Mark Latham Commodity Equity Intelligence Service

Monday 13th February 2017
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    N Korea tests ballistic missile

    The U.S. Army is slated to deploy 24 AH-64D Apache heavy attack helicopters to the Korean Peninsula to better deter military threats from North Korea, United States Forces Korea (USFK) announced in a January 8 statement.

    The heavy attack helicopters will replace 30 OH-58D Kiowa Warrior observation and light attack helicopters. Around 360 U.S. Army personnel are expected to replace a similar number of U.S. troops currently serving with the OH-58D unit.

    “The 1-6th Heavy Attack Reconnaissance Squadron (H-ARS) will begin to arrive to Korea on this month, bringing with them 24 AH-64 Apache helicopters. As part of a scheduled rotation, the Apaches will replace the 30 OH58D’s currently stationed on the Korean Peninsula,” the statement reads.


    A Texas-based squadron of B-1B Lancers has arrived on Guam to assume U.S. Pacific Command’s continuous bomber presence mission at Andersen Air Force Base.

    An undisclosed number of Lancers from Dyess Air Force Base’s 7th Bomb Wing, 9th Expeditionary Bomb Squadron arrived on the island Monday, an Air Force statement said.

    They’ll take over for a Lancer squadron out of Ellsworth Air Force Base, S.D., that arrived at Andersen in August to replace an aging fleet of B-52 Stratofortresses.

    “Since 2004, Air Force bombers such as the B-1, the B-52 and the B-2 Spirit have been in continuous rotations, providing nonstop stability and security in the Indo-Asia-Pacific region,” the statement said.

    Guam-based Lancers conduct “routine strategic deterrence and regional training missions,” the statement said.

    The four-engine supersonic jet was designed for nuclear capabilities but switched to an exclusively conventional combat role in the mid-1990s, according to Boeing’s website.

    US will also dispatch a dozen F-16s to Guam in mid-January.

    US supercarrier USS Carl Vinson and its strike group, alongside nuclear capable B-52 and B-1B bombers are being considered for the massive operation.After a month at sea, sailors aboard the USS Carl Vinson Strike Group were greeted to a warm “Hafa Adai” welcome at the US Guam Naval Base.

    Guam - Sailors from the USS Carl Vinson Strike Group were greeted today with welcome home signs and tears of joy. The sailors have been deployed since January 5, marking this port visit the first for the carrier in their Western Pacific Deployment.

    Image title

    The Zumwalt-class destroyer is a class of United States Navy guided missile destroyers designed as multi-mission stealth ships with a focus on land attack. Futuristic rail guns are also due to be attached to the stealth vessel – which use electromagnets to hurl slugs at speeds of up to 5300mph.

    Feb. 7 (UPI) -- China voiced its opposition to a U.S. proposal to deploy the USS Zumwalt in the waters surrounding the Korean peninsula, a development that Beijing says it is "watching closely."

    Foreign ministry spokesman Lu Kang said on Tuesday "all countries concerned should work toward military cooperation for the sake of peace and stability, and tensions should not be created."

    Lu added China is opposed to any measures that affect China's security interests, South Korean news agency Yonhap reported.

    In January, Adm. Harry B. Harris, Jr., commander of the U.S. Pacific Command, proposed deploying the United States' largest missile destroyer near Korea's southernmost Jeju Island.

    The $4 billion USS Zumwalt is a multi-mission stealth ship with a displacement of about 15,000 tons.

    10 Feb: President Trump told President Xi Jinping of China on Thursday evening that the United States would honor the “One China” policy, reversing his earlier expressions of doubt about the longtime diplomatic understanding and removing a major source of tension between the United States and China since shortly after he was elected.

    In a statement, the White House said Mr. Trump and Mr. Xi “discussed numerous topics, and President Trump agreed, at the request of President Xi, to honor our One China policy.” It described the call as “extremely cordial” and said the leaders had invited each other to visit.

     "Pacific Air Forces will send 12 F-22 Raptor aircraft and approximately 190 airmen to Royal Australian Air Force Base Tindal in early February to conduct combined exercises and training missions with the Royal Australian Air Forces," the official article on the web site stated on Friday.

    The F-22 can also carry air-to-surface weapons such as bombs with Joint Direct Attack Munition (JDAM) guidance and the Small-Diameter Bomb, but cannot self-designate for laser-guided weapons.[151] Internal air-to-surface ordnance is limited to 2,000 lb (910 kg).[152] An internally mounted M61A2 Vulcan 20 mm rotary cannon is embedded in the right wing root with the muzzle covered by a retractable door to maintain stealth.[153] The radar projection of the cannon fire's path is displayed on the pilot's head-up display.[154]

    F-22 with external weapons pylons

    The F-22's high cruise speed and altitude increase the effective ranges of its munitions, with the aircraft having 50% greater employment range for the AIM-120 AMRAAM than prior platforms.[120] While specifics are classified, it is expected that JDAMs employed by F-22s will have twice or more the effective range of legacy platforms.[155] In testing, an F-22 dropped a GBU-32 JDAM from 50,000 feet (15,000 m) while cruising at Mach 1.5, striking a moving target 24 miles (39 km) away.[156]

    The missile, the first test since Mr Trump became president, was launched from Banghyon air base in the western province of North Pyongan, and flew east towards the Sea of Japan, the South Korean defence ministry said.

    It flew about 500km before falling into the sea, a ministry spokesman said, adding the exact type of missile had yet to be identified.

    "Today's missile launch... is aimed at drawing global attention to the North by boasting its nuclear and missile capabilities", the ministry said in a statement.

    "It is also believed that it was an armed provocation to test the response from the new US administration under President Trump," it added.

    Mr Trump responded with an assurance to the visiting Japanese prime minister that Washington was committed to the security of its key Asian ally.

    "I just want everybody to understand and fully know that the United States of America stands behind Japan, its great ally, 100 percent," Mr Trump said, without elaborating.

    Mr Abe denounced the launch as "absolutely intolerable" while top government spokesman Yoshihide Suge told reporters in Tokyo it was "clearly a provocation to Japan and the region.

    The Trump administration had been expecting a North Korean “provocation” soon after taking office and will consider a full range of options in a response to Pyongyang’s missile test, but calibrated to show U.S. resolve while avoiding escalation, a U.S. official told Reuters on Saturday.

    The new administration is also likely to step up pressure on China to rein in North Korea, reflecting President Donald Trump's previously stated view that Beijing has not done enough on this front, the official said, speaking on condition of anonymity.

    “This was no surprise,” the official said. "The North Korean leader likes to draw attention at times like this."

    Trump and his aides are likely to weigh a series of possible responses, including new U.S. sanctions to tighten financial controls, an increase in U.S. naval and air assets in and around the Korean peninsula and accelerated installation of new missile defense systems in South Korea, the official said.

    US commanders plan to execute their strategy to annihilate the threat from North Korea in a massive war games operation dubbed Key Resolve.

    Warships, bombers, fighter planes and soldiers will all be on-hand for the colossal military exercise which will be the largest on record in the Korean Peninsula.

    North Korea's nuclear weapons will be "destroyed" in a simulated scenario designed to test the military strength of the US in the Pacific and its ally South Korea.

    Attached Files
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    Australia heat wave causes firms to power down but blackouts avoided

    Major energy users in Australia shut down on Friday, and the public were asked not to go home and cook or watch television, averting big blackouts amid strained supplies as an extreme heat wave moved from the desert interior to the east coast.

    The temperature climbed to 47 Celsius (117 Fahrenheit) in parts of New South Wales (NSW) state and the Australian Capital Territory on Friday, while Saturday is expected to see a record for the hottest February day on record.

    The extreme heat caused power prices to soar to an unprecedented A$14,000 per megawatt-hour (MWh) as power stations struggle to meet skyrocketing demand for cooling.

    Authorities had been preparing to temporarily suspend power to selected areas of New South Wales late on Friday to prevent overload just days after 40,000 homes and businesses lost electricity in the state of South Australia.

