Mark Latham Commodity Equity Intelligence Service

Wednesday 2nd December 2015
Background Stories on www.commodityintelligence.com

News and Views:

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    Macro

    US CEO Economic Confidence Implodes, Drops To Lowest In Three Years


    Following a relentless barrage of recessionary industrial and manufacturing data, moments ago the Business Roundtable released its latest, fourth quarter 2015 CEO Economic Outlook Survey, and it is an absolute disaster.

    According to the report, for the third quarter in a row, CEOs expressed growing caution about the U.S. economy’s near-term prospects and indicated they are moderating their plans for capital investment over the next six months, according to the Business Roundtable fourth quarter 2015 CEO Economic Outlook Survey, released today.

    The Business Roundtable CEO Economic Outlook Index – a composite of CEO projections for sales and plans for capital spending and hiring over the next six months – declined 6.6 points, from 74.1 in the third quarter of 2015 to 67.5 in the fourth quarter.

    This third consecutive quarterly decline brought the Index to its lowest level in three years. As shown in the chart below CEOs are as unconfident in the recovery as they were in late 2012. In other words, CEO confidence has just dropped to a level last seen when the Fed was about to unveil QE3.


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    RWE says to put renewables, grids, retail into new unit


    RWE on Tuesday confirmed plans to put its renewables, grids and retail businesses into a separate entity, about 10 percent of which it aims to place in an initial public offering (IPO) at the end of next year.

    Germany's second-largest utility said the IPO, to take place along with a capital increase, could result in the sale of additional stakes in the new subsidiary "at the same or later point in time".


    Read more at Reutershttp://www.reuters.com/article/2015/12/01/rwe-breakup-idUSFWN13Q04220151201#6x8tJMxbsLhiJxdq.99
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    Oil and Gas

    Saudi Oil Minister Pledges to Listen to Other OPEC Members


    Saudi Arabia will discuss all issues at the OPEC meeting on Friday and listen to concerns of other members, said the nation’s Oil Minister Ali al-Naimi.

    “We have a meeting on Friday, we will discuss all these issues,” al-Naimi told reporters Tuesday. “We will listen and then decide.”

    Naimi spoke as he arrived in Vienna for a meeting that is widely expected to ratify the Organization of Petroleum Exporting Countries’ decision a year ago to defend market share rather than support prices. Some members including Iran and Venezuelacontinue to push for the group to reverse course and curb production.

    Oil prices just completed the biggest monthly decline since July as OPEC, which pumps about 40 percent of the world’s supply, showed few signs of trimming production. Crude has fallen almost 40 percent the past year as a record surplus persisted while global producers fight for market share.

    When asked if Saudi Arabia will stick to its strategy of defending its markets against competing supplies, al-Naimi said: “Who said we are keeping market share strategy? Did I ever say?”

    Iranian Oil Minister Bijan Namdar Zanganeh sent a letter to OPEC calling for a cut in excess output, Mehr news agency reported Tuesday. The group should reduce current production of 31.3 million barrels a day to come back in line with its target of 30 million, Zanganeh said.

    http://www.bloomberg.com/news/articles/2015-12-01/saudi-oil-minister-pledges-to-listen-to-other-opec-members

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    LNG Falls Faster Than Oil as U.S. Fracking Spurs Growing Glut


    Spare a thought for anyone who bet on a recovery in liquefied natural gas prices after last year’s 45 percent plunge.

    LNG to northeast Asia, home to the world’s biggest consumers, plunged 25 percent this year, outpacing Brent’s 23 percent slump as of Tuesday. While analyst estimates compiled by Bloomberg show that crude will recover in 2016, prices for the super-chilled fuel will probably extend declines by as much as 25 percent, according to a survey by Bloomberg.

    As the U.S. gears up to start a new LNG plant for the first time in more than four decades and output from Australia to Angola increases, the glut will peak in 2018, according to Sanford C. Bernstein & Co. LNG, which Goldman Sachs Group Inc. said will this year overtake iron ore as the world’s second most valuable commodity by trade, fell to its lowest level since 2010 in October, according to World Gas Intelligence in New York.

    “The biggest story is the increase in LNG export capacity,” said Mike Fulwood, principal for global gas at Nexant Inc.’s Energy and Chemicals Advisory in London. Capacity will increase 14 percent through the fourth quarter next year, “while demand is increasing much more slowly in the main LNG importing countries.”

