Mark Latham Commodity Equity Intelligence Service

Friday 21st August 2015
Background Stories on

News and Views:

Attached Files


    China Aug flash Caixin/Markit PMI hit a new low

    China Aug flash Caixin/Markit PMI hit a new low

    The flash reading of China’s Caixin/Markit general manufacturing Purchasing Managers’ Index (PMI) further fell 0.7 from the final figure in July to 47.1 in August, hitting a 77-month low, data showed on August 21.

    That compared with an expected reading of 48.2, posting the sixth consecutive month below the 50-point threshold separating growth from contraction, suggesting China’s economic conditions are still deteriorating.

    The output sub-index was 46.6 in August, down 0.5 from July, hitting a 45-month low, indicating a slower growth in manufacturing sector.

    The sub-indexes for new orders, new export orders and employment all registered decreases, signaling the weakening demand and a worsening labor market.

    The flash PMI data has fallen further from July’s two-year low, indicating that the economy is still in the process of bottoming out. But overall, the likelihood of a systemic risk remains under control and the structure of the economy is still improving.

    There is still pressure on the front of maintaining growth rates, and to realize the goal set for this year the government needs to fine tune fiscal and monetary policies to ensure macroeconomic stability and speed up the structural reform, He Fan, Chief Economist at Caixin Insight Group said.
    Back to Top

    President Xi lowers official growth target?

    Xi’s economic planners may for the first time emphasize “population policies” over gross domestic product in the country’s next development blueprint, said the person, who asked not to be identified because the talks are private. The focus sets the stage for a host of rule changes regarding health, pensions, social welfare and possibly lifting the caps on children some families can have, the person said.

    More than three decades into an industrial boom that has created the world’s second-largest economy, China’s struggling to get rich before it grows old. The working-age population shrank for the first time in at least two decades last year as growth slowed, echoing Japan’s downturn in the late 1990s. As part of the shift, the party may lower its hard growth target of 7 percent to a range between 6.5 percent and 7 percent and make that a flexible guideline, the person said.

    Mu Guangzong, a professor at Peking University’s Institute of Population Research, said that avoiding the same fate requires immediate action to loosen birth limits and strengthen the social safety net for the elderly.

    The number of people 15 to 64 years of age fell about 1.6 million last year, according to the National Bureau of Statistics. Like Japan, the decrease has coincided with a slowdown in China’s economy, which is on track this year to grow at its slowest pace in a quarter century.
    Back to Top

    Is Tianjin Port closed?

    Image titleTianjin Port, am 20/08/2015.
    Image titleJapanese TV reporting cloud over sea over East China Sea.

    Toyota Motor Corp (7203.T) and rival global automakers are looking to divert shipments to Shanghai and other ports from Tianjin after massive explosions last week disrupted operations indefinitely at China's largest auto import hub.

    Authorities have restricted access to areas affected by the Aug. 12 blasts at a hazardous chemicals warehouse which killed at least 114 people. Automakers are struggling to reach lots and warehouses to assess damage and clear thousands of charred cars to make facilities usable, though the port continues to operate.

    On Wednesday, Renault SA (RENA.PA) and Subaru maker Fuji Heavy Industries Ltd (7270.T) said they would re-route imports to Shanghai, while Hyundai Motor Co (005380.KS) said it would send further shipments to Shanghai and Guangzhou.

    Toyota is considering re-routing imports to Shanghai and Dalian which have enough capacity to prevent any significant logistical problems, a senior Beijing-based executive said.

    "Port of Tianjin will likely be unusable for a long while, although I have no idea at the moment how long these disruptions would last," said the executive, who was not authorised to speak with media on the matter and so declined to be identified.

    Toyota suspended its two final assembly lines near Tianjin port on Monday to Wednesday, partly to assess any damage. It made 432,340 cars at the plants last year, and is likely to lose 2,200 a day due to the blasts, said researcher IHS Automotive.

    A Toyota spokesman in Japan said, without elaborating, that the automaker was looking to re-route shipments to other ports.


    Tianjin, regarded as a gateway to China's industrial northeast, handles 40 percent of car imports in the world's biggest auto market. But the explosions are likely to hamper normal operations for at least a couple of months, said IHS.

    Attached Files
    Back to Top

    Safety hazards found at 70 pct of Beijing chemical firms inspected - Xinhua

    Safety hazards found at 70 pct of Beijing chemical firms inspected - Xinhua

    Safety hazards have been found at almost 70 percent of firms handling dangerous chemicals inspected in Beijing since two massive blasts killed 114 people last week, including a branch of Asia's largest refiner Sinopec Corp, state media reported.

    An inspection of 124 sites that stored dangerous chemicals in the Chinese capital found hazards at 85 firms, the official Xinhua news agency said late on Thursday, citing Beijing's work safety bureau.

    Two of those firms were shut after inspectors found they did not meet appropriate safety standards.

    Inspectors found that security personnel at the Beijing branch of Sinopec Corp were unfamiliar with how to handle an oil tank fire, Xinhua said. Employees were also found smoking in dormitories near the facility, it said.

    "Companies that fail our inspections will be ordered to suspend operations, and their warehouses will be put under 24-hour surveillance," Qian Shan, vice-head of the Beijing work safety bureau, was quoted as saying by Xinhua.

    Beijing has also suspended operations at firms that make or deal in highly toxic chemicals and explosives from Aug. 17 to Sept. 6 in preparation for a military parade and athletics event, Xinhua said.

