Mark Latham Commodity Equity Intelligence Service

Thursday 4th June 2015
Background Stories on www.commodityintelligence.com

News and Views:

Attached Files






    Oil and Gas

    BP CEO sees oil price "softness" in second half of 2015

    BP Chief Executive Bob Dudley said on Wednesday he sees "some softness" in oil prices in the second half of the year as global supplies continue to grow.

    "Supply growth continues to go up. We are at a balance with the supply and demand right now," he said on the sidelines of the Organization of the Petroleum Exporting Countries (OPEC) seminar.

    "I think we can see some softness in price continuing and as a result as an industry we must readjust cost structures, tax structures around the world," Dudley said.

    http://www.reuters.com/article/2015/06/03/opec-meeting-bp-idUSL5N0YP1NV20150603
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    Big Oil chiefs tell OPEC they're adapting to price shock

    Six months after OPEC upended oil markets and sent prices crashing, the head of U.S. oil giant ExxonMobil has an unusual message for the cartel: thanks.

    While Exxon and other large oil companies have been forced to slash spending, cut staff and sacrifice tens of billions of dollars in revenue as oil prices halved, they have also watched with quiet satisfaction as upstart rivals from the U.S. shale patch struggle simply to survive through the downturn.

    The price collapse has helped shine a sharper light on the highest-cost producers, Rex Tillerson, head of the world's largest publicly traded oil company, told a rare meeting of oil executives and OPEC ministers.

    "We're trying to discover where the marginal barrels are around the world. It's important for all of us to know," he said. "We are constantly chasing the price against the cost of supply."

    "We live with a lot of uncertainty and we're rewarded for how well we manage it," said Tillerson, one of the best-paid CEOs in the world. If you can't live with uncertainty, "be a librarian", he said.

    OPEC decided against cutting its oil production last year to fight for market share with non-OPEC producers, thus aggravating a global oil glut that arose due to a shale boom in the United States. The group is expected to maintain that policy on Friday at its first meeting since the November decision.

    Tillerson has repeatedly said the downturn was a time of opportunities to acquire rivals, although Exxon has yet to emulate a megadeal done by rival Royal Dutch Shell in April to acquire smaller competitor BG for $70 billion.

    Tillerson also urged against excessive cuts amid a low oil price environment - be it capital spending or staff: "We are chasing a moving target (oil price). We always overshoot in both directions - on the way up and on the way down".

    The head of French oil company Total, Patrick Pouyanne, said he was confident technology would achieve further breakthroughs to allow the U.S. shale oil industry to increase output even in an environment of low oil prices.

    Asked whether he had a target price in mind for U.S. shale or Total's operations in general, Pouyanne said: "We have a margin - not a target price. I'm not crazy to bet on one target price".

    http://www.reuters.com/article/2015/06/03/opec-meeting-majors-idUSL5N0YP2FN20150603
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    International Energy Agency says Australian LNG faces $26b annual hit to revenue

    Australia's new liquefied natural gas projects face a potential $US20 billion ($25.7 billion) hit to annual revenue after last year's halving in the crude oil price, while future projects face an uphill battle to be built at all, according to the International Energy Agency, which has slashed its forecast for gas demand.

    The IEA warned revenues for Australia's seven new LNG projects are set to come in "well below target", with the drop in oil prices dramatically eating into returns on capital given the direct link between LNG contract sales prices and oil prices.

    In its annual gas market report, released in Paris on Thursday, the IEA noted that a massive 72 billion cubic metres of new LNG export capacity is to start up in Australia by 2018. The new projects have almost all suffered cost blowouts and delays, as the surge in construction drove up labour and construction rates.

    The agency calls Australia's growth in LNG "impressive", but questions the business case for the flood of investment in such a short timeframe: "With the benefit of hindsight, carrying out such a large simultaneous expansion program seems to be questionable from a business perspective," it said.