    The outlook for prices, global demand as well as new capacity from U.S. and Australia are all topics that will be discussed by executives, traders and analysts this week at the World LNG Summit in Rome.

    As the price plunge ripples through markets, the growing output is impacting the world’s biggest producers of the fuel. Qatar waived a $1 billion penalty for lower imports under an Indian contract, while Russia’s Gazprom PJSC offered its first-ever gas auctions in Europe in September.

    LNG for delivery in the next four to eight weeks in Asia cost $7.55 per million British thermal units as of Nov. 23, according to WGI. The spot price may fall as low as $5.70 next year, according to the survey of nine traders, executives and analysts. Brent crude may average $57.30 a barrel next year, according to 48 estimates on Bloomberg. It traded at $44.30 on Tuesday.

    Cheniere Energy Inc.’s Sabine Pass will be the first U.S. export facility since ConocoPhillips started a plant in Alaska in 1969. As a result of a boom in production from shale formations, the U.S. has become the world’s biggest oil and gas producer, also set to transform itself from an importer into a net exporter of LNG.

    “The excess gas that exists in the U.S. will find its way out and will probably mean lower prices for the rest of the world,” Frank van Doorn, head of gas and LNG trading at Vattenfall AB’s trading unit, said in an interview in Barcelona on Nov. 25.

    While the U.S. export facilities will add another 4.5 million metric tons, next year’s main addition will be in Australia, where another 27.2 million tons will come online. That compares with a total planned capacity of 326 million tons. Angola will also restart a plant that’s been shut since April 2014 because of technical issues.

    http://www.bloomberg.com/news/articles/2015-12-02/lng-falls-faster-than-oil-as-u-s-fracking-spurs-growing-glut
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    Russian Oil Output Stays Near Record Level as OPEC Set to Meet


    Russian oil output in November hovered near a post-Soviet record set the previous month, shrugging off a crude-price slump before OPEC gathers for its annual meeting in Vienna.

    Production of crude and gas condensate averaged 10.779 million barrels a day during the month, according to data from the Energy Ministry’s CDU-TEK unit. That’s an increase of 1.3 percent from a year earlier and slightly beneath the 10.782 million barrels a day record in October.

    The Organization of Petroleum Exporting Countries meets on Dec. 4 to discuss its output limit a year after it chose to defend market share rather than cut production amid a supply glut. That decision compounded the price slump as Saudi Arabia pursued a policy that squeezed U.S. shale producers and other higher-cost output.

    Russia, which isn’t a member of OPEC, continues to build output as a weakened ruble reduces costs for drilling and the nation’s tax system helps compensate for the lower price.

    Crude exports reached 5.32 million barrels of oil a day in November, an 11 percent gain from the previous year and a 2.4 percent decline from the previous month.

    http://www.bloomberg.com/news/articles/2015-12-02/russian-oil-output-stays-near-record-level-as-opec-set-to-meet
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    China's Fosun looks to buy Israel gas fields from Delek -Israeli source


    Chinese investment group Fosun International is interested in buying two small natural gas fields in the eastern Mediterranean from Israel's Delek Group, a source close to Delek said on Tuesday.

    Delek, which controls a number of gas fields offshore Israel, is being forced to sell off some assets by the government in an effort to open the sector to new competition.

    According to a government plan expected to be implemented in the coming weeks, the company will have 14 months to find a buyer for the undeveloped Tanin and Karish fields, which have combined gas reserves of 3 trillion cubic feet.

    "Fosun is interested in the two fields," the source told Reuters on condition of anonymity.

    A spokesperson for Fosun and officials at Delek declined to comment.

    It would not be the first big deal between the companies. In June, Fosun bought a controlling stake in insurer Phoenix Holdings from Delek for 1.8 billion shekels ($464.12 million).

    Already in the race is Italian utility Edison, which has entered talks to buy Tanin and Karish, and last month Israel's energy minister discussed a possible sale with the CEO of rival Italian group ENI.

