Mark Latham Commodity Equity Intelligence Service

Wednesday 6th January 2016
Background Stories on www.commodityintelligence.com

News and Views:

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    Macro

    Offshore Chinese yuan plunges to five-year low against dollar


    The Chinese yuan plunged to a five-year low in offshore trading and the gap between it and its mainland counterpart widened sharply on Wednesday, reflecting growing expectations of further weakness in the currency amid an economic slowdown and a slump in stock markets.

    The offshore yuan fell to 6.6915 against the greenback, the lowest rate of exchange since at least the last quarter of 2010 and a 2.1 percent discount to the onshore yuan's 6.5506 level. While the yuan is primarily traded on the mainland and subject to strict central bank supervision, its offshore counterpart is accessible to everyone.

    "The spread between the onshore and offshore yuan has now reached some of the highest levels in the pair's history – a clear indication of both volatility and intervention," said Angus Nicholson, a market strategist at IG.

    Markets generally expect the onshore yuan to continue depreciating against the dollar on the back of sluggish growth prospects, accelerating capital outflows and demand for overseas assets.

    "The combination of weak cyclical and structural forces is seen working against the currency," HSBC analysts said in a research note. "In the near-term, there could be stronger dollar demand against the onshore yuan as the latter's depreciation expectations remain entrenched."

    China intervention casts doubts on market reform drive

    The latest trigger for the slump came after the People's Bank of China (PBOC) set the onshore yuan midpoint rate at 6.5314 per dollar, the weakest fixing since 2011.

    The fix represented a 0.22 percent decline from the previous session, a faster pace than witnessed recently. This was despite Tuesday's suspected intervention by the central bank to halt currency declines.

    Analysts said the somewhat confusing message—buying yuan in the secondary market only to guide it lower the next day—was part of the PBOC's plan to let the onshore yuan reflect market forces.

    "To achieve a more market-balanced yuan, the PBOC has to ensure an orderly depreciation before they can see an eventual appreciation in the currency," explained Maybank analysts in a note, calling the increased volatility "a natural order of change."

    The widening spread between the offshore and onshore rates may be used as a gauge as to how much more the latter will have to adjust before it reaches an equilibrium level, Maybank added.

    "In fact, we think that the next time the offshore and onshore rates converge completely, it could mark the beginning of the end of the offshore yuan."

    http://www.cnbc.com/2016/01/05/offshore-chinese-yuan-plunges-to-five-year-low-amid-slowdown-stock-slump.html
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    Mr Buckley says India's solar surge may slash coal imports


    Business Day reported that dramatic cost declines in solar power tenders in India have shaken up expectations on pricing for the renewable fuel and have triggered warnings that the country's need for thermal coal imports will be much lower than some are banking on.

    Huge solar power contracts awarded by Indian states to global players in November and December have been priced at levels more than 20 per cent below 12 months ago and point to solar power rapidly overtaking thermal coal imports in competitiveness for power generation.

    The figures signal that forecasts for growth in thethermal coal trading According to Mr Tim Buckley, director of energy finance studies at the Institute for Energy Economics and Financial Analysis, which supports renewable energy, market by the International Energy Agency are too bullish even though they were cut back in December.

    Mr Buckley said that coal miners such as Adani and BHP Billiton were guilty of "ingrained thinking" in pressing ahead with coal expansion plans.

    He said that a company that denies a technology change is real makes mistakes. The implication is for coal mining, coal railways and coal ports."

    India's Minister for Energy, Piyush Goyal said India should be able to end thermal coal imports by 2017.

    However, others doubt this target can be met. Melbourne-based Project Monitor describes the assumptions underlying claims from environmental groups that renewable energy growth would damp India's coal demand as "tenuous". It points out the problem of intermittent power generation from solar and wind, and casts doubt on India's ambitions to meet its 2020 coal production target.

    The consultancy said that "The confidence expressed by some that, over the next decade, coal demand will slow significantly and imports will drop to near-zero is almost certain not to be realised."

    http://steelguru.com/coal/mr-buckley-says-india-s-solar-surge-may-slash-coal-imports/442908#tag

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    Oil and Gas

    Oil Tumbles After Saudis Slash Prices To Europe


    "The Saudis are preparing for Iran’s return," said Mohamed Sadegh Memarian, who recently retired as the head of petroleum market analysis at Iran’s oil ministry, as they sharply cut the prices they charge for crude oil in Europe (to the biggest discount since Feb 2009). The move that will likely undercut Iran happens as sectarian tensions escalate between the rival Middle Eastern nations. As WSJ reports, the Saudi move appears to pave the way for a competition over European oil markets later this year when Iran is expected to increase its exports after the expected end of western sanctions over its nuclear program.

