Mark Latham Commodity Equity Intelligence Service

Tuesday 19th April 2016
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    Siemens may build gas-fired power plant in Germany

    Siemens cleared a regulatory hurdle on Monday in a bid to build a gas-fired power station in southern Germany, a rare event in a country where a drive for renewable energy has made many traditional sources of power unprofitable.

    It would be the first gas plant order in Germany in four years for Siemens, whose chief executive said last year he had resigned himself to never selling another gas turbine in his home country.

    Germany's cartel office has approved the plant in Leipheim, north east of Ulm in Bavaria, which would be built by Siemens and Stadtwerke Ulm, a utility in Baden Wuerttemberg. It still needs approval from European Union competition authorities.

    The gas-fired plant is designated as a reserve power plant for Bavaria where the neighbouring nuclear power station Gundremmingen will be switched off in two stages, 2017 for block B and 2021 for Gundremmingen C. Reserve power plants can earn more money, making a gas-fired option more commercially viable.

    A Siemens spokesman said the project was still awaiting approval from European cartel authorities. "We cannot yet give any further details."

    He also said that a firm order would only materialise after the consortium had been fully established.

    Bavaria currently gets a third of its power from renewable sources, including solar, hydroelectric, biomass and geothermal.

    But the state, like Germany as a whole, still needs some conventional energy capacity to guard against supply swings in a region that is home to carmakers BMW and Audi that are heavy energy users.

    Coal is usually chosen to fill this gap because it is cheaper than gas-fired power. Coal-fired power plants currently earn 7.70 euros per megawatt hour of 2017 baseload production sold ahead in the wholesale market, while those of gas-fired capacity lose 3.7 euros/MWh Thomson Reuters data shows.

    But analysts say that gas plants operating in the reserve market for power in Germany that can switch on quickly when there is a shortfall can earn extra money, making them commercially viable.

    The Welt am Sonntag newspaper had reported on Sunday that the job could be worth up to half a billion euros for Siemens ($565 million) for a 600 megawatt (MW) plant.
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    3D Printing arriving in aerospace in force now.

    That’s according to Terry Wohlers, an industry analyst and consultant who publishes an annual volume regarded by many as the most authoritative source of analysis for the additive-manufacturing industry. Last year, companies purchased 808 machines capable of building metal parts layer by layer, up from 550 in 2014 and 353 in 2013, according to Wohlers. Annual sales growth in the hundreds of units may seem small, but these machines cost hundreds of thousands to a million dollars each.

    GE has begun commercial production of this 3-D-printed fuel nozzle and eventually plans to produce 30,000 annually.

    Makers of orthopedic and dental implants were among the first to begin 3-D-printing metal products; they have been producing implants this way for a few years. But the entry of the aerospace industry has the potential to turn metal additive manufacturing into a much bigger business.

    Several 3-D-printed parts developed by GE, Airbus, and others are either ready for the market or close to it. In fact, GE is already using the technology to produce two complicated jet engine components—a fuel nozzle and an apparatus for housing temperature sensors—as well as parts for a turboprop engine. And companies are developing numerous additional parts for airplanes, satellites, and rockets behind the scenes.

    Industrial additive manufacturing generally involves an intense heat source, either a laser or an electron beam, that melts metal powders layer by layer according to computerized instructions, building up parts as the metal solidifies. The technology is especially useful for making complicated components in relatively small volume, because developing the tools to manufacture them can be very expensive.

    A container for a temperature sensor made by GE was the first 3-D-printed metal part to gain approval from the Federal Aviation Administration.

    The conventional version of GE’s 3-D-printed fuel nozzle is composed of 18 individual parts that must be welded together. The new version is just a single part, and it is 25 percent lighter, which will help increase fuel efficiency. There are 19 such nozzles in a new jet engine that GE is developing, for which the company has 10,000 orders, and the company plans to use the technology to make 30,000 of these nozzles annually.

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    India's March trade deficit narrows, but exports plummet

    India's trade deficit narrowed for the third straight month in March to $5.07 billion, as imports shrank at a faster pace than exports, data showed on Monday.

    Although exports for the year ending March were the weakest since 2010/11, down 15.85 percent from a year ago, the narrowing trade gap showed that India - the world's No.3 crude importer - has been a net beneficiary of the collapse in oil prices.

    For the 2015/16 fiscal year that ended in March, the trade deficit stood at $118.5 billon, compared with $137.7 billon in the previous fiscal year.

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    Oil and Gas

    Kuwait Oil-Workers Strike Over Pay Dispute Enters Third Day

    Oil workers at Kuwait’s oil production facilities extended their strike for a third day over an unresolved pay dispute, slashing the OPEC member’s output by about 1.7 million barrels a day, an amount exceeding the current global surplus.

    The “strike is on,” Kuwait National Petroleum Co. spokesman Khaled Al-Asousi said in a text message Tuesday. Attempts to reach a settlement failed after talks with the union broke up at 3 a.m., said a government official who asked not to be identified because the negotiations are private.

    Oil production plunged 60 percent to 1.1 million barrels a day when the strike began on Sunday, while the state refining company slowed operations at its three oil-processing plants to less than 60 percent of their combined capacity. Kuwait Petroleum Corp.’s oil-production and refining units are working to restart units and raise fuel-processing rates to full capacity, officials said Monday.

    Oil pared declines, with Brent crude dropping 0.4 percent to $42.74 a barrel by 8:45 a.m. in Dubai, after falling as much as 0.7 percent. Kuwait pumped 2.81 million barrels a day last month, making it OPEC’s fourth-largest producer, while worldwide supply surpassed demand by 1.6 million barrels in the first quarter, according to the International Energy Agency.

    “If the Kuwaiti strike persists, it re-balances the market,” Robin Mills, chief executive officer at consultant Qamar Energy in Dubai, said by phone on Monday. “So far it looks like Kuwait is meeting demand and supplying their commitments out of storage.”

    Oil workers in Kuwait are striking to protest cuts in pay and benefits as Middle Eastern crude exporters, reeling from lower oil income, cut subsidies and government handouts. The walkout is the first by oil workers in Kuwait since at least 1996, according to Middle East Economic Digest.

    “The substantial impact of the Kuwait strike has added significantly to the various short-term shut-ins around the world,” consultants FGE said in a note on April 18. The Kuwaiti cuts are “pretty well trebling the shortfalls” from unplanned disruptions in countries including OPEC members Nigeria, Iraq and Venezuela, it said.

    The strike may last 10 to 15 days, because the government set up a joint committee to negotiate with the union over 10 days, said Virendra Chauhan, a London-based oil analyst at Energy Aspects Ltd. “Assume a bit of time to return to work and ramp up,” he said. “Basically we are not expecting months of delay.”

