Mark Latham Commodity Equity Intelligence Service

Friday 18th December 2015
Background Stories on

News and Views:

Attached Files


    Rival Libyan Factions Sign UN Peace Deal After Months of Talks

    Rival Libyan factions overcame last-minute disagreements and signed a United Nations-brokered peace deal on Thursday that supporters hope will help end years of deepening turmoil and counter Islamic State militants in the country.

    A majority of members from both the Tripoli-based General National Congress and the House of Representatives in the eastern city of Tobruk were present at the signing in Skhirat, Morocco. Along with delegates from around Libya, they represented about 80 percent of the nation’s diverse groups and factions.

    “Today is a historic day for Libya,” UN envoy Martin Kobler said. “All the parties have made concessions, putting the interests of the country first. The international community will continue its support for the future Libyan government.”

    The two opposing administrations, each with its own legislature and armed allies, have tussled over oil and power for more than a year, shattering the economy and creating a vacuum that allowed Islamic State to thrive. Analysts have cautioned the divisions are so deep, there is no guarantee the deal will hold.

    The UN road-map for a way to end the chaos triggered by the fall and slaying of ex-leader Muammar Qaddafi four years ago was endorsed by 17 nations in Rome last Sunday. They included the five permanent members of the UN Security Council, large EU states and Libya’s neighbors.
    Back to Top

    Brazil prosecutors charge 12 in SBM Offshore graft scheme

    Brazilian prosecutors on Thursday charged 12 people with a bribery scheme involving Dutch firm SBM Offshore NV, the world's top leaser of oil production ships, and state oil firm Petroleo Brasileiro SA .

    Police said they had four arrest orders as part of the scheme, dubbed "Operation Black Blood," though two of them involved suspects already in jail in the southern city of Curitiba, the epicenter of a broader investigation into price fixing and bribery on Petrobras contracts with engineering firms.

    Former Petrobras executives Pedro Barusco, Jorge Zelada and Renato Duque were charged with corruption along with former SBM sales agents Julio Faerman and Luis Eduardo Campos Barbosa da Silva, according to a statement from federal prosecutors.

    Anthony Mace and Didier Keller, both former SBM chief executive officers, were charged with racketeering and corruption as was Robert Zubiate, former senior vice president.

    Earlier on Thursday, police carried out raids and arrests in "Operation Black Blood" in Rio de Janeiro, Angra dos Reis and Curitiba, police said.

    The alleged bribery in the SBM probe in Brazil predates the better-known "Operation Car Wash," which is focused on graft involving engineering firms and Petrobras between 2003 and 2014.

    Between 1998 and 2012, there were "undue payments" in Switzerland of at least $46 million relating to contracts for floating oil production, storage and offloading ships, prosecutors said.

    They said Duque, who is currently in jail on corruption charges in Curitiba, asked SBM sales agents for $300 million for the ruling Workers' Party to fund its 2010 election campaign.

    An SBM representative in Brazil said none of the company's offices in Brazil had been raided. Petrobras did not immediately respond to request for comment.

    SBM, which supplies and operates floating production, storage and offloading vessels, is negotiating a leniency agreement with the Brazilian government, sources have told Reuters.

    The company settled with Dutch authorities in November 2014 for a record $240 million, ending a more than two-year inquiry into improper payments to government officials in Angola, Brazil and Equatorial Guinea by sales agents between 2007 and 2011.

    Dutch prosecutors said they received information from Brazilian authorities that SBM Offshore's Brazilian sales passed on some of their commissions to Brazilian government officials via offshore entities.

    Attached Files
    Back to Top

    Argentine Peso Collapses 29% After Government Lifts Currency Controls

    For those interested in a case study of what happens after a dramatic devaluation, you now have front row seats for what is likely to be a 25-30% peso plunge. Grab the popcorn.

    That's what we said on Wednesday evening in "Prepare For Peso Plunge: Argentina Lifts Currency Controls," after the country's FinMin Alfonso Prat-Gay announced that, as promised, new President Mauricio Macri would move to unify the official and black market exchange rates in the face of depleted FX reserves and still sky high inflation.

