Mark Latham Commodity Equity Intelligence Service

Thursday 17th December 2015
Background Stories on www.commodityintelligence.com

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    Macro

    China's cabinet approves major nuclear, hydro power projects


    China's cabinet approved major clean energy projects including hydropower and nuclear installations, according to a statement issued on Wednesday.

    The State Council, China's cabinet, gave approval to construction of a nuclear power plant in Fangchenggang in the southern province of Guangxi, and approved the expansion of a nculear power plant in the eastern province of Jiangsu, according to the statement.

    The statement gave no details on the size of the projects.

    The cabinet also gave the go-ahead for a hydropower plant straddling the southwestern provinces of Sichuan and Yunnan.

    http://www.reuters.com/article/china-government-energy-idUSB9N13W02N20151216
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    China Nov power consumption up 0.6pct on yr


    China’s power consumption stood at 465.8 TWh in November, rising 0.6% on year and up 3.72% on month, showed data from the National Energy Administration (NEA) on December 17.

    Power consumption by the residential segment was 54.7 TWh, rising 6.5% from the year prior but down 3.36% from October.

    For the non-residential segment, the primary industries – mainly the agricultural sector – used 7.4 TWh of electricity in November, rising 6.6% on year and up 1.37% on month.

    The secondary industries – mainly the industrial sector – consumed 347.1 TWh of electricity, falling 1.6% on year but up 5.25% from October.

    The industrial sector specifically, consumed 341.2 TWh of electricity in November, decreasing 1.6% from the year before but up 5.15% from October, with the heavy industry accounting for 83.1% or 283.6 TWh, dropping 2.4% year on year but up 4.84% on month.

    Power consumption by tertiary industries – mainly the services sector – reached 56.6 TWh in November, increasing 9.4% year on year and 2.17% higher from the month prior.

    Over January-November, China consumed a total 5,049.3 TWh of electricity, up 0.7% from the same period last year, the NEA said.

    Power consumption by the residential segment amounted to 668.6 TWh during the same period, gaining 4.7% from the previous year.

    Under the non-residential segment, the primary industries used 95.3 TWh of electricity, up 3% year on year; the secondary industries used 3,633 TWh of power, down 1.1% year on year, with the industrial sector at 3,569.8 TWh, down 1.1%; while the tertiary industries consumed 652.4 TWh, up 7.3%.

    Meanwhile, the average utilization of power generating units across the country dropped 7.91% year on year to 3,597 hours over January-November this year.

    Hydropower plants logged average utilization of 3,256 hours during the same period, dropping 4.09% from the previous year; while thermal power plants logged average utilization of 3,916 hours, falling 8.31% from a year ago.

    China added 90.44 GW of power generating capacity from January to November, including 13.31 GW of new hydropower capacity and 47.51 GW of new thermal power capacity.

    http://en.sxcoal.com/0/136675/DataShow.html
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    US Industrial Production Crashes Most Since 2009, Weather Blamed


    For the third month in a row US Industrial Production dropped MoM, crashing 0.6% in November (against expectations of a mere 0.2% drop). This is the 9th month of 2015 with no MoM increase in industrial production and is the biggest MoM drop since March 2012. However, for the first time since Dec 2009, Industrial Production fell YoY (down 1.2%) signalling America is deep in recession. The excuse, blame, is "unusually warm weather" which sent the utilities index down 4.3% as demand for heating tumbled.

     Image title

    So if the wealther was to blame for November, what was to blame for January, February, March, April, May, June, September, and October?

    http://www.zerohedge.com/news/2015-12-16/industrial-production-crashes-most-2009-weather-blamed

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    Baltic Dry Crashes To New Record Low As China Demand Weakens.


    Despite a brief dead-cat-bounce late November, which Jim Cramer heralded as evidence of stabilization in China, the world's best known freight index has collapsed to new all-time record lows this morning. Amid a persistent glut of ships and ongoing concerns about Chinese steel imports, The Baltic Dry has tumbled to 471 - the lowest level in at least 30 years.

     
    Image title
    As Bloomberg adds, China, which makes about half the world’s steel, is on track for the biggest drop in output for more than two decades, according to data compiled by Bloomberg Intelligence...

    Owners are reeling as China’s combined seaborne imports of iron ore and coal -- commodities that helped fuel a manufacturing boom -- record the first annual declines in at least a decade. While demand next year may be a little better, slower-than-anticipated growth in 2015 has led to almost perpetual disappointment for rates, after analysts’ predictions at the end of 2014 for a rebound proved wrong.

    “It doesn’t help that Chinese steel production is about to see the most dramatic decline to the lowest in 20 years,” said Herman Hildan, a shipping-equity analyst at Clarksons Platou Securities in Oslo.“Demand growth is collapsing.”

    http://www.zerohedge.com/news/2015-12-16/baltic-dry-crashes-new-record-low-china-demand-collapsing

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    Joy Global swings to loss, cuts dividend


    U.S. maker of mining equipment Joy Global logged Wednesday an unexpected and sharp loss in its fourth quarter and announced it was cutting its dividend as it struggles to survive long-dragged drop in demand triggered mostly by low commodity prices.