    KPC, the main national oil company, is able to meet its supply commitments to clients in spite of the walkout, the official Kuwait News Agency reported Monday, citing the oil industry’s spokesman, Sheikh Talal Al-Khaled Al-Sabah. Refiner Kuwait National Petroleum Co. was processing about 520,000 barrels of oil a day, the same amount as Sunday, and all three of its plants were operating, Al-Asousi said Monday. Union officials haven’t been responding to requests for comment since the strike began.

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    Saudi's Other Warning Makes Oil Traders Sweat After Doha Failure

    After his comments thwarted supply negotiations in Doha, oil traders are weighing another implied warning from the Saudi deputy crown prince: the threat of an intensifying clash with Iran over market share.

    It was Mohammed Bin Salman’s repeated assertions that the kingdom wouldn’t join an output freeze without Iran that derailed talks between 16 producing countries on April 17. In interviews with Bloomberg News, the prince cautioned that if other producers increased output, Saudi Arabia could respond in kind. Iran is restoring exports after international sanctions over its nuclear program were lifted in January.

    “It was an indication to Iranians that, look guys, if you’re not joining the table we have enough power to crank up production,” Abhishek Deshpande, an analyst at Natixis SA in London, said in a Bloomberg Television interview Monday. “You can question how much more they can crank it up by, but the chances are that, now there’s no freeze, the Saudis will go ahead and increase their production as they were planning.”

    Oil prices dropped on Monday after Saudi Arabia resolved that an oil-supply freeze was possible only with the support of all OPEC members, including Iran, causing talks in the Qatari capital to unravel. Tensions between the two regional antagonists have flared as they take opposite sides in bloody conflicts in Yemen and Syria.

    In an interview published on April 1, Prince Mohammed said that while Saudi Arabia was ready to cap production in concert with other countries, "if there is anyone that decides to raise their production, then we will not reject any opportunity that knocks on our door.”

    The world’s largest oil exporter could increase output by more than 1 million barrels a day, or about 10 percent, to 11.5 million if there was demand for it, the prince, chairman of the Supreme Council of Saudi Arabian Oil Co., said on April 14. It could increase further to 12.5 million in six to nine months, he added. The country pumped 10.2 million a day last month, according to data compiled by Bloomberg.

    “This just shows how central the tensions and the rivalry in the region between Iran and Saudi Arabia are,” Dan Yergin, vice chairman at IHS Inc. said in a Bloomberg Television interview. “There’s zero trust between these two countries right now.”

    Iran plans to boost output to 4 million barrels a day in the Iranian year through March 2017, Oil Minister Bijan Namdar Zanganeh said April 6. That would be an increase of about 800,000 barrels a day from March production. Its crude shipments have risen by more than 600,000 barrels a day this month, according to shipping data compiled by Bloomberg.
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    Iran urges oil producers to keep discussing freeze, says it can't sign up

    Iran urged other oil producers on Monday to continue talks on an output freeze to prop up crude prices, but insisted it was justified in not freezing its own output.

    Iranian OPEC Governor Hossein  Kazempour Ardebilli was speaking to his oil ministry's Shana news agency after talks on Sunday between producers in Doha collapsed when Saudi Arabia demanded that Iran join a freeze. Iranian representatives were not present at the talks.

    "We support cooperation between OPEC and non-OPEC member countries and efforts to bring stability to the oil market, and we urge all producers to continue their negotiations," Ardebilli said.

    But he also said Iran had made it clear that it wanted to regain its share of the oil market lost when it was hit by economic sanctions, and that "its position is supported by most OPEC and non-OPEC members around the world".

    The sanctions were lifted in January after Iran and the group of world powers known as the P5+1 agreed on curbs to Tehran's nuclear programme.

    Ardebilli said that if Iran participated in the proposed output freeze, it would in effect be maintaining sanctions on itself.

    "Those who opposed the nuclear deal between Iran and the P5+1 and the lifting of cruel sanctions on the Islamic Republic... proposed the oil output freeze in January 2016, having the illusion that Iran has no other choice but to accept," he said, in an apparent reference to Saudi Arabia.
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    Petrobras, Brazil oil sector could get lift from impeachment

    Brazil's corruption-battered state oil company Petrobras could be a big beneficiary if the country's opposition parties impeach President Dilma Rousseff, investors and analysts said on Monday.

    Vice President Michel Temer, who would take power if Rousseff were impeached, is considered open to industry calls for changes to oil rules brought in by her Workers' Party over the past decade.

    Rousseff's critics have said the policies, aimed at boosting state control of huge offshore discoveries, drove up costs, limited output and built up Petrobras' crippling $126 billion debt, the largest of any oil company.

    "First off, Petrobras will no longer be used as a tool for monetary policy," said Edwin Gutierrez, head of emerging market sovereign debt at Aberdeen Asset Management in London, pointing to a longtime policy of keeping gasoline prices artificially low to keep a lid on inflation.

    Many have said Rousseff's policies left Brazil's oil industry and Petroleo Brasileiro SA, as Petrobras is formally known, with few options but layoffs, cutbacks and asset sales when oil prices plunged and a giant corruption scandal was uncovered over the last year and a half.

    With Brazil's offshore oil among some of the world's most expensive to extract, any new government would have to make changes to attract a shrinking pool of investment capital away from other oil producers, he added.

    Brazilian oil unions, some of the biggest opponents of Rousseff's impeachment, are also convinced changes are afoot if Temer takes over, said Deyvid Bacelar, an oilworkers' union leader and employee representative on Petrobras' board of directors.

    Likely changes would include an end to strict local purchasing laws for ships and oil platforms, new layoffs to add to the tens of thousands already imposed nationwide, an end to minimum Petrobras involvement in key offshore oil developments and a wholesale selloff of Brazilian oil assets to foreigners.

    Temer's PMDB party and the opposition PSDB, that would likely partner with him if he became president, agree that Petrobras' role in new offshore development should be reduced and foreign investment encouraged, said Adriano Pires, a long-time PSDB advisor.

    Still, Petrobras is likely to remain a symbol of nationalist pride, limiting the potential for real change, said John Baur, global income portfolio manager who handles some of the $306 billion of assets held by Eaton Vance Investment Managers in Boston.

    "One of the reasons Rousseff was so unpopular was because she was slowly starting to make some of the changes that needed to be made," he said. "With many of the same people still around, big change in Brazil seems far-fetched."

    Even a hands-off policy, avoiding the political interference that led to corruption, massive writedowns and a plunging share price, could be a big improvement, some experts said.

