Mark Latham Commodity Equity Intelligence Service

Monday 7th March 2016
Background Stories on www.commodityintelligence.com

News and Views:

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    Macro

    Brazil Labour Minister calls detention of ex-president Lula "violence"


    Brazil's Labor Minister Miguel Rossetto said on Friday the detention of former President Luiz Inácio Lula da Silva for questioning in an anti-corruption probe was not "justice" and described it instead as "violence."

    "The act is a clear attack on what Lula represents, as a political and social leader," the minister said in an emailed statement.

    http://www.reuters.com/article/brazil-corruption-lula-rossetto-idUSE6N13Z02L
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    Slashing overcapacity indispensable for China recovery


    The central government has put de-capacity as this year's top priority for the first time in years, followed by destocking, deleveraging, lowering costs and improving weak growth areas. It shows its urgency and complexity.

    China's economy has entered a new normal. Given the mounting downward pressure, cutting excessive capacity is crucial for three reasons.

    First, as demand in some sectors is close to or has already reached a peak level, industrial development can only be achieved through cutting overcapacity. China is in its late stage of industrialization, after its tertiary sector surpassed secondary sector in 2012. Such transition is often accompanied by a shift of leading industries from garment manufacturing, mining and building materials to high-tech and services.

    For instance, as demand for heavy chemicals already peaked, overcapacity is in absolute sense instead of cyclical, therefore it can no longer be dissolved through demand expansion or the next economic cycle. According to industry sources, domestic consumption in crude steel peaked at 764 million tons in 2013 and fell 3.4 and 5.5 percent in 2014 and 2015 respectively. Such downward trend is expected to continue this year. In a longer term, as China's railway construction nears completion and the growth in real estate and auto industries slows, a drastic recovery in the steel demand will be less likely.

    Second, overcapacity is the major reason behind China's economic slowdown. Excessive capacity is to blame for the slump in industrial products, corporate earnings as well as fiscal revenue, while increasing the risk. Sectors suffering severe loss are those plagued by overcapacities. According to statistics by the industry, 90 major mining groups reported 91 percent decline in their profit and the loss among registered steel companies totaled 64.53 billion yuan. Profit margin in mining sector was merely 1.76 percent, way below the industrial average 5.76 percent.

    Third, only through cutting capacity, can the economy return into a better shape. Excessive capacity can lead to vicious competition, let alone the structural transformation and innovation. What's more, such unhealthy situation can have a ripple effect on the supply chain, causing financial and credibility risk. Therefore, if there is no real progress in cutting capacity, the whole economy will fall into deflation, low efficiency and low growth. It is therefore crucial to get the corporate profitability and development back to normal and ward off financial risks.

    Addressing the overcapacity issue may cause some pain in the short term such as putting local economy and job market under pressure, however we should have no illusion. Sooner beats later. We have to choose between strangling the whole industry and allowing the bankruptcy of a few.

    Cutting capacity should be government-led and market-driven

    The State Council recently put forward a general layout for de-capacity, stating that such task should combine the market mechanism with government's support.

    Market should play a crucial role in cutting excessive capacity. According to market mechanism, price would fall in sectors faced with overcapacity, and some companies would suffer a loss and finally go bankrupt and the demand and supply would reach a balance. Such case has already been seen in sectors such as consumption, garment and photovoltaic.

    However, government should also strive to maintain a healthy and fair business environment. The reason behind the current overcapacity issue is unfair competition. For instance, due to the weak enforcement of regulation, some firms known for causing high energy consumption and pollution didn't pay for the environmental cost. In these situations, bad money could drive out the good ones.

    Therefore, the government should enhance enforcement of laws and regulations, and punish unsafe production or other wrongdoings. For sectors plagued by severe overcapacity such as steel and coal, it should also take necessary steps to alleviate the issue.

    First, the government should launch clear guidance on withdrawal. Companies should hold accountable to their own investment decisions. Specific supporting guidance can help ease the exit process and ensure social stability. Such consideration is already underway.

    Second, multiple measures can be used to address re-employment issue. Amid capacity slash, how to allocate laid-off workers is the key. The government should enhance training service and basic social security coverage, and encourage employment across the region.