    Earlier this month Delek paid its partner Noble Energy $67 million for the rights to sell Noble's 47 percent stake in the two fields.

    http://af.reuters.com/article/energyOilNews/idAFL8N13Q23O20151201
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    ArcLight, Freepoint to buy Hovensa St. Croix refinery, plan storage hub


    Private equity firm ArcLight Capital, together with commodities trader Freepoint, unveiled plans on Tuesday to buy the Hovensa refinery complex in St. Croix in the Caribbean and turn it into a massive oil storage hub.

    The partners also said China's Sinopec, Asia's largest oil refiner, has leased 75 percent of Hovensa's existing crude oil storage capacity in a 10-year strategic deal for one of Asia's biggest oil market players, according to a statement on Tuesday.

    Existing capacity at Hovensa is for 13 million barrels of crude and oil products. Freepoint, which supplies fuel oil to Puerto Rico's power utility, will lease 2 million barrels of fuel oil storage at the site.

    Boston-based ArcLight, which has operated oil storage facilities around the world, will be the majority owner of Hovensa, a refinery formerly owned by Hess and Venezuela's state oil company, PDVSA, that has been shuttered in recent years.

    Stamford, Connecticut-based Freepoint, a merchant trader of oil and other commodities, said it would have a 20 percent minority stake in the venture.

    The partners have plans to invest at least $125 million to boost storage and tanker loading and unloading capacity at the site in the U.S. Virgin Islands by the end of 2016, a source familiar with the plans said.

    The investment will bring Hovensa's total oil storage capacity to as much as 30 million barrels and make it one of the premiere oil storage and trans-shipment hubs in the strategic Caribbean region, the source said. The plans also involve deepening the port to allow for fully loaded very large crude carriers to dock at the hub.

    Key to the deal is the long-term lease of most of Hovensa's 13 million in current operational oil storage capacity to Sinopec, which has rapidly become a major player in the Americas crude and oil product markets.

    The revival of Hovensa comes as competing oil traders scramble to get hold of more Caribbean oil storage capacity during the rout in oil prices.

    Current technical conditions in the oil futures market is rewarding oil traders that store oil for future profit instead of immediately selling it, creating high demand for storage assets like Hovensa's tanks.

    Hovensa could also regain its stature as a major trans-shipment and oil-blending facility perched near U.S. and Latin American markets. It could also be a staging point for crude exports to Asia, including through the Panama Canal, which is being expanded to accommodate larger tanker ships.

    For Freepoint, which leases other oil storage facilities in the Americas, the deal represents an expansion of capacity to boost its trading in the Americas. It is also an ideal staging point to deliver fuel oil to Puerto Rico, where it has a long-term supply deal with the island's utility, which uses fuel oil for power generation.

    Freepoint said it helped to negotiate the long-term lease of crude storage at Hovensa to Sinopec. Terms of the leasing deal were not disclosed.

    The Hovensa deal, including the forthcoming investments to expand the facility, is likely to expand Caribbean region merchant oil storage capacity by as much as 42 percent, ArcLight and Freepoint said. They added the deal could establish the partners as market rivals to Buckeye Partners, currently the biggest regional player.

    Read more at Reutershttp://www.reuters.com/article/2015/12/01/hovensa-refinery-storage-idUSL1N13Q17J20151201#ICjRzZiEcarDdQEd.99

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    Santos brokers look to sell A$585 mln in unwanted stock


    Santos Ltd retail investors took up 57 percent of their entitlements in a A$1.35 billion ($987 million) share offer, the oil and gas producer said on Wednesday, better than the one-third uptake some media reports had flagged as energy prices remain weak.

    The sale to retail investors was part of a A$2.5 billion entitlement offer announced in November after Santos snubbed a takeover proposal and sold some assets to cut debt and prepare for a prolonged period of weak oil prices.

    The offer was fully underwritten by Citi, Deutsche Bank and UBS, who will put the remaining shares up for auction, due to be completed before the market opens on Thursday.

    Institutions last month took up 86 percent of their entitlements in the earlier leg of the offer which raised A$1.17 billion. The unsold shares from that offer were sold off at A$4.60 a share, a premium to the entitlement offer price of A$3.85.

    "The results of the...offer demonstrate recognition from shareholders of the long-term value in Santos and their support for the initiatives the company has taken to substantially strengthen its balance sheet," Executive Chairman Peter Coates said in a statement.

    The Australian Financial Review newspaper had said there had been talk the underwriters were left holding between A$900 million and A$1 billion worth of shares in the retail offer.

