Mark Latham Commodity Equity Intelligence Service

Tuesday 6th September 2016
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    G20 a success for China, but hard issues kicked down the road

    G20 a success for China, but hard issues kicked down the road

    China is lauding its successful hosting of the G20 summit in scenic Hangzhou, with open confrontation largely avoided and broad consensus reached over the fragile state of the global economy and the need for a wide range of policies to fix it.

    There was even a joint announcement by China and United States that they would ratify the Paris climate change agreement, a significant step for the world's two biggest emitters of greenhouse gases.

    But scratch beneath the surface, and the gathering of the world's most powerful leaders was not all plain sailing - from the distraction of a North Korean missile test to the failure of the United States and Russia to reach agreement over Syria, and diplomatic faux pas to double speak over protectionism.

    Chinese state media, while largely basking in the glory of a summit that happened without being too overshadowed by disputes such as the South China Sea, also let slip Beijing's frustrations at what it sees as Western efforts to stymie its economic ambitions.

    "For the world's major developed economies, they should curb rising protectionism and dismantle anti-trade measures as economic isolationism is not a solution to sluggish growth," China's official Xinhua news agency said late on Monday.

    "In order to build an inclusive, rule-based and open world economy, protectionism must be prevented from eroding the foundation for a faster and healthier economic recovery."

    In the run-up to G20, China has been particularly upset by what it sees as unwarranted suspicion of its overseas investment agenda smacking of protectionism and paranoia.

    A few weeks before the summit, Australia blocked the A$10 billion ($7.63 billion) sale of the country's biggest energy grid to Chinese bidders, while Britain delayed a $24 billion Chinese-invested nuclear project.


    Behind the scenes, Western countries have been accusing China of not sticking to its own goals.

    Before the summit, European G20-sources doubted that the Chinese agenda would mark a real new chapter to create more sustainable growth for the global economy.

    China, asking in public for more openness and steps to counter protectionism, is still giving Western investors only very limited access to their market, a European official said.

    A big concern for foreign investors in China is what they see as the increasing difficulty of doing business in China, driven by concern that new laws and policies are seeking to effectively shut out foreigners or make life very hard for them.

    "President Xi accurately raised the alarm on the need to counter the increase in protectionism around the world," said James Zimmerman, chairman of the American Chamber of Commerce in China.

    "But actions speak louder than words and the ball is in China's court to implement its own needed domestic reforms and to provide greater market access for foreign goods, services and technology."

    And calls to utilize innovation as an economic driver should reflect policies that encourage an environment promoting fair and market-driven innovation that is open to all participants, and not just a few domestic champions, Zimmerman said.

    Several diplomats familiar with the summit said China had resisted the idea of putting steel on the final communique, though it did make an appearance in the end with G20 leaders pledging to work together to address excess steel capacity.

    For countries like Britain, whose steel industry crisis has been directly blamed on a flood of cheap Chinese imports, the issue is key.

    An official from British Prime Minister Theresa May's office said they and the United States had pushed for language in the communique on the importance of working together at G20 to tackle excess production.

    "We have, despite resistance from some countries, secured some language on the importance of doing that," the official said.

    Asked if China was one of those resisting, she just repeated "in the face of some resistance".

    Another shadow over the G20 has been the rise of popular opposition to free trade and globalization, embodied by phenomenon like Britain's summer vote to leave the European Union and Donald Trump becoming the Republican presidential candidate in the United States.

    "We agree with the G20's analysis that the benefits of trade and open markets must be communicated to the wider public more effectively," said John Danilovich, Secretary General of the Paris-based International Chamber of Commerce.

    "It's vital that business and governments work together to explain how and why trade matters for all."
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    Brazil police launch operation into fraud at state pension funds

    Brazil's federal police launched an operation on Monday to investigate fraud at pension funds of major state-run companies, carrying out seven arrest warrants, over a hundred search warrants and freezing assets worth 8 billion reais ($2.46 billion), police said in a statement.

    The pension funds under investigation are those of state-run banks Caixa and Banco do Brasil, oil company Petrobras and postal service Correios, the police said.

    The funds did not immediately respond to requests for comment.

    The warrants were issued by a judge in the capital of Brasilia, with police operations being executed in eight states as well as the federal district of Brasilia.

    Police said the investigation was focused on 10 cases which had racked up losses worth billions of reais (dollars). Of these, eight were related to reckless or fraudulent investments made through connected investment funds, police said.
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    Oil and Gas

    Saudi Oil Minister Says No Need Now to Freeze Crude Output

    There is currently no need to limit oil output, Saudi Energy Minister Khalid Al-Falih said on Monday, after signing an energy agreement with his Russian counterpart Alexander Novak.

    “There is no need now to freeze production,” Al-Falih said in an interview with Al Arabiya television in Hangzhou, China. “It is among the preferred options, but it is not necessary today. The market is improving day by day.”

    Crude prices gained more than 5 percent before Al-Falih and Novak made a joint statement, amid speculation that the two oil producers could reach an agreement to cap output. A similar proposal in April failed after Saudi Arabia insisted that Iran also participate. Russian President Vladimir Putin and Saudi Arabian Deputy Crown Prince Mohammed bin Salman met Sunday in Hangzhou and agreed to work together to ensure stability in the oil market.

    Al-Falih described Saudi Arabia’s agreement with Russia as “important” and said the two producers would continue to cooperate. The countries discussed several options to stabilize oil markets including a joint freeze on output, he said.

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    Iran plans to complete new oil export terminal by year-end

    Iran expects to complete a pipeline and a terminal to export a new grade of crude by year-end, boosting the country's drive to ramp up oil production to pre-sanctions levels.

    A senior official from the National Iranian Oil Company said late on Monday that the terminal near Kharg Island in the Gulf would be ready to export the new grade of crude, known as West Kharoon, after the facilities were completed "sometime by the end of this year".

    Iran oil officials have said it will be ready to enter talks on a possible oil supply freeze with other OPEC members once it returns output to levels before sanctions were imposed on its crude imports over the country's disputed nuclear programme.

    "As soon as (the pipeline and terminal are) completed, we will be able to segregate and export this crude," Seyed Mohsen Ghamsari, director for international affairs at the National Iranian Oil Company, told Reuters.

    Initial production of the new grade may be just under 300,000 barrels per day, making it key in boosting Iranian production, he said. The grade was originally expected to be introduced to the market earlier this year.

    The crude blend will be of similar quality to Iraq's Basra Heavy crude, with an API gravity of between 22 and 26 degrees and a sulphur content higher than 2 percent.

    Ghamsari said earlier on Monday Iran is producing just over 3.8 million bpd of crude and could reach 4 million bpd in a few months.

    "We are ready to negotiate the level of production as soon as we come back to the production before sanctions," Ghamsari said, adding that output was a little higher than 4 million bpd before sanctions.

    A nod from Iran is key in getting members of the Organization of Petroleum Exporting Countries to agree to a deal to freeze production which could curb excess supply globally and support oil prices .

    Tehran's aggressive moves to recoup market share, lost under international sanctions, have paid off in Asia with July crude imports up 61 percent at 1.64 million bpd from a year ago.

    Still, crude exports to Asia and Europe, Iran's key markets, are expected to stabilise in September after sharp rises in the first half.