    Third, the government should adopt fiscal and financial measures to address zombie companies that consume a large amount of capital and land resources but actually are no longer sustainable on their own. They should be cut off from any fiscal or financial support and roll out liquidation plan.

    Fourth, the government should push ahead industrial transformation and updates, along with de-capacity. The "Made in China 2025" and the Internet Plus drive will help companies move up the industrial chain and improve their competitiveness

    http://en.chinamining.com.cn/News/2016-03-04/1457061696d75519.html
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    China's premier says economy faces greater difficulties in 2016: state radio


    China's economy is facing greater difficulties and challenges in 2016 as the government forges ahead with structural reforms, state radio on Friday quoted Premier Li Keqiang as saying.

    The government will keep economic growth within a "reasonable range" this year, Li said.

    China's top economic planner has said the government would target economic growth of 6.5 percent to 7 percent this year, confirming a Reuters report, and sources said the money supply and inflation forecasts were in line with that target.

    http://www.reuters.com/article/us-china-economy-growth-idUSKCN0W6132
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    China to launch mixed ownership pilot programmes in oil, gas, rail sectors


    China plans to launch several mixed ownership pilot programmes in the oil, natural gas and rail sectors as it deepens reforms of state-owned enterprises, the country's top economic planner said on Sunday.

    As China restructures its state-owned companies, it will also moderately increase investment in infrastructure and public services, Xu Shaoshi, head of the National Development and Reform Commission (NDRC), told reporters at a briefing in Beijing.

    In September last year, China issued guidance on reforming state-owned enterprises, including the introduction of so-called mixed ownership of state firms, as part of the most far-reaching reforms of its sprawling and inefficient state sector in two decades.

    China has about 150,000 state-owned enterprises, managing more than 100 trillion yuan ($15.37 trillion) in assets and employing over 30 million people, according to the official Xinhua news agency.

    http://www.reuters.com/article/china-parliament-soe-reform-idUSB9N15B00F

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    China to cap energy consumption in 2016-2020 period


    China will put a cap on annual energy consumption between 2016 and 2020 to promote energy saving, a draft outline of the country's five-year development plan said on Saturday.

    China's energy consumption will stay below 5 billion tonnes of standard coal, according to the draft outline of the 13th Five-Year Plan on national economy and social development, which is presented to the National People's Congress annual session for review.

    The country consumed 4.3 billion tonnes of standard coal of energy last year, official data showed.

    China will push forward an energy consumption revolution in industries, construction, transportation and public institutions in the five-year period, and actively promote energy-saving technologies, the draft said.

    Given a continued economic downturn, the country is seeking to make its economy grow in a cleaner and more efficient manner.

    China aims to lower its energy consumption per unit of GDP by 15 percent by 2020, the draft said.

    The country is also promoting the use of clean energy, including wind, solar and nuclear power, to restructure energy consumption currently dominated by coal.

    http://en.chinamining.com.cn/News/2016-03-07/1457311440d75524.html
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    German Banks Told To Start Hoarding Cash


    German newspaper Der Spiegel reported yesterday that theBavarian Banking Association has recommended that its member banks start stockpiling PHYSICAL CASH.

    Europe, of course, has been battling with negative interest rates for quite some time.

    What this means is that commercial banks are being charged interest for holding wholesale deposits at the European Central Bank.

    In order to generate artificial economic growth, the ECB wants banks to make as many loans as possible, no matter how stupid or idiotic.

    They believe that economic growth is simply a function of loans. The more money that’s loaned out, the more the economy will grow.

    This is the sort of theory that works really well in an economic textbook. But it doesn’t work so well in a history textbook.

    Cheap money encourages risky behavior. It gives banks an incentive to give ‘no money down’ loans to homeless people with no employment history.

    It creates bubbles (like the housing bubble from 10 years ago), and ultimately, financial panics (like the banking crisis from 8 years ago).

    Banks are supposed to be conservative, responsible managers of other people’s money.

    When central bank policies penalize that practice, bad things tend to happen.

    Traditionally when a commercial bank in Europe wants to play it safe with its customers’ funds, they would hold excess reserves on deposit with the European Central Bank.

    In the past, they might even have been paid interest on those excess reserves as an extra incentive to be conservative.

