Mark Latham Commodity Equity Intelligence Service

Friday 18th September 2015
Background Stories on www.commodityintelligence.com

News and Views:

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    Macro

    Last bid to kill Iran nuclear deal blocked in U.S. Senate


    U.S. Senate Democrats blocked legislation meant to kill the Iran nuclear deal for a third time on Thursday, securing a major diplomatic victory for President Barack Obama.

    By a vote of 56-42, the Republican-majority Senate fell short of the 60 votes needed in the 100-member chamber to advance the legislation as all but four of Obama's fellow Democrats backed the nuclear pact announced in July.

    With no more Senate votes planned this week, the result ensured that Congress will not pass before a midnight deadline a resolution of disapproval that would have crippled the agreement by eliminating Obama's ability to waive many U.S. sanctions.

    http://www.reuters.com/article/2015/09/17/iran-nuclear-congress-idUSL1N11N1LY20150917
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    The price of cement in China has collapsed ... and that is not good


    If China's economy is growing at 7% or more per year, why has the price of cement there dropped by 25% in the last two years?

    You can't build anything permanent without cement. It's a great indicator of how the underlying, real economy is actually doing: If people are buying a lot of cement then it means they have the cash to build large, new, permanent objects. Houses, roads, bridges and cities. If building and construction are on the decline then the price of cement should fall.

    This is what Chinese cement looks like right now, according to from Macquarie's Chief China Economist, Larry Hu:  



    https://trove.com/a/The-price-of-cement-in-China-has-collapsed-and-that-is-not-good.lsH8m?utm_campaign=hosted&utm_medium=twitter&ts=1442547180&utm_source=sns&nocrawl=1
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    Former Sinopec executive to be prosecuted for graft


    A former general manager of Chinese energy giant Sinopec Group has been expelled from the Communist Party and will be prosecuted for crimes, including bribery and abuse of power, the party's anti-corruption watchdog said on Friday.

    Wang Tianpu, an oil industry veteran, was put under investigation in April.

    In a brief statement, the watchdog said that Wang accepted gifts, abused his position for the benefit of his relatives, spent public money on banquets, took bribes and engaged in extortion.

    Sinopec Group is the parent of Sinopec Corp, Asia's largest oil refiner.

    "Wang Tianpu was a senior leadership cadre in the party, and he severely broke discipline," the watchdog, the Central Commission for Discipline Inspection, said.

    His case has been handed over to the legal authorities, it added, meaning he will face prosecution.

    The company said it was fully behind the decision.

    "We support the decision of the party centre and have zero tolerance for corruption," a Sinopec media official told Reuters.

    It was not possible to reach Wang for comment and not clear if he had a lawyer.

    Chinese President Xi Jinping has warned that corruption threatens the party's survival and his three-year anti-graft campaign has brought down scores of senior officials in the party, the government, the military and state-owned enterprises.

    China is stepping up inspections this year at conglomerates owned by the central government as part of its anti-graft efforts.

    http://www.reuters.com/article/2015/09/18/china-corruption-sinopec-corp-idUSL4N11O1KA20150918
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    Oil and Gas

    Kuwait says oil market will balance itself, must be patient


    Kuwait's OPEC governor Nawal al-Fuzaia said on Thursday the oil market would balance itself but "we need to be patient", indicating support for the producer group's policy of defending market share despite falling prices.

    Speaking at the Gulf Intelligence Energy Markets Forum in the UAE emirate of Fujairah, Fuzaia said the current imbalance in the market stemmed from several factors and not just an economic slowdown in China.

    "The weakening demand in China, it is a short-term issue. I don't think that it will have an effect on OPEC market share," she said.

    OPEC shifted policy in November 2014 by deciding not to support prices by cutting output, in order to defend market share against U.S. shale oil and other higher-cost supply sources.

    The shift, led by Saudi Arabia and its Gulf allies, has proved controversial within OPEC as oil prices have more than halved from above $100 in June 2014, hurting the economies of less wealthy members such as Venezuela.

    Still, Fuzaia said the Organization of the Petroleum Exporting Countries needed more transparency in data from China to gauge demand.

    "I am not saying we can't trust Chinese numbers but our concern is that it is not the actual demand, it is the calculated demand. It could be the same as actual demand or not," she said.

    Fuzaia said OPEC was looking for stable, sustainable growth in China's economy and demand but that should Chinese demand decline, Kuwaiti crude would go to other markets.

    http://www.reuters.com/article/2015/09/17/kuwait-opec-idUSL5N11N20S20150917

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    China to double Russia ESPO pipeline imports to 30 mil mt/year in Oct 2017

     
    China will double its pipeline imports of Russian ESPO crude to 30 million mt/year as early as October 2017, after the second Mohe-Daqing pipeline comes on stream, PetroChina Vice President Sun Longde said Wednesday, according to local media.

