Mark Latham Commodity Equity Intelligence Service

Friday 24th July 2015
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    Oil and Gas


    Age of Abundance: No price for scarcity.

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    Gold at new low.Image title
    Copper breaks to five year low

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    Anglo American posts 30% drop in profit after commodities rout

    Anglo American Plc reported a 30% drop in first-half profit after a collapse in commodity prices.

    Underlying earnings fell to $904 million from $1.28 billion a year earlier, Anglo said in a statement today. The company maintained its interim dividend at 32 cents.

    Slumping commodity prices have undermined Chief Executive Officer Mark Cutifani’s efforts to turn around the fortunes of a business that mines African platinum and diamonds to Brazilian iron ore. The company fell to a 13-year low this week.

    Anglo American said it would take a non-cash impairment charge of $3.5 billion after tax, which includes a hefty $2.9 billion writedown on its Brazilian Minas-Rio iron-ore, facility following a warning earlier this month.

    Chief executive Mark Cutifani told CNBC the outlook for metals was set to deteriorate even further in the second half of the year as the group confirmed that it would be culling thousands of jobs in the coming years.

    The group also said it would cut some 6,000 overhead indirect jobs, which comes as platinum producer Lonmin also announced that it was planning to shut down several mining facilities, putting 6,000 jobs at risk.

    "It is a very tough environment, we have reduced our numbers by 10,000 in South Africa in platinum already, we still have a long way to go, we try and do it in the most sensitive way we can. In the end we have to make sure we are competitive. We have to take the long-term view, but we have got to do it in the right way," Cutifani told CNBC.

    Speaking on the continued decline in the demand for commodities, Cutifani said the data is a concern, and since February the firm has seen a $1.7 billion price impact on its products.

    "At the moment I am not sure we are at the bottom, I hope we are but one can never be sure and one has got make sure that your business can handle whatever the market throws at it," he told CNBC.

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    Caixin China PMI drops sharply, surprising markets

    The preliminary China Caixin purchasing managers index (PMI) surprised markets by dropping to a 15-month low in July, with analysts pinning the hit on the recent stock market crash and weak export demand.

    The index, released Friday, fell to 48.2, coming in well below the 49.7 forecast from a Reuters poll and the 50-mark separating growth from contraction.

    "The PMI came as a big surprise for the market, which was expecting an increase," Dariusz Kowalczyk, senior economist at Credit Agricole private bank, said. "I believe the reading reflects the negative impact of the stock market crash, the weaker outlook for consumption and the worsening of availability of funding for investment," he said, noting that initial public offerings (IPOs) were suspended in the wake of stock market turmoil.

    The data mark a sharp contrast to China's quarterly gross domestic product (GDP) data released last week, which beat forecasts by showing 7.0 percent growth, renewing long-standing concerns over data accuracy.

    "Recent improvements in economic momentum may have been derailed this month by weaker foreign demand," Julian Evans-Pritchard, a China economist at Capital Economics, said in a note Friday, adding that the export orders component of the data posted the largest decline. "Today's PMI reading suggests that the improvement in momentum seen at the end of the second quarter may not have extended into the start of the third quarter and that downside risks to growth remain."
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    North American mining stocks fall on debt fears despite strong results

    North American mining stocks slumped on Thursday, stripping two global producers of hundreds of millions of dollars in value, as market-beating results failed to appease investors fed up with bloated debt and hefty capital commitments.

    The selloff, led by Freeport-McMoRan and Teck Resources, set the stage for a rough reporting season, as miners trudge through the fourth year of a commodity downturn.

    Investors must scrutinize mining stocks and their debt loads, said Darren Lekkerkerker, co-manager of the Fidelity Global Natural Resources Fund, which has only about 4 percent of its investments in mining.

    "You need to really be careful about owning those stocks, because as the commodity price comes down, when they have a lot of leverage, cash flow is really going to come down too," said Lekkerkerker.

    "No one wants to own stocks where they may need to do an equity issue in order to shore up the balance sheet."

    The stock of U.S.-based diversified miner and energy producer Freeport closed down 9 percent at $13.64, while Teck fell 4.6 percent to C$9.93. Both slid to six-year lows earlier, slashing $1.8 billion in market value from Freeport and C$600 million ($460 million) from Teck.

    Freeport said Thursday its debt rose 3 percent in the June quarter.

    "With a debt load of $20.9 billion and a market cap of $15.7 billion, it's out of line," said Maison Placements Canada Chief Executive John Ing.

    Freeport's stock slide reflects "the lack of any plan to really de-lever the balance sheet in any significant way," said BB&T Capital Markets analyst Garrett Nelson.

    On Monday, shares of Barrick Gold, the most levered North American gold producer, plunged 16 percent when bullion fell to five-year lows.

    The most significant change for the gold sector over the past four years is climbing debt levels at North American producers, RBC Capital Markets analyst Stephen Walker said in a note.

    Despite Teck's better-than-expected quarterly profits, investors worry about the Canadian miner's C$2.9 billion contribution to the Fort Hills oil sands project and a possible writedown of its coal assets due to weak prices, Haywood Securities analyst Kerry Smith said.

    There are also concerns that Teck's credit rating could fall below investment grade.
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    Freeport-McMoRan posts Q2 loss as metal, oil prices drop

    Diversified U.S. miner and energy producer Freeport-McMoran Inc reported an unexpectedly strong adjusted profit on Thursday as sales of the metals and oil it produces rose, but its hefty debt load swelled and it also posted a big net loss.

    The Phoenix, Arizona-based company's net loss of $1.85 billion, or $1.78 per share, resulted from writedowns on its oil and gas properties. Freeport shares were down 3 percent at $14.58 on the New York Stock Exchange after an opening gain.

    Excluding one-time charges of $2 billion, Freeport's adjusted profit was 14 cents a share, well above analysts' consensus expectation of 7 cents a share, according to Thomson Reuters I/B/E/S.

    "The outperformance versus our estimate was due to higher copper, gold, and oil sales than expected, combined with lower copper net cash costs, partially offset by weaker realized oil and gas prices," RBC Capital Markets analyst Fraser Phillips said in a note to clients. Phillips had expected adjusted earnings of 7 cents a share.

    Debt notched higher to $20.9 billion at quarter's end from $20.3 billion at the close of March. Freeport increased its debt in 2013 as it acquired two oil and natural gas producers, seeking to diversify from copper, gold and molybdenum mining.

    The company said it will continue to squeeze costs and capital spending as it tries to improve the health of its balance sheet.

    Freeport maintained its full-year sales forecast of 4.2 billion pounds of copper, 1.3 million ounces of gold, and 52.3 million barrels of oil equivalent. It trimmed its molybdenum output estimate to 93 million pounds from 98 million pounds.

    The average realized copper price in the quarter was $2.71 a pound, down from $3.16 in the year-before quarter. Sales of 964 million pounds largely matched last year's 968 million pounds.

    Sales of 13.1 million barrels of oil equivalent were down from 16 million barrels a year earlier, and average prices fell to $67.61 a barrel from $95.50.

    Gold production more than doubled to 352,000 ounces from 159,000 ounces, at an average price of $1,174 per ounce, down from $1,296.

    Freeport maintained its 2015 capital spending estimate of $2.8 billion for its oil and gas unit and $2.5 billion for mining projects.

    Cash totaled $466 million as of June 30, Freeport said.
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    France Passes New Energy Law Quadruples Carbon Price

    French lawmakers adopted a long-delayed energy law that will reduce the country’s reliance on nuclear reactors and raise carbon prices almost fourfold.

    Lawmakers late Wednesday passed legislation that included a last-minute amendment initially rejected by the government to increase the target price of carbon to 56 euros ($61.48) a ton in 2020 and 100 euros a ton in 2030, according to the National Assemblywebsite. The rate, now 14.50 euros a ton, climbs to 22 euros a ton in 2016 and is integrated in a levy on fossil fuels.

    The rise provides “visibility” to the business community on how carbon prices will evolve, Environment Minister Segolene Royal said. Higher taxes on fossil fuels will be offset by lower levies on other products, she also said.

    The new energy transition law, passed by a show of hands with no count to be published, reflects a campaign pledge three years ago by President Francois Hollande to cut France’s nuclear-energy reliance in favor of renewables.

    The law stipulates that nuclear reactors should provide half of all power output “by around” 2025. Electricite de France SA’s 58 reactors currently provide about three-quarters of French electricity production.

    Engie Chief Executive Officer Gerard Mestrallet said Thursday on France Inter radio that he favors a carbon price. Business leaders including six European oil majors had come out in recent months for a carbon-pricing mechanism as an incentive to move to cleaner energies and cut climate-changing emissions.

    The law, which also caps nuclear capacity at today’s 63.2 gigawatts, had been delayed by industry resistance and ministerial changes. The opposition-led Senate watered down nuclear provisions and backed the higher carbon price.
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    Dow Chemical profit beats estimates as margins continue to expand

    Dow Chemical Co reported a better-than-expected quarterly profit as the company's operating margins rose for the eleventh quarter in a row, helped largely by low raw material costs at its plastics-making business.

    The U.S. chemical maker's plastics business has benefited from easy access to cheap shale gas, which is stripped down into ethane to make ethylene - a key component of plastics and many chemicals.

    Global crude oil prices have halved in the past year, narrowing the price difference between crude oil-derived naphtha and natural gas-based ethane cracking, which erased the competitive advantage U.S. chemical firms had over their European rivals.

    Still, Dow's margins have held steady due to its cost-cutting efforts. The company's margins rose nearly to 19 percent in the second quarter ended June 30 from 15 percent a year earlier.

    The company cut 3 percent of its global workforce in May as part of a broader plan to reduce costs by $1 billion over three years.

    Dow has moved its focus to more lucrative businesses such as performance plastics and electronics to lower its exposure to commoditized chemicals.
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    Teck profit beats estimates as loonie’s slide aids bottom line

    Teck Resources Ltd. reported better-than– estimated second-quarter profit as the Canadian diversified mining company benefited from lower relative costs due to a slumping local currency.

    Net income fell to C$63-million ($48.6-million), or 11 cents a share, from C$80-million, or 14 cents, a year earlier, Vancouver-based Teck said in a statement on Thursday. Profit excluding one-time items was 14 cents a share, topping the 12– cent average of 25 analyst estimates compiled by Bloomberg.

    Sales were little changed at C$2-billion, beating the C$1.95-billion average estimate.

    “Downward movement in the Canadian dollar is acting as a counterweight to weakness in copper and coal prices,” Shane Nagle, a Toronto-based analyst at National Bank Financial, said before the results were released.

    The Canadian dollar has slumped against the greenback in the past year as growth in the Canadian economy slowed. While much of Teck’s operating costs are paid with the local currency, the company sells coal and metals in U.S. dollars.

    Each one-cent change in the U.S.-Canada exchange rate has a C$52-million effect on Teck’s earnings before interest, taxes, depreciation and amortization, the company said in February. Teck also said it was benefiting from the drop in oil prices.

    Teck generated 69 per cent of its revenue last year from operations in Canada, according to data compiled by Bloomberg.

    The company is the world’s second-largest exporter of seaborne coal used in steel making. The quarterly benchmark price for metallurgical coal fell in the period to $110 a metric ton, the lowest in more than seven years, amid slowing Chinese demand and a global oversupply.

    Teck said its copper unit costs fell by 15 U.S. cents a pound from a year earlier, while coal costs declined by $17 a ton, helped by the falling Canadian dollar, lower oil prices and cost-reduction efforts.
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    Former senior Chinese energy executive stands trial

    A former senior Chinese energy executive has gone on trial this week, the official Xinhua news agency reported on Wednesday, part of the government's sweeping crackdown against deep-rooted corruption.

    Wang Yongchun was a deputy general manager at China's biggest oil company, China National Petroleum Corporation (CNPC) , until he became caught up in a graft probe last year.

    Wang's trial on charges of "holding a huge amount of property with unidentified sources" and "abuse of power by a staff member of a state-owned company" opened on Monday in Xiangyang, central Hubei province, Xinhua said.

    Several senior CNPC executives have already been put under investigation in the far-reaching crackdown, among them former Chairman Jiang Jiemin, who was formally charged in March.

    CNPC, the parent of PetroChina , was a power base for disgraced former domestic security chief Zhou Yongkang, who was jailed for life for corruption last month, and several of his former colleagues or political allies have been caught up in a sweeping graft probe.
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    BHP Output Cuts Seen Flagging Bottom

    As commodity prices tumbled this week to a 13-year low, the world’s biggest miner said it will cut production of three of its four most important raw materials.

    Petroleum, copper and coal output will fall in fiscal 2016, while iron ore is the only one of its so-called four pillars forecast to post a rise, BHP Billiton Ltd. said Wednesday. The average prices for all its key commodities fell in the first half of the year, BHP said.

    Raw materials have tumbled about 9 percent in the past two months, driving the Bloomberg Commodities Index down as economic growth slows in China, the largest buyer of metals and energy. The drop comes as debate intensifies among producers about the merits of curbing output in oversupplied markets.

    “It looks to be a signal that, outside of iron ore, we are looking at the bottom of the market,” according to Mark Pervan, head of commodity research at Australia & New Zealand Banking Group Ltd. in Melbourne. “If they’re turning supply down, they must think that the market is nearing the bottom.”

    BHP, which flagged charges and impairments totaling as much as about $4.7 billion for fiscal 2015, fell 1.4 percent to A$26.44 at 1:44 p.m. in Sydney, extending its decline this year to 3.7 percent.

    U.S. crude slumped on Monday below $50 a barrel for the first time in more than three months, while the LMEX Index of six base metals hit a six-year low earlier this month. The rout has extended to the currencies of economies tied to commodities such as Australia, Canada and Norway.

    The weaker oil prices mean BHP will defer development of U.S. onshore gas fields, while declining copper grades and a coal mine closure will also crimp production.

    Full-year petroleum output will fall 7 percent to 237 million barrels of oil equivalent, as copper production declines 12 percent to 1.5 million metric tons. Coking coal output will slip 6 percent as thermal coal production by 2 percent. Iron ore output is forecast to expand by 6 percent.
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    BHP beats fiscal 2015 iron ore guidance, takes copper hit

    BHP Billiton beat its own production guidance for iron ore in fiscal 2015 and said it was on track for additional growth in the current year following major expansion work.

    The global miner also flagged a further hit to its full-year underlying profit of up to $650 million, chiefly linked to writedowns in its copper business.

    The impairments come on top of $2 billion in post-tax writedowns to its U.S. shale oil division announced last week.

    Output at its Western Australia iron ore mines increased by 13 percent to a record 254 million tonnes in the year ended June 30 versus previous guidance of 250 million tonnes, the company said on Wednesday.

    "Better productivity will be the sole source of volume growth at Western Australia Iron Ore in the 2016 financial year with production forecast to increase by 7 percent and unit costs are expected to fall to US$16 per tonne," Chief Executive Andrew Mackenzie said in the latest company production report.

    Further productivity improvements would contribute to an increase to 290 million tonnes a year over time, BHP said. The miner in April deferred a port project that would have boosted output to 290 million tonnes by mid-2017.

    BHP is facing ever-stiffer competition from Vale and Rio Tinto for its share of the seabourne iron ore trade, which many analysts believe will not meet bullish forecasts, contributing to a collapse prices.

    BHP said it saw a 41 percent decline in the price of its ore in fiscal 2015 to $61 per wet metric tonne. Iron ore .IO62-CNI=SI is trading around $52 a tonne, down from prices above $190 in early 2011 on slowing demand growth in China.

    The June quarter output for BHP's share of production of 60.1 million tonnes was in line with analysts' estimates of 60 million tonnes. The full-year production figures and guidance take into account the share of output for BHP's joint venture partners in some mines.

    Rival Rio Tinto this month cut its calendar 2015 target for shipments by 10 million tonnes to 340 million tonnes after two cyclones disrupted operations.

    BHP said it expects the latest impairments to total between $350 million and $650 million, mostly tied to its Cerro Colorado mine in Chile and redundancies in the overall copper business. A reduction in the use of rigs will also contribute between $50 million and $150 million to the writedown.
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    After Betting on an Oil Rebound, Small Factories Are Getting in Trouble

    Planning for a pickup in sales, some small manufacturers borrowed money from their larger counterparts to ramp up production. Now, a growing number can't pay for the investments as their forecasts aren't panning out, with energy-related companies being among the hardest hit.

    Small factories sometimes borrow from other manufacturers (who tend to be bigger) to pay for goods, with a commitment to repay them at some point in the future. Credit managers for the manufacturers who are owed the money are reporting that more of their clients are so far behind in their bills that the "act of last resort" is being taken: hiring a collection agency to recoup money owed, said Chris Kuehl, economic adviser for the National Association of Credit Management.

    The main culprits of this financial distress are small energy companies who supply large oil firms. When planning for this year, many of these companies expected the price of oil to rebound, he said. This "unjustified optimism" has left many of these companies in bad shape, Kuehl said.

    There may be more strain ahead. That's because credit managers “live in the future,” forecasting whether customers can pay invoices as many as four months from now, Kuehl said, and evidence is building that more energy companies are finding it increasingly difficult to make good on their debts.
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    A Chinese energy giant has entered the global market.

    China’s State Power Investment Corporation (SPI) was formed through the merger of China Power Investment Corporation (CPI) and State Nuclear Power Technology Corporation (SNPTC).

    The merger was approved by the State Council on 29 May.

    The combined company, which was formally established yesterday, has a registered capital of CNY 45 billion (£4.5bn), with total assets of CNY 722.3 billion (£74.55bn) and almost 14 million employees.

    The business has hydro, thermal and nuclear power as well as new energy sources.

    SPI has an installed generating capacity of 98GW.

    The company also covers electricity, coal, aluminium production, logistics, finance and other sectors. Annual sales are expected to exceed CNY 200 billion (£21bn).
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    China’s energy guzzlers H1 power use down 1.5pct on yr

    Power consumption of China’s four energy-intensive industries dipped 1.5% on year to 819.1 TWh over January-June this year, accounting for 30.8% of the nation’s total power consumption, the China Electricity Council (CEC) said on July 21.
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    Power producer Talen Energy to acquire Mach Gen for $1.18 bln

    U.S. power company Talen Energy Corp said on Monday it would acquire rival Mach Gen LLC for $1.18 billion to expand in the wholesale power market.

    Mach Gen owns more than 2,500 megawatts of natural gas-fired generating capacity.
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    End Game

    The prices of raw materials from oil and gold to copper, cotton and sugar tumbled, underscoring an increasing aversion to commodity investments as the Federal Reserve prepares to raise interest rates for the first time in nearly a decade.

    U.S. oil prices dipped below $50 a barrel on Monday during intraday trading for the first time since April, while gold slid 2.2% to its lowest level in five years.

    The drops extend a retreat from the commodity sector that has picked up speed in recent months. Hedge funds and other investors are holding more bearish than bullish wagers on gold for the first time on record going back to 2006, according to data released Friday by the Commodity Futures Trading Commission. Investors cut their bullish bets on oil to the lowest level since March.

    Investors pulled roughly $1.1 billion from commodities-sector funds during the second quarter of 2015, according to fund-data provider EPFR Global.

    Driving the selloff are expectations that the Fed will raise borrowing costs in coming months, a move that investors expect to further boost the dollar and pressure the prices of commodities, which generally are priced in the U.S. currency. A rising dollar makes raw materials less affordable to overseas investors, while higher interest rates tend to draw money into yield-bearing assets and away from commodities, which pay their holders nothing and often carry storage costs.

    Commodity prices fell close to the lowest level since 2002 on Monday, under pressure from a rout in precious metals, lower oil prices and weakness in most agricultural and soft commodities.

    The excess return Bloomberg Commodity index, which tracks a basket of 22 materials, was on course for its lowest close in 13 years as strengthening dollar weighed on well-supplied markets for energy, metals and grains.




    Across commodities, there are increasing signs that the more than decade-long “commodity supercycle” has ended.

    Producers have responded to several years of elevated prices by bringing on new supplies, which have more than met growth in demand from emerging markets.

