Mark Latham Commodity Equity Intelligence Service

Monday 29th June 2015
Background Stories on www.commodityintelligence.com

News and Views:

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    Macro

    Rideshares, Uber, AirBnB

    And in Germany, General Motors launched a CarUnity app that lets owners of any brand rent their vehicles to Facebook friends or people in the app's network.

    "This is a big bang moment for the auto industry," said Thilo Koslowski, vice president at research firm Gartner Inc., who estimates that by 2025, 20% of the vehicles in urban centers will be dedicated to shared use.

    "Imagine all of a sudden 20% of your vehicles sales in the classic sense — to individuals who will be the only user of that car — go away," he said.

    Each vehicle that goes into a full-time car-sharing service, such as short-time rental company Zipcar, supplants four to six new car sales and postpones the purchase of up to seven more, said Susan Shaheen, a transportation expert and professor of civil and environmental engineering at UC Berkeley.

    As people share vehicles, cars become "less sexy and more just transportation tools," Koslowski said.


    The ultimate effect on car sales is unclear. Population growth and a burgeoning middle class in developing countries are creating new customers at a steady clip. But sales could take a serious hit if people decide it's cheaper to forgo owning a car in favor of renting or ride-sharing for the occasional errand.

    "This will force the auto industry to rethink how it markets its products," Koslowski said.


    AirBnB

    Image title

    Uber

    Up to 12,000 London cabbies caused gridlock in London when they refused to work in protest over Uber’s fare-by-distance calculations, which the Licensed Taxi Drivers Association argued works like a taxi meter and is therefore illegal for private cars to use.

    The move backfired. While the black taxi drivers were “holding London to ransom” and “causing significant economic impact” to the city worth £125m, according to Uber, the cab-hailing app was granted a free ride to the front page and said that sign-ups soared by 850pc compared with the previous week.

    “The results are clear: London wants Uber in a big way,” the company said at the time.



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    Oil and Gas

    Asian LNG: These beautiful contracts.

    The uncertain geopolitical landscape of today’s natural gas markets has led increasingly to renegotiation of long-term gas supply contracts. Such contracts, which can be worth billions of dollars, often include price adjustment mechanisms which are intended to ensure that over the lifetime of the contract the contractual price can be adjusted to reflect changes in the market. Those mechanisms can provide for negotiations with a backstop of arbitration. While negotiations will be the preferred method to respond to minor changes in the market, when market fluctuations are volatile enough one (or both) parties may be incentivized to push instead for arbitration. This may be a significant roll of the dice, and some recent arbitral awards show that arbitral tribunals are not afraid of determining the appropriate price in accordance with the underlying contract and price review mechanism.

    TRIGGERING OF THE PRICE ADJUSTMENT MECHANISM AND THE MARCH TO ARBITRATION

    Any significant market shift will lead to buyers or sellers across the market seeking renegotiation of price under long-term contracts. For example, recent reductions to gas spot prices have led buyers to seek to trigger price review mechanisms under gas supply contracts. Suppliers have either agreed to the price review or taken the disputes to arbitration. Further complications arise when such gas supply agreements include a “take or pay” condition, where the buyer pays the supplier for specified quantities of gas irrespective of the buyer’s needs.

    There can be ambiguity as to whether a price review mechanism is triggered. Often such mechanisms are drafted in general terms in order to provide flexibility between the parties. However, the language surrounding the triggering of such a clause—and the point at which any dispute should be elevated from negotiations to formal dispute process such as arbitration—should be carefully drafted if the parties wish to avoid a lengthy dispute processes as to whether the clause is even engaged (and only then as to what the price should be).

    ARBITRATION AS AN ENABLER FOR A CONTINUING RELATIONSHIP

    There are, or have been, a number of recent high-profile gas pricing disputes which demonstrate that commencement of arbitration can be one aspect of a negotiation process, or indeed can provide resolution of a valuable dispute by a neutral panel which allows the parties to carry on with performance of a long term contract.

    For example, the Turkish pipeline operator BOTAS has been reported as having brought a claim against the National Iranian Gas Company in 2005 for alleged refusal to lower gas prices despite low production rates and poor quality product. That arbitral procedure took four years, at which point the arbitral tribunal issued an award in favour of BOTAS for US$760 million. From publicly available information, those companies continued their contractual relationship following that arbitral award, and more recently a second arbitration was commenced by BOTAS in January 2012 under the same underlying agreement. That second arbitration remains on-going.

    This story is not unique to that case and as many buyers and suppliers under long-term gas supply contracts will know, arbitration can be a somewhat costly but otherwise helpful neutral process by which a dispute as to pricing can be resolved, otherwise allowing the parties to carry on with their contractual arrangements.

    While arbitration can be a useful neutral mechanism, parties will be wary of arbitrators becoming overly assertive in applying a new or different formula which goes beyond what the parties originally negotiated or envisaged.

    For example, the decisions in recent cases such as those in the cases of RWE v. Gazprom (2013) andRasgas v. Edison LNG (2012) indicate that tribunals are ready to depart from the wording of a gas supply contract, particularly where the contract price is linked to the price of oil. In the RWE award, the arbitral tribunal adjusted the contract price formula by linking it to gas spot prices instead of oil prices, as was agreed under the agreement. It is difficult to analyze these cases and draw conclusions as the awards and the respective contracts are confidential. However, at first glance, it appears that such decisions have caused justifiably concern for the parties, in particular suppliers.

    Similarly, in Atlantic LNG Company of Trinidad and Tobago v. Gas Natural LNG SPA (2008), the arbitral tribunal came up with a two-part pricing scheme and imposed its own preferred pricing structure, which neither party requested or desired.

