Mark Latham Commodity Equity Intelligence Service

Tuesday 24th January 2017
Background Stories on www.commodityintelligence.com

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    Macro

    Trump pulls U.S. out of Pacific trade deal, loosening Asia ties


    U.S. President Donald Trump formally withdrew the United States from the Trans-Pacific Partnership trade deal on Monday, distancing America from its Asian allies, as China's influence in the region rises.

    Fulfilling a campaign pledge to end American involvement in the 2015 pact, Trump signed an executive order in the Oval Office pulling the United States out of the 12-nation TPP.

    Trump, who wants to boost U.S. manufacturing, said he would seek one-on-one trade deals with countries that would allow the United States to quickly terminate them in 30 days "if somebody misbehaves."

    "We're going to stop the ridiculous trade deals that have taken everybody out of our country and taken companies out of our country," the Republican president said as he met with union leaders in the White House's Roosevelt Room.

    The TPP accord, backed heavily by U.S. business, was negotiated by former Democratic President Barack Obama's administration but never approved by Congress.

    Obama had framed TPP, which excluded China, as an effort to write Asia's trade rules before Beijing could, establishing U.S. economic leadership in the region as part of his "pivot to Asia."

    China has proposed a Free Trade Area of the Asia Pacific and has also championed the Southeast Asian-backed Regional Comprehensive Economic Partnership.

    Trump has sparked worries in Japan and elsewhere in the Asia-Pacific with his opposition to the TPP and his campaign demands for U.S. allies to pay more for their security.

    His trade stance mirrors a growing feeling among Americans that international trade deals have hurt the U.S. job market. Republicans have long held the view that free trade is a must, but that mood has been changing.

    "It's going to be very difficult to fight that fight," said Lanhee Chen, a Hoover Institution fellow who was domestic policy adviser to 2012 Republican presidential nominee Mitt Romney. "Trump is reflecting a trend that has been apparent for many years."

    Harry Kazianis, director of defense studies at the Center for the National Interest think tank in Washington, said Trump must now find an alternative way to reassure allies in Asia.

    "This could include multiple bilateral trade agreements. Japan, Taiwan and Vietnam should be approached first as they are key to any new Asia strategy that President Trump will enact,” he said.

    Trump is also working to renegotiate the North American Free Trade Agreement to provide more favorable terms to the United States, telling reporters he would meet leaders of NAFTA partners Mexico and Canada to get the process started.

    BUSINESS LEADERS

    The new president met with a dozen American manufacturers at the White House on Monday, pledging to slash regulations and cut corporate taxes - but warning them he would take action on trade deals he felt were unfair.

    Trump, who took office on Friday, has promised to bring factories back to the United States - an issue he said helped him win the Nov. 8 election. He has not hesitated to call out by name companies he thinks should bring outsourced production back home.

    He said those businesses that choose to move plants outside the country would pay a price. "We are going to be imposing a very major border tax on the product when it comes in," Trump said.

    He asked the group of chief executives from companies including Ford Motor Co, Dell Technologies Inc, Tesla Motors Inc and others to make recommendations in 30 days to stimulate manufacturing, Dow Chemical Co Chief Executive Officer Andrew Liveris told reporters.

    Liveris said the CEOs discussed the border tax "quite a bit" with Trump, explaining "the sorts of industry that might be helped or hurt by that."

    "Look: I would take the president at his word here. He's not going to do anything to harm competitiveness," Liveris said. "He's going to actually make us all more competitive."

    At part of the meeting observed by reporters, Trump provided no details on how the border tax would work.

    The U.S. dollar fell to a seven-week low against a basket of other major world currencies on Monday, and global stock markets were shaky amid investor concerns about Trump's protectionist rhetoric.

    "A company that wants to fire all of its people in the United States, and build some factory someplace else, and then thinks that that product is going to just flow across the border into the United States - that's not going to happen," he said.

    CUT TAXES AND REGULATIONS

    The president told the CEOs he would like to cut corporate taxes to the 15 percent to 20 percent range, down from current statutory levels of 35 percent - a pledge that will require cooperation from the Republican-led U.S. Congress.

    But he said business leaders have told him that reducing regulations is even more important.

    "We think we can cut regulations by 75 percent. Maybe more," Trump told business leaders.

    "When you want to expand your plant, or when Mark wants to come in and build a big massive plant, or when Dell wants to come in and do something monstrous and special – you're going to have your approvals really fast,” Trump said, referring to Mark Fields, CEO of Ford.

    Fields said he was encouraged by the tone of the meeting.

    "I know I come out with a lot of confidence that the president is very, very serious on making sure that the United States economy is going to be strong and have policies - tax, regulatory or trade - to drive that," he said.

    Trump told the executives that companies were welcome to negotiate with governors to move production between states.

    http://www.reuters.com/article/us-usa-trump-business-idUSKBN1571FD
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    Consensus sharp again.

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    Beijing announces 10 measures to curb smog in 2017


    Beijing witnessed 39 heavily polluted days last year, 19 days fewer than 2013, said anofficial of the Beijing Municipal Environmental Protection Bureau at a press conference onSaturday, who also announced ten "strict measures" to fight smog in the Chinese capitalthis year.

    "In 2016, there were 39 days of heavy pollution in Beijing, a reduction of 19 days comparedwith 2013," said Li Xiang, Deputy Director of the Atmospheric Environment ManagementDivision of the bureau.

    According to a report by Chinanews.com, Li attributed the improvement in air quality to arange of measures such as the reduction of coal consumption, the control of vehicleemissions and the closure of high-emission enterprises.

    This year will be crucial for Beijing to meet the targets set in China's Airborne PollutionPrevention and Control Action Plan (2013-17), according to which, by 2017, the Beijing-Tianjin-Hebei region should have reached a 25 percent reduction in air emissions from 2012 levels, with the average annual density of PM2.5 particles in Beijing falling to about 60 micrograms per cubic meter. Therefore, Beijing will take ten "strict measures" tofurther curb smog and improve air quality:

    1. To promote the transition from coal to clean energy in 700 villages in the rural area;

    2. To cut emissions in Beijing from the power sector as much as possible;

    3. To transform the remaining 4,000 ton/h coal fired industrial and heating boilers toones powered by clean energy;

    4. To ban light-duty gasoline vehicles of national I and II emission standards from beingdriven inside the fifth ring roads from February 15, 2017;

    5. To install diesel particulate filters on all new heavy-duty diesel vehicles and strictlypunish behaviors of excess emission from existing heavy-duty diesel vehicles;

    6. To reduce emissions of nitrogen oxides from 10,000 ton/h gas boilers;

    7. To clean up 2,560 "dispersed, disordered and dirty" enterprises and shut down 500 manufacturing and polluting enterprises;

    8. To replace oil-based paint with water-based paint in Beijing, Tianjin and Hebei;

    9. To enhance law enforcement and supervision and establish an environmental policeforce;

    10. To intensify regional collaboration mechanism on the prevention of and emergencyresponse to air pollution.

    http://en.people.cn/n3/2017/0123/c90000-9170617.html
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    China's producer prices face upward pressure in 2017, NBS


    China's producer prices face upward pressure in 2017, as the market situation continues to improve, the National Bureau of Statistics (NBS) said  in a commentary on its website, adding to expectations that global inflation may be stronger in 2017.

    China's producer prices surged more than expected by the most in more than five years in December as prices of coal and other raw materials soared.

    Stronger prices are welcome news for China's heavily indebted smokestack industries, which are largely state owned and in need of more cash flow to help pay off loans.

    But some industries have not resolved their overcapacity issues, which could be a potential obstacle for further rises in factory prices, the NBS said.

    http://www.sxcoal.com/news/4551729/info/en
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    Anglo sees incremental gains as trading unit hits cruising speed


    Anglo American, which broke with tradition when it set up a focused commercial unit, sees modest improvements ahead after an early boost to profits, as it gets closer to clients, even offering shelter from volatile markets with fixed-price contracts.

