Mark Latham Commodity Equity Intelligence Service

Foreign investors are likely to flee Colombia’s mining sector in the coming months as the country is failing to protect the interest of global companies operating and exploring in the country, the local mining association warns.

According to Roberto Junguito, president of the board of governors at the Colombian Mining Association (ACM), the country needs to set clear rules for the industry and prioritize national over local interests.

His comments to Financial Times (subs. required) come as recent rulings have forced some major miners, including world number three gold producer AngloGold Ashanti (NYSE:AU), to halt operations.

Recent rulings have forced some major miners, including world number three gold producer AngloGold Ashanti, to halt projects and operations.

“Recent years have not been easy for mining,” Junguito told FT, citing protests, road blockades, falling commodity prices and a government tax reform introduced late last year.

“The biggest challenge of them all is judicial uncertainty. A lot of recent court cases have gone against the industry.”

In April, AngloGold had to halt all exploration work at its La Colosa project in central Tolima after voters overwhelmingly backed a proposal to ban mining in the municipality.

The company, which had been advancing the project for 14 years, has invested roughly $900 million in Colombia over the past decade and La Colosa was the largest of its three projects in the country, as it has the potential to become on of the world’s largest gold mines.

A few days earlier, Canada’s Gran Colombia Gold (TSX:GCM) decided to take the Colombian government to court for forcing the company to halt operations at its Marmato project until further consultation with locals has been conducted.

The Toronto-based company, which acquired the project when it merged with Medoro in 2011, is seeking $700 million in compensations and it’s basing the suit in the Colombian-Canadian free trade agreement.

Those two cases are not the only ones. Another Canadian firm, junior explorer Zonte Metals (TSX-V: ZON), is locked in a legal battle with local authorities over a permit rejection. In February, a special court granted Zonte rights to proceed with the lawsuit that claims both, Colombia’s Department of Antioquia and the National Mining Agency did not process its exploration application in accordance with the country’s mining code.

Fear of copycat effect

At the Colombian Mining Association’s (ACM) annual conference last week, companies voiced their concern the recent incidents could encourage other communities to push for similar votes or try to block multinationals via lawsuits.

There are 39 local referendums currently in the works, which results could spell troubles for several mining, oil and infrastructure projects.

The group warned there are 39 local referendums currently in the works, which results could spell troubles for several mining, oil and infrastructure projects, local La FM reported (in Spanish).

Former Minister of Mines and Energy Amylkar Acosta, said that Colombia’s mining sector will fall victim of social unrest and legal insecurity.

"The regions and territories where extractive activities take place are plagued with land use conflicts, which have not been solved due to lack of clear rules," he said according to RCN Radio (in Spanish).

He noted that one of the main bones of contention is the recent change in royalties perceived by municipalities, which went from 70% royalty income to a mere 9%.

"This triggers discontent because the communities do not see a benefit from mining and that dissatisfaction triggers protests, blockades and other problems," Acosta said.

Colombia’s top mining sectors are gold and coal, but there has been a spike in interest for potential copper projects in the last years.

http://www.mining.com/heres-colombias-mining-sector-losing-shine/

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Trump to extend Iran sanctions relief, still developing US policy

The Trump administration said Wednesday it will extend sanctions relief for Iran given under the 2015 nuclear deal with the Islamic republic.

In a statement, Stuart Jones, an acting assistant secretary at State, said the administration would continue to waive sanctions as required under the deal, known as the Joint Comprehensive Plan of Action. The waivers were set to expire Wednesday.

The US continues to "closely scrutinise" Iran's commitment to the Obama-era nuclear deal and the Trump administration is still developing a "comprehensive" Iran policy, Jones said.

"This ongoing review does not diminish the United States' resolve to continue countering Iran's destabilising activity in the region, whether it be supporting the Assad regime, backing terrorist organisations like Hezbollah, or supporting violent militias that undermine governments in Iraq and Yemen," Jones said. "And above all, the United States will never allow the regime in Iran to acquire a nuclear weapon."

As a candidate for president, Donald Trump criticised the nuclear deal the Obama administration brokered with Iran as the "worst deal ever" claiming he would negotiate a "better" deal, without offering specifics. On April 18, Secretary of State Rex Tillerson said Iran has complied to date with its requirements under the deal, while calling the deal a failure a day later.

The US Treasury Department Wednesday announced unrelated, new sanctions in connection to Iran's ballistic missile program.

Since the nuclear deal was reached in July 2015, Iranian oil production has climbed from 2.8 million b/d to 3.81 million b/d in April, according to the US Energy Information Administration.

The extension of the sanctions comes ahead of Iran's presidential election on Friday.

https://www.platts.com/latest-news/oil/washington/trump-to-extend-iran-sanctions-still-developing-21762944

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China Unicom Units Inflated Sales for Years, Document Shows

China United Network Communications Group Co., the state-run phone giant known as Unicom Group, found what it described as an unprecedented degree of falsified revenue, profit and asset figures at units in the northwestern province of Shaanxi, according to an internal document seen by Bloomberg News. Its shares fell in Hong Kong.

Nine out of 10 branches in Shaanxi engaged in organized, cross-departmental faking of financial figures from 2012 to 2016, and more than 70 managers have been disciplined, according to the document, which was dated April 6. Though the document didn’t give a tally of the fraud, Caixin reported it involved 1.8 billion yuan ($261 million) of revenue in the past five years, citing a document and an internal speech by Unicom’s chairman.

Spokespeople at Unicom Group, China’s second-largest mobile-phone carrier, weren’t immediately reachable. A representative of the company’s Hong Kong-listed arm, China Unicom (Hong Kong) Ltd., couldn’t immediately comment.

The findings emerged at a time Unicom Group is preparing to sell billions of dollars in shares as part of a government push to attract private capital into state-owned enterprises. The company was among six SOEs picked by the nation’s economic planner last year for a pilot program in mixed-ownership -- China’s preferred term for its privatization campaign.

"This case exposes some of China Unicom’s weaknesses in its corporate governance, but for a company with around 300 billion yuan in annual revenue, irregularities of a couple of billions won’t change its fundamentals," said Steven Liu, an analyst at China Securities International in Hong Kong who has a buy rating on the stock.

Unicom fell as much as 3.6 percent, the most in a month, on Thursday in Hong Kong trading. Its Shanghai-listed arm, China United Network Communications Ltd., has been suspended from trading since late March pending further disclosure of its mixed-ownership plan.

Unicom’s Hong Kong-listed arm has posted three years of falling revenue -- 274.2 billion yuan in 2016 -- and two years of declining profits amid intensifying competition and the increased cost of keeping up with market leader China Mobile Ltd. Earnings are expected to recover this year, according to average analyst estimates compiled by Bloomberg.

The document also said:

About 17% of the total falsified revenue came from Shaanxi’s Tongchuan and Yulin cities, while the Hanzhong branch falsified more than a third of its revenue
Penalties ranged from dismissals to administrative warnings, suspended party membership and salary deductions
Managers were punished according to the Communist Party disciplinary guidelines
The nature and repercussions of the fraud are unprecedented in Unicom’s history, according to the document

https://www.bloomberg.com/news/articles/2017-05-18/china-unicom-units-inflated-financials-for-years-document-shows

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Petrobras, Vale ADRs plunge after new Brazil corruption allegations

Shares in Brazilian state-controlled oil company Petroleo Brasileiro SA and iron ore miner Vale SA both plunged in U.S. after-hours electronic trading following a report that the country's president was taped backing the payment of a bribe to thwart a corruption probe.

Petrobras American Depositary receipts were down 11 percent to $9.15, while Vale ADRs slumped 7 percent to $7.93.

http://www.reuters.com/article/us-brazil-corruption-stocks-idUSKCN18E02X

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Swiss to vote on law to help renewables, ban new nuclear power plants

Swiss voters will on Sunday determine the fate of a law proposing billions of dollars in subsidies for renewable energy, a ban on new nuclear plants and a partial utilities bailout.

Polling so far suggests the law will be approved in the binding referendum, but support has slipped. A survey this month by research institute gfs.bern for state broadcaster SRG showed 56 percent of voters backed the law, down from 61 percent.

The Swiss initiative mirrors efforts elsewhere in Europe to reduce dependence on nuclear power, partly sparked by Japan's Fukushima disaster in 2011. Neighboring Germany aims to phase out nuclear power by 2022. Nearby Austria banned it decades ago.

Debate on Switzerland's "Energy Strategy 2050" has focused on what customers and taxpayers will pay for the measures and whether a four-fold rise in solar and wind power by 2035, as envisaged in the law, can deliver reliable supplies.

Critics say a family of four would pay 3,200 Swiss francs ($3,257) in extra annual costs and say more intermittent wind and solar energy would mean a greater reliance on imported electricity. Switzerland was a net power importer in 2016.

"This law will lead to massive increases to the price of energy while leaving Switzerland without adequate, reliable power," said Toni Brunner, leader of the opposition Swiss People's Party (SVP) which helped force the referendum.

Opposition posters show a woman shivering under a cold shower, suggesting this is what voters face if they say "yes".

Energy Minister Doris Leuthard, whose government proposed the law, dismisses opposition estimates as highly inflated. She said the package would cost the average family 40 francs more a year, based on a higher grid surcharge to fund renewable subsidies.

"The SVP is including costs related to a second phase of the Energy Strategy that is not up for a vote," she said in a television interview.

COUNTING THE COST

The price tag row largely hinges on whether costs are based on the surcharge alone or also include future expenses related to managing the reduction of fossil fuel use and emissions. The SVP puts the broader costs at about 200 billion francs.

The law would raise 480 million francs a year from electricity users to fund investment in wind, solar and hydro power, while 450 million francs would be earmarked from an existing fossil fuels tax to help cut energy use in buildings by 43 percent by 2035 compared to 2000 levels.

Solar and wind now account for under 5 percent of output, compared with 60 percent for hydro and 35 percent for nuclear. Under the law, power from solar, wind, biomass and geothermal sources would rise to at least 11,400 gigawatt hours (GWh) by 2035 from 2,831 GWh now.

Swissmem, the electrical and mechanical engineering industry lobby, has urged a "no" vote, citing the variability of renewable supply. "Even limited interruptions in our electricity supply can cause massive costs," said spokesman Ivo Zimmermann.

The law will ban building new nuclear plants. Switzerland has five plants, with the first slated to close in 2019. Voters have not set a firm deadline for the rest, allowing them run as long as they meet safety standards.

Supporters say the law would help utilities which rely on hydropower, whose costs exceed Europe's wholesale prices.

Alpiq, BKW, AXPO and other utilities would share a 120 million franc annual subsidy to help close the gap between production costs and market prices. Other funds would help build new dams or refurbish old ones.

About 38,000 renewable projects, mostly small roof-top solar installations, await approval as a national fund to support them has insufficient funds. Supporters say the new law would help end the logjam.

http://www.reuters.com/article/us-swiss-energy-idUSKCN18D1KB

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China's One Belt, One Road policy seen changing polymer landscape

Traders expect China's "One Belt, One Road" or OBOR policy to move polymer resin production from eastern China to inland provinces and Asian countries, industry sources said late Tuesday on the sidelines of Chinaplas, which runs in Guangzhou over May 16-19.

OBOR, also known as the "Belt and Road Initiative" is China's plan to revive ancient trade routes linking Asia, Africa and Europe to boost global commerce. It was unveiled by Chinese president Xi Jinping in 2013 and spans some 65 countries.

Commenting on the Belt and Road Forum for International Cooperation which ended Sunday in Beijing, polymer traders said the countries which would experience more trade are mainly the land routes that are covered in the policy, which includes China to Central Asia, China to Russia, China to South Asia such as Nepal, and China to Eastern Europe.

China signed cooperation deals with 68 countries and international organisations during the two-day forum.

Low value manufacturing could be moved to the other less developed countries along the OBOR route, and the finished goods then imported back to China or sold in the domestic markets, traders said.

Domestically within China, labor-intensive plastic processor industries might migrate to China's western provinces, away from eastern China where rising wage costs pose a challenge. This will also help create jobs, they said.

The largest Chinese plastics compounder, Kingfa, has announced plans to build a new plant in Chengdu, Sichuan, with a registered capital of Yuan 500 million ($72.6 million). Also, Saudi Arabia's Sabic and Japan's Toray have begun building plants in Chengdu over the last few years.

POLYMER TRADE MAINLY FLOWS VIA MIDDLE EAST-ASIA SEA ROUTE

OBOR will affect the Middle East as polymers are mainly supplied by sea from the Middle East to China.

OBOR comprises a land-based "Silk Road Economic Belt" and a "21st Century Maritime Silk Road."

It is logical to expect that countries along the maritime route will attract the lion's share of Chinese future investments.

Already, Saudi Arabia is working to integrate its Vision 2030 reforms with the Chinese initiative and to attract more Chinese companies to invest in Saudi Arabia.

Vision 2030 is a plan to reduce Saudi Arabia's dependence on oil and diversify its economy.

China imports about 9 million mt/year of polyethylene and about 3 million mt/year of polypropylene according to source estimates and import statistics.

Within China, polymers move by rail as well as road via lorries to the consumption areas in eastern China. The low-end finished end products mainly serve the domestic Chinese market.

LANDLOCKED COUNTRIES TO CONTRIBUTE TO POLYMER DEMAND

Polymer demand, which is consumption driven, would also grow given that the more than 60 countries in the OBOR route have a combined gross domestic product of an estimated $21 trillion, according to source estimates.

Most of the inland Asian countries do not feature prominently as demand is still quite small, but with a growing population, consumption is expected to grow, sources said.

SECURING FEEDSTOCK ADVANTAGES

OBOR may also lead to securing more low-cost feedstock advantages for polymer manufacturing to China, traders said.

Currently polymers are made mainly from oil but also partially from gas and coal.

Already Uz-Kor Gas Chemical, an Uzbekistan company along the OBOR route, started up a new plant in late 2015 and has sold around 163,701 mt of polyethylene to China to date, customs statistics showed. Uzbekistan has signed onto the OBOR initiative.

Uz-Kor processes about 4.5 Bcm of gas to produce about 400,000 mt/year of PE and 100,000 mt/year of PP.

Gas-based polymers would also free Chinese polymer processing companies to manufacture higher level goods, from "made in China" to "smartly made in China", the theme of this year's Chinaplas, sources said.

https://www.platts.com/latest-news/petrochemicals/singapore/analysis-chinas-one-belt-one-road-policy-seen-27831336

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China's April power capacity near record even as Beijing curbs excess

China's installed power capacity rose 7.6 percent to the second-highest on record in April, with coal accounting for nearly two-thirds of the total, data showed on Wednesday, even as the country has pledged to curb excess and shift to cleaner power.

Capacity rose to 1,613.25 gigawatts (GW) by the end of April, just shy of December's record 1,645 GW, National Energy Administration (NEA) data showed, in line with China's expansion to keep pace with its industrial demand.

That was up 7.6 percent from a year earlier and 0.3 percent from March.

The total takes the world's second-largest economy closer to its target of 2,000 GW by 2020, as outlined in the current five-year plan.

Beijing's push to curb excesses in its power capacity showed some signs of taking effect, with the year-on-year growth rate at its lowest since at least 2010, according to historic data.

The 7.6 percent rise compares with double-digit percentage increases for most of 2016. Growth has slowed every month since July last year and has not fallen below 8 percent since at least the end of 2010, data shows.

A slowdown was expected as Beijing aims to rein in excess capacity and shift the nation to renewable generation that produces less emissions.

But coal's 65 percent portion of the total capacity, well below the 2020 target, highlights the obstacles of the shift to cleaner fuels like hydro, wind and solar.

http://www.reuters.com/article/china-power-idUSL4N1IJ2F9

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R3, Apple, Google, Amazon, Paypal, Intuit: Blockchain, again.

https://en.wikipedia.org/wiki/R3_(company)

History[edit]

The consortium started on September 15, 2015 with nine financial companies:^[5][6][7][8] Barclays, BBVA, Commonwealth Bank of Australia, Credit Suisse, Goldman Sachs, J.P. Morgan,^[9] Royal Bank of Scotland, State Street, and UBS.

On September 29, 2015 an additional 13 financial companies joined:^[10] Bank of America, BNY Mellon, Citi, Commerzbank, Deutsche Bank, HSBC, Mitsubishi UFJ Financial Group, Morgan Stanley, National Australia Bank, Royal Bank of Canada, Skandinaviska Enskilda Banken,^[11] Société Générale, and Toronto-Dominion Bank. Financial Times reporter Kadhim Shubber wrote that the new additions are "a sign the industry is gathering behind R3 in one potential implementation of the distributed ledger technology behind the currency bitcoin."^[12]

On October 28, 2015 an additional three financial companies joined:^[13] Mizuho Bank, Nordea, and UniCredit.

On November 19, 2015 an additional five financial companies joined :^[14] BNP Paribas, Wells Fargo, ING, Macquarie Group and the Canadian Imperial Bank of Commerce.

On December 17, 2015, an additional 12 financial companies joined :^[15] BMO Financial Group, Danske Bank, Intesa Sanpaolo, Natixis, Nomura, Northern Trust, OP Financial Group, Banco Santander, Scotiabank, Sumitomo Mitsui Banking Corporation, U.S. Bancorp and Westpac Banking Corporation.

As of April 25, 2016, three additional financial companies had joined:^[16] SBI Holdings of Japan, Hana Financial of South Korea, and Bank Itau of Brazil.