    But the Australian Energy Market Operator (AEMO) said late on Friday tight power supply conditions had subsided for the day, without power cuts to residents.

    "AEMO can confirm that residential load shedding was not required at any point throughout the day ... predominantly due to reduced electricity consumption across the state," it said in a statement.

    Earlier, NSW Energy Minister Don Harwin urged households and businesses to save electricity.

    "Rather than going straight home and turning on the television and cooking, (you might) want to consider going to a movie, going out to a shopping center, keeping the load low, every bit like that helps," Harwin told reporters in Sydney.

    A paper mill, water treatment operations and Australia's largest aluminum smelter, Tomago, were among businesses that halted operations to conserve energy, with many industrial users required to do so under their contracts.

    The Tomago smelter, which exports to Southeast Asia, Japan and China, is the single largest consumer of electricity in NSW and is jointly owned by Anglo-Australian group Rio Tinto and Oslo-based Norsk Hydro.


    Weather forecaster Olenka Duma said a build-up of heat in the vast interior outback was being pushed east across NSW, the country's most populous state.

    "It was like the windows and doors were closed for a long time, and now a weather front has dragged the hot air here," Duma, an official of the Bureau of Meteorology, told Reuters.

    It was even too hot for ice cream.

    "I'm not doing any business today, I'm just sitting in the air-conditioning at home," said Ned Qutami, owner of six mobile ice cream bars in Sydney.

    "People at the beach are either in the water or heading home. No one is hanging around to eat ice cream," said Qutami, who runs Sydney Ice Cream & Coffee in beachside suburbs.

    The intense heat and power outages have sparked debate over energy security, after the market operator told power companies in South Australia state on Wednesday to switch off some customers' power supply for a short spell to manage demand.

    South Australia depends on wind for more than a third of its power supply, and the wind died down at the same time as people started cranking up air-conditioners.

    That was the latest in a string of power disruptions and electricity price spikes to hit the southern state, including a state-wide blackout that forced copper mines, smelters and a steel plant to shut for up to two weeks last September.

    The problems have sparked a review of the national electricity market and energy policy on how to cope with rapid growth of wind and solar power and the closure of coal-fired power plants that have been essential for steady supply.
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    Peru judge orders international arrest warrant for ex-president Toledo

    A Peruvian judge issued an international arrest warrant for former president Alejandro Toledo and said he should spend up to 18 months in jail while prosecutors investigate him for allegedly taking $20 million in bribes from Brazilian builder Odebrecht SA.

    Judge Richard Concepcion said evidence uncovered so far in a graft probe, including testimony from an Odebrecht executive and bank records, warranted putting Toledo in "preventive prison" while charges of influence peddling and money laundering were prepared.

    In issuing an arrest warrant, Concepcion said Toledo appeared to have used the "high office of the presidency" to "make an illegal pact" to sell off a highway project that promised to integrate the region.

    Toledo, who rose to power denouncing the corruption of his predecessor, has repeatedly denied taking bribes from Odebrecht. Toledo was in France last week and absent from the hearing.

    If found guilty, he could be sentenced to up to 15 years in prison, lead prosecutor Hamilton Castro said.

    Toledo "laughed at Peruvian society, he laughed at the expectations Peruvian society had for ... clean public work projects," Castro told the court hearing into the prosecutor's request for "preventive prison" for Toledo.

    Toledo's attorney Heriberto Benitez accused the judge of having a "vengeance" and said he would appeal against the ruling.

    "He can't come back ... I wouldn't recommend it," Benitez told reporters. "With judges like this, careful!"

    The government of President Pedro Pablo Kuczynski, who served as Toledo's finance minister and prime minister a decade ago when the contracts were awarded, said it would offer a reward for information leading to Toledo's capture if he did not turn himself in.

    Odebrecht has been at the center of a growing graft scandal in Latin America since admitting to doling out hundreds of millions of dollars in bribes from Peru to Panama.

    The revelation, made in U.S. courts in December, threatens to implicate presidents and former presidents who once promoted the hydroelectric plants, highways and irrigation canals that Odebrecht has built in the past two decades.

    Toledo, a shoeshine boy turned economist who plays up his indigenous roots, inspired scores of Peruvians to vote for him in 2001 as an antidote to widespread graft in the government of Alberto Fujimori, who is now serving a 25-year prison sentence for corruption and human rights abuses.

    Prosecutor Castro opened his case, that Toledo be jailed while investigations continue, quoting the Incan law "ama sua" or "do not steal."

    He said Toledo met the head of Odebrecht Peru, Jorge Barata, in a luxury hotel in Rio de Janeiro in 2004 and promised to help the firm win two highway contracts in exchange for $35 million.

    Odebrecht only paid $20 million because Toledo did not change the bidding terms to exclude competitors, Castro said, citing testimony from Barata. Toledo did, however, change laws to pave the way for Odebrecht's bid and pressured the tendering committee to pick its proposal, Castro said.

    Some $10 million in transfers from Odebrecht have been traced to offshore companies linked to Yosef Maiman, an Israeli businessman and longtime friend of Toledo tasked with receiving the bribes, Castro said.

    Maiman did not respond immediately to requests for comment.

    The contracts helped pave a highway from the Andes through the Amazon to connect Peru's Pacific ports and Brazil's Atlantic shores. Originally requiring an investment of $658 million, cost overruns pushed the final price tag for the two contracts to $1.34 billion, according to the comptroller.

    Odebrecht and its junior partner on the projects, Peru's biggest construction conglomerate, Grana y Montero, still maintain a 656 km (400 miles) stretch of the highway.
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    Oil and Gas

    Brent spreads imply big draw down in crude stocks after June

    Brent futures prices indicate the crude market is expected to move into a deficit with a significant draw down in stocks from the middle of the year.

    Brent futures are trading close to full contango or full carry through until June but thereafter the calendar spreads are no longer wide enough to cover the cost of storing and financing oil stocks.

    Most stocks are held involuntarily because the oil is in transit from the well to the refinery or because the stocks are needed to meet the operational requirements of refiners.

    But beyond these operational requirements, traders will hold inventories only if prices are expected to rise or they can cover their storage and financing costs by running a short position in the futures market.

    The structure of futures prices therefore determines the profitability of storing oil beyond minimum operating needs, so called “cash and carry” trades.

    On Feb. 9, the structure of Brent futures prices provided around 37 cents per barrel to hold stocks between April and May and around 33 cents to hold stocks from May to June.

    If the cost of onshore storage is around 20-30 cents per barrel per month and the cost of borrowing is around 2 percent per year, storage is just about profitable in May and June.

    But the spread from June to July is just 24 cents and it declines even further to just 15 cents from July to August and 6 cents from August to September. There is no way oil storage can be profitable at such low spreads.

    The economics of storage is very sensitive to assumptions about the cost of leasing tank farm space and borrowing money.

    The figures used above are purely illustrative. Some traders will have access to storage much cheaper (or more expensive) than these figures.

    Both the cost of leasing space and the cost of borrowing is specific to the tank farm and the storage company so will vary.

    Onshore storage is generally much cheaper than offshore storage, and some companies will have access to financing at lower costs than others.
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    Non-OPEC delivers 40 pct of pledged oil curbs in January - OPEC sources

    Eleven non-OPEC oil producers that joined a global deal to cut output to boost prices have delivered 40 percent of promised curbs in January, two OPEC sources said.

    The sources cited OPEC calculations based on data from the International Energy Agency.

    OPEC’s figures, reported earlier on Friday by Reuters, put its own compliance at 92 percent.

    The Organization of the Petroleum Exporting Countries, Russia and other producers agreed to cut oil production by a combined 1.8 million bpd in the first half of 2017 to boost prices and get rid of a supply glut.

    The lower compliance figure for non-OPEC to date is partly due to the phased implementation of the deal by Russia, the largest non-producer cooperating with OPEC.

    Russia said it would phase in its share of the cut gradually rather than in the first month of the agreement and in January lowered supply by 100,000 bpd. Moscow pledged to reduce output by 300,000 bpd in the agreement.

