Mark Latham Commodity Equity Intelligence Service

Thursday 6th October 2016
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    Pityana dubs Zuma “sponsor of corruption” in breathtaking attack

    ANGLOGOLD Ashanti chairman, Sipho Pityana, today launched an all-out attack on President Jacob Zuma calling for his immediate departure from office and describing him as a man “who cannot be trusted”.

    Pityana was speaking at the Joburg Indaba conference being held in Sandton and he launched his attack on Zuma after being warned from the podium by the speaker ahead of him – deputy minister of mineral resources Godfrey Oliphant – to tone down his comments.

    Oliphant said: “You can’t take South Africans to the ballot box. The president has to run his term. If you carry on like that we will return in kind”.

    In response Pityana stated flatly: “I have been asked to behave myself but, sorry deputy minister, Zuma must go for the sake of the country. The elephant in the room is a president who lacks integrity; the elephant in the room is a president who is without honour”.

    Pityana ended his speech declaring: “We have to seize the moment and save South Africa. I have now committed treason”, and was given a standing ovation by the great majority of the audience.

    According to conference chairman, Bernard Swanepoel, Oliphant was not scheduled to address the conference, but had “gatecrashed it” at the last moment.

    Pityana described South Africa as a country in crisis on several fronts of which the most pressing was the high level of corruption in government and state enterprises which was now on such a scale it was being referring to as “state capture”.

    He described Zuma as “… a president who at best is missing in action and, at worst, he is a leader at the very root of this crisis – one who has abrogated his constitutional duties” as well as “a president who literally laughs off any suggestion that government be held to a higher standard – and, is, in fact, the sponsor-in-chief of corruption”.

    He added that: “Our finance minister – a rare example of probity and good governance – a distinguished public servant who is leading the efforts to maintain our investment grade credit rating is hectored and intimidated at every turn. Ratings agencies are sneered at. Businesses are hobbled at any opportunity. The needs of ordinary people are ignored”.

    Pityana was also critical about the policy of silence on key national issues such as corruption which had been followed to date by much of the business community.

    He commented: “We are at a watershed moment for our young democracy. Many in our leadership – most notably our President – have an agenda that appears – to me at least – to be entirely at odds with addressing the increasingly desperate needs of our country.

    “It cannot be business as usual. We need to wake up to what our young students sense already which is that the business community has a vital role to play in saving South Africa.

    “Business is present in every home in our country in one way or another yet it is a missing voice in meaningful discourse on the most important issue of the day”.

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    Innogy IPO to be priced at upper end of range

    Utility RWE is expected to price the shares of Innogy, which bundles its renewables, network and retail units, at the upper end of the target range, Innogy said on Wednesday, signalling strong demand for Germany's largest IPO since 2000.

    Investors will likely pay a price between 35 and 36 euros ($39.29-40.41) per share in the offering, a spokeswoman for Innogy said, the upper end of a 32-36 euro target range communicated last month.

    Would-be shareholders are keen on Innogy's high share of regulated businesses, giving them clarity over its profits for several years into the future at a time when interest rates remain at record lows.

    Books are covered twice already at a price of 35 euros apiece, a person familiar with the listing said, amounting to orders worth more than 9.7 billion euros. For any IPO to go through smoothly bankers consider it necessary to get bids for twice the volume of shares available.

    The person added one large U.S. investment fund alone had placed an order for stock worth more than 700 million euros, following a similar order from asset manager BlackRock, which has committed to buy 940 million euros of Innogy shares.

    As part of the IPO, Innogy will issue 55.6 million new shares while parent RWE aims to sell as many as 83.3 million existing shares, valuing the unit at up to 20 billion euros, more than twice RWE's current market capitalisation.

    Parent RWE, which will hold at least 75 percent in Innogy following the listing, had already received orders for all of the shares on offer on Sept. 26, the first day of the subscription period. The stock is due to start trading on Friday.
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    Oil and Gas

    Aramco price cuts

    Aramco cuts Nov light oil pricing to US by 10 cents; Europe by 45 cents, Asia by 25 cents, Med by 10 cents


    Saudi Arabia, the world’s largest crude exporter, cut pricing for November oil sales to Asia and Northwest Europe and for most grades to other regions amid a global supply glut.

    State-owned Saudi Arabian Oil Co., known as Saudi Aramco, lowered its official pricing for Arab Light crude to Asia by 25 cents a barrel to 45 cents less than the regional benchmark, it said Wednesday in an e-mailed statement. The company had been expected to widen the discount for shipments of Arab Light by 30 cents a barrel, to 50 cents less than the benchmark for buyers in Asia, according to the median estimate in a Bloomberg survey of six refiners and traders.

    OPEC last week agreed to trim oil production for the first time in eight years after prices dropped to about half their levels in 2014. The decision meant the group abandoned a two-year-old, Saudi-led policy of letting members pump as much as possible to push higher-cost producers out of the market. That policy has contributed to a global supply glut, with output from Organization of Petroleum Exporting Countries reaching record highs.

    “Aramco’s mandate is still to target market share,” Matt Stanley, a Dubai-based oil broker at Freight Investor Services, said by phone. “They are going to be as competitive as possible even if OPEC has agreed to cut production to help prices.”

    Record Output

    Brent crude has gained about 13 percent since OPEC agreed in Algeria to trim output to between 32.5 million barrels and 33 million barrels a day. The 14-nation group pumped a record 33.75 million barrels a day in September, according to a Bloomberg survey. Saudi Arabia’s production slipped to 10.58 million barrels a day last month from 10.64 million daily in August, according to the survey. Brent gained 1.9 percent to $51.81 a barrel at 2:06 p.m. in London.

    Excess crude supply will continue to weigh on prices, JBC Energy GmbH said Monday in a note. Crude supplies may exceed demand by 2 million barrels a day in October as seasonal autumn refinery maintenance curbs demand, the Vienna-based consultant said.

    “We see a strong likelihood of increased pressure on prices over the next month,” JBC said.

    U.S. Pricing

    Saudi Aramco cut the premium for Arab Light crude to the U.S. by 10 cents a barrel to 35 cents a barrel more than the benchmark, according to the statement. Extra Light was the only grade increased for U.S. buyers, with the premium rising 20 cents to $1.80 a barrel. Aramco cut all pricing for Northwest Europe and for the Mediterranean region, widened the discounts on Light and Heavy grades, raised pricing for Extra Light and kept Medium crude unchanged.

    Middle Eastern producers are competing with cargoes from Latin America, North Africa and Russia for buyers in Asia, its largest market. Producers in the Persian Gulf region sell mostly under long-term contracts to refiners. Most of the Gulf’s state oil companies price their crude at a premium or discount to a benchmark. For Asia the benchmark is the average of Oman and Dubai oil grades.
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    Iraq has invited journalists and OPEC secondary sources to Baghdad/Basra

    Iraq has invited journalists and OPEC secondary sources to Baghdad/Basra to share "the most accurate figures of Iraqi oil production"

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    OPEC, non-OPEC producers plan informal meet in Istanbul to discuss Algiers deal: Algeria

    OPEC and non-OPEC oil producers plan an informal meeting in Istanbul Oct. 8-13 to discuss how to implement a production deal OPEC members reached in Algiers last month, Algerian Energy Minister Nouredine Bouterfa has told local Ennahar TV.

