Mark Latham Commodity Equity Intelligence Service

Wednesday 17th June 2015
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    Chinese firms put cash to work in stocks

    Chinese firms put cash to work in stocks

    Chinese companies are turning to an unlikely source for profits in the soft economy: the country’s red-hot stock markets.

    Chinese companies are finding stock investing an attractive option as the wider economy struggles with tepid demand, excess industrial capacity, persistently high borrowing costs and other troubles. Their interest poses a challenge for policy makers, who want to nurture markets companies can tap for investment capital, rather than creating a venue for speculation.

    “The stock market is a big risk for China’s economy because the current rally isn’t supported by the economic fundamentals,” said China economist Zhu Chaoping at UOB Kay Hian Holdings Ltd., a Singapore-based investment bank. “Regulators will have their work cut out for them keeping the market in check.”

    According to the latest official data, profits earned by Chinese manufacturers rose 2.6 per cent from a year earlier in April, a turnaround from a drop of 0.4 per cent in the previous month. Yet nearly all of that increase—97 per cent—came from securities investment income, data from the National Bureau of Statistics show. Excluding the investment income, China’s industrial profits were up 0.09 per cent.

    Meanwhile, over the course of 2014, the value of stocks, bonds and other tradable securities owned by listed Chinese companies rose by 946 billion yuan ($152.4 billion), a 60 per cent increase, according to an analysis by Mr. Zhu.
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    Consol Energy launches IPO of CNX Coal partnership

    PBSIt reported that Consol Energy Inc. launched the initial offering of stock in a spin-off that will run its Pennsylvania coal mines, and possibly other operations.

    The Cecil-based coal and natural gas company said in a U Securities Exchange Commission filing that it would sell up to 11.5 million shares in CNX Coal Resources at a price of USD 19 to USD 21 per share. Consol will retain an interest of between 49.5 percent and 55.8 percent of the partnership, depending on whether underwriters of the offer exercise an option to buy more shares.

    Consol in March formed the spin-off as a master limited partnership, which provides certain tax benefits for energy companies while allowing them to seek separate investment in assets. CNX Coal Resources will include Consol's three coal mines in Greene and Washington counties — Bailey, Enlow Fork and Harvey — and could later assume Consol's Buchanan metallurgical coal mine in Virginia, its Baltimore export terminal and natural gas gathering pipeline system in Virginia, Kentucky and West Virginia.
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    Oil and Gas

    Libya eyes 200,000 b/d output rise

    Platts - Libya eyes 200,000 b/d rudeoil output rise from 432,000 b/d in 'coming weeks'; increase to come from Waha fields, NOC chief Sanalla says
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    Low oil price hits $200 billion in mega-projects

    Deepwater oil projects and complex gas facilities worth around $200 billion have been cancelled or put on hold worldwide in recent months due to the sharp drop in oil prices over the past year, consultancy Ernst and Young said on Tuesday.

    Further project cuts and delays are likely as the industry braces for an extended period of lower oil prices as a result of a supply glut.

    "The mind set in the industry at the moment is that prices are unlikely to be bouncing up materially in the near term," the consultancy's Andy Brogan said in a presentation. "There is an expectation that volatility is with us for a reasonable period of time to come and companies need to cope with that."

    International companies have responded rapidly to the near halving of oil prices since last June, slashing tens of billions of dollars in capital spending in order to boost their balance sheets and maintain dividend payouts to investors.

    "A total of $200 billion of oil and gas projects have been deferred or cancelled," said Brogan, global oil and gas transactions leader at Ernst and Young.

    "Portfolios reviews are happening more frequently and probably with more rigour," Brogan told the World National Oil Companies Congress. "There isn't anywhere for projects to hide."

    The main 24 mega projects that have been put on ice or scrapped are spread across the globe, according to EY.

    For oil, many of the projects are complex, deepwater fields in the Gulf of Mexico, the North Sea, West Africa and Southeast Asia with budgets of up to $20 billion.

