Mark Latham Commodity Equity Intelligence Service

Friday 19th June 2015
Background Stories on www.commodityintelligence.com

News and Views:

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    Macro

    Excerpts from Pope Francis encyclical on the environment

    Pope Francis on Thursday issued a major encyclical on the environment, called "Laudato Si (Praise Be), On the Care of Our Common Home". Here are some key excerpts from the official English version:

    http://www.reuters.com/article/2015/06/18/pope-environment-excerpts-idUSL5N0Z427X20150618

    Original document:
    file:///C:/Users/Mark/Downloads/papa-francesco_20150524_enciclica-laudato-si_en.pdf



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    China local railway bureaus allowed to lower freight rates up to 15%

    China’s local railway bureaus have been given the right to lower cargo freight rates by up to 15%, while more discounts would still need approval of the China Railway Corporation (CRC), a move aimed at boosting transport volume and facilitate marketization.

    Local railway authorities can decide the running time of rail lines and the number of rail wagons within their management, the CRC said.
     
    The move followed a decision by China Railway to deepen rail cargo reform and foster railways into modern logistics in April.
     
    In recent years, the share of rail cargo transport has been decreasing owing to the changes in energy and economic structure. Transport demand for bulk commodities like coal and steel, etc. has been continuing to decline, due to weak demand.
     
    Should the above policy be actually implemented, it will bode well for relevant companies. However, one railway insider told China coalResource that the discounts will not be applied to coal and oil shipment, without elaborating the reason.

    http://en.sxcoal.com/0/122369/DataShow.html
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    Oil and Gas

    Saudi April Crude Exports Drop as More Supply Used Locally

    Saudi Arabia reduced crude oil exports in April as the world’s biggest producer used record supplies domestically for a burgeoning refining industry.

    Shipments fell to 7.74 million barrels a day from 7.9 million in March, the Riyadh-based Joint Organisations Data Initiative said on its website Thursday. The nation processed 2.22 million barrels a day in domestic refineries in April, the most since at least January 2002 when JODI started collecting statistics from governments.

    Saudi Arabia began operating a 400,000 barrel-a-day refinery at Yanbu on the Red Sea last year. Another plant with the same capacity is scheduled to begin operation in 2017 at Jazan in the country’s southwest. The kingdom’s oil-product exports rose 44 percent last year following the startup of a refinery in the Gulf port of Jubail, according to JODI data.

    “Saudi needs more crude to stay at home,” Kamel al-Harami, an independent oil analyst in Kuwait, said by phone from Kuwait City on Thursday. “The Saudis want to put a cap on exports during summer and they are satisfied with anything around 7.7 million to 7.9 million barrels a day as they want to keep their market share.”

    Saudi Arabia’s output rose to 10.31 million barrels a day in April from 10.29 million in March, according to JODI. The nation was the world’s largest producer for a second month in a row, displacing Russia which had been first in February.

    Brent for August settlement traded at $63.81 a barrel, down 6 cents, on the London-based ICE Futures Europe exchange at 2:58 p.m. local time.

    http://www.bloomberg.com/news/articles/2015-06-18/saudi-april-crude-exports-drop-as-more-supply-used-domestically
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    Russia, Saudi oil ministers to mull cooperation agreement -source

    Russian and Saudi oil ministers plan to discuss a broad cooperation agreement on Thursday at an economic forum in Russia's second city of St Petersburg, two sources told Reuters.

    One source said the agreement to be discussed between Russian Energy Minister Alexander Novak and Saudi Arabia oil minister Ali al-Naimi would not be about joint oil production or export strategy.

    A spokeswoman for Russia's Energy Ministry confirmed the meeting but declined to comment on the agenda.

    Saudi Arabia is the leading oil producer in OPEC and the world's top oil exporter, while Russia, which is not an OPEC member, is the second biggest oil supplier to the global markets.

    http://www.reuters.com/article/2015/06/18/russia-crisis-forum-saudi-idUSR4N0YV01320150618

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    Saudis Said to Discuss Sweetening India Oil Deals With Own Ships

    Saudi Arabia is said to be in talks with Indian oil buyers to ship crude on the Middle East supplier’s own tankers, potentially cutting the cost of cargoes.

