Mark Latham Commodity Equity Intelligence Service

Tuesday 26th January 2016
Background Stories on www.commodityintelligence.com

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    Macro

    Saudi Arabia can sustain low prices for a long, long time, Saudi Aramco boss says


    LONDON (ShareCast) - (ShareCast News) - Crude oil futures weakened in afternoon trading following remarks from Saudi Aramco chairman Khalid al-Fatih that his country would maintain its investment plans. Saudi Arabia, the world´s main producer of oil could sustain low prices for "a long, long time," al-Fatih told a conference in Riyadh, Bloomberg reported.

    Earlier in the day, the Secretary General of the Organisation for the Petroleum Exporting Countries, Abdalla El-Badri, had called on producers from outside the group to assist in braking the glut of oil around the world.

    Figures showing a 5.6% drop in Chinese diesel use in December and gasoline use at its lowest in two years were seen by some as adding to Monday´s decline in prices.

    As of 18:48GMT front month Brent crude futures were off by 4.1% to $30.92 per barrel on the ICE.


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    Global stocks fell sharply Tuesday as Chinese markets plunged and oil prices fell back below $30 a barrel.

     

    Investors sold equities in Europe and Asia and favored traditional havens such as the yen, gold and U.S. Treasurys after the Shanghai Composite plummeted 6.4%.

    “People are scared to death about China,” said John Manley, chief equity strategist forWells Fargo Funds Management.


    Compounding investors’ concerns, Brent crude oil fell 3.5% to $29.43 a barrel, weighing on energy shares, amid concerns about oversupply.
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    Cities across Brazil cancel carnival celebrations because of economic woes


    Rio de Janeiro's Carnival has more than just samba this year as group's pay tribute to Motown, hard rock and even Michael Jackson.

    At least 48 cities in eight states across Brazil have cancelled their carnivals due to the recession, which has eroded municipalities' financial resources, media reports said.

    Nearly 50 cities in the states of Goias, Minas Gerais, Paraiba, Rio de Janeiro, Rio Grande do Norte, Rondonia and Tocantins decided at the last minute to scrap their carnivals to save money needed for other programs, the G1 news Web site said.

    Other cities, the majority of them in the interior of São Paulo state, cancelled carnival celebrations, considered the biggest festivals of the year, electing to use the funds in the fight against dengue, whose cases have spiked in the past year, along with chikunguña and zika cases.

    All three diseases are spread by the Aedes aegypti mosquito.

    Other municipalities in São Paulo are using funds initially intended for carnivals to deal with the damage caused by the recent torrential rains that hit parts of the state.

    Even cities still planning to hold carnivals are scaling back the celebrations due to the severe economic downturn in Brazil.

    Brazil's gross domestic product (GDP), according to analysts, will contract 2.99 percent this year after falling 3.71 percent in 2015, while the inflation rate is expected to top 10 percent.

    http://latino.foxnews.com/latino/money/2016/01/25/cities-across-brazil-cancel-carnival-celebrations-because-money-woes/
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    Oil and Gas

    Iraq's Oil output from central and southern fields exceeded 4.0 mln bbls day in December


    Iraq's oil ministry told Reuters on Monday that the country had record output in December, with its fields in the central and southern regions producing as much as 4.13 million barrels a day. A senior Iraqi oil official said separately the country may raise output even further this year.

    "There's more oil coming into the market, and there's no reason to expect oil prices to go up," said James Williams, energy economist at WTRG Economics in London, Arkansas.

    "If you look at the supply-demand situation, prices have not bottomed. We're probably going to go lower again through March in the absence of an OPEC meeting."

    A preliminary Reuters survey showed on Monday that commercial crude oil and gasoline inventories probably rose last week, while distillate stocks likely fell.

    http://www.reuters.com/article/global-oil-idUSL3N159189
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    China Diesel Use Slumps as Natural Gas, Gasoline Demand Gains


    China’s diesel consumption contracted for a second year as its economy shifts away from industrial investment toward consumption-led growth. Gasoline and natural gas demand rose.

    Diesel use in 2015 dropped 3.7 percent from the previous year, National Development and Reform Commission said in a statement on its website. The contraction is greater than the 1.5 percent decline in 2014. Gasoline and natural gas consumption rose 7 percent and 5.7 percent, respectively.

    China’s fuel use reflects divergent economic trends as gasoline demand in the world’s largest automobile market is rising while cooling industrial production damps diesel consumption. Industrial output grew at 6.1 percent last year, the slowest pace on record since at least 1999. China’s total vehicle sales are expected to increase 6 percent this year after rising to a record in 2015.