    Announcing a loss of $1.32 billion for the fiscal fourth quarter ended Oct. 30, the Milwaukee-based maker of giant shovels, conveyor belts and jumbo drills also posted guidance for the current fiscal year well below analyst expectations.

    Joy now expects sales of $2.4 billion to $2.6 billion for the current year, down from $3.17 billion in the year ended Oct. 30. That means the mining equipment maker expects to sell less than half the $5.66 billion peak it reached only three years ago, around the time mining companies began cutting spending on new equipment and servicing of old machinery.

    The company took impairment charges of $1.34 billion during the quarter, citing a “prolonged severe downturn of global commodity markets.”

    The company took impairment charges of $1.34 billion during the quarter, citing a “prolonged severe downturn of global commodity markets.” The write down compares with profit of $129.7 million, or $1.31 per share, barely a year earlier.

    Joy Global said it had exceeded cost-reduction targets during the year and aims to cut another $85 million in 2016.

    "We are controlling the things we can, and are confident our strategies and operational execution will position us well for the future, but the state of our end markets sets up another challenging year in 2016," Chief Executive Ted Doheny said in a statement.

    The company, which gets more than 60% of its revenue from coal miners, forecast adjusted earnings of 10 cents to 50 cents a share for the current year, down from $1.95 per share in the year ended in October.

    http://www.mining.com/joy-global-swings-to-loss-cuts-dividend/

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    Oil and Gas

    OPEC producers bearish on oil in 2016 as oversupply persists

    OPEC producers bearish on oil in 2016 as oversupply persists

    OPEC producers see little chance of significantly higher oil prices in 2016 as extra Iranian production could add to surplus supplies and the prospect of voluntary output restraint remains remote.

    OPEC delegates, including those from Gulf OPEC members, say higher oil prices are not around the corner yet, despite further growth in global demand and as a rise in non-OPEC supply is tempered by prices that have more than halved in 18 months.

    Some see a more balanced market by 2017 even though they expect further pressure on oil which could send prices to test the mid-$30 a barrel range on market sentiment rather than fundamentals, before slowly rebounding by the second half of next year.

    The comments, days after OPEC failed to agree a production ceiling for the first time in decades, show delegates in the producer group are pushing back their expectations of a stronger market. In August, Gulf delegates were hoping for oil at $60 a barrel by this month.

    "In the first half of next year, prices will be under pressure from supply being above demand and concern about Iranian supply," said an OPEC delegate from a major producer.

    "With the current low prices, I find it very hard to predict prices at more than $40-$45 for Brent in the whole year. I don't think it will reach $60."

    "You cannot be optimistic in such market conditions, keeping in mind that today Brent is below $39 a barrel," said a second OPEC delegate, from a non-Gulf member.

    "I believe that 2016 is not going to be any better than 2015 with an average of $50 at the most unless OPEC takes action to decrease production, which is unlikely."

    The world is awash in oil - more than 2 million barrels per day in excess supply is implied by OPEC's numbers - before any extra barrels that reach the market from Iran once Western sanctions are lifted.

    In addition, say some OPEC sources, an anticipated U.S. interest rate rise this week could push prices further down, even if only for a short period of time.

    But these sources also expect global inventories to start declining by the second half of 2016, supporting prices more towards the year-end.

    Supplies from high-cost producers such as U.S. shale drillers are also set to fall more quickly into next year, despite being resilient until now, as many have been already operating at losses, they say.

    "By the second half of next year it will show the real recovery. Then by 2017 you will have a more stable market," the delegate added. "But this is subject to the Iranian crude, when it will come and by how much."

    http://www.reuters.com/article/oil-price-opec-idUSL8N14436B20151216

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    Sinochem signs 10-year deal to buy oil from Angola's Sonangol


    China's state-run Sinochem Group said on Wednesday it had signed a deal with Angolan state-owned producer Sonangol to buy crude oil for more than 10 years.

    The statement on the Chinese company's website did not give details of the supply amount or other financial details, but trading sources said the agreement was for four or five cargoes per month, which would make the company one of the largest holders of monthly contracts to buy Angolan crude.

    There are currently around 15 cargoes given to these so-called term buyers each month from Angola's export programmes of roughly 55 cargoes.

    The deal is a coup for Angola, as OPEC members fight for market share, particularly in China, the world's largest energy consumer.

    While payment terms were not disclosed, sources said the deal directly related to loans that the Chinese government has given to Angola as its commodity-reliant economy struggles with the more than 60 percent drop in crude oil prices over the past year.

    Along with the chairman of Sonangol, Angola's financial minister, Armando Manuel, was present at the signing of the deal, as was Zheng Zhijie, president of China Development Bank.

    A year ago, China agreed to lend Sonangol $2 billion to expand oil and gas projects, and Angolan President Jose Eduardo dos Santos was in China in June seeking a two-year moratorium on debt repayments along with financing for a variety of projects, including a $4.5 billion hydropower scheme.

    But the deal is also likely to push out another term contract holder, sources said. Sonangol has to trade some of its oil on a spot basis in order to establish prices for term agreements.

    http://www.reuters.com/article/sinochem-sonangol-idUSL3N1453ET20151216
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    Japan: November LNG imports down 2.7% YoY, utility consumption down 9%


    Japan’s imports of liquefied natural gas dropped 2.7 percent in November as compared to the same month a year ago.

