Mark Latham Commodity Equity Intelligence Service

Friday 31st March 2017
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    China March factory activity grows fastest in nearly five years on building boom

    Activity in China's manufacturing sector unexpectedly expanded at the fastest pace in nearly 5 years in March, adding to evidence that the world's second-largest economy has gained momentum early this year as construction booms.

    But while factory output accelerated and new orders from home and abroad improved, economists are increasingly questioning how long China's solid growth can be sustained.

    Over a dozen cities have announced fresh measures in March to cool the overheated property market, while the export outlook is threatened by U.S. President Donald Trump's protectionist rhetoric.

    For now, though, China's factories appear to have shifted into higher gear, encouraged by the strongest profit growth in six years.

    China's official Purchasing Managers' Index (PMI) rose to 51.8 in March from the previous month's 51.6, data showed on Friday.

    That was the strongest reading since April 2012 and well above the 50-point mark that separates growth from contraction on a monthly basis. Economists had expected 51.6.

    Manufacturers also stopped shedding jobs in March for the first time in nearly five years as profitability improved. A prolonged slump in the sector and Beijing's recent campaign to cut excess capacity in "smokestack" industries such as steel have put millions out of work.

    In an encouraging sign that China's economic growth is also becoming more balanced and broad based, activity in the services sector accelerated last month. The official non-manufacturing Purchasing Managers' Index (PMI) rose to 55.1, the highest since May 2014, a separate survey showed.

    The March activity readings and a raft of upbeat data for January and February point to solid growth early in 2017.

    China's economy likely expanded 6.8 percent in the first quarter from a year earlier, in line with the previous quarter, said Zhang Yiping, an economist at Merchants Securities.

    Analysts polled by Reuters in January had expected growth would start to cool this quarter, and even the government has set a less aggressive full-year growth target of 6.5 percent.


    China's better-than-expected performance so far may be largely due to a surprise rebound in home sales and strong government infrastructure investment, which have added fresh impetus to a months-long construction boom that has lifted demand for materials from cement to steel.

    Factory output accelerated in March, with the sub-index rising to 54.2 from 53.7 in February. Highlighting the strength of the building boom, a measure of the construction industry stood at a robust 60.5, compared to 60.1 in February.

    Total new orders -- which cover domestic and export demand -- also showed improvement, rising to 53.3 from February's 53.

    But economists continue to have worries.

    Apart from additional government curbs on property purchases, the central bank has embarked on cautious policy tightening to rein in the risks from a rapid build-up in debt.

    It has raised money market and short- and medium-term interest rates on special loans several times already this year.

    "Today's PMI readings suggest that China's economy continued to perform well in March, though we doubt the current strength will be sustained for much longer," Capital Economics said in a note.

    "The correction in the property market still has much further to run which, in combination with policy tightening, will drive a slowdown in investment and industrial activity during the coming quarters."

    The construction rally may already be starting to show signs of fatigue, said Jonas Short, Head of Beijing Office of investment bank NSBO, pointing to a drop in new construction orders to the lowest since August 2016.

    Inventories of iron ore at China's ports have swelled to the highest since at least 2004, by some estimates, also suggesting the risk that supply is beginning to outpace demand.

    "We are concerned that this build-up in inventories in sectors such as steel is not going to be translated into end-user demand," Short said.

    Sharp gains in producer prices in recent months may also be losing their oomph, pointing to weaker profit growth ahead for the industrial sector.

    "The rally in China’s producer prices is reaching the limit...As prices start to ease, buyers will likely halt new orders and hence overall business momentum will slow," analysts at ANZ said in a note.

    Indeed, China's iron ore futures prices fell nearly 2 percent on Friday and were set for a monthly drop of 13 percent on worries about surging stockpiles. [IRONORE/]


    Asian financial markets were largely unfazed by the buoyant China data as investors' attention turned to the first meeting between Trump and Chinese President Xi Jinping next week.

    Trump foreshadowed the risk that those talks could be tense, tweeting on Thursday that the United States could no longer tolerate massive trade deficits and job losses.

    The U.S. Commerce Department said earlier that Beijing must change its trade practices and the way its state enterprises operate.

    Trump's recent meeting with German leader Angela Merkel "revealed he's willing to give bad meetings. A bad meeting with President Xi would raise the prospect of a trade war, which would be a global risk-off event," ING's chief Asia economist Tim Condon said in a note
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    China Shenhua, Datang Int'l Power discuss possibility of regrouping

    China Shenhua Energy Co., Ltd and Datang International Power Generation Co., Ltd were encouraged by the State-owned Assets Supervision and Administration Commission of the State Council (SASAC) to discuss the possibility of regrouping, in order to further optimize the industry structure, sources said.

    The discussion is still in preliminary stage, so it remains unknown whether the regrouping is to be carried out or not.

    China Shenhua said they had not yet been informed of it, and they would release a relevant statement if informed.

    China Shenhua Energy Co., Ltd is the listed arm and core asset of the state-owned Shenhua Group, while Datang International Power Generation Co., Ltd is a listed arm of the state-owned China Datang Group. The regrouping only between two listed arms of state-run firms is unprecedented in China.

    According to its annual report released on March 18, China Shenhua realized net profit of 22.7 billion yuan ($3.29 billion) in 2016, and announced to provide 59 billion yuan of dividend to shareholders. The move, coupled with frequent personnel adjustments lately, aroused regrouping expectations in coal industry.

    With the deepening of coal capacity cuts, relevant authorities repeatedly stressed the necessity of the industry's regrouping, and state-owned coal enterprises are likely to accelerate steps in this regard.

    China Datang Group, one of the top five power producers in China, reported total profit of 17.32 billion yuan in 2015, and its installed power capacity stood at 127.2 GW, data showed.

    Power is also one of the six major businesses of China Shenhua. The company's Chairman Ling Wen said the clean development of coal for power generation will be one of the priorities.
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    Tens of thousands told to evacuate after cyclone brings flood fears to Australia's east

    Australian authorities told 40,000 people to evacuate to higher ground on Thursday as a storm system generated by a powerful cyclone that pummeled the northeast two days ago swept down the coast with heavy rain.

    Cyclone Debbie hit as a category four storm in the north of tropical Queensland state on Tuesday, smashing tourist resorts, bringing down power lines, flattening canefields and shutting down coal mines.

    Driving rain fell most heavily on Thursday in hinterland and coastal areas either side of the state capital, Brisbane.

    "This severe weather system that began with Cyclone Debbie and is tracking down the coast is causing havoc across our state," Queensland Premier Annastacia Palaszczuk told reporters in Brisbane.

    The cyclone was downgraded to a tropical low depression on Wednesday but on Thursday was driving squalls with torrential rain across a 1,200-km (745-mile) stretch of Australia's east coast, swelling rivers, causing flash floods and prompting authorities to tell 40,000 people to evacuate.

    In Lismore in the north of neighboring New South Wales state, the State Emergency Service order 7,000 residents in low-lying areas to leave after forecasts predicted the town's worst flood in nearly 20 years.

    A levee protects the rural hub in the Northern Rivers region of New South Wales, home to at least 25,000 people, but most of those downtown planned to seek higher ground, Geoff Baxter, a barman at the Richmond Hotel told Reuters.

    "We're clearing out the pub, mate, and closing it up. All the shops got closed, everyone's clearing up their cellars," he said.

