Mark Latham Commodity Equity Intelligence Service

Monday 22nd June 2015
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    Shanghai's energy-saving measures pay off

    The output of Shanghai's energy-saving industry hit 32.3 billion yuan (US$5.2 billion) in 2014, up 12.2 percent year on year, officials told an annual energy-saving conference yesterday.

    Investment in energy saving surged 55.7 percent from 2013 to 7.9 billion yuan last year, the officials said.

    Shanghai managed to save energy equal to 300,000 tons of coal and cut 700,000 tons of carbon dioxide in the past year.

    There were 112 new energy-saving firms registered in Shanghai last year, up 35.6 percent from 2013. This brought the total number of such firms to 427 by the end of 2014.

    Industrial energy accounted for 54 percent of the city's total energy use in 2013, down from 70 percent in 2000. The proportion of coal energy in total energy use had been cut to 41 percent in 2013 from 65 percent in 2000.

    Shanghai said it will offer 3 billion yuan in subsidies to promote renewable energy and new-energy cars.
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    Odebrecht CEO Detained by Brazil Police in Petrobras Case: Folha

    The heads of two of Brazil’s largest construction companies were detained by police on Thursday as part of a broader probe into corruption at Petrobras, according to local media.

    Marcelo Odebrecht and Otavio Azevedo, heads of Construtora Norberto Odebrecht and Andrade Gutierrez construction companies, respectively, were among the 12 people judges had issued detainment and arrest warrants for, according to Folha de Sao Paulo and O Globo newspapers.

    Brazil’s Federal Police are investigating money laundering, embezzlement and racketeering as part of the probe.

    Odebrecht said in an e-mailed statement that its offices in Sao Paulo and Rio de Janeiro had been searched and that arrest warrants had been carried out.

    Andrade Gutierrez in an e-mailed statement said it was aiding in the police investigation and denied any involvement in relation to the so-called Car Wash operation, referring to investigations into a scheme of alleged kickbacks on service contracts at state-run oil company Petrobras.

    It is the most senior-level detainment of corporate executives since the Petrobras scandal broke last year.

    The executives will be taken to Curitiba, capital of the state of Parana, according to a Federal Police statement.
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    Oil and Gas

    Oil prices expected to 'improve' on rising demand, low stocks: Naimi

    Saudi Arabia's oil minister Ali Naimi is confident that oil prices will rise in the coming months given the increase in global demand and the low level of commercial stocks.

    Speaking about the oil market, Naimi was quoted by SPA as saying: "I am optimistic about the future of the market in the coming months in terms of the continuing improvement and increasing global demand for oil as well as the low level of commercial inventories."

    This, he said, "is expected to improve the level of prices."

    Naimi and Prince Mohammad also met with Russia's President Vladimir Putin, which "reaffirms the significance" of relations between the two countries, SPA reported.

    The meeting addressed means of enhancing bilateral relations, particularly in the fields of peaceful use of nuclear energy, military and technical cooperation, housing, the oil and gas sector and investment opportunities.

    An agreement was signed on cooperation in the field of "peaceful use" of nuclear energy, which aims to "promote and strengthen the relationship between the two countries to the best interest of both sides, both economically and technically," SPA reported.

    "We have agreed to set up a working group that would consider concrete projects that will allow us] to expand our cooperation," Novak said after the signing ceremony.

    Novak said he had seen an interest from Saudi companies to take part in energy projects in Russia, while Russian companies are also interested in taking part in projects in Saudi Arabia.
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    EU bosses say new Russian gas pipeline must comply with bloc's laws

    A planned expansion of the Nord Stream pipeline that delivers Russian gas to Germany must comply with EU laws, the European Commission said on Friday, adding it was working to maintain Ukraine's role as an important transit country.

    Russia's Gazprom said on Thursday that Royal Dutch Shell and its long-time gas buyers in Europe - Germany's E.ON and Austria's OMV - had agreed to build two new Nord Stream gas pipelines under the Baltic Sea to Germany.

    The announcement runs counter to Commission efforts to work with suppliers other than Russia, and to create a robust energy union based on closer collaboration between the 28 member states and sharing of available supplies.

