Mark Latham Commodity Equity Intelligence Service

Friday 13th May 2016
Background Stories on www.commodityintelligence.com

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    Macro

    Brazil Senate Votes in Favour of Dilma Rousseff Impeachment Trial


    Brazil’s Senate voted early Thursday to put President Dilma Rousseff on trial for illegally manipulating fiscal accounts, making her the second leader since democracy was restored in 1985 to be forced to step down amid impeachment proceedings.

    In a marathon voting session that began the previous day, 55 senators voted to move forward with the impeachment processwhile 22 voted against. As a result of the outcome, which was widely expected, Ms. Rousseff will have to step down almost immediately to stand trial, which could take up to 180 days.

    She could return to office if less than two-thirds of the Senate vote to convict her. But few believe the unpopular president will survive the process.

    Vice President Michel Temer will assume the presidency for the duration of the trial and would finish out her term through the end of 2018 if she is convicted.

    Ms. Rousseff is being tried on charges that she illegally moved money between state-controlled entities to make her government’s budget deficit appear smaller than it really was. She denies wrongdoing and accuses her opponents of effectively staging a coup d’état.

    Brazil’s Senate voted to begin a full impeachment trial of President Dilma Rousseff. That forces her to step aside. What went wrong for the country’s first female president? WSJ’s Jason Bellini has #TheShortAnswer.

    While Ms. Rousseff’s most loyal supporters have endorsed that view, legal scholars say the impeachment process has taken place within the framework of Brazil’s constitution.

    But many have questioned whether the charges against Ms. Rousseff are serious enough to warrant her ouster when many of the legislators leading the impeachment push have been implicated in a massive corruption scandal centered on Petróleo Brasileiro SA,known as Petrobras.

    http://www.wsj.com/articles/brazil-senate-votes-in-favor-of-dilma-rousseff-impeachment-trial-1463046110
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    Noble Group obtains $3 bln credit facilities, Q1 profit falls


    Noble Group finalised $3 billion in bank credit facilities, a crucial move for Asia's biggest commodity trader to refinance all of its debt for this year after being whacked by credit rating downgrades.

    It reported a 62 percent fall in quarterly net profit, hit by tight credit conditions.

    Noble is trying to shore up investor confidence following Standard & Poor's and Moody's cutting its ratings to junk but the company could end up paying one of the highest interest rates in its existence, Reuters has reported.

    "The group's focus on liquidity limited the trading opportunities of our businesses during the quarter, particularly oil liquids and gas and power," Noble CEO Yusuf Alireza said in a statement.

    "These facilities address substantially all of our remaining 2016 debt," he said.

    The latest credit facilities include $1 billion in an unsecured 364 day revolving loan facility, a transaction which was supported by 25 banks, Noble said.

    Noble will be paying an interest rate of 225 basis points over the U.S. dollar Libor on the loan, more than twice the 85 basis points it paid just a year ago, sources told Reuters.

    The interest rate will be the highest for a one-year loan in Noble's history in Asia, according to Thomson Reuters LPC. Noble did not provide details of interest rates.

    It also announced a $2 billion credit facility which allows for the issuance of trade finance instruments such as letters of credit, as well as for loans.

    The Singapore-listed company reported a net profit of $40.5 million in the three months to March 31 from $106.6 million a year ago on a 32 percent fall in revenue to $11.39 billion.

    The commodity merchant hit the spotlight in February 2015 when it was accused by Iceberg Research of overstating its assets by billions of dollars, claims which Noble has rejected.

    Hit by the worst rout in commodity markets in decades, Noble's Alireza has steered the company to sell assets, cut business lines and taken big writedowns.

    The focus on short-term debt and secured financing is increasing Noble's risk profile and could reduce its financial flexibility, rating agency Fitch said last week when it placed the company on watch for a potential downgrade to junk.

    In February, Noble reported its first annual loss since 1998, battered by a $1.2 billion writedown for weak coal prices.

    http://www.reuters.com/article/noble-group-results-idUSL3N1893QO

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    Oil and Gas

    Glencore tries a corner in Brent?

    While oil bulls were delighted by yesterday's DOE news of an inventory drawdown refuting the prior day's API news of a major build, what was ignored was the build in Cushing storage (more on that shortly), which according to Genscape hit a utilization just shy of 80%, or more than 70 million barrels, a record high since Genscape began monitoring the hub in 2009. To be sure, the risk of running out of land storage has been one we have previously discussed on various occasions and hinted that one way this is being circumvented is with substantial amounts of oil being stored on tankers at sea, mostly by commodity trading companies who take advantage of the oil contango to generate month to month profits as producers choose to keep their product away from the market until prices rise.

    As it turns out, not only is this the case, but according to Reuters, one particular energy trader - a name well-known to Zero Hedge readers - Glencore, has built up a massive inventory stake in the Brent market where it now holds an unprecedented 30% position in Brent, which it is holding for offshore storage in its tankers in hopes of pushing the price of Brent, and thus the entire energy complex higher, by limiting supply.

    As Reuters details, citing trade sources, Glencore has built up one of the largest positions in part of the Brent crude market which acts as a benchmark for global oil prices since the start of the year.