    He did not say when construction would start.

    The existing 15 million mt/year Mohe-Daqing pipeline in northeastern Heilongjiang province receives Russian ESPO crude from the border Mohe station and sends it to Daqing, started operations in January 2011.

    The pipeline was built to take 15 million mt/year of ESPO crude from Rosneft for 20 years.

    The second ESPO crude pipeline will run parallel to the first.

    Under earlier deals, Russia's state-owned Rosneft agreed to increase ESPO deliveries to China National Petroleum Corp. by 5 million mt/year in 2015 and another 5 million mt/year in 2016.

    But the delivered volume has only increased slightly this year.

    PetroChina has taken a total of around 11.02 million mt from the existing pipeline over January-August, or an average 33,105 b/d, with the yearly volume for 2015 expected to hit 16.48 million mt at the current transmission rate. While well below the 20 million mt/year target, this would be up 5.7% from 15.6 million mt shipped in 2014.

    Rosneft redirected some of the ESPO exports to China via its Kozmino port, the destination of its only export pipeline to Asian markets.

    PetroChina's 20.5 million mt/year Dalian refinery has been receiving seaborne cargoes shipped from Kozmino. The refinery this year will take around 5 million mt/year in seaborne cargoes.

    Dalian refinery also takes ESPO crude shipped via pipeline from Daqing, with the 2015 volume estimated at 3.5 million mt.

    Three other PetroChina refineries are major takers of pipelined ESPO from Daqing: 9 million mt/year Liaoyang Petrochemical in northeastern Liaoning province, the 10 million mt/year Jilin Petrochemical in northeastern Jilin province and the 5 million mt/year Harbin Petrochemical in Heilongjiang province.

    ESPO crude makes up all of Liaoyang Petrochemicals' feedstock and 60%-65% of the Dalian refinery's feedstock.

    Jilin and Harbin refineries process ESPO crudes and domestic onshore crudes such as Daqing.

    http://en.chinamining.com.cn/News/2015-09-18/1442542052d73786.html
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    China fuel oil imports to slow further on reforms


    Chinese imports of fuel oil will drop further this year and next as reforms in the world's No.2 economy allow more independent refineries to ship in crude oil as an alternative feedstock, traders and analysts said.

    China is opening its crude oil imports to buyers outside the state-owned sector, with independent refiners so far getting the go-ahead to use a total of nearly 700,000 barrels per day (bpd) in crude imports, or about 11 percent of total crude shipments into the country.

    With seven refiners already receiving the final greenlight to use imported crude oil and two of them granted licenses to import directly themselves, analysts expect fuel oil to be displaced quickly. Consultancy Energy Aspects said fuel oil demand could fall by 9 percent next year.

    "Straight run fuel oil imports have dropped a lot mainly as teapot refineries are getting import licenses for crude," said a trader with a Chinese state-owned company.

    Small, independent refiners in China, often nicknamed 'teapots', prefer to process crude rather than fuel oil due to better refining economics and larger yields of high-value products such as gasoline and diesel.

    China's appetite for fuel oil, which is also used in shipping, has already been hit hard by a shift to natural gas and the nation's economic slowdown, with the nation flipping into net fuel oil exports in July for the second month since 2006.

    China imported nearly 1.1 million tonnes of fuel oil in July, it's lowest volumes in a year, while its exports nearly doubled from June, customs data showed.

    Demand has also been curbed as the government has raised the fuel consumption tax several times, keen to reduce China's heavy use of energy and natural resources while addressing its severe pollution problems.

    And appetite from shippers in China has also been fading, traders said.

    "Fuel oil demand for shipping is also bad as trade has slowed down a lot," said a Singapore-based bunker fuel supplier.

    "They are also using larger vessels now so this affects prices as well."

    Cash premiums for straight run fuel oil have fallen by at least a third since the start of the year, a Singapore-based trader said.

    Meanwhile, China's imports of bitumen mixture, another type of heavy oil that can easily be blended into fuel oil, have also dropped. Companies had in the last two years switched to importing fuel oil declared as bitumen mixture to avoid paying consumption tax, but slowing demand and a clampdown by the government has curbed those imports, traders said.