    Russia provides around a third of the EU's energy.

    In its first public response to Thursday's news, the Commission said it would be vigilant about enforcing EU law that prevents any one supplier dominating the market and would keep working with Ukraine as "a major reliable transit country".

    "The European Commission recalls that new pipelines must be built in full compliance with EU legislation and will be vigilant about the rigorous application of EU law notably in the field of energy, internal market and competition," a statement said.

    The statement reiterated the Commission's commitment to seeking diverse gas suppliers, including more use of liquefied natural gas (LNG).

    Although European domestic gas production is expected to fall, so far only around 57 percent of Russian capacity to the EU is used, the EU executive said.

    While the European Union has been seeking to curb its dependence on Russian energy, Russia has been working to diversify its supply routes.

    The 55 billion cubic metre per year expansion of Nord Stream is in addition to Gazprom's planned Turkish Stream project to deliver 47 bcm to Europe via Turkey.

    Moscow has said the ultimate aim is to cease relying on Ukraine, which the Commission said was the route for roughly half of the Russian gas shipped to the EU.
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    Rosneft Agrees to Sell 20% of Taas Subsidiary to BP

    Rosneft announced Friday that it has signed a final binding agreement to sell a 20 percent share of its subsidiary company Taas-Yuryakh Neftegazodobycha (Taas) to BP.

    The Taas joint venture will further develop the Taas operated Srednebotuobinskoye oil and gas condensate field in the Sakha Republic, Yakutia, building infrastructure to aid further exploration of the region’s reserves. The Srednebotuobinskoye field’s reserves under Taas’ C1 and C2 lincensed areas total 133 million tons of liquid hydrocarbons and 4.8 trillion cubic feet of gas, according to Rosneft.

    Rosneft and BP have also agreed to explore two additional areas of mutual interest in the West Siberian and Yenisey-Khatanga basins, covering a combined area of around 100,000 square miles. This agreement commits BP and Rosneft to conduct studies and, if successful, establish new joint ventures to obtain licenses and perform exploration activities. Any joint ventures will be owned 51 percent by Rosneft and 49 percent by BP. As part of this agreement Rosneft and BP will also form a joint venture to carry out further appraisal work on the Baikalovskiy field, discovered by Rosneft in 2009.

    Rosneft Management Board Chairman Igor Sechin commented in a company statement:

    "Eastern Siberia is a priority area for Rosneft. Taas-Yuryakh Neftegazodobycha is carrying out a set of actions with the aim to further expand local infrastructure and boost production capacities. I’m glad that our cooperation with BP is developing in such a promising area."

    - See more at:
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    Nigeria's Buhari advised to end fuel subsidy - sources

    Nigeria's Buhari advised to end fuel subsidy - sources

    Nigeria's new president, Muhammadu Buhari, has been advised by his transition committee to end a fuel subsidy programme and privatise Nigeria's four refineries, senior sources in his party told Reuters on Sunday.

    Africa's top oil producer and biggest economy heavily subsidises gasoline and relies on imports for the bulk of its domestic demand due to an underperforming refining system.

    Buhari, who was sworn in as president three weeks ago, is considering the recommendations made in the strategy report produced by a 19-member committee formed from his All Progressives Congress (APC) party.

    "The removal of the fuel subsidy is one of the recommendations of the transition committee," said a senior APC source, who did not want to be named.

    "The committee also suggested to Mr President that the four refineries be privatised so that the government stops wasting money on annual turnaround maintenance," he said.

    A second APC source also told Reuters that these recommendations were contained in the report given to Buhari earlier this month.
    Nigeria's Buhari advised to end fuel subsidy - sources
    Buhari's predecessor, Goodluck Jonathan, cut subsidies by 90 percent in the 2015 budget because government revenues have been hit by the slump in oil prices.

    Nigeria attempted to end subsidies three years ago, doubling the price of a litre of petrol overnight, in efforts to cut government spending.

    The move angered citizens who see cheap pump prices as the only benefit they derive from living in an oil-rich country, and led to eight days of nationwide strikes. The government later reinstated part of the subsidy to end the strikes.