    A nationwide inspection of facilities handling dangerous chemicals and explosives was ordered by the State Council a week ago. It said in a statement on Thursday that advanced equipment and the best expertise needed to be used to prevent major environmental incidents in the future.

    Xinhua said more than 300 inspection teams in southwestern Sichuan province had checked 1,258 chemical-related firms and had ordered one company to stop production.

    Northwestern Gansu province had also ordered chemical companies with fire or explosion risks to suspend operations. Marine authorities in the coastal city of Shanghai, China's financial hub, are reviewing ships that transport dangerous goods, it said.

    On Wednesday, three oil and gas firms close to residences were told by authorities in the cities of Hangzhou and Shenzhen to halt operations.

    Chinese emergency workers raced to put out four new fires that had broken out close to the site where two massive explosions in a warehouse storing dangerous chemicals killed 114 people last week, the official Xinhua news agency said on Friday.

    Xinhua said one of the "ignition points" came from within an automobile distribution area near the blast site and the other three were within the central blast area.

    Attached Files
    Back to Top



    Port of Tianjin

    From Wikipedia, the free encyclopedia
    Port of Tianjin
    200x182 pixels Logo of the Port of Tianjin
    Country  People's Republic of China
    Location Tianjin
    Coordinates 38°58'33" N 117°47'15" E
    Opened 1860 (Port of Tanggu); 1952-10-17 (Tianjin Xingang reopening)
    Operated by Tianjin Port Group Ltd
    Owned by Tianjin State-owned Assets Supervision and Administration Commission
    Type of harbor Deep-water Seaport/Riverport
    Land area 121 km2[1]
    Size 260 km2 (470 km2 total jurisdictional area)
    Available berths 217; Production Berths: 140 (2010)[2]
    Employees 20,000 (2008)
    Chairman Yu Rumin
    World Port Index Number 60190
    Nautical Charts 94363/0 (NGA/NIMA); 2653/4 (Admiralty); 11773/4(Chinese)
    Annual cargo tonnage 500 million tonnes (2013)
    Annualcontainervolume 13 million TEU (2013)
    Value of cargo 197.249 billion USD (2011)[3]
    Passenger traffic 110,000 cruiser passengers (2012)[4]
    Annual revenue 21.5 billion RMB (2011)[5]
    Net income 1.678 billion RMB (2011)[6]
    This article contains Chinese text.Without proper rendering support, you may see question marks, boxes, or other symbols instead of Chinese characters.

    Coordinates: 38°58′33″N 117°47′15″E

    The Port of Tianjin (Tianjin GangChinese天津港pinyintiānjīn gǎng), formerly known as the Port of Tanggu, is the largest port in Northern China and the main maritime gateway to Beijing. The name "Tianjin Xingang" (Chinese天津新港pinyintiānjīn xīngǎng; literally: "Tianjin New Port"), which strictly speaking refers only to the main seaport area, is sometimes used to refer to the whole port. The port is on the western shore of the Bohai Bay, centred on the estuary of the Haihe River, 170 km southeast of Beijing and 60 km east of Tianjin city. It is the largest man-made port in mainland China,[7] and one of the largest in the world. It covers 121 square kilometers of land surface, with over 31.9 km of quay shoreline and 151 production berths at the end of 2010.[8]

    Tianjin Port handled 500 million tonnes of cargo and 13 million TEU of containers in 2013,[9] making it the world's fourth largest port by throughput tonnage and the ninth in container throughput.[10] The port trades with more than 600 ports in 180 countries and territories around the world.[2] It is served by over 115 regular container lines.[11] run by 60 liner companies, including all the top 20 liners. Expansion in the last two decades has been enormous, going from 30 million tonnes of cargo and 490,000 TEU[12] in 1993 to well beyond 400 million tonnes and 10 million TEU in 2012.[13] Capacity is still increasing at a high rate, with 550–600 Mt of throughput capacity expected by 2015.

    The port is part of the Binhai New Area district of Tianjin Municipality, the main special economic zone of northern China, and it lies directly east of the TEDA. The Port of Tianjin is at the core of the ambitious development program of the BNA and, as part of that plan, the port aims to become the primary logistics and shipping hub of North China.

    On 12 August 2015, at least two explosions within 30 seconds of each other occurred at a container storage station at the Port of Tianjin in the Binhai New Area of Tianjin, China. The cause of the explosions was not immediately known, but initial reports pointed to an industrial accident. Chinese state media said that at least the initial blast was from unknown hazardous materials in shipping containers at a plant warehouse owned by Ruihai Logistics, a firm specializing in handling hazardous materials.Image title

    Back to Top

    Saudi Rial under pressure, Kazach Tenge plunge.

    Image titleUnder pressure. Saudi banks whinging that the gov't is borrowing from them without giving them an insight into the budget.
    Image title
    Tenge plunges. Kazakhstan: home of dubious parastatal resource companies, an aging dictator, and a enormous oil field that has the wrong plumbing. 
    Back to Top

    ECB Statistical Paper on 'Google Bullishness'

     Google bullishness:
    In a similar fashion to Twitter bullishness TtB, namely as per Equation (1), we define Google bullishness GwB from the volumes of Google queries that contain the corresponding financial terms. The volume of such queries is determined using Google Trends, which necessitates a few notable changes. First, we find that the volumes of Google searches on the adjectives “bullish” and “bearish” are insignificant, most likely because isolated adjectives are rarely the subject of searches made by Google users. Indeed, Google Hot Trends indicates that the overwhelming majority of search queries are nouns. We therefore replace the adjectives “bullish” and “bearish” with equivalent terms, i.e. “bull market” and “bear market”, for our Google bullishness indicator GwB . These ensure a greater depth of coverage.Image title

    Attached Files
    Back to Top

    Oil and Gas

    Kogas July sales down 20 pct

    Kogas July sales down 20 pct

    Kogas of South Korea, the world’s largest corporate buyer of LNG, said its sales volume totaled 1.90 million mt in July, a drop of 20 percent as compared to the same month last year.

