Mark Latham Commodity Equity Intelligence Service

Thursday 18th May 2017
Background Stories on www.commodityintelligence.com

News and Views:

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    Macro

    Petrobras, Vale ADRs plunge after new Brazil corruption allegations


    Shares in Brazilian state-controlled oil company Petroleo Brasileiro SA and iron ore miner Vale SA both plunged in U.S. after-hours electronic trading following a report that the country's president was taped backing the payment of a bribe to thwart a corruption probe.

    Petrobras American Depositary receipts were down 11 percent to $9.15, while Vale ADRs slumped 7 percent to $7.93.

    http://www.reuters.com/article/us-brazil-corruption-stocks-idUSKCN18E02X
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    China Unicom Units Inflated Sales for Years, Document Shows



    China United Network Communications Group Co., the state-run phone giant known as Unicom Group, found what it described as an unprecedented degree of falsified revenue, profit and asset figures at units in the northwestern province of Shaanxi, according to an internal document seen by Bloomberg News. Its shares fell in Hong Kong.

    Nine out of 10 branches in Shaanxi engaged in organized, cross-departmental faking of financial figures from 2012 to 2016, and more than 70 managers have been disciplined, according to the document, which was dated April 6. Though the document didn’t give a tally of the fraud, Caixin reported it involved 1.8 billion yuan ($261 million) of revenue in the past five years, citing a document and an internal speech by Unicom’s chairman.

    Spokespeople at Unicom Group, China’s second-largest mobile-phone carrier, weren’t immediately reachable. A representative of the company’s Hong Kong-listed arm, China Unicom (Hong Kong) Ltd., couldn’t immediately comment.

    The findings emerged at a time Unicom Group is preparing to sell billions of dollars in shares as part of a government push to attract private capital into state-owned enterprises. The company was among six SOEs picked by the nation’s economic planner last year for a pilot program in mixed-ownership -- China’s preferred term for its privatization campaign.

    "This case exposes some of China Unicom’s weaknesses in its corporate governance, but for a company with around 300 billion yuan in annual revenue, irregularities of a couple of billions won’t change its fundamentals," said Steven Liu, an analyst at China Securities International in Hong Kong who has a buy rating on the stock.

    Unicom fell as much as 3.6 percent, the most in a month, on Thursday in Hong Kong trading. Its Shanghai-listed arm, China United Network Communications Ltd., has been suspended from trading since late March pending further disclosure of its mixed-ownership plan.

    Unicom’s Hong Kong-listed arm has posted three years of falling revenue -- 274.2 billion yuan in 2016 -- and two years of declining profits amid intensifying competition and the increased cost of keeping up with market leader China Mobile Ltd. Earnings are expected to recover this year, according to average analyst estimates compiled by Bloomberg.

    The document also said:

    About 17% of the total falsified revenue came from Shaanxi’s Tongchuan and Yulin cities, while the Hanzhong branch falsified more than a third of its revenue
    Penalties ranged from dismissals to administrative warnings, suspended party membership and salary deductions
    Managers were punished according to the Communist Party disciplinary guidelines
    The nature and repercussions of the fraud are unprecedented in Unicom’s history, according to the document

    https://www.bloomberg.com/news/articles/2017-05-18/china-unicom-units-inflated-financials-for-years-document-shows

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    China's One Belt, One Road policy seen changing polymer landscape


    Traders expect China's "One Belt, One Road" or OBOR policy to move polymer resin production from eastern China to inland provinces and Asian countries, industry sources said late Tuesday on the sidelines of Chinaplas, which runs in Guangzhou over May 16-19.

    OBOR, also known as the "Belt and Road Initiative" is China's plan to revive ancient trade routes linking Asia, Africa and Europe to boost global commerce. It was unveiled by Chinese president Xi Jinping in 2013 and spans some 65 countries.

    Commenting on the Belt and Road Forum for International Cooperation which ended Sunday in Beijing, polymer traders said the countries which would experience more trade are mainly the land routes that are covered in the policy, which includes China to Central Asia, China to Russia, China to South Asia such as Nepal, and China to Eastern Europe.

    China signed cooperation deals with 68 countries and international organisations during the two-day forum.

    Low value manufacturing could be moved to the other less developed countries along the OBOR route, and the finished goods then imported back to China or sold in the domestic markets, traders said.

    Domestically within China, labor-intensive plastic processor industries might migrate to China's western provinces, away from eastern China where rising wage costs pose a challenge. This will also help create jobs, they said.

    The largest Chinese plastics compounder, Kingfa, has announced plans to build a new plant in Chengdu, Sichuan, with a registered capital of Yuan 500 million ($72.6 million). Also, Saudi Arabia's Sabic and Japan's Toray have begun building plants in Chengdu over the last few years.

    POLYMER TRADE MAINLY FLOWS VIA MIDDLE EAST-ASIA SEA ROUTE

    OBOR will affect the Middle East as polymers are mainly supplied by sea from the Middle East to China.

    OBOR comprises a land-based "Silk Road Economic Belt" and a "21st Century Maritime Silk Road."

    It is logical to expect that countries along the maritime route will attract the lion's share of Chinese future investments.

    Already, Saudi Arabia is working to integrate its Vision 2030 reforms with the Chinese initiative and to attract more Chinese companies to invest in Saudi Arabia.

    Vision 2030 is a plan to reduce Saudi Arabia's dependence on oil and diversify its economy.

    China imports about 9 million mt/year of polyethylene and about 3 million mt/year of polypropylene according to source estimates and import statistics.

    Within China, polymers move by rail as well as road via lorries to the consumption areas in eastern China. The low-end finished end products mainly serve the domestic Chinese market.

    LANDLOCKED COUNTRIES TO CONTRIBUTE TO POLYMER DEMAND

    Polymer demand, which is consumption driven, would also grow given that the more than 60 countries in the OBOR route have a combined gross domestic product of an estimated $21 trillion, according to source estimates.

    Most of the inland Asian countries do not feature prominently as demand is still quite small, but with a growing population, consumption is expected to grow, sources said.

    SECURING FEEDSTOCK ADVANTAGES

    OBOR may also lead to securing more low-cost feedstock advantages for polymer manufacturing to China, traders said.

    Currently polymers are made mainly from oil but also partially from gas and coal.

    Already Uz-Kor Gas Chemical, an Uzbekistan company along the OBOR route, started up a new plant in late 2015 and has sold around 163,701 mt of polyethylene to China to date, customs statistics showed. Uzbekistan has signed onto the OBOR initiative.

    Uz-Kor processes about 4.5 Bcm of gas to produce about 400,000 mt/year of PE and 100,000 mt/year of PP.

    Gas-based polymers would also free Chinese polymer processing companies to manufacture higher level goods, from "made in China" to "smartly made in China", the theme of this year's Chinaplas, sources said.

    https://www.platts.com/latest-news/petrochemicals/singapore/analysis-chinas-one-belt-one-road-policy-seen-27831336
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    Swiss to vote on law to help renewables, ban new nuclear power plants


    Swiss voters will on Sunday determine the fate of a law proposing billions of dollars in subsidies for renewable energy, a ban on new nuclear plants and a partial utilities bailout.

    Polling so far suggests the law will be approved in the binding referendum, but support has slipped. A survey this month by research institute gfs.bern for state broadcaster SRG showed 56 percent of voters backed the law, down from 61 percent.

    The Swiss initiative mirrors efforts elsewhere in Europe to reduce dependence on nuclear power, partly sparked by Japan's Fukushima disaster in 2011. Neighboring Germany aims to phase out nuclear power by 2022. Nearby Austria banned it decades ago.

    Debate on Switzerland's "Energy Strategy 2050" has focused on what customers and taxpayers will pay for the measures and whether a four-fold rise in solar and wind power by 2035, as envisaged in the law, can deliver reliable supplies.