    It is now importing about 500,000 to 700,000 tonnes a month of bitumen mixture, compared with 1.5 to 2 million tonnes a month late last year, said a Beijing-based trader.

    http://www.reuters.com/article/2015/09/18/china-fueloil-idUSL4N11M2OR20150918

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    European gas supply no longer a risk, demand is key concern


    Security of gas supply is no longer an issue in European markets, and the balance of risk has moved to demand, participants said at the Platts European gas summit in Brussels Thursday.

    "We're long on everything -- we're long gas, we're long storage, we're long flexibility, we have too much of everything," Christopher Delbruck, CEO of E.ON Global Commodities, said.

    "Total storage capacity is above import requirements -- this has no precedent in Europe," GDF Suez's (now Engie) former vice president Jean-Francois Cirelli said. "The main economies are well supplied and will be well supplied."

    But this robust near-term supply picture raises longer-term challenges, E.ON's Delbruck said.

    "The economic sustainability of that solution is not there [given the extent to which prices could fall]."

    Depressed prices would compromise future investment as well as the existence of current supply infrastructure, participants said.

    "Not all storage sites are covering operational costs; storage operators could close facilities to deal with over capacity," Michael Kohl, commercial managing director at RWE Gas Storage, said.

    Martin Bachmann, head of German firm Wintershall's European exploration and production division, said investment in the upstream gas sector was required to "safeguard" security of supply.

    But despite the longer-term supply risks, demand is now the key immediate challenge facing Europe's gas industry, according to Cirelli.

    "There is no security of demand in Europe -- no-one knows where we are going," he said, citing data from French bank Societe Generale showing a 22% fall in annual European gas demand from 2006-2014 driven mainly by lower power sector demand.

    http://www.platts.com/latest-news/natural-gas/london/european-gas-supply-no-longer-a-risk-demand-is-26211997

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    Mid-sized European oil firms face tough choices as oil stays low


    Small and medium-sized oil companies, squeezed by the oil price slump, may have to raise expensive new finance, sell assets or seek new investors to plug any funding gaps as banks tighten up on lending.

    Many of these companies have already cut spending and axed thousands of jobs following a more than halving in the oil price to around $50 a barrel since June last year.

    But they may need to do more as revenues fall and the oil price looks set to stay low. Oil's fall last month to its lowest since early 2009 at just above $40 a barrel has dashed hopes in the oil industry for a swift recovery.

    In many cases, banks lend money based on a company's oil and gas reserves base, in what is known as reserve-based lending, so, in theory, the lower the oil price outlook, the smaller the loan or credit line.

    "Banks will be broadly supportive but for some riskier clients and transactions, there may be a gap in financing that didn't exist before and they will have to find alternative financing," one banker, who heads a loan syndicate, said.

    "There is concern that banks will redenominate and reduce existing financing for energy companies. Banks are looking at this now, it's a live issue."

    The companies and their banks sit down twice a year to review finances, which used to be a fairly routine conversation when oil was riding high. Most companies emerged from the April round of talks, known as "redeterminations" relatively unscathed because of expectations of an oil price recovery.

    The current round may be more difficult as banks will have cut their long-term oil price forecasts, according to several bankers and consultants.

    "Managements and boards have had to come to terms in recent weeks with the 'lower for longer' oil price view," Rupert Newall, head of EMEA energy investment banking at BMO Capital Markets, said.

    Exploration and production companies with large project financing needs include Africa-focused Tullow Oil, North Sea producers Lundin Petroleum and Ithaca Energy , according to bankers and analysts.

    Nomura has estimated Tullow Oil's net debt will rise to $4.7 billion by the second half of 2016, when its TEN project off Ghana's coast is planned to start production.

    Tullow's net debt at the end of the first half of 2015 was $3.6 billion.

    Tullow and Ithaca declined to comment. Lundin did not immediately respond to requests for comment.

    In the United States, where some oil companies borrowed heavily to invest in shale, several have run into trouble this year, including Oklahoma-based Samson Resources.

    But Jo Clark, a transaction advisory consultant at EY, said the chances were low of similar problems in Europe.

    There have been a few casualties. Oil producer Afren , for example, decided to go into administration in July when it failed to win support for a refinancing plan.

    Credit rating agency Standard & Poor's on Thursday cut its long-term corporate credit rating on British oilfield services company Expro Holdings Ltd to CCC+ from B-, citing its high leverage and the challenging market conditions in oil and gas.

    http://www.reuters.com/article/2015/09/17/oil-companies-debt-idUSL5N11A2HR20150917
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    Aussie energy company Santos starts shakeup


    While announcing a board shakeup, Australian energy company Santos said Thursday it was vetting interests from other entities eyeing its assets.