    Further north, Queensland closed more than 2,000 schools as sustained heavy rainfall brought flash floods to the Gold Coast tourist area and Mackay further north.

    In the cyclone-hit zone further north still, military helicopters, ferries and planes brought hundreds of holidaymakers stranded on resort islands in the storm's path to the mainland, where tens of thousands more people were without power.

    Resorts along the world-famous Great Barrier Reef and the Whitsunday coast bore the brunt of the storm with wind gusts stronger than 260 kph (160 mph).

    "It's kind of chaos down here," Jon Clements, an architect awaiting evacuation from Hamilton Island, told Reuters. "I think there's probably three times the number of people they can put on aeroplanes at the moment down there."

    At nearby Daydream Island, where water supplies had run low since the storm, troops brought food, fuel and water while helicopters carried sick guests to the mainland.

    The resort will be closed for at least a month for repairs, management said in a statement, as tourism operators statewide reported canceled bookings and anticipated a long-term hit to trade.

    "That's the kind of collateral damage we suffer sometimes in our industry," Queensland Tourism Industry Council chief executive Daniel Gschwind told Reuters.

    In the Bowen Basin, the world's single largest source of coal used to make steel, major miners Glencore and BHP said they were still assessing the extent of any disruption to shipments.

    All four coal rail networks run by operator Aurizon were closed, alongside its road and rail operations from the Bowen Basin to Brisbane. Ports at Abbot Point, Hay Point and Mackay also shut, but did not report extensive damage.

    Of the smaller miners, Yancoal had called force majeure on its Middlemount mine.

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    Anhui Feb power output up 18.3pct YoY

    Eastern China's Anhui province saw its power output up 18.3% year on year to 18.25 TWh in February, data showed from Anhui Energy Administration.

    Anhui produced 38.73 TWh of electricity over January-February, up 3% from the preceding year. Of this, hydropower and thermal power amounted to 830 GWh and 36.66 TWh, increasing 15.6% and 1.2% from the year-ago level, respectively.

    During the same period, the province consumed 29.69 TWh of electricity, climbing 5.3% from the year prior. Of this, 13.98 TWh of electricity was consumed in February, jumping 15.4% year on year.

    Residential segment consumed 5.46 TWh of electricity in February, a rise of 6.2% from a year ago.

    For non-residential segment, the primary industries – mainly the agricultural sector – used 290 GWh in February, up 17.3% from the year-ago level.

    During the same period, the secondary industries – mainly the industrial sector -- consumed 19.14 TWh, increasing of 4.2% year on year.

    Power consumption by tertiary industries – mainly the service sector – witnessed a yearly increase of 8.2% to 4.79 TWh in February.

    As of end-February, Anhui had an installed power generation capacity of 58.25 GW. Of this, thermal power capacity stood at 49.21 GW; capacity of wind power amounted to 1.82 GW; that of hydropower reached 3 GW; others at 4.22 GW.

    From January to February, utilization of power generating units averaged 644 hours, 65 hours less than a year ago.

    Of this, hydropower plants logged average utilization of 280 hours, an increase of 33 hours from the year prior; the average utilization of thermal power plants decreased 52 hours on the year to 740 hours.
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    Vedanta extends CEO Tom Albanese's contract by five months

    Indian mining company Vedanta Resources Plc said on Thursday it has extended CEO Tom Albanese's contract by five months until the end of August.

    The three-year contract was due to expire on Friday.

    Vedanta's executive chairman Anil Agarwal is leading the succession process to identify candidates to replace Albanese, the company said.

    Vedanta was hit by the slump in commodities prices. Its revenue fell 16.6% last year to 10.7-billion pounds ($13-billion), its lowest in six years, while profit before tax, excluding special items, plunged 79.5%.

    Vedanta's shares have fallen 12.4% since Albanese, the former head of Rio Tinto Plc , took the helm in April 2014.
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    GE completes first phase of huge India grid project

    GE Energy Connections has completed the first phase of a project to bring reliable electricity to India.

    The Champa Ultra High Voltage Direct Current project is intended to connect 46 per cent of India’s population to efficient energy.

    It is the first 800 kV scheme in the world to use dedicated metallic return conductors, which GE says eliminates the need for ground electrodes and increases the system’s reliability.

    Led by Power Grid Corporation of India, the project will connect thermal power produced in Chhattisgarh in the central-eastern part of the country to the north via Kurukshetra, via a 1365 km energy highway.

    Executed in two phases, the project will transport 6000 MW of power upon full completion. Both phases comprise two poles, each with the capacity to transmit 1500 MW.

    Now GE has announced it has completed the first of these phases and successfully transmitted 1500 MW of power.

     “When we help turn the lights on for India’s northern region, we are improving the lives of over half a billion people,” said Reinaldo Garcia, president for Grid Solutions at GE Energy Connections.
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    Oil and Gas

    OPEC compliance with oil curbs rises in March as UAE joins cut: survey

    OPEC oil output is likely to fall for a third straight month in March, a Reuters survey found on Wednesday, as the United Arab Emirates made progress in trimming supplies while maintenance and unrest cut production in exempt nations Nigeria and Libya.

    The reduction by the UAE has helped boost OPEC compliance this month with its production-cutting deal to 95 percent, up from an initial February estimate of 94 percent and a record high, according to Reuters surveys.

    The Organization of the Petroleum Exporting Countries pledged to reduce output by about 1.2 million barrels per day (bpd) from Jan. 1 - the first accord on supply curbs since 2008. Non-OPEC countries pledged to cut about half as much.

    In comments made to Reuters, OPEC Secretary-General Mohammad Barkindo said the OPEC and non-OPEC agreement "is gradually, but steadily working its way to restore balance to the oil markets".

    "The rebalancing process is already underway," he added.

    OPEC wants to end a glut that is keeping oil LCOc1 below $52 a barrel, half the level of mid-2014. But stocks are still high despite strong OPEC compliance, boosting expectations that the group will seek to prolong the agreement.

    "OPEC is now facing the prospect of falling short of its objective," said Stephen Brennock of oil broker PVM. "Bulging global oil stockpiles will not draw down to the five-year average unless OPEC-led cuts are extended."

    Compliance of 95 percent is higher than OPEC achieved in its last cut in 2009, Reuters surveys show. Analysts including those at the International Energy Agency have put adherence in 2017 even higher, with the IEA calling it a record.

    March's biggest reduction came from the UAE, which was slower than Kuwait and Saudi Arabia to trim supply. Output is lower this month because more cuts have been implemented and due to planned maintenance, industry sources say.

    After limited reductions earlier in 2017, UAE officials and industry sources have said the country would improve average compliance during the six-month duration of the supply cut.

    The Reuters survey showed Saudi Arabia's output rose slightly in March from a large reduction in February. Even with March's increase, the total curb achieved is 564,000 bpd, well above the target cut of 486,000 bpd.

    As a result, Saudi Arabia, Kuwait and as of this month, the UAE, compensated for the weaker adherence of other members, including Algeria, Ecuador, Gabon and Venezuela.

    Iraq has boosted compliance too, the survey found, with exports from northern and southern ports falling. A supertanker collided with a berth at Basra oil terminal in late March, although this did not affect shipments significantly.

    Iran's production rose slightly. Tehran was allowed a small increase in output under the OPEC agreement.

