Mark Latham Commodity Equity Intelligence Service

Tuesday 10th January 2017
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    Chinese commodity futures are staging another mind-boggling rally

    Even by their usual volatile standards, Chinese commodity futures have been posting some mind-boggling moves higher in Tuesday’s Asian trading session.

    Here’s the scoreboard at the mid-session break:

    SHFE Copper ¥46,160 , 0.87%
    SHFE Aluminium ¥12,820 , 0.79%
    SHFE Zinc ¥22,385 , 4.33%
    SHFE Nickel ¥86,800 , 1.13%
    SHFE Rebar ¥3,123 , 5.51%
    DCE Iron Ore ¥589.00 , 7.09%
    DCE Coking Coal ¥1,221.50 , 3.87%
    DCE Coke ¥1,610.00 , 4.01%

    The term “bonkers”, comes to mind, particularly the move seen in bulks and steel futures.

    Iron ore, in particular, is having a whale of a session, surging by 7.07% to 589 yuan, the highest level seen since mid-December.

    Vivek Dhar, a mining and energy commodities analyst at the Commonwealth Bank, said prices had been supported on demand hopes after environmental restrictions on steel production in northern China were partially lifted earlier in the week.

    He also said that an announcement of further steel capacity cuts in the Chinese province of Hebei — a major steel producing region — may have also contributed to recent gains.

    “While smog concerns still threaten to lower steel output, a drive to cut outdated steel capacity is also pressuring production lower. The Chinese province of Hebei announced that it will cut 32 million tonnes of steel capacity this year,” he said.

    While that may explain the resilience in rebar futures seen on Tuesday, as Dhar noted late last year, reduced steel output would usually see demand for the raw materials required to make it — including iron ore — fall as a consequence.

    That doesn’t seem to be a consideration for traders right now, let alone the fact that Chinese iron ore port stockpiles currently sit near the highest levels seen in over two years.

    As they have done for a while now, where Chinese steel prices move, bulk commodity futures continue to follow.

    The renewed strength in futures followed the release of Chinese producer price inflation figures earlier in the session which revealed prices grew at the fastest annual pace seen since September 2011 in December.
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    China to cut annual energy consumption growth to 2.5% over 2016-20

    China has set its energy consumption annual growth target at averaged 2.5% during over 2016-2020, 1.1 percentage points slower than the 3.6% in 2011-15, according to the country's newly released 13th Five Year Plan.

    The lower growth was set according to the new energy consumption trend because of China's "new normal" economic growth, deputy head of the National Energy Administration Li Yangzhe said Thursday at a press conference, according to an NEA press release.

    Beijing has been happy with relatively lower GDP growth, with an expectation that the economy grew at 6.7% in 2016 and 6.5% in this year.

    As a result, the total energy consumption will be contained within 5 billion mt of standard coal equivalent by 2020.

    Meanwhile, the country also aims to reduce energy intensity -- energy consumption per unit of GDP -- in 2020 by more than 15% from 2015, according to the jointly released by the NEA and the National Development and Reform Commission on Thursday.

    The aim is to raise the share of non-fossil fuels of total energy consumption to more than 15% and the share of natural gas to 10% from 8%, while pushing down coal consumption to below 58% from 62%.

    Nur Bekri, the head of NEA, said on December 27 set a target to lift the proportion of gas in the consumption mix to 6.8% in 2017, and reduce coal's share to around 60%.

    He said that in 2016, total energy consumption was estimated to have risen 1.4% to around 4.36 billion mt of standard coal equivalent, with non-fossil energy accounting for 13.3%.

    In addition, Beijing is encouraging the replacement of oil-based vehicle fuels with electric and gas while increasing energy efficiency.

    China also planed to invest Yuan 2.5 trillion ($360 billion) in clean and renewable energy by 2020 to reduce pollution.

    The annual target for clean and renewable energy consumption was set in the plan at 580 million mt of standard coal equivalent.
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    China's Dec producer prices accelerate at fastest pace in over 5 years

    China's producer prices surged the most in more than five years in December and by more than expected as prices of coal and other raw materials soared, adding to expectations that global inflation may be stronger in 2017.

    The pick-up in prices reinforces views that the world's second-largest economy is on steadier footing heading into the new year, underpinned by stronger factory activity and domestic demand which is being driven by a lending and construction boom.

    But some analysts worry the strong gains in producer prices may also be fueled by growing speculation in commodities futures markets, adding to the broader risk of bubbles in China's economy even as leaders attempt to control explosive growth in debt.

    "I don't think there's an inflation issue in China, it's an asset bubble," said Commerzbank senior emerging market economist Zhou Hao in Singapore.

    The producer price index (PPI) jumped 5.5 percent in December from a year earlier, the most since September 2011, compared with a 3.3 percent increase in November, the National Statistics Bureau said on Tuesday.

    That is boosting profits for China's heavily indebted smokestack industries, which are largely state owned, and generating more cash flow to help pay off their loans.

    Analysts had expected a 4.5 percent gain, a Reuters poll showed.

    Reflecting surging demand for building supplies and coal for both heating and steelmaking, and government-mandated cuts in excess industrial capacity, raw materials and mining prices continued to show the fastest gains, rising 9.8 percent and 21.1 percent, respectively.

    The statistics bureau said volatility in exchange rates was one reason for the increase in producer prices, as commodity imports became more expensive.

    The yuan weakened 6.5 percent against the dollar last year, its worst performance since 1994.

    Consumer inflation rose 2.1 percent on-year, missing expectations, as food prices rose at a more modest 2.4 percent pace.


    For the first time in nearly five years, economists at HSBC have raised their forecast for global growth and inflation over the next two years based on robust manufacturing activity, a resilient China and above all the fiscal boost expected to come in the United States under incoming President Donald Trump.

