Mark Latham Commodity Equity Intelligence Service

Thursday 12th November 2015
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    China Oct economic activity shows downward pressures persist

    China's factory output growth hit a 7-month low in October while investment expansion slipped to its weakest pace since 2000, signs that further government policy support may be needed to shore up slowing demand in the world's second biggest economy.

    The one bright spot in tepid October data released Wednesday was an improvement in retail sales, which appear to be keeping the growth rate of the world's second-largest economy from sliding.

    Chinese leaders have embarked on the most aggressive policy easing since the 2008/09 global financial crisis, but the October numbers highlight persistent headwinds from weak global demand, a cooling domestic property sector and excess factory capacity.

    "Fiscal policy is likely to become more expansionary next year," said Lin Hu, an economist at Guosen Securities in Beijing. "There will be more interest rate and RRR (reserve requirement ratio) cuts and we cannot rule out the possibility of such cuts within the year."

    Factory output grew slower-than-expected at an annual 5.6 percent in October, the weakest in seven months, National Bureau of Statistics data showed. That was below a Reuters forecast of 5.8 percent and down on September's 5.7 percent.

    Fixed asset investment rose 10.2 percent in the first 10 months, in line with expectations but the weakest pace since 2000 and easing from a 10.3 percent gain in the January-September period.

    The cooling real estate sector remained a drag on investment, with property investment growth slowing to 2.0 percent in January-October from 2.6 percent in the first nine months.

    Retail sales growth continued to pick up, expanding at an annual 11.0 percent in October, compared with 10.9 percent in September. Analysts had forecast 10.9 percent growth in October.

    Helping lift retail sales were buoyant vehicle purchases, which rose 11.8 percent from a year earlier in October, the biggest on-year gain since December, according to the China Association of Automobile Manufacturers.

    Last week, General Motors Co. said China vehicle sales rose 15 percent to a record high in October.

    And on Wednesday, e-commerce giant Alibaba reported sales from the Singles' Day online shopping extravaganza had already surpassed last year's total of $9.3 billion, a sign consumer sentiment remains firm in the fourth quarter.

    Most analysts put more weight on indicators showing persistent problems than on green-shoots.

    Zhou Hao, senior emerging markets economist at Commerzbank in Singapore, said the data is not encouraging, despite some stabilisation, with manufacturing slowing and demand sluggish.

    "Property investment remained low, which has failed to turn around the momentum of overall investment," Zhou said.

    "While consumption outperformed somewhat, the overall growth profile still remains weak."

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    China Oct thermal power output down 6.6pct on year

    Electricity output from China’s thermal power plants – mainly coal-fired – stood at 310.7 TWh in October, falling 6.6% year on year and down 1.24% month on month, showed data from the National Bureau of Statistics (NBS) on November 11.

    It hit the new low in monthly thermal generation since February this year when the country celebrated its traditional Spring Festival with factories shutting operation for a week-long holiday.

    The slide in thermal power generation was mainly due to the falling residential electricity consumption amid cooler weather as well as the closure of many small thermal plants.

    By contrast, China’s hydropower output decreased 7.44% on month but up 2.1% on year to 99.5 TWh in October.

    Total electricity output in China reached 445.4 TWh in October, dropping 3.2% from a year ago and down 2.07% on month, the NBS data showed. That equated to daily power output of 14.37TWh on average, falling 3.2% on year and down 5.21% from September.

    Over January-October, China produced a total 4,651.1 TWh of electricity, edging down 0.1% year on year, with thermal power dropping 2.6% on year to 3,466.2 TWh while hydropower output increasing 3.4% to 847.4 TWh.

    Over January-October, the share of thermal power generation from the total power generation fell from 75.09% in the first three quarters to 74.52%; while hydropower rose from 17.79% in the past nine months to 18.22%.

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    China Graft Crackdown Nets Top Beijing, Shanghai Officials

    China’s ongoing anti-corruption campaign has for the first time brought down senior officials in the country’s two biggest cities, Beijing and Shanghai, in what analysts say is a further sign of the deepening of the crackdown. Shanghai Vice Mayor Ai Baojun and Beijing Municipal Deputy Party Secretary Lu Xiwen were detained on suspicion of serious violations of discipline, a party code word for corruption, state media said Wednesday.

    Few details were given about the case of Lu, who had previously called on officials to stay close to the grassroots, and was recently elected as president of the Beijing Volunteer Service Federation. Ai, however, was a high-profile Shanghai official who was head of the management committee of the city’s pilot Free Trade Zone, where a number of China's proposed financial reforms are being piloted. He was also a director of a tourism zone which includes the city’s new Disneyland resort, due to open next year -- and was seen in public as recently as last Friday at an Industrial Fair.

    No details of Ai's alleged misdemeanors were given, but his detention may be linked to corruption during his previous spell at Shanghai-based Baosteel Corporation, one of China’s largest state-owned steel makers, the South China Morning Post reported, quoting a local government source.

    His detention follows speculation that Shanghai officials could be caught up in the anti-graft campaign -- which until now had spared top leaders in China's financial capital -- after an investigation into corruption in the city by central officials last year.

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    China warns WTO its cheap exports will soon be harder to resist

    China has served notice to World Trade Organization members including the European Union and United States that complaints about its cheap exports will need to meet a higher standard from December 2016, a Beijing envoy said at a WTO meeting.

    Ever since it joined the WTO in 2001, China has frequently attracted complaints that its exports are being "dumped", or sold at unfairly cheap prices on foreign markets. Under world trade rules, importing countries can slap punitive tariffs on goods that are suspected of being dumped.

    Normally such claims are based on a comparison with domestic prices in the exporting country.

