data for the Week Ending May 15, 2015

     U.S. crude oil refinery inputs averaged over 16.2 million barrels per day during the week ending May 15, 2015, 245,000 barrels per day more than the previous week’s average. Refineries operated at 92.4% of their operable capacity last week. Gasoline production decreased last week, averaging about 9.7 million barrels per day. Distillate fuel production decreased last week, averaging over 4.8 million barrels per day.

    U.S. crude oil imports averaged 7.2 million barrels per day last week, up by 318,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged over 7.0 million barrels per day, 0.4% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 542,000 barrels per day. Distillate fuel imports averaged 227,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 2.7 million barrels from the previous week. At 482.2 million barrels, U.S. crude oil inventories are at the highest level for this time of year in at least the last 80 years. Total motor gasoline inventories decreased by 2.8 million barrels last week, but are above the upper limit of the average range. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories decreased by 0.5 million barrels last week and are in the lower half of the average range for this time of year. Propane/propylene inventories rose 2.6 million barrels last week and are well above the upper limit of the average range. Total commercial petroleum inventories decreased by 2.1 million barrels last week.

    Total products supplied over the last four-week period averaged about 19.7 million barrels per day, up by 3.9% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged over 9.0 million barrels per day, up by 1.1% from the same period last year. Distillate fuel product supplied averaged over 4.1 million barrels per day over the last four weeks, up by 1.6% from the same period last year. Jet fuel product supplied is up 6.5% compared to the same four-week period last year.
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    U.S. motorists continue driving surge in March

    U.S. motorists drove a record number of miles in March, continuing a surprising road renaissance that has now spanned more than a year, newly released U.S. government data shows.

    Motorists logged 261.7 billion miles on U.S. roadways in March, the most ever for the month and a 3.9 percent bump over the year-ago month, according to data released Wednesday by the Federal Highway Administration.

    March marks the 13th consecutive month of year-on-year growth.

    The surge in vehicle miles traveled comes amid a growing U.S. economy and a drop in U.S. gasoline prices, which averaged $2.40 per gallon in March, about $1 dollar cheaper than the year prior.

    Americans' driving habits are watched closely by oil traders, since U.S. gasoline demand accounts for about one-tenth of global oil demand.
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    Alternative Energy

    No new wind projects for areas with much wind power wasting

    New wind projects will not approved the following year in places where more than 20 percent of their wind electricity is abandoned, China's energy regulator said on Wednesday.

    Provinces and cities that aim to tap wind resources will increase electricity transfer through improving grid connectivity, the National Energy Administration (NEA) said.

    To improve its energy mix and battle worsening air pollution, China has tilted increasingly toward clean energy including wind power, hydropower and nuclear power.

    China's newly installed wind power capacity jumped to a record high of 19.81 million kilowatts in 2014. Wind power generated 153.4 billion kilowatt hours of electricity last year, accounting for 2.78 percent of the country's total generated electricity and making it the third-largest source of electricity after thermal power and hydropower.

    However, wind electricity waste is a headache for China thanks to imbalanced distribution of wind resources and imperfect grid system.Wind-rich provinces are mainly in the less developed north and northwest regions where electricity supply exceeds demand.

    An average of 8 percent of wind electricity was abandoned last year, down 4 percentage points from the previous year. Yet, the situation turned worse in the first three months of this year with 18.6 percent of wind power production going to waste, 6.6 percentage points higher year on year.

    The NEA attributed the increased wasting during the period to better wind conditions and weak demand of electricity.
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    Monarch Power Granted Patent for Solar Powered Turbine

    Scottsdale-based Monarch Power has been granted a US-Patent for a revolutionary turbine that can power, heat, and chill homes and businesses using solar or natural gas. The Hui turbine is the invention of Monarch CEO Joseph Hui, Professor Emeritus at Arizona State University.

    Hui, aka Solar Man to those who follow him on social media, believes his turbine will be a “game changer” in the power industry, liberating millions of people from their utility companies.

    The Hui turbine uses heat stored in molten salt for power generation day or night. Homes can also go off-grid, thanks to the Lotus Butterfly™, a solar powered system with natural gas backup, in the final phases of development under Hui’s Steve Jobs-like attention to detail, utility, and beauty.

    Our natural gas grid provides backup energy security more reliably than overhead power lines.”