    Hopes of stronger spending under Trump are sparking expectations of stronger U.S. economic growth and inflation which more interest rate hikes from the Federal Reserve.

    China's sustained producer price jump has not yet started filtering into consumer prices, suggesting its central bank will not be under pressure to tighten monetary policy as soon, analysts say.

    But policy insiders already expect a tilt towards more conservative monetary policy this year as top leaders struggle to strike a balance between supporting the economy with ample credit and preventing a destabilising build-up in debt.

    Commerzbank's Zhou said that a bubble in commodities, led by coal and steel prices, could complicate policy decisions if economic growth slows and some easing of monetary conditions is needed.

    The PBOC reaffirmed it would keep liquidity in the financial system stable while taking steps to prevent asset bubbles and financial risks in its annual work meeting for 2017.

    Capital Economics expects consumer price inflation to pick up this month, in part because Lunar New Year falls in late January, earlier than in 2016, but it said the price rebound could be short-lived.

    "We think the pick-up (in inflation) will mainly be driven by movements in commodity prices and is unlikely to be sustained," Capital Economics economist Chang Liu said in note.

    The government think tank, the China Academy of Social Sciences (CASS), forecast that the country's CPI would grow 2.2 percent in 2017 and PPI would rise 1.6 percent for the year.

    For 2016, CPI rose 2.0 percent while PPI slid 1.4 percent.
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    TVA says winter weekend peak demand fourth-highest on record amid frigid cold

    The Tennessee Valley Authority saw peak demand reach 28,863 MW at 8 am CST Sunday, the fourth-highest winter weekend peak demand on record, the balancing authority said Monday morning.

    The weekend peakload beat the forecast load of 27,868 MW for the same hour by 995 MW, according to Energy Information Administration's electric system operating data.

    EIA's data also showed the region was pulling in as much as 778 MW from neighboring regions at midnight Sunday. Moreover, footprint region power demand peaked at 27,575 MW on Saturday.

    TVA's weekend on-peak power price package was assessed by S&P Global Platts in the high $30s/MWh, a premium to the prior day's day-ahead assessment in the low $30s/MWh. The day-ahead price is usually higher than weekend package.

    The region operator added that winter weekend peak demand was the highest since reaching 28,863 MW on January 9, 2011. The all-time winter weekend peak of 30,034 MW was set January 9, 2010.

    The system temperature at the peakload hour was registered at 14 degrees as frigid cold blanketed the state.

    High and low temperatures in Nashville on Sunday were 31 degrees and 8 degrees, with the average at 19.5 degrees, 17.9 degrees below seasonal norms, according to National Weather Service.

    The TVA is a corporate agency of the US that provides electricity for business customers and local power distributors serving 9 million people in parts of seven Southeastern states.

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    Oil and Gas

    Libya’s oil production up to 708,000 bpd, a three-year high

    Libya’s oil production is up to 708,000 bpd, a three year high, the National Oil Corporation’s (NOC) chairman Mustafa Sanalla revealed. Sanalla made the revelation yesterday during his visit to the Jalo oil production area in south east Libya where he met with local dignitaries and civil society organizations.

    During the visit, Sanalla discussed local development and environment issues in the region and said that the region suffered from huge neglect and needed the state to support it. To underscore this need, Sanalla visited the local A&E hospital built by the NOC and ENI which, although handed over to the Ministry of Health in 2013, was yet to be opened.

    Sanalla also laid the foundation stone to a local Petroleum Institute which he hoped would aid development and training in the region.

    Meanwhile, Sanalla continued his media attack on fuel smuggling and its effects on Libyans. In an earlier statement released by the NOC, Sanalla expressed his condolences for the death of a Libyan family by carbon monoxide poisoning as a result of using charcoal for heating due to power cuts and fuel shortages.

    ‘‘I was pained very much by what I heard about the story being reported about the death of a whole Libyan family by suffocation as a result of power cuts’’.

    ‘‘This family represents the thousands of miserable cases that poor Libyan citizens suffer’’ as a result of fuel smuggling or demonstrations preventing oil production.

    In the same vain, Brega Marketing, the NOC’s fuel distribution company, announced that it was increasing deisel distribution by 2.5 million litres in view of the cold weather and power cuts so as to meet increased demand for heating. Cooking gas cylinder distribution will also be increased.

    The company said that it will also be initiating ‘’strong’’ anti-smuggling measures to prevent fuels going into the black market.

    Brega also announced that it was rolling out the installation of a number of Point of Sale (POS) machines at petrol stations so that customers can pay with their debit cards. This move is aimed at mitigating the current cash crises at Libyan banks. Cooking gas cylinder distributors will also have POS systems in the next phase, Brega revealed.
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    Kuwait Says Saudi Arabia to U.A.E. Complying With Oil Cuts

    Oil producers from Saudi Arabia to the United Arab Emirates are complying with production cuts promised last year to stabilize the market, Kuwait’s governor to the Organization of Petroleum Exporting Countries said.

    Qatar, Kuwait and Oman are also complying, having announced cuts to customers, Nawal Al-Fezaia, Kuwait’s OPEC governor, said in an interview Monday in Kuwait City where OPEC’s Secretary General Mohammad Barkindo is scheduled to have talks on the cuts with Kuwait Oil Minister Essam Al-Marzouk and other officials.

    OPEC and crude producers outside the group, including Russia, are implementing production cuts of about 1.8 million barrels a day this year after crude prices slumped from more than $100 a barrel since 2014 amid oversupply. Libya and Nigeria are exempt from the cuts because of conflict. Brent crude has dropped 1.4 percent this year to $56.05 a barrel after rallying 52 percent last year.