    For those unfamiliar, the Brent market is based on four North Sea crude oils - Brent, Forties, Oseberg and Ekofisk, or BFOE. And, according to Reuters Glencore is quietly cornering the Brent market, by holding more than a third of the 37 BFOE cargoes loading in June and is expected to acquire more.

    The report details that Glencore has been acquiring June BFOE cargoes through the "chains" - a forward market in which cargoes soon to be assigned loading dates are traded, according to trade sources citing data from pricing agency Platts.

    "It's definitely a bold statement of market view by Glencore," said a trading source with another company operating in the North Sea. "You'd have to be in their heads and in their books to know exactly what's going on."

    To be sure, Glencore has been alleged to "warehouse" oil previously, most recently in January when Bloomberg reported that "Glencore is said to be storing oil on ships off the coast of Singapore and Malaysia as a market structure known as contango allows traders to benefit from holding on to supplies for sale later. The commodities trader has at least 4 very large crude carriers, each of which can hold about 2 million barrels, floating at sea off the nations’ coast in Southeast Asia."

    However taking advantage of contango for contango purposes is one thing. Attempting to corner the entire market is something entirely different, and has direct implications on the price of oil, something Glencore can further benefit from if it were to be concurrently long Brent. 

    According to Reuters, just under half of June's supply of the four benchmark crude grades amounts to nearly 10 million barrels of oil - over 10 percent of daily world production. "Glencore have got big positions all over the place in BFOE," said another North Sea trading source. "They are consistently keeping cargoes in the chains."

    The company has taken this position as supply underpinning the Brent contract is set to be smaller than in a typical month. In June, output of the BFOE crudes will fall to 740,000 barrels per day - the lowest in almost two years - mainly because of maintenance at Ekofisk oilfields.  This, say analysts, helped Brent futures for June delivery strengthen against the July contract and eventually trade at a premium - a structure known as backwardation and unusual when supply is generally ample.

    It also means that Glencore was likely losing money on the actual month to month roll of its inventory, however it was more than offsetting losses if it was concurrently long Brent as removing 30% of the overall market supply has certainly pushed the price of Brent notably higher.

    Reuters sources agreed with this assessment: "Glencore have obviously been very bullish," the first trade source said. "Part of the explanation would be that they recognised there would be next to no Ekofisk around and the North Sea market would tighten up. So, why not?"

    Why not? Well, because to some this stockpiling reeks of manipulation of the price by keeping a major amount of monthly supply off the market. And snce Brent and WTI tend to trade largely in tandem, the answer to "why not" is because millions of consumers would end up paying far more at the pump than if Glencore was not choking supply just to boost its own earnings.

    One way to see the impact of this may be to look at the strip which both in Brent and WTI has flattened substantially as can be seen on the chart below, as prompt month manipulation by the likes of Glencore pushes spot higher even as hedgers and long-term investors continue to sell the long end on expectations of declining future prices.

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    CNPC to Start Laying Second China-Russia Oil Pipeline in June


    China National Petroleum Corp., the country’s biggest oil and gas producer, will start laying a second domestic oil pipeline in June to allow for increased Russian crude supplies to flow to China’s northeastern city of Daqing.

    The project between the Chinese border city of Mohe and Daqing runs parallel to an existing spur off of Russia’s East Siberia-Pacific Ocean crude pipeline. The 942 kilometer (585 mile) line has received construction approval from the National Development and Reform Commission, China’s top economic planner, and is expected to be completed by October 2017, CNPC said in astatement on its website Thursday. The two pipelines will have a combined annual capacity of 30 million metric tons of crude.

    “The second oil pipeline will help integrate northeast China’s crude resources, and further improve the safety and reliability of China’s crude oil supplies,” CNPC said in the statement.

    The energy relationship between the two neighbors -- one of the world’s biggest oil producers next door to the biggest oil user after the U.S. -- has continued to deepen since Russia started sending oil supplies to China from the spur off the ESPO pipeline in 2011. Imports of Russian crude last year jumped 28 percent, placing the country as China’s largest supplier on an annual basis after Saudi Arabia.

    Russia’s Transneft will be ready to ship 30 million tons of oil a year to China through the link by Jan. 1, 2018, Vice President Sergei Andronov said in April. Russia’s OAO Rosneft signed a $270 billiondeal with CNPC in 2013 to supply about 360 million metric tons of crude to China over 25 years, the second of two crude-supply deals between the countries.

    China and Russia are also considering building a second natural gas pipeline to transport as much as 30 billion cubic meters of natural gas annually from West Siberia to China over 30 years. The two signed a $400 billion pact in 2014 to send 38 billion cubic meters of natural gas annually over 30 years to China via East Siberia by as soon as 2018.

    http://www.bloomberg.com/news/articles/2016-05-12/cnpc-to-start-laying-second-china-russia-oil-pipeline-in-june-io48uk3h
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    Brazil's Petrobras reports third straight quarterly loss


    Brazil's state-controlled oil company Petroleo Brasileiro SA  posted its third-straight quarterly loss on Thursday as oil prices and production fell and a weaker currency boosted debt costs.

    The result missed analyst expectations of a profit.

    The consolidated net loss at Petrobras, as the company is known, was 1.25 billion reais ($358 million) in the three months ending March 31, compared with a profit of 5.33 billion reais a year earlier, the Rio de Janeiro-based company said in a securities filing.

