Mark Latham Commodity Equity Intelligence Service

Wednesday 14th December 2016
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    Small business optimism remained flat leading up to Election Day and then rocketed higher as business owners expected much better conditions under new leadership in Washington, according to a special edition of the monthly NFIB Index of Small Business Optimism, released today.

    “What a difference a day makes,” said Juanita Duggan, President and CEO of the National Federation of Independent Business (NFIB). “Before Election Day small business owners’ optimism was flat, and after Election Day it soared.”

    The NFIB Index of Small Business Optimism is one of the oldest and most widely respected economic research reports in the country. It is a survey asking small business owners a battery of questions related to their expectations for the future and their plans to hire, build inventory, borrow, and expand.

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    Explanation of US tax plans.

    How is the GOP’s business tax different than the current corporate income tax?

    The easiest way to understand how the new tax in their plan works is to compare it to the current corporate income tax.

    Under current law, corporations are taxed on their profits, which are roughly defined as revenues minus costs, at a marginal rate of 35 percent. Costs are things like state and local taxes, the cost of goods sold, interest payments, and other business inputs. Businesses that purchase capital investments need to depreciate, or write off, the cost of those goods over many years or decades. In addition, U.S. corporations are taxed on profits they earn overseas and bring back to the U.S. minus a credit equal to the taxes they paid overseas on that income.

    The GOP’s plan would alter the corporate income tax in five major ways:

    1. The tax rate would be lowered to 20 percent.
    2. Businesses would no longer need to depreciate capital investments. Instead, they will be able to fully write off, or expense them, in the way in which they purchased them.
    3. Businesses would no longer need to pay tax to the IRS on profits they earn overseas.
    4. Businesses would no longer be able to deduct interest as a business expense.
    5. The corporate tax would be “border adjusted.”

    These changes turn the tax into what is called a “destination-based cash flow tax.”

    All of those changes are straightforward, but I am not sure what you mean by “border adjusted.”

    The border adjustment is one of the more interesting features in the GOP’s tax reform plan.

    Typically, we hear about a border-adjusted tax in the context of a value-added tax. A border-adjusted tax is a tax that is applied to all domestic consumption and excludes any goods or services that are produced here, but consumed elsewhere.

    A border adjustment conforms to what is called “destination-based” principle (thus the “destination-based” in the “destination-based cash flow tax”). This principle states that the tax is levied based on where the good ends up (destination), rather than where it was produced (origin).

    Most value-added taxes throughout the world follow the destination principle. However, this principle can also apply to retail sales taxes, business taxes, and carbon taxes. The GOP plan applies this principle to business taxes.

    So how does a border-adjusted business tax generally work?

    In the context of a value-added tax, a border adjustment works by applying the tax to imports, but exempting exports from the tax. The GOP’s business tax is not a VAT, but the mechanism that makes it border adjustable is similar.

    In order to make the corporate tax border adjustable, the revenue from sales to nonresidents would not be taxable, and the cost of goods purchased from nonresidents would not be deductible. So if a business purchases $100 million in goods from a supplier overseas, the cost of those goods would not be deductible against the corporate income tax. Likewise, if a business sells a good to a foreign person, the revenues attributed to that sale would not be added to taxable income.

    Another way to think about the border adjustment is that the corporate tax would ignore revenues and costs associated with cross-border transactions. The tax would be solely focused on raising revenue from business transactions from sales of goods in the United States.

    VATs are usually border adjusted. Does this mean the corporate tax in the GOP's plan is a VAT?

    No. There are provisions in the GOP plan’s business tax that make it similar to a VAT, such as full expensing of capital investment, the non-deductibility of interest payments, and the border adjustment. However, it does not have the same tax base as a VAT. Specifically, the tax in the GOP tax plan allows businesses to deduct payroll. A VAT would not.

    A tax on imports, but not on exports. This sounds like a tariff.

    A border adjustment is not a tariff, nor would it give the U.S. a trade advantage.

    At first glance, a border adjustment sounds like a tariff because it applies to imports, but does not apply to exports. The adoption of a border-adjustable tax is sometimes praised as a cure for the U.S. trade deficit, or promoted as giving the U.S. a competitive edge, or offsetting a competitive edge now enjoyed by foreign producers whose countries use border-adjusted taxes. Such claims are unfounded, and based on a misunderstanding. For instance, Senator Ted Cruz wrongly argued that his plan would benefit exports.

    A border-adjusted tax falls equally on domestic and imported goods, in order to tax the amount of income people spend on consumption. A domestically produced good and an imported good will face the same tax. Goods produced in the U.S. and exported abroad are exempt from taxation, but exports are not consumed at home. However, the foreign buyer may be subject to a consumption tax levied in his home country, but that is not the concern of the U.S. taxing authority.

    Of course, U.S. producers may think of this as a subsidy for exports because they would not be taxed on sales overseas. But if businesses were able to reduce the prices of their goods they sell overseas due to the border adjustment, this would trigger a higher demand for dollars in order to purchase those goods. This higher demand for dollars would increase the value of the dollar relative to foreign currencies and offset any perceived trade advantage granted by the border adjustment.

    How would a border adjustment impact federal revenues?

    In the case of the United States, a border-adjusted tax would raise revenue by broadening the tax base. The United States has a large current account deficit; its imports greatly exceed its exports. Because of that difference, taxing spending on imports instead of taxing sales of exports would raise revenue, roughly $1 trillion or more over a decade.

    Of course, the plan also lowers the corporate tax rate and enacts full expensing, so on net the tax changes will likely reduce overall business tax revenue.

    Would a border adjustment be complicated?

    A system in which cross-border transactions are essentially ignored would actually be simpler than current law.

    Businesses have profits and investments all over the world. Properly allocating revenues and costs across borders is quite a complex task and requires businesses to navigate very complex parts of the U.S. tax code.

    Moving to a destination-based cash flow tax would eliminate the need for a lot of these complex provisions because the tax would only concern itself with domestic transactions. As Alan Auerbach has pointed out, the need to allocate research and development costs would go away under this proposal.

    In addition, because the GOP plan’s corporate tax is a territorial tax—dividends paid by U.S. foreign subsidiaries are not taxable in the U.S.—there would be no need to calculate foreign tax credits.

    How would the proposed tax impact profit shifting?

    One of the impacts of the GOP’s proposed cash-flow tax is that profit shifting that occurs under the current corporate income tax would be pretty much eliminated.

    Under current law, businesses have the incentive to overstate costs in the United States and overstate profits elsewhere in order to avoid the higher marginal tax rate in the United States. This is because the current tax is based on where profits are located, not sales.

    With a destination-based tax, this incentive disappears because the very transactions that make profit shifting possible are ignored. For example, if a business understates profits in the U.S. by understating the cost of widgets it sells to a subsidiary in France, it wouldn’t matter because that transaction would be ignored because it is an export. Likewise, if a foreign subsidiary overstates the cost of lumber it imports to the United States, it, again, doesn’t matter because that cost is not deductible against the corporate tax base.

    Also, because interest in the GOP’s plan is not deductible, profit shifting through cross-border loans would no longer be possible. IP income would also not be an avenue through which businesses profit shift because royalties paid overseas for goods sold in the United States would not be deductible.