    The world’s largest buyer of the chilled gas imported 6.69 million tonnes of LNG last month, preliminary data from Japan’s Ministry of Finance reveals.

    Japan paid 379,385 million yen for imports in November, down 41.5 percent as compared to 2014.

    LNG use by Japan’s ten independent regional electric power companies declined 9 percent to 4.28 million tonnes, according to the Federation of Electric Power Companies of Japan (FEPC).

    October purchases by the ten utilities were at 4.17 million tonnes of LNG, down 8.3 percent from 2014.

    Total electricity generated and purchased across the ten companies in November also dropped by 3.8% from a year to 66.82 billion kWh, FEPC said.

    http://www.lngworldnews.com/japan-november-lng-imports-down-yoy/

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    Woodside Petroleum cuts $US170m of spending


    Woodside Petroleum has advised spending this calendar year will be $US170 million ($206 million) lower than previously indicated, while production will be at the top end of guidance as the oil and gas producer battles with the impact of sliding global energy prices.

    In the update provided on Thursday, Woodside said that its total spending this year would be $US6 billion rather than the $US6.17 billion estimated in February, a 2.75 per cent reduction.

    Capital expenditure would be $US100 million lower than guided, while the exploration budget has fallen by $US70 million, it said.

    Woodside offered no commentary on the updated guidance, leaving it unclear whether the underspending stems from cutbacks because of the slump in oil prices, cost deflation or another reason. However all oil and gas producers have been reexamining spending plans to eliminate or defer non-essential investment as crude oil prices continue to slip to levels not seen for more than six years.

    Production for 2015 is now put by the Perth-based energy player at between 91 million and 93 million barrels of oil equivalent, an upward narrowing from its previous range of 88 million-93 million boe.

    "It's not clear to me my why they felt the need to put this out; it doesn't seem a material change," one analyst said.

    One suggestion was that Woodside's recently abandoned $11.6 billion play to take over Oil Search had fuelled speculation of negative news in the offing in the larger player's core business, which the company wanted to rectify. On the basis of the updated guidance, Woodside's 2015 output will be well towards the upper end of its April estimate of 86 million-94 million boe.

    Woodside shares slipped 0.85 per cent to $26.82, off the three-year lows it touched earlier this week but under-performing the broader energy sector. The company had its credit outlook downgraded by negative from stable by Moody's late Wednesday after the agency cut its 2016 Brent oil price assumption by $US10 a barrel to $US43.

    Woodside's spending for 2015 jumped from the original level of just over $US1 billion when it acquired Apache's stake in Chevron's Wheatstone LNG venture in Western Australia and other LNG assets earlier this year. The revised number of $US6 billion includes the $US3.65 billion purchase price.

    The company has yet to release capex plans for 2016, but UBS analyst Nik Burns said earlier this week he was anticipating a budget of about $US1.5 billion, a 39 per cent reduction from the circa $US2.4 billion of this year excluding the acquisition price for the Apache deal.



    Read more: http://www.smh.com.au/business/energy/woodside-petroleum-cuts-us170-million-of-spending-20151217-glppj7.html#ixzz3uYxxwm7n
    Follow us: @smh on Twitter | sydneymorningherald on Facebook
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    ConocoPhillips, 28 Energy Producers Face Moody's Rating Cuts


    ConocoPhillips and Anadarko Petroleum Corp. are among 29 U.S. oil and gas exploration and production companies whose ratings Moody’s Investors Service is reviewing for possible downgrades, spelling new trouble for the beleaguered industry.

    This comes as plummeting commodity prices have weighed on energy producers’ debt, with the industry’s investment-grade bonds falling 4.7 percent this year. Junk-rated energy securities have fared much worse, losing 21 percent, according to Bank of America Merrill Lynch indexes. Yields on speculative energy debt have risen to 14.91 percent, the highest since 2009.

    ConocoPhillips is rated A2 by Moody’s, while Anadarko, at Baa2, is just two steps above junk.

    Oil prices have tumbled 33 percent this year, trading Wednesday near a six-year-low at $35.79 a barrel. The Bloomberg Intelligence Independent Explorers and Producers Index of 61 equities has fallen 51 percent.

    Among the companies up for review are some of the best performers in the shale patch, a sign that the impact of lower oil prices is spreading. Shares of Newfield Exploration Co. have advanced 27 percent this year while Cimarex Energy Corp. and Pioneer Natural Resources Inc. are down less than 10 percent.

    "Industry conditions have weakened further, with oil and natural gas prices at multiyear lows," said Pete Speer, Moody’s senior vice president. "E&P companies will be stressed for a longer period with much lower cash flows, difficulty selling assets and limited capital-markets access."

    A Moody’s gauge of stress in the high yield oil and gas sector has risen to the highest since 2009. Energy defaults may rise as high as 5 percent next year, according to the ratings company.