    "I imagine that whomever takes over the government will look at Petrobras in a more careful way than they did only a short time ago" said Nelson Narciso, a former director of Brazil oil agency ANP.
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    Papua New Guinea LNG projects see opportunity in tough market

     As liquefied natural gas (LNG) producers despair over a supply glut, two projects in Papua New Guinea are pressing on in a bid to sign off on new developments by 2018 to take advantage of a drop in construction costs and high quality gas.

    France's Total SA said this week it could build the country's second LNG plant for $10 billion, well below industry estimates, while Australia's Oil Search Ltd, which aims to expand in the region, said it expected new projects would have no trouble attacting lenders.

    The push is in stark contrast to moves by rivals to shelve or delay LNG projects from Australia to Canada following an 80 percent slump in prices amid a flood of new supply just as demand has slowed.

    Papua New Guinea has an advantage over Australian and U.S. gas as it is liquids rich, which creates extra revenue, it is closer to the world's biggest LNG markets in Japan, South Korea and China, and the gas has a higher heating value.

    ExxonMobil Corp is already weighing an expansion of its PNG LNG plant, which has been exporting for two years and is now producing at an annual rate of 8 million tonnes.

    In its first public comments on cost, rival Total said a second plant, dubbed Papua LNG, could be built for $10 billion, at least 25 percent below analysts' estimates.

    "We intend to build our own facilities. It will be a big project - about $10 billion and 10,000 people will have jobs," Chief Executive Patrick Pouyanné was quoted saying in two PNG newspapers on Monday following talks with PNG Prime Minister Peter O'Neill.

    Oil Search, a partner in both Papua LNG and ExxonMobil's PNG LNG, said on Tuesday it expects to be able to fund its share of any new PNG developments.

    "Based on soundings with financial institutions ... significant debt funding appears to be available for good quality projects such as these potential developments, despite the weaker oil price," it said in its quarterly report.

    For a 7-million-tonnes-a-year project using gas from the Elk and Antelope fields, $10 billion would imply a cost of around $1,425 a tonne, compared with previous estimates from Papua LNG partner InterOil Corp of a cost of around $2,000 to $2,100 a tonne.

    "That is low," Neil Beveridge, a senior analyst at Bernstein Research, said in an email, adding: "We certainly believe that project could be one of the lowest cost in the region."

    Oil Search declined to comment, deferring to Total as operator of the project. A Total spokesman told Reuters the cost estimate referred to the entire project, not just Total's share.

    Pouyanné said last week now is the time to invest in new LNG plants, as projects will be able to negotiate cheaper construction costs with contractors as a raft of ongoing projects are completed over the next two years.

    "Frankly for a major company like Total, the best strategy is to invest when prices are low because then the costs are low," he told reporters at a conference last week.

    Oil Search wants the Papua LNG and PNG LNG projects to work together, to prevent wasting money the way LNG producers have on the east coast of Australia building three competing projects side by side.

    UBS analyst Nik Burns estimates a stand-alone Papua LNG project would cost $15 billion and an expansion of PNG LNG would cost $9 billion, while tying them together could cut the combined costs by at least 10 percent.

    "The size of the prize is potentially quite large," Burns said.

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    Italy's gas imports from Russia hit new low, Algerian flows at steady high

    Italian gas imports from Russia and northwest Europe hit new lows on Sunday, as flows from Algeria continued to defy expectations, remaining at a steady high since the start of April, according to data from Eclipse Energy, an analytics unit of Platts, Monday.

    The rise in Algerian gas exports to Italy since the start of the second quarter has seen a slump in supplies from Italy's other core gas suppliers.

    Italy is Europe's third biggest gas market with consumption of some 66 Bcm in 2015, and it is reliant on imports for as much as 90% of its demand.

    Russia was Italy's largest single gas supplier last year, delivering 49% of all Italian imports, or 30 Bcm.

    On Sunday, gas supplies from Russia to Italy fell to just 48 million cu m, the lowest level since the end of January, according to the Eclipse data.

    And supplies via Switzerland from northwest Europe on Sunday hit their lowest point since October last year at just 6 million cu m.

    By contrast, Algerian gas exports to Italy on Sunday totaled 63 million cu m, in line with the average since the start of the month, the Eclipse data showed.

    That is significantly higher than the 16 million cu m/d average in March.

    Russian exports to Italy in the first quarter averaged 77 million cu m/d, so the drop to less than 50 million cu m/d at the weekend is significant.

    A theoretical continued rate of 50 million cu m/d for the rest of the year would see Russia supply just 21 Bcm to Italy in 2016.

    The slowdown in Russian supplies to Italy is surprising in some ways after Eni agreed with Russia's Gazprom in January this year to "maximize" the sale of Russian gas under the partners' long-term contract supply agreements.

    However, Eni CEO Claudio Descalzi also said in March that Eni had re-negotiated in 2015 its long-term gas import contract with Algeria's Sonatrach to include increased gas volumes.

    The sudden hike in Algeria exports could be attributed to a number of factors, including lower LNG production and customers nominating higher volumes because of favorable prices under long-term, oil-indexed contracts.

    Algerian pipeline exports to Spain are also well up so far in April, supplies averaging 41 million cu m/d compared with a March average of just 29 million cu m/d, the Eclipse data showed.

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    Keppel Profit Drops as Oil Price Slump Delays Offshore Projects

    Keppel Corp., the world’s largest builder of oil rigs, reported a 41 percent decline in first-quarter profit as weak oil prices led to delivery delays of offshore projects.

    Net income dropped to S$211 million ($156 million) from S$360 million a year earlier, Keppel said in a statement Monday. Sales slumped 38 percent to S$1.7 billion from S$2.8 billion. The higher contribution from its property business at 47% helped to partially offset lower profits from offshore and marine sectors, the company said in the statement.

    Oil companies and rig operators face rising debt and spending cuts, and have abandoned orders or asked shipyards to delay deliveries of offshore drilling rigs and production facilities. That’s caused shipyards to post losses or smaller profits after writing off costs from projects under construction, and demand has fallen with crude prices still less than half of what they were three years ago.

    "The sustained low oil price environment continues to take a toll on the global oil and gas industry, which is in the midst of one of the most severe downturns in recent years," Chief Executive Officer Loh Chin Hua said in the statement.

    Keppel fell 2 percent to close at S$6 Monday before the earnings announcement. The stock has fallen 7.8 percent this year.

    Keppel and its smaller rival Sembcorp Marine Ltd. also face risks from Brazil, where debt-ridden Sete Brasil Participacoes SA accounts for a combined $10.5 billion in orders for semi-submersibles and drill ships at the two companies. Sete Brasil fell into financial distress after it was unable to secure long-term financing and its only client state-run oil producer Petroleo Brasileiro SA, or Petrobras, faced allegations of kickbacks.

