Mark Latham Commodity Equity Intelligence Service

Wednesday 4th May 2016
Background Stories on www.commodityintelligence.com

News and Views:

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    Macro

    China April official PMI stands at 50.1


    China’s official manufacturing Purchasing Managers’ Index (PMI) stood at 50.1 in April, easing from March's 50.2 and barely above the 50-point mark that separates expansion in activity from contraction, showed the data from the National Bureau of Statistics on May 1.

    It showed that activity in China's manufacturing sector expanded for the second month in a row in April, but only marginally. The findings raised doubts about the sustainability of a recent pick-up in the world’s second largest economy.

    The output and new order sub-index stood at to 52.2 and 51 in April, compared with last month’s 52.3 and 51.4, respectively.

    The sub-index of new export orders, a proxy for the trade industry, stood at 50.1 in the month, compared with 50.2 in March, data showed.

    The sub-index for employment edged down 0.3 to 47.8 from the month prior, signaling a slightly faster contraction of labors in manufacturing enterprises.

    Separately, the private Caixin/Markit purchasing managers' index released on the same day showed factory activity dropped to 49.4 in April from March’s 49.7.

    http://en.sxcoal.com/0/145363/DataShow.html
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    China Presses Economists to Brighten Their Outlooks


    Chinese authorities are training their sights on a new set of targets: economists, analysts and business reporters with gloomy views on the country’s economy.

    Securities regulators, media censors and other government officials have issued verbal warnings to commentators whose public remarks on the economy are out of step with the government’s upbeat statements, according to government officials and commentators with knowledge of the matter.

    The stepped-up censorship, many inside and outside the ruling Communist Party say, represents an effort by China’s leadership to quell growing concerns about the country’s economic prospects as it experiences a prolonged slowdown in growth. As more citizens try to take money out of the country, officials say, regulators and censors are trying to foster an environment of what party officials have dubbed “zhengnengliang,” or “positive energy.”

    In the past, Chinese authorities have targeted mainly political dissidents while commentary about the economy and reporting on business has been left relatively unfettered in a tacit acknowledgment that a freer flow of information serves economic vitality.

    But Beijing has moved to reassert control of the country’s economic story line after policy stumbles that contributed to selloffs in China’s stock markets and its currency last year fed doubts among investors about the government’s ability to navigate the slowdown.

    Lin Caiyi, chief economist at Guotai Junan Securities Co. who has been outspoken about rising corporate debt, a glut of housing and the weakening Chinese currency, received a warning in recent weeks, officials and commentators said. It was her second.

    The first came from the securities regulator, and the later one, these people said, from her state-owned firm’s compliance department, which instructed her to avoid making overly bearish remarks about the economy, particularly the currency.

    Pressured by financial regulators bent on stabilizing the market, stock analysts at brokerage firms are becoming wary of issuing critical reports on listed companies. At least one Chinese think tank, meanwhile, was told by propaganda officials not to cast doubt on a planned government program to help state companies reduce debt, economists familiar with the matter say.

    While evidence of the clampdown is anecdotal, it appears widespread. Government departments didn’t respond to requests for comment or declined to comment.

    During the past two months, the Communist Party leadership has been talking up the economy to try to reassure global markets.

    This message control risks further constraining information about the world’s second-largest economy, thereby deepening the anxieties of investors who already doubt the reliability of official statistics and statements.

    http://www.wsj.com/articles/china-presses-economists-to-brighten-their-outlooks-1462292316#:ZRmrzWquXN9OKA
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    Glencore's Zinc, Copper, Coal Output Declines After Cutbacks


    Glencore Plc’s zinc and copper production fell in the first quarter as the company curbed mine output following last year’s slide in commodity prices. It maintained output forecasts for all products except oil, which it reduced.

    Zinc output totaled 257,100 metric tons in the three months through March, down 28 percent from a year earlier, the Baar, Switzerland-based miner and trader said in a statement on Wednesday. Copper output slipped 4 percent, while coal production declined 17 percent. The company cut its oil-output target by 300,000 barrels.

    Glencore has said it plans to reduce copper output by about 7.5 percent this year and cut zinc supply by a quarter. Some of the biggest miners have been forced to shutter unprofitable operations, trim costs and sell assets to reduce debt in response to slowing demand from top user China. The Swiss firm, led by billionaire Ivan Glasenberg, has surged in London this year after ending 2015 as the second-worst performer in the FTSE 100 Index.

    Glencore is the world’s biggest zinc miner and the move to reduce output of the metal is bringing the market closer to deficit. It’s the second-largest producer of refined copper and has suspended operations in the Democratic Republic of Congo and curtailed output in Zambia.

    While copper output dropped because of curtailments in Africa, production was partly offset by increases in South America, the company said.

    In other commodities, Glencore’s nickel production advanced 16 percent to 27,600 tons as coal production fell to 29.7 million tons.

    http://www.bloomberg.com/news/articles/2016-05-04/glencore-s-zinc-copper-coal-output-declines-after-cutbacks
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    Palladium/Gold: A fresh look at an old indicator.

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    Oil and Gas

    Risks rise as hedge funds place record bet on oil


    Hedge funds increased their net long positions in Brent and WTI derivatives by 7 million barrels to a record 663 million barrels in the week ending April 26.

    Even though oil prices have already risen by roughly $20 per barrel (70 percent) from their low in January, hedge funds are more bullish than at any time since oil prices started slumping in the summer of 2014.