    In fact, this system would create an incentive for businesses to shift profits into the United States and companies that hold IP overseas and sell goods throughout the world would have an incentive to relocate that IP to the United States.

    What about the World Trade Organization? Would they object to this tax?

    The World Trade Organization generally allows and expects consumption-based taxes (called “indirect taxes”) to be border adjusted. However, it objects to income-style taxes (called “direct taxes”) being border adjusted. So the corporate income tax is considered not eligible for border-adjusted treatment. This is the conventional treatment going back to the 1950s.

    However, there is a case for treating this tax as an indirect, consumption-based tax. Once a business tax allows full and immediate expensing of capital investment spending, it takes on the nature and tax base of a consumption-based tax.

    Where should I go to read more about this subject?

    The Center of American Progress, back in 2011, published a paper highlighting the benefits of a destination-based cash flow tax.

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    Trump picks Exxon chief Tillerson as secretary of state

    President-elect Donald Trump announced Exxon Mobil Corp's Rex Tillerson as his choice for secretary of state on Tuesday, praising the business leader as a successful international dealmaker who has led a global operation.

    Tillerson's experience in diplomacy stems from making deals with foreign countries for the world's largest energy company, although questions have been raised about the oil executive's relations with Russia.

    "He will be a forceful and clear-eyed advocate for America’s vital national interests, and help reverse years of misguided foreign policies and actions that have weakened America’s security and standing in the world," Trump said in a statement.

    Tillerson said he shared Trump's "vision for restoring the credibility of the United States’ foreign relations and advancing our country’s national security."

    Trump picked Tillerson, 64, after the Texan was backed by several Republican establishment figures including former Secretary of State James Baker, former Secretary of State Condoleezza Rice and former Defense Secretary Robert Gates, the transition official said.

    Their support is seen as key to helping Tillerson get past a possibly contentious Senate confirmation battle likely to focus on his relationship with Russian President Vladimir Putin.

    In 2013, Putin bestowed a Russian state honor, the Order of Friendship, on Tillerson, citing his work "strengthening cooperation in the energy sector".

    Trump judged in making the pick that Tillerson could adequately address questions about his relations with Russia, an official said.

    Lawmakers from both major parties have raised questions about Tillerson and former U.N. Ambassador John Bolton, who has been mentioned as a possible No. 2 State Department official and who has voiced hawkish views on Iraq and Iran.

    Separately, a source close to the transition said Trump had chosen former Texas Governor Rick Perry as his nominee for energy secretary, with an announcement expected soon. Perry met Trump on Monday at Trump Tower in New York.

    Republicans and Democrats said Tillerson, who is president of Exxon Mobil Corp, would be asked about his contacts with Russia, having met Putin several times. He won fresh praise from Moscow on Monday.

    Senator John McCain, a leading foreign policy voice and the 2008 Republican candidate for president, told Reuters in an interview: "I have concerns. It's very well known that he has a very close relationship with Vladimir Putin."

    There has been controversy over the role alleged Russian cyber hacking may have had on the outcome of the Nov. 8 presidential election, in which Trump defeated Democrat Hillary Clinton.


    While busily filling out his Cabinet, Trump is seeking to answer questions about how he will separate himself from his far-flung business empire before taking over the presidency on Jan. 20.

    He had planned a news conference on Thursday to lay out the details but delayed it until Tuesday due to what aides said was the crush of picking people to serve in his administration.

    In a series of late-night tweets on Monday, Trump said he would be leaving his business before Jan. 20 so he can focus full-time on the presidency and that he would leave his two sons, Donald Trump Jr and Eric Trump, to manage it.

    He did not mention his daughter, Ivanka, who has been a central player in Trump's business affairs and who is said to be considering a move to Washington to help her father.

    "No new deals will be done during my term(s) in office," Trump said.

    He said he would hold a press conference "in the near future to discuss the business, Cabinet picks and all other topics of interest. Busy times!"

    Trump chose Tillerson over 2012 Republican presidential nominee Mitt Romney, who had famously criticized Trump during the party's fight for a nominee this year. Trump called Romney to tell him he had decided to choose someone else for the job.

    "It was an honor to have been considered for secretary of state of our great country," Romney said in a Facebook posting on Monday night.

    "My discussions with President-elect Trump have been both enjoyable and enlightening. I have very high hopes that the new administration will lead the nation to greater strength, prosperity and peace."
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    Rick Perry is Donald Trump's choice for energy secretary

    President-elect Donald Trump has selected former Texas Gov. Rick Perry to be his nominee for energy secretary, multiple transition sources told CNN Tuesday, which would make him head of an agency he once sought to eliminate.

    Perry, twice an aspirant for the White House and for decades a swaggering figure in the Texas Republican Party, returns to the national limelight after his career in politics withered amid scandal and embarrassment.

    If confirmed by the Senate, Perry will inherit a department that has focused on promoting clean energy and reducing dependence on fossil fuels, but has also seen domestic production of oil explode. And his selection is a nod to the traditional GOP emphasis on energy sources like coal and oil.

    A hallmark of Obama's Energy Department has been the grants and loans it issues for research. The loan program was expanded to include renewable energy projects as part of Obama's economic stimulus package in 2009, and more than $30 billion in loans have been issued since then.

    These loans have also been a source of controversy. In 2011, Obama administration had to defend its loan to Silicon Valley energy startup Solyndra when it filed for bankruptcy and taxpayers had to foot a $535 million bill. For all its support of green energy, the department has also presided over a massive oil boom.

    Obama's current energy secretary Ernest Moniz is a longtime supporter of fracking, which he sees as a "bridge" to a low-carbon future. He has lauded increased domestic production of oil and natural gas via the technique. Hydraulic fracturing technology, more commonly known as fracking, now accounts for more than half of all US oil production -- a massive jump considering fracking made up less than 2% of the country's oil output in 2000. The production of American crude has nearly doubled in the past decade, putting U.S. behind only Saudi Arabia and Russia in world rankings.
    Trump has made it clear he wants the US to play an even bigger role in the global oil ecosystem.

    "I've never understood why, with all of our own reserves, we've allowed this country to be held hostage by OPEC, the cartel of oil-producing countries, some of which are hostile to America," Trump wrote in his book "Crippled America."

    Experts say pumping more oil could decrease the country's dependence on foreign crude, but there's also a risk it would send prices crashing again. Oversupply caused oil prices to plummet as much as 75% between 2014 and earlier this year.

    Perry's selection culminates a four-year effort to rebuild his political image in the aftermath of his disastrous 2012 run. A late entrant into the presidential primary, Perry was recruited as the sought-after alternative to eventual nominee Mitt Romney, but his policy stumbles failed to install confidence and his career sputtered.

    The crystallizing moment -- when Perry on a primary debate stage blanked and painfully could not recall the name of the third federal agency he vowed to eliminate as President -- none other than the Energy Department that he will now lead -- a gaffe that became known primarily for the word with which he ended his live misery: "Oops."

