Mark Latham Commodity Equity Intelligence Service

Thursday 3rd November 2016
Background Stories on

News and Views:

Attached Files


    Jailed ex-Brazil Congress leader may not get to tell all

    He was already among the most reviled politicians in Brazil and now he is among the most feared.

    Eduardo Cunha, the former speaker of the lower house of Congress who led the impeachment of a president while at the same time being accused of graft, was arrested two weeks ago on multiple corruption charges.

    Speculation is rife he could take down hundreds of congressmen with him if he turns state's witness, leading local media to label him as a "suicide bomber" loaded with secrets which could implicate legions of legislators.

    But there is just one catch: investigators and prosecutors say they would rather see Cunha, accused of taking at least $6.5 million in bribes, imprisoned for the longest time possible if he is found guilty. They only want to cut a plea bargain deal with him if he really offers proof against leaders at the highest level or on an extraordinary number of politicians.

    Cunha is one of the highest-profile targets of "Operation Car Wash," a far-reaching investigation that centers on bribes and political kickbacks from contracts with state-run oil company Petroleo Brasileiro SA, or Petrobras. So far nearly 200 people have been charged in the case.

    "Everybody wants us to sign a deal with Cunha, including newspaper columnists and editorials basically saying we have an obligation to do so," Carlos Lima, a lead prosecutor in the probe, told Reuters recently from his office in the southern city of Curitiba, where the investigation is centered.

    "But I'm not going to trade Cunha for anybody less powerful than he was, unless he comes and offers up some 200 deputies (legislators) that were beneath him. Then perhaps it is possible."

    Two other officials directly involved with the Petrobras probe agreed with that thinking.

    They said that unless Cunha is able to provide evidence against senior ministers to President Michel Temer, or against the president himself, it is unlikely they would be willing to negotiate any plea bargain with Cunha, given the amount of bribes and wide-ranging graft he stands accused of committing.

    "The moral cost of cutting a deal with Cunha would be enormous," said one source.

    Another emphasized it would be difficult to reach a plea bargain with Cunha because they think he would only name certain politicians out of vengeance for either kicking him out of office or for somehow not protecting him from the Petrobras investigation.

    "Cunha seems more like an extortionist of businesses, and with that money he sustained his own personal caucus in Congress," another source said. "I would have to be convinced he is telling the truth, that he is not hiding crimes of those loyal to him while trying to expose those who 'crossed' him. That gets complicated to sort out."

    Marlus Arns, a Curitiba-based lawyer representing Cunha, did not respond to requests for comment about any possible plea bargain or charges against him.

    Prosecutors also charged Cunha's wife, Claudia, in the case for alleged money laundering. That heightened expectations Cunha would press hard to be accepted as a state's witness and implicate a huge swath of the political establishment.

    That he would sing to prosecutors is the hope of many Brazilians, who have watched with intense satisfaction as some of the nation's most well-known businessmen and political figures have fallen in a country where the powerful enjoyed impunity for corruption and other crimes for centuries.

    "I understand that reasoning, I really do," said the prosecutor Lima. "But it is a question of whether Cunha can offer proof against somebody above him, and I am not certain that he can."

    Polls showed that Brazilians overwhelmingly supported Cunha's expulsion from Congress in September on grounds that he lied about secret bank accounts in Switzerland.


    In February 2015, Cunha, a member of Temer's Brazilian Democratic Movement Party (PMDB) that for a decade was the main member of the long-ruling Workers Party (PT) governments, defied the wishes of his own coalition to run for and win the speakership of the lower house of Congress.

    Just six months later, he officially had broken with the PT government of former president Dilma Rousseff, saying that she was using the Petrobras investigation as a tool of "political persecution" against him.

    As speaker, only Cunha could allow impeachment proceedings to begin against Rousseff, whom critics accused of breaking budgetary laws. He did just that in early December 2015, just hours after PT deputies cast deciding votes for Cunha to face an internal investigation before the House's ethics committee.

    By May of this year, Rousseff was impeached and her Vice-President Temer installed as successor. But Cunha could not shake free of corruption allegations.

    Temer distanced himself from Cunha and refused to throw him political lifelines, leading to the now constant speculation that Cunha will pull all possible PMDB skeletons out of the closet should he be granted a plea bargain.

    Cunha himself, just after the vote that kicked him out of Congress, told journalists that "those who turn state's witness are criminals, and I am not a criminal."

    But that was before his case was ordered by Brazil's Supreme Court to be sent to anti-corruption Judge Sergio Moro in Curitiba, the magistrate leading the Petrobras probe.

    Moro has a reputation for moving through cases swiftly, handing down harsh sentences and of not having his decisions reversed on appeal.

    Of the 84 people found guilty in the "Car Wash" probe by Moro, just one had his conviction overturned by a higher court - a 99-percent conviction rate, a statistic those who face him know all too well.

    Attached Files
    Back to Top

    Impact of EV's, oil vs copper

    BNEF wasn’t alone in seeing a turning point in EV sales growth this year—Wood Mackenzie, the International Energy Agency, and many others see the EV market trending upward quickly enough to destabilize oil demand, especially with the continued implementation of supportive policies.

