Mark Latham Commodity Equity Intelligence Service

Monday 13th June 2016
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    China's Bank's, Gold and Bitcoin surge.

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    Ten EU nations still breaching pollution limits: EEA

    Air pollution from sources such as transport and agriculture is still above legal limits in 10 European Union member states, data from the European Environment Agency (EEA) showed on Friday.

    Since 2010, Austria, Belgium, France, Germany, Ireland and Luxembourg have persistently breached their emissions ceilings for nitrogen oxides; Denmark, Germany, Ireland and Luxembourg have exceeded their limits for non-methane volatile organic compounds; and Austria, Denmark, Finland, the Netherlands and Spain have exceeded limits for ammonia, the EEA said.

    In 2014, 10 member states reported emissions data for these pollutants which were the above the ceiling for at least one.

    Nitrogen oxides are produced by exhaust fumes from road transport while ammonia derives from the use of fertilisers and the handling of animal manure. Nitrogen dioxide is a harmful component of nitrogen oxides, causing respiratory problems and cardiovascular disease.

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    India's Industrial Output Contracts Unexpectedly in April

    India's industrial output unexpectedly contracted in April amid weak performance in manufacturing, indicating that the country's economic recovery may still not have gained a firm footing.

    Industrial production, a measure of output in the manufacturing, mining and utilities sectors, fell 0.8% from a year earlier, compared with a revised 0.3% rise in March and worse than the 0.8% increase predicted by economists polled by The Wall Street Journal.

    Optimism is rising, though. Above-average levels of rainfall predicted this year and a large pay increase for nearly 10 million government employees and pensioners are expected to boost consumer demand.

    The latest data are at odds with the 7.6% rise in India's gross domestic product last fiscal year.

    While GDP growth has been robust, other indicators such as industrial output have been showing weaker activity, causing confusion about the health of the economy.

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    Miners cut distressed debt pool by $60bn as rebound firms

    Mining companies are getting back into financial shape and have cut the sector’s pool of distressed bonds by at least $60-billion, providing another boost to the industry’s outlook as commodities enter a bull market. 

    Anglo American and Glencore are among companies whose notes no longer feature in the ranks of distressed US-dollar denominated debt after selling assets and cutting dividends to bolster their balance sheets, according to Bloomberg Intelligence. 

    The amount of metals and mining bonds trading at distressed levels fell this month to $26-billion from a peak of $86-billion in February, the data show. “There has been a large degree of self help, whether that’s through asset sales or cost cutting or capex rationalisation, to improve cash flow,” said Anthony Ip, a credit sector specialist at Citigroup in Sydney. “At the macro level, you’ve got the rally in commodities prices and the market appears more comfortable with China risks, so that’s helping sentiment.” 

    Commodities have entered a bull market, ending a five-year rout, as supply constraints drive up prices in everything from soybeans to zinc, while Citigroup said last month that raw materials had turned a corner following the biggest price collapse in a generation. 

    Notes issued by the likes of copper producer Freeport-McMoRan and iron-ore miner Fortescue Metals Group also are no longer trading at distressed levels, according to Bloomberg Intelligence’s Richard Bourke. The analysis examined bonds with more than $100-million outstanding that were trading with option-adjusted spreads greater than 1000 basis points. Spreads that wide are often considered a definition of distress, according to Bourke. 

    Moody’s Investors Service, which began a sector-wide assessment of mining in January that prompted 36 rating downgrades, last month upgraded the outlook on Anglo’s Ba3 senior unsecured ratings from negative to positive as a result of better-than-expected asset sale receipts. Anglo in April agreed to sell its niobium and phosphate businesses for $1.5-billion. 

    Miners have announced $27-billion of pending and completed asset sales this year, including China Molybdenum’s $2.65-billion agreement to buy Freeport’s stake in the Tenke Fungurume copper-cobalt mine. That’s easing concern over producers’ debt even with raw materials prices trading about 50% lower than a 2011 peak. 

    Matthew Moore, a senior analyst at Moody’s said by phone. “One of the things that we’ll continue to look at is the ability of companies to execute on things like asset sales for debt reduction,” Moore said. “We’ve also seen companies like Fortescue go out and buy back some of their debt as well, which is improving the position of that company in its rating level.”

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    China's industrial output growth unchanged in May

    China's industrial output rose 6 percent year on year in May,unchanged from April, official data showed Monday.