    Recently, in partial award of BOTAS Petroleum Pipeline Corporation v. the National Iranian Gas Company (2014), the tribunal dismissed BOTAS’s claim that the NIGC failed to meet Turkish gas demands and thus sought both specific performance and a US$13 billion price cut on that basis. The second claim of US$25 million, for reduction in the price of gas on the basis of a price revision clause, is yet to be ruled upon by the tribunal.


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    Japan May LNG imports fall to 5.75 mil mt, lowest volume since Oct 2010

    Japan's LNG imports fell 11.4% year on year to 5.75 million mt in May, the lowest volume since October 2010 when it was 5.22 million mt, data released Monday by the Ministry of Finance showed.

    Mild temperatures and sluggish demand in downstream markets were partly responsible for the decline in imports, it added.

    Shipments from Australia fell 14.8% from a year ago to 1.2 million mt due to the unplanned shutdown of the North West Shelf plant in Western Australia.

    Australia was, however, still the biggest supplier of LNG to Japan.

    Imports from Malaysia and Qatar, the second and third largest suppliers, also registered a fall in May. Malaysia sent 0.98 million mt of LNG, down 12.5% from a year earlier and 11.3% from April.

    Imports from Qatar slipped 4.7% year on year and 20.6% month on month to 0.96 million mt.

    No LNG cargoes came from European countries in May despite the wider spread between the JKM Marker and National Balancing Point.

    The spread widened by more than $1/MMBtu, in particular toward the end of the month, with July JKM around $7.70/MMBtu and ICE NBP futures for July around $6.50/MMBtu.

    Japan Customs Cleared crude oil price was $59.227/barrel for May, down 45.7% from a year earlier but up 5.6% from April.

    Some of Japan's long-term LNG contracts are linked to the JCC crude price but with a lag of a few months, so fluctuations in oil prices typically take some time to be reflected in LNG prices.

    http://www.platts.com/latest-news/natural-gas/tokyo/japan-may-lng-imports-fall-to-575-mil-mt-lowest-27554805
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    Rosneft First-Quarter Net Falls 35% After Oil Prices Slumped

    OAO Rosneft, Russia’s largest oil producer, said first-quarter profit fell 35 percent after last year’s drop in crude prices.

    Net income dropped to 56 billion rubles ($1 billion) from 86 billion rubles a year earlier, the Moscow-based company said in a statement on its website. That was better than the average 36.5 billion-ruble estimate of nine analysts surveyed by Bloomberg.

    The state-owned company has sought to cut costs while maintaining output as it repays debt piled up in the $55 billion acquisition of Russia’s third-largest oil producer, TNK-BP, in 2013. U.S. and European sanctions in response to Russia’s support for separatists in Ukraine have complicated Rosneft’s task by limiting its access to debt and equipment. That was compounded by a more than 50 percent slump in the average oil price in the first three months of 2015 compared with the year-earlier period, according to Rosneft.

    Net debt fell to $43.3 billion in the quarter, the company said. Rosneft’s hydrocarbons output rose to 5.2 million barrels a day from 5.09 million a year earlier.

    Earnings before interest, taxes, depreciation and amortization decreased 8.3 percent to 265 billion rubles, which was higher than the 241 billion-ruble estimate of nine analysts. Sales declined 6.3 percent to 1.29 trillion rubles.

    BP Plc holds almost 20 percent of Rosneft’s shares. Rosneft, almost 70 percent owned by the Russian government, announced changes to its accounting method for foreign-currency risk earlier this year.

    http://www.bloomberg.com/news/articles/2015-06-26/rosneft-first-quarter-net-falls-35-after-oil-prices-slumped
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    Gazprom Neft nearly doubles production at Iraq’s Badra field

    A fourth well has been brought into production at Iraq’s Badra field, which is operated by Gazprom Neft. This new high flow-rate well (Р-05) has allowed total production at the field to nearly double to 27–28,000 bopd.

    Badra field lies in eastern Iraq's Wasit Province. Image: Gazprom Neft.

    The launch of the Р-05 well has seen production at Badra field reach levels comparable (in quantitative terms) with Gazprom Neft's fields in Western Siberia, where oil production exceeds one million tonnes per year.

    Bringing well P-05 into production will allow geological and engineering operations to be conducted at existing wells (P-08 and BD-04) in the near future, with no impact on totalproduction volumes.

    Further field development is ongoing, with drilling being completed and a further well (P-04) being brought online with an expected flow rate of around 10,000 bopd.

    In addition to this, drilling of a further two wells (under a contract already in place with Chinese company ZPEC) is ongoing, with another currently being prepared. The total number of drilling rigs at Badra field is expected to increase from three to seven by the end of 2015.

    http://www.worldoil.com/news/2015/6/26/gazprom-neft-nearly-doubles-production-at-iraq-s-badra-field
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    Argentina will pursue judge order on Falklands drillers- minister

    Argentina will pursue judge order on Falklands drillers- minister

    Argentina will pursue in Britain and the United States a local judge's order to seize assets of oil drillers operating in the disputed Falklands Islands, the foreign minister said in an interview published in local media on Sunday.

    On Saturday, a federal judge in Tierra del Fuego ordered the seizure of $156 million in bank accounts, boats and other property of six European and U.S. oil companies operating in the islands.

    A source with knowledge of the situation said the ruling was meaningless because the companies do not generally hold assets in Argentina or use Argentine waters.

    Foreign Minister Hector Timerman told local newspaper Tiempo Argentino on Sunday that on Monday he will formally request that the stock exchange regulators in London and New York implement the judge's order.

    The companies named in the order are Premier Oil Plc , Falkland Oil and Gas Ltd, Rockhopper Exploration Plc, Noble Energy Inc y Edison International Spa.