    Now it’s the exact opposite. If a bank holds excess reserves on deposit at the ECB to ensure that they have a greater margin of safety, they must now pay 0.3% to the ECB.

    That’s what it means to have negative interest rates. And for the bank, this eats into their profits, especially when they have tens of billions in excess reserves.

    Talk about being between a rock and a hard place.

    On one hand, banks stand to lose a ton of money in negative interest. On the other hand, they put their customers’ deposits at risk if they don’t hold extra reserves.

    Well, the Bavarian Banking Association has had enough of this financial dictatorship.

    http://www.zerohedge.com/news/2016-03-04/revolution-begins-german-banks-told-start-hoarding-cash
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    Oil and Gas

    Oil jumps as traders close short positions, U.S. producers cut rig count


    Oil prices jumped on Monday, extending a rally that has lifted crude benchmarks by more than a third from this year's lows, as tightening supply and an improving global outlook strengthened the sentiment for a market recovery.

    Front-month Brent LCOc1 crude futures were trading at $39.49 per barrel at 0400 GMT, up 77 cents or 2 percent from their last settlement. That is up more than a third from a low hit in January, when prices fell to levels not seen since 2003.

    U.S. West Texas Intermediate (WTI) futures were trading at $36.63 a barrel, up 71 cents from the last close and 40 percent above lows touched in February.

    "It looks at this stage as if it (oil) has formed a little bit of a bottom and perhaps we're going to see a sustained price in the $30s, maybe trending back up to $40 dollars at some point," said Ben Le Brun, market analyst at OptionsXpress.

    On the supply side, U.S. energy firms cut oil rigs for an 11th week in a row to the lowest level since December 2009, data showed on Friday, as producers slash costs.

    Drillers removed eight oil rigs in the week ended March 4, bringing the total count down to 392, oil services company Baker Hughes Inc (BHI.N) said. [RIG-OL-USA-BHI]

    Beyond a tightening supply outlook, traders said a shift in sentiment was also lifting prices as they shut down short positions and abandoned bets on further falls in prices.

    Trading data shows that the number of managed short positions on WTI contracts - which would benefit from lower prices - have fallen more than a quarter since mid-February, with many new long positions betting on rising prices being opened.

    http://www.reuters.com/article/us-global-oil-idUSKCN0W9045

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    Saudi foreign minister says 'we will maintain our oil market share'


    Saudi Arabia will maintain its oil market share and the idea that it would cut production, while other countries increase it is "not a realistic one," Saudi Foreign Minister Adel al-Jubeir said on Saturday.

    "Our view is market forces determine the price of oil and we will maintain our market share and markets will recover," he told a group of journalists in Paris.

    http://www.reuters.com/article/us-saudi-oil-idUSKCN0W70HA
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    Iran oil and gas condensate exports to reach 2 million bpd by end-March: Shana


    Iran's oil and gas condensate exports would reach 2 million barrels per day by the end of March, director of international affairs at National Iranian Oil Co (NIOC) was quoted as saying by the oil ministry's news agency SHANA on Saturday.

    "The gas condensate sells more slowly than the crude oil, but we expect its sales to become even faster than the crude oil's in the future," Mohsen Ghamsari added.

    http://www.reuters.com/article/us-oil-iran-exports-idUSKCN0W70BD
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    Pipeline outage almost halves north Iraq oil exports in Feb


    Oil exports from northern Iraq fell by almost half to an average of 350,067 barrels per day (bpd) in February as a result of an ongoing outage of the pipeline to Turkey, the Kurdistan region's Ministry of Natural Resources said on Monday.

    The pipeline, which carries crude from fields in the autonomous Kurdistan region and Kirkuk to the Mediterranean port of Ceyhan has been idle since Feb. 17 due to "circumstances" inside Turkey, the ministry said.

    The nearly three-week outage is a major blow to Kurdistan, which depends on revenue from its exports through the pipeline and is struggling to avert an economic collapse induced by low oil prices.

    Turkey's energy ministry said on Feb. 27 it had begun work to repair the pipeline, and an industry source based in the Kurdistan region told Reuters on Sunday the work would be completed "in a day or two".

    The pipeline runs through Turkey's restive southeast, which has seen the worst violence since the 1990s after a two-year ceasefire between the government and Kurdish militants broke down last July.