    While the world’s biggest crude exporter won’t offer to sell its crude at a discount to its official selling price, it may pass on the benefit of lower shipping costs, four people with knowledge of the matter said, asking not to be identified because the talks are confidential. The use of vessels owned by Saudi Arabia may reduce the cost of its supplies by 25 to 30 cents a barrel, two officials at two Indian refiners said.

    OPEC’s biggest member is seeking to defend market share amid competition from other suppliers and as refiners across Asia look for bargains from Europe to Mexico. Producers are vying for sales as a global glut is exacerbated by the highest U.S. output in more than three decades and as the Organization of Petroleum Exporting Countries pumps at the fastest pace since 2012.

    “Everybody is trying to capture market share,” Ehsan Ul-Haq, an analyst at KBC Energy Economics in London, said by phone. “One of the things the Saudis can do is to provide better freight in order to somehow influence refiners to take more crude from them.”

    Saudi Arabia may sell its supply to India on a delivered basis, meaning shipping costs are included in the price paid by the buyer for the cargo, the people said. The Middle East nation typically sells its crude on a free-on-board basis, where the buyer arranges freight.

    The two sides are still discussing the plan, which would need government approval, said the people. Saudi Aramco, as the state oil company is known, sells its crude to Asia at a monthly differential to the average of the Dubai and Oman grades.

    http://www.bloomberg.com/news/articles/2015-06-18/saudis-said-to-discuss-sweetening-india-oil-deals-with-own-ships
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    Gazprom, Shell agree to expand Sakhalin-2 project

    Russian gas producer Gazprom and Royal Dutch Shell have signed an agreement to expand the Sakhalin-2 LNG project.

    Officials from both companies signed the agreement at an economic forum in Russia's second city of St Petersburg on Thursday.

    The Sakhalin-2 project, Russia's sole LNG plant, has a current annual capacity of around 10 million tonnes. The third line would add another 5 million tonnes of liquefied natural gas a year.

    http://www.reuters.com/article/2015/06/18/russia-crisis-forum-shell-idUSR4N0YV01D20150618
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    Rosneft in gas supply pact with E.ON

    Russia’s Rosneft has signed a new gas supply pact with the country subsidiary of German energy giant E.ON as the state-owned company seeks to boost its gas business in competition with compatriot Gazprom.

    The contract, signed at this week’s International Economic Forum in St Petersburg, entails the supply of 4.4 billion cubic metres of gas over a five-year period to E.ON Russia’s Surgut Power Plant-2 and is a continuaton of an existing supply deal that expires this year.

    Rosneft said in a statement it is the leading gas producer among Russian oil companies, with output of 56.7 billion cubic metres last year and estimated gas reserves of 7.2 trillion cubic metres.

    http://www.upstreamonline.com/live/1403607/rosneft-in-gas-supply-pact?utm_source=twitterfeed&utm_medium=twitter
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    Wintershall to sell package of offshore Norway assets for $602 mln

    UK-based Sequa Petroleum has reached agreement to buy a portfolio of Norwegian offshore field interests for $602 million from Wintershall, the oil and gas subsidiary of BASF, the companies said on Thursday.

    Sequa said the transaction will be conducted by Oslo-based Tellus Petroleum Invest A/S, which it is also buying in a concurrent deal for $4 million plus 6 million shares in Sequa.

    The agreement with Wintershall will give Tellus interests in five fields – 20 percent of Knarr, 15 percent of Maria, 10 percent of Yme, 6.5 percent of Ivar Aasen and 4.5 percent of Veslefrikk.

    Wintershall will remain operator for the Maria development, retaining a 35 percent interest.

    Proven and probable reserves being acquired are estimated to be a net 59 million barrels of oil equivalent, based on data from the Norwegian Petroleum Directorat, the company said.

    https://uk.news.yahoo.com/wintershall-sell-package-offshore-norway-assets-602-mln-090506816--finance.html#dsfWTk9
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    Major investor in Dragon Oil says ENOC offer undervalues company

    Asset management company Baillie Gifford, oil producer Dragon Oil's largest independent investor, said an increased takeover offer from majority owner Emirates National Oil Co (ENOC) "materially undervalued" the company.