    Saudis have slashed prices with the biggest discount to Europe sionce Feb 2009...

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    Which has sent crude prices lower...
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    As The Wall Street Journal reports,

    Italy and Spain relied on Iran for 13% and 16% of their oil imports before the European Union banned such purchases under sanctions related to its nuclear program in 2012. Although the country was replaced in the market by Saudi Arabia and other countries such as Russia, Tehran is counting on rekindling those ties when it resumes exports.

    Saudi Arabian Oil Co., or Saudi Aramco, the kingdom’s state-owned oil company, didn’t mention the conflict in its news release about the price cuts.

    Aramco prices are set every month at a discount or premium to various regional benchmark prices, which go up and down based on supply, demand and other factors considered by the market. On Tuesday, Aramco said it was deepening the discount for its light crude by $0.60 a barrel to Northwest Europe and by $0.20 a barrel in the Mediterranean for February delivery.

    Iranian oil professionals interpreted the move as a way to compete with Iran returning to the oil markets. The European Union is set to lift an embargo on Tehran as soon as next month.

    http://www.zerohedge.com/news/2016-01-05/oil-tumbles-after-saudis-slash-prices-europe

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    OPEC December oil output slips, still near record


    OPEC oil output fell in December, a Reuters survey found on Tuesday, led by lower supply from Iraq following a record-breaking month in November and smaller declines elsewhere in the producer group.

    The Organization of the Petroleum Exporting Countries is still pumping close to record amounts as Saudi Arabia and other big producers focus on market share, weighing on any recovery in oil prices from near 11-year lows.

    OPEC supply fell in December to 31.62 million barrels per day (bpd) from a revised 31.79 million in November, according to the survey, based on shipping data and information from sources at oil companies, OPEC and consultants.

    Oil prices have more than halved in 18 months and hit an 11-year low in the wake of OPEC's Dec. 4 decision to keep its year-old policy of no output restraint. The current crisis between Saudi Arabia and Iran - expected to pump more oil as sanctions are lifted - makes cooperation over supply even less likely, analysts say.

    "There is certainly no chance of Saudi Arabia scaling back its oil supply to make space for Iranian oil," said Carsten Fritsch, analyst at Commerzbank, adding the tensions still justify a risk premium on prices because they could escalate.

    "In other words, the existing oversupply may actually grow further in the short term."

    OPEC has boosted production by almost 1.40 million bpd since its November 2014 refusal to cut supply and prop up prices. Output is not far below July's 31.88 million bpd, the highest since Reuters records began in 1997.

    The biggest monthly decline in output came from Iraq, the world's fastest growing source of supply growth last year.

    Exports from Iraq's main outlet, its southern terminals, have slipped from November's record level which had been boosted by delayed October cargoes, but are likely to reach new highs in the coming months, industry sources said.

    Shipments from Iraq's north by the Kurdistan Regional Government via Ceyhan in Turkey have edged lower, while those by Iraq's State Oil Marketing Organisation have remained at zero for a third month, the survey found.

    Top exporter Saudi Arabia has kept output steady to slightly lower, sources in the survey said, due to less demand from outside the country and largely steady domestic use.

    "Directionally supply is down a little bit," said a source who tracks Saudi output. Saudi production reached a record high of 10.56 million bpd in June.

    Nigerian output declined by 50,000 bpd due to disruptions to exports from the Brass River and Bonny production streams, sources in the survey said.

    Output in Iran, eager to reclaim its spot as OPEC's second-largest producer when sanctions over its nuclear program are lifted, is edging up, the survey found. Kuwait and Qatar also posted small supply rises.

    Indonesia, which rejoined OPEC on Dec. 4 bringing the membership to 13, will be included in the January survey.

    http://www.reuters.com/article/us-opec-oil-idUSKBN0UJ1GF20160105

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    China issues 20.93 mln mt in product export quotas in first 2016 round up 115%


    China has more than doubled its first round oil product export quotas to 20.93 million mt from a year ago to 27 refineries in 2016, industry sources told Platts Tuesday.

    It contrasted to the 9.75 million mt released for the same period last year.

