Mark Latham Commodity Equity Intelligence Service

Friday 3rd February 2017
Background Stories on www.commodityintelligence.com

News and Views:

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    Macro

    Saudi Aramco likely to list on multiple exchanges at same time: minister


    Saudi Aramco is likely to list its shares simultaneously on more than one exchange but this is still under evaluation, Energy Minister Khalid al-Falih said on Thursday.

    Asked by reporters if Aramco would list first on the Saudi bourse and then on another exchange abroad, Falih said: "It will probably be done concurrently, but we have not announced. We are evaluating. All our options are open."

    The planned listing next year of up to 5 percent of Aramco, expected to be the world's biggest initial public offer of shares, is a centerpiece of the Saudi government's plan to diversify the economy beyond oil.

    http://www.reuters.com/article/us-saudi-aramco-ipo-idUSKBN15H1C5
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    Did this financier just call the end of the mining rally?


    After four-plus years of declines, 2016 was a comeback year for the mining industry – with only a couple of exceptions, energy, metal and mineral prices rallied strongly last year.

    The turnaround in the sector has convinced at least one private equity firm that it may be time to lock in some profits. Reuters reports the Orion Mine Finance Group is in talks to sell a portfolio of 87 royalty, streaming and offtake assets.

    Looks like harvest time came early

    The agreements cover gold, silver, base metals and diamonds across 16 countries and could fetch as much as $1 billion:

    "Our fund has a seven-year life. At the end of 2016 we were done with investments. We are now in harvest mode," [Orion portfolio manager Douglas] Silver said when asked why Orion was selling the portfolio. He said the sales process was launched at the beginning of January.

    The last time a large royalty and streaming portfolio was put on the market was in 2010 when Orion sold International Royalty Corp to Royal Gold, Silver said.

    The exclusive report notes a long list of possible suitors including Franco-Nevada, Silver Wheaton, Sandstorm Gold, Osisko Gold Royalties and Triple Flag, a new mining financing firm founded by former Barrick Gold finance chief Shaun Usmar.

    Contrarian investment

    At the end of 2015, beginning of last year when metals and minerals were making multi-year lows, and commodity asset managers and banks' trading desks were closing Orion launched a new hedge fund to trade industrial and precious metals.

    The peak price cycle was in 2011 and these cycles tend to last seven years

    Oskar Lewnowski, the founder and chief investment officer of Orion told Bloomberg at the time "there are three factors driving commodities: momentum-driven financial flows, physical fundamentals and macro events":

    "For a long time, metals were driven by financial flows, be it mining-orientated banks, commodity hedge funds, CTAs [Commodity Trading Advisors] and even retail equity investors," Lewnowski said in an interview in London.

    "With those guys out, we are back to fundamentals. And that’s an environment in which we can do well."

    Lewnowski, which spun Orion out of his Red Kite fund in 2013 to invest in junior mining, was also willing to put a date on a turnaround:

    "The turnaround is going to come in 2018," Lewnowski said. "The peak price cycle was in 2011 and these cycles tend to last seven years."

    Looks like harvest time came early.

    And for those still heavily invested in mining and metals, let's hope the timing of Orion's off-load is not an indication that the rally has peaked.

    http://www.mining.com/financier-just-call-end-mining-rally/
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    Japan considers buying more U.S. energy as Abe prepares to meet Trump


    Japanese Prime Minister Shinzo Abe is considering increasing energy imports from the United States, two sources familiar with the plan told Reuters, as he prepares to meet President Donald Trump, who has complained about Japan’s trade surplus.

    Japan is putting together a package of plans for Japanese companies to invest in infrastructure and job-creation projects in the United States for Abe to take to the Feb. 10 meeting with Trump in Washington.

    Another idea is to offer to increase liquid natural gas (LNG) imports from the United States, a source in the ruling coalition told Reuters.

    Another option, if Abe determines that Trump is most concerned about the trade gap, is to increase imports of U.S. shale oil or gas on top of the investment package, according to a top executive at a major Japanese corporation who is close to Abe.

    Japanese officials have been scrambling to respond to Trump’s scattershot comments since he took office.

    He has threatened to impose a tax on car imports from Mexico, criticised Japan’s trade gap with the United States and most recently accused Japan, along with China and Germany, of devaluing their currencies to the detriment of U.S. companies.

    “(Abe) wants to know what’s the most important thing for Trump,” said the executive, who declined to be identified.

    “If it is the trade surplus that Trump cares the most about, for instance, then we could come up with a few possible solutions,” including importing more U.S. shale oil or gas.

    Abe’s approach toward Trump would be “not accommodating, not opposing”, he said.

    Utilities would be resistant to buying more U.S. shale gas because they have already committed to buying large amounts and Japan’s demand for energy is falling, an executive at a Japanese gas importer told Reuters on condition of anonymity.

    Prices for LNG in Asia have fallen by almost a fifth this year amid a supply glut.

    Japan is the world’s biggest buyer of the gas cooled to liquid form for transport on ships and takes in nearly a third of global shipments.

    Once seen as a panacea for Japan’s energy crisis after the Fukushima nuclear disaster in 2011 led to the shutdown of most reactors in the country, U.S. shale gas is now just one of many options for Japan to meet its needs.

    Japan took in its first shipment of shale gas in liquid form this month and more shipments are likely to come as more export terminals start shipments this year and next.

    The Yomiuri newspaper said Abe’s growth and jobs initiative would include a plan for Japan and the United States to jointly develop a $450 billion “infrastructure market”, into which the Japanese government and companies would invest $150 billion over 10 years.

    http://www.lngworldnews.com/japan-considers-buying-more-u-s-energy-as-abe-prepares-to-meet-trump/

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    Glencore sticks with 2017 production targets


    Glencore stuck with its target for broadly higher output in 2017 on Thursday after reporting falls in copper and zinc which led overall production lower last year.

    The Swiss-based company said fourth-quarter copper production fell 3 percent and for the full year was down 5 percent at 1.4 million tonnes reflecting the closure of some African operations.

    Glencore's steepest fall in output came in zinc which was down 24 percent in 2016 despite finishing the year with an 8 percent quarter-on-quarter rise to 304,900 tonnes.

    Zinc prices rallied 60 percent last year, making them the best performing metal on the London Metals Exchange in 2016, helped partly by Glencore's production cuts.

    The company has said capacity for zinc will stay shut until market conditions allow for extra supply without pushing down prices.

    http://www.reuters.com/article/glencore-production-idUSL5N1FN1JT
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    Sulfur emission cap: 2020 deadline fuelling challenges


    As ship-owners gear up to embrace new sulfur emission norms that will come into effect from 2020 onwards, challenges related to upgrade of vessels, availability of cleaner fuels, and ordering new ships remain vexing issues.

    The International Maritime Organization, or IMO, has stipulated a reduction in the maximum sulfur limit in marine fuels from 3.5% to 0.5% from January 2020 onwards.

    In less than three years, all ships across the globe will mandatorily have to use low-sulfur fuels or gas instead of the high-sulfur fuel oil, or HSFO, that currently dominates the market.

    A common refrain among ship-owners is that while the date of implementation of the new sulfur cap is finalized, the "fine print of how to enforce and implement" needs to be worked upon. This is significant because the new norms will entail additional costs that can cause serious commercial distortion if the implementation does not happen uniformly across the world.

    Since this involves a global equivalent to millions of tons of fuels used in thousands of ships, several stakeholders in the shipping industry are now suggesting additional measures to ensure that the transition is smooth and hassle free.

    According to shipping industry estimates, based on current demand, close to 2.5 million b/d, or over 75% of the current bunker fuel market, will be displaced when the lower sulfur content norms are implemented.

    "There are a number of practical consequences -- it is of course hard to believe that in one minute on the new year eve of 2020, all ships around the world will suddenly become 100% compliant, particularly if in the middle of a voyage," Dragos Rauta, technical director at the International Association of Independent Tanker Owners, or Intertanko, told S&P Global Platts.

    Intertanko has around 210 members, whose combined fleet comprises some 3,654 tankers, totaling over 312.7 million dwt.

