Mark Latham Commodity Equity Intelligence Service

Tuesday 17th May 2016
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    Asked about aid, China says Venezuela crisis is domestic matter

    An economic crisis in Venezuela is a domestic matter, a spokesman for China's Foreign Ministry said on Monday, when asked if the country planned to give aid to the Latin American nation.

    The OPEC country, which has received about $50 billion in Chinese financing since 2007, is also struggling with a contracting economy and runaway inflation, following a collapse in oil prices.

    Venezuelan President Nicolas Maduro has imposed a 60-day state of emergency due to what he called plots by the United States and within his own country to subvert him.

    "We hope that Venezuela can properly handle their current domestic situation and safeguard the stability and development of the country," said Hong Lei, a spokesman for China's Ministry of Foreign Affairs.

    He declined to comment specifically on the situation in Venezeula, however.

    Investors have long hoped China would provide financial relief, or at least ease the terms of a major loan pact by which Venezuela borrows money and repays in shipments of oil and fuel.

    The Venezuelan opposition won control of the National Assembly in an election in December, propelled by voter anger over product shortages, raging inflation that has annihilated salaries, and rampant violent crime, but the legislature has been routinely undercut by the Supreme Court.

    Protests are on the rise and a key poll shows nearly 70 percent of Venezuelans now say Maduro must go this year.
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    Oil and Gas

    Iraq Oil Surge Seen Losing Steam Just as Markets Need More Crude

    Iraq’s oil industry is on a roll. Production has jumped more than 40 percent since mid-2014 and exports are at near-record levels.
    It probably won’t last. Plunging government revenue is hampering the state’s ability to invest, while OPEC’s second-biggest crude producer is reaching the limits of its capacity to store and export oil, according to analysts at Energy Aspects Ltd. and FGE. Spending on the country’s biggest fields may shrink to as little as $7 billion this year from about $13 billion in 2015 and $20 billion in 2014, Richard Mallinson of Energy Aspects said Monday.

    Iraq has boosted output after decades of sanctions, war and under-investment, with international companies such as BP Plc and Lukoil PJSC developing some of the largest deposits in its oil-rich southern region. The country is exporting 3.3 million barrels a day of crude this month from the southern port of Basrah, and it targets keeping shipments at that level for the rest of the year, Deputy Oil Minister Fayyad Al-Nima said in a May 13 interview. Without more investment, these exports are sure to slide, the analysts said.

    “We’re going to see production growth flatten and then start to decline by late this year and into 2017,” Mallinson said by phone from London. “What does that mean if Iraq doesn’t deliver growth this year? If you were expecting a big increase from Iraq and we don’t see that, it will add to bullish sentiment in the market.”

    While crude continues to flow from Rumaila, West Qurna and other fields in the south, parts of northern Iraq are a battleground for forces trying to dislodge the Islamic State militants who have occupied swathes of territory since 2014. The conflict has prevented the government from exporting oil through its northern pipeline to Turkey, and the collapse of a plan to share oil revenue with the self-ruling Kurds in northeastern Iraq has limited sales from fields in the region.

    Iraq pumped a record 4.51 million barrels a day in January and 4.31 million in April, according to data compiled by Bloomberg. Its total production capacity, including in Kurdish areas, is 4.8 million barrels a day, and increasing that to a target of 5 million will depend on oil prices, Al-Nima, the deputy minister, said. Domestic demand for oil as fuel for power plants is also a constraint on exports, Al-Nima said.

    Investment in Iraq’s southern fields may fall by 30 percent to 40 percent this year as the government, which gets most of its income from oil sales, delays payments to foreign companies and limits future spending, said Tushar Tarun Bansal of FGE in Singapore.

    “Investment in new wells isn’t getting done, and that will show up in reduced production later in the year,” Bansal said. “The market is yet to account for the impact that will have, and it could lead to higher prices.”
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    China April preliminary oil demand rises 1.7 pct to record high

    China's April preliminary oil demand rose 1.7 percent from a year ago as refining throughput rose as independent refiners increased their processing runs and as fuel exports dropped.

    China consumed about 10.62 million barrels per day (bpd) of oil in April, a record daily consumption volume, according to Reuters calculations based on preliminary government data published on Friday.

    The gain in demand, which excludes adjustments of oil stocks, was mainly due to an increase in refinery throughput in part at independent plants.

    In April, Chinese refiners processed 10.89 million bpd of crude oil, up 2.4 percent year on year, data from the statistics bureau showed. The figure compared to March's runs at 10.58 million bpd.

    Throughput for the January to April period rose 2.9 percent on year to about 10.69 million bpd.

    China's refined fuel exports fell to 3.68 million tonnes in April from 3.75 million tonnes in the previous month. A year ago, China was a net importer of refined oil products.

