Mark Latham Commodity Equity Intelligence Service

Wednesday 8th February 2017
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    Cereal box-sized spacecraft could sample asteroids for mining potential

    It may not be necessary to fire a billion-dollar spacecraft into orbit in order to find out the potential of mining asteroids. Instead, tiny spacecraft no bigger than a cereal box could be launched  with the intention of intercepting potential mineral-bearing asteroids in order to see how likely it is they contain metals worth mining and returning to Earth.

    Sound far-fetched? Possibly, but if the cost of asteroid mining exploration can be brought down to the millions from the billions, it could propel the yet-to-be-proven mining method closer into the realm of the probable. At least, that is the hope of a group of scientists who presented the concept at the annual fall meeting of the American Geophysical Union (AGU) in San Francisco.

    The cereal box-sized "motherships" could be built for $10-20 million, a fraction of the cost of current asteroid-exploration spacecraft.

    Called MIDEA (Meteoroid Impact Detection for Exploration of Asteroids), the mission concept "would launch tiny robotic scouts to rendezvous with asteroids and then study the material that minuscule impactors blast off them," according to a post in The results could reveal which space rocks make good mining targets.

    The best part? The cereal box-sized "motherships" could be built for $10-20 million, a fraction of the cost of current asteroid-exploration spacecraft.

    At the moment MIDEA is only conceptual, but it is receiving funding from NASA's Early Stage Innovations program. According to, construction is a ways off, with a space flight likely to be at least five to 10 years away.

    For now, the eyes of asteroid-mining enthusiasts will be on OSIRIS-REx.

    In September NASA's $1 billion spacecraft began a two-year journey to the asteroid Bennu, from which it will try gathering around 60 grams of dust, soil and rubble and return it to Earth.

    Once OSIRIS-REx arrives at Bennu in 2018, it will spend a couple of years surveying the asteroid’s body using its five instruments — three spectrometers, a camera suite and a laser altimeter — to select a suitable site for sampling.

    The craft will then carefully approach the celestial body — though it will never actually land on it — and extend a 3.3-metre arm that will fire nitrogen gas at the surface. This jet will break off samples to be collected and returned to Earth in 2023.

    Geologists believe asteroids are packed with iron ore, nickel and precious metals at much higher concentrations than those found on Earth, making up a market valued in the trillions of dollars.
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    Colombia president's campaign allegedly took Odebrecht cash: official

    Colombian President Juan Manuel Santos's 2014 election campaign allegedly received as much as $1 million from Brazil's Odebrecht SA, the country's attorney general said on Tuesday, as fallout from a massive corruption scandal continued.

    A portion of some $4.6 billion allegedly paid by engineering company Odebrecht to Otto Bula Bula, a former Liberal Party senator, was designated for the Santos reelection campaign, Colombia's Attorney General Nestor Humberto Martinez said in a statement.

    "It has been established that of that amount, in 2014 Mr. Otto Bula sent two transfers to Colombia, which were cashed at the time, for $1 million, and whose final beneficiary was the campaign management of "Santos for President - 2014," he said.

    The president's campaign chief Roberto Prieto denied the accusation and Camilo Enciso, the president's transparency secretary, said the allegations were untrue.

    Telephone calls to Odebrecht in Sao Paulo went unanswered after hours.

    Bula, who was arrested last month on charges of bribery and illicit enrichment, was tasked by Odebrecht with ensuring a certain number of higher-priced tolls were included in a contract to build a highway, Martinez has said.

    Bula has denied those charges.

    The campaign of Santos's rival in the election, Oscar Ivan Zuluaga, is also being investigated for receiving money from Odebrecht. Zuluaga was the candidate for former President Alvaro Uribe's right-wing Democratic Center party.

    Odebrecht's reputation has been hit after prosecutors in Brazil unearthed a bribes-for-contracts scandal that has extended into other countries.

    U.S. prosecutors allege that Odebrecht paid hundreds of millions of dollars in bribes in association with projects in 12 countries, including Brazil, Argentina, Colombia, Mexico and Venezuela, between 2002 and 2016.

    Prosecutors in Peru on Tuesday asked a judge to order the arrest of former President Alejandro Toledo for suspected involvement.
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    Argentina requests information in spy chief bribery probe: news report

    A federal judge in Argentina will request information from Brazil and Switzerland to determine if President Mauricio Macri's spy chief received bribe money from a builder in 2013, state-run news agency Telam reported on Tuesday.

    Prosecutors publicly announced two weeks ago that they are investigating whether National Intelligence Agency Director Gustavo Arribas received a bribe from Brazil-based Odebrecht SA  in the form of a $600,000 bank transfer from a Brazilian money changer.

    Arribas denied taking bribes or having any link to Odebrecht in a statement last month, when reports of an alleged bribe first appeared in local media. He said he was living in Sao Paulo in 2013 and had declared all of his bank accounts to Argentine authorities. Arribas' lawyers could not be reached on Tuesday.

    Odebrecht is at the center of a global graft scandal. As part of a $3.5 billion settlement with Brazilian, U.S. and Swiss authorities in December, the company admitted to paying bribes in 12 mostly Latin American countries including $35 million in Argentina.

    Prosecutors in Argentina are also investigating four projects involving Odebrecht, the largest construction firm in Latin America, for corruption.

    The formal requests for information will be sent after Feb. 21, Telam reported. The judge overseeing the case, Canicoba Corral, was not immediately available for comment.

    Argentina wants access to movements in Arribas's Credit Suisse account from Switzerland and plea bargain testimony from the money changer in Brazil, Telam reported.

    The bank transfer being investigated took place well before Macri was elected in November 2015.

    Odebrecht declined to comment on active investigations. The company said in a statement to Reuters that it was working to adopt measures to improve its commitment to ethical business practices and to promote transparency.
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    Brazil prosecutors claim JBS's Batista, Eldorado's CEO broke agreement

    Federal prosecutors asked a court on Monday to re-impose preventive measures against two key suspects in a corruption probe dubbed Operation Greenfield, which is investigating fraud at state-run companies' pension funds.

    According to the prosecutors' statement, defendants Joesley Batista, from the family that controls meatpacker JBS SA , and José Carlos Grubisich Filho, chief executive of pulp producer Eldorado Brasil Celulose SA, breached an agreement that had been signed with the prosecutors related the investigation.

    Asking the court to recognize that the defendants "violated principles of good faith" contained in the agreement, the prosecutors petitioned a judge to block assets worth as much as 3.8 billion reais ($1.22 billion) belonging to the investigated parties.

    The sum, said the prosecutors, would serve as "a guarantee" to compensate losses allegedly caused by the defendants in their business dealings with state-run companies' pension funds, as well as state-bank Caixa Econômica Federal and the FGTS workers' severance fund.

    The probe of the pension funds is one in a string of corruption investigations into the vast overlap of Brazilian business and politics.