    In an interview scheduled be broadcast on Thursday, Bouterfa said the Algiers deal to cut output would be in force for up to a year.

    Oil prices rose about 7 percent in September, ending up a second straight month, after OPEC unveiled plans in Algiers to reduce output to between 32.5 million and 33.0 million barrels per day. Details are still being worked out among producers.
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    Oil Tankers Piling Up in North Sea Highlight Glut Facing OPEC

     A pile up of tankers waiting in the North Sea suggests a glut is building again in the market where benchmark crude is traded, highlighting the task facing OPEC as it seeks to rein in a global glut.

    At least 10 tankers are at or near locations off the coasts of England and Scotland where they must wait to transfer their cargoes, according to vessel-tracking information compiled by Bloomberg. The increase is happening amid seasonal work at the U.K.’s largest oil field.

    "The physical crude market is already showing signs of weakness with floating storage threatening to build up in the North Sea, in spite of ongoing field maintenance," according to a research note from JBC Energy GmbH. It cited the vessel pile up at the ship-to-ship transfer sites as one of the indicators of a surplus.

    The Organization of Petroleum Exporting Countries is trying to prop up oil prices despite signs that a worldwide supply surplus isn’t getting any better. The group is now ironing out the details of a pact, announced last week in Algiers, that would curb output to 32.5 million to 33 million barrels a day.

    The pact triggered a rally in crude prices, which in turn spurred a rush by U.S. shale producers to lock in future prices.

    Libya, Nigeria Rebound

    The OPEC accord exempts Iran, which is emerging from international sanctions, from production cuts. While precise details of the plan have yet to be thrashed out, Nigeria has also said it won’t have to comply and Libya is unlikely to be asked to because its oil production is a fraction of what it should be. The deal will be finalized at the end of next month.

    European refiners "have more options again now that Nigerian and Libyan loadings are rebounding" and crude and petroleum-product stocks remain high, JBC Energy analyst Eugene Lindell said in an e-mail.

    There are signs that oil futures respond to the day-to-day changes in the physical oil market. Brent contracts slumped more than 10 percent from mid-July to early August after it emerged that traders had amassed a fleet of tankers that were storing barrels in the North Sea. By mid August, many of those tankers had gone, and futures more thanreversed their decline.

    Daily exports of the crude grades that comprise the Dated Brent benchmark are set to rise to a seven-month high in November, according to loading programs obtained by Bloomberg.

    Shell offered Forties crude this week at a discount of as low as 80 cents per barrel below Dated Brent on a ship-to-ship transfer basis. That compares with the last such deal done on September 20 from Total to Shell at a 5 cents premium.

    Meanwhile, the structure of contracts for difference -- derivatives used in the North Sea for speculation and hedging -- returned to contango, where prices in the future are higher than those at present. A forward curve in contango is an indication of an oversupplied market where prompt cargoes sell at lower prices than those for later delivery.
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    PIRA Energy expects oil surplus to be gone by second half of 2017

    The surplus in crude oil supply that has led to a two-year price rout has been eroding since the second quarter and will be "gone" by the beginning of the second half of 2017, PIRA Energy Group founder Gary Ross told reporters on Wednesday.

    A massive glut in oil brought crude prices crashing from the $100 a barrel range in mid-2014 to as low as about $27 early this year.

    Organization of Petroleum Exporting Countries last week agreed to modest oil output cuts in the first such deal since 2008, limiting production to a range of 32.5 million-33.0 million barrels per day.

    Global benchmark Brent crude prices have risen more than 10 percent in the week since the deal.

    The decision by OPEC to embrace production cuts will help move crude prices toward a target of $50-$60 per barrel, said Ross, who is now chairman of the consultancy.

    OPEC's policy has shifted as Saudi Arabia is targeting that price range and Iran has become more willing to accept an agreement, Ross said.

    On Wednesday oil prices rose about 2 percent, touching their highest since June after an unexpected drop in U.S. crude stocks.[O/R]

    Speaking at a news conference on the sidelines of PIRA's executive energy conference, Ross said that U.S. shale producers were likely to hedge more selectively after OPEC decided to limit output, whereas previously they looked to lock in future output close to the $50 a barrel level.

    Shale producers and oil-consuming companies were under-hedged, he said, adding that industrial and airline buying would support prices.

    On the upcoming U.S. presidential election, Ross said, if Democrat Hillary Clinton wins, the stock market will likely rally and raise the value of all risk assets, including oil and gas.

    "People are going to be relieved that Trump is not there, because of his uncertain policies," Ross said.

    Energy policy has come up only intermittently during the 2016 campaign.

    This is the first time in 20 years that gasoline prices have not been a major topic of debate during a U.S. presidential election, said Jim Messina, campaign manager for President Barack Obama who also spoke at the news conference.
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    Brazil Opens Oil Fields to Foreign Firms in Major Policy Shift

    Brazil’s Congress voted on Wednesday night to open up its pre-salt oil fields to foreign investors by scrapping Petroleo Brasileiro SA’s obligation to be the area’s sole operator.

    The legislation was approved by a 292-to-101 vote, following a bad-tempered debate during which opponents, many dressed in the orange jumpsuits of the state-controlled oil company, repeatedly attempted to delay proceedings. Various amendments to the legislation will be debated next week before President Michel Temer signs it into law.

    In a significant change to Brazil’s offshore oil industry regulations, companies other than Petrobras can now operate blocks in the largest deep-water deposits discovered this century. Until now the heavily indebted state-controlled oil producer was legally obliged to operate all the pre-salt fields with a 30 percent minimum stake.

    Legislation to open up the area to foreign investors began under former President Dilma Rousseff, but many within her left-wing Workers’ Party were deeply hostile to the idea. Tuesday’s vote, backed by the Petrobras leadership, marks the most investor-friendly change in regulation since the 1997 oil law that ended the state company’s monopoly in Brazil.

    "It’s a very important sign that the government is in control of this process to open up the industry," said Milton Costa, the secretary-general for the Brazilian Petroleum Institute, or IBP, an oil industry lobbying group. "There’s no way Petrobras can handle the pre-salt requirements by itself."

    First Pick

    Petrobras will have the first pick of the fields in the area, according to the new regulation. Since he took over the running of the company on June 2, Petrobras CEO Pedro Parente has repeatedly warned that its obligation to participate in all investments would delay pre-salt exploration due to financial constraints. The old rule also limited the company’s freedom to participate only in fields of its choice, according to Parente.

    The congressional vote eases nationalistic oil policies that have been in place since 2007, the year Brazil announced it had discovered the largest group of offshore deposits this century in a region where the oil is trapped under a layer of salt, miles below the seabed.