    Now that the projects are finally crossing the finishing line "after a very painful journey", the collapse in the oil price is threatening returns of the projects set to start production over the next two years, the IEA said.

    The IEA calculates said that assuming a 14.5 per cent slope of LNG sales prices to crude oil in long-term contracts, a drop in the crude oil price from $US100 a barrel to $US50 would reduce the Australian projects' revenues by $US20 billion a year. That represents almost 10 per cent of the combined capital expenditure of Australia's seven new LNG projects, of just over $US200 billion.

    Brent crude oil prices, a benchmark for Asian prices, have slid to about $US65 a barrel from $US115/bbl a year ago, in line with the $US50 reduction in prices in the IEA's theoretical calculation.

    "Low oil prices will sharply lower the return on capital of projects soon to be on line whose volumes are sold on an oil price linked basis," said the agency, the OECD's advisory agency on energy.

    http://www.afr.com/business/energy/gas/international-energy-agency-says-australian-lng-faces-26b-annual-hit-to-revenue-20150604-ghfl2u
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    India refiners in talks with Iraqi oil firm on strategic reserves-sources

    State refiners Indian Oil Corp and Hindustan Petroleum Corp are holding talks with Iraq's national oil company to buy 4 million barrels of Basra light crude oil for India's strategic petroleum reserves (SPRs), three sources said.

    India in March asked the state refiners to each seek two very large crude carriers (VLCCs) of Iraq's Basra crude oil for arrival in May-June totalling 8 million barrels for the reserves in the coastal city of Vizag in southern Andhra Pradesh state.

    But after being faced with having to pay a premium for spot oil purchases the refiners had decided to directly negotiate with Iraq's State Oil Marketing Organisation (SOMO), said the sources with knowledge of the talks.

    So far the indications were that SOMO would supply the refiners with Basra Light crude at the official selling price, said one of the sources, who declined to be identified due to the sensitivity of the issue.

    The sources said the refiners were looking for the oil supplies to arrive in the next two to three months.

    HPCL last month awarded a tender for June loading to European trader BP at $1.40 a barrel above the official selling price (OSP).

    IOC, the country's biggest refiner, agreed to pay a premium of 50-60 cents a barrel to Chinese trader Unipec for a VLCC arriving in mid-June.

    "The spot market is getting pricey now," said an Asian oil trader, highlighting recent spikes in Basra light premiums. "I think SOMO's ambition to push the OSP for Basra Light higher is achievable now."

    http://www.reuters.com/article/2015/06/03/india-iraq-spr-idUSL3N0YP37120150603
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    US 'non-imports' freed up 108 Bcm of LNG: official

    The boom of the US shale gas industry in recent years has freed up more than the LNG equivalent of 100 Bcm of gas for world markets that might otherwise have been consumed by the US this year, a Department of State official told the World Gas Conference Tuesday.

    Robin Dunnigan, deputy assistant secretary at the Bureau of Energy Resources, told the conference that 10 years ago it was expected the US would be importing the LNG equivalent of around 108 Bcm of gas by 2014.

    In fact, it imported only 1 Bcm of gas.

    So while people often asked her about the likely impact of upcoming US LNG exports, she said they should remember the impact already made by US "non-imports."

    "That's changed the energy picture in the world globally," she said.

    US exports of LNG are expected to start late this year or early next year from Cheniere Energy's Sabine Pass facility.

    http://www.platts.com/latest-news/natural-gas/paris/world-gas-conference-2015-us-non-imports-freed-21542923?hootpostid=44a3c83939c52180ea8da1bc8c857c16
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    Increasing demand boosts sales for Deep Casing Tools

    Deep Casing Tools has seen an increase in demand for its casing and completion technology products. This development has resulted in sales in excess of half a million pounds this year to new clients alone. Deep Casing Tools provides a range of innovative tools designed to land casing and completions at target depth within oil or gas wells.

    Supply agreements signed with major contractors in Malaysia and Vietnam earlier this year has increased sales from local operators. More than 30 tools have already been dispatched this year to the Middle East, Far East, the USA and Canada, increasing the number of tools sold to 270.