    Hedge funds and other money managers held futures and options contracts equivalent to 791 million barrels of crude betting on a further rise in prices and just 128 million barrels gambling on a fall.

    The record net long position in crude easily surpasses previous peaks set in May 2015 (572 million barrels) and June 2014 as ISIS fighters threatened the oilfields of Iraq (626 million barrels).

    Large concentrations of long or short positions are often followed by a sharp reversal in prices when holders try to lock in their profits by liquidating some of their positions, triggering a rush for the exit.

    The accumulation of such a large net long position over the last 17 weeks could indicate an increasing risk crude prices will pull back and give up at least some of their recent gains in the short term.

    Crude prices have been closely correlated with the accumulation and liquidation of hedge fund positions in Brent and especially WTI since the start of 2015 (tmsnrt.rs/1SKnhyS).

    Traders and analysts are divided over whether hedge funds and other money managers are now fully invested in crude, heightening the risk of reversal, or could still increase their position further.

    Since the start of the year, hedge funds have added almost 195 million barrels of additional long positions in Brent and WTI, while cutting short positions by 235 million.

    The brutal squeeze on former hedge fund short positions has been at least as important as the emergence of fresh long positions in pushing prices higher.

    But with hedge fund short positions down from a recent peak of 392 million barrels in the second week of January to just 128 million barrels there are not many more short positions to squeeze.

    On the long side, hedge funds have already amassed a record number of contracts. Past experience indicates that this could be a close to their maximum position.

    But oil prices are less than half of the level that they were in June 2014, so the dollar amount of hedge fund positions is still relatively modest, which could indicate they have further scope to add long positions.

    On balance, the hedge funds' record net long position has shifted the balance of price risks towards the downside in the short term.

    http://www.reuters.com/article/oil-prices-kemp-idUSL5N1802Q0

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    W. African oil sailing east down in May on cooled Chinese buying


    Chinese loadings of West African crude oil fell back from 19-month highs in May as delivery delays, port congestion and full tanks scuppered interest from private oil refineries, according to a Reuters survey of shipping fixtures and traders on Tuesday.

    China's bookings of West African crude fell to 981,000 barrels per day (bpd) for May loading, down from a 19-month high in April of 1.14 million bpd. Traders had warned for weeks that logistical bottlenecks and port congestion at Qingdao would make it difficult for the frenzied purchases from so-called teapot refiners to continue.  

    An increase in India's purchases, to a four-month high of roughly 613,000 bpd helped to offset the decline. But overall bookings still slipped to 1.81 million bpd, their lowest level since January.    

    Weaker demand from the independent, or teapot, refineries in China, the world's largest energy consumer, is a red flag not just for West African oil producers, but for the broader market.

    These private refiners were granted licenses to import crude only last year, and their keen buying was a key source of support for the roughly 70 percent rally in oil benchmarks since the beginning of the year.

    In an interview with Reuters, a senior official from China's biggest private refiner warned that port congestion and logistical issues would cut into the teapot buying.

    Reliance, a private Indian refiner, booked several cargoes, including Angola's Pazflor, Cabinda and Dalia, Gabon's Olowi and a cargo of Cameroonian crude. This, along with tenders from state-run Indian Oil Corp., helped boost the country's purchases.

    But Reliance processes a diverse mix of crude, and is constantly looking to maximise revenue by buying the most cost effective grades, making it a fickle buyer. It is also looking to increase purchases from Iran, which could dent its other bookings.  

    http://www.reuters.com/article/oil-west-africa-exports-idUSL5N18044C
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    Venezuela Oil Output Slumps in First Quarter as Drilling Slows


    Venezuela’s oil production dropped across all regions in the first quarter for the first time since 2008, according to energy consultant IPD Latin America.

    The country’s output totaled 2.59 million barrels a day in the first three months of the year, down 188,000 barrels from an average of 2.78 million in 2015, IPD said in an e-mailed statement. “For the first time since Q3 2008 oil production from all districts fell, including that of the Orinoco Oil Belt, where production had been on the rise since Q1 2009,” IPD said.

    Venezuela, which relies on crude shipments for 95 percent of export revenue, is facing the worst recession in decades amid the slump in crude prices. IPD attributed the production declines to factors including drilling challenges, natural gas compression issues and well maintenance difficulties due to restriction of field services and theft.

    IPD has lowered its 2016 output forecast due to the drop in first-quarter output. The consultancy, which had expected 2016 annual production of 2.62 million barrels a day, is now forecasting an average annual rate of about 2.35 million, it said. Completing a well now takes as long as 60 days, compared with a previous average of around 15, according to IPD.

    The consultant said there is “minimal correlation” between the country’s power crisis and the oil output reduction as the national oil company, Petroleos de Venezuela SA, generates about 90 percent of the electricity required for the country’s upstream operations.

    “Downstream operations have the potential to be more affected than upstream by power crisis. El Palito and Paraguana power supply is most precarious. Primary and ancillary operations at the Jose industrial park depend on National Electric System, resulting in potential service interruptions,” IPD said.

    Power outages have led to Venezuela offering more diluted crude oil, known as DCO, and fewer synthetic grades, Joe Gorder, CEO of refiner Valero, said today on the company’s first quarter earnings call. Gorder also said there had been no decrease in Venezuelan oil volumes imported into the U.S.

    http://www.bloomberg.com/news/articles/2016-05-03/venezuela-oil-output-slumps-in-first-quarter-as-drilling-slows
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    Shell Q1 income plunges on low prices


    LNG giant Royal Dutch Shell on Wednesday posted it first results since the multi-billion takeover of BG, revealing a sharp decline in its first-quarter profit on low oil, gas and LNG prices.

