Mark Latham Commodity Equity Intelligence Service

Tuesday 29th March 2016
Background Stories on www.commodityintelligence.com

News and Views:

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    Macro

    China's next stimulus.

    http://www.newtimes.co.rw/section/article/2016-03-28/198416/

    In this context, China is not facing a choice between Keynesian stimulus or supply-side reform, but rather a challenge in balancing the two. In order to avoid a hard landing that would make structural adjustment extremely difficult to implement – not, it should be noted, to prop up growth – another stimulus package that increases aggregate demand through infrastructure investment is needed. Given that China’s fiscal position remains relatively strong, such a policy is entirely feasible.

    The new stimulus package should be designed and implemented with much more care than the CN¥4 trillion ($586 billion) package that China introduced in 2008. With the right investments, China can improve its economic structure, while helping to eliminate overcapacity.

    The key will be to finance projects mainly with government bonds, instead of bank credit. That way, China can avoid the kinds of asset bubbles that swelled in the last several years, when rapid credit growth failed to support the real economy.

    To accommodate this approach, the People’s Bank of China should adjust monetary policy to lower government-bond yields. Specifically, it should shift the intermediate target of monetary policy from expanding the money supply to lowering the benchmark interest rate. Needless to say, in order to uphold monetary-policy independence, China has to remove the shackles from the renminbi exchange rate.

    Structural adjustment remains absolutely critical to China’s future, and the country should be prepared to bear the pain of that process. But, under current circumstances, a one-dimensional policy approach will not work.

    Expansionary fiscal policy and accommodative monetary policy also have an important role to play in placing China on a more stable and sustainable growth path.

    Yu Yongding served on the Monetary Policy Committee of the People’s Bank of China from 2004 to 2006.


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    China Beige Book Reveals Employment Plunges To 4-Year Low, Capex Worst In History


    Back in December, New York-based China Beige Book Internationalreleased what they called a “disturbing” set of data that pointed to pronounced weakness in the Chinese economy.

    “National sales revenue, volumes, output, prices, profits, hiring, borrowing, and capital expenditure were all weaker than the prior three months,” the firm - whose CBB is modeled on the Fed’s survey of US economic conditions and is supposed to provide a more objective assessment of China’s economic health than the goal seeked figures that emanate from the NBS - remarked.

    In the three months since the CBB’s last report, we haven’t seen a whole lot in the way of positive data that would have caused us to believe that things are looking up. Exports, for instance, cratered more than 20% in RMB terms last month and 25% in USD terms - the third worst performance in history.

    Sure enough, the CBB’s latest quarterly read on the Chinese economy betrays more pervasive problems including a persistent lack of hiring and a disheartening dearth of capex. “Only 33% of firms reported capital expenditure growth in the first quarter, the lowest in the survey's five-year history,” Reuters reports, adding that “the share of firms reporting capex growth has fallen by over 40 percent since the second quarter of 2014.”

    The CBB’s survey, which includes 2,200 companies and 160 bankers, showed that although profits have risen, hiring has collapsed to a four-year low and that poses a very real problem for the Party which is perpetually concerned with optics. “The weakness in the job market hits at a paramount concern for the Chinese Communist Party,” WSJ notes, before quoting CBB president Leland Miller, who said the following in the report:

    “The party cares very much about the state of the labor market. The first quarter may therefore be one of the rare occasions when investors see the data and react mostly with relief, while the results cause some mild panic back in Beijing.”

    http://www.zerohedge.com/news/2016-03-28/employment-plunges-4-year-low-capex-worst-history-china-beige-book-reveals

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    China mutual funds turn to commodities, bet on reforms


    China's mutual fund industry is pushing to develop investment products linked to local commodity futures, betting that plans to fight chronic oversupply in the country's mammoth resource sector will drive up prices for raw materials.

    The funds want to branch out beyond their traditional focus on stocks and fixed-income, with no immediate upturn in sight in the wake of turmoil last year that pulled down share markets by nearly 50 percent and forced bond yields to multi-year lows.

    But a government campaign to streamline China's bloated mining industries and crimp supply that has dragged on global commodity markets has buoyed hopes of an enduring recovery in prices of materials such as iron ore and copper, burnishing their appeal to fund managers.

    Inflows from China's mutual fund industry, estimated to have managed 8.4 trillion yuan ($1.3 trillion) by the end of last year, could be a major boost to liquidity in one of the world's largest commodity futures markets, which had transaction values totaling 136.5 trillion yuan in 2015.

    That would ramp up the pricing power of the top consumer of most raw materials at a time when Beijing is looking to increase its sway in international markets.

    "Investors have a growing appetite to diversify their investment destination after the stock market crash, and believe commodities are good assets as China is pushing for capacity-cut reform that will be favorable for raw materials," said Fang Shisheng, a senior official with Orient Futures in Shanghai.

    Shenzhen-based UBS-SDIC Fund Management in August 2015 launched the first Chinese mutual fund product to invest in local commodities, linked to silver futures on the Shanghai Futures Exchange.

    Other funds are now waiting for regulatory approval for similar steps. They include Fortune SG Fund Management, which a company official said was planning a fund that tracks Shanghai copper futures SCFcv1, and Huatai-Pine Bridge Investments, which wants to start a fund to track an index of several agricultural futures.

    Huang Lei, a marketing manager at Beijing-based Harvest Fund, told Reuters the company is also weighing the launch of a commodity product, though nothing has been set in stone.

    Meanwhile, a manager with Wanjia Asset said the Shanghai-based firm was preparingapplication materials to begin a fund that tracks a commodities futures price index, without giving more detail.

    "Commodities futures markets have been very hot these days while there are very few opportunities in other markets, so mutual funds are looking into commodities," she said.

    SURGING TRADE

    Several commodity markets around the world have recovered this year, with Dalian iron ore futures DCIOcv1 rallying more than 35 percent since early January and oil futures LCOc1 climbing back near $40 a barrel after plunging below $30.

    For the first two months of this year, total ShFE trading volumes surged about 50 percent, with volumes on the Dalian Commodity Exchange shooting up over 85 percent.

    But some futures brokers warned that Chinese mutual funds would need time to understand commodity futures and to hire experienced traders.

    "The trading of commodities futures is different, requiring strong risk control skills ... but it's becoming a trend for mutual funds to participate in the arena too," said a futures broker who speaks to funds.

    Others saw such diversification as inevitable.

    "Taking the longer view, I ... see the development of new commodity investment funds as the continued and necessary diversification of investment products in China - a process that will continue for many more years," said John Browning, managing director of Hong Kong-based Bands Financial.

    http://www.reuters.com/article/us-china-funds-commodities-idUSKCN0WT0QX

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    Central Banks: exhaustion?

    Image title
    Danielle DiMartino Booth, President at Money Strong, LLC; Former Advisor, Federal Reserve Bank of...
     
    A former Fed official says the U.S. economy's out of tricks. Here's what we're facing.
     

    ECB's Draghi plays his last card to stave off deflation

    Kuroda Negative Rate Bazooka Fizzles on Overnight Lending Freeze





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    Signs of Life.

    Image titleImage titleImage title
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    Brazil party set to abandon Rousseff, eyes presidency


    Brazil's largest party will decide on Tuesday to break away from President Dilma Rousseff's floundering coalition, party leaders said, sharply raising the odds she will be impeached amid a corruption scandal.

    The fractious Brazilian Democratic Movement Party (PMDB) will decide at its national leadership meeting on the pace of disengagement from the Rousseff administration, in which it holds seven ministerial posts and the vice presidency.