    Turkey has accused the Kurdistan Workers' Party of blowing up the pipeline, but the militant group denies responsibility.

    In January, 601,811 bpd were exported through the pipeline.

    http://www.reuters.com/article/iraq-kurds-oil-exports-idUSL5N16F117
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    Kuwait refines oil pricing in battle for European customers


    Gulf OPEC member Kuwait has changed the way it prices oil for Europe, trading sources said, in a rare tactical move aimed at making its crude more competitive as the battle for customers between OPEC and non-OPEC rivals intensifies.

    The European market, long dominated by Russian oil supplies, has been neglected by major OPEC producers due to poor growth as they focused on expanding Asian markets.

    But as Russia moved aggressively into Asian markets and with the growing global oil glutheating up the fight for customers, OPEC members such as Saudi Arabia and Iraq ramped up sales to Europe, taking on former Russian customers such as Poland and Sweden.

    Large sales from Iraq's Kurdistan into Europe have added to the competition over the past six months and now Kuwait - a usually little-noticed seller in Europe - is both increasing sales and making its crude more attractive.

    "If we want to have a share in any market, we have to have competitive marketing. That's what we are doing ... we have a legitimate market share that we try to protect and develop," a senior trading source familiar with the development said.

    Trading sources said that from late last year the state-run Kuwait Petroleum Corporation (KPC) began pricing its European exports against the dated Brent benchmark after years of following OPEC's heavyweight Saudi Arabia in pricing its oil against the Brent Weighted Average (BWAVE).

    BWAVE is also used by Iran while Iraq is using dated Brent. Over the past year, because of the way they are calculated, barrels priced off dated Brent have on average been cheaper than those priced against BWAVE.

    "All you have to do is just to look at who the customers like from the point of view of pricing. It is pretty obvious that over the past year, they gravitated towards Iraqi and very cheap Kurdish oil," a second trading source said.

    While changing its pricing policy, KPC also started trading more barrels on a spot basis in Europe, following the sale of its Rotterdam refinery to trading house Gunvor.

    Last month, a senior KPC official said Kuwait planned to boost output this year and sign new export deals with European customers despite "fierce competition".

    The company is now estimated to be selling around 500,000 barrels per day in Europe on a term and spot basis, trading sources say, covering some 5 percent of the continent's demand.

    The move comes as Iran, OPEC's third-largest oil producer, is also preparing to sell more crude to Europe after the lifting of international sanctions in January.

    Iran said this week it could consider a pricing improvement for its crude sales to Europe by selling some spot cargoes at the dated Brent benchmark, though it was sticking with BWAVE for its term contracts.

    http://www.reuters.com/article/us-kuwait-oil-marketing-idUSKCN0W60JA
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    Bumi Armada To Take Legal Action Against Woodside For Termination Of Contract


    Bumi Armada Bhd intends to fully enforce its rights, including initiating legal proceedings against Woodside Energy Julimar Pty Ltd for purportedly terminating its contract.

    Bumi Armada said its wholly-owned unit, Armada Balnaves Pte Ltd received a notice of termination from Woodside over the charter of the Armada Claire Floating Production Storage and Offloading (FPSO) unit, which has been operating in the Balnaves Field, off north-western Australia since delivering first oil in August 2014.

    In a filing to Bursa Malaysia, Bumi Armada claimed that the purported notice of termination was not valid, and instead it was tantamount to a cancellation for convenience or alternatively, was a repudiation of the contract by Woodside, pursuant to which the company was entitled to a compensation.

    The offshore oilfield services provider said the purported termination of the FPSO charter contract is expected to have an impact on its 2016 financial results.

    "(However), the extent of which cannot be conclusively ascertained at this juncture as it will depend on the outcome of the company's legal action against Woodside," it said.

    http://www.bernama.com/bernama/v8/bu/newsbusiness.php?id=1222093
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    Ecopetrol Reports Loss of $2 Billion on Lower Crude Prices


    Ecopetrol SA, Colombia’s state-controlled oil producer, reported a wider fourth-quarter loss amid low crude prices and accounting impairments.

