Mark Latham Commodity Equity Intelligence Service

Thursday 5th November 2015
Background Stories on www.commodityintelligence.com

News and Views:

Attached Files





    Macro

    Will Ambrose eat his hat?

    http://www.telegraph.co.uk/finance/economics/11973507/Ill-eat-my-hat-if-we-are-any-where-near-a-global-recession.html

    I'll eat my hat if we are anywhere near a global recession

    The fiscal spigot is opening in the US, China and Europe, and the world's money growth is near a 25-year high



    The damp kindling wood of global economic recovery is poised to catch fire.


    For the first time in half a decade of stagnation, government policy has turned expansionary in the US, China and the eurozone at the same time. Fiscal austerity is largely over. The combined money supply is surging.


    Such optimistic claims are perhaps hazardous, given record debt ratios in most areas of the world and given that we are six-and-a-half years into an aging economic cycle that might normally be rolling over at this stage. It certainly feels lonely.



    "It is a very benign picture for the world. We should see above trend growth over the next year" Tim Congdon, International Monetary Research

    Attached Files
    Back to Top

    Oil and Gas

    China fuel surplus to double by 2020 as refining sector opens -CNPC research


    Surplus annual production of diesel, gasoline and kerosene in China will double to nearly 30 million tonnes by 2020 from last year's level, boosted by increasing output from independent refiners, according to an industry research paper.

    Smaller and independently operated refineries, known as 'teapots', are set to churn out more and higher-grade oil products after Beijing allowed them to import crude for the first time to encourage competition and boost private investment.

    That could stoke exports of finished products from the world's second-largest refining industry after the United States, dragging on Asian refining margins DUB-SIN-REF already pressured by rising supplies from mega-sized new refineries in the Middle East.

    "With improved feedstock, they'll be able to produce higher quality fuel ... Teapots will become more competitive in the Chinese fuel market," CNPC Economics and Technology Research Institute, the in-house research arm for state energy giant China National Petroleum Corp, said in its paper.

    These plants, mostly in the eastern province of Shandong, used to produce diesel and gasoline by processing imported fuel oil from places such as Russia or Venezuela, a feedstock heavier and generally of poorer quality than crude oil.

    The paper, released to media this week, estimated that teapot refiners could win quotas to import a total of 1.6 million barrels per day of crude oil. By the end of October, Beijing had granted 11 plants quotas to ship in a total of nearly 1 million bpd.

    China's refining industry has long been dominated by state companies Sinopec Corp and PetroChina, which have only until recently started scaling down expansion after nearly two decades of building frenzy.

    The growing fuel surplus will see independents queuing up to apply for permits to export as early as next year, industry experts said. For now, only a handful of state refiners are licensed oil exporters.

    Total Chinese exports of diesel, gasoline and kerosene stood at around 20 million tonnes in 2014, according to customs data Teapot refineries are forecast to operate at 60 percent of their total capacity in 2016, up from an estimated 37 percent in 2014, according to CNPC.

    It also estimated China's total crude oil processing capacity would reach 800 million tonnes, or 16 million bpd, by 2020 assuming an average addition of 400,000 bpd of new capacity each year.

    Crude throughput is likely to hit 12 million bpd, or 1.6 million bpd more than the current rates shown in official data.


    Read more at Reutershttp://www.reuters.com/article/2015/11/05/china-oil-surplus-idUSL3N12Y29520151105#VyR8jP4LvcjieJlx.99
    Back to Top

    China Pushing Ahead With Shale While Falling Prices Dim Interest


    China is poised to further open up its acreage to shale gas exploration even as the appetite for producing the fuel ebbs amid a global glut and plunge in energy prices.

    China’s Ministry of Land and Resources may announce details of the third round of shale gas auctions within two months, Guo Jiaofeng, a researcher at the Development Research Center of the State Council, a government think tank, said in an interview in Chengdu, Sichuan province. An announcement is expected by the end of the year, he said.

    The new blocks will be offered as interest in exploring China’s shale potential has cooled amid falling prices and the country’s challenging geology. Brent, the benchmark for more than half of the world’s crude trading, has fallen more than 40 percent in the past year, pulling gas prices down with it. The government is trying to lure more private companies in the next bid round as part of broader reforms of an industry dominated by state-run giants.

    “It may not be the best time for private companies to bid for shale parcels,” said He Sha, a professor at Southwest Petroleum University. “Falling oil prices, shrinking government subsidies and a lack of technology, among other things, will hurt private companies’ chances to succeed in shale gas exploration.”

    China will cut subsidies for shale gas developers from 2016 to 2020 even as the country encourages explorers to produce more natural gas as a replacement for coal. Shale gas subsidies will be cut to 0.3 yuan per cubic meter from 2016 to 2018 and further to 0.2 yuan from 2019 to 2020 from 0.4 yuan currently, China’s finance ministry said in April.

    The oil and gas research center at the China Geological Survey, an affiliate of the ministry, has selected 40 parcels in northern and southern China and submitted the list to the land regulator for the auctions, Guo Tianxu, an engineer at the center, said in an interview at the conference. The ministry may select more than 20 parcels from the list for the auction, he said.

    http://www.bloomberg.com/news/articles/2015-11-05/china-pushing-ahead-with-shale-while-falling-prices-dim-interest
    Back to Top

    Amec Foster Wheeler slashes dividend, shares tumble


    British oil and gas services company Amec Foster Wheeler Plc slashed its dividend, forecast lower second-half margins and raised its cost-saving target as upstream customers reduced spending amid tumbling oil prices.