    An OPEC and non-OPEC technical committee due to meet in Vienna on Feb. 22 will look further at how to assess compliance with the deal.
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    India’s Oil Demand Plunges Most in 13 Years Amid Cash Ban

    India’s monthly oil demand fell the most since May 2003 as the government’s crackdown on high-value currency notes continued to reverberate through the country’s $2 trillion economy.

    Fuel consumption fell 4.5 percent to 15.5 million tons in January from 16.2 million tons a year ago, the Oil Ministry’s Petroleum Planning and Analysis Cell said Friday. Diesel use, which accounts for about 40 percent of total fuel demand in India, dropped 7.8 percent to 5.8 million tons, the biggest decline since September. Gasoline consumption fell the most since June.

    Expansion in the world’s fastest-growing major economy is under pressure after Prime Minister Narendra Modi in November withdrew high-value currency notes in a country where almost all consumer payments are in cash. Growth in gross domestic product may slow to 6.5 percent in the year through March from 7.9 percent the previous year, according to an Economic Survey presented by the finance minister’s advisers.

    “This decline in demand is due to demonetization,” according to Tushar Tarun Bansal, director at Ivy Global Energy. “I would expect this decline to be a one off and dissipate from February. This should result in a slower demand growth for diesel in the first quarter in 2017.”

    India imports more than 80 percent of its crude requirement and the International Energy Agency expects it to be the fastest-growing consumer through 2040. In most areas people are spending the same amount on fuel that they did before the money crackdown, although some rural areas and small businesses are still affected, according to Bansal.

    Petcoke consumption fell for the first time in more than a year, declining about 9.9 percent to 1.95 million tons. Gasoline consumption fell 0.6 percent to 1.8 million tons. Liquefied petroleum gas use expanded 16.4 percent to 2 million tons, while jet fuel demand increased 17.8 percent to 627,000 tons.
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    Tide turns for Asia oil upstream sector as crude's ascent ends somber spell

    After a two-year struggle to stay afloat, upstream activity in Asia's oil sector is finally starting to show signs of revival, as a steady climb in crude oil prices is making the market believe that the sector in the region might have reached an inflection point.

    Even if investors may not rush immediately to pour in millions of dollars into exploration activity, leading players in the region are saying that companies are now beginning to at least test the economic viability of exploration and development projects, and some are even ready to seal deals.

    Shell's late-January agreement to sell its stake of more than 22% in the Bongkot field in Thailand to state-owned Kuwait Foreign Petroleum Exploration Co. has sent a strong signal that the market is starting to become conducive for signing deals -- companies are more willing to buy assets.

    "The worst is over for the E&P industry in Asia," said Gordon Kwan, head of oil and gas research at Nomura. "If oil prices continue to march toward $60/barrel, we should see a gradual increase in E&P spending in Asia, with focus on China offshore and development of previous discoveries in Vietnam, Philippines and Malaysia."

    Shell's $900 million agreement with Kufpec covers sale of subsidiaries -- Shell Integrated Gas Thailand and Thai Energy Co. -- which together hold a 22.222% equity stake in the Bongkot field. This is along with the adjoining offshore acreage for blocks 15, 16 and 17, as well as block G12/48.

    The acquisition of the Bongkot assets provides Kufpec with 68 million barrels of oil equivalent in proved and probable reserves, and approximately 39,000 boe/d of production from 2016.

    Wood Mackenzie said in a recent report that the Asia-Pacific's upstream oil sector holds upto $40 billion worth of opportunities in 2017 as oil majors continue to divest mature and mid-life assets in the region.

    "The decline in upstream activity we have seen since the dramatic fall in oil prices seems to have bottomed out in Southeast Asia," said Richard Lorentz, director of business development at upstream oil and gas company KrisEnergy. "Companies in the region are now beginning to test the economic viability of exploration and development projects using a much lower commodity price than prior to the drop of 2014."


    Activity in the upstream sector may not have surged yet, but the region is certainly seeing pockets where both government and private companies are willing to take risk and boost spending.

    In January, Indonesia started the process of handing out upstream contracts using the new gross split scheme, with the Offshore North West Java block awarded to state-owned Pertamina to develop over 20 years -- the first to be awarded under this system. The ONWJ block contains 309.8 million barrels of crude and 1.114 Bcf of gas.

    The government has also appointed Pertamina to develop eight other blocks that are expiring in 2017-2018. The eight blocks include: Attaka, offshore east Kalimantan; South East Sumatra, offshore South Sumatra; Tengah, offshore East Kalimantan; East Kalimantan block in East Kalimantan; North Sumatra Offshore, offshore North Sumatra; Sanga-Sanga block, onshore East Kalimantan; Tuban, onshore East Java; and Ogan Komering in South Sumatra.

    Thailand's PTTEP aims to focus on accelerating exploration projects in Thailand and Southeast Asia, while actively seeking merger and acquisition opportunities to enhance oil reserves and production. It plans to allocate 64% of its estimated capital expenditure in 2017 to Thailand, and focus primarily on maintaining production levels at existing projects.

    Another 24% will be allocated to projects in neighboring countries, particularly those in production or exploration stage in Myanmar. The remainder 12% will be for projects in Australia, Africa, and North and South America, including the PTTEP Australasia Project and the Mozambique Rovuma Offshore Area 1 Project.

    "Between 2010 and 2016, national oil companies were the main buyers in Asia-Pacific, acquiring over 2 million boe of commercial reserves. This year we expect to see more buying activity from local independents and private equity-backed players," said Prasanth Kakaraparthi, senior upstream research analyst at Wood Mackenzie.

    "Domestic utilities and refiners, Japanese players and Middle-Eastern NOCs looking for growth opportunities are also possible acquirers," he added.

    In China, Chevron is hoping to be able to boost production from its Chuandongbei natural gas project, which would eventually contribute to the company's overall increase in oil and gas production by 4%-9% in 2017.

    "In China, to arrest the decline in crude production and for any E&P activity to be sustainable, we will need to see prices rising beyond $65/barrel," said Tushar Bansal, director at Ivy Global Energy, an independent oil and gas research consultancy.

    In Bangladesh, the government has decided to award South Korean Posco Daewoo Corp. permission to carry out the first hydrocarbon exploration in deep-water block DS-12, after the cabinet committee on economic affairs February 8 approved the signing of a production sharing contract. Currently, no oil and gas exploration is being carried out in Bangladesh's deep-offshore blocks.

    Wood Mackenzie added that Myanmar, which holds some of the last remaining frontier acreage in an otherwise mature region and accounts for the bulk of frontier exploration drilling, would be the brightest spot in Asia-Pacific in 2017.


    However, all these projects are expected to move slowly, as governments and companies keep a close eye on the oil price trend.

    "The macro environment remains challenging, especially in the face of policy uncertainties from Donald Trump's administration and the impact on Asian trade and commodity prices. Oil companies are still very cost conscious," Kwan of Nomura added.

    Some analysts were of the view that Asian countries might speed up work on some of the ongoing E&P projects but were still not keen to look for completely new projects within the region. They are instead looking for projects outside of Asia-Pacific region.

    "Asian E&P activity is falling out of favor among international oil companies. They are diverting capital to resources elsewhere, for example, to the Middle East and the United States," said Virendra Chauhan, senior oil analyst at Energy Aspects.

    "Outside of projects for which investments have already been made in Asia, such as the Malikai project in Malaysia, there are very few large projects which could deliver material growth," he added.

    Malikai is Shell's second deep-water project in Malaysia and is located 100 km off Sabah. It comprises two main reservoirs, with a peak annual production of 60,000 b/d. The field is part of the Block G Production Sharing Contract awarded by Petronas in 1995. Shell, the operator, and ConocoPhillips each has a 35% interest in the development, while Petronas Carigali has 30%.
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    Asian gasoline crack to Brent crude hits 13-month high on strong demand

    Strong demand pushed the physical benchmark FOB Singapore 92 RON gasoline crack against front-month ICE Brent crude futures to a 13-month high of $13.14/b at the Asian close last Friday, S&P Global Platts data showed.