    In addition to the traditional quota winners, the state-owned oil majors, five new qualified refineries also get their first batch of a total 430,000 mt quota for oil products exports.

    This volume comprised of 250,000 mt of gasoline and 180,000 mt of gasoil. A total of 330,000 mt of quotas were given to four independent teapot refineries -- Lijin Petrochemical, Yatong Petrochemical, Sinochem Hongrun and Dongming Petrochemical -- in eastern Shandong province.

    The remaining 100,000 mt of the quota for the new players goes to Huajin refinery in northeastern Liaoning province which is a subsidiary of state-owned Norinco.

    These refineries all had been given both import quotas and import licenses last year.

    In mid-November, they were allowed by China's Ministry of Commerce to apply for quotas to export oil products from 2016.

    Dongming Petrochemical, which exported its first 10,000 mt cargo of gasoline from Rizhao port of Shandong, this time was allotted a total quota of 120,000 mt, including 90,000 mt for gasoline and 30,000 mt for gasoil.

    The quotas, issued late last week, also cover 11 refineries with Sinopec, nine with China National Petroleum Corp., China National Offshore Oil Corp's Huizhou refinery, and Sinochem's Quanzhou refinery.

    State-owned oil companies, as well as independent refineries which joined the fleet recently, normally seek export quotas for some oil products from the government based on their requirements and can also request to have unused volumes from the quota of a particular oil product switched to another one.

    Quotas are given out roughly every quarter and unused volumes can be rolled over to the following quarter.

    The latest quotas were approved by the Ministry of Commerce and General Administration of Customs late last week, according to sources.

    Last year, China issued a total of 29.8 million mt of oil products quotas in five rounds, up 52.8% from 2014.

    http://www.platts.com/latest-news/oil/singapore/china-issues-2093-mil-mt-product-export-quota-27111570
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    Biggest No Longer Means Best in Qatar's Strategy for LNG Wealth


    For Qatar, the world’s largest exporter of liquefied natural gas, preparing for a looming glut of the fuel isn’t about being the biggest seller. It’s about being the most efficient.

    Global LNG output is expected to rise by a third to about 330 million metric tons annually by 2018, according to Sanford C. Bernstein & Co. Most of the new fuel will come from the U.S. and Australia, which is poised to topple Qatar as the biggest supplier. Unlike Saudi Arabia, the largest oil shipper, Qatar won’t be fighting for market share at the expense of earnings.

    Instead, the sheikhdom will continue as one of the most profitable LNG sellers by taking advantage of the industry’s lowest production costs and a control over supply routes that lets it redirect LNG quickly between continents to exploit opportunities, said Ibrahim Ibrahim, vice chairman of Ras Laffan Liquefied Natural Gas Co., known as RasGas.

    “A lot of people have gas, but we have an integrated project,” he said in an interview in Doha. “We are not trying to maintain a leadership role.”

    The Persian Gulf nation faces a challenge similar to the one Saudi Arabia has grappled with in oil markets, as competitors take market share and drive down prices, according to a Nov. 13 report by the Arab Gulf States Institute in Washington, a research center. Prices for LNG delivered to Asia have plunged more than 60 percent from a record in 2014.

    Buyers such as Tokyo Electric Power Co., South Korea’s Chubu Electric Power Co. and Petronet LNG Ltd., India’s biggest gas importer, are haggling for better terms.

    “Most of the long-term prices will expire around 2020,” Chung Yangho, South Korea’s deputy minister of energy and resources policy, said on Nov. 9 in Doha. “If the oversupply continues, we hope to see there will be less rigid market conditions.”

    http://www.bloomberg.com/news/articles/2016-01-06/biggest-no-longer-means-best-in-qatar-s-strategy-for-lng-wealth

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    More guards killed in Islamic State attacks on Libya's oil ports


    Islamic State militants attacked checkpoints near the Libyan oil port of Es Sider for a second day on Tuesday and an oil storage tank in the port was set on fire by a long-range rocket, a spokesman for the security guards said.

    Ali Hassi said militants had attacked checkpoints 30-40 km (19-25 miles) from the port, and that two guards were killed and 16 wounded in the fighting. Seven guards were killed and 25 were wounded in Monday's clashes, he said.

    The National Oil Corporation (NOC) said the oil tank fire started just as firefighters were close to bringing under control another blaze at an oil tank that was hit during fighting in the nearby port of Ras Lanuf on Monday.