    The pace of increase slowed from 6.8 percent registered in March and 6.1 percent postedin the same month of last year, according to data from the National Bureau of Statistics(NBS).

    Value-added industrial output, one of the leading indicators for economic growth, rose 0.45percent in May from April.

    In the first five months, industrial output grew 5.9 percent from one year earlier, up from5.8 percent registered during the January-April period.

    Value-added industrial output measures the output of Chinese companies with annualrevenues above 20 million yuan (about 3 million U.S. dollars).

    The output of the hi-tech and equipment manufacturing industries maintained stronggrowth, rising 11.5 percent and 8.5 percent, according to NBS.

    Manufacturing output expanded 7.2 percent in May. Mining output fell 2.3 percent and the output of the electricity, heating, gas and water sectors grew 2.4 percent, the NBS said.
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    Oil and Gas

    China May crude oil runs down 0.1 pct on year - stats bureau

    China's crude oil runs fell 0.1 percent in May from a year earlier to 44.23 million tonnes, the statistics agency said on Monday.
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    Libyan forces claim port in Islamic State stronghold of Sirte

    Forces aligned with Libya's unity government said on Friday they had taken control of the port of Sirte, making further gains in Islamic State's North African stronghold.

    Brigades largely composed of fighters from Misrata advanced this week to the perimeter of Sirte's city center, after launching a counter attack against Islamic State last month and driving the militant group back along the coastal road between the two cities.

    The brigades are part of an operation backed by Libya's U.N.-backed Government of National Accord (GNA), which arrived in Tripoli in March and has been gradually working to establish its authority.

    Western powers see it as the best bet for trying to unite Libya's political and armed factions against Islamic State and for restoring some stability to the oil-rich North African country.

    A source from the operations room in Misrata said fighters from the front line in the south of Sirte had looped round to the seafront to capture the port, which lies about 5 km (3 miles) east of the city center.

    The brigades have advanced more swiftly than many expected, though their progress has been hampered by suicide bombers, mines and snipers.

    Clashes in Sirte on Friday left 11 brigade members dead and 35 wounded, the operations room source said. More than 100 fighters from the GNA-backed brigades have been killed and more than 500 wounded since the campaign to recapture Sirte began in early May.

    Islamic State started expanding into Libya in 2014 as the political turmoil and conflict in the country worsened. It took full control of Sirte last year, but has struggled to retain territory or win support elsewhere in Libya.

    As the brigades based in Misrata have advanced on Sirte from the west, a separate force that controls some of Libya's key oil terminals and is also aligned with the GNA has pushed Islamic State back from the east. They reached Harawa, a town about 70 km from Sirte, on Thursday.
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    Russian LNG gets financial support

    The leader of a Russian liquefied natural gas project targeting the Asia-Pacific market said it received its first tranche of a loan from national lenders.

    Two Russian lenders delivered $1.13 billion for the Yamal LNG project. Novatek, the largest private natural gas company in Russia, leads the project aimed at sourcing the markets in the Asian-Pacific. The funding is part of a broader finance effort steered from the Russian National Wealth Fund with help from Chinese banks.

    Yamal LNG CEO Evgeny Kot was quoted by Russian news agency Itar-TASS as saying some tankers were already tested for LNG deliveries and the funding should help spur further developments.

    "Readiness of the first stage of the LNG plant is over 70 percent," he said.

    Russia's economy is hobbled by dual strains of economic sanctions related to crises in Ukraine and the low price of crude oil. Liquefied natural gas, meanwhile, offers for maneuverability outside the geopolitical constraints associated with conventional pipeline arteries, like those running to Europe through Ukraine.

    In a market characterized by tight spending trends, Novatek said the costs of development are low enough to compensate for higher maritime shipping costs to the Asian-Pacific markets.

    Novatek controls 60 percent of the Yamal LNG project in the arctic north of Russia, alongside French energy company Total and the China National Petroleum Corp.

    The Yamal LNG project has the capacity to produce about 16.5 million tons of natural gas and exports could target consumers in the Far East. As many as 16 ice-class carriers will be designated to ship LNG year-round to global consumers.

    Yamal could start full operations as early as next year.
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    First Dunkirk LNG cargo to arrive on July 8, commercial ops to start in Sep

    Commercial operations at France’s fourth LNG import terminal in the port of Dunkirk will begin in September, with the first cargo for commissioning purposes expected on July 8.