    The prospect of the subsidy removal contributed to fuel shortages in the final days of Jonathan's administration as gasoline importers went on strike saying they were owed money from the government.

    Last week, the state-owned Nigerian National Petroleum Corporation (NNPC) said its four oil refineries would resume production in July.

    The ailing refinery system generally runs well below capacity, sometimes at just 20 percent, due to neglect and pipeline sabotage.
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    U.S. oil rig decline extends beyond six months

    The number of U.S. rigs drilling for oil declined by four from last week, extending the drop in active rigs for a 28th consecutive week, according to data from oil services firm Baker Hughes.

    The number of active oil rigs has plummeted 61 percent, or by 978 rigs, since the peak of 1,609 rigs in October. The current count is 631 active oil rigs. Baker Hughes counts a total of 857 U.S. rigs when including gas rigs, which increased by two from last week.

    Although the oil rig count is still in decline, the pace has slowed dramatically from earlier this year. The count dropped by seven rigs the week prior and by 13 rigs the last week of May. The country dropped by just one rig in the week that ended May 22.

    The slowing of the rig count decline has corresponded with U.S. oil prices settling closer to $60 a barrel since late April, leading many analysts to believe the worst of the energy sector’s downturn is behind it.

    The rig count began plummeting last fall after oil prices collapsed from highs of more than $100 a barrel last summer. Oil companies slashed their capital spending and terminated workers. The industry’s job cuts reached 150,000 worldwide by the end of May, with the U.S. seeing the deepest cuts, according to energy recruiting firm Swift Worldwide Resources.

    Producers pulled back from marginal or frontier shale plays where drilling costs are higher. Energy companies are now trying to operate more efficiently and produce oil with fewer rigs and people.
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    Eagle Ford production dips, but barely

    Oil production from the Eagle Ford Shale in South Texas dipped by 6,000 barrels per day in May, according to Bentek Energy.

    But the field was still producing about 1.6 million barrels per day, about 21 percent higher than the same month last year.

    In April, Eagle Ford production also dipped by 8,000 barrels per day.

    Oil production in North Dakota’s Bakken shale formation was relatively flat, increasing by 650 daily barrels between April and May, according to Bentek, an analytics and forecasting unit of Platts. The Bakken was producing around 1.2 million barrels per day, up about 155,000 barrels from the year before.

    “The steep decline in rig count and the discouraging oil barrel pricing environment has taken its toll on oil production from the Eagle Ford Shale,” said Sami Yahya, Bentek energy analyst, in a news release. “While producers have been actively making gains in efficiency and high-grading their acreage, the efforts have not been sufficient to prevent oil production from dipping. Still, it is worth noting that production decline from the Eagle Ford in May is very small and is less than the decline noted in April, and production from the Bakken shale remains flat despite the severe cuts in rigs. The shortening of drill times in both of those key shales has helped sustain production levels.”

    Bentek said that from May 2014 to May 2015, U.S. crude oil production increased by 870,000 barrels per day.

    The Platts Eagle Ford Marker, which shows the value of oil out of the Eagle Ford Shale, has had an average price of $57.11 per barrel for the year, down 38 percent from the year before.

    Eagle Ford prices have ranged between $46.22 per barrel and $66.23 per barrel since the beginning of 2015.
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    Cushing Inventories Rise for the First Time in 7 Weeks

     The EIA reported that Cushing crude oil inventories rose by 112,000 barrels to 58.11 MMbbls in the week to June 12. Last week’s rise snapped a seven-week falling streak.

    What does this mean?

    The rise in inventories is bearish for WTI crude oil prices. In turn, it’s negative for US oil producers .

    2015 versus 2014 inventories

    Crude oil stocks at Cushing had been rising continuously since November 2014. However, since April 2015, the pace of the rise slowed down. In the April 24 week, inventories fell for the first time in almost six months. They had been falling consistently until last week

    Earlier in 2014, inventories fell consistently before rising toward the later part of the year. The fall in 2014 was mostly a result of new infrastructure coming online. This enabled more crude oil to move out of Cushing.