    ENOC, which owns 54 percent of Dragon Oil, increased its bid to buy out minority shareholders to 750 pence per share on Tuesday, valuing the stock it does not already own at about 1.7 billion pounds ($2.7 billion).

    Baillie Gifford, Dragon Oil's second-biggest investor after ENOC with a 7.2 percent stake, said the improved offer does not fully value the firm's growth potential.

    Baillie Gifford said on Thursday that it had offered to discuss the possibility of ENOC including a contingent payment note to shareholders as part of the deal.

    The note would pay out if production from Turkmenistan's Cheleken contract area, Dragon Oil's only producing field, hits certain milestones, Baillie Gifford said.

    Dragon Oil said it expects production at Cheleken to plateau at 100,000 barrels of oil per day for the next five years.

    A spokesman for ENOC maintained that the offer was a fair one.

    "The offer price was derived based on extensive feedback from numerous shareholders, and the independent committee of Dragon Oil," the spokesman said.

    The current round of bidding is ENOC's second attempt to buy Dragon Oil after failing to acquire the company in 2009.

    http://www.reuters.com/article/2015/06/18/dragonoil-ma-enoc-idUSL5N0Z435B20150618
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    Survey reveals bleak picture for North Sea oil and gas industry

    Two-thirds of North Sea oil and gas industry operators (67 per cent) have been forced to cancel projects because of the recent fall in oil price, according to an industry report published today.

    The findings, from the 22nd Oil and Gas Survey, conducted by Aberdeen & Grampian Chamber of Commerce in partnership with law firm Bond Dickinson, reveal that half of operators (50 per cent) have been forced to reduce staff training for the same reason.

    The fall in oil price has been a contributory factor to a fall in confidence and activity levels in the sector. Contractors' confidence in the UK Continental Shelf is at its lowest point since the survey began in 2004. Only 7 per cent of contractors are more confident about their UKCS activities than they were a year ago, compared to 76 per cent who are less confident.

    The percentage of firms that report working at or above optimum levels in the UKCS has also fallen to its lowest level since the survey began in 2004. Just one in five contractors (21 per cent) is working at or above optimum levels, down from 47 per cent in the previous survey and just over half (52 per cent) report working at or above optimum levels in overseas markets, down from 72 per cent.

    Exploration has been a big casualty of the challenges facing the oil and gas industry, with 70 per cent of all firms involved in exploration having seen the value of it fall in the past 12 months, and just 8 per cent of them expecting the value of exploration to increase in the coming year.

    One respondent cautioned that although measures in the March 2015 Budget were welcome, further stimulus to exploration and investment is required: 'Allowances on producing fields were welcome, but more was needed to increase exploration drilling, without which there will be no new projects and decommissioning will accelerate, thus removing infrastructure and opportunity for good.'

    http://www.oilvoice.com/n/Survey-reveals-bleak-picture-for-North-Sea-oil-and-gas-industry/ce971282d70b.aspx#.VYKcCW2QaWM.twitter
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    Gazprom to expand Nord Stream gas pipeline with E.ON, Shell, OMV

    Russian gas giant Gazprom has agreed to build a new pipeline to Germany under the Baltic Sea with a trio of Western energy companies, bringing Europe closer into Moscow's energy orbit.

    The Russian gas company is trying to find new ways to deliver gas to Europe bypassing conflict-stricken Ukraine.

    "Since the commissioning of Nord Stream pipeline, Gazprom has been investigating potential extension of this export route. Now we are going to proceed with the implementation of this project together with our partners," Gazprom Chief Executive Alexei Miller said in a statement.

    Gazprom's partners in the Nord Stream pipeline, a major gas supply artery feeding into western Europe, are Anglo-Dutch Shell , Germany's E.ON and Austria's OMV.

    Gazprom would own 51 percent in the project to build stage 3 and 4 of Nord Stream, with capacity of 55 billion cubic metres per year, Gazprom spokesman Sergei Kupriyanov said on the sidelines of the St Petersburg International Economic Forum.

