Mark Latham Commodity Equity Intelligence Service

Thursday 27th April 2017
Background Stories on www.commodityintelligence.com

News and Views:

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    Macro

    White House proposes tax reform without border adjustment


    The Trump administration Wednesday proposed an overhaul of the US tax code without the controversial border-adjustment provision that could have upended US energy and commodity trade flows and distorted the Brent/WTI spread.

    The plan would slash business taxes to 15%, from the current 35% corporate tax rate, extend those cuts to small and medium "pass-through" companies, and allow companies one chance to repatriate trillions of dollars in overseas earnings, Treasury Secretary Steven Mnuchin said during a White House briefing.

    Companies across the energy sector are expected to embrace the cuts.

    While US refiners were breathing easier about not facing steep new import costs from the House of Representatives' plan, Tesoro lobbyist Stephen Brown said it may be too soon to declare the border adjustment dead.

    Brown said the White House has "figured out that the Senate is poised to administer last rites over the BAT," but House leaders are still defending it.

    "I think it's still alive," Brown said. "It's not as viable as it once was. And today is more of an opening gambit than anything else. It's not politically realistic in terms of blowing a hole in the deficit, but it paints a signpost for the direction the [White House] wants to go."

    WAITING FOR RELIEF

    Bill Douglass, chairman of the Small Retailers Coalition and owner of Texas-based Douglass Distributing, said he would welcome any cuts to business taxes. His company, which handles more than 130 million gallons of fuel a year, pays an effective tax rate of 43.5%, including surcharges from the Affordable Care Act, Douglass said.

    "We have all waited a long time for relief, so any proposals about reduction are welcome," he said.

    Edison Electric Institute, which represents investor-owned electric utilities, said the White House proposal was positive for its members, but it would continue to fight the House plan's elimination of deductions for net interest expenses and state and local taxes.

    "Our industry is the nation's most capital-intensive industry, and EEI's members invest more than $100 billion each year to build smarter energy infrastructure and to transition to an even-cleaner generation fleet," the group said. "The loss of interest detectability will increase the cost of capital, which is reflected in electric rates paid by our customers." The White House plan omits a border-adjustment provision that is central to the House's tax blueprint, despite campaigns against it by importers from across the US economy.

    Mnuchin said earlier Wednesday during an event hosted by The Hill that Treasury officials are talking weekly with House and Senate leaders to come to agreement on one tax plan that they hope to move through Congress by the end of the year.

    "There's many aspects of it we like; there's certain things that we're concerned about," Mnuchin said of the GOP's border-adjustment proposal. "What we've discussed with them is we don't think it works in its current form and we're going to continue to have discussions with them about revisions that they will consider."

    HOW TO PAY FOR TAX CUTS?

    The House plan calls for cutting corporate taxes to 20% from 35% and paying for those cuts with a border adjustment that would tax imports but not exports. Analysts estimate the border provision would raise consumer prices, upend energy and commodity trade flows, and inflate WTI crude prices by as much as 25% relative to Brent.

    The measure is estimated to generate up to $1 trillion over 10 years -- a key element that would make the package revenue neutral and allow legislators to advance the bill through the faster budget reconciliation process.

    A major sticking point of the White House plan will be funding the massive tax reductions without blowing up the federal deficit.

    Mnuchin gave few specifics about how the administration wants to pay for the cuts, except to say that it would lead to 3% or higher gross domestic product growth.

    "This will pay for itself with growth and with reduction of different deductions and closing loopholes," he said.

    Mnuchin said the White House is counting on "a lot of desire" from all sides in Congress to pass a tax package that boosts the economy, makes US businesses more competitive and creates jobs.

    "We will be working very closely with the House and the Senate to turn this into a bill that can be passed and the president can sign," he said. "And there's lots and lots of details that will go into how that will pay for itself."

    http://www.platts.com/latest-news/oil/washington/white-house-proposes-tax-reform-without-border-21564004

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    China eyes upgrades to manufacturing industry, report


    China will make unwavering efforts in upgrading its manufacturing industry as the nation transitions to an economy that relies more on innovation and high value-added products, Xinhua reported.

    "China's manufacturing sector is tasked with challenges including a downshift in growth, structural adjustment and a shift in growth engines," said Miao Wei, minister of industry and information technology.

    He made the remarks when delivering a report submitted to Chinese lawmakers for deliberation at a four-day bimonthly session of the National People's Congress Standing Committee, which opened on April 17.

    China is determined to roll out more policies to optimize the investment environment and tap investment potential of businesses in a bid to support the development of advanced manufacturing, according to the report.

    The manufacturing sector will also be bolstered by lowered operation costs by standardizing fee systems, optimizing land supply and streamlining the tax structure, Miao told lawmakers.

    In the report, Miao also stressed expanding financing channels for the manufacturing sector and reducing market entry restrictions to make the manufacturing industry more open to foreign investment.

    China will aim to improve its innovation system with focus on the research and development of new materials, intelligent manufacturing and robots.

    http://www.sxcoal.com/news/4555257/info/en
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    China's first quarter industrial profits grew more than 20 percent: People's Daily


    Profits of Chinese industrial firms grew more than 20 percent in the first quarter from the same period a year ago, a senior official from the country's top economic planner was quoted as saying on Wednesday.

    While still robust, the figure could suggest a marked earnings slowdown in March from the first two months of 2017, when profits surged almost 32 percent, the fastest pace in nearly 6 years.

    The comments from Ning Jizhe, vice chairman at the National Development and Reform Commission (NDRC), came a day ahead of the official data release.

    Ning told the People's Daily in an interview that market watchers should not be too sensitive to minor fluctuations in China's economic growth rate and should pay more attention to the quality of growth instead.

    "We can't have zero growth, or too low of a growth rate, but the growth rate is not omnipotent, nor is the GDP," Ning said.

    Strong first-quarter profits, together with an increase of 14.1 percent in fiscal revenue, has set "an excellent foundation" for improved growth quality in 2017, he said.

    Echoing bullish comments from the finance minister and the central bank chief, Ning said China is set to achieve its annual growth target, even though it has so far reported data for only the first three months of the year.

    But Ning also cautioned that the problem of excess capacity in sectors such as steel and coal has not been fundamentally resolved despite more efficient utilization rates, adding it will take some time to sort out.

    The government made some progress in shutting more inefficient capacity last year, but a senior official of the China Iron and Steel Association (CISA) called on Tuesday for further cuts, saying the sector remains saturated despite increased profits in the first quarter.

    China's government has lowered its growth target to around 6.5 percent this year from a range of 6.5-7 percent last year and an actual rate of 6.7 percent.

