Mark Latham Commodity Equity Intelligence Service

Wednesday 8th June 2016
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    Macro

    Brazil prosecutor seeks arrest of Senate president, ruling party leader: report


    Brazil's chief prosecutor asked the Supreme Court to authorize the arrest of the presidents of the Senate and of the ruling PMDB party for allegedly trying to obstruct police investigations, newspaper O Globo said on Tuesday.

    Supreme Court Justice Teori Zavascki must now decide whether to accept the request, O Globo said.

    Chief prosecutor Rodrigo Janot also requested permission to arrest suspended House speaker Eduardo Cunha and former president José Sarney, who was a senator until 2014, for seeking to block the two-year-old probe into political kickbacks at state oil company Petrobras.

    Senate President Renan Calheiros, PMDB acting president and Senator Romero Jucá, former president Sarney and Cunha are some of Brazil's most powerful political leaders. The four men have denied any attempt to halt the probe.

    Their arrests could weaken the new administration of interim President Michel Temer, as it seeks to build support in the Senate to convict suspended President Dilma Rousseff on charges of breaking budgetary laws.

    The chief prosecutor also requested Calheiros be removed from the Senate presidency, O Globo said. If he is suspended, an ally of Rousseff, Senator Jorge Viana, would become the acting president of the Senate in the middle of her impeachment trial in the upper house.

    The trial is expected to conclude in mid-August as Brazil is hosting the Olympic Games in Rio de Janeiro.

    Under Brazilian law, the Supreme Court must approve any judicial action taken against members of congress. Sarney was included in the request, even though he is no longer a senator, because he is mentioned in the same case as Jucá and Calheiros.

    The chief prosecutor's request to the Supreme Court came following the release of recordings made by Sérgio Machado, a former senator and PMDB ally who struck a plea bargain deal with prosecutors to collaborate in the sweeping corruption probe that has plunged Brazil into political mayhem.

    Machado recorded Calheiros, Juca and Sarney, separately, allegedly discussing strategies to weaken the investigation.

    The recordings were leaked by newspapers in recent weeks and caused Jucá's dismissal as Planning Minister.

    The Supreme Court voted unanimously last month to remove Cunha, a bitter rival of Rousseff's, as speaker of the lower house on charges of obstructing the corruption investigation.

    Media representatives for Calheiros, Jucá, Sarney, Cunha and Janot did not immediately respond to requests for comment on the O Globo report. A Supreme Court spokeswoman declined to comment.

    http://www.reuters.com/article/us-brazil-politics-idUSKCN0YT1H6
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    China's May forex reserves fall to lowest since Dec 2011


    China's foreign exchange reserves in May fell to $3.19 trillion, their lowest since December 2011, central bank data showed on Tuesday, likely due to the effects of a stronger dollar and sporadic official intervention.

    But analysts said the drop did not necessarily suggest a resurgence of speculative capital outflows.

    The reserves, the world's largest, fell by $27.9 billion in May - the biggest monthly drop since February.

    They rose by $7.1 billion in April and $10.3 billion in March, reflecting easing capital outflows and the dollar's drop against non-dollar currencies such as the euro and yen.

    "It mostly reflects exchange rate fluctuations which we estimate lowered the dollar value of the portion of the reserves held in other currencies by $25 billion," Julian Evans-Pritchard, from Capital Economics, wrote in a note.

    Economists polled by Reuters had predicted foreign exchange reserves would fall to $3.20 trillion at the end of May from $3.22 trillion at the end of April.

    The People's Bank of China has intervened in foreign exchange markets to cushion the yuan against capital outflows as markets brace for a rise in U.S. interest rates this year.

    China said it will give the United States a 250 billion yuan ($38 billion) investment quota for the first time to buy Chinese stocks, bonds and other assets, deepening financial ties and interdependence between the world's two largest economies. The announcement was made at the bilateral Strategic and Economic Dialogue in Beijing on Tuesday.

    U.S. central bank chief Janet Yellen said in late May that the Federal Reserve should raise interest rates "in the coming months" if the U.S. economy picks up as expected and jobs continue to be generated, bolstering the case for a rate increase in June or July.

    Heavy capital outflows seen last year seem to have subsided after the PBOC's heavy intervention to support the yuan in January and February, though the more recent weakening of the yuan to its lowest levels this year has put outflows back on the radar.

    http://www.reuters.com/article/china-economy-forexreserves-idUSL4N18R31Q
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    U.S. Said to Rebuff EU Bid to Shield Banks From Iran Sanctions


    European Union governments have hit a wall with the U.S. in attempts to shield banks and companies that do business with Iran from the threat of financial sanctions.

    EU finance ministers pressed U.S. officials to provide more explicit guidance on the administration’s sanctions regime during talks in Brussels in late May, without success, two people familiar with the meeting said. Spokeswomen for the U.S. Treasury and the European Commission declined to comment on the talks.

    With an estimated $24 billion in additional EU trade at stake over the next two years, Europe, Russia and the U.S. lifted economic sanctions linked to Iran’s nuclear program in January. Yet restrictions on dollar-denominated trades related to Iran were among the penalties left in place, crimping Europe’s expansion of business ties with the Islamic republic.

    “Banks evidently view the risk of violating U.S. sanctions as too great,” Arnold Wallraff, head of the German government’s Office for Economic Affairs and Export Control, said in an interview. “Additional measures to limit liability would be helpful. Politicians need to address that.”

    With oil and aviation deals usually financed in dollars with large banks sharing the risks, the ban on dollar transactions remains a hurdle for deals such as Iran’s agreement to buy 118 Airbus planes worth $27 billion, announced shortly after sanctions were lifted in January.

    EU finance ministers and officials pressed the U.S. to give assurances to banks about the reach and application of the remaining sanctions, according to the people, who asked not to be identified because the talks were private. In its response, the U.S. declined to go beyond its publicly announced policy, the people said.

    Past Penalties

    The push by EU governments reflects pressure by banks after the nuclear deal with world powers sparked optimism that Iran would rejoin the global financial system. More than half of international companies interested in doing business with Iran are holding back for fear of running afoul of sanctions, according to a report by global law firm Clyde & Co.