    The crack was last higher on January 27, 2016, at $13.32/b, Platts data showed.

    Demand is being driven mainly by Abu Dhabi Oil Refining Co.'s, or Takreer's, requirements for March-April. Production from its 840,000 b/d Ruwais refinery in the UAE had been reduced to 50% by the closure of its west refinery due to a fire January 11 at its 127,000 b/d RFCC, crimping gasoline production.

    To plug the shortfall, ADNOC is seeking 240,000 mt of 95 RON gasoline in nine 27,000 mt cargoes over March-April delivery in a tender valid until February 19.

    Demand within Asia was also buoyant, with firm buying from Indonesia and Vietnam. Indonesia's March requirements were heard to be around 10 million-11 million barrels, more than February's 8 million-9 million barrels of imports. Recently concluded tenders in Asia also reflected an uptrend in cash differentials.

    Taiwan's CPC sold 30,000 mt of 92 RON gasoline for March 6-22 loading from Kaohsiung at a premium of 30-40 cents/b to the Mean of Platts Singapore 92 RON gasoline assessments on an FOB basis.

    It had previously sold two cargoes of 92 RON gasoline for February loading at premiums of 25-30 cents/b to the MOPS 92 RON gasoline assessments, FOB.

    A source close to the company said there were more bids for the latest tender than for the previous month.

    Supply is also expected to be lower over March-April due to maintenance season.

    Taiwan's Formosa Petrochemical Corp. will partially shut its 540,000 b/d Mailiao refinery for maintenance from mid-March to end April, while refineries in Indonesia have a heavy turnaround schedule over March-April, market sources said.

    The rally in NYMEX March RBOB futures further boosted the market. In the US, Energy Information Administration data showed a surprise draw in US gasoline stocks, which fell 869,000 barrels to 256.2 million barrels in the week ended February 3 after five straight weeks of builds.
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    Total CEO says first Yamal LNG cargo expected by October

    Total Chief Executive Patrick Pouyanne said on Thursday that the first shipment from the $27 billion Yamal LNG project it is developing in Russia with Novatek could be sent before October this year.

    Pouyanne said during a presentation to investors on Total’s 2016 financial results that Novatek’s CEO Leonid Mikhelson told him that the first LNG shipment would leave the facility by October.

    “Mister Mikhelson promised to me that they will deliver LNG by October 2017… I trust him…,” Pouyanne said during the presentation.

    The liquefied natural gas project in the Yamal peninsula in Siberia is expected to produce a total of 16.5 million tonnes of LNG per year. Almost all of the volumes from the project have already been contracted.

    Shareholders in the Yamal LNG project are Novatek, as the operator with a 50.1 percent stake, CNPC and Total with 20 percent stake each and China’s Silk Road Fund with a 9.9 percent stake.
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    Japan's Inpex says Ichthys LNG project still set for Q3 start-up

    Japan's Inpex says Ichthys LNG project still set for Q3 start-up

    Japan's Inpex said Friday its Ichthys LNG project in Australia was still expected to start in the third quarter of this year as planned despite the recent contract cancellation by an Australian company involved in the Ichthys' power plant.

    "We have not changed our schedule of the start up in the third quarter," Masahiro Murayama, director and senior managing executive officer at Inpex's finance and accounting told a media briefing Friday.

    CIMIC Group, a subcontractor for Inpex, said in January it terminated its contract with JKC Australia LNG Pty Ltd for the design, construction and commissioning of the Ichthys Combined Cycle Power Plant (CCPP) project.

    Murayama said JKC would still proceed with construction.

    In 2015, Inpex announced postponement the startup of the Ichthys LNG project until the July-September quarter of 2017 from initially scheduled late 2016 due to a delay in construction of the offshore floating facility.

    Ichthys LNG has a liquefaction capacity to 8.9 million mt/year.

    The project is owned 62.245% by Inpex, 30% by Total, 2.625% by CPC, 1.575% by Tokyo Gas, 1.2% Osaka Gas, 1.2% by Kansai Electric, 0.735% by Chubu Electric and 0.42% by Toho Gas.
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    Cheniere close to completing Sabine Pass LNG Train 3

    Cheniere close to completing Sabine Pass LNG Train 3

    U.S. LNG export player Cheniere is progressing construction activities at its Sabine Pass liquefaction and export project in Louisiana.

    The company said in its monthly construction report that the Stage 2 activities, which include the liquefactions trains three and four, have been 95.5 percent complete at the end of December.

    Stage 3 activities, which include the construction of the fifth liquefaction train was ahead of schedule in December reaching 52.4 percent completion.

    During December 2016, the restoration of above ground pipe has been completed at Train 3.

    The majority of the remaining construction work includes pipe insulation, and completion of the lighting system, Cheniere said. Startup activities

    Startup activities continued in Train 3 with the circulation of hot oil, running of the ethylene compressors on nitrogen, high-pressure leak checks, and system defrost. Loading of perlite into the Train 3 cold boxes was also completed during December.

    In January, the third liquefaction train began receiving gas from the Transco pipeline.

    Activities in Train 4 continue with a focus on the installation of above ground piping, pipe testing, pipe restoration and compressor fit-out activities. In the Train 4 compressor area, mineral and synthetic lube oil flushes are ongoing.

    On Stage 3 activities continued with the concrete batch plant subcontract and the award of the equipment insulation material supply subcontract. OSBL firewater pipe installation continued, the reports says.

    Installation of foundations in the ISBL and OSBL areas continued with the last section of the compressor table top, for the methane compressor, and the water treatment building foundations poured. Steel erection continued in the cryo rack, mercury removal, fuel gas facilities, propane

    Steel erection continued in the cryo rack, mercury removal, fuel gas facilities, propane condenser area, AGRU pipe rack, under compressor tabletop, and OSBL main north-south pipe rack.

    Above ground pipe installation continued in cryo rack, AGRU pipe rack, and mercury removal area. Above ground pipe fabrication continued for under compressor tabletop. OSBL structural steel erection continued for the main north-south pipe rack and commenced for the water treatment building pipe rack. Revamp structural steel and above ground pipe installation continued, Cheniere said.

    The OSBL substation was set. OSBL and ISBL sitework continued with roads installation, final grading, and trenches and culverts installation.

    Train 3 substantial completion is estimated to be June 2017 based on actual construction progress realized, Cheniere said, adding that the Train 4 progress will be monitored over the coming months for any potential impact on the August 2017 substantial completion target.

    The Sabine Pass liquefaction facility is the first of its kind to export abundant U.S. shale gas to overseas markets.

    Cheniere is developing and constructing up to six liquefaction trains at Sabine Pass, which are in various stages of development. Each train is expected to have a nominal production capacity of about 4.5 mtpa of LNG. Below is the gallery showing the construction progress at the facility.
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    Rig count hops up 12; Permian Basin again drives rise

    The number of oil and gas rigs in U.S. fields rose again this week, up 12 or about 170 over the past three months.

    This week’s count marks the fourth increase in a row, and a boom of more than 335 rigs since the count fell to its recent low, last spring.

    U.S. oil drillers collectively sent eight more rigs into the patch this week, the Houston oilfield services company Baker Hughes reported Friday. Gas drillers added four.

    The Permian Basin, in West Texas and New Mexico, again led the rise, adding six.

    The total rig count rose to 741, up from a low of 404 in May, and up 200 rigs year over year.

    The number of active oil rigs jumped to 591 this week, gas rigs to 149. The number offshore rigs dipped again, by one to 21, down four rigs year over year.

    Total rig counts lifted by seven in Texas, four in New Mexico, two in Louisiana, two in West Virginia and one in Pennsylvania. Ohio and Wyoming lost two each.

    Drilling activity has continued to rise despite stagnating oil prices. Since February’s low of about $26 a barrel, prices have stuck above $50 for several weeks now.
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    Gasoline sails away from American drivers as East Coast stocks swell

    Traders are preparing to export cargoes of coveted gasoline from the U.S. East Coast after months of heavy importing and local production swamped the region.

    At least two cargoes of gasoline are lined up to sail to West Africa, according to three market sources, with others eyeing their own shipments.