    A formal rupture appears inevitable and will increase the isolation of the unpopular Rousseff, freeing PMDB members to vote for her impeachment.

    That makes it likely she will be temporarily suspended from office by Congress by early June and replaced by Vice President Michel Temer, leader of the PMDB, while the Senate decides if she should be permanently ousted.

    Temer aides said the vice president is ready to take over and move fast to restore business confidence in Brazil, in an effort to pull Latin America's largest economy out of a tailspin. Brazilian media reported over the weekend that a team of Temer aides is drawing up a plan for his first weeks as president.

    "On Tuesday we will be disembarking from this government. The vote for independence will win," PMDB Senator Valdir Raupp, who until recently had backed Rousseff, said by telephone.

    Raupp said PMDB ministers would have to resign or leave the party, though a gradual withdrawal from those posts may take place as a compromise to keep the party united.

    Party officials calculate that between 70 to 80 percent of the 119 voting members of the directorate will vote to end the PMDB's alliance with Rousseff and her Workers' Party. One told Reuters that 75 had already pledged to do so.

    Rousseff, a former Marxist guerrilla who is Brazil's first female president, has vigorously denied any wrongdoing and rejects impeachment charges that she manipulated government spending accounts to help her re-election in 2014.The impeachment process only adds to the crisis that has hit Brazil, shaken to the core by its biggest ever corruption scandal - an investigation into political kickbacks to the ruling coalition from contractors working for state oil company Petrobras.

    An attempt by Rousseff to appoint Lula to her Cabinet was the last straw for many of her allies who saw it as a desperate move to shield him from prosecution by a lower federal court that is overseeing most of the Petrobras case, a view fed by a wiretap recording of a conversation between them.

    Brazil's top court is expected to decide later this week if Lula can indeed become a minister. If he is allowed, that means that only the Supreme Court can put him on trial under Brazilian law.

    HEADING FOR EXIT

    "The latest events make it very difficult for us to continue supporting the Workers' Party government. The feeling among the party rank and file across the country is that we should leave," said Jorge Picciani, leader of the PMDB in Rio de Janeiro, which had been a bastion of support for Rousseff until recent days.

    Picciani said all but two of Rio's 12 voting delegates were in favor of quitting Rousseff's coalition.

    The departure of the PMDB is expected to lead other smaller parties to bolt from the governing coalition, a domino effect that will further undermine Rousseff's ability to muster one third of the votes in Congress needed to block her impeachment.

    The two largest, the Progressive Party (PP) and the Republican Party (PR), each with 40 seats or more in the lower chamber, have signaled that they are leaving.

    Temer is already looking at ways to cut public spending to tackle a widening fiscal gap that cost Brazil's its investment grade credit rating, the O Estado de S.Paulo newspaper reported on Sunday.

    It said a small team of aides led by Wellington Moreira Franco, Rousseff's former civil aviation minister, is considering sweeping welfare cuts in social programs that would be carried out by the finance minister of a Temer government.

    Two names under consideration for that job are former central bank governors Henrique Meirelles and Arminio Fraga, the newspaper said. A spokesman for Temer declined to comment on the report.

    http://www.reuters.com/article/us-brazil-politics-idUSKCN0WU1AC

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    Global trade and 3D printers.

    The flow of digital information around the world more than doubled between 2013 and 2015 alone, to an estimated 290 terabytes per second, McKinsey says. That figure will grow by a third again this year, meaning that by the end of 2016 companies and individuals around the world will send 20 times more data across borders than they did in 2008 ...Image title

    It is already in evidence at major companies like General Electric, which is using 3D printers to make fuel nozzles for jet engines and expects its aviation unit to be manufacturing 100,000 parts using the technology by 2020. Such innovations bring closer the day when companies make much greater use of the capacity to receive equipment not by container ship, but by a digital set of orders destined for a 3D printer.
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    The Cloud comes of age.

    It has been reported that by 2018, the global market for cloud equipment will reach $79.1 billion. Having burst onto the tech scene in 2006, the “cloud” — as IT leaders, programmers, and marketers know it today — is almost a decade old. From Google Docs to Dropbox, Web-connected humans are glued to the cloud every minute, of every day.
    Image title

    CAD and its associated computer-aided manufacturing (CAM) have typically been on-premises, not remote, systems because of the highly detailed and voluminous designs they must work with. The Engineering Cloud will use a Fujitsu technology, Remote Virtual Environment Computing (RVEC), for high-speed display of virtual desktops developed by Fujitsu Laboratories. RVEC can compress images at high speed and decompress them in the user display, allowing a cloud-based CAD/CAM solution, the spokesmen said.

    One goal of the Engineering Cloud is to allow large and small manufacturers to escape the constraints of PC desktops and use larger cloud-based systems without needing to invest in them directly. If such systems were available from a cloud supplier, then small manufacturers could share data across engineering teams and product designers, regardless of where they were located. Such a move could speed products to market if there was no need to set up common systems between distributed team members. Fujitsu also will supply a product lifecycle management system and a parts database as components of its offering.

     A new IBM Center for Applied Insights study, “Growing up Hybrid: Accelerating Digital Transformation,” revealed an elite group of front-runners achieving business benefits at a higher rate than other organizations. These pack leaders are leveraging hybrid cloud to drive digital change, spring-boarding them into next-generation initiatives such as Internet of Things (IoT) and cognitive computing.

    Thanks to very simple programming, applications can connect to support the swift and efficient flow of information ranging from product SKUs to media buys, CRM data, and credit card transaction details.

    “Cloud based APIs and microservices simplify information exchange,” says Chris Hoover, global vice president of product and marketing strategy at Perforce Software. “It lowers the barrier for new vendors to enter the market.”

    The result, according to Hoover, is a trend in which enterprise companies are moving away from a ‘top down’ approach to software and information exchanges


    Milestones and achievements in 2015 include:

    • A 10x increase in shipments processed by the TMS solution and corresponding 800% increase in corporate revenue. Likewise, there has been a six-fold increase in the number of shippers participating in the Cloud Logistics network.




    Image titleWhat’s important to keep in mind, according to Bolander, is that the tech community isn’t looking at the cloud from a cost-savings perspective anymore. Rather, the cloud has evolved into a tactical advantage for businesses looking to scale strategically.

    There’s an expectation that things should be easy, and it has to be real-time information.We have to integrate all those things and operate at the speed at which the business runs.”

    Once a company starts moving IT into a third-party data center, it’s only a matter of time before entire business processes start heading in that same direction. Once business process outsourcing starts to occur in volume, it becomes apparent pretty quickly that one smaller group of people in the cloud can automate a process or task that used to be performed by 10 times as many people working in 10 different companies. As that trend continues, it’s not like those jobs moved somewhere and will come back one day; they just simply disappeared into the cloud.

     The truth is that no Washington, Brussels or Beijing is offering the kind of leadership required to address these issues. That doesn’t necessarily mean the economic sky will fall tomorrow, but regardless of what anybody stumping for votes thinks you might want to hear, it’s hard to see how things are going to get dramatically better anytime soon. And it’s even easier to see how regardless of who gets elected, preparing for things to get worse before they get better might be a really good idea.



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    The New Economy's answer to infrastructure.


    Image titleThe Hyperloop is a futuristic mode of transportation that consists of passenger pods traveling through tubes at speeds of more than 500 miles per hour. And the first one is being built currently in the desert, north of Las Vegas, Nevada.


