Mark Latham Commodity Equity Intelligence Service

Thursday 17th March 2016
Background Stories on www.commodityintelligence.com

News and Views:

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    Macro

    China Adopts New Urbanization Guidelines


    Last week, China’s State Council and the Communist Party’s Central Committee released a new set of guidelines for strengthening urban planning and development. These guidelines were borne out of recommendations from the Central Urban Work Conference this past December reflecting the nation’s new emphasis on urban sustainability. The last such meeting was held in 1978 when China’s cities were home to less than 20 percent of its population. By contrast, that number today is 57 percent.

    This announcement represents a major step forward for urban development in China. For the past few decades, city planning was based on a car-dependent, Soviet model dominated by superblocks, wide roads and single-use districts. By comparison, the new guidelines prioritize walking and public transit options over car use, preserve historical and cultural characteristics, and grow cities only within the means of their natural resources.

    In 2008, for the first time in human history, more than half of the global population was living in urban areas, and the United Nations predictstwo-thirds of the world’s population, about 6 billion people, will be city-dwellers by 2050. As the world’s most populous nation, China’s urban development will set the tone as urban populations continue to grow worldwide.

    The comprehensive principles included in China’s new guidelines range widely in scale, covering a city’s entire geographic boundary down to its streets, blocks and buildings. They also offer guidance on municipal water, waste and energy systems, which are important at all scales. Five of the key principles included in the guidelines:

    1. “Narrow roads, dense street networks”
    2.  Enforcing urban growth boundaries
    3.  Expanding mixed-use development
    4.  Increasing use of public transit
    5.  Focusing on historical preservation and city character

    http://www.triplepundit.com/2016/03/china-adopts-new-urbanization-guidelines/?utm_campaign=Contact+SNS+For+More+Referrer&utm_medium=twitter&utm_source=snsanalytics

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    China Jan-Feb power consumption up 2pct on year

    China Jan-Feb power consumption up 2pct on year

    China’s power consumption rose 2% on year to 876.2 TWh over January-February, showed data released by the National Energy Administration on March 16.

    In the same period, power consumption by the residential segment was 140.5 TWh, up 11.8% on year.

    For the non-residential segment, the primary industries – mainly the agricultural sector – used 11.7 TWh over January-February, rising 6.7% from the previous year.

    The secondary industries – mainly the industrial sector, consumed 591.5 TWh, dropping 2.1% on year.

    Power consumption by tertiary industries – mainly the service sector – increased 11.9% on year to 132.5 TWh.

    Over January-February, the average of utilization of power generating units (annual capacity over 6 MW) across the country was 575 hours, 54 hours lesser than the same period last year.

    Of this, hydropower plants logged average utilization of 445 hours, an increase of 72 hours; the average utilization of thermal power plants decreased 83 hours on year to 656 hours.

    In addition, China added 22.28 GW of power generating capacity in the same period, including 0.99 GW of new hydropower and 13.95 GW of new thermal power capacity.

    In February, China’s power consumption stood at 381.2 TWh, rising 4.0% on year, said the NEA.

    http://en.sxcoal.com/0/142810/DataShow.html

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    Amaral get Petrobras corruption plea deal


    Brazil's Supreme Court has accepted a plea agreement offered to Senator Delcidio do Amaral in which the former ally of the country’s President Dilma Rousseff and her predecessor Luiz Inacio Lula da Silva accuses the two leaders of having known about corruption at state-owned Petrobras.

    http://www.upstreamonline.com/incoming/1426985/amaral-get-petrobras-corruption-plea-deal
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    Rio Tinto names Walsh’s successor


    Diversified major Rio Tinto on Thursday announced that copper and coal CEO Jean-Sébastien Jacques would succeed CEO Sam Walsh when he retires in July this year. 

    To ensure a smooth transition, Jacques would join the board and become deputy CEO with immediate effect. “Jacques is a very experienced executive with a demonstrated track record and brings a unique blend of strategic and operational expertise. He has run complex operations and projects across five commodities and five continents. 

    Jacques is a highly-regarded leader who shares Rio Tinto’s strong values and has embraced its culture,” said Rio chairperson Jan du Plessis on Thursday. Du Plessis noted that the appointment of Jacques was the culmination of a comprehensive and deliberate execute succession process. 

    Jacques for his part has said that safety across Rio’s global operations would remain a key focus. “Rio Tinto is a world-class company with some of the best tier-one assets and people in the industry. It is an honour and a great privilege to be given the opportunity to lead the company as we continue to develop the business and pursue the delivery of value for shareholders,” he added. 