    But the terms of China's membership stated that -- because it was not a "market economy" -- other countries did not need to use China's domestic prices to justify their accusations of Chinese dumping, but could use other arguments.

    China's representative at a WTO meeting on Tuesday said the practice was "outdated, unfair and discriminatory" and under its membership terms, it would automatically be treated as a "market economy" after 15 years, which meant Dec. 11, 2016.

    All WTO members would have to stop using their own calculations from that date, said the Chinese envoy, whose name was not given by a WTO official who spoke to reporters about the meeting.

    Dumping complaints are a frequent cause of trade disputes at the WTO, and dumping duties are even more frequently levied on Chinese products.

    In September alone, the WTO said it had been notified of EU anti-dumping actions on 22 categories of Chinese exports, from solar power components to various types of steel products and metals, as well as food ingredients such as aspartame, citric acid and monosodium glutamate. The EU was also slapping duties on Chinese bicycles, ring binder mechanisms and rainbow trout.

    From the end of next year, such lists would need to be based on China's domestic prices "to avoid any unnecessary WTO disputes", the Chinese representative said.

    More than 20 percent of the 500 disputes brought to the WTO in its 20 year history have involved dumping, including several between China and the EU or the United States in the last few years.

    Read more at Reuters

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    Eon reports record loss of €7.25bn as it writes down power assets

    Eon, Germany’s largest utility by market value, posted its biggest ever quarterly net loss as it took billions of euros in writedowns on the value of its power generation assets.

    Losses stood at €7.25bn for the three months to September 30, compared with a loss of €835m the previous year. The company reported impairments of €8.3bn in the third quarter.

    Eon said the writedown, which it had flagged in September, was triggered by the “significant decline in commodity and energy prices, which is mainly a result of structural change on global energy markets and on the regulatory framework”.

    The company has been hit hard by the “energiewende”, Germany’s radical shift towards clean energy sources, which has depressed the country’s wholesale electricity prices and badly hurt the profits of conventional utilities.

    In a statement, Eon’s chief financial officer, Michael Sen, said the operating environment “remains very difficult”.

    Eon reported earnings before interest, taxes, depreciation and amortisation of €5.4bn for the first nine months of 2015, down 18 per cent from the previous year, and underlying net income of €962m, a fall of 30 per cent on 2014.

    The company said it continued to expect ebitda for full-year 2015 to be between €7bn and €7.6bn, with underlying net income of between €1.4bn and €1.8bn.

    The company’s shares were trading up 5.4 per cent at €9.5 by midday in Frankfurt.

    Vincent Gilles, an analyst at Credit Suisse, said the results were “another confirmation that the economic environment is absolutely terrible for Eon, with commodity prices lower and the price of power down 50 per cent in the last four years”.

    Eon is pursuing plans to spin off parts of its conventional power generation business into a separate company called Uniper in order to focus on renewables. In a statement, chief executive Johannes Teyssen said the spin-off was on schedule and “entering the final phase”.

    In September, Eon cancelled plans to hive off its German nuclear power plants after the German government proposed a law that would make companies permanently liable for the costs of dismantling nuclear reactors.

    Eon operates three nuclear power plants in Germany and has minority stakes in three others. Berlin is phasing out nuclear power by 2022.

    Mr Gilles said that in announcing the €8.3bn impairment, Eon was “preparing the balance sheet for the demerger, and in doing so, goes much further than most of its peers”.

    “I have a lot of respect for a company that’s adjusting its balance sheet to the realities of the market,” he said.
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    An Almost Perfect Storm Of Incompetence And Felony

    “Misdeeds, once exposed, have no refuge but in audacity. And they have accomplices in those who are fearful in their complicity.”

    Tacitus, Annals

    We just saw a very historically significant decline in the precious metals in terms of days lower without relief. And we have seen a remarkable rise in the US dollar index against the Euro and the Swiss franc that cannot possibly be good for the real economy of the US, when every other developed nation is trying to devalue their currencies to stimulate their exports and inhibit imports.

    I believe that a portion of the gold selling in particular is an effort to knock down the open interest in gold for December. If there was any serious attempt for holders of those contracts to stand for delivery, even JPM, which has been obviously building up its stores of gold to act as the 'fixer' in that market, would not be able to cover the demand.

    JPM was consistently taking delivery for their house account in gold, and just transferred 70,000+ ounces over from Nova Scotia's warehouse, from whom they had been taking delivery.

    As we know, in the last big delivery month, JPM stepped up with an enormous amount of their gold, 400,000+ ounces, to provide enough real bullion to satisfy the contracts standing for delivery. Even now their inventories remain somewhat depleted.

    The dollar has also been soaring, because the Fed is trying to pretend that the US is recovering so that they can raise rates.  A strong dollar and higher rates are very harmful to what is almost undoubtedly a fragile economic recovery in the US.

    And it is fantasy to think that the US can somehow go it alone, and continue to improve while the rest of the world is cutting rates because their economies are slowing.

    The Fed wants to raise rates for their own policy purposes, so they can cut them, without going overtly negative, when their latest financial bubble starts to collapse, which it may already be doing.They cannot really raise rates in a Presidential election year past June, so they will push ahead, to serve their own purposes, even as they harm the real economy.

    There will be another financial crisis as the IMF warned today. There will be a serious dislocation in several financial markets, including the precious metals and the bonds at some point, that will rock the current system to its foundations.

    It is a portion of the credibility trap which inhibits any meaningful remedy and reform.

    It is an almost perfect storm of incompetence and felony.
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    Oil and Gas

    Russia's Oil Rivalry With Saudis Masks the Bigger Iranian Threat; and Ambrose, again.

