Mark Latham Commodity Equity Intelligence Service

Friday 17th July 2015
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    China's economy is all about one thing right now

    China reported an impressive second quarter on Wednesday. The June quarter gross domestic product (GDP) came in at 7%, beating the median forecast for 6.9%.

    While the Chinese economy has been decelerating in recent years, it's not too hard to see why China's most recent quarter was hotter than expected.

    Bloomberg's chief Asia economist Tom Orlik points out that the recent boom in the Chinese stock market boosted the financial sector, and caused it to grow at more than twice the growth rate of the whole economy.

    The sector may have added a whopping 0.5 percentage point to the GDP print, according to Orlik.

    "The good news is that helped offset weakness elsewhere in the economy," Orlik wrote in a note Wednesday. "Real estate managed an expansion of just 3.3 percent and transport and logistics grew just 4.9 percent. The bad news is that, with the increase in financial sector output tied to surging equity market valuations and turnover, it will be tough to sustain in the face of the market correction."

    Year-to-date, the Shanghai Composite Index is up 18%, despite a correction that started mid-June and plunged the market by 30% in about one month.

    A growing financial sector creates more job opportunities, and so that's a plus.

    But, with such a fragile economy and stock market, China cannot depend on its financial sector to prop its growth numbers so that they continue hitting the 7% target.
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    Anglo American plc Production Report for the second quarter ended 30 June 2015.

      Q2 2015 Q2 2014 % vs. Q2 2014 H1 2015 H1 2014 % vs. H1 2014
    Iron ore – Kumba (Mt) 10.4 11.5 (9)% 22.6 22.8 (1)%
    Iron ore – Minas-Rio (Mt)(1) 1.8 - nm(2) 3.0 - nm(2)
    Export metallurgical coal (Mt) 5.3 4.8 9% 10.2 10.9 (6)%
    Export thermal coal (Mt) 8.6 8.1 5% 17.3 16.0 8%
    Copper (t)(3)(4) 184,500 194,400 (5)% 356,300 396,400 (10)%
    Nickel (t)(5) 6,300 10,600 (41)% 13,000 19,800 (34)%
    Platinum (equivalent refined) (koz)(6) 572 358 60% 1,108 715 55%
    Diamonds (Mct)(7) 8.0 8.5 (6)% 15.6 16.0 (3)%

    Solid Q2 2015 production performance, broadly in line with Anglo American expectations.
    Iron ore production from Kumba decreased by 9% to 10.4 million tonnes due to mining feedstock constraints to the plants at Sishen.
    Minas-Rio produced 1.8 million tonnes (wet basis) of iron ore, a 55% increase compared to Q1 2015, reflecting the ongoing ramp up of the operation.
    Export metallurgical coal production increased by 9% to 5.3 million tonnes with higher production from Moranbah, due to a longwall move in Q2 2014, and development coal from the Grosvenor project.
    Export thermal coal production increased by 5% to 8.6 million tonnes, primarily due to higher production in Australia largely the result of a change in mix.
    Copper production decreased by 5% to 184,500 tonnes, as expected and mainly due to the temporary shutdowns of the processing plants at Los Bronces to manage water reserve levels and plant stability issues at Collahuasi.
    Nickel production decreased by 41% to 6,300 tonnes as expected, due to the planned Barro Alto furnace rebuilds.
    Equivalent refined platinum production increased by 60% to 572,000 ounces benefitting from reduced industrial stoppages compared to 2014.
    Diamond production decreased by 6% to 8.0 million carats, mainly due to lower grades and reduced plant availability at Orapa. In addition, operational flexibility at the Venetia and Jwaneng tailings treatment plants was utilised to reduce production marginally, in response to softer trading conditions.
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    Brazil: Lula comes under the spotlight.

    SÃO PAULO—Brazil’s ruling party was newly buffeted on Thursday as federal prosecutors opened an investigation into former President Luiz Inácio Lula da Silva for alleged influence peddling on behalf of a Brazilian construction giant.

    Officials are trying to determine whether the popular Mr. da Silva used his clout upon leaving office to convince international leaders to award contracts to Odebrecht SA, and to push Brazil’s development bank, known as BNDES, to finance those deals with subsidized loans.