    Meanwhile, Chris Salisbury has been appointed acting CEO of the copper and coal product group and would attend the Rio executive committee in this capacity.

    http://www.miningweekly.com/article/rio-tinto-names-walshs-successor-2016-03-17
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    Gold bull.

    Gains in Comex futures for delivery in April was inspired by a US Federal Reserve interest rate decision to keep rates on hold. Gold touched a near six-year low of $1,049.60 December 17 but 2016's bull run has seen the precious metal gain just over 20% since then. A bull market is a 20% upward move from a low.

    Any indications that the Fed is showing less enthusiasm for rate hikes is bullish for gold, as we saw today

    While the announcement was expected the statement by the central bank indicated only one more rate hike this year compared to four previously. The central bank raised rates from zero in December, the first such move in nine years. The Fed statement wasn't only cautious about the health of the US economy but also warned “global economic and financial developments continue to pose risks”.

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    Oil and Gas

    Libyan oil production drops to 295,000-350,000 bpd in past two weeks -NOC


    Libya's oil production dropped to between 295,000 and 350,000 barrels per day for the past two weeks because of long-standing power supply problems, a spokesman for the National Oil Corporation said on Wednesday.

    Mohamed al-Harari said shortages from the public electricity network had affected oil supplies from the eastern Sarir and Messla fields, but he expected production to recover soon to between 360,000 and 370,000 bpd.

    Libya's oil production has fallen from a high of more than 1.6 million bpd in 2011, amid political chaos and armed conflict in the OPEC member country.

    http://www.reuters.com/article/libya-energy-idUSL5N16O5CP
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    Saudi Aramco, Shell plan to break up Motiva, divide up assets


    Royal Dutch Shell and Saudi Aramco announced plans on Wednesday to break up Motiva Enterprises LLC in a deal that ends a partnership of nearly two decades and hands control of the biggest U.S. refinery to the Saudi state oil giant.

    News that the two energy companies will divide assets in their oil refining and marketing joint venture had been expected by many as they navigated an often-frayed relationship where their respective interests sometimes diverged.

    An early sign of a pending breakup emerged last summer when Motiva announced plans to set up its own oil products trading operation separate from Shell. The desk started up in January.

    The divorce also comes as the Saudi government considers selling shares in the world’s largest oil firm.

    Abdulrahman Al-Wuhaib, senior vice president of downstream at Saudi Aramco, said in a statement on Wednesday that the joint venture formed in 1998 served the partners' downstream business objectives "very well for many years."

    "It is now time for the partners to pursue their independent downstream goals," he said.

    A U.S. spokesman for The Hague-based Royal Dutch Shell said the breakup and split of Motiva's assets were consistent with Shell's plans to simplify its global portfolio.

    http://www.reuters.com/article/us-usa-motiva-aramco-shell-idUSKCN0WI2XC
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    Kosmos to pursue LNG project as it ups resource estimate offshore Mauritania


    Kosmos Energy’s Ahmeyim-2 appraisal well has successfully delineated the Ahmeyim and Guembeul gas discoveries offshore Mauritania and Senegal.

    Located in Mauritanian waters, approximately 5 km northwest, and 200 m downdip of the basin-opening Tortue-1 discovery well in approximately 2,800 m of water, Ahmeyim-2 was drilled to a total depth of 5,200 m.

    As anticipated, in the Lower Cenomanian and Albian, Ahmeyim-2 penetrated the seismic-inferred gas-water contacts, defining the field limit and extending the productive field area from approximately 50 km2 to 90 km2. Furthermore, the well confirmed significant thickening of the gross reservoir sequences down-structure and importantly, within the Lower Cenomanian, static fluid pressure communication between the Tortue-1, Guembeul-1 and Ahmeyim-2 wells.

    The well encountered 78 m of net gas pay in two excellent quality reservoirs, including 46 m in the Lower Cenomanian and 32 m in the underlying Albian. These results demonstrate field-wide reservoir continuity and indicate Tortue West is a large, simple gas field.

    With the integration of the Ahmeyim-2 well results, Kosmos’ Pmean gross resource estimate for the Tortue West structure has increased to 15 Tcf from 11 Tcf as a result of extending the field area in the Cenomanian and the Albian. Accordingly, the Pmean gross resource estimate for the Greater Tortue Complex has increased to over 20 Tcf from 17 Tcf.

