Mark Latham Commodity Equity Intelligence Service

Tuesday 27th September 2016
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    China August industrial profits rise nearly 20 percent, fastest in three years

    Profits earned by China's industrial firms in August grew at the fastest pace in three years helped by rising sales, higher prices and lower costs, pointing to strengthening economic activity.

    The world's second-largest economy has shown recent signs of stabilization, propped up by a housing boom and government spending, but growth has been patchy with companies in some sectors such as steel not faring as well due to excess capacity.

    Profits in August jumped 19.5 percent to 534.8 billion yuan ($80.2 billion), the National Bureau of Statistics (NBS) said on Tuesday, the fastest monthly rate since August 2013. Annual profit growth was 11 percent in July.

    Industrial profits in August have shown positive changes and government policies continue to produce effects, NBS official He Ping said in a statement accompanying the data.

    He said rapid growth in August was also boosted by a low base of comparison last year.

    China's traditional industries continue to struggle, particularly in sectors hobbled by overcapacity, He said.

    The profit data by sector, however, highlights the uneven stabilization.

    Manufacturing profits rose 14.1 percent from a year earlier while mining industry profits fell 70.9 percent.

    Total profits for the January-August period rose 8.4 percent from the same period a year earlier, compared with a 6.9 percent rise in the first seven months of this year.

    Chinese industrial firms' liabilities at the end of August were 4.6 percent higher than at the same point last year.

    The data covers large enterprises with annual revenues of more than 20 million yuan from their main operations.

    Bank of America Merrill Lynch highlighted risks to corporate earnings in a recent report on listed firms.

    "We think a housing bubble in top cities is a genuine risk, and stimulus may weaken due to a renewed focus on the supply-side reform; we expect earnings to come under significant pressure again reasonably soon," it said.

    The Asian Development Bank on Tuesday increased its growth forecast this year for China to 6.6 percent from 6.5 percent, and for 2017 to 6.4 percent from 6.3 percent, citing fiscal and monetary stimulus measures.
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    Big South African union backs Ramaphosa as next president

    Deputy President Cyril Ramaphosa's chances of becoming the next leader of South Africa got a boost on Monday when a powerful mining union backed him to succeed President Jacob Zuma.

    Debates over who should follow Zuma, either when his term ends in 2019 or before, are heating up after the ruling African National Congress (ANC) suffered its worst local election results last month, exposing party divisions.

    Ramaphosa, 63, would be the first choice for many investors because he is more likely to support pro-business policies than many in the traditionally left-leaning ANC.

    A decision has been taken "to support the candidacy of Cyril Ramaphosa for president" (of the ANC), the National Union of Mineworkers (NUM), one of South Africa's biggest unions, said in a statement.

    "It is not only NUM that is gunning for Cyril for president," General Secretary David Sipunzi added, without giving details. However, Sipunzi said NUM wanted Zuma to see out his second term which runs until 2019.

    NUM has around 200,000 members and plays an important role in galvanizing public support for the ANC at elections. Its endorsement of Ramaphosa could encourage other influential trade unions to join its campaign.

    The ANC rules in an alliance with the South African Communist Party and trade union group, COSATU, both of which will be influential in lobbying for Zuma's successor.

    COSATU, which played a key role in the fight against white-minority rule and says it represents 2 million workers, has yet to publicly back any candidate.

    "COSATU has not come up with an official position. We must speak to all the unions and come with a clear mandate," Matthew Parks, COSATU's Parliamentary Coordinator, told Reuters.

    "It is tradition that the deputy takes the position but it is an ANC decision. Unity is paramount, both inside the ANC and between the alliance partners," Parks added.

    Zuma is expected to stand down as ANC president at a party conference late next year, ahead of national elections in 2019 when his tenure as the country's leader will come to an end.

    The ANC has dominated since the end of apartheid in 1994 and is widely expected to retain control at the 2019 vote, making its next leader almost certain to succeed Zuma as president.


    Ramaphosa, a wealthy businessman and founding member of NUM, is likely to face strong competition if he does compete for the ANC leadership, including from Zuma's ex-wife, Nkosazana Dlamini-Zuma, who is currently head of the African Union.

    "It's the start of the campaign and it will gain momentum," said Gary van Staden, a political analyst at NKC Economics.

    "Other COSATU members should line up soon behind Cyril. His prospects are good."

    Dlamini-Zuma, 67, is a Zulu, the largest ethnic group in South Africa, and would likely have the support of Zuma's powerful voting block within the ANC were she to run.

    Ramaphosa comes from the minority Venda tribe.

    Around one in five South Africans are Zulu and politicians from Zuma's home Kwa-Zulu Natal province, a key ANC stronghold, have influence over top party decisions.

    Despite their separation, Zuma backed her for the AU job and gave her a position in his cabinet. Analysts say she would be unlikely to follow up on several high-profile corruption cases that have plagued his tenure.

    Zweli Mkhize, a Zulu and the current ANC Treasurer-General, has also been mentioned as a potential party leader.

    No ANC member has declared their intention to run for leadership.

    Zuma has faced calls to quit from several members of the ANC and prominent business leaders following losses in local elections in August and a string of graft scandals but the party's top echelons have backed him.

    Zuma's younger brother Michael became the latest to call for his resignation, urging him to quit or risk being killed, without elaborating on any death threats.
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    Oil and Gas

    Iran Now Has the Edge in the Fight Over Oil Prices With Saudi Arabia - No freeze

    Suddenly the tables have been turned on Saudi Arabia.

