Mark Latham Commodity Equity Intelligence Service

Monday 7th December 2015
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    Beijing Issues Air Pollution Red Alert for the First Time

    Beijing Issues Air Pollution Red Alert for the First Time

    Beijing authorities have issued a red alert for smog, the highest warning level, effective from 7am on Dec. 8.

    Acrid-smelling smog rolled back into Beijing on Monday, shrouding the city of 20 million people in a gray haze four days after northern China reported the worst pollution in a year.
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    Venezuela's opposition coalition just won a massive victory

    Venezuela's opposition trounced the ruling Socialists on Sunday to win the legislature for the first time in 16 years and gain a long-sought platform to challenge President Nicolas Maduro's rule of the OPEC nation.

    The opposition Democratic Unity coalition won 99 seats to the Socialists' 46 in the 167-national National Assembly, the election board said, with some districts still to be counted.

    Fireworks were set off in celebration in pro-opposition districts of Caracas when the results were announced, while government supporters dismantled planned victory parties.

    Maduro, 53, quickly acknowledged the defeat, the worst for the ruling "Chavismo" movement since its founder Hugo Chavez took power in 1999.

    "We are here, with morals and ethics, to recognize these adverse results," Maduro said in a speech to the nation, although he blamed his defeat on a campaign by business leaders and other opponents to sabotage the economy.

    "The economic war has triumphed today," Maduro said.

    His quick acceptance of the results eased tensions in the volatile nation where the last presidential election in 2013, narrowly won by Maduro, was bitterly disputed and anti-government protests last year led to 43 deaths.

    Opposition leaders, who have lost over-and-over since Chavez's first election victory 17 years ago, were jubilant, even though their victory was mainly thanks to public disgust at Venezuela's deep economic recession.

    "We're going through the worst crisis in our history," coalition head Jesus Torrealba said. "Venezuela wanted a change and that change came ... a new majority expressed itself and sent a clear and resounding message."

    Opposition sources predicted that once counting was finalised, they would win as many as 113 seats. That would give them a crucial two-thirds majority needed to shake up institutions such as the courts or election board.

    The result could also embolden government foes to seek a recall election against Maduro in 2016 if they garner the nearly 4 million signatures needed to trigger the referendum.

    The government's defeat was another blow to Latin America's left following last month's swing to the center-right in Argentina's presidential election.
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    Anglo to cut dividend?

    Anglo American Plans to Slash Dividend

    Company has scrambled to shore up balance sheet as it reels from plunging prices for metals and gems

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    Billionaire Palmer steps up fight with China's CITIC amid nickel slump

    Officials in Australia's Queensland state are prepared to step in to help protect jobs at a nickel refinery if needed, but called on its owner, mining magnate and politician Clive Palmer, to be open about the refinery's financial position.

    Concerns resurfaced this week about the future of the Queensland Nickel refinery when a lawyer acting for Palmer sought an advance A$48 million ($35 million) payment in an unrelated dispute, saying the matter needed to he heard that week.

    The case against estranged iron ore partner, China's CITIC Ltd, over any advanced payment of royalties due on the Sino Iron project will now be heard on Monday.

    Queensland Nickel, bought by Palmer from BHP Billiton in 2009, is one of the country's biggest refineries with a capacity of 35,000 tonnes a year.

    A slump in the nickel price from just over $13 a pound in early 2011 to $4.73 a pound amid a mounting supply glut has put pressure on many producers of the metal, used to make stainless steel.

    Queensland state's treasurer said he had met with Queensland Nickel but declined to say what exactly was discussed, except to say the commodities slump was hurting the whole resources sector, including Queensland Nickel.

    "We'll work with affected stakeholders where required to support jobs and employment in the region," Treasurer Curtis Pitt said in a statement after meeting with the mayor of Townsville and politicians from the region.

    Queensland Nickel operates in Yabulu, near Townsville, whose mayor has raised concern about the fate of the plant which she says accounts for more than 3,600 direct and indirect jobs and A$1.3 billion in activity for the city.

    Read more at Reuters
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    Oil and Gas

    OPEC fails to agree production ceiling after Iran pledges to boost output

    OPEC members failed to agree an oil production ceiling on Friday at a meeting that ended in acrimony, after Iran said it would not consider any production curbs until it restores output scaled back for years under Western sanctions.

    A final statement was issued with no mention of a new production ceiling, apparently allowing member countries to continue pumping oil at current rates into a market that has been oversupplied.

    OPEC's secretary general Abdullah al-Badri said the body could not agree on any figures because it could not predict how much oil Iran would add to the market next year, as sanctions are withdrawn under a deal reached six months ago with world powers over its nuclear program.