    The London-listed company lost more than a quarter of its market value in morning trade on Thursday. The stock was on track to record its sharpest one-day fall ever.

    Oil equipment and services companies have been hit as their clients have cut capital expenditure, themselves pressured by oil prices that have more than halved since their 2014 peak.

    Amec Foster said it raised its cost-savings target by $55 million to $180 million by 2017, and that it would recommend a final dividend of 14.2 pence, half the amount it paid a year earlier.

    The company added that it expected second-half margins to fall from the first half. It reported pro-forma scope revenue of 3.87 billion pounds ($5.95 billion) for the nine months ended Sept. 30, a 1.8 percent fall from a year earlier.

    Amec's peer Hunting Plc on Tuesday forecast a sharp fall in profit from continuing operations this year to a tenth of its 2014 result, while engineering firm Weir Group Plc said separately it would cut 400 more jobs.

    Europe's oil majors have reduced 2015 spending programmes by about 15 percent to near $107 billion, and more cuts are seen next year.

    Amec Foster Wheeler shares were down 25.4 percent at 556.85 pence at 0922 GMT on the London Stock Exchange. The shares hit a low of 550 pence earlier in the session, their lowest since April 2009.


    Read more at Reutershttp://www.reuters.com/article/2015/11/05/amec-foster-outlook-idUSL3N1302VT20151105#wkRaoKr6Htg3jxTZ.99

    Attached Files
    Back to Top

    Norway Oil-Rig Tender Reveals 'Desperate' Drillers in Price Rout


    An unusually high number of rigs are competing for a Det Norske Oljeselskap ASA drilling contract on the Alvheim oil field in the North Sea, an illustration of how companies are desperate for business as producers slash spending amid a crude-price slump.

    “I’ve tendered for rigs on the Norwegian continental shelf many times, and I’ve never seen a tender with 13 rigs competing for the job,” Det Norske Chief Executive Officer Karl Johnny Hersvik said in an interview Wednesday. “That’s a pretty extraordinary figure.”

    Thanks to the fierce competition among drillers starved of contracts, Det Norske expects to pay “extremely favorable” rental rates and get “very flexible” terms for the 300-day contract for a semi-submersible rig that it’s seeking, Hersvik said.

    Offshores drillers such as Transocean Ltd., Seadrill Ltd. and Fred Olsen Energy ASA have been caught in a double whammy of falling demand for their services and a glut of new rigs coming into the market. In Norway, Statoil ASA, the dominant state-controlled oil company, has cut the equivalent of four years of drilling by terminating and suspending rig contracts over the past 18 months, adding to the oversupply.

    “It’s a desperate situation for the rig companies and a very pleasant situation for the oil companies,” analyst Truls Olsen of Fearnley Securities AS said in a phone interview. “Typically, less than a handful of rigs have been involved in tenders like this” and the number of companies vying for Det Norske’s contract “must be a record for Norway,” he said.

    The daily rental rate for Det Norske’s rig will be lower than a recent award to Odfjell Drilling Ltd., which will get about $300,000 a day to drill on Statoil’s Johan Sverdrup field for three years starting in March 2016, Nordea Markets analyst Janne Kvernland said by e-mail. That’s about half of what Odfjell’s Deepsea Atlantic rig is currently earning.

    Next year will be “ugly” for the rig market, Seadrill CEO Per Wullf said last month. The Hamilton, Bermuda-based driller could be willing to accept day rates of as low as $160,000 on very short contracts if they allow the rig to stay active and bridge a gap in its work schedule, he said. The company won’t accept less than $350,000 to $400,000 a day for longer deals, Wullf said.

    Det Norske expects to award the contract, which will also include options that are “much longer” than the initial period, “quite soon,” Hersvik said.

    http://www.bloomberg.com/news/articles/2015-11-04/norway-oil-rig-tender-reveals-desperate-drillers-in-price-rout

    Attached Files
    Back to Top

    NDRC cuts fuel prices


    The National Development and Reform Commission (NDRC), China's top economic planner, on Tuesday announced that it will reduce both gasoline prices and diesel prices by 125 yuan ($19.7) per ton each starting from Wednesday.

    Retail gasoline prices will fall by 0.09 yuan per liter after the adjustment, while diesel prices will be cut by 0.11 yuan per liter, according to the NDRC.

    This is the 10th oil price reduction this year, news portal cnr.cn reported on Tuesday.

    The NDRC said the adjustment was made based on recent changes in the global market.

    http://en.chinamining.com.cn/News/2015-11-04/1446602251d74347.html

    Attached Files
    Back to Top

    Report: EU plans more LNG imports


    European Union is targeting increase in liquefied natural gas imports, exploiting its diversification potential.

    According to Reuters, a draft document seen by the news agency reveals that the commission is preparing a strategy for LNG imports and gas storage, a part of its attempts to create a single market based on cooperation and source diversification across the union.

    The document also addresses the shareholder’s agreement signed by Gazprom and its partners to construct the Nord Stream II pipeline, claiming it opposes the European regulatory framework.