    Anglo, like many miners, shied away from directly trading its own material for decades, selling instead largely through intermediaries such as established trading houses.

    That changed in 2013 under CEO Mark Cutifani, as Anglosought a direct connection with customers to get more value from every tonne of material sold, a move which added more than $400-million to underlying operating profit in two years.

    The value of sales made to intermediaries - and not direct to end users - fell from 60% in 2012 to less than 10% of the total in 2015 - roughly the current level, according to Peter Whitcutt, the Anglo veteran who became chief executive of marketing a year ago.

    The group is now close to the limit of the extra cash it can squeeze out per tonne sold, Whitcutt said in an interview last week. But it can still get closer to the needs of commodity end-users, particularly in opaque markets like thermal coal, or targeted markets like minor platinum group metals.

    "There is more we can do as we improve the resource-to-market connection and make the most of what we have in the ground," he said, speaking at the group's Singapore office, the base for much of its trading activities.

    Demand for fixed-price contracts, for example, has prompted Anglo to develop its capabilities in financial derivatives.

    "We sell on a floating price basis, but some customers want a fixed price, so we can put that back to our 'risk neutral' position using financial markets," he said.

    Anglo says it will not trade commodities it does not mine and has no plan to invest in warehouses or vessels, though it now has a shipping desk and sees more value to be extracted from better use of those ships.

    "We are not expanding into handling third party material or using financial instruments just for the sake of it," Whitcutt said. It does still see some scope to trade material mined by others.

    "We have a real capability rooted in Anglo American's mines and our desire to get full value for our resource."

    Anglo is one of several mining companies that have turned to the philosophy of extracting as many marginal gains as possible across operations to improve overall performance at a time of weak prices.

    http://www.miningweekly.com/article/anglo-sees-incremental-gains-as-trading-unit-hits-cruising-speed-2017-01-23
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    Oil and Gas

    IRAN FLOATING STORAGE NOW AT ITS LOWEST POINT


    IRAN|FLOATING STORAGE NOW AT ITS LOWEST POINT WE HAVE EVER RECORDED AS "SERENA" TOOK OFF FOR SOUTHKOREA. 19.26MB REMAINING

    @TankerTrackers  
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    Kurdistan Pays Oil Companies, Breaking Seven-Week Cash Drought


    The government of Iraqi Kurdistan has paid international oil companies for the first time in seven weeks, as rising crude prices give a much-needed boost to the region’s coffers.

    DNO ASA, Genel Energy Plc and Gulf Keystone Petroleum Ltd received a combined $53.9 million for oil sold in October, the companies said on Monday. The Kurdistan Regional Government paid for their September exports on Dec. 5 and still owes them for crude sold in November and December. Shares of the companies rose.

    The KRG has struggled to keep up regular payments to international contractors as it contends with low crude prices, a dispute over revenues with the federal government in Baghdad, large numbers of internal refugees, and a long war with Islamic State militants. Oil has risen almost 20 percent since OPEC and other producers agreed last month to curb supply, easing the financial strain on the region.

    DNO shares were 1 percent higher at 9.28 kroner at 9:22 a.m. in Oslo. Genel gained 0.6 percent in London to 83.5 pence and Gulf Keystone advanced 0.2 percent to 130 pence.

    The companies and the regional authorities have now agreed on a new monthly payment schedule, according to people familiar with the matter. Producers have said they need regular payments in order to invest and boost their fields’ production. They’ve also asked to be paid back arrears for past oil sales. In the case of DNO, that amount stood at about $1 billion as of November, almost the size of the company’s market capitalization.

    DNO operates the Tawke field, which produced an average of 108,122 barrels a day in October, the company said in a statement. It received payment of $38.9 million, to be shared with its field partner Genel. Gulf Keystone received $15 million for oil sold from the Shaikan field in the same month.

    https://www.bloomberg.com/news/articles/2017-01-23/kurdistan-pays-oil-companies-breaking-seven-week-cash-drought

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    LNG market re-balancing to stall until 2020s, study says


    The LNG market is expected to hit the bottom of a boom-bust cycle over the next five years, a report by Aurora Energy Research shows.

    This comes as a result of the depressed prices, a virtual halt in investment and the drop in contracts value.

    Over the five-year period, a wave of new supply, predominantly in the US and Australia, will increase the total liquefaction capacity by up to a third, only accounting for committed projects, with any upward supply-side pressure only beginning to emerge beyond 2021.

    The report further claims that even at that point weak demand is likely to impede a swift recovery. Although buyers are far more diverse than ever before, fundamental reasons will stall a full rebalancing until at least the mid-2020s.

    Gas demand growth is currently squeezed out by renewables deployment, energy efficiency gains and depressed GDP growth expectations. New windows of opportunities in the transport sector and petrochemicals, while boosting the long-term prospects, are unlikely to bring a significant uplift in the short term, according to AER.

    Largely in response to these conditions, and with growing numbers of increasingly sophisticated participants, the LNG business model is transitioning towards flexibility to unlock value. Buyers are increasingly trading to benefit from price volatility by redirecting cargoes, and shipping providers are also capturing a significant share of the value of flexibility through freight rates. Opportunities for structural changes in the market with shorter contracts, emerging supply hubs, and new pricing formulas are starting to shape new rules for the industry.

    In Europe, these emerging market dynamics boost buyers’ negotiating position against historic suppliers, as LNG is increasingly eroding Russia’s market power.

    http://www.lngworldnews.com/lng-market-rebalancing-to-stall-until-2020s-study-says/
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    Qatar Petroleum (QP) plans to integrate Qatargas and RasGas into a single entity named Qatargas.


    This will operate all the ventures currently managed by the two entities.

    Saad Sherida Al-Kaabi, QP’s president and CEO, said the aim is “to create a truly unique global energy operator in terms of size, service, and reliability…and enhance our competitive position.”

    The newly combined entity will also operate all Qatar’s onshore LNG facilities.

    Qatargas and RasGas produce gas from fields offshore Qatar. The main shareholders in the two companies are ExxonMobil, Total, ConocoPhillips, and Shell.

    The integration process is expected to be completed within 12 months – existing operations will not be impacted, QP stressed.

    http://www.offshore-mag.com/articles/2017/01/qatar-petroleum-merging-offshore-gas-groups.html
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    Halliburton warns of weakness in international markets


    Halliburton Co, the world's No. 2 oilfield services provider, on Monday warned of weakness in markets outside of North America, echoing comments made by larger rival Schlumberger last week.

    Halliburton reported a better-than-expected quarterly adjusted profit as oil producers put more rigs back to work in North American shale fields.

    Shale producers, encouraged by a rise in crude prices after a slump of more than two years, have been drilling and completing more wells in North America.

    "Despite the positive sentiment surrounding the North American land market, it is important to remember that our world is still a tale of two cycles," Chief Executive Dave Lesar said in a statement.

    "The North America market appears to have rounded the corner, but the international downward cycle is still playing out."

    International markets are yet to recover with most oil companies reluctant to increase spending on expensive deepwater and mature oilfields.

    Net loss attributable to Halliburton widened to $149 million, or 17 cents per share, in the fourth quarter ended Dec. 31, from $28 million, or 3 cents per share, a year earlier.

    The current quarter included impairment and other charges of $169 million, compared with $282 million last year.

    Excluding items, the company earned 4 cents per share in the latest reported quarter, beating the average analyst estimate of 2 cents, according to Thomson Reuters I/B/E/S.