    But yesterday, mining giant BHP Billiton published an analysis arguing that EVs could have big impacts on markets for aluminum, lithium, nickel, manganese, cobalt, and particularly copper that dwarf the oil market fallout. Billiton notes that an EV requires four times as much copper as an internal combustion car. In its estimate, 140 million

    EVs on the road around the world would displace about 2 million barrels per day of oil and create a net increase of 8.5 million tons of copper demand. This demand increase would be worth about a third of total global copper demand—some $38 billion out of a $100 billion annual market. By comparison, that same number of EVs would displace about 2 million barrels per day, $37 billion worth of oil annually out of a $1.8 trillion market.

    BHP Billiton estimates that 140 million EVs on the road around the world would displace about 2 million barrels per day of oil and create a net increase of 8.5 million tons of copper demand.

    Of course, Billiton’s projections favor its position as a mining conglomerate. Moreover, the impact of developments such as autonomous technology and shared-mobility business models will change how cars are owned and used in ways that can’t currently be projected.

    But the disproportionate impact that EVs are likely to have on copper versus oil markets is sure to be a dynamic to watch in the coming years, as the same number of electric cars that would displace 2-3 percent of the global oil market would boost the world’s copper demand by one-third. Copper markets could be sent reeling with knock-on effects for other metals and global commodities, which are known to operate in boom-bust cycles thanks to long lag periods between upstream investment and actual production.

    Attached Files
    Back to Top

    The 3D printing future has arrived

    Digitalization is transforming and opening up exciting new opportunities in the power industry - no more so than additive manufacturing, commonly known as 3D printing. Tildy Bayar visits a first-of-its-kind workshop for the development, manufacturing and repair of power generation components in metal through 3D printing

    Additive manufacturing, or laser sintering, or selective laser melting - more commonly referred to as 3D printing - has the potential to effect fundamental changes in the way power plant components are designed, manufactured and distributed.

    The leading maker of 3D printing equipment, EOS e-Manufacturing Solutions, notes that 'additive manufacturing' is the most accurate term, contrasting it with traditional manufacturing techniques which it calls 'material removal' (and which thus might be thought of as 'subtractive manufacturing').

    Rather than beginning with a solid block of plastic or metal and hewing a shape from it, or welding different subcomponents together, as in traditional techniques, additive manufacturing builds components from scratch through the application of many micro-thin layers of powderized material, applied sequentially and melted together with a precision laser. These materials can be plastics, metals or composites.

    While the technique has been in use for 10 years for rapid prototyping purposes in metal, it is now being increasingly used in serial production, where it is already proving transformative. On a recent trip to Siemens' new additive manufacturing facility in Finspang, Sweden, the technology and, perhaps, the future of power plant component production was on display.

    From dreams to reality

    Siemens' Industrial Turbomachinery facility in Finspang is one of three additive manufacturing 'hubs' the company maintains, with an existing facility in Berlin and another in the works in the UK, at the headquarters of recently-acquired advanced manufacturing firm Material Solutions. The Finspang facility has been a turbine manufacturing plant since 1913 and had a number of owners, including ABB, before being acquired by Siemens in 2003. It now produces and packages the company's SGT-500, SGT-600, SGT-700, SGT-750 and SGT-800 model industrial gas turbines, as well as the Industrial Trent (up to 66 MW) aero-derivative gas turbine.

    The additive manufacturing department was added to the facility in 2009 and officially opened this year. It features a number of EOS 3D printers which work in conjunction with a proprietary computer-aided design (CAD) program. The first piece printed through its process was a model in metal of the company's local headquarters, Finspang House.

    As Thorbjoern Fors, CEO of the company's Distributed Generation Services business, puts it, the department's focus is driven by the idea that "if you can dream it, you can print it". He says the technology and innovations 3D printing can give rise to could transform both production and service, enabling the manufacturing process to become design-driven and allowing for almost unlimited innovation in design, materials and structures, while also simplifying and speeding up repairs.

    In addition, Dr Vladimir Navrotsky, CTO of the Distributed Generation Services business and Siemens' Innovator of the Year for 2015, notes that "with this technology there is no scale effect - we could make one component or 1000 and the cost would be the same, unlike classical production where bigger volume equals lower cost."

    Transforming service

    According to Navrotsky, additive manufacturing offers a number of benefits for the component repair process, including reduced lead time, fewer process steps (for example, no casting is involved), savings on materials, elimination of tools, and on-demand (or "instant decentralized") production.

    In a 2013 example of a repair undertaken through additive manufacturing, the first commercial product produced by the Finspang facility was a spare part, a burner tip for the SGT-800 turbine. Rather than manufacturing a new head, the old head was cut off, and a new head was printed directly onto the burner instead of needing to be welded on.

    An SGT-1000F turbine at a gas-fired power plant in Brno in the Czech Republic has been running since June with 3D printed spare parts. During the last scheduled inspection, three of its 24 burners were equipped with Siemens' first printed burner heads.