    The board at Santos said Chief Executive Officer David Knox will step down once a successor is named after seven years at the helm. Knox will stay on in the interim, though Chairman Peter Coates will take on more responsibilities.

    "We are undertaking a thorough strategic review of all options to restore and maximize shareholder value in the face of the continuing pressures on oil prices, globally," Coates said in a statement.

    Santos in August said net profit for the first half of 2015 at $37 million was 82 percent lower year-on-year. Capital expenditure was down by more than half from the same period in 2014, reflecting the substantial slump in crude oil prices.

    The company in July said it was maintaining its production guidance moving forward despite reductions in capital and operating expenditure. During the second quarter, the company produced 14.3 million barrels of oil equivalent, 12 percent higher year-on-year, and posted sales volumes of 15.7 million boe, 4 percent higher year-on-year. Sales revenue, however, fell 19 percent.

    Coates said the company has a portfolio of high-quality assets and shareholder values needs to be protected. Though no short-cuts are on the table, the chairman said all options are on the table.

    "We will be talking with the parties who have approached us to date with interest in various assets and other strategic initiatives and with this announcement there may well be new expressions of interest received," he said.

    The company said it was taking the "appropriate steps" to cut operating costs. For full year 2015, Santos is targeting $180 million on supply chain savings.

    Santos boasts strong operational performance from its liquefied natural gas portfolio, particularly from its LNG project in Papua New Guinea.

    http://www.upi.com/Business_News/Energy-Industry/2015/09/17/Aussie-energy-company-Santos-starts-shakeup/4161442487441/

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    Glencore vies with Trafigura, Vitol in thawing LNG market

    Glencore vies with Trafigura, Vitol in thawing LNG market

    Mining and trading giant Glencore is mounting a challenge to Trafigura and Vitol to become the top merchant trader of liquefied natural gas, as a market in which sales are largely frozen into decades-long contracts looks set to thaw.

    Trafigura recently adopted tactics developed from years of trading oil to become the world's top LNG merchant, investing in logistics and storage, while also providing credit and shouldering risk for buyers.

    Glencore, on the other hand, plans to double its global LNG trading team and trade as many as 50 cargoes of the super-chilled fuel over the next year - almost twice what Trafigura traded in its fiscal year to Sept. 30, 2014.

    LNG could soon surpass iron ore as the world's second-biggest traded commodity, with estimates of the market's worth ranging between $90 billion and $150 billion.

    "The opportunity for growth in LNG trading is spectacular," said Glencore's global head of LNG, Gordon Waters, who joined in July after 18 years at BP.

    Trading companies, which industry sources say have so far accounted for less than 10 percent of overall LNG trade, could help trigger a more liquid Asian LNG market, with exchanges from Singapore to Tokyo launching indices and futures contracts in preparation.

    Waters was in a team at BP that took it from selling LNG via long-term contracts to being a key player in spot and short-term trade. "The idea is to do that all over again," he told Reuters.

    Glencore - which has had a limited presence in LNG up to this point - plans to trade some 40 to 50 cargoes on spot or short-term deals over the next year and double the size of its three-trader team based in Singapore, London and Madrid.

    "Come back in 12 months, and I think you'll notice a rapid growth," Waters said.

    Glencore's planned volumes would be just under what some analysts say Trafigura could sell in the year to the end of this month, after the latter sold 1.7 million tonnes of spot LNG, or about 28 cargoes, the previous fiscal year.

    Trafigura declined to provide further details in its volumes and market strategies.

    Vitol says on its website it delivered over 1 million tonnes of LNG worldwide in 2014.

    A Vitol spokeswoman declined to provide more details on its volumes, but said the trading house had been "at it years before anyone else, despite lots of noise in the last couple of years from Trafigura."

    Sudden oversupply and the development of financial derivatives have allowed "new species to emerge in LNG," such as trading houses and banks, including his own, said Jogchum Brinksma, managing director at Citigroup Global Commodities, at this month's World LNG Series in Singapore.

    Other merchants trading LNG include Noble Group and Gunvor.

    http://www.reuters.com/article/2015/09/17/asia-lng-merchants-idUSL4N11N3WH20150917

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    Vertical wells are making a comeback


    It’s no secret that low commodity prices and the supply glut are pushing oil drillers to find cheaper ways to drill.

    According to Oil and Gas Investor, producers are looking to old vertical wells for increased production from shallow play at a lower cost than horizontal drilling. Vertical wells also have a strong cash flow asset. In addition, vertical wells can be put into production within 10 days, compared to horizontal wells that take a month or longer to complete.