    The first commissioning cargo of about 135,000 cbm of LNG will be brought by France’s energy giant EDF, who owns a 65 percent stake in Dunkirk LNG (Dunkerque LNG). A second ship will follow in August to complete testing of the import facility, according to Dunkirk LNG.

    To remind, LNG World News reported last week that the first commissioning cargo was expected between 04th and 08th July.

    The first ship will “call at the LNG terminal wharf for seven days (rather than the normal 24 hours). As the equipment will still be at ambient temperature, the LNG (at -160°) will need to be unloaded much more slowly than normal so the process gradually enters its ‘cool state’,” Christophe Liaud,Commercial Director of Dunkerque LNG said in a statement.

    “Additionally, the LNG load must come from a liquefaction plant and have a sufficiently low pressure. The methane tanker must also be less than 15 years old to ensure it has the specific equipment required for the start-up of the terminal. Last but not least, the client must accept the risk of cancelling the call if the terminal is not in fact ready on the planned date.”

    “It’s a lot of limitations,” said Liaud, adding that EDF has managed to find an LNG supplier who can “meet these limitations while guaranteeing a competitive price“.

    The Dunkirk LNG terminal will have an annual regasification capacity of 13 billion cbm of gas, enough to cover about 20% of France and Belgium’s annual gas consumption.

    EDF booked 8 bcm of the LNG terminal’s capacity, while Total reserved 2 bcm of gas. The remaining gas quantities will be sold on the market after the LNG terminal has been commissioned.

    Besides EDF, Fluxys of Belgium has a 25% share in the LNG terminal. French gas and oil giant Total owns the remaining 10 percent.
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    Wanted: Oil traders who know China, with good heads for liquor

    Chinese independent oil companies are luring traders, marketers and risk managers away from dominant state behemoths, offering better pay and perks in a hiring spree triggered by the freeing up of China's crude import trade.

    Global oil firms and commodity houses have also been raiding state giants such as Sinochem and CNPC for staff to help handle up to $50 million a day in new crude flowing into China this year, and the cherry-picking of talent is likely just getting started.

    China's independent "teapot" refiners, so called due to their small size, could be processing by the end of this year as much as a fifth of the crude imports of the world's No.2 oil consumer. Already, in the first five months of 2016 - the first full year of a dozen of them being granted crude import licences - they have captured about 10 percent of the inbound shipments.

    Shandong Dongming Petrochemical Group, China's largest independent refiner, has built a Singapore-based trading team of 11 to handle this new business, including trading and shipping managers hired from CNPC Fuel Oil Company and the CNOOC group.

    "A team of this size is far from enough for our scale of 10 million tonnes a year (200,000 bpd) crude demand," said Zhang Liu Cheng, vice president of Shandong Dongming.

    "We'll need more to cover products, chemicals and market analysis," Zhang said.

    Awarding crude import quotas of up to 1.2 million barrels per day (bpd) to China's teapots has started a tussle for talent as the refiners - and the oil majors and trading houses that aim to supply them - dive into an activity previously restricted to state-owned enterprises (SOEs).

    This year, use of the quotas has made up most of a 16 percent or around 1 million bpd rise in China's crude imports, even with several underused and more awaiting approval.

    Those angling for a slice of this market have already hired more than 40 traders and others, mostly from state companies, say colleagues and acquaintances of people who have moved jobs.

    "We have a big but not totally motivated team," said a senior trader with a state oil company, noting that offers often beat SOE employment, particularly at smaller firms.

    "Certainly we're going to see more talent outflows as the teapots have just begun hiring," the senior trader said.

    Most of the hires are in their mid-thirties, having honed their craft at Chinese state companies such as Sinochem Corp, China National Offshore Oil Corp and China National Petroleum Corp, sources said.

    "Our traders are very popular," said a source from one of the state oil trading companies. "Most of those who moved from our company are going to trading houses and majors because the perks are definitely better."

    "We are looking for people who have systematic training, good relationship skills, and people who understand how China markets work," said a Beijing-based executive with a global trading house.

    Also, with teapots concentrated mostly in the eastern province of Shandong, an ability on plant visits to withstand drinking bouts could also be critical as official at some refineries there are renowned for their large capacities for alcohol.