    "This is the first time this spare-part-on-demand process was ever done," says Fors, adding that in the traditional process, re-manufacturing the burner head alone would have taken six months; with additive manufacturing, the entire process was accomplished in a few weeks.

    Attached Files
    Back to Top

    Iraq defaults on $1 billion debt to Iran

    Iran is currently exporting some 1,500 megwatts of electricity to Iraq.

    Iraq has an outstanding debt of $1 billion to Iran related to the purchase of electricity and the two neighbors are discussing mechanisms to have it settled, an Iranian deputy energy minister says.

    Iran is currently exporting some 1,500 megawatts of electricity to Iraq, with a further capacity established to raise it to 2,000 megawatts.

    Deputy Energy Minister Houshang Falahatian said on Wednesday that Iraq now runs a debt of $1 billion related to more than one year of power purchases from Iran and other dues related to earlier years.

    Iraq had undertaken to settle the debt in 10 installments but it has fallen back on the repayments after initially fulfilling part of its commitments, he said.

    “The rise in the volume of Iraq’s debts to Iran has nothing to do with the sanctions or problems related to the transfer of money through foreign banks,” Falahatian said.

    The accumulation of the debt, the minister said, was chiefly due to the decline in Iraq’s revenues from the oil price crash.

    “Despite the rise in the volume of the debt, exports of electricity to Iraq continue,” Falahatian added.
    Back to Top

    Oil and Gas

    Europe’s Biggest Oil Company Thinks Demand May Peak in 5 Years

    Royal Dutch Shell Plc, the world’s second-biggest oil company by market value, thinks demand for oil could peak in as little as five years.

    “Oil, we’ve long been of the opinion that demand will peak before supply,” Chief Financial Officer Simon Henry said on a conference call on Tuesday. “And that peak may be somewhere between 5 and 15 years hence, and it will be driven by efficiency and substitution, more than offsetting the new demand for transport.”

    The World Energy Council has forecast that petroleum consumption will peak in 2030 if renewable energy and other disruptive technologies continue to improve rapidly. Michael Liebreich, founder of Bloomberg New Energy Finance, predicts the growth of electric vehicles and better fuel efficiency mean oil demand will peak around 2025 and decline in the 2030s.

    Shell will still be in business for “many decades to come” because it is focusing more on natural gas and expanding its new-energy businesses including biofuels and hydrogen, Henry said.

    “Even if oil demand declines, its replacements will be in products that we are very well placed to supply one way or the other, so we need to be the energy major of the 2050s,” Henry said. “That underpins our strategic thinking. It’s part of the switch to gas, it’s part of what we do in biofuels, both now and in the future.”

    Shell sees “oil and gas as being part of the energy mix for many decades to come,” it said in a statement Wednesday.

    Shell bought BG Group Plc for $54 billion this year in a move the company said was partly aimed at increasing its gas business. Gas made up about 48 percent of the company’s total production in the third quarter ended Sept. 30, according to data compiled by Bloomberg. UK competitor BP Plc had 38 percent gas, including from units, in the period.

    The anticipated increase in demand of about 20 million barrels a day over the next two decades will probably be big enough to overwhelm the impact of the electric car, Spencer Dale, chief economist for BP, said Oct. 11. Those vehicles will have a bigger impact in 30 to 50 years, although there’s a chance it could happen sooner, he said.
    Back to Top

    Russia's oil output in Oct hits new post-Soviet era high

    Russia's oil output set a new post-Soviet era record high in October, rising 0.1 percent fromSeptember to 11.2 million barrels per day (bpd), energy ministry data showed on Wednesday.

    The rise underscores the difficulty the government could have in freezing output levels as part of a global pact with other top producers in order to support oil prices.

    Oil and gas sales account for more than a third of Russia's state budget revenues, down from half in 2014 reflecting a fall to below $50 per barrel from $115.

    In tonnes, Russia's oil output in October rose to 47.386 million from 45.483 million in September.

    Supply from the Organization of the Petroleum Exporting Countries also rose to a record level in October as Nigerian and Libyan output partially recovered from disruptions and Iraq
    boosted exports.

    Ministry data showed Rosneft increased production by 0.1 percent, Lukoil's output rose by 0.9 percent, and Surgutneftegaz cut production by 0.3 percent.

    The rise in Russian crude output has been supported by a increase in drilling as companies capitalise on a weaker rouble.

    "The pace of the growth in drilling has been maintained, at 16 percent for the nine months of the year, while Rosneft cranked up drilling at Samotlor oilfield by 40 percent and by 67 percent at Yugansk," said Valery Nesterov, analyst at Sberbank CIB.

    We see that the energy ministry is in a predicament while  holding the talks about the (output level) freeze."

    He added that the quality of the drilling, such as horizontal drilling, has also improved.

    The ministry expects a rise in oil output in 2017 to 548 million tonnes, or 11 million barrels per day, due to new fields coming onstream.

    Nesterov said that Russia has potential for growth to 2019, when a peak of 570-575 million tonnes could be reached thanks to investments made before sanctions introduced by the West against Moscow for its role in the Ukrainian crisis in 2014

     The measures virtually bar Russian oil producers from raising capital on the Western debt market.