    The A$3.85 offer price was pitched at a massive 35 percent discount to Santos' closing price before it was announced.


    Read more at Reutershttp://www.reuters.com/article/2015/12/02/santos-ltd-equity-idUSL3N13R1SY20151202#dP6SOdTgUDsgBf6Z.99
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    Texas is the most attractive place for oil & gas investment


    Separately, a Canadian think tank said that of 14 jurisdictions having large oil and natural gas reserves, Texas topped the list followed by the UAE, Alberta, Qatar, and Kuwait.

    The Fraser Institute of Calgary reported that Texas was the most attractive jurisdiction for oil and gas investment worldwide based on an annual global survey of petroleum sector executives.

    The 2015 Global Petroleum Survey rated 126 jurisdictions around the world based on barriers to investment such as high taxes, costly regulatory obligations, and uncertainty over environmental regulations as well as on estimated oil and gas reserves.

    “Texas remains a beacon of stability in the oil and gas sector with its wealth of proven reserves and clear and consistent regulatory environment,” said Kenneth Green, Fraser Institute senior director, natural resource studies, and director of the Global Petroleum Survey.

    The survey also featured an alternate ranking format, which ignored proved oil and gas reserves and focuses solely on survey responses about the extent to which government policies can deter oil and gas investment.

    In this format, seven out of the top 10 were US locations. The Netherlands ranked No. 1, followed by Alabama, Oklahoma, Texas, Mississippi, Kansas, Arkansas, Saskatchewan, North Dakota, and Manitoba.

    http://www.ogj.com/articles/2015/12/market-watch-oil-prices-fall-slightly-ahead-of-opec-meeting.html
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    America's biggest gas field finally succumbs to downturn


    The drilling rigs are gone from the hills surrounding this Pennsylvania town of 30,000. The hotels and bars are quieter too, no longer packed with the workers who flocked in their thousands to America's newest and biggest gas field.

    The drilling boom of the past seven years is over, even though thousands of existing wells in the Marcellus region still produce a fifth of U.S. natural gas supply. Now, exclusive data made available to Reuters points to a slump in drilling that could hit production next year, defying government and industry expectations of a further rise in output.

    Preliminary figures provided by DrillingInfo, which monitors rig activity, showed drilling permits issued for the 90,000-square mile (233,100 sq km) reservoir beneath Pennsylvania, Ohio, and West Virginia, slumped to 68 in October from 76 in September. There were still 160 permits issued in June and over 600 a month at the peak in 2010.

    "The fact that it is slowing and the speed at which it is slowing" sums up the state of U.S. shale gas industry, Allen Gilmer, chief executive officer of DrillingInfo, told Reuters.

    Recent months are subject to revisions, DrillingInfo said, but a retreat of such magnitude, combined with falling output from older wells, would mark a turning point for the Marcellus - and the whole U.S. gas market.

    The Energy Information Administration now forecasts overall U.S. gas output to hit a record in 2016 for the sixth year in a row. A drop in Marcellus production could snap that streak and help prop up prices that have fallen by two thirds since 2010.

    U.S. natural gas production has risen 30 percent since 2008 when the development of hydraulic fracturing, or fracking, and horizontal drilling unlocked vast shale gas reserves, swamping the market with new supply and causing a collapse in prices.

    The Marcellus area makes up nearly half of those shale reserves and the government expects the region to keep producing more in the coming years, albeit at a less furious pace.

    To be sure, the impact of the slump in drilling permits could be mitigated by other factors. New pipelines coming online in 2016 will allow hundreds of wells already drilled to be hooked up to the grid. A harsh winter could also boost heating demand for natural gas.

    Still, the retreat could weigh on Marcellus production well into next year, said Grant Nulle, an oil and gas economist at the EIA. "Those are very low numbers," Nulle said. "It is possible that producers could wait six months to drill after obtaining a permit, which could impact production into May or June," he added.

    An as yet unpublished outlook from the EIA, which does not take into account the permit numbers, anticipates lower Marcellus production only through March, and a rise for the rest of the year. The EIA does not expect a full year's decline until 2019.

    While gas keeps flowing, the drilling crews are gone and with gas prices near 14-year lows, producers have choked hundreds of wells in the region in the hope that falling supply will stem the slide.