    Competition is growing in Russia’s biggest oil market. While Saudi Arabia’s encroachment in Europe is getting all the attention, the biggest threat comes from another part of the Middle East -- Iran.

    The world’s largest oil exporter has started shipping crude to traditional Russian markets like Poland and Sweden, but Saudi supplies to Europe won’t increase by enough to reduce prices, said Texas-based consultant Stratfor. In contrast, a surge in Iranian exports after the lifting of sanctions could erode the value of Russian shipments to the region as soon as next year, according to KBC Advanced Technologies.

    Tougher competition in Europe, the destination for almost 70 percent of Russia’s oil exports, comes as the country is already battling recession. Oil and gas sales account for about half of government revenues and the commodity-price slump has amplified the economic blow from international sanctions over Ukraine. An increase in Iranian exports following a nuclear dealwith world powers could make matters worse.

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    “Eastern European refineries are geared to process Russian crude, the Urals blend, and the closest sort to it would be Iranian oil,” Michael Nayebi-Oskoui, senior energy analyst for Middle East and South Asia at Stratfor, said by phone. For Saudi shipments to push prices down “they would have to be significantly rerouted from Asia towards Europe, and we don’t see that happening,” he said.

    Iranian shipments to Europe came to around 600,000 barrels a day, or 17 percent of its production, before sanctions blocked imports in 2012. Once restrictions are lifted, Oil Minister Bijan Namdar Zanganeh has said the National Iranian Oil Co.’s priority will be to regain its “lost share” of the market, regardless of the impact on crude prices.

    “Iran is going to be looking at marketing fairly aggressively”, David Fyfe, head of market research and analysis at oil trader Gunvor Group Ltd., said by phone from Geneva. “They want to reclaim the foothold they previously had.”

    Former customers in southern Europe already have shown an interest in resuming purchases of Iranian oil. Hellenic Petroleum SA is “in the process of initiating a dialogue” with Iran’s national oil company, as are “most western companies,” Vasilis Tsaitas, a company spokesman, said by e-mail. Hellenic operates three of the five refineries in Greece with total capacity of 341,000 barrels a day, according to its website.

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    Kogas LNG imports down in Jan-Sep

    South Korea’s Kogas said its LNG imports dropped 14 percent in the first nine months of this year due to a decline in domestic sales.

    The worlds’ largest corporate buyer of LNG said in a report on Tuesday it imported 22.91 million mt of the chilled gas in January-September, compared to 26.61 million mt it imported last year.

    Domestic sales fell 7.6 percent to 23.19 million mt of LNG in the period, according to the report.

    Sales into the power sector were at 11.03 million mt, down 10.5 percent, while the company’s city gas sales dropped 4.8 percent on year to 12.14 million mt.

    Most of the LNG supply was imported under 16 long-term and 3 mid-term contracts from 10 countries around the world.

    The Korean company currently operates 64 storage tanks in 4 LNG receiving terminals.

    Kogas received the first cargo of LNG from the Santos-operated US$18.5 billion GLNG project in Australia on October 27.

    The MISC-operated 152,300 cbm Seri Bakti delivered the chilled gas to Kogas’ Pyeongtaek LNG import terminal.

    Kogas said in the report it is expecting  to receive 9 LNG cargoes from the Australian project this  year, and 78 cargoes in 2016.

    The company has a 15 percent stake in the LNG project located on Curtis island off Gladstone.

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    Santos shares sink 27pc on shortfall in take-up of $2.5b rights issue

    A sharp drop in Santos shares after the first part of the gas player's underwritten $2.5 billion equity raising has caused some to question the board's decision to reject outright last month's $7.14 billion takeover approach from Middle East-backed Scepter Partners.

    The 27 per cent decline to $4.30, from the last close of $5.91 on Friday, came after the shares were halted all week since Santos on Monday announced a $3.5 billion package of measures to cut debt.

    The heavy reliance of the package on a dilutive equity raising disappointed some investors, who had expected more proceeds to flow from asset sales instead, although the appointment of former Clough boss Kevin Gallagher as the new chief executive has been welcomed.

    Significantly, the share price move on Thursday represented a 16.5 per cent fall from the $5.15 equivalent price of Santos stock that took into account the extra shares issued.

    However, while the shares were halted, crude oil prices have sunk almost 4 per cent and the market has also been affected by broader concerns that have softened the share prices of Santos peers such as Origin Energy, which is down 5.5 per cent this week.

    The softness in the share price still surprised some analysts, particularly as the take-up by institutional investors of the discounted share offer was a reasonable 86 per cent.

    Also, as already reported in Street Talk , the shortfall of entitlements cleared in a bookbuild on Wednesday at $4.60.

    It remains unclear whether the bookbuild price was supported by the participation of a strategic investor such as Santos' new cornerstone shareholder, private Chinese firm Hony Capital. That potentially won't be known until November 21, being the latest date to file a disclosure.

    Executive chairman Peter Coates still described the issue as a success and said it gave "a clear sign of confidence" in the measures to reduce debt. That package, which includes an asset sale, was the result of a strategic review process led by Mr Coates, which also elicited the $6.88 per share approach from Scepter.

    One analyst said that with the share price decline on Thursday, there was "a question a lot of shareholders would be asking" as to why the board hadn't sought to engage with Scepter on a better offer, although other sources pointed out the company's unknown background and opaque funding.

    The $1.35 billion retail part of the offer opens next week and Santos is aiming to drum up interest in a roadshow to take in Sydney, Melbourne and Adelaide. Entitlements not taken up will be offered for sale in another bookbuild on December 3.

    Fat Prophets has yet to advise its clients on whether to take up their entitlements, but analyst David Lennox said that typically if the share price was above the entitlement price, then "we would generally be comfortable" to recommend shareholders participate.