    Barring a major shock, stronger-than-expected growth of 6.9 percent in the first quarter is expected to give the economy enough of a tailwind to meet the full-year target even if activity cools a bit later in the year, as many analysts predict.

    China's industrial firms have been enjoying their best profits in years in recent months as a construction boom and government-mandated cuts in excess capacity led to sharp increases in prices of raw materials such as iron ore and coal.

    But most economists expect price gains will soon start to slow as government stimulus fades and a red-hot property market cools.

    http://www.reuters.com/article/china-economy-industrial-profits-idUSL4N1HY3VT
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    Atlas Copco profit beats forecast as growth comes surging back


    Compressor and mining gear maker Atlas Copco beat forecasts for quarterly profit and order intake on Wednesday, boosted by strong growth in its mining and industrial businesses, and said it expected demand to improve further.

    Many engineering firms have struggled to grow in recent years as weak commodity prices have squeezed mining investments and global industrial demand more broadly.

    But firming prices for metals and crude oil last year and an improving backdrop for industrial demand have lately fuelled a pick up in growth for engineering firms such as Atlas Copco.

    The Swedish company said first-quarter earnings before interest and tax rose to 5.71 billion crowns ($651 million) from 4.17 billion in the same period last year, ahead of a mean forecast for 5.31 billion crowns in a Reuters poll of analysts.

    Atlas, whose products include vacuum pumps, industrial power tools and assembly systems, reported its biggest jump in order intake since 2011, with bookings rising to 31.7 billion crowns, a like-for-like rise of 18 pct, beating a 28.1 billion forecast.

    "We see a positive trend in all sectors of our business," Chief Executive Ronnie Leten said in a statement.

    The strongest rise in like-for-like order intake was recorded in the group's newly established Vacuum Technique business area, up 33 percent year-on-year, followed by its mining business, where bookings rose 28 percent.

    The vacuum business is driven by strong demand from customers in the semiconductor industry.

    Atlas shares were up 2.3 percent at 0950 GMT, taking their year-to-date rise to 21 percent. The stock had climbed earlier this week on the back of forecast-beating results from Nordic mining gear rivals Sandvik and Metso.

    http://www.reuters.com/article/atlas-copco-results-idUSL8N1HY2S1
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    US April propylene contracts settle down 6 cents/lb: sources


    April US propylene contract prices reached final settlements Wednesday, posting a 6-cent/lb drop to 46 cents/lb for polymer-grade product and to 44.5 cents/lb for chemical-grade product, sources said Wednesday.

    The settlement is within market expectations, which recently called for a decrease of 5-8 cents, sources said.

    Multiple propylene market participants -- including three buyers, three producers, one trader and four downstream polypropylene participants -- confirmed the settlements at that level.

    Sources cited the decrease to an increase in supply, noting a combination of recent refinery and steam cracker restarts, an increase in propane/butane cracking in steam crackers, and high run rates for metathesis units.

    The supply increase has been met with falling demand. Sources have said that propylene buyers are holding off orders and reducing their derivative run rates, expecting lower prices in the coming weeks.

    Spot PGP hit a three-month low on April 19, assessed at 36.5 cents/lb FD USG, after shedding 12.5 cents/lb from the beginning of the month, according to S&P Global Platts data.

    Since April 19, spot PGP has climbed 2 cents/lb, last assessed Tuesday at 38.5 cents/lb FD USG, according to Platts data.

    US propylene contract prices are settled on a monthly basis between major producers and buyers. The process includes price nominations by producers and subsequent negotiations with customers.

    http://www.platts.com/latest-news/petrochemicals/houston/us-april-propylene-contracts-settle-down-6-centslb-21563987
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    Oil and Gas

    Will Libya’s Production Rebound As Its Largest Oil Field Re-Opens?


    Libya’s biggest oil field, Sharara, which has been offline for most of the past month, is set to reopen after the Petroleum Facilities Guard (PFG) reached an agreement with protesters who have repeatedly shut down the pipelines that pump oil into the field, according to PFG chief, Brigadier General Idriss Abu Khamada.

    The deal that the PFG has reached will lead to the reopening of the Sharara field, which produces 200,000 bpd, according to Khamada.

    At the end of March, unnamed armed factions were said to have blocked production at the Sharara and Wafa fields in western Libya, cutting the country’s total output by 252,000 bpd. Sharara alone produced 220,000 bpd before the shutdown, accounting for a large part of Libya’s overall 700,000 bpd production until that point. It resumed pumping oil after a two-year pause last December.

    Less than a week later, Libya’s National Oil Corporation (NOC) said that after intervention from its chairman Mustafa Sanalla, the militia men agreed to release the pipeline so the oil flow could be resumed.

    Another week later, production at Sharara was stopped again.

    Last week, reports suggested that the El-Feel oil field in western Libya—operated by a joint venture between Italy’s Eni and Libya’s National Oil Corporation (NOC)—had reopened after two years, and expects to start pumping oil as soon as a power outage is fixed.Related: Low Oil Prices Force Abu Dhabi To Sell U.S. Assets


    Libya’s NOC said on April 20 that El-Feel continues to be closed and under force majeure due to dependence on electricity sourced from Sharara, which remained closed as of last Thursday.

    http://oilprice.com/Energy/Crude-Oil/Will-Libyas-Production-Rebound-As-Its-Largest-Oil-Field-Re-Opens.html

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    Nigeria: Shell Reopens 225,000BPD Bonga Field After Maintenance

    Nigeria: Shell Reopens 225,000BPD Bonga Field After Maintenance

    Shell Nigeria Exploration and Production Company Limited (SNEPCo) has reopened the 225,000 barrel-per-day capacity Bonga deepwater oilfield after a turnaround maintenance, which ensured that statutory activities that would ensure continuous optimum operations at the field were executed.

    http://allafrica.com/stories/201704260206.html
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    Iran adds floating storage


     
    IRAN|AN FLOATING STORAGE IS BACK IN BUSINESS! We have added 3 vessels that qualified our 1 month rule

    @TankerTrackers  
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    No sign of oil policy reversal from Saudi Arabia after royal decrees


    Saudi King Salman's surprise decrees over the weekend that reinstated allowances and bonuses for public sector employees and military personnel is not a sign that the much heralded Vision 2030 economic reforms are being put aside, according to analysts and Saudi observers.

    But nor is the policy reversal evidence of any return to the kind of government largesse that some Saudis had become used to.

    Rather, the changes amounted to a recognition of a need to correct a year of austerity measures that hit too hard, as the kingdom struggled to adapt to lower oil prices.

    The king on Saturday also appointed several government officials seen as close to Vision 2030 champion and Salman's son, Deputy Crown Prince Mohammed bin Salman, which would appear to cement the ambitious economic reform plan.

