Mark Latham Commodity Equity Intelligence Service

Tuesday 28th March 2017
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    Trump to sign order on Tuesday easing energy regulations: officials

    President Donald Trump will sign an order on Tuesday aimed at making it easier for companies to produce energy in the United States, administration officials said on Sunday.

    Under Trump, the U.S. Environmental Protection Agency is aiming to aggressively roll back Obama-era environmental regulations.

    Trump plans to sign the executive order at the EPA to reduce "unnecessary regulatory obstacles that restrict the responsible use of domestic energy resources," a White House official said.

    EPA Administrator Scott Pruitt told ABC's "This Week" the order would help reverse the Obama administration's anti-fossil fuel strategy.

    Pruitt has publicly doubted the scientific consensus that human actions are the lead cause of climate change. His installation at the EPA last month reinforced the view on both sides of the political divide that America is ceding its position as a leader in the global fight on climate change.
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    China's energy guzzlers Jan-Feb power use up 11.8%

    Power consumption of China's four energy-intensive industries rose 11.8% on year to 273 TWh over January-February, compared to a 10% increase in the same period of 2016, accounting for 29.2% of the nation's total power consumption.

    Of that, the chemical industry consumed 69.9 TWh of electricity, up 2.8% from the year-ago level, compared with a year-on-year increase of 3.3% in 2016; while power consumption of building materials industry stood at 37.5 TWh, rising 0.5% from the year-ago level, compared to a 12% decrease in 2016.

    Ferrous metallurgy industry and non-ferrous metallurgy consumed 77.6 TWh and 88 TWh, climbing 15.7% and 22.4% from year-ago level, respectively, compared to a 18% and 11.8% decrease a year prior.
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    Have Animal spirits gone 'pop'?

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    Oil and Gas

    Saudis Show Commitment To Aramco IPO With New Tax Plan

    Saudis Show Commitment To Aramco IPO With New Tax Plan

    After more than a year of rumor and talk about an initial public offering of Saudi Aramco, this week saw the first reliable indication that the world’s largest energy company is, in fact, intending to proceed with the plan to offer shares on the global markets. Recently, Saudi Arabia has collected approximately 85% of Aramco profits via a combination of taxes, fees, and dividend-like structures. The prior arrangement would not have facilitated a successful IPO, because investors want to see more of the profit stay with the company and its shareholders .

    To alleviate concerns of future investors, Saudi Arabia recently announced that it is switching to a 50% tax on Aramco. This is a high tax, but not entirely out of line with those issued in developed countries. For instance, in California or New York, a large corporation can face similar tax liability between federal, state, local, employment, and property taxes.

    Saudi Aramco's tax rate is reduced from 85 percent to 50 percent, bringing it in line with international benchmarks.

    This change in tax policy is not without precedent. For example, in tellehe 1950s, Aramco (then American owned) had a variable tax rate, which combined with fees and royalties was intended to always produce a “50% tax.”  In reality, this was meant to create a 50/50 profit sharing situation between the company and the government, while allowing the U.S. company to avoid taxes at home via the foreign income tax credit. Since Aramco became Saudi owned in the 1980s, the actual tax rate has been less important than the amount of money flowing into the Kingdom’s coffers while Aramco has stayed healthy enough to self-fund its projects without much leverage.

    However, this new Saudi tax structure raises another concern for investors in Aramco and other Saudi endeavours. Saudi Arabia relies heavily on Aramco revenue to fund its country’s social welfare system, large and technologically advanced military, and expansive royal family. A 50% Aramco tax may not be sufficient to fund all of the Kingdom’s liabilities. Investors should realise that Saudi Arabia and Aramco have other opportunities to spread wealth to the country—most notably the dividend . A generous dividend structure that pays Saudi Arabia (which will still own at least 95% of Aramco post-IPO) will keep funds flowing to the Kingdom and also create an incentive to potential investors, depending on the structure and class of shares. Dividends could both help pay Saudi Arabia what it needs and increase the value of Aramco stock.
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    Iran's Rouhani signals expansion in energy cooperation with Russia

    Iranian President Hassan Rouhani said on Monday that Tehran welcomed Russian investment in its gas and oil fields, signaling major developments in energy cooperation between the two countries.

    "There is a huge potential for Russian investment in Iran's energy sector," Rouhani told reporters at Mehrabad airport in Tehran before departing for Moscow.

    "Some oil and gas fields have been suggested to Russian companies... We will see a big development in energy co-operations," he said in a news conference broadcast live on state television.
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    Chevron suspends production at Gorgon Train Two LNG project

    Chevron has temporarily suspended production of liquefied natural gas (LNG) at its Gorgon Train Two production line in Australia, a company spokesman said in an email statement on Monday.

    "Production at Gorgon Train 2 is being temporarily suspended for a planned turnaround to enhance the train's reliability in alignment with previously arranged strategies," he added, without saying when Chevron plans to restart the production line.

    "The remainder of the plant production continues to be steady," he added.
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    Asia refiners snap up cheap light oil to reap higher fuel profits

    As the cost of light crude drops, some refiners in Asia are snapping up cargoes of the oil that is easier and cheaper to process than their usual diet of heavy crude, chasing profits from making diesel and gasoline.

    As a result of the OPEC production cuts, the world's oil supply has become more light and those oil types yield more diesel and gasoline, the fuels that command the highest margins, when processed in a crude distillation unit, the most basic unit a refinery uses to make fuels.

    Since purchasing the lighter oil makes it easier to extract diesel and gasoline, Asian refiners have jumped on the crude supply trend by buying light oil from Russia, Africa and even from as far as the United States to bolster their profits.

