Mark Latham Commodity Equity Intelligence Service

Friday 23rd October 2015
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    Oil and Gas


    Coldest before the dawn

    Frankfurt-based sentix, a leader in the emerging field of behavioural finance, has been compiling a commodity sentiment index for more than a decade by surveying more than 4,500 institutional and private investors.

    The sentix Asset Class Sentiment for Commodities index dropped precipitously in mid-July to lows not seen even at the height of the global financial crisis or during the stomach-churning fall in the price of crude in the second half of 2014.

    The researcher warned with admirable Germanic directness that "when such a strong fall of the indicator occurs it is not wise to buy the market anti-cyclically," but as was the case in late 2009 "the time for contrarians will come when confidence returns" which could take "several months".

    From the record low of –20.75 seen on this graph dated July 20, the sentix index has now shot back up to above 0.

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    China 2015 power consumption growth may shrink to 1pct: CEC

    China’s power consumption growth would shrink from the previous 2% to 1% in 2015, the China Electricity Council (CEC) said.

    China consumed a total 456.3 TWh of electricity in September this year, declining 0.2% year on year, the fourth yearly decline this year, following the drop of 6.3%, 2.2% and 1.3% in February, March and July respectively, showed data from the National Bureau of Statistics (NBS).

    Power consumption by the primary industries, tertiary industries and residential segment all posted year-on-year increase of 2.7%, 7.3% and 4.6%, separately, while that by the secondary industries stood at 312.8 TWh, falling 2.9% on year and down 11.7% from August.

    The decreased power use was greatly impacted by slack demand and overall supply glut in the secondary industries, with power consumption at building and metallurgical industries down 6.4% and 7.8% over January-September, compared with the growth of 7.3% and 1.8% from a year ago.

    The decline in these two industries’ power use contributed 1.2 percentage points in the total power use growth across the country.

    Additionally, the EI Nino-impacted cooler weather also resulted in the consumption slid this year, analysts said.

    Meanwhile, the average utilization of power generating units across the country dropped 7.24% on year to 2,972 hours over January-September this year. Of this, hydropower plants and thermal power plants contributed 2,639 and 3,247hours, down 3.08% and 7.55% on year, respectively.

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    Freeport-McMoRan Swings to Loss, Takes Big Oil-and-Gas Write-Down

    Freeport-McMoRan Inc. swung to a third-quarter loss on another big write-down tied to the company’s struggling oil-and-gas operations. The loss, excluding one-time items, was sharply wider than analysts had feared and revenue missed expectations.

    The U.S.’s biggest miner and a major copper producer, also announced plans to further curtail copper and molybdenum production, including a possible shutdown of its Sierrita mine in Arizona.

    Freeport-McMoRan recently said it would explore options for its troubled oil and gas business and cut the size of its board as it contends with tumbling commodity prices and a move on the company by activist investor Carl Icahn. Possible moves include a spinoff, joint-venture arrangements or further cost cuts.

    Mr. Icahn first disclosed an 8.5% stake in Freeport in August, when the company announced it would slash 2016 capital spending by 29%, cut expected copper production by 150 million pounds, and eliminate about 10% of its U.S. workforce of roughly 15,600.

    Overall, Freeport-McMoRan reported a loss of $3.8 billion, or $3.58 cents a share, compared with a year-earlier profit of $552 million, or 53 cents a share. Excluding net charges of $3.7 billion, the per-share loss was 15 cents.

    Revenue decreased 35% to $3.68 billion.

    Analysts polled by Thomson Reuters expected per-share loss of eight cents and revenue of $3.96 billion.

    U.S. miner and oil producer Freeport-McMoRan, under pressure from activist investor Carl Icahn and falling prices, said on Thursday it will further cut copper and molybdenum output as it posted a bigger-than-expected quarterly loss.

    The Phoenix-based company said it remains confident in the longer-term outlook for copper prices, but will halve operating rates at its Sierrita mine in Arizona as price continue to fall.

    The move will cut output by 100 million pounds of copper and 10 million pounds of molybdenum annually, said Freeport, which is also considering a full shutdown of the mine.

    Combined with cuts announced in August, annual production has been reduced by 250 million pounds of copper and 20 million pounds of molybdenum.

    The biggest U.S.-listed copper miner, Freeport said a primary strategic objective is the "significant" reduction of its $20.7 billion debt load.

    The company also said it continues to mull options for its oil and gas business. They include spinning off the unit to shareholders, joint ventures, an initial public offering of a minority stake of the unit and further spending cuts.

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    Teck Resources swings to loss after $1.7 billion charge

    Teck, the largest producer of steel-making coal in North America, said the write-downs reflect lower expectations for commodity prices.

    Canadian mining giant Teck Resources swung to a loss in the third quarter of the year due to a $1.7 billion (Cdn$2.2 billion) asset impairment charge in its steel-making coal and other businesses.

    The Vancouver-based company, the largest producer of steel-making coal in North America, said the write-downs reflect lower expectations for commodity prices.

    “We are taking significant steps to meet the challenge of low commodity prices,” Tech chief executive Don Lindsay said in a statement.

    The company’s adjusted earnings and revenue, excluding the charges, did better than analyst estimates.

    And it seems to be working, as the company’s adjusted earnings and revenue, excluding the charges, did better than analyst estimates.Third-quarter earnings, totalled Cdn$29 million ($22 million), or 5 cents a share, from Cdn$159 million, or 28 cents, a year earlier.

    Teck also noted it has reduced costs throughout the company and raised nearly $1 billion in two streaming transactions.

    In April, the miner decided to cut its dividend to shareholders from $0.45 per share to $0.15 to weather weak prices that the company attributes to global oversupply.

    A month later, it cut production and inventories of steel-making coal by suspending operations for three weeks in the third quarter. It said production in the fourth quarter, which began Oct. 1, would be aligned with sales volumes.
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    Anglo American output challenged cuts diamond production

    Anglo American PLC reported Thursday broadly mixed output across most of the commodities it produces in the third quarter, with lowered diamond production in response to weaker prices for the gemstones.

    The world's fifth-largest diversified miner by market capitalization said diamond output, its largest earnings driver last year, fell 27% to 6 million carats in the three months ended Sept. 30 compared with the year-earlier period.

    Iron ore output, its second-largest earnings contributor last year, rose 10% on year to 14.3 million metric tons as the ramp up of its Minas Rio iron ore project in Brazil more than offset lower output from its majority owned South African unit, Kumba Iron Ore Ltd (KIO.JO).

    Copper output fell 3% on year to 171,100 tons in the quarter as a result of the sale of the Anglo Norte assets in Chile. Otherwise copper output from its retained operations increased 1% on year.

    Platinum concentrate output rose 14% to 614,000 troy ounces compared with the year-earlier quarter when output was hit by a five month-strike. Export thermal coal and nickel output both fell during the period, while export metallurgical coal output rose.

    Anglo American's shares have halved since the beginning of the year as a result of the continued commodities price rout stemming from weaker-than-expected Chinese economic growth and a supply glut in many of the commodities it produces.

    The company has slashed costs, boosted mining performance and sought to sell unwanted assets, but tumbling commodity prices, particularly in iron ore, copper, coal, and diamonds-four key earnings drivers for the company-has eclipsed those efforts.

    Mining group Anglo American said on Thursday it was postponing major project investment decisions at its platinum unit until at least 2017 and had cut diamond production in the face of soft demand.

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    Dispute over rigged ship engine tests adds to Volkswagen's woes

    Norwegian shipowner I.M. Skaugen has disclosed it is seeking $50 million in compensation from a marine unit of Volkswagen for rigging performance tests of ship engines produced over a decade ago.

    I.M. Skaugen alleges that the specifications of the six engines it bought from MAN were misleading and it is seeking compensation for higher fuel use than specified over the expected 30-year lifetimes of the engines.

    VW now owns 75 percent of MAN Diesel and Turbo SE, although it was not an owner of MAN when the engines were made. MAN supplied the engines to Skaugen in 2002-03 and has legal counter-claims over contracts with Skaugen. VW first acquired a stake of 22 percent in MAN in 2006.

    I.M. Skaugen has decided to publicise the case, filed in a Singapore court in July, because it sees similarities between MAN's handling of the ship engine tests under VW ownership and the German company's response to the biggest scandal in its 78-year history, caused by cheating diesel car emissions tests.

    "We have tried to engage MAN for quite some time to sort out these problems. In 2012 we were promised transparency and we were promised that they would do whatever they could to settle the issues," CEO Morits Skaugen told Reuters.

    "My goal here is to highlight that the method being applied, the software, is the same. The purpose seemed to be the same, to conceal the fact that these engines do not meet the promised standards, whether it is fuel consumption or emissions."

    A VW spokesman contacted by Reuters declined to comment. VW acquired a controlling 55 percent stake in MAN in 2011, up from almost 30 it had held since 2007, and now owns 75 percent.

    MAN admitted in 2011 that some of its factory tests of four-stroke marine diesel engines may have been rigged to show artificially low fuel use. A MAN spokesman said the company has worked to compensate clients since but has not published a list of those affected and has been unable to settle with I.M. Skaugen.

    In July 2015, I.M. Skaugen filed a $20 million demand in a Singapore court for compensation from MAN for the six engines which it says were underperforming. Skaugen said the company would revise up the amount to $50 million to reflect new estimates for fuel and other costs.
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    Emerging: Mr Gann would say short.

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    China key UHV transmission line expected to finish ahead of schedule

    China’s key ultra-high voltage (UHV) power transmission line -- the 1,000 kV AC Huainan-Nanjing-Shanghai line -- is expected to come on stream before March 2016, the scheduled time of commissioning, the state news agency Xinhua reported.

    The line started construction in September 2014, and presently 85% of the project has been completed, Xinhua said.

    With a total investment estimated at 26.8 billion yuan ($4.21 billion), the line has a designed substation capacity of 12 GW.

    The project is aimed at meet increasingly growing power demand in economically developed Jiangsu and Shanghai.

    China put its first UHV transmission line -- the 1,000 kV AC southeastern Shanxi-Henan’s Nanyang-Hubei’s Jinmen line – into operation in 2009.

    At present, China has six UHV power transmission lines in operation, including 1,000 kV southeastern Shanxi-Henan’s Nanyang-Hubei’s Jinmen line, 800 kV Sichuan’s Xiangjiaba-Shanghai line, 800 kV Guizhou’s Jinping-southern Jiangsu line, 1,000 kV Anhui eastbound power transmission project, 800 kV Xinjiang’s south Hami-Henan’s Zhengzhou line, and 800 kV Xiluodu left bank-Zhejiang’s Jinhua line.

    China aims to operate 27 UHV power transmission lines by 2020, including the existent six lines, eight in construction or planning, and 13 lines to be built.

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    Brazil Impeachment Papers About to Drop as Crisis Hits New Stage

    For the second time in Brazil’s 30-year-old democracy, the country finds itself lurching toward the impeachment of its president.

    A group of high-profile lawyers plans to file a request Wednesday to begin the proceedings, nudging President Dilma Rousseff closer to being ousted after months of will-she or won’t-she-be-impeached speculation that has paralyzed Congress, rattled financial markets and deepened an economic slump.

    If lower house President Eduardo Cunha, a Rousseff rival, accepts the request, it will trigger a months-long process and exacerbate the drama of corruption and political infighting that has highlighted Brazil’s fall from emerging-market darling.

    Weakened by a bribery scandal that started at the state-run oil giant and has helped push her approval ratings to record lows, Rousseff is accused of doctoring the government’s 2014 and 2015 fiscal accounts. While the outcome of the impeachment effort is far from clear, economists and investors agree: The political stalemate needs to be resolved -- and quickly.

    Without stability in the capital, they say, Latin America’s biggest country will struggle to shore up its soaring budget deficit, win back investors and rebound from what’s projected to be the longest recession since the Great Depression.

    Fast Resolution

    “A fast resolution would be good, one way or the other, but then it really depends what type of political reality emerges at the end of the process,” said Alberto Ramos, chief Latin America economist for Goldman Sachs Group Inc. “Nobody can claim to know what’s going to happen next. We just know which questions to ask, but we don’t know the answers.”

    Rousseff has maintained throughout the spreading scandal that she hasn’t done anything wrong and declined to comment for this article.

     “Government action will not be impeded by the opposition,” she told journalists in Helsinki on Tuesday. “No matter how many impeachment requests they make.”

    While at least two dozen already have been filed, this one is different because of who is submitting it: lawyer Helio Bicudo, a prominent former member of Rousseff’s Workers’ Party, and former Justice Minister Miguel Reale Junior. The nation’s largest opposition party supports the petition.

    Bicudo and Reale argue that Rousseff doctored accounts to hide the severity of a budget deficit. The country’s audit court already rejected her 2014 financial practices, which may provide legal grounds for the impeachment charges.

    Impeaching a president in Brazil requires several steps: The lower house must accept the petition, examine it and put it to a vote. Two thirds of the lawmakers must back the charges for the petition to go to the Senate, which will make the final decision.

    If Rousseff is removed from office or resigns, Vice President Michel Temer would take over and finish her term, which ends in 2018.
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    BHP lifts iron ore output, cuts $200 mln from petroleum unit

    BHP Billiton boosted September quarter iron ore production by 7 percent on Wednesday, while maintaining full-year guidance and shrugging off growing concerns of a mounting global supply glut.

    The mining giant also trimmed its planned capital spending in oil and gas, finding a further $200 million in cost savings as it tightens its belt during a commodities downturn driven by softer demand in China.

    "BHP Billiton remains on track to meet full-year production and cost guidance after a solid operational performance this quarter," Chief Executive Andrew Mackenzie said in the report, ahead of the company's annual meeting in London on Thursday.

    At its projected iron ore production rate, BHP will retain its world number three ranking in output and exports of the steel-making commodity, which accounts for more than half its revenue and profits.

    Iron ore miners have been on a drive to lower their iron ore production costs to close to $10-$15 a tonne to keep ahead of the deterioration in pricing.

    BHP, which posted quarterly output of 61 million tonnes, plans production of 247 million tonnes in the year to June 30, 2016, up 6 percent on a year earlier, ranking it behind Vale and Rio Tinto .

    Vale this week said it produced a record 88.2 million tonnes of iron ore in the September quarter, just ahead of Rio Tinto, and would also continue to increase output.

    In copper, BHP said quarterly production fell 3 percent to 377,000 tonnes as a strong operating performance was offset by the mining of less rich ores at its majority-owned Escondida mine in Chile.

    However, its guidance for the 2016 financial year remained unchanged at 1. 5 million tonnes.

    The petroleum division's output fell by 4 percent to 64.5 million barrels of oil equivalent, although it still expects meet a target of 237 million barrels for the year.

    In the United States, the company has cut the number of its onshore drilling rigs from 10 to seven and is deferring some development activity.

    "With lower oil prices, BHP still wants to get the barrels out the door, but at the lowest cost possible," said Stock Resource mining analyst Mark Gordon.

    Despite the output slip, analysts said the petroleum division's quarterly output was better than expected.

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    Yum! Brands Splits In Two: Will Spin Off China-Facing "Bad Yum"

    When just days after Yum! Brands saw its biggest earnings disappointment in years sending its shares cratering following Chinese results which cames orders of magnitude below expectations and leading to a major guidance cut, it appointed Icahn protege, activist investor Keith Meister to its board, many speculated that some major spin-off, or split of the company's China facing assets, was just a matter of time. And so it was, less than a week to be precise. Moments ago Yum! Brands announced its intention to split into two companies creating a publicly traded Yum! China or ("Bad Yum") which will contain the ongoing Chinese weakness, while keeping legacy Yum! Brands.

    How this is good for the company in the long-run is anyone's guess, but at least it confirms that in the short run, China will get much worse before/if it gets better, as the 4% jump in the stock price confirms.
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    Vedanta Shares Drop as Company Refutes Reports of CEO Leaving

    Vedanta Resources Plc, the Indian metals and oil producer controlled by billionaire Anil Agarwal, fell to the lowest in almost two weeks as the company refuted a report that Chief Executive Officer Tom Albanese would stand down.

    Albanese will step down as head of Indian mining unit Vedanta Ltd. in March next year and will be replaced by former Anglo American Plc CEO Cynthia Carroll, whom the company hired last month as an adviser, Indian television station ET Now reported on its Twitter account. Vedanta is scheduled to report its interim earnings result on Nov. 4.

    Albanese “will continue to drive the Vedanta business and serve as the group CEO,” the London-traded parent company said in an e-mailed statement following the report. “As to some queries on the status of Ms. Cynthia Carroll, she will provide her invaluable support to the Chairman’s office on matters of strategic importance to the company.”

    Carroll, who was Anglo American CEO from 2007 to 2013, was last month appointed to chair Vedanta Resources Holdings Ltd. and advise the group-level chairman Agarwal on “corporate development and significant value-creation opportunities,” according to the statement announcing her hire.

    Albanese was appointed to head Vedanta in April last year following a six-year stint as CEO of Rio Tinto Group. He headed Rio at the same time Carroll was running Anglo before both departed after over-paying for acquisitions.

    “When Albanese joined Vedanta, it was the first time they got somebody professional from outside at the top,” Giriraj Daga, a portfolio manager at SKS Capital & Research Pvt. in Mumbai, said by phone. “The idea was that things were changing. So now people will see any management change as a negative."
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    Atlas Copco Profit Beats Estimates as Demand Grows in Europe

    Atlas Copco AB, the world’s largest maker of air compressors, reported higher-than-estimated profit in the third quarter and signaled demand is improving in European markets.

    For the second straight quarter, earnings at the Swedish manufacturer hit a new high,  Atlas Copco said in a statement Tuesday. Operating profit jumped 28 percent to 5.31 billion kronor ($640 million), buoyed by the Swedish krona’s weakness that’s boosting earnings of exporters. Analysts surveyed by Bloomberg estimated profit of 5.03 billion kronor.

    Atlas Copco, whose products include rock drills and assembly systems for the manufacturing, mining and construction industries, forecast demand in the coming months will hold steady. Orders jumped 7 percent in local currency in the third quarter. Swedish industrial companies, including Assa Abloy, are benefiting from their historic client bases closer to home after chasing emerging market growth and finding slowing demand in countries such as China.

    “Sectors such as aerospace and automotive showed good demand for our industrial tools and assembly systems, but mining, oil, gas sectors were weak,” Chief Executive Officer Ronnie Leten said in the statement.

    Exchange rates had a positive impact of 670 million kronor on earnings. Revenue increased 9 percent to 25.7 billion kronor, compared with the 25.4 billion-krona average of 16 analyst estimates compiled by Bloomberg. Excluding acquisitions and currency effects, revenue was unchanged.

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    EU Oil Equity Sentiment: desparately seeking susan.

    Europe’s Big Oil Is a Buy as Cuts Point to Recovery at Last

    After enduring the longest oil-price collapse in more than a decade, crashing profits and an investor exodus, Europe’s biggest producers are regaining fans as analysts bet earnings bottomed last quarter and will now start to recover.

    While Total SA, the region’s second-biggest oil company, will probably post the worst quarterly performance since 2009, it also has the highest proportion of buy ratings in a year, according to analysts surveyed by Bloomberg. Despite similarly bleak forecasts, Royal Dutch Shell Plc, Europe’s No. 1, has the
    biggest share of buy recommendations since mid-2012 while BP Plc has the most since February.

    The ratings show faith in the producers’ ability to weather the commodities rout, which has seen Brent crude tumble by 40 percent in a year and company valuations shrink to at least three-year lows. More analysts now believe that the industry’s sweeping spending cuts, job losses and shuttered output will be sufficient to bolster oil prices and foster profit growth.

    “It is possibly a case of being darkest before the dawn,” Lydia Rainforth, a London-based analyst at Barclays Plc, said by e-mail. A pullback in production and delays to projects “make some form of recovery inevitable” in the oil market, she said.

    Shell’s B shares, the most widely traded, have increased 15 percent this month, heading for the best performance since April 2008, after previously falling 30 percent this year. Total has gained 11 percent, while BP is up 13 percent, the biggest jump since October 2011. Energy companies are the best performers on the MSCI World Index this month after languishing at the bottom for most of the year. 

                             Spending Cuts

    The rebound comes after the companies made spending cuts to help them ride out the downturn. Drillers have reduced investments in exploration and production by a record 20 percent this year, International Energy Agency Executive Director Fatih Birol said Oct. 6. Companies also have divested assets, scrapped staff incentives and renegotiated contracts to lower costs.

    “Across the board, we see companies working very hard to cut capital and operating expenditure levels and the speed at which this is going is very high,” Occo Roelofsen, Amsterdam- based leader of the oil and gas practice at consultants McKinsey & Co., said by phone. “A lot of business units are starting to
    cope with the new situation relatively fast as they start to adjust to the new normal.”

    While the cutbacks help to buoy balance sheets and cash flow, they hamper explorers’ ability to add oil resources. Shell’s reserves and production have dropped in three of the past four years, while BP’s output has declined about 18 percent since the 2010 Gulf of Mexico oil spill that forced the company to sell assets to pay for the damages. 

                          Defending Dividends

    As cuts bite, companies are making dividends a priority over production growth. Shell Chief Executive Officer Ben Van Beurden said this month he is “pulling out all the stops” to safeguard shareholder payouts that Shell has maintained since the end of the Second World War.

    Oil’s 16-month dive has been brutal, wiping out $397 billion from the value of the 23 companies in the Stoxx Europe 600 Oil & Gas index and driving down earnings.

    Total will post adjusted profit of $2.5 billion for the third quarter when it reports on Oct. 29, according to the average of five analyst estimates compiled by Bloomberg. That’s the lowest since the fourth quarter of 2009. Profit at BP, reporting Oct. 27, will drop to $1.3 billion, the lowest in at least five years, while Shell will report $3.3 billion, near the lowest since 2013, analyst estimates show.

    Results will subsequently improve, said Ahmed Ben Salem, a Paris-based oil analyst with Oddo & Cie. As a result of spending cuts, the oil companies’ break-even price -- the level at which they can make a cash profit -- is at about $80 a barrel and will fall to $60 by 2017 from $100 last year, he said, without giving
    an oil-price forecast.

    "Oil companies are doing the job and adjusting to this lower-price situation,” Ben Salem said. “They’re resetting their companies to be leaner and more cost-effective, which will only benefit them in the future.”

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    Commodity traders buy there own bonds

    Forget oil, copper and wheat. Commodities traders are crowing about the money to be made in the bond

    On the cocktail party circuit at the industry’s LME Week earlier this month, at least a dozen traders and executives said that the surest profits these days was in debt issued by their employers and their very own rivals: Glencore Plc, Louis Dreyfus Commodities BV, Trafigura Pte Ltd. and Noble Group Ltd.

    Take $1.25 billion of Glencore notes maturing this month: the yield surged to a record 32.3 percent on Sept. 29, up from less than 2 percent in early September. Buying $1 million worth of the bond that day may generate in excess of $35,000 in profit in less than four weeks if Glencore repays the notes by maturity on Oct. 23.

    Bonds got sucked into the same vortex that sent Glencore shares plunging 30 percent in a matter of hours on Sept 28. Even as yields surged, traders said the turmoil hadn’t shaken the backing of the lenders who financed the industry, suggesting the bonds were a safer bet than the markets had priced in.

    "The bonds of the trading houses were extremely cheap," said Graham Sharp, an adviser to consultants Oliver Wyman & Co. and co-founder of oil and metals trading house Trafigura. "This was an anomaly."

    While the natural resources industry is battling the worst drop in prices since the global financial crisis, traders -- particularly in oil -- are benefiting from the pick up in price volatility.

    Not only traders, but the firms themselves have been buying back their own debt. Gunvor Group Ltd. last month completed the repurchase of the commodities trader’s $500 million debut bond. The yield on the notes peaked at more than 14 percent in December after the U.S. imposed sanctions on co-founder Gennady Timchenko. The Russian billionaire sold his stake one day before the sanctions were announced.

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    Trudeau's Liberals Oust Harper With Surprise Canada Majority

    Justin Trudeau’s Liberal Party swept into office with a surprise majority in Canada’s election, ousting Prime Minister Stephen Harper and capping the biggest political comeback in the country’s history.

    With 86 percent of polls reporting, the Liberals were elected or leading in 184 of the 338 seats in the House of Commons, with the Conservatives on pace to take 102 and the New Democratic Party 41, according to preliminary results Monday from Elections Canada. Most polls had predicted the Liberals would win a minority government.

    The result is a vindication of Trudeau’s campaign to reject Harper’s budget restraint agenda, claiming the nation needsdeficit spending to combat economic woes triggered by an oil-price collapse. Trudeau, 43, also used his youthful optimism to exploit a thirst for change, as almost three-quarters of voters said they were ready to oust Harper’s Conservatives after more than nine years in power. Harper plans to step down as party leader.