    Lower output in Nigeria and Libya, which are exempt from the curbs, helped bring overall OPEC production down.

    Nigerian production fell partly because of planned maintenance at the Bonga field. A recovery in Libya ran into a setback after armed protests blocked output from two fields.

    OPEC announced a production target of 32.5 million bpd at its Nov. 30 meeting, which was based on low figures for Libya and Nigeria and included Indonesia, which has since left the group.

    The Libyan and Nigerian reductions mean OPEC output in March has averaged 32.01 million bpd, about 260,000 bpd above its supply target adjusted to remove Indonesia.

    The Reuters survey is based on shipping data provided by external sources, Thomson Reuters flows data, and information provided by sources at oil companies, OPEC and consulting firms.
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    Saudi 2017 vs Saudi 2016

    “We  met with non-OPEC producers,we asked‘what are you going to do?’They said nothing.We said the meeting is over.”–Ali Al-Naimi,February2016.

    Saudi Energy Minister Khalid al-Falih said Riyadh held "frank and friendly" discussions with oil exporters about cutting oil production as promised. March 2017.
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    Kazakh minister sees higher March oil output, questions OPEC cuts

    Kazakhstan's energy minister, Kanat Bozumbayev, has again cast doubt on the country's commitment to cut oil output under an agreement with OPEC, telling state media that March output was again likely to be on the high side and suggesting the trajectory of production was upward.

    The comments, carried by state news agency Kazinform, came after Kazakh officials failed to attend a meeting in Kuwait over the weekend intended to discuss last November's agreement between OPEC and non-OPEC producers on reducing output, and a possible extension beyond its six-month term.

    Speaking to reporters after a government meeting Tuesday, Bozumbayev highlighted methodological problems with calculating countries' compliance and said output from two of Kazakhstan's 'super-giant' fields, Karachaganak and Kashagan, would increase, according to Kazinform.

    Asked by how much Kazakhstan intended to cut its output, Bozumbayev said: "It is not a question of how much. We can only increase." He attributed recent fluctuations in production partly to seasonal factors.

    "We, let us say, in January over-fulfilled our commitment -- the cut was more than 20,000 b/d -- in February a little less. In March, our production will be a bit higher. In April I expect, with the warmer weather, production will fall," Bozumbayev said.

    "This is due to various factors, including climactic ones, and how the oil fields in various parts of the country behave, depending on their stage of exploitation. Many of our large fields are reducing their output, in total by a million mt a year, because they passed their peak."

    Bozumbayev has previously described as symbolic Kazakhstan's obligation under the agreement to cut its production by 20,000 b/d. Kazakh compliance is complicated by recent increases in output from the giant Kashagan field, which came on stream last October after a decade's delay.

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    China likely to keep oil product exports steady to lower in H1 2017: sources

    China likely to keep oil product exports steady to lower in H1 2017: sources

    China is highly likely to restrict oil product exports in the first half of 2017 to flat or below H1 2016 levels amid growing focus on pollution control, curbing excess capacity and international trade flows, sources with knowledge of the matter said this week.

    The total export quota for the second quarter was likely to be calculated based on the actual outflow in H1 2016 minus the quota allocated in Q1 2017, a Beijing-based senior product trader with a state-owned oil giant said.

    China exported 16.817 million mt of oil products in H1 2016 and awarded 12.4 million mt of quotas in Q1 2017, implying that the Q2 2017 oil product export quotas will be somewhere between 4 million mt to 5 million mt, according to calculations by sources.

    This is only one third the volumes allocated in Q2 2016, which was at 14.59 million mt, and is a continuation of the trend seen in Q1, when the quota allotted was 40% below Q1 2016's 20.93 million mt.

    Sinopec is estimated to get around 3 million mt quota in Q2 -- mostly for jet fuel, PetroChina around 1.2 million mt, while Sinochem and CNOOC are likely to get 450,000 mt each, according to two Beijing-based product traders with state-owned companies.

    Independent refineries are unlikely to be on the quota allocation list, they said.

    "This is a rough estimate for each company, which could be different from the actual allocation. But I am quite sure the actual quota will be cut significantly from last year to cap the outflows," one of the Beijing-based traders said.

    This is a mandate from the country's top planner, the National Development and Reform Commission, and the NDRC is likely to introduce controls over total export volumes, he added.

    "We used to get as much quota as we applied for, but the situation has now changed," a Sinopec refiner said, adding that they expected the Q2 allocation to be lower than their application.


    China exported a total 38.28 million mt of gasoline, gasoil, jet fuel and naphtha in 2016, up 51% year on year.

    Traders had been expecting product exports to be over 40 million mt this year, but this is highly unlikely now.

    The significant increase in exports last year and the potential of more exports in the coming years as refining capacity grows might have raised concerns among international oil product players, one trading source said, adding that Beijing was also getting concerned about international trade flows.

    Meanwhile, China's top leadership is currently more focused on controlling excess capacity and pollution rather than promoting exports in return for more foreign currency, as it was in the last few years.

    To the leaders, more oil product exports might mean more crude imports with higher throughput and heavier pollution, sources said.

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    Putin says Russia will become world’s top LNG producer

    Russia will become the world’s biggest liquefied natural gas (LNG) producer, according to President Vladimir Putin.

    Putin said this on Thursday during a video conference call with chief executives of Russia’s Novatek and France’s Total, the partners in the giant Yamal LNG export project.

    “Russia, without any doubt, not only can, but will become the largest producer of liquefied natural gas in the world,” he told the chief executives.

    The LNG project in the Yamal peninsula in Siberia will have a total capacity of 16.5 million tonnes of LNG per year. This is Russia’s second LNG project along Gazprom’s Sakhalin LNG plant.

    Novatek, the operator of the Yamal LNG project is also planning to build another project in the Gydan peninsula named Arctic LNG-2, that would have the same output as Yamal LNG.

    In fact, Novatek’s head and co-owner, Leonid Mikhelson was quoted by Reuters as saying on Wednesday that natural gas resources in the Gydan and Yamal peninsulas could support the production of over 70 million tonnes of LNG per year.

    This is comparable to LNG production in Qatar that is the largest exporter of the chilled fuel in the world and produces about 77 million tonnes per annum.

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    Russian Yamal LNG to sell first 2017 LNG cargoes on spot market

    Russia's Yamal LNG in the Arctic, expected to debut later this year, plans to start deliveries under long-term contracts in 2018, while initial cargoes will be sold on the spot market, Novatek CEO Leonid Mikhelson said Thursday.

    "Deliveries under long-term contracts will begin next year. This year, supplies will take place on spot market," Mikhelson told reporters in a briefing in the Arctic port of Sabetta, from where the LNG will be shipped.

    "The project participants will enter the spot market with initial volumes, and will sell these volumes where the market is best," he said.

    Novatek plans to launch the first 5.5 million mt/year train this year, with another two of the same capacity to follow in 2018 and 2019.

    The first LNG tanker is to leave the port of Sabetta on the Kara Sea in the second half of the year but it is hard to give a more precise timeframe as testing works are continuing, he said.

    CEO of France's Total, Patrick Pouyanne, also present in Sabetta, said the launch would take place before October.

    Total owns 20% in the project, where Novatek holds a 50.1% stake. China's CNPC and Silk Road Fund hold 20% and 9.9% in the project respectively.