    Keppel wrote off S$230 million in the fourth quarter over delinquent projects.

    Brazil, which has traditionally been one of the company’s key markets, "continues to be mired in economic and political challenges," Loh said.

    Keppel stopped construction work for Sete Brasil and won’t resume until payment commences, Loh said.

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    UKOG’s Horse Hill to create up to 5,600 jobs and be worth up to £52.6bn

    A new report has said UK onshore discovery, Horse Hill, could create up to 5,500 jobs and be worth up to £52.6billion.

    UK Oil & Gas Investments (UKOG) commissioned EY to produce a report on the Gatwick site’s potential.

    The EY report read: “The development of Kimmeridge Limestone Oil in the Weald Basin, assuming it can be extracted from a development site at the volumes projected by UKOG, has the potential to generate significant economic value to the UK economy, partially off-set the decline in oil production from UK fields, support employment, and generate significant tax benefits to the exchequer.

    “These benefits will be maximised via the development of a UK-based supply chain, and through a series of targeted policies and initiatives to appropriately mitigate potential barriers to development.

    “Conceptual studies and oil in place estimates previously conducted suggest a significant opportunity for the UK to secure a proportion of its energy from the Weald Basin.”

    Future peak oil production could provide approximately 4% to 27% of 2014 UK daily oil demand over the life of the project, according to the report.

    The Gross Value Added to the UK economy could range from £7.1billion to £52.6billion, the project will generate between 1,000 to 5,600 jobs in the UK and lifetime tax revenues of between £2.1billion to £18.1billion, according to key findings.

    Stephen Sanderson, UKOG’s chairman, said: “This report confirms UKOG’s view that the development of Kimmeridge Limestone oil in the Weald Basin can make a very significant contribution to the economy, employment and energy security of the UK.

    “The report’s conclusions are given credence by the recent results of the highly successful Kimmeridge Limestone flow tests at the Horse Hill-1 oil discovery. The tests demonstrate that significant volumes of high-quality light oil exists within the Kimmeridge Limestones and can flow naturally to surface at commercial rates.

    “The unexpectedly high aggregate flow rate of over 1365 barrels per day (“bopd”) from Horse Hill’s two Kimmeridge Limestones far exceeds the study’s modelled peak flow rate of 400 bopd per horizontal well. It is, therefore, possible that the overall economic impact of Kimmeridge Limestone oil could be significantly higher than this initial report describes.”

    It comes after UKOG bought Angus Energy’s remaining 7.8% interest in the Horse Hill-1 oil discovery.

    The £1.8million transaction increases UKOG’s stake in the onshore Weald Basin from 19.9% to 27.3%.
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    Chevron signs up Australia's Alinta to buy gas from Wheatstone

    Chevron has agreed to sell 20 petajoules a year of gas from its Wheatstone project to Alinta Energy in Western Australia starting in 2020, securing a customer for more than a quarter of the domestic gas output from Wheatstone.

    The contract, lined up at a tough time for producers looking to seal long-term deals amid a gas supply glut, is for seven years, Chevron said on Tuesday.

    "This agreement is an important step in Chevron's rapidly expanding domestic gas business in Western Australia," Chevron Australia managing director Roy Krzywosinksi said in a statement.

    The $29 billion Wheatstone project is due to start producing liquefied natural gas (LNG) for export in 2017 and start supplying the Western Australian domestic market from 2018.

    At full tilt, the project will have a capacity of 8.9 million tonnes a year of LNG and 200 terajoules a day of domestic gas, with the gas being marketed separately by each of the project partners.

    Chevron has a 64 percent stake, with the remainder owned by Kuwait Foreign Petroleum Exploration Co (KUFPEC), Woodside Petroleum and Japan's Kyushu Electric Power Co and Tokyo Electric Power Co (TEPCO).

    Chevron already supplies about 10 percent of the Western Australian market with gas from its share of the competing North West Shelf project.
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    Energy Transfer-Williams Deal Had a Different Kind of Tax Day

    Monday turned out to be a different sort of Tax Day for Energy Transfer Equity LP and Williams Cos., two U.S. energy pipeline giants seeking a multibillion-dollar merger.

    While Americans were filing their annual tax returns, Energy Transfer revealed in its own filing that it has yet to obtain a tax opinion needed to close its takeover of Williams. Latham & Watkins LLP told the company that, if the deal had closed Monday, the law firm wouldn’t have been able to deliver a so-called “721 opinion” -- deeming the transaction an exchange that frees shareholders from tax liabilities.

    Williams disagrees with that position and the two companies are discussing how it may affect the deal’s closing, according to the filing. It’s the latest in a series of twists for the troubled pipeline merger. Since Energy Transfer offered in September $43.50 for each Williams share, the collapse in oil prices has cut the market value of both companies by roughly half, casting doubt on whether the takeover will happen.

    “We view the current uncertainty over the opinion as yet another impediment to the ETE-WMB merger,” said Selman Akyol, an equity analyst at Stifel Nicolaus & Co. “The latest transaction update from ETE muddies the waters.”

    The deal’s arbitrage spread, traded by those betting on whether it’ll close, widened Monday to the biggest since January, reflecting growing doubt about its prospects.

    The spread is “blowing out,” Timm Schneider, an analyst at Evercore ISI, said in a note to clients. “The stocks are certainly reacting to the speculation around a potential completion (or not) of this transaction.”

    Energy Transfer shares jumped as much as 22 percent Monday before settling at $9.85. Williams slid as much as 13 percent and closed at $16.68.

    Both companies are required to cooperate and make “commercially reasonable efforts” to obtain the tax opinions necessary for the deal, based on their merger agreement. Lance Latham, a spokesman for Williams, declined to comment on Monday’s filing. Vicki Granado, a spokeswoman for Energy Transfer, declined to comment beyond the statement.

    Energy Transfer also indicated in Monday’s filing that future dividend payouts from its Energy Transfer Corp. unit, a limited partnership created for the Williams merger, may be in jeopardy.

    Owing in part to “more challenging business conditions,” Energy Transfer’s management is forecasting that Energy Transfer Corp., shares of which would be exchanged for existing ones in Williams, will issue payouts of 57 cents a share in 2016 and 46 cents in 2018 -- but nothing in 2017.

    The proposed deal has already spurred disagreements between the two companies. In March, Energy Transfer completed a private unit offering that it may use to help pay down debt associated with the purchase of Williams. Williams had earlier blocked its proposal to hold a public offering and wasn’t involved in the private one.