    The biggest oil exporter has swapped its traditional role as price dove with regional foe Iran, for years OPEC price hawk. The government in Riyadh is now offering a deal -- including its first output cut in eight years -- to boost prices; Tehran is dragging its feet. At the center of the reversal is their contrasting thresholds for enduring economic pain.

    "Both countries are coming from different positions," said Jason Tuvey, Middle East economist at consulting firm Capital Economics. "Iran has been under sanctions until recently, so it’s getting an economic boost as investment returns and oil output rises. Meanwhile, Saudi Arabia is facing steep fiscal cuts."

    The contrast between the two countries is stark. Iran, never as dependent on oil revenue as its neighbor, has seen prospects boosted by rapprochement with the west. In Saudi Arabia, tentative moves toward economic reform haven’t prevented two years of weak prices causing financial havoc: it’s burning through foreign exchange reserves, government contractors have gone unpaid and civil servants will get no bonus this year.

    Diverging Economies

    Saudi Arabia will suffer a fiscal deficit equal to 13.5 percent of gross domestic product this year, compared with one of less than 2.5 percent of GDP for Iran, the International Monetary Fund estimates. The IMF says the Saudis need oil close to $67 a barrel to square the books. For Iran, it’s lower, at $61.50. Brent crude, the global benchmark, was down 0.4 percent at $47.18 a barrel as of 1:18 p.m. in Hong Kong.

    When it comes to economic growth, Saudi Arabia is slowing sharply to 1 percent while Iran is accelerating toward 4 percent. The current account -- a broad measure of a country’s economic relationship with the world -- tells the same story. Saudi Arabia faces a double-digit deficit this year; Iran’s is nearly balanced following economic reforms in 2012 and 2013 to weather the impact of international sanctions over its nuclear program.

    While Iranian President Hassan Rouhani faces elections next May and is under pressure over the country’s economic performance since sanctions were lifted, it’s already been through the austerity that’s only starting in Saudi Arabia, according to Amrita Sen, chief oil analyst at consultant Energy Aspects Ltd. "Iran has already been through so much pain, incrementally they aren’t really worse off," she said.


    Saudi Arabia led OPEC in November 2014 to defend market share, notably against U.S. shale oil producers, at the expense of high oil prices. A month after the policy shift, Ali Al-Naimi, then Saudi oil minister, told the trade journal Middle East Economic Survey that "sooner or later" rivals would run into financial difficulties. The kingdom had "the ability to hold out" for a long time, he said.

    Nearly two years later -- and under different oil minister -- Riyadh is now signaling it may be ready for a U-turn.

    Saudi Arabia has told other OPEC members it’s willing to reduce production to January levels, according to Algerian Energy Minister Noureddine Boutarfa. That effectively would mean a cut of 500,000 barrels a day. Iran, meanwhile, is refusing to freeze its production at the current level of 3.6 million barrels a day, aiming instead to lift output to about 4 million barrels a day, the level before sanctions halved exports.

    When the oil slump started, few would have anticipated that Saudi Arabia would be seeking a deal to boost prices and Iran would resist it. Beyond the economy, other factors are at play, including regional politics. Both countries are on opposite sides of the Syrian and Yemeni civil wars. Then there’s pride -- Iran wants to return to pre-sanctions production.

    Spending Petrodollars

    For the last two years, as oil prices plunged from more than $100 a barrel to a 12-year low of less than $30 a barrel in January, the Saudis have drawn on their huge currency reserves to cushion the impact. It spent $115 billion last year and between January and July this year it used up another $52 billion.

    For analysis on the sale of Saudi Aramco, click here

    Worried about a looming insolvency if the kingdom continued to spend way above its oil income, Riyadh sought to staunch the financial bleeding.

    Subsidies, long a political taboo, are being cut, as are the salaries of government ministers by 20 percent. Infrastructure projects have been delayed, and a value-added tax is mooted for 2018. If Saudis have continued spending as they did last year, Mohammed Al-Sheikh, a financial adviser to the crown, told Bloomberg in April the country would have gone “completely broke” by early 2017.

    On the other side of the Persian Gulf, there isn’t the same sense of crisis.

    "Tehran would love to have higher oil prices, but Iran is the OPEC country that had to do fewer budget sacrifices due to cheap oil," said Olivier Jakob, an analyst at Petromatrix GmbH in Zug, Switzerland. "They feel they have a strong hand.”

    Iran Says It Won't Freeze Output at Current Level

    Oil extended declines as Iran said it’s unwilling to freeze output at current levels and wants to raise production to 4 million barrels a day, damping expectations for OPEC to reach a deal to stabilize markets when the group meets Wednesday in Algiers.

    It’s “not on our agenda” to reach agreement at the OPEC talks in Algiers, Iranian Oil Minister Bijan Namdar Zanganeh told reporters in the Algerian capital. Iran, which produced about 3.6 million barrels a day last month, is seeking a 12-13 percent share of OPEC’s market, he added.

    The U.A.E. supports a deal to freeze output if other nations agree, but production cuts are not up for discussion, Oil Minister Suhail Al Mazrouei said.

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    Labour vows fracking ban if it wins general election

    A future Labour government would ban fracking, shadow energy secretary Barry Gardiner is to say.

    Mr Gardiner will tell the Labour Party conference there would be an "outright ban" on the process, which involves gas being extracted from shale rock.