    This week, Russia's No.2 oil producer Lukoil launched the Filanovsky offshore oil field in the Caspian Sea, the second major oil field opened by Russia in a week and the fourth this year.

    Natural gas production in Russia rose to 61.07 billion cubic metres (bcm) or 1.97 bcm per day in October from 51.33 bcm in September.
    Back to Top

    Militants attack NNPC pipeline in Niger Delta - military

    Nigeria Nov 2 Militants in Nigeria's southern Niger Delta oil hub attacked a pipeline operated by the Nigerian National Petroleum Corporation, the military and a witness said on Wednesday.

    The Batan flow station, around Ekweregbene, was attacked, a military spokesman said, while Sheriff Mulade, a witness, said it had taken place at around 1200 GMT.

    The flow station is located in a creek between the southern city of Warri and the Forcados oil terminal, which last week resumed crude exports following repairs after an attack.
    Back to Top

    Demand for gas to spur exploration in Cooper, Otway basins – report

    South Australia’s Cooper and Otway basins are poised for greater exploration on the back of higher gas demand from the eastern states, a new report by consultancy firm Core Energy has found.

    The report, commissioned by the South Australian Department of State Development and published this week, noted that by 2018, yearly demand in the eastern Australiagas sector would approach about 2 000 PJ, rising from a historical high of about 700 PJ.

    This means there would need to be an underlying reserve of about 40 000 PJ to support 20 years of activity, and 80 000 PJ over a 40-year outlook.

    The report noted that gas resources located within or near existing gas production, transport, and processing in the Cooper and Otway basins were considered the best opportunity for further exploration, development and to supply gas markets at the lowest costs.

    “Affordable gas is becoming more and more important as the National Electricity Market transitions away from coal-fired power towards a mix of gas and renewables,” said Mineral Resources and Energy Minister Tom Koutsantonis.

    “Last month, the state government announced that we will be partnering with gas companies through a grant scheme that will incentivise more gas to be extracted and supplied to the South Australian market first, which will put downward pressure on power prices.”

    Koutsantonis said that the report indicated the scale of the potential for the development of new gas projects in the Cooper and Otway basins.

    “These South Australian resources could underpin decades of gas supply for both domestic gas and export liquefied natural gas (LNG) markets.”

    In February, the Department of State Development documented preliminary estimates indicating there is more than 600-trillion cubic-feet of sales gas and 80-billion barrels of oil in place – all within the Cooper basin’s tight sand, shale and deep coal reservoirs.
    Back to Top

    Sewage to Crude

    RICHLAND, Wash. – It may sound like science fiction, but wastewater treatment plants across the United States may one day turn ordinary sewage into biocrude oil, thanks to new research at the Department of Energy's Pacific Northwest National Laboratory.

    The technology, hydrothermal liquefaction, mimics the geological conditions the Earth uses to create crude oil, using high pressure and temperature to achieve in minutes something that takes Mother Nature millions of years. The resulting material is similar to petroleum pumped out of the ground, with a small amount of water and oxygen mixed in. This biocrude can then be refined using conventional petroleum refining operations.

    Wastewater treatment plants across the U.S. treat approximately 34 billion gallons of sewage every day. That amount could produce the equivalent of up to approximately 30 million barrels of oil per year. PNNL estimates that a single person could generate two to three gallons of biocrude per year.

    Sewage, or more specifically sewage sludge, has long been viewed as a poor ingredient for producing biofuel because it's too wet. The approach being studied by PNNL eliminates the need for drying required in a majority of current thermal technologies which historically has made wastewater to fuel conversion too energy intensive and expensive. HTL may also be used to make fuel from other types of wet organic feedstock, such as agricultural waste.

    What we flush can be converted into a biocrude oil with properties very similar to fossil fuels. PNNL researchers have worked out a process that does not require that sewage be dried before transforming it under heat and pressure to biocrude. Metro Vancouver in Canada hopes to build a demonstration plant.

    Using hydrothermal liquefaction, organic matter such as human waste can be broken down to simpler chemical compounds. The material is pressurized to 3,000 pounds per square inch — nearly one hundred times that of a car tire. Pressurized sludge then goes into a reactor system operating at about 660 degrees Fahrenheit. The heat and pressure cause the cells of the waste material to break down into different fractions — biocrude and an aqueous liquid phase.

    "There is plenty of carbon in municipal waste water sludge and interestingly, there are also fats," said Corinne Drennan, who is responsible for bioenergy technologies research at PNNL. "The fats or lipids appear to facilitate the conversion of other materials in the wastewater such as toilet paper, keep the sludge moving through the reactor, and produce a very high quality biocrude that, when refined, yields fuels such as gasoline, diesel and jet fuels."

    In addition to producing useful fuel, HTL could give local governments significant cost savings by virtually eliminating the need for sewage residuals processing, transport and disposal.