    Ship-owners will have to choose whether they want to use 0.5% sulfur fuel or invest in scrubbers, an assessment they will make based on ship's age, price of scrubbers, operational costs of scrubbers, and price differential between HSFO and ultra-low sulfur fuels, or ULSFs, Rauta said.

    NEW PROPOSALS

    "A great deal more needs to be done at IMO ahead of the 2020 deadline," the secretary general of Asian Shipowners' Association, Harry Shin, told Platts.

    Intertanko, Baltic and International Maritime Council, or BIMCO, and a host of other industry bodies have now jointly submitted a proposal document to an IMO sub-committee over the issues of concern for effectively implementing the cap on sulfur emissions.

    Among others, the document mentions of the impact on machinery systems, particularly the safety concerns that may arise from the use of new sources of fuels and blends, and a verification mechanism "to ensure a level commercial landscape," and delivery of compliant fuels on ships.

    "Ships cannot ascertain the sulfur level of fuels being delivered to [them] prior to or during bunkering operations; non-conformity is discovered only days after bunkering," the document said.

    Not all ports will be ready to supply 0.5% sulfur fuels by 2020 and there is already a provision to allow ships which could not obtain compliant fuels, but parameters for such instances need to be formally recognized by IMO, it said.

    However, ship-owners say that this can put them at a disadvantage, especially those who are scrupulously following the rule book, because ULSFs command a premium over HSFOs. The price differential between HSFO and 0.10% sulfur-content marine gas oil has typically been in the $250-$350/mt range, according to the shipping industry estimates.

    ENFORCEMENT AND QUALITY

    "Enforcement is [critical] to make sure that owners following the new laws are not at a competitive disadvantage to ships not using the required fuels," managing director of the Hong Kong Shipowners Association, Arthur Bowring, told Platts. The association is one of the world's largest, with its members owning and operating a fleet with a combined carrying capacity of more than 162.5 million dwt.

    Questions remain as to whether the sulfur cap will be enforced effectively, as legal frameworks and detection methods remain inadequate, and fines and sanctions are currently upto the individual member countries to enforce, Banchero Costa, a Genoa-based shipping consultancy and brokerage said in a recent report.

    There is also a concern that the new blends that are described in the IMO's assessment report, might not be compatible with the existing engines and fuel systems, Bowring said.

    Many of the new fuels with 0.10% sulfur content that showed up in the market over the last two years are not included under the ISO standard for marine fuels, called ISO 8217, said Rauta. Since safety requires full transparency, the criteria defining any such new fuels should be fully provided and they should be inserted in the ISO 8217 series, he added.

    "In 2020, the entire world will be an Emission Control Area, so there are no cheap options left," the chief shipping analyst at BIMCO, Peter Sand, told Platts. BIMCO is the world's largest international shipping association, with more than 2,200 members globally.

    SCRUBBERS VS FUELS

    "If the operator also owns the ship and pays for bunker fuel, investing in a scrubber is the most economical option," Sand said. Scrubbers are exhaust gas cleaning systems that remove sulfur from fuel, thus enabling continuous use of HSFO, and are permitted under the IMO rules but have related technical and environmental challenges.

    Ship-owners can recover investment costs sooner or later, Sand said, adding that "if the prices of IMO-compliant fuels go through the roof in early-2020 and the world is awash with HSFO, it will be a matter of months before a scrubber investment is recouped."

    Ship-owners' concern will be the upfront cost of around $3 million-$4 million with no guarantee that it will be needed in case the spread between marine gasoil and HSFO stays very narrow.

    "Keep in mind that if today a five-year old Supramax is worth some $14 million, to spend at least $3 million-$5 million on a scrubber is quite a big investment," said Ralph Leszczynski, research director at Banchero Costa.

    "I [think] we will get into a bit of a rush to install scrubbers towards 2019, when it sinks in that the rules are indeed going to be implemented and distilled fuels really do cost a lot more than HSFO. I think, for the moment, 95% of people will go for either distilled fuels or scrubbers," he said.

    Intertanko's Rauta points out that if a ship is running on 50 mt fuel/day and is on sea for 200 days/year, while the ULSFs' premium to HSFO is $200/mt, the extra cost of fuel for the ship-owner will be $2 million/year. Depending on the price one pays to retrofit a scrubber, but assuming it to be $2 million-$4 million, the owner can recover it within one or two years of operations, he said.

    In 2012, Intertanko developed a calculator to assist ship-owners in doing a cost-benefit analysis of installing a scrubber versus using ULSFs in the Emission Control Areas.

    "LNG as fuel is also an option, but not a cheap one; retrofitting a ship to use LNG [may not be] economically viable today," said Rauta.

    Currently, only a miniscule number of ships, around 100 out of the global merchant fleet population of more than 85,000, are running on LNG, though newbuilding orders are on the rise and may rise exponentially over the next decade.

    "The supporting infrastructure for LNG bunkering currently remains limited globally. LNG requires cryogenics for bunker storage tanks, which would reduce available onboard cargo space," the Banchero Costa report said.

    "LNG has the main problem of limited availability at ports. So if you trade a Supramax bulk carrier or an Aframax tanker, you are not going to cut yourself off from the possibility of bunkering at most ports in the world," added Leszczynski.

    However, things are not hunky dory for scrubbers either. The wash-water of a scrubber is an acid which is very corrosive. Ship-owners have options to invest in hybrid scrubbers that have closed loop for operations in ports that do not allow direct discharge of wash-waste.

    "There are also challenges in disposing solid waste ashore if closed-loop scrubbers are used, and they may be a preferred option only for a small, and perhaps specialized, portion of the fleet, unless the ULSFs are in shortage and very costly," said HKSOA's Bowring.

    Rauta suggests a blend option. It would be cheaper to operate the open-loop scrubber on high seas and switch to ULSFs in specific waters where their use is restricted, he said.

    Ship-owners can reconfigure the fuel system of ships so that the operations of ULSFs and HSFOs are segregated and the fuel switch is managed to maximize the use of scrubbers and minimize that of expensive IMO-compliant fuels, he added.

    Another interesting dimension of the entire initiative is that now new ships will be ordered which must be able to run on different type of fuels though the shipyards are not regulated by IMO.

    http://www.platts.com/latest-news/shipping/singapore/shipping-feature---sulfur-emission-cap-2020-deadline-26653247

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    Bitcoin Extends China Golden Week Gains - Tops $1000, One-Month Highs


    As the dollar continues to tumble (and amid China's quite period during Golden Week), Bitcoin has gently begun to shake off China 'probe' weakness and extend its gains once again. For the first time since January 5th, Bitcoin is trading above $1000...



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    Coal rule killed by U.S. Congress, others near chopping block


    The U.S. Congress moved swiftly on Thursday to undo Obama-era rules on the environment, corruption, labor and guns, with the Senate wiping from the books a rule aimed at reducing water pollution.

    By a vote of 54-45, the Senate approved a resolution already passed in the House of Representatives to kill the rule aimed at keeping pollutants out of streams in areas near mountaintop removal coal-mining sites.

    The resolution now goes to President Donald Trump, who is expected to sign it quickly. It was only the second time the Congressional Review Act, which allows lawmakers to stop newly minted regulations in their tracks, has been used successfully since it was passed in 2000.

    The Senate then turned to an equally controversial rule requiring mining and energy companies such as Exxon Mobil and Chevron to disclose taxes and other payments they make to governments at home and abroad. Democrats, who cannot filibuster the resolution, attempted to slow the process by pushing debate late into the night, with a vote scheduled for shortly after 6:30 a.m. on Friday.

    Republicans are using their control of Congress and the White House to attack regulations they believe hurt the economy. They cast the stream protection rule as harming industry and usurping state rights.

    "The Obama Administration’s stream buffer rule was an attack against coal miners and their families,” said the top Senate Republican, Mitch McConnell, adding it had threatened jobs in his home state of Kentucky.

    Environmental activists and many Democrats said it would have made drinking water safer by monitoring for pollutants such as lead.

    "Given that many of these toxins are known to cause birth defects, developmental delays, and other health and environmental impacts, this basic monitoring provision was essential," said Jeni Collins, associate legislative representative for environmental group Earthjustice.

    The coal industry hopes the repeal will lead Trump to overturn a moratorium by former President Barack Obama's administration on some coal leases.