    The commission questions the necessity of such a project that would bypass the traditional transit state, Ukraine and reinforce Gazprom’s position in the German market, according to the report.

    Although, Russian gas is priced lower than LNG, it is believed that the later gives certain leverage to the European Union in new contract negotiations, cutting on its dependence on Russian gas.

    http://www.lngworldnews.com/report-eu-plans-more-lng-imports/
    Back to Top

    UK Grid uses 'last resort measure to keep power flowing

    Britain was forced to rely on new "last resort" measures to keep the lights on for the first time on Wednesday after coal power plants broke down and wind farms produced less than one per cent of required electricity.


    National Grid used a new emergency scheme to pay large businesses to cut their electricity usage, resulting in dozens of large office buildings powering down their air conditioning and ventilation systems between 5pm and 6pm.


    The scheme, which is paid for through levies on consumer energy bills, was introduced last year but had never been called upon before.


    National Grid blamed the power crunch on “multiple plant break downs”. Several ageing coal-fired power plants had unexpected maintenance issues and temporarily shut down, experts said, reducing available supplies.


    Back to Top

    US oil production climbed again last week


                                                     Last Week   Week Before     Last Year

    Domestic Production 1000'...... 9,160             9,112              8,972




    Attached Files
    Back to Top

    Summary of Weekly Petroleum Data for the Week Ending October 30, 2015


    U.S. crude oil refinery inputs averaged over 15.6 million barrels per day during the week ending October 30, 2015, 21,000 barrels per day more than the previous week’s average. Refineries operated at 88.7% of their operable capacity last week. Gasoline production decreased last week, averaging over 9.5 million barrels per day. Distillate fuel production increased last week, averaging 4.9 million barrels per day. 


    U.S. crude oil imports averaged over 6.9 million barrels per day last week, down by 89,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged 7.2 million barrels per day, 0.8% below the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 307,000 barrels per day. Distillate fuel imports averaged 84,000 barrels per day last week. 


    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 2.8 million barrels from the previous week. At 482.8 million barrels, U.S. crude oil inventories remain near levels not seen for this time of year in at least the last 80 years. Total motor gasoline inventories decreased by 3.3 million barrels last week, but are above the upper limit of the average range. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories decreased by 1.3 million barrels last week but are in the middle of the average range for this time of year. Propane/propylene inventories rose 0.8 million barrels last week and are well above the upper limit of the average range. Total commercial petroleum inventories decreased by 2.3 million barrels last week. 


    Total products supplied over the last four-week period averaged 19.7 million barrels per day, up by 1.1% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged 9.2 million barrels per day, up by 2.5% from the same period last year. Distillate fuel product supplied averaged over 3.9 million barrels per day over the last four weeks, up by 8.9% from the same period last year. Jet fuel product supplied is up 2.8% compared to the same four-week period last year.







    Attached Files
    Back to Top

    Marathon Oil has third-quarter loss as low oil prices hurt


    Marathon Oil Corp, on Wednesday reported a quarterly loss that topped Wall Street expectations, as low commodity prices prompted the a U.S. oil company with operations in Texas and Equatorial Guinea to write down the value of assets.

    Marathon, based in Houston, also tweaked its production growth forecast for this year.The company expects total output to grow 7 percent, at the top end of its previous range for growth of 5 percent to 7 percent.

    U.S. oil and gas companies, hit hard by a more than 60 percent drop in crude prices from a year ago, have slashed capital spending and slashed the number of rigs drilling to conserve cash.

    Even so, operators have been able to lift output through drilling efficiencies and new techniques used to brings wells to production.

    "In an environment where we expect oil prices to remain low for a longer period of time, Marathon Oil continues to take strong action to deliver meaningful cost reductions and efficiency gains, while we remain on target to achieve the high end of our original total Company production growth targets," Marathon Oil Chief Executive Lee Tillman said in a statement.

    Marathon, which slashed its dividend 76 percent last week, reported a third-quarter loss of $749 million, or $1.11 per share, compared with a year-ago profit of $431 million, or 64 cents per share.

    Excluding $611 million in after-tax charges that included asset impairments, Marathon had a per share loss of 20 cents per share. On average, Wall Street analysts had expected a loss of 40 cents, according to Thomson Reuters I/B/E/S.

    Total oil and gas output from continuing operations (excluding Libya) averaged 434,000 barrels oil equivalent per day (boed), up 6 percent from the year-earlier period.


    Read more at Reutershttp://www.reuters.com/article/2015/11/04/marathonoil-results-idUSL1N12Z3LE20151104#kFVhGLIOXkMtpepH.99

    Attached Files
    Back to Top

    Carrizo Oil & Gas announces third quarter 2015 loss of $708 million and increases production guidance


    Carrizo Oil & Gas, Inc. today announced the Company's financial results for the third quarter of 2015 and provided an operational update, which includes the following highlights:

    Record Oil Production of 23,573 Bbls/d, 18% above the third quarter of 2014
    Total Production of 35,948 Boe/d, 7% above the third quarter of 2014
    Loss From Continuing Operations of $708.8 million, or ($13.75) per diluted share, and Adjusted Net Income (as defined below) of $10.4 million, or $0.20 per diluted share
    Adjusted EBITDA (as defined below) of $113.6 million
    Raising 2015 crude oil production guidance

    Carrizo reported a third quarter of 2015 loss from continuing operations of $708.8 million, or ($13.75) per basic and diluted share compared to income from continuing operations of $83.0 million, or $1.83 and $1.80 per basic and diluted share, respectively, in the third quarter of 2014. The loss from continuing operations for the third quarter of 2015 includes certain items typically excluded from published estimates by the investment community, including the full cost ceiling test impairment recognized this quarter. Adjusted net income, which excludes the impact of these items as described in the statements of operations included below, for the third quarter of 2015 was $10.4 million, or $0.20 per basic and diluted share compared to $31.8 million, or $0.70 and $0.69 per basic and diluted share, respectively, in the third quarter of 2014.