    Both fires were still burning on Tuesday afternoon.

    Es Sider and Ras Lanuf, Libya's biggest oil ports, have been closed since December 2014. They are located between the city of Sirte, which is controlled by Islamic State, and the eastern city of Benghazi.

    Libya descended into chaos after the fall of Muammar Gaddafi in 2011 and rival governments and militias have been competing for the country's oil wealth ever since.

    The U.N. is trying to win support for a deal to form a national unity government, but many members of Libya's rival parliaments have not signed up.

    The country's crude oil production has dropped to less than a quarter of a 2011 high of 1.6 million barrels per day.

    Islamic State militants have taken advantage of a security vacuum to tighten their grip on Sirte, and have been threatening to advance east along the coast. They have not managed to take control of any oil installations yet, as they have in Syria.

    On Monday, Islamic State suicide car bombers struck near Es Sider and there were clashes between its fighters and security guards. The tank that was hit in Ras Lanuf, 20 km (13 miles) from Es Sider, was holding about 400,000 barrels of oil.

    http://www.reuters.com/article/us-libya-security-idUSKBN0UJ0WE20160105
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    Sinopec strikes high-yielding oil at China's Beibu Bay test well


    Sinopec Corp said it struck high-yielding oil and gas in a test well offshore Beibu Bay near China's southwestern coast, marking a rare offshore oil and gas find by the state firm that is largely focused onshore.

    The Wei-4 well, some 110 kms (68 miles) southwest of the coastal city of Beihai, tested a daily output of 1,264 tonnes of crude oil and 71,800 cubic metres of natural gas at a first layer, after identifying oil-bearing layers nearly a hundred metres thick.

    On the second layer, Sinopec struck 1,184 tonnes of daily oil flow and 76,000 cubic metres of natural gas, the company said in a statement on Wednesday.

    The well, drilled in the shallow part of the sea, is 3,783 metres deep. It took 29 days to drill.

    "It's a high-flowing offshore test well rarely seen over the last decade," said Sinopec.

    China's offshore oil and gas activities have long been dominated by Sinopec's smaller domestic peer CNOOC Ltd .

    Before Beibu Bay, Sinopec's limited offshore works were mostly conducted in East China Sea where the firm discovered several natural gas fields.

    http://www.reuters.com/article/sinopec-corp-offshore-oil-idUSL3N14Q2F320160106
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    Sapped U.S. shale budgets to come in lower than 1980s bust


    As crude prices languish below $40 a barrel, American drillers are retreating from domestic oil fields even faster than in the tumultuous 1980s oil bust.

    U.S. oil companies are set to curb investments by 24 percent this year to $89.6 billion, meaning that from the beginning of last year to the end of this year, domestic drillers will have cut their annual capital budgets by 51 percent. That’s more than the industry’s 46 percent cut in the mid-1980s, according to Cowen & Co., which began its oil-company spending survey in 1982.

    But the oil field exodus eventually will pay off. U.S. crude production surged in recent years but it began to decline last year. Crude traders are watching domestic output data to figure out when the global oil glut might start to shrink. For the oil market, the faster, the better.

    “These conditions will ultimately cleanse the oil patch and set the stage for a sustained upcycle,” said James West, an oil field services analyst at Evercore ISI, who has also released an oil company spending survey.

    Through the first half of the year, though, it will be rough in the U.S. oil patch. Deep budget cuts are expected to prompt another exodus of drilling rigs from Texas and North Dakota, with the average U.S. land rig count dropping by about 300 this year, Cowen says. Each rig is tied to dozens of oil field jobs, and the Federal Reserve estimates the nation has lost 70,000 U.S. oil and gas jobs already.

    Related: Far East trumps Mideast in oil-market influence as prices slide

    To make matters worse for Houston’s oil equipment makers, Cowen’s estimate for the 2016 spending reduction may be too conservative because the survey went out in November, when oil was $48 a barrel. U.S. crude has tumbled to about $36 a barrel, and if prices stay that low for much longer, drillers will likely have to shed more capital dollars than they anticipated.

    Evercore ISI’s survey indicated a 19 percent drop in spending this year, but with oil prices much lower than they were just two months ago, official budgets may come in 40 percent to 50 percent below initial projections, West said.