    After the discovery, Brazil suspended all bidding rounds while Congress discussed new regulation designed specifically for the pre-salt region. The law passed in 2010 and in 2013 established the rules for oil auctions. But since then, Petrobras has cut investments by more than a half and lower oil prices have reduced the profitability of the highly costly deep-water fields.

    ‘Handing Over’

    No companies competed against a Petrobras-led consortium at the first and only auction of the deep-water blocks. Nevertheless, opposition to foreign ownership of Brazilian natural assets remains an article of faith for many on the left.

    "We are handing over on a platter control of an area that we discovered and over which we have jurisdiction to multinationals,"said Jandira Feghali, from the opposition Communist Party of Brazil.

    The new regulations will attract investment as operators tend to set the development strategy and rhythm, according to IBP representative, Mauro Andrade. They also choose the technology applied in the fields.

    The country still needs to clarify the rules governing field boundaries, local content requirement and whether to extend a tax incentive regime beyond 2020 for the oil industry to generate competition for the next bidding round, he said. Brazil expects to offer new pre-salt acreage as early as 2017.

    "Brazil has taken an important step, but if the country doesn’t address these three issues there will be still uncertainty ahead," he said.
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    Russia's Rosneft, Indonesia's Pertamina agree on refining, upstream JVs

    Russian state oil company Rosneft and Indonesian state energy company Pertamina have agreed a refinery joint venture in the Southeast Asian country, which may also get stakes in upstream projects in Russia, Rosneft said on Wednesday.

    Pertamina is seeking overseas producing energy assets as Indonesia's domestic oil output has been declining since the early 1980s. The company is also developing domestic processing facilities to cut fuel imports.

    Indonesia, which rejoined OPEC last year, consumes 1.6 million barrels per day (bpd) and produces around 0.85 million bpd, according to a review conducted by BP.

    Rosneft, which is expected to get a 45 percent stake in the 300,000 barrels-per-day refinery, wants to expand abroad, especially in a region dominated by OPEC producers from the Gulf.

    The new Tuban refinery will have a crude processing capacity of 300,000 bpd and is targeted for completion in 2021.

    Rosneft said that Pertamina could also get up to 20 percent in the offshore Northern Chayvo project off Russia's Pacific island of Sakhalin and up to 37.5 percent in the onshore Russkoye field in Siberia.

    As well as its first venture with Russia, Pertamina is looking at energy projects in Iran, Saudi Arabia, UAE, Gabon, Kazakhstan and Azerbaijan, adding to its overseas assets in Malaysia, Algeria and Iraq.

    Pertamina plans to upgrade four of its existing seven refineries, and develop at least two new oil processing plants by 2023, more than doubling its domestic capacity to 2.3 million bpd from 1 million bpd currently.
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    Asia flows boost shipping rates, displace U.S. crude imports

    Robust Asian demand for West African crude is fueling a worldwide surge in shipping rates for the largest oil tankers that is being felt from Houston to Singapore.

    Chartering rates for Suezmaxes and very large crude carriers (VLCCs) have recovered rapidly in recent weeks after plunging to their lowest in more than year this summer.

    The spike in rates comes as Asian refiners return to the market after a seasonal turnaround period, and as several key streams of West African crude are finally loading for export after supplies were constrained because of pipeline disruptions in Nigeria.

    The higher rates, which imply fewer imports into the United States, could support benchmark oil prices in coming weeks.

    Increased demand from Asia for this crude has tied up ships and barrels that might have otherwise moved to the United States. The higher prices are leaving brokers and traders scrambling to secure vessels, particularly for common routes from West Africa to the U.S. East Coast or Western Europe.

    Chinese loadings of West African crude are set to average 1.1 million barrels per day in October, the highest since April.

    The interest in Suezmaxes comes at a time when two key West African crudes, Nigeria's Qua Iboe and Forcados, return to the global market after a months-long force majeure. Rebels hit a sub-sea pipeline operated by SPDC, an affiliate of Royal Dutch Shell, in February, forcing the company to stop exports of the Forcados stream of oil.

    Exxon stopped exporting Qua Iboe in July after a leak on the line feeding oil to the export terminal.

    On Tuesday, Reuters tracking data showed that the first cargo since July of Qua Iboe loaded at a local terminal.

    "Nigerian loadings are now scheduled to reach some 1.9 million barrels per day next month. The pick-up has had a clear effect on freight markets," JBC Energy said in note last week. Nigeria exported some 1.4 million bpd in September.

    Transporting oil on larger vessels is more cost effective, especially for longer voyages.

    In September, Suezmax volumes rose by nearly 60 percent from August, according to one ship broker, pushing the rates for the popular West Africa-to-United Kingdom route up to 110 percent of the World Scale, a shipping rate benchmark. In August, that route was as low as 35 percent, another broker said.

    That rate has since leveled off this past week but remains elevated.

    The spot rate for a Suezmax from the U.S. Gulf to Japan or South Korea is around $3.5 million, brokers say, more than double the rate for the same route two months ago.

    Meanwhile, VLCC fixtures for October loading from West Africa are up 50 percent month-over-month, the first ship broker said. Last week, a VLCC moving from the Caribbean to Singapore was priced at about $3.85 million, up from $3 million just a week prior, a third broker said.

    With higher rates, fewer imports could come into the U.S. East Coast and Gulf Coast, reducing overall inventories. That could boost oil prices as refiners draw from existing storage, traders said.

    U.S. crude imports in October are expected to be the lowest since September 2015, according to preliminary data from Thomson Reuters Eikon's shipping data.

    While the Suezmax market softened slightly this past week, more opportunities in coming weeks should limit further downside, according to a note from shipbroker Charles Weber Co available via Capital Link Weekly on Thomson Reuters' Eikon, citing the resumption of additional exports.

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    KOGAS to sell 330,000 tons LNG to BP for 20 years

    Korea Gas Announced on Oct. 5 that IT has signed an Agreement with BP to sell Annual 330,000 tons of Liquefied the Natural Gas Produced AT ITS Offshore Facility in Mozambique for The Next 20 Years.

    Through ITS Subsidiary, The State-owned Company About enterprise | owns 10 percent percent stake of Coral South Floating LNG Facility expected to be installed offshore the African country . The facility is operated by Eni East Africa  , which owns 70 percent stake in Area 4, where 1.8 billion tons of gas was discovered in 2014, and will begin commercial operations from 2022.
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    Ukraine Starts Winter With Half-Empty Natural Gas Stores: Chart

    Image title

    Ukraine, a key transit nation for Russian natural gas supplies to European households and power plants, started the six-month winter heating season that began Oct. 1 with the lowest inventories since at least 2014 after halting purchases of the fuel from Russia 11 months ago amid a price dispute. The European Union is seeking gas talks in Moscow before temperatures drop further to ensure the fuel continues to flow smoothly.

    Attached Files
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    Natural gas market ‘mystery’ floats in the Mediterranean

    A liquefied natural gas tanker plying the waters of the Mediterranean has created a guessing game for energy traders.