    Four years later -- under the threat of prosecution for allegedly promising to strip funding for a county agency if a local official would not leave her post -- Perry's campaign was more modest. He became one of the first candidates to attack Trump, labeling him at one point a "cancer on conservatism," but dropped out in September 2015 amid fundraising troubles. He eventually became an occasional surrogate for Trump during the general election.
    In his first 100 days, Trump says he'll roll back Obama-era regulations on the fossil fuel industry, bringing jobs back to coal country. Many of these regulations fall under the Environmental Protection Agency , but leadership from the Energy Department could play a key role.

    Trump has also pledged to expand drilling on federal land, which would require approval from the Interior Department. The Army Corps of Engineers, which reports to the Department of Defense, oversees the permit process for the contentious Dakota Access Pipeline.
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    China thermal, hydro power output both rises in Nov

    Total electricity output in China reached 503.4 TWh in November, gaining 7% from a year ago and up 3.24% from October, showed data from the National Bureau of Statistics (NBS) on December 13.

    That equated to a daily output of 16.78 TWh on average in the month, up 7% year on year, data showed.

    Electricity output from China's thermal power plants – mainly coal-fired – rose 5.3% year on year to 379.7 TWh in the month, up 6.81% from October, the NBS data showed.

    By contrast, China's hydropower output climbed 3.3% year on year but dropped 13.1% month on month to 80.4 TWh in November.

    The output of nuclear power and wind power both increased 34.8% from the year-ago level to 19.5 TWh and 20.8 TWh in the month, while that of solar power surged 42.6% year on year to 3 TWh.

    Over January-November, China's total power output increased 4.2% on year to 5,370.1 TWh.

    Of this, thermal power stood at 3,967.9 TWh, up 2.2% year on year; while hydropower reached 984 TWh, up 6.4% from the year prior.

    The output of nuclear power and wind power stood at 191.4 TWh and 190.8 TWh, rising 23.5% and 17.9% year on year; solar power output was 35.9 TWh, increasing 32.7% from a year ago.

    Over the period, thermal power generation accounted for 73.89% of the total power generation, while hydropower output accounted for 18.32%.
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    Bitcoin Reaches Multiyear High as Chinese Get Nervous


    1. China, where the stock market stumbled again as the Chinese authorities continue their arbitrary acts of rulemaking. This time they hit the insurance industry, criticizing some of the larger firms for buying stocks.
    China Vanke, a developer who was apparently being acquired last month, slumped another 6% as a result of the officials’ criticizing leveraged buyouts (ending the acquisition).

    2. The nation’s government bond yields rose further, with corporate yields following. The selloff in the corporate sector has been especially acute at the short-end of the curve. Are we seeing some redemptions from wealth management products (WMPs) who tend to hold a great deal of corporate debt?

    3. The renminbi is expensive to borrow in Hong Kong again. Rates have been rising quickly for term loans (as opposed to overnight). Here is the 3-month yuan HIBOR rate.

    Part of the reason for the tighter offshore yuan market is Hong Kong’s decline in yuan time deposits. Hong Kong residents used to open renminbi accounts to get a much higher rate relative to the Hong Kong dollar. But after the August 2015 devaluation, deposit volumes have been declining. Beijing’s tightening of capital controlsis also reducing the yuan availability in Hong Kong.

    4. The renminbi implied volatility jumped in recent days as investors brace for more currency declines.

    5. Bitcoin hit a multiyear high as market participants continue to point fingers at China’s residents.

    6. Many ask where the rest of Asia will stand in a US-China trade dispute. Here are the China- vs. US-bound exports from the largest Asian economies (ex-Japan).

    7. China’s latest batch of economic releases looks quite stable. In fact, some argue that these figures are too stable to be real (with only minimal fluctuations on a year-over-year basis).

    8. China’s Western acquisitions spiked in 2016. With Bejing concerned about capital outflows, will all this shopping spree slow down next year?
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    Oil and Gas

    China's Sinopec weighs takeover of Gulf Keystone

    China's Sinopec Corp  is weighing a takeover of Gulf Keystone Petroleum, an oil company operating in the Kurdistan region of Iraq, Bloomberg reported on Tuesday.

    Gulf Keystone shares were up 13.5 percent at 144.43 pence at 1041 GMT.

    Sinopec, Asia's largest refiner, is working with advisers and has made an approach to Gulf Keystone, Bloomberg reported, citing sources familiar with the matter.

    The company may also attract other bidders, according to Bloomberg.

    A spokesman for Gulf Keystone declined to comment, while Sinopec could not be immediately reached for comment.

    Gulf Keystone has been fighting to avoid insolvency after low oil prices and overdue oil export payments from the Kurdistan regional government crippled its balance sheet.

    The Kurdish oil producer's market value has tumbled to about 290 million pounds ($368 million) as of Monday's close from its peak valuation of 3.5 billion pounds in February 2012, according to Reuters calculations.

    Earlier this year, Gulf Keystone agreed to swap $500 million of debt for equity, wiping out some of the world's top funds as shareholders.

    In July, Norwegian energy firm DNO ASA (DNO.OL) offered to buy Gulf Keystone for $300 million, following the latter's junk bond deal.

    However, DNO's proposal lapsed as Gulf Keystone failed to meet certain conditions related to its financial restructuring.
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    One Europe Oil Refiner Said to Get 20% Less Saudi Arabia Crude

    Saudi Arabia, spearheading OPEC’s quest to eliminate a crude glut, will cut the amount of oil it allocates to one European refining company by about 20 percent, a person with direct knowledge of the matter said.

    The restriction, imposed by state oil company Saudi Aramco, will be applied to next month’s supplies, the person said, asking not to be identified because the information is private. It offers a clue about how the kingdom’s planned supply curbs will play out geographically. Separately, Iraq’s state oil marketing company will tell customers to expect reduced volumes next month, a second person said.

    The Organization of Petroleum Exporting Countries surprised oil markets at the end of November by clinching a deal to limit its collective output by about 1.2 million barrels a day and then enlisting non-member nations to join the effort. The focus of Saudi Arabia’s own cuts was outside of Asia as other regions had bigger surpluses, a Gulf official said Dec. 9.

    Saudi Arabia agreed to cut its production to 10.06 million barrels a day at the end of November and the nation’s oil minister, Khalid al-Falih, said Dec. 10 that even deeper cuts were possible. The planned restrictions by Saudi Arabia and Iraq follow similar announcements by the state oil companies of the U.A.E. and Kuwait to their Asian customers. Until now, most European refiners said they hadn’t been informed of Saudi Arabia’s intentions for supply next month.

    A second European refiner will receive the amount of oil from the Saudis in January that they had asked for, a person familiar with the matter said Tuesday without stating whether that would be an increase or decrease on prior months. A third refiner, yet to be notified of their January allocations, expects normal contractual supplies next month, according to a person with knowledge of the matter.
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    Iran crude oil exports to hit 5-mth low in Dec -source

    Iran's crude oil exports in December are set to fall 8 percent from November to a five-month low, a source with knowledge of its preliminary tanker schedule said, as lower shipments to China and others in Asia offset bumper exports to Europe.

    Iran was exempted from last month's OPEC deal to reduce output by 1.2 million barrels per day (bpd) starting from January, and had been expected to boost its output slightly.