    "Vision 2030 might be detoured from time to time but it represents Plans A, B and C for the government," said Matthew Reed, vice president at Washington-based Middle East consultancy Foreign Reports.

    "Most Saudis recognize the system needs fixing, that there is fat to cut. But last year, when state finances looked grim, Riyadh cut to the bone when it suspended benefits and bonuses. It was probably too deep," he added.

    Analysts said the decrees make it likely Saudi Arabia will support an extension of the OPEC/non-OPEC production cuts past their June expiry, given that the kingdom needs to continue supporting oil prices to sponsor the employee bonuses.

    OPEC along with 13 non-OPEC countries that agreed in December to cut a combined 1.8 million b/d will meet in Vienna on May 25 to discuss the deal.

    Oil prices are up some 11.5% since it was signed.

    The latest data from the General Authority for Statistics showed Saudi oil export revenues were up 75% year-on-year in February to Riyals 53.16 billion. That was up 21% since September when the austerity measures were taken.

    YOUNG BLOOD

    "The decision to reverse the civil service salary and benefit cuts ... will likely have the most significant implications for oil," said Helima Croft, an analyst with RBC Capital Markets, adding she expects Saudi Arabia to "anchor the extension" of the OPEC/non-OPEC deal.

    "The reversal shows the limits to austerity and, more importantly, increases the need for higher oil prices," she said.

    The government shake-up included the promotion of the deputy crown prince's elder half-brother, Prince Abdulaziz bin Salman the longstanding deputy oil minister, to the position of state minister for energy affairs.

    Prince Abdulaziz had been deputy oil minister since 1995, serving under Ali al-Naimi and current minister Khalid al-Falih.

    His new remit as a state minister and relationship to energy, industry and mineral resources minister Falih remains unclear, although a source familiar with Saudi thinking said there was "no hint of a policy change coming from this move".

    "He is equal in rank to Falih now, as a cabinet minister, whereas before he was vice minister," said the source, who spoke on condition of anonymity. "The two have a good working relationship".

    Falih, for his part, said the king's new appointments aimed to strengthen the country's leadership with "young blood".

    The royal decrees would "inject new energy in the arteries of the country," Falih said, as Saudi Arabia presses ahead with the Vision 2030 economic plan.

    A year ago, the 31-year-old deputy crown prince, known as MBS, announced Vision 2030, which he said would confirm the kingdom as "the heart of the Arab and Islamic worlds, the investment power house, and the hub connecting three continents".

    The plan seeks to delink the kingdom's economy from oil prices and open large swaths of it up to private investment through a raft of significant structural reforms that will be largely financed by a sale of up to 5% of state-owned oil company Saudi Aramco through an IPO.

    But, stung by stubbornly low oil prices from a global oversupply caused by the surge of US shale production as well as OPEC's Saudi-led pump-at-will market share policy, Riyadh last September slashed subsidies on a range of goods and services, as MBS cited the need to help balance the kingdom's books and wean the country off of its oil revenue dependence.

    PRICE RISES

    The move raised the ire of many citizens, with some calling for protests.

    Saturday's decrees, which the government said were prompted by increased crude oil export revenues and a decline in the kingdom's budget deficit, reinstated state employee bonuses, with the first payments at the end of May.

    These include an extra two months' pay to troops stationed on the border with Yemen, where Saudi Arabia has been fighting a costly war since 2015.

    The announcement clearly showed the kingdom's need for the cushion of the welfare state to ease the impact of domestic fuel and electricity prices, as well as taxes, said Fareed Mohamedi, chief economist of energy consultancy Rapidan Group.

    Last year, Saudi "social media was alive with fear and criticism of the austerity policy of Mohammed bin Salman," Mohamedi said.

    While bonuses may have been reinstated, it is unlikely the government will go back on the subsidy cuts. In fact, most Saudis are waiting for further domestic fuel and electricity price rises in July.

    Increases of up to 40% had been widely expected to be included in the kingdom's 2017 budget late last year, but did not materialize.

    Instead, the government announced a few details of its planned economic reforms up to 2020, known as the Fiscal Balance Program which it hopes will save around Riyals 362 billion ($97 billion).

    The government is still establishing a mechanism, known as the Household Allowance Program, which will protect lower income households from any sharp jump in costs, and to avoid potentially undermining its unwritten social contract with Saudi citizens.

    If the increased fuel and power prices are confirmed, it would be the second major hike after the kingdom's dramatic change in policy last year.

    "Getting through the next two years without financial disruptions will be the key challenge for the regime," said Mohamedi, a former corporate adviser to Saudi Aramco from 2014 to mid-2016. "Thereafter, [market] balances will tighten and they will be more successful."

    http://www.platts.com/latest-news/oil/dubai/analysis-no-sign-of-oil-policy-reversal-from-26720421
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    Drewry cuts freight rate outlook for LNG shipping


    Given the mounting pressure on freight rates and continuing fleet growth over the next two years, excess LNG tanker supply will reduce only gradually with the recovery in rates pushed back to the latter part of next year, according to the shipping consultancy, Drewry.

    The consultancy maintains a bearish stance on the LNG shipping freight rate outlook for 2017 on account of strong fleet growth which is expected to be around 13%, Drewry said in its latest edition of the LNG Forecaster report.

    The movement in rates has so far been in line with Drewry’s expectations, as rates have been falling since the beginning of the year.

    The spot rate for dual-fuel diesel-electric (DFDE) vessels (East of Suez) is currently around $26,000 per day, compared to $37,000 per day in the beginning of the year, a fall of 30%, it said in the report.

    “The tremendous weakness observed recently in the freight market highlights the ample vessel supply. We are anticipating two years of aggressive fleet growth with supply expected to expand a further 9% in 2018 which will extend the period of weak freight rate development into next year,” Shresth Sharma, Drewry’s lead LNG shipping analyst said in the report.

    “Therefore, we do not expect rates to start recovering until the end of 2018 when several new LNG trains from the US are expected to be operating at full capacity,” said Sharma.

    “As a result, we have trimmed down our forecast for average spot freight rates in 2018 to $40,000pd from the earlier expectation of $50,000pd,” he added.

    http://www.lngworldnews.com/drewry-cuts-freight-rate-outlook-for-lng-shipping/

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    Novatek’s profit drops as revenue climbs


    Novatek of Russia on Wednesday reported a 38.7 percent drop in profit for the first quarter of 2017 due to the foreign exchange effect and the effect of the disposals of interests in joint ventures.

    First quarter net profit reached RR 71.0 billion (US$1.25 billion) as compared to RR 115.9 billion ($2.05 billion) during the corresponding quarter in 2016.