    “Ahmeyim-2 is our fourth successful exploration and appraisal well and continues our 100% success rate in the outboard Cretaceous petroleum system offshore Mauritania and Senegal, further demonstrating that Kosmos has opened a world-class hydrocarbon province. With this well, we believe we have proven sufficient gas resource to underpin a world-scale LNG project in the Tortue West structure alone. The combination of the resource size and quality continue to support our view that Tortue is a competitive source of LNG and we are working towards commercialization,” said Andrew G. Inglis, chairman and CEO.

    http://www.worldoil.com/news/2016/3/16/kosmos-to-pursue-lng-project-as-it-ups-resource-estimate-offshore-mauritania

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    U.K. Cuts Tax on North Sea Drillers Squeezed by Slump in Oil


    The U.K. cut taxes on the North Sea oil and gas industry as Chancellor of the Exchequer George Osborne seeks to ease the strain on producers squeezed by plunging oil prices.

    The supplementary charge for the oil and gas industry fell by half to 10 percent from 20 percent, bringing the overall corporate tax rate to 40 percent from 50 percent, Osborne announced in his budget Wednesday. The Petroleum Revenue Tax, which stood at 35 percent, will be scrapped altogether, he said. These changes will be backdated, starting from January of this year.

    The decision comes as a slump in Brent oil prices by more than 60 percent since mid-2014 has made much of the production in the U.K.’s North Sea basin -- once the Treasury’s “golden goose” -- uneconomic as costs escalate at aging fields.

    The news is welcome, Alan McCrae, U.K. head of energy tax at PricewaterhouseCoopers LLP, said by e-mail. “This is aimed at stimulating investment at a time when the industry desperately needs it.”

    Lobby group Oil & Gas U.K. has forecast a 22 percent slump in capital expenditure in the region this year as dwindling revenue forces operators to retrench. Some producers have suspended projects to save cash.

    While Oil & Gas U.K. had asked for a bigger cut of 20 percentage points in the main tax rate, it had lobbied to see the the Petroleum Revenue Tax abolished.

    Shares of independent oil companies operating in the U.K. North Sea rose on the news. EnQuest Plc climbed as much as 3.5 percent, Cairn Energy Plc jumped as much as 4.5 percent and Premier Oil Plc surged 8.2 percent.

    http://www.bloomberg.com/news/articles/2016-03-16/u-k-cuts-tax-on-north-sea-drillers-squeezed-by-slump-in-oil
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    Gulf Keystone making ‘strenuous efforts’ to continue as going concern


    The directors of Gulf Keystone Petroleum, the oil producer active in the Kurdistan Region of Iraq, have warned that low oil prices, the febrile political situation in the region and other problems related to operating in the area create a “material uncertainty” that casts “significant doubt” on the company’s ability to continue as a going concern.

    But in a mixed full year results statement, they also state they have a “reasonable expectation” that Gulf Keystone has “adequate resources to continue in operational existence for the foreseeable future”, as they take action to reduce costs and continue to discuss a potential restructuring with lenders.

    London-listed Gulf Keystone is one of several oil producers active in the Kurdistan region that have been trying to weather a cocktail of difficulties, also including securing regular payments from the semi-autonomous region’s government to export crude.

    Gulf Keystone last year hired advisers to review its options, including a potential sale, while it also went to bondholders to ask for extra breathing space.

    In its full year results published on Thursday, Gulf Keystone said interest over a possible sale, or acquisition of certain assets, had been “expressed by various parties” but given the weak oil price environment and security concerns in Iraq, “a transaction is unlikely in the near term”. Discussions with bondholders, meanwhile, continue.

    Gulf Keystone stressed:

    The Company continues to actively review options to secure new funding and restructure the Company’s balance sheet, to ensure it is able to continue as a going concern.

    The company has been cutting costs and managed to reduce its operating costs last year to $4.5 per barrel of oil from $5/bbl previously. Production last year reached 11.1m barrels of oil, a 71 per cent increase on 2014, which averaged out to 30,500 barrels of oil per day.

    Revenues improved to $86.2m from $38.6m a year earlier while net losses narrowed to $135m from $248.2m. Its cash balance at March 16 was $50.6m, up from $43.6m at the end of December.

    https://next.ft.com/content/eceb02fe-babb-3c65-b4aa-2f42daed70ca
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    Summary of Weekly Petroleum Data for the Week Ending March 11, 2016


    U.S. crude oil refinery inputs averaged 16.0 million barrels per day during the week ending March 11, 2016, 85,000 barrels per day more than the previous week’s average. Refineries operated at 89.0% of their operable capacity last week. Gasoline production increased last week, averaging over 10.0 million barrels per day. Distillate fuel production increased last week, averaging 4.8 million barrels per day.

