Mark Latham Commodity Equity Intelligence Service

Tuesday 16th May 2017
Background Stories on www.commodityintelligence.com

News and Views:

Attached Files







    Macro

    China's Factory Output, Investment Moderate as Growth Dials Back


    The world’s second-largest economy dialed back a gear in April as authorities crack down on the nation’s swelling financial leverage.

    Key Points

    Industrial output rose 6.5 percent last month from a year earlier, compared to 7 percent seen by economists and 7.6 percent in March
    Retail sales increased 10.7 percent versus 10.8 percent seen by analysts  
    Fixed-asset investment excluding rural areas expanded 8.9 percent for the first four months, compared to a median estimate of 9.1 percent

    Big Picture

    Growth momentum has softened after a strong first quarter as policy makers seize the window to curb shadow lending and leverage. While equity and credit markets have been shaken by the campaign, economic fundamentals remain robust as reflation boosts company profits and external demand gets a boost from a pick up in global growth. The Bloomberg monthly GDP tracker pulled back to 7.15 percent in April, from 7.64 percent in March.

    Economist Takeaways

    "All the data sends the same message: The economy slowed down meaningfully in April," said Larry Hu, head of China economics at Macquarie Securities Ltd. in Hong Kong. "But given that growth is still fine, in the second quarter policy makers will still focus on reducing financial risk."

    Slowing growth combined with bond-market tumult "will likely throw the People’s Bank of China off its tightening trajectory," Bloomberg Intelligence economists Tom Orlik and Fielding Chen wrote in a report. "Despite the slight slowdown in retail sales, the pace of consumption growth continues to far outstrip that of household income -- an unsustainable state of affairs reflecting breakneck growth in bank loans to households."

    "Slowing domestic consumption growth and softer external demand appear to have driven the slowdown," said Julian Evans-Pritchard, China economist at Capital Economics Ltd. in Singapore. "Infrastructure and property investment are holding up, helping to stave off a sharper deceleration. But we doubt the current strength in these areas can be sustained given that policy is being tightened and the property market is starting to cool."

    "The April activity data barrage add to evidence China’s cyclical upswing has peaked and conditions will cool into the second half of the year," said Katrina Ell, an economist at Moody’s Analytics in Sydney. "Autos remained a major drag due to high base effects from earlier subsidies."

    "Chinese growth appears to be moderating, in line with the central bank’s tweaking of market interest rates slightly higher," said Callum Henderson, Managing Director, Global Markets, Asia Pacific at Eurasia Group in Singapore. "This is good news for China as growth should be relatively strong and solid heading into the 19th Party Congress – and most likely will be. However, it suggests a modest correction going forward in the assets of those countries that export to China heading into the second half.”

    The Details

    Private fixed-asset investment rose 6.9 percent in first four months while property development investment climbed 9.3 percent
    Ferrous and non-ferrous metal smelting and pressing dragged on industrial production
    China’s surveyed jobless rate fell in April from March
    China added 4.65 million new jobs from January to April
    The weaker April economic data was partly due to there being fewer work days during the period, a statistics bureau spokesman said at a briefing

    https://www.bloomberg.com/news/articles/2017-05-15/china-s-factory-output-investment-slow-as-growth-dials-back

    Attached Files
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    China PE prices hit 11-month lows on weak demand


    Polyethylene import prices in China have hit 11-month lows because of weak demand resulting from a multitude of factors, market sources said on Monday, prior to the opening of ChinaPlast, which runs from Tuesday to Friday in Guangzhou, China.

    The bearish reasons listed by market participants include higher interest rates, slow economic growth, higher domestic production in China, less debt lending, a weak Chinese currency, low futures trading volumes, high import volumes, and new global capacities.

    Linear low-density polyethylene import prices, at $1,115/mt CFR Far East Asia as assessed on May 12, were at its lowest seen since June 2016, according to S&P Global Platts data.

    The domestic Chinese market saw abundant supply from both local and overseas suppliers. PE imports in first-quarter 2017 rose 25.66% from Q1 2016 to 3,051,275 mt, according to China import statistics. This was a result of new global suppliers in 2017, with a total capacity of 5-6 million mt/year, all targeting China as a key import market, traders said,

    Domestic PE production in China in Q1 2017 also rose to around 4 million mt, an increase of "probably around 10%" from that in Q1 2016, traders said. This led to the current high PE inventories at ports, estimated at around 500,000 mt, according to traders.

    "Although [inventories] had fallen from the all-time high of 1 million mt seen in February, it is still at a multi-year high," a Chinese trader said.

    Moreover, continued weakness in the Chinese curreny, at Yuan 6.9 against the US dollar -- a nine-year low -- made imported resin unattractive, sources said.

    The bearishness in China's Dalian futures, which showed a year-on-year fall of 59.23% in January-April volumes traded, also led to the bearish buying sentiment, traders added.

    Decreased money supply had led to soft Chinese demand to boot, sources added. China's efforts to tackle excessive lending have led to incraese in interest rates.

    As of May 15, the Shanghai Interbank Offered Rate, or Shibor, lending rates for three and six months increased 96 and 44 basis points to 4.4184% and 4.3996%, respectively, while one-month interest rates fell 6 basis points at 4.0462%. The weekly interest rates are updated every Monday at 11.00 am on the People's Bank of China website.

    On top of this, a weaker 2017 gross domestic product has also lessened demand for PE, since PE is heavily linked to consumption, industry sources said.

    China's GDP is expected to be 6.5% in 2017, 0.2% lower than 2016's, as Chinese premier Li Keqiang had earlier announced.

    https://www.platts.com/latest-news/petrochemicals/guangzhou/analysis-china-pe-prices-hit-11-month-lows-on-27829680
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    Nepal in talks with China to build $8 billion cross-border rail link: finance ministry official


    Nepal is in talks with China to build a cross-border rail link that may cost up to $8 billion, and funding could be expected after Nepal formally signed up to Beijing's Belt and Road initiative, a Nepali finance ministry official said on Sunday.

    Yug Raj Pandey, an under secretary at Nepal's Ministry of Finance, told Reuters the proposed 550 kilometer-long railway would connect China's western Tibet region to Nepal's capital of Kathmandu and will carry goods and passengers.

    The Himalayan nation officially signed an agreement two days ago to be part of President Xi Jinping's ambitious plan to build a new Silk Road, he said on the sidelines of the Belt and Road Forum in Beijing.

    "Now we are a member of (the initiative) we can get some specific project assistance from China's government. We expect it for the railway," he said. "Once we connect by railway then we can increase our trade and invite more tourists to Nepal."

    Pandey said the two countries had been in discussions for the past five months about the project, which could cost $7-8 billion and take up to eight years to complete.

    He said Nepal planned to start preparing a detailed project report for the railway, and that they had yet to decide how much funding they will seek from China.

    The railway will travel over 400 kilometers in China to the Nepal border, and then about another 150 kilometers from the Nepali border to Kathmandu, he said.

    "Our first priority is railway, and second will be hydropower projects and cross-border transmission lines between Nepal and China," he said.

    China last year agreed to consider building a railway into Nepal and to start a feasibility study for a free trade agreement with impoverished, landlocked Nepal, which has been trying to lessen its dependence on its other big neighbor India.

    Pandey declined to comment about India's opposition to parts of the Belt and Road initiative, in particular an economic corridor China is building in Pakistan.