    The key shareholders arrived in Sabetta Thursday for the formal welcoming into the port of the first icebreaker, named after Christophe de Margerie, former CEO of Total who brought the French company into the project and who was killed in a airplane crash in Russia two and a half years ago.

    The 300-meter-long tanker, currently the largest icebreaking tanker in the world, has a capacity of 172,600 cu m, and can go through ice 2.1 meters (6.9 feet) thick, its operator Sovcomflot said.

    Actual deliveries to customers will be somewhat lower as the LNG storage tanks at the plant have a 160,000 cu m capacity, and some of the LNG will be used as tanker fuel.

    The Arc7 tanker, which arrived in the port Wednesday, is the first of the 15 tankers planned to carry gas from the project.

    The tanker can travel west of Sabetta year round and carry gas east via the Northern Sea Route between July and December, Sovcomflot said.

    Russia's president Vladimir Putin, who tuned in from another Northern city of Archangelsk via broadcast link to welcome the tanker, praised the project's role on the global scale.

    "This is a big event," Putin said. "If we keep moving at this pace, which I must say is rather impressive even to me...then Russia not only can but will become the largest LNG producer in the world."

    Yamal LNG will have taken four years from the investment decision to the launch of the first train.

    Russia, one of the world's largest gas producers, so far has one operating LNG project, the 9.6 million mt/year Sakhalin 2, in the Far East of the country.


    Yamal LNG has nearly fully contracted the project's volumes, "90% or maybe even 100% of which will go to the Asia-Pacific region," Mikhelson said. Despite a well-supplied LNG market, which has led to numerous LNG projects being postponed around the world, Yamal LNG has a competitive advantage due to low production costs, Pouyanne said.

    "This is the largest complex today being built in the world. And it is very competitive," he said. "There is a huge amount of cannot compete with such low production costs, [as in Yamal peninsula] and because of the large size of the plant, the cost of the liquefaction," Pouyanne said when asked whether he sees Yamal LNG as competitive against US LNG.

    "It is much more competitive than many projects that will be developed in liquefied [natural] gas. It is very competitive, both Yamal and the following phase of Yamal," Pouyanne said, referring to the mirror Arctic LNG 2 project, which Novatek plans to build in the Gydan peninsula across the Bay of Ob in 2022-23.

    Novatek CFO Mark Gyetway earlier estimated total cost of feedstock, liquefaction and shipping at slightly under $3/MMBtu.

    Total -- which has repeatedly stated its commitment to working in Russia even with western sanctions complicating the involvement of foreign companies in Russian oil and gas projects -- is looking to continue cooperation with Novatek, potentially also on its next LNG plant, Pouyanne said.

    "Yamal LNG was only the beginning of partnership with Novatek," he said.

    Novatek expects to take the investment decision for the Arctic LNG 2 in around 18 months, Mikhelson said.
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    Petronas to export world's first LNG from floating production unit: data, sources

    Malaysia's Petronas is about to export the world's first liquefied natural gas (LNG) produced from a floating production unit, according to shipping data and people familiar with the matter, beating rivals like Royal Dutch Shell in a race that has cost developers billions of dollars.

    The Petronas Floating LNG Satu (PFLNG Satu), sitting off the coat of Bintulu on Malaysia's Borneo island, is currently loading LNG into the 144,000 cubic meter capacity LNG tanker Seri Camellia, according to trade sources and shipping data in Thomson Reuters Eikon.

    "Now, Satu is loading up a tanker, which will leave within the next day or two, making Satu the world's first LNG that was produced from a floating platform," one source close to the matter said, declining to be named due to the commercial sensitivity of the deal.

    Eikon data shows that the LNG tanker arrived on March 25 and has started loading the LNG cargo. Traders with knowledge of the matter said that PFLNG Satu's first export cargo was heading for South Korea.

    Petronas declined to comment.

    The Satu facility, which is estimated to have cost as much as $10 billion, arrived in those waters last year, preparing for first operations.

    Other producers currently developing floating LNG production facilities include Royal Dutch Shell, which with the over-$12 billion Prelude FLNG is building the world's biggest maritime vessel for use in Australia. Japan's Inpex is building a similarly big FLNG unit as part of the $37 billion Ichthys export project, also for use in Australia.

    Both these hugely expensive projects have been plagued by delays, allowing Petronas to become the first company to produce LNG from a floating production unit.

    The huge development costs have led some to question whether FLNG units on this scale will be ordered again in future.

    The LNG industry is undergoing huge change as the biggest ever flood of new supply is hitting the market, with volumes coming mainly from Australia and the United States.

    The oversupply resulted in a more than 70 percent fall in Asian spot LNG prices from their 2014 peaks to around $5.50 per million British thermal units (mmBtu).

    The Satu project's progress boosts Petronas' credibility as a firm able to engineer and execute cutting-edge projects, said Prasanth Kakaraparth, senior upstream analyst at energy consultancy Wood Mackenzie.

    "Petronas enters a super-elite club of global players with FLNG capability," said Kakaraparth. "But with spot prices looking to trend below $5/mmbtu, this is a very tough environment to be bringing on new supply."
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    Exxon makes another discovery offshore Guyana

    U.S. oil giant Exxon Mobil is at it again. The company on Thursday announced “positive results” on the Snoek well offshore Guyana, confirming a new – third – discovery on the Stabroek Block. Drilling targeted similar aged reservoirs as encountered in previous discoveries at Liza and Payara, Exxon said.

    “The latest discovery at Snoek demonstrates the continued success we have achieved in this technically complex play, which is just part of the significant exploration province offshore Guyana,” said Steve Greenlee, president of ExxonMobil Exploration Company.

    ExxonMobil started drilling of the Snoek well on February 22, 2017 and encountered 82 feet (25 meters) of high-quality, oil-bearing sandstone reservoirs.

    The well was  drilled to 16,978 feet (5,175 meters) in 5,128 feet (1,563 meters) of water on March 18. The Snoek well is located in the southern portion of the Stabroek Block, approximately 5 miles (9 km) to the southeast of the 2015 Liza-1 discovery.

    Following completion of the Snoek well, the Stena Carron drillship has moved back to the Liza area to drill the Liza-4 well.

    “As we continue to evaluate the full potential of the broader Stabroek Block, we are also taking the necessary steps to ensure the safe, cost-efficient and responsible development of this world-class resource, which can provide long-term, sustainable benefits to the people of Guyana,” said Greenlee.

    The Stabroek Block is 6.6 million acres (26,800 square kilometers). Esso Exploration and Production Guyana Limited is operator and holds 45 percent interest in the Stabroek Block. Hess Guyana Exploration Ltd. holds 30 percent interest and CNOOC Nexen Petroleum Guyana Limited holds 25 percent interest.

    As for the Liza discovery, ExxonMobil drilled three wells in there, and is now getting ready for the fourth. The Liza-1 well was drilled in March 2015 while the Liza-2 well was drilled in June 2016. ExxonMobil affiliate Esso Exploration and Production Guyana, responsible for all drilling activities on behalf of ExxonMobil in Guyana, drilled the Liza-3 well in October last year.