    Gold dropped below $1,100 an ounce for the first time in five years; US WTI crude oil futures fell within a few cents of $50 a barrel, less than half its level of July last year; and copper in London slipped back towards a six-year low near $5,400 a tonne.

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    Seeing as gold is collapsing we had better watch velocity

    Fed Lifts Capital Requirements for Banks

    As originally proposed, the size of the surcharge would have been determined based on a measure of each bank’s systemic importance relative to other global banks. This made individual surcharges somewhat unpredictable; they would depend not just on a bank’s own actions but those of others, too. So, a bank seeking to reduce its surcharge by shrinking could be stymied if other banks took the same tack.

    That wasn’t what the Fed wanted. Discussing the new rules, Chairwoman Janet Yellensaid the goal was to force banks either to shrink or to hold substantially more capital.

    The revised rule uses a fixed measure of systemic importance. That should make the surcharge more predictable.

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    Franklin Hit With Losses as Billion-Dollar Energy-Bond Bets Sour

    Doubling down on the debt of drillers and miners is coming back to bite money manager Franklin Resources Inc. as those industries struggle amid a prolonged commodities slump.

    Losses are accelerating in bonds that the firm’s been buying up the past two years as prices on everything from crude to iron ore resume declines. Debt of coal producer Peabody Energy Corp., in which Franklin was the biggest public holder as of March, plunged 51 percent the past two months. A $2.3 billion junk-bond issue that the asset manager helped orchestrate in April for Australian iron miner Fortescue Metals Group Ltd. has lost 14 percent of its market value in less than a month.

    While Franklin’s not alone in feeling the pain of steep declines in commodity prices since the peak last year, few mutual-fund managers have been as aggressive in staking their fortunes to the industry’s debt even as defaults begin to mount. In some cases the asset manager is cutting its losses, selling the senior debt of coal producer Walter Energy Inc. before its bankruptcy filing this month, according to people with knowledge of the trades. In others, it’s been swapping its holdings for debt that would recover more in a restructuring.

    “This is a difficult time in the market, especially for anyone who’s had a meaningful energy exposure,” said Ed Perks, who manages the $90 billion Franklin Income Fund, which has had about 20 percent of its holdings in energy-related assets in 2015. “We’re always kind of evaluating our outlook for different companies and the best way forward.”

    Franklin’s funds owned more than 15 percent of oil explorer Energy XXI Ltd.’s $4.5 billion of bonds through March, according to data compiled by Bloomberg. The debt has lost 33 percent this year, according to Bank of America Merrill Lynch index data. It owned more than a third of the $1.5 billion of securities issued by CHC Group Ltd., a helicopter company that shuttles offshore oil and gas workers. That debt has lost 32 percent.

    The firm was also the biggest holder of Arch Coal Inc. notes, which have declined 46 percent; SandRidge Energy Inc., which are down 39 percent; and Linn Energy LLC, which have lost 19 percent.

    Franklin and Capital Group Cos. bought almost half of Fortescue’s $2.3 billion bond offering in April in a so-called reverse inquiry, a person with direct knowledge of the matter said at the time. The sale allowed the money managers to swap lower-ranking unsecured notes for the new secured debt, which paid more, a second person said.
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    GE Raises Low End of Industrial Forecast Amid Finance Exit

    General Electric Co. is getting more bullish about profit prospects from industrial operations as Chief Executive Officer Jeffrey Immelt accelerates efforts to shrink the GE Capital finance unit.

    The shares rose in early trading Friday after GE boosted the low end of its 2015 forecast for earnings from manufacturing. The new projection is $1.13 to $1.20 a share, up from a range starting at $1.10. Second-quarter adjusted profit of 31 cents a share beat analysts’ 28-cent average estimate.

    Immelt’s push to divest most of GE Capital ties the parent company’s fortunes more firmly than ever to the industrial divisions making products such as jet engines and locomotives. His April 10 plan for $200 billion in GE Capital asset sales is so sweeping that it largely overshadowed how GE’s manufacturing businesses were faring.

    “We got some better operating performance than we might have thought,” said Nicholas Heymann, a William Blair & Co. analyst. “The exit of Capital seems to continue to be on track.”

    GE’s Power & Water and Aviation units helped drive a 2 percent jump in sales of $32.8 billion, topping analysts’ $28.8 billion estimate. Industrial revenue was $26.1 billion. Industrial margins, a metric used by investors to gauge the strength of GE’s operations, rose 0.7 percentage point to 16.2 percent.
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    Senior Iranian cleric challenges nuclear deal with world powers

    A senior cleric challenged Iran's historic nuclear deal with world powers on Friday, echoing a cautious early assessment of the accord by Supreme Leader Ayatollah Ali Khamenei, an arch-conservative who has the last word on matters of state.

    Ayatollah Mohammad Ali Movahedi Kermani did not dismiss the accord in his remarks at Friday prayers in Tehran, but his language was sufficiently tough -- some terms of the deal were an "insult" and "excessive", he said -- to indicate significant unease about the accord within Iran's clerical establishment.

    His remarks will be seen by Iranians as reflecting Khamenei's views and contrast with the praise given to the accord by President Hassan Rouhani and Foreign Minister Mohammad Javad Zarif, who plan to use the deal as the basis for a charm offensive among Iran's wary Arab neighbours.

    Kermani said Iran would accept a deal only if sanctions were lifted immediately, frozen revenues were returned and Tehran's revolutionary ideals, including its fight with "global arrogance" - a term for the West and Israel -- were preserved.

    "They have some excessive demands," he said, objecting to restrictions placed on the number of centrifuges Iran can operate, on its nuclear research and development and on its handling of enriched uranium.

    Political analysts said the comments by Khamenei and Kermani allow conservative clerics the political space to make further criticisms of the deal and could also absolve the Supreme Leader of responsibility if the accord, which will last for years, falls apart at some future stage.

    At the same time their criticism is not so severe as to torpedo the deal and block a lifting of sanctions - something ordinary Iranians are desperate to see happen to restore a normal economy.
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    Is the internet destructive of end demand?

    Image titleMicrosoft's Encarta shrank the Encyclopedia business from $1.2B to $600M before Wikipedia shrank the business by another 90%.

    Image titleImage title

    Print sales of adult fiction have declined by over £150m since 2009, new figures show, as ebooks take an increasingly large bite out of the market.

    A review of 2014 from book sales monitor Nielsen BookScan shows that while the decline in sales of print books in the UK slowed last year, with value sales down 1.3% to £1.39bn, and volume sales down 1.9% to 180m, the performance for printed adult fiction was markedly worse. The adult fiction market was the worst-performing of all areas of the book business, down by 5.3% in 2014 to £321.3m, with volume sales down 7.8% to 50.7m. In 2009, printed adult fiction was worth £476.16m.

    The decline is even greater when paperback fiction is removed from the picture: according to Nielsen, hardback adult fiction sales plummeted last year by 11.6% to £67.9m, with just three titles – by crime and thriller bestsellers Lee Child, CJ Sansom and Martina Cole – selling more than 100,000 copies.

    We knew this day was coming.  Self-published ebook authors are landing on the New York Times bestseller list in a big way.

    Take a look at the August 5 edition of The New York Times Fiction Ebook bestseller list, out yesterday.  Lightning struck multiple times this week.

    Congrats to Colleen Hoover (Slammed at #8, Point of Retreat at #18), R.L. Mathewson (Playing for Keeps at #16), Lyla Sinclair (Training Tessa at #17) and Bella Andre (If You Were Mine at #22, Can't Help Falling in Love at #23, and I Only Have Eyes for You at #24).

    Open Access: the future of academic publishing
    Researchers, authors and funding bodies are realising that the high price of access to academic books and journals means that only a select few can read their work. Open Access (that is, making texts free to read and reuse) helps spread research results and other educational materials to everyone, globally, not just to those who can afford it or have access to well-endowed university libraries able to pay the high prices required by commercial 'legacy' publishers. Scholars are realizing that participation in a system that confines the readership, and therefore the intellectual engagement, to the affluent few is not only morally questionable but a potential drag on the progress of their subject, and indeed of their academic careers.

    It is becoming a requirement for publicly-funded research to be made available in Open Access format and we are able to achieve this quickly and effectively.

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    Gold: Surrender?

    A lot of investors have become disillusioned with gold,” says Suki Cooper, head of metals research at Barclays in New York. “Safe-haven demand hasn’t been strong enough to lift prices, but has only been strong enough to keep them from falling.”

    Many people may have bought gold for the wrong reasons: because of its glittering 18.7% average annual return between 2002 and 2011, because of its purportedly magical inflation-fighting properties, because it is supposed to shine in the darkest of days. But gold’s long-term returns are muted, it isn’t a panacea for inflation, and it does well in response to unexpected crises—but not long-simmering troubles like the Greek situation. And you will put lightning in a bottle before you figure out what gold is really worth.

    With greenhorns in gold starting to figure all this out, the price has gotten tarnished. It is time to call owning gold what it is: an act of faith. As the Epistle to the Hebrews defined it forevermore, “Faith is the substance of things hoped for, the evidence of things not seen.” Own gold if you feel you must, but admit honestly that you are relying on hope and imagination.

    Recognize, too, that gold bugs—the people who believe in owning the yellow metal no matter what—often resemble the subjects of a laboratory experiment on the psychology of cognitive dissonance.

    When you are in the grip of cognitive dissonance, anything that could be regarded as evidence that you might be wrong becomes proof that you must be right. If, for instance, massive money-printing by central banks hasn’t ignited apocalyptic inflation, that doesn’t mean it won’t. That means it is more likely than ever to happen—someday.

    You don’t want to be one of these people, spending years telling reality that it is wrong. There is a case to be made for owning gold, but it speaks in a whisper, not in the shouts of doomsday so customary among gold bugs.

    Because gold, unlike stocks, bonds, real estate and other financial assets, generates no income, valuing it is all but impossible. “It’s intrinsically worthless or intrinsically priceless,” says Paul Brodsky, a former hedge-fund manager who now is a strategist at Macro Allocation, an investment-research and consulting firm in New York. “You can build a financial model to value it, but every input is going to be your imagination.”

    'China released data on its gold holdings for the first time in about six years, but investors say the guessing game about the country’s actual inventory continues.

    The People’s Bank of China on Friday published figures on its gold reserves for the first time since 2009. Its official gold reserves stood at 53.3 million ounces, or 1,658 metric tons, in June.

    The last time China reported official figures was in April 2009. Back then, the figure stood at 1,054 metric tons, according to Ross Norman, chief executive officer at Sharps Pixley.

    The latest total is about half what the market thought it was. The market was generally expecting a total of well over 3,000 metric tons, according to Brien Lundin, editor of Gold Newsletter.'

    After yesterday's announcement by China claiming they only possess 1,658 tonnes of gold, today one of the top money managers in the world told King World News that official gold holdings in China may actually be 10X that figure.  He also discussed brilliant monetary chess move against the West.

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    Oil and Gas

    Houston: We have a problem!

    Image title
    Chesapeake 5 year CDS credit protection cost.

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    Petrobras union may follow 24-hour strike with September walkout

    Brazil's main oil workers union is considering an open-ended strike in September if a 24-hour walkout scheduled for midnight Thursday fails to stop moves to shrink state-run oil company Petrobras, a senior union official said.

    FUP, which represents platform, refinery and other workers, is fighting plans by Petroleo Brasileiro SA, as Petrobras is known, to sell $15.1 billion of assets by the end of 2016.

    Petrobras wants to pay down debt, which at about $120 billion is the largest of any oil company, as well as generate cash for investment and revive investor confidence after a giant corruption scandal.

    FUB also opposes a bill before Brazil's Senate seeking to strip Petrobras of its right to all new development work in a giant offshore area known as Subsalt Polygon and end a requirement that Petrobras take a minimum 30 percent stake in exploration and production rights in the area.

    "If our demands aren't met, we are ready for an open-ended strike in September," said Simão Zanardi, a member of the national directorate of FUP, Brazil's largest federation of oil workers union. "We will not let them sell off what belongs to all Brazilians."

    FUP opposes any non-government involvement in Petrobras and wants the company, which has had non-government shareholders since the 1950s, totally nationalized.

    While most Petrobras strikes have had little or no impact on production, FUP wants to revive the spirit of a 31-day strike in 1995.

    That strike ended due to the government threatening mass lay-offs, but Zanardi believes it helped avert a privatization of Petrobras in 1997, when it was stripped of its monopoly on exploration, production and refining in Brazil.

    Under Brazilian law, unions must cooperate in the safe operation or shutdown of dangerous facilities. The 24-hour strike will leave many union members on the job. Petrobras officials have said it would take five to 10 days for a strike to start having a significant impact on oil or fuel output.
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    Offshore driller Hercules says weeks from bankruptcy

    Hercules Offshore Inc, stung by slumping demand for drilling services in older Gulf of Mexico oilfields, said on Thursday it plans to file for creditor protection in about three weeks and emerge several months later with a restructured balance sheet.

    The small company, which rents out jackup rigs to drill shallow water wells that tend to yield less than giant deepwater ones, has been struggling for months because of an oversupplied rig market and slumping oil prices that have forced producers to slash spending.

    In November it cut 15 percent of its workforce, or 324 jobs, and last month started talks with creditors for an orderly bankruptcy filing.

    Hercules said on Thursday it has support for the filing from holders of over two thirds of its collective outstanding debt. It added that the prepackaged process will reduce the time it spends in bankruptcy protection, which it hopes to leave early in the fourth quarter.

    The company's balance sheet lists $266 million in current assets and $1.35 billion in current liabilities.
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    FLNG capex to reach $58.3 billion to 2021

    Capex for FLNG vessels is estimated by Douglas-Westwood to reach $35.5 billion during 2015-2021. FSRU capex is forecast at $22.8 billion for the same time period. That makes the overall FLNG spending $58.3 billion for the period as predicted in World FLNG Market Forecast 2015-2021.

    The delivery of Petronas’ PFLNG 1, also known as the PFLNG SATU, will put the world’s first FLNG vessel into operation by the end of 2016.
    This will be followed by Shell’s Prelude FLNG vessel, a significantly larger project and one that is likely to shape future FLNG developments.

    Construction of the 488 m- (1,601 ft) long facility started in 2012 at Samsung in Korea and is expected to start up by 2017.

    Following these projects is a second wave of new projects that are yet to be sanctioned but are expected to drive a growth in expenditure from 2019 onwards. This includes major projects in frontier regions such as East Africa.

    DW anticipates more floating regasification units are to be sanctioned, with Asia and Latin America being the dominant regions. Upcoming projects are visible in Indonesia, China, Pakistan, India, Vietnam, Bangladesh, and Sri Lanka, mostly led by national oil companies. Latin America will see deployments of floating regassification units in Chile and Puerto Rico.
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    Cameron profit falls by one-third

    Oil service firm Cameron said Thursday a downturn in drilling ate into its second-quarter profits.

    Houston-based Cameron, which provides equipment to offshore producers, reported a net income for the three months ending June 30 of $155 million, down from $233 million in the same period last year. Revenues fell to $2.2 billion from $2.5 billion.

    In its earnings release, the company said that orders were on the rise from the first quarter of 2015.

    “We believe the pace of the decline in customer spending has begun to moderate,” said Cameron CEO and Chairman Jack Moore.

    But the company said it would remain on the defensive. Cameron reported a $13 million facility closing and severance charge on the quarter.

    “In this environment, we remain focused on the things we can control: the ongoing systemic reduction in our cost structure, execution, customer relationships and technology advancement,” Moore said in a statement.
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    As pump prices drop, U.S. motorists splurge on premium gas

    U.S. motorists' habit of filling up with costlier "premium" gasoline when pump prices drop is delivering extra profits to refiners, such as Royal Dutch Shell and traders like Noble Group.

    For the second time in the past decade, a sharp fall in pump prices has triggered a spike in demand for the higher-octane fuel that has far outpaced the overall rise in consumption.

    In the first four months of the year, sales of premium grade gasoline - which makes up around a tenth of the market - surged by 12.6 percent, according to the latest data available from the U.S. Energy Information Administration. Regular grade sales rose by only around 3.7 percent during the period.

    The extra demand combined with a supply squeeze in California, where cleaner fuel that uses similar additives as high-octane gas is the norm, has widened the price difference between regular and premium fuels and sent the price of specialized components used to make premium gas soaring.

    "Premium can be very lucrative for refiners when the spread between regular and premium are high," Neil Earnest, an energy expert with energy consultants Muse Stancil, said.

    By mid-July, premium gasoline was selling at 38 cents more than regular grades, EIA figures show, compared with just under 32 percent last year. Premium gas was still 40 percent cheaper than regular gas a year ago. (graphic:

    Companies that make or import niche fuels, such as alkylate and reformate that are blended with ordinary gasoline to increase its octane rating, are reaping additional returns even if some experts question whether premium fuel offers any considerable benefits for most motorists.
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    Iranian officials say condensate and fuel oil on ships

    As traders speculate over what type of oil is being kept by Iran in floating storage, two Iranian oil officials said on Thursday that the oil was condensate and fuel oil.

    The millions of barrels on ships could be delivered quickly to Iran's customers once sanctions are lifted and some traders believe a substantial part is crude, making them concerned about its impact on a global market already suffering a supply glut.

    "There is no crude oil in our floating storage, only condensate and fuel oil," said one of the officials, who declined to be identified due to company policy.

    Another official also said no crude was being stored.

    World powers and Iran reached a landmark deal last week, paving the way for sanctions on Iranian oil exports to be lifted in exchange for curbs on its nuclear programme.

    Brent crude has fallen about 4 percent since the deal on concerns of the impact of a prompt release of the estimated 40 to 50 million barrels of Iranian crude and condensate from floating storage.

    "Iran oil storage concerns are likely overblown," Morgan Stanley analysts led by Adam Longson said in a note.

    "Industry sources suggest that a large portion of the Iranian crude stored on floating tankers is condensate."

    Some traders, however, say Iran has stored crude on tankers and is reluctant to let the market know because of concerns it could depress prices.

    "If it's a known fact that they have so much crude floating, the market will react by demanding discounts to help clear it," said a senior trader who deals with Iranian oil.

    Iran sells most of its fuel oil from storage tanks in Fujairah, traders said, adding that they do not see an incentive for the producer to store the product.

    "It would be surprising if they stored fuel oil as they had a mechanism of pushing it into the market, so why store it if you need the cash?" a fuel oil trader with a western firm said.

    Asian trade sources have said that most of the oil held in Iran's floating storage, or about 30 million barrels, was condensate, and the rest crude oil.

    Iran's stockpile of the ultra light oil is building up each month as Dragon Aromatics, the biggest buyer of South Pars condensate in China, has been shut since April after a fire.

    The Chinese petrochemical producer used to buy 2 million barrels of South Pars condensate, out of the 9 million barrels Iran produces each month.
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    Drillers Patterson-UTI, Precision gain from high-tech rig demand

    Two North American land drilling-rig operators - Patterson-UTI Energy Inc and Precision Drilling Corp - issued positive outlooks on Thursday, highlighting the competitive advantage of drillers using newer, high-tech rigs.

    Snyder, Texas-based Patterson-UTI said its margins were improving and its U.S. rig count was stabilizing, while Calgary-based Precision Drilling said it expected its market share to improve due to demand for high-tech rigs.

    Modern, faster rigs are cheaper to run and drill more efficiently than the older rigs still used by many drillers.

    That makes them a must-have for oil and gas companies trying to rein in spending in the face of weak oil prices. Crude oil prices have more than halved since June last year.

    Cost-cutting is also helping the drilling companies protect their margins. Precision Drilling said in April it had 2,200 fewer employees than at the end of 2014.

    "Although we have no visibility into a recovery at this time, we believe that our rig count appears to be stabilizing," Patterson-UTI Chief Executive Andy Hendricks said in a statement accompanying the company's second-quarter results.

    Ongoing cost-cutting efforts in the company's contract drilling business, especially in the pressure pumping unit, have resulted in better-than-expected margins, he said.

    Patterson-UTI, which had an average 122 rigs in operation in the United states in the quarter, said it expected the average rig count in July to be consistent with the second-quarter U.S. exit rate of 110.

