Mark Latham Commodity Equity Intelligence Service

Wednesday 2nd March 2016
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    Executives of Brazil's No. 2 building company say it paid Rousseff campaign suppliers -paper

    Executives from Brazil's second-largest building company Andrade Gutierrez have testified to prosecutors that the company paid suppliers for President Dilma Rousseff's 2010 electoral campaign, newspaper a Folha de S.Paulo reported on Tuesday.

    The testimony, as part of a plea bargain by the 11 executives, would be the first direct link between the sprawling 'Operation Carwash' investigation into kickbacks at state oil firm Petrobras and the election of President Rousseff, the paper said.

    A source confirmed the executives had signed a plea bargain deal that is being handled by Federal prosecutors as it involved politicians. The Federal prosecutors' office had no comment.
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    Eskom says low tariff increase could hurt operations

    Electricity supplier Eskom said on Tuesday it would try to minimise the risk of power cuts after South Africa's energy regulator refused to let it raise prices by more than 9.4 percent.

    Eskom, the sole supplier in Africa's most industrialised economy, had asked for much bigger price hikes to recover 22.8 billion rand ($1.45 billion) in costs from 2013/14, when it ran expensive diesel plants and brought in more green power to keep the lights on.

    The regulator, Nersa, said it was allowing the utility to recover 11.2 billion rand by raising the price, or tariff, paid by customers.

    "We are giving them half of what they had asked for," Nersa Chairman Jacob Modise told reporters. "The energy regulator decided that the average tariff for standard tariff customers be increased by 9.4 percent for the 2016/17 financial year only."

    Eskom is scrambling to repair its ageing power plants and grid. Last year, the utility was forced to impose almost daily power cuts, or "load shedding", that hurt economic growth.

    Chief Executive Brian Molefe said in a statement the regulator's decision did not address the question of Eskom's continued financial sustainability.

    "It will have operational consequences," he said. "We will do our best to minimise the risk of load shedding, striking a balance with Eskom's already depleted balance sheet."

    Analysts said there was an increased threat of power cuts now that Eskom had failed to get the requested increase.

    "Eskom's application, if approved in its entirety, would have seen electricity tariffs climb by as much as 16.6 percent," said Jeffrey Schultz, economist at BNP Paribas.

    "South Africa's electricity system remains extremely tight and, therefore, further electricity supply cuts later this year are not out of the question."

    The mining sector, hard hit by weaker metal prices and beset by job cuts and mine closures, said operations would be weighed down further by higher electricity prices.

    "For the struggling mining sector this increase will have a major impact on increasing the industry's cost base," Chamber of Mines CEO Roger Baxter said in a statement.

    "Further pressure on electricity prices will push a number of mining companies further into the red, necessitating further restructuring."
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    Oil and Gas

    Europe's Biggest Oil Hub Fills as Ship Queue at Seven-Year High

    The queue of ships waiting outside Europe’s biggest port and oil-trading hub of Rotterdam has grown to the longest in seven years as a global supply glut fills storage capacity.

    As many as 50 oil tankers, twice as many as normal, are waiting outside Rotterdam because storage sites are almost full, the port’s spokesman Tie Schellekens said by phone on Tuesday.

    “This is a clear sign of the oversupply filling up storage to the brim,” Gerrit Zambo, an oil trader at Bayerische Landesbank in Munich, said by phone. “People are preferring to store oil rather than cut production. These are bearish signs.”

    The world is so awash with oil that BP Plc Chief Executive Officer Bob Dudley said last month people will be filling up their “swimming pools” with it this year. Traders are taking advantage of a market contango, where forward prices are higher than current prices, by buying oil cheap, storing it and selling the commodity later. As onshore storage fills up, companies could start stockpiling at sea in a repeat of a strategy last seen in 2008 and 2009.

    Near Capacity

    Crude oil in storage tanks in Rotterdam stood at 51.3 million barrels on Feb. 19, the highest for the time of year in data starting in 2013, according to Genscape, which monitors inventories. Royal Vopak NV, the world’s largest oil-storage company, last week reported a fourth-quarter occupancy rate of 96 percent at its 11 terminals in the Netherlands compared with 85 percent a year earlier.

    The situation in Rotterdam mirrors that in the biggest U.S. storage hub of Cushing in Oklahoma, where stockpiles are at a record high.

    “In Cushing and probably Rotterdam storage is filling up very quickly,” said Giovanni Staunovo, an analyst at UBS Group AG in Zurich, Switzerland. “In China, given high oil imports, there are too many ships and the infrastructure seems not be able to handle that.”