    Hui predicts that the Edison power grid with centralized generation of electricity will be replaced by personal energy. He invented the term PE for local sourcing, generation, storage, and use of energy. “Energy isn’t just about electricity. Energy is for home heating and cooling, cooking, driving, communicating, lighting, and watering. Electricity is good for transmission but poor for storage. Our sun provides heat storable by molten salt. No battery is needed.”

    PE is made possible with the small, simple, quiet, efficient, and economical Hui turbine. “Industrial turbines and generators are huge, expensive, and noisy.

    “Batteries are uneconomical to balance uneven demand against constant generation. Here in Arizona, power utility SRP imposes punitive demand charges for solar homes, effectively killing rooftop solar,” said Hui, who bitterly opposed SRP in recent rate hike hearings. “SRP is holding the sun hostage. If the sun fails to shine and you use a kilowatt for 30 minutes, SRP can charge peak usage for the entire month at $33/kilowatt!”

    Hui calls his turbine his proudest invention. “It is simple and beautiful. Look to the heavens: galaxy arms spiral logarithmically into the center. The Hui turbine let super-critically heated carbon dioxide spirals exponentially outward through micro-channels engraved in disks,” says Hui, who is writing a physics book called “What’s the matter with energy” which describes many of his inventions. “Key is gradual pressure release of gas pushing the turbine spiral wall. The exponential spiral is the perfect shape for hot dense gas expansion.”
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    This Key Uranium Player Is About to Shock The Market

    Things appeared to be stabilizing in the global uranium market the last several months. With prices for the metal settling into a comfortable groove between $36 and $44 per pound.

    But he Japan Times reported that the country's key nuclear operator Tokyo Electric Power Co. (Tepco) is preparing to sell part of its uranium stockpiles. With documents obtained from the utility suggesting that more than 750 tonnes of uranium could be sold over the coming months.

    Tepco is considering the move in order to reduce costs associated with holding ever-growing uranium stockpiles. The company has not consumed any uranium since 2011, shortly after the Fukushima disaster resulted in a complete nuclear shutdown across Japan.

    That stoppage has left uranium piling up in storage, as Tepco continues to take delivery of mine supplies purchased under long-term contracts. The company now holds 17,570 tonnes of uranium -- up from 16,805 tonnes prior to Fukushima.

    Tepco says it wants to reduce those stocks to pre-Fukushima levels. Implying that it could divest up to 765 tonnes.

    That's equivalent to 1.69 million pounds of uranium. Or about 1% of yearly demand worldwide -- suggesting that this divestment alone shouldn't be a show stopper for prices.

    But Tepco also said it may take further steps to reduce its uranium stocks -- including terminating uranium purchase contracts it currently holds with miners globally.

    Such a development would represent a significant reduction in demand. And might be enough to cause a drag on the global market.
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    Monsanto says would divest all of Syngenta's seed business

    Monsanto Co., the world's largest seed company, said on Wednesday it plans to divest all of Syngenta Ag's seeds and traits businesses as well as some overlapping chemistry assets to get regulatory approval for a takeover of its Swiss rival.

    Monsanto President Brett Begemann said in a statement that U.S.-based Monsanto sees an acquisition of Syngenta as a move toward "redefining the future of agriculture," and is confident it can address regulatory concerns about a combination of the two agrichemical and seed giants.

    Syngenta already has rejected a $45 billion offer, but Monsanto continues to pursue a deal.

    Syngenta officials reacted swiftly to Monsanto's comments, saying a sell-off of its seeds business would not be enough to allay regulators' concerns about the tie-up.

    "The regulatory hurdles are more challenging than implied by the announcement," a Syngenta spokesman said in a statement.

    Several industry sources say acquiring Syngenta is a "compelling need" for Monsanto, as the U.S. seed company known best for its Roundup herbicide and biotech seeds faces mounting threats from both regulatory scrutiny and consumer opposition.

    Though Monsanto has sought to diversify its business platforms, the bulk of its profits are tied to its long-held glyphosate-based Roundup herbicide and genetic alterations to seeds that make crops impervious to glyphosate herbicides.

    But widespread weed resistance to glyphosate has created problems for farmers, and health concerns about glyphosate and glyphosate-tolerant crops are growing.

    If Monsanto takes over Syngenta, it would gain a broad portfolio of fungicides, insecticides and other herbicides.

    Syngenta's new agrichemical products include one that combats rust disease on soybeans in Brazil, another that uses natural soil bacteria in a seed treatment to fight soybean and sugar beet pests, and a seed treatment that combats pest damage to soybeans, corn and sunflower.