    "Korean buyers are buying light crude because its price competitiveness is improving," a local South Korean refining source said on the condition of anonymity as he was not authorized to talk publicly about trading.

    "Light crude used to be pricey and now as it's oversupplied, it's great for refiners. We can buy it at cheaper prices, save costs and produce more high value-added products like light naphtha and gasoline. We're hoping this trend will continue."

    South Korean refiner Hyundai Oilbank bought Sakhalin Blend crude for April and May, several market traders said, using the light oil to blend with its typically heavy crude slate. Taiwanese refiner CPC added up to two more light oil cargoes in the second quarter and bought Algeria's Saharan Blend to partly replace heavier Angolan oil and for processing at its new splitter, said a company spokesman.

    Meanwhile, Thai Oil bought Sakhalin Blend and U.S. Eagle Ford crude for the first time ever in the second quarter, while Thailand's PTT also bought the Russian grade.

    Refiners typically measure the relative difference between light and heavy oil grades by looking at the premium of Arab Light crude from Saudi Arabia to Arab Heavy. That spread is at $2.45 a barrel in April, according to the latest official selling prices the country has released, the narrowest in seven months.

    The production cuts by the Organization of the Petroleum Exporting Countries (OPEC) mainly reduced the supply of medium heavy crude grades from the Middle East that yield more residual fuel oil that needs further and more costly upgrading into light transportation fuels.


    U.S. production of light oil has stepped in to fill the gap from the OPEC cuts and Asian refiners are buying light grades they have stayed away from in the past.

    U.S. output, mainly of light oil, is up by 670,000 barrels per day since October, data from the Energy Information Administration showed, with traders are moving some of the lighter supply to Asia.

    The turn to light crudes is a bit of a headache for many Asian refiners, who have spent millions of dollars installing cokers, crackers and other upgrading units that can process residual fuel oil into higher-value fuels.

    "The world has gotten awfully light. It's a nice problem to have, but if you have a coker, the last thing you want is to have a stranded asset," said Jamie Webster, a fellow at Columbia University's Center on Global Energy Policy.
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    China methanol imports at 1.46 mln T in Jan-Feb

    China imported a total 1.46 million tonnes of methanol in January-February, surging 35.7% year on year, showed data from the General Administraton of Customs.  

    That accounted for 16.6% of China's total methanol imports last year, data showed.

    China imported 675,000 tonnes of methanol in February, plunging 14.4% from the month before but surging 33.2% from the prior-year level.

    The March import is expected to exceed 700,000 tonnes, industry sources predicted.

    Besides, China exported 200 tonnes of methanol in February, plunging 98.1% year on year and down 65.8% from the previous month.

    In the first two months, China's total methanol exports slid 92.7% on the year to 800 tonnes.

    Attached Files
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    BP hits more gas off Egypt

    UK-based energy giant and LNG player BP made another gas discovery in the North Damietta offshore concession in the East Nile Delta, Egypt.

    The Qattameya Shallow-1 exploration well was drilled to a total depth of 1,961 meters in a water depth of approximately 108 meters using the El Qaher II jack-up rig. The wireline logs, pressure

    The wireline logs, pressure data and fluid samples confirmed the presence of 37 meters of net gas pay in high-quality Pliocene sandstones, BP said adding that options to tie the discovery back to nearby infrastructure are being studied.

    Bob Dudley, BP Group CEO, said, “Qattameya marks our third discovery in the block where we are already developing the Atoll field and appraising the Salamat discovery.”

    BP’s North Africa regional president, Hesham Mekawi, added that the company believes the development of the Qattameya could help unlock the resources in other nearby discoveries with similar shallow low-pressure characteristics.

    The well is located 60 kilometers north of Damietta city, 30 kilometers south west of Salamat and only 35 kilometers to the west of Ha’py offshore facilities, with BP owning 100 percent equity in the discovery.
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    CNOOC Predicts 5% Production Decline in 2017

    2017 CapEx between ¥60 billion and ¥70 billion

    China National Offshore Oil Corporation (CNOOC) reported annual results on March 23, reporting net earnings of ¥637 million ($92.6 million). Total oil and gas revenue for 2016 was ¥121 billion, down 17% from ¥147 billion in 2015. CNOOC production dropped 4% to 476.9 MMBOE in 2016, the first production decrease in a decade.

    OPEX down 38% since 2014

    As a historically high-cost producer, CNOCC has been hit hard by the downturn. CNOOC has focused on cutting costs since 2014, and its efforts have yielded moderate success. The company reports that OPEX has decreased by 38% since 2014, and all-in costs have decreased by 18%. This has done much to offset the effects of lower prices. Lower-cost opportunities have been prioritized for exploration. The company decreased exploration CapEx by 37% in 2016, but only decreased the number of exploration wells it drilled by 5%.

    After cutting costs in 2016 to ¥49 billion, CNOOC expects to spend near 2015 levels in 2017. In 2015 the company spent ¥66.5 billion, while 2017 CapEx is estimated to be between ¥60 billion and ¥70 billion. Production is expected to continue to decline in 2017, with 450 MMBOE to 460 MMBOE expected. Production to remain below historic levels

    CNOOC plans to increase “profitability-oriented production volume” in the next few years. While production is expected to increase in 2018 and 2019, is will not recover to even 2016 levels. Current projections indicate 460 MMBOE to 470 MMBOE of production in 2019.