    J&F, the Batista family holding company that controls both JBS and Eldorado, did not have an immediate comment.
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    3D Printing of Rocket Engines?

    Yes, and it’s not only possible, it’s happening with ARC Engines. Kyle Adriany explains the rocket engines and components now possible with ARC’s patented technology.

    Following in the footsteps of the likes of Richard Branson and Elon Musk, Arc Engines is revolutionizing the space industry by testing and developing the first ever 3D printed rocket engine. They’ve also developed cost effective methods to commercialize space travel.

    Through using methods such as Direct Metal Laser Sintering (DMLS), they can shape strong metals such as nickel super alloy, transforming them to produce ground breaking products.

    ARC Engines uses stable fuel injection systems for efficient combustion, producing something worthwhile in the aerospace industry.
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    Mitsui raises FY16/17 profit f'cast on higher metal prices

    Japanese trading house Mitsui & Co Ltd on Wednesday raised its profit forecast for the current financial year by 36 percent because of higher prices for coking coal and iron ore.

    The revised forecast of 300 billion yen ($2.67 billion) is higher than a consensus profit estimate of 252 billion yen from 11 analysts polled by Thomson Reuters I/B/E/S.

    A surge in coal prices and rising iron ore prices helped boost its full-year profit estimate at its metals segment to 175 billion yen from an earlier prediction of 110 billion yen, Mitsui chief financial officer Keigo Matsubara told a news conference.

    "An improvement in metals markets as well as cost cuts at energy operations and solid income from the Independent Power Producer business were behind the upward revision for the full-year profit estimate," he said.

    Coking coal futures on the Singapore Commodity Exchange soared in the second half of last year as top commodity consumer China clamped down on local production as part of a campaign against pollution.

    They have since dropped by more than 40 percent to around $165 a tonne, but are still double what they were in mid-2016.

    Iron ore prices on the Dalian Commodity Exchange have more than doubled from the end of March last year to around 640 yuan ($93) a tonne.

    But Mitsui, which owns large iron ore assets, sees uncertainties over metals prices going forward, including impacts from the "America First" policies by the new U.S. presidential administration and China's regulations on coal mining, Matsubara said.

    For the nine months through Dec. 1, the Japanese trading firm reported a 71 percent jump in net profit to 230.33 billion yen, propelled by robust profits from metals.

    As a result of higher full-year profit outlook, Mitsui said it would buy back up to 1.56 percent of its outstanding shares, as an extra measure to increase shareholder return.
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    Oil and Gas

    US EIA cuts 2017 world oil demand growth forecast

    The U.S. Energy Information Administration on Tuesday cut its 2017 world oil demand growth forecast by 10,000 barrels per day to 1.62 million bpd.

    In its monthly forecast, the agency cut its oil demand growth estimate for 2018 by 50,000 bpd to 1.46 million bpd.
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    China to take first cargo of Eastern Canadian crude: sources

    Eastern Canadian crude will make a first-of-its-kind voyage into the Caribbean and on to China, as weakening prices have opened the unique arbitrage to East Asia, crude traders said Monday.

    The unusual voyage is also supported by depressed shipping rates, Brent's narrowing premium to benchmark Dubai and a shrinking Middle East supply due to OPEC-led production cuts.

    Crude traders said a 710,000-barrel cargo of White Rose, 30.56 API and 0.28% sulfur, and a partial cargo of Hibernia, 36 API and 0.40% sulfur, will lift mid- to late February out of the NTL terminal in Whiffen Head, Newfoundland. It's unclear, however, which companies bought and sold the cargoes. Traders said the grades will first head to NuStar's Statia Terminal in St. Eustatius, where they will be co-loaded with an unspecified Latin crude grade onto a ship bound for China, likely a VLCC.

    The East Coast Canada barrels will most likely be co-loaded with a cargo of Venezuelan extra-heavy sour crude Merey, according to an industry source familiar with the Latin American markets. Produced in Venezuela's Orinoco Belt, Merey crude has a typical API gravity of 16 degrees and sulfur content of 2.45%. In January, about 3.668 million barrels of Venezuelan crude were shipped from Jose Terminal to St. Eustatius, from where they are presumably distributed to buyers in other markets.

    According to the latest import data from Platts China Oil Analytics, China imported an average of 403,000 b/d of Venezuelan crude in 2016, representing a year-on-year increase of 79,000 b/d, or 24.4%. A narrowing spread between the front-month swap value for Brent and Dubai has provided and incentive for imports of Brent-based crudes to China, including Venezuelan, Colombian and Brazilian grades, according to a second Latin American industry source.

    During the past six months, the spread between front-month Brent and Dubai swap values has decreased $1.61/b, falling to $1.77/b on Monday.

    Easing freight rates in the Americas have further opened the arbitrage window between the Americas crude markets and China, helping to keep total costs low for additional barrels needed to help make up for cuts in OPEC production. A majority of freight rates across vessel classes have trended downward since the start of the year.

    The regional VLCC market experienced the deepest lull in activity in the previous two weeks, as holidays in Northeast Asia had put any deals on pause. Replenished tonnage and more newbuilds coming online in the Arab Gulf have lately flooded the global VLCC market, adding further pressure on rates in the Atlantic Basin.

    Platts on Monday assessed the Caribbean-China run, basis 270,000 mt, at $5.8 million lump sum. That rate has gradually descended from an eight-month high of $6.3 million on January 11.

    Freight for Suezmaxes had fallen as well, as the glut in tonnage appeared to be outpacing working cargoes system-wide, leading several market participants to brace for a bearish outlook.

    The US Gulf Coast-Singapore trip, basis 130,000 mt, was assessed at $2.6 million lump sum on Monday. Trafigura placed a Heidmar vessel to be named on subjects for a USGC-Singapore voyage at $2.625 million lump sum for a February 16 fuel oil loading, but it was believed to be done prior to current market conditions.

    "A lot of ships prompt," a broker said. "[There are] openings for today and tomorrow," suggesting that Suezmax rates in the Americas had not bottomed out.

    The Eastern Canadian grades typically sell about 40 days before loading, meaning the cargoes were likely sold in early January as the price differentials for the crudes were on one of their biggest downward plunges of the past few years. S&P Global Platts assessed White Rose at Dated Brent plus 30 cents/b on December 30, and it fell to minus 30 cents/b by January 13. At the time, that was its lowest point since December 22, 2015, when it was Dated Brent minus 40 cents/b. Over the same period, Hibernia dropped from Dated Brent minus 55 cents/b to minus $1.15/b. That would put the outright price of the cargoes on January 13 at $44.735/b for White Rose and $53.885/b for Hibernia during the February loading period.

    The grades have been pressured by competing Bakken grades and seasonal East Coast refinery maintenance.

    Aligning with the weakened differentials was a decreased supply of Middle Eastern crudes, which often travel to China, due to OPEC-backed production cuts. The milestone 2016 agreement saw January output from the 13 members, not including Indonesia, at 31.16 million b/d in January, down 690,000 b/d from December, according to a Platts survey released Monday.