    “It’s a good time to do maintenance on oil fields during production cuts,” Al-Fezaia said. Kuwait will be producing 2.7 million barrels a day by the end of the month, she said. That compares with 2.89 million barrels a day in December, according to data compiled by Bloomberg. Most of the cuts have affected Kuwait’s crude exports, and all other OPEC nations will probably do the same to meet local demand, Al-Fezaia said.

    Libya and Nigeria need more time to boost their production before they can be considered to join in the cuts, she said. “Once both these countries resume full production capacity, we will review this," Al-Fezaia said.

    “Extension of the current deal or additional cuts depends on conditions in the oil market, the recovery of prices and reduction of the oversupply,” she said.
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    Russia cuts oil output by 100,000 bpd in early January: industry sources

    Russia cut its oil production in early January by around 100,000 barrels per day (bpd) from the previous month after an agreement with OPEC to cap global crude output, two sources from the energy sector told Reuters on Monday.

    Russia's oil and gas condensate output averaged 11.1 million barrels per day (bpd) in the period from Jan. 1 to Jan. 8, according to the two sources. This was down from 11.21 million bpd in December and October's level of 11.247 million bpd, a starting point for output reduction agreed with the Organization of the Petroleum Exporting Countries.

    The sources declined to give the reason for the fall or name the companies that reduced their production. The cuts came amid a cold spell in Russia and in its oil production heartland of Western Siberia in particular, where temperatures reached as low as minus 60 Celsius (minus 76 Fahrenheit).

    Russian Energy Minister Alexander Novak had said the targeted level of Russian output was 10.947 million bpd after the production cut deal. He also said that Russia plans to reduce oil output by 200,000 bpd in the first quarter and reach the cuts of 300,000 bpd thereafter, as agreed with OPEC last month.

    Some other countries, including Saudi Arabia, the world's top oil exporter and biggest OPEC producer, have also reduced their output.

    Saudi Arabia cut oil output in January by at least 486,000 bpd to 10.058 million bpd, fully implementing OPEC's agreement to reduce output, according to a Gulf source familiar with Saudi oil policy.

    Many analysts still expect Russian oil production to grow in 2017 overall and reach a record high due to new fields coming on line.

    "We expect Russian crude and condensate output to decline only gradually from the remarkable Sep-Dec 2016 production levels, and to reach the announced 300,000 bpd output cut at the end of H1 2017," Vienna-based JBC Energy said in a note last week.

    "Year-on-year, however, we still see Russian crude production rising 170,000 bpd to average 11.14 million bpd in 2017."
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    Iraq's oil challenges stretch beyond insurgency

    The fight against Islamic State militant group may be the top priority for Iraq, but if success in 2016 turns into victory in 2017, Iraqi leaders will not be home and dry.

    The financial crisis remains crippling, low oil prices require a curtailment of fields, and internal political disputes could create a zero-sum race toward national disintegration.

    We have been here before. Iraqi leaders have repeatedly brought the country to the edge of the cliff and turned it around in a broad political agreement, though those deals themselves were not sustainable and often amounted to kicking the can down the road.

    There is broad agreement, at least, that the threat of IS is top priority. The group has lost battles over the past year to the point where it holds only pockets of territory, including Mosul, over which a battle has become a bloody and treacherous slog. What remained of its control of oil infrastructure in Iraq --as opposed to Syria -- a year ago was neutralized by mid-year.

    Formal federal Iraq security forces and semi-autonomous Kurdistan region forces working together with various government-sanctioned paramilitary forces, coordinated by and operating in conjunction with US-led air strikes and ground support forces, have largely held and extended the line.

    That line, when IS is vanquished enough, will be a new front, at least politically, over control of a new Iraq in which multiple groups have multiple self-definitions.


    In and around Kirkuk, as well as north of Mosul, there are five oil fields, currently under the control of the Kurdistan Regional Government but which officially belong to the federal Oil Ministry's North Oil Company. The KRG took the Bai Hassan field and Kirkuk field's Avana Dome in June 2014 to protect it from IS marauders who were closing in on nearly everything in north-west and north-central Iraq with the collapse of much of Iraq's army.

    Bai Hassan is currently producing 195,000 b/d and Avana is producing 85,000 b/d, Baz Karim, president of KAR Group, the local energy company the KRG has contracted to develop the fields, told S&P Global Platts. He says he expects Bai Hassan to try to go over 200,000 b/d and is waiting for approval from the KRG's Ministry of Natural Resources of development plans for both fields.

    KAR has also been given a contract by the KRG to develop the Sufaya oil field, which is producing as much as 5,000 b/d currently, as well as Ain Zalah and Butmah, all of which are north of Mosul and also belong to the NOC.

    The federal government insists that it will be given those fields back when the security situation stabilizes and political talks over longstanding issues of oil rights and revenues are resumed. Neither side seems to want to budge, however.

    The KRG relies on the production from those NOC fields, in addition to the more than 300,000 b/d under its official control, to make transfers to traders at the port of Ceyhan and ultimately obtain enough revenues to pay down debt -- including to civil servants who are not being fully paid their salaries.

    Amidst this financial stress, the Kurdish parties are all fighting, and the dominant Kurdistan Democratic Party remains firmly in control of both security forces as well as the regional presidency and prime minister's office, though the regional parliament hasn't met in over a year and the presidency's term has been legally lapsed for more than three years.

    The federal government also would face myriad consequences if it gave into Kurdish demands for oil independence. It would lose out on legal and financial authority, which could further hit its own budget calculations. Prime Minister Haider al-Abadi would face political pressure that could topple his weak hold on the government -- he has already had three ministers over the past year forced out of their position by opposing parties as well as some within his party.