    U.S. crude oil imports averaged 7.7 million barrels per day last week, down by 355,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged about 8.0 million barrels per day, 10.0% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 716,000 barrels per day. Distillate fuel imports averaged 258,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 1.3 million barrels from the previous week. At 523.2 million barrels, U.S. crude oil inventories are at historically high levels for this time of year. Total motor gasoline inventories decreased by 0.7 million barrels last week, but are well above the upper limit of the average range. Finished gasoline inventories increased while blending components inventories decreased last week. Distillate fuel inventories decreased by 1.1 million barrels last week but are above the upper limit of the average range for this time of year. Propane/propylene inventories rose 0.2 million barrels last week and are well above the upper limit of the average range. Total commercial petroleum inventories increased by 1.8 million barrels last week.

    Total products supplied over the last four-week period averaged over 19.7 million barrels per day, up by 1.8% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged 9.4 million barrels per day, up by 6.4% from the same period last year. Distillate fuel product supplied averaged about 3.7 million barrels per day over the last four weeks, down by 7.7% from the same period last year. Jet fuel product supplied is up 1.8% compared to the same four-week period last year.

    CUSHING INVENTORIES ROSE 545,000 BARRELS, EIA SAYS

    http://ir.eia.gov/wpsr/wpsrsummary.pdf
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    US Oil production falls 10K bbl/d


                                                Last Week   Week before    Last Year

    Domestic Production '000....... 9,068             9,078            9,419

    http://ir.eia.gov/wpsr/overview.pdf
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    Petrobras to snap up majority of Sabine Pass LNG commissioning cargoes


    Petrobras is the most likely buyer of up to seven of the eight to ten commissioning cargoes from Cheniere’s Sabine Pass LNG export terminal in Louisiana.

    Cheniere’s commissioning cargoes have a high ethane content, which is suited for the Brazilian facilities that can fraction the liquids before regasification.

    The gas being used for the commissioning cargoes comes from Sabine Pass LNG storage tanks. This means it is old LNG and the boil off gives it a higher ethane content, a source close to Cheniere told Platts.

    Lithuania, that was earlier reported as the first destination for the Sabine Pass’ inaugural cargo does not have the capability to handle the high ethane levels.

    Cheniere shipped the first cargo to Bazil on February 24. However, the vessel that was initially headed for the Bahia regasification terminal in All Saints’ Bay, Salvador, in the state of Bahia wasdiverted to the Guanabara Bay LNG terminal, near Rio de Janeiro.

    Unlike the Bahia regasification terminal, Petrobras has the infrastructure to handle the high ethane cargo at the Guanabara Bay facility.

    http://www.lngworldnews.com/petrobras-to-snap-up-majority-of-sabine-pass-lng-commissioning-cargoes/
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    Alternative Energy

    SunEdison and TerraForm delay filing reports again, shares slide


    Solar company SunEdison Inc said it had delayed filing its annual report beyond the extended due date after identifying material weaknesses in its financial reporting controls, sending its shares down 20 percent in premarket trading on Wednesday.

    SunEdison "yieldco" TerraForm Power Inc, whose shares were down more than 14 percent, also said it had delayed filing its annual report for the second time.

    Both reports were due on Tuesday.

    SunEdison said earlier this month it had delayed filing its annual report while an internal investigation was conducted into its financial position.

    That investigation has not been completed, SunEdison said on Wednesday.

    The latest delay is mainly the result of problems with newly installed financial information systems, the company said.

    TerraForm said on Wednesday it needed to assess whether the IT-related problems and investigation at SunEdison could affect its own financial reporting.

    However, the company said it had also identified material weaknesses in internal controls, including processes for validating revenue recognition.

    TerraForm is one of two SunEdison "yieldcos" - dividend-paying units that hold solar, wind or other power assets for the parent company.

    The companies said they had not yet identified any material misstatements or need for restatements of their financial statements or disclosures.

    http://www.reuters.com/article/sunedison-inc-results-idUSL3N16O3SR
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    Climate change, energy is back on EU summit agenda-draft


    EU leaders meeting in Brussels this week will debate the Paris Agreement on climate change, a draft EU text showed, after officials previously said the migrant crisis had knocked it off the agenda.

    EU officials, speaking on condition of anonymity, said European Council President Donald Tusk, who will chair the summit, had spent a week negotiating a compromise text that they believed the big member states would agree on.

    The text, seen by Reuters, "underlines the need for the European Union and its member states to be able to ratify the Paris Agreement as soon as possible".

    It also says the EU is committed to a target to cut greenhouse gas emissions domestically by at least 40 percent by 2030, as agreed at political level in October 2014.

    The target has become controversial as some member states and environment campaigners have interpreted the agreement of a global deal in Paris as a reason to push for the EU to agree a more ambitious goal.