    Several gas producers, including Chesapeake Energy and Cabot Oil and Gas, have announced production cuts in the region.

    Inflection Energy, a Denver-based privately-owned company with an office in Williamsport, has cut production from 50-70 percent of its wells, company spokesman Matt Henderson said.

    "It is better to choke back than to sell into this market," Henderson said.


    Read more at Reutershttp://www.reuters.com/article/2015/12/02/usa-marcellus-decline-idUSL8N13M49D20151202#45IzYCte4YmhXuYJ.99
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    Kerry: Exxon could lose 'billions' in climate change lawsuit


    If it’s proven that Exxon Mobil Corp. misled investors and the public on the science of climate change, Secretary of State John Kerry said he would be “outraged, furious” and predicted the company could be hit with a record lawsuit.

    “I think that Exxon Mobil stands potentially to lose billions of dollars in what I would imagine would be one of the largest class-action lawsuits in history,” Kerry told Rolling Stone in a wide-ranging interview on foreign policy and climate change.

    Asked if he would support such a lawsuit, Kerry said, “I would support the investigation into what happened, and, based on the facts, I'd pursue the facts. You pursue the truth in this kind of a situation.”

    Reports by InsideClimate News and a team of Columbia University journalists in the Los Angeles Times have accused the oil giant of quietly studying the negative impacts of carbon dioxide on the atmosphere while publicly questioning the science of climate change.

    Exxon has denied the claims. In a letter to Columbia officials earlier this month, the company accused the journalists of engaging in unethical practices and ignoring evidence from the company.

    The reports have led environmental groups and the three major Democratic presidential candidates to push the Department of Justice to investigate. New York Attorney General Eric Schneiderman has also launched a probe.

    Kerry said that, if true, Exxon’s actions would be on par with those of cigarette companies that ignored the cancer-causing nature of their products.

    “It's the same thing,” he said. “It's immoral and incredibly damaging to everybody's global interests. It's a betrayal.”

    http://thehill.com/policy/energy-environment/261668-exxon-could-lose-billions-in-climate-suit-kerry-predicts
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    Alternative Energy

    Solar, wind power output to surpass shale in five years, says Goldman


    New solar and wind capacity additions between 2015 and 2020 will add more power globally than U.S. shale-oil production did during 2010-2015, according to a new report by Goldman Sachs.

    A new equity research report published this week by U.S. investment bank Goldman Sachs examines the low carbon economy and forecasts solar PV and onshore wind will add more to the global energy supply over the next five years than U.S. shale managed over the previous five.

    The report, titled The Low Carbon Economy and produced by Goldman Sachs environmental division GS Sustain, expects a wider transition towards greener and cleaner technologies over the next decade, including LEDs accounting for six out of ten lightbulbs; electric and hybrid vehicles to number 25 million worldwide by 2025 (a ten-fold increase on today’s number), and a reduction of >5 gigatonnes (Gt) of C02 per year by that date.

    However, it is the field of renewable energy that is poised to have the greatest positive impact on our climate, the report finds. Analysts Brian Lee and Jaakko Kooroshy, who worked on the report, believe that solar PV and onshore wind power combined will add the equivalent energy of 6.2 million barrels of oil a day to the world’s energy supply, outstripping the 5.7 million barrels a day of U.S. shale oil produced from the nation’s wells since 2010.

    “Wind and solar are on track to exceed 100 GW in new installations for the first time,” they wrote, delivering more than 1 Gt of carbon emission savings annually and comprising two of the ‘big four’ low carbon technologies that Goldman Sachs believe will drive this lower emissions transition.

    “We identify LEDs, solar PV, onshore wind and electric and hybrid vehicles as clear front-runners in the emerging low-carbon economy.”

    http://reneweconomy.com.au/2015/67742
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    EU approves UK state aid for RWE biomass-fired power plant


    The European Commission has approved British plans to subsidise the conversion of RWE's Lynemouth coal-fired power plant in northern England to burning biomass, sending the German utility company's shares higher.

    The European Commission said on Tuesday a nine-month investigation showed that the project accords with European environmental and energy goals, giving the green light to an agreement struck under Britain's contracts-for-difference (CfD) electricity pricing mechanism to support the project until 2027.

    RWE, which bought the coal-fired power plant in 2012, said it would now take 18 months to adapt the station to run 100 percent on biomass with a generation capacity of 420 megawatts.