    Simple and efficient

    "The best thing about this process is how simple it is," said Drennan. "The reactor is literally a hot, pressurized tube. We've really accelerated hydrothermal conversion technology over the last six years to create a continuous, and scalable process which allows the use of wet wastes like sewage sludge."

    An independent assessment for the Water Environment & Reuse Foundation calls HTL a highly disruptive technology that has potential for treating wastewater solids. WE&RF investigators noted the process has high carbon conversion efficiency with nearly 60 percent of available carbon in primary sludge becoming bio-crude. The report calls for further demonstration, which may soon be in the works.

    Demonstration Facility in the Works

    PNNL has licensed its HTL technology to Utah-based Genifuel Corporation, which is now working with Metro Vancouver, a partnership of 23 local authorities in British Columbia, Canada, to build a demonstration plant.

    "Metro Vancouver hopes to be the first wastewater treatment utility in North America to host hydrothermal liquefaction at one of its treatment plants," said Darrell Mussatto, chair of Metro Vancouver's Utilities Committee. "The pilot project will cost between $8 to $9 million (Canadian) with Metro Vancouver providing nearly one-half of the cost directly and the remaining balance subject to external funding."

    Once funding is in place, Metro Vancouver plans to move to the design phase in 2017, followed by equipment fabrication, with start-up occurring in 2018.

    "If this emerging technology is a success, a future production facility could lead the way for Metro Vancouver's wastewater operation to meet its sustainability objectives of zero net energy, zero odours and zero residuals," Mussatto added.

    Nothing left behind

    In addition to the biocrude, the liquid phase can be treated with a catalyst to create other fuels and chemical products. A small amount of solid material is also generated, which contains important nutrients. For example, early efforts have demonstrated the ability to recover phosphorus, which can replace phosphorus ore used in fertilizer production

    Attached Files
    Back to Top

    Another small increase in US oil production

                                                         Last Week     Week Before   Last Year

    Domestic Production '000........... 8,522              8,504              9,160
    Alaska ................................................ 510                 501                  509
    Lower 48 ........................................ 8,012              8,003              8,651
    Back to Top

    Summary of Weekly Petroleum Data for the Week Ending October 28, 2016

    U.S. crude oil refinery inputs averaged over 15.4 million barrels per day during the week ending October 28, 2016, 104,000 barrels per day less than the previous week’s average. Refineries operated at 85.2% of their operable capacity last week. Gasoline production decreased slightly last week, averaging over 9.8 million barrels per day. Distillate fuel production increased last week, averaging about 4.7 million barrels per day.

    U.S. crude oil imports averaged 9.0 million barrels per day last week, up by 2.0 million barrels per day from the previous week. Over the last four weeks, crude oil imports averaged 7.7 million barrels per day, 7.0% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 458,000 barrels per day. Distillate fuel imports averaged 60,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 14.4 million barrels from the previous week. At 482.6 million barrels, U.S. crude oil inventories are at the upper limit of the average range for this time of year. Total motor gasoline inventories decreased by 2.2 million barrels last week, but are well above the upper limit of the average range. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories decreased by 1.8 million barrels last week but are well above the upper limit of the average range for this time of year. Propane/propylene inventories rose 0.3 million barrels last week and are near the upper limit of the average range. Total commercial petroleum inventories increased by 9.0 million barrels last week.

    Total products supplied over the last four-week period averaged 20.2 million barrels per day, up by 2.6% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged 9.1 million barrels per day, down by 1.2% from the same period last year. Distillate fuel product supplied averaged about 4.1 million barrels per day over the last four weeks, up by 3.7% from the same period last year. Jet fuel product supplied is up 5.7% compared to the same four-week period last year.

    Cushing up 100,000 bbl

    Attached Files
    Back to Top

    Colonial Pipeline plan to cut off dirty jet fuel could hit airlines

    Major airlines including Delta, United and American could face higher fuel costs if U.S. regulators allow Colonial Pipeline Co to stop shipping a dirtier blend of jet fuel by 2018.

    The Colonial system carries most of the jet fuel that is delivered via pipeline to the East Coast and used by busy airports serving New York, Washington, D.C. and Atlanta, along with U.S. military bases.

    The pipeline company said earlier this month it would ask the Federal Energy Regulatory Commission for permission to halt shipments of high-sulfur jet fuel and diesel.

    Preliminary estimates indicate that jet fuel prices could rise significantly if Colonial wins approval, said John Heimlich, chief economist for the industry trade group Airlines for America (A4A).

    Rising fuel prices could make certain flights unprofitable, forcing airlines to cut service and sell fewer seats - likely at higher prices.

    It would take jet fuel price increases of 30 to 50 cents per gallon to have a big impact on pricing or flight availability, said Robert Mann, an industry consultant and former executive at American and other airlines. Jet fuel in the New York Harbor traded at about $1.44 per gallon as of Tuesday.

    A Colonial spokeswoman said the pipeline company was discussing its regulatory proposal with affected airlines but declined further comment to Reuters.

    The move would allow Colonial, which daily ships more than 3 million barrels of petroleum products, to more efficiently move more low-sulfur products through its pipeline. Cutting down on dirtier fuels would reduce so-called "transmix," which occurs when high-sulfur and low-sulfur products are combined. The resulting mixture has to be refined or blended again.