    Shell’s first quarter earnings on a current cost of supplies (CCS) basis were $0.8 billion, down 83% as compared with $4.8 billion for the same quarter a year ago.

    The company’s adjusted earnings, excluding one-off items such as proceeds from divestments, dropped 57 percent to $1.6 billion from $3.7 billion a year earlier, beating analysts’ expectations.

    Shell’s CEO Ben van Beurden said the company is continuing to reduce its spending levels, as it manages the financial framework in the low oil price environment.

    “The combination with BG is off to a strong start, as a result of detailed forward planning before the completion of the transaction. This will likely result in accelerated delivery of the synergies from the acquisition, and at a lower cost than we originally set out,” the CEO said.

    “Putting all of this together, capital investment in 2016 is clearly trending toward $30 billion, compared to previous guidance of $33 billion, and some 36% lower than combined Shell and BG investment in 2014,” van Beurden said.

    According to van Beurden, Shell expects to absorb BG’s capital investment and operating expenses during 2016, with no net increase overall, compared with Shell stand alone in 2015.

    He added that Shell would continue to manage spend, through “dynamic decision-making across the organisation, taking advantage of opportunities from both the deflating market and the two companies coming together.”

    Royal Dutch Shell Plc’s first-quarter profit beat analysts’ estimates as better-than-expected earnings from oil refining and chemicals production countered crude prices at a 12-year low.

    http://www.lngworldnews.com/shell-q1-income-plunges-on-low-prices/
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    Halliburton Loss Grows as It Takes Baker Hughes Deal Charges


    Halliburton Co.’s first-quarter loss widened as customers slashed budgets in half and the company took charges related to the failed $28 billion merger with Baker Hughes Inc.

    The merger was called off Sunday in the face of stiff resistance from global regulators over antitrust concerns. Halliburton, the world’s largest provider of fracking services, recorded first-quarter costs of $378 million, or 44 cents a share, related to the Baker Hughes bid, according to a statement Tuesday. That’s higher than the $79 million, or 9 cents a share, acquisition-related costs in the final three months of the year.

    Overall, Halliburton reported a loss of $2.4 billion, or $2.81 a share, deeper than a loss of $643 million, or 76 cents, a year earlier. Excluding certain items, profit was 7 cents a share, higher than the 4-cent average of 36 analysts’ estimates compiled by Bloomberg. The company also eliminated 6,000 more jobs in the quarter to reduce costs, according to a statement April 22.

    The oil services industry is operating at a loss in North America, home to the world’s largest market for hydraulic fracturing. Schlumberger Ltd., the biggest oil servicer, lost $10 million in the U.S. and Canada, excluding taxes, during the first three months of the year. Halliburton, the world’s No. 2 provider, reported an operating loss of $39 million in North America, its largest region, on revenue of $1.8 billion, according to an April 22 statement announcing preliminary results.

    The second- and third-largest oil-service firms had set a deadline for the end of April to complete the deal or walk away. The U.S. Justice Department heard concerns from dozens of companies and ultimately concluded that the deal was "not fixable at all," David Gelfand, deputy assistant attorney general, told reporters Monday on a conference call.

    “In accordance with Generally Accepted Accounting Principles, and in conjunction with the termination of its merger agreement with Baker Hughes, Halliburton determined that its proposed businesses to be divested no longer meet the assets held for sale criteria as of March 31, 2016,” the company said in the statement.

    Halliburton announced the Baker Hughes takeover in November 2014 in a bid to better compete against industry leader Schlumberger. The U.S. Justice Department filed a lawsuit in early April to stop the merger, saying it threatened to eliminate head-to-head competition in 23 products and services used in oil exploration.

    The statement was released before the start of regular trading in New York.

    http://www.bloomberg.com/news/articles/2016-05-03/halliburton-loss-widens-as-oil-explorers-cut-more-u-s-drilling
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    Venture Global LNG raises capital


    Venture Global LNG Inc. has announced that it has successfully closed its fourth round of equity investments through a private Reg. D transaction.

    This round added to the group of high profile, very large institutional investors in the company. The offering raised additional capital of US$55 million, bringing the total capital raised to date to over US$265 million.  

    Venture Global LNG confirmed that the proceeds will be used to fund development activities for its proposed LNG export facilities in Louisiana, US.

    In a joint statement, Co-CEOs Mike Sabel and Bob Pender, said: “This latest equity raise is further affirmation that the market and investors recognise and value our company’s continued execution on significant project milestones, as well as our competitive advantage as the low-cost provider of North American LNG.”

    Venture Global LNG is developing the 10 million tpy Venture Global Calcasieu Pass facility on a site located at the intersection of the Calcasieu Ship Channel and the Gulf of Mexico. It is also developing the 20 million tpy Venture Global Plaquemines LNG facility in Plaquemines Parish, Louisiana on a site located 30 miles south of New Orleans, Louisiana.

    http://www.lngindustry.com/liquefaction/03052016/Venture-Global-LNG-raises-capital-2387/
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    Record low volumes in oil and gas hurts Vallourec in Q1


    French steel pipe maker Vallourec on Tuesday reported a net loss and fall in revenues in the first quarter as volumes plummeted to record lows mainly in the oil and gas businesses, but it said results will be better in the next quarter.