    “China has adopted an economic development shift away from industrial-intensive drivers toward being more services oriented,”  Lin Jiaxin, a Guangzhou-based analyst with research company ICIS-China, said by phone.“Diesel demand is damped as industrial activities slow.”

    Diesel consumption, a barometer of the country’s industrial activity, will stay flat or fall in 2016, while gasoline use will rise by 200,000 barrels a day, according to an International Energy Agency forecast last month. The country’s diesel exports surged 75 percent last year to a record.

    China’s diesel demand will grow at an average annual rate of 1.3 percent through 2025 as gasoline use expands 6.2 percent, ICIS-China said last week in a report. Gasoline consumption will surpass diesel for the first time in 2024, it said.

    Natural gas demand last year rose 5.7 percent to 193.2 billion cubic meters, the NDRC said Monday. A price cut in November probably helped raise sales at the end of the year, according to Tian Miao, a Beijing-based analyst at North Square Blue Oak Ltd., a research company. Consumption during the first 11 months of the year had increased only 3.7 percent, according to Tian.

    “I expected natural gas sales to see a big jump in December, so it helped cover up rather sluggish sales in the first eleven months,” Tian said by phone.

    http://www.bloomberg.com/news/articles/2016-01-25/china-diesel-use-slumps-as-natural-gas-gasoline-demand-gains

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    China Energy Giant Signals Nation's Fuel Oversupply Is Worsening

    Image titleChina Energy Giant Signals Nation's Fuel Oversupply Is Worsening

    China’s biggest energy company predicted the nation’s refineries will increase output in 2016, exacerbating a fuel glut and boosting exports of the surplus to regional markets.

    Net export of oil products -- which strips out imports -- will rise by 31 percent this year to 25 million metric tons, China National Petroleum Corp. said in its annual research report. The country’s refineries will increase oil processing by 5.3 percent while net crude imports will rise 7.3 percent to 357 million tons.

    “China is set to ship record oil products overseas amid its slowing domestic demand,” Jean Zuo, an analyst at ICIS China, said by phone from Guangzhou. “The country will remain enthusiastic for crude imports this year amid low prices and as strategic crude stockpile facilities are due to come online.”



    China exported a record amount of diesel, kerosene and gasoline last year and for the first time shipped more products abroad than it imported amid the slowest economic expansion in 25 years. Meanwhile, its crude purchases increased to a record in 2015 as the world’s second-biggest oil consumer sought to fill its strategic oil reserve and the government allowed small private processors called teapots to buy foreign supplies.

    Teapot Expansion

    The teapots, clustered around the eastern Chinese province of Shandong, will account for the bulk of the increase in oil processing this year as the country’s bigger state-owned processors decrease output, CNPC said in its report.

    "China’s fuel glut is in its worst shape," Dai Jiaquan, director of CNPC’s oil market department, said Tuesday. "This is mainly due to weak demand and fast growth of refining projects in recent years. Now low oil prices have boosted refinery operating rates, especially for teapots, who are snatching market share rapidly from major refineries.”

    The country’s oil consumption will rise 4.3 percent to 566 million tons this year, with imports satisfying 62 percent of total demand, according to CNPC.

    http://www.bloomberg.com/news/articles/2016-01-26/china-energy-giant-signals-nation-s-fuel-oversupply-is-worsening

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    Exxon Sees Energy Demand Rising 25% by 2040 as Population Grows


    Energy demand will climb 25 percent worldwide by 2040, an increase equivalent to all the power and fuel consumed currently in the Americas, according to Exxon Mobil Corp.

    Crude oil will retain its dominant position among energy sources a quarter century from now as population growth and rising standards of living in much of the world more than offset energy-saving efficiency gains, Exxon said in its annual long-term outlook released on Monday. Demand for natural gas will grow more than any other source and will account for 40 percent of the overall increase, according to the report.

    Oil demand will grow by 20 percent to 112 million barrels a day in 2040, the Irving, Texas-based explorer said. The base year was 2014 for all the figures cited in the report, which Exxon relies on for long-term business and strategic planning. Those crude supplies will come increasingly from shale, oil-sands mines and deepwater fields, Exxon said.

    Venezuela will emerge as a major producer of crude from oil sands in coming decades, the company predicted. Globally, output from oil sands will more than double by 2040, according to the report.

    China and India will account for half of the global increase in demand for all types of energy going forward, Exxon said. Another 30 percent of the worldwide growth will be driven by just 10 countries: Brazil, Mexico, South Africa, Nigeria, Egypt, Turkey, Saudi Arabia, Iran, Thailand and Indonesia, according to the report.