    For Iranian crude exports to Asia "there won't be significant change from July", Ghamsari said. He expects September exports to Europe to rise to 500,000 bpd, up 100,000 bpd from July.

    Iran remains in talks with Arab Petroleum Pipelines Company (SUMED) to lease storage tanks, although the producer has been able to increase exports to Europe without the facilities, Ghamasari said. Low freight rates have also reduced the cost of shipping Iranian crude to Europe, he added.

    In Iran, NIOC will reduce its gasoline imports and condensate exports once the first phase of its Persian Gulf refinery starts up by end-March 2017, he said.

    Gasoline imports have fallen this year as Iran uses more compressed natural gas to fuel cars, Ghamsari said without providing volumes.

    Separately, NIOC increased fuel oil exports this year to meet robust demand, especially for the straight-run 280-centistoke grade, he said.
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    China's oil refineries running below 70% capacity

    China's oversupply of petroleum products will worsen, as its oil refineries are running below 70 percent capacity, said an industry insider Sunday.

    "Overcapacity has long plagued refineries, and the dipping of the global crude price has made overcapacity ever more prominent," said Cui Guanglei, deputy head of the refinery division of Sinopec Group, China's largest petroleum refinery.

    On the consumption side, China is using more gasoline and less diesel, Cui said. Sinopec saw overall petroleum sales rise 3.1 percent in the first half of the year, with gasoline up 12.5 percent but with diesel falling.

    Sinopec has been adjusting its production, trying to decrease the diesel-to-gasoline ratio of its products, but it is still under significant and increasing pressure from the consumption trend, Cui said.

    As a comparison, refineries in the United States have been operating at around 90 percent capacity this year, according the US Energy Information Administration.
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    Despite cuts, Big Oil to expand production into the 2020s

    Never mind the drop in crude prices, huge spending cuts and thousands of job losses - the world's top oil and gas companies are set to produce more than ever for some time.

    While top oil companies struggle with slumping revenues following a more than halving of prices since mid-2014 after years of spectacular growth, their production has persistently grown as projects sanctioned earlier in the decade come on line.

    Overall production at the world's seven biggest oil and gas companies is set to rise by around 9 percent between 2015 and 2018, according to analysts' estimates.

    With an expected recovery in prices, the increased production should boost cash flow and secure generous dividend payouts, which had forced companies to double borrowing throughout the downturn.

    "There are a lot of projects coming on stream over the next three years that will support cash flow and ultimately dividend," Barclays analyst Lydia Rainforth said.

    And despite a drop in new project approvals, companies have throughout the downturn cleared a number of mammoth undertakings such as Statoil's Johan Sverdrop oilfield off Norway and Eni's Zohr gas development off the Egyptian coast.

    Others opted to acquire new production, such as Royal Dutch Shell, which bought smaller rival BG Group for $54 billion this year, and Exxon Mobil through investments in Papua New Guinea and Mozambique.

    Shell is expected to see the strongest growth among its peers over the next two years at 8 percent, according to BMO Capital Markets.

    Production is unlikely to drop after 2020, and could post modest growth as companies continue to bring projects onstream, albeit at a slower pace, BMO analyst Brendan Warn said.

    French oil major Total, for example, plans to clear three major projects by 2018 - the Libra offshore oilfield in Brazil, the Uganda onshore project and the Papua LNG project - that will begin production after 2020.

    "We won't see 5 to 10 percent growth that we've seen from companies in recent years. It will be closer to 1 or 2 percent," Warn said.


    Capital spending, or capex, for the sector is set to drop from a record $220 billion in 2013 to around $140 billion in 2017 before modestly recovering, according to Barclays.

    But companies have learnt to do more with the money after slashing expenditure and tens of thousands of jobs, while the cost of services such as rig hiring dropped sharply throughout the downturn.

    "2017 is the sweet spot for integrated companies. It took two to three years to adjust to the drop in oil prices, and a lot of the efficiencies introduced in recent years will roll into 2017, when projects kick in and free cash flow will improve," Rainforth said.

    The resilience is mostly due to new gas projects coming on stream as companies shift towards the less polluting hydrocarbon that is expected increasingly to displace oil demand in coming decades.

    The slower pace of project development after a decade of rapid growth that was accompanied by soaring costs will help companies, Warn said.

    "That is much more sustainable for a major that will reduce the number of large capex projects."
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    Russia's Yamal LNG project on track and on budget, says Novatek

    Russia's Yamal LNG project, to build the country's second gas liquefaction plant, is on track and on budget with Novatek and its partners having invested $18.5 billion so far, Novatek's CEO said.

    The first phase of the project, in which Novatek is in partnership with France's Total and China's CNPC and the Silk Road Fund, is due to start operation some time next year and Novatek's chief executive said it was 76 percent ready.

    Russia is the world's biggest producer of conventional gas after the United States but wants to increase its production of liquefied natural gas (LNG), which currently accounts for less than 5 percent of world output.

    Investment in the Yamal project, which will require $27 billion in total, was at risk after Novatek came under Western sanctions over Moscow's role in the Ukraine crisis, but the project has since secured funding from Chinese and Russian banks, as well from the Russian government.

    "To date, we have resolved all issues related to Yamal LNG's financing," Leonid Mikhelson, Novatek's chief executive and a major shareholder, told reporters in comments cleared for publication on Monday. "In my opinion, we should implement similar projects on our own, not using (Russia state) budget financing in the future."

    The Yamal facility will have three production lines when it is completed, each with an annual capacity of 5.5 million tonnes of LNG.

    In April, Yamal LNG signed loan deals with Chinese banks worth over $12 billion. It also secured Russian state funds worth 150 billion roubles ($2.3 bln) from a rainy day fund and 3.6 billion euros ($4 bln) from state-controlled Russian lenders Sberbank and Gazprombank.


    Russia currently operates just one LNG plant, on the Pacific Island of Sakhalin, led by Gazprom, with an annual capacity of around 10 million tonnes.

    Sakhalin-2 plans to expand to add a third production line with 5 million tonnes of annual capacity some time in the future. The United States, Qatar and Australia, however, are also all expanding LNG production.

    Novatek, Russia's second biggest producer of conventional gas, plans to commission its second LNG project, Arctic LNG-2, by 2025 with planned LNG production of up to 16.5 million tonnes a year.

    Mikhelson declined to give a cost estimate for Arctic LNG-2 project and said that Novatek was not in a hurry to choose partners for the project.

    Japan Bank for International Cooperation (JBIC), which has signed up to help finance the Yamal project, is also ready to support the Arctic LNG-2 project, he said.
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    Petronet LNG’s net profit climbs 55 pct

    Petronet LNG, India’s largest importer of the chilled fuel, reported a 55 percent rise in its net profit for the quarter ended June 30.

    The company posted a net profit of 3.77 billion rupees for the quarter ended June 30, 2016 as compared to 2.44 billion rupees in the corresponding period a year ago.

    Total income decreased 36 percent to 53.86 billion rupees for the June quarter, Petronet said in a filing to the stock exchange on Monday.

    Petronet LNG recently commissioned the regasification facilities under the Dahej LNG terminal’s expansion project.