    Gazprom wants to bypass Ukraine, its key gas export route to Europe, and plans to build the Turkish Stream pipeline beneath the Black Sea to ensure smooth transit of Russian gas when the transit contract with Kiev expires in 2019.

    Despite plans to start laying pipes in coming weeks, Moscow and Ankara have no firm agreement on the project yet.

    At the same time Gazprom's soured relationship with the European Commission over Russia's role in the Ukraine crisis means it may have a hard time convincing Europe to approve new pipelines that increase the region's dependence on Russian energy.

    But Nord Stream partner E.ON argues that Europe's demand for Russian gas will grow as domestic production declines. European gas output is set to shrink to 185 billion cubic metres (bcm) by 2030 from 275 bcm in 2010, it said in a statement.

    E.ON, Germany's biggest utility, said expanding Nord Stream was the most efficient and cheapest method of ensuring European energy security, pointing out that diversifying supply routes is was important as finding new suppliers.

    The aim was to complete the first expansion strand in the fourth-quarter of 2019 and the second in the fourth quarter of 2020, E.ON said.

    Nord Stream, which already consists of two lines, has an annual capacity of 55 billion cubic metres.

    Gazprom is currently allowed only limited access to the pipeline under a European Union law which seeks to prevent energy suppliers from dominating infrastructure.

    Kupriyanov told reporters that apart from E.ON, Shell and OMV there could be other shareholders in the expansion project.

    http://www.reuters.com/article/2015/06/18/energy-gazprom-pipeline-idUSL5N0Z42OB20150618
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    Shale Fallout Torments Nigeria as Flagship Oil at Decade-Low

    The shale boom that’s reduced U.S. dependence on overseas crude is reverberating in Nigeria as Africa’s biggest oil producer cuts the pricing for its flagship grade to the lowest in a decade.

    The country, part of the Organization of Petroleum Exporting Countries, will sell July supplies of its Bonny Light crude at 23 cents more than Dated Brent, according to an e-mailed statement from state-run Nigerian National Petroleum Corp. That’s the smallest differential since 2005 and compares with a 50 cent premium in June and $2.55 a year earlier, data compiled by Bloomberg show.

    Surging output from U.S. shale formations contributed to a market glut that drove crude almost 50 percent last year, roiling global markets as producer nations lost revenue and foreign-exchange reserves. While oil has pared losses this year, prices are still below what some producers including Nigeria and other OPEC members need to balance their budgets, data from the International Monetary Fund and ING Bank NV show.

    “Nigeria has no choice but to cut their price differential to fight for market share,” Hong Sung Ki, a commodities analyst at Samsung Futures Inc., said by phone from Seoul. “The U.S. was its key oil buyer in the past but imports have been shrinking with more shale output in an already oversupplied market.”

    The slump in prices last year forced authorities in Nigeria, which relies on oil for about 70 percent of its income, to scale back budgeted spending and devalue the naira currency. The nation’s former finance minister, Ngozi Okonjo-Iweala, said earlier this month that her successor will face a “difficult” year because of plunging crude revenues.

    The U.S. has bought an average 30,000 barrels a day of Nigerian crude this year, data from the Energy Department show. It shipped almost 1 million barrels a day from the African nation in 2010, according to the data.

    http://www.bloomberg.com/news/articles/2015-06-19/nigeria-cuts-pricing-for-bonny-light-crude-to-lowest-in-a-decade
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    PTT to cut on LNG purchases

    PTT of Thailand could cut on buying LNG in the second half of 2015 as gas consumption is expected to be lower.

    Sources told Platts that gas consumption growth was lower than the expected 5% rise which cuts on PTT’s LNG requirements. The slow growth is due to a decline in domestic power demand.

    The company is assessing its market position for September after it completely abandoned LNG purchases in August.

    Although the gas consumption in 2015 is expected to grow slower than expected, a significant rise in LNG imports is predicted.