    So far this year, at least 36 producers owing more than $13 billion have gone bankrupt, according to a Nov. 8 report from Haynes & Boone, a law firm with offices in Houston, New York and other cities. Magnum Hunter Resources Corp., filed for bankruptcy yesterday.

    http://www.bloomberg.com/news/articles/2015-12-16/conocophillips-anadarko-among-oil-explorers-reviewed-by-moody-s
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    Summary of Weekly Petroleum Data for the Week Ending December 11


    U.S. crude oil refinery inputs averaged over 16.6 million barrels per day during the week ending December 11, 2015, 41,000 barrels per day less than the previous week’s average. Refineries operated at 91.9% of their operable capacity last week. Gasoline production increased last week, averaging 10.0 million barrels per day. Distillate fuel production decreased last week, averaging 5.1 million barrels per day.

    U.S. crude oil imports averaged over 8.3 million barrels per day last week, up by 291,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged about 7.9 million barrels per day, 6.3% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 660,000 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 4.8 million barrels from the previous week. At 490.7 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 increased by 1.7 million barrels last week, and are in the upper half the upper half of the average range. Both finished gasoline inventories and blending components inventories increased last week. Distillate fuel inventories increased by 2.6 million barrels last week and are in the upper half of the average range for this time of year. Propane/propylene inventories fell 1.7 million barrels last week but are well above the upper limit of the average range. Total commercial petroleum inventories increased by 5.0 million barrels last week.

    Total products supplied over the last four-week period averaged about 20.0 million barrels per day, down by 0.5% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged over 9.2 million barrels per day, up by 0.7% from the same period last year. Distillate fuel product supplied averaged over 3.5 million barrels per day over the last four weeks, down by 8.2% from the same period last year. Jet fuel product supplied is up 6.5% compared to the same four-week period last year.

    Cushing crude oil inventories rose 607,000 BBL

    http://ir.eia.gov/wpsr/wpsrsummary.pdf
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    US domestic oil production rises slightly, still above last year


                                          Last Week  Week Before   Last Year

    Domestic Production.......   9,176           9,164           9,137

    http://ir.eia.gov/wpsr/overview.pdf
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    U.S. Natural Gas Production Continued to Drop in November: Platts Bentek


    Natural gas production in the lower 48 United States averaged 71.3 billion cubic feet per day (Bcf/d) in November, which is down about 0.46 Bcf/d, compared to the October average, according to Platts Bentek, an analytics and forecasting unit of Platts, a leading global provider of energy and commodities information. On a month-over-month basis, November natural gas production was down less than 1% from October.

    'U.S. natural gas production volumes in November did not live up to the expectations of the market, as the Northeast pipeline expansions underperformed,' said Sami Yahya, Platts Bentek energy analyst. 'The Northeast is the primary growth driver of production for the U.S., and the wave of new expansions that were brought online in November did not ramp up as quickly as expected. The Northeast grew only 0.3 Bcf/d out of the approximately 1.5 Bcf/d of new takeaway capacity.'

    Yahya explained that the combination of weaker demand, near-capacity storage fields, maintenance, and construction delays contributed to the underperformance of the projects. The Northeast is the only major region that saw month-over-month growth. The Southeast/Gulf region on average shed nearly 0.4 Bcf/d this month. While maintenance was a factor in the decline, this sharp dip could be a signal that some producers are intentionally chocking back production due to the depressed pricing environment, Yahya said. The Rockies region lost about 0.2 Bcf/d in volumes from October to November, as Texas and the Midcon region cut roughly 0.1 Bcf/d each.

    'Going at the rate it is going now, the Northeast is currently not very effective in offsetting production declines around the country,' said Yahya. 'However, as winter season comes on full throttle, it may lend the Northeast the needed push to not only reach new highs, but also eliminate the declining status of U.S. gas production. The downside risk is that December typically brings along the freeze offs season, which could introduce further curtailments to production in many areas, inside and outside the Northeast.'

    The Platts Bentek data analysis suggests 2015 U.S. natural gas production will average approximately 72 Bcf/d, with more growth still expected through the end of the year. Such would mark a year-on-year growth of 3 Bcf/d over 2014.

    The Platts Bentek data analysis is based on an extensive sample of near real-time production receipt data from the U.S. lower 48 interstate pipeline system. Platts Bentek production models are highly correlated with and provide an advance glimpse of federal government statistics from the U.S. EIA.

    http://www.oilvoice.com/n/US-Natural-Gas-Production-Continued-to-Drop-in-November-Platts-Bentek/395580ff819f.aspx?utm_source=twitterfeed&utm_medium=twitter&utm_campaign=Feed%3A+OilvoiceHeadlines+%28OilVoice+Headlines%29
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    Motorists hit the roads in record volumes in October - U.S. DOT


    Motorists logged 273.5 billion miles on U.S. roads in October, a 2.4 percent increase over last year and the most ever for the month, according to data released Thursday by the U.S. Department of Transportation.

    The numbers are the latest example of strong U.S. gasoline demand, fueled by low pump prices and increased economic activity.

    http://www.reuters.com/article/usa-gasoline-demand-idUSL1N14519120151216
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    Halcon Resources sets 1:5 reverse stock split

    Halcon Resources sets 1:5 reverse stock split

    Oil and gas producer Halcon Resources Corp on Wednesday announced a one-for-five reverse stock split, effective Jan. 5.

    The New York Stock Exchange had told Halcon on Aug. 25 that the company's stock had fallen foul of its listing requirement that a stock must not trade at less than $1 for 30 consecutive trading days.