    Now let's just hope Macri's move to negotiate new terms for the $17 billion derivatives book amassed by former central bank governor Vanoli is enough to keep the country from taking a massive hit on its dollar futures.
    Back to Top

    Moody's places ratings of BHP Billiton on review for downgrade

    Global Credit Research - 18 Dec 2015

    Sydney, December 18, 2015 -- Moody's today has placed the ratings of BHP Billiton entities on review for possible downgrade. The ratings review includes the A1 senior unsecured ratings, (P)A1 senior unsecured medium term note (MTN) and shelf ratings and the (P)P-1/P-1 short term ratings of the subsidiaries of BHP Billiton Limited and BHP Billiton Plc, as well as the A1 issuer ratings of BHP Billiton Limited and BHP Billiton Plc. Other ratings placed on review include the A2 senior unsecured ratings of WMC Finance (USA) Limited, the A3 subordinated note ratings of BHP Billiton Finance (USA) Limited and BHP Billiton Finance Limited, and the (P)A2 senior unsecured MTN programme rating of WMC Finance Ltd.

    The review was prompted by the precipitous decline and persistent weakness in commodity prices and follows the recent downward revisions of Moody's oil and natural gas price assumptions on 15-December 2015 and Moody's base metals and bulk commodity prices on 08-December 2015.

    Moody's does not expect commodity prices shift significantly in 2016 from the low levels observed in late 2015, which have touched multi-year lows for several commodities. For the calendar years 2016 and 2017, Moody's current price assumptions for major commodities produced by BHP Billiton include: Brent crude averaging USD43 and USD48 per barrel; iron ore 62% Fe China averaging USD40 and USD45 per tonne (t); high quality metallurgical coal averaging USD80/t and USD85/t; and Copper averaging USD2.15 and USD2.35 per pound; respectively. Moody's also assumes Newcastle thermal coal will average USD55/t for both years.
    Back to Top

    Oil and Gas

    Novatek, China’s Silk Road Fund ink Yamal LNG deals

    Novatek, China’s Silk Road Fund ink Yamal LNG deals

    Russia’s Novatek said on Thursday it has signed definitive agreements for the sale of a 9.9% equity stake in the $27 billion Yamal LNG project to China’s Silk Road Fund (SRF).

    The two companies also inked a deal under which SRF will provide a 15-year loan to Novatek worth about 730 million euros ($792 million) for the financing of the Artic LNG project. The larger part of the loan has been disbursed to Yamal LNG, Novatek said in a statement.

    Chairman of the Management Board of Novatek, Leonid V. Mikhelson said that the signing of the binding agreements is “another important step in the execution of the company’s long-term development strategy“.

    “With the closure of this transaction we will achieve the appropriate target shareholder structure, which will contribute to the planned financing of the project and further facilitate its successful implementation,” Mikhelson added.

    Yamal LNG project includes the construction of a liquefaction plant with annual capacity of 16.5 million tons per annum based on the feedstock resources of the South-Tambeyskoye field. The production from the LNG project is scheduled to start in 2017.

    Novatek now owns a 50.1% stake in the LNG project, while France’s Total and China’s CNPC hold 20% each.
    Back to Top

    Britain awards more shale gas licences

    Britain awarded another 132 new onshore oil and gas exploration licences on Thursday, giving developers access to more land for shale gas fracking for the first time in seven years.

    Britain is estimated to have substantial amounts of gas trapped in underground shale rocks and Prime Minister David Cameron has pledged to go "all out" to extract these reserves, to help offset declining North Sea oil and gas output, despite opposition from environmental campaigners.

    Many other European countries, including France and Germany, have banned the use of shale gas hydraulic fracturing, or fracking, due to environmental concerns.

    The latest awards conclude Britain's first onshore oil and gas licensing round in seven years. Overall, it awarded 159 licences and 75 percent of the blocks covered were related to shale gas or oil, the government said.

    Companies which obtained new licences include established shale gas companies IGas, Egdon Resources, Cuadrilla Resources and INEOS. The latter won 21 new licences which it said now made it Britain's biggest shale gas by acreage.

    "We currently import around half of our gas needs, but by 2030 that could be as high as 75 percent," said British Energy Minister Andrea Leadsome in a written statement to parliament.

    "That's why we're encouraging investment in our shale gas exploration so we can add new sources of home-grown supply to our real diversity of imports."

    Britain on Thursday also said it will cut subsidies to renewable energy projects less than a week after a global climate change agreement was struck to wipe out carbon emissions this century.

    So far, shale gas fracking in its modern form has only taken place at one site in northeastern England. Local planning approvals for new projects have been slow because of concerns by residents about environmental, noise and visual impact.