    The company's revenue fell 20.9 percent to $4.02 billion, missing analysts' estimate of $4.09 billion.

    http://www.reuters.com/article/us-halliburton-results-idUSKBN1571GT
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    Naphtha surges as cold Asia weather pulls LPG to heating


    Asia's naphtha demand has surged since late 2016 as petrochemical makers are turning to the product after supplies of cheaper alternative liquefied petroleum gas (LPG) were consumed by heating demand amid cold regional weather.

    Prices for naphtha spot cargoes for sale to South Korea flipped to premiums on Jan. 6 for the first time since November because of the higher demand.

    Spot premiums hit a near 21-month high on Jan. 19 as Lotte Chemical paid $6 to $7 a tonne to Japan quotes on a cost-and-freight basis, said two traders that participate in the market.

    Asia petrochemical producers had been using LPG to swap out a portion, typically between 5 to 15 percent, of the naphtha that is normally used as a feedstock to make products such as ethylene and propylene.

    However, LPG is more commonly used as a heating and cooking fuel for Asia and, as temperatures in the region have plunged to colder-than-normal levels, the fuel has gone to meet heating demand.

    "The majority of the demand we have now is from the heating sector in a North Asian country," said a Singapore-based trader. "Given the high LPG price now, LPG sellers cannot sell the fuel to naphtha crackers. It's too expensive,"

    Some naphtha cracker operators who have LPG term barrels resold their barrels to their suppliers to cash in on the strong LPG prices and filled the void with naphtha instead, the two traders said.

    Typically, Asian ethylene makers will make the partial switch to LPG from naphtha provided LPG is about 93 percent of the naphtha price or at least $50 a tonne cheaper than naphtha.

    However, propane and butane for second-half February delivery were at about $522 a tonne and nearly $566 a tonne against prompt Asian naphtha at $517, data from brokerage Ginga showed on Jan. 20.

    "The current LPG price level is unexpected," said Ong Han Wee of energy consulting firm FGE. "The spike has been caused by short-term shortages."

    Ong sees the current LPG demand is coming largely from North China, Japan and South Korea for heating but a delay in cargoes loading from Texas in the last two weeks due to fog had affected the market supplies as well.

    Asia's naphtha strength could last at least another month as the switching away from LPG is occurring at the same time less naphtha is set to arrive from Europe.

    Asia is set to receive around 900,000 tonnes of naphtha from Western Europe and the Mediterranean in February, based on a survey of five traders in the market.

    That is about 31 percent less than the volumes reported in the survey for January and down from the 2016 monthly average of 1.2 million tonnes.

    http://www.reuters.com/article/asia-naphtha-idUSL3N11Y2OL

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    Chevron Slams Canadian Backdoor in $9.5 Billion Pollution Fight


    Now entering its 24th year, an international legal war seeking to hold Chevron Corp. liable for oil pollution in the Amazon has featured battles in courtrooms ranging from the U.S. to Ecuador to Canada. In a blow to Ecuadorian villagers who contend the company sullied their lands, an Ontario judge last week protected Chevron’s Canadian assets from being seized as part of the fight.

    That’s a big victory for the second-largest U.S. fossil fuel company, because in 2011 Chevron lost a court case in Ecuador over the question of liability. As far as the Ecuadorian judiciary is concerned, Chevron owes some $9.5 billion, plus interest, to the villagers. But the energy giant, contending that the enormous judgment was obtained by fraud, has refused to pay. Chevron has no assets in Ecuador, so there’s nothing there for plaintiffs to seize. That’s why the case migrated north to Canada, where a subsidiary has operations the villagers would like to liquidate to cover their verdict.

    But in a highly technical 35-page opinion, Judge Glenn Hainey of the Ontario Superior Court of Justice made a sharp distinction between Chevron the parent corporation and Chevron Canada the subsidiary. Chevron Canada wasn’t the defendant in Ecuador and as a legally separate entity, the judge held, can’t be held responsible for its parent’s liabilities.

    Chevron hailed the decision. “Once again, the plaintiffs’ attempts to enforce their fraudulent judgment have been rebuked,” R. Hewitt Pate, Chevron’s vice president and general counsel, said via email. “We are confident that any jurisdiction that examines the facts of this case and the misconduct committed by the plaintiffs will find the Ecuadorian judgment illegitimate and unenforceable.”

    Karen Hinton, a New York-based spokesperson for the villagers, said in a statement that her clients will appeal Hainey’s ruling, and predicted a swift reversal. “The villagers expect to proceed later this year with their seizure of Chevron’s assets to force the company to respect multiple [Ecuadorian] court judgments that found it” liable for massive contamination, Hinton added.

    The very long story that brings us to this moment began in 1993 with a lawsuit filed in New York federal court against Texaco (which Chevron acquired in 2001). Brought on behalf of poor rural Ecuadorians, the complaint was dismissed by U.S. courts and restarted in 2003 in Ecuador. Eight years later, it led to the multibillion-dollar verdict now at issue. Chevron countered that any pollution resulting from Texaco’s activities in the rain forest was the responsibility of the Ecuadorian government to clean up—and, in any event, the verdict was tainted by the misconduct of the villagers lawyers, led by a New York-based attorney named Steven Donziger.

    To drive home that last point, Chevron sued Donziger in 2011, obtaining a U.S. judgment that he’d violated anti-racketeering laws by turning the Ecuadorian suit into the equivalent of an extortion scheme. Last year, a federal appeals court upheld the ruling, finding that Donziger and his colleagues engaged in coercion, fraud, and bribery in Ecuador. The decisions have the effect of making it impossible for the villagers to collect on the Ecuadorian verdict in the U.S. That brings us to Canada.

    The legal complexities in this branch of the litigation proliferate. In a separate part of his Jan. 20 ruling, Judge Hainey said that if somehow the Ecuadorians succeed in moving forward with their action in Canada—for example, if a higher court reversed his finding that the subsidiary should be shielded—then the oil company would be allowed to fight asset seizures by pointing to the evidence of fraud presented in the U.S. racketeering case.

    https://www.bloomberg.com/news/articles/2017-01-23/chevron-slams-canadian-backdoor-in-9-5-billion-pollution-fight
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    Chinese demand helps keep ESPO blend crude oil premiums largely steady


    Baseload demand from China has kept the premium for Russian Far East ESPO blend crude for March-loading cargoes steady at around last month's traded levels, according to traders.

    The premiums for ESPO blend for March loading so far were mostly around $3.50/b to Platts front-month Dubai crude assessments, with earlier trades said to have been done at slightly lower premiums.

    Russia's Rosneft sold its cargoes for loading over March 1-6 and March 11-16 at a premium of around $3.50/b to Dubai crude assessments, traders said. Buyer details could not be confirmed.

    Surgutneftegaz sold via tender two cargoes of ESPO crude for loading over February 28-March 5 and March 3-8 at premiums of between $3.30/b and $3.50/b to Platts front-month Dubai crude assessments, FOB, traders said.

    Gazpromneft also sold a cargo for loading over March 3-13 at a premium of around $3.50/b to Platts front-month Dubai crude assessments, FOB.

    In comparison, February-loading ESPO Blend crude cargoes traded last month at premiums between $3.50/b and $3.90/b to Platts front-month Dubai crude assessments.

    Premiums for March-loading ESPO Blend crude cargoes have remained relatively steady, traders said, even though cash differentials for March-loading light Middle East sour crude cargoes have declined from last month.

    Traders attributed the steady premiums for ESPO to firm demand from Chinese refiners.

    "We cannot compare ESPO to Murban [as] ESPO demand [now comes mostly] from Chinese [refiners and they]... don't use Murban. For them, [ESPO is] where they see value," said a North Asian crude trader.

    Cash differentials for Abu Dhabi's Murban dipped on weak buying interest from Asian end-users for March-loading cargoes ahead of the peak turnaround season, traders said.

