Mark Latham Commodity Equity Intelligence Service

Friday 20th January 2017
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    Oil and Gas

    Steel, Iron Ore and Coal


    US Economic Expectations Soar To 15 Year Highs... What Now?

    Bloomberg's survey of economic expectations has soared since Donald Trump was elected and at 56.0 in January, it is the highest since 2002.

    This spike in 'hope' is occurring as the current economic situation is seen as deteriorating and, as the chart below suggests, this might be as good as it gets...

    Image title

    But this time could be different?

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    European styrene market reaches fresh 17-month high despite slowing Asia

    The European styrene spot price reached a fresh 17-month high on Wednesday despite a slowing Asia market ahead of the Chinese New Year, according to S&P Global Platts data.

    The styrene 5-30 days forward spot price was assessed at $1,299.50/mt FOB ARA Wednesday, the highest level since mid-August 2015. The February price breached the $1,300/mt mark and was assessed at $1,305/mt on Wednesday as high bids pushed up the price.

    Market sources said that buy activity in Asia was cooling off ahead of the Lunar New Year holiday at the end of January, with the January market largely absent in Europe as well.

    East China inventory levels have been increasing ahead of the holiday and were registered at 64,100 mt on Wednesday, rising 18,400 mt on the week.

    As the European market was "not short" product, an arbitrage was expected to open between Europe and Asia, allowing for any exports to be fixed with Asia for delivery after the New Year break.

    Turnarounds in Asia in February-March were expected to spur buy interest for European product from Asia.

    Instead, the European spot price saw a $20.50/mt daily hike on Wednesday amid minor production issues at LyondellBasell/Covestro's propylene oxide styrene monomer unit in Maasvlakte in the Netherlands.

    A company spokesman from Covestro confirmed that the plant was running despite earlier issues.

    The upstream benzene market also saw a surge in prices Wednesday on the back of production issues and depleted stocks, according to sources. The production issue was reported to be in the Netherlands, although Platts could not obtain confirmation.

    The benzene spot price soared $46/mt on the day to $992/mt CIF ARA, the highest level in 26 months.

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    Profit in China's top five power cos may slump 45pct

    China's top five power generators may see a year-on-year slump of 45% in total profit last year, mainly attributed to surged thermal coal prices, Grate Wall Securities said lately.

    Profit in these generators – State Power Investment Corporation, China Huaneng Group, China Huadian Corporation, China Datang Corporation and China Guodian Corporation – may fall to around 60 billion yuan ($8.7 billion) in 2016, it said.

    China Datang Corporation expected its loss at 2.5-2.8 billion yuan last year; Huaneng Power International, Inc., a subsidiary of China Huaneng Group, saw profit drop 2.13% year on year.

    However, net profit of State Power Investment Corporation ranked first in the five groups, standing at 8.76 billion yuan last year.  

    The surge of China's thermal coal prices since June last year added production cost for utilities, plus power tariffs cuts in 2015, making current coal prices exceed their break-even point.

    By end-December last year, the Fenwei CCI Thermal Index assessed domestic 5,500 Kcal/kg NAR coal traded at Qinhuangdao port at 617 yuan/t FOB with 17% VAT, surging 68.8% from the start of the year.

    These groups had finished the whole year's output target one month ahead of schedule, thanks to improved demand in the third quarter of the year when high temperature pulled power load and output, said Grate Wall Securities.

    In 2106, China's power consumption rose 5% year on year to 5,919.8 TWh, official data showed.
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    US Commerce Secretary-nominee Ross says to be proactive against dumping

    President-elect Donald Trump's nominee for commerce secretary, Wilbur Ross, Wednesday said he planned to use the department's ability to self-initiate antidumping and countervailing duty investigations to send a message to foreign manufacturers -- a proactive stance that steel industry executives have long encouraged.

    "I like the idea of occasionally using self-initiation by the Department of Commerce to bring these cases," Ross said at his televised confirmation hearing. "We're not going to self-initiate every case. We don't have the staffing to do it, but I think by picking strategic cases and initiating cases them it will ... send a message to the other side that we're getting more serious about this. Second, it would definitely accelerate the process."

    Ross, 79, is an investor known helping to restructure companies, including steel companies, and has operated businesses in 23 countries.

    At the hearing, Ross called himself "an activist," and said self-initiating antidumping and countervailing duty investigations would help small companies that have a harder time gathering the funding and data to bring forth a case. Self-initiating trade cases would send a message that the US government will more aggressively combat cheaters.

    Antidumping and countervailing duty investigations have been a trade tool frequently utilized by the US steel industry. Senator Gary Peters, Democrat-Michigan, asked Ross about his willingness to self-initiate antidumping and countervailing duty investigations. Peters said the last self-initiated antidumping case may have been in the 1990s. President Reagan in 1985 ordered Commerce to self-initiate an antidumping investigation on Japanese semiconductor imports.

    Typically, US manufacturers petition for antidumping and countervailing duty investigations to Commerce and the International Trade Commission. After the petition filing, the statutory timeline for countervailing duty investigations can last 205-300 days, while antidumping investigations may take 280-420 days, according to the ITC.

    Of the 65 antidumping and countervailing duty investigations Commerce initiated in 2015, 46 or 71% were for steel products, according to analysis of Commerce data. In 2016, Commerce initiated 48 antidumping and countervailing duty investigations, of which 25 or 52% were for steel. Aside from steel products, US companies have petitioned for duties on ferrovanadium, paper products, wood products, chemicals, residential washers and truck and bus tires.

    Ross Wednesday also said Commerce self-initiating trade cases could cut the amount of preparatory time needed to bring forward a trade case, but he would also seek to litigate trade cases faster.

    "Historically, the people who have been the dumpers refuse to not comply on a timely basis with requests for information," he said. "If confirmed, I would not look very kindly on the perpetrators deliberately delaying cases by not providing information."

    Ross said he would welcome additional resources to be able to assign more people to work on trade remedy actions.

    Thomas Sneeringer, president of the Committee to Support US Trade Laws, said that's one reason why trade cases take so long.

    "Some of the delays could be avoided if there were enough people to work on the cases on a real-time basis," Sneeringer told S&P Global Platts. Sneeringer thought US trade law enforcement agencies will gain the budget to support enhanced efforts, he added.

    Steel mills and market sources have been supportive of Ross' nomination.

    "AISI is encouraged by Secretary-designate Ross' clear focus on the challenges that the steel industry is facing, and his intent to use all of the tools at his disposal to ensure a level playing field," Tom Gibson, president and CEO of the American Iron and Steel Institute, said in a statement. "This includes his recognition of the utility of self-initiating cases where appropriate, in addition to his commitment to accelerate all cases. We strongly support his nomination and look forward to his swift confirmation as Secretary."
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    Oil Demand.

    Image titleDo you remember in late 2015 we showed you an astonishing lift in Gasoiline sales? Well it's reversed and moved negative:

    US gasoline Demand is now negative year on year. -2% vs miles travelled up 2%. That  is tertiary inventory burn.

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    Atlas Copco to split group, company veteran Rahmstrom named new CEO

    Sweden's Atlas Copco said it would split into two listed companies in 2018, forming an industrial business and a separate mining and civil engineering firm whose equity would be distributed to the same shareholders.

    Atlas Copco also appointed Mats Rahmstrom, currently head of its Industrial Technique business, as chief executive from April. Rahmstrom replaces Ronnie Leten, who turned 60 last year, and is stepping down after eight years.

    Atlas Copco will concentrate on industrial customers, while the new company, with the working name NewCo, will focus on mining and civil engineering. Rahmstrom, who has been with the company for almost 30 years, will stay with the larger and more profitable industrial business when the split takes place.

    The industrial company, which will continue to be known as Atlas Copco, has annual sales of 74 billion Swedish crowns ($8.3 billion) and an operating margin of about 20 percent.

    The divisions which will form the new mining and civil engineering company have annual sales of around 28 billion crowns with an operating margin of about 16 percent. They have been hit by the fall in commodity prices over the last two years.

    "While a surprise, the decision to separate Atlas Copco into two companies should allow for more focused management and better capital allocation and value creation," Morgan Stanley said in a note. It has an "Overweight" rating on the stock.

    Investor AB (INVEb.ST), Atlas Copco's largest shareholder with 22.3 percent of votes, said it supported the proposal and that both the two companies would remain core investments.

    Rahmstrom, 51, had been touted as a leading candidate to take over as head of Atlas Copco.

    During his time at Industrial Technique, which sells industrial power tools and car assembly gear, its sales have doubled and margins have become the highest in the group, topping 23 percent in the third quarter.


    The news fits into a pattern across Europe where a wave of spin-offs through initial public offerings (IPOs) is under way.

    In Sweden, hygiene products group SCA (SCAb.ST) is planning a split, and Sandvik (SAND.ST) is looking at a listing of its specialty steel unit Material Technology, according to business daily Dagens Industri.

    While several European spin-off plans have come about after investor pressure, Atlas Copco's proposal comes after its shares have surged and organic growth returned for the mining business after several tough years.

    "We see that there are very few synergies between the businesses with a very limited overlap of customers," Atlas Copco Chairman Hans Straberg told a news conference.

    "We have now grown the company in such a way that it makes sense to have these two businesses stand on their own."

    Atlas Copco shares rose 0.6 percent at 1307 GMT, outperforming a 0.4 percent drop in the STOXX Europe 600 Industrial Goods & Services Index.

    Its shares are up 265 percent with Leten as CEO, compared with a 136 percent gain for the European sector index, and a 74 percent gain for closest peer Sandvik.
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    Exxon Buys More Permian

    Exxon Mobil Corp. is the latest company to expand in the red-hot Permian Basin in Texas and New Mexico, announcing a deal Tuesday to buy companies owned by the Bass family for $5.6 billion in stock and up to $1 billion in additional payments.

    Once a dominant player in the region, Exxon is joining other oil firms in a race to build up drilling portfolios in West Texas and New Mexico. Even as crude prices hover slightly above $50 a barrel, about half the level of three years ago, the value of land in the Permian basin has skyrocketed to records amid a flurry of land buying as companies gear up for a rebound.

    With the purchase, newly installed Exxon Chairman and Chief Executive Darren Woods will nearly double the oil and gas the company holds in the area to the equivalent of 6 billion barrels, the company said. While Exxon had among the largest positions in the Permian basin before the deal, it was far smaller than that of peers including Chevron Corp. and Occidental Petroleum Corp.

    The Exxon deal brings acquisitions in the area to more than $10 billion in just the past week. On Monday Noble Energy Inc. said it would pay $2.7 billion to buy West Texas producer Clayton Williams Energy Inc.

    Exxon paid about $23,500 an acre including potential future payments, according to Jefferies & Co., about 25% less than the average price paid in the past six months. Exxon’s ability to use shares in treasury to buy assets may be attractive to sellers based on potential tax advantages, according to Jefferies analysts.

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    Singapore’s Export Growth Beats Forecasts for Second Month

    Non-oil exports up 9.4% in Dec with strong electronics sales
    Exports to China rose 40%, while demand from U.S. fell 17%

    Singapore’s exports surged above economists’ forecasts for a second consecutive month, signaling a recovery in the trade-dependent economy.

    Key Points

    Non-oil domestic exports rose 9.4 percent in December from a year ago, International Enterprise Singapore said in a report. The median estimate of 15 economists surveyed by Bloomberg was for a 5.8 percent increase.
    Electronics exports increased 5.7 percent in the period, after a 3.5 percent gain in November.
    Non-oil exports rose 1 percent in the month, compared with a median forecast for a 5.5 percent contraction.

    Big Picture

    A slowdown in global trade and lower oil prices have undermined growth in the export-driven economy, but a strong reading in November, when exports soared 11.5 percent despite a forecast for a small decline, has given hope for some improvement. The economy is expected to continue a modest pace of expansion, Ravi Menon, managing director of the Monetary Authority of Singapore, said Monday, with authorities forecasting growth of 1 percent to 3 percent for this year. Trade-oriented industries should benefit from a mild upturn in global and regional electronics, he said. Earlier this month, the trade ministry said preliminary data showed the economy expanded an annualized 9.1 percent in the three months to December from the previous quarter.

    Economist Takeaways

    “Given Singapore is the canary in the coal mine, today’s positive non-oil domestic exports print corroborates with recent trade data which showed a notable rebound in exports in most Asian countries. This suggests the tentative end of the trade recession which has plagued the region since late 2014,” Australia & New Zealand Banking Group Ltd. analyst Weiwen Ng said in a note. “While this development is encouraging, we are cognizant of the risk that the rebound in non-oil domestic exports is in its nascent stage and could be dampened or even derailed by geopolitical tensions and rise in protectionism.”
    “There are signs of improvement but the improvement will be gradual,” Julian Wee, a Singapore-based senior market strategist at National Australia Bank Ltd., said by phone. “Cyclically, there is a recovery in China but you’re definitely not going back to 8 percent growth. Quarter to quarter there may be some improvement, and that’s what you’re seeing. There will be a deceleration in China’s growth overall.”

    Other Details

    Pharmaceuticals exports rose 7.3 percent in December from a year ago
    Petrochemicals surged 28.5 percent
    Exports to China increased by 40 percent from December last year, while those to the U.S. fell 17 percent

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    Protests In Mexico Push Country To Brink Of Revolution And Nobody’s Talking About It

    Long-simmering social tensions in Mexico are threatening to boil over as failing neoliberal reforms to the country’s formerly nationalized gas sector are compounded by open corruption, stagnant standards of living, and rampant inflation.

    The U.S. media has remained mostly mute on the situation in Mexico, even as the unfolding civil unrest has closed the U.S.-Mexico border in San Diego, California, several times in the past week. Ongoing “gasolinazo” protests in Mexico over a 20 percent rise is gas prices have led to over 400 arrests, 250 looted stores, and six deaths. Roads are being blockaded, borders closed, and government buildings are being sacked. Protests have remained relatively peaceful overall, except for several isolated violent acts, which activists have blamed on government infiltrators.

    The few mainstream news reports that have covered the situation blame rising gas prices but fail to examine several other factors that are pushing Mexico to the brink of revolution.

    ‘Narco-state’ corruption

    The narco-state, or as Mexican activists say, “el narco-gobierno,” is a term used to describe the open corruption between the Mexican government and drug cartels. The narco-state has been in the headlines lately over the kidnapping and presumed murder of 43 Ayotzinapa students in Iguala, Guerrero, in 2014. This has been a source of continuous anti-government protests ever since.

    Though the kidnappings remain officially unsolved, members of the Guerrero Unidos drug cartel have admitted to colluding with local police forces to silence the student activists. Twenty police officers have been arrested in association with the kidnapping. Former Iguala police chief Felipe Flores has been arrested and “accused of offenses including organized crime and kidnapping the students,” the AP reports. The corruption apparently goes all the way to the top, as federal authorities say former Iguala mayor José Luis Abarca personally ordered the kidnappings.

    One Mexican activist who wished to remain anonymous told Anti-Media that “a lot of people think it’s only the gasoline prices, but the price of gas is just the straw that broke the camel’s back. It all started with Ayotzinapa.”

    Much like the U.S., the Mexican government is susceptible to corporate influence. It just so happens that the most influential corporate entities in Mexico are drug cartels — and it’s hard for the government to rein in entities that fund and infiltrate it. Similar to the phenomenon of “regulatory capture,” the Mexican government is at least partially funded and co-opted by drug cartels. This festering problem is an underlying factor in the current civil unrest in Mexico.

    Neoliberal policies left the working class behind

    NAFTA was a contentious issue in the 2016 U.S. presidential election, but it’s just as controversial in Mexico, if not more so. The grand 1994 “free trade” scheme, signed into law by Bill Clinton, saw a dramatic redesign of both the U.S. and Mexican economic landscapes. Corn farmers, long a vital factor in Mexico’s peasant farming economy, were wiped out by low-priced corn subsidized by the U.S. government, which immediately flooded Mexican markets after NAFTA was passed. The Mexican immigration crisis at the U.S.’ southern border soon followed.

    Meanwhile, manufacturing plants soon began moving into Mexico from the U.S. to take advantage of extremely cheap labor — leaving many workers in the U.S. out of a job. American agricultural corporations like Driscoll’s have recently come under fire for employing slave-like labor conditions to produce boutique organic fruit for U.S. consumers. Protests for workers rights in Mexico, which recently raised its minimum wage to 80 pesos (~$4) per day, are often met with heavy-handed police crackdowns.

    Incoming President Trump has capitalized on two issues caused by NAFTA — the immigration crisis and outsourcing of U.S. jobs — and his reactionary protectionist economic policies will undoubtedly make Mexico’s predicament even worse.

    Mexico’s nationalized oil conglomerate, Pemex, has been plagued by falling production for years. Corruption, which is inherent to state-run institutions, has condemned Mexico’s gas industry to inefficiency and stalled innovation. Theft has become a widespread issue, and oil workers were recently caught red-handed siphoning gas directly out of pipelines.

    Supposedly to ramp up production and lower prices, the Mexican government pushed through neoliberal privatization schemes in 2013 and 2014, which were backed by U.S. oil interests and incubated by the Hillary Clinton-run State Department. President Enrique Peña Nieto promised the reforms would result in increased production and lower fuel prices, though production has fallen and prices spiked 20 percent on January 1st. Prices are expected to rise even further, as fuel subsidies will be completely phased out by March 2017. Peña Nieto claims the prices must go up to match international prices, though consumers in the U.S. currently pay less for gas than Mexicans.

    Peña Nieto’s neoliberal reforms have fallen flat as economic growth has been anemic for years and wealth inequality has grown out of control.

    Rampant inflation in Mexico

    Perhaps the biggest driver of the current civil upheaval in Mexico is out of control inflation coupled with the value of the peso reaching record lows. Mexican workers are already stretched thin financially as minimum wage hovers at four U.S. dollars per day. Food prices, which were on the rise before the gas price increases, are set to climb 20 percent or more as they correlate closely with prices at the pump.

    According to Zero Hedge, in Mexico it currently takes “the equivalent of 12 days of a minimum wage to fill a tank of gas — compared to the U.S.’ seven hours.” People who don’t drive will also feel the pain, as public transportation costs are likely to rise with fuel prices. Rising gas prices also put downward pressure on the rest of the Mexican economy as workers spend more money on gas and less on consumer goods.

    The Mexican government’s deficit spending and Trump’s tough talk on trade have been factors in devaluing the peso, making everything in Mexico more expensive for the working class and driving the general discontent that makes the country a hotbed of unrest.

    Overall, no one factor can be blamed for causing extreme levels of unrest in Mexico. Before the Ayotzinapa student kidnappings, Mexico was already seeing widespread protests, marches, and strikes. The last several presidential elections have been contested, and the current administration of Enrique Peña Nieto has only a 22 percent approval rating. The general feeling of helplessness in the face of narco-state corruption and economic insecurity is not going away with the next election or protest, and wealth inequality in the country is beyond remedy. Mexico is ripe for revolution. Whether it’s triggered now by the gas gouging and subsequent inflation or in the near future, it’s coming — and we should be talking about it.
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    Rio Tinto payout hopes brighten on solid outlook for 2017

    Global miner Rio Tinto could be in a position to reward shareholders with a strong dividend hike or even a share buyback next year as it benefits from a sharp rise in metals prices, fund managers and analysts said on Tuesday.

    Rio Tinto's decision last year to pursue "value over volume" at its mines to ensure maximum shareholder returns has put the world's second biggest mining company at the forefront of the commodities price revival.

    It reported output and shipments for 2016 in line with its guidance on Tuesday and kept its targets for 2017 intact, expecting to ship 330 million-340 million tonnes of iron ore.

    "Our disciplined approach remains in place in 2017, with the continued focus on productivity, cost reduction and commercial excellence," Rio Tinto Chief Executive Jean-Sébastien Jacques said in releasing the company's full-year operations report.

    Two fund managers said Rio Tinto's 2016 performance and outlook for 2017 could prompt the board to consider boosting shareholders' returns, including buybacks.

    "Depending on what commodity prices are like through the end of the year and what options they have in terms of reinvestment, we may see some form of capital return," said Arnhem Investment Management portfolio manager Neil Boyd-Clark.

    Iron ore prices last year defied forecasts, rising sharply as Chinese steel production was stronger than expected, but most forecasters doubt prices will remain high over 2017.

    Iron ore, Rio Tinto's biggest earner, is selling for more than $83 a ton, up 6 percent in the past two weeks following an 81 percent gain over 2016.

    That's more than double the record low price of $38.30 a ton in December 2015, which led the company to dump its policy of never cutting dividends after suffering an $866 million loss for 2015.

    For 2016, Rio Tinto is forecast to report net profit of $4.6 billion, according to Thomson Reuters I/B/E/S, and has committed to pay out at least $1.10 per share. Analysts tip Rio will pay a dividend of $1.34 for 2016, rising to $1.76 for 2017.

    Prices of copper and aluminum, two other key drivers, rose 25 percent and 12 percent respectively in 2016 and continue to climb this year.

    Shaw & Partners analyst Peter O'Connor believes Rio Tinto could generate as much as $6 billion in free cash this year and again in 2018, setting the stage for higher returns to investors.

    "Couple that with gearing at the low end of the guidance range, we expect that some pretty chunky capital management is on the agenda, i.e. dividend payout to head towards the higher end of the 40-60 percent band and a share buyback or two," he said in a note.
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    China 2016 power consumption up 5pct on year, NEA

    China consumed 5,919.8 TWh of electricity in 2016, increasing by 5% year on year, showed data from the National Energy Administration (NEA) on January 16.

    Of this, 805.4 TWh was consumed by the residential segment, gaining 10.8% from a year earlier, data showed.

    For the non-residential segment, the primary industries – mainly the agricultural sector – used 107.5 TWh last year, rising 5.3% from the previous year.

    The secondary industries – mainly the industrial sector, consumed 4,210.8 TWh, increasing 2.9% year on year.

    Power consumption by tertiary industries – mainly the service sector – increased 11.2% on the year to 796.1 TWh.

    Meanwhile, the average utilization hours of power generating units across the country was 3,785 hours, down 203 hours from a year ago, according to the NEA data.

    Of this, hydropower plants logged average utilization of 3,621 hours, an increase of 31 hours; the average utilization of thermal power plants decreased 199 hours on year to 4,165 hours.

    In 2016, China added 120.61 GW of power generating capacity, including 11.74 GW of new hydropower and 48.36 GW of new thermal power capacity.
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    Henan to cap energy consumption this year

    China's central province of Henan planned to cap total energy consumption within 245 million tonnes of standard coal equivalent in 2017, a year-on-year rise of 2.9%, as part of its efforts to realize low-carbon development, according to local officials at a meeting.

    Total energy output across the province is expected to gain 6.7% from a year ago to 110 million tonnes of standard coal equivalent this year, while its dependence on outbound energy supply will be some 50%.

    The province will invest more than 68 billion yuan ($9.86 billion) into energy projects in 2017, in a bid to accelerate upgrading of its energy structure and ensure energy supply.

    Last year, the province plowed over 70 billion yuan into major energy projects, with 38 billion yuan into power grid and 12.5 billion yuan into renewable projects, both hitting a record high.
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    Datang Int'l Power predicts over 2.5 bln yuan loss in 2016

    Datang International Power Generation Co., Ltd, a listed arm of China Datang Group, predicted a loss of 2.5-2.8 billion yuan in 2016, compared with net profit of 2.81 billion yuan in 2015, said the company in a statement released on January 14.

    The separation of its coal chemical business was cited for the deficit by the company, which reduced earnings of 5.52 billion yuan during the period.

    According to the statement, the government's curtailment of on-grid coal-fired power tariff early last year and a surge of domestic coal prices in the second half of 2016 all led to a year-on-year decline in earnings from the company's power business.
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    India's Reliance Industries Q3 net profit up 10 pct, beats estimate

    India's oil-to-telecoms conglomerate Reliance Industries Ltd beat analysts' estimates to post a 10 percent increase in third-quarter standalone net profit, as high margins from its core business of crude oil refining helped bolster earnings.

    The "standalone" profit and revenue figures include the company's refining and petrochemicals business and oil and gas exploration in India.

    Standalone net profit rose to 80.22 billion rupees ($1.18 billion) for the three months to Dec. 31 from 72.96 billion rupees reported a year earlier, Reliance, controlled by India's richest man Mukesh Ambani, said in a statement on Monday.

    Analysts on average had expected a standalone profit of 78.5 billion rupees, according to data compiled by Thomson Reuters.

    Its standalone revenues for the quarter came in at $9.8 billion, up 9 percent from a year ago due to higher margins from selling petrol and diesel.

    Refining and petrochemicals contribute around 90 percent to overall revenue and profit.

    The company said its gross refining margin, or profit earned on each barrel of crude processed - a key profitability gauge for a refiner - was $10.8 per barrel for the quarter.

    On a consolidated basis, which includes its telecom, retail and U.S. shale gas operations, its net profit came in at 75.67 billion rupees.

    Reliance commercially launched its fourth-generation (4G) telecoms network, Reliance Jio, on Sept. 1 offering free voice and data service to its subscribers until the end of March.

    The telecoms venture, in which the company has invested approximately $20 billion, had built a subscriber base of 72.4 million by Dec. 31, Reliance said.