    Saudi Arabia, the world’s biggest oil exporter, said last month it won’t cut production to ease global oversupply, while Iran has pledged to increase output after sanctions were lifted in January. Still, oil climbed on Tuesday from the highest close in more than seven weeks on speculation that monetary stimulus in China could help revive flagging economic growth in the world’s second-biggest fuel consumer.

    Price Contradiction

    Brent crude, the international benchmark, rose as much as 1.3 percent to $37.05 a barrel on the London-based ICE Futures Europe exchange, after prices gained 6.3 percent last week.

    There is a “contradiction” between the increase in oil prices and the physical supply and demand situation seen in Rotterdam and Cushing, Zambo said. With storage tanks filling up, oil prices for immediate delivery would probably fall while cargoes for future delivery would increase, resulting in a deepening of the market contango.

    Chris Bake, a senior executive at Vitol Group, the world’s largest independent oil trader, said in February that traders are considering storing oil at sea, a strategy last employed in 2008 and 2009.

    “Primary and secondary storage is pretty much full,” Bake said. “It’s probably a good time to be a vessel owner.”

    On Feb. 11, U.S. benchmark West Texas Intermediate for delivery in four months traded $6 a barrel higher than that for one-month supply, the widest gap in five years. The premium has since narrowed to $3.88 a barrel on Tuesday.

    That’s still some way off the $15 premium reached in January 2009, a “super-contango” that helped traders make billions of dollars from storing oil in supertankers moored in sheltered anchorages in the North Sea, the Persian Gulf, the Singapore Strait and off South Africa.

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    The Oil stockpile fret: climbing a wall of worry.

    Image titleWe may get to end of the year, and even though supply and demand are in balance, the market shrugs and says ‘So what?’ because it’s waiting for proof of inventory draw-downs,” said Mike Wittner, head of oil markets at Societe Generale SA in New York. “Moving from stock-builds to balance might not be enough.”Image titleInventories started to swell in 2014 as the wave of supply unleashed by the U.S. shale oil boom, coupled with other new output, outpaced growth in global oil demand by a factor of three. The pile-up continued in 2015 as OPEC members like Saudi Arabia and Iraq raised production to defend their share of world markets, and are poised to fill even more as Iran -- freed as of last month from international sanctions -- pushes new exports into a market that’s already saturated.
    Image titleFor a historical precedent, Goldman Sachs Group Inc. points to the oil glut that developed in 1998 to 1999 as demand plunged in the wake of the Asian financial crisis. Crude prices kept falling even as the Organization of Petroleum Exporting Countries made output cuts in March and then June of 1998, slipping below $10 a barrel in London in December of that year. It wasn’t until stockpiles in developed economies started dropping in early 1999 that the recovery took shape

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    South Korea plans to buy more Iranian condensate this year

    The country's trade and energy ministry said on Tuesday.

    "We will increase oil and natural gas imports from Iran, especially Iranian condensate," the ministry said in a statement.

    It added that the two countries would establish a payment system to facilitate smooth trade of crude and condensate between National Iranian Oil Company and South Korea's SK Energy and Hyundai Oil Bank.

    South Korea's imports of Iranian crude oil tripled in January from a year earlier with the United States lifting sanctions on Tehran, but shipments remained far below pre-sanction levels.

    The Islamic Republic on Jan. 17 emerged from years of economic isolation as sanctions over its disputed nuclear programme were lifted.

    Iran is exporting 100,000 barrels a day of oil to South Korea, one of its main crude customers, and hopes to double that figure by the end of 2016, Oil Minister Bijan Zanganeh was quoted as saying on Monday.
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    China raises coal bed methane gas subsidy to help fight air pollution

    Beijing has raised the subsidy for coal bed methane (cbm) production by half from this year to 2020 in a move to encourage exploration and production of the cleaner-burning fuel as part of its air pollution control initiatives.

    The subsidy for each cubic metre of cbm ¨C natural gas trapped among coal seams ¨C has been raised to 0.3 yuan in the five years to 2020 from 0.2 yuan in previous years, the Ministry of Finance said in a statement posted on its website on Tuesday.

    The move is expected to help struggling producers of the greener but more challenging and expensive to extract natural gas, after Beijing slashed non-residential wholesale natural gas prices by an average of 28 per cent from November following a crash in global energy prices.

    "Many cbm projects are no longer profitable following the recent domestic gas price cut amid slowing demand growth," Nomura Asia-Pacific head of oil and gas research Gordon Kwan said. "This is why China is lending a helping hand to the producers to motivate long-term investment in cbm."

    Cbm and shale gas ¨C natural gas trapped between shale formations ¨C are unconventional forms of gas that are free from state pricing, but they have not been immune from price reduction pressure since conventional gas has similar properties to and competes with unconventional gas.