    "Sometimes I'm scared to visit our refinery in Shandong as they drink too much," said a Chinese trader who buys crude on behalf of one of the teapots.
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    Dudley: ‘Quitting Norway was not an option’

    The $1.3 billion deal to merge the Norwegian business of BP with Det Norske Oljeselskap was borne out of the hugely competitive nature of today’s industry and the UK supermajor’s unwillingness to letting its assets in Norway go, according to BP’s chief executive Bob Dudley.
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    CNPC to prioritize gas in pipeline for future

    Analysts expect prices to rebound slightly in coming years as a result of the government's policy to encourage cleaner energy

    Asia's largest oil and gas producer, China National Petroleum Corp, is betting big on natural gas, aiming to boost both its supplies and transportation capacity in the next five years.

    The state-owned company, which provides more than two-thirds of the country's natural gas, plans to sell in excess of 750 billion cubic meters of the fuel between now and 2020, a 40 percent increase on the past five years, says Zhao Zhongxun, deputy director of CNPC's planning department.

    CNPC technicians check natural gas facilities in Yinchuan, capital of the Ningxia Hui autonomous region. Xinhua

    "Our top priority is to boost domestic supplies of natural gas, then adjust imports based on demand, and at the same time expand our pipeline network and capacity of LNG terminals," he says, detailing the energy giant's new five-year plan for natural gas, during a "green development" forum held in Beijing.

    That blueprint suggests that by 2020, the company's pipeline network is expected to exceed 60,000 kilometers with an annual transport capacity of 180 billion cubic meters.

    Also planned are 12 more gas storage sites, with the receiving capacity of its three liquefied natural gas terminals expanding from 13 million to 19 million tons.

    Oil majors have all cut their spending on future projects as plummeting crude oil prices have slashed their profits, but CNPC will secure the production of natural gas and maintain its exploration, a source told China Daily, without giving further details on the budget for natural gas.

    CNPC spokesman Qu Guangxue says there will be greater promotion of gas-fired power plants and the use of natural-gas-powered vehicles.

    CNPC imports a third of its natural gas from major countries in Central Asia such as Kazakhstan and Turkmenistan, and Zhao says it will begin imports from Russia in 2019 on completion of the Chinese section of Sino-Russia pipeline.

    PetroChina, CNPC's listed unit, posted its first quarterly loss in April amid falling global crude prices and shrinking domestic demand.

    Its profit on natural gas and pipelines slumped nearly 36 percent to 4.7 billion yuan ($714 million; 640 million euros) in the first four months of 2016.

    Zhao says during the first three years of its 12th Five-Year Plan (2010-15), the company grew its natural gas supplies 13 percent.

    But demand for the fuel shrunk last year from many industrial sectors including smelting, construction and glass production.

    Analysts expect gas prices to rebound slightly over the coming years as a result of the government's policy to encourage cleaner energy to combat air pollution.

    "Natural gas is a practical choice for China," says Gao Jian, a senior analyst at commodities consultancy Sublime China Information Co Ltd, "as the country increases its share of nonfossil fuel in its energy mix, and relies more on alternatives."

    The share of natural gas in the country's total primary energy mix will be raised to above 10 percent by 2020, double the current level, he says.

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    Qatari LNG Deliveries to Europe Down, Volumes to Mideast, S Asia Rise

    For the first five months of 2016, Europe has seen a slow down in deliveries of Qatari LNG.

    Surprisingly, this decline in imports was not lead by Europe's largest importer of Qatari gas, namely the UK.

    Desmond Wong explains how arrivals of Qatari volumes into the UK have remained largely stable compared to the same period last year, with declines from Belgium, Turkey, Portugal, France and Italy, cumulatively forming the bulk of the decline, with increased volumes heading into the Middle East and South Asia.
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    Oil Extends Losses as U.S. Rigs Drilling for Crude Rise 2nd Week

    Crude fell a third day after the number of rigs drilling for oil in the U.S. rose for a second week.

    Futures fell as much as 1.8 percent in New York after dropping 4.2 percent in the previous two sessions. Rigs targeting crude in the U.S. rose by 3 to 328 last week, capping the longest run of weekly gains since August, Baker Hughes Inc. said Friday. Iran is seekingto boost output by 600,000 to 700,000 barrels a day over five years from fields in an area west of the Karoun River along the Iraqi border, Oil Minister Bijan Namdar Zanganeh said.

    “The increase in rigs means U.S. production may increase in the latter half of 2016, and that creates a bearish mentality in the market,” said Takayuki Nogami, chief economist at Japan Oil, Gas and Metals National Corp., a state-run company that helps secure energy supplies. “With oil over $50 a barrel, there is a deep-rooted view that American shale producers may return.”