    Gas sales into the power sector were at 1.01 million mt, down 26.8 percent when compared to July in 2014, Kogas said in a filling to the stock exchange.

    The company’s city gas sales dropped 10.6 percent on year to 887,000 mt.

    Kogas imported 16.54 million mt of LNG in the first half of 2015, down 17.1 percent as compared to the previous year.
    Back to Top

    Santos puts itself on the block, stock recovers from 12-year low

    Santos puts itself on the block, stock recovers from 12-year low

    Australia's Santos Ltd put its assets on the block after being approached by unnamed parties and moved to replace its chief executive, just as its flagship $18.5 billion Gladstone liquefied natural gas project is set to start up.

    Santos on Friday appointed Peter Coates as executive chairman following a one-third slide in its share price this year, and said it was looking for a successor for Managing Director David Knox.

    Coates will lead a strategic review, with Deutsche Bank and Lazard advising, with Santos saying parties had expressed interest in some of its assets and "strategic initiatives".

    The company said it expected more interest after Friday's announcement.

    "No options will be ruled out from consideration," Coates said in a statement.

    Knox declined to comment on any of the approaches and gave no deadline for Coates' review, but said it was urgent, given the impact of falling oil prices on Santos' shares.

    Santos has been under pressure to shore up its balance sheet since oil prices began sliding last year and has opted to slash costs and rather than sell new shares to boost its funding, spooking investors.

    Its net debt of A$8.8 billion is now well above its A$5.7 billion market value.

    "The investment thesis for Santos is based on higher oil prices. I can place that bet with lower risk through other vehicles, given the significant amount of debt they've got and that equity holders take on the losses if the strategy is wrong," said Paul Phillips, a partner at Perennial Growth Management.

    Santos had been counting on output from its share of the Papua New Guinea LNG project, which began exporting last year, and a late-September start-up for the Gladstone LNG project to boost its coffers, but weak oil-linked LNG prices have hammered earnings.

    On Friday it reported a worse-than-expected 88 percent slide in underlying net profit for the six months to June to A$32 million ($23 million).

    It cut its interim dividend by a quarter to 15 cents a share.

    Gladstone LNG is one of the world's first three coal seam gas-to-LNG projects, all in Australia's Queensland state and all starting up just as oil prices have sunk to 6-1/2 year lows.

    Attached Files
    Back to Top

    Mexico hedges 2016 oil exports at average of $49 per barrel

    Mexico hedges 2016 oil exports at average of $49 per barrel

    Mexico’s government hedged oil exports for next year at an average $49 a barrel, locking in protection against low crude prices, the nation’s Finance Ministry said.

    Mexico spent $1.09 billion for the put options, giving it the right to sell 212 million barrels at the hedged prices, the ministry said Thursday on its website. That’s more than the $773 million Mexico spent last year on hedging, reflecting the almost 60 percent slump in the oil price over the past year.

    The ministry said the options, purchased in 44 transactions from June 9 to Aug. 14, will cover the portion of next year’s budget that’s vulnerable to lower crude prices. The government is due to send its full budget proposal to Congress by Sept. 8. Mexico traditionally implements its hedge later in the year, often finishing as late as November.

    The price Mexico negotiated for 2016 is 36 percent lower than the $76.40 a barrel hedge obtained for this year. Still, $49 a barrel is higher than current market prices for next year. The West Texas Intermediate 2016 calendar swap, which reflects the average price U.S. crude oil for next year, stood at $47.86 a barrel on Thursday.

    Mexico’s hedging program has often roiled energy markets since its introduction in the early 1990s as banks acting on behalf of the country sell futures to cover their own options positions.

    Mexico engaged Morgan Stanley, Citigroup Inc., JPMorgan Chase & Co. and Goldman Sachs Group Inc. among others to implement the hedge, people with knowledge of the program said last month.

    Finance Minister Luis Videgaray said in April that the country planned to hedge exports for 2016, after locking in prices for annual sales of about 200 million barrels over the past several years.

    “Certainly, it will not be a hedge at the price we were able to get for this year’s hedge, but we’ll take what the market gives us,” Videgaray said in an interview at the time.

    The Mexican government, which depends on oil for about a third of its revenue, is set to profit from the 2015 hedge. The average price this year for Mexico’s main oil export is $48.9 a barrel, more than a third below the $76.4 at which it hedged.

    Attached Files
    Back to Top

    Ecopetrol creates new free trade zone conduct offshore operations

    Ecopetrol creates new free trade zone conduct offshore operations

    The Board of Directors of Ecopetrol S.A.  in its meeting held on August 14, 2015, authorized the creation of a Colombian company indirectly wholly owned by Ecopetrol S.A.

    The creation of the new subsidiary seeks to develop offshore activities in Colombia, which the company currently carries out as operator and non-operator, and take advantage of the benefits of Decree 2682/14, 'pursuant to which the conditions and requirements are established for declaring the existence of Permanent Offshore Free Trade Zones'.

    Once the new company is created, the ANH's approval will be sought in order to assign Ecopetrol S.A.'s contractual rights under the exploration and production contracts of the offshore blocks in which it is operator and non-operator.