    Coal use for power generation will drop to about 30 percent in 2040, from 40 percent in 2014, while natural gas will pull even with coal. Wind and solar will provide more than 10 percent of the world’s electricity, up from about 4 percent, Exxon said.

    http://www.bloomberg.com/news/articles/2016-01-25/exxon-sees-energy-demand-rising-25-by-2040-as-population-grows
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    Halliburton profit better-than-expected on cost cuts


    Halliburton Co, the world's No.2 oilfield services provider, reported a better-than-expected quarterly adjusted profit as deep cost cuts helped offset the impact of a drop in drilling activity.

    Halliburton, like rival Schlumberger Ltd, said 2016 would be another challenging year for the industry.

    Several oil and gas producers have scaled back drilling and slashed capital spending in response to a more than 70 percent fall in oil prices since June 2014.

    Excluding a $192 million impairment charge and costs related to its pending acquisition of Baker Hughes Inc (BHI.N), Halliburton earned 31 cents per share, higher than analysts' average estimate of 24 cents, according to Thomson Reuters I/B/E/S.

    Operating margins in the company's North America operations, which account for more than half of Halliburton's revenue, improved 1.6 percentage points in the quarter ended Dec. 31.

    Chief Executive Dave Lesar said the company, which is awaiting regulatory approval for the Baker Hughes deal, was focused on pending regulatory reviews and divestitures required to alley competition-related concerns.

    Total revenue fell 42 percent to $5.08 billion, including a 57 percent drop in North American revenue, mainly due to weak drilling activity and pricing.

    The net loss attributable to the company was $28 million, or 3 cents per share, in the quarter, compared with a profit of $901 million, or $1.06 per share, a year earlier.

    http://www.reuters.com/article/halliburton-results-idUSL3N15941

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    Saipem ‘set for large Iranian deal’


    Italy’s Saipem is set to ink a monster pipeline construction deal with Iran as the Middle East oil powerhouse moves to sign contracts with European players following the lifting of sanctions, according to a report.

    The services player is set to be awarded the deal for around 2000 kilometres of pipeline worth between $4 billion and $5 billion, Reuters reported, citing an unidentified source. The seemingly impending deal was not, however, confirmed by Saipem.

    The contract is set to be hammered out imminently as Iranian President Hassan Rouhani touched down in Italy on Monday, leading a 120-strong delegation on a European tour to sign deals.

    In total Italian firms could see deals of up to $18 billion, with Reuters also saying local steel firm Danieli is in line for deals worth up to $5.7 billion.

    Rouhani is meeting with Italian President Sergio Mattarella, Prime Minister Matteo Penzi and Pope Francis on his trip, before heading to France in mid-week, where, among others, deals for aircraft are set to be concluded.

    Upstream reported in July that Saipem and German engineering giants Linde and Siemens were set to be the first to resume business in Iran following the historic nuclear agreement on 14 July. Oil majors are also set to resume upstream operations in the country now that sanctions have been lifted.

    http://www.upstreamonline.com/live/1422092/saipem-set-for-large-iranian-deal?utm_source=twitterfeed&utm_medium=twitter

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    Lithuania negotiates LNG price cut with Statoil


    Lithuania’s prime minister Algirdas Butkevicius informed the LNG supply deal with Statoil of Norway has been amended.

    According to the newly agreed terms, the contract has been extended from five to 10 years while the volume Lithuania will import from Norway increased from 2.7 billion cubic meters to 3.7 bcm. Annual sales volumes will decline from 540 million cubic meters to 350 mcm as Lithuania’s gas consumption declines.

    Dalius Misiunas, head of Lietuvos Energijarevealed that the price was reduced by 15-20 percent. Misiunas hinted at the new deal in November 2015, due to Lithuania’s falling demand.

    The reviewed price is forecast to be in the range between €16-20 per megawatt-hour, closer to the price of gas supplied by Gazprom.

    Lithuania’s gas supply deal with Russian Gazprom expired at the end of last year but the contract left an option for Lietuvos Energija to buy a certain amount of gas from Gazprom in 2016, Misiunas told Reuters following the conference with the prime minister.

    http://www.lngworldnews.com/lithuania-negotiates-lng-price-cut-with-statoil/

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    Lukoil says Russia needs to work with OPEC to limit oil supply


    Russia needs to start working with OPEC to cut oil supplies to the world market to try to support prices, Leonid Fedun, vice-president of Lukoil , Russia's second largest oil producer, was quoted as saying on Monday.