    Patterson-UTI's revenue fell nearly 38 percent to $472.8 million in the three months ended June 30. The company reported a net loss of about 13 cents per share, compared with a year-earlier profit of 37 cents per share.

    Precision Drilling posted a loss of 10 Canadian cents per share, compared with the loss of 2 cents per share it reported in the second quarter of 2014.

    Revenue fell nearly 30 percent to C$334.5 million.
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    $1 Natural Gas?????

    Image title
    Texas Eastern Transmission's Illinois Hub price spot.
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    Freeport sets sights on export of foreign-sourced LNG

    Texas-based terminal operator Freeport LNG Development LP has filed an application with the US Department of Energy (DoE) for renewal of its blanket authorization to export LNG previously imported into the US from foreign sources.

    The application relates to the amount up to the equivalent of 24 billion cubic feet (Bcf) of natural gas on a short-term or spot market basis for a two-year period starting on July 19th, 2015.

    If approved, Freeport LNG would export the LNG from the Freeport LNG Terminal located on Quintana Island, Texas, to any country with the capacity to import LNG via ocean-going carrier and with which trade is not prohibited by U.S. law or policy.

    The company currently holds a blanket authorization to import LNG from various international sources by vessel in an amount up to the equivalent of 30 Bcf of natural gas.

    DoE said that in reviewing the application it would consider domestic need for the gas as well as other issues, such as consistency with DoE’s policy of competition and free negotiations on trade arrangements and environmental effects.
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    Senate Republicans end bid to pare back oil train safety rule

    Senate Republicans have backed away from a controversial proposal that would have repealed a new federal safety rule requiring oil trains to be equipped with advanced new braking systems.

    Republicans eliminated the proposal from a multi-year surface transportation bill, after coming under pressure from the Obama administration and Democratic lawmakers, whose support they need for passage of the legislation, Senate aides said on Wednesday.

    In late June, the Republican-controlled Senate Commerce Committee voted to repeal the requirement that trains carrying crude oil install electronically controlled pneumatic (ECP) brakes, less than two months after the administration unveiled sweeping new rules aimed at preventing catastrophic oil train derailments.

    The railroad and oil industries, including interests controlled by billionaire investor Warren Buffett, mounted a powerful lobbying campaign to overturn the ECP requirement, saying it would slap an unnecessary $3 billion cost on railroads, oil refiners and others.

    BNSF Railway Co, which Buffett owns through his Berkshire Hathaway Inc holding company, is the leading U.S. railroad for crude oil shipments and would have benefited most from cost relief if the Republican bid had been successful.

    Senator John Thune, Republican chairman of the Senate Commerce Committee, had proposed repealing the ECP requirement last month with a measure that orders new research to justify the technology's benefits until a permanent decision is made.

    But the legislation unveiled this week by Senate Republican leader Mitch McConnell preserves the ECP requirement. It still requires the study of braking technologies, and calls on the transportation secretary to repeal the ECP requirement eventually if the research does not justify its use.
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    Halliburton seen facing antitrust issues on Baker Hughes deal

    Oilfield services provider Halliburton Co's acquisition of smaller rival Baker Hughes Inc is facing resistance from U.S. regulators who are concerned that the deal could hurt competition, Bloomberg reported.

    Justice Department lawyers reviewing the proposed $35 billion deal are worried that the oilfield services industry would become too concentrated post the merger, Bloomberg reported, citing a person familiar with the matter.

    "We are fully committed to our target of closing the pending Baker Hughes acquisition in late 2015," Halliburton spokeswoman Susie McMichael said in an email to Reuters.

    The Justice Department concern focused on two areas, according to the first source. One is that the drilling technology businesses would go to small companies that could not effectively compete with the two leaders. The other is that the leaders would have less incentive to innovate.

    Halliburton and Baker Hughes have overlapping businesses in the United States, Asia and Europe, and the deal is being scrutinized by regulators in several countries.

    The second source, who believes regulators will ultimately approve the deal, said the companies knew going into the antitrust probe that divestitures would be needed, and that these were under discussion.

    The Justice Department has not said if it was satisfied, said the source, who noted that the agency was far from ready to make a final decision.

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    Cairn Energy said to vote against Vedanta offer

    FT - UK-based explorer Cairn Energy is set to vote against an offer by Vedanta Ltd to buy out minority shareholders in its former subsidiary Cairn India, according to people familiar with the situation.

    The move will cast doubt on the overall transaction, which was proposed last month by Mumbai-based resources conglomerate Vedanta Ltd, in part to bolster the finances of its heavily indebted London-listed parent Vedanta Resources.

    Cairn Energy is Cairn India’s largest minority shareholder, with a 10 per cent stake. Vedanta controls about 60 per cent of Cairn India, but Indian law requires that a majority of minority shareholders also approve the deal.

    This means that the two largest minorities — Cairn Energy and state-backed insurer Life Insurance Company of India (LIC), which holds about 9 per cent — are likely to be able to block the transaction, analysts say.

    A vote against the merger would mark the latest twist in the often tumultuous relationship between Vedanta and Cairn, which began when Vedanta’s billionaire founder Anil Agarwal bought out the British group’s majority holding in a long-delayed $9.6bn deal in 2011.

    Cairn Energy’s objections rest on “fundamental” disagreements over valuations, alongside a preference for holding an investment in an energy company rather than a distributed resources group, according to one person with direct knowledge of the matter.
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    US Domestic oil production week ending July 17th

                                        Last week    Last Month   Year ago

    Domestic Production .....9,558           9,562          8,565
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    Summary of Weekly Petroleum Data for the Week Ending July 17

    U.S. crude oil refinery inputs averaged about 16.9 million barrels per day during the week ending July 17, 2015, 45,000 barrels per day more than the previous week’s average. Refineries operated at 95.5% of their operable capacity last week. Gasoline production increased last week, averaging over 10.1 million barrels per day. Distillate fuel production decreased last week, averaging about 5.1 million barrels per day.

    U.S. crude oil imports averaged over 7.9 million barrels per day last week, up by 587,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged over 7.5 million barrels per day, 2.5% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 815,000 barrels per day. Distillate fuel imports averaged 193,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 2.5 million barrels from the previous week. At 463.9 million barrels, U.S. crude oil inventories remain near levels not seen for this time of year in at least the last 80 years. Total motor gasoline inventories decreased by 1.7 million barrels last week, but are in the upper half of the average range. Finished gasoline inventories increased while blending components inventories decreased last week. Distillate fuel inventories increased by 0.2 million barrels last week and are in the middle of the average range for this time of year. Propane/propylene inventories rose 0.3 million barrels last week and are well above the upper limit of the average range. Total commercial petroleum inventories increased by 2.9 million barrels last week.

    Total products supplied over the last four-week period averaged about 20.0 million barrels per day, up by 3.4% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged over 9.6 million barrels per day, up by 6.9% from the same period last year. Distillate fuel product supplied averaged 3.8 million barrels per day over the last four weeks, down by 1.5% from the same period last year. Jet fuel product supplied is down 2.6% compared to the same four-week period last year.

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    Russia: The conclusion of the second gas contract with China is postponed

    The signing of a contract with China for the supply of gas through the 'Altai' pipeline (or 'the Power of Siberia - 2') has been delayed indefinitely, two federal officials told 'the Vedomosti'. The growth of the Chinese economy is slowing down, China is revising its energy needs, they explain.

    The growth in demand for gas in China is slowing, and due to the fall in oil prices, LNG, for example from Australia, is becoming more accessible for China, the analyst of 'Sberbank CIB' Valeriy Nesterov informs. According to BP, in 2012-2013 gas consumption in China has grew by 12-13%, while in 2014 the increase was 8.5% and reached 185.5 billion cubic meters. In H1 2015 the growth was only 2%, Nesterov states, in this situation 'Gazprom' will not be able to get a high price for the 'Altai' gas.

    'Gazprom' offered to CNPC a high price, explaining it with high cost of the construction of the 'Altai pipeline'. China is ready to build a cheaper gas pipeline and considers an open tender so that its companies can participate and the construction costs become transparent', - the President of the Russian-Chinese analytical center Sergei Sanakoyev explains: 'Gazprom' refuses, so China is in no hurry.
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    North Dakota oil well completions slow sharply

    No new well completion reports have been filed in North Dakota since July 10, the longest gap this year, according to daily activity records published by the state's Department of Mineral Resources (DMR).

    Completions, rather than wells drilled, provide the best guide to short-term changes in output, since operators can always delay completing a well and putting it into production, either because they are waiting for completion crews to be available or to wait for better prices.

    Completion is usually defined as a single operation including the stimulation and testing of a well as well as the installation of surface production equipment 

    North Dakota's regulators consider a well completed when the first oil is produced through wellhead equipment into tanks from the ultimate producing interval and after the well has been cased.

    Well operators must file a completion report with state regulators within 30 days of the completion date, and in some circumstances immediately.

    "In no case shall oil or gas be transported from the lease prior to the filing of a completion report unless approved by the (DMR) director," according to state rules.

    Completions reported to the DMR are published in its daily activity reports. The number of completions reported each day is volatile because operators have some discretion about when to file their forms; there are indications that operators often file a clutch of reports for related wells at the same site at the same time.

    Nonetheless the forms have to be filed within 30 days so the number of completions reported over a period of seven to 14 days gives a rough idea of how many wells are being put into production.

    The recent slump in reported completions is unusual and coincides with the fall in oil prices which has seen wellhead prices for Bakken crude drop below $50 per barrel.

    If the slump continues over the next few days, it could be a sign that shale producers are deferring putting more wells into production to save cash and wait for better prices.

    The DMR estimates that 110 to 120 new wells need to be completed each month to maintain state oil output at its current level of 1.2 million barrels per day.

    According to the latest state report, 102 wells were completed in April and 114 in May, though the May figure is preliminary.

    The number of wells reported completed so far in July is running far below the previous level and well below the number the DMR estimates is needed to hold production steady.

    It is possible that operators will file a sudden rush of completion forms in the next few days, but unless they do, it looks like the pace of completions may be slowing substantially.

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    Pioneer Natural Resources Company Provides Production Updates

    Second Quarter 2015 Production

    Pioneer’s production averaged 197 thousand barrels oil equivalent per day (MBOEPD) in the second quarter of 2015, of which 51% was oil production. Oil sales averaged 101 thousand barrels per day (MBPD), natural gas liquids (NGLs) sales averaged 37 MBPD and gas sales averaged 356 million cubic feet per day. The Company’s production guidance for the quarter was 198 MBOEPD to 203 MBOEPD.

    Strong Spraberry/Wolfcamp production performance in the second quarter (119 MBOEPD) was partially offset by lower-than-expected production in the Eagle Ford Shale (46 MBOEPD). The shortfall in the Eagle Ford Shale was primarily due to (i) fewer wells being placed on production during the quarter as a result of weather delays and (ii) well performance issues in LaSalle County, an area outside of Pioneer’s core acreage in Karnes and Dewitt counties. Second quarter production in the West Panhandle field (7 MBOEPD) was also negatively impacted by a longer-than-expected turnaround at the Fain gas processing plant and weather impacts.

    Spraberry/Wolfcamp production grew 7 MBOEPD in the second quarter, or 6%, compared to the first quarter of 2015, driven by the Company’s successful horizontal drilling program in this play. Fifty-five horizontal wells were placed on production during the second quarter as expected, of which 28 wells were in Pioneer’s extensive Northern Spraberry/Wolfcamp acreage position and 27 wells were in the Southern Wolfcamp joint venture area. The majority of the horizontal wells drilled across Pioneer’s northern acreage position were Wolfcamp B interval wells. The average production from these wells is tracking estimated ultimate recoveries (EURs) of more than 1 million barrels oil equivalent (MMBOE). Five Lower Spraberry Shale horizontal wells were also placed on production across the northern acreage during the second quarter with average production results tracking EURs of 1 MMBOE.

    In the Eagle Ford Shale, Pioneer’s second quarter production was approximately 3 MBOEPD below the Company’s forecast for the quarter. The Company expected to place 42 wells on production in the Eagle Ford Shale during the second quarter. However, due to record rainfall and flooding in this area during the quarter, only 33 wells were placed on production in Karnes and DeWitt counties where Pioneer has continued to drill some of the most productive wells in the Eagle Ford Shale and has successfully implemented a downspacing and staggering program. The reduced number of wells placed on production impacted second quarter production by approximately 2 MBOEPD.

    Pioneer placed 15 Eagle Ford Shale wells on production on the Washburn Ranch lease (approximately nine thousand net acres) in LaSalle County during 2014. Due to a fire in May of 2014 at the central gathering plant for this area, production from these wells was significantly curtailed until year-end 2014. As a result of the fire, the production forecast that was developed for 2015 was based on limited production data and actual production for these 15 wells came in approximately 1 MBOEPD below this forecasted level in the second quarter. The Company has postponed any further drilling in this area until it has a better understanding of well performance to date.

    Full-Year 2015 Production Update

    Pioneer is maintaining its full-year 2015 production growth forecast at 10%+. Although production growth in the Eagle Ford Shale is now forecasted to be nominal in 2015, production from the Spraberry/Wolfcamp is forecasted to grow by 22% to 24% in 2015 compared to the 20%+ previously forecasted. The reduction in the Eagle Ford Shale growth rate is primarily due to the delays in placing wells on production and performance issues during the first half of 2015, while the increase in the Spraberry/Wolfcamp growth rate reflects the continuing strong performance of the horizontal drilling program, especially in Pioneer’s northern acreage.
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    PetroNeft Resources provides Licence 61 operations update

    PetroNeft an oil & gas exploration and production company operating in the Tomsk Oblast, Russian Federation, and 50% owner and operator of Licenses 61 and 67 is pleased to provide an update on operations at Licence 61.



    T-503 horizontal well brought online at sustained rate of over 550 bopd.
    Latest test rate was 675 bopd.


    Processing and interpretation of 1,000 km of high quality 2D seismic underway.
    Early indications suggest that the Sibkrayevskoye structure is larger than previously understood.


    L-10 well horizontal segment in progress.


    Current gross production from Licence 61 about 2,400 bopd.

    Tungolskoye Development

    The T-503 well at Tungolskoye has been successfully completed with a horizontal segment of 1,000 metres in the Upper Jurassic J1-1 horizon at a depth of approximately 2,502 metres TVD. Of the 1,000 metres horizontal segment it is estimated that approximately 663 metres is in effective net pay. The well was brought online on 14 July and the average flow rate over the last five days has been over 550 bopd (750 bfpd). The well is still cleaning up the long horizontal section and the water cut is now below 20% and continuing to reduce. The well will be allowed to continue in this mode for a period to monitor its performance. Higher oil rates should be possible once the well has fully cleaned up completion and drilling fluids. The latest test rate, on 21 July 2015, was 675 bopd (755 bfpd at 10% water cut).

    The Tungolskoye T-51B well has also been completed. While it provided the necessary stratigraphic control for the T-503 horizontal well, the reservoir in this vertical well was tight in the J1-2 and it was not possible to produce from it. The well will ultimately be used as the water source well for pressure maintenance programme at Tungolskoye.

    The T-508 vertical well is now drilling ahead; the primary purpose of this well is to provide the necessary stratigraphic information for the drilling of a horizontal well in the south-east of the oil field, and will be completed as either a producer or injector.
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    Iraq replaces Saudi as top crude oil supplier to India in June

    Iraq replaces Saudi as top crude oil supplier to India in June; totalled 3.56 mil mt (896,826 b/d), up 85% on year, shipping data shows

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    ConocoPhillips halts shale gas talks with CNPC for Sichuan field

    ConocoPhillips ended talks with China National Petroleum Corp. on a shale gas development in the country after a two-year study.

    “The right commercial decision was to halt further discussions on this block,” ConocoPhillips’s China unit said in an e-mail response to questions Wednesday. The company said it made the decision “some time ago.”

    While China has sought to replicate the U.S. shale boom, the nation last year cut its 2020 shale gas production target to about a third of its original estimate amid difficult geology, lack of infrastructure and limited exploration rights. The nation holds the world’s largest shale gas reserves.

    “We remain positive on China’s shale gas potential, and we sincerely hope that ConocoPhillips can play an important role in developing this supply of clean energy to fuel the Chinese economy,” the Houston-based company said.

    Qu Guangxue, CNPC’s Beijing-based spokesman, didn’t answer two calls to his office.

    The halt to the talks was reported earlier by the National Business Daily. ConocoPhillips signed an agreement with CNPC’s listed unit PetroChina Co. to evaluate shale potential in the Neijiang-Dazu field in the Sichuan basin in February 2013.
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    Southeastern takes 21% stake, pushing changes at Consol Energy

    An activist investor that recently raised its stake in Consol Energy Inc. to more than 21 percent of its shares is pushing the Cecil-based company to sell or spin off some natural gas holdings to raise money while it battles low prices.

    Southeastern Asset Management, which three years ago helped bring huge management changes to shale driller Chesapeake Energy, told federal regulators it will discuss with Consol management, board members and potential buyers its ideas for getting more money from those gas assets.

    “While Southeastern applauds many of the actions of the board and management of (Consol) over the last two years, in our view it is now time for the company to accelerate its efforts to build and realize value per share,” the Memphis-based firm wrote in a Securities and Exchange Commission filing late Monday.

    Southeastern is Consol's largest shareholder and said its officials have had “productive” discussions with management in the past.

    Consol said it's interested in hearing details from Southeastern.

    “We value the opinions of all of our shareholders, and certainly a major shareholder such as Southeastern,” Consol spokesman Brian Aiello said. “We are confident in the strategic direction we are in the process of executing, and look forward to working with Southeastern and all of our shareholders to continue to unlock the inherent value of Consol Energy.”

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    Americans Heading Back to Work Drive at Record Pace Through May

    U.S. drivers put a record number of miles on their cars in May, helped by a growing economy and cheap gasoline.

    American motorists traveled 275.1 billion miles in May and have totaled 1.26 trillion so far this year, a record for the first five months of the year, Federal Highway Administration data show.

    Why are the roads getting more crowded? More than four million Americans have gotten jobs since the beginning of 2014, creating more daily commutes, and gasoline prices are down 26 percent from last year’s peak.

    “It is possible that U.S. driving may set new records all summer,” Doug Hecox, a spokesman for the highway agency in Washington D.C., said by phone yesterday. “Normally, the peak of the travel season is June, July and August.”

    The data include all travel on all U.S. roadways, amounting to about 1,100 miles for every American over the age of 16, according to federal data. That’s the highest level since August 2010.

    All of this driving is good news for U.S. refiners, who processed a record amount of crude into fuel last week. The profit for making fuel along the Gulf Coast, where about half of the nation’s refineries are located, is the highest for this time of year in at least a decade, according to data compiled by Bloomberg.
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    Ridgewood launches deep-water Gulf fund, oil $20 per barrel or less

    Ridgewood Energy is not letting $50 oil shift its aim. The energy company focused on the deep-water Gulf of Mexico closed a $1.9 billion private equity fund that it contends will still prove profitable.

    Houston- and New Jersey-based Ridgewood said its new Ridgewood Energy Oil & Gas Fund III is its biggest yet and exceeded its initial $1.5 billion target.

    As other companies slow down their expensive deep-water Gulf investments, Ridgewood says it can find and develop oil there for $20 a barrel or less. Competitors moving out of the space will actually help the firm, said Kenny Lang, Ridgewood president and chief operating officer.

    “We have the ability to find and develop significant oil reserves for a very low cost per barrel,” Lang said in a prepared statement. “Our disciplined approach allows us to deliver strong returns across a range of oil price environments, and recent dislocation in the sector has created even more compelling opportunities for investment.”

    Ridgewood was founded in 1982, but started focusing on the deep-water Gulf in 2008. Ridgewood also has managed significant capital from New York-based Riverstone Holdings since 2010.

    Ridgewood’s last fund closed with $1.1 billion in early 2014.
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    Weatherford makes Revolution RSS commercially available

    Weatherford International has announced the commercial release of its Revolution rotary-steerable system.