Toyota Financial Services joined in June^[17] and MetLife joined in August 2016.^{[citation needed]}

On March 3, 2016, R3 announced that it had completed a trial involving 40 banks held in the last two weeks of February, testing the use of blockchain solutions offered by Eris Industries, IBM, Intel and Chain to facilitate the trading of debt instruments. This was a follow-on to an 11-bank trial conducted earlier in January which used Ethereum hosted on Microsoft Azure.^[18]

In November 2016, Goldman Sachs, Santander and Morgan Stanley each withdrew from the consortium.^[19][20][21]

On December 14, 2016, Credicorp becomes the first Spanish-speaking Latin American member of R3.^[22][23]

JPMorgan has become the latest sell-side institution to withdraw from the R3 blockchain consortium, following the exits of Goldman Sachs, Morgan Stanley and Santander in November last year.

Reuters reports that JPMorgan has withdrawn from the consortium led by New-York based R3 CEV, which is currently in the process of a fundraising drive to raise $150 million from its members and strategic investors in return for a 60 percent stake in the business.

In November last year, Goldman Sachs, Morgan Stanley and Santander all left the consortium, as banks seek to streamline the number of blockchain-based ventures they are involved in as interest in the technology cools.

While the cryptocurrency industry may see Apple and PayPal as competitors, those two tech companies are among a group pushing for regulatory reforms in the US that could provide a boost to the nascent industry.

For those that missed the news, Apple and PayPal have joined forces with Google, Amazon and Intuit in Washington, DC, to push for reforms to spur innovation in the financial system. Notably, a core item on their agenda is a federal money transmission license that would supersede the existing state-by-state regime.

Further, Financial Innovation Now (FIN), the lobby group representing the five companies, sent a letter to the Senate Banking Committee last month proposing a series of recommendations that, among other items, called for the establishment of a national money transmission requirement to be managed by the Treasury Department.

"Consumer protection is a critical part of payments regulation, but it makes no sense for different states to regulate digital money differently from one state to another," the letter explained.

Brian Peters, executive director of FIN, stressed to CoinDesk the group is taking the money transmission issue seriously and is seeking a legislative solution.

A New York-based broker-dealer has asked the Securities and Exchange Commission (SEC) to propose rules to cover blockchain-based assets.

According to the petition, Ouisa Capital wants the SEC to weigh in on the use of crypto tokens and resolve “the lack of regulatory clarity with respect to the regulation of digital assets and blockchain technology”.

The firm went on to write:

"Ouisa encourages the SEC to engage in a meaningful discussion of how to regulate FinTech companies that are issuing digital assets that may be deemed securities and the platforms and broker-dealers that facilitate the issuance and trading of those digital assets. We believe digital assets in several contexts are securities and that existing laws provide a mechanism for regulation of the issuance and trading of digital assets."

Additionally, Ouisa asked the SEC to create a so-called 'regulatory sandbox', through which startups and financial firms can test new products in limited settings.

India's Vedanta swings to profit after metal rally, zinc payout

Vedanta reported a fourth-quarter profit as India’s biggest base metals producer benefited from a rally in prices and a special dividend announced by its zinc arm.

Net income attributable to owners was 14.1-billion rupees in the three months through March and revenues were 246.1-billion rupees, the unit of London-listed Vedanta Resourcessaid in a statement Monday. That compares with a loss of 138.4-billion rupees a year ago because of a writedown at its oil unit.

A surge in zinc prices globally saw profit at unit Hindustan Zinc surge 43% in the quarter from a year earlier and the company announced a record payout to investors in March. Vedanta’s billionaire chairman Anil Agarwal got another lift in April after shareholders approved merging the company with his Indian energy business, Cairn India, as he bids to create a resources heavyweight in the mold of Australia’s BHP Billiton.

A near- $1.2-billion windfall from Vedanta’s 65% stake in Hindustan Zinc and access to about $4 billion in cash at Cairn India will help soften concerns over its debt pile, according to ratings agencies. Vedanta’s gross debt stood at 636.6-billion rupees at the end of March, while cash and liquid investments were 634.7-billion rupees, according to the company.

“Our strategic focus to ramp up production across the portfolio namely in zinc, aluminium, power and iron-orebusinesses throughout the year has supplemented revenue growth,” outgoing CEO Tom Albanese said in the statement. Record production of zinc and aluminium and cost management initiatives also helped the company boost profits, he said.

Vedanta’s stock rose 1.8% to close at 241 rupees on Monday, putting it up 11% for the year. Zinc prices in London advanced 36% in the past year due to a shortfall in production of the metal used to galvanize steel.

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China's Factory Output, Investment Moderate as Growth Dials Back

The world’s second-largest economy dialed back a gear in April as authorities crack down on the nation’s swelling financial leverage.

Key Points

Industrial output rose 6.5 percent last month from a year earlier, compared to 7 percent seen by economists and 7.6 percent in March
Retail sales increased 10.7 percent versus 10.8 percent seen by analysts
Fixed-asset investment excluding rural areas expanded 8.9 percent for the first four months, compared to a median estimate of 9.1 percent

Big Picture

Growth momentum has softened after a strong first quarter as policy makers seize the window to curb shadow lending and leverage. While equity and credit markets have been shaken by the campaign, economic fundamentals remain robust as reflation boosts company profits and external demand gets a boost from a pick up in global growth. The Bloomberg monthly GDP tracker pulled back to 7.15 percent in April, from 7.64 percent in March.

Economist Takeaways

"All the data sends the same message: The economy slowed down meaningfully in April," said Larry Hu, head of China economics at Macquarie Securities Ltd. in Hong Kong. "But given that growth is still fine, in the second quarter policy makers will still focus on reducing financial risk."

Slowing growth combined with bond-market tumult "will likely throw the People’s Bank of China off its tightening trajectory," Bloomberg Intelligence economists Tom Orlik and Fielding Chen wrote in a report. "Despite the slight slowdown in retail sales, the pace of consumption growth continues to far outstrip that of household income -- an unsustainable state of affairs reflecting breakneck growth in bank loans to households."

"Slowing domestic consumption growth and softer external demand appear to have driven the slowdown," said Julian Evans-Pritchard, China economist at Capital Economics Ltd. in Singapore. "Infrastructure and property investment are holding up, helping to stave off a sharper deceleration. But we doubt the current strength in these areas can be sustained given that policy is being tightened and the property market is starting to cool."

"The April activity data barrage add to evidence China’s cyclical upswing has peaked and conditions will cool into the second half of the year," said Katrina Ell, an economist at Moody’s Analytics in Sydney. "Autos remained a major drag due to high base effects from earlier subsidies."

"Chinese growth appears to be moderating, in line with the central bank’s tweaking of market interest rates slightly higher," said Callum Henderson, Managing Director, Global Markets, Asia Pacific at Eurasia Group in Singapore. "This is good news for China as growth should be relatively strong and solid heading into the 19th Party Congress – and most likely will be. However, it suggests a modest correction going forward in the assets of those countries that export to China heading into the second half.”

The Details

Private fixed-asset investment rose 6.9 percent in first four months while property development investment climbed 9.3 percent
Ferrous and non-ferrous metal smelting and pressing dragged on industrial production
China’s surveyed jobless rate fell in April from March
China added 4.65 million new jobs from January to April
The weaker April economic data was partly due to there being fewer work days during the period, a statistics bureau spokesman said at a briefing

https://www.bloomberg.com/news/articles/2017-05-15/china-s-factory-output-investment-slow-as-growth-dials-back

Is A Chinese Recession Imminent? Yield Curve Inverts For First Time Ever

Is A Chinese Recession Imminent? Yield Curve Inverts For First Time Ever

While China growth has been slowing, and monetary conditions tightening, few (if any) have predicted any prolonged deflation (let alone a recession), yet overnight - for the first time ever - the $1.7 trillion Chinese bond market inverted, flashing a warning signal to the world that something is wrong.

Early on Thursday, the five-year yield rose to 3.71%, breaking above the 10-year yield for the first time since records began - even though the latter, at 3.68%, was near a 25-month high.

Some of the overnight weakness in the 10Y yield was eased by reports that PBOC would offer some Medium-Term Loans.

Of course it's not just bonds that are getting dumped...

But, as The Wall Street Journal writes, such a “yield-curve inversion” defies normal market logic that bonds requiring a longer commitment should compensate investors with a higher return. It usually reflects investor pessimism about a country’s long-term growth and inflation prospects.

Perplexed traders and analysts offered up many excuses...

“Many of us are scratching our heads for an explanation because this kind of curve inversion is absolutely not normal,” said Wang Ming, a partner at Shanghai Yaozhi Asset Management Co., a bond fund that manages 2 billion yuan ($289.66 million) in assets.

“The inversion is a form of mispricing in the bond market,” said Liu Dongliang, senior analyst at China Merchants Bank . “The fact that no one is taking the bargain despite the higher yield on the five-year bond just shows how depressed investors’ mood is.”

“It’s really difficult to predict when the selloff or such anomalies will end because China’s bond market is reacting to the regulatory crackdown only and is no longer reflecting economic fundamentals,” said China Merchants Bank’s Mr. Liu.

But of course, the reality is - without massive and contonued credit creation, there are very large questions about just how 'dynamic' Chinese growth could be and while technical flows are certainly part of the reasoning for 5Y yields rising, the question is, why wouldn't the rest of the world pile in to 'reach for yield'... unless the fundamentals really did have them worried?

http://www.zerohedge.com/news/2017-05-11/chinese-recession-imminent-yield-curve-inverts-first-time-ever

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Oil and Gas

WAF VLCC freight rates soft due to weak China buying, slow Persian Gulf market

The cost of taking crude oil from West Africa to China on VLCCs has hit a near two-month low, due to slack demand from China and a weak Persian Gulf market, sources said.

The VLCC route from West Africa to China, basis 260,000 mt, was assessed at $11.95/mt on Tuesday, the lowest level since March 31, when it was valued at $11.85/mt, according to S&P Global Platts data.

NPI was heard to have taken the VLCC vessel Kondor on subjects at w55.5 for a voyage from West Africa to China with June 14-16 loading dates, which equates to $11.95/mt.

The leading VLCC market in the Persian Gulf is weak and this is depressing the Atlantic market as well, sources said.

Shipbroking sources estimate the tonnage over-hang at approximately 38 VLCC ships in the Persian Gulf, which is close to the highest level in three years.

"We are looking to the Atlantic for some hope, but the Caribs can't take everything, and there is not much to take Arabian Gulf ships away and reposition them in the Atlantic," said one shipbroker.

Chinese demand for Angolan crude has been slightly lower for May and June cargoes, with the country's teapot refineries reducing their purchases from earlier in the year.

"We have had high global refinery maintenance and don't have peak runs. The teapots haven't come back into the market and a lot of them have already used up their import quotas," said one trader.

The lower Chinese demand has placed downward pressure on Angolan differentials and made these barrels more attractive to European refiners. As the voyage time from Angola to Europe is considerably shorter than from Angola to China, VLCC ton mile demand has been reduced by the lower Chinese demand for Angolan crude.

https://www.platts.com/latest-news/shipping/london/tankers-waf-vlcc-freight-rates-soft-due-to-weak-26739920

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Tidewater files for Chapter 11 bankruptcy as it seeks to cut debt

U.S. offshore support vessel owner Tidewater has filed voluntary petition under Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the District of Delaware.

The move is intended to help Tidewater pursue a prepackaged plan of reorganization in accordance with its previously announced restructuring support agreement (the “RSA”) with certain lenders to “effectuate a comprehensive balance sheet restructuring.”

The company last week said it had entered into a debt restructuring support agreement with certain consenting creditors.

The U.S.-based vessel company has entered into the deal with lenders under its Fourth Amended and Restated Revolving Credit Agreement, dated as of June 21, 2013, and holders of Tidewater Senior Notes to put into force a proposed prepackaged plan of reorganization of the company.

As part of its debt restructuring plan, Tidewater plans to reject certain sale-leaseback agreements for leased vessels currently in the company’s fleet, and to limit the resulting rejection damages claims to approximately $131 million.

However, the Sale Leaseback Parties dispute the amount of the rejection damages claims and a final resolution of the amount of such claims will be subject to litigation, Tidewater said.

“As a result, there is no certainty as to the final amount of sale-leaseback rejection damages claims that will be treated pursuant to the Prepackaged Plan,” the company added.

The prepackaged plan is supported by lenders holding approximately 60% of the outstanding principal amount of loans under the Credit Agreement and Noteholders holding 99% of the aggregate outstanding principal amount of the Senior Notes. Collectively, these supporting Lenders and Noteholders also constitute a majority in number of the holders of General Unsecured Claims.

Debt reduction

Announcing its agreement with creditors last week, Tidewater said the plan would substantially deleverage its balance sheet and better position Tidewater “to weather the extended downturn in the offshore energy industry while maintaining the company’s position as a worldwide market leader in offshore vessel services.”

Tidewater expects that it will eliminate approximately $1.6 billion in principal of outstanding debt.

Under the plan, the consenting creditors will receive their pro rata share of $225 million of cash; common stock and, if applicable, warrants to purchase common stock, representing 95% of the pro forma common equity in reorganized Tidewater, and new 8% fixed rate secured notes due in 2022 in the aggregate principal amount of $350 million.

Furthermore, Tidewater’s existing shares of common stock will be cancelled, and the existing common stockholders of Tidewater will receive their pro rata share of common stock representing 5% of the pro forma common equity in reorganized Tidewater.

The existing shareholders will also be granted six year warrants to buy purchase additional shares of common stock of reorganized Tidewater.

These warrants will be issued in two tranches, with the first tranche (the“Series A Warrants”) being exercisable immediately, at an aggregate exercise price based upon an equity value of the Company of approximately $1.71 billion, and the second tranche (the “Series B Warrants”) being exercisable immediately, at an aggregate exercise price based upon an equity value of the Company of $2.02 billion, Tidewater said. The tranches will enable the existing shareholders to buy a number of shares equal to 15 percent (7.5% per tranche).

Business as usual

Tidewater expects to continue to operate the business as debtors-in-possession under the jurisdiction of the Bankruptcy Court and fully expects to continue existing operations and maintain staffing and equipment as normal throughout the court-supervised financial restructuring process.

“Tidewater has filed a series of motions with the Bankruptcy Court to ensure a seamless transition into chapter 11 and has sought the approval of the Bankruptcy Court to continue paying prepetition employee wages and salaries and to provide employee benefits without interruption. The Company continues to work closely with its suppliers and partners to ensure it meets ongoing obligations and business continues uninterrupted,” the company added.

Jeffrey M. Platt, Tidewater’s President and Chief Executive Officer states, “After much thought and successful negotiations with certain of our economic stakeholders, we decided that commencing the chapter 11 cases was necessary to create financial stability which would allow Tidewater to remain a formidable competitor given this unprecedented industry downturn. Throughout the chapter 11 process, we anticipate meeting ongoing obligations to our employees, customers, vendors, suppliers, and others. We will continue to provide our customers with dependable, high-quality services.”

To support and effect the restructuring, Tidewater has filed applications to retain, among others, Weil, Gotshal & Manges LLP as restructuring counsel, Jones Walker LLP as corporate counsel, Lazard Frères & Co. as investment banker, and AlixPartners, LLP as restructuring advisor.

Subject to the approval of the Bankruptcy Court, the Prepackaged Plan is expected to be consummated in approximately 45 days.

“Tidewater believes it has adequate liquidity to maintain its operations in the ordinary course and does not intend to seek any debtor-in-possession financing during the pendency of the bankruptcy cases,” the company said.

http://www.offshoreenergytoday.com/tidewater-files-for-chapter-11-bankruptcy-as-it-seeks-to-cut-debt/

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Aiming To Lift Production, Kazakhs May Not Play Along With OPEC Cuts

While many oil producers part of the OPEC/non-OPEC agreement to curb production have already stated their support to the deal extension for another nine months, Kazakhstan is going into next week’s meeting with little enthusiasm for rolling over its production cuts, as it plans to raise output from its major oil fields.

Kazakhstan’s Energy Minister Kanat Bozumbaev said earlier this week that his country would attend the meeting at which OPEC and partners are expected to hammer out the details of the cuts extension.

In the deal from November 30, OPEC pledged to cut 1.2 million bpd of its production, while Azerbaijan, Bahrain, Brunei Darussalam, Equatorial Guinea, Kazakhstan, Malaysia, Mexico, Oman, Russia, Republic of Sudan, and Republic of South Sudan committed to a collective cut of 558,000 bpd.

At that time, Kazakhstan promised to cut output by 20,000 bpd from an average 1.5 million bpd, Radio Free Europe says.

According to Bloomberg, Minister Bozumbaev has said that his country won’t automatically roll over the cuts it is implementing now.

Kazakhstan is seeking to increase production at its giant fields, especially Kashagan, which after years of delays and setbacks, resumed commercial-scale production in October 2016 at a rate of 90,000 bpd. In January, the company operating the field said that it was ramping up production to 180,000 bpd.

Just days before Saudi Arabia and Russia said that they agreed that the production cuts should be extended by nine months to March 2018, Bozumbaev said that Kashagan currently produces 140,000-150,000 bpd, and output would rise to 200,000 bpd in the second half of the year, and possibly to 300,000 bpd at the end of the year.

But the minister noted that it’s important for Kazakhstan that the price of Brent not drop below US$50 per barrel. The country’s budget is based on a US$50 Brent price, and therefore Kazakhstan will discuss the possibilities of an output cut extension.

A recently approved expansion at another field, Tengiz, plans for production to increase by some 260,000 bpd, to around 850,000 bpd.