    Ecopetrol is the largest company in Colombia and is an integrated oil and gas company; it is among the top 40 oil companies in the world and among the top four oil companies in Latin America.
    Back to Top

    Aubrey McClendon pursuing $100 million deal for drilling rights in Australia

    Aubrey McClendon pursuing $100 million deal for drilling rights in Australia

    U.S. shale gas explorer Aubrey McClendon is negotiating a $100 million acquisition of Australian drilling rights in a move that marks the former Chesapeake Energy Corp. chief’s first foray overseas.

    McClendon’s American Energy Partners LP signed a letter of intent and a three-month exclusivity agreement with Armour Energy Ltd. to acquire a 75 percent stake in 21.5 million acres of drilling rights, Brisbane, Australia-based Armour said in a statement on Thursday. Armour rose the most in three years.

    Terms of the preliminary deal require American Energy to pay Armour as much as $18 million in signing bonuses and to spend $100 million on oil and natural gas drilling over five years. American Energy also has the option to acquire a 5 percent stake in Armour and a seat on the board of directors, according to the statement.

    Work on the project should begin by May, Armour Chief Executive Officer Robbert de Weijer said in a phone interview. Separately, the company is seeking buyers for a stake in 7.8 million acres it holds in the same region, he said. Armour soared 49 percent to 7 Australian cents in Sydney.

    The deal “vindicates Armour’s view that the McArthur Basin represents one of the worlds great opportunities for the discovery of a new frontier oil and gas province,” Nicholas Mather, Armour’s executive chairman, said in the statement.

    McClendon, who co-founded Chesapeake in 1989 and built it into a U.S. gas titan before his ouster in a 2013 investor revolt, is showing confidence in Australian shale even asmajor international explorers such as Chevron Corp., ConocoPhillips and Statoil ASA have abandoned projects.

    Northern Territory

    John Raymond’s Energy & Minerals Group private equity firm, a key backers of McClendon’s post-Chesapeake activities, last week agreed to acquire an 18 percent stake in Australian shale rights held by closely-held Pangaea Resources Pty. McClendon and Raymond are investing in the county’s Northern Territory region.

    In his home country, McClendon’s efforts to build a new shale empire since his forced departure from Chesapeake have foundered. American Energy has struggled under low energy prices and heavy debts incurred to amass a portfolio that stretches from the Great Plains to Appalachia.

    Attached Files
    Back to Top

    Private Equity firm invests up to $400million in UK-based Zennor Petroleum

    Private Equity firm invests up to $400million in UK-based Zennor Petroleum

    UK exploration firm Zennor Petroleum (previously named MPX) could receive up $400million in funding from a private equity firm

    Kerogen Capital cited Zennor’s track record, asset base, reduced operating costs in the North Sea and an improved UK fiscal regime as reasons for investing.

    The private equity fund manager is focussed on the international oil and gas sector with approximately US$1.6 billion in invested and committed capital.

    Founded in 2006, Zennor, is a private exploration and production company based in Guildford, England.

    Kerogen has made an initial commitment of US$100 million in Zennor, but said it may commit, with its limited partners, up to $400million to Zennor.

    Proceeds from Kerogen’s initial investment will be used to fund the development of Zennor’s existing assets and expand the portfolio by way of new acquisitions, farm-ins and licensing rounds.

    Kerogen will become the majority shareholder alongside Zennor management.

    Zennor’s management team, led by Martin Rowe, Rod Crawford and James Henry, have technical and commercial experience in the UK North Sea.

    The technical team worked together previously at ARCO (now BP) and a number of independents, culminating in their current roles at Zennor.

    Zennor has an existing portfolio of licences including a 100% interest in the Finlaggan gas-condensate discovery in the Central North Sea.

    Finlaggan is described as “an attractive low cost conventional appraisal and development project”, and underpins Kerogen’s investment in Zennor.

    Kerogen co-Founder and managing partner, Jason Cheng, said: “Kerogen is attracted to the UK North Sea given recent market dynamics, combining attractive pricing for assets, substantial reductions in operating cost structures, and an increasingly favourable fiscal environment.”

    “Zennor is an excellent entrepreneurial group poised to take advantage of the current window of opportunity in the North Sea, particularly with the team’s deep technical and operating experience.”

    Zennor managing director, Martin Rowe, said: “We are delighted to be working alongside Kerogen in seeking to grow our upstream business in Northern Europe.
    Back to Top

    North Sea helicopter pilots support strike action

    North Sea helicopter pilots support strike action

    Offshore Energy Today reported Monday that BALPA, the British Airline Pilots Association, had called its helicopter pilots operating in the North Sea for aballot on strike action.

    The ballot was closed on Tuesday, August 18, 2015. According to BALPA’s press release, North Sea Helicopter Pilots have indicated strong support for strike action if helicopter companies do not make serious improvements in the way they deal with job losses.

    They have also highlighted the serious impact on safety the threat of redundancy is having, the association said.

    In the survey conducted by BALPA, pilots accepted the downturn in the industry meant jobs would go, but were frustrated at the way management are going about it, BALPA added.

    The association also added that pilots want the helicopter companies to improve voluntary redundancy arrangements to try and prevent as many compulsory job losses as possible. And they believe the companies are not valuing the experience of senior pilots highly enough in deciding who may need to be made redundant.

    “BALPA will do all it can to protect pilots who are feeling the brunt of the downturn in the North Sea oil industry.”