    The United States consumed more than 9 million barrels per day of gasoline in 2016, accounting for nearly 10 percent of global oil demand. The East Coast accounts for over a third of the national consumption.

    The exports underscore the record stocks of motor fuel on the East Coast, which were overshadowed by an unexpected draw down across the nation as a whole.

    Oil trader Noble sold the cargoes of Nigerian-grade gasoline, one to Mocoh and the other to Glencore, the sources said. The cargoes will load in the coming days for West Africa, though ship brokers said the vessels had not yet been arranged.

    "We have quite high production, and record high stocks in PADD1," Robert Campbell, head of oil products research with Energy Aspects in New York said of the east coast region.

    He added that because gasoline in New York Harbor is, unusually, cheaper than the U.S. Gulf refining centre, "if you're going to lift from the United States, you're going to lift from New York Harbor."

    The cargoes will add to U.S. gasoline exports that hit a record in November, the most recent month of data available, as American-made fuel sailed for Latin America, West Africa and even Asia. The Hafina Andromeda recently carried clean products from the U.S. Gulf to West Africa, while the Grace Victoria has been fixed to load gasoline for Asia.

    The unusual cargo movements out of the U.S. East Coast are not limited to gasoline.

    Other cargoes of distillates also set out for Europe in recent weeks, including aboard the STI Wembley, the Energy Protector and the Torm Thunder.

    The 110,000 tanker SKS Dee, which trader Trafigura chartered to sail to New York Harbor from India's Jamnagar refinery, has also been waiting for an outlet since Jan. 24, according to Reuters ship tracking, a further sign of the region's limited import needs.

    Distillate exports from the region are not unprecedented. But Europe's refineries rely on drivers in West Africa and the U.S. East Coast to consume their gasoline.

    The East Coast exports for now are of limited threat to global refining margins, as refinery maintenance eases oversupply fears. Other sources said the moves could also be driven by efforts to clear out winter-grade gasoline. But the development casts a shadow on the ability of U.S. consumers to gobble up fuel.

    "Demand is an implied figure and dependant on the export (figure) they use," one trader said of U.S. data. "If exports are higher than they think, then demand is lower than published."
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    February 8 Alberta Landsale Result is Best in Over 2 Years

    The February 8th Alberta land sale has netted the province $35.1 million in Lease and License fees.  That’s the best result since the October 15th, 2014 sale, when the result was $38.2 million for oil and gas and oilsands leases.

    There were a total of 188 parcels with successful bids for this sale.  

    The total area of the 188 parcels in this week’s sale was 86.9 thousand hectares with an average bid price of $403.24 per hectare.  That compares to $229.64 per hectare for the last sale on January 25 and is a 76% increase.

    Forty-nine companies participated, compared to sixty in the last sale.  Two land agents paid $7.9 million for 2 separate parcels in this sale. Both parcels are in the Sylvan Lake area of Central Alberta, an area which is known for Late Cretaceous gas production (Edmonton Group). One parcel is 12 sections while the other is 10.75 sections.

    Attached Files
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    Oxy continues to eye Q1 startup of Texas JV cracker: company

    Occidental Chemical Corporation has nearly completed construction of its joint-venture ethane steam cracker in Ingleside, Texas, and anticipates a first-quarter startup, the company's CFO said during a Thursday earnings call.

    Mexican PVC producer Mexichem is the partner in the 50:50 JV, called Ingleside Ethylene, which is building the steam cracker adjacent to OxyChem's complex in Ingleside, along with pipeline and storage facilities in Markham, Texas.

    Oxy also said that it expects free cash flow from its chemicals business to increase by about $400 million in 2017, due in part to the startup of the JV cracker.

    The steam cracker will have five ethane cracking furnaces capable of producing 544,000 mt/year of ethylene, according to regulatory filings.
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    Teck, Suncor up cost of Fort Hills oil sands project

    Canada's largest diversified miner Teck Resources has revealed that its Fort Hills oil sands project could cost up to $1.9 billion more than what it originally anticipated.

    The Vancouver-based company now expects its share of the project to cost $805 million, or about 10% more than forecast, and as a result the miner will record an after-tax impairment charge of $164 million in its fourth quarter results.

    As a result, Teck will record an after-tax impairment charge of $164 million in its fourth quarter results.

    According to Teck’s partner in the venture, Suncor Energy, the cost increase was caused by last year’s devastating wildfires in Fort McMurray, along with construction changes to boost capacity.

    The cost per barrel, however, will remain at about $84,000 per flowing barrel of bitumen because nameplate capacity has been increased to 194,000 barrels per day from 180,000 bpd, Suncor said while delivering fourth quarter results.

    The company, Canada's largest energy firm, added that its share of Fort Hills' remaining project capital was between $1.6 billion and $1.8 billion and most of that would be spent this year, with production expected to gradually ramp up through 2018.

    "Bringing our key major growth projects, Fort Hills and Hebron, to first oil by the end of this year continues to be a top strategic priority for us," Suncor chief executive officer, Steve Williams, said in the statement.

    Both Teck and Suncor said the project was 76% complete as of Dec. 31 and that it remains on track to produce first oil in late 2017.
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    EQT buys Marcellus, Utica acreage in Stone Energy bankruptcy auction

    EQT buys Marcellus, Utica acreage in Stone Energy bankruptcy auction

    EQT on Thursday said it won a bankruptcy auction that would see the Pittsburgh-based producer expand its Appalachian Basin footprint in West Virginia through the purchase of 85,400 net acres, including 53,400 net acres in the core of the Marcellus Shale play, as well as drilling rights on 44,100 net acres in the Utica Shale.

    Under the deal, which a bankruptcy court is expected to approve Friday, the independent exploration-and-production company will acquire acreage with production of about 80 MMcf of natural gas equivalent per day from Stone Energy for $527 million.

    The acquired acreage -- primarily located in West Virginia's Wetzel, Marshall, Tyler and Marion counties -- is within the core of EQT's liquids-rich development areas and complements the company's adjacent operations, it said in a statement.

    EQT said the assets include 174 Marcellus wells -- of which 123 are developed and 51 are in-progress -- as well as 20 miles of gathering pipeline and 32,000 acres outside the company's core development area.

    The acreage has an average 85% net revenue interest and 86% is either held by production or has lease expiration terms that extend beyond 2019, which means the producer will be able to take its time before it begins developing the acreage.

    In December, Stone and its domestic subsidiaries filed voluntary petitions under Chapter 11 of the US Bankruptcy Code in the Bankruptcy Court for the Southern District of Texas.

    As part of its pre-packaged bankruptcy filing, the court oversaw an auction that allowed Stone to put its Appalachian Basin assets up for sale to raise additional capital as part of its pre-arranged plan of reorganization. Prior to the bankruptcy filing, in October, Stone had entered into an agreement with TH Exploration III, LLC, an affiliate of Tug Hill, to sell the assets for $360 million in cash. Pursuant to bankruptcy court orders, the auction was held on Wednesday, with the initial Tug Hill bid serving as the stalking horse bid.

    Stone agreed to use a portion of the $527 million purchase price to pay for the break-up fee and expense reimbursement involved in the rejection of the Tug Hill bid.

    The completion of the auction process should allow Stone to emerge from the protection of the bankruptcy court as early as Friday, a Stone spokeswoman said in an interview Thursday.

    "With the successful conclusion of the auction, we are now poised to move forward with our pre-packaged plan, with Stone, its noteholders and the bank group all in agreement on a plan of action," Stone Chairman, President and CEO David Welch said in a statement.

    EQT's acquisition of the Stone assets marks a continuation of a strategy of filling in acreage within its core footprint in the Marcellus and Utica plays outlined by company President Steve Schlotterbeck in a conference call on the producer's fourth-quarter and full-year earnings earlier this month.

    In May, EQT announced it had signed an agreement to acquire 62,500 net acres in Wetzel, Tyler and Harrison counties in West Virginia for $407 million from Statoil USA Onshore Properties. The acreage, which at the time of the announced deal was producing 50 MMcf/d, expanded the producer's Marcellus footprint by 29%.