    The narrow Brent/Dubai Exchange of Futures for Swaps and the narrowing spread between WTI and Dubai have also opened up options for Asian end-users to seek competitively priced crude grades from elsewhere, traders said.

    Second-month Brent/Dubai EFS -- which enables holders of ICE Brent futures to exchange a Brent futures position for a Dubai crude swap -- was $1.50/b at 3 pm Singapore time (0700 GMT) Monday, steady from Friday.

    The second-month EFS averaged $1.74/b to date in January, compared with $2.17/b in December, Platts data showed.

    However, a Singapore-based trader said that independent Chinese refiners "should have learned ... by now not to take cargoes at such levels. It does not make sense for Sokol to [trade in the] low $4s/b and yet ESPO is still in mid-$3s/b."

    ExxonMobil last sold at least two cargoes for loading in March -- one at a premium of close to $4/b to Platts Dubai crude assessments, while the second cargo went to Unipec at a premium in the low $4s/b to Dubai crude.

    European trading house Trafigura also sold a March-loading cargo at a similar level -- Dubai crude assessments plus low $4s/b -- sources said, but buyer details could not be confirmed. Last month, February-loading Sokol barrels were sold at a premium of $4.10-$4.40/b to Platts Dubai crude assessments.

    http://www.platts.com/latest-news/oil/singapore/chinese-demand-helps-keep-espo-blend-crude-oil-26645463
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    Gazprom Mulls $6 Billion Asset Sales, Dividend Freeze


    Gazprom PJSC, the world’s biggest natural gas producer, is considering asset sales, freezing dividends and increasing its borrowing as export earnings wane, according to its three-year budget.

    The state-controlled company aims to raise 350 billion rubles (around $6 billion) from asset sales this year, while borrowing may climb to 288 billion rubles and more than double from that level next year, a copy of the document obtained by Bloomberg News show. Dividend payments are forecast at the 2016 level through 2019, according to the plan, approved by the board in December.

    Despite a rebound in crude oil, which dictates the price for most of Gazprom’s export contracts, the proposed budget shows the company remains under financial pressure as it tries to finance new pipelines to Europe and Asia. Gazprom needs to increase borrowing to “ensure liquidity and cover obligations” at oil prices close to current levels, according to the budget.

    No final decision has been made on asset sales and there is no set time frame, two people with knowledge of the issue said, asking not to be identified because the information isn’t public. Gazprom’s press service declined to comment. The stock lost as much as 1.7 percent in Moscow to the lowest intraday level since Nov. 18.

    Management plans to sell Gazprom’s stake in Gascade Gastransport GmbH, which operates more than 2,400 kilometers of gas pipelines across Germany, possibly this year, Interfax reported, citing unidentified people. There are several potential bidders, the newswire said. The Moscow-based exporter acquired 49.98 percent in the grid through an asset swap with Germany’s BASF SE in 2015.

    Gazprom hasn’t sold such a large amount of assets since 2010. Back then, it disposed of 9.4 percent of its largest domestic competitor, Novatek PJSC, for 57.5 billion rubles (about $1.9 billion at the time), classifying its remaining 9.9 percent stake as an asset for sale. The shares, which currently have a market value of about 215 billion rubles based on Moscow trading, could be a candidate, said Raiffeisen Centrobank AG analyst Andrey Polischuk.

    Gazprom is considering various options for raising cash using the Novatek stake, including a possible sale, the people said. The energy giant may earmark some Novatek stock for the sale of convertible bonds, according to one of the people and another person who asked not to be named. No decisions have been made, all three said.

    Novatek has offered to buy four gas fields from Gazprom in Russia’s north, which the state-run company is now assessing. The fields could be valued at about $1 billion, RBC news service reported last month.

    Another asset, which deputy chief Andrey Kruglov said last year could be sold or used for convertible bonds, is 6.6 percent of Gazprom itself, a stake that has a market value of about 230 billion rubles now. The company bought half of those shares last year to help the government bail out a state lender.

    Gazprom usually revises its budgets, which don’t include its oil arm Gazprom Neft PJSC, as well as utilities in Russia and Europe-based gas traders, twice a year. Last year, it beat its target in European exports by 10 percent, while failing to reach agreement on shipments with once a key consumer, Ukraine, amid arbitration proceedings.

    https://www.bloomberg.com/news/articles/2017-01-23/gazprom-said-to-mull-asset-sales-dividend-freeze-on-lower-gains
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    Robots Are Taking Over Oil Rigs


    The robot on an oil drillship in the Gulf of Mexico made it easier for Mark Rodgers to do his job stringing together heavy, dirty pipes. It could also be a reason he’s not working there today.

    The Iron Roughneck, made by National Oilwell Varco Inc., automates the repetitive and dangerous task of connecting hundreds of segments of drill pipe as they’re shoved through miles of ocean water and oil-bearing rock. The machine has also cut to two from three the need for roustabouts, estimates Rodgers, who took a job repairing appliances after being laid off from Transocean Ltd.

    “I’d love to go back offshore,” he says. The odds are against him. As the global oil industry begins to climb out of a collapse that took 440,000 jobs, anywhere from a third to half may never come back. A combination of more efficient drilling rigs and increased automation is reducing the need for field hands. And therein lies a warning to U.S. President Donald Trump, who has predicted a flood of new energy-sector jobs under his watch.

    Automation, of course, has revolutionized many industries, from auto manufacturing to food and clothing makers. Energy companies, which rely on large, complex equipment for drilling and maintaining oil wells, are particularly well-positioned to benefit, says Dennis Yang, chief executive officer of Udemy, a company in San Francisco that trains workers whose careers were derailed by advanced machinery.

    “It used to be you had a toolbox full of wrenches and tubing benders,” says Donald McLain, chairman of the industrial-programs department at Victoria College in south Texas. “Now your main tool is a laptop.” McLain, who worked as a rig hand for 25 years, is helping to retrain laid-off oil workers for more technical jobs.

     Dangerous Talk

    During the boom, companies were too busy pumping oil and gas to worry about head count, says James West, an analyst at investment bank Evercore ISI: “We got fat and bloated.” He says the two-and-a-half-year downturn gave executives time to rethink the mix of human labor and automated machinery in the oil fields.

    Still, in the current political climate, they’re proceeding cautiously. More robotic drilling ultimately means lower labor costs and fewer workers near some of the most dangerous tasks. But oil companies probably will frame their cost-cutting technologies simply as a way to be more competitive around the world, says West.

    “They’ll more likely brag about the automation rather than these head counts,” West says. “It’s kind of dangerous to talk about jobs in the Trump administration.”

    Yet Trump is seen as the great hope for more shale-job creation than ever before, says Jay Colquitt, founder of OilfieldTrash.com, an online news portal catering to oilfield workers. As more federal lands open up for drilling, the jobs will follow, he adds.

    “Even though modern technology is great, you can’t eliminate the person,” says Rodgers. “To make sure it never fails, you’ve got to have somebody there watching it, to verify it.”

    The industry is acutely aware of the heavy reliance on manpower, after the world’s four largest oil-service companies spent $3.12 billion in severance costs during the past two years, says Art Soucy, president of global products and technology for Baker Hughes.

    Rigs have gotten so much more efficient that the shale industry can use about half as many as it did at the height of the boom in 2014 to suck the same amount of oil out of the ground, says Angie Sedita, an analyst at UBS Corp. Nabors Industries, the world’s largest onshore driller, says it expects to cut the number of workers at each well site eventually to about five from 20 by deploying more automated drilling rigs.

    The impact of technology extends well beyond the wellhead. Automation-related jobs for software specialists and data technicians are in demand as the oil industry recovers, said Janette Marx, chief operating officer of Airswift, an oilfield recruiter. She sees explorers and service companies being much more methodical and selective in their hiring this time around.