    But Iran's December crude exports excluding condensate are set to fall to 1.88 million bpd, from 2.04 million bpd in November, the source familiar with its export situation said. That may be a sign it is having trouble maintaining output after the lifting of sanctions this year led to a surge in production.

    Exemption from the deal agreed by the Organization of the Petroleum Exporting Countries (OPEC) was a victory for Tehran, which has argued it needs to regain the market share it lost under Western sanctions targetting its nuclear programme.

    Compared with a year ago, Iran's December crude exports are still set to jump 81 percent as shipments to Europe resumed only in February this year, according to the source.


    Iran exports to Asia this month are set to fall 17 percent from November to 1.11 million bpd, the lowest since February, as major importers all cut their purchases except for India.

    Exports to Europe look set to rise 10 percent from November to this year's high of 767,000 bpd, topping levels seen prior to the imposition of toughened sanctions in 2012.

    Before the sanctions were enforced, Iran was exporting about 2.2 million bpd of crude each month, with Europe taking about 600,000 bpd, according to the International Energy Agency.

    Loadings headed for China in December will tumble 28 percent from November to 400,000 bpd, the lowest since October 2015.

    Japan is lifting 134,000 bpd of crude, down 1.6 percent from November, while South Korea is loading 60,000 bpd, half its November volumes.

    India - the only major Asian buyer to show growth - will load 517,000 bpd in December, up 12 percent from November and making it Iran's top buyer for the month.

    In Europe, Italy and Turkey are both lifting around 190,000 bpd, while Greece and Spain are taking around 97,000 bpd.

    Austria is loading about 1 million barrels this month, following its first purchase in years in August.

    In addition, another 161,000 bpd is heading to unspecified destinations in Europe.
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    Jera to sell LNG to UK’s Centrica

    Japan’s Jera, the joint company of Tepco and Chubu Electric and the largest importer of liquefied natural gas, signed an agreement with Centrica for the sale of up to six cargoes per year.

    The six cargoes per year will be delivered to the Isle of Grain LNG terminal in the U.K. for a period of five years starting in April 2019, Jera informed in its statement on Tuesday.

    The price of LNG sold will be linked to European gas market price, with a volume flexibility at JERA’s discretion, the statement reads.

    The Japanese company adds that it will optimize the SPA volume in cooperation with Centrica, securing flexibility to respond to LNG demand fluctuations.

    The LNG sale and purchase agreement comes following discussions based on the memorandum of understanding with Centrica on collaboration in the LNG business, in such areas as utilization of LNG terminal capacity in the U.K., joint procurement of LNG and optimization of LNG vessels.

    Earlier in September, Centrica signed a five-year deal to purchase up to 2 million tonnes of liquefied natural gas per annum from Qatargas.

    Last week, Jera informed it has made its first purchase from the U.S. mainland, loading a cargo at Cheniere’s Sabine Pass LNG terminal in Louisiana.
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    Swan Energy gets nod for start of construction of LNG terminal

    SLPL executed epc contract for marine,dredging works worth INR 21.15 billion with National Marine & Infrastructure India Private Limited

    Co gets approval from gujarat maritime board for commencement of construction of lng terminal with ancillary structures for FSRU project, GUJARAT
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    Gazprom Signs Oil Deal With Iran as Russians Return in Force

    Russian companies including Gazprom PJSC signed a raft of initial agreements with Iran that could lead to contracts worth billions of dollars, as Energy Minister Alexander Novak outlined Russia’s ambition to become a major investor in the Persian Gulf nation.

    A Russian delegation to Tehran signed nine agreements on Tuesday in industries ranging from energy to railways. Gazprom reached an unspecified accord with Iran’s state natural gas company, and its subsidiary Gazprom Neft PJSC signed a deal to study the Cheshmeh-Khosh and Changuleh oil fields. State-run Gazprom is the third Russian energy company to sign a memorandum of understanding with Iran, joining Lukoil PJSC and Zarubezhneft OAO.

    “Our priority is to develop Iran’s big projects,” Novak said at one of several signing ceremonies during the day. “These agreements will have a significant influence on the relationship between our two countries.”

    The number of foreign business delegations visiting Tehran has swelled since the easing of sanctions in January opened Iran’s $400 billion economy to global investors. Even so, many international companies have refrained from signing final deals to invest in the country as they assess risks amid sanctions that are still in place and as they wait to see what U.S. President-Elect Donald Trump and Iranian elections in May might mean for business.

    To read about Iran’s stalled investment boom, click here

    Russian investors may be able to move into Iran more quickly than Western European competitors because Russian banks are less constrained by remaining U.S. sanctions on Iran, Richard Dalton, a former U.K. ambassador to Tehran, said by phone. “Russia is better placed certainly than the U.K., France or Germany,” he said.

    OPEC member Iran has sharply boosted sales of crude oil sales since the loosening of sanctions over its nuclear program. The Organization of Petroleum Exporting Countries, which decided last month to cut its collective output to shore up prices, gave Iran an exemption and will allow the nation to boost output by 90,000 barrels a day to 3.8 million barrels a day starting Jan. 1.

    The Oil Ministry has courted international oil companies to help it meet its production targets. Royal Dutch Shell Plc signed a deal last week to assess three of Iran’s largest oil and gas fields, while Total SA reached a non-binding agreement in November for a $4.8 billion gas-development project.

    “We have significant need for capacity,” Hamid-Reza Araghi, managing director of National Iranian Gas Co., said after signing the agreement with Gazprom. “God willing, in the next one or two months, we will be able to convert these into projects and contracts.”

    Russia also signed agreements to develop the Bandar Abbas power station on the southern Iranian coast and to electrify a railway in the country’s northeast, Iran’s Information and Communications Technology Minister Mahmoud Vaezi said. Together with other agreements in trade, finance, industry, mining and agriculture, the preliminary deals could lead to final contracts with a total value of $10 billion, he said.

    Attached Files
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    InterOil Provides Update on ExxonMobil Transaction

    InterOil Corporation today provided an update on the transaction with Exxon Mobil Corporation.

    Following the previously announced decision by the Court of Appeal of Yukon to allow an appeal lodged by Phil Mulacek, InterOil’s Independent Transaction Committee (“the Committee”), consisting of four independent and experienced directors of InterOil, are undertaking a detailed and thorough review process relating to the proposed transaction, with the support of independent legal counsel and BMO Capital Markets, an independent financial advisor.

    To accommodate the new review process, ExxonMobil and InterOil have agreed to extend the outside date of the current Arrangement Agreement to the close of business on Wednesday, December 21, 2016 (New York time).

    Dr. William Ellis Armstrong, Chairman of the Committee said, “We are pleased to have reached an agreement with ExxonMobil to extend the outside date and expect to be in a position to update shareholders on the progress of our deliberations shortly.”
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    Slack data management exposed BP to high safety risk: leaked report

    Slack data management exposed BP to high safety risk: leaked report

    BP's refining operations are exposed to high safety risks that can lead to deadly accidents and pollution as a result of slack data management and a lack of investment, according to a leaked internal report from 2015.