Given its ambitious plans to grow production, Kazakhstan may be reluctant to sign up to cutting its output for another nine months.

http://oilprice.com/Latest-Energy-News/World-News/Aiming-To-Lift-Production-Kazakhs-May-Not-Play-Along-With-OPEC-Cuts.html

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WTI Stays near $49 if OPEC Cuts Continue: EnerCom

WTI Stays near $49 if OPEC Cuts Continue: EnerCom

OPEC’s meeting to decide the future of production cuts is quickly approaching, and many expect that the group will extend their deal through at least the end of this year.

The production cuts, when they were first initiated, helped to bring both WTI and Brent crude oils back above $50 per barrel, but prices have struggled to maintain that position or go higher as unconventional drilling and U.S. production continue to ramp up.

In EnerCom Analytics’ Monthly Energy Industry Data & Trends for April, the firm examined the possible effects of OPEC’s decision making on WTI prices and forecasted that oil prices would hit $49.29 per barrel if the group maintained cuts and the members exempt from the deal reached their production targets.

When the deal was originally announced, Libya and Nigeria were given exemptions from production cuts.

Iran has stated that it hopes to achieve 4 MMBOPD of output, the same amount it was producing prior to the implementation of international sanctions. Production in the Islamic Republic ramped up quickly following the end of sanctions, but many believe that it will need to attract foreign investment and partners in order to hit its 4 MMBOPD mark as it stretches its existing projects to the limits of their current capacity.

Libya has repeatedly claimed force majeure on its production as the country continues to struggle with a civil war, and Nigeria’s oil infrastructure continues to be a target for factions that are unsatisfied with the current government, making it difficult for either to increase and maintain, production.

If all three were able to reach their targets, however, with Iran hitting 4 MMBOPD, Libya maintaining its production at its peak of 1.1 MMBOPD, and Nigeria pushing output back to levels seen in 2015 as OPEC ramped up production, WTI prices would reach $49.29 per barrel, assuming compliance with the production deal remained high, according to EnerCom Analytics. WTI closed at $49.35 today, six cents higher than EnerCom’s April prediction.

At this point, it seems that the market has largely priced in the extended production cuts. If the group does confirm that cuts will continue, oil prices will likely remain largely unchanged.

Failure to extend cuts: $47.50 oil

If the group is unable to reach an agreement on further production cuts and increases output to levels seen in December 2016, WTI could go as low as $47.50 as markets begin to absorb the increased production, according to EnerCom’s models. Even at those prices, however, most U.S. basins would remain economic, the report said.

At $45 WTI, the Eagle Ford, Delaware, Midland and Bakken are all able to generate 20% IRRs or better, meaning that even if oil fell to $47.50, many operators would be able to continue drilling. This, in turn, caps how far oil price would be able to rise beyond that point, however.

Adjusting for inflation, these prices are somewhat below the historical average going back to 1974. Over the last 43 years, WTI has averaged $36.26 nominally, but $54.67 per barrel once adjusted for inflation.

If you like to receive EnerCom’s predictions as soon as they are released, as well as the firm’s insight on a number of other topics, subscribe to Energy Industry Data & Trends. To learn more about the scenarios run by EnerCom, and how U.S. policies and increases in the strength of the dollar might affect WTI oil prices

https://www.oilandgas360.com/wti-stays-near-49-opec-cuts-continue-enercom/

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Halliburton's incoming CEO sees significant price hike

Halliburton Co, the No. 2 oilfield service provider, expects to raise prices at least 10 percent and in some cases 20 percent or more this year, higher increases than many customers expect but ones that company executives said were crucial to fuel the oil industry's nascent growth.

The rising business activity comes as Jeff Miller prepares to become the 98-year-old company's chief executive officer next month, taking over from Dave Lesar, CEO since 2000.

"We will continue to implement our strategy," Miller said in an interview at the company's Houston headquarters just outside George Bush Intercontinental Airport. "North America is absolutely our growth story today."

Miller, Lesar and other executives have been in talks with customers for months about raising rates for Halliburton's myriad services, highlighting not only the company's scale but its experience.

Halliburton was the first company to hydraulically fracture, or frack, a well, pioneering the process in 1949.

Many customers had locked in service rates during the two-year price downturn when Halliburton laid off more than 35,000 employees. Today, with the American shale oil industry whirring again, Halliburton is at max capacity for many services and itching to charge more.

Like peers, Halliburton has said it will not refurbish old equipment for field use until prices rise and has no North American fracking crews available until at least the fall. That limits the ability of customers to bring new wells online.

"Customer urgency is the most-important part of that discussion today," said Miller, an accountant by training.

Lesar, who will retire as CEO but remain executive chairman until Dec. 2018, echoed those comments in an interview, adding that Halliburton is keen to work with producers to prevent rampant cost inflation.

"We and our customers have to co-exist in this environment," said Lesar, who became CEO after predecessor Dick Cheney was nominated to be U.S. vice president. "Everybody has got to make money."

Shares of Halliburton, which have lost about 14 percent this year, rose 24 cents, or 0.5 percent, on Thursday to close at $46.58.

OIL PRICES

Both executives expect oil prices CLc1 to remain near $50 per barrel for the foreseeable future, a level they believe will allow North American shale customers and Halliburton to grow in tandem.

"Clearly, the rising star at this point in time is the Permian" shale basin of Texas and New Mexico, Lesar said, adding that the DJ Basin in Colorado and the Utica in Ohio are other shale areas where Halliburton is growing.

Costs for sand used in fracking pressured Halliburton over the winter, since many mines are located in the northern United States. Still, both executives said they believe their supply costs should stabilize this year.

STAFFING & COMPETITION

Halliburton has hired more than 2,000 workers since the oil industry started to recover, more than half of them former employees. That points to the company's lucrative salary and perks, as well as its culture, both executives said.

"We've got a very loyal workforce," Miller said.

"Our position in North America is second-to-none," Lesar said. "We intend to hold that, no matter what the competition does."

http://www.reuters.com/article/us-halliburton-executives-growth-idUSKCN18E2Q4

Noble Energy Sells Marcellus Midstream to Quantum Energy Partners for $765 Million

Noble Energy, Inc. today announced that it has signed a definitive agreement to divest the holding company which owns a 50 percent interest in CONE Gathering, LLC and 21.7 million common and subordinated limited partnership units to a portfolio company of Quantum Energy Partners (“Quantum”) for total cash consideration of $765 million. The limited partnership units represent a 33.5 percent ownership interest in CONE Midstream Partners LP . CONE Gathering owns the general partner of CONE Midstream.

David L. Stover, Noble Energy’s Chairman, President and CEO, commented “CNNX has performed exceptionally well since its IPO in late 2014, exceeding forecasts despite a challenging macro-economic backdrop. Including this transaction, Noble Energy will realise more than $1 billion in total value from our Marcellus midstream business, which represents approximately three times our net invested capital. Going forward, our midstream efforts are focused on Noble Midstream Partners, supporting our DJ Basin and Delaware Basin growth areas.”

http://boereport.com/2017/05/18/noble-energy-sells-marcellus-midstream-to-quantum-energy-partners-for-765-million/

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China succeeds in mining combustible ice in South China Sea

China has succeeded in collecting samples of combustible ice in the South China Sea, a major breakthrough that may lead to a global energy revolution, Minister of Land and Resources Jiang Daming said Thursday.

This is China's first success in mining flammable ice at sea, after nearly two decades of research and exploration, the minister said at a trial mining site in the Shenhu area of the South China Sea Thursday.

China found flammable ice, a kind of natural gas hydrate, in the South China Sea in 2007.

International scientific circles have predicted that natural gas hydrate is the best replacement for oil and natural gas

http://news.xinhuanet.com/english/2017-05/18/c_136294670.htm

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Most OPEC/non-OPEC deal countries support 9-month extension: Algerian minister

Most OPEC/non-OPEC deal countries support 9-month extension: Algerian minister

"I think we have a consensus and the majority of countries support the
proposal of Russia and Saudi Arabia," Boutarfa told reporters after talks with his Russian counterpart Alexander Novak in Moscow.

On Monday, Novak and his counterpart from OPEC kingpin Saudi Arabia,
Khalid al-Falih, said they agreed on the need for a nine-month extension of
the agreement, which expires at the end of June.

Boutarfa, who visited Russia after traveling to Iraq last week to discuss
the issue with Iraqi oil minister Jabber al-Luaibi, also reiterated that he
supports the proposal.

The countries participating in the agreement, including OPEC member
Algeria and non-OPEC Russia, are to meet in Vienna on May 24 and 25
to discuss the possible extension of the agreement between OPEC and non-OPEC oil producers to reduce oil production by some 1.8 million b/d from October 2016 levels.

Several African countries have expressed their interest in joining the
agreement of OPEC and non-OPEC countries, Boutarfa reportedly said, while speaking in Moscow.

"There are several African countries that have expressed their support to
the agreements. We'll consider this issue at a meeting in Vienna," he said, as reported by Prime news agency.

On Tuesday, Novak said some three to five new countries could join
the agreement next week, declining to name them.

Boutarfa also expressed satisfaction with the level of compliance with
production cut obligations among participants.

MORE SUPPORT

When asked if he is concerned about Russia fulfilling its obligations,
Boutarfa said: "As for the last month, the conformity is very high. For OPEC it's more than 100% and also you have good conformity from the non-OPEC countries. It's more than 95%," he said.

Russia said it has fully meet its obligation to reduce production by
300,000 b/d by May, with this cut level being achieved in the last days of
April.

The average daily output cut in April was at around 252,000 b/d. Unlike
some OPEC countries, Russia cannot regulate quickly its production and needs some time to achieve the output cut through reduced drilling.

Earlier this week, Kuwaiti oil minister Essam al-Marzouq lent his weight
to a growing consensus over the need to extend the OPEC/non-OPEC output cut deal into next year, offering the state's full support to the extension in a statement released by Kuwait Petroleum Corp Tuesday.

This followed Monday comment by Mohammed al-Rumhy, the oil minister of Oman, a key non-OPEC Arab producer, who also supported the extension.

Before Novak and Falih announced their proposal on Monday, a number of
other countries had expressed their support for the production cut extension, but at the time there was a perception that the possible extension would be for six months only. Among those who expressed their support then were OPEC members Iran, Iraq and Angola.

At the same time, Brazil's Petrobras on Tuesday ruled out joining the
non-OPEC group of countries participating in the deal, with its CEO Pedro
Parente saying in an interview with S&P Global the company is very heavily in debt and its financial situation would not allow it to do that.

Brazil was among a number of oil producers that were invited, but did not
join, the current OPEC-led output cut deal designed to reduce global oil stock levels and support oil prices.

Other countries that turned down an invitation to join the cuts included
Bolivia, Colombia, Turkmenistan, Trinidad and Tobago, Egypt, the Republic of Congo, and Uzbekistan.

https://www.platts.com/latest-news/oil/moscow/most-opecnon-opec-deal-countries-support-9-month-27832525

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Crude stocks at China's Shandong ports rise on maintenance at independent refineries

Crude stocks at China's Shandong ports rise on maintenance at independent refineries

Crude oil stocks at major ports in eastern China's Shandong province had risen to a 13-month high because of heavy maintenance at independent refineries and high crude imports in the previous months, port sources told S&P Global Platts Thursday.

Discharge operations at the ports however, were not affected, they added.

Total crude inventory at the major ports of Qingdao, Longkou, Laizhou and Rizhao in Shandong rose 10% from mid-April to around 2 million mt as of May 11, the highest since April 2016, according to JLC data. JLC is a Beijing-based energy information provider formerly known as JYD.

And at Qingdao port, stocks have been hovering at relatively high levels of around 750,000-800,000 mt in recent weeks -- slightly above the average level of 700,000 mt over January-April.

A source at Qingdao port attributed the build in stocks to several independent refineries deferring moving crude from the port to their facilities in recent weeks, as they are facing ullage issues at their own crude storage tanks during turnarounds.

A total 12.8 million mt/year (256,000 b/d) of independent refining capacity had been shut for maintenance in May, up 41% from 9.1 million mt/year last month, according to Platts calculations.

Wantong Petrochemical's 4.3 million mt/year refinery was shut on April 28 for a month-long maintenance until end-May, while the 3.5 million mt/year Lijin refinery was shut on May 3 for a turnaround lasting one month. The 5 million mt/year Lianhe Petrochemical will restart in end-May from an ongoing maintenance that started in end-April.

With those plants undergoing full turnarounds, crude consumption is estimated to have been cut by about 1 million mt this month, according to sources.

Adding to a heavy turnaround program, high crude imports over the past months have also contributed to the build in crude stocks at the ports, according to sources.

Crude imports by Shandong independent refineries came at 8.3 million mt in April, down 17% from a record high of 10 million mt in March, a separate Platts monthly survey showed.

Despite the month-on-month drop, April crude imports were still the second highest level seen since Platts started tracking independent refinery imports in January 2016.

And imports are likely to fall further in May, as fewer crude cargoes have called at the berths this month, given that a few independent refineries are running low on import quotas.

CRUDE DISCHARGE OPERATIONS NOT AFFECTED

Meanwhile, crude discharge operations at the ports have not been affected by the high port stocks, according to sources at Qingdao and Laizhou ports.

Currently, Qingdao port is not facing any congestion and it takes about a week for a cargo to be discharged, which is the normal timing, said the Qingdao source.

Sources at Laizhou port also confirmed that there is no congestion, simply because fewer cargoes have arrived in the first half of the month.

A total 300,000 mt of crude have been discharged in the first half of May, falling nearly 29% from around 420,000 mt in the first half of April, according to the source.

No vessels were waiting outside Laizhou port as of Thursday. In contrast, three to four 100,000-mt vessels have waited outside port limits each day at its peak.

At Qingdao port, around six vessels were waiting to discharge on Thursday. This compares to a peak of around 15 vessels last year due to logistic issues.

https://www.platts.com/latest-news/oil/singapore/crude-stocks-at-chinas-shandong-ports-rise-on-27832617

Attached Files

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China resumes light cycle oil imports amid tax uncertainty - sources

China has resumed imports of light cycle oil (LCO) after buyers cancelled shipments in April, as a planned Chinese consumption tax has not been announced, four industry sources said this week.

Less than 1 million tonnes of LCO are being shipped from South Korea to China in May and June, compared with a peak of 2 million to 3 million tonnes, said two of the sources, both from South Korean refiners. The lower volumes reflects cautious buyers, they said.

China had planned to impose consumption taxes on oil by-products such as mixed aromatics, light cycle oil and bitumen blend. The tax would close a loophole that allowed Chinese buyers to import light cycle oil, then sell it locally as low-grade diesel, avoiding taxes that would normally be levied on diesel.

The proposed tax was initially expected to be levied in May but no official announcement has been made, increasing uncertainty among buyers, the sources said.

At least two LCO cargoes for late-April loading from South Korea were cancelled last month ahead of the planned tax.

But shipments have resumed for May-loading cargoes, the sources said. They are likely being used for blending into fuel oil instead of being re-sold as diesel, one of the sources said.

Light cycle oil is the residue produced after running fuel oil through a catalytic cracking unit to produce gasoline and diesel.

LCO cargo premiums have dropped by about one-sixth from their peak, which is reducing the incentive for refiners to produce the oil and instead maximize their output of jet fuel and diesel, one of the sources said.

Premiums have also dropped to below $1 a barrel on a free-on-board (FOB) Korea basis for the cargoes, compared with a peak of about $6 a barrel earlier this year and $2 to 3 a barrel in April, the sources added.

"Buyers are still wary as no one knows the status of when the tax will be implemented," the source said

http://www.reuters.com/article/china-oil-imports-idUSL4N1IK310

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Russia has not complied with oil cuts?

Russia has not complied with oil cuts?

Not only has Russia not complied, it has barely managed to cut 150,000 b/d over the six months.

@ncitayim

OPEC officials say Russia hasn't cut the amount of 300,000 barrels a day as promised over six months

@summer

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Fracking Crew Shortage May Push Oil's Biggest Bubble to 2018

Shale explorers pushing to expand oil production are struggling to find enough fracking crews after thousands of workers were dismissed during the crude rout.

Independent U.S. drillers underspent their first-quarter budgets by as much as $2.5 billion collectively, largely because they couldn’t find enough fracking crews to handle all the planned work, according to Infill Thinking LLC, a research and consulting firm focused on oilfield services and exploration. If the scarcity holds, output increases planned for this summer may get pushed into 2018, creating an unanticipated production bulge with “scary” implications for oil prices, said Joseph Triepke, Infill’s founder.

In some cases, active crews are walking away from jobs they signed up for months ago -- and paying early-termination penalties -- to take higher-paying assignments with other explorers. Workers earn anywhere from $29,000 to $72,000 a year before overtime, depending on the company and the region.

The tight fracking market “means U.S. oil production growth this year will be back-half weighted, and we may not understand the full extent of U.S. production growth until early 2018,” said Triepke, who previously was an analyst at Citadel LLC’s Surveyor Capital unit. “This point is particularly scary if you are a rooting for higher oil prices.”

Oilfield-service companies contributed the largest chunk of more than 441,000 jobs slashed globally as prices plunged from more than $100 a barrel over the last three years, according to Houston-based industry consultant Graves & Co.

Now, with the price of oil settling at around $50 a barrel, shale drillers are once again gearing up in areas such as the Permian Basin, where break-even costs are as low as $30 a barrel. The result: rising competition for workers and equipment, which means higher costs. Fracking companies are now charging 60 percent to 70 percent more than a year ago as explorers engaged in bidding wars to lock up crews, according to Infill data.