    Critics say a family of four would pay 3,200 Swiss francs ($3,257) in extra annual costs and say more intermittent wind and solar energy would mean a greater reliance on imported electricity. Switzerland was a net power importer in 2016.

    "This law will lead to massive increases to the price of energy while leaving Switzerland without adequate, reliable power," said Toni Brunner, leader of the opposition Swiss People's Party (SVP) which helped force the referendum.

    Opposition posters show a woman shivering under a cold shower, suggesting this is what voters face if they say "yes".

    Energy Minister Doris Leuthard, whose government proposed the law, dismisses opposition estimates as highly inflated. She said the package would cost the average family 40 francs more a year, based on a higher grid surcharge to fund renewable subsidies.

    "The SVP is including costs related to a second phase of the Energy Strategy that is not up for a vote," she said in a television interview.

    COUNTING THE COST

    The price tag row largely hinges on whether costs are based on the surcharge alone or also include future expenses related to managing the reduction of fossil fuel use and emissions. The SVP puts the broader costs at about 200 billion francs.

    The law would raise 480 million francs a year from electricity users to fund investment in wind, solar and hydro power, while 450 million francs would be earmarked from an existing fossil fuels tax to help cut energy use in buildings by 43 percent by 2035 compared to 2000 levels.

    Solar and wind now account for under 5 percent of output, compared with 60 percent for hydro and 35 percent for nuclear. Under the law, power from solar, wind, biomass and geothermal sources would rise to at least 11,400 gigawatt hours (GWh) by 2035 from 2,831 GWh now.

    Swissmem, the electrical and mechanical engineering industry lobby, has urged a "no" vote, citing the variability of renewable supply. "Even limited interruptions in our electricity supply can cause massive costs," said spokesman Ivo Zimmermann.

    The law will ban building new nuclear plants. Switzerland has five plants, with the first slated to close in 2019. Voters have not set a firm deadline for the rest, allowing them run as long as they meet safety standards.

    Supporters say the law would help utilities which rely on hydropower, whose costs exceed Europe's wholesale prices.

    Alpiq, BKW, AXPO and other utilities would share a 120 million franc annual subsidy to help close the gap between production costs and market prices. Other funds would help build new dams or refurbish old ones.

    About 38,000 renewable projects, mostly small roof-top solar installations, await approval as a national fund to support them has insufficient funds. Supporters say the new law would help end the logjam.

    http://www.reuters.com/article/us-swiss-energy-idUSKCN18D1KB
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    China's April power capacity near record even as Beijing curbs excess


    China's installed power capacity rose 7.6 percent to the second-highest on record in April, with coal accounting for nearly two-thirds of the total, data showed on Wednesday, even as the country has pledged to curb excess and shift to cleaner power.

    Capacity rose to 1,613.25 gigawatts (GW) by the end of April, just shy of December's record 1,645 GW, National Energy Administration (NEA) data showed, in line with China's expansion to keep pace with its industrial demand.

    That was up 7.6 percent from a year earlier and 0.3 percent from March.

    The total takes the world's second-largest economy closer to its target of 2,000 GW by 2020, as outlined in the current five-year plan.

    Beijing's push to curb excesses in its power capacity showed some signs of taking effect, with the year-on-year growth rate at its lowest since at least 2010, according to historic data.

    The 7.6 percent rise compares with double-digit percentage increases for most of 2016. Growth has slowed every month since July last year and has not fallen below 8 percent since at least the end of 2010, data shows.

    A slowdown was expected as Beijing aims to rein in excess capacity and shift the nation to renewable generation that produces less emissions.

    But coal's 65 percent portion of the total capacity, well below the 2020 target, highlights the obstacles of the shift to cleaner fuels like hydro, wind and solar.

    http://www.reuters.com/article/china-power-idUSL4N1IJ2F9

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    Oil and Gas

    Russia has not complied with oil cuts?

    Russia has not complied with oil cuts?

    Not only has Russia not complied, it has barely managed to cut 150,000 b/d over the six months. 

    @ncitayim

    OPEC officials say Russia hasn't cut the amount of 300,000 barrels a day as promised over six months 

    @summer
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    Flotilla of U.S. crude heads to Asia as OPEC weighs extending cuts


    Oil tankers carrying roughly 2.5 million barrels of U.S. crude are currently en route to Asia, trade sources said on Wednesday, as U.S. producers take advantage of favorable prices to ship to Asia while OPEC ponders further supply cuts next week.

    At least three vessels capable of moving 1 million barrels of crude each are sending domestic oil to Asian refiners, as well as some Mexican crude, several sources said.

    OPEC members meet next week to discuss extending a global supply cut, but the possibility of U.S. supply eating into their market share will be a challenge. While member countries have largely restrained their supply, they have remained intensely focused on keeping market share with Asian refiners. But relatively cheap U.S. crude has buoyed exports to Asia.

    Traders expect that May U.S. crude exports could reach around 1 million barrels per day, with a sizable portion of that going to Asia. Last week, U.S. crude exports touched 1.09 million bpd, the third highest on record, according to U.S. government data. If numbers remain elevated, they could surpass the record 1.2 million bpd seen in February.

    "We expect that momentum to continue when (Dakota Access Pipeline) opens and as more Permian production hits Corpus Christi docks," said Sandy Fielden, director of oil and products research at Morningstar, of the exports.

    Increasing traffic to Asia is possible because of a widening premium for Brent over U.S. crude, which touched a six-week high on Wednesday.

    "Early May spot prices showed both Brent and Dubai trading at around a $3 per barrel premium to Brent and WTI Cushing, which is an open window," said Fielden.

    Meanwhile, prompt Brent crude's premium to Dubai, also called the exchange of futures for swap narrowed to below $1 a barrel last month, hitting 46 cents a barrel on April 27, its tightest since 2010.

    That spread has been tightening since OPEC agreed to production cuts in November, making U.S. cargoes more competitive. An extension to OPEC cuts may further benefit U.S. producers and exporters.

    The Sydney Spirit, a Bahamas-flagged vessel, is delivering Alaskan North Slope (ANS) crude to Asia, according to two sources and Reuters vessel tracking data. Half of the crude onboard the vessel is unsold, one of the sources said.

    Vessel tracking data available via Eikon system lists the ship as "for orders," which indicates there may not be a buyer for at least some of the crude. The ship is currently on its way to Asia.

    Meanwhile, Japanese refiner Cosmo Energy loaded the Almi Star, a Aframax vessel carrying around 600,000 barrels of crude, with offshore Southern Green Canyon crude and Domestic Sweet Blend (DSW) outside of Houston, before picking up an additional 300,000 barrels of Maya crude at Dos Bocas, Mexico, two sources familiar with the matter said.

    That ship will move through the Panama Canal, and then transfer crude to a larger Suezmax vessel loaded with 400,000 barrels of Mexican Maya crude for a voyage to Asia, the sources said.

    The Montesperanza, another Suezmax, is headed to Singapore after loading at the Galveston Offshore Lightering Area. The ship is controlled by French energy firm Total SA, and the crude on it is expected to go to Japan, two sources said.

    http://www.reuters.com/article/us-usa-crudeexports-idUSKCN18D2ZU
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    Indian jet fuel, LPG demand shrugs off demonetisation impact


    Jet fuel and LPG have turned out to be the shining stars in India's oil demand basket so far in 2017 as rapidly growing air travel and New Delhi's clean fuel energy push are helping the two fuels to post the sharpest growth rates among all oil products.

    As air travel continues to grow amid intensifying competition among airlines offering competitive fares, jet fuel demand rose by 9.5% year on year in April, to 610,000 mt from 557,000 mt from a year earlier, according to data from the Petroleum Planning and Analysis Cell.