    Labour would back "clean technologies for the future", he will say.

    The government says fracking could provide the UK with greater energy security and create jobs, but opponents argue it is bad for the environment.

    Environmentalists say shale gas projects will make the UK's climate change targets impossible to achieve.

    Gary Smith, the GMB union's Scotland secretary, said ruling out fracking was "madness", saying the UK would be dependent on gas for decades.

    "We will have to confront the fact that we will be buying gas from hangmen, henchmen and head-choppers. We don't think that's ethical. We have world-class regulators and world-leading standards in terms of monitoring. Ruling it out now is madness," he told the Press Association.
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    Project Forward in talks with Shell

    Project Forward in talks with Shell

    Project Forward has announced that it has combined with Shell to discuss and investigate the options of supplying LNG-powered vessels. They will also assess the bunker requirements for globally-trading bulk carriers, tankers and container vessels.

    Led by Arista Shipping and including the resources of ABS, Deltamarin, Gaztransport & Technigaz (GTT) and Wärtsilä, Project Forward has developed a technically feasible and commercially viable design for ocean going, deep sea vessels powered by LNG fuel. The design is equally suitable for bulk carriers and tankers.

    Arista Shipping Principal, Alexander P Panagopulos, said: “Merchant shipping is under increased pressure of tight regulations on emissions from a range of sources and this will continue in future […] LNG is a cleaner burning marine fuel for shipping which can help ship owners and operators to reduce emissions of CO2, sulfur, particulates and nitrogen oxides.”

    The design of Project Forward ensures a long sailing range on LNG, which can be adjusted to fit specific needs of each owner or trade pattern. As a result, it could be sufficient for LNG-fuelled vessels to bunker LNG at major ports only. Arista Shipping feels the establishment of bunkering locations needs to be concentrated in these major ports and the development accelerated in order to meet this emerging and rapidly expanding demand.

    Together, the Project Forward partners are working towards one common goal; making the launch of a first bulk carrier vessel with the innovative Project Forward design feasible within the next few years.
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    Israel's Leviathan natgas partners sign $10 bln export deal with Jordan

    Backers of Israel's massive Leviathan natural gas field signed a $10 billion deal on Monday to supply 1.6 trillion feet (tcf) of gas to Jordan's National Electric Power Company.

    "Subject to regulatory approvals from Israel and Jordan, sales ...are anticipated to commence at field startup," said Texas-based Noble Energy, the project's operator.

    Talks on the contract began more than two years ago.

    The 15-year deal for Leviathan, which holds an estimated 22 tcf of gas, should help the U.S.-Israeli group secure funds to bring it online.

    Production is expected to begin around 2019 or 2020.

    The Leviathan group has also been in talks to export much larger quantities of gas to companies in Egypt.

    Shares in the Israeli partners - which include Ratio Oil , Delek Group and its subsidiaries Avner Oil and Delek Drilling - were halted by the Tel Aviv Stock Exchange for more than a half hour.

    Leviathan, discovered in the eastern Mediterranean in 2010, is one of the world's largest offshore gas discoveries of the past decade.

    Last year, Israel approved plans for a 15.5 kilometre (9.6 mile) pipeline near the Dead Sea to export gas to Jordan.
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    Bulgaria looks to attract Cyprus gas imports for its planned gas hub

    Bulgaria would hope to attract natural gas from Cyprus if its planned gas hub at the Black Sea, to transport gas from Russia and the Caspian Sea to southern and central Europe, goes ahead, it said on Monday.

    Bulgaria will launch a feasibility study next year on building a 1.5 billion euro ($1.7 bln) hub at the Black Sea port of Varna that would use gas pipeline links it is already building with neighbouring Greece, Serbia, Romania and Turkey, and eventually also an undersea pipeline from Russia.

    Cypriot gas supplies can flow through the pipeline that Bulgaria is building with Greece and Bulgarian Energy Minister Temenuzhka Petkova said Sofia is ready to boost its capacity if needed, after meeting her Cypriot counterpart Yiorgios Lakkotrypis in Nicosia.

    "Natural gas from Cyprus is one of the options to feed the natural gas hub," the energy ministry quoted Petkova as saying.

    Sofia has yet to attract Russia to the idea of its gas hub, which has the support of the European Commission. The European Bank for Reconstruction and Development is also ready to support the plan.

    Cyprus, where U.S. energy firm Noble discovered an estimated 4.5 trillion cubic feet of natural gas in one prospect in late 2011, is considering Bulgaria as a country en route to shipping Mediterranean gas to Europe, the energy ministry quoted Lakkotrypis as saying.

    "We intend to deliver natural gas to Bulgaria through the gas interconnector with Greece or the LNG terminal near (the northern Greek city of) Alexandroupolis," Lakkotrypis said.

    He said he would like to examine in detail the Bulgarian government's plan to build a gas hub.

    Bulgaria plans to have the gas pipeline with Greece operational at the end of 2018. Sofia also plans to take a stake in the planned LNG terminal at Alexandroupolis in Greece, which will be linked to the pipeline.
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    Sale of South African Oil Reserves ‘Careless,’ Regulator Says

    South Africa’s Strategic Fuel Fund failed to notify the National Treasury of a sale of crude oil reserves and to properly safeguard the assets, the nation’s Auditor-General said in a report to lawmakers.