    This development comes at a time of growth in the company after reporting that it has doubled its revenue year-on-year to £9m in 2014.

    Lance Davis, Director of Deep Casing Tools, said: “New clients in Europe, the Far East and the United States have increased tool demand to improve the well construction process. A combined office and warehouse facility was established in the Jebel Ali Free Zone (JAFZA) in the United Arab Emirates earlier this year to support the growing customer base in the Middle and Far East. Additional sales and operational personnel were employed to support increased demand which has resulted in new orders. Trials are also underway with new operators in the Far East, which should continue a successful year for the company.”

    http://www.scandoil.com/moxie-bm2/news/increasing-demand-boosts-sales-for-deep-casing-too.shtml

    Deep Casing Tools’ drill-thru turbine motor provides significant time and cost savings when compared to conventional methods. With the new ability to ream while running in, the casing can be run sooner while the hole is in best condition, eliminating wiper trips and open hole exposure time.

    Attached Files
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    Summary of Weekly Petroleum Data for the Week Ending May 29

    U.S. crude oil refinery inputs averaged 16.4 million barrels per day during the week ending May 29, 2015, 43,000 barrels per day less than the previous week’s average. Refineries operated at 93.2% of their operable capacity last week. Gasoline production decreased last week, averaging 9.4 million barrels per day. Distillate fuel production increased last week, averaging over 5.0 million barrels per day.

    U.S. crude oil imports averaged nearly 7.4 million barrels per day last week, up by 677,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged over 7.0 million barrels per day, 1.3% below the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 692,000 barrels per day. Distillate fuel imports averaged 64,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 1.9 million barrels from the previous week. At 477.4 million barrels, U.S. crude oil inventories remain near levels not seen for this time of year in at least the last 80 years. Total motor gasoline inventories decreased by 0.3 million barrels last week, but are above the upper limit of the average range. Finished gasoline inventories increased while blending components inventories decreased last week. Distillate fuel inventories increased by 3.8 million barrels last week and are in the middle of the average range for this time of year. Propane/propylene inventories rose 3.8 million barrels last week and are well above the upper limit of the average range. Total commercial petroleum inventories increased by 7.4 million barrels last week.

    Total products supplied over the last four-week period averaged over 19.9 million barrels per day, up by 4.3% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged about 9.3 million barrels per day, up by 1.1% from the same period last year. Distillate fuel product supplied averaged over 4.0 million barrels per day over the last four weeks, down by 1.6% from the same period last year. Jet fuel product supplied is up 7.8% compared to the same four-week period last year.

    http://ir.eia.gov/wpsr/wpsrsummary.pdf
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    Freeport may sell less than 20 pct of oil, gas unit in IPO

    Freeport-McMoRan Inc, which is exploring a public offer for a stake in its oil and gas business, will likely sell off less than 20 percent of the unit, Freeport Chief Financial Officer Kathleen Quirk said on Wednesday.

    Freeport said in April it was mulling an initial public offering for a minority stake in the unit to raise funds for project development, but did not say how much it planned to sell.

    Keeping 80 percent of the unit gives Freeport some tax advantages, Quirk told a Deutsche Bank AG conference in Chicago.

    Freeport, the biggest U.S.-based copper miner, expects to make a decision on the IPO in the Fall.

    http://www.reuters.com/article/2015/06/03/fcx-ipo-unit-idUSL1N0YP2O220150603
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    CNRL says ramping up oil sands output as Alberta wildfires ease

    Canadian Natural Resources Ltd said on Wednesday it is ramping up production at its 30,000 barrel per day Kirby South oil sands project in northern Alberta as the wildfire threat in the region eases.

    The company was forced to cut production to 12,000 bpd last week because of wildfire disruptions.

    Canadian Natural also said safety checks and equipment assessments at its 80,000 bpd Primrose project, which was evacuated because of the fire threat, will be taking place over the "next several days", along with a staged start-up of production.