    Most ministers left the meeting without making a comment. Iranian oil minister Bijan Zangeneh had said before the meeting that Tehran would be prepared to discuss action only when his country reached full output levels, if and when Western sanctions are lifted.

    Saudi oil minister Ali al-Naimi earlier had said he hoped growing global demand could absorb an expected jump in Iranian production next year: "Everyone is welcome to go into‎ the market".

    Iran has repeatedly said it would boost production by at least 1 million barrels per day when sanctions are lifted. Without curbs elsewhere, this would add to a global glut, as the world is currently consuming up to 2 million bpd less than it is producing.

    Read more at Reuters

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    Yergin: Why oil prices cannot stay this low

    The next two quarters will be tough on crude prices, but 2016 will be a year of transition for oil markets, IHS Vice Chairman Dan Yergin said Friday.

    Yergin told CNBC's "Squawk Box" he expects oil markets to begin to balance next year or in 2017.

    "The oil market "can't stay low like this because you're not going to have the investment you need," he said." "By 2020, the world oil market is going to need another 7 million barrels a day of production."

    "Right now, the whole mantra is slow down, postpone, cancel projects," he added.

    Multinational energy companies and U.S. shale oil producers have slashed capital spending in order to protect their balance sheets as their revenues plummet and cash flow dries up. Crude prices began to sink from historic highs last fall, and the downturn accelerated after OPEC announced it would not cut supply to balance oil markets.

    Despite expectations that high-priced American crude production would collapse at $70 a barrel, U.S. producers can perform well at $55 to $60 per barrel. However, current prices in the $40 to $50 range are creating "great pain," he said.

    Yergin said he does not expect OPEC to change its policy of maintaining current oil output levels to defend market share. The 12-member orgnization is meeting Friday in Vienna.

    Crude oil futures rose Thursday on reports that top oil exporter Saudi Arabia would agree to cut production by 1 million barrels a day, provided non-OPEC members also dial down output.

    However, a Saudi source said later the report by industry publication Energy Intelligence was "baseless." Iran, Iraq and Russia swiftly rejected any such proposal.

    Russia, which does not belong to OPEC, is the world's top oil producers and has been pumping crude at a rate of about 10.5 million barrels per day.

    After years of sanctions on Iranian oil, Iran's leaders have said they plan to bring 500,000 barrels per day to markets as soon as possible, and they anticipate reaching 1 million barrels. The world is already oversupplied with about 1.5 million barrels of oil.

    Kurt Hallead, co-head of energy research at RBC Capital Markets, said a Saudi cut was highly unlikely because it would essentially subsidize U.S. production and make room in the oil markets for Iran, the Saudis chief regional rival.

    Oil prices may be range bound for years, he told "Squawk Box" on Friday.

    "I think this is more like the period of 1991 to 1994, where you had about a three-year period of capacity absorption before the supply and demand lines kind of crossed again," he said.

    In his scenario, prices would move up and down between current levels and roughly $60 per barrel.
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    "Shale is the new Reality"

    “There is nothing at the moment that could be done from OPEC to correct the situation,” said an OPEC delegate from a Persian Gulf Country. “Shale is the new reality.”
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    Asian LNG market to enter deeper glut as demand falters, supplies soar

    Asia's liquefied natural gas (LNG) glut is set to deepen in 2016 as long-planned new production comes to the market just as demand from top buyers Japan and South Korea as well as China wanes.

    While analysts say that new consumer demand may offset dwindling use from established buyers, new supplies will outweigh overall orders, resulting in a low gas price outlook for years to come.

    "From having been an import basin, Asia will next year be going to have excess supplies and worse so in 2017," said David Hewitt, co-head of global oil and gas equity research at Credit Suisse.

    While term buyers will take most of the volumes from Australia's 13 new LNG supply-trains, commissioning cargoes over the next two years totalling 14 million to 15 million tonnes will go into the spot market, adding pressure to prices.

    Hewitt said he expected Asian LNG spot to fall to "eye-watering low" levels of below $5 per million British thermal units (mmBtu) in early 2016 and to hit a low of $4 during the year.

    Because of the emerging glut, Asian spot LNG prices LNG-AS have already plummeted by almost two-thirds since 2014 to around $7.30 per mmBtu.


    With this wave of supply, even rising demand from new customers that will outweigh the dips in demand from established importers will not be enough to balance the market.

    Japan imported 6.06 million tonnes of LNG last month, down 12.8 percent from a year ago, while South Korea's monthly imports have averaged 2.7 millon tonnes this year, the lowest since 2009, customs data showed.