    The company, which supplies the oil and gas industry, said revenues in the quarter fell 36.2 percent to 671 million euros ($771.99 million) compared with the same quarter in 2015, while its net loss was 284 million euros.

    Oil, gas and petrochemicals contribute to about a third of Vallourec's business.

    "As expected, the first quarter of 2016 was marked by a decrease in volumes. This new record low level illustrates the extent of the crisis the oil & gas markets are going through," said Philippe Crouzet, Chairman of the Management Board.

    http://www.reuters.com/article/vallourec-results-idUSP6N14400X
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    Petrobras sells Argentina, Chile assets


    Brazil's state-run oil firm Petroleo Brasileiro SA said on Tuesday it concluded the sale of a 67.2 percent stake in Petrobras Argentina SA to Argentina's Pampa Energia for $892 million, according to a securities filing.

    Petrobras also sold all of Petrobras Chile Distribucion Ltda to Southern Cross Group for about $490 million, the company said.

    http://www.reuters.com/article/us-petrobras-argentina-idUSKCN0XU2G4
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    All of Fort McMurray now evacuating as wildfire spreads


    The whole city of Fort McMurray, Alberta, the gateway to Canada's oil sands region, is under a mandatory evacuation order because of an uncontrolled wildfire that is rapidly spreading, local authorities said on Tuesday.

    Evacuees are being told to head north toward the oil sands camps after the fire breached the highway south of the city of about 80,000 people.

    http://www.reuters.com/article/canada-wildfire-alberta-idUSL2N18100I
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    Critical Project for Canadian LNG Exports Gets Favourable FERC Review


    Spectra Energy’s Atlantic Bridge project has just gotten an important “favourable” Environmental Assessment (EA) from the Federal Energy Regulatory Commission.

    A favorable EA is a signal that FERC will, later this year, grant a full approval for the project. And that’s really good news for Canadian LNG export plants–and equally good news for Marcellus drillers.

    Here’s how this news all ties together. The Atlantic Bridge project is a series of upgrades to two different pipeline systems already in existence: the Algonquin Gas Transmission (AGT) pipeline and the Maritimes & Northeast Pipeline (M&NE).

    The two pipelines will be connected along the coast of Massachusetts, near Boston. Thing is, right now the M&NE flow gas from north to south, from Canada to the U.S. Part of the Atlantic Bridge project is to make M&NE bidirectional, able to flow gas from south to north. The AGT will collect gas from the prolific Marcellus via a third Spectra-owned pipeline–the Texas Eastern Transmission Company (TETCO) pipeline–delivering Marcellus gas to New England.

    Yes, much/most of the gas will go to New England, but excess gas produced during periods of the year when not as much gas is used in New England will then be available to flow on up to Canada and to one of several new LNG export facilities either in planning or under construction. It all starts with a favourable EA…

    http://marcellusdrilling.com/2016/05/critical-project-for-canadian-lng-exports-gets-favorable-ferc-review/
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    Valero's profit nearly halves on lower margins


    U.S. refiner Valero Energy Corp reported a 49 percent fall in profit, hurt by weak margins and higher inventories.

    Refiners ramped up production in 2015, leading to higher inventories and weaker margins this year as demand softened during the mild winter.

    Valero's refining throughput margin fell to $7.96 per barrel in the first quarter, from $12.39 per barrel last year.

    Net income attributable to shareholders fell to $495 million, or $1.05 per share, in the first quarter ended March 31, from $964 million, or $1.87 per share, a year earlier.

    Operating revenue fell 26.3 percent to $15.71 billion in the quarter.

    Up to Monday's close of $59.82, Valero's New York-listed shares have fallen 15.4 percent this year, while the S&P 500 oil & gas refining & marketing sub-index has fallen 13.3 percent over the same period.

    http://www.reuters.com/article/valero-energy-results-idUSL3N1802DA

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    Encana Corp dives into the red as revenue drops 40%


    Calgary-based Encana Corp. has reported a US$379-million net loss for the first quarter as revenue fell 40 per cent compared with the same time last year.

    Encana is adjusting to persistently low commodity prices and recorded $607 million in asset writedowns and $22 million for restructuring charges during the quarter ended March 31.

    Its operating loss was $130 million or 15 cents per share — three cents worse than analyst estimates from Thomson Reuters.

    Net loss including the writedowns amounted to 45 cents per share, compared with $1.71 billion or $2.25 per share a year earlier and an estimate of 20 cents per share.

    Revenue after royalty payments fell to $753 million from $1.25 billion in the first quarter of 2015. Analysts had estimated about $657 million of revenue, according to Thomson Reuters.

    A year earlier, Encana had an operating profit of $19 million or three cents per share after eliminating the impact of $1.2 billion in asset writedowns and other items.

    The quarterly results were issued several hours ahead of Encana’s annual shareholders meeting today in Calgary.

    Although dismal, Encana says the latest financial report showed some signs of improvement in operating efficiency.

    “Our teams are drilling some of the fastest, highest performing and lowest cost wells in our core four assets and we continue to find greater efficiency in every part of the business,” Encana chief executive and president Doug Suttles said.