    Spokeswoman Julie Woo said only minor equipment repairs are required but until the assessment is complete, no timeline will be available for when Primrose will reach full capacity.

    http://www.reuters.com/article/2015/06/03/canada-oil-sands-fires-idUSL1N0YP2NT20150603
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    The Texas Natgas Massacre: By Bill Powers

    Natural gas production in Texas in Q1 2015 declined 1.5 billion cubic feet per day (bcf/d), results from the Texas Railroad Commission (RRC) show. That's a 5.5% decline on the 22 bcf/d Texas produces-a full one third of all natural gas production in the USA.

    Conservatively, I expect a 15% decline in the Lone Star state for all of 2015. That would result in a loss of more than 3 bcf/d.

    In fact, that's very conservative as the collapse in Texas rig count from 891 a year ago to only 373 for the week ending 5/15/2015-a 58% drop-is having a profound impact on gas production in the state.

    The combination of thousands of wells drilled in the past few years that are still in the high-decline portion of their lifecycle and such a large reduction in drilling activity indicates that Texas is on track for an epic decline in gas production in 2015.

    To be sure, the reduced output is partly to blame on slumping activity levels. Investors should remember that the 1.5 bcf/d decline in Q1 2015 occurred with an average of 647 land rigs running in the state. As of May 15, 2015 there were only 372 rigs working in the state. (Source: Baker Hughes)

    Now, considering there is usually a six-month lag between falling rig counts and declining production, the drop in Texas in the first three months of 2015 is remarkable. More importantly, the quick drop in Q1 indicates the second half of year is likely to see a more pronounced fall off in production barring a quick rebound in activity.

    Below is a table tallying up the declines by major Texas plays in Q1 along with conventional production as well as my projected decline for the entire year:

    Play Name Decline in Q1 2015 Projected 2015 Decline
    Barnett .4 bcf/d 1 bcf/d
    Eagle Ford .33 bcf/d .75 bcf/d
    Permian .2 bcf/d .4 bcf/d
    Granite Wash .25 bcf/d .5 bcf/d
    Haynesville 0 0
    Conventional .3 bcf/d .6 bcf/d
    Total 1.5 bcf/d 3.25 bcf/d

    http://www.oilvoice.com/n/The-Texas-Natgas-Massacre/39293c50a9bd.aspx?utm_source=twitterfeed&utm_medium=twitter&utm_campaign=Feed%3A+OilvoiceHeadlines+%28OilVoice+Headlines%29
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    Venezuela finds new front in attack on U.S. fracking: water

    Venezuela sought to open a new front in its months-long verbal assault on the U.S. shale oil industry on Wednesday, suggesting it posed a grave threat to water supplies.

    In the latest criticism of the hydraulic fracturing technology that has yielded a gusher of crude supplies in Venezuela's biggest oil market, oil minister Asdrubal Chavez cited the "huge environmental impact" from shale.

    "This does not seem to raise any concerns among the governments promoting it or the companies involved," he told an OPEC seminar in Vienna attended by chief executives of some of the world's biggest oil companies, including Exxon and BP, both of which operate in U.S. shale.

    "It is a responsibility of the conventional crude oil-producing countries to develop price mechanisms that take into account these economic and geopolitical actors that promote technologies that threaten the availability of the fundamental resource for human existence: water."

    The comments echo those of environmental activists in the United States who have questioned both the extensive amount of water that must be injected into shale wells, and also the risk that the chemical-laced mixes used in fracking could seep into groundwater.

    The issue is a difficult one for scientists because in many places data on water quality has rarely been taken before the energy extraction began.

    After years of study, the U.S. Environmental Protection Agency is expected soon to release a landmark report on the possible impact of fracking on drinking water. Other existing research has failed to identify any systemic problems, although a handful of reported incidents have raised public concerns.