    The implied oil demand is the sum of domestic refinery throughput and net imports of refined products. Reuters will publish a more detailed demand calculation later in April, broken down by products and amended for changes in fuel stocks based on data yet to be released.
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    Saudi Aramco awards Hasbah gas expansion contract

    State oil giant Saudi Aramco IPO-ARMO.SE has awarded a $1 billion-plus contract to India's Larsen & Toubro (L&T) and Singapore-based Emas AMC for the expansion of the offshore Hasbah sour gas field, industry sources said.

    Increasing its supply of gas is a top priority for Saudi Arabia. Many industrial firms have complained about a shortage crimping expansion plans, while the kingdom is trying to use more of the fuel for power generation and water desalination instead of burning crude oil, which it wants to export.

    Work on the expansion scheme includes building platforms and pipelines, with the field's supply feeding the Fadhili gas plant, a $6 billion complex that will include a gas processing unit and sulphur recovery.

    Saudi Aramco declined to comment. L&T did not respond to emailed requests for comment, while Emas was not available for immediate comment.

    It is the second major contract win for the duo in recent months: Emas AMC, a unit of Ezra Holdings, also teamed up last year with the Indian firm to secure a long-term contract with Aramco to work on offshore facilities.

    The expansion of Hasbah will supply 2 billion standard cubic feet per day (scfd) of gas to the Fadhili plant, for which Aramco awarded a construction contract last year. The remaining 500 million scfd of supply for the plant will come from the onshore Khursaniyah field.

    Hasbah already feeds Wasit, another major gas plant. Aramco said in March it had started producing natural gas from the offshore field ahead of peak summer demand in the world's largest oil exporting country.

    An industry source told Reuters the Wasit plant would reach full capacity in July of processing 2.5 billion scfd of gas.

    Attached Files
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    Libya to resume oil shipments from Hariga after talks -sources

    May 16 Libya will resume oil shipments from the port of Hariga after an agreement was reached at talks in Vienna between rival oil officials representing the east and west of the country, Libyan oil sources told Reuters.

    Exports from the port have been blocked since early this month due to a standoff between the rival eastern and western National Oil Corporations (NOC).

    The NOC in Benghazi, which is loyal to Libya's eastern government, has prevented the loading of a tanker sent by the NOC in Tripoli, since the former tried unsuccessfully last month to export a cargo of crude for the first time.
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    Rosneft announces first quarter 2016 operating results

    - Average daily hydrocarbon production of 5.21 mmboe, an increase both compared to Q1 2015, and for two consecutive quarters (+2.5% compared to Q3 2015)
    - Production drilling grew by 52% with maintaining in-house OFS share above 50%
    - Gas production grew by 6% to 16.72 bcm against Q1 2015
    - Refining throughput optimization with refining depth up to 68.9%
    Euro-5 motor fuel production increased by 1.7 times against Q1 2015


    Hydrocarbon production continued to grow in Q1 2016. The level of production reached 5.21 mmboed (64.0 mmtoe), up by 0.2% against Q1 2015 and by 2.5% over the last two quarters.

    In Q1 2016 the Company increased its production drilling by 52% against Q1 2015 to 2.08 million meters as established by the targets for the year. The share of in-house services in the total drilling footage consistently exceeds 50%. New wells put into operation grew by 59% compared with Q1 2015 (with horizontal wells share of 30%).

    Liquid hydrocarbon production in Q1 2016 returned to the level of Q1 2015 and amounted to 50.2 mmt. The largest contribution to these positive production dynamics was provided by: RN-Uvatneftegaz (+13.2%), RN-Severnaya Neft (+17.6%), Sakhalin-1 project (+23.1%), Samaraneftegaz (+6.0%), as well as the Northern tip of the Chayvo field (+39.4%).

    RN-Uvatneftegaz started commercial oil production at a new field of the Uvat project - the West Epasskoe (crude oil ABC1+C2 recoverable reserves exceed 17 mmt). The technological targets of the West Epasskoe field are included in the Eastern Hub in the south of the Tyumen region enabling to gain synergies through the use of existing fields' infrastructure.

    In March 2016, the Company produced 120 mmt of oil at the Vankor field since its commissioning in 2009. The project of drainhole well completion is being successfully implemented at the field. Experience in operating such wells has shown a significant increase in their productivity.In Q1 2016, Rosneft in cooperation with Statoil successfully completed a pilot project on the selection of efficient technologies PC1 reservoir development in the North-Komsomolsk field (Yamalo-Nenets Autonomous District, operator - RN-Purneftegas LLC). Total ABC1+C2 recoverable reserves of the North-Komsomolsk field amount to 203 mmt of oil and condensate and 197 bcm of gas. We were able to conduct pilot operation of 2 horizontal wells in different operating modes, and perform a number of well tests to update the geological and hydrodynamic field models. The average flow rate during the operation exceeded initial expectations and reached more than 75 tpd. Production potential is estimated at more than 100 tpd per well. Over 7,000 tons of oil was produced during the period of pilot operation.