    “The accounting authority did not exercise reasonable care to ensure the safeguarding of assets of the public entity,” the Auditor-General wrote in the report tabled on Sept. 23, referring to the management of the fund. The SFF also “did not inform the National Treasury of the sale of its 10 million barrels of strategic crude oil reserves, as required by the Public Finance Management Act,” it said.

    The SFF, a unit of the Central Energy Fund whose primary shareholder is the Department of Energy, sold 10 million barrels of oil in December, when Brent crude oil prices were at an eight-year low, for $280 million as part of a rotation of stocks. The department said in July it will review all contracts related to strategic reserve rotation and storage.

    The fund’s former acting chief executive officer, Sibusiso Gamede, resigned in July before the Department of Energy announced the contract review. This was after the department objected to an offer by the SFF for the assets of Chevron Corp. in the country. The department also launched a probe into that purchase attempt.

    The sale of the oil assets generated 3.9 billion rand ($285 million), according to the Auditor-General’s report. It was originally claimed that the revenue from the transaction was 5 billion rand, Johannesburg-based Business Day reported on Monday.

    The media desks of the Auditor-General and the SFF wouldn’t immediately respond to e-mailed questions.
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    Genscape Cushing draw

    Genscape Cushing draw of -276,114bbl for week ending 9/23

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    What's the SCOOP on the STACK?

    There are more than just earthquakes buzzing in Oklahoma. The South Central Oklahoma Oil Province and Sooner Trend Anadarko Basin Canadian and Kingfisher counties (SCOOP and STACK) are becoming some of the most highly sought after shale assets in North America. Along with the Permian, the newly developed acreage in Oklahoma seems to provide some of the best economics of the North American oil plays.

    Extensions of the Cana Woodford, the SCOOP and STACK have turned interest in Oklahoma away from pure natural gas towards liquids potential. Operators including Devon, Newfield and Marathon have focused efforts on drilling the liquids rich plays since the downturn in natural gas prices in 2008. According to Devon, certain STACK assets reward operators with 20-30%+ IRR, second highest behind prolific core Permian plays. Operators have also noted that the STACK has little to no produced water. This along with high yields from horizontal redevelopment and modern stimulations have created a buzz around the basin's future potential.

    During 2015, the STACK became one of the few unconventional formations in North America to see a year over year increase in rig count. However, increased operator interest in Oklahoma has coincided with renewed speculation that fracking may be connected to the 5.6 magnitude earthquake that recently shook the state. While the precise connection between fracking and earthquakes remains unproven, specialists believe that the injection of wastewater from disposal wells could increase the likelihood of earthquakes in the area. The environmental concern surrounding the SCOOP and STACK could yet play an important role in the basins success.

    With one of the lowest breakevens of the North American shale plays - some areas reportedly economical under $40/ bbl. WTI - the question surrounding potential environmental legislation remains. Whether or not operators are able to overcome these concerns will play an important role in US production over the next decade.
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    Rice Energy to buy Vantage for about $2.7 bln as M&A picks up

    Oil and gas producer Rice Energy Inc said on Monday it will buy Vantage Energy for about $2.7 billion, in what has become the most active month for acquisitions in the energy sector since oil prices sank two years ago.

    Rice Energy shares slid 4.2 percent to $26 in after market trading after it said it would pay about $1.02 billion in cash, issue about 39.1 mln shares worth about $980 million and assume about $700 million in debt.

    The deal follows others this month by EOG Resources Inc , which is buying privately-held Yates Petroleum Corp for $2.5 billion, and Enbridge of Canada's plans to buy pipeline company Spectra Energy Corp of Houston in an all-stock deal valued at about $28 billion.

    Rice would buy assets including about 85,000 net core Marcellus acres in Pennsylvania, with rights to deeper Utica Shale on about 52,000 net acres and 37,000 net acres in the Barnett Shale. Net production from these assets was 399 million cubic feet equivalent per day in the second quarter.

    Rice Energy said it would sell some of the acquired core midstream assets, including 30 miles of dry gas gathering and compression assets, to Rice Midstream Partners LP for $600 million.

    Rice Energy also raised its 2016 capital budget forecast to $735 million from $660 million due to the acquisition, which is expected to close in the fourth quarter.

    Evercore advised Rice Energy while Latham & Watkins LLP served as its legal counsel.
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    TransCanada's Columbia Pipeline offers to buy Columbia Pipeline Partners

    TransCanada Corp said on Monday its unit, Columbia Pipeline Group, offered to buy Columbia Pipeline Partners LP for about $848 million in cash.

    The $15.75 per common unit offer represents a premium of 11.3 percent to Columbia Pipeline Partners' 30-day average closing price as of Sept. 23, TransCanada said.

    A committee of independent directors of Columbia Pipeline Partners' board will be formed to consider the offer as the general partner of Columbia Pipeline Partners is an indirect unit of Columbia Pipeline Group, TransCanada said.

    TransCanada, which completed its $10.3 billion takeover of Columbia Pipeline Group in July, had said it was reviewing strategic alternatives for master limited partnership (MLP) holdings, including Columbia Pipeline Partners LP.

    Columbia Pipeline Partners LP is a Delaware MLP with interests in three regulated U.S. natural gas pipelines, as well as storage and related midstream assets.

    TransCanada, Canada's second-largest pipeline company, has retained Morgan Stanley as its financial adviser and Vinson & Elkins as legal adviser.
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    Agricultural merger mania fuels fears among small seed sellers

    The U.S. Justice Department is looking into concerns that global consolidation among major seed and agricultural chemical companies may squeeze supplies of the building blocks for widely used genetically modified seeds, a farm group told Reuters.