    “We are on track to deliver $550 million of year-over-year cost savings.”

    http://business.financialpost.com/news/energy/encana-corp-dives-into-the-red-as-revenue-drops-40?__lsa=31ad-822c
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    Noble Energy sells certain Greeley Crescent acreage in DJ Basin for $505 million


    Noble Energy, Inc. today announced that it has signed a definitive agreement to divest certain oil and natural gas properties in the Greeley Crescent area of Weld County, Colorado. The transaction includes the sale of approximately 33,100 primarily undeveloped net acres within the DJ Basin to Synergy Resources (NYSE: SYRG) for $505 million. The effective date of the transaction is April 1, 2016, and closing is expected to occur as early as June 2016, subject to customary terms and conditions.

    David L. Stover, Noble Energy's Chairman, President and CEO, commented, 'The Greeley Crescent sale signifies Noble Energy's continued portfolio management efforts and accelerates the value of these assets to the Company. This transaction also highlights the strong value of undeveloped acreage throughout the DJ Basin. Our DJ Basin development activities are currently focused on Wells Ranch and East Pony, where we have a deep inventory of long lateral drilling opportunities in an oily part of the basin. In addition, our existing infrastructure in these areas provides a competitive advantage. Combined with other asset sales, we have now announced transactions totaling more than $775 million in proceeds this year, which further enhances our flexibility to strengthen our investment-grade balance sheet and accelerate activity levels once justified by higher commodity prices.'

    Average daily production on the assets divested is approximately 2,400 barrels of oil equivalent per day, net to Noble Energy, with approximately two-thirds operated and one-third non-operated. The acreage and production sold represent approximately eight percent and two percent, respectively, of the Company's totals in the DJ Basin. Several hundred vertical wells have been drilled on the assets by multiple operators. Noble Energy has drilled 14 horizontal wells on the acreage over the past four years. Post transaction close, Noble Energy's DJ Basin position will total 363,100 net acres, including 111,600 combined acres in Wells Ranch/East Pony and 31,800 acres remaining in the Greeley Crescent area.

    The acreage included in the transaction remains dedicated to Noble Energy's midstream business for oil and water gathering, as well as freshwater services.

    http://www.oilvoice.com/n/Noble-Energy-sells-certain-Greeley-Crescent-acreage-in-DJ-Basin-for-505-million/890fbda1e3ed.aspx?utm_source=twitterfeed&utm_medium=twitter&utm_campaign=Feed%3A+OilvoiceHeadlines+%28OilVoice+Headlines%29
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    Alternative Energy

    GE wants to become big player in offshore wind, eyes Adwen takeover


    General Electric wants to become a major player in the offshore wind industry and is interested in buying the Areva-Gamesa offshore joint venture Adwen, GE's new head of renewables said on Tuesday.

    Following its takeover of the energy assets of the French group Alstom, GE in November 2015 created a global renewable energy business unit with sales of 9 billion euros ($10.42 billion), staff of 13,000, and its headquarters in France.

    The resulting enlarged unit has built about 25 percent of the world's installed base of hydropower and more than 20 percent of global onshore wind capacity, but has virtually no presence in the capital-intensive offshore business, which GE had always steered clear of.

    "We have the ambition to become one of the three major players in the offshore wind market," GE renewables head Jerome Pecresse told reporters in Paris on Tuesday.

    He added that it was too soon to discuss a market share target. Germany's Siemens is European market leader for offshore wind with 63.5 percent of installed capacity in Europe at the end 2015, followed by MHI Vestas with 18.5 pct.

    http://www.reuters.com/article/ge-renewables-france-idUSL5N1802KF
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    Mainstream Renewable plans 100 mln euro equity fundraising for expansion


    Mainstream Renewable Power, a developer that builds wind and solar plants for clients such as IKEA, has appointed PJT Partners to raise at least 100 million euros ($114 million) through an equity sale, it said on Tuesday.

    The green energy company, created in 2008 from the proceeds of the 2 billion euro sale of renewable energy firm Airtricity to utilities SSE and E.ON, wants to raise capital from one or more investors to finance its expansion in South America, Africa and southeast Asia, it said in a statement.

    The company also announced a profit after tax of 96 million euros for 2015, the first time the company has made an annual profit. In 2014, it made a loss of 46.6 million euros.

    Mainstream has largely wrapped up its involvement in renewable energy projects in Europe, where green subsidies are being reined in after huge growth, and is instead banking on developing markets to find new business.

    http://www.reuters.com/article/mainstreamrenewable-equity-expansion-idUSL5N17W6TG
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    Uranium

    Rio Tinto's ERA to sell stockpiled uranium to cover mine closure


    Rio Tinto's Energy Resources of Australia said on Wednesday it plans to sell uranium from a stockpile over the next four years to fund the closure of its Ranger mine, while it tries to keep options open to develop a new mine.

    ERA's prospects beyond 2021 are bleak after Aboriginal land owners refused to back a renewal of its mining authority beyond 2021 and its parent, Rio Tinto, last year declined to invest in further studies on its Ranger 3 Deeps project.

    Uranium prices have collapsed more than 60 percent since Japan's Fukushima nuclear plant disaster in 2011.

    Following a strategic review, ERA said on Wednesday it would spend about A$4 million ($3 million) a year keeping alive the option of developing Ranger 3 Deeps, which would require an extension of its processing license that expires in January 2021.

    "ERA will maintain its dialogue with all stakeholders to ensure it continues to understand their perspectives in relation to an Authority extension," ERA Chairman Peter Mansell said in a speech prepared for the group's annual meeting.

    He warned that the project's viability might be hurt if it were reactivated later than mid-2018, as there would be a gap in sales from its stockpile, due to run down in late 2020, and the start of production from Ranger 3 Deeps.