    “To me, it’s not just about automating the rig, it’s about automating everything upstream of the rig,” says Ahmed Hashmi, head of upstream technology for BP PLC. “The biggest thing will be the systems.”

    That means an engineer can design an oil well at his desk. With the press of a button, an automated system would identify the equipment needed from a supplier, create a 3D model and send instructions for building it out into the field, Hashmi says. “That is automation.”

    https://www.bloomberg.com/news/articles/2017-01-24/robots-are-taking-over-oil-rigs-as-roughnecks-become-expendable
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    LNG Limited’s Magnolia LNG to supply India’s first East coast terminal


    Magnolia LNG, Perth-based LNG Limited’s U.S. unit, signed a heads of agreement with Vessel Gasification Solutions for a 20-year supply of 4 mtpa of liquefied natural gas from its project in Lake Charles, Louisiana.

    According to the company’s statement, the non-binding HoA provides for free-on-board deliveries to the proposed  Krishna Godavari LNG import terminal.

    The firm SPA is conditional upon the financial close of the KG LNG terminal and satisfaction by VGS of defined credit requirements underpinning their LNG purchases within agreed timeframes.

    Gaurav Tiwari, president of VGS added that the deal with Magnolia LNG would bring a “significant tranche of U.S.-produced LNG” to a new market on India’s East coast.

    The terminal being developed by VGS is located offshore at Kakinada Deepwater port in Andhra Pradesh, India. The facility aims to supply regasified natural gas to power plants with the capacity of 7000 MW as well as industrial users.

    The proposed Magnolia LNG facility would have up to four trains each with a liquefaction capacity of 2 mtpa or more, two 160,000-cbm storage tanks, ship, barge and truck loading facilities and supporting infrastructure.

    http://www.lngworldnews.com/lng-limiteds-magnolia-lng-to-supply-indias-first-east-coast-terminal/
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    Agriculture

    Salmon price high

    Image titleThe culprit behind the rising price of salmon is about the size of an aspirin: a parasite known as the sea louse, or salmon louse. Acute outbreaks in Scotland and Norway this year have, er, eaten into the global supply of farmed Atlantic salmon. Norway, the planet’s biggest salmon producer, exported around 5% less by volume than in 2015. Globally, production fell around 9%. All that adds up to a problem that will increasingly put the squeeze on seafood lovers—and raises new questions about how to beat back the scourge of sea lice without hurting salmon, and the people who love to eat them, in the process.

    One technique, known as a thermolicer, plunges the salmon into a scalding-hot bath. The hot water kills off the sea lice—and also, sometimes, the fish themselves. Last year, salmon-farming giant Marine Harvest inadvertently cooked 95,000 caged salmon with a thermolicer. Though that killed 95% of the sea lice, it also left the company with 600 tonnes of dead salmon to incinerate. Along with rampant salmon deaths from pesticide treatments, the thermolicer incident caused a 16% drop in the company’s Scottish salmon output for 2016.

    There are other options in the works, including lice-zapping lasersfancy ultra-large-scale pens, and delousing vessels called hydrolicers. But even with the preponderance of government funding from leading salmon-farming countries, new technology is expensive to develop. And for the salmon-farming giants like Marine Harvest, Nova Sea, and others, scale remains a challenge. Meanwhile, a promising sea lice vaccine hasn’t yet borne fruit.

    Worse, the conditions that invite sea lice seem to be on the rise. The sea lice life cycle accelerates in warmer temperatures. So it’s hardly surprising that a recent study found that unusually balmy seas helped encourage the 2015 sea lice epidemic that swept British Columbia, Canada.

    This all adds up to a pricey problem. And given that the sea lice spread shows few signs of abating—nor does the outbreak of another salmon blight, amebic gill disease—consumers are likely to face steeper salmon prices in 2017. Analysts at the Norwegian bank Nordea expect global supply of farmed Atlantic salmon to stay below 2015 levels for the next three years.

    The sea lice epidemic isn’t just hurting fish, farmers and consumers—it also takes a toll on other sea life. Slice is poisonous to crustaceans, though its long-term effects have not been researched. In 2013, a subsidiary of Cooke Aquaculture, one of North America’s biggest salmon producers, pleaded guilty to killing hundreds of lobsters with its use of cypermethrin, a delousing chemical used in Europe but banned in Canada.

    The most egregious ecological problem, however, is the fact that the teeming sea lice reservoirs created by farming are devastating wild salmon populations. In that sense, sea lice and humans have something in common: an appetite for Atlantic salmon that nature simply can’t sustain.



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    Precious Metals

    Palladium price surges to 22-month high


    The Palladium price continued its strong run with Nymex contracts jumping 5% to $794 an ounce, bringing gains for the precious metal so far in January to 18% or more than some $120 an ounce. Sister metal platinum has also gained year-to-date, exchanging hands for $980 an ounce on Friday.

    PGM price strength comes on the back of declining output from top producer South Africa, which together with Russia is responsible for more than 80% of global supply of the metals.

    Top consumer China in December extended tax breaks on purchases of small vehicles

    Data released this week showed South African output fell by 8.9% year on year and 3.4% month on month in November. In the January to November period, PGM production was down by 2.1% compared to 2015.

    Despite a safety stoppage at the world's number one PGM producer Amplats at the start of the year in general disruptions to supply were limited in 2016 a research note by Capital Economics points out.

    In 2014 labour unions embarked on a gruelling five-month strike, but last year wage negotiations were concluded without disruptions:

    What’s more, the average platinum price in South African rand terms rose 9% last year. This means that producers had no incentive to voluntarily cut output. This is also evident when looking at the revenue from PGM sales which were up 5% y/y in October and 3.5% in the first ten months of 2016.

    Instead, we think that underinvestment over the past five years could be starting to negatively impact production. That said, any upside for PGM prices should be fairly limited as above-ground stocks remain abundant.

    On the demand side the outlook for palladium and to a lesser extent platinum is also positive. Top consumer China in December extended tax breaks on purchases of small vehicles which were due to expire at the end of 2016 through this year. Roughly 75% of palladium demand is from the autocatalyst sector.

    Palladium finds application in gasoline engines and is more exposed to the Chinese and US markets where diesel (platinum's main industrial application) hardly features in the passenger vehicle segment.

    Underinvestment over the past five years could be starting to negatively impact production in South Africa

    While the Chinese tax will be lifted to 7.5% from the 5% (usual rate is 10%) where it has been since October 2015, the extension should keep vehicle-purchase prices in the world number one auto market chugging along.

    The tax cut stimulated sales, as indicated by a 14% year-on-year increase in combined passenger and commercial vehicle sales during the first 11 months of 2016, according to the China Association of Automobile Manufacturers. The growth was driven by a 16% rise in passenger vehicles sales in the same period, which accounted for 87% of China’s combined passenger and commercial vehicle sales.

    In a vote of confidence for the PGM market South Africa’s Sibanye Gold  is buying Stillwater Mining, the only US platinum and palladium producer, at a premium. The cash deal worth $2.2 billion cleared a major hurdle on Friday.

    http://www.mining.com/palladium-price-surges-22-month-high/
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    Miner Centamin won't bid in Egypt gold tender, terms not viable


    Centamin Plc, which runs Egypt's only commercial gold mine, said it would not bid in the country's new gold exploration tender because the terms are not commercially viable.

    Egypt, which is hoping that gold production can be a future source of growth for its struggling economy, began accepting bids last week for five concessions in its first tender for new gold exploration since 2009. The deadline for bids is April 20.

    Centamin, which last year produced 551,036 ounces from its Egyptian Sukari mine, said the terms were less attractive than previous rounds.

    "Whilst Egypt contains many areas that are highly prospective for gold, Centamin will not bid for further ground under the latest terms proposed by EMRA (Egypt's mining agency) in the 2017 bid round," Centamin chairman Josef El-Raghy told Reuters.