    Senator Joe Manchin, who represents West Virginia, historically coal country, was one of the few Democrats who supported killing the rule. He told CNN more than 400 changes had been made to the regulation as it was drafted.

    "There's nobody in West Virginia that wants dirty water and dirty air, but you can't throw 400 different regulations ... on top of what we already have and expect anyone to survive," he said.

    GUNS, PAY DISCRIMINATION

    Also on Thursday, the House on Thursday overturned Obama administration rules addressing pay discrimination at federal contractors and requiring expanded background checks for gun purchasers who receive Social Security benefits and have a history of mental illness. It plans on Friday to kill a measure addressing methane emissions on public lands. The Senate will then take all three up.

    The Senate is also targeting rules enacted in the final months of Obama's administration for extinction. Senator David Perdue, a Republican from Georgia, introduced on Wednesday a resolution for killing one intended to protect users of gift and prepaid cards.

    Under the Congressional Review Act, lawmakers can vote to undo regulations with a simple majority. Agencies cannot revisit overturned regulations. Timing in the law means any regulation enacted since May is eligible for repeal.

    The House already approved a resolution ending the rule that requires oil companies to publicly state taxes and payments, which is part of the 2010 Dodd-Frank Wall Street reform law.

    Republicans and some oil and mining companies say the rule is burdensome and costly and duplicates other long-standing regulations.

    Supporters of the rule see it as vital for exposing bribery and questionable financial ties U.S. companies may have with foreign governments, as well as showing shareholders how their money is spent.

    http://www.reuters.com/article/us-usa-congress-regulations-idUSKBN15H2PC
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    China Caixin manufacturing PMI for January falls to 51.0 from 51.9 in December, missing forecast for 51.8


    The China Caixin manufacturing purchasing managers' index (PMI) for January slowed from December, missing a Reuters poll forecast, but continued to show the mainland's economy was recovering.

    The reading came in at 51.0 in January, down from December's 47-month record of 51.9 and below a Reuters' poll forecast for 51.8.

    A reading above 50 indicates expansion, while a reading below signals contraction.

    "The rate of improvement slowed since December, as output and new orders increased at weaker rates amid a further reduction in employment," the Caixin PMI statement said on Friday. "At the same time, inflationary pressures remained sharp, with both input costs and output charges increasing at rates scarcely seen throughout the past five years."

    In December, China's PPI (producer price index) climbed to a five-year high, rising 5.5 percent on-year, exiting years of deflation. Producer prices had slumped in recent years amid excess capacity in many industries and a slowdown in global growth. That also signaled not just likely stabilizing economic growth, but also a likely pick up in corporate profits.

    The Caixin figures came as China's markets reopened on Friday after closing for the week-long Lunar New Year holiday.

    The Australian dollar slipped after the data to as low as $0.7638 from $0.7660 before the release. China is a key market for Australia's exports of raw materials, tying its economic prospects to the mainland.

    At least one analyst wasn't overly concerned by what the Caixin PMI's miss might signal.

    "Given the volatility we have around Chinese New Year, it's very hard to read. I was expecting something softer for January, but until we get February and March numbers it's really very hard to get a sense of how economic activity is doing," Julia Wang, a greater China economist, told CNBC's "Squawk Box" on Friday.

    "They've basically been on holiday over the past two weeks. Most of the construction and construction sites basically ground to a halt in mid-January," she added."That's why the PMIs and activity data in January as a whole are expected to be a little bit softer."

    On Tuesday, the official manufacturing PMI came in at 51.3 for January, down a smidgen from 51.4 in December, but still better than a Reuters poll forecast of 51.2.

    The official figures tend to focus on larger companies, while the private China Caixin PMI focuses on smaller and medium-sized firms.

    The two data points likely confirm indications that the mainland's economy has been recovering recently, but some questioned how long the pickup might last.

    "The Chinese economy maintained stable growth in January. But the sub-indices showed that the current growth momentum may be hard to sustain. We must remain wary of downward pressures on the economy this year," Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group, said in the Caixin statement on Friday.

    Others were also concerned about what the data might signal.

    "Early indicators for January, including today's PMI release, suggest that the recent recovery remains largely intact for now but has begun to lose steam," Julian Evans-Pritchard, a China economist at Capital Economics, said in a note on Friday. "Given clear signs that the property market is cooling and that monetary and fiscal policy have become less supportive, we expect economic growth to begin to slow again in the coming quarters."

    The official non-manufacturing PMI, which takes a reading on the services sector, rose to 54.6 in January from 54.5 in December. Those figures were released on Tuesday.

    While the manufacturing PMI data tend to be more closely watched, China's pivot toward domestic consumption and away from manufacturing- and investment-led growth means the service sector, which includes consumer industries such as real estate, retail and leisure, has become the majority of the mainland economy.

    It is also a key barometer of consumption, which accounts for more than 50 percent of gross domestic product (GDP).

    The figures likely signaled that China's economic growth was stabilizing. Concerns have persisted over the mainland economy's health, as private-sector debt has surged even as the amount of growth from additional debt has declined.

    But the economy in recent months has received a fillip from a pickup in the property sector.

    http://www.cnbc.com/2017/02/02/china-caixin-pmi-for-january-shows-mainlands-continued-economic-recovery-slows.html
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    Oil and Gas

    Oil edges up on threat of U.S. issuing new Iran sanctions


    Oil prices edged up on Friday on news that U.S. President Donald Trump could be set to impose new sanctions on multiple Iranian entities, raising geopolitical tensions between the two nations.

    Comments by Russian energy minister Alexander Novak that oil producers had cut their output in accordance with a pact agreed in December also helped support prices, analysts said.

    Reuters reported on Thursday that Trump's administration is prepared to roll out new measures against more than two dozen Iranian targets following Tehran's ballistic missile test, according to sources familiar with the matter.

    Moves by the U.S. to impose new sanctions on Iran is "something at the back of short-term traders' minds," said Ric Spooner, chief market analyst at Sydney's CMC Markets.

    "It's on the risk radar more than it otherwise might have been," he said.

    The sources, who had knowledge of the administration's plans, said the package of sanctions was formulated in a way that would not violate the 2015 Iran nuclear deal.

    Supply concerns were also raised when Russia's energy minister said global oil output was cut by 1.4 million barrels per day (bpd) last month as part of the deal last year between OPEC and other producers.

    "Oil markets have been supported by OPEC and as long as things hold people will look for evidence output curbs have chiseled away at inventories," Spooner said.

    Novak also said Russian companies may cut oil production quicker than had been initially agreed with OPEC and that he expected the market to rebalance by the middle of this year.

    Oil prices have stabilized about 15 percent higher than they were before OPEC and non-OPEC producers agreed in December to curb output, National Australia Bank said in a note on Friday.

    "We now expect oil prices to average around the mid to high $50s in Q1 and Q2, before reaching the low $60s by end-2017 and stabilizing at around those levels in 2018," the bank said.

    Brent prices could also come under pressure due to refinery maintenance in Europe and Asia in the first half of this year creating a situation where crude exports remain high while crude demand weakens, energy consultancy BMI Research said in a report on Friday.

    http://www.reuters.com/article/us-global-oil-idUSKBN15I03P
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    Saudi Arabia Raises March Crude Oil Pricing for All Buyers


    Saudi Arabia, the world’s largest crude exporter, raised pricing for March sales to buyers from the U.S. to Asia as output cuts by OPEC and other producers shore up oil prices.

    State-owned Saudi Arabian Oil Co., known as Saudi Aramco, boosted its official pricing for Arab Light crude to Asia by 30 cents to 15 cents a barrel more than the regional benchmark, it said Thursday in an e-mailed statement. The company had been expected to increase pricing for the grade to a premium of 10 cents more than the Oman-Dubai benchmark, according to the median estimate in a Bloomberg survey of six refiners and traders.

    Aramco raised pricing in Northwest Europe to the highest since 2015, except for the Heavy grade which was boosted to the highest since 2014. Pricing was increased in Asia to the highest this year. Buyers in the Mediterranean region will also see higher pricing for all grades in March.

    Oil jumped 52 percent last year, its first annual gain in four years, as the Organization of Petroleum Exporting Countries took steps to limit production to eliminate a global supply glut. The group and 11 other producers, including Russia, have been meeting their collective pledge to cut output by as much as 1.8 million barrels a day, Saudi Arabia Energy Minister Khalid Al-Falih said in Vienna on Jan. 22. The cuts started last month.