    The average estimate of five analysts surveyed by Reuters was for a profit of 3.64 billion reais.

    Petrobras has struggled mightily with a plunge in world oil prices and its role at the center of a massive corruption scandal. It is saddled with the oil industry's largest debt and has also been hurt by falling domestic demand due to Brazil's worst recession since the 1930s.

    That scandal helped lead to the removal of Brazilian President Dilma Rousseff, a former Petrobras chairwoman, earlier on Thursday by the country's Senate.

    The average price of benchmark Brent crude oil LCOc1 fell 36 percent in the first quarter to $35.21 a barrel from $55.13 a barrel a year earlier. Efforts to reduce Petrobras' debt were also limited by an 11 decline in the value of Brazilian real against the U.S. dollar, raising the local currency cost of foreign debt.

    "We want to increase our levels of predictability and meet our targets; when your debt is large and your risk increases you have fewer options," Chief Financial Officer Ivan Monteiro told reporters at Petrobras headquarters during an earnings presentation.

    "Petrobras is a company with high cholesterol, and that cholesterol is debt leverage," he added, saying all senior executives are now focused on cutting costs and meeting targets.

    Total debt was virtually unchanged from the fourth quarter at $126 billion. Rising debt maturities, though, dragged down Petrobras' cash position 21 percent to 77.8 billion reais from the end of 2015, according to the company's cash-flow statement.

    High maturities are expected to last for at least three years, forcing Petrobras to limit investment, Monteiro said.


    First quarter cash, though, was more than double the amount Petrobras had on hand a year earlier, thanks to lower capital spending.

    Referring to possible debt swaps that could ease short and medium-term demands for cash, Monteiro said capital markets were "starting to offer alternatives to reduce the concentration of maturities."

    Petrobras' net revenue, or total sales minus sales taxes, fell 5.4 percent to 70.3 billion reais. Adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, a measure of operating profit, fell 2 percent to 21.1 billion reais.

    Lower revenue was driven by lower production.

    Average daily output fell 6.6 percent to an average 2.617 million barrels of oil and equivalent natural gas a day (boepd) from 2.803 million boepd a year earlier. Average daily output in the first quarter 2016 was the lowest in nearly two years.

    In 2015, Petrobras met its annual oil output goal for the first time in 13 years, Monteiro said.

    http://www.reuters.com/article/us-petrobras-results-idUSKCN0Y32YN

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    Hunting sees 30-40 pct fall in full-year revenue on oil slump


    Oilfield services company Hunting Plc said it expects revenue for the year to fall 30-40 percent due to the slump in oil prices, and warned that its full-year outlook remained uncertain.

    Hunting's lowered forecast comes at a turbulent time for the oil services sector, as the prolonged slump in oil prices has led to a steep decline in drilling activity.

    The London-based company reported an underlying earnings before interest, taxes, depreciation and amortization (EBITDA) loss of $16.2 million for the four months ending April.

    "It's not great to see. We certainly hadn't been forecasting an EBITDA loss but that's what they're talking about now," Arden Partners analyst Daniel Slater said.

    The company said it continues to take steps to cut costs, and was working with its lenders to amend terms of its loan covenants.

    "The key is whether the banks will be willing to renegotiate. It sounds like there is a good chance that they will be, which is why I wouldn't be overly concerned," Slater said.

    Hunting is looking to switch to asset-based covenants from the current profit-based covenants, as it reported a loss in EBITDA for the four months to April, Finance Director Peter Rose told Reuters.

    Shares in the company closed down 12 percent on the London Stock Exchange to trade at 284 pence, their biggest single-day loss since 2002, and were at the bottom of FTSE Small Cap Index .

    http://www.reuters.com/article/hunting-outlook-idUSL3N1894XU
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    Obama Gas Rules Set Table For Wide Emissions Cut, If Trump Loses


    Oil-and-gas producers have a financial incentive to make sure methane isn't leaking from wells and pipelines. Yet methane has become a well-documented problem--and once it joins the atmosphere, scientists will tell you, it becomes a potent greenhouse gas, responsible for a quarter of the Earth's extra heat.

    Today the Obama administration issued rules requiring the industry to tighten up any new and renovated infrastructure. The move is a first step in realizing a goal the president first articulated in January 2015, when he pledged to cut U.S. methane emissions over a decade to 45 percent below 2012 levels. In addition to being good for the planet, the gas saved may be worth $100 million.

    The oil-and-gas industry is the largest emitter of methane, and the U.S. is the world's largest oil-and-gas producer. It's responsible for about 10 percent of global methane emissions from the oil and gas sector, according to Mark Brownstein, vice president for the climate and energy program at the Environmental Defense Fund. His group says the new rules will have the same effect as closing 11 coal-burning power plants.

    The industry opposes the new rules because of their expected cost, suggesting they "could put [the] shale energy revolution at risk," according to an American Petroleum Institute statement. Shale oil and gas gave Americans an extra $1,337 to spend in 2015, according to the trade group. Cleaner than coal, natural gas has already helped reduce U.S. emissions significantly over the past decade, as power generators shifted fuels.

    An EPA analysis of the new methane regulations suggests the environmental benefits outweigh compliance costs by as much as $690 million.