    New infrastructure includes TransCanada’s Keystone XL Pipeline, Cushing’s Marketlink Pipeline, Magellan Midstream Partners’  Longhorn Pipeline, and the joint venture Seaway Pipeline operated by Enterprise Products Partners and Enbridge.
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    Energy Transfer Equity confirms bid for Williams Co

    Energy Transfer Equity LP, a portfolio company that owns energy assets, said it has made an all-equity offer of $53.1 billion, including debt, to merge with Williams Companies Inc.

    Energy Transfer equity said it would buy all of the outstanding common stock of Williams at $64 per share, which represents a 32.4 percent premium to its closing price on June 19.

    Natural gas pipeline company Williams Companies Inc said on Sunday it is exploring strategic options after it received an unsolicited takeover proposal for $64 per share or $48 billion.

    Williams did not name the party who made the offer but it said its board determined the proposal "significantly undervalues" the company.

    Energy Transfer Equity LP, a portfolio company that owns energy assets, is the bidder referred to in Williams' announcement on Sunday, according to a person familiar with the matter.

    A spokeswoman for Energy Transfer Equity could not immediately be reached for comment.

    Williams said it will continue with its definitive agreement to acquire all of the public outstanding shares of Williams Partners, which gathers, processes and transports natural gas.

    The company said that the offer from the unnamed party was contingent on termination of Williams' pending acquisition of Williams Partners.

    "In light of the unsolicited proposal, our board believes it is in the best interest of shareholders to conduct a thorough evaluation of strategic alternatives," Alan Armstrong, president and chief executive of Williams, said in a statement.

    Williams retained Barclays and Lazard to assist with the strategic review.

    Its shares closed Friday ay $48.34.
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    Enbridge to transfer some assets to Enbridge Income Fund for C$30.4 bln

    Enbridge to transfer some assets to Enbridge Income Fund for C$30.4 bln

    Enbridge Inc said it would transfer its Canadian liquids pipelines business and certain Canadian renewable energy assets to Enbridge Income Fund in a deal valued at C$30.4 billion ($24.81 billion).

    The deal will provide Enbridge with an alternative source of funding for its growth opportunities and asset acquisitions, the company said on Friday.

    Enbridge Income Fund, which is operated by Enbridge, holds a diversified portfolio of energy transportation and power generation businesses.
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    Cenovus updates royalty lands transaction process

    Cenovus Energy Inc. continues to make progress on its previously announced plan to pursue opportunities to maximize the value of its royalty interest and mineral fee title lands.

    The company confirms it is in discussions with a counterparty with respect to a potential sale of the assets. There is no assurance any agreement will result from the discussions.

    Until such time as it is appropriate to make a public announcement about a transaction, Cenovus does not intend to comment further on this matter.
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    Alternative Energy

    Trina Solar plans USD 500 million India plant amid ban

    Bloomberg reported that Trina Solar Limited will invest in a USD 500 million plant with India’s Welspun Energy Limited as the world’s biggest supplier of panels seeks to circumvent US and European Union sanctions on solar shipments from China.

    Mr Zhiguo Zhu, senior vice president of Trina Solar, said in a phone interview that “The 2 GW facility will be in either the western state of Gujarat or southern state of Andhra Pradesh. Construction of the plant, planned in two phases, will take about 18 months. We’ll use Indian products to export to the U.S. or even Europe.”

    According to Bloomberg New Energy Finance, driven by the policy barriers, Chinese companies are setting up capacities globally. Southeast Asia is attracting the most investors, with advantages of low labor costs, local policy incentives and proximity to China, the source of the most raw materials.

    The World Health Organization said in May 2014 that global renewable energy companies are flocking to India after Mr Narendra Modi, PM of India, in November set a national target of installing 175 GW of clean power by 2022, an almost fivefold increase from the current installed capacity. India has 11 of the top 20 cities with Earth’s worst air quality.

    The executive said that Trina expects demand of as much as 600 MW in India this year.

    Mr Zhiguo said that “Next year, India will become our third-largest market. In future, it could become our biggest after China.”

    Changzhou, China-based Trina Solar and Welspun Energy of New Delhi signed an accord in May during Modi’s visit to China to jointly set up a photovoltaic industry park in India.
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    ICL to supply India with 835,000 tonnes of potash

    Israel's ICL has signed several contracts to supply its Indian customers with a total of 835,000 tonnes of potash.

