Mark Latham Commodity Equity Intelligence Service

Thursday 16th February 2017
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    'Good Time to Expand'

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    Robust consumer spending, an uptick in factory production and firming inflation are pointing to a healthy start in 2017 for the U.S. economy and another interest-rate increase by the Federal Reserve, potentially as soon as next month.

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    Oil and Gas

    Crude thoughts.

    A mystery is confounding the US oil market: when inventories rise, prices rise, too. That is not the way it is supposed to work. At 508.6m barrels as of early February, stocks of crude sitting in commercial tanks were 8 per cent higher than a year before and close to a record. In theory, the excess supply should weigh on markets. But this year a loose pattern has emerged after the US government releases weekly oil data: surprisingly large increases in crude stocks have prompted spurts of buying. “The mantra is ‘buy the builds’,” said Andy Lebow of Commodity Research Group, a US consultancy. “It seems to be working, week after week, as inventories build.” The midweek petroleum status report of the Energy Information Administration is watched obsessively by traders, shedding light on supply and demand in the leading oil-consuming nation. The next one is due on Wednesday morning Washington time. Over the last five reports US commercial crude oil stocks rose by a total of 29.6m barrels. Each weekly rise surpassed expectations. While declining immediately after each report, the price of the West Texas Intermediate oil benchmark was trading higher 20 minutes later, often accompanied by a burst of volume. WTI prices also settled higher after four of the past five releases. Theories about who is behind the bidding have riveted an otherwise placid oil market. WTI has hewed to a range of less than $5 a barrel, averaging about $53, since the start of the year. Ole Hansen, chief commodity strategist at Saxo Bank, said: “There’s been a lot of head-scratching in the oil market the last few weeks as the EIA data has been consistently bearish, but each week after the initial dip we have rallied. Everyone is talking about it.” Fund managers have been betting that the Opec oil cartel will prop up prices after curtailing supplies since January 1. “There is a very big incentive to support this market both by producers, some of whom have cut output, and by the hedge funds that have built up this very big long position,” Mr Hansen said. Doug King, co-founder of the $229m Merchant Commodity Fund, said he saw “a lot of agendas” behind the buying, from big macro hedge funds defending bullish positions to Opec countries trying to ensure the market rides out excess stocks before the group’s cuts are felt. Mr King said Opec members pumping millions of barrels a day had an incentive to defend the price. “In the greater scheme of things buying a few thousand lots (contracts) is not a big deal,” he said. It is difficult to identify buyers given the anonymous nature of futures markets. A trader at a big US energy merchant said the surge of post-report volume was unmistakable, even as he had “no clue” who it was. “Everybody sees it,” he said. The price swings around the releases may reflect broader tensions in the market, as the data trigger selling by automated trading programs that is then reversed by investors with a longer-term view. Olivier Jakob of Petromatrix, a Swiss-based energy consultancy, said strong buying volumes generally came about 10 minutes after the reports. “It seems clear that someone there is implementing a defined strategy, but we are still in a price range because the strong buying that systematically comes after the release of the weekly report is not followed by continued strong buying on the Thursday and Friday,” he wrote in a note last week. Some traders said that while EIA figures still attracted attention, their importance was overstated. “We have two words to describe it: ‘Stats, shmats’,” said Mark Vonderheide, a veteran oil trader who runs Geneva Energy Markets in New York. “The stats are old news, codifying bits and pieces picked up by 1,000 different people and already discounted in the market.”

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    Libyan and Nigerian crude oil export loadings

    Libyan and Nigerian crude oil export loadings so far this month are up nearly 600,000 bpd from December's low

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    Nigeria to launch $1 bil Niger Delta clean-up project to curb unrest in oil region

    Nigeria will this week launch a comprehensive clean-up program for the oil-producing Niger Delta region devastated by years of pollution from oil spills, a government statement on Tuesday said, as Nigeria moves to curb unrest in the region that has long impacted production and exports.

    The clean-up program for Ogoniland in the heart of the Niger Delta region would be undertaken by a special body set up by the government in 2016, and will cost $1 billion, Nigeria's Vice President Yemi Osinbajo announced in southern Rivers state during the second leg of his peace talks with Niger Delta leaders and stakeholders, the statement said.

    Osinbajo said Shell, Nigeria's biggest oil producer, would provide $1 billion spread over five years, while the government has provided a grant of $10 million.

    Shell was not immediately available for comment.

    Niger Delta communities have staged protests against oil spillages that they said, damaged their environment and sources of livelihood, and have often blockade access to production facilities by producers, as well as attacks on pipelines to demand compensation.

    Oil companies said most of the spills in the Niger Delta region were caused by oil theft and sabotage attacks.

    Nigerian oil output plummeted to a near 30-year low of around 1.4 million b/d in May 2016, from 2.2 million b/d earlier in the year, as attacks on oil facilities in the Niger Delta rose at an alarming pace due to resurgent militancy.

    A United Nations report released in 2011 estimated that the clean-up of Ogoniland could take up to 30 years with the initial remediation taking five years and the restoration another 25 years.

    Osinbajo said the government viewed the clean-up project and the restoration of the degraded environment as a major step towards achieving the peace deal in the Niger Delta where attacks on oil installations which began early last year, cost the Nigerian government 60% of its revenues.

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    UK LNG stocks fall at 46-month low on weak delivery schedule

    The amount of natural gas equivalent held in tank in the UK's three LNG regasification terminals fell to the lowest since March 2013 over the weekend as a weak delivery schedule led to stocks running low despite poor regas rates, data from National Grid showed Tuesday.

    LNG stocks combined began Monday's gas day at 429 million cu m of natural gas equivalent, below the levels recorded in March/April last year and falling further towards the low seen 46 months ago.

    Stock levels were split between Isle of Grain, South Hook, and Dragon at 187 million cu m (32% of capacity), 171 million cu m (35%), and 71 million cu m (37%), respectively, National Grid data showed.

    Total LNG stock levels were less than half the 2017-to-date high of 918 million cu m from early January and over 200 million cu m shy of the five-year average of 642 million cu m.