    Weatherford said its point-the-bit technology delivers clean, accurately placed, and completion-ready wellbores. With advanced sensors and telemetry, the system gives operators a reliable method for drilling from vertical to horizontal in a single run.

    “Revolution RSS allows single-run drilling of curve and lateral sections, as well as high-pressure/high-temperature (HP/HT) and high-dogleg applications. This enables operators to make better petrophysical measurements while maximizing borehole exposure to the reservoir delivering superior productivity indexes. In the last year and a half, Revolution RSS has drilled 284 vertical-curve-lateral wells in a single run, totaling 2.4 million ft [731,520 m],” said Etienne Roux, vice president of Drilling Services at Weatherford.

    The system allows operators to drill in HP/HT zones with temperatures exceeding 300°F (149°C).

    The Revolution RSS is compatible with the full Weatherford suite of logging-while-drilling formation evaluation services, including real-time feedback on tool settings and status.
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    Baker Hughes sees no respite from 'unfavourably market conditions'

    Oilfield services provider Baker Hughes Inc, which is being acquired by larger rival Halliburton Inc, said it expects unfavorable market conditions to persist for the rest of the year.

    The forecast comes days after industry leader Schlumberger Ltd said it expects an uptick in demand in North America later this year.

    Halliburton also said on Monday that it expects an uptick in activity later this year, though it does not expect a "meaningful recovery" until 2016.

    Oilfield service companies have seen demand decline due to a steep fall in global crude prices since June last year.

    "In North America, we don't anticipate activity to increase while commodity prices remain depressed," Baker Hughes Chief Executive Martin Craighead said in a statement on Tuesday.

    Houston-based Baker Hughes, which previously said it would cut about 10,500 jobs, or 17 percent of its global workforce, has also closed and consolidated about 140 facilities worldwide.

    Excluding a one-time restructuring charge, the company posted a loss of 14 cents per share, matching analysts' average estimate, according to Thomson Reuters I/B/E/S.

    Revenue from North America, which accounted for nearly 38 percent of the company's total revenue, fell 47 percent to $1.50 billion in the second quarter ended June 30.

    The net loss attributable to Baker Hughes was $188 million, or 43 cents per share, compared with a profit of $353 million, or 80 cents per share, a year earlier.

    Revenue dropped 33 percent to $3.97 billion, but beat the average analyst estimate of $3.78 billion.

    Up to Monday's close of $59.46, Baker Hughes' stock had risen nearly 17 percent since Nov. 13, when news of a possible deal first emerged.
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    Simon Henry sells £423,400 worth of stock in Royal Dutch Shell Plc

    Chief Financial Officer Simon Henry sold 20,000 shares ofRoyal Dutch Shell Plc stock in a transactiondated Tuesday, May 5th.

    The stock was sold at an average price of GBX 2,117 ($33.04), for a total transaction of £423,400 ($660,736.58).

    Simon knows more than we do about Shell’s ill-fated 2015 Arctic Drilling campaign.  

    The cost thus far is north of $6 billion, without a thimble full of oil to show for it.

    With further mishaps, growing global opposition and time fast running out for the 2015 drilling season, he will probably soon flog some more shares, before ordinary investors start taking flight.
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    Chesapeake Energy to suspend dividend payments

    Chesapeake Energy Corp, the second-largest U.S. natural gas producer, said it would suspend dividend payments starting in the current quarter to save up to $240 million a year.

    The company, which like other oil and gas producers has been hurt by a drop in prices, had planned to pay an annual dividend of 35 cents per share.

    In suspending its dividend for the first time since 1998, Chesapeake joins other companies in the energy industry that have cut or suspended dividend payments to save capital.

    Chevron Corp said in May it would not raise its dividend in the second quarter and that it would see "where things shake out long term" before raising its payout.

    Oklahoma City-based Chesapeake reported a first-quarter loss in May and said it would raise production this year.

    The company said on Tuesday that money saved by not paying a dividend would be used to develop its "high-quality" assets.
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    Canadian natural gas producers losing ground to US competitors

    Vancouver Sun reported that Canadian natural gas producers are losing more ground to US competitors as an acute shortage of pipeline space is forcing them to curb growth.

    Producers have been shutting in supplies this year over a capacity squeeze poised to last another few months on TransCanada Corporation's NGTL system in Alberta, as the pipeline company undertakes inspections and repairs ordered by regulators. Less space on the 23,500-kilometre system, which gathers two-thirds of Western Canada’s gas output, has also contributed to volatile prices for supplies shipped on other regional pipelines.

    The constraints are the latest dilemma for Canadian producers selling increasingly less gas into the US because of a supply boom there. Delays to expansion plans may prevent them from taking full advantage of cheaper drilling costs as the fall in oil prices has lowered service rates.

    Mr Darren Gee, CEO of Peyto Exploration and Development Corp, said that “We’re struggling to get our gas to market. This is the first time in our 17-year history that we’ve experienced this.”

    Peyto, Tourmaline Oil Corp. and NuVista Energy Ltd. are among producers that have curtailed gas output because of the transportation issues. Peyto reduced production by about 10% in May because shipments were pushed off pipelines.

    Mr John Stephenson, CEO and founder of Stephenson & Company, said in Toronto that “Companies have warned investors about the challenges and mostly factored slower output growth into their 2015 forecasts. Still, until the bottlenecks are eased, fund managers will view lower cash flow as a drag on Canadian producers relative to their US peers.”

    The transportation issues represent another negative, though Mr Stephenson said that he hasn’t reduced his small holdings in Peyto and Tourmaline.

    He said that “You have less growth, so you have less potential for upside and you have uncertainty in terms of timing. It’s another mental hurdle for an investor to get over.”

    Attached Files
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    Nova Scotia natural gas facility gets US export approval

    CTV News reported that a proposed liquefied natural gas facility in Cape Breton has received export approval from the U.S. Department of Energy.

    Bear Head LNG Corporation said that the approval would authorize it to bring up to 12.5 billion cubic metres per year of US natural gas to Canada and to export up to 8 million tonnes of liquefied natural gas per year to free trade countries.

    The company said that it is now waiting for the same authorization from Canada's National Energy Board.

    Environmental approval was granted by Nova Scotia's Environment Department in May.

    The company must address 32 terms and conditions to control greenhouse-gas emissions and to reduce impacts on wildlife, water and wetlands at the site near Port Hawkesbury.

    Construction of the facility is expected to begin next year, with operations to start in 2019.
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    Oil Explorers Pull Back From Shallow U.S. Gulf in Shift to Shale

    Explorers Mostly Quit Shallow U.S. Gulf in Shift to Inland Shale

    The number of permits for new wells in seas less than 500 feet (152 meters) deep plunged 74 percent to nine during the first six months of this year from a year earlier, according to the U.S. Bureau of Safety and Environmental Enforcement.

    Shallow-water drilling has largely targeted gas in recent decades because most of the crude in fields close to shore had already been discovered and harvested. The glut of gas from shale fields in Texas, Louisiana, Oklahoma and Pennsylvania that crushed prices for the fuel made offshore gas production less attractive.

    “A lot of the players operating on the continental shelf are financially distressed or significantly cutting back on capital spending,” J.B. Lowe, an analyst at Cowen and Company in New York, said in an interview on Monday. “There’s not the same amount of cash flow coming in to justify drilling some of these prospects when there’s better stuff to be had elsewhere.”

    In the years following the April 2010 blowout at the Macondo well that sank the Deepwater Horizon rig, shallow-water permitting for the first half of the year peaked in 2013, when regulators were greenlighting new exploration projects at a rate of one every five days.

    It’s a different story in the deep waters of the Gulf, where exploration is proceeding apace with 2014, undaunted by the rout in crude prices. During the first six months of this year, 31 permits were approved for new wells, unchanged from a year earlier, according to the BSEE.

    Brent crude averaged $59.35 during the period, down 45 percent from a year earlier, according to data compiled by Bloomberg. Deep-water exploratory permitting for the first half of the year since the Deepwater Horizon disaster topped out at 67 in 2012.

    The BSEE defines anything beyond 500 feet as deep water. That differs from much of the industry, which regards 1,000 feet as the cutoff point.
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    Halliburton secures $500 mln to fund drilling in old wells

    Halliburton Co said it had tapped BlackRock Inc for $500 million to help fund drilling in existing shale wells, the first such move by a major oilfield services provider at a time when oil producers are shying away from drilling new wells.

    Market leader Schlumberger NV and Baker Hughes have touted refracking, the practice of fracking existing wells, as means for oil producers to save money. Drilling normally accounts for about 40 percent of the cost of a new well.

    "Though a relatively small market today, we see significant runway for refrac in the future," Halliburton President Jeffrey Miller said on a post-earnings call on Monday.

    Oil and gas companies have said refracking is still too unpredictable, but some such as Devon Energy Corp and Chesapeake Energy Corp are using the technology to revive output from existing wells.

    The funding could help Halliburton speed up adoption of refracking, Edward Jones analyst Rob Desai said.

    "I think people are wondering why Halliburton themselves weren't providing some of that financing." Desai said Halliburton tapped the capital market to help it conserve capital given the Baker Hughes deal and the effect of the oil price slump on its own business.

    Halliburton's revenue from North America slumped 38.5 percent in the second quarter ended June 30. Revenue from outside the region fell 12 percent.

    The company said it expects an "uptick" in activity, including refracking, later this year and a "meaningful recovery" only in 2016.
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    How much oil does Texas produce? The EIA has a better way to count

    The U.S. Energy Information Administration is trying to make its oil production estimates faster and more accurate. That will mean going around Texas’ top industry regulator and straight to the producers to get the numbers.

    Recent price swings in crude oil markets have necessitated the shift, said Gary Long, an EIA petroleum engineer, as production has swung faster during the downturn than it did at any point during the long buildup of the shale oil boom.

    “We were basically just using a ruler and adding 50,000 (barrels) a day, and that worked pretty well for a while,” he said. “But after the downtown and the talk of the (production) rollover… we thought ‘Our methodology isn’t going to see that.'”

    The Lone Star State produces the most oil in the U.S. The EIA’s most recent April figures put its total bounty at about 3.71 million barrels of crude per day. But that figure uses the methodology that the EIA is moving away from, and it isn’t perfect.

    The projection starts with data from the Texas Railroad Commission, a state agency which receives reports from producers about how much oil each lease they own has produced. The Texas Railroad Commission figures are messy. Often, the forms aren’t complete or contain errors, and the Railroad Commission will file the problem reports in a pending file that doesn’t get counted.

    That can leave a lot barrels out of the figure. For example, the Texas Railroad Commission reported a preliminary March production of 2.30 million barrels per day, while the EIA gives 3.78 million barrels per day in the same period.

    Over about six months or so, Railroad Commissions figures are adjusted upwards as the paperwork is gradually moved out of the pending file. Eventually, the number ends up within a few percent of the EIA estimate, Long said.

    The Texas Railroad Commission declined to be interviewed on the subject, but a spokeswoman for the group noted it updates its figures as late or corrected reports come in.

    To compensate for the Railroad Commission’s data lag, the EIA looks at how months-old Railroad Commission data has been revised and applies that historic adjustment to the best available data it can get for the present month. The process works well when the past data is similar to present data, but can miss the mark when things move fast enough to create a disconnect between the past and present.

    And moving quickly is what the oil markets have been doing recently. The number of active rigs is down by 60 percent from an October 2014 high, and prices have fallen by about half since last year. Recently, another correction has driven crude down $10 per barrel and ended a fleeting period of stability at $60 per barrel.

    Accordingly, the EIA has been experimenting with going straight to producers to get its production data. The process would resemble how the group arrives at its natural gas data, Long said.

    The top 80 percent or so of producers by the amount of crude they pump would report to the EIA how much they produced across the state. That data would then form the backbone of a production estimate by the EIA, whose analysts would estimate the rest.

    “We actually started surveying operators or producers,” Long said, saying that the next monthly estimate may be made using the new methodology if all goes well. “That data has started coming in. We’re looking at it, we’re evaluating it.”
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    CONSOL Energy/Noble Energy Rumours Continue to Swirl

    Following up on our CONSOL Energy/Noble Energy rumor from last Friday, MDN now has a second source that delivers a bit more information about the rumor–refining it for us. We told you on Friday that a persistent rumor among those working for or with CONSOL Energy is that Noble Energy is lining up to buy the gas division, CNX . A new source tells MDN that a complete buyout of CNX is not necessarily in the cards–but that Noble Energy is “taking over” the joint venture acreage the two currently hold in a 50/50 deal in the Marcellus/Utica…
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    Iran seeks to regain market share regardless of oil price

    Iran will emphasize regaining oil sales it lost due to sanctions over helping to prop up prices once curbs that choked off the nation’s crude exports are lifted.

    The Persian Gulf producer plans to restore output to the level it achieved before the economic curbs crippled production and exports, Oil Minister Bijan Namdar Zanganeh said Monday in Tehran. Iran wants to pump almost 4 MMbopd within seven months once sanctions are removed and 4.7 MMbopd as soon as possible after that, he said.

    Such an increase may cause oil prices to fall, Zanganeh told reporters after meeting with Germany’s Vice Chancellor Sigmar Gabriel. “But that doesn’t mean we won’t enter our oil into the market.”

    Iran had the second-biggest output in OPEC before the European Union banned purchases of its crude in July 2012. The country is now fourth-largest in the Organization of Petroleum Exporting Countries, with output in June averaging 2.85 MMbopd compared with 3.6 MMbopd at the end of 2011, according to estimates compiled by Bloomberg.

    Under the nuclear agreement Iran and six world powers reached in Vienna last week, the U.S. agreed to end efforts to limit Iran’s oil sales. The EU said it would end the bloc’s embargo on imports once Iran complies with obligations to scale back its nuclear program.

    Countries that sold more oil and took market share from sanctions-bound Iran will have to adjust as the country restores its output and exports to historical levels, Zanganeh said, without identifying such nations.
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    Halliburton profit beats estimates as costs cuts pay off

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

    The company also said it was "fully committed" to completing its takeover of smaller rival Baker Hughes Inc, after the U.S. Department of Justice extended its review of the deal.

    Halliburton's shares rose 3 percent to $41.25 in premarket trading on Monday.

    The Halliburton-Baker Hughes deal is facing stiff regulatory scrutiny because the companies have overlapping businesses in the United States, Asia and Europe.

    Halliburton has put up three drilling businesses for sale to alleviate regulatory concerns and said on Monday it was "pleased with the prices and level of interest" it had received.

    The company was confident of achieving cost synergies of nearly $2 billion from the deal regardless of market conditions or cost cuts moves made by either company to date, Chief Executive Dave Lesar said in a statement.

    The company and its peers have been cutting costs and laying off thousands of workers in response to lower drilling activity globally due to the slump in crude oil prices.

    Halliburton's revenue from North America slumped 38.5 percent in the second quarter ended June 30. Revenue from outside the region fell only 12 percent. North America accounts for 45 percent of the company's revenue.

    Total revenue slumped 26.5 percent to $5.92 billion, but beat analysts' average estimate of $5.78 billion.

    Halliburton's net profit slumped 93 percent to $53 million, or 6 cents per share. Excluding charges related to the pending Baker Hughes deal and other items, adjusted profit was 44 cents.

    According to Thomson Reuters I/B/E/S, the company earned 38 cents per share, excluding depreciation cessation on assets held for sale, deal-related costs, impairments and other charges. That was higher than analysts' average estimate of 29 cents.

    Through Friday's close of $39.99, Halliburton's shares have fallen about 44 percent in the last 12 months, compared with a 38 percent fall in the Dow Jones U.S. oil equipment and services companies index.

    Attached Files
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    Consol Energy Warns It Will Report a Second-Quarter Loss

    Consol Energy Inc. on Monday warned it would report a loss for its second quarter, largely due to lower energy prices.

    In addition, Consol—one of the country’s biggest natural-gas producers—said it would record a “significant” write-down on its conventional shallow oil and gas assets on account of continued depressed NYMEX forward prices.

    The Pennsylvania company didn’t indicate how wide of a loss it expects to post. According to Thomson Reuters, analysts have expected the company to swing to a profit in the June quarter and report $10.4 million, or 10 cents a share.

    In April, Consol projected second-quarter gas production of about 71 billion cubic feet and coal production of 7.1 million tons to 7.73 million tons. The company said Monday that it still expects to hit those targets.

    Like many other energy companies grappling with sharply lower energy prices, Consol has this year trimmed its capital budget and it is in the midst of a restructuring program designed to help it scale back its exposure to coal. The company recently sold a stake in a new master limited partnership, CNX Coal Resources.

    Shares in the company, down 43% over the past three months, were inactive premarket. Consol is slated to report second-quarter results next week.
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    Hedge funds turn unusually bearish on oil

    Hedge funds and other money managers have rarely been so bearish about the outlook for oil prices, according to the latest positioning data from the U.S. Commodity Futures Trading Commission.

    Hedge funds boosted short positions in futures and options linked to the price of U.S. crude to 138 million barrels by July 14, from 84 million four weeks earlier. Over the same period, they cut long positions from 340 million to 292 million barrels.

    The hedge fund community has an inherent long-bias, but the ratio of long to short positions, at just over 2:1, down from 4:1 a month ago, is among the lowest in the last six years (

    The number of hedge funds with reported short positions was equal to the number of longs last week, which is highly unusual.

    The liquidation of long positions and establishment of fresh shorts help explain the downward pressure on U.S. crude prices over the last month.

    The market has not been this bearish about the outlook for oil prices since March, when investors were worried about rising inventories and the possibility storage space at oil refineries and tank farms would run out.

    In March the number of short positions was much higher, at around 200 million barrels, but so was the number of long positions, at around 380 million barrels.

    Prices subsequently rose more than $16 per barrel, about 36 percent, as the short positions were unwound over the next two months.

    There is some potential for hedge funds to add to their current short positions and reduce their long exposure further, putting extra downward pressure on crude prices in the next few weeks.

    But hedge funds are already running unusually short, and at least some of those positions need to be bought back, which could moderate selling pressure and push prices higher again.
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    Chevron's Gorgon LNG project faces fresh strike risk

    Chevron's $US54 billion ($73 billion) Gorgon liquefied natural gas project being built off Western Australia is facing a fresh threat of industrial action after unions won official approval to ballot workers on a potential strike just months before exports from the massive venture are finally due to begin.

    The latest development risks further delaying the start of production at the troubled project, Australia's biggest single resources venture, beyond its second-half 2015 target, which has already slid by more than a year from the original schedule.

    Chevron Australia boss Roy Krzywosinski had issued several warnings that the lagging competitiveness of the LNG construction sector in Australia was threatening to deter about $100 billion of potential further investment in the sector, and sounded an alarm about inflexible industrial relations systems.

    The Fair Work Commission on Friday ruled the Construction, Forestry, Mining & Energy Union and the Australian Manufacturing Workers' Union could hold a protected ballot of employees of CB&I, the United States engineering company carrying out a $US2.3 billion contract on mechanical, electrical and instrumentation work at the onshore LNG plant under construction on Barrow Island.

    In the last month CB&I workers have several times rejected a proposed replacement enterprise agreement, driven by a desire to see a shorter work roster introduced. A pay increase included in the new agreement, which would replace an EA that expired on January 20, was on hold awaiting resolution of the dispute.

    Chevron, which owned almost 50 per cent of the Gorgon venture and was the operator, declined to comment. CB&I could not be contacted.

    A hard-line group of construction workers had been pushing for the work roster at the remote Gorgon site to be switched to a 20:10 cycle, consisting of 20 days of work followed by 10 days off. That compared with an existing work cycle of 28 days on and nine days off. The shorter cycle would further increase costs at the Gorgon project, which was already a substantial $US17 billion over its original $US37 billion budget.
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    US rig count falls 6 units to 857

    The US drilling rig count fell 6 units to reach 857 during the week ended July 17, essentially cancelling out the last 3 weeks’ worth of gains, according to data from Baker Hughes Inc.

    The losses came from rigs drilling on land and in inland waters. Land rigs were down 3 units to 824, while those drilling in inland waters also fell 3 units to reach 2 rigs working.