    Among the most expensive are liquefied natural gas facilities such as the Arrow liquefied natural gas (LNG) project in Australia, operated by Royal Dutch Shell's and PetroChina and BG Group's Prince Rupert LNG project in Canada.

    Though often just as expensive, most oil mega-projects benefit from the advantage of returning value within 3 to 4 years from first investment, compared with up to 12 years for LNG projects, Brogan said.

    "We have seen IOCs (international oil companies) already go through one rigorous review of their portfolio. We are now seeing them turning their attention to see how flexibility can be embedded in their portfolios and businesses"

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    Japan: LNG imports down 11.4 pct in May

    Japan’s imports of liquefied natural gas dropped 11.4 percent in May, as compared to the same month a year ago, preliminary data from the Ministry of Finance reveals.

    The world’s largest buyer of the chilled gas imported 5.75 million tonnes of LNG in May.

    Japan paid 315,439 million yen for LNG imports in May, down 44.1 percent on year, according to the data.

    LNG use by Japan’s ten independent regional electric power companies was lower 7 percent to 3.99 million mt in May.

    Total electricity generated and purchased across the ten companies in May declined by 3 percent from a year earlier to 64.98 billion kWh, data from the Federation of Electric Power Companies of Japan showed.
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    Gazprom’s Baltic LNG to cost over USD 18 bln

    Gazprom’s Baltic LNG project in the Baltic Sea port of Ust-Luga is estimated at 1 trillion roubles (around $18.5 billion), a port official told reporters at a conference, Reuters reports.

    The plant capacity will amount to 10 million tons of LNG a year with the possibility of expansion to 15 million tons.

    It will be supplied with gas from the Unified Gas Supply System of Russia, according to Gazprom.

    In 2013, Gazprom signed the memorandum of understanding and cooperation with Leningrad region as part of the liquefied natural gas plant project.
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    Petrobras delays cuts to July when govt meets for oil plan- sources

    Brazil's state-run oil company Petrobras will likely delay details of major cuts to its $221 billion five-year spending plan until July, two sources said, when the government plans to announce a rescue program for the industry.

    Petrobras, which is struggling with a corruption scandal, falling oil prices, stagnant output, and the largest debt of any oil company, had planned to announce deep spending cuts, expected to be about 30 percent of the proposed spending, by the end of June.

    However, executives at Petroleo Brasileiro SA, as Petrobras is formally known, have run into internal and political resistance to cuts given the major role the company plays in Brazil's economy, a top Petrobras executive with direct knowledge of company discussions told Reuters.

    The government is only coming to terms with Petrobras' economic fragility and how government efforts to increase control over the country's natural resources could make Petrobras weaker still, the senior coalition member told Reuters.

    The government's July oil plan is likely to mimic a program announced earlier this month to bolster shrinking government funds for investment in ports, highways and other infrastructure with private capital, one of the officials said.

    That will require changes to Brazil's 2010 oil law, the official said, most notably ending a requirement that Petrobras take a minimum 30 percent stake and serve as operator in any new development contracts in Brazil's most prolific oil areas.

    Oliveira said the bill would likely substitute a Petrobras right of first refusal to operate and participate financially in new areas in place of its current obligation.

    Despite growing Senate support, a change is unlikely to be made by July, the official said, adding that it could possibly win Rousseff's support. The official's opinion is backed by a third source, a senior government bureaucrat involved in day-to-day oil-planning talks.

    Oil-industry officials, including some at Petrobras, also want Brazilian-content requirements, blamed for higher costs and project delays, eased. Rousseff has said she won't change them.
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    H-Energy selling stake in LNG Gateway project

    Hiranandani Group’s H-Energy is reportedly looking to sell a stake in its LNG terminal on India’s west coast in order to raise funds for the construction.

    A 26% stake has already been sold in an LNG terminal on the east coast and talks for a similar deal are underway for a project on the west coast, Live Mint reports.

    Darshan Hiranandani, director at H-Energy said the company signed a deal with Excelerate Energy for the east coast project that is set to cost $600 million. The project is based on an FSRU and will be set up off West Bengal.