    But EU officials say the European Commission is concerned that reopening the discussion on the 2030 target would derail a difficult debate this year on how to share out that goal among the 28 member states, including Poland, whose economy depends on coal.

    Environment ministers, who met in Brussels earlier this month, said the EU was not doing enough to counter climate change. A letter voicing their concern was sent on their behalf to Tusk on Monday, EU officials said.

    Segolene Royal, France's environment minister, said earlier this month that the Paris Agreement would be on the agenda of summit talks on Thursday and Friday, adding French President France Hollande would seek backing from fellow leaders.

    But on Monday, three officials speaking on condition of anonymity said the need to focus on migration meant climate and energy would no longer be discussed, although they said France was maintaining pressure for the issue to be raised.

    As host of the Paris talks, France has led the drive for Europe to maintain climate leadership ahead of a meeting in New York next month to formally open the Paris Agreement for signatures.

    With climate, energy also re-enters the talks. The draft summit text urges law-makers "to proceed with work on the proposals to reinforce the EU energy security as a matter of priority".

    http://www.reuters.com/article/europe-migrants-climatechange-idUSL5N16N5LA
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    Agriculture

    Israel Chemicals cuts costs on weak potash market, to pay dividend


    Israel Chemicals (ICL) said on Wednesday it was reducing capital spending and planned to cut 2016 costs by another $50 million due to a weak global potash market, but still decided to pay a fourth-quarter dividend.

    ICL, one of the three largest suppliers of the crop nutrient potash to China, India and Europe, had previously said it would cut costs by $350 million this year versus 2013.

    It said on Wednesday it planned to take steps to generate an additional $50 million in cash flow through improved working capital and other measures. ICL also intends to limit capital spending excluding acquisitions to $650 million a year over the next few years, down from a previous goal of $700-$800 million.

    As a result, it said, the company's debt levels should decline moderately starting this year.

    "In light of the significant deterioration in the potash business environment and the continued weak outlook for the potash business, (ICL) has adopted a number of additional measures to strengthen its financial position and results," ICL said.

    It said it would pay a fourth-quarter dividend of $67 million, or 5 cents a share.

    ICL, which has exclusive permits to extract minerals from the Dead Sea, last month said it earned 14 cents per diluted share in the October-December period.

    ICL also said it had formed a search committee to find a replacement for its chairman after Nir Gilad said last month he would step down in September after nine years in office. Candidates will be chosen by May 1 and shareholders will vote for a new chairman in August.

    ICL separately said it was considering a public bond offering in Israel but did not provide further details other than filing a shelf prospectus with local authorities. Standard & Poor's Maalot rated the potential bonds 'AA" for up to 1.25 billion shekels.

    http://www.reuters.com/article/icl-costs-idUSL5N16O4GO
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    India 'not scared' if Monsanto leaves, as GM cotton row escalates


    U.S. seed company Monsanto is welcome to leave India if it does not want to lower prices of genetically modified cotton seeds as directed by the government, a minister said on Wednesday, in a sign the rift between New Delhi and the firm is widening.

    The comments come as Prime Minister Narendra Modi's nationalist government expects to develop its own genetically modified (GM) cotton varieties early next year to end Monsanto's dominance; it controls over 90 percent of cotton seed supply.

    New technologies are critical to lifting India's poor farm productivity, although even if India did develop a home-grown GM cotton variety in 2017, it would struggle to sustain a program that needs to refresh seeds every decade or so, experts warned.

    The introduction of Monsanto's GM cotton seeds in 2002 helped turn India into the biggest producer of the fiber, while other crops like pulses continue to suffer as transgenic food is banned and local research has stalled.

    Despite the gains GM cotton brought for more than 7 million cotton farmers in India, some of them and their associations, including one affiliated to Modi's ruling party that promotes self-reliance, have complained Monsanto overprices its products.

    Under pressure to mollify farmers hit by three straight crop failures due to bad weather, Modi's government has imposed a cut of around 70 percent in royalties that local firms pay Monsanto for its cotton technology.

    India's anti-trust regulator is also investigating whether the company misused its near-monopoly to jack up rates. A Monsanto joint venture with a local company says it is confident the allegations will be proved groundless.

    Monsanto has taken the government to court over the royalty.

    It said in a statement this month it would have to reevaluate its India business, because it was difficult to bring in new technologies in an "environment where such arbitrary and innovation-stifling government interventions make it impossible to recoup research and development investments ..."

    But Sanjeev Kumar Balyan, the junior agriculture minister, told Reuters the government was trying to rectify what he called past mistakes that allowed a foreign company to dictate seed prices and stifled local crop research.

    "It's now upon Monsanto to decide whether they want to accept this rate or not," Balyan said. "If they don't find it feasible, then they are free to take a call. The greed (of charging) a premium has to end.