    China has touted what it formally calls the Belt and Road initiative as a new way to boost global development since Xi unveiled the plan in 2013, aiming to expand links between Asia, Africa, Europe and beyond underpinned by billions of dollars in infrastructure investment.

    http://www.reuters.com/article/us-china-silkroad-nepal-idUSKBN18A05F
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    Aust'n scientists discover "lost forests"


    A team of international scientists led by those at Australia's University of Adelaide have discovered 467 million hectares of "previously unreported forest," in a development which could help improve the accuracy of global carbon modelling and lead to new conservation efforts.

    The scientists discovered the previously unreported forests, which increases the current global "forest cover" by 10 percent, on all continents, with a major focus on uninhabitable areas such as the south of the Sahara desert, central India, rural Australia and parts of South America.

    The scientists said the differences in the coverage estimates was stark in Africa, where reported forest regions doubled, something the team has said could revolutionize carbon modeling for climate change and force a re-think in conservation.

    In a statement released on Friday, the University of Adelaide's Prof. Andrew Lowe said scientists from more than a dozen organizations analyzed the global distribution of forests and woodlands across drylands.

    He said dryland forests were previously difficult to measure using satellite imagery or other remote sensing because of the "relative low density of trees."

    "Just when we thought we knew the world, this project shows we are still improving our knowledge and description of natural systems," Lowe said.

    "To 'find' an area of forest that represents 10 percent of the global forest cover is very, very significant, with broad consequences for global carbon budgeting and dryland restoration and management.

    "It shows that dryland regions have a greater capacity to support trees than previously perceived and understood. With its low opportunity costs, dryland could therefore provide a unique chance to mitigate climate change through large-scale conservation and afforestation actions. It also shows the potential for improved livelihoods of the people in these areas."

    According to Lowe's colleague, Associate Professor Ben Sparrow, the teams used more than 210,000 satellite images to calculate global forest cover.

    "The main reason for the underestimate of forest cover is that previous land type classifications have been based on older and lower resolution satellite imagery without any kind of ground validation," Sparrow said on Friday.

    "This new reassessment has been possible due to access to higher resolution satellite imagery, through Google Earth Engine, as well as the incorporation of ground validated information from TERN's ecological plots."

    http://news.xinhuanet.com/english/2017-05/12/c_136276565.htm
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    India's Vedanta swings to profit after metal rally, zinc payout


    Vedanta reported a fourth-quarter profit as India’s biggest base metals producer benefited from a rally in prices and a special dividend announced by its zinc arm.

    Net income attributable to owners was 14.1-billion rupees in the three months through March and revenues were 246.1-billion rupees, the unit of London-listed Vedanta Resourcessaid in a statement Monday. That compares with a loss of 138.4-billion rupees a year ago because of a writedown at its oil unit.

    A surge in zinc prices globally saw profit at unit Hindustan Zinc surge 43% in the quarter from a year earlier and the company announced a record payout to investors in March. Vedanta’s billionaire chairman Anil Agarwal got another lift in April after shareholders approved merging the company with his Indian energy business, Cairn India, as he bids to create a resources heavyweight in the mold of Australia’s BHP Billiton.

    A near- $1.2-billion windfall from Vedanta’s 65% stake in Hindustan Zinc and access to about $4 billion in cash at Cairn India will help soften concerns over its debt pile, according to ratings agencies. Vedanta’s gross debt stood at 636.6-billion rupees at the end of March, while cash and liquid investments were 634.7-billion rupees, according to the company.

    “Our strategic focus to ramp up production across the portfolio namely in zinc, aluminium, power and iron-orebusinesses throughout the year has supplemented revenue growth,” outgoing CEO Tom Albanese said in the statement. Record production of zinc and aluminium and cost management initiatives also helped the company boost profits, he said.

    Vedanta’s stock rose 1.8% to close at 241 rupees on Monday, putting it up 11% for the year. Zinc prices in London advanced 36% in the past year due to a shortfall in production of the metal used to galvanize steel.
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    Elliott steps up pressure on BHP to ditch petroleum


    Activist investor Elliott Management upped the pressure for strategic changes at BHP on Tuesday, calling for an independent review of the mining giant's petroleum business.

    Elliott, which has built up a 4.1 percent stake in BHP's UK-listed arm and is urging changes to boost shareholder value, said there were clear signs that the market was receptive to a new strategy for BHP.

    "There is extremely broad and deep-rooted support for pro-active steps to be taken by management to achieve an optimal value outcome for BHP's petroleum business following a formal open review," it said in letter to management.

    Elliott, founded by billionaire Paul Singer, has been pushing for BHP to collapse its dual-listed structure, spin off its U.S. oil and gas assets, and boost returns to shareholders since tabling its proposals on April 10 - all of which BHP has rejected.

    Its latest letter, which did not name any other shareholders, was released just hours before BHP Chief Executive Andrew Mackenzie is due to speak at a Bank of America Merrill Lynch mining conference in Barcelona.

    "This latest salvo by Elliott is well-timed to coincide with Mackenzie's speech," said an analyst, on condition of anonymity as his company owns BHP shares. "It almost forces BHP to directly address them on this."

    Responding to concerns raised by the Australian government, Elliott said on Tuesday that BHP could remain incorporated in Australia and stay an Australian tax resident, retaining full listings on the Australian and London bourses.

    In a slide presentation on its website, fixingbhp.com, Elliott criticized BHP's track record on share buybacks and suggested the company should make a $6 billion buyback in 2018.

    Such a buyback, if the current valuation remained unchanged, would lead to $2.4 billion in value accretion, equivalent to more than 12 times Elliott's expected costs of unifying BHP's dual listings, it said.

    Elliott has put the cost of unification at $200 million and said BHP's $1.3 billion estimated cost was "flawed and misleading".

    BHP had no immediate comment on the latest proposal.

    Mackenzie has previously stressed that it is the wrong time for BHP to sell its U.S. petroleum assets, given oil prices are still low at about $52 per barrel.

    BHP has also sought to highlight the action it is taking to divest non-core parts of its U.S. shale assets.

    http://www.reuters.com/article/us-bhp-billiton-elliott-idUSKCN18C00N
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    Hebei admits more lapses in pollution, overcapacity fight


    China's Hebei province is not properly enforcing policies to cut pollution or reduce chronic overcapacity in major industrial sectors like steel and coal, Reuters reported, citing the environmental bureau.

    Hebei produces more steel a year than the whole of the European Union, and it aims to cut total annual production capacity to less than 200 million tonnes by the end of the decade, down from 286 million tonnes in 2013.

    However, despite plans to shed 60 million tonnes of capacity over the 2013-2017 period, Hebei actually saw production increase in 2016.

    The northern province, one of China's most polluted regions, has launched a campaign to hold officials accountable for enforcing environmental policies and to tackle "grass roots micro-corruption".

    The provincial environmental protection bureau said in a recent statement it has launched its own campaign to root out "ineffective mobilization" by officials in the battle against pollution.

    One of the key problems was the failure to implement industry overcapacity rules, it said.

    During campaigns to cut excessive steel, iron, cement, glass and coal capacity, some illegal plants were suspended but not shut down, allowing dead facilities to spring back to life or relocate, it said.

    Also, shuttered "zombie" firms did not have their power or water supplies cut off or their facilities demolished, allowing them to re-open, it said.

    Policies aimed at converting villages from coal to gas or electricity were not being implemented properly or according to schedule.

    Hebei surrounds Beijing and is estimated to be the source of about a third of the particulate matter drifting over Beijing.

    As the province strives to meet 2017 air quality targets, it has launched a series of campaigns aimed at punishing polluters and "normalising compliance".

    http://www.sxcoal.com/news/4556102/info/en
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    Oil and Gas

    ANOTHER MASSIVE BUILD IN CHINESE CRUDE OIL INVENTORY!