    While the number of active oil rigs in the U.S. rose for a second week the nation’s output is still well below last year’s peak, and explorers have idled more than 1,000 drilling machines since the start of last year. The $50-to-$60 a barrel area is the “sweet spot” as more U.S. producers are expected to return at $60, according to Mark Watkins, Utah-based regional investment manager for The Private Client Group of U.S. Bank.
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    Southwestern Energy sells portion of South west Appalachia acreage

    Southwestern Energy Company announced today that it has entered into a definitive agreement with Antero Resources Corporation to sell approximately 55,000 net acres in West Virginia for $450 million. The cash proceeds from the transaction are expected to be used to reduce the principal balance of the company's $750 million term loan due in November 2018.

    The properties are located in Doddridge, Harrison, Marion, Monongalia, Pleasants, Ritchie, Tyler and Wetzel Counties and are currently producing from the Marcellus Shale. Net production from this acreage is approximately 14 MMcfe per day, primarily from non-operated wells, and proved reserves on this acreage were 11 Bcfe as of December 31, 2015. The Company has no current plans to drill on these properties before 2023.

    'This transaction is one step on delivering on the commitment we made to strengthen our balance sheet in 2016,' remarked Bill Way, President and Chief Executive Officer of Southwestern Energy. 'We are bringing forward the value of acreage that is much longer dated in our development plans, enabling us to take action and proactively reduce outstanding debt. Together with the progress we are making on margin enhancement, this sale further strengthens both the Company's financial flexibility and our bridge to value-added growth for shareholders.'

    The transaction is expected to close in the third quarter of 2016, subject to customary closing conditions and purchase price adjustments.
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    Teine Energy Agrees to Buy Penn West Oil Assets for $763 Million

    Teine Energy Ltd., the energy company backed by Canada Pension Plan Investment Board, has agreed to buy oil-producing properties from Penn West Petroleum Ltd. for C$975 million ($763 million) in cash.

    The deal involves all of Penn West’s properties in the Canadian province of Saskatchewan, including its Dodsland Viking light-oil assets in the east and the medium and heavy crude assets in the west, Calgary-based Penn West said in a statement late on Friday. The agreement helps highly-leveraged Penn West stay in compliance with debt covenants it had forecast potentially breaching in the second quarter, which ends June 30. Penn West now expects to remain within those covenants through 2016, it said in Friday’s statement.

    Penn West is fighting to stay afloat as the crude market rout approaches two years. The company, while selling other assets to reduce its debt, had long sought to avoid parting with the Viking properties that were important to its strategy. Analysts in recent weeks had forecast that Penn West would have to resort to selling the Viking properties, and Bloomberg reportedlast week that the company had hired hired Royal Bank of Canada to advise it on the sale of the assets.

    “Saskatchewan is a coveted asset amongst many of our competitors and with this transaction we have capitalized on the demand for high-quality oil assets of scale,” David Dyck, chief financial officer of Penn West, said in the statement. “This is a pivotal transaction for the company.”

    The sale of the Saskatchewan assets is expected to close in the second quarter, according to the statement. Penn West has also agreed to sell Alberta properties for proceeds of about C$140 million, the company said, without identifying any buyers. Penn West has agreed to sell assets fetching a total of C$1.3 billion in cash in 2016, the company said.

    Penn West’s share price has fallen 90 percent since U.S. crude’s price peak in mid-2014, to close at C$1.16 in Toronto on Friday. The company had total debt of C$1.86 billion at the end of the first quarter, according to data compiled by Bloomberg.
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    Bayer waiting for Monsanto to engage after spurned bid: sources

    Monsanto Co, the world's largest seed company, has still not opened its books more than two weeks after it rejected Bayer AG's $62 billion acquisition offer but left the door open to a possible deal, according to people familiar with the matter.

    The impasse shows that little progress in negotiations has been made since Monsanto on May 24 turned down its German peer's $122-per-share cash offer but said it was open to "continued and constructive conversations."

    Monsanto has said that Bayer's offer "significantly undervalues the company and also does not adequately address or provide reassurance for some of the potential financing and regulatory execution risks related to the acquisition."

    Bayer, however, has no plans to increase its offer without first reviewing Monsanto's confidential information, the sources said on condition of anonymity because of the confidentiality of the talks.