    The report, co-authored by BP, IBM (IBM.N) and industry consultancy WorleyParsons (WOR.AX), states that the British company's refining and petrochemical business, known as downstream, is trailing rivals such as Royal Dutch Shell by up to seven years in managing information to reduce safety risks and financial losses.

    "Inadequate management and use of engineering information has been a root cause or contributing factor" in 15 percent of 500 high-risk incidents reviewed in the report, which was provided by Greenpeace.

    BP has improved its safety record since the 2010 Deepwater Horizon rig explosion in the Gulf of Mexico where 11 people were killed and which led to the largest environmental disaster in U.S. history.

    BP had no fatalities among its employees in 2014 and 2015 compared with four in 2013 and one in each of the previous two years, according to company data. Among BP contractors, there were three fatalities in 2014 and one in 2015.

    In comments on the leaked report, BP said it was "committed to safe, reliable and compliant operations. With that in mind, BP regularly conducts internal assessments in an effort to make improvements to its operations".

    "This particular report focused on potential enhancements to how BP manages engineering data. It is not an analysis of any operational incidents, and any suggestion that this report indicates BP is wavering from its safety commitment is wrong," a company spokesman said.

    The most significant incident recorded by the authors occurred in January 2014 at the 413,500 barrels per day (bpd) Whiting, Indiana refinery which cost BP $258 million in lost production. The incident at the gasoil hydrotreater unit, which removes sulphur from oil, was due to "multiple deficiencies in engineering information management".

    At the Hull petrochemical plant in northern England equipment that was not operated correctly led to losses of $35 million to $45 million.

    BP's safety record came in to focus in 2005 when a blast at its Texas City refinery killed 15 workers and injured 180 others. BP was fined $84.6 million by the U.S. Occupational Safety and Health Administration between 2005 and 2012 for safety rules violations found at the refinery in investigations following the blast.

    The report said highly material safety risk and financial performance issues remained due to "the lack of refining and petrochemicals-wide direction, governance, coordination and investment".

    The upstream segment, which produces oil and gas, has further work to do but is significantly ahead of downstream, the report said, reflecting the big focus BP has placed on safety after the Deepwater Horizon explosion.

    Greenpeace UK's senior climate adviser Charlie Kronick said in a statement that "BP's sloppy approach to a crucial aspect of safety hasn't changed".

    "The same happy-go-lucky attitude that played a role in major accidents in the past is seemingly still reflected in the management of safety information across the oil giant’s operations from rig to refinery."
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    Sinopec Said to Revive Up to $10 Billion IPO of Retail Unit

    China Petroleum & Chemical Corp., the world’s biggest oil refiner, is reviving a long-mooted initial public offering of its retail business that could raise as much as $10 billion, people familiar with the matter said.

    The state-owned oil company, known as Sinopec, has asked banks to submit proposals by this month for roles to manage a potential Hong Kong listing next year, according to the people, who asked not to be identified as the information is private. Sinopec shares jumped 4.3 percent to HK$5.86 at 10:55 a.m. Wednesday in Hong Kong, headed for the biggest gain since April.

    Sinopec’s retail operations include more than 30,500 fuel stations under its own brand as well as a network of convenience stores. It proposed a listing of the retail business in 2014, when it sold a 29.99 percent stake for 107 billion yuan ($15.5 billion) to a group of investors including China Life Insurance Co. and billionaire Guo Guangchang’s Fosun International Ltd.

    “Low crude prices and a shaky stock market in Hong Kong this year were the reasons Sinopec hasn’t tried aggressively to list,” Anna Yu, a Hong Kong-based analyst at China Merchants Securities (HK) Co., said by phone Wednesday. “It looks more reasonable now for them to try next year if oil prices rise and the appetite for IPOs recovers as many expect.”

    ‘High Expectations’

    The oil refiner’s chairman, Fu Chengyu, retired from Sinopec in May last year and was replaced by Wang Yupu, who had been deputy head of the Chinese Academy of Engineering. No final decisions have been made, and Sinopec may also decide against floating the business if market conditions are unfavorable, the people said.

    A Beijing-based spokesman for Sinopec declined to comment.

    The company’s retail gasoline sales gained 9.8 percent last year to 58 million metric tons, according to its annual report. Its non-fuel transactions jumped 45 percent to 24.8 billion yuan as it increased cooperation with Internet companies.

    “Sinopec has high expectations for the unit, as fuel stations, by any standard, are the crown jewels of all Sinopec assets,” China Merchants’s Yu said. “It generates steady cash flow and is little affected by oil-price fluctuation.”

    Growth Targets

    The retail business isn’t being properly valued within Sinopec, and some of the unit’s outside shareholders may be pushing for a listing to monetize their investments, according to Neil Beveridge, a senior analyst at Sanford C. Bernstein & Co. in Hong Kong.

    “The real profit driver in those networks is non-fuel retail,” Beveridge said by phone Wednesday. “Spinning off these businesses is a better way of enhancing the value of these assets.”

    Chinese energy giants have sold parts of their extensive pipeline assets to cut costs and meet government-set growth targets as lower oil prices hurt earnings. Sinopec said Monday it agreed to sell a 50 percent stake in a pipeline unit to investors, including China Life, for 22.8 billion yuan as it seeks funds to expand its natural gas business.
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    Oil labour shortages?

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    Bakken oil production jumps in October

    North Dakota oil production up 71K bpd in October vs September to 1.043 million bpd - state regulator

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    EIA Dec Drilling Rpt: Marcellus Production Continues Rocket Ride

    EIA Dec Drilling Rpt: Marcellus Production Continues Rocket Ride

    Yesterday MDN’s favorite government agency, the U.S. Energy Information Administration (EIA), issued our favorite monthly report–the Drilling Productivity Report (DPR).

    The DPR is the EIA’s best guess, based on expert data crunchers, as to how much each of the U.S.’s seven major shale plays will produce for both oil and natural gas in the coming month.

    For the past two reports, estimating production for November and December, Marcellus natgas has increased. The trend continues in this latest report, which forecasts production for the coming month of January.

    The October report predicted Marcellus production would increase in November by 73 million cubic feet per day (MMcf/d).

    The November report predicted Marcellus production would increase in December by 130 MMcf/d.

    The current December report predicts Marcellus production will go up by another 160 MMcf/d in January.

    Yikes! Another trend observed: four of the seven shale plays will increase production in January, one (the Utica) will produce about the same in January, and only two will produce less gas in January than they did in December. Translation: shale gas production is once again on the rise–which breaks a five month record of month over month declines across all seven plays.

    Attached Files
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    Continental Resources Reports Record STACK Meramec Well

    Continental Resources, Inc. today announced a new Company record well in the over-pressured oil window of the Oklahoma STACK play. The Angus Trust 1-4-33XH produced 4,642 barrels of oil equivalent (Boe) per day in a 24-hour test, comprised of 2,088 barrels of oil (Bo) and 15.3 million cubic feet (MMcf) of natural gas. During this initial production test, the Angus Trust flowed at 5,200 psi (pounds per square inch). Continental has a 78% working interest in the well.