    The terminal has been expanded from 10 mtpa to 15 mtpa, with the remaining part of the expansion project, the two LNG storage tanks expected to be completed by October 2016.

    The company also owns the Kochi LNG terminal 5 mtpa Kochi liquefied natural gas terminal at Kochi, Kerala.
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    CNPC selling $11 billion in financial assets to listed unit in reform push

    CNPC selling $11 billion in financial assets to listed unit in reform push

    China National Petroleum Corp (CNPC), the country's largest state energy group, will sell $11 billion worth of financial assets to a listed unit as part of the state giant's reform plan to restructure its non-core businesses.

    Under Beijing's broad reform agenda to make its state-owned enterprises more efficient and competitive, CNPC has said it will restructure non-core departments, such as oilfield services, engineering and financial operations, and list them on stock exchanges.

    Jinan Diesel Engine, a unit under CNPC, said late on Monday that it plans to buy certain financial assets in CNPC for 75.5 billion yuan ($11.3 billion) via cash, asset swaps and a share issue.

    The unit, listed on the Shenzhen exchange, said it aims to raise up to 19 billion yuan in a private placement of shares to fund the acquisition.

    CNPC is also the parent of PetroChina <0857,HK>, Asia's largest oil and gas producer.

    "It's part of the company's stated restructuring of non-core units. CNPC is using the Jinan firm as the shell for listing its financial assets," said a Hong Kong-based oil and gas analyst, who declined to be named due to company policy.

    The assets CNPC is selling to the listed unit include the state group's holdings in CNPC Finance, Bank of Kunlun, Kunlun Financial Leasing, Bank of China International and others, according to a filing by Jinan Diesel Engine.

    In a similar move, Sinopec Group in 2014 transferred its oilfield service business to listed unit Sinopec Yizheng Chemical Fibre Co Ltd.

    Earlier expectations had been for a radical "big bang" shake-up of China's state energy firms, but Beijing has instead taken smaller steps such as pilot privatization projects and letting companies restructure assets internally.
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    Gazprom says 2 Bcm of natural gas sold at winter 2016 auction

    Russia's Gazprom Export sold 2 Bcm of natural gas to 11 companies during auctions Tuesday- Friday last week for 3-4 Bcm of gas offered for winter 2016-17 (October-March) delivery in Germany and Austria, the company said Monday.

    This was 1 Bcm more than was sold at the first ever Gazprom auction last year when the company sold 1.2 Bcm to 16 companies at German delivery points only.

    This year, the delivery points were offered at auctions on a take-or-pay basis for next winter included delivery in Austria and were: German Greifswald NEL or GASPOOL hub, Greifswald OPAL exempted, Olbernhau II, and Austrian Baumgarten or Arnoldstein.

    Most of the volumes were sold at the Greifswald NEL delivery point in Germany, almost one quarter or 500 million cu m was sold at Austria's Baumgarten, while nothing was sold at Greifswald Opal exempted point, a spokeswoman told S&P Global Platts Monday.

    Unlike last year, Gazprom did not reveal the details of the volume sold at each delivery point, nor the average price from the auctions.

    Last year, the prices turned out higher than spot and forward prices at European gas hubs, Gazprom said.

    But the company said it was satisfied with the auction results this year and it intends to pursue new auctions in parallel to its oil-indexed long-term contracts.

    "The fact that once again we have been able to sell additional gas volumes at the direction where we tested the first auction sales last year proves that this trading model worked not only once but is able to be used regularly," Gazprom Export director general Elena Burmistrova said Monday.

    "Gas sales on an auction basis complements our deliveries within the long-term contracts. We are aiming at conducting gas auctions in the future," she added.

    Gazprom said last year it could offer some 10% of its total supply to Europe via auctions in the 2017-2018 period. But it has not repeated this target so far this year.

    Some European gas traders polled by Platts said most of the volume might have been sold on Friday, when most reserve prices were below hub prices, or "in the money".

    On Friday for instance, some Czech traders told Platts the reserve price at Oberhau point was at German NCG hub price level, so in the money.

    But traders also said Monday they were surprised by the significant volumes sold at the Baumgarten delivery point.

    That delivery point gave an option for buyers to take delivery at Arnoldstein, opening the opportunity of onward transportation to Italy.

    But Italian traders told Platts last week the reserve prices had been too high given the transportation costs to reach Italy's PSV hub for winter.

    "This is surprising [the Baumgarten result]. Maybe the volumes will stay in Austria," said a European gas trader who participated in the auctions.

    On the Greifswald OPAL exempted, Gazprom's auctions were once again unsuccessful, with no gas sold.

    The Opal pipeline connects the Russian Nord Stream pipeline with Europe's gas transportation network. However, the European Commission allows Gazprom to use only half of the pipeline capacity for Russian gas to be delivered across Germany to the Czech Republic, with the other half reserved for third parties.

    Katja Yafimava, Senior Research Fellow at the Oxford Institute for Energy Studies told Platts Friday: "Such auction will reveal whether there is indeed any demand for capacity at OPAL exempted -- in terms of volumes and time periods -- and therefore whether the continuing refusal to allow Gazprom to use capacity is reasonable."
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    Colombia's Cano Limon pipeline hit by leftist ELN rebel attack

    A leftist rebel bomb attack has halted pumping operations along Colombia's second most important oil pipeline, the Cano-Limon Covenas, state oil company Ecopetrol said on Monday.

    The attack by National Liberation Army (ELN) guerrillas occurred on Saturday in a rural area of northern Norte de Santander province, close to the border with Venezuela, the company said.

    The incident did not halt production or exports.

    The 485-mile (780 km) pipeline has the capacity to transport up to 210,000 barrels of crude daily from oil fields operated by U.S.-based Occidental Petroleum to the Caribbean port of Covenas.

    Attacks on oil installations by the ELN, a group of about 1,500 combatants, have been a frequent occurrence during a conflict that has taken more than 220,000 lives and displaced millions over the past 52 years.

    President Juan Manuel Santos sought to begin peace talks with the ELN in March, but negotiations have stalled until the group frees all its hostages.

    The Revolutionary Armed Forces of Colombia (FARC), the biggest rebel group in the South American country, agreed to a peace accord with the government on Aug. 24.
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    Tankers: UKC-East VLCC freight rates fall to lowest recorded level on abundant supply

    The cost of sending fuel oil cargoes to Singapore from Rotterdam on VLCCs has dropped to the lowest level in more than 10 years due to a large supply of available ships in the UK Continent, sources said.

    The UK Continent-East route, basis 270,000 mt, was assessed $200,000 lower at a $2.3 million lump sum Friday, according to S&P Global Platts data, the lowest since Platts started assessing the route in January 2006.

    On the fixture front, VLCCs were booked at $2.25 million and $2.3 million last week for Rotterdam-Singapore fuel oil runs in September. The current freight rates represent a major downward movement from January, when rates were as high as $6.4 million.

    The dwindling returns attainable by shipowners on the route this year have been reflected across the VLCC spectrum, with freight rates near historic lows in a variety of regions.

    The main factor behind the dropping rates has been an increase in global VLCC supply, with a large number of newbuilds joining the existing fleet.