    Baker Hughes data shows that the horizontal rig count fell by 2 percent while the vertical rig count rose 20 percent from early June to Sept. 4.

    http://shalegasreporter.com/news/vertical-wells-making-comeback/57584.html
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    OPEC Sees Crude Rising to $80 by 2020 as Rival Suppliers Falter


    OPEC expects the average price of its crude oil to rise to $80 a barrel by 2020 as supply from non-members grows more slowly than expected.

    Production from nations outside the Organization of Petroleum Exporting Countries will be 58.2 million barrels a day in 2017, 1 million lower than previously forecast, according to an internal research report from the group seen by Bloomberg News. While OPEC expects little stimulus to demand in the medium term as a result of cheaper oil, it estimated that the average price of its crude will increase by about $5 annually to 2020 from $55 this year.

    The impact of current low prices is “most apparent on tight oil, which is more price reactive than other liquids sources,” according to the report. “Supply reductions in U.S. and Canada from 2014-2016 are clearly revealed.”

    The price of oil has tumbled more than 50 percent in the past year, triggering a cutback in drilling in the U.S. and other non-OPEC nations. Crude collapsed as OPEC followed Saudi Arabia’s strategy of defending its share of the global market against shale and other competitors.

    http://www.bloomberg.com/news/articles/2015-09-17/opec-sees-crude-rising-to-80-by-2020-as-rival-suppliers-falter

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    Alternative Energy

    Wind energy could meet 25% of Europe’s electricity demand by 2030.


    That’s according to a new report by the European Wind Energy Association .

    It revealed the continent could install  320GW of wind capacity during the same period.

    The installation of 254GW of onshore capacity and 66GW of offshore installations are also expected to create 334,000 jobs, stated the EWEA.

    Europe currently has a wind capacity of 128.8GW which “can meet more than 10% of power consumption in a normal wind year”, the report said.

    It added forecasts depend on political and regulatory factors including a clear governance structure for EU to reach its green target.

    It aims to generate 27% of energy from renewables in the next 15 years.

    Kristian Ruby, Chief Policy Officer of the EWEA said: “The regulatory framework is a key driver in guaranteeing investor certainty. If policy makers get it right, the wind sector could grow even more. If they don’t, we will fall short to the detriment of investments, employment and climate protection.

    “Three key challenges must be tackled. A renewable energy directive with a strong legal foundation for renewables in the post-2020 space; a reformed power market tailored to renewable energy integration and, finally, a revitalised Emissions Trading System that provides a clear signal to investors by putting a meaningful price on carbon pollution.”

    In the UK the government is scrapping subsidies for onshore wind projects from April 2016.

    Earlier this month it rejected the Navitus Bay offshore wind project.

    http://www.energylivenews.com/2015/09/17/wind-could-meet-25-of-europes-power-needs/
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    Tesla coming, but consumers may lose as networks, retailers fight over solar and storage


    The arrival of the Tesla battery storage unit, known as the Powerwall, in Australia over the next few months will herald the biggest challenge to Australia’s electricity industry for decades.

    Tesla announced on Thursday that it is fast-tracking the roll-out of its battery storage product, and Australia will be its first market for the 7kWh household units. The first deliveries had not been expected until well into 2017.

    The Tesla Powerwall is not the first, or even the cheapest battery storage maker to enter the Australian market. But it is the most ubiquitous brand, and it threatens to do to incumbent business models what Uber is doing to the taxi industry, and Facebook, Twitter and Amazon did to traditional publishing.

    Tesla is targeting the Australian market first because it is ripe for change. It has high electricity prices, particularly the grid component; excellent sun, lots of rooftop solar (more than 4,400MW on more than 1.4 million homes), and its tariff structure should make it attractive for households and businesses to store their solar output in a box for use in the evening, rather than giving it away for next to nothing to the grid.

    There are a range of predictions on how quickly battery storage will be adopted in Australia. Some suggest that the combination of a solar array and battery storage is already cheaper than grid power in some areas, others suggest it will be another 5 years before the combination is cheap enough to become a mass market.

    But the promised benefits to consumers could be undermined because of a major turf war between the incumbent utilities, whose business models are being threatened by the new technology, and because regulators are being so slow to act.

    Australia’s network operators and electricity retailers say they can see battery storage coming, yet they seem unprepared for the speed of that transition. To protect their outdated business models they are erecting barriers, changing tariff structures by jacking up fixed prices, and in some cases even banning storage and electrical vehicles from the grid.