    In Q1 2016, the Company started production drilling at the Tagul field (ABC1+C2 recoverable reserves stand at 286 mmt of oil and condensate and 228 bcm of gas), which is part of the Vankor cluster. The drilling is directional with primarily horizontal completions. During 2016, it is planned to complete drilling about 9 wells and continue with field infrastructure development.

    In Q1 2016, gas production amounted to 16.72 bcm, which is 1% above the level of Q4 2015 and 6% above Q1 2015. One of the key factors in gas production growth for the periods indicated is the startup of the 2nd stage of Rospan's Novo-Urengoi comprehensive gas and condensate processing plant in a comprehensive testing mode in Q4 2015. This facility will enable to increase the actual performance of the GPP to 11 million cubic meters of gas per day and 1,700 tons of condensate per day. Another significant factors of the gas production growth are the start of the third and fourth wells at the Northern tip of the Chayvo field and commissioning of the gas processing plant at RN-Purneftegaz's Barsukovsky field in December 2015.

    The utilization of associated gas in Q1 2016 grew to 91% compared with 87% in Q1 2015. The improvement of APG utilization is an important element of environmental policy.

    Much more information:

    Attached Files
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    Japan's upstream oil and gas investment to tumble in 2016/17

    Japan's upstream oil and gas investment to tumble in 2016/17

    Investment by big Japanese firms in upstream oil and gas developments is set to fall by around 40 percent to about 1.2 trillion yen ($11 billion) in 2016/17 due to current low prices, a government Energy White Paper showed on Tuesday.

    The upstream investments by 10 firms including Inpex Corp, JX Holdings, Mitsubishi Corp and Mitsui & Co had already slipped from 2.1 trillion yen in 2014/15 to 1.9 trillion yen in the year ended in March, the trade ministry said.

    The other firms surveyed are Japan Petroleum Exploration (Japex), Cosmo Energy Holdings, Idemitsu Kosan, Itochu Corp, Marubeni Corp and Sumitomo Corp.

    Globally, top oil companies have struggled to cope with a roughly 55 percent decline in oil prices since their 2014 peak, triggering a wave of spending cuts on new wells and projects to conserve cash.

    International Energy Agency (IEA) Executive Director Fatih Birol said last month that global upstream investment fell by 24 percent in 2015 and is set to fall by 18 percent in 2016.

    This would be the first time that the upstream investment has fallen for a second straight year since the 1980s, he said.

    Birol said annual global upstream investment needs to be at about $630 billion a year to compensate for declining output at existing fields and maintain current production levels.

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    Oil sand work camps evacuated as Alberta wildfire moves north

    A massive wildfire burning around the oil sands hub of Fort McMurray was growing and moving rapidly north late on Monday, forcing firefighters to shift their focus to protecting major oil sand facilities north of the city, officials said.

    The sudden movement of the fire prompted the evacuation of some 4,000 people from work camps outside Fort McMurray, with all northbound traffic once again cut off at the city, the Regional Municipality of Wood Buffalo said.

    Suncor Energy Inc and Syncrude Canada confirmed they had evacuated workers from the affected area. Their major facilities were under a precautionary notice with the fire still some 15 to 20 kms (10-12 miles) away, officials said.

    A dozen work camps south of the major projects faced mandatory evacuation notices.

    "The urgency we're looking at is with regards to the oil gas infrastructure," Scott Long, executive director of the Alberta Emergency Management Agency, told reporters in Edmonton, adding Fort McMurray itself appeared to be safe for now.

    The entire population of Fort McMurray, about 90,000 people, was forced to flee nearly two weeks ago as the uncontrolled wildfire raged through some neighborhoods and destroyed about 15 percent of structures.

    On Monday, the blaze continued to burn uncontrolled, now covering 285,000 hectares (704,000 acres), officials said. By Monday evening it was moving 30 to 40 meters (98 to 131 feet) every minute and had jumped a critical firebreak north of the city to push into the oil sand camp areas.

    "When you have this type of extreme fire behavior, it doesn't matter what tankers you put in front of it, or how many helicopters, mother nature is going to continue to move that fire forward," wildfire manager Chad Morrison said.

    Morrison said the blaze was expected to slow into the evening and that it was unclear if it would reach the major oil sand facilities, though responders were preparing for that eventuality.