    Reliance's flagship refining operations, with a 1.2 million barrels per day crude oil refinery in the western state of Gujarat, reported a 4.3 percent fall in profitability for the December quarter to $912 million.

    The petrochemicals business saw a 25.5 percent jump in profit to $486 million, Reliance said. ($1 = 68.0999 Indian rupees)
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    China's Xi says Chinese economy to keep growing steadily

    China's economy will remain stable and keep growing steadily while resisting protectionism, President Xi Jinping told Swiss executives on Monday.

    "We are confident" Xi said, adding that there were headwinds facing the global economy, which is still weak.

    "Overall China's economy is performing steadily. In 2016, last year, GDP is expected to grow by 6.7 percent on a year-on-year basis, and that means we missed our set target, but that expectation according to some international institutions will be among the highest among major economies."

    "Protectionism, populism and de-globalization are on the rise. It’s not good for closer economic cooperation globally," he said.

    Xi, on a state visit to Switzerland before a keynote speech at the World Economic Forum in Davos, said China's economy, with growth expected at 6.7 percent in 2016, was entering a "new normal", and Swiss firms could help it improve quality, and become more efficient, equitable and sustainable.

    “The restructuring of China’s economy and the upgrading of our industries will generate huge new demand.” Xi said.

    "In terms of intellectual manufacturing, finance, insurance, energy conservation, environmental protection, energy generation, electricity, food and medicine, Switzerland has advanced technology and... expertise and could be a new partner for innovation for China.”

    China owed its economic development to opening up, and Switzerland and China would work together to reject all forms of protectionism, he said.

    “We will expand the openness of our service sector and general manufacturing industry to provide more investment opportunities for foreign businesses and create a sound legal and policy environment a legal playing field.”

    China has become Swiss engineering company ABB's (ABBN.S) second biggest single market, behind only the United States, amid demand for high voltage transmission equipment for the country's burgeoning power grid and factory robots for the Middle Kingdom's car industry.

    Elevator maker Schindler has designs on rivaling bigger Kone and Otis, a unit of U.S.-based United Technologies, in China, where it has made acquisitions and expanded manufacturing facilities for elevators and escalators.

    China is the world's biggest elevator market, accounting for about 60 percent of all new equipment orders, and Schindler said it is scouting for more acquisitions.

    Swiss drug and chemical makers are also fanning out in China. Novartis (NOVN.S) just completed a $1 billion research campus in Shanghai, while Clariant (CLN.S) is pinning its hopes on rising Chinese consumer demand for products including ingredients for soaps.

    Meanwhile, China's state-owned China Construction Bank got its Swiss banking license in 2015 and signed a renminbi clearing agreement with Swiss-based Zuercher Kantonalbank just last September. Switzerland is seeking to become a hub of renminbi trading, as China seeks to internationalize its currency and reduce reliance on other nations' money for trade.

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    DUET-Cheung Kong deal to test Australia's foreign investment regime

    DUET Group has agreed to recommend an increased $5.51 billion bid from a consortium led by Cheung Kong Infrastructure Holdings (1038.HK), in a deal that is likely to test Australia's appetite for foreign investment in its key energy assets.

    In what is seen as an increasingly protectionist stance, Australia has been thwarting attempts by foreign investors to buy strategic assets in the country. Recently, it blocked a bid by Hong Kong's Cheung Kong Infrastructure (CKI) to buy state-owned firm Ausgrid on national interest grounds.

    Australia has since imposed limits on foreign ownership in the sales process for a smaller power grid, Endeavour Energy, as sensitive assets such as ports and energy grids come under increased scrutiny.

    CKI's latest bid to buy DUET for A$3.03 a share - up A$0.03 from an earlier offer - remains subject to approval from the Foreign Investment Review Board (FIRB), but the Hong Kong firm said it was confident of obtaining clearance.

    "We are encouraged by many...statements by senior officials in Australia saying Ausgrid situation was unique and did not set any precedent and should not be a consideration in FIRB's future approach to foreign investment," CKI Deputy Managing Director Andrew Hunter told media during a conference call on Monday.

    DUET's board has decided to recommend CKI's A$7.37 billion offer in the absence of a higher bid.

    John Pearce, the chief investment officer of DUET's largest shareholder, UniSuper, which has a 15.6 percent stake, said in a statement that he was "comfortable" with the board's decision.

    Shares in the Australian energy firm rose more than 5 percent to just below CKI's per-share offer price on Monday.

    "It is a very high valuation for DUET," RBC Capital Markets analyst Paul Johnston said, adding it equated to 1.6 times DUET's regulated asset base. "The market is now focused on FIRB. The assets of DUET are less sensitive (than Ausgrid) I think from a national security point of view."

    DUET's assets include a gas pipeline in Western Australia as well as suburban power grids that are smaller than Ausgrid's, the network for Australia's largest city, Sydney.

    CKI said the DUET deal would be done through a consortium that also included related companies Cheung Kong Property Holdings (1113.HK), CK Hutchison Holdings (0001.HK) and Power Asset Holdings (0006.HK).

    DUET Chairman Doug Halley said the company believed the offer fully recognized the value and future growth platform the management team had created as well as the operating and financing cost savings available to the CKI-led consortium.

    In a report issued on Dec. 5, Morningstar analyst Jennifer Song said the value accretion available to CKI from its bid was poised to come primarily from lower debt costs.
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    Renault Shares Tumble After Anti-Fraud Authority Accusations Of "Cheating" On Emissions Tests

    Renault hasn’t been officially notified about the French diesel probe, a spokesman said by phone. Renault isn’t using software to cheat on emissions, the spokesman said

    Yesterday we sarcastically noted "they are all at it" when Fiat Chrysler was slammed by the EPA for emissions cheating, and now get further confirmation of the farce as The FT reports, French authorities have started a preliminary investigation into Renault amid suspicion the company may have “cheated” to conceal abnormal emissions of pollutants from some of its diesel engines.

    The government commission’s report over the summer found that nitrogen oxide emissions for many Renault models went well beyond their official limit under “normal” driving conditions, by a factor of more than 10 in the case of some models.

    As The FT details, the decision, made on Thursday, comes after France’s independent anti-fraud authority referred the carmaker to state prosecutors in November, after completing its own investigation.

    Three judges were appointed to lead the investigation, the Paris prosecutor said in a text message, into whether they "made merchandise dangerous for human health."

    Last year, three Renault sites in France were raided by authorities as part of a sprawling national investigation linked to the Volkswagen emissions scandal, sparking fears that the emission-rigging case was spreading across Europe.

    The French government, which owns 20 per cent of Renault, and the carmaker has denied using software to cheat emission testing, saying its models “conformed to the laws and norms in each market where they are sold.”
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    EDF allowed to delay reactor outages as cold snap looms -regulator

    EDF is allowed to delay planned outages at two nuclear reactors involved in a safety probe to help the French utility meet demand as a cold snap looms next week, nuclear regulator ASN said on Friday.

    EDF had requested delays to outages planned at its Civaux 1 and Tricastin 2 reactors scheduled for this Thursday and Friday, respectively, ASN said.

    "This request was motivated by risks to the electricity grid related to the cold snap expected next week," ASN said. "ASN considered this deferral to be acceptable."

    Civaux 1 will now go off line for safety checks on Jan. 18 followed by Tricastin 2 on Jan. 26, ASN said.

    The agency said it was examining EDF's request to have the Civaux outage delayed until end-March.

    A prolonged cold spell is expected to hit France and most of western Europe next week, pushing average temperatures sharply below normal seasonal levels and increasing demand for electricity for heating.

    France depends on its 58 nuclear reactors for more than 75 percent of its electricity needs.

    ASN said it had authorised EDF to restart nine of 12 reactors whose steam generators were involved in an investigation. The nine represent a capacity of 8.1 gigawatts and seven of them are already back online.

    Two others, Bugey 4 and Tricastin 4, will restart on Jan.13 and Jan. 16, respectively.

    ASN launched the investigation after raising concerns that steel used in steam generator channel heads could contain high concentrations of carbon which could weaken their ability to resist cracking.
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    China’s CEFC has big ambitions, but little known about ownership, funding

    Inside four years, CEFC China Energy has emerged from relative obscurity as a niche fuel trader to become a rapidly growing oil and finance conglomerate with assets across the world and an ambition to become one of China's energy giants.

    It has a rare contract to store part of the nation's strategic oil reserve, gained financing from the state-owned China Development Bank (CDB) and has hired a number of former top officials from state-owned energy companies, CEFC officials said. It also has layers of Communist Party committees across its subsidiaries – more than at many private Chinese companies.

    Its influence goes well beyond Beijing. Czech President Milos Zeman has appointed CEFC’s founder and Chairman Ye Jianming as an advisor on economic policies, and the company has become one of China’s biggest investors in central Europe.

    Still, the privately-owned company’s opacity could become hurdles to its expansion as regulators reviewing deals around the world increasingly seek to understand how companies are controlled and financed. Little is known about how Ye raised the money to build the company or about its ownership structure.

    A deal to take a 50 percent stake in a Czech-Slovak bank that was announced in March is taking a long time to approve. One condition that needs to be satisfied under Czech law is whether the origin of funds for the acquisition is transparent. European Central Bank rules have some related requirements.

    A CEFC executive said it expected clearance for the acquisition by the middle of this year.

    A spokesman for the company said it has no special connections with the Chinese government, adding that its “rapid growth in recent years was because its corporate strategy fits well with China’a macro-development strategy and policy.”


    The Shanghai-based company – which was set up in 2002 in Ye’s home town in Fujian province - had 263 billion yuan ($38 billion) in revenue in 2015 and 30,000 employees at the end of that year.

    Ye told a board meeting in July he wants it to become a second Sinopec, China's second-largest energy giant and Asia's top oil refiner.

    He plans to build a retail fuel network in Europe through acquisitions and supply it with gasoline from refineries in Romania and China, the latter after consolidating some independent Chinese refineries known as "teapots", according to a script of his presentation reviewed by Reuters.

    Ye, 40, declined to comment for this story but three current and former company executives and two CEFC press officers all told Reuters CEFC wants to become an integrated oil company that also owns banks, insurers and brokerages.

    "The big plan is to acquire over the next four to five years upstream and refining assets with a combined size of one million barrels per day," said a senior director of CEFC.


    CEFC's oil ambitions started to take shape when it built a 3.05-billion yuan oil storage facility on Hainan island in southern China. It began operating in June last year and is one of the few privately owned facilities used to store the national petroleum reserve.

    Company officials have also said it has a 30 billion yuan trade financing line of credit with CDB, which funds infrastructure projects.

    In the past year, CEFC has done a series of deals.

    A year ago, it agreed to acquire KMGI, the international business of Kazakh's state oil and gas firm KazMunaGaz for $680 million.

    Then in March during President Xi's first visit to the Czech Republic, CEFC announced it was raising its stake in the J&T Finance Group to 50 percent from 9.9 percent for 980 million euros ($1.04 bln).

    J&T has banks operating in the Czech Republic, Russia, Croatia, Barbados and euro zone member Slovakia, and a larger stake in the group should help CEFC gain better access to the euro zone.

    The firm was already a shareholder in Czech brewery group Lobkowicz PLG.PR, publishing house Empresa Media, and the nation’s top football club Slavia Praha. For factbox of major assets.

    The European Central Bank and the Czech central bank are yet to clear the J&T deal. The Czech and Slovakia central banks declined to comment. An ECB spokesman said it doesn’t comment on individual banks.

    CEFC's wide range of investments in the central European nation and its hiring of politically-connected figures there has led to questions in the Czech media about whether CEFC is purely commercially driven or is operating under the influence of the Chinese government.

    Also Czech Finance Minister Andrej Babis, whose party rules in a coalition with the Social Democrats, told reporters in October that CEFC’s focus on private companies “brings no yield to the Czech Republic.”


    There is little public information about Ye, who company officials said loves reading works about Confucianism and Daoism, and rarely attends business dinners. Unlike many other Chinese entrepreneurs, Ye also strictly bans relatives from working at CEFC, officials said.

    CEFC describes itself on its website as having a "unique, innovative management model…that combines merchant economy, Confucianism and military-style management".

    A CEFC spokesman said Ye’s ownership of the group is held through stakes at subsidiaries not the holding company, though he did not provide a full explanation of the ownership structure.

    Company officials said Ye, who once worked in the forest police force in his home province in Fujian, made his first 10 million yuan in his early 20s’ from a property deal there. He moved into the oil business after buying his first oil assets in an auction.

    Attached Files
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    China FX regulator denies reports of forex controls

    China's foreign exchange regulator said on Friday that recent media reports about forex controls are untrue and disturb normal market operations.

    The State Administration of Foreign Exchange would continue to crack down on illegal activity in the forex market, a notice posted on its microblog account said.

    The Chinese government has been intensifying a campaign to put the brakes on the depreciation of the yuan, including tightening controls on capital outflows. The yuan fell more than 6.5 percent against the dollar last year.

    Earlier on Friday, Bloomberg reported that the central bank had asked some banks to stop processing cross-border yuan payments until they balance inflows and outflows.

    Citing unidentified people familiar with the matter, it said the directions, issued verbally on Wednesday, required lenders to show at the end of every month that the amount of outgoing yuan matches the sum that comes in, it reported.

    The PBOC has yet to respond to a faxed request from Reuters for a comment. (Reporting by Zhang Lusha and Ryan Woo;

    Attached Files
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    Aside for the debt mavens.

     Image title
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    Roger Bootle says 'Growth'.

    A third major factor making for a stronger world economy is not directly related to the financial crisis. At the beginning of last year the markets and many commentators managed to get themselves extremely worked up over the damage supposedly done to the world economy by low oil prices. By contrast, it seemed to me that low oil prices had to be a good thing. But the losses from low oil prices were highly concentrated and visible in the short term; by contrast, the gains were more widely distributed and might only become evident to the beneficiaries after a period of time. Accordingly, it was likely that there would be a short-term hit to the global economy, offset by a longer-term gain. We are now into that longer term.

    Meanwhile, the recovery from ultra-low oil prices has brought a further benefit, namely the easing of the pressure on hard-pressed companies and countries. Russia, for instance, should emerge from recession this year. Even so, oil consuming companies and individuals are still facing much lower prices than they were two years ago. The result is that the world should now be experiencing a substantial net dividend from lower oil prices.

    The upshot of all of this is that world growth this year is set to be higher than last year. Not only that, but it may well be a good deal stronger than almost anyone expects.  Of course, in the world of forecasting you have to be prepared for surprises. Over the last few years we have all been exceedingly well prepared for downside surprises. What I am about to say is decidedly risky but I will say it nevertheless: I have a hunch that we now need to be prepared for surprises on the upside.

    Roger Bootle is chairman of Capital Economics

    [email protected]

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    Texas GOP blog running Ryan Tax reform


     The Scoop

    Texas Insider Report: WASHINGTON, D.C.– Ways and Means Republicans are committed to making pro-growth tax reform a reality in 2017. Last year, as part of Speaker Ryan’s “Better Way” agenda, we released a detailed Blueprint for bold, pro-growth tax reform. Now we are moving forward aggressively to turn the ideas of our Blueprint into comprehensive tax reform legislation that lowers tax rates, closes special interest loopholes, empowers families and small businesses, and unleashes job creation across the country.

    By focusing on three crucial goals – growth, simplicity, and service – we will deliver the 21st century tax code that Americans deserve. Here’s how our bold plan for tax reform will benefit families and job creators nationwide:

    Our Blueprint takes historic action to deliver a 21st century American tax code that is built for growth – the growth of families’ paychecks, the growth of local businesses, and the growth of our economy as a whole. These innovative reforms include:

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    Oil and Gas

    Santos hits new production and sales records

    Oil and gasmajor Santos reported record production and sales volumes for 2016, which MD and CEO Kevin Gallagher on Friday described as a “year of significant change” for the Australia-based company.

    The ASX-listed company produced a record 61.6-million barrels of oil equivalent in the year ended December, up 7% on 2015’s production and at the upper-end of its guidance.

    Sales volumes increased by 31% to 84.1-million barrels of oil equivalent, which Santos said was also a new record.

    Fourth quarter production reached 15-million barrels of oil equivalent, up 1% on the previous corresponding period and sales volumes for the December quarter increased to 21.9-million barrels of oil equivalent, up 27% on the previous corresponding period.

    Liquefied natural gas (LNG) sales volumes also reached record highs of 2.8-million tonnes in 2016, up 89% on the previous corresponding period, following the ramp-up of the Gladstone LNG project, in Queensland, and strong performance from the Darwin LNG project, in the Northern Territory, and the Papua New Guinea LNG project.

    Gallagher said Santos should be “proud of what was achieved” in 2016.

    “We restructured the business, removed substantial cost and generated free cash flow for the first time in many years. Our production cost per barrel has reduced, and we are free cash flow positive below $38/bbl, down from $47/bbl at the start of 2016.”

    He noted that in addition to the cost out success, Santos also implemented a new organisation structure, which sought to maximise production, and developed a clear new strategy. The group also enjoyed exploration success in Western Australia and Papua New Guinea.

    Furthermore, the company sold its noncore assets and strengthened its balance sheet for a lower oil price environment through an institutional placement completed in December.

    “We enter 2017 with a clear strategy and a solid platform off which we can build and grow. Our business turnaround will continue as we reshape and focus our organisation to support five core, long-life natural gas assets; Cooper Basin, Gladstone LNG, Papua New Guinea, Northern Australia and Western Australian gas.

    “This singular focus will also allow Santos to become a leaner, lower cost and high performance business with significant upside opportunities across our portfolio.”

    For 2017, Santos expected sales volumes to reach between 73-million and 80-million barrels of oil equivalent, with production expected to reach between 55-million and 60-million barrels of oil equivalent.

    The major is expected to spend between $700-million and $750-million in capital during 2017.
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    Explorers in World's Fastest-Growing Oil Market Seek Tax Breaks

    Explorers in the world’s fastest-growing oil market are seeking lower taxes on crude produced domestically to encourage fresh drilling as India tries to reduce its dependence on energy imports.

    State-run Oil & Natural Gas Corp. and the biggest private producer Cairn India Ltd.want Finance Minister Arun Jaitley to at least halve the tax on crude oil production in the federal budget due Feb. 1. India surprised some explorers last year with its 20 percent levy on crude produced locally, moving from a fixed charge. Companies pay more now with crude near $50 a barrel than they did under the old system when it was double the price.

    “Globally, given the low oil price scenario, governments have provided incentives to stimulate and attract investments,” said Sudhir Mathur, interim chief executive officer at Cairn India. “In India, the cess rate of 20 percent acts as a disincentive to increase production and commit incremental investments.”

    Attracting investments to boost output from local fields is key for Prime Minister Narendra Modi, who has made energy security a priority and set a target of cutting oil imports by 10 percent in the next five years. Reducing the levy will help explorers including ONGC and Cairn India, which Oil Minister Dharmendra Pradhan estimates will spend $25 billion by the end of this decade.

    India’s hydrocarbon resources are highly undeveloped and production has been declining for the past several years, prompting the government to nudge companies to invest in reversing the fall and increase energy supplies.

    New Delhi-based ONGC is spending over $5 billion for its biggest development plan in a deep-sea block in the Bay of Bengal off the country’s east coast. Cairn India also plans to spend as much as $4 billion over the next few years to drill for oil.

    Asia’s third-largest economy meets about 80 percent of its crude oil requirements through imports.

    “We need some money to be left behind so that we are able to flow back into the investment cycle,” said A.K. Srinivasan, finance director at ONGC, the nation’s biggest explorer. “Otherwise there will be cash shortage. Already, we are going to run cash shortages.”

    At a price of $55 a barrel, ONGC may have to pay about $11 as cess, compared with $9 when prices were $100 a barrel and the tax was fixed charge, he said. “With crude prices firming up, the cost impact of this tax is quite high.”

    Brent oil prices have risen about 17 percent since the Organization of Petroleum Exporting Countries’ agreed in November to cut production for six months starting in January. The fuel traded above $100 as recently as September 2014.

    Firming crude prices may also allow the government to reduce the levy on retail prices for gasoline and diesel, according to Dhaval Joshi, an analyst at Emkay Global Financial Services Ltd.

    India didn’t pass on to consumers the entire benefit of crude’s price decline from July 2014, increasing excise duty on the two fuels nine times and mopping up about 960 billion rupees ($14 billion) in the previous two fiscal years.

    The government may now look at easing prices as one way of cushioning the impact of its Nov. 8 ban on high-denomination currency notes, which impactedthe rural population the most, as it prepares for five state elections this quarter.

    The consumer price of diesel, the most-used fuel in the country, is at a record while that of gasoline is at the highest since August 2014, according to state-run fuel retailer Indian Oil Corp.’s website.

    “Yes, taxes have come and we have not hidden it,” Pradhan, the oil minister, said in New Delhi on Jan. 16. “If the prices start pinching the consumers, we’ll see.”
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    Brazil oil workers' union accepts Petrobras' collective wage deal

    The Brazilian oil workers' union has accepted a proposal from state-controlled Petrobras for a collective wage deal, the union said in a statement on its website on Thursday.

    According to the statement, the union's managing board recommends workers approve the company's offer.
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    Summary of Weekly Petroleum Data for the Week Ending January 13, 2017

    U.S. crude oil refinery inputs averaged about 16.5 million barrels per day during the week ending January 13, 2017, 639,000 barrels per day less than the previous week’s average. Refineries operated at 90.7% of their operable capacity last week. Gasoline production decreased last week, averaging about 9.0 million barrels per day. Distillate fuel production decreased last week, averaging over 4.7 million barrels per day. 

    U.S. crude oil imports averaged 8.4 million barrels per day last week, down by 674,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged 8.2 million barrels per day, 4.5% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 588,000 barrels per day. Distillate fuel imports averaged 152,000 barrels per day last week. 

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 2.3 million barrels from the previous week. At 485.5 million barrels, U.S. crude oil inventories are near the upper limit of the average range for this time of year. Total motor gasoline inventories increased by 6.0 million barrels last week, and are above the upper limit of the average range. Both finished gasoline inventories and blending components inventories increased last week. Distillate fuel inventories decreased by 1.0 million barrels last week but are above the upper limit of the average range for this time of year. Propane/propylene inventories fell 7.4 million barrels last week but are in the upper half of the average range. Total commercial petroleum inventories decreased by 2.0 million barrels last week. 

    Total products supplied over the last four-week period averaged over 19.3 million barrels per day, up by 0.1% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged about 8.6 million barrels per day, down by 2.4% from the same period last year. Distillate fuel product supplied averaged over 3.5 million barrels per day over the last four weeks, up by 6.6% from the same period last year. Jet fuel product supplied is up 8.5% compared to the same four-week period last year.

    Cushing down 1.2 mln bbls

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    US oil production unchanged

                                                           Last Week  Week Before  Last Year

    Domestic Production '000 ............ 8,944            8,946         9,235
    Alaska ................................................... 513              515            532 
    Lower 48 .......................................... 8,431            8,431         8,703
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    Australian heavy sweet crude premiums fade amid uptick in Brazilian supply

    An increase in export volumes for March has weighed on premiums paid for Australian heavy sweet crudes to date this month and the downside correction could continue amid growing competition from Brazilian arbitrage supplies, Asian traders said Thursday. S&P Global Platts assessed Vincent crude at a premium of $2.60/b to Platts Dated Brent crude assessments on an FOB basis Wednesday, the lowest differential since December 15 last year, when it commanded a $2.55/b premium. Trade sources said Quadrant Energy and BHP Billiton could have each sold a 550,000-barrel cargo of Pyrenees crude for loading in March at a premium in the range of $3.10-$3.40/b to Platts Dated Brent crude assessments, weaker than the premium of around $4/b heard paid for a February-loading cargo in the previous trading cycle. "It's double the export volume [for Australian heavy sweet Pyrenees crude in March from February] so it's natural to see the premium slide," said a North Asian sweet crude trader.

    Indications of heavy sweet crudes to be exported from Australia in March reflected a much bigger program, with Pyrenees seeing a 100% increase in exports from the month before.

    There are no Vincent crude cargoes available for loading in February, but Woodside Petroleum holds one 550,000-barrel cargo for loading over March 7-11.

    The March Vincent cargo was recently sold to an Asian customer at about 30 cents/b below the latest March Pyrenees value, a source with direct knowledge of the sales told Platts Thursday.

    "Quite often we achieve numbers pretty similar to Pyrenees," the source added.

    However, some North Asian crude traders said the Vincent cargo was likely sold at around Dated Brent plus $2.50/b, putting it roughly 60-90 cents/b below the premiums heard paid for March Pyrenees cargoes.

    Regional sweet crude traders said price differentials for Australian heavy sweet grades could extend losses in the near to medium term amid growing concern that China's state-run and independent refiners, the major customers of Pyrenees and Vincent, could shift focus elsewhere for cheaper supplies.

    One Singapore-based sweet crude trader said Australian crude producers could surrender some market share in China to South American suppliers, with latest data showing a growing number of Brazilian crude exports to the world's biggest energy consumer.

    "It's not like Australia is the only place for China to acquire heavy low sulfur crudes... of course they can look elsewhere like South America," the Singapore-based trader said.