    The unseasonably low stock levels have come despite regasification having been at low levels this winter, as deliveries of LNG into the UK have been much lower this winter compared with previous seasons amid higher pricing and firmer spot demand elsewhere.

    Between October 1 and January 31, nine LNG tankers delivered LNG into the UK, with South Hook receiving six vessels from Qatar, Isle of Grain receiving three -- two from Qatar, one from Nigeria -- and Dragon none.

    During the first four months of the Winter 2015-16 delivery period, South Hook received 30 vessels from Qatar alone. Isle of Grain received six -- three from Algeria and one each from Norway, Qatar, and Trinidad & Tobago -- and Dragon two Qatari deliveries.

    This has been countered by regas levels being well down this winter compared with previous winters.

    Regas levels this winter have totaled 1.06 Bcm, more than 75% lower year-on-year and on course for the lowest total for a winter-delivery period this decade.

    Moreover, Isle of Grain has reloaded three LNG tankers this winter -- one each to Belgium, South Korea and Turkey -- after having begun reloading operations last March, further contributing to the weaker regas levels.

    Stock levels at Isle of Grain were expected to be boosted in the short term with the expected arrivals of the Cadiz Knutsen from the Dominican Republic and the Gallina from Peru, though no Qatari LNG tankers are confirmed as UK arrivals for the remainder of the month, meaning South Hook stocks could slide further.
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    CFR China methanol hits 35-month high on tight supply, MTO demand

    The CFR China methanol price has risen 11% since the start of this month to be assessed at $382/mt Tuesday, just short of a three-year high, S&P Global Platts data showed.

    The rally was driven by exceptionally tight supply from the Middle East, as well as expected demand from several methanol-to-olefin plants, according to industry sources.

    The CFR China methanol assessment was last higher on March 12, 2014, when it was at $395/mt.

    Oman's Salalah Methanol Company unexpectedly shut its 1.3 million mt/year plant Tuesday due to a technical problem detected Monday evening, a source from main offtaker Oman Trading International said Tuesday.

    Earlier on February 3, Iran's Zagros Petrochemical Company shut both its methanol plants Friday because of a shortage in natural gas supply, according to a company source.

    The No. 1 and 2 plants have a nameplate capacity of 1.65 million mt/year each, and the gas outage will affect 3.3 million mt/year of total capacity.

    The Iranian government is grappling with cold weather, and is shifting feedstock natural gas away from the petrochemical sector into heating, according to industry sources.

    Similarly, Fanavaran Petrochemical Company's methanol plant has been affected, and operations have fallen to 50% of its 1 million mt/year nameplate capacity, sources said. On the demand side, China's Jiangsu Sailboat Petrochemical, also known as Jiangsu Shenghong, is expected to restart its MTO plant in early March, pending the start-up of its downstream ethylene vinyl acetate unit, industry sources said.

    The MTO plant has capacity to produce 385,000 mt/year of propylene, 315,000 mt/year of ethylene and 100,000 mt/year of C4/C5, consuming about 2.4 million mt/year of methanol in the process.

    Still in China, Zhejiang Xingxing New Energy is expected to restart its MTO plant in the second half of February, according to industry sources.

    The MTO plant consumes 1.8 million mt/year of feedstock methanol, and produces 600,000 mt/year of olefins. Downstream integration includes 300,000 mt/year polypropylene capacity and a swing plant capable of producing ethylene oxide or monoethylene glycol, sources added.

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    Iran berates Total for delaying gas field development deal

    Iran's oil minister has criticised French oil company Total for its decision to delay signing a contract to develop a gas field in southern Iran, saying that the reasons given by Total's chief executive were "unacceptable" to Tehran.

    Total was the first Western energy company to sign a major deal with Tehran since the lifting of international sanctions with its South Pars 11 project in the Gulf to develop a part of the world's largest gas field that Iran shares with Qatar.

    Total's chief executive, Patrick Pouyanne, said last week that it aimed to make a final investment decision on the $2 billion project by the summer, but the decision hinges on the renewal of U.S. sanctions waivers.

    "I don't know why Total has said so," Bijan Zanganeh was quoted as saying by Mehr news agency on Wednesday. "It's been included in the contract that we all follow European Union's policies. Their comments are unacceptable," he added. U.S. President Donald Trump has called into doubt the Western powers' deal with Iran over its nuclear technology development programme and, responding to an Iran's ballistic missile test last month, imposed fresh sanctions on Tehran. The South Pars 11 project aims to produce 1.8 billion cubic feet a day of gas, equivalent to 370,000 barrels of oil. The produced gas will be fed into Iran's gas network.
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    Tokyo Gas sales rise in January

    Japan’s biggest city gas supplier, Tokyo Gas said its natural gas sales rose 3.5 percent in January year-on-year.

    Total gas sales by Tokyo Gas reached 1.63 billion cubic meters in January.

    Volumes sold to the residential market were boosted by the lower average temperature, reaching 486.451 million cubic meters, 6.4 percent up on the corresponding period in 2016.

    In its latest monthly report, Tokyo Gas said the volumes in the business sector was up 8.3 percent, reaching 276.853 million cubic meters while the volumes in the industrial sector rose 3.6 percent reaching 645.704 million cubic meters.

    Volume for wholesale supply to other gas companies totalled 219.868 million cubic meters, dropping 7.4 percent from January 2016.

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    France's Total looks further downstream in effort to ease looming supply glut

    France's Total is looking to invest in energy projects further downstream than their upstream and LNG production facilities, the company's President of Gas Laurent Vivier said Tuesday.

    The strategy is a logical change given the current tough environment for final investment decisions for new greenfield LNG production projects, according to Vivier.

    What some industry observers are underestimating is the pace that new buyers can enter the market, as Total's interests in two recently announced LNG import projects in the Ivory Coast and Pakistan would require a combined 9 million mt/year and will start receiving LNG in 2018, Vivier said.

    Both projects would allow for quick entrance into the market, utilizing FSRUs from Golar LNG and Hoegh LNG respectively, he said.

    "We are now ready to invest downstream in the value chain," Vivier added.