    The Leverkusen-based company needs access to Monsanto's books before it can decide whether it can pay a higher price, as well as offer a more detailed plan on how to address potential antitrust risks, the sources added.

    Bayer also has no intention currently to go hostile with its bid, the sources said.

    Monsanto, based in St. Louis, has not directly told Bayer that it is looking for better terms in order for it to offer the German company access to confidential information, according to one of the sources.

    However, Monsanto's lack of engagement demonstrates that it not only views Bayer's offer as too low, but that it does not even consider it as a basis for negotiations, the sources said.

    The situation did not change even after Monsanto held a regular board meeting this week to approve a quarterly dividend of 54 cents per share.

    Bayer declined to comment, while a Monsanto spokeswoman did not respond to a request for comment.

    The Wall Street Journal had reported earlier on Friday that Bayer had made a new takeover approach to Monsanto that was rebuffed, in part because it didn't include a higher price.

    Bayer's unsolicited bid for Monsanto is the largest all-cash takeover on record, according to Thomson Reuters data, just ahead of InBev SA's $60.4 billion offer for Anheuser-Busch in June 2008.
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    Precious Metals

    Bitcoin Surges to Two-Year High as Supply Seen Shrinking in July

    Bitcoin surged to a two-year high amid expectations supply of the digital currency will shrink next month.

    The cryptocurrency rallied to $696.5 on Monday in Hong Kong, the highest since February 2014, according to data compiled by Bloomberg. It was trading at $689.23 as of 3:50 p.m. in Hong Kong, up 19 percent from Friday.

    Profits from mining bitcoins will be reduced in July, a process that’s written into the code to limit supply, according to Chinese exchanges OKCoin and Huobi. Increased attention from venture capitalists and banks on blockchain, the technology of digital ledgers, has boosted bitcoin’s legitimacy, Jack C. Liu, chief strategy officer at OKCoin, said in Hong Kong.

    "The halving of the supply of Bitcoin is attracting many retail investors," Liu said. "More broadly, we continue to see follow-through from the blockchain hype cycle translating to interest in bitcoin the asset."

    The price of bitcoin has mostly recovered following a steep decline to less than $200 in January of last year from more than $1,000 in December 2013.

    Bitcoin’s rebound is coinciding with weakness in the yuan, which fell the most in two months on Monday in Shanghai. Losses have accelerated in recent weeks as the dollar strengthened and China’s economic outlook deteriorated. Data Monday showed industrial output rose 6 percent in May from a year earlier, while fixed-asset investment increased 9.6 percent in the first five months of 2016, missing all 38 economist forecasts.
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    Base Metals

    Commodities broker Marex targets growth away from LME after fee hikes

    Commodities broker Marex Spectron is expanding its metals business into new regions and products beyond the London Metal Exchange after fee hikes led its customers to look for cheaper avenues for trading.

    London-based Marex has hired new staff to reach into Japan and to add an industrial metals base in Singapore, its global head of metals told Reuters in an interview late last week.

    Simon Van Den Born said the additions would boost its regional base metals businessnow centred in Hong Kong and help build up alternative business lines such as in gold.

    "I would say that the predominant response we get from clients is: how can I avoid the LME with its fee structure? People are migrating away from the LME because of that," Van Den Born said.

    Hong Kong Exchanges and Clearing Ltd bought the LME for $2.2 billion four years ago, before raising trading fees by an average 31 percent at the start of last year as it aimed to wring profit from its investment.

    LME volumes fell in 2015 and have dropped by 9 percent in the first quarter, a trend the Hong Kong bourse has blamed on slow market conditions. Volumes at rivals the U.S Comex bourse and Shanghai Futures Exchange have grown.

    The LME was not immediately available for comment.

    "Our business a couple of years ago was centred around the LME floor and 20 people in London. Today the business is just far more diverse. Precious metals is something we've seen decent growth in the last 24 months," Van Den Born said.

    "We're looking to institutional investors, Chinese players like hedge funds, that's the marketplace we're expanding in ... Our China corporate business may have subsided a little bit, (but) our investor business has increased - our presence in Singapore will maintain that."

    While its overall metals business was steady, Marex's direct Chinese volumes have shrunk 30 percent since the start of 2015, he said.

    Marex Spectron was formed through a merger of metals and oil brokerage firms in 2011 and is majority owned by British private equity investor JRJ Group. Its head count has doubled to more than 500 since 2012, of which metals accounts for some 60 global roles. Beyond London, the broker has bases in Houston, Oslo and New York.