    "Maximisation of cash flow from the processing of stockpiled ore enables the company to strengthen its financial position, build confidence in its delivery of high quality rehabilitation outcomes and provides a foundation for the company to examine future growth options," ERA said in a statement.

    The company says it expects rehabilitation of Ranger, including filling up the the mine pits, will cost around A$509 million, after having spent more than A$405 million over the past four years.

    ERA's shares were steady on Wednesday but have plunged 73 percent since last June when Rio decided to stop funding work on Ranger 3 Deeps.

    http://www.reuters.com/article/rio-tinto-energy-rsc-aust-idUSL3N180463
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    Agriculture

    Digital farming could spell shake-up for crop chemicals sector


    Global pesticides, seeds and fertiliser companies may be forced to re-engineer their business models as farmers adopt specialist technology that helps maximise harvests while reducing the use of crop chemicals.

    New businesses are springing up that promise to tell farmers how and when to till, sow, spray, fertilise or pick crops based on algorithms using data from their own fields.

    Their emphasis on reducing the use of chemicals and minerals known as farming inputs is a further challenge for an industry already struggling with weak agricultural markets worldwide.

    "If our only goal is to sell as much inputs as possible by the litres of chemicals, I think we would have a real problem going forward," said Liam Condon, head of Crop Science at Bayer , the world's second-largest pesticides supplier.

    Bayer bought proPlant, a developer of software for plant health diagnostics, earlier this year. Rivals are also investing in digital farming with the aim of generating service revenues that could offset any future drop in chemicals volumes.

    "If you only spray half of the field that's much less inputs," Condon added. "The knowledge to get to the fact that you only spray that part of the field -- that, you can sell."

    After an aborted takeover move for Syngenta, U.S. seeds giant Monsanto says data science and services are the "glue that holds the pieces together" of its strategy for future growth.

    Monsanto's $1 billion purchase in 2013 of the Climate Corporation, which analyses weather conditions, was the digital farming sector's biggest deal to date.

    DuPont is investing in digital farm management services under its Encirca brand, which it said in March had customers representing more than 1 million acres of farmland.

    At the 970-hectare farm in Bavaria where Juergen Schwarzensteiner rotates corn, potatoes and grains, satellite maps and software supplied three years ago by a unit of farming goods distributor BayWa have prompted many changes.

    These include reducing the overuse of nitrogen fertiliser -- a risk to drinking water quality and the environment -- and cutting down on other fertilisers.

    As well as BayWa's FarmFacts, farm management software startups include Iowa-based Farmers Business Network Inc, backed by Alphabet Inc and investor Kleiner Perkins, and Missouri-based FarmLink LLC.

    All aim to provide farmers with individualised prescriptions on how to work each field down to a fraction of an acre, using data they have collected on soil and weather conditions, the use of crop chemicals and crop yields. Feedback from the farmers they have advised in turn allows the companies to fine-tune their computer models of plant growth.

    According to market research firm AgFunder, venture capital investments in food and agriculture technology nearly doubled to $4.6 billion last year, with "precision agriculture" startups raising $661 million in 2015, up 140 percent from 2014.

    Syngenta bought seven agricultural technology firms last year alone, AgFunder said.

    For now, the main aim of these companies is to help farmers using their drones, field robots, decision support software and smart irrigation systems to boost yields, said Carsten Gerhardt, a chemicals industry specialist at advisors A.T. Kearney.

    "But in the mid- to longer-term, I also expect there to be a reduction in the use of input factors by about 30 to 40 percent," he added.

    "There's a risk for established players if digital services providers can convince farmers that they can settle for the second-best herbicide and show what really counts is a more precise way of using it."

    http://www.reuters.com/article/farming-digital-idUSL5N1743WQ

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    Steel, Iron Ore and Coal

    Germany to exit coal power "well before 2050" - draft document


    Coal-fired power production in Germany should come to an end "well before 2050", according to a draft environment ministry document seen by Reuters on Tuesday on how Europe's biggest economy can achieve its climate goals.

    Calls have grown for Berlin to set out a timetable to withdraw from coal in power production, after global leaders clinched a climate-protection deal in Paris last December to transform the world's fossil-fuel driven economy.

    The government is due to decide on a national climate action plan for 2050 by mid-2016 which will lay out how it plans to move away from fossil fuels and achieve its goal of cutting CO2 emissions by up to 95 percent compared to 1990 levels by the middle of the century.

    The draft document, which still needs to be rubber-stamped by other ministries and has not yet been approved by Environment Minister Barbara Hendricks, says CO2 emissions from the energy sector will need to be halved by 2030 compared to 2014 levels.

    The paper proposes setting up a committee to come up with recommendations on how to phase out coal while averting economic hardship for those working in coal-producing regions.

    The coal sector still accounts for around 40 percent of electricity generated in Germany and is viewed as an important pillar for a stable power supply as the country exits nuclear power and moves towards renewable sources of energy.

    The document calls for a faster expansion of renewables than currently envisaged and says support for solar power needs to be increased.

    Germany generated more than a quarter of its electricity from renewable sources - such as wind and solar power - in 2014. The document said the amount of energy produced by green sources should increase by around 75 percent by 2030.

    Support for research into energy-storage technologies should be doubled over the next 10 years, the paper says.