    Basra province, which accounts for the bulk of Iraqi oil production and exports, could use so-called special treatment of the Kurds as a rationale to move forward with vague plans to create its own region and control oil revenues as well.


    However, Iraq has significant potential to chart a steady course through rough waters.

    For one thing, oil exports remain at record highs, production is steady, and the world's largest oil companies have invested throughout the country. Iraq faces a bottleneck for growth in that both domestic energy transfer infrastructure is underdeveloped and export infrastructure is at capacity.

    This might be a good thing, because Iraq must cut 210,000 b/d from its overall production output to make good on its part of the OPEC and non-OPEC producer pledge to reduce global supply in an effort to increase oil prices.

    It's too early to know just how close to the target Iraq will reach. Oil ministry officials have repeatedly assured Platts that it will not violate the quota deal, though any cuts to fields and exports risk triggering additional domestic political landmines. Iraq's petrodollar program, for example, that kicks back a per barrel production and refinery bonus to provinces in an effort to spur local development.

    If Iraq, and its fellow producers, succeed, oil prices may rise to a point it will more than make up for reduced production. That will give Iraq more revenues, which could ease the financial crisis, though would also give Iraqi political leaders more to fight over.
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    Nigerian oil union threatens three-day strike at Exxon Mobil, Chevron

    Nigerian oil union threatens three-day strike at Exxon Mobil, Chevron

    A Nigerian oil labor union will stage a three-day strike at Chevron and Exxon Mobil fuel depots from Wednesday in a protest over sackings if talks with the government fail, union officials said on Monday.

    The Nigeria Union of Petroleum and Natural Gas Workers (NUPENG) said it would make a final decision after its leaders meet officials from the ministries of petroleum and labor, as well as the state oil company, on Tuesday in the capital, Abuja.

    OPEC member Nigeria has already been hit by low crude prices and a wave of militant attacks in its southern Niger Delta oil hub throughout 2016 which has hampered production.

    Nigerian labor unions have criticized oil companies for sacking workers in recent months. Last week NUPENG held a strike at Total's fuel depots in a row over sackings, but it was suspended after one day because an agreement was reached. No details have emerged about the deal.

    If the planned strike goes ahead this week, 10,000 workers could down tools, Tokunbo Korodo, who chairs NUPENG's southwestern Lagos zone, said.

    "There will be a total shutdown of production terminals, distribution and filling stations. We are talking about the downstream sector," Korodo said.

    Chika Onuegbu, a senior figure in another labor union - Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) - said his members would await the outcome of government talks before deciding whether or not to strike.

    An Exxon Mobil spokesman declined to comment, while Chevron could not immediately be reached for comment.
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    Kogas Dec sales rise 9.6 pct YoY

    Kogas Dec sales rise 9.6 pct YoY

    South Korea’s Kogas, the world’s second-largest corporate buyer of LNG, boosted its gas sales by 9.6 percent in December year-on-year.

    Kogas said in a filing to the stock exchange it sold 3.83 million mt of LNG equivalent in December, as compared to 3.50 million mt in the same month in 2015.

    Sales in the power generation sector increased 16.4 percent to 1.68 million mt while city gas sales reached 2.32 million mt, a rise of 5.6 percent when compared to December 2015.

    To remind, Kogas reported a 32.5 percent jump in sales for November 2016 to 3.41 million mt of LNG.

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    Total Pays $900 Million for Control of Ugandan Oil Project

    Total SA agreed to buy a stake in a project in Uganda from Tullow Oil Plc for $900 million as a recovery in crude prices accelerates the pace of deals in the energy industry.

    French oil major Total will acquire a controlling stake in the Lake Albert development, the companies said Monday in separate statements. Total will pay an initial $100 million in cash, with another $100 million split equally when the project gets sanctioned and when it first starts pumping oil. The remaining $700 million is a “deferred consideration,” used by Tullow to fund its share of the costs.

    “Our increased share in the Lake Albert project will bring significant value to Total and fits with our strategy of acquiring resources for less than $3 a barrel with upside potential,” Chief Executive Officer Patrick Pouyanne said in a statement.

    The acquisition is part of Total’s push to develop reserves and grow production by 5 percent per year in the 2014 to 2020 period as the French oil major expects the recent dearth in projects to create a shortage by the end of the decade. Last month, Total agreed to buy stakes in Brazilian oil fields and energy infrastructure from Petroleo Brasileiro SA in a $2.2 billion deal.

    The valuation of the deal looks reasonable “at first glance,” said Stephane Foucaud, a London-based managing director at GMP FirstEnergy. “There is a sense of urgency among buyers to make deals as valuations are generally becoming very demanding.”

    Uganda Potential

    Brent, the global crude benchmark, has gained almost 20 percent since OPEC struck an accord at the end of November to curb production.

    Total will increase its stake in the Ugandan project by 21.57 percent to 54.9 percent, leaving Tullow with 11.76 percent, the companies said.

    Landlocked Uganda has an estimated 1.7 billion barrels of recoverable oil at fields in the Lake Albert basin that the government expects Tullow, Total and China’s Cnooc Ltd. to start pumping by 2021. The government has estimated it will receive $43 billion of revenue from the resource over 25 years. The Lake Albert development will pump about 230,000 barrels a day when it reaches full production, according to the statement.

    Tullow -- the best performer on the Stoxx Europe 600 oil and gas index last year -- rose 2.7 percent to 333.60 pence, after earlier gaining as much as 8.4 percent in London trading. Total fell 1.4 percent to 48.09 euros.