    Williams filed suit against Energy Transfer and its chief executive officer, Kelcy Warren, over the exchange earlier this month. In its challenge against Warren, Williams said its would-be leader “maliciously” orchestrated the offering to guarantee himself more than $200 million a year in payments at the expense of other investors.
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    Cox Oil Offshore acquires Gulf of Mexico assets from Chevron

    Cox Oil Offshore, L.L.C., an established, privately owned, independent oil and gas company today announced they have successfully completed a transaction in which Cox Oil acquired a number of assets in the Gulf of Mexico from Chevron. The acquisition includes 19 fields and associated assets located primarily on the GOM Outer Continental Shelf and in Louisiana state waters.

    'Today's closing further demonstrates Cox Oil's dedication to the Gulf of Mexico and the Outer Continental Shelf. We look forward to welcoming the more than 100 Chevron employees that will be joining our team,' said Brad E. Cox, Chairman and Founder of Cox Oil.

    'This transaction contributes to our long term, strategic focus in the oil and gas industry. We are grateful to Chevron and their professional staff for their dedication and efforts in this process,' said Craig Sanders, CEO of Cox Oil.

    The asset acquisition package includes 170 active wells, 70 platforms, 70 caissons and other offshore structures. The financial aspects of the deal will not be disclosed. The closing date for the transaction is April 15, 2016.

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    Oregon LNG Project ceases operations

    Oregon LNG has announced that it has ceased operations on the Oregon LNG Project.

    Oregon LNG confirmed that the owner of the LNG project, Leucadia National Corp., has decided to cease funding the project.

    In a short statement released on its website, Oregon LNG said: “Oregon LNG thanks all those in the project area who supported its 12-year effort to bring good jobs and tax revenues to Warrenton and Clatsop County by building a LNG terminal and associated pipeline. Oregon LNG will have no further comment.”

    The proposed US$6 billion project would have included an LNG export terminal located in Warrenton, Oregon, US, at the mouth of the Columbia River, and a natural gas connector pipeline to bring largely Canadian natural gas from an existing pipeline in Washington State to the terminal site. Oregon LNG hoped that the LNG project would have produced up to 9 million tpy of LNG.
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    French nuclear watchdog says investigating falsified engineering reports

    French nuclear security watchdog ASN said on Monday that it had been informed of the falsification of control reports by a French engineering company which produces parts used by industries that supply the nuclear sector among others.

    ASN did not namee companies involved, but said in a statement that equipment destined for a research reactor under construction may have been affected.

    The watchdog said an investigation has been launched to determine the scope of the falsification. It also requested that the nuclear industry sector carry out checks.
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    Precious Metals

    Net long gold COMEX positions extend to 4.5-year high: CFTC

    Managed-money investors increased net long gold positions on US commodity exchange COMEX to 170,634 contracts for the week to April 12, the highest level since September 2011, data from the US Commodity Futures Trading Commission showed Monday.

    The figure is up 12% from 152,758 contracts the previous week and is the largest weekly addition for five weeks.

    With each contract worth 100 oz, the total represents around 550 mt of gold.

    Institutional investors have built up bullish positions only since January, coinciding with the surge in this year's gold price, after eight weeks of net short positions in November and December.

    Gold has gained over 15% since the start of 2016, up to six-week highs around $1,260/oz last week on extended dollar weakness uncertainty around global monetary policy.

    "Markets [have] become generally more nervous in the aftermath of the global financial crisis and this is one of the key factors that has amplified the change in sentiment towards gold this year," UBS precious metal analyst Joni Teves said Friday.

    "Heightened risk aversion encourages holding gold as an insurance. Although an improvement in risk appetite would divert some attention away from gold, support would come from accommodative policy and lower rates," she added.

    Gold was trading around $1,230/oz Monday morning.

    Meanwhile, SPDR Gold Trust, the world's largest gold-backed exchange-traded product, showed weekly outflows of 5.35 mt for the week ending Friday.

    After significant gains this year, up 176 mt from January to March, the fund is down nearly 7 mt in April.

    Total assets in the fund now stand at 817.81 mt, down from a 3.5-year high of 823.7 mt in the last week of March.

    Net long positions in silver were up 29.5% to a three-year high of 56,018 contracts, according to CFTC data.

    Platinum was up 12.1% to 16,425 contracts and palladium was down 25.6% lower at 4,788 contracts.
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    Community opposition forces Newmont to abandon Conga project in Peru

    Output from Conga was supposed to replace production from the nearby Yanacocha mine (pictured), which is running out of gold. (Image from archives)

    Newmont Mining Corp's (NYSE:NEM), the world's 2nd largest gold miner, is walking way from its $5 billion Conga copper and gold project in Peru after year of relentless community opposition.

    In its annual filing with the U.S. Securities and Exchange Commission (SEC), the Colorado-based miner said that due to current social and political conditions, the company “did not anticipate being able to develop Conga for the foreseeable future.”

    Locals welcomed the news, which granted Peruvian farmer Máxima Acuña de Chaupe the Goldman Environmental Prize.

    Acuña, who has been at the forefront of the opposition against the Conga project since it was first proposed in 2010,said in a statement she only has one more wish. “I want to return to the peaceful life I had on my land with my family for almost 20 years.”

    Newmont decided to halt construction work at the project in November 2011, after violent protests led by governor Gregorio Santos forced the country's government to declare a state of emergency.

    Peruvian farmer Máxima Acuña de Chaupe has won the Goldman Environmental Prize after Newmont removed its proposed Conga gold mine in northern Peru from its list of reserves in its annual filing with the SEC. (Image provided)

    Minera Yanacocha, one of the two local companies working with Newmont in the now mothballed project, tried hard to win local support, but was unable to secure it.

    Social pressure continued in the following years, to the point that Peru’s government had to hire international consultants to determine the viability of revised water strategy proposed Newmont. Eventually, authorities decided to order a suspension of all work at the site, except for the construction of water reservoirs.

    Conga, which had the potential to generate up to 350,000 ounces of gold and 120 million pounds of copper a year, during its 19-year life, was going to be built by Newmont’s existing Yanacocha mine, Latin America’s largest gold operation.

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    Base Metals

    World's largest underground copper mine remains shut on heavy rains, mudslides

    Codelco's El Teniente mine, the world's largest underground copper operation and the sixth biggest copper mine by reserve size. (Image from archives)

    Chile’s Codelco, the world’s No.1 copper producer, said Monday that its El Teniente mine will remain closed until at least Thursday, following torrential rains that hit the central part of the country over the weekend, causing major damages and leaving an estimated 4 million people without drinking water.