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    Oil and Gas

    Saudi Arabia triggers potential fuel price war by flooding market with diesel

    The world's top crude oil exporter Saudi Arabia has turned itself into a major power of refined fuels, offering customers millions of barrels of diesel and potentially triggering a price war with Asian competitors as its exports feed into a glut.

    Saudi Arabia, a leading member in the Organization of Petroleum Exporting Countries (OPEC), already pledged last November to keep crude output high to defend its market share against higher-cost producers.

    While the strategy has kept crude markets well-supplied and prices low, the Kingdom has seen mixed success in defending its market share as global production remains high despite low prices.

    Saudi Arabia is now processing more of its crude at home as its massive refineries turn it into the world's fourth-largest refiner, in a tie with Royal Dutch Shell, that allows the Kingdom to export more fuel products than ever before.

    Aramco Trading Co, a subsidiary of state oil giant Saudi Aramco, offered via tenders 2.8 million barrels of ultra low sulphur diesel for loading in late July to early August, trade sources said, enough to meet Japanese demand for three-and-a-half days.

    "We are already seeing the impact in the Asia-Pacific," said Suresh Sivanandam, principal analyst for refining and chemicals at Wood Mackenzie.

    "This year there is not a single drop of diesel exported from Singapore to the Middle East," he added, referring to a once popular diesel export route.

    The ramp-up mainly of ultra low sulphur diesel to Europe sees the Saudis compete head on with big Asian diesel exporters India and South Korea and reduces Asia's gasoil margin to the lowest in five years.

    The flurry of shipping activity out of Yanbu has also pushed up freight rates for long-range tankers by nearly 20 percent since last week, a shipbroker said.

    Saudi Arabia opened its newest 400,000-barrels per day refinery in Yanbu in April, reaching full capacity within two months.

    "Yanbu has become a distillates monster," a shipbroker said, referring to the hike in exports from the Red Sea port.

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    Shell expects oil price recovery to take several years

    Royal Dutch Shell expects oil prices to recover gradually over the next five years, with progress slowed by persistent global oversupply and receding Chinese demand growth.

    The Anglo-Dutch energy giant is betting on crude rising to $90 a barrel by 2020, a key assumption in its move to buy rival BG Group for $70 billion to help transform it into a leading player in the costly deepwater oil production and liquefied natural gas (LNG) markets.

    "We are not banking on an oil price recovery overnight. It will take several years but we do believe fundamentals will return," Andy Brown, Shell's upstream international director, who oversees the company's oil and gas production outside North America, told Reuters in an interview.

    "Until such time, we, like other companies, will have to make sure we stay robust," he said, referring to deep spending cuts taken by oil companies in recent months in the face of a near-halving of oil prices since June last year.

    A rise in global supplies, mainly due to a sharp increase in output from U.S. shale, has weighed on oil prices.

    In the nearer term, Shell expects Brent crude oil to show only a modest recovery from today's $58 a barrel, with 2016 prices forecast to average $67 a barrel and $75 a barrel in 2017, based on the company's BG offer.
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    First Iranian ship storing oil sails for Asia after nuclear deal

    First Iranian ship storing oil sails for Asia after nuclear deal

    An Iranian supertanker with two million barrels of oil is heading to Asia after sitting in Iranian waters for months, the first vessel storing crude offshore to sail after a nuclear deal this week, data showed on Thursday.

    Iran and six major world powers reached a landmark nuclear deal on Tuesday, clearing the way for an easing of international sanctions on Tehran and higher oil exports.

    While oil analysts do not expect Iran to make a major return to the market until next year, it has been parking millions of barrels of oil on tankers for months.

    The fully laden Starla, operated by Iran's top tanker group NITC, had been used for floating storage since Dec. 12, a tanker tracking source said.

    "This is the first tanker to come off floating storage," the source said. "One of the scenarios is it could do an STS operation, although nothing is known at the moment," the source said, referring to ship-to-ship transfers of oil between two vessels, usually at sea.

    ThomsonReuters Eikon shipping data showed the vessel sailing through the Gulf of Oman with a Singapore destination. Earlier this week the Starla was idling offshore the United Arab Emirates in an area known as Khor Fakkan, often used for STS.

    It is unclear whether the estimated 2 million-barrel cargo had been sold, or if so whether the deal occurred after this week's agreement. But it is a milestone following a months-long build-up of idling crude tankers holding up to 50 million barrels of oil, equal to over a month's worth of Iran's exports.