    CNOOC’s flagship property is the Bohai Bay, an inland sea with a large amount of hydrocarbon reserves. The company estimates that multiple fields in the bay contain a total of 37.4 billion BOE of reserves. The Kenli project in the Bohai came online in Q1 2016, with expected peak production of 9.6 MBOEPD. Expansion of the Penglai project in the Bohai is planned for 2017, with anticipated peak production of 13 MBOEPD. Additional projects are expected to add a combined 80.2 MBOE of peak production.
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    Production at Russia's Sakhalin-2 LNG plant suspended

    Production of liquefied natural gas (LNG) at Sakhalin-2 LNG plant was suspended on Sunday after an accident at one of production platforms, a spokeswoman for Sakhalin Energy, which operates the plant, said on Monday.

    The spokeswoman said that on Sunday, production at Lunskaya A offshore platform was suspended after a gas leak was detected. The leak has been eliminated and some of the platform's staff evacuated.

    The spokeswoman could not say when LNG production would be restarted.
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    Genscape Cushing build

    Genscape Cushing build +517k bbls in last week

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    Schlumberger aims to topple king of fracking, Halliburton Co

    Schlumberger is forming a joint venture with Weatherford International in a bid to take on fracking king Halliburton Co.

    The world’s biggest oil-field service provider will own 70 percent of the venture and be the operator of the hydraulic fracturing partnership.

    The new business will be known as OneStim, the two companies said in a statement.

    Weatherford, the number four in world rankings of oil-field services, will own 30 percent and receive a one-time cash payment of $535 million.

    Halliburton is the world’s largest provider of fracking services.

    Fracking, in which service companies blast water, sand and chemicals underground to release trapped hydrocarbons, has been one of the most battered businesses in the oil patch during the two-year market downturn. Weatherford said in February it had shut down its fracking unit and would sell the business after profits evaporated.

    The new joint venture, expected to close in the second half of the year, will bring Schlumberger closer to its chief rival, Halliburton, which has a total fleet of fracking pumps that add up to 3 million horsepower, according to Spears & Associates, a Tulsa-based oil-field consultant. Schlumberger currently has about 2 million horsepower, while Weatherford has an estimated 800,000 to 1 million.

    Richard Spears, vice president at Spears & Associates said: “They would be on par with Halliburton in terms of horsepower.

    “I wouldn’t put them on par with Halliburton in terms of revenue, because Weatherford isn’t bringing any business to them. It’s just trucks.”

    Last year, some of the biggest oil-field service providers told investors that pricing for their fracking work had dropped to unsustainable levels, forcing Baker Hughes Inc. and Weatherford to severely pull back their businesses. After a proposed merger with Halliburton failed to gain regulatory approval, Baker Hughes agreed to combine its oil and gas business with General Electric Co., forming another service company giant to challenge Halliburton and Schlumberger. The deal remains under regulatory review.

    The partnership with Schlumberger comes as Weatherford prepares to welcome a new chief executive officer, Mark McCollum, who will start next month after leaving his job as Halliburton’s finance chief.

    McCollum’s predecessor, Krishna Shivram, ran Weatherford as interim CEO for several months. During that time, Shivram said Weatherford would look to sell its U.S. onshore fracking business and its land-rigs business for a total of $2 billion. He said last month that the company had shut down the last of its fracking fleets at the end of last year.
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    Total targets U.S. polyethylene market with $1.7 billion investment

    French oil and gas major Total  said it aims to become a major player in the U.S. polyethylene market as it announced a $1.7 billion joint venture on Monday with Austria's Borealis and Canada's Nova Chemical.

    The new venture plans to build a 1 million ton per year ethane steam cracker in Port Arthur, Texas, and is also considering building a 625,000 tonnes per year polyethylene unit at Total's Bayport site, also in Texas, on the U.S. Gulf Coast.

    Total will hold a 50 percent stake in the venture and the new cracker, which will be built alongside Total's Port Arthur refinery and Total/BASF's existing steam cracker, is scheduled to start in 2020, it said.

    "By joining forces with Borealis and Nova, we aim to create a major player in the US polyethylene market," Total's Chief Executive Patrick Pouyanne said in a statement.

    Total said it expects the joint venture to be established in late 2017 and a final investment decision on the polyethylene unit will be taken simultaneously by the JV partners.
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    The DNA of oil wells: U.S. shale enlists genetics to boost output

    The DNA of oil wells: U.S. shale enlists genetics to boost output

    A small group of U.S. oil producers has been trying to exploit advances in DNA science to wring more crude from shale rock, as the domestic energy industry keeps pushing relentlessly to cut costs and compete with the world's top exporters.

    Shale producers have slashed production costs as much as 50 percent over two years, waging a price war with the Organization of the Petroleum Exporting Countries (OPEC).

    Now, U.S. shale producers can compete in a $50-per-barrel oil market, and about a dozen shale companies are seeking to cut costs further by analyzing DNA samples extracted from oil wells to identify promising spots to drill.

    The technique involves testing DNA extracts from microbes found in rock samples and comparing them to DNA extracted from oil. Similarities or differences can pinpoint areas with the biggest potential. The process can help cut the time needed to begin pumping, shaving production costs as much as 10 percent, said Ajay Kshatriya, chief executive and co-founder of Biota Technology, the company that developed this application of DNA science for use in oilfields.

    The information can help drillers avoid missteps that prevent maximum production, such as applying insufficient pressure to reach oil trapped in rocks, or drilling wells too closely together, Kshatriya said.

    "This is a whole new way of measuring these wells and, by extension, sucking out more oil for less," he said.

    Biota's customers include Statoil ASA, EP Energy Corp and more than a dozen other oil producers. Kshatriya would not detail Biota's cost, but said it amounts to less than 1 percent of the total cost to bring a well online.

    A shale well can cost between $4 million and $8 million, depending on geology and other factors.

    Independent petroleum engineers and chemists said Biota's process holds promise if the company can collect enough DNA samples along the length of a well so results are not skewed.