    Tullow Oil CEO Aidan Heavey said he hopes the deal will increase the likelihood that the project will be sanctioned this year so that first oil can happen by the end of 2020. Tullow will no longer be the principal operator of the development in Uganda once the deal closes.

    U.K.-listed Tullow will write down about $400 million following the asset sale, an amount to be included in its full-year results. That amount “should largely be considered as noise” as the deal confirms RBC Capital Markets’ asset valuation, according to Al Stanton, an analyst at the bank.

    The agreement is backdated to Jan. 1.
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    Genscape Cushing inventory

    Genscape Cushing inventory

    Genscape Cushing inventory -784Kbbl for week ended Jan 6.

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    Obama EPA Signs One Final “Sue and Settle” Case Against O&G

    January 20th, when Donald Trump is inaugurated and decomposing swamps like the EPA get drained, can’t happen soon enough. However, before that date, the Obamadroids are doing everything they can to get their last digs in.

    One of them is the rogue, out-of-control Environmental Protection Agency, which will soon be swept clean by Scott Pruitt (delicious justice if ever there were some). We’ve written about the sleazy practice of “sue and settle” in the past–a practice whereby government agencies like the EPA get their friends in the radical environmental movement to sue them, then they quickly settle the case and say “See, we HAVE to do this because the court is making us do it.”

    Scott Pruitt knows all about that practice and it will stop on Jan. 20. But until then, the EPA continues to engage in it.

    The latest case they’ve just settled was brought by the odious National Resources Defense Council, Earthworks and a mishmash of other radical groups in May 2016 regarding an attempt to ban injection wells and stop landfills from accepting drill cuttings.

    The EPA wants to once again eat away at the sovereignty of the states by regulating oil and gas drilling “wastes” using federal law (illegal under the U.S. Constitution). When was the last time you heard of a big lawsuit like this being settled in a matter of a few months? Yeah, never…
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    Wisconsin tribe votes against renewing Enbridge pipeline agreements

    A Native American tribe in Wisconsin has voted against renewing agreements allowing Enbridge Inc to use their land for a major crude oil pipeline, the latest sign of increasing opposition to North American energy infrastructure.

    The Bad River Band decided not to renew easements on Enbridge's Line 5 pipeline last week because of concerns about the risk of oil spills, and called for the 64-year-old pipeline to be decommissioned and removed.

    The move against Line 5 underlines how environmental and aboriginal resistance to energy infrastructure is evolving. Opponents are trying to block existing pipelines and expansions on brownfield sites like Kinder Morgan's Trans Mountain project, as well as protesting new facilities.

    "As many other communities have experienced, even a minor spill could prove to be disastrous for our people," Bad River Tribal Chairman Robert Blanchard said in a news release, adding the band would reach out to federal, state and local officials to evaluate how to remove Line 5.

    Calgary-based Enbridge said it had been discussing the easement renewals since before the agreements expired in 2013, and the pipeline had operated safely through the reservation since 1953.

    "We are surprised to learn of the Bad River Band’s decision not to renew individual easements within the reservation for Line 5 after negotiating in good faith for the past several years," Canada's largest pipeline company said in a statement on Monday.

    "We will be taking some time to review the Band's decision in detail to determine our next steps."

    The denial comes after months of protest by Native American and environmental groups against the Energy Transfer Partners Dakota Access Pipeline, which would transport crude from North Dakota to the Midwest.

    The Army Corps of Engineers in December denied an easement needed to complete the line, which would have allowed the company to drill under Lake Oahe, a water source that has been a focus of the protests.

    Line 5 carries 540,000 barrel per day of light crude and natural gas liquids from Superior, Wisconsin, to Sarnia, Ontario.

    Enbridge said the pipeline traverses 12.3 miles of the Bad River reservation and there are 15 tracts of land with expired easements, making up about 20 percent of the right-of-way within the reservation. The tribe has partial ownership in 11 of those.

    The other 80 percent of tracts within the reservation have easements that expire in 2043 or never expire.
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    Antero Resources Tops Nearly All Other E&Ps According To This Market-Beating, Backtested Strategy

    Antero Resources Tops Nearly All Other E&Ps According To This Market-Beating, Backtested Strategy

    Antero Resources is known as a high-growth E&P, but it tops nearly all other E&Ps using a market-beating, value strategy.

    Antero has hedged approximately 90% of its expected production between 2016 and 2019.

    Antero management expects that leverage will continue to trend down in 2017 and 2018, with production growth of 20% to 25% per year.

    Bulls say that Antero's extensive hedges provide downward protection from commodity price declines.

    Bears say that Antero's extensive hedges will cap upward movement in the stock over the next several years.

    I was recently reading "Backtesting 101, Part 1: The Misunderstood Investing Tool," written by Seeking Alpha author Ryan Telford. In this article, he published a list of 30 stocks that he tested for the lowest EV/EBITDA stocks in the U.S. mid- and large-cap universe. There are a number of energy companies in this Portfolio123 screen, but Antero Resources caught my attention as it is well-known as a high-growth exploration and production (E&P) company. Furthermore, it is operating in the prolific, low-cost areas of the Marcellus and Utica shale's in the Appalachian Basin.

    The EV/EBITDA screen is well-known as a value screen. Antero Resources is known as high growth E&P. How did Antero Resources pass this value screen? I will try to answer this question and a few others below.

    The following data is taken from What Works on Wall Street, written by James P. O'Shaughnessy (Fourth Edition, pp. 103-124). Please note that O'Shaughnessy has a number of rules that he uses that are detailed in his book. Among the most important ones to understand is that all strategies are rebalanced annually and stocks are equally weighted with no variables. Although he rebalances his backtests annually, he also considers his strategies as long term in nature rather than short-term trading strategies.
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    Alternative Energy

    China Three Gorges generates 206 TWh of electricity in 2016

    Four large hydropower stations run by China Three Gorges Corporation generated 206.06 TWh of electricity in 2016, the highest on record, the company said on January 9.