    In the cumulative January-April period, jet fuel demand surged 12% year on year to 2.46 million mt from 2.19 million mt a year earlier.

    "While demonetization has affected consumption of some oil products, it has not affected air travel because most air tickets are booked using credit cards. Not much cash is involved. Therefore, jet fuel demand remains robust, said Tushar Bansal, director at Ivy Global Energy, a Singapore-based oil and gas consultancy.

    India announced the scrapping of 1,000 and 500 rupee notes with immediate effect on November 8, 2016, in a move aimed at curtailing the shadow economy but which also led to a slowdown in demand for various commodities over the following months.

    According to CAPA - Centre for Aviation, an independent provider of market intelligence for the aviation sector, India is likely to overtake Japan in 2017 to become the world's third-largest domestic aviation market, behind the United States and China.

    In reaching this milestone, India will have achieved average domestic annual traffic growth of over 15% since the liberalization of the sector commenced in 2003-04 (April-March).

    While domestic traffic could grow by nearly 25% in 2017-18 (April-March) and approach 130 million passengers, international travel could growth by about 10%-12%, CAPA added. Strong economic fundamentals have contributed to the growth, although traffic has been over-stimulated by low fares.

    "India's status as the fastest growing aviation market in the world creates tremendous opportunities. But risks are also heightened as the inadequacy of India's infrastructure planning, a fast emerging shortage of skills, flawed policy initiatives, and weak regulatory oversight threaten to become major stumbling blocks," according to a CAPA report on India's aviation outlook.

    Prime Minister Narendra Modi has said that in the global civil aviation market, India, which is currently the eighth-largest market in the world, would become the third-largest by 2034, adding that growth in the aviation sector would multiply demand for aviation fuel in India four times by 2040.

    Rising domestic demand is taking a toll on India's jet fuel exports as more cargoes find their way into local markets. Jet fuel exports in the first quarter of 2017 fell almost 12% year on year to 1.75 million mt, from 1.99 million mt in Q1 2016.

    Market participants expect India's jet fuel exports to maintain a downward trend as domestic demand is expected to remain robust in the foreseeable future.

    LPG SPREADS ITS WINGS

    While LPG demand grew by only 2.6% year on year in April to 1.63 million mt, from 1.59 million mt a year earlier, it has been the second-fastest growing fuel this year, with demand rising by 6.1% year on year to 7.31 million mt in the January-April period, from 6.9 million mt in the same year-ago period, PPAC data showed.

    "The government is expected to speed the pace of distribution of subsidized LPG connections to the poor. That will keep the demand growth at double digits," Bansal added.

    India is expected to invest $3.9 million-$4.7 billion in developing infrastructure facilities for LPG to raise household connections to 95.5% by 2020, oil ministry officials said Friday.

    State-own Indian Oil Corp plans to spend 10% of its overall capex of $3.1 billion for 2017-18 on strengthening the infrastructure for LPG including setting up of terminals and bottling plants.

    But despite the capacity build-out, IOC's chairman B. Ashok said he expects India to continue importing LPG at least for the next 12 to 13 years after which he anticipates a slowdown in India's LPG demand growth.

    India consumed 21.5 million mt of LPG in 2016-17, a 9.8% growth from the previous year (2015-16), according to the oil ministry updates. Half of the last year's demand was met via imports, mainly from the Middle East. India's LPG imports rose 23% year on year to 11 million mt of LPG in 2016-17.

    "Our main import destinations will continue to be the Middle East as shale gas production has made LPG price relatively a competitive option," Petroleum Minister Dharmendra Pradhan said.

    India aims to increase the number of households with LPG access to 268.7 million in 2018-19, up by around a third from 199 million in 2016-17, and to add 10,000 new LPG distributors by 2019, the minister said. The renewed push on LPG saw 4,600 new distributors open in 2016-17.

    India's overall demand for oil products in April rose 2.3% year on year to 16.79 million mt, or 4.4 million b/d, PPAC data showed. January-April oil products demand fell 1% year on year to 65.7 million mt, or 4.3 million b/d.

    "In line with our expectations, India's oil demand is on a recovery path as the impact of demonetization fades," said Sri Paravaikkarasu, Head of Oil, East of Suez, at consultancy FACTS Global Energy.

    "Transport fuels should continue to propel oil demand growth in the coming months although LPG and other products will also contribute to a 5% to 6% average growth for the year," she added. "The double-digit growth in fuel oil in 2016 should reverse this year, while kerosene will track the negative trend."

    https://www.platts.com/latest-news/oil/singapore/analysis-indian-jet-fuel-lpg-demand-shrugs-off-27831257

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    BP inks Indonesia LNG supply deal


    UK-based energy giant BP has signed a deal to supply LNG to the Indonesian power utility Perusahaan Listrik Negara (PLN).

    BP is to supply 16 LNG cargoes per year from its Tangguh LNG project in Bintuni Bay to PLN over 2020-2035.

    The Tangguh LNG facility consists of offshore gas production facilities supplying two 3.8 mtpa liquefaction trains that have been in operation since 2009.

    In July last year, the project partners have made a final investment decision to build a third train at the facility. The third liquefaction train will add 3.8 mtpa of production capacity to the existing facility, bringing total plant capacity to 11.4 mtpa. First production from the third train is expected in 2020.

    Besides BP, the other partners in the Tangguh production sharing contract are MI Berau (16.30%), CNOOC Muturi (13.90%), Nippon Oil Exploration (Berau) (12.23%), KG Berau Petroleum and KG Wiriagar Petroleum Ltd (10.00%), Indonesia Natural Gas Resources Muturi (7.35%), and Talisman Wiriagar Overseas (3.06%).

    http://www.lngworldnews.com/bp-inks-indonesia-lng-supply-deal/
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    OPEC Risks Deal Fatigue as Maintaining Oil Curbs Get Tougher


    The Organization of Petroleum Exporting Countries and its partners are expected to extend output curbs into early 2018 when they meet next week, in an ongoing bid to clear a global surplus. Yet the tailwinds that made cutting supply easier in the first half of the year -- from a seasonal lull in demand to temporary oil-field maintenance -- will be gone just as new obstacles are emerging.

    To keep a lid on output this summer, Saudi Arabia will need to sacrifice an even bigger share of exports as consumption at home rises. Iraq yearns to expand capacity, and has already used the option of maintenance to keep oil fields idle. Meanwhile Nigeria and Libya, two OPEC nations exempt from the deal, are restoring lost output.

    “They’re going to struggle,” said Michael Barry, director of research at consultants FGE in London. “This deal has been remarkable in its implementation. As time goes on, discipline is likely to erode. Almost every country wants their production to go up.”

    As the world’s fuel-storage tanks remain brimming
    and prices languish, OPEC and its allies have conceded that the initial plan for six months of production cuts wasn’t long enough. Yet Saudi Arabia and Russia’s proposal that their 24-nation coalition, due to meet in Vienna on May 25, should extend the measures for another nine months may prove an unbearable strain.

    “Production curbs for the first quarter of 2017 were comparatively easy to agree to,” said David Fyfe, chief economist at Geneva-based oil trader Gunvor Group. “They’ll likely agree to extend” but “the risk is higher they’ll leak extra barrels onto the market.”

    OPEC showed an unprecedented level of commitment to this deal, implementing 96 percent of the cuts it promised during the first four months of the year, according to the International Energy Agency.

    Holding Line

    Some are optimistic that OPEC and its partners will maintain their resolve. The stakes are high enough that the organization will stick to its commitments, and as inventories decline producers will feel encouraged to stay the course, said Mike Wittner, head of oil market research at Societe Generale SA in New York.

    “They’re going to hold the line,” said Wittner. “If we see stock draws happening soon, which we believe will be the case, those signs of success will bolster their determination. When you see light at the end of the tunnel, it’s easier to keep it together.”