    This will mark the second time in four months that an Eastern Canadian grade has made a breakthrough trip. Uruguay's ANCAP purchased a Hibernia cargo in October that lifted in mid-November. That trip was made possible by the grade's low price and high fuel oil yield. It's also the second time that White Rose will pioneer a move into Asia. In November 2013, Indian Oil Corp. bought about 1 million barrels of White Rose light crude produced by Husky Energy.

    Attached Files
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    International offshore rig count sinks in January

    The international offshore rig count for the first month of the year was down both sequentially and year over year, according to rig count reports by the oilfield services provider Baker Hughes.

    Baker Hughes’ report shows that the international offshore rig count for January 2017 was 206, down 4 from the 210 counted in December 2016, and down 36 from the 242 counted in January 2016.

    Furthermore, the report shows that the international rig count for January 2017, which includes land and offshore units, was 933, up 4 from the 929 counted in December 2016, and down 112 from the 1,045 counted in January 2016.

    The average U.S. rig count for January 2017 was 683, up 49 from the 634 counted in December 2016, and up 29 from the 654 counted in January 2016.

    The average Canadian rig count for January 2017 was 302, up 93 from the 209 counted in December 2016, and up 110 from the 192 counted in January 2016.

    The worldwide rig count for January 2017 was 1,918, up 146 from the 1,772 counted in December 2016, and up 27 from the 1,891 counted in January 2016.

    The worldwide offshore rig count for January 2017 was 231, down 4 from 235 counted in December 2016, and down 40 from the 271 counted in January 2016.
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    Strict EU regulations remain burden for European refineries

    Stringent European Union environmental regulations continue to pose a challenge to refineries in the region, according to delegates at an EU refining forum in Brussels.

    The forum, which started in 2012 and is chaired by the EU, aims to examine excessive legislation and its impact on the refining industry.

    While the EU recognizes the importance of the refining sector, its drive to lowering carbon emissions remains fully in force.

    "The European Union will stick to its commitment to a low carbon economy," was the message by European Commissioner for climate action and energy Miguel Arias Canete, who added that "clean energy transition is here to stay," and that the refinery sector "must adapt to decarbonization."


    But refiners appealed to EU policy makers to implement a "broader and more rational approach" and to "have regulation aligned with the rest of the world," as Cepsa CEO Pedro Miro Roig said.

    The very strict environmental regulations in Spain have resulted in the idling of Cepsa's Tenerife refinery three years ago, and the plant is unlikely to restart, Miro Roig said. The EU regulations are also posing "a heavy burden" for Cepsa's two operating refineries in Spain, adding $2/barrel to the cost "to comply with the regulations."

    "We can't focus on short-term policies and strategies," Miro Roig said.

    The EU legislation has reduced competitiveness of the refining sector by 25%, according to the "fitness check" published by the European Commission, reminded Jaime Martin Juez, Repsol's director of technology and sustainability. He also noted that products with carbon cost embedded in them are imported in Europe without any checks.

    The so-called fitness check looked at the impact of EU legislation on costs and productivity in the refining sector over the period 2000-12 and was finally published by the European Commission after much delay in 2015.

    Delegates at the current forum asked for the fitness check to be updated with the impact of the post-2012 legislation.

    Delegates also suggested that the next meetings of the forum should address the challenges posed by the new IMO sulfur cap to be enforced in 2020.

    The global implementation of the sulfur cap on marine fuels "is a major concern," said John Cooper, director general of FuelsEurope, adding that the level of compliance globally will be critical.

    Meanwhile, increasing the competitiveness of European refineries "is critical for our future," said Repsol's Martin Juez.

    Declining demand for products "will involve further refinery closures," Cepsa's CEO warned.

    After closing five refineries, Italy still has an excess of production capacity and faces problems of competition, said an Italian delegate.

    In order to adapt to changes of demand, European refineries will require "significant investments" but investors need to "have confidence in the future of the industry," Cepsa's CEO said.

    While ExxonMobil is committed to its investments in upgrades at its Rotterdam and Antwerp refineries, it said it needs "support to provide solutions to the challenges we face." "We need transparent, predictable EU energy policy -- market-based," said ExxonMobil's Janet June Matsushita.

    Meanwhile, any risks to the European refineries could have repercussions to the closely linked petrochemical sector.

    More than 55% of the feedstock of the petchems industry comes from refineries, so "any risk to our refineries means risk to survival to our petchems industry," Miro Roig said.


    Among other challenges to European refiners is the expected rising share of alternative and renewables fuels, such as electrical cars, natural gas, LPG and biofuels. The EU has an ambition to "become world number one in renewables," said Commissioner Canete.

    Yet delegates noted some constraints and weaknesses.

    While electrical cars are becoming more popular, storing electricity remains a challenge even though technology is "advancing rapidly," Laszlo Varro, chief economist of the International Energy Agency, said. He also noted that the integration of electricity cars into the electricity network needs "to be managed carefully," and that based on current policy assumptions they are unlikely to have a significant impact on the oil industry in the next 15 years.

    Meanwhile FuelsEurope's Cooper pointed to the fact that electrical vehicles also have CO2 emissions embedded in their manufacturing and that regulations should "consider the carbon life cycle throughout the vehicle manufacturing, energy production and recycling."

    "There is no such thing as zero emission vehicle," said Cooper.

    FuelsEurope expects that smaller passenger cars in Europe will be shifting to gasoline rather than diesel, while the IEA expects that overall passenger cars will be consuming less oil at the expense of electrical cars and biofuels.


    On a more positive note for many delegates, data presented at the forum suggests that demand for oil products will remain predominant in the EU and by 2030 will still represent 86-87% of European transport sector needs, down from 94% today. Oil also represents around 34% of the inland energy consumption in Europe, according to EU data.

    Hence maintaining a "solid refining sector in Europe" is crucial, and "we can't see all this industry relocated," said Dominique Ristori, director general for Energy at the commission.

    As a way of improving conditions, the EU is looking at reducing the differences in the costs of energy -- gas, electricity -- between refineries within the EU. "Some refineries pay four-five times more [than others]," said Canete, adding "We should be able to reduce these differences."

    But energy costs can reach up to 60% of the operational costs for European refiners, said Canete, adding that they face higher energy costs compared to their competitors.

    And while refinery closures have slowed down since the 2011-14 peak, competitive pressures "remain high," Canete said.

    Attached Files
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    High Asia TDP run rates on firm benzene boosts toluene prices: sources

    High run rates at toluene disproportionation units in Asia to meet strong demand for benzene has boosted demand and prices for toluene, but also led to a glut of isomer-grade mixed xylene, market sources said, in line with S&P Global Platts data.

    The isomer-MX versus toluene spread was mostly in positive terrain in 2016, and hit a high of $134/mt on August 5, but narrowed towards the end of the year and flipped to negative on January 5 at minus $3/mt.