    “Compliance is great -- it’s been really fantastic,” Al-Falih said, after the producers met to agree on how to monitor the reductions. “Based on everything I know, I think it’s been one of the best agreements we’ve had for a long time.” Saudi Arabia’s production was below 10 million barrels a day, he said on Jan. 12. The country pumped on average about 9.98 million barrels a day last month, according to a survey compiled by Bloomberg.

    Middle Eastern producers compete with cargoes from Latin America, North Africa and Russia for buyers in Asia, its largest market. Producers in the Persian Gulf region sell mostly under long-term contracts to refiners. Most of the Gulf’s state oil companies price their crude at a premium or discount to a benchmark. For Asia the benchmark is the average of Oman and Dubai oil grades.

    https://www.bloomberg.com/news/articles/2017-02-02/saudi-arabia-raises-march-crude-oil-pricing-for-all-buyers
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    ConocoPhillips posts smaller-than-expected loss


    ConocoPhillips, the largest U.S. independent oil producer, reported a smaller-than-expected loss, helped by higher oil prices and lower costs.

    The company's total realized price was $32.93 per barrel of oil equivalent (BOE), 15.4 percent higher a year ago, it said on Thursday.

    The Houston-based company's operating costs were down 21.5 percent in the fourth quarter.

    Excluding Libya, production was marginally down at 1.59 million barrels of oil equivalent per day.

    ConocoPhillips said its production in the first quarter of 2017 would be between 1.54 million-1.58 million barrels of oil equivalent per day.

    The company's net loss narrowed to $35 million, or 3 cents per share, in the quarter, from $3.45 billion, or $2.78 per share.

    The year-ago quarter included a $2.74 billion charge, while the latest quarter included a gain of $52 million.

    On an adjusted basis, ConocoPhillips reported a loss of 26 cents per share, much smaller than the 42 cents analysts estimated, according to Thomson Reuters I/B/E/S.

    Revenue rose 7.2 percent to $7.25 billion, but missed the average analysts' estimate of $7.30 billion.

    http://www.reuters.com/article/conocophillips-results-idUSL4N1FN2QL
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    Egypt pens deals to import up to 45 LNG cargoes


    The Egyptian Natural Gas Holding Company has reportedly secured between 43 and 45 LNG cargoes for delivery from March until the end of the year.

    The company signed agreements to import the cargoes from Oman, Russia and France Reuters reports, citing Mohamed al-Masry, the head of EGAS.

    It was reported last year that EGAS plans on spending around US$2.2 billion for LNG to be imported in 2017.

    EGAS secured 60 cargoes for delivery in 2017 and 2018 through what was claimed to be the largest mid-term tender ever issued in which the company looked for 96 cargo to be delivered. Out of the 60 cargoes, only six have been set for delivery in 2018.

    With the additional 43-46 LNG cargoes secured under the new deal, EGAS has now booked close to 100 LNG deliveries in 2017.

    http://www.lngworldnews.com/egypt-pens-deals-to-import-up-to-45-lng-cargoes/
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    Gasoline Tankers Dodge New York Again as Region’s Glut Returns

    Gasoline Tankers Dodge New York Again as Region’s Glut Returns

    America’s East Coast gasoline glut is back and it’s so big that tankers bound for New York are being forced to detour mid-ocean toward other destinations.

    The region’s record inventories have grown so large that at least five tankers bringing cargoes to New York in January were forced head elsewhere while en route. Ship charters show European plants directing more of what they produce to Africa. The stockpile buildup has depressed both trans-Atlantic shipping rates and refiners’ profits from making the fuel.

    The increase in inventories “will keep demand for voyages into the East Coast low as the market awaits the impact of spring maintenance” at refineries, said George Los, senior tanker markets analyst at Charles R. Weber Co. in Greenwich, Connecticut.

    The stockpile buildup has been caused by the lowest U.S. gasoline demand since 2012 at a time when refiners are processing more than normal. The U.S. is a common destination for Europe’s excess gasoline, with companies including BP Plc and Repsol SA among those booking seven or eight tankers a week in the spot market for the voyage. Current East Coast inventories would be enough to supply the region for almost a month, an all-time high, according to data compiled by Bloomberg.

    “The concern is the PADD1 market,” Gary Simmons, senior vice president at Valero Energy Corp., said this week, referring to the East Coast. High inventories on the Gulf Coast are less problematic because improving weather will allow exports to clear supplies from that region, he said.

    Gasoline inventories on the U.S. East Coast rose to more than 73 million barrels, exceeding the previous high set last July, Energy Information Administration data showed Wednesday. National stockpiles also increased. The four-week average for demand, which has declined since mid-August, dipped to about 8.2 million barrels a day, the lowest since February 2012.

    http://boereport.com/2017/02/02/gasoline-tankers-dodge-new-york-again-as-regions-glut-returns/

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    Canadian Natural Resources Limited Horizon Update


    Canadian Natural Resources Limited provides an operations update for Horizon Oil Sands (“Horizon”). In December 2016 the Company continued to achieve higher than expected performance at Horizon, with production averaging approximately 184,000 bbl/d of Synthetic Crude Oil (“SCO”). After the successful ramp of the Phase 2B expansion, average production in the fourth quarter of 2016 reached approximately 178,000 bbl/d of SCO, at the high end of previously issued fourth quarter 2016 Horizon production guidance. As a result of these strong operational results and cost efficiencies at Horizon, the Company realized operating costs of $22.53/bbl (US$16.89/bbl) of SCO in the fourth quarter of 2016.

    Horizon continues to perform above expected design rates, with January 2017 production averaging approximately 195,000 bbl/d of SCO. As a result of this strong operational performance and realized cost efficiencies, Canadian Natural is lowering its 2017 SCO operating cost guidance by $2.00/bbl to $24.00/bbl to $27.00/bbl, including planned downtime for maintenance, turnaround and tie-in activities relating to the Phase 3 expansion.

    As was previously announced, Canadian Natural continues to evaluate an opportunity to debottleneck the Horizon fractionation tower and potentially increase production by an additional 5,000 bbl/d to 15,000 bbl/d of SCO for an estimated project capital cost of $70 million. It is estimated that this opportunity would coincide with the turnaround in the third quarter of 2017, effectively increasing the planned outage from 24 to 45 days. A final decision to proceed is expected in the second quarter of 2017.

    The Horizon Phase 3 expansion, which is targeted to add 80,000 bbl/d of SCO production is on schedule and on budget for commissioning and start up in the fourth quarter of 2017. The completion of the Horizon expansion provides significant sustainable zero decline production to the Company’s long-life low decline asset base.

    Canadian Natural is a senior oil and natural gas production company, with continuing operations in its core areas located in Western Canada, the U.K. portion of the North Sea and Offshore Africa.

    http://boereport.com/2017/02/02/canadian-natural-resources-limited-horizon-update/
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    Canada: governments, First Nations pen PNW LNG monitoring agreement


    An agreement on environmental monitoring of the proposed Pacific NorthWest LNG project, a first of its kind, has been signed between the government of Canada, the government of British Columbia, the Lax Kw’alaams Band and the Metlakatla First Nation.

    Through this agreement, First Nations will work directly with provincial and federal authorities as part of a committee to ensure the Petronas-led Pacific NorthWest LNG project is developed in the most environmentally sustainable way possible.

    The committee will enable enhanced environmental oversight of the Pacific NorthWest LNG project and the active engagement of local First Nations, a joint statement by the parties involved reads.

    It will foster information-sharing and continuous environmental monitoring and oversight and also enable the Lax Kw’alaams Band and Metlakatla First Nation to provide input into the project’s environmental management plans and follow-up programs.

    The committee is the product of input and feedback from Indigenous peoples regarding their desire to play an active role in monitoring the project on an ongoing basis, the statement reads.

    The cooperative agreement sets out the principles, structure, and roles and responsibilities of an Environmental Monitoring Committee for the Pacific NorthWest LNG project, in British Columbia.