    The net loss attributable to shareholders widened to 6.3 trillion pesos ($2 billion), from a loss of 2.49 trillion pesos a year earlier, Bogota-based Ecopetrol said Sunday in a statement. That missed the 325.5 billion-peso net income average of five analysts’ estimates compiled by Bloomberg. Consolidated net income was a loss of 6 trillion pesos. The company said no dividend will be paid.

    “2015 was one of the most challenging years for the oil industry,” Chief Executive Officer Juan Carlos Echeverry said in the statement. "Ecopetrol, like many other companies in the sector, executed profound adjustments in its operations to be more efficient and overcome the low crude prices."

    Results were affected by impairments associated with U.S. accounting regulations, Echeverry added in the statement. The company has reduced its investment plan for 2016 by 26 percent, reflecting "discipline of capital and focus in higher value investments."

    Average output in the quarter was 761,300 barrels of oil equivalent per day, a 0.5 percent drop from a year earlier.

    http://www.bloomberg.com/news/articles/2016-03-06/ecopetrol-reports-loss-that-misses-estimates-on-low-crude-prices

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    Alternative Energy

    Hanergy appoints CICC to find strategic investor-sources


    Scandal-hit Hanergy Thin Film (HTF) has appointed China International Capital Corp (CICC) to find a strategic investor, a move it hopes will shore up its finances and help its shares resume trading, two sources with knowledge of the matter said.

    HTF is under investigation by the Securities and Futures Commission (SFC) after its shares crashed suddenly in May, a case that has raised concerns about possible widespread market manipulation in Hong Kong, denting the appeal of the Asian city as a major financial centre.

    In a bid to revive its fortunes, the Chinese solar technology company has been seeking a strategic investor for the past six months, but it has now decided to enlist one of China's oldest investment banks to help it as its uncertain financial future is scaring off investors, one of the sources said.

    "Despite (HTF Chairman) Li Hejun's strong connections, no one would want to put money into this hole now; you don't know when it'll ever start trading again," the source said.

    Both sources declined to be named because the matter remains confidential. HTF and CICC did not respond to repeated attempts by Reuters for comment.

    Hanergy shares staged a spectacular five-fold rally over nine months before suddenly crashing 47 percent in a few frantic minutes of trading on May 20. It was the last day they traded.

    Sources familiar with the SFC probe have told Reuters that the investigation centres on possible market manipulation. The SFC has confirmed it was investigating Hanergy, but has declined to give any details.

    Li, whose share gains on HTF made him one of China's richest men, sold in December a six percent stake in the company at a steep 95 percent discount to HTF's last traded share price, regulatory filings show.

    Several equities analysts who used to cover HTF have long dropped their coverage. "I doubt it will ever trade again," one analyst, who declined to be named because of the sensitivity of the Hanergy case, told Reuters.

    HTF offered in July to severe its links with mainland parent Hanergy Holding, its main source of revenues, and its affiliates in an attempt to address a SFC request for more corporate accounts disclosure.

    But it decided last week to ditch this plan as it needed more revenues.

    "The SFC considered that the restructuring proposal was not able to/failed to adequately address its concerns and accordingly, the company did not implement the restructuring proposal," HTF said in the statement last week, where it also predicted a significant loss for the year.

    http://www.reuters.com/article/hanergy-tfp-investor-idUSL3N16C2W3
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    German wind boom triggers subsidy cut as govt mulls tighter caps


    Germany's booming onshore wind installations have triggered a further automatic subsidy cut as the government mulls tighter caps in its next reform of the renewable energy bill (EEG) currently under consultation with a planned move to a tender process for most renewable subsidies from 2017 onwards.

    Onshore wind installations over the 12-month-reference period (Feb 2015 to Jan 2016) totaled 3,564 MW, which will automatically trigger a further cut in subsidies by 1.2% from July, the federal grid regulator BNetzA said this week.

    This will be the third quarter in a row that subsidies will be cut automatically as installations remain well above the annual ceiling of 2,600 MW, it said.

    Germany's 2014 reform of the EEG law introduced an annual target corridor of 2.4 GW to 2.6 GW of net onshore wind additions with installations above or below triggering automatic adjustments to the feed-in-tariffs with the grid regulator monitoring additions on a quarterly basis.