    The domestic oil industry wasn’t designed to function with $36 oil. Even though some rigs can drill 20 percent more wells and some wells can produce 40 percent more oil, U.S. oil producers’ overall cash flow is expected to come in 35 percent lower this year, the worst haul since 2002, according to Raymond James.

    Hidden behind the stark budget cuts is a marked change in the strategy that U.S. oil companies have employed since technological breakthroughs opened up commercial production in dense formations. A record proportion of drillers — 80 percent — are planning to spend within their cash flow this year, according to Evercore ISI.

    “This is a record and dwarf’s last year’s 55 percent,” West said.

    http://fuelfix.com/blog/2016/01/05/sapped-u-s-shale-budgets-to-come-in-lower-than-1980s-bust/#36696101=0

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    The Shale Defaults Begin Here: Banks Quietly Shrink These 25 Companies' Credit Facilities


    Everyone knows that at $35/barrel oil, virtually every US shale company is cash flow negative and is therefore burning through cash and other forms of liquidity such as bank revolvers and term loans, just as everyone knows that should oil remain at these prices, the US shale sector is facing an avalanche of defaults.

    What is less known is who will be the next round of companies to default.

    One good place to get an answer is to find which companies' bankers are quietly tightening the liquidity noose (because they don't want to be stuck holding worthless assets in bankruptcy or for whatever other reason), by quietly reducing the borrowing base on existing credit facilities.Image title

    It is these companies which find themselves inside this toxic feedback loop of declining liquidity, which forces them to utilize assets even faster, thus even further shrinking the borrowing base against which their banks have lent them money, that will be at the forefront of the epic bankruptcy wave that is waiting to be unleashed across the US, leading to tens of billions of defaults junk bonds over the next 12-18 months.

    So, without further ado here are 25 deeply distressed companies, whose banks we found have quietly shrunk the borrowing base of their credit facilities anywhere from 6% in the case of Black Ridge Oil and Gas to a whopping 51% for soon to be insolvent New Source Energy Partners.




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    Pioneer Natural Resources Company Announces Upsizing and Pricing of Common Stock Offering


    Pioneer Natural Resources Company announced that it has priced a public offering of its common stock at $117.00 per share. The size of the offering has been upsized from 10.5 million shares to 12 million shares. Pioneer will receive total gross proceeds (before underwriters’ discounts and commissions and estimated expenses) of approximately $1.4 billion. BofA Merrill Lynch, Citigroup, Credit Suisse and J.P. Morgan are acting as joint book-running managers on the offering. The Company has also granted the underwriters an option for 30 days to purchase up to an additional 1.8 million shares of the Company’s common stock. The offering is expected to close on or about January 11, 2016.

    The Company expects to use the net proceeds from this offering for general corporate purposes, including continuing to actively develop its acreage position in the Spraberry/Wolfcamp play in West Texas while maintaining a strong balance sheet during the current period of low commodity prices.

    http://www.businesswire.com/news/home/20160105006904/en/Pioneer-Natural-Resources-Company-Announces-Upsizing-Pricing

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    Eclipse Resources Drilling 1 Well in 2016, Restricting Production


    Eclipse Resources issued their fourth quarter 2015 operational update yesterday, along with publishing an updated investor’s PowerPoint. Eclipse is a smaller but important Marcellus/Utica driller with its headquarters in State College, PA–although they do almost all of their drilling in Ohio’s Utica Shale.

    In November word leaked out that Eclipse is shopping the company. There was no overt or implied reference to that in yesterday’s update.

    What the update did say, however, is that save a single well they plan to drill in the first quarter of this year, Eclipse is not planning to do any more drilling until the price of natgas increases. They also said that although previously drilled wells going online have the potential to boost Eclipse’s production in 2016, they plan to reign in the flow rates to keep them at 2015 levels–again, until the price of natgas goes up.

    Nobody is predicting an increase in natgas prices any time soon (at least not in 2016), but it appears Eclipse is buckling in for a long ride through low-price valley.

    http://marcellusdrilling.com/2016/01/eclipse-resources-drilling-1-well-in-2016-restricting-production/?utm_source=dlvr.it&utm_medium=twitter
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    Alternative Energy

    EU opens in-depth probe into Drax biomass plans


    A new in-depth investigation into the UK’s plans to support the conversion of the Drax coal-fired power plant into biomass has been launched.

    The European Commission said it will investigate to ensure the public funds used to support the project do not result in overcompensation and do not give the operator an unfair advantage over competitors.