    According to data from Affinity Research, there are 37 new VLCCs due to be delivered this year, with 24 having already joined the fleet. There are a further 39 VLCCs expected to be added in 2017, which is likely to heap further downward pressure on what are already historically low freight rates.
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    Saudi Aramco-Motiva in lead to buy Lyondell's Houston refinery: sources

    Saudi Aramco-Motiva in lead to buy Lyondell's Houston refinery: sources

    Saudi Aramco IPO-ARMO.SE and its U.S. refining joint-venture Motiva Enterprises lead the race to buy LyondellBasell Industries Houston refinery, according to three sources familiar with the matter.

    An announcement of the sale by Lyondell is expected this week, the sources said.

    Lyondell spokesman Michael Waldron declined on Monday to discuss a sale of the refinery.

    Reuters reported on Aug. 25 that Dutch chemical company Lyondell had retained Bank of America Merrill Lynch to help with a sale of the refinery.

    A company spokeswoman said in August, "the refinery may be more valuable as part of a larger refining system. We are exploring all options."

    Lyondell uses the Houston refinery to produce feedstocks for its chemical plants. The refinery can run a variety of cheaper high-sulfur crude oils. In the past few years it has been running a large amount of Canadian oil.

    The 263,776 barrel per day (bpd) Houston refinery was restoring production on Monday after an early Thursday morning power outage, the latest in a string of fires, shutdowns and power outages that have cut the plant's production throughout year.

    Saudi Aramco-Motiva emerged as the leading contender over the weekend, when Lyondell's management evaluated proposals from potential buyers, the sources said.

    Aramco-Motiva and Canada's Suncor Energy Inc were exchanging proposals with Lyondell in the past few days, according to the sources.

    Little was heard about another potential buyer, Valero Energy Corp, the sources said.

    Saudi Aramco, Motiva, Suncor and Valero did not reply to messages seeking comment.

    The refinery has been valued at about $1.5 billion based on an average price between $5,000 and $6,000 per barrel of refining capacity in recent sales of U.S. refineries.

    Lyondell's refinery supplies dry gas to Shell's joint-venture refinery seven miles (11.25 km) east in Deer Park, Texas. Aramco and Shell announced plans in March to divide Motiva’s three refineries, distribution terminals and retail networks between them. Aramco is to keep the Motiva name.

    It was unclear if the Lyondell refinery will remain with the post-breakup Motiva once the split takes place on April 1, 2017.

    Negotiations on the final distribution of assets after the breakup were continuing as of last week, according to Motiva.
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    Alternative Energy

    Cost of renewable may keep falling, IRENA

    The cost of renewable energy has fallen dramatically and will continue to do so, while investment has reached record levels and additions to global capacity have set new highs, said Adnan Amin, director-general of the International Renewable Energy Agency.

    According to a report published by IRENA, by 2025, average electricity costs for solar photovoltaics could fall by 59%, offshore wind power costs could fall by 35%, and onshore wind power costs could see a 26% reduction, compared with the level last year.

    The improvements can be attributed to the G20's strong commitment to non-fossil fuels, said Amin.

    G20 energy ministers and officials met in Beijing in June, ahead of the upcoming G20 Summit in Hangzhou, capital of Zhejiang province, acknowledging the progress made in scaling up renewable energy.

    By 2025, the global average cost of electricity from solar PV and onshore wind power sources will be roughly 5 to 6 US cents per kilowatt-hour.

    Electricity prices for concentrated solar power could also fall by as much as 43%, depending on the technology used, according to the report, which highlighted the significant cost differences that exist today and signaled strong potential for future cost reductions for G20 members.

    "Given that solar and wind are already the cheapest source of new generation capacity in many markets around the world, this further cost reduction will broaden that trend and strengthen the compelling business case for switching from fossil fuels to renewables," Amin said.

    As of 2016, 173 countries have set renewable energy targets, up from 43 in 2005.

    To facilitate the sharing of best practices, IRENA and the International Energy Agency continually update their joint IRENA/IEA Policy and Measures Database, which contains more than 700 policies for G20 members.

    The continuing cost reductions have resulted in growing investment in the renewable energy sector. Last year, a record $286 billion was invested in renewable sources, 3% higher than the previous record in 2011, according to IRENA.

    "But to increase deployment of renewable energy to the levels needed to meet global climate and development goals, this figure must double by 2020 and more than triple by 2030," the report said.

    China is playing a vital role in the global renewable markets by leading investment and newly installed generation capacities.

    Globally, investment in fossil fuels was less than half the amount invested in renewable energy last year, and it's estimated that by 2040 two-thirds of energy projects valued at $11.4 trillion will be in the renewable sector.

    Since 2009, the price of solar PV modules has fallen roughly 80%, while the price of wind turbines has declined by 30%-40%, mainly as a result of the expansion of generation capacity.

    IRENA said that by 2025 cost reductions for renewable energy will increasingly depend on technological innovation, operating and maintenance costs, and quality project management.
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    Coal India pushes into solar

    Coal India is diversifying its core business through a plan to install 600 megawatts of solar power in four states.

    The announcement, is part of an agreement with the Solar Energy Corporation of India (SECI) to build 1,000 megawatts of solar capacity throughout the country between 2014 and 2019.

    "In the first phase, CIL is going to set up 2×100 MW solar power plants in the state of Madhya Pradesh. In the second phase CIL is going to develop a capacity of 600 MW in the solar parks of Madhya Pradesh, Chhattisgarh, West Bengal and Maharashtra for which NIT [Notice Inviting Tender] has already been floated by SECI," the world's largest coal producer said in its annual report.

    India is the third-largest producer of coal, behind China and the U.S. Yet it relies heavily on imports because of mismanagement and an onerous bureaucracy in coal exploration, production and power generation. As a result, nearly a quarter of India's 1.2 billion people have no electricity, according to the World Bank.

    The Indian government is well aware of the problem and has been actively pushing to not only produce more coal domestically, but also to diversify its energy mix.

    “The world must turn to (the) sun to power our future,” Prime Minister Narendra Modi said at the 2015 COP21 climate conference. “As the developing world lifts billions of people into prosperity, our hope for a sustainable planet rests on a bold, global initiative.” That plan is to derive 40 percent of its energy from renewable sources by 2030, including 100 GW of solar energy by 2022. The target is ambitious, since India currently only has about 8 GW of installed solar.

    However strides are being made. A new report by Mercom Capital Group says that India is likely to install 4.8 GW of solar capacity in 2016. The clean energy communications and research firm also said the solar project pipeline in India is now about 21 GW, with 14 GW under development and 7 GW scheduled to be auctioned, as reported Sunday by Economic Times.
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    Bayer sweetens Monsanto bid as talks enter final stretch

    German pharmaceutical and crops manufacturer Bayer AG said on Monday that its negotiations with Monsanto Co had advanced, and that it was now willing to offer more than $65 billion to acquire the world's largest seeds company.

    Bayer's announcement came as the gap in price expectations between the two companies has narrowed significantly, although important terms, including potential divestitures in case of antitrust scrutiny, have yet to be agreed on.

    Bayer in a statement said that it was prepared to offer $127.50 per share in connection with a negotiated deal, up from its previous offer of $125 per share. The Bayer statement confirmed a report by German daily Rheinische Post earlier on Monday.

    Rheinische Post also reported, citing sources which it did not identify, that an offer of $130 per share may be necessary to clinch a deal with Monsanto "in a swift and friendly way."