    According to the Proposition 1A Bond Act, the high-speed rail project has to be  financially viable; trains have to operate (without subsidy) every five minutes in either direction during the day; and funds for each segment of the route need to be identified before work on the leg in question can commence. Above all, trains have to make the 520-mile (840-km) journey between the Los Angeles basin and the San Francisco in two hours and 40 minutes, reaching speeds of 220 mph (350 kph). As for ridership, the rail authority reckoned some 65m to 96m passengers per year would be travelling the route by 2020. The basic fare was to be $55 one way.
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    CRB ETF closes

    Investment Objective

    The ETF seeks investment results that replicate as closely as possible, before fees and expenses, the price and yield performance of the Thomson Reuters CRB Commodity Producers Index (the "Underlying Index").

    Investment Strategies

    The fund, using a low cost "passive" or "indexing" investment approach, seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the Underlying Index. The Fund will normally invest at least 80% of its total assets in the equity securities that comprise the Underlying Index and depositary receipts based on the securities in the Underlying Index.

    Description

    The Global Commodity Equity ETF (the “ETF” and "CRBQ") is an Exchange Traded Fund (“ETF” and “Fund”) which provides exposure to the equity securities of a global universe of listed companies engaged in the production and distribution of commodities and commodity-related products and services in the agriculture, base/industrial metals, energy and precious metals sectors.

    The Global Commodity Equity ETF Provides the Following Features:

    • Potential Inflation Protection: An increasing money supply, a weakening U.S. dollar, and a lack of investment in overall commodity infrastructure may contribute to an increase in the rate of inflation. Because commodity prices have tended to rise during inflationary times, investors have generally regarded commodities as protection against a decline in the purchasing power of paper currency.
    • Portfolio Diversification: Adding commodity equity exposure to a conventional investment mix of stocks and bonds may improve overall portfolio diversification, thus lowering risk and increasing the potential for enhanced long-term, risk-adjusted returns.Diversification, however, does not eliminate the risk of experiencing investment loss. This ETF does not invest directly in commodities.
    • Participation in Global Demand for Commodities: Emerging markets such as India and China have growing middle and upper classes, which are demanding products and services they once could not afford. Commodity production is limited by the availability of finite resources and by the time and capital needed to bring supplies to market. CRBQ potentially allows investors to benefit from these trends by offering exposure to the equities of commodity producing companies.
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    China’s energy guzzlers Jan-Feb power use down 10.1pct on yr


    Power consumption of China’s four energy-intensive industries dropped 10.1% on year to 244.1 TWh over January-February, accounting for 27.9% of the nation’s total power consumption, the China Electricity Council (CEC) said on March 21.

    Of this, the ferrous metallurgy industry consumed 67.1 TWh of electricity over January-February, falling 18% year on year, compared to the drop of 5.4% from the previous year; while the non-ferrous metallurgy industry used 71.9 TWh of electricity, down 11.8% year on year, compared a 3.5% growth from the year prior.

    The chemical industries consumed 67.9 TWh of electricity during the same period, up 3.3% year on year, lower than a 2.6% growth a year ago; while power consumption of building materials industry dropped 12% year on year to 37.2 TWh, compared to a 5.8% rise a year ago.

    http://en.sxcoal.com/0/143257/DataShow.html
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    China pushes for mandatory integration of renewable power to grids


    China has ordered power transmission companies to provide grid connectivity for all renewable power generation sources and end a bottleneck that has left a large amount of clean power idle, the National Energy Administration (NEA) said in a statement on March 28.

    http://en.sxcoal.com/0/143461/DataShow.html
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    Oil and Gas

    Oil charts: Summary.


    Image titleImage titleUS demand responds to price. (Wish we could say the same of emerging!)
    Image titleEIA expectation on the US shales. Too pessimistic?
    Image titleCrude supply contracting now
    Image titleStorage cliff.


    Initial frac jobs were just 3,000 foot laterals with just 5 stages. Water and proppant volumes were a fraction of what it is today. Although less complicated, costs were significantly higher. These very small jobs took much longer than complex well designs of today. Many thought unconventional liquids production wouldn't be economic for decades, but costs decreased. Without high oil prices, the exploration phase would have been much slower.
    Image title
    Shale's sorted by the bond market!

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    Saudi losing market share.

    Saudi Arabia lost market share in more than half of the most important countries it sold crude to in the past three years, even as the kingdom increased output to record levels.


    Image titlehttps://next.ft.com/content/5e8c1d52-f19f-11e5-aff5-19b4e253664a

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    China crude oil stockpile up 1.08 pct, gasoline drops diesel surges


    China's commercial crude oil stocks increased 1.08 percent in February over January, while stocks of refined oil products went up 17.34 percent, data monitored by Xinhua News Agency showed on Monday.

    Last month, China imported 31.72 million tonnes of crude oil, according to the report.

    Gasoline stocks dropped 7.23 percent as the travelling peak during the China New Year holiday fueled demand. Diesel stocks increased 38.26 percent due to factories shutting down during the holiday, according to the report.

    Kerosene stocks gained 7.51 percent, said the report.

    http://en.chinamining.com.cn/News/2016-03-29/1459216827d75850.html
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    Seadrill extension: $58k a marginal day?

    Seadrill's (NYSE: SDRLlatest contract attracted a lot of attention here on SA. Fellow contributor Fun Trading stated that the new contract or contract extension was a positive and should be celebrated. On the contrary, Henrik Alex called the contract a disaster for the industry.

    I recently applied the lower-for-longer day rate scenario for Seadrill and used day rates of $250,000 for semis and drillships. Now, with this new and important piece of information, it's time to reevaluate my previous thoughts.

    So, what was the day rate for West Tellus?

    There are two ways how you may look at the problem. The first one is to calculate the reduced day rate for the previous contract and the new day rate for the contract extension. You will get a day rate of $300,000.

    The second way to evaluate the contract is to divide the net effect on the backlog on the number of added working days, which will leave the previous day rate intact but the new day rate will be roughly $58,000. The numbers are very different and the reaction is also different depending on which method you use.

    Naturally, bulls will point to the $300,000-day rate and tell that this was a win for Seadrill. After all, this day rate is above bearish expectations for this part of the industry cycle. Bears will point to the day rate of $58,000 - a number that does not require much commentary. In my view, the correct answer depends on what question you ask.

    If you are interested in what exact day rate Seadrill got for an extension of the contract - the day rate is $58,000. The company had a contract in place with a good day rate, but decided to prolong the contract at the expense of the day rate.

    Why did Seadrill sign the contract?

    At first glance, the contract makes no sense at all. Why go for a blend and extend contract if your additional day rate is $58,000 and you lock your rig for 18 months? If we assume stacking costs of around $35,000 per day and operating costs of $130,000 (I think I'm using rather optimistic numbers), the rig would have been better off waiting for a new job. Under current contract, West Tellus will be losing $72,000 per day instead of losing $35,000 per day if it were warm stacked.

    The difference between two options is $37,000 per day, which accrues to $20.3 million over the 18-month period. Even if stack costs are higher for West Tellus, the decision still makes no sense. After all, the rig would have had 18 months to get a new job. The initial contract ended in April 2018, so the rig had time to search for the job up until 2020 before the decision to stack would bring more losses than the decision to extend the contract. Is Seadrill so bearish on the industry that it does not believe that West Tellus will be able to find work until 2020 after it finished working for Petrobras (NYSE: PBR)?

    In my view (and this is speculation, of course), Petrobras threatened to cancel the existing contract and the terms of cancellation were not favorable to Seadrill. This is the only possible logical explanation why Seadrill agreed to this losing blend and extend deal. Otherwise, Seadrill's actions make no sense at all.