    The government will also push for a stricter European emissions trading system and is considering whether an additional levy on petrol, heating oil and gas would increase demand for green technologies.

    http://www.reuters.com/article/germany-environment-coal-idUSL5N1805E5
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    Shenhua Q1 net profit falls 21pct on year


    China Shenhua Energy Co., Ltd, the listed arm of coal giant Shenhua Group, realized net profit of 4.61 billion yuan ($711.8 million) in the first quarter of the year, falling 21.4% from the year prior, said the company in its quarterly report released on April 30.

    The operating revenue declined 4.6% year on year to 39.4 billion yuan during the same period, it said.

    In the first quarter, the company intensified sales of outsourced coal amid rebounded coal demand from downstream sector. Total coal sales reached 92.5 million tonnes or 27.2% of the year’s target, up 27.1% on year; while output of commercial coal stood at 71.3 million tonnes or 25.5% of the year’s target, up 2.9% on year.

    China Shenhua said it will continue to maximum the sale of coal traded at northern ports, and increase the sales of outsourced and exported coal properly in 2016.

    Data showed that sales of coal shipped via northern ports stood at 54.4 million tonnes in the first quarter, accounting for 58.8% of total sales.

    The production cost of the company’s self-produced coal stood at 106.3 yuan/t during the same period, sliding 7.5% from a year ago.

    Domestic coal demand may stabilize in traditional slack season under China’s policy of steady economic growth, and the supply glut will gradually be eased in the long run, said China Shenhua.

    http://en.sxcoal.com/0/145349/DataShow.html
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    Brazil Seeks $44 Billion in Suit Over Spill at BHP-Vale Mine Dam


    Brazilian prosecutors filed a 155 billion reais ($44 billion) civil suit against Vale SA, BHP Billiton Ltd. and their iron-ore venture over a November dam rupture that killed as many as 19 people and caused severe environmental damage.

    The prosecuting task force is demanding the two companies and Samarco Mineracao SA provide initial payment of 7.8 billion reais within 30 days, according to a statement from the prosecutor’s office. The civil suit also challenges a previous agreement the companies signed with Brazil’s federal government and the Minas Gerais and Espirito Santo state governments.

    Samarco had been making progress at overcoming what authorities describe as Brazil’s biggest environmental disaster before the lawsuit was filed. In March, Samarco, Rio de Janeiro-based Vale and Melbourne-based BHP struck a deal with the Brazilian governments, committing to pay as much as 12 billion reais over 15 years. President Dilma Rousseff officially presided over the event, praising the companies and the administration for reacting quickly to address the damage caused.

    The prosecutors allege in Tuesday’s statement that state and federal agencies failed to provide the oversight necessary to avoid such a disaster.

    “This action is much more extensive” than the previous agreement with the governments, prosecutor Eduardo Aguiar said Tuesday in a telephone interview. “It includes not just the three companies but the federal government, both state governments and also various agencies.”

    The amount sought in the prosecutors’ civil suit was based on costs to repair the damage caused by the 2010 Deepwater Horizon oil-spill disaster in the Gulf of Mexico, according to the statement. The Brazilian suit includes more than 10,000 pages of technical reports and more than 200 claims related to ecological, economic and social damages.

    Prosecutors said the total value of the damages is an estimate and will be assessed by an independent technical team. In Brazil, prosecutors have a history of demanding large reparations for environmental disasters that are then reduced. Chevron Corp. was one party targeted by multibillion-dollar suits for 2011-2012 offshore oil spills, and eventually settled for a fraction of that amount.

    http://www.bloomberg.com/news/articles/2016-05-03/vale-bhp-s-samarco-faces-new-civil-suit-worth-43-billion
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    Iron ore price plummets as Chinese stockpiles rise


    Iron ore prices lost more than 4% of their value on Tuesday, as China’s port inventories have started piling up.

    The drop comes as stockpiles in China, the world’s main buyer, climbed 1.2% to 98.5 million tons last week.

    The steel-making material traded 4.3% lower to $63.41 a ton, reversing the large gain seen last Friday and reducing gains this year to 46%, according to Metal Bulletin Ltd.

    The drop comes as stockpiles in China, the world’s biggest buyer, climbed 1.2% to 98.5 million tons last week, the highest in more than a year, according to Shanghai Steelhome Information Technology Co.

    Analysts called the end of the iron rally last month. Goldman Sachs Group, for one, said the price was likely going back down to $35 during the fourth quarter of the year.

    China's securities regulator on Friday urged commodity futures exchanges to curb excessive speculation following the surge in prices that sparked fears markets were heading for a risky boom-and-bust cycle.

    http://www.mining.com/iron-ore-price-plummets-as-chinese-stockpiles-rise/?utm_source=twitterfeed&utm_medium=twitter
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    Fortescue sees iron ore steadying as China aligns trading curbs, investment needs


    Australia's Fortescue Metals Group expects iron ore prices to stabilise as China walks a fine line to curb market speculation, which triggered a recent run-up the price of iron ore futures, the miner's chief executive said on Wednesday

    "The Chinese government wants more market forces to drive the economy and they are encouraging those processes," Fortescue CEO Nev Power told reporters on the sidelines of a conference.

    "On the one hand the Chinese government wants to drive the economy with that process. But on the other hand, they do not want it to get out of control," he said.

    Iron ore prices have jumped more than 45 percent since the start of the year on the back of a pick-up in demand from Chinese steel mills and futures' speculation, but major miners expect prices to fall back later this year due to oversupply.

    The China Securities Regulatory Commission has said it would not allow the futures market to become a "hot-bed" for speculators and urged commodity exchanges to curb excessive speculation following a surge in prices.