    "We're not scared if Monsanto leaves the country, because our team of scientists are working to develop (an) indigenous variety of (GM) seeds," he said.

    A Monsanto spokesman declined to comment beyond the statement, but analysts said it was unlikely to withdraw from India lightly given the huge size of the market and its strategic importance now that China has bid to snap up the company's biggest rival, Syngenta (SYNN.S), for $43 billion.

    Monsanto India is the firm's only listed unit outside its home base, and it has been selling seeds and herbicide in the country for more than four decades.

    Globally the company has cut its earnings forecast as seed prices fall amid lower farm spending, and any climb-down in India could lead to demands for price cuts in other markets.

    Monsanto warned in January that its international GM traits businesses could face unpredictable regulatory environments that may be highly politicized.

    "The decision of the government to override contracts signed by private entities sends a negative signal when the prime minister is going around the world seeking private investment," said Ashok Gulati, an agricultural economist who formerly advised the government.

    He said that although India might be able to develop its own GM cotton seeds based on Monsanto's current Bollgard II technology, their efficacy will drop sharply in 4-5 years as pests they are meant to kill become resistant.

    "What will we do then? Invite Monsanto again?" he asked, adding that developing new technology would require expensive and extensive research.

    http://www.reuters.com/article/india-monsanto-idUSL3N16O2K4

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    Base Metals

    China copper: CIF import premium slips further on high stocks


    The spot import premium for London Metal Exchange-registered brands of copper cathode on a CIF China basis has fallen further, pressured by high stocks in Shanghai Futures Exchange warehouses and little import interest on the lack of arbitrage opportunity, industry sources said Wednesday.

    Platts lowered its CFR China copper premium assessment to $60-$75/mt Wednesday, down from $70-$85/mt last week on lower indications heard.

    A Southeast Asian trader indicated the CIF China premium for copper at $65-$75/mt, down from $80-$85/mt last week, while an east China-based trader heard around $70, down $15-$20/mt on the week.

    "Yes, the CIF China premium is down mainly due to rising stocks in the country. When the Chinese yuan devalued in November-December 2015, there was a good profit margin from buying LME copper at cash price and selling it at the SHFE. China's copper imports were up, resulting in the high stocks volume in SHFE warehouses. In addition, Chinese domestic demand is still weak as it is not the buying season yet," the eastern Chinese trader added.

    Several Chinese sources also heard of the further fall in the CIF China premium for copper as copper stocks continued to rise in the country.

    A north China-based analyst heard it at $60-$70/mt, compared with $70/mt last week; an east China-based industry source heard at $60-$70/mt, down from $85-$90/mt the previous week; and a north China-based industry source heard an average of $65/mt, down about $5/mt week-on-week.

    "There's no arbitrage opportunity at the moment. In fact, there's an import-related loss of Yuan 800-1,000/mt," added the northern Chinese analyst.

    The eastern Chinese industry source and the northern Chinese industry source noted that current copper prices had generally stayed on the high side but were rather rangebound.

    "China's recent weak industrial output statistics have dampened copper prices. But a weaker dollar has given copper prices some support. The dollar has weakened last night, pending on the announcement from the US Federal Open Market Committee's meeting due to end later today," the eastern Chinese industry source added.

    China's value-added industrial output gained 5.4% on the year in the first two months of 2016, the lowest monthly growth since November 2008, official data showed Saturday.

    The 5.4% growth retreated from the 6.8% increase in the Jan-Feb period of 2015 and the 5.9% in December 2015. It was also lower than the 6.1% annual gain seen in 2015, according to the National Bureau of Statistics.

    The weekly SHFE stocks totaled 350,138 mt on Friday, up 14.8% on the week, while LME copper stocks were 174,175 mt, down 6.7%.

    http://en.chinamining.com.cn/News/2016-03-17/1458177958d75684.html

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    Steel, Iron Ore and Coal

    Shaanxi Feb coal output slumps 49.7pct on month


    Shaanxi province, one of China’s major coal production bases, produced 18.31 million tonnes of raw coal in February, slumping 49.71% from January and down 26.2% on year, said the Shaanxi Administration of Coal Mine Safety on March 16.

    Stagnant demand from utilities through the Spring Festival was considered the vital factor behind the month-on-month decline, analysts said.

    Coal output over January-February fell 19.51% from the previous year to 54.74 million tonnes.

    Of this, key state-owned mines -- owned by the central and provincial governments -- produced 33.39 million tonnes of raw coal, down 2.82% from the year prior, including 14.57 million tonnes from Shenhua Shendong Coal Group, down 13.06% on year.