    The department has asked the American Soybean Association for details about how small and independent seed companies license seed traits from developers, said Steve Censky, chief executive of the association.

    The federal inquiries started after Dow Chemical said in December that it would seek to merge with DuPont in a $130 billion deal. In recent months, department officials have also asked how farmers select seeds, Censky said.

    Such questions are common in antitrust reviews, as regulators try to decide whether to approve, reject or place conditions on a merger.

    The Justice Department did not respond to a request for comment.

    Smaller companies need to license corn and soybean traits, which can protect against insects and other threats, because they cannot afford the more than $100 million it costs to develop them.

    Major seed makers often license traits and other genetic material to smaller dealers that have close relationships with farmers and can help place products on more acres.

    Independent seed sellers said the proposed Dow-Dupont merger could hurt them if the companies decide to hike licensing fees or to keep their best traits for themselves. They have similar concerns about subsequent announcements that Bayer AG would seek to buy Monsanto Co and that Chinese state-owned China National Chemical Corp [CNNCC.UL] aimed to acquire Syngenta AG. All three deals are still pending.

    "It's the big question that everybody is looking at right now," said Todd Martin, CEO of the Independent Professional Seed Association, about the future of licensing. "Anything that does not support the expansion of the licensing market, we are against."

    The association has asked Dow and DuPont to expand licensing as part of their merger. The soybean association, which represents more than 20,000 U.S. farmers, told the Justice Department that trait licensing by major companies needs to be preserved, Censky said.


    Unlike Dow, Monsanto, Bayer and Syngenta, DuPont has not been active in licensing traits.

    That has raised concerns among small seed companies that a combined Dow-DuPont could pull back on licensing the technology, a prospect Martin said would be "incredibly negative" for independent sellers.

    Independent companies supply about 20 percent of corn and soybeans seeds in North America, giving farmers choices as they work to boost harvests in a downturn. Without licensing, the number of brands of corn seed would probably drop to less than a dozen from about 200 currently, Martin said.

    Dow told Reuters it has not made decisions on trait licensing because its deal with DuPont has not been finalized. Monsanto said it was "too soon to have any of those answers" about whether its $66 billion acquisition by Bayer would affect licensing.

    Syngenta said its $43 billion acquisition by ChemChina will not change its licensing conditions.

    DuPont and ChemChina did not immediately respond to requests for comment.

    Trait licensing was on the agenda at a U.S. Senate Judiciary Committee hearing on Tuesday, where executives of top companies defended their planned mergers and acquisitions. Bayer CropSciences's CEO told senators it had "no plans to discontinue" trait licensing.

    But Senator Charles Grassley, a Republican from Iowa and the committee chair, was one of several lawmakers who worried the deals would slow innovation in seeds and pest control.

    Sonny Beck, CEO of Beck's Hybrids, the largest family-owned U.S. seed company, told Reuters the company pays to license nearly all its traits from larger companies, including Dow and Monsanto.

    "If they say, 'we're going to keep it all for ourselves,'" he said, "that would hurt us."
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    ChemChina seeks EU okay for Syngenta deal, decision due October 28

    China National Chemical Corp has sought antitrust approval for its $43 billion bid for Swiss pesticides and seeds group Syngenta from the European Union and a decision is expected by Oct. 28.

    State-owned ChemChina filed its request on Sept. 23, the European Commission's website showed on Monday.

    The EU competition enforcer can either clear the deal, with or without concessions, or it can open a full investigation if it has serious concerns that ChemChina's takeover of the world's largest pesticides maker could harm customers and rivals.

    ChemChina cleared one of the biggest hurdles last month when a U.S. national security panel approved what would be the largest foreign acquisition by a Chinese company.
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    Base Metals

    Metal Tiger’s Botswana copper project moves towards the big leagues

    Significant tonnages are being revealed at the T3 copper project, only six months after its discovery. There's significant amounts of copper in the ground at T3

    In double-quick time the T3 copper prospect in north eastern Botswana has gone from grass roots exploration to real development opportunity.

    The T3 deposit was only discovered in March but already its owners - joint venture partners MOD Resources (ASX:MOD) and Metal TigerPLC (LON:MTR) - have been able to prove up a resource of 350,000 tonnes of copper, more than half of it in the indicated category.

    What’s more, there is a high grade core of 8.6 mln tonnes of ore grading 2.16% copper and 30.6 grams silver per tonne.

    And there could be more to come. The resource remains open down dip and along strike, and the drill rigs are currently turning with a view to adding more resource before too long.

    Meanwhile, an open pit mining scoping study is due in December. Already there are clear indications of the thinking of the partners.

    “If the deposit is mined the central core of high-grade vein hosted mineralisation may provide an opportunity for early payback of capital,” Metal Tiger said in an update to market.

    “The high silver content should provide significant concentrate credits.”

    That will be music to the ears of mining investors with shorter-term horizons. But in the long-term what may turn out to be more interesting will be the results of the current drilling.

    At 350,000 tonnes, T3 is already making some impact on the global scale. At one end, long-standing London copper miner, Atalaya Mining, is now fully operational on a smaller reserve and resource base.