    The comments from Venezuela are its latest broadside against the rise of an industry that is widely cited for tipping the world's oil market into oversupply and precipitating a collapse in oil prices that has slammed the increasingly cash-strapped and unpopular government in the midst of a deep recession.

    Chavez blamed fracking for creating an "involuntary price war among oil-producing brother countries".

    President Nicolas Maduro has for months alleged that the United States is deliberately flooding the market with shale oil to sink prices and destabilise his OPEC nation, whose crude shipments to U.S. refiners have halved over the past decade.

    http://www.reuters.com/article/2015/06/03/opec-meeting-venezuela-fracking-idUSL1N0YP11A20150603
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    Alternative Energy

    At OPEC the Saudi Oil Minister Mainly Wants to Discuss Solar Power

    Everybody wants to know what the oil minister for Saudi Arabia thinks. These days, it's all about solar power.

    He's talking about it. A lot. Perhaps more than ever before. And some people in Saudi Arabia say it's for real this time. This matters, because it shows just how much renewable power is disrupting the traditional energy industry that's dominated for more than a century.

    In Vienna today, where OPEC ministers are meeting with the leaders of the world's biggest oil companies, Saudi oil minister Ali al-Naimi was asked an open-ended question that generated this revealing answer.

    Reporter: What would you like to hear from the oil executives over the next two days?

    Al-Naimi: What do they think the future holds? ... On the whole energy spectrum.

    Reporter: What do you think is interesting that is going on right now in the energy spectrum?

    Al-Naimi: Solar energy. It's an opportunity for everybody.

    It's interesting because just two weeks ago, while on a panel in Paris, the minister spoke at length about the nation's ambitious plans to push into solar power, recognizing that one day its fossil fuel exports will end. Al-Naimi said Saudi Arabia will be exporting lots of  electricity, rather than oil.

    We've heard this before, but so far almost nothing has happened. Saudi Arabia, the land of constant sunshine, today has less than 50 megawatts of solar power capacity, 0.1 percent of what exists in Germany, according to Bloomberg New Energy Finance. Much of its power comes from burning oil.

    This time it's different, according to Mohamed Ramady, petroleum professor at King Fahd University in Dhahran, who said a recent reorganization of the Saudi energy industry and related government ministries will spur solar-power development.

    "It is going to happen this time,'' he said.

    http://www.bloomberg.com/news/articles/2015-06-03/at-opec-the-saudi-oil-minister-mainly-wants-to-discuss-solar-power
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    Power line standoff holds back Germany's green energy drive

    Nestled in the hills of northern Bavaria, residents of Pegnitz once enthusiastically embraced Germany's green energy programme. Now they are pushing back, upset that high voltage cables and pylons are planned across their tiny town.

    It is a crucial phase in Chancellor Angela Merkel's "Energiewende", or shift from nuclear power and fossil fuels towards renewable energy sources -- a policy that has put Germany on the map as a leader on green issues before a G7 meeting on June 7-8 and a climate summit at the end of the year.

    But the resistance is developing into a major headache for Merkel. It is dividing her coalition, undermining her most ambitious domestic policy, creating uncertainty for some of Germany's biggest companies, and threatening the goal of producing nearly half of all power from renewable sources by 2025 while remaining Europe's economic powerhouse.

    One of three main power lines carrying wind power from the breezy north to the industrial south would cut through Pegnitz. Many of its 14,000 residents worry that it will destroy the landscape, devalue property and bring unknown health risks.

    "We are absolutely in favour of the Energiewende, but the power lines are the wrong way to implement it," Uwe Raab, the mayor of Pegnitz told Reuters. "The people in Pegnitz are frightened and upset."

    The issue is likely to come to a head in the next few weeks as the government has set a deadline of the end of June or start of July to reach agreement on the routes.

    "Studies suggest there could be a link between power lines and cancer," says Markus Bieswanger, leader of a protest group in the town. While there is no clear evidence of this, the uncertainty is enough to unsettle the public.