    For the third quarter of 2015, adjusted earnings before interest, income taxes, depreciation, depletion, and amortization, as described in the statements of operations included below ('Adjusted EBITDA'), was $113.6 million, a decrease of 22% from the prior year quarter as the impact of lower commodity prices more than offset the impact of higher production volumes.

    Production volumes during the third quarter of 2015 were 3,307 MBoe, or 35,948 Boe/d, an increase of 7% versus the third quarter of 2014. The year-over-year production growth was driven by strong results from the Company's Eagle Ford Shale assets as well as an increase in production from the Company's Utica Shale assets. Oil production during the third quarter of 2015 averaged 23,573 Bbls/d, an increase of 18% versus the third quarter of 2014 and 6% versus the prior quarter; natural gas and NGL production averaged 51,710 Mcf/d and 3,757 Bbls/d, respectively, during the third quarter of 2015. Third quarter of 2015 production exceeded the high end of Company guidance due primarily to strong performance from the Company's Eagle Ford Shale assets.

    http://www.oilvoice.com/n/Carrizo-Oil-Gas-announces-third-quarter-2015-loss-of-708-million-and-increases-production-guidance/f679bd7ad8e9.aspx
    Back to Top

    Range Resources to offload natural gas operations in Virginia for $876mln


    US-based oil and natural gas producer Range Resources is set to offload its natural gas operations in southwestern Virginia's Nora field for $876mln in a bid to reduce debt.

    As part of the transaction, the company will sell about 3,500 operated wells and about 460,000 net acres in the Nora/Haysi combined fields.

    During the third quarter, the Nora assets produced 109 Mmcf per day representing 7.5% of Range Resources' net production.

    "While these are great assets operated by a talented team, bringing the value forward through a sale was the best decision for our shareholders."

    Following the sale, the company will be able to cut total debt by an expected 24% and further bolster its financial position.

    Range Resources chairman, president and CEO Jeff Ventura said: "While these are great assets operated by a talented team, bringing the value forward through a sale was the best decision for our shareholders.

    "Using our consistent, return-focused capital allocation process, we will continue to review our portfolio for opportunities to bring value forward where other assets cannot compete for capital in comparison to our 1.6 million stacked-pay acreage position in the Marcellus, Utica and Upper Devonian."

    The sale, which is scheduled to close by the end of the year, is also expected to reduce direct operating expenses, brokerage natural gas and marketing expenses for 2016.

    According to Range Resources, the sale is subject to customary closing conditions as well as purchase price adjustments.

    The company purchased additional interest in the Nora Field in June 2014 and took over 100% ownership of the asset.

    http://www.hydrocarbons-technology.com/news/newsrange-resources-to-offload-natural-gas-operations-in-virginia-for-876m-4709883
    Back to Top

    Chesapeake trims 2015 capex to cope with weak oil and gas prices


    Oil and gas producer Chesapeake Energy Corp cut its 2015 capital budget for the second time this year to cope with a slump in oil and gas prices, but raised its production forecast.

    The company also wrote down the value of some oil and gas assets by $5.42 billion in the latest quarter, adding to the $10 billion in impairment charges it has already booked this year.

    Chesapeake lowered its 2015 capital expenditure target to $3.4-$3.9 billion from $3.5-$4.0 billion.

    However, the company raised its 2015 total production forecast to 670,000-680,000 barrels of oil equivalent per day (boepd), from 667,000-677,000 boepd.

    Chesapeake's shares were up 4.7 percent at $7.97 in premarket trading on Wednesday. The stock has lost 65 percent in the past 12 months.

    Net loss attributable to Chesapeake shareholders was $4.69 billion, or $7.08 per share, in the third quarter ended Sept. 30, compared with a profit of $169 million, or 26 cents per share, a year earlier.

    Excluding one-time items, Chesapeake reported a loss of 5 cents per share, compared with the average analyst estimate of 13 cents per share, according to Thomson Reuters I/B/E/S.


    Read more at Reutershttp://www.reuters.com/article/2015/11/04/chesapeake-enrgy-results-idUSL3N12Z4KH20151104#VGrwIBXBDYc5XRUT.99
    Back to Top

    Goodrich Petroleum reports 3Q loss


    Goodrich Petroleum reports third-quarter loss, misses expectations
    Goodrich Petroleum Corp. (GDP) on Wednesday reported a loss of $17.8 million in its third quarter.

    On a per-share basis, the Houston-based company said it had a loss of 44 cents.

    The results missed Wall Street expectations. The average estimate of eight analysts surveyed by Zacks Investment Research was for a loss of 21 cents per share.