    Van Den Born also said that HKEX's push to develop a monthly contract at the expense of the LME's current structure which encourages daily trade for three months out, was changing the nature of the bourse.

    "After a while you defund the contract, you just drive towards a cash settled contract rather than a fundamentally physically settled contract which has been the bedrock of the LME."

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    Lawsuit alleges Glencore warehouse firm falsified zinc documents

    Executives at a metals warehouse firm owned by commodities group Glencore allegedly ordered workers to falsify documents in New Orleans to manipulate the zinc market, according to a complaint filed by zinc purchasers in a U.S. Federal Court.

    On Monday, a U.S. judge in Manhattan allowed a private antitrust lawsuit to go forward against two units of Anglo-Swiss Glencore Plc. The suit accuses Glencore Ltd. and Pacorini Metals USA of trying to monopolize the market for special high grade (SHG) zinc, driving up its price.

    Her 62-page decision cited allegations made in the complaint filed by zinc purchasers alleging that Pacorini Metals USA, owned by Glencore, created false bills of lading, which are receipts given by transporters confirming shipment of goods.

    U.S. District Judge Katherine Forrest in Manhattan said that the zinc purchasers had alleged sufficient facts for the case to go forward.

    She said they had raised "a plausible story of market control" by the Glencore units in violation of U.S. antitrust law. Forrest did not rule on the merits of the antitrust claim.

    The case will now proceed to the discovery phase, during which both sides will gather evidence to bolster their claims.

    A Glencore spokesman said: "The company does not generally comment on ongoing class action cases and the allegations made therein."

    The group had moved to dismiss the complaint on various legal grounds.

    According to the 87-page complaint by the zinc purchasers, a confidential witness who worked in management for Pacorini said he was instructed by Pacorini executives in late summer or early autumn of 2012 to create falsified documents to mask high-volume movements of zinc.

    "The falsified bills of lading contained false signatures, stated that the metals were picked up by truckers that 'never existed', and sometimes contained incorrect tonnage amounts," the complaint said.

    A second confidential witness who worked as a shipping and receiving clerk for Pacorini confirmed the account, the complaint added.

    The first witness also said representatives of Glencore met with several other large trading companies in late summer or early autumn of 2012 and agreed to a “synchronized” and “highly coordinated” schedule of zinc warrant cancellations at warehouses in New Orleans, according to the complaint.

    If true, the allegations would involve serious violations of regulations of the London Metal Exchange (LME), the world's oldest and biggest market for industrial metals, which registers a global network of metal warehouses. Forging documents would violate the LME warehouse agreement that all approved firms must sign.

    The LME said it never confirms or comments on any of its investigations.

    The judge had dismissed an earlier version of the proposed class-action lawsuit which also named Goldman Sachs Group Inc and JPMorgan Chase & Co as defendants.

    The zinc purchasers allege in the complaint that Glencore sought to manipulate daily reports sent to the LME about warehouse movements of zinc.

    Warehouse movements of metals can influence LME prices as investors see less or more availability of metal, according to traders.

    The complaint also alleges that the false documents played a part in manipulating backlogs of zinc waiting to be delivered, which pushed up the zinc premium, a surcharge buyers pay for immediate delivery of physical metal.

    "Plaintiffs allege that defendants’ efforts to manipulate these warehouse queues were successful and caused an increase in the MW (Midwest) SHG premium and ultimately caused them to pay higher prices for SHG zinc," the judge's ruling said.

    The 139-year old LME is in the midst of wide-ranging reforms of its global network of over 600 approved warehouses in 37 locations after complaints by consumers paying rent to store metal while trapped in backlogs to get delivery of the material.

    Under LME disciplinary procedures, a warehouse firm has 20 days to submit a defense to any charges and a hearing must take place no later than 20 working days after that.

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    Steel, Iron Ore and Coal

    China May coal output down 15.5pct on yr

    China produced 263.75 million tonnes of coal in May, sliding 15.5% year on year, data from the National Bureau of Statistic (NBS) showed on June 13.

    That dipped 1.6% on month, compared with the decline of 8.77% in April, data showed.

    China’s raw coal output stood at 1.34 billion tonnes over January-May, dropping 8.4% from the year prior, compared with the decline of 6.8% in January-April.