    Other towns are also in revolt. Since the federal network agency presented its master plan to build the three high-voltage direct-current transmission lines from north to south, protest groups have formed across the country.

    The conflict has escalated since the combative premier of Bavaria, Horst Seehofer, head of Merkel's sister party, the Christian Social Union (CSU), bowed to public concern and publicly revoked his support for the grid expansion.

    So the governing coalition has delayed a decision on whether to go ahead with the three power lines several times, creating uncertainty for the economy and Merkel's grand project -- just as it has also delayed a plan to reduce emissions from coal plants under pressure from miners and industry.

    Underground cabling and modernising existing pylons could be a solution at least in some areas, the net operators say.

    But Raab, the mayor, remains sceptical. He fears that protests could turn violent as was the case in the Bavarian town of Wackersdorf in the 1980s. Back then, citizens prevented the construction of a nuclear reprocessing plant. During clashes with police, hundreds of people were hurt and some even killed.

    http://www.reuters.com/article/2015/06/03/germany-energy-protests-idUSL6N0WH0WH20150603
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    Uranium

    Anatolia and Uranium Resources on fast track to production with merger

    Uranium hopeful Anatolia Energy on Thursday announced that it had reached a merger agreement with US-based Uranium Resources to create a larger diversified uranium development and exploration business. 

    Under the terms of the transaction, Uranium Resources would acquire full control of the ASX-listed Anatolia by offering shareholders 0.06579 of its own shares for every one Anatolia share held. 

    The offer valued Anatolia shares at A$0.115 a share, and represented a premium of 29.1% on the company’s closing price prior to the announcement of the merger, and a premium of 47.3% on the 30-day volume-weighted average price.

    On the completion of the merger, Anatolia shareholders would hold a 40.6% interest in the combined entity, with Uranium Resources shareholders owning 59.4%. Anatolia MD and CEO Paul Cronin said on Wednesday that the merger with Uranium Resources would provide a solution to Anatolia’s current objective of advancing its Temrezli project, in Turkey, into production as quickly as possible. 

    Cronin said that the merger brought with it the possibility of reducing up-front capital costs for the Temrezli project if the merged entity could successfully relocate and use Uranium Resources’ Rosita processing plant, in South Texas. “The Rosita processing plant had major upgrades and additions in 2007/8, before construction was halted. It is fit for our Temrezli project and has the added benefit of already being designed and constructed with the ability to scale-up the production profile from 800 000 lb/y uranium oxide (U3O8), to 1.6-million pounds U3O8 a year, with some additional upgrades, which will accommodate potential future production from satellite operations that may feed into the Temrezli central processing plant.” 

    A February prefeasibility study into the Temrezli project, based on a central processing plant delivering 1.2-million tonnes a year of U3O8, estimated that a capital investment of $41-million would be required. 

    http://www.miningweekly.com/article/anatolia-and-uranium-resources-on-fast-track-to-production-with-merger-2015-06-04
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    Precious Metals

    Lonmin’s value near an all-time low

    Three years of falling platinum prices have left Lonmin Plc near an all-time low and valued at just $1.3 billion. That’s down from a peak of more than $12 billion in 2007 for the miner of the metal used in cars and jewelry. And now the company’s largest shareholder, mining and commodities giant Glencore Plc, is getting set to divest its 23.9 percent holding in Lonmin by distributing the stake to its shareholders.

    Glencore, which acquired its stake in Lonmin in the 2013 takeover of Xstrata Plc, is divesting the holding because “we do not trade platinum and have no special insight into the market,” Chief Executive Officer Ivan Glasenberg said when the plan was announced in February.

    After Glencore distributes its Lonmin shares on June 9, that may create a group of sellers that want to dispose of their holding, according to Investec. It also could create an opportunity for a buyer.

    “Certainly they are a target — their market valuation is more or less the same as sinking a shaft,” Adrian Williams, a mining analyst at Avior Capital Markets Ltd. in Johannesburg, said by phone. “It’s not a particularly well-run company, but they’ve got good assets.”