    ANOTHER MASSIVE BUILD IN CHINESE CRUDE OIL INVENTORY!

    BOOM! ANOTHER MASSIVE BUILD IN CHINESE CRUDE OIL INVENTORY! +40.7 MILLION BARRELS DURING APRIL! NOW +134M FOR THE YEAR, AT +1.18MPBD!

    @TankerTrackers  
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    Aramco Offshore to Add 1 Million b/d by 2023

    Aramco Offshore to Add 1 Million b/d by 2023

    Saudi Aramco plans to add a little over 1 million b/d of oil production from its offshore fields by 2022-23 and has begun moving ahead with its expansion plans.

    http://www.energyintel.com/pages/login.aspx?fid=art&DocId=961515

    Saudi Aramco has awarded the National Petroleum Construction Company (NPCC) a new contract for four offshore platforms and associated submarine pipelines, cables and tie ins for Al Safaniya, Zuluf and Berri oilfields.

    “These EPC contracts for Al Safaniya, Zuluf and Berri Oilfields include engineering, procurement, fabrication, load-out, transportation, installation, hook-up and pre-commissioning work of four offshore platforms (SSS Wellhead Decks) with the associated four subsea pipelines, three submarine cables and downstream tie-ins,” said Aqeel A Madhi, CEO of NPCC.

    Madhi added that this third contract comes under the scope of the long-term agreement (LTA) between Saudi Aramco and NPCC, signed in October 2016, to help with offshore oil and gas producing platforms and related facilities in the Arabian Gulf.

    https://www.tradearabia.com/news/OGN_324963.html
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    Oil To Hit $60 Max in 2017


    There is clear consensus that oil prices will be in the $50-60 per barrel range this year, and within the $60-80 per barrel range in 2020, according to a new survey from Wood Mackenzie.


    The survey, which analyzed the responses of 170 industry professionals, revealed that priorities for 2017 are focused on protecting dividends and strengthening balance sheets.

    Higher risk investments, such as deepwater projects, are being screened at higher hurdle rates by the industry, according to the report, which suggested that lower risk investments, like asset M&A, are most likely to be pursued by the sector.

    “The industry is very cautious right now and risk appetite is low,” Martin Kelly, Wood Mackenzie’s head of corporate analysis, said in a statement sent to Rigzone.

    Wood Mackenzie’s oil price prediction is in line with a recent poll conducted by Rigzone, which placed the price of Brent Crude Oil at around $60 per barrel by the end of the year.

    http://www.reuters.com/sectors/basic-materials

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    Nigerian oil union orders sympathy strikes at upstream companies


    Senior Nigerian oil workers' union Pengassan has told its members to withdraw their services from offices and oil production facilities operated by upstream companies in Nigeria, in sympathy with striking employees of the local subsidiary of ExxonMobil, union and industry source said Monday.

    The union directive, which threatens Nigeria's bid to restore production back to over 2 million b/d, followed a failed attempt by the Nigerian government to mediate in the two week-old dispute between the Pengassan union branch of ExxonMobil and the management of the US major, over the sacking of more than 80 workers, a union official said.

    Union officials have locked workers out in offices at Shell, Eni and Chevron in the commercial capital Lagos, as well as the companies operational bases in southern Niger Delta region, officials of the foreign companies told Platts by telephone.

    The union has also shut down some of ExxonMobil's production facilities in southern Akwa Ibom, a company source confirmed.

    ExxonMobil produces more than 300,000 b/d.

    "The national executive of Pengassan at the weekend directed members to begin at the international oil companies in solidarity with our members in Mobil Producing Nigeria," Abel Agarin, chairman of the Lagos branch of Pengassan said.

    Industry analysts said the union action could deal a major blow to Nigeria's bid to restore output following months of militant attacks on oil infrastructure that caused the West African nation's production to plummet to near 30-year low last year.

    Nigeria's Labor minister Chris Ngige has in the meantime referred the dispute between Pengassan and ExxonMobil to an Industry Arbitration Panel for resolution, after the failed attempts by the government to settle the matter, a government official said on Monday.

    "After the union failed to attend the meeting called on two occasions last week by the Minister of Labour and that of the Petroleum Resources, the Labor Minister on Friday, referred the matter to the Arbitration Panel," the official said.

    "This means all the parties in the dispute should maintain the status quo," the official added.

    Nigeria's two powerful oil unions Pengassan and its junior counterpart Nupeng, have been at loggerheads with multinational companies over what they called unfair labor practices by the companies.

    The Nigerian government, which in recent weeks stepped up peace talks with Niger Delta leaders and youths to end unrest in the region, has set the target of producing 2.2 million b/d of oil this year to help drag the country's economy out of the recession it slipped into last year.

    https://www.platts.com/latest-news/oil/lagos/nigerian-oil-union-orders-sympathy-strikes-at-26735916
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    China refinery runs at 7-mth low on maintenance, gas growth quickens


    China's April refinery throughput fell to its lowest level on a daily basis since last September as some large state-owned refineries conducted planned oil plant maintenance and crude oil output continued to drop.

    April crude throughput was down 0.6 percent year on year to 44.45 million tonnes, or about 10.82 million barrels per day (bpd), the lowest in seven months as several major plants carried out planned shutdowns, according to data from the National Bureau of Statistics (NBS).

    The April throughput was 3.3 percent lower compared to the 11.19 million bpd level in March. Refineries had processed a record amount of 11.26 million bpd in December as processors ramped up output at the end of year due to attractive margins.

    For the first four months of the year, crude throughput was up 3.1 percent from a year ago at 182.25 million tonnes.

    The NBS data on Monday also showed domestic crude output fell 3.7 percent last month versus a year earlier to 15.99 million tonnes, or 3.89 million bpd.

    Output for the first four months was down 6.1 percent on year at 64.01 million tonnes.

    Although still in negative growth, China's crude oil production has been declining less rapidly in recent months and is expected to post flat growth for the whole of 2017, said Seng Yick Tee, analyst with consultancy SIA Energy.

    "We expect crude oil output to recover more in the second half to show positive growth, as a result of higher oil prices and state oil companies boosting spending," said Tee.

    Natural gas output rose 15 percent in April from a year earlier at 12.2 billion cubic metres (bcm), extending for the second month in a row double-digit growth that has not been seen for more than three years.

    Natural gas productions gained six percent on year at 50.9 bcm for the January-April period, the data showed.

    China's gas consumption growth has been quickening since the start of this year after a nearly three-year lull, according to analysts, thanks to stronger demand from industrial and power sectors under a government push to wean off coal addictions.

    http://www.reuters.com/article/china-economy-output-crude-idUSL4N1IH0V6
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    Cheniere in talks to boost LNG shipments to China


    Cheniere Energy Inc said on Friday it has had extensive negotiations with China about increasing U.S. liquefied natural gas exports, as a new trade deal paves the way for a second wave of LNG investment in the world’s fastest growing gas supplier.

    The Trump Administration on Thursday said it reached an agreement with China to increase trade access for some U.S. companies to China, which is expected to include LNG exports.

    That should benefit several companies building LNG export terminals in the United States, as the U.S. is forecast to become the third largest LNG exporter by the end of next year.

    Cheniere is currently the only company able to export large cargoes of LNG from the continental United States, giving it a leg up now to ink long-term contracts with China, the world’s largest growth market for gas.

    “We’re heartened by this trade deal for its potential to increase Chinese access to American LNG,” Cheniere spokesman Eben Burnham-Snyder told Reuters.

    “We have had extensive negotiations with the Chinese over the last month,” he said. Cheniere has also shipped LNG to 20 other countries around the globe, and is in talks to ship to more.