    "The real challenge companies face is obtaining planning permission from local planning authorities, as the refusal of Cuadrilla's applications in June demonstrated," said Catherine Howard, a planning partner law firm Herbert Smith Freehills.

    Cuadrilla was refused planning permission for two shale gas projects earlier this year but the government has since announced it would use new powers to make its own decision on the matter.

    On Wednesday, lawmakers voted in favour of the use of fracking to extract shale gas under national parks, weakening a decision against fracking in national parks made earlier this year and giving shale gas explorers access to more resources.
    Back to Top

    Price of OPEC Oil Slumps to 11-Year Low as Members Keep Pumping

    Image title
    The average price of crude sold by OPEC members slumped to the lowest in 11 years as members kept pumping into an oversupplied market.

    The reference basket of crudes produced by the Organization of Petroleum Exporting Countries dropped to $32.33 a barrel Wednesday, according to an e-mail from the organization’s secretariat in Vienna on Thursday. That’s the lowest since April 2004, according to data compiled by Bloomberg.

    Oil slumped after OPEC decided a year ago to defend market share by maintaining production and allowing lower prices to pressure rival suppliers. Saudi Arabia and Iraq, the group’s largest producers, are already pumping close to record volumes, while Iran and Algeria plan to boost output next year. The strategy has come at a cost for the group, which will forgo about $500 billion in revenue in 2015, according to the International Energy Agency.

    OPEC members will try to shore up revenue by pumping more next year, Goldman Sachs Group Inc. predicted. The organization will raise output by at least 640,000 barrels a day to 32 million in 2016, driven by gains in Iran and the group’s other Persian Gulf members, the bank said in a report.

    Iran plans to boost output by about 500,000 barrels a day within weeks of international sanctions being lifted next year, and eventually add about 1 million barrels a day of supplies, Oil Minister Bijan Namdar Zanganeh said last month. The nation will increase supplies by 285,000 barrels a day in 2016, and can tap about 35 million barrels stored on tankers, Goldman Sachs estimated.

    Algeria’s state oil producer Sonatrach Group plans to raise crude output by 5 percent next year, Salah Mekmouche, the company’s vice president of exploration and production, said in an interviewin Algiers. The nation pumped 1.1 million barrels a day last month, according to data compiled by Bloomberg.

    The OPEC basket is composed of Saharan Blend, Girassol, Oriente, Iran Heavy, Basrah Light, Kuwait Export, Es Sider, Bonny Light, Qatar Marine, Arab Light, Murban and Merey.

    Attached Files
    Back to Top

    Israeli PM gives final go-ahead for Leviathan gas field development

    After years of political infighting, Israeli Prime Minister Benjamin Netanyahu signed a deal on Thursday giving final approval for the development of the Leviathan natural gas field off Israel's coast.

    Despite fierce criticism from opponents who argue Israel's largest gas reserve will be controlled by one group, limiting competition, Netanyahu has pushed the deal through, describing it as critical to national security interests.

    As part of the agreement, Texas-based Noble Energy and Israel's Delek Group, which discovered Leviathan in 2010, will retain control of the field, but are being forcing to sell other, smaller assets.
    Back to Top

    APLNG to send its first ever cargo

    The ConocoPhillips-operated Australia Pacific LNG project is about to ship its inaugural cargo with the docking of the first carrier at the Curtis island facility.

    The 165,600 cbm Magellan Spirit, owned by Teekay is currently located at the A$25 billion (US$18 billion) LNG plant, shipping data reveals.

    The LNG cargo will be probably sent to China’s Sinopec, which holds a stake in the LNG project, according to a report by ICIS.

    APLNG is a joint venture between ConocoPhillips (37.5%), Origin Energy (37.5%) and Sinopec (25%).

    The Curtis Island LNG facility started producing the chilled gas last week. Gas being supplied to the LNG facility is from Australia Pacific LNG’s gas fields in the Surat and Bowen basins, operated by Origin Energy.

    The LNG facility will have two production trains with the ability to process up to 9 million tonnes per annum.
    Back to Top

    Russia boosts oil sales in Asia, even as OPEC battles to win customers

    Russian oil producers have strengthened their position in Asia by supplying nearly a quarter more crude this year, shifting the balance of power in one of the few bright spots in the global market and blunting OPEC's high-profile drive to win customers.

    Aided by a weak rouble and new pipelines, Russia has replaced Iran as a top five supplier to Asia, boosting sales 23 percent to 1.3 million barrels per day in the first 11 months of 2015 from a year ago, according to data compiled by Reuters based on trade flows and customs information.