    The Angus Trust well is located immediately north of Continental’s Boden 1-15-10XH in south central Blaine County. The Boden produced an initial 24-hour test rate of 3,508 Boe, 28% oil, at a flowing casing pressure of more than 5,000 psi. The Boden was Continental’s first completion in the condensate window of the over-pressured STACK. In just over a year, the Boden has produced 591,000 Boe, 26% oil. The Boden is currently producing 1,815 Boe per day, 22% oil, at a flowing casing pressure of 2,900 psi.

    “The Angus Trust is another tremendous STACK Meramec well,” said Harold Hamm, Chairman and Chief Executive Officer. “Aside from being a Company record well, it further validates our perspective of the extent of the over-pressured oil window.”

    The Company estimates its total completed well cost for the Angus Trust is $8.9 million, approximately 30% less than the Boden. The Angus Trust’s 9,500-foot lateral was completed in 36 stages, with 20 million pounds of white sand, similar to the Boden.

    December Production Exit Rate Revised Higher

    As a result of strong production in both North Dakota and Oklahoma, the Company has increased its expected production exit rate for December 2016. The Company now expects to exit 2016 with production in a range of 213,000 to 218,000 Boe per day, compared with the previous guidance range of 205,000 to 210,000 Boe per day. The Company expects to maintain approximately this production level through the first quarter of 2017.

    Attached Files
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    Callon Petroleum (CPE) to Acquire Delaware Basin Acreage for $615M

    Callon Petroleum Company (NYSE: CPE) today announced that its wholly owned subsidiary, Callon Petroleum Operating Company, has entered into a definitive agreement to acquirecertain undeveloped acreage and producing oil and gas properties for total consideration of $615 million in cash from American Resource Development LLC, American Resource Development Upstream LLC, and American Resource Development Midstream LLC (collectively, "Ameredev"). The Company intends to fund the cash purchase price with the net proceeds of an equity offering announced concurrently with the announcement of this acquisition, and with current cash balances or availability under its revolving credit facility.

    Key attributes of the Ameredev acquisition include:

    Approximately 27,552 gross (16,098 net) surface acres, centered around a contiguous position in Ward County, Texas, with additional acreage in Pecos and Reeves Counties, Texas;

    Current net production of approximately 1,945 barrels of oil equivalent per day (71% oil) for the month of October 2016 based on information provided by the seller, including production from 20 gross operated horizontal wells currently producing from the Wolfcamp and Bone Spring formations;

    Estimated delineated base inventory of 481 gross (206 net) identified horizontal drilling locations targeting the Wolfcamp A and B zones with an average lateral length of approximately 7,500 feet, including 36% of the inventory comprised of 10,000 foot laterals;

    Additional potential horizontal drilling locations from both delineated and emerging prospective zones in the Wolfcamp and Bone Spring formations;

    Established infrastructure ownership, including five salt water disposal wells and over 13 miles of gathering lines and gas lift return lines; and

    An agreement to acquire up to an additional 1,006 net acres in Ward County, mutually identified by Callon and Ameredev, if such leasehold acquisitions are consummated prior to closing of the Ameredev acquisition.

    Ameredev currently operates approximately 80% of net surface acreage and has an average working interest in operated properties of approximately 82%. On a pro forma basis, assuming the closing of the acquisition, Callon's aggregate Permian Basin position will include approximately 55,500 net surface acres concentrated in four core operating areas within both the Midland and Delaware sub-Basins.
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    Alternative Energy

    US solar generation installations set record in third quarter: GTM Research

    A record 4,143 MW of solar photovoltaics was installed in the US in the third quarter, with 3,200 MW being utility-scale PV installations, GTM Research said Tuesday in a report commissioned by the Solar Energy Industries Association.

    The previous quarterly high was in the fourth quarter of 2015, with 3,284 MW of solar installed, according to GTM.

    US solar installations drove 60% of new electric generating capacity additions in Q3 2016, a record quarterly market share, GTM said.

    "Between Q1 and Q3 2016, solar accounted for 39% of all new electric generating capacity brought on-line in the US, ranking second only to natural gas as the largest source of new capacity additions," it said.

    Total installed solar generation capacity in the US at the end of the third quarter reached 35,743 MW, up from roughly 10,000 MW three years ago, GTM said.

    The utility-scale PV market continues to be the primary driver of solar installation growth in the US, while residential rooftop installations have slowed, it said. The utility-scale segment represented 77 % of solar PV installed in the third quarter of 2016.

    "Driven by a large pipeline of utility PV projects initially procured under the assumption of a 2016 federal Investment Tax Credit expiration, the third quarter of 2016 represents the first phase of this massive wave of project completion, a trend that will continue well into the first half of 2017," said Cory Honeyman, associate director of US solar at GTM Research, in an accompanying statement.

    California, which now has 15,251 MW of solar generation, added more than 1,000 MW of utility scale in Q3, GTM said.

    GTM expects the US to install 14,100 MW of solar PV in full-year 2016, which, if reached, it said, would be 8 % above the 2015 total of 7,300 MW.

    In the fourth quarter, GTM said it believes 7,800 MW of solar will come online, with "a massive" 4,800 MW of utility PV projects making up the bulk of that quarterly total. The consultants said that 19 utility-scale projects greater than 100 MW are expected to come online in Q4.

    "More solar capacity is expected to come online in the second half of this year than has ever come online in a single year," GTM said.

    More than 50% of the original utility PV pipeline intended for 2016 has "successfully pushed out interconnection into 2017, or later," it said. This roughly 6,000 MW "spillover" of utility PV installations was enabled by the extension of the federal Investment Tax Credit, which Congress approved in December 2015.

    California's investor-owned utilities have "already procured enough renewables to meet their renewable portfolio standard obligations through the end of this decade," GTM said. "Despite dirt-cheap PPA pricing, the utility PV segment is struggling to reboot procurement given the degree of demand pull-in in 2016."

    Even with PPA pricing consistently ranging between $35/MWh and $60/MWh, utility offtakers have only partly countered the demand rollback from utilities that over-procured in the past couple of years, GTM said.

    As a result, over 70% of the 2017 utility-scale project pipeline procurement will come from entities other than utilities seeking to meet renewable portfolio standards, it said.

    Corporate customers have already procured more than 1,500 MW of so-called off-site wholesale solar for post-2016 installation dates, GTM said.
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    E.ON invests in UK start up that uses sails to harness wind power

    German energy group E.ON has invested in a British start-up business that uses sails instead of rotors to harness wind energy.

    Kite Power Solutions (KPS) secured 6 million euros ($6.36 million) in a fresh funding round that, apart from E.ON, included oil industry services company Schlumberger and Royal Dutch Shell, E.ON said on Tuesday.

    A spokesman declined to say how the funding was divided up.

    KPS's technology generates energy from wind by flying sails comparable to the ones used in kite surfing in altitudes of up to 450 meters (1,476 ft), which is much higher and far less expensive than current wind turbines.

    "We catch the opportunity to be a first mover in producing renewable energy at locations where it is for economic and technical reasons not possible today," Frank Meyer, senior vice president at E.ON's B2C & Innovation unit said.

    The move is part of a broader trend in the energy industry, where pressures to shift away from fossil fuel-fired power plants has triggered a race to develop new technologies that companies hope can help transform the industry.