    The Pacific NorthWest LNG project received federal environmental assessment approval in September 2016, subject to over 190 legally-binding conditions to be fulfilled by the proponent throughout the life of the project.

    The Canadian Environmental Assessment Agency and BC Environmental Assessment Office remain responsible for ensuring ongoing compliance with their respective legally-binding conditions for the project.

    http://www.lngworldnews.com/canada-governments-first-nations-pen-pnw-lng-monitoring-agreement/
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    Williams starts up Gulf Trace to serve Cheniere’s Sabine Pass LNG plant


    Williams Partners started operations on Gulf Trace project, a 1.2 million dekatherm per day expansion of the Transco pipeline system to serve the Cheniere’s Sabine Pass liquefaction and export terminal in Cameron Parish, Louisiana.

    The Gulf Trace project allows Transco’s production area mainline and southwest Louisiana lateral systems to flow gas bi-directionally from Station 65 in St. Helena Parish, to Cameron Parish, where Cheniere’s facility is located. Cheniere has subscribed to all the firm capacity for the project.

    “Projects like Gulf Trace, which leverage existing gas pipeline infrastructure, make it possible to connect abundant domestic supply with emerging international markets,” said Rory Miller, senior vice president of Williams Partners’ Atlantic-Gulf operating area.

    He added that the company can take advantage of the fact that Transco pipeline passes through every U.S. state with an LNG export facility currently under construction.

    Natural gas demand to serve LNG export facilities along the Transco pipeline is expected to grow by approximately 11,000 MDth/d by 2025.

    In September 2016 the company filed an application seeking regulatory approval for its Gulf Connector expansion project, designed to deliver 475,000 dekatherms per day to feed two LNG export terminals in Texas, one located on the northern coast of Corpus Christi Bay in 2019, and another located on the coast of Freeport Bay in the second half of 2018.

    The Gulf Trace project is part of approximately $1.6 billion in transmission growth projects Williams Partners plans to bring into service on its Transco pipeline system in 2017 that will help increase the pipeline’s capacity by approximately 3.0 million dekatherms per day. The Garden State, Dalton, Hillabee (Phase 1), Virginia Southside II and New York Bay Expansion projects are all under construction and/or expected to be placed in-service this year.

    http://www.lngworldnews.com/williams-starts-up-gulf-trace-to-serve-chenieres-sabine-pass-lng-plant/
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    Styrene Rocket Ship.

    Image title

    Styrene prices surge on US Gulf plant problems

    ICIS-1 Feb 2017 HOUSTON (ICIS)--It is unclear how extended US Gulf styrene outages will impact downstream markets, but prices in all areas likely will be ...

    Mexico's PE shortages worsen on cracker outage

    ICIS-10 Jan 2017 The outage started because of problems with the energy supply to ... ethylene di-chloride (EDC) and styrene are affected by the outage as well.
    Story image for styrene outages from ICIS

    Europe petrochemical producers to hike naphtha use in crackers

    ICIS-27 Jan 2017 ... well as the various global styrene turnarounds from February onwards, ... demand following a string of hiccups and outages throughout 2016, ...


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    Alternative Energy

    Saudi Arabia Will Invite Bids for Renewable Energy Projects in April


    Saudi Arabia will invite international and domestic companies to bid for renewable energy projects in April , the energy minister said on Wednesday, adding that he expected to award the deals in September.

    Energy minister Khalid al-Falih, speaking at a new s conference in Riyadh said the projects would include two new solar and wind power plants with a capacity to produce 700 megawatts of power.

    The projects are part of a major renewable energy supply program which is expected to involve investments of between $30 billion and $50 billion by 2023.

    " The terms on renewable contracts will be motivating," Al-Falih said at the press conference, according to Bloomberg, "so that the cost of generating power from these renewable sources will be the lowest in the world. " He added that they would also be the largest-sized such projects in the Middle East, and would be the country's first public-private partnership tender.

    As the world's largest exporter of crude oil, Saudi Arabia has been trying to move away from its economic dependency on fossil fuels by investing in renewables and developing nuclear power, reports Bloomberg. Al-Falih said at the news conference that the country aims to generate up to 9.5 gigawatts of power from renewables by 2023.

    http://fortune.com/2017/02/02/saudi-arabia-renewable-energy-bid/
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    China's wind power capacity continues to grow


    Installed wind power capacity in China continued to grow in 2016, boosting clean energy.

    China had 149 million kW of installed wind power capacity as of the end of 2016, with 19.3 million kW added last year, according to the National Energy Administration (NEA).

    Wind power facilities generated 241 billion kWh of electricity in 2016, 4% of the country's total electricity production, compared with 3.3% in 2015.

    However, close to 50 billion kWh of wind power was wasted, up from 33.9 billion kWh a year earlier, due to distribution of wind resources and an imperfect grid system.

    China's energy mix is currently dominated by coal.

    http://www.sxcoal.com/news/4551846/info/en
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    Trump or no Trump.. the greens are coming

    Bad news petrol-heads; Trump or no Trump, the green revolution is coming to get you

    64 Comments

    Solar energy is likely to maintain momentum, regardless of Trump. Renewables have become as much a transformative tech shift as they are a regulatory response to global environmental challenges
    Solar energy is likely to maintain momentum, regardless of Trump. Renewables have become as much a transformative tech shift as they are a regulatory response to global environmental challenges CREDIT: DAVID MCNEW/GETTY IMAGES/DAVID MCNEW/GETTY IMAGES

    For Trump, the Paris agreement is the very embodiment of the “top down” multilateralism he and his ideological éminence grise, Steve Bannon, love to hate. What’s more, he thinks climate change is a “hoax”, or, as he once put it, a “very, very expensive form of tax”. Who knows; he may even be right. It wouldn’t be the first time the scientific orthodoxy has been entirely wrong.

    Already, the climate change lobby is in ragged retreat before the Donald’s penchant for government by pen-flourishing executive order, and the fossil fuel brigade in a state of resurgent, high excitement. We seem to be at the start of a new age of “drill, baby, drill” licence for the rednecks of Big Oil. Supposedly consigned to the dustbin of history by clean energy concerns, hydrocarbons are all of a sudden being given a new lease of life.


    Yet for those interested in the economics of energy, there is a much more significant question to answer than Trump’s designs on the Paris accord: whether climate change is a hoax or not, does it any longer matter? Put more succinctly, is it actually necessary to have binding national targets for carbon emissions in order to move to a low-carbon economy?

    If not, then Paris will eventually be seen as of little importance, a well-intentioned, but largely pointless talk-fest of backslapping mutual governmental congratulation barely deserving of a footnote in the history books.

    We may not be there quite yet, but we are close. Green technologies are reaching a tipping point of take-up, cost and efficiency which make their eventual wholesale adoption virtually inevitable, regardless of anything that might be done to reinvigorate fossil fuel industries in the meantime.

    Low carbon technologies have already seen extremely rapid market penetration worldwide
    Low carbon technologies have already seen extremely rapid market penetration worldwide

    It is the economics which will in future drive the transition to a low emissions environment, not government intervention and carbon taxes. Never mind electric cars and LED light bulbs, peering into the future, we can already see a world of virtually cost free energy, of smart phones powered by radiant light alone, and of office blocks and houses that derive all their energy from the sun, the wind, and their own waste.

    In terms of cost, longevity, and efficiency, all these technologies are showing almost exponential rates of improvement. Ironically, much of the cutting-edge research and development, from Elon Musk’s Tesla to thin-film solar cells and the latest in long-life battery storage, takes place in America.

    On energy and technology, as on so much else, the Donald and his advisers are a mass of contradictions

    Is the new administration seriously proposing to give up the country’s world leading position in clean energy for the essentially already obsolete technology of the internal combustion engine and the coal fired power plant? Of course not.

    Mr Trump might be on to something politically in the sentimentality of his appeal to the coal miners of Pennsylvania and West Virginia, but in terms of the hard-headed economics, no amount of environmental deregulation can turn back the clock and save these industries.

    As it happens, the decimation of American coal was not the work of subsidised renewables, but of the shale gas revolution, which Mr Trump thoroughly approves of. On energy and technology, as on so much else, the Donald and his advisers are a mass of contradictions.