    Power said he expected some volatility to continue in iron ore trading but said much of the world's higher cost production was eliminated during last year's period of low ore prices, enabling fundamental market forces to exert greater influence.

    "We are pleased to see the Chinese government starting to say this is not designed to be a highly speculative exchange, we want producers and users to be the main participants," Power said.

    Power said Fortescue, the world's fourth-biggest iron ore miner, was mining and shipping ore for an average price of around $30 a tonne - roughly half the current benchmark spot price.

    "The positive we are seeing is the underlying strong demand in China," Power said, adding steel mill margins were also robust.

    http://www.reuters.com/article/fortescue-iron-idUSL3N18118C
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    Fortescue wipes out more debt


    Iron-ore major Fortescue Metals has issued a $650-million repayment issue for its 2019 senior secured term loan. 

    The repayment comes just days after the miner announced a $577-million repayment of senior unsecured notes. CEO Nev Power said on Wednesday t hat the $650-million term loan repayment would be made at par from accumulated cash on May 16, and would generate interest savings of around $28-million a year. 

    “We are committed to ongoing debt reduction and have accelerated the repayment of the term loan and notes on the back of strong cash flows from sustainable operational efficiencies and cost reductions,” Power said. 

    With the latest repayments, Fortescue’s total 2016 debt repayments have increased to $2.3-billion, generating annual interest savings of around $164-million.

    http://www.miningweekly.com/article/fortescue-wipes-out-more-debt-2016-05-04
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    A glut faces Indian iron-ore miners


    India was facing an imminent glut in iron-ore with production forecast at 180-million tonnes in 2016-17 and a current carryover stockpile of 140-million tonnes. The increase in stockpiles has come despite a 63% fall in imports during 2015-16, at 5.6-million tonnes, with miners apprehending a problem of plenty in the months ahead.

    Final figures of current stocks were yet to be collated but indications available from Federation of Indian Mineral Industries (FIMI) show stocks have climbed to 140-million tonnes at the end of March, from levels of around 128-million tonnes in the previous corresponding period, across major producing provinces of Odisha, Jharkhand, Goa and Karnataka. 

    According to FIMI, of the total stockpile an estimated 85-million tonnes were low-grade fines which were not finding any takers among domestic raw material consumers. To make matters worse, according to the FIMI, dispatches from mines in Odisha was failing to take-off since the local government charged the same rate of royalty for all grades of iron-ore, making it unviable for consumers to lift low grade ores. 

    The existing stockpile and glut in the market was expected to worsen since mines in Odisha had a cap for production of up to 80-million tonnes for 2016-17, set by the Environmental Ministry, but were still operating at 50% capacity. FIMI maintained that with mines in Odisha still having headroom to ramp up production in the coming months and with a slow-down in mine dispatches, the oversupply situation would aggravate over the current year. 

    The Federation has also flayed the Odisha government for continuing with its policy that half of iron-ore production should be earmarked for steel mills located within the province even though the aggregate average off-take by the latter did not exceed 20-million tonnes, leading to local miners getting saddled with rising volumes of stocks. 

    In the medium term, Indian iron ore production was forecast to hit the 200-million tonnes mark by 2020, the first time since 2010-11 and falling steadily since then. FIMI has cautioned that with mine dispatches unlikely to show an uptick considering depressed prices of steel and the financial stress facing most domestic steel mills, the only option to prevent worsening of over-supply and stock-pile up at pitheads was to step up exports. 

    It was pointed out that despite falling iron ore exports from the country, the government had steadfastly refused to scrap or reduce the 30% export tax on high-grade ore though the same had been scrapped in case of low grade ore. Last fiscal, Indian iron ore exports touched an all time low of 4.8-million tonnes, down from the heydays of 2010-11 when exports were recorded at 97-million tonnes.

    http://www.miningweekly.com/article/a-glut-faces-indian-iron-ore-miners-2016-05-04
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    China’s key steel mills daily output up 0.09pct in mid-April


    The daily crude steel output of China’s key steel mills edged up 0.09% from ten days ago to 1.69 million tonnes in mid-April, posting the second ten-day increase in a row, according to data released by the China Iron and Steel Association (CISA).

    China’s daily crude steel output is expected to be 2.28 million tonnes in mid-April, up 0.79% from ten days ago, CISA forecasted.

    The supply of crude steel at steel mills continued to climb in mid-April after the accelerated production in early April, and China’s daily supply of crude steel came to be the highest level since mid-May last year.

    Daily output of steel products in key steel mills gained 5.33% from March to 1.67 million tonnes in mid-April; that of iron pig and coke stood at 1.64 million and 0.33 million tonnes, falling 0.4% on month and rising 1.05% from ten days ago, respectively.

    By April 20, stocks of steel products in key steel mills rose 0.69% from ten days ago to 13 million tonnes, yet it was still 22.03% lower than the same period last year.

    Meanwhile, social stocks of steel products stood at 9.96 million tonnes, sliding 5.26% on month.

    In mid-April, sales price of crude steel rose 11.01% from ten days ago to 2,376 yuan/t on average; that of steel products increased 7.18% from ten days ago to 2,920 yuan/t.

    Analysts still expect new upward trend in steel prices amid the peak season for building industry in May, yet they also acknowledge the great negative impacts of oversupply and high inventories on prices once the demand slides.

    http://en.sxcoal.com/0/145396/DataShow.html
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