    China's LNG demand could dip by around 300,000 tonnes this year, according to analysts, although this is expected to be a short-term dip rather than a long-lasting trend.

    A dozen new buyers - including Morocco, Poland, the Phillippines and Bangladesh - are expected to start importing LNG by 2020, creating about 13 million tonnes a year of new demand. But this will not consume the 14 million to 15 million tonnes of commissioning cargoes coming onto the market.

    Along with consumption from existing buyers, newcomers are expected to add 50 million tonnes per annum of demand by 2020, yet a huge 120 million tonnes a year of new LNG is scheduled to come online by then, according to industry expectations.

    With such an overhang in supplies, analysts and industry members say that some planned production will have to falter in order to rebalance the market.

    In another sign of a deepening glut, China's Sinopec has been given rare approval by its partners in the Australia Pacific LNG project to sell on some of the cargoes it doesn't need for itself, albeit with heavy restrictions.

    The A$24.7 billion ($18.06 billion) Australia Pacific LNG project is now starting operations and will produce 9 million tonnes of LNG a year when completed.

    Most LNG deals have so-called destination clauses which prohibit the sale of unwanted cargoes to third parties.

    However, ConocoPhillips, which holds 37.5 percent of the project, and Australia's Origin, with a similar-sized stake, have given Sinopec permission to sell on some cargoes it doesn't need, permitting they are sold within China or outside Asia and are sold linked to oil prices, according to Conoco. Sinopec holds 25 percent of the project.

    With oil-indexed LNG prices about a dollar higher than Asian spot prices and European benchmarks almost $3 per mmBtu cheaper, Sinopec will have a hard time selling the shipments. Higher freight costs from Australia to Middle East and European markets will also add to the price of Sinopec's cargoes.

    Read more at Reuters

    Attached Files
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    Jordan’s NEPCO targets spot LNG purchases

    National Electric Power Company of Jordan is expected to issue an LNG tender soon seeking cargoes from the spot market.

    NEPCO’s managing director assistant for operation and planning, Amani Al-Azzamtold Reuters on Thursday that Jordan expects to import around 20 percent of its LNG from the spot market in 2016 and 2017.

    He added that Jordan could import up to seven cargoes a year from the spot market in 2016 and 2017, noting that an LNG supply tender could be issued by the end of December, seeking one or two cargoes for delivery in the first quarter of next year.

    Jordan’s NEPCO already inked a deal with Shell for the supply of 36 LNG cargoes in 2015 and 2016
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    Turkey Turns to Iraq's Kurds for Gas Amid Pressure From Putin

    Turkey plans to build a pipeline to import gas from the Kurdistan Regional Government in northern Iraq, part of efforts to diversify its energy supply as relations with Russian President Vladimir Putin deteriorate.

    The state-run gas grid operator Botas will open a tender in two months for construction of the 180-kilometer (112-mile) pipeline, which will carry up to 20 billion cubic meters of gas a year from the border with Iraq to where the existing grid ends at Mardin, a Turkish official said Wednesday, asking not to be named in line with policy.

    Turkish officials have scrambled to secure alternative sources of energy since its F-16s downed a Russian warplane in the border region with Syria, triggering economic sanctions and intensifying verbal attacks from Putin. Though Russia has promised to adhere to its contractual supply obligations, the incident has left Turkey exposed.

    “In the long-term, Turkey needs to cut its dependence on Russian gas below 30 percent, from 55 percent now, and it also needs to speed up work on getting Kurdish gas,” Mehmet Ogutcu, chairman of London-based energy advisory firm Global Resources Partnership, said by phone on Wednesday. “Those occupying ruling positions in Turkey should stop promulgating the narrative that it can get gas from other sources -- it’s not that easy.”

    Turkey’s $800 billion economy relies on imports for almost all of its fossil fuel needs, with half of its natural gas coming from Russia at a cost of as much as $10 billion last year.

    Istanbul, Turkey’s most populous city that accounts for more than a quarter of national output, is almost entirely dependent on Russian gas imports through the Trans-Balkan pipeline, according to the Turkish official. Storage facilities around the city may not be sufficient to meet demand in the case of a prolonged cut in supply, he said.

    “On energy, Turkey is definitely more dependent on Russia than what the consensus seems to portray,” Naz Masraff, director for Europe at political risk consultants Eurasia Group, said on Monday. “If there were to be technical problems on the Trans-Balkan line for one or two days, that would really make Turkey and especially the Istanbul region struggle both in terms of power cuts, gas cuts, heating and production.”