    EQT's bid to lock up acreage in the Marcellus and Utica plays reflects moves by its rivals last year to acquire assets in the Appalachian Basin.

    In September, Canonsburg, Pennsylvania-based Rice Energy said it would acquire rival Appalachian producer Vantage Energy in a deal valued at $2.7 billion, including the assumption of debt. The deal gave Rice about 85,000 net core Marcellus acres in Greene County, Pennsylvania, with rights to the deeper Utica Shale on about 52,000 net acres, as well as 37,000 net acres in the Barnett Shale of North Texas.

    In June, Antero Resources agreed to acquire from Southwestern Energy about 55,000 net acres in the core of the Marcellus Shale for $450 million. About 75% of the 55,000 net acres contained dry Utica rights.

    Scott Hanold, an analyst with RBC Capital Markets, estimated the EQT deal equates to about $5,400/acre, adjusted for proved developed producing reserves when evaluating only the core Marcellus acreage.

    "There are two goals in EQT's recent acquisitions: blocking up acreage to enable longer laterals and adding new inventory. This transaction falls mostly into the second bucket," Hanold said. "The company likely continues to pursue smaller deals that fit into these categories but only in its core focus area."
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    Alternative Energy

    Vestas leaps to top spot in U.S. wind market

    Danish wind turbine maker Vestas Wind Systems has leapt to the top spot in the U.S. wind market, overtaking General Electric, data from a wind industry trade group shows.

    Vestas, the world's biggest wind turbine maker, supplied 43 percent of the 8.2 GW of wind power capacity connected to the U.S. power grid last year, the American Wind Energy Association said in a quarterly report released on Friday. That was up from 33 percent in 2015 and just 12 percent in 2014.

    In comparison General Electric's market share fell to 42 percent in 2016 from well over half in 2014, the association said, although GE remains the market leader in terms of overall installed capacity in the United States.

    "It is definitely our ambition to at least keep our market share," Vestas Chief Executive Anders Runevad told Reuters.

    Vestas reported record global revenues for 2016 on Wednesday but warned it would see lower orders in the United States this year and said rapid growth in demand in the industry generally could be coming to an end as the wind market matures.

    The Danish company is set to lose its status as the world's top wind turbine maker as Germany's Siemens and Spain's Gamesa have agreed to combine their assets in the sector.

    Wind energy has surpassed hydropower as the biggest source of renewable electricity in the United States, according to the association, helped by tax credits under Barack Obama's administration. There is uncertainty about government support under President Donald Trump's administration although tax credits already awarded seem safe.

    "How (the U.S. market) will pan out over the years is still very hard to predict," Runevad said.

    Attached Files
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    Cameco expects lower revenue for 2017 after market headwinds lead to disappointing 2016 results

    Canadian uranium producer Camecoexpects 2017 revenue to fall further to between C$1.95-billion and C$2.08-billion, based on currently committed sales volumes being weighed down by a decrease in average realised prices in the uranium segment as a result of lower prices under both fixed and market related contracts, a major contract dispute and an expected decrease in sales volumes from subsidiary NUKEM.

    For the 12 months ended December 31, Cameco, the world’s highest-grade uranium producer reported a 12% drop in consolidated revenues to C$2.43-billion.

    Just last week, Tokyo Electric Power, operator of the Fukushima nuclear plant, scrapped its billion-dollar uranium supply contract with Cameco.

    The miner reported a net loss attributable to shareholders of C$62-million, down 195% from the comparable profit of C$65-million in 2015.

    Excluding a C$124-million impairment charge for the full carrying value of the mothballed Rabbit Lake mine and the full C$238-million carrying value of its interest in Australian exploration venture Kintyre, the company reported adjusted profit of C$143-million, which was 59% lower year-on-year.

    Further, cash generated from operations, after working capital changes, fell 31% over the 12 months to C$312-million.

    During 2016, uranium output, which accounts for about 90% of the company’s gross profit, amounted to 27-million pounds, down 5% year-on-year. Realised prices fell 9% to $41.12/lb.

    Cameco said it expects contracting, which generally fetches higher prices over the spot price, to remain “somewhat discretionary”. In 2016, the uranium spot price ranged from a high of $35/lb, to a low of about $18/lb, and averaging about $26/lb for the year. Utilities continue to be well covered under existing contracts, and, given the current uncertainties in the market, the company expects they and other market participants will continue to be opportunistic in their buying, Cameco said.

    During 2016, Cameco had implemented several strategic initiatives intended to strengthen the core business and enhance financial performance over time. These initiatives include suspending production at the Rabbit Lake operation and curtailing its US mining operations, the signing of a collaboration agreement with the aboriginal communities located near its Saskatchewan operations, restructuring of the NUKEM segment and corporate office departments, and office space consolidation.

    This was not enough to sustain profitability in the current environment, prompting Cameco to reduce the workforce at the McArthur River, Key Lake and Cigar Lake operations by about 10%, or 120 employees, by May.

    For 2017, Cameco expects uranium production of 25.2-million pounds, with sales expected to range between 30-million to 32-million pounds.
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    Base Metals

    Indonesia issues new mining permit to Freeport...But

    Indonesia has issued a new mining permit for the local unit of Freeport McMoRan Inc , government officials said on Friday, signalling the possible end to a month-long suspension of exports from the world's second-biggest copper mine.

    Indonesia halted Freeport's exports of copper concentrate on Jan. 12, a suspension Freeport said would reduce output from its Grasberg mine by around 70 million pounds of copper per month.

    On the same day the government issued rules requiring Freeport to obtain new mining rights before being allowed to resume exports, as part of a broader push to add value to the country's minerals and develop domestic industries.

    The suspension had supported recent gains in copper prices , which initially pulled back from session highs in London on Friday on news that Grasberg shipments may resume. Freeport's shares jumped 4 percent.

    Freeport warned last week that it could be forced to slash Grasberg production and reduce its workforce of more than 30,000 if it did not get a new export permit by mid-February.

    Rio Tinto , in a joint venture with Freeport in Indonesia since 1995, said on Thursday it was considering exiting its interest in the mine as a result of the uncertainties.

    The new permit signed by Energy and Mineral Resources Minister Ignasius Jonan on Friday would be valid until 2021, with an option to extend, Coal and Minerals Director General Bambang Gatot told reporters.

    A similar permit was issued to fellow Indonesian copper miner Amman Mineral Nusa Tenggara, a unit of Medco Energi Internasional, Gatot said.

    The two companies could now apply to resume exports, he added.

    The new mining permit was expected to require Freeport to pay taxes and royalties that it has been exempt from, and divest up to 51 percent of its Indonesian unit, up from 30 percent under current rules. To date, it has divested only 9.36 percent.

    It was not immediately clear if Freeport had agreed to adopt the new provisions or end its 1991 contract of work with the Indonesian government under which fixed tax rates and other guarantees apply.

    "Whether they agree or not, we'll see," Gatot said. "Whether there are incentives, we can work on this."

    Freeport-McMoRan Inc, the world's biggest publicly-listed copper miner, said on Friday that it has not reached an agreement with Indonesia on a new permit for its Grasberg mine and copper concentrate exports remain restricted.

    Indonesia, which earlier on Friday said it had issued a new mining permit to Freeport, halted shipments of copper concentrate exports on Jan. 12, a suspension that Freeport said would reduce output from its Grasberg mine by around 70 million pounds of copper per month.

    Attached Files
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    BHP vows legal action at top copper mine after group enters site

    BHP Billiton, the owner of the world’s biggest copper mine known as Escondida, said it will take legal action after a group of more than 300 people entered the mine site during a strike and forced some contractors to abandon the compound.

    People wearing masks entered the mine site at 18:00 Santiago time on Saturday, threatening the staff of contract companies and setting off fire alarms, causing damage, the Melbourne-based company said in an e-mailed statement Sunday. A smaller group cut power to security cameras, it said.