In response, servicers are scrambling to re-hire hands and retrieve gear from storage, said Andrew Cosgrove, an analyst at Bloomberg Intelligence.

Typical Crew

A crew typically consists of 25 to 30 workers who operate a huge array of powerful truck-mounted pumps, storage tanks for fluids and sand, hoses, gauges and safety gear. Fracking, which involves pumping tons of water, sand and chemicals into a well to smash open the surrounding oil- and gas-soaked rock, is the most expensive part of drilling a well, usually accounting for about 70 percent of the total cost.

So far, independent shale drillers are confident they’ll find ample fracking capacity and are leaving their ambitious double-digit output growth targets intact. West Texas Intermediate crude, the U.S. benchmark, is heading for a second weekly advance as U.S. stockpiles decline while Saudi Arabiaand Russia indicated a willingness to extend price-boosting production cuts. WTI on Thursday was trading 0.3 percent lower at $48.91 a barrel as of 1:07 p.m. in Singapore.

Those efforts could be dashed in coming months, however, if shale explorers deliver a larger-than-expected bubble of supply.

“Every single pressure pumper is saying their order books are full through the third quarter and some as far ahead as the first quarter of ’18,” Cosgrove said.

Walkaways

EQT Corp. was left short of fracking crews during the first quarter when some pumping companies walked away for higher-paying contracts. Still, the Pittsburgh-based shale driller expects to attract enough fracking capacity by the beginning of June to stay on track and hit its full-year growth forecast.

“A couple of our frack contractors decided to pay us the penalties to take their frack crews to jobs that were more profitable,” EQT Chief Executive Officer Steven Schlotterbeck said during an April 27 conference call with analysts. “So we will get some penalty fees but that obviously is far less than the value of having the wells fracked on the schedule that we would have liked.”

The last time the shale patch boomed, Parsley Energy Inc. CEO Bryan Sheffield remembers personally delivering breakfast and giving away World Series tickets to get into good graces with fracking companies.

Better-Paying Gigs

That was late 2011, when booming demand for fracking capacity meant service companies could fire clients to take better-paying gigs, Sheffield said in an interview. The 39-year-old Parsley founder was relatively unknown at the time, trying to get to the top of frack companies’ cancellation lists, so he could get a chance to hire them and get his oil flowing.

Those days are back, he said.

After the last boom that saw oilfield truck drivers commanding more than $200,000 a year in the Bakken of North Dakota, companies are again hunting for more truckers -- this time in the Permian Basin of Texas and New Mexico for hauling water, sand and oil. Fracking equipment prices began rising late last year, Sheffield said.

“This is exactly what we saw in 2011 and 2012,” Sheffield said. “The bottleneck moves down the chain.”

https://mail.google.com/mail/u/0/?shva=1#inbox?compose=15c1a494d2f1143e

Canadian Natural Resources Limited announced today that Toronto Stock Exchange has accepted notice filed by Canadian Natural of its intention to make a Normal Course Issuer Bid through the facilities of Toronto Stock Exchange or other alternative Canadian trading systems. Purchases may also be made through the facilities of the New York Stock Exchange.

The notice provides that Canadian Natural may, during the 12 month period commencing May 23, 2017 and ending May 22, 2018, purchase for cancellation up to 27,931,135 shares, being 2.5% of the 1,117,245,428 outstanding common shares as at May 12, 2017. Canadian Natural will not acquire more than 25% of the average daily trading volume of its common shares during a trading day, being 591,186 common shares subject to certain prescribed exceptions. The price which Canadian Natural will pay for any such shares will be the market price at the time of acquisition. The actual number of common shares that may be purchased and the timing of any such purchases will be determined by Canadian Natural.

In addition to further strengthening its balance sheet, investing in exploration and development of its diverse asset base, and participating in acquisition opportunities, returns to shareholders remain a priority to create value for Canadian Natural’s shareholders. Funds flow in 2017 is targeted to be allocated to these four pillars and may also be used by Canadian Natural, depending upon future trading prices and other factors, to purchase its common shares, as it is believed to be a worthwhile investment, and in the best interests of Canadian Natural and its shareholders

http://boereport.com/2017/05/17/canadian-natural-resources-limited-announces-normal-course-issuer-bid-4/

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Indian jet fuel, LPG demand shrugs off demonetisation impact

Jet fuel and LPG have turned out to be the shining stars in India's oil demand basket so far in 2017 as rapidly growing air travel and New Delhi's clean fuel energy push are helping the two fuels to post the sharpest growth rates among all oil products.

As air travel continues to grow amid intensifying competition among airlines offering competitive fares, jet fuel demand rose by 9.5% year on year in April, to 610,000 mt from 557,000 mt from a year earlier, according to data from the Petroleum Planning and Analysis Cell.

In the cumulative January-April period, jet fuel demand surged 12% year on year to 2.46 million mt from 2.19 million mt a year earlier.

"While demonetization has affected consumption of some oil products, it has not affected air travel because most air tickets are booked using credit cards. Not much cash is involved. Therefore, jet fuel demand remains robust, said Tushar Bansal, director at Ivy Global Energy, a Singapore-based oil and gas consultancy.

India announced the scrapping of 1,000 and 500 rupee notes with immediate effect on November 8, 2016, in a move aimed at curtailing the shadow economy but which also led to a slowdown in demand for various commodities over the following months.

According to CAPA - Centre for Aviation, an independent provider of market intelligence for the aviation sector, India is likely to overtake Japan in 2017 to become the world's third-largest domestic aviation market, behind the United States and China.

In reaching this milestone, India will have achieved average domestic annual traffic growth of over 15% since the liberalization of the sector commenced in 2003-04 (April-March).

While domestic traffic could grow by nearly 25% in 2017-18 (April-March) and approach 130 million passengers, international travel could growth by about 10%-12%, CAPA added. Strong economic fundamentals have contributed to the growth, although traffic has been over-stimulated by low fares.

"India's status as the fastest growing aviation market in the world creates tremendous opportunities. But risks are also heightened as the inadequacy of India's infrastructure planning, a fast emerging shortage of skills, flawed policy initiatives, and weak regulatory oversight threaten to become major stumbling blocks," according to a CAPA report on India's aviation outlook.

Prime Minister Narendra Modi has said that in the global civil aviation market, India, which is currently the eighth-largest market in the world, would become the third-largest by 2034, adding that growth in the aviation sector would multiply demand for aviation fuel in India four times by 2040.

Rising domestic demand is taking a toll on India's jet fuel exports as more cargoes find their way into local markets. Jet fuel exports in the first quarter of 2017 fell almost 12% year on year to 1.75 million mt, from 1.99 million mt in Q1 2016.

Market participants expect India's jet fuel exports to maintain a downward trend as domestic demand is expected to remain robust in the foreseeable future.

LPG SPREADS ITS WINGS

While LPG demand grew by only 2.6% year on year in April to 1.63 million mt, from 1.59 million mt a year earlier, it has been the second-fastest growing fuel this year, with demand rising by 6.1% year on year to 7.31 million mt in the January-April period, from 6.9 million mt in the same year-ago period, PPAC data showed.

"The government is expected to speed the pace of distribution of subsidized LPG connections to the poor. That will keep the demand growth at double digits," Bansal added.

India is expected to invest $3.9 million-$4.7 billion in developing infrastructure facilities for LPG to raise household connections to 95.5% by 2020, oil ministry officials said Friday.

State-own Indian Oil Corp plans to spend 10% of its overall capex of $3.1 billion for 2017-18 on strengthening the infrastructure for LPG including setting up of terminals and bottling plants.

But despite the capacity build-out, IOC's chairman B. Ashok said he expects India to continue importing LPG at least for the next 12 to 13 years after which he anticipates a slowdown in India's LPG demand growth.

India consumed 21.5 million mt of LPG in 2016-17, a 9.8% growth from the previous year (2015-16), according to the oil ministry updates. Half of the last year's demand was met via imports, mainly from the Middle East. India's LPG imports rose 23% year on year to 11 million mt of LPG in 2016-17.

"Our main import destinations will continue to be the Middle East as shale gas production has made LPG price relatively a competitive option," Petroleum Minister Dharmendra Pradhan said.

India aims to increase the number of households with LPG access to 268.7 million in 2018-19, up by around a third from 199 million in 2016-17, and to add 10,000 new LPG distributors by 2019, the minister said. The renewed push on LPG saw 4,600 new distributors open in 2016-17.

India's overall demand for oil products in April rose 2.3% year on year to 16.79 million mt, or 4.4 million b/d, PPAC data showed. January-April oil products demand fell 1% year on year to 65.7 million mt, or 4.3 million b/d.

"In line with our expectations, India's oil demand is on a recovery path as the impact of demonetization fades," said Sri Paravaikkarasu, Head of Oil, East of Suez, at consultancy FACTS Global Energy.

"Transport fuels should continue to propel oil demand growth in the coming months although LPG and other products will also contribute to a 5% to 6% average growth for the year," she added. "The double-digit growth in fuel oil in 2016 should reverse this year, while kerosene will track the negative trend."

https://www.platts.com/latest-news/oil/singapore/analysis-indian-jet-fuel-lpg-demand-shrugs-off-27831257

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BP inks Indonesia LNG supply deal

UK-based energy giant BP has signed a deal to supply LNG to the Indonesian power utility Perusahaan Listrik Negara (PLN).

BP is to supply 16 LNG cargoes per year from its Tangguh LNG project in Bintuni Bay to PLN over 2020-2035.

The Tangguh LNG facility consists of offshore gas production facilities supplying two 3.8 mtpa liquefaction trains that have been in operation since 2009.

In July last year, the project partners have made a final investment decision to build a third train at the facility. The third liquefaction train will add 3.8 mtpa of production capacity to the existing facility, bringing total plant capacity to 11.4 mtpa. First production from the third train is expected in 2020.

Besides BP, the other partners in the Tangguh production sharing contract are MI Berau (16.30%), CNOOC Muturi (13.90%), Nippon Oil Exploration (Berau) (12.23%), KG Berau Petroleum and KG Wiriagar Petroleum Ltd (10.00%), Indonesia Natural Gas Resources Muturi (7.35%), and Talisman Wiriagar Overseas (3.06%).

http://www.lngworldnews.com/bp-inks-indonesia-lng-supply-deal/

OPEC Risks Deal Fatigue as Maintaining Oil Curbs Get Tougher

The Organization of Petroleum Exporting Countries and its partners are expected to extend output curbs into early 2018 when they meet next week, in an ongoing bid to clear a global surplus. Yet the tailwinds that made cutting supply easier in the first half of the year -- from a seasonal lull in demand to temporary oil-field maintenance -- will be gone just as new obstacles are emerging.

To keep a lid on output this summer, Saudi Arabia will need to sacrifice an even bigger share of exports as consumption at home rises. Iraq yearns to expand capacity, and has already used the option of maintenance to keep oil fields idle. Meanwhile Nigeria and Libya, two OPEC nations exempt from the deal, are restoring lost output.

“They’re going to struggle,” said Michael Barry, director of research at consultants FGE in London. “This deal has been remarkable in its implementation. As time goes on, discipline is likely to erode. Almost every country wants their production to go up.”

As the world’s fuel-storage tanks remain brimming and prices languish, OPEC and its allies have conceded that the initial plan for six months of production cuts wasn’t long enough. Yet Saudi Arabia and Russia’s proposal that their 24-nation coalition, due to meet in Vienna on May 25, should extend the measures for another nine months may prove an unbearable strain.

“Production curbs for the first quarter of 2017 were comparatively easy to agree to,” said David Fyfe, chief economist at Geneva-based oil trader Gunvor Group. “They’ll likely agree to extend” but “the risk is higher they’ll leak extra barrels onto the market.”

OPEC showed an unprecedented level of commitment to this deal, implementing 96 percent of the cuts it promised during the first four months of the year, according to the International Energy Agency.

Holding Line

Some are optimistic that OPEC and its partners will maintain their resolve. The stakes are high enough that the organization will stick to its commitments, and as inventories decline producers will feel encouraged to stay the course, said Mike Wittner, head of oil market research at Societe Generale SA in New York.

“They’re going to hold the line,” said Wittner. “If we see stock draws happening soon, which we believe will be the case, those signs of success will bolster their determination. When you see light at the end of the tunnel, it’s easier to keep it together.”

Still, strong compliance was often attributable to Saudi Arabia cutting more than it was required, compensating for laggards like Iraq and the United Arab Emirates.

If the kingdom continues to restrain output, it needs to make another sacrifice. The Saudis typically boost production during the summer to maintain exports while meeting increased local demand from air conditioning. Keeping a cap on output would mean foregoing some exports and the revenues they bring.

Iraqi Question

Iraq, which still hasn’t made its full cut, plans to boost production capacity to 5 million barrels a day, an increase of about 6 percent, Oil Minister Jabbar al-Luaibi said on May 11. This won’t conflict with its commitment to freeze output, he said.

“We have question marks around Iraq,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London. “They have been reluctant since the very beginning, and were slow to implement their cuts. Most of the supply restraint in Iraq has come with the help of field maintenance.”

Maintenance in Iraq, Kuwait and the U.A.E. may have accounted for about 500,000 barrels a day of the output halted -- almost half the group’s total cut, according to FGE. For Iraq, this enabled them to avoid compensating foreign companies for unscheduled production shutdowns.

“Several countries basically used maintenance as a way of keeping production down but what they did was pull it forward from later in the year,” said FGE’s Barry. “Now maintenance is over the question is what do they do? More maintenance or cut at other fields? The pressure is on.”

OPEC also faces the challenge that the two members exempted from the deal because of production losses are recovering. Both Libya and Nigeria are showing progress in tackling the political crises that slashed their output.

Disciplinary Issues

Libya is producing at the highest level in more than two years after restarting its largest oil field, according to state-run National Oil Corp., while Nigeria has fixed a pipeline after a one-year halt that could boost its output by about 13 percent.

The 11 non-members joining OPEC’s effort have still only implemented about two-thirds of their promised reduction, according to the IEA, and also face problems in sustaining their curbs. Cutbacks in Russia came alongside the traditional seasonal stagnation in activity, and prolonging them would thwart plans by companies to expand output.

“It was easy to mask maintenance in the first half as voluntary cuts, but quite impossible to do it any further,” said Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt. “There will be lower discipline within OPEC, and lower discipline from non-OPEC.”

https://www.bloomberg.com/news/articles/2017-05-16/opec-risks-deal-fatigue-as-maintaining-oil-curbs-gets-tougher-j2s5ws6u

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SM Keeping Bakken Assets

Bids for Divide County acreage didn’t add up

SM Energy announced that it has postponed indefinitely the sale of its Divide County North Dakota assets.

SM expressed its desire to sell its Divide County assets in January, and expected to close the transaction around mid-year.

Goal was to reduce leverage

According to analysts at Wells Fargo, expected valuations were around $400 million. However, the bids the company received were too low and would not allow SM to meaningfully reduce its leverage. With this in mind, SM has decided to retain its 123,570 net acres in North Dakota.

SM’s Divide County assets are producing about 10.7 MBOEPD. SM did not drill or complete any wells in the area in Q1, but reports 17 net DUCs (drilled uncompleted wells) in inventory.

SM wants to focus on Midland, Eagle Ford

SM Energy has already completed a series of divestitures, as it focuses on its Midland basin and Eagle Ford properties. In December the company sold its Williston basin assets outside of Divide County to Oasis Petroleum (ticker: OAS) for $765.8 million. In January the company sold its non-operated Eagle Ford assets for $800 million to an affiliate of KKR (ticker: KKR).

SM used the Williston basin sale to fund its acquisition of acreage in the Midland basin, and has now accumulated 88,000 net acres in the area. The company plans to use the proceeds from its Eagle Ford sale to fund its projected 2017-2018 spending, which will exceed cash flows. The Divide County sale would have been used to reduce debt, as the company’s 3-year objective is net debt to EBITDAX of 2.0x. SM’s net debt to total 2016 EBITDA was 5.6x, for reference.

No sale increases immediate net debt to EBITDAX, but reduces outspending

The failure of the sale means that net debt to EBITDAX will not decrease as quickly, but the funds from this asset will decrease projected outspending over time.

Wells Fargo reports that without a Divide County sale net debt to EBITDAX will climb to 4.4x in Q1 2018 before beginning to decrease. The lack of a sale increased KLR’s net debt to EBITDA projection from 3.4x to 3.8x. Stifel now projects year-end 2017/2018/2019 net debt to EBITDA of 3.4x/2.6x/1.9x vs 3.1x/2.7x/2.0x.

SM President and CEO Jay Ottoson commented on the sale, saying, “We have successfully pre-funded the expected outspend for our capital program for 2017 and 2018 with the completed sale of our third party operated Eagle Ford assets, and we do not need to sell our Divide County assets.

“We have concluded that current market uncertainty around forward oil prices is not conducive to realizing a sales price that meets our deleveraging objective. We remain committed to our long-term financial strategy, which is best served by retaining the cash flow generated by the Divide County assets.”

https://www.oilandgas360.com/sm-keeping-bakken-assets/

Shale Play `Left for Dead’ Gets Some Love as U.S. Gas Rises

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Tidewater in bankruptcy deal to eliminate $1.6B in debt

Tidewater, one of the world’s largest offshore vessel owners, has entered into a debt restructuring support agreement with certain consenting creditors.

The U.S.-based vessel company has entered into the deal with lenders under its Fourth Amended and Restated Revolving Credit Agreement, dated as of June 21, 2013, and holders of Tidewater Senior Notes to put into force a proposed prepackaged plan of reorganisation of the company.