    The company is in similar negotiations with major oil and gas companies for its LNG terminal project on the west coast, as it needs funds before the construction on the 8 mtpa facility kicks off in August. This terminal will be the first to allow third parties to import LNG and regasify it for a fee.

    The LNG terminal project is located at JSW Jaigarh Port near Ratnagiri, Maharashtra.
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    Wintershall examining stake in Occidental's Libyan oil assets -NOC

    Germany's Wintershall is eyeing a stake in the Libyan oil assets of Occidental Petroleum, the chairman of Libya's National Oil Corp (NOC) said on Tuesday.

    Mustafa Sanallah said NOC had given Wintershall, a subsidiary of BASF, access to confidential technical information at the request of Occidental.

    He added that this did not signify that Occidental is looking to exit its business in Libya.

    "This does not mean they are going to get out," Sanallah said. "It could be a joint venture."
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    Wintershall's Unmanned North Sea Platform Produces 1st Gas.

    German oil and gas firm Wintershall announced Tuesday that the unmanned mini-platform, L6-B, has started producing natural gas off the Dutch North Sea coast.

    The platform was built in just nine months and was brought to its offshore location in June 2014. Wintershall said that the advantage of the new generation of "Minimum Facility" platforms is that they can be deployed in particularly shallow waters and can economically produce even from very small natural gas fields. Another benefit is that the can help the firm cut down on costs thanks to the short time needed for construction and their simple installation.

    The L6-B field is located in a restricted military zone, with Wintershall Noordzee being the first company allowed to operate in the area. Consequently, the installation needs to be as small as possible and Wintershall believes its topside may be the smallest in the world.

    The facility is anchored to the seabed through suction piles. It rises about 60 feet above the sea and has three decks but no helideck. The facility can accommodate a maximum of two producing wells. The substructure weighs just 1,100 tons, with the topside weighing only 100 tons. A pipeline will transport gas produced by L6-B to the neighboring platform of L8-P4.

    Wintershall sees the North Sea as a core region for it. The firm now operates 25 offshore platforms in Dutch, German and UK waters, and it expects natural gas production to be one of its main areas of activity in the Netherlands and in the southern North Sea.

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    European oil 'mini-major' challenges industry's old model

    A fast-growing European oil venture between the world's top energy trader Vitol and private equity firm Carlyle Group is attempting to cash in where the industry's biggest companies have struggled for years.

    European oil companies, or "majors", such as Total , BP and Royal Dutch Shell have significantly downsized their European refining and distribution businesses in recent years due to shrinking demand and an ageing, oversized refining industry.

    But for Swiss-based venture Varo Energy, combining refining and other downstream assets with its central oil trading business makes sense: by offering products and services across the value chain on a smaller scale, it says it can reduce inefficiencies that have weighed on the big oil companies.

    "The key is to build more downstream presence and to complement that with trading around the assets," said veteran Dutch oil entrepreneur Marcel van Poecke, 55, who is managing director of Carlyle International Energy Partners (CIEP) and the driver behind the Varo model.

    Founded in 2012, Varo was renamed Varo Energy after merging last month with Dutch-based storage and trading company Argos. The merged company controls businesses from oil production to refineries to storage terminals and petrol stations, creating what van Poecke says is a "mini-major" focused on a strip of western Europe.

    "You will see more coordinated trading around those assets because now it becomes one company from Rotterdam up to Switzerland," he said.

    Trading houses like Vitol say that refineries and other businesses can become inefficient after decades under the ownership of big oil companies. By taking them over, traders can make them leaner and lift profit margins, they say.

    As oil majors seek to get rid of refineries and focus on their more profitable upstream businesses, Varo Energy says it is scooping up downstream assets at cheap prices.

    "Major oil companies have been selling refineries to free up capital for upstream ventures where they can make better margins ... (Traders) tend to get those refinery assets very cheap so they don't weigh heavily on their books as working capital," said Steve Sawyer, downstream consultant at FGE.