    Iran is "likely assuming that either a small increase in exports will not undermine the historic accord reached, or, that no one would notice," analysts at Macquarie wrote in a research note. However, if an increase in exports is sustained it will "weigh on near term balances."

    Iran's Oil Minister Bijan Zanganeh said last month the country was aiming to add 500,000 barrels per day (bpd) to production within two months of Western sanctions being eased, and as much as 1 million bpd in six to seven months.

    The sanctions have halved Iran's shipments to as little as 1 million bpd.

    Years of under investment mean Iran may struggle to get its oil industry anywhere near full potential, analysts say. It will also take time to raise output while nuclear inspectors verify Iran's compliance with the terms of the deal, and sanctions are slowly removed.

    Last month, tanker tracking sources said Iran was storing as much as 40 million barrels of oil, mostly crude, on board tankers at its anchorages, which could flood the oil market.

    Windward, a Tel Aviv operated maritime data and analytics company, estimated this week that Iran was storing 51.4 million barrels of crude and condensate on 28 vessels at sea.

    ThomsonReuters Research and Forecasts freight analysts put the figure slightly lower at up to 41 million barrels, according to a report last week.

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    Oil up on UK oilfield outage

    Britain's Buzzard oilfield, the most important source of crude oil underpinning the global benchmark Brent, was closed after power supplies failed, traders said.

    It normally pumps 170,000 to 180,000 barrels per day (bpd) but went down in the early hours of Thursday, traders said.

    A spokeswoman for Buzzard operator Nexen, a unit of China's CNOOC, declined to comment.

    "There was a trip last night," said one crude oil trader, who declined to be identified.

    Buzzard is the single biggest contributor to the Forties crude stream, one of four crude grades underpinning the price of over-the-counter Brent, which is linked to Brent futures.

    Brent's front-month August futures contract, due to expire later on Thursday, moved to a premium of 30 cents a barrel above the September contract on the Buzzard news, its highest premium for more than two months.
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    ConocoPhillips to scale back deep-water exploration and Gulf of Mexico programs

    ConocoPhillips said Thursday it would cut spending on its Gulf of Mexico and deep-water exploration programs, as the driller continues to tighten its belt amid lower prices.

    Houston-based ConocoPhillips has already trimmed its 2015-2017 capital spending program from an initial $16 billion to about $11.5 billion per year after crude oil prices fell last year. Of that $11.5 billion, less than $1.8 billion was dedicated to exploration.

    ConocoPhillips spokesman Daren Beaudo said in an emailed statement the company wasn’t detailing the magnitude of the cut to its deep-water spending at this time, or the number of layoffs that may accompany it. ConocoPhillips reports is second-quarter 2015 earnings on July 30.

    The company did say it had terminated a three-year drilling contract with the Ensco Plc DS-9 deep-water drill ship, which was scheduled to begin drilling in the Gulf in late 2015.

    The move will require ConocoPhillips to pay Ensco monthly termination fees equal to the about $550,000-per-day operating rate for two years, according to a statement from Ensco. Those fees could be reduced if Ensco is able to re-contract the rig within that time period.

    “Our decision to reduce spending in deepwater will further increase our capital flexibility and reduce expenses without impacting our growth targets,” said ConocoPhillips CEO and Chairman Ryan Lance, in a written statement. “This strengthens our ability to achieve cash flow neutrality in 2017 even if lower commodity prices persist.”

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    Schlumberger profit beats estimates as cost cuts pay off

    Schlumberger profit beats estimates as cost cuts pay off

    Schlumberger Ltd, the world's No.1 oilfield services provider, reported a bigger-than-expected quarterly profit as its cost-cutting efforts helped soften the impact of reduced global drilling activity.

    Schlumberger, which provides drilling technology and equipment to oil and gas companies, now expects exploration and production investment in North America to fall by more than 35 percent.

    The company in April forecast North American E&P spending to drop more than 30 percent.

    "We believe that the North American rig count may now be touching the bottom, and that a slow increase in both land drilling and completion activity could occur in the second half of the year," Chief Executive Paal Kibsgaard said in a statement.

    According to weekly data published by Baker Hughes Inc last week, U.S. energy firms added five oil rigs, the second straight week of increases and a sign drillers were ready to return to the well pad.

    "We do see some activity improvement (in North America) although we do think that activity improvement will be limited," Evercore ISI analyst James West said.