    Halcon's shares hit a record low of 31.06 cents on Wednesday. They have fallen 82 percent this year, hurt by a steep drop in oil prices.

    The company said on Wednesday that the stock split would not impact any stockholder's ownership on a percentage basis or their voting power.

    http://www.reuters.com/article/us-hlcn-rsrc-stocks-idUSKBN0TZ33V20151216
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    Calfrac to issue equity to meet required debt ratio


    Canadian oilfield services provider Calfrac Well Services Ltd said on Wednesday it is raising C$27.5 million via an equity issue aimed at shoring up a key debt ratio, underscoring the level of pressure on energy sector companies hit by slumping oil and gas prices.

    The Calgary-based company said the proceeds of the offering will help it meet its required leverage ratios. Earlier this week, Calfrac entered into an agreement with its syndicate of lenders to make certain amendments to its credit facilities in order to provide it with greater financial flexibility.

    The offering dubbed an 'equity cure' will let the company maintain a specified funded debt to earnings before interest, taxes, depreciation and amortization (EBITDA) ratio.

    If the net proceeds are not utilized as an 'equity cure', it is expected that they will be used by Calfrac to fund capital expenditures, to reduce its outstanding indebtedness, or for general working capital and corporate purposes.

    "Overall, the timing of the issuance seems sudden, but we understand the rationale," said Evercore analyst James West in a note to clients. "Calfrac is taking decisive action to bolster its status as a going concern. The dilution from the equity raise is offset by the removal of the covenant breach overhang."

    Oilfield services providers have been hurt as energy companies have slashed overall costs and have mothballed projects, as they scramble to deal with depressed oil and gas prices currently hovering around 11- and 15-year lows, respectively.

    Earlier this week, Canadian oil and natural gas producer Encana Corp slashed its dividend by about 79 percent and its 2016 capital budget by more than a quarter. This came just days after its rival Cenovus Energy Inc said it expects its capital spending to be 19 percent less next year than in 2015.

    Calfrac said it top single shareholder, Matco Investments Ltd, will participate in the offering to at least maintain its current ownership at 20.45 percent.

    The lead underwriter on the deal Peters & Co, along with a syndicate of other firms is purchasing 20.37 million shares in Calfrac at C$1.35 a share, guaranteeing the company gross proceeds of about C$27.5 million.

    http://www.reuters.com/article/calfrac-well-srv-equity-idUSL1N1450XF20151216
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    Alternative Energy

    UK government cuts domestic solar support less than expected


    The British government reduced financial support for domestic-scale solar power to 4.39 pence per kilowatt hour on Thursday and limited new spending on its feed-in-tariff (FiT) scheme at 100 million pounds ($150 million).

    Under the scheme, households, businesses or farms which install low-carbon energy sources such as solar panels or small wind turbines are paid for the electricity they generate and unused energy can be sold to electricity suppliers.

    The government had been expected to cut the feed-in-tariff for domestic solar to much less.

    http://www.reuters.com/article/britain-solar-idUSU8N12901920151217
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    Vestas Offshore Wind Gets 330-Megawatt Order for U.K. Project


    MHI Vestas Offshore Wind A/S said it won a 330-megawatt order for a Dong Energy A/S project in the Irish Sea off the northwest coast of England.

    The order is for 40 V164 8-megawatt turbines, Vestas Wind systems A/S, one of the company’s parents, said in a regulatory statement. The contract covers supply and commissioning of the wind turbines and a five-year service contract at Dong’s Walney Extension West project, it said.

    MHI Vestas is a joint venture between Vestas and Mitsubishi Heavy Industries Ltd. Its 8-megawatt turbines can each generate at slightly more than 8 megawatts. Vestas said in Wednesday’s statement that it discloses MHI Vestas orders when they are worth more than 1 billion Danish Kroner ($146 million).

    http://www.bloomberg.com/news/articles/2015-12-16/vestas-offshore-wind-gets-330-megawatt-order-for-u-k-project
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    Energy storage focus: Storage worth its salt


    Two projects in Africa are showcases for the energy storage potential of molten salt. South Africa is abundantly sunny, so it makes sense to capture this natural resource and use it to turn the lights on.

    In recent years the South African government has taken action to stimulate delivery of renewable power generation capacity by awarding project agreements to developers through the Renewable Energy Independent Power Producer Procurement (REIPPP) programme.

    Mott MacDonald was the lead consultant to the government on the development of REIPPP. Projects have been awarded under five bidding windows so far, and many of these have achieved financial close. A sixth bidding window is expected to commence soon.

    The majority of projects selected for development under the programme are wind farms and solar photovoltaic (PV) plants. However, a small and slowly growing proportion has focused on an increasingly important player in renewable energy: concentrated solar power (CSP).

    Compared to PV, which is becoming ubiquitous, CSP is still nascent as a commercial-scale solar generation technology. But it has an advantage over PV in that it is easier to incorporate energy storage into a large-scale CSP plant.

    This is a valuable benefit for South Africa, given its power demand profile. A sharp peak in demand consistently occurs around sunset, when solar generation yield is tailing off. With energy storage, state-owned utility Eskom can deal with this peak in demand by calling on reserves of solar energy stored earlier in the day by CSP plants.