    Shareholders can buy one new share at $3.85 for every 1.7 shares they hold.

    Read more:
    Follow us: @smh on Twitter | sydneymorningherald on Facebook

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    Japanese Refiners Agree to Merge as Fuel Consumption Shrinks

    Idemitsu Kosan Co. and Showa Shell Sekiyu KK signed a non-binding agreement to merge as Japan’s refiners consolidate amid declining domestic demand and a fuel glut.

    The two companies expect 50 billion yen ($407 million) of synergies by the fifth year after a deal, according to a filing on Thursday to the Tokyo Stock Exchange. The merger is expected to be completed between October 2016 and April 2017. A value for the transaction wasn’t provided.

    The memorandum of understanding isn’t binding and most details, including the method for merging, haven’t been decided. In July, Idemitsu agreed to purchase a 33.24 percent stake in Showa Shell from Royal Dutch Shell Plc for 169 billion yen. A full combination of the two would create a company with about a third of the domestic gasoline market.

    Oil demand in Japan has been declining as the nation’s population shrinks and as a shift to more energy-efficient cars prompts refiners to lower output. The government, a backer of industry consolidation, has asked for cuts in processing capacity as the U.S. boosts exports and new production redraws global gasoline and diesel trade flows.
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    Repsol Quarterly Earnings Miss Estimates After Oil Prices Tumble

    Repsol SA, Spain’s largest oil company, reported a 62 percent decline in third-quarter earnings as lower crude prices countered improved refining performance.

    Adjusted net income fell to 159 million euros ($171 million) from 415 million euros a year earlier, the Madrid-based producer said Thursday in a statement. That missed the average 201.6 million-euro estimate of 18 analysts surveyed by Bloomberg. It reported a net loss of 221 million euros after taking charges at units including gas and gas.

    Repsol last month unveiled a five-year plan to sell 6.2 billion euros of assets and cut investments by as much as 38 percent as it deals with the plunge in crude prices. The company is also integrating Talisman Energy Inc., the Canadian producer it acquired for $13 billion in May. Repsol announced more than $1 billion in asset sales in the third quarter, part of which was included in the five-year target.

    The price of Brent crude has declined more than 40 percent over the past year amid a global supply glut.

    Since the oil-market slump started in mid-2014, the lower cost of crude has boosted profits for refiners and helped companies including Repsol to buoy earnings. The company’s refining margin, a gauge of profitability, jumped to $8.80 a barrel in the third quarter from $3.90 a year earlier, according to an Oct. 14 company filing.
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    Anadarko confirms Apache rejected all-stock buyout offer

    Anadarko confirms Apache rejected all-stock buyout offer

    Anadarko Petroleum Corp confirmed that it had offered to buy oil producer Apache Corp in an all-stock deal, but the offer had been rejected without discussions.

    Apache shares fell 6 percent in premarket trading on Wednesday, while Anadarko shares rose 2 pct.

    "We are unwilling to pursue the transaction without access to detailed non-public information, and based on our analysis, which shows that Apache appears to trade at or near full value currently, the offer was withdrawn," Anadarko Chief Executive Al Walker said in a statement.

    Media reported on Tuesday that Apache had rejected an offer from Anadarko.

    The offer, which included a "modest" premium, would have been "highly" accretive to Anadarko on a cash flow per-share basis even before synergies, Anadarko said on Wednesday.

    Some analysts expect a consolidation in the U.S. shale industry as companies struggle against a prolonged slump in crude prices.

    However, there have few major deals among exploration and production companies so far due to a big difference between what buyers are willing to pay and what sellers demand.

    Read more at Reuters
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    Core part of the Eagle Ford in the money even at the oil price below $40

    In light of the oil price drop in 2015, shale production proved to be resilient in two ways. First, operators were able to benefit from lower unit costs and higher efficiency. Second, each well's performance increased because of high grading and better completion techniques.

    Using the Eagle Ford Shale play as an example, Figure 1 shows the evolution of the average wellhead breakeven prices* from 2012 to 2015. The values are derived by studying every single well in terms of well performance, hydrocarbon content and drilling and completion cost. Back in 2012 and 2013, the average breakeven was ~$70/bbl. In 2014, the wellhead breakeven price dropped by ~10% reaching ~ $63/bbl. For 2015, the reduction is estimated to be around 25%.

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    To better understand the 2015 development of the wellhead breakeven prices, Figure 2 shows the breakdown of the price split between the two drivers, well performance and unit prices. The contribution from unit cost savings is calculated based on 2014 well parameters with 2015 cost levels. The well performance contribution is simply the difference between the breakeven price adjusted for unit cost savings and 2015's breakeven prices.

    Image titleNorth American shale plays are heterogeneous in nature, with the best areas dependent on the optimal combination of depth, thickness and thermal maturity. Therefore, the average breakeven price does not provide a good overview of the profitability of a play. In 2015, operators are focusing the development on the very core areas where breakeven prices are significantly below average. To illustrate the breakeven spreads, Figure 3 shows the wellhead breakeven oil prices for the wells put on production in 2014 and 2015 where the breakeven oil prices are calculated using the 2015 unit costs. According to the map, the best wells have breakeven prices lower than $40/bbl. The core counties include Karnes, DeWitt and part of Gonzales counties, where the main companies are ConocoPhillips, Marathon Oil, BHP Billiton and EOG Resources. ConocoPhillips is currently running three rigs in DeWitt County, where BHP Billiton has seven rigs. Marathon Oil also operates seven rigs in Karnes County. Wells located in Dimmitt and Webb counties are also considered core, where the main operators are Anadarko and Chesapeake.