    EU-Iran trade is expected to quadruple in the next two years from an annual level of some $8 billion, according to the U.K. Foreign Office. Yet U.S. politics mean the window for expanding trade with Iran may be closing, with Republican presidential frontrunner Donald Trump signaling he’d tear up the Iran accord that he says led to U.S. “humiliation.”

    Nuclear-related sanctions, including a ban on Iran’s use of the SWIFT system for international financial transactions, were lifted in January following the nuclear deal. Other international sanctions related to terrorism and ballistic-missile development remained in place, as does a U.S. ban on American commerce with Iran.


    Past U.S. penalties loom large, including the record $9 billion fine that BNP Paribas SA agreed to pay in 2014 in part for dealings with Iran. France’s Societe Generale SA, Germany’s Deutsche Bank AG, Zurich-based Credit Suisse Group AG, ING Groep NV in the Netherlands and the U.K.’s Standard Chartered Plc are among the big European banks that have said they’re generally not prepared to do business in Iran yet.

    ‘Lack of Clarity’

    France’s government, worried that companies may lose exports, is said to be in talks with the U.S. Treasury’s Office of Foreign Assets Control, or OFAC, to seek a commitment that banks can do business without incurring legal woes.

    The U.S. administration says Treasury and State Department officials have held meetings with companies, government officials and financial institutions in more than a dozen countries to discuss the sanctions relief for Iran. Guidance on OFAC’s website is regularly updated in response to questions about the scope of the sanctions, the Treasury spokeswoman said by e-mail.

    U.S. Secretary of State John Kerry met European bankers including Deutsche Bank AG Co-Chief Executive Officer John Cryan in London in May, telling them “that legitimate business, which is clear under the definition of the agreement, is available to banks.”

    That doesn’t satisfy the Europeans. Several EU companies have asked the European Commission to take their individual cases to the Treasury so they can gain legal clearance or permissions before trading with Iran, Francesco Fini, an official in the office of EU foreign-policy chief Federica Mogherini, told Bloomberg BNA on May 25.

    “Lack of clarity from the U.S. is causing a lack of certainty for companies like Airbus,” Franck Proust, a French member of the European Parliament, said during a committee meeting in May. “There are no banks at this point that will support investments.”

    http://www.bloomberg.com/news/articles/2016-06-07/u-s-said-to-rebuff-eu-bid-to-shield-banks-from-iran-sanctions-ip59qkxe

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    Oil and Gas

    China Oil Imports Fall as Congestion Curbs Refiner Crude Access


    Oil imports by China, the world’s biggest consumer after the U.S., fell to a four-month low as congestion at one of its biggest ports curbed purchases from independent refiners.

    Inbound shipments in May totaled 32.24 million metric tons, data from the Beijing-based General Administration of Customs showed on Wednesday. That’s equivalent to 7.62 million barrels a day, down 4.3 percent from the previous month. Net oil-product exports fell by almost one-third from April to 810,000 tons.

    China has been a bright spot for the global crude market as smaller refiners known as teapots increase purchases after authorities loosened restrictions for them to import oil. Qingdao port in Shandong province, where most teapots are based, has been congested this year from "unprecedented" tanker traffic, according to Liu Jin, general manager of Qingdao Shihua Crude Oil Terminal Co., which operates oil berths at the port.

    "The congestion at the Qingdao port is highlighting the need to slow the pace of buying," Michal Meidan, an Asia energy analyst at Energy Aspects Ltd., said before the data was released. "Prices have gone up so teapots will use this to take stock of their buying patterns thus far."

    While imports slipped on a monthly basis, inbound shipments in the first five months of the year have surged 16.5 percent over the same period in 2015, according to customs data. The nation’s crude imports may ease over the May-June period as lack of storage and logistical bottlenecks limit purchases, BMI Research said in a report last month.

    China’s refineries processed a record 44.75 million tons crude in April, while output from its domestic fields slumped to the lowest in 14 months, data from the National Bureau of Statistics showed last month.

    http://www.bloomberg.com/news/articles/2016-06-08/china-oil-imports-fall-as-congestion-curbs-refiner-crude-access
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    Nigeria to scale down army campaign in Delta, talk to Avengers: officials


    Nigeria will scale down a military campaign in the oil-producing Niger Delta and talk to the Niger Delta Avengers militant group which has claimed a string of attacks there that sharply cut crude output, officials said.

    But the militant group said in a statement, without mentioning the government initiative, its mandate was "to liberate the Niger Delta people."

    The government has also decided that the military presence in the region, which had been increased in the last few weeks, should be scaled down, a statement issued by the vice president's office said on Tuesday.

    The southern Delta swamps, where many complain of poverty and oil spills, have been hit by militant attacks on oil and gas pipelines which have brought Nigeria's oil output to a 20-year low, and helped push oil prices to 2016 highs on Tuesday. [O/R]

    President Muhammadu Buhari had appointed a team led by the national security adviser "to begin the process of a very intensive dialogue with those caught in the middle of this," Oil Minister Emmanuel Ibe Kachikwu said late on Monday.

    "I want to call on the militants to sheath their weapons and embrace dialogue with government," he said. "We are making contacts with everybody who is involved, the ones that we can identify, through them, the ones that we can't identify so that there is a lot more inclusiveness in this dialogue."

    "Probably we will suspend the operations of the military in the region for a week or two for individuals in the creeks to converge for the dialogue," he said.

    Vice President Yemi Osinbajo, who had been expected to travel to London to meet investors on Tuesday, instead met Niger Delta state governors and military chiefs to discuss ways to end the militancy.

    A statement from Osinbajo's office said it had been decided at the meeting that the military presence in the region should be "de-escalated," although forces would be kept to provide security for the talks.

    Adding to the problems of authorities trying to stem the violence, a group in the southeast calling for secession declared support for the Avengers.

    "We support the Niger Delta Avengers," said Uche Madu, a spokesman for the Movement for the Actualization of the Sovereign State of Biafra (Massob) which wants secession for the region which fought a civil war from 1967-70.

    A former militant group, the Movement for the Emancipation of the Niger Delta, which laid down arms in 2009 under a government amnesty, accused the army of a "disproportionate use of force."

    MEND, which was one of the largest militant groups, also said the Delta Avengers had attracted some of its former fighters. So far it has been unclear who is behind the Avengers.