    In December, ExxonMobil awarded a contract to SBM Offshore to supply an FPSO unit for the Liza development, which is estimated to hold an excess of 1 billion oil-equivalent barrels.
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    PetroChina 2016 profit sinks 78 pct on lower crude prices

    China's largest oil and gas producer, PetroChina, on Thursday reported a drop of 78 percent in 2016 annual net profit, to its lowest since at least 2011, as it was hit by lower prices for crude oil and natural gas.

    The shrinking profits posted by China's state oil and gas producers for last year have highlighted their growing challenges from falling output at aging wells and excess supply in domestic fuel oil markets.

    PetroChina's net profit sank to 7.86 billion yuan ($1.14 billion) from 35.7 billion yuan in 2015, while revenue fell 6.3 percent to 1.62 trillion yuan ($235 billion), based on IFRS accounting standards.

    PetroChina's crude oil production fell 5.3 percent to 920.7 million barrels in 2016 - still the highest among global oil producers including BP and Shell - but marking the lowest for PetroChina since 2012, according to Reuters data. The state company's crude oil output peaked in 2015 at 972 million barrels.

    PetroChina's total oil and gas output for the year was 1.47 billion barrels of oil equivalent, down 1.8 percent from 2015.

    PetroChina had 7.44 billion barrels of proven crude oil reserves, down 12.7 percent from 2015, it said.

    In its annual report, the company said domestic gasoline demand was lower than expected, while diesel consumption fell.

    "The situation of excessive supply in domestic refined products became severe" last year, it said.

    "The quantity of imported and processed crude oil, operating capacity, and market shares of local refineries (all) increased significantly, leading to fiercer market competition."

    PetroChina's smaller upstream competitor CNOOC - a specialist in offshore operations - earlier reported its worst result since 2011, but forecast its output to rise this year.

    Profits at Sinopec - Asia's largest refiner - rose 44 percent from a year earlier on the back of strong performances in refining and chemicals.

    Sinopec's oil and gas production in 2016, however, fell 8.6 percent to 431.29 million barrels of oil equivalent versus 471.91 million a year earlier.
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    Israel's Delek targets global energy expansion after profit jump

    Israel's Delek Group said on Thursday its quarterly profit was boosted by the sale of two natural gas sites and higher income from its exploration and production operations as it seeks further international expansion.

    Delek agreed to buy Ithaca Energy last month in a deal valuing the North Sea oil producer's equity at $646 million and building on Delek's expansion in the North Sea ahead of a planned London listing this year.

    This followed its purchase last year of a 13.18 percent stake in Faroe Petroleum, another North Sea operator, for 43 million pounds.

    "2017 will be marked by furthering the group's international presence, by executing on our strategy to focus on the energy sector, with a goal of becoming a key player in global energy markets," Delek CEO Asaf Bartfeld said in a statement.

    Delek shares were up 1.1 percent at midday in Tel Aviv after it said it earned 375 million shekels ($104 million) in the fourth quarter, up from 54 million shekels a year earlier.

    Delek, through its subsidiaries, has major shares in the Tamar and Leviathan gas fields off Israel's coast. Profit from exploration and production was 119 million shekels in the quarter, compared with 58 million in the same period in 2015.

    It said it had produced a record 9.4 billion cubic metres of natural gas at Tamar in the quarter, reaching peak production after four years.

    Delek said the $148 million sale of its stakes in the Karish and Tanin gas fields, which was required by the Israeli government in a bid to open up competition, led to a gain of 253 million shekels.

    It expects production at Leviathan to begin by the end of 2019. The project's partners have already received bank financing and have budgeted $3.75 billion for its development.

    Delek declared a dividend of 200 million shekels, or 16.69 shekels a share, for the quarter.
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    Brazil readies two new FPSOs for subsalt oil and natural gas output: Petrobras

    Brazil is in the process of preparing two new floating production, storage and offloading vessels, or FPSOs, to start oil and natural gas production in the country's record-setting subsalt frontier, state-led producer and refiner Petrobras said Thursday.

    The FPSO P-69 arrived at the Brasfels shipyard in Angra dos Reis, south of Rio de Janeiro, on Tuesday, Petrobras said. The vessel will have 18 processing modules installed onboard before heading out to start production at the Lula Extremo Sul area of the massive Lula Field in 2018, the company said.

    The new floating production units are part of eight that will be installed offshore Brazil over the next two years, according to Petrobras' investment plan for 2017-2021. The ultra-deepwater region accounted for nearly 50% of Brazil's total crude output in January, including a record 1.276 million b/d of oil and 49.53 million cu m/d of natural gas from 73 wells.

    The FPSO P-69 is part of five new production units expected to come onstream in 2018, with all of the new FPSOs installed at subsalt fields. In addition to Lula Extremo Sul, FPSOs are also expected to pump first oil from the Berbigao area in the transfer-of-rights area and the Buzios 1, Buzios 2 and Buzios 3 modules of the Buzios Field.

    Petrobras owns a 65% operating stake in the Lula Field, which is Brazil's largest oil and gas producer. Shell retains a 25% minority stake, while Portugal's Galp Energia holds the remaining 10%. The P-69 will be capable of producing up to 150,000 b/d of oil and processing up to 6 million cu m/d of gas, according to Petrobras.

    Fresh production records are also expected in 2017, when Petrobras and its partners developing the subsalt region are scheduled to install three new FPSOs. Petrobras expects to install new FPSOs at the Lula Norte and Lula Sul areas of the Lula Field in 2017, as well as a single floating production unit that will produce from the sister Tartaruga Mestica and Tartaruga Verde fields.

    The FPSO P-66, which will be installed at the Lula Sul area, left the Brasfels shipyard in early February and has already arrived on site, where work to anchor the vessel and connect the first production well is currently underway.

    Petrobras also expects to connect 57 new production and injection wells in 2017 to FPSOs installed over the past 18 months, which are now undergoing the ramp-up phase of output development, according to the company. Petrobras connected 56 wells in 2016, down from a recent high of 73 wells in 2015.

    Brazil will also see an additional boost to output in the fourth quarter of 2017, when a long-term well test is conducted at the subsalt Libra Field and independent producer QGEP Participacoes starts an early production system at the Campos Basin's Atlanta Field.

    The FPSO Pioneiro de Libra, which will conduct the long-term well test at Libra, also left the Jurong shipyard in Singapore for Brazil on Tuesday, Petrobras said in a separate statement. The FPSO will be leased by the group developing Libra, which was Brazil's first subsalt field sold under the country's new production-sharing regime. The field is estimated to hold 8 billion-12 billion barrels of recoverable reserves.

    The Navion Norvegia tanker was converted to an FPSO capable of pumping 50,000 b/d of oil and processing 4 million cu m/d of gas, according to Petrobras. The FPSO is expected to arrive in Brazil in early June.

    "The FPSO will be the first to operate in the Libra block," Petrobras said in the statement. "The long-term well test seeks to reduce risks and optimize definitive production systems for the area."

    Petrobras operates the Libra production-sharing area with a 40% stake, while Shell and Total each retain 20% shares. Chinese state oil companies CNPC and CNOOC also each own 10% minority stakes.

    The long-term well test at Libra is expected to start in the third quarter of 2017, Petrobras Exploration and Production Director Solange Guedes said last week.

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    Marathon Petroleum Capline pipeline closed


     Marathon operates the 1.2 million barrels per day, Louisiana-to-Illinois Capline pipeline
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    India reinstates wheat import tax, sets at 10% from March 28

    India has reinstated its import duty on wheat and has set it at 10% effective March 28, according to a customs notice posted on the website of the Central Board of Excise and Customs Tuesday.