    A Suncor spokeswoman said 120 people were evacuated from its MacKay River plant and camps as a precautionary measure Monday afternoon, adding the facilities were not at risk from the fire.

    Syncrude, a joint venture among numerous energy companies operating in the region, said on Twitter that it was relocating its workers to safety.

    The fire also threatened Enbridge Inc's Cheecham crude oil tank farm south of Fort McMurray. The blaze, about 1 km (1,094 yards) away from the tank farm, was under control with the wind cooperating as the company's industrial firefighters tackled the fire, officials said earlier in the day.

    Enbridge said a firebreak around the terminal was being widened and that crews were assessing other fire suppression tactics like spraying down facilities. It said some pipelines in and out of the terminal were operating, and the situation was being monitored.

    Roughly a million barrels per day of oil sands crude production was shut in as a precaution and because of disruptions to regional pipelines, and much of that production remains offline.

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    WTI curven now building a big 'kink'

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    Range Resources to Buy Memorial Resource Development for $3.3 Billion

    Range Resources Corp., a Fort Worth, Texas, natural-gas producer, on Monday said it agreed to buy rival energy company Memorial Resource Development Corp. in an all-stock deal valued at $3.3 billion.

    The agreement also calls for Range to take on $1.1 billion in debt owed by Memorial. Range will absorb the smaller driller, adding its Louisiana operations to existing acreage and wells across Pennsylvania, Texas and Oklahoma.

    Once it closes, the transaction will rank as one of just a handful of deals executed between sizable independent U.S. energy producers during the oil-and-gas downturn.

    When Whiting Petroleum Corp. announced its acquisition of Kodiak Oil & Gas Corp. in mid-2014, the deal was valued at $3.8 billion, plus $2.2 billion in debt. Noble Energy Inc.’s acquisition of Rosetta Resources Inc., announced a year ago, was valued at $2.1 billion, plus $1.8 billion in debt.

    Jeff Ventura, chief executive of Range, said integrating Houston-based Memorial’s assets will give Range a strategic position on the East and Gulf coasts, and more exposure to natural gas demand. Gas accounted for 71% of the Range’s production last year, while oil and other liquids accounted for 29%, company filings show.

    Both Range and Memorial have seen the value of their shares cut in half during the energy bust, as the price of oil has dropped from more than $100 to under $50 today. In that time, the benchmark U.S. natural gas price has fallen from more than $4.50 per million British thermal units to just over $2. Range shares closed at $42.01 Friday, down from more than $90 just before oil prices peaked in late June 2014. Shares of Memorial have fallen from nearly $30 in September 2014 to $13.45 a share as of Friday.

    Range will issue 0.375 shares, worth $15.75 based on Friday’s closing price, for each share of Memorial, a 17% premium to the Memorial’s closing price on Friday. Memorial shareholders will own 31% of the combined company, and Memorial will have the right to nominate one of its independent directors to Range’s board.

    The companies expect the deal to close in the second half of the year.
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    SandRidge Energy files for bankruptcy protection

    SandRidge Energy Inc and master limited partnership Breitburn Energy Partners LPfiled for bankruptcy protection on Monday, the latest U.S. oil and gas companies to fall victim to weak oil prices.

    A plunge in global crude prices LCOc1 has now pushed at least 28 publicly traded North American oil and gas producers to seek bankruptcy protection since early 2015, according to a Reuters review of regulatory filings.

    SandRidge said in a court filing that it had total assets of $7.01 billion and total debt of $4 billion as of March 31. 

    Breitburn listed assets and liabilities of $1 billion to $10 billion.

    SandRidge, which has been in talks with creditors on a restructuring deal, said on Wednesday it would not be able to file financial results for the quarter ended March 31 on time.

    Small oil and gas producers have largely exhausted funding alternatives after issuing more equity and debt, tapping second-lien loans and shedding assets over the last two years to stay afloat as banks trim credit lines.
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    Penn West Petroleum flags going concern risk

    Canadian oil and gas producer Penn West Petroleum Ltd said on Monday it may default on its financial covenants at the end of the second quarter and raised doubts about its ability to continue as a going concern.

    Penn West had long-term debt of C$1.86 billion as of March 31, or $1.44 billion at current exchange rates.

    The company said it was in talks with lenders on amending its financial covenants, which if successful would reduce the risk of default.

    Penn West said it would try to raise money by selling more assets and would seek funding from investors.

    The Calgary-based company, like other oil and gas companies, is suffering from a near-60 percent slump in global crude prices since mid-2014.

    The plunge has pushed at least 28 publicly traded North American oil and gas producers to seek bankruptcy protection since early 2015, according to a Reuters review of regulatory filings.

    Penn West, which reported a smaller first-quarter loss on Monday due to lower expenses, said total production fell 18.9 percent to 77,010 barrels of oil equivalent per day in the three months ended March 31.