    Image titleAs breakeven prices fall further in 2015, it is important to highlight that the core areas are still profitable at prices below $40/bbl. It is clear that in the Eagle Ford Shale play the high grading and unit cost savings are having a positive impact on the wellhead breakeven oil prices. The wellhead breakeven oil price has fallen around 25% in 2015 compared to 2014. This also explains why shale focused companies are more resilient towards the low oil price environment.

    * Required oil price to achieve a type-well NPV of 0. It is assumed that condensate price is the same as oil price, NGL price is constant at $36/boe and gas price is constant at $3/kcf.

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    Rex Energy 3Q15: $95M Paper Loss, 1st Utica Well Online, Prod Up 15%

    Rex Energy and Eclipse Resources are really like two peas in a pod. The people who founded Eclipse, which is shopping itself, are former Rex Energy people.

    Both companies are pure play, concentrating on the Marcellus/Utica, and both companies are headquartered in State College, PA.

    On Monday Rex Energy issued its third quarter 2015 update. The company lost nearly $95 million for 3Q15–but the entire thing was a paper loss, writedowns for the value of their assets because the price of natural gas took a nosedive.

    Production for the company was up 15% in 3Q15 over the same period a year earlier. Some of the biggest news we spot in the update is that Rex has been able to squeeze the costs all the way down to $5.2 million per Marcellus well they drill.

    Also big news: Rex put into production their very first Utica Shale well, drilled in Lawrence County, PA.
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    TransCanada chosen to build $500m Mexican natural gas pipeline

    Canadian oil and gas infrastructure operator TransCanada has been awarded a $500-million contract to build, own and operate the Tuxpan–Tula pipeline, in Mexico. 

    Construction of the 36-inch-diameter pipeline was supported by a 25-year natural gas transportation service contract with the Comisión Federal de Electricidad (CFE), Mexico's State-owned power company. "The Tuxpan–Tula pipeline demonstrates our continued commitment to developing Mexico's energy infrastructure to meet the need for increased natural gas supply," TransCanada president and CEO Russ Girling stated. 

    Construction was expected to start in 2016 and TransCanada expected the pipeline to be in service by the fourth quarter of 2017. The pipeline would be about 250 km long and have a contracted capacity of 886-million cubic feet a day. 

    The pipeline will start in Tuxpan, in the state of Veracruz, and extend through the states of Puebla and Hidalgo, supplying natural gas to CFE's combined-cycle power generating facilities in each of those jurisdictions, as well as to the central and western regions of Mexico. The pipeline would serve new power generation facilities, as well as those currently operating with fuel oil, which would be converted to use natural gas as their base fuel. 

    The Tuxpan–Tula pipeline would complement TransCanada's business in Mexico, where it already owned and operated the Tamazunchale and Guadalajara pipeline systems and was completing construction of the Topolobampo and Mazatlan pipelines. By 2018, with the Tuxpan–Tula pipeline, TransCanada would have five major pipeline systems, with about $3-billion invested in Mexico.
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    Alternative Energy

    Mexico to award up to 2,500 MW in renewable energy contracts in March

    Mexico will start soliciting bids later this month in its first auction of renewable energy certificates, part of an electricity sector overhaul that ends the state-owned power company's monopoly, government officials said on Wednesday.

    Initial awards of the new certificates, which provide the right and impose the obligation to produce clean energy, are set for March, officials said.

    Up to 6 million of the certificates will be awarded in the first auction via 20-year contracts that seek to produce up to 2,500 megawatts of additional power generation from clean sources like wind or solar.

    National electricity company CFE will initially be the only buyer of the energy from companies that are awarded the certificates in the competitive tenders, but new wholesale power companies allowed by the energy overhaul will later be able to purchase it, too, said Energy Minister Pedro Joaquin Coldwell.

    "This blueprint guarantees that there will be demand for companies that generate electricity from clean sources," said Joaquin Coldwell.

    Mexico, a major crude oil producer and exporter, has for decades generated most of its power from fuel oil. Over the last several years, however, it has transitioned into cheaper and cleaner-burning natural gas as well as renewable sources.

    The new contracts will also help CFE meet a mandate to generate at least 5 percent of its power from cleaner sources by 2018.

    Read more at Reuters
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    Vattenfall focuses on large-scale wind power in Denmark

    The sale of a number of smaller wind farms on Jutland will allow Vattenfall, Denmark's largest operator and owner of onshore wind farms, to focus specifically on large onshore and offshore wind power projects.

    A total of 88 older turbines from 19 wind farms on Jutland with a total capacity of 65 MW have been sold to Green Power Partners K/S. The sum is not made public.

    'The size of these wind farms does not match Vattenfall's strategic direction, which is why we decided to sell them. We can now concentrate on further developing and strengthening our position in Denmark in the sector of large-scale onshore and offshore wind power,' says Martin Reinholdsson, Vice President of Vattenfall Generation.

    Vattenfall is investing in both onshore and offshore wind power in Denmark. The construction of the Klim wind farm in North-West Jutland is almost complete. Here, 35 older turbines have been replaced by 22 new and much more efficient ones, making it Denmark's largest onshore wind farm in terms of output. At the same time, project planning is underway for the 400 MW Horns Rev 3 wind farm off the west coast of Jutland.

    On 29 October, the Danish Energy Agency presented the candidates who are pre-qualified to bid for Kriegers Flak, Denmark's largest offshore wind power project with an output of 600 MW. Vattenfall is one of seven candidates.

    Yesterday's announcement marks the official start of the tender process which will end in November 2016. The winner will be those can offer the lowest price in öre per kWh for the first 50,000 full-load hours. In comparison, Vattenfall won the Horns Rev 3 concession with a price of 77 öre per kWh.