    Colonial has not specified what it intends to ship in place of high-sulfur fuels. But the pipeline has been full for about four years, and Colonial would likely see strong demand for any open space.

    The company shut its gasoline pipeline for the second time in less than two months on Monday after an explosion in Alabama killed one worker and injured five others. It briefly shut the distillates line as well, which transports jet fuel.

    American Airlines Group Inc, United Continental Holdings Inc and JetBlue Airways Corp declined to comment on Colonial's regulatory proposal, referring questions to A4A. A spokeswoman for Southwest Airlines Co declined to comment, saying the airline is still evaluating the plan.

    Delta Air Lines Inc may be more insulated from fuel price shocks than others because the company operates a refinery in the northeast U.S. that is heavily geared toward jet fuel production. Delta did not respond to requests for comment.


    Colonial's plan is driven largely by waning demand for high-sulfur fuels. Railroad and marine transportation companies, for instance, are using less high-sulfur diesel fuel in response to environmental regulations.

    Sulfur levels in jet fuel are not currently regulated, however, and the industry still uses high-sulfur fuels widely, in part because they have better lubricating qualities for airplane engines.

    Airlines can and do use a range of cleaner fuels, Heimlich said, which Colonial would continue to ship under its proposal. But airlines are concerned that many refiners could take years to make upgrades required to produce jet fuel to Colonial's proposed low-sulfur standard.

    Some refiners would need to invest in desulfurization units known as hydrotreaters, said David Hackett, president of the energy consultancy Stillwater Associates. Or they could update their facilities to process sweet crude instead of high-sulfur sour crude.

    Either way, refinery costs would go up, and the transition would take time, raising the prospect of airline fuel shortages.

    "Three years is minimum," Hackett said.


    Colonial needs permission from the energy commission to stop shipments of high-sulfur fuel, and the airlines can exert influence on that process.

    A commission spokeswoman declined to comment, noting that Colonial's proposal has not been formally filed with the agency.

    At stake is a large portion of the about 400,000 barrels per day (bpd) of jet fuel that moves from the U.S. Gulf to the East Coast via pipeline, according to U.S. Energy Department data. About two-thirds of East Coast jet fuel demand is currently met by pipeline flows from the Gulf Coast, according to analysts at Energy Aspects.

    If Colonial wins approval, airports in the southeastern U.S. may turn to Kinder Morgan's 700,000 barrel-per-day Plantation Pipeline, which has less than a third of Colonial's capacity. Kinder Morgan, in a statement, said it is "evaluating the changing market conditions" before considering any expansion of shipping high-sulfur jet fuel.

    If Plantation and other interstate pipelines followed Colonial's lead, it could make supplying airports even more challenging.

    Trucking fuel to major airports is not feasible due to the sheer volume of fuel needed.

    Waterborne shipments could be expensive, in part due to the Jones Act, a maritime policy which requires goods transported by water between U.S. ports to be carried on U.S.-flagged ships. That may make it cheaper to import jet fuel, particularly from Europe.
    Back to Top

    Constitution Pipeline Case Goes to Court in 2 Weeks, Briefs Filed

    You may recall that in April, New York’s anti-drilling governor, Andrew Cuomo, decided he would cave to pressure from radical environmentalists once again and block the building of the federally-approved Constitution Pipeline. 

    Cuomo’s toadies at the Dept. of Environmental Conservation (DEC) denied the Constitution the permits it needs to cross creeks and swamps. That was finally enough for Williams and the other partners in the project, who promptly sued NY in federal, NOT state, court. 

    The court venue is important, because in NY our court system at the highest level is corrupt–the governor appoints judges and those judges like their big-salary jobs and want to get reappointed–so they “decide” cases the way Andy wants them decided. 

    We’ve predicted, repeatedly, that the NY DEC runs the very real risk of being removed from the decision process when it comes to federally-approved pipeline projects. If they lose the Constitution case, they will no longer have a role to play. Even the libs at Bloomberg think the DEC has a weak case (see Bloomberg Predicts Court Will Strip NY’s Right to Stop Constitution). 

    We’re now two weeks away from the court hearing date and Williams has filed a couple of briefs blasting the DEC and the DEC has filed a brief responding. It’s turning into a legal brawl. Warning to Williams: be prepared to fight like a New York street-fighter. Fortunately, the case sits in U.S. Circuit Court of Appeals and not the NY Court of Appeals (NY’s highest court)…
    Back to Top

    Alternative Energy

    China takes the lead in renewable energy, as cost-effectiveness improves

    China's renewable energy investment constitutes one-third of the world's investment in the area, said Adnan Z. Amin, director-general of the International Renewable Energy Agency.

    China's total investment in renewable energy last year was $102.9 billion, up 17 percent from the same period the year before, said Amin at the International Forum on Energy Transitions held in Suzhou from Oct 30 to 31.

    International investment in renewable energy was $330 billion last year.