    “Canadians from all across this great country sent a clear message tonight -- it’s time for a change in this country, my friends, a real change,” Trudeau told cheering supporters at a Montreal hotel.

    The result reflected an east-west vote split in a country with six time zones, with Liberals dominating along the Atlantic coast and the country’s two largest provinces -- Quebec and Ontario -- while the Conservatives won most seats in western provinces such as Alberta.
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    New EU rules may mean Trafigura clears commodity derivatives elsewhere

    European Union plans to impose position limits on commodity trading firms could mean Trafigura takes its clearing business outside the region, Christophe Salmon, the company's chief financial officer said on Monday.

    The European Securities and Markets Authority (ESMA) last month announced rules to flesh out the Markets in Financial Instruments Directive II (MiFID II) law that comes into force in January 2017.

    Position limits, which curb how much of a commodity individual trading firms can hold in order to avoid unduly influencing its price, are being introduced for the first time.

    Depending on the commodity, position limits will range from 5 to 35 percent of the market. ESMA will publish its draft rules on position reporting by end of 2015.

    While the new rules are aimed at curbing speculators, commodity trading companies - often acting as wholesalers in the market - will be caught up in the regulation.

    "We are completely price agnostic, meaning that each time there is a mismatch between buy and sell we hedge it on the derivative market," Salmon said at the Reuters Commodities Summit.

    Large volumes transacted by trade houses can give the impression of unduly large positions, but any holdings are typically physically backed.

    "The simple fact that you can put some hard limit to the quantum of a complete misunderstanding of the concept," Salmon said.

    "It will probably be that we will have to use non-European clearing platform and marketplace to be able to do the same volume of hedging."

    MiFID II also stipulates that commodity market wholesalers or intermediaries will have to hold capital reserves unless they pass a couple of tests on trading activity.

    The "market share" test assesses whether a company's speculative trading in commodity derivatives is high in relation to overall trading in the EU. The "main business" test measures speculative trading in commodity derivatives as a percentage of its total commodity derivatives trading.

    The thresholds for the market test for metals and agriculture are four percent, oils and oil products and gas at three percent, six percent for power and 10 percent for coal.

    Salmon also said regulatory capital requirements for commodity traders would make the EU uncompetitive in relation to the United States or Asia.

    "Most of the hedging we do, 95 percent, is done on a cleared platform, we post initial and variation margin on a daily basis," he said.

    "Asking commodity traders to book regulatory capital to potentially cover a liquidation scenario is in fact wearing the trousers with belts and braces."

    Initial and variation margins is the cash left with clearing houses to cover a percentage of open futures positions.

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    China’s GDP Growth Beats Forecasts, and rumours of stimulus.

    China’s economy expanded quicker than economists forecast in the third quarter as the services sector propped up the world’s second-largest economy, suggesting monetary and fiscal stimulus is keeping Premier Li Keqiang’s 2015 expansion target within reach.

    Gross domestic product rose 6.9 percent in the three months through September from a year earlier, the National Bureau of Statistics said Monday, beating economists’ estimates for 6.8 percent. Still, that was the slowest quarterly expansion since the first three months of 2009, based off previously announced data.

    A stronger services sector and robust consumption are helping offset weakness in manufacturing and exports. The government has cut interest rates five times since November and boosted infrastructure spending in recent months to keep growth from sliding too far below this year’s target for about 7 percent.

    "It’s what we call the two-speed economy," said Zhu Haibin, chief China economist at JPMorgan Chase & Co. in Hong Kong. "The manufacturing slowdown is the bigger problem for the Chinese economy in the near term."

    The pace of growth in the services sector quickened to 8.4 percent in the third quarter, while so-called secondary industry -- which includes manufacturing -- weakened to a 6 percent expansion.

    Industrial output in September rose 5.7 percent from a year earlier, compared with economists’ median estimate of 6 percent. Retail sales increased 10.9 percent, versus a 10.8 percent gain forecast for the month.

    Fixed-asset investment climbed 10.3 percent in the first nine months from the same period last year, compared to a median projection of a 10.8 percent increase. That’s the slowest pace of gains since 2000.

    The slower growth of both industrial production and fixed-asset investment prompted some economists to question the reliability of the GDP data.

    "We don’t have total confidence in the numbers, and we are surprised by the acceleration in services output given the collapse in the equity market," Bloomberg economists Tom Orlik andFielding Chen wrote in a note. "However, tax revenue -- difficult to fake -- is up 5.2 percent year on year in the eight months to August and the gap with nominal GDP growth is narrowing."

    Bloomberg’s monthly GDP tracker slowed to 6.55 percent in September from 6.64 in the prior month.

    Reflecting the slowdown in the nation’s old growth drivers, power consumption declined 0.2 percent from a year earlier in September. A slowdown in property investment and excess industrial capacity have weighed on industries from steel to cement, leaving the economy on track for its slowest full-year expansion in 25 years.

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    Investors may face rough ride if Canadian election leads to political instability

    Given there is a good chance that Monday's Canadian federal election will not give one party control of the country's parliament, investors may want to brace for a period of political instability that could dent Canadian financial markets. The already weakened Canadian dollar could be most vulnerable to a further drop, market participants warned.

    Most recent polls have been suggesting the most likely outcome is a center-left Liberal minority government, with a lesser possibility that the ruling Conservatives will be in a position to form a minority government. Either of them would need the support of another party to govern

    The Liberals and left-leaning New Democratic Party (NDP) have telegraphed that they would not support Conservative Prime Minister Stephen Harper if he formed a minority administration. Under that scenario, they could bring down such a government and either offer to form an alternative minority government or trigger a new election.

    The Liberals have said they will not go into a formal coalition with the NDP, though there is always the possibility that stance could change once the votes are in.

    "What we could see is pressure on the currency more than anything else," said John Stephenson, head of Stephenson & Co Capital Management, noting it would be especially hard for a minority Conservative administration to govern.

    Liberal leader Justin Trudeau has pledged to run budget deficits to fund infrastructure spending, which could boost the stocks of engineering, construction and equipment companies, though it may take a toll on government bond prices in the near-term. Both the Conservatives and the NDP have stressed they will balance the budget.
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    China Sept power output falls 3.1 pct on yr -stats bureau

    China generated 454.8 billion kilowatt-hours (kWh) of power in September, down 3.1 percent from the same month last year, the country's statistics bureau said on Monday, with industrial demand still under pressure as the economy slows.

    Power generation growth has been falling this year as a result of declining consumption levels in downstream industries like steel, which are struggling with crippling rates of overcapacity and weak prices.

    With China trying to ease its fossil fuel dependence, the slowdown in electricity demand has had a pronounced impact on China's thermal power plants, usually responsible for about three-quarters of the country's total electricity.

    The predominantly coal-fired generators produced 314.6 billion kWh of power in September, down 3.6 percent on the year and accounting for 69 percent of the total. Thermal power production over the first three quarters has fallen 2.2 percent, compared to a 0.1-percent increase in overall generation.

    The drop in thermal power in September could have been more severe had it not been for a decline in hydropower volumes over the period. Hydro generation fell 6.7 percent on the year to 107.5 billion kWh, with reservoir storage levels still lower than the same period of 2014.

    With the power market in surplus, grid companies have been able to take on cleaner sources of electricity without disrupting supplies, and utilisation rates at China's coal-fired power plants have been dropping.

    Average utilisation rates at China's thermal power plants fell by 265 hours in the first three quarters of the year, the National Energy Administration said in a separate release on Monday.

    Falling demand from thermal power plants has helped drag Chinese coal production down by 2.2 percent in September and 4.3 percent in the first three quarters as a whole.

    The NEA said total power consumption in September reached 456.3 billion kWh, down 0.2 percent compared to the same month last year, with industrial consumption dropping 2.9 percent over the period.

    Total generation capacity, measuring generating units of 6,000 kilowatts or more, reached 1,385 gigawatts by the end of September, up 9.4 percent compared to the same period of last year. Thermal power stood at 947.22 GW, up 6.8 percent.

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    SKF sends gloomy signal on industrial demand after weak Q3

    Sweden's SKF, the world's top bearings maker, painted a downbeat picture for the industrial sector on Friday, forecasting lower demand ahead as a global slowdown gathered pace amid sharp sales declines in North America and Asia.

    SKF, viewed as a manufacturing bellwether with its bearings found in products ranging from skateboards to wind turbines, posted a surprise drop in third-quarter core earnings, and said it needed to cut costs further given the market conditions.

    "The expected weakening of market demand that we flagged for in July materialised and gathered pace during the quarter, especially in Asia and North America," SKF Chief Executive Alrik Danielson said in a statement.

    "Entering the fourth quarter, we expect the macro-economic uncertainty to continue and as a consequence we expect demand in the fourth quarter to be slightly lower sequentially."

    SKF's like-for-like sales tumbled 5 percent in the quarter, with North America down 11 percent and Asia down 8 percent. Europe fared better in the quarter, down 1 percent.

    Investor worries over China, SKF's biggest Asian market, have intensified over the summer amid stock market turmoil, slumping car sales and weakening industrial gauges in the world's second largest economy.

    U.S. factories have also shown vulnerability to the chill in global economy, with their growth slowing in September.

    SKF, which derives more than 70 percent of its operating profit from its industrial markets unit, said sales to the energy sector had been one of few bright spots in China.

    SKF shares, which had lost over a third of their market value since a mid-April peak, fell a further 4.6 percent by 1143 GMT, the worst performer in the STOXX Europe 600 Industrial Goods & Services Index.

    "It is quite obvious that significant restructuring is needed next year, so analyst estimates need to be cut radically," Handelsbanken Capital Markets analyst Peder Frolen said.

    Shares of Nordic industrial peers dropped after SKF's earnings, with mining equipment makers Atlas Copco and Sandvik both down more than 3 percent.

    SKF, a rival of Germany's Shaeffler AG, said adjusted operating profit fell to 1.98 billion Swedish crowns ($240.32 million) from a year-ago 2.09 billion on the back of a weak demand, lagging a mean forecast of 2.28 billion in a Reuters poll of analysts.

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    Oil and Gas

    Takeover target Santos pares capital spending, trims output forecast

    Australian oil and gas producer Santos Ltd, looking to beef up its balance sheet after knocking back a $5 billion takeover offer this week, flagged on Friday it would cut capital spending by a further 10 percent this year.

    Santos also lowered the top end of its 2015 oil and gas production forecast by 5 million barrels to 57 million to 59 million barrels of oil equivalent (mmboe), blaming the change on unscheduled outages and lower than expected demand for its gas in Queensland.

    It said capital spending would drop to A$1.8 billion ($1.3 billion), as it deferred some development activity amid a wider strategic review and auction of assets as it races to cut its A$8.8 billion net debt pile.

    Santos on Thursday rejected a A$7.1 billion bid from Scepter, a firm backed by the royal families of Brunei and the United Arab Emirates, calling the offer opportunistic and saying the conditions would have hurt consideration of other alternatives.

    Its third-quarter sales revenue fell 24 percent to A$808 million, hit by weaker oil prices. This was partly offset by a 4 percent rise in gas production to 14.5 mmboe, due mostly to its prized stake in the Papua New Guinea liquefied natural gas (LNG) project.

    "We said that we would produce more for less and this quarter's figures are a strong reflection of that. Year to date production is up 10 percent while capex is down 55 percent and unit production costs are down 15 percent," Santos CEO David Knox said in a statement.

    Santos has just started exporting from its $18.5 billion Gladstone LNG project, the biggest project it has ever built and operated, boosting its credentials as a gas supplier to Asia.
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    Australia flags concerns on $35 bln Halliburton bid for Baker Hughes

    Australia's antitrust regulator raised concerns on Friday about Halliburton Co's proposed $35 billion buyout of rival Baker Hughes Inc , in another setback for a deal that has already hit competition snarls in the United States.

    Delaying its final ruling for a third time, the Australian Competition and Consumer Commision (ACCC) said joining the world's No. 2 and No. 3 oilfield services firms to eclipse the current No. 1, Schlumberger NV, "may create conditions that would facilitate coordinated behaviour in the market".

    "The ACCC is concerned that the acquisition would result in the merged entity being one of only a small number of suppliers that could service the relevant markets," ACCC Chairman Rod Sims said in a statement, which described the companies as "close competitors across a broad range of oilfield goods and services in Australia".

    "The ACCC is particularly concerned in relation to the supply of complex or high-risk projects, such as off-shore drilling projects," Sims added.

    The regulator will give a final ruling on Dec. 17, but the remarks signal the hurdles the companies face as they try to push through a deal first announced 11 months ago as a way to cut costs amid an oil price downturn.

    The two firms have already committed to selling businesses to appease U.S. authorities, but the ACCC's Sims noted that authorities in Europe, India and China are also looking at the deal.

    The deal originally had a deadline of Dec. 16, but the two companies, which both provide services, technology and systems to the oil and gas industry globally, have more recently said it may not close until 2016.

    The ACCC initially said it expected to give a decision by July 9 but postponed that twice to collect extra information from both companies. The regulator said it has requested more information by a deadline of Nov. 12.

    The ACCC on Thursday also postponed a final decision on Royal Dutch Shell's $70 billion takeover of BG Group by a week, its second delay for a ruling on that deal, amid a flurry of M&A activity in the global energy sector that ias increased its workload.

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    Australia oil, gas deals heat up with Beach Energy and Drillsearch Energy merger

    Australian oil and gas producers Beach Energy and Drillsearch Energy Ltd agreed to a billion dollar merger on Friday, the day after Santos rejected a $5 billion offer, signalling the industry's fortunes may be bottoming.

    The pace of deals in the sector has picked up as a slump in oil prices since June last year has battered share prices to such weak levels that companies and assets are proving irresistible to buyers with sufficient funds.

    "Here it's been a particularly painful year for (energy) equities, which has generated once-in-a-cycle type opportunites for people with a more bullish long-term view on oil prices," said Adrian Prendergast an analyst with Morgans in Melbourne.

    Analysts said the string of bids over the past month, including Suncor's C$4.3 billion bid for Canadian Oil Sands, suggested acquirors see oil prices bottoming as supply comes out of the market, especially in the United States.

    "It does provide some indication the industry thinks it may miss the opportunity to transact in this recent oil price rout as people in the market have become more positive about oil prices next year," said Scott Simpson, an analyst at GMP Securities in Perth.

    The Drillsearch-Beach merger followed a A$7.1 billion ($5.2 billion) bid for Santos from a firm backed by the royal families of Brunei and the United Arab Emirates and an A$11.7 billion bid by Woodside Petroleum for Oil Search Ltd.

    "We are starting to see M&A as a real theme as cashed-up groups seek assets with exposure to oil price upside," UBS analyst Nik Burns said in a note on the Scepter bid for Santos.

    Drillsearch agreed to a takeover offer valuing it at A$384 million, a 27 percent premium to its close on Thursday, to create a combined company worth about A$1.2 billion. The enlarged group would be Australia's biggest onshore oil and gas producer.

    The two companies, both with good cashflows and little debt, said they would be well-positioned to snap up distressed assets, possibly from Santos or Origin Energy, which is also beefing up its balance sheet, to expand beyond their core in the Cooper Basin.

    "This is not about squeezing the lemon, this is about finding growth opportunities," Drillsearch Chairman Jim McKerlie told analysts.

    The merger of Beach and Drillsearch had long been expected as they are already partners in Cooper Basin oil and gas acreage, Beach owns a 4 percent stake in Drillsearch and they are both 19.9 percent owned by Seven Group Holdings.

    Combined, they expect to produce 10.6 million to 11.8 million barrels of oil equivalent in the year to June 2016.
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    Top oil traders wary of tapping their war chests

    The world's biggest oil traders are sitting on a war chest worth billions of dollars, but are reluctant to embark on a spending spree, because the pool of available assets is either too pricey or simply not for sale.

    Vitol, Mercuria, Trafigura and Gunvor, the four privately-owned houses that traded nearly a billion tonnes of raw materials last year, have all said they are open to opportunities, but not at any price.

    "The assets are (either) problematic, so it's not clear you want to own them, or they are reasonable assets, but their price hasn't come down low enough to create an opportunity," Mercuria chief executive Marco Dunand told the Reuters Commodities Summit.

    The trading companies, which profit from volatility in the price of commodities, rather than falls or rises, have used this downturn in raw metals to rid themselves of assets they no longer want and prepare the ground for juicier targets.

    Mercuria sold a 51 percent stake in Henry Bath, one of the world's oldest metals storage firms that it acquired through its purchase of JPMorgan Chase's physical commoditiesbusiness, in September, for $60 million.

    Rival Trafigura netted nearly $900 million last year from the sale of an 80-percent stake in the Corpus Christi complex, its oil asset in the Texas shale hub, to U.S. firm Buckeye.

    Chief financial officer Christophe Salmon said Trafigura was open to opportunities, but only those that would not compromise the company's balance sheet.

    "Obviously, if you divest from existing assets, this leaves you more ability to reinvest, to recycle this capital into future acquisitions, so it's a moving piece," he said.

    "Now that valuations are coming to a more reasonable level, we could be looking at opportunities again on a very selective basis," Salmon said.

    With that in mind, Trafigura is drawn more by infrastructure than in upstream producing assets, he said.

    Gunvor, one of the world's top four oil trading houses, has raised some $2 billion from selling its Russian assets, since former co-owner, Russian billionaire Gennady Timchenko, was hit with U.S. sanctions last year.

    Gunvor chief executive Torbjorn Tornqvist told the summit he definitely saw his company growing in the coming years.

    The company's series of divestments has left it with a healthy cash pile that it could invest in new business in places like Europe, the United States and China.

    Vitol on the other hand has snapped up a number of assets in the last year, from taking control over a series of European oil refineries through its Varo Energy joint venture, to buying a stake in the Nigerian downstream assets of Oando, to taking over oil storage firm VTTI
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    Statoil: New Compressors Boost Gas Recovery at Troll A

    Two giant compressors that started up on the Troll A platform offshore Norway earlier this month will ensure a daily export capacity of 4.23 billion cubic feet of gas from the Troll field, according to Statoil.

    The compressors will help the Troll field meet its long-term production profile, currently extending to 2063. They are operated by land-based power from Kollsnes west of Bergen, ensuring zero emissions of carbon dioxide and nitrogen oxides from the platform. During the past 18 months Statoil has started up low-pressure compressors on Troll A, Kvitebjørn, Heidrun, Kristin, Åsgard and Gullfaks, which has increased the recovery rate of the installations by more than 1.2 billion barrels and has extended their lives.

    Gunnar Nakken, a senior vice president at Statoil, commented in a company statement:

    “This is a new strategic milestone for the Troll field. The compressors are an important investment to ensure sustainable, long-term production and activity on the Norwegian continental shelf.”

    - See more at:
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    Cameron’s profits slip 10.5 percent as cost cutting offsets weaker demand

    Cameron International’s profits slipped 10.5 percent as the Houston-based oil tool maker offset weaker demand for its onshore products by cutting costs and nearly tripling its subsea operating income.

    CEO Scott Rowe said in a statement said the company’s third quarter earnings were nearly identical to those a year ago, before the dramatic collapse in oil prices and the deep plunge in the U.S. rig count.

    “These results validate the journey we began in 2014 to reduce the company’s fundamental cost structure and improve execution across our four segments,” he said.

    Cameron posted earnings of $213 million, or 98 cents per share, in the three-month period ending Sept. 30. That’s down from $238 million, or $1.12 per share, during the same time a year ago.

    Revenues fell from $2.7 billion to $2.2 billion amid weaker demand for all of its products and services, the company said.

    Cameron’s subsea and drilling segments boosted its operating income despite the brutal downturn, in part due to project cost reductions, the company said.

    Its surface divisions and valves and measurements segments continued to struggle with waning demand and pressure from producers for deeper discounts.

    Although Cameron has been able to protect its balance sheet by improving operations and cutting costs, Rowe said the tough times show no signs of abating, which means the company will likely see operating income margins decline in all business segments in the fourth quarter.

    “In the face of market headwinds, we will maintain our relentless focus on the things we can control: execution, customer relationships, cost reduction and technology,” he said.

    The company has cancelled its conference calls with investors as it continues to work on a merger with Schlumberger. Cameron said it expects the $12.8 billion deal to close in the first quarter of 2016.

    Cameron has warned of further weakening in the fourth quarter after the company posted a reduced profit in the latest period.
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    Marubeni Corp moves in on Santos PNG LNG stake

    Japanese trading and investment house Marubeni Corporation is believed to be seeking a stake in the Santos and Oil Search-backed PNG LNG gas project.

    As Santos and its advisers at Deutsche Bank and Lazard juggle a fistful of proposals stemming from the wide-ranging strategic review, Street Talk understands one option under serious consideration for Santos is to sell a 3.6 per cent stake in PNG LNG to Marubeni in a deal that could be worth as much as $2 billion.

    Santos has a 13.5 per cent stake in the PNG LNG project, which it owns alongside ExxonMobil (33.2 per cent and operator), Oil Search (29 per cent), National Petroleum Company of PNG (16.8 per cent), JX Nippon Oil and Gas Exploration Company (4.7%) and Mineral Resources Development Company (2.8 per cent).

    The asset's strategic value was underscored by Woodside Petroleum's bid for Oil Search in September and Santos executive chairman Peter Coates has already called PNG LNG his company's "jewel in the crown". But Santos' stake would be worth less than Oil Search's because it does not own as much of the gas that would be used for an expansion.

    That said, everything is on the table at Santos and there are plenty of balls in the air.

    Other sources reckon Santos' preferred deal is the sale of assets in Western Australia and Victoria, along with an equity raising. [Bids for assets were due on October 20, however it's understood they were pushed back by one week.] However, hiving off a 3.6 per cent stake could allow Santos to achieve twin goals of paying down debt and maintaining a material interest in the project.

    It comes as Santos rejected a $6.88 a share cash proposal from Middle East-backed Scepter Partners, saying it was an "opportunistic" approach. Scepter's team, headed by former Blackstone Advisory Partners banker Anthony Steains, is understood to have sought meetings with Santos, along with no-talk no-shop conditions and four-to-six weeks due diligence. Highbury Partnership and Gilbert + Tobin are advising the bidder.

    Fund managers and analysts were also left wondering on Thursday night how Santos could price an equity raising given the 16 per cent share price jump on Thursday and the $6.88 a share line in the sand.

    They were also left guessing at the strength of Scepter's bid. It's a new entity and listed equities investors are yet to see exactly how the bidder funds its deals.

    There is a theory that Steains and co made the bid without pitching the deal to the underlying equity sponsors [i.e. sovereign wealth funds and Brunei royalty]. It's also understood Scepter needed due diligence to line up debt funding.

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    Weatherford announces third quarter 2015 results

    Weatherford International plc reported a net loss before charges of $42 million ($0.05 net loss per share non-GAAP) on revenues of $2.24 billion for the third quarter of 2015. GAAP net loss for the third quarter of 2015 was $170 million, or a net loss of $0.22 per share.

    Third Quarter 2015 Highlights

    Net debt decreased by $28 million and positive free cash flow from operations was $123 million;
    Operating income increased 3% and by 47 basis points sequentially, driven mostly by improvements in North America where revenue increased by 2% and operating margins increased 493 basis points with the modest recovery from spring break up in Canada and continued cost reduction measures;
    Best-in-class sequential incrementals of 2% and year-on-year decrementals of 29%;
    Completed the previous reduction in force target of 11,000 employees by September 30, 2015, with realized annualized savings of $803 million; and
    Repurchased $236 million of long-term debt through open market transactions generating a gain of $35 million.

    Bernard J. Duroc-Danner, Chairman of the Board, President and Chief Executive Officer, stated:

    'We continue to make rapid and deep cost progress and drive structural change, while effectively redirecting our culture and strengthening our talent bench. Our actions remain centered around perennially improving our cost structure through cycles and intensifying capital allocation and cash generation as a company-wide discipline. Our direction is steadfast.

    Our free cash flow from operations in the third quarter increased to $123 million. We are confident in our ability to generate positive free cash flow every quarter going forward and on a full year basis this year and beyond. Our path further takes us towards operating excellence and a strict focus on our industrial core.'

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    Patterson-UTI Energy Reports Financial Results for Q3

    Including the non-cash charges discussed below, the Company reported a net loss of $226 million, or $1.54 per share, for the third quarter of 2015, compared to net income of $16.0 million, or $0.11 per share, for the quarter ended September 30, 2014.  Revenues for the third quarter of 2015 were $422 million, compared to $846 million for the third quarter of 2014.

    The financial results for the three months ended September 30, 2015 include pretax non-cash charges totaling $280 million ($187 million after-tax, or $1.28 per share).  These charges include $125 million from the impairment of all goodwill associated with the Company's pressure pumping business, $131 million from the write-down of drilling equipment primarily related to mechanical rigs and spare rig components, $22.0 million from the write-down of pressure pumping equipment and closed facilities and $1.9 million related to the impairment of certain oil and natural gas properties.  For the nine months ended September 30, 2015, the financial results also include pretax charges of $19.8 million related to a legal settlement and the impairment of certain oil and natural gas properties during the first six months of 2015.