    - See more at:

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    Sunverge Is On A Mission To Marry Solar Power And Energy Storage

    At the Energy Storage North America conference in San Diego last month, the floor was packed with vendors. One of them was Sunverge, and they were interesting because they were focused not only on the issue of on-premise storage, but specifically how to combine solar power and storage together. Sunverge currently manages 5.3 megawatt-hours (MWh) of distributed storage, combined with 1.9 MW of solar.

    This solar/storage hybrid is a theme that is getting a lot more play around the world these days, as regulatory environments change for solar while the costs of both solar and storage continue to decline (having entered later in the game, storage costs have a lot further to go, but they are following a similar trajectory to that of solar).

    That regulatory environment will likely be a critical driver of storage adoption rates. As solar penetration rates increase, rules related to solar feed-in tariffs or net metering will continue to change. Countries such as Germany are reducing feed-in tariffs that once paid individuals a handsome price for all of the power produced on a rooftop. Now, with the delta between the price paid for electricity from the grid and the price received for exporting surplus solar power to the grid, it starts to make more sense to store energy on site, for deferred consumption at a later time when the solar panels are not producing.

    In Australia, for example, it is estimated that buying power from the grid can be three to times more expensive than the value of locally generated solar power exported to the grid. With those kind of economics, storage and self-consumption (what Rocky Mountain Institute refers to as ‘load defection’) makes economic sense.

    Meanwhile, in the U.S., Hawaii’s Public Utility Commission recently enacted an order eliminating the net metering option (under which the solar producer is credited the retail rate for each kilowatt-hour of surplus exported to the grid). With the new ruling, the exported solar is valued at approximately half the retail rate. This change hurts the economics of solar energy, but boosts the potential value of storage, since one can effectively double the value of every kilowatt-hour of solar power stored and consumed on site (compared with selling it back into the grid).

    Of course the economics ultimately depend upon a variety of factors, including costs of installed systems, retail rates, and the amount of energy that can be stored. But the trends are moving in favor of ever more solar and storage combinations, especially at the residential and SME (Small and Medium Enterprises) level, which is where Sunverge has staked its claim.
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    Base Metals

    Zijin plans $1.4 BIL share placement to fund copper, gold projects

    Chinese gold and copper miner Zijin Mining plans to raise Yuan 9 billion ($1.4 billion) through private share placements in the Shanghai stock market to fund buying of assets in Congo and Papua New Guinea and for a mine development project in China, the company said late Wednesday.

    The miner told the Shanghai and Hong Kong stock exchanges that its board had approved a revised plan which would see the company issue and allot a maximum 2.66 billion A shares at a minimum Yuan 3.38/share to a few specific independent investors.

    Of the total proceeds raised, Yuan 3.22 billion will be allocated to the development of the Kolwezi copper mine in Congo, central Africa, and loans provision to a Sino-Congolese joint venture company which owns the project.

    Zijin has 51% in the joint venture company, called La Compagnie Miniere de Musonoie Global, through its subsidiary Jin Cheng Mining. Other partners in the joint venture are Congo's state mining company La Generale des Carrieres et des Mines (28%) and China's Zhejiang Huayou Cobalt (21%).

    Zijin also plans to fund the Yuan 2.52 billion Kamoa copper project in Congo.

    The miner agreed in May this year to pay Vancouver-based Ivanhoe Mines $412 million for a 47.025% stake in the Kamoa project, of which the Chinese miner already has a 9.9% control.

    Another Yuan 1.82 billion of the share placement's proceeds has been earmarked for the Porgera gold mine development in Papua New Guinea.

    Fujian-based Zijin reached a $298 million deal with Canadian gold producer Barrick Gold in May for a 47.5% interest in the Porgera project.

    Zijin still needs to seek approval from its shareholder and securities watchdog China Securities Regulatory Commission on its revised private share placement proposal. The proposal has a 12-month validity period.
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    Vedanta’s Zambian unit says copper mine ‘unsustainable’

    Vedanta’s Zambian unit says copper mine ‘unsustainable’

    Zambia’s Konkola Copper Mines, owned by Vedanta Resources, said on Wednesday that its Nchanga mine is making “unsustainable losses”, responding to reports that the miner was set to close the operation.

    According to Zambia’s The Post newspaper, Konkola sent stakeholders a shutdown notice on November 4, which said 2 500 contractors would lose their jobs when the Nchanga operation was closed. But Konkola said in a statement in response to the story that it had agreed not to take any steps until it received feedback from unions.
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    3D Printing spurs TiOs usage?

    3D printing

    A lens on the German company Botspot’s Botscan3D—which scans objects placed on the stand in the center—gets an adjustment at a trade fair in Erfurt, Germany, in June.Dutch fashion designer Iris van Herpen uses 3D-printing, computer modeling and engraving to create her outfits—such as this one on display at an Atlanta art museum this month—in collaboration with architects, engineers and digital-design specialists.Some of Ms. van Herpen’s 3-D-printed shoes; she’s know for creating high-tech fabrics and fashions that combine materials like steel and silk with objects like magnets and umbrella parts.Australian researchers created the world’s first 3-D-printed jet engine, on display at the Avalon International Air Show in February. They said they planned to use printed components in flight tests within a year.New Zealand space technology company RocketLab looks to cut millions of dollars from the cost of satellite launches with its battery-powered Rutherford rocket engine, made from 3-D-printed parts.A young French boy born with a right-hand malformation trying on his new 3-D-printed prosthesis—in his chosen superhero colors—in August. Worn like a glove, it allows him to grasp objects and costs just $55 to make.A chocolate bear produced by a 3-D food printer on display at a Berlin electronics show in September.A mobility cart produced by 3-D printing allows TurboRoo, a Chihuahua born with only two legs, to take a walk in Indianapolis.French engineer and professional violinist Laurent Bernadac playing the ’3Dvarius,’ 3-D-printed from transparent resin, in Paris in September. 1 of 9fullscreen

    A lens on the German company Botspot’s Botscan3D—which scans objects placed on the stand in the center—gets an adjustment at a trade fair in Erfurt, Germany, in June. 