    The new harvest has begun and the government is seen as planning to reduce imports as an attempt to help farmers, given that the previous four months of no import duties have seen a large volume of wheat imports, domestic millers said.

    The world's second-largest wheat producer had previously reduced its tariff on wheat imports to 10% in September 2016, from 25%, to reduce food cost ahead of major festive season.

    Subsequently, the government abolished the import tax on December 8, as inadequate domestic supply amid two years of drought had driven domestic prices higher and depleted centrally held stocks.

    In order to meet domestic shortfalls of wheat, India had bought more than 2 million mt of wheat from Australia since December, for December-March shipments, according to traders, although the possibility of policy changes and higher Australian wheat prices have slowed down buying appetite over January to February.

    ASW with 9% protein was last sold to India in January, at about $213-$214/mt on a CFR basis for February shipment, according to data collected by S&P Global Platts.

    On Tuesday, APW was assessed at $205/mt FOB WA, down $0.50/mt from Monday amid lower buy-sell indications as market sentiment softened with extended falls in US wheat futures and prevailing low Australian dollar.

    India is expected to produce a record harvest yield of 96 million mt for the 2016-2017 season (April-March), according to government estimates.

    Besides reinstating an import duty on wheat, the custom notice also stated a 10% import duty would be implemented for tur dal with immediate effect Tuesday.
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    Base Metals

    Freeport near deal allowing Indonesia exports: minister

    Freeport McMoRan Inc's Indonesian unit is close to reaching a deal that would allow the world's biggest publicly listed copper producer to temporarily resume concentrate exports, Indonesia's mining minister said on Thursday.

    The news boosted Freeport's stock more than 6 percent as it is a marked shift in tone from the Southeast Asian nation, which banned miners from shipping copper concentrate on Jan. 12 as part of a hard line push to develop its local smelter industry and boost domestic benefits from mining.

    Energy and Mineral Resources Minister Ignasius Jonan said a new deal would allow Freeport to resume exports for the next six months from Grasberg, the world's second-biggest copper mine, while a new permit is negotiated.

    "Freeport Indonesia has entered the final stage of discussions," Jonan told parliament, adding the finance ministry will oversee talks, focusing on a "nailed down" tax rate and guarantees fiscal terms will not change.

    "If they agree on the special mining permit, they can export, as long as they put forward a proposal to develop a smelter within five years," Jonan said, adding Freeport agreed to adopt the new permit in principle.

    Freeport stock climbed 6.1 percent to $13.50 in New York afternoon trading.

    Phoenix, Arizona-based Freeport said it was progressing "constructive discussions" that would allow it to resume exports, while retaining its current contract until there is agreement on a new permit.

    Indonesia wants Freeport to adopt a license that includes new taxes and royalties, but Freeport insists on retaining fiscal and legal guarantees.

    Analysts were skeptical that a deal is close, noting big hurdles including taxes, divestment and the right to international arbitration.

    "Ultimately, both sides have a tremendous incentive to find a resolution, but it seems like there are still significant hurdles," said Jefferies analyst Chris LaFemina.

    "It's not clear to me that those long-term issues are any closer to being resolved."

    Under the ban, Freeport has shelved billions of dollars of planned investments, but is taking a hit on Grasberg, which represents about a third of its cash flow, on average, said LaFemina.

    Freeport must also to divest 51 percent of its Indonesian unit - up from 30 percent - under the new permit.

    Last year, Freeport valued Grasberg at $16.2 billion. It offered a 10.64 percent stake, for $1.7 billion, to the government, which proposed $630 million.

    Jonan said a valuation would reflect "commercial or market value", but not include the value of mineral resources.

    If permit issues are unresolved by June 17, Freeport has warned it could go to arbitration and seek damages.
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    Workers to end strike at Peru's top copper mine Cerro Verde

    Workers at Peru's biggest copper mine, Freeport-McMoRan Inc's Cerro Verde, will resume work on Friday after voting to end a nearly three-week strike, the union said on Thursday.

    The union reached an agreement for better benefits with the company late on Wednesday, union leader Jesus Revilla said.
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    Steel, Iron Ore and Coal

    Blackwater coal rail system in Australia's Queensland to reopen Friday: Aurizon

    The Blackwater coal system in Australia's Queensland state is expected to reopen Friday at 2 pm Australian Eastern Standard Time (0400 GMT) following its closure earlier in the week due to the effects of Tropical Cyclone Debbie, operator Aurizon said Friday.

    All four of Aurizon's Central Queensland Coal Network systems -- Newlands, Goonyella, Blackwater and Moura -- were closed during the week. The company on Wednesday declared force majeure on Goonyella, Newlands and Moura. "The Blackwater corridor will reopen to services with some restrictions including a maximum speed of 60 km/h and some single line sections where double tracks normally operate," Aurizon said Friday. "Aurizon is working closely with customers and supply chain partners on the detailed logistics planning required for a safe and coordinated return to services, and to maximize railings for coal customers, both for export and domestic power stations," it said.

    An update on the state of the other three rail systems will be provided later Friday, Aurizon said.

    The Blackwater system links central Queensland mines from the Bowen Basin to Gladstone port.

    The Port of Gladstone briefly suspended operations on Thursday but was open once again on Friday, Maritime Safety Queensland confirmed to S&P Global Platts Friday.

    The Moura system, which remains shut, also connects mines to Gladstone, while Goonyella links mines to the Hay Point and Dalrymple Bay coal terminals, and Newlands connects mines to the Abbot Point Coal Terminal.

    The Hay Point, Dalrymple Bay and Abbot Point coal terminals were all closed during the week.

    The North Queensland Bulk Ports Corporation announced on Thursday that the Port of Abbot Point has been cleared for shipping and that it will be up to operator Adani to make a decision when the coal terminal itself can resume operations.

    Adani was not available for immediate contact.

    There has been no change to the status of Hay Point port, which remains closed, a NQBP spokeswoman told Platts Friday. It is home to both the Hay Point and Dalrymple Bay coal terminals.

    New Hope's Queensland Bulk Handling coal terminal at Brisbane port was also closed on Thursday.
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    China's coal-fired generation strong despite renewables push: Citi

    China's coal-fired power generation as a percentage of the total energy mix is on the rise for the second year, despite the push towards renewable capacity additions in the country, Citi analysts said Friday.

    The share of thermal power in the generation mix declined to 73% in 2015 from 83% in 2011.

    Thermal has since grown to 74% of the mix in 2016 and to 78% in January-February this year, the analysts said.

    "Hydropower generation was down 5% year on year in January-February 2017 and that contributed to thermal power growing faster than overall power demand," they said.

    A 5% growth in China's coal-fired power generation would mean an additional consumption of about 65 million mt of coal, with the size of the entire seaborne market at about 850 million mt, the analysts said.

    China's January-February total coal imports have surged 48.5% year on year to 42.61 million mt, according to customs data.

    Nuclear and wind -- which account for about 4.8% of the mix -- and solar, which accounts for less than 1%, are continuing to grow at double-digit percentages, but they are "still a small proportion" of the overall electricity demand balance, the analysts said.