    The company’s revenue for the period rose by 11 percent to RR 154.6 billion, largely driven by the increase in natural gas sales volumes as well as the increase in liquids sales prices.

    Novatek’s natural gas sales volumes totaled 18.8 bcm, representing a 5.5 percent increase compared with the corresponding period in 2016, resulting from a higher demand for natural gas due to adverse weather conditions.

    As at the end of the first quarter 2017, the total amount of natural gas recorded as inventory totaled 130 mmcm compared to 429 mmcm as at the end of the first quarter 2016, Novatek said in its report

    http://www.lngworldnews.com/novateks-profit-drops-as-revenue-climbs/
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    Australia plans LNG export limits to help ease local price pain


    Australia's conservative government unveiled a radical plan on Thursday to restrict exports of liquefied natural gas (LNG) at times when domestic shortages push up local prices, aiming to ease soaring energy costs for local manufacturers.

    The plan would allow Australia's resources minister to impose controls on LNG exports on advice from the market operator and regulator, as the government seeks to cap domestic gas prices, which have become a political hot potato.

    "It's not a threat. This will be export controls. They will not be able to export gas if that has the consequence of reducing the availability of gas for the Australian market," Prime Minister Malcolm Turnbull told Australian Broadcasting Corp radio.

    Australia is the world's second-largest LNG exporter after Qatar, but local gas prices have rocketed over the past two years with the start of LNG exports from three newly built plants in eastern Australia to customers in China, Japan, Korea and Malaysia.

    The government's move drew a swift rebuke from gas producers, who called instead for curbs on onshore gas exploration to be lifted to help boost supply.

    "Restricting exports is almost unprecedented for Australia," said Malcolm Roberts, chief executive of the Australian Petroleum Production and Exploration Association.

    The Australian Energy Market Operator warned in March of a shortage set to hit eastern Australia and has already taken steps to ensure there is enough gas for power plants at peak times.

    At least one of the east coast LNG plants, Gladstone LNG (GLNG) - operated by Australia's Santos Ltd - is drawing gas out of the domestic market to help meet its export contracts.

    Santos said on Thursday it was seeking more details on how the new policy would work.

    "Moving forward, Santos will supp
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    Summary of Weekly Petroleum Data for the Week Ending April 21, 2017


    U.S. crude oil refinery inputs averaged 17.3 million barrels per day during the week ending April 21, 2017, 347,000 barrels per day more than the previous week’s average. Refineries operated at 94.1% of their operable capacity last week. Gasoline production decreased last week, averaging over 9.7 million barrels per day. Distillate fuel production decreased last week, averaging about 5.1 million barrels per day.

    U.S. crude oil imports averaged over 8.9 million barrels per day last week, up by 1.1 million barrels per day from the previous week. Over the last four weeks, crude oil imports averaged over 8.1 million barrels per day, 4.9% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 916,000 barrels per day. Distillate fuel imports averaged 54,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 3.6 million barrels from the previous week. At 528.7 million barrels, U.S. crude oil inventories are near the upper limit of the average range for this time of year. Total motor gasoline inventories increased by 3.4 million barrels last week, and are near the upper limit of the average range. Both finished gasoline inventories and blending components inventories increased last week. Distillate fuel inventories increased by 2.7 million barrels last week and are in the upper half of the average range for this time of year. Propane/propylene inventories were unchanged from last week and are in the lower half of the average range. Total commercial petroleum inventories increased by 6.6 million barrels last week.

    Total products supplied over the last four-week period averaged over 19.5 million barrels per day, down by 2.2% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged over 9.2 million barrels per day, down by 1.8% from the same period last year. Distillate fuel product supplied averaged over 4.1 million barrels per day over the last four weeks, up by 4.5% from the same period last year. Jet fuel product supplied is up 0.9% compared to the same four-week period last year.

    Cushing down 1.2 mln bbls

    http://ir.eia.gov/wpsr/wpsrsummary.pdf

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    US lower 48 oil production up 20,000 bbls


                                                       Last Week  Week Before  Last Year

    Domestic Production'000........... 9,265           9,252           8,938
    Alaska ............................................... 523              530                513
    Lower 48 ...................................... 8,742            8,722           8,425

    http://ir.eia.gov/wpsr/overview.pdf
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    Sanchez Energy Announces First Quarter 2017 Operating Results; Comanche Integration


    Sanchez Energy Corporation, today announced operating results for the first quarter of 2017.  Highlights include:

    As previously announced, Sanchez Energy along with Blackstone Energy Partners (“Blackstone”) in a 50/50 partnership closed the acquisition of working interests in approximately 318,000 gross operated acres in the Western Eagle Ford on March 1, 2017 (the “Comanche Transaction”), resulting in adding approximately 67,000 barrels of oil equivalent per day (“Boe/d”) of production, 300 million barrels of oil equivalent (“MMBoe”) of proved reserves, and 155,000 net acres;
    First quarter production, which includes one month of Comanche production, totaled approximately 4.6 MMBoe, or approximately 51,800 Boe/d, net of previously divested production which was approximately 3,700 Boe/d;
    With the closing of the Comanche Transaction and the ongoing production increase from legacy assets, the Company is currently producing at a record level of approximately 76,000 Boe/d;
    Completion operations on the large inventory of drilled but uncompleted (“DUC”) wells acquired in the Comanche Transaction began in early March 2017, with the first 9 DUC wells brought on-line in mid-April 2017;
    The Company has completed contracting of major services to support drilling plans and mitigate the risk of inflationary pressure on its cost structure, with sand, pressure pumping, and drilling rigs now contracted for the next two years;
    Drilling activity at Comanche currently consists of 3 rigs with 2 additional rigs planned in May 2017;
    The Company brought 14 wells on-line in the South Central region of Catarina in the first quarter 2017 using a new generation of frac design that is 60% larger than the previous design used in this region.

    MANAGEMENT COMMENTS

    “During the first quarter of 2017, we took a major step towards positioning Sanchez Energy among the leading producers in the Eagle Ford Shale,” said Tony Sanchez, III, Chief Executive Officer of Sanchez Energy.  “After months of careful planning and preparation, drilling and completion operations on the newly acquired acreage began quickly and efficiently after closing the Comanche Transaction on March 1, 2017.  Completion operations began at Comanche within days of closing the transaction, resulting in initial production from the completion of the first 9 DUC wells in only 45 days.  We are currently running 3 drilling rigs, 2 frac spreads, and 3 workover rigs at Comanche, with plans to add additional rigs and completion equipment as the year progresses. Production from the initial DUC wells that were recently completed has been strong and so far has exceed expectations.