    While excessive stockpiles of platinum may continue to keep prices depressed for now, at some point the supply-demand balance will shift. The average price of the metal is expected to increase more than 25 percent to $1,618 an ounce by 2018, according to the median forecast of 23 analysts surveyed by Bloomberg.

    For buyers willing to make an early bet on the rebound, Lonmin represents a bargain.

    Lonmin may appeal to a larger competitor such as Impala Platinum Holdings Ltd., according to Stanlib Asset Management Ltd. Impala is building new shafts and has capacity to treat additional ore at its own processing facilities, allowing it to produce platinum cheaper. A Chinese buyer may be interested in acquiring Lonmin as a way to lock in a supply of the metal, according to Imara SP Reid Pty Ltd.

    http://www.moneyweb.co.za/news/companies-and-deals/lonmins-value-near-an-all-time-low/
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    Base Metals

    Zambia mulls cutting mining royalties even further

    According to state broadcaster ZNBC, mines minister Christopher Yaluma said that lower taxes would make underground mining more cost effective.

    Zambia set mining royalties for both open-pit and underground mines at 9% in April, abandoning a short-lived tax hike that would have seen the government charging as much as 20%.

    The royalty increase prompted warnings of closures and thousands of job losses, underscoring a growing trend across the continent, where governments from Tanzania to Guinea are changing tax regimes and adjusting ownership structures to get a larger share of natural resources.

    From 1997 to 2013, mining attracted $12.6bn in foreign investment to Zambia, according to industry figures. The capital injection helped the southern African nation become one of the continent’s star economic performers, with average annual GDP growth of 6.4% over the last decade.

    Today, mining employs 90,000 people and contributes about three-quarters of the country’s foreign exchange earnings and 25-30% of government revenue.

    http://www.mining.com/zambia-mulls-cutting-mining-royalties-even-further/?utm_source=twitterfeed&utm_medium=twitter
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    Steel, Iron Ore and Coal

    China to curb illegal coal production, power quota related

    China pledged to further curb illegal coal production in a document on the website of the National Development and Reform Commission on June 3, which released it jointly with the National Energy Administration and the State Administration of coal mine Safety.

    One strict policy is that utilities’ power generation quota would be related to how they implement thermal coal contracts signed with producers.
     
    If one utility buys thermal coal from mines under illegal production, its annual power generation quota will be reduced. For 2015, the reduced power generation quota would equal 1.2 times of the volume of thermal coal the utility buys from mines under illegal production; for 2016, the ratio would be 1.5 times.
     
    An overall inspection of coal mine construction and production is required to be carried out by various levels of governments in coal-producing areas.
     
    A list of mines illegally built, in production beyond capacity or in unsafe conditions would be publicized on the website of the provincial government, and be submitted to the above-mentioned three parties and then to transportation authorities, which may restrict coal transportation for mines on the list.
     
    All illegal mines would asked to shut operation to rectify within a time limit, and those fails to do so would be forced to close by the provincial government.

    http://en.sxcoal.com/0/119966/DataShow.html
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    Richard’s Bay coal market faces changes after complaints to globalCOAL



    Coal trading platform globalCOAL will weigh changes to South Africa’s Richard’s Bay market this week after complaints about high bids for unusual tonnages.

    Since January there has been a jump in the number of buyers looking for non-standard tonnages for RB1 coal, said globalCOAL, the world’s top physical coal broker.

    Traders said those bids are often above the market, which some think is skewing prices higher, with a knock-on effect on the API 4 index, the benchmark for pricing South African coal.

    The vast majority of bids and offers are made in multiples of 25,000 tonnes but traders said that in recent months there had been a rise in bids for non-standard amounts, such as 60,000 tonnes, which fewer sellers could meet, particularly at short notice.

    Such volumes made up less than 1 percent of trade on the market over the last five years, globalCOAL data shows. This year, that has jumped to 14 percent.