    The previous contract was a disaster, but the new one is a full-blown Armageddon. The worse scenario would be to work for Petrobras for free. The news is bearish for both Seadrill and the industry. I expect that we will see similar renegotiations in the future.



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    ExxonMobil 'eyes Eni Mozambique stake'


    US supermajor ExxonMobil is looking to take a sizeable stake in Italian operator Eni’s Area 4 gas-rich acreage off Mozambique, according to a report.

    The Irving, Texas-based giant is in talks about taking a 15% slice in the asset, Reuters reported, but may even have an interest in taking Eni’s entire 50% stake.

    Two unidentified sources said ExxonMobil was eyeing the 15% stake, with another source indicating to the news wire that it was interest in the whole 50% stakes, while yet another source said ExxonMobil was interested in other Eni assets.

    Eni has already said it wants to shed some of its interest in the Rovuma basin play, with stake sales in Congo-Brazzaville an even perhaps Egypt also on the cards.

    Eni said in mid-March that it was looking to dispose of €7 billion ($7.9 billion) worth of assets by 2019, mainly through the sale of stakes in new discoveries. Under its new 2016-2019 business plan, Eni is also eyeing capital expenditure cuts “to fulfil short term constraints”. While the group’s capex will be reduced by 21% to €37 billion, upstream spending will drop by 18%.

    Eni is keen to take a final investment decision on its Coral floating liquefied natural gas project in Area 4 within a few months.

    The company is also targeting more FLNG vessels on the field and is working on sanctioning its Mamba onshore LNG scheme in Area 4, perhaps in late 2017.

    First gas is set to flow from Coral in 2021, while Mamba could be online a year or more later.

    http://www.upstreamonline.com/live/1427919/exxonmobil-eyes-eni-mozambique-stake?utm_source=twitterfeed&utm_medium=twitter

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    Asian VLCC freight rate drops 39% on week on muted demand


    Worldscale rates on key Asian Very Large Crude Carriers routes fell sharply this week due to the easing of delays at China's oil receiving ports coupled with charterers resorting to the strategy of drip feeding the market with cargoes, said sources Thursday.

    Rates on the key VLCC Persian Gulf-to-Japan route fell 39 Worldscale points week on week to w61 basis 265,000 mt Thursday.

    "The market has moved back after the abnormally high rates [for this season]. Spring is the maintenance season for Asian refineries so demand should not be strong," said a North Asia-based charterer.

    It was a roller-coaster VLCC market this month with the key PG-Japan rate rising from the year's low of w50.5 at the start of the month to w102 in mid-March due to firm demand for cargoes loading in late March and tight supply from various port delays.

    Sources said that for VLCC cargoes loading after April 5, vessel availability was no longer tight with port delays in China falling to five or six days from a waiting period of two weeks.

    Demand for vessels has also returned to the typical levels with 38 cargoes fixed for the first decade of April.

    The lowest fixture rate seen this week was S-Oil having placed the Kalymnos on subjects for a Ras Tanura-Onsan voyage, loading April 12-14, at w57 basis 280,000 mt. Sources said this was a discounted rate as the Kalymnos was a 2000-built vessel.

    Market sources said rates were expected to bottom out as levels approached the low of the year -- w50.5 -- last seen on March 3, showed Platts data.

    "The market is approaching the bottom, [competitive] owners are disappearing and the available ships on the list are mainly handled by strong owners. However I don't believe there is any rebound [as the fundamental supply is more than demand]," said a South Korea-based charterer.

    Charterers were expected to "cherry pick" re-let vessels and hold back until next week to charter for the remaining cargoes loading in the second decade of April, said a broker.

    http://www.platts.com/latest-news/shipping/singapore/tankers-asian-vlcc-freight-rate-drops-39-on-week-27395245
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    ONGC approves $5B worth field development plan (India)


    India’s Oil and Natural Gas Corporation (ONGC) has approved the Field Development Plan (FDP) for the development of fields falling under Cluster 2 of the deepwater block KG-DWN-98/2, in the Krishna-Godawari Basin offshore India, with plans to complete the project in 2020.

    According to the company, the development would involve a capital expenditure of $5.076 billion.

    The field will be developed with one gas process platform with a bridge connected living quarters platform for processing gas from free gas wells, FPSO for processing, storage and evacuation of oil/ gas from Cluster 2A fields, about 430 km subsea pipelines of various sizes from 6” to 22”, about 151 km umbilical and 10 manifolds, riser base manifolds and onshore gas handling terminal.

    In addition, drilling and completion of 35 wells have been planned. Out of those 35 wells, 15 will be oil producers, 12 water Injection, and 8 free gas producers.

    Production of first gas is planned by June 2019, first oil by March 2020, with overall completion in June 2020.

    Cluster 2 of the Block has been divided into two parts, Cluster 2A which has estimated in-place reserves of 94.26 MMt of crude oil and 21.75 BCM of associated gas; and Cluster 2B, which has estimated in-place reserves of Free Gas of 51.98 BCM.

    ONGC said that peak oil rate would be 77,305 bopd and 3.81 MMSCMD of associated gas through 15 producer wells along with 12 water injection wells with a peak water injection rate of 9,400 m3/d from Cluster 2A oil fields. Peak production rate of free gas is envisaged at 12.75 MMSCMD from 8 wells of Cluster-2B free gas fields.

    Further, total oil and gas production planned is 23.526 MMt and 50.706 BCM respectively during the project life from the Cluster 2. The peak daily production rate from the Cluster 2 works out to 16.89% and 27.60% of ONGC’s current production rate of crude oil and natural gas, respectively.

    http://www.offshoreenergytoday.com/ongc-approves-5b-field-development-plan-india/
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    Aramco starts up at Kasbah


    Saudi Arabian state oil giant Saudi Aramco has started up its Kasbah offshore sour gas project in the Persian Gulf.

    http://www.upstreamonline.com/live/1427857/aramco-starts-up-at-hasbah?utm_source=twitterfeed&utm_medium=twitter
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    Iran's oil storage struggle holds back exports to Europe


    Iranian oil flows to Europe have begun to pick up from a slow start after sanctions were lifted in January, but trading sources say a lack of access to storage part-owned by Tehran's Gulf Arab rivals now looms large on a list of obstacles.

    European countries accounted for more than a third of Iran's exports, or 800,000 barrels a day, before the European Union imposed sanctions in 2012 over its nuclear programme.

    Since January, Tehran has sold 11 million barrels to France's Total, 2 million barrels to Spain's Cepsa and 1 million to Russia's Litasco, according to Iranian officials, traders and ship-tracking data. Some of these cargoes will not arrive in Europe before mid-April.

    With most U.S. sanctions still in place, there is no dollar clearing, no established mechanism for non-dollar sales and banks are reluctant to provide letters of credit to facilitate trade.

    A new initiative by international ship insurers has helped, but traders say exports have been hampered by Iran's unwillingness to sweeten terms for potential European buyers.

    Iranian oil officials and international traders have also grown increasingly concerned by a delay regaining access to storage tanks in Egypt's port of Sidi Kerir on the Mediterranean coast, from where it supplied up to 200,000 bpd to Europe back in 2011.

    "As of now, there is no tankage for Iran there. Before sanctions, it was Iran's main terminal for supplies to Western nations," one Iranian oil source said.


    Four traders with western oil majors and major trading houses told Reuters Iranian officials have notified them Iran cannot get access to the SUMED-owned terminal for now and so could not supply them with crude from there.

    Sidi Kerir, which connects to the Red Sea via pipelines also owned by SUMED (Arab Petroleum Pipelines Company) allows Iran to deliver oil much more quickly than if it goes by ship from Iran's Kharg Island terminal, which takes nearly a month.