    The bid round's terms have not been made public but were seen by Reuters.

    They include a 6 percent royalty payment, an at least 50 percent production share, partial cost recovery before the start of production sharing, and three bonus payments to EMRA, including one of at least $1 million.

    "The proposed 6 percent royalty rate... is one of the highest globally... Furthermore, the onerous production-sharing terms, the partial cost recovery and the various bonuses due to EMRA create a non-commercial operating environment for any mining investor," said Raghy.

    "Combined, the proposed terms result in an effective tax rate that is by far one of the highest for mining globally."

    Mining companies have long called for Egypt to abandon its production-sharing agreement model, which has garnered little interest in past bid rounds, in favor of a more streamlined royalty and tax regime common in mining jurisdictions worldwide.

    Centamin said it stands ready to reinvest if a modern mining law is introduced.

    "Egypt needs a modern and competitive mining law and then there will be many mines like Sukari, which was created after over $1bn of investment and now employs directly and indirectly approximately 5,000 people," said Raghi.

    "This bid round should be canceled otherwise ground will be held by small companies for many years with no significant investment as was the case with all areas offered in 2006 and 2008."

    EMRA said it expects high turnout for the latest tender based on early indications but did not provide further details.

    "Egypt's potential will put it, in under 10 years, among the biggest producers of gold in the world based on our level of gold reserves and the studies and expertise we have," EMRA head Omar Teama told Reuters.

    http://www.reuters.com/article/us-centamin-egypt-idUSKBN15717J

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    Russia expected to sell Klondike gold deposit cheap amid sanctions: sources


    Russia is expected to sell discounted rights to one of the world's largest untapped gold deposits this week to a joint venture of miner Polyus and a state conglomerate, industry sources and analysts said, after sanctions and restrictions discouraged other bidders.

    The starting price in the Jan. 26 auction of the Sukhoi Log deposit is $145 million, valuing gold there at $2 per ounce, around 10 times cheaper than deposits of a similar size elsewhere in the world, according to one analyst.

    The Russian government, after 20 years of promises to sell the deposit, hopes the start of production will generate much-needed tax revenues and jobs.

    Moscow has also come under pressure from a two-year lobbying campaign by shareholders in the joint venture of Polyus and state-run Rostec, according to an industry source, who spoke on condition of anonymity.

    Rostec is headed by Sergei Chemezov, a close associate of Russian President Vladimir Putin.

    As part of a policy of keeping strategic resources in Russian hands, the government limited access of foreign investors to the auction, ordering that 25 percent of any bidder should be owned by state-controlled firms.

    Western sanctions over Russia's involvement in the conflict in Ukraine has also made it harder for Russian companies to get access to foreign debt markets, thinning out potential bidders.

    Only two bids, from SL Zoloto - the joint venture between Polyus and Rostec - and Zoloto Bodaibo - a joint venture between Polyus creditor VTB Bank and businessman Ibragim Palankoyev - were submitted to the auction.

    Polyus is owned by the family of Russian billionaire Suleiman Kerimov.

    "Polyus is the front-runner because it is able to cope with the project in terms of financial resources," said Oleg Petropavlovskiy at BCS Investment Bank. "Having a state partner allows it to split risks and to reckon on state support with infrastructure building."

    Palankoyev's relatives have done business with Kerimov in previous years, Vedomosti newspaper reported in December. He has no known background in mining and has never held significant mining assets. The auction would be declared void if there was only one bidder.

    The sale of Sukhoi Log is unlikely to affect gold markets because the start of production is still years away.

    Adding Sukhoi Log to Polyus's portfolio could make it more attractive for deals long under consideration. These include a secondary public offering in Moscow and talks with Chinese investors, which, sources have said, are considering an acquisition of a stake in Polyus.

    "It (Sukhoi Log) brings a saleable story," another senior industry source said.

    Polyus declined to comment.

    The auction will start at a price of 8.6 billion roubles ($144 million) for the deposit, which, according to Soviet-era research, contains 1,943 tonnes (62.5 million troy ounces) of gold in its reserves.

    Deposits of a similar size elsewhere in the world are 10 times more expensive, said Nikolay Sosnovskiy at Prosperity Capital Management said.

    However, the real value of the deposit is hard to estimate because its reserves, based on Soviet research done in the 1960s when it was discovered, require further exploration.

    Sukhoi Log will require up to $5 billion in investments, according to industry estimates based on a 10-year-old state feasibility study.

    http://www.reuters.com/article/us-russia-sukhoilog-idUSKBN1571MA
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    Base Metals

    World’s Copper King Is Finally Kicking the Habit After 50 Years


    President Michelle Bachelet says her administration has laid the basis to achieve what no other Chilean government has managed to do for half a century -- break the nation’s copper addiction.

    The emphasis on productivity, innovation, education and research is changing the economic culture of the country, Bachelet said in an interview in the presidential palace in Santiago Friday. The Socialist party-member spoke as she enters into the last year of her second four-year term.

    “I am convinced that in 10 years, and hopefully before, with all the things we are doing with the productivity agenda, with growth, Chile is going to be a far more diversified economy,” Bachelet said. “We can make that jump towards development.”

    The decade-long copper boom that ended in 2014 pushed Chile to the edge of developed-nation status, with gross domestic product per capita approaching levels seen in countries such as Portugal. Then copper prices tumbled and the forecast of former President Sebastian Pinera that Chile would be a developed nation by 2018 suddenly looked hopelessly ambitious. Now, says Bachelet, Chile is laying the groundwork to make that final leap.

    As part of an ambitious education reform, Bachelet’s government has guaranteed free higher education for all starting in 2020, stepped up public-private partnerships, encouraged the commercialization of university research and only last week, created a Ministry of Science. The Finance Ministry’s productivity agenda alone has 47 different measures, 10 congressional bills and 37 administrative initiatives, involving an investment of $1.5 billion.

    “The way to develop is not to do more of the same,” Bachelet said. “The way to do it is exactly what we have been trying to do -- develop an ambitious productivity agenda.”

    After copper prices tumbled, Chile has posted its slowest three years of growth since the economic collapse of 1981. At the same time, copper grades are falling, making Chile less competitive with other commodity-rich nations such as Peru.

    The state-owned copper giant Codelco is in the middle of an $18 billion investment plan, just to maintain production at current levels.

    Social Pressures

    While Bachelet’s administration has stressed the productivity drive, many in industry have criticized her for focusing on redistributing wealth, rather than creating it. A 2014 tax law raised fiscal revenue by 3 percentage points of GDP to finance education and health spending. At the same time, labor laws have strengthened the bargaining rights of trade unions.

    Bachelet says it was impossible to ignore mounting social demands. Chile has changed since the end of Augusto Pinochet’s dictatorship in 1990, she said.

    “The children of democracy are far more demanding, conscious of their rights; they want greater transparency, more accountability,” Bachelet said. “That is called development. You can approve of it or not, but there will always be greater expectations.”

    Industry leaders blame her reform program for undermining business confidence, damping investment and growth and exacerbating the impact of lower copper prices. Bachelet’s popularity slumped to 19 percent in August last year, the lowest approval rating for any Chilean president since at least 2006, according to polls by GfK-Adimark, dragged down by a graft allegations involving her son.

    Another Year

    The central bank cut its growth forecast for 2017 to between 1.5 percent and 2.5 percent last month, from 1.75 percent to 2.75 percent. That will make a fourth year of sluggish growth in a country that has expanded 5.4 percent on average since 1987.

    Bachelet said she remains determined to push through her remaining reform package; overhauling the private-pension system, passing two more education bills, finalizing proposals for a new constitution and legalizing abortion in some cases.