    Shares of Cheniere jumped as much as 5 percent to $49.50 on Friday to their highest since February, and the stock has more than doubled since Cheniere’s Sabine Pass terminal first opened in February 2016. Shares closed up 3.3 percent to $48.68.

    Since the shale boom in the U.S. a decade ago, energy companies have been building export facilities, with as much as 6 billion cubic feet per day of capacity due by the end of 2018.

    “In the longer term, the deal paves the way for a second wave of investment in U.S. LNG,” said Massimo Di-Odoardo, Head of global gas and LNG research at natural resources consultancy Wood Mackenzie.

    “Developers will now be able to target Chinese buyers directly, potentially supporting project financing. It could also support direct Chinese investment into liquefaction and upstream developments on U.S. soil,” he said.

    Those companies include Dominion Resources Inc, Kinder Morgan Inc, Sempra Energy and Freeport LNG, which are building LNG export terminals, and Exxon Mobil Corp, Veresen Inc, Venture Global LNG and Tellurian Inc, which hope to build new export terminals.

    Under the plan, which falls under the framework of the U.S.-China Comprehensive Economic Dialogue, Chinese companies can now negotiate long-term contracts to source LNG from U.S. suppliers, the U.S. Commerce Department said.

    “We are happy for all support in moving forward with U.S. LNG exports…We view this announcement as a step forward in improving the balance of trade,” said Joi Lecznar, a spokeswoman for Tellurian, which is developing the $13-$16 billion Driftwood LNG export facility in Louisiana, expected to enter service in 2022.

    Until now, Chinese buyers have not bought long-term LNG supplies from the U.S. directly.

    China, however, has bought U.S. LNG through short-term, or spot, deals. The only long-term contracts it has for U.S. LNG are with companies, like Royal Dutch Shell PLC, which themselves have agreements to buy gas from Cheniere’s Sabine Pass or other U.S. export terminals.

    Sabine Pass in Louisiana entered service in February 2016, making it the first and only big LNG export facility in the lower 48 U.S. states. The United States has been a net importer of natural gas for 60 years; that is expected to change in 2017 as a result of LNG exports.

    China was the third biggest importer of U.S. LNG in 2016, having imported 17.2 billion cubic feet (bcf) on six vessels, according to federal energy data. For the first two months of 2017, China imported 30.9 bcf of gas on 10 tankers.

    One billion cubic feet is enough gas for about five million U.S. homes.

    By 2030, Wood Mackenzie projects Chinese LNG demand will reach 75 million tonnes per annum or 10 bcfd. That would be worth $26 billion a year at current prices ($7 per million British thermal units).

    “The U.S. is keen for a slice of the pie,” Di-Odoardo said, noting that U.S. LNG accounted for about 7 percent of total LNG imports into China in March.

    The Trump Administration earlier announced plans to expedite the environmental permitting process for other new facilities, such as Veresen’s Jordan Cove project on the Pacific Coast in Oregon.

    http://www.lngworldnews.com/cheniere-in-talks-to-boost-lng-shipments-to-china/
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    Eni fires up Jangkrik gas project in Indonesia


    Italian energy giant and LNG player Eni has started gas production from the Jangkrik development project, in deep water offshore Indonesia.

    The project comprises the gas fields Jangkrik and Jangkrik North East, located in the Muara Bakau block, Kutei basin, in the deep water of Makassar Strait.

    Production from ten deep-water subsea wells, connected to the newly built floating production unit (FPU) “Jangkrik”, will gradually reach 450 million standard cubic feet per day (mmscf/d), equivalent to 83,000 barrels of oil equivalent per day (boed), according to Eni.

    The gas, once processed onboard the FPU, will flow via a dedicated 79km pipeline to the onshore receiving facility, both built by Eni, and then through the East Kalimantan Transportation System, finally reaching the Bontang gas liquefaction plant.

    Gas volumes from Jangkrik will supply the local domestic market as well as the LNG export market, providing a significant contribution to Indonesia’s current energy requirements and future economic development, Eni said.

    The production start-up comes within three and a half years from the sanctioning of the project.

    “The completion of the project and the start-up of production ahead of schedule further confirm Eni’s strategy and global capabilities. Furthermore, it provides the opportunity for the Jangkrik floating production unit to become a hub for the development of our nearby gas discovery Merakes (Eni 85%, Pertamina 15%), which could start production within the next two years. We will consolidate our near field exploration strategy and operating model and maximize the integrated development of our projects also in Indonesia,” said Eni Chief Executive Claudio Descalzi.

    Eni is the operator with a 55% stake of the Muara Bakau PSC through its subsidiary Eni Muara Bakau B.V. The other partners are Engie E&P (through its subsidiary GDF Suez Exploration Indonesia BV) with 33.334% and PT. Saka Energi Muara Bakau with 11.666%.

    http://www.lngworldnews.com/eni-fires-up-jangkrik-gas-project-in-indonesia/

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    Chevron stops production at Gorgon Train 1


    US-based energy giant Chevron has shut down the first liquefaction train at its multi-billion Gorgon LNG plant on Barrow Island in Western Australia.

    “Production on Gorgon Train 1 was stopped on May 12th due to a failure of a flow measurement device,” Chevron’s spokesman told LNG World News in an emailed statement on Monday.

    “Train 1 is expected to be down approximately one month for this replacement and we will take this opportunity to perform other routine maintenance,” he said.

    He added that Trains 2 and 3 were running normally and the terminal is continuing to ship LNG cargoes.

    Chevron has in March started-up the third and the last Train at the Gorgon facility that has a total capacity of 15.6 million mt/year.

    The troubled $54 billion LNG project has experienced several production interruptions since it shipped its first cargo in March last year.

    “The Gorgon project is currently loading a ship about every 2 days and has shipped 67 cargoes to date with 38 cargoes shipped since the beginning of the year,” Chevron Asia Pacific Exploration and Production president Stephen Green said during the company’s first-quarter conference call on April 28.

    According to Green, all three Trains were running over 85% of nameplate capacity at that time, processing gas from both the Jansz and Gorgon fields.

    “Looking ahead, we’ll complete commissioning and start-up of additional equipment, which boosts efficiency of the trains such as the turbo expanders and the end flash gas compressors, systems that can be started now that all 3 trains are operational,” Green said during the call.

    Once all systems are in operation, Chevron plans to begin the optimization and tuning of each train, the first step in further increasing the plant’s capacity.

    “After this, we’ll analyze plant performance and look for debottlenecking opportunities that will increase capacity and capture incremental value going forward,” Green said.

    http://www.lngworldnews.com/chevron-stops-production-at-gorgon-train-1/
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    U.S. shale oil output expected to rise by 122,000 barrels a day in June: EIA


    Oil production from seven major U.S. shale plays is forecast to climb by 122,000 barrels a day to 5.401 million barrels a day in June from May, according to a monthly report from the Energy Information Administration released Monday.

    Oil output from the Permian Basin, which covers parts of western Texas and southeastern New Mexico, is expected to see the largest climb among the big shale plays, with an increase of 71,000 barrels a day.

    http://www.marketwatch.com/story/us-shale-oil-output-expected-to-rise-by-122000-barrels-a-day-in-june-eia-2017-05-15
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    Genscape Cushing inventory


    Genscape Cushing inventory -505K bbls W/W

    @zerohedge  
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    Permian Effective Rig Count 1,109


    On an individual basis, the Utica has seen the most advancement in productivity. Current rigs in the Utica are yielding 4.5 times more barrels of oil equivalent than January 2014 Utica rigs. There are currently 22 rigs active in the Utica area, but the production from these rigs equates to 99 January 2014 rigs.