    E.ON, Germany's second largest energy group after Innogy, has so far invested in more than a dozen startups in the United States, Europe and Australia.
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    Monsanto shareholders back Bayer deal, CEO hopeful of U.S. approval

    Shareholders of U.S. seeds and agrochemicals company Monsanto Co approved the company's $66 billion acquisition by Bayer AG on Tuesday, a deal that still requires regulatory approval to close as expected in late 2017.

    Increased research and development spending by the combined companies and plans to develop a global seeds and biotechnology hub in St. Louis fuel hopes regulators will not block the deal, which was agreed upon in September, Monsanto CEO Hugh Grant said.

    "I think those augur well for the deal," he told Reuters in an interview.

    If the deal closes, it will create a company commanding more than a quarter of the combined world market for seeds and pesticides in the fast-consolidating farm supplies industry.

    Uncertainty about whether President-elect Donald Trump would stand in the way of large mergers after taking office in January has clouded the outlook of some deals. Trump vowed during his campaign to block AT&T Inc's (T.N) purchase of Time Warner Inc (TWX.N) and look to break up Comcast Corp's (CMCSA.O) deal to buy NBC Universal, citing too much concentration of power.

    The president does not directly decide if a merger is illegal under antitrust law. That is done by the U.S. Justice Department or Federal Trade Commission, which divide up the work of assessing mergers. If one of the agencies decides to stop a deal, it must convince a judge to agree.

    Grant said he has not met with Trump or any of his transition team and did not elaborate on how the company was working to secure the deal.

    The acquisition came after a string of large mergers that have roiled the agribusiness sector in the last year or so, including ChemChina's purchase of Swiss chemicals company Syngenta AG (SYNN.S) and a merger of Dow Chemical and DuPont.

    DuPont's chief executive, Ed Breen, said last week the incoming Trump administration is not likely to have an impact on his company's merger with Dow Chemical.
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    Precious Metals

    De Beers diamond sales tempered by India's cash crackdown

    Anglo American's latest De Beers diamond sale showed that demand had slowed after India's withdrawal of high-value banknotes, though it was higher than during the commodities slump of a year ago, the company said on Tuesday.

    Prime Minister Narendra Modi's decision to scrap old 500 rupee ($7.40) and 1,000 rupee banknotes as part of a crackdown on tax evasion and counterfeiters has dented consumer spending in a country where most people are paid in cash and buy what they need with cash.

    Anglo American said that rough diamond sales for De Beers' final sale of the year amounted to $418 million, compared with $476 million for the previous sales cycle this year.

    The last sale of 2015 brought in $248 million.

    "While the trade in lower-value rough diamonds is experiencing a temporary slowdown as a result of the demonetisation programme in India, demand across the rest of the product mix continued to be healthy," De Beers' CEO Bruce Cleaver said.

    He had previously said that the second half of the year would be tougher after a recovery in the first six months as jewellers restocked following Christmas sales.

    Anglo American has put its De Beers diamond business at the centre of its strategy of focusing more sharply on high-value commodities, rather than bulk assets.

    India is the third-biggest diamond jewellery market behind the United States and China, accounting for about 8 percent of global demand.

    Typically, Indians purchase jewellery in cash and many do not have credit cards. In addition to withdrawing high-value notes from circulation, the government has also capped daily withdawals from cash machines at 2,000 rupees.

    London-listed Gemfields said at the start of December that it was postponing the auction of predominantly higher-quality emeralds from its Kagem mine in Zambia to February because of the banknote crackdown and accompanying hit to consumer spending.
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    Base Metals

    Regulator approves expansion of Antofagasta's Centinela mine in Chile

    Antofagasta Minerals said on Monday that environmental regulators approved a proposed expansion of its Centinela mine in northern Chile, opening the door for a $4.35 billion investment by the Chilean copper mining company.

    The expansion project, which is set to be rolled out in two stages, would double Centinela's copper output to over 400,000 tonnes a year.

    "With environmental approval, we will be completing the engineering studies in the coming months," Antofagasta Chief Executive Ivan Arriagada said in a statement.

    "We hope to submit this project to the board of Antofagasta in 2018 once these studies are done. The final authorization to bring this project about will depend on the required investment ... and the possibility of securing financing for its construction, aspects which we are currently working on."

    The expansion would extend the life of the mine to 2056.
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    Japanese auto aluminium suppliers wary of boom in electric motor-driven car sales

    Japanese diecasters and secondary aluminium alloy smelters are closely following the progress of Nissan Motor's electric passenger vehicle Note ePOWER, which has become a best seller in November -- the month of its launch, sources said Tuesday.

    The Note ePOWER was launched on November 2, and 15,784 units of the model were sold in that month making it the highest selling car model in the country, according to Japan Automobile Dealers Association.

    "The boom of Note suggests that motor-run electric vehicles will become popular faster than we initially thought, and that engines will become obsolete. We, diecasters, need to start thinking about survival," said one diecaster source.

    Note comes with a gasoline engine made of secondary aluminium alloys, and a motor. The car does not have any transmission components.

    The engine generates electricity that drives the car by running the motor, sources said.

    A typical Japanese car consumes at least 80 kg of ADC alloys, mainly for the engine and transmission components, according to industry data.

    "Requirement of auto diecasting alloys will decrease as the alloy is used predominantly for engine and transmission parts. More cars will have a motor rather than an engine, and ADC will be used for small motor components," said one Japanese trader.

    The other top selling car models in Japan during November were hybrid passenger vehicles which have a gasoline engine and a motor.

    Toyota Motor's hybrid passenger vehicle, Prius, with a gasoline engine and a motor, came in second, selling 13,333 units, and Aqua, a hybrid Toyota car, came in third selling 12,409 cars, and the fourth was Sienta, also a Toyota hybrid car.

    "The Note model selling better than hybrid vehicles will likely to trigger other Japanese automakers to speed up releases of electric vehicles with no engines," the diecaster added.

    But automakers are under greater pressure to make lighter cars. There are car components made of steel and other material that could be replaced by aluminium, sources said.

    Attached Files
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    Steel, Iron Ore and Coal

    China Jan-Nov coal industry FAI continues to improve

    China's fixed-asset investment (FAI) in coal mining and washing industry amounted to 276.4 billion yuan ($40.06 billion) over January-November, with the year-on-year fall further narrowing 0.4 percentage points from a month ago to 23.2%, showed data from the National Bureau of Statistics (NBS) on December 13.

    Private investment in the sector stood at 168.8 billion yuan, falling 16.5% year on year, compared to a drop of 17.8% a month ago.

    During the same period, fixed-asset investment in all mining industry in the country posted a yearly decline of 20.2% to 919.9 billion yuan; of this, private investment in mining industry stood at 567.6 billion yuan, dropping 12.1% from the previous year.

    Meanwhile, the total fixed-asset investment in ferrous mining industry in the first eleven months witnessed a yearly drop of 29.1% to 90.5 billion yuan; while that in oil and natural gas industry dropped 33.9% on year to 186.9 billion yuan, according to the NBS data.