    BALPA General Secretary, Jim McAuslan, said: “We are not being unreasonable. We know the downturn in the North Sea is going to hit jobs, but the way the companies are going about it is causing massive frustration, borne out by the very high turnout and strong ‘yes’ vote in this ballot conducted over just four days.

    “In the event management do not substantially shift their position BALPA’s National Executive Council will be meeting early next month to consider a move to a formal strike vote, something we are still hoping to avoid.”

    According to BALPA, a strong and worrying message from the survey was concern over safety. Pilots reported that the threat hanging over them, their families and their colleagues, was having serious unintended effects on their ability to sleep and concentrate, the association emphasized.

    One pilot commented: “Crews are concerned and distracted and this is reflected in an increase of mistakes and lack of awareness. The threat of being ‘at risk’ is dominating the mindset of the majority of our pilots.”
    Back to Top

    U.S. drivers log 3.9 pct more miles in June vs year ago-DOT

    U.S. drivers log 3.9 pct more miles in June vs year ago-DOT

    The number of miles driven on U.S. roads and streets rose 3.9 percent in June from a year ago, according to government data released on Thursday, highlighting a pickup in driving activity that is pushing gasoline use toward a new record.

    Americans logged an estimated 275.1 billion miles on U.S. roads in June, 3.9 percent more than June last year, the largest year-on-year growth rate since January, according to data released by the Federal Highway Administration. Year to date, miles driven are up 3.5 percent from 2015, the data showed.
    Back to Top

    Frackers turn to toilet water in drought-prone Texas

    Frackers turn to toilet water in drought-prone Texas

    Top shale oil producer Pioneer Natural Resources Co has found an unusual way to both save water and cut costs for its wells: tapping the treated runoff from toilets, sinks and showers in west Texas.

    Pioneer has signed an 11-year, $117 million deal with the city of Odessa, Texas that will guarantee it access to millions of gallons of treated municipal wastewater each day, for use in nearby oilfields. Deliveries of the so-called effluent, are expected to start at the end of the year.

    As crude oil has slid to its lowest level in six years -currently about $40 a barrel - oil and gas companies pumping from shale rock have tried to cut every unnecessary penny from their operations. Water acquisition and transportation can be up to 10 percent of the cost of drilling and fracking a well, according to consulting firm IHS.

    Producers are also trying to mitigate long-term risks of water scarcity in the arid Permian Basin of West Texas, where the top U.S. oilfield is situated.

    Oil and gas companies operating in area, including Pioneer and Apache Corp, have long sought cheaper, more environmentally sound sources of water to use for fracking.

    For example, both companies have drawn some of the water they use in their operations from the Permian's brackish aquifers, which contain water unfit for drinking. Both companies also have worked to recycle water that is used for frack jobs or found in the ground while drilling.

    Pioneer is the first oil and gas company to sign a long-term wastewater supply contract with Odessa, a city of about 110,000 people. The Dallas-based company recently began construction on a pipeline network that will transport the treated water from the city's sewage plant to one of its oilfields about 20 miles away.

    The municipal reclaimed water the company intends to use comes from sewage plants that treat human waste and water from activities that include bathing and food preparation, according to Texas regulators.

    EOG Resources Inc, which has wells in the Eagle Ford formation in South Texas, is considering using water from wastewater treatment plants, according to its web site. And Anadarko Petroleum Corp uses treated water purchased from the city of Aurora in Colorado, according to a spokesman.
    Back to Top

    Alternative Energy

    France doubles size of solar tender after strong bidding

    France doubles size of solar tender after strong bidding

    France will double the amount of solar power capacity it will commission to be built in a tender after high demand and competitive prices emerged during bidding, the French energy ministry said on Thursday.

    It had launched a tender process for 400 megawatts (MW) of large, 250 kilowatt-peak (KWp) solar installations  in September last year, and will now authorise a further 400 MW in view of offers submitted before an end-June deadline.

    Almost 2,000 MW of ground-mounted capacity was offered, at prices that are for the first time as competitive as onshore wind tariffs, the ministry said in a statement.

    The results will be announced in a few weeks and selected projects will have two years to get off the ground, it added.

    Solar power capacity has grown slowly in France compared with Germany, Spain or Italy. It had 5.6 gigawatts (GW) of installed capacity at end-2014, compared with 38.2 GW in Germany. Last year, more capacity was installed in Britain than in France.

    But the government, which has just passed the final version of a long-delayed energy bill, intends to cut the share of nuclear power to 50 percent of the electricity mix in 2025, from the current 75 percent, the highest level in the world.

    Renewable energy, including solar, is expected to account for 40 percent by then.

    Attached Files
    Back to Top

    Adani in talks with Softbank and Foxconn for solar power

    Adani in talks with Softbank and Foxconn for solar power 

    The Adani Group is reportedly in talks with Japan's Softbank and Foxconn for investment in a USD 3 billion project to make solar cells and panels in India.

    According to media reports, over the past few weeks, Mr Gautam Adani, Adani Group founder has had held talks with Mr Masayoshi Son, Softbank Chairman and Mr Terry Gou, Foxconn head.

    There is no official confirmation of talks by any of the parties so far.

    It may be recalled that two months ago Adani and US solar power company SunEdison ended a USD 4 billion agreement struck earlier this year for solar power projects.

    Adani is looking to set up a plant to produce 3 GW of solar cells and panels by 2020 and the location could be Gujarat.