    "I don't doubt that with enough information (Biota) could find a signature, a DNA fingerprint, of microbial genomes that can substantially improve the accuracy and speed of a number of diagnostic applications in the oil industry," said Preethi Gunaratne, a professor of biology and chemistry at the University of Houston.

    Biota has applied its technology to about 80 wells across U.S. shale basins, including North Dakota's Bakken, and the Permian and Eagle Ford in Texas, Kshatriya said. That is a tiny slice of the more than 300,000 shale wells across the nation.

    EP Energy, one of Biota's first customers, insisted on a blind test last year to gauge the technique's effectiveness, asking Biota to determine the origin of an oil sample from among dozens of wells in a 1,000-square foot zone.

    Biota was able to find the wells from which the oil was taken and to recommend improvements for wells drilled in the same region, said Peter Lascelles, an EP Energy geologist.

    "If you've been in the oilfield long enough, you've seen a lot of snake oil," said Lascelles, using slang for products or services that do not perform as advertised.

    Lascelles said DNA testing helps EP Energy understand well performance better than existing oil field surveys such as seismic and chemical analysis. The testing gives insight into what happens underground when rock is fractured with high pressure mixtures of sand and water to release trapped oil.

    Biota's process is just the latest technology pioneered to coax more oil from rock. Other techniques include microseismic studies, which examine how liquid moves in a reservoir, and tracers, which use some DNA elements to study fluid movement.

    Venture capitalist George Coyle said his fund Energy Innovation Capital had invested in Biota because it expected the technique to yield big improvements in drilling efficiency. He declined to say how much the fund had invested.

    "The correlations they're going to be able to find to improve a well, we think, are going to be big," he said.
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    PA DEP Permit Delays Causing Slowdown in New Marcellus Drilling

    Delays in turning around permit applications for new Marcellus drilling is hurting the industry, according to the Marcellus Shale Coalition (MSC).

    MSC president Dave Spigelmyer says lack of certainty in the PA Marcellus means more drilling goes to neighbouring West Virginia and Ohio–even to Louisiana.

    The PA Dept. of Environmental Protection (DEP), responsible for reviewing and issuing permits, sounds somewhat defensive about their lack of performance, blaming delays on staff shortages, staff turnover, and “enhanced scrutiny of permit applications.”

    The Pittsburgh office now takes over 200 days (over 6 months!) to process an erosion control permit–up from 139 days in 2015. Simply not acceptable…
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    Alternative Energy

    China's air quality worsens in Jan-Feb

    China's air quality worsened year on year in the first two months of 2017 mainly due to unfavorable weather conditions, high winter coal consumption and a warming economy, Xinhua reported.

    In the first two months, 338 major cities around China enjoyed good air quality on 64.6% of days, down 4.8 percentage points from a year earlier, the Ministry of Environmental Protection (MEP) said in a statement.

    The average density of fine particulate matter PM2.5 in those cities rose 12.7% to 71 micrograms per cubic meter.

    In the Beijing-Tianjin-Hebei region, the share of days with good air quality was down by 19 percentage points to 44.7% in the same period, and PM2.5 density surged 48% from a year ago, MEP said.

    The share of good air days for Beijing plunged 22.5 percentage points to 54.2%.

    The city of Haikou in southern China's Hainan Province had the cleanest air out of the nation's 74 major cities, while Hebei's capital city Shijiazhuang was the worst polluted.

    Hebei is aiming to cut coal consumption by households and small-scale enterprises, a major source of smog in the region.

    Chai Fahe, expert with the Chinese Research Academy of Environmental Sciences, attributed the deterioration partly to unfavorable meteorological conditions for pollutants to disperse, including lighter wind and higher humidity in some regions.

    The warming economy also weighed on air quality, Chai said.

    With recovering production and demand since the latter half of last year, both output and pollutant emissions from high-polluting sectors were on the rise, he said.

    China is heading in the right direction for tackling air pollution, head of MEP Chen Jining said earlier this month.

    In the past three years, days of good air quality increased in the Beijing-Tianjin-Hebei region, the Yangtze River Delta and the Pearl River Delta, Chen said.

    However, the campaign against air pollution cannot be completed in a short period of two or three years, but will need a relatively long time, he added.

    In 2017, China will cut the emissions of both sulfur dioxide and nitrogen oxide by 3%, and reduce PM2.5 density in key areas markedly.
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    Argentina says Enirgi, Orocobre to invest $880m in lithium

    Miners Enirgi GroupCorporation and Orocobre will expand their production of lithium in Argentinawith investments of $720-million and $160-million, respectively, Argentina's government said on Thursday.

    Argentina is the world's No. 3 producer of lithium, a hotly demanded material used in car batteries and mobile phones.

    According to the government's statement, the investment from Enirgi to create an advanced materials division in Argentina will help the company increase its production to more than 50 000 tonnes of lithium carbonate annually.

    Enirgi Group said in a March 21 statement it was opening an advanced materials division in Argentina but did not give an investment amount.

    Orocobre's production would increase to 30 000 tonnes per year in 2020 from 13 000 tonnes currently, the statement said.

    The companies did not immediately respond to request for comment.

    Industry representatives and the government say Argentina's lithium production could triple by 2019 as companies announce investments.

    Currently, Argentina produces 29 000 tonnes of lithium carbonate per year, around 15% of global output.
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    Flow Battery Storage Pilot Project Begins in California

    San Diego Gas and Electric (SDG&E) last week said it has launched a 2-MW vanadium redox flow (VRF) battery storage pilot project in coordination with Sumitomo Electric (SEI).