    The company already secured six cargoes through tenders, amounting to 370,000 tons of LNG, while it is also expected to receive 2 million tons of the chilled gas from Qatar through the 20-year supply deal it signed with Qatargas in 2012.

    http://www.lngworldnews.com/ptt-to-cut-on-lng-purchases/
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    Alternative Energy

    Uruguay Spends $2.6 Billion to Become South America Wind Leader

    Uruguay hopes to generate as much as 38 percent of its power from wind by the end of 2017, up from about 13 percent now, cementing Uruguay’s position as South America’s top wind-energy user, according to Gonzalo Casaravilla, chairman of the state- owned electric utility UTE.

    That would put Uruguay in the same league as Denmark, the global wind energy trailblazer that got 43 percent of its power from wind last year. The country of 3.3 million is embracing wind because it offers low operating costs and as a hedge against drought, which reduces power from hydroelectric dams and in the past has forced it to fall back on fossil fuels.

    “When someone calculates the percentage of wind power in our energy matrix, we’ll surely rank among the leaders in the world,” Casaravilla said in an interview May 15 in Montevideo. He expects the country to get about 30 percent of its power from wind by the end of next year.

    “In percentage terms, Uruguay is a leader in wind generation in Latin America, and you can even compare it to some of the leaders worldwide,” said Lilian Alves, an analyst based in Sao Paulo for Bloomberg New Energy Finance.

    Uruguay was the fastest-growing wind market in the world in 2014, according to the World Wind Energy Association. Installed capacity surged almost eight fold to 479 megawatts, according to the Energy Ministry.

    In a wet year like 2014, about 74 percent of Uruguay’s electricity came from hydropower. Now, with a drought affecting parts of the country, wind is coming to the rescue as hydropower’s share slips below 70 percent.

    Uruguay is especially well-suited for wind with low ridges smoothing the flow of steady winds coming off the Atlantic Ocean. That helps turbines run at about 40 percent of capacity, said Fernando Schaich, a director at the Montevideo-based renewable-energy developer SEG Ingenieria.

    http://www.renewableenergyworld.com/news/2015/06/uruguay-spends-26-billion-to-become-south-america-wind-leader.html#_gus&_gucid=/content/rew/en/news/2015/06/uruguay-spends-26-billion-to-become-south-america-wind-leader&_gup=twitter&_gsc=uZ5ofI&_giguuid=d6f9bb193bf647dfb6c96dc005825ad1
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    OCI Solar Power LLC Begins Construction Of Largest Solar Plant In Texas

    San Antonio-based OCI Solar Power LLC has started construction on a 110-megawatt (MW) solar plant in eastern Pecos County near Bakersfield. At full build-out, this would be the largest solar plant in Texas. The solar arrays will track the sun horizontally and vertically, making this one of the largest dual-axis solar projects in the world.

    The Alamo 6 plant is near Bakersfield. It is on the 1,200-acre Apollo reinvestment zone, which was renamed from Wala when OCI Solar purchased the project from Macquarie, the original developer. A private landowner holds the lease.

    The project is one of seven facilities that compose a 400MW project OCI Solar is constructing for CPS Energy, Greater San Antonio's energy company. As part of the agreement with CPS Energy, OCI Solar has committed to bring over 800 long-term jobs to the San Antonio area.

    http://www.noodls.com/view/3014BF7EA8277C035042EC29DD1C825AE407D5F4?3330xxx1434650582#sthash.8xNBc2Sn.dpuf


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    Precious Metals

    India proposes gold-linked bonds to lower bullion imports

    India is planning to issue sovereign bonds linked to the bullion price in an effort to divert some of the estimated 300 tonnes plus of annual demand for gold bars and coins and curb bullion imports, which can push up the trade deficit.

    The Reserve Bank of India, the central bank, will issue the bonds on behalf of the government, with a minimum interest rate of 2 percent, according to a draft outline issued by the government late on Thursday.

    "The main idea is to reduce the demand for physical gold," according to the draft.

    Indians prize gold as gifts and as a way of storing wealth. The country consumes nearly 1,000 tonnes of gold every year, most of it imported, and gold is the second-biggest expense on the import bill after oil.

    To reduce overseas purchases of the precious metal, Finance Minister Arun Jaitley unveiled plans in February for a sovereign gold bond and a bullion deposit scheme.