    On Monday it hit minus $29/mt, with isomer-MX FOB Korea at $737/mt and toluene FOB Korea at $766/mt.

    Toluene is the feedstock to make benzene and mixed xylenes in TDP units.

    Market sources said demand for toluene into TDP units was boosted by on-purpose benzene production, as benzene prices have hovered around more than two-year high levels recently, last assessed at $1,054/mt FOB Korea, the highest since November 3, 2014, then at $1,067/mt FOB Korea.

    "It means toluene is on an uptrend, MX is on a downtrend," a South Korean producer source said, adding that MX supply was set to increase as TDP units would be running as high as possible at the moment.

    A TDP unit will typically produce around half-half of benzene and isomer-MX if it runs on toluene only, thereby maximizing its benzene output, the producer said. Other potential feeds could be mixed aromatics.

    "We are trying to run it as much as possible," another South Korean producer source said about its TDP unit's run rate.
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    BP sees Q4 realised European natural gas price recover by 22% vs Q3

    BP said Tuesday its average realised gas price in Europe in the fourth quarter of 2016 jumped by 22% on the quarter to $4.81/Mcf ($4.70/MMBtu) as market conditions improved significantly across Europe toward the end of the year.

    The increase mirrored that of fellow European major Shell which last week also reported a sharp rise in its average Q4 gas sales price in Europe.

    Gas prices across Europe rallied in Q4 from multi-year lows throughout the rest of 2016 on a tighter-than-expected gas market caused by colder weather, limited LNG availability and nuclear outages in France.

    BP's realised European price had fallen to a multi-year low in Q3 last year of just $3.94/Mcf.

    BP's European gas price boost helped push its global average realised gas price in Q4 to $3.08/Mcf from $2.77/Mcf in Q3 2016.

    CFO Brian Gilvary also said BP's gas trading division had a good quarter. "Gas trading had a good result in the fourth quarter," he said on a conference call with analysts.

    However, the Q4 realised prices are still below the same period of 2015 when BP registered an average price of $6.08/Mcf in Europe and $3.47/Mcf globally.


    BP has been particularly hard hit by the continued low Henry Hub gas price in the US in the wake of the shale gas boom.

    BP is more exposed to US gas prices than its European peers given its large portfolio of producing assets in the US.

    It realised a price of just $2.29/Mcf in the US in Q4, up from $2.19/Mcf the previous quarter.

    "US prices rose in Q4 on falling production and higher demand," Gilvary said.

    Gilvary said the company expected prices to rise in 2017 which would support its realised prices.

    "We see a modest improvement in the Henry Hub price," Gilvary said.

    BP's US gas production in Q4 averaged 1.68 Bcf/d, compared with just 268 MMcf/d in Europe.

    Total gas output in the period was 5.85 Bcf/d, with the rest of the world accounting for the balance.

    The total was a 2.6% increase from 5.7 Bcf/d in Q3, but a 3.3% decrease year on year from 6.05 Bcf/d.


    Elsewhere in BP's upstream business, CEO Bob Dudley said the company hoped to start production from the 5 Tcf West Nile Delta gas project this summer, earlier than expected.

    "The West Nile Delta project will come on toward the summer rather than the fall which we had planned on," Dudley said.

    He also stressed the company's commitment to Egypt, where last year BP bought a 10% stake in the giant Eni-operated Zohr field.

    "Egypt is very strategic. We think it has great potential as a gas market, and as [new projects] come online Egypt's position -- potentially moving to a gas exporting country -- is in very good shape," Dudley said.

    Egypt began importing LNG in April 2015 to meet a growing supply-demand gap caused by a major slowdown in domestic gas development.

    No new upstream deals were signed between 2010 and 2013 during Egypt's political transformation, meaning the country quickly went from being a net exporter to net importer of gas.

    Gilvary said the risk profile of Egypt was much better than it was during the Arab Spring.

    "The risk is significantly reduced from where we were four to five years ago in terms of the portfolio we have. Being part of Zohr balances that risk," Gilvary said.

    He added that BP was benefiting from an improved payment environment in Egypt.

    "Receivables were coming under some stress three years ago, but that is vastly reduced now," he said.

    Dudley, meanwhile, also hinted as some possible gas project final investment decisions in 2017, including in Oman and in India.
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    BP and Shell Hit After OPEC Output Cuts Halt Oil-Trading Bonanza

    The oil-trading boom that cushioned the profits of Royal Dutch Shell Plc and BP Plc through the price slump of 2015 and early 2016 is over.

    BP said on Tuesday it made a “small” loss trading oil in the fourth quarter, while Shell last week said trading profits “flattened” in late 2016. The fall off in trading contributed to worse-than-expected fourth-quarter profits at Europe’s largest oil and gas producers.

    Although better known for their oilfields, refineries and gas stations, Shell and BP are the world’s top energy traders, handling about 20 percent of the world’s oil demand between them and dwarfing independent trading houses such as Vitol Group BV, Trafigura Group and Glencore Plc.

    BP “simply had a weak fourth quarter” in oil trading, Brian Gilvary, the company’s chief financial officer, said in an interview, adding that BP managed to make a profit in overall trading once natural gas was included.

    Oil traders thrived in 2015 and 2016 by taking advantage of an oversupply that led to an unusually strong contango market structure — where contracts for future delivery trade higher than spot prices. The contango allows traders to buy oil cheap, store it and profit later by locking in their profit through derivatives in so-called “cash-and-carry” deals.

    As onshore depots filled up over the last two years, oil traders relied on supertankers for “floating storage” deals, at times anchoring ships for months in natural ports or near trading centers like Singapore.

    The contango has narrowed sharply since the Organization of Petroleum Exporting Countries and Russia cut production. The price difference between Brent crude for immediate delivery and the one-year forward dropped to a contango of $0.52 a barrel on Friday, the narrowest since September 2014 and well below the 2015 peak of $12 a barrel.

    Oil traders predict the market could flip later this year into the opposite condition, backwardation, where prices for immediate delivery trade at a premium to forward contracts.

    Oliver Wyman, a consultancy that publishes a benchmark annual review of the commodities trading industry, said the trading arms of BP and Shell enjoyed in 2015 their best year ever thanks to “low, volatile spot prices that created cash-and-carry opportunities.”

    Total, the other major oil company with significant trading operations, reports quarterly earnings Thursday. In contrast to their European rivals, Exxon Mobil Corp. and Chevron Corp. have smaller trading operations.

    Independent commodity trading houses have also seen profits from energy trading decline. Vitol, the largest independent oil trader, reported a 42 percent drop in first-half 2016 profit, according to people familiar with the matter. Trafigura, the third-largest independent oil trader behind Vitol and Glencore, said in December that full-year gross profit from crude and petroleum product trading fell 13 percent.
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    Oil extends losses after API reports huge U.S. crude build

    Oil prices that tumbled more than 1 percent Tuesday fell further after settlement, pressured by growing crude stockpiles in the United States as evidence of a burgeoning revival in U.S. shale production could complicate efforts by OPEC and other producers to reduce a supply glut.