    "China is taking the lead in renewable energy development. Last year, China's wind and hydropower newly-installed capacity accounted for more than half of the world's total. Its photovoltaic newly-installed capacity accounted for one third of the world's total," he said.

    The key to renewable energy development is to lower the costs. The infrastructure cost of photovoltaic power has gone down by 70 percent from 2005, said Qu Xiaoye, president and founder of Canadian Solar Inc based in Ontario, and it needs to drop further.

    "China's photovoltaic power accounts for 1 percent of the country's total power. In Germany, the proportion is 7 to 8 percent. With effective cost reduction, photovoltaic power has great room for growth," said Qu.

    According to Qu, every one percentage point reduction in cost will lead to 5 percent reduction in price per kilowatt hour. This is mainly to be achieved by technological research to make the solar panels more cost effective.

    Qu said that the on-grid price of photovoltaic power might be lowered to the same level as fossil fuel-fired power by 2022.

    "Another major cost is financing. Most of the photovoltaic companies lease facilities through financial leasing, which takes up 40 percent of the revenue. Therefore, a more flexible and diversified financing system is needed for renewable energy," said Qu.

    According to a report by IRENA released in June, the average costs of photovoltaic power are going to drop by 59 percent by 2025, compared with the 2015 price of $0.5 per kilowatt.

    Oceanic and land wind power costs are expected to go down by 35 and 25 percent respectively by 2025, according to IRENA.

    China has pledged to increase its share of non-fossil fuels in primary energy consumption from 12 percent in 2015 to 15 percent by 2020 and 20 percent in 2030.

    In order to achieve this goal, the wind and photovoltaic integration into the national grid would need to be at least 400 million kilowatts in 2020 and 1 billion kilowatts in 2030.

    Attached Files
    Back to Top

    First Solar's profit slumps 56 pct; company cuts 2016 rev forecast

    First Solar Inc, the largest U.S. solar equipment manufacturer, reported a 55.9 percent drop in quarterly profit on Wednesday, and the company cut its full-year revenue forecast for the second time.

    The company cut its revenue guidance to $2.8 billion-$2.9 billion from $3.8 billion-$4 billion as it revised the sale timing for its California Flats and Moapa projects. The projects are now expected to be sold in 2017.

    First Solar's net income fell to $154.1 million, or $1.49 per share, in the third quarter ended Sept. 30 from $349.3 million, or $3.41 per share, a year earlier.

    Net income in the quarter was hurt by pre-tax charges of $4 million.

    First Solar, the first major U.S. solar company to report quarterly results, said net sales fell 45.9 percent to $688 million due to the completion of multiple systems projects during the quarter.
    Back to Top


    Cameco's profit beats estimates on higher uranium sales

    Canadian uranium producer Cameco Corp on Wednesday reported a better-than-expected quarterly profit, largely helped by a jump in uranium sales volumes.

    Cameco's uranium sales rose 35 percent to 9.3 million pounds in the third quarter ended Sept. 30, while its average realized uranium price fell 0.6 percent to $43.37 per pound.

    Chief Executive Tim Gitzel said though uranium prices are at the lowest levels in more than a decade, the company's average realized prices were well above the market price thanks to its portfolio of long-term contracts.

    However, Cameco warned that the uranium market would remain depressed until Japan's nuclear reactors are restarted and excess supply is depleted, among other things.

    The 2011 Fukushima meltdown led to shutdowns of all of Japan's nuclear reactors, depressing the radioactive metal's price. Some reactors have since come back online, but global uranium inventories remain high.

    Cameco reported a net profit of C$142 million, or 36 Canadian cents per share, attributable to equity holders in the quarter, compared with a loss of C$4 million, or 1 Canadian cent per share, a year earlier.

    Excluding items, the company earned 30 Canadian cents per share, beating the average analyst estimate of 28 Canadian cents per share, according to Thomson Reuters I/B/E/S.

    Revenue rose 3.2 percent to C$670 million, beating analysts' expectation of C$654.9 million.
    Back to Top


    Fertilizer maker CF Industries posts first quarterly loss since 2010

    U.S. nitrogen fertilizer producer CF Industries Holdings Inc on Wednesday reported a loss for the third quarter, its first in six and a half years, pressured by lower prices.

    Fertilizer prices have plunged this year amid declining U.S. farm incomes and ample supplies, even as CF completes expansion of nitrogen facilities in Louisiana and Iowa.

    Buyers were slow to stock up as prices declined during the period and with new production capacity coming online through mid-2017, CF, North America's largest maker of nitrogen fertilizer, said in a statement.

    CF's quarterly loss totaled $30 million, or 13 cents per share, compared with a profit of $90 million or 39 cents per share a year earlier. Net sales fell by 27 percent to $680 million.

    The last time CF posted a quarterly loss was the first quarter of 2010, according to Thomson Reuters data.

    Excluding one-time items including expansion costs, CF earned $30 million or 13 cents per share, topping the average analyst estimate of a 3-cent per share loss, according to Thomson Reuters I/B/E/S.