    The utility said that the four-year demonstration project will help determine if flow battery technology can economically enhance the delivery of reliable energy to customers, integrate growing amounts of renewable energy to the power grid and give the utility flexibility in how it manages the grid.

    According to SDG&E, VRF batteries have an expected life-span of more than 20 years, and could have less degradation over time from repeated charging cycles than other technologies.

    SDG&E will be testing voltage frequency, power outage support and shifting energy demand.

    "We are delighted to see our first flow battery system operating in the U.S.  through the multiple-use operation of the battery system in SDG&E's distribution network,” Junji Itoh, managing director of Sumitomo Electric, said.

    SDG&E said that it has approximately 100 MW of energy storage projects completed or contracted.
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    K+S Potash to begin production at its Legacy mine in Saskatchewan by year-end

    For the last 40 years, nine potash mines have been operating in Canada’s western-central province of Saskatchewan. But that’s about to change.

    Before the end of 2017, K+S Potash Canada and partner Amec Foster Wheeler — in charge of the project design and management — hope to start production at the Legacy project, a new site with an expected output of 2.86 million tonnes per year once at full capacity.

    Earlier this month, the company welcomed the first 177 of 531 custom-built rail cars, which shows how close they are to starting production, K+S said.

    Interviewed by’s Cecilia Jamasmie during the 2017 Prospectors & Developers Association of Canada Convention in Toronto, AmecFW's Mining President, David Lawson, explained why, despite the tough climate in the potash industry, he is optimistic about the future of the Saskatchewan project.

    Similarly, AmecFW’s Senior Vice President Mining, Duane Gingrich, talked about the challenges and advantages of building Legacy in the prairies.

    According to Gingrich, the project's developers have been able to reduce its footprint and volume by 45%, saving nearly $100 million in cost of concrete. At the same time, he added, by designing and fabricating items away from the site, they have saved considerable amounts of time and money.
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    Precious Metals

    Rhodium prices break through $1,000/oz on supply tightness

    Rhodium prices rocketed through the $1,000/oz resistance level this week after speculative investors declined to release metal to the market, forcing consumers in need to buy the metal at higher prices.

    The Platts New York Dealer rhodium price rose to $945-$1,015/oz from $905-$950/oz last week.

    Prices began moving higher on Tuesday as European refiners began lifting their base prices in response to steady demand from industrial consumers.

    UK refining majors Johnson Matthey and Engelhard Materials Services, a division of German specialty chemical producer BASF, ended the week at $1,015/oz after closing last week at $960/oz.

    Bid/ask spreads varied greatly. Some market sources reported bids as low as $920/oz, while other sources reported sales as high as $1,020/oz.

    "I don't know how good industrial demand is right now, but in the past couple of weeks, rhodium has been in backwardation," one PGMs dealer said, referring to a market when metal for nearby delivery is more expensive than metal delivered several months forward.

    Backwardated markets tend to develop when current supply begins to fall and/or immediate demand begins to increase.

    "It's costing more to borrow rhodium if you can find someone who will lend you some, so you're forced to buy it," he added, putting this week's range of physical deals at $950-$1,020/oz.

    A second PGMs dealer who put the range of deals at $970-$1,015/oz said "a couple of the banks were hoarding" and unwilling to release rhodium to the market. Nevertheless, rhodium "is well bid at the moment," he added.

    A PGMs refiner/recycler agreed, saying there was "decent, real demand" from industrial consumers, and put this week's range at $945-$1,013/oz.

    But a second PGMs refiner pointed to the amount of rhodium held by banks and speculative investors as the primary reason for the price increase. "I don't think there is that much industrial demand to drive these prices that much higher right now," he said, putting this week's range at $925-$1,010/oz.

    Rhodium is primarily used in automobile catalytic converters to reduce vehicle emissions, and is alloyed with platinum to create glass reinforcement fiber for digital displays.

    Elsewhere, the Platts New York Dealer ruthenium price ticked up to $37-$43/oz from $35-$40/oz after reports of increased buying over the past two weeks.

    But not all sources agreed that the buying had lifted prices, arguing they could still buy ruthenium at $40-$41/oz given the abundant supply.

    In a report earlier this week, German precious metals recycler/refiner Heraeus said that "for a few days now, there has been some nervous activity in ruthenium. Turnover reached a level we have not seen in a long time."

    Heraeus said it appeared traders and smaller investors were trying to position themselves, even though only a few industrial transactions had occurred.

    "Even though the price has risen slightly, there is by no means a shortage in the market. It remains to be seen whether the current situation persists and whether prices may after all move a little more," Heraeus analysts said.

    Ruthenium is mostly used in electrical contacts and computer hard-disk drive sensors.

    Attached Files
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    Base Metals

    Malaysia extends bauxite mining ban until mid-2017

    Malaysia on Tuesday extended a moratorium on bauxite mining by a further three months to June 30, looking to clear remaining stockpiles of the aluminium raw material as it presses the industry to halt damage to the environment.

    Natural Resources and Environment Minister Wan Junaidi Tuanku Jaafar said 2.15 million tonnes of bauxite still remained around Kuantan, the port capital of key bauxite producing state Pahang, from a total of 5.4 million tonnes before the moratorium was first imposed.

    Malaysia's largely unregulated bauxite industry ramped up output in 2014 to fill a supply gap after Indonesia banned exports, but the frenetic pace of digging led to a public outcry over water contamination and other environmental damage.

    The government imposed a three-month ban on bauxite mining in January last year, and has extended it several times as it waits for the stockpiles to be run down.

    "As of Feb. 28, only 3.25 million metric tonnes of bauxite were exported," Wan Junaidi said in a statement, although he added that some mining was still going on despite the moratorium.