    But while deep subsidy cuts and monthly monitoring for solar managed to slow down the speed of solar additions to their lowest level since 2007, wind has boomed since the 2014 reforms with Germany adding a record 11 GW of new wind capacity over the past two years.

    Some 3 GW of this were delayed offshore wind projects finally coming online as grid link bottlenecks eased, but onshore wind alone added over 8 GW, overshooting the annual cap by over 3 GW for 2014/15.

    The government plans to move financial support for 80% of all new renewable power output from the current feed-in-tariff system to annual tenders from 2017.

    According to a framework paper by the economy and energy ministry for the EEG 2016 reform, the move to tenders will reduce the overall cost of Germany's drive to a renewable energy future from a current 33% share for renewables to up to 45% by 2025.

    According to the ministry, the tendering process will also make the expansion more planable by better sticking to annual target ranges after Germany's solar boom (2010 to 2012) and current wind boom (2013 to 2015) doubled its wind and solar portfolio to 85 GW within just over five years, fundamentally changing Germany's power landscape.

    Even on such a trajectory, Germany is set to reach the 100 GW wind and solar milestone by 2018, adding to the existing oversupply and pushing power prices to historic lows with supply cuts from the politically-determined nuclear phase-out and lignite closures only starting to have a real impact in the early 2020s.

    http://www.platts.com/latest-news/electric-power/london/german-wind-boom-triggers-subsidy-cut-as-govt-26388562
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    Agriculture

    Monsanto threatens to exit India over GM royalty row


    Monsanto Co, the world's biggest seed company, threatened to pull out of India on Friday if the government imposed a big cut in royalties that local firms pay for its genetically modified cotton seeds.

    Mahyco Monsanto Biotech (India)(MMB), a joint venture with India's Mahyco, licenses a gene that produces its own pesticide to a number of local seed companies in lieu of royalties and an upfront payment. MMB also markets the seeds directly, though the local licensees together command 90 percent of the market.

    Acting on complaints of local seeds companies that MMB was charging high fees, the farm ministry last year formed a committee to look into the matter.

    The committee has now recommended about a 70 percent cut in royalty, or trait fee, that the seed companies pay to MMB, government sources said. The farm ministry is yet to take a decision on the committee's recommendation.

    "If the committee recommends imposing a sharp, mandatory cut in the trait fees paid on Bt-cotton seeds, MMB will have no choice but to re-evaluate every aspect of our position in India," Shilpa Divekar Nirula, Monsanto's chief executive for the India region, said in a statement.

    "It is difficult for MMB to justify bringing new technologies into India in an environment where such arbitrary and innovation stifling government interventions make it impossible to recoup research and development investments," she said.

    Shares of Monsanto India dropped as much as 7 pct to a near 2-year low before ending down 2.4 pct.

    MMB does not publish revenue figures or say how much it contributes to Monsanto's overall revenue.

    Separately, MMB has filed a case in a Delhi court, challenging the authority of the committee to determine the trade fee agreed upon by MMB and a number of Indian seed companies

    In a partnership with Mahyco, U.S.-based Monsanto launched a GM cotton variety in India in 2002 despite opposition from critics who questioned its safety, helping transform the country into the world's top producer and second-largest exporter of the fibre.

    In a ruling last month, the Competition Commission of India, the antitrust regulator, said there were indications that MMB had abused its dominant position in the country and asked its director general to complete an investigation within two months.

    The government-appointed committee has also recommended cutting Bt cotton seed prices to about 800 rupees for a packet of 400 grams. Currently Bt cotton seeds are being sold between 830 and 1100 rupees in different parts of the country.

    http://www.reuters.com/article/india-monsanto-idUSL3N16C3PM
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    Canada Pension Plan, Saudi firm leading Glencore unit bids


    Canada Pension Plan Investment Board and state-owned Saudi Agricultural and Livestock Investment Co are among the lead bidders for a minority stake in the agriculture unit of Glencore Plc,.

    The firms are presenting final bids for the unit this month and Glencore is open to selling stakes to more than one party, Bloomberg reported, citing people with knowledge of the matter. 

    Glencore aims to slash net debt to $17-$18 billion by the end of 2016, $1 billion more than previously planned, by offloading more assets amid a prolonged commodities rout.