    “In addition to assuming operations at Comanche, the Company brought 14 horizontal wells on-line in the South Central region of Catarina during the first quarter 2017.  These wells were completed with proppant loading of approximately 3,000 pounds per foot, which is 60 percent more proppant and fluids compared to our standard design.  The move to a larger completion design in the South Central region of Catarina stems from tests conducted in this area over the last year.  Based on the results of this testing, we anticipate the new design will result in a flatter decline profile with payout in as little as six months and performance that is roughly 25% better than our standard completion work after 6 months of operation.

    “As we make a step-change in our operational scale, we continue to maintain a focus on well costs.  Excluding the cost of the larger completion work we are realizing an average of 10 percent to 15 percent service cost inflation, which is in line with expectations.  That being said, we have now completed contracting of major services to support drilling plans for the next two years, with fixed price arrangements in place for sand, pressure pumping, and drilling rigs, among other services.  We believe these arrangements will allow us to maintain our cost structure and de-bundled approach to procurement despite the current pressure on the services market.”

    http://boereport.com/2017/04/26/sanchez-energy-announces-first-quarter-2017-operating-results-comanche-integration-remains-on-schedule-as-the-company-achieves-record-production/
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    Maiden Bakken oil cargo to Asia ships out, with more to come


    The first ever reported export of North Dakota's crude oil to Asia left port last month, according to a shipping document seen by Reuters on Wednesday, in what is expected to be the first of numerous cargoes once the key Dakota Access pipeline starts moving oil in May.

    Swiss-based Mercuria Energy Trading S.A. loaded more than 600,000 barrels of Bakken crude, as well as some Mars Sour crude, in late March off the coast of Louisiana onto the very large crude carrier (VLCC) Maran Canopus, destined for Singapore, according to the bill of loading and ship tracking data.

    The burgeoning appetite for U.S. crude among Asian refiners could be a boon for Bakken crude, especially when the Dakota pipeline starts up. That line can carry 470,000 barrels per day of oil from North Dakota's Bakken play to the Gulf, the starting point for the lion's share of U.S. oil exports.

    At least two Asian refiners told Reuters that they are interested in Bakken light crude because of the products it can yield through refining.

    "There seems to be increasing demand for light quality crude in Asia," said Michael Cohen, head of energy commodities research at Barclays. "I think with Dakota Access coming online, it makes the pipeline route from the Bakken to the Gulf Coast more economical."

    With the start of Dakota Access (DAPL), Bakken producers such as Hess Corp and Continental Resources for the first time will have a direct route to export terminals on the Gulf Coast, better connecting them to international markets.

    A year ago, Hess Corp sold Bakken crude out of the U.S. Gulf to Europe, the first reported export of the light North Dakota oil since Congress lifted the ban on exporting crude in 2015.

    "As DAPL opens up supply of Bakken crude to the U.S. Gulf Coast, we are looking at potential exports to customers in South America, Europe and Asia," said Lorrie Hecker, a spokeswoman for Hess.

    While new exports of Bakken could be a boon for North Dakota producers, they will also dump more U.S. crude into the global oil market at a time when OPEC and non-OPEC countries are seeking to lower worldwide inventories.

    U.S. production has increased by nearly 500,000 barrels a day so far in 2017, with current production of about 9.3 million bpd, per U.S. Energy Department figures.

    The Maran Canopus supertanker took oil in a ship-to-ship transfer from smaller Aframax vessels on five different occasions, according to data on Thomson Reuters Eikon. It left the Louisiana Offshore Oil Port for Singapore on March 29 at 96 percent filled.

    http://www.reuters.com/article/us-oil-exports-bakken-idUSKBN17S2SX
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    Anadarko to shut down 3,000 oil wells after fatal home explosion


    Anadarko Petroleum Corporation announced Wednesday afternoon that it will shut down 3,000 oil wells similar to the one 170 feet from a home in Firestone that was the site of an explosion and fire that claimed two lives last week.

    In a news release, the energy company did not definitively say the well is the cause of the explosion, which remains under investigation by the Colorado Oil and Gas Commission and Frederick-Firestone Fire Protection District and Firestone Police Department.

    The explosion leveled a home in the Oak Meadows subdivision near the intersection of Colorado and Firestone Boulevards the evening of April 17.  

    The bodies of 42-year-old Mark Martinez and his brother-in-law 42-year-old Joey Irwin III were later found in the basement.

    High school science teacher Erin Martinez was injured, as was her 11-year-old son, who was released from the hospital that same day. Mark Martinez is Erin Martinez's husband, and Irwin is her brother.  

    Anadarko says it operates an older vertical well that was drilled by a previous operator approximately 200 feet from the home.

    On Friday, investigators from the Frederick-Firestone Fire Protection District told 9NEWS they are “confident” about the cause, but will hold off on releasing it until they are 100 percent certain.

    Family members told 9NEWS they suspected something that went wrong with the water heater led up to the explosion and subsequent fire.

    Anadarko says it will shut down similar vertical wells in northeast Colorado until field personnel “can conduct additional inspections and testing of the associated equipment, such as facilities and underground lines associated with each wellhead.”

    The wells account for 13,000 net barrels of production each day, Anadarko said.

    They went on to say they will face “particular focus” on places where houses and commercial developments are being built.

    The company says this process could take two to four weeks, depending on weather.

    http://www.wtsp.com/news/anadarko-to-shut-down-3000-oil-wells-after-fatal-home-explosion/434452499
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    Hess reports smaller loss on higher crude prices, lower costs


    U.S. oil producer Hess Corp reported a smaller quarterly loss on Wednesday, helped by an uptick in crude prices and lower operating costs.

    U.S. crude prices CLc1 averaged $51.78 per barrel in the first three months of the year, up 54 percent from a year earlier.

    Hess's average realized crude oil selling price, including the effect of hedging, was $48.58 per barrel in the first quarter ended March 31, up from $28.50 a year ago.

    Higher selling prices helped Hess make up for a fall in production.

    Excluding production from Libya, net production was 307,000 barrels of oil equivalent per day (boepd) in the quarter, lower than 350,000 boepd a year ago.

    Total revenue and non-operating income rose 28.4 percent to $ 1.28 billion, while total costs and expenses fell 13.3 percent to $1.58 billion.

    Net loss attributable to Hess narrowed to $324 million, or $1.07 per share, in the first quarter ended March 31, from $509 million, or $1.72 per share, a year earlier.

    http://www.reuters.com/article/us-hess-results-idUSKBN17S1GS
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    Cenovus Energy posts smaller-than-expected quarterly loss


    Canadian oil company Cenovus Energy Inc reported a smaller-than-expected quarterly loss as operating costs fell, while oil sands production rose.

    Oil and gas companies have sharply cut costs and have been consolidating assets following a two-year slump in crude prices.