    There was no immediate direct response from the Avengers on the dialogue initiative. On its Twitter account it only issued a statement framing MEND leaders as criminals.

    "Our struggle is focused on the liberation of the People of Niger Delta from decades of divisive rule and exclusion," it said.

    Kachikwu also said Nigeria's oil output was between 1.5 million and 1.6 million barrels a day, down from 2.2 million barrels at the start of the year.

    "Over the last two months, we have probably lost about 600,000 barrels from various attacks of militants in the area," he said.

    http://www.reuters.com/article/us-nigeria-security-oil-idUSKCN0YT0RR
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    Latest from Niger Delta Avengers


    Niger Delta Avengers ‏@NDAvengers  2h2 hours ago

    This is to the Gen. public we're not negotiating with any Committee. if Fed Govt is discussing wth any group they're doing that on their own

    Niger Delta Avengers ‏@NDAvengers  2h2 hours ago

    At 1:00am today, the @NDAvengers blow up Well RMP 20 belonging to Chevron located 20 meters away from Dibi flow Stattion in Warri North LGA.

    @NDAvengers
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    Shell Says Impossible to Repair Stricken Nigerian Oil Facility


    Royal Dutch Shell Plc said it won’t attempt to repair a key pipeline in Nigeria for now after militants attacked it a second time last week, the latest sign of alarm among foreign oil companies in the African nation.

    Chief Financial Officer Simon Henry said the company had to withdraw repair crews last week after a second attack against the 48-inch Forcados export pipeline that links onshore storage tanks with an offshore port.

    “We cannot operate or repair if our people are threatened,” Henry said in an interview at Shell’s annual capital markets day. While the company previously said it planned to repair the facility, first attacked in February, this month, the CFO said that it was “not possible” at this time.

    Shell’s resignation over the disabled pipeline suggests a new level of insecurity as a wave of violence hits the oil-rich Niger Delta, leaving production at its lowest level in nearly three decades. In the past, energy companies were able to repair pipelines after attacks, barring a few exceptions deep into the region’s swamps and creeks. The attacks are more destructive than in the past, Henry said.

    “There is clearly better organization and targeting," according to the CFO.

    http://www.bloomberg.com/news/articles/2016-06-07/shell-says-impossible-to-repair-stricken-nigerian-oil-facility
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    IEA Cuts Gas Demand Outlook Again as Glut Seen to End of Decade


    While oil markets will start re-balancing after a slump next year, an oversupply in natural gas won’t disappear until the end of the decade, the International Energy Agency said, slashing its gas demand outlook for a fourth straight year.

    Global consumption will expand by 1.5 percent annually from 2015 through 2021, down from last year’s forecast of 2 percent growth from 2014 through 2020 and a 2.5 gain over the prior six years, the Paris-based agency said Wednesday in its Medium-Term Gas Market Report. The slowdown will be driven by weaker use in the U.S. and Japan as the fuel struggles to compete against booming renewables and “very cheap” coal in power generation.

    “Slower generation growth, rock-bottom coal prices and robust deployment of renewables constrain gas’s ability to grow faster in today’s low-price environment,” the IEA said.

    Global gas markets will remain oversupplied until 2018 and demand and supply won’t align until 2021 as liquefied natural gas capacity jumps 45 percent through 2021, 90 percent of which in the U.S. and Australia. Markets will struggle to absorb the increase amid the return of Japanese reactors, cheap coal and competitive Russian pipeline fuel in Europe. The IEA in Februarysaid an oil glut that damped prices will end in 2017.

    U.S. gas fell 71 percent from a peak in 2008 to average $2.61 a million British thermal units on the Henry Hub in 2015, while U.K. prices on the National Balancing Point dropped 39 percent in the period to $6.53 a million Btu, according to the IEA. Meanwhile, benchmark coal in the U.S. fell 54 percent to $1.97 a million Btu and 62 percent to $2.34 in northwest Europe.

    World gas demand will be 3.9 trillion cubic meters (140 trillion cubic feet) in 2021, compared with 3.6 trillion cubic meters in 2015, the IEA said. Global supply will also rise 1.5 percent annually, slowing from the prior period as low prices and demand deter investments.

    http://www.bloomberg.com/news/articles/2016-06-08/iea-cuts-gas-demand-outlook-again-as-glut-seen-to-end-of-decade

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    Mozambique’s Rovuma gas field faces investment drought


    Mozambique’s Rovuma Area 1 gas project, in which India government-owned oil and gas companies hold a 30% stake, has been hit by an investment drought. The start of production from the fields too has become uncertain with no binding agreement from prospective liquefied natural gas (LNG) buyers as few were willing to enter into long-term contracts in the falling oil and gas pricing environment. 

    Two India government officials have pointed out that about $6-billion had already been invested in the Rovuma Area 1 gas assets and that a further $25-billion would be required to bring the asset into production. However, considering that gas purchase agreements have not been signed, major stakeholders were unwilling to make a final investment decision as the project’s projected cash flow could not be determined, the officials added. 

    While neither official was willing to risk a guess on when commercial production from Rovuma would start, both agreed that it would not be before 2021/22 and that too was subject to the revival of oil and gas prices and finding buyers for LNG from the project. 

    When the Indian oil and gas companies first started investing in Rovuma, they had forecast that production would start in 2018.  However, the Indian officials said that, even if one offtake contract was clinched by end of the current financial year, production would not be possible before 2021/22. It was pointed out that Rovuma was just one of the several stalled LNG projects across the world, falling victim to the downturn in oil and gas prices. 

    Delayed development at Rovuma was negative for bilateral relations between Mozambique and India. It was also considered a setback for the Asian country’s attempt to secure a bigger footprint in African hydrocarbon sector. ONGC Videsh, the overseas arm of national exploration and production major ONGC Limited, Oil India Limited and oil refiner-marketer Bharat Petroleum Corporation Limited together hold a 30% stake in Rovuma Area 1. 

    The companies acquired the stake from Indian firm Videocon and Anadarko Petroleum Corporation, when Anadarko partially divested a 10% stake. Anadarko continued to be lead operator of the block, which was believed to have reserves ranging between 35-trillion and 65-trillion cubic feet of gas. 