    While the deposit scheme aims to mobilise idle household gold, estimated at more than 20,000 tonnes, the sovereign bond would allow consumers to invest in 'paper' gold rather than physical gold.

    The price of the bond would be linked to the price of gold and it would pay an interest rate linked to the international rate for gold borrowing.

    For interest rates, "an indicative lower limit of 2 percent may be given but the actual rate will have to be market-determined", the government proposal said.

    The sovereign bonds would be issued in denominations of two, five and 10 grams of gold or other sizes for a minimum term of five to seven years and they could be used as collateral for loans, it said.

    The government aims to issue bonds worth 135 billion rupees ($2.12 billion) or the equivalent of 50 tonnes of gold in the first year.

    It invited the public to comment on the plans by July 2.

    http://www.reuters.com/article/2015/06/19/india-gold-bonds-idUSL3N0Z51CY20150619
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    Gold price: Hedge funds scramble to cover 233 tonnes

    Gold on Thursday was clawing its way back to the $1,200 an ounce level, buoyed by dovish comments from the US Federal Reserve about the pacing of interest rate cuts which took some shine of the strong dollar.

    In brisk afternoon trade in New York, gold for delivery in August, the most active contract, added $25.50 an ounce or 2.2% from Wednesday's close to exchange hands for $1,202.40 an ounce, the best level since May 22.

    The latest positioning comes within shouting distance of the record-breaking shorts going into 2014

    Lower-for-longer interest rates add to the allure of gold which produces no income and relies on price appreciation to attract investors.

    Worries about the economic impact of the Greek debt crisis and a weaker dollar also boosted the yellow metal which usually moves in the opposite direction to the greenback.

    But much of Thursday action stemmed from speculators trying to cover massive short positions on the futures market that had been built up over several weeks.

    Last week large investors on the futures market such as hedge funds, referred to as "managed money", added a whopping 31% to bearish bets compared to the week before.

    In the week to June 9 according to the Commodity Futures Trading Commission's weekly Commitment of Traders data, speculators' short positions – bets that gold could be bought cheaper in the future – jumped to more than 8.2 million ounces (233.5 tonnes).

    The latest figure surpasses the 7.7 million in March when gold was hitting lows for 2015 of around $1,150 and comes within shouting distance of the record-breaking short positions going into 2014. That December 2013 short position was the highest since 2007, back when gold changed hands for $700 an ounce.

    On a net basis hedge funds are now long under 4.5 million ounces, more than 10 million ounces below levels hit in January this year.

    http://www.mining.com/gold-price-hedge-funds-scramble-to-cover-233-tonnes/
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    Base Metals

    Rush for the exit as tin exports from Indonesia surge in May/June

    Image Source: PeriodictableThe preliminary data released by the Indonesian Trade Ministry shows that Tin exports from the country surged higher during the month of May this year. The exports during the month totaled 6,263 tonnes, rising sharply by 23% from 5,071 tonnes exported during April. The above data is based on the figures reported by surveying companies as per pre-shipment checks carried out by them.

    The tin sales by Indonesia continue to run well above the export cap of 4,000 tpm set by Bangka-Belitung Governor Rustam Effendi. The most recent data suggests that sales during the first 16 days of June have already crossed 4,760 tonnes. The exports during the last two days have skyrocketed to 1,600 tonnes. According to industry experts, the sudden surge in exports is on the back of fears that the administration may further limit the export quota. Stricter control measures are expected to be announced soon, they added.

    The tin smelters are being forced to push their sales in order to raise cash towards Ramadan bonus payments to workers. Also, smelters must settle all their royalty payments as mining activities need to attain “clean and clear” status starting this August. The new rules may result in closure of smelters that fail to comply with the regulations. This is expected to lower production levels, which in turn may lead to lower export volumes.