    Ground Zero

    In the Permian basin, the heart of current unconventional activity, rigs are currently yielding 3.3x more production than Permian rigs did in January 2014. This means that the Permian Effective Rig Count is 1,109, which is higher than the nationwide Effective Rig Count from September 2015 to November 2016.

    Permian, Eagle Ford, Haynesville growth expected

    In the EIA’s monthly Drilling Productivity Report the agency outlined recent drilling and production activity. In today’s report, the EIA provided estimates for production growth from May to June. As might be expected, the Permian is projected to see the largest oil and gas production growth.

    The region’s oil production is projected to rise 70 MBOPD to 2,492 MBOPD, while gas production rises 169 MMcf/d to 8,391 MMcf/d. The Eagle Ford is projected to see the second-largest growth in oil production, while the EIA estimates the Haynesville will experience the second-largest growth in oil production.

    In a turnabout from prevailing strategy last year, drilling activity continues to outpace completions, according to the EIA. The agency estimates that there were 5,721 drilled uncompleted wells in the U.S. in April, up 187 from March. This growth is led by the Permian, where the recent surge in activity has drawn about half of all U.S. drilling rigs. Of the major basins, only the Utica saw completion activity outpace drilling, as the region’s DUC inventory decreased by six from March to April.

    Source: EIA

    The EIA also released estimates of new well oil and gas production per rig, an estimate for the productivity of rigs in individual basins. The EIA estimates that rigs in the most productive oil rigs are found in the Eagle Ford, where rigs are yielding 1,448 BOPD. When considering gas, Marcellus rigs are the most productive, with each active Marcellus rig yielding 13,427 Mcf/d.

    https://www.oilandgas360.com/permian-effective-rig-count-1109/

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    Analysts question latest North Dakota crude breakeven prices


    North Dakota's breakeven price for crude production averaged $24/b in the first quarter of 2017, with the breakeven in the state's most active county averaging $21/b, according to estimates from the state's Department of Mineral Resources.

    The breakeven price puts the Bakken Shale play in economic competition with nearly any play in the world, including Saudi Arabia, but analysts caution that the latest data out of North Dakota may not be telling the whole story of what drillers are seeing there.

    "These numbers don't make that much sense to me," said Graham Walker, an oil market analyst with Petrologica. "It's very much an art, these breakeven prices. There are so many factors you can include or not include."

    Walker said that, when calculating their breakeven prices, North Dakota officials may be including only sanctioned wells, or only wells that are successfully completed and put on production while ignoring unsuccessful attempts. Rather than a point where wells make money, the state's breakeven price may be a threshold that needs to be maintained before a well is shut in.

    Walker pointed to McLean County in the central portion of the state, where there were no rigs and only 64 wells capable of producing in Q1. The state estimated that the breakeven price in McLean was $17/b.

    "If it's $17/b in McLean, where is everybody?" Walker asked.

    During a press briefing Friday, Lynn Helms, the state's top oil and gas regulator, said that the $17/b figure represents the relatively small sample size of the producing wells in the region, particularly three highly successful wells that are "pushing the limits" of drilling technology.

    "We're a bit at the mercy of statistics," Helms said.

    Alison Ritter, a spokeswoman for the state agency, declined to comment further Monday on how the state determines breakeven prices.

    In Q1, statewide breakeven prices averaged $24/b, with 51 rigs and 15,639 wells at the start of the quarter. McKenzie County, in the northwest of the state, averaged $21/b and had 24 rigs and 4,260 wells. Neighboring Dunn County, which had 11 rigs and 2,030 wells, averaged $23/b.

    However, the statewide breakeven figures, which analysts argue seem too low, are above previous breakeven estimates by the state.

    In February, the agency estimated that statewide breakeven prices averaged $18/b in the fourth quarter of 2016 and in November estimated the statewide breakeven averaged $21/b in the third quarter of 2016. The agency estimated the statewide breakeven averaged $26/b in the second quarter of 2016.

    According to an analysis of well economics by Platts Analytics, Bakken breakeven prices averaged $33.38/b in May, down $1.73/b from January. Bakken breakeven prices have fallen by $11.25/b compared with May 2014, when they were estimated to average $44.63/b, according to Platts Analytics.

    Platts Analytics analyst Matt Andre said that while his analysis looks at a typical well in the basin using weighted average initial production rates and drilling and completion costs, the state may only be looking at top performing wells in the play.

    Enerplus, a Bakken producer, estimates the breakeven in the play at $33.50/b while Diamondback Energy puts the Bakken breakeven at $33.36/b.

    On Friday, North Dakota's DMR said that about 1.025 million b/d of crude oil was produced in the state in March, down 8,610 b/d from February.

    In its Drilling Productivity Report Monday, the US Energy Information Administration estimated that Bakken production will average 1.026 million b/d in May and rise to 1.032 million b/d in June.

    Overall production in all US shale plays is forecast to rise from 5.279 million b/d in May to 5.401 million b/d in June, an increase of 122,000 b/d. The largest increase will be in the Permian Basin, where output will climb 71,000 b/d compared with May to 2.492 million b/d in June, according to the EIA.

    https://www.platts.com/latest-news/oil/washington/analysts-question-latest-north-dakota-crude-breakeven-21737015
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    North Dakota Crude-by-Rail Loadings Plummet with DAPL Startup Imminent


    Crude-by-rail loadings in North Dakota kicked off May with volumes at their lowest point since 2012, as the market prepares for the upcoming startup of Energy Transfer Partners’ 470,000 bpd Dakota Access (DAPL) crude pipeline.

    For the week ending May 5, loaded crude volumes at the 13 Genscape-monitored rail terminals in North Dakota plummeted 111,000 bpd to 130,000 bpd, the lowest amount since week ending June 1, 2012. Genscape only monitored five rail terminals at the time, but crude production was 664,000 bpd in June 2012, versus 1.026mn bpd in March 2017, according to the latest data from North Dakota's Department of Mineral Resources.

    The startup of ETP’s Bakken Pipeline system (which is the Bakken-to-Patoka, IL, DAPL and 470,000 bpd Patoka-to-Nederland, TX, Energy Transfer Crude Oil pipeline) will result in a fundamental shift in how crude is shipped out of the Bakken shale play.

    The Dakota Access pipeline is “mechanically complete and line fill operations are set to conclude mid-May,” a company spokeswoman said May 9. The Bakken Pipeline system is set to begin service on June 1, the spokeswoman added.

    A company tariff filing on April 13 with the U.S. Federal Energy Regulatory Commission showed that interstate operations will begin on May 14.

    Once the Bakken Pipeline system is operational in June, the local refinery and pipeline takeaway capacity will surpass Bakken production in North Dakota and Montana, thereby eliminating the need for crude shipments by rail from the region, Genscape data shows. Bakken production in May is forecast by Genscape to average 1.039mn bpd, while pipeline and local refinery capacity is 878,000 bpd. In June, once DAPL comes online, pipeline and refinery capacity will jump to 1.348mn bpd, with production expected to average 1.027mn bpd.

    Crude-by-rail loadings in North Dakota have been on the decline since they peaked at 585,000 bpd in March 2014, according to Genscape, as new pipeline capacity and lower crude production then began to chip away at the volumes. After loadings declined to an average of 296,000 bpd in 2016, 2017 volumes were relatively stable through end-May 2017 at an average of 255,000 bpd.

    Refineries on the U.S. East Coast were the first ones to shy away from rail volumes and instead opt for waterborne crude deliveries, Genscape data shows.