    One Indian official said that assured offtake from Rovuma by Indian gas importers was one of the options to monetise development of the gas field, but acknowledged that “reconciling sovereign interests” of exporting and importing nations would be a challenge in depressed oil and gas price regimes.

    http://www.miningweekly.com/article/mozambiques-rovuma-gas-field-faces-investment-drought-indian-officials-2016-06-07

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    Qatar to slash condensate exports by October 2016 -official


    Qatar will double its capacity for processing condensate by almost 150,000 barrels a day (bpd) in August when trials begin on a new splitter at the Ras Laffan refinery with commercial production starting by October, a Qatar Petroleum official said.

    Condensate exports from Qatar will drop from the current 500,000 bpd to about 350,000 bpd when the 146,000-bpd splitter starts operating, said the official, who declined to be named as he was not authorised to speak publicly.

    Qatari condensate exports have already been facing competition from U.S. and Iranian light oil shipments but the splitter should help the Gulf state soak up some of its condensate at home.

    "Overall, there should be less condensate supply in August, but it would still be enough for everyone considering how long the market was in July," a Singapore-based trader said.

    Output of full-range naphtha will double with the start of the new condensate splitter, Ibrahim Al Sulaiti, marketing director of condensate at Tasweeq said in 2014. Part of this would then be used as feedstock for new gasoline and aromatics units that are set to come online in late 2017.

    The Qatari unit's start-up will increase Middle East naphtha exports to Asia, which is already struggling with a stubborn supply glut and tepid demand from gasoline producers.

    "(Qatar is) ambitious in their plan to ramp up production but it would be foolhardy to push a new plant so quickly," the trader said, pointing to the naphtha glut.

    http://www.reuters.com/article/qatar-naphtha-idUSL8N19004A
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    Rosneft First-Quarter Profit Falls 75% as Crude Oil Falls to Low


    Rosneft OJSC, Russia’s largest oil producer, said profit slumped 75 percent in the first quarter as crude prices hit their lowest point in over a decade.

    Net income dropped to 14 billion rubles in the first three months of the year compared to 56 billion rubles in the same period a year earlier, according to a statement on the Moscow-based company’s website. That missed the 28 billion-ruble estimate of nine analysts, surveyed by Bloomberg News. Revenue fell 21 percent to 1.05 trillion rubles.

    Earnings before interest, taxes, depreciation and amortization declined to 273 billion rubles from 319 billion rubles in the first quarter of last year, according to the statement.

    http://www.bloomberg.com/news/articles/2016-06-08/rosneft-first-quarter-profit-falls-75-as-crude-oil-falls-to-low
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    Trafigura First-Half Profit Falls 10% as Oil-Trading Boom Fades


    Trafigura Group Pte said fiscal first-half profit dropped 10 percent as an oil-trading boom fades, even as volumes increased to a record 4 million barrels per day.

    Net income fell to $602 million in the six months to March 31, from $672 million a year earlier, Trafigura, based in Singapore and with major trading operations in Geneva, said Tuesday in a statement.

    The results were “satisfactory” even if the company “did not match the numbers achieved in the exceptional trading conditions in the first half of 2015,” Chief Executive Officer Jeremy Weir said in the statement.

    Trafigura reported record profit from oil and petroleum-product trading in the last fiscal year as the company’s traders took advantage of arbitrage opportunities created by price swings, while locking in returns by storing cheap crude for delivery at higher prices in the future. That contango market structure and continued price volatility meant the first half of the year remained a “favorable” environment for oil trading, Weir said.

    “With U.S. production falling sharply and demand continuing to grow strongly, for example for gasoline in the U.S. and China, the much-anticipated rebalancing of supply and demand now seems within reach,” the CEO said.

    Oil Share

    Gross profit from the oil and petroleum products division fell 22 percent to $787 million in the first half, even as volumes climbed 46 percent. Oil still accounted for 62 percent of Trafigura’s total revenue, which declined 8.5 percent to $44 billion amid lower commodity prices.

    The company has benefited from increased oil flows from Russian state producer Rosneft OJSC. It struck long-term arrangements to handle oil from the Moscow-based company -- sanctioned by the U.S. over Russia’s role in the Ukraine conflict -- by ensuring payments are no longer than the 30 days permitted under sanctions.

    Gross profit from metals and minerals trading dropped 24 percent to $386 million on revenue of $16.7 billion. Volumes were steady and Weir said the market was improving.

    “There were more positive signs in some segments during the first half,” said Weir. “In zinc concentrates, a long-anticipated supply deficit has arrived, while aluminum stocks are drawing down as capacity shutdowns take hold, and even in nickel, previously among the hardest hit metals, a deficit has emerged on rising demand and falling supply.”

    Offtake Deals

    Trafigura added supply and offtake agreements during the period with Nyrstar NV, a zinc smelting company in which it’s the largest shareholder. It further expanded its involvement with the Belgium-based metals producer by taking over a marketing agreement that was previously handled by Noble Group Ltd.

    The gross trading margin for both metals and oil shrank to 2.7 percent from 3.1 percent a year earlier. Gross profit fell 23 percent to $1.2 billion from $1.5 billion. Earnings before interest, taxes, depreciation and amortization was $821 million, down 27 percent from the year before.

    The closely held trading house is owned by a group of 600 employees. Its largest shareholder, co-founder and former CEO and Chairman Claude Dauphin died from cancer in September. The company has said it plans to buy out his stake of less than 20 percent.

    Trafigura said it has created two new management committees, one to oversee the trading business and another to oversee investments.

    http://www.bloomberg.com/news/articles/2016-06-07/trafigura-first-half-profit-falls-10-as-oil-trading-boom-fades
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    Toho Gas inks deal to buy U.S. LNG


    Japan’s Toho Gas said it has entered into a sale and purchase deal with Diamond Gas, a Mitsubishi Corporation unit, to buy liquefied natural gas from Cameron LNG export project in the U.S.

    This deal follows the heads of agreement the two companies signed in April last year.

    Under the agreement, Toho Gas will buy 200,000 metric tons, or three cargoes of LNG per year for a period of 20 years from the liquefaction facility starting in 2019.