    The Maran Gas Delphi has taken a meandering course after loading up on U.S. shale gas a month ago at Cheniere Energy’s Sabine Pass export terminal in Louisiana. The ship anchored off the coast of Greece for several days, prompting speculation that it would deliver its supplies to a port in the region. Instead, the tanker is now bound for the Red Sea, raising the prospect that it may instead travel to the Middle East or Southeast Asia.

    RELATED: Gulf Coast booming with propane, butane and now LNG exports

    The winding track of the Maran Gas Delphi is a testament to how a gas glut fed by surging production from countries including U.S. and Australia is complicating global trade of the fuel. The rise of so-called homeless LNG, or supplies not already committed to customers, is confounding efforts by traders and analysts to get a grasp of the market and make bets.

    “It’s bit of a mystery,”  Jason Feer, head of business intelligence at ship broker Poten & Partners in Houston, said of the Maran Gas Delphi. “Normally LNG logistics are pretty well-rehearsed, and having an LNG carrier cooling its heels is expensive.”

    Cargoes of LNG not committed to customers will peak at 80 million tons by 2020, up from 50 million now, Feer said. This comes as buyers demand more flexible terms and long-term contracts expire amid the global market oversupply, he said.

    The Maran Gas Delphi is not the only example of how LNG cargoes are taking a longer or diverted route to find a home. The Stena Clear Sky, also with a cargo from Sabine Pass, spent a month circling South America before unloading on Mexico’s Pacific coast, instead of taking a shorter route via the now-opened Panama Canal, which would have saved it about 21 days.

    More complicated routes highlight how flexible LNG trade is becoming, with more demand for short-term trade to place cargoes in an oversupplied market, said Malcolm Johnson, a Guildford, England-based faculty member of The Oxford Princeton Programme, an energy training provider.

    Flexible volumes

    U.S. volumes are flexible and don’t have destination restrictions and charter rates are low, which means the buyer wins time to find the best market, he said. A tanker that’s carrying an LNG cargo can effectively be used as a storage.

    “What we are likely to experience is that they do divert cargoes at a certain short notice where demand may arise,” Johnson said by phone. “The tanker charter rates are very low, they are extremely low, they give a cargo owner a bit of space to decide which market to potentially move the cargo to.”

    Anangel Shipping Enterprises, owner of the vessel, and Royal Dutch Shell, which chartered the ship, declined to comment. A spokeswoman for Cheniere wasn’t immediately able to provide comment. The contract terms of the cargo were unclear.

    “Everybody is working to track the vessels,” Feer from Poten and Partners said by phone. “From a trader’s point of view, understanding who’s long, who’s short and where volume is moving is obviously really critical.”

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    Dunkirk LNG to start commercial operations by year end

    France’s fourth liquefied natural gas import terminal in the port of Dunkirk is expected to begin commercial operations by the end of the year.

    TS LNG, a consortium made up of SENER and Techint, that built the LNG terminal, is continuing its industrial trials, Dunkerque LNG said in its statement.

    Sylvain Ringot, technical director of Dunkerque LNG, said the commissioning process has faced difficulties.

    He reminded of the incident on July 26, when “some LNG was sent by mistake into the BOG circuits and a small amount flowed as far as the base of the flare, causing a fire.”

    He added that the incident was due to a malfunction of level sensors.

    Additionally, following the incident, the high-pressure BOG compressor, the equipment that makes it possible to send extra gas across the network, was started and the flare, which was working until August 12, is now extinguished.

    The next step TS LNG is set to take is to send gas through the network under normal working conditions.

    Dunkirk LNG received its second commissioning cargo on September 15, aboard Teekay’s 140,500-cbm LNG carrier Hispania Spirit.

    The terminal will have an annual regasification capacity of 13 billion cbm of gas, enough to cover about 20 percent of France and Belgium’s yearly gas consumption.

    Dunkirk LNG is 65 percent owned by EDF, 25 percent by Fluxys and 10 percent by Total.
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    Summary of Weekly Petroleum Data for the Week Ending September 30, 2016

    U.S. crude oil refinery inputs averaged over 16.0 million barrels per day during the week ending September 30, 2016, 302,000 barrels per day less than the previous week’s average. Refineries operated at 88.3% of their operable capacity last week. Gasoline production increased last week, averaging 10.0 million barrels per day. Distillate fuel production increased last week, averaging over 4.7 million barrels per day.

    U.S. crude oil imports averaged over 7.7 million barrels per day last week, down by 125,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged 8.0 million barrels per day, 10.1% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 1.0 million barrels per day. Distillate fuel imports averaged 103,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 3.0 million barrels from the previous week. At 499.7 million barrels, U.S. crude oil inventories are at historically high levels for this time of year. Total motor gasoline inventories increased by 0.2 million barrels last week, and are above the upper limit of the average range. Finished gasoline inventories decreased slightly while blending components inventories increased last week. Distillate fuel inventories decreased by 2.4 million barrels last week but are above the upper limit of the average range for this time of year. Propane/propylene inventories rose 0.7 million barrels last week and are above the upper limit of the average range. Total commercial petroleum inventories decreased by 11.2 million barrels last week.

    Total products supplied over the last four-week period averaged about 19.9 million barrels per day, up by 3.0% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged over 9.3 million barrels per day, up by 3.2% from the same period last year. Distillate fuel product supplied averaged 3.6 million barrels per day over the last four weeks, down by 8.9% from the same period last year. Jet fuel product supplied is up 6.2% compared to the same four-week period last year.

    Cushing up 600,000 BBL

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    Drop in US oil output

                                                                           Last week    Week before   Last year

    Domestic Production '000................. 8,467              8,497            9,172
    Alaska .............................................. 462                  454                487
    Lower 48 ....................................... 8,005              8,043            8,685
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    BHP Billiton hits pay in Caicos well

    BHP Billiton has announced positive drilling results at the Caicos exploration well in the Gulf of Mexico.

    Located in Green Canyon 564 where BHP Billiton has 100% interest, this well is approximately 100 miles south of the Louisiana coast in the deepwater Gulf of Mexico.

    The company said on Wednesday that Caicos was drilled to a total depth of 30,803 feet and encountered oil in multiple horizons. The well was drilled with Seadrill’s 2013-built drillship West Auriga.

    The 6th generation ultra-deepwater drillship West Auriga is under a long-term contract with BP in the Gulf of Mexico. The rig’s contract was assigned to BHP Billiton Petroleum (Deepwater) Inc., on June 10, 2016, for one well with an option for a second well with BP’s consent.

    BHP Billiton President Operations Petroleum, Steve Pastor, said at an investor briefing in London:“We are encouraged by the Caicos results and are moving to further appraise the area. The next step will be drilling the Wildling well in November. With success at Caicos and Shenzi North, we continue to be optimistic around the opportunity for a commercial development in the area.”

    Earlier this year, BHP Billiton announced plans to increase its spending on exploration for the next year. The company plans to invest approximately $900 million dollars in exploration, which represents 18 percent of its overall capital budget.
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    Chesapeake shores up capital with $1.25 billion debt deal

    U.S. natural gas producer Chesapeake Energy Corp closed a private placement of $1.25 billion of debt on Wednesday, shoring up capital for debt repayment 10 months after it said it had no plans to file for bankruptcy.