    China is rich in unconventional gas but poorly endowed in conventional gas.

    Hong Kong-listed and Shanxi province-based AAG Energy, the first non-state-owned cbm explorer to get Beijing¡¯s permission to enter into large-scale commercial production in 2011, said in January competition from the expected conventional gas price cut forced it to lower its own cbm prices as early as September.

    As a result, its average selling price fell 11.9 per cent to 1.56 yuan per cubic metre in the second half of last year from 1.77 yuan in the first half.

    The latest 0.1 yuan per cubic metre subsidy increase is not sufficient to offset the price decline.
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    Frontline says resolving Iran oil shipping insurance issues still months away

    Frontline, one of the world's largest independent tanker firms, says securing insurance for cargoes carrying oil from Iran is likely to take another two to three months, potentially limiting Iran's ability to quickly ramp up oil exports.

    Iran has been seeking to rapidly increase oil exports since international sanctions were lifted as part of its nuclear deal with world powers, which came into effect in January, but it still faces insurance and financing hurdles.

    "We have not lifted anything yet, there are still terms of insurance and payments. There are still some outstanding (issues). (But) we expect that to be in place within two to three months," said Robert Hvide Macleod, chief executive of Oslo-listed Frontline.

    "That could change, but two to three months (is) our estimate," he told a conference call with investors on Monday.

    The United States still prohibits U.S. individuals or companies from trading with Iran and insurers are trying to clarify details on the parameters of the U.S. sanctions.

    "In terms of volumes, (Iran's) pre-sanctions levels were 2.8 million barrels of oil per day. Their domestic refineries consumed about 1.8 million," MacLeod said.

    "There is a million left to export which they did on their own ships. Now the post-sanctions volumes available into 2016 looks to be between 1.5 million to 2 million barrels."

    MacLeod said once the insurance issue is resolved, Iran would rely more on international shipping. Iranian tankers have been holding unsold oil at Iranian ports and will continue to do so due to a lack of land storage facilities, he said.

    "We expect the chartering requirement from Iran to increase and (for) them to fix international tonnage," he said.
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    SacOil agrees $6billion gas pipeline project

    Sacoil has agreed a deal for the construction of a $6billion, 2,600km large-diameter pipeline to transport natural gas between Mozambique and South Africa.

    The South African oil and gas company said the agreement is with national Mozambique oil company ENH and Profin and Chinese pipeline company CPP will transport natural gas from Mozambique’s Rovuma Basin to Gauteng in South Africa and en route will deliver gas to key towns and settlements in Mozambique.

    SacOil chief executive Dr Thabo Kgogo said the cooperation agreement is a key milestone in the progression of the natural gas pipeline and distribution project.

    “It confirms the financing commitments required for the pre-investment and engineering studies phases of the project, and paves the way for its speedy and effective construction and implementation.

    “The agreement brings together a wealth of expertise as a pre-investment consortium that will focus on bringing the project to bankability, assuring that a solid investor group is drawn from China, Mozambique and South Africa.”
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    GAIL delays LNG carrier tender again

    India’s GAIL has again postponed the tender seeking to hire nine LNG carriers to carry U.S. liquefied natural gas starting in 2017.

    According to the tender documents GAIL has set the new date for bid submissions to March 31, 2016.

    Indian company re-floated its tender in September 2015, but has since delayed the bid submissions date twice. It was last expected to close on February 29.

    No changes were made to the initial tender as GAIL is still looking for nine LNG ships of a cargo capacity of 150,000-180,000 cbm, enabling it to comply with its off-take commitments at Sabine Pass and Cove Point LNG projects from December 2017.

    According to the report by Press Trust of India, GAIL’s chairman and managing director B C Tripathi noted the latest postponement is due to a request by bidders that are looking for more time to complete their bids.

    Under the original tender, nine vessels, three of which have to be built by shipyards in India, will have a delivery window from January 1, 2019, to May 31, 2019, for foreign shipyards and July 1, 2022, and ending June 30, 2023, for Indian shipyards.

    Indian shipyards, Pipavav Defence and Offshore Engineering and Cochin Shipyard have already agreed deals with South Korea’s DSME and Samsung Heavy Industries, respectively, to cooperate in the construction of the vessels.

    Cochin Shipyard has additionally acquired a licence by France’s GTT to build LNG carriers with the Mark III membrane containment system.
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    Colombia's Ecopetrol says reserves down 11 pct in 2015 to 1.85 bln bbl

    Colombian state-run oil company Ecopetrol said its proven oil and gas reserves were down 11 percent in 2015 to 1.85 billion barrels equivalent because of a decline in exploration caused by low crude prices.