    Crude-by-rail shipments to the five monitored terminals on the East Coast tumbled 58,000 bpd to 20,000 bpd for the week ending May 5, with only PBF’s 182,200 bpd refinery in Delaware City, DE, posting receipts. The three-week decline for the region was 121,000 bpd. The region averaged 117,000 bpd in 2017 through the end of April.

    Some refiners began the move away from railed-in barrels early in the year. After receiving 59,000 bpd by rail in January, Phillip 66’s 238,000 bpd Bayway refinery in Linden, NJ, averaged 15,000 bpd in February and 14,000 bpd in March. There have been no unloaded volumes at the refinery in the past three weeks.

    There were no unloadings at the 335,000 bpd Philadelphia Energy Solutions refinery in Pennsylvania last week for the first time since early March 2016. Unloadings at the refinery had a week-on-week drop of 43,000 bpd, and brought the three-week decline to 75,000 bpd.

    However, waterborne crude imports to the East Coast have increased in recent weeks, replacing the displaced rail barrels. For the week ending May 4, waterborne imports into PADD 1 averaged 877,000 bpd, putting the three-week average at 873,000 bpd, Genscape data shows. March and February waterborne imports averaged 436,000 bpd and 428,000 bpd, respectively.

    Domestic waterborne crude deliveries to the Bayway refinery have stepped up in recent weeks as the rail volumes have dropped off, Genscape data shows. Domestic deliveries to the refinery are averaging 148,000 bpd over the last four weeks, compared to 85,000 bpd over the preceding four weeks. Waterborne imports have increased, as well, to the refinery. Imports received at Bayway have averaged 290,000 bpd the last two weeks, up from the April average of 231,000 bpd.

    Genscape added flow data for DAPL to the Mid-Continent Pipeline and PetroRail Bakken services on May 12, 2017. The Dakota Access pipeline flows from Johnsons Corner, ND, to Patoka, IL. The pipeline has further upstream connectivity to the Stanley, Ramberg, Epping, Trenton, and Watford City terminals. According to Dakota Access’ tariff, the pipeline is entering interstate service on May 14, 2017. As such, any flow activity observed prior to that date may be considered as related to linefill activity. DAPL historical data is available beginning March 17, 2017.

    Access Genscape's PetroRail report to gain insight into the market with the industry's most comprehensive crude-by-rail data. Receive analysis and market implications of crude-by-rail movements in North America from Genscape's proprietary monitors. To learn more about Genscape's PetroRail report, or to request a free trail, please click here.

    Genscape's Mid-Continent Pipeline Service provides insight into major pipeline shutdowns, start-ups, flow changes, and construction. Using its proprietary energy monitoring technology, aerial photography, and industry expertise, Genscape offers an unprecedented view into critical pipelines supplying storage hubs and refineries in the United States and Canada.

    - See more at: http://www.genscape.com/blog/north-dakota-crude-rail-loadings-plummet-dapl-startup-imminent#sthash.9thhdTqy.dpuf
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    Alternative Energy

    Argentina expects to triple its production of lithium in five years with investments for USS 1500 million


    Google Chrome translation:

    The country currently has the capacity to produce 35,500 tonnes per year but five projects are under development to multiply that figure by three in 2021.

    Argentina has an installed capacity of lithium production of 35,500 tons per year, which means 16 percent of the global supply, but has at the advanced stage of development five other projects that will allow it to triple its production in 2021 with investments for US $ 1.5 billion and exports for about 880 million US dollars.

    This is the result of a report prepared by the Under-Secretariat for Mining Development, in which it is highlighted that there are currently two projects in production in the country: the Salar del Hombre Muerto / Mina Fénix, which has been producing in Catamarca since 1997; And the Salar de Olaroz in Jujuy, about to reach full capacity this year.

    In 2016, Olaroz accounted for 6% of global production and marked a milestone as the first greenfield project ("from scratch") in brines after 19 years, while the Orocobre operator of the field plans to at least double Its capacity from 17,500 to 35,000-42,500 tons, taking advantage of the current infrastructure ..

    At the same time, there are several projects with different degrees of advancement that could be operating in the next 5 years, among which the company Lithium Americas, together with SQM and JEMSE, in the Salar de Cañarí, Jujuy stands out.
    There the partners announced the construction of a lithium-potassium plant with a capacity of 25,000 tpa that would be produced in 2019, and a second stage projected that would add an additional 25,000 tpa.

    The Galaxy Resources group plans to build a plant in the Salar del Hombre Muerto, also in Jujuy, that would be producing 25,000 tpa in a first phase by 2020; While the company Eramet finalized the studies in the salares of Centenario and Mice for the construction of a plant of 20,000 tpa.

    Another of the most advanced projects is Enirgi Group, the operating company of Salar del Rincón, in the province of Salta, which has a pilot plant of 1,200 tpa, and is seeking financing to build a plant with a capacity of 20,000 tpa.

    Considering these four major projects that are more advanced, plus the expansion programmed by Olaroz, would incorporate some 110,000 nominal tons to the current production, which implies investments of US $ 1.5 billion and annual exports for about US $ 880 Million, at an average of $ 8,000 a ton although some projections put the price at $ 12,000 for the coming years.

    The report of the undersecretary under Mario Capello, who reports to the mining secretary, Daniel Meilán, highlights that in addition to these projects, in Argentina there are five others in the advanced exploration stage, 12 in initial exploration and 17 in the exploration stage .

    Each project of lithium with a horizon of 40 years and an estimated capacity of 20,000 tpa requires on average about 350 million dollars of investment and employs in its construction between 400 and 600 people, whereas for the operation generates around 200 sources of work Between direct and indirect labor.

    With the consolidated figures for 2016, Argentina was the most dynamic producer in recent years, passing from 11% to 16% of the world market for lithium derivatives.

    The mining authorities emphasized "the Argentine opportunity to grow demand and a project race in the world is to develop new projects so that they stabilize, before the windows of opportunity for the Entry of new competitors ".

    The international market for this mineral is in an upward cycle, but it is still small if compared to other minerals, as for data for 2016 the value of world gold production (124 billion USD), for example, is 87 times that of lithium (1.4 thousand USD) and copper (94,437 million USD) about 66 times.

    The ton of lithium carbonate accounted for an increase of 48.02% from an average of US $ 5,050 a ton in 2014 to US $ 7,475 in 2016, with peaks in the second half of the year that exceeded 9,000 u $ S

    Regarding global demand last year closed at 37,800 tonnes, up 13.5% on that of 2015, while in the same period the use of lithium batteries, with 39% of the market, shifted from the historic first place To ceramics and glass, and is expected to account for more than two-thirds of demand by 2025.

    Argentina is in fourth place in terms of proven lithium reserves, although depending on the sources, it may appear third, and it possesses between 25% and 30% of the potential resources of the so-called "lithium triangle" formed together with Bolivia and Chile.

    http://www.aminera.com/2017/05/15/argentina-preve-triplicar-produccion-litio-cinco-anos-inversiones-us-1500-millones/
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    Agriculture

    Trump reassures farmers immigration crackdown not aimed at their workers


    President Donald Trump said he would seek to keep his tough immigration enforcement policies from harming the U.S. farm industry and its largely immigrant workforce, according to farmers and officials who met with him.

    At a roundtable on farm labor at the White House last month, Trump said he did not want to create labor problems for farmers and would look into improving a program that brings in temporary agricultural workers on legal visas.

    "He assured us we would have plenty of access to workers," said Zippy Duvall, president of the American Farm Bureau Federation, one of 14 participants at the April 25 meeting with Trump and Agriculture Secretary Sonny Perdue.