    Russia's share of the world's biggest oil market has risen to 7.3 percent from 4.7 percent five years ago and shows how President Vladimir Putin's efforts to court Asian countries such as China is bearing fruit as it looks to cut its dependence on its traditional markets such as Europe.

    China and South Korea saw the biggest jumps in Russian imports, according to the data. Given Russia's proximity to major crude buyers in North Asia, it can export crude on tankers via Sakhalin Island, and by pipelines directly to China or via the Russian port of Kozmino on the Sea of Japan.

    Another advantage for Russia has been the more than halving in the value of the rouble against the U.S. currency since mid-2014, slashing production costs in dollar-traded international oil markets.

    "Given Asia is the main crude short (undersupplied area) left in this market, the battle for market share remains intense," said Amrita Sen, chief oil analyst at consultancy Energy Aspects.

    Within the Organization of the Petroleum Exporting Countries (OPEC), Iraq has been the firm winner, raising its supplies to Asia by a quarter thanks to record production and heavy discounts that illustrate how intense the price war for customers has become even within OPEC.

    The expansion by Russia and Iraq in Asia this year has capped increases for Saudi Arabia, suggesting the strategy the OPEC kingpin is leading of pumping more oil to expand market share has only worked within limits.

    "OPEC did not make significant gains in market share in Asia in 2015," he added.

    While Saudi Arabia managed to halt a decline in its Asian market share last year and remains the region's top supplier by raising exports by 2.7 percent in the first 11 months this year to 4.2 million bpd, OPEC data shows that its sales to Asia peaked at 4.59 million bpd in 2013.

    Within OPEC, Iraq overtook Kuwait to become the third-largest crude supplier to Asia behind Saudi Arabia and the United Arab Emirates (UAE) this year.

    The second-largest OPEC producer boosted its crude deliveries to major customers in Asia by close to 360,000 barrels per day (bpd) to 1.77 million bpd in the first 11 months, Reuters data showed.

    Attached Files
    Back to Top

    Billionaire Fredriksen to buy up distressed oil rig assets - paper

    Norwegian-born billionaire John Fredriksen has set up a company to snap up oil rigs from firms struggling with low crude prices, adopting a similar approach to the one he used in 2012 when the tanker market collapsed.

    In an interview with business daily Dagens Naeringsliv, the man with an estimated fortune of 100 billion crowns ($11 billion), said he was putting some of his money into the venture called Sandbox, but might seek outside investors in due course.

    "We have decided to establish a new company which will buy jackups and floating rigs when others have to throw in their cards," Fredriksen told the newspaper. "The Sandbox plan is to build a portfolio of newer drilling vessels, which are about to be completed at shipyards."

    The shipping tycoon, nicknamed "Big Wolf" or "Big John", controls companies in offshore drilling, shipping of oil and dry bulk and salmon farming after making a fortune from tankers during the commodities price boom at the start of the century.

    Rates for offshore rigs have more than halved since crude oil prices slumped from last year's peak to below $40 a barrel, and about 40 of the 350 rigs worldwide have been taken out of the market by oil companies to save costs.

    "We are looking at everything to do with distressed rig assets now. It will certainly take some time before the market comes back, but it is in bad times that it is possible to make reasonable investments," Fredriksen told the newspaper, explaining the plan for Sandbox.

    Fredriksen's business empire already has a rig company called Seadrill. Once the most valuable of its kind, its shares have lost 88 percent since their peak in September 2013 and are now valued at $1.9 billion making it the world's second largest offshore driller behind Transocean.

    Fredriksen has bought up some of Seadrill's debt and its Chief Executive Officer Per Wullf told the newspaper in the same interview that the company would of course survive.

    The billionaire adopted a similar model when the oil tanker market collapsed in 2012. He set up a company called Frontline 2012 which bought assets from his struggling Frontline. The two firms are now merging following a recovery in the tanker market.

    According to the newspaper, Fredriksen's holdings in Seadrill, Frontline, Golden Ocean , Marine Harvest and Norwegian Property account for about a third of his estimated fortune.

    Fredriksen said he has bought up about 20 dry bulk vessels privately with rates at an all time low. The ships are run commercially by Golden Ocean, which is struggling with the worst downturn in the dry bulk shipping market.

    In tankers, Fredriksen also said he would buy very large crude tankers (VLCCs) of 300,000 dead weight tonnes if the price was below $90 million.