    The company slashed its budget by as much as 90 percent in January. It also cut about 35 percent of its workforce in September and stopped paying dividend from the next month in an effort to reign in spending.
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    Producer/merchants' total holdings in NYMEX crude futures largest since 2013

    Producer/merchants massively boosted their total holdings in crude futures for the reporting week ended May 10, data from the Commodity Futures Trading Commission showed Friday.

    This brings their total holdings in NYMEX crude -- the sum of longs and shorts -- to 702,586 contracts, the most since October 2013, the CFTC data showed.

    The group added 25,041 longs and 20,180 shorts, which effectively left them net short by an unremarkable 283,534 contracts. However, the action comes amid a rather large increase in total open interest for December crude futures, which rose 8,511 contracts to 212,925 contracts.

    With December crude touching $49.26/b last week, crude producers -- a substantial portion of the producer/merchant category -- were likely attempting to help lock in a floor through the traditionally very liquid December contract.

    This week, a number of crude producers said they were more actively hedging. Devon Energy said it would look at more "opportunistic" hedges while keeping crude production around 50% hedged. And Marathon Oil said it was looking at a $40/b floor for its 2016 oil hedges. Pioneer Natural Resources said it was 50% hedged for 2017 and 85% hedged this year.

    ConocoPhillips, too, may start to hedge, CEO Ryan Lance said Tuesday. The company currently does not hedge any of its roughly 800,000 b/d of global crude and bitumen production, Lance said.

    Money managers, meanwhile, piled headlong back into short positions. The group added 20,367 shorts and cut 659 longs, pulling their net long position lower by 21,026 contracts to just 191,731 contracts.

    This marks the second straight week the group has trimmed its net long position, and comes as prompt crude futures rose just over $1 to $44.46/b over the reporting week.

    Money managers had built up a substantial net long position between the beginning of the calendar year through mid-March, a period that saw crude prices hit bottom in mid-February before rising steadily ever since. That net long has proven difficult to maintain, however, having drifted below 200,000 contracts both last week as well as in early April.

    Swap dealers were also very active last week, adding 12,868 longs and cutting 5,857 shorts, leaving their net short position 18,725 contracts leaner at 8,087 contracts. Other reportables were less busy, but still cut their net long by 5,558 contracts to 100,229 contracts.
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    Alternative Energy

    Ontario to spend $5.4 bln to cut carbon footprint

    The government of the Canadian province of Ontario plans to spend more than C$7 billion ($5.41 billion) over four years from 2017 in a bid to cut the province's carbon footprint, the Globe and Mail reported on Monday.

    The province will begin to phase out natural gas for heating, provide incentives to retrofit buildings and give rebates to buyers of electric vehicles, according to a Climate ChangeAction Plan reviewed by the newspaper.

    The government plans to spend C$3.8 billion on grants, rebates and other subsidies to retrofit buildings, and move them off natural gas and on to geothermal, solar or other forms of electric heat, the Globe reported. (

    Another C$1.2 billion will go to help factories and other industrial businesses cut emissions, such as by buying more energy-efficient machines, the Globe said.

    The plan requires gasoline sold in the province to contain less carbon, lays out building code rules requiring all new homes by 2030 to be heated with electricity or geothermal systems and sets a target for 12 percent of all new vehicle sales to be electric by 2025.

    The office of Ontario's Ministry of Finance did not immediately respond to a Reuters request for comment.
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    Statoil gains offshore lease for floating windfarm

    Statoil ASA, the Norwegian energy company, was granted a lease to use the seabed off the east coast of Scotland and can now begin building the world’s first floating offshore wind farm.

    The Hywind project will consist of five 6-megawatt turbines. They will float on steel tubes fastened to the seabed about 25 kilometers from the town of Peterhead, according to a statement issued by the company based in Stavanger, Norway. The U.K.’s Crown Estate granted the lease, a step that allows Statoil to begin construction. Works onshore and near-shore are planned to begin later this year. Turbines will be installed in 2017.

    Floating turbines allow offshore wind farms to be deployed in deeper waters, opening up the industry to areas such as Japan and Mediterranean countries. Statoil installed a floating turbine off the coast of Norway in 2009 for tests. The Hywind project will be the first multi-turbine array.
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    U.N. committee finds weed killer glyphosate unlikely to cause cancer

    The weed-killing pesticide glyphosate, made by Monsanto and widely used in agriculture and by gardeners, probably does not cause cancer, according to a new safety review by United Nations health, agriculture and food experts.

    In a statement likely to intensify a row over its potential health impact, experts from the U.N.'s Food and Agriculture Organization (FAO) and World Health Organization (WHO) said glyphosate is "unlikely to pose a carcinogenic risk to humans" exposed to it through food. It is mostly used on crops.