    During the roundtable conversation about agriculture, farmers and representatives of the sector brought up labor and immigration, the details of which have not been previously reported. Some farmers told Trump they often cannot find Americans willing to do the difficult farm jobs, according to interviews with nine of the 14 participants.

    They said they were worried about stricter immigration enforcement and described frustrations with the H-2A visa program, the one legal way to bring in temporary seasonal agricultural workers.

    The White House declined to comment on the specifics of the discussion, but described the meeting as "very productive." The U.S. Department of Agriculture did not respond to a request for comment on the April meeting.

    About half of U.S. crop workers are in the country illegally and more than two-thirds are foreign born, according to the most recent figures from the U.S. Department of Labor's National Agriculture Workers' Survey.

    During the roundtable, Luke Brubaker, a dairy farmer from Pennsylvania, described how immigration agents had recently picked up half a dozen chicken catchers working for a poultry transportation company in his county.

    The employer tried to replace them with local hires, but within three hours all but one had quit, Brubaker told the gathering at the White House.

    Trump said he wanted to help and asked Secretary Perdue to look into the issues and come back with recommendations, according to the accounts.

    While other issues such as trade, infrastructure and technology were also discussed, participants were more positive after the meeting about the conversation on foreign labor "than about anything else we talked about,"  said Bill Northey, a farmer and Iowa's secretary of agriculture.

    RED TAPE

    Tom Demaline, president of Willoway Nurseries in Ohio, said he told the president about his struggles with the H-2A guestworker program, which he has used for 18 years.

    He told Trump the program works in concept, but not in practice. "I brought up the bureaucracy and red tape," he said. "If the guys show up a week or two late, it puts crops in jeopardy. You are on pins and needles all year to make sure you get the workers and do everything right."

    While use of the program has steadily increased over the past decade, it still accounts for only about 10 percent of the estimated 1.3 million farmworkers in the country, according to government data. In 2016, the government granted 134,000 H-2A visas

    Employers who import workers with H-2A visas must provide free transportation to and from the United States as well as housing and food for workers once they arrive. Wage minimums are set by the government and are often higher than farmers are used to paying.

    Steve Scaroni, whose company Fresh Harvest brings in thousands of foreign H-2A workers for growers in California's Central valley, says, however, that he could find work for even more people if he had more places to house them.

    For a related photo essay click on: reut.rs/2qdtfnb

    Trump recently signed another executive order titled "Buy American, Hire American," calling for changes to a program granting temporary visas for the tech industry, but not to visas used by farmers and other seasonal businesses, including Trump's own resorts.

    FARMER CONCERNS

    Trump also signed two executive orders, just days after taking office, focused on border security that called for arresting more people in the United States illegally and speeding up deportations.

    Roundtable participants said that many farmers have worried about the effect of the stepped up enforcement on their workforce, but Trump told them his administration was focused on deporting criminals, not farmworkers.

    "He has a much better understanding about this than some of the rhetoric we have seen," said meeting attendee Steve Troxler, North Carolina's agriculture commissioner and a farmer himself.

    The farmers at the meeting said they stressed to the president the need for both short-term and permanent workers. They said there should be a program to help long-time farmworkers without criminal records, but who are in the country illegally, to become legal residents.

    Last Tuesday, Democrats in the House and Senate said they would introduce a bill to give farmworkers who have worked illegally in the country for two consecutive years a "blue card" to protect them from deportation.

    Brubaker, the Pennsylvania farmer, said he liked what he had heard about the bill and hoped it would get the president's support to make it a bipartisan effort.

    "The administration has got something started here," he said of the meeting with farm leaders. "It's about time something happens."

    http://www.reuters.com/article/us-usa-immigration-farmers-trump-idUSKCN18B1BB
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    China soy growers to receive bigger subsidies than corn producers


    China's top grain-producing provinces will pay greater subsidies to soybean farmers than corn growers as the country pushes to whittle a huge corn glut.

    The nation has been overhauling its grains policy in the wake of abandoning a state stockpiling system that amassed over 250 million tonnes of corn, more than one year's consumption.

    The governments of Heilongjiang and Liaoning provinces in the northeastern corn belt announced the move on subsidies in policy documents published late last week, although details on subsidy levels will be released later.

    China included cutting corn acreage and lifting soybean acreage in its five-year plan issued last year. It is the world's top consumer of both commodities.

    The amount of land used to grow soybeans in China will rise to 140 million mu (9.3 million hectares) by 2020, up from 98 million mu in 2015, according to the plan.

    http://www.reuters.com/article/us-china-soybeans-subsidies-idUSKCN18B0N0
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    Precious Metals

    Platinum to see first market surplus in six years in 2017: JM


    The platinum market is set to record its first surplus in six years in 2017, Johnson Matthey said on Monday, as a drop in demand from the vehicle industry, jewelers and investors outstrips a smaller fall in supply.

    But the deficit in palladium is expected to widen to 792,000 ounces in 2017 from 163,000 ounces this year, the company said.

    The rising deficit in palladium helped cut its discount to platinum to less than $100 an ounce this month, it lowest in 15 years. The average for the past 20 years has been $555.

    Both metals are heavily used in catalytic converters but platinum, which is used more heavily in diesel catalysts, is seen as vulnerable to a drop in diesel market share.

    Commenting on platinum, JM said: "Chinese jewelry fabrication is expected to contract again, while automotive demand will be hit by changes in catalyst technology in Europe, in response to the introduction of Real Driving Emissions testing."

    JM, a leading manufacturer of vehicle catalysts, added in its release: "Investment demand is forecast to remain positive, but at lower levels than in the last two years, as purchasing by Japanese investors slows."

    Platinum prices have underperformed other precious metals this year, rising about 2 percent against a near 20 percent jump in palladium. The market is expected to be in a 300,000 ounce surplus this year.

    Strong automotive and industrial demand for platinum and firm investment had kept it in a deficit of 202,000 ounces last year, JM's data showed.

    Automotive demand for palladium hit record levels last year, with buying by Chinese automakers up 23 percent. Russian destocking pushed supply up 5 percent.

    http://www.reuters.com/article/us-platinum-week-matthey-idUSKCN18B28E
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    Base Metals

    Zinc miners leverage scarcity to flex muscles over smelters


    If there were any doubt that the zinc supply chain is tightening, it should be dispelled by this year's benchmark smelter treatment charge.

    The treatment charge is the fee paid by a miner to a smelter for converting mined concentrates into refined metal and it is probably the best indicator of raw material availability; high during times of surplus and low during times of scarcity.

    This year's headline fee of $172 per tonne is the lowest in a decade, a firm swing of the negotiating pendulum in favour of miners and a tangible sign that the much-anticipated concentrates crunch has arrived.

    Indeed, miners have used the squeeze on availability to make what might turn out to be a historic change in how these annual benchmark contracts are structured.

    Zinc bulls have been waiting a long time for this supply squeeze and they may have to wait a bit longer before it moves from raw materials to refined metal parts of the chain.

    But at a mined concentrates level it has very surely arrived.

    HEADLINE DOWN, PRICE PARTICIPATION OUT

    This year's headline treatment charge of $172 per tonne was confirmed by Belgium's Nyrstar, a zinc miner itself but a much bigger converter of concentrates into refined metal.

    It represented a 15 percent decline from last year's benchmark of $203 per tonne and was the lowest outcome since 2006.

    The comparison is worth noting because that was the year London Metal Exchange (LME) zinc hit its highest ever level at $4,580 per tonne.

    As well as seeing their revenues reduced this year, smelters have also lost any price participation.

    Price participation disappeared from copper concentrate contracts several years ago but it has persisted in the zinc market in the weird and wonderful form of "escalators" and "de-escalators".