    Drax is seeking the government’s help to convert one of its six units at its coal plant in Selby, northern England, to burn wood pellets.

    It will have the capacity to generate 645MW of renewable electricity and be paid a strike price for the production.

    The project is estimated to supply around 3.6TWh of electricity per year and operate until 2027. The plant would require approximately 2.4 million tonnes of wood pellets annually, mainly sourced from the US and South America.

    Drax has so far switched two other units to biomass before the UK planned to slash subsidies in July last year.

    The Commission considered the estimates of the plant’s economic performance “may be too conservative” in its preliminary analysis.

    It added: “A positive change in operating parameters could significantly affect the project’s rate of return. At this stage, the Commission therefore has concerns that the actual rate of return could be higher than the parties estimate and could lead to overcompensation.

    “Moreover, the amount of wood pellets required is considerable, as compared to the volume of the global wood pellets market and demand from the Drax conversion project could significantly distort competition in the biomass market. The Commission is therefore also concerned that on balance the measure’s negative effects on competition could outweigh its positive effect on achieving EU 2020 targets for renewable energy.”

    Drax said it welcomes the opportunity to work with the UK Government and the Commission to complete the state aid clearance process.

    Last year the Commission approved UK state aid for theTeesside combined heat and power biomass plant and the conversion of Lynemouth power station to biomass.

    http://www.energylivenews.com/2016/01/05/eu-opens-in-depth-probe-into-drax-biomass-plans/

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    Base Metals

    China’s state stockpiler said to seek domestic copper supplies


    China’s State Reserve Bureau is seeking as much as 150,000 metric tons of domestically produced refined copper for its stockpiles amid a collapse in prices to six-year lows, according to people with knowledge of the situation.

    The state agency issued the tender, which closes Jan. 10, to multiple sellers including smelters at a meeting in Beijing on Tuesday, the people said, asking not to be identified because the information is private. The tender was reported late Tuesday by FastMarkets.com.

    Smelters in China, the world’s largest producer and consumer of metals, are contending with a collapse in prices as the nation’s growth slows to its weakest in a quarter century. The SRB’s move to soak up excess supply follows industry pledges in December to cut output and sales, and lobbying of the government to step in to support the market.

    Nobody answered phone calls and a fax seeking comment from the National Development and Reform Commission, which overseas the SRB. Calls to the SRB’s trading department also were unanswered.

    China’s refined copper surplus was forecast to narrow last year to 1.14 million tons as imports fell, according to state- run researcher Beijing Antaike Information Development Co. in October. At the same time, Antaike projected that domestic production would grow 7.7 percent to 7.42 million tons.

    http://www.mineweb.com/news/base-metals-and-minerals/chinas-state-stockpiler-said-to-seek-domestic-copper-supplies/
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    Malaysia imposes three-month ban on bauxite mining


    Malaysia imposed a three-month ban on bauxite mining, effective from January 15, due to concerns over its impact on the environment in a move that could hurt stockpiles of the aluminium making ingredient in China. 

    Malaysia's bauxite mining industry has boomed in the past two years to meet demand from top aluminium producer China, but a lack of regulations has led to a public outcry with many complaining of water contamination and environmental damages. 

    Just last month, bauxite mining was blamed for turning the waters red on a stretch of coastline and surrounding rivers in eastern peninsula Malaysia after heavy rains. "Everything will come to a complete stop on Jan 15," Malaysia's natural resources and environment minister, Wan Junaidi Tuanku Jaafar, said in a press conference on Wednesday. 

    Other than clearing of stockpiles and installation of cleaning facilities, all other activities will stop, he added. Malaysia will also freeze new bauxite export permits for the three months, the minister said. In the first 11 months of 2015, Malaysia exported more than 20-million tonnes of bauxite to China, surging nearly 700% from a year ago. 

    In 2013, it shipped 162 000 t. The Southeast Asian nation has been exporting increasing amounts of the raw material to China, filling in a supply gap after Indonesia banned bauxite exports in early 2014.

    http://www.miningweekly.com/article/malaysia-imposes-three-month-ban-on-bauxite-mining-2016-01-06

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    Bauxite Mining and Alumina Refining Companies Mull $69 Billion in Project Activity


    Researched by Industrial Info Resources (Sugar Land, Texas) --

    It has been a tough couple of years for the mining industry. Mining companies have cut back production and capex worldwide on the heels of low commodity prices.