    The reserves were equivalent to 7.4 years of output, down from 2014 figures of 8.6 years. The reserves' replacement index was 6 percent, Ecopetrol said in a statement late on Monday.

    "The largest contributions to reserves come from the Castilla and Chichimene fields, both operated directly by Ecopetrol, and the Rubiales field, which will be operated by the company from June 2016," the statement said.

    Ninety-five percent of the proven reserves are the property of Ecopetrol, while the remainder belongs to partners and subsidiaries.

    The company had reported 2.08 billion barrels equivalent of reserves in 2014.
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    Anadarko says to monetize up to $3 billion of assets in 2016

    Anadarko Petroleum Corp said it plans to monetize up to $3 billion of assets this year amid a slump in crude oil prices.

    The U.S. oil company has already closed or signed agreements to monetize about $1.3 billion of assets this year, it said last week.

    Anadarko also said on Tuesday that it expected 2016 capital expenditures to range between $2.6 billion and $2.8 billion,
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    Henry Hub breaks 20 yr lows.

    Image title
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    Former Chesapeake CEO McClendon charged with bid-rigging of land leases

    Aubrey McClendon, former chief executive officer of Chesapeake Energy Corp  and a legend in the U.S. energy industry, was charged on Tuesday with conspiring to rig bids to buy oil and natural gas leases in Oklahoma, the Justice Department said.

    The indictment follows a nearly four-year federal antitrust probe that began after a 2012 Reuters investigation found that Chesapeake had discussed with a rival how to suppress land lease prices in Michigan during a shale-drilling boom. Although the Michigan case was subsequently closed, investigators uncovered evidence of alleged bid-rigging in Oklahoma.

    In addition to the federal probe, the Michigan attorney general brought criminal charges against Chesapeake, which the company settled in 2015 by agreeing to pay $25 million into a compensation fund for land owners. The Justice Department indictment paves the way for what may be one of the highest-profile criminal antitrust cases against a well-known U.S. CEO in decades, and could thrust McClendon, a controversial figure whose aggressive leasing tactics are legendary in the energy industry, into the highest-stakes legal battle of a decades-long career.

    Oklahoma-based McClendon is a shale drilling evangelist who was once among the highest paid U.S. CEOs. He co-founded Chesapeake with fellow Oklahoma oilman Tom Ward in 1989. In 2013, McClendon stepped down from the helm of Chesapeake amid a liquidity crunch and corporate governance concerns. Ward left Chesapeake in 2006 and founded competitor SandRidge Energy Inc (SDOC.PK) the same year.

    McClendon, who is now with American Energy Partners (AEP), was charged with one count of conspiracy to rig bids, a violation of the Sherman Antitrust Act, the Justice Department said.

    "The charge that has been filed against me today is wrong and unprecedented," McClendon said in statement. "I have been singled out as the only person in the oil and gas industry in over 110 years since the Sherman Act became law to have been accused of this crime in relation to joint bidding on leasehold." Chesapeake itself is unlikely to face criminal prosecution, the company said. "Chesapeake has been actively cooperating for some time with a criminal antitrust investigation by the Department of Justice regarding past land leasing practices," said Chesapeake Energy spokesman Gordon Pennoyer. "Chesapeake does not expect to face criminal prosecution or fines relating to this matter."

    Chesapeake shares declined 3.6 percent in after-hours trading to $2.66

    The seven-page indictment alleges that McClendon set up a conspiracy of two energy companies which agreed not to bid against each other in purchasing oil and natural gas leases in northwest Oklahoma from 2007 to 2012. The indictment did not name either company.

    The indictment comes at a time when energy executives across America are already facing considerable distress. Oil and gas companies like Chesapeake, SandRidge, and McClendon’s new venture AEP, have struggled as the price of oil plummeted by 70 percent since late 2014.

    Both Chesapeake and SandRidge, once storied firms in Oklahoma’s oil industry, have recently engaged restructuring experts as they scramble to pay off billions in debt and avoid potential bankruptcy. Chesapeake's stock price has tumbled more than 80 percent in the last year. SandRidge was delisted from the New York Stock Exchange in January, and closed Tuesday at 4 cents per share.

    Much of the companies' debt was accrued in the period from 2007 through 2012 when McClendon was allegedly engaged in an antitrust conspiracy, a time when Chesapeake was snapping up millions of acres of land leases nationwide to expand its shale drilling.

    McClendon has also been embroiled in a lawsuit with Chesapeake which alleged that he took sensitive company data from his former company to build his new business.

    The Justice Department said that McClendon's indictment was the first case in an ongoing federal antitrust investigation into price fixing, bid rigging and other anti-competitive conduct in the oil and natural gas industry.