    Softbank, Foxconn and Bharti Enterprises have already pledged to invest about USD 20bn in solar projects in India.
    Back to Top


    Russia's Uralkali considers share buyback, delisting

    Russia's Uralkali considers share buyback, delisting

    Russia's Uralkali , the world's biggest potash producer, will consider a new share repurchase programme next week, potentially leading to a delisting, the company said on Friday.

    Uralkali has already spent $1.1 billion this year on a buyback that decreased its free float to 23 percent and increased the number of treasury shares, representing stock that has been bought back and is retained by the company.

    It said in June that it had asked its audit committee to review the benefits of having its global depositary receipts (GDRs) listed on the London Stock Exchange (LSE) and present its recommendations by the end of August.

    The audit committee, which Uralkali said has also been evaluating a possible share repurchase programme, will present its recommendations for consideration by the board on Aug. 24, the company said in a statement on Friday.

    A decision has yet to be made, the company said, but it added that a further decrease in the free float of its GDRs on the LSE could lead to a delisting.

    Russian business daily Vedomosti reported on Friday that Uralkali would have to delist from the LSE if it buys back 10 percent of its shares from the market because that would lead to its free float dropping below the LSE's requirements.

    News agency Interfax had reported earlier that Uralkali might spend a further $1 billion to $1.5 billion on a share buyback and Vedomosti had said it could delist its shares by year-end and merge with shareholder Uralchem.

    Mikhail Prokhorov's Onexim owns a 20 percent stake in Uralkali, Chengdong Investment Corporation holds 12.5 percent and Uralchem owns 19.99 percent. Treasury shares account for 24.2 percent. The rest is in free float.
    Back to Top

    Precious Metals

    Is this gold price jump the turning point?

    Is this gold price jump the turning point?

    On Thursday, gold shot up to a five-week high after dovish comments from the Federal Reserve threw fuel on currency fires already burning bright around the globe.

    In afternoon dealings in heavy volume gold futures with December delivery dates were priced at $1,153.10 an ounce in New York at its highs for the day and up $25.30 or 2.2% from Wednesday's close. Gold is now up 6.4% from a more than five-year closing low of $1,084 struck August 5.

    China's shock currency devaluation that sent ripples through commodity dependent economies last week sparked the rally, while Fed minutes released on Thursday that indicated a rate hike is less likely in September led to a sell-off in the dollar,  increasing jitters on currency and stock markets.

    Backwardation is a rare and un-natural phenomenon in gold and certainly indicates something is afoot of a bullish nature"

    The dollar remains 17.5% higher against major world currencies and gold's resurgence may have more to do with recent developments on the New York Comex market which has moved into uncharted territory.

    Last week large gold futures investors such as hedge funds, referred to as "managed money", continued to hold near record short positions– bets that gold could be bought cheaper in the future – and added only slightly to  longs.

    According to the Commodity Futures Trading Commission's weekly Commitment of Traders data speculators' short positions  was down slightly to more than 11.4 million ounces (323 tonnes), while longs grew by less than 600,000 ounces.

    On a net basis hedge funds remain short of the metal, a position entered into during the week to July 21 – the first time since at least 2006, when the data was first being tracked.

    Any sustained move higher could see a scramble for gold on futures markets as traders cover short positions, but analysts are reluctant to call it a decisive turning point for the metal.

    Ross Norman of Sharps Pixley, a large London bullion dealer, says apart from the record shorts, the strong buying of gold options with a strike price of $1,200 "clearly suggests some players see considerable upside from here."

    Other factors are pushing gold higher this week.

    The market is in backwardation and spot gold is trading higher than gold for delivery in the future which suggests there is real tightness in the physical market.

    "Backwardation is a rare and un-natural phenomenon in gold and certainly indicates something is afoot of a bullish nature," says Norman, the London Bullion Market Association most accurate annual forecaster coming in as the outright winner five times and a runner up four times.

    Sharps Pixley is owned by Germany's Degussa, Europe's top precious metals trader which revealed this week that demand for bars in Germany, the world's third largest market after India and China and twice the size of the US, is up 50% compared to last year.

    Norman does however suggest "cautious optimism":

    "Gold prices have been horrifically elastic these last 3 years and "momentum fade" has deeply eroded the confidence of the most die-hard bull.

    "We don't yet have a bull market in place in our view but a figure above the $1240 will certainly give many renewed confidence – which could potentially be self-reinforcing, just as was between 2000 and 2008 when the market clipped along at a 12% year on year gain well before any of us had heard the words "sub-prime" even."

    Attached Files
    Back to Top

    Polyus Gold beats forecasts with doubled first-half net profit

    Polyus Gold beats forecasts with doubled first-half net profit

    Polyus Gold, Russia's largest producer of the yellow metal, said on Thursday its first-half net profit more than doubled on the back of higher sales and revaluation gains on derivative financial instruments.

    Polyus, controlled by billionaire Suleiman Kerimov and his partners, has been supported by its gold price hedging programme which helped offset lower bullion prices.

    Net profit rose to $583 million, beating analysts' average forecast of $342 million, while adjusted net profit jumped 89 percent from the year before to $432 million.

    Polyus said its 2015 production would be closer to the upper end of its expected range between 1.63 million and 1.71 million ounces. It also said it would take part in a state tender for Sukhoi Log in the Irkutsk region of Siberia, one of the world's largest untapped gold deposits, if it was announced.

    Sukhoi Log has remained untapped for half a century and Russia has been considering selling rights to the deposit for almost 20 years. "We are expecting news from the regulator and will apply for the auction in case the licence for the deposit appears," Chief Executive Pavel Grachev said.