    But on the other hand, the largest undeveloped copper project in the world, which is widely thought to be the Udokan copper project in the Zabaikal region of Russia, boasts 16 mln tonnes of copper in contained reserves alone, never mind the resource.

    How far MOD and Metal Tiger can move T3 away from comparisons to the smaller Atalaya resource and up towards the size of Udokan remains to be seen.

    It’s worth noting that the combined reserves and resources of BCL, the state copper mining company at Botswana, are nearer in scale to T3, than to Udokan.

    That’s no surprise given the shared geological setting, but it does mean that when it comes to development, T3 could end up as a big hitter in the Botswana copper mining scene.

    However, further north, in the famous Copper Belt, the mines move into another league.

    The KOV mine, held by Katanga has produced over 2 mln tonnes of copper over many decades of production, while the Tenke Fungurume mine held jointly by Lundin and Freeport (NYSE:FCX), holds a contained copper resource base of 3.8 mln tonnes.

    Freeport has just inked a deal to sell its 80% stake in Tenke Fungurume to a Chinese company for US$2.65 bn in cash.

    It’s quite some world to be moving into.

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    Teck submits regulatory application for $5bn Quebrada Blanca Phase 2

    Canadian diversified miner Teck Resources is moving ahead with the $4.5-billion to $5-billion second-phase development of its Quebrada Blanca (QB) copper mine, in Northern Chile.

    Vancouver-headquartered Teck said Monday it has submitted the Social and Environmental Impact Assessment (SEIA) for the project to the Region of Tarapacá Environmental Authority.

    "QB Phase 2 is a long-life asset that will operate through multiple price cycles and generate significant value for many years. Our regulatory submission outlines the significant economic and social benefits that this project would generate for the region, as well as extensive proposed environmental mitigation measures, including the first large-scale use of desalinated seawater for mining in Chile's Tarapacá Region,” stated president and CEO Don Lindsay.

    Teck expects the proposed QB Phase 2 project to add another 25 years to the life of the existing mine as a large-scale concentrate-producing operation. It expects to publish an updated feasibility study, including capital and operating cost estimates for the project, in the first quarter of 2017.

    It said a development decision will be reliant upon regulatory approvals and market conditions, among other considerations. Such a decision is not likely before mid-2018, Teck stated.

    The new capital cost estimate will include a 140 000 t/d concentrator and related facilities; a new port facility and desalination plant; and concentrate and desalinated waterpipelines. QB Phase 2 is expected to have an annual production capacity of more than 250 000 t of copper and 8 000 t of molybdenum in concentrate for the first ten years of mine life.

    Quebrada Blanca produced 39 100 t of copper in 2015.
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    Chinalco mining surges by record after parent offers buyout

    Chinalco Mining Corporation International advanced the most on record after owner Aluminum Corporation of China, or Chinalco, offered a premium of about one third to take the Hong Kong-listed unit private. Shares in CMC, which mines copper in Peru, remained below the takeout price.

    CMC jumped as much as 28% to HK$1.34 and closed at HK$1.31. A unit of state-owned Chinalco, China’s biggest aluminum producer, offered HK$1.39 a share, a 32% premium to CMC’s close on September 14 and 34% more than its average price over the last 30 trading days, according to a statement from the two companies late Friday. CMC was listed in Hong Hong at HK$1.75 in January 2013 and trading was halted on September 15 pending the takeover announcement.

    “Investors may be expecting the offer to be rejected because it’s not very close to” CMC’s value at its initial public offering, said Andrew Clarke, Hong Kong-based director of trading at Mirabaud Asia.

    CMC’s stock has since been hit by falling copper prices, which are down about 40% since its listing, and difficulties at its Toromocho project in Peru. The move to privatise CMC will make it easier for Chinalco to raise funds for Toromocho, which started operations in December 2013. The mine has had its revenue squeezed by weaker prices, inefficientoperations and sporadic worker strikes.

    “This has had a negative impact on the trading prices of CMC shares, and has also decreased the ability of CMC to raise equity funding for operations,” according to the statement.

    CMC approved a $1.32-billion expansion of Toromocho in June 2013 to improve efficiency. However, “a substantial part of such future capital expenditure remains unfunded,” the companies said.

    By privatising CMC, Chinalco will be able to exercise “greater flexibility in reorganising the capital structure of CMC and in increasing funding to CMC,” according to the statement. The proposal would “also provide current shareholders with a reasonable exit of their investment in CMC that is attractive in light of current market conditions,” the companies said.
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    Philippine halts 20 more mines, 55.5 pct of nickel output - undersecretary

    The Philippines has suspended 20 more mines for environmental violations, most of them nickel, a government official said on Tuesday, bringing to 30 the number of mines shuttered.

    The suspended mines account for 55.5 percent of nickel ore output in the Philippines based on last year's production, Environment and Natural Resources Undersecretary Leo Jasareno told a news briefing.

    The Philippines is the world's top nickel ore supplier.

    Among those suspended include Oceanagold Corp, the top gold producer in the Southeast Asian nation.
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    Steel, Iron Ore and Coal

    Stunning coking coal rally wreaks havoc in steel, iron ore

    The rise in the price of coking coal is upending the economics of the iron ore and steel markets with the Australian export benchmark price climbing 164% so far this year.

    Metallurgical coal was exchanging hands at $206.40 on Monday according to data provided by Steel Index as it consolidates at higher levels following weeks of panic buying not seen since 2011, when floods in key export region in Queensland sent the price surging to $335 a tonne (albeit not for long).