    Last November, a consortium led by Total was awarded the rights to build and operate an LNG regasification terminal in the Ivory Coast with a total import capacity of 3 million mt/year.

    The project, planned to receive first gas imports by mid-2018, would require $200 million in capital expenditure and add 2 GW of new power plant capacity to the region, as well as feed connections to neighboring countries.

    More recently, Total was part of a consortium including Qatar Petroleum, Mitsubishi, ExxonMobil and Hoegh LNG, in collaboration with local developer Global Energy Infrastructure Limited, to develop a 6 million mt/year import terminal in Pakistan.

    This terminal would be Pakistan's third FSRU but first private LNG import terminal, and would include a 170,000 cu m FSRU, jetty and pipeline, with gas starting in 2018.

    A final investment decision is expected to be made on the Pakistan project by mid-2017.

    The key to helping absorb a lot of this extra supply is the new demand coming from unexpected areas that were not forecast to require LNG three years ago, Vivier said.

    Over the next three years, he said he expected to see more LNG importers in growing economies to rapidly gain access to the LNG market, which should rebalance any supply-demand imbalance relatively quickly.

    Platts Analytics expects Ivory Coast could begin importing LNG in early 2019.
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    World's first purpose-built LNG bunkering vessel delivered

    Engie, Fluxys, Mitsubishi Corporation, and Nippon Yusen Kaisha have taken delivery of the ENGIE Zeebrugge -- the world's first purpose-built LNG bunkering vessel -- from Hanjin Heavy Industries & Construction at the Yeongdo shipyard in Busan, South Korea, Fluxys said in a statement Wednesday.

    The ENGIE Zeebrugge, which has a 5,000 cu m LNG capacity, will be based at the Zeebrugge LNG terminal in Belgium and will be able to supply LNG as a marine fuel to ships operating in northern Europe.

    LNG-fueled ships are largely dependent on fixed bunker locations in order to receive the fuel, with a limited bunkering capacity currently available from LNG trailers.

    "LNG is expected to become an important alternative fuel for the maritime industry," Fluxys said, with international regulations on emissions for ships tightening.

    "The challenge in making LNG grow in the bunker market is to develop sufficient supply infrastructure to support the increasing number of LNG- fueled ships that are expected to come into operation," Fluxys said.

    The Zeebrugge LNG terminal recently commissioned its second jetty, where small LNG-fueled carriers with capacities of 2,000 cu m and above are able to berth and receive fuel.
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    Origin Energy misses profit forecasts, hit by weak LNG revenue

    Origin Energy Ltd fell far short of analysts' forecasts on Thursday, reporting a 28 percent drop in half-year underlying profit as weak oil prices hit revenue at its Australia Pacific liquefied natural gas (APLNG) project.

    The blow came a day after Australia's top power and gas retailer flagged it was taking a A$1 billion ($770 million) impairment charge on its 37.5 percent stake in APLNG, which the market shrugged off given that rival LNG projects had been hit by writedowns earlier.

    Still, Managing Director Frank Calabria, reporting his first results since taking the reins last October, said earnings were growing from the company's power and gas retail business, thanks to higher volumes and better profit margins.

    "We continue to focus on accelerating debt reduction and improving returns to shareholders, so we can position Origin for growth in a rapidly changing market," Calabria said in a statement.

    Gas prices have been rising sharply in Australia, as gas has been drained from the domestic market to feed new LNG export plants, including APLNG. At the same time, electricity prices have rocketed on the back of rising use of wind and solar energy.

    Origin said it was on track to go ahead with an initial public offering of its exploration and production assets, excluding gas aimed for exports, in 2017.

    Underlying profit after tax sank to A$184 million for the six months to December from A$254 million a year earlier. That compares with a forecast of around A$332 million from two analysts.

    Weakened revenue from APLNG meant the project was unable to cover increases in interest, tax, depreciation and amortisation, it said.

    Origin paid no interim dividend, as expected. It stopped paying dividends last August to focus on paying down debt to help it weather weak oil and gas prices.
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    US Oil production unchanged

                                                       Last Week  Week Before   Last Year

    Domestic Production '000.......... 8,977           8,978           9,135
    Alaska ................................................ 511              518              512
    Lower 48 ...................................... 8,466           8,460           8,623
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    Summary of Weekly Petroleum Data for the Week Ending February 10, 2017

    U.S. crude oil refinery inputs averaged about 15.5 million barrels per day during the week ending February 10, 2017, 435,000 barrels per day less than the previous week’s average. Refineries operated at 85.4% 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 4.5 million barrels per day.

    U.S. crude oil imports averaged 8.5 million barrels per day last week, down by 881,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged 8.5 million barrels per day, 9.9% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 604,000 barrels per day. Distillate fuel imports averaged 216,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 9.5 million barrels from the previous week. At 518.1 million barrels, U.S. crude oil inventories are above the upper limit of the average range for this time of year. Total motor gasoline inventories increased by 2.8 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 0.7 million barrels last week but are above the upper limit of the average range for this time of year. Propane/propylene inventories fell 2.6 million barrels last week but are in the middle of the average range. Total commercial petroleum inventories increased by 11.1 million barrels last week.

    Total products supplied over the last four-week period averaged about 19.4 million barrels per day, down by 2.0% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged over 8.4 million barrels per day, down by 5.3% from the same period last year. Distillate fuel product supplied averaged 3.8 million barrels per day over the last four weeks, up by 7.4% from the same period last year. Jet fuel product supplied is down 3.3% compared to the same four-week period last year.

    Cushing down 700,000 bbls
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    Competition for oil services ramping up in Permian; ‘It’s déjà vu,’ says Parsley CEO

    Bryan Sheffield, CEO of Austin-based Parsley Energy, speaks at NAPE Summit in Feb. 2017 at the George R. Brown Convention Center in Houston.

    Bryan Sheffield isn’t worried about a land-price bubble in West Texas’s booming Permian Basin oil field.

    Sheffield, chief executive of Austin-based Parsley Energy, just spent $2.8 billion on Permian land held by Fort Worth’s Double Eagle Energy. It was the second largest deal of the year so far, behind only Exxon Mobil’s $6.6 billion purchase of Bass family land in the Permian’s Delaware Basin.