    It is the first time annual generation has exceeded 200 TWh. The amount generated is able to meet Shanghai's electricity needs for two years and is equivalent to a reduction of 65.8 million tonnes in coal burned, cutting 168.8 million tonnes of carbon dioxide and 800,000 tonnes of sulfur dioxide emissions.

    The Three Gorges hydropower project, the country's largest with a generating capacity of 22.4 GW, is located in the middle reaches of China's longest river, the Yangtze. It generated 93.5 TWh of electricity last year.

    Xiluodu, the country's second-largest dam, generated 61 TWh and Xiangjiaba, China's third-largest hydropower plant, generated 33.2 TWh. The smaller Gezhouba generated 18.3 TWh.
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    New unit of S. China nuclear plant starts operation

    The fourth unit of the Yangjiang nuclear power plant in the southern China's Guangdong province was connected to the grid on January 8, said its operator China General Nuclear Power Corp. (CGN).

    The fourth unit now enters the final testing phase before its commercial operation, according to the company.

    The previous units of the nuclear power plant have all realized commercial operation, and the fifth and sixth units are under construction.

    The CGN has currently 20 nuclear power units capable of generation, with a total installed capacity of more than 20 GW.
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    WA approves Toro’s Wiluna project

    Uranium developer Toro Energy has received environmental approval for the extension of its Wiluna project, in Western Australia.

    The ASX-listed company said this week that Western Australian Environment and Heritage Minister Albert Jacobhad approved the revised proposal for the Wiluna project, which would see Toro construct and operate a uranium mineconsisting of four deposits, and mining about two-million pounds a year of uranium oxide over 16 years.

    The Ministerial consent consolidates into one revised proposal the previous Western Australian approval to mine the Centipede and Lake Way deposits, establish a processing plant at the Centipede mine site and associated infrastructure, while also approving the mining of the Millipede and Lake Maitland deposits, and constructing a haul road between Lake Maitland and the approved processing facility at Centipede.

    Toro said that with the state government approval granted, the company would seek to complete the federal government assessment process by March this year.
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    ChemChina, Syngenta submit remedy proposals to EU antitrust watchdog

    State-owned China National Chemical Corp and Swiss pesticides and seeds group Syngenta AG on Monday submitted proposed remedies to the European Union's antitrust watchdog to address concerns over their $43 billion merger.

    The European Commission's website showed the companies had submitted "commitments" on Jan. 9, which typically means the parties have proposed remedies such as asset divestment or product pricing commitments.

    The website did not show any further information on the nature of the commitments.

    "Details of the remedy proposals are confidential," a spokesman for ChemChina told Reuters.

    The Commission opened an in-depth investigation into ChemChina's takeover of Syngenta in October, saying the companies had not allayed concerns over the deal.

    Syngenta said last week the Commission had agreed to extend the review deadline by 10 working days to April 12 to allow "sufficient time for the discussion of remedy proposals".

    In an October statement, the Commission highlighted ChemChina's European subsidiary Adama as one area where the companies had overlapping operations that could cause competition concerns.
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    Base Metals

    Refined nickel prices under pressure as output forecast to rise

    Refined nickel prices will remain under pressure in the coming weeks as the impending moderation of Indonesia's mineral ore export ban and consequent resumption of nickel exports will increase global nickel supply, new analysis by Fitch-affiliated BMI Research has shown.

    According to a report Thursday, BMI expects the current selloff to ease by the second quarter, making way for modest gradual increases for the rest of the year.

    Analysts expect that refined nickel prices will remain under pressure in the coming weeks, as speculative selling heightens on the back of Indonesia moderating its mineral ore export policy. The Indonesian government is amid drafting a new law which will likely see a resumption in nickel ore exports from the country after a three-year hiatus.

    Prior to the country's mineral ore export ban was implemented in early 2014, Indonesia was the world's second largest supplier of nickel ore at 16 .7% of global production in 2013.

    As a result, nickel prices could break below support currently coming at $10 000/t and head lower before increasing modestly later on in 2017. BMI maintained its 2017 nickel price forecast of $10 500/t on average as prices will be supported by China's continued and intensified fiscal support for the construction sector this year. This is because nickel is used in the production of stainless steel, which is used widely in the transport and construction sector, BMI stated.
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    Australia offers financial support for crippled Alcoa aluminium plant

     The Australian government has offered "substantial" financial support to help repair Alcoa's aluminium smelter in Victoria that was crippled last month by a state-wide blackout, government Ministers said on Monday.

    The outage, which caused molten aluminium to solidify, disrupted some production at the 300 000 t/y Portland smelter and raised questions about the facility's long-term future.

    The ongoing negotiations between Australia's government, energy provider AGL Energy, and Alcoa suggest the smelter may eventually resume full production.

    "The state's substantial support is aimed at keeping the smelter open and sustainable into the future," State Minister Philip Dalidakis in a statement.

    The government had offered "significant, immediate financialsupport", as well as the potential for further assistance through Australia's Clean Energy Finance Corporation, a government-owned bank that invests in renewables, to provide longer-term energy security, said a spokesman for Federal Minister Greg Hunt.

    Both Ministers declined to comment on the scale of financialsupport because negotiations were confidential, but Australia's Fairfax Media reported that Alcoa received an offer of A$240-million ($175.63-million), comprised of $200-million in state funds over four years and a $40-million interest-free loan from Canberra.

    A spokesman for Alcoa also declined to comment on the negotiations, saying only that the plant continued to operate at a reduced capacity.