    Still, strong compliance was often attributable to Saudi Arabia cutting more than it was required, compensating for laggards like Iraq and the United Arab Emirates.

    If the kingdom continues to restrain output, it needs to make another sacrifice. The Saudis typically boost production during the summer to maintain exports while meeting increased local demand from air conditioning. Keeping a cap on output would mean foregoing some exports and the revenues they bring.

    Iraqi Question

    Iraq, which still hasn’t made its full cut, plans to boost production capacity to 5 million barrels a day, an increase of about 6 percent, Oil Minister Jabbar al-Luaibi said on May 11. This won’t conflict with its commitment to freeze output, he said.

    “We have question marks around Iraq,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London. “They have been reluctant since the very beginning, and were slow to implement their cuts. Most of the supply restraint in Iraq has come with the help of field maintenance.”

    Maintenance in Iraq, Kuwait and the U.A.E. may have accounted for about 500,000 barrels a day of the output halted -- almost half the group’s total cut, according to FGE. For Iraq, this enabled them to avoid compensating foreign companies for unscheduled production shutdowns.

    “Several countries basically used maintenance as a way of keeping production down but what they did was pull it forward from later in the year,” said FGE’s Barry. “Now maintenance is over the question is what do they do? More maintenance or cut at other fields? The pressure is on.”

    OPEC also faces the challenge that the two members exempted from the deal because of production losses are recovering. Both Libya and Nigeria are showing progress in tackling the political crises that slashed their output.

    Disciplinary Issues

    Libya is producing at the highest level in more than two years after restarting its largest oil field, according to state-run National Oil Corp., while Nigeria has fixed a pipeline after a one-year halt that could boost its output by about 13 percent.

    The 11 non-members joining OPEC’s effort have still only implemented about two-thirds of their promised reduction, according to the IEA, and also face problems in sustaining their curbs. Cutbacks in Russia came alongside the traditional seasonal stagnation in activity, and prolonging them would thwart plans by companies to expand output.

    “It was easy to mask maintenance in the first half as voluntary cuts, but quite impossible to do it any further,” said Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt. “There will be lower discipline within OPEC, and lower discipline from non-OPEC.”

    https://www.bloomberg.com/news/articles/2017-05-16/opec-risks-deal-fatigue-as-maintaining-oil-curbs-gets-tougher-j2s5ws6u

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    Petrobras turnaround could yield first dividend in years in 2017


    Brazil's state-controlled oil company Petrobras will pay its first shareholder dividend in three years if the company turns a profit in 2017, Chief Executive Officer Pedro Parente said on Wednesday.

    Parente took the helm of the world's most indebted energy company a year ago and said he is ahead of schedule with an aggressive restructuring plan to cut its $95 billion debt, reduce costs and sell assets.

    Petroleo Brasileiro SA, or Petrobras, made a record operating profit in the first quarter and if that continues throughout the year, chances are good that the firm will pay a dividend, Parente told Reuters in an interview in New York.

    "We really are keen to start paying dividends as fast as we can," he said. "If at the end of the year I have a profit, we would be more than happy to start paying dividends."

    Petrobras' bylaws say that shareholders are entitled to dividends if the company turns a profit, pending approval from the board and considering factors such as cash requirements and investment opportunities. Company executives have in the past said Petrobras is not obliged to pay dividends on its profits.

    Rising output in Brazil's prodigious offshore fields is helping Parente turn Petrobras around from its nadir in 2014, when the firm last paid dividends.

    Then, investors lost confidence as Petrobras sank into a political and financial maelstrom with the oil price fall reducing its revenues, a corruption scandal swamping the company and losses mounting due to government fuel subsidies.

    Ratings firms downgraded Petrobras' creditworthiness, landing the firm with a huge interest bill to service its debt, which then stood at around $130 billion, accumulated to finance development of massive reserves in Brazil's deep Atlantic waters.

    Parente says he was hopeful about hitting his key metric to reduce leverage by the end of this year - a full year ahead of schedule.

    "It is likely we will reach that target ... before 2018. I hope, but I don't know." he said.

    He is targeting reducing Petrobras' debt to 2.5 times its adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) from 5.1 times EBITDA at the end of 2015. At the end of the first quarter the ratio stood at 3.24.

    Even if he hits that target, Parente has no plans to stop reducing debt or to let up on asset sales.

    "We're not going to stop our plan... This is not yet a healthy leverage level for Petrobras," he said.

    A more appropriate level that would put Petrobras in line with global oil majors would be around 1.5 EBITDA, he said. He has no plans, for now, to make that a new target.

    Investors have rewarded Parente for the turnaround. The firm achieved an interest rate of below 5 percent this week on a five-year bond for the first time since the crisis, Parente said. At the worst point, the rate was around 13 percent.

    Parente said he would consider serving as chief executive beyond the end of next year if the government that is elected in 2018 wants him to continue in the post. A full cycle of management at the company would be four years, he said.

    Petrobras has yet to decide whether it will participate in three government auctions this year for oilfields, he said. If it does, it will be go for deepwater fields, as operating there is Petrobras' strength, he added.

    The company will not adjust its five-year capital expenditure plan of $75 billion through 2021 to finance the development of new fields, Parente said, adding that the firm would fund any expansion through cost reductions.

    Petrobras will not bid for onshore or shallow water oilfields, he said, and is committed to selling its participation in onshore and shallow water fields as part of a $21 billion divestment plan, he said.

    He declined to say how much cash he hoped to raise with field sales.

    Rising Brazilian output, both from Petrobras and from international oil firms operating there, has contributed to a strong rise in output from non-OPEC producers this year that is making it hard for the Organization of the Petroleum Exporting Countries to curb global supply and end a two-year glut.

    Petrobras' crude exports rose to 725,000 barrels per day in the first quarter, up 72 percent on the year. The rise came in part because of higher output, but also because a recession in Brazil has hit domestic oil demand.

    http://www.reuters.com/article/us-brazil-petrobras-idUSKCN18D2Y6
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    Iran to Offer Azadegan Oil Fields as Single Project


    Iran is preparing to combine its massive North and South Azadegan oil fields for development as a single project and plans to invite IOCs to bid for the contract in coming weeks.

    http://www.energyintel.com/pages/login.aspx?fid=art&DocId=961605
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    Summary of Weekly Petroleum Data for the Week Ending May 12, 2017


    U.S. crude oil refinery inputs averaged over 17.1 million barrels per day during the week ending May 12, 2017, 363,000 barrels per day more than the previous week’s average. Refineries operated at 93.4% of their operable capacity last week. Gasoline production decreased last week, averaging over 10.0 million barrels per day. Distillate fuel production increased last week, averaging over 5.0 million barrels per day.

    U.S. crude oil imports averaged 8.6 million barrels per day last week, up by 970,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged over 8.3 million barrels per day, 9.3% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 696,000 barrels per day. Distillate fuel imports averaged 161,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 1.8 million barrels from the previous week. At 520.8 million barrels, U.S. crude oil inventories are in the upper half of the average range for this time of year. Total motor gasoline inventories decreased by 0.4 million barrels last week, but are above the upper limit of the average range. Finished gasoline inventories increased while blending components inventories decreased last week. Distillate fuel inventories decreased by 1.9 million barrels last week but are in the upper half of the average range for this time of year. Propane/propylene inventories increased by 0.6 million barrels last week but are in the lower half of the average range. Total commercial petroleum inventories increased by 4.3 million barrels last week.

    Total products supplied over the last four-week period averaged about 19.8 million barrels per day, down by 2.2% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged 9.3 million barrels per day, down by 2.6% from the same period last year. Distillate fuel product supplied averaged about 4.1 million barrels per day over the last four weeks, down by 0.8% from the same period last year. Jet fuel product supplied is up 6.1% compared to the same four-week period last year.