    "I think if we saw oil prices at $65-$70 per barrel brent, then we would see some type of improvement in activity particularly in North America and likely some stabilisation in the international markets, which should lead to an improvement in activity next year," West said.

    Brent oil closed at $57.50 per barrel on Thursday.

    Schlumberger, which is less exposed to North America than rivals Baker Hughes and Halliburton Co, said revenue from the region fell nearly 39 percent in the second quarter.

    Revenue from the international business, which accounts for two-thirds of total revenue, fell 19 percent.

    Cost of revenue fell 23 percent to $7.12 billion in the quarter ended June 30, from a year earlier.

    The company earned 88 cents per share, handily beating the average analyst estimate of 79 cents per share, according to Thomson Reuters I/B/E/S.

    Schlumberger under CEO Kibsgaard has cut 20,000 jobs in 2015 and scaled back spending in response to weak crude prices.

    Shares of Schlumberger rose 1.3 percent to $85 in extended trading.

    Through Thursday's close of $83.89, Schlumberger's shares had fallen 1.7 percent this year, compared with a nearly 8 percent fall in the Dow Jones U.S. oil equipment and services companies index.
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    Petrobras agrees to pay Brazil $508 mln to settle tax dispute

    Brazil's state-run oil company Petroleo Brasileiro SA said late Thursday it paid 1.6 billion reais ($508 million) to settle part of a tax dispute with Brazilian authorities and will take the charge against second-quarter earnings.

    The charge includes 1.2 billion reais in back taxes and 400 million reais in fines, the company, known as Petrobras, said in a statement.

    The payment comes after Brazil's CARF, a body within the Finance Ministry that hears appeals on tax disputes, ruled against the oil company on a dispute concerning taxes related to Petrobras' foreign subsidiaries in 2008.

    The dispute dates back to 2012 but Petrobras said in a statement that it was necessary to make the payment now prevent the assessment from increasing as well as legal provisions such as a ban on importing oil.

    Petrobras, which had not made provisions for the tax payment, is currently revamping the way it accounts for tax liabilities on the behest of new chief executive and former banker Aldemir Bendine, according to recent media reports.
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    Oil price drop hits Santos’ revenue

    Australian LNG player Santos posted revenue of $786 million, 19% down on the $974 million in the corresponding quarter in 2014.  

    Santos recorded higher second quarter production and higher sales volumes, as well as significant reductions to both capital and operating expenditure.

    Second quarter production of 14.3 million barrels of oil equivalent and sales volumes of 15.7 mmboe were 12% and 4% higher than the corresponding quarter, the company said in a statement.

    Sales revenue were affected by the lower realised oil price, partially offset by higher domestic gas prices and a weaker Australian dollar.

    Santos Managing Director and Chief Executive Officer David Knox said, “Year to date capital expenditure is 53% below 2014 levels and our production costs for the first half are tracking below guidance at A$14.0 per boe.”

    He added that the company’s flagship GLNG project is progressing well as it moves toward first LNG around the end of the third quarter. All upstream facilities are commissioned and fully operational.

    Santos reported that sales gas, ethane and sales gas to LNG production of 65.2 petajoules for the quarter was 17% higher than the corresponding quarter, reflecting a full quarter of PNG LNG production and increased Cooper production.

    Total sales gas, ethane and LNG sales revenue increased 15% to $409 million for the quarter due to higher LNG volumes and higher domestic gas prices. The reduction in LNG sales revenues compared to the previous quarter reflects the 3-4 month lag to the oil price in LNG contracts.
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    Antero Resources Announces solid Second Quarter 2015 Operations

    -Average net daily gas equivalent production was 1,484 MMcfe/d, a 67% increase over the prior year quarter and flat quarter over quarter
    -Average net daily liquids production (C3+) was 45,900 Bbl/d, a 127% increase over the prior year quarter and a 15% increase sequentially
    -Realized natural gas price after hedging averaged $3.86 per Mcf, a $1.22positive differential to Nymex
    Realized C3+ NGL price after hedging averaged $19.51 per barrel (34% of WTI)
    -Realized natural gas equivalent price including NGLs, oil and hedges averaged$3.85 per Mcfe
    Planning to spud Antero's first Utica Shale well in West Virginia in the third quarter of 2015
    -Completed bolt-on acquisition of approximately 4,400 net acres with both Marcellus Shale and Utica Shale potential
    -Preliminary net production growth target of 25% to 30% in 2016

    Operating Update

    All operational figures are as of the date of this release unless otherwise noted.