    Weekly data from trade association the American Petroleum Institute estimated that U.S. crude stockpiles had surged 14.2 million barrels last week.

    If U.S. Energy Information Administration data due on Wednesday at 10:30 a.m. confirms the stockpile surge, it will be the largest build since October.

    Analysts have forecast that U.S. crude stockpiles rose 2.5 million barrels last week - a fifth straight weekly build - while gasoline inventories grew 1.1 million barrels - a sixth consecutive weekly build.

    U.S. gasoline stocks are rising much faster than normal at the start of the year, threatening to leave refiners struggling to clear an overhang of motor fuel later in the year.

    U.S. gasoline futures RBc1 fell to settle at $1.4875 a gallon, after dropping earlier in the session below the 200 day moving average on a continuous chart, a bearish technical signal.

    "It's a supply-driven setback ... We are within 2 million barrels of the record in U.S. gasoline stocks that we saw last February," said Tony Headrick, energy markets analyst at CHS Hedging. "A strong build in inventory reports could weigh on gasoline in a seasonal time frame where gasoline demand is weak."

    The oil market has been supported for two months as the Organization of the Petroleum Exporting Countries and other exporters have agreed to cut output by almost 1.8 million barrels per day (bpd) since the start of the year. OPEC and Russia have together cut at least 1.1 million bpd so far.

    But market players are concerned that rising U.S. shale production and signs of slowing demand growth could offset these efforts.

    The U.S. government slightly trimmed its forecast for 2017 production but the market shrugged off the monthly report as its demand forecast was little changed.

    "The general perception is that OPEC is cutting production, which is supporting prices, but high stock levels, rising rig counts and growing U.S. production are capping gains," said Tamas Varga, analyst at London brokerage PVM Oil Associates.

    Societe Generale oil analyst Michael Wittner said U.S. shale oil output was recovering faster than expected.

    "Rig counts are increasing at an accelerating pace, and given the technological advances of the past three years, this should translate into significant supply," Wittner said.

    "U.S. shale is coming back, and it’s coming back strong."

    Chinese oil demand grew in 2016 at the slowest pace in at least three years, Reuters calculations showed, the latest sign of slower demand from the world's largest energy consumer.
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    Pioneer Natural results beats Street on cost cuts, rising oil prices

    U.S. shale oil producer Pioneer Natural Resources Co (PXD.N) on Tuesday posted a better-than-expected adjusted quarterly profit helped by cost cuts and rising crude prices CLc1.

    The results reflect the slow-but-steady improvement across the energy sector due to improving commodity prices. Pioneer said it would spend about $2.8 billion this year due to that improvement, about 8 percent above last year's levels.

    The company posted a net loss attributable to common shareholders of $44 million, or 26 cents per share, compared to a loss of $623 million, or $4.17 per share, in the year-ago period.

    Excluding one-time items, Pioneer earned 49 cents per share.

    By that measure, analysts expected earnings of 33 cents per share, according to Thomson Reuters I/B/E/S.

    Production rose 13 percent to 241,833 barrels of oil equivalent per day.
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    Parsley Energy to buy Permian Basin assets for about $2.8 billion

    Parsley Energy Inc said on Tuesday it would buy certain assets in the oil-rich Permian Basin for about $2.8 billion from Double Eagle Energy Permian LLC, its second deal in the largest U.S. oil patch in less than a month.

    The energy industry overall poured more than $28 billion into land acquisitions in the Permian Basin of West Texas last year, more than triple what they spent in 2015.

    Permian Basin producers make money at the current crude price CLc1 of about $52-$53 per barrel because of the region's sprawling pipeline network, abundant labor and supplies, and warm winters that allow year-round work. Double Eagle and its predecessor companies have made a fortune buying and selling Permian acreage starting in 2009.

    Parsley said the deal, which includes undeveloped acreage and producing oil and gas properties, would add about 71,000 net acres to its acreage in the Midland Basin, bringing its total acreage in the Permian Basin to about 227,000 acres.

    The oil producer's shares were down nearly 4 percent in after-hours traded, recovering somewhat from a drop of more than 7 percent, after the company said it would sell stock to fund the acquisition.

    Parsley said on Jan. 10 that it would buy acreage in the Permian Basin for about $607 million and said on Tuesday it would increase its activity in the region and raised its production forecast and capital budget for 2017.

    Parsley hiked its 2017 capital budget to $1 billion to $1.15 billion from $750 million to $900 million.

    It expects full-year production of 62,000-68,000 barrels of oil-equivalent per day (boed), up from its previous forecast of 57,000-63,000 boed.

    The company estimated it produced 38,100-38,300 boed in 2016 and had total development expenditures of $493-$499 million, within the estimated production and spending ranges it gave on Jan. 10.

    Parsley said it intends to finance the cash portion of the latest acquisition through an offering of 36 million shares and debt.
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    Plains All American profits fall, revenues grow

    Houston oil pipeline giant Plains All American saw its net income fall in the fourth quarter as it ramps up spending for a build out of pipeline infrastructure from the booming Permian Basin to the Houston region.

    Plains reported Tuesday its fourth-quarter net income fell 49 percent from $247 million at the end of 2015 down to $126 million last quarter. However, Plains’ quarterly revenues grew 19 percent to $5.95 billion from $5 billion. For the full year, Plains posted a $726 million profit versus $903 million in 2015.

    However, Plains is focused on new spending to expand in West Texas and New Mexico. Plains announced in January it will buy the Alpha Crude Connector pipeline gathering and storage system for $1.2 billion from Midland-based Concho Resources and Dallas private-equity firm Energy Spectrum Capital. Plains also said it will expand its existing BridgeTex and Cactus pipeline systems in West Texas.

    Plains Chairman and Chief Executive said he’s focused on capitalizing off of growing drilling and production activity in the Permian.

    “These activity levels have increased our conviction in significant Permian Basin production growth in 2017,” Armstrong said in a prepared statement.
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    US Army Corps approves easement needed to complete Dakota Access oil pipeline

    The US Army Corps of Engineers has approved the final easement needed to complete the Dakota Access Pipeline and will issue the document to the company in no more than 24 hours, the government said Tuesday in a notice to Congress.

    Paul Cramer, deputy assistant secretary of the Army, said the agency would waive a two-week waiting period often observed between the notification to Congress and the issuance of the easement.

    The approval will allow Dakota Access to finish a section underneath Lake Oahe, a dammed section of the Missouri River in North Dakota that became the focal point of months of protests against the project.

    The delayed 470,000 b/d Bakken crude oil project could start commercial service no sooner than early May, based on a timeline the company's lawyer gave in court Monday.