    The new rules also set up what could be the next phase of fossil fuel regulation. The Environmental Protection Agency included an "information collection request," which asks the public what technology and practices would best cut emissions from existing facilities, which are currently exempt from the new rules. The next phase may or may not happen ...

    A Hillary Clinton or Bernie Sanders administration would likely try to protect Obama's climate-and-energy legacy, including these new rules. The EPA would take in the public comments prompted by today's information request and possibly use them to retrofit the existing system with more rule-making.

    Once rules are finalized, it's harder for a new president to uproot them. A Donald Trump administration, for example, would need to initiate a regulatory process to undo Obama's finalized regulations. That's not true of proposals that are still in the pipeline, which can be frozen and dropped.

    http://www.bloomberg.com/news/articles/2016-05-12/obama-s-gas-limits-set-up-next-phase-but-first-there-s-an-election

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    Enbridge says slowly resumes operations after Canadian wildfire

    Enbridge says slowly resumes operations after Canadian wildfire

    Enbridge Inc said on Thursday it was steadily resuming service on its pipeline network through Canada's energy heartland about a week after a massive wildfire spread through the Fort McMurray, Alberta, area, forcing a shutdown.

    The Calgary-based company said the shutdown, which included all pipelines in and out of its Cheecham terminal some 50 km (31 miles) south of the fire-ravaged city, affected some 900,000 barrels per day of volume on its system.

    Chief Executive Officer Al Monaco said operations had resumed at Cheecham and that the Woodland pipeline was ready to restart. The company was waiting to get access to conduct a fly-over inspection as fire crews were still working in the area.

    He added that the roughly 100-km (62.14 mile) portion of the Athabasca line from Cheecham to the Kirby Lake terminal was expected to resume operations over the weekend.

    "So (we're making) good progress on getting our systems back in operations, but the process isn't like turning on a tap," Monaco told analysts on a conference call. "You've got to expect some period of ramp-up to full capacity."

    Enbridge delivered about 2.5 million barrels per day (bpd) of crude oil through its Canadian mainline system during the quarter, up from 2.2 million bpd a year earlier.

    Deliveries through the company's Lakehead pipeline system also rose, to 2.7 million bpd from 2.3 million bpd a year earlier, the company said on Thursday.

    Enbridge operates thousands of miles of crude oil and natural gas pipelines that extend across North America.

    http://www.reuters.com/article/enbridge-inc-results-idUSL3N18945O
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    Canada's Enbridge posts quarterly profit as shipments rise


    Enbridge Inc , Canada's largest pipeline company, reported a quarterly profit, compared with a year ago loss, as crude shipments increased.

    Enbridge delivered about 2.5 million barrels per day (bpd) of crude oil through its Canadian mainline system during the quarter, up from 2.2 million bpd a year earlier.

    Deliveries through the company's Lakehead pipeline system also rose, to 2.7 million bpd from 2.3 million bpd a year earlier, the company said on Thursday.

    Enbridge's Line 18 pipeline, which carries crude from its Cheecham terminal, was back in service on Wednesday, nearly a week after it was shut down as wildfires raged through northern Alberta.

    The company's net earnings attributable to shareholders was C$1.21 billion ($942.4 million), or C$1.38 per share, in the first quarter ended March 31, compared with a loss of C$383 million, or 46 Canadian cents per share, a year earlier.

    Excluding items, the company earned 76 Canadian cents per share, beating analysts' estimate of 64 Canadian cents per share, according to Thomson Reuters I/B/E/S.

    http://www.reuters.com/article/enbridge-inc-results-idUSL3N18945O

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    Chesapeake says swapped debt for 4 percent of equity over past week


    Debt-laden Chesapeake Energy Corp, the second-largest U.S. natural gas producer, said on Thursday it had issued or agreed to issue about 4 percent of its outstanding shares in exchange for debt over the past week.

    The company's shares were up 4 percent at $4.54 in premarket trading following news of the privately negotiated deals.

    A number of U.S. oil producers have completed debt-for-equity swaps or bond swaps as they try to reduce their debt and interest payments as oil prices remain weak.

    Chesapeake, whose debt stands at about $9 billion, said it issued or agreed to issue about 28.1 million shares between May 5 and May 11 in exchange for senior notes worth about $153 million. The notes are due in 2017, 2019, 2037 and 2038.

    The company said in February it had tapped legal firm Kirkland & Ellis for advice as it seeks to bolster its balance sheet to manage debt maturing in the next 18 to 24 months.

    Chesapeake has said it has no plans to seek bankruptcy protection, as some analysts and investors have speculated.

    Chief Financial Officer Nick Dell'Osso said on May 5 that Chesapeake was considering "the use of additional secured debt, private transactions with bondholders and other types of exchange offers and open market purchases."

    Up to Wednesday's close, Chesapeake's shares had fallen about 24 percent since then.

    http://www.reuters.com/article/us-chesapeake-debt-idUSKCN0Y31GW

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    Canadian oil producer Crescent Point posts bigger loss


    Canadian oil and gas producer Crescent Point Energy Corp reported a bigger quarterly loss due to weak oil prices.

    Crescent Point, which said it continued to lower its overall cost structure, has slashed its dividend, curbed capital spending and scaled back drilling activity to operate within its cash flow amid a steep and prolonged plunge in crude prices since June 2014.