    The rally was triggered by Beijing’s decision to limit coal mines' operating days to 276 or fewer a year from 330 before as it seeks to restructure the industry. Safety closures and weather related supply curbs in China and Australia only added fuel to the fire.

    In a new research note Adrian Lunt of the Singapore Exchange says margins for steelmakers in China, which forges almost as much steel as the rest of the world combined have come under pressure again and the tight conditions may continue:

    "The recent spike in coking coal prices has sent spot steelmaker margins plummeting back to around their lows last seen in Q4 2015. And unless coking coal prices reverse course soon, this is likely to weigh on steelmaker earnings through the course of Q4 2016, particularly as restocking needs have provided some support to iron ore prices

    "With Chinese steel output remaining strong and demand sentiment relatively robust (with continued support from both real estate and infrastructure in particular), steelmaker margin pressures appear likely to persist over the coming months."

    While the price of iron ore has also recovered this year – up 31.5% year to date holding above $55 a tonne on Monday – the iron ore/coking coal ratio is now at its lowest level this century according the SGX calculations.

    Analysts from Macquarie recently warned that speculation as much as fundamental factors are driving the price with a mere half-a-million tonnes (out of a seaborne trade of 200 million tonnes a year) responsible for the August-September surge to above $200.

    Most producers, with the exception of BHP Billiton which set up globalCOAL a few years back, do not receive the spot price but the ruling quarterly contract price which is still in double digits.

    In an earlier report The Steel Index noted that  speculation that the upcoming quarterly contract negotiations for the October – December 2016 period "may be rather combative" and that according to market participants, Japanese steelmakers will undoubtedly face levels “at least above US$120/t” in the final quarter of 2016.
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    China's coal industry Jan-Aug profit up 15pct on year

    China's coal mining and washing industry profits rose 15% from last year to 22.48 billion yuan ($3.37 billion) over January-August, compared with 14.55 billion yuan over January-July, according to data released by the National Bureau of Statistics (NBS) on September 27.

    During the same period, the coal mining and washing industry realized revenue of 1.39 trillion yuan, dropping 10.2% from a year ago, a slower decline compared with a fall of 11.9% in the first seven months, data showed.

    Total profit of the country's entire mining industry declined 70.9% on year to 53.47 billion yuan from January to August, with total revenue at 3.04 trillion yuan, a decrease of 9.4% from the year-ago level.

    Meanwhile, profit in ferrous and non-ferrous metal mining industry stood at 22.35 billion and 27.95 billion yuan, falling 18% and up 3.8% on year, respectively.
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    South Korea Aug met coal imports rise 22pct on year

    South Korea imported 2.71 million tonnes of metallurgical coal in August, including coking coal and PCI coal, rising 21.97% on year and 3.24% on month, according to the latest customs data.

    The country imported 2.12 million tonnes of coking coal in August, up 11.57% from a year ago and 6.43% from July.

    Of this, 1.04 million tonnes were shipped from Australia, increasing 9.27% on year and up 11.92% on month.

    This was followed by Canada with an export of 494,100 tonnes, rising 11.21% from the same month in 2015 and up 31.2% from July; Russia with 256,000 tonnes, gaining 29.5% from a year ago but down 39.31% from July; and the USA with 198,900 tonnes, dropping 20.31% on year but up 44.65% on month.

    In August, South Korea imported 598,500 tonnes of PCI coal, rising 81.97% compared with the year-ago level but falling 6.64% on month.

    Australia remained the largest PCI coal supplier to South Korea in August at 402,900 tonnes, a surge of 133.97% on year, followed by Russia at 129,200 tonnes, climbing 25.32% from the previous year, and the at 66,400 tonnes, soaring 201.82% from the year-ago level.
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    Yancoal, Glencore in talks on Rio Tinto coal portfolio

    The contest for Rio Tinto's coal portfolio is believed to be hotting up between Yancoal and Glencore, with discussions between the two prospective bidders said to be in an advanced stage, The Australian reported on September 26.

    Deutsche is handling the sale on behalf of Rio, and while it is understood that no one party is in exclusive due diligence on the portfolio, bilateral talks are happening between both suitors.

    Glencore is self-advised, while Yancoal has previously called upon the services of JPMorgan, although it is unclear as to whether the bank is involved.

    The large-scale and high-quality portfolio may carry a price tag that may be worth of $1 billion.

    It includes Rio's Hunter Valley and Mount Thorley Warkworth operations in NSW and its Hail Creek and Kestrel mines in Queensland.
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    Rio Tinto launches debt reduction program

    Major minor Rio Tinto on Monday announced a bond buyback plan for up to $3-billion, saying it was taking advantage of its healthy cash situation to further reduce debt.

    Under the plan Rio Tinto has issued a redemption notice for approximately $1.5-billion of its 2017 and 2018 US dollar-denominated notes.

    It said it commenced cash tender offers to purchase up to approximately $1.5-billion of its 2019, 2020, 2021 and 2022 US dollar-denominated notes.
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    Brazil miner Samarco misses payment on bond, trustee bank says

    Brazilian mining company Samarco Mineração SA, which suspended operations in November after a fatal dam disaster, did not make an interest payment on a $500 million bond that was due on Monday, according to the Bank of New York Mellon, the trustee.