    During the week, rigs targeting oil fell 7 units to 638. Gas-directed rigs, meanwhile, were up 1 unit to 218. Rigs considered unclassified were unchanged at 1 rig working.

    Rigs engaged in horizontal drilling fell 4 units to 650. Directional drilling rigs lost 4 units to 84.

    Rigs drilling offshore and in the Gulf of Mexico were both unchanged this week, both maintaining counts of 31.

    Canada’s rig count continued its upward climb, jumping 23 units to 192. Its count has now risen in 8 of the last 10 weeks. This week’s gain was spurred by a rebound in gas-directed rigs, which were up 16 units to 94. Oil-directed rigs, meanwhile, were up 7 units to 98 rigs working. Canada’s overall count is still down 189 year-over-year.

    Among the major oil- and gas-producing states, Louisiana lost 3 units to reach 69 rigs working. Texas, North Dakota, and Pennsylvania each were down 2 rigs, reaching respective totals of 366, 68, and 43. Oklahoma, at 105, and California, at 11, were each down 1 unit. Unchanged from a week ago were Wyoming, 21; Ohio, 19; West Virginia, 18; Utah, 7; and Arkansas, 4. Four states gained a single rig this week: New Mexico, 50; Colorado, 39; Alaska, 11; and Kansas, 11.

    At 98 units, there were 4 fewer rigs drilling in the Eagle Ford this week, while the Marcellus area lost 3 units to 59.

    Attached Files
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    Saudi Arabia Crude Exports Fall to Five-Month Low on China

    Saudi Arabia’s crude oil exports slumped to a five-month low in May as local refineries used more supplies and some plants in China closed for maintenance.

    The world’s biggest oil exporter shipped 6.94 million barrels a day in May, down from 7.74 million in April and the lowest since December, according to data published Sunday on the website of the Joint Organizations Data Initiative, or JODI. The drop in exports is more than Qatar produces in one month. New refineries in Saudi Arabia are leaving less crude available for overseas at a time when the market is in surplus.

    Chinese refineries had almost 1 million barrels a day of capacity offline in May, almost twice the total in April, according to London-based Energy Aspects. Brent crude futures declined for the past two months as U.S. drillers added more rigs and OPEC production exceeded its monthly output target for more than a year.

    “It’s very clear that if China sneezes, Saudi oil exports will get a cold,” Mohammed Ramady, professor of economics at King Fahad University for Petroleum and Minerals at Dhahran, Saudi Arabia, said by phone on Sunday. “The fall in Saudi crude exports in May illustrates the tight rope of opportunities facing major oil exporters with their dependence on a single market like China for sustaining their growth.”

    Saudi refineries used 2.4 million barrels a day for their own operations in May, up from 2.2 million in April and the most since at least January 2002, according to JODI data. The nation is building refineries to diversify its economy and add more jobs. Refineries usually boost output in hotter summer months in the Middle East when air conditioning demand peaks.

    “The numbers are alarming knowing that we are still in May and the summer demand will keep rising until August,” Ramady said. “This means that less crude will be available for exportation.”

    Exports fell for a second month even with output at 10.33 million barrels a day, the most since at least 2002, according to JODI, which compiles data provided by oil-exporting countries.

    Crude oil imports in China, the world’s biggest energy consumer, declined 11 percent in May from a year earlier, according to the Beijing-based Customs General Administration. Some of China’s stockpiling probably came to an end that month, according to Energy Aspects.
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    Schlumberger CEO expects weak pricing for the rest of the year

    Schlumberger Ltd, the world's No. 1 oilfield services provider, expects little improvement in pricing levels in the near future as customers continue to keep a tight lid on budgets, it said on a conference call on Friday.

    The company on Thursday reported a quarterly profit well ahead of expectations as it managed to cut cost of revenue by more than a fifth, softening the impact of reduced global drilling activity.

    Schlumberger, which provides drilling technology and equipment to oil and gas companies, expects exploration and production investment in North America to fall by more than 35 percent versus its forecast, in April, of a 30 percent drop.

    Here is a selection of comments from chief executive Paal Kibsgaard from Friday's conference call:

    "The dramatic reduction in activity in US land has created a massive capacity oversupply in the service industry with pricing quickly plummeting to unsustainable levels, in particular for pressure pumping."

    "There's going to be a further impact of pricing in the second half of the year. We haven't seen the full impact of that."

    "There will be little to no improvement in pricing levels in North America and hence the market will still remain very challenging for the foreseeable future."

    "On the supply side of the oil market, the global market share battle between OPEC and the high cost producers is still playing out with the first signs of flattening North America production starting to show."

    "We do expect that any improvement in oil prices in the second half of the year will potentially lead to increased investment levels in 2016, both for exploration and development related activity."

    On offshore projects: "Going forward in terms of sanctioning new projects, I think it's going to be very important for the industry to be able to ... come up with technical solutions and field development plans that significantly reduces cost per barrel."

    "We have fully exited Iran. When the sanctions are lifted and when it is permissible, we will evaluate going back in."

    Attached Files
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    Whiting Petroleum Updates Production and Capex Guidance

    -Q2 Production Estimated at 15.5 MMBOE or 170,245 BOE/d, Above the High End of Prior Guidance Net of 8,300 BOE/d Asset Sales
    -FY 2015 Production Guidance Increased to 7% Growth, Equates to 10% Growth Adding Back Asset Sales
    -Capital Budget Forecast Increased to $2.3 Billion from $2.0 Billion
    -$185 Million of Additional Q2 2015 Non-Core Property Sales; $300 Million of Total Asset Sales in 1H 2015
    -Enhanced Completions Deliver 40% to 50% Production Increases Across Multiple Williston Basin Areas

    Operations Update

    We have been testing larger sand volume completions across our acreage in the Williston Basin. These completions incorporated sand volumes of four to six million pounds with well costs ranging from $6.5 million to $7.5 million. Production from enhanced completions in all three areas discussed below is outperforming our 700 MBOE type curve for the production periods cited.

    Enhanced completions at Polar field result in 40% productivity increase. We have completed two higher sand volume slickwater wells at our Polar field in Williams County, North Dakota. On average, these wells had 60-day rates of 935 BOE/d, 40% greater than 12 offsetting wells completed with lower sand volumes.

    Enhanced completions at Walleye field result in 50% productivity increase. We have completed two higher sand volume slickwater wells at our Walleye field in Williams County, North Dakota. On average, these wells had 60-day rates of 1,095 BOE/d, 50% greater than three offsetting wells completed with lower sand volumes.

    Enhanced completions at Pronghorn field result in 50% productivity increase. We have completed nine higher sand volume slickwater wells at our Pronghorn field in Stark County, North Dakota that have at least 120-days of production. On average, these wells had 120-day rates of 755 BOE/d, 50% greater than 42 offsetting wells completed with lower sand volumes. Based on these results, we recently moved a drilling rig back to the Pronghorn field.
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    Rosetta Resources Inc. Announces 2015 Second Quarter

    -Delivered total daily oil equivalent production volumes of 63.0 MBoe/d, exceeding the high end of the quarterly guidance range for the quarter.
    -Achieved record Permian daily production of 9.0 MBoe/d, an increase of 23 percent from the first quarter 2015.
    -Successfully completed three South Gates Ranch and four Reeves County horizontal wells.

    Rosetta Resources Inc. today reported adjusted net income (non-GAAP) for the second quarter 2015 of $11.8 million, or $0.16 per diluted share, versus adjusted net income of $50.5 million, or $0.82 per diluted share for the same period in 2014. The decrease in adjusted net income was primarily driven by lower commodity prices, partially offset by higher production volumes. Net income for the quarter, which included a non-cash impairment of $245.2 million, was a loss of $341.7 million, or $(4.52) per diluted share, versus net income of $14.4 million, or $0.23 per diluted share, in 2014. Adjusted EBITDA (non-GAAP) was $125.9 million in the second quarter of 2015, compared to $181.5 million in the second quarter 2014.
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    Russia to maintain oil extraction at the level of 520-525 mln tons in 2016

    The Minister of Energy of Russia, A. Novak, thinks that oil extraction in Russia in 2016 will stay at the current rate of 520-525 mln tons.

    'None of the major companies plans to reduce oil extraction next year... I don't expect a general fall', he said.

    He says that in H1 the volumes of operational drilling rose by 10.3%.

    Previously this week Fitch reported that it expects oil extraction fall in Russia in 2016 due to the EU and US sanctions that have restricted the access to the International financial resources to Russian producers of raw materials as well as due to low prices in the world hydrocarbons market.

    Novak plans to discuss in late July the situation in the global oil market with the head of OPEC, A. Salem al-Badri, including the elimination of sanctions.

    There won't be a great influence with the additional volumes from Iran on the market as the market has already assessed this effect and the prices will be formed based on the prime cost of shale oil.

    Novak said that Saudi Arabia and Russia have a common opinion that oil extraction should not be artificially reduced - the market will correct the oil price itself.
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    Lower oil prices? Not for Europe's gasoline consumers

    Crude oil prices may be falling, but things are not so rosy for European gasoline consumers.

    Gasoline pump prices in the 28-member European Union hit their highest since early November this week, according to the EU's statistics office.

    Benchmark Brent crude oil, on the other hand, dropped more than 30 percent over the same eight-month period to around $57 a barrel.

    Behind the divergence are robust global demand for gasoline and a stronger dollar, which makes dollar-priced commodities like oil more expensive for buyers using other currencies, said analyst Oliver Jakob at Swiss-based Petromatrix.

    "The price for the consumer in Europe looks very different than if you look at the Brent price in dollars," Jakob said.

    By contrast, average diesel pump prices in Europe were this week at their lowest since March 30, according to Eurostat.

    Unlike gasoline, diesel supplies have risen steadily in recent months as huge refineries in the Middle East, Asia and the United States increase their output while demand has remained relatively stable.

    The drop in oil prices over the past year sparked strong demand for gasoline across the world from China's rapidly expanding middle class to the United States, where consumers are driving more and buying bigger cars.

    This demand has also offered Europe's embattled refiners a rarely seen run of profits as dozens of tankers filled with gasoline and blending components leave Europe for Asia, the Middle East, Africa and the Americas monthly.
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    Shale 2.0: The Next Productivity Revolution

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    Alternative Energy

    SunEdison inks pact with Tata to supply solar power in Delhi

    US-based Solar SunEdison signed a long-term power purchase agreement (PPA) with Tata Power Delhi Distribution Ltd (TPDDL), to provide 180 MW solar power for latter’s consumers in New Delhi.

    “SunEdison has signed a long-term PPA with TPDDL to provide 180 MW of utility-scale solar power for the people of New Delhi,” SunEdison’s president of Asia-Pacific and Sub-Saharan Africa, Pashupathy Gopalan said.

    Mr. Gopalan said the agreement to supply solar power will be for a period of 20 years, after commissioning of the projects located in Shivpuri in Madhya Pradesh.

    He further said the solar power projects for the PPA are expected to be operational in next one and half year and the company is about 6-9 months away from the financial closure of the projects.

    On the tariff under PPA, he said the company will supply power at two rates – Rs. 5.93 per unit (Kwh) and Rs. 5.97 per unit.

    The final tariff or landing cost of power after factoring in various other expenses will be Rs. 6.49 per unit and Rs 6.52 per unit.

    About concerns that the tariff on “higher” side, Mr. Gopalan said, since the PPA is for a long period, the prices would be competitive than the rate of conventional energy in coming years, as there is no risk of fluctuation in fuel rates.

    An official of the TPDDL said this PPA will help the company meet almost 50 per cent of its Renewable Purchase Obligation (RPO).

    The official said TPDDL is under obligation to buy 9 per cent of its total power purchase from renewable energy sources and this agreement will help meet almost 100 per cent its RPO by 2017.

    Besides, the company is promoting rooftop solar panels, in the area of operation in Delhi, which has the potential of installing 400 MW of such panels.
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    China Sunergy Regains Compliance with Nasdaq Listing Requirements

     China Sunergy Co., Ltd. , a specialized solar cell and module manufacturer, today announced that it had received written notification from the Listing Qualifications Department of the NASDAQ Stock Market, on July 20, 2015 informing the Company that it has regained compliance with the continued listing requirements under NASDAQ Listing Rule 5250(c)(1) .

    On May 20, 2015, the Company received a letter from NASDAQ , indicating that, the Company failed to file on Form 20-F for the period ended December 31, 2014 in a timely manner. The Letter requires, among others, the Company to submit a plan to regain compliance with respect to the above delinquent report within 60 calendar days of the receipt of the Letter.

    On July 10, 2015, company filed its Form 20-F for the period ended December 31, 2014. On July 20, 2015, the Company received written notification from Nasdaq that by filing its Form 20-F, the NASDAQ staff determined the Company has complied with the Listing Rule, and accordingly, this matter is now closed.
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    China's largest solar power tower plant starts construction

    China's largest solar power tower plant has begun construction in the northwestern province of Qinghai, local media reported on July 22.

    Occupying 2,550 hectares of the Gobi Desert in Golmud city, the plant will have an installed capacity of 200 MW, and be capable of supplying electricity to 1 million households, according to Qinghai Solar-Thermal Power Group.

    "Its designed heat storage is 15 hours, thus, it can guarantee stable, continual power generation," said board chair Wu Longyi.

    Once operational, the plant will generate 1.12 TWh of electricity per annum, slashing standard coal use by 4.26 million tonnes every year, reducing emissions of carbon dioxide and sulfur dioxide by 896,000 tonnes and 8,080 tonnes, respectively.

    The project, which was invested 5.38 billion yuan ($879.1 million), is planned to be put into operation before end-July 2018.

    China has been focusing on increasing its proportion of clean energy. By 2014, the country's solar power capacity was 28.05 GW, 400 times more than 2005, and there are plans to increase this to around 100 GW by 2020.

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    Shenhua gains approval for first offshore wind power project

    China’s largest coal producer Shenhua Group has obtained approval from the Provincial Development and Reform Commission of East China’s Jiangsu province to build an offshore wind power plant in Dongtai, said the State-owned Assets Supervision and Administration Commission on July 20.

    The approval marked a substantial progress in Shenhua’s move into the offshore wind power field.

    The Dongtai Phase 4 offshore wind power plant, about 42km off the coast, has a designed installed power generation capacity of 300 MW, including 75 wind turbines each with capacity of 4 MW.

    This may imply that Shenhua has started to explore new energy businesses to seek a new driver of profit growth, as its engagements in coal and thermal power sectors face a gloomy future.

    Its listed subsidiary, China Shenhua Energy Co., Ltd., may see H1 earnings slide 40% on year, according to a research report from CITIC Securities.
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    Britain moves to slash renewable subsidy costs

    Britain's government on Wednesday moved to rein in the spiraling costs of renewable power subsidies which it said threatened to push up household bills.

    The plans include closing support for small-scale solar projects, changing the way renewable projects qualify for payments and modifying subsidies for biomass plants.

    The proposals come just a month after the government said it would scrap new subsidies for onshore wind farms from April next year.

    "We can't have a situation where industry has a blank cheque and that cheque is paid for by people's bills," Energy and Climate Change Secretary Amber Rudd said on BBC radio.

    Figures published by the Department of Energy and Climate Change (DECC) show the cost of renewables subsidies could reach 9.1 billion pounds ($14 billion) a year by the 2020/21 tax year compared with a proposed budget of 7.6 billion.

    Investors said the government's u-turn had undermined the industry's case for investing in renewable electricity production.

    "The government has stripped away without warning incentives for projects on which many companies have made major investment decisions in renewable technologies," said Richard Kirkman, technical director at Veolia UK, a subsidiary of French environmental services group Veolia.

    Other European governments have also curbed generous renewable subsidies.

    Last year Germany changed its renewable energy law, seeking to cap support for renewables, while Spain changed its subsidy scheme for solar plants after higher than expected demand.

    Britain's DECC also said on Wednesday it would no longer guarantee subsidies offered for biomass conversion projects.

    The decision sent shares in power company Drax, which is in the process of converting its coal plants to using biomass, down around 2 percent in early trading but they have since recovered.

    As part of extensive reforms of Britain's electricity market, the government has been changing the way it supports renewable energy by replacing direct subsidies with a contracts-for-difference (CfD) system.

    Under the scheme, qualifying projects are guaranteed a minimum price at which they can sell electricity and renewable power generators bid for CfD contracts in a round of auctions.

    But Rudd on Tuesday cast doubt on whether there would be another auction of CfD renewable support by telling a parliamentary committee she could not confirm it would take place.
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    Distributed solar power revenues may triple in decade - Navigant

    According to the industry analyst Navigant Research, global revenues from distributed solar photovoltaic power are expected to more than triple in a decade as the technology becomes viable without subsidies.

    Navigant said in an e-mailed study that revenue from the installations, which are typically small-scale and deliver power to areas near the point of generation, is forecast to rise to USD 151.6 billion in 2024 from USD 40.6 billion last year.

    Mr Roberto Rodriguez Labastida, an analyst at Navigant, said that “The distributed solar PV generation market continues to transition from being dependent on lavish feed-in tariffs and environmentally conscious wealthy homeowners to a cost-effective source of electricity that is gaining traction.”

    Navigant predicted about 346 GW of new distributed solar PV panels will be installed globally from this year through 2024, producing total revenue for the industry of USD 668.5 billion. Over that time, subsidies are expected to be reduced 'significantly' as installation costs decline 4% to 6% a year.

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    LG Electronics’ NeON 2 Solar Panel Available in the United States

    LG Electronics announced that the LG NeON 2, will be available in the United States in August. The LG NeON 2 is equipped with newly developed LG "Cello" technology, which consists of 12 thin wires instead of three busbars. The company said that technology offers significantly improved performance and reliability even over the original NeON high-performance solar panel. For its "groundbreaking idea and technological innovation," the LG NeON 2 was recognized last month with the Intersolar Europe Photovoltaics Award.

    LG Solar is also bringing the "Mono X NeON 72," to the U.S this fall, an all-new series of 72-cell solar modules, suited for commercial installations.

    Two models will be available, designed to deliver high-efficiency outputof up to 360 and 365 watts respectively, in a giant 77- by 39-inch panel. This series builds on LG's 60-cell Mono X NeON that uses LG's N-Type double-sided cell structure that allows the light reflected from the rear of the module to be reabsorbed, also generating additional power.

    Cello — which stands for Cell Connection, Electrically, Low Loss, Low Stress and Optical Absorption Enhancement — uses circular-shaped wires to scatter light more effectively for better absorption, while reducing the electrical loss by spreading the current with 12 cell busbars, according to the company.

    LG said that the NeON 2 is ideal for home owners with a limited rooftop space, boasting 6.4 kWp capacity with 20 modules (60 cells) while the capacity of a 285W p-type Mono with the same number of modules generates only 5.7 kWp and the capacity of a 255W p-type Poly with the same number of modules generates only 5.1kWp.
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    Class Action Lawsuit Against Yingli Green Energy Holding Co. Ltd.

    Goldberg Law PC announces that a class action lawsuit has been filed in the United States District Court for the Central District of California against Yingli Green Energy Holding Co. Ltd., for alleged violations of the federal securities laws. Investors who purchased shares between March 18, 2014 and May 15, 2015.

    The class in this case has not yet been certified, and until certification occurs, you are not represented by an attorney. If you choose to take no action, you can remain an absent class member.

    Yingli is a supplier of vertically integrated photovoltaic (PV) modules based in the People’s Republic of China. According to the complaint, the Company made false and/or misleading statements and failed to disclose: (1) that the Company was inappropriately recognizing revenue; (2) that the Company had no reasonable prospects to collect on certain accounts receivable based on historical customer conduct; (3) that the Company was no longer able to borrow from commercial banks to fund its operations; (4) that Yingli’s inability to raise additional capital or borrow funds from commercial banks threatened the Company’s ability to continue as a going concern; and, (5) that, as a result of the foregoing, Defendants’ statements about Yingli’s business, operations, and prospects were false and misleading and/or lacked a reasonable basis. When the truth emerged, the stock dropped harming investors.