    "For a trader, having a refinery gives a physical outlet for his oil to reduce his exposure in the market. It also gives him information he might not have access to so, all in all, he has better information that can help him make better decisions on what crude to buy."
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    Congo parliament adopts new hydrocarbons code

    Democratic Republic of Congo lawmakers have adopted a new hydrocarbons code that the country hopes will allow it to draw more benefits from its expanding oil sector.

    The Central African mining nation pumps 25,000 barrels per day, accounting for just 11 percent of its export revenues, although exploration off the Atlantic coast and near its eastern border with Uganda could increase that significantly.

    Perenco, an Anglo-French oil and gas company, is Congo's only active producer of oil, but French company Total and a company owned by Israeli billionaire Dan Gertler are exploring near Lake Albert, straddling the border with Uganda.

    "The implementation of this law will allow (Congo) to assure the security of investments and to put in place a fiscal regime that permits the Congolese state to profit from its hydrocarbon resources so that those contribute in particular to growth and the fight against poverty," Minaku said.

    The code, which has not yet been made law by President Joseph Kabila, would replace a 1981 law widely considered to be obsolete. The final text of the bill was not immediately available.

    Previous drafts have included a 40 percent capital gains tax on all contracts, although it was not clear if this clause remained in the version adopted by parliament.

    One point of controversy among lawmakers was a provision in the National Assembly version that would require oil companies to cede at least 20 percent of shares in their operations to a "national society of commercial character."

    The Senate called the provision "contrary to the principle of economic liberalism" and said it risked creating conflicts of interest.
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    ExxonMobil Announces Kearl Expansion Project Starts Production Ahead of Schedule

    Exxon Mobil Corporation (NYSE:XOM) today announced that production at its Kearl oil sands expansion project in Alberta, Canada, started ahead of schedule and is expected to double overall capacity to 220,000 barrels of bitumen a day.

    “Kearl’s bitumen was first processed in ExxonMobil refineries to help the company fully understand its properties before introducing it to the market”

    The expansion project is ultimately expected to reach 110,000 barrels per day. Kearl will access approximately 4.6 billion barrels of resource for more than 40 years.

    “The ahead-of-schedule startup of the Kearl expansion demonstrates ExxonMobil’s project management expertise and highlights our ability to safely and successfully execute complex projects,” said Neil Duffin, president of ExxonMobil Development Company. “The improved understanding gained from the initial Kearl development phase was applied to the expansion project to produce this outstanding result.”

    The expansion project consists of three additional trains that use proprietary paraffinic froth treatment technology to produce bitumen. The process reduces energy requirements and environmental impacts by not requiring an on-site upgrader, which avoided a multi-billion dollar capital investment and associated operating expenses. Energy needs are further reduced through the installation of energy-saving cogeneration facilities.

    The project produces blended bitumen with about the same lifecycle greenhouse gas emissions as the average crude oil refined in the United States. Other environmental innovations include on-site water storage to reduce water use, progressive land and tailings reclamation, and a state-of-the-art waterfowl deterrent system.

    “Kearl’s bitumen was first processed in ExxonMobil refineries to help the company fully understand its properties before introducing it to the market,” Duffin said. “It is now processed in more than 25 refineries around the world.”
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    Halliburton reveals new dissolvable frac plug

    Halliburton’s Completion Tools has introduced the Illusion fully dissolvable frac plug. The 10,000-psi rated frac plug eliminates the need to mill out a plug after fracing.

    Halliburton says the plug can be installed anywhere in the wellbore for optimal placement of perforations to improved fracturing, without prepositioned locator subs or other equipment that remains in the wellbore post-frac. Illusion frac plugs dissolve completely to leave an unrestricted bore for production, and no intervention is required to clean the wellbore after the frac, Halliburton continues.

    Halliburton’s new Illusion dissolvable frac plug

    Halliburton’s new Illusion dissolvable frac plug.
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    Tropical Storm Bill charges across Texas

    Tropical Storm Bill headed further into central Texas with heavy rains and high winds on Wednesday but no serious injuries were reported, relieving officials and residents just three weeks after floods killed about 30 people in the state.