    LNG will be delivered on an ex-ship basis with the price of the chilled fuel linked to the US natural gas Henry Hub index.

    Cameron LNG has obtained approval from the U.S. DOE to export up to 14.95 Mtpa, or approximately 2.1 Bcf per day, of domestically produced LNG.

    Construction on the project began in October 2014, with commercial operations expected to begin in 2018.

    Cameron LNG is a joint venture owned by affiliates of Sempra Energy, Engie, Mitsui & Co. and Japan LNG Investment, a joint venture formed by affiliates of Mitsubishi Corporation and Nippon Yusen Kabushiki Kaisha

    http://www.lngworldnews.com/toho-gas-inks-deal-to-buy-u-s-lng/

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    SCT&E LNG firms up 20-year supply deal


    SCT&E LNG on Tuesday informed it has signed a binding 20-year fixed price natural gas supply agreement to support its future LNG facility to be constructed on Monkey Island in Cameron Parish, Louisiana.

    In May 2015, the company signed the non-binding MOU with a natural gas supplier for a 20-year fixed price on natural gas from the commencement of operations of the SCT&E LNG facility.

    Chairman and CEO, Greg Michaels, said, “We have successfully completed the negotiations and now have a contractual method to offer this unique natural gas supply structure to our LNG offtakers. Together with our upstream supplier, we have essentially created a 25-year hedge on natural gas for our customers.”

    SCT&E LNG said the deal is” first of its kind” among U.S. LNG export projects.

    The company is looking to export liquefied natural gas via take-or-pay tolling agreements.

    So far, SCT&E LNG has signed four offtake MOU’s totalling 4.7 mtpa of LNG, over a third of the proposed facility’s total capacity.

    Currently, the facility is scheduled to produce 12 mtpa of LNG with shipments starting in 2022.

    http://www.lngworldnews.com/scte-lng-firms-up-20-year-supply-deal/
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    Shell makes final investment decision on Pennsylvania petrochemicals complex


    Shell said it has made a Final Investment Decision (FID) to build a major petrochemicals complex in Pennsylvania.

    The construction is expected to take up to 18 months with commercial production expected to begin early in the next decade.

    The oil major said the project will bring new growth and jobs to the region, with up to 6,000 construction workers involved in building the new facility and 600 permanent employees at the site when it is completed.

    The move comes on the same day Shell held its Capital Markets Day and revealed it would be divesting out of up to 10 countries in its global portfolio.

    The complex is expected to use low-cost ethane from shale gas producers in the Marcellus and Utica basins to produce 1.6million tonnes of polyethylene per year.

    Graham van’t Hoff, executive vice president for Royal Dutch Shell plc’s global Chemicals business, said: “Shell Chemicals has recently announced final investment decisions to expand alpha olefins production at our Geismar site in Louisiana and, with our partner CNOOC in China, to add a world-scale ethylene cracker with derivative units to our existing complex there.”

    https://wpcluster.dctdigital.com/energyvoice/oilandgas/111582/shell-makes-final-investment-decision-pennsylvania-petrochemicals-complex/
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    IHS Report: Shale & Fracking Delivered U.S. Energy Independence


    A new report just issued by Global consulting and research firm IHS, says that Canadian oil sands and U.S. “tight oil” (i.e. shale oil) production have “become the twin pillars of North American energy security.”

    Canada’s oil sands the shale in U.S. represent 95% of the growth in North American oil production from 2009-2015. Over the same time we reduced our dependence on offshore oil imports by 40%.

    Folks, this is HUGE. Fracking of shale is nothing short of a miracle in our country. For Crazy Bernie Sanders to shout, as he did at a rally in California last week, that “We are going to ban fracking all across this country” is insanity itself.

    Can you imagine if that fossil actually became President and signed an Executive Order banning all fracking? Hillary Clinton’s position is essentially the same as Crazy Bernie’s. Loony tunes.

    For the first time since the oil shocks of the 1970s when OPEC began to royally screw us over, we now can tell OPEC where to go pump their oil. You can see why Obama’s decision to deny the Keystone XL Pipeline from Canada is so stupid and damaging to our energy security…

    http://marcellusdrilling.com/2016/06/ihs-report-shale-fracking-delivered-u-s-energy-independence/
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    HP says "phones start ringing"

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    Agriculture

    U.S. lawmakers probe EPA staff over possible bias in herbicide review


    U.S. lawmakers are investigating whether U.S. Environmental Protection Agency staff influenced the World Health Organization's review of glyphosate and its finding that the herbicide probably causes cancer, according to a letter sent to the agency on Tuesday.

    The letter from the U.S. House of Representatives Committee on Science, Space and Technology is part of an ongoing investigation into the agency after the EPA posted and withdrew an internal report that said glyphosate was not cancer causing.

    One question that lawmakers are trying to answer, according to legislative sources, is whether EPA staff allowed personal bias to color the agency's scientific review of glyphosate, the chemical in Monsanto Co's Roundup herbicide.

    Some EPA staff participated in both the U.S. review and the WHO review. While the committee's line of investigation was not clear, lawmakers cited the contradictory findings of the two reviews.

    Those reviews were by the EPA's cancer assessment review committee or CARC and the WHO's cancer arm, the International Agency for Research on Cancer or IARC.

    “Given the apparent contradictions of the CARC and IARC findings for glyphosate ..., the committee has concerns about the integrity" of the WHO review, the role of EPA officials in that review and their influence on the outcome of the EPA study, the committee's letter to the EPA seen by Reuters said.

    According to the letter, lawmakers want congressional staff to interview four top EPA officials who were involved in one or both reviews of glyphosate.


    An EPA spokeswoman said Tuesday the agency had received the letter, was reviewing it and would respond.

    In an earlier letter EPA sent to the committee, the agency said that publishing the cancer assessment review committee's report was an accident and that the cancer review was still ongoing.

    The EPA said it was "currently reviewing our standard operating procedures for the release of documents to avoid the inadvertent release of pre-decisional information in the future."

    The congressional committee began its investigation into the EPA last month after the report by the EPA's cancer assessment review committee became briefly public.

    The report found that glyphosate was "not likely" to be carcinogenic to humans. It also appeared to dispute the IARC report and questioned its analysis.