    Cushing unchanged

    http://ir.eia.gov/wpsr/wpsrsummary.pdf
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    US Lower 48 production up 12,000 bbls


                                                       Last Week  Week Before   Last year

    Domestic Production '000.......... 9,305           9,314            8,791
    Alaska ............................................... 510  .            531               506
    Lower 48 ...................................... 8,795           8,783            8,285

    http://ir.eia.gov/wpsr/overview.pdf
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    Oil inventories become more visible


    Reported oil stocks have fallen much more slowly than OPEC anticipated at the beginning of the year, leading to scepticism about the effectiveness of the organisation's production cuts.

    But the sluggish response may reflect the repositioning of formerly uncounted stocks to more visible locations rather than a failure to adjust the supply-demand balance.

    In general, crude oil and refined products move down the supply chain from areas of net production to areas of net consumption.

    Despite significant trading activity around particular cargoes, the movement of crude and products essentially occurs in only one direction.

    For commercial reasons, it makes no sense to move crude and products back up the supply chain, away from consumers and back towards refiners and producers.

    Crude and products stocks are positioned as close to refiners and final consumers as possible, subject to the availability and cost of storage.

    OPEC ministers and officials have stated that the objective of production cuts is to eliminate the overhang of excess oil stocks and reduce inventories to the five-year average level.

    Ministers and officials most often reference commercial crude and product stocks held in OECD member countries when talking about the overhang and market rebalancing.

    OECD stocks are the most accurately and frequently reported so in some ways it makes sense to use them as the benchmark for assessing whether the production cuts are working.

    The problem is that they are not necessarily representative of stockpiles held in producing and consuming countries outside the OECD.

    According to the International Energy Agency, total OECD commercial stocks rose during the first quarter of 2017, but this was largely offset by a reduction in floating storage and stocks held outside the OECD ("Oil Market Report", IEA, May 2017).

    The diverging behaviour of OECD and non-OECD oil stocks reflects their differing locations along the oil industry's supply chain.

    While OECD countries are substantial net importers of crude and consumers of refined products most of the major oil-exporting countries are located outside the OECD.

    OECD refining centres also contain lots of inexpensive storage options which make them the preferred choice for holding non-operational or speculative inventories.

    The result is that storage tanks in the OECD tend to be the first to fill during a period of oversupply and the last to empty when global stocks are falling.

    By targeting OECD stocks, OPEC has made achieving its objective harder in the short term, because these stocks will be the last to respond to its production policy.

    There is some evidence excess global inventories have already fallen, with reductions in oil-exporting countries, floating storage and remote locations part way between producing and consuming centres.

    Excess stocks are gradually being pulled along the supply chain from producers, floating storage and remote locations towards the major refining centres in the OECD.

    But the behaviour of the supply chain introduces an important non-linearity into the response of OECD stocks to OPEC's production policy.

    OECD stocks are likely to fall slowly at first, then accelerate once producer stocks and floating storage have been emptied.

    As a result, OPEC's production policy often tends to appear relatively ineffective at first before gaining traction later.

    In this instance, the stubbornly high level of OECD oil inventories during the first quarter of 2017 may have masked a broader tightening in the supply-demand-inventory balance.

    Inventory movements coupled with stronger seasonal consumption during the northern hemisphere summer could result in a more pronounced decline in OECD stocks during the second and third quarters.

    http://www.reuters.com/article/oil-inventories-kemp-idUSL8N1IJ260

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    Drilling applications backing up at Bureau of Land Management


    President Donald Trump’s pledge to open oil and gas drilling on federal lands has hit a bureaucratic log jam.

    More than 3,000 applications for drilling permits are  awaiting review at the Bureau of Land Management, according to a report by E&E News, a trade publication.

    Acting Director Mike Nedd told E&E the bureau is working on several strategies to speed the processing of applications. “It may be a strike team. It may be shifting the workload to a different office,” he said.

    Revenue from oil and gas production on federal lands and waters declined sharply in recent years, after the collapse in commodity prices in 2014. Interior Secretary Ryan Zinke has ordered staff to review regulations and management to see how production can be increased.

    “Every day that goes by while independent producers — companies with an average of 12 employees — wait for their permits to be approved means more money out of their own pockets,” Neal Kirby, spokesman for the Independent Petroleum Association of America, told E&E.

    http://fuelfix.com/blog/2017/05/17/drilling-applications-backing-up-at-blm/
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    Canadian Natural Resources Limited Announces Normal Course Issuer Bid


    Canadian Natural Resources Limited announced today that Toronto Stock Exchange has accepted notice filed by Canadian Natural of its intention to make a Normal Course Issuer Bid through the facilities of Toronto Stock Exchange or other alternative Canadian trading systems. Purchases may also be made through the facilities of the New York Stock Exchange.

    The notice provides that Canadian Natural may, during the 12 month period commencing May 23, 2017 and ending May 22, 2018, purchase for cancellation up to 27,931,135 shares, being 2.5% of the 1,117,245,428 outstanding common shares as at May 12, 2017. Canadian Natural will not acquire more than 25% of the average daily trading volume of its common shares during a trading day, being 591,186 common shares subject to certain prescribed exceptions. The price which Canadian Natural will pay for any such shares will be the market price at the time of acquisition. The actual number of common shares that may be purchased and the timing of any such purchases will be determined by Canadian Natural.

    In addition to further strengthening its balance sheet, investing in exploration and development of its diverse asset base, and participating in acquisition opportunities, returns to shareholders remain a priority to create value for Canadian Natural’s shareholders. Funds flow in 2017 is targeted to be allocated to these four pillars and may also be used by Canadian Natural, depending upon future trading prices and other factors, to purchase its common shares, as it is believed to be a worthwhile investment, and in the best interests of Canadian Natural and its shareholders

    http://boereport.com/2017/05/17/canadian-natural-resources-limited-announces-normal-course-issuer-bid-4/
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    Fracking Crew Shortage May Push Oil's Biggest Bubble to 2018


    Shale explorers pushing to expand oil production are struggling to find enough fracking crews after thousands of workers were dismissed during the crude rout.

    Independent U.S. drillers underspent their first-quarter budgets by as much as $2.5 billion collectively, largely because they couldn’t find enough fracking crews to handle all the planned work, according to Infill Thinking LLC, a research and consulting firm focused on oilfield services and exploration. If the scarcity holds, output increases planned for this summer may get pushed into 2018, creating an unanticipated production bulge with “scary” implications for oil prices, said Joseph Triepke, Infill’s founder.

    In some cases, active crews are walking away from jobs they signed up for months ago -- and paying early-termination penalties -- to take higher-paying assignments with other explorers. Workers earn anywhere from $29,000 to $72,000 a year before overtime, depending on the company and the region.

    The tight fracking market “means U.S. oil production growth this year will be back-half weighted, and we may not understand the full extent of U.S. production growth until early 2018,” said Triepke, who previously was an analyst at Citadel LLC’s Surveyor Capital unit. “This point is particularly scary if you are a rooting for higher oil prices.”

    Oilfield-service companies contributed the largest chunk of more than 441,000 jobs slashed globally as prices plunged from more than $100 a barrel over the last three years, according to Houston-based industry consultant Graves & Co.

    Now, with the price of oil settling at around $50 a barrel, shale drillers are once again gearing up in areas such as the Permian Basin, where break-even costs are as low as $30 a barrel. The result: rising competition for workers and equipment, which means higher costs. Fracking companies are now charging 60 percent to 70 percent more than a year ago as explorers engaged in bidding wars to lock up crews, according to Infill data.

    In response, servicers are scrambling to re-hire hands and retrieve gear from storage, said Andrew Cosgrove, an analyst at Bloomberg Intelligence.