    As global crude output has outpaced consumption, storage space has become increasingly prized, in sharp contrast with 2011, when Iran could lease tanks in Sidi Kerir and the world struggled to produce enough oil to meet demand.

    SUMED is half owned by state-run oil company Egyptian General Petroleum Corp. The other half is owned by Kuwait, the United Arab Emirates, Qatar and Iran's arch rival Saudi Arabia, with which it is vying for influence across Middle East.

    "There is competition for market share and they don't want Iran to lease storage there. Of course, not having storage will hurt Iran's exports to Europe," the Iranian source said, adding he still hoped to gain access to some storage in April.

    OPEC Gulf members led by Saudi Arabia have repeatedly said they are looking to protect and expand their footprint in key Asian, European and U.S. oil markets, where they have lost out in the past few years because of a boom in non-OPEC supply.

    Iran, OPEC's third largest producer, has said it hopes to overcome most of the financial, legal and logistical obstacles it has faced this month, but shipping data suggest the path is far from smooth.

    Some 45-50 million barrels of Iran's oil are estimated to be held in tankers at sea, barely changed from the amounts thought to be in floating storage before sanctions were lifted at the start of the year.

    A tanker with one million barrels of Iranian crude, the Distya Akula, has been anchored off Suez since Feb. 24, as Iran has been unable to find a buyer, traders said.

    They also said Greece's Hellenic Petroleum, a major buyer of Iranian oil prior to sanctions, has been unable to secure financing for deliveries and has yet to restart purchasing oil.

    Several trading sources said Hellenic would now rely on Total to ship Iranian oil.

    Hellenic said the company had an agreement with Iran on Jan. 22 for the payment of 2011-2012 crude oil purchases that was subject to compliance with international rules and banking regulations, but did not comment on any recent developments.

    An Iranian official said on Tuesday exports had risen by 900,000 barrels per day to 2.2 million bpd in the past two months.

    http://www.reuters.com/article/iran-oil-storage-idUSL5N16T22M

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    US Oil rig count falls by 15


    The US oil rig count fell 15 to 372 this week, according to driller Baker Hughes.

    It's the lowest total since the week of November 13, 2009.

    The gas rig count rose by 3 to 92 this week, taking the total tally down 12 to 464.

    Last week, the tally of oil rigs rose for the first time in 13 weeks, by one. The combined count of oil and gas rigs fell to another record low, as five gas rigs were turned off.

    We got the data one day early because of Good Friday.

    http://uk.businessinsider.com/baker-hughes-rig-count-march-24-2016-3?r=US&IR=T

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    Israeli court blocks government's natural gas plan in blow to energy firms


    Israel's Supreme Court blocked a controversial plan to develop the country's natural gas fields on Sunday, dealing a blow to energy companies operating in the eastern Mediterranean and drawing fire from the government.

    Prime Minister Benjamin Netanyahu reached a deal last year with Texas-based Noble Energy  and Israel's Delek Group that would leave them in control of the country's largest gas field, Leviathan, while forcing them to sell smaller, yet sizeable, assets.

    The agreement also provided an outline for the next decade, with the government committing to leave taxes, export quotas and other regulation unchanged, and the companies agreeing to develop Leviathan at an accelerated pace.

    The court, however, said the government was not in a position to make such long-term commitments.

    A commitment "that binds the government to the outline, including no changes in legislation and opposing legislative initiatives for 10 years - cannot stand," the court said in its ruling.

    The cabinet could try to pass a law in parliament, the judges said, but given the strong opposition and Netanyahu's single-seat majority, such a move seemed unlikely.

    The court gave the government a year to come up with an alternative arrangement or the outline will be cancelled.

    "The decision severely threatens the development of the gas reserves of the state of Israel," Netanyahu said of perhaps his biggest political setback since re-election a year ago.

    The prime minister even made the unusual step of defending the deal in the Supreme Court last month. [L8N15T06I]

    "Israel is seen as a state with excessive judicial interference in which it is difficult to dobusiness," he said. "We will seek other ways to overcome the severe damage that this curious decision has caused the Israeli economy."

    Noble and Delek have held off on developing Leviathan, a $5-$6 billion investment, until the deal was approved.

    In a joint statement, they commended the court for opposing just one section of the outline.

    "In order to allow us to meet the framework goals, primarily the development of Leviathan by the end of 2019, we call on the government to facilitate the stability provisions in a short time frame," the companies said.

    The deal would have also encouraged new energy companies who have been waiting for regulatory uncertainty to clear up before investing in exploration.

    However, it also drew a lot of opposition including from public advocacy groups and opposition lawmakers, who said it would still have left Noble and Delek in control of too much of Israel's gas.

    "The bottom line is that it's bad news for the partners, but in our estimation, and given the sensitivities of the subject, the last word has yet to be spoken," he said.

    http://www.reuters.com/article/us-israel-natgas-court-idUSKCN0WT0J6

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    The DUC's come online

    U.S. drillers are springing open dormant oil wells they drilled but have left untapped since last year, trying to shore up cash they desperately need after a long and brutal downturn.

    It could be the first small tremor of a long-awaited comeback in industry activity, or it could be an early start of another premature ramp-up that, like the failed restart in the summer of 2015, could upset the delicate oil supply correction that's supposed to help lift prices later this year.

    After a recent oil price rally, deep cost-cutting and technological breakthroughs, many oil companies can now afford to pump crude from their large backlog of wells. That's one reason some U.S. oil production expected to vanish this year could be "switched back on" if oil prices keep rising, said Neil Atkinson, head of the oil market division at the International Energy Agency in Paris.

    "But what's the lag time between companies saying, 'Hey, we're back in business,' and then actually producing oil? Is it six months? Is it nine months?" Atkinson said. "This is uncharted territory."

    ENERGY

    • Rigs stacked along Business 20 west of FM 1788 photographed Tuesday, Feb. 24, 2015.James Durbin/Reporter-TelegramOil companies finally tapping long-dormant shale wells

    The speed of the U.S. oil industry's inevitable resurrection after the worst oil bust in decades is at the center of a new debate in the energy world, with some analysts arguing if an oil price recovery arrives before crude stops pouring into storage tanks, domestic drillers could start pumping more oil and cause prices to fall back down. The rally hit a bump this past week, with U.S. crude declining to $39.46 a barrel on Thursday, but it is still well above last month's average of about $30 a barrel.

    Others say the downturn has left the industry's finances in tatters, depleted its oil field crews and equipment, and it would take far too long for drillers to stop a sharp decline in U.S. oil production this year. The thinking goes if it's too late to stop the output drop, then the industry can return to the oil patch without fear of interrupting the realignment of supply and demand.

    There are early signs U.S. companies are trying to test that theory. Last month, oil companies brought 12 wells into production for every 10 they began to drill, which indicates they are reducing their backlog of so-called drilled-but-uncompleted wells faster than they're drilling new wells for the first time in five months, according to consulting firm Rystad Energy in Norway.

    "It's very marginal, but it still is an increase. It could be the early signs of a recovery, but it's too early to say," said Bielenis Villanueva Triana, a senior analyst at Rystad. The industry's forecasts for U.S. oil production are "very sensitive to the drilled-but-uncompleted wells, but there's definitely going to be a decrease" in overall U.S. production this year.

    Anadarko Petroleum Corp., EOG Resources and other U.S. companies have said since last year they have drilled hundreds of wells but left the crude underground, and could bring them online within two to three months in an oil price recovery.