    Glencore declined to comment. Canada Pension Plan Investment Board and Saudi Agricultural and Livestock Investment Co were not immediately available for comment.

    http://www.reuters.com/article/glencore-divestiture-idUSL3N16C45U
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    Steel, Iron Ore and Coal

    South Korea expects record coal demand in 2016


    An increase in the number of coal-fired power plants starting operations this year will likely drive record coal demand in South Korea, despite the country's pledge to curb greenhouse gas emissions at last year's Paris climate summit.

    The Korea Energy Economics Institute (KEEI), a government-run think tank, forecasts South Korean coal demand will rise 6.3 percent to more than 140 million tonnes in 2016, as 9 new plants with a combined capacity of 7.7 gigawatts come online.

    Coal accounted for nearly 40 percent of South Korea's electricity supply last year, according to data from Korea Power Exchange.

    "It takes about 4 to 5 years to build new power plants and start operations. We just can't cancel the operation of new plants that are already built and ready," said an energy ministry official.

    South Korea has scrapped plans to build four coal-fired power plants and aims to boost its nuclear reactor fleet by two more units in 2028 and 2029 as it looks to increase the share of nuclear and gas for power generation and cut reliance on coal.

    Although Asia's fourth-largest economy still plans to build 19 new coal-fired power plants by 2022.

    Seoul imported nearly 10 million tonnes of coal in January, up 5 percent from a year earlier, customs data shows. Of that, imports of steaming coal used for power generation rose nearly 6 percent year-on-year, reaching 7.7 million tonnes. Imports are mainly from Australia, Indonesia and Russia.

    Hailed as the first truly global climate deal, an agreement reached last December in Paris committed both rich and poor nations to reining in rising emissions blamed for warming the planet.

    http://www.reuters.com/article/southkorea-coal-demand-idUSL3N16B2JG

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    Record high coal stocks at Indian power plants show no sign of depleting: CEA


    Combined stocks of thermal coal at 101 Indian power plants rose to a new record high of 36.33 million mt Wednesday, up 4.9% from a month ago and 74.5% higher than at the same time last year, according to data released Friday by India's Central Electricity Authority.

    Stock levels have been climbing to new record highs almost continuously since the end of December.

    The data showed the Indian power plants had enough supply for 26 days of coal burn, up from 24 a month ago and 15 a year ago.

    No plants have had less than a week's supply or less than four days worth of consumption since January 13, which compared to 17 with less than a week's worth of stock a year ago and 4 with less than four days worth of consumption on March 2, 2015.

    The volume of imported coal in the stocks remained above the 2 million mt mark, up 28% from a month ago but down 2.6% from the same time last year.

    Low dry bulk freight rates have helped different origins of coal, such as Russian and Colombian material, become competitive into India, providing buyers with more choice in imported supply.

    http://www.platts.com/latest-news/coal/london/record-high-stocks-at-indian-power-plants-show-26388564

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    China's steel prices rise over 15 per cent after Beijing vows more easing measures to boost growth

    China's steel prices rise over 15 per cent after Beijing vows more easing measures to boost growth

    Steel prices in China have risen sharply over the past few days, offering signs of economic recovery and positive investor sentiment after Beijing made it clear that more easing measures are on the way to help boost growth.

    Prices of steel billet - a raw steel product that can be processed into bars, wires and sheets ¨C in Hebei province¡¯s Tangshan rose more than 15 per cent over the last three days.

    Tangshan is China's steel production capital.

    The jump prompted steel merchants and plants across the country, from Shanghai to Shenzhen, to raise their prices.

    The price rebound came in tandem with a clear policy message from Beijing that the government would boost fiscal spending and monetary easing to help growth.

    China has targeted at least 6.5 per cent annual growth for the next five years - an ambitious goal that will require strong fixed-asset investment at home as the export engine rapidly loses steam.

    The factory-gate steel billet price in Tangshan was 2,060 yuan (HK$2,450) per tonne on Monday ¨C a hefty increase from the 1,780 yuan per tonne last Friday - according to information on Mysteel.com, the Internet portal for China¡¯s steel industry.

    While the present billet price, which is often used as a benchmark for other steel products, is still less than what it was four years ago, it was about one-third higher from last month.