    The “bird killing” wind turbines of America, so much hated by the new President, already employ nearly twice as many people as coal, most of them in relatively deprived, rural areas. Take away the tax breaks, and it will certainly slow their progress, but it won’t halt it.

    Coal isn’t yet entirely dead. It’s got some years left, particularly in the developing world. But its cost effectiveness is already under siege from the new technologies. Clean energy has developed an unstoppable momentum.

    Even oil industry stalwarts are beginning to see the writing on the wall. Remember “peak oil”? This was the idea popularised by a geologist at Shell back in the 1970s that fossil fuel reserves were finite and would soon reach maximum production potential, after which they would go into precipitous decline. By now, we were meant to be running out, resulting in sky high oil prices, rationing and descent into international conflict for scarce resources.

    Sarah Palen, who popularised the expression
    Sarah Palen, who popularised the expression "drill, baby, drill", with Donald TrumpCREDIT: AP PHOTO/MARY ALTAFFER/AP PHOTO/MARY ALTAFFER

    It never happened, and now almost certainly never will. In a report last week, BP estimated that there is today twice as much technically recoverable oil available as the world will need between now and 2050, making it highly likely that some oil reserves will never be extracted at all.

    This is quite an admission, for it implies that the oil industry has only got so much time left, and should be making hay while it still can. If demand is about to peak permanently, it makes sense to pump as much of the stuff now, regardless of the resulting glut and depressed price. The idea that underpins OPEC – that a barrel of oil is worth more left in the ground than extracted – is turned on its head.

    So spare the righteous indignation when Trump pulls out of the Paris accord; beyond the symbolism, it’s not going to make a great deal of difference.

    Analysis by Carbon Tracker and the Grantham Institute at Imperial College London published last week makes particularly grim reading for die-hard petrol-heads; the falling costs of electric vehicle and solar technology, it suggests, will halt growth in oil and coal far sooner than fossil fuel companies are willing to admit – so quickly, in fact, that it will render many of the targets for emission reductions agreed in Paris pretty much superfluous to requirements. They’ll be superseded of their own accord.

    The writers may be guilty of a certain amount of wishful thinking. When it comes to energy, all assertions need to be treated sceptically, for invariably they are instructed by vested interest. But the direction of travel is clear. Historic experience of new technologies, moreover, is that the speed of adoption nearly always greatly exceeds expectations, driving a virtuous circle of cost reduction and consequent take-up.

    So spare the righteous indignation when Trump pulls out of the Paris accord; beyond the symbolism, it’s not going to make a great deal of difference. The power of markets is much more likely to deliver results than the meaningless public relations of a self-congratulatory government target.



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    Agriculture

    EU set to approve ChemChina's $43 billion bid for Syngenta: sources


    ChemChina is set to secure conditional EU antitrust approval for its $43 billion bid for Swiss pesticides and seeds group Syngenta, the largest foreign acquisition by a Chinese company, two people familiar with the matter said on Thursday.

    The deal is important for China, the world's largest agricultural market, which is seeking to secure the food supply for its huge population. Syngenta's portfolio of top-tier chemicals and patent-protected seeds would boost its potential output.

    The Chinese state-owned company has agreed to minor concessions to allay the European Commission's concerns over its takeover of the world's largest pesticides maker. Regulators had been worried that the deal may lead to higher prices and fewer choices for farmers.

    ChemChina will divest a couple of national product registrations, including existing products and a few in the pipeline, in more than a dozen EU countries, one of the people said.

    The products are generally from ChemChina unit and Israeli crop protection company Adama while a few are from Syngenta, the person said. No plants, facilities or personnel are involved. Adama is the largest supplier of generic crop protection products in Europe.

    Commission spokesman Ricardo Cardoso declined to comment. It was not immediately possible to reach ChemChina for a comment outside regular office hours. Syngenta said it has not been notified of any decision by the Commission.

    The Commission may announce its approval next month, ahead of its scheduled April 12 deadline, the source said.

    Syngenta shares were 0.45 percent higher at 426.4 Swiss francs in late trade. The deal has already been approved by a U.S. national security panel.

    http://www.reuters.com/article/us-syngenta-ag-m-a-china-natl-chem-eu-idUSKBN15H1SQ
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    Base Metals

    Another year, another lead squeeze, but is this one different?


    Last year zinc was the star performer among the major base metals traded on the London Metal Exchange (LME).

    Might it be sister metal lead's turn to shine this year?

    The unglamorous heavy metal has already had a tumultuous start to 2017.

    LME three-month metal, currently trading around $2,340 per tonne, has notched up a year-to-date gain of over 16 percent, beating zinc into second place.

    Funds have been quietly lifting their exposure. As of the close of last week the money manager net long position was equal to 18.5 percent of open interest, a record level since the LME started publishing such data in July 2014.

    A ferocious squeeze on the London market has helped. The LME's benchmark cash-to-three-months spread CMPB0-3 traded out to $45.50-per tonne backwardation at one stage last month, a degree of tightness not seen since 2011.

    In the mix has been a dominant long position holder and a sharp rise in cancellations of LME lead stocks. The amount of metal earmarked for physical load-out from the LME warehouse system currently stands at 67,225 tonnes, representing almost 36 percent of total exchange stocks.

    Seasoned watchers of the London lead market might be forgiven for rolling their eyes at this point.

    We've been here before. There were similar squeezes on LME stocks in both March and December 2015 and neither of them had anything to do with real-world demand. Rather, they resulted from "warehouse wars" as storage operators competed for stocks and rental revenues.

    But this time might just be different because there is a growing sense that this opaque market might really be tightening up to the point that metal is now being hoarded in expectation of a physical squeeze later this year.

    Graphic on LME lead stocks; open and cancelled tonnage and ratio of cancelled tonnage since Jan 2015:

    HERE WE GO AGAIN?

    Last month's sharp contraction in time-spreads bore all the hallmarks of one of those periodic tussles for LME-stored lead that has enlivened an otherwise dull market in recent years.

    Some 15,000 tonnes of metal that were earmarked for physical load-out in the Dutch port of Vlissingen were placed back onto LME warrant.

    Within days another 43,000 tonnes of LME stocks had been cancelled, primarily at the South Korean port of Busan but also across a range of European locations.

    At the heart of all this stocks mayhem has been the unidentified entity gripping the nearby spreads. At times it has controlled positions equivalent to between 80-90 percent of available LME tonnage. The latest exchange report <0#LME-WHC> shows it still there with 50-80 percent of stocks.

    Superficially, this might look like the latest round in the tit-for-tat smash-and-grab "warehouse wars" that caused similar spread and stocks disruption in both 2015 and early 2016.

    LME metal would be cancelled and disappear from one location only to reappear in another, only for the original victim to turn aggressor and start the cycle again.

    The long-term impact on LME stocks has been negligible. They started this year at 191,650 tonnes, little changed from 221,975 tonnes at the start of 2015.

    But the word in the tight-knit lead trading community is that this time is different with traders rather than storage operators taking strategic physical positions in expectation of a looming squeeze on availability in the real world rather than paper market.

    SISTER METALS, TWIN DYNAMICS

    The squeeze has already started upstream at the mine concentrates stage of the supply chain.

    Treatment charges (TCs), which is what smelters charge miners for transforming raw material into metal, are the best indicator of what is happening in the concentrates part of the supply chain.

    And, according to research house Wood Mackenzie, spot TCs into China are currently below $20 per tonne, down from $80 just three months ago and the lowest level since at least the turn of the decade.

    In this respect lead is playing catch-up with zinc. The two metals are commonly found in the same deposits with lead the "ugly sister" by-product to zinc.

    The closure due to exhaustion of mines such as Century in Australia and Lisheen in Ireland may have grabbed the zinc headlines but both were also producers of lead.

    And while the zinc market is on tenterhooks as to when Glencore might reactivate the 500,000 tonnes of zinc mine capacity it shuttered at the end of 2015, it's easily forgotten that the same company has 100,000 tonnes of lead capacity in mothballs.

    Global mine production of lead fell by 3.3 percent in 2015 and by a sharper 7.5 percent over the first 11 months of 2016, according to the International Lead and Zinc Study Group.

    A SPECTACULAR YEAR?

    As with zinc, the consensus is that it's only a matter of time before the squeeze on raw materials translates into a squeeze on refined metal. Indeed, it might be happening faster in lead.