The plan, that includes Tidewater and some of its subsidiaries filing for Chapter 11 bankruptcy by May 17, will, the company says, substantially deleverage its balance sheet and better position Tidewater “to weather the extended downturn in the offshore energy industry while maintaining the company’s position as a worldwide market leader in offshore vessel services.”

The prepackaged plan has the support of the company’s lenders holding 60% of the outstanding principal amount of loans under the credit agreement and holders of 99% of the aggregate outstanding principal amount of Tidewater’s Senior Notes. Tidewater expects that it will eliminate approximately $1.6 billion in principal of outstanding debt.

http://www.offshoreenergytoday.com/tidewater-in-bankruptcy-deal-to-eliminate-1-6b-in-debt/

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Caspian oil pipeline eyes massive expansion thanks to new oilfields

The Caspian oil pipeline is seen boosting its capacity this year by around 47 percent thanks to new oilfields in the region including the giant Kashagan deposit in Kazakhstan, the consortium's director general, Nikolai Gorban, said on Friday.

Oil exports via the Caspian Pipeline Consortium (CPC) rose by 3.6 percent to 44.3 million tonnes in 2016 and are expected to grow to almost 65 million tonnes (1.3 million barrels per day) this year.

http://www.reuters.com/article/us-russia-cpc-oil-idUSKBN1881D0

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EOG in a nutshell.

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Alternative Energy

France needs 'massive' renewables growth, nuclear not only energy solution, says PM

France needs "massive and rapid" growth in renewable energy capacity and nuclear power is not the country's only energy solution, new Prime Minister Edouard Philippe said on Thursday.

Philippe, who was appointed by newly inaugurated President Emmanuel Macron, used to work as head of public affairs for state nuclear energy group Areva, parts of which are set to be absorbed by EDF, the state power utility which operates the nation's ageing nuclear power station fleet.

On Wednesday, Macron appointed environmentalist Nicolas Hulot as his environment minister with responsibility for energy matters - a move that hit EDF's share price.

Nuclear power accounts for about three-quarters of French power generation at present.

France needs "to reach the objectives set out by the President," Philippe said on France Inter radio. "That means an approach founded on the secure base of nuclear and a rapid, massive and visible development of renewables," he added.

Philippe also said the government would take a "pragmatic" approach regarding France's future energy and power supplies.

http://www.reuters.com/article/france-energy-idUSL8N1IK1T1

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Daimler, Vivint Solar in exclusive deal on U.S. home batteries

German automaker Daimler AG will enter the nascent U.S. market for home batteries through a collaboration with residential rooftop solar installer Vivint Solar Inc, the two companies said on Thursday.

The exclusive partnership, Vivint's first foray into energy storage, will allow the companies to compete against similar offerings from automaker Tesla Inc, solar installer Sunrun Inc, battery maker LG Chem Ltd and others.

The market for energy storage is small, but growing rapidly as the costs of lithium-ion batteries fall. Last year the industry generated $320 million in revenue in the United States, though residential systems made up just 4 percent of the total.

Home battery systems allow customers to store solar power generated during the day for use after sunset, a time when they might charge an electric vehicle. Eventually, as utilities move to charging higher rates for power used in the evening, when demand is greatest, the batteries could bring customers significant savings. They can also provide backup power.

Daimler will sell the batteries through its Mercedes-Benz Energy subsidiary established last year, bringing its aspirational car brand to the home energy market in much the same way Tesla has with its Powerwall batteries.

The head of Mercedes-Benz Energy Americas, Boris von Bormann, said entering the home storage market was a natural evolution for the luxury car brand.

"In the future when someone steps into a dealership and they are looking to purchase an EV, they are asking for several solutions and storage will be one of them," he said in an interview.

Vivint Chief Executive Officer David Bywater said solar customers are increasingly demanding an energy "ecosystem" that includes home energy management, storage and electric vehicle charging.

Mercedes-Benz "will help us both on the home storage as well as the EV charging stations over time," Bywater said.

The energy storage systems will be made up of 2.5 kWh modular batteries that can be combined to create a system as large as 20 kWh. The largest size would cost about $13,000 fully installed, Bywater said.

By comparison, a 14 kWh Tesla Powerwall costs $6,200, not including up to $2,000 in installation costs, according to pricing information on Tesla's website.

The systems are available immediately, and Vivint plans to sell them both online and through its primary door-to-door sales operation.

http://www.reuters.com/article/daimler-vivint-batteries-idUSL2N1IJ1OA

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12 from 12: ARENA’s big solar plans take off across the country

The Australian Renewable Energy Agency has announced that all 12 of the projects that won funding under its large-scale solar program have now reached financial close and will begin construction shortly, if they haven’t already.

The last of the 12 projects to get to financial close – the 20MW White Rock solar farm in northern NSW – did so late last week. Funding was never really in doubt considering that the project is owned by Chinese giant Goldwind, which is building a 175MW wind farm by the same name at the same place.

ARENA, however, used the milestone to hail its $90 million initiative as a huge success, helping to bring down the cost of large-scale solar to the level of wind energy – and five years ahead of what had been expected.

The 12 projects have also benefited from $320 million in low-cost finance from the Clean Energy Finance Corporation, as the country’s major banks tried to wrap their mind around this new technology.

But there is every sign that they have, and have lowered the risk quotient on their financing, at least for those with long-term power purchase agreements. While the ARENA program will deliver 490MW of large-scale solar, another 1,500MW is thought to be also under construction, or about to begin, around the country.

“This competitive round is the perfect demonstration of how ARENA is accelerating Australia’s shift to a low emission, renewable energy future,” Frischknecht said in a statement.

“From zero to more than 20 plants in five years, Australia’s large-scale solar industry has grown at a tremendous pace thanks to concerted efforts by ARENA and the CEFC.

“We know of at least six new plants that are being developed without any ARENA grant funding support.”

He said the ARENA program had unlocked $1 billion in investment from other sources and regional economies would benefit, with an estimated 2,300 direct jobs and thousands more indirect jobs expected to be created by these plants.

Frischknecht said planning, developing and financing large-scale solar projects remained a complex task involving multiple different parties. That’s why the knowledge gained from the project is so valuable.

“ARENA believes in the power of shared knowledge. That’s why we require project developers to share the learning from each stage of development, construction and connection with the renewable energy sector,” Mr Frischknecht said.

“Our support for Whitsunday Solar Farm assisted project developer Edify Energy to secure debt finance for two additional plants, Hamilton Solar Farm in Queensland and Gannawarra Solar Farm in Victoria. ARENA is benefitting from knowledge sharing activities across the three projects.”

The projects are expected to be completed between late-2017 and mid-2018, and will help reduce wholesale prices in all three states where these projects will be built when they come on stream.

http://reneweconomy.com.au/12-from-12-arenas-big-solar-plans-take-off-across-the-country-81918/

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How cheap is solar? Cheap enough to cool the air outside

How cheap is solar? Cheap enough, says the head of the Australian Renewable Energy Agency, to drive the transformation of our grid to zero emissions. Cheap enough, he says, to inspire some people to install air conditioners on their verandah to cool the air outside the house, as well as inside.

Source: Wendy Miller, Senior Research Fellow, Queensland University of Technology (via The Conversation)

The latter, quite bizarre example was given by ARENA CEO Ivor Frischknecht at the recent Emissions Reduction conference in Melbourne to illustrate just how cheap solar has become.

He came across a home owner in Townsville, north-eastern Queensland, who had installed a very large rooftop solar system, and planned to use it to power an air conditioning unit on the verandah.

“He likes to have cool air on his face while he is sitting outside outside,” Frischknecht said. “And this is fine, because if you are only running it in middle of day, and using the solar, the energy is free.”

Indeed, noted Frischknecht, solar was becoming so cheap, and will become so abundant, that we will reach the situation where the kilowatt hours of use (i.e. the production) are effectively free. The cost will come in managing the variability, and integrating it into the grid.

But even here, contrary to much that is written, Frischknecht says the technologies to do that are available now, in the form of battery storage, demand response, pumped hydro and a “whole bunch of solutions that can ensure that the lights stay on.”

The challenge comes down to rewriting the market rules and regulations, and reframing business models, so that these technologies are rewarded for their services, and not punished.

He cited the use of battery storage.

“If you have a battery today and charge it up –you have to pay transmission costs and distribution costs and a share of RET, and when you discharge it again and sell the output, you pay all those costs again,” Frischknecht said.

“You are adding 50 per cent to the cost of energy getting stored. That’s a pretty big barrier to put in place of a mechanism we need.”

Frischknecht says it is not hard to look forward and imagine a world where many things would be quite different, and when a lot of centralised fossil fuel generation is made redundant by the falling costs of renewables.

“The cost of solar PV will be so cheap it will literally cover every surface – packaging, buildings, cars, roads. Energy will be cheap, but we will still got this variable output issue. We are going to have to figure out different ways of pricing and dealing with variable output.”

http://reneweconomy.com.au/how-cheap-is-solar-cheap-enough-to-cool-the-air-outside-85335/

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China, India surpass U.S. as most attractive renewables markets: report

China and India have surpassed the United States to become the two most attractive countries for renewable energy investment, a report by UK accountancy firm Ernst & Young showed on Tuesday.

In an annual ranking of the top 40 renewable energy markets worldwide in terms of allure, China was the top country, followed by India.

The United States, which ranked the highest last year, slumped to third place, due to a shift in U.S. energy policy under President Donald Trump.

Trump has issued orders to roll back many of the previous administration's climate change policies, revive the U.S. coal industry and review the Clean Power Plan, which requires states to cut carbon emissions from power plants.

Meanwhile, China announced this year that it would spend $363 billion on developing renewable power capacity by 2020. India's government has unveiled plans to build 175 gigawatts of renewable energy generation by 2022.

Among European countries, Germany ranked fourth, France eighth and Britain moved to 10th place, from 14th last year.

While Britain's renewable investment environment is more settled than in recent years, which were beset by subsidy cuts, future energy policy after it leaves the European Union is uncertain, the report said.

"The UK's reappearance in the top 10 is the result of other countries falling away – notably Brazil, which cancelled a wind and solar auction in December - rather than any particularly encouraging resurgence," said Ben Warren, EY's head of energy corporate finance.

http://www.reuters.com/article/renewables-investment-idUSL8N1IH5JB

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Argentina expects to triple its production of lithium in five years with investments for USS 1500 million

Google Chrome translation:

The country currently has the capacity to produce 35,500 tonnes per year but five projects are under development to multiply that figure by three in 2021.

Argentina has an installed capacity of lithium production of 35,500 tons per year, which means 16 percent of the global supply, but has at the advanced stage of development five other projects that will allow it to triple its production in 2021 with investments for US $ 1.5 billion and exports for about 880 million US dollars.

This is the result of a report prepared by the Under-Secretariat for Mining Development, in which it is highlighted that there are currently two projects in production in the country: the Salar del Hombre Muerto / Mina Fénix, which has been producing in Catamarca since 1997; And the Salar de Olaroz in Jujuy, about to reach full capacity this year.

In 2016, Olaroz accounted for 6% of global production and marked a milestone as the first greenfield project ("from scratch") in brines after 19 years, while the Orocobre operator of the field plans to at least double Its capacity from 17,500 to 35,000-42,500 tons, taking advantage of the current infrastructure ..

At the same time, there are several projects with different degrees of advancement that could be operating in the next 5 years, among which the company Lithium Americas, together with SQM and JEMSE, in the Salar de Cañarí, Jujuy stands out.
There the partners announced the construction of a lithium-potassium plant with a capacity of 25,000 tpa that would be produced in 2019, and a second stage projected that would add an additional 25,000 tpa.

The Galaxy Resources group plans to build a plant in the Salar del Hombre Muerto, also in Jujuy, that would be producing 25,000 tpa in a first phase by 2020; While the company Eramet finalized the studies in the salares of Centenario and Mice for the construction of a plant of 20,000 tpa.

Another of the most advanced projects is Enirgi Group, the operating company of Salar del Rincón, in the province of Salta, which has a pilot plant of 1,200 tpa, and is seeking financing to build a plant with a capacity of 20,000 tpa.

Considering these four major projects that are more advanced, plus the expansion programmed by Olaroz, would incorporate some 110,000 nominal tons to the current production, which implies investments of US $ 1.5 billion and annual exports for about US $ 880 Million, at an average of $ 8,000 a ton although some projections put the price at $ 12,000 for the coming years.

The report of the undersecretary under Mario Capello, who reports to the mining secretary, Daniel Meilán, highlights that in addition to these projects, in Argentina there are five others in the advanced exploration stage, 12 in initial exploration and 17 in the exploration stage .

Each project of lithium with a horizon of 40 years and an estimated capacity of 20,000 tpa requires on average about 350 million dollars of investment and employs in its construction between 400 and 600 people, whereas for the operation generates around 200 sources of work Between direct and indirect labor.

With the consolidated figures for 2016, Argentina was the most dynamic producer in recent years, passing from 11% to 16% of the world market for lithium derivatives.

The mining authorities emphasized "the Argentine opportunity to grow demand and a project race in the world is to develop new projects so that they stabilize, before the windows of opportunity for the Entry of new competitors ".

The international market for this mineral is in an upward cycle, but it is still small if compared to other minerals, as for data for 2016 the value of world gold production (124 billion USD), for example, is 87 times that of lithium (1.4 thousand USD) and copper (94,437 million USD) about 66 times.

The ton of lithium carbonate accounted for an increase of 48.02% from an average of US $ 5,050 a ton in 2014 to US $ 7,475 in 2016, with peaks in the second half of the year that exceeded 9,000 u $ S

Regarding global demand last year closed at 37,800 tonnes, up 13.5% on that of 2015, while in the same period the use of lithium batteries, with 39% of the market, shifted from the historic first place To ceramics and glass, and is expected to account for more than two-thirds of demand by 2025.

Argentina is in fourth place in terms of proven lithium reserves, although depending on the sources, it may appear third, and it possesses between 25% and 30% of the potential resources of the so-called "lithium triangle" formed together with Bolivia and Chile.

http://www.aminera.com/2017/05/15/argentina-preve-triplicar-produccion-litio-cinco-anos-inversiones-us-1500-millones/

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China's pig farmers will start to lose money next year as the country's herds are close to full capacity, analysts said on Thursday, which may undermine planned expansions of pork production.

China's farmers had earlier culled herds after a spell of losses, which pushed prices to a record 22 yuan ($3.19) per kg last year. As a result, companies including Cofco Meat, New Hope Liuhe and Guangdong Wen's Foodstuffs embarked on a building spree to expand production to chase profits of more than $100 per pig.

But prices have been falling for several months, driven by the replenishing of sows, said Feng Yonghui, chief analyst at consultancy Soozhu.com.

"Sows are not yet in overcapacity, but it will be very soon, within two or three months. Which means by next year this profit-making cycle will end and turn to losses," he told an industry seminar.

Prices have already tumbled from last year's peak to about 14.5 yuan per kg and are set to keep falling sharply, said Feng.

"Next year they'll fall to more than 5 yuan per half kg," he told Reuters on the sidelines of the seminar.

Sows removed from farms that have been shut in southern China to tackle water pollution are simply being transferred elsewhere, which is not leading to an expected further reduction of the hog herd, said Feng

Meanwhile, large farming groups have built new capacity further north, and many are still planning new projects. Top producer Wen's is targeting production of 27.5 million hogs by 2019, up from 17 million last year.

Productivity in China is also increasing, said Pan Chenjun, executive director of food and agriculture research at Rabobank Hong Kong, with the average piglets per sow now around 17.

"I agree with Feng that by middle of next year some farmers will be losing money," she told Reuters.

"Although a lot of farms have closed since 2016, it hasn't led to a real drop in production capacity."

She estimated pork production will increase by 2 percent this year, pressuring prices.

Soozhu.com's Feng added that the loss-making cycle could last as long as six years, around double the typical period for a down cycle, with major pork firms unwilling to relinquish market share.

"Smallholders also made a lot of money last year so they won't want to slaughter sows either," he added.

China's sow inventory fell from about 50 million head in 2014 to 37.5 million currently, according to official data.

http://www.reuters.com/article/us-china-pork-idUSKCN18E1FF

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Pests and pathogens could cost agriculture billions

The spread of pests and pathogens that damage plant life could cost global agriculture $540 billion a year, according to a report published on Thursday.

The report, released by the Royal Botanic Gardens (RBG) at Kew in London, said that an increase in international trade and travel had left flora facing rising threats from invasive pests and pathogens, and called for greater biosecurity measures.

"Plants underpin all aspects of life on Earth from the air we breathe right through to our food, our crops, our medicines," said Professor Kathy Willis, RBG Kew's director of science.

"If you take one away, what happens to the rest of that ecosystem - how does it impact?"

Researchers also examined the traits that would determine which plant species would cope in a world feeling the effects of climate change.

Plants with deeper roots and higher wood density are better able to withstand drought, while thicker leaves and taller grasses can cope with higher temperatures, the report found.

Surprisingly, researchers also found that the traits that are likely to help species thrive appear to be transferable across different environments.

"The interesting fact to emerge is that the suite of 'beneficial' traits are, on the whole, the same the world over and are as true in a temperate forest as in a desert," Professor Willis said in a statement.

The report, which involved 128 scientists in 12 countries, found that 1,730 new plant species had been discovered in the past year.