    Chesapeake, struggling with a huge pile of debt taken for shale development, said it could convert the 10-year notes to equity in three years if its stock trades above 130 percent of the conversion price for a specified period.

    The company also said it exchanged its common shares for preferred shares representing about $1.2 billion of liquidation value, at a discount of over 40 percent.

    "Through the transactions that closed today, we have substantially improved our capital structure," said Chesapeake Chief Executive Doug Lawler.

    "These transactions represent major steps toward reaching our financial goals of $2-3 billion of debt reduction and growing production within free cash flow."

    The company's total debt stood at about $8.7 billion as of June 30.

    The Oklahoma-based company said its cash on hand as of Sept. 30 was about $1 billion, pro forma for the convertible debt issuance.
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    Alternative Energy

    In contrasting strategy, China to ramp up REE output to regain pricing control

    The Chinese government is expected to ramp up rare earth element (REE) exports in a bid to regain control over pricing policy, according to a new report by market intelligence firm BMI Research.

    This is expected to be a reversal from the government's previous export-restrictive strategy to control prices.

    Rare earth metals are critical raw materials, used in a diverse number of sectors, including the electronics,telecommunications and automotive sectors.

    Over the last two decades, China has maintained a virtual monopoly on REE output. According to BMI, China's share of global rare earth output accelerated rapidly from 1999 to 2015. In 2015, China's REE output totalled 105 000, accounting for over 90% of global output, with other countries accounting for just 19 000 t during this period.


    Between 1990 and 2015, China's policy by default of ramping up rare earth output developed later into a deliberate policy of increased REE pricing power. Between 1990 and 2000,China's rare earth output grew by 450% to 73 000 t. Over this same period, rare earth output from other countries (Australia, US, Greenland, Malaysia and Brazil) declined by 60% to 16 000 t, down from 44 000 t in 1990. The latter countries' decline was largely the result of decreasing margins on the back of an increasingly well-supplied market, researchers noted.

    In 2006, China shocked the world when it suddenly imposedexport quotas and duties for REE exports and, in 2010, the Chinese government decided to reduce the country's REEexport quota by 40%, which saw rare earth prices soar globally. The government stated that the 2006 quota was to conserve the country's environment and limit the depletion of critical resources.

    Despite more than 28 World Trade Organisation (WTO) members imposing export restrictions on certain metals and minerals during the previous decade, BMI found that there was some international concern that China's control of the rare earth market and restrictions on exports could be used as a political weapon.

    Subsequently, the US, joined by the European Union andJapan, brought a case to the WTO's dispute settlement body against the Chinese REE export restrictions in 2012. China's case was brought forward to the WTO, which ruled against the policy in 2014.

    On January 1, 2015, after losing its battle in the WTO's final ruling, China ended the country's 16-year-old REE exportquota system and, on May 1 last year, eliminated exporttariffs on REEs, including tungsten, molybdenum, iron andsteel particles, as well as other products, as part of the ruling 's requirement.

    This resulted in China losing rare earth production market share to other producing countries, including the US,Greenland and Russia, BMI stated.


    BMI expects that, in a bid to regain pricing power, the Chinese government will pursue a strategy of consolidating the country's domestic rare earth sector and increasing exports over the coming quarters.

    “We believe the Chinese government will pursue a strategy of increasing supply in order to push down prices, which will put pressure on overseas miners' profit margins," said the firm.

    Since the export tariffs were removed, Chinese rare earth exports have consistently been higher than during the period beforehand, BMI noted.

    The strategy has resulted in rare earth prices falling drastically over the last 18 months. Over 2015, export prices from China's Inner Mongolia region fell by 30% compared with 2014, while China's total export value of rare earths decreased by over 40% over the same period.

    Among the hardest hit have been dysprosium and cerium, which saw prices fall from $65 865/t and $883/t respectively, in May 2015, to $37524/t and $685/t respectively, by September 2016.

    While domestically this has accelerated the government's consolidation drive, it also proved a major challenge for producers operating in countries such as Australia and the US. The most notable example occurred on June 25, 2015, when US-based REE producer Molycorp filed for Chapter 11 bankruptcy.

    While the firm had been operating with losses since 2011, the low-price environment exacerbated its struggles. Molycorpwas able to previously maintain operations as it was deemed a key alternative supply channel for the US, other than China.

    In light of China's new approach, BMI expects another trade case to be presented to the WTO by the US and other major rare earth consumers over the coming quarters.

    BMI believes that Australia, Russia, Greenland and the US hold significant rare earth output growth potential over the long term. Despite this, the analysts do not expect that these countries will be able to overtake China's market share any time soon, owing to China's strategy, which has resulted in the current low rare earth price climate.
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    U.S. plans to stockpile more lithium compounds used in batteries

    The U.S. Defense Logistics Agency (DLA) said it has a mandate to buy 600 kg of lithium cobalt oxide (LCO) and 2,160 kg of lithium nickel cobalt aluminium oxide (NCA) in the fiscal year starting Oct. 1.

    The amounts were detailed by the DLA in its Annual Materials Plan for financial year 2016-2017, which runs from October to September, published on its website this week.

    They are double the 300 kg of LCO and 1,080 kg of NCA it was mandated to buy in the 2015-2016 fiscal year.

    Both compounds are used to make lithium-ion batteries. LCO batteries are used for mobile phones and laptops and NCA batteries are used for electric vehicles.

    In 2014 the DLA was authorised for the first time in 20 years to acquire new materials for the National Defense Stockpile (NDS). It has authorisation to buy cobalt compounds from fiscal year 2014 through fiscal year 2019.

    Under the Defense Production Act of 1950, the U.S. Geological Survey advises the DLA on the acquisition and disposal of NDS mineral materials.
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    French day-ahead spot power price jumps on further outages

    French day-ahead spot power price rose 8.75 euros ($9.81) or 22.4 pct on Wednesday on tight nuclear power supply following an unplanned outage at EDF's 1,300 MW Paluel 4 reactor overnight.

    The was also another unplanned outage at Engie's 428 MW gas-fired plant, French grid operator RTE said on its website.

    European power prices have hit one year highs in the past week on French nuclear power supply concerns. According to Reuters tabulation, 22 out of 58 French nuclear reactors are currently on planned or statutory outage.

    Attached Files
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    Tepco looks for government aid amid fears of bankruptcy

    The President of Tokyo Electric Power Co Holdings (Tepco) has requested what he referred to as ‘structural assistance’ in helping the company decommission the ill-fated Fukushima Daiichi nuclear reactor power plant.

    Naomi Hirose says his company does not want financial assistance but is in need of a plan to avoid the firm avoiding bankruptcy in dismantling the reactors. Fukushima had provided one third of Japan’s electricity prior to a 2011 accident caused by a tsunami impacting on the plant leading to reactor melt down.

    "We don't want to receive national rescue measures but want to bear the Fukushima responsibility ourselves," Hirose told a government panel. "For that reason, we would like to undertake steps for a further overhaul than we have had so far."