    "While the renewables and hydropower have priority over the grid, then all the demand growth above 1% year on year overall power demand growth has to be met through thermal power generation if hydropower does not grow," the analysts noted.
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    Thermal coal price rally to hold

    After a surge in coal prices in the second half of 2016 on the back of mining curbs imposed by China, both thermal and metallurgical coal have declined sharply this year.

    But at above $80 and $150 a tonne respectively, the market is still trading well above recent multi-year lows which saw seaborne benchmark thermal coal trade dip below $50 and coking coal touch $75s.

    A new report from BMI Research, a unit of Fitch, predicts thermal coal prices will drift lower but hold onto much of these gains on the back of strong demand from top consumer China which forges as much steel and burns as much coal as the rest of the world combined.

    BMI upped its price expectations for this year and 2018 and now forecasts steam coal to hover between $70 to $90 over the next three to six months buoyed by Beijing's continuing fiscal support to the heavy industries.

    While the shortage of seaborne coking and thermal coal supply that had developed over H216 has eased, the market is still tight due to a 1.7% y-o-y drop in Chinese raw coal output in the first two months of 2017. Nevertheless, high-frequency indicators, including time-spreads on Newcastle coal futures, indicate that a loosening trend is underway in the global market.

    For instance, the spread between first and six-month Newcastle coal contracts has narrowed to around $4.35/tonne in March 2017, compared to an October 2016 high of $7.65/tonne.

    As a result towards the end of 2017, the seaborne market is likely to loosen further and prices head lower again and continue to ease towards the end of the decade according to BMI.

    After missing out on the rally in seaborne coal last year thanks to a very small presence in export markets, prices achieved by US miners have been playing catch-up.

    Hopes of a revival for the industry thanks to changes to the regulatory environment by the Trump administration have seen Central Appalachian coal (Nymex FOB) jump nearly 40% to $51.60 a short ton year from decade lows hit in October. Coal from the Powder River basin has also improved, jumping to $11.45, from the $8.25 low hit hit in September.

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    Masimong said to lead bid for Anglo's South African coal mines

    Masimong Minerals has emerged as the favorite to win an auction for some of Anglo American’s South African coal mines, according to two people familiar with the matter.

    Led by South African Chamber of Mines President Mike Teke, Masimong has edged ahead of Phembani Group, the other shortlisted bidder, in the process to buy the mines that mainly supply coal to state-owned power utility EskomHoldings, said the people, who asked not to be identified because the information hasn’t been made public. Their offers ranged from R2-billion to R3-billion, two other people with knowledge of the matter said earlier this month.

    “Anglo American is in discussions with a number of shortlisted bidders and continues to engage key stakeholders in relation to the Eskom-tied domestic thermal-coaloperations,” spokesperson Pranill Ramchander said in emailed comments. “We will make further announcements as appropriate.”

    Teke declined to comment. The chamber represents miningcompanies operating in South Africa including Anglo and Glencore.

    Anglo opted to sell the New Vaal, Kriel and New Denmark mines following a decision just over a year ago to dispose of assets in response to plunging commodity prices and a desire to pay off debt. It’s since scaled back those plans as prices rebounded. The mines together account for about half of Anglo’s South African coal production.

    Anglo rose 1.3% to 1 234.5 pence by the close in LondonWednesday.

    Both Masimong and Phembani, founded by MTN Groupchairperson Phuthuma Nhleko, plan to list their companies if they succeed in buying the mines, three people familiar with the matter said earlier this month.

    The two companies are black-owned, and Eskom, the country’s largest buyer of coal, says it wants suppliers to be black-controlled. South Africa is pushing companies to boost black involvement in the economy to make up for discrimination during apartheid.
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    Teck updates Q2 steelmaking coal guidance to 6.8 mln t

    Canada miner Teck Resources Limited provided a preliminary guidance for second quarter steelmaking coal volumes and costs, and an update to its guidance for the first quarter of 2017, according to the guidance released on March 29.

    Steelmaking coal sales volumes for the second quarter of 2017 are expected to be at least 6.8 million tonnes, and site costs in the second quarter are expected to be within the range of $47-51/t.
    The average realized price is now expected to be between US$209-212/t for the first quarter, at the higher end of our previous guidance range. Sales volumes in March improved relative to weak sales in the first two months, but not sufficiently to result in sales above 5.8-6 million tonnes in the quarter.
    Final quarterly sales will depend on timing of shipments. Through the first quarter, mining activity largely continued at full production rates but lower sales volumes, as winter weather and transportation issues affected clean coal production. As a result, site unit costs will be above our annual guidance range in the first quarter, in the range of $54-57/t.
    With production and sales volumes expected to return to more normal levels in the second quarter, we reconfirm our previous annual production guidance of 27-28 million tonnes and annual site cost guidance of $46-50/t.
    The second quarter 2017 quarterly contract price for steelmaking coal has not yet been settled, as the market awaits the outcome of the cyclone event in Australia, but assuming a return to normal market conditions we expect our average blended realized price for all of our steelmaking coal products in the second quarter to be in the usual range of approximately 95% of the quarterly contract price.
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    China QHD Port may lift port charges for coal in Apr

    China's benchmark Qinhuangdao port has planned to adjust up port charges for coal by 1 yuan/t on April 1 to improve profitability, a move to return to the same level as around the same time last year, sources said.

    After the adjustment, mainly to reflect the rise in coal prices that have secured profit for both miners and end user, the port charges of coal for domestic and export trade will be at 23.5 yuan/t and 25.45 yuan/t, respectively, according to a plan still under discussion.

    The policy may exert little impact on large customers at the port, as they usually own special storage yards as well as berths and have strong anti-risk capability. Small and medium customers may have to shoulder higher transfer cost.

    Authorities with Qinhuangdao Port Group lowered port charges by 1 yuan/t on April 18, 2016, in order to attract customers in a sliding coal market. It further cut port charges by 3 yuan/t in June but canceled this in September, as coal prices rose with growing demand.

    Other northern ports may follow suit to raise port charge for coal, which is at 13.5 yuan/t at SDIC Caofeidian and 16.5 yuan/t at Jingtang.
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    China rail operator works to boost coal stocks at northern ports

    China Railway Corporation (CRC) -- the country's rail operator -- asked local bureaus of Taiyuan and Hohhot to expedite coal transport to northern ports, in case of supply tightness during the coming spring maintenance to Daqin rail line, the company said.

    The maintenance will start on April 6 and last for 25 days till the end of the month.

    As utility restocking demand remained resilient, the CRC wished to boost coal stocks at northern ports to ensure supply.

    The CRC required local bureaus to give priority to bulk commodities, for which agreements have been signed, in allocating transport capacity.

    According to a new railway operating plan starting April 16, 194 trans-bureau direct rail lines will be in operation for bulk commodities.

    Of that, 62 rail lines will be used to transport medium- and long-term coal contracts signed between miners and utilities, and 46 rail lines will be targeted for other coal transport.
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    US sheet steel mills hold prices but buyers hit pause

    US sheet steel mills continue to quote hot-rolled coil prices at around $660/st, but buyers have taken a break from placing spot orders, market sources said Thursday.

    A service center source said that "asking prices" from his suppliers have been at $660/st and galvanized substrate prices have been steady at $860/st. He has not purchased any steel at those levels though. "It does feel the market may be hitting the pause button here," he said.