    In a brief statement, Monsanto said on Monday it had been engaged in "constructive" negotiations with Bayer, during which it received the updated non-binding acquisition proposal for $127.50 per share in cash.

    The Saint Louis-based company added that it was continuing these conversations as it evaluated Bayer's offer, as well as proposals from other parties it did not name. It cautioned that there was no certainty that any deal would occur.

    Bayer's bid was already the largest all-cash proposed takeover on record. A deal with Monsanto would give the German company a shot at grabbing the top spot in the fast-consolidating farm supplies industry.

    ChemChina agreed earlier this year to buy Switzerland's Syngenta for $43 billion, after the latter rejected takeover approaches from Monsanto. Dow Chemical Co and DuPont are forging a $130 billion merger, which is to be followed by a break-up into three businesses.

    In July, Bayer raised its earlier offer of $122 per share to $125 to put Monsanto under pressure to engage further.

    Monsanto subsequently turned down Bayer's $125 a share offer, but said it was open to further talks with the German company, as well as other parties.

    Reuters reported last month that Monsanto's talks with Bayer were making progress, with the latter receiving some limited access to Bayer's books.

    Since then, negotiations have advanced further, with more information exchanged between the two sides and the chief executives of the two companies engaging in direct discussions, according to people familiar with the matter, who asked not to be identified because of the confidentiality of the talks.

    However, while the two companies are close to reaching an agreement on price, they have yet to agree on a strategy on how to jointly tackle potential antitrust challenges, the people said.
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    Israeli fertiliser maker ICL won't bid for stake in Chile's SQM

    Fertiliser maker Israel Chemicals (ICL) will not be bidding for an indirect stake that is for sale in Chilean potash and lithium producer SQM, a spokesman for the Israeli company said.

    ICL Chief Executive Officer Stefan Borgas said in May that ICL was interested in investing in SQM, which is 30 percent held by Potash Corp of Saskatchewan, but noted SQM was too big for ICL to buy outright.

    A share-based merger of ICL and SQM, or ICL buying a stake in SQM, could be attractive, but would need to involve Potash Corp, which is also a shareholder in ICL, Borgas said in May.

    SQM's controller Julio Ponce in December began the process of selling the bulk of his shares in the company. His holding firm Oro Blanco is looking to sell its majority stake in Pampa Calichera, which in turn owns around 23 percent of SQM. Bids are due on Monday.

    "We will not be in involved in this process," ICL's spokesman said.
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    Precious Metals

    AMCU, platinum mines fail to reach wage deal

    South Africa's biggest platinum mine-workers' union and the industry have failed to reach a deal on workers' pay, the union said on Monday, raising the prospect of industrial action in the world's top producer of the white metal.

    The Association of Mineworkers and Construction Union (AMCU), which led a crippling five-month strike in 2014, has been in talks with Anglo American Platinum, ImpalaPlatinum and Lonmin since July this year.

    "To date no progress has been made," AMCU said in a statement. "The union has therefore officially declared deadlocks with all three companies."

    The companies were not immediately available to comment.

    AMCU said it would next week separately meet Impala and Anglo American Platinum to seek a resolution. No meeting with Lonmin has been confirmed, it said.

    Declaration of a dispute is the first step towards launching a strike and if next week's meetings fail to find a solution, the dispute would be referred to a government mediator in a bid to break the impasse, failing which AMCU could give the industry a 48-hour notice to down tools.

    AMCU is demanding pay hikes of more than 50% for its lowest pad members, who home take around R8 000 ($557) a month, and a 15% hike for its higher paid members.

    The demands are well above inflation at 6%.

    South Africa has the biggest and most lucrative platinumreserves but labour unrest and regulatory uncertainty have dampened investors' enthusiasm.

    The strike in 2014 hit the industry hard, costing it more than 20 billion rand in lost output and forcing the companies to cut jobs, shed mines and in some cases seek cash from investors.
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    Base Metals

    As Nyrstar hedges forward, should zinc bulls be worried?

    Zinc continues to glow red hot amid the general gloom pervading the industrial metals sector.

    On the London Metal Exchange (LME) three-month metal closed last week valued at $2,364 per tonne, up 50 percent on the start of the year and the highest it's been since May last year.

    Everyone, it seems, is still buying into the galvanising metal's enticing narrative of supply shortfall, something of a stand-out in a sector that is more worried about the weak state of demand.

    So too is Nyrstar, the Belgian zinc smelting giant. "We believe that the zinc price should continue to rise on the basis of improving supply and demand fundamentals", said the company's chief executive officer, Bill Scotting.

    Except that statement accompanied a notification that the company has just initiated a hedging programme, essentially locking in forward prices through the end of the first quarter of next year.

    Which raises the question as to whether Nyrstar thinks this year's rally might be about to run out of steam.

    Should zinc bulls be worried?


    Nyrstar has used the options market to mitigate the potential for lower prices over the coming months.

    The "collar structures", as they're called, involve the purchase of put options, which confer the right to sell, and the simultaneous sale of call options, which confer the right to buy.

    The net effect, as Nyrstar explained, is to eliminate price exposure outside of a $2,137-2,437 per tonne price band through the end of this year.

    A similarly structured hedge over the first quarter of next year will do the same in a $2,100-2,457 price band, with exposure kicking back in at a price above $2,800 per tonne.

    There are several points worth noting here.

    Firstly, Nyrstar has done this sort of thing before. Similar short-term "strategic" hedges on the zinc price were put in place in both 2013 and 2014, while the company has this year also hedged its foreign exchange exposure.

    Secondly, the latest hedges cover only a small part of the company's production, around 8,000 tonnes per month of metal. Production guidance this year is 1.0-1.1 million tonnes, equivalent to 83,000-92,000 tonnes per month.

    Thirdly, Nyrstar is going through a wholesale financial restructuring, including the disposal of its zinc mining business, as it tries to shore up its balance sheet in the wake of zinc's plunge to a multi-year low of $1,444.50 per tonne in January this year.

    Given Nyrstar's trials and tribulations, locking in a degree of pricing certainty on part of its output is understandable.

    But it also means that Nyrstar's zinc hedges may say as much about the company as they do about the zinc price.

    The more interesting question, though, is whether other producers are thinking, and doing, the same.


    Because the other unique thing about Nyrstar's hedges is that the company publicly discloses them in explicit detail.

    Plenty of other producers don't.

    But there are signs that others may also be capitalising on zinc's super-strong rally to, quite literally, hedge their bets.

    Take the LME options market, for example.

    Back in June all the excitement was about what was happening on the upside, with super-bullish plays being put on strike prices as high as $3,000 per tonne in June 2017.

    Those call options are still open, by the way, but in the interim the overall tenor of the LME options market has changed.

    Back in June open interest on calls through January 2018 totalled 42,582 lots, while open interest on puts stood at just 26,200 lots.

    Fast forward a couple of months, however, and the playing field has shifted in favour of put options.

    There are now 48,679 lots of open interest on put options through January 2018, exceeding the 44,914 lots of open interest on the calls.

    The last few days in particular have seen some fairly heavy volumes go through on puts at the $2,000, $2,100 and $2,175 strike prices across the front three months.