    The value of Turkey’s business makes it unlikely that Putin will break Russia’s deals to supply gas, according to Emin Danis, energy program coordinator at Istanbul-based Caspian Strategy Institute.

    The pipeline to northern Iraq would further a relationship with Iraq’s Kurds that has improved in recent years, in contrast to the collapse of a ceasefire with autonomy-seeking Kurds in Turkey earlier this year. Turkey offers the sole route to market to the expanding Kurdish oil industry, and Turkish companies provide builders and consumer goods.
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    Oil rig count falls for 3rd straight week

    The US oil rig count fell by 10 to 545 last week, for a third period in a row, according to oil driller Baker Hughes.

    That's the lowest tally since the week of June 4, 2010.

    The gas rig count rose by 3 to 292.

    In the prior period, US oil producers idled 9 rigs, while the gas rig count dropped by 4.
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    Alternative Energy

    China starts building 2nd biggest offshore wind farm

    China's top wind power company has started building the country's second-largest offshore wind farm, state media said, as Beijing aims to boost the nation's clean power industry and cut dependence on fossil fuels that are contributing to smog.

    Construction of the project in the eastern coastal Fujian province, which is majority owned by Longyuan Power Group Corp Ltd, will take three years at an estimated cost of 8.2 billion yuan ($1.28 billion), Fujian Development and Reform Commission records show.

    The plant on Nanri island off the southeast coast of Fujian province will have installed capacity of 400 megawatts (MW) by 2018, state-run news agency Xinhua said on Friday.

    When complete, it will be second only to two other projects which have planned capacity of 600MW.

    State-owned and Hong Kong-listed Longyuan, a unit of China Guodian Corp, will invest 5.7 billion yuan, or 70 percent of the total funds, with the rest supplied by Jiangyin Sulong Heat and Power Generating Company.

    Since last year, China, the world's fifth-biggest offshore wind power producer, has approved 44 offshore wind projects in 11 provinces with combined installed capacity of 10.53 gigawatts (GW), according to the National Energy Administration (NEA).

    But only two of those were up and running by July, with many stalled by high construction costs of around 20,000 yuan per kilowatt engine, NEA documents show.

    As part of the country's target to have installed capacity of 200GW of wind power by 2020 and encourage investment in the growing sector, China has set prices for offshore wind power generators at 0.75-0.85 yuan per kilowatt hour, higher than the grid tariff of coal-fired plants.

    Grid congestion has stalled onland wind power deliveryEarlier this week, China said it would prioritize renewable energy, including wind and solar, as part of its electricity sector reforms.

    Offshore wind is a relatively new market for China, which launched its first 100MW project in Shanghai in 2009.

    Read more at Reuters
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    EU solar panel producers win Chinese import curb extension

    European solar panel manufacturers have won an extension of restrictions on Chinese imports after the European Commission agreed on Saturday to a review that keeps curbs in place for at least a year.

    Seeking to resolve a dispute about cheap Chinese imports, the Commission in 2013 set a minimum sales price and a limit on the number of Chinese-made solar panels, wafers and cells sold in the European Union.

    The restrictions were due to expire this month but the Commission said it had decided to consider a request by EU ProSun, an association of EU producers, to extend them.

    "The request is based on the grounds that the expiry of the measures would be likely to result in continuation of dumping and recurrence of injury to the (EU) industry," the Commission said in its Official Journal, referring to EU industry concerns that Chinese rivals would be able to import free of tariffs.

    The Commission's decision to start a so-called expiry review extends the current arrangement for at least a year while it is assessed.

    "As long as Chinese manufacturers fail to comply with basic international trade and competition rules, the EU must maintain the measures in full force and effect," EU ProSun said in a statement.

    European producers accuse China, whose solar exports to the EU rose to 21 billion euros ($21.2 billion) in 2011, of using soft loans and export credits to try to corner the EU market.

    China denies any wrongdoing, arguing that its products are more competitive.

    Read more at Reuters

    Attached Files
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    German grid operator sees 70% wind + solar before storage needed

    The company responsible for more than one-third of Germany’s electricity grid says there is no issue absorbing high levels of variable renewable energy such as wind and solar, and grids could absorb up to 70 per cent penetration without the need for storage.

    Boris Schucht, the CEO of 50 Hertz, which operates the main transmission lines in the north and east of Germany – and which is 40 per cent owned by Australia’s Industry Funds Management – says the industry’s views of renewable energy integration has evolved rapidly in the past decade.

    “It’s about the mind-set,” Schucht said at the Re-energising the Future conference in Paris, and later to RenewEconomy.