    The world's sixth largest potash producer said on Friday that the new contracts, which are $10 per tonne above previous contracts, "demonstrate the strong relationships that ICL has developed with its customers in India who elected to wait until the conclusion of ICL’s recent strike to negotiate the contracts with ICL Fertilizers."

    The strike in Israel involving around 2,000 employees lasted four months. The workers returned to their jobs at the end of May, averting mass layoffs at three Dead Sea-area factories.

    Commenting on the news, Nissim Adar, president & CEO of ICL Fertilizers, said, "The new contracts that we have signed with our customers in India confirm our leading position in the strategic Indian market, whose potential for rapid growth is expected to be a leading driver of worldwide potash demand for years to come as a result of the rise in India’s standard of living, among other factors, which is transforming eating habits and driving the need to provide sufficient quantities of food for a large population that will only continue to grow in the future."

    ICL says it is active in India through its ‘Potash for Life’ farmer training program and promotion of potash consumption. The program, launched in October 2013, is designed to unlock the potential of agriculture in India by promoting balanced fertilization among India’s farmers to increase agricultural productivity and economic benefits, as well as to contribute to the creation of sustainable food production in India.
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    Precious Metals

    Zijin targets Australian gold miner in M&A spree

    Zijin Mining Group launched a bid for Australian gold explorer Phoenix Gold on Monday, the Chinese company's third planned acquisition of a foreign mining asset in less than a month.

    Long-dormant M&A activity in Australia and other mining-intensive countries is showing signs of a rebirth, with Zijin the most acquisitive to date and with the deepest pockets.

    "The company is open to opportunities around the world," Zijin Executive Director and Vice President George Fang told Reuters. "It is a goal to find more gold or other assets."

    In May Zijin announced it was issuing shares to raise 10 billion yuan ($1.61 billion) for acquisitions.

    Before launching its A$47 million ($36.55 million) offer for Phoenix, it accumulated a 17.9 percent interest in the company.

    Zijin already mines gold next door to a Phoenix deposit after paying A$240 million for another Australian miner, Norton.

    Zijin has made the withdrawal of a placement of 61.9 million Phoenix shares by Evolution, which is awaiting a shareholders' vote on Tuesday, a condition of its offer.

    Phoenix is advising shareholders not to take any action as it solicits alternative proposals.
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    Base Metals

    Barrick copper mine sale draws bid from BHP

    BHP Billiton Ltd. and Teck Resources Ltd. are among companies entering the final round of bidding to buy a stake in Barrick Gold Corp.’s Zaldivar copper mine in Chile, people familiar with the matter said.

    China’s Zijin Mining Group Co. is in the race for the asset, which is expected to be valued at at least $2 billion, the people said, asking not to be identified as the information is private. Barrick is seeking a buyer for 50 percent of the mine, while some of the suitors are interested in buying the whole asset, two people said. A final decision on the winner is likely to be reached in July, they said.
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    China copper smelter faces new risk over restructuring

    China copper smelter faces new risk over restructuring

    A majority shareholder in a $1.9 billion Chinese copper smelter being built in the port city of Lianyungang faces the risk of a court-ordered restructuring or bankruptcy, marking a new threat to a project still awaiting environmental approval.

    The smelter, which is due to have a capacity of 800,000 tonne a year, or more than 10 percent of China's copper smelting capacity in 2015, is being built by Jiangsu Universal Copper.

    The firm is majority owned by Jiangsu Tiandilong Group Co Ltd with the remainder held by firms in Hong Kong and Malaysia.

    Work on the smelter has proceeded slowly over the past two years and, as well as the financing it still requires, an environmental assessment report had not yet been approved, said a source with direct knowledge of the Jiangsu Universal Copper operation.

    Jiangsu Tiandilong is a producer of copper rods and power cables in Yixing city in Jiangsu province and also has property and solar investments, according to the company's website.

    A judge at a court in Yixing confirmed by telephone that it had accepted a filing by a branch of Bank of China in Yixing seeking a bankruptcy restructuring of Jiangsu Tiandilong.