    Syngenta's agrichemical portfolio brought in more than $11.3 billion in revenues last year, compared to Monsanto's $5.1 billion from its herbicides. Each company saw total revenues of more than $15 billion in 2014.

    An industry banker familiar with the situation said a Syngenta deal is critical for Monsanto. He said developing just one new agrichemical can take a decade or more and cost $200 million to $300 million, and that Monsanto needs an entire portfolio of new offerings.

    Monsanto officials say glyphosate remains a key part of the company's future, and said it has signed an expanded commercial licensing and technology agreement with Scotts Miracle-Gro Co to extend its Roundup brand herbicide in the lawn and garden industry, a deal that adds $300 million in gross profit contribution for Monsanto.

    Attached Files
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    Base Metals

    First Quantum launches equity offering of up to C$1.44bn

    Base metals producer First Quantum Minerals on Wednesday announced that it planned to raise up to C$1.44-billion through a common share equity offering. 

    The TSX- and LSE-listed company said it intended to use the net proceeds of the offering to advance and expand existing production facilities, pay back debt and for general corporate purposes, including strategic investments to further improve its returns and growth pipeline.

    RBC Capital Markets and Goldman Sachs Canada would lead a syndicate of underwriters. 

    First Quantum had swung to a net loss of $82-million, or $0.14 a diluted share, for the first three months of the year, as lower copper and nickel sales and prices impacted the bottom line.
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    Steel, Iron Ore and Coal

    China Smog War Seen Dooming Coal on ‘Cheap But Dirty’ Purge

    China’s battle against pollution is threatening the recovery of coal prices from the lowest level in almost nine years.

    China is turning to alternative energy sources as it races to meet emissions targets and eradicate the smog that’s enveloped cities and become a major cause of social unrest. President Xi Jinping has vowed to punish “with an iron hand” those who destroy the environment and his government is abolishing outdated capacity in the most polluting industries while promoting the use of electric cars and solar rooftops.

    The weekly average price of power-station coal at Qinhuangdao, the nation’s biggest port for delivering the fuel, fell to 405 yuan ($65) a metric ton as of May 17, data from the China Coal Transport and Distribution Association show. That’s the lowest level since July 2006 and down from a record 995 yuan. None of the five analysts in the Bloomberg survey forecast prices to climb above 500 yuan before 2020.

    Last year, the amount of electricity generated by coal-fired plants in China declined for the first time since 1974 while output from non-fossil fuel sources, including hydro power, wind and nuclear, rose about 20 percent, according to the nation’s Electricity Council. Xi set a target in November to cap carbon emissions by 2030.

    About 3 gigawatts of new coal-fired capacity will be brought on for every 1 gigawatt that will be retired from 2015 to 2020, compared with a ratio of 6 to 1 in the five years through 2014, said Sophie Lu, an analyst at Bloomberg New Energy Finance.

    Electricity generated by hydro and nuclear cut coal consumption at thermal power plants by as much as 110 million tons last year, according to Wood Mackenzie.

    Thermal power plants operated last year at the lowest level since 1978 and utilization rates, the leading indicator of coal demand, may decline further in 2015, according to the China Electricity Council. These facilities used 1.25 billion tons of the fuel in 2014, down 7.4 percent from a year earlier, data from the Council show.

    “Coal demand in China has peaked,” said Laban Yu, a Hong Kong-based analyst at Jefferies. “It went down last year, it’s probably going down even more this year. Coal prices will never recover, ever.”

    Attached Files
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    India- Fresh emission limits for new thermal electricity units

    New thermal power plants will have to generate electricity with 25 per cent less soot particles under modified rules of operation announced by the government that will also impose fresh limits on other emissions.

    The Union environment ministry has released a draft notification specifying the revised norms from 2017 to slash emissions of particulate matter, nitrogen oxides, sulphur dioxide and mercury.

    Thermal plants are a major source of air pollution. A survey of 47 coal-powered plants released by the NGO Centre for Science and Environment (CSE) earlier this year found that over half the units violated limits on various emissions.

    The CSE has estimated the new rules will cut particulate emissions by 25 per cent, sulphur dioxide by 90 per cent, nitrogen oxides by 70 per cent and mercury by 75 per cent.

    "The proposed changes may go a long way in safeguarding public health," the CSE said in a release yesterday.

    Under the rules, thermal plants established after 2003 need to meet slightly lower standards, while emissions will be even more relaxed for plants constructed before 2003.