    December 2016 saw a dramatic increase in Brazilian crude imports to 1.05 million mt, more than doubling from 529,000 mt the month before, Platts data showed.

    January shipping fixtures seen by Platts indicated that Petrobras has fixed the New Vanguard, Cosglory Lake, GC Fuzhou and Saham to move a combined 1.06 million mt of crude oil for January loading from Brazil to the Far East and India.

    Petrobras has also fixed the Maran Cassiopeia to move 130,000 mt of crude for February 2 loading from Brazil to the Far East, according to the latest February shipping fixtures.

    "[Brazilian crudes that Chinese have bought for Q1 delivery are also] sweet and heavy [but they are] cheaper than the similar grades produced in the Far East and West Africa," a trader with knowledge of China's recent purchases from South America said.

    The influx of Brazilian crude supplies into Asia is expected to continue throughout the first quarter as WTI continues to weaken relative to Brent and Dubai, making WTI-based crudes more price competitive than those linked to the Middle Eastern and European benchmarks, market participants said.

    The front-month swap spread between Dubai crude and WTI has narrowed significantly over the past month or so, with the February Middle East crude benchmark swap at one stage commanding a premium over its US counterpart early in the month.

    In addition, the front-month Brent-WTI swaps spread in Houston has averaged $2.49/b so far this month, compared with an average of $2.41/b in December and $1.53/b in November.

    The trader with knowledge of the recent Brazilian supply deals declined to confirm the exact crude grades purchased from Petrobras, but market sources said the cargoes could be Marlim, Roncador and Lulu crude.

    Marlim has a gravity of 19.2 API and 0.78% sulfur, while Roncador Heavy has a gravity of 18 API and 0.688% sulfur. Petrobras also exports Lula with 29.3 API and 0.35% sulfur.

    Australia's Vincent is a heavy sweet crude with a gravity of around 17.4 API and sulfur content of 0.37%. Pyrenees has a gravity of 19.3 API with 0.19% sulfur, according to the grade's assay report dated September 16, 2011.
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    China’s Cnooc Raising Spending First Time Since Oil’s Plunge

    Cnooc Ltd. plans to raise capital spending for the first time since crude began its crash in 2014 as China’s biggest offshore oil and gas producer prepares for life after the slump and a second year of falling output.

    The Beijing-based explorer will increase expenditure, including in the Gulf of Mexico, to 60 billion to 70 billion yuan ($8.7 billion to $10.2 billion) for 2017 after cuts in the last two years, according to a statement to the Hong Kong stock exchange and a press conference on Thursday. It set its production target to between 450 million to 460 million barrels of oil equivalent after last year posting the first output decline since at least 1999.

    “As a pure upstream player, Cnooc has to invest for the future, especially in exploration as it needs to find new reserves to keep sustainable development,” said Tian Miao, a Beijing-based analyst at North Square Blue Oak Ltd. “Higher capital spending for 2017 is line with improved sentiment on crude prices since late last year.”

    The oil industry is expected to boost spending for the first time in three years after slashing almost half a million jobs globally during crude price’s downturn, according to industry consultant Graves & Co. Brent averaged about $45 a barrel in 2016, more than 50 percent below levels in 2014, and is expected to rise above $55 this year, according to the median of 45 analyst estimates compiled by Bloomberg. Cnooc is more exposed to the price of the commodity compared with its Chinese peers as it earns almost all its income from exploration and production.

    Cnooc said in a separate online presentation that it spent 50.3 billion yuan last year. The company produced an estimated 476 million barrels of oil equivalent during that time, meeting the lower end of its 470 million to 485 million barrel target, it said Thursday.

    The deep-water Gulf of Mexico fields, Appomattox and Stampede, will take a majority of overseas spending this year, Chairman Yang Hua said at a press conference in Hong Kong. The two fields, along with Egina in Nigeria, “meet our principles of investing capital in high-return projects around the world,” Yang said.

    Preferred Play

    The explorer posted its first-ever half-year loss in August as crude oil’s plunge and writedowns on assets including Canadian oil sands crimped earnings. The explorer reported a 15 percent fall in third-quarter sales as output declined with capital spending. Domestic production fell more than 9 percent because of declines from existing fields and weak natural gas demand, the company said in October.

    Still, the explorer is a preferred stock among analysts. Of the 23 analysts tracking the company, 13 rate it a buy, seven as hold and three as sell. Analysts at Nomura Holdings Inc., Morgan Stanley, and Sanford C. Bernstein & Co. had forecast before Thursday’s release that the company will raise spending this year by between 10 percent to as much as 30 percent. Cnooc shares lost 0.4 percent to close at HK$10 before the statement was released.

    China’s crude oil output has fallen 6.9 percent in the first 11 months of 2016 to about 4 million barrels a day as its state-owned producers struggled to support output at the country’s aging fields. Imports last year grew at the fastest pace in six years -- and the nation was the world’s biggest buyer in December -- as the cheapest crude in more than a decade triggered stockpiling and as independent refiners accelerated purchases.

    Cnooc also said Thursday:

    Five new projects are expected to start this year; 20 projects are under construction
    Plans to drill 126 exploration wells this year from 118 last year
    Targets net production of 455 million to 465 million barrels of oil equivalent for 2018; targets 460 million to 470 million barrels for 2019
    Exploration accounts for 18 percent of this year’s spending, while development is 66 percent and production is 15 percent
    China to account for 64 percent of production, 52 percent of spending in 2017; overseas projects to make up 36 percent of production, 48 percent of spending
    2017 total production seen as 83 percent oil, 17 percent gas
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    Russia’s Gazprom swings to profit in Q3

    Russian energy giant Gazprom posted a net profit of 102 billion roubles ($1.7 billion) in the third quarter of 2016 as it benefited from a stronger rouble.

    Moscow-based Gazprom logged a loss of 2 billion roubles in the same quarter a year ago after a foreign-exchange loss.

    The company said its third-quarter sales were down to 1.26 trillion roubles from 1.29 trillion in the same period in 2015 as its gas sales to Europe dropped to 570 billion roubles.

    In the nine-month period that ended September 30, 2016 net sales of gas to Europe and other countries rose 8 percent to 1.55 trillion roubles.

    This was mainly driven by “the increase in volumes of gas sold by 28 %, or 35.6 bcm, which was partially compensated by the decrease in average Russian Ruble prices,” Gazprom said.

    Gazprom is Europe’s largest supplier of natural gas and generates more than a half of its revenue from selling gas to Europe.
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    Dresser-Rand’s first micro-scale LNG solution starts up

    Dresser-Rand, part of Siemens Power and Gas, has commissioned its first micro-scale natural gas liquefaction system at the Ten Man LNG facility in Pennsylvania, U.S.

    The modular, portable solution, developed by the Dresser-Rand, allows the operator, Frontier Natural Resources, to monetize stranded gas assets at Tenaska Resources’s Mainesburg field, located in the Marcellus shale play.

    The scope of supply included a standardized LNGo solution consisting of four different modules, each handling one step of the liquefaction process, Siemens said in its statement

    The Ten Man facility commenced production in mid-September last year, just four months from contract signing, and has produced approximately half a million liters of LNG since startup.

    Siemens further added that the micro-scale LNGo solution eliminates the need for establishing gas pipeline infrastructure or arranging for long-distance trucking of LNG from centralized plants to point of use.

    Attached Files
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    Indonesia overhauls system for future oil, gas contracts

    Indonesia has adopted a new scheme for future oil and gas production sharing deals so that contractors shoulder the cost of exploration and production, rather than being reimbursed by the government.

    Under the shake-up, flagged late last year, contractors will retain a bigger portion of the oil and gas they recover in return for paying more upfront costs.

    The shift, designed to ease the burden on Jakarta's budget, will only apply to new contracts and will not disrupt existing agreements using the current cost-recovery system.

    Big global firms such as Chevron, Exxon Mobil and Total operate in Indonesia, but the country has struggled to attract fresh investment and to develop new fields.

    Speaking at a press conference late on Wednesday, Energy Minister Ignasius Jonan said the base split for gas production would be 52 percent for the government, with the rest going to a contractor. For oil output, the government will get 57 percent.

    Contractors could be awarded a bigger share of production if conditions make working on a field more difficult and expensive, he added.

    Under the previous system, the government received a share of 70 percent for gas and 85 percent for oil.

    The first contract under the new scheme was signed on Wednesday with PT Pertamina for the Offshore North West Java (ONWJ) block, in which the government gets 37.5 percent of any gas and 42.5 percent of oil.

    "This gross split (mechanism) means all expenses would be the responsibility of the contractor, no longer burdening the state budget," Jonan told reporters.

    Pertamina's chief executive Dwi Soetjipto said the increased split for the ONWJ block would not cover its costs, but that he hoped to retrieve them by "making efforts on efficiency".

    Last year, oil and gas contractors operating in Indonesia asked for more than $11 billion reimbursement for costs, much bigger than the $8.4 billion initially planned.

    Indonesia's crude oil output peaked at around 1.7 million barrels per day in the mid-1990s. But with few significant oil discoveries in Western Indonesia in the past 10 years, production has fallen to roughly half that as old fields have matured and died.

    The industry is a vital part of the Indonesian economy, but its contribution to state revenue has dropped from around 25 percent in 2006 to an expected 3.4 percent this year, according to data compiled by consulting firm PricewaterhouseCoopers.
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    China buys 70% of Russian ESPO cargoes from Kozmino in 2016

    China became the dominant purchaser of Russian eastern crude grade ESPO in 2016, having bought over two-thirds of all cargoes loaded from the Kozmino port in Russia's Far East last year, and significantly outstripping other buyers, data from national oil pipeline operator Transneft showed Tuesday.

    Russia exported a total of 31.8 million mt (or 636,868 million b/d on average) of ESPO crude from Kozmino in 2016, up 4.6% year on year and estimates the deliveries to remain roughly flat this year as the volumes have been exceeding the port's installed capacity.

    Of the total, China bought 22.2 million mt, up 51% year on year, taking its share of total ESPO cargoes delivered from Kozmino to 69.8% in 2016, compared to just over 48% in 2015, when it was competing with Japan as the biggest purchaser of ESPO cargoes from Kozmino.

    The increase in Chinese imports was due to a significant boost in purchases by independent refineries, which received the right to import crude in 2015.

    In addition to Rosneft's term buyers CNPC and ChemChina, independent refineries, including Luqing Petrochemical, Kenli Petrochemical, and Hongrun Petrochemical, Haiyou Petrochemical, as well as trading companies Kunyang and Yijia, took delivery of the barrels.

    Russia, which also pumped around 23.5 million mt of pipeline crude to China, competing with Saudi Arabia as the main crude supplier to China through the year.

    Apart from China, Malaysia was the other country which significantly increased purchases by ESPO blend, becoming the fourth-biggest buyer of the Russian crude.

    The imports rose eightfold to 1.6 million mt, although from a low basis of just two cargoes, each 100,000 mt, bought in 2015, Transneft data showed.

    Russia was the second-largest supplier to Malaysia in 2016 after Saudi Arabia, even knocking the Saudis off the top spot in some months.


    Other traditional buyers of ESPO blend from Kozmino, including Japan and South Korea, reduced their offtake.

    The two countries were increasingly buying alternative crude blends, primarily from Saudi Arabia and Iran.

    Nonetheless, Japan remained the second biggest buyer of ESPO cargoes in 2016, even though it more than halved its purchases to just 3.9 million mt on the year.

    South Korea also maintained its position as the third-largest ESPO buyer, while its offtakes reduced by 25% year on year to 2.4 million mt.

    Transneft estimates crude deliveries via Kozmino at between 31.3 million and 31.8 million mt in 2017, as the supplies have already reached the port capacity and exceeded it slightly following the dredging of the port.

    Russia's ESPO blend, a medium-sweet crude popular among North Asian refiners, typically loads in 100,000 mt Aframax-sized cargoes.

    In late 2015, larger, Suezmax-sized cargoes started loading at the port for the first time since deliveries from Kozmino began at the end of 2009.

    In 2016, the company completed the dredging work of the port and its two berths are now able to load 140,000 mt tankers, Transneft's first vice-president Maxim Grishanin said Friday.

    Nonetheless, standard cargoes of 100,000 mt enjoy greater interest from buyers, he said.

    Kozmino is the end point of the East Siberia-Pacific Ocean pipeline, which runs across East Siberia, and also sends over 330,000 b/d of crude to China, via a pipeline offshoot from Skovorodino to Mohe.
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    Russian gas flows to Europe, Turkey surge 25% on year in H1 Jan

    Russian gas flows to Europe and Turkey were already 25.5% higher year on year in the first 15 days of January, according to the latest Gazprom data, having hit an all-time high daily level on January 8.

    The continued high flows in 2017 -- following record-breaking volumes last year -- come as cold weather across Europe, especially in the east, triggers increased demand for Gazprom gas.

    Russian gas prices also remain competitive compared with European hubs -- the oil price rally of end-2016 will only filter through to oil-indexed gas contracts in the coming months -- so European buyers are thought to be maxing out their Russian gas purchases.

    In a statement Monday, Gazprom said gas flows to what it calls the Far Abroad -- Europe and Turkey but not the ex-Soviet states -- were 25.5% higher than in the same period of 2016.

    "In absolute terms, the increase amounted to about 1.9 Bcm of gas," Gazprom said.

    Flows to Germany were 20.7% higher in January 1-15, it said, without giving absolute volumes.

    "We are reaching record levels through the Nord Stream pipeline," CEO Alexei Miller said.

    Russian gas flows via the Nord Stream pipeline to Europe continue to run at maximum capacity, with flows to Germany at 158 million cu m on Monday, according to data from Platts Analytics' Eclipse Energy.

    Of that, 76 million cu m was delivered into the OPAL pipeline to the Czech Republic, up on the average 44 million cu m/d in 2016 before Gazprom was granted additional capacity in OPAL in October by the European Commission.

    Flows into OPAL continue at these higher levels despite uncertainty over the legality of the European Commission decision to allow Gazprom to use more capacity in OPAL after an appeal by Poland's PGNiG.

    The increased flows through Nord Stream come at the expense of exports of Russian gas via Ukraine, which have fallen by the same amount since mid-December.

    That implies volumes are simply being diverted to the Nord Stream route away from the Ukraine route, the former being a cheaper route to market for European buyers.

    Gazprom's supplies to Europe and Turkey hit a total of 179.3 Bcm in 2016, a significant jump on its previous highest level of 161.5 Bcm from 2013 and well above the 2015 total of 158.6 Bcm.
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    Oil production accelerating in the Permian Basin, EIA says

    Oil production in the Permian Basin could rise by 53,000 barrels a day by next month, the Energy Department said Tuesday, and analysts expect the flurry of West Texas land deals to keep drillers pumping oil.

    That’s the largest monthly increase in the region since January 2016, according to data compiled by the Energy Information Administration. The EIA’s first shale oil forecast of the year comes after U.S. shale drillers dispatched scores of rigs to the region and companies like Exxon Mobil Corp. and Noble Energy announced multibillion-dollar land grabs there.

    “All these guys putting money to work are going to have to drill to get a return on their investment,” said Stephen Trauber, head of global energy investment banking at Citigroup in Houston. “They’re going to see pretty significant growth. There are still several more deals that could get done.”

    The EIA said oil production across the nation’s seven major shale plays is set to rise by 41,000 barrels a day, with the Permian’s increase offset by declines in the Bakken Shale in North Dakota and the Eagle Ford Shale in South Texas.
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    Aramco Chief Says Oil Tax Will Be Cut to Lure Investors to IPO

    Saudi Arabia has promised it will reduce the overall tax rate paid by its national oil company to make its 2018 initial public offering -- potentially one of the largest in history -- more appealing to investors.

    “Definitely the fiscal regime will be changed," Saudi Arabian Oil Co. Chief Executive Officer Amin Nasser said in a Bloomberg Television interview on Tuesday in Davos, Switzerland. “When you look at the fiscal regime and the taxes, it has to be aligned with other listed companies.”

    Aramco, as the company is commonly known, currently pays a 20 percent royalty on its revenue plus an 85 percent tax on income, Nasser said. He declined to say what tax rate the kingdom is considering.

    Saudi officials said Aramco’s tax rate wouldn’t need to be slashed because the company -- considered the crown jewel of the country’s economy -- is able to make a profit even when oil prices plunge. In 2016, under the existing tax regime and with crude dipping to 12-year lows, Aramco was able to pay a dividend and fund its biggest-ever capital investment program, Nasser said.

    "Based on the advice of the different banks that we use during the process of the IPO, we are setting a certain fiscal regime that will meet investors’ requirements,” Nasser said.

    Saudi Arabia is looking at markets including Hong Kong, London, New York and possibly even Canada as international venues for the sale. The kingdom will offer 5 percent of the world’s biggest oil producer as part of a plan by Deputy Crown Prince Mohammed bin Salman to set up a giant biggest sovereign wealth fund and help reduce the economy’s reliance on hydrocarbons.

    Nasser said the kingdom was considering whether to do a double listing, with shares sold in the domestic market in Riyadh and a foreign exchange, or a triple-listing, with two foreign locations on top of the local bourse.

    In his most extensive comments yet about the IPO plans, Nasser said the Aramco IPO will include the so-called concession, which comprises the oil and gas reserves of the kingdom. Saudi Arabia sits on about a fifth of the world’s reserves.

    "The listing is based on Saudi Aramco maintaining the concession," Nasser said. "If you have the concession, you have the physical oil.”

    The concession dates from 1933, when King Abdulaziz, the founder of modern Saudi Arabia, granted it to an American company. Riyadh nationalized Saudi Aramco, which at one point was owned by the companies that are today Exxon Mobil Corp and Chevron Corp., in a series of deals from 1973 to 1980.

    Nasser said the IPO will take most likely in the second half of 2018, narrowing the window from earlier comments by Saudi officials who said a flotation was planned for some point through 2018.

    In the past, Saudi officials have said the flotation would value the company at as much as $2 trillion -- which, if true, will make it the world’s most valuable. Selling just five percent could raise $100 billion, ranking it as the IPO the biggest ever. However, some investors have cautioned that Aramco is unlikely to be worth as much, noting that other national oil companies that have sold shares have achieved relatively low valuations.

    Nasser said that Aramco wasn’t planning as yet to increase its production capacity, currently at about 12 million barrels a day, saying the matter would be decided after the IPO. The company has "ample" spare capacity to meet any incremental demand, he added.

    Instead, Nasser said the focus is in expanding the company’s refining capacity to 8 million to 10 million barrels a day, up from 5.4 million barrels a day currently. Saudi Arabia invested in the 1980s in refineries in the U.S. and more recently has been spending money in South Korea and Indonesia.

    "This is an area of interest for us: expand our refining capacity globally and also our petrochemicals,” he said.
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    U.S. crude discount to Brent widens on Trump tax talk, OPEC

    U.S. oil prices hit their biggest discount to global benchmark Brent crude in five months on Tuesday as President-elect Donald Trump said an oil import tax plan would be too complex and as a global deal to reduce supply hits Middle East output.

    The deeper the discount, the easier it is for U.S. crude producers to export oil to refiners worldwide. A glut in global supply had limited the appetite for crude from the United States until late last year, even after the United States had lifted a long-standing ban on exports.

    The spread between U.S. West Texas Intermediate (WTI) and Brent is widening enough to open the window for exports for some U.S. crude grades, said Dominick Chirichella, senior partner at the Energy Management Institute in New York.

    It was already wide enough in December for traders and major producers to line up a flotilla of carriers to ship more oil to Asia than in nearly two decades.

    A proposal spearheaded by U.S. House of Representatives Speaker Paul Ryan to boost jobs and the economy by taxing crude imports and exempting exports has fueled expectations for tighter supply into the United States and bolstered WTI.

    However, Trump called the tax plan "too complicated," casting doubts on the passing of such a law and widening the spread between the two crude benchmarks.

    The comments pushed U.S. crude's discount over Brent to the deepest in nearly five months on Tuesday and just two cents away from the biggest discount since late February 2016.

    An agreement by the world's top exporters in late November to cut output has had a bigger impact on Brent than on U.S. crude. Most of the oil-producing countries that are cutting output price their crude against Brent, while in the United States the higher oil price is likely to lead to higher supply as shale producers increase activity.

    Since the OPEC deal was announced on Nov. 30, the WTI-Brent spread has widened by more than $1 per barrel.

    If the crude tax is not passed, the spread may widen further. Money managers piled into options in mid-December on the premise that the law would pass, one trader said. They bet that WTI could rise to parity with Brent in 2018, partly if the tax was signed into law.
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    Genscape Cushing inventory week ending 1/13

    Genscape Cushing inventory week ending 1/13: -756,302 bbl w/w.

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    Goodrich Petroleum Announces Haynesville Shale Well Results

    Goodrich Petroleum Corporation today announced preliminary results on two Haynesville Shale wells in North Louisiana.

    The Company has participated in two Haynesville Shale wells in Caddo Parish, Louisiana that have reached a combined 24-hour peak rate to date of approximately 72,000 Mcf per day. The Company owns a 17.4% working interest in each of the wells which came online the middle of December.

    As previously announced, the Company has established a preliminary capital expenditure budget for 2017 of $40 million, which will be concentrated in the core of the Haynesville Shale play in North Louisiana. The budget, which will be monitored quarterly, contemplates 12-16 gross (3-4 net) wells for the year, with plans to commence drilling operations on its Wurtsbaugh 26-14-16 1 Alt well by early February.

    The Company currently owns approximately 24,000 net acres prospective for the Haynesville Shale, with approximately 16,000 net acres in the core of North Louisiana, where it estimates 235 gross locations with an approximate 41% working interest. The Company also owns approximately 8,000 net acres in the Angelina River Trend of East Texas, where it estimates approximately 123 gross Haynesville Shale locations and 123 gross Bossier Shale locations, with an average working interest of approximately 33%.

    In addition, the Company has entered into a natural gas hedge through a costless collar of $3.00 – $3.60 for 12,000 Mcf per day for calendar year 2017.
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    Nasser sees Saudi Aramco capacity extending beyond 12,5mln bbls

    Saudi Aramco CEO Amin Nasser also spoke about investment plans, telling an audience that Saudi Arabia is building out its capacity, as part of an investment push that is necessary to avoiding future price spikes. "If there is no investment, prices will spike," Mr. Nasser said.
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    BP CEO Won’t Boost Spending, Signaling Caution on Oil Rebound

    BP Plc boss Bob Dudley is not yet ready to boost spending despite the rebound in oil prices.

    The company will keep capital expenditure below $17 billion this year and next, Chief Executive Officer Dudley said in a Bloomberg television interview in Davos, Switzerland. That’s $6 billion lower than 2014, when crude prices first started to slump, showing that the impact of the two-year industry downturn still lingers.

    “I think we are climbing very, very slowly out of a very tough period for the industry,” Dudley said Tuesday. “Our focus now is to get our own engine moving again” while staying disciplined and being ready for more volatility, he said.

    While the London-based company is keeping a tight grip on spending and new projects, it is also seeking to grow again. It has finally settled billions of dollars of payments related to the 2010 Gulf of Mexico spill, which shrank the company by a third, Dudley said. BP has agreed to spend more than $4 billion on assets since the end of last year.

    The oil industry has become more optimistic since the agreement last month between the Organization of Petroleum Exporting Countries and 11 other producers to cut output with the aim of ending three years of oversupply. BP will be able to cover spending and dividends from its income at an average crude price of $55 a barrel this year, Dudley said, potentially bringing an end to two years of negative cash flow and rising debts.

    Brent crude, the global benchmark, traded at $56.52 a barrel in London as of 10:43 a.m. Prices will average $55.88 this year, according to the median of 46 analyst estimates compiled by Bloomberg.

    BP approved a $9 billion project to develop a deep-water field in the U.S. Gulf of Mexico and another to expand a liquefied natural gas export project in Indonesia last year. A $2.2 billion expansion of output in Abu Dhabi and a $916 million investment in fields in Mauritania and Senegal last month were followed by a A$1.785 billion acquisition of Woolworths Ltd.’s network of Australian gas stations.

    The company will continue to be “very selective on projects this year,” Dudley said. BP plans six major developments in 2017, he said.
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    Global ship insurers to resume near full coverage for Iran oil - officials

    Global shipping insurers have devised a way to ensure nearly full coverage for Iranian oil exports from next month after striking a deal to provide cover without involving U.S.-domiciled reinsurers, officials in Tokyo and London said.

    Restrictions on U.S. firms handling Iranian goods had greatly limited the number of reinsurers of cargoes, but the new arrangements - which essentially allow re-insurance of ships without the involvement of U.S. firms - should boost the number of eligible shipments.

    That will provide a boon to Iran, which is trying to raise oil exports after most sanctions were lifted last year, though banking restrictions that remain in place that could cap any major rise in exports.

    "There will be no U.S.-domiciled reinsurer participation on the 2017 IG reinsurance program," Andrew Bardot, secretary and executive officer at the International Group (IG) of P&I Clubs in London told Reuters on Tuesday.

    The new arrangements take effect on Feb. 20, he and other officials said.

    "This will substantially address the potential shortfall in reinsurance recoveries in the event of Iranian-related claims," Bardot said in an email.