    "In my opinion, if such a political decision is taken, Russia should jointly work with OPEC to cut supply to the market... It's better to sell one barrel of oil at $50 than two barrels at $30," Fedun told TASS news agency in an interview.

    OPEC and Russia, the world's top oil producers, have refused to cooperate to help buoy global oil prices as they were defending their market share from each other and the United States, where shale oil output had taken off over recent years.

    As a result, Brent has fallen to around $31 per barrel from $115 in the middle of 2014, on the oversupply and a weaker Chinese economy, causing shale oil production to decline in the United States.

    Weak oil prices are also hitting Russia's commodity-dependent budget and the rouble, which touched all-time lows of around 86 per U.S. dollar last week.

    OPEC has always said it would agree to cuts if other producers such as Russia joined such a move.

    However, Russian officials have said severe weather conditions do not allow a manageable production cut and that they expected the global market to rebalance on its own after the most costly producers cut output.

    The Russian Energy Ministry has slightly revised down data on oil production in the country in December to 10.80 million barrels per day (bpd) from a preliminary reported 10.83 million bpd, still its post-Soviet high.

    Lukoil Chief Executive Vagit Alekperov told Reuters last week that total oil production in Russia could decline by 2-3 percent this year and possibly more if the government raises taxes.

    Lukoil's own oil output exceeded 100 million tonnes (2 million bpd) last year,the company said earlier.

    It did not give a break down by regions, although energy ministry data showed it was pumping an average of 1.7 million bpd in Russia alone.

    Fedun, a mastermind of Lukoil's expansion abroad, said the company's output was unlikely to remain as high as last year but did not give a figure.

    "The practice of filling the market with cheap oil at any cost is wrong -- half a year or a year later it could be sold at twice as high," he said.

    Fedun added Lukoil was preparing to cut production at its West Qurna-2 project in Iraq.

    "Earlier, the Iraqi government said that they are ready to take out 300,000-500,000 bpd from the market. Our share will be proportional," Fedun told TASS.

    Iraq was pumping an average of 4.2 million bpd in December, according to a Reuters survey, with production at West Qurna-2 last reported at 450,000 bpd.

    http://www.reuters.com/article/russia-oil-lukoil-opec-idUSL8N15914Z

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    Indian state oil refiners plan 1.2 mln bpd plant on west coast


    Three Indian state-run oil refiners will jointly build a 60 million tonnes a year, or 1.2 million barrels per day (bpd), refinery on the country's west coast, the federal oil minister said on Monday, adding the investment for the first phase of the refinery could exceed 1 trillion rupees ($14.8 billion).

    Indian Oil Corp. Ltd, Bharat Petroleum Corp. Ltd and Hindustan Petroleum Corp. Ltd along with another state-run company, Engineers India Ltd, will design for an 800,000 bpd capacity in the first phase of the refinery in Maharashtra state, Dharmendra Pradhan said on Twitter.

    India is seen as the most important driver of energy demand growth in the world in the years to come with its oil consumption seen rising by 6 million bpd to about 10 million bpd by 2040, according to the International Energy Agency.

    Reliance Industries Ltd, controlled by India's richest man Mukesh Ambani, currently operates the world's biggest single-location refinery complex, in the western Gujarat state, with a capacity to process about 1.2 million bpd of crude.

    The planned refinery will produce gasoline, diesel and other products as well as feedstock for petrochemical plants, Pradhan said, adding his ministry would work with the provincial government for early identification of land and finalising project details.

    The minister did not give a timeline for setting up the refinery.

    http://www.reuters.com/article/indian-oil-corpn-india-refinery-idUSL3N1594P4
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    Sichuan gas field delivers its first supplies

     
    A natural gas project jointly developed by Chevron Corporation and PetroChina Company Ltd delivered its first gas on Monday-a significant move toward increasing domestic supplies of the cleaner-burning fuel.

    The Luojiazhai gas field, also the first phase of the Chuandongbei project in the Sichuan Basin, has an annual production capacity of 3 billion cubic meters, according to a statement by the Chinese oil and gas company, which is the listed arm of State-owned China National Petroleum Corporation.

    Chevron, the American multinational energy corporation, is the operator of the project and holds a 49 percent stake, with PetroChina holding the rest.

    The companies have signed a 30-year deal to develop the tricky sour natural gas field, that contains a high level of hydrogen sulfide, meaning higher risk and standards in the technical processes being used.

    The complexity of the project has meant the gas is coming on stream around eight years later than expected, coupled with what have been a series of disagreements on how to develop the fields.