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    SunEdison, unit to buy Vivint Solar for about $2.2 bln

    SunEdison Inc agreed to buy Vivint Solar Inc, the second-biggest U.S. solar panel installer, in a deal valued at about $2.2 billion, speeding up its expansion in the booming residential solar market.

    Demand for Vivint's residential solar systems has soared as the company that went public last october allows homeowners to lease its systems rather than buying them outright. A decline in equipment costs has also helped.

    The distributed generation business, or power produced for local consumption, is expected to contribute about 28 percent of SunEdison's 2016 revenue, post acquisition, from an estimated 18 percent in 2015, S&P Capital IQ analyst Angelo Zino said.

    Installers command higher margins from the residential solar market than more aggresively priced utility-scale projects.

    Vivint, controlled by Blackstone Group LP, operates in seven states, including California and New York.

    SunEdison will give Vivint stockholders $9.89 in cash, $3.31 in stock and $3.30 in notes for every share held. The offer works out to $16.50 per share - a 51.7 percent premium to Vivint's Friday close.

    Vivint shares jumped as much as 46.4 percent to $15.93 on the New York Stock Exchange on Monday. SunEdison shares were up 2.9 percent at $32.48, after touching a near-seven-year high of $33.44.

    SunEdison also said its unit TerraForm Power Inc would eventually buy Vivint's rooftop solar portfolio of 523 megawatts, expected to be installed this year, for $922 million.

    The offer works out to four times Vivint's retained value of $560 million as of March 31, said Raymond James analyst Pavel Molchanov.

    Retained value, a metric commonly used by solar firms, is the value of income from future electricity sales minus costs.
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    Dubai Electricity & Water Closes Solar-Park Phase Two Financing

    Dubai Electricity and Water Authority arranged financing for a 200 megawatt solar plant that will form part of a planned $3.3 billion solar park, the government-owned utility said.

    The photovoltaic plant is the second phase of a project to produce more than 3,000 megawatts of electricity when completed in 2030, DEWA said Monday in an e-mailed statement. Dubai, the largest sheikhdom in the United Arab Emirates after Abu Dhabi, plans to boost solar production to 7 percent of the national total by 2020 and then to 15 percent by 2030, it said.

    “DEWA will continue to execute these ground-breaking projects in renewable energy and contribute to the growing energy needs of Dubai,” Chief Executive Officer Saeed Mohammed Al Tayer said in the statement, which gave no details about the financing. Officials at DEWA’s media office didn’t answer five phone calls seeking additional information.

    Dubai is developing solar power as it seeks to reduce reliance on natural gas as its main source of energy for local use. Saudi Arabia and Abu Dhabi are also developing renewable energy as oil producers in the Persian Gulf try to curb the burning of costlier fossil fuels to produce power for their growing populations. DEWA tripled its target for solar energy by 2030 to 15 percent from 5 percent of total power capacity, al-Tayer said in a Jan. 21 interview.

    The company will own 51 percent of the new facility, with the remainder shared between Saudi Arabia-based ACWA Power International and TSK, a builder with headquarters in Spain. The plant is to be operational in April 2017.
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    Germany sees big rise in offshore wind capacity

    Germany added more than three times the amount of offshore wind capacity in the first six months of this year than in the same period of 2014 and the country looks set to reach half of its 2020 offshore target of 6,500 megawatts (MW) later this year.

    After regulatory hurdles and questions over onshore connections were cleared, investors have warmed to the technology, helping Germany in its ambitious plan to use more renewable power.

    Data from engineering association VDMA showed that some 1,765 MW of new offshore capacity were installed in the first six months of 2015, compared with 492 MW in January-June 2014.

    Current permissions and construction activity mean capacity additions for the whole of 2015 are likely to reach 2,250 MW, which would take overall installed capacity to 3,300 MW.

    "The expansion is going ahead with further projects," said Joerg Buddenberg, chairman of VDMA's offshore wind committee.

    "Units with a capacity of 704 MW are under construction at nine projects and final investment decisions (FID) have been taken at five further projects," he added.

    But VDMA said investors needed clarity about future network connections in order to look beyond 2020, because offshore projects need long lead times and limited access to onshore connections would hamper their ability to compete.

    "Should the access to networks become a bottleneck again, then cuts to production costs, which is the aim of introducing more competition, would be unnecessarily hindered," said Joerg Kuhbier, chairman of the non-profit Offshore-Windenergie Foundation.

    Renewable legislation planned by the government for 2016 is due to change the fixed-price schemes of the past to auction-based models, bringing green energy gradually into the wholesale power market, away from a costly era of subsidies.

    These subsidies have allowed operators to overcome initial problems and costs of the new technology and exploit the advantages of big turbines and steady winds far out at sea.

    Some 89 percent of Germany's total operating 668 turbines are located in the North Sea and the rest in the shallower and less windy Baltic Sea.
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    Lynas earns record revenues in June quarter

    Rare earths miner Lynas has reported positive free cash flow for the quarter ended June 30, on the back of increased production and record high revenues. Production for the quarter reached 2 606 t, up from the 1 973 t produced in the previous quarter, allowing for a record gross sales revenue of A$51.9-million, up 74% on the previous quarter. 

    However, market prices were, at the end of the quarter, affected by announcements by the Chinese government regarding the rare-earth export and resource taxes. Export taxes had been cancelled, as expected, reducing the cost handicap between magnet makers in and outside of China. Further, a new resource tax had fallen short of the expectations of a number of speculators, which were now realising a loss, with a negative effect on market price. 

    “The rare earths market is one that is characterised by speculative activity. Company valuations can show great volatility based on announcement and rumours. “While we expect a level of uncertainty in the rare earths market to continue in the near term, we remain focused on becoming the strongest-performing company within this market,” said CEO Amanda Lacaze. She noted that the results achieved in the fourth quarter were the next step in Lynas’s resolve to build a company whose valuation was based on actual performance rather than speculation. 

    Meanwhile, Lacaze pointed out that Lynas had successfully completed significant change programmes in a number of areas, including resetting its cost base, improving business efficiency, accelerating its production ramp-up, growing market share, acquiring customers to ensure consumption and further developing solutions to minimise and manage all waste streams.

    In addition, the company had also focused on embedding a company culture focused on continuous improvements. “Actions implemented over the last year have significantly reduced the Lynas cost base. Most initiatives have been focused on fixing a number of basic commercial elements including reducing overhead costs and reviewing supply contracts,” Lacaze noted. 

    Lynas on Friday also announced amendments to its contract with the supplier of two major chemical reagents for the Lynas Advanced Materials Plant. The company had carried a provision for onerous contracts, which represented the expected value of obligations arising under take-or-pay clauses of its supply agreement. Since signing the contract, Lynas had paid A$25.1-million in take-or-pay payments and other penalties. 

    The company said on Friday that as usage was forecast to continue at rates significantly below the original contracted qualities, the company had provided an overall liability of A$42.3-million at the end of December last year. However, the company had now successfully completed negotiations with the supplier and further penalties were not expected under the amended agreement. 

    The take-or-pay volumes had now been reduced to current and expected future volume consumption and the term of the amended supply contract would expire in January 2025. Over the next six months, Lynas was expected to pay A$460 000 a month to discharge the existing take-or-pay amount. A further existing A$4.41-million would be settled through the issue of Lynas shares.
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    Rare metal exchange in Kunming denies it can't pay investors

    The Kunming-based Fanya Metal Exchange (FYME) in Southwest China's Yunnan Province, which claims to be the world's largest rare metal exchange, on Thursday denied rumors that liquidity problems have caused it to default on 40 billion yuan ($6.44 billion) owed to investors.

    "The FYME actually has no payment obligation to investors since it is just a trading platform that provides buying, selling and financing services for enterprises, as well as minor metal investment services for investors," Deng Siji, brand director at the FYME, told the Global Times on Thursday.

    "But the FYME has been working with investors and companies, and seeking government support, to solve a crisis caused by a high level of investor redemptions," Deng said.

    The FYME, a minor metals spot trading exchange that began operating on April 4, 2011, has 14 tradable varieties of listed commodities including indium, germanium and cobalt. It accounts for nearly 95 percent of the world's indium stocks, according to its official website.

    The exchange said that it had cumulative turnover of 325.7 billion yuan as of the end of June, with total trading volume of 440,000 tons.

    Rumors began circulating earlier this month that about 220,000 individual investors from at least 22 Chinese provinces have experienced difficulties in getting back the money they invested via the FYME's platform. The amount is said to be about 40 billion yuan.

    More than 800 investors from around the country turned up at the exchange's premises on Monday.

    "The main business that most investors participate in is supply-chain financing, which provides direct financing for enterprises based on 100 percent collateralization for minor metals and rare -earth assets," the FYME said.

    "Massive redemptions by investors make it difficult for enterprises to immediately produce more than 30 billion yuan in cash to repay those investors," the FYME said in a written response to China Business News, that news organization reported on Wednesday. "Investors can seize the collateralized assets as payment under the agreement, but they are unwilling to do so because these assets are illiquid."

    The FYME said the wave of redemptions had been caused by several factors. One was falling trading volume, which in turn reflected an "inefficient trading system" required to meet regulatory requirements. Another was the booming A-share market, which drained liquidity from other markets. Additionally, the exchange cited "malicious" short selling by institutions.
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    India to award 15,000 MW of solar projects this year

    Live Mint reported that as part of the National Democratic Alliance government’s green energy push, India will award contracts for the supply of 15,000 MW this year.

    A senior government official, requesting anonymity, said that according to the plan, Solar Energy Corporation of India will shortly call for bids from solar project developers for buying 2,000 MW.

    The procurement by SECI will be done through a reverse bidding process and it will provide a purchase guarantee, making such projects bankable and help solar power eventually cost the same as that purchased from the grid.

    The official quoted above said that “The states have already tendered for around 3000 MW. Also, NTPC has already tendered 2600 MW. We are confident that by March 31st 2016, a capacity of 15,000 MW will be awarded.”

    While the present installation cost of a solar project is around INR 6 crore per MW, economies of scale are expected to drive down the cost to INR 4.5 crore per MW. The plan to reduce solar power tariffs comes in the backdrop of state electricity boards increasingly showing reluctance to buy power on account of their poor financial health. With a debt of INR 3.04 trillion and losses of INR 2.52 trillion, SEBs are on the brink of financial collapse.
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    China National Nuclear Power H1 output surges 55 pct

    China National nuclear Power Co., Ltd., the country’s first listed nuclear company, saw its nuclear power output rise 54.5% on year to 36.67 TWh in the first half of 2015.

    The company attributed the marked increase to the commencement of new generating units in Fujian and Zhejiang provinces.

    Fuqing Nuclear Power Plant’s No. 1 Unit, which was located in Fujian and put into operation in November 2014, generated 4.46 TWh of electricity over January-June this year.

    Qinshan No. 1 Nuclear Power Plant’s Fangjiashan No. 1 and No. 2 Unit, which were located in Zhejiang and came on stream last December and this February successively posted a 656.8% year on year increase to 9.46 TWh in the first half.

    Qinshan No. 2 Nuclear Power Plant saw power output rise 4.11% on year to 10.04 TWh over January-June, while Qinshan No. 3 Nuclear Power Plant showed a year-on-year drop of 5.02% to 5.13 TWh.

    Tianwan Nuclear Power Plant, located in Jiangsu, embraced a year-on-year growth of 1.91% to 7.58 TWh.
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    CF Industries Continues Its Shopping Spree

    Just weeks after acquiring U.K.-based nitrogen producer GrowHow, fertilizer producer CF Industries (NYSE: CF) is looking to score another acquisition. This time, the buyout target is Dutch chemicals maker OCI.

    There is a wave of consolidation washing over the global materials industry, and CF Industries is playing its role. The company originally pursued Norwegian nitrogen producer Yara International, but when internal struggles at Yara caused the deal to be shelved last October, CF ended up turning its attention to Yara's 50% interest in GrowHow which it ultimately purchased for $580 million.

    Now, the company is turning its attention to certain unnamed businesses of OCI. Although both companies confirmed the discussions, neither cared to elaborate further on which businesses were under consideration.

    This is indicative of the rollup occurring across the industry, one which saw fertilizer giant PotashCorp recently announce it wanted to purchase German potash producer K+S and had biotech Monsanto going after its Swiss counterpart Syngenta in a bid to gain control over its $15 billion chemicals business. And earlier this year, Dow Chemical split off its chlorine production business and merged it with Olin.

    While depressed commodities pricing is helping drive some of the deals, for U.S.-based companies looking overseas, it also represents an opportunity to escape high domestic corporate taxes.

    In a process known as an inversion, a U.S. corporation buys a foreign company and reincorporates in its new partner's home country. The U.S. Treasury Department clamped down on inversions last year by cutting off access to cash that companies have accumulated overseas, making such deals unattractive if not more difficult. However, they are not impossible to arrange, and The Wall Street Journal says a few deals in the $1 billion to $2 billion range where the parties did not have much money overseas have still gone through.

    An inversion is said to be at least one of the reasons why CF Industries, which is based in Illinois, is going after OCI, but these are industry giants with a combined market cap of $20 billion. Regardless of the rationale, investors can expect more such deals to be made in the future.

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    ICL sees progress in tax talks, could renew Israel investments

    Potash producer Israel Chemicals (ICL) said on Monday it would resume investments worth more than 5 billion shekels ($1.3 billion) in Israel if the government scraps a planned rise in taxes on natural resources.

    The company, which has exclusive rights to mine minerals at the Dead Sea, last year halted or put under review nearly $2 billion in domestic projects because of the proposed tax hikes.

    The tax increase was proposed by former Finance Minister Yair Lapid, but his party is no longer part of the governing coalition following a March election, raising the chance the new Likud-led government might soften or even drop the proposal.

    Parliament, the Knesset, is expected to decide on the tax rate by the end of this year.

    Tel Aviv-based ICL, the world's sixth-biggest potash producer and the only big mining company operating in Israel, said on Monday it was making progress in talks with the government on the issue. If taxes are not raised it would plan to invest $1.5 billion in domestic projects over the next four years, including those put on hold last year, it said.

    Most of its projects are in the Negev desert in southern Israel.

    "ICL hopes that this dialogue will help create new and proper arrangements for all the issues, allowing it to invest again in Israel, after such investments were halted in ... 2014," it said in a statement.

    "Within this framework, ICL has presented an investment plan worth over 5 billion (shekels) for projects in the eastern Negev."

    The tax proposal recommended a progressive tax of 25 percent after miners reach an annual return on investment of 14 percent, rising to 42 percent for returns over 20 percent. Israel's government currently takes in about 23 percent in taxation from mining companies but that would ultimately rise to between 46 and 55 percent under the proposal.
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    Precious Metals

    Newmont earnings in line, raises output forecast

    Newmont Mining Corp reported higher second-quarter adjusted earnings on Wednesday, in line with analyst expectations, as lower oil prices and favorable exchange rates offset the impact of weaker metal prices.

    Based on this performance, Newmont, the world's No. 2 gold producer, raised its gold production forecast and lowered its cost outlook.

    The miner now expects attributable gold production of between 4.7 million and 5.1 million ounces in 2015, up from a prior forecast of 4.55 million to 4.9 million ounces. It sees production rising to between 5.2 million and 5.5 million ounces in 2017.

    Consolidated all-in sustaining costs per ounce are now expected to be between $920 and $980 in 2015, down from an earlier forecast of $960 to $1,020, and seen holding relatively steady at between $900 and $1,000 in 2017.

    The changes also take into account the recent acquisition of the Cripple Creek & Victor mine, the pending sale of the Waihi mine and the start up of the Long Canyon mine.

    Newmont said adjusted net earnings rose to $131 million, or 26 cents a share, in the quarter to end-June from $101 million, or 20 cents a share, in the same period a year ago.

    Analysts on an average expected the miner to report earnings of 26 cents per share, according to Thomson Reuters I/B/E/S.

    All-in sustaining costs to produce one ounce of gold improved to $909 an ounce from $1,063 in the same quarter a year ago.

    Attributable gold production from Newmont's mines in the Americas, Australia, Asia and Africa rose to 1.24 million ounces of gold and 41,000 tonnes of copper in the quarter. That compares with 1.22 million ounces of gold and 20,000 tonnes of copper in the second quarter of 2014.
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    Saracen's costs fall as Gold production rises

    After having announced record quarterly and yearly gold production earlier this month, gold miner Saracen Mineral Holdings on Wednesday said it had also achieved record quarterly and full-year all-in sustaining costs (AISC), as well as record operational cash flow. 

    The miner previously reported that gold production for the full year had reached 167 531 oz, compared with a previously announced guidance of 160 000 oz. Quarterly production also reached a record of 46 563 oz. Saracen on Wednesday noted that AISC for the quarter was a record low of A$871/oz, compared with the A$1 112/oz reported in the previous quarter, while full-year AISC reached A$1 139/oz, well below the guidance of A$1 150/oz. 

    All-in cash expenditure for the year fell by A$5.6-million to A$40.6-million for the full year, mainly owing to openpit mining coasts falling by some A$4.1-million during the year, as mining reached the base of the Whirling Dervish openpit mine. 

    Gold sales were also strong, with some 44 002 oz sold in the quarter ended June at an average sales price of A$1 552/oz, for revenue of A$68.3-million. Operational cash flows during the quarter generated a record A$36-million, beating the previous record of A$21.6-million set in the March quarter. 

    The cash flow was determined after taking into account all openpit and underground mining costs, ore haulage, processing and site administration expenses, as well as royalties, sustaining capital and underground development. 

    Saracen was currently working on bringing its Thunderbox mine into production, to complement the Carouse Dam operations. With the addition of the Thunderbox operation, Saracen’s production was expected to double to 300 000 oz/y within two years.

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    Alrosa’s rough diamonds sales down 22% in first half of the year

    Russia’s Alrosa, the world's top diamond producer by output in carats, said Tuesday it sold 18 million carats of rough diamonds for $2.1 billion in the first half of 2015, significantly less than in the same period last year, when it raised $2.7 billion from about 21.1 million carats.

    The company, hit by a sustained slowdown in the diamond market during the second quarter of the year, said its rough prices declined by 3% during the three months ended June 30 and by 6% in the first half of the year.

    Alrosa’s mines generate 25% of the world's diamond output and it competes with De Beers, a unit of Anglo American (LON:AAL), to rank as the world's leading diamond miner.

    Production, however, was up 13% compared to the first half of 2014. In fact, Alrosa’s mines generate 25% of the world's diamond output and it competes with De Beers, a unit of Anglo American (LON:AAL), to rank as the world's leading diamond miner.

    At the Karpinskogo-1 pipe of the Lomonosov deposit (Severalmaz), diamond output increased to 600,000 carats after production began in October 2014.

    Higher grade ore was processed from extra stockpiles at the open pit of the Udachnaya pipe.

    At the Mir underground mine, diamond output almost doubled through measures to reduce water inflow, while the first 481,000 carats of diamonds were produced from the Botuobinskaya pipe after its launch in March 2015.

    Earlier this month, Alrosa's president Andrey Zharkov visited Angola to discuss further cooperation in developing new diamond projects in the African nation.
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    Evolution achieves record FY output, lower costs

    Australian gold miner Evolution Mining has reported record gold production for the three months to June 30, as well as for the full-year, as both the Edna May and Mt Carlton operations delivered strongly. Gold production for the June quarter reached 113 821 oz, which was up from the 103 305 oz delivered in the previous quarter, while full-year gold production was up by 2.3% year-on-year to 437 570 oz. 

    The Edna May operation, in Western Australia, delivered an outstanding result during the full year, producing 89 766 oz, up 23% on the previous financial year and well above the forecast production. Edna May produced 22 283 oz of gold in the three months to June. 

    The Mt Cartlon project, in Queensland, also delivered strong results for the full year, producing 77 658 oz of gold, which was also above the guidance of between 65 000 oz and 72 500 oz. The mine produced 20 845 oz of gold in the June quarter. The Mt Rawdon and Cracow mines, both in Queensland, performed within guidance. Mt Rawdon produced 102 162 oz of gold for the full-year and Cracow 9 064 oz. For the quarter ended June, Cracow delivered 27 868 oz of gold, while Mt Rawdon produced 27 242 oz of gold. 