    The $660/st price for HRC is a minimum price for spot, a mill source said. Lead times are extended, and he said he does not have to be flexible on the price. The mill source said a customer bid more than 1,000 st at $650/st this week, and he turned down the order.

    The market is wavering, and buyers have been unmotivated to place orders, according to another mill source. The mill's cold-rolled coil pricing has been steady at $860/st, though orders have been light.

    There is a bit more of a range in galvanized sheet prices, depending on the gauge and coating extras. "To be competitive on those products you have to be competitive on the base price," he said. The full range of galvanized sheet prices is $840-$880/st, he said.

    On Thursday, S&P Global Platts held its daily HRC and CRC assessment flat at $650-$670/st and $850-$870/st, respectively. Both assessments are normalized to an ex-works basis.

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    Growth in China steel activity slows in March, fuels oversupply fears: PMI

    Activity in China's steel industry expanded at a slower pace in March even as mills continued to ramp up output, sparking worries of oversupply in the world's top producer of the metal, an industry survey showed on Friday.

    A renaissance in China's steel industry has been a major driver of the world's second-largest economy in recent quarters, helping generate the strongest profit growth in years.

    The Purchasing Managers' Index (PMI) for the steel sector fell to 50.6 in March, down from February's 51.4 but still above the 50-point mark that separates growth from contraction on a monthly basis, according to data from China Federation of Logistics & Purchasing (CFLP).

    Since last year, cash-starved Chinese mills have boosted production to take advantage of rising metal prices and higher profit margins, but a reading on new orders slipped to 50.6 in March from 55.3 in the previous month, suggesting a sharp cooling in demand.

    Steel prices were on track for a 4 percent fall in March, the first monthly drop since December, on worries that supply is outstripping demand. [IRONORE/]

    Inventories of finished goods expanded for the first time in March after five months of decline, rising to 53 from 47.7 in February, its highest level since July 2015.

    But despite rising inventories, steel output quickened to a 10-month high in the month, up to 52 from 50.4 in February.

    "If inventories can't be digested quickly, steel factories will once again face relatively large destocking pressures," CFLP said in a release, adding that steel inventory by March 31 was 29.6 percent higher than the same time last year.

    A months-long construction boom fueled by a strong housing market and higher government infrastructure spending have spurred China's demand for steel and other building materials.

    But fresh government curbs to cool the heated property market in recent weeks are expected to dampen housing demand and drag on investment and industrial activity eventually.

    More than a dozen Chinese cities have tightened restrictions on home purchases so far this month to deter speculation.
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    POSCO sees Q1 operating profit up 82 pct on China demand, higher steel prices

    South Korean steelmaker POSCO said on Thursday it estimated its first-quarter operating profit likely jumped more than four-fifths, topping analysts' expectations, underpinned by solid steel demand in China amid rising prices.

    For 2019, the world's fourth-biggest steelmaker said it expects to nearly double its annual operating profit to 5 trillion won compared with last year, fuelled by higher-margin premium products and improvements in non-steel businesses.

    Disclosing preliminary earnings guidance for the first time, the world's fourth-largest steelmaker said operating profit for January-March was about 1.2 trillion won ($1.07 billion), climbing 82 percent from 659.8 billion won a year ago and beating a consensus forecast of 816 billion won from 16 analysts' views.

    Steel prices in China, the world's biggest consumer, have risen 16 percent so far in 2017, extending last year's sharp recovery from a six-year decline as Beijing implements efforts to spur infrastructure spending and cut excess manufacturing capacity.

    POSCO, which estimated revenue climbed 17 percent to 14.6 trillion won in the period while net profit more than doubled to 800 billion won, expects to report final first-quarter numbers next month.

    Company chairman Kwon Oh-joon, who has restructured affiliates and cut debts at the steel giant to help cope with intense competition from China and once-sagging product prices, was appointed for another three-year term early this month.

    The estimates were disclosed after POSCO shares closed down 0.9 percent on Thursday while the broader market fell 0.1 percent. The company's shares have risen 10 percent this year, outpacing the market's 7 percent rise, after snapping six consecutive years of declines last year.

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    India seeks ways to revive state steel giant after damning report

    India has set up an expert panel to help revive its loss-making state steel maker after a government review found the company to be far less efficient than its rivals despite spending more than $10 billion in the past eight years.

    A review document, containing previously undisclosed data and seen by Reuters, criticises Steel Authority of India (SAIL) for everything from the use of low-quality raw materials to outdated technology, suggesting that its problems were not simply the result of cheap Chinese steel imports.

    SAIL, which has been overtaken by JSW Steel as India's biggest producer, has posted seven straight quarterly losses, and Reuters reported last week that it was at risk of losing business from its biggest client.

    SAIL's underperformance could derail the government's target to triple steel production in the country by 2030, and shows how Prime Minister Narendra Modi's big infrastructure dreams may have to rely heavily on the private sector and imports.

    Steel Minister Chaudhary Birender Singh, worried by what he called SAIL's "unsatisfactory" output performance, has asked the panel to recommend a timeline for ramping up capacity at a "quick pace", to find ways to lower production costs and to improve branding and marketing.

    "The terms of the reference of the committee will include chalking out a revival plan for turning around loss-making (companies) of the Ministry of Steel to profit-making companies in 2017/18," Singh's office told the committee this week, in a memo seen by Reuters.

    The panel, comprising top officials of various government ministries and SAIL, met for the first time this week and will be helped by Boston Consulting Group (BCG) in coming up with a revival plan for the company.

    They will set quarterly, six-monthly and yearly targets for SAIL, according to the memo. Two government sources said minister Singh wants a plan for SAIL and smaller state steel company RINL in 15 days.

    A SAIL spokesman did not respond to requests for comment. A steel ministry spokesman declined comment.

    Government officials earlier said SAIL had failed to take advantage of protectionist measures that have helped private companies out-price Chinese steel and lift their margins.


    SAIL fares poorly when compared to international efficiency standards and those of private Indian companies such as JSW and Tata Steel in blast furnace productivity, raw material consumption and energy usage, according to the review document.

    For example, SAIL's average daily blast furnace productivity of 1.58 tonnes per cubic meter last fiscal year ended March was 40 percent lower than that of JSW. SAIL said the metric improved 7 percent between April and December last year.

    Its use of coke - derived from high-quality coal, and thus costly - was also higher than private peers and global standards. April-December coke use came down 3 percent from a year ago, SAIL said.

    Its use of pulverized coal injection technology - a cheaper substitute to coke - was the lowest compared to JSW and Tata in 2015/16. During April-December, SAIL said the gauge improved 14 percent.

    The government said this week that three of SAIL's ailing units put up for strategic stake sales have made losses for the past five years despite the company pumping in more than $400 million for their modernisation. (

    The steel ministry told parliament on Wednesday that most SAIL plants were set up almost half a century ago and that the technologies and equipment had become "old and obsolete".

    SAIL is chasing tie-ups with foreign majors such as ArcelorMittal and POSCO, companies known for their cutting-edge technology.

    Analysts say higher employee costs, typical of government companies in India, were another factor holding SAIL back.

    "Even when the market was good, SAIL was under-performing because of higher fixed costs," said Goutam Chakraborty, analyst at Emkay Global Financial Services in Mumbai, who expects SAIL to show improvement by end of this decade.
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