    Despite the slowing economy, gas consumption in China, the world's largest energy consumer, is expected to hit 205 billion cu m this year, a growth rate of 5 to 6 percent, a report by SCIG said.

    http://en.chinamining.com.cn/News/2016-01-26/1453769835d75122.html
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    Quicksilver Resources announces winning bid for sale of certain US assets


    Quicksilver Resources Inc. and its U.S. subsidiaries announced today that they have successfully completed a Bankruptcy Court-approved auction for their U.S. oil and gas assets located primarily in the Barnett Shale in the Fort Worth basin of North Texas as well as assets in the Delaware basin in West Texas, which are concentrated in Pecos County, Texas and to a lesser extent Crockett and Upton Counties, Texas. The completion of the auction follows a months-long marketing process of all of Quicksilver's and its U.S. subsidiaries' U.S. assets that began in September 2015. At the auction, which was held on January 20 and 21, 2016, Quicksilver and its U.S. subsidiaries declared an all-cash bid from BlueStone Natural Resources II, LLC in the amount of $245 million the highest or otherwise best bid for the oil and gas assets, and the successful bid.

    Regarding the outcome of the auction, Glenn Darden, President and CEO of Quicksilver, said, 'We believe that the marketing and sales process was thorough and resulted in a successful outcome. This sale maximizes value for the benefit of our creditors in the face of difficult market conditions.'

    Quicksilver and BlueStone executed the asset purchase agreement for the sale of the oil and gas assets on January 22, 2016. Quicksilver and its U.S. subsidiaries will seek final approval for the sale from the United States Bankruptcy Court for the District of Delaware on January 27, 2016. Quicksilver and its U.S. subsidiaries intend to continue normal operations pending the consummation of the sale.

    Quicksilver and its U.S. subsidiaries filed voluntary petitions under chapter 11 of title 11 of the United States Code on March 17, 2015, in the United States Bankruptcy Court for the District of Delaware. The chapter 11 cases are being jointly administered under the case number 15-10585. Quicksilver's Canadian subsidiaries were not included in the chapter 11 filing and are not subject to the requirements of the Bankruptcy Code. The assets of Quicksilver's Canadian subsidiaries are not included in this sale, and the sale process for those assets remains ongoing.

    http://www.oilvoice.com/n/Quicksilver-Resources-announces-winning-bid-for-sale-of-certain-US-assets/9bfbf539e926.aspx?utm_source=twitterfeed&utm_medium=twitter&utm_campaign=Feed%3A+OilvoiceHeadlines+%28OilVoice+Headlines%29
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    Alternative Energy

    Einhorn's Greenlight seeks sale of solar company SunEdison


    David Einhorn's hedge fund Greenlight Capital said it has been in talks with SunEdison Inc regarding a board seat and that it is looking to sell the solar company's assets or even the company itself.

    SunEdison has been under pressure from investors and hedge funds, including Appaloosa Management LP, who are against the solar company's decision to buy Vivint Solar Inc's assets.

    Shares of SunEdison, valued at about $840 million, rose 1 percent in extended trading on Monday. They have plummeted 91 percent since the Vivint deal was announced in July last year.

    Einhorn had a 6.8 percent stake in SunEdison as of Jan. 15, while Greenlight had a 4 percent stake, according to a regulatory filing on Monday. 

    Greenlight said it held talks with SunEdison between Jan. 15 to Jan. 25 regarding a board seat and changes in the company's senior management team.

    No agreement has been reached, the hedge fund said.

    Einhorn lost 20.6 percent in 2015 as a bet on SunEdison cratered in November, extending Greenlight's losses.

    The Wall Street Journal reported on Sunday that SunEdison would give Greenlight a board seat.

    http://www.reuters.com/article/sunedison-inc-greenlight-capital-idUSL3N1595M4
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    Agriculture

    Putin says government looks into export duties on mineral fertilisers


    Russia's government is looking into introducing duties on exports of mineral fertilisers to make them more affordable for the country's farmers, President Vladimir Putin said on Monday.

    Meeting his loyalists from the pro-Kremlin public movement, The All-Russia People's Front, Putin heard compalints from a farmer saying that massive exports of mineral fertilisers meant Russia's agricultural producers were forced to buy pricey fertilisers for hard currency.

    "As for such a measure as raising export customs duties, yes, it is one of the solutions, and it is also being studied now," Putin said during a visit to the region of Stavropol in southern Russia.