    Parsley paid about $37,000 an acre and Sheffield says he won’t pay more than $40,000 any time soon. But he argued that Permian sweet spots are so good they’ll make money at $60,000 an acre — which some have paid — as long as the companies get rigs up and running on the land within a few months of purchase.

    Still, he warned, competition for services is now quickly tightening, and that will likely cut into profits. Hydraulic fracturing teams, drilling rigs and truck hauling crews are in such demand they’re firing clients who won’t pay higher prices, or skipping jobs to find higher-paying work, he said.

    It’s almost like 2011 again, he said in an interview after speaking at the winter NAPE conference at the George R. Brown Convention Center in downtown Houston. As the shale revolution was booming, when Parsley was much smaller, he was bringing frack companies breakfast. He even took oil field service executives to a World Series game — Texas Rangers v. St. Louis Cardinals — in Arlington that year, just so he could get on top of their waiting list.

    “It’s déjà vu all over again,” Sheffield said on Tuesday.

    The Double Eagle deal was Parsley’s second of the year. The company spent $650 million in January for about 23,000 acres in the Delaware and Midland basins.

    Parsley is done buying land for the year, Sheffield said. But he’s happy with the company’s purchases.

    “We’re growing so fast,” he said. “I think we’re in the driver’s seat.”
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    Phillips 66 sees strong US export demand reviving midstream opportunities

    Phillips 66 expects a revival in the US midstream space in 2017, as demand for exports of crude, products and LPGs remain strong, President Tim Taylor said Tuesday.

    "We see a resurgence of opportunities in the midstream," said Taylor, addressing attendees at Credit Suisse's 22nd Annual Energy Summit in Vail, Colorado. His comments were webcast.

    Taylor said Phillips 66 and its midstream master limited partnership, Phillips Energy Partners, continues to find ways to deal with the "nature of market changes," particularly around growth in exports of both crude and products.

    Phillips 66 is a stakeholder in the Dakota Access Pipeline, expected to come online in the second quarter of 2017.

    DAPL received its final permit to finish the line in February 2017 following a contentious battle with environmentalists.

    Completion of the pipeline will open cheaper transportation for North Dakota's Bakken crude. The line will carry the light, sweet crude into the Midwest oil hub of Patoka, Illinois, and onward to the US Gulf Coast via the Energy Transfer Crude Oil Pipeline, or ETCOP. Phillips 66 is also a stakeholder in ETCOP.

    This will give the landlocked crude port access, opening the door for exports, as well as lower transport costs for East Coast refiners, who pay high rail costs from North Dakota to the East Coast.

    Phillips 66 is also working on the completing the Bayou Bridge Pipeline, which will bring Texas crude east to Louisiana. The Beaumont, Texas, to Lake Charles, Louisiana, segment is completed and work is underway connecting the line to St. James, Louisiana.

    "We are creating crude options" for us and others, Taylor said.

    While Phillips 66 is bullish on its chemical and midstream segments this year, it sees challenges remaining for the US refining segment, expecting current high product inventories to weigh on margins into the summer.

    Taylor expects the first half of 2017 to be dedicated to "clearing up excess product inventories" and the second half heading back into a balanced supply and demand picture for refiners.

    "This is a transition year," he said.

    Asked about the corporate tax reform being discussed in Washington, Taylor echoed many other refiners saying "it is not completely understood."

    He said a 25% tax on crude imports as being considered would see "Gulf Coast crude rise to parity" to imported grades, raising both crude and product prices.

    The higher costs would be passed through to consumers and likely cause "upsets in the supply chain," he said.

    While it is "way too early to tell" whether it would be a negative or positive for refining, it would be a positive for their chemical segment operations, Taylor said.

    Removal of taxes on exports, as is currently under discussion, would benefit Phillips 66's chemical operations where exports are high and feedstock is domestic.

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    Statoil joins Shell and other foreign companies exiting Canadian projects

    Norway's oil and gas powerhouse Statoil ASA has finalised its exit from the Canadian oilsands and is by no means alone in a list of high-profile internationally-based operators to agree a sale of Canadian upstream assets during the past 12 months.

    Statoil  is selling its interest in the Kai Kos Denseh project to Athabasca Oil Corp. for an initial Cdn$578 million. Analysis of this transaction can be found here.

    Other significant sales agreed upon in 2016 by non-Canadian companies include:

    1) Murphy Oil Corp. sold a 5% stake in the Syncrude project to Suncor Energy Inc. for $937 million in June. Murphy has been a stakeholder in the Syncrude project for 19 years. Murphy also agreed to sell heavy oil assets in Alberta's Peace River area to Baytex Energy Corp. for Cdn$65 million in November. This sale to Baytex closed in January 2017 – Download CanOils' latest M&A review for more details.

    2) Royal Dutch Shell sold Alberta Deep Basin and Northern B.C. Montney assets to Tourmaline Oil Corp. for Cdn$1.4 billion in November. That same month, Shell also parted with interests in five Newfoundland and Labrador exploration licenses in a deal with Anadarko Petroleum Corp. for an undisclosed fee.

    3) Japan's Mitsubishi Corp. sold its 50% interest in its Cordova natural gas joint venture with Penn West Petroleum Ltd. to its partner for an undisclosed fee in November.

    4) Harvest Operations Corp. (owned by South Korea's KNOC) sold assets producing 1,500 boe/d in Southeast Saskatchewan to Spartan Energy Corp. in June for Cdn$62 million. Harvest also sold assets in South Alberta to an unnamed party for Cdn$6.7 million in August.

    CanOils Monthly M&A review for January 2017 is available to download here.

    Despite all of these deals, 2016 was hardly a complete exodus when it came to foreign-based companies and Canadian M&A deals. For example, Calgary Sinoenergy Investment Ltd., a Chinese firm, acquired Long Run Exploration Ltd. in June for Cdn$770 million.