    The WHO's IARC last year classified glyphosate as "probably carcinogenic to humans."

    The House's Agriculture Committee previously said it too was examining the agency's review of glyphosate and atrazine, another chemical used in agricultural herbicides.

    The Agriculture Committee also wanted to know what steps still needed to be taken to finalize and issue the glyphosate report, which it had expected in July 2015.

    http://www.reuters.com/article/us-usa-glyphosate-epa-idUSKCN0YT2FP

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    K+S says Kassel prosecutors drop pollution case


    German potash and salt miner K+S said on Tuesday that public prosecutors in the city of Kassel, where the company is headquartered, had dropped investigations into suspected water pollution because they had found no evidence of misconduct.

    In a separate case about water pollution which was brought by prosecutors in the town of Meiningen against the company's chief executive and supervisory board chairman among others, a decision on whether to start proceedings remains outstanding.

    The Meiningen court said on Tuesday it would not decide before the end of August whether the case would go to trial.

    http://www.reuters.com/article/us-k-s-wastewater-kassel-idUSKCN0YT1KI
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    Base Metals

    Copper Is Crashing After Huge Spike In Inventories


    Copper futures are tumbling by the most in 2 months (testing back towards 4 month lows) after the biggest two-day increase in copper stockpiles monitored by LME since 2004.

    Copper held in Asian warehouses tracked by the London Metal Exchange jumped 50 percent in the past two days, the most in seven years.

    Supplies are moving to Singapore, South Korea and Taiwan from China, where stockpiles tracked by the Shanghai Futures Exchange have almost halved since mid-March.

    Base metals are still trading at "relatively low levels," Jens Naervig Pedersen, a senior analyst at Danske Bank in Copenhagen, said by e-mail. "Uncertainty over the outlook for global manufacturing is outweighing the positive effect of the lower dollar," he said.

    Whether this is more CCFD unwinds or the hangover from the massive speculative bubble of the last 3 months is unclear but the inventory spike in almost without precedent.

    This plunge in copper prices is especially notable as the reflation trade appears to have got hold of China commodities once again with Dalian up over 3% overnight, Rebar up over 2% and Shanghai Iron Ore up almost 3%.

    http://www.zerohedge.com/news/2016-06-07/copper-crashing-after-huge-spike-inventories
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    Chinese copper imports jump by 19.4 pct in May, Aluminium exports rise


    China's copper imports jumped by 19.4 percent from the same month a year ago to 430,000 tonnes in May, customs data showed on Wednesday, as term shipments remained strong despite higher prices in overseas markets.

    Shipments eased from the month before, however, falling by 4.4 percent from April, data from the General Administration of Customs showed. Arrivals of the metal including refined copper, copper alloys and semi-finished copper products have reached 2.31 million tonnes in the first five months of 2016, up 22.1 percent from a year ago.

    Given that the difference between Shanghai and global copper prices has not been attractive for imports into China, Daniel Hynes, an analyst with ANZ in Sydney, said it was a "reasonable result."

    "I would expect imports to ease in June on seasonal factors, and also the arbitrage has turned negative for Chinese traders."

    China's copper demand tends to be strongest in the second quarter, on pent up demand after the Lunar New Year holiday and before the northern hemisphere summer.

    Shipments into China have remained strong this year, as a weaker dollar boosted the purchasing power for China's copper buyers, swelling exchange and bonded inventories. Exchange stockpiles hit record highs in March. At the same time, China's smelters have ramped up output on more new international mine supply.

    The glut has hurt the demand for spot refined copper, already hampered by a slowing economy in the world's top producer of the metal. Premiums for spot copper in Shanghai's bonded zones reached four-year lows of $45 a tonne this week.

    Chinese traders have shifted copper stocks to Asian warehouses registered with the London Metal Exchange as domestic demand wanes and banks unwound financing deals. Traders expected further increases in coming months.

    China's imports hit a record 570,000 tonnes in March as price differentials between domestic and international markets favoured imports in previous months.

    China exported 420,000 tonnes of unwrought aluminium and aluminium products, including primary, alloy and semi-finished aluminium products, in May, up 5 percent from April's 400,000 tonnes, data showed.

    Aluminium exports were 2.4 percent higher than the same month in 2015. Total exports fell 7.9 percent to 1.9 million tonnes for the first five months of this year.

    http://www.reuters.com/article/china-economy-trade-copper-idUSL4N1901DL
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    Sandfire’s DeGrussa copper/gold mine now solar powered


    Australia’s largest off-grid solar and battery storage facility has been successfully commissioned and has started providing electricity to the DeGrussa copper and gold mine in Western Australia. 

    The solar plant, which was located immediately adjacent to Sandfire Resources’ DeGrussa underground mine and processing plant, was currently generating 7 MW of electricity, which consortium members said on Tuesday would ramp up to 10 MW in the summer months. 

    Testing confirmed that the plant could perform in accordance with contractual specifications and validated the power purchase agreements covering the facility. Continual testing would be completed in June to ensure it could maintain stable operations at 100% generation capacity. 

    Commissioning of the $40-million project started in March following installation of the last of the 34 080 solar photovoltaic panels. The panels have a single-axis tracking system mounted on 4 700 steel posts, enabling the panels to track the sun during the day. A network of low-voltage, high-voltage and communication cables connected the panels to a 6 MW lithium-ion battery storage facility and the existing 19 MW diesel-fired power station at the mine. 

    The solar facility has been integrated with the diesel-fired power station, which Pacific Energy subsidiary KPS owned, which would continue to provide baseload power to the DeGrussa mine. The solar plant would reduce Sandfire’s diesel consumption by about five-million litres a year and would lower carbon dioxide emissions by about 12 000 t, which MD Karl Simich said was a reduction of over 15% based on the miner’s reported emissions for the 2016 financial year. 

    Simich said the completion and successful commissioning of the DeGrussa solar power project was a significant achievement, providing a strong demonstration of the exciting opportunities emerging within the mining industry for the adoption of renewable energy technologies at remote mine sites. “This project has already attracted a significant amount of interest from within the mining industry in Australia with Sandfire receiving inquiries from several of our peers interested in adopting this technology at their mine sites. 