    The union, whose 2 500 members stopped work on Thursday after wage talks broke down, has set up a makeshift camp just outside the mine. Union President Patricio Tapia said while a group of members did enter the mine site, they marched peacefully around the contractor workers’ camp and left. They didn’t trigger alarms or break anything, Tapia said by phone Sunday.

    The incident is the latest in a tense first four days of a strike that helped propel the price of copper to its biggest gain in almost four years on Friday, after Escondida declared force majeure on its shipments and a fire broke out in another dormitory area for contractors. The union denied any involvement.

    Escondida accuses the union of sending fewer workers than authorized for a skeleton crew during the strike, thereby jeopardizing mine safety, as well as blocking access to contract companies. The union says it’s adhering to labor rules governing the skeleton crew and is blocking roads to prevent thieves and strike breakers from entering the site.

    “We categorically reject these acts that not only infringe company values but also the law, and put at risk the safety of our people,” Escondida Corporate Affairs VP Patricio Vilaplana said in the statement. “As a result, the company will use all necessary resources and take the pertinent legal actions to guarantee the safety of all workers.”
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    Forged warehouse receipts related to nickel: Access World

    Forged warehouse receipts for metal currently circulating in the market in the name of logistics company Access World appear to be related to nickel in Asia, the company said Thursday.

    "We note that currently all relevant forged warehouse receipts we have seen have been in the name of Access World Logistics (Singapore) Pte Ltd (previously Pacorini Metals (Asia) Pte. Ltd.) and have been solely across nickel," the company said in a statement.

    Access World, formerly Pacorini Metals, is owned by Switzerland-based commodities group Glencore.

    In late January the company said it had "become aware that there are forged warehouse receipts in our name circulating in the market."

    The company encouraged holders of any Access World receipts to seek authentication from the relevant issuing office for any warehouse receipts not issued to them directly by Access World.

    On Thursday, it announced a four-business-day "authentication window" to run from Friday through Wednesday, February 15.

    "At the end of this authentication period it would then be our intention to continue to honour duly authenticated original warehouse receipts in accordance with applicable laws and regulations and on terms to be agreed with the relevant holders," Access World said.
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    Trafigura acquires stake in recovering Finnish nickel mine

    Commodities trader Trafigura said it will take a 15.5 percent stake in Finland's Terrafame nickel and zinc mine as part of a 250 million euro ($266 million) deal, which will help the mine ramp up production.

    The mine in northern Finland has been under government control since 2015 following years of losses and production problems but returned to profit in the final quarter of last year, helped by a rebound in metals prices. It has been looking for new investors for some time.

    Trafigura will acquire the stake through its Galena fund and will also finance a new loan as part of the deal.

    "The investment ... will provide the working capital needed to enable the Terrafame mine to reach its potential to become a world-class mine ... Looking forward, the demand side for nickel looks robust," Trafigura Chief Executive Jeremy Weir told a news conference on Friday.

    As part of the arrangement, Trafigura agreed to buy all nickel deliveries and 80 percent of the zinc deliveries for seven years, a deal worth around 3 billion euros, Terrafame said.

    The mine produced 22,575 tonnes of zinc last year and 9,554 tonnes of nickel.

    Global zinc consumption is estimated at 14.5 million tonnes this year and nickel at around two million tonnes.

    The government took over the mine in 2015, and set up a company called Terrafame to build it up after production problems, environmental damage and weak nickel prices pushed former owner Talvivaara into a debt restructuring in 2013.

    The government has so far injected about 500 million euros in the site, seeking to protect jobs and the environment in the rural Kainuu region. Closing the mine would have cost an additional 300-400 million euros, the government estimated.

    "According to our estimate, Terrafame does not need additional funding from the state after this. The financing arrangement will strengthen the economy," economy minister Mika Lintila said.

    Terrafame returned to profit in the fourth quarter on the back of growing production volumes and rising metal prices. Zinc prices at around $2,900 a tonne are more than double the levels seen in January 2015 and nickel is up roughly 25 percent over the same period to around $10,660 a tonne.

    In the fourth quarter of last year, Terrafame's nickel output surged 64 percent from the previous quarter to 3,875 tonnes and its zinc production rose 37 percent to 8,680 tonnes.

    Talvivaara, which developed the mine, had aimed to make it Europe's biggest nickel mine by pioneering an extraction process called bioheapleaching.

    But repeated production problems were compounded when the mine leaked waste water in 2012, causing one of Finland's most serious environmental disasters.
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    Australia's Ravensthorpe nickel mine cut off by rains – First Quantum

    Heavy rains have cut access in and out of the Ravensthorpe nickel-producing operations in Western Australia, owner First Quantum Minerals said on Monday.

    The processing of nickel ore into metal was continuing at the site, 250 km from the Port of Esperance on the Indian Ocean, the company said in a statement emailed to Reuters.

    "There is currently no access into or out of First Quantum Minerals' Ravensthorpe nickel operations," First Quantum said. "At this stage we will not declare force majeure but we reserve the right to."

    A protracted delay in shipments would aggravate already tight global supply. Nickel prices are up by 15 percent since late January, following a Philippine government decree that closed more than half the mines there over environmentalconcerns.

    Ravensthorpe was earlier expected to produce 25 000 t of nickel in 2017, according to First Quantum's website.

    Global demand for nickel - used to toughen stainless steel - stands at around two-million tonnes per year, according to the Lisbon-based International Nickel Study Group. Capital Economics in London in a recent note predicted nickel prices would climb to $11 500 a tonne by the end of the year versus just under $10,000 in early January.

    Most of Western Australia state has been belted with heavy rains, with Ravensthorpe one of the hardest hit areas.

    Up to 126 mm of rain fell in areas around the mine, according to the weather bureau.

    Nickel on the London Metal Exchange was up about 0.7% on Monday at $10 740 a tonne, after having gained about 3.7% on Friday.
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    Steel, Iron Ore and Coal

    China to control IPO, refinancing of coal, steel cos, CSRC

    China Securities Regulatory Commission (CSRC) announced lately to strictly control IPO (Initial Public Offerings) and refinancing of domestic coal and steel producers, in order to prevent companies from expanding production capacity.

    It was expected to guarantee the implementation of the nation's capacity cut policy in both coal and steel industries, and put the two pillar industries onto a more sustainable and healthy track.

    In 2016, the financing (cash) amount by IPO and refinancing totaled 1.33 trillion yuan, a year-on-year increase of 59%, with financing amount by IPO hitting a five-year high, showed data from the CSRC.

    Meanwhile, the commission allowed fast approval for Tibet, Xinjiang Uygur Autonomous Region and other less-developed areas, in a bid to promote the nation's "Western Development Strategy" and help these regions to prosper.

    Last year, three companies in Tibet completed IPO, raising funds of 1.04 billion yuan; Xinjiang saw six firms complete IPO, raising money of 2.41 billion yuan.

    Attached Files
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    China Jan coal imports rise 64.4pct on year

    China's coal imports stood at 24.91 million tonnes in January, surging 64.4% from the year-ago level, thanks to the domestic capacity cut campaign carried out since last year, showed data released by the General Administration of Customs (GAC) of China on February 10.

    However, the volume was 7.19% lower than last December, impacted mainly by slack demand from end users amid the Spring Festival holidays.

    The value of coal imports in January was $2.34 billion, increasing 225.4% year on year and 5.92% month on month. That translated to an average price of $93.97/t, rising $46.5/t on the year and up $11.63/t from the previous month.

    By end-January, coal stockpiles at coastal power plants of six major power companies stood at 10.89 million tonnes, down 2.51% from a month earlier.

    Their coal consumption decreased by 40.2% month on month to 429,000 tonnes by the end of January, which was enough to cover 25 days of use, 10 more days than the month prior.

    China's coal imports were on the decline after a record high of 327 million tonnes in 2013. In 2015, the volume slumped nearly 30% year on year to a new low of 204 million tonnes, while the drop narrowed to 25.2% last year, with coal imports totalling 255.51 million tonnes.