    Shares in RWE rose by up to 8.5 percent following the approval, which also coincided with news the company was considering spinning off its retail, networks and renewables units.

    State aid approval for Lynemouth was also positive for Drax , the operator of Britain's biggest coal-fired plant whose conversion of a third unit to biomass is still awaiting state aid approval by the European Commission.

    CfD contracts for the two biomass conversion projects are comparable, analysts said, increasing Drax's chances for its plans to also gain state aid approval.

    "This is positive news for the company, and it could even potentially lead to the government having a more positive outlook on the base load potential of biomass," said Angelos Anastasiou, utilities analyst at Whitman Howard.

    A Drax spokesman said the decision was "encouraging" but the two contracts had differerent underlying technical and economic assumptions.

    The company is considering converting a fourth of the six units at Drax to run on biomass.

    Britain will hold its next auction of renewable energy subsidies by the end of 2016 and a further two over the course of the current government's term, energy minister Amber Rudd said last month.

    It is unclear whether biomass projects will be able to participate in the next rounds but Andrew Koss, chief executive of Drax's operating subsidiary Drax Power, said conversion plans for a fourth biomass unit could be among the most competitive bidders in the scheme.

    "If that happens (full competition under the scheme) we believe our fourth unit would be one of the cheapest," he said during a cross-party Energy and Climate Change Committee hearing in Parliament on Tuesday.


    Read more at Reutershttp://www.reuters.com/article/2015/12/01/eu-energy-uk-biomass-idUSL8N13Q2J520151201#UV7U6uV9X4rUxeQr.99
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    France to spend billions of euros on African green projects


    France plans to spend billions of euros in renewable energy and other environmental projects in its former west African colonies and across Africa over the next five years, President Francois Hollande said on Tuesday.

    Africa produces little of the greenhouse gases such as carbon dioxide, produced by burning fossil fuels, linked by scientists to rapid climate change. But it is particularly vulnerable to a changing climate, as much of its population is poor, rural and dependent on rain-fed agriculture.

    Hollande told a conference on Africa, held as part of climate change talks in Paris, that his government would double investments in renewable energy generation, ranging from wind farms to solar power and hydroelectric projects, across the continent to 2 billion euros ($2 billion) between 2016 and 2020.

    In addition, he said Paris would triple to 1 billion euros a year by 2020 its contribution to Africa's battle with desertification and other climate change challenges.

    Most of that investment will be directed at some former West African colonies, where Paris has significant security interests and has deployed thousands of troops to fight Islamist militants.

    One project, dubbed the "Great Green Wall", was initially intended to create a barrier of trees reaching from the Sahel in west Africa to the Sahara in the east, but will now focus on creating pockets of trees to revive the soil.

    Another aims to protect Lake Chad, which is threatened by pollution.

    African leaders want the biggest polluting nations to commit to financing as part of contributions to an internationally administered Green Climate Fund, that hopes to dispense $100 billion a year after 2020 as a way to finance the developing world's shift towards renewables.


    Read more at Reutershttp://www.reuters.com/article/2015/12/01/climatechange-summit-africa-france-idUSL8N13Q2ZY20151201#f0V1zFUD8JaOd3bM.99
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    Beijing-Tianjin-Hebei realize first near zero emissions coal-fired power plant


    Beijing-Tianjin-Hebei region saw Shenhua Guohua Sanhe power plant first realize near zero emission, after its 3# unit realizing near zero emissions on November 24, local media reported lately.

    The 1.3 GW plant has started comprehensive upgrade on its four units before two years ago, with investment totaling 976 million yuan.

    At present, the emission of smoke, sulfur dioxide and nitrogen oxide of the plant was 508 tonnes, 1,169 tonnes and 2,185 tonnes lesser than the standard emission, falling 85.3%, 60.5% and 88.9% from the prior-upgrade level.

    Coal consumption of the plant dropped 11.3g/KWh, and saved standard coal use of 67,700 tonnes and water use of 60,000 tonnes per year.

    Shenhua Guohua Power Co. has realized near zero emissions upgrade on its 16 units, and it will expand this to 21 by end-2015. By the end of June 2016, the company will realize ultra-low emission in its all units at Beijing-Tianjin-Hebei region.