    Having reviewed the scientific evidence, the joint WHO/FAO committee also said glyphosate is unlikely to be genotoxic in humans. In other words, it is not likely to have a destructive effect on cells' genetic material.

    The conclusion contradicts a finding by the WHO's Lyon-based International Agency for Research on Cancer (IARC), which in March 2015 said glyphosate is "probably" able to cause cancer in humans and classified it as a so-called Group 2A carcinogen.

    Seven months after the IARC review, the European Food Safety Authority (EFSA), an independent agency funded by the European Union, published a different assessment, saying glyphosate is "unlikely to pose a carcinogenic hazard to humans".

    The differing findings thrust glyphosate into the center of a row involving EU and U.S. politicians and regulators, the IARC experts, environmental and agricultural specialists and the WHO.

    Diazinon and malathion, two other pesticides reviewed by the WHO/FAO committee, which met last week and issued its conclusions in a statement on Monday, were also found to be unlikely to be carcinogenic.
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    Precious Metals

    China’s ICBC buys giant London gold vault from Barclays

    China’s ICBC Standard Bank aid on Monday it is buying a precious-metals vault from Barclays PLC’s, one of Europe’s largest vaults, in the latest move by the Chinese bank to increase its role in the precious metal’s market.

    The agreement, which is due to close in July according to Bloomberg, will make ICBC Standard the only Chinese bank to operate a vault in London, a strategic market when it comes to trading and storing precious metals.

    The vault, which holds up to 2,000 tonnes in gold, silver, platinum and palladium, will make it easier for ICBC to sells its services to western-based clients.

    China accounts for more than a quarter of global bullion demand, but gold trading was until recently largely run out of western banks and in markets such as London and New York.

    The vault, which holds up to 2,000 tonnes in gold, silver, platinum and palladium, will make it easier for ICBC to sells its services to western-based clients given that it now has a location to store metals that is closer to them.

    The facility, located at a secret location in London, was opened by Barclays in 2012and took more than a year to build.

    No financial terms were announced.

    Last week, ICBC joined the London clearing system for gold, silver, platinum and palladium, which is managed by London Precious Metals Clearing Limited (LPMCL).

    As many investment bank, Barclays has been moving out of the precious metals market in recent years. In January, the lender confirmed rumours that it was exiting metal trading, following similar decisions by several high-profile banks and trading houses, including Deutsche Bank AG and Switzerland-based Gunvor Group.

    ICBC, which boasts more than four million business clients and services 410 million retail customers, paid $765 million for control of the London global markets unit of Johannesburg-based Standard Bank in 2014 to expand into the bullion and forex trade. In 2008 ICBC bought 20% of the 150-year old Standard Bank group, Africa's largest bank, for $5.4 billion.
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    Base Metals

    KGHM delays expansion of flagship mine in Chile

    Shares in Polish mining giant KGHM , Europe's second-largest copper producer, soared Monday after earnings at overseas units helped it beat analysts estimates for the first-quarter profit.

    As copper prices trade near the lowest level in more than two months KGHM has decided to delay the next phase of expansion at its flagship overseas mine in Chile, Sierra Gorda.

    The state-controlled copper miner, which posted a slower-than-expected drop in profit on Friday, also said it was delaying the next phase of expansion at its flagship overseas mine in Chile, Sierra Gorda, after a continued rout in metals prices more than halved its net profit in the first quarter.

    Earnings before interest, taxes, depreciation and amortization, or Ebitda at Sierra Gorda stood at $39 million with the production cost falling 32% from the previous quarter. The mine has generated a total Ebitda loss of $976 million since it began commercial production in July last year, including $928 million write-offs.

    KGHM gained control of Sierra Gorda in 2011 when it bought Canadian rival Quadra FNX for $2.07 billion (Cdn$2.87 billion), the largest-ever foreign acquisition by a Polish company.

    In January Sierra Gorda's co-owner, Japan's Sumitomo, said it cut its profit forecast due to the investment loss at the mine.

    KGHM, also the world's largest silver miner, said that despite delays and increased costs, it aims to bring the mine to full production by the end of June.

    Sierra Gorda produced 84,000 tonnes of copper concentrate in 2015 and 15 million pounds of molybdenum last year, far from over 220,000 tonnes and 25 million pounds, respectively, targeted after the second phase.
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    Antofagasta suffers setback on Chile investment plan approval

    Chilean copper miner Antofagasta has suffered a setback as it seeks environmental permit approval for new investment at its Los Pelambres mine, in central Chile, but hopes to resolve the issue in coming days. 