    To seal the deal, pressure is now on AGL Energy to agree to provide cheaper power to the plant as a result of the government's financial support.

    A spokeswoman for the energy firm said discussions with Alcoa were ongoing.

    James Purcell, the member of the state parliament for Western Victoria, said an announcement could be made on Friday if a power supply deal can be reached.

    "Everyone is working to ensure that the smelter remains open," Dan Tehan, federal Member of Parliament for the district which includes Portland, told Reuters.

    Tehan said federal assistance to Alcoa was justifiable in the wake of the power outage that damaged the smelter.

    "In my view, such an event warrants the government looking at ways it can assist the smelter to get back on its feet and continue operations," he said.

    "It is critically important to the local economy that we get the smelter back up and running at full production."
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    Steel, Iron Ore and Coal

    Australia forecasts coal prices to rise in 2017

    Australia's Department of Industry, Innovation and Science forecasts the price of metallurgical coal, one of the best-performing commodities in the country, to rise by 59% on a contract basis this year to an average $182.2/t in 2017, it said on January 9.

    Contract prices for long-term supply for the March quarter 2017 were settled between Australian metallurgical coal producers and Japanese steel producers, at $285/t. This marked the highest negotiated quarterly contract price in five years.

    The contract price averaged $114/t in 2016, the department said in its latest commodities outlook paper.

    The department also lifted its average 2017 thermal coal price forecast to $74/t from $63/t previously, citing China's supply side reform policies and lower output from Indonesia.Thermal coal averaged $62/t in 2016.

    Besides, the department expects iron ore to average $51.60/t this year and $46.70/t in 2018, compared with current spot prices of around $80/t, double the price a year ago. It predicted a price of $44.10/t in 2016.

    It said the price rise is being caused by a temporary lift in Chinese steel production and run ups caused by speculative commodities trading in China that will not last.

    The department also dropped its forecast for exports of iron ore by 2% to 832.2 million tonnes in fiscal 2016-17 from 851 million tonnes previously, though this is still a 5.9% year-on-year rise.
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    US coal exports rise 39pct YoY in Nov

    US exported 5.95 million tonnes of coal in November, rising 34.8% from October and up 39.2% from the year prior, Platts reported on January 6, citing US Census.

    The month also showed the first significant US exports of bituminous coal to China since February 2014.

    For overall US coal exports, November was the highest monthly total of the year and the highest monthly total since May 2015. Each of the major categories -- metallurgical, bituminous and subbituminous -- of US coal showed year-to-date highs in November.

    The increase was due to the rally in seaborne prices for both thermal and met coal that opened up more export opportunities for US coal.

    In November, exports of US bituminous coal totaled 1.99 million tonnes, surging 50.9% from October and up 52.8% from a year ago; met coal exports stood at 3.49 million tonnes, up 21.8% from October and up 34.4% from the year-ago month. It was the highest monthly total since August 2015.

    Top met coal export destinations in November were Canada, which imported 480,949 tonnes, compared with 289,952 tonnes in the year-ago month; Germany, which imported 373,833 tonnes in November, compared with 21,523 tonnes in November 2015; and Japan, which imported 372,188 tonnes in November, compared with 181,898 tonnes a year ago.

    Top bituminous coal export destinations in November were the Netherlands, which imported 670,955 tonnes in November, compared with 791,257 tonnes in the year-ago month; India, which imported 329,607 tonnes in November, compared with 104,033 tonnes a year ago; and China, which imported 233,273 tonnes, compared with essentially nothing in the year-ago month.

    Subbituminous coal exports from the US totaled 402,891 tonnes in November, up 126.8% from the prior month and up 31.4% from the year-ago month. The top destination in November was South Korea, which imported 165,103 tonnes in the month, up from zero in the year-ago month.

    Over January-November in 2016, bituminous US coal exports totaled 11.73 million tonnes, down 36.5% compared with the year-ago period, while met coal exports totaled 32.9 million tonnes, down 15.3% year on year.

    Year-to-date, the largest importers of US met coal are Brazil, at 5.41 million tonnes, compared with roughly the same amount through the same period in preceding year; the Netherlands, at 3.3 million tonnes, compared with 3.56 million tonnes a year ago; and Japan, at 3.22 million tonnes, compared with 2.9 million tonnes in the previous year.

    Year-to-date, the largest importers of bituminous coal were the Netherlands, at 4.59 million tonnes, compared with 6.82 million tonnes in the same period last year; India, at 2.1 million tonnes, compared with roughly the same amount a year ago; and Germany, at 1.52 million tonnes, compared with 1.98 million tonnes a year ago.

    In the first eleven months last year, the country's subbituminous exports totaled 1.94 million tonnes, down 55.9% from a year ago.
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    Smog-stricken Hebei plans to reduce coal-fired power

    Hebei, one of China's northern provinces that is plagued by air pollution, has vowed to reduce its dependence on coal-fired power plants, Xinhua News Agency reported on January 9.

    At the ongoing session of the provincial legislature, it was announced that a plan would be drawn up to cut coal-power generation this year, which would feature the elimination of outdated facilities and upgrade of power plants.

    To optimize energy structure, the province will support construction of wind farms in the cities of Zhangjiakou and Chengde, as well as a photovoltaic power project in Zhangjiakou, where the 2022 Olympic and Paralympic Winter Games are to be held, according to a provincial government report released on January 8.

    It will also speed up power grid construction to transfer power to and from other provinces.

    According to the report, Hebei is expected to increase its wind and photovoltaic power capacity by 2 GW and 1.5 GW. Annual natural gas supply will reach 12 billion cubic meters.