    The fixed-asset investment in non-ferrous mining industry stood at 134.6 billion yuan during the same period, down 9.0% from the year-ago level, data showed.
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    Beijing mulls ban on coal trucks, storage in Tianjin in smog fight

    Beijing's environmental watchdog is considering a ban on the use of trucks to transport coal and closing coal storage facilities in Tianjin, one of China's busiest ports, a researcher with the agency said, in what would be a drastic move to tackle smog.

    The city's Environmental Protection Bureau has not made a formal proposal to the municipal government of Tianjin, Zhou Yangsheng, researcher with the agency told a coal industry briefing on late Monday.

    He did not give an estimate on when a decision might be made on the move.

    If implemented, it would be the latest in a series of extreme steps taken by the capital city government to cut air pollution in and around the smog-plagued capital Beijing.

    The area surrounding the capital and its neighbor Tianjin in Hebei province is the most polluted in the world's second-largest economy despite mounting efforts to control traffic and shut down coal-fired power plants and steel mills.

    Tianjin port, China's second largest by cargo volume, is the key hub for trading 100-million-tonnes a year of sea-borne coal and domestic coal that flows south from Inner Mongolia.

    The proposal could reduce coal volumes at Tianjin by as much as 43 million tonnes, incurring a loss of 400 million yuan ($58 million) for the city, Yangsheng said, although ports in other parts of China would take the lost business.

    Closing storage facilities and prohibiting trucks would also likely force shippers and traders to find alternative routes and modes of transport, like rail.

    The municipal government of Tianjian did not respond to a request for comment on the proposal.

    Attached Files
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    Coal vessel queue at PWCS terminals rises to 4-wk high

    The vessel queue at the Port Waratah Coal Services terminals at Australia's Newcastle Port rose for the third consecutive week to a four-week high of 26 ships on December 11, Platts reported on December 12, citing the logistics coordinator for the Hunter Valley coal chain.

    The queue grew by four ships from 22 a week earlier, and is 11 ships more than the year-to-date average of 15 vessels, data collected from the Hunter Valley Coal Chain Coordinator's weekly reports showed.

    HVCCC does, however, expect the queue to fall to just six ships by the end of the month -- based on terminal demand, it said.

    Inbound receivals to PWCS were 3.50 million tonnes for the week ended December 11, down slightly from 3.60 million tonnes in the previous week. Port Waratah coal stocks finished the week at 2.13 million tonnes, up by 426,000 tonnes week on week, it said.

    The Port Kembla Coal Terminal had zero ships either queuing or assembled on the same day, which is down from two queuing and two assembled a week earlier, the port operator said.

    Exports from PKCT have picked up with 323,218 tonnes sent in the past seven days, compared with approximately 115,793 tonnes per week in November.

    The Dalrymple Bay Coal Terminal didn't have any ships loading on December 12, down from two a week earlier, and the number of coal vessels at anchor rose by four ships to 20 week on week, which is more than double the average queue of nine throughout November, figures from DBCT Management showed.

    The RG Tanna Coal Terminal at Gladstone Port also saw a rise in queue numbers. It had three ships at berth and 15 at anchor, up from four at berth and seven at anchor a week earlier, and an average of eight at anchor throughout November, the Gladstone Ports Corporation said.
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    CNX Coal expects increased sales in 2017-18 as market recovers

    CNX Coal expects increased sales in 2017-18 as market recovers

    CNX Coal Resources expects sales volumes to increase in 2017 due to strengthening coal markets both in the US and abroad, it said Tuesday.

    The Canonsburg, Pennsylvania-based company said in an investor presentation that it expects coal sales of 6.25 million to 6.75 million st in 2017, up from 5.9 to 6.1 million st in 2016. For 2018, the company also expects sales volumes of 6.25 million to 6.75 million st.

    The company said it expects to gain from the recent pricing recovery due to a combination of unsold coal, unpriced/collared coal, and the fact that roughly 15%-20% of the company's sales are linked to power prices.

    In addition, the company said for the coming year it expects a 5%-10% improvement in average revenue per ton and flat to low-single-digit increases in cost of coal sold compared with 2016.

    In the third quarter, the company reported an average sales price per ton sold of $44.30/st, and operating cash cost per ton sold of $29.29/st.

    CNX Coal owns 25% of the Bailey, Harvey and Enlow Fork mines in western Pennsylvania, with the remainder held by Consol Energy, which spun off CNX Coal in July 2015.
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    Hebei slashes 33.85 Mtpa surplus steel capacity

    Hebei province, a giant steel producer in northern China, slashed 33.85 million tonnes per annum (Mtpa) of surplus steel capacity by the end of November, said the provincial Development and Reform Commission on December 8.

    Steel makers from eight cities – including Tangshan, Handan, Qinhuangdao among others – contributed to the province's de-capacity campaign.

    A total of 15 steel enterprises in Tangshan cut 15.69 Mtpa of steel capacity during the same period, with Hebei Iron and Steel Group cutting 2.45 Mtpa.

    Handan followed with nine firms cutting 8.15 Mtpa of excess steel capacity. Qinhuangdao and Xingtai shed 3.52 Mtpa and 2.72 Mtpa of steel capacity, respectively.

    China has finished the 2016 de-capacity target of 45 Mtpa in steel industry ahead of schedule, according to Xu Kunlin, vice secretary general of the National Development and Reform Commission.
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    US Southeast rebar prices move up further on mill hikes

    Recent price hikes issued by US rebar producers continued to show strength in the market this week as higher offers were heard in the US Southeast, according to market sources.

    "We are seeing the increases that were announced having an impact on the market," a fabricator in the region said.

    At the start of the month, Nucor, Gerdau Long Steel North America, Steel Dynamics Inc. and Commercial Metals Co. independently announced $25/st increases on rebar transaction prices, effective with new orders December 2. The increases mark the third round of price hikes in as many months. US producers previously raised rebar prices $30/st in November and $20/st in October.

    Offers from domestic mills for rebar were heard as high as $540/st ex-works in the Southeast Tuesday, however others said this would only represent the high end of the current price range. Others put pricing closer to $520-$530/st ex-works.

    S&P Global Platts on Tuesday raised its daily US Southeast rebar assessment to $520-$540/st ex-works, up from $510-$520/st.

    The mills do not seem to have an abundance of stock on the ground, which is helping higher prices to stick, said a distributor in the region. However, the fabricator said while mills may have closed rollings for the remainder of the year, they still seem to have enough inventory on hand to satisfy demand.

    Higher import pricing is also continuing to have a positive impact on the domestic rebar market, sources said. After offers soared in recent months, Turkish pricing has peaked at $460/mt CFR Houston ($423/st CIF), the distributor said, however nothing really firm is currently being offered for March arrivals.

    Platts on Tuesday raised its daily US imported rebar assessment to $413-$423/st CIF Houston, up from $404-$413/st CIF.

    Domestic rebar pricing will likely stay relatively stable approaching year-end due the typical seasonal slowdown associated with the holidays, sources said, but there could be another increase in January if the current increase holds and scrap prices rise again as expected.

    "With scrap gearing up to go even higher there is a possibility rebar could go up again, but I don't think the current increase is stable enough to see another increase before then," the fabricator said.
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