    “10 to 15 years ago when I was young engineer, nobody believed that integrating more than 5 per cent variable renewable energy in an industrial state such as Germany was possible.”

    Yet, Schucht says, in the region he is operating in, 42 per cent of the power supply (in output, not capacity), came from wind and solar – about the same as South Australia. This year it will be 46 per cent, and next year it will be more than 50 per cent.

    “No other region in the world has a similar amount of volatile renewable energy ….. yet we have not had a customer outage. Not for 35 or 40 years.”

    Schucht conceded that Germany, which through its Energiewende (energy transitions) has pioneered the push into variable renewable energy, made some mistakes in the early years, particularly in relation to the management of rooftop solar PV. But at that time, the penetration rate was low and renewables was only a niche market.

    He points to the changes made since then as proof that the integration is posing no issues. In the solar eclipse earlier this year, a ramp down of more than 10GW of solar PV and ramp up of 14GW of solar PV (both within minutes) were handled by the market with no need for intervention.

    “We believed in the market and education of market,” Schucht said. “We did not need to interfere. It was done by itself.”

    Because of this, Schucht believes that integration of 60 to 70 per cent variable renewable energy – just wind and solar – could be accommodated within the German market without the need for additional storage. Beyond that, storage will be needed.

    Schucht later told RenewEconomy that even higher levels of renewable energy could be absorbed. But before the grid went to 100 per cent renewable energy, he thought that attention should be turned to ensuring there was more renewable energy in the transport and heating sectors.

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    China to become global nuclear energy player with 110 reactors

    China will have 110 operational nuclear reactors by 2030, making it one of the largest nuclear energy users in the world by then, Power Construction Corp. of China Ltd. (PowerChina) said.

    Exports of indigenous technologies to be key thrust in the 13th Five-Year Plan (2016-20), said PowerChina.

    PowerChina said that the total scale of nuclear power generation from reactors both under construction and in operation in the country will reach 88 GW by the end of 2020, according to estimates in the draft 13th Five-Year Plan for the power industry.

    According to the draft plan, China will set aside 500 billion yuan ($78 billion) for setting up nuclear power plants using its homegrown nuclear technologies and add six to eight nuclear reactors every year from 2016 for the next five years.

    Though it is only a draft proposal, it will "set the tone during the annual legislative and political advisory sessions in 2016", the state-owned firm said.

    There are 22 nuclear reactors in operation and 26 under construction in China, according to the National Energy Administration.

    During the first nine months of this year, the listed firm saw its revenue rise 24.7% to 145 billion yuan from the same period a year earlier, according to a regulatory filing. It claimed to have built about one-third of the nuclear reactors that are currently operating in China.

    At the same time, China is also looking to popularize its homegrown pressurized-water nuclear technology known as Hualong One both at home and abroad.

    In May, work on a pilot project involving Hualong One started in Fuqing, Fujian province, indicating that China is ready to export its nuclear technologies, experts said.

    Sun Qin, chairman of China National Nuclear Corp, said the third-generation nuclear technology meets the highest requirements for global safety standards and has a competitive edge over others in terms of economic performance and reliability.

    Chinese nuclear companies are already making huge inroads in global nuclear markets such as the United Kingdom, Argentina and Kenya.
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    Precious Metals

    De Beers suspends operations at Canada's Snap Lake diamond mine

    De Beers Canada is suspending operations at its unprofitable Snap Lake diamond mine in the Northwest Territories due to poor market conditions, and said on Friday it will evaluate the Arctic mine's potential over the next year.

    De Beers, 85 percent owned by Anglo American and 15 percent by the government of Botswana, said work to put the underground mine on care and maintenance has started and will last up to nine months.

    The mine, which had 595 employees and 200 contractors, has not turned a profit since it began production in 2008. Despite efficiency gains in recent years, Snap Lake was not expected to become profitable for three years due to declining prices, said spokesman Tom Ormsby.

    Technically challenging to mine, Snap Lake also had groundwater problems that added to high costs. Planned to operate until 2028, it produced 1.2 million carats last year.

    De Beers is terminating 434 employees and will employ 120 for the suspension work. Ongoing care and maintenance operations will require about 70 staff, it said.

    Another 41 employees have been transferred to Gahcho Kue mine, now being built in the Northwest Territories (NWT) with Mountain Province Diamonds, a 49-percent project partner. Sixty more could be transferred in 2016.

    Gahcho Kue is due to start production in late 2016 and operate for 11 years.

    Mountain Province Chief Executive Patrick Evans said the suspension will further trim De Beers' output, already cut to 29 million carats from 32 million carats this year.