    With the advance of supply-side structural reform, the state and local governments unveiled more measures in May to guide de-capacity efforts in the bloated coal sector. The Ministry of Finance also arranged 100 billion yuan of special fund to help resettle employees in the coal and steel sectors.

    So far, 11 main coal producing provinces in China have publicized their re-verified production capacity in line with the 276-workday reform, with capacity combined at 1.93 Btpa, down 16% from previous capacity of 2.29 Btpa in total.

    The state government has vowed to shut over 1,000 coal mines in 2016, with combined capacity 60 Mtpa. And the approval of new coal mines will be suspended in three years since 2016.

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    Coal to Replace Gas as Japan’s Leading Power Source From 2019

    Coal is set to overtake gas within the next three years as the largest generator of power in Japan as power utilities replace aging nuclear capacity with the fossil fuel, Bloomberg New Energy Finance said.

    Nuclear power, which accounted for about 29 percent of Japan’s total power output before the 2011 Fukushima disaster, will peak at 13.6 percent by 2023, BNEF said in a report released on Monday. By 2040, nuclear’s share will fall to just 1.2 percent.

    Even with the greater reliance on coal, the country will likely meet its 2030 emission reduction target for the power sector due to a drop in power demand, according to the London-based researcher. The elimination of oil-fired generation, greater reliance on more efficient coal-power plants and an increase in clean energy will also contribute.

    Japan will come very close to meeting its emission reduction target for the power sector, which is aiming for a 34 percent reduction by 2030 compared with 2013 levels, according to the BNEF forecast.

    However, the government’s aim for zero-emission sources to account for 44 percent of electricity generation in 2030 is unlikely to be met without new policy initiatives, according to the report.

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    Vale's Mozambique unit says trains attacked by gunmen

    Vale's Mozambique unit says trains attacked by gunmen

    The Mozambique unit of Brazilian mining company Vale said on Friday that its trains had targeted by gunfire twice in recent days on the Sena rail line which carries coal from the interior to the Indian Ocean port of Beira.

    "Vale has been working with the relevant authorities to ensure that logistic activities on the Sena railway line can safely continue," the company said in a statement.

    Vale did not say what the trains were carrying or whether it had suspended activities on the line.
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    India cancels four major new coal plants in move to end imports

    The Indian Energy Ministry has this week announced plans to cancel four proposed coal-fired power plants with a combined capacity of 16 gigawatts (GW).

    The plans previously called for four ultra mega power plants (UMPP) across Chhattisgarh, Karnataka, Maharashtra and Odisha, but these are now to be cancelled due to lack of interest from the host states.

    This is yet another major policy shift underscoring how seriously India is working to transform, modernize and diversify its electricity sector away from coal.

    For eight years, these four proposed plants remained in the planning, preparation and land acquisition stage. However, community resistance to compulsory land acquisition and forced resettlement combined with electricity power surpluses to push the government to issue a cancellation order.

    Moreover, two of the UMPPs (8GW) were planned for coastal locations, aimed to run on imported coal. As such, the announcement is in line with Indian Energy Minister Piyush Goyal target of eliminating thermal coal imports into India.

    His motivation in eliminating thermal imports is to drive delivered cost of electricity down, reduce the current account burden, improve energy security and the straight out lack of need in light of increased domestic production.

    April 2016 coal imports fell 15% year on year.

    To operate, these four UMPPs would have required upwards of a total of 46 million tonnes per annum of coal (approx. 12Mtpa per plant), half of which was to have been imported.

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    China's crude steel output rises 1.8 pct in May on year -stats bureau

    China's crude steel output rose 1.8 percent to 70.5 million tonnes in May from a year ago, the second time to stand above 70 million tonnes this year, datafrom the National Bureau of Statistics showed on Monday.

    The average daily crude steel output in the world's top producer eased 1.7 percent to 2.27 million tonnes in May from a month ago, according to Reuters' calculation based on the data.

    Steel prices surged 79 percent in April from a decades-low hit late last year, encouraging mills to resume production and even bringing some zombie mills alive.

    But prices declined one quarter since May as demand wanes, promoting mills to cool heir pace to pick up production as falling prices eroded their margins and some have started to make a loss.

    Total output for the first five months fell 1.4 percent to 329.95 million tonnes from the same period last year, data showed. Steel production is expected to fall further in June amid slowing demand and China's efforts to cut overcapacity.

    China has committed to curbing its steel capacity and winding down weak state enterprises by taking new measures and strengthening global coordination.
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