    The second named tropical storm of the 2015 Atlantic hurricane season made landfall on Tuesday afternoon near the sportfishing town of Matagorda, then lost much of its punch, the U.S. National Weather Service said.

    There were no reports of substantial damage, and oilfields in the Gulf of Mexico and near the coast were not impacted by the storm. Refineries and a nuclear power plant, the South Texas Nuclear Generating Station in Bay City, also operated normally.

    "This is a rain event," Houston Mayor Annise Parker said at a news conference. "This is a normal rain event."

    Flash flood watches were issued for six states. The watch area included Houston and central Texas, where floods over Memorial Day weekend last month swept away thousands of vehicles and damaged homes.

    The storm was forecast to sweep over the Texas capital of Austin and then drive on to Dallas on Wednesday. It has maximum sustained winds of 45 miles per hour (70 kph).

    Heavy rain had already drenched parts of Texas over the weekend, pushing high rivers closer to overflowing their banks.

    The National Hurricane Center said the storm was expected to weaken into a tropical depression overnight, but it could bring up to 8 inches (20 cm) of rain to eastern Texas and Oklahoma and up to 4 inches (10 cm) to Arkansas and southern Missouri.

    Flooding could snarl work in onshore oilfields, but producers including EOG Resources and ConocoPhillips said they were unaffected.
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    Alternative Energy

    SunEdison scoops up Continuum’s Wind in biggest clean energy buyout

    SunEdison scoops up Continuum’s Wind in biggest clean energy buyout

    SunEdison, the largest renewable energy development company in the world by generation capacity, on Tuesday announced it has signed a definitive agreement to acquire Mumbai-based Continuum Wind Energy. The buyout - the biggest in the clean energy sector in the country so far - will significantly consolidate its local presence and further highlight the frenzied global interest in the Indian renewable energy sector in the backdrop of the Modi government's renewed focus on the space and its ambitious target to add 100 GW (100,000 MW) renewable capacity by 2022. Currently only 20 GW of wind farms operate in India.

    The Belmont, California headquartered SunEdison, which is listed on Nasdaq, will take over 242 MW of operating wind assets that Continuum owns and operates in Maharastra and Gujarat as well as 170 MW of assets under contruction. The company also has 1000 MW of plants in development across 6 states. This will be the third wind buy for SunEdison - In May, they acquired two renewable energy portfolios, including the domestic portfolio of around 100 MW of Spain-based FersaEnergias Renovables, SA.

    Sun Edison has not disclosed the deal value in any official communication, but sources close to the transaction said Continuum Wind Energy has been valued at Rs 3,720-3,900 crore ($620-650 million), inclusive of its debt. The equity value alone has been pegged at around Rs 1,920 crore ($320 million). Analysts tracking the sector estimate that the company should close FY15 with Rs 400 crore of revenue. The deal is expected to close in the next 6-8 weeks.

    "India is a core market for SunEdison and offers tremendous growth opportunities in both wind and solar energy. We made a commitment to Prime Minister Modi that we will deliver 15.2 GW of renewable energy by 2022. We are putting our money where our mouth is," Pashupathy Gopalan, President of SunEdison, Asia Pacific told ET on a call from South Africa.

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    Orocobre: Olaroz Lithium Facility Operations Update

    Orocobre: Olaroz Lithium Facility Operations Update

    Production ramp up slower than expected due to equipment limitations and early operational issues

    Production bottlenecks have been sequentially identified and all bar one have been successfully rectified

    Improving production rate through Q3 whilst final modification is completed

    Company reaffirm guidance to meet nameplate monthly run rate of 1,450 tonnes during Q4

    CY2015 production now fully committed

    Strong market growth and lithium price growth

    Full news release:
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    Base Metals

    Congo says Ivanhoe Mines' Kamoa deal should be suspended

    Democratic Republic of Congo said on Tuesday that Ivanhoe Mines' sale of a stake in the Kamoa copper mine to China's Zijin Mining should be suspended until concerns raised by the government can be resolved.