    "The companies can defend themselves in foreign courts, but that will have a cost or penalty to their market listing," Timerman said.

    He said that international law forbid altering the state of territory where the United Nations has accepted that there is a sovereignty dispute, and that the companies had breached the rule by drilling wells.

    Argentina claims sovereignty over the South Atlantic islands which it calls the Malvinas, located about 435 miles (700 km) off the coast of Tierra del Fuego and occupied by around 3,000 people who mostly say they wish them to remain a British overseas territory.

    Britain and Argentina fought a short war in 1982, after the then Argentine military dictatorship briefly seized the islands, and tensions have escalated again in recent years with the discovery of oil deposits.

    Ahead of Argentine elections in October, rhetoric is heating up. "What the United Kingdom is doing is what it did in classic colonialism: appropriate resources from its colonies and take them back to their country," said Timerman on Sunday.

    Falkland Oil and Gas and Rockhopper declined to comment. Noble Energy, the British foreign office and the other mentioned companies could not immediately be reached for comment.

    http://www.reuters.com/article/2015/06/28/argentina-falklands-idUSL2N0ZE0A720150628
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    Iran gas exports to Iraq delayed again by security concerns

    Iran's plans to export natural gas to Iraq have been pushed back indefinitely, an Iranian official was quoted as saying on Saturday, blaming the poor security situation in Iraq for the delay.

    The oil-producing neighbours signed an agreement in 2013 under which Iran would start exporting gas to Iraq to feed three power plants in Baghdad and Diyala. But two years later, exports have still not begun.

    "The lack of security and presence of Daesh (Islamic State) is behind the delay of gas exports to Iraq," Ali-Reza Kameli, head of the National Iranian Gas Exports Company, was quoted as saying by Shana, a news agency linked to Iran's Oil Ministry.

    When asked when exports might begin, he replied: "That depends on the security situation in Iraq."

    In March Kameli said exports to Iraq could begin in May if security conditions improved. Iran first announced a delay in September last year, shortly after Islamic State militants took control of large swathes of Iraqi territory.

    Iran has huge gas reserves and exports small quantities to Turkey, but production has failed to keep pace with high domestic consumption. Northern Iran relies heavily on gas imports from Turkmenistan, especially for heating in winter.

    Tehran is in talks with six world powers to curb its nuclear programme in exchange for relief from international sanctions, which could open up Iran's energy sector to foreign investment within a year.

    Iraq, which like Iran is a major oil producer and member of the Organization of the Petroleum Exporting Countries (OPEC), has struggled to attract foreign investment to develop its gas industry and suffers severe power shortages.

    http://www.reuters.com/article/2015/06/27/iran-iraq-gas-idUSL5N0ZD05N20150627
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    Nigerian president dissolves state oil company board

    Nigeria's new President Muhammadu Buhari dissolved the board of the state-owned oil company on Friday as a first step in cleaning up the sector in Africa's biggest crude producer.

    Inaugurated on May 29, Buhari came to power on an anti-corruption ticket and a pledge to make the sector that provides 80 percent of government revenues more transparent.

    "The president has said he will clean up the oil sector. That is the beginning of the clean up," said the president's spokesman Femi Adesina.

    Buhari, who has yet to announce his cabinet, is likely to keep the oil portfolio for himself rather than trust others with the lifeblood of Africa's biggest economy and an industry that has long been mired in corruption scandals.

    A presidency source who declined to be named said the management team of the state-owned Nigerian National Petroleum Corporation (NNPC) was also likely to go in the coming weeks.

    "It is significant," Bismarck Rewane, economist and CEO of Lagos consultancy Financial Derivatives. "The whole structure of the NNPC is completely and utterly dysfunctional."

    In 2013, then central bank governor Lamido Sanusi said tens of billions of dollars in oil revenues had failed to make it into state coffers while watchdogs say the government may be losing billions more through opaque contracts in which crude oil is swapped for refined imports such as diesel.

    The lower house of parliament decided on Wednesday to investigate whether the government had been short-changed by the state oil company scheme to swap crude for the refined products.

    "You can't possibly have the same board in place while the place is being investigated and with the intention to change the way things are being done there," said Adesina.

    "It's the country's cash cow. It has a bright future. It's just that transparency and accountability have to be introduced into how it operates and this is the beginning of that process."

    The NNPC will report to the presidency until a new board is appointed, said Ohi Alegbe, a spokesman for the oil company.

    Nigeria's anti-corruption agency has investigated various oil scandals in the past, including a fuel subsidy fraud costing the government $6.8 billion between 2009-2011. But due to a lack of political will, only a handful were prosecuted.

    http://www.reuters.com/article/2015/06/26/nigeria-oil-idUSL8N0ZC3W520150626
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    Total rig count finally rises, but oil rigs are down again

    The number of U.S. rigs drilling for oil declined for a 29th consecutive week, but the total number of operating rigs increased for the first time this year.

    The amount of rigs drilling for natural gas increased by five for the week, which was more than the loss of three oil rigs from last week,  according to data from oil services provider Baker Hughes.

    Although the oil rig count is still in decline, the pace has slowed to a crawl and analysts have projected the dip could cease any week now. The U.S. oil benchmark is hovering steadily near $60 a barrel and the rig count is down by more than 60 percent since its fall peak.

    The total U.S. rig count is at 859 rigs this week, according to Baker Hughes, while the oil rigs count dropped down to 628 rigs.  The number of active oil rigs has plummeted by 981 rigs, since the peak of 1,609 in October.

    The small increase in total rigs came partly from Louisiana, which added six active rigs from last week. Texas lost two rigs during the same time frame.