    I would not be surprised to see more facilities like this built over the next few years, as the benefits and potential of solar power become increasingly recognised across the resource sector,” he said. The DeGrussa Solar Power project is owned by French renewable energy firm Neoen, with juwi Renewable Energy responsible for the project development; engineering, procurement and construction, as well as operations and maintenance. 

    The mine’s production guidance for the 12 months to the end of June 30, was expected to be in the range of 65 000 t to 68 000 t of contained copper metal and 35 000 oz to 40 000 oz of contained gold metal. The C1 cost was expected to be about $0.95/lb to $1.05/lb. 

    http://www.miningweekly.com/article/sandfires-degrussa-coppergold-mine-now-solar-powered-2016-06-08
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    Chinese mining giants join forces to create new industry behemoth


    China Minmetals Co, one of the country's largest mining groups by asset value and overseas projects, merged with China Metallurgical Group Co on Thursday, creating a new conglomerate bigger than the asset value of any of the three global giant mining companies-BHP Billiton Ltd, Rio Tinto Group and Vale SA.

    After the merger, China Metallurgical, the largest metallurgical engineering contractor and service provider in the country, will become a wholly owned subsidiary of China Minmetals. The company will no longer be directly administered by the State-owned Assets Supervision and Administration Commission of the State Council.

    Before the merger, China Minmetals had overseas operations in 34 countries and regions.

    The new company will have 240,000 employees, 29 national-level research and development centers and institutes, and different types of mines in Africa, Australia, Latin America and Asia. It will have mining and mine-related construction projects in more than 60 countries and regions.

    He Wenbo, chairman of China Minmetals, said the move would help the new company optimize its business structure and further ensure China's resource security in the current global business and political situation.

    "The new company will deploy more resources and manpower to accelerate the construction pace of developing copper, zinc and nickel mining projects in overseas markets to meet China's demand in these specific mining resources, as well as developing its modern logistics, financial services and equipment manufacturing businesses," He said.

    The combined sales revenue of the two Chinese companies reached 430 billion yuan ($65.36 billion) in 2015.

    The move is part of the ongoing restructuring of State-owned enterprises. The top two high-speed rail makers and two leading shipping companies have already merged since last year.

    Guo Wenqing, former chairman of China Metallurgical and now general manager of China Minmetals, said the merger would help the new company have a more diversified operational model that could take full advantage of the opportunities likely to come from the Belt and Road Initiative, as well as strengthen the company in its competition with established foreign rivals in overseas markets.

    http://en.chinamining.com.cn/Companies/2016-06-06/1465199575d76495.html
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    Steel, Iron Ore and Coal

    China May coal imports climb 5.7pct on month

    China May coal imports climb 5.7pct on month

    China imported 19.03 million tonnes of coal, including lignite in May, slumping 33.54% on year but up 5.7% on month, showed data from the General Administration of Customs (GAC) on May 8.

    The monthly increase in coal imports was mainly caused by reduced domestic supply amid miners’ implementation of government-mandated 276-workday regulation.

    Total value of the imports in May stood at $881.9 million, dropping 3.94% year on year and down 4.6% month on month. That translated to an average price of $46.34/t, dropping $13.2/t from the year prior and down $2.66/t on month.

    Over January-May, China imported a total 86.28 million tonnes of coal, up 3.63% on year; total value of the imports stood at $5.33 billion, slumping 22.7% from the year before.

    http://en.sxcoal.com/0/147476/DataShow.html
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    Indonesia's June HBA thermal coal price up 1.2pct on month

    Indonesia's June HBA thermal coal price up 1.2pct on month

    Indonesia's Ministry of Energy and Mineral Resources has set its June thermal coal reference price, also known as Harga Batubara Acuan (HBA), at $51.81/t FOB, up 1.2% from May, but down 13.06% compared with the same month last year.

    The HBA is a monthly average price based 25% on the Platts Kalimantan 5,900 kcal/kg gross as received assessment; 25% on the Argus-Indonesia Coal Index 1 (6,500 kcal/kg GAR); 25% on the Newcastle Export Index -- formerly the Barlow-Jonker index (6,322 kcal/kg GAR) of Energy Publishing -- and 25% on the globalCOAL Newcastle (6,000 kcal/kg NAR) index.

    It is based on 6,322 kcal/kg GAR coal, with 8% total moisture content, 15% ash as received and 0.8% sulfur as received.

    The HBA for thermal coal is the basis for determining the prices of 75 Indonesian coal products and for calculating the royalties Indonesian producers have to pay for each metric ton of coal they sell locally or overseas.

    http://en.sxcoal.com/0/147426/DataShow.html
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    BHP Billiton sells Indonesian coal assets to Adaro


    BHP Billiton said on Tuesday it has agreed to sell its coal assets in Indonesia to its partner, Adaro Energy, following a slump in prices for metallurgical coal.

    BHP did not disclose the price for its 75 percent stake in IndoMet Coal, which it first flagged was up for sale in April.

    Adaro, however, Indonesia's second largest thermal coal producer, said in a statement the deal was worth $120 million and would "become effective upon the fulfilment of requirements in the share sale agreement, including necessary approvals from the Government of the Republic of Indonesia."

    The amount is well below the $335 million Adaro paid for a 25 percent stake in IndoMet in 2010. Analyst had said in April that BHP would be lucky to get $200 million for its stake due to regulatory uncertainty in Indonesia and the sharp slump in coal prices.

    "After a detailed review of IndoMet Coal, we concluded that although the project could support a larger scale development, BHP Billiton has a range of other growth options in the portfolio that are more attractive for future investment," IndoMet Coal asset president James Palmer had said in a statement earlier in the day.

    IndoMet holds seven coal contracts of work in Central and Eastern Kalimantan, including the 1 million tonnes a year Haju mine, which started producing last year.

    Haju made up less than 2 percent of BHP's metallurgical coal output in the first nine months of its current fiscal year.

    http://www.reuters.com/article/us-bhp-billiton-adaro-energy-idUSKCN0YT0VA
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    Iron ore jumps to two-week high


    On Tuesday the Northern China benchmark iron ore price advanced more than 3% to $52.30 per dry metric tonne, a more than two week high according to data supplied by The Steel Index.