    Cenovus last month agreed to buy most of ConocoPhillips' Canadian oil and gas assets in a C$17 billion deal that effectively doubled the size of the Canadian oil company.

    Cenovus, which has laid off nearly a third of its workforce since the end of 2014, said operating costs for its oil sands fell 6 percent to C$8.97 per barrel in the first quarter.

    The company said on Wednesday that operating margin was C$450 million, a three-fold increase from last year, helped by higher commodity prices.

    Total oil production rose about 19 percent to 234,914 barrels per day.

    The company's net profit was C$211 million ($155.54 million), or 25 Canadian cents per share, in the first quarter ended March 31, compared with a loss of C$118 million, or 14 Canadian cents per share, a year earlier.

    Operating loss was 5 Canadian cents per share, while analysts on average were estimating a loss of 8 Canadian cents per share, according to Thomson Reuters I/B/E/S.

    The Calgary, Canada-based company has lost nearly a fifth of its value since the deal with ConocoPhillips was announced in late-March.

    http://www.reuters.com/article/cenovus-energy-results-idUSL4N1HY3VY
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    Alternative Energy

    Lynas Corp: Higher output, prices boost cash-flow


    Rare earths miner and processor Lynas is gaining the benefits of record performance, with March qtr (Q3FY17) operating and investing cash flows rising to $A11.6M on the back of record invoiced sales of $69.3M (up 6.6% from the Dec qtr) and above-design rate production of 1,373t NdPr.


    Now the world's second largest producer of neodymium-praseodymium, and the largest independent supplier, Lynas is benefiting also from the improving in-China market price to $US34/kg from $31/kg at the start of the qtr).

    http://www.miningbusiness.net/content/lynas-corporation-higher-output-prices-boost-cash-flow
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    China to lead wind power growth over next five years


    China will lead growth in global wind power capacity of almost 65% over the next five years, with other Asian countries also developing more renewable energy, Reuters reported on April 25, citing the Global Wind Energy Council.

    Cumulative wind energy capacity was 487 GW at the end of 2016, a 12.6% rise from the year before and should grow by almost 65% to 800 GW by the end of 2021, the GWEC said in its annual report on the industry.

    While China will continue to lead the global market, other countries such as India, which set a record for new wind installations last year in an effort to meet ambitious government targets, will also play a part. Globally, wind power capacity installed in 2016 reached 54 GW, which should rise to 60 GW this year, GWEC said.

    Last year, the International Energy Agency said renewables surpassed coal in 2016 to become the largest power source in the world.

    "Wind power is now successfully competing with heavily subsidized incumbents across the globe, building new industries, creating hundreds of thousands of jobs and leading the way towards a clean energy future," GWEC Secretary General Steve Sawyer said in a statement.

    Last year saw significant price reductions for offshore wind in Europe, the report said.

    "Europe will continue to lead the offshore market, but the low prices have attracted the attention of policymakers worldwide, particularly in North America and Asia," it said.

    http://www.sxcoal.com/news/4555273/info/en
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    Precious Metals

    Fresnillo says Q1 silver output up 12.5 pct, on track to meet FY targets


    Precious metals miner Fresnillo Plc said its silver production rose 12.5 percent in the first quarter due to higher ore grades at its Fresnillo and Cienega mines in Mexico.

    The company, which mines silver and gold at six mines in Mexico, said silver production hit 12.4 million ounces for the quarter ended March 31.

    Gold production for the quarter, however, fell 3.3 percent to 222,290 ounces due to lower grades at the company's Herradura mine and a one-off reduction of inventory levels.

    The company said it was on track to meet its 2017 production guidance of 58 million-61 million ounces of silver and 870,000-900,000 ounces of gold.

    Demand for gold, a safe-haven metal, has been robust amid mounting geopolitical uncertainty across the world, including Britain's move to leave the European Union.

    Meanwhile, the slide in the peso has been pushing costs lower for Fresnillo, while silver prices are ramping up on strong industrial demand and the metal's attraction as a haven from risk.

    Spot gold prices have risen 8.4 percent in the first quarter and silver has gained 14.4 percent, while the Mexican Peso has weakened 9.6 percent.

    http://www.reuters.com/article/fresnillo-results-idUSL4N1HY2NF
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    Base Metals

    Freeport readies first Grasberg copper exports after 15-week halt


    Freeport McMoRan Inc is preparing three copper concentrate export shipments from its giant Grasberg mine in Indonesia after a 15-week outage, sources with direct knowledge of the matter said.

    Freeport is ramping up output and copper shipments from Grasberg, the world's second-biggest copper mine, after obtaining an export permit on Friday that coincided with U.S. Vice President Mike Pence's state visit.

    These include shipments for customers in South Korea and Japan, the sources told Reuters. The restart of Grasberg shipments could mean freight savings for East Asian customers forced to buy from Chile while Indonesian exports were offline, one South Korean-based trade source said.

    It takes "about 35 days" to ship from Chile, he said, more than three times longer than it takes to ship from Grasberg.

    A shipping source in Japan said a vessel has loaded 22,000 tonnes of copper concentrate from Grasberg and is ready to leave for South Korea as early as later on Wednesday. Other ships may be headed to India and China, industry sources said.

    A spokesman for Freeport Indonesia declined immediate comment on the matter.

    Freeport is coordinating with customers who had made "other arrangements for supply when we were shut down for exports," chief executive Richard Adkerson told an earnings conference call late on Tuesday.

    There were "a series of ships, ones having loading completed as we speak," he said, referring to 20,000-25,000-tonne vessels.

    "We had close to 100,000 tonnes of copper concentrate at our portside ... so we'll have a series of ships to reduce that inventory."

    Indonesia halted Freeport's copper concentrate exports on Jan. 12 under rules requiring the world's largest publicly listed copper miner to adopt a new mining permit, divest a 51 percent stake of its Indonesian unit, build a second smelter, relinquish arbitration rights and pay new taxes and royalties.

    Adkerson said arbitration is still an option being considered by the Phoenix, Arizona-based company that has said it will only agree to a new permit with the same fiscal and legal protection in its current contract.

    The stoppage has cost both sides hundreds of millions of dollars, and tensions have grown around Grasberg after Freeport laid off about 10 percent of its workforce of 32,000 and cut spending on underground expansion by one-third in an effort to stem its losses.

    The company is now in talks with union leaders representing about one-third of its Indonesian workforce, Adkerson said, "in an effort to get them back to work."

    Union leaders warned last week that a one-month strike would commence on May 1, demanding an end to Freeport's furlough policy.