    Attached Files
    Back to Top

    U.S. Oil Output has First Year-on-Year Drop Since 2011, API Says

    U.S. crude production in November posted the first annual decline in almost five years as falling prices curbed investment.

    The U.S. pumped an average 9.11 million barrels of crude a day in November, down 0.8 percent from a year earlier, the American Petroleum Institute said in a monthly report Thursday.

    Tumbling crude prices have lead companies to cut back on exploration and the development of new fields. The number of active oil rigs in the U.S. dropped to 524 in the week ended Dec. 11, the least in five years, according to data compiled by Baker Hughes Inc.

    "I think we’re about to see another round of cutbacks, which will result in further decline in output next year," said Gene McGillian, a senior analyst at Tradition Energy in Stamford, Connecticut.

    West Texas Intermediate for January delivery dropped 1.6 percent to close at $34.95 a barrel on the New York Mercantile Exchange. It was the lowest close since February 2009. Prices have slipped 34 percent this year.

    Production of natural gas liquids, a byproduct of gas drilling, rose 6.4 percent from November 2014 to 3.32 million barrels a day, a record for the month and 28,000 barrels short of the all-time high reached in August.

    Total deliveries of fuel, a measure of demand, rose 1.2 percent from a year earlier to the highest November total since 2007. Consumption of gasoline and jet fuel increased while demand for distillate fuel, a category including diesel and heating oil, and residual fuel dropped.

    Gasoline consumption rose 3.2 percent from a year earlier and jet fuel demand climbed 6.2 percent, while distillate fuel slumped 1 percent and residual fuel use tumbled 46 percent as prices for natural gas declined.
    Back to Top

    FERC approves Lake Charles LNG

    BG Group and Energy Transfer said that the Lake Charles LNG project in Lousiana received approval to site, construct and operate the natural gas liquefaction and export facility from the Federal Energy Regulatory Commission.

    The export project will be constructed at the existing LNG regasification facility in Lake Charles owned by Energy Transfer, the two companies said in a statement on Thursday.

    Lake Charles LNG project already has a conditional permission from the U.S. Department of Energy to export up to 15 million tons of LNG per year.

    Final investment decisions from both BG Group and Energy Transfer are expected to be made in 2016, with construction to start immediately following a positive decision and first LNG exports anticipated about four years later,” the statement reads.

    BG Group is in charge of selecting the engineering, procurement and construction contractor as well as managing the construction and will operate the plant upon the construction completion and also be responsible for the LNG offtake.

    Attached Files
    Back to Top

    Anadarko Petroleum Issues Update; Boosts Q4 Oil Sales-Volume Outlook

    Anadarko Petroleum Corporation (NYSE: APC) announced extensions to the maturity dates of its credit facilities and also provided an interim update on its fourth-quarter performance.

    Anadarko extended the maturity of its $3 billion unsecured revolving credit facility to January 2021 and received commitments to renew its $2 billion 364-day credit facility upon its expiration in January 2016, to a new maturity in 2017, further supporting the company's strong liquidity position. These extensions were achieved with no changes to covenants or pricing and with 100-percent participation from the company's bank group.

    Operationally, performance continues to exceed expectations across the portfolio. Production increases relative to guidance are being driven by the company's core oil-producing areas in the Wattenberg field and the Delaware Basin. As a result, the company is increasing the midpoint of its fourth-quarter oil sales-volume guidance by more than 15,000 barrels of oil per day (BOPD) to a range of 314,000 to 319,000 BOPD. This outperformance is the primary contributor to a 2-million-BOE (barrels of oil equivalent) increase in the company's total fourth-quarter sales-volume guidance, resulting in a new range of 70 to 72 million BOE.

    Along with the strong production performance, the company's continued efficiency gains are driving lower capital expenditures, with fourth-quarter capital investment expected to be at or below the mid-point of current guidance. Additionally, the company is continuing to make meaningful improvements to its cost structure, with direct oil and natural gas operating expense per BOE expected to be below the low end of current guidance.

    Anadarko also announced it continues to make significant progress at its Heidelberg development in the Gulf of Mexico, which is well ahead of schedule and now expected to achieve first oil in the first quarter of 2016 from the three initial wells, pending regulatory approvals.