    Dakota Access said it can have oil flowing under Lake Oahe within 60 days of receiving the easement and start commercial operations within 83 days.

    President Donald Trump signed an executive memorandum January 24 directing the Corps to "review and approve" Dakota Access "in an expedited manner, to the extent permitted by law and as warranted, and with such conditions as are necessary or appropriate."

    The four-state, $3.8 billion pipeline is designed to deliver Bakken and Three Forks crude to Patoka, Illinois, where it connects with the Energy Transfer Crude Oil Pipeline to Texas.

    Energy Transfer Partners, Sunoco Logistics and Phillips 66 own shares in the project. Enbridge Energy Partners and Marathon Petroleum announced plans in August to acquire a major stake, but that deal has not closed.

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    High infrastructure costs, low returns delay US use of LNG for bunkering

    The use of LNG for bunkering in the US maritime industry will take some time as shipowners and suppliers consider the costs of building infrastructure and assess the risks, according to industry sources.

    "Most companies won't even look at that type of project unless the return on investment is at least 10% and depending on the capital leverage the return on investment may need to be closer to 18%-20%.

    The return on investment is largely determined by the cost of capital leverage," a shipping expert with more than 50 years of industry experience said.

    The International Maritime Organization decided October 27 to reduce emissions by nearly 87% for oceangoing ships sailing in international waters. Starting in January 2020, ships will be required to burn fuel with a maximum sulfur content of 0.5%, except when traveling in designated Emission Control Areas where the sulfur limit is 0.1%.

    Although in Asia and Europe shipowners and port authorities are working on the transition to LNG fueling ahead of the new regulations, in the Americas the shipping industry is still assessing how feasible the utilization of LNG can be.

    "The concern from an owner/operator of tramp ships -- a ship with no fixed schedule -- would be for the availability of fuel where we need it. So unless we see massive investment in LNG installations around the world, I am afraid the availability of fuel will be a major concern," said Mikkel Borresen, vice president of Dampskibsselskabet Norden, a shipping company which operates a fleet of about 238 ships and resupplies marine fuel in major ports such as Rotterdam, Singapore and Houston.

    The IMO's decision is more a call for shipowners than for refiners, an oil refinery source based in Houston said, because with current market conditions refiners have less interest in processing residuals and are more focused on diesel, which is in high demand because it is "clear and bright."

    But he also said it is unfair to ask shipowners to provide a solution to the issue when the maritime industry is still recovering from the impact of the bankruptcy of South Korean-based shipping company Hanjin in late August.

    The estimated cost of building an onshore regasification LNG unit is around $1 billion, according to market sources.

    In the US there is one facility in operation designed specifically for LNG bunkering. The facility in Port Fourchon, Louisiana, is owned by the marine transportation company Harvey Gulf International Marine.


    When the IMO first implemented the ECA zones in 2010, the change had a minimal impact and represented a low-cost investment, as some ships had to change parts of the piping system and some had to change the bunker tank configuration, sources said.

    But the tankage and other systems needed to contain and consume LNG as a fuel are more complex and larger than traditional bunker fuel engines. Ships would lose space, which is used to hold the cargo being transported, which would affect the amount of money the ship is able to generate, sources said.

    "LNG capacity is around 1.6-2 times greater than that of conventional fuel, and with the necessary equipment the actual loss is even greater, and could be as high as 3-4 times," according to a Poten source.

    The infrastructure needed for liquefaction of the gas and storage are the primary contributors to the high cost of retrofitting a ship.

    There are additional costs not related to infrastructure, such as crew training or the time lost during the engine conversion process, which shipowners also take into account.

    The large-scale adoption of LNG bunker fuel will be an "evolution" and is decades away, the Poten source said.

    Retrofitted vessels alone will not have a meaningful impact on LNG bunker fuel demand because there will not be many of those ships due to the high cost of capital needed, he said.

    The lifespan of a ship is typically 20-30 years. Shipowners prefer to wait out the life of the ship rather than invest in retrofitting as the return on investment would outlast the ship life. Many sources believe that meaningful LNG bunkering demand will come from newly built ships.
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    Alternative Energy

    Vestas Q4 in line with expectations; says 2017 sales could fall

    Wind turbine maker Vestas Wind Systems on Wednesday posted fourth-quarter operating profit in line with expectations but said revenue this year could fall from 2016's record level.

    The Danish company said its board of directors would recommend a dividend payout of 9.71 Danish crowns per share, compared with 6.82 crowns last year.

    "I am extremely pleased with Vestas' 2016 performance, delivering a record year on revenue, EBIT margin, net profit, free cash flow, order intake, and combined order backlog," Chief Executive Anders Runevad said in a statement.

    Vestas said it expects 2017 sales of between 9.25 billion and 10.25 billion euros, compared with 10.24 billion in 2016.

    Vestas is set to lose its status as the world's biggest wind turbine maker as Germany's Siemens and Spain's Gamesa have agreed to combine their assets in the sector.

    The company delivered 2,544 megawatts of wind turbine capacity in the fourth quarter, up from 2,150 MW a year earlier.

    Operating profit before special items rose 25 percent in the fourth quarter from a year earlier to 504 million euros, bang in line with the figure forecast in a Reuters poll of analysts.

    Vestas and its rivals are benefiting from a new focus on renewables, encouraged by the Paris Agreement on climate change in Dec. 2015 and a five-year extension of a key U.S. Production Tax Credit.

    Vestas' share price came under pressure after it warned in November of a slowdown in the U.S. market in 2017, coupled with the election win by Donald Trump, who had expressed support for conventional fossil fuels.

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    Mt Marion ships its first lithium

    The Mt Marion lithium project, in Western Australia, has shipped its first lithium concentrate.

    Project partners Mineral Resources and Neometals on Tuesday said the first shipment of 15 000 t of lithium concentrate was loaded at the port of Kwinana, for delivery to Chinese offtake partner Ganfeng Lithium.

    The first shipment of lithium concentrate followed the successful commissioning and the continued ramp-up of production at the Mt Marion operation, which was expected to produce 400 000 t/y at full capacity.

    Ganfeng, which has a 13.8% interest in the project through Jiangxi Ganfeng Lithium, has agreed to an offtake of 200 000 t/y of spodumene concentrate of between 4% and 6% lithium-oxide content.

    Mineral Resources previously flagged the possibility of divesting of its 43.1% interest in the Mt Marion project.
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    Mosaic profit beats; cuts dividend on 'gradual' market improvement

    Mosaic Co reported a better-than-expected quarterly profit as it kept a tight leash on costs, and the company slashed its annual dividend as it expected only a "gradual" improvement from a prolonged slump in the fertilizer market.

    The company's shares were down 6.6 percent at $29.90 in light premarket trading on Tuesday.

    The world's largest producer of finished phosphate products said it would cut its annual dividend by 45.4 percent to 60 cents per share, effective with the next declaration.

    A capacity glut and soft crop prices have pushed potash and phosphate prices to multi-year lows.