    Polyus is also reviewing its project to develop one of the world's largest untapped deposits, Natalka in Russia's far east, and plans to provide an update on the project in the autumn.

    Its total 2015 capital expenditure is expected to be lower than in 2014, when it stood at $525 million.

    The company's revenue grew 1 percent to $1.0 billion, while adjusted core earnings or EBITDA rose 50 percent to $589 million due to the rouble weakening and cost optimisation.
    Back to Top

    Base Metals

    Tenge tumble allows Kaz Minerals to cut cost forecasts

    Tenge tumble allows Kaz Minerals to cut cost forecasts

    Kazakh copper producer Kaz Minerals cut its cost forecasts for the year, helped by a weaker tenge currency, and the prospect of more benefits sent its shares soaring on Thursday.

    Kaz, which is listed on the stock market in London, said the decision to introduce a floating exchange rate in Kazakhstan announced on Thursday could help it to lower costs further if the currency continues to weaken.

    The company, which pays its bills in the local tenge currency but makes revenues in U.S. dollars, reduced its full-year forecasts for production costs to 260-280 U.S. dollar cents per pound from 280-300 cents earlier.

    Those adjustments were based on a tenge rate of 170-198 per dollar, the miner said. The currency weakened to 257.20 per dollar on Thursday in response to the policy shift.

    "We are not able to tell you any level we should expect, it's a free float exchange rate.(Tenge weakness) will help us because about 60 percent of our costs are in tenge," Chief Executive Oleg Novachuk told journalists in a conference call.

    Kaz shares were up 13 percent as of 1045 GMT, outperforming a 2 percent rise in the FTSE 350 mining index.

    "We attribute this reaction to expectations that some of the cost benefits of a currency depreciation would be retained by the company," Morgan Stanley analysts said in a note.

    "However, we maintain that cost benefits of a weaker currency are typically eroded by an increase in underlying inflation."

    "We thought the company might run a bit short of money in 2017, but the devaluation of the tenge could go some way to offset those concerns," said Ed Sterck, an analyst at BMO Capital Markets.

    The company said it was on track to achieve its 2015 copper cathode production target of 80,000 to 85,000 tonnes.

    Kaz plans to grow its copper output to about 300,000 tonnes by 2018 through three new projects: Bozshakol, Aktogay and Koksay.

    The commissioning of its Bozshakol project in northern Kazakhstan, initially expected in the fourth quarter of this year, was now expected in the first quarter of 2016, following a fire there this month.
    Back to Top

    First Nickel goes into receivership

    First Nickel goes into receivership 

    Legal firm KSV Kofman has been appointed as the receiver of First Nickel after the company’s principal secured lender Resource Capital Fund demanded repayment of all of the obligations owing to it, enforcing its security under the Bankruptcy and Insolvency Act of Canada. 

    The Ontario Superior Court of Justice made an order appointing KSV, following extensive discussions between First Nickel and its secured lenders. As a result of the court order, all of the First Nickel directors and president and CEO Thomas Boehlert resigned on Thursday, having agreed to remain available to assist the receiver. 

    First Nickel first signaled in June that the Lockerby nickel mine, in the Sudbury basin of Ontario, would be placed on care and maintenance or closed during the third quarter, after all remaining nickel ore above the 6 800-foot-level had been exhausted. It had systematically been laying-off workers over the last several weeks. 

    Weak nickel prices had rendered the mine uneconomic and prompted it to immediately suspend a ramp development program required to continue accessing deeper reaches of the ore deposit. 

    First Nickel had acquired the Lockerby mine from Falconbridge in 2005, before idling it in 2008, when nickel prices fell from 26-year highs of about $23/lb. The operation restarted in September 2011, when the price of nickel again trended higher. Lockerby was considered one of the highest-grade nickel operations in production in the Sudbury basin. 

    FNI had an offtake agreement with Glencore Canada, that bought all the ore for processing.
    Back to Top

    China Zhongwang sees short-seller report helping its development

    China Zhongwang sees short-seller report helping its development

    China Zhongwang Holdings Ltd , the world's second-biggest maker of industrial aluminium extrusion products, is thankful for a report by a short seller alleging it doctored its books, its executive director said on Thursday.

    "Whether it is good or bad, it will help our development in the future," Lu Changqing told reporters in Hong Kong, saying the allegations by previously unknown short-seller Dupre Analytics showed his company's importance.

    Zhongwang halted trade and issued a detailed denial last week after Dupre accused it of inflating its sales by sending shipments to companies it controls offshore.

    "We should be thankful for the report," Lu said, without saying how it would help his company's development. He added that his company would like to talk to Dupre but did not know how to get hold of them.

    Zhongwang said last week it reserved the right to take legal steps in relation to the matters arising from the report, including commencing formal legal proceedings.

    Lu said on Thursday the Dupre report had no impact on its operations.

    He said the multi-year lows of aluminium prices were due to slow domestic economic growth and not the result of Chinese exports of semi-finished aluminium products since around 90 percent of China's production stayed at home.

    The global aluminium industry should seek ways to boost consumption of the metal rather than focus on accusing China of exporting the metal to push prices down, he said.

    Zhongwang was looking to increase production of aluminium products for the transportation sector, Lu said, adding that the company was seeking opportunities to buy firms that make aluminium parts or structural designs for cars in the United States and Europe.

    Zhongwang posted a net profit of 1.5 billion yuan ($235 million) in the first half of 2015, up 18 percent from a year ago, the company said in a statement on Thursday.

    The company produced about 350,000 tonnes of aluminium extrusion products - objects with a definitive cross-sectional profile - in the first half of 2015, of which about 45,600 tonnes were exported.