    Vancouver-based Ivanhoe announced last month that it would sell a 49.5 percent stake in Ivanhoe subsidiary Kamoa Holding Ltd to China's Zijin Mining Group Co Ltd for $412 million.

    Kamoa Holding Ltd currently owns 95 percent of the project in Congo's Katanga province.

    In a statement released on Tuesday, the government, which holds a 5 percent stake in the Kamoa project, said Ivanhoe had promised it an additional 15 percent stake and expressed concern that the sale to Zijin would dilute its new shares.

    "That last transaction should be suspended until the completion of the talks that the government has undertaken," mines minister Martin Kabwelulu and portfolio minister Louise Munga Mesozi said in a statement.

    The government also vowed to reevaluate the Kamoa mine's legal status in Congo.
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    Indonesia seeks legal route for bauxite miners to resume exports

    Indonesia's government is discussing legal avenues to allow a resumption of bauxite exports to help kickstart stalled smelter projects, top officials said, as Southeast Asia's largest economy tries to promote infrastructure development.

    Indonesia imposed restrictions on exports of unprocessed metal ores in early 2014 in an effort force firms to develop smelters that would add value to the country's resources and create jobs.

    However, many firms including bauxite miners said building smelters was unfeasible in the absence of supporting infrastructure and export revenue, and the country's revenue from mining has plummeted.

    Indonesia's bauxite exports fell to 2.1 million tonnes in calendar 2014 from 55.6 million in 2013, when they were worth $1.3 billion to the country's economy.

    "We are discussing this to see if there's a possibility of us providing a slight relaxation," Sofyan Djalil told reporters on Tuesday, adding that the government was looking into allowing exports by firms that have set aside a smelter development guarantee fund in an escrow account.

    "It will be very restricted, very tight. Free riders won't be allowed," Djalil said, adding that no relaxation would be given to nickel miners building smelters.

    According to Mining Minister Sudirman Said, any relaxation of the existing bauxite export rules needs first to ensure it doesn't contradict the country's law on mining, and would likely be covered in a new ministerial decree.
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    Steel, Iron Ore and Coal

    China, Australia ink FTA removing import tariffs on met coal; date to be fixed

    China and Australia Wednesday inked a bilateral free trade agreement that will remove the existing 3-6% import tariffs on metallurgical coal, Australia's Department of Foreign Affairs and Trade said.

    This follows the signing of a memorandum of understanding between the two countries last year.

    The implementation of the FTA will not be immediate as it now needs to pass through domestic legal and parliamentary processes in both China and Australia, including a review by Australia's Joint Standing Committee on Treaties and the Senate Foreign Affairs, Defence and Trade References Committee, DFAT said in an email response to queries.

    Such domestic processes typically take "a few months," an industry source said.

    The implementation of the FTA will immediately cut the import tariffs on coking coal from the current 3% to zero and phase out those on PCI from the current 6% to zero over three years; to 4% in the first year, 2% in the second and zero in the third, based on the indicative schedule provided by DFAT.

    China imposed a 3-6% tariff on imported metallurgical coal in October 2014, a move which many Chinese participants felt to be a protective measure by the state to prevent the collapse of the sluggish domestic industry.
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    China coking coal market outlook stable in the short run

    China’s domestic coking coal market is likely to be stable in the short run, due to increased restocking demand from coke and steel plants, though the steel market remains bearish.

    Most producers reported smooth sales recently amid increased restocking demand from end users; few of them even noted tightness in supply for some coking coal grades.

    One Taiyuan-based miner, who recently put mine into production, said almost all the local mines were in suspension, with only two mines operating. He is now offering primary coking coal with 0.4-0.45% sulphur at 630 yuan/t, ex-washplant basis.