    "Supply restraint on the part of the major producers is very prudent and it's certainly going to help relieve the pressure that exists in the mid-stream and balance the supply-demand equation," he said.

    Slower demand growth in China for diamond jewelry along with a glut of supply held by stone cutters and polishers have helped push the price of rough stones down by 18 percent this year.

    "It's going to be a shock to our economy," said Tom Hoefer, executive director of the NWT and Nunavut Chamber of Mines.

    Diamonds directly contributed 18 percent to the NWT's gross domestic product last year, but some put the figure closer to 40 percent when related spending for such things as construction is included, Hoefer said.

    Rio Tinto sees production at its majority-owned Diavik mine ending in 2023. Dominion Diamond, which holds 40 percent of Diavik and 89 percent of Ekati mine, could extend Ekati operations to 2031.

    Read more at Reuters

    Attached Files
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    Base Metals

    Nyrstar suspends U.S. mine in face of weak zinc price

    Belgium's Nyrstar NV said on Monday it was suspending operations at another mine as it seeks to reduce cash consumption in the face of weak zinc prices.

    The company, the world's largest zinc smelter, said it would place its Middle Tennessee Mines on so-called care and maintenance, resulting in about 50,000 tonnes of zinc in concentrate being taken out of the market.

    Zinc metal production at Nyrstar's nearby Clarksville smelter would be reduced by about 7 percent, equivalent to some 9,000 tonnes per year. It would continue to be supplied by East Tennessee Mines and elsewhere.

    "We continue to take decisive action to reduce spending in our mines, and further mine operation suspensions may be necessary if the depressed metals price environment continues," Nyrstar chief executive Bill Scotting said in a statement.

    Nyrstar said last month it would consider cutting zinc concentrate output by 400,000 tonnes if prices remained depressed. That would be on top of 100,000 tonnes removed by the earlier suspension of its Myra Falls operations in Canada and Campo Morado operations in Mexico, it said.

    Zinc three-month forward prices are hovering around six-year lows and are down a third since early May.

    Nyrstar has also announced plans for a rights issue of 250-275 million euros ($272-299 million) to shore up its balance sheet and said it could even exit its poorly performing mining business.

    "We expect to complete the process to divest the majority or all of our mines over the course of 2016," Scotting said on Monday.

    Read more at Reuters

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    Iluka scraps Kenmare bid, but Mozambique mine may still be in reach

    After nearly two years of talks to snare a large mineral sands mine in Mozambique, Australia's Iluka Resources canned a $77 million all-share bid for Kenmare Resources Plc after the Irish group's top shareholder refused to back the bid.

    Kenmare owns the Moma mine in Mozambique, which Iluka wanted to snap up cheaply after a slump in prices for titanium feedstock used in paint pigments battered the debt-laden Irish company.

    Under Irish rules, Iluka is blocked from making a fresh offer for 12 months, but it may still be able to grab the Mona mine if Kenmare fails to meet its lenders' requirements in 2016.

    According to Kenmare's half-year report, lenders have said if a deal fails to go ahead, the company must set out a timetable by the end of January 2016 for cutting debt, which means it may have to sell new shares or convert debt to equity.

    "If this is ultimately unsuccessful and the company ends up in the hands of the debt providers, it could provide an opportunity for Iluka to purchase the assets without any equity component," Citi analysts said in a note on Monday.

    Kenmare's board and management had been in favour of teaming up with Iluka, but top shareholder M & G Investment Management, baulked after Iluka cut its offer in November for the second time to 0.007 Iluka shares for every Kenmare share.

    Iluka Chairman Greg Martin said Iluka was "very disappointed" Kenmare's board had been unable to secure a promise from M&G to support the bid, which was a pre-condition for the deal to go ahead.

    Even after being cut by about 80 percent from its original proposal of 0.036 Iluka shares for every Kenmare share, the offer was worth more than four times Kenmare's closing price of 0.44 pence on Dec. 4.

    "Iluka believes that in a heavily pro-cyclical resources industry, value can be generated by acting counter-cyclically, where appropriate," Managing Director David Robb said in a statement.

    The company said it still has its own growth option, with the Puttalam project in Sri Lanka, where it has a large sulphate ilmenite resource similar to Kenmare's in Mozambique, but that project is still a long way from being built.

    Read more at Reuters
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    Steel, Iron Ore and Coal

    Glencore to cut more Australia coal output as price sinks

    Commodities group Glencore said it will idle its loss-making Collinsville colliery in Australia for three weeks starting later this month and will restrict production next year as thermal coal prices deteriorate.