    Coal output of local mines -- owned by the prefecture and lower-level governments and private mines -- stood at 21.34 million tonnes, dropping 38.27% on year.

    Total coal sales during the same period reached 53.49 million tonnes, dropping 20.51% on year, with sales in February falling 48.52% on month and down 27.5% on year to 18.18 million tonnes.

    Over January-February, key state-owned mines contributed 32.29 million tonnes of coal sales, including 13.44 million tonnes from Shenhua Shendong; local mines contributed 21.2 million tonnes.

    By end-February, coal stocks of coal producers in the province slid 2.3% on year and down 0.37% on month to 3.51 million tonnes.

    Coal transports of the province in the month were 6.45 million tonnes, slipping 4% from a year ago.

    http://en.sxcoal.com/0/142804/DataShow.html
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    UK Jan thermal coal imports plunge 77pct on year


    The UK imported 680,060 tonnes of thermal coal in January, plunging 77% year on year and down 39% from December to a seven-month low, due to lower shipments from most origins, according to the latest customs data.

    The last time imports were below 1 million tonnes was September last year. The UK has reduced its coal imports since doubling its Carbon Price Support mechanism in April 2015, decreasing coal’s competitiveness.

    In 2015, the country imported 17 million tonnes of thermal coal, 48% lower on the year.

    Thermal coal imports are expected to be even lower in 2016, with a number of coal-fired power plants facing closure, with five UK coal-fired plants closing during the November 2015-March 2016 period alone.

    Colombia delivered 433,523 tonnes to the UK in January, falling 38% on the year and 41% lower than December’s volume to a four-month low.

    During January, the UK imported 166,152 tonnes of Russian thermal coal, dropping 89% from the same month in 2015 and down 41% on the month, also at a four-month low.

    No coal was received from the US or South Africa in January.

    http://en.sxcoal.com/0/142805/DataShow.html
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    Peabody flags bankruptcy risk after skipping interest payment


    Peabody Energy Corp, the largest U.S. coal producer, said it may have to seek bankruptcy protection as it did not have enough funds to continue operations.

    Falling demand for coal, tough environmental controls and cheaper natural gas have pushed several big coal miners, including industry No. 2 Arch Coal Inc, into bankruptcy in the past year.

    Peabody, which flagged the bankruptcy risk under the "risk factors" section of a regulatory filing on Wednesday, said it decided to skip a $71.1 million interest payment on its senior notes, kicking off a 30-day grace period. 
    The company, which had a total debt of $6.3 billion at the end of 2015, said there was "substantial doubt" about its ability to continue as a going concern.

    Peabody's shares have crashed from their record high of more than $1,300 in 2008 to $4.01 as of Tuesday's close, reflecting the downturn in the coal market over the past few years.

    The stock was down 30 percent at $2.80 before the opening bell on Wednesday.

    Peabody's lenders are pushing it to restructure its debt through bankruptcy but the company has also been pursuing bond exchanges.

    As of Dec. 31, the company had cash and cash equivalents of $261.3 million.

    St. Louis-based Peabody's efforts to raise funds through asset sales hit a roadblock last month. A deal to raise $358 million in cash by selling coal mines in New Mexico and Colorado was temporarily shelved after the buyer failed to secure financing.

    http://www.reuters.com/article/peabody-energy-bankruptcy-idUSL3N16O3N3
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    Vattenfall gets one binding bid for German lignite assets


    Sweden's Vattenfall has received a binding offer for its lignite assets in Germany, while one potential buyer has dropped out and another said Vattenfall would have to contribute money itself to keep the loss-making operations running.

    The sale, launched at the end of 2014, includes roughly 8,100 megawatt (MW) of lignite-fired plants, which generate about 10 percent of Germany's total electricity, as well as mining activities.

    Vattenfall had set March 16 as the deadline to submit binding bids, sources said.

    Lignite miner Vranska Uhelna, part of Czech Coal, has made a binding offer for the German assets, a spokesman for the company said on Wednesday, declining to comment on the details.

    Meanwhile, Czech energy group CEZ said it had decided not to bid due to falling power prices and uncertainty over possible early shutdowns of coal power plants in Germany.

    Germany's energy group Steag and Australian investment fund Macquarie have proposed setting up a foundation to manage lignite assets, requiring Vattenfall to put in about 2 billion euros ($2.2 billion), a source familiar with the process said.

    The foundation model would ensure that no cash will flow out of the loss making operations, and no dividends will be paid, and it could safeguard against faster decommissioning of lignite power plants.

    Germany decided last year to put some lignite power plants in a reserve from 2018, including 1,000 MW of Vattenfall's capacity, to meet carbon emissions reduction goals by 2020.