    The company planned to make all units realize ultra-low emission by 2017, reaching coal consumption to 297g/KWh.

    Analyst said the near zero emissions and 0.001 yuan/t per KWh cost would help coal-fired plants get rid of the main resource of air pollution.

    http://en.sxcoal.com/0/135913/DataShow.html
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    Precious Metals

    Hedge funds have never bet this much on a falling gold price

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    On Tuesday on the Comex market in New York, gold futures with February delivery dates eked out a small gain in brisk post-holiday trade, but remains not far off near five-and-half year lows hit last week.

    Exchanging hands for $1,067.40 gold is down more than $100 an ounce or just under 10% from where it was trading just before the Federal Reserve's interest rate announcement in October which opened the door for a rate rise – which would be the first in nine years – when the bank next meets in two weeks time.

    Last week gold touched $1,053 an ounce, the lowest since February 2010 and November has been the worst month for gold since mid-2013, a year during which the metal fell 28% in value.

    The likelihood that Fed will raise rates from near zero where they have been since December 2008, before the end of the year prompted large futures speculators or "managed money" investors such as hedge funds to dramatically raise bearish bets on the metal.

    Higher interest rates boost the value of the dollar and makes gold less attractive as an investment because the metal is not yield-producing and futures traders have been hammering this home by dumping nearly 140,000 lots or the equivalent of just under 400 tonnes of gold over just four weeks weeks.

    According to the CFTC's weekly Commitment of Traders data speculators cut back long positions – bets that prices will rise – and added to their short positions. That raised bets that gold will be cheaper in future to nearly 11 million ounces.

    At 1.4 million ounces the market is now in its biggest net short position ever, surpassing bearish positions entered into in July and early August. That was the first time hedge funds were net negative since at least 2006, when the Commodity Futures Trading Commission first began tracking the data.

    It's not just gold that is being swamped by negative sentiment. According to the CFTC, 15 of the 24 commodities tracked turned more bearish last week.

    Those include the major commodities like crude oil, copper, soybeans, cotton, corn and wheat where speculators are betting that these commodities will be cheaper in future. Like gold US benchmark oil West Texas Intermediate and North Sea Brent Crude were pushed to the most bearish positioning on record.





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    Base Metals

    BHP to lower copper production costs, increase output


    BHP Billiton plans to lower production costs and increase output at its copper business, remaining optimistic about rising demand in the long term, the company's president of copper said on Tuesday.

    Daniel Malchuk said BHP would lower production costs to $1.08 per pound in its 2017 financial year, from a projected $1.21 per pound in the year ending June 2016.

    "Over this period, the release of latent capacity across the portfolio will also help annual group copper production grow to approximately 1.7 million tonnes at very low cost," Malchuk said in a presentation.

    BHP has said it expects to produce 1.5 million tonnes in the 2016 financial year, down from 1.7 million tonnes in 2015.

    Malchuk said while near-term oversupply in the copper market was weighing on spot prices, attractive long-term fundamentals supported the company's positive outlook.

    He said grade declines, falling investment across the sector, the lack of greenfield projects and expected demand growth in China were likely to constrain industry supply in the long term.

    "At some point in time the copper market will need additional production and probably that is going to happen later in this decade or early in the next decade," Malchuk told reporters on a conference call, adding BHP was not "too fascinated by the spot copper price".

    Copper prices slumped 10 percent in November, the biggest monthly loss since January, and have fallen nearly 27 percent so far this year.

    "If you look at our copper portfolio, these are assets that will be operating for decades. So the value of our assets is not dependent on what happens today or in six months time. It is dependent on what is going to happen in the next 10 or 20 years," Malchuk said.


    Read more at Reutershttp://www.reuters.com/article/2015/12/01/bhp-billiton-copper-idUSL8N13Q2GD20151201#yTC3IoYG8RJf20t1.99
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    Steel, Iron Ore and Coal

    Brazil's Vale estimates $443 mln Samarco impact in 2016


    Brazilian miner Vale SA said in a Tuesday presentation that the impact of the Samarco dam burst could be $443 million in 2016 and that it planned to reduce investments by around $6 billion next year.

    Vale also said it expected to produce between 340 million and 350 million tonnes of iron ore in 2016, an amount that could increase to between 380 million and 400 million tonnes in 2017 and to 420 million and 450 million tonnes in 2020.