    Since then, Sinoenergy has been one of Alberta's most active operators, according to recent Rig Locator drilling market share data for Q4 2016. Only Canadian Natural Resources Ltd.and Cenovus Energy Inc. drilled more new operated wells in Q4 2016. U.S.-based Devon Energy Corp. also figured prominently in terms of wells drilled.
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    Governor orders evacuation of Dakota pipeline protest camp

    The governor of North Dakota ordered protesters on Wednesday to evacuate a demonstration camp near the site of the Dakota Access Pipeline in the latest move to clear the area that has served as a base for opposition to the multibillion dollar project.

    Republican Doug Burgum ordered demonstrators to leave the camp located on land owned by the U.S. Army Corps of Engineers by Feb. 22, citing safety concerns that have arisen due to accelerated snowmelt and rising water levels of the nearby Cannonball River.

    Burgum also said in his executive order that the camp poses an environmental danger to the surrounding area. His order reaffirms a Feb. 22 deadline set by the Army Corps for the demonstrators to clean up and leave.

    Environmentalists and Native Americans who have opposed the pipeline, saying it threatens water resources and sacred sites, have faced a series of set-backs since President Donald Trump took office in January.

    A federal judge on Monday denied a request by Native American tribes seeking to halt construction of the final link of the $3.8 billion pipeline after the Corps of Engineers granted a final easement to Energy Transfer Partners LP last week.
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    Alternative Energy

    European Parliament adopts draft reform of carbon market post-2020

    European Parliament on Wednesday adopted draft reforms of the EU's carbon market post-2020 that aim to balance greater cuts in greenhouse gases with protection for energy-intensive industries.

    The European Union's emission trading system (ETS), a cap-and-trade permit system to regulate industry pollution, has suffered from excess supply since the financial crisis, depressing their prices and heightening the need for reform.

    But politicians and EU nations are divided over how best to fix the complex system, with industry and environment groups lobbying hard on opposing sides over dozens of amendments to the EU executive's proposal.

    Reform efforts have also been overshadowed by Britain's decision to quit the bloc, raising fears it would also leave the EU's scheme, hammering prices.

    The draft, adopted in tight vote of 379 for to 263 against, rejected a proposal for a faster removal of surplus carbon permits from the EU's emission trading system from 2021. It sticks with the European Commission proposal for the cap of emissions to decrease by 2.2 percent per year.

    Climate campaigners said the reform did not go far enough to meet the EU's Paris climate pledge and help reach the its goal of a 43 percent cut in greenhouse gases from industries and power plants covered by the market compared with 2005.

    The reform proposal will now be referred to the Environment Committee, whose lawmakers will lead the talks with the EU's other two lawmaking bodies - the bloc's 28 nations and the Commission - to hammer out the final legislation.

    The benchmark European carbon contract fell around 2 percent following the vote, hovering around 5 euros/tonne, but Thomson Reuters carbon analysts said that market reaction to the vote will probably be short-lived.

    In bid to shore up prices, the draft proposal doubles the rate at which the scheme's Market Stability Reserve (MSR) soaks up excess allowances to 24 percent per year in the first four years after its entry into force in 2019.

    It also cancels 800 million carbon allowances from the MSR in 2021, with another 200 million unused permits being scrapped if a cap on overall allocations known as the cross-sectoral correction factor (CSCF) is not triggered.

    To protect industry, the draft allows for the share of allowances auctioned to be reduced by up to five percent in order to cushion against the impacts of CSCF on industry.

    A proposed amendment to establish a carbon inclusion mechanism for importers of certain goods, such as cement, was rejected. Such industries will be included on a list receiving free allowances to prevent them relocating abroad to avoid environmental taxes.

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    SunPower posts bigger quarterly loss

    SunPower Corp's quarterly loss widened, as the No. 2 U.S. solar panel maker took a bigger restructuring charge.

    The company's net loss attributable to shareholders widened to $275.1 million, or $1.99 per share, in the fourth quarter ended Jan. 1, from $40.5 million, or 29 cents per share, a year earlier.

    SunPower said it recorded a $175.8 million charge related to restructuring expenses in the latest quarter, compared with $31.2 million a year earlier.

    The company, majority owned by French energy giant Total SA , said revenue jumped 40.5 percent to $1.02 billion.

    SunPower said in December it would lay off 25 percent of its workforce and close a plant as it cuts costs to counter the slump in prices.
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    Bunge profit beats estimates on improved margins in Brazil

    U.S. agricultural trader Bunge Ltd reported a better-than-expected quarterly profit, helped by higher sugar and ethanol prices and improved margins in Brazil.

    The company also said that it expects its biggest business - the agribusiness unit that buys, stores, processes and sells agricultural commodities - to start the year slow and progressively improve as volumes and margins pick up in South America.

    South American farmers are expected to harvest bumper crops of corn and soybeans this year, which should help Bunge in 2017.

    Brazil is expected to harvest at least 104 million tonnes of soybeans this year and nearly 90 million tonnes of corn, according to government and industry analysts.

    Last year's weather-reduced corn and soybean harvests in Brazil prompted farmers there to hold back supplies. That weighed on processing margins and limited trading opportunities for big grain companies like Bunge.

    Bunge and rival agribusinesses ADM, Cargill and Louis Dreyfus are known as the ABCD companies that dominate global grain trading. They make money buying, selling, storing, processing and transporting crops around the world.

    White Plains, New York-based Bunge said net income available to shareholders rose to $262 million, or $1.82 per share, in the fourth quarter ended Dec. 31, from $188 million, or $1.30 per share, a year earlier.

    Excluding one-time items, the company earned $1.70 per share, beating the average analysts' estimate of $1.57 per share, according to Thomson Reuters I/B/E/S.

    Net sales rose 8.6 percent to $12.06 billion, beating estimates of $11.41 billion.
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    Precious Metals

    Agnico Eagle to invest $1.2 bln in Arctic gold mines

    Agnico Eagle Mines said on Wednesday it would invest more than $1.2 billion in building a gold mine in Canada's Arctic and expanding another, making it one of the few gold companies to be constructing mines at a time when industry output is shrinking.