    "In 2015, we set out to preserve and build value by focusing a greater percentage of our capital investments on longer-dated projects, while driving improved efficiencies into every aspect of our business, carefully managing our cost structure and accelerating value through asset monetizations," said Anadarko Chairman, President and CEO Al Walker. "As we move closer to the end of the year and turn our focus toward 2016, I am increasingly encouraged by our results and proud of the work our employees and service providers have done to make Anadarko a better company by maximizing performance in a difficult macro environment. We are committed to a continued disciplined and value-focused approach in 2016 with capital spending expected to be significantly lower and aligned with cash in-flows from operations and targeted asset monetizations."

    Attached Files
    Back to Top

    Alternative Energy

    What Just Happened in Solar Is a Bigger Deal than Oil Exports

    The clean-energy boom is about to be transformed. In a surprise move, U.S. lawmakers agreed to extend tax credits for solar and wind for another five years. This will give an unprecedented boost to the industry and change the course of deployment in the U.S.

    The extension will add an extra 20 gigawatts of solar power—more than every panel ever installed in the U.S. prior to 2015, according to Bloomberg New Energy Finance (BNEF). The U.S. was already one of the world's biggest clean-energy investors. This deal is like adding another America of solar power into the mix.

    The wind credit will contribute another 19 gigawatts over five years. Combined, the extensions will spur more than $73 billion of investment and supply enough electricity to power 8 million U.S. homes, according to BNEF.

    "This is massive," said Ethan Zindler, head of U.S. policy analysis at BNEF. In the short term, the deal will speed up the shift from fossil fuels more than the global climate deal struck this month in Paris, and more than Barack Obama's Clean Power Plan that regulates coal plants, Zindler said.

    This is exactly the sort of bridge the industry needed. The costs of installing wind and solar power have dropped precipitously—by more than 90 percent since the original tax credits took effect—but in most places coal and natural gas are still cheaper than unsubsidized renewables. By the time the new tax credit expires, solar and wind will be the cheapest forms of new electricity in many states across the U.S.

    The tax credits, valued at about $25 billion over five years, will drive $38 billion of investment in solar and $35 billion in wind through 2021, according to BNEF. The scale of the new projects will help push costs down further and will stimulate new investment that lasts beyond the extension of the credits.

    Few people in the industry expected a five-year extension. Stocks soared. SolarCity Corp., the biggest rooftop installer, surged 34 percent yesterday. SunEdison Inc., the largest renewable-energy developer, climbed 25 percent, and panelmaker SunPower Corp. increased 14 percent.

    Congress is expected to vote by the end of this week on the tax credits as part of a broader budget deal that also lifts the 40-year-old ban on U.S. oil exports. Oil producers have lobbied for years to lift the ban, but it isn't likely to significantly affect either consumption of oil or deployment of renewables. Leaders from both parties reached an agreement on the bill late Tuesday.  

    The 30 percent solar tax credit was set to expire next year and will now extend through 2019 before tapering to 10 percent in 2022. The wind credit had expired at the end of 2014, and the extension will be retroactively applied from the start of 2015 through 2019, declining in value each year.

    Wind power has had an especially tumultuous relationship with U.S. lawmakers, who have kept the industry's credits alive through a disruptive ping-pong game of short-term extensions every year or two. "You open manufacturing plants and then you close them. And then you open them and you close them," BNEF's Zindler said. "It's economically inefficient. This will give them a good five-year line of sight on what the market will look like, and that's really important."

    Attached Files
    Back to Top

    Scottish Power sells tidal energy business to Atlantis

    Scottish Power Renewables has sold its tidal power business to Atlantis Resources in exchange for a six percent stake in Tidal Power Scotland Limited, the country's largest tidal power developer.

    The deal builds on Atlantis' leading position in Britain's tidal energy sector following its purchase of one of its rivals, Marine Current Turbine Limited, from Siemens in April.

    Tidal power converts energy harnessed from tidal movements into electricity via turbines. Scottish Power's tidal business includes two projects worth 6.6 million pounds, meaning TPSL, which now owns the projects, is valued at 110 million pounds.

    "It brings another highly credible industrial shareholder with deep skill sets, as well as positioning the company strongly for bringing in new investors into its projects," analysts at Peel Hunt said of Atlantis. Peel Hunt raised its target price by 10 pence on Atlantis on the back of the announcement and recommends buying the stock.

    TPSL, in which Atlantis retains a 94 percent holding, will now have a tidal power project portfolio of nearly 650 megawatts, making it Britain's largest tidal power player.