    Read more at Reutershttp://www.reuters.com/article/2015/12/01/vale-sa-outlook-idUSE6N10I08020151201#YCXlh1U4LpSlpoYr.99
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    China to ban private coal-fired power plants construction in some areas


    China’s new construction or expansion of private coal-fired power plants would be banned in Beijing-Tianjin-Hebei, Yangtze River delta and Pearl River delta zones, according to one of the six official documents jointly released by National Development and Reform Commission (NDRC) and National Energy Administration (NEA) on November 30.

    The document further specified that new coal-fired power plants would not be approved to construct in regions with excess installed capacity and low utilization hours.

    Private coal-fired power plants are served as the supporting facilities for both industrial production and neighboring residential use. They’re an important part of domestic thermal power industry, according to the document.

    The move was to cater to the national trend in enhancing energy utilization rates and easing domestic air pollution, as well as optimizing resources allocation.

    The document highlighted strict control on efficiency, environmental protection and water resource management on newly-added private thermal power plants construction, and further eliminated and upgraded outdated plants.

    Besides, all the newly-added private power plants across the country are to be included in China’s total amount control for thermal power construction, and the construction should start after gaining the approval from local governments, it said.

    Meanwhile, the construction of newly-added private power plants should meet the standard of national energy industry policies and power layout, and they would equally participate in competition with state-owned thermal plants, it added.

    http://en.sxcoal.com/0/135860/DataShow.html

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    China Nov steel sector PMI hits a 7-yr low


    The Purchasing Managers Index (PMI) for China’s steel industry further slumped 5.2 on month to 37 in November, hitting a 7-year low and the 19th straight month below the 50-point threshold, showed the latest data from the China Federation of Logistics and Purchasing (CFLP).

    The dropping index presented an increasing contraction in the sector, which further indicated a tougher status and dim future in domestic steel market, calling for the implementation of industrial transformation and upgrading.

    The output sub-index dropped 7.7 from October to 35.4 in November, the 15th consecutive month below the 50 mark, and nearly the lowest of recent five months.

    China’s steel products output may continue to decline in December, as steel mills still suffered greater losses and flat demand at domestic market.

    The new order sub-index decreased 8.2 from October to 29.7 in November – the lowest since July, and the new export order index slightly rebounded 1.9 from October to 41.2 in the same month, yet still below the 50-point threshold, reflecting a contraction trend of steel exports in the short run.

    The sub-index for steel products stocks increased 3.5 to 49.2 in November, after the fourth successive monthly drop last month, as some unsold steel products of steel mills were directly turned to stocks amid shrinking demand and falling orders.

    As of November 20, total stocks in key steel mills stood at 15.19 million tonnes, rising 1.13% from ten days ago but down 7.04% from October, said the CFLP.

    Domestic steel prices is expected to fall in December, as the effect of intensified production cut of steel mills will not show in the short run amid current shrinking demand and sluggish market.

    http://en.sxcoal.com/0/135902/DataShow.html

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    EU steel sector faces EUR 28 per tonne cost under ETS obligations by 2030


    Carbon Pulse reported that European steelmakers face costs of EUR 28 per tonne of steel to comply with ETS obligations by 2030, according to a study commissioned by steel lobby Eurofer, which said the burden could destroy the industry’s economic viability.

    The analysis carried out by Dutch consultancy Ecofys found that the total net carbon costs for the EU’s steel sector in the period 2021-2030 are projected to amount to EUR 34.2 billion. This translates into EUR 10 per tonne of steel in 2021, and EUR 28 per tonnet crude steel in 2030, when taking into account both the need to buy EUAs beyond those allocated freely and higher electricity prices due to utilities passing on their ETS costs.

    The study was presented at the EU Parliament’s full plenary session in Strasbourg last week and could put pressure on lawmakers to scale back the European Commission’s proposal for post-2020 EU ETS reforms, despite other analyses suggesting that industries including steel are able to manage ETS costs.

    The analysis and subsequent warnings represent the first major effort by industry to respond to the Commission’s proposal, as lawmakers prepare to debate potential changes to it over the next 12 months.

    http://steelguru.com/steel/eu-steel-sector-faces-eur-28-per-tonne-cost-under-ets-obligations-by-2030/440301#tag
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