    Codelco warned that for each day the mine remains inactive, it loses about 1,500 tonnes of copper output, as El Teniente is the world's largest underground copper mine and the sixth biggest by reserve size.

    Codelco loses about 1,500 tonnes of copper output for each day El Teniente mine remains inactive.

    In total, Codelco estimates it will lose around 5,000 tonnes of the red metal due to the suspension of mining activities,local newspaper El Mercurio reports (in Spanish).

    The situation could get even worse, as the state emergency agency, Onemi, issued Monday an early alert for the Atacama region, the heart of Chile’s copper industry, which is expected to also get heavy rain and winds of at least 100k/h.
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    Steel, Iron Ore and Coal

    China cuts working hours for coal miners in bid to tackle supply glut

    China will reduce the number of statutory working days for its coal miners to 276 a year from 330 as it bids to tackle a chronic supply glut that has sapped prices, the country's work safety watchdog said on Monday.

    With demand on the wane and mining firms facing widespread losses, China plans to shut down 500 million tonnes of coal production capacity over the next three to five years as part of its efforts to cut a surplus estimated at more than 2 billion tonnes a year.

    China's State Administration of Work Safety ( said in a notice on its website on Monday that the official production capacity of the country's coal mines would be adjusted to fit the new 276 working day limit, meaning that mines will be held to even stricter production caps.

    China's mines traditionally produced more than their designed capacity as miners worked throughout the year to churn out as much coal as possible.

    But the practice has led to safety problems as well as oversupply, and China is now cracking down on mines that produce more than they are allowed.

    The country has also promised to ban all new coal mine projects for at least three years, and will close more than 1,000 mines this year.

    Coal production in China fell 3.5 percent to 3.68 billion tonnes last year, dropping for the second year in succession amid slowing industrial demand and a state campaign to cut the country's dependence on polluting fossil fuels.

    In a break with tradition, Chinese coal miners this year allowed their workers to leave their posts during the Chinese new year holidays, another move aimed at curbing oversupply and shoring up prices.
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    Glencore, Tohoku set coal contract, but benchmark fades

    Glencore and Tohoku Electric Power set a Australian thermal coal import price 9 percent below last year, although the traditional benchmark for industry pricing appears to be breaking down, sources said on Tuesday.

    The contract price for the financial year beginning April 1 was set at $61.60 per tonne, down from $67.80 a year ago, four sources said, reflecting a global supply glut for thermal coal but still well above current spot prices.

    The Tohoku/Glencore price has often set the benchmark for other Japanese utilities, but industry sources said the pricing mechanism was coming under pressure amid a shakeup of Japan's electricity market that has increased competition.

    "What is happening this year is the traditional Japanese benchmark system is collapsing," said a source familiar with the negotiations. "We are hearing there will be different prices depending on where the coal comes from and also volumes."

    Another source with direct knowledge of the matter said there were other contracts with lower prices, including ones below $60 per tonne, depending on where coal is mined.

    "Given higher competition in the face of the liberalisation of Japan's retail electricity power market, buyers' evaluations and negotiations have become more strict," the source said.

    "The utilities are not buying coal just by calories any more, but are trying to set different prices to reflect their evaluation of each mine," he added.

    Competition among Japanese power and city gas utilities intensified this month when the companies lost their monopoly control over the retail power market.

    A Tohoku spokesman said the company had reached an agreement with Glencore, but declined to comment further. Glencore was not immediately available for comment.

    Australia accounts for about three-quarters of Japan's thermal coal imports. Shipments reached 86.8 million tonnes in 2015, with about 50 million tonnes covered by annual contracts.

    Other potential buyers said they were slightly disappointed with the Glencore-Tohoku price, as spot coal has been traded at below $55 a tonne due to slow demand in Asia.

    Asian benchmark thermal coal from Australia's Newcastle terminal fell about 14 percent in the financial year to March 31, settling at $54.19 a tonne. The price has lost more than 60 percent since early 2011.

    "The agreed price came a bit high, but Japanese utilities need to accept higher prices so that producers can stay in business and supply high-quality coal for a long-term," one buyer said.

    Coal producer Peabody Energy Corp filed for U.S. bankruptcy protection last week after a sharp drop in coal prices left it unable to service debt of $10.1 billion, much of it incurred for expansion in Australia.

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    China Coal Energy Mar coal sales up 26pct on month

    China Coal Energy Co., Ltd, the country’s second largest coal producer, sold 11.57 million tonnes of commercial coal in March, gaining 25.76% on month and up 26.4% on year, the third consecutive year-on-year rise, the company announced on April 15.

    In the first quarter this year, the company sold 30.42 million tonnes of commercial coal, up 25.6% from a year ago, it said in a statement.

    Of this, self-produced commercial coal accounted for 6.76 million tonnes or 58.4% of the total in March, rising 16.2% on month and up 19.4% on year, also the third straight year-on-year increase. The volume over January-March increased 20.7% on year to 20.1 million tonnes.

    China Coal Energy, which sold large volumes of coal through railways, has benefited directly from a 0.001 yuan/ cut in rail freight of Daqin line to 0.09 yuan/ in early February.

    Coal mines of the company are mostly located in Pingshuo mining area in Shanxi province, which contributed nearly 70 million tonnes of coal output last year.

    China Coal produced 7.1 million tonnes of commercial coal in March, up 17% on month but down 1.3% on year, with that in the first quarter up 3.96% on year to 20.49 million tonnes.

    On March 24, China Coal Energy and another three leading producers including China Shenhua, Datong Coal and Yitai Group decided to maintain the prices of thermal coal shipped via China’s northern ports stable in April from March, after a meeting with the China National Coal Association, a move that would help them to maintain market shares.

    Prices of thermal coal, used mainly for power generation, have been relatively stable since entering April, after rebounding 20-30 yuan/t since December last year, supported by low stocks at northern ports and constrained output amid the government’s efforts to tackle overcapacity.

    On April 15, the Fenwei CCI thermal index assessed domestic 5,500 Kcal/kg NAR coal at 384 yuan/t, up 5.06% from the start of the year, while 5,000 Kcal/kg NAR coal rose 5.03% from the start of the year to 344.5 yuan/t.

    With flat demand expected for the short run, thermal coal prices will be mainly impacted by the pace of production recovery at main production areas and competition of imported coal from the abroad.
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    China Mar rail coal transport down 9.7pct on year

    China’s rail coal transport dropped 9.7% on year but up 14.4% from February to 159 million tonnes in March, showed the latest data from the China Coal Transport and Distribution Association.

    Of this, 111 million tonnes or 69.8% of the total were railed to power plants, a yearly decline of 5.4% but a monthly increase of 11%, data showed.