    Andy Hendricks, Patterson-UTI's Chief Executive Officer, stated, "During the third quarter, our rig count averaged 105 rigs in the United States and four rigs in Canada, compared to the second quarter average of 122 rigs in the United States and two in Canada.  Current commodity prices are, of course, negatively impacting drilling activity.  For the month of October, we expect our average rig count will be 92 in the United States and four in Canada."

    Mr. Hendricks added, "We recognized $28.9 million of revenues related to early contract terminations in contract drilling during the third quarter.  These early termination revenues positively impacted our total average rig revenue per day of $26,010 by $2,870.  Excluding early termination revenue, total average rig revenue per day during the third quarter would have been $23,140, compared to $24,330 per day in the second quarter.

    "Total average rig operating costs per day during the third quarter decreased $140 to $13,580 from $13,720 in the second quarter.  Excluding the positive impact from early termination revenues in both the second and third quarters, total average rig margin per day was $9,560 during the third quarter, compared to $10,600 during the second quarter.

    "At the end of the third quarter our rig fleet included 160 APEX® rigs.  During the fourth quarter we expect to add one additional new APEX® rig under contract to our fleet.  We currently have no plans for additional newbuild rigs in 2016.

    "As of September 30, 2015, we had term contracts for drilling rigs providing for more than $800 million of future dayrate drilling revenue.  Based on contracts currently in place, we expect an average of 71 rigs operating under term contracts during the fourth quarter, and an average of 45 rigs operating under term contracts during 2016.

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    Sanchez Energy Announces Third Quarter 2015 Operating Results

    Production of 4,862 thousand barrels of oil equivalent ("MBOE") during the third quarter 2015 for average production of 52,844 barrels of oil equivalent per day ("BOE/D") driven by continued outperformance of Catarina wells

    The Company received approximately $345 million in cash with the close of the Western Catarina Midstream Divestiture, with annual lease operating costs expected to rise approximately $0.75 per barrel of oil equivalent over previous guidance as a result of the transaction

    The Company's joint venture ("JV") with Targa Resources Partners LP (NGLS)("Targa") to construct a cryogenic processing plant expected to have initial capacity of 200 million cubic feet per day ("MMcfd") and associated high pressure gathering pipelines near Sanchez Energy's Catarina asset in the Eagle Ford Shale is expected to provide a path to improved yields, lower processing fees, and significant marketing benefits


    "During the third quarter 2015, we continued to realize operational success driven by strong production and declining well costs," said Tony Sanchez, III, Chief Executive Officer of Sanchez Energy.

    "Production for the third quarter 2015 averaged approximately 52,844 BOE/D, exceeding the high end of our guidance range of 46,000 to 50,000 BOE/D. A comprehensive optimization of our drilling and completion practices, along with direct sourcing strategy has resulted in cost savings of approximately 50% of our total well cost relative to third quarter 2014.

    Extensive changes have been made to our processes and systems with essentially no change to our well design. As a result, our production remains strong and we have developed the financial flexibility needed to successfully manage a two-rig program in today's more challenging commodity price environment."
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    Northern Oil and Gas, Inc. Announces Reaffirmation of its Borrowing Base at $550 million

     Northern Oil and Gas, Inc. today announced that, during the semi-annual redetermination period under Northern's revolving credit facility, its bank syndicate group reaffirmed and maintained the existing $550 million borrowing base.

    "Capital discipline, combined with our exposure to the core of the Williston Basin, supported the reaffirmation of our borrowing base," commented Northern's Chairman and Chief Executive Officer, Michael Reger.  "The financial flexibility of our business model and the discipline we are showing through our capital allocation process gave our lenders the confidence they needed to maintain our borrowing base.  We appreciate the continued support provided by the entire syndicate of banks in our facility."
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    Shale gas research reveals huge potential

    China's shale gas exploration and development technology has entered the early stages of large-scale development, a report said on Wednesday.

    Released during a three-day international event - China Mining 2015 - the report said exploration and development of shale gas in the Sichuan Basin has made a major breakthrough, as they discovered the first un-compartmentalized field with a geological reserve of one hundred billion cubic meters.

    By the end of 2014, China had spent 23 billion yuan for exploration and development and has proven reserves of 106.8 billion cubic meters with an expected annual output of 3.2 billion cubic meters, the report said.

    It said the shale gas resource was rich and widespread in China with huge potential for commercialization.

    From 2009 to 2012, the Ministry of Land and Resources spent 660 million yuan on investigative work in key areas. It also made evaluations on the potential resource in 41 basins and regions.
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    Santos rejects $5.1 bln sovereign wealth-backed bid

    Embattled Australian oil and gas producer Santos Ltd on Thursday rejected a A$7.1 billion ($5.1 billion) takeover proposal from a fund backed by the ruling families of Brunei and the United Arab Emirates.

    Santos effectively put itself on the block in August, looking to sell assets in a bid to cut its A$8.8 billion net debt as its Gladstone liquefied natural gas (LNG) project begins operations amid a sharp slump in oil prices.

    It said the bid from Bermuda-headquartered Scepter, pitched at a 26 percent premium to its close on Wednesday, was too cheap and included conditions that would hurt its consideration of asset sales and a wider strategic review.

    "The Proposal is considered to be opportunistic in nature and does not reflect the fair underlying asset value of the company," Santos said in a statement to the Australian stock exchange.

    Santos shares jumped as much as 20 percent on news of the bid, but were still worth only half as much as a year ago. The stock was trading at $6.28 at 0225 GMT, well below the proposed offer of A$6.88 a share.

    Scepter had no immediate comment on the rejection, its head of merchant banking, Anthony Steains, said.

    Two analysts said they thought shareholders would welcome the bid, given that the stock dipped below A$4 less than a month ago, but said valuations hinge on a long-term view of oil prices.

    "It looks a fairly punchy price relative to value of the assets," said Bernstein analyst Neil Beveridge. "It looks to be a pretty decent bid."

    Scepter, with offices in New York, London and Beijing, describes itself as a syndicate of ruling families, sovereign wealth funds and ultra-high net worth industrialists who have committed more than $14 billion to back large transactions.

    Prince Abdul Ali Yil Kabier, a member of Brunei's ruling royal family, is a founder and director of the firm alongside financier Rayo Withanage. Other directors include Brunei's Prince Bahar Bin Jefri Bolkiah, the United Arab Emirates' Sheikh Juma al Maktoum, former HSBC chairman John Bond and former U.S. ambassador to Qatar Patrick Theros.

    Incorporated this year, the management team is made up of several former directors of Blackstone Advisory Partners in Asia.

    Santos' spokesman declined to comment on any other alternatives the company was considering or what conditions Scepter had sought in its bid sent on Oct. 20. Analysts and investors assumed one of the conditions was exclusivity.

    While analysts said the offer was a full price relative to their valuations on Santos based on a long-term oil price around $75 a barrel, a top 10 shareholder said it made sense for the board to reject the bid.

    "If you're prepared to auction off your assets, why would you offer someone exclusivity if they didn't offer a cracking (takeover) price?" said Jason Beddow, chief executive of Argo Investments, Santos' eighth largest shareholder.

    Santos has stakes in oil and gas production in Australia, Papua New Guinea, Indonesia and Vietnam, with the jewel in its crown considered to be its 13.5 percent stake in the Papua New Guinea LNG project.

    Analysts have said that stake alone could be worth more than A$5 billion, based on the value implied in a recent takeover bid by Woodside Petroleum for Oil Search Ltd, a bigger stakeholder in PNG LNG.
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    Brazil gives SBM ultimatum in $250 mln bribery settlement

    Brazil has told Dutch SBM Offshore NV, the world's top oil production ship leaser, to agree soon to a $250 bribery settlement if it wants to regain its biggest client in the world's largest oilship market, a government source told Reuters.

    The ultimatum gives SBM several days to sign a leniency deal that includes financial reparation and other clauses such as cooperation with a corruption investigation. The settlement, which has been under negotiation for months, would lift a ban on the Amsterdam-based firm from bidding for new business with Petrobras, Brazil's state-run oil company.

    Petrobras, whose officials were accused by Brazilian prosecutors of accepting bribes from SBM representatives in order to win contracts, will receive the proceeds of the deal, gaining badly needed cash to finance expansion and pay debt, the largest in the oil industry.

    Petrobras officials were not immediately available for comment. SBM had no immediate comment on the matter.

    The government source, who asked not to be named because he is involved in the negotiations, told Reuters on Wednesday that an agreement was very close but there remained a 50-50 chance of the talks folding over difficulties related to a few final clauses.

    "We have negotiated endlessly and we gave them an ultimatum: Either we finish now or we break off talks and the company will be penalized," the source said.

    The official did not detail the stumbling blocks but he said negotiations had been particularly complex because they involved several parties, including the Comptroller General's office, which is the main negotiator, as well as Rio de Janeiro state prosecutors and Petroleo Brasileiro SA, as the oil company is formally known.

    The source confirmed that the leniency deal under negotiation involves payment by SBM to Petrobras of about 1 billion reais ($253 million), part of which would be paid in cash and the rest in services to be provided by the Dutch company to Petrobras.

    Brazilian prosecutors had accused SBM of paying millions of dollars in bribes between 1995 and 2003 to secure contracts with Petrobras. Since the corruption scandal emerged, SBM and other suppliers, including construction and engineering firms, have been implicated, resulting in a ban on doing business with Petrobras.
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    US oil production unchanged on week

                                          Last Week  Week Before  Last Year
    Domestic Production........ 9,096          9,096            8,934
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    US Inventories post another large gain

    U.S. oil inventories rose by 8 million barrels last week, as another week of refinery downtime meant fewer barrels of oil were processed and more flowed into storage.

    The larger-than-expected build reminded traders that an end to the glut of oil driving down prices remains far off. U.S. benchmark oil prices fell by 90 cents or 1.94 percent in early trading Wednesday.

    U.S. inventories stood at 476.6 million barrels in the week ending Oct. 16, the highest level for this time of year in at least eight decades, according to the U.S. Energy Information Administration. Traders had expected a build of about 3.75 million barrels, according to the median estimate of 10 economists surveyed by Bloomberg.

    The gain comes as U.S. refineries have reduced the amount of oil they process during the fall maintenance season. Refineries ran at 86.4 percent of their full capacity, up 0.4 percentage points from last week but still far below the 95 percent-plus rates common a few months ago.

    Gasoline inventories fell by 1.5 million barrels to 219.8 million barrels. Distillate fuels fell by 2.6 million barrels to 145 million barrels.

    Wednesday’s weekly data showed the fourth consecutive weekly build in U.S. inventories and the second second consecutive gain of more than 7.5 million barrels.
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    Baker Hughes Revenue Falls 39% on Depressed Oil Prices

    Baker Hughes Inc. on Wednesday reported a 39% drop in revenue for its third quarter, as the oil-field services company forecast difficult conditions for its current quarter while depressed oil prices continue to pressure spending from its customers.

    Baker Hughes, which is being acquired by larger rival HalliburtonCo., has cut thousands of jobs and closed facilities as plunging oil prices have prompted many of its clients to curtail or cancel projects. Baker Hughes and its peers are particularly struggling in the U.S., where shale producers have dialed back operations.

    Chief Executive Martin Craighead said Baker Hughes is seeing greater interest in its production offerings, as customers focus on optimizing production from existing wells over exploration and production. Mr. Craighead said he expects the company to face further reductions in activity and pricing pressures throughout the remainder of the year.

    For the quarter ended Sept. 30, Baker Hughes reported a loss of $159 million, or 36 cents a share, compared with a prior-year profit of $375 million, or 86 cents a share.

    Excluding restructuring charges and merger costs, among other items, the company’s adjusted per-share loss was 5 cents a share.

    Revenue fell to $3.79 billion from $6.25 billion a year earlier.

    Analysts polled by Thomson Reuters were expecting an adjusted loss of 14 cents a share on revenue of $3.79 billion.

    Revenue fell across all of Baker Hughes’s geographic segments in the quarter compared with a year ago, with the biggest drop in North America. The division saw a 57% decline in revenue to $1.4 billion, as average rig counts fell 54% and customers cut spending.

    Latin America posted a 23% decline in revenue, while revenue fell 21% in the Middle East and Asia Pacific division.
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    Japan's Jera says will significantly cut long-term LNG contracts resource coal

    Japan's JERA Co, set to become the world's biggest buyer of liquefied natural gas (LNG) next year, plans to significantly cut the amount of gas it purchases on long-term contracts, the company's president told the Reuters Global Commodities Summit.

    JERA, a joint venture set up by Tokyo Electric Power (Tepco) and Chubu Electric Power to initially handle fuel procurement with a possibility of eventually taking over thermal power stations, has more than 10 million tonnes of gas on long-term contracts that expire by around 2020.

    But the company will not automatically renew them, President Yuji Kakimi said.

    The move puts more question marks over planned big LNG projects, which rely on long-term contracts to get financing approved, amid a downturn in commodities markets that has cut investment in many areas.

    JERA, which buys around 80 percent of its gas on long-term contracts, will only contract volumes to cover the absolute minimum of fuel needed, using the most optimistic scenarios for rebooting its nuclear power plants and the take-up for renewable energy being promoted by the government.

    Additional requirements for gas will be met with mid-term and short-term contracts or spot purchases, Kakimi said.

    "Our original mission of procuring at a similar level to Europe and the U.S. is close to being achieved with oil price falling, but even if oil prices rose, we have to make sure that (procurement) costs are capped," he said.

    JERA will surpass Korea Gas Corp as the world's single biggest buyer of LNG with annual purchases of around 40 million tonnes once it fully integrates the partners' existing contracts next summer.

    Kakimi said Jera's annual purchases of gas are expected to decline in line with government forecasts, implying the company will be burning around 28 million tonnes a year by 2030.

    He also said the company is expanding Chubu Electric's unit in Houston to start LNG trading opportunities when the Freeport LNG project, in which Chubu invests in, starts export in 2018.


    JERA also aims to broaden its sources of coal to lower its reliance on high-quality Australian coals in order to cut costs.

    Australia is by far the biggest supplier to Japan, accounting for nearly 80 percent of Japan's thermal coal imports in the first eight months of this year.

    "Since it looks difficult to see more flows from Indonesia under current market circumstances, it is important to develop new sources such as Russia, the U.S., Colombia and Africa," Kakimi said.

    JERA, which buys about 20 million tonnes of thermal coal a year, is also interested in buying into in coal mines to hedge against rises in coal prices, he said.

    He declined to say how much a stake it aims to buy, but said stakes equivalent to 30-40 percent of its procurement would be "too much" under the current market.

    Attached Files
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    Baker Hughes expects less drilling in 4th qtr

    Oilfield services provider Baker Hughes Inc said it expects less drilling in the current quarter due to reduced customer spending but said it was seeing "stronger interest" in services that help increase oil and gas production.
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    '$60 barrel could fuel Norway revival'

    Cost reductions being achieved on both existing and new field projects off Norway will result in a rebound in investment and activity levels as early as next year given an oil price above $60 a barrel, according to a contractor boss.
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    Polish Lotos CEO says interested in Saudi, Iranian oil

    IMr Pawel Olechnowicz the chief executive of Poland's No 2 oil refiner Lotos said that he was interested in refining Saudi and Iranian oil as part of efforts to diversify away from Russian crude.

    Mr Olechnowicz said that "We are interested in refining any oil, including Saudi and Iranian oil. Diversification allows for greater safety of the company."

    Last week, the head of Russia's biggest oil company Rosneft said that Saudi Arabia had started supplying crude oil to Poland, a market traditionally dominated by Russia.
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    Russia Races Past Saudi Arabia in Tussle for Chinese Oil Market

    Russia beat Saudi Arabia to become the biggest seller of crude to China for the second time this year in the race to supply the world’s biggest energy consumer.

    Asia’s largest economy bought a record 4.04 million metric tons of crude from Russia, or about 988,000 barrels a day, in September. That’s 42 percent more than a year earlier and 31 percent higher than in August, according to data from the General Administration of Customs in Beijing on Wednesday. Oman was the third-biggest supplier, behind Saudi Arabia, while Angola slipped to fourth place from second in the previous month.

    China, the world’s second-biggest oil user, is buying near record amounts of crude from overseas as it seeks to take advantage of a plunge in prices to boost its stockpiles. The International Energy Agency estimates the nation will be responsible for more than a quarter of global consumption growth next year, making it a keybattleground for producers seeking to defend market share amid a worldwide oversupply.

    “The biggest battle to supply oil to China is between Russia and Saudi,” Gao Jian, an analyst at SCI International, a Shandong-based energy consultant, said by phone. “Russia is gaining momentum with its pipeline and buying interest for its crude from teapot refineries.”

    A direct pipeline to northern China has boosted exports of East Siberia-Pacific Ocean crude. Seaborne shipments were also spurred by the proximity of the Kozmino port in Russia’s east to the Asian nation, while new rules allowing small independent refineries known as teapots to buy imported supplies have also helped sales.

    Shandong Kenli Petrochemical, a teapot refiner, bought ESPO crude as its first directly imported cargo after gaining a license last month, according to ICIS China, a Shanghai-based commodities researcher. The grade would help increase the plant’s production of both gasoline and diesel, it said in an emailed note earlier in October. Russia last beat Saudi Arabia as the Asian nation’s biggest supplier in May.

    Saudi Arabia, the biggest producer in the Organization of Petroleum Exporting Countries, exported 3.95 million tons to China in September, 17 percent lower than a year earlier, the customs data show. Oman’s sales jumped 18 percent to 3.17 million tons for the month.
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    Only five non-member countries attend oil meeting with OPEC

    Only five non-OPEC countries have sent representatives to a meeting of OPEC and non-OPEC oil market experts that began on Wednesday at the petroleum exporter group's Vienna headquarters.

    The Organization of the Petroleum Exporting Countries had invited eight non-member nations including Russia for talks on the market, ahead of OPEC's policy-setting meeting on Dec. 4.

    Wednesday's talks are not expected to increase the prospect of cooperation on oil supply curbs or show much support for a price band proposed by OPEC member Venezuela.

    But participants could agree to share information or continue to assess the market, OPEC delegates and analysts say.

    "There will be an exchange of views, discussion of the market and the OPEC secretariat's presentation, but I don't think there will be an agreement to coordinate," an OPEC delegate said.

    Of the non-OPEC countries invited, Mexico, Russia, Colombia, Kazakhstan and Brazil are understood to have sent representatives. A similar meeting held in May failed to achieve cooperation between the two sides.

    Non-OPEC producers have refused to work with OPEC in cutting supply to reduce a surplus that has prompted oil prices to sink below $50 a barrel from $115 in June 2014.

    In turn, OPEC has refused to limit supply alone and many of its members have raised output.

    Most OPEC countries have sent their national representatives - oil experts who rank below ministers - to the event, although Venezuelan Oil Minister Eulogio del Pino and his Ecuadorean counterpart Pedro Merizalde-Pavón are attending.

    Cash-strapped member Venezuela is pushing for OPEC and non-OPEC cuts and has proposed reviving OPEC's price band mechanism, attempting to set a price floor of $70 a barrel.

    But the Gulf OPEC members, including top exporter Saudi Arabia, have shown no interest in returning to a strategy of supporting prices, seeking instead to fight for market share.

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    Sound Energy announces strategic collaboration with Schlumberger

    Sound Energy announces strategic collaboration with Schlumberger

    Sound Energy, the European / Mediterranean focused upstream oil and gas company, is pleased to announce:

    a Memorandum of Understanding between Sound Energy and Schlumberger Oilfield Holdings Limited in respect of a strategic relationship between Sound Energy and Schlumberger across Europe and Africa; and
    a Term Sheet with Schlumberger Production Management, the production management arm of Schlumberger regarding the Tendrara licence, onshore Morocco.

    The non-binding Term Sheet represents the first preliminary agreement to be entered into under the MOU and where it is envisaged that, subject to the execution of a definitive project agreement, SPM will collaborate with the Company on the Tendrara licence in Morocco. This collaboration would include SPM providing integrated technical services on a risked basis with an upside linked to production performance.
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    OPEC view on non OPEC production, Oct 2015

    Non-OPEC oil supply development Last year, non-OPEC oil supply witnessed a record-high growth of 2.24 mb/d. OECD Americas saw the highest output of all regions with an increase of 1.92 mb/d, much of which came from non-conventional sources. Actual data for the first half of this year shows non-OPEC supply grew by 1.77 mb/d, before dropping to 0.42 mb/d in the third quarter, according to preliminary data (Graph 1). 

    This declining trend has been driven mainly by the low oil price environment, with prices down by around 50% since 3Q14. As a result, the oil industry has experienced a rapid fall in global upstream spending, down by more than 20%, with North America cutting as much as 35% (Graph 2). This has led to lower activity – less drilling and the delay or cancellation of new projects – which has put pressure on production growth. Moreover, the current price environment has incentivized the entire oil industry to become more efficient and cost effective. 

    Graph 1: Non-OPEC supply growth, y-o-y 

    Image titleThe case of tight oil supply provides a clear example. With the decline in oil prices, rig counts were reduced by half and US shale producers took steps to increase efficiency and cost saving. Smaller operators active in tight oil have been particularly impacted by low prices, as they are usually pressed for cash. Many companies have also attempted to endure by hedging their crude output, as well as securing new loans. More recently, accessing credit has become more challenging as the decline in oil prices has diminished the value of companies’ collateral. This has resulted in less cash available for capex, leading to an evident acceleration in the decline in production in 3Q15. 

    In light of these developments, US liquids output in the last quarter of this year is expected to show a contraction of 0.15 mb/d quarter-on-quarter and by 0.33 mb/d year-on-year, down from 1.91 mb/d in 4Q14. In terms of non-OPEC supply, the impact of lower oil prices on production has resulted in the supply growth forecast being downwardly revised to 0.72 mb/d in 2015, some 0.6 mb/d less than the initial forecast and well below the previous year. 

    In 2016, the postponing or cancelling of upstream projects will likely continue, resulting in contraction of 0.13 mb/d in non-OPEC supply. US oil supply in 2016 is expected to decline by 0.1 mb/d. Production in FSU, Africa, Middle East and OECD Europe is also expected to fall. In contrast, Brazil’s output is projected to increase, although at a slower pace as a number of anticipated projects have been deferred. The 2016 forecast for non-OPEC supply is associated with a high level of uncertainty. Oil price fluctuations and technical challenges – such as unplanned shutdowns and sharper-than-expected decline rates – along with geopolitical conditions could affect non-OPEC supply in the coming year. 

    While the increase in non-OPEC supply last year was more than twice that of global oil demand growth, this relationship is expected to flip this year before widening further in 2016 so that world oil demand growth exceeds the change in non-OPEC supply. This should reduce the excess supply in the market and lead to higher demand for OPEC crude. Required OPEC crude in 2016 is expected to average 30.8 mb/d, with the second half of the year reaching as high as 31.4 mb/d, resulting in more balanced oil market fundamentals.

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    China crude stocks up for fourth straight month

    China registered a crude stock build for the fourth straight month in September at 784,000 b/d on an increase in net imports and a decline in refinery throughput, Platts calculations based on recently released official data showed.

    The crude stock build compared to the 47,000 b/d rise in August.

    China does not release official data on stocks. Platts calculates China's net crude stock draw or build by subtracting refinery throughput from the country's crude oil supply.

    The latter takes into account net crude oil imports and domestic crude production.

    The build in September resulted in an average of 755,000 b/d of stock build, or total 92 million barrels, over this stockbuilding wave that started in June -- higher than the 572,700 b/d, or total 68.72 million barrels, in the previous four-month wave seen over November 2014 to February 2015.

    Moreover, this wave is likely to extend to November.

    Chinaoil, the importing arm of state-owned oil giant PetroChina, alone purchased 72 crude cargoes of 500,000 barrels each during the Platts Market on Close assessment process in August.

    The delivery month for these will fall across October and November, which will likely push up imports in November.

    On the other hand, Chinese independent teapot refineries, which have been given import quotas in recent months, are in a hurry to import crude, sources have said.

    All this suggests that the country is speeding up stockbuilding.

    China is planning to have a strategic petroleum reserve to cover 90 days of its net crude imports in 2015.

    "To meet these targets, an estimated 600 million barrels of crude will be needed by the end of this year," said James Lu senior analyst from Platts China Oil Analytics.

    A total of around 8 million cu m (50.3 million barrels) of SPR storage facilities are scheduled to be put into operation by the end of this year, while more independent companies are building oil storage, which will allow more crude inflows to oil tanks in China.
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    Saudi Arabia’s SABIC reports 9.4pct drop in Q3 profit

    Image Source: presstvSaudi Arabia’s petrochemicals giant, Saudi Basic Industries Corp. (SABIC), has reported a 9.4-percent profit loss in the Q3 of this year as a result of a decline in the price of its products.