    Meantime, tin prices which had fallen nearly 15% in 2014, have fallen by almost 24% year-to-date in 2015. Indonesia-the key producer of tin, has been implementing various restrictions on tin shipments out of the country in an attempt to reduce the glut situation. Further curbs on exports look inevitable.

    http://steelguru.com/metal/tin-exports-from-indonesia-surge-in-may/427357#tag
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    Western Areas adds Glencore’s Cosmos nickel complex to its portfolio

    Nickel miner Western Areas on Friday announced that it would buy the Cosmos nickel complex, in Western Australia, from Glencore subsidiary Xstrata Nickel Australasia Operations. 

    The acquisition would provide Western Areas with substantial additional exploration upside and a potential second mining operation, which would complement its existing Forrestania nickel operation, MD Dan Lougher commented.

     “The Cosmos nickel complex is an excellent, prudent and low-cost investment, which is consistent with our brownfields acquisition strategy,” he said. Western Areas would pay A$24.5-million for Cosmos, which is located in the world-class Agnew Wiluna nickel belt, which has an endowment of more than nine-million tonnes of nickel. 

    Historical production from the Cosmos complex was around 127 000 t of nickel at an average grade of 5.0%. Western Areas believed the complex had “substantial exploration opportunities” in areas which remained largely untested and said it was planning a 24-month exploration programme for the site. There was also the potential to establish an underground mine at the undeveloped Odysseus high-grade deposit hosting a total mineral resource of 7.3-million tons at 2.4% nickel, containing 174 000 t nickel. 

    Included in the transaction is significant on-site infrastructure and material, such as a 450 000 t/y concentrator, a semi-autogenous mill, which could be used at any of Western Areas’ potential development projects, including mill expansion scenarios at Forrestania and a large accommodation village, which would support an early start-up. 

    Lougher further pointed out that Western Areas’ balance sheet was in a strong position and, once debt-free from July this year, together with ongoing cash flow generation, the company expected to be able to support dividends for shareholders, while maintaining capacity to fund a ramp-up of exploration activity and drive organic capital improvement projects.

    http://www.miningweekly.com/article/western-areas-adds-glencores-cosmos-nickel-complex-to-its-portfolio-2015-06-19
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    Steel, Iron Ore and Coal

    Slide in China steel snuffs iron ore rally, revives glut worries

    A slump in Chinese demand for steel has poured cold water on a rally in iron ore this month, with prices for the raw material likely to drop over the rest of the year, traders and analysts said.

    Iron ore surged 40 percent from a decade-low in just over two months as dwindling stocks at China's ports suggested tighter supply in a market that had been hit hard by plentiful ore.

    But China's appetite for steel has been shrinking as its economy slows and is now taking a further hit as construction eases over the summer, forcing mills to cut production. January-May output fell nearly 2 percent from the year before as consumption dropped 5 percent, based on government and industry data.

    Prices will also be pressured by indications that iron ore shipments are starting to pick up again, after speculation that some miners and traders had been holding back supply to bolster prices.

    "We believe current iron ore prices are too high and the rally should turn out to be self-defeating as necessary supply cuts are unlikely to happen, keeping the market in surplus," said Carsten Menke, analyst at Julius Baer in Zurich.

    After hitting a near five-month high of $65.40 a tonne <.IO62-CNI=SI> in early June, iron ore lost 6 percent this week after Shanghai rebar steel futures slid to the lowest since their 2009 launch.

    Menke said iron ore could fall below $40 per tonne in a worst case scenario if China's construction sector weakens and the overall economy slows further.

    A decline in stocks of imported iron ore at China's ports to the lowest since 2013 fueled the sharp price recovery amid speculation miners were delaying shipments and traders holding off on offering cargoes.

    China's domestic iron ore output dropped 11 percent in the first five months of 2015 as tumbling prices forced high-cost producers out of the market.

    "There is no logic in holding back supply in the hope prices might go up," Andrew Harding, iron ore chief at Rio Tinto , said on the No. 2 producer's website.

    http://en.chinamining.com.cn/News/2015-06-19/1434696104d72627.html
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    China steel exports said to be sold at a loss as backlash grows

    Some Chinese steelmakers are selling their output abroad at a loss, according to traders and a producer, as a group of global industry bodies urged governments to take action over rising shipments from China.