    JENS MEYER/ASSOCIATED PRESS Dutch fashion designer Iris van Herpen uses 3D-printing, computer modeling and engraving to create her outfits—such as this ... Some of Ms. van Herpen’s 3-D-printed shoes; she’s know for creating high-tech fabrics and fashions that combine materials like steel and silk with objects like magnets and umbrella parts. 

    BRANDEN CAMP/ASSOCIATED PRESS Australian researchers created the world’s first 3-D-printed jet engine, on display at the Avalon International Air Show in February. They said they planned to use printed components in flight tests within a year.

    REUTERS New Zealand space technology company RocketLab looks to cut millions of dollars from the cost of satellite launches with its battery-powered Rutherford rocket engine, made from 3-D-printed parts. 

    PHIL WALTER/GETTY IMAGES A young French boy born with a right-hand malformation trying on his new 3-D-printed prosthesis—in his chosen superhero colors—in August. Worn like a glove, it allows him to grasp objects and costs just $55 to make. 

    JEFF PACHOUD/AGENCE FRANCE-PRESSE/GETTY IMAGES A chocolate bear produced by a 3-D food printer on display at a Berlin electronics show in September. AXEL SCHMIDT/REUTERS A mobility cart produced by 3-D printing allows TurboRoo, a Chihuahua born with only two legs, to take a walk in Indianapolis. 

    KELLY WILKINSON/ASSOCIATED PRESS French engineer and professional violinist Laurent Bernadac playing the ’3Dvarius,’ 3-D-printed from transparent resin, in Paris in September.

    SYDNEY—Global miners including Rio Tinto PLC and Iluka Resources Ltd. have long made a pile of profit from digging up a sludgy commodity known as mineral sands, then shipping it to countries such as China where it is used to whiten bathroom tiles or in household paints.

    Now, these miners are shooting to be at the forefront of technological change—supplying the same commodity for use in 3-D printing. They are working on ways to cut the cost of producing titanium dioxide, the compound commonly produced from mineral sands, and investing in technologies that will make it more attractive for the 3-D printing industry.

    In doing so, they hope to protect profits from future swings in demand for titanium dioxide. Prices of the mineral sand rutile have fallen more than two-thirds from their peak in 2012, amid a slowdown in the pace of demand from traditional users. That has forced miners to slash output: Iluka—the world’s second-biggest producer of titanium dioxide, with mining facilities in the U.S. and Australia—dug up 23% less raw rutile in the first nine months of 2015 versus a year earlier. Rio Tinto, the No. 1 producer, has closed furnaces in Canada and South Africa and says its global operations are running at about 60% of their capacity.

    3-D printing—also called additive manufacturing—offers great potential to diversify the market for mineral sands. The technology has transformed within a decade from a niche industry making models, prototypes and smaller items such as hearing aids to one that has attracted investments from companies including jet-engine maker General Electric Co. and appliance giant Whirlpool Corp.These manufacturers want stronger, more lightweight materials that don’t cost more than the ones that they currently use.

    3-D printing involves slicing a digital image of an object into thousands of layers, which printers then recreate one at a time in plastic, metal or other materials. A powdered form of the chosen material, such as titanium dioxide, is used to create the three-dimensional object from a computer design. In the case of titanium, the powder is melted layer by layer with a laser to create the item.


    While high costs to slow print speeds have constrained the 3-D printing industry, there are signs of more rapid growth. Consultancy Wohlers Associates Inc., based in Fort Collins, Co., predicts it to be worth US$21.2 billion in 2020, up from US$4.1 billion last year.

    “It is potentially a turbocharger over time on demand for titanium dioxide,” said David Robb, Iluka Resources’s managing director.


    The size of the market for 3-D printing powder—which includes forms of titanium, as well as steel, cobalt and other raw materials—is set to increase at a compound rate of 24% each year through 2020 to be worth US$500 million, according to MicroMarket Monitor, an India-based research company. It foresees 3-D printing being increasingly adopted in the manufacturing of some components used in the automobile and aerospace industries.

    To be sure, 3-D printing currently accounts for a small segment of the titanium-dioxide market and miners say it may be years before it contributes to their profits in a big way. Nearly 90% of titanium dioxide produced goes into pigments for paints, paper and plastics.

    While mineral sands account for only a fraction of Rio Tinto’s profits compared with iron-ore sales, they are the main business of the world’s other top two suppliers, Iluka and Stamford, CT.-based Tronox Ltd.

    Iluka is diverting a portion of its mineral-sands output to an industrial unit in Rotherham, a former steelmaking center in northern England. There, scientists for closely held Metalysis are testing a technology that they hope will simplify and dramatically reduce the cost of producing titanium powder. Iluka, owns 18% of Metalysis.

    Rio Tinto is also “positioning ourselves on a technical side and a production side” for a potential spurt in demand for 3-D printing powder, said diamonds and minerals chief executive Alan Davies.

    The mining giant has teamed up with The Natural Sciences and Engineering Research Council of Canada and École de Technologie Supérieure, an engineering school in Montreal, and is supporting four other academic projects assessing the production of titanium metal powders that could be used in 3-D printing, Mr. Davies said.

    Boeing Co., which already makes several hundred types of aircraft parts using 3-D printing, including air duct components, has been investigating a process called electron-beam melting, as it works well with titanium.