    These determine how much the treatment charge can change depending on how far the zinc price deviates from a preset "basis" price in the contract.

    In 2016, for example, the "basis" price was set at $2,000 with escalators allowing for price participation up to $3,750 and de-escalators down to $1,500.

    This year, however, both escalator and de-escalator have been set at zero, a partial victory for those miners seeking the complete elimination of price participation by smelters.

    Escalators and de-escalators remain in the benchmark contract, in theory allowing for a resurrection at a future date.

    Whether price participation actually returns remains to be seen.

    When BHP Billiton dropped price participation from its copper contracts in 2007, it was at the time presented as a temporary market-driven phenomenon.

    But within a couple of years everyone else had done the same and price participation was quietly consigned to the copper history books.

    METAL STILL FREE

    Smelters can probably afford to be sanguine about the zero price participation this year.

    As Hilmar Rode, chief executive of Nyrstar, told analysts on the company's first-quarter conference call: "If you go back and you monitor say the last 10 years, you'll see sometimes that works in favour of the mine sometimes in favour of the smelters but over a longer period of time ... it's pretty much a net zero."

    More important to a company like Nyrstar is the retention of another strange-sounding component of the annual zinc treatment charge benchmark, namely "free metal".

    What this means is that zinc smelters pay for only 85 percent of the metal contained in the concentrate.

    This curiosity dates back to a long-lost time when most of the world's zinc smelters were pyrometallurgical and typically could only extract that amount of metal from the concentrate.

    Times and technology have changed a lot since then and a company such as Nyrstar can now typically recover around 96-97 percent of the metal, meaning it gets 11-12 percent "free".

    Miners would no doubt love to eat into, if not eliminate altogether, this "free metal" allowance but the consensus seems to be that this would be a step too far right now.

    NO RELIEF?

    The sharp drop in the benchmark treatment charge was widely expected.

    This zinc supply crunch has been a long time coming and there have been plenty of false starts for over-eager bulls in recent years.

    But, to quote Jonathan Leng, principle zinc analyst at Wood Mackenzie, "the record 6.3 percent fall in global mine supply in 2016 transformed the concentrate market."

    Concentrate stocks fell to "minimum working levels" in September of last year and smelters, particularly those in China, are having to cut production.

    Nor does Woodmac see much change in the zinc concentrates market any time soon. Its view is that it will remain tight for the next couple of years with treatment charges likely to remain at correspondingly low levels over that period.

    What does this mean for the refined zinc price?

    So far bulls have been frustrated that mine supply crunch hasn't translated into refined metal crunch.

    China's imports of refined zinc remain subdued, while metal is still occasionally appearing on LME warrant at New Orleans, albeit not in the sort of volumes as seen in the past.

    Woodmac's Leng, however, believes it's only a matter of time. He expects to see acute tightness later this year with stocks "projected to fall to historically low levels and remain so until 2020."

    That will translate into a price high next year "comparable to the 2006 price peak".

    Not everyone, it's fair to say, is quite so bullish . There are still a good number of known unknowns at work, not least the state of mine supply in China itself.

    But this year's benchmark concentrates terms make it hard to argue against the starting proposition of bulls such as Wood Mackenzie.

    The concentrates market is as tight as it's been since 2006.

    Whether that means a return to the historical peak in zinc prices in that year remains to be seen.

    http://www.reuters.com/article/zinc-concentrates-ahome-idUSL8N1IH4P9

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    Steel, Iron Ore and Coal

    S.Korea to temporarily close 10 old coal-fired power plants in June


    South Korea will temporarily shut down 10 coal-fired power plants that are over 30 years old in June to mitigate air pollution, the office of President Moon Jae-in said in a statement on Monday.

    The measure comes as coal-fired power plants are being criticised for contributing to deteriorating air quality in South Korea, Asia's fourth-largest economy.

    Amid these concerns, new President Moon vowed during his election campaign to close the old coal power plants and review a plan to add coal power generation. Instead he advocated increasing the share of renewables to produce more clean energy.

    Following through on the promise to reduce coal-fired generation, the presidential office, formally called the Blue House, said that it will temporarily suspend operations of the older coal power plants next month for one month.

    The Blue House also said it will shut the older coal plants again in 2018 from March to June and, furthermore, wants to close all of the old coal plants within Moon's presidency which ends in May 2022.

    In July last year, South Korea's energy ministry announced a plan to close the 10 old coal-fired power plants by 2025 in order to lower its coal power reliance and reduce greenhouse gas emissions.

    Coal supplies about 40 percent of South Korea's total power generation because it is cheaper compared to other energy sources such as liquefied natural gas.

    At present, South Korea runs a total of 59 coal-fired power plants. Out of the total, the 10 old power plants make up 10.6 percent of South Korea's total installed coal power capacity, or 3.3 gigawatts, the statement said.

    http://www.reuters.com/article/southkorea-politics-energy-idUSL4N1IH13D

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    Coal market oversupply risks grow as producers boost output


    Indonesia's coal industry has benefited from higher prices this year after a downturn in 2015 and 2016 put many small producers out of business, though recent price declines could signal more difficulties ahead.

    Australian coal prices, the benchmark for Asia, soared 130 percent to over $110 per ton last year, but have slumped by 20 percent since early April to just over $70.

    Ken Crichton, president-director of mining contractor Theiss Indonesia, said his company needed to be careful responding to clients' demand for more production.

    "We've put most of our idle plant back to work - now we've got the decision whether we re-invest or not. And after the last five years it's going to be quite a challenge to convince our organization where prices are going to be to justify further investment and expanding our operations in Indonesia."

    However, the chief executive of Indonesian producer PT Adaro Energy, Garibaldi "Boy" Thohir, told Reuters that he was less concerned over oversupply.

    "Domestic demand from Indonesia will increase rapidly and ... it's also not very easy to ramp up production because there are a lot of challenges," he said, citing problems that some miners, particularly for smaller ones, have in procuring heavy equipment and gaining financing.

    "Yes, short term there will be a little more supply but in the medium term I'm still very optimistic," he said.

    Thohir said Adaro was not increasing output this year or for the foreseeable future as it dedicated reserves to feed its own domestic power plants.

    Indonesia's 2017 coal output may rise 11.5 percent from a year ago to 101 million tonnes, said Agung Priabadi, the energy ministry's director of coal. Power stations would use 86 million tonnes.

    Indonesia, the world's top thermal coal exporter, could increase production by 5 percent in 2017 and 2018, Indonesian Coal Mining Association Chairman Pandu Sjahrir said on Sunday.

    In October, Sjahrir said Indonesia's coal production could reach 460 million tonnes in 2017, up from an estimated 440 million tonnes last year, because of improving prices.

    However, Indonesia output may be limited as the country's producers divert capital to power plant projects rather than expansions, Sjahrir added.

    http://www.reuters.com/article/us-coal-asia-coaltrans-idUSKCN18B0TL

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    Global coal market seen in 16 mln t oversupply in 2017 -Noble analyst


    The global coal market is forecast to hit an oversupply of 16 million tonnes this year as production increase, Noble Resources chief coal analyst said on Monday.

    "Those (producers) who are going to expand into the second half of this year are going to have to face price pressure," Rodrigo Echeverri, the head of coal analysis at Noble Resources, told the Coaltrans Asia conference in Bali.

    "The producers are now making money, so it's in the hands of the producers what they do with that money. To go and invest in their own production and expand it - that's actually not a very good idea for the market. That almost guarantees that we'd see the market go back to 2015 where we were all struggling."

    http://www.reuters.com/article/coal-asia-coaltrans-oversupply-idUSJ9N1HB00S
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