    The scale of the shift in positioning goes way beyond anything that could be attributable just to Nyrstar's hedging.

    The increase in put option open interest since June represents almost 562,000 tonnes.

    Evidently, others are thinking the same about the sustainability of the zinc rally as Nyrstar, even if they don't have the Belgian company's specific balance sheet pressures.

    Moreover, options are only one way of hedging forward price exposure.

    The more conventional path is in the form of forward sales and here too, the shape of the forward zinc curve on the London market should give pause for thought.

    Beyond January next year the curve is firmly backwardated, which seems to bear out chatter on the LME "Street" about what one broker, Kingdom Futures, has called "aggressive forward producer hedging programs".
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    Japan aluminium buyers to turn to spot markets, could crimp annual contracts

    Japanese aluminium buyers are looking to crimp the amount of the metal they purchase via annual contracts, instead turning to spot markets where premiums have in recent months dropped to their lowest in over seven years amid a persistent supply glut.

    Most aluminium buying by Asia's biggest importer of the metal is carried out through annual contracts, with premiums for delivered metal set each quarter via negotiations that act as a benchmark for the region.

    But with spot metal premiums falling since hitting this year's highs around March, sources at buyers said quarterly negotiations had locked them into prices well above those in the market.

    "Lots of inventories are out there and we can get better deals if we buy them in spot," said a source at a fabricator, adding that the company would likely buy less via annual contracts in 2017. He declined to be identified due to the sensitivity of the issue.

    Aluminium stocks at three major Japanese ports slid to about 300,000 tonnes in July from a record above 500,000 tonnes in May 2015, but that is still above 230,000-270,000 tonnes in early 2014.

    Less contract purchases could be a blow to suppliers such as Rio Tinto , Alcoa and South32 as they would likely lose guaranteed sales. Rio declined to comment on the issue, while Alcoa and South32 did not immediately respond to requests for comment.

    Japanese contract premiums are expected to hit the lowest in seven years in October-December, with key producers offering $80-82 per tonne, down 9-14 percent from the previous quarter. But buyers are seeking even lower levels, bidding for the low $70s given weakening spot premiums at around $70, according to sources.

    Premiums are paid over the London Metal Exchange cash price .

    Major Japanese buyers include traders like Marubeni and Mitsubishi and fabricators such as UACJ and Kobe Steel.

    "We intend to ask smelters to change the way we do business," said a source at a Japanese trading house that was hit by heavy losses on aluminium inventories in the last financial year.

    But a producer warned that "without annual deals, buyers may not get as much metal as they want at a time they want if supply gets tighter".

    A Singapore trader who deals into Japan said that the country was likely to shift to greater spot purchases gradually, at first buying only limited amounts via spot.

    Meanwhile, a few buyers said they could push for prices under annual contracts to be based on a spot premium index, removing the need for quarterly negotiations that have been used for decades.

    But most suppliers and buyers said such a shift would be difficult as finding an index that accurately reflected the state of Japanese markets could be tricky.

    Japanese buyers and global producers are poised to start negotiations over 2017 contracts in November.
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    China ex-works Shanxi alumina gains Yuan 20/mt to Yuan 1,870/mt

    China's spot alumina prices firmed further Monday as offers remained high on strong short-term sentiment, market participants said.

    The Platts ex-works Shanxi alumina spot assessment was Yuan 1,870/mt ($280/mt) full cash terms Monday, up Yuan 20/mt from Friday, and also up Yuan 30/mt on the week and Yuan 140/mt on the month.

    In neighboring Henan province, tradeable spot alumina prices were also heard mostly higher at Yuan 1,900/mt cash, up from Yuan 1,880-1,900/mt, with ex-works Guangxi prices pegged at Yuan 1,830-1,850/mt cash, up from around Yuan 1,800/mt previously.

    Market sentiment continued strong on talks of potential smelter restarts in the fourth quarter, expected new metal capacity ramp-ups, and recent transport problems in Shanxi due to increased coal deliveries, sources said.

    A surge in coal traffic?has led to congestion and delays in the domestic rail services, and availability of wagons, sources said.

    Smelters indicated buy ideas at Yuan 1,800-1,850/mt cash ex-works Shanxi, while sellers eyed Yuan 1,900-1,950/mt on Monday.

    "Offers are going up again today, more around Yuan 1,950/mt cash for both Shanxi and Henan now. No trades have been reported but it will be hard to conclude below Yuan 1,900/mt now," a Beijing trader said.

    One Shanxi refiner quoted Yuan 1,920/mt cash on Monday and said he would not sell below Yuan 1,900/mt now, while another indicated tradeable prices at around Yuan 1,890/mt cash ex-works Shanxi.

    A South China smelter agreed offers remained high on strong sentiment, but expected the uptrend to be short-lived.

    "Prices went up earlier mainly due to the Wanji and Chalco Shanxi refineries shutdowns, but those have resumed, so there's less pressure. The transport issues in Shanxi are also temporary, so this uptrend won't last," the South China smelter source said.
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    Steel, Iron Ore and Coal

    Shanxi awards coal, steel producers for cutting production

    Shanxi awards coal, steel producers for cutting production
    Shanxi, China's leading coal-producing province, has awarded nearly 1 billion yuan ($15 million) to six State-owned coal producers for cutting production.

    The six pledged to slash coal production capacity by a combined 10.6 million tons per year, with Datong Coal Mine Group promising the biggest cut of 3 million tons per year. The group received 312 million yuan, according to the Shanxi provincial department of finance.

    The central Henan province plans to award 2.18 billion yuan to coal and steel producers this year for cutting production, with three State-owned coal producers already receiving a portion of the funds.

    The funds will compensate workers whose employment has been affected due to cuts in overcapacity, said the Henan provincial department of finance.

    The country has adopted a combination of measures to make cutting overcapacity an economic priority.

    Last week, a furnace capable of producing 1.33 million tons of iron every year, or enough iron to build an Eiffel Tower in three days, was demolished in Baogang Group in north China's Inner Mongolia Autonomous Region.

    The furnace, which was built in 1959, is the largest to be demolished since China initiated supply-side reform to tackle industrial overcapacity last year.

    The country has vowed to cut steel capacity by 100 to 150 million tons by 2020, including 45 million tons in 2016. This year's target to slash coal capacity is 250 million tons.

    Time is limited, as China's top economic planner had ordered local governments to speed up measures to cut excess coal capacity.

    "Local governments should strive to fulfill their targets by the end of November, while central and provincial state-owned coal producers should complete them in early November," Lian Weiliang, deputy head of the National Development and Reform Commission, said in August when addressing an internal meeting.
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    Premium hard coking coal spot price more than doubles so far this year on tight supply

    Spot premium hard coking coal prices from Australia surged 11% Monday, in what was the biggest day-on-day rise since January 11, 2011 on domestic Chinese coal supply anxieties and eager mill pre-winter re-stocking.

    S&P Global Platts assessed premium low-vol hard coking coal shipped from Australia up $15.75/mt from Friday at $157/mt FOB Australia Monday, the highest level since March 19, 2013.

    Prime hard coking coal FOB Australia prices have now more than doubled this year, from $76.45/mt FOB Australia on January 4.