    Under Chile’s $172 billion pension system, created during Pinochet’s dictatorship, every Chilean pays 10 percent of their wages into a privately-managed fund. While the government has proposed an extra 5 percent levy on wages paid by employers, so far, there are no proposals to take existing funds away from the private fund managers, Bachelet said.

    "What is clear to everybody is that pensions in Chile aren’t good," Bachelet said. "The system is good for the market, for the economy, but it’s not good for the people that retire."

    EU Ties

    Boosting ties with the EU is also on the agenda as the government reinforces its commitment to free trade, even with the arrival of Donald Trump to the U.S. presidency and the “America First” policy outlined in his inaugural speech.

    “I believe in free trade not just for theoretical reasons, but also for practical ones,” Bachelet said. “Chile is a country of 17 million people; we can’t depend on the internal market.”

    Neither is Bachelet afraid to court unpopularity over immigration. An influx of immigrants last year from Haiti pushed the number of foreigners in Chile to record highs and created a backlash in some cities.

    Chileans will choose their next president in November of this year, with the new head of state taking over in March 2018.

    “I hope they choose someone that allows us to continue advancing toward a country in which the economy can develop, but in which the fruits of that economy are better shared,” Bachelet said.

    https://www.bloomberg.com/politics/articles/2017-01-23/chile-is-kicking-the-copper-habit-after-50-years-bachelet-says
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    China Moly to help BHR acquire stake in Congo's Tenke copper mine


    China Molybdenum Co (CMOC) said on Sunday that it has signed an agreement with Chinese private equity firm BHR to support BHR's acquisition of a 24% stake in Democratic Republic of Congo's giant Tenke copper mine.

    CMOC says it is the majority owner of Tenke after completing a $2.65-billion purchase of a 56% stake in the mine, one of the world's largest, from Freeport McMoRan Inc in November. BHR agreed to buy a minority stake from Canada's Lundin Mining in November for about $1.14-billion.

    Congo state mining company Gecamines, which has a 20% stake, has tried for months to block both sales, arguing it has a right to pre-empt them.

    Gecamines representatives and Congo's mines minister could not be immediately reached for comment on Sunday.

    "CMOC will provide financial guarantees and other assistance to BHR to ensure that BHR's acquisition of Lundin's 24% indirect stake in (Tenke) completes successfully in a timely manner," CMOC said in a statement.

    It added that CMOC and BHR have entered into an agreement, which would give CMOC the right to purchase BHR's stake at a pre-agreed price if BHR leaves the project.

    Congo is Africa's largest copper producer, mining about 1 million tonnes of the metal in 2014 and 2015. Tenke has proven and probable reserves of 3.8 million tonnes of contained copper, according to CMOC.

    http://www.miningweekly.com/article/china-moly-to-help-bhr-acquire-stake-in-congos-tenke-copper-mine-2017-01-23
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    Teck eyes sharing port with Anglo American in Chile


    Teck Resources has held talks with fellow miner Anglo American Plc about sharing port infrastructure at their neighboring copper mines in Chile, Teck's chief executive officer said on Monday, arguing for more industry partnerships.

    Sharing infrastructure between Teck's Quebrada Blanca copper mine and Anglo's Collahausi copper mine, both of which are weighing expansions, would help reduce costs for both companies as well as reduce their environmental footprint, Teck CEO Don Lindsay said.

    "They are looking at expansion. We are too. We are building two ports 5 kilometers (3 miles) apart. This is ridiculous," Lindsay said, speaking at a mining conference in Vancouver.

    "We've got to stop doing that as an industry," he said, adding that host countries appreciate miners working together to reduce their environmental impact.

    There are clusters of ore bodies all over the world owned by different companies but well suited for joint development, Lindsay said.

    Teck, which also mines coal and gold, formed a joint venture with fellow Vancouver-based gold producer, Goldcorp in 2015 to jointly develop their neighboring mines, Relincho and El Morro, which are also in Chile.

    Lindsay said he had spoken with Anglo CEO Mark Cutifani about sharing infrastructure.

    "We'll sort something out," he said.

    Last week, Goldcorp CEO David Garofalo said the world's biggest gold miners need to forge partnerships to share the financial and other risks of developing large gold deposits.

    http://www.reuters.com/article/us-teck-res-anglo-american-chile-idUSKBN1572UR
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    China halting 3.3mtpa of Al production?

    Image title

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    Steel, Iron Ore and Coal

    China Shenhua 2016 coal sales gains 6.6pct on year


    China Shenhua Energy Co., Ltd, the listed arm of coal giant Shenhua Group, sold 394.9 million tonnes of coal in 2016, gaining 6.6% year on year, the company announced in a statement late January 22.

    The growth was mainly bolstered by a 34.7% year-on-year rise in sales of outsourced coal, which stood at 109.4 million tonnes, said the statement.

    The company sold 34.7 million tonnes of coal in December, increasing 4.8% from the year prior but down 4.7% from November.

    During the same period, coal sales price averaged 317 yuan/t, exclusive of VAT, a rise of 8.2% from the year-ago level.

    The company produced 289.8 million tonnes of commercial coal last year, climbing 3.2% year on year. The production in December stood at 25.3 million tonnes, rising 0.4% year on year but dipping 1.9% month on month.

    In the first three quarters, China Shenhua realized net profit of 17.31 billion yuan ($2.52 billion), edging up 0.7% from the preceding year, with net profit increasing from 4.61 billion yuan over January-March to 7.48 billion yuan over July-September.

    The upward profitability would continue in the fourth quarter, backed mainly by the loosening of coal capacity caps, truck overload rules and increased rail coal delivery, the company said.

    http://www.sxcoal.com/news/4551701/info/en
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    Shanxi to increase advanced coal capacity by 70 Mtpa in 2017


    North China's coal-rich Shanxi planned to add advanced coal capacity by 70 Mtpa in 2017, local media reported, citing the provincial coal work conference on January 20.

    The province will boost advanced capacity by implementing capacity replacement and capacity cut, boosting coal mines regrouping, further improving per unit yield, mechanization and automatization levels, and carrying out safety production at mines.

    Shanxi planned to continue to eliminate outdated capacity and ease overcapacity in the coal industry, targeting coal capacity cut of around 20 Mtpa in 2017.

    It aimed to build 150 modern coal mines by 2020, in order to improve mining efficiency and protect the environment. In 2017, it will build five 10-Mtpa coal mines.

    http://www.sxcoal.com/news/4551746/info/en
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    China safety agency says 'illegal' output led to fatalities at state coal mine


    China's State Administration of Work Safety said on Tuesday that "illegal" ramped-up output and poor maintenance at a state-owned coal mine in Shanxi province led to an accident that killed 10 workers last week.

    The Danshuigou coal mine, near Shuozhou city and owned by China's second-largest producer China National Coal Group, has a quota from the provincial government to produce 900,000 tonnes of coal a year - or 75,000 tonnes per month.

    But the mine has been producing up to five times that amount, at 400,000 tonnes in November and 260,000 tonnes in December, the work safety regulator said.

    The over-quota output and poor maintenance at the mine contributed to a tunnel collapse on Jan. 17 last week that killed 10 workers, it also said.

    "The lack of maintenance for coal workers' safety, the use of fake safety measurement data and ramped-out production rates all led to an accident with this coal mine that been granted a whole set of mining licenses," the work safety watchdog said.

    The company has also been digging new tunnels that it knows are not seismically stable, the agency said.

    ChinaCoal's spokesman Jiang Chun said in a phone call that the company has learned a lesson from the mine accident.

    "ChinaCoal Group is seriously dealing with the case of illegal mining, and has started a company-wide investigation of over 50 mines on illegal output," he said.

    ChinaCoal said the Danshuigou coal mine has already been closed until the company can address all the issues at the site.