    According to the trade ministry, Freeport exported 1.17 million tonnes of copper concentrate to Japan, South Korea, China, India and the Philippines in 2016.

    http://www.reuters.com/article/indonesia-freeport-exports-idUSL4N1HY43E
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    U.S. launches national security probe into aluminium imports


    The U.S. Commerce Department launched an investigation on Wednesday to determine whether a flood of aluminium imports from China and elsewhere was compromising U.S. national security, a step that could lead to broad import restrictions on the metal.

    Commerce Secretary Wilbur Ross said the investigation was similar to one announced last week for steel imports into the United States, invoking Section 232 of a national security law passed in 1962 at the height of the Cold War.

    Ross told reporters the probe was prompted by the extreme competitive pressures that unfairly traded imports were putting on the U.S. aluminum industry, causing several domestic smelters to close or halt production in recent years.

    China, the world's top producer and consumer of the metal, is seriously concerned by the probe and hopes to resolve the dispute through negotiations, a Commerce Ministry spokesman said at a regular briefing on Thursday.

    The U.S. move is the latest of several potential U.S. actions aimed at stemming a rising tide of aluminium imports. The Commerce Department is investigating allegations that Chinese companies are dumping aluminium foil into the U.S. market below cost and benefiting from unfair subsidies.

    Ross said part of the justification for the investigation was that U.S. combat aircraft such as the Lockheed Martin F-35 joint strike fighter and the Boeing F/A-18 Super Hornet require high-purity aluminum that is now produced by only one smelter, Century Aluminum Co.

    He said that company could probably meet U.S. peacetime needs, but not if the United States needed to ramp up defence production for a conflict. The same high-purity aluminium goes into armour plating for military vehicles and naval vessels, he said.

    "At the very same time that our military is needing more and more of the very high-quality aluminium, we're producing less and less of everything, and only have the one producer of aerospace- quality aluminium," Ross told a White House briefing.

    The investigation will determine if there is sufficient domestic aluminium capacity to meet U.S. defence needs and will also assess the effects of lost jobs, skills and investments on national security, Ross said.

    Although he said China was a major contributor to the global excess capacity in aluminium production, he said imports from other countries, including Russia, were also causing problems.

    "This is not a China-phobic program, this has to do with a global problem," Ross said.

    Last November, a dozen U.S. senators requested that a U.S. national security review panel reject the $2.3 billion acquisition of Cleveland-based aluminium products maker Aleris Corp by China's Zhongwang International Group Ltd.

    Aleris spokesman Jason Saragian said the aluminium probe announced by the Commerce Department was unrelated to the ongoing review of the merger by the Committee on Foreign Investment in the United States (CFIUS).

    "The pending acquisition is not affected by this broad inquiry, because the transaction does not involve any imports from China," Saragian said in an emailed statement.

    http://www.reuters.com/article/us-usa-trade-aluminum-idUSKBN17T044
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    Arconic sheds Alcoa stake through debt-for-equity swap


    Specialty metals maker Arconic Inc said on Wednesday it would exit its stake in Alcoa Corp through a debt-for-equity swap with two of its creditors.

    Arconic said it would exchange the nearly 13 million Alcoa shares it owns for debt held by Citigroup Global Markets Inc and Credit Suisse Securities (USA) LLC.

    http://www.reuters.com/article/arconic-alcoa-idUSL4N1HY6GQ
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    Steel, Iron Ore and Coal

    Russian miner Mechel says stronger results support debt reduction


    Russian metals and mining giant Mechel could start reducing debt this year if prices for its products hold up and other favourable market conditions continue, it said on Wednesday.

    Mechel, which borrowed heavily before Russia's economic crisis took hold in 2014, has struggled to keep up debt repayments as demand for its products weakened alongside tumbling coal and steel prices.

    Before reaching restructuring agreements on the bulk of its debt last year, the company controlled by businessman Igor Zyuzin was facing bankruptcy.

    Mechel Chief Executive Oleg Korzhov said that increases in prices for coal and steel, its two main products, had supported the company's financial results in 2016.

    "The cashflow generated by the group enables us to service our debt, operate successfully and, if the current favourable market situation holds, begin to decrease our debt burden," he said in a statement.

    Mechel's net debt stood at 459 billion roubles ($8.12 billion) at the end of last year.

    Chief Financial Officer Sergei Rezontov told Reuters in October that the company hoped to sign a final debt restructuring deal with creditors in early 2017.

    But the company said on Wednesday that a syndicate of banks had filed a suit over the repayment of a pre-export financing contract at the London Court of International Arbitration in February.

    "In February 2017, a number of creditors filed 14 arbitration requirements at the London Court of International Arbitration concerning a pre-export financing contract," Mechel said in its 2016 financial report.

    Including penalties and fines, the outstanding debt on that contract amounted to about 68 billion roubles by the end of 2016, the report said. A company spokeswoman said talks with the banks were ongoing.

    Mechel posted a net profit of 1.6 billion roubles for the fourth quarter of 2016, against a net loss of 2.8 billion roubles in the previous quarter.

    Its net profit for the year totalled 7.1 billion roubles, its first annual net profit since 2011, Korzhov said.

    Revenue increased by 20 percent quarter on quarter to 79.7 billion roubles, Mechel said, and earnings before interest, taxation, depreciation and amortisation (EBITDA) jumped 55 percent to 24.6 billion roubles.

    Capital expenditure will total 12.5 billion roubles in 2017, the company added, and it plans to produce 10 million tonnes of coking coal concentrate this year, having sold 8.7 million tonnes in 2016.

    http://www.reuters.com/article/russia-mechel-results-idUSL8N1HY3WG
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    Ganqimaodu coal imports soar 216pct on year


    As of April 10, coal imports at Ganqimaodu border crossing in northern China's Inner Mongolia autonomous region skyrocketed 215.59% year on year to 5.01 million tonnes, data showed from Wulate Zhongqi Bureau of Commerce.

    Daily coal imports stood at 49,600 tonnes, soaring 215.92% from the preceding year. That was 101 days earlier for the border crossing to see coal imports exceeding 5 million tonnes compared to the previous year.

    From January to March, the border crossing imported 4.5 million tonnes of coal from neighboring Mongolia, hitting a quarterly new high. Total coal imports valued at $360 million.

    Over March 13-March 19, Ganqimaodu borders imported 460,000 tonnes, hitting a new high on weekly-basis. Daily coal imports reached a peak of 88,000 tonnes on February 15.

    Robust imports via the border crossing was mainly due to tight supply of coking coal in China, caused by the policy of de-capacity, environmental protection and supply-side structural reform.

    With Mongolian washed coking coal traded at the border crossing dropping three times to 900 yuan/t since February, as much as 32 enterprises were engaged in coal import business at the border crossing.

    http://www.sxcoal.com/news/4555294/info/en
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    Haunted by 2016, China's utilities ready for coal buying spree


    China's utilities are readying for a months-long buying spree to shore up thermal coal reserves ahead of the hotter summer months, sources say, in a strategy aimed at averting a supply crunch but which may drive prices higher.