    The steelmaking raw material is down sharply since trading within shouting distance of the $70 mark in mid-April but is back in bull territory for 2016 with a 22% rise since the beginning of the year and a 40% rebound since hitting near-decade lows in December.

    The massive cost deflation in the past two years, helped by lower oil prices and freight rates, as well as a depreciation in producers’ currencies, may have come to an end

    Iron ore's fightback comes despite data showing exports from top supplier Australia nearing record levels and higher port stocks in China pointing to weakening fundamentals for the commodity.

    Shipments from Port Hedland in the Pilbara region of West Australia increased 4% from last year and totalled 39.4 million tonnes in May – not far off March's all-time record of 39.5 million. Cargoes from world number three and four iron ore producers BHP Billiton and Fortescue Metals Group use the facility which is responsible for the bulk of the seaborne trade.

    Data released last week showed stockpiles of iron ore at ports in China, responsible for consuming nearly three quarters of seaborne cargoes, climbing back above 100 million tonnes to levels last seen at the end of 2014.

    Analysts at Citigroup upgraded their forecasts for iron saying Chinese demand may "surprise to the upside", but the investment bank still expects a decline to an average of $49 a tonne this year and $42 next year before falling to $38 in 2018. Previously Citigroup predicted a retreat to below $40 as soon as the end of this year.

    The commodity may also find some support from a potential increase in miners’ production costs according to the bank:

    The “massive” cost deflation in the past two years, helped by lower oil prices and freight rates, as well as a depreciation in producers’ currencies, may have come to an end.

    http://www.mining.com/iron-ore-jumps-two-week-high/
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    Rio Tinto to buy back up to $3bn in debt


    Diversified mining company Rio Tinto is further reducing its debt, announcing this week that it would repurchase up to $3-billion of its US dollar-denominated notes. 

    The company has launched cash tender offers to buy back notes due in 2018, 2020, 2021 and 2022. 

    This is Rio Tinto’s second bond buyback in as many months, with the company in April having bought back $1.5-billion of its 2017 and 2018 notes. 

    Debt reduction is high on the priority list of major diversified miners. Rio Tinto has sold about $4.7-billion in assets since the start of 2013.

    http://www.miningweekly.com/article/rio-tinto-to-buy-back-up-to-3bn-in-debt-2016-06-08
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    Protectionism Goes Nuclear.


    A huge global trade war is on the horizon, regardless of whether Hillary or Trump wins the election.

    The die is cast: US Steel Given Green Light to Seek China Import Ban.

    The US has given the go-ahead for the country’s largest steel producer to seek a ban on imports from Chinese rivals, in the first known case in which trade sanctions could be used in retaliation for alleged China government-backed hacking of commercial secrets.

    In a decision last week the US International Trade Commission gave the go-ahead for the case to proceed, setting the stage for a legal battle that experts say will probably take more than a year for an administrative judge to decide.

    This timeframe could lead to a decision related to arguably the US’s most important commercial relationship early in the next president’s first term. Under the law, US presidents are given 60 days to block ITC decisions on Section 337 cases, although according to the ITC “such disapprovals are rare”.

    “We strongly believe that Chinese steel producers have engaged in illegal unfair methods of competition, which have created a force with which no market economy can compete,” Mario Longhi, the company’s president and CEO, said in a statement welcoming the ITC decision. “We remain confident that the evidence will prove the Chinese steel producers engaged in collusion, theft and fraud and we will aggressively seek to stop those responsible for these illegal trade actions.”

    Trade experts say that the case also represents the potential escalation of what has been a creeping protectionism in recent years with steel a growing target of anti-dumping cases.

    But a wholesale ban on US imports of Chinese steel would be materially different and could set a protectionist tone for the next US presidency, said Simon Evenett, a professor of international trade at the University of St Gallen in Switzerland, who oversees the Global Trade Alert, a monitoring service for protectionist measures.

    “The big thing is really the potential scale of this case versus the pin pricks that we have seen unleashed over the past nine months,” Mr Evenett said.

    “This should be setting off alarm bells,” he said. “It is really a nuclear option.”

    http://www.zerohedge.com/news/2016-06-07/obama-administration-protectionism-goes-nuclear-seeks-total-ban-chinese-steel

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    China steel exports rise in May, Iron ore imports up


    Chinese steel exports rose 3.7 percent to 9.42 million tonnes in May from the previous month, customs data showed on Wednesday, as steel mills continued to ship output abroad in sales that have raised global trade tensions.

    China also boosted its iron ore imports by 3.4 percent in May to 86.75 million tonnes from the previous month, the highest since December. Shipments climbed 9.1 percent to 412.15 million tonnes in the first five months of the year, customs data showed.

    Chinese steel mills accelerated production amid a seasonal pick-up in demand and higher prices, boosting appetite for the steelmaking ingredient, with imports staying above 80 million tonnes a month this year apart from the holiday season of February.

    Total steel exports rose 6.4 percent to 46.28 million tonnes in the first five months of the year, according to data from the General Administration of Customs.

    China's robust exports have come under fire from global rivals, who have accused it of dumping cheap exports after a slowdown in demand at home.

    "The pushback to steel exports has been more from the U.S. and Europe which only represent less than 10 percent of total exports," said Daniel Hynes, commodity strategist at ANZ.

    "We're still seeing strong exports to the rest of Southeast Asia and obviously the Chinese mills have a competitive advantage into this region," said Hynes, who sees China's total shipments again topping 100 million tonnes this year.

    China's steel exports reached a record 112 million tonnes in 2015.

    South Korea is the top market for Chinese steel, with shipments reaching 13.5 million tonnes last year, compared with 2.35 million tonnes to the United States, according to data compiled by MEPS consultancy.

    The trade dispute over steel escalated after the U.S. regulators launched on investigation into complaints by United States Steel Corp that Chinese competitors stole its secrets and fixed prices.

    Steel surged 80 percent in late April from decades-low prices hit in December last year, prompting steel mills to ramp up production and some zombie mills to resume output, complicating government efforts to cut overcapacity.

    China has committed to curbing its steel capacity and winding down weak state enterprises by taking new measures and strengthening global coordination.

    http://www.reuters.com/article/china-economy-trade-steel-idUSL4N18Y2MT

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