Nine new species of the climbing vine Mucuna, used in the treatment of Parkinson's disease, were found and named across South East Asia and South and Central America.

http://www.reuters.com/article/environment-plants-idUSL8N1IJ43Z

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New EuroChem potash mines to produce 1.1 mln T 2018 -CFO

Privately held fertilizer producer EuroChem Group plans to produce 1.1 million tonnes of potash in 2018 from its two new Russian mines, with output capacity ramping up to 8.3 million tonnes annually by 2024 or 2025, the company's chief financial officer said on Wednesday.

EuroChem also intends to convert up to 200,000 tonnes of that potash to sulphate of potash (SOP), a premium product, in 2019, and to 500,000 tonnes of SOP in 2020 or 2021, CFO Andrey Ilyin told Reuters.

New EuroChem potash mines to produce 1.1 mln T 2018 -CFO

May 17 Privately held fertilizer producer EuroChem Group plans to produce 1.1 million tonnes of potash in 2018 from its two new Russian mines, with output capacity ramping up to 8.3 million tonnes annually by 2024 or 2025, the company's chief financial officer said on Wednesday.

EuroChem also intends to convert up to 200,000 tonnes of that potash to sulphate of potash (SOP), a premium product, in 2019, and to 500,000 tonnes of SOP in 2020 or 2021, CFO Andrey Ilyin told Reuters.

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Chinese company confirms huge UK fertilizer deal

A small Chinese company that is key to plans by Sirius Minerals to build a huge fertilizer mine under a national park in the north of England has confirmed it has a binding agreement with the UK firm.

DianHuang CEO Wang Xiaotian reiterated the agreement in a letter to Reuters on May 15, saying it had been signed on May 27 last year. DianHuang would buy 150,000 tonnes of the mineral polyhalite a year from first extraction in 2021, scaling up to a million tonnes a year over five years as part of plans to grow peony flowers and extract edible oil from their seeds, he said.

The reassurance from Wang followed a May 8 telephone interview with Reuters in which he said the two firms were still negotiating.

The DianHuang deal is the biggest take-or-pay agreement Sirius has inked so far with a named customer. By demonstrating confirmed demand for its product, it helped Sirius raise $1.2 billion in financing for the mine and win planning permission from the North York Moors national park.

Sirius needs its existing take-or-pay agreements and more to raise a further $2.6 billion, in debt financing, to complete the mining project. The company has said it must double the amount of polyhalite covered by take-or-pay deals to satisfy the banks arranging the financing that it has enough potential cash flow.

Asked if DianHuang had signed a legally binding agreement with Sirius, Wang had said by telephone: "We have not officially signed this, it is just a strategic cooperation agreement ... Because with Sirius we have a framework cooperation, of course we hope this cooperation can be pushed forward."

These were the first comments to media by the Chinese company on the deal, which Sirius announced in June 2016. At that time, Sirius said DianHuang would buy up to a million tonnes of fertilizer a year from first extraction, under a take-or-pay arrangement.

In the telephone interview, Wang had said DianHuang was also negotiating with a rival firm, ICL, also known as Israel Chemicals.

"It depends whose fertilizer is more beneficial for us," he said. "ICL is the biggest global producer of organic potassium fertilizer. They are also competing, they are also in touch with us. They have brought over some fertilizer for test use."

ICL, whose mine is on the same Yorkshire seam that Sirius plans to exploit, declined to comment on DianHuang's statement.

After Reuters posed questions to Sirius Minerals about Wang's phone comments, Sirius said the assertion that it only had a framework agreement with DianHuang was incorrect: "The Company has a binding offtake agreement in place."

Sirius added that any possible talks between DianHuang and its rival were up to the Chinese firm.

In Wang's letter, which he wrote after Reuters contacted Sirius, he said: "To clarify, the contract is not a framework agreement but rather a firm take or pay agreement." Wang was not immediately available to comment further when contacted by Reuters after the letter.

ICL is so far the only company that has actually begun mining polyhalite, a relatively new entrant to the fertilizer market which both it and Sirius say is a multi-nutrient product superior to traditional potash. Wang's follow-up letter to Reuters made no reference to ICL.

Sirius has announced take-or-pay agreements for up to 3.6 million tonnes a year of its polyhalite product so far. It has not named some customers for commercial reasons. That is about half what it says it needs to complete the project.

It says the mine will create thousands of jobs and add as much as 2.4 billion pounds ($3.11 billion) per year to the United Kingdom's gross domestic product.

http://www.reuters.com/article/us-mining-sirius-exclusive-idUSKCN18D0UN

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BHP likely to open Jansen potash mine in Canada by 2023

BHP, the largest mining company by market capitalization, sees potash as a key commodity in which to base its future growth despite prices are still hovering around $230 a tonne, less than half what they were only five years ago.

Speaking at the Bank of Merrill Lynch mining conference in Barcelona, Spain, chief executive Andrew Mackenzie confirmed the company's commitment to the crop nutrient by announcing that the first phase for the company’s massive Jansen potash mine will be completed within six years.

BHP could seek approval from the board for Jansen's expansion as early as June 2018, said chief executive Andrew Mackenzie.

“As we currently see it, we’re looking at a phased expansion into Jansen with an initial stage of four million tonnes per annum, and that will generate competitive returns,” Mackenzie said.

He added the company could seek approval from the board for such expansion as early as June 2018, with production beginning in 2023.

“As we progress this project we continue to optimize the development path as to how we might add a mine to those shafts so we can reduce risk and unlock value,” Mackenzie noted.

The world's number one mining company has committed to date a total investment of $3.8 billion to move Jansen into production. From that total, $2.6 billion have been set aside for surface construction and the sinking of shafts, though analysts predict the total cost will be close to $14 billion.

According to BHP’s leader, a phased expansion of Jansen — which is projected to produce generate 8 million tonnes of potash a year or nearly 15% of the world's total — is expected to generate competitive returns in stage 1, with significant potential upside in subsequent stages.

However, he didn’t seem in any rush to finish the project. Instead, he said that, as with every venture BHP embarks on, the company will only develop it “when the time is right.”

http://www.mining.com/bhp-likely-to-open-jansen-potash-mine-in-canada-by-2023/

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China soy growers to receive bigger subsidies than corn producers

China's top grain-producing provinces will pay greater subsidies to soybean farmers than corn growers as the country pushes to whittle a huge corn glut.

The nation has been overhauling its grains policy in the wake of abandoning a state stockpiling system that amassed over 250 million tonnes of corn, more than one year's consumption.

The governments of Heilongjiang and Liaoning provinces in the northeastern corn belt announced the move on subsidies in policy documents published late last week, although details on subsidy levels will be released later.

China included cutting corn acreage and lifting soybean acreage in its five-year plan issued last year. It is the world's top consumer of both commodities.

The amount of land used to grow soybeans in China will rise to 140 million mu (9.3 million hectares) by 2020, up from 98 million mu in 2015, according to the plan.

http://www.reuters.com/article/us-china-soybeans-subsidies-idUSKCN18B0N0

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Trump reassures farmers immigration crackdown not aimed at their workers

President Donald Trump said he would seek to keep his tough immigration enforcement policies from harming the U.S. farm industry and its largely immigrant workforce, according to farmers and officials who met with him.

At a roundtable on farm labor at the White House last month, Trump said he did not want to create labor problems for farmers and would look into improving a program that brings in temporary agricultural workers on legal visas.

"He assured us we would have plenty of access to workers," said Zippy Duvall, president of the American Farm Bureau Federation, one of 14 participants at the April 25 meeting with Trump and Agriculture Secretary Sonny Perdue.

During the roundtable conversation about agriculture, farmers and representatives of the sector brought up labor and immigration, the details of which have not been previously reported. Some farmers told Trump they often cannot find Americans willing to do the difficult farm jobs, according to interviews with nine of the 14 participants.

They said they were worried about stricter immigration enforcement and described frustrations with the H-2A visa program, the one legal way to bring in temporary seasonal agricultural workers.

The White House declined to comment on the specifics of the discussion, but described the meeting as "very productive." The U.S. Department of Agriculture did not respond to a request for comment on the April meeting.

About half of U.S. crop workers are in the country illegally and more than two-thirds are foreign born, according to the most recent figures from the U.S. Department of Labor's National Agriculture Workers' Survey.

During the roundtable, Luke Brubaker, a dairy farmer from Pennsylvania, described how immigration agents had recently picked up half a dozen chicken catchers working for a poultry transportation company in his county.

The employer tried to replace them with local hires, but within three hours all but one had quit, Brubaker told the gathering at the White House.

Trump said he wanted to help and asked Secretary Perdue to look into the issues and come back with recommendations, according to the accounts.

While other issues such as trade, infrastructure and technology were also discussed, participants were more positive after the meeting about the conversation on foreign labor "than about anything else we talked about," said Bill Northey, a farmer and Iowa's secretary of agriculture.

RED TAPE

Tom Demaline, president of Willoway Nurseries in Ohio, said he told the president about his struggles with the H-2A guestworker program, which he has used for 18 years.

He told Trump the program works in concept, but not in practice. "I brought up the bureaucracy and red tape," he said. "If the guys show up a week or two late, it puts crops in jeopardy. You are on pins and needles all year to make sure you get the workers and do everything right."

While use of the program has steadily increased over the past decade, it still accounts for only about 10 percent of the estimated 1.3 million farmworkers in the country, according to government data. In 2016, the government granted 134,000 H-2A visas

Employers who import workers with H-2A visas must provide free transportation to and from the United States as well as housing and food for workers once they arrive. Wage minimums are set by the government and are often higher than farmers are used to paying.

Steve Scaroni, whose company Fresh Harvest brings in thousands of foreign H-2A workers for growers in California's Central valley, says, however, that he could find work for even more people if he had more places to house them.

For a related photo essay click on: reut.rs/2qdtfnb

Trump recently signed another executive order titled "Buy American, Hire American," calling for changes to a program granting temporary visas for the tech industry, but not to visas used by farmers and other seasonal businesses, including Trump's own resorts.

FARMER CONCERNS

Trump also signed two executive orders, just days after taking office, focused on border security that called for arresting more people in the United States illegally and speeding up deportations.

Roundtable participants said that many farmers have worried about the effect of the stepped up enforcement on their workforce, but Trump told them his administration was focused on deporting criminals, not farmworkers.

"He has a much better understanding about this than some of the rhetoric we have seen," said meeting attendee Steve Troxler, North Carolina's agriculture commissioner and a farmer himself.

The farmers at the meeting said they stressed to the president the need for both short-term and permanent workers. They said there should be a program to help long-time farmworkers without criminal records, but who are in the country illegally, to become legal residents.

Last Tuesday, Democrats in the House and Senate said they would introduce a bill to give farmworkers who have worked illegally in the country for two consecutive years a "blue card" to protect them from deportation.

Brubaker, the Pennsylvania farmer, said he liked what he had heard about the bill and hoped it would get the president's support to make it a bipartisan effort.

"The administration has got something started here," he said of the meeting with farm leaders. "It's about time something happens."

http://www.reuters.com/article/us-usa-immigration-farmers-trump-idUSKCN18B1BB

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Precious Metals

De Beers diamond sales down by 11%

The company said it continues to see steady demand despite the industry entering a typically quieter season.

De Beers, the world’s largest rough diamond producer by value, saw its sales declining by 11% during the fourth cycle of the year compared with the previous cycle.

The Anglo American’s unit said provisional diamond sales of $520 million for the fourth sales cycle ended May 15, compared with $586 million generated in the previous sales cycle. Sales for the fourth cycle of 2016 were $636 million.

The company, however, said it continues to see steady demand despite the industry entering a typically quieter season.

"Sentiment remains positive as we head towards the important Las Vegas trade show in early June,” chief executive Bruce Cleaver said in the statement.

http://www.mining.com/de-beers-diamond-sales-11-per-cent/

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Bearish aura pervades London Platinum Week

The mood was distinctly bearish among attendees at London Platinum Week 2017, with representatives from across the value chain painting a negative outlook for the autocatalyst metal.

"[For the time being] people do not hate [platinum], but at $1,000 they will hate it again," said a fund manager Monday evening.

A senior banking source said: "The mood is overall bearish."

Diverging outlooks on supply and demand dynamics were circulating among participants at the event.

Johnson Matthey, the world's largest refiner of platinum and palladium, expects to see a supply surplus in 2017, the first in six years.

The company also sees falling jewellery demand for the metals as Chinese manufacturers look set to turn increasingly to gold.

"The envisaged surplus is quite sizable at 302,000 oz. Last year saw a deficit of 202,000 oz...The main reason for the anticipated surplus is weaker demand (minus 9.5%) -- because of new standards, less platinum is being used in diesel auto-catalysts," Germany's Commerzbank said in reaction to Johnson Matthey's forecasts.

This contrasted with predictions from the World Platinum Investment Council and Thomson Reuters GFMS.

Ross Strachan, precious metals demand manager at Thomson Reuters, said: "Platinum has been the worst performing precious metal in the year to date, continuing a pretty underwhelming performance in 2016. We do not expect it to continue to lag its peers substantially as the market has priced in much of the bad news...We are looking for a fundamental deficit this year as mine production continues to be hindered by the lack of investment in earlier years."

Industry lobby group WPIC said Monday that overall platinum supply was forecast to fall 2% year on year to 7.73 million oz in 2017, with both primary and secondary supply expected to decline.

Total demand in 2017 is projected at 7.795 million oz, WPIC said.

Recycling is projected to fall by 6% to 1.76 million oz.

"This quarter's report reinforces our long-held view that supply will become increasingly constrained in 2017, while revisions to the data show that 2016 was more heavily in deficit than previously detailed," WPIC CEO Paul Wilson said.

One senior industry source struck a negative tone: "Diesel passenger vehicles are unsaleable...and with the stock of metal driving around Europe -- and soon to be recycled -- diesel could conceivably become a net source of supply of platinum, not demand."

"Also cheap platinum has damaged -- perhaps fatally -- the platinum jewellery brand in China," he added. "The two big drivers for platinum have stalled so I can't be anything other than negative."

JP Morgan's technical analysts, however, were less downbeat, issuing a "buy platinum" recommendation in anticipation of a minimum rally to $1,050/oz.

https://www.platts.com/latest-news/metals/london/bearish-aura-pervades-london-platinum-week-26737083

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Platinum to see first market surplus in six years in 2017: JM

The platinum market is set to record its first surplus in six years in 2017, Johnson Matthey said on Monday, as a drop in demand from the vehicle industry, jewelers and investors outstrips a smaller fall in supply.

But the deficit in palladium is expected to widen to 792,000 ounces in 2017 from 163,000 ounces this year, the company said.

The rising deficit in palladium helped cut its discount to platinum to less than $100 an ounce this month, it lowest in 15 years. The average for the past 20 years has been $555.

Both metals are heavily used in catalytic converters but platinum, which is used more heavily in diesel catalysts, is seen as vulnerable to a drop in diesel market share.

Commenting on platinum, JM said: "Chinese jewelry fabrication is expected to contract again, while automotive demand will be hit by changes in catalyst technology in Europe, in response to the introduction of Real Driving Emissions testing."

JM, a leading manufacturer of vehicle catalysts, added in its release: "Investment demand is forecast to remain positive, but at lower levels than in the last two years, as purchasing by Japanese investors slows."

Platinum prices have underperformed other precious metals this year, rising about 2 percent against a near 20 percent jump in palladium. The market is expected to be in a 300,000 ounce surplus this year.

Strong automotive and industrial demand for platinum and firm investment had kept it in a deficit of 202,000 ounces last year, JM's data showed.

Automotive demand for palladium hit record levels last year, with buying by Chinese automakers up 23 percent. Russian destocking pushed supply up 5 percent.

http://www.reuters.com/article/us-platinum-week-matthey-idUSKCN18B28E

A deepening global shortage of aluminium and an improving outlook for Russian equities should make tycoon Oleg Deripaska's En+ company attractive to investors seeking exposure to emerging markets free of foreign exchange risks, its chief told Reuters.

Chief Executive Maxim Sokov said En+ is billing itself as a Russian aluminium and hydropower conglomerate similar to Norway's Norsk Hydro but with the benefit of lower-cost Siberian power, a boon for highly energy-intensive aluminium smelting.

"We convert power into aluminium and sell it to the world. We believe the aluminium market has a significant upside," said Sokov, whose company owns Siberian power assets and a 48 percent stake in Rusal, the world's second-largest aluminium producer.

In a Reuters poll published this month, analysts slashed their estimates of a global aluminium surplus this year by 74 percent to 82,000 tonnes from 317,000 tonnes in the previous poll in January. They have pegged in a deficit of 200,000 tonnes for 2018, mostly due to a crackdown in top producer China to reduce smog.

The metal, mainly used in transport and packaging, has been the best performer on the London Metal Exchange, rising 13 percent this year and touching 28-month highs.

En+ predicts demand for aluminium will exceed production by 0.7 million tonnes this year even before China caps winter power generation to reduce pollution.

That should lead to a further decline in aluminium production globally by about 1.2 million tonnes, beginning from the winter months of 2017, Sokov said. En+ is considering an initial public offering (IPO) in 2017, possibly as early as June, market sources have said.

Sokov declined to comment on any IPO, saying the group "is considering various instruments, including public capital markets" to raise funds as it is seeking to cut its debt.

DEBT BURDEN

En+ has amassed debts of around $5 billion during the last decade when it was consolidating power assets in Siberia and wants to reduce the leverage to around three times its core earnings from the current ratio of around six.

Deripaska, who started as a metals trader in the 1990s, was Russia's richest and the world's ninth richest person, according to Forbes, before the markets crashed in 2008.