    Glencore said it would also lay off 80 percent of the remaining staff at the mine in Queensland state early next year with the loss of 180 jobs, having already cut 80 positions in May.

    "In 2016, we will phase down overburden removal and only produce coal from in-pit inventory and field stockpiles," Glencore said in a statement emailed to Reuters. "We will reassess the situation during the year."

    Collinsville produced 2.24 million tonnes of thermal coal along with some coking coal in 2014, according to Glencore data.

    The world's biggest thermal coal exporter

    , Glencore overall shipped 38.8 million tonnes from Australia in the first nine months of 2015.

    A 43 percent fall in thermal coal prices over the past 26 months and a supply glut had contributed to Collinsville's financial losses, it said.

    The main job cuts will be in place by the beginning of March 2016.

    Glencore said in February that it would reduce its Australian coal production by 15 percent in 2015 to avoid selling at a discount into an oversupplied market.

    Read more at Reuters

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    China's Sichuan Shengda Group says unable to pay bond investors on time

    Chinese coal miner and pig iron producer Sichuan Shengda Group Ltd said on Monday that it has not been able to make full payments on time to bond holders.

    The privately-owned company issued 300 million yuan ($46.83 million) worth of bonds on Dec. 5, 2012, giving investors the option to sell back the debt in three years, with a fixed annual yield of 7.25 percent.

    But Shengda said in a statement on Monday that it has not been able to make full payments on both principle and interests.

    Read more at Reuters
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    Iron ore sinks below $40 a tonne

    Iron ore prices got hammered again Friday, sinking to a 10-year-low of $39.40 a tonne, the lowest ever recorded by price assessor The Steel Index (TSI), which began compiling data in 2008.

    Prices were set for their steepest weekly drop in five months

    According to Metal Bulletin, the spot price for benchmark 62% fines traded Friday just above the critical $40/tonne mark (at $40.03).Prices were set for their steepest weekly drop in five months as declining Chinese steel demand keeps adding to a global oversupply of the steelmaking raw material.

    Iron ore has not traded this low since around 2007, when annual contract pricing between the Big 3 producers — Vale, Rio Tinto and BHP Billiton — and Chinese and Japanese steelmakers were still the industry norm.
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    China iron ore concentrates producers hold prices in rout

    Most of China's domestic iron ore concentrates suppliers have refrained from cutting their prices further over the week after a substantial 9% reduction the previous week, as they hold back looking for clearer signs from the seaborne cargo market, according to sources.

    Platts assessed China's domestic 66% Fe iron ore concentrate delivered to steel mills in Tangshan city in Hebei province in a slightly narrower range at Yuan 450-Yuan 460/dry metric ton ($70-$72/dmt) Friday, compared with Yuan 450-470/dmt a week earlier, both on cash terms and including 17% value-added tax.

    The previous week's proactive move to cut prices in anticipation of weakening consumption from Chinese steel mills into December amid tightening cash flow has failed to yield much in the way of sales, officials from domestic iron ore mines admitted.

    A procurement official from a 3 million mt/year steel mill in Hebei disclosed that they have been relying on iron ore supplies from term contracts despite prices being than on the spot market because of tightness in cash.

    "We are really with little cash, so at least payments by letters of credit for term supplies will give us more time in full payments, and price is no longer the only or primary concern now," he explained.

    Besides, many more mills in Hebei are mulling either retrenching employees or reducing their production if really necessary to trim costs and weather the month.

    Under such circumstances, iron ore inventories should be as low as possible as mills need to be ready to cut production should other means of trimming costs be insufficient, market sources said.

    Chinese miners, therefore, will not further reduce prices unless seaborne cargoes fall below $40/dmt CFR North China and hold there, they added.

    Iron ore supply in China is not an issue at all, both from domestic production and overseas cargoes, which means Chinese mills can wait and pick up material on the spot market as needed, the sources agreed.

    Indeed, iron ore inventories at the Chinese ports have been rising slowly.

    As of November 27, the volume at 44 Chinese ports increased by 1.55 million mt to 87.65 million mt, the latest statistics from the Dalian Commodity Exchange showed, with the tonnage being sufficient for 27 days of steel output nationwide based on the present daily output level.

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    Vale sees global seaborn iron-ore demand at 1.35bn to 1.4bn t in 2016

    Vale SA, the world's biggest iron ore producer, said on Friday it sees global seaborn iron-ore demand at a healthy 1.35-billion to 1.4-billion tonnes next year. "Technically prices should be around $50/t next year, but there's much more going on than that, including sentiment," said Peter Poppinga, Vale's executive director for base metals and information technology. 