    The sanctions were lifted after a landmark deal in 2015 with world powers that put constraints on Iran's nuclear activities.

    But some prior U.S. sanctions remain in place, which had meant U.S. reinsurers could not participate in covering Iranian cargoes.

    To plug the shortfall by U.S. insurers, the group of the world's top 13 ship insurers created so-called "fall-back" insurance last year, under which tankers carrying Iranian oil were insured up to around $830 million per ship.

    That was below normal coverage for a tanker and risk-averse shippers refrained from lifting cargoes. However, it still allowed Iran to more than double crude exports from as low as about 1 million barrels per day (bpd) at the height of the sanctions. Iran's exports were as high as 3 million bpd before the sanctions.

    From next month, normal coverage will apply up to $3.08 billion and compensation beyond that up to $7.8 billion for accidents and oil spills would be collected from shipping companies insured by P&I group members.


    Other obstacles to lifting Iranian oil remain though, including the incoming administration of President-elect Donald Trump, who has described the nuclear deal as a "disaster" and threatened to scrap it, which could mean new oil export sanctions.

    Additionally, owners may still not call on Iran because they could be banned from Saudi Arabian ports on subsequent voyages, a European supertanker broker said.

    Saudi Arabia has banned tankers if they have previously carried Iran crude due to tensions between the countries over the conflict in Yemen, the shipbroker said.

    There is a premium of between $4,000 to $12,000 per day for foreign-owned ships hired to transport Iranian crude compared with rates to transport crude from other Middle East countries, a Singapore-based supertanker broker said. That could also limit Iranian liftings.

    Banking restrictions under the remaining U.S. sanctions are also likely to stay in place for some time and constrain Iran's trading activities, said Jonathan Hare, general counsel with Norwegian P&I club Skuld.

    "I think the main obstacle for everyone remains the banking system," he said.

    The government of Japan, one of the biggest buyers of Iranian crude, is working to extend a sovereign insurance scheme it started in 2012 to continue Iranian oil imports in the year starting in April, to cover any shortfalls from the P&I insurance, a senior government official told Reuters.

    Iran has complied with a deadline under the 2015 accords to remove nuclear equipment called centrifuges from one of its atomic sites, the International Atomic Energy Agency said on Monday.
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    China's crude oil output will fall 7 percent by 2020 - government

    China's crude oil output is expected to drop by 7 percent by 2020 compared with the previous five-year plan as output from some of the nation's largest, but oldest, wells falls, while natural gas supplies will rocket by almost two-thirds.

    Under a plan covering the period 2016-2020 published by the National Development and Reform Commission (NDRC) on Tuesday, crude output will be around 200 million tonnes by 2020, equivalent to 4 million barrels per day (bpd). That would be down from 215 million tonnes in the 2011-2015 plan.

    The drop reflects falling output at aging, high-cost fields as producers scale back production in a lower oil price environment. For the first 11 months of 2016, production was down 6.9 percent at 182.91 million tonnes, just under 4 million bpd.

    Consultancy Wood Mackenzie, however, forecasts a decline of nearly 500,000 bpd in Chinese crude oil production over the next four years at 3.5 million to 3.6 million bpd.

    "We don't see any large greenfield oil developments coming stream by 2020. As such, given the maturity and age of the main oil fields ... we forecast an ongoing decline in output," said Angus Rodger, Woodmac's upstream research director.

    Meanwhile, the NDRC said natural gas supply would be 220 billion cubic meters (bcm) by 2020, compared with 134 bcm under the 2012-2015 five-year plan as Beijing prioritizes the sector's growth.

    The government is maintaining an earlier target for shale gas output at 30 bcm, or 13.6 percent of the total.

    The government has said it will prioritize the expansion of liquefied natural gas terminals and will "appropriately" add new capacity. Annual pipeline capacity to carry gas will exceed 400 bcm, the NDRC said on Tuesday.

    In the oil sector, pipeline capacity will be around 650 million tonnes for crude - equivalent to 13.1 million barrels per day - and 300 million tonnes for refined products by 2020.

    China will also further improve fuel quality to cut emissions, aiming to roll out the "national six" grade for gasoline and diesel from 2019, after implementing "national five" specifications from this year.

    "National six" has the same cap on sulfur content as "National five" but tighter limits on other pollutants such as olefins and aromatics.

    Overall refining capacity will be capped but state-of-art new capacities will be "appropriately" expanded, as the world's second-largest oil consumer is already facing a supply glut, the report said.
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    Algeria force majeure hurting LNG deliveries to southern France -GRTgaz

    French gas grid operator GRTgaz said a force majeure situation in Algeria and tensions in the global gas market were impacting deliveries of liquefied natural gas (LNG) to southern France.

    Deliveries to the Fos-sur-Mer terminal were at about 40 gigawatt-hour (GWh) per day, compared with almost double that at 70 GWh per day needed for this period of the year when there is increased demand for power and heating, GRTgaz chief executive Thierry Trouve told journalists on Tuesday.

    Trouve said there was enormous demand for gas for power generation in southern France, due to the cold weather, at about 85 GWh per day.

    He added that tensions in the world gas market, with expected U.S. gas production going to Asia instead of Europe, were also exacerbating the problem.

    "We are doing everything to have more LNG deliveries by end
    February," Trouve said.

    Read more:
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    Pakistan LNG soon to name 240-cargo tender winners

    The state-owned Pakistan LNG is set to open financial bids for its two tenders seeking the supply of 240 cargoes of liquefied natural gas on January 19.

    The contracts for the successful bidders will be awarded on January 31, Pakistan’s Business Recorder reported, citing sources in the Ministry of Petroleum and Natural Resources.

    In the first tender issued in November 2016, Pakistan LNG sought the delivery of 60 cargoes for a period of five years and in its second tender the company sought 180 cargoes over a period of 15 years. According to the report, a total of 14 bids were received.

    In addition, it was reported that the company is looking to issue new tenders for more LNG supplies as soon as the current process is finalized.

    The start of the deliveries is set for July 2017, with a nominal cargo capacity set at 140,000-cbm, according to the initial documents.

    Cargoes will be delivered to Pakistan’s second LNG terminal at Port Qasim, Karachi being developed by Pakistan GasPort Limited that has chartered BW’s 170,000-cbm FSRU for the project under a 15-year deal signed in August.

    The vessel, named BW Integrity, is currently under construction at the Samsung Heavy Industries shipyard in Geoje, South Korea.
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    Pertamina eyes US LPG to replace some Mid East supply

    Indonesia's state-owned oil and gas company Pertamina is eyeing more LPG imports from the US to replace part of its Middle Eastern supply as US cargoes are currently cheaper, a senior company official said Tuesday.

    "Currently more than 90% of LPG supply comes from the Middle East and the rest from the spot market. We would like to import more from the US into Indonesia. We expect to get a more competitive price from US," said the senior vice president of Pertamina's integrated supply chain, Daniel Purba, on the sidelines of the LPG Indonesia 2017 conference in Jakarta.

    The expansion of the Panama Canal enables US LPG cargoes to reach the Asia Pacific, including Indonesia, faster than the Cape of Good Hope passage.

    With that, Pertamina expects its LPG imports from the Persian Gulf to decline, although it estimates overall US LPG imports will remain lower than Middle Eastern supplies, according to Purba.

    US cargoes currently make up 3% of Pertamina's overall imports.

    The biggest domestic LPG supply currently comes from Bontang in East Kalimantan.

    Pertamina also expects Indonesia to get LPG supply from undeveloped LNG projects, according to Bambang.

    Inpex Masela is the biggest LNG project that is expected to come on stream around 2021. BP's third train at Tangguh is due to come on stream in 2019.

    "Pertamina and the government are studying other energy resources so it can cut back on LPG imports in the future. We are studying brown coal," Bambang said.
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    JKM monthly: Price for Feb delivery jumps 21% on month to $9.488/MMBtu

    The Platts JKM for February delivery averaged $9.488/MMBtu over December 16 to January 13, jumping 20.8% from a month earlier, on limited supply and demand from some end-users as well as traders and portfolio players.

    The shutdown at the Chevron-operated Gorgon LNG Train 1, on Barrow Island in Western Australia, from late November to early January provided support, with cargoes for February delivery heard to be limited.

    As a result, supply tenders concluded at strong levels.

    Chinese CNOOC's sell tender offered one DES cargo each for February and March, which were heard awarded to Trafigura and Glencore, respectively, market sources said.

    The February cargo was heard to be awarded at $9.65/MBtu to $9.70/MMBtu while the March cargo was awarded at $8.45/MMBtu to $8.5/MMBtu, according to the sources.

    Both cargoes were heard to be re-marketed from Shell's long-term contracted LNG supply.

    Demand from India also emerged with Indian Oil Corp., Bharat Petroleum Corp Ltd. and Gail all issuing tenders.

    Gail was looking for one cargo a month for January to March delivery, but in the end only fulfilled its February requirement between the high-$9s/MMBtu and the low-$10s/MMBtu, sources said.

    After ending 2016 at $9.75/MMBtu, the highest since January 9, 2015, the Platts JKM for February delivery came under a little pressure amid emerging new supply.

    Gorgon Train 1 resumed production on January 2 while Angola LNG, which went into a controlled shutdown in late December, resumed offering cargoes via tenders.

    More supply tenders also hit the market, with Abu Dhabi's Adgas launching on January 9 a sell tender for a single FOB cargo for mid-February loading.

    Other tenders included Australia Pacific LNG offering three DES cargoes for late Q2 to early Q3 delivery, and GLNG issuing a bilateral tender for a February cargo.


    In the US, front-month NYMEX Henry Hub gas futures over December 16 to January 13 averaged $3.443/MMBtu, rising 60.7% year on year, and up 5.1% month on month.

    The Platts FOB Qinhuangdao coal price over the same period averaged at $4.014/MMBtu, surging 61% year on year.

    Platts FOB Singapore 180 CST fuel oil over December 16 to January 13 averaged 10.7% higher month on month and shot up 110.5% year on year at $8.619/MMBtu.
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    Russia's Gazprom says exports to Germany hit record high in 2016

    Russian gas producer Gazprom said on Monday its gas exports to Germany hit a record high last year and have surged since the start of this year.

    It said it exported 49.8 billion cubic metres (bcm) of gas to Germany in 2016, surpassing a record 45.3 bcm in 2015.

    Germany is the biggest overseas market for state-run Gazprom, which currently supplies a third of Europe's gas.

    That has raised concern in Europe that the region is too reliant on Russian gas, and those concerns have risen since pricing spats between Moscow and Kiev disrupted supplies in the wake of Russia's seizure of Crimea from Ukraine in March 2014.

    Low oil prices have help spur demand for Russian gas as the prices of Gazprom's long-term gas contracts are pegged to the price of oil with a six- to nine-month time lag.

    The company said earlier this month its exports to countries outside the former Soviet Union had reached record highs since the start of 2017 due to cold weather in Europe.

    On Monday it said its exports to Europe and Turkey increased by 25.5 percent in the first half of this month from a year earlier. Exports to Germany jumped 21 percent during the period.

    Attached Files
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    Noble Energy to buy Clayton Williams Energy for $2.7 billion

    Noble Energy to buy Clayton Williams Energy for $2.7 billion

    Oil producer Noble Energy Inc  said on Monday it would buy smaller rival Clayton Williams Energy Inc  for about $2.7 billion in a cash-and-stock deal to enhance its presence in the Permian Basin, the top U.S. oil field.

    Noble Energy said the deal includes 71,000 net acres in the core of the Southern Delaware Basin in Reeves and Ward counties in Texas, which are a part of the larger Permian Basin.

    The Permian basin has seen a slew of land acquisitions as producers scramble to gain or expand positions in the oil field, where drilling costs are low, in preparation for recovering oil prices.

    Under the deal's terms, Clayton Williams shareholders would receive 2.7874 shares of Noble Energy common stock and $34.75 in cash for each share of common stock held.

    The value of the transaction, based on Noble Energy's closing stock price as of Jan. 13, is about $139 per Clayton Williams Energy share or $3.2 billion in aggregate, including the assumption of about $500 million in net debt, the company said.

    Houston, Texas-based Noble Energy said its total capital budget for 2017 is now estimated at $2.1 billion-$2.5 billion and sees sales volumes between 410,000-420,000 barrels of oil equivalent per day (boepd)

    Noble Energy said it would fund the cash portion of the acquisition through a draw on its revolving credit facility, which stood untouched at $4 billion at the end of 2016, and expects to raise above $1 billion in 2017 through ongoing portfolio management and optimization.

    Noble Energy said the number of rigs on the new acreage is planned to accelerate to three by the end of this year, from one currently.

    Petrie Partners Securities LLC acted as financial adviser to Noble Energy, while Skadden, Arps, Slate, Meagher & Flom, LLP was the company's legal adviser. Evercore and Goldman, Sachs & Co were financial advisers to Clayton Williams Energy, and Latham & Watkins LLP acted as its legal adviser.

    The deal is expected to close in the second quarter of 2017.

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    Progressing up the mountain of LNG

    The LNG market is in the earlier stages of an unprecedented ramp up in supply. Global liquefaction capacity is set to rise by more than 50% by 2022. 205 bcma (149 mtpa) of new liquefaction capacity is past the Financial Investment Division (FID) and is under construction or has come onstream since 2015.

    We published an article in early 2016 setting out the characteristics of this mountain of new LNG supply. As we enter 2017, we are only approximately 30% up the mountain. There remains over 145 bcma (101 mtpa) of capacity still to be commissioned across 2017-22. 130 bcma (96 mpta), almost 90% of the remaining volumes, will come online over the next three years alone.  In today’s article we return for a status check.

    Mountain characteristics

    New LNG supply is dominated by two sources:

    Australian LNG liquefaction capacity which reached FID between 2009-12 and is due to come online between 2015-17.
    US LNG export capacity which reached FID between 2012-15 and is due online 2017-20 (in addition to Sabine Pass trains 1 & 2 which were commissioned in 2016).

    Chart 1 shows an updated view of the mountain of supply volume breakdown we showed last year.

    Image title

    Chart 1: 2015-22 Mountain of new LNG supply updated

    Source: Timera Energy

    The 60 bcma (44 mtpa) of capacity delivered to date across 2015-16 has included:

    The three Queensland projects backed by coal bed methane (Curtis Island, Gladstone)
    Sabine Pass Trains 1 & 2
    Indonesia’s Donggi-Senoro plant
    Trains 1 & 2 of the giant West Australian Gorgon project

    The capacity volumes shown in Chart 1 are based on target dates for first cargoes. However the full impact of new supply from the projects commissioned to date has been diluted by project ramp up times and delays.

    The calm before the storm

    As observed in the last LNG supply growth surge in the late 2000s, there is a lag between anticipation and reality. New LNG trains typically have a commissioning ramp up time of 6 to 9 months from first cargo to full capacity. On top of this there have been a number of delays and disruptions to the ramp up of new LNG trains.

    Chevron’s Gorgon terminal has suffered perhaps the most prominent issues, with a series of unscheduled stoppages for maintenance disrupting supply from both Train 1 and 2. These issues, in addition to cold weather in China and nuclear maintenance in South Korea contributed to firming Asian spot LNG prices in Q4 2016. It should be noted however that despite these setbacks, Australian LNG exports for November 2016 were up 44% YoY.

    The remainder of the climb

    The impact of new supply is set to become more pronounced as 2017 progresses. Ramp up and teething issues for existing terminals are likely to recede. In addition the next wave of new projects are due to come online including the Wheatstone, Itchys and Prelude projects in Australia, the 1st train of the Russian Yamal terminal and Sabine Pass Train 3.

    The issue confronting the LNG market from 2017 is that the pace of growth in supply in the next three years is likely to significantly outstrip demand growth. There are likely to be two important implications of this:

    Increasing European imports: LNG cargoes that are surplus to Asian (& emerging market) requirements are likely to end up in Europe, given liquid hubs, flexible contractual structures and an ability for the power sector to absorb gas.
    Further price convergence: Surplus LNG is likely to put downwards pressure on spot price differentials between Asia, Europe and the US. This could see the trans-Atlantic spread between NBP/TTF and Henry Hub compressing to non-sunk variable costs below 1 $/mmbtu.

    Beyond 2017 all eyes shift to the US. There is a committed delivery pipeline of more than 80 bcma of US export capacity, most of which is due to come online in 2018-19. The US is also the most likely next source of new liquefaction FIDs to supply the LNG market in the 2020s. In addition to possible FID’s for Sabine Pass Train 6 and Corpus Christi Train 3, the Golden Pass project, awaiting non-FTA approval could add a further 20 bcma of export capacity if it proceeds.

    Perhaps most importantly, the growing supply glut is set to see a substantial increase in the role of Henry Hub in driving the level of global gas prices as LNG trading arbitrage narrows spreads between key regional price benchmarks.

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    Total sees average gas price realisation up in Q4, OMV price slips

    France's Total said Monday its average global gas price realisation in the fourth quarter was $3.89/MMBtu, up from $3.45/MMBtu in the previous quarter as prices continued to recover from their multi-year lows earlier in 2016.

    While Total saw its Q4 realised price rise, fellow European oil and gas company, Austria's OMV, failed to increase its average realised price. In Q4, OMV saw its average price drop to Eur12.10/MWh -- the equivalent of around $3.76/MMBtu using current exchange rates -- down from Eur13.10/MWh in the previous quarter.

    Both companies' realised prices are down on Q4 2015, however, Total by 12.6% year-on-year and OMV by 17.6%.

    OMV also said its sales volumes in Q4 rose to 29.8 TWh from 28.7 TWh in Q4 2015 and from 22.2 TWh the previous quarter.

    Total's quarter-on-quarter rise in the realised gas price in Q4 came as global oil and gas prices were boosted from the early-year lows.

    Benchmark Brent crude averaged $49.30/b in Q4 compared with an average of just $33.90/b in Q1.

    US gas prices have also rallied, with the Henry Hub price currently running at around $3.40/MMBtu.

    European prices are currently higher still, with the Dutch TTF day-ahead price trading at the equivalent of $6.62/MMBtu, according to Platts' assessments.

    The US Energy Information Administration last week raised its forecast for first-quarter 2017 Henry Hub gas spot prices to $3.65/MMBtu, 29 cents above its December estimate.

    The agency, in its January Short-Term Energy Outlook, projected Henry Hub gas prices would average $3.55/MMBtu across all of calendar-year 2017, up from an average of $2.51/MMBtu in 2016.

    Those European majors with the most exposure to the US gas market remain the hardest hit as prices remain low, driven by the well-supplied market in the continued shale gas boom.

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    Strong Asian demand props up cash differentials for Mideast medium heavy sour crude

    Strong demand from Asian refiners amid healthy distillate cracks and expected implementations of OPEC production cuts have propped up cash differentials of Middle Eastern medium heavy sour crude for March loading, traders said late last week.

    Spot cargoes of March-loading Qatar Marine crude were heard sold at premiums ranging between 10 cents/b and 20 cents/b to the grade's official selling price, traders said. They added that all spot cargoes for March loading could have been sold.

    "All [Qatar Marine] cargoes [for March loading] are gone," said a North Asian crude trader.

    Apart from Qatar Marine, March-loading Upper Zakum crude cargoes were heard to have changed hands at premiums of between 20 cents/b and 25 cents/b to the grade's OSP.

    Inpex and ExxonMobil were heard to have sold a cargo each to Shell, while some cargoes could have been placed to Japanese end-users, traders said.

    Two March-loading Dubai crude cargoes were also heard to have been placed at premiums of around 20 cents/b to Dubai crude, traders said. Further information on the trades remained unclear.

    Traders indicated that strong cracks for heavy and middle distillates and expected cuts to supply are supporting sentiment for the medium, heavy grades.

    Second-month 180 CST and 380 CST high sulfur fuel oil to Dubai crude swap cracks averaged minus $2.15/b and minus $3.02/b respectively in January to date, the highest since July and June 2012 when they averaged at minus $1.83/b and minus $2.25/b respectively, S&P Global Platts data showed.

    Second-month gasoil and jet fuel to Dubai crude swap cracks, meanwhile, averaged $11.75/b and $12.48/b respectively in January to date, hovering close to the 11-month highs of $12.37/b and $13.02/b in October respectively, the data showed.

    Meanwhile, traders continue to await the issuance of Qatar Petroleum's Al-Shaheen crude tender. Starting from January, QP would undertake all of Qatar's crude and condensate sales process previously conducted by state-owned petroleum and petrochemicals marketing company Tasweeq, following the successful integration of the trading arm into the national oil company, QP said in an email notice earlier this month.

    Last month, Tasweeq was heard to have sold five cargoes of Al-Shaheen crude for loading over February 1-2, February 3-4, February 12-13, February 25-26 and February 26-27 at discounts of around 20-30 cents/b to Platts front-month Dubai assessments, traders said.

    Traders are also awaiting the outcome of Bahrain Petroleum Co.'s tender offering March-loading Banoco Arab Medium which closed on Friday. Traders indicated that there were no tenders from Bapco for February loading Banoco Arab Medium last month because of additional demand from term buyers.

    It was last heard to have sold a January loading cargo of the crude, via tender, to a western trading house at a premium of around 5 cents/b to Saudi Aramco's OSP for Arab Medium.

    Meanwhile, traders said they expected Middle Eastern light sour crude grades to remain under pressure for March loading.

    "[Because of the narrow EFS] arbitrage cargoes [coming to Asia will] mostly [affect demand for] the lighter grades ... Middle East light sour grades are under pressure," said an East Asian crude trader.

    Second-month Brent/Dubai Exchange of Futures for Swaps -- which enables holders of ICE Brent futures to exchange a Brent futures position for a Dubai crude swap -- was assessed at $1.65/b on Friday.

    The second-month EFS averaged $1.81/b in January to date, compared with $2.17/b in December, Platts data showed.

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    Icy conditions, non-OPEC cut could hit Q1 Far East Russian crude exports

    A double whammy of icy conditions in the oil fields in the Russian Far East and the major non-OPEC producer's latest promise to cut production could lead to a decline in Sokol and Sakhalin Blend crude exports in the first quarter, market sources said Monday.

    Heading into the second half of the March trading cycle, clarity over the loading dates for light sweet Far East Russian grades was still lacking and market participants continued to await the release of full loading details for the month.

    The general expectation, however, was that exports of the Far East Russian grades for Q1 may drop from the previous quarter as production and logistics are hampered by extreme cold winter conditions, traders said.

    "Sokol's final [March-loading] program will only be [confirmed by] next Friday ... it's much later than usual," said a source with direct knowledge of the light sweet crude's monthly exports, indicating that monthly loading details for the light sweet crude are typically announced within the first week of every calendar month.

    Abnormally cold weather has prevailed in January in many parts of Siberia, with weather services registering temperatures of around minus 50 C last week, some 15 C below normal.

    Meanwhile, the waters around the DeKastri terminal near Sakhalin Island, as of Sunday, were at sub-zero temperatures, with at least 40% of the sea surface in that area covered in ice, the Hydro-meteorological Centre of Russia website showed Monday.

    "Suppliers selling their [Sokol and Sakhalin Blend] cargoes on a CFR delivered basis need to prepare ice-breaking vessels," a trader with a Japanese refining company said previously.

    "[Production and] loading operations can take longer in frozen environment as well ... there are lots of planning to do," the trader added. Furthermore, "Russia has agreed to cut its output as well," said a North Asian crude trader. "It seems the [very cold] weather [conditions] would naturally help them to implement that [production cut agreement]," he added.

    Late last year, non-OPEC producers, led by Russia, had agreed to cut output by 558,000 b/d in the first half of 2017, with Russia set to cut 300,000 b/d. Russia is one of five countries on a monitoring committee overseeing the implementation of the deal.

    Russia has started reducing its crude output as part of a production-cut deal with OPEC, with the fall in the first 10 days of the year higher than initially expected, energy minister Alexander Novak said last week. FEB, MAR EXPORTS SEEN LOWER VS JAN

    The last Far East Russian loading program seen by S&P Global Platts indicated that a total of 11 cargoes of Sokol crude would be exported in February, less than around 12-13 cargoes expected to load in January. ExxonMobil holds two cargoes for loading around February 8 and February 19, while Rosneft holds four cargoes for February 5, 9, 16 and 24. Marubeni, Itochu and Japex, members of the Tokyo-based Sakhalin Oil and Gas Development Co., also have one cargo each for loading in February.

    India's ONGC Videsh Ltd. sold two cargoes for loading over February 9-15 and February 21-27 via spot tenders in the previous trading cycle.

    Meanwhile, Sakhalin Energy was said to have sold a total of four 730,000-barrel cargo of Sakhalin Blend crude for loading over February 1-7, 9-15, 14-20 and 19-25 to South Korean and Japanese buyers, compared to a total of six cargoes sold for loading in January.

    "Probably the long delay [in the release of March Sokol and Sakhalin program] means the producers are planning some kind of [output] cut, whether it be due to Russia's policy or cold weather or both ... we might see rather low export volume for March," said another North Asian crude trader. Still, traders also pointed out that any Russian output reduction plans would be mostly geared toward the crude grades produced in the country's more productive northern and western regions.