    The U.S. Energy Information Administration projects that U.S. oil production will fall in June.

    http://fuelfix.com/blog/2015/06/26/total-rig-count-finally-rises-but-oil-rigs-are-down-again/#29569101=0
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    Many pipeline projects coming to the Marcellus Shale

    Pittsburgh Post-Gazette PowerSourcereports that as many as 17 new pipeline projects may come to the Marcellus Shale in the next three years.

    These 17 pipelines will be able to ship nearly 17.3 billion cubic feet of natural gas per day from Pennsylvania, Ohio and West Virginia. Some of the end markets for the gas include the Northeast, Midwest, eastern Canada and the South.

    Pipeline infrastructure is needed in the Utica and Marcellus Shale plays as existing pipelines have maxed out due to increased production in the region.

    http://shalegasreporter.com/news/many-pipeline-projects-coming-marcellus-shale/56252.html
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    Alternative Energy

    World Bank supports solar energy projects in Jordan

    Jordan Times reported that the Multilateral Investment Guarantee Agency, the political risk insurance and credit enhancement arm of the World Bank Group, is backing the development, construction and operation of four solar power projects in Jordan, adding 50 MW of clean, renewable energy generation capacity to the country's grid.

    According to a MIGA statement, the plants in Maan and Mafraq benefit from a 20 year power purchase agreement with the National Electric Power Company.

    The statement said that MIGA's investment guarantees of USD 15.6 million cover equity investments by private-equity fund Adenium Solar Jordan for up to 20 years against the risks of transfer restriction, expropriation, breach of contract, and war and civil disturbance. The World Bank Group's International Finance Corporation is also supporting the projects as a lender.

    http://steelguru.com/power/world-bank-supports-solar-energy-projects-in-jordan/428100#tag
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    Indian Railways to float tenders to procure solar energy

    PTI reported that Indian Railways will float tenders to procure at least 200 MW of solar energy in the next two months, a step which will promote use of non-conventional energy in its daily functioning.

    Mr Manoj Kumar Sinha, Union Minister of State for Railways, said that the Centre is presently working out details of the plan.

    The tender is part of Railways' plan to procure 1000 MW of solar energy over the next 5 years.

    He said that "We have fixed a target of procuring 1000 MW solar power in the whole Indian Railways. We are working on it. We are going to float a tender for at least 200 MWs in next two moths. We have plenty of rooftops available in Indian Railways to install the panels."

    The Ministry has commissioned one MW solar power plant, the largest such project in the country till now, at Katra Railway station in Jammu and Kashmir on March 30 this year.

    A senior Northern Railway official said that "This initiative was taken after Prime Minister Narendra Modi's instructions during inauguration of the Udhampur-Katra section of Kashmir Rail Link Project."

    Railways proposes to harness solar energy by utilising rooftop space through public private partnership mode as per feasibility, the modalities of which are being worked out.

    According to the plan, Railways plans to install solar power plants of about 8.8 MW capacity at railway stations, railway office buildings and level crossing gates throughout the country under railway funding.

    These include provision of 10 KWp solar PV modules each at 200 stations under various Zonal Railways, provision of total 4.05 MWp Solar Photo Voltaic (SPV) at roof top of 21 railway office buildings and provision of total 1.3 MWp capacity Solar Photo Voltaic plants at 2000 Level Crossing gates on Indian railways.

    http://steelguru.com/logistic/indian-railways-to-float-tenders-to-procure-solar-energy/428093#tag
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    U.S. bankruptcy judge refuses Molycorp request for loan

    Molycorp Inc failed to get approval from a U.S. Bankruptcy judge on Friday to borrow about $44 million at the rare earth producer's first bankruptcy hearing.

    Judge Christopher Sontchi agreed with the objection by an affiliate of Oaktree Capital Management that Molycorp could not justify its need for the money, which would deepen the company's insolvency.

    The company will discuss with its creditors how to structure the loan and will return to court on Thursday at 10 a.m., according to Sontchi's chambers.

    Molycorp, which filed for bankruptcy on Thursday, sought the money for its operations and to signal to customers and employees that the company would meet its commitments. Molycorp was seeking the money on an interim basis and had planned to return to court to seek approval to borrow up to $225 million.

    Oaktree, which had loaned the company about $250 million in September, argued Molycorp was essentially two businesses, a profitable developer and distributor known as Neo and the unprofitable Mountain Pass mining operation in California.

    Oaktree's loans are guaranteed by the Neo business. It objected to the additional borrowing, arguing it was burdening the profitable business with unnecessary debt to finance the development of Mountain Pass.

    Molycorp's chief financial officer, Michael Doolan, testified that the Neo business could survive without the bankruptcy loan. He also said Mountain Pass provided less than 30 percent of Neo's raw material and acknowledged the board considered closing the mine.

    "Neo would be wounded, no question," he said, speculating on the impact of not getting the loan. But "it would not be a fatal blow in and of itself," he added.

    The Mountain Pass side of the business had issued $650 million in senior secured notes, and the investors holding those notes had committed to providing the $225 million bankruptcy loan.

    Molycorp plans to swap ownership of the company to the secured bondholders in return for their debt.

    http://www.reuters.com/article/2015/06/26/molycorp-bankruptcy-idUSL1N0ZC1FY20150626
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    Orocobre Limited $32.3 Million Capital Raising Completed

    Orocobre Limited wishes to announce that it has raised A$32.3 million through a Placement to both domestic and international institutional and sophisticated investors. The raising was significantly oversubscribed, with support shown by both existing and new shareholders.

    The proceeds will be used principally to provide funding to the Olaroz Lithium Facility joint venture company, Sales de Jujuy SA (SDJ SA), where Orocobre's ownership structure requires the Company to contribute 75% of the project funding. Use of funds includes: working capital and capex requirements at the SDJ SA project level during the production ramp up period at the Olaroz lithium facility, financing costs during the ramp up period, and costs incurred in rectifying operational issues and production bottlenecks (US$7m). The funds will be provided to SDJ SA through a shareholder loan mechanism.