    Attached Files
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    Ganqimaodu Jan coal imports soar 185pct on year

    Ganqimaodu border crossing in northern China's Inner Mongolia autonomous region imported 1.45 million tonnes of coal from neighboring Mongolia in January, soaring 185.04% year on year, said the local media.

    Coal sales at the border crossing stood at 1.28 million tonnes in January, increasing 45.03% year on year.

    The coal stockpiles at the border crossing were 1.29 million tonnes by end-January, a year-on-year decrease of 47.33%.

    With Mongolian washed coking coal traded at the border crossing has been stable at some 1,000 yuan/t since January, as much as 37 enterprises were engaged in coal import business at the border crossing.

    Ganqimaodu borders resourceful Mongolia, whose Tavan Tolgoi coal mine has coal reserves of 6.4 billion tonnes, with primary coking coal at 1.8 billion tonnes and thermal coal at 4.6 million tonnes. The border crossing has been an important hub of coal trades between the two countries since its opening in 2009.
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    Shanxi state-run miners stop hiring new mining staff in 5 yrs

    Shanxi state-run miners stop hiring new mining staff in 5 yrs

    State-run coal producers in coal-rich Shanxi province will not recruit new mining staff in the next five years, Vice Governor Wang Yixin said at a work meeting lately.

    In the next five years, the state-owned coal enterprises will instead adjust employed workers allocation to meet the demand. The move was expected to curb staff surplus, remove company burdens and bring new vitality.

    Meanwhile, Shanxi will also encourage the third party labor services during the period to alleviate personnel burden, Wang said.

    He highlighted the significance of enhancing economics and efficiency of employment, and the necessity to build a recruitment restriction mechanism, which will be directly related with industrial development and profitability.
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    Indonesia's Bukit Asam to raise 2017 coal output by 26%: CEO

    Indonesia's PT Bukit Asam plans to increase coal production 26% in 2017 to 24 million tonnes, the chief executive of the state-owned company said, amid improved prices and increasing demand for the fuel at home and abroad, Reuters reported.

    "We see Chinese and Indian demand increasing now, (and) new markets like the Philippines and Vietnam are starting to seek our coal," CEO Arviyan Arifin told Reuters in an interview.

    Arifin said he hoped prices remained stable at around $80/t, noting that 2017 was off to a good start compared with the first quarter of 2016 when prices were around $50/t.

    "If demand is high, prices are good, we can invite investors to develop new logistics channels, or to increase our logistics capacity, so production can (improve)," he said.

    Last year Bukit Asam produced 19 million tonnes of coal.

    Other mines were also benefiting from better coal prices, Arifin said. "(Small) mines that were dead have come back to life again," he said, referring to the recent government coal production target of 470 million tonnes for 2017.

    "You can see this in the field. Now that prices are at $80 maybe they're breaking even, or they're making a profit," he said.

    Indonesia's domestic market typically absorbs around 60% of Bukit Asam's output, Arifin said, and several new power stations are expected to start operations in Indonesia this year.

    By 2020, Bukit Asam plans to expand and develop around 1,500 km (932 miles) of rail infrastructure linking its Tanjung Enim mine to ports on the northern and southern coasts of Sumatra Island.

    Bukit Asam is working to transform itself into an energy company and hopes to develop seven power stations around Indonesia with a combined coal consumption of more than 30 million tonnes, among other initiatives to diversify its core business.
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    Iron ore price hits 2.5-year high

    The Northern China import price of 62% Fe content ore jumped 4.6% on Friday, reaching $87 per dry metric tonne level after data showed imports by China, top consumer of the steelmaking raw material, continued to strengthen in 2017 after hitting an all-time high last year.

    It was the highest level since August 2014 and the iron ore price has more than doubled in value over the past year following near-decade lows of $37 a tonne in December last year according to data supplied by The Steel Index.

    Trade figures released overnight showed China imported 92 million tonnes of iron ore in January, up 12% or just less than 10 million tonnes compared to a year ago. Shipments for January were the second highest on record valued around $7 billion.

    The all-time record for monthly Chinese imports in terms of volume was in December 2015 with shipments totalling 96.3 million tonnes. But the price of iron ore fell to below $40 a tonne, the lowest in nearly a decade during that month, pushing the value of shipments below $5 billion.

    The all-time record in terms of dollar value was set in January 2014, when the country imported $11.3 billion worth of iron ore back when prices were firmly in triple digit territory.

    Forging more than half the world's steel, Chinese imports of iron ore for the full year 2016 topped one billion tonnes for the first time. The 1.024 billion tonnes constitute a 7.5% increase over the annual total in 2015 and is indicative to what extent exporters from Brazil and Australia has been able to displace high-cost domestic producers.

    Because Chinese ore is of such a low quality most Chinese fines require sintering (fines are mixed with coking coal and partially smelted) before being fed into blast furnaces.

    Sintering adds to the environmental impact and costs which does not fit well with Beijing's green agenda. China's steelmakers have been substituting domestic supply and reducing the percentage of fines in favour of pellets and so-called "lump" ore from Australia, South Africa and South America which lowers costs and cut pollution by reducing the need for sintering.

    The government is also pushing to eliminate overproduction in the steel sector by consolidating the industry under a few large companies and shutting down low-quality producers which often use scrap as feedstock.

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    Anglo American to sell Kumba despite iron ore rally — experts

    Anglo American, the world's fifth largest diversified miner, will likely go ahead with its planned sale of its South Africa-based Kumba Iron Ore division, even though an ongoing rally in prices for the commodity has increased the asset’s appeal, experts say.

    According to BMI Research, while iron ore prices have climbed 90% in the last year to over $80 a tonne, the sale of Africa's largest iron ore mine would prove prudent for Anglo's long-term outlook, given its elevated debt load.

    “This positive price dynamic, coupled with the 550% rise in Kumba Iron Ore's US share price in 2016 (…) presents Anglo with a strategic opportunity to sell the mine at a premium,” they said in a note released Thursday.

    Hit by a deep rout in commodity prices, and burdened by large borrowings, Anglo last year put its coal, iron ore, manganese and nickel assets up for sale as part of a radical “portfolio restructuring,” which aims to have the group focus only on copper, diamonds and platinum.

    Since the plan was unveiled, however, most commodities have rebounded, boosting Anglo’s cash generation and profitability to such an extent that the miner is now on track to meet its year-end debt-reduction target without more disposals this year.

    Market rumours had indicated that Anglo favoured a spin-off of its iron ore and thermal coal assets in South Africa, rather than selling them one at the time.
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    China steel capacity rises in 2016, despite closures - Greenpeace

    China's steel capacity actually rose in 2016 after the country's high-profile closure programme concentrated on already idled plants, environment group Greenpeace said on Monday.

    China announced early last year that it would shut down as much as 150 million tonnes of annual crude steel production capacity over the next five years to tackle a price-sapping glut in the sector.

    But in research conducted jointly with Custeel, a consultancy affiliated with the China Iron and Steel Association (CISA), Greenpeace estimated there was a net capacity increase of 36.5 million tonnes in 2016.

    While a total of 85 million tonnes of annual capacity was shut in 2016, exceeding the national target, the majority was already idled, with only 23 million tonnes still actually in operation.

    And, even though last year's plan banned all new projects, Greenpeace said 12 million tonnes of new capacity went into operation.

    Furthermore, the group estimated another 49 million tonnes of steel production was restarted over 2016 in response to a recovery in prices.

    Greenpeace also said 80 percent of the net increase in capacity took place in the heavily-polluted regions surrounding the capital Beijing, including Hebei province.

    Hebei, China's biggest steel producing region, aims to cut total capacity to less than 200 million tonnes by the end of the decade, down from 286 million tonnes in 2013.

    The province has promised to close 60 million tonnes of "outdated" capacity from 2014 to the end of this year as part of its pledges to improve air quality.

    China's total steel capacity stood at 1.1 billion tonnes last year, according to official figures, lower than some previous estimates but still representing a surplus of around 300 million tonnes.

    Xu Shaoshi, the head of the National Development and Reform Commission, China's economic planner, told reporters last month that China would aim to shut another 45 million tonnes of steel capacity in 2017.
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