    SABIC, which is the Middle East's largest listed company, posted a net profit of SAR 5.6 billion in the July to September period this year compared with SAR 6.18 billion in the corresponding period last year.

    The company, however, did not provide any explanation for the price drop.

    According to the statement, SABIC’s net profit in the first nine months of the year also dropped 17.7 percent. It net income in the first three quarters of 2015 stood at SAR 15.7 billion compared to SAR 19.1 billion in the same period in 2014.

    Mr Yousef Abdullah al-Benyan, the company’s acting chief executive, said that SABIC, which is 70-percent state-owned took steps to cut costs by an average of 22 percent during the first three quarters of this year.

    Mr Benyan said that cost reduction helped mitigate the impact of a 22-percent fall in the company’s third-quarter sales to SAR 37.3 billion from SAR 48.7 billion a year earlier, but did not explain on how SABIC reduced costs.
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    U.S. lawmakers in deal on extending rail safety deadline -senator

    U.S. lawmakers from the House of Representatives and Senate have reached an agreement to extend a Dec. 31 deadline for railroads to implement new safety technology, a leading Republican senator said on Tuesday.

    Senate Commerce Committee Chairman John Thune, a South Dakota Republican, said that talks between the two chambers have successfully bridged differences on a three-year extension of the deadline for railroads to implement positive train control, or PTC.

    "Congress now needs to pass this plan in the coming weeks to avoid service disruptions that will impact shippers across the country and commuter railroad passengers," Thune said in a statement issued by the committee. "This PTC extension will keep the pressure on freight and passenger railroads to ensure safety benefits are realized as soon as possible."

    PTC is a complex communications system that can avoid derailments and other accidents by automatically slowing or stopping a train. U.S. safety officials say the technology would have avoided the May 12 Amtrak derailment that killed eight people and injured more than 200 in Philadelphia.

    Most U.S. railroads are expected to miss the Dec. 31 deadline for adopting the technology and have threatened to suspend freight and passenger service on major lines after Jan. 1, 2016, if lawmakers fail to grant an extension.

    Railroads say PTC implementation has been hampered by high costs, bureaucratic delays and technological hurdles.

    House lawmakers introduced legislation last month to extend the deadline for at least another three years.

    Senators enacted their own bipartisan measure in July that would allow the U.S. Transportation Department to approve extensions on a case-by-case basis.

    Rail operators have warned that they could begin notifying customers of possible service suspensions as early as the end of October.
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    U.S. oil output slide looms as shale firms hit productivity wall

    Stagnating rig productivity shows U.S. shale oil producers are running out of tricks to pump more with less in the face of crashing prices and points to a slide in output that should help rebalance global markets.

    Over the 16 months of the crude price rout, production from new wells drilled by each rig has risen about 30 percent as companies refined their techniques, idled slower rigs and shifted crews and high-speed rigs to "sweet spots" with the most oil.

    Such "high-grading" helped shale oil firms push U.S. output to the loftiest levels in decades even as oil tumbled by half to less than $50 a barrel and firms slashed rig fleets by 60 percent.

    But recent government and private data show output per rig is now flatlining as the industry reaches the limits of what existing tools, technology and strategies can accomplish.

    "We believe that the majority of the uplift from high-grading is beginning to wane," said Ted Harper, fund manager and senior research analyst at Frost Investment Advisors in Houston. "As a result, we expect North American production volumes to post accelerating declines through year-end."

    Drillinginfo, a consultancy with proprietary data, told Reuters well productivity has fallen or stabilized in the top three U.S. shale fields - the Permian Basin and Eagle Ford of Texas and the Bakken of North Dakota - since July or August.

    The U.S. Energy Information Administration, whose benchmark drilling productivity index is based in part on Drillinginfo data, forecasts next month's new oil production per rig in U.S. shale fields to stay at October levels, which it estimates at 465 barrels per day (bpd).

    The big challenge of shale oil work is that well output drops off quickly - often more than 70 percent in the first year alone. So producers need to keep squeezing more oil out of new wells drilled by the currently deployed rig fleet just to offset steep declines in what existing wells produce.


    If that is no longer possible and firms remain reluctant to add rigs because of low crude prices and an uncertain outlook, overall production is set to sink. (

    Chip Davis, managing partner at energy venture capital firm Houston Ventures, says the downward pull of declining output from older wells is getting stronger.

    In the Eagle Ford, production from so-called legacy wells fell by 145,485 bpd last month, a drop that was 23 times larger than the 6,293 bpd lost in September of 2010, before the fracking boom brought thousands more wells online.

    "The boulder that is decline is much bigger in size and rolling much faster than before," Davis said. "We've got very few rigs to buttress the rate of decline."

    That growing drag suggests the fall in U.S. output could be sharper than a 10 percent drop the EIA sees between a peak of 9.6 million bpd in April and next August, when it expects production to bottom at 8.66 million bpd before starting to recover.

    Producers' coping strategies with the worst cash crunch in years could be also hurting productivity of new wells.

    To save money, many have started drilling shorter and cheaper vertical wells. They have also cut back in some cases on the size of multi-million dollar hydraulic fracturing jobs for long horizontal wells. Both factors can hurt the average amount of oil being added by new wells.

    Analysts say it is hard to predict how much U.S. output will fall and whether it will undershoot official forecasts because lower production could lift prices and that in turn might prompt producers to redeploy idle rigs to pump more.

    But for now, most companies are budgeting less next year for new drilling work and the U.S. rig count has tumbled to 595, according to Baker Hughes.

    Analysts at Bernstein Research have said that productivity gains so far in this downturn have come from improved efficiency rather than fundamental leaps in technology.

    Yet such advances, which are hard to predict, would be necessary to boost productivity again because analysts say shale firms seem to have fully exploited techniques such as drilling multiple wells from one location, drilling longer horizontally, and more intensive fracturing along a well bore.

    Initial production rates for new wells in major oil basins also appear to be slowing, Bernstein analysts said, citing their analysis of peak rates dating back to 2009.

    "Shale inefficiencies will be unable to overcome rig count collapse, leading to a roll in production which is bullish for oil price," they said.

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    Hess Quietly Shops the Rest of Their Ohio Utica Acreage

    In January 2014 Hess Corporation sold 74,000 of its 95,000 100%-owned Utica Shale acreage leases to Aubrey McClendon’s American Energy Partners for $924 million

    After the sale, Hess still owned 21,000 acres of leases plus a 50% share of a joint venture with CONSOL Energy in another 65,000 acres. In January of this year, Hess (like other drillers) cut way back on their budget for Utica drilling.

    It appeared that Hess was still in love with the Utica as recently as August when Hess’ top managers said some flattering things about their Utica acreage. Perhaps that was a buildup to selling their remaining position–because that’s exactly what they’re now doing.

    According to unnamed sources who have seen an offering document being circulated, Hess is shopping all of their remaining Utica acreage, including the jv with CONSOL Energy.
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    Iran Plans 20-Year Contracts as Incentive for Energy Investments

    Iran will pay foreign oil companies larger fees than it did under previous buy-back contracts to attract $100 billion of investments needed to rebuild its energy industry.

    The Persian Gulf state, once OPEC’s second-largest crude producer, will also offer 20-year contracts on oil and natural gas projects, Roknoddin Javadi, managing director of state-run National Iranian Oil Co., said in an interview in Tehran.

    “What’s been announced so far looks like an attractive contract -- no doubt it’s a vast improvement on the buy-back contracts,’’ saidRobin Mills, a Dubai-based consultant who worked formerly for Royal Dutch Shell Plc on projects in Iran from 1998 to 2003.

    New contract terms will be introduced next month, as part of plans to boost oil production to 5.7 million barrels a day and gas output to 1.4 billion cubic meters a day by 2021, Javadi said.

    “The new contract that we’re going to present has raised the opportunity for those who invest to be able to participate in operation and production for a long term, let’s say 20 years,” he said. “This is the major incentive.”

    Iran’s previous buy-back contracts merely paid oil companies a fixed fee over five to seven years, without giving investors a share of a field’s production in the longer term. The new contract will link payments to oil companies to the quantity they produce, Javadi said.

    The new contract looks more appealing to investors than the service fees offered by neighboring Iraq, and it shares some features with the production-sharing agreements in common use elsewhere in the oil industry, Mills said. Investors will apparently have an incentive to produce more oil and develop a field for much longer than permitted under a buy-back, he said.

    “It’ll be one of the most attractive contracts in the Middle East for the size and quality of the fields that are being offered,” Mills said.

    Iran will present its new oil and gas contracts on Nov. 27-28 in Tehran, Javadi said.

    The country has already lined up buyers in Europe and Asia for increased oil production it plans as soon as sanctions are lifted, Javadi said. The country will pump and sell 500,000 barrels a day in additional oil within a week of sanctions being lifted and will raise that by at least another 500,000 barrels a day within six months, he said.

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    Schlumberger in $125-million deal for Vorteq hydraulic fracturing technology

    Schlumberger Technology Corp. has signed a 15-year deal with Energy Recovery, Inc., which grants Schlumberger exclusive rights to Energy Recovery’s VorTeq hydraulic pumping system, the first hydraulic fracturing manifold (“missile”) built to isolate hydraulic fracturing pumps from abrasive proppants that cause pump failure.

    The VorTeq system is a hydraulic pumping system that replaces the missiles traditionally used in hydraulic fracturing. In current operations, the missile routes water, proppants (sand or ceramics) and chemicals downhole at treating pressures up to 15,000 psi.

    However, the proppants cause frequent failures in the high pressure hydraulic fracturing pumps. With VorTeq, high-pressure hydraulic fracturing pumps will process clean or proppant-free water and transfer the hydraulic energy to the hydraulic fracturing fluid within the VorTeq missile.

    Under the terms of the agreement, Schlumberger will pay a $75-million exclusivity fee immediately. Schlumberger will also pay two separate $25-million milestone payments (for a total of $50 million) subject to the satisfaction of certain key performance indicators, which are expected to occur in 2016. The agreement also includes continuing annual royalties for the duration of the license agreement, subject to the satisfaction of certain key performance indicators.

    “We believe VorTeq is a paradigm shift for the hydraulic fracturing industry as it significantly reduces maintenance costs associated with pumping downtimes and provides considerable redundancy efficiencies,” Energy Recovery’s President and CEO Joel Gay said.

    “We believe this technology offers Schlumberger the immediate benefit of reducing wear and tear on its pumps, as well as reducing downtime. In the medium-term, we believe it provides Schlumberger additional savings associated with eliminating redundant equipment onsite,” said Gay. “For a company in this market who wants to keep producing but needs to be mindful of costs, this technology tackles these challenges and delivers meaningful results.”

    The heart of the VorTeq system is Energy Recovery’s Pressure Exchanger technology, which is the leading pressure energy recovery device in desalination with over 16,000 devices deployed globally.

    The technology works by capturing and recycling otherwise wasted pressure energy in fluid flows, by a clean liquid-to-liquid energy exchange between high pressure and low pressure fluids. With a single moving part made of tungsten carbide, one of the most abrasion resistant materials on the planet, the system has been engineered to withstand tremendous pressure and harsh conditions, and transfers up to 95% of the hydraulic energy from one fluid to the next.
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    Russia's Gazprom Says 2015 Investment Program Revised to 1.043 Trillion Roubles

    Russia's Gazprom has revised its 2015 investment programme to 1.043 trillion roubles ($16.8 billion), the state gas company said in a statement on Tuesday.

    It said that represented an increase of 238.7 billion roubles compared with a preliminary figure given late last year.

    - See more at:
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    Kinder Morgan buys some U.S. terminals from BP in $350 mln deal

    Pipeline company Kinder Morgan Inc said it would buy 15 refined products terminals in the United States from a unit of BP Plc in a deal valued at about $350 million.

    Kinder Morgan said on Tuesday that it would hold 14 of the acquired assets under a joint venture with BP.

    Kinder Morgan, which will own 75 percent of the joint venture, will be the sole owner of one of the terminals.
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    'Costs cut' on Johan Castberg

    Statoil has reportedly cut costs by more than 30% on the stalled Johan Castberg field project in the Barents Sea off Norway, with the state-owned operator still on course for a concept decision next year.
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    Genel Cuts 2015 Oil Output Forecast on Iraq Payment Delays

    Genel Energy Plc, an oil producer in Iraqi Kurdistan, reduced its output forecast for this year after suffering delays to payments for its exports.

    The London-based company said Tuesday it expects to pump 85,000 to 90,000 barrels a day in 2015, compared with a previous forecast of 90,000 to 100,000. It also lowered guidance for spending and revenue. Shares of the company dropped 5.8 percent.

    Oil producers in Kurdistan including Genel, Gulf Keystone Petroleum Plc and DNO ASA have been caught for years in a spat over revenue-sharing between the regional authorities and Iraq’s federal government. In December, both parties agreed to allow increased oil shipments, yet payment eluded the companies untillast month as the oil-price slump and the costs of fighting Islamic State militants put pressure on government resources.

    “Given the payment situation has been irregular, we stopped investing in the drilling of the fields,” Genel’s Chief Financial Officer Ben Monaghan said in a phone interview. “Inevitably with conventional oil fields, if you stop investing, the production will begin to decline.”

    The Kurdish authorities resumed payments to oil companies in September. Genel said in a separate filing Tuesday that partners in the Taq Taq oil field received a gross payment of $30 million for exports, of which its own share was $16.5 million, matching the amount received last month.

    The company is still awaiting a payment for its share of the Tawke field which should be “imminent,” Andrew Benbow, a Genel spokesman said. Genel received a payment of $8 million for its share in the Tawke field last month.

    “The reduction of production at Taq Taq and Tawke in the current uncertain political context in Kurdistan is an issue,” FirstEnergy Capital LLP wrote in an e-mailed note. “We appreciate this is likely to be a way to put pressure” on the Kurdish authorities to boost payments, it said.

    Genel lowered its capital-expenditure forecast for this year to $150 million to $175 million from previous guidance of $150 million to $200 million. The company also narrowed its forecast range for 2015 sales to $350 million to $375 million from $350 million to $400 million, based on a Brent price of $50 a barrel in the fourth quarter. Brent is currently trading at about $48.50.

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    Vitol sees oil struggling to break above $60/bbl by end-2016

    Vitol, the world's largest oil trader, believes the crude price will struggle to trade above $60 a barrel next year, as the effects of slowing global demand growth could be compounded by a return of Iranian and maybe even Libyan barrels.

    Ian Taylor, the chief executive of Vitol, said his company forecast global oil demand growth in 2016 to reach around 1.35 million barrels per day (bpd), slowing from this year's strong expected growth of 1.7 million bpd.

    Cheap oil encouraged record refining runs, but even this has not been enough to absorb oversupply and, as such, the price has held below $50 a barrel for much of the second half of this year .

    Taylor said he expected consumption in China to increase next year, but global demand growth would likely still fall short of the levels seen this year.

    "Will we get 1.7 million barrels a day in 2016? No. I don't think so and that's one of my worries. If we did get 1.7 million bpd in 2016, then we could easily get to $60, but I don't think we will," Taylor told the Reuters annual Commodities Summit.

    The International Energy Agency forecasts demand growth of 1.21 million bpd in 2016.

    Taylor said he did not expect OPEC's meeting in early December to yield any change to the producer group's stance of retaining market share by pumping record amounts of oil. The policy has exacerbated a global glut of crude.

    "I don't expect it, but I'm certainly not going to take any big bets, because it still could happen and all we need is 500 (500,000 bpd) less from Saudi to give the market a bit of a serious shock," he said.

    The consensus among industry players is for Iranian exports to rise by around 300,000-500,000 bpd by next spring.

    "There will be a battle for market share, particularly in Asia and a little bit in the Mediterranean. It will be difficult to place that (Iranian) oil. I think it will depend very much how far U.S. production has gone down by then," Taylor said.

    The risk to the oil market balance is that the void left by shuttered U.S. shale capacity could be quickly filled by Iran and Libya, which is producing around 400,000 bpd, a fraction of the 1.6 million bpd of its heyday prior to 2011.

    "Can the market make room for (Iran)? Probably yes, but I'm not sure the market can make room for that and a doubling or tripling of Libyan production, which is my other big worry," Taylor said.

    "The Libyans could easily get back 300,000 or 400,000 bpd. If you have 500,000 from Iran and 400,000 from Libya and you lose 1 million barrels from the Americans, you're back to where you started, which is why I don't see the market moving hugely."
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    Reports Of The Energy Industry's Demise Greatly Exaggerated: Wood Mackenzie

    We took a stab at assessing the impact of October borrowing base redeterminations on a set of high yield borrowers on which we get the most questions.  Reading accounts in the press you might believe that upstream operators are buckling under crippling debt loads. We beg to differ. Most of the high yield borrowers in the upstream space are reasonably well positioned to continue drilling even at current oil and gas prices.  Our analysis suggests just a handful of these upstream companies will have to make asset sales, renegotiate lending terms or curtail drilling activity further. And we certainly don’t expect the October borrowing base redeterminations to have meaningful influence on oil supply.

    Reserve-based lending (RBL) is a form of revolving credit extended by banks to operators on the basis of their oil and gas reserves in the ground .  Twice a year, in April and October, banks re-assess the value of those reserves and adjust the credit lines. With the steep decline in oil prices, there has been much attention this time around on the October redetermination. The “hit” based on oil price assumptions this October versus this past May should be around 20%. However,most companies have the capacity to absorb this, either because they have that unused capacity on their credit lines and/or cash on the balance sheet.

    Credit lines are determined nearly entirely on the value of the cash flow streams from producing wells. While cash is generally being consumed at the corporate level, what some stories miss is that adding producing wells extends companies’ ability to borrow. With the focus on the cash burn, many forget to take into account the resulting additions to the borrowing base, which partially offset that cash burn. It is this piece of the puzzle that can allow upstream companies to drill at the current pace for longer than many imagine. When we layered this additional production into our analysis, what was already a manageable liquidity situation for most became even more so.

    Although it seems irrational to drill new wells into such low oil prices, it is not as irrational as you might imagine.   Equity markets are valuing public companies at oil prices well above those you see on your screen, roughly US$65 to US$70 or higher, so companies drilling wells at US$45 to US$50 are only responding to the incentives set out for them by the capital markets. Banks may only be valuing reserves at US$50 for the purpose of lending, but the US$65 to US$70 equity market valuation provides incentive for operators to drill – and to add producing reserves.

    So don’t believe what you hear about the demise of the upstream oil and gas industry. All but a few are well positioned to continue their current pace of drilling activity.  Increasing their production base in turn grows upstream companies’ borrowing bases.  Meanwhile, equity markets are pricing higher oil prices and stand by to fund shortfalls. Those industry obituaries will have to be put on hold for the time being.

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    Oil Search Quarterly Sales Decline 30% as Energy Prices Slide

    Oil Search Ltd., the target of a takeover bid from Woodside Petroleum Ltd., posted a 30 percent decline in third-quarter sales after a drop in energy prices.

    Revenue fell to $379 million from $538.2 million a year earlier, according to a  statement from Oil Search on Tuesday. Sales dropped 3 percent from the June quarter. Output rose to a record 7.42 million barrels of oil equivalent, the company said.

    Oil Search, which has a stake in the Exxon Mobil Corp.-operated liquefied natural gas project in Papua New Guinea, is among companies grappling with a slump in prices amid a surge in new supply. Benchmark Brent crude averaged $51.48 a barrel in the third quarter, compared with $103.59 during the same period in 2014.

    “We are aiming to reduce costs and enhance production while continuing to move forward with our high-value growth opportunities,” Managing Director Peter Botten said in the statement. “The company is in an excellent position to withstand sustained low oil prices and capitalize from an oil price recovery.”

    Oil Search last month rejected Woodside’s $8 billion takeover approach as too low. The offer is “fully priced,” Chief Executive Officer Peter Coleman said last week, amid speculation Woodside will increase its bid.
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    Financing for Russia's Yamal LNG plant stalls - sources

    Efforts to secure financing for Russia's Yamal LNG plant have stalled, with the owners baulking at costly Chinese loans and Western sanctions hampering alternatives, two Russian banking sources said, warning the search could drag into next year.

    The quest to bankroll the $27 billion project ahead of a planned 2017 launch is seen as a test of Russia's ability to secure foreign loans at a time when the country's access to capital markets is severely limited by Western sanctions over its involvement in the conflict in eastern Ukraine.

    The lead Russian company in the project -- Novatek , Russia's largest private gas producer -- is under U.S. sanctions, making it harder for it to find cash for an export project that envisages three liquefied natural gas (LNG) production lines with a capacity of 5.5 million tonnes a year each.

    Novatek has a 50.1 percent stake in what will be only Russia's second LNG plant. France's Total and China's CNPC hold 20 percent each. And last month, Novatek agreed to sell a 9.9 percent stake to the China Silk Road Fund.

    Originally, Novatek, where a close ally of President Vladimir Putin, Gennady Timchenko, is a co-owner, had expected to raise up to $20 billion from Chinese banks, with the first funds expected by the end of 2014.

    But two Russian banking sources, who declined to be named, told Reuters they saw little movement on a deal for now.

    One of the sources said that Yamal LNG was not happy with earlier offers from the banks and had been forced to relaunch the bidding process.

    "Chinese money is expensive, so Novatek and Total would like European banks to take on the larger share of financing which is complicated by sanctions," the source said.

    He said it was unclear whether the loans would be provided by the end of the year.

    "There is no movement at the moment," another source said. "Of course, everything could be done in the course of one night ... but so far it looks unlikely that there will be anything before the year-end."

    Russia's state development bank VEB has pledged $3 billion in banking guarantees, while the country's Sberbank and Gazprombank preliminarily agreed to provide $3 billion and $1 billion in loans, respectively.

    "The delay in announcing project financing for Yamal LNG also raises concerns about the project's timing and possible increased equity investment in the project," Goldman Sachs said in a research note on Monday.

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    Saudi Arabia Seen Raising $32 Billion in 2016, Saudi Fransi Says

    Saudi Arabia will probably sell about 120 billion riyals ($32 billion) of debt in 2016 as the country seeks to prop up its finances after oil’s slump, according to Saudi Fransi Capital.

    Next year’s expected 10 billion riyals a month of sales will add to an estimated 135 billion riyals of debt issuance this year, analyst Aqib Mehboob wrote in a note to investors on the country’s banking industry.

    Saudi Arabia is responding to the decline in crude, which accounts for about 80 percent of revenue, by tapping foreign reserves, cutting spending, delaying projects and selling bonds. Net foreign assets fell by about $82 billion at the end of August after reaching an all-time high last year. The country has raised about 75 billion riyals from debt issuance this year, according to the bank.

    Saudi Arabia’s public debt is among the world’s lowest, with a gross debt-to-GDP ratio of less than 2 percent in 2014. “Even with the government running a 20 percent of GDP deficit again, and only funding 25 percent of the deficit through bond issuance, the foreign reserves remain at very comfortable levels,” Mehboob said in the report.

    Falling for a seventh month in a row, net foreign assets held by the central bank dropped to $654.5 billion in August, the lowest since February 2013.

    Saudi Fransi Capital is the investment-banking arm of Banque Saudi Fransi, a lender that is part-owned by France’s Credit Agricole SA.

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    Indian Oil Corporation purchases 30% of its crude from spot market

    Economic TimesIndian Oil Corporation, the nation's largest refiner and fuel retailer, now purchases 30% of its crude requirements in the spot market, compared to 20% last year, helping it lower procurement cost and gain flexibility in responding to the consumer demand.

    IOC's move is part of the larger shift among refiners towards the spot market as longterm price contracts put them at a disadvantage in a sharply falling crude oil environment.

    In 2014-15, most refiners were saddled with huge inventory losses due to falling prices that hurt their profits. The volatility in crude prices, which have halved in a year, is a headache for refiners, which aim to counter this by enhanced spot purchases.

    Mr AK Sharma, director (finance), said that "It (spot purchases) is saving us money. This also gives us flexibility in terms of the types of crude we want to purchase, depending on the demand of the products. Otherwise, you have to buy and process and sell the kind of things there is no demand for."

    Mr Sharma said that the company now has enhanced flexibility on which crude to buy and when depending on the intensity of the demand for products like diesel, petrol, naphtha and LPG as some variety of crude oil are more suited to produce certain kinds of products in higher quantity. So now, IOC is able to better respond to the consumer demand and is less caught in situations when it would produce something more because of the supply of the crude and less because of the demand. The purchase term agreements for refiners usually last a year with prices fixed every month on the basis of a formula dependent on the average prices in the international market topped by a premium.
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    Japan's JOGMEC buys light crude for strategic reserves

    State-run Japan Oil, Gas and Metals National Corp (JOGMEC) on Monday bought about 2.52 million barrels (400,000 kilolitres) of light crude via tender for the government's Strategic Petroleum Reserves, a trade ministry official said.