    Sub-Saharan Africa's first large-scale operational CSP plant, KaXu Solar One in South Africa, was commissioned in early 2015 after project owner and developer Abengoa successfully steered the scheme through REIPPP. Mott MacDonald was the lenders' technical advisor (LTA) during its financing and construction, and is now providing operational monitoring services on behalf of the lenders.

    It is easier to incorporate energy storage into a large-scale CSP plant than a PV project.

    As South Africa's first parabolic trough CSP plant, KaXu is a major achievement in itself. But it is about to be overshadowed by a 'big brother' being constructed next door: Xina Solar One.

    CSP uses giant curved mirrors - parabolic troughs - to focus the sun's heat onto horizontal absorber tubes filled with oil-based heat transfer fluid, which convey the thermal energy to a main heat exchanger where water is converted to steam. The steam drives a turbine, which produces power for the grid. Xina features a new generation of the technology based on a larger version of the trough collectors, meaning it can achieve the same yield as KaXu with fewer collectors.

    Salt is used for storage because it has exceptional heat retention properties.

    KaXu and Xina are notable for their use of innovative molten salt energy storage technology to retain thermal energy captured during the day. Salt is used because it has exceptional heat retention properties.

    To capture the energy, a proportion of the heat transfer fluid is diverted into a second heat exchanger, where it heats molten salts which are circulated from a cold salt storage tank to a hot tank.

    The molten salts are heated to approximately 400oC, then discharged into a separate tank for storage. After sunset, the system reverses to maintain power generation.

    Both KaXu and Xina use molten salt storage technology, but once again Xina has the advantage of size because its larger salt tanks mean it can store twice as much energy as KaXu.

    Xina's storage capacity is equivalent to the energy that would be produced by the plant operating for five hours at full capacity.

    http://www.powerengineeringint.com/articles/print/volume-23/issue-12/features/storage-worth-its-salt.html?hootPostID=fcd0d136fd958f4f95b24cae359cf13c
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    Norway's Statkraft ceases new offshore wind investments


    Norwegian utility Statkraft will cease investing in new offshore windfarms, including the world's biggest project off the coast of Britain, so it can continue paying dividends to its government owners despite a slump in Nordic power prices.

    The decision announced on Wednesday is a blow to Britain's plans to maintain its status as the world's biggest offshore wind market, with plans to double offshore wind energy capacity from the current 5 gigawatts (GW) by 2020.

    However Statkraft said it had changed its investment plans due to the Norwegian government overturning an earlier decision to allow the company to retain 5 billion crowns ($574 million) in dividends to support new investments.

    The company's revenue has been hurt by low Nordic power prices, which fell to a 15-year low of 13.4 euros per megawatt-hour (MWh) in the third quarter.

    "Offshore wind power is capital intensive. The reduced financial terms from the owner entail that it is not possible for Statkraft to invest in new offshore wind projects", said Statkraft Chief Executive Christian Rynning-Toennesen.

    Statkraft said it will not invest in Dogger Bank, expected to be the world's biggest offshore wind farm, and Triton Knoll, both off the east coast of England, although it would stay for the development phase.

    A spokesman for British green energy lobby group RenewableUK said Statkraft's decision was disappointing but he expected others to take its place.

    The Dogger project is being developed by a group dubbed Forewind which also includes RWE, SSE and Statoil. The group said it had consent for four 1.2 gigawatt (GW) projects and it was up to its members to determine the next steps forward.

    Triton Knoll is being developed by Statkraft and RWE. The later said it expected the project to go ahead. "Triton Knoll remains one of the most competitive projects in UK waters and both partners remain committed to ensuring its success," said a spokesman for RWE Innogy UK.

    Offshore wind is one of the more expensive forms of renewable energy because turbines are sited far out at sea. The British government recently said conditions for qualifying for subsidies would become much stricter as it tries to rein in costs.

    Statkraft may also postpone some overseas hydropower projects, including two in Chile, spokesman Knut Fjerdingstad said.

    Fjerdingstad added Statkraft will honour already agreed investment in the Dudgeon wind farm, which it is developing with Statoil and Abu Dhabi's Masdar, and will stay as operator of the Sheringham Shoal wind farm, its biggest investment in Britain so far.

    http://www.reuters.com/article/statkraft-windfarm-idUSL8N1450Q920151216

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    Steel, Iron Ore and Coal

    Heilongjiang to replace 17 mln T of low-quality coal in 2 years


    Northeastern China’s Heilongjiang province planned to invest more to retrofit coal-fired boilers and replace 17 million tonnes of low-quality coal with standard quality coal in two years, said Governor Luhao at a meeting on December 12.

    Those low-quality coals mainly refer to the coal from Inner Mongolia with transport distance over 600km and calorific value lower than 16.5MJ/kg, which are prohibited by the government.

    The province has more than 7,000 small boilers with annual capacity at and below 10 t/h, with Harbin owning over 1,300.

    The two-phase move was expected to ease air pollution in the northeastern industrial province.

    Firstly, Harbin and Suihua cities in the province would take the initiative in the heating season of 2016 to use standard coal in all of heating suppliers and other individuals, instead of low-quality coal.