    According to a lawyer, a company in this situation typically submits a restructuring proposal to the court, which then decides whether the proposal is accepted or the company has to go into bankruptcy.

    A restructuring of Jiangsu Tiandilong would not have a big impact on the domestic copper market, since there was already over capacity, said Yang Changhua, a senior analyst at state-backed research firm Antaike.

    Jiangsu Tiandilong produces copper rods, made from refined metal and used to manufacture power cables.

    According to Yang, it had halted production at its rods plant, which has less than 200,000 tonnes of annual capacity.

    Traders in Shanghai said the firm had been reducing buying of refined copper since last year.

    Attached Files
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    Southern Copper will likely have to extend pause on Peru project -gov't

    Peru's energy and mines minister said on Friday that Southern Copper Corp will likely extend its 60-day "pause" of its $1.4 billion Tia Maria project past mid-July in order to keep building local support.

    "I think the company has known for some time that it will have to do so," Rosa Maria Ortiz said in an interview.

    Southern Copper, controlled by Grupo Mexico, announced the formal suspension of its already-stalled project on May 15 to quell deadly protests against it.

    But Ortiz said she thinks the proposed copper mine might get started in a year if the company and government work closely with communities to clear up concerns over environmental impacts.

    "The company is doing work on communicating with communities that, from my point of view, it should have done long ago," Ortiz said. "I think that helps and is going to clear up a series of doubts."

    Ortiz said that Tia Maria is not another Conga - the $4.8 billion gold and copper project proposed by Newmont Mining Corp that has been on hold indefinitely since 2011 because of local opposition.

    "Conga is on stand-by. Tia Maria is still in a process in which dialogue can be opened," Ortiz said. "Conga meant replacing lakes with reservoirs...the impact is much greater. With Tia Maria, not a liter of water from the valley basin will be touched."

    After deadly protests against Tia Maria in 2011, Southern Copper revised its environmental plan to include a desalinization plant. But renewed rallies calling for the project's cancellation broke out in March as a construction permit for the project was pending.

    Ortiz said that despite the Conga and Tia Maria conflicts, plenty of mining projects in Peru face no opposition from communities and roll out as scheduled.

    Next year, copper output in Peru is forecast to jump 66 percent to 2.58 million tonnes as two new mines owned by Chinese companies ramp up production, Ortiz said. Gold production, which dropped 10 percent last year, will rise 8 percent in 2016.
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    Rio Tinto, Savannah to Set Up Mozambique Heavy-Sands Venture

    Rio Tinto Group and Savannah Resources Plc will combine their heavy mineral-sands prospects in Mozambique to create a “world-class” area for the titanium, ilmenite, and zircon-bearing ore deposits in the country.

    Rio Tinto International Holdings and Savannah’s AME East Africa will combine their adjacent Mutamba, Dongane and Jangamo prospects in Inhambane province, as well as Rio’s Chilubane heavy mineral-sands occurrences in Gaza province in an unincorporated joint venture, London-based Savannah said in a statement on its website Monday. Rio will buy all the heavy mineral concentrate produced from any mine that may be developed in the project area, it said.

    This combines Savannah’s inferred mineral resource of 65 million metric tons at 4.2 percent total heavy minerals and Rio’s exploration target of 7 billion to 12 billion tons at grades ranging from 3 percent to 4.5 percent, it said. Savannah will operate the venture and may earn an interest of as much as 51 percent in the combined Mutamba-Jangamo project, while Rio

    Mozambique’s Mineral Resources and Energy Ministry has yet to approve the formation.

    Heavy mineral sands include titanium, a lightweight metal used in the aerospace, oil and gas industries. They also encompass ilmenite and rutile, used in steelmaking, as well as zircon, which can be used in television and computer screens.
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    Steel, Iron Ore and Coal

    Indonesia Jan-May coal output down nearly 20pct

    Indonesia, the world’s top exporter of seaborne thermal coal, produced 166 million tonnes of coal over January-May this year, down 19.4% from the same period last year, said the Ministry of Commerce on June 18, citing Indonesia’s Ministry of Energy and Mineral Resources.