    Another barrier is the emerging turf war between network operators – the companies who run the poles and wires – and the electricity retailers – the companies who package up and send you the bill – over who can deal with customers.

    http://reneweconomy.com.au/2015/tesla-coming-but-consumers-may-lose-as-networks-retailers-fight-over-solar-and-storage-76619

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    China’s largest onshore wind power unit starts operation


    The largest onshore wind power generating unit in China has been put into operation in Zhangjiakou, northern Hebei province recently, media reported.

    Operated by State Grid Jibei Electric Power, the generating unit has an installed capacity of 5 MW, equaling more than three times of the average capacity of wind power units in the country, which is normally at 1.5 MW.

    And the maximum daily wind power generation may top 120 MWh, which could meet power demand from thousands of households, the report said.

    http://en.sxcoal.com/0/131560/DataShow.html
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    ABB commands 50pct share in India’s solar power inverters market


    Clean Technica reported that ABB has massively increased its share in the Indian solar power inverters market over the last few months, giving it an excellent platform to further expand its footprint and take advantage of the huge 96 GW potential market by 2022.

    According to reports, ABB has supplied inverters for 2 GW worth of solar power capacity of the total 4 GW of capacity operational in India.

    The company supplied inverters for 1 GW of capacity in the last 5 months alone. This demand is likely to have been driven by projects allocated under the various state solar power policies.

    ABB has a manufacturing facility in Bengaluru in southern India, from where it supplies the PVS800 model of inverters. The company has a production capacity of 3 GW every year from this facility.

    The PVS800 has now become a trusted model among solar power project developers in India. Being a global brand, ABB attracts orders from Indian as well as international developers.

    The company has supplied inverters to some of the leading solar power projects in the country, including Welspun Energy which operates India’s largest solar project installed by a single developer. It also supplied inverters to the largest canal-top solar power project in the world, located in Gujarat.

    In addition to inverters for solar power projects, ABB also manufactures and supplies solar-powered water pumps that have application in the agricultural sector. The company has supplied around 5,000 solar-powered pumps so far.

    The company management expects even higher growth in the solar power inverters business as the government pushes forwards the ambitious National Solar Mission that targets 100 GW solar power capacity installed by 2022.

    http://steelguru.com/power/abb-commands-50pct-share-in-india-s-solar-power-inverters-market/434764#tag

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    Agriculture

    PotashCorp CEO: K+S takeover offer increasingly attractive


    Changing market conditions are improving the attractiveness of PotashCorp’s offer for the takeover of K+S, the Canadian miner’s CEO told a Credit Suisse conference yesterday. He anticipates a difficult five years for the potash industry, but suggested that industry overcapacity is not quite as severe as many think.

    The CEO of Canada’s Potash Corp. of Saskatchewan Inc. (PotashCorp), Jochen Tilk, has spoken of the potential benefits of PotashCorp’s takeover offer for Germany-based K+S AG, though he admitted that the European salt and potash producer is not "actively engaged".

    http://www.indmin.com/Article/3489365/PotashCorp-CEO-K+S-takeover-offer-increasingly-attractive.html

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    Precious Metals

    Kinross Gold cuts 2015 capex and cost forecast, trims output view


    Canadian miner Kinross Gold Corp on Thursday lowered its full-year capital spending and overhead costs forecasts and raised the lower end of its production outlook.

    The company, which has been looking for ways to reduce costs amid sliding metals prices, cut its 2015 capital spending forecast to $650 million from $725 million.

    ""Every region has stepped up and is expected to produce at, or above, its prior guidance range, and below prior cost guidance ranges," Chief Executive Paul Rollinson said in a statement.

    Kinross said it expects overhead expenses to be below its forecast of $205 million and said it is looking to more opportunities to lower such costs further.

    The company said it expects to produce 2.5-2.6 million gold equivalent ounces in 2015, compared with its previous forecast of 2.4-2.6 million gold equivalent ounces.

    Kinross reduced its all-in sustaining cost forecast to a range of $975 to $1,025 per ounce from $1,000 to $1,100.

    Cost of sales is now expected to be $690-$730 per ounce, down from its previous forecast of $720-$780 per ounce.

    Kinross had slid to a loss in the second quarter, in line with market expectations, on the back of a weaker gold price, lower gold sales and the temporary suspension of operations at a mine in Chile.

    At that time, in July, Rollinson said Kinross was again considering cutting jobs at its Tasiast gold mine in Mauritania to lower costs.

    http://www.reuters.com/article/2015/09/17/kinross-outlook-idUSL4N11N5KZ20150917
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    Base Metals

    Chile's copper mines restart


    Chile's Codelco says Andina open-pit mine restarts operations

    Chile's state copper miner Codelco said it has restarted operations on Thursday at its open-pit Andina mine, which lies in the Andes mountains north-east of capital city Santiago, following a massive quake the prior night.