    The independent oil and gas company posted revenue of $17.7 million in the period, also missing Street forecasts. Five analysts surveyed by Zacks expected $31 million.

    To date, the Company has reduced total debt by approximately $198 million (31%) and annual interest expense by approximately $9.5 million (debt exchanges and conversions only) since the end of the second quarter through the following transactions:

    In September the Company exchanged $55 million of (old) 2032 convertible notes into $27.5 million of (new) 2032 convertible notes resulting in $27.5 million of net debt reduction;
    In September the Company closed on the sale of its Eagle Ford Shale production, proved reserves and associated acreage which allowed for a reduction in net debt through the third quarter of approximately $72.5 million. Approximately $14 million of sales proceeds is still held in escrow pending a post-closing settlement;
    In October the Company exchanged $158.2 million of 2019 senior notes into $75 million of second lien notes resulting in $83.2 million of net debt reduction. The Company expects to book an estimated gain of $62.6 million in the fourth quarter for the debt exchange;
    In October the Company exchanged $17.1 million of (old) 2032 convertible notes into $8.5 million of (new) 2032 convertible notes resulting in $8.6 million of net debt reduction;
    In September and October the Company reduced total debt by an additional $6.2 million through conversion of (new) 2032 convertible notes into common stock.

    The Company remains focused on transactions that will reduce debt and interest expense.

    The borrowing base under the Company's senior credit facility was reaffirmed at $75 million and covenants amended to provide for flexibility through February 2017.

    THIRD QUARTER HIGHLIGHTS:

    Capital expenditures for the quarter totaled $16.4 million. Full year capital expenditures expected to be lower by 10-15% versus previous guidance;
    Production for the quarter totaled 645,000 barrels of oil equivalent ("Boe") (50% oil), which was affected by deferred completions and the sale of the Company's Eagle Ford production, proved reserves and associated acreage;
    Adjusted Revenues, which includes the benefit of realized gains on the Company's oil hedges, were $31.5 million for the quarter versus $55.1 million in the prior year period;

    http://finance.yahoo.com/news/goodrich-petroleum-reports-3q-loss-132334869.html

    http://finance.yahoo.com/news/goodrich-petroleum-announces-third-quarter-130000670.html
    Back to Top

    Precious Metals

    Modi launches gold monetisation scheme, response seen muted


    India's prime minister will on Thursday launch a programme to lure tonnes of gold from households into the banking system, but low returns and concerns over tax authorities hounding depositors may hinder a scheme aimed at cutting imports.

    India's obsession with gold is rivalled only by China, with the metal used widely in wedding gifts, religious donations and as an investment. The country has amassed about 20,000 tonnes of gold worth over $800 billion in family lockers and temples.

    Previous attempts at mobilising this gold have been unsuccessful, but Prime Minister Narendra Modi is hoping higher interest rates paid will help it to succeed this time.

    "The government wants to reduce the reliance on gold imports over time," a finance ministry official said.

    Banks will collect gold for up to 15 years to auction them off or lend to jewellers from time to time. They will pay 2.25-2.50 percent interest a year, higher than previous rates of around 1 percent.

    But industry experts and bankers said many prospective depositors will not take up the scheme due to concerns that the tax department could question the source of gold, while others may find conventional bank deposit rates of 8 percent more attractive.

    "The present scheme will not bring out even 20 tonnes of gold," said Anantha Padmanabhan, southern region head of the All India Gems and Jewellery Trade Federation.

    Modi will also launch a sovereign gold bond, offering 2.75 percent interest to domestic investors to cut physical buying.

    Padmanabhan, however, said an amnesty was needed for people to deposit up to 500 grams of gold without any questions. The government has yet to make its position clear on this issue.

    Investors will have to disclose their permanent account number, registered with the income tax department, if the value of gold is worth more than 50,000 rupees ($763.53). Some people fear it is a way for the government to keep a tab on the source.

    Read more at Reutershttp://www.reuters.com/article/2015/11/04/india-gold-idUSL3N12Y3UR20151104#RutV5XoxMyysJPrI.99

    Attached Files
    Back to Top

    Base Metals

    Processing fees for spot copper concentrates to China hit 7-month high


    Spot treatment and refining charges that Chinese copper smelters receive for processing raw material concentrate imports have risen 10 percent in two months to hit a seven-month high, as many smelters cut purchases prior to talks on term shipments.

    Strong spot rates could help smelters receive higher charges for the 2016 term shipments.

    Spot standard copper concentrates to China traded carrying treatment and refining charges (TC/RC) of about $108 per tonne and 10.8 cents per pound this week, the highest since April 2015, sources at smelters said.

    Spot TC/RCs were at about $98-$100 and 9.8-10 cents in September and $92-$95 and 9.2-9.5 cents in August.

    Supply of spot concentrates may rise next month, as some global traders and miners try to boost revenues ahead of the year-end, said a trader at an international trading house.

    Large Chinese smelters were not keen to take spot concentrate imports prior to talks with global miners on term shipments in 2016, though smaller smelters were seeking spot shipments with higher TC/RCs, the smelter sources and traders said.

    A manager at a medium-sized smelter said his firm was seeking spot imports and asking for TC/RCs of $107-$108 and 10.7-10.8 cents.

    Chinese smelters and global miners are set to start talks on TC/RCs for term shipments in 2016 in mid-November.