    Five and a half years on, Tepco still struggles to contain radioactive water from the plant and has said it can't predict the eventual costs of clean-up and decommissioning. According to Zero Hedge website, the reactors “continue to leak around 300 tonnes of radioactive waste into the Pacific Ocean every day.

    That is set to continue ” as the source of the leak cannot be sealed as it is inaccessible to both humans and robots due to extremely high temperatures.

    Hirose told reporters that it is difficult to accurately predict the costs of even a gradual decommissioning of the crippled reactors.

    "If the issue of recognising all the estimated losses at once were to emerge, our company would fail, so we would like some structural assistance from the government to be able to avoid that risk," Hirose said.

    Japan's utilities lobby expects clean-up and compensation costs from the Fukushima disaster to overshoot previous estimates by 8.1 trillion yen ($78bn) beyond an initial estimate 7.9 trillion yen.
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    Monsanto surprises with adjusted profit as expenses drop

    U.S. seeds and agrochemicals company Monsanto Co (MON.N), which agreed last month to be bought by Germany's Bayer AG for $66 billion, reported a surprise adjusted profit, helped by a drop in expenses and higher corn seed volumes.

    Monsanto agreed in September to a sweetened $128-per-share offer from Bayer that, if approved by regulators, would create a company commanding more than a quarter of the world market for seeds and pesticides.

    The St. Louis, Missouri-based company had been expected to report a loss on an adjusted basis, reflecting a slump in commodity prices and a fall in farm incomes.

    However, net sales in the company's corn seeds and traits business jumped 34 percent in the three months ended Aug. 31 as corn seed volumes rose in the United States.

    Monsanto's expenses also dropped, by nearly 10 percent, as its cost cutting measures paid off. The company said in January it would cut about 3,600 job cuts, or about 16 percent of its global workforce, through fiscal 2018.

    The company's global restructuring also includes an exit from the sugar cane business and streamlining some commercial and research and development work, the company has said.

    Monsanto, whose shares were little changed in premarket trading on Wednesday, did not offer any update on potential divestitures related to the Bayer deal.

    Some farm groups, rival seed companies and lawmakers have raised concerns about the huge deal, saying it could result in higher prices and reduced choices for farmers.

    Bayer and Monsanto have said they are confident that the deal will pass regulatory muster. Bayer has said it is committed to divest up to $1.6 billion of its portfolio to win approval.

    The net loss attributable to Monsanto narrowed to $191 million, or 44 cents per share, in the fourth quarter ended Aug. 31 from $495 million, or $1.06 per share, a year earlier.

    Excluding items, however, the company earned 7 cents per share. Analysts had expected a loss of 3 cents per share on that basis, according to Thomson Reuters I/B/E/S.

    Net sales of the company, known for its genetically engineered corn, soybean and the Roundup herbicide, rose 8.8 percent to $2.56 billion, beating the average estimate of $2.36 billion.

    Up to Tuesday's close of $102.15, Monsanto's shares had fallen about 4.3 percent since the Bayer deal was announced last month.

    Attached Files
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    Vale fertilizer deal on track despite BNDES delay -sources

    Vale SA's plan to dispose of fertilizer assets remains on track despite a request last week by Brazil's state development bank, BNDES, to analyze the transaction more carefully, according to two people with direct knowledge of the situation.

    Terms of the deal, which involves the sale of certain assets to U.S.-based Mosaic Co, are unlikely to change significantly, one of the sources said on Wednesday, requesting anonymity to speak freely about the issue.

    BNDES pushed back the vote on the fertilizer deal at a Vale board meeting last Thursday, the first person familiar with the situation said. O Globo columnist Lauro Jardim, without saying how the newspaper obtained the information, reported that day that BNDES had delayed the voting on the transaction to Oct. 20.

    One of the people said Mosaic could pay about $3.6 billion for some of Vale's fertilizer assets. The sale of other unspecified operations within Vale's fertilizer unit is being negotiated with Norway's Yara International ASA, the first person said, without elaborating.

    Both Vale and BNDES, which are based in Rio de Janeiro, declined to comment, as did Mosaic. Yara said it did not comment on market speculation.

    Vale, the world's largest iron ore producer, is disposing of assets to help meet a $10 billion debt-reduction target by next year. The strategy was devised by Chief Executive Officer Murilo Ferreira to help insulate the mining company against declining iron ore and nickel prices, after losing a record $12.1 billion last year.

    Reuters first reported on June 17 that Mosaic was eyeing Vale's fertilizer assets.

    The transaction underscores how Brazil, the world's fifth-largest fertilizer consumer, remains a key growth spot for fertilizer and phosphate producers. Vale estimates that demand for the products in Latin America's largest economy is expected to grow twice as fast as global demand over the next decade.

    Vale has fertilizer assets in Canada, Brazil, Peru, Argentina and Mozambique. Mosaic bought distribution assets from Archer Daniels Midland Co in Brazil and Paraguay last year.
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    Precious Metals

    Talks to resolve Goldcorp Mexico mine blockade under way: official

    Negotiations are under way to resolve a week-long blockade at Goldcorp Inc's suspended Peñasquito gold mine in Mexico, a government mediator said on Wednesday.

    Goldcorp, the world's No. 3 gold miner by market value, said on Monday that it shut mine operations on safety concerns from the blockade by a trucking contractor concerned about losing business due to mine efficiencies.

    Talks began Tuesday night and another meeting was scheduled for Wednesday, said Julio Cesar Chavez, a Zacatecas government official and mediator in talks between Goldcorp and the trucking contractor and farmers, who have joined in the protests against Goldcorp.

    "An agreement with the land owners and a trade agreement with the truckers is pending today," he said in an interview with Reuters.

    Vancouver-based Goldcorp was not immediately available for comment.

    There are 420 police officers at the site and they have cleared three entrances to the mine, Chavez said. One truck brought food into the mine yesterday, and protesters are now being asked to allow another truck to enter with water, he said.

    In a meeting Tuesday night, truckers and a committee representing farmers asked Goldcorp to withdraw lawsuits against protesters, said Felipe Pinedo, one of the protest leaders.

    Protesters are demanding jobs and payment for environmental damages and water used by the mine, Pinedo has said.

    In late August, Reuters reported on a long-running leak of contaminated water, which had not been disclosed to the public, at the mine, Mexico's biggest gold deposit.

    Goldcorp said it has about 750 people at the northern Mexico mine and expects to produce between 520,000 and 580,000 ounces of gold this year, equal to around 19 percent of its total forecast output of 2.8 million to 3.1 million ounces.

    A contingency plan was in place that would allow mining and processing to be restarted immediately once the dispute was resolved, Goldcorp said. It did not expect the shutdown to impact 2016 production or cost estimates.
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    Base Metals

    Chile's Codelco delays $2.25 billion in investments on copper prices slump

    Chile’s Codelco, the world's top copper miner, has once again made drastic changes to its ambitious five-year investment plan as falling copper prices continue to dry up the company’s earnings.

    The state-owned miner, which faces what its chief executive Nelson Pizarro recently called its “worst crisis ever” since created in 1976, has decided to reduce its investment budget by $2.25 billion, local news site El Pulso reports (in Spanish).