    JOGMEC was seeking four sets of 630,000-barrel light crude, which are to be delivered to two government stockpiling bases in Tomakomai City in Hokkaido, northern Japan, by Feb. 24, 2016.

    The ministry official declined to comment on the crude grades or the prices.

    The tender comes after Japan in June sold a total 4.15 million barrels of crude from the government's Strategic Petroleum Reserves as part of a plan to replace the oil with other grades.

    In recent years, Japan has been replacing heavier crude in its reserves with lighter crudes to reflect the growing share of light crudes in recent imports. The tender is not linked to any emergency release coordinated by the International Energy Agency.
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    OMV to take 1 bln euro charges as oil price slump dents asset values

    Austria's OMV will take around 1 billion euros ($1.1 billion) in special charges to reflect the damage to the value of its oil fields and equipment by weak crude prices, conceding the oil price outlook was significantly more bearish than it had previously predicted.

    Reflecting trends across the sector due to the slump in oil prices, Austria's biggest industrial company said on Monday the decline had "significantly burdened" its performance in the third quarter, adding it had slashed its assumptions for the coming years by as much as $25 a barrel.

    The company's shares, which had risen on Friday to their highest in nearly four months, fell 3.8 percent in early trading, though they pared losses and were down 1.8 percent at 25.01 euros by 0749 GMT.

    "These revised assumptions have required impairments to asset valuations in the upstream business, covering both assets under production and development, as well as exploration assets, to be recognized during the quarter," the company said.

    The comments from OMV, which also said it planned to sell a stake of up to 49 percent in its pipeline unit Gas Connect Austria, echo similar moves from European competitors. Spain's Repsol for instance said last week it would step up asset sales, trim investments and cut costs.

    OMV is due to report its third-quarter earnings on Nov. 5.

    The group's new assumption for the price of benchmark Brent crude was $55 a barrel in 2016, it said. Its previous assumption was $75 a barrel, according to its 2014 annual report.

    For 2017, the forecast was trimmed to $70 a barrel from $90, and the figure for 2018 was reduced to $80 a barrel from $105 a barrel. From 2019 onwards, it expected $85 a barrel.

    "Net special charges recorded in the (third) quarter, predominantly as a consequence of the reduced oil price assumptions, will amount to approximately 1 billion euros," OMV said.

    The company said potential buyers of up to 49 percent of its Gas Connect Austria unit had expressed "strong interest" and a deal was expected to be signed next year.

    "In times of a difficult oil price environment, we are taking the appropriate measures to both optimize the portfolio and strengthen the group's cash flow and balance sheet", Manfred Leitner, head of OMV's downstream division, said.

    The company said its production had fallen to 292,000 barrels of oil equivalent (boe) per day from 307,000 a day in the previous quarter and 311,000 in the same quarter last year.

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    Halliburton profit beats as costs fall, revenues miss

    Halliburton Co, the world's No.2 oilfield services provider, reported a better-than-expected quarterly profit as deep cost cuts helped offset the impact of a drop in drilling activity.

    The company earned 31 cents per share on an adjusted basis, higher than analysts' average estimate of 27 cents, according to Thomson Reuters I/B/E/S.

    However, total revenue fell nearly 36 percent to $5.58 billion, missing analysts' estimate of $5.64 billion.

    Revenue nearly halved in North America in the third quarter ended Sept. 30, mainly due to weak drilling activity and pricing. The region accounts for nearly 50 percent of the company's revenue.

    Net loss attributable to the company was $54 million, or 6 cents per share, in the third quarter, compared with a profit of $1.20 billion, or $1.41 per share, hurt mainly by charges related to asset write-offs and severance costs.

    "We are pleased with our third-quarter results, especially the resilience of our international business, where we outperformed our largest peer on a sequential a

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    Niko Resources provides corporate debt update

    Niko Resources Ltd. provides the following updates:

    The previously disclosed waiver of certain financial covenants and undertakings under the facilities agreement (as amended) with the institutional lenders of its US$340 million senior term loan facilities and a related forbearance agreement expired on October 15, 2015.

    The Company is in negotiations with its senior lenders to extend the covenants in the third amendment to the facilities agreement and to extend the forbearance period in the forbearance agreement entered into on September 22, 2015, and expects to complete these negotiations next week. The Company has been advised that the senior lenders will not seek to enforce any of their rights under the amended facilities agreement during this period.
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    Russia ready to discuss oil-price bands, output cuts with OPEC

    Economic Times Russia said that it’s prepared to discuss crude- price ranges and output cuts when it meets with the Organization of Petroleum Exporting Countries next week.

    Mr Alexander Novak, Russia’s energy minister, said that “So far, we have not seen any proposals except for the one that concerns production cuts. We are not ruling out altogether the possibility of discussing the issue, both with OPEC and non-OPEC countries.”

    Following a meeting with other oil producers in Vienna last November, Novak said Russia doesn’t have the ability to reduce or increase output quickly because of the harsh winters and complex geology at its Siberian fields. While previous attempts by Russia and OPEC to cooperate on cutting production have failed, the government is under increased budgetary pressure after the nation entered its first recession in six years.

    Mr Novak said that Russia still believes production cuts are “inefficient” as they only result in short-term price gains. Any artificial price increases lead to investment inflows and, in turn, to price declines.

    Mr Igor Sechin, chief executive officer of Russia’s largest oil producer OAO Rosneft, said that Saudi Arabia is “actively dumping” its supply and expanding in Europe, traditionally a key market for Russian exports.

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    Saudi Arabia Said to Delay Contractor Payments After Oil Slump

    Saudi Arabia is delaying payments to government contractors as the slump in oil prices pushes the country into a deficit for the first time since 2009, according to three people with knowledge of the matter.

    Companies working on infrastructure projects have been waiting six months or more for payments as the government seeks to preserve cash, the people said, asking not to be identified as the information is private. Delays have increased this year and the government has also been seeking to cut prices on contracts, the people said.

    Saudi Arabia is tackling the slump in crude, which accounts for about 80 percent of revenue, by tapping foreign reserves, cutting spending and selling bonds. Net foreign assets fell by about $82 billion at the end of August after reaching an all-time high last year. The country has raised 55 billion riyals ($15 billion) from debt issuance this year. The government is also seeking to cut capital spending and delay projects.

    “It’s hard to hold back from boosting spending when oil is on the rise, but very hard to cut when oil prices fall,” Simon Williams, chief economist for central and eastern Europe, the Middle East and North Africa at HSBC Holdings Plc, said in e-mailed comments. “Cuts are coming -- the budget deficit is too large to ignore and pretend it’s business as usual.”

    Payment delays could slow the completion of projects under construction, including the $22 billion Riyadh metro, and curb the expansion needed to create jobs for a rising population. In the past, government spending has been a catalyst for growth. For example, when authorities announced $130 billion in social spending in 2011, the economy expanded 10 percent. This year, growth will probably be about 3 percent, according to data compiled by Bloomberg.

    A spokesman for the finance ministry declined to comment.

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    China heads for record crude buying year as cargoes snapped up

    As China closes in on the United States as the world's biggest crude oil importer, demand from private refiners and stockpiling of cheap oil is expected to keep imports at record levels after a wobble in the third quarter.

    Despite slower growth in recent months - crude imports rose just 1.3 percent in September on a year earlier - buying for October-November delivery has picked up strongly, traders and analysts say.

    The purchases will ease concerns of a sharp slowdown in Chinese buying and support prices in coming months, analysts said.

    The increased buying has shown up in tanker movements and freight rates, said Energy Aspects analyst Virendra Chauhan, and analysts are upgrading earlier forecasts for second half growth.

    "Despite a slowing Chinese economy, crude imports remain robust on the back of accelerated stockpiling activities into operating and commercial storage," said Wendy Yong, analyst at oil consultancy FGE.

    Since July, China has also granted nearly 700,000 bpd of crude import quotas to small refiners, known as "teapots", or roughly 10 percent of China's current total imports, as part of efforts to boost competition and attract private investment, creating a new source of demand.

    "The teapots are super-active," said one oil trader, with many racing to fill their new quotas.

    And state-owned refiners are restocking after a third-quarter lull. Unipec, the trading arm of Asia's top refiner Sinopec, bought 6 million barrels of North Sea Forties crude and 2.9 million barrels of Russian ESPO for loading this month, and it has also stepped up Angolan crude purchases for November.

    To accommodate the oil, new storage tanks on southern Hainan island have either been put to use or are due to be filled with crude from end-2015.

    FGE expects China's crude imports in the second half to rise by 12 percent from a year ago, up from a previous estimate of 10 percent. It forecast China's crude imports to rise 9 percent for the year.

    Such a rise would take Chinese imports to 6.75 million barrels per day, not far off U.S. imports of 7.3 million bpd. China's imports outpaced the United States in April were roughly on par in September.

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    China preliminary Sept implied oil demand down 0.1 pct yr-on-yr

    China's implied oil demand fell slightly in September from the same period last year even as passenger car sales rose for the first time in six months.

    China consumed roughly 10.13 million barrels per day (bpd) of oil in September, down 0.1 percent from a year ago, and down 1.3 percent from August, according to calculations based on preliminary government data.

    The fall came as Chinese auto sales climbed 2.1 percent in September from a year earlier, according to an industry association last week.

    Daily implied oil demand is the sum of domestic refinery throughput and net imports of refined products, not counting adjustments for inventory changes.

    The latest throughput and net import figures put China's implied oil demand in the first nine months of 2015 at 10.35 mln bpd, up 3.9 percent from the same period last year.

    The year-to-date growth is running behind the International Energy Agency's most recent forecast for Chinese demand in 2015, which was revised higher to 4.9 percent earlier this month.

    Reuters will publish more detailed demand calculations later in August, broken down by product and adjusted for estimated changes in fuel stocks based on data yet to be released.

    In September, Chinese refineries C-CNREFPROC processed 0.5 percent more crude oil than a year ago at 10.32 million bpd. That was down 1.1 percent from August on a daily basis. Refinery runs in the first nine months of the year were at 10.38 million bpd.

    The National Bureau of Statistics will provide a breakdown of output by refined products later this week.

    China's domestic crude output rose 2.7 percent to 4.32 million bpd in September and recorded the same percentage growth in the first nine months of the year, the statistics bureau data showed.

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    BP Plc and China's CNPC will next week unveil a strategic alliance

    BP Plc and China's CNPC will next week unveil a strategic alliance

    BP Plc and China's CNPC will next week unveil a strategic alliance to develop oil resources in Iraq and other regions, industry sources said on Friday.

    The deal, one of several high profile deals to be signed during a visit by Chinese President Xi Jinping to London, will aim to bolster cooperation between the two companies in Iraq, where they are developing the giant Rumaila oilfield.

    Rumaila, in southern Iraq, is the world's second largest oilfield and produced 1.34 million barrels per day in 2014, according to BP's website.

    The two companies will also seek to expand into new joint ventures in other parts of the world, according to the sources. No clear production or investment targets are expected to be included in the deal, they said.

    State-owned China National Petroleum Corp is Asia's largest oil producer and parent of PetroChina Co Ltd...
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    Parex provides operations and third quarter production update

    Parex Resources Inc., a company focused on Colombian oil exploration and production, provides an operational update.

    Q3 Production.

    Quarterly (Q3 July 1-Sept 30, 2015) production grew to 27,375 barrels of oil per day compared to Q2 2015 production of 27,025 bopd and from Q3 2014 production of 25,175 bopd

    Jacana 2015 Discovery (LLA-34, 55% WI, Non-op)

    The Jacana-2 well was drilled to a depth of 11,092 feet approximately 820 meters northeast of the Jacana-1 well in the direction of the Tigana field. The well encountered potential oil bearing zones in both the Mirador and Guadalupe formations. The Guadalupe reservoir was tested with the use of an electric submersible pump and after 112 hours, a total of 3,941 barrels of 15 API oil had been recovered at an average rate of 845 bopd. The production rate on the final day of testing was 1,152 bopd with a water-cut of 0.5% and a producing drawdown of 20% indicating a production capability beyond the limitation of the current testing facility. The long term testing facility for the Jacana field has been completed and the Jacana-1 well is currently producing approximately 1,800 bopd with a watercut of 1%. 

    Tilo 2014 Discovery (LLA-34, 55% WI, Non-op)

    The Tilo-2 appraisal well was drilled 740 meters southwest of the Tilo-1 discovery well in the direction of the Tigana field to delineate the Guadalupe reservoir. The well encountered two potential oil bearing sections in the Guadalupe reservoir. The lower Guadalupe reservoir was the first zone that tested over a 53 hour period with the use of an ESP. The well recovered a total of 1,358 barrels of oil for an average production rate of 615 bopd. The final measured water-cut from the well was 88% indicating that a water contact is present in the wellbore. The well was recompleted into the upper Guadalupe reservoir and tested for a period of 144 hours. A total of 4,851 barrels of 14 API oil was recovered from the test at an average rate of 809 bopd and a final rate of 857 bopd with a water-cut of 12% .

    Bazar 2015 Discovery (LLA-26, 100% WI, Operated)

    The Bazar-2 well was drilled approximately 2.2 kilometers northeast of the 2015 Rumba-1 discovery and 1.1 kilometers northeast of the Rumba-2 appraisal well. The well encountered similar potential oil bearing zones in the Mirador formation as Rumba-1 and Rumba-2 wells and was tested in the upper Mirador zone with the use of an ESP. The well was tested for a period of 183 hours and recovered a total of 14,267 barrels of 18 API oil at an average rate of 1,871 bopd and a final facility restricted rate of 2,300 bopd with a water-cut of 1% .

    Q4 Guidance

    Capital expenditures for 2015 are estimated to be $140-$145 million. Fourth quarter 2015 oil production is forecast to be 28,500 bopd, an increase of 7% from production of 26,544 bopd for the fourth quarter of 2014. As at June 30th 2015, Parex had no bank debt, an undrawn credit facility of USD$200 million and working capital of approximately USD$90 million.
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    Regulator orders encashing 25pct of GAIL’s bank guarantee

    LiveBusiness Line reported that the Petroleum & Natural Gas Regulatory Board has ordered the encashing of 25 per cent of GAIL (India)’s performance bank guarantee for failing to achieve financial closure for the Surat-Paradip pipeline project.

    The board found that GAIL failed to achieve financial closure for the project even after 42 months. The company had been given the authorisation to lay a 1,724-km natural gas pipeline from Surat in Gujarat to Paradip in Odisha in 2012.

    On September 30, the board had passed an order for encashing 25 per cent of the bank guarantee.

    However, this order was challenged in the Delhi High Court by GAIL (India).

    On October 10, the Delhi High Court gave the company one week to satisfy the PNGRB with respect to its financial capabilities, the regulator said in its October 13 order.

    Following the development, PNGRB asked GAIL (India) to furnish proof of tying up funds from banks or a company resolution approving the allocation of funds for the project.

    PNGRB said that “On hearing the representative of GAIL, we find that neither any error in the order dated September 30 has been pointed out nor any resolution of the Board of Directors of GAIL has been placed before us and moreover, no other reason could be placed which could convince the Board to re-look into its earlier decision.”

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    Reliance Profit Rises 14% on Refining Margins, Weak Rupee

    Reliance Industries Ltd.’s second-quarter profit climbed 14 percent as gross refining margins widened at the operator of theworld’s biggest oil-refinery complex and a weakening rupee boosted export earnings.

    Net income increased to 65.61 billion rupees ($1 billion) in the three months ended Sept. 30 from 57.42 billion rupees a year earlier, the Mumbai-based company said Friday in a stock exchange statement. That beat the 58.8 billion-rupee mean of 12 analyst estimates compiled by Bloomberg. Sales fell 37 percent to 608.17 billion rupees.

    Mukesh Ambani-controlled Reliance is hoping to cut energy costs at its 1.24 million barrels-a-day Jamnagar refinery complex in the western state of Gujarat as well as petrochemical units by using synthesis gas and imported ethane as feedstock. Lower costs will help the company boost margins and face competition from China, which exported a record volume of fuel in August.

    Asian refiners, including Reliance, have benefited from lower crude prices in the third quarter with Brent averaging about half of what it was a year ago. The company is also betting on a fourth-generation telecommunications network, which is expected to start later this year.

    “Refining and petrochemical companies in India should do well on the back of higher refining margins compared with the year ago period,” Sudip Shah, London-based chief executive officer at Orbit Investment Securities Services Plc said before the earnings. His clients hold Reliance Industries’ bonds.

    The adjoining refineries at Jamnagar have a combined capacity of 1.24 million barrels a day and can process cheaper, lower grades of crude into high-value products. Brent oil, the global benchmark, averaged about $51 a barrel in the quarter.

    Reliance earned $10.6 for every barrel of crude it turned to fuels in the quarter, compared with $8.3 a year earlier and $10.4 in the preceding three months, according to the statement.

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    Saudi commercial stocks at record.

    Saudi Arabia, the world’s largest oil exporter, is storing record amounts of crude in its quest to
    maintain market share as it cut shipments.

    Commercial crude stockpiles in August rose to 326.6 million barrels, the highest since at least 2002, from 320.2 million barrels in July, according to data posted on the website of the Riyadh-based Joint Organisations Data Initiative. Exports dropped to 7 million barrels a day from 7.28 million.

    “The fall in Saudi crude exports reflects the market reality,” Mohammed Ramady, an independent London-based analyst, said Sunday by phone. “It’s normal to see this fall knowing that the market is becoming highly competitive, with many countries in OPEC selling at discounts and under-pricing the Saudi crude.”

    Crude inventories have been at record highs since May, a month before Saudi Arabia’s production hit an all-time high of 10.56 million barrels a day. The nation has led the Organization of Petroleum Exporting Countries in boosting production to defend market share, abandoning its previous role of cutting
    output to boost prices.

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    Alternative Energy

    Swiss CO2 capture plant to help grow vegetables

    A commercial-scale plant which captures CO2 will be built in Switzerland, with the greenhouse gas to be used to improve vegetable growth.

    It will be operated by Zurich-based Climeworks, a spin-off company from the Swiss Federal Institute of Technology in Zurich (ETH Zurich).

    It will use a so-called Direct Air Capture (DAC) technology, which relies on a novel filter to extract carbon dioxide from the atmosphere and is a claimed to be a world first.

    The plant works using gas which binds to the surface of the reusable filter. When the filter is filled to its capacity, it is heated to 100°C to release the CO2.

    Image: Climeworks

    It is expected to be operational by mid-2016 and capture 900 tons of CO2 from the atmosphere a year. The firm aims to enhance the growth of vegetables by up to 20% in a nearby greenhouse.

    The plant is part of a three-year pilot and demonstration project and is expected to cost up to €4 million (£2.94m).

    It will be built in the village of Hinwil, at the site of a recycling facility, which will supply it with heat and power.

    Climeworks said the project is a “crucial milestone” towards closing the carbon cycle, where CO2 emitted from any source can be captured and re-used to produce carbon-neutral fuels.

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    Foxconn to partner Apple plans to add 2 GW green energy projects

    US tech giant Apple is embarking on two new clean energy programs in China aimed at reducing the greenhouse gas emissions by its manufacturing partners by over 20 million metric tons between now and 2020, equivalent to taking nearly 4 million passenger vehicles off the road for one year.

    For achieving this objective, Apple will partner with suppliers in China to install more than 2 gigawatts of clean energy projects over next five years.

    The new initiatives in China will see Apple significantly expanding its clean-energy investments to build more than 200 MW of solar projects in the northern, eastern and southern grid regions of China. These projects will produce energy equivalent to the quantum used by more than 265,000 Chinese homes in a year and will begin to offset the energy used in Apple's supply chain.

    The second Apple initiative is to push its manufacturing partners to become more energy efficient and to use clean energy for their manufacturing operations.

    In addition, Apple Thursday announced that the construction of its 40 megawatts solar projects in the Sichuan Province is now complete. These solar installations produce more electricity than what is used by Apple's 19 corporate offices and 24 retail stores in China.

    "Climate change is one of the great challenges of our time, and the time for action is now," said Tim Cook, Apple's CEO, in a statement.

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    Terra Firma's Monterey to take Infinis Energy private

    Monterey Group, owned by private equity firm Terra Firma, agreed on Thursday to buy back the rest of renewable power generating firm Infinis Energy it did not own, following regulatory changes that have hit the sector.

    Britain this year announced a swathe of cuts in renewable energy subsidies, including changing the way renewable projects qualify for payments and scrapping subsidies for onshore wind farms.

    Infinis Energy's share price has halved since it listed in November 2013 and the rare move of taking it private was the best option for the business, according to a source familiar with the deal.

    "We have considered gradual sell-downs of our interest in the company since its IPO ... and more recently we have also explored other strategic options, but the change in the regulatory environment for Infinis has prompted us to rethink our strategy," Guy Hands, chairman and chief investment officer of Terra Firma, said in a statement.

    The agreed cash offer values Infinis at 555 million pounds ($856 million).

    The deal is likely to result in a break-up of the firm, which generates power from landfill gas and from wind, the source added.

    Monterey, which already owned 68.5 percent of Infinis, will pay 185 pence per share for the remaining shares, a 40.4 percent premium to the closing price of 131.75 pence on Oct. 21.

    Infinis' shares were trading at 183.5 pence at 0845 GMT, up 39.3 percent.

    Goldman Sachs advised Terra Firma and Monterey. Barclays and RBC advised Infinis.
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    Lithium Cartel raises prices 17%

    Demand volume inventory reduction lithium price is now the biggest weekly gain in four years

    Source: Original 2015/10/23 8:59:39 Six types of institutional holdings in the same industry
    Last week, the Chinese battery grade lithium carbonate prices rose 8 percent, the biggest weekly gain in four years. And since last year's third quarter, lithium carbonate prices have risen 39%. At present, the domestic lithium carbonate little inventory, and the release of new capacity is less, so the lithium carbonate prices or continuity.   According to sources, since the first quarter of last year, China continued to increase efforts to support new energy vehicles, China's automobile market downturn in the overall environment, the sudden emergence of new energy vehicles, sales booming. According to the China Automotive Industry Association data show that in January 2015 to August, China's new energy automobile production 118,000, sales of 108,700, an increase of 2.6 times, respectively, and 2.7-fold.   New energy vehicles is growing rapidly, driven by demand for lithium battery cathode material increase. The number of lithium battery company余家飞speed increase from 10 in 2008 to the current more than 100, and the heat also launched a new round of expansion. It is reported that this year at least 18 listed companies to invest in lithium battery project, the amount of investment over 50 billion yuan.   Demand good, but the arrival of winter cause the Lithium production plummeted, and then pushed up prices. At present, the global lithium resource exploitation lies in the Chemetall (Germany), FMC (USA), SQM (Chile) hands of three companies, accounting for about 70% of the market. Although China is rich lithium resources, subject to technical limitations Tempered lithium-based compounds, therefore exploitation in the past for a long period of time is very limited.   Lithium resource mining methods there are also two types: ore extraction of lithium and Lithium. Currently, the global lithium resources mainly from Salt Lake Lithium route. The Salt Lake Lithium and entered production season, resulting in the upstream supply is tight, reducing raw material supply. To this end, in September, the first price increase leading enterprise FMC. The company since October 1, 2015, on a global scale to enhance the lithium product prices across the board, including lithium carbonate prices by 15%.   International mining industry lead prices pulled up the price. It is understood that domestic manufacturers of lithium raw material inventory is very small.   Brokerage research reports, ore prices rising in recent years, coupled with FMC price, per tonne of lithium carbonate price broke through 60,000. Taking into account the domestic no new lithium carbonate production capacity release, Qinghai major capacity shut down by the end of November, is expected to support prices until next year.A shares in Accor Group, Gan Feng Li industry and other listed companies involved in the production and sales of lithium carbonate related businesses.

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    Mexico Planning $46 Billion Coast-to-Coast Wind-Energy Push

    Mexico is planning to quadruple its wind-power capacity as part of President Enrique Pena Nieto’s effort to transform the country’s energy industry.

    The country expects to have about 10 gigawatts of turbines in operation within three years spread across almost every region, up from 2.5 gigawatts in 2014, part of a government plan to add 20 gigawatts of clean energy by 2030, according to Mexico’s Wind Energy Association.

    A total of 22 gigawatts of wind power will be added over the next 25 years, requiring $46 billion in investment. The wind push is due to two converging trends: Mexico’s historic shift from a state-controlled energy monopoly, and its efforts to transform a grid that relies on fossil fuels for three-fourths of the nation’s electricity.

    "We’re already a new country," Alejandro Peraza, general director of the energy regulator CRE, said in an interview in Mexico City. "Mexico is getting cleaner."

    Mexico pledged to reduce 22 percent of its greenhouse gas emissions by 2030. Wider use of renewable energy will reduce fossil-fuel based power generation to 45 percent.