    “His actions put company profits ahead of the interests of leaseholders entitled to competitive bids for oil and gas rights on their land. Executives who abuse their positions as leaders of major corporations to organize criminal activity must be held accountable for their actions,” said Assistant Attorney General Bill Baer, head of Justice Department's Antitrust Division.

    Chesapeake, SandRidge, and McClendon had previously disclosed in securities filings that they were being investigated by the Justice Department's Antitrust Division.
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    Linn Energy expects to breach debt covenant, company says

    Linn Energy LLC expects to fall out of compliance with the terms of a fully drawn $3.6 billion line of credit in 2016, the company said in a regulatory filing Tuesday.

    The covenant breach could result in a default and ultimately a bankruptcy if creditors aren’t willing to renegotiate. The debt terms include a 30-day grace period.

    “The Company does not expect to remain in compliance with all of the restrictive covenants contained in its credit facilities throughout 2016 unless those requirements are waived or amended,” Linn Energy wrote in the document.

    “The uncertainty associated with the Company’s ability to meet its obligations as they become due raises substantial doubt about its ability to continue as a going concern.”

    Linn Energy made the comments in a regulatory filing announcing that the company would delay filing its 10-K form, which outlines annual and quarterly performance. Linn indicated it needed more time to complete the company’s financial statements and disclosures.

    On Feb. 4, Linn Energy said it was exploring strategic alternatives, business code for a restructuring or sale that could stave off bankruptcy. In Tuesday’s announcement, Linn indicated it had $1 billion in cash and cash equivalents available.

    Linn also indicated it will report significant impairments on its non-cash assets and oil reserves, totaling about $5.8 billion for 2015, according to the documents.
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    Alternative Energy

    China delivers global record wind and solar installs

    China has formally confirmed two new clean-energy world records in 2015 — one for installing a record 32.5 GW of wind in a single year, and the second for installing 18.3 GW of solar, both higher than initial estimates, Windpower reported on March 1.

    Meanwhile, coal consumption fell 3.7% year on year on the back of just 0.3% electricity production growth and a rapid diversification of China’s electricity generation capacity.

    “The latest figures confirm China’s record-breaking shift toward renewable power and away from coal,” said Tim Buckley, Director of Energy Finance Studies at the Institute for Energy Economics and Financial Analysis (IEEFA).

    “Solar and wind continue to be the big winners, as illustrated by a 73.7% increase in grid-connected solar generation capacity. Declining consumption coupled with an over-abundance of domestic supply, meaning coal imports into China were particularly badly hit, dropping 30.4% on year” , he said.

    While these figures are largely consistent with initial estimates for the 2015 year, the official Chinese National Bureau of Statistics confirmation yet again highlights that global electricity markets “are transforming a great deal faster than anyone actually expected,” said Buckley.

    “China’s official 2015 wind installations are an all-time global record of 32.5 GW, 30% ahead of even the most optimistic forecasts by financial markets made only a year ago. China itself is the only nation to have come anywhere near this, delivering 20.7 GW of new installs in 2014,” he said.

    The National Bureau of Statistics also reported 18.3 GW of grid-connected solar installations in 2015, again surpassing the previous world record of 12.9 GW set by China in 2013. The 14.9 GW of hydroelectricity and 6.0 GW of nuclear capacity installs by China in 2015 round out a year of rapid grid generation diversification.

    Bloomberg New Energy Finance reported that China’s new investment in renewable energy and energy efficiency rose 17% on year to a record $110 billion in 2015.
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    The World's Largest Solar Power Plant Is Now Active In The Sahara

    The Noor Ouarzazate, the world's largest solar power plant, has been activated in Morocco and is projected to be finished by 2018. In the video above, learn about the plant, which, when finished, will reduce carbon emissions by 760,000 tons per year.§ion=us_world&utm_hp_ref=world
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    U.S. NRC engineers urge fix for nuclear power stations

    A group of engineers within the U.S. nuclear power regulator is concerned that a design flaw in nearly all U.S. nuclear plants could endanger emergency core cooling systems. The group has urged the regulator to order power station operators to either fix the problem or face mandatory shutdowns.

    Seven engineers in late February petitioned the Nuclear Regulatory Commission to order immediate enforcement actions against licensees of U.S. nuclear power plants, in a little-noticed, but public move.

    The petition, filed under a standard NRC process, urges the agency to respond by March 21.

    The engineers are concerned that a design flaw in nearly all U.S. nuclear facilities leaves them vulnerable to so-called open phase events in which an unbalanced voltage, such as an electrical short, could cause motors to burn out and reduce the ability of a reactor's emergency cooling system to function. If the motors are burned out, backup electricity systems would be of little help, the petition said.