    "While we are confident the market bottom is behind us, the pace of improvement is expected to be gradual," Chief Executive Officer Joc O'Rourke said in a statement.

    Potash MOP (muriate of potash) cash production costs dropped 28 percent in the fourth quarter from a year earlier, while phosphate conversion costs fell 15 percent.

    Net earnings attributable to Mosaic fell to $12 million, or 3 cents per share, in the three months ended Dec. 31, from $155 million, or 44 cents per share, a year earlier.

    On a per share basis, the company recorded a charge of 23 cents, compared with 16 cents a year earlier.

    Excluding items, the company earned 26 cents per share, according to Thomson Reuters I/B/E/S, handily beating estimates of 13 cents.

    Plymouth, Minnesota-based Mosaic's net sales fell to $1.86 billion, but was slightly above analysts' average estimate of $1.80 billion.

    Mosaic recently bought Vale SA's fertilizer business for $2.5 billion, the latest in the global fertilizer market as companies seek ways to beat the slump in prices.

    The deal, which makes the Brazilian iron ore miner the biggest shareholder in the U.S. company, is expected to close in late-2017.

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    Precious Metals

    Gemfields’ Q2 emerald output nearly halves

    Production of emerald and beryl at Aim-listed Gemfields’ 75%-owned Kagem mine, in Zambia, nearly halved to 4.7-million carats in the three months to December 31, compared with the 8.2-million carats produced in the three months to December 2015.

    CEO Ian Harebottle said the mine experienced a mixed second-quarter with lower production volumes, as a result of the varied nature of the mineralisation at the deposit, which was offset to some extent by the efforts of the operating team on site.

    Meanwhile, Gemfields’ 75%-owned Montepuez ruby mine, in Mozambique, continued to deliver strong results, with a significant increase in ore processed relative to the prior comparable period as a result of improved operational efficiencies.

    The mine, however, produced 1.1-million carats of ruby and corundum in the quarter under review, compared with the 1.6-million carats in the prior comparable period, as lower-grade but higher-value material was processed.


    Fabergé sales orders increased by 95% year-on-year in the quarter under review.

    “It is pleasing to see that the luxury market has started the year off with a buoyant note with Fabergé showing solid January sales demand,” Harebottle said.

    The number of sales transactions increased by 48% year-on-year, while the average selling price per piece increased by 12% year-on-year.

    Total operating costs for the quarter increased by 2% largely owing to increased marketing and events spend.
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    Rio hands diamond mine over to Madhya Pradesh government

    Diversified miner Rio Tinto will "gift" the Bunder diamond project, in India, to the government of Madhya Pradesh.

    Rio last year announced that it would not proceed with the development of the Bunder mine, owing to commercial considerations, and that it would close all projectinfrastructure.

    The government of Madhya Pradesh signed an order in January, under which it will accept ownership and take responsibility for the Bunder assets.

    Rio copper & diamonds CEO Arnaud Soirat said Rio’s exit from Bunder is the latest example of the company streamlining its asset portfolio, adding that it simplifies the business, allowing the company to focus on its world-class assets.

    “We believe in the value and quality of the Bunder project and support its future development and the best way to achieve that is to hand over the assets to the government of Madhya Pradesh.”

    Soirat noted that the assets being handed over to the government will include all land, plant, equipment and vehicles at the Bunder project site. The inventory will also include diamond samples recovered during exploration.

    It is believed that this approach will assist the government to package the assets if it is to proceed with an auction process for the Bunder mineral rights.

    “Rio Tinto has long and enduring ties with India and we continue to see the nation as an important market for our metals and minerals and as a key hub for Rio’s businessservices.”

    Soirat said the company remains committed to its diamonds business and the Indian diamond industry through its world-class underground mines, the Argyle diamond mine, in Australia, and the Diavik diamond mine, in Canada.
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    Base Metals

    Workers at Chile's Escondida copper mine to strike Thursday: halt output

    Workers are set to strike on Thursday at BHP Billiton Plc's Escondida copper mine after contract talks mediated by the Chilean government failed to reach a deal, the main union at the world's largest copper mine told Reuters.

    The union has warned that a strike at the Chilean copper mine could be lengthy, potentially affecting global supplies of a metal used in everything from construction to telecommunications.

    BHP Billiton said it planned to halt production during the strike since it could not guarantee the safety of the 80 workers the government had authorized to remain at the mine to perform "critical duties", such as equipment upkeep and adherence to environmental protocols.

    "The company doesn't want to change its position, so we understand that there is nothing left to negotiate ... there is nothing left to talk about, we've already talked a lot and we are definitely going on strike," union spokesman Carlos Allendes said on Tuesday.

    The strike is planned to start at 8 a.m. (1100 GMT) on Thursday.

    "We've decided not to replace workers, at least during the first 15 days of the strike. With complete conviction, we have accepted that we will not be producing during this phase because the safety of our workers cannot be guaranteed during a strike," said Patricio Vilaplana, Escondida's vice-president of corporate affairs.

    The two sides on Friday started a five-day government-mediated period of negotiations that effectively delays a work stoppage the Escondida Union No. 1 voted for last week.

    A strike can only legally begin on Thursday since Wednesday will be the last day of the scheduled negotiations if talks are not actually held. If there is a sudden change of heart, both parties can agree to an extension.

    Allendes warned that the union has decided not to sit down to negotiate with the company on Wednesday.

    "There will be no talks tomorrow," Allendes said.

    In a statement on Monday, the union said BHP had not committed to a benefits scheme that places new and longtime workers on equal footing. The union, which considers equality of benefits essential to any agreement, added that it tried to discuss the issue with the company, which asked to put it off to the end of negotiations.

    Labor negotiations at Escondida, which have a long history of being tricky, are seen as a benchmark for the industry at large. The last wage talks four years ago, when copper prices were considerably higher, ended with Escondida offering each worker a bonus worth some $49,000, the highest ever offered in Chile's mining industry.

    Falling profits at Chile's copper mines because of lower prices of the metal have caused belt-tightening that makes labor negotiations more difficult. Labor problems at Escondida could portend tough negotiations this year at other Chilean copper mines, such as Anglo American and Glencore's Collahuasi and Antofagasta's Los Pelambres.

    Escondida is majority-controlled by BHP, with Rio Tinto and Japan's JECO also holding stakes.
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    Steel, Iron Ore and Coal

    Indonesia port disruptions cause coal shipping delays

    Loading disruptions at ports in East and South Kalimantan on the Indonesian side of Borneo island are causing a coal supply shortage in one of the world's most important export regions, causing delays as ships wait to take on new cargoes.

    Shipping data in Thomson Reuters Eikon and port loading schedules seen by Reuters show 136 ships were offshore Indonesia as of Feb. 6, waiting to take on coal.

    The affected coal ports and anchorage zones include Samarinda in the province of East Kalimantan and Taboneo, near the capital of South Kalimantan, Banjarmasin, on the island's southern coast.