    Typical Crew

    A crew typically consists of 25 to 30 workers who operate a huge array of powerful truck-mounted pumps, storage tanks for fluids and sand, hoses, gauges and safety gear. Fracking, which involves pumping tons of water, sand and chemicals into a well to smash open the surrounding oil- and gas-soaked rock, is the most expensive part of drilling a well, usually accounting for about 70 percent of the total cost.

    So far, independent shale drillers are confident they’ll find ample fracking capacity and are leaving their ambitious double-digit output growth targets intact. West Texas Intermediate crude, the U.S. benchmark, is heading for a second weekly advance as U.S. stockpiles decline while Saudi Arabiaand Russia indicated a willingness to extend price-boosting production cuts. WTI on Thursday was trading 0.3 percent lower at $48.91 a barrel as of 1:07 p.m. in Singapore.

    Those efforts could be dashed in coming months, however, if shale explorers deliver a larger-than-expected bubble of supply.

    “Every single pressure pumper is saying their order books are full through the third quarter and some as far ahead as the first quarter of ’18,” Cosgrove said.

    Walkaways

    EQT Corp. was left short of fracking crews during the first quarter when some pumping companies walked away for higher-paying contracts. Still, the Pittsburgh-based shale driller expects to attract enough fracking capacity by the beginning of June to stay on track and hit its full-year growth forecast.

    “A couple of our frack contractors decided to pay us the penalties to take their frack crews to jobs that were more profitable,” EQT Chief Executive Officer Steven Schlotterbeck said during an April 27 conference call with analysts. “So we will get some penalty fees but that obviously is far less than the value of having the wells fracked on the schedule that we would have liked.”

    The last time the shale patch boomed, Parsley Energy Inc. CEO Bryan Sheffield remembers personally delivering breakfast and giving away World Series tickets to get into good graces with fracking companies.

    Better-Paying Gigs

    That was late 2011, when booming demand for fracking capacity meant service companies could fire clients to take better-paying gigs, Sheffield said in an interview. The 39-year-old Parsley founder was relatively unknown at the time, trying to get to the top of frack companies’ cancellation lists, so he could get a chance to hire them and get his oil flowing.

    Those days are back, he said.

    After the last boom that saw oilfield truck drivers commanding more than $200,000 a year in the Bakken of North Dakota, companies are again hunting for more truckers -- this time in the Permian Basin of Texas and New Mexico for hauling water, sand and oil. Fracking equipment prices began rising late last year, Sheffield said.

    “This is exactly what we saw in 2011 and 2012,” Sheffield said. “The bottleneck moves down the chain.”

    https://mail.google.com/mail/u/0/?shva=1#inbox?compose=15c1a494d2f1143e

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    Oregon county rejects measure blocking natural gas terminal


    A coastal Oregon county overwhelmingly rejected a ballot measure aimed at blocking a proposed natural gas terminal dealing a blow to what was the latest in a series of efforts to thwart energy projects across the Pacific Northwest.

    The measure, had it passed, would have banned transport of fossil fuels not intended for local use through Coos County, located about 200 miles (322 kms) south of Portland.

    Around 76 percent of votes were cast against the measure, with 24 percent in favor, according to unofficial results posted on the Coos County government website late Tuesday.

    "This ballot measure was not a good measure by any means, and I think (the voters) were able to see that," Coos Bay's mayor Joe Benetti, who opposed the measure, told local newspaper The World.

    Backers called the initiative a response to a $7.6 billion proposal by Calgary-based Veresen Inc, to build a facility in the county where natural gas would be liquefied and transferred to tanker ships for sale abroad. They cast the measure as a local refusal to contribute to global warming.

    Gary Cohn, head of the National Energy Council, in April singled out the Veresen project as a priority for the administration of Republican President Donald Trump.

    The Coos County initiative was part of regional resistance in the Northwest to fossil fuel projects that has seen the blockage of several major export facilities.

    Last year, the Lummi Nation Native American tribe and environmental groups blocked an export terminal in Northwest Washington state that would have moved Montana and Wyoming coal to markets in Asia.

    In January, Washington State denied a permit for a coal export terminal in the city of Longview, citing concerns about the financial viability of the project.

    In February, bowing to pressure from activists, Seattle's city council voted to divest approximately $3 billion from Wells Fargo, citing concerns over the bank's support of the North Dakota Access Pipeline, among other factors.

    Passage of the Coos Bay measure would have been another blow for liquid natural gas projects on the West Coast, even as depots in other areas of the country have moved forward.

    Cheniere Energy Inc opened a port in Louisiana last year and several other companies are set to open projects on the Gulf Coast in 2018 and 2019. Dominion Energy Inc plans to open the Cove Point LNG port in Maryland later this year.

    http://www.reuters.com/article/us-oregon-energy-vote-idUSKCN18D0VB

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    Agriculture

    New EuroChem potash mines to produce 1.1 mln T 2018 -CFO


    Privately held fertilizer producer EuroChem Group plans to produce 1.1 million tonnes of potash in 2018 from its two new Russian mines, with output capacity ramping up to 8.3 million tonnes annually by 2024 or 2025, the company's chief financial officer said on Wednesday.

    EuroChem also intends to convert up to 200,000 tonnes of that potash to sulphate of potash (SOP), a premium product, in 2019, and to 500,000 tonnes of SOP in 2020 or 2021, CFO Andrey Ilyin told Reuters.

    New EuroChem potash mines to produce 1.1 mln T 2018 -CFO

    May 17 Privately held fertilizer producer EuroChem Group plans to produce 1.1 million tonnes of potash in 2018 from its two new Russian mines, with output capacity ramping up to 8.3 million tonnes annually by 2024 or 2025, the company's chief financial officer said on Wednesday.

    EuroChem also intends to convert up to 200,000 tonnes of that potash to sulphate of potash (SOP), a premium product, in 2019, and to 500,000 tonnes of SOP in 2020 or 2021, CFO Andrey Ilyin told Reuters.
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    Pests and pathogens could cost agriculture billions


    The spread of pests and pathogens that damage plant life could cost global agriculture $540 billion a year, according to a report published on Thursday.

    The report, released by the Royal Botanic Gardens (RBG) at Kew in London, said that an increase in international trade and travel had left flora facing rising threats from invasive pests and pathogens, and called for greater biosecurity measures.

    "Plants underpin all aspects of life on Earth from the air we breathe right through to our food, our crops, our medicines," said Professor Kathy Willis, RBG Kew's director of science.

    "If you take one away, what happens to the rest of that ecosystem - how does it impact?"

    Researchers also examined the traits that would determine which plant species would cope in a world feeling the effects of climate change.

    Plants with deeper roots and higher wood density are better able to withstand drought, while thicker leaves and taller grasses can cope with higher temperatures, the report found.

    Surprisingly, researchers also found that the traits that are likely to help species thrive appear to be transferable across different environments.

    "The interesting fact to emerge is that the suite of 'beneficial' traits are, on the whole, the same the world over and are as true in a temperate forest as in a desert," Professor Willis said in a statement.

    The report, which involved 128 scientists in 12 countries, found that 1,730 new plant species had been discovered in the past year.

    Nine new species of the climbing vine Mucuna, used in the treatment of Parkinson's disease, were found and named across South East Asia and South and Central America.

    http://www.reuters.com/article/environment-plants-idUSL8N1IJ43Z
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    Chinese company confirms huge UK fertilizer deal


    A small Chinese company that is key to plans by Sirius Minerals to build a huge fertilizer mine under a national park in the north of England has confirmed it has a binding agreement with the UK firm.

    DianHuang CEO Wang Xiaotian reiterated the agreement in a letter to Reuters on May 15, saying it had been signed on May 27 last year. DianHuang would buy 150,000 tonnes of the mineral polyhalite a year from first extraction in 2021, scaling up to a million tonnes a year over five years as part of plans to grow peony flowers and extract edible oil from their seeds, he said.