    "The supply deficit is the big story for 2017," according to Farid Ahmed, principal lead analyst at Wood Mackenzie.

    The company estimates last year's refined lead shortfall of 38,000 tonnes will become a more acute 86,000-tonne deficit this year.

    As ever with lead, there is considerable uncertainty as to what is happening in the scrap part of the supply chain, which accounts for a much higher ratio of supply than for other industrial metals.

    But, according to Ahmed, "the secondary sector is limited in its ability to respond to the primary shortfall," dependent as it is on the recycling of scrap batteries.

    Batteries fail during extremes of hot and cold weather rather than responding to any price or economic cycle.

    And with lead only accounting for around 14 percent of revenue for miners, new mine supply is going to depend on what happens to the price of zinc rather than its "ugly sister".

    Wood Mackenzie is forecasting the lead price to rise steadily through 2017 and to exceed $2,500 per tonne next winter during the "battery kill" peak demand season.

    "Stock movements point to major players positioning themselves ready for a major squeeze on metal availability," according to Ahmed.

    His conclusion is that "this year promises to be spectacular for lead".

    So maybe not just another "warehouse war" squeeze after all?

    http://www.reuters.com/article/lead-market-ahome-idUSL5N1FM457

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    Asia alumina: Australia slips 50 cents/mt on global stockbuild


    The Platts Australian alumina daily assessment slipped 50 cents/mt on Thursday to $336.50/mt FOB, as the market evolved from a tight or snug position, to being better supplied.

    In the last couple of days, a number of producer, consumer and trader sources have said the market appeared to be under downward pressure as more tonnage have become available.

    On Thursday, a supplier said he was expecting higher production rates in China to drag on the global alumina market. He thought the next March trade was likely to settle below $337/mt FOB Western Australia.

    In recent days, buyers guidance has been mentioned a number of times at $335/mt FOB Australia.

    There are tons to be had from Australia, India, Vietnam and possibly, Indonesia and Brazil.

    Additionally Chinese market participants have made overtures of being open to reselling imported tons, sources said in the last week.

    China's financial markets are set to reopen on Friday after a week-long holiday for the Lunar New Year.

    http://www.platts.com/latest-news/metals/sydney/asia-alumina-australia-slips-50-centsmt-on-global-27762163
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    Steel, Iron Ore and Coal

    Rio said to get approaches on last $1.5bn of coal assets


    Rio Tinto Group, which agreed last month to sell $2.45-billion of Australian assets, has received approaches for its remaining coal operations in the country, people with knowledge of the matter said.

    The London-based company is considering options for its Hail Creek and Kestrel mines, including a potential sale, according to the people, who asked not to be identified because the details are private. Its controlling stakes in the operations, which are located in Queensland state’s Bowen Basin and mainly produce coking coal used in steelmaking, could fetch as much A$2-billion ($1.5-billion), the people said.

    Rio, the world’s second-biggest miner, has been divesting Australian coal assets since dismantling its energy division in 2015. The company is focusing on its most profitable and long-life operations in iron ore, copper and aluminum as China’s economy matures and growth cools, Chief Executive Officer Jean-Sebastien Jacques told investors at a London seminar in December.

    The assets are Rio’s last producing coal mines globally after it agreed to sell its stakes in Australian thermal coal operationsto an arm of China’s Yanzhou Coal Mining for $2.45-billion. A formal sale process for Hail Creek and Kestrel may not begin until Anglo American decides whether to sell its Australian coking coal mines, the people said.

    Rio declined to comment in an e-mailed statement. The company said last month it has agreed or completed at least $7.7-billion of asset sales since 2013.

    Anglo American rejected a bid from Apollo Global Management and Xcoal Energy & Resources for its Moranbah and Grosvenor mines in Australia as too low, people familiar with the matter said in November. Other potential suitors for those assets included BHP Billiton, Warburg Pincus-backed mining investor Anemka Resources, Coronado Coal and AMCI Capital, the people said at the time.

    Rio owns 82% of Hail Creek and 80% of Kestrel, according to the company’s website. The two operations produced a combined ten-million metric tons of coking coal and 4.6-million tons of thermal coal last year, Rio said in a January 17 filing.

    http://www.miningweekly.com/article/rio-said-to-get-approaches-on-last-15bn-of-coal-assets-2017-02-02
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    Japan trading house Mitsubishi hikes profit outlook on strong coal prices


    Japanese trading house Mitsubishi Corp on Thursday hiked its net profit forecast for the current financial year by around a third, driven up as coking coal prices remain way above lows hit last year.

    The revised forecast of 440 billion yen ($3.9 billion) is higher than a consensus estimate of 372 billion yen from 13 analysts polled by Thomson Reuters I/B/E/S.

    The move comes after the trading house in November upgraded its profit guidance for the 2016/17 financial year, which ends in March.

    Coking coal futures on the Singapore Commodity Exchange soared in the second half of last year as top commodity consumer China clamped down on local production as part of a campaign against pollution.

    They have since dropped by about 40 percent to around $170 a tonne, but are still double what they were in mid-2016.

    "Coking coal prices have not hit bottom yet and are likely to fall slightly further," Kazuyuki Masu, chief financial officer of Japan's Mitsubishi Corp told a news conference on Thursday. But he added that the company did not expect a sharp fall.

    Mitsubishi's profit forecast underscores a V-shaped recovery from last financial year when it booked its first-ever annual net loss due to massive writedowns on a slump in commodity prices.

    Backed by strong earnings, Mitsubishi boosted its dividend forecast for the current year to 70 yen a share, against an earlier estimate of 60 yen and actual dividend of 50 yen a year earlier.

    For the April-December period, Mitsubishi reported a 54.8-percent climb in net profit to 371.5 billion yen, as healthy profit from its metals business offset lower earnings from non-resource segments such as machinery and infrastructure.

    Japanese trading houses such Mitsubishi and Mitsui & Co fulfil a quasi-national role by importing everything from oil to corn to sustain the country's resource-poor economy.

    http://www.reuters.com/article/mitsubishi-results-idUSL4N1FN1BG
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    Update on China coal provinces' 2017 de-capacity targets


    China's northern Shanxi and central Henan provinces will take the lead in coal capacity cut in 2017, both setting 20 Mtpa de-capacity target, according to the annual sessions of provincial legislatures held in January.

    The southwestern province of Guizhou followed with a capacity cut target of 15 Mtpa for this year.

    In 2017, Hebei, Jilin, Qinghai and Inner Mongolia aim to shed coal capacity of 7.42 Mtpa, 3.14 Mtpa, 1.32 Mtpa and 1.2 Mtpa, respectively.

    Central China's Hubei is determined to shut all coal mines in the next two years, while the capital city of Beijing said it will close all coal mines by 2020.

    For the de-capacity move in the steel sector, Hebei -- China's top production base – targets to eliminate 31.86 Mtpa capacity in 2017.

    Tianjin, Shanxi and Inner Mongolia has resolved to cut 1.8 Mtpa, 1.7 Mtpa and 0.55 Mtpa steel-making capacity this year, respectively.

    http://www.sxcoal.com/news/4551863/info/en
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    Yanzhou Coal 2016 profit may surge 120-140pct on year


    Net profit of Yanzhou Coal Mining Co. -- a leading coal producer based in eastern China's Shandong province – is expected to surge 120-140% year on year in 2016, it said in the latest statement.

    In 2015, the company's net profit stood at 859.5 million yuan ($124.6 million), data showed.

    The increase was mainly due to rising coal prices amid the government's supply-side reform and the company's cost cut and efficiency increase.

    Yancoal Australia Ltd., an Australian unit of Yanzhou Coal Mining, bought Coal & Allied Industries Ltd. from Rio Tinto at $2.45 billion last month, making itself the largest coal producer in Australia.

    http://www.sxcoal.com/news/4551867/info/en
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    Arch Coal well-positioned for higher pricing environment: analyst

    Arch Coal well-positioned for higher pricing environment: analyst

    Arch Coal's exposure to high quality metallurgical coal and Powder River Basin thermal coal should position the producer well in 2017's higher priced environment, an analyst said Wednesday.