    "The extension of the moratorium will give space to industry players to clear existing stockpiles and prepare measures to mitigate pollution across the bauxite mining and export supply chain," he said.

    Angry residents have protested over the contamination of water sources and the destruction of the environment in a region where heavy rains lead to bauxite runoff.
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    Steel, Iron Ore and Coal

    Australia's Dalrymple Bay, Hay Point, Abbot Point coal terminals shut ahead of cyclone

    At least three coal terminals have shut as a tropical cyclone bears down on the coast of Australia's Queensland state, a spokeswoman for North Queensland Bulk Ports told S&P Global Platts Monday.

    "In preparation for Tropical Cyclone Debbie, the ports of Mackay, Hay Point and Abbot Point have been closed until further notice," she said.

    The latest advice from Australia's Bureau of Meteorology shows Tropical Cyclone Debbie off the coast of north Queensland.

    The bureau upgraded it from a category 2 to a category 3 during the day Monday, with sustained winds near the center of 150 kmh and wind gusts to 205 kmh. It is expected to make landfall as a category 4 tropical cyclone between Ayr and Cape Hillsborough, north of Mackay, on Tuesday morning, it said.

    Category 5 is the highest on the bureau's scale.

    "Areas of heavy rain with the potential to cause severe flash flooding are expected to develop about parts of the northern and central Queensland coast and adjacent inland areas later today and continue through Tuesday," the bureau said in a statement.

    "Widespread daily rainfall totals of 150 to 250 mm, with isolated falls of 500 mm, are also likely to lead to major river flooding over a broad area next week, and a flood watch is current for coastal catchments between Rollingstone and Gladstone, extending inland to the Upper Flinders, Thomson and Barcoo catchments," it added.

    Officials at the Port of Gladstone, 430 km south of Hay Point which also exports coal, were not immediately available for comment.

    Hay Point is home to the BHP Billiton Mitsubishi Alliance-operated Hay Point Coal Terminal and the Queensland state government-owned common user Dalrymple Bay Coal Terminal. Abbot Point, 250 km to the north, also has a coal terminal.

    Logistics sources close to DBCT said operations there ceased late Saturday due to strong winds related to the cyclone. The regional harbor master closed the Port of Hay Point Sunday, the sources said.


    According to a ship agency source, no vessels are currently alongside the coal terminals at Hay Point, Dalrymple Bay, Abbot Point or Mackay Harbour. Eighteen dry bulk vessels had arrived at Dalrymple Bay prior to the closure, while Hay Point and Abbot Point had 17 vessels and one vessel respectively.
    Glencore said on Monday it was halting operations at its Collinsville and Newlands coal mines in Australia ahead of Cyclone Debbie's arrival in northern Queensland on Tuesday.

    "We are preparing to temporarily suspend production at our Collinsville and Newlands coal mines but do not envisage any impact on our annual production forecasts," Glencore, one of Australia's top thermal coal producers, said in an emailed statement.

    It said operations were continuing as normal at its Oaky Creek, Clermont and Rolleston coal mines, Mount Isa copperand zinc operations, and Ernest Henry Mining coppercomplex.

     Mining giant BHP Billitonsaid on Monday it was suspending operations at its South Walker Creekcoal mine in Queensland with Cyclone Debbie expected to bear down on Australia on Tuesday close to the site.

    "BHP Billiton Mitsui Coal (BMC) South Walker Creek Mine is close to the official warning zone and subsequently operations will be temporarily suspended from end of day shift Monday 27th of March until the storm threat has passed," a BHP spokesman said.

    South Walker Creek produced 2.4-million tonnes of metallurgical coal in the six months to December 2016.

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    China's coking coal imports up 49.5pct YoY in Feb

    China imported 4.43 million tonnes of coking coal in February, surging 49.5% from the year-ago level but dropping 28.9% from January, showed the latest data from the General Administration of Customs (GAC).

    The import value was $759.05 million in the month, rising sharply by 279.3% year on year but falling 26.9% month on month, data showed.

    In the first two months, China's coking coal imports totaled 10.69 million tonnes, rising 69% year on year. The value was $1.8 billion, up 324.8% from the preceding year.

    In February, China exported 90,000 tonnes of coking coal, 7.1% higher than the year-ago level. The value gained 74% year on year to $12.32 million.

    Over January-February, its coking coal exports dropped 3.3% year on year to 220,000 tonnes. The value increased 78.6% from the year prior to $37.78 million.

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    German coal-plant profitability recovers as coal hits 2-month low

    Profit margins for coal-fired power plants to produce electricity for delivery in Germany next year have rebounded and reached positive territory for the first time this year as coal prices have dropped and a stronger euro also helping profitability, S&P Global Platts data shows.

    The German year-ahead clean dark spread (CDS) for a 35% efficient coal plant rebounded to Eur0.08/MWh after plunging below zero at the start of the year to its lowest in five years as tight supply fundamentals in the Asian market supported coal prices.

    At the same time, the German year-ahead clean spark spread (CSS) for a 50% efficient gas-fired plant fell to minus Eur5.69/MWh, with the spread between the oldest coal plants and modern gas plants widening slightly to almost Eur6/MWh after shrinking in November to just Eur1/MWh, its narrowest since 2011.

    The gap between coal and gas generation margins in Germany was Eur20/MWh three years ago, with most gas plants uneconomic, but changes to the global supply-demand balance have narrowed that gap, with modern gas plants increasingly pricing the oldest coal plants out of the market.

    However, average efficiencies for the German coal plant fleet have also improved, with some 7 GW of highly-efficient (45%) coal plants coming online in 2014-15 and some delays to the closure of the oldest coal plants.