    The company forecast about C$300 million of excess free cash flow for 2016, if oil prices average $45 per barrel.

    Funds flow, a measure of Crescent's ability to fund new drilling, fell to C$378 million in thequarter from C$433.6 million, a year earlier.

    The company posted a net loss of C$87.5 million ($68.15 million), or 17 Canadian cents per share, for the first quarter ended March 31, compared with a loss of C$46.0 million, or 10 Canadian cents per share, a year earlier.

    Total production rose about 16 percent to 178,241 barrels of oil equivalent per day.

    Up to Wednesday's close, the company's Toronto-listed stock had lost about a third of its value in the past 12 months.

    http://www.reuters.com/article/crescent-point-results-idUSL3N1893XA
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    Newfield May Sell Eagle Ford Assets Said Valued at $500 Million


    Newfield Exploration Co. has hired two investment banks to find buyers for its acreage in Texas’s Eagle Ford basin and other oil plays as it seeks to focus on Oklahoma’s Anadarko region.

    The Woodlands, Texas-based company has formally begun the process of selling its 35,000 net acres in the Eagle Ford, as well as parcels in other parts of South Texas, Stephen Campbell, Newfield’s vice president for investor relations, said in an interview Wednesday. The company’s assets in other areas of the country, including North Dakota and Utah, are also for sale, he said.

    “The Anadarko Basin is the asset that will continue to get the lion’s share of the capital and anything outside of the Anadarko is open for discussion," Campbell said in a telephone interview.

    The Eagle Ford assets could fetch about $500 million in a sale, according to a person familiar with the matter, who requested anonymity to discuss a private process. Campbell declined to discuss bidders or potential values.

    Newfield’s planned exit from South Texas comes as it allocates most of its drilling budget to holdings in the booming Scoop and Stack fields in Anadarko, where the industry sees hope of higher profits even at low oil prices. The driller agreed to pay $470 million last week to buy some of Chesapeake Energy Corp.’s position in the Stack.

    http://www.bloomberg.com/news/articles/2016-05-11/newfield-may-sell-eagle-ford-assets-said-valued-at-500-million
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    Oil leaks at Shell’s Gulf of Mexico field. Production shut


    Shell has shut production from its oil platform in the U.S. Gulf of Mexico offshore Louisiana following an oil leak.

    Federal regulator the Bureau of Safety and Environmental Enforcement (BSEE) on Thursday said it was responding to a two mile by thirteen mile sheen in the Gulf of Mexico, approximately 97 miles south of Port Fourchon, LA.

    According to BSEE the offshore oil and gas operator, Shell Offshore Inc., reported that a sheen was observed in the area of its Glider Field, a group of four subsea wells located in Green Canyon Block 248. The production from these four wells flows through a subsea manifold to Shell’s Brutus platform located in 2,900 feet of water.

    Shell reported that production from all wells that flow to the Brutus platform have been shut-in. There are no injuries reported and no personnel have been evacuated. The total subsea release from the four wells is estimated to be 2,100 barrels of oil, BSEE said.

    A BSEE inspector conducted an overflight of the area and is currently on location at the Brutus platform. BSEE will lead the incident investigation.

    http://www.offshoreenergytoday.com/oil-leaks-at-shells-gulf-of-mexico-field-production-shut/
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    Alternative Energy

    China to boost energy storage 10-fold to cut power waste -industry


    China is expected to raise its power storage capacity by ten-fold to 14.5 gigawatts by 2020, as the world's second-biggest economy tries to cut massive waste from renewable energy projects, an industry association said.

    China is the world largest wind and solar power producer, but some regions are estimated to be losing more than 40 percent of their power because of technical restraints and bottlenecks in the grid, alongside weak power demand growth.

    Storage technologies, such as pumped storage hydropower or lithium ion batteries, are expected to play a critical role in improving the China's capacity to make better use of renewables.

    International companies involved in providing storage technology to China include ABB and TUV Rheinland, while domestic players include Soaring Electric, Sifang Automation and joint ventures such as Sungrow-Samsung SDI Energy Storage Power Supply company.

    China currently has 105 megawatts of storage capacity after a 110 percent increase over the previous five years, but that represented just 1.7 percent of total generation capacity by 2015, according to a report released this week by the China Energy Storage Alliance, an industry body.

    "We didn't count pumped hydropower, and we project growth to rise to 14.5 GW by 2020 based on manufacturers' orders," said Tina Zhang, managing director of the alliance.

    The government said in its latest 2016-2020 "five-year plan" that it would seek breakthroughs in the commercialisation of energy storage, but it did not set a target.

    "China is heading an energy revolution led by the transformation to low-carbon energy and the opening up of its wholesale power market, and storage will be important to bolster the changes," said Jiang Liping, vice president of the State Grid Energy Research Institute.

    Most storage projects are not yet financially viable and investors want more government support.

    Xu Honghua, president of Beijing Corona Science and Technology, which designs renewable technology, said China needed to bring in a mechanism for different prices for peak and off peak power to provide incentives to use energy from storage, and the return on investment needed to be 12 percent to support the new technology.

    http://www.reuters.com/article/china-power-idUSL3N1873CH
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    DONG Energy says to list in Copenhagen this summer


    Denmark's DONG Energy ended months of media speculations on Thursday when it announced plans to list on the Nasdaq Copenhagen stock exchange this summer in what could be the largest initial public offering (IPO) in Denmark ever.