    The previous week, that figure stood at 108, the data showed. The two Kalimantan provinces make up one of the world's biggest thermal coal mining regions.

    "The issue is that coal cannot get out because local authorities are blocking it," Pandu Sjahrir, Chairman of the Indonesian Coal Mining Association told Reuters, adding that traders had complained to him about the issue.

    Reuters was unable to confirm with local port authorities what was causing the delays.

    Traders said that the disruptions would likely impact seaborne thermal coal prices, especially from Australia.

    "If there's disruptions in Indonesia, coal buyers will have to turn to alternative sources to meet their demand, and that's Australian coal," said one coal trader.

    Australian prompt cargo prices for coal from its Newcastle terminal last settled at $81 per tonne.

    Indonesia is targeting production of 470 million tonnes of coal in 2017, the bulk of which will be exported to Asia.

    Among the country's biggest coal producers are Bumi Resources, Adaro Energy and Bukit Asam .
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    US Hampton Roads coal exports in January highest since March 2015

    US Hampton Roads coal exports in January highest since March 2015

    Coal exports from terminals in Virginia's Hampton Roads region totaled 2.59 million st in January, up 25.3% from the prior month and up 40.3% from the year-ago month, according to Virginia Maritime Association export data released Monday.

    It was the highest monthly total since March 2015.

    The increase is likely due to a number of deals booked late last year as higher international seaborne prices brought increased demand for US thermal and metallurgical coals.

    At the three individual terminals in Hampton Roads, Lambert's Point, also known as Pier 6, exported 1.15 million st in January, up 22.3% from December and up 32.7% from last year.

    It was the also highest monthly total for the Norfolk terminal, which is owned and operated by Norfolk Southern since March 2015.

    Pier IX, based in Newport News, exported 716,892 st in January, up 205.6% from the previous month and up 408.6% compared with the year-ago month. It was also the highest monthly total since 2015 for the terminal, which is owned and operated by Kinder Morgan.
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    Rio Tinto boosts dividend on commodities recovery

    Global miner Rio Tinto said on Wednesday it will pay a bigger-than-expected annual dividend of $1.70 per share on the back of a strong recovery in mineral commodities markets in 2016 and cost-cutting.

    Underlying earnings for the world's second-biggest mining house rose by 12 percent to $5.1 billion, beating analysts' estimates for around $4.87 billion, according to an externally compiled consensus.

    The result marks a turnaround from 2015, when the world's No. 2 miner posted its worst underlying earnings in 11 years and scrapped its generous payout policy amid tumbling commodity prices.

    "We enter 2017 in good shape. Our team will deliver $5 billion of extra free cash flow over the next five years from our productivity programme," Chief Executive Jean-Sebastien Jacques said in a statement.

    The market had been expecting a dividend of about $1.33 a share, according to the external consensus. The annual payout is still below 2015's dividend which partly included the previous payout policy of never cutting payments year to year.

    Analysts are mixed on whether Rio Tinto will increase returns to shareholder in 2017 or hold on to more cash amid forecasts for a retraction in commodities prices.

    The price of iron ore surged 81 percent last year and now sells for around $80 a tonne, despite analysts' expectations for a retreat to around $55.

    The concern is that millions of tonnes of additional low-cost supply from Australia and Brazil will overwhelm demand in 2017 and send prices into retreat.
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    Vale expects to book $1.2bn Q4 fertiliser impairment

    Diversified Brazilian mining major Vale expects to book a $1.2-billion after-tax impairment charge on its fertiliser business for the fourth quarter.

    The company, which expects to report fourth-quarter and full-year results on February 23, said in regulatory filing on Monday that the charge arises from the December agreement to sell certain assets in its fertiliser division to Mosaic Co for $2.5-billion.

    Vale, which is headed up by CEO Murilo Ferreira, added that owing to a lower price outlook for certain products, it expects to recognise further impairments (with no cash effect) in its base metals operations in Vale Newfoundland and Labrador and Vale New Caledonia (VNC).

    While the miner is still finalising the exact figures of these impairments, it expects these to be “significantly less” than the $4.9-billion impairment booked on these assets in 2015.

    Vale also said it plans to reopen a 2026 bond issue and use the proceeds to redeem bonds maturing in March 2018. The investment banking units of Banco Bradesco, Banco do Brasil, JP Morgan Securities, MUFG Securities Americas and Santander Investment Securities will manage the issue, according to the filing.
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    Asian Q1 ferrochrome contract prices set at 110-128 cents/lb CIF

    Specialty steelmakers in Asia set first quarter high-carbon ferrochrome contract prices in a wide range of 110-128 cents/lb CIF because different mills bought at different times over the last four months, market sources said Monday.

    One mill had bought as early as October while the most recent Q1 contract closed in January.

    Q1 prices were at least 10% higher than in Q4, sources said.

    Asian mills typically buy one or two months before the quarter starts.

    Purchase decisions were pushed ahead or postponed due to a rapid rise in ferrochrome prices in Asia and fears that a rise in Chinese stainless steel demand could lead to a shortage of ferrochrome, sources added.

    In 2016, 24.9 million mt of crude stainless steel was produced, up 15.7% year on year, the Stainless Steel Council of China Special Steel Enterprise Association said.

    A steelmaker set the Q1 contract price in October at $1.10/lb CIF main Asian port, for over 500 mt/month, the mill source said.

    The Indian material was 10-50 mm lumps with minimum 60% chrome, maximum 3% silicon, 8% carbon, 0.04% phosphorous and 0.05% sulfur.

    Another steelmaker bought Q1 supplies in mid-December at $1.26-$1.28/lb CIF main Asian port, for over 1,000 mt/month, said a seller.

    The mill bought supplies of mixed origin with 10-50 mm lumps and chrome content of 50-60%, he added. This could not be confirmed with the mill, however.

    A third steelmaker bought in January at around $1.20/lb CIF main Asian port, for over 2,000 mt/month, sources said. The material was 10-50 mm lumps with minimum 60% chrome, maximum 3-4% silicon and 8-9% carbon.

    The different Q1 settlement levels reflected market conditions at the time of purchase, sources said.

    In October, the spot price of 58-60% high-carbon ferrochrome imports in China, the largest importer in Asia, averaged 90.13 cents/lb CIF, S&P Global Platts data showed.

    In December, the prices averaged $1.22 cents/lb CIF China, while the January it averaged $1.12/lb CIF China.

    The second mill contract was set only a few days after Glencore's December 15 announcement hiking the European Q1 contract price by 50% from Q4 to $1.65 cents/lb, said the seller source.

    "Prices were hitting the peak at the time," he said.

    Asian spot ferrochrome prices softened in January ahead of the Lunar New Year holidays.

    The Platts China high-carbon 58-60% ferrochrome price was last assessed at $1.04-$1.15/lb CIF China on February 3.

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