    Boeing said it is continuously reviewing 3-D printing methods, believing the technology offers “the potential for widespread use” to create titanium parts for its aircraft.

    However, Boeing said titanium powder is currently much more expensive than aluminum and steel, so there needs to be a strong business case for it to replace those materials.

    Still, Iluka says new planes tend to contain about three times the titanium of older models.

    “If you have a process that systematically changes out some of the componentry or engines with a lighter and equally strong metal, it is really a compelling case,” said Rio Tinto’s Mr. Davies.

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    Steel, Iron Ore and Coal

    China Jan-Oct coal industry FAI down 16.5pct on year

    China’s fixed-asset investment (FAI) in coal mining and washing industry stood at 330.1 billion yuan ($51.6 billion) over January-October, down 16.5% year on year, showed data from the National Bureau of Statistics (NBS) on November 11.

    Private investment in the sector contributed 186.4 billion yuan of the total, falling 15.7% from the previous year, compared to a 16.8% decline over January-September.

    Meanwhile, fixed-asset investment in all mining industries across the country posted a year-on-year drop of 8.5% to 1,051.6 billion yuan over January-October. Of this, private investment in mining industries contributed 594.4 billion yuan during the same period, falling 12%.

    The NBS data showed a total 118.6 billion yuan was spent on fixed assets in ferrous mining industry during the same period, down 20.2% from the previous year; while investment in oil and natural gas industry rose 1.7% on year to 255.8 billion yuan.

    The fixed-asset investment in non-ferrous mining industry witnessed a year-on-year decline of 4.7% to 175.1 billion yuan during the same period, data showed.
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    China Oct coke output down 9.4pct on year

    China produced 37.17 million tonnes of coke in October, decreasing 9.4% from a year ago but up 1.2% from September, showed data from the National Bureau of Statistics (NBS) on November 11.

    That was the first rebound after a three consecutive monthly drop, as coke producers returned to normal work after the Beijing military parade in September and slowed down production cut amid loan payment pressure.

    Over January-October, total coke output of China reached 375.66 million tonnes, down 5.1% year on year, the NBS data showed.
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    Met coal prices seen steady at record low into 2016

    Asian buyers will probably pay $89/t for hard coking coal, used to make steel, in the three-month period starting January 1, according to the median estimate of nine analysts surveyed by Bloomberg.

    That matches the price for this quarter, which is at a record low for quarterly prices and the smallest for any long-term contract since at least 2004, when deals were agreed on a yearly basis.

    The pain may not let up next year for metallurgical coal producers from Australia to the US as quarterly contract prices are forecast to remain at a record low amid slowing Chinese demand.

    Coal prices have suffered along with other raw materials while demand from China weakens as its economy shifts away from heavy investment and grows at the slowest pace in a generation. Producers from Teck Resources to Vale have cut output and shut mines as metallurgical prices slumped.

    "Demand growth has been moderating for most of the past two years as China withdraws," said Daniel Morgan, an analyst at UBS Group in Sydney. "Much of the met coal industry is loss-making and some of the market leaders are only breaking even."

    Australia, the world's biggest shipper of coking coal, has sustained output despite the price slide, with exports during the first nine months of this year marginally higher than the same period in 2014, government data shows.

    Australia exported 139.2 million tonnes of metallurgical coal during the nine months through September, compared with 137.1 million during the same period last year, according to data from the Australian Bureau of Statistics. Producers have cut 34 million tonnes from the market, equivalent to about 12% of last year's seaborne supply, Royal Bank of Canada estimates.

    Chinese imports slipped 17% to 62.4 million tonnes in 2014, from a peak 75.4 million in 2013, according to estimates from Morgan Stanley. The bank predicts they will fall further this year to 48.7 million.
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    Vale, BHP to create fund for Brazil dam burst recovery, may be fined

    Mining companies Vale SA and BHP Billiton Ltd plan to create a fund for rebuilding efforts after two dams burst at their iron ore venture in Brazil, their chief executives said in a visit to the site on Wednesday.

    Vale CEO Murilo Ferreira said Samarco, the joint venture operating the Germano mine complex, had shown it was able to deal with the disaster last Thursday that left at least six people dead and another 22 still missing.

    Read more at Reuters

    The Brazilian government on Wednesday said it may fine mining giants BHP Billiton Ltd and Vale SA for the "environmental catastrophe" caused by ruptured dams at an iron ore mine jointly owned by the companies in a southeastern state.

    The government is increasingly concerned over the rising death toll and contaminated mud flowing through two states as a result of the disaster. It is studying the mine's permits and will ensure the owners pay for cleanup costs, Environment Minister Izabella Teixeira told reporters in Brasília, the capital.

    "If federal fines are applicable, we will apply them," Teixeira said. "There will be punishment, and under Brazilian law the environment has to be repaired."

    Her remarks are the strongest yet from Brazilian government officials, who have been caught off-guard by a disaster that killed at least eight people and left another 21 missing in the mineral-rich state of Minas Gerais nearly a week ago.

    The warning also came as the chief executives of Australia-based BHP , the world's largest mining company, and Brazil's Vale , the world's biggest iron ore miner, scrambled to publicly take responsibility for the disaster.

    After surveying the devastated area together, BHP CEO Andrew Mackenzie and Vale CEO Murilo Ferreira told a press conference they would fulfill all their obligations as joint owners of the mine, which is formally run by Samarco Mineração.

    The two men said the mining giants would create a joint fund for the recovery costs, but added that it was too soon to calculate how much would be needed. They also reaffirmed the companies' commitment to the joint venture over the long term.

    Read more at Reuters

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