    "But according to the estimates by the agriculture ministry and the industry ministry, it may not lead to the desired result."

    http://www.reuters.com/article/russia-fertilisers-idUSR4N154020
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    Precious Metals

    Harmony guides 3rd consecutive quarter of increased production


    Harmony Gold Mining Company Limited (‘Harmony’ or ‘the Company’) is pleased to advise that it continued to increase its gold production for a third consecutive quarter. Underground grade was up close to 7% and overall gold production was 2% higher quarter on quarter.

    Newly appointed chief executive officer, Peter Steenkamp, commented: “The production teams kept their momentum, with the majority of the operations delivering both higher kilograms and higher grades.  Combined with the current higher R/kg gold prices, the past quarter has been very rewarding for Harmony.”

    The company reports second quarter and half year results to the end of December on the 4th of February.

    http://www.mineweb.com/news-fast-news/harmony-guides-3rd-consecutive-quarter-of-increased-production/?platform=hootsuite
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    Base Metals

    China's Copper, Zinc Imports Jump to Multiyear Highs in December


    China’s imports of copper and zinc surged last month as buyers took advantage of low prices and used the metals to hedge currency risk.

    The world’s biggest consumer of metals imported the most refined copper since at least 2008, while zinc shipments rose to the highest since May 2009, according to data from the country’s customs administration. China took in more material as prices slumped to the cheapest in more than six years and the country’s currency weakened.

    Purchases of copper increased 34 percent from a year earlier to 423,181 tons, while imports of zinc rose more than 441 percent to 94,434 tons, a volume not seen since the world was emerging from the financial crisis.

    Inbound shipments of refined nickel climbed more than sixfold in December to 34,506 tons, while they rose 125 percent for the full year to 292,095 tons.

    http://www.bloomberg.com/news/articles/2016-01-26/china-s-copper-zinc-imports-jump-to-multiyear-highs-in-december

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    Freeport yet to pay Indonesia smelter deposit as export deadline looms


    Freeport McMoRan Inc has yet to pay a $530 million deposit for a new Indonesian smelter, which the government is demanding before renewing the U.S. company's export permit for copper concentrate, a mines ministry official said on Tuesday.

    Freeport, which has seen its stock plummet over 70 percent in the last three months as commodity markets plunge, could be forced to halt concentrate exports from its massive Grasberg copper and gold mine in the province of Papua if it fails to meet government obligations.

    Freeport executives are expected to discuss the issue with the government on Tuesday.

    "So far, there has been no update," Bambang Gatot Ariyono, director general of coal and minerals in the ministry, told Reuters. "We still don't know yet whether to ban (Freeport's exports) today or not."

    A trade ministry official has said the U.S. company's export permit expires on Tuesday and that a six-month renewal would not be issued until the deposit was submitted.

    Officials from Freeport, which later on Tuesday will announce its financial results for the last quarter of 2015, were not immediately available to comment.

    A halt in exports would deal another blow to Freeport's profits, while denying the Indonesian government desperately needed revenue from one of the country's biggest taxpayers.

    Freeport, under pressure from activist investor Carl Icahn, has struggled to reduce its $20.7 billion of debt and announced in October it would cut production globally.

    Under normal conditions, Freeport Indonesia produces about 220,000 tonnes of copper ore per day, of which about a third usually goes to its domestic smelter at Gresik, with the rest exported as concentrate.

    Any reduction in exports could help buoy copper prices that have dropped around 6 percent so far this year on worries over a global supply glut. London copper was trading at $4,440 a tonne in Asia on Tuesday, below Friday's two-week high of $4,484.

    The $530 million deposit is intended to be a guarantee that the Phoenix, Arizona-based company will complete construction of another local smelter, which the government hopes will boost returns from its natural resources.

    The amount would add to an estimated $80 million that Freeport set aside in July to obtain its current export permit.

    "It is unlikely for Freeport to not pay that deposit, they certainly want to export so they will negotiate," said Helen Lau, analyst at Argonaut Securities in Hong Kong.

    A prolonged interruption to the Papua mine would impact about 24,000 people working at Grasberg, which could lead to unrest in a region where Indonesia's government is trying to increase economic activity.

    http://www.reuters.com/article/indonesia-freeport-idUSL3N15A1B9

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    Vedanta Resources' Lisheen mine makes final shipment


    Jan 25 Diversified mining and energy company Vedanta Resources Plc said its Lisheen mine in Ireland made its final shipment last week, completing planned closure of the site.

    Vedanta Resources, which also produces copper, coal, aluminium, lead, iron ore, and oil, said mining activity at the zinc and lead mine had stopped in November.

    The mine's closure, which was announced last April, will further tighten the supply of the metal used to galvanise steel.