    "[Sakhalin] output is relatively smaller than other regions [in Russia] ... we still might see a cargo or two less [for Sokol and Sakhalin Blend in March compared to February] but the bulk of the Russian production cut [if any] would be in the Siberia and Ural regions," said the first North Asian crude trader.
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    South Korean LNG imports boosted by winter demand

    South Korea, the world’s second-largest buyer of LNG, boosted its imports of the chilled fuel by 13.5 percent in December year-on-year, according to the customs data.

    The country imported 4.03 million mt of LNG in December, as compared to 3.55 million mt in the corresponding month the year before.

    It is expected that the demand for LNG for power generation will continue to rise due to the colder-than-usual temperatures in the midst of the heating season.

    South Korea paid about US$1.55 billion for December imports, 3.1 percent down year-on-year, the data showed.

    The world’s largest LNG exporter, Qatar, remained the dominant source of South Korean imports with 1.3 million mt of the chilled fuel imported from Qatar in December.

    Australia was replaced as the second largest exporter to South Korea by Malaysia that exported 653,332 mt, while imports from Australia reached 547,049 mt during the month.

    The remaining volumes imported into South Korea were sourced from Oman, Indonesia, Russia, Nigeria, Brunei, Papua New Guinea, United Kingdom, Norway, and the United States.

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    Saudi energy minister: unlikely to extend producers' agreement

    OPEC and non-OPEC producers are unlikely to extend their agreement to cut oil output beyond six months, because of the level of compliance with the deal and the rebalancing of the market, Saudi Arabian Energy Minister Khalid al-Falih said on Monday.

    However Falih, speaking to reporters on the sidelines of an industry event in Abu Dhabi, also said producers would reassess the situation and extend the agreement if necessary.

    "We don't think it's necessary given the level of compliance...and given the expectations of demand," he said.

    "My expectations (are)...that the rebalancing that started slowly in 2016 will have its full impact by the first half."

    Falih said: "Based on my judgment today it's unlikely that we will need to continue (the agreement) - demand will pick up in the summer and we want to make sure that the market is supplied well. We don't want to create a shortage or squeeze.

    "The extension will only happen if there is a need."

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    LNG Limited says it can’t explain rise in its share price

    LNG export terminal developer, LNG Limited on Monday issued a comment after it had been asked by the Australian Stock Exchange on the reasons behind a 23 percent rise in the company’s share price.

    LNG Limited securities rose from a closing price of A$0.70 on January 10 to a high of $0.86 on January 13.

    There was also a significant increase in the volume of the company’s securities traded in the past few trading days, the ASX noted in a letter dated January 13 asking LNG Limited whether the company is aware of any information that had not been announced to the market.

    “The company is not aware of any information concerning it that has not been announced to the market which, if known, could explain the recent trading in its securities,” LNG Limited said in its response.

    This is not the first time that the ASX is asking LNG Limited to explain reasons behind the rise in the company’s shares price.

    Back in June 2016, LNG Limited declined media reports of a possible takeover of the company, that was reported as a reason for a surge in the company’s shares price. The rumors came following more than a 50 percent rise in company’s shares.

    LNG Limited’s shares dropped 5 percent from Friday, closing at $o.81 on Monday.

    Perth-based LNG export player has three LNG terminal projects under development in the United States, Canada, and Australia with a combined production capacity of nearly 20 mtpa, according to its website.

    LNG Limited’s portfolio includes the Magnolia LNG export terminal in Louisiana, U.S., Bear Head LNG in Nova Scotia, Canada, and Fisherman’s Landing project in Gladstone, Australia.
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    Drilling rig count falls for first time since September

    Activity in the oil patch took its biggest step backward since June with seven drilling rigs removed from oil fields throughout the U.S.

    The overall rig count fell this past week for the first time since September, although the resilient Permian Basin in West Texas still saw one rig added. The Permian now accounts for more than 51 percent of all the nation’s active rigs drilling for oil, according to weekly data collected by the Baker Hughes oilfield services firm.

    The rare recent fall in the rig count could partly prove seasonal with the end of the holidays and a recent freeze that swept across most of the country, including much of Texas.

    The overall rig count saw a net loss of six rigs, because the number of rigs pursuing natural gas jumped by one.

    Texas saw a net loss of two rigs with one each lost in the East Texas’ Barnett Shale and in the Panhandle’s Granite Wash Basin. The only shale area to lose more than one rigs was Colorado’s DJ-Niobrara basin, which fell by two rigs.

    The total rig count is now at 659 rigs, up from an all-time low of 404 rigs in May, according to Baker Hughes. Of the total tally, 522 of them are primarily drilling for oil.

    After the Permian, the next most active area is Texas’ Eagle Ford shale with just 47 rigs.

    The oil rig count is down 68 percent from its peak of 1,609 in October 2014, before oil prices began plummeting. The price of U.S. oil hit a low $26.21 on Feb. 11 before beginning to rebound. The U.S. benchmark for oil prices was hovering below $53 a barrel early Friday afternoon.

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    As OPEC Acts on New Year’s Resolution, U.S. Shale Pumps Away

    U.S. shale is getting in the way of a New Year’s resolution by OPEC to cut production and boost the market.

    Producers and merchants increased their bets on lower West Texas Intermediate crude prices to the highest level since 2007 as futures held above $50 a barrel. The increase in hedging against a price drop signals a comeback in U.S. shale output, just as OPEC members and other producers seek to reduce supply.

    The Organization of Petroleum Exporting Countries reached an agreement in November to cut production by 1.2 million barrels a day for six months starting in January, and were joined by 11 non-OPEC nations in an effort to reduce a global glut. The Energy Information Administration last week raised its forecast for 2017 U.S. crude production. A Barclays Plc survey showed North American oil and gas explorers will spend 27 percent more this year.

    “It may not all be physical above-the-ground inventory that is being hedged, but it may be a portion of 2017 and 2018 planned production,” Tim Evans, an energy analyst at Citi Futures Perspective in New York, said Friday. “Certainly, if there was strong conviction that oil prices are heading for $70, then producers would be less inclined to sell at current levels.”

    Producers and merchants increased their short positions, or bets on lower prices, to 675,968 futures and options in the week ended Jan. 10, U.S. Commodity Futures Trading Commission data show. WTI fell 2.9 percent to $50.82 a barrel during the report week, and added 0.4 percent to $52.56 at 12:29 p.m. Singapore time on Monday.

    Making a Comeback

    The U.S. oil rig count increased 10 out of the past 11 weeks, according to Baker Hughes Inc. data. The EIA also reported that U.S. crude output rose to the highest level since April in the week ended January 6, while crude stockpiles surged by the most since November.

    Saudi Arabia, the world’s biggest oil exporter, cut output to less than 10 million barrels a day, below its targeted level, Energy Minister Khalid al-Falih, said Thursday. Algeria will cut its oil output by more than it agreed, while Iraq hopes to meet its full cut by the end of the month.

    Hedge funds held mostly steady during the period, CFTC data show. Money managers’ net-long position rose 0.5 percent to 305,909 while long and short positions both fell.

    In fuel markets, net-bullish bets on gasoline rose 3.3 percent to 63,443 contracts, the highest since July 2014, as futures fell 4.6 percent. Money managers cut net-bullish wagers on ultra low sulfur diesel by 17 percent to 32,481 contracts, as futures slipped 3.9 percent.

    Deal Compliance

    The group will adopt compliance mechanisms at a meeting in Vienna on Jan. 22, OPEC Secretary-General Mohammad Barkindo said in a Bloomberg Television interview Friday. Members of OPEC will meet in May in Vienna to assess the market and decide whether the group, as well as non-OPEC producers, need to extend the agreement to curb production, Barkindo said.

    Investors are looking at “compliance and the response of what shale is going to be,” Michael D. Cohen, the head of energy commodities research at Barclays Capital in New York, said Friday.

    Higher production elsewhere will complicate OPEC’s task. U.S. oil output will grow by 110,000 barrels a day this year and will be higher on an annual basis by April, the EIA said in its Short-Term Energy Outlook Jan. 10. One producer exempt from the deal, Libya, increased output to 700,000 barrels a day, a National Oil Corp. official said earlier this month.

    Producers are “protecting themselves,” Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors LLC, said Friday. “The production increase from the U.S. coupled with Libya’s increases are really going to hit the market going forward.”
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    Oil’s Painful Cost-Squeeze Generates Output Dividend for Norway

    Cost cuts are painful, but for Norway’s oil industry making every penny count has also yielded a surprising production windfall.

    Thanks to improvements from cheaper, faster drilling to greater regularity in the operation of production platforms, producers pumped 85,000 barrels a day more crude than expected during the past two years, or 6 percent above forecast, according to industry regulator, the Norwegian Petroleum Directorate. And it gets better: this week the NPD raised its output forecast for the 2017 to 2020 period by 8 percent, an average of 110,000 barrels a day.

    That’s the same as 2015 production from the country’s third-biggest field -- the Snorre deposit in the North Sea -- and almost as much as the iconic Ekofisk field, the discovery that kicked off Norway’s oil age.

    “It’s impressive,” Nordea AB’s Oslo-based oil analyst Thina Saltvedt said in a phone interview Friday. “When the crisis came, Norway was efficient in doing something about it.”

    As investment in Norway’s oil industry continues to decline over the next two years, lower costs and greater efficiency are providing the silver lining in a downturn that’s been more painful for western Europe’s biggest producer than the financial crisis. While cost estimates for seven large projects have been cut in half over the past two years and it’s been clear that efficiency gains were helping producers beat output forecasts, the NPD’s annual five-year prognosis released on Thursday was the first to show the impact on current and medium-term production.

    “We’re starting to have faith that this is possible,” the NPD’s Director General Bente Nyland said in an interview in Stavanger following the presentation of the report. “The drilling campaigns on producing fields show that there’s a great focus among the companies to maintain production, and it’s paying off. It’s all about costs.”

    Statoil ASA, the state-controlled producer that operates about 70 percent of Norway’s oil and gas output, has reduced the time it spends on one production well by 40 percent, cutting the cost by 30 percent, spokesman Ola Anders Skauby said. Last year, the company drilled 119 wells after planning for 113, and in 2015, 117 wells after planning for 95, he said.

    “The improvement measures we’ve set in motion have yielded results,” Skauby said in an e-mail. “We’re planning better, working more efficiently and we’ve simplified the well designs.”
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    Tanker backlog offshore Houston



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    UK's Rough gas storage withdrawal works impact reduced: CSL

    The volume impact of well maintenance at the UK's only long-range natural gas storage facility, Rough, has been reduced to allow for higher withdrawal volumes for the rest of the month, owner and operator Centrica Storage Ltd said in an updated REMIT message Friday.

    The well maintenance will now have an impact of 92 GWh/d (8.7 million cu m/d) compared to the 108 GWh/d volume impact estimated. The duration of the works was unchanged, due to end at the beginning of the February 1 gas day.

    This puts the maximum withdrawal capacity from the Rough reservoir under current operational conditions at 256 GWh/d. Withdrawals Friday morning were close to maximum capacity at 23 million cu m/d.

    Rough stocks began Wednesday's gas day at 1.11 Bcm, sharply down from the 2.64 Bcm at the same point last year and the 2.90 Bcm five-year average, National Grid data showed.

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    India's 2016 Iran oil imports hit record high - trade

    India's annual oil imports from Iran surged to a record high in 2016 as some refiners resumed purchases after the lifting of sanctions against Tehran, according to ship tracking data and a report compiled by Thomson Reuters Oil Research and Forecasts.

    The sharp increase propelled Iran into fourth place among India's suppliers in 2016, up from seventh position in 2015. It used to be India's second-biggest supplier before sanctions.

    For the year, the world's third biggest oil consumer bought about 473,000 barrels per day (bpd) of oil from Iran to feed expanding refining capacity, up from 208,300 bpd in 2015, the data showed.

    In December, imports from Iran trebled from a year earlier to about 546,600 bpd.

    In 2015 refiners slowed purchases due to sanctions which choked payment routes, insurance and halved Iran's exports.

    Indian refiners Reliance Industries, Hindustan Petroleum, Bharat Petroleum and HPCL-Mittal Energy Ltd (HMEL) last year resumed imports from Tehran, attracted by the discount offered by Iran.

    "In most of 2016 there was a fight among Gulf producers to increase their market share and lifting of sanctions against Iran has intensified that fight," said Ehsan ul Haq, senior analyst at London-based consultancy KBC Energy Economics.

    In April-December, the first nine months of this fiscal year, Iranian supplies to India averaged a record 530,300 bpd, up from about 400,000 bpd before sanctions tightened against Tehran.

    India's 2016 Iranian oil imports were the highest in at least six years, according to the Reuters data.

    Government data going back over a longer period shows the average was the highest since the 2001-02 fiscal year.

    Overall, India imported 4.3 million bpd oil in 2016, up 7.4 percent from the previous year.


    Rising imports from Iran and Iraq lifted the Middle Eastern share in India's crude diet to 64 percent in 2016, reversing a declines in recent years, partly due to rising prices for Atlantic Basin oil tied to Brent.

    The average premium for Brent jumped against Dubai crude DUB-EFS-1M to more than $3 a barrel in 2016 from around $1.80 in 2015.

    "In 2016 Iran ramped up its output to regain market share while Iraq segregated its production into Basra Light and Heavy to attract customers. Basra Heavy was sold at a discount, making it more attractive than rival grades," said Haq.

    Iran's share of Indian oil imports surged to 11 percent in 2016 from 5 percent in 2015.

    Saudi Arabia remained the top supplier to India last year followed by Iraq and Venezuela.

    Imports from Latin America declined for a second year, with its share of imports shrinking to about 16 percent from 18 percent, while Africa's share fell to about 15 percent from a fifth.

    "Low oil prices brought down production in Latin America while Nigerian barrels were impacted by violence in the Niger Delta. Also falling U.S. oil output impacted trade flows, with some Latin American and African oil finding a place in the U.S.," Haq said.
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    US Gulf Coast refiners look to Algeria to feed FCCs: trade

    Sluggish trade in Houston vacuum gasoil barges this week turned attention of market players to substitute feedstock from Algeria, market sources said Thursday.

    Low-sulfur straight-run fuel oil at maximum 0.30% sulfur can be substituted for VGO in the gasoline-making fluid catalytic cracker at a refinery.

    The 335,000 b/d refinery complex at Skikda, Algeria, has been a major source of the low-sulfur feedstock for US use. Much US-produced straight run fuel oil reflects higher sulfur levels up to 3.00%, with that product used as coker feed. A small fraction of US-produced straight run fuel oil tests beneath 0.3% sulfur, market sources have said.

    "The Skikda is basically the poor man's VGO," a US feedstocks source said. "That should make further moves up in VGO less likely."

    The differential for straight run fuel oil at 0.30% sulfur ("low-sulfur straight run") rose 25 cents Thursday to cash February WTI plus $5.5/b. Low-sulfur VGO fell 25 cents to $8.25/b.

    Market players offered different ideas Thursday on the fuel oil-VGO breakdown this month at the maw of Gulf Coast FCCs. Brokers said the balance was tipping to fuel oil, and a trader at one US refiner said the balance was in favor of VGO. Another market source had the split as level among the feedstocks.

    But nearly all market sources agreed that US VGO trade has slowed. Only a handful of barge trades have been heard since last Friday.

    Phillips 66, Valero and BP were seeking transit Thursday for a combined 165,000 mt of low-sulfur straight run fuel oil from Algeria to Gulf Coast ports. Phillips 66 and Valero were understood by market sources to be acquiring feedstock for use at their Gulf Coast refineries, with BP expected to deliver on a supply contract.

    "Valero brings in the majority," a shipping source said.

    Separately, Litasco was seeking transit for 70,000 mt of VGO at an unspecified sulfur level from the Bahamas to the Gulf Coast aboard the British Merlin starting Thursday.

    A refinery restart confirmed Thursday should lend support to straight run fuel oil and VGO markets in the coming days. Exxon Mobil said it was restarting unspecified units at its plant in Beaumont, Texas. The FCC and diesel-focused hydrocracker went offline there earlier this week.

    The market for lower-sulfur feedstocks also found support in rising gasoline profits. The unleaded-87 crack against Gulf Coast-dominant Louisiana Light Sweet crude has risen three consecutive trading days and was up 3 cents/b Thursday to $13.77/b. It has topped $13.00/b for 15 consecutive trading days, something that has not happened since August 2015.
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    Alternative Energy

    German offshore wind capacity up 818 MW in 2016 to 4,108 MW

    German offshore wind developers connected 156 new wind turbines with a capacity of 818 MW to the national grid in 2016, bringing total grid-connected offshore wind capacity to 4,108 MW, German wind power lobby groups said Thursday.

    Last year lags behind 2015 when German offshore wind capacity tripled to 3.3 GW after grid link bottlenecks in the North Sea eased with eight North Sea projects finally coming online.

    For 2017, the lobby groups forecast 1,400 MW of new capacity followed by an average of 1,000 MW for 2018 and 2019 set to bring installed offshore capacity to around 7.5 GW by end-2019, ahead of the government's reduced 6.5 GW target for 2020.

    Germany is moving from set feed-in-tariffs to competitive auctions for all new renewable projects with the first offshore wind auction planned for April this year with some 1,500 MW of new projects tendered for the 2021 to 2025 period.

    According to the lobby groups, cost reductions for new offshore projects will also come to Germany after the latest tendering results in Denmark and the Netherlands have shown a remarkable drop in costs even if conditions in Germany are not exactly as in Denmark or the Netherlands.

    Expected grid bottlenecks, especially in the North Sea, will limit new capacity auctions for 2021/22 with the government's new long-term target set at 15 GW by 2030.

    Offshore wind turbines in German waters generated some 13 TWh of electricity in 2016, up 57% on year with TSOs estimating around 20 TWh of offshore wind this year based on average wind conditions, it said.
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    Canada's Strongbow's UK partner to explore for lithium in Cornwall

    British company Cornish Lithium said on Thursday it had reached a mineral rights agreement with Canada's Strongbow Exploration to explore for lithium in Cornwall, southwest England, stoking hopes for a British mining revival.

    Cornwall historically was a mining hub for metals such as tin and copper and the British government is keen to resurrect the industry as it seeks to bolster the economy against the shock of leaving the European Union.

    Cornish Lithium said new technology offered the potential to extract lithium from underground hot springs and to supply products to the rapidly growing battery market for electric cars and for power storage.

    "We believe the potential benefits of developing a lithium industry in Cornwall will be significant for the county and for the UK as a whole," Cornish Lithium CEO Jeremy Wrathall, a mining engineer who graduated from Camborne School of Mines in Cornwall. He also works at Investec bank.

    "It will be the largest exploration programme ever carried out in Cornwall's history," he told Reuters by telephone.

    Wrathall said it would be at least five years before lithium could be produced and he could not yet predict volumes.

    Cornish Lithium's next step is to secure funding. It foresees spending 5 million pounds ($6.16 million) in the exploration phase.

    The British government, which is also anxious to maintain a car industry in Britain, has defined lithium, most of which comes from South America, Australia and China, as a metal of strategic importance.

    Cornish Lithium's partner Strongbow Exploration last year bought South Crofty, which in 1998 was the last tin mine to close in Cornwall. Strongbow Exploration is seeking to bring back tin production there.

    Under Thursday's deal, Strongbow would get royalties from any lithium extracted by Cornish Lithium from brine springs in the area.

    Previous attempts to revive the South Crofty tin mine faltered because of challenging economics.

    But Strongbow CEO Richard Williams said the political and economic climate was very different and tin prices have risen to above $20,000 a tonne on the London Metal Exchange (LME).

    They are still below the peak of $33,600 recorded in 2011.

    "In a post-Brexit environment people and certainly the authorities are looking to generate new jobs," Williams said, adding that previous local opposition to a mining revival had disappeared.

    Crucially, the firm already has a mining licence and planning permission for a new processing facility, meaning that if all goes well with removing water from South Crofty, mining could resume around the end of the decade.

    When South Crofty was operating, it employed around 200 people and every mining job would be expected to create three to four indirect jobs, Williams said.
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    Saudi to launch $30-50 billion renewable energy program soon: minister

    Saudi energy minister Khalid al-Falih gestures during the 2017 budget news conference in Riyadh, Saudi Arabia December 22, 2016. REUTERS/Faisal Al Nasser

    Saudi Arabia will launch in coming weeks a renewable energy program that is expected to involve investment of between $30 billion and $50 billion by 2023, Saudi Energy Minister Khalid al-Falih said on Monday.

    Falih, speaking at an energy industry event in Abu Dhabi, said Riyadh would in the next few weeks start the first round of bidding for projects under the program, which would produce 10 gigawatts of power.

    In addition to that program, Riyadh is in the early stages of feasibility and design studies for its first two commercial nuclear reactors, which will total 2.8 gigawatts, he said.

    "There will be significant investment in nuclear energy," Falih said.

    Under an economic reform program launched last year, Saudi Arabia is seeking to use non-oil means to generate much of its additional future energy needs, to avoid running down oil resources which are required to generate foreign exchange through exports.

    Falih said Saudi Arabia was working on ways to connect its renewable energy projects with Yemen, Jordan and Egypt. "We will connect to Africa to exchange non-fossil sources of energy," he said, without elaborating.

    Its finances strained by low oil prices, Riyadh wants to conduct many of its future infrastructure projects through partnerships in which private companies from within the kingdom and abroad would bear much of the cost and risk.
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    Morocco: 170 MW of solar PV to be built at €0.042/kWh

    PV magazine previously reported that in November Morocco’s public agency for the renewable energies, Masen, signed a 20-year power purchase agreement (PPA) with Acwa Power for the development of 170 MW of solar PV plants.

    The new capacity regards the Noor PV 1 program, that consists of a 70 MW photovoltaic plant located in Ouarzazate, a 80 MW plant located in Laayoune and a 20 MW plant located in Boujdour.

    Masen told pv magazine that “the combined kilowatt hour (kWh) rate of the three projects making up the Noor PV 1 program (with an aggregate capacity of about 170 MW) is 0.46 dirhams (€0.042).”

    Morocco does not have a feed-in tariff yet.

    Saudi Arabia’s Acwa Power was selected after an international tender to develop, build and operate the three plants under a BOOT (Build, Operate, Own and Transfer) scheme.

    Masen has also confirmed that “the three PV plants should be transferred to Masen (not to the ONEE which is the national utility) at the end of the power purchase agreement.” This is 20 years after the date of commissioning the plants, which is expected in early 2018.

    Meanwhile, the PV sector is awaiting the results of the tender concerning the first phase of the Noor Midelt solar complex (‘Noor Midelt Phase 1 Projects’).

    Masen has previously told pv magazine that “this phase would cover two hybrid PV and CSP power plant projects with storage. The CSP gross capacity is expected to be between 150 MW and 190 MW for each project. The PV capacity is to be proposed by developers based on request for proposal (RfP) requirements.
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    China eyes ocean renewable energy development

    China's maritime authority has issued a five-year plan on developing ocean renewable energy, stipulating measures to develop relevant technology and utilize island renewable energy, state media reported.

    The plan, issued by the State Oceanic Administration, said efforts will be made to promote the application of marine renewable energy and make better use of island renewable energy by carrying out evaluations and developing technology and equipment.

    The plan also said basic research and innovations in key technology related to marine renewable energy will be encouraged.

    The foundation for ocean energy development will be reinforced, and resource assessment and building of public service platforms in the South China Sea and island regions will be the focus, according to the plan.

    The plan also mentioned opening-up and international cooperation measures in relevant fields.

    According to the plan, ocean renewable energy includes energy generated from sea tides, waves, temperature differences and biomass.
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    Solar can provide key grid services: California ISO report

    In a finding that could affect the outlook for renewables integration, solar facilities with smart inverter technology can provide key grid services at levels that are similar to, and in some cases better than, conventional power plants, according to a study by California's grid operator, the Department of Energy's National Renewable Energy Laboratory and First Solar.

    "These findings mean renewable energy in the [California Independent System Operator] footprint -- and beyond -- could be integrated into power grids at a much higher level and faster pace than once believed," Clyde Loutan, ISO's senior adviser for renewable energy integration, said Wednesday.

    The study comes amid concerns about how growing amounts of renewable generation will affect grid operations. The US has 25,000 MW of utility-scale photovoltaic capacity, plus 1,800 MW of concentrating solar, according to the report, titled "Using Renewables to Operate a Low-carbon Grid."

    California is at the forefront in the shifting generation mix, with renewable requirements that climb to 50% by 2030. The ISO has more than 9,000 MW of grid-connected solar and expects rooftop solar to grow from about 5,000 MW to 9,000 MW by 2020. Also, the grid operator estimates an extra 20,000 MW of renewables may be needed to meet the state's renewable portfolio standard.

    The ISO is being forced to curtail renewables during periods of growing oversupply, according to the report. The grid operator curtailed 2,000 MW of renewables on one day in April, it said.

    "With increased frequency of curtailment, more opportunity is created if the industry can tap into the controllability of the renewable resources, and thus expand the carbon-free resources for such services," the report said.

    Currently, utility-scale PV plants are typically not used by utilities or grid operators for electrical grid services, according to the report.