    Any coal mine that produces 10 percent more than its government quota will be shut down for an indefinite period, the safety agency said.

    The statement from the safety agency is the first official acknowledgement that state-owned coal mines are involved in what it terms illegal mining since prices began to rally in mid-2016.

    Price of thermal coal at the key northern port of Qinghuadao SH-QHA-TRMCOAL have soared 54 percent in the past 12 months to around $86 per tonne.

    http://www.reuters.com/article/china-coal-mining-idUSL4N1FE1JP

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    Peabody reorganisation at risk from Wyoming litigation -court paper


    Peabody Energy Corp's plan to emerge from Chapter 11 bankruptcy faces a "material risk" that the U.S. coal producer could suffer a $1 billion revenue loss due to a disputed lease at the world's largest coal mine, according to an objection filed to its reorganization plan.

    The plan by Peabody, the world's largest private-sector coal company, to cut $5 billion of debt and emerge from bankruptcy in April is supported by most of its creditors, but has faced a series of official objections from other parties.

    Oil and gas driller Berenergy Corp and Peabody hold overlapping federal mineral leases in Wyoming's Powder River Basin, where Peabody operates the North Antelope Rochelle mine that provides the bulk of its coal production.

    In October a Wyoming District Court ruled that Peabody was entitled to mine through Berenergy's wells as long as it made certain payments to the oil and gas company. An appeal is pending before the state's Supreme Court.

    Berenergy said in a court filing that an adverse decision by Wyoming's high court would prevent Peabody from mining near its wells, potentially causing the coal producer to lose more than $1 billion in revenues it projects in the first five years of its emergence from Chapter 11.

    "Thus, that litigation creates a material risk to Peabody's post-reorganization financial viability," Berenergy said in an objection to Peabody's reorganization plan filed with the U.S. Bankruptcy Court in St. Louis.

    In an emailed statement, Peabody spokesman said the company was evaluating the objection and would respond in due course.

    Indiana and several environmental groups also objected to Peabody's reorganization plan on concerns over how it would cover about $1 billion in future mine cleanup costs.

    At issue is whether Peabody will use third-party bonds to cover future environmental liabilities in place of "self-bonding," a federal practice that exempts large coal companies from setting aside cash or collateral to ensure that mined land is returned to its natural setting, as required by law.

    A hearing to approve Peabody's reorganization was scheduled in St. Louis on Thursday.

    Among other objections, certain creditors and shareholders have opposed the proposed recoveries granted under the plan. And four former executives, including former chief executive officer Gregory Boyce, filed a complaint about their retirement packages.

    The U.S. Trustee, a government watchdog for bankruptcies, has also objected to parts of the reorganization plan.

    http://www.reuters.com/article/peabody-energy-bankruptcy-idUSL1N1FD2BE
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    Powder River Basin 2016 coal output at 283 mln T


    Miners in Wyoming-based Powder River Basin produced 283 million tonnes of coal last year, falling 22.1% from the year-ago level, according to the latest federal data.

    The entire state produced 293 million tonnes of coal in 2016. State economists had set a likely 300 million tonnes of coal for 2016 in October projections.

    Though 7 million tonnes short of forecast, the volume was higher than expectations earlier in the year, when the coal sector appeared to have hit rock bottom.

    Since 2013, competition from natural gas, the retirement of coal-fired power plants and environmental regulations have led to slowing production of coal, leading to 30-year price lows and the mass Wyoming layoffs of last spring.

    Some coal companies had invested in metallurgical coal, used for making steel, but that market plummeted leaving Alpha Natural Resources, Arch Coal and Peabody Energy burdened by debt and declaring bankruptcy between late 2015 and early 2016.

    Production generally averages around 100 million tonnes per quarter in Wyoming, but that figure dipped to 86 million tonnes in the second quarter of 2015 before the bankruptcy run. By the spring of last year, coal production in Wyoming had hit a record low of 60 million tonnes.

    The bounce back at the end of 2016 has been credited to the seasonal increase in natural gas prices, making coal more competitive. It's also a sign of a stabilizing market, experts say. Two of the three bankrupt companies have emerged, wiping most or all of their bad debt.

    Forecasts for the future of the coal industry have been varied, but most show an eventual decline as natural gas competition and utility demand changes the landscape for U.S. electricity generation.

    There is some hope in the coal community for the new administration in Washington, D.C., and political promises to roll back the Clean Power Plan, an emissions-reduction rule that would steadily erode coal's strength in the electricity market.

    http://www.sxcoal.com/news/4551739/info/en
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    New $5B iron ore mine in the works for WA


    Western Australia is poised to sign an agreement with a wealthy New Zealand family whose multi-pronged business empire includes a large, undeveloped iron ore deposit.

    WA Premier Colin Barnett said the Balla Balla Infrastructure Group would build the six to 10 million-tonnes-a-year iron ore mine on the Pilbara coast between Karratha and Port Hedland, WAtoday reported on Monday. The project is worth an estimated AUD$5.6 billion.

    "This State agreement includes a requirement for local industry participation and community development plans to be submitted to the government for approval, maximising the benefits of the project for West Australians," the premier was quoted saying. The new mine is expected to create 3,300 jobs during construction and 910 once in operation.

    The project also involves construction of a 160-kilometre railway and port, which would unlock the Balla Balla magnetite ore deposit along with billions of tonnes of hematite ore further inland that currently has no way of getting to market, notes The West Australian. The publication adds that other mining companies owning nearby deposits could also use the new rail link, "breaking the transport stranglehold enjoyed by BHP Billiton, Rio Tinto and Fortescue Metals Group."

    The parent company of the Balla Balla Infrastructure Group is the Todd Corporation, whose interests include mining, energy, health care, and property development.

    According to a page on its website, Todd Minerals in 2015 acquired Rutila Resources Ltd., thus increasing its ownership in the Balla Balla Infrastructure Group (BBIG) to 90%. BBIG's projects in the Pilbara region of Australia include:

    A 6-10 million tonne per annum iron ore project at Balla Balla.
    An approved port facility at Balla Balla.
    The development of a 160km railway line to the central Pilbara.

    The Todd Corporation has a 52.6% interest in Flinders Mines Limited (ASX:FMS), which is developing the Pilbara Iron Ore Project, a 24.1% interest in tungsten company Wolf Minerals (ASX:WLF), and an 11.5% stake in a Canadian tungsten-molybdenum joint venture with Northcliff Resources (TSX:NCF).

    Iron ore recently climbed to $83.50 a tonne, the highest the steelmaking ingredient has been since September 2014, on strong import figures from China.

    http://www.mining.com/new-5b-iron-ore-mine-in-the-works-for-wa/
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    China's key steel mills daily output up 2.7pct in early Jan

    China's key steel mills daily output up 2.7pct in early Jan

    Daily crude steel output of China's key steel mills gained 2.72% from ten days ago to 1.71 million tonnes over January 1-10, according to data released by the China Iron and Steel Association (CISA).

    The country's total crude steel output was estimated at 2.24 million tonnes each day on average during the same period, climbing 2.89% from ten days ago, the CISA said.

    By January 10, stocks of steel products at key steel mills stood at 12.6 million tonnes, up 2.35% from ten days ago, the CISA data showed.

    The increased steel stocks were mainly due to weak purchase interest from downstream construction sector in winter and active replenishment by traders amid bullishness toward the future market.

    In mid-January, rebar price increased 2.7% from ten days ago to 3,299.2 yuan/t; wire price climbed 2.9% from ten days ago to 3,397.7 yuan/t, showed data from the National Bureau of Statistics.

    Domestic steel market is expected to remain sluggish after the Chinese Lantern Festival (February 11), and steel prices will still lack support to go up.

    http://www.sxcoal.com/news/4551745/info/en
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