    The reassurance from Wang followed a May 8 telephone interview with Reuters in which he said the two firms were still negotiating.

    The DianHuang deal is the biggest take-or-pay agreement Sirius has inked so far with a named customer. By demonstrating confirmed demand for its product, it helped Sirius raise $1.2 billion in financing for the mine and win planning permission from the North York Moors national park.

    Sirius needs its existing take-or-pay agreements and more to raise a further $2.6 billion, in debt financing, to complete the mining project. The company has said it must double the amount of polyhalite covered by take-or-pay deals to satisfy the banks arranging the financing that it has enough potential cash flow.

    Asked if DianHuang had signed a legally binding agreement with Sirius, Wang had said by telephone: "We have not officially signed this, it is just a strategic cooperation agreement ... Because with Sirius we have a framework cooperation, of course we hope this cooperation can be pushed forward."

    These were the first comments to media by the Chinese company on the deal, which Sirius announced in June 2016. At that time, Sirius said DianHuang would buy up to a million tonnes of fertilizer a year from first extraction, under a take-or-pay arrangement.

    In the telephone interview, Wang had said DianHuang was also negotiating with a rival firm, ICL, also known as Israel Chemicals.

    "It depends whose fertilizer is more beneficial for us," he said. "ICL is the biggest global producer of organic potassium fertilizer. They are also competing, they are also in touch with us. They have brought over some fertilizer for test use."

    ICL, whose mine is on the same Yorkshire seam that Sirius plans to exploit, declined to comment on DianHuang's statement.

    After Reuters posed questions to Sirius Minerals about Wang's phone comments, Sirius said the assertion that it only had a framework agreement with DianHuang was incorrect: "The Company has a binding offtake agreement in place."

    Sirius added that any possible talks between DianHuang and its rival were up to the Chinese firm.

    In Wang's letter, which he wrote after Reuters contacted Sirius, he said: "To clarify, the contract is not a framework agreement but rather a firm take or pay agreement." Wang was not immediately available to comment further when contacted by Reuters after the letter.

    ICL is so far the only company that has actually begun mining polyhalite, a relatively new entrant to the fertilizer market which both it and Sirius say is a multi-nutrient product superior to traditional potash. Wang's follow-up letter to Reuters made no reference to ICL.

    Sirius has announced take-or-pay agreements for up to 3.6 million tonnes a year of its polyhalite product so far. It has not named some customers for commercial reasons. That is about half what it says it needs to complete the project.

    It says the mine will create thousands of jobs and add as much as 2.4 billion pounds ($3.11 billion) per year to the United Kingdom's gross domestic product.

    http://www.reuters.com/article/us-mining-sirius-exclusive-idUSKCN18D0UN

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    Precious Metals

    Bearish aura pervades London Platinum Week


    The mood was distinctly bearish among attendees at London Platinum Week 2017, with representatives from across the value chain painting a negative outlook for the autocatalyst metal.

    "[For the time being] people do not hate [platinum], but at $1,000 they will hate it again," said a fund manager Monday evening.

    A senior banking source said: "The mood is overall bearish."

    Diverging outlooks on supply and demand dynamics were circulating among participants at the event.

    Johnson Matthey, the world's largest refiner of platinum and palladium, expects to see a supply surplus in 2017, the first in six years.

    The company also sees falling jewellery demand for the metals as Chinese manufacturers look set to turn increasingly to gold.

    "The envisaged surplus is quite sizable at 302,000 oz. Last year saw a deficit of 202,000 oz...The main reason for the anticipated surplus is weaker demand (minus 9.5%) -- because of new standards, less platinum is being used in diesel auto-catalysts," Germany's Commerzbank said in reaction to Johnson Matthey's forecasts.

    This contrasted with predictions from the World Platinum Investment Council and Thomson Reuters GFMS.

    Ross Strachan, precious metals demand manager at Thomson Reuters, said: "Platinum has been the worst performing precious metal in the year to date, continuing a pretty underwhelming performance in 2016. We do not expect it to continue to lag its peers substantially as the market has priced in much of the bad news...We are looking for a fundamental deficit this year as mine production continues to be hindered by the lack of investment in earlier years."

    Industry lobby group WPIC said Monday that overall platinum supply was forecast to fall 2% year on year to 7.73 million oz in 2017, with both primary and secondary supply expected to decline.

    Total demand in 2017 is projected at 7.795 million oz, WPIC said.

    Recycling is projected to fall by 6% to 1.76 million oz.

    "This quarter's report reinforces our long-held view that supply will become increasingly constrained in 2017, while revisions to the data show that 2016 was more heavily in deficit than previously detailed," WPIC CEO Paul Wilson said.

    One senior industry source struck a negative tone: "Diesel passenger vehicles are unsaleable...and with the stock of metal driving around Europe -- and soon to be recycled -- diesel could conceivably become a net source of supply of platinum, not demand."

    "Also cheap platinum has damaged -- perhaps fatally -- the platinum jewellery brand in China," he added. "The two big drivers for platinum have stalled so I can't be anything other than negative."

    JP Morgan's technical analysts, however, were less downbeat, issuing a "buy platinum" recommendation in anticipation of a minimum rally to $1,050/oz.

    https://www.platts.com/latest-news/metals/london/bearish-aura-pervades-london-platinum-week-26737083

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    Base Metals

    ERG’s DRC mine delivers 35% increase in copper output


    Frontier mine, owned by Eurasian Resources Group (ERG), has delivered more than 107 000 t contained copper in concentrate in 2016, an 35% year-on-year increase in output.

    ERG on Wednesday said the growth at its flagship mine, in the Democratic Republic of the Congo(DRC), came on the back of its revised production plan, launched in late 2015, which sought to increase long-term copper production by improving the efficiency and effectiveness of its operating model.

    Frontier GM John Robertson said the production figures were encouraging. “This is a major step forward for the group and supports ERG Africa’s strategy to become a regional copper and cobalt champion.”

    http://www.miningweekly.com/article/ergs-drc-mine-delivers-35-increase-in-copper-output-2017-05-17
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    Steel, Iron Ore and Coal

    China seeks more than coal capacity cut, NEA


    Though achievements have been obtained in coal capacity cut since last year, China seeks more than that, and what it really focuses on is the clean and efficient utilisation of fossil fuels, said Li Zhi, head of the National Energy Administration.

    Coal and oil contribute 62% and 19% to China's total energy consumption, respectively, which was mainly resulted from its resource structure. Coal will remain a significant fuel in China's primary energy mix in a long period ahead, said Li.

    Huang Qili, academician of the Chinese Academy of Engineering, suggested that power firms that mainly rely on coal burns should strive to enhance efficiency to reduce coal use and promote clean utilization of coal.

    He pointed out that the average efficiency of China's coal-fired power generation was 33%, compared with 43% of foreign countries.

    "Coal is both resource and energy, so we should promote its comprehensive use," he added.

    http://www.sxcoal.com/news/4556174/info/en

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    Banpu reports revenue boost in Q1, driven by rising coal price


    Thailand-based Banpu Public Co., Ltd. reported total sales revenue of US$633 million in the first quarter, increase 15% or $81 million over the same period last year, showed the latest quarterly results.

    Banpu is also seeing a significant increase in earnings before interest, tax, depreciation and amortization (EBITDA) of 93% year on year though flat quarter on quarter at $216 million.

    For the first quarter, Banpu's net profit amounted to $40.86 million, a turnaround from a net loss of $5.15 million in the same period last year.

    Banpu has expanded its investments in shale gas in the US. Also, the company aims to strengthen its midstream business strategy in coal trading and is also looking for opportunities to become a leading energy provider in the Asia-Pacific region.