    The majority state-owned utility said in September it would list within 18 months and sources told Reuters on Wednesday that it would likely issue the so-called intention to float on Thursday.

    Analysts have said the IPO will value the company at around 80 billion Danish crowns ($12 billion), making it the largest ever flotation in Denmark.

    The IPO is expected to consist of a sale of at least 15 percent of the company's shares, with the Danish state keeping a 50.1 percent stake in the business, DONG said on Thursday.

    It did not provide a listing date but normally an intention to float is followed by a prospectus within a couple of weeks and a flotation another couple of weeks after that.

    DONG is the world's largest offshore wind farm developer and 75 percent of its capital was deployed in this business area at the end of 2015.

    "An IPO will facilitate DONG Energy's access to capital and make it even stronger than today, when it, for example, comes to investments in the construction of offshore wind farms," finance minister Claus Hjort Frederiksen said in a separate statement.

    DONG posted a 35 percent rise in first quarter core operating profit last month mainly driven by its offshore wind business.

    "We have significant growth opportunities in both existing and new markets. We have an aspiration to construct 1 gigawatt of additional installed offshore wind power capacity per year from 2021 to 2025," chief financial officer Marianne Wiinholt told an analyst conference call on Thursday.

    The government sold 18 percent of DONG to a group of investors led by Goldman Sachs in January 2014.

    JP Morgan, Morgan Stanley and Nordea are global co-ordinators at the listing while Citigroup, Danske Bank, UBS, RBC, Rabobank and ABG Sundal Collier are also involved.

    http://www.reuters.com/article/dong-energy-ipo-idUSL5N1891SA
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    Eni embarks on green energy quest


    Italian oil major Eni, which has historically invested little in renewable energy given its strong track record in discovering oil and gas, plans renewable energy projects in Italy, Pakistan and Egypt.

    As part of a push into green energy, Eni aims to bring 420 megawatts of mostly solar power generation online by 2022 by reusing derelict land linked to existing fossil fuel operations.

    The world is currently adding more clean energy capacity than coal, oil and gas combined and Eni joins other oil majors in turning to green energy investments to curb carbon emissions and get a foothold in the fast growing sector.

    Last year, Europe's top oil firms urged governments around the world to introduce a pricing system for carbon emissions as part of a wider push to move to a low-carbon economy.

    French oil company Total said this week it was buying high-tech battery maker Saft as its seeks to expand its renewable energy business.

    In Italy alone, Eni said on Thursday it expects to build more than 220 megawatts of solar power capacity in regions including Liguria, Sardinia, Sicily, Calabria, Puglia and Basilicata for an estimated 200 to 250 million euros.

    Eni's existing gas-fired plants will be used in tandem with solar to cover any shortfalls when the sun doesn't shine.

    But oil and gas remains at the heart of Eni's investment plans and last month Eni Chief Executive Claudio Descalzi outlined plans to invest 20 billion euros ($23 billion) in Africa over the next four years, mostly in oil and gas, while also boosting the continent's energy mix by spending on renewables.

    Eni previously said it was ready to spend "hundreds of millions" of euros on solar power projects in Africa, where it is the largest foreign oil and gas producer.

    http://www.reuters.com/article/eni-renewable-energy-idUSL5N1892TQ
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    Agriculture

    Bayer is reportedly looking to buy Monsanto — and Monsanto's stock is surging


    The chemical and pharmaceutical giant Bayer AG is considering making a bid for the agrochemical Monsanto, Bloomberg's Aaron Kirchfeld, Ruth David and Dinesh Nair report.

    The combined company would become the largest supplier of farm chemicals and seeds, according to the report.

    Monsanto's stock was up about 17% in pre-market trading.

    http://uk.businessinsider.com/bayer-exploring-bid-for-monsanto-2016-5?r=US&IR=T
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    U.S. forecaster sees rising likelihood of La Nina in 2016


    A U.S. government weather forecaster on Thursday heightened its projections for the La Nina weather phenomenon to take place in the Northern Hemisphere later this year, on the heels of an El Nino likely to fade by early summer.

    The Climate Prediction Center (CPC), an agency of the National Weather Service, in its monthly forecast pegged the chance of La Nina developing in the fall and winter 2016-17 at 75 percent.

    That follows a forecast last month for an increasing chance of La Nina in the second half of the year.

    Global forecasters have been increasingly seeing the likelihood for La Nina to emerge this year.

    The phenomenon, which is typically less damaging than El Nino, is characterized by unusually cold ocean temperatures in the equatorial Pacific Ocean. It tends to occur unpredictably every two to seven years. Severe occurrences have been linked to floods and droughts.

    The ongoing El Nino, a warming of sea-surface temperatures in the Pacific, has been tied to crop damage, fires and flash floods.

    http://www.reuters.com/article/us-weather-elnino-idUSKCN0Y31PZ
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    Precious Metals

    South African court gives go ahead to silicosis class action suit against gold mining companies


    South Africa's High Court on Friday gave the green light for a class action suit seeking damages from the gold mining sector on behalf of thousands of miners who contracted the fatal lung disease silicosis while working underground.