    Antero's net daily production for the second quarter of 2015 averaged 1,484 MMcfe/d, including 45,900 Bbl/d of liquids (19% liquids).  Second quarter 2015 production represents an organic production growth rate of 67% from the second quarter of 2014 and was approximately the same as the first quarter of 2015.  Liquids production for the second quarter of 2015 represents an organic production growth rate of 127% and 15% from the second quarter of 2014 and first quarter of 2015, respectively.

    Commenting on second quarter 2015 production and expectations for the remainder of the year, as well as the 2016 outlook, Paul Rady, Chairman of the Board and CEO, said, "We had an outstanding quarter operationally, once again beating our production estimates.  As we look ahead to the second half of 2015, we expect to see a slight decrease in production during the third quarter, but expect a ramp up in completions and production during the fourth quarter as we head into 2016.  Driven by our expected fourth quarter operational momentum and the expected completion of the 50 Marcellus deferred completions in the first half of 2016, we are preliminarily targeting 2016 production growth of 25% to 30%.

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    Genesis to buy Enterprise's U.S. Gulf business

    Pipeline company Genesis Energy LP said it would buy Enterprise Products Partners LP's Gulf of Mexico pipelines and services business for about $1.5 billion to expand its offshore pipelines business.

    Enterprise said the sale will help fund asset purchases in the Eagle Ford and Permian basin in Texas.

    The offshore assets being acquired include Enterprise's stake in nine crude oil pipeline systems with more than 1,100 miles of pipeline and nine natural gas pipeline systems totaling about 1,200 miles.

    Enterprise said it expects to record an impairment charge of about $100 million related to the sale in the quarter ended June 30.

    Genesis Energy said it expects the acquisition to add to its four offshore pipelines in the Gulf of Mexico.

    The company said the acquisition, which is expected to close this month, would immediately add to its cash available for distribution.
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    Alternative Energy

    HANERGY vows to challenge HK regulator's stock halt

    Troubled Chinese solar panel maker Hanergy said Hong Kong's securities watchdog is demanding documents it's unable to hand over and vowed to challenge a suspension order that prevents its shares from trading in the Asian financial center.

    Hanergy Thin Film Power Group said in a statement late Thursday that it will appeal to the Securities and Futures Commission and may go to court if necessary to challenge the trading halt, which it said was not in the interest of shareholders.

    Shares in Hanergy, a unit of Beijing-based Hanergy Holding Group, had already been suspended in Hong Kong since May 20 at the company's request after they plunged by nearly half in a spectacular meltdown that wiped out $19 billion in market value in less than an hour.

    The plunge also slashed Chairman Li Hejun's fortune, which surged alongside the rapid rise in Hanergy's stock in the preceding 12 months and had made him, on paper, one of China's richest people.

    Hanergy's announcement came a day after the SFC took the rare step of issuing its trading halt, which prevents shares from resuming trading even if the company requests it.

    In its statement, the company said the regulator ordered the trading halt because it had refused to hand over financial statements for Hanergy Holding and details of outstanding loans taken out by Li. Hanergy said the documents are the parent company's private financial information and Li's personal affairs.

    Hanergy also shed some light on a possible reason for the stock's dramatic drop, saying the "significant price fluctuation was caused by speculations of a possibility" that a customer would not complete a deal to purchase solar panel equipment.
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    Solar Frontier Expanding Globally As Japanese Solar Market Softens

    After three years of brisk sales in Japan driven by an aggressive Feed-in Tariff (FIT), Solar Frontier is looking to expand into the global market and still hopes to build a manufacturing plant in the U.S. according to the company president and CEO Atsuhiko Hirano.

    The company purchased a 280-MW pipeline — consisting of about 10 mid-sized projects — from Gestamp earlier this year and plans to use it to “create a foundation” of projects in the U.S., which is one of its key markets.  In addition, Solar Frontier has a 100 MW pipeline of projects in the U.K. “So 2013 and 2014 was really all about Japan but now we are making it clear that we are going global,” he explained.

    The company also plans to “disperse our production capacity” into the global market and has a very aggressive goal of deploying 3 GW of capacity into the market by 2020.