    Above break-even

    Drawing on two data snapshots, one from mid-2015 and the other from earlier this year, energy research firm Wood Mackenzie estimates oil companies have uncorked about 400 of more than 1,400 uncompleted oil wells since September in Texas' Eagle Ford Shale, Wolfcamp and Bone Spring plays and North Dakota's Bakken Shale, though oil companies still added to their backlog of uncompleted wells because many drilling rigs were still on contract.

    The firm says climbing oil prices have recently pushed above break-even costs in North Dakota and Texas to complete wells, which could prompt operators to complete another 440 wells in those regions over the next six months, with the oil production from those wells peaking at 250,000 to 300,000 barrels a day in November or December.

    Several U.S. producers have told investors they plan to draw down their inventory of dormant wells this year, including Pioneer Natural Resources, Cabot Oil & Gas, Oasis Petroleum, Chesapeake Energy Corp., Hess Corp. and RSP Permian, according to Wood Mackenzie. Whiting Petroleum had said it would pump more crude from its backlog of wells if oil prices landed between $40 and $45 a barrel, and that generally holds true for many of the more aggressive operators, analysts say. The companies could not be reached for comment.

    "At $40 oil, you'll definitely see an acceleration of wells being completed and more activity coming back," said Maria Cortez, an analyst at Wood Mackenzie. "It's the more financially attractive option for (some of) these operators."

    Hess Corp. expects to drill and complete 50 wells and finish another 30 that have been waiting to be completed this year.

    "We are in a really good position in the Bakken," said John Roper, a spokesman for Hess. "Because we have such prime leases, we're able to focus on those."

    Tapping that inventory of wells is one of three major levers that U.S. oil companies can pull to restart activity. One other lever is hedging, which allows companies to lock in higher prices for the oil they produce, and it has already been pulled. Earlier this month, net short positions among producers - oil hedging - reached the highest point ever recorded by the U.S. Commodity Futures Trading Commission, which has tracked those numbers for about a decade.

    The bulk of producer hedges are done between oil companies and banks and aren't recorded by the CFTC, but those trades typically track closely with the public data, and there has been a substantial increase in recent weeks, said John Saucer, vice president of research and analysis at Mobius Risk Group in Houston. Drillers are hedging at current prices because they can lock in mid-$40 oil prices for production in coming months or more than a year out, he said.



    ~Houston Chronicle.

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    $9bn in E&P equity ytd.

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    Maple Syrup vs Natural Gas

    A federal judge could hold a Pennsylvania family that runs a maple syrup business in contempt of court on Feb. 19 if it persists in blocking crews from felling a grove of trees to make way for a new shale gas pipeline that would cross its property.

    The defendants and their supporters, who first confronted chainsaw crews on Feb. 10, face arrest if they again interfere, U.S. District Court Judge Malachy Mannion in Scranton warned earlier this week.

    The $875 million Continental Pipeline, due to be operational this autumn, would run 124 miles (200 km) from Montrose, Pa., to Albany, N.Y., and bring gas from Pennsylvania fracking wells to the New York and New England markets.

    "We're trying to keep them from cutting trees before they have all the permits they need to build in New York state," said Megan Holleran, spokeswoman for North Harford Maple, a family-run syrup business in New Milford, Pa.

    Christopher Stockton, a Constitution spokesman, acknowledged the company does not have all the permits needed to finish the New York portion of the pipeline but said it expected to receive them.

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    Alternative Energy

    New world record set in renewable energy investments


    Global investment in renewable energy capacity hit a new record in 2015 despite falling oil, gas and coal prices, says a UN-backed report.

    All investments in renewables, including early-stage technology and R&D as well as spending on new capacity, totalled $286 billion in 2015, some 3 per cent higher than the previous record in 2011, said the 10th edition of United Nations Environment Programme’s (UNEP) annual report — Global Trends in Renewable Energy Investment 2016.

    A total of 134 gigawatts (GW) of renewable power was added worldwide in 2015 compared to 106GW in 2014 and 87GW in 2013, the report said.

    It highlighted that the green investments has broadened out to a wider and wider array of developing countries, helped by sharply reduced costs and by the benefits of local power production over reliance on imported commodities.

    “Renewables are becoming ever more central to our low-carbon lifestyles, and the record-setting investments in 2015 are further proof of this trend. Importantly, for the first time in 2015, renewables in investments were higher in developing countries than developed,” said Achim Steiner, executive director at UNEP, in an official statement.

    In 2015, for the first time, investments in renewable energy in developing and emerging economy nations ($156 billion, up 19 per cent compared to 2014) surpassed those in developed countries ($130 billion, down eight per cent from 2014).

    Much of these record-breaking developing world investments took place in China (up 17 per cent to $102.9 billion, or 36 per cent of the world total).

    Other developing countries showing increased investment included India (up 22 per cent to $10.2 billion), South Africa (up 329 per cent to $4.5 billion), Mexico (up 105 per cent to $4 billion) and Chile (up 151 per cent to $3.4 billion).

    Among developed countries, investment in Europe was down 21 per cent, from $62 billion in 2014 to $48.8 billion in 2015, the continent’s lowest figure for nine years despite record investments in offshore wind projects.

    Investments in the US were up by 19 per cent to $44.1 billion, and in Japan investment was much the same as the previous year at $36.2 billion.

    The report was launched by the Frankfurt School-UNEP Collaborating Centre for Climate & amp; Sustainable Energy Finance and Bloomberg New Energy Finance (BNEF) on Thursday.

    http://gulfnews.com/business/sectors/energy/new-world-record-set-in-renewable-energy-investments-1.1698638

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    CSIQ #1 on valuerank.

    Image title

    The "ValueRank" ranking system is quite complex, and it is taking into account many factors like 5-year average yield, sales growth, trailing P/E, price to book, price to sales and return on equity, as shown in Portfolio123's chart below.

    Back-testing over sixteen years has proved that this ranking system is very useful. The reader can find the back-testing results of this ranking system in this article.


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    Scientists have found a way to recycle sunlight — and it could cause a solar power revolution


    The world of solar cells could be on the cusp of a revolution, as researchers seek to boost efficiency by harnessing the power to recycle light.

    A new study, published Thursday in the journal Science, considers the properties of hybrid lead halide perovskites, a group of materials already making waves in solar cell technology, and demonstrates their ability to absorb energy from the sun, create electric charge, and then churn out some light energy of their own.

    Moreover, the researchers demonstrated that such these cells can be produced cheaply, with easily synthesized materials, making the proposition much more commercially viable.

    “We already knew that these materials were good at absorbing light and producing charge-carriers,” says co-author Felix Deschler of Cambridge University, UK, in a telephone interview with The Christian Science Monitor. “But now we have demonstrated that they can also recombine to produce photons again.”

    Solar cells work by absorbing the light energy – photons – from the sun, converting this energy into electrical charge, and then conveying that charge to electrodes, which take the energy out into the power-hungry world.

    Hybrid lead halide perovskites were already known to do this task efficiently, but what Dr. Deschler and his team have demonstrated is an ability to do more: the perovskites are actually able to emit light themselves after creating charge – and then reabsorb that light energy.

    The result is a solar cell that acts like a concentrator, able to produce more energy – to boost the voltage obtained from a given amount of light – than would a cell made of materials without this recycling ability.

    “Why this is now a big thing is because the current record of photo cell efficiency rests at 20-21 percent, whereas the absolute limit is 33 percent,” says Deschler. “Our results suggest a route to achieve that limit.”

    The efficiency of a solar cell refers to the percentage of energy, given a certain amount of light, it can harness for use.