    Evolution on Tuesday said a focus on cost and productivity improvements continued during the 2015 financial year, which resulted in record low costs across the group. Average C1 cash costs of A$711/oz for the year was 9% below that of 2014. The average was also below the bottom-end of the guidance of between A$750/oz and A$820/oz. 

    All-in sustaining costs for the full year improved by 4% on 2014, reaching A$1 036/oz, and was also below the bottom-end of the guidance of between A$1 050 and A$1 130/oz. 

    Evolution noted that using the average Australian/US dollar exchange rate for the June quarter, the company’s costs continued to decline relative to its global peers during 2015. 

    Meanwhile, for the quarter under review, the company’s operations delivered a record cash contribution of A$41.4-million, after all sustaining and major project capital expenditure. A total of A$43.2-million was spent during the quarter, with some A$77-million spent in the full year on sustaining costs and a further A$91.2-million on capital expenditure.
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    Large 5 tonne trade dumps Gold

    In Shanghai, close to 5 tonnes of gold was sold on the SGE in a two-minute window just prior to 9:30am, in a market where the normal volume traded is 25 tonnes in an entire day. The August 15 Comex gold contract also saw 7,600 contracts traded in the same two-minute window, though intraday trading data showed an unusual spike in Comex volume just before Shanghai, suggesting Comex gold lead the selloff, but SGE clearly exacerbated it.

    Thianpiriya says the technical outlook is very bearish now for gold, saying “further downside risks remain” and that “other indicators also suggest the likelihood of an immediate rebound is low.”

    Gold fell 1% on Friday after the People's Bank of China revealed lower than expected gold reserves. All the signs coming out of the world's biggest gold consumer right now are cautious.

    “We would be sellers of rallies, and wary of buying dips,” Thianpiriya says.

    Here’s a chart of the crazy move in the gold price.

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    Base Metals

    Alcoa to split downstream business segments as its value-add portfolio expands

    Lightweight and high-performance metals producer Alcoa will split its downstream portfolio into two segments, with one maintaining a core focus on aerospace and the other centred on the construction and commercial wheels markets. 

    NYSE-listed Alcoa had also closed the acquisition of vertically integrated titanium and specialty metal products supplier RTI International Metals in a stock-for-stock transaction with an enterprise value of $1.5-billion. 

    Alcoa had been transforming its business focus in recent years, increasingly depending on the higher-margin downstream market. Combined with its other recent acquisitions of Firth Rixson and TITAL, as well as other innovation-led organic growth investments, Alcoa continued to deepen its reach into the high-growth aerospace market. 

    The Engineered Products and Solutions (EPS) segment, led by group president Olivier Jarrault, had been streamlined to enable a core focus on Alcoa’s position as an aerospace partner. The EPS group would comprise business units that primarily catered to the aerospace market through Alcoa Titanium & Engineered Products, the designation for the newly acquired RTI business, 

    Alcoa Fastening Systems & Rings, and Alcoa Forgings & Extrusions, into which the Firth Rixson business had been integrated, and Alcoa Power & Propulsion, which now included the TITAL business. Alcoa had formed a new business segment,

    Transportation and Construction Solutions, incorporating the Alcoa Wheel & Transportation Products, and Alcoa Building & Construction Systems business units, both previously part of EPS. Alcoa said it hoped the new group structure would drive a successful expansion into emerging regional markets, where both these business units had significant opportunity, in addition to capturing continued growth in existing markets. 

    To build on the exciting growth prospects for Alcoa in emerging markets, Latin American regional president Jose Drummond had been appointed to lead the group as president of Alcoa Transportation and Construction Solutions. He would also maintain his regional president role.
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    Nickel bucks the trend of slower Chinese metal imports

    China's pull on refined metal from the rest of the world was much diminished in the first half of this year.

    Financial demand for metal as collateral against loans has been much diminished since the Qingdao port scandal in the middle of last year.

    Manufacturing demand, meanwhile, has also softened in tandem with the broader slowdown in the Chinese economy to the point that analysts at Goldman Sachs argue that metals demand has experienced a "hard" landing in the first part of this year.("Revealing China's Commodity 'Hard Landing'", July 20, 2015).

    The stand-out exception to the first-half picture of slowing imports was nickel.

    Even here, though, there is sufficient ambiguity to be wary about extrapolating a trend from June's bumper imports.

    Net imports of refined nickel more than doubled to 78,100 tonnes in the first six months of 2015.

    In truth, imports had been running at pretty humdrum levels until June, when they went stratospheric. June's imports of 38,800 tonnes were the third highest monthly tally on record after June and July 2009.

    This, it's worth remembering, is exactly what nickel bulls had been hoping to see.

    Imports of nickel raw materials are still falling, down 37 percent in the first half, with flows of Philippine ore failing to fully fill the gap left by the Indonesian ban on exports.

    The pressures on China's nickel pig iron (NPI) producers are building as inventories of Indonesian ore run down and the current low price environment forces out marginal operators.

    Logically, the less nickel China produces, the more it will need to import, which is why bulls have seized on the latest figures as a sign of things to come.

    This process has already been playing out in ferronickel, a cheaper and more obvious NPI substitute for stainless steel mills.

    Ferronickel imports also more than doubled in the first half of this year and were running at a record pace of over 60,000 tonnes per month in both May and June.

    So is that import demand now spilling into the refined metal market, offering bulls the tantalising hope that the seemingly endless rise in London Metal Exchange stocks might be about to turn?

    The answer right now is only maybe.

    June may yet turn out to be something of an outlier month with surging refined nickel imports reflecting factors other than pent-up manufacturing demand.

    It's noticeable, for example, that imports from Russia at 21,700 tonnes hit an all-time high.

    And that may have reflected the well-flagged delivery issues around the recently-launched nickel contract on the Shanghai Futures Exchange (SHFE).
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    South32 warns of $1.9bn impairment, despite posting production records

    Triple-listed diversified miner South32 has reported production records at four of its operations during its first quarter of production since its break from major BHP Billiton. However, the miner has warned of a $1.9-billion asset impairment on its Australian and South African manganese smelters, as well as its Wolwekrans Middelburg Complex, within the South African energy coal division. 

    The miner said the cumulative noncash impairment of $1.3-billion on its manganese assets was largely offset by the previous fair value uplift of $2.1-billion described in its listing documents. South32 made its market debut in May, after BHP shareholders agreed to the divestment of South32, which comprises the aluminium, coal, manganese, nickel and silver assets previously held in the BHP portfolio. 

    “This was an historic period for our company as shareholders approved the demerger and we listed on the ASX, LSE and JSE,” said South32 CEO Graham Kerr. During the three months ended June, production records were set at the Brazil aluminium operations, the Illawarra coal project, in Australia, as well as at the manganese operations in Australia and South Africa. 

    The group’s alumina production increased by 1% quarter-on-quarter to 1.2-million tonnes, while aluminium production was down 1% to 242 000 t. The Brazil aluminium operation produced 337 000 t of alumina and 330 000 t of aluminium for the quarter, an 8% and 16% respective increase on the previous quarter. The Worsley alumina operation produced 929 000 t of alumina during the quarter, down 1% on the previous quarter. Aluminium production at the Hillside and Mozal refineries were broadly unchanged during the quarter, as efficiency gains offset a significant increase in load-shedding events during the year. The South African aluminium operations produced 175 000 t during the quarter, while the Mozal plant delivered 65 000 t. 

    Manganese production increased by 3% during the quarter to 1.12-million tonnes, with 81 000 t of manganese alloys produced, a 26% decline on the previous quarter. South32 said on Wednesday that the company had responded to challenging market conditions by temporarily suspending capacity at its Metalloys plant and prioritising higher-value manganese ore production. The South African Metalloys operation was also affected by a fatality during the quarter, which led to the initial suspension of operations, before a decision was taken to restart only one of the four furnaces in response to market conditions. 

    “We are fast-tracking the implementation of our regional operating model and have established a strong foundation for our agile and entrepreneurial culture. The curtailment of aluminium production at Alumar and manganese alloy production at Metalloys demonstrates our commitment to maximise financial performance per share, rather than volume,” Kerr said. 

    Meanwhile, metallurgical coal production increased by 23% quarter-on-quarter to 1.9-million tonnes, while energy coal production reached 8.5-million tonnes in the June quarter.
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    First Quantum restarts Ravensthorpe

    Canadian miner First Quantum has started re-commissioning work at the Ravensthorpe nickel mine, in Western Australia. 

    The company said on Wednesday that the atmospheric leach circuit at the mine had been restarted earlier this month, after being shut down in December last year following a tank failure. Operations at the 38 000 t/y nickel plant was suspended following an acid spill. 

    First Quantum said on Wednesday that steady-state production would likely be achieved by the end of July, at which point the circuit should operate at 50% of production capacity, with a throughput of 80 t/h. It is planned that this capacity would continue for the next six months while out-of-service leach tanks were progressively refurbished.
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    Finished products help Norsk Hydro offset aluminium price fall

    Norsk Hydro, one of the world's largest aluminium producers, beat second-quarter profit forecasts as demand for finished products such as components, strips and foils offset the impact of falling metal prices.

    The Norwegian company cut forecasts for global primary aluminium demand growth excluding China for the second quarter running, and said there was more excess aluminium in global markets than it had previously estimated.

    But it said better performances from its rolled products and Sapa business, a joint venture with Norway's Orkla, were helping it to cope, sending its shares more than 4 percent higher in early Tuesday trading.

    "It was very important for the share that there was a beat in this report as the share has traded along with negative earnings revisions for the last 4-5 months," Nordea Markets analysts said, referring to recent cuts in analysts' profit forecasts as aluminium prices have fallen.

    The three-month price of aluminium -- used in the aerospace, construction and automotive sectors -- was around $1,700 per tonne on Tuesday, down from around $2,000 in May as exports from China and Russia saturate the market.

    Norsk Hydro shares are down around 24 percent over the last three months. At 0750 GMT, they were up 1.6 percent at 32.63 crowns, one of the biggest rises among European blue-chips.

    The company reported a jump in second-quarter underlying operating profit to 2.67 billion Norwegian crowns ($324 million) from 544 million in the year-ago period, above forecasts for 2.34 billion in a Reuters poll of analysts..

    It trimmed its 2015 global forecast for primary aluminium demand growth to 2-3 percent from 3 percent excluding China, and to 5 percent from 6 percent when China is included.

    The firm, one of Norway's largest industrial companies with operations from Brazil to Qatar, said global markets would be oversupplied by between 0.5 and 1 million tonnes of aluminium this year, up from a previous estimate of 0.5 million tonnes, as Chinese production exceeds a deficit in the rest of the world.

    U.S. peer Alcoa said earlier this month it expected supply to outpace global demand by 760,000 tonnes this year, some 400,000 tonnes higher than its previous forecast, as China had not cut output as much as expected..

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    Indonesia tin smelters face credit squeeze over shipment failures

    Indonesian tin smelters are finding it harder to get credit from banks and trading houses after a Singapore-based firm failed to deliver some shipments, in a further blow to an industry reeling from a slump in prices.

    More than a third of Indonesia's smelters have already shut over the past year and tougher credit conditions could hasten mergers or closures in the world's top exporter of refined tin.

    "It's not easy to get more money like it used to be," said Agung Nugroho, corporate secretary at PT Timah, Indonesia's biggest tin miner.

    "Now in order to get credit from the banks, besides a good name and letter of guarantee, we have to show them all of the assets," he said, adding tight credit could force consolidation or mergers between smaller smelters.

    A trader at a global trading house confirmed it had cut advances to firms in Singapore and Indonesia to finance tin purchases due to concerns over deliveries not being made.

    "We only try to get material from companies that can ship without needing money in advance," said the trader, who declined to be identified due to the sensitivity of the issue.

    A banker at an Asian-based Western lender also said the firm was more cautious about lending due to low tin prices and concerns about deliveries to its customers after Singapore-based Uni Bros Metal Pte Ltd (UBM) had failed to deliver some cargoes.

    Asked about the issue, UBM did not directly refer to the missed shipments but said in an email that there had been an "unprecedented" fall in tin prices.

    Traders noted that steep falls in tin prices can lead to a cash crunch for trading firms that haven't sufficiently hedged against price swings.

    UBM, a mid-size trader in the tin industry, acted as a middle man, sourcing tin from Indonesian smelters for end-users or major trading houses.

    UBM failed to deliver contracted tin shipments to at least two customers in the first quarter of 2015, according to a Taiwanese smelter and a metals trader with direct knowledge of the matter. Reuters could not confirm the reasons for the non-deliveries.

    UBM's failure to make the deliveries has led at least three mid-size trade houses - significant players in the small tin market - to stop advancing funds by prepaying for tin shipments from Indonesia, three sources familiar with the matter said.

    Prepayments are relied on by many smaller Indonesian smelters for operating capital. Smaller smelters account for more than a quarter of Indonesia's tin exports, traders estimate.
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    Nevada Copper Corp update on drilling at Pumpkin Hollow copper project

    Nevada Copper Corp announced drill results at the Company's 100%-owned Pumpkin Hollow project located near Yerington Nevada. The primary objective of the drilling was to obtain additional samples for iron metallurgical testwork. The assay results however also contained several notable high grade copper intersections in the South open pit, including 230 feet (188 feet true thickness) grading 1.49% copper within a broader zone of 448 feet (367 feet true thickness) grading 1.0% copper.
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    Steel, Iron Ore and Coal

    Vale hits second-quarter iron-ore record

    Vale said on Thursday it produced 85.3-million tonnes of its own iron-ore in the second quarter, a record for the quarter and second highest ever for the firm. The total was 7.4% higher than the same period last year as the world's largest iron-ore producer continues to ramp up output despite a falling price for the mineral, which recently touched a decade low. 

    Vale's all-time quarterly record for the main steel-making ingredient was 85.7-million tonnes in the third quarter of 2014. 

    Vale is in a battle for market share with low-cost Australian producers Rio Tinto and BHP Billiton. On top of increasing overall output, Vale reiterated it is cutting 25-million to 30-million tonnes a year of low-quality iron-ore on which the company is no longer making enough money. Vale did not give a timeframe for the reduction in low-quality ore volumes but said it would be replaced by new, higher-quality production. 

    The company also produced 67 100 t of nickel and 2.01-million tonnes of coal in the quarter, the company said in a statement. When 4.02-million tonnes of iron-ore purchased from third parties is included, Vale produced 89.3-million tonnes in the quarter.
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    Nucor Profit Falls as Steel Prices Slump

    Nucor Corp. said Thursday its second-quarter profit fell mainly on a slump in steel prices, but predicted a better second half in part because of stronger trade protection laws.

    The Charlotte, N.C.-based firm, the biggest steelmaker in the U.S. by capacity, said earnings fell 15% to $124.8 million, or 39 cents a share, from $147 million, or 46 cents, a year earlier. Though down, the results were well ahead of the company’s guidance for earnings of 20 cents to 25 cents a share.

    Revenue decreased 18%, to $4.36 billion, reflecting a 13% drop in average sales price a ton. Shipments to outside customers dropped 5%, including a decline of 2% in steel mill shipments that reflected reduced production.

    “Pricing remains under pressure from exceptionally high levels of imports,” the company said. Imports made up an estimated 32% of the finished steel market in the first half of 2015, up from 27% in the first half of 2014. The benchmark hot-rolled coil index has fallen 23% to $464 per ton since the start of the year.

    The American steel industry is being reshaped by a global steel glut fueled by record exports from China as that economy cools. China buys roughly half the world’s steel, so any hiccup matters. Not all the imports into the U.S. come from China, but many are displaced from countries where China has grabbed market share. The environment has frustrated American steelmakers because their domestic market is relatively solid, with the exception of the oil and gas industry, which has suffered from the oil price swoon.

    Without the imports, this “would otherwise be a good environment for domestic producers,” Deutsche Bank analyst Jorge Beristain wrote in a note this week.

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    Teck eyes further coal cutbacks

    Canadian miner Teck Resources Ltd said coal output could need further cutbacks if grim market conditions continue.

    The company, the largest producer of steel-making coal in North America, has begun rotating shutdowns at six Canadian coal mines and said it may take further actions in the fourth quarter if the supply-demand balance does not improve.

    That move will reduce Teck's third-quarter coal production by about 1.5 million tonnes to 5.7 million tonnes, with sales seen in the range of 6 million to 6.5 million tonnes.

    Hurt by a slowdown in Chinese demand and a glut of new supply from Australia, Teck forecasts annual coal production of 25 million to 26 million tonnes.

    With prices for all its major commodities down significantly, the company said it is focusing on cost cutting and disciplined use of capital.

    Average realized prices for coal fell 14 percent to $95 per tonne.

    Teck said it has reached agreements with the bulk of its coal customers for the third quarter, based on a quarterly benchmark of $93 per tonne.

    Teck has said it could do more so-called "streaming" deals on silver output from its mines. Analysts speculate that Teck may want to raise funds for acquisitions or to help fund its portion of the Fort Hills oil sands development.

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    Stronger rouble boosts Russian Severstal's Q2 net profit

    Severstal, one of Russia's largest steel producers, saw its second-quarter net profit increase by 39 percent quarter-on-quarter because of a stronger rouble, it said on Thursday.

    Severstal's net profit of $469 million was boosted by a FX translation profit of $130 million, the company, controlled by billionaire Alexei Mordashov, said in a statement.

    Adjusting for this non-cash item, the company would have posted an underlying net profit of $339 million, missing an estimate by analysts of $358 million.

    Its revenue increased 18 percent quarter-on-quarter to $1.8 billion, while earnings before interest, taxation, depreciation and amortisation (EBITDA) rose 0.9 percent to $588 million.

    The rouble strengthened by around 5 percent against the U.S. dollar in the second quarter and led to higher dollar-denominated selling prices. Revenue was also supported by a seasonal rebound in sales on domestic and export markets.

    However, it said it expected global steel prices to remain under pressure because of a weaker Chinese economy, with steel demand falling 5.1 percent since the start of 2015 and growing Chinese steel products exports.
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    Outokumpu’s underlying EBIT was EUR -25 million in Q2

    While European restructuring progressed and performance in Coil EMEA improved, a decline in financial performance was driven by low delivery volumes and weak performance in Coil Americas. Coil Americas’ underlying EBIT loss increased to EUR 50 million. Operating cash flow was EUR -41 million.

    Stainless steel deliveries were 616,000 tonnes1 (I 2015: 620,000 tonnes).
    Underlying EBITDA2 was EUR 57 million (I 2015: EUR 77 million) and underlying EBIT2 was EUR -25 million (I 2015: EUR 2 million). The decline was driven by weak performance in Coil Americas.
    EBIT was EUR -26 million (I 2015: EUR -10 million). The net effect of raw material-related inventory and metal derivative gains/losses was EUR -1 million (I 2015: EUR 7 million). There were no non-recurring items in the second quarter (I 2015 EUR -19 million).
    Operating cash flow was EUR -41 million (I 2015: EUR -62 million).
    Net debt increased to EUR 2,116 million (March 31, 2015: EUR 2,034 million) and gearing was 96.4% (March 31, 2015: 91.5%).

    Outokumpu estimates stainless steel end-user demand to remain relatively healthy in the third quarter. However, the European markets will be seasonally slow during the summer months, and in Americas, the pressure from Asian imports continues and low nickel price puts constraints on distributor sector buying, pricing and rebound of the market. In APAC region stainless steel market remains difficult.

    Outokumpu estimates somewhat lower delivery volumes quarter-on-quarter with seasonal decline in Europe and gradual increase in Americas. The Group’s underlying EBIT for the third quarter is estimated to improve from the second quarter, but to remain negative mostly due to seasonal impacts. In addition to the ongoing savings programs, special measures are taken to improve profitability in Coil Americas. With current prices, the net impact of raw material-related inventory and metal derivative gains/losses on profitability is expected to be EUR 10-15 million negative.