    In August, the ISO and NREL tested a 300-MW solar plant in California owned by First Solar. The test aimed to show the plant's ability to follow signals from the ISO at sunrise, midday and sunset and how it performed in three key areas: frequency control voltage control and ramping capacity.

    The data from the test show how with advanced power controls a photovoltaic plant can morph from being simply an intermittent energy resource to one also providing grid services ranging from spinning reserves, load following, voltage support, ramping, frequency response, variability smoothing and frequency regulation to power quality, the report said.

    The ISO said the most unexpected and significant benefit from the tests was the "agile" voltage support the solar plant offered when it produced power during the day and at night when it could absorb a small amount of power from the grid.

    The ISO, NREL and First Solar intend to explore economic and contractual incentives that could be used to encourage solar facilities to provide reliability services.

    The ISO and NREL are also considering conducting simultaneous tests of ancillary service controls by solar PV and wind generation to understand how working in tandem they can provide various combinations of ancillary services.
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    China sets goals for nuclear energy development in next five years

    The National Development and Reform Commission (NDRC) and the National Energy Administration have officially issued the 13th Five-Year Plan for energy development, according to a statement on the NDRC website.

    Throughout the next five years, over 30 million kilowatts of nuclear energy facilities will be under construction in China. By 2020, China will have 58 million kW of installed nuclear power.

    The country will continue developing nuclear power safely and efficiently while also speeding up the construction of nuclear projects in coastal regions, according to the development plan.

    The country will develop some major nuclear technology projects, start the construction of CAP1400 demonstration project and create a high temperature gas-cooled reactor demonstration project.

    The country will also launch some independent innovation projects, including smart small-and-medium sized reactors, commercial fast reactors and 600,000 kW high temperature gas-cooled reactors.

    Compared with other types of energy, safety is the top priority for nuclear energy, including the safety of equipment, management and the site of a plant.

    According to the plan, the share of non-fossil fuels will rise to more than 15% and the share of natural gas should reach 10% by 2020.

    China's total energy consumption will be capped at 5 billion tonnes of coal equivalent by 2020, representing an annual uptick of about 2.5% between 2016 and 2020.
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    Cameco expects to report net loss for 2016, cut jobs at uranium mines

    Canadian uranium producer Cameco Corp on Tuesday said it expected its 2016 adjusted profit to be significantly lower than analysts' estimates and also said it would cut 120 jobs at three of its uranium mines in 2017.

    The Saskatoon, Canada-based company said it expects to report a net loss for 2016 citing asset impairments resulting from fair market assessments at the end of the year. The average estimate among Reuters' analysts was a profit of 86 cents per share for 2016.

    Cameco said it plans to reduce workforce at the McArthur River, Key Lake and Cigar Lake operations by 10 percent.

    "The current earnings expectations do...reflect the consequences of a continued weak uranium market and our resolve to make the necessary decisions to defend and preserve our core uranium business for the long-term benefit of our stakeholders," Chief Executive Officer Tim Gitzel said in a statement.

    Cameco reported a 35 percent rise in uranium sales in the quarter ended Sept. 30, even at a time when uranium prices are near multiyear lows.

    Excess supplies has kept uranium prices at record lows, forcing mining companies to mothball mines, slice costs and cut debt as they struggle to survive.
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    Bayer to boost U.S. jobs, investments amid Monsanto deal: Trump spokesman

    Bayer AG has pledged to boost its investments in the United States amid its deal to buy U.S. seeds giant Monsanto, investing $8 billion in research and development and adding American jobs, U.S. President-elect Donald Trump's spokesman said on Tuesday.

    The German drugs and pesticides maker pledged to maintain its more than 9,000 U.S. jobs and add 3,000 new U.S. high-tech positions, Sean Spicer told reporters in a conference call following Trump's meeting with the chief executives of both companies last week.
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    Mosaic to reopen Colonsay potash mine in a matter of days

    About 330 workers who were temporarily laid off at Mosaic’s Colonsay potash mine in Saskatchewan last July, are counting the days until the company resumes operations.

    The decision to reopen the idled mine was based on the US fertilizer producer’s expectations that 2017 will be a stronger year for the potash industry.

    Decision to reopen the idled mine was based on Mosaic's expectations that 2017 will be a stronger year for the potash industry.

    “We expect supply reconciliation and demand growth will result in a productive operating environment and are optimistic that 2017 will be a stronger year for the potash industry,” a Mosaic spokesperson told Global News.

    Analysts had speculated it was highly unlikely the company would reopen the mine in 2017, due to excessive global capacity and a faltering farm economy. Rival K+S AG is set start production this year in Saskatchewan, and Potash Corp will complete expansion of its biggest mine there.

    But the Plymouth, Minnesota-based company is going ahead with the plans to resume operations at the mine, which has an annual capacity of 2.6 million tonnes.

    The firm, the world’s largest producer of finished phosphate products, was not the only potash producer to take extreme measures last year on the back of low prices and weak demand. In January, PotashCorp mothballed its new Picadilly potash operation in New Brunswick, dismissing more than 420 employees. A month later, it curbed production at all of its Saskatchewan operations.

    Later, Intrepid Potash (NYSE: IPI) said it would close the high-cost West Facility in Carlsbad, New Mexico, in July, affecting about 300 employees.

    Colonsay mine, located about 65 kilometres southeast of Saskatoon, is one of Mosaic’s three Canadian potash operations. The other two are Rsterhazy and Belle Plaine.
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    Brazil to boost new crop financing by about 20 percent: Temer

    Brazil will increase a subsidized credit line available to farmers to prepare for the 2017-2018 crop by about one-fifth to 12 billion reais ($3.72 billion), President Michel Temer told Reuters on Monday.

    The new crop financing will allow Brazilian producers to purchase agricultural inputs such as seeds, fertilizers and pesticides at reduced interest rates to better plan future production.

    Last year, the government made 10 billion reais available to prepare for the 2016-2017 crop, which is on track to break records.

    The agricultural sector has provided a rare glimmer of hope amid the worst recession on record in Brazil, the top exporter of soy, coffee, sugar, orange juice and tobacco.

    Government crop agency Conab forecasts a record soy crop of 103.8 million tonnes for the 2016-2017 season in the country. Favorable weather is expected to improve corn and wheat crops as well, it said.

    "We will inject 12 billion reais into agriculture," Temer said in an interview in his office in the Planalto presidential palace. "It will be announced this week or next week (as part of) the pre-crop plan."

    Last year, state-controlled Banco do Brasil, the country's No. 1 lender by assets, offered a preferential interest rate of 8.75 percent for new crop financing. The government usually pays the difference between that rate and the normal cost for the bank to raise the capital in the market.

    Interest rates in Brazil are falling from decade-high levels as inflation subsides during the economic slowdown. The central bank cut its benchmark lending rate last week by 75 basis points to 13.00 percent - markets had expected a smaller cut.

    Temer, who took over from former president Dilma Rousseff after her impeachment last year, also said in the interview that government agency Sebrae would announce a further 1.2 billion reais in cheap financing for small- and medium-sized businesses.

    The increase in credit comes as Temer's center-right government seeks ways to drag Latin America's largest economy out of a two-year recession without placing further strain on overstretched government finances.

    His government announced a series of measures in December aimed at reducing the debts of struggling companies and making it easier to do business in Brazil.

    Attached Files
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    Australian wheat to dominate Asian market in H1 2017 on competitive pricing: traders

    Australian wheat is expected to dominate Asia's market in the first half of 2017, as a large export surplus will pressure prices to be more competitive and attract buyers, traders said late last week.

    The world's fourth-largest wheat exporter is set to produce a record harvest of around 33 million mt for the 2016-2017 season (October-September), tipping record harvest of about 29.9 million mt set five years ago.

    Given higher production, exportable volume from Australia is estimated at 24.5 million mt for the 2016-2017 season, up 52.2% from the 2015-2016 season, which would exert tremendous pressure on producers to find outlets, according to traders.

    "Australian wheat sellers will have whole year round to clear its big crop, and quickly too, to avoid head-on-head bumps with other wheat origins, particularly Black Sea's new crop in Q2," commented a Singapore-based trader.

    Already, prices were lower for new crop in Australia, with the export value of Australian Premium White wheat with minimum 10.5% protein, transacted at $199/mt FOB Kwinana on January 12, down from $212-$213/mt FOB a year ago, according to S&P Global Platts data.

    Lower protein wheat, Australian Standard White with minimum 9% protein, was trading at around $186/mt FOB Kwinana, or about $200/mt CFR Indonesia, which was $5-$10/mt below the value of Black Sea 11.5% protein wheat.

    ASW is typically priced above Black Sea wheat. Over the 2015-2016 season, ASW was at a premium of $10-$15/mt over Black Sea wheat.

    Apart from an ample supply of ASW, the flip in the relative value between ASW and Black Sea wheat also stemmed from a rise in delivered prices of Black Sea wheat.

    "Higher shipping rates in November and [the] reluctance of farmers to sell, contributed to the higher Black Sea value to Southeast Asia," commented a trader.

    With the current ASW prices, there is "really no incentive" for buyers to switch to other origins, said millers and traders.

    Over November to January, more than 800,000 mt of ASW for February-April shipment were sold, with Southeast Asia being the predominant destination, according to Platts data.

    "With such a big crop this year, Australian exporters have had to buy back demand from the Black Sea and price to be more competitive in global markets," said James Foulsham, CBH's wheat trading manager in its weekly comment on January 13. CBH is the largest grain seller in Western Australia, the country's largest wheat exporter state.

    An ample global wheat supply, with the world's production expected to rise 2.34% from last year's record harvest to 752.7 million mt, have added further downward pressure to the market.

    Major exporting countries -- Black Sea, US and Canada -- are also sitting on large volumes of exportable wheat because of a big crop. This would imply tougher competition among major exporters, who would continue to eye the Asian market due to consumption growth.

    Platts assessed APW at $201/mt FOB Western Australia on January 13, while Russian 12.5% was assessed at $183/mt FOB Black Sea.

    Attached Files
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    Precious Metals

    De Beers pilots fixed-price contracts for auction sales

    Diamond company De Beers will start piloting fixed-price forward contracts in its auction sales, providing customers the opportunity to guarantee access to future supply with certainty over the price to be paid when the contract reaches maturity.

    The first event to feature the fixed-price forward contracts will take place on February 16, for the grainers, smalls and near-gem categories of rough diamonds.

    The pilot has been developed in response to customer feedback on the previously used forward contract sales, which offered the guarantee of future supply but with a ‘floating’ price based on the spot price at the point when the forward contract matured.

    Fixed-price forward contracts are expected to provide a highly effective supply sourcing option for small and medium-sized enterprises, which are seeking access to regular rough diamond supply at a predictable price.

    “Extensive customer dialogue has highlighted potential to further develop the forward market for our rough diamonds. Our customers have told us they see value in securing short-term supply contracts but would prefer to do so on a fixed-price basis, avoiding potential challenges when securing contracts on a floating price basis that references the underlying spot price at contract maturity.

    “We are, therefore, piloting three-month forward contracts on a fixed-price basis to complement our spot sales channel and the term supply contracts offered by global sightholder sales, while further testing stated customer demand for regular, guaranteed short-term supply at a fixed price,” De Beers auction sales executive VP Neil Ventura said.

    Since launching forward contract sales on a floating price basis in December 2013, auction sales has steadily developed its forward sales channel, selling more than 350 bespoke supply contracts over the period.

    The pilot for fixed-price contracts follows other auction sales pilots, including those enabling third parties to use its auction platform for rough and polished diamond sales.
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    Gold miner Goldcorp details growth plan, shares rise

    Canadian gold miner Goldcorp Inc detailed an ambitious growth plan on Tuesday that includes increasing production as well as yet-to-be-mined reserves by 20 percent over the next five years from existing operations and deposits, lifting its shares.

    At an investor day event, the Vancouver-based miner focused on the exploration potential at its mine sites and projects in the Americas, a turnaround from recent years when most miners' attention was on reducing costs, not growth.

    "Growth is not as dirty a word as it was a couple of years ago," Goldcorp Chief Executive David Garofalo said, warning that the gold industry risked becoming irrelevant if it did not reverse a trend of falling output and reserves.

    Goldcorp late on Monday said it expected to increase gold output by a fifth over the next five years to about 3 million ounces, driven by capacity ramp-ups at its Cerro Negro mine in Argentina and the Eleonore mine in Canada.

    Its gold reserves are forecast to rise 20 percent to 50 million ounces in the same period from the conversion of existing resources at its Century project in Ontario, Peñasquito mine in Mexico and Pueblo Viejo mine in the Dominican Republic.

    Goldcorp forecast its all-in sustaining costs - the industry benchmark - falling by 20 percent to $700 an ounce by 2020.

    "It is this long-term strategy of rising production and falling costs, with a focus on key current assets, that has us very excited about the future of Goldcorp," Desjardins analyst Michael Parkin said in a note to clients.

    In late afternoon trading, Goldcorp's shares were 3.4 percent firmer at C$19.82 on the Toronto Stock Exchange, outperforming the S&P/TSX Gold Index, which was up 1.7 percent.

    In order to stem falling industry production and reserves, the world's biggest gold miners should partner to share the financial and other risks of developing large gold deposits, Garofalo said.

    "What we are looking to do on the M&A side is find more of those large resources that are undeveloped right now and do so in partnership with some of our senior peer companies," he said.

    "It is better to have two heads, to have two technical teams, two balance sheets," he said.

    Corporate mergers and acquisitions, where one gold miner buys another, were likely not on the cards for any of the big producers as they are "very difficult to do," Garofalo said.
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    Acacia confirms merger talks with Endeavour Mining

    Gold miner Acacia Mining said on Friday it was in early talks about a possible merger with Canadian gold miner Endeavour Mining.

    Acacia, which operates mines and exploration projects in Tanzania, Kenya, Burkina Faso and Mali, was responding to media reports.

    The company added that there was no certainty of a deal.

    Endeavour also confirmed preliminary discussions had taken place with Acacia.

    Acacia had a market value of £1.72-billion pounds ($2.1-billion) as of January 12, while Endeavour had a market value of C$2.18-billion ($1.66-billion).

    Endeavour bought True Gold Mining for about C$240-million in March, giving it access to a low-cost gold mine in Burkina Faso.

    Gold prices are expected to rise in 2017 as geopolitics, deflationary pressure, more quantitative easing, negative interest rates, Brexit drive demand for the precious metal, which is seen as a safe haven.
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    Base Metals

    Freeport seeks guarantees from Indonesia amid mining shake-up

    The Indonesian unit of Freeport-Mcmoran Inc is seeking fiscal and legal guarantees from the government over mining rules issued last week, a spokesman for the copper mining giant said late on Thursday.

    The Southeast Asian nation has been pushing miners to build smelters to process ore locally, with concentrate shipments stopped since Jan. 12 under laws introduced in 2014.

    But new regulations announced last week mean that Freeport and some other miners could be allowed to keep exporting ore if they meet conditions including shifting from their current 'contracts of work' to so-called 'special mining permits', a move that could leave them liable to paying more in taxes.

    The latest rules also require foreign mining companies to divest at least 51 percent of their holdings in Indonesia.

    Freeport spokesman Riza Pratama said in a statement that the company had told the government it would shift away from a contract of work and develop an additional smelter within five years as long as it obtains "a stability agreement providing the same rights and the same level of legal and fiscal certainty provided under its contract of work".

    He said Freeport expects to be allowed to resume concentrate exports while the new licence and requested guarantees were finalised.

    "There is no requirement to pay export duties on concentrates or to conduct further divestments (under the company's existing contract)," Pratama added.

    As of Friday, the mining ministry had not issued a recommendation for Freeport to obtain an export permit. According to Coal and Minerals Director General Bambang Gatot, Freeport will have to receive its new mining licence before the government will issue an export permit.

    Energy and Mineral Resources Minister Ignasius Jonan said it would take a "maximum of 14 days" for Freeport to obtain its new mining licence, once all necessary documents were submitted.

    The head of the finance ministry fiscal policy office said on Wednesday that he expected Freeport to pay "slightly" more in taxes once it obtains the new mining permit.
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    Rio starts on new bauxite mine

    Diversified giant Rio Tinto has awarded a A$70-million bulk earthworks contract to Queensland-based civil engineering firm QBrit for work at it’s A$2.6-billion Amrun bauxite project, in Cape York.

    The project will produce at an initial rate of 22.8-million tonnes a year, with the option to expand to up to 50-million tonnes a year, with first output targeted for 2019.

    Production from the Amrun project will replace the depleted East Weipa mine, and will increase the overall bauxite exports from Weipa by around 10-million tonnes.

    “Since being declared a prescribed project, Queensland’s independent Coordinator-General has been monitoring all approvals the proponent requires and facilitating the timely delivery of approval processes,” acting Minister for State Development, Bill Byrne said on Thursday.

    “The Coordinator-General also approved a number of key change requests from the proponent.

    “This project builds on Rio Tinto’s long-standing existing operations in Gladstone and Weipa which have supplied the raw product used to produce 10 per cent of the world’s aluminium,” he said.

    Once operational, the Amrun project will support the continued employment of the current 1 400 strong workforce based in Weipa, as well as more than 2 000 employees based at the Yarwun and Queensland Aluminium refineries in Gladstone that are fed with bauxite from Cape York.
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    Copper price is getting crushed

    The surge in the copper price to near 18-month highs following Donald Trump's win in the US presidential election came as a surprise to an industry under pressure since 2011 over growing supply.

    The bullishness about the impact of Trump's $500 billion infrastructure plans and solid growth in top consumer China on demand for the bellwether metal has cooled down considerably.

    2016 was the fifth year in a row that the average copper price declined year on year

    After a brief surge to within sight of the post November 8 highs last week, bears were firmly back in control on Tuesday .

    In afternoon trade on Tuesday copper for delivery in March traded more than 3% lower at $2.6045 per pound ($5,742 a tonne) in New York.

    The decline came despite a plunge in the value of the US dollar which usually moves in the opposite direction of commodity prices following comments by president elect Trump questioning  Washington's decades old strong dollar policy.

    According to a survey of 22 investment banks and other commodity research institutions released by FocusEconomics on Tuesday analysts and investors are far from sanguine about the prospects for the metal over the rest of the year.

    Despite 13 of the analysts polled raising their previous forecasts for the copper price by the end of  this year, of those polled only a handful sees copper averaging the final quarter of 2017 above the current spot price. Despite predictions of an improving price environment over the course of 2017, the median estimate for the average price in Q4 2017 is more than 9% below today's ruling price.

    The consensus forecast for the average over the whole of 2017 is $2.37 a pound ($5,234 a tonne) rising only marginally in 2018. At $2.21 ($4,871) 2016 was the fifth year in a row that the copper price averaged below the previous year.

    The most bullish institution is Unicredit which sees copper averaging 2017 around $2.77 ($6,100) while JP Morgan forecast is decidedly negative – the bank see copper falling to $2.13 ($4,700) by the end of the year with an average below $5,000 in 2017.
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    Indonesia may issue new tax rules for mineral exports next week – official

    Indonesia may issue new tax rules for mineral exports next week, a Finance Ministry official said on Tuesday, after discussions with the Energy and Mineral Resources Ministry, which recently changed rules on domestic mineral processing.

    "We want the export duties to push domestic processing. That's the principle," Suahasil Nazara, head of the Fiscal Policy Office at the Finance Ministry, told reporters, adding that the taxes were "not just for increasing state revenues".

    "There's a high possibility we will continue with a scheme that has layers, depending on completion of smelters," he added.
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    Govt officials endorse development of DRC tin project

    Government officials from the North Kivuprovince in the Democratic Republic of Congo (DRC) have endorsed the development of Alphamin Resources’ 10 000 t/y Bisie tin project.

    Construction on the project is expected to begin in the first quarter of this year, with the mine to reach full production in 2019.
    The provincial government has established a committee, comprising persons with high-level technical and specialised skills, to assist and guide Alphamin during the mine’s construction period and initial operations.
    “The provincial government is committed to providing a favourable environment for private investment in a win-win partnership,” North Kivu Governor Julien PalukuKahongya noted in a statement issued by Alphamin on Tuesday.

    Some 700 people will be employed during the mine’s construction. Once operational, the mine will employ 450 permanent employees.

    It is estimated that the mine will produce 10 000 t/y of tin in concentrate over the 12-year mine life.  
    “North Kivu has many assets and industrious people, from which past events have diverted investors’ attention. This is a very encouraging sign and helps us in our role as ambassadors for North Kivu to global investors to convey the support of government - nationally, provincially and locally - which will assist Alphamin with the development of our project,” Alphamin CEO Boris Kamstra commented.

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    Kenmare lifts FY17 production guidance as market looks positive

    LSE-listed Kenmare Resources on Monday adjusted its production guidance for this year to between 950 000 t and 1.05-million tonnes of ilmenite, 5% to 16% higher than production for 2016, owing to increased utilisation and recovery rates at its Moma titanium minerals mine, in Mozambique.

    The miner further expects its zircon production to rise by 6% to 22% year-on-year to between 72 000 t and 83 000 t, while its rutile production is also expected to climb by 15% to 28% to between 9 000 t and 10 000 t.

    The higher production outlook comes on the back of record yearly and quarterly production of ilmenite, rutile and zircon.

    For the three months to December 31, the mine’s heavy mineral concentrate (HMC) production increased 55% to 474 300 t, while ilmenite output rose 35% year-on-year to 256 900 t, zircon production by 38% year-on-year to 20 000 t and rutile output by 35% year-on-year to 2 300 t.

    HMC production for the year ended December 31, totalled 1.41-million tonnes, up 28% on that produced the year before.

    Ilmenite production for the full year increased 18% to 903 300 t, while zircon output was up 32% to 68 200 t. Full-year rutile production was up 30% to 7 800 t.

    Total shipments of finished products for the year were up 28%, setting a record of 1.02-million tonnes shipped.

    Demand for ilmenite had grown strongly throughout 2016, resulting in significant price increases since the market bottomed in the second quarter, Kenmare noted.

    The company said the outlook for ilmenite prices remained positive for the year ahead, supported by low productinventories throughout the value chain and higher titanium feedstock consumption, as pigment demand continued to grow in line with global gross domestic product.
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    Australia government, Alcoa say making progress in aluminium smelter talks

    Plans to provide government support to keep open a 30-year-old aluminium smelter in Australia owned by Alcoa have made "progress", parties involved in talks said on Monday without giving details.

    The government is offering financial support to help supply the Portland smelter in southern Australia with sufficient power in the wake of a blackout late last year that left it running at only one-third of its 300,000-tonnes-per-year capacity. However, details are still being discussed.

    "Significant progress has been made over the weekend, with great demonstrations of good faith from all parties working to find a solution for the future of the Portland smelter," Australia's industry minister, Greg Hunt, and Victoria state treasurer Tim Pallas said in a joint statement.

    Alcoa and AGL Energy, which supplies the smelter with power, confirmed progress had been made in the latest discussions, but declined to elaborate.

    The smelter directly employs about 700 workers.

    The secretary of the Australian Workers Union in Victoria, Ben Davis, said the talks were a sign the smelter had a good chance of staying open.

    "I believe Alcoa wants to keep this smelter running," he said. "If they wanted to fold up the tent, they would have done it when they lost two-thirds of its capacity."

    Alcoa, the majority owner, has previously said it would continue to implement cost saving measures at the plant, but its future would be decided by an ability to remain internationally competitive.

    A rise in electricity prices had added to pressure on the smelter, which is also battling a glut in the aluminium market.
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    Aluminium Disaster, as per Huffington Post.

    This devastation to workers, families, communities and corporations occurred even after Ormet had shuttered a smelter in Ohio in 2013, destroying 700 jobs and Century closed its Hawesville, Ky., smelter, killing 600 jobs, in August of 2015.

    It all happened as demand for aluminum in the United States increased.

    That doesn’t make sense until China’s role in this disaster is explained.

    That role is the reason the Obama administration filed a complaint against China with the World Trade Organization (WTO) last week. In this case, the President must ignore the old adage about speaking softly. To preserve a vital American manufacturing capability against predatory conduct by a foreign power, the administration must speak loudly and carry a big aluminum bat. 

    The bottom line is this: American corporations and American workers can compete with any counterpart in the world and win. But when the contest is with a country itself, defeat is virtually assured.

    In the case of aluminum, U.S. companies and workers are up against the entire country of China. That is because China is providing its aluminum industry with cheap loans from state-controlled banks and artificially low prices for critical manufacturing components and materials such as electricity, coal and alumina.

    By doing that, China is subsidizing its aluminum industry. And that is fine if China wants to use its revenues to support its aluminum manufacturing or sustain employment – as long as all of the aluminum is sold within China. When state-subsidized products are sold overseas, they distort free market pricing. And that’s why they’re banned.

    China agreed not to subsidize exports in order to get access to the WTO. But it has routinely and unabashedly flouted the rules on products ranging from tires to paper to steel to aluminum that it dumps on the American market, resulting in closed U.S. factories, killed U.S. jobs and bleak U.S. communities.

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    Indonesia won't flood nickel market: minister

    Indonesia's abrupt easing of a three-year ban on nickel ore exports will not flood the global market but instead is aimed at balancing the country's smelters and creating job opportunities at mines, top mining officials said on Saturday.