    Front-year coal into Europe plunged to $62/mt by Wednesday's close, its lowest so far this year and down from almost $80/mt at its November peak, when prices doubled in just over six months.

    Another reason for the slightly improved profitability of German coal plants is a stronger euro, which has risen above $1.08 against the dollar -- its highest since the US elections in November -- while EUA carbon allowances remain flat around Eur5/mt after spiking above Eur6/mt on March 1.

    Higher carbon prices favor less carbon-intensive gas-fired power plants.

    Outright power prices have also turned more bearish, falling Wednesday to a 2017 low after a bullish winter supported increased coal and gas burn.

    While coal keeps dominating the German power mix, with domestic lignite plants outperforming hard-coal plants and a combined share of over 40% last year, the share of gas in the power mix is set to rise further this year after gas plants registered the only gains across conventional power plants in 2016.
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    UK carbon emissions fell 6% in 2016 after record drop in coal use

    Carbon Brief analysis shows the UK’s CO2 emissions fell by 5.8% in 2016, after a record 52% drop in coal use.

    The reduction would leave UK CO2 emissions some 36% below 1990 levels. The huge fall in CO2 from coal use in 2016 was partially offset by increased emissions from oil (up 1.6%) and gas (up 12.5%).

    These findings are based on Carbon Brief analysis of Department of Business, Energy and Industrial Strategy (BEIS) energy use figures. This analysis has proven to be accurate in previous years. The department will publish its own CO2 estimates on 30 March.

    Update 6/3: Carbon Brief’s analysis has been reported by the Financial Times, the Press Association and Business Green.

    Coal crushed

    The most dramatic change in 2016 came from coal emissions, which fell by 50% compared to a year earlier to around 37 million tonnes of CO2 (MtCO2). A decade earlier, in 2006, UK coal emissions stood at 137MtCO2. These CO2 cuts are down to falling demand for coal.

    Coal use had already reached record lows in 2014 and then again in 2015. Last year set another record low, with demand halving to 18 million tonnes (Mt). The 52% drop was the largest recorded in percentage terms. It outstrips even years with miners’ strikes (1921,1926 and 1984), when coal use fell by around 30% before rebounding a year later.

    UK coal use 1858-2016, millions of tonnes (black area) and the level in 2016 (orange line). Hover over the chart for more information, including year-on-year changes. Source: BEIS and Carbon Brief analysis. Chart by Carbon Brief using Highcharts.

    Coal use has fallen 74% since 2006 and is now 12 times below the record 221Mt used in 1956. UK coal demand has fallen precipitously because of cheaper gas, the expansion of renewables, falling demand for energy and the closure of Redcar steelworks in late 2015.

    Perhaps the most consequential factor, however, is the UK’s top-up carbon tax, which doubled in 2015 to £18 per tonne of CO2. The future of the carbon price floor is uncertain; it has only be fixed out to 2021.

    On Wednesday, chancellor Philip Hammond’s budget is expected to set out the future path of the tax, which will have wide-ranging reverberations on planned coal phase out, the cost of low-carbon power subsidies and beyond. The steel industry has long lobbied against the tax, despite being shielded from 85% of its cost.

    Last year, three coal-fired power stations closed in the UK and shifting wholesale energy prices pushed coal to gas across Europe, a shift that amplified the impact of the carbon price floor. As a result, UK windfarms generated more power than coal in 2016, even though wind output declined slightly compared to the very windy year in 2015.
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    Daqin Railway raises coal freight rates by 10%

    Daqin Railway Co., Ltd., operator of multiple rail lines including the coal-dedicated Daqin line, announced on March 25 it will lift rail coal freight rates by 10% to the benchmark rate set by the government, effectively canceling a discount that has been offered to boost shipment since early February 2016.  

    The decision to raise freight rate was mainly attributed to tightening truck transport rules in the country's campaign to improve air quality, market insiders said, which push miners to opt for railway to get coal moved to northern ports.  

    Effective 18:00 on March 24, coal freight rate for rail lines implementing the nation's standard rate would be raised by 0.01 yuan/ to the benchmark freight rate of 0.098 yuan/, while that of Daqin, Beijing-Yuanping and Fengtai-Shacheng lines was lifted by 0.01 yuan/ to 0.1 yuan/, Daqin Railway said in a statement.

    The benchmark freight rate is set by the National Development and Reform Commission (NDRC), and rail operators are allowed to adjust it up no more than 10% but no limit for downward adjustment.

    Industry insiders believed that the recovery of benchmark freight rate will increase transport fees of coal delivered from Shanxi and Inner Mongolia to northern ports by 7 yuan/t and 12 yuan/t, respectively.

    It will support prices of coal that is on sale at northern ports in the short run, yet coal deliveries and profit are expected to shrink in the long term. Daqin Railway's revenue is likely to increase 4 billion yuan in 2017 from last year.

    Daqin Railway predicted a year-on-year slump of 50% in net profit to some 6.32 billion yuan ($917.9 million) in 2016, mainly impacted by the downward adjustment of coal freight rate, the company said in its earnings forecast report on January 21. Its net profit totaled 12.65 billion yuan in 2015.

    The rail coal transport has been rising since October last year when China rolled out truck overloading policy. In the first two months this year, Daqin line transported a total 65.32 million tonnes of coal, up 20.1% from the year prior.

    In February this year, China's Ministry of Environmental Protection required a shift from trucks to railways in delivering coal to Tianjin port by end-September, which may boost coal transport of Daqin in 2017.