    Spot iron ore prices fell below the psychological $40/t threshold on Friday and were set for their steepest weekly decline in five months as falling Chinese steel demand exacerbated a global glut of the steelmaking raw material.
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    Nippon Steel to buy 1.8-2.6 mln T/year of iron ore from India

    Nippon Steel & Sumitomo Metal Corp , Japan's biggest steelmaker, said on Friday it had renewed a contract to buy 1.8-2.6 million tonnes of iron ore annually from India's state-owned Metals & Minerals Trading Corp (MMTC) over three years.

    The deal follows the approval by India's cabinet in June to renew a long-term contract between MMTC and Japanese steelmakers for the supply of high-grade iron ore, despite growing pressure in India to use its natural resources to meet domestic needs.

    Under the contract, India will supply 3.0-4.3 million tonnes of the steel-making material a year to Japanese steelmakers.

    JFE Steel, a unit of JFE Holdings Inc, and Nisshin Steel Co Ltd said they had also renewed their contracts with MMTC, but declined to disclose their purchase volumes.

    A Kobe Steel Ltd spokesman said it could not immediately confirm whether or not the firm had signed a deal.

    Despite the plunging price of iron ore in an oversupplied global market, Japan's steelmakers want to diversify procurement sources to ensure a long-term supply of the raw material, as Japan depends on Australia and Brazil for its imports.

    In the fiscal year that ended March 2015, Japan imported a total of 136.8 million tonnes of iron ore, 61.1 percent of which came from Australia and 26.5 percent from Brazil.

    Read more at Reuters
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    Vale says Valemax ship sale, leaseback could fetch $1.1 bln

    Brazil's Vale SA said on Friday that it plans to sell its 11 remaining Valemax iron ore carriers and lease them back in transactions that could raise $1.1 billion.

    Vale has said it has experienced some delay in selling the ships, the key to its attempt to cut transportation costs between its Brazilian mines and Asian customers, as it seeks to get the best freight rates under contracts to lease the ships back from the new owners.

    Each more than 360-meter-long (1181-ft-long) ship can carry 380,000 to 400,000 tonnes of ore and are among the biggest vessels afloat.

    Vale has been selling its part of the world's 35-vessel Valemax fleet for about $110 million each, Luciano Siani, chief financial officer of Rio de Janeiro-based Vale told investors at a conference in London.

    The ships are needed to help Vale compete with its principal Australian rivals in the world sea-borne iron ore market. BHP Billiton Ltd and Rio Tinto Ltd, which are closer to China, the world's largest market for the mineral, the main ingredient in steel.

    By carrying more ore in each vessel, Vale's per-tonne freight costs falls. Cost cutting has become an urgent matter for Vale as iron ore .IO62-CNI=SI fell below $40 per tonne for the first time since spot-market pricing was implemented for major customers in 2008.

    It is also now at its lowest since 2005, when prices were still set between major steelmakers Vale and other top miners at annual negotiations.

    Vale is also counting on the ships to reduce its carbon footprint, the company said. The current Valemax vessels burn 35 percent less fuel per tonne of ore moved and the newer vessels will burn even less, said Peter Poppinga, head of Vale's ferrous metals division.

    During a question and answer session with investors in London, Poppinga also said Vale plans to drastically reduce ore stockpiles in its southern mine system in Minas Gerais state part of efforts to "shrink" its southern system operations.

    The southern system has higher costs, and produces lower grade ore on average than the company's northern system, which is centered on its giant Carajas mining complex in Brazil's Amazon state of Pará.

    With iron ore prices low, the company may not pay dividends next year in order to preserve cash to finish its planned final year of a giant expansion to its Carajas mine complex, Siani said.

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    Thyssenkrupp launches programme to improve steel business

    German industrial group Thyssenkrupp launched a five-year programme on Friday to improve the performance of its steel business amid worsening markets.

    It said the so-called "one steel" programme aimed to focus the business more sharply on customers, raise production efficiency, innovate faster and improve the supply chain.

    "Following a strong focus on cost reduction measures in recent years and successful financial stabilization, the steel business now aims to maintain and continuously improve its performance," Thyssenkrupp said in a statement.

    Thyssenkrupp more than doubled operating profit at its European steel business in the year ended September thanks to deep cost cuts, but cheap steel imports

     from China - where the market is oversupplied - continue to depress prices.

    "The situation on the steel markets has not stabilised as hoped but has worsened considerably in recent months," it said.

    Thyssenkrupp said the programme would start at Steel Europe and may eventually be extended to its loss-making Brazilian steel operations. (

    Read more at Reuters

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