    Indonesian mines may export up to 5.2 million tonnes of nickel ore a year under the country's new rules, the mining minister said, only a fraction of its shipments when it was once a top global supplier of the stainless steel material.

    Energy and Mineral Resources Minister Ignasius Jonan's comment came after an industry backlash over the government's decision on Thursday to lift a ban on the export of nickel ore and bauxite under certain conditions.

    Nickel prices and the shares of companies that had heavily invested in smelters tumbled after the news, as analysts said the resumption of nickel ore exports from Indonesia could wreck the global prices of the commodity.

    Senior mining officials defended the new rules, saying that the amount of nickel ore that can be exported must correspond to the miners' smelter capacity and that it will be "comparable".

    "It's not like they build small smelters and export as much as they can. No, we are going to regulate that," the deputy mining minister, Arcandra Tahar, told reporters.

    The government banned the export of nickel ore and bauxite in 2014 in order to spur higher-value processing of mineral ores. A year before the ban kicked in, Indonesia exported around 60 million tonnes of nickel ore.

    The ban cost Southeast Asia's biggest economy billions of dollars in lost revenue and led to job losses, as many mines laid off their workers.

    The Philippines took Indonesia's crown as the world's top nickel ore exporter, accounting for around one-quarter of the world's mined nickel supply, although its government has since restricted output due to environmental concerns.


    Under Indonesia's new rules announced on Thursday, nickel miners must dedicate at least 30 percent of their smelter capacity to process low-grade ore, defined as having a nickel content of less than 1.7 percent.

    Low-grade ore is harder to process and smelters have been reluctant to take it. But in order for miners to get high-grade ore, they have to dig through low-grade ore first, which then gets thrown out.

    "If local smelters cannot absorb the low-grade nickel, why are they not happy that we allow the nickel miners to export some of it?" Jonan said.

    "The goal of the government is for all the raw materials to be smelted here, but it will take time," he said, noting that the policy shift would protect jobs and increase export duties.

    Indonesia produces 17 million tonnes of nickel ore per year, of which 10 million is low-grade, according to Jonan. The country's nickel smelting capacity is currently 16 million tonnes and may reach 18 million this year, he added.

    Miners will be able to export ore over the next five years only if they show progress toward building smelters either individually or with partners, among other conditions.

    Last year, Tedy Badrujaman, the chief executive of PT Aneka Tambang Tbk (Antam), said the state-controlled miner hoped to export 20 million tonnes of low-grade nickel ore.

    Antam's shares jumped 6.4 percent on Friday as analysts said the company's expected increase in sales could make up for a fall in nickel prices. Asked when Antam will start shipping out nickel ore, the company's corporate secretary said it was still making calculations.


    In 2014, Indonesia banned mineral ore exports while allowing the shipments of concentrates to continue for three more years. The full ban on concentrate exports was supposed to have kicked in on Jan. 12, but the government also relented on that deadline.

    Under the new regulation, companies, including U.S. mining giant Freeport-McMoRan Inc, can continue exporting copper concentrate if they meet certain conditions.

    Jonan said the ministry received a letter from Freeport on Friday stating its commitment to convert to the new special mining permit. The government will grant an export recommendation for Freeport "soon", Jonan said.

    However, Freeport has to divest a stake of up to 51 percent, from 30 percent previously, at fair market value and an initial public offering is being considered, Jonan said. Freeport has only divested 9.36 percent so far.

    Jonan had met Freeport CEO Richard Adkerson and Chappy Hakim, the CEO of the U.S. company's Indonesian unit, in Jakarta on Friday, a person with direct knowledge of the matter said.

    A Freeport Indonesia spokesman said that he had no knowledge of the meeting and that the company is still studying the impact of the special mining permit on its operations.
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    Codelco chairman treated for minor injuries after package explodes

    The chairman of Codelco, Chile's state-run copper miner, was being treated in the hospital for minor injuries after receiving a package that exploded at his home on Friday.

    Oscar Landerretche "is in a good state of health after being a victim today of the explosion of an artifact that he received at his home," said Codelco, the world's largest copper miner.

    Chilean President Michelle Bachelet said in comments to journalists that Landerretche had received some injuries on his arms and abdomen, and that his family had been unhurt.

    "This was unacceptable and of course specialist police forces are investigating," she said.

    It was not immediately clear who was behind the attack. Chile, which returned to democracy in 1990 after a 17-year dictatorship, is normally one of Latin America's most stable countries.

    However, there have been a number of low-level attacks by anarchist groups in recent years. In September 2014 several people were injured after a device exploded next to a metro station.

    Landerretche is a 44-year-old economist who has led Codelco's board, a government-appointed position, for the last two years. The miner is part-way through an ambitious investment program but has struggled to turn a profit against a backdrop of low global copper prices.

    Copper industry workers said he was well respected and they were baffled as to the reason behind the attack.

    "We copper workers reject this kind of act," said Codelco union leader Raimundo Espinoza.

    "I don't think Oscar is the kind of person who has enemies," said copper mining veteran and ex-Codelco chief executive Diego Hernandez to CNN Chile.
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    India considering minimum import price on aluminium - govt official

    India is considering imposing a minimum import price on aluminium, the top bureaucrat in the ministry of mines said on Friday.

    "MIP (Minimum Import Price) on aluminium is under consideration. We will take a week to send our recommendation forward," the mines secretary Balvinder Kumar told Reuters.

    Last month, an Indian government body decided against imposing safeguards on some aluminium products citing lack of evidence over imports hurting profitability of domestic industry.
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    Freeport can export!

    Copper-mining giant PT Freeport Indonesia has, in principle, agreed to change the company'€™s contract of work (CoW) into a special mining license (IUPK) as required by the government, a deal that will enable it to renew its concession rights earlier than expected, a senior official at the Energy and Mineral Resources Ministry has said.

    '€œThis is an important milestone that will give a way out to accelerate decisions regarding Freeport Indonesia'€™s operational continuity,'€ the ministry'€™s spokesman Dadan Kusdiana said in a press briefing after the ministry'€™s meeting with the company'€™s executives.

    Freeport Indonesia'€™s future operations have long been an issue partly because the company is seeking certainty for its massive investment in underground mining as well as in developing a copper smelter.

    Freeport Indonesia'€™s current CoW will expire in 2021 and under current regulations any request for an extension can only be made two years prior to expiry. 

    However, with the immediate change from CoW to IUPK, the contract term will no longer be valid as Freeport Indonesia will operate under a new licensing regime. 
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    Steel, Iron Ore and Coal

    China 2016 coke output edging up 0.6pct

    China produced 449.11 million tonnes of coke in 2016, edging up 0.6% from a year ago, showed data from the National Bureau of Statistics (NBS) on January 20.

    This was the first time since 2015 the country's year-to-date coke output rose on a year-on-year basis.

    In December, China produced 38.06 million tonnes of coke, rising 8% on the year but falling for the second straight month by 1.83% from November.

    China's coke market may stay weak before the Spring Festival, as steel mills maintain demand-based purchase and cut operation of blast furnaces.
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    Union Pacific reports Q4 drop in coal volumes, revenues

    Union Pacific reports Q4 drop in coal volumes, revenues

    Union Pacific's coal carloads in the fourth quarter fell 9.3% on a year-over-year basis, while coal revenues dipped 6.2%, the railroad said Thursday.

    The Omaha, Nebraska-based railroad, the second biggest transporter of coal in the US behind rival BNSF Railway, said coal carloads totaled 320,000 compared with 353,000 in the year-ago quarter.

    Beth Whited, the railroad's new vice president of marketing, said coal stockpiles at the utilities in its service territory stood at roughly 93 days of burn in Q4, roughly 18 days higher than historic levels but below the roughly 100 days of burn in the year-ago quarter.

    "We have seen what I call a very modest fall off in inventory levels ... so it's still kind of a challenging stockpile environment," Whited said. "We are though in a little different situation then most of 2016, in that we have natural gas prices considerably higher ... so that gives us some potential for our served plants to be more in the money and able to burn coal."

    Powder River Basin volumes dipped 16% from the year-ago quarter, while volumes from other regions, such as Colorado and Utah, increased 24% due to higher export demand, Whited said.

    Coal revenues totaled $699 million in the fourth quarter, and made up 13.5% of the railroad's total quarterly revenue. In the year-ago quarter, coal revenues totaled $745 million and made up 14.3% percent of total revenue.

    By comparison, coal revenues in Q4 2014 totaled $1.1 billion, but have largely declined due a drop in coal demand from low natural gas prices.

    Average revenue per coal unit totaled $2,183 in the quarter, up 3.6% from the year-ago quarter.

    For 2017, the railroad expects a modest increase in coal volumes due to higher natural gas prices and increased export demand.
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    China's small and mid-sized coal mines halt production for holidays

    China's small and mid-sized coal mines at producing bases like Shaanxi, Shanxi and Inner Mongolia provinces halt production recently in succession, as the Spring Festival holidays approach late this month.

    Yuyang district in Yulin city of Shaanxi ordered all local coal mines to suspend production from January 10 until the end of Spring Festival holidays on February 2, said the local coal bureau, citing the recent coal mine accidents as the main reason for the suspension.

    Shenmu district of Yulin followed on January 15, leaving a few state-run coal mines and mines supplying coal-fired plants under operation.

    Coal mines adopting blasting method in Shenfu Coalfield of the city were also shut down for holidays, and may resume production from March 4-11.

    Meanwhile, all the coal mines had suspended production in Hengshan district of Yulin since January 19, with some miners destocking. The resumption date is uncertain for now.

    In northern China's coal-rich Shanxi province, Jincheng city ordered all local coal mines to suspend production on January 20 for the Spring Festival, said the municipal government on January 16. Production resumption inspection will be started from February 3, after the end of Spring Festival holidays.

    Coal mines in northern China's Inner Mongolia are expected to suspend production from January 20, with stocks at some opencast mines sold out.

    An insider pointed out that the suspension of small and mid-sized coal mines made sense, given safety concerns prior to the Lunar New Year.

    The impact of production halts at mines could be limited and coal prices may be firm, despite constrained supply, as demand from downstream sectors is also on the drop, said insiders.
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    China Dec coal output hits 1-year high on winter demand

    China's December coal output rose 1 percent from November to hit its highest level in a year, as miners cranked out more product to meet government orders amid increased demand from utilities during the cold winter months, data showed on Friday.

    Notching up a third straight monthly increase, miners produced 311 million tonnes of coal, the National Bureau of Statistics said. That was down 3 percent year on year.

    For the full year, coal production fell 9 percent from a year ago to 3.64 billion tonnes, the third annual drop as Beijing shifts away from the polluting fuel.
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    Beijing orders dragnet to uncover illicit steel, coal company expansions

    As part of an ongoing campaign to rein in illegal Chinese steel and coal expansions, Beijing has ordered provincial authorities to conduct a "dragnet" and submit a list of offenders to central government agencies by January 20.

    Provincial governments must conduct inspections to uncover companies that have unlawfully set up new capacity, produced and sold induction furnace billet, or restarted closed capacity, according to a statement Thursday on the website of the National Development and Reform Commission, jointly issued with five other agencies.

    Local authorities will also have to lay out how and under what timeframe they intend to deal with offending companies.

    Steel company cases are to be reported to the NDRC, the Ministry of Industry and Information Technology and the General Administration of Quality Supervision, Inspection and Quarantine.

    Coal cases are to be referred to the NDRC, the State Administration of Work Safety, the National Energy Administration and the State Administration of Coal Mine Safety.

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    China's current steel capacity cut goal for 2017 exceeds 30 Mtpa

    China's state-owned steel makers and some provinces have released their 2017 goals of cutting surplus crude steel capacity, which exceed 30 million tonnes per annum (Mtpa) in total.

    The move is in line with the national supply-side structural reform which has been implemented since last year and aimed at improving bloated steel industry.

    As a major steel producing province, Hebei takes the lead to slash 19.86 Mtpa of steel capacity and 17.14 Mtpa of iron making capacity this year, with Tangshan reducing steel and iron capacity of 8.61 Mtpa and 9.33 Mtpa, respectively.

    Jiangsu province planned to eliminate 11.7 Mtpa of crude steel capacity over 2007-2018, following capacity elimination of 5.8 Mtpa achieved last year. The province also targeted to raise its capacity utilization of steel industry to a reasonable level and basically phase out "zombie enterprises" by 2020.

    The state-run steel enterprises will shut 5.95 Mtpa of steel capacity in 2017, and meanwhile accelerate elimination of "zombie companies". Efforts will be made to reform the steel producers stuck in deficits and reduce their losses by 20% this year.
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    Anglo shortlists bidders for some South African coal mines

    Anglo American Plc has shortlisted groups led by some of South Africa's most prominent black businessmen as bidders for several of its South African coal mines as it focuses on diamonds, platinum and copper, Bloomberg reported on January 18, citing two people familiar with the discussions.

    Groups selected by Anglo include companies led by Mike Teke, president of South Africa's Chamber of Mines; Phuthuma Nhleko, chairman of the Phembani Group and head of Africa's biggest mobile phone company MTN Group Ltd.; and Sandile Zungu, executive chairman of Zungu Investments, according to the people who asked not to be identified because the information is not public. Rand Merchant Bank is involved in the process, they said.

    Anglo, founded in Johannesburg in 1917, announced plans in February last year to sell more than half of its mines to focus on a smaller group of commodities. The mines under discussion are those that sell coal locally in South Africa, mainly to state power company Eskom Holdings SOC Ltd. Together the assets -- the New Vaal, Kriel and New Denmark mines - account for about half of the company's South African coal production.

    The three mines combined produced almost 7 million tonnes of coal in the third quarter of last year, according to Anglo. While the value of the coal contracts with Eskom varies, they usually average around 500 rand ($37.07) per tonne, said Khulu Phasiwe, a spokesman at the utility. That would equate to about $1 billion worth of coal annually from the Anglo assets.

    South Africa's government is pushing companies to boost black involvement in the economy to make up for discrimination during apartheid. Eskom says it wants suppliers to be black controlled.

    Anglo won't comment on potential bidders due to confidentiality agreements, said Moeketsi Mofokeng, spokesman of the company. "We continue to engage Eskom and the government about the process that we've embarked on." Teke, Zungu and RMB also declined to comment. Phembani didn't immediately reply to e-mails.
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    Russia 2016 coal production rises 3.27pct on year

    Coal-rich Russia produced 384 million tonnes of coal in 2016, a year-on-year rise of 3.27%, showed data from the Energy Ministry of Russian Federation.

    The country's coal output in December climbed 3.8% from November to 35.15 million tonnes. But the volume was 0.91% lower than 35.48 million tonnes produced in 2015, data showed.

    In 2016, the country exported 164 million tonnes of coal, increasing 8.03% from the year prior.

    Its coal exports stood at 14.24 million tonnes in December, rising 11.34% from the year-ago level and edging up 0.78% from November

    Coal output and exports of Russia in 2015 totaled 371.67 million and 151.42 million tonnes, respectively.
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    Colombia 2016 thermal coal exports rise 9% to record 88 mln T

    Colombia exported a record 88.1 million tonnes of thermal coal in 2016, rising 9% year on year, Platts reported on January 17, citing the Colombian shipping agent Deep Blue.

    The largest taker of Colombian thermal coal during the year was the Netherlands at 17.26 million tonnes, although the volume edged down 1% from 2015.

    Turkey was sent 15.91 million tonnes in 2016, jumping 38% from the previous year.

    Other countries that saw noticeable year-on-year gains in 2016 were Chile at 5.12 million tonnes, up 16%, as well as India and South Korea at 2.48 million tonnes and 1.95 million tonnes respectively. Both India and South Korea received no Colombian thermal coal in 2015.

    The destination that saw the most noticeable fall was the UK, where Colombian thermal coal exports dropped 86% on the year to only 598.177 tonnes.

    US-based producer Drummond's Puerto Drummond exported the highest volume in 2016 at 32.10 million tonnes, which was 16% higher from the preceding year. Following closely was Cerrejon's Puerto Bolivar terminal where shipments for the year totaled 32.07 million tonnes, down 2.4% on the year.

    Prodeco's Puerto Nuevo also saw exports increase 17% in 2016 to 19.53 million tonnes, while shipments from third-party port Carbosan-Sociedad Portuaria de Santa Marta were at 3.55 million tonnes for the year, up 3.3%.
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    South Korean utilities adopt new coal purchase strategy for Q2 cargoes

    South Korean power utilities are to target mid-calorific value 5,000 to 5,500 kcal/kg NAR thermal coal in purchase tenders for second quarter shipments including from Australia and Russia and possibly US cargoes, a source close to the Korea market said Tuesday.

    Q2-delivery cargo tenders for such mid-range calorific value thermal coal could start to emerge from Korean buyers over the next few weeks, said the source who is familiar with the Korean import market.

    Korean utilities' new purchase strategy is informed by two market factors: firstly, an increase in the Korean government's consumption tax for imported thermal coal which will favor mid-CV product, and secondly, a shift away from lower-calorific value Indonesian cargoes.

    "Mid-CV coal in the range of 5,000 to 5,500 kcal/kg NAR may benefit from changes to the consumption tax," said the market source.

    "Korean power utilities want to secure more mid-to-high CV coal from Australia, Russia and possibly the US, than low CV coal," he said.

    From April onwards, the Seoul government is to apply a Won 6,000 ($5.13/mt) increase to its two-year old consumption tax which is imposed in three bands according to the calorific value of imported cargoes.

    For the lowest band, applying to thermal coal with a calorific value of less than 5,000 kcal/kg NAR, is a tax of Won 21,000/mt, which increases to Won 27,000/mt post-April 1.

    Mid-calorific value thermal coal, that is 5,000 to 5,500 kcal/kg NAR, attracts a consumption tax of Won 24,000/mt currently that rises to Won 30,000/mt in April.

    High calorific value imported cargoes of 5,500 kcal/kg NAR and above are liable for a tax of Won 27,000/mt that becomes Won 33,000/mt from April.

    The tiered structure of the consumption tax, with higher rates payable for higher calorific value cargoes on a per metric ton basis, means buyers are incentivized to purchase a greater volumes of mid to higher-CV thermal coal, sources said.

    Power utilities in South Korea have taken early action to ensure they secured enough cargoes for delivery in Q1 2017, before the planned increase in consumption tax rates on April 1, said the source.

    Another motivating factor favoring the purchase of mid-to-high CV thermal coal relates to Indonesian coal, and some concerns around its perceived quality following tenders for Korean buyers last year, said the source.

    Low-calorific value thermal coal from Indonesia was the focus of many Korean purchase tenders last year.

    "Korean utilities want to secure homogeneous coal in the low CV range," said the market source.

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    Shenhua Huanghua port 2016 coal shipment surges 48pct

    Shenhua Huanghua port in northern China shipped 173.61 million tonnes of coal in 2016, surging 47.9% year on year, making it China's top coal handling port, showed data released by Shenhua Group on its website.  

    The port realizes revenue of 3.96 billion yuan ($575.72 million) last year, rising 42.60% on the year, with profit more than doubling to a record high of 1.63 billion yuan.

    In 2016, Shenhua Huanghua port's throughput reached 183.70 million tonnes, up 53.08% from the year-ago level.

    This was mainly attributed to climbed coal supply from newly-commissioned Zhunchi railway, increased handling capacity, as well as its open to all coal producers since 2015 instead of being exclusive to Shenhua Group.

    Inner Mongolia-based Yitai Group shipped 8.48 million tonnes of coal via Shenhua Huanghua port during 2016, given lower costs and shorter shipping distance.
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    BMI bumps up US coal outlook despite poor fundamentals

    US coal production growth is forecast to be 1.5% in 2017 and 2% in 2018, up from previous forecasts of a respective contraction of 4% and 3% over the same periods, MiningWeekly reported on January 16, citing a recent trend analysis from Fitch-affiliated market analyst BMI Research.

    "We have revised upward our US coal production growth outlook in 2017 and 2018, on the back of the country's coal demand outlook and rising metallurgical coal prices over the coming quarters. However, competitive natural gas prices, subdued thermal coal prices and rising local opposition to coal projects will prevent a reversal in the structural decline of the industry," analysts noted.

    As the US coal industry enters a period of respite, supported by strong metallurgical coal prices and an expected increase in US thermal coal demand, BMI has revised up the country's production outlook.

    An increase in coal use in the domestic electricity generation mix will tighten the US market in the near term and support muted coal production growth in 2017 in 2018.

    According to BMI, the spike in metallurgical coal prices in particular will encourage project development.

    However, BMI pointed out that competitive natural gas and other alternative electricity prices, lack of export opportunities and structurally lower coal prices will hinder significant coal production growth or investment over the coming years.

    For instance, while BMI forecasted thermal coal prices to average higher in 2017, at $65/t, compared with $60/t in 2016, this price level remains well below the $121/t peak in 2011. BMI noted that US thermal coal stockpiles remain elevated, at 163,000 tonnes in October 2016, in line with the average levels in 2015.

    As the US coal industry's top miners focus on reorganization following a string of bankruptcies over the past two years, coal mine closures will remain common.

    Projects will continue to face both local opposition over environmental concerns and federal regulations, as the outgoing Obama administration rushes to secure its legacy, said BMI.

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    Vale loads first iron-ore shipment from giant new S11D mine

    The world’s biggest iron-ore miner, Vale, has loaded the first ore from its largest-ever mine, the S11D project, in Canaã dos Carajás, southeast of Pará, at the Ponta de Madeira docks.

    On Friday, Vale loaded its first 26 500 t of commercial ore produced at the $14.4-billion mine in Brazil, divided into three vessels with capacity ranging between 73 000 t and 380 000 t.

    Vale noted that the surplus vessel capacity was filled with high-grade iron-ore fines from other mines in its northern operations – Carajás IOCJ. Carajás IOCJ, with 65% of iron content, represents 40% of Vale's sales. Until 2020, Carajás IOCJ will account for more than half of Vale’s output.

    The high quality of the ore extracted from the new mine will give the company flexibility to blend it in ports in Malaysia, China and Oman, with product produced in the so-called south and southeast systems, in Minas Gerais, improving the pricing of the final product, as well as extending the life of the mines in that state.

    S11D is expected to reach full output by 2018, enough to fill 225 Valemax ships – the largest cargo carriers in the world. The S11D mine will boost Vale’s current 109-million-ton capacity to 230-million tons a year, while having a smaller environmental footprint than existing operations.

    The S11D project does not include tailings dams owing to a combination of the high-quality ore and state-of-the-art beneficiation technology. The beneficiation process does not need water, making environment-friendly dry-stacking tailings disposal methods feasible.

    The project has adopted other technologies such as the implementation of a truckless system, in which ore is mined without the need to use "off-road trucks", which reduces greenhouse gas emissions and particulate matter.
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    China halts over 100 coal-fired power projects

    China has ordered 11 provinces to stop 101 coal-fired power projects, some of which are under construction, with a combined installed capacity of more than 100 GW and an investment around 430 billion yuan ($62.30 billion), Caixin reported on January 17.

    In a document issued on January 14, the National Energy Administration (NEA) announced to suspend coal projects already under construction in some provinces and autonomous regions including Xinjiang, Inner Mongolia, Shanxi, Gansu, Ningxia, Qinghai, Shaanxi and other northwestern regions. These projects would no longer go ahead as part of measures outlined in the country's 13th Five Year Plan of Electricity Development.

    According to the document, China committed to cap coal-fired capacity below 1,100 GW by 2020, however, the new builds would have taken that figure to 1250 GW, breaching the government-set limit.

    Authorities asked provinces and multiples to stop approving coal plants back in March 2016, and in April implemented a "traffic light" approval system that shot down plans for 90% of upcoming plants. On September 23, 2016, the NEA suspended 15 coal-fired projects in nine provinces with combined capacity of 12.40 GW. In October, the NEA said it would postpone construction of some coal-fired plants that already had approvals.

    On November 7, 2016, the National Development and Reform Commission and the NEA jointly released the 13th Five Year Plan of Electricity Development, in which the country vowed to reduce coal-fired installed capacity to 55% of the total by 2020. To achieve the commitment, China should scrap and postpone coal-fired projects with capacity totaling over 150 GW during 2016-2020.

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    2017 regional de-capacity goals released to optimise coal, steel industries

    China's several provinces successively released their 2017 capacity cut goals for both coal and steel sectors, in order to further eliminate surplus capacity and optimize the industries.

    Coal-rich Shanxi province planned to slash 20 million tonnes per annum (Mtpa) of coal capacity and 1.7 Mtpa of steelmaking capacity this year. After curtailment of 23.25 Mtpa of coal capacity last year, overcapacity reduction and outdated capacity replacement will remain the top priority of the province in 2017.

    Hebei province in northern China will step up efforts to complete its de-capacity target set since 2013, which required 60 Mtpa of steel capacity, 61 Mtpa of cement capacity, 40 Mtpa of coal capacity to be cut by 2017.

    It meant the province will reduce coal and steel capacity of 7.42 Mtpa and 31.86 Mtpa this year.

    Jilin province voiced resolve in continuing de-capacity campaign in the new year, responding to the nation's supply-side structural reform. It planned to shed 3.14 Mtpa of coal capacity in 2017, and shut coal mines with annual capacity below 0.15 million tonnes.