    Earlier this month, the London-listed company's operating unit, Antofagasta Minerals, submitted a $1.1-billion plan to build new infrastructure, including an improved mill and new desalinisation plant, so it can maintain output at the mine at 400 000 t/y of copper. 

    But a local regulatory body ruled last week that it could not consider the submission because the paperwork neglected to define the potential impact the plans might have on nearby communities.

     "The study has not been rejected," Antofagasta told Reuters on Monday. "It's a paperwork formality that we hope to resolve in the coming days." 

    Spurred by popular resentment toward mining and energy projects that could be detrimental to the environment, regulators in Chile, the top copper exporter, have become more demanding in recent years, leading some projects to be delayed, and others to be abandoned altogether.
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    Steel, Iron Ore and Coal

    India’s NTPC takes coal import holiday

    Breaking with import dependency over the last decade, India’s largest thermal power producer, NTPC Limited, has decided to take a coal import holiday during the current financial year in response to higher domestic availability and expected production from captive mines. 

    Having received guarantees of assured coal supplies from producer Coal India Limited (CIL), NTPC would not enter into any import contracts during 2016/17, and would receive only a small volume of shipments during the year, which had already been contracted, a company official said. 

    The power utility had initially planned to import 21-million tonnes in 2015/16, which during course of the year was reduced to 16-million tonnes. However, actual shipments were lower at 10-million tonnes, in response to higher dispatches from CIL, the official said. The official added that there was a possibility that the import holiday would be extended for the next few years as captive coal blocks allocated to NTPC were progressively brought into production.

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    Top Chinese steelmaker urges more government support for exports!

    Jiangsu Shagang, the listed unit of China's biggest privately-owned steel producer, said on Monday the government should provide steelmakers with more support in their efforts to export products and shift capacity overseas.

    China's massive steel sector has come under growing international scrutiny, with foreign steelmakers accusing the country's firms of flooding the global market with cheap, subsidized steel and driving them out of business.

    But Chen Ying, Shagang's general manager, said supporting exports would help speed up China's efforts to tackle a massive capacity surplus now amounting to around 300 million tonnes a year, nearly double the total annual production of the European Union.

    "China should support exports - steel product exports and moving projects and plants abroad," said Chen at an industry conference.

    "Chinese steel products have an international market and there is demand," she said. "If there is demand, why shouldn't steel products be exported?"

    Ma Guoqiang, chairman of the China Iron and Steel Association, told the conference earlier that the government had never encouraged China's steel firms to boost exports, saying the sector was primarily oriented toward the domestic market.

    The country's central bank, in a document published last month, said China would boost state support for the export of steel by encouraging firms to shift production abroad as part of its efforts to ease domestic overcapacity.

    Chinese steel exports reached a record high of 112.4 million tonnes last year, up 19.9 percent on the year.
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    China Apr thermal power output down 5.9pct on year

    Electricity output from China’s thermal power plants – mainly coal-fired – stood at 328.9 TWh in April, dropping 5.9% year on year, showed data from the National Bureau of Statistics (NBS) on May 14.

    By contrast, China’s hydropower output increased 10% on year to 77.9 TWh in April, mainly due to robust output of hydropower in southern China.

    Total electricity output in China reached 444.4 TWh in last month, down 1.7% from a year ago, the NBS data showed.

    That equated to a daily output of 14.81 TWh on average in the month, falling 1.7% on year.

    During the first four months this year, China’s total power output increased 0.9% on year to 1798.6 TWh. Of this, thermal power stood at 1377.2 TWh, dropping 3.2% year on year; while hydropower reached 281.6 TWh, climbing 15.5% from the year prior.

    Over the period, the share of thermal power generation in the total power generation was at 76.57%, while hydropower output accounted for 15.66%.

    The decrease in China’s thermal power generation was mainly attributed to surplus power supply amid slowing domestic economy.

    Much attention has been drawn on the excess installed capacity of thermal power generation lately, which was forecasted to be more than 200 GW during the "13th Five-Year Plan" period (2016-2020).

    Local governments and enterprises have been further urged by the National Development and Reform Commission and National Energy Administration to slow down the construction of coal-fired power plants.
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    China's thermal power overcapacity likely to worsen, Fitch

    Excess capacity in China's thermal power generation is likely to worsen from now to 2017 due to falling coal costs and favorable on-grid tariff rates, Fitch Ratings said in a report on May 17.

    Despite government support of facilities that run on cleaner fuels, China's electricity producers have incentives to keep adding thermal power capacity before the end of 2017 as falling coal costs and favorable on-grid rates keep profitability high, Fitch said.

    Annual fixed-asset investment in thermal power sources increased by 1%, 13% and 22% in 2013, 2014 and 2015, respectively. Projects that have started construction are likely to be completed in the next two years, the report said.