    Phase two of the Radomiro Tomic sulphur project will be postponed to 2024, while construction of a new level at El Teniente, originally set to be done by 2020, now it is expected to complete in 2023.

    The figure, though significant, is minor when taken in the context of Codelco’s ambitious investment plan,originally pegged at $25 billion (now sitting at $18bn), aimed at upgrading its aging mines and dealing with dwindling ore grades.

    "We have modified our strategy for the projects. Instead of carrying them out simultaneously, development will now take place sequentially," the miner said in an internal newsletter sent to staff quoted by El Pulso.

    Among the affected plans, Codelco noted that phase two of its Radomiro Tomic sulphur project will be postponed to 2024, while construction of a new level at El Teniente, originally set to be done by 2020, now it is expected to complete in 2023.

    The company, however, won’t touch a much neededexpansion project at its century-old Chuquicamata mine underground, currently underway, which is due to be completed by 2019.

    The investment cuts come despite Chile’s government injected $600 million of capital into the copper giant earlier this year.

    But Codelco, which hands over all its profits to the state, has received only 10% of its surplus over the past decade. In comparison, private copper miners reinvest an average of about 40% of their profits.

    The miner’s output amounts to around a tenth of global supply and it has been one of the main forces behind Chile’s transition from one of Latin America’s poorest countries to one of the richest over the past 40 years.

    Base metals suffered a broad-based sell-off Tuesday after the dollar hit a multi-month high, but the slide has since slowed down.
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    Peru's La Oroya smelter to be auctioned in first quarter of 2017

    Peru's nearly 100-year-old polymetallic smelter La Oroya and the nearby copper mine Cobriza will likely be offered up in an auction in the first quarter of 2017, the head of the company tasked with finding a buyer said Wednesday.

    Pablo Peschiera, director of consulting firm Dirige, said the two assets of the now-bankrupt company Doe Run Peru would likely fetch at least $100 million, though investments to upgrade the smelter could cost $700 million.

    Peschiera said he was optimistic about the new bidding round that follows an August 2015 auction that failed to draw any offers as investors fretted over environmental standards, past pollution and demands from workers.

    Dirige has asked the government to ease sulfur dioxide emission limits in La Oroya and to tweak rules to clarify that a new operator would not be liable for Doe Run Peru's obligations.

    Dirige has also connected potential buyers with workers to broker preliminary deals, Peschiera said.

    "The market is in charge. We'll launch the auction with whatever conditions are in place and hope that by then these changes will have been made," Peschiera said in an interview.

    The smelter in Peru's central Andes was shuttered in 2009 when Doe Run Peru, owned by New York billionaire Ira Rennert's Renco Group, ran out of money to buy concentrates and pay for environmental upgrades.

    The company left $650 million in debts unpaid, including $90 million to $100 million owed to workers, Peschiera said.

    The smelter now only processes some zinc, employing a fraction of some 2,200 mostly furloughed workers.

    A workers' strike scheduled next week to demand the rest of the smelter restarts could hurt sale prospects, Peschiera said, adding he hopes to persuade the union to call off the stoppage.

    President Pedro Pablo Kuczynski's promise to revive La Oroya as part of his plan to boost the value of the country's mineral exports has sparked fresh interest from investors, Peschiera said.

    Kuczynski, who took office in July, convinced Congress to give La Oroya more time to find a buyer and has slammed Peru's emissions standards as too strict, saying upgrading La Oroya's copper circuit would cost $500 million under current rules but only $200 million if Canadian standards applied.

    Peru relaxed the sulfur emissions limit for La Oroya in 2014, but Peschiera said standards should be loosened further.

    Kuczynski's environment minister told Reuters last month that air and water quality standards are under review.
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    Zinc, lead prices break free from long term downtrend

    Base metals have also enjoyed a stand-out 2016 with across the board gains year-to-date. Measured from recent lows which mostly occurred at the end of 2015 and in January and February this year the recovery in prices this year is even more impressive.

    While bellwether copper has also been lacklustre adding only 1.5% in 2016, zinc is the top performer for the year with a 49% gain since January and the recent rally in lead means the metal now boasts a 16.5% rise in 2016 scaling $2,000 a tonne in September.

    Aluminum and cobalt have both enjoyed double digit gains so far this year while tin (+39% just over $20,000) and nickel (+17% holding above $10,000) have recovered after wobbles over the summer. With the exception of copper base metals are currently trading at their 2016 highs after a strong third quarter.

    BMI Research in a research report says the positive momentum is likely to continue as additional infrastructure stimulus measures by China and developed markets will provide a boost to prices for the next six to nine months.

    The graphs for zinc and lead look particularly encouraging, with both metals breaking out of a long term downtrend:Image title

    Attached Files
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    U.S. judge dismisses aluminium price-fixing litigation

    A federal judge on Wednesday dismissed nationwide litigation by aluminium purchasers who accused banks and commodity companies of conspiring to drive up prices for the metal by reducing supply, forcing them to overpay.

    The decision by U.S. District Judge Katherine Forrest in Manhattan halts, for now, three years of litigation against Goldman Sachs Group Inc, JPMorgan Chase & Co, mining company Glencore Plc, and various commodity trading, mining and metals warehousing companies.

    Purchasers had accused the defendants of colluding from 2009 to 2012 to manipulate prices by hoarding inventory.

    They claimed that this caused delays of up to 16 months to fill orders, leading to higher storage costs, which in turn inflated aluminium prices and the cost of producing cabinets, flashlights, soft drink cans, strollers and other goods.

    In August, the 2nd U.S. Circuit Court of Appeals in Manhattan upheld Forrest's dismissal two years earlier of antitrust claims by "indirect" commercial end users and consumer end users.

    Applying that ruling, Forrest on Wednesday said related claims by "first level" purchasers, which she allowed to go forward in March 2015, must also be dismissed.

    She said both cases rested on the same "core assertion" that Platts Midwest Premium, a component of aluminium prices, rose because of alleged "shenanigans" in aluminium warehouse services.

    "There is no allegation or evidence in the record that defendants engaged in any anticompetitive conduct outside of the aluminium warehouse services market," Forrest wrote. "Profit by defendants or losses by plaintiffs subsequently experienced in physical aluminium is irrelevant to antitrust standing."

    Lawyers for the purchasers did not immediately respond to requests for comment. Goldman spokesman Michael DuVally and JPMorgan spokesman Brian Marchiony said their banks were pleased with the decision. Glencore did not immediately respond to requests for comment.

    Forrest concluded with a long footnote lamenting how a 2015 U.S. Supreme Court decision, Gelboim v. Bank of America Corp, could impede settlements of complex litigation by letting some plaintiffs--here, the indirect purchasers--appeal dismissals of their claims while other plaintiffs press on.

    "In this case, the opposite has occurred," she wrote. "A 'Gelboim Appeal' has caused a case nearing final procedural stages to come to a halt. Perhaps this is the most just result. But plaintiffs will undoubtedly appeal--and if successful, the parties will be picking up where they left off two years hence."