    In early 2012 an unbalanced voltage event forced Exelon Corp's Byron 2 reactor in Illinois to shut down automatically. The unit was shut for about a week.

    Later that year, the NRC alerted nuclear power plant operators in a bulletin to a potential design vulnerability concerning open phase and collected feedback from the operators.

    But the agency never ordered the plants to make changes to reduce any open phase vulnerabilities. The petition said 13 open phase events have occurred at U.S. and international nuclear plants over the last 14 years.

    Dave Lochbaum, a nuclear expert at nonprofit group the Union of Concerned Scientists, said it was encouraging that the engineers stepped forward without fear of retribution. But he said those concerns show "something is not right with the safety culture at the agency." The NRC could have eased concerns years ago by forcing plants to take action, he said.

    "Why the NRC snatched defeat from the jaws of victory, I don't know," Lochbaum said.

    The nuclear industry played down the petition. "This is not a matter of safety significance that merited interruption of the safe operations of our facilities, in 2012 or now," said John Keeley, a spokesman at the Nuclear Energy Institute.

    Scott Burnell, an NRC spokesman, said the engineers' petition "will be considered under our normal process." Based on responses to the bulletin the agency issued in 2012, the NRC is "confident that plants are safe to continue operating," Burnell said.
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    Fertiliser maker Yara to cut costs, raise investments

    Norwegian fertiliser maker Yara plans to cut operating costs and raise investments to become more competitive and grow its business, it said in an update ahead of an investor meeting on Tuesday.

    The company raised its estimate for 2016 capital expenditure to 17.9 billion Norwegian crowns ($2.06 billion) from previous guidance of 14.5 billion, and predicted a decline to 10 billion in 2017 and 7 billion the following year.

    In 2015, Yara's capital expenditure was 14.4 billion.

    "We believe growth is key to creating further shareholder value, and sustaining and growing our competitive edge. Also, improving our relative cost position and productivity is a key priority," Chief Executive Svein Tore Holsether said in a statement.

    "During the next six months we will establish a corporate improvement programme, consisting of several initiatives aimed at reducing cost and increasing efficiency," it added, without elaborating.

    Yara presented two main scenarios for its earnings per share, ranging from 35 Norwegian crowns in the first to 57 in the second, and with the potential to add 6-7 crowns per share by 2018 under the company's growth plans.

    Both were ahead of Yara's reported earnings per share for 2015, which rose to 29.38 crowns from 27.59 crowns in 2014.

    "The scenarios are not a prediction of future results, but are "what if" examples based on selected fertilizer and energy price scenarios and Yara's current business," it added.
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    U.S. moves to end use of Bayer Cropscience, Nichino America insecticide

    The U.S. Environmental Protection Agency said on Tuesday it is issuing a notice of intent to cancel all Bayer CropScience and Nichino America flubendiamide products that pose a risk to aquatic invertebrates.

    EPA said it concluded that continued use of the insecticide would result in unreasonable adverse effects on the environment. The agency said it had requested a voluntary cancellation in accordance with the conditions of the original registration, but that thecompanies had rejected EPA's request.

    Flubendiamide is registered for use on over 200 crops, including soybeans, almonds, tobacco, peanuts, cotton, lettuce, alfalfa, tomatoes, watermelon, and bell peppers, with some crops having as many as six applications per year, according to the EPA.

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    Precious Metals

    De Beers ramps up diamond supply with $610m sale

    De Beers is ramping up diamond sales to cash in on a recovery from last year’s slump.

    The company last week sold $610 million of uncut stones at its second auction of the year, 12% more than a January offering that was already bigger than expected.

    “Rough-diamond demand continues to show signs of improvement as excess inventory has continued to work through the system in recent months,” Philippe Mellier, chief executive officer of the Anglo American unit, said in a statement. “However, we remain mindful of the need for a cautious approach as the recovery continues.”

    De Beers and Russia’s Alrosa, which control almost two-thirds of the market, sold more than $1 billion of diamonds in January, exceeding market expectations and sparking concerns that the sales may have been too much, too soon. Mining companies cut about a quarter of global supply last year to arrest the 18% slump in rough-diamond prices brought on by China’s economic slowdown and an industrywide credit crunch.

    Alrosa Sales

    Alrosa sold about $780 million of rough diamonds in its first two sales of the year, with the amount sold about the same in January and February, according to two people familiar with the transactions. The company hasn’t cut prices so far this year, unlike De Beers, which lowered them as much as 7% in January.

    China’s economy continues to show signs of a deepening malaise, with the latest spate of indicators this week showing weakness in services and manufacturing.