    Meanwhile, the low-quality coal-fired boilers of those industrial firms with standard coal consumption at and above 10,000 tonnes would be retrofitted.

    In 2017, all the low-quality coal-fired boilers across the province should be replaced with standard ones, and small boilers with annual capacity at and below 10 t/h at the main urban zones of prefectural and higher levels would be completely eliminated.

    http://en.sxcoal.com/news.aspx
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    China Coal Energy Nov coal sales down 18pct on year


    China Coal Energy Co., Ltd, the second largest coal producer in China, sold 10.41 million tonnes of commercial coal in November, falling 17.7% on the year and down 3.5% on month, the fourth straight year-on-year and the third month-on-month drop, the company announced on December 16.

    Over January-November, the company sold 122.38 million tonnes of commercial coal, falling 14.7% from a year ago.

    Of this, self-produced commercial coal accounted for 7.63 million tonnes or 73.3% of the total sales in November, decreasing 1.5% on year and down 2.18% from October. The volume between January and November stood at 87.01 million tonnes, down 12% on year.

    Meanwhile, coal output of the company continued to fall, registering 7.66 million tonnes in November, sliding 5.9% on the year and down 8.2% from October.

    Total output over January-November dropped 16% on year to 87.59 million tonnes, or 58.4% of its target for 2015, which was set at 150 million tonnes.

    In 2014, the company’s raw coal output reached 150 million tonnes, down 4.1% year on year.

    In November, China Coal kept prices stable for most of its products, except for 20-30 yuan/t in three coal grades, in response to the government’s call for stabilizing the market and prepare for the annual contract talks before the year end.

    It meanwhile, continued to offer discounts for large-volume buyers and high-sulfur coals.

    Prices of thermal coal traded in China’s domestic market have stabilized since December, as supplies were negatively impacted by bad weather, while coal burns at power plants increased amid cold weather.

    Steady pricing by Shenhua, China Coal and large coal groups also was in favor of the market that has been on the downward trajectory over the past year.

    http://en.sxcoal.com/0/136685/DataShow.html
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    Whitehaven faces stellar first half in 2016


    Coal miner Whitehaven Coal this week told shareholders that its expected earnings before interest, tax, depreciation and amortization (Ebitda) would nearly double in the first half of 2016, compared with the previous corresponding period. 

    Ebitda for the first half of 2016 was expected to be in the range of A$100-million to A$105-million, meaning the miner would be profitable during that period. Furthermore, cash margin performance in the half-year was also expected to exceed the A$13/t margin reported in the year ended June this year, enabling Whitehaven to reduce its net debt over the 2016 financial year. 

    Full-year production guidance for run-of-mine coal production has also been upgraded from the previous estimate of between 18.8-million tonnes and 19.4-million tonnes, to between 19.5-million tonnes and 20.1-million tonnes. “During my recent visit to Asia, customers in Japan, Korea, and Taiwan emphasised the strong and growing demand for our Gunnedah basin coal. Our coal’s high calorific value, low ash and low sulphur qualities attracts pricing premiums of up to 5%,” said Whitehaven MD and CEO Paul Flynn. 

    “Production growth from our two tier-one mines, Narrabri and Maules Creek, has enabled us to expand our portfolio of quality customers.” Whitehaven was also given the go-ahead by the New South Wales Department of Planning and Environment to increase production at its Narrabri mine from eight-million tonnes a year to 11-million tonnes a year, and would see the miner install a 400-m-wide longwall face at the Narrabri mine.

    http://www.miningweekly.com/article/whitehaven-faces-stellar-first-half-in-2016-2015-12-17
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    CISA tells China iron ore importers to beware steel credit crunch


    China's iron ore importers need to keep a close eye on the country's steel mills as they mull output cuts and shutdowns amid a year-end credit crunch, the China Iron and Steel Association said Thursday.

    Prices of iron ore derivatives including futures, swaps and options have seen signs of recovery recently due to expectations of a better 2016 for China's steel sector, but the situation was unpredictable, CISA said in its latest iron ore monthly report.

    Importers need to be "alert to price volatility with possible steel production cuts or halts, or retrenchments among Chinese mills, in the near term, with their failure to secure financing or credit issuance from banks towards the year end," CISA said in the report.

    Iron ore imports in December are expected to be lower than in November due to tightening cash flow at most Chinese steel mills, market sources said. Platts IODEX fell below $40/dry mt CFR North China December 4 for the first time since assessments began in 2008, and hit a new record low at $38.50/dmt Tuesday, before edging up 65 cents/dmt to $39.15/dry mt CFR North China Wednesday.

    Iron ore market sources said a sustained price rebound was unlikely as Chinese steel mills struggled for cash flow and kept their iron ore inventories as low as possible.

    The market had been less pessimistic in November, when iron ore prices were hovering at a then year-to-date low of $40-$45/dmt CFR North China and some enthusiasm for restocking emerged, CISA's analysis confirmed.

    The number of Chinese companies importing iron ore rose to 545 in November from 527 in October, despite most mills operating at a loss, the analysis showed.

    The total volume of China's iron ore imports rose 15.1% month on month to 105.6 million mt in November, with Australia and Brazil's combined share rising to 86% of it from 84% the month before, CISA said.