    The decline was mainly due to producers’ output cut on the back of falling global coal prices, which has posted a nearly 20% decline since 2014.

    Total coal export during the same period was 135 million tonnes, the ministry said.

    Low Indonesian thermal coal prices continue to weigh on producers’ margins and some have reduced their offer prices in an attempt to clear stockpiles, said market sources.

    Indonesia’s June thermal coal reference price, also known as Harga Batubara Acuan (HBA), was set at an all-time low of $59.59/t, FOB Kalimantan, falling 19.1% from a year ago and down 2.4% from May, said the ministry.

    Indonesia may see its coal output drop 24% year on year in 2015, according to Pandu Sjahrir, chairman of the Indonesian Coal Mining Association (ICMA).
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    Japan crude steel output falls for 9th month in May

    Japan's crude steel output fell 7 percent in May from a year earlier, the ninth straight monthly fall, as slack car consumption and slower government spending on public works battered steel demand.

    The continued decline is in contrast with recent data which underlined an upbeat mood among Japanese manufacturers and retailers.

    In May, steel production slid to 8.92 million tonnes, the Japan Iron and Steel Federation said on Friday.

    "Automakers are still making production adjustments due to high inventories. That is affecting steel demand," said a researcher at the federation.

    "Behind the weaker steel output was also a drop in public works due to slower budget implementation by the government than a year ago. But that will likely change from July as the budgets are expected to be executed," he said.

    The Ministry of Economy, Trade and Industry (METI) said in April that Japan's crude steel output for April-June is forecast to drop 7.8 percent from a year earlier to the lowest for the quarter in six years.

    Attached Files
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    Rio Tinto sees 'a few years of reduced consumption of new steel'

    China is still working through built-up iron ore inventories which will dampen metal demand in the short term, says Andrew Harding, chief executive of Rio Tinto's iron ore operations.

    Harding made the comments in the company's in-house magazine, Mines to Market, in a question and answer piece.

    He was asked about long-term growth, which he argued is good due to population growth and more people entering middle class, but short-term the market is still tough. (Emphasis added.):

    The Chinese economy is in transition to what is being called the “new normal” – driven more by domestic consumption than by infrastructure growth. In 2015 to date, China’s steel production has been much the same as last year. There is inventory in the housing sector that has to be run down, and that will lead to a few years of reduced consumption of new steel.

    But a year or two where there are short-term effects running shouldn’t sway us from the long-term outlook. The long-term drivers are fundamentally sound and will keep driving consumption forward, but you will have this period of transition.

    Harding noted the pattern of boom and bust is not new mining. Capital spending needs time to catch up demand, and it is not easily turned around.

    "Since mines take a long time to come on-stream, that supply is still coming on-stream while, in the short term, demand growth is not looking as strong as it was. It’s a common pattern you see in mining, and it’s playing out yet again in iron ore."

    Harding says the company is focused on being at the bottom of the cost curve. It's the only place to be. To the rest, his sympathies:

    For players at the opposite end of the curve, unless they can cut their costs dramatically, they will go out of business. They’re not profitable in the long term, and definitely not through cyclical lows like we’re seeing now.

    I am sympathetic towards the people in these companies who may lose their jobs, and towards the suppliers to these companies that may lose their contracts.
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    AK Steel provides second quarter earnings guidance

    AK SteelAK Steel has provided guidance for its second quarter 2015 financial results. AK Steel said that it expects to report a net loss of $0.37 to $0.42 per diluted share of common stock for the second quarter of 2015. AK Steel said that the company's expected second quarter results continued to be negatively impacted by lower carbon steel prices due to the continued high level of what the company believes are unfairly traded imports.
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    Chinese steel products exports will be high in June - SMM

    According to commodity information provider Shanghai Metals Market, China’s seel products exports are likely to remain high in June

    The company claims that 30 mainstream building materials factories estimate that their exports will rise by 5% due to sluggish steel prices in China’s domestic marketplace.

    In May, China exported 9.2 million tonnes of steel products, up 7.73% month-on-month and 14% up year-on-year. During the first five months of 2015, China exported 43.52 million tonnes of steel products, up 28.2% year-on-year, says NBS.
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