    “In Japan the demand was abut 9.3 GW and we only have 1.3 GW of capacity so we are limited by what we can supply,” Hirano explained.  Solar Frontier currently has about 10 percent market share in Japan, which is in line with thin-film’s share of the overall solar market worldwide.

    Hirano said that the attractive FIT meant that PV system prices could be higher in Japan than elsewhere, which caused Chinese manufacturers to target the Japanese market and drive up competition. “Unlike the other countries, the Japanese government has been unwilling to impose some type of tariff or duty on Chinese products,” he said. “We have been faced with some price competition that is not based on production cost,” he added.  

    Hirano would like to see a balanced approach with regard to developing a renewable energy industry, meaning that governments put some value on creating jobs and economic growth driven by the creation of renewable energy products in addition to valuing the clean energy that the products produce. For that same reason, the company is exploring a manufacturing facility in New York.
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    Precious Metals

    Barrick poised to sell more gold mines

    Barrick Gold Corp., nearing a deal for its Zaldivar copper mine, is likely to consider three other mines as leading candidates for sale as it works to cut the biggest debt in the gold industry.

    Among the remaining non-core mining operations that Barrick would examine selling are its 50 percent stake in Australia’s Kalgoorlie mine, Canada’s Hemlo and Bald Mountain in Nevada, according to analysts and investment bankers.

    The world’s largest producer of the metal has pledged to raise at least $3 billion this year to reduce its $12.9 billion debt. The Toronto-based company is in advanced discussions to sell a 50 percent stake in its Zaldivar mine in Chile with final bids submitted last week by China Molybdenum Co., BHP Billiton Ltd. and others, people familiar with the matter said last week.

    While Barrick has said it only wants to sell a 50 percent stake in the mine, some of the bidders were expected to have submitted bids for the whole operation, which is valued at more than $2 billion, the people said.

    If completed, Zaldivar would mark the last of three deals Barrick has pledged to complete this year. In May, the company sold a 50 percent stake in its Porgera mine in Papua New Guinea to Zijin Mining Group Co. for $298 million. That came two days after it agreed to sell its Australian Cowal mine to Evolution Mining Ltd. for $550 million.

    Excluding Zaldivar, the company has made more than $2 billion in deals since its total debt peaked at $15.8 billion in 2013, the same year gold futures had their biggest annual plunge in more than three decades. The debt had ballooned after Barrick’s takeover of copper miner Equinox Minerals Ltd. in 2011.

    Reducing debt will remain a priority after the Zaldivar sale, Andy Lloyd, a Barrick spokesman, said this week in an e- mail.
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    Base Metals

    China June copper output hits 6-month high, aluminium, zinc at record

    China's production of refined copper rose 6.6 percent from the previous month in June, hitting a six-month high as some smelters reopened after maintenance and expanded output.

    Output reached 695,121 tonnes in June, compared with 652,379 tonnes in May, data from the National Bureau of Statistics showed on Thursday. The June output increased 13.1 percent from a year ago.

    For the first half of 2015, refined copper output rose 9.4 percent from a year ago to 3.78 million tonnes.

    At least one large smelter resumed production in June after maintenance and another smelter expanded production last month, said Yang Changhua, senior analyst at state-backed research firm Antaike.

    Smelters increased production despite low domestic copper prices, which CU-1-CCNMM fell nearly 4 percent in June.

    A 200,000 tonnes-a-year smelter started production in May and its production is expected to rise gradually in the coming months.

    Yang expects refined copper production to rise further in July due to the new smelter and as another large smelter completed maintenance this week.

    New capacity continued to drive up production of primary aluminium to a fresh record of 2.76 million tonnes in June, up 3.3 percent from May, the data showed.

    In the first half, aluminium output jumped 11.7 percent from a year ago to 15.6 million tonnes.

    More than 2 million tonnes of aluminium capacity started production in the first half, said Xu Hongping, analyst at China Merchants Futures. Another 3 million tonnes of new capacity is likely to come onstream in the second half, she said.

    Production costs to many aluminium smelters had fallen due to weak prices of raw material alumina and coal, offsetting weak domestic prices AL-A00-CCNMM, Xu said.

    Xu expects aluminium production to rise further in the coming months.

    Production of refined zinc hit a record in June, while lead, tin and nickel all rose to the highest levels this year.