    Toronto-based Agnico said its board had approved mine builds for its Meliadine project as well its Amaruq deposit, which is a satellite deposit of its existing Meadowbank mine. Both Meliadine and Amaruq are in Canada's Nunavut territory.

    Both operations are expected to start production in the third quarter of 2019. As such, production at Meliadine is now forecast to start about a year earlier than previously expected.

    Meliadine's capital cost is roughly $900 million and Amaruq around $330 million, Agnico Chief Executive Sean Boyd said.

    It was a good time to be building mines as there was not a lot of competition for goods and services, making for less pressure on input costs, he told Reuters by telephone.

    "There is not a lot of building activity in the mining sector right now. It is a good time to access high quality contractors," Boyd said.

    The two projects would help expand Agnico's gold production to a forecast 2 million ounces in 2020 from expected annual production of around 1.55 million ounces over the next three years. Depending on the timing of the Amaruq permits and development at both projects, 2019 production could be higher.

    The Meliadine project has received all its necessary permits and licences from Nunavut authorities, while Agnico expects Amaruq to get its final approvals this year and next.

    Global gold mine production fell 1.5 percent to 3,168 tonnes in 2016 from 3,216 in 2015, according to a report in January by GFMS analysts at Thomson Reuters.

    Five years of weak gold prices, a lack of new large finds and miners' focus on slashing debt has reduced the number of gold mine builds around the world in recent years.

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    Barrick posts market-beating profit, boosts spending

    Barrick Gold Corp reported better-than-expected profits and ambitious debt reduction plans on Wednesday, saying its balance sheet is now healthy enough to boost dividends and exploration spending.

    The Toronto-based miner, which is hiking its dividend to 3 cents from 2 cents a share, said it will expand its hunt for new gold beyond trusted core districts and projects, to so-called 'greenfield' areas.

    Such uncharted territory represents a higher risk of failure, but bigger potential rewards for sizeable discoveries. Some 80 percent of the $185-$225 million exploration budget is earmarked for the Americas, with much of the remainder for its African unit, Acacia.

    In 2016, it budgeted $125-$155 million for exploration.

    Barrick, the world's biggest gold miner, reported an adjusted profit of 22 cents a share, ahead of the consensus analyst estimate of 19 cents per share, and up from 8 cents a share in the same period last year.

    Revenue increased to $2.32 billion from $2.24 billion.

    Barrick, which has been selling non-core assets to help cut debt, plans to further reduce its debt by $2.9 billion by the end of 2018, decreasing its debt load to $5 billion from $7.9 billion currently.

    Cash flow from operations, non-core asset sales and new joint ventures and partnerships will finance the effort, which reduced debt by $2 billion in 2016.

    Barrick estimates its 2017 all-in sustaining costs, a measure of the effective day-to-day cost of producing gold, at $720-$770 an ounce, below an earlier estimate of $740-$775.

    The cost of fourth-quarter production was $732 an ounce, down from $848 in the same period last year. Barrick has been pushing to improve efficiency and incorporate more technology into its operations.

    Barrick expects to produce 5.6-5.9 million ounces of gold in 2017, up from 5.52 million in 2016, and above its earlier target of 5-5.5 million ounces.

    Production in 2018 is expected to drop to 4.8-5.3 million ounces, and to 4.6-5.1 million ounces in 2019.

    Fourth-quarter gold production declined to 1.52 million ounces from 1.62 million last year. Full-year copper output was 415 million pounds, with fourth-quarter production of 101 million pounds.

    Proven and probable gold reserve estimates fell 6.5 percent, to 85.9 million ounces at the end of 2016, from 91.9 million ounces in 2015. Last year, some 1.9 million ounces was divested and 6.8 million ounces depleted through mining, Barrick said.

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    Base Metals

    Arconic sells 60 percent stake in Alcoa for $890 million

    Arconic Inc, which is under pressure from hedge fund Elliott Management, said it sold nearly two-thirds of its 19.9 percent stake in Alcoa Corp for about $890 million.

    Alcoa Inc spun off Alcoa Corp, which houses the company's traditional aluminum smelting and refining businesses, in November and renamed itself as Arconic.

    The stake sale comes at a time when Arconic's biggest shareholder, Elliott Management, is campaigning for the ouster of Chief Executive Klaus Kleinfeld.

    Alcoa Corp's shares have surged about 68 percent since it was listed as an independent company on Nov. 1.

    Arconic sold the shares in an overnight block trade, Thomson Reuters publication IFR reported on Tuesday, citing sources.

    Morgan Stanley bought 23.35 million Alcoa shares before reoffering them to institutional investors at $38.25 each, a narrow 0.8 percent discount to the stock's Tuesday close, IFR reported.

    Arconic said the proceeds from the sale would bolster its cash balance and help it pay down debt or pursue share buybacks.

    Shares of Arconic have risen about 30 percent since Jan. 31, when Elliott started a proxy fight with the company after it posted a fourth-quarter loss.

    Alcoa Corp's shares were down about 2 percent at $37.85 in morning trading. Arconic shares were little changed at $29.40.
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    Steel, Iron Ore and Coal

    China may resume 276-working day rule at coal mines

    China may ask coal mines presently operating 330 days annually to produce on a 276-working day basis from mid-March, when the winter heating ends in northern China, in order to prevent the reemergence of excess capacity, market sources said.

    The 276-working day rule may last till the end of August, disclosed sources. The plan has been submitted to the National Development and Reform Commission and is still under discussion, one source said.

    China's advanced coal mines, those with safe and high efficient mines, may still be allowed to continue operating 330 days, as the NDRC tries to regulate production in a more flexible manner.  

    The government may allow northeastern Heilongjiang, Liaoning and Jilin provinces among other seven provinces, which use more coal than produced and have to buy from provinces outside, to decide the working days by themselves, another source said.

    If implemented, there could be some 150 Mtpa of coal production capacity curbed during this period.

    China will continue to press ahead with de-capacity efforts in the coal industry this year, and the expected reduction of capacity will be less than last year's 250 Mtpa, said Jiang Zhimin, vice president with the China National Coal Association, in late January.