The tycoon spent the next decade successfully renegotiating his debts although he never fully recovered and with an estimated wealth of $5.1 billion he ranks today as Russia's 23rd richest man.

The debt is mainly with top Russian state banks Sberbank and VTB, of which two thirds is rouble denominated and one third is dollar denominated. Sokov said rouble revenues from power sales support repayment of rouble debts, while Rusal's dollar-denominated dividend supports dollar debt payments, thus limiting foreign exchange risks which often put off investors in Russian companies.

"We effectively have a natural hedge thanks to aluminium and power generation. If the dollar weakens, we get stronger rouble revenues from power sales. If the rouble weakens, then we gain from higher dollar aluminium revenues," Sokov said.

Besides an improving outlook for the sector, the outlook for Russia is also getting better as geopolitical and sanctions concerns subside.

"The outlook for Russia will depend on the meeting between (Russian President Vladimir) Putin and (U.S. President Donald) Trump. But even among this uncertainty, Russian assets have considerably gone up in price," said Sokov.

He gave as an example yields on Russian corporate bonds, which used to trade above 10 percent but have lately declined to 4-6 percent on renewed appetite from investors, including for Rusal's debt.

"I think a similar story will happen with Russian equities" he said, predicting the narrowing of valuations gaps with Western rivals.

http://www.reuters.com/article/us-russia-enplus-idUSKCN18C0RR

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Zinc miners leverage scarcity to flex muscles over smelters

If there were any doubt that the zinc supply chain is tightening, it should be dispelled by this year's benchmark smelter treatment charge.

The treatment charge is the fee paid by a miner to a smelter for converting mined concentrates into refined metal and it is probably the best indicator of raw material availability; high during times of surplus and low during times of scarcity.

This year's headline fee of $172 per tonne is the lowest in a decade, a firm swing of the negotiating pendulum in favour of miners and a tangible sign that the much-anticipated concentrates crunch has arrived.

Indeed, miners have used the squeeze on availability to make what might turn out to be a historic change in how these annual benchmark contracts are structured.

Zinc bulls have been waiting a long time for this supply squeeze and they may have to wait a bit longer before it moves from raw materials to refined metal parts of the chain.

But at a mined concentrates level it has very surely arrived.

HEADLINE DOWN, PRICE PARTICIPATION OUT

This year's headline treatment charge of $172 per tonne was confirmed by Belgium's Nyrstar, a zinc miner itself but a much bigger converter of concentrates into refined metal.

It represented a 15 percent decline from last year's benchmark of $203 per tonne and was the lowest outcome since 2006.

The comparison is worth noting because that was the year London Metal Exchange (LME) zinc hit its highest ever level at $4,580 per tonne.

As well as seeing their revenues reduced this year, smelters have also lost any price participation.

Price participation disappeared from copper concentrate contracts several years ago but it has persisted in the zinc market in the weird and wonderful form of "escalators" and "de-escalators".

These determine how much the treatment charge can change depending on how far the zinc price deviates from a preset "basis" price in the contract.

In 2016, for example, the "basis" price was set at $2,000 with escalators allowing for price participation up to $3,750 and de-escalators down to $1,500.

This year, however, both escalator and de-escalator have been set at zero, a partial victory for those miners seeking the complete elimination of price participation by smelters.

Escalators and de-escalators remain in the benchmark contract, in theory allowing for a resurrection at a future date.

Whether price participation actually returns remains to be seen.

When BHP Billiton dropped price participation from its copper contracts in 2007, it was at the time presented as a temporary market-driven phenomenon.

But within a couple of years everyone else had done the same and price participation was quietly consigned to the copper history books.

METAL STILL FREE

Smelters can probably afford to be sanguine about the zero price participation this year.

As Hilmar Rode, chief executive of Nyrstar, told analysts on the company's first-quarter conference call: "If you go back and you monitor say the last 10 years, you'll see sometimes that works in favour of the mine sometimes in favour of the smelters but over a longer period of time ... it's pretty much a net zero."

More important to a company like Nyrstar is the retention of another strange-sounding component of the annual zinc treatment charge benchmark, namely "free metal".

What this means is that zinc smelters pay for only 85 percent of the metal contained in the concentrate.

This curiosity dates back to a long-lost time when most of the world's zinc smelters were pyrometallurgical and typically could only extract that amount of metal from the concentrate.

Times and technology have changed a lot since then and a company such as Nyrstar can now typically recover around 96-97 percent of the metal, meaning it gets 11-12 percent "free".

Miners would no doubt love to eat into, if not eliminate altogether, this "free metal" allowance but the consensus seems to be that this would be a step too far right now.

NO RELIEF?

The sharp drop in the benchmark treatment charge was widely expected.

This zinc supply crunch has been a long time coming and there have been plenty of false starts for over-eager bulls in recent years.

But, to quote Jonathan Leng, principle zinc analyst at Wood Mackenzie, "the record 6.3 percent fall in global mine supply in 2016 transformed the concentrate market."

Concentrate stocks fell to "minimum working levels" in September of last year and smelters, particularly those in China, are having to cut production.

Nor does Woodmac see much change in the zinc concentrates market any time soon. Its view is that it will remain tight for the next couple of years with treatment charges likely to remain at correspondingly low levels over that period.

What does this mean for the refined zinc price?

So far bulls have been frustrated that mine supply crunch hasn't translated into refined metal crunch.

China's imports of refined zinc remain subdued, while metal is still occasionally appearing on LME warrant at New Orleans, albeit not in the sort of volumes as seen in the past.

Woodmac's Leng, however, believes it's only a matter of time. He expects to see acute tightness later this year with stocks "projected to fall to historically low levels and remain so until 2020."

That will translate into a price high next year "comparable to the 2006 price peak".

Not everyone, it's fair to say, is quite so bullish . There are still a good number of known unknowns at work, not least the state of mine supply in China itself.

But this year's benchmark concentrates terms make it hard to argue against the starting proposition of bulls such as Wood Mackenzie.

The concentrates market is as tight as it's been since 2006.

Whether that means a return to the historical peak in zinc prices in that year remains to be seen.

http://www.reuters.com/article/zinc-concentrates-ahome-idUSL8N1IH4P9

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Swedish engineering group Sandvik says hit in cyber attack

Swedish engineering firm Sandvik said on Saturday it had been hit in the cyber attack that has affected public authorities and companies around the world.

Sandvik said computers handling both administration and production were hit in a number of countries where the company operates, with some production forced to stop.

"In some cases the effects were small, in others they were a little larger," Head of External Communications Par Altan said.

"In some cases, certain production has been affected. Certain, but far from all of it."

Altan would not say which countries had been affected or give further details on the impact on production.

He said Sandvik was now assessing the situation.

http://www.reuters.com/article/sandvik-cybercrime-idUSL8N1IF0BZ

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U.S. EPA paves way for stalled copper and gold mine in Alaska

U.S. environmental regulators have cleared the path for a stalled copper and gold mine in Alaska by agreeing to settle current lawsuits and other issues over the project, which had drawn environmental concerns over its potential impact on the world's largest sockeye salmon fishery.

U.S. Environmental Protection Agency, in a statement on Friday, said the settlement does not guarantee the proposed mining project in southwest Alaska's Bristol Bay region would ultimately win approval but that its review would now be carried out "in a fair, transparent, deliberate, and regular way."

The Pebble Limited Partnership mining company had filed a lawsuit against the EPA under the previous administration of Democratic president Barack Obama, which had sought to block it.

Backers of the project had been hopeful that Obama's Republican successor, Donald Trump would allow it to proceed. Shares of Northern Dynasty Minerals, which owns the massive Pebble deposit, have surged since Trump won the U.S. election back in November. Trump took office Jan. 20.

In February 2014, the EPA took the unusual action of blocking a mine before the project owner applied for a development permit.

Opponents of the mine include environmental groups as well as many native residents who rely on the fish from the Bristol Bay watershed, which EPA has said supports the world's largest fishery of sockeye salmon. Many commercial fishermen and sport fishermen are oppose it.

In the settlement reached on Thursday, Pebble Limited Partnership can now apply for a Clean Water Act permit from the U.S. Army Corps of Engineers, the EPA said in its statement released on Friday.

The EPA and Pebble Limited Partnership also agreed to ask the U.S. District Court for the District of Alaska to dismiss related cases and lift a court-ordered preliminary injunction, according to the statement.

http://www.reuters.com/article/mining-alaska-epa-idUSL1N1IE0OV

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Rusal boosts first-quarter profit, to restart aluminium smelter project

Russian aluminium giant Rusal posted higher first-quarter recurring net profit on Friday amid stronger aluminium prices and said it was preparing to resume construction of its aluminium smelter in Siberia.

Russian tycoon Oleg Deripaska controls 48 percent of Rusal through his En+ Group, which also manages his hydro power businesses. En+ may raise $2 billion in IPO in London and Moscow in June, sources familiar with the deal have said.

Hong Kong-listed Rusal, the world's second largest aluminium producer, reported first quarter recurring net profit of $434 million, up from $149 million a year earlier, thanks to higher prices and volumes of sales.

Global demand for aluminium continued to grow in the first quarter of 2017, led by the transportation sector, while supply is expected to tighten in the second half, it added.

In a separate statement on Friday, Rusal announced that it had proposed the resumption of construction of its long-standing Taishet aluminium smelter.

Its board of directors has already approved the $38.5-million financing of works at the smelter in 2017, it added.

"While the funding is relatively small, the capacity is unlikely to come on stream in the near term," analysts at Citi said in a note.

Rusal, which started building this smelter in 2007 but then delayed it when aluminium prices fell, told Reuters that it was still in talks with banks and its partner Russian power generator Rushydro to organize the financing for Taishet.

In 2016, Rusal said it was negotiating the $800-million of the project financing and to build 430,000 tonnes of annual capacity there by the end of 2018.

A source who attended meetings between En+ management and analysts previously told Reuters that En+ hopes that Rusal's two brownfield projects - Taishet and another Boguchansk smelter in Siberia - would raise their capacity by one million tonnes of aluminium in 3-5 years, boosting En+'s EBITDA.

En+'s 2016 EBITDA (adjusted earnings before interest, taxation, depreciation and amortization) reached $2.3 billion. Rusal accounted for $1.5 billion of that sum, and EN+'s other businesses - power operations, coal mining and logistics - accounted for $822 million.

Rusal's shares rose 1.6 percent in Hong Kong on Friday, against a 0.1-percent growth in benchmark index.

Rusal estimated demand grew 5.5 percent year on year to 15 million tonnes in the first quarter. Over the same period, global supply was up 7.8 percent to 14.9 mln tonnes, signaling a market roughly in balance, according to the company.

http://www.reuters.com/article/us-rusal-results-idUSKBN18810C

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Steel, Iron Ore and Coal

China's key steel mills output up 7.53pct in April

China's key steel mills output up 7.53pct in April

http://webcache.googleusercontent.com/search?q=cache:http://en.sxcoal.com/&gws_rd=cr&ei=sY0eWaC0CaWWgAbh4pHQCA

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China's ferrous scrap exports may be a longer-lived anomaly in 2017

China depends on imported iron for around 80% of its needs, yet the country's burgeoning ferrous scrap exports highlights a reliance on iron ore and coking coal at ever bigger blast furnaces in China's steel industry.

China is expected to utilize a growing pile of ferrous scrap originating from its economy's stellar growth, providing likely unmatched scale and speed in scrap generation from automobiles to buildings.

However, adapting the local blast furnace-focused steel industry to use more scrap may take time, as government-ordered closures of electric furnaces unleashes new scrap supplies.

China has become the world's biggest user of scrap, but as a proportion of crude steel production at 808 million mt in 2016, the ratio is small, at just over 10%.

In the US, the ratio is over 70%. And to put it in context, an increase in crude steel production in the US of 5% based on current feedstock trends may require a similar amount of scrap the US exported last year to Turkey, the biggest scrap importer.

INDUCTION

The Chinese government's directive to eliminate scrap-fed induction melting furnaces in the country by June 30, led to a huge turnaround. According to industry estimates, China's induction furnaces produced around 30-50 million mt last year of steel, and capacity totaling 80-120 million mt/year of finished steel output will go.

Based on the output range last year, 33-55 million mt of scrap would need to find a home.

Chinese export scrap availability, despite a 40% export duty being imposed, is expected to depress scrap prices in Asia.

Regional scrap importers Tokyo Steel and Taiwan's Feng Hsin have ordered trial lots of Chinese scrap. South Korea's Hyundai Steel is inspecting scrap in China this month.

Chinese scrap has been offered into Southeast Asia, and as far afield as India.

Scrap used at integrated mills in China may be currently limited to well under a 10% rate per ton of crude steel, and the addition of domestic feed earlier sourced for induction furnaces may be harder to absorb.

In the US, scrap charging rates may be up to three times as much. Some Europe mills are flexible in charging more scrap, while 10% is a typical ratio. This is depending on raw materials availability and relative pricing, qualities of scrap and final steel, and impact around wider operations and costs.

In China, more scrap was fed when coke prices rose sharply, with Shagang booking bulk scrap from the US in response.

However, scrap demand in China's steel sector is determined on short-term price comparisons with other raw materials, and access to qualities.

Chinese blast furnace operators may be reluctant to adapt rates and utilize more scrap if the availability proves short-lived.

Global scrap prices are relatively high, around 30% above a trough seen in September 2016 for Turkey's benchmark import prices.

A catalyst for embracing more scrap in China may be emissions restrictions, which could hit iron ore sintering and pelletizing plants and cokemaking.

However, with ready supplies of imported lump ore at ports, at current low price premiums, paying up for scrap may not be so attractive.

"China reduced its steel scrap imports by 7.1% [in 2016] and, therefore, clearly used more steel scrap from the domestic market," said Rolf Willeke, statistics adviser at the BIR Ferrous Division, in a report this month.

"The proportion of steel scrap used in the country's steel production increased from 10.4% in 2015 to 11.1% in 2016," Brussels-based Bureau of International Recycling said in the report.

In April, iron ore and premium HCC imports into China, based on Platts benchmark spot price assessments, averaged at around $182/mt CFR China based on industry ratio needed per ton of hot metal, while scrap benchmark HMS 80:20 East Asia CFR prices were 1.5 times higher.

The same comparative ratio averaged at over 2:1 scrap import prices to the mix of iron ore and coking coal prices adjusted per ton of hot metal in 2016.

Even accounting for 40% China export tax, and adjusting for quality, scrap prices remain higher than the mix of iron ore and Premium HCC, while the final evaluation may be complicated by individual fixed and cash costs in utilizing the inputs.

China's steel scrap reserve may easily outpace any future growth in demand. Latent supplies may reach 7.8 billion mt by 2017, 10 billion mt by 2025, and 12 billion mt by 2030, estimates Li Xinchuang, president of China Metallurgical Industry Planning and Research Institute.

China's scrap consumption estimated currently at 100 million mt may exceed 200 million mt by 2025 or take another five years to 2030 before reaching the level, based on the group's forecasts.

https://www.platts.com/latest-news/metals/london/feature-chinas-ferrous-scrap-exports-may-be-a-26739827

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Molybdenum slips as market slows

A lack of activity in the molybdenum market took its toll on prices as sellers said they were receiving little interest.

Sellers said they had not received any inquiries during the day and felt the market had turned very quiet since last week.

"It's not difficult to find material if you need it," a European trader said. "There are more sellers compared to buyers."

Offers were heard in Europe at $8.30/lb but market participants said sellers were biddable. "It's a whole lot of nothing today," a second European trader said.

In Asia, a trader said there were no inquiries and would consider selling at $8.30/lb if he could find a buyer.

S&P Global Platts daily dealer oxide assessment stood at $8.30-$8.35/lb Tuesday from $8.30-$8.45/lb Monday.

Platts daily European ferromolybdenum assessment was also lower Tuesday at $20.50-$20.80/kg from $20.50-$20.90/kg Monday.

Ferromolybdenum offers were heard at $20.80/kg and higher but there were doubts that sales could be concluded at this level.

Others said they were having offers rejected at $20.60/kg as there was no demand from mills or traders.

https://www.platts.com/latest-news/metals/london/molybdenum-slips-as-market-slows-26738907

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Inner Mongolia to cap energy use at 225 Mt standard coal by 2020

Hong Kong-listed IRC says could reopen Russia iron ore mine

Commodity company IRC Ltd on Wednesday said it was considering restarting its 1.1-million tonnes per year iron ore mine in the far east of Russia, the latest sign of revival in a sector shaking a years-long downturn.

"Following the positive price movements in 2017 and the recent stabilisation in the bulk commodity market, the board is considering restarting Kuranakh, including options of potential cooperation with other parties," the Hong Kong-listed company said in a statement.

The Kuranakh mine, in Russia's Amur region, was producing about 1.1 million tonnes of iron ore concentrate each year before it was put under 'care and maintenance' in early 2016. It was also churning out about 200,000 tonnes a year of ilmenite, a titanium ore.

Iron ore prices have surged 30 percent and ilmenite by 150 percent since the mine was suspended, the company said.

However, the statement comes at a time when futures prices in China have toppled off record highs hit in recent months, dampened by concerns about a slowdown in demand in the world's top importing nation and a growing glut as stockpiles have ballooned.

The most-active Chinese iron ore futures have fallen by about 30 percent since hitting record highs of 650.5 yuan ($94.49) per tonne in February.