    As discussed in the update announcement on 17 June 2015, production ramp up has been slower than expected due to equipment limitations and early operational issues, however these areas have now been identified and rectified, with the final rectification in the purification circuit anticipated to be completed within 3-4 months. It is expected that the nameplate monthly run rate of 1,450 tonnes will be met during Q4.

    The slower than anticipated production ramp up has impacted the working capital position of SDJ SA. During the ramp up period, operating costs of a typically fixed nature have been incurred, whilst lower revenue was received due to slower than anticipated production quantities.

    http://www.abnnewswire.net/press/en/80272/Orocobre_Limited_(ASX:ORE)_(TSE:ORL)_323_Million_Capital_Raising_Completed.html
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    Agriculture

    Organic rules ok?

    It almost sounds like some crazy science fiction future, and that's no accident. The growBot project is part of the Public Design Workshop with Dr. Carl DiSalvo, and the whole idea is to imagine the future how you think it ought to be, and then figure out how to make it happen. Lady Rogue explained that imagining and a whole lot more when we chatted last week.


    Lady Rogue: I think we commonly conflate "technology" with "industrialization," and we forget that tools like plows, rakes and tractors are technology. Organic farming is an alternative to industrial food production. we'd like to strengthen the viability of organic farming by helping to create new tools and technology.
    Lady Rogue: The future of industrial food production is clear: genetically identical plants will be harvested by robots. This future is about 15 years away, give or take a recession or environmental collapse.
    Lady Rogue: Our food is already processed by plants, packaged by robots, shipped with sophisticated RFID embedded pallets to centralized distribution points that are increasingly controlled by intelligent algorithms. That is the clear-cut future progression of industrial food production. Our job is to help organic farmers to imagine tools that will help them create a viable production model as an alternative to this future.
    Lady Rogue: I haven't met a farmer yet who isn't interested in a way to preserve their way of life. I haven't met a farmer who isn't hoping that young people take up the siren call and become food producers themselves. So, no, I don't think that farming is anti-technology at all. It's just tainted with a wee bit of mistrust because the technology in recent years has tended to benefit industrial food production, and not organic.

    REALITY INTRUDES:

    Myth #1: Organic Farms Don't Use Pesticides

    When the Soil Association, a major organic accreditation body in the UK, asked consumers why they buy organic food, 95% of them said their top reason was to avoid pesticides. They, like many people, believe that organic farming involves little to no pesticide use. I hate to burst the bubble, but that's simply not true. Organic farming, just like other forms of agriculture, still uses pesticides and fungicides to prevent critters from destroying their crops. Confused?

    So was I, when I first learned this from a guy I was dating. His family owns a farm in rural Ohio. He was grumbling about how everyone praised the local organic farms for being so environmentally-conscientious, even though they sprayed their crops with pesticides all the time while his family farm got no credit for being pesticide-free (they're not organic because they use a non-organic herbicide once a year). I didn't believe him at first, so I looked into it: turns out that there are over 20 chemicals commonly used in the growing and processing of organic crops that are approved by the US Organic Standards. And, shockingly, the actual volume usage of pesticides on organic farms is not recorded by the government. Why the government isn't keeping watch on organic pesticide and fungicide use is a damn good question, especially considering that many organic pesticides that are also used by conventional farmers are used more intensively than synthetic ones due to their lower levels of effectiveness. According to the National Center for Food and Agricultural Policy, the top two organic fungicides, copper and sulfur, were used at a rate of 4 and 34 pounds per acre in 19711. In contrast, the synthetic fungicides only required a rate of 1.6 lbs per acre, less than half the amount of the organic alternatives.

    The sad truth is, factory farming is factory farming, whether its organic or conventional. Many large organic farms use pesticides liberally. They're organic by certification, but you'd never know it if you saw their farming practices. 

    Myth #2: Organic Foods are Healthier

    Some people believe that by not using manufactured chemicals or genetically modified organisms, organic farming produces more nutritious food. However, science simply cannot find any evidence that organic foods are in any way healthier than non-organic ones - and scientists have been comparing the two for over 50 years.

    Just recently, an independent research project in the UK systematically reviewed the 162 articles on organic versus non-organic crops published in peer-reviewed journals between 1958 and 2008 11. These contained a total of 3558 comparisons of content of nutrients and other substances in organically and conventionally produced foods. They found absolutely no evidence for any differences in content of over 15 different nutrients including vitamin C, ?-carotene, and calcium. There were some differences, though; conventional crops had higher nitrogen levels, while organic ones had higher phosphorus and acidity - none of which factor in much to nutritional quality. Further analysis of similar studies on livestock products like meat, dairy, and eggs also found few differences in nutritional content. Organic foods did, however, have higher levels of overall fats, particularly trans fats. So if anything, the organic livestock products were found to be worse for us (though, to be fair, barely).


    Myth #3: Organic Farming Is Better For The Environment

    As an ecologist by training, this myth bothers me the most of all three. People seem to believe they're doing the world a favor by eating organic. The simple fact is that they're not - at least the issue is not that cut and dry.

    Yes, organic farming practices use less synthetic pesticides which have been found to be ecologically damaging. But factory organic farms use their own barrage of chemicals that are still ecologically damaging, and refuse to endorse technologies that might reduce or eliminate the use of these all together. Take, for example, organic farming's adamant stance against genetically modified organisms (GMOs).