    Steady metal prices ZN-0-CCNMM and sufficient supplies of raw material zinc concentrate supported refined zinc production, which rose 5.3 percent from May to 559,490 tonnes in June.

    In the first half, refined zinc output rose 12.9 percent from a year ago to 3.07 million tonnes.

    Lead output rose 6.9 percent from the previous month to 382,159 tonnes in June, the highest since June 2014.

    In the first half, lead output dropped 3.5 percent from a year ago to 2.05 million tonnes on weak demand and tight environmental requirements.

    Tin surged 27.3 percent on the month to 14,548 tonnes in June. Output in the first half dipped 1.5 percent from a year ago to 78,988 tonnes.

    Refined nickel jumped 12.5 percent from May to 33,863 tonnes in June. The half-year output was 176,274 tonnes, up 21.2 percent from a year ago.
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    Gresik copper smelter in Indonesia shut due to technical issues

    Image Source: MMCA spokesman at majority owner Mitsubishi Materials Corp said on Thursday that Indonesian copper smelter Gresik has shut down due to a technical problem and it is not clear when the smelter will reopen

    Mr Takuya Kitamura said that the shutdown at the smelter was due to a broken pipe system, but he was not able to give a timetable for how long the outage would last. Mr Kitamura was not able to say whether the company was looking for alternatives for themselves or their customers for sourcing replacement supply.

    But two sources with knowledge of the shutdown said the plant has already been shut for several weeks and that they expected the closure to last for at least one more.

    Mitsubishi Materials owns 60.5 percent of the operator of the facility, PT Smelting. The Indonesian unit of U.S.-based Freeport-McMoRan Inc holds a 25 percent stake. Other stakeholders in PT Smelting are Mitsubishi Corp with 9.5 percent, and Nippon Mining and Metals, a unit of Nippon Mining Holdings, with 5 percent. The Gresik smelter produced 230,000 tonnes of refined copper last year running at about 75 percent of its capacity.
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    Steel, Iron Ore and Coal

    Rizhao Steel Holding further cut coke purchase prices

    Rizhao Steel Holding Group Co., one leading Shandong-based coke producer, cut coke purchase price by 20 yuan/t from July 16, the second decline in a month after a 10 yuan/t cut on July 8.

    The company is now offering 780 yuan/t for Grade II met coke sourced inside the province and 800 yuan/t for products outside the province.

    Many other cash-tight steel mills may follow suit to further press down coke purchase prices to reduce losses, analysts said.

    China’s steel industry has had a torrid July to date, with prices for various products like hot-rolled coil and billet falling 6-8% since the start of the month.

    Prolonged loss in the steel sector has led to severe production cuts and increased furnace maintenance at steel mills, which also negatively impact coke demand .

    Data from industry portal China Coal Resource showed the ex-plant prices of Grade II met coke at Dong’e, Zibo and Tengzhou regions of Shandong stood at 780 yuan/t, 780 yuan/t and 760 yuan/t, respectively, as of July 15.
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    No joy for EU steelmakers from rising demand as imports bite - Eurofer

    European economic growth is expected to power a 1.5 percent rise in EU steel demand this year but local producers will see little benefit due to rising imports, steel body Eurofer said on Thursday.

    Overall steel imports into the European Union are expected to rise 5 percent, hurting domestic mills.

    For 2016, Eurofer, whose members include top global steelmaker ArcelorMittal, ThyssenKrupp and Voestalpine, said it expects apparent steel demand growth of 1.9 percent.

    "EU steel imports are again rising significantly, thereby fuelling price competition and eroding margins. Massive and increasing overcapacity in China in an era of slowing growth is the root cause of this," Eurofer director-general Axel Eggert said in a statement.

    "As long as Chinese mills continue to offload their products rather than cut production, we foresee the continuation of difficult market conditions," he added.

    Eurofer estimates that Chinese exports to the EU rose 49 percent year-on-year over the first five months of 2015.

    The EU has this year taken some measures to protect domestic steelmakers, including its imposition in March of anti-dumping duties on imports of cold-rolled flat stainless steel from China and Taiwan.

    Protectionist measures have also been imposed in countries including Indonesia, India, Turkey, Mexico and Iran as China continues to sell record levels of cut-price steel to overseas markets.

    "Our downstream clients are generally seeing muted business conditions. They see little impact from apparently brighter macroeconomic conditions, and headwinds and uncertainties persist," Eggert said.

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