    There were only four other sessions since Platts started daily assessments in October 2010 that a larger day-on-day increase was observed.

    The cost of using met coal in the blast furnace hit 51.5% of total input costs on Monday, more than that of iron ore. It was the first time coking coal costs have been higher than iron ore since Platts started assessing met coal in October 2010.

    Market participants reported a significant surge in buying interest at higher price levels at the start of the trading week.

    "Buyers who need to restock are desperate to buy regardless of how high the offers are," a northeast China steelmaker said. "That is why prices can rise several dollars a day."

    A deal was reported done Monday for an Australian premium low-vol with 71-73% CSR, 80,000 mt, early-November laycan at $157/mt FOB Australia.

    A second transaction was concluded at $160/mt FOB Australia for November laycan with 75,000, November laycan.

    A firm offer was reported for an Australian premium low vol with 73-75% CSR, 75,000 mt, also November laycan, at $165/mt CFR China. Keen buying interest was heard close to the offer level.

    Although these cargoes laycans fell outside the Platts 7-45 days loading window assessment, sources said there was little price difference between November and October laycans.

    There was also an index deal heard done late last week for a premium low-vol with 69-72% CSR at a small premium to Platts Premium Low-vol FOB Australia for a November laycan cargo and a sub-Panamax-size shipment.

    "This market is like what we saw before during the rise. You either match the offer price or bid above it if there is no offer," a Chinese trading source said. "Despite us bidding high, we lost out and could not get any cargoes as its not an easy market because supply is elusive."


    Among factors behind the price increase was persistent premium low-vol and mid-vol spot tightness for October and November laycans, as well as talk of a recent roof collapse at one large Queensland premium coking coal mine.

    That coincided with Chinese mills gearing up for a pre-winter re-stocking cycle and, hence, actively eyeing November laycan material, a Chinese source said.

    "There is firm Chinese demand...The market is changing very fast," the source said, adding prices were being refreshed on a daily basis.

    Also, trading firms were battling to obtain forward laycan shipments in anticipation logistics issues in north China could continue, sources said.

    For tier-two HCC, there was an offer for half a Capesize cargo of Australian 62-64% CSR HCC at $155/mt CFR China, or a 3-4% premium above Platts HCC 64 Mid Vol CFR China. This was for an October laycan material.

    Indicative bids for such coal were at $145/mt CFR China.

    Prices for second-tier material were assessed up $11/mt up to $150/mt CFR China, or $143/mt FOB Australia on a Panamax freight back-calculation.

    There was also a PCI deal done for an Australian PCI with 21-23% VM and 9-10% ash at a 2-3% premium to Platts Low Vol PCI CFR China index Friday. This was for a 60,000 mt cargo for an end-September laycan.

    Meanwhile in the futures market, there was a deal done Monday for Q1 2017 at $143/mt FOB Australia, for a 15,000 mt contract or 5,000 mt per month.


    Looking ahead, "this is not sustainable at all," an international source said. "Other mines will start opening very soon," the source said, adding US miners were offering products in the spot market, suggesting that swing suppliers could erode the recent price uptick.

    The source also said the pace of price upticks suggested buyers have no market power and it was firmly a sellers' market.

    Another source said mills had to consider cheaper coal alternatives than Australian or they would need to cut production.

    While there was no downside pressure in the short term, the rate of price rises suggested speculative bubbles should be, or have already started to appear, the mining source said.
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    Indonesia's September HBA thermal coal price hits new high for 2016

    Indonesia's Ministry of Energy and Mineral Resources has set its September thermal coal reference price, also known as Harga Batubara Acuan or HBA, at $63.93/mt FOB, which is up 9.5% from August, 9.8% higher year on year and the peak level for 2016 so far.

    The HBA price rally since May was largely driven by a mix of supply cuts and strong demand from China.

    The HBA is a monthly average price based 25% on the Platts Kalimantan 5,900 kcal/kg gross-as-received assessment; 25% on the Argus-Indonesia Coal Index 1 (6,500 kcal/kg GAR); 25% on the Newcastle Export Index -- formerly the Barlow-Jonker index (6,322 kcal/kg GAR) of Energy Publishing -- and 25% on the globalCOAL Newcastle (6,000 kcal/kg NAR) index.

    In August, the daily Platts FOB Kalimantan 5,900 kcal/kg GAR coal assessment averaged $57.19/mt, up from $50.28/mt in July, while the daily 90-day Platts Newcastle FOB price for coal with a calorific value of 6,300 kcal/kg GAR averaged $67.37/mt, up from $62.29/mt the previous month.

    The HBA price for thermal coal is the basis for determining the prices of 75 Indonesian coal products and for calculating the royalties Indonesian coal producers have to pay for each metric ton of coal they sell locally or overseas.

    It is based on 6,322 kcal/kg GAR coal, with 8% total moisture content, 15% ash as received and 0.8% sulfur as received.
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    Japan July thermal coal imports down 14.24pct on year

    Japan's thermal coal imports (including bituminous and sub-bituminous coals) stood at 9.32 million tonnes in July, down 14.24% year on year but up 9.44% month on month, the latest customs data showed.

    In July, Japan imported 8.55 million tonnes of bituminous coal, down 10.33% on year but up 15.29% on month.

    Australia remained the largest supplier to Japan with 7.05 million tonnes of the material, falling 13.14% on year but rising 18.83% on month.

    This was followed by Russia at 841,900 tonnes, dropping 26.76% on year and 17.38% on month.

    Imports from Indonesia stood at 417,700 tonnes, surging 161.06% year on year and increasing 23.69% on month.

    Imports from Canada soared 96.23% on year to 177,000 tonnes in the month, and those from China almost doubled on year to 61,300 tonnes.

    Meanwhile, Japan imported 773,400 tonnes of sub-bituminous coal in July, down 42.13% on year and 29.89% on month.

    Indonesia, the top supplier of this material, shipped 390,600 tonnes to Japan in July, falling 65.36% on year and 50.18% on month.

    Russia followed with 182,000 tonnes, 6.6 times from a year earlier and up 19.19% from the previous month.

    Japan imported 68,900 tonnes of sub-bituminous coal in July, rising 39.2% on year, against none in June.

    Additionally, Japan imported 494,100 tonnes of anthracite coal in July, dropping 20.88% from a year ago but increasing 28.07% from June.
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    Vitol said to mull Gupta stake in South Africa coal terminal

    By one account the deal is already done.

    Swiss commodities trader Vitol Group is interested in buying a stake in South Africa’s Richards Bay Coal Terminal from a company controlled by the Gupta family, according to a person with knowledge of the matter.

    Buying the stake in Africa’s biggest coal export facility from Optimum Coal Holdings Ltd. would give Geneva-based Vitol rights to ship eight million metric tons of the fuel annually.

    While South Africa has high-quality coal reserves and is well positioned to export the fuel to India and China, shipments are constrained by limited port capacity. Only shareholders have an automatic right to export through Richards Bay, which accounts for almost all of South Africa’s coal shipping capacity.

    The Guptas and South African President Jacob Zuma’s son Duduzane bought Optimum through Tegeta Exploration & Resources Ltd. for 2.15 billion rand ($148 million) from Glencore Plc in December. Optimum also owns two coal mines.