    GMOs have the potential to up crop yields, increase nutritious value, and generally improve farming practices while reducing synthetic chemical use - which is exactly what organic farming seeks to do. As we speak, there are sweet potatoes are being engineered to be resistant to a virus that currently decimates the African harvest every year, which could feed millions in some of the poorest nations in the world15. Scientists have created carrots high in calcium to fight osteoperosis, and tomatoes high in antioxidants. Almost as important as what we can put into a plant is what we can take out; potatoes are being modified so that they do not produce high concentrations of toxic glycoalkaloids, and nuts are being engineered to lack the proteins which cause allergic reactions in most people. Perhaps even more amazingly, bananas are being engineered to produce vaccines against hepatitis B, allowing vaccination to occur where its otherwise too expensive or difficult to be administered. The benefits these plants could provide to human beings all over the planet are astronomical.

    Yet organic proponents refuse to even give GMOs a chance, even to the point of hypocrisy. For example, organic farmers apply Bacillus thuringiensis (Bt) toxin (a small insecticidal protein from soil bacteria) unabashedly across their crops every year, as they have for decades. It's one of the most widely used organic pesticides by organic farmers. Yet when genetic engineering is used to place the gene encoding the Bt toxin into a plant's genome, the resulting GM plants are vilified by the very people willing to liberally spray the exact same toxin that the gene encodes for over the exact same species of plant. Ecologically, the GMO is a far better solution, as it reduces the amount of toxin being used and thus leeching into the surrounding landscape and waterways. Other GMOs have similar goals, like making food plants flood-tolerant so occasional flooding can replace herbicide use as a means of killing weeds. If the goal is protect the environment, why not incorporate the newest technologies which help us do so?


    Myth #4: It's all or none

    The point of this piece isn't to vilify organic farming; it's merely to point out that it's not as black and white as it looks. Organic farming does have many potential upsides, and may indeed be the better way to go in the long run, but it really depends on technology and what we discover and learn in the future. Until organic farming can produce crops on par in terms of volume with conventional methods, it cannot be considered a viable option for the majority of the world. Nutritionally speaking, organic food is more like a brand name or luxury item. It's great if you can afford the higher price and want to have it, but it's not a panacea. You would improve your nutritional intake far more by eating a larger volume of fruits and vegetables than by eating organic ones instead of conventionally produced ones.

    What bothers me most, however, is that both sides of the organic debate spend millions in press and advertising to attack each other instead of looking for a resolution. Organic supporters tend to vilify new technologies, while conventional supporters insist that chemicals and massive production monocultures are the only way to go. This simply strikes me as absurd. Synthetic doesn't necessarily mean bad for the environment. Just look at technological advances in creating biodegradable products; sometimes, we can use our knowledge and intelligence to create things that are both useful, cheap (enough) and ecologically responsible, as crazy as that idea may sound.







    Yields compared.


    1. Comparing the yields of organic and conventional agriculture Seufert, V., Ramankutty, N. & Foley, J. A. Nature http://dx.doi.org/10.1038/nature11069 (2012)


    Summary ... Our analysis of available data shows that, overall, organic yields are typically lower than conventional yields. But these yield differences are highly contextual, depending on system and site characteristics, and range from 5% lower organic yields (rain-fed legumes and perennials on weak-acidic to weak-alkaline soils), 13% lower yields (when best organic practices are used), to 34% lower yields (when the conventional and organic systems are most comparable). Under certain conditions—that is, with good management practices, particular crop types and growing conditions—organic systems can thus nearly match conventional yields, whereas under others it at present cannot...








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    Potash Corp would not shed K+S operations in a deal -sources

    Potash Corp of Saskatchewan Inc , the world's largest fertilizer company by capacity, does not plan any closures at K+S AG if its bid for its German peer proves successful, according to people familiar with the matter.

    Potash Corp and K+S have both acknowledged the bid publicly but have disclosed no other details. Sources told Reuters last week that K+S is concerned that Potash Corp wants to take capacity out of an oversupplied market in order to boost profitability.

    Potash Corp, however, intends to keep K+S's German mines operational, would not divest its market-leading salt business, and would continue with the development of a $4 billion legacy mining project in Canada, the people said on Sunday.

    Potash Corp also views K+S's assets as complementary, with the latter's specialty business that commands high prices diversifying Potash Corp's more commoditized potash, nitrogen and phosphate business, the people said. It also sees the stable, strong cash flow of K+S's salt business as attractive, the people added.

    Friendly talks between Potash Corp and K+S started last year, the people said. The chief executives of the two companies met in February to discuss a merger, with Potash CEO Jochen Tilk arguing that a full combination was the most attractive opportunity, according to the sources. Potash Corp submitted a written acquisition proposal to K+S at the end of May, the people added.

    Since then, however, K+S has refused to engage in negotiations with Potash Corp, without communicating a reason, the people said. This is despite Potash Corp's assurances that any deal would not be based on labor and other cost savings, and that K+S's management would be offered important roles in the combined company, the people added.

    Potash Corp also sees a strong fit between its business in the United States and K+S's footprint in Europe, the people said. It expects to maintain K+S's headquarters in Kassel, Germany, as the combined company's European headquarters, they added.

    Potash Corp has offered to pay around 41 euros per K+S share, valuing the company at close to 8 billion euros ($8.9 billion), a person familiar with the matter told Reuters on Friday.

    This would amount to a 57 percent premium to the average price of K+S for the 12 months prior to news of Potash Corp's offer emerging.

    http://www.reuters.com/article/2015/06/28/ks-ma-potashcorp-idUSL5N0ZE10620150628
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    Base Metals

    $8 trillion alternative energy boom is a win for copper

    Here’s a bit of energizing news: In 2014, for the first time in four decades, the global economy grew along with energy demand without an increase in global carbon emissions.