    It currently has about 1 million tonnes of annual capacity to make the products and will add 1.8 million tonnes.
    Back to Top

    Steel, Iron Ore and Coal

    Glencore suspends coal supply agreement with S.Africa's Eskom

    Glencore suspends coal supply agreement with S.Africa's Eskom

    Glencore's South African coal mining subsidiary suspended its supply agreement with national power utility Eskom on Thursday while the mining unit undergoes a financial rescue programme, its administrators said.

    Glencore has said that Optimum Coal Mine, which produces 10 million tonnes a year, is under financial strain because it was selling coal to Eskom for less than the cost of production.

    South Africa's business rescue law, similar to Chapter 11 bankruptcy protection proceedings in the United States, allows a financially distressed company to temporarily delay creditors' claims against it or its assets.

    Optimum has offered to temporarily supply coal to Eskom at the cost of production, higher than what Eskom currently pays, while a new deal is negotiated, V-Squared Business Rescue Services, the business rescue practitioner said in a statement.

    The Glencore unit sells half its output to Eskom's 2,000-megawatt Hendrina power station under a supply contract which is due to run until 2018. Eskom has also complained about the low quality of coal from Optimum, a claim disputed by Glencore.

    Eskom spokesman Khulu Phasiwe said the utility was under its own financial strain and could only renegotiate the current contract when it ends in 2018.

    "At this stage we cannot make any alterations to the contract, we have communicated to Glencore that we may renegotiate in 2018," he said.

    Phasiwe said the company would consult its lawyers on Optimum's decision to suspend coal supplies.

    Hendrina power station has coal stockpiles for up to 40 days and will come up with a plan for in case the issue is not resolved within that time, he said.

    Global coal prices have fallen by around 10 percent this year, partly due to oversupply, extending losses seen since 2011. This is of particular concern for South Africa as the production of coal contributes more than any other commodity to its gross domestic product.

    Eskom is renegotiating most of its coal contracts and borrowing money to ease financial pressures as it struggles to provide enough power to keep the lights on in the Africa's most advanced economy.
    Back to Top

    Guildford cancels Mongolian deal

    Guildford cancels Mongolian deal 

    ASX-listed junior Guildford Coal has abandoned its plans to acquire an 80% stake in a large thermal coal project and associated power station project in Mongolia. 

    The company said on Friday that following a due diligence process, Guildford had decided not to proceed with the transaction. Guildford in June signed a memorandum of understanding to acquire the 600 MW mine-mouth-coalfired Tsaidamnuur project, located 15 km from the Trans-Mongolian Railway line, which traverses Mongolia connecting Russia and China. 

    The project consisted of three mining licences, containing a large thermal coal deposit. With the decision not to proceed with the transaction, Guildford would now take action to recover a $2-million fully refundable deposit.
    Back to Top

    Steel exports from China to surge this year – Cliffs Natural Resources

    Steel exports from China to surge this year – Cliffs Natural Resources

    According to Cliffs Natural Resources, steel exports from China will surge to more than 100 million tonnes this year as local mills benefit from a rising tide of cheap iron ore to produce more than Asia’s top economy needs.

    Mr Lourenco Goncalves, chief executive officer of the largest US iron ore producer, said in a phone interview from the company’s headquarters in Cleveland, Ohio “It’s like a bad virus. Australia continues to give iron ore to China almost for free, allowing them to produce more than they need.”

    He said “What China is exporting alone is bigger than the second biggest producer of steel in the world: it is crazy.”

    He added “With the massive sales of iron ore to China, enabling China to produce a lot more than China actually needs for consumption, there’s a glut of exports.”

    However, Mr Wang Yingsheng, deputy secretary-general of the China Iron & Steel Association, said in an interview “Everyone is complaining about Chinese steel exports. While the volume of shipments shows the good appetite from foreign clients, it also indicates overcapacity and weakening demand in China.”

    Exports from China are forecast to expand 21 per cent to 111 million tonnes in 2015, according to a projection from Colin Hamilton, head of commodities research at Macquarie Group. That compares with 53 million tonnes in 2013.
    Back to Top

    Global crude steel production in July dips by 3.8% YoY

    Global crude steel production in July dips by 3.8% YoY


    WorldSteel crude steel production for the 65 countries reporting to the World Steel Association (worldsteel) was 133 million tonnes in July 2015, a -3.8% decrease compared to July 2014.
    Back to Top
    Commodity Intelligence LLP is Authorised and Regulated by the Financial Conduct Authority

    The material is based on information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. Opinions expressed are our current opinions as of the date appearing on this material only.

    Officers and employees, including persons involved in the preparation or issuance of this material may from time to time have "long" or "short" positions in the securities of companies mentioned herein. No part of this material may be redistributed without the prior written consent of Commodity Intelligence LLP.

    Company Incorporated in England and Wales, Partnership number OC334951 Registered address: Highfield, Ockham Lane, Cobham KT11 1LW.

    Commodity Intelligence LLP is Authorised and Regulated by the Financial Conduct Authority.

    The material is based on information that we consider reliable, but we do not guarantee that it is accurate or complete, and it should not be relied on as such. Opinions expressed are our current opinions as of the date appearing on this material only.

    Officers and employees, including persons involved in the preparation or issuance of this material may from time to time have 'long' or 'short' positions in the securities of companies mentioned herein. No part of this material may be redistributed without the prior written consent of Commodity Intelligence LLP.

    © 2018 - Commodity Intelligence LLP