    In the first quarter of the year, China’s railways transported a total 476 million tonne of coal, falling 11.3% year on year, with thermal coal transport contributing 339 million tonnes or 71.2% of the total, down 4.6%.

    Coal-dedicated Daqin line transported 83.28 million tonnes of coal during the same period, down 21.4% on year, with March volume down 19.3% on year at 28.89 million tonnes.
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    Mechel signs debt restructuring deal with Sberbank

    Russian coal and steel producer Mechel said on Monday it had agreed a debt restructuring deal with the country's biggest bank Sberbank totalling 30 billion roubles ($446 million) and $427 million.

    The mining company, controlled by businessman Igor Zyuzin, borrowed heavily before Russia's economic crisis and has struggled to keep up repayments as demand for its products weakened alongside tumbling coal and steel prices.

    It is now in talks to restructure $5.1 billion, about 80 percent of its total debt, with four large creditors: Sberbank, Gazprombank, VTB and a syndicate of foreign banks.

    Mechel said on Monday its subsidiaries had reached an agreement with Sberbank to restructure the $427 million and 13 billion roubles of the 30 billion total.

    A separate agreement regarding the remaining 17 billion roubles owed by Mechel's Chelyabinsk Metallurgical Plant is due to be completed shortly, it said.

    The miner said it must now repay 2.8 billion roubles to Sberbank and its Sberbank Leasing subsidiary to complete the restructuring deal.

    The grace period for Mechel's main debt could be extended until January 2020, with loans maturing in April 2022, Mechel said, but only if VTB agrees to similar conditions.

    In February, Mechel reached debt restructuring agreements with major creditors after two years of negotiations. But last month, the company failed to get a quorum of 50 percent of its minority shareholders' votes to approve the deal.
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    Rio Tinto cuts 2017 iron ore guidance as first-quarter shipments rise

    Rio Tinto on Tuesday cut its 2017 production guidance from its Australian iron ore mines due to a delay in the rollout of its autonomous transport technology, based on driverless trains.

    The global mining giant said output from its Pilbara mines, which make up the vast majority of its iron ore production, would fall to 330 million to 340 million tonnes from a previous forecast of 350 million tonnes, as testing of its AutoHaul technology continues.

    Rio Tinto's $518 million autonomous train plan has been under development since 2012, and follows the deployment of 71 autonomous trucks at its Australian iron ore mines.

    Still, the world's No. 2 iron ore producer posted an 11 percent rise in first quarter iron ore shipments and confirmed it was on track for a record 350 million tonnes in 2016 as it runs its mines at full tilt despite a global supply glut amid slower Chinese industrial growth.

    The production increases underscore the determination of outgoing Chief Executive Sam Walsh to defy calls for supply restraints until markets are in better balance.

    Rio Tinto's first quarter shipments climbed to 80.8 million tonnes from 72.5 million in the year-ago quarter, but were down from 91.3 million tonnes in the preceding quarter due to a cyclone that interrupted shipments in late January.

    "We continue to experience volatility in commodity prices across all markets," Walsh, who last week tipped a second-half contraction in iron ore prices, said in a statement.

    Iron ore stood at $59.40 a tonne, having advanced nearly 40 percent since January due to restocking of depleted inventories in China.

    "In the short term Rio's guidance is being maintained and that comes as the iron ore price is high," said Shaw & Partners analyst Peter O'Connor. "Next year, their guidance is down, and we don't know where the price is going to be, that's not good."

    Citigroup analysts forecast a decline in iron ore prices in the second half of 2016 due to continued oversupply. The bank sees iron ore averaging $45 a tonne in 2016, $39 in 2017 and $38 in 2018.

    Walsh, who retires in July, has repeatedly defended running the company's mines at maximum speed even as demand growth from China's steel mills waned, saying any curtailment would simply open the door for competitors to fill the void and do little to lower supply and elevate prices.

    BHP Billiton, the world no. 3 producer, will report quarterly production on Wednesday. It is likely to report a strong quarter, although also affected by weather, as it too focuses on reducing costs rather than shedding production. However, its overall shipments will be crimped by the suspension of production from its Samarco joint venture in Brazil following a deadly damburst.

    Rio Tinto said its thermal coal output fell 3 percent in first quarter versus a year ago to 5.5 million tonnes, pointing to a yearly total of 16 million to 17 million tonnes.

    In copper, where Rio Tinto is looking for greater exposure to offset a high-weighting toward iron ore, first quarter mined production slipped 2 percent to 141,200 tonnes against the same period a year ago.

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    Rio Tinto Q1 iron ore output up 13% as prices soar

    Rio Tinto Group reported first-quarter iron ore production rose 13% as the world’s second-largest supplier continues to expand output amid the steelmaking ingredient’s 2016 price surge.

    Output rose to 84 million metric tons in three months to March 31, London-based Rio said Tuesday in a statement. That compares to 74.7 million tons in the same period a year earlier, and was in line with the 83.9 million ton median estimate among six analysts surveyed by Bloomberg. Production dropped 4% from the previous quarter on seasonal factors.

    Iron ore surged 23% in the first quarter as improving margins at China’s steel mills — which account for about half of global production — spurred demand, while policymakers including Premier Li Keqiang have indicated they’re prepared to bolster growth in the top commodity-consuming nation. Raw material prices have probably bottomed amid brighter prospects for Chinese demand, according to Citigroup Inc.

    Output was higher “due to the completion of some brownfield developments and expanded infrastructure capacity in the Pilbara in 2015,” the company said in the statement.

    China’s economy stabilised last quarter as a surge in new credit spurred a property sector rebound. The world’s biggest steel producer pushed output to a record in March as mills in China fired up plants to take advantage of a price surge since the start of the year that’s rescued profit margins.

    “We continue to experience volatility in commodity prices across all markets,” Chief Executive Officer Sam Walsh, who will step down on July 1, said in the statement. “In the face of a testing external environment, our focus remains on delivering further cost and productivity improvements, disciplined capital management and maximising free cash flow, to ensure that Rio Tinto remains strong.”
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    Major steel producers fail to reach deal on overcapacity, U.S. chides China

    China and other major steel-producing countries failed to agree measures to tackle a global steel crisis as the sides argued over the causes of overcapacity, prompting U.S. criticism of Beijing's approach and an angry response from Chinese officials.

    A meeting of ministers and trade officials from over 30 countries, hosted by Belgium and the OECD on Monday, sought to tackle excess capacity, but concluded only that it had to be dealt with in a swift and structural way.

    Washington pointed the finger at China over the failure of the talks, saying Beijing needed to act on overcapacity or face possible trade action from other countries.