    The CSE said coal-based power plants account for 60 per cent of particulate matter, 45 per cent of sulphur dioxide, 30 per cent nitrogen oxides and 80 per cent mercury emissions spewed by the power sector.

    Two years ago, Greenpeace India had released a document that dubbed coal power as "India's dirtiest energy source", and estimated that between 80,000 and 100,000 people died prematurely from the health consequences of coal-related emissions.
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    China steel plant lauded for capacity was never approved

    A steel plant in Hanzhong that reported record-high production in April was repeatedly rejected over environmental concerns and continues to operate despite multiple failures to receive ministry approval, media reports said.

    The Hanzhong Steel Limited Corp of Shaanxi Steel Group, in Mianxian county, Shaanxi province, which has investment of more than 13 billion yuan ($2.1 billion), was rejected twice by the national environmental watchdog, a report said.

    Shaanxi province's Environmental Protection Bureau said it was aware of the issue but did not comment further on Wednesday.

    The plant produced more than 300,000 tons of steel in April, a record high, Hanzhong Daily, the city's official newspaper, reported on May 15. It also noted that the city and county governments, as well as the parent corporation, celebrated the achievement with a 300,000 yuan award.

    However, a report released on Wednesday on the website of Xinhua News Agency said the plant was operating illegally, despite winning several official government awards after it opened in January 2012.

    The Ministry of Environmental Protection rejected the plant in April 2012, four months after it started steel production, saying it failed to meet required environmental projection standards and failed to follow the province's steel production capacity restrictions.

    The province's Environmental Protection Bureau confirmed the rejection in May 2012 but continued to negotiate with the ministry to get approval of the environmental impact assessment. Since 2011, officials from the bureau have gone to Beijing more than 20 times, Xinhua reported.

    The ministry rejected the plant again in November of last year, saying it was too close to a famous tourist sight, Mount Dingjun, and might generate excessive airborne pollutants, a statement on the ministry's website said.

    The project also did not complete a relocation of nearby villagers, it said.

    Construction of the plant started in 2009. It was one of four national reconstruction projects started after the destructive 2008 Wenchuan earthquake in an effort to support the local economy.
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    Tata Steel sees rebound at home, growth in Europe after Q4 loss

    India's Tata Steel Ltd said it expected a rebound in steel demand in its home market and modest growth in Europe this year, after reporting a $889 million quarterly loss inflated by a hefty impairment on its UK business.

    The consolidated fourth quarter loss from Tata Steel, Europe's second-largest steelmaker, compares with a net profit of 10.36 billion rupees ($163 million)a year earlier. Net sales dropped more than a fifth, hit by weak steel prices.

    The combination of a slowdown in China and a devaluation of the Russian rouble have led to a surge in cheaper steel products on international markets over the past two quarters, pressuring steel prices and squeezing Tata Steel's margins in Europe and India, at a time when demand is also still lacklustre.

    The company has been forced to slash costs and jobs following its ill-timed entry into Europe, where steel demand has languished after the financial crisis and clients have turned to cheap imports, which Tata said remained a worry.

    "(European Union) demand is forecast to grow modestly again and the EU steel industry is in a stronger position to benefit than it was pre-crisis. But surging Chinese exports look set to remain a serious concern," Karl-Ulrich Köhler, chief executive of Tata Steel's European operations said.

    Tata Steel last week said it would take a $785 million non-cash charge in the fourth quarter, mainly related to its loss-making European long products unit, which serves the construction and engineering industries and employs 6,500 people in Britain and elsewhere on the continent.

    The company announced in October last year that it was in talks with Geneva-based Klesch Group to sell that unit, in order to focus on higher value products, like those for the auto industry.

    Group Executive Director Koushik Chatterjee told a news conference in Mumbai on Wednesday that the discussions continued, and Tata Steel hoped to see a "final picture emerging in the next few months.

    Tata Steel has been focusing on shifting to higher-margin speciality steel to propel a turnaround, more than seven years after it entered the continent through the $13 billion acquisition of Corus, formerly British Steel, in 2007.

    In its home Indian market, Tata Steel is "hopeful" that steel demand will rebound this fiscal year on the back of higher investments across key industrial and infrastructure sectors, T.V. Narendran, chief of the company's Indian and Southeast Asian operations, said.

    A string of mining stoppages in recent months led to a number of Tata Steel's iron ore mines in India being shut during the past year, causing its plants to operate below capacity.
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