Rocketing prices prompted some Chinese producers to reopen mines after suffering years of tepid demand.

http://www.reuters.com/article/china-ironore-idUSL4N1IJ1E6

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China's Shagang cuts ferrous scrap buying price for fourth time in May

China's largest ferrous scrap user Jiangsu Shagang Group, has lowered its buying prices for heavy melting scrap by Yuan 40-60/mt ($6-$10/mt) Tuesday -- its fourth reduction this month.

Shagang will now pay Yuan 1,470/mt ($213/mt), including 17% value added tax, delivered to Zhangjiagang, for heavy melting scrap with a minimum width of 6 mm.

The company last lowered its buying prices for scrap by Yuan 50-70/mt on May 12. The latest cut brings the cumulative fall in Shagang's buying price for that specification by Yuan 140/mt (8.7%) this month.

Also on Tuesday, two major mills in eastern China -- Zenith and Magang -- cut their scrap buying prices by Yuan 40/mt.

https://www.platts.com/latest-news/metals/singapore/chinas-shagang-cuts-ferrous-scrap-buying-price-26737048

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Indonesia tenders to build remaining 12 GW of 35 GW power project by end-2017

Indonesia is tendering to build 12 gigawatts of electricity generating capacity as the final plank in Jakarta's plan to increase the country's power sector capacity by 35 GW by 2019, sources said at the 23rd Coaltrans Asia Conference in Bali this week.

"Out of 35 GW, we are likely to close tenders for 11.7-11.8 GW by the end of the year," said Harlen En, head of the coal division at PLN (Persero) at the conference on Monday.

Tendering process takes a lot of time, as does financial closure, Harlen said, adding it takes at least three-four years to commission a power plant. Harlen said PLN has long-term contracts with the some of the major miners, like Adaro, Kideco, Berau Coal, and Kaltim Prima Coal, until 2025.

Moreover, to support both the success of the 35 GW project and to secure coal supply, PLN intends to partner in mine-mouth coal projects, Harlen said.

According to market sources, around 60% of the 35 GW project's generating capacity will be fueled by coal. The move is likely to see a spark increase in domestic demand for Indonesian thermal coal, sources said.

M. Arsajad Rasjid P.M., CEO of Indika Energy, said, the 35 GW power project would result in extra coal demand of around 110 million-120 million mt and progressively 140 million-150 million mt.

Indonesia intends to raise its share of domestic thermal coal production to around 60% by 2019 from 22% in 2017, said Satry Nuguraha from the Ministry of Energy and Mineral Resources on Monday.

THE ROADBLOCKS

Land issues have been deterring the progress of the project, said Dharma Djojonegoro, deputy CEO at Adaro power, on Tuesday.

"Various regulation licenses and permits have to be synced in, so it takes a lot of patience to do that. It took us about three-four years to sort land issues and the change in the transaction currency to Indonesian Rupiah was also a setback. Then we had to deal with the land zoning issue too, which took us around six months," Djojonegoro added.

"The cost factor is also very important," Harlen said, adding the pricing for the project should be "comfortable" for both suppliers and PLN.

Given the current volatility in energy prices, he added they intend to discuss with the government to peg a floor and a celling price.

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Adani to begin producing coal from Australian project in FY21

Indian conglomerate Adani Group plans to begin extracting coal from the $16.5 billion Carmichael project in Australia in 2020-21, PTI reported on May 14, citing Chairman Gautam Adani.

The group, which has interests from ports to power, would finalise by June an investment decision for the project, which has been delayed due to protests from environmental groups.

Adani expressed his group is not just investing in coal but also in renewable energy in Australia, seeking to develop 1,500 MW of solar projects by 2022.

It has signed pacts to build two solar farms, each with capacity of 100-200MW in Queensland and South Australia.

Adani said the company has scaled down the coal mine capacity in the first phase. Originally seen producing 60 million tons a year from six open-cut pits and five underground mines, a scaled-down first stage is now planned to produce 25 million tons a year of coal and will cost over USD 4 billion.

"We will begin work within months after getting final approval from the Australian government," he said.

Projections of a global glut of coal and prolonged low prices notwithstanding, Adani is pushing ahead with plans to build the mine that would produce thermal coal to generate electricity and operate for six decades.

"About 15 million tons of coal produced from the project (in the northern Australian state of Queensland) will be shipped to India for generating electricity," he said.

The group has for more than five years battled opposition from green groups, who insist any expansion of the port will cut into the Great Barrier Reef World Heritage Area. The port is to be used for exporting coal to India.

"A port already exists with capacity to handle coal from phase-one," he said adding a rail line will have to be built for transporting coal from the mines to the port.

The group has so far invested A$3.4 billion on the Abbot Point port and preparatory work for the Carmichael coal mine. It has applied for an Australian government agency loan to finance the railway line.

Adani said he is expecting Australian federal and state government nods for the coal project soon.

http://www.sxcoal.com/news/4556144/info/en

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Chinalco wants to be sole owner of world’s largest iron ore deposit

Chinalco has sent the Guinean government a draft agreement that included a proposal to take over blocks 1 and 2 before it starts developing 3 and 4. (Image courtesy of Rio Tinto Simandou)

Aluminum Corp. of China, better known as Chinalco, is said to have approached the Guinean government with a proposal to take over the entire Simandou iron ore project, the world’s largest untapped resource of the steelmaking ingredient.

The moves comes about seven months after Rio Tinto (ASX, LON:RIO) agreed to sell to the Chinese company its 46.6% stake in the giant project for up to $1.3bn. The deal gave Chinalco almost 80% of the project, with the Guinean government holding the rest.

While the requested parts of the project belong to Guinea, they are at the centre of litigation between it and Israeli billionaire Benny Steinmetz's BSGR.

The state-owned miner's written proposal for Simandou, Reuters reports, was sent to the government in March and included a motion to take over blocks 1 and 2 before it starts developing 3 and 4.

While the requested parts of the project belong to Guinea, they are at the centre of litigation between it and Israeli billionaire Benny Steinmetz's BSGR.

Simandou with over 2 billion tonnes of reserves and some of the highest grades for direct-shipping-ore in the industry (66% – 68% Fe which attracts premium pricing) has a chequered history.

It was originally discovered by Rio Tinto, which held the licence for the entire deposit since the early 1990s. In 2008 the firm was stripped of the northern blocks by a former dictator of the country.

BSG Resources acquired the concession later that year after spending $160 million exploring the property. In 2010, it sold 51% to Vale for $2.5 billion.

The Rio de Janeiro-based company stopped paying after the first $500 million after missing a number of development milestones. Then the new Guinean government launched a review of all mining contracts awarded under previous regimes, including an investigation into the Vale-BSGR joint venture which concluded the later had won its mining rights through corruption.

The Guinean inquiry cleared Vale of any involvement in the alleged corruption.

To date BSGR denies the allegations and even launched arbitration proceedings against Guinea last year.

Shortly after, Rio —the world's number two producer of iron ore — officially pulled the plug on the project. Following an internal probe, the company alerted US and UK authorities in November of a $10.5 million payment made in 2011 to a French investment banker involved in helping Rio obtain its mining rights over Simandou.

With complete control over Simandou, Beijing would be a step closer to securing iron ore supply for its vast economy for decades to come.

China consumes more than 70% of the world's seaborne iron ore and imports have been gradually displacing domestic production, which has pushed dozens of local iron ore mines into bankruptcy in the past two years.

http://www.mining.com/chinalco-wants-sole-owner-worlds-largest-iron-ore-deposit/

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Coal market oversupply risks grow as producers boost output

Indonesia's coal industry has benefited from higher prices this year after a downturn in 2015 and 2016 put many small producers out of business, though recent price declines could signal more difficulties ahead.

Australian coal prices, the benchmark for Asia, soared 130 percent to over $110 per ton last year, but have slumped by 20 percent since early April to just over $70.

Ken Crichton, president-director of mining contractor Theiss Indonesia, said his company needed to be careful responding to clients' demand for more production.

"We've put most of our idle plant back to work - now we've got the decision whether we re-invest or not. And after the last five years it's going to be quite a challenge to convince our organization where prices are going to be to justify further investment and expanding our operations in Indonesia."

However, the chief executive of Indonesian producer PT Adaro Energy, Garibaldi "Boy" Thohir, told Reuters that he was less concerned over oversupply.

"Domestic demand from Indonesia will increase rapidly and ... it's also not very easy to ramp up production because there are a lot of challenges," he said, citing problems that some miners, particularly for smaller ones, have in procuring heavy equipment and gaining financing.

"Yes, short term there will be a little more supply but in the medium term I'm still very optimistic," he said.

Thohir said Adaro was not increasing output this year or for the foreseeable future as it dedicated reserves to feed its own domestic power plants.

Indonesia's 2017 coal output may rise 11.5 percent from a year ago to 101 million tonnes, said Agung Priabadi, the energy ministry's director of coal. Power stations would use 86 million tonnes.

Indonesia, the world's top thermal coal exporter, could increase production by 5 percent in 2017 and 2018, Indonesian Coal Mining Association Chairman Pandu Sjahrir said on Sunday.

In October, Sjahrir said Indonesia's coal production could reach 460 million tonnes in 2017, up from an estimated 440 million tonnes last year, because of improving prices.

However, Indonesia output may be limited as the country's producers divert capital to power plant projects rather than expansions, Sjahrir added.

http://www.reuters.com/article/us-coal-asia-coaltrans-idUSKCN18B0TL

China April steel output hits record, second month to push peak higher: stats bureau

China produced a record volume of steel in April, breaking the previous highest peak set in March, data showed, stoking worries about a growing glut of metal even as the government said most of this year's targeted capacity cuts have already been met.

Chinese steelmakers churned out a highest-ever 72.78 million tonnes in April, up 4.9 percent, the National Statistics Bureau (NBS) data showed on Monday, surpassing March's monthly record of 72 million tonnes as mills in the world's top producer rushed to profit from rising prices even as demand remains flat.

In a briefing after the data release, an NBS spokesman said the nation had already met 63.4 percent of this year's targeted cuts for steel and 46 percent of coal cuts.

The ramp-up in steel output underscores the challenge for the government as it aims to slash 50 million tonnes of low-grade outdated capacity this year, on top of the 65 million removed last year. The government is targeting rebar, used in construction, in particular.

But many of the plants that have been closed in recent years were already idled and output from still-open plants has continued to rise.

"Driven by high profits, steel companies are raising their capacity, by using high-quality iron ore and increasing their use of steel scrap," said Bai Jing, analyst at Galaxy Futures.

"Production might be at record high, but the steel production capacity is being reduced."

In the first four months, production totalled 273.9 million tonnes, up 4.6 percent from the same period a year earlier, the data showed.

http://www.reuters.com/article/us-china-economy-output-steel-idUSKCN18B05I

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Foresight Energy Q1 coal sales up 41% on stronger export volumes: company

US coal producer Foresight Energy's sales volumes and cash costs both improved in the first quarter as it took advantage of stronger export markets and increased production, company executives said Thursday.

The St. Louis-based company, which operates solely in the Illinois Basin, reported sales volumes of 5.3 million st, up 40.7% from the year-ago quarter, as Foresight shipped 24% of its coal into the export market. By comparison, the producer had shipped 14% of its coal into exports in the year-ago quarter, said Rob Moore, the company's president and CEO.

"Most significant was our ability to access export markets due to substantial improvements in API2 prices compared with the prior-year quarter," Moore said.

Related Commodities Spotlight podcast: Newly optimistic US coal industry focuses on flexibility, federal regulations

Foresight, which did not take questions after its prepared remarks, noted production efficiencies at both Sugar Camp and Williamson mines, which ranked as the two most productive mines in the country in terms of clean tons per hours worked, Moore said.

Foresight's cash costs averaged $22.80/st for the quarter, down from $23.86/st in the year-ago quarter, and down from $22.84/st in the prior quarter. Its coal sales averaged $43.12/st, down from $43.45/st in the year-ago quarter and down from $48.46/st in the prior quarter.

The company generated coal sales revenues of $227.8 million during the quarter on sales of 5.3 million st, up from $163.1 million in the year-ago quarter on sales of 3.8 million st.

"Our current cost structure is sustainable, and we anticipate improving costs over the remainder of the year," Moore said.

For the remainder of 2017, Foresight has 18.6 million st contracted for delivery and anticipates an "active spot market," Moore said. Its contracted tonnage is 84%-91% of the company's projected production of 20.5 million-22 million st for the remainder of the year, he said.

Moore also touched on the next steps for reopening its long-idled Deer Run longwall mine near Hillsboro in Montgomery County, Illinois.

The company had submitted a formal application last month to the US Mine Safety and Health Administration to re-enter the mine. Moore said that MSHA had accepted its plan to evaluate the status of the underground mine, which has been idled for over two years due to elevated carbon monoxide levels.

MSHA's acceptance of the plan did not include longwall systems or returning air shafts, but Moore called it "a step in the right direction in evaluating conditions of the mine."

"In coming weeks, we plan to breach the seals that are restricting airflow into the mine and allow personnel into the mine," he said.

https://www.platts.com/latest-news/coal/houston/foresight-energy-q1-coal-sales-up-41-on-stronger-21709832

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Coal workers at India's CIL, SCCL to go on three-day strike from June 19

Workers at state-owned Coal India Limited and Singareni Collieries Company Ltd. will go on strike from June 19 to protest the delay in wage revision and other issues, sources said Thursday.

Five trade unions representing around 500,000 workers of CIL and SCCL had decided to go on strike from June 19-23, SK Pandey, representative of one of the trade unions, the Bharatiya Mazdoor Sangh, said.

The trade unions have already served notice to CIL, SCCL and coal ministry, Pandey added.

The other trade unions involved in the protest are the All India Trade Union Congress (AITUC), the Centre for Indian Trade Unions, the Hind Mazdoor Sabha, and the Indian National Trade Union Congress.

Talks between the unions and the government on wage revision and pension schemes fell through this week resulting in the decision to go on strike, Pandey said.

Industry sources put the output loss from a three-day strike at 4.5 million mt for CIL and around 537,000 mt for SCCL.

CIL has targeted a production of 660 million mt coal in fiscal 2017-2018 running from April to March.

https://www.platts.com/latest-news/coal/newdelhi/coal-workers-at-indias-cil-sccl-to-go-on-three-26733754

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Chongqing Steel warns of uncertainty in steel asset sales, shares still suspended

Chinese steelmaker Chongqing Iron & Steel Co warned late on May 11 that its plans to sell off debt-ridden iron and steel assets faced "uncertainties" and might not go ahead, saying trading in its shares would remain suspended.

It didn't say when it expected a restart in trading of shares that have been suspended since June last year, after it suffered net losses of almost 6 billion yuan ($872 million) in 2015. The firm has blamed its predicament on the downturn in the economy, severe industrial overcapacity, soaring labor costs and persistently low steel prices.

The company warned in a notice posted to the Hong Kong Stock Exchange on May 11 that a proposed restructuring plan that would enable it to exit the steel industry entirely and shift to more lucrative sectors like finance might not satisfy regulatory requirements. Chongqing Iron & Steel had a market value of about $1.6 billion when shares last traded.

The firm announced last August that it intended to sell all its steel assets to the Yufu Group, an entity run by the local Chongqing city government. It then hoped to acquire high-quality assets in the financial and industrial investment sectors from Yufu.

But it said on May 9 that the steel assets "involve large scale of debt with numerous creditors and complex liabilities associated with litigations", adding that it was still unclear whether the proposed transactions would proceed.

"There is also fairly great uncertainty in whether agreement can be reached with the main creditors on the intended disposal plan," it warned.

http://www.sxcoal.com/news/4555964/info/en

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Beijing's battle against pollution takes toll on truck drivers at coal port

On a recent visit to the area around Tianjin Port Co Ltd, there were more than one hundred empty trucks parked at the coal storage center run by Ningdong Logistic Co, Reuters reported.

Once one of the busiest places close to Tianjin's sprawling port, the storage facility was now silent as activity had ground to a halt after the port operator last month announced a ban on trucking in coal or storing it there. The announcement was sooner than expected.

It is a sign that Beijing's years-long war on pollution is disrupting the logistics of the market for coal - one of China's crucial commodities - as well as the lives of what trucking industry insiders estimate are 60,000 drivers who carry coal to and from the port.

The central government has said it may extend the measure to ports in heavily industrialized Hebei province by September as it tries to combat choking pollution that often blankets the north of the country, including nearby Beijing.

"I was sending coal from Inner Mongolia to the port and carrying imported iron ore from the port to other places. The government has completely cut my livelihood," said Wang Fangyuan, who was based in Tianjin but has left with a fleet of 40 trucks and their drivers to ply the trade in Erdos, 800 miles to the northwest in Inner Mongolia.

Cleaner air

Until now, Beijing's efforts to cut overcapacity and pollution had little impact on the output of the country's favorite fuel. Outdated, inefficient mines were shut, only to be replaced with production from leaner, cleaner ones. The ban has helped knock about 20% off Tianjin Port's shares but had its desired effect on air quality, at least locally.

Tianjin Port, which last year handled about 110 million tonnes of coal arriving by truck and rail, has said it is taking measures to increase rail freight to help offset the loss of trucked coal.

The ban, aimed at reducing pollution from trucking coal, has put Tianjin port at a disadvantage to other ports such as Tangshan and Caofeidian.

It has also created traffic jams at nearby Huanghua port in Hebei province, and threatens to increase the cost of moving coal as traders shift to rail, which is more expensive.

Inside the port's own coal storage area, around 600,000 tonnes of coking coal is covered in green plastic webbing since the start of May to reduce dust. Sprinklers are used to keep the dust down.

http://www.sxcoal.com/news/4555953/info/en

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