    The zinc market has tightened after last year's output cuts by Glencore Plc and the closure of the Century mine in Australia.

    Vedanta Resources said Lisheen typically produced about 300,000 tonnes of zinc concentrate annually. The mine produced 150,000 tonnes of mined metal in 2015.

    Lisheen employed 360-400 people at full production, the company said.

    http://www.reuters.com/article/vedanta-res-plc-lisheen-idUSL3N1593SI
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    Steel, Iron Ore and Coal

    California insurance commissioner calls for coal divestment


    California's insurance commissioner on Monday asked all insurance companies doing business in the state to voluntarily divest from coal companies and said he will also require insurance companies to disclose their coal company holdings.

    Coal use by utility companies has plummeted amid low natural gas prices and new federal regulations aimed at curbing carbon emissions, a major contributor to climate change.

    Ten years ago coal produced 50 percent of the nation's power supply but now accounts for only about 35 percent, according to the U.S. Energy and Information Administration.

    The lack of demand has driven the price of coal down and helped force Arch Coal Inc, the nation's second-largest U.S. coal miner, to file for bankruptcy protection earlier this month.

    "The movement away from coal and the rest of the carbon economy poses a potential financial risk to insurance companies investing in coal and the carbon economy," California Insurance Commissioner Dave Jones said.

    Jones is the first state insurance regulator in the United States to call on insurance companies to divest from coal and the first to require insurance companies to disclose their investments.

    California is the largest insurance market in the United States and sixth-largest in the world, with companies collecting $259 billion in premiums annually, according to the Insurance Commission.

    A representative for the Property Casualty Insurers Association of America's California office, which represents insurance companies in the state, declined to comment on the commissioner's moves.

    http://www.reuters.com/article/california-insurance-coal-idUSL2N15921L

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    China Coal Energy witnesses its first annual loss since it went public


    China Coal Energy Co., Ltd, the country’s second largest coal producer, predicted a net loss of 2.3-2.8 billion yuan ($349.6-425.68 million) in 2015, the first annual loss since its listing in 2008, according to the latest announcement of the company.

    It was the fourth straight yearly decline after reaching a record high of 9.67 billion yuan in net profit in 2011, and it slumped 399.87% from 2014’s net profit of 767 million yuan.

    This severe loss was due to plunging coal prices amid economic slowdown, weak demand, and overcapacity in coal industry, the company said.

    More than 80% of the company’s revenue was from coal business in recent two years, industry insiders said. With more than 90% of coal enterprises across the country were in red, China Coal Energy also saw a severe slump in earnings.

    In end-2015, the Fenwei CCI Index assessed domestic 5,500 Kcal/kg NAR coal traded at Qinhuangdao port at 365.5yuan/t FOB with VAT, registering a decline of 27.8% from the start of the year.

    China Coal Energy’s profit was about 15 million yuan in the first quarter of 2015; the profit turned into a loss of 965 million yuan by late-June and further expanded to 1.67 billion yuan by end-September.

    In 2015, the company produced 95.47 million tonnes of commercial coal, dropping 14.6% on year -- the third consecutive yearly decline; its commercial coal sales during the same period fell 12.6% to 137.13 million tonnes, posting a second consecutive year-on-year decline.

    China Coal Energy will try its best to break through the dilemma by further deepening industrial transformation and enhancing its cost control and investment management, it said.

    http://en.sxcoal.com/0/139971/DataShow.html
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    Vale: Stay of execution on Tubario

    A Brazilian judge decided on Monday that miner Vale may reopen its iron-ore and coal port near Vitoria, the company's lawyer said, staving off the possibility it will have to start closing mines. The decision by federal appeals judge Vigdor Teitel gives Vale 60 days to explain how it would fix environmental problems at Tubarao port that led to a court-ordered shutdown last week, said lawyer Sergio Bermudes. Vale had only about four days to overturn the closure, which began Thursday, or risk having to start shutting mines in Minas Gerais, HSBC said in a note to clients last week. When closed the port was shipping about 200 000 t/d of iron-ore brought to Tubarao by rail from the highland state of Minas Gerais.

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    http://www.miningweekly.com/article/vale-wins-order-reopening-iron-port-for-at-least-60-days-2016-01-26

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    Government policies have killed iron ore trade in India


    PTI reported that alarmed by the continuous slide in the exports of iron ore, miners body FIMI has accused the government of “killing” India’s ore trade and sought immediate steps for its revival. Apprehending a sharp fall in exports of the key steel-making raw material this fiscal too, the Federation of Indian Mineral Industries has said ore units are on the verge of closure.