    Many Chinese smelters expect the global concentrate market to have a surplus next year although some global miners have trimmed production due to low metal prices trading not far off six-year lows, said a manager at a state-owned smelter.

    "Many estimates (by analysts) show a surplus...based on miners' production plans," the manager said. He expects the 2016 benchmark TC/RC to rise up to $110 and 11 cents, from this year's $107 and 10.7 cents.

    Smelter executives and traders said last month the 2016 benchmark could be about $100-$110 and 10-11 cents.

    Still, China's demand for concentrate imports is expected to rise next year to cover higher metal production, meaning some pressure on TC/RCs.

    State-backed research firm Antaike expects China's refined copper production to rise 6-7 percent to 7.87-7.94 million tonnes in 2016. China is expected to add about 550,000 tonnes both in smelting and refining capacity next year.


    Read more at Reutershttp://www.reuters.com/article/2015/11/04/china-copper-fees-idUSL3N12Z3CI20151104#IGhG3AGJWsDqIDlD.99

    Attached Files
    Back to Top

    Steel, Iron Ore and Coal

    Glencore Jan-Sep coal production drops 8pct on year


    Diverse miner Glencore produced 102.7 million tonnes of coal during January-September, slipping 8% year on year, as it continued to limit production in a weak market environment, the company said on November 4.

    The miner produced 16.2 million tonnes of South African export thermal coal during the first nine months of 2015, falling 7% on year.

    Output of South African domestic thermal coal for the first three quarters of the year also fell 8% on year to 15.6 million tonnes.

    Glencore attributed the lower production at its South African operations to the closure of the Optimum opencut operations and Middelkraal. However, the miner noted that Optimum's underground mine was still operating, although it was under business rescue proceedings, and increased production at Impunzi and Tweefontein has partly mitigated the overall reduction.

    At its Colombian operations, Glencore produced 13.9 million tonnes at Prodeco over January-September, slipping 8% on year, as it lowered production to meet temporary night railing restrictions.

    At the same time, the miner's 33.3% pro-rata share of production from the Cerrejon mine was 8.4 million tonnes, edging 2% higher.

    In Australia, its export thermal coal production for the first nine months dipped 8% on year to 38.8 million tonnes, while domestic thermal coal production at the Australian operations dropped 31% from the same period in 2014 to 2.9 million tonnes.

    Glencore has been scaling back production in Australia due to weak market conditions.

    Australian coking coal production for the first nine months of 2015 fell 9% on year to 4.2 million tonnes, due to geological issues at Oaky North, while semi-soft coking coal output rose 8% on year to 2.7 million tonnes.

    All average energy commodity export prices fell compared to the first nine months of 2014, with the South African thermal coal average realized export price dropping 23% on year to $54/t.

    The average realized export price of Australian thermal coal dropped 16% from the year before to $61/t, while in Colombia, the average realized export prices for the period were $64/t at Prodeco and $57/t at Cerrejon, slipping 175 and 15% on year, respectively.

    In Australia, the average realized export price of coking coal and semi-soft fell 16% and 18% on year, respectively, to $101/t and $79/t.

    http://en.sxcoal.com/0/134340/DataShow.html
    Back to Top

    German Cabinet passes coal-fired power reserve law


    The German cabinet on Wednesday approved a plan to pay utilities to set aside some of their coal-fired power capacity as Europe's biggest economy looks to ensure stable supply and reduce carbon emissions.

    Some 2.7 gigawatts (GW) of power generation from brown coal, equivalent to the output of eight power plants, will be placed in reserve and shut down by 2022, a government official said.

    The plan is part of Germany's efforts to cut its carbon emissions by 12.5 million tons by 2020.

    In July, Economy Minister Sigmar Gabriel abandoned plans for a levy on coal-fired power plants and instead announced that companies would be paid to shift capacity to the reserve.

    Utilities RWE, Vattenfall and Mibrag will reduce coal-fired power output from the start of winter 2016 and receive an average of 230 million euros ($251 million) per year collectively.

    Consumers are expected to face higher electricity bills as costs of around 1.6 billion euros for the scheme will not be shouldered by the government.

    Opposition lawmaker Oliver Krischer from the Green Party accused Gabriel of yielding to the interests of the utilities and creating a reserve which no-one needed at great cost.

    It remains to be seen whether the European Commission will approve the plan, he said.

    The Cabinet also passed a new electricity market design which allows utilities to charge higher prices at times of shortages when wind or renewable energy sources cannot provide sufficient supply.

    This could help operators of gas-fired power plants which are not profitable under current conditions due to low spot prices and competition from cheaper coal and renewables.


    Read more at Reutershttp://www.reuters.com/article/2015/11/04/germany-energy-coal-idUSL8N12Z24120151104#KYgGtplAdhuAMdf0.99

    Attached Files
    Back to Top

    China's imports of Australian coal from Gladstone up 53pct on mth


    China's coal imports from the eastern Australian port of Gladstone rose to 956,000 tonnes in October, up 53% from 624,000 tonnes in September, said Gladstone Ports Corporation on November 4.

    China’s imports of Gladstone coal over January-October stood at 9.6 million tonnes, down 32.9% from 14.3 million tonnes in the first ten months of 2014.