    That trend, for most metals and minerals, will continue in 2016. However, a recent spate of bauxite mining projects points to the commodity bucking the trend in spite of current weak pricing trend.

    Combined bauxite mining and alumina refining projects account for about $69 billion worldwide. This includes 110 bauxite mining projects totaling $23 billion and 130 alumina refining projects totaling about $46.9 billion, according to Industrial Info'sGlobal Mining Project Database.

    http://www.marketwired.com/press-release/bauxite-mining-alumina-refining-companies-mull-69-billion-project-activity-industrial-2085493.htm
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    Steel, Iron Ore and Coal

    China to implement new coal-power price linkage mechanism


    China’s National Development and Reform Commission (NDRC) officially announced in a December 31 document to implement a new coal-power price linkage mechanism, starting from January 1, 2016.

    http://en.sxcoal.com/0/138925/DataShow.html
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    China Coal industry faces bleak future as mergers and reshuffle loom


    After being in a tight spot for over three years and writing off more than 80% of losses, China's coal industry faces another tough year with its overcapacity, Securities Daily reported.

    Authorities have stressed steps to accelerate the merger and reorganizations of the 'zombie' enterprises, or large-scale sectors with excessive productions suffering long-term losses and have little hopes turning the situations around.

    Coal sector has become the main target in the sweep.

    Starting from 2012, the coal price saw continuous slumps with a drop over 30%. Even though the price fell lower even than potatoes, many companies would rather lose profit than halt production in order to expand the market share. Industry insider told the newspaper that when production stops, the cash flow stops too which puts the companies in a more difficult situation.

    Statistics show that the coal sector suffers from an average asset liability ratio of 67.7%, the highest point in 16 years.

    Many coal companies are swamped. Hidili Industry International Development Limited, the biggest private owned coal mining company in Sichuan, has reportedly defaulted on its $183 million debt. China Shenhua Energy Co Ltd, the nation's biggest coal producer by volume, has seen a 40% salary cut.

    The China National Coal Group Corp (ChinaCoal), the nation's second-largest producer of coal by output, sold its low-profitable assets in hard cash worth 927 million yuan to reduce the debt and keep the cash flow. Half of the assets were sold by the end of 2015, but it only reduced the debt by 1%, which stood at 79% by Sept 30 last year.

    According to the company's third-quarter report, the miner has gained 44.8 billion yuan in the first three quarters of last year, a 13.8% decrease year on year. The net profit loss was about 1.67 billion yuan, a 352.8% slump year on year.

    With the bigger players having their hands tight, small fish find it harder to keep it together in the industry winter.

    China will accelerate the closing and reorganizing of the coal productions of old and low quality and control the capacity tightly, said Lian Weiliang, deputy director of the National Development and Reform Commission, at 2016 China Coal Trade Conference in December last year.

    Premier Li Keqiang said that China will lessen the pollution by 60% in electric power industry through upgrading, saving around 100 million tonnes of raw coal demands.

    According to statistics, 49 cases of mergers had taken place in coal mining industry in the first 11 months of 2015, a 58% of increase from the previous year.

    http://en.sxcoal.com/0/138963/DataShow.html

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    Beijing investigates coal in fight against pollution

     
    Beijing's government is investigating coal and other mining companies, as well as firms producing dangerous chemicals, in an effort to raise safety standards and push polluting enterprises out of the city.

    Chinese authorities have come under growing pressure to combat a pervasive smog problem, which is a major source of public dissatisfaction, coming after decades of unbridled economic growth.

    Last year, city investigations into fire safety, construction, dangerous chemicals and other industries suspended 7,778 firms and shuttered 906 more, the official Xinhua news agency reported, citing the Beijing Administration of Work Safety.

    The city wants to improve safety standards across industries, the report said, and force companies to use modern technology and equipment.

    Higher standards would push high-risk and high-polluting enterprises, including those with high energy consumption, to leave the city, Xinhua said.

    State media has in the past blamed Northern China's reliance on coal for the energy needs, as well as heavy industries surrounding many northern cities, for the choking haze.

    China's coal industry, which meets around 65 percent of the country's primary energy demand and employs nearly 6 million people, has been hit by a slowdown in sectors like power, cement and steel, as well as a campaign to cut smog.

    http://en.chinamining.com.cn/News/2016-01-05/1451957494d74850.html

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    Indonesian big coal miners plan higher production in 2016


    The Jakarta Post reported that the country’s major coal miners plan to further boost production in 2016 although analysts estimate that an oversupply in the world’s coal market will continue.