    "Operations in the open-pit mine restarted at 10:00 am local time," Codelco told Reuters.

    http://www.reuters.com/article/2015/09/17/chile-quake-codelco-idUSC0N0Y501G20150917

    Antofagasta says to progressively restart Chile's Los Pelambres ops

    SANTIAGO, SEPT 17

    Antofagasta Plc said it is inspecting the installations of its flagship Los Pelambres copper mine and expects to progressively restart operations in the coming hours after a strong quake Wednesday night in central Chile forced it to suspend activities.

    Antofagasta said that its port infrastructure in the coastal city of Los Vilos was not damaged by the quake and ensuing tsunami waves and that Los Pelambres' tailings dam was also undamaged.

    The company reiterated that none of its workers was injured in the natural disaster.

    http://www.reuters.com/article/2015/09/17/chile-quake-antofagasta-idUSC0N0Y501E20150917
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    Rio Tinto plans to expand Mongolia copper mine


    Rio Tinto said it is committed to expanding its Oyu Tolgoi copper mine in Mongolia based on a positive outlook for the metal and confidence that low production costs can buoy profits even as competitors cut output.

    The miner wants to lock in up to $4.2 billion in project financing by November to build more than 200 km of tunnels to access higher-quality ores at the deposit over the next five to seven years, Craig Kinnell, Rio's chief development officer for copper and coal, said during a media tour of the mine this week.

    The expansion should extend the mine's lifespan past 2100 and open up 80 percent of the resources available, making it the world's third-largest mine for copper and gold.

    With new project approvals slowing elsewhere, Kinnell said he was confident demand would hold up, particularly in China.

    "I can't see anything to reconsider given the quality of our resource," he said. "Our commitment is to bring this on as soon as possible".

    Oyu Tolgoi is expected to produce 175,000 to 195,000 tonnes of copper in 2015 and has a key role in Rio Tinto's strategy to ease its dependence on iron ore, but there have been concerns that its expansion is coming at the wrong time.

    "Rio Tinto has to develop the mine as it is a core copper asset to the company," said Yang Changhua, senior analyst at state-backed research firm Antaike in Beijing.

    "But expected additional copper from the Oyu Tolgoi mine would pile pressure on the global copper market, which is not likely to improve strongly in the coming two years," he said.

    However, Kinnell said that while the expansion of Oyu Tolgoi would raise ore production, there were no plans to expand concentrator capacity at the project.

    He added that low production costs meant the project would be a "bedrock" for the firm, and that he remained bullish on the long-term fundamentals for copper.

    While Rio plans to expand operations its four key copper assets - Oyu Tolgoi, Kennecott, Escondida and Grasberg - rival Glencore said it would cut supplies by 400,000 tonnes.

    Rio is also looking for new supplies with plans to get online the Resolution project in the United States and La Granja in Peru, raising concerns that the industry will be hit by the sort of glut now affecting iron ore.

    "The market is aware that supply cuts such as those by Glencore can only lay the basis for a tightening of the market," said Carsten Menke, commodities research analyst at Julius Baer.

    "This is different to 2009, when for example copper demand collapsed because we had a global recession. This time the oversupply in the copper market is due to the expansion of mine production over the last few years."

    http://www.reuters.com/article/2015/09/17/mongolia-rio-tinto-idUSL4N11N26W20150917
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    Intergeo eying Chinese funds for Siberian copper project


    Billionaire Mikhail Prokhorov’s Intergeo MMC Ltd. is turning to China to help develop a $2 billion copper deposit in southern Siberia.

    There’s a “strong possibility” the company, which holds the license to the Ak Sug field in the Tyva region, will get Chinese financing for the project, Intergeo Chief Executive Officer John Lill said by e-mail. It’s working on a loan feasibility study adhering to Chinese standards and may attract at least one equity partner, he said.

    Intergeo retained some mining licenses, including Ak Sug with more than 4.9 million metric tons of copper reserves, when Prokhorov sold his stake in GMK Norilsk Nickel PJSC, Russia’s largest metals producer, in 2008. The company had considered an initial public offering in Canada to fund the development and planned a merger with Vancouver-based producer Mercator Minerals Ltd. to gain a listing before the deal collapsed last year. Russian companies are looking to China for more funding after relations with Europe and the U.S. worsened because of the conflict in Ukraine.

    "Assuming successful financing, we would likely be starting production in around four-and-a-half years,” Lill said. China will probably be the main consumer of copper concentrate produced at Ak Sug, he said.