    One Hebei-based coking plant source still intended to press down coking coal prices to reduce cost and change the current loss-making dilemma. The delivered price of Shanxi’s primary coking coal with 1.0% sulphur was 680-700 yuan/t with VAT, according to the source.

    One Shandong-based buyer said the ex-washplant price of locally-produced washed gas coal with 0.6% sulphur was 470-475 yuan/t with VAT, up 5 yuan/t from May.

    He said the delivered price of Shanxi primary coking coal with 1.3% sulphur was 610 yuan/t with VAT, and anticipated further price rise in late June, due to tight supply in some Shanxi mines.

    Large miners were prudent in adjusting prices. China’s largest metallurgical coal producer -- Shanxi Coking Coal Group, continued to set prices separately with each buyer at varied extents of discount, due to still high stocks.

    One Linfen-based miner said the price of his raw coking coal was adjusted up by 10 yuan/t or so, with the ex-washplant price presently at 390-400 yuan/t, VAT included. This has been accepted by downstream washing plants and coking plants.
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    Polish miner JSW considers share issue to avoid crunch

    Polish coal miner JSW is considering a share issue, among other options, to rescue it from a liquidity crisis caused by record low coal prices, the Chief Executive Edward Szlek said.

    JSW, the European Union's biggest coking coal producer, ran into trouble at the end of 2014 when its cash reserves were depleted by high costs and low prices and it had to put a planned eurobond issue on hold because of weak demand.

    "A share issue is one of the conventional instruments which a company looking for capital could use. We are considering this as one of the solutions. We are focusing on the talks with the financial sector to find the best solution for our company," Szlek said in an emailed reply to Reuters questions.

    He said JSW now had more than 500 million zlotys ($136 million) of cash, but said coal prices were unlikely to rebound soon.

    "We are aware that either we will go for radical actions or we will face losing liquidity. We are determined not to let that happen," Szlek said.

    This year, the state-run company was also hit by a strike, which translated into a loss of about 100 million zlotys in the first quarter.

    To prevent a collapse, JSW's management has cut costs and is working on obtaining new loans.

    Szlek also said he was optimistic about the result of JSW's talks with debt holders to postpone their put options on bonds the company issued last year.

    In 2014, JSW issued zloty- and dollar-denominated bonds worth about $388 million. The debt holders have the right to demand their buy-out in July.

    "We have good relations with our debt holders. Also our savings programme and efficient actions to secure liquidity were well received. I am optimistic about the result of the talks, although they are extremely difficult."

    JSW, which plans to focus on extracting coking coal used in steel production, rather than on thermal coal used in power generation, is also considering merging its Krupinski coal mine with its Pniowek coking coal mine.

    Coking coal makes up 70 percent of JSW's output. The rest is thermal coal, which commands a lower price due to oversupply.

    Last month, local media reported that JSW was considering a gradual shutdown of Krupinski, which produces mostly thermal coal and employs about 2,800 people.

    "We are considering a few options for Krupinski. The most likely one will consist of merging it with Pniowek mine in order to optimize the product range," Szlek said.
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    Outlook for new steel orders weakens in China- Platts

    The outlook for new steel orders in China over June deteriorated from May, according to a survey by global commodity information provider Platts.

    Platts China Steel Sentiment Index showed a headline reading of 42.2 out of a possible 100 points in June. The June index tumbled 26 points from May’s 68.2, falling below the 50 threshold after three consecutive months of strong expectations for new steel orders.

    A CSSI reading above 50 indicates an increase, and a reading below 50 indicates a decrease.

    Mr Paul Bartholomew Platts analyst on steel and steel raw materials said “Market sentiment is extremely pessimistic at the moment due to continued weak demand from domestic end-user segments, such as manufacturing and property construction. This is expected to put downward pressure on flat steel prices, such as hot rolled coil, over the next month despite slightly higher iron ore input costs.”

    The outlook for new domestic steel orders dropped 27 points from the previous month to 43.2, while export order expectations softened further by 14 points to 43.9. The outlook for crude steel production in June also entered negative growth territory, dropping 7.6 points to 44.4.
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