    The case is In re: Aluminium Warehousing Antitrust Litigation, U.S. District Court, Southern District of New York, No. 13-md-02481.
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    Steel, Iron Ore and Coal

    North Queensland coal exports rise 9% to 15-month high in September: NQBP

    Coal exports from the Hay Point, Dalrymple Bay and Abbot Point terminals in the Australian state of Queensland rose by 9% in September, from August, to a 15-month high of 12.99 million mt, led by strong gains at the Dalrymple Bay and Abbot Point terminals, the North Queensland Bulk Ports Corporation said Wednesday.

    September's combined throughput from the three terminals breached the year-to-date monthly average of 12.02 million mt by 970,000 mt, the data showed.

    From January to September, exports totaled 108.21 million mt, which is higher than the same period last year, when it was at 105.98 million mt.

    Despite the multi-month high in September, there remains capacity for significantly higher exports. The three facilities have a combined nameplate export capacity of 190 million mt/year, and in September they operated at an annualized rate of 158.05 million mt/year.

    For the year to September, the terminals saw an annualized rate of 144.67 million mt/year.

    The rise in September was mainly driven by increased exports from the Dalrymple Bay facility. Exports from the 85 million mt/year nameplate capacity terminal surged 19% month on month in September to 6.67 million mt, which, like the combined total, was a 15-month high from the facility.

    The Dalrymple Bay Coal Terminal's September annualized rate was just 3.85 million mt/year shy of its annual nameplate capacity, hitting 81.15 million mt/year. DBCT is a Queensland state government-owned common user facility.

    The Adani Group-owned Abbot Point Coal Terminal also saw a strong month- on-month rise, up by 28% in September to 2.31 million mt, which breached the year-to-date monthly average for the facility of 2.20 million mt, according to NQBP data.

    APCT's annualized rate for September of 28.11 million mt/year, however, remains well below its nameplate capacity of 50 million mt/year.

    Coal transport on the Newlands Coal Rail System, which links several metallurgical coal mines to the Abbot Point Coal Terminal, was disrupted due to a derailment September 11, operator Aurizon said during the month. Transport was to resume September 19, Aurizon had said at the time.

    BMA's Hay Point terminal bucked the trend and posted losses in September. Exports totaled 4.01 million mt at the terminal during the month, down 12% from August, and below the year-to-date monthly average of 4.14 million mt/year, according to the data.

    The terminal operated at an annualized rate of 48.79 million mt/year during September, which compares against its nameplate capacity of 55 million mt/year.
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    Miner Arch re-emerges aiming for US met coal output lead

    Arch Coal emerged from Chapter 11 Wednesday, becoming the biggest publicly listed US met coal miner with 7.5 million st of sales targeted in 2017, as a downsized Alpha Natural Resources split assets with spinoff Contura Energy.

    Arch cut debt after completing financial restructuring and emerged from court protection, with new equity to trade on the New York Stock Exchange under ticker symbol ARCH, it said in a company statement.

    "We are particularly pleased to be emerging in a resurgent metallurgical market, and look forward to similar strengthening in thermal coal markets in the months ahead," Arch CEO John Eaves commented in the statement.

    Investment bank FBR heralded Arch's sales plan and post restructuring "low-cost" operation, and expected a $130/mt FOB HCC benchmark would translate into 50% EBITDA coming from met coal alone. Arch also produces thermal coal.

    FBR factored in Arch's average 2017 met coal prices at $82.02/st Mine, with costs at just over $53/st Mine. Company guidance was for met coal costs to fall around $50/st.

    "While we always considered Arch a strong operator, we believe the company is now positioned to prosper in almost any coal price environment," FBR analysts led by Lucas Pipes said in a note.

    "Near term, we see the company's met coal exposure as its greatest catalyst," FBR said as it initiated coverage of Arch's new shares at outperform.

    "Arch's met coal products include a range of product types, but importantly they include a large contribution of prized high-vol A qualities. We believe both in the domestic market as well as internationally into Europe, high-vol A grade coal is considered scarce while being an essential part of many steelmakers' met coal blends."


    The St. Louis-based group expects met coal sales at between 7 million-7.5 million st in 2017, and said the vast majority of the volume is yet to be committed and therefore is exposed to current and potentially higher prices, in a presentation to investors released earlier this week.

    Arch said it intends to build on European market share, while expecting growth in Japan, South Korea and India, and said a focus on high-vol, fluidity coals may aid its position.

    Premiums for high-vol A rose on shortages, with Platts data showing a diversion with longer term price trends for US low-vol, meanwhile benchmark grade spot coal prices surpassed $200/mt FOB to triple on year-to-date lows.

    "While the US share of European met supply will fluctuate somewhat, high-quality, high-vol coals will remain a cornerstone of European coke blends," Arch said in the investor presentation.

    "Arch is focused primarily on the high-vol segment, and enjoys a quality and freight advantage relative to Australian supply. If vessel rates increase and/or Asian demand for Australian met coal strengthens, the US could compete for still greater share in Europe."

    Blackhawk Mining, Alpha Natural Resources, Contura and smaller US miners are similarly exposed to US high-vol HCC, and may capitalize on price and market trends. Traders Xcoal Energy & Resources, Integrity Coal Sales have supplied more US met coal than Arch.
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    Brazil's CSN sees $30 billion to $35 billion value for ore unit: source

    Cia Siderúrgica Nacional SA is seeking a valuation of between $30 billion and $35 billion for iron ore unit Congonhas Minérios SA, in which the Brazilian steelmaker is in talks to sell a minority stake, a person familiar with the matter said on Wednesday.

    According to the person, who asked for anonymity since the process is confidential, China Brazil Xinnenghuan International Investment Co is interested in buying 20 percent to 25 percent of Congonhas Minérios directly from CSN.

    Talks are progressing slowly and may not result in a deal, the person said.

    Reuters reported on Sept. 26 that both companies were discussing the transaction, whose outcome also hinges on the ability of CSN to secure long-term supply contracts from CBSteel, as the Chinese company is known.

    A spokesman for CSN did not have an immediate comment. Efforts to reach media representatives for CBSteel were unsuccessful.

    The stake sale in Congonhas Minérios is Chief Executive Officer Benjamin Steinbruch's most ambitious asset divestiture plan yet for CSN, which has the largest debt burden among Brazilian steelmakers. Optimism over the sale has driven shares of São Paulo-based CSN up 7 percent over the past week.

    Congonhas Minérios was created at the end of 2014, through the merger of CSN's fully owned Casa de Pedra mine and Namisa, an ore production joint venture with six Asian companies. Casa de Pedra has one of Brazil's best-quality iron ore reserves.

    The six Asian companies that own a combined 12 percent of Congonhas Minérios would keep their stakes unaltered if a deal between CSN and CBSteel materializes, the person said.

    They include Japan's Itochu Corp, Nisshin Steel Co Ltd, JFE Steel Corp and Kobe Steel Ltd as well as Korea's Posco Ltd and Taiwan's China Steel Corp.
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