    New York-based FBR estimates that the St. Louis-based producer, which emerged from Chapter 11 bankruptcy in October after only nine months, has higher exposure to the burgeoning met coal markets through its flagship Leer Mine in West Virginia.

    FBR said that Arch could realize $150/mt Q1 mine prices for its open met coal tonnage. The miner had previously announced hedges at $67/mt in Q3 2016, FBR said.

    FBR also believes that improving domestic thermal coal markets will improve over the next six-12 months, creating opportunities for Arch.

    "We believe [Arch] has spare capacity in the PRB that could be activated for the right price," FBR analyst Lucas Pipes said in a note. "We believe Arch's hurdle rate for increased production is fairly high, which we view positively in a market previously plagued by little production discipline."

    Arch's Black Thunder mine in the PBR produced 67.9 million st in 2016, down 31.7% from the prior year, according to data from the Mine Safety and Health Administration.

    Following Arch's emergence from bankruptcy, the company had $311 million in cash against total debt of approximately $360 million, FBR's Pipes said.

    "Arch can maintain production at low cash costs without a major step-up in capital expenditures," the analyst said.

    Arch reports its Q4 and 2016 year-end earnings results February 8.
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    After 16 attempts, a cheaper method for carbon capture at work in India


    As students at the prestigious Indian Institute of Technology in Kharagpur in eastern India, Aniruddha Sharma and Prateek Bumb had one obsession: finding a cheaper, more efficient way to capture carbon emissions to combat climate change.

    They began working on the problem in 2009, while still at university. The eureka moment came after numerous trials and errors that required re-starting the process 16 times.

    With no help from the Indian government, Sharma and Bumb tapped private investors. They also won prize money of 3.6 million pounds ($4.5 million) in a UK competition, giving them access to scientists and academics in the field.

    "Carbon capture technology may have the single biggest impact on emissions reduction," said Sharma, co-founder of Carbon Clean Solutions (CCS), now based in London.

    "But for it to be widely used, it's very important that the technology be cost-effective," he told the Thomson Reuters Foundation.

    India is the world's fourth largest emitter of greenhouse gases. As a signatory to the Paris Agreement on climate change, it has committed to ensuring at least 40 percent of its electricity is generated from non-fossil fuel sources by 2030.

    However, India - and other nations - also are looking for ways to reduce climate-changing emissions from burning fossil fuels.

    Capturing carbon dioxide produced by power plants is one way to cut those emissions. But while most previous technologies have focused on capturing the emissions and pumping them below ground, CCS's technique is a capture-and-utilize one.

    It uses a patented molecule that captures carbon dioxide from power plant emissions and uses it to make other useful products like baking soda.

    The technology can be retrofitted onto existing plants, and is cheaper and more efficient than existing methods, Sharma said.

    POLICY SUPPORT

    Worldwide, technology to capture carbon dioxide emissions and store them underground has struggled to find traction.

    The UK scrapped plans to spend up to 1 billion pounds to commercialize the technology just days before the Paris climate meeting in 2015.

    Nevertheless, countries and companies are still keen.

    BHP Billiton last year gave $7.4 million to China's Peking University to develop carbon capture technology.

    India offers no subsidies for carbon capture and instead focuses on increasing its renewables capacity to cut emissions.

    "To encourage innovations like this, we would need more state backing, just as we have seen in the renewables space," said Aruna Kumarankandath at the Centre for Science and Environment in Delhi.

    "These technologies are hard to develop and scale."

    There is clearly a market: while Sharma and Bumb's Carbon Clean Solutions has found takers in Europe, its biggest vote of confidence has come from India.

    Tuticorin Alkali Chemicals & Fertilizers has used the technology at its plant in southern Tamil Nadu state since October.

    At the plant, carbon dioxide is captured from a coal-fired boiler and converted into soda ash, which is used in glass manufacturing, sweeteners and detergents.

    The process is projected to save 60,000 tonnes of carbon dioxide emissions a year, a world first, according to Sharma.

    The cost of capture is about $30 per ton - about half the cost of other technologies in the market, he said.

    "The next wave of innovation will reduce the cost further, perhaps even by half, to the point where it's almost equivalent to or less than the emissions tax," he said.

    "Then it would make more sense to capture the carbon than to emit it," he said.

    http://www.reuters.com/article/us-india-renewables-power-idUSKBN15H08I
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    Iron Ore: $80 odd is bigger deal now than last time.

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    Stainless steel maker Outokumpu proposes first dividends since 2010


    Outokumpu, Europe's largest stainless steel maker, reported its first annual core operating profit since 2007 on Thursday and proposed its first dividend since 2010, sending its shares sharply higher.

    The Finnish company, which has struggled since the financial crisis and an unsuccessful acquisition of Thyssenkrupp's Inoxum unit in 2012, swung back to profit helped by cost cuts and rising sales at its Americas division.

    Underlying operating profit rose to 45 million euros ($49 million) last year, matching analysts' expectations, from a loss of 101 million in 2015, but a proposed annual dividend of 0.10 euros per share came as a surprise to all analysts in a Reuters poll.

    "The turnaround secured in 2016, combined with the progress made in debt reduction and the positive outlook that starts the year 2017, presents also the right time to start paying dividends," CEO Roeland Baan said in a statement.

    It expects the stainless steel market to be strong in the first quarter both in Europe and United States, and that higher ferrochrome prices will help its profitability in Europe.

    Outokumpu forecast its adjusted EBITDA to increase above 250 million euros in the first quarter of 2017, compared to 38 million a year earlier.

    Shares in the company rose 6.9 percent by 1055 GMT.

    "That first-quarter forecast is very bullish, and no one was expecting a dividend. They have taken the right measures and the market is favourable at the moment," said Antti Kansanen, analyst at Evli brokerage, with a "buy" rating.

    The company cut its net debt target to below 1.1 billion euros at the end of the year, down by 100 million from the previous forecast.

    http://www.reuters.com/article/outokumpu-results-idUSL5N1FN315
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    ArcelorMittal increases European Q2 HRC, CRC, HDG offers


    ArcelorMittal has increased its offer levels for coil products in the second quarter, with the company noting particular strength in the hot dipped galvanized market.

    Offer levels for base grade ex-works HDG are now up to Euro730/metric ton, while cold rolled coil and hot rolled coil has been set at Euro700/mt and Euro600/mt respectively, in line with market expectations.

    The announcement suggests continued acceptance of higher prices. By comparison, ArcelorMittal's Q1 offers were set at Euro575/mt for HRC, Euro680/mt for CRC and Euro690/mt for HDG, all on an ex-works basis.

    The company confirmed HDG is the strongest performing product with demand less dependent on the automotive sector than previously, and buying requirements rising in most sectors.

    "It's really about a supply and demand situation which is very favorable, and it's really European wide. We see a European price level with very similar supply/demand. It's the same price for the north, south and east," a senior executive at the company said.

    High zinc costs are also persisting and filtering into cots, with the price at $2872/mt as of 10am (February 2) on LME Select, up from around $2500/mt at the start of the year.

    Market sources had long been anticipating the announcement and it is expected that other major mills will unveil official Q2 prices in the coming weeks.

    http://www.platts.com/latest-news/metals/london/arcelormittal-increases-european-q2-hrc-crc-hdg-26653235

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    U.S. steps closer to slapping duties on stainless steel sheet from China


    The U.S. Commerce Department on Thursday stepped closer to placing duties on imports of stainless steel sheet and strip from China, issuing a final determination that the products were being subsidized and dumped in the U.S. market at below fair value.

    The department said it affirmed antidumping duties ranging from 63.86 percent to 76.64 percent on the imports, and an anti-subsidy rate of 75.60 percent for mandatory respondent Shanxi Taigang Stainless Steel Co Ltd.

    The duties will go into effect for five years if the U.S. International Trade Commision subsequently affirms its earlier finding that U.S. producers were being harmed.

    AK Steel Corp, Allegheny Ludlum, North American Stainless and Outokumpu Stainless USA had brought the case seeking relief. Imports of the products from China were valued at an estimated $302 million in 2015, according to the department.

    The U.S. International Trade Commission is scheduled to make its final determination of injury to U.S. producers on or about March 20.

    http://www.reuters.com/article/us-usa-china-steel-idUSKBN15H30J
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