    Meanwhile, Jilin-based Tonghua Iron and Steel Co., Ltd will be responsible for iron capacity elimination of 0.8 Mtpa in 2017.

    Guizhou province in southwestern China will close 120 coal mines this year, cutting 15 Mtpa of surplus capacity. The province also encouraged restructuring of coal producers, which required the number of coal mines to be halved and restructured producers to have annual production capacity of 0.3 million tonnes or more.

    Hubei province planned to shut all of its coal mines in the next two years, following coal capacity reduction of 10.11 Mtpa last year. A total of 15,429 layoffs will be resettled over 2016-2018.
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    Baosteel 2016 profits to surge 600-800pct on year

    Profit in Shanghai-based Baoshan Iron and Steel Co., Ltd. (Baosteel) was expected to surge 600-800% from the previous year in 2016, said the company lately.

    In 2015, Baosteel's profit stood at 1.013 billion yuan ($14.7 million), slumping 82.5% from the year prior, data showed.

    Meanwhile, Jiangsu Shagang Co., Ltd. and Fujian Sangang Minguang Co., Ltd. turned from losses to profit in 2016.

    Fujian Sangang Minguang predicted its net profit to be 538.6-742.9 million yuan in 2016, surging 180% year on year.

    The increase in profit was mainly attributed to rising steel prices and firm raw material prices, along with supply-side reform, a recovery in demand, and cost reduction at steel mills.

    During January-November last year, total profit at China's 99 major steel makers stood at 33.15 billion yuan, compared with a loss of 52.91 billion yuan in the same period of 2015.
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    Whitehaven reports solid coal sales

    Whitehaven Coal, which mines in New South Wales' Gunnedah basin, has reported record quarterly and half-year metallurgical coal sales for the three and six months ended December.

    The miner reported on Monday that quarterly metallurgical coal sales had reached 1.2-million tonnes in the three months to December, and two-million tonnes in the interim period.

    Total coal sales for the quarter increased by 7% on the previous corresponding period to 5.3-million tonnes, with Whitehaven reporting that run-of-mine (RoM) coalproduction had reached 5.5-million tonnes during the quarter, up 2% on the previous corresponding period.

    Whitehaven told shareholders that the Maules Creek minedelivered 2.46-million tonnes of coal in the December quarter, 40% higher than the 1.75-million tonnes produced in the previous corresponding period.

    Production at the Narrabri mine was adversely impacted by geotechnical conditions during the quarter under review, with RoM production dropping by 24% on the previous corresponding period, to 1.87-million tonnes.

    The three Gunnedah opencut mines produced 1.13-million tonnes RoM coal during the quarter, and some 2.31-million tonnes in the six months to December. The Tarrawonga mineproduced 639 999 t, the Rocglen mine 242 000 t and the Werris Creek mine 246 000 t during the three months to December.
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    Iron-ore opens 2017 with a bang after flaying skeptics last year

    Iron-ore has carried last year’s bullish momentum into the start of 2017, with prices rallying to a two-year high amid speculation that China’s demand for overseas ore will hold up even as the world’s largest miners bring on new capacity.

    Ore with 62% content in Qingdao in China climbed 3.9% to $83.65 a dry metric ton, according to Metal Bulletin The commodity has risen 6.1% in 2017 after surging more than 80% last year.

    iron-ore has more than doubled since bottoming in December 2015 amid better-than-expected consumption in China after government stimulus. The latest upswing has been supported by signs that policy makers in the world’s top steelmaker are redoubling efforts to clamp down on outdated mill capacity, lifting steel prices and buttressing iron-ore. The advance has come even as banks including Barclays outline the case for weaker prices later in the year, and as Brazil’s Vale SA starts up output at its largest mine.

    “One of the major factors driving iron-ore prices at present is the greater emphasis by Chinese authorities on high-end steel products,” said Gavin Wendt, founding director and senior resource analyst at MineLife. “The balance of production is shifting toward premium steel products. China requires more imported iron-ore from Brazil and Australia to meet its requirements.”

    Earlier in Asia, SGX AsiaClear futures in Singapore jumped as much as 6.4% to $82.12 a metric ton, the highest level since October 2014, as the most-active contract in Dalian soared 7.6%. Rio Tinto Group rose as much as 2.4% in London while BHP Billiton added 0.9%.


    “Fundamentals do not explain the full price movement since last week, and that’s why I think speculation is playing the main role,” said Di Wang, an analyst at researcher CRU Group in Beijing. Steel and iron-ore futures climbed last week after the government vowed to continue capacity-cutting measures.

    Figures on Friday showed that China imported a record 1.024-billion tons in 2016, up 7.5% from a year earlier, with most cargoes from Australia and Brazil, the world’s top shippers. Purchases last month totaled about 89-million tons, compared with 96.3-million tons a year earlier.More supply is on the way, and stockpiles at ports in China are already at a record. In Brazil, Vale has been loading the first ore from its new S11D mine since Thursday, according to North Port Operations Manager Walter Pinheiro Filho. The $14-billion venture is the industry’s largest project.

    iron-ore is probably destined to retreat later this year as seaborne supply expands and demand plateaus or eases, according to Barclays. Current levels aren’t sustainable, analyst Dane Davis told Bloomberg in a January 12 interview.

    “Our key call, and the message we’re putting forward, is that the $80 price level does not represent a new normal for iron-ore prices, instead it’s a temporary blip,” New York-based Davis said in an interview. “I’m an analyst, not a psychic. But I do think over time, demand should start to slow down.”
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    China revises scrap processing guidelines in bid to starve induction furnaces

    China unveiled updated regulations for entry into the iron and steel scrap processing industry Friday, its latest move as part of a battle waged against induction furnace operators -- this time by starving them of a key raw material: scrap.

    The sale of scrap to induction furnace-based producers of construction steel will be forbidden, according to regulations that take effect from March 31, 2017, released by the Ministry of Industry and Information Technology.

    Selling scrap to operators of electric arc furnaces smaller than 30 mt will also become illegal, with with exception of high-alloy EAFs, the ministry said.

    China has set the complete elimination of induction furnaces as the cornerstone of this year's supply side structural reforms in steel, China Iron & Steel Association chairman Ma Guoqiang said last week.

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    Coal India's Central Coalfields raises coking coal prices

    Indian state-owned Coal India Limited's subsidiary Central Coalfields Limited has raised its coking coal prices with effect from Saturday.

    CIL did not specify how much prices had been raised in a filing to the Bombay Stock Exchange, saying only that it may help CIL earn Rupee 8.99 billion ($13.1 million) in additional revenue in the balance of fiscal 2016-17 -- January 13-March 31 -- and Rupee 2.22 billion in the next fiscal year.

    The increase in price was the result of subsuming a washery recovery charge or WRC, which was charged separately on non-linked washery grade coking coal, it said.

    CIL's unit Bharat Coking Coal Limited has also raised coking coal prices, by about 20%, which will help CIL earn additional revenue of Rupee 7.02 billion for the remainder of fiscal 2016-17 and Rupee 29.86 billion in fiscal 2017-18, the company said.

    Sources said the hikes added to cost pressures on Indian steelmakers already grappling with subdued demand and high import prices for coking coal.
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    Peabody Equity holders vs Creditors.

    A former lobbyist for Peabody and past chairman of the World Coal Association, Palmer naturally believes that coal’s prospects have rekindled with the administration of President-elect Donald J. Trump and Asia’s future growth. He points to the 20% rise in shares of rival Arch Coal (ARCH) since its October emergence from bankruptcy (see also “Arch Coal’s Shares Could Catch Fire,” Dec. 3, 2016) as a foretaste of the windfall he thinks Peabody’s reorganization plan would give to his former colleagues in management and to the investors who’d become the company’s new owners—prominent among them, Elliott Management, Discovery Capital Management, and Aurelius Capital Management.

    It’s not quite so clear whether Peabody’s postbankruptcy stock will taste sweet or like ash. The company didn’t respond to our queries and the hedge funds declined to comment. In recent weeks, the spot price for the coking coal used in metallurgy has receded 40%, and next quarter’s contract price will drop. Unsecured Peabody debt, which would convert into most of the new company’s equity under the reorganization plan, has traded down from 65 cents on the dollar to around 40. Expectations for Peabody’s resurgence have apparently cooled.

    Peabody’s current stock has meanwhile returned from $16 to $4.92, leaving it with an equity market valuation of $91 million. Shareholders like Palmer will ask the bankruptcy judge to appoint a committee to represent them in Peabody’s proceeding. But even with an equity holders’ committee, it’s unlikely that the bankruptcy will leave anything for existing stockholders. In bankruptcy, creditors rule and most Peabody creditors have already agreed to support the plan that cancels the stock.

    Before it sought bankruptcy protection last year, Peabody had been in the coal business for 133 years. Its stock market capitalization was around $20 billion in 2011 when it laid on debt to acquire the Australian metallurgical coal resources of Macarthur Coal to supplement its thermal coal business in the U.S. Thermal coal might sell for $50 a ton for the steam boilers of power plants, but scarcer coking coal shot above $250 a ton in 2008 and again in 2010–luring many coal companies to buy “met” coal resources.

    UNFORTUNATELY FOR MINERS, prices for both kinds of coal started a multiyear slump in 2012. Thermal coal’s share of U.S. power generation fell from nearly 50% to 30% as natural gas became abundant and cheap, thanks to fracking. As shown in the chart above, met coal prices also sank as China mined more, but then decided to decelerate its steel output. Peabody shares dropped with coal’s price. Last April, Peabody started bankruptcy proceedings to reduce the more than $7 billion in debt owed by its U.S. companies. Although its mines were still cash flow positive, Peabody lost money in 2015 and said restructuring would let it ride out “the storm that has beset the coal industry.”

    As disgruntled shareholders now point out, the storm soon passed. Not long after Peabody published an August 2016 business plan that forecast a price of just $95 a ton for met coal in 2017, market prices for both met and thermal coal staged a dramatic recovery. Benchmark contract prices for the largest steel mills rose to $200 for 2016’s fourth quarter—twice Peabody’s guidance–because of production bottlenecks in Australia and cutbacks Beijing imposed on miners. By December, the benchmark for 2017’s first quarter was set at $285 and spot pricing neared $300.

    On Dec. 8, hedge fund Mangrove Partners asked the judge to give existing shareholders a seat at the table, arguing that resurgent coal prices lifted the miner’s cash flows sufficiently to raise Peabody’s enterprise value above the $7.8 billion owed creditors, leaving equity holders “in the money” if only they could get a piece of the reorganized business. Otherwise, Mangrove’s motion warned that Peabody’s creditors would get a windfall like the one yielded by Arch Coal’s bankruptcy. In July, Arch’s advisors estimated that the stock market value of a reorganized company wouldn’t exceed $666 million–but in October, Arch exited bankruptcy at a $1.5 billion market cap and is now valued near $2 billion.

    Mangrove wouldn’t comment, but the equity holder’s concerns were shared in another court filing by a group of five fund managers who acquired Peabody debt that’s just above equity in the company’s capital structure.

    Just before Christmas, the company filed its reorganization plan with the court. It took passing note of the rise in coal prices, and nudged up its forecast to an average of $135 a ton for met coal in 2017. Even so, the plan stipulated an enterprise value for Peabody of just $4.3 billion. Because that number is billions less than the company’s debt, the plan provides nothing for current stockholders. Instead of cash, the plan would give unsecured creditors like Elliott most of the stock in a new Peabody. Top management, which owned less than 1% of the current stock, stands to get up to 10% of the new shares.

    Creditors have lined up behind the plan, to the disappointment of shareholders like Mark Gottlieb, a trader who notes that bondholders were offered deep discounts on the new Peabody’s stock if they quickly agreed to the plan.

    Shareholders may fight about the value of the Peabody enterprise–as shareholders did last year in the contentious bankruptcy of zinc producer Horsehead Holding. The judge in that case gave careful consideration to the stockholders’ arguments. Then he approved the reorganization plan that wiped them out. 

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    Hubei to shut all coal mines in next two years

    Hubei province in central China planned to shut all of its coal mines in the next two years, responding to the nation's supply-side structural reform, said Acting Governor Wang Xiaodong at a meeting held on January 15.

    In 2016, the province slashed 10.11 million tonnes per annum (Mtpa) of coal capacity, outstripping the 8 Mtpa target set for 2016-2018.

    Meanwhile, 3.38 Mtpa of steel capacity was cut during the year.

    A total of 15,429 layoffs will be resettled over 2016-2018.

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    India Dec coal imports down 25pct on year

    Coal imports by India fell 25% on the year to 14.31 million tonnes in December, due to higher availability of domestic fuel, mjunction, an online procurement and sales platform floated jointly by state-run SAIL and Tata Steel said.

    "The year-on-year imports were lower because public sector power generation companies have virtually stopped buying imported coal as they are getting almost sufficient supplies of domestic coal," mjunction CEO Vinaya Varma said.

    Further, Varma said, there was sharp increase in non-coking coal imports in December as compared to November last year as non-power sector consumers started stocking up the material in the aftermath of softness in international prices towards end of November.

    "International coal prices softened by 15% in the first week of December 2016 compared with the prices prevailing in the third week of November and this prompted price-sensitive Indian consumers to bring in higher quantities of imported coal that has consistency in quality," Verma added.

    Expressing concern over import of coal despite being surplus in the dry fuel, Coal and Power Minister Piyush Goyal had earlier said that Coal India has set a target to replace about 15 million tonnes of imported coal with indigenous fuel in the next few months.

    Helped by a record coal production by the world's largest coal miner Coal India, India reduced its import bill of the dry fuel by more than Rs 28,000 crore in the last fiscal.
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    China's top coal province to cut 20 mln T of capacity in 2017 - Xinhua

    China's top coal-producing province Shanxi will cut 20 million tonnes of output capacity this year, state news agency Xinhua reported.

    Tackling excess coal production capacity will remain the provincial government's priority in 2017, Xinhua quoted Shanxi Governor Lou Yangsheng as saying on Saturday.

    The reduction cuts should be achieved through market and law-based means, Lou said, while mergers and acquisitions in the sector would also be encouraged.

    Shanxi, in the country's north, accounts for about a quarter of coal production in China, which has been working to curb excess capacity and a supply glut of the fossil fuel. The province shed 23.25 million tonnes of coal production capacity and shut down 25 coal mines last year, Xinhua said.

    The province plans to cap output and consolidate the industry around big producers over the next four years in a bid to boost efficiency, according to a blueprint by the provincial government. The province's annual coal output would be capped by 2020 at 1 billion tonnes and capacity at 1.2 billion tonnes annually by 2020.
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    Tokyo Steel raises product prices for 3rd straight month; cites China pickup, Olympics

    Jan 16 Tokyo Steel Manufacturing Co Ltd , Japan's top electric-arc furnace steelmaker, will raise product prices for a third straight month, citing firmer international prices and domestic building projects getting under way for the 2020 Olympics.

    Tokyo Steel, which makes beams and bars used for in the construction industry, said on Monday product prices will climb by about 2-4 percent for February delivery, marking the first time in nearly six years that it has raised prices for three consecutive months.

    Managing director Kiyoshi Imamura said at a news conference there is room for the company's prices to move even higher later this year. Tokyo Steel's pricing strategy is closely watched by Asian rivals such as South Korea's Posco and Hyundai Steel Co, as well as China's Baoshan Iron & Steel Co (Baosteel).

    "The steel market has been under pressure due to massive China production and exports in the past two years," Imamura said, "but things look different now as China's demand has recovered while its exports have declined."

    Among Olympic construction projects under way in Tokyo, Imamura cited the building of the main stadium to host the games, with work on the Olympic village for athletes due to start this month.

    The latest move would translate to price rises of 1,000-3,000 yen ($8.80-26.30) a tonne, Imamura said. ($1 = 114.0500 yen)
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    Shining iron-ore future for Sierra Leone possible as Chinese investors commit

    The $700-million planned injection by Chinese State-owned mining company Shandong Iron and Steel into an iron-ore processing plant at the Tonkolili mine, in Sierra Leone, has further cemented the West African region’s strong mining outlook, BMI Research said on Friday.

    The new investment, which was described as the largest industrial investment in the country's history, followed Shandong’s acquisition of the remaining 75% stake it did not own from African Minerals in 2015 after the Ebola crisis halted operations and left the former owner in debt.

    “This follows a growing trend of Western miners pulling out of the region owing to rising costs and debt loads [and] being replaced by risk-tolerant, government-backed Chinese investors,” BMI said in its latest industry trend analysis.

    The emerging trend seemingly bodes well in certain respects for Sierra Leone, with BMI’s view that China’s provision of additional domestic infrastructure stimulus measures have propped up prices, contributing to a “very positive” past year for iron-ore.

    “We believe Sierra Leone's iron-ore production will remain on an uptrend in the coming years and the country will outpace Mauritania as the second-largest producer in Africaby 2019.”

    The Tonkolili mine is considered to have access to some of the largest iron-ore resources in Africa.

    “The mine's current production capacity is 20-million tonnes a year and it was initially planned that the mine would eventually produce up to 35-million tonnes of iron-ore a year. All of the iron-ore mined at Tonkolili will be shipped to China, according to Shandong Iron And Steel,” BMI Research explained.

    However, despite this, BMI Research maintained its forecast of a slowdown in iron-ore production growth in Sierra Leonefrom 15% in 2017 to 4.2% in 2021, as the Chinese-backed investment project was focused on the processing of iron-oreand was unlikely to impact its output significantly.

    While the processing of the ore domestically could boost the labour market, it is still unclear whether local workers will be selected for the value-addition process.

    “Further, the total contribution of Sierra Leone's miningindustry as a percentage of gross domestic product (GDP) is no longer as significant as it once was and will continue to decrease in the coming years, even as GDP growth increases,” the firm added.

    GDP growth is expected to average less than 7% over the next ten years.

    “Our view for iron-ore prices to moderate towards the end of 2017 and in 2018 could even put the whole investment at risk, which would be a big blow to an economy that has only recently started recovering from the Ebola crisis,” BMI Research concluded.
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    China's key steel mills daily output edges up in late Dec

    Daily crude steel output of China's key steel mills edged up 0.49% from ten days ago to 1.66 million tonnes over December 21-31, according to data released by the China Iron and Steel Association (CISA).

    The country's total crude steel output was estimated at 2.18 million tonnes each day on average during the same period, edging up 0.46% from ten days ago, the CISA said.

    China's daily crude steel output averaged 2.20 million tonnes during 2016, and that during December was 1.71 million tonnes.

    By December 31, stocks of steel products at key steel mills stood at 12.31 million tonnes, down 3.31% from ten days ago, the CISA data showed.

    In late December, the average price of crude steel dropped 242 yuan/t from ten days ago to 2,720 yuan/t, while that of steel products rose 7 yuan/t from ten days ago to 3,667 yuan/t.
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    Brazil's Usiminas unit saw no risk from capital reduction -source

    Brazilian steelmaker Usinas Siderúrgicas de Minas Gerais SA's plan to tap excess cash from a mining subsidiary that was rejected this week was found not to pose any potential financial risk for the unit, a person briefed on the matter said.

    In recent months, Usiminas sought tapping excess cash at the Musa Mineração Usiminas SA through a capital reduction, to comply with terms of a 6 billion-real debt refinancing accord with banks. The initiative was rejected earlier this week by Musa shareholder Sumitomo Corp.

    According to the person, executives at Musa ran simulations under which the 1 billion-real ($315 million) capital reduction would take place, with none of them pointing to any cash strain.

    The simulations were run late last year at the behest of Sumitomo, the person said. Musa offered to formally present results to the management and board of Usiminas so they were aware of the implications of the plan ahead of the Jan. 10 vote, the person said.

    Sumitomo vetoed the plan that day, claiming it could put at risk Musa's financial position for the years to come. Belo Horizonte, Brazil-based Usiminas declined to comment, as did Musa and Sumitomo. The person requested anonymity due to the sensitivity of the issue.

    Usiminas has vowed to legally challenge the veto through any "valid legal means." The veto bars the debt-laden steelmaker from tapping cash from Musa, in which Sumitomo has a 30 percent stake. Analysts have said that Musa is not in urgent need to deploy cash because it is not currently undertaking significant investment plans.

    The situation is another chapter in a 2 1/2-year rift between the steelmaker's two top shareholders - Nippon Steel & Sumitomo Metal Corp and Techint Group's Ternium SA . Ternium and Nippon Steel have been battling over control of Usiminas, which is suffering with Brazil's worst recession ever and high debt.

    This week, Ternium called on Usiminas Chief Executive Officer Rômel de Souza to accelerate the tapping of Musa's cash before the debt refinancing accord's June 2017 deadline.

    This week, Reuters reported, citing documents, that Souza and Musa President Wilfred Brujin had unilaterally agreed to the use of Musa's excess capital without the acquiescence of Usiminas' board. Souza is also the chairman of Musa.

    The document from November showed that two Nippon Steel-appointed members of the Usiminas board suggested Musa could extend a loan to Usiminas to meet the refinancing deadline of June 2017.
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    Coal’s recovery too good to resist for world’s biggest exporter

    Indonesia will exceed its coal production target for another year as miners cash in after prices recovered from a five-year collapse.

    The world’s biggest exporter will produce about 489-million metric tons this year, 18% above the government-mandated target, according to energy ministry forecasts. That’s up from last year’s output estimated at 434-million tons and would be at least the third year in a row that the nation has produced more than it planned.

    Southeast Asia’s largest economy has been trying to cap its coal output in an attempt to preserve resources for future generations of Indonesians. That’s proving a challenge as resurgent prices tempt producers to maximise output from new and existing mines to meet demand at home and abroad.

    “Actual annual production will generally be higher than targeted because prices are now higher,” Bambang Gatot Ariyono, the director-general of coal and mineral resourcesat the energy and mineral resources ministry, said January 5. “It compensates for previous losses.”

    Coal more than doubled in 2016 after tumbling to the lowest in almost a decade as efforts by China to reduce excess supply pushed prices higher and faster than anyone anticipated. The recovery is breathing new life into an industry hammered by overcapacity and shrinking demand, reviving share prices of miners around the world, from Indonesia’s PT Bumi Resources to Australia’s Whitehaven Coal.

    A gauge of Indonesian mining companies surged more than 70% in 2016, dwarfing the 15% advance in the JakartaComposite index. The gauge slumped 41% in 2015, its worst year since 2008.

    Bumi Resources, Indonesia’s biggest coal producer, expects to mine more than 90-million tons this year, compared with 86-million tons in 2016, corporate secretary Dileep Srivastava said in an e-mail. PT Adaro Energy, operator of the country’s largest mine, didn’t provide estimates for 2017 but the company said in e-mail that it “will continue to maintain production discipline and improve efficiency to grow the company sustainably in the long term.”

    The government isn’t willing to force companies to curtail output from newly constructed mines after granting them production licences, according Ariyono from the EnergyMinistry. “We can’t tell them to stop,” he said.

    A growing share of Indonesia’s output is remaining in the country, with 25% of supply this year forecast to be consumed domestically, up from 21% in 2016 and 19% in 2015, according to Energy Ministry estimates. The government sees local demand at 121-million tons this year, up from an estimated 91-million tons in 2016, according to the data.

    Still, Indonesia exports most of what it mines, with China, India, South Korea, and Japan among its biggest customers. With international prices now showing signs of peaking, Indonesia isn’t being complacent about the longevity of the rally, according to the country’s coal mining association.

    “Producers view that current high prices can’t be used as future reference,” said Hendra Sinadia, deputy executive director of the Indonesian Coal Mining Association.

    Thermal coal in Indonesia climbed for a seventh month to $101.69 a metric ton in December, the highest since 2012 and the longest run of gains in data compiled by Bloomberg since 2009. Australia’s Newcastle coal more than doubled last year to almost $110 a ton in November, before slipping to about $84 this month.

    China, which produces and consumes more than any other country on the planet, has worked overtime to cool the market, reversing some output restrictions and encouraging more production before winter. The nation’s output rose in November to the highest level in a year, according to the National Bureau of Statistics.

    “China will re-balance between cutting production and meeting domestic demand,” Sinadia said. “They are doing this right now.”

    Indonesia’s miners are also trying to wean themselves off China, with exports shrinking over the past three years. The nation accounted for almost 20% of Indonesia’s total overseas shipments in 2015, down from almost 31% in 2013, according to data from the state statistics agency. Over the same period, India’s coal purchases rose to 34% of Indonesia’s exports, from 28% in 2013, the data show.

    “When Bumi realised that China growth was showing signs of a slow down three to four years ago we proactively diversified into other markets such as India and developed a few new ones like Philippines,” Bumi Resources’s Srivastava said. “We prefer not to be overly exposed in any single market but to have a diversified market exposure.”

    Indonesia’s exports to China may fall again in 2017 as rising domestic output erodes its appetite for imports, according to Michelle Leung, a Hong Kong-based analyst at Bloomberg Intelligence.

    “Exports will depend on the level of demand in the seaborne market,” said  Rory Simington, principal coal analyst at Wood Mackenzie. “Indonesian producers have the flexibility to satisfy demand from China, India and rest of the seaborne market, provided the price is right.”

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