    Anglo has put De Beers at the center of its turnaround programme. The London-based parent, which last month reported a fourth year of losses, is speeding up plans to pull out of coal and iron ore and build its slimmed down future around diamonds, copper and platinum.

    De Beers’ contribution to Anglo’s profit almost halved in 2015 as underlying earnings fell. Sales dropped by 34% as prices declined and De Beers cut supply.
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    Steel, Iron Ore and Coal

    China Iron ore, steel prices increase in tandem

    Iron ore and steel futures in China climbed to multi-month highs on Tuesday, buoyed by expectations of firmer steel demand in the world's top consumer from this month.

    Construction activity usually picks up from March along with the warmer spring weather, prompting Chinese steel producers to lift output, boosting demand for raw material iron ore.

    The most-traded May iron ore on the Dalian Commodity Exchange rose as much as 4.4 percent to 380 yuan ($58) a ton, its strongest since September 11, 2015. It was up over 3.7 percent at 378 yuan by 3 pm Beijing time.

    On the Shanghai Futures Exchange, construction-used rebar for May delivery was up 2.3 percent at 1,984 yuan per ton after rising as high as 1,991 yuan, its loftiest since August 28.

    "Steel futures are rising on expectations for demand into the Chinese new year as construction companies stock up on the reactivation of new projects authorized by Beijing," analysts at SP Angel said in a note.

    Daily crude steel output by key Chinese mills stood at 1.56 million tons in the first 10 days of February, up 3.7 percent from the previous 10 days, according to the China Iron and Steel Association.

    Stockpiles of finished steel products held at these mills totaled 13.85 million tons, up 15.2 percent from the prior 10 days, based on data released in mid-February.

    Sharp gains in Chinese steel prices has fueled a recovery in iron ore prices in 2016 following a three-year decline.
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    China’s coal use declined 3.7% in 2015, according to official statistics

    This is the second year running that the consumption of China’s most polluting fuel has declined. What’s more, the reduction took place while the economy grew.

    The data will raise hopes that coal use in the country has finally peaked.

    The statistics reveal that the decline in coal is accelerating. In 2014, China’s coal usedeclined by 2.9%. The year before that, it increased by 3.7%, illustrating the country’s marked energy turnaround.

    Meanwhile, renewables continued to grow, with solar capacity increasing by 74% in 2015, and wind by 34%.

    According to Greenpeace analysis of the figures, this means that China’s CO2 emissions declined by 1-2% in 2015.
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    Russia Jan coal output up 3.7pct on year

    Coal-rich Russia produced a total 32.22 million tonnes of coal in January, rising 3.7% year on year, showed data from the Energy Ministry of Russian Federation.

    Coal export stood at 12.59 million tonnes in the month, climbing 6.5% from a year ago, data showed.
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    Yancoal Australia to shut NSW coal mine

    Yancoal Australia, the Australian coal miner controlled by Chinese coal giant Yanzhou Coal Mining Co., will shutter its Donaldson mine in NSW's Hunter Valley in response to the prolonged downturn in the sector, it said in a regulatory filing on February 24.

    Yancoal said it will reduce mining activities from March 14, before moving the operation to "care and maintenance" in June.

    Coal prices have been languishing near multiyear lows due to slowing demand from China and an oversupply from new and expanded mines planned when prices were booming.

    The miner said the decision would result in about 92 job losses from its 103-person workforce at the mine, where it digs up thermal and semi-soft coking coal to be exported through the Port of Newcastle for power utilities and steel mills in Asia.

    Yancoal has announced it will offer voluntary redundancies across its three local underground operations, including Ashton outside of Singleton.

    The miner recently restructured their local operating model and about 180 staff was forced to sign controversial new workplace agreements.

    They are also planning to raise $950 million in new debt funding through an issue of nine year secured debt bonds to a consortium of financiers.

    “Yancoal will is seeking expressions of interest from Donaldson employees willing to move to Austar and Ashton if new opportunities become available," the release says.
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    Brazil's iron ore exports increase, decline in value in February

    Brazil's iron ore exports fell 48.8% year-on-year in February to US$686mn, according to foreign trade department Secex.

    The drop was mostly due to falling prices amid a supply glut on the international market. The average price of Brazilian iron ore in February was US$22.90/t, down 54.4% year-on-year.

    In terms of volume, exports increased 12.3% to 29.9Mt.

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    Samarco to pay at least $5 billion in Brazil dam spill deal: source

    Samarco Mineracao SA will pay at least 20 billion reais ($5 billion) over 15 years as part of a deal reached with the Brazilian government to settle a lawsuit for damages caused by a deadly dam spill at a mine in November, a government source told Reuters on Tuesday.