    "Every day, the price is higher than yesterday," said Zhang Mingkun, a sales manager at Xinyong Trade, a steel product merchant, in Tangshan.

    "Market sentiment is completely different from a few months earlier, and everyone is now expecting the prices to go up further."

    http://en.chinamining.com.cn/News/2016-03-07/1457336638d75542.html

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    China key steel mills daily output down 0.36pct in mid-Feb


    Key steel mills in China saw their average daily crude steel output post a 0.36% ten-day drop to 1.56 million tonnes in mid-February, according to the latest data released by the China Iron and Steel Association (CISA).

    Since February, this figure has been hovering around 1.56 million tonnes, higher than 1.51 million tonnes in late-January, but down 3.70% from the same period the year prior.

    China’s daily crude steel output in mid-February was estimated at 2.06 million tonnes, edging down 0.12% from early-February.

    Steel products daily output in key steel mills averaged 1.47 million tonnes, rising 5.50% month on month, with that of pig iron and coke standing at 1.54 million and 0.32 million tonnes, rising 0.25% on month and up 0.25% from ten days ago, respectively.

    By February 20, stocks in key steel mills stood at 14.62 million tonnes, jumping 4.72% from February 10.

    In the same period, the average price of crude steel in key steel mills was 1,765 yuan/t ($270.6/t), down 5% from early-February; and that of steel products edged down 0.14% to 2,418 yuan/t from early-February.

    Domestic prices of the six major steel products all increased in late-February, with rebar price averaging 1,984.5 yuan/t, up 2.6% from mid-February, showed data from the National Bureau of Statistics (NBS).

    The rise in steel prices, which mainly caused by China’s loose credit policy combined with lower-than-expected stock levels, may continue to rebound in March as entering the traditional busy season.

    In late-February, Shagang Group – China’s largest private steel maker, raised steel prices by 30-50 yuan/t, and will increase 30 yuan/t more in early-March; the future price of carbon sheet from state-run Baosteel climbed 100-260 yuan/t over February-March from January.

    Presently, steel makers are having a good control of steel output and cautious about resuming production. Steel industry may shake off deficits and begin to make profits in March, analyst said.

    http://en.sxcoal.com/0/141976/DataShow.html

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    Serbia invites bids for loss-making steel plant


    Serbia has invited bids for its loss-making Zelezara Smederevo steel mill, marking the latest stage in attempts to find a solution to the plant which has been swallowing $120 million a year in subsidies since it was nationalised in 2012.

    In an advertisement in Belgrade's Politika daily, the economy ministry set the starting price for the plant at 45.69 million euros ($50 million) and March 30 as the deadline for binding bids. Offers will be made public on April 1.

    The sale is a part of Serbia's efforts to offload unprofitable state firms as part of its 1.2 billion euro loan deal with the International Monetary Fund. Assets to be sold or made bankrupt include the RTB Bor copper mine, the Galenika drug company and the Resavica coal mine.

    Serbian Prime Minister Aleksandar Vucic had said last November China's Hebei Iron & Steel Group was considering a strategic partnership with the plant, Serbia's only steel mill, and an investment of at least 300 million euros.

    The advert did not say if the Chinese company was still potentially involved and no-one at the ministry could immediately be reached for comment.

    Serbia bought the plant from U.S. Steel in 2012 for $1 to avert its closure and save more than 5,000 jobs. A sale to U.S. steel firm Esmark collapsed last year and Serbia appointed Netherlands-registered HPK Engineering to run it and make it profitable until its privatisation.

    Last October the plant restarted its second furnace, shut down since 2011, to boost output and improve prospects for a sale.

    http://www.reuters.com/article/serbia-steel-idUSL8N16C14Z
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    U.S. Commerce Department launches trade probe into stainless steel from China


    The U.S. Commerce Department said on Friday it had launched an anti-dumping and countervailing duty investigation into imports of stainless steel sheet and strip from China.

    The probe was in response to a petition from AK Steel Corp , Allegheny Ludlum (IPO-ALGL.N), North American Stainless, and Outokumpu Stainless USA, it said.

    It added that the U.S. International Trade Commission was scheduled to make its preliminary determination of injury to U.S. producers on or before March 28.

    http://www.reuters.com/article/usa-china-steel-idUSL2N16C1KQ
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