    The dependence on coal for power generation is considered one of the main contributors to air pollution in Hebei.

    The province, also a leading iron and steel producer in China, plans to cut iron and steel capacities by 32 million tonnes per annum in 2017.

    The average PM2.5 density in Hebei dropped 9.1% in 2016 and a reduction of over 6% has been set for this year.

    Attached Files
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    SW China's Chongqing closes 344 coal mines last year

    Southwestern China's coal-rich Chongqing municipality shut down 344 coal mines with combined production capacity at 20.84 million tonnes per annum (Mpta) in 2016, overfulling its target.

    The city vowed in April last year to phase out 23 Mpta of coal capacity through closure of around 340 mines during 2016-18, and planned to close 140 mines with capacity totaling 9 Mtpa in 2016.

    Over January-October last year, Chongqing had shut down 163 mines and finished its 2016 capacity cut target.

    After a major mining accidents on October 31, the municipal government made up mind to shut down small-sized coal mines with annual capacity at and below 90,000 and accelerate elimination of outdated mines.

    During the last two months of 2016 alone, the city shut down 181 small-sized coal mines with combined capacity of 10.74 Mtpa.

    By end-2016, Chongqing had 63 coal mines with capacity at 23.64 Mpta, compared to 407 mines in the beginning of the year.
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    Atlas pays off some debt

    Iron-oreminer Atlas Iron has repaid A$54-million in debt, following a strong December quarter, reducing its US term loan debt to A$118-million.

    The miner said earlier this month that it had completed the December quarter with some A$134-million cash on hand, as a result of the cashflow generated during the quarter ended December.

    This was up from the A$95-million cash on hand at the end of September 2016.

    The miner noted that the significant increase in cash came after making principal and interest repayments of some A$20-million during the December quarter, and a A$3-million repayment to the Western Australian government in relation to the royalty relief programme.

    Under cash sweeping arrangements with lenders, any cash on hand at the end of each quarter in excess of A$80-million will be paid to the lenders. As a result, Atlas has now repaid A$54-million in debt.

    “Atlas is now on track to be in a net cash position by the middle of this year,” said interim MD Daniel Harris.

    “This markedly stronger balance sheet will help make Atlas more resilient and better placed to capitalise on its opportunities, including the development of the Corunna Downs project.”

    A December definitive feasibility study found that the projectcould deliver some four-million tonne a year of lump and fines direct shipping ore over an initial mine life of five to six years.

    The project is expected to require a capital investment of between A$47-million and A$53-million, and the Atlas board is expected to take a development decision in March this year.
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    Russia remains main coal supplier for Ukraine in 2016

    Russia remains the main supplier of coal for Ukraine last year, TASS reported on January 7, citing the State Fiscal Service of Ukraine.

    In 2016, total value of Ukrainian imports of bituminous coal and anthracite amounted to $1.47 billion, 9.8% less than a year earlier. Of this, the value from Russian coal reached $906.3 million or 61.7% of the total, according to the service.

    In the year, the coal import value from the United States stood at $212.1 million; that from Canada was $94.4 million; Other countries at $254.3 million.

    In 2015, Ukraine has bought anthracite and bituminous coal totaling $1.63 billion mainly from Russia, the US and Kazakhstan.

    Kiev began to experience an acute shortage of thermal coal in the summer of 2014, when as a result of hostilities in the Donbass control was lost over the region, which has the majority of the mines. This forced Ukraine to import significant volumes of coal, as well as to reduce its consumption.
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    US steel mills start year operating at 71% of capability

    US steel mills started the year operating at 71% of their capability and with 4.8% more raw steel output than the first week of 2016, American Iron and Steel Institute data showed Monday.

    In the week ended Saturday, US mills produced 1.684 million st, up 5.8% from the prior week's output of 1.592 million st. The industry's capability utilization bounced up to 71% last week from 67.1% the week before.

    Last week's production was 4.8% higher than the same week last year, when mills operated at 68.7% of their capability.

    Southern mills ramped up production 11.6% week on week to 578,000 st last week, up from 518,000 st. Western mills also boosted production 11.9% to 66,000 st from 59,000 st.

    Northeast mills produced 214,000 st of steel last week, up 4.4% week on week from 205,000 st. Great Lakes mills increased steel output 2.3% to 662,000 st last week, up from 647,000 st. Midwest mills produced 164,000 st last week, up 0.6%, or 1,000 st, from the week before.

    The AISI determines its weekly raw steel production data based on weekly data from 50% of the domestic industry and estimates the rest using monthly production data.
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    Thyssenkrupp labour chief demands better deal than Port Talbot

    Workers at German steelmaker Thyssenkrupp will refuse to pick up the tab for concessions being offered to British unions by Tata Steel to further a merger, Thyssenkrupp's labor chief told Reuters on Monday.

    Thyssenkrupp and Tata have been in talks for about a year to merge their European steel operations to cut costs and overcapacity, but negotiations have been complicated by Tata's huge pension deficit in the UK.

    The German company's labor chief Wilhelm Segerath said he sees no reason why Thyssenkrupp's plants should suffer because of job and investment guarantees offered to workers at Port Talbot, Britain's biggest steel plant, in return for pension cuts.

    Tata has now offered to guarantee production at Port Talbot, Wales, for five years and to invest across its British business in return for being able to close the final-salary pension scheme to future accrual.

    "If they get five years, we want at least 10 years," Segerath said. "We won't accept that our plants will now be endangered in a consolidation. Even an attempt to do so would trigger massive resistance from us."

    He cited "enormous structural problems" at Port Talbot, which lost a million pounds ($1.22 million) a day in the past financial year but has since turned profitable, mainly thanks to external factors including higher prices and a weaker pound.
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