        Top power generating companies will need to purchase more than 40 million tonnes of thermal coal by the end of June to provide a cushion of supply during the third quarter, the second-highest demand period of the year after winter, according to internal government calculations provided by a source briefed on the matter.

    That is 14 percent of China's quarterly output, or 15 days of use. The estimate is based on stocks of 90 million tonnes at the nation's thousands of utilities and a target to reach at least 130 million tonnes by June, the source said. That target is equivalent to almost half of the utilities July to September consumption.

    The plan is to avoid a repeat of last winter's chaos when government mining cuts tightened domestic supplies, triggering a rally in prices in the world's top coal consumer and forcing Beijing to take emergency steps to boost supplies to avert an energy crisis.

    "China could have a bigger coal crisis than last year," said an Inner Mongolia-based purchasing manager with China Resources Power Group on Wednesday.

    Utilities including China Datang Corp [SASADT.UL] and China Guodian Corp [CNGUO.UL] typically replenish stocks after the winter, but this year they will need to load up more than usual because stocks are at multi-year lows, two analysts and two utility sources said.

    The stockpiling demand could spur higher thermal coal futures prices. Futures have already rallied 26 percent this year and hit a record 566.20 yuan ($82.17) per tonne earlier this month.

    Prices are surging as China's government clamped down on illegal mining and required miners to shut production as way to combat pollution and overcapacity.

    The National Development and Reform Commission (NDRC), China's economic planner, did not respond on Wednesday.

    A hotter-than-average summer would have a blistering impact on coal-fired power generation demand. Long-range weather forecasts show temperatures in China's two biggest cities Beijing and Shanghai will be slightly higher than average in July to September.

    Another challenge for the power market is recent low rainfall amounts, which last month crimped hydropower output, China's second-largest power source behind coal.

    "The first quarter was particularly dry compared with 2016, so coal generation went up quite aggressively. Power demand will remain strong and coal will see more upsides when hydropower falters," said Frank Yu, Principal Consultant, APAC Power & Renewables, for Wood Mackenzie.

    Coal inventories at major utilities stand at 50 million tonnes, their lowest in April since at least 2014 when they were 72 million tonnes, according to a survey by consultancy Fenwei.

    Utilities consumed 300 million tonnes of coal in the July to September period last year, Fenwei said.

    The Inner Mongolia buyer said he has 60,000 tonnes of coal, or about ten days of use, which is "very low".

    He will need to increase stocks to almost 100,000 tonnes, or 15 days of use, by the end of June to see him through the summer months.

    Illustrating rising concerns about coal prices in Beijing, the NDRC has issued two statements this week saying it will take steps to get prices to return to "reasonable" levels before the summer months.

    http://www.reuters.com/article/us-china-coal-power-idUSKBN17S1IV
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    China to reallocate 500,000 coal and steel workers in 2017


    China needs to reallocate around half a million coal and steel workers in 2017, while advancing reduction of surplus capacity in both industries, Lu aihong, spokeswoman of the Ministry of Human Resources and Social Security, said at a press conference on April 25.

    "This is the key to resolve overcapacity issues, not only directly related to workers' vital interests, but also to the progress of supply-side structural reform," Lu said when asked what measures and policies the ministry will take to address rearrangement of laid-off workers.

    "In order to do a good job this year, we issued a notice couple of days ago over this issue with NDRC and other four relevant departments. We've already arranged key tasks for the year." added Lu.

    On February 29, Yin Weimin, the head of the ministry, said China will introduce a policy this year to encourage the development of new industries, besides assigning workers different jobs within the same or a different company, early retirement or encouraging them to become entrepreneurs.

    China reallocated jobs to 726,000 coal and steel workers in 2016 "without any major problems", overall employment outlook in 2017 is expected to remain relatively stable, despite the government facing immense pressure to create jobs, Yin said then.

    China's central government allocated more than 100 billion yuan ($14.54 billion) last year to help laid-off coal and steel workers and spent more than 30 billion yuan from the fund last year.

    http://www.sxcoal.com/news/4555256/info/en
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    Kloeckner beats Q1 forecasts, invests in 3D printing


    German steel distributor Kloeckner & Co beat market expectations for first-quarter core profits thanks to a jump in steel prices, which it said it expected to stabilise this quarter, lifting its share price in early trading.

    Kloeckner said it expected a "noticeable" increase in earnings before interest, tax, depreciation and amortisation (EBITDA) for the full year - which it quantified as 5-10 percent growth - after they more than quadrupled in the first quarter.

    EBITDA of 77 million euros ($84 million) beat all the estimates in a Reuters poll, which averaged 74 million euros, and Kloeckner said it expected 60-70 million euros this quarter. Sales that grew 16 percent to 1.6 billion euros also beat consensus.

    Chief Executive Gisbert Ruehl said he expected steel prices to rise by close to 2 percent over the full year in Europe and roughly 3 percent in the United States, and said Kloeckner could benefit from any new U.S. anti-dumping tariffs.

    "We are more likely to be positively affected by U.S. tariffs than negatively," he told reporters, saying Kloeckner imports only 7 percent of the steel it distributes in the United States, where it makes 40 percent of its sales.

    Shares in Kloeckner jumped as much as 4.5 percent but later pared gains to trade 1.6 percent higher in a market weighed down by disappointing results from U.S. Steel.

    "Beyond the beat on Q1 and the solid Q2 EBITDA guidance, it is the 'notable increase' in FY17E EBITDA which may imply that EU/US steel prices will remain relatively resilient in H217 from a very high H117E level," wrote Berenberg analyst Alessandro Abate, who rates Kloeckner "hold".

    Kloeckner also said it had bought a 10 percent stake in Berlin start-up BigRep, which makes the world's largest 3D printers at a cubic metre, for under 10 million euros.

    It said it planned to use these 3D printers at its European and U.S. sites in a bid to increase its share of higher-value, finished products, and expected the market for 3D printing, or additive manufacturing, to grow by 20 percent a year.

    Kloeckner said it had not participated in a previous BigRep funding round but had been impressed by large customers that BigRep had since managed to win including BMW, ABB and Airbus.

    Additive manufacturing saves money on material costs by reducing the number of parts needed and saves time from design to manufacturing. Some industrial parts can already be made in this way and the technology is developing fast.

    German steel producer and rival distributor Thyssenkrupp and U.S. industrial group General Electric both announced plans this week to invest in 3D printing in Germany.

    http://www.reuters.com/article/kloeck-co-results-idUSL8N1HY2N6

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