    Chinese mills had sold steel overseas at a loss of up to 200 yuan ($32) a tonne and cut the export price of hot-rolled coil by 5 percent to $340-$350 a tonne, free-on-board basis, this week compared to last week, according to traders and a producer in Hebei, China's top steel producing province.

    These mills were also selling at a loss to the domestic market, they said.

    "The domestic market is too weak to consume high output and our prices are competitive, so some mills are still keen to step up exports, hoping to ease high inventories and maintain market share," said a senior official at a privately owned mill in Hebei.

    China exports around 10 percent of its annual steel output from hundreds of steelmakers and it was unclear the quantity of steel the traders and official were referring to.

    China's steel exports rose 28 percent to 43.5 million tonnes in January-May, even as domestic crude steel output fell nearly 2 percent. In 2014, exports jumped 51 percent to a record 93.78 million tonnes.

    Eight steel associations from Asia, the Americas and Europe said in a joint statement this week all regions were "suffering from a dramatic increase in unfair steel imports that is fueled by massive global overcapacity."

    "Looming over it all is China, whose massive and increasing overcapacity in an era of slowing growth has already destabilized the global steel market and trade flows," the statement said.

    http://www.reuters.com/article/2015/06/18/china-steel-exports-idUSL3N0Z11QD20150618
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    VTB says Mechel agrees to debt restructuring terms

    Russian steel and coal producer Mechel has agreed to the terms for restructuring its debt with VTB, the country's second-largest bank said on Thursday.

    Separately larger rival Sberbank said it had found two prospective buyers for its share of Mechel's debt.

    Controlled by businessman Igor Zyuzin, Mechel has been in discussions for months with its main lenders, including VTB, Sberbank and Gazprombank, over a restructuring of debts which at the end of last year were estimated to total $7 billion.

    The troubled group, which employs 72,000 people, borrowed heavily before Russia's economic downturn, deepened by Western sanctions over the Ukraine crisis and the fall in oil prices.

    VTB's first deputy chairman, Yuri Soloviev, told reporters on the sidelines of the annual St Petersburg International Economic Forum on Thursday that Mechel was slowly repaying its debts.

    "Yes, they have agreed but not signed (the agreement), but we will sign. They are paying off the interest but not all of it yet. They still have time before July 1," he told reporters.

    "The future of Mechel will be solved in a quieter way with the other creditors ... it is not a major restructuring - it is a way out of the conflict."

    Mechel declined to comment. Sixty-eight percent of the debt is held by the three state-controlled banks, Sberbank, VTB and Gazprombank.

    Maxim Poletayev, a first deputy chairman of Sberbank's executive board, said on Thursday his bank was also now in discussions over selling Mechel's debt with two different parties.

    "We have outlined our positions," he said. "But we aren't stopping the other process. We have four suits on bankruptcy and if before the end of July they don't pay their main debt to us there will be another."

    "There won't be any discount (if Sberbank sells the debt)," Poletayev said at the same forum in St Petersburg.

    Separately, Kremlin aide Andrei Belousov said there was still no consensus on Mechel's debt restructuring.

    http://www.reuters.com/article/2015/06/18/russia-crisis-forum-mechel-idUSL5N0Z412W20150618
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    Nucor forecasts dip in profit as imports hit steel prices

    Nucor Corp, the No. 1 U.S. steelmaker by market capitalization, forecast a fall in quarterly profit as cheaper steel imports continue to weigh on average selling prices of the metal.

    The dollar's strength over the past few quarters has left U.S. steelmakers reeling as cheaper imports from China, the biggest producer of the metal, flood the U.S. market, hurting prices.

    Imports accounted for about 32 percent of the finished steel market in the first five months of 2015, compared with about 26 percent in the same period last year, Nucor said on Thursday.

    Demand for Nucor's products from energy markets has also fallen as weak oil prices prompt oil producers to ease back on drilling and idle rigs.

    The company forecast a profit of 20-25 cents per share for the second quarter ending July 4, well below the average analysts estimate of a profit of 31 cents, according to Thomson Reuters I/B/E/S.

    It earned 46 cents per share in the same period a year ago.

    http://www.reuters.com/article/2015/06/18/nucor-outlook-idUSL3N0Z447320150618
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