    According to a widely accepted 1961 paper by William Shockley and Hans Queisser, theoretical thermodynamics cap solar efficiency at 33 percent. It is simply impossible to do better, they argued.


    Yet the beauty of this most recent work is not only the hope of climbing closer to that theoretical ceiling, but the materials used to do so.

    “You wouldn’t expect photon recycling in our materials because their fabrication is so much simpler than others,” explains Deschler. “Our materials are very cheap to make, very versatile.”

    The reason for surprise, even skepticism, is founded in the way these materials are made – via solution. This affords little control over the way in which the structure forms.

    If you have impurities in a crystalline structure, you are left with a “defect site”, which makes the material “messier,” in terms of light absorption. Without such impurities, you have what is known as a “sharp absorption onset,” allowing efficient and clear absorption of the light.

    “So, while they are very efficient,” says Deschler, “we’re still trying to understand why and how they’re better than other materials.”

    The researchers expect considerable interest from solar cell producers looking for a cheaper, more efficient way to harness the power of the sun.

    http://www.businessinsider.com/scientist-have-found-a-way-to-recycle-sunlight-2016-3?IR=T

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    Precious Metals

    Zijin Mining's 2015 profit falls 29 pct on weak gold, base metal prices


    Zijin Mining Group Co Ltd , China's biggest listed gold producer, reported on Friday a 29.4 percent fall in its 2015 net profit as a weak global economy pressured metal prices.

    Zijin Mining posted a net profit of 1.7 billion yuan ($261 million), down from the previous year's 2.3 billion yuan.

    The mining group, which also produces other metals such as copper, lead and zinc, aims to increase its production this year as it expects demand and prices to improve for its products, it said in a statement on the Shanghai stock exchange.

    It expects gold production at its mines to increase by 15 percent to 42.5 tonnes this year and aims to raise its mine-produced copper by three percent to 155,000 tonnes, it said.

    "As gold and other metals are seen as safe haven metals, we expect prices to be well supported with some room for rises this year. Base metal prices are also expected to rebound gradually," the mining group said in the statement.

    Zijin is one of many Chinese companies that have made inroads into overseas markets as part of efforts to step up presence globally.

    The mining group now owns stakes in foreign assets such as Barrick Gold Corp's Porgera mine in Papua New Guinea and Ivanhoe's Kamoa copper project in the Democratic Republic of Congo.

    The results statement came after China's markets closed on Friday. The company's Shanghai shares rose 0.3 percent, lagging China's main stock indices.

    http://www.reuters.com/article/zijin-results-idUSL3N16X215
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    Base Metals

    Insurance risk on tailings dams?

    MINING.com: How can risk assessment reduce the probability of tailings failure?

    Harvey McLeod: Well as I mentioned before, if you don't know you have a problem you are not going to manage it. The process of risk assessment is really getting everybody to think about what could go wrong, because if you have some ideas of what could go wrong, then you can start implementing both management practices to manage the risk but also engineer or design other procedures which will reduce the likelihood or the consequence of something happening. It's important to illustrate that risk is a combination of two things: it's the likelihood that something will happen and the consequence.

    MINING.com: What role does risk assessment play in mine financing?

    Harvey McLeod: Well I will think you will see with these recent failures that there’s been a large drop in the equity of the companies. Moving forward you will see financiers and shareholders saying: "Wait a minute, if I am going to invest my money in this company, what are the risks?" Insurers will be asking the same questions. Traditionally insurance companies haven't focused on tailings dam failure. It's been more of a global insurance policy. And certainly after the Omai and Los Frailes in the late '90s insurers started asking, "Should we have different systems for insuring mining companies?"

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    Copper stocks move to China

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    Copper miner Codelco posts historic loss in 2015


    Codelco, the world's biggest copper producer, reported a 3.6% rise in output in 2015 but a fall in the price of the metal led it to post a historic earnings loss. 

    The Chilean state-run company said in results published Thursday that it produced 1.73-million tonnes of copper last year from its wholly owned mines. Declining ore grades at its older sites were counterbalanced by a boost from the new Ministro Hales mine. 

    Mining companies globally have been reducing output and jobs as a way of coping with a six-year low in the copper price, and Codelco has been cutting costs. Despite the cost cuts, last year it said it had a pre-tax loss of $2.19-billion, significantly down from a $3.03-billion profit in 2014, and its worst bottom-line result since it began issuing earnings reports in the early 1990s. 

    Codelco was nationalised in the 1970s and returns all its profits to the state, providing an important source of income to the government. The fall in the copper price, sparked by cooling demand in key buyer China, has forced the centre-left government of President Michelle Bachelet to curb budget spending and reduce economic growth forecasts. 

    Codelco said its production cost per pound was $1.39 in 2015, down 8% from the previous year.

    http://www.miningweekly.com/article/top-chilean-copper-miner-codelco-posts-historic-loss-in-2015-2016-03-24
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    Non-Chinese aluminium output creeps up to four-year high


    China still holds the key to balancing the global primary aluminium market.

    Its exports of metal in the form of semi-manufactured products have slowed in the first couple of months of 2016 but at 590,000 tonnes they represent the movement of significant surplus into the rest of the world.

    The exact state of Chinese production is uncertain, with February figures from the China Nonferrous Metals Industry Association (CNIA) pending.

    Run-rates appeared to drop significantly over December and January but the market has been caught out before by volatility in the data over the end-year period, both calendar and Lunar.

    Only with the February figures will we see whether all the talk of curtailing production in return for government assistance in stockpiling metal has translated into a material drop in output.

    However, with all eyes on what is happening in China, it's easy to overlook a trend of rising production in the rest of the world.

    Without anyone really noticing, run-rates crept up to an annualised 25.51 million tonnes in February, the highest level since December 2011, according to the International Aluminium Institute (IAI).

    Output in the first two months of 2016 rose by 3.7 percent, an acceleration from growth of 2.5 percent over the course of 2015.


    It's a surprising outcome for a market still trading just above November's six-year low of $1,432.50 per tonne and burdened by high stocks.

    But while production is declining in the United States and Brazil, new capacity is simultaneously firing up elsewhere.

    A NEW DRIVER

    The last spurt in aluminium production growth outside China took place in the Gulf region in 2014, resulting from the full ramp-up of the 1.3-million-tonnes per year EMAL smelter in Abu Dhabi.

    Production growth in the Gulf braked sharply last year to 2.3 percent from 27.4 percent in 2014 and is running at just 1.5 percent so far this year.

    That is probably reflective of "normal" capacity creep at smelters such as Aluminium Bahrain, which lifted output by 30,000 tonnes last year to a record 960,600 tonnes.

    As Gulf production growth levels off, a new driver is taking over in the IAI's Asia (non-China) reporting region.

    Output here jumped by 23.6 percent last year and growth is still running at a fast 18.3 percent so far this year.

    This is largely down to the commissioning of new smelters in India; Mahan and Aditya, both operated by Hindalco, and the giant Jharsuguda II, operated by Vedanta Resources .

    Hindalco, part of the Aditya Birla group, reported primary metal production of 296,000 tonnes in the fourth quarter of 2015, up 35 percent on the year-earlier period.

    The 360,000-tonnes per year Mahan smelter in the state of Madhya Pradesh was operating at full capacity by the end of December, while the similar-sized Aditya plant in the state of Orissa is "well on course for full ramp-up", according to Hindalco.

    Both have captive coal-based power supply and are fed by the new Uktal alumina refinery, which itself is working towards capacity of 1.5 million tonnes per year.