    FIMI secretary general Mr RK Sharma said “India is the only country in the world which has killed its flourishing iron ore trade. The trends show that exports will decline hugely this fiscal. In 2014-15, exports stood at 6.12 million tonnes.”

    The allegations come in the wake of India’s top 12 major ports witnessing a sharp 38 per cent decline in ore handling to only about eight million tonnes (mt) in April-December of the current fiscal, which includes domestic movement of cargo.

    Mineral ore exporter bodies have already sought Prime Minister Narendra Modi’s intervention for removal of export duty on iron ore, saying it will help in higher revenues of $750 million a year. Besides, industry body GMOEA has written to PMO urging it to remove the export duty on iron ore fines with Fe content below 58 per cent and on iron ore lumps.

    http://steelguru.com/mining/government-policies-have-has-killed-iron-ore-trade-in-india-fimi/444535#tag
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    Global crude steel output fell 2.8 pct in 2015- Worldsteel


    Global crude steel production fell 2.8 percent last year, marking the first annual decline since 2009, as producers succumbed to pressure from waning demand and tumbling prices.

    Figures from the World Steel Association showed on Monday output fell to 1.623 billion tonnes in 2015 versus the previous year.

    Crude steel output in China, the world's top producer and consumer of the alloy, fell 2.3 percent to 803.8 million tonnes, the data showed, the first drop in more than three decades.

    China's government is pushing to erode massive overcapacity in the steel sector as economic growth slows, falling last year to its weakest in a quarter of a century.

    The nation's massive steel sector is said to have surplus capacity of 300-400 million tonnes, roughly half of global surplus capacity of about 700 million tonnes.

    Global steel prices ST-CRU-IDX are at their lowest since 2013 on account of this glut, with bankruptcies and capacity closures picking up pace the world over.

    Steel output in the EU fell 1.8 percent to 166.2 million tonnes last year, the data showed, while output in North America was 110.7 million tonnes, down 8.6 percent.

    With its steel demand shrinking, China exported a record 112.4 million tonnes of cheap steel last year, forcing other mills to crimp output as they struggled to compete.

    The decline in global steel output accelerated towards the end of the year, the data showed. It fell 5.7 percent in December to 126.7 million tonnes, while in China, output shrunk 5.2 percent to 64.4 million tonnes.

    http://www.reuters.com/article/steel-output-global-idUSL8N1591O1

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    ArcelorMittal idles Spain plant as EU steel crisis simmers


    ArcelorMittal has idled a steel plant in Spain due to "extremely adverse" market conditions, a company spokesman said on Monday, as the world's biggest steelmaker becomes the latest victim of Europe's steel sector crisis.

    Some 5,000 EU steel jobs were lost late last year, out of a total 330,000 jobs. Steelmakers pin much of the blame on China, whose exports rose to record levels above 110 million tonnes last year.

    An ArcelorMittal spokesman said on Monday the company's steel plant in Sestao, northern Spain, will be idled indefinitely. It has a 1.5 million tonne per year output capacity.

    "Management has taken the decision in view of extremely adverse conditions ... (namely) falling steel prices caused by record imports from China at prices below production costs," said the spokesman.

    "(It) will be idled from February," he added.

    Global steel prices ST-CRU-IDX are near their lowest since 2003 due to a steel glut, with bankruptcies and capacity closures picking up pace the world over, including in China.

    ArcelorMittal cut its 2015 profit forecast last November, saying Chinese exports had hit steel prices and customers were holding off making new orders.

    Shares in the company, which produces 5-6 percent of the world's steel, fell 57 percent last year amid several rating downgrades and have lost 15 percent this year.

    China produces half the world's 1.6 billion tonnes of steel. Its has about 300-400 million tonnes of spare capacity, roughly half of global spare capacity of about 700 million.

    Global trade friction with Beijing escalated last year, with scores of anti-dumping duties filed, as slowing growth in China prompted its mills to export record amounts of excess steel.

    The European Union is considering granting China market economy status after December, a move that would make it harder to impose anti-dumping measures. Steelmakers say granting that status would kill off nearly the entire EU steel sector.

    EU mills struggle to compete with Chinese steel due to weak post-financial crisis demand, energy costs and green taxes that are some of the highest in the world, plus steep labour costs.

    ArcelorMittal produces nearly half of Spain's steel, employing some 9,500 people. The Sestao site is one of 12 Spanish operations which the company owns.

    http://www.reuters.com/article/steel-arcelormittal-spain-idUSL8N1593G4

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