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    China solar power capacity reaches 37.95 GW by end-Sept

    China’s solar power installed capacity reached 37.95 GW by end-September, data showed from the National Energy Administration on October 20.

    Of this, capacity from photovoltaic (PV) power plants stood at 31.7 GW, while that from distributed PV power projects was 6.25 GW.

    Over January-September, China’s newly-built solar power capacity stood at 9.9 GW, with capacity from PV power plants and distributed PV power projects at 8.32 GW and 1.58 GW, respectively.

    China produced a total 30.6 TWh of solar power during the same period, with 3 TWh or around 10% abandoned, data showed.

    Northwestern Gansu and Xinjiang provinces topped the abandonment rate at 28% and 20%, reaching 1.76 TWh and 1.04 TWh in the first three quarters, separately.

    So far, nine provinces of the country saw their solar power capacity exceed 1 GW, with Xinjiang, Gansu ranking the top two at 6.17 GW and 5.81 GW, respectively.
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    GM, LG partnership on Chevy Bolt may be roadmap for future deals

    General Motors Co on Tuesday outlined a wide-ranging partnership with Korean electronics firm LG Corp for production of the 2017 Chevrolet Bolt electric car that could establish a blueprint for such collaborations in the future.

    Several LG subsidiaries, including LG Electronics and LG Chem, have worked closely with GM to develop electric motors, battery cells, dashboard displays and other electronic systems for the Bolt, which goes into production late next year in Michigan.

    The two companies are highlighting their partnership at a time when GM is under pressure from Fiat Chrysler Automobiles NV Chief Executive Sergio Marchionne to explore an alliance to spread the costs of developing electric vehicles and other new technology. GM Chief Executive Officer Mary Barra has rebuffed Fiat Chrysler, saying GM can improve economies of scale and advance new technology strategies in other ways.

    The GM-LG partnership is one of the most extensive yet between a U.S. automaker and an overseas supplier, and will shift more of the development and production cost for the new Chevrolet to a partner with considerable technical expertise.

    The Bolt is designed to be an affordable electric car, priced from around $35,000, with a 200-mile range between charges. The vehicle would compete against BMW AG's i3, the Nissan Leaf and Tesla Motors Inc 's future Model 3.

    LG's initial engagement with GM began in 2007, when LG Electronics provided the vehicle communications module for GM's OnStar telematics system. LG Chem supplied battery cells for the Chevrolet Volt, a plug-in hybrid launched in 2010.

    With the Bolt, GM was able to shift some costs to LG, a consumer electronics company that has been building its connections in the auto industry.

    LG invested more than $250 million in an engineering and manufacturing facility in Incheon, outside Seoul, to develop and build components and systems for the Bolt, according to a source familiar with the deal.

    The supply agreement is a coup for LG Electronics, which is trying to boost its autobusiness amid growing headwinds for its television and smartphone businesses.

    The broad range of products being supplied to GM could enhance LG Electronics' auto business, which recently won contracts to supply information displays to Honda Motor Co and Volkswagen AG's Porsche.

    The evolving auto/tech partnerships could cut both ways. Apple Inc has talked with German automaker BMW AG about collaborating on an Apple-designed electric car, and Google said it is talking to vehicle manufacturers about partnering on a self-driving car.
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    1,000 jobs in Holyhead and Port Talbot with £2bn Chinese biomass investment

    A Chinese company is to invest £2bn in two eco-parks in north and south west Wales creating 1,000 jobs.

    SinoFortone Group said the investment would build two 299MWe biomass power stations on Anglesey and in Port Talbot.

    Heat from the plants will be recycled by hydroponic and aquaculture centres, producing prawns and vegetables.

    The announcement was made as Chinese President Xi Jinping started his UK visit.

    Development company SinoFortone Group said it had the support of the Chinese government and it would be the largest biomass power project in the world.

    The project will take three years.

    A co-operation agreement has been signed with the British Orthios Group, whose chief executive Sean McCormick said the "core objective" of the project was to increase the UK biomass energy supply while reducing carbon emissions and increasing food supply.

    A Welsh government spokesman said: "We welcome any further progress on these two projects, which have the potential to create hundreds of jobs and provide a major boost for the local economy."

    A spokesman for Anglesey council said: "This investment will bring a tremendous boost to the economy of the area.

    "This news moves the project considerably closer to being realised."
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    Chinese firm Sany Group to invest $3 billion in renewable energy sector in India

    China-based Sany Group, a global manufacturing company, on Thursday committed investments of US$3 billion (Rs 20,000 crore) for the period 2016-20 towards development of 2,000 megawatt of renewable energy projects (for offshore wind power generation).

    Besides generating 4.8 TWh (terawatt hour) of power annually, the project is estimated to generate 1,000 jobs and prevent carbon emissions of around 3.6 million tonnes per year. (1 TWh is equal to 1,000,000 MWh).

    Sany's India operations are its largest setup outside China. The company has a manufacturing plant in Chakan, Pune, where products such as crawler cranes, concrete pump, transit mixer amongst others are manufactured.

    Liang Wengen, chairman, Sany Group, said: 'Green Energy industry in India is growing and we see this as a huge opportunity to introduce our wind energy business in the country. We have invested in a potential market like India, and are excited about the future growth and potential for future investment.'

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    2.1GW of solar PV under construction in Chile

    A total of 741 MW-AC of solar PV was operational in Chile at the end of September, according to the latest report from CIFES, the nation’s renewable energy center. This means that Chile’s PV capacity grew by 144 MW from the 597 MW in operation that CIFES reported for the end of August.

    Additionally, 2.11 GW-AC of solar PV is under construction. These projects are on schedule to be completed between October 2015 and August 2017, according to data from Chile’s National Energy Commission (CNE).

    CIFES also reports that in September, Chilean solar PV generated 131 gigawatt-hours, representing 2.3% of electricity generation in the nation’s main grids. Once the projects under construction are completed this should rise to over 8%, which is higher than Italy, Greece or Germany at present. Depending on the rate of development in those nations, this could put Chile at the highest level of any medium-to-large nation on earth.

    Last week Chile’s government put out a roadmap calling for solar to represent 19% of electricity generation in 2050, with all renewable energy sources including large hydro making up 70% of generation.
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    China's wind power capacity to hit 120 gigawatts by end of 2015

    China's wind power capacity is to hit 120 gigawatts by the end of 2015, according to the National Energy Administration (NEA) on Friday.

    Zhu Ming, deputy director of the NEA's new and renewable energy department, said wind power capacity has reached 105 gigawatts by the end of June this year.

    He stressed wind power generation has become an important part of the country's electricity supply, and needs more subsidies, better technology and management.

    By the end of 2020, China aims to increase non-fossil energy to 15 percent of total primary energy consumption, and sharply enhance the ratio of renewable energy in production.
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    Investment in renewables up 7%

    Investment in renewable energy rose by 7% in the third quarter (Q3) of this year.

    That’s according to Clean Energy Pipeline, a data service dedicated to the green energy sector, which said investment totalled $75.4 billion (£49.01bn) during the same period.

    It believes the funding will surpass the $286 billion (£185.9bn) recorded in 2014.

    Finance in clean energy projects totalled $53.4 billion (£34.7bn), a 21% increase in Q3 driven by a 51% increase in the Asia-Pacific region. It saw a record volume of $24.1 billion (£15.6bn) of investment.

    On the other hand, project finance in Europe fell 38% annually to $9.1 billion (£5.9bn), a three-year low, the report added.

    That was caused by a slump in the number of projects financed. Only 93 renewable energy projects in Europe secured financing, it stated.

    Arond 23.4GW of renewable energy capacity was acquired in Q3, a record high, according to Clean Energy Pipeline.

    Thomas Sturge, Head of Research at Clean Energy Pipeline said: “The most striking feature of last quarter’s investment figures was the sharp decrease in European project finance. This should not come as a surprise. There is still plenty of appetite to invest in renewables but swingeing subsidy cuts in some of Europe’s major markets during the last three years have significantly reduced deal flow.”
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    CNNP Jan-Sept power output soar 52pct on yr

    China National Nuclear Power Co., Ltd (CNNP) produced a total 56.89 TWh of electricity in the first three quarters this year, posting a year-on-year increase of 52.08%, showed data in its quarterly report released on October 19.

    The on-grid electricity output stood at 52.96 TWh during the same period, rising 51.66% from the year prior, it said.

    The increase was mainly due to successive operation of new nuclear power generating units from November 2014 to February 2015, including Fuqing nuclear power plant 1# unit, Fangjiashan nuclear power plant 1# and 2# units.

    The company expected its net profit over January-September to rise 30-70% year on year. The net profit generated during the first half of the year posted a year-on-year rise of 149.55%, thanks to the operation of new generating units.

    CNNP, listed in June this year, will put the raised fund into five nuclear power projects with combined installed capacity totaling 10.37GW per annum. As scheduled, the installed capacity of the company would amount to 17.89GW per annum by 2017, a rise of 61.59% year on year.
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    Dow Chemical reviewing options for agri unit

    Dow Chemical Co said it would "review all options" for its agrosciences business, after the unit reported its third straight quarter of sales decline on Thursday.

    The No.1 U.S. chemical company said it would sell its stake in a joint venture with Petrochemical Industries Co of Kuwait for pretax proceeds of $1.5 billion.

    Dow is also looking to cut its stake in another joint venture in Kuwait that makes petrochemical products.

    Shares of the company, which reported a higher-than-expected quarterly profit, rose about 7 percent to $50.70 in premarket trading.

    Dow's joint venture with Petrochemical Industries, MEGlobal, produces ethylene glycol, a raw material used to make polyester fibers. The U.S. company's partners in the petrochemical products joint venture, Greater EQUATE, include Petrochemical Industries and Boubyan Petrochemical Co.

    Dow's net income attributable to shareholders surged more than 50 percent to $1.29 billion, or $1.09 per share, in the third quarter ended Sept. 30, partly due to a $621 million gain related to the sale of its AgroFresh specialty chemical business.

    Operating profit rose about 14 percent to 82 cents per share as a fall in raw material prices boosted margins.

    Revenue fell 16 percent to $12.04 billion.

    Analysts on average had expected an operating profit of 69 cents per share and revenue of $12.38 billion, according to Thomson Reuters I/B/E/S.

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    Yara profit doubles on GrowHow UK sale; expects natural-gas boost soon

    Norwegian fertilizer producer Yara International ASA said Wednesday it expected a boost from cheap European natural gas in the coming quarters, as third-quarter net profit more than doubled on the year, helped by a sales gain and cheaper energy.

    Net profit was 4.04 billion Norwegian kroner ($496.84 million) compared with NOK1.71 billion a year earlier, as a NOK1.34 billion foreign exchange loss due to the stronger dollar was offset by the NOK3.20 billion gain from the sale of GrowHow U.K. Revenue rose to NOK30.48 billion from NOK24.10 billion a year earlier.

    Excluding special items and foreign exchange losses, earnings-per-share were NOK7.41, compared with NOK7.62 a year earlier, the company said.

    Third-quarter fertilizer prices fell on the year but were countered by higher deliveries, lower energy costs, and a stronger dollar, Yara said. Deliveries grew 1% on the year, mainly due to the acquisitions of OFD in Latin America and Galvani in Brazil.

    The company expects European energy costs to be NOK550 million lower on the year in the first quarter, and NOK300 million lower on the year in the first quarter.
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    Monsanto asks California to pull plan to list herbicide as cancer cause

    A plan by California environmental officials to list a commonly used herbicide as cancer-causing should be withdrawn, Monsanto Co told state regulators on Tuesday, saying California's actions could be considered illegal because they are not considering valid scientific evidence.

    The formal comments were filed by Monsanto with the state's Office of Environmental Health Hazard Assessment (OEHHA), part of California's environmental regulatory office, on the final day the state accepted public comments about its intention to list glyphosate as a cause of cancer.

    The OEHHA gave notice in September that it intended to list glyphosate under Proposition 65, a state initiative enacted in 1986 to inform residents about cancer-causing chemicals. State officials said the action is required after the World Health Organization's (WHO) cancer research committee in March classified glyphosate as a probable human carcinogen.

    The WHO's research unit said it reviewed many scientific studies, including two out of Sweden, one out of Canada and at least three in the United States before making its classification.

    Roughly 8,000 comments were filed regarding the state action, according to officials, including those from Monsanto.

    Listing glyphosate as a cancer cause "has the potential to deny farmers and public agencies the use of this highly effective herbicide," Monsanto said in its public filing. "Global regulatory authorities... agree that glyphosate is not carcinogenic."

    Glyphosate was introduced in 1974 and is the key ingredient in Monsanto's branded Roundup line of herbicides, as well as hundreds of other products. It is registered in more than 160 countries, and has been embraced by farmers, homeowners and others because of its efficacy in killing tough weeds.

    But many scientific studies have raised questions about the health impacts of glyphosate and consumer and medical groups have expressed worries about glyphosate residues on food.

    Since the WHO classification, the New York-based mass-tort firm of Weitz & Luxenberg and other firms representing U.S. farm workers have filed lawsuits against Monsanto, accusing the company of knowing of the dangers of glyphosate for decades.

    Monsanto has said the claims are without merit.
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    Coffee Rots as Farm Workers Quit to Build Colombian Highways

    Colombian coffee growers face soaring labor costs and harvesting delays as pickers leave for better-paid construction jobs.

    Producers of the famed arabica beans brewed by companies including Starbucks Corp. are paying workers twice what they received two years ago. Still, the labor shortages are leaving coffee beans on trees longer, allowing them to fall to the ground, where beetles can bore into the cherries.

    “For every three workers we need, we have two,” said Juan David Rendon, head of the Andes Coffee Cooperative, whose members have about 35,000 hectares (86,000 acres). “Infrastructure in Colombia has been demanding a lot of manpower.”

    Farmers are now paying laborers as much as 600 pesos (21 cents) a kilo that they pick, Rendon said in a telephone interview.

    Construction has replaced oil and mining as the main motor of economic growth in the Andean nation. Farm labor may become even more scarce when work begins on President Juan Manuel Santos’ $17 billion highway program known as 4G, which aims to build 1,300 kilometers of new roads by 2018 and cut travel time between industrial centers and ports.
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    Precious Metals

    Lonmin aims for $400 mln rights issue, proceeds with job cuts

    Platinum producer Lonmin plans a $400 million rights issue of new shares and will proceed with a planned restructuring to cut 6,000 jobs in the face of depressed prices, it said on Wednesday.

    The moves, along with a debt restructuring, are last-ditch efforts to turn round a company that has seen its share price fall to record lows this year. The $400 million rights issue exceeds its current market capitalisation of 170 million pounds ($262 million).

    Lonmin also announced that it had cut its capital expenditure for the year to Sept. 30 to $136 million from an original target of $250 million.

    The company, which had already flagged the possibility of 6,000 job losses with the aid of voluntary severance and early retirement programmes, said the restructuring is now expected to be completed by the end of September 2016.

    It said that South Africa's Public Investment Corporation (PIC), which owns about 7 percent stake of the company, had indicated to Lonmin's board that it would take up its full entitlement and might "underwrite a material portion of the proposed rights issue in excess of that.

    The embattled platinum producer, whose Marikana mine was the scene of the police killing of 34 wildcat strikers three years ago, also said it planned to amend its debt facilities "for a total of $370 million, maturing in May 2020".

    It said this would be conditional on the raising of $400 million in new equity funding through the rights issue.

    "The amended debt facilities will replace the existing debt facilities commitments, which as at 30 September 2015 were approximately $543 million and mature in May and June 2016," it said.

    Lonmin had to rely on an $800 million rights issue to shore up its battered balance sheet in November 2012 and has been beset by a string of problems since.

    Lonmin also has social and housing obligations to meet under South African law and achieving these would be difficult under current operating and market conditions.

    Job losses are another sensitive issue in Africa's most advanced economy, where the unemployment rate is about 25 percent, the mining workforce is restive and income disparities are glaring.
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    Alrosa sold 42% of its mined diamonds in Q3 Analyst says results reflect waning demand.

    Alrosa PJSC, the world’s largest rough- diamond producer by output, sold less than half of the stones it mined in the third quarter, reflecting a collapse in global demand.

    The company mined about 11.6 million carats in the three months through September, an increase of 20 percent compared with the same period a year earlier, it said in a statement on its website Wednesday. The producer sold 4.9 million carats in the period. In the second quarter, Alrosa’s sales had lagged production by only 600,000 carats.

    “Alrosa’s third-quarter results reflect the slowdown in demand” and has forced the company to stockpile a portion of output, said Konstantin Yuminov, an analyst at Raiffesenbank AO. “This situation may roll over to the next year.”

    Diamond producers, including Alrosa and De Beers, are under pressure to cut supply and lower prices as traders, cutters and polishers struggle to turn a profit amid a squeeze on credit and languishing jewelry sales. Prices for rough diamonds have slumped about 15 percent this year as China’s economic slowdown cut demand for luxury goods.

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    China’s weak demand for diamonds drags sector into slump

    Cooling demand for diamond jewellery in China has come at the same time that prices for rough gems began to dip.

    Weaning demand for diamonds in China, the second largest consumer of precious gems after the U.S., has dragged the seemingly immune-to-the-commodities-rout sector down the slippery slope.

    According to Zimnisky Global Rough Diamond Price Index, prices for the precious rocks have fallen almost 12% in the past year, squeezing producers profits.

    Conditions deteriorated sharply in the second half of this year, when diamond prices took a steep dive. The carnage deepened troubles in the sector, as dealers had already began facing difficulties to sell their existing inventory into softening markets, while also facing tougher financing conditions.

    At the same time, Anglo American-owned De Beers, the world’s No.1 diamond producer, has been increasing spending on marketing in China. The goal, says the company, is to prop up growth and attract new consumers, targeting women between the ages of 18 and 29, and buyers in third- and fourth-tier cities.

    De Beers is saying it’s business as usual; it’s not,” said Guy Harari, co-founder of rough-diamond trading platform Bluedax

    “De Beers is saying it’s business as usual; it’s not,” said Guy Harari, co-founder of rough-diamond trading platform Bluedaxto Bloomberg. “The market is much weaker than what De Beers tries to show the world.”

    The gloomy conditions, however, are set to fade soon, says Rio Tinto, the third-biggest diamond producer. The company believes that China’s demand for diamonds will pick up pace faster than the global average as gains in household wealth drive a demographic and cultural shift across the nation.

    Alan Davies, Rio’s diamonds and minerals chief executive officer, said that as China moves toward a consumption-based economy, sales are likely to grow 8% a year in the next five to 10 years, exceeding the 3% to 5% per annum forecast for the world, he said in an interview withBloomberg.

    De Beers agrees and anticipates an improvement by 2017 at the latest. In the meantime, the company has cut production twice this year by as much as 15%, and lowered prices at its sales, known as sights.

    Russia's Alrosa, the world's top diamond producer by output in carats, is even more optimistic. CEO Andrey Zharkov told Rapaport earlier this month that his company expects rough diamond prices to stabilize by the end of the year.

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    Petropavlovsk makes progress on debt reduction

    Gold miner Petropavlovsk hit its amended production targets in its latest three months as it focuses on the high grade ounces at its Russian mines.

    The miner has adopted a high margin production strategy to ensure meets it debt repayment schedule.

    In line with this new plan, gold production fell to 114,500oz in the three months to September compared to 150,100oz a year ago.

    Net debt was cut by US$255mln to US$675m compared with a year ago and Pavel Maslovskiy, chief executive, said it was “progressing well” with its target to reduce net debt to US$600mln by the end of the year.

    Total gold production for the first nine months of the year was 354,700oz (456,500oz)

    Sales for this period were 343,500oz (460,900oz) at an average price US$1,198/oz. For the latest quarter, sale prices averaged US$1,153/oz.

    For the full year Petropavlovsk said cash costs would be US$600 per ounce with all-in-sustaining costs 15% higher and all-in-costs 5% above that.

    Maslovskiy added: “Operationally, Q3 works were carried out in line with the group's plan across all our mines with the exception of Pioneer.”

    Here, access to the high-grade area required a new set of technological parameters but now 150,000oz of gold is expected to be recovered by the end of the year.

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    Osisco Gold: $30.5M TECK Royalties Deal

    Osisko Gold Royalties is buying a portfolio of Canadian royalties held by Teck Resources for C$30.5M cash.

    The portfolio consists of 31 royalties, most of which are NSR royalties and a production royalty on properties in E Canada, including those on Richmont Mines' producing Island Gold Mine in N Ontario and Integra Gold's Lamaque property in the Abitibi. Others cover Metanor Resources’ Hewfran Block in N Quebec, NioGold Mining’s Marban property in Malartic, Lake Shore Gold’sFenn-Gib project in N Ontario and Northern Gold Mining’s Garrcon property, also in N Ontario.
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    El Nino halts Papua New Guinea gold mine-Barrick

    Operations at the Porgera gold mine in Papua New Guinea have been suspended due to drought conditions, part owner Barrick Gold said on Monday, the latest mine in the Asia-Pacific to be disrupted by El Nino-induced dry weather.

    Production had been halted due to low levels of water in the mine's reservoir, used in processing the raw ore, operator Barrick (Niugini) Ltd said in a statement to Reuters.

    "Some water-intensive production activities at the mine have been temporarily suspended during this extended dry season, and we are using this opportunity to bring forward some scheduled maintenance activities," it said.

    "The very unusual extended dry conditions that we have seen in recent months have meant that our supplies of production water have run very low, and we have made the decision to shut down our milling and processing plants for the time being to conserve our water supplies."

    Barrick earlier this year forecast Porgera would yield 400,000-450,000 ounces of gold in 2015, down from its peak years of around 900,000 ounces when it was regarded as one of the world's foremost deposits.
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    Base Metals

    China refined copper demand to rise 4-4.5 pct in 2016 -Antaike

    China's demand for copper is expected to rise 4-4.5 percent in 2016, with the exact level depending on economic growth, investment in powerprojects and bank credit to small- and medium-scaled factories, said a senior analyst at state-backed research firm Antaike.

    Those variables have also prompted Antaike to trim its 2015 forecast for growth in copper demand to 5.3 percent from the 6.2 percent touted at the start of the year, He Xiaohui told Reuters on the sidelines of an industry conference in Nanning in southwest China. He put demand at 9.18 million tonnes in 2015.

    But He said the 2015 forecast could be cut further to below 5 percent in December if appetite for the metal did not show signs of improving.

    "Few people expect demand (growth) to be better next year than this year," He said.

    "Optimists say the winter is not over yet. Pessimists say it is just the beginning."

    He said bank credit to the metals sector, in particular small- and medium-sized firms, had been tight.

    Some smaller factories that use refined copper for manufacturing of copper rods and power cables had contracted out their orders to bigger ones or declined to take orders because they did not have cash to buy metal, he said.

    State investment in the power sector is expected to rise next year after slowing in 2015. Still, copper is used only when grids fund projects and place orders for power cables and wires, He said.

    China will spend at least 2 trillion yuan ($315 billion) to improve its power grid infrastructure over the 2015-2020 period, which an executive at a state-owned copper producer told Reuters could consume some 1.3 million tonnes of refined copper.

    Antaike's He said copper demand could boom if funding for power projects surged next year.
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    CEO Of Europe's Largest Zinc Producer Hints At Default

    Complacency seemed ready to set back in, with Glencore stock recently rising as high as its recent equity offering price of 125p. And then today we noticed that not only is Glencore's CDS back above 700 bps, the widest it has been in three weeks, but that another mining company has fallen into the market's crosshairs, this time Belgium-based (with Zurich HQ) Nyrstar NV, Europe's largest refined-zinc producer, whose stock crashed the most since its initial public offering in 2007, while it bonds tumbled to a yield of 19%, suggesting a default may be imminent.

    The official version is that this plunge happened after the company said "its mining business is being challenged by the rout in metals."

    According to Bloomberg, "Investment in the company’s Port Pirie smelting operations in Australia will cost A$563 million ($405 million), about 10 percent more than previously forecast, it said in a statement Thursday. Nyrstar shares slumped as much as 27 percent, the most since at least October 2007, to the lowest in six years."

    "Clearly, the business has underperformed for some time," Nyrstar CEO Bill Scotting said, referring to mining. "At these zinc prices we are not cash generating so we have to look at that portfolio. If zinc prices don’t recover we will potentially have to idle more mines."

    However, none of this is news, or should be news.

    What was news was the CEO's admission in Belgium's Tijd that the company "can't guarantee the full repayment of the company's notes due in May 2016. In other words, a default, by any other name.

    So while other commodity traders such as Glencore and Trafigura are desperate to preserve the image that they have no liquidity problems, Nyrstar is the first to hint the D-word.

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    State-owned company should take Freeport Indonesia stake -minister

    One of two Indonesian government-owned companies, miner Aneka Tambang or aluminium producer PT Inalum, should buy the stake that Freeport-McMoran's plans to divest in its Indonesian unit, the country's state-owned enterprise minister said.