    Vedanta's 1.25-million-tonnes per year Jharsuguda II plant began commissioning at the start of 2015 and is only slowly firing up towards nameplate capacity.

    The plant produced 19,000 tonnes of metal in the fourth quarter of 2015 and as of Dec. 1 a total 80 pots had been energised.

    Quite evidently, full ramp-up is going to be a lengthy affair and the smelter will continue adding to India's and the region's aluminium production profile over the coming period.

    http://www.reuters.com/article/aluminium-production-ahome-idUSL5N16W2TT

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    Alcoa shuts Warrick aluminium smelter in Indiana, rolling mill still operates


    Alcoa has permanently closed a 269,000 mt/year primary aluminium smelter at its Warrick Operations in southwestern Indiana but continues to operate a rolling mill and coal-fired power plant at the site, which is located about 10 miles east of Evansville, a company spokesman said Monday.

    Alcoa earlier this year said it planned to shut the 56-year-old smelter by the end of the first quarter as it was no longer financially viable.

    By the end of Q2, Alcoa also expects to reduce alumina output by 1 million mt including curtailing the remaining 810,000 mt of refining capacity at its Point Comfort operations in Texas.

    About 325 employees, many of them members of the United Steelworkers union, were laid off at Warrick, although some 1,100 employees remain, Alcoa spokesman Jim Beck said in an interview.

    http://www.platts.com/latest-news/metals/louisville-kentucky/alcoa-shuts-warrick-aluminum-smelter-in-indiana-21159136
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    Steel, Iron Ore and Coal

    US considers sharp royalty rise for coal.

    US to consider sharp hike in royalties on coal

    MATTHEW BROWN | Associated Press

    BILLINGS, Mont. (AP) -- Royalty rates on coal extracted from massive strip mines on public lands could increase 50 percent under a pending overhaul of a U.S. government program that critics say contributes to climate change, documents released Thursday show.

    The royalty hike was contained in an Interior Department notice providing the first outlines of a planned three-year evaluation of the government's sale of coal from public lands, primarily in the West.

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    China to halt construction on coal-fired power plants in 15 regions


    China will stop the construction of coal-fired power plants in 15 regions as part of its efforts to tackle a capacity glut in the sector, the country's energy regulator said on Thursday, confirming an earlier media report.

    The Southern Energy Observer, a magazine run by the state-owned China Southern Power Grid Corp, said regulators had halted the construction of coal-fired plants in regions where capacity was already in surplus, including the major coal producing centers of Inner Mongolia, Shanxi and Shaanxi.

    An official at the communications office of the National Energy Administration (NEA) told Reuters that the report was correct, but he did not provide any further details.

    The report, citing documents issued to local governments by the regulator, said China would also stop approving new projects in as many as 13 provinces and regions until 2018.

    The rapid expansion of China's coal-fired power capacity, together with a slowdown in demand growth, has saddled the sector with its lowest utilization rates since 1978, the NEA said earlier this year.

    Environmental group Greenpeace said the rules, if fully implemented, could involve up to 250 power projects with a total of 170 gigawatts (GW) in capacity, according to initial estimates.

    "China is finally beginning to clamp down on its out of control coal power bubble," said Lauri Myllyvirta, Greenpeace's senior campaigner on coal, in an emailed statement.

    "However, these new measures fall far short of even halting the build-up of overcapacity in coal-fired power generation, let alone beginning to reduce it," he said.

    China's total generation capacity reached 1,485.8 GW by the end of February, up 11.8 percent year on year, according to the latest figures. Thermal power, which mostly consists of coal-fired capacity, rose 9.4 percent on the year to 1,003.8 GW.

    China aims to raise the share of non-fossil fuels to 15 percent of total primary energy by 2020, up from 12 percent at the end of last year.

    http://www.reuters.com/article/china-power-coal-idUSL3N16W322

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    China Shenhua Energy's profit falls, to cut output in 2016


    China Shenhua Energy's net profit fell 56.9 percent in 2015, missing forecasts and dropping for a third straight year due to lower demand in a slowing economy and the country's efforts to switch to cleaner forms of energy.

    The listed arm of the Shenhua Group, China's biggest coal producer, said in its annual report demand for coal and other fossil fuels was likely to fall further in 2016, with the pace of restructuring in the energy sector expected to accelerate and the global economic recovery still lacking strength.

    "We predict coal prices will remain at a low level, losses among coal enterprises will worsen, some coal mines will cut or suspend production and output for the whole year will steadily drop," the firm said.

    In 2015, Shenhua Energy's net profit was 16.14 billion yuan ($2.47 billion), down from the previous year's 37.4 billion yuan, it said in a filing to the Shanghai stock exchange.

    That came in lower than analysts' average forecast of 20.1 billion yuan, according to Thomson Reuters data. The coal producer has seen its annual net profit decline since 2013, with the fall widening each year.

    China's coal sector has been hit by a sustained downturn in demand and a price-sapping capacity glut, forcing big state producers to cut output last year.

    Shenhua Energy produced 280.9 million tonnes of coal in 2015, down 8.4 percent on the year, and its target output for this year is expected to fall 0.3 percent to 280 million tonnes, it said in its results filing.

    It also expects its 2016 revenues to drop 18 percent to 145.1 billion yuan.

    Sales volume in 2015 fell 17.9 percent to 370.5 million tonnes, it said. Output from its coal-fired power stations fell 3.6 percent to 210.45 billion kilowatt hours.

    The efforts of big state miners to cut output brought nationwide production down 3.5 percent to 3.68 billion tonnes, but it did little to gee up the market.

    Prices of coal at the port of Qinhuangdao in Hebei province SH-QHA-TRMCOAL have gained 5.4 percent so far this year, but they remain around 20 percent lower than the same period of 2015.

    The government said in February it would aim to close 500 million tonnes of coal mining capacity in the coming three to five years, but the country's total capacity surplus has been estimated at more than 2 billion tonnes.


    http://www.reuters.com/article/china-shenhua-results-idUSL3N16W3TT
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    China key steel mills Feb steel products sales up 5 pct


    China’s key steel mills sold 39.67 million tonnes of steel products in February, up 5.14% on year, according to the latest data released by the China Iron and Steel Association (CISA).

    http://en.sxcoal.com/0/143425/DataShow.html
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    China's Dongbei Special Steel misses payment on short-term note


    Dongbei Special Steel Group Co Ltd, an unlisted steel manufacturer based in Northeast China, missed a payment on an 800 million yuan ($123 million) short-term note which matured over the weekend, the Shanghai Clearing House said in a statement on its website.

    The firm had previously warned Friday evening that it might be unable to pay on time, citing tough conditions in the steel industry as a whole and strong pressure on its sales.

    Money and bond markets showed little reaction to the news, with the volume weighted average rate of the benchmark seven-day bond repurchase agreement in the interbank market down three basis points in morning trade and the yield on AA rated five year corporate debt up just one basis point.

    "The news should be basically priced in already," said a bond trader at a commercial bank in Shanghai.

    "The overall trend of the bond market is pretty well established, and you may start to see more differentiation based on individual companies, but this particular event isn't likely to have too much impact."

    According to international convention, debtors usually have a 30-day grace period to avoid formal default, but traders said that in China this was not necessarily the case.

    Overcapacity and volatile prices have resulted in a number of Chinese steel firms running into trouble over the past year and a half.

    Earlier in March, financial magazine Caixin reported that Tianjin-based Bohai Steel Group Co Ltd may be unable to make full repayment on 192 billion yuan of debt.

    http://www.reuters.com/article/china-debt-steel-idUSL3N1711AZ
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