    Samarco, a joint venture between Vale and BHP Billiton, will pay 4.4 billion reais in the three years following the agreement that will be signed on Wednesday, said the official who requested anonymity since the information was not yet public. The rest of the funds will be released in the following years.

    Regarded as Brazil's worst environmental disaster, the burst dam killed 19 people, forced hundreds to leave their homes and polluted one of the country's main rivers.

    The deal comes after Vale announced a fourth-quarter net loss of $8.57 billion, its worst ever as a private company, and BHP recorded its first loss in more than 16 years for the six months to Dec. 31.

    BHP Billiton declined to comment on terms of any agreement, but reiterated that an agreement was close.

    Press representatives with Vale and Samarco were not immediately reachable for comment.

    The dam burst revealed a series of mistakes by under-funded mining and environmental regulators in one of the world's top iron-ore producer, triggering a debate over harsher mining controls in Congress.

    Brazilian police in the state of Minas Gerais last week accused six Samarco executives and one contractor of murder in connection with the deaths caused by the dam spill.
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    22 out of 33 listed steel enterprises post loss in 2015

    22 out of 33 listed steel enterprises in China, which have published their performance report or forecast for 2015, posted or predicted annual losses last year, with the rest 11 staying in the profit-making list, the latest data showed.

    Of the 22 loss-making enterprises, 19 witnessed their annual revenue turn to losses from profits just a year ago.

    Gansu Jiu Steel Group Hongxing Iron & Steel Company estimated the largest loss of 6.98 billion yuan ($1.07 billion), followed by Wuhan Iron and Steel Company and Maanshan Iron & Steel Company, with their annual loss estimated at 6.8 billion yuan and 4.8 billion yuan, respectively.

    Apart from the two above-mentioned enterprises in severe losses of more than 6 billion yuan, there are still another six that have forecasted losses of more than 3 billion yuan.

    In the same period, Baoshan Iron and Steel Co., Ltd., China’s largest listed steel maker, ranked the first with profit at 0.96 billion yuan. However, it is still a plummet of 83.4% from the year prior.

    While it is worth mentioning that Shandong Iron & Steel Group Company and Ling Yuan Iron & steel Company have turned from losses to profits in 2015, when the industry was struggling in its roughest time.

    Presently, steel capacity utilization has decreased to around 70% due to various problems accumulated in years of high-speed development in the industry, which are getting more prominent under 2015’s complicated domestic and international environment.

    In order to gain more market share and working capital, some steel makers lowered steel prices or even chose to sell their products at a lower-than-cost price, which has caused vicious competition, analysts said.
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    Kloeckner sees online drive as key to turnaround

    German steel distributor Kloeckner & Co is betting that doing more business online will enable it to respond to tough sector competition and allow it to reduce working capital and improve cash flow and profitability.

    The loss-making company has invested about 10 million euros ($11 million) in developing an online service platform to allow its many small customers to automatically detect and request imminent supply needs, speeding up delivery.

    Next year, it will launch a broader industry platform to bring in large suppliers. It is already working with steel giants Nucor and Tata and is in talks with others, Chief Executive Gisbert Ruehl said on Tuesday.

    Along with restructuring, managing supply chains online is the primary tool Kloeckner is using to combat desperate conditions in the steel industry, where European and U.S. prices are under pressure from cheap Chinese products.

    The strategy is not without risk: success in this area will come to some extent at the expense of its existing business, and it will increase price transparency -- something more in the interests of its customers than itself.

    Still, Ruehl believes, the company will lose if it hangs back.

    "Will we do it, even if we cannibalise part of our own business?" he asked at a news conference on Tuesday. "It will come," he said. "The only question is who will do it?"

    Ruehl, a consistent and outspoken advocate of online expansion, is convinced that Kloeckner is for now ahead of its peers.

    Building a system that allows customers' factory machines to predict and order what they need without human intervention will reduce inventories on all sides, pushing more steel-dependent sectors such as construction towards the just-in-time delivery that is already prevalent in the automotive industry.

    Lower steel inventories, driven not only by customers holding out for lower prices but also by more efficient ordering, helped Kloeckner to cut its net working capital by almost 200 million euros last year.

    That pushed its free cash flow back into positive territory and helped reduce its net debt.

    If it continues along its planned path, it could reduce net working capital by more than a third by 2019, allowing it to become practically debt-free if it wanted to, Kloeckner said.

    Kloeckner plans to charge a transaction fee, initially of 3 percent, for customers using its service platform.

    Ruehl said it was too early to tell whether that would be sufficient to compensate for a likely fall in prices due to greater transparency.
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