    The deal comes on the same day as the British government announced cuts to small-scale renewable energy subsidies in a bid to rein in costs for green energy projects.
    Back to Top

    Base Metals

    Alcoa lands two Boeing contracts worth more than $2.5bln

    Metals company Alcoa Inc said on Thursday it has signed two long-term supply contracts with plane manufacturer Boeing Co worth more than $2.5 billion that will be part of its value-added business once the company splits in the second half of 2016.

    One of the contracts is for fasteners and the other for lightweight titanium seat track assemblies, which hold seats in place and bear the weight of passengers.

    The contracts involve providing parts for the 737 MAX, 777X and 787 Dreamliner.

    "This is a major contract for us," Alcoa Chief Executive Klaus Kleinfeld told Reuters. "This shows the strength we have been able to build in this complicated business."

    In October the company announced a similar $1 billion contract with Airbus to provide fasteners for the A350 XWB, A320neo and A330.

    Alcoa has bet on growth from titanium and high-strength aluminum sales to the aerospace industry as its order book swells for airplane production and amid renewed global spending on automobiles. About 40 percent of revenue for the new value-added business was generated by the aerospace sector.

    After the split next year, Alcoa's traditional business, which also includes better-performing bauxite and alumina, will retain the Alcoa name. The newer company has yet to be named.

    Attached Files
    Back to Top

    Steel, Iron Ore and Coal

    Golden age of coal in China seems over, peak-demand scenario possible - IEA

    China could be facing peak coal demand for the first time ever as a cooling economy and structural changes in its industry hit consumption, paving the way for India to emerge as the main driver of global coal use by 2020, the International Energy Agency said.

    China is the world's top coal consumer but its uptake of the dirty fossil fuel has waned with the country moving more towards less energy-intensive sectors. State efforts to cap consumption in a bid to clear up the choking smog that smothers the country's major cities have also hit demand.

    "The golden age of coal in China seems to be over," the International Energy Agency (IEA) said on Friday in its Medium-Term Market Report to 2020, adding that a "peak coal" demand scenario was now probable due to stagnating housing and infrastructure development.

    Lower-than-expected power demand as the use of electricity drops in heavy industry will also contribute to the decline in coal consumption, the Paris-based group added.

    The IEA said China's coal demand would fall to 2,640 million tonnes of coal-equivalent (Mtce) by 2020 from 2,843 Mtce in 2014 based on the group's peak-demand scenario.

    As a result, global demand will dip to 5,509 Mtce in 2020 from 5,540 Mtce in 2014, the IEA said. Under a slightly less bearish outlook, however, demand could still see a 0.8 percent annual growth to 5,814 Mtce in 2020, it added.

    Slowing demand, environmental policies and more alternative fuels will keep coal prices low, the IEA added. Thermal coal prices have already fallen to or near decade troughs.

    "The continuous pressure from shale gas in the United States, stronger climate policies, and especially, the overcapacity and slowdown in China all contribute to the oversupply. This glut will be even more acute if a peak coal demand in China becomes real," the IEA said.

    The U.S. Institute for Energy Economics and Financial Analysis (IEEFA), which also published a coal outlook this week, painted a gloomy picture for coal demand as well.

    "The global traded coal industry is in dire straits," said Tim Buckley, IEEFA's director of Energy Finance Studies in Australasia.

    "(The) outlook for the global traded coal industry remains one of declining demand, excess supply ... relentless cost down initiatives, excessive financial leverage, asset write-downs and unprecedented stranded assets (and) shareholder wealth destruction," IEEFA said.

    India is expected to pick up some of the slack in Chinese demand with its coal use seen up 149 Mtce by 2020, accounting for half of the rise in world coal demand over the period, according to the IEA.

    The IEA did not include findings of the global climate change talks which took place in Paris earlier in December as the group said the report was being printed during the negotiations.

    Attached Files
    Back to Top

    QHD thermal coal prices further rebound, stocks hit 20-mth low

    Prices of thermal coal traded at China’s top transfer port of Qinhuangdao continued to rebound at a faster pace this week, mainly due to increased demand and low rail supplies that have drawn stocks down to the lowest of the past 20 months.
    Back to Top

    Inner Mongolia Alax Jan-Nov coal output down 20pct on year

    Alax League in northern China’s Inner Mongolia produced a total 7.22 million tonnes of raw coal over January-November this year, down 20% year on year, showed data from the Alax Commission of Economy and Information Technology on December 17.