    That’s according to energy policy group REN21’s just-released Renewables 2015 Global Status Report, which attributes this stabilization to “increased penetration of renewable energy and to improvements in energy efficiency.”

    What this means is that as the world’s population continues to grow, and as more people in developing and emerging countries gain access to electricity, the role alternative energy sources such as wind, solar and geothermal play should skyrocket. Between now and 2040, a massive $8 trillion will be spent globally on renewables, about two thirds of all energy spending, according to Bloomberg New Energy Finance. Solar power alone is expected to draw $3.7 trillion.

    This is good news indeed for copper, necessary for the conduction of electricity in all energy technologies, whether they be traditional or alternative. The use of some carbon-emitting fossil fuels—coal, for instance—will likely drop off over the years, but copper will remain an irreplaceable component in our ever-expanding energy needs.

    Global copper consumption is poised to increase not just because electricity demand is growing. New energy technologies typically require more of the red metal than traditional sources. Each megawatt of wind power capacity, for instance, uses an average of 3.6 tonnes of copper. Electric trolleys, buses and subway cars use about 2,300 pounds of copper apiece. Where we’ll see the most significant growth, though, is in the production of hybrid and electric cars, which use two to three times more copper than internal combustion engines.

    http://www.mining.com/web/8-trillion-alternative-energy-boom-is-a-win-for-copper/?utm_source=twitterfeed&utm_medium=twitter
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    Zambia asks copper miners to curb electricity use

    Zesco Ltd., Zambia’s state-owned power utility, has asked mining companies in Africa’s second-biggest copper producer to cut power usage amid a shortage caused by low dam levels, spokesman Bestty Phiri said.

    Phiri could not immediately say by how much Zesco asked companies to curb usage, in response to a text message. Zesco, which has a generating capacity of about 2,200 megawatts, has a 560-megawatt shortfall, state-owned broadcaster ZNBC said Thursday, citing the company. Zambia produces over 90 percent of its electricity from hydropower, and low rainfall has caused water levels to drop.

    “We are looking forward to a full analysis of the power supply situation and subsequent discussion with all major stakeholders on how the power deficit will be managed,” Jackson Sikamo, president at the Zambia Chamber of Mines, said in reply to e-mailed questions Wednesday.

    Zambia’s copper production probably won’t top last year’s, when output fell to a three-year low, because of a tax dispute between producers and the government, Mines Minister Christopher Yaluma said June 11. The power shortage could exacerbate a decline, as producers of the metal account for more than half of the country’s electricity demand.

    http://www.mineweb.com/news/energy/zambia-asks-copper-miners-to-curb-electricity-use/
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    First Nickel under TSX delisting review

    Mining and exploration company First Nickel reported it has received notice that the TSX is reviewing the eligibility of the company’s common shares for continued listing on the TSX. 

    The company advised on Friday that the TSX was reviewing whether First Nickel met its continued listing criteria in terms of the company’s financial condition and operating results, whether First Nickel had adequate working capital and an appropriate capital structure, and if the share price of First Nickel’s common shares had been so reduced as to not warrant continued listing. 

    First Nickel was being reviewed under the TSX’s remedial review process and had 120 days to comply with all requirements for continued listing. If the company could not meet the requirements of the TSX on or before October 28, First Nickel’s common shares would be delisted 30 days from that date.

     First Nickel assured, in a statement, that it intended to cooperate fully with the TSX review process, including the consideration of listing alternatives for its common shares. Any continued listing or alternate listing of the company’s common shares would be dependent on numerous factors. 

    In light of the status of First Nickel’s operations under the current nickel price environment, there was no assurance that the company would be able to maintain a listing of its common shares on the TSX, or obtain an alternate listing on another exchange, the company said.

    http://www.miningweekly.com/article/first-nickel-under-tsx-delisting-review-2015-06-26
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    Steel, Iron Ore and Coal

    China May thermal coal imports down 40.8pct on yr

    China’s thermal coal imports, including bituminous and sub-bituminous coal, dropped 40.8% on year and down 26.0% on month to 6.48 million tonnes in May, according to the latest data released by the General Administration of Customs (GAC).

    Australia remained the largest supplier, exporting 3.8 million tonnes of bituminous and sub-bituminous material to China in May, falling 17.8% on month and down 20.9% on year.

    In the same month, China's imports of Indonesian thermal coal fell 39.8% from April and down 40.2% from a year ago to 1.84 million tonnes.

    Thermal coal imports from Russia slumped 51.7% on year and down 15.6% on month to 0.78 million tonnes in the month.

    Over January-May, China imported a total 36.14 million tonnes of bituminous and sub-bituminous material, down 44.0% from the year before, data showed.

    Top supplier Australia exported a total 18.61 million tonnes of thermal coal to China during the same period, down 21.9% from the year before.

    Meanwhile, total imports of lignite dropped 32.0% from the previous year to 20.85 million tonnes during the same period, with May imports decreasing 29.3% on month and down 24.9% on year to 3.54 million tonnes.

    Lignite imports from the top supplier Indonesia stood at 19.48 million tonnes between January and May, down 31.8% on year.

    http://en.sxcoal.com/0/122659/DataShow.html
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    China Coal Energy H1 loss may reach 0.8-1.2 bln yuan

    China coal energy Co., Ltd., the country’s second largest coal producer, may suffer a loss of 0.8-1.2 billion yuan ($130.9-196.4 million) during the first half of the year, said the company on June 26.

    This was the first loss since 2012, data showed, compared to a net profit of 686 million yuan from the same period last year.

    The company attributed the loss mainly to falling prices caused by weak demand amid slowing Chinese economy and a supply glut in the Chinese market.