    Czech privately-held energy group EPH, which has submitted a preliminary bid in December together with financial group PPF, was not immediately available to comment.

    Vattenfall has declined to comment on the binding process, but has previously said it expected to make a proposal regarding the lignite sale to its shareholder, the Swedish government, during the first half of 2016.

    http://www.reuters.com/article/vattenfall-germany-lignite-idUSL5N16O23U

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    China Feb rail coal transport down 15.4pct on year


    China’s rail coal transport dropped 15.4% on year to 139 million tonnes in February, showed the latest data from the China Coal Transport and Distribution Association.

    Of this, 100 million tonnes or 71.9% of the total were railed to power plants, a yearly decline of 5.4%, data showed.

    In the first two months of the year, state-owned railways transported a total 315 million tonne of coal, falling 12.8% year on year, with thermal coal transport contributing 228 million tonnes or 71.4% of the total, down 5%.

    http://en.sxcoal.com/0/142788/DataShow.html
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    Glencore, partners in Australian port face heavy cost of boom era bet


    Glencore and five other miners backing the world's most expensive coal port in Australia face extra annual charges of A$150 million after the restructuring of one of their partners this month, the latest to buckle under slumping commodity prices.

    The additional charge will deal a blow to the remaining backers of the A$2.6 billion ($2 billion) Wiggins Island Coal Export Terminal (WICET) in east Australia at a time when they are grappling with floundering coal markets.

    Mining and trading giant Glencore and seven partners began negotiations to build WICET in 2008 near the height of a coal boom, but prices have plunged 75 percent since then on global oversupply, China's slowing economy and competition from natural gas.

    Expecting coal markets to remain strong, the partners had agreed to pay port fees for 27 million tonnes whether they shipped that volume or not - setting themselves a tonnage charge as much as five-times higher than other coal ports.

    The project currently charges around A$20 a tonne, several people familiar with the terms said. Neighbouring RG Tanna coal port at Gladstone charges about $5 a tonne. WICET Chief Executive Marcus McAuliffe declined to comment on the charge.

    But adding to the partners' woes - and those of their 19 lenders, owed more than $3 billion - coal prices have now pushed two of WICET's original owners, Cockatoo Coal and Bandanna Energy, into administration.

    Both were stung by port charges for capacity they were never able to produce after coal prices crashed to nine-year lows and funding for their projects dried up.

    "The world didn't unfold, the coal mining sector didn't unfold, and the mine development didn't unfold the way everyone was hoping for. Then they were left paying four times what they could pay shipping through the terminal next door," said Stephen Longley at PPB Advisory, the administrator for Cockatoo, which emerged from a restructuring this month.

    The grand hope when it was planned was that WICET would eventually ship 120 million tonnes a year, fed by what would have been Australia's biggest coal mine, Xstrata's Wandoan. But Glencore shelved Wandoan in 2013 after taking over Xstrata.

    TOUGH TERMS

    Under the terms of the port agreement, the rest of the WICET partners - Glencore, Wesfarmers, Baosteel's Aquila Resources, Yancoal Australia, Guangdong Rising Assets Management's Caledon Coal and New Hope Corp - now have to pay the amount that would have been due from Cockatoo and Bandanna - A$150 million a year.

    "Every time one drops it makes it more challenging for the rest," said Thomas Jacquot, a senior director at Standard & Poor's.

    Glencore played down the impact of the extra costs, indicating that charges would be capped if any further partners dropped out.

    "The incremental costs to Glencore imposed by existing users at WICET are contained by commercial protections and must be viewed in the context of our greater global coal production business," (MGL: That's gobblegook!)it said in an emailed statement.

    The other remaining partners declined to comment.

    Glencore must shoulder 40 percent of the costs, reflecting its share of the port's 27 million tonnes a year capacity, meaning it has taken on an extra A$60 million a year in costs on top of the A$218 million a year it was already paying.

    And the pain is worsening for Baosteel's Aquila, which has yet to build the Eagle Downs mine that committed to using 1.6 million tonnes of capacity at the port.

    That implies Baosteel is spending A$32 million a year for its unused capacity plus bearing an extra A$9 million from Cockatoo and Bandanna.

    Distressed debt investors fed speculation last year that WICET's banks, nervous that the project would find it tough to service debt amid the coal price slide, were looking to sell the loan backing the port below par value.

    WICET's McAuliffe dismissed talk of any urgency to refinance, with the nearest deadlines around three years out, but said they would look to cut costs, including interest costs.

    http://www.reuters.com/article/australia-coal-idUSL4N16H5J2

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