    Freeport Indonesia is looking to divest 10.6 percent of the company as part of the process of extending its contract to operate its huge copper and gold mine in the region of Papua beyond 2021. It must propose the divestment share price to the government this month.

    The comments from SOE Minister Rini Soemarno come as ministers have been battling over control of U.S. mining giant Freeport's future in the country, threatening to mar President Joko Widodo's five-day trip to the United States later this month.

    "We propose that state-owned enterprises can take the divested share," Soemarno told reporters on Wednesday. "There are two possibilities: Antam and Inalum."

    Indonesia's government, which already has a 9.4-percent stake in Freeport Indonesia, will have 90 days to decide on the divestment proposal once it has been received.

    Freeport has no issues relating to the proposed divestment as long as it has a "legal basis and a clear mechanism", said company spokesman Riza Pratama. The U.S. miner would prefer to make the divestment through an initial public offering, he added.

    Aneka Tambang was willing to take the Freeport Indonesia stake, Chief Executive Tedy Badrujaman told a parliamentary hearing on Wednesday, although the state-owned nickel miner would need help from financial institutions to fund the acquisition.

    Ahead of Widodo's first trip to the United States next week, ambassador Robert Blake told reporters on Wednesday that Freeport was not actually seeking a contract extension, but instead wanted assurances that when its current contract expires, it would be extended.

    "Freeport is ready to start investing in the underground mine in Papua but of course they need some assurances that their contract will be extended so they can recoup some of their investment," said Blake, speaking in Jakarta.

    Earlier this month, Indonesian government officials said they planned to amend rules on mining contract renewals by the end of the year, which would allow companies to propose an extension 10 years before their contracts expire.

    Present rules only allows talks on an extension to start two years before a contract is due to end.
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    China copper production rises 2.3 pct in Sept

    China's refined copper production rose 2.3 percent in September from the previous month, hitting a three-month peak due to increasing output at some new smelters and higher supplies of raw material.

    Refined copper production reached 680,235 tonnes in September, the highest since June and rising from 664,954 tonnes in August, data from the National Bureau of Statistics showed on Tuesday.

    "Some new smelters have been gradually increasing production," said Ye Yugang, an analyst at Jinrui Futures. He added that some older smelters had also stepped up production after completing repairs in the summer.

    That pushed up overall output slightly despite other smelters curbing production due to weak metal prices.

    Jiangxi Copper has said it would cut output by 10 percent over the next few months. Jinchuan Group has crimped production due to problems in a sulphur facility.

    Supplies of raw material copper concentrate also rose as imports jumped 5.2 percent in September, supporting metal production.

    Copper output was likely to climb slightly in October, even though domestic demand was still lukewarm due to the slowing economy, Ye said.

    Meanwhile, refined zinc production increased 1.1 percent to 536,745 tonnes in September, rising for the second straight month.

    Demand for zinc is expected to improve in coming months because of Beijing's plans to increase investment in infrastructure projects, supporting prices ZN-1-CCNMM, industry sources said.

    Production of primary aluminium fell 1.2 percent in September from the previous month to 2.72 million tonnes, the lowest since May this year.

    Low prices have continued to prompt high-cost smelters to cut aluminium production, with Aluminum Corp of China (Chinalco) shutting its biggest facility. Still, the cuts were not big enough to push up domestic prices as new low-cost capacity came onstream.

    Spot aluminium in China AL-A00-CCNMM has hovered around six-year lows since the third quarter, trading below 11,000 yuan per tonne on Tuesday, the lowest since late 2008.

    Low prices and weak domestic demand also weighed on production of lead, nickel and tin.

    Refined lead production dropped 1.6 percent from the month before to 313,620 tonnes in September, falling for the third straight month.

    Refined nickel output stood at 28,376 tonnes in September, down 11 percent from the previous month and the lowest since March this year.

    Refined tin production fell 3.6 percent to 14,380 tonnes in September, reversing a rise of 6.1 percent in August.
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    Top Philippine nickel miner says prices may have hit bottom

    Global nickel prices may have hit bottom and production cuts could hasten a recovery in the metal that has lost nearly a third of its value this year, the CFO of the Philippines' top nickel ore miner said.

    "It's likely that we've already seen the bottom this year, so there could be potential upside next year," Emmanuel Samson, chief financial officer of Nickel Asia Corp, told the Reuters Global Commodities Summit on Monday.

    "It's difficult to imagine that prices are sustainable at current levels considering an estimated 60 percent of producers are losing money today. Of course, if some producers cut production that would definitely help prices recover faster."

    The price of refined nickel, used to make stainless steel, has fallen 31 percent on the London Metal Exchange this year, reflecting weaker demand in top consumer China.

    The Philippines became the biggest supplier of nickel ore to China after Indonesia banned shipments in January 2014. Nickel ore is used to make nickel pig iron (NPI), a cheaper substitute for refined metal in producing stainless steel.

    Nickel ore miners are faring better than refiners, Samson said, with current ore prices still higher compared to levels prior to the Indonesian ban. LME nickel has dropped about 30 percent to around $10,450 a tonne over the same period.

    Chinese growth of between 6 percent and 7 percent should be enough to sustain the country's stainless steel demand at around current levels, maintaining appetite for Philippine nickel ore, he said.

    Samson said the Philippines could not fully meet China's demand for nickel ore, as it lacked big volumes of high-grade material that Indonesia used to supply.

    Stocks of Indonesian ore in China, piled up just before the ban took effect, were expected to be depleted by year-end.

    "NPI producers in China will be completely dependent on Philippine ore, which is not sufficient to cover NPI capacity. Chinese stainless steel producers would have to rely more on other sources of nickel such as ferronickel or pure nickel," said Samson.

    Nickel Asia, partly owned by Japan's Sumitomo Metal Mining Co Ltd, is keen to acquire more assets, but is keeping its sights at home. The miner said in April it would acquire stakes in two smaller miners to expand its resource base by 24 percent.

    "We are always on the lookout for new nickel properties locally," Samson said.

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    Copper producer jumps 30% on takeover offer

    Aditya Birla Minerals, headquartered in India, closed up 30.56% Friday on close to triple average volumes, after an $86 million takeout attempt by Australia's Metals X Limited. Metals X is offering one of its shares for every five Aditya shares at a price of 27.4 cents a share – a 60 percent premium on the 17 cents a share Aditya was trading at before the announcement. ABY on Friday closed at 23.5 cents, bringing the market cap up to $73.46 million.

    The deal however is by no means done. Sydney Morning Herald reported on Monday that the bid was "subject to numerous conditions, including a 90 per cent minimum acceptance condition". The newspaper also quotes Metals X CEO Peter Cook as saying that the bid was designed to "crystallize" a response from the Aditya board and its majority shareholder, Hindalco Industries also of India, after it received no response to a number of friendly offers earlier this year.

    Bombay-based Aditya Birla Group is among the largest producers of primary aluminum in Asia. It has two copper mines in Australia, the Mount Gordon mine in northwest Queensland, and the Birla Nifty mine located 120 kilometres from Mount Isa, one of the largest underground mines in the world, producing copper and zinc-lead-silver. Late last year Aditya announced it would unload its Mount Gordon mine, a promise it made good on in September, selling to Lighthouse Mineral Holdings Pty for around $10.8 million. Copper concentrate from the Birla Nifty mine is trucked to Port Hedland for shipping to Hindalco Copper’s Dahej smelting and refining facility in India.

    Metals X is Australia's largest tin producer, operating the Renison mine in Tasmania. It also has nickel and gold operations, including the Higginsville and South Kalgoorlie operations in Western Australia.
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    Hindustan Zinc to Invest 83.6 Billion Rupees to Expand Capacity

    Hindustan Zinc Ltd., India’s biggest miner of the metal, plans to spend 83.6 billion rupees ($1.3 billion) in the next three years to ramp up mine and smelter capacities.

    The company plans to increase zinc and lead ore mine production in Rajasthan state by 41 percent to 12.8 million metric tons a year and metal output to 1.028 million tons annually from 850,000 tons, the unit of the London-listed Vedanta Resources Plc said in an e-mailed statement on Friday. Hindustan Zinc is also looking to expand all its underground mines, it said.

    The investment comes after Vedanta Resources said earlier this week that the company won’t be following Glencore Plc in cutting zinc output after prices slumped this year as it’s “rational” to maintain its low-cost production. Zinc made up 37 percent of Vedanta Resources’ 2014-15 pretax earnings, and it may benefit from the supply cutbacks, according to Bloomberg Intelligence.

    Hindustan Zinc’s investments will also include a 500,000 tons-a-year di-ammonium phosphate plant to be set up in Udaipur at an estimated cost of 13.5 billion rupees, Hindustan Zinc said. The new plant would be built in the next three years and generate employment for more than 7,000 people, it said.

    Vedanta’s oil unit Cairn India Ltd. has also announced an investment of 125 billion rupees in the next three years in Rajasthan to develop its Mangla-Bhagyam extended oil recovery polymer project, Mangla-Aishwariya in-fills and set up a sulphate removal plant, according to the statement.

    Shares of Hindustan Zinc rose 4.8 percent to close at 154.25 rupees in Mumbai on Friday, the highest level since Aug. 7. The advance pared losses to 9.5 percent this year.

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    Chuquicamata goes underground

    Calama (Chile), Oct 18 (EFE) .- The Chuquicamata copper mine, Codelco of Chile, is immersed in a mega project that will transform the world's largest underground reservoir and prolong its life over half a century.

    The project, which will invest 4,200 million dollars (about 3.7900 billion) and work about three thousand people, is a marvel of engineering and includes unique processes and technologies in the mining industry.

    "Converting an open pit that leads exploited over a hundred years in an underground mine is unique in the world, there is a challenge equivalent today of the scale of what Codelco is doing," he told Efe Victor Perez, Manager of Business Planning and Market Development Company.

    Nestled in the northern region of Antofagasta, in the Atacama Desert and near the city of Calama, Chuquicamata mine is a flagship state-owned Codelco and for many years was mining at the world's largest open pit.

    The site, which last year produced over 340,000 metric tons of copper, was one of the stalwarts of Codelco during the last decade, when the super cycle of commodity prices brought him millions in income to the Chilean public coffers.

    The price of copper has fallen and Codelco has implemented severe austerity plan. But late last century, long before it reached the current situation, the company began to study the possibility of converting Chuquicamata into an underground mine.

    Engineers discovered that under the current pit pampers there are at least 4,300 million tons of ore.And the Chuquicamata underground project, which will be operational in 2019, aims to exploit 1.760 million tons of copper ore and molybdenum up to 2058, equivalent to 140,000 tonnes per day.

    The huge amount of copper reserves that lie underground and other operating factors led Codelco to conclude that the best alternative was an underground operation, which is unusual in the world of copper, told Efe Edisson Pizarro, director of Innovation and Applied Technology of the project.

    "Transportation costs are increasingly high. For the depth of the pit, each truck has to travel about 20 kilometers to go, carrying mineral and out," said Pizarro, an expert in underground mining that has spent four years working on the project Chuquicamata underground.

    It has also affected the sustained decline in copper grade, which is the concentration of minerals in rocks and the material is removed.

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    Indonesian battle over Freeport threatens to mar leader's US trip

    Indonesian ministers are battling over control of U.S. mining giant Freeport-McMoRan's future in the country, threatening to mar the president's first trip to the United States later this month.

    President Joko Widodo starts a five-day trip to Washington and San Francisco on Oct. 25, as investor sentiment in Southeast Asia's largest economy brightens following a cabinet reshuffle and a series of new stimulus measures.

    One of Widodo's first stops will be with Freeport executives at a breakfast ahead of his meeting with U.S. President Barack Obama, according to a tentative schedule obtained by Reuters.

    At the heart of talks will likely be Freeport's years-long bid to renew its contract, allowing the firm to continue operating beyond 2021 at the lucrative Grasberg mine in Papua, one of the world's biggest deposits of gold and copper.

    Freeport wants certainty to spend $18 billion to build what would be the world's biggest underground mine. But under law the government cannot begin to renegotiate until 2019, two years before the contract expires.

    A mines ministry official said this month the rules were being revised, possibly allowing companies to propose an extension earlier.

    Mines minister Sudirman Said assured Freeport in a letter last week that the government would "promptly" approve a contract extension once it completes the process later this year.

    "For the government, it is better to make a decision instead of delaying the problem. If it's postponed, it will burden the government," Said Didu, the minister's senior adviser, told reporters when asked about Freeport's contract extension.

    But Said's boss, chief natural resources minister Rizal Ramli, and security czar Luhut Pandjaitan have sharply criticized Freeport's 48-history in Indonesia and say a contract extension will not be decided for at least another four years.

    "We have a regulation ... 2019, two years before the contract expires," Pandjaitan told Reuters late Thursday. "We cannot change our regulation just because of Freeport."

    The mines ministry has dismissed statements from the two senior ministers on the issue, saying they do not have the authority to decide on such matters.

    Didu said the mines ministry has Widodo's support to extend the company's contract as quickly as possible.

    "The president doesn't want many parties involved in this negotiation with Freeport because, based on experience, many parties have political and business interests."

    But when reporters asked the president on Friday to provide some clarity, Widodo said: "The extension can be done two years before the end of the contract, it means 2019."

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    Antofagasta slows pace of exploration in cost cuts drive

    Antofagasta slows pace of exploration in cost cuts drive

    Chilean copper producer Antofagasta Plc has cut back on exploration activities, its chief executive said, part of plans to save about $160 million this year.

    Like its peers, London-listed Antofagasta is battling a slide in commodity prices as a result of slowing growth in China, the world's top consumer of industrial metals. London copper prices are recovering from six year lows hit in late August.

    Antofagasta Chief Executive Diego Hernandez told Reuters late on Thursday that the company was on track with its cost savings plan for the year.

    "We are doing less things than we were doing before. We have reduced our exploration, we continue to do exploration but at a lower pace," Hernandez said.

    "Studies we can postpone we have postponed and we have reorganised some areas in our mines and head office to improve productivity and costs."

    Antofagasta Minerals, the group's operational division, said earlier this month it was reducing its workforce by around 7 percent to cut costs.

    As the industry battles sinking prices, major miners including Glencore and U.S.-listed Freeport have cut production as prices fall towards levels where some operations are no longer economically viable.

    But Hernandez said Antofagasta was not planning to suspend its production as the company's operations have positive operating margins.

    Family-controlled Antofagasta operates the Los Pelambres mine, which produced just over 400,000 tonnes of copper last year out of Chile's total 5.8 million tonnes. It also has smaller operations and is ramping up its new Antucoya project.

    Antofagasta's Los Pelambres had been affected by water shortages, but the situation was now improving, Hernandez said.

    "In Pelambres area we went through probably four years of drought and this year we have had a normal year in terms of rain and we should recover our water stocks," he said.
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    Chinalco plans shutdown of biggest aluminium smelter-report

    Aluminum Corp of China (Chinalco), the country's top producer of the metal, plans to shut down its biggest smelter - accounting for about an eighth of its total capacity - due to low prices, an industry body said.

    The shutdown reflects mounting pressure on even state-owned companies in the face of slower economic growth and a planned restructure of state-owned enterprises, although it is not expected to have much impact on a forecast domestic output surplus this year.

    Chinalco vice president Jiang Yinggang announced the shutdown of the Liancheng smelter in the northwestern province of Gansu last week during a visit with other company officials, according to a report on the website of industry body China Nonferrous Metals Industry Association.

    The smelter has an annual capacity of about 550,000 tonnes, analysts said, compared with Chinalco's total capacity of more than 4 million tonnes.

    Liancheng was Chinalco's worst performing smelter and the company had been unable to turn it around, the report said, citing Jiang.

    Liancheng had recorded losses of 1.99 billion yuan ($313 million) since 2011 due to high production costs and weak aluminium prices, which had fallen up to 36 percent during the period.

    Production costs at Liancheng averaged 13,860 yuan ($2,180) a tonne in the first 8 months of this year, Jiang said. This compared to an average in China of about 12,840 yuan and 11,330 yuan a tonne for the lowest cost producer, he said.

    Jiang said that in the current market it would be difficult for aluminium prices to rebound to 13,000 yuan.

    The report gave no details on the timing of the shutdown, but Xu Hongping, an analyst at China Merchants Futures, said it should be completed by end-November.

    Chinalco could close more loss-making smelters if prices stayed weak in coming months as it looks to maintain profits, an executive at a smelter in Guizhou province told Reuters.

    Its listed unit swung to a net profit in the first half of this year after posting a record loss in 2014.

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    Steel, Iron Ore and Coal

    CIL stake sale misses another date - Report

    Financial Express reported that the department of disinvestment (DoD) has extended the deadline to appoint financial advisors for Coal India (CIL) disinvestment to November 10, as it has failed to receive adequate response from merchant bankers. The first deadline was set on September 2, 2015, which was later extended to October 14.

    People familiar with the development said global investment banks flagged concerns over a shortfall in Coal India’s environment sustainability commitments.

    In addition, there was lack of clarity regarding the group or basket under which CIL would feature. Bankers have sought more clarity on the matter, as it would have a bearing on the costs involved in conducting a government deal.

    The DoD aims at appointing five merchant bankers, and has now facilitated meetings between merchant bankers and representatives of the company.

    CIL had in 2013 committed to a sustainable development policy under which the Maharatna PSU has to pursue mining, integrating environmental, sociocultural and economic factors.

    A senior government official said that “CIL has some sustainability plans that CIL committed in 2013. They have not been able to implement it. The foreign bankers have expressed concerns on that.”
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    Sinosteel's debt woes cast doubt on China's SOE reform programme

    The prospect of China's state-owned metals trader Sinosteel defaulting on its debt leaves Beijing with a dilemma: stick with its pledge to let market forces operate in its sprawling state sector or step in to save jobs and keep the steel giant afloat.

    On Monday Sinosteel extended the date investors can start redeeming its bonds and also deferred interest payments, citing liquidity problems, fuelling concerns about the mounting default risks in China's bloated state-owned enterprises (SOEs).

    Last month China promised to create "stronger, better and larger" SOEs through a far-reaching reform programme, which includes restructuring those that are performing poorly and allowing some to close.

    The programme is expected to take five years to implement, but the huge debts facing many of China's mammoth state-owned firms, which together employ around 7.5 million people, need more urgent attention.

    Chinese media has reported Beijing is on the verge of intervening to save Sinosteel, a move some in the metals industry say would set the wrong precedent for other struggling SOEs.

    "Sinosteel is a typical 'zombie enterprise'...the government should let the company go bust," said Xu Zhongbo, a steel industry veteran and president of Beijing Metal Consulting in Beijing.

    Total debts at China's state-owned firms rose 11 percent from a year earlier to 71.76 trillion yuan ($11.29 trillion) in the first eight months of 2015, according to the latest Ministry of Finance data. Servicing those loans is getting costlier, with financing costs up 12.1 percent over the period.

    Sinosteel's liabilities are estimated at more than 100 billion yuan, with a debt-to-asset ratio of 98 percent over the 2011-2013 period, according to a report issued last year by domestic credit rating agency China Cheng Xin.

    Sinosteel's spokespeople could not be reached for comment to confirm those figures or comment on their current situation.

    Several SOE executives believe China will have to pull back from its reform programme while companies grapple with the slowing economy, particularly in the commodities and shipbuildling sectors.

    "The government will still want the market to allocate resources, but the government will have to put social stability first and consider bad loans for it won't just sit on the sidelines," Xu Lejiang, chairman of China's no.2 steel maker Baosteel, told reporters on Wednesday.

    "Aggressive acquisitions...big investment in overseas mining and fooling around with private mills all caused the firm to become what it is today," he said.

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    Lu’an Group takes tough move to cope with sluggish market

    Lu'an Group, one of the five top coal producers in Shanxi, planned to suspend salary but retain the job for employees, in order to cut labor cost amid worsening coal market.

    All management staff who worked no less than five years for the company could apply for leave without pay, which in principle, shall not be less than five years, the company said in a recent statement.

    Shanxi Lu'an Environmental Energy Development, the group’s listed company, posted net profit of 113.7 million yuan ($17.8 million) in the first half of the year, plunging 76.1% year on year.

    The group sold 14.09 million tonnes of commercial coal during the same period, down 9% on year, with combined PCI and washed metallurgical coal sales accounting for nearly half of the total, reaching 6.31 million tonnes and 101,600 tonnes, respectively.

    Lu’an Group cut free-on-rail price by 40 yuan/t for washed coal from its Sima and Wuyang mines, and cut price of other lean coals by 30 yuan/t, effective on October 1.

    As of October 20, the CCI Met Shanxi PCI index assessed the ex-washplant price of Shanxi PCI coal at 405 yuan/t, dropping 21.4% from six months ago.

    Besides Lu’an Group, Shanxi's another four major miners -- Datong Group, Shanxi Coking Coal, Yangquan Coal and Jincheng Anthracite -- also have announced similar measures to encourage workers to leave without pay or work in shifts. This, according to industry insiders, is expected to cut around 10% staff in total.

    Underground workers or 2/3 of the total staff and most ground service staff would be encouraged to work in shifts; while administrative officials would stay in positions, sources said.

    All of them would be paid salaries during work and living allowance during the leave period. The measure is estimated to cut labor cost by 20-30% and cut raw coal production cost by 10%, industry insiders said.

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    JSW Steel avoids loss in Q2

    JSW Steel Ltd reported an 84 percent fall in net profit for the July-September quarter as the steel sector continues to struggle with weak demand and high debts, but was able to avoid an expected loss after lowering expenses.

    JSW Steel, which counts itself among the lowest cost steel producers in the world, reported a consolidated net profit of 1.17 billion rupees ($17.96 million) for the second quarter ended Sept. 30 versus 7.49 billion rupees a year ago.

    Analysts had expected a loss of 1.65 billion rupees, according to data compiled by Thomson Reuters.

    Net sales fell 21.5 percent to 107.43 billion rupees.

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    Vale earnings slide as iron-ore rout blunts cost-cutting efforts

    Vale SA, the world’s biggest iron ore and nickel producer, reported a decline in quarterly earnings as slumping prices overshadowed efforts to focus on higher quality deposits and cut costs.

    Third-quarter adjusted earnings before interest, taxes, depreciation and amortization fell 15 percent from a year earlier to $1.88 billion, the Rio de Janeiro-based company said Thursday in a statement. That compared with the $1.86 billion average of 11 dollar-based estimates compiled by Bloomberg. On a net basis, Vale had a loss of $2.12 billion as a weaker Brazilian real increased the burden of the company’s debt and derivative losses.

    Vale is producing more higher-quality iron ore and halting some of its most expensive output to improve margins and navigate an oversupplied market that sent prices down more than 70 percent from a 2011 peak. The company is betting an expansion of its Carajas complex in northern Brazil, its biggest project ever, will trim costs further, allowing the producer to boost market share and offset the effect of lower prices.

    “Lower iron ore and base metals prices should weigh on the company’s earnings in 2016 and 2017, ultimately jeopardizing cash flow generation and stretching the balance sheet,” Credit Suisse Group AG analyst Ivano Westin said in a research note Tuesday.

    On Monday, Vale posted record iron-ore output for the third quarter thanks to higher production at Carajas, while it shuts down less efficient operations elsewhere in Brazil. Production of nickel and copper missed analysts’ estimates amid shutdowns in Canada.

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    Rio Tinto gets preliminary nod to expand Australian coal mine

    Rio Tinto on Thursday came a step closer to gaining approval to expand its Warkworth coal mine in Australia after an influential panel recommended the work proceed, against the wishes of environmental and community groups.

    Without a final go-ahead to expand, the mine producing electricity-generating thermal coal would by December no longer be economically viable, according to the company.

    In the coming weeks, the actual approval or rejection determination will be made by a division of the New South Wales state Planning and Assessment Commission.

    Generally, the commission follows the preliminary recommendation passed by an independent panel established by the state government.

    An approval could help in any efforts by Rio Tinto to attract buyers for its coal mines in Australia, where high operating costs and low selling prices are weighing on profits.

    In September, the company agreed to sell its 40 percent stake in the Bengalla coal mine to local operator New Hope Coal

    Georgina Woods, a coordinator for the Lock the Gate Alliance in New South Wales, said the recommendation failed to take into account the wishes of the local community.

    "The New South Wales government has failed to create balanced and common sense policy that protects villages, the wine-industry and endangered bushland from coal mining," Woods said.

    "This short-sighted mining-at-any-cost policy is costing us a thriving, diverse and sustainable economic future for the region."

    A Rio Tinto spokesman said that the expansion enjoyed widespread community support and would help retain jobs and pour money into local economies.

    "Today's recommendation from the NSW Planning Assessment Commission provides a great sense of hope for the 1,300 people who work at the mine and for the hundreds of Hunter Valley businesses and community groups it supports," the spokesman said.
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    India's coal imports slump 27 pct in September 2015 - Mr Swarup

    Mr Anil Swarup, Coal Secretary, said that India's coal imports fell 27 percent to 12.6 million tonnes in September from a year earlier as local output jumped.