    Term cargo arrivals from Australia surged 25.4% month on month to 61.9 million mt in November and from Brazil rose 10.4% on month to 19.6 million mt.

    Australia's supply of medium and lower grades ores with a ferrous content of 55-63% was up 11.1% month on month at 50.8 million mt in November, comprising 82% of the total, while Brazil supplied 11.4 million mt of higher grade material of 63% Fe and above, up 46.8% month on month and comprising 58% of its total shipments into China.

    http://www.platts.com/latest-news/metals/singapore/cisa-tells-china-iron-ore-importers-to-keep-close-27062226

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    Australia cuts iron ore forecast to USD 39 wiping out AUD 7 billion from budget


    Australian Financial Review reported that the Australian Federal Government has cut its key iron ore price forecast by USD 9 a tonne for 2015-16, wiping AUD 7 billion from its anticipated revenue take over the forward estimates. The updated commodity price forecasts, contained in its mid-year economic update on Tuesday, form part of a AUD 26 billion blow out in the budget deficit over four years, compared to the May budget.

    Iron ore price assumptions for this financial year have been scaled back from USD 48 per tonne, free on board, in May to USD 39 per tonne. This reduces anticipated company tax receipts.

    Iron ore delivered in China, which includes around USD 5 in transport costs, is now trading around the decade-low rate of USD 37 a tonne.

    Currency movements have, however, worked in the budget's favour, as a falling Australian dollar increases the value of iron ore, which is calculated in US dollars.

    Treasurer Mr Scott Morrison said on Tuesday that there were some specific seasonal factors weighing on the iron ore price that were reflected in the updated forecasts. He said "There are some particular factors impacting on the iron ore price in China at the moment. There's seasonal issues, there's weather issues, there are some financing issues which go to how credit is being made available at the back end of the year."

    Federal budget forecasts rely on an averaging of ore prices during a four week period leading up to the published figures. This has coincided with a period of price weakness for the key steel-producing material.

    http://steelguru.com/mining/australia-cuts-iron-ore-forecast-to-usd-39-wiping-out-aud-7-billion-from-budget/441504
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    Vedanta to continue iron ore transport in Goa


    Navhind Times reported that a day after the truckers agitation broke out for the second time, the management of Vedanta’s iron ore division said on Wednesday that it would not bow down to intimidatory tactics and would “go ahead” with ore transportation.

    Company sources said that they have no plans of stopping the transportation and are trying to meet their export order.

    But we are not giving anything more than the stated rate of Rs 8 per tonne per kilometer to transporters, the sources said.

    Vedanta is amidst a crisis as the agitating truckers have stopped the ore transportation. The company had to cancel one shipment of export order after the agitation turned violent.

    The sources said that they are willing to resolve the issue “through talks” but will not be agreeing to any higher rate demanded by a section of truckers.

    Of the 1,300 truckers registered with the DMG, the company has engaged 600 truckers who have agreed to the Rs 8 per tonne rate.

    The agitation is by the truckers who are from other places and not on our route, claimed the sources. Ministers, opposition leaders, trade unions, etc., are trying to resolve the truckers issue which has been politicized, the sources said, adding that they are caught between freefalling international ore prices on one side and bullying unleashed by truckers on the other side.

    The Vedanta sources added that there is no instruction from the government to stop transporting ore and efforts will be on to resolve the issue with transporters.

    http://steelguru.com/mining/vedanta-to-continue-iron-ore-transport-in-goa/441597#tag
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    Japan 2016/17 crude steel output seen flat, exports to drop -industry


    Japan's crude steel output in the fiscal year that starts next April is likely to be flat from this year at around 105 million tonnes, with growing local demand offsetting faltering exports, an industry body said on Wednesday.

    That tepid outlook from the Japan Iron and Steel Federation follows a string of weak signals on the country's economy that have raised doubts about government efforts to reignite growth and end decades of deflation.

    It also comes as steelmakers around the world grapple with the fallout of massive exports of cheap steel from China, with producers there turning overseas as the local appetite wavers.

    "Domestic demand will certainly increase next fiscal year thanks to higher capital expenditure and consumer spending ahead of the planned sales tax hike in 2017, on top of Olympic-related construction demand," Koji Kakigi, chairman of the steel industry body, told a news conference.

    Japan plans to raise its sales tax to 10 percent from 8 percent in April 2017. The country is also gearing up to host the Olympics in 2020.

    "The problem is overseas demand ... It's difficult to make a forecast now, but we expect a slight drop in steel exports next fiscal year," Kakigi said, without giving further detail.

    Kakigi, also president of JFE Steel, a unit of JFE Holdings Inc, said appetite for the country's exports would be hit by increased shipments of Chinese steel.

    Japan's crude steel production has been in a downtrend since late last year, pressured by slack consumption of cars and houses after a sales tax hike in April 2014.

    Tumbling steel prices in Asia, hit by China's exports and weaker demand for energy-related steel products such as drill pipes because of plunging oil prices, forced steelmakers like Nippon Steel & Sumitomo Metal and JFE Steel to trim output.

    Japan's industry ministry has predicted the country's crude steel output would fall 3.7 percent in October-December from a year earlier.

    http://www.reuters.com/article/japan-steel-idUSL3N1451WH20151216
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