    "We did not receive any money or information today from Samarco," a spokesman for the bank told Reuters in a statement on Monday.
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    Brazil's CSN, CBSteel discussing ore deal, sources say

    Cia Siderúrgica Nacional SA is considering selling part of its stake in Congonhas Minérios SA, Brazil's No. 2 iron ore producer, to China Brazil Xinnenghuan International Investment Co, two people familiar with the deal said on Monday.

    According to the people, the Chinese mill known as CBSteel is interested in buying about 25 percent of Congonhas directly from CSN. They said CSN, as Brazil's No. 2 listed flat steelmaker is known, would remain in control of the unit, adding that talks are advancing slowly and may not necessarily result in a deal.

    The first person, who asked for anonymity since the talks are private, said any deal valuing Congonhas north of $20 billion is more likely to succeed. The transaction also hinges on CSN being able to secure long-term supplying contracts from CBSteel, the same person noted.

    CSN, which owns about 88 percent of Congonhas, declined to comment. Efforts to contact CBSteel's media representatives in Brazil were unsuccessful.

    Shares of CSN reversed early losses and gained 0.3 percent to 8.76 reais in mid-afternoon trading, underscoring optimism among investors that a Congonhas Minérios deal would help CSN accelerate cutting the largest debt burden among Brazilian steelmakers, currently at about 26 billion reais ($8 billion).

    The stock has more than doubled this year, partly on hopes Chief Executive Officer Benjamin Steinbruch will push forward with asset sales to cut debt. The six Asian companies that own a combined 12 percent of Congonhas would keep their stakes unaltered if a deal between CSN and CBSteel takes place, the people said.

    On Aug. 19, O Globo newspaper reported intentions by CBSteel to buy 30 percent of the unit.

    Congonhas Minérios was created at the end of 2014, through the merger of CSN's fully owned Casa de Pedra mine and Namisa - an ore production joint venture with the Asian companies. Casa de Pedra has one of Brazil's best-quality iron ore reserves.

    According to bankers and analysts, CSN agreed to combine both assets to avoid paying $3 billion in penalties to the partners for missing Namisa's expansion goals. The Asian consortium includes Japan's Itochu Corp, Nisshin Steel Co Ltd, JFE Steel Corp and Kobe Steel Ltd as well as Korea's Posco Ltd and Taiwan's China Steel Corp.
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    China's Dongbei Special Steel defaults ninth time in 2016, restructuring looms

    Dongbei Special Steel Group Co Ltd said on Monday it had defaulted on a one-year bond, the latest in a string of missed payments this year by the unlisted Chinese steelmaker.

    It marks Dongbei's ninth default of 2016.

    Owned by the Liaoning provincial government in China's northeast rust belt, Dongbei announced on the website of China's interbank bond market operator that it had failed to pay 744 million yuan of principle and interest on a one-year bond.

    It had warned earlier in September it was uncertain if it could make payment. 

    Its original default in March helped ignite a selloff in Chinese corporate debt. In recent months, bond prices have rallied, prompting central bank intervention seen by dealers as a sign it is concerned about bond market leverage. [nL3N1BC2YC]

    Dongbei said on Sept 5 it was delaying the disclosure of its interim financial information as it was in the midst of a debt restructuring plan.

    Citing a source familiar with the matter, Reuters IFR reported earlier on Monday that the Liaoning government had decided to file for a court-ordered restructuring after creditors rejected an initial proposal to swap debt for equity. [nL3N1C21K8]

    Many of China's corporate debt problems can be found in the northeast, the home of the country's steel industry and a region heavily dependent on the big industry that fuelled China's economic expansion. Now Beijing is pushing to shut surplus capacity and reform inefficient state enterprises.

    In May, a Reuters analysis of central bank data showed that Chinese rust-belt provinces, including Liaoning, had sharply raised their dependence on high-cost "shadow finance" in early 2016, as traditional lenders pulled back.

    Attached Files
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    Ferrochrome price in sharp rise

    The European benchmark ferrochrome price for the fourth quarter of 2016 has been settled at 110c a pound, 12.2% up on the 98c-a-pound price of the third quarter.

    Johannesburg Stock Exchange-listed Merafe Resources said last month that it expected to benefit from renewed positive ferrochrome demand trends, as well as from only four of seven South African ferrochrome producers currently being in production.

    Merafe – headed by CEO Zanele Matlala – generates income primarily from the Glencore–Merafe Chrome Venture.

    In reporting its results for the six months ended June 30, Merafe indicated higher demand prospects for ferrochrome on the likelihood of global stainless steel production growing 2.6% this year and by 3.1% in 2017.

    CRU senior ferrochrome consultant Mark Beveridge, who is responsible for CRU’s ferrochrome market outlook, ferrochrome cost service and chrome monitor publications, describes the recovery of the South African chrome industry over the last four months as being “dramatic”.

    Beveridge, who joined CRU in 2012 from the International Chromium Development Association where he was in-house market analyst, points out that chrome ore prices have rebounded substantially on strong second-quarter Chinese demand.

    “A combination of stimulus-linked demand for ferrochrome in China and a relative absence of chrome inventory led to a scrabble for South African ore,” he wrote in a document forwarded to Creamer Media’s Mining Weekly Online.

    The recovery in chrome prices also coincides with what the research group believes to be significant moves to consolidate the South African industry.

    CRU believes such consolidation should pave the way for the creation of a stronger South African chrome sector that is able to regulate the supply of both ore and alloy better than has been possible in recent years, while also ensuring South Africa's overall charge chrome output increases in future.
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