    Fitch expects investment returns in the thermal power sector to remain generally robust in the short term, largely because the sector can still enjoy a healthy "dark spread," or the difference between on-grid power tariffs and unit generation fuel costs.

    However, severe overcapacity could cause competition that hurts returns in the longer run. Performance of individual independent power producers will start to diverge based on asset quality and location, according to the report.

    Fitch believes that China will take further measures to rein in investment in the sector.
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    Rio Tinto submits feasibility study for Simandou project in Guinea

    Anglo-Australian mining giant Rio Tinto said on Monday it had submitted feasibility studies to the Guinea government for its massive Simandou iron ore project, considered the world's biggest untapped iron ore deposit. 

    Simfer, Rio Tinto's subsidiary, "submitted today the bankable feasibility study (EFB) of the mine and the infrastructures of the Simandou South Project in Guinea", the world's No 2 miner said in a statement. 

    "They are based on extensive analyses conducted during the last two years by Simfer, China Harbour Engineering Company (CHEC), China Railway Construction Corporation (CRCC) and other international mining and construction services providers." 

    The real cost of the project, which could have a major impact on Guinea's flagging economy, has yet to be revealed but it is tipped to reach $20-billion.
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    US, Chinese companies respond to US Steel Section 337 filing

    Multiple US and Chinese companies spoke out for and against US Steel's use of a Section 337 investigation to try to bar all Chinese carbon and alloy steel products from the US market, ahead of the US International Trade Commission's decision on whether to begin the investigation.

    On April 26, USS filed a complaint with the ITC, alleging that Chinese steelmakers and distributors conspired to fix prices, stole trade secrets and circumvented duties by false labeling. The ITC has up to 30 days from the filing to decide whether to pursue the case.

    Some US manufacturers that purchase tin mill products and some pipe and tube companies believe excluding Chinese steel from the US market would harm their businesses. Ball Metal Food Container -- which purchases tinplate from Chinese companies named in the USS petition -- told the ITC in a filing that excluding all Chinese steel products from the US market would harm US companies by reducing competition, potentially resulting in higher prices and short supplies.

    Packaging company BWAY said it has been purchasing tin mill products from Baosteel for more than 10 years, and said Baosteel's product has kept the market competitive.

    There are certain parts of the market where USS and other companies do not have the capacity to replace the material lost from an exclusion order, Baosteel said. The company added that it would "argue vigorously" against any potential violations.

    China's Hunan Valin argued that USS' complaint "brings up serious public interest and public policy concerns" and interferes with US-China economic and political relationships.

    "Because other measures have largely stopped steel imports from China already, the public interest is not served by expending scarce governmental resources to open up another front via the Section 337 arena to combat very similar behavior," the mill said in a filing.

    Coiled tubing manufacturer Global Tubing sided with Chinese steelmakers, and Coastal Pipe USA CEO Michael Sanders said "strict monitoring of responsible mills to effect a reasonable competitive and efficient industry is what's needed."

    In support of the investigation, Barry Zekelman, CEO of JMC Steel Group, told the ITC that USS is one of JMC's key suppliers and that the company's viability was essential to JMC, which is North America's largest independent pipe and tube manufacturer.

    "We urge the [Obama] administration to ensure that US Steel Corporation is able to present its case, advance its theories and evidence, and probe the activities of these respondents, by initiating a full Section 337 investigation into these deeply troubling allegations," Zekelman said. "The American people deserve relief from the unfair practices that are alleged in the Section 337 petition."

    The American Iron and Steel Institute and Steel Manufacturers Association said USS' requested remedies are in the public interest and said there was unused steelmaking capacity that is ready to replace the volume of Chinese steel that may be subject to an exclusion order or a cease and desist order.
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    Tokyo Steel hikes prices of deformed steel reinforcing bars

    May 16 Tokyo Steel Manufacturing , Japan's top electric arc furnace steelmaker, said on Monday it would raise the prices of its deformed steel reinforcing bar products for June delivery by around 6 percent, reflecting a recovery in domestic markets.

    Tokyo Steel's pricing strategy is closely watched by Asian rivals such as Posco, Hyundai Steel Co and Baosteel, which all export to Japan.

    The company kept the prices of other steel products unchanged after its first across-the-board hike in more than two years for May.

    Nippon Steel & Sumitomo Metal Corp is also raising the price of its sheet steel products, hot-rolled, cold-rolled and galvanised sheets and coils by about 20 percent from June, reflecting higher overseas markets, it said on Friday.

    The sales of deformed steel bars, used in reinforced concrete for buildings, accounted for about 7 percent of total revenues, a Tokyo Steel official said.

    "Other domestic steel makers have also raised the prices of steel sheets and hot-rolled.
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