    Cabinet allegations

    While Vitol is interested in the purchase, it’s concerned about the negative publicity around the Gupta family, who have been accused by some ruling party officials of trying to influence South African cabinet appointments, the person said. They asked not to be identified, because the information is private. Vitol spokeswoman Andrea Schlaepfer declined to comment.

    Vitol has trading and marketing operations in South Africa, where it’s building a fuel-storage facility with Malaysia’s MISC Group in Cape Town. In 2012, it formed a coal trading company in neighboring Mozambique by buying a stake in a terminal that exports coal from South African mines. Vitol traded more than 20 million tons of physical coal in 2015, according to its website.

    The Gupta family spent more than two decades building up a South African business empire spanning mining, computers, engineering, media and a safari lodge. As well as befriending Zuma, they included Duduzane as a shareholder in several of their companies, including the firm that acquired Optimum.

    Asset Sales

    They announced that they would sell their South African interests on Aug. 27. “At this time it would be inappropriate to comment as far as the detail of any such transaction,” Gert van der Merwe, a lawyer for the Gupta-controlled Oakbay group of companies, said by phone Friday.

    Nazeem Howa, the chief executive officer of their holding company, Oakbay Investments, said in a Bloomberg Television interview on Aug. 30 that there has been “tangible” interest from an international investor in the assets.

    The Gupta family has become embroiled in a power struggle between Zuma and Finance Minister Pravin Gordhan over control of spending by state-owned companies. Gordhan’s team is probing contracts between a company controlled by the Gupta family and state-owned power utility Eskom Holdings SOC Ltd.

    Other shareholders in the Richards Bay terminal include Glencore, South32 Ltd., and Anglo American Plc.
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    Rio Tinto sells stake at South African anthracite mine

    Rio Tinto had completed the sale of its 74% stake in underground mine Zululand Anthracite Colliery (ZAC) in South Africa to Menar Holding, for an undisclosed sum, the company announced on its website.

    The rest stake of the mine is still held by Rio Tinto's Broad-Based Black Economic Empowerment partner, Maweni Mining Consortium Pty Ltd.

    ZAC produces premium quality anthracite for international and domestic customers and has more than 1300 employees and contractors.

    Rio Tinto acquired the mine in 2010 when the group paid $3.9 billion to take over Riversdale Mining at the height of the global boom in coking coal.

    Rio Tinto was only interested in acquiring the Mozambique coal assets and resources owned by Riversdale but the deal turned out to be one of the worst the group had ever done because it ended up selling the Riversdale Mozambique operations in 2014 for just $50m to India's International Coal Ventures.

    Riversdale also owned ZAC which Rio Tinto immediately earmarked for disposal as "non-core" and initially sold to Forbes & Manhattan Coal (Forbes) in 2012. That deal was never completed because Forbes subsequently cancelled it on the grounds of non-performance by ZAC.

    Menar has a proven track record of operating and investing in South Africa through its controlling interest in Canyon Coal, which owns three coal mines in Mpumalanga and other coal projects in Mpumalanga and Gauteng.

    Rio Tinto has a long-standing relationship with South Africa and continues to invest in Richards Bay Minerals and exploration for other minerals in the country.
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    BHP expects iron-ore price to notch declines on new mine supply

    BHP Billiton, the world’s largest mining company, expects iron-oreprices to begin retreating as “well-telegraphed” new supply hits the market fromAustralia and Brazil.

    “Some of that supply is late, but we have every confidence it will arrive,” Huw McKay, BHP’s vice president of market analysis and economics, said Friday in an interview in Singapore.

    “We do expect it will weigh on price from where we are, and we’ll be closer to the middle of the range that we think about, rather at the top of the range, which is where the price is now.”

    The remarks by BHP add to a chorus of banks calling time on an unexpected rally after prices soared in 2016 to trade around $60 a metric ton over the last month after three years of declines. Citigroup and Morgan Stanley have flagged iron-ore weakening toward the end of the year as more supply is shipped, with Westpac Banking predicting a slump below last year’s low of $38.30.

    After a “unique” year, the under-performance of supply is expected to reverse over the next 12-to-18 months, McKay said at a media briefing earlier on Friday. “We still see new low-cost tons reaching the market later this year and definitely through calendar 2017.”


    There are prospects for increased ore supply from Vale SA, which is expected to start output from its S11D project before the year-end, and from Australian billionaire GinaRinehart’s Roy Hill, according to Morgan Stanley. The bankhas estimated that prices may drop back to $40 as the approach of winter in China typically blunts steel demand and output.

    “The market has been caught short in China because delivery towards supply targets had been so – almost metronomic – in recent years,” McKay said in the interview. “I don’t think there was much allowance for the fact that supply might undershoot.”

    Ore with 62% content delivered to Qingdao has rallied 36% in 2016 to $59.39 on Friday, according to Metal Bulletin. This year, policy makers in China added stimulus, presiding over a revival in the property market and boosting the outlook forsteel consumption and prices.

    'DOING OK'

    “For next year, whilst we see end-use quite stable, we see the composition in end-use a little different,” McKay said. “Machinery is actually very weak at the moment still, it’sinfrastructure and housing and automobile that’s doing ok. We expect machinery to catch up a bit next year but housingwill be slower.”

    McKay is part of BHP’s marketing team in Singapore, which oversees the supply chain of the company’s products from asset to market and is responsible for defining its long-term view of market fundamentals. The team is led by the president of marketing and supply, Arnoud Balhuizen.

    Apart from iron-ore, the oil market is also set to rebalance over the next 12-to-18 months, with high volatility expected, Balhuizen said at the briefing when BHP launched its new blog series Prospects. Oil prices slumped to the lowest since 2003 in February, forcing BHP to cut operating rigs in the US and trim its capital expenditure by about 44% for this fiscal year.

    Attached Files
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    G 20: Japan PM Abe calls for structural reforms to address steel overcapacity

    Japanese Prime Minister Shinzo Abe told the G20 summit on Monday that the issue of steel overcapacity should be addressed by pressing ahead with structural reforms based on market mechanisms, a senior Japanese government spokesman said.

    "Regarding overcapacity of steel and others, market distortion by subsidies and export credit is the fundamental problem... I would like to urge structural reforms based on market mechanisms, while maintaining transparency," Abe was quoted by Japanese Deputy Chief Cabinet Secretary Koichi Hagiuda as saying.

    Abe also urged that freedom of navigation and overflight be thoroughly observed according to law, Hagiuda said. He said Japan has lodged a stern protest to North Korea over its latest missile launches.
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    China's Dongbei Special Steel delays disclosing H1 financial information

    Unlisted Dongbei Special Steel Group Co Ltd, having defaulted on several bonds earlier this year, said on Monday it would delay the disclosure of its interim financial information.

    The troubled Liaoning province-owned steelmaker was scheduled to publish its first-half information on August 31.

    "The company is accelerating debt restructuring, and will audit and disclose relevant financial information when the final restructuring plan is settled," the company said in a statement published on website of China's foreign exchange trade platform, or Chinamoney.

    The troubles of Dongbei Special Steel, whose original default in March helped trigger a broad-based Chinese bond market sell-off in April, have sparked a rare public battle in China between creditors, a local government and a state-owned company even as concerns mount about growing debt levels in the economy.
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