    In 2016, Daqin railway hauled 351.25 million tonnes of coal, down 11.52% from 2015.
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    China's coal industry Jan-Feb profit at 43.8 bln yuan

    China's coal industry Jan-Feb profit at 43.8 bln yuan

    China's coal mining and washing industry realized profit of 43.8 billion yuan ($6.3 billion) over January-February, compared with a loss of 2.09 billion yuan in the same period last year, according to data released by the National Bureau of Statistics (NBS) on March 27.

    During the same period, the coal mining and washing industry realized revenue of 414.31 billion yuan, surging 38.3% from a year ago, data showed.

    Total profit of the country's entire mining industry stood at 75.81 billion yuan from January to February, compared with a loss of 9.77 billion yuan last year.

    Total revenue in the entire mining industry was 810.66 billion yuan, up 30.3% from the year-ago level.

    Meanwhile, profit in ferrous and non-ferrous metal mining industry stood at 7.04 billion and 9.23 billion yuan, up 80.5% and up 359% year on year, respectively.
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    Vale taps veteran executive Schvartsman as new CEO

    Vale SA surprised investors with the appointment of Fabio Schvartsman as chief executive officer on Monday, choosing a commodities industry veteran to lead transformation of the world's No. 1 ore producer into a company with dispersed share ownership.

    Schvartsman, who has been the CEO of Klabin SA, Brazil's largest paper and cardboard producer, for the past six years, had not figured in media reports as a potential replacement for CEO Murilo Ferreira. The departure of Ferreira was announced last month.

    In a career spanning four decades, Schvartsman occupied key positions in companies such as fuel distribution giant Ultrapar Participações SA, phone carrier Telemar Participações SA and U.S. oil driller San Antonio International. Vale's board picked him from a list prepared by executive recruiting firm Spencer Stuart.

    Schvartsman faces the task of engaging Vale's investors in a plan to phase out a 20-year controlling shareholder pact and merge the company's two classes of stock into a single one. The plan was announced last month, the same day that Ferreira announced he would quit when his term expired in late May after six years at the helm of the mining giant.

    A more dispersed shareholder structure is key to enhancing transparency and stifling interference from politicians, who for years have pressed Vale to invest in non-core projects. Some top shareholders proposed that Ferreira stay in the job for another year, Reuters reported in January.

    The appointment of Schvartsman "minimizes investor concerns on political interference at Vale, which we view positively," Leonardo Correa, a senior analyst at Banco BTG Pactual, said in a client note.

    Preferred shares , Vale's most widely traded class of stock, rallied 2.5 percent to 27.97 reais, while common shares gained 1.3 percent to 29.39 reais. Both stocks are up 3.5 percent since Reuters reported Vale's reorganization plan in January.


    Schvartsman's surprise appointment was welcomed by several analysts and investors, who expect the executive to replicate the job he did at Klabin.

    "Despite being new to the mining sector, we believe that Schvartsman can make a smooth transition to Vale," said Marcos Assumpção, a senior analysts with Itaú BBA in São Paulo.

    Under Schvartsman, Klabin undertook rapid growth through some capital spending plans but got caught in a downbeat cycle marked by rising debt and Brazil's worst recession on record. Still, he managed to boost operational margins to about 35 percent, from about 25 percent when he assumed.

    Currently, units of Klabin are some of the most expensive among Latin American paper and pulp producers, trading at about 7 percent premium to global peers, according to Thomson Reuters calculations.

    In a statement, Klabin thanked Schvartsman for "his commitment to participating actively in the transition plan," noting that the paper producer's board will give continuity to his job.

    Reuters had reported some of Ferreira's lieutenants and executives with Vale experience were being considered for the job.
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    China's Hebei province launches new probe into steel overproduction

    China's Hebei province, a major steel-producing area, has launched a fresh probe into steel overproduction in the city of Tangshan amid concerns that firms have continued to raise output despite mandatory capacity cuts.

    Hebei was ordered by China's central government to investigate firms in Tangshan that have "restricted but not cut production, restricted production but not actually cut emissions, and cut capacity but actually increased output," according to a provincial notice dated March 25 circulated by traders on Monday and seen by Reuters.

    An industry source based in Tangshan confirmed the veracity of the document, but said it was unclear whether the new round of inspections would have any immediate impact on production or prices.

    The document was issued by a special provincial policy team responsible for restructuring the steel industry. It said Hebei has already established an inspection team and Tangshan must begin its own investigations immediately.

    Tangshan produces around 90 million tonnes of steel a year, more than the whole of the United States. China has pledged to slash steel capacity by between 100 million and 150 million tonnes over the 2016-2020 period to shore up prices and ease sector debts.

    Located around 100 miles east of the capital Beijing, Tangshan is on the frontline of the country's "war on pollution", and was seventh on the list of China's ten smoggiest cities in the first two months of this year.

    At the start of the year, Tangshan promised to shut 8.6 million tonnes of annual crude steel capacity in 2017. It pledged to make cuts of 40 million tonnes over the 2013-2017 period and had already shut 31.9 million tonnes by the end of last year.

    Hebei promised to cut crude steel capacity to less than 200 million tonnes a year in the province by the end of 2020, down from 286 million tonnes in 2013. It aims to shut 15.6 million tonnes in 2017.

    However, the Ministry of Environmental Protection has routinely named and shamed municipal governments in Hebei for failing to implement pollution rules.

    Environmental group Greenpeace said in February that China's active steel capacity actually rose by 35 million tonnes in 2016 after the high-profile closure program focused mainly on shutting plants that had already been idled.

    "The steel industry's capacity reduction targets need to be upgraded to reductions in actual production - only then will we see real improvements in air quality," said Lauri Myllyvirta, senior global campaigner at Greenpeace East Asia.

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