    South Korea's demand for Gladstone coal jumped to its highest in 27 months in October at 1.4 million tonnes, up 60% from September's shipments of 873,000 tonnes.

    Over January-October, South Korea imported 9.1 million tonnes of coal from Gladstone port, up 15.2% from a year earlier, the port data showed.

    Indian customers booked 1.28 million tonnes of coal from Gladstone port's three coal terminals in October, down 23.5% from 1.68 million tonnes in September. Its total imports from Gladstone port stood at 12.33 million tonnes over January-October, compared with 11.2 million tonnes a year ago.

    Japan, another major customer, consumed 1.68 million tonnes of coal from Gladstone in October, down 16% from 2 million tonnes in September.

    The port has exported 59.3 million tonnes of coal over January-October, up 1 million tonne from a year earlier.

    http://en.sxcoal.com/0/134348/DataShow.html
    Back to Top

    Rio Tinto sees strong growth in iron ore demand outside China


    Rio Tinto said on Thursday it expects to see strong growth in iron ore demand in countries outside of China as the global seaborne market expands.

    China has long been the top market for sea-traded iron ore, importing close to 1 billion tonnes a year, out of a global market of 1.4 billion tonnes. Rio Tinto accounts for about a third of China's imports.

    "We project that the world will demand around 3 billion tonnes of iron ore by 2030, a 2 percent average annual increase from today's levels," Rio Tinto's iron ore head Andrew Harding said.

    "We are expecting non-Chinese demand for steel to increase by 65 per cent in the period to 2030, with ASEAN (Association of Southeast Asian Nations) economies and India playing key roles," Harding said in a speech to business leaders in Perth.

    Half of the expansion in global iron ore demand will be supplied through the seaborne market, according to Harding, where Australia and Brazil are the dominant suppliers.

    Still, Chinese demand for ore will be "critically important," with steel production expected to grow 1 percent a year from a very high base, he said.

    Harding's comments run counter to forecasts by the China Iron & Steel Association (CISA), which sees China's crude steel output declining to 780 million tonnes by 2020 from 823 million tonnes in 2014, as steelmakers grapple with slower demand growth and tumbling prices.

    CISA on Wednesday said it expected China's crude steel production to fall this year and next, with a brief rebound in 2017 before resuming the downward trend.

    China's steel sector is already struggling with 300 million tonnes of surplus capacity, pushing iron ore prices to their lowest since July, while inventories at Chinese ports have ballooned to the highest since May.


    Read more at Reutershttp://www.reuters.com/article/2015/11/05/rio-tinto-australia-iron-idUSL3N1301B020151105#qVCrrxfzOEMjQQOF.99
    Back to Top

    Ore exports from Port Hedland sink in October


    Image Source: dredgingtodayBloomberg reported that Iron ore cargoes from Australia's Port Hedland to China fell last month to the lowest level since July ahead of a seasonal slowdown in the largest buyer that may compound a decline in production and consumption as the economy cools.

    Exports to China were 30.7 million metric tons from 33.8 million tons the previous month and 31.7 million tons a year earlier, according to data from the Pilbara Ports Authority on Wednesday. Overall iron ore shipments totalled 36.5 million tons, down from a record 39.4 million tons in September and 37.5 million tons a year ago.

    For the year-to-date, shipments are still well ahead of 2014. Exports to China from Port Hedland were 314 million tons in the first 10 months compared with about 284 million tons in the same period in 2014.

    http://steelguru.com/mining/ore-exports-from-port-hedland-sink-in-october/438501#tag
    Back to Top

    China's crude steel output to fall to 780mn T by 2020

     
    China's output of crude steel is expected to fall to 780 million tonnes by 2020, the China Iron & Steel Association (CISA) said on Wednesday, as the steel sector grapples with slower demand growth and tumbling prices. China's crude steel production will fall this year and the next, with a brief rebound in 2017 before resuming its downward trend, CISA told an industry conference in Beijing.

    With steel prices hitting their lowest in more than two decades, the country's massive steel sector is struggling with surplus capacity of about 300 million tonnes and cooling demand growth.

    However, top iron ore miners, including Rio Tinto and BHP Billiton , are still expanding output, betting on sustainable growth in China, despite the contraction in steel output by the world's biggest producer.

    BHP sees moderate but sustainable growth in Chinese steel production over the next decade, although it cut its forecast for peak steel production to between 935 million and 985 million tonnes in the mid-2020s, down from 1 billion tonnes previously.

    Shrinking demand, soaring losses and tighter credit have undermined Chinese steel firms, with more, particularly in the northern region, expected to make deeper output cuts over the next few months.

    Anshan Iron & Steel Group, one of China's major state-owned steel firms, has suspended operations at some blast furnaces this week, industry sources said.

    China's apparent crude steel consumption fell in 2014 for the first time in three decades, to stand down 3.4 percent at 738.3 million tonnes. Consumption for the first nine months of this year dropped 5.8 percent to 533 million tonnes.

    http://en.chinamining.com.cn/News/2015-11-05/1446692377d74367.html

    Attached Files
    Back to Top

    Tata Steel announces carbon reduction project


    Tata Steel has announced a new carbon-cutting project called HIsarna, which could cut CO2 emissions by 20 percent.

    In conjunction with Rio Tinto and other European steelmakers, the project is being piloted at IJmuiden steelworks in the Netherlands.