    Intergeo signed an agreement with China Overseas Engineering Group Co. Ltd. and China Nonferrous Metal Industry’s Foreign Engineering and Construction Co. earlier this month for engineering, procurement and construction at Ak Sug.

    The agreement “is part of a package with the financing and we expect a large Chinese policy bank to join the project," Lill said. "Eximbank has already voiced interest to our partners at NFC,” he said, referring to the Export-Import Bank of China.

    http://steelguru.com/mining/intergeo-eying-chinese-funds-for-siberian-copper-project/434814#tag
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    Steel, Iron Ore and Coal

    BHP sees Australian coal above the bottom end of the cost curve


    Diversified major BHP Billiton has called for greater productivity in the Australian coal sector, as prospects of a price rise in the near future remained dim. 

    Speaking in Brisbane, BHP coal president Mike Henry pointed out that prices for metallurgical coal had fallen by a further 25% to 30% since the start of 2015, while the price for thermal coal fell another 10% to 15%. “There are no signs of things getting better in the medium term.” 

    He noted that despite Australia’s natural endowment of coal resources, the local sector was facing stiff competition from Russia, Canada and China, who were equally as focused on achieving increased output at lower prices. “They have been expanding production, increasing productivity and lowering costs. In some instances, they are achieving mine-site cash costs of $10/t to $20/t less than Australia. 

    Some of the differential has been driven by things we don’t control; like currency movements or geological endowment. But at the end of the day, all that matters is whether we are able to improve productivity sufficiently to secure ourselves at the low end of the cost curve.” 

    Henry said that as miners, the industry had to look to itself to drive the technical and commercial excellence that would ensure that it fully and safely realised the potential of installed capacity. “The financial sustainability of the Australian coal industry is wholly dependent on our ability to materially improve and sustain levels of productivity to stay one step ahead of our global competition. 

    Through working with our employees to achieve this, within a supportive industrial relations system, we’ll be able to create and protect jobs in the industry.”

    http://www.miningweekly.com/article/bhp-calls-for-closer-cooperation-in-oz-coal-fields-2015-09-18
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    Shanxi coking coal miners cut prices amid flat demand


    Shanxi’s coking coal miners have started to cut prices in a bid to incentivize demand from coke and steel producers as downstream markets continued to worsen since entering September.

    Miners at Liulin, Luliang City have cut prices by 20-30 yuan/t from the start of September, with mainstream ex-washplant price at 590-610 yuan/t for primary coking coals. Some end users noted a 30 yuan/t cut for low-sulphur primary coking coal, which was orally promised by Luliang-based big miners but yet not finalized.

    Linfen’s low-sulphur coking coal price also dropped 20-30 yuan/t, with mainstream ex-washplant price for materials with 9.5% ash, 0.4% sulphur and G value of 85 at 595-610 yuan/t.

    Changzhi-based miners cut low-sulphur primary coking coal prices to 575-590 yuan/t, and reduced 20 yuan/t for high-sulphur lean coal -- one type of coking coal blend – to 410 yuan/t, both ex-washplant basis.

    Meanwhile, Changzhi-based large miners cut prices of blended coal by 20 yuan/t and washed coal 10 yuan/t, with price of lean coal with 10.5% ash and 13-14 G value at 425-480 yuan/t.

    Market sources said washing plants at Changzhi and Linfen were running 20-40% capacity due to low prices.

    Downstream coking plants may continue to press down coking coal prices to reduce losses, as coke prices were on a downward trend. Shenhua Group’s 20 yuan/t cut for its Grade II met. coke on September 15 may lead to another round of price drop, sources said.

    http://en.sxcoal.com/0/131571/DataShow.html

    Attached Files
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    China Aug coal transport down 16.5pct on year


    China’s rail coal transport fell 16.5% on year and down 1.6% on month to 162.4 million tonnes in August, posting the ninth consecutive year-on-year decline, showed the latest data from the China Coal Transport and Distribution Association.

    Over January-August, China transported a total 1.35 billion tonnes of coal through railways, down 11.8% from a year ago, data showed.

    Of this, 922.7 million tonnes or 68.4% of the total was railed to power plants, down 12% year on year, with August haulage sliding 12.9% on year and down 1.8% from July to 113.4 million tonnes.

    Coal-dedicated Daqin line transported 33.63 million tonnes of coal in August, falling 11.8% on year and down 2.2% from July. Total haulage between January and August dropped 9.3% from the year prior to 273.8 million tonnes.

    http://en.sxcoal.com/0/131564/DataShow.html

    Attached Files
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