    "An increase in the average selling price of coal results in higher sales revenue, which was previously affected by a seasonal decrease in demand for coal in Indonesia and the move of longwall machinery at the mine sites in Australia." Somruedee Chaimongkol, Banpu's chief executive officer said.

    He said the 15% year on year increase in Banpu's total sales revenue was largely due to a continued rising of the global coal price. Of the $633 million revenue, coal sales accounted for $566 million, or 89% of total sales revenue. Sales of power, steam and others generated $60 million, representing 9% of total revenue. In addition, the gas business from two shale sources in Pennsylvania generated $7 million, accounting for 1% of the sales revenue.

    http://www.sxcoal.com/news/4556205/info/en

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    India's coal output expects to boom temporarily


    A report by the Indian government indicates the country will double its coal output to 1.5 billion tonnes by 2020, Power Engineering reported on May 16.

    As the world's third largest coal producer, India currently generates 58% of its energy from coal. However, coal's share of the country's energy mix is expected to shrink to between 42-48% by 2047, according to the report.

    The report was written by Indian think tank NITI Aayog, which advises the government on policy issues and is chaired by Prime Minister Narendra Modi and the Institute for Energy Economics Japan.

    India is also the world's second-largest coal importer, though the country hopes to cut its imports to zero by the end of this year.

    "India would like to use its abundant coal reserves as it provides a cheap source of energy and ensures energy security as well," the report said.

    However, the report suggests India will need to resume importing coal again after its coal output peaks in 2037, according to the report, while imports could rise to as much as 62% of its total by 2047 if the country doesn't make its coal mining more efficient.

    Renewable generation is also expected to grow to 175 GW by 2022. The country currently generates 4% of its energy from renewable sources. Natural gas could rise from 6.5% of India's energy now to between 10-17% by 2047.

    http://www.sxcoal.com/news/4556189/info/en

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    Beijing-Tianjin-Hebei area to totally ban coal burning


    Beijing-Tianjin-Hebei area, China's major high-tech and heavy industrial base, will speed up achieving "zero" coal-burning in this place, announced the Ministry of Environmental Protection (MEP) in a briefing on May 16.

    According to a former plan released from the MEP, Beijing, Tianjin, Hebei's Langfang and Baoding should entirely ban burning coal by October 2017.

    As of end-October, Beijing pledged to complete the project of changing coal to clean energy in the rest of 820 villages.

    By September 2016, the city has started the project in 463 villages, and fulfilled changing coal to electricity in 385 villiages.

    Wuqing District in Tianjin, was divided into Beijing-Tianjin-Hebei coal-ban area and made sure no coal firing by October this year, said a senior official of the MEP.

    "It is estimated 0.45 million tonnes of coal can be reduced up completion," he added.

    Before the deadline of October 2017, Hebei's Baoding planned to finish reforms of coal-to-clean energy in 590,000 families of 1,467 villages.

    http://www.sxcoal.com/news/4556166/info/en

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    China, India dominate coal ownership as some shun climate risks


    Investors in China and India increasingly dominate ownership of coal reserves amid campaigns for divestment in many rich nations to limit the risks from climate change, Reuters reported, citing a study.

    The report, by British-based research group Influence Map, identified thousands of shareholders in 117 listed companies producing 3 billion tonnes a year of thermal coal with 150 billion tonnes of reserves.

    It said that ownership of thermal coal, used in power plants, was dominated by "strategic investors in China and India (governments, individuals, power companies, special purpose companies)."

    Ownership had shifted towards Asia from Europe and North America in recent years, Dylan Tanner, executive director of InfluenceMap, said.

    "Coal has been pushed into a corner, stigmatized by the divestment community," said Tanner.

    Almost 200 governments pledged at a summit in Paris in 2015 to shift this century from fossil fuels towards renewable energies to curb climate change, and more than 500 major investors have pledged to limit coal investments.

    China and India say they will need coal for decades to bolster economic growth even as they try to curb emissions blamed for warming the planet.

    As part of the divestment in coal, Norway's sovereign wealth fund and California's CalPERS and CalSTRS pension funds, representing about $1.4 trillion in assets, had sharply cut their ownership of coal since 2010, the study said.

    Some investors, however, now see opportunities in coal because U.S. President Donald Trump doubts climate change is man-made and wants to promote fossil fuels from the United States as a cheap source of energy.

    Even before Trump's election, some mid-size U.S. and other asset managers "have been bulking up on coal in the last five years in anticipation of a resurgence of some of the remnants of the U.S. coal bankruptcies and growth in Asia," the study said.

    The report said that if all the coal reserves identified in the report are consumed, it would release greenhouse gases equivalent to 45% of the gases needed to raise average surface temperatures above an agreed ceiling of 2 degrees Celsius (3.6 Fahrenheit) above pre-industrial times.

    http://www.sxcoal.com/news/4556155/info/en

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    Tata Steel agrees British pensions deal


    India's Tata Steel has agreed the main terms of a deal to cut benefits for its British pension scheme in a move that will see the firm back a new plan that will pose less risk to the company.

    The pension scheme is a major stumbling block in talks to merge Tata's British and European steel assets with those of Thyssenkrupp (TKAG.DE), because the German company is opposed to taking on 15 billion pounds ($19.37 billion) in UK pension liabilities.

    The fate of Tata's British businesses, including the country's largest steelworks at Port Talbot, has been in the air since Tata Steel said a year ago it planned to sell its British assets following heavy losses.

    Pensions consultants questioned, however, whether the pensions deal announced on Tuesday would be enough to satisfy Thyssenkrupp.

    Tata said the deal will see it plough 550 million pounds into the British Steel Pension Scheme (BSPS), one of Britain's largest final salary schemes with 130,000 members.

    The deal is subject to formal approval by The Pensions Regulator, but Tata said it expected to get approval shortly.

    "We are in a very positive consultation with all stakeholders," said Tata Steel's executive director for finance and corporate Koushik Chatterjee.

    Tata Steel UK has agreed, as part of the deal, to sponsor a new pension scheme that will have lower benefits than those of the original BSPS and will therefore pose less of a risk to the company.

    As a further safety measure, Tata will give the BSPS a 33 percent equity stake in its UK business.

    BSPS members who do not agree to move to the new scheme will automatically transfer to the Pension Protection Fund (PPF), which said all members, including those in the new scheme, are guaranteed at least PPF compensation levels.

    The PPF is a lifeboat for pension schemes in Britain that run into trouble.

    "Good progress is being made," The Pensions Regulator said.

    But it added: "We will only approve (pensions restructurings)...where stringent tests are met, so that they are not abused by employers seeking to inappropriately offload their pension liabilities."

    Martin Hunter, principal at pensions consultant Punter Southall, said the deal did not involve a total separation of the pension scheme from Tata.

    Thyssenkrupp has consistently opposed taking on Tata's UK pension liabilities, though it continues to pursue merger talks with Tata in a bid to achieve sector consolidation and tackle Europe's excess steel capacity.

    "The $64,000 question is ‘is this good enough for Thyssenkrupp, given that Tata Steel UK is still on the hook for the pension scheme?’,” said independent pensions consultant John Ralfe.

    Thyssenkrupp declined to comment.

    The merger is vigorously opposed by German trade unions, who fear large-scale job cuts as a result - probably at Germany's expense after workers at Tata Steel's Port Talbot plant in Wales were recently given job guarantees.

    Tata Steel reported an unexpected fourth-quarter loss on Tuesday due to one-off exceptional items, including charges related to the pensions deal.

    It posted a fourth-quarter net loss of 11.68 billion rupees ($182.4 million), compared with a net loss of 30.42 billion rupees a year ago.

    The company’s current debt is 730 billion rupees as of the end of March 2017.

    http://www.reuters.com/article/us-tata-steel-pensions-idUSKCN18C253

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