    Research suggests it could reduce today’s steel industry CO2 emissions and energy use, as well as lower the emissions of fine particle dust and dioxins, and nitrogen and sulphur oxides.

    http://steelguru.com/steel/tata-steel-announces-carbon-reduction-project/438419#tag
    Back to Top

    U.S. Sets New Duties on Chinese Steel


    Six American steel makers including U.S. Steel filed three trade complaints earlier this year. On Tuesday, they received a preliminary ruling on the first as the Commerce Department established preliminary duties of up to 236% on imports of corrosion-resistant steel from China. The tariff goes into effect immediately and will be set for five years if a final ruling in favour of the duty is made in January.

    U.S. Steel Chief Executive Mario Longhi pointed to the role of Chinese imports in a company statement Tuesday, saying that “excessively high levels of imports, much of which we believe are unfairly traded” hit steel prices.

    A U.S. Steel spokeswoman said the tariffs were “a good first step” and that the company is looking forward to the next decision, “encouraged that our federal agencies tasked with this critical oversight and enforcement of our trade laws will halt these harmful, illegal and unfair practices.”

    China’s Commerce Ministry declined immediate comment, saying it was looking into the decision. Phone calls to the China Iron and Steel Association weren’t answered.

    Steelmakers in China and other countries have denied taking advantage of domestic subsidies or other favours to dump low-cost steel on U.S. markets.

    Overall, imports of steel into the U.S. are slightly down in 2015, but they have increased dramatically for certain key steel categories, including the corrosion-resistant steel hit by the preliminary tariff.

    Many categories of steel are offered at such low rates that they’re “toxic for pricing,” said Phil Gibbs, an analyst for Cleveland-based Keybanc Capital Markets.

    The tariffs will provide some support for prices in the U.S., but some analysts say companies are going to have make longer-term structural changes.

    “We could see steel prices stay this low for the next 10 years,” Mr. Gibbs said.

    The Commerce Department also set smaller duties on imports from India, South Korea and Italy. A separate ruling on the case will be issued in December.

    http://www.wsj.com/articles/u-s-steel-projects-worse-than-expected-shipments-in-2015-1446589798

    Attached Files
    Back to Top

    U.S. Steel reports another huge loss


    U.S. Steel continues to rack up huge losses despite an aggressive cost cutting program.

    The Pittsburgh-based company reported a third quarter net loss of $173 million US Tuesday afternoon. That brings its losses for nine months of 2015 to more than $509 million US.

    The latter includes a $53-million US loss to shut down blast furnace, steelmaking and most flat-rolled operations at its Fairfield Works and a $10-million US charge for a pension obligation related to its troubled U.S. Steel Canada operation.

    In a news release, company president Mario Longhi blamed the poor performance on unfair imports of subsidized foreign steel and a sluggish American economy.

    "Total segment (earnings before interest and taxes) improved as compared to the second quarter as we continued to take action to address our cost structure," he said. "We remain focused on our Carnegie Way transformation efforts to weather the continued difficult market environment. These efforts will better position our company to generate stronger operating margins and respond to changing market conditions."

    Carnegie Way, named for company founder Andrew Carnegie, is an aggressive cost cutting program that Longhi said has so far trimmed $715 million US from its operations.

    Despite its losses the company has strong liquidity of $2.9 billion US, including $1.2 billion US in cash.

    For the rest of 2015, the company predicts adjusted earnings before interest, taxes, depreciation and amortization of about $225 million US.

    The quarterly results compare to a net loss of $207 million US in the same period last year and a second quarter 2015 net loss of $261 million US.

    The results reported from the company's American headquarters do not include figures for its Canadian arm, which is under creditor protection.

    The court-appointed monitor of that process recently reported year-to-date losses of $343.8 million.

    The American company noted year-to-date losses of $217 million US associated with U.S. Steel Canada. That's down from $413 million US for the same period last year.

    [U.S. Steel wants Canadian unit to pay $2.2B debt]

    However, it also reported improved results in the flat-rolled steel segment compared to the second quarter, although it contends the sector continues to be plagued by unfair imports.

    "Imported flat-rolled products, much of which we believe are dumped and/or subsidized, remained excessively high in the third quarter, causing further damage to the domestic market," it said in a release. "Based on preliminary statistics, imported sheet products still averaged more than one million tons per month in the third quarter and not only continued to erode our market share, but also placed downward pressure on both our spot and our contract prices."

    Average prices for the quarter were $674 US per ton, down from $777 US for the same period last year. The year-to-date average price was $712 US per ton.

    Looking ahead, Longhi said the future is not bright.

    "Commercial markets are not improving as we had anticipated for the second half of 2015. Steel selling prices reversed direction as excessively high levels of imports, much of which we believe are unfairly traded, and a significant decline in steel scrap prices caused spot prices to reach new lows for the year," he added. "High import levels also had a negative impact on the rebalancing of supply chain inventories, decreasing customer order rates in the second half of the year."

    Based on those factors, Longhi said the company expects "significantly lower shipments and average realized prices than we previously projected for full-year 2015."

    http://www.thespec.com/news-story/6079315-u-s-steel-reports-another-huge-loss/
    Back to Top
    Commodity Intelligence LLP is Authorised and Regulated by the Financial Conduct Authority

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

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