    Eoghan Cunningham, chief executive of globalCOAL, said its compliance committee would meet on Wednesday. It will review responses from members regarding the functioning of the market and whether it should limit volumes to multiples of 25,000 tonnes on the physical market.

    “GlobalCOAL has received a substantial number of submissions from market members and will deliberate on that feedback,” Cunningham said.

    One trader told Reuters that by entering bids on screen that no seller is in a position meet, a bidder could artificially push up prices.

    “The way you do that is by the timing and size of those parcels,” the trader said.

    As the market is not particularly liquid, bids and offers help inform pricing on the API 4 index, which is calculated using data gathered by Argus and IHS McCloskey.

    http://www.miningne.ws/2015/06/03/richards-bay-coal-market-faces-changes-after-complaints-to-globalcoal/
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    China Coal fails to gain approval for low-CV coal fired power project

    China coal energy Group, the country’s No. 2 coal producer, failed to obtain approval from the environmental watchdog for a low-CV coal firedpower generation project in northern Shanxi province.

    The Ministry of Environmental Protection refused to give go-ahead to the environmental impact assessment of a new power project proposed byChina coal Pingshuo Group, the major branch of China Coal Energy, the ministry said on May 29.

    This means that China Coal Pingshuo Group would not be able to start construction on the project, according to China’s environmental impact assessment law.

    One of the main reasons is that the proposed project is located in Shuozhou City, where coal-fired power plants are intensively distributed and air quality is far below the required level, the ministry said.

    Meanwhile, the project failed to meet the requirement that new coal-fired power projects except cogeneration are prohibited in prefecture-level cities in China, as stipulated in the 12th Five-Year plan for prevention and control of atmospheric pollution, it said.

    On January 1, China implemented the "harshest-ever" new environmental protection law, with heavy fines on those violating the relevant requirements. This would stimulate the clean use of coal and demand for premium coal in the long run, insiders said.

    http://en.sxcoal.com/0/119930/DataShow.html
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    Australia's Port Hedland iron ore exports to China rise 5.2 pct in May

    Australia's iron ore exports to China from Port Hedland rose 5.2 percent in May from a month earlier, while total shipments from the port hit a record high, figures released on Thursday showed.

    Exports of the steelmaking commodity to Australia's biggest trading partner climbed to 31.69 million tonnes last month from 30.1 million tonnes in April, according to the Pilbara Ports Authority, which operates the world's biggest export terminal for iron ore.

    Total shipments of iron ore from Port Hedland hit an all time peak of 38 million tonnes in May, up 7.3 percent on the previous month. Shipments to Japan jumped 67 percent in the month to 2.15 million tonnes.

    Iron ore in recent years has replaced coal as the country's greatest source of foreign income.

    Port Hedland, which handles about a fifth of the world's seaborne iron ore trade, is used by BHP Billiton and Fortescue Metals Group to ship around 35 million tonnes a month, the lion's share to Chinese steel mills.

    The inventory of imported iron ore at 44 Chinese ports dropped 1.95 million tonnes to 86.7 million tonnes by May 22 , latest data from industry consultancy SteelHome showed.

    http://www.reuters.com/article/2015/06/04/australia-iron-may-idUSL3N0YQ1SC20150604
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    SDI, AK Steel, ArcelorMittal USA, CSI, Nucor and US Steel file case against 5 countries

    Steel Dynamics Inc, AK Steel Corporation, ArcelorMittal USA, California Steel Industries, Nucor Corporation and United States Steel Corporation have petitioned to the US Department of Commerce and the US International Trade Commission to apply antidumping and countervailing duties against imports of corrosion resistant steel from China, India, Italy, South Korea, and Taiwan.

    http://steelguru.com/steel/sdi-ak-steel-arcelormittal-usa-csi-nucor-and-us-steel-file-case-against-5-countries-on-corrosion-resistant-steel/425909#tag
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