    However, China may face greater difficulty in carrying out the de-capacity task this year, he said.
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    Shuozhou coal output drops 20.9pct YoY in Dec

    Shuozhou city in coal-rich Shanxi province produced 12.2 million tonnes of raw coal in December, falling 20.92% year on year but up 3.35% from November, showed data from local Coal Industry Bureau.

    Local mines – owned by governments at the prefecture and lower levels and private operators – produced 4.66 million tonnes of raw coal in December, dropping 15.16% from a year ago but up 19.3% from the month prior.

    Raw coal output from state-owned China Coal Pingshuo Group Co. stood at 5.18 million tonnes, decreasing 17.05% year on year and down 7.83% from November.

    The city's raw coal output stood at 152.87 million tonnes in 2016, dropping 16% from the year-ago level, data showed.

    Raw coal output from local coal mines dropped 20.92% on the year to 49.55 million tonnes during the same period, while that from China Coal Pingshuo slid 6.24% from a year ago to 71.85 million tonnes.

    The city's sales of raw coal totaled 65.6 million tonnes in 2016, down 19.7% on the year, while sales of washed coal dropped 7.99% year on year to 116.65 million tonnes.

    Sales of raw coal in December stood at 6.22 million tonnes, falling 10.9% year on year but surging 186.26% month on month, while sales of washed coal rose 12.48% on the year but down 26.81% from Novemberr to 9.68 million tonnes.

    By end-December, raw coal stocks across the city stood at 5.16 million tonnes, falling 29.89% year on year but edging up 0.12% from November; washed coal stocks were 2.76 million tonnes, increasing 4.88% on the year but down 8.01% from the month prior.
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    Teck shares slide on coal demand woes despite earnings beat

    Canadian miner Teck Resources Ltd reported a better-than-expected quarterly profit on Wednesday, lifted by a surge in the price of coal for steelmaking, but weaker demand at the start of the year spooked investors, sending its shares lower.

    Teck, North America's largest producer of steelmaking - or coking - coal, said that inquiries from buyers had picked up recently and that it expects sales to be weighted toward the second half of this quarter after a slow start.

    "I actually feel much better today than I did three weeks ago," Teck Chief Executive Donald Lindsay said on a conference call.

    Teck blamed the weaker start on customers drawing down coal inventories following a fourth-quarter buying binge, sparked by global supply worries that were ultimately unfounded. The Lunar New Year holidays also crimped demand in Asia.

    Shares of the Vancouver-based company, which also mines copper, gold and silver, were down 9 percent at C$29.70 in mid-afternoon trading. It was the best-performing stock on the Toronto Stock Exchange in 2016.

    Teck has reached agreements with the majority of its coal customers for the first quarter, based on a quarterly benchmark price of $285 per tonne.

    But since that benchmark was set in early December, spot prices have plunged to about $155 per tonne. Teck expects an average realized price this quarter of about 70 percent to 75 percent of the $285-per-tonne benchmark.

    Teck forecast first-quarter steelmaking coal sales of approximately 6 million tonnes, down from 7.3 million tonnes last quarter.

    But Lindsay said the miner's top priority was reducing debt, and it was aiming to get debt levels, possibly this year, below $5 billion from $6.1 billion at the end of 2016.

    A surge in coal prices last year from below $80 a tonne to above $300 had raised expectations of mine restarts. Real Foley, Teck's coal marketing vice president, said less than 15 million tonnes of coking coal had come online globally and that there had been no restarts since last October.

    The company forecast 2017 steelmaking coal production of 27 million to 28 million tonnes, but said output may be adjusted depending on demand. Teck, the world's second-biggest exporter of seaborne coking coal, reported an adjusted profit of C$1.61 per share in the three months to the end of December, ahead of analysts' consensus estimate of C$1.56.

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    Indonesia thermal coal exports hit 13-month high in Nov

    Indonesia, the world's largest thermal coal exporter, shipped a 13-month high of 20.37 million tonnes in November, up 1% on the year and 8% from the previous month, Platts reported on February 14.

    Sub-bituminous coal made up the majority of the total at 16.41 million tonnes, while the remaining 3.96 million tonnes was bituminous coal.

    During the first 11 months of the year, Indonesia exported 207.52 million tonnes of thermal coal, down 8% from the corresponding 2015 period.

    The largest taker of Indonesian thermal coal in November was India at 5.6 million tonnes, which was down 27% on the year, but 12% higher than October and at a five-month high.

    China took 3.88 million tonnes of thermal coal from Indonesia during the month, jumping 29% on the year but steady on the month.

    Exports to South Korea also climbed 34% on the year and 15% on the month to 2.86 million tonnes.

    Japan was shipped 1.67 million tonnes during November, up 20% on the year and 60% from October, while Indonesia sent 1.44 million tonnes to Taiwan, down 19% from November 2015 but up 18% on the month.
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    China rejects North Korean coal shipment -Yonhap

    China rejected a shipment of coal from North Korea a day after the country testfired a ballistic missile in violation of international sanctions, South Korea's Yonhap News Agency reported on Wednesday.

    A load of around 16,295 tonnes of North Korean coal, estimated to be worth around $1 million, was not allowed to be unloaded at a seaport in Wenzhou in China's Zhejiang province on Monday, and will be returned to the North Korean western port of Nampo, the agency said citing unidentified sources.

    The rejection was due to a higher-than-permissible level of mercury contained in the coal, the agency said.

    The move came a day after Pyongyang's test of the intermediate-range ballistic missile on Sunday, its first direct challenge to the international community since U.S. President Donald Trump took office on Jan. 20.

    In September, the United Nations imposed new sanctions on North Korea, as part of an effort to deter Pyongyang from pursuing its nuclear weapons programme after the country's fifth and largest nuclear test.

    It set an annual sales cap of $400.9 million or 7.5 million tonnes, whichever is lower, on coal, the isolated country's biggest export, effective from Jan. 1.

    Chinese foreign ministry spokesman Gen Shuang said he was not aware of the case when asked about the rejection at a regular briefing on Wednesday.