    Mr Swarup said that "With unprecedented increase in coal production by Coal India Ltd (COAL.NS), import of coal comes down for third successive month."

    Meanwhile, India is opening a mine a month as it races to double coal output by 2020.
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    Australia to tighten grip on coking coal as U.S. rivals suffer

    Australia is set to boost its dominance of the global trade in steel-making coal, as cost cutting and better margins due to a slide in the local dollar stoke a rise in production and put pressure on U.S. rivals to cut output.

    Top exporter BHP Billiton , which along with Japanese partners Mitsubishi Corp and Mitsui & Co supplies nearly a quarter of globally traded coking coal, will be the biggest beneficiary.

    "As China's import flows stabilise and higher-cost North American production exits, BHP Billiton will be left as the dominant price-setting player on the supply side," Morgan Stanley analysts Tom Price and Joel Crane said in a note.

    Commodity prices have plunged over the past three years as demand in China has dropped, and the two key steel-making ingredients, coking coal and iron ore, have suffered the most.

    Coking coal prices have tumbled 75 percent from a peak of $330 a tonne in 2011, mainly due to a near one-third increase in Australia's exports from new mines that were approved at the height of China's demand boom.

    Steel demand has since fallen off in China and Japan as growth has slowed and the Chinese property market has softened.

    The World Steel Association last week forecast that China's demand for finished steel products would drop 3.5 percent in 2015 to 686 million tonnes and fall a further 2 percent in 2016.

    Despite the weaker outlook, coking coal producers in Australia are maintaining or boosting their output, shielded by an 11 percent slide in the Aussie dollar this year that has enhanced the impact of cost-cutting since coal is priced in U.S. dollars.

    That makes it worthwhile to produce as much as possible of any form of coking coal, whether it is hard, semi-soft or pulverised coal injection (PCI) material, which all fetch more than thermal coal, used in power stations.

    "We're minded to produce every tonne of PCI and semi-soft we can because that's where there's a healthy margin," said Paul Flynn, managing director of Whitehaven Coal, which started exporting from a new mine, Maules Creek, earlier this year.

    Unlike iron ore, where the market is being crushed by new supply from both Australia and Brazil, coking coal is dominated solely by Australia, the source for around 60 percent of global trade.

    That grip is set to tighten, with Australia's official forecaster seeing coking coal exports rising by 8 million tonnes over the two years to 2016, while it sees U.S. exports dropping by 6 million tonnes over the same period.

    Cuts are expected to come from the United States, where coal companies such as Walter Energy, Alpha Natural Resources and Patriot Coal face higher costs than Australian rivals and have been battered by sliding coal demand due to the shale gas boom. This has left some with little choice other than restructuring to avoid bankruptcy.
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    China steel output may collapse 20%, Baosteel Chairman says

    China’s steel industry, the largest in the world, is bleeding cash and every producer is feeling the pain, according to the head of the country’s second-biggest mill by output, which raised the prospect that nationwide production may shrink 20 percent.

    Losses for the industry totaled 18 billion yuan ($2.8 billion) in the first eight months of the year compared with a profit of 14 billion yuan in the same period a year earlier, Shanghai Baosteel Group Corp. Chairman Xu Lejiang said on Wednesday. Output may eventually contract by a fifth, matching the experience seen in the U.S. and elsewhere, he said.

    After decades of expansion, China’s steel industry has been thrown into reverse as local demand contracts for the first time in a generation amid slowing economic growth and a property downturn. The slowdown has pummeled steel and iron ore prices and prompted Chinese mills to seek increased overseas sales, boosting trade tensions. The country is the linchpin of the global industry, accounting for half of worldwide production.

    ‘“If we extrapolate the previous experience in Europe, the United States, Japan, their steel sectors have all gone through painful restructuring in the past, with steel output all contracting by about 20 percent,” Xu told reporters at a forum in Shanghai. “China will eventually get there as well, regardless how long it takes.”

    Crude-steel output in China surged more than 12-fold between 1990 and 2014, and the increase was emblematic of the country’s emergence as Asia’s largest economy. Output probably peaked last year at 823 million metric tons, according to the China Iron & Steel Association. The country produced 608.9 million tons in the first nine months, 2.1 percent less than the same period last year, the statistics bureau said on Monday.

    “The whole steel sector is struggling and no one can be insulated,” Xu said. “The sector is facing increasing pressure on funding as banks have been tightening lending to the sector – – both loans and the financing provided for steel and raw material stockpiles.”

    “We are talking about output contracting by 20 percent, not just capacity,” Xu said, adding that Shanghai Baosteel Group may be able to report a small profit this year.

    “Steel prices have slumped by about 27 percent to 28 percent year-to-date,” Xu said. “So how much further can the steel price drop? I think we are back to the question on how long those loss-making mills can keep producing. If nobody exits the market, the price will fall further. But I think it won’t be like this for too long.”
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    Sinosteel Misses Payment

    China bond defaults are forecast to climb after a state-owned steelmaker missed an interest payment, raising questions about the government’s commitment to stand behind such firms.

    Sinosteel Co. failed to pay interest due Tuesday on 2 billion yuan ($315 million) of 5.3 percent notes maturing in 2017 after saying it will extend the deadline as it plans to add a unit’s stock as collateral. That came after the National Development and Reform Commission planned to meet noteholders and ask them not to exercise a redemption option on Tuesday to force full repayment, people familiar with the matter said last week.

    Chinese authorities are weeding out weak state firms that Premier Li Keqiang called zombies. Australia & New Zealand Banking Group Ltd. warned that rising debt in the sector may drag economic growth down to as low as 3 percent. Two state-owned companies, Baoding Tianwei Group Co. and China National Erzhong Group Co., reneged on obligations earlier this year, according to China International Capital Corp. and China Bond Rating Co.

    “Sinosteel’s default means we will see more and more real bond defaults, in which investors may not get full repayment, in China,” said Ivan Chung, an associate managing director at Moody’s Investors Service in Hong Kong. “The government may want to reduce its intervention in default cases and let market forces play a bigger role.”

    Sinosteel’s failure to pay interest on time constitutes a default, according to Industrial Securities Co., Haitong Securities Co. and China Merchants Securities Co. China Bond Rating Co. said in a report Wednesday if Sinosteel bond investors had agreed to the delay of interest payment, it didn’t constitute a default, whereas if they hadn’t, it did. Sinosteel hasn’t said in its statements whether it got permission from investors, and two calls to the company Wednesday went unanswered.

    Flagging authorities’ balancing act as they try to liberalize markets while preventing turbulence, Li said last week the government will prevent systemic risks and banks should not cut or withdraw lending to companies which are in “temporary” difficulties.

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    Yankuang Q3 coal sales down 35pct on yr; outsourced coal sales slump

    Shandong-based Yankuang Group Co., Ltd., parent of Yanzhou Coal Mining Co., Ltd., saw its commercial coal sales fall 34.7% on year to 20.34 million tonnes in the third quarter of the year, it said in the latest announcement on October 20.

    Of this, sales of self-produced commercial coals reached 15.08 million tonnes, down 3.9% on year, while that of outsourced coals plunged 66% on year to 5.26 million tonnes.

    The decline of outsourced coal sales was largely attributed to its higher cost and lower sales prices compared with self-produced coals, with sales price averaging 465.98 yuan/t during the first half of the year.

    In the first three quarters of the year, the company sold a total 63.33 million tonnes of commercial coals, accounting for 51.9% of its annual target. Self-produced coal sales realized 66.4% of its annual target at 69.08 million tonnes, data showed.

    Meanwhile, the company produced 15.29 commercial coals in the third quarter, down 8.3% year on year.
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    Inner Mongolia Oct coal prices continue to dip

    Coal prices at China’s Inner Mongolia Autonomous Region averaged 120 yuan/t in October this year, falling 2 yuan/t from September and down 40 yuan/t from the year prior, showed the latest data from the regional Coal Industry Bureau.

    Of this, the average coal price at eastern region stood at 109 yuan/t, down 14 yuan/t on year and unchanged from September; that at western region decreased 2 yuan/t on month and down 50 yuan/t on year to 124 yuan/t, data showed.

    The average price of western high-vol thermal coals stood at 146 yuan/t, falling 3 yuan/t from September and down 64 yuan/t from a year ago; while the price of western low-vol thermal coals averaged 88 yuan/t, falling 1 yuan/t on month and down 26 yuan/t on year.

    The coking coal price averaged 240 yuan/t, 10 yuan/t lower than September and down 60 yuan/t from the year prior; anthracite price stood at 520 yuan/t in October, falling 10 yuan/t on year and unchanged from September.

    The average ex-plant price of Grade II met coke at Wuhai region—one major production base in western Inner Mongolia—dropped 30 yuan/t from September and down 230 yuan/t on year to 600 yuan/t; the washed coal prices in Wuhai averaged 440 yuan/t, down 14 yuan/t on year and unchanged from last month.

    Lignite prices at eastern Inner Mongolia averaged 109 yuan/t, decreasing 14 yuan/t on year and unchanged from September, said the bureau.

    The imported coking coal price from neighboring Mongolia averaged 260 yuan/t at Ceke border crossing in October, unchanged from September and down 45 yuan/t on year; while imported primary coking coal prices at Ganqimaodu border crossing averaged 430 yuan/t, dropping 20 yuan/t on month and down 58 yuan/t on year.
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    POSCO Q3 profit edges up 0.5 pct, steel supply glut continues

    South Korean steelmaker POSCO said its third-quarter operating profit crept up 0.5 percent from a year earlier, beating estimates, as more stable iron ore input costs helped it absorb weak steel product prices and a continuing supply glut.

    POSCO, the world's sixth-biggest steelmaker, said on Tuesday operating profit for July-September was 638 billion won ($566 million) on a parent-only basis, above a consensus forecast of 608 billion won compiled by Thomson Reuters I/B/E/S. The closely watched parent-only measure refers to earnings from steel business, and excludes profit from affiliates.

    The third-quarter profit was up from 635 billion won in the same period a year earlier, and ahead of 608 billion won in the April-to-June quarter.
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    Shenhua Jan-Sep coal sales down 18.3pct

    China’s coal giant Shenhua Group saw its coal sales fall 18.3% from a year ago to 278.9 million tonnes over January-September, it said late October 19.

    Sales in September stood at 31.3 million tonnes, decreasing 17.4% on year and down 11.3% from August.

    Coal output of Shenhua fell 10% on year to 210.6 million tonnes over January-September, with September output dropping 10.1% on month and down 10.8% on year to 22.2 million tonnes, the thirteenth consecutive year-on-year decline.

    Shenhua has been moderately cutting the output of inefficiency coal mines and coal trades, impacted by flat demand from downstream sectors amid slack market in recent years.

    Shenhua provided a 10-15 yuan/t discount of its coal products for buyers, following other large groups’ price cut, effective October 9.

    The group’s major product 5,500Kcal/kg NAR coal was offered at 390 yuan/t at present, down 26.3% from 529 yuan/t at the start of the year.

    Large coal producers intensified price competition of shipped coals, in order to take more market shares amid worsening profitability, the analyst said.

    In September, Shenhua saw 16.9 million tonnes of coal shipped through ports, falling 11.1% on month and down 19.5% on year; the volume between January and September fell 13.7% from the year prior to 153.4 million tonnes.

    Of this, the shipment at its exclusive-use Huanghua port fell 16.4% on year to 83 million tonnes over January-September, with September shipment at 10 million tonnes, rising 1% from August but down 18% on year.

    The group exported 800,000 tonnes of coal over January-September, a year-on-year decline of 33.3%, with September exports at 100,000 tonnes, unchanged from the year prior.

    Coal imports of Shenhua slumped 98.2% on year to 100,000 tonnes over January-September, with September Imports at 100,000 tonnes, down 50% on year.

    In addition, Shenhua’s power output in September stood at 16.34 TWh, rising 2.9% on year but down 12.57% on month; that over January-September fell 4.2% on year to 153.69 TWh.

    Its electricity sales stood at 15.17 TWh in the same month, up 3.2% on year and down 12.72% on month; sales in the first three quarters of the year fell 4.2% on year to 143.08 TWh.
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    China Jan-Sep coal industry FAI down 16.5pct on year

    China’s fixed-asset investment (FAI) in coal mining and washing industry stood at 297.2 billion yuan ($46.7 billion) over January-September, down 16.5% year on year, showed data from the National Bureau of Statistics (NBS) on October 19.

    The decrease is faster than a 14.4% drop over January-August this year.

    Private investment in the sector contributed 166.7 billion yuan of the total, falling 16.8% from the previous year, compared to a 12% decline over January-August.

    Meanwhile, fixed-asset investment in all mining industries across the country posted a year-on-year drop of 8% to 932.7 billion yuan over January-September. Of this, private investment in mining industries contributed 528.8 billion yuan during the same period, falling 12.3%.

    The NBS data showed a total 106.5 billion yuan was spent on fixed assets in ferrous mining industry during the same period, down 20.8% from the previous year; while investment in oil and natural gas industry rose 5.5% on year to 225.9 billion yuan.

    The fixed-asset investment in non-ferrous mining industry witnessed a year-on-year decline of 3.2% to 116.5 billion yuan during the same period, data showed.
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    Vale iron ore output hits new record

    Brazil’s Vale, the world's biggest iron ore producer, posted Monday a new record-high in seaborne production, with 88.2 million metric tons mined in the third quarter, which beat analyst estimates.

    The Rio de Janeiro-based miner also said it has suspended higher-cost mining operations accounting for about 13 million tonnes of annual production.

    They will mostly be replaced by ore coming on-stream from three new lower-cost mines in Brazil's southeastern state of Minas Gerais, as it finishes the expansion of Carajás, the world's largest iron-ore complex, next year.

    The move aims to improve profit margins in the face of weak global iron ore prices.

    Along with rivals BHP Billiton and Rio Tinto, Vale has been increasing production despite falling iron ore prices in an effort to corner the global market, forcing out higher cost producers.

    The glut in global iron ore supply has seen prices drop from a high of nearly $200 per tonne in 2011 to forecasts of below $50 within two years.

    Iron ore delivered to China averaged about $55 a ton in the third quarter, compared with more than $90 a ton a year earlier, according to The Metal Bulletin Iron Ore Index, hurting revenue for producers.

    On Monday, the Chinese import price for 62% iron content fines at the port of Qinqdao lost $ $0.46 or 0.8% of its value to $53.3 a tonne, way below the record-highs of 2011.

    Vale, also the world's No.1 nickel producer, said output of the base metal dropped 0.7% in the quarter to 71,600 tons, the survey shows. Output for copper, the industrial metal used in wiring and plumbing, declined 5.3% to 99,300 tons.

    Attached Files
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    Vedanta makes first shipment of 88,000 tonne iron ore from Goa

    Vedanta’s Iron Ore division shipped its first cargo of iron ore today after resuming mining operations at its Codli, Bicholim and Surla mines in Goa. The first shipment of 88000 tonnes is exported to China via the vessel “Ao Hong Ma”. Vedanta’s Iron Ore division is the first iron ore mining company to start operations in Goa after three years due to the ban on mining.
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    Odisha caps 75 mn tonnes iron ore despatch for 2015-16

    Business Standard recently reported that Odisha has capped iron ore desptach from the Joda and Koira circles at 75 million tonnes for 2015-16 on the back of improved infrastructure in mining circles. Iron ore despatch for Joda circle is capped at 44.35 million tonnes, while the limit for the Koira circle during 2015-16 is 30.65 million tonnes. A notification in this regard would be brought out soon

    The decision to cap the despatch was taken by a committee under the chairmanship of chief secretary after several rounds of meetings.

    Joda and Koira are two of the most prolific ore producing sectors spread across the mineral-rich Keonjhar and Sundargarh districts in the state.

    As of now, only 46 out of 143 iron ore mines are operational in the state. Of the 46 operational mines, eight are captive mines while the rest 38 are merchant mines. The merchant mines have a combined production capacity of 106.07 million tonnes a year.

    Iron ore production in Odisha crashed to 47.35 million tonnes in 2014-15 compared to 77.91 million tonnes in 2013-14 as several key mines remained under shutdown due to the Supreme Court's order.
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    India in talks to buy coking coal mines in South Africa

    India is talking to South Africa to buy coal mines there to feed its expanding steel industry, Coal Secretary Anil Swarup said, adding that New Delhi also hopes to stop imports of coal used to generate power in three years as domestic output jumps.

    After years of poor production crippling power supply, state-run Coal India is boosting output at a record pace to meet Prime Minister Narendra Modi's goal of connecting to the grid millions of Indians who still make do with kerosene lamps.

    But India, which wants to triple its steel capacity to 300 million tonnes by 2025, does not have enough reserves of coking or steelmaking coal, prompting Coal India to look at assets abroad, Swarup told the Reuters Global Commodities Summit on Monday.

    "They are presently in negotiations with people in South Africa," Swarup said. "We imported around 80-90 million tonnes of coking coal last (fiscal) year and if that is the amount that can come through a mine owned by Coal India, it would consider it."

    Swarup declined to give any investment figure but said money was not an issue for Coal India, which had cash and bank balance of more than $8 billion for the year ended March 31.

    Overall coal imports into India, the world's third-largest buyer, fell for the third straight month in September in a country used to seeing shiploads coming in as new power plants started. Coal India's output grew 32 million tonnes to 494.2 million tonnes in the fiscal year 2014/15, the biggest volume rise in its four-decade history.

    "In three years we should be able to mine (all the power-generating) coal we require," Swarup said. "The quality of coal that is not available will still be imported."

    India is looking to more than double its total coal output to 1.5 billion tonnes by the end of this decade, with 500 million coming from the private sector. Swarup said India is working out details to open up the nationalized sector and allow private companies to mine and sell coal.

    The turnaround in India's coal industry has been a highlight of Modi's tenure in office since May last year, and the prime minister is keen that output grows further.

    "He is extremely engaged," Swarup said. "We are reasonably satisfied, though there is still a long way to go."

    But environmentalists are worried that the world's third-largest polluter was leading a pan-Asian dash to burn more of the dirty fossil fuel amid international efforts to contain global warming.

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    China Sep coke output down 8.8pct on yr

    China produced 36.73 million tonnes of coke in September, decreasing 8.8% from a year ago and down 1.66% from August, showed data from the National Bureau of Statistics (NBS) on October 19.

    That was the eighth straight yearly decline, mainly attributed to low operation rates of coking plants amid weakening demand and sluggish market on the whole.

    Over January-September, total coke output of China reached 338.48 million tonnes, down 4.7% year on year, the NBS data showed.

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    Finland's Outokumpu sells stake in Chinese mill to cut debt

    Europe's largest stainless steel company Outokumpu is selling a 55 percent stake in Shanghai Krupp Stainless (SKS), Chinese joint venture mill, for 370 million euros ($420.5 million) to reduce debt, it would sell all but 5 percent of its 60 percent stake in the venture with Baosteel Group, which owns the remaining 40 percent.

    The loss-making Finnish company last month trimmed its result forecast, citing nickel prices and weak deliveries in Europe and the United States, raising investor concern over its debt levels.

    "This is definitely good news for Outokumpu. The share in SKS ... was not part of Outokumpu's core operations. On top, the company got a really good price for it," said Antti Viljakainen, equity research analyst at Inderes.

    "The sale reduces Outokumpu's risk profile, which has risen due to its weak profit development this year."

    Outokumpu said it would sell the 55 percent stake to Lujiazui International Trust Co, which would reduce Outokumpu's gearing by about 30 percentage points from 96.4 percent at the end of July.

    Outokumpu is struggling to turn around its business after the unsuccessful acquisition of Thyssenkrupp's Inoxum unit in 2012. The company has suffered technical problems at its plant in the United States and the business in the region has also been hit by increasing imports from Asia.

    "While the sale of SKS has given Outokumpu time to push through its strategic change, in the long term it does not solve the company's main problems, which are in the United States," Viljakainen added.
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    China crude steel output falls in Sept y/y as demand slows

    China's crude steel output fell 3 percent in September from a year ago to 66.12 million tonnes, government data showed on Monday, as persistent weakness in demand in the world's top producer forced steekmakers to curb output.

    Output in the first nine months of 2015 was down 2.1 percent at 608.94 million tonnes, compared with the same period of last year, data from the National Bureau of Statistics showed.

    With steel prices at their lowest in nearly three decades, steel mills, including big state-owned firms, are expected to cut output further in the fourth quarter.

    "China's steel output has already fallen a lot this year, while we expect more output cuts ahead and some will not be able to survive from cash shortage and heavy losses," said Qiu Yuecheng, analyst at the steel trading platform Xiben New Line E-Commerce in Shanghai.

    China's economic growth eased to 6.9 percent in the third quarter from a year earlier, beating expectations but still the slowest since the global financial crisis, putting pressure on policymakers to roll out more support measures.

    The average daily steel output was 2.204 million tonnes in September, up 2.3 percent from August, according to Reuters' calculation based on the data, driven by a modest seasonal pick-up in demand.

    China's apparent consumption of crude steel peaked last year and dropped 5.5 percent to 477 million tonnes for the first eight months, outpacing a 3.5 percent fall in output, the China Iron & Steel Association said in a report on Oct.10.

    Meanwhile, steel mills have boosted sales abroad to offset shrinking orders in the domestic market, with September shipment hitting an-all time high of 11.25 million tonnes.

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    Sinosteel extends bond redemption date amid liquidity concerns

    China's state-owned Sinosteel said it had extended the date investors can start redeeming its bonds for a month until Nov. 16 amid reports the debt-laden steel giant had asked investors to hold off seeking repayment due to liquidity problems.

    The extension would allow investors in the debt issued by subsidiary Sinosteel Corp Ltd to have more time to review the matter, the company said in a statement posted on the website of one of the country's main bond clearing houses late Friday.

    In a separate letter seen by Reuters, Sinosteel had asked bondholders of its 2 billion yuan ($315 million) October 2017 bonds not to exercise a put option on Oct 20, the earliest available date, because the company would not be able to make full payment. Some of the company's operations had been halted and it was facing a severe liquidity shortage, the letter said.

    Local and international media reported the contents of the letter, but its authenticity could not be confirmed and Sinosteel did not answer calls requesting comment.

    In the statement posted on the website, Sinosteel offered shares of its Shenzhen-listed subsidiary Sinosteel Engineering & Technology Co Ltd as additional collateral for the debt, as an inducement for bondholders to stay invested.

    Sinosteel had a debt of over 100 billion yuan with debt-to-asset ratio up to 98 percent between 2011 and 2013, according to a report dated in June 2014 issued by China Cheng Xin International Credit Rating (CCXI), a domestic rating agency.

    China's steel sector has been grappling with a slowing economy, oversupply and a hefty debt burden, a legacy of over-investment during the country's infrastructure boom in the wake of the global financial crisis.

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    China unveils rankings of top coal production bases in 2014

    China National Coal Association (CNCA) released the list of top 8 coal producing provinces based on their actual output in 2014.

    There were eight provinces with 2014 coal output above 100 million tonnes, with Inner Mongolia at 984.25 million tonnes, Shanxi at 976.7 million tonnes, and Shaanxi at 515 million tonnes, said the CNCA on October 13.

    Coal output of top 8 Chinese producing provinces in 2014
    Output (Mt)
    Inner Mongolia
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    Green worries keep foreign banks away from $3.3 bln Coal India sale

    India's plan to raise as much as $3.3 billion from selling a 10 percent stake in Coal India Ltd could be thrown off course by global investment banks under pressure from environmental groups to steer clear of the share sale.

    Several senior executives at foreign investment banks in Mumbai said 'green' concerns had clouded Coal India since its listing five years ago, and few were keen to take on a deal that could tarnish their public image.

    The pressure in a country where economic growth frequently trumps environmental concerns comes at a convenient time for banks. Many operating in India are under pressure to be more selective when it comes to roles that are heavy on staff but light on returns. The government pays a fee of just 1 rupee ($0.015).

    Banks' reluctance, say people directly involved in the sale, prompted the government this week to extend the deadline for bids from banks for a third time, and could make it tougher for New Delhi to narrow the fiscal gap.

    The Department of Disinvestment, which oversees stake sales in state firms, has not given a reason for the extensions.

    "This time, the pressure from groups like Greenpeace is very intense, and no one is in a mood to take chances on a deal where you're not going to make money anyway," said one senior investment banker at a foreign bank.

    A second banker at a large European bank said he would struggle to get permission from his bosses. "The pressure is building up," he said.

    An official at the finance ministry, which oversees the disinvestment department, brushed aside concerns the share issue could be derailed, arguing environmental concerns had always been an issue for Coal India.

    But an individual close to Coal India confirmed bankers and investors were under pressure from environmental campaign groups, and a third investment banker said the government was expected to call a meeting to discuss concerns over the sale.
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