    The Fenwei/Platts CCI1 Index for domestic 5,500 Kcal/kg NAR coal traded at Qinhuangdao port was assessed at 395.5 yuan/t on June 26, inclusive of VAT, FOB basis, down 21.8% from the start of the year.

    China Coal realized net profit of 151 million yuan in the first quarter of the year, down 97.2% year on year, according to its quarterly report.

    That means the company’s operation have further worsened during the second quarter.

    By end-June, China coal has reduced the FOB Qinhuangdao price of its 5,800 Kcal/g NAR coal by 18.5% from the end of the first quarter to 510 yuan/t, VAT inclusive; while the decline in 5,000 Kcal/kg NAR coal was slightly bigger at 18.9% from March to June.

    Coal sales price averaged 347 yuan/t in the first quarter, down 13.5% from the year before and down 5.4% from 2013.

    China Coal Energy produced 9.93 million tonnes in May, down 4.2% on year but up 38.1% on month -- the 11th consecutive year-on-year drop. Over January-May, it produced 37.65 million tonnes of coal, down 24.8% year on year, it said in a statement early this month.
     
    http://en.sxcoal.com/0/122830/DataShow.html
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    Indian steelmakers upset as Japan, S.Korea eat local market share

    India could raise steel tariffs further to check a surge of imports, a minister said on Friday, but local steel firms are concerned that free trade agreements with Japan and South Korea would still let those countries boost shipments.

    Amid a global glut, steel imports jumped 72 percent in the last fiscal year to March to 9.3 million tonnes. South Korea and Japan together sent 3.5 million.

    Imports in April and May, the first two months of the new fiscal year, rose 55 percent to 1.67 million tonnes. But shipments from Japan soared 111 percent and those from South Korea 51 percent.

    Heavy industries minister Anant Geete said he would meet finance ministry officials within a week to discuss more measures to "safeguard" the local industry and check the qualityof imported steel, after companies complained recent duty increases of up to 2.5 percentage points were inadequate.

    But billionaire Sajjan Jindal, chairman of JSW Steel Ltd , said Japan and South Korea pay little or no duty when they sell steel to India.

    "I don't think any more duty increase is likely to happen, and actually, that is not even helping, because 50 percent of the imports is coming from FTA countries," Jindal told Reuters, referring to countries with free trade agreements with India.

    "Therefore, right now what we're working on (with the government) is anti-dumping and safeguard measures."

    Further dismaying local firms such as JSW and Kalyani Steels , this week India extended a deal to provide high-grade iron ore to Japan and South Korea as part of bilateral ties.

    "When the agreements were signed, it was a flourishing industry," said A.S. Firoz, chief economist at a steel ministry research unit. "But things have changed now and the domestic industry is really vulnerable."

    The steel ministry is in favour of taking steel out of the FTAs, according to government and industry sources with knowledge of the issue, but such a decision is unlikely in the near term, given government-to-government relations.

    Growth in Indian steel demand is expected to be the highest among the world's 10 biggest users this year and the next, the World Steel Association says.

    April-May consumption rose 7 percent after growth of 3 percent last fiscal year, but local mills have not benefited: their output rose just 0.8 percent in April-May while exports slumped 36 percent.

    http://www.reuters.com/article/2015/06/26/india-steel-idUSL3N0ZC2PO20150626
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    China Hebei steel production drops 2.4 pct y/y in May

    Northern China's Hebei, the country's biggest steelmaking province, produced 16.11 million tonnes of the material in May, down 2.4 percent on the year, hit by weak underlying demand and a seasonal construction downturn.
         
    Crude steel output from Hebei in the first four months of the year reached 83.28 million tonnes, 0.3-percent lower than the same period last year, according to figures from the National Bureau of Statistics.
     
    Hebei's total output amounted to 23 percent of the national total in May and 24.5 percent in the first five months. Hebei's steel sector is one of the principle targets of China's "war on pollution", with the province under pressure to slash annual steel capacity by 60 million tonnes over the
    2014-2017 period.

    China's Ministry of Industry and Information Technology is about to release details of a plan to curb nationwide capacity by 80 million tonnes over the 2015-2017 period, with small and private mills in Hebei likely to bear the brunt of the cuts.  
       
    An official with the ministry told a forum on Saturday that environmental rules for the steel sector were also likely to be tightened over the 2016-20 period and firms that fail to comply will be forced to close, state news agency Xinhua reported.
       
    Hebei's production decline has been offset by increases in Jiangsu on the eastern coast, which has seen output rise 12.5 percent to 44.93 million tonnes over the January-May period of2015.    

    http://www.reuters.com/article/2015/06/29/china-steel-hebei-idUSL4N0ZF21W20150629
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    5 Indian steel companies facing financial stress on projects delays - RBI

    Business Line reported that according to the Financial Stability Report published by RBI on last Thursday, 5 of the top ten private steel companies are facing sever financial stress due to delay in implementation of their projects,

    Listing out the woes of the industry, the central bank in its half-yearly review of the economy said steel companies’ expansion projects are getting delayed due to problems with land acquisition, environmental clearances among other factors. Though the sector holds good long-term prospects it is currently under stress, necessitating a close watch by lenders.

    The industry is also facing other challenges with respect to access to capital for investment, shortage of iron ore, low-paced mechanisation of mines, lower level of capacity-utilisation of coal washeries, dependence on imported coking coal and volatility in the currency market.

    Accessing the overseas market, the report said the industry faces high domestic port charges amidst low domestic demand.

    The depressed global steel prices have taken a toll on Indian steel companies on the pricing front in domestic market. A mismatch in steel pricing leads to large-scale imports. “These factors have created stress in the sector in general and more particular in case of private sector companies,” the report said.

    http://steelguru.com/steel/5-indian-steel-companies-facing-financial-stress-on-projects-delays-rbi/428220#tag

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