    He reiterated the government's stance that the guidelines on coal in the United Nations sanctions are very clear and China is abiding by them.
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    China Shenhua Jan coal sales up 59.9pct on year

    China Shenhua Energy Co., Ltd, the listed arm of coal giant Shenhua Group, sold 33.1 million tonnes of coal in January, gaining 59.9% year on year but down 4.6% month on month, the company announced in a statement late February 14.

    Coal sales in January was impacted by annual contract talks and weak demand, said the statement.

    The company produced 25.5 million tonnes of commercial coal in January, rising 3.2% on the year and up 0.8% on the month.

    In February, Shenhua lowered annual contract price for 5,500 Kcal/kg NAR coal by 7 yuan/t to 569 yuan/t FOB with VAT and cut monthly contract price by 20 yuan/t to 610 yuan/t FOB. Current spot offer prices for the coal grade were at 590 yuan/t FOB.

    The company's power output fell 3.9% year on year to 19.82 TWh in January, and its power sales dropped 4.1% from a year ago to 18.59 TWh in the month.
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    China iron-ore slips from record high as steel retreats

    Iron-ore futures in China fell more than 1% on Wednesday after reaching a record high in a rapid rally spurred by rising steel prices that some market participants feel may have been overdone.

    Both commodities had started their rally shortly after Chinareturned from the Lunar New Year break this month, with mills replenishing iron ore stocks hoping steel demand would strengthen as construction activity picks up.

    "Margins at steel mills have increased primarily from higher steel prices, but also as metallurgical coal and coke costs have declined," Commonwealth Bank of Australia analyst Vivek Dhar said in a note.

    The most-active rebar on the Shanghai Futures Exchange closed down 0.8% at 3 391 yuan ($494) a tonne, after touching a two-month high of 3 458 yuan earlier.

    Iron ore on the Dalian Commodity Exchange dropped 1.3% to end at 697.50 yuan per tonne, after initially peaking at 718 yuan. That matched the highest intraday level for the most-traded contract reached in October 2013, when the exchange launched iron ore futures.

    "As China's activity normalises after the Chinese New Yearholiday period we expect restocking demand to fall and prices to decline," Dhar said.

    "Chinese steel demand expectations have supported steel and iron ore prices this year, but not to the extent that prices suggest."

    Stocks of imported iron ore at China's ports reached 126.95-million tonnes on Febuary 10, the highest since at least 2004, according to data tracked by SteelHome.

    Strong iron ore futures prices had helped boost bids for physical cargoes, pushing up the spot benchmark above $90 a tonne this week for the first time since 2014.

    "While prices looked overvalued at above $90/tonne, we see little on the horizon that can drag prices lower," analysts at ANZ said in a note.
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    Tata Steel UK workers accept cuts to pension benefits

    Tata Steel's British workers voted on Wednesday to accept pension benefit cuts in return for safeguards on jobs and investment, although the Indian company's plan to spin off its entire UK pension scheme still faces regulatory hurdles.

    Wednesday's vote allows Britain's largest steelmaker to close its 15 billion pound ($19 billion) British Steel Pension Scheme (BSPS) to future accrual and replace the final salary scheme with a less generous defined contribution scheme.

    "Steelworkers have made great sacrifices ... Those sacrifices must be repaid by Tata Steel honouring its commitments on investment and job security. Nothing less would be a betrayal and add to the deep mistrust that steelworkers now have for the company," said Tony Brady, national officer of the Unite trade union.

    In return for pension changes, Tata Steel has pledged to guarantee production and jobs at Britain's largest steelworks in Port Talbot, Wales, for five years and to invest 1 billion pounds in its UK business over the next decade.

    The company's new defined contribution scheme will cover its existing 11,000 UK employees. The firm is, however, seeking rare regulatory approval to cut benefits for all 130,000 BSPS members and to spin off the scheme into a standalone entity.

    Tata says its UK unit, which is set this year to post its first profit in five years, will fail if it has to keep ploughing funds into a scheme with 13 times more pensioners than paying employees.

    The company is also seeking to spin off the pension scheme because Germany's Thyssenkrupp, with which it is in merger talks, is not prepared to take on any UK pension liabilities in the event of a tie-up.

    "Steelworkers have taken a tough decision. It is vital that we now work together to protect the benefits already accrued and prevent the BSPS from free-falling into the pension protection fund (PPF)," said Roy Rickhuss, general secretary of the union Community.

    The PPF is a lifeboat for failing UK pension schemes. Tata Steel's UK workers were under pressure to back a deal that secured jobs and investment because if the company fails, they will face deeper benefit cuts under PPF payout terms.

    Stephen Kinnock, member of parliament for Aberavon, Wales, said: "What we have seen today is that the workforce will strain every sinew to save our industry. If fulfilled, the package voted on today should secure the future for Port Talbot."

    Some industry watchers, however, remain to be convinced that the 4,000 or so jobs at Port Talbot are secure for more than five years.

    Thyssenkrupp has said its main goal in merging with Tata's European operations is to combat overcapacity in the steel sector, and many expect this makes jobs at Port Talbot, a vital regional employer, vulnerable in the long term.

    Some pension experts also say Tata faced a battle to spin off the UK pension scheme because it would have to convince the regulator that the UK unit might otherwise go insolvent - something that looks less likely now it is heading for a profit.

    Martin Hunter, principal at pension consultants Punter Southall, said Tata faced a "substantial hurdle" winning regulatory clearance.

    "Even if the Pensions Regulator can be convinced that insolvency is inevitable... the cash sum needing to be offered to achieve a separation could be substantial, perhaps even in excess of 1 billion pounds."

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    Jiangsu to shed 6.5 Mtpa steel capacity in 2017

    Jiangsu province in eastern China planned to shed 6.5 million tonnes per annum (Mtpa) of crude steel capacity in 2017, said Zhao Zhiming, vice director of the provincial Development and Reform Commission.

    The province will eliminate steelmaking capacity by 11.7 Mtpa over 2017-2018, said officials on January 17.

    Last year, it shut 5.8 Mtpa of steelmaking capacity, outstripping its 2016 capacity reduction target.
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