    Of this, the output of bituminous coal fell 29% on year to 4.22 million tonnes; while that of anthracite decreased 2% from a year ago to 3 million tonnes, impacted by weak demand and low prices.

    A’zuo Banner and A’you Banner in Alax contributed 5.09 million and 1.26 million tonnes of raw coal over January-November, sliding 28% and 5% on year, respectively.

    Tengri Economic Development Zone in Alax produced 870,000 tonnes of raw coal during the same period, up 41% year on year.

    The coal market in Alax League still faced a downturn in November, and most coal producers were in production cut or even halted operations.

    Meanwhile, high stocks of imported coal and subdued demand caused prices to decline further.

    Over January-November, raw coal imports through Ceke Border Crossing in Alax’s Ejin Banner, stood at 6.66 million tonnes, up 7% on year. Stocks of imported raw coal stood at 2.39 million tonnes.

    The average price of imported raw coal decreased 10% from 290 yuan/t in December 2014 to 260 yuan/t.

    By end-November, coal stocks in the league totaled 310,000 tonnes, with stocks at A’zuo accounting for 96.8% or 300,000 tonnes.

    Average price of anthracite in Alax fell 7% to 510 yuan/t ($78.68) by end-November from 550 yuan/t in the end of last year; that of bituminous coal fell 11.9% to 185 yuan/t from 210 yuan/t.

    Attached Files
    Back to Top

    Australian Isaac Plains coal mine to resume production in 2016

    The Isaac Plains coal mine in Australia, which was mothballed in 2014, will restart production next year despite an international move to cut output to improve environment, the operator Stanmore Coal said on December 17.

    Australian miner Stanmore Coal bought the mine from Brazilian mining giant Vale and Japanese firm Sumitomo for A$1 ($72 cents) this July.

    Isaac Plains coking coal operation is located in central Queensland state, and expects to produce at least 1.1 million tonne/year of coking coal over 2016-2018.

    Stanmore expected shipments of coking coal to commence in April 2016, creating A$7 million in royalties to the cash strapped Queensland state government, as well as other federal and state taxes.

    "Challenging commodity markets have presented an exceptional opportunity for Stanmore and in early 2016 we will become an independent producer of high quality coking coal for export to the steel industry in the region," Stanmore Coal managing director Nick Jorss said.

    "The acquisition of Isaac Plains for a nominal sum gives us a fully equipped coking coal mine with three years of mine life at current prices, and it comes with over A$350 million of plant and equipment including dragline and wash plant with excess capacity," Stanmore Coal chairman Neville Sneddon said.

    Stanmore said its low-cost approach and optimized mine plan for Isaac Plains, including targeting a lower strip ratio for coal in the mine's northern pits, are to result in a 35% reduction in cost.

    Attached Files
    Back to Top

    Mexico probes China, Taiwan cold-rolled steel imports

    Mexico's Economy Ministry is launching an anti-dumping investigation into imports of cold-rolled flat steel from China and Taiwan, according the government said on Thursday.

    Steel company Ternium requested the investigation in September, saying that importsfrom China and Taiwan increased sharply between January 2012 and April 2015 and that hurt local producers, the government said.

    Mexico has taken steps to protect its struggling steel industry this year, including introducing new import duties, anti-dumping quotas and enhancing customs controls to enforce the quotas.

    The Economy Ministry said in September it would investigate imports of steel wire rod from China.
    Back to Top
    Commodity Intelligence LLP is Authorised and Regulated by the Financial Conduct Authority

    The material is based on information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. Opinions expressed are our current opinions as of the date appearing on this material only.

    Officers and employees, including persons involved in the preparation or issuance of this material may from time to time have "long" or "short" positions in the securities of companies mentioned herein. No part of this material may be redistributed without the prior written consent of Commodity Intelligence LLP.

    Company Incorporated in England and Wales, Partnership number OC334951 Registered address: Highfield, Ockham Lane, Cobham KT11 1LW.

    Commodity Intelligence LLP is Authorised and Regulated by the Financial Conduct Authority.

    The material is based on information that we consider reliable, but we do not guarantee that it is accurate or complete, and it should not be relied on as such. Opinions expressed are our current opinions as of the date appearing on this material only.

    Officers and employees, including persons involved in the preparation or issuance of this material may from time to time have 'long' or 'short' positions in the securities of companies mentioned herein. No part of this material may be redistributed without the prior written consent of Commodity Intelligence LLP.

    © 2018 - Commodity Intelligence LLP