    Outokumpu’s operating result may be impacted by non-recurring items associated with the ongoing restructuring programs. This outlook reflects the current scope of operations.

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    Fortescue Deepens Cuts as Iron-Ore Downturn Bites

    Fortescue Deepens Cuts as Iron-Ore Downturn Bites

    Fortescue Metals Group Ltd. said it intends to cut costs in the year ahead by nearly as much as the two prior fiscal years combined, as the miner steps up its defense against a slumping iron-ore price.

    Once a tiny explorer, Fortescue took on major producers Vale SA, Rio TintoPLC and BHP Billiton Ltd. in a decadelong expansion that turned it into the world’s fourth-largest iron-ore exporter. But the cost of digging up its ore is higher than those rivals, and the miner also sells its raw material, which is lower quality, for less. That leaves it vulnerable as iron-ore prices fall.

    In 2012, executives set about cutting costs from the business, spooked by a sharp dip in prices that sparked emergency talks with lenders. Cutbacks were wide-ranging, from job layoffs to company funded barbecues.

    Now, Fortescue thinks it can go deeper. On Thursday, the miner said it expects to cut costs a further US$1.4 billion in the year through June, 2016, almost matching the US$1.6 billion of savings recorded over the 24 months prior.

    “That means we will produce the same amount of tons as we did last year, and we will spend US$1.4 billion less in doing so,” Chief Financial Officer Stephen Pearce said on a conference call.

    The miner is renegotiating rates with suppliers and changing how it blends and processes ore. Mr. Pearce wouldn’t say whether there would be more job cuts, although he said: “We will always continue to refine our organization.”

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    BC Iron sets sights on cost reductions

    ASX-listed BC Iron on Thursday told shareholders that the company would strongly focus on cost reductions in the near-term. 

    During the three months to June, the Nullagine joint venture (JV), in the Pilbara, delivered 1.46-million tonnes of ore, which was in line with the previous quarter’s production. C1 cash costs at the operation reached A$49/t free-on-board, which was also in line with the previous quarter, while all-in cash costs reached A$58/t. 

    However, in an effort to cut costs, BC Iron transitioned its major mining, crushing and screening contractor at the Nullagine project. The company exercised an early termination right in its contract with Watpac, appointing a new contractor. “The June quarter results were solid given the transition in our major contractor at the Nullagine JV during the period and the ongoing iron-ore market challenges,” said BC Iron MD Morgan Ball. “Our cost base is now materially lower as a result of changes implemented over the last six months, which is reflected in our full year guidance for 2016.” 

    The miner was targeting a C1 cash costs of between A$42/t and A$45/t at the Nullagine project for the 2016 financial year, with all-in cash costs expected to reach between A$48/t and A$54/t. “We are continuing to strive for further cost reductions in light of expected ongoing volatility in iron-ore prices and also remain focused on ensuring we make decisions that are in the best interest of shareholders,” Ball said. 

    For 2016, BC Iron was expected to produce between 4.9-million tonnes and 5.3-million tonnes of ore, compared with the 5.26-million tonnes produced during the full year ended June. The miner said that the slightly lower production rates in 2016 would facilitate the deferral of capital expenditure associated with the higher-cost Bonie East and Coogan mesas.
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    China’s June thermal coal imports slow to 4-mth low

    China’s June imports of thermal coal – including bituminous and sub-bituminous coals, slumped to a four-month low of 6.21 million tonnes, a 43% drop on year and down 4% from the previous month, according to the latest data from the General Administration of Customs (GAC).

    China’s thermal coal imports over January-June were 42.35 million tonnes, a 44% fall from the year-earlier period.

    The slump was mainly due to low prices in the domestic market, stricter trace elements check, reduced power demand amid weak industrial activity and increased competition from the hydropower sector.

    Thermal coal prices have been hovering low at China’s domestic market since May, after falling materially from the start of the year, with 5,500 Kcal/kg NAR coal now around 495 yuan/t ($80.9/t) with VAT, FOB Qinhuangdao.

    China imported 3.76 million tonnes of Australian thermal coal in June, down 28% on the year and 1% lower than May, while imports from Indonesia slumped 52% on year and down 4.3% on month to 1.76 million tonnes.

    Thermal coal imports from Russia decreased 56% on year to 661,790 tonnes in the month, the lowest since October 2012.

    Meanwhile, China’s lignite imports in June fell 18% on the year and down 18.1% from May to 2.9 million tonnes.

    Lignite imports over January-June were 23.75 million tonnes, down 35% year on year.

    Lignite imports from top supplier Indonesia stood at 22.15 million tonnes in the same period, down 34.7% from a year ago.
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    Six of the seven listed Chinese coal cos report H1 deficit amid sliding prices

    Six of the seven listed Chinese coal companies that have released half-year performance forecasts pointing to a combined loss of 1.9-2.5 billion yuan ($310-408 million), in stark contrast to profit of 133 million yuan a year ago.

    China coal energy Co., Ltd., China’s second largest coal producer, may post the most significant loss, as it forecast a loss of 0.8-1.2 billion yuan in the first half, the first deficit since 2012 on June 26.

    Next was Taiyuan Coal Gasification Co., Ltd., who said on July 15 its H1 net loss was expected to hit 650-700 million yuan, more than doubling 312 million yuan’s deficit over January-June 2014. The company attributed the huge loss to tough sales amid sliding prices of washed coal and middlings – a byproduct in the process of coal preparation.

    Henan-based Shenhuo Coal and Electricity Co., Ltd. said it may have to bear a loss of 270-300 million yuan in the first half. The company said the average sales price of its coal products fell 93.66 yuan/t on year to 447.28 yuan/t over the six-month period, leading to 341 million yuan of drop in net profit.

    On July 18, Hebei-based Kailuan Energy Chemical Co., Ltd., a major coking coal producer, predicted a deficit of 150-200 million yuan in the first half, a sharp drop from 103 million yuan of profit in the same period last year.

    Inner Mongolia-based Pingzhuang Energy Co., Ltd. and Shanxi-based Meijin Energy Co., Ltd. forecast a loss of 49.5-50.5 million and 23-28 million yuan from January to June, respectively.

    Jizhong Energy Co., Ltd., also based in Hebei, appeared to be the only company with luck to see a net profit of 6-10 million yuan during the first half, which, however, was down over 80% year on year.
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    Indian stainless steel imports in 2014-15 up by 49% YoY

    Image Source: EpcworldPress Trust of India reported that Minister of State for Steel Mr Vishnu Deo Sai in the Rajya Sabha informed that India's stainless steel imports surged 49 per cent to 5.5 lakh tonnes in the last financial year

    India had imported 3.7 lakh tonnes of stainless steel in 2013-14

    In value terms, imports of the metal rose by 23 per cent to INR 5,918.9 crore in 2014-15, as against INR 4,801.9 crore in 2013-14, the data showed.

    Mr Sai told "Domestic steel manufacturers and other stakeholders have been representing against the surge in imports of steel.”
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    Indian Q2 thermal coal imports down 4 pct on year

    Indian imported 21.5 million tonnes of thermal coal over April-June, the first quarter of the 2015-16 fiscal year, down 4% on the year, according to the latest data of India’s Central Electricity Authority.

    Of the total, 10.6 million tonnes was imported by 29 utilities for blending while 10.9 million tonnes was imported by eight utilities for power plants burning only imported coal.

    Twelve utilities did not import any coal during the same period.

    Privately-owned power producer Adani Power imported the most thermal coal in April-June at 4.2 million tonnes, followed by state-run power generator NTPC Ltd. with import of 3.8 million tonnes.

    For 2015-16, utilities are set to import 115 million tonnes of thermal coal. Of this, 73 million tonnes would be for those plants blending imported and domestic coal, with the remaining 42 million tonnes to be imported by those plants which use only imported coal.

    During 2014-15, Indian utilities imported 91.24 million tonnes of coal compared with a target of 94 million tonnes.

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    China Coal Energy H1 coal output down 22pct on yr

    China coal energy Co., Ltd., the country’s second largest coal producer, produced 46.27 million tonnes in the first half of the year, down 22.1% on year, it said in a statement late July 21.

    The drop was mainly due to the company’s output cut amid weak demand and a supply glut in the market on the back of slowing Chinese economy.

    In June, China coal produced 9.6 million tonnes of coal, down 5.3% year on year and down 3.3% from May – the 12th consecutive year-on-year drop, said the company.

    Total coal sales over January-June reached 66.12 million tonnes, down 12% on year, with the June sales at 13.71 million tonnes, down 2.7% on year but up 0.3% from May.

    The company sold 8.92 million tonnes of self-produced coal in June, accounting for 65.1% of the total, down 13% year on year and down 3.9% from May. Total self-produced coal sales between January and June dropped 16.8% on year to 55.26 million tonnes.
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    China’s Jun coking coal imports surge 170pct on mth

    China’s coking coal imports surged 170.2% from May’s 1.88 million tonnes to 5.08 million tonnes in June, showed the latest data from the General Administration of Customs (GAC).

    Industry insiders attributed to the increase mainly to increased buying from end users amid bottom-out prices in late-May, which led to an influx of vessels arrived in June.

    However, it was still a drop of 11.2% year on year, the fourth consecutive year-on-year drop, indicating persisting weakness in domestic demand.

    Imports from top supplier Australia rose 12.8% from the previous year and tripled the month-ago level to 2.85 million tonnes in June.

    Coking coal imports from Mongolia – China’s second largest supplier – fell 31.5% on year but surged 141.5% from May to 1.28 million tonnes during the same month.

    Canada’s June exports to China was nearly 5.4 times of the May volume, reaching 0.43 million tonnes, plummeting 35.5% from the year before.

    Imports from Russia reached 0.22 million tonnes in June, falling 56.6% from a year ago and down 18.5% from the previous month.

    During the first half of the year, China imported a total 21.64 million tonnes of coking coal, down 30.1% year on year.

    Top supplier Australia contributed 10.86 million tonnes or 50.2% during the same period, down 27.7% year on year.
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    Adani suspends two Carmichael contractors - SMH report

    India's Adani Mining has suspended two major contractors on its A$10 billion ($7.4 billion) Carmichael coal project in Australia, the Sydney Morning Herald reported on Wednesday, raising fresh doubts about the project's future.

    Project manager Parsons Brinckerhoff and Korea's POSCO Engineering & Construction Co Ltd, which is also touted as an investor in the final project, were told late last week to stop work on the Carmichael mine, rail and port project, the newspaper said, citing sources.

    Adani's office in Australia did not immediately respond to requests for comment on Wednesday. A spokeswoman for Parsons Brinckerhoff referred a query on the contract to Adani. POSCO could not immediately be reached for comment.

    Both contractors have big roles in the project. Parsons Brinckerhoff are the principal project management consultants, while POSCO is due to build Adani's 388-kilometre (242 mile) rail line from the mine to the sea and take a financial stake in the development.

    Adani had raised concerns about the project's financing last month when it said it was rejigging the budget for the mine.

    Adani intends to ship most of the coal to India for use in generating household power, which would help Indian Prime Minister Narendra Modi achieve his goal of connecting the whole country to the electricity grid during his tenure.

    The company said then that the project's budget, based on previous anticipated approval timelines and milestones, was no longer achievable due to delays in receiving various approvals from the Queensland state government. It also confirmed it had suspended the contracts of four engineering firms while waiting for those approvals.

    Adani has signed up buyers for about 70 percent of the 40 million tonnes of coal the Carmichael project is due to produce in its first phase.

    The project mainly hinges on environmental approval to deepen a port on the fringe of the Great Barrier Reef in order to ship the coal, a proposal generating opposition worldwide.
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    China key steel mills daily output down 1.52pct in early-July

    Daily crude steel output of key Chinese steel producers dipped 1.52% from ten days ago to 1.705 million tonnes over July 1-10, showed data from the China Iron and Steel Association (CISA).
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    Qinhuangdao coal stocks hit 3-mth high on reduced shipment

    Coal stocks at Qinhuangdao port, the benchmark for China’s domestic market, hit a 3-month high at 7.06 million tonnes on July 18, due to persisting weak demand and typhoon-interrupted shipping activity.

    On July 21, coal stocks at the port was 6.99 million tonnes, down 0.43% on day but up 6.72% from a week ago, showed data from Qinhuangdao Port Group.

    Daily inbound coal railings to Qinhuangdao port averaged 0.59 million tonnes during the week ended July 21, down 6.6% on week; while outbound shipment was 0.53 million tonnes on average each day over the same period, plunging 22.3% on week.

    Coal demand from utilities recovered a bit this week, as plants gradually resumed chartering activities after typhoons and hot weather.

    Coal stocks at power plants under the six coastal utilities stood at 13.04 million tonnes on July 21, down 0.1% from a week ago; daily coal consumption averaged 0.6 million tonnes, up 4.3% from the previous week. That was enough to cover 21.7 days of consumption, down from 22.7 days a week ago.
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    China coal miners have 140 GW power capacity by end-2014

    Installed power generation capacity from coal-fired plants partly or fully owned by China’s coal producers hit 140 GW by the end of 2014, taking 17% of the country’s total coal-fired power capacity, said Wang Xianzheng, director of China National Coal Association, at an industry meeting earlier this month.

    The government has been urging coal miners to engage more in power or integrated coal-power business, to better use their coal resources to improve profitability.

    With a combined power capacity of 65 GW, coal giant Shenhua Group, parent of China Shenhua Energy, realized profit of over 20 billion yuan ($3.27) in the first half, thanks to its coal-power integration, said Ling Wen, the general manager of the group.

    Datong coal mine Group, the biggest Shanxi-based coal producer, gained 900 million yuan of profit last year from its power business, with power output hitting 36.45 TWh. It has an installed power capacity of 14 GW.

    And also, power producers are encouraged to tap the upstream coal industry to lower cost and help advance structural adjustment and transitioning of the coal sector.

    China’s top five power producing companies hold a combined coal production capacity of 320 million tonnes per annum, with output at 260 million tonnes each year or 20% of their coal consumption.
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    Steel downtrend further dampens Chinese met coal market

    China’s metallurgical coal market has further deteriorated over the past week, as steelmakers steered clear of purchases as they grapple with a persisting downtrend in steel markets.

    Moreover, persisting losses and the government’s intensified environmental protection campaign are leading to more furnaces maintenance and output cut in steel mills.

    Sources said only one or two out of the 12 steel mills in Bazhou region of Hebei province were in operation. Some small steelmakers in Hebei also started to cut production, impacted by the Anti-Japanese War military parade in early September.

    Many steel mills sources in Tangshan confirmed that they have received notifications from the local government to suspend or cut production for nine months, in preparation for the World Horticultural Exposition to be held in the city in 2016.

    One Changzhi-based large miner took the lead to cut the free-on-rail prices of his lean coal and PCI by 10-20 yuan/t, and started to pay some fees related to rail transport, resulting in a total 30-40 yuan/t drop.

    Prices of imported coking coal also posted apparent drop amid weak domestic demand. The price of premium low-vol hard coking coal was assessed at $92.5/t CFR China on July 15, falling $2.75/t on week.

    Many coking plants expected coking coal prices to drop; some of them in Linfen of Shanxi and Hebei province have cut coking coal purchase prices this month. One Hebei-based coke producer cut purchase price of Shanxi high-sulphur primary coking coal by around 20 yuan/t, with the delivered price of this material with 1.3% sulphur at 590 yuan/t.

    On the other hand, some steelmakers hoped recent furnace maintenances across China could help balance the seasonal drop-off in demand over the next two months.

    Attached Files
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    Indian domestic iron ore supply up in June - Prabhudas Lilladher

    Image Source: twimg.comEconomic Times reported that brokerage Prabhudas Lilladher said domestic iron ore supplies improved strongly on the back of re-opening of mines in Odisha and enhanced mining capacity of existing mines but this is not expected benefit the domestic producers.

    It said “Despatches of merchant miners in Odisha grew 24 per cent to 4.1 million tonnes in June 2015, the highest monthly despatch in June since 2011, according to the brokerage. Also, Karnataka's iron ore capacity rose by about 20 per cent to 24 million tonnes in June 2015.”

    Prabhudas Lilladher said the sharp fall in iron ore prices globally has eroded the advantage Indian steel players enjoyed so far because of access to cheap iron ore.
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    Mills in China's top steel city face new pollution penalties

    China's top steel producing city of Tangshan will punish firms if they fail to meet tough new pollution standards over the next three months, according to new industry guidelines, a move that could force closures and help ease a severe capacity glut.

    Already struggling with record low prices and rising environmental compliance costs, firms could now have their power prices tripled if they fail to pay for the work required to meet the new standards, analysts estimated.

    The new measures, dated July 1 and circulated over the weekend by traders and analysts, target big industrial coal and water consumers in Tangshan, including coal-fired power plants, cement manufacturers and steel producers. The measures, reviewed by Reuters, also ban the sale and utilisation of low-grade coal.

    As a result, billet prices in Tangshan have risen by as much as 60 yuan per tonne, according to analysts at Xiben New Line E-Commerce, a steel trading platform in Shanghai.

    "With the industry now facing severe losses, and with more and more steel mills cutting output, the unusual price movements in Tangshan will raise confidence among traders in other regions and see an increase in prices across the board," the analysts said in a note.

    In order to comply with the new emissions standards, 29 steel enterprises will have to upgrade a total of 104 blast furnaces, 182 converters and 22 sintering plants by the end of October, the document said. Enterprises that fail to do the work in the stipulated time will face higher power prices.

    Tangshan, which is located around 150 kilometres (90 miles) from the capital Beijing, produced around 90 million tonnes of crude steel last year, more than the whole of the United States.
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    Indonesia's Jul HBA thermal coal price records all-time low

    Indonesia's July thermal coal reference price, also known as Harga Batubara Acuan (HBA), was set at $59.16/t FOB, the lowest ever recorded since its inception in January 2009, said the Ministry of Energy and Mineral Resources.

    The July HBA price represents a drop of 0.7% from June, when it was set at $59.59/t -- an all-time low before the latest fall.

    The HBA is a monthly average price based 25% on the Platts Kalimantan 5,900 kcal/kg gross as received assessment; 25% on Argus-Indonesia Coal Index 1 (6,500 kcal/kg GAR); 25% on the Newcastle Export Index -- formerly the Barlow-Jonker index (6,322 kcal/kg GAR) of Energy Publishing -- and 25% on the globalCOAL Newcastle (6,000 kcal/kg NAR) index.

    The HBA for thermal coal is the basis for determining the prices of 73 Indonesian coal products and for calculating the royalties Indonesian producers have to pay for each metric ton of coal they sell locally or overseas.

    It is based on 6,322 kcal/kg GAR coal, with 8% total moisture content, 15% ash and 0.8% sulfur.
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    Whitehaven Coal tips further coal price falls

    Whitehaven Coal tips further coal price falls

    AAP reported that Whitehaven Coal's sales are on the rise but it expects prices to continue to fall. The miner achieved a 46 per cent improvement in coal sales in the three months to June, due mainly to increased production at its Narrabri mine and the commissioning of its controversial Maules Creek project.

    More than 1.4 million tonnes of coal was produced at Maules Creek in the June quarter, and production will soon be ramped up to an annual rate of 8.5 million tonnes.

    But coal prices have continued to fall due to an oversupply in the market and lower Chinese demand, though Whitehaven said it had been shielded somewhat by the high quality of its thermal coal, which is used to generate electricity.

    The average thermal coal price realised by the company was USD 60.72 per tonne in the June quarter, down from USD 65.37 in the three months to March.

    The average June quarter price for its metallurgical coal, which is used by the steel industry, was $US75.90 per tonne, down from USD 87.15 in the preceding quarter.

    Managing director Mr Paul Flynn tipped prices for metallurgical coal to fall further in the three months to September, in the range of USD 70 and USD 75 per tonne.

    Mr Flynn said that "Certainly our forecast for the September quarter is a further reduction. We've all seen what the settlements have been for metallurgical coal and that will have its related impact."

    He said that But prices for thermal coal are expected to be more resilient at around USD 60 per tonne, due to Whitehaven's participation in the higher quality segment of the market.
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