    The court also allowed a class action to go ahead on behalf of miners who contracted tuberculosis in the mines.

    The defendants in the case include Harmony Gold, Gold Fields, AngloGold Ashanti, Sibanye Gold , African Rainbow Minerals (ARM) and Anglo American, which have formed the Occupational Lung Disease (OLD) Working Group to deal with such issues.

    http://www.reuters.com/article/safrica-gold-silicosis-idUSL5N18A1UZ
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    Jeweller Chow Tai Fook warns its annual profit could fall by 50 pct


    China's largest jeweller by market value, Chow Tai Fook Jewellery Group Ltd, said on Thursday that its annual profit could be half what it reported last year due to continuing weak consumer sentiment.

    Chow Tai Fook has repeatedly warned of a weaker business environment and said in January that it would close some of its Hong Kong stores. Its first-half profit was off by 42 percent.

    The firm said hedging losses and the sale of more gold items with a lower profit margin, would also impact full year profits.

    Chow Tai Fook recorded a profit of HK$5.46 billion last year. It is due to report annual results again on June 5.

    Hong Kong retail sales fell for the 13th consecutive month in March, while sales of jewellery, watches, clocks and valuable gifts posted their 19th consecutive month of decline.

    http://www.reuters.com/article/chowtaifook-profitwarning-idUSL2N1890F9
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    Goldcorp to buy Kaminak Gold for C$520 million


    Goldcorp Inc said it would buy Kaminak Gold Corp for about C$520 million ($406 million), giving it the Coffee gold project south of Dawson City, Yukon.

    Vancouver-based Goldcorp will offer 0.10896 of a share for each Kaminak share, or C$2.62 based on Goldcorp's Wednesday close.

    The offer price represents a premium of 32.3 percent to Kaminak's Wednesday close.

    Goldcorp's U.S.-listed shares were up 1.7 percent at $18.43 in premarket trading on Thursday.

    Kaminak's key asset is the Coffee gold project, which has total indicated gold mineral resources of 3 million ounces.

    Goldcorp said the board of directors of both the companies have unanimously approved the deal.

    RBC Capital Markets and Fort Capital Partners acted as financial advisers to Goldcorp and Cassels Brock & Blackwell LLP provided legal advice.

    http://www.reuters.com/article/kaminak-gold-ma-goldcorp-idUSL3N1894M6
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    Base Metals

    Russia's Rusal Q1 core earnings fall; sees positive signs


    Russian aluminium giant Rusal Plc reported a 57 percent slump in first-quarter core earnings, hurt by weaker aluminium prices, but pointed to signs of improvement in the market.

    Rusal, which last year was overtaken by China's Hongqiao as the world's biggest aluminium producer, said it expects demand to outstrip supply by 1.2 million tonnes in 2016, following a 600,000-tonne surplus last year, led by strong Chinese demand and capacity curtailments.

    "During the first quarter of 2016 amid turbulent commodity markets, Rusal's continued focus was on tighter cost controls and operational efficiency," Chief Executive Vladislav Soloviev said in a statement.

    Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) for the March quarter fell to $312 million from $721 million a year earlier, matching forecasts around $311 million from five banks.

    Core earnings were up 2 percent from the December quarter.

    Average sale prices during the quarter fell 28 percent from a year earlier, while its sales of primary aluminium and alloys rose 2.4 percent to 957,000 tonnes.

    "Positive dynamics witnessed in the aluminium sector are supported by an accelerating ex-China deficit and solid demand fundamentals as the transportation sector continues to fuel global demand growth in primary aluminium," Soloviev said.

    Rusal expects 5.3 percent growth in global aluminium demand in 2016 to 59.6 million tonnes. Chinese demand is seen expanding by 7 percent to 31 million tonnes, driven by transportation, which will account for roughly half of new demand, followed by construction, consumer durables and packaging.

    On the supply side, Chinese production growth is expected to moderate to 4.8 percent this year, its weakest pace in five years as high cost smelters were shut down, but previously committed expansions came online.

    Rusal estimated that out of 4.4 million tonnes of production cuts in 2015 in China, 585,000 tonnes were restarted in the first quarter of this year and 715,000 tonnes were newly commissioned. At the same time, another 604,000 tonnes were idled.

    Exports of semi-manufactured Chinese aluminium products were also expected to moderate this year, it said, as premiums for metal outside China fell and Shanghai prices rose due to local capacity cuts, dampening the profitability of global shipments.

    Record China semis exports have raised the ire of major global producers and resulted in a trade investigation by U.S. authorities.

    http://www.reuters.com/article/united-co-rusal-results-idUSL3N18A092

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    Steel, Iron Ore and Coal

    Anglo coal assets may gain allure after early progress


    Anglo American has delivered its first coal from a longwall operation at its Grosvenor mine in Australia seven months ahead of schedule, it said on Thursday, news that could raise its chances of selling the asset.

    Anglo American is aiming to cut its debt to $10 billion by selling $3-4 billion of assets in 2016, including its iron ore, coal and nickel units.

    The Grosvenor metallurgical coal mine in the Bowen Basin of Queensland is regarded as among the best of Anglo American's Australian coal operations and the firm is counting on it to push its asset sale programme forward, analysts say.