    "Unless China starts to take timely and concrete actions to reduce its excess production and capacity in industries including steel ... the fundamental structural problems in the industry will remain and affected governments – including the United States – will have no alternatives other than trade action to avoid harm to their domestic industries and workers," U.S. Secretary of Commerce Penny Pritzker and U.S. Trade Representative Michael Froman said in a statement.

    Asked what steps the Chinese government would take following the unsuccessful talks, China Commerce Ministry spokesman Shen Danyang told reporters on Tuesday: "China has already done more than enough. What more do you want us to do?"

    "Steel is the food of industry, the food of economic development. At present, the major problem is that countries that need food have a poor appetite so it looks like there's too much food."

    The OECD said global steelmaking capacity was 2.37 billion tonnes in 2015, but declining production meant that only 67.5 percent of that was being used, down from 70.9 percent in 2014.

    Britain in particular has felt the squeeze as its largest producer Tata Steel has announced plans to pull out of the country, threatening 15,000 jobs. Last week, more than 40,000 German steel workers took to the streets to protest against dumping from China.

    China, the world's top steel producer, has been ramping up exports of steel in recent years, as it battles to steer its economy into services-led growth and away from traditional manufacturing, while keeping employment levels high.

    China's steel exports jumped 30 percent from a year ago to 9.98 million tonnes in March despite a slew of anti-dumping measures globally.

    But blaming China for woes in the global steel industry is simply a lazy excuse for protectionism, and such finger-pointing will be counter-productive, China's official Xinhua news agency said in a commentary on Monday.

    "It's more been their competitive advantage into Asian countries which has really driven that rise in exports," said Daniel Hynes, a commodity strategist at ANZ Bank. "I think that will continue and will keep those export levels relatively high despite the pressures we're seeing now."

    At a news conference following Monday's meeting, deep divisions between China and other producers were clear.

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    China says financial crisis caused weakening global steel demand

    China believes that the weakening global demand for steel since the 2008-09 financial crisis is the "fundamental cause" of excess capacity in the steel and related industries, which is a common challenge for the world.

    But China's domestic efforts in reducing overcapacity in the related sectors and its Belt and Road Initiative, which is actually helping boost steel consumption, need global cooperation and coordination.

    China laid out its position on Monday at the High-Level Symposium on Excess Capacity and Structural Adjustment in the Steel Sector in Brussels.

    Zhang Ji, China's assistant minister of Ministry of Commerce, heads a delegation to the talks, organized by Belgian government and OECD.

    "The Chinese side believes that since the international financial crisis, economies have suffered a notable slowdown, sluggish recovery, and a decline in infrastructure construction, industrial development and household consumption, leading to weak global demand for steel," according to the position paper.

    "This is the fundamental cause of excess capacity in the steel and some other industries,
    " the document said.

    Before the international financial crisis in 2008, strong growth of the world economy was conducive to the increase in the production capacity of the global steel industry.

    "Any other analysis and judgment on the steel excess capacity will make us lose direction and fail to find a correct solution," the paper was cited as saying.

    The Chinese side took the view that the OECD Steel Committee is a forum for global dialogue and communication on steel, and the nature of the session should be a symposium rather than a formal official meeting.

    China also said that the excess capacity problem currently facing the steel sector is a universal one for all steel-producing countries in the world.

    "It is a common challenge that needs to be confronted by all countries together. The shared problem needs to be tackled with shared efforts. Pointing fingers at one another doesn't help solving it," the paper said. "Therefore, we believe that all parties should take part in the Symposium in the spirit of cooperation and discuss excess capacity issue in the steel sector constructively."

    China is now making tremendous efforts and considerable sacrifices to cut its overcapacity. During the 12th Five-Year Plan period from 2011-2015, China shut down outdated facilities with total production capacity of over 90 million tons; in the coming five years, China will further reduce crude steel capacity by 100 million to 150 million tons, involving the reemployment of 500,000 people.

    "The measures we have taken and the effects they produce have been fully recognized and appreciated by many countries," Chinese government said in the paper.

    China hopes more countries would take proactive measures in line with their respective national conditions and stage of development, jointly contributing to resolving excess capacity in the steel industry, according to the position paper.

    China believes that countries need to work on both the supply side and the demand side, and vigorously expand the demand to tackle excess capacity.

    "China's Belt and Road Initiative set out a vision to strengthen the connectivity and infrastructure development of countries along the route. This has fuelled their demand for steel, and delivered win-win outcomes through social and economic development," the paper was cited as saying.

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    China steel, iron ore futures pull back further after rally

    Iron ore and steel futures in China pulled back further on Friday from an early-week rally that lifted prices to multi-month highs amid signs of a pickup in demand in the world's top consumer.

    Spot iron ore has similarly retreated, but was still up 10 percent so far on the week as firmer steel prices spurred buying interest in the raw material.

    The most-traded September iron ore on the Dalian Commodity Exchange was down 2 percent at 414 yuan ($64) a tonne by midday. It touched a 17-month high of 432 yuan on Thursday.

    On the Shanghai Futures Exchange, steel rebar for October delivery slipped 1.5 percent to 2,316 yuan a tonne. It spiked to an 11-month peak of 2,435 yuan on Wednesday.

    "Steel demand was also expected to slow on views that steel end-users had accumulated enough steel inventories for some time and were waiting for steel prices to fall before repurchasing," Commonwealth Bank of Australia said in a note.

    A pickup in seasonal demand lifted China's crude steel output to a record high of 70.65 million tonnes in March, government data showed.

    "This is really surprising. Steel output will likely rise further in the second quarter due to improving demand, but we still expect full-year output to drop slightly from 2015 due to supply-side reforms and tight credit," said Yu Yang, an analyst at Shenyin & Wanguo Futures in Shanghai.

    Iron ore for immediate delivery to China's Tianjin port dropped 2.2 percent to $58.60 a tonne on Thursday, after touching a five-week high of $59.90 the day before, according to The Steel Index.

    The spot benchmark is still up 10 percent for the week, its strongest such gain since April last year.

    Iron ore could find firm support at $50 a tonne, analysts at Sucden Financial say.

    "As policymakers in China remain committed in their supportive efforts we could see traction built around these levels with spikes higher as sentiment once again overrides the fundamentals, they said in a report.

    "However, aside from some potential for tentative spikes towards $70 ... we anticipate spot iron ore prices will be capped on the upside by ample supply and lower per capita consumption, which could eventually drag prices lower towards the tail-end of 2016."

    China's economy grew at its slowest pace in seven years in the first quarter. Indicators from the country's consumer, investment and factory sectors, however, point to nascent signs that the slowdown in the world's second largest economy may be bottoming out.

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