    The production levels proposed by large coal miners are quite different from those filed by small and medium coal miners, who mostly plan to reduce production on account of low demand in the world’s coal market.

    According to data from the Energy and Mineral Resources Ministry’s mineral and coal directorate general, by mid-December, as many as 71 companies, consisting of 64 coal contract of work holders and 7 permit holders, proposed a total of 303.33 million tons of production in 2016. The 2016 production plan will be far lower compared to the proposed 419 million tons in 2015.

    The ministry’s director for coal, Mr Adhi Wibowo, said that a large number of small coal producers had yet to file their production plans for this year. However, their contribution to the country’s total production is quite small.

    Figures from the mineral and coal directorate general showed that most big firms actually planned to increase their output.

    Among 11 firms producing more than 5 million tons, only two firms proposed lower output in 2016, namely PT Adaro Indonesia with a slight 0.8 percent cut and PT Kideco Jaya Agung with almost 18 percent.

    Mr Garibaldi Thohir, President director of Adaro Energy, the owner of Adaro Indonesia, said that his company would set output at a range of 52 to 54 million tons in 2016, around 7 percent lower compared to targeted output in 2015 of 54 to 56 million tons.

    Mr Thohir said that “We sell most of our coal under long-term contracts and only a little we offer on the spot market. We will reduce the amount [of coal offered] on the spot market.”

    Meanwhile, Kideco is unlikely to raise its production because its sales remain sluggish. Figures from Jakarta-listed Indika Energy, which is Kideco’s parent firm, showed that the subsidiary company had suffered from a 15.6 percent drop in selling price from January to September 2015.

    http://steelguru.com/coal/indonesian-big-coal-miners-plan-higher-production-in-2016/442913#tag

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    Iron ore price 16% rally off decade low comes to abrupt halt


    After falling to a near decade low of $37 a tonne on 11 December, the iron ore price clawed back 16% without registering a single down day to open 2016 trading at $43.10.

    That rally came to an abrupt halt on Tuesday with the Northern China 62% Fe import price including freight and insurance (CFR) losing 2.3%.

    The bad news out of China that roiled equities and metals prices finally caught up with the steelmaking raw material. And with no change to the fundamentals for the industry it's hard to why iron ore would continue to climb.

    Port inventories in China, responsible for more than 70% of the seaborne trade, are piling up again. China’s iron ore demand is set to fall by 4.2% in 2016 to just over 1 billion tonnes according to the country's Metallurgical Industry Planning and Research Institute as steel production shrinks 3.1%.

    While the demand picture is certainly not pretty, the main driver of a lower iron ore price has been growing supply.

    Hopes pinned on Big 4 to exercise their "unprecedented pricing power"

    In December, Australia's 55mtpa Roy Hill mine started shipments. Rio Tinto's 20mtpa Silvergrass mine could be up and running within a year and Vale's gigantic 95mtpa S11D project could follow soon after.

    Many smaller producers have exited the market and others are "hanging on by their fingernails" in the inimitable words of Rio CEO Sam Walsh, but there are now also signs that the majors, which still enjoy healthy margins at today's price, may be throttling production.

    Vale cut its iron ore production guidance for this year to 340–350mt from a previous forecast of 376mt and the Rio de Janeiro-based company also said it may slow down the S11D expansion. Anglo American is doing the same at Minas Rio, announcing the ramp up to 26mtpa will only happen in 2018. Kumba is cutting production at Sishen in South Africa by nearly 30% to 26mt.

    Morgan Stanley in a  research report quoted by Bloomberg noted that with more than three-quarters of global supply in the hands of just four companies "with unprecedented pricing power", it may be time for the majors to change tack:

    “What’s needed to buoy the ore price? Vale, Rio Tinto, BHP Billiton to end their competitive supply surge and act more rationally in this weakened market,” analysts Tom Price and Joel Crane wrote. “Vale’s the last to deliver big tons to the market: if a moderation of its supply-growth strategy is followed by the Australians, this will secure a price above that of market expectations.”

    http://www.mining.com/iron-ore-price-16-rally-off-decade-low-comes-to-abrupt-halt/?utm_source=twitterfeed&utm_medium=twitter&utm_campaign=Feed%3A%20MasterGold%20%28Gold%20News%29&utm_term=MasterMetals

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