    "While Grosvenor may not fit Anglo American's strategic portfolio choices, its long-term commercial attractiveness is beyond question," Seamus French, CEO of Bulk Commodities for Anglo American, said in a statement.

    It said the project was delivered for $100 million below budget and in line with environmental obligations. Anglo will now step up production at Grosvenor and ship the coal to steel consumers across Asia.

    At full capacity, the Grosvenor longwall mine is expected to produce 7.5 million tonnes that can be sold every year, with 3.2 million tonnes expected to be produced in 2016.

    At full tilt, Grosvenor is expected to operate at an all-in sustaining unit cost of 110 Australian dollars ($81) per tonne.

    Sources have previously said the firm's metallurgical coal assets in Australia could be valued at about $1.5 billion.

    Steel companies, including as Taiwan's China Steel and India's JSW Steel, have been mentioned by analysts as potential parties interested in buying Grosvenor assets.

    http://www.reuters.com/article/angloamerican-coal-idUSL5N1892VJ
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    China steel and related products end week with another loss


    The most-traded rebar on the Shanghai Futures Exchange was down 5 percent at 2,020 yuan ($310) a tonne by 0553 GMT after falling by the 6 percent maximum allowed by the exchange.

    Rebar, or reinforcing steel used in construction, surged 80 percent from last December to April, but has since dropped more than 27 percent. It has lost more than 11 percent this week, the most since the contract was launched in 2009.

    The price rally pushed some shuttered steel mills in the world's top producer to resume production, but the ensuing price rout could make them unprofitable again.

    Iron ore on the Dalian Commodity Exchange was down 5.4 percent at 362.50 yuan a tonne after also dropping by its 6 percent downside limit.

    "We are now kind of at or past the peak in seasonal demand so prices are coming down. And maybe since we overshot on the upside so we can undershoot on the downside," said Ian Roper, commodity strategist at Macquarie.

    Other steelmaking raw materials hit hard on Friday included coke and coking coal on the Dalian exchange, which fell 5.5 percent and 3.7 percent respectively.

    Agriculture futures also slumped with soybean oil and palm olein on Dalian down 4 percent and Shanghai rubber falling nearly 5 percent. Egg and soybean dropped more than 2 percent.

    Investors appear to have pulled out more funds from Chinese markets as exchanges keep up the pressure to control speculative investment and crack down on high-frequency trading.

    http://www.reuters.com/article/china-markets-commodities-idUSL3N18A1ML

    Attached Files
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    China still fighting steel glut despite price surge


    China still faces severe steel oversupply, and a recent price surge is only due to temporary market expectations, a senior official said on May 12.

    Steel prices increased significantly starting in March and declined mildly in May, as surging property sales pushed up steel demand, Zhao Chenxin, spokesperson with the National Development and Reform Commission (NDRC), the nation's economic planning agency, said at a press conference.

    The price increase also followed resumed construction after winter leave and rebuilding of inventory by trading companies, Zhao said.

    He said the government's de-stocking moves reduce steel supply, which partly explains the price surge.

    "The price surge is mainly due to expectations of more policy tightening and other short-run factors. Severe steel glut has not been fundamentally reversed," he added.

    Steel makers have been in deep water over the past few years as a result of shrinking demand and excessive capacity built up during decades of rapid expansion.

    The country's steel mills were "in severe winter" last year as overcapacity and tumbling steel prices squeezed profit margins.

    The government launched a nationwide campaign to reduce overcapacity and upgrade production as part of the country's efforts to battle economic headwinds.

    Zhao said the price surge will only mildly disturb the de-stocking efforts, and the price increase will be short-lived.

    http://en.sxcoal.com/0/145954/DataShow.html

    Attached Files
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    Hebei Steel to cut 5 mln T of steelmaking capacity for 2016-17



    China's biggest steelmaker Hebei Iron & Steel Group plans to slash 5.02 million tonnes per year (tpy) of steelmaking capacity during 2016-17, the company said on Friday, as the government aims to cut overcapacity in the bloated steel sector.

    The steelmaker will also eliminate 2.6 million tpy of ironmaking capacities in the coming two years, after it has already shut 5.6 million tonnes of annual ironmaking capacity and 6.8 million tpy of steelmaking capacity since 2008, it said on the company's website.

    As part of its efforts to weather a supply glut and the slowing economy, the company also plans to raise the proportion of higher-value-added products it makes to above 70 percent by 2020 from the current 41 percent.

    A supply glut and record exports from China, the world's biggest steel producer, have been widely blamed by European countries and the United States for causing deep losses, mill shutdowns and worker layoffs.

    Hebei Steel agreed to buy a Serbian steel plant in April as it aims to expand overseas and shift capacity abroad to weather a slowing economy at home.

    State-owned Hebei Steel produced 47.75 million tonnes of crude steel last year, followed by Baosteel Group at 34.94 million tonnes and privately-owned Jiangsu Shagang Group with 34.21 million tonnes, according to data from the National Bureau of Statistics.

    China as a whole is planning to shed 100 million to 150 million tpy of capacity from a total of 1.2 billion tpy in the coming five years as the country aims to cut overcapacity in sectors including coal and steel.

    http://www.reuters.com/article/china-hebei-steel-idUSL3N18A1UC
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