    The Deerfield, Illinois-based company's shares fell about 3 percent after normal trading hours on the New York Stock Exchange.
    Back to Top

    Precious Metals

    Fosun in exclusive talks to buy stake in Russian gold miner Polyus: sources

    Fosun International Ltd, is in exclusive talks to buy a large minority stake in Russia's biggest gold miner Polyus, three sources with knowledge of the matter told Reuters, in what would be the Chinese group's maiden Russian deal.

    Fosun, an aggressive buyer known internationally for its purchase of French resort operator Club Med, is keen to invest in Russia and other emerging markets such as India, as it moves away from Europe and developed markets. Reuters reported in August that Fosun is also in talks to buy a minority stake in Russian investment bank Renaissance Capital..

    Fosun's interest in Polyus comes as other Chinese companies have also been targeting gold mine acquisitions to meet domestic demand amid a recovery in prices. State-controlled Zijin Mining Group Co Ltd and state-backed Shandong Gold Mining Co Ltd held separate talks with Canada's Barrick Gold Corp to buy a 50 percent stake in an Argentinian gold mine, Reuters reported last month..

    China, the world's top consumer, producer and importer of gold, has ambitions to be a global gold price setter. It recently set up a yuan-based gold 'fix' that establishes a regional benchmark.

    The talks between Fosun and Polyus have been underway for a couple of weeks, said sources, who declined to be named as the talks are confidential.

    The two companies are still negotiating the final terms, including the size of the stake, and any deal value could be subject to last minute changes, one of the people said. Fosun is conducting due diligence on Polyus but no deal is imminent, the person added.

    One of the sources said Fosun is looking to invest around $2 billion in Polyus, owned by the family of Russian billionaire Suleiman Kerimov. The source added that Fosun is looking to form a consortium of private equity investors to help finance the deal.

    Both Fosun and Polyus declined to comment.

    Both Zijin and Shandong Gold had previously expressed interest in buying a Polyus stake, one of the sources said. Zijing declined to comment while Shandong Gold did not offer an immediate comment.


    Based on Polyus' outstanding shares, the Russian gold miner has a market value of about $9 billion, according to Reuters calculations.

    Polyus is planning a public placement with either existing or new shareholders as it needs to raise its free float to at least 10 percent to meet Moscow Exchange requirements, Reuters reported last month.

    Fosun's interest in Polyus comes as the Shanghai-based conglomerate, controlled by billionaire co-founder Guo Guangchang, is shifting its investment focus to emerging markets where asset valuations are lower and growth prospects are higher.

    Fosun this year acquired India's Gland Pharma from KKR & Co for about $1.3 billion, marking its first Indian acquisition.. The company has spent more than $30 billion over the past two decades buying real estate, insurance, leisure and tourism assets globally.

    Guo, 49, one of China's most powerful business leaders, told Reuters in June that he considered 2016 a "good time" to invest in oil and commodities, adding that Fosun would increase investment in this segment.

    Born in a rural village in the eastern province of Zhejiang, Guo studied philosophy at Shanghai's elite Fudan University and serves as a delegate to the National Committee of the Chinese People's Political Consultative Conference, a parliamentary advisory body.

    Fosun first diversified into natural resources in 2014 when it bought Australia's Roc Oil Co for A$474 million, although Guo said the investment wasn't a success due to plunging oil prices.

    In Russia, Fosun has already set up two subsidiaries - Fosun Management (Russia) and Fosun Eurasia Capital - to seek investment opportunities and build its asset management business in the country and neighboring regions, its website shows.

    Moscow-based Polyus has posted a steady rise in gold output over the last few years and expects to produce up to 1.90 million ounces of gold this year. It also has the world's fourth-largest gold reserves, according to the company, with over 64 million ounces of proven and probable gold reserves.

    A weakened rouble has lowered the costs of gold mining in Russia in dollar terms, helping Polyus to post a record first-half core profit margin. Net debt, however, jumped during 2016 due to a share buyback and stood at $2.9 billion at the end of September.

    (Reporting by Julie Zhu in HONG KONG and; Polina Devitt in MOSCOW; Additional reporting by Oksana Kobzeva, Olga Popova, and Andrey Kuzmin; Writing by Denny Thomas; Editing by Lisa Jucca and Richard Pullin)
    Back to Top

    Base Metals

    Twelve U.S. senators urge security rejection of China aluminum M&A deal

    Twelve U.S. senators urged on Wednesday that a national security review panel reject Chinese aluminum giant Zhongwang International Group Ltd's proposed $2.3 billion purchase of U.S. aluminum products maker Aleris Corp.

    The senators asked Treasury Secretary Jack Lew in a letter to launch a review of the deal by the Committee on Foreign Investments in the United States and "ultimately reject it" on grounds that it would damage the U.S. defense industrial base.

    "Zhongwang’s purchase of Aleris would directly undermine our national security, including by jeopardizing the U.S. manufacturing base for sensitive technologies in an industry already devastated by the effects of China’s market distorting policies, and creating serious risk that sensitive technologies and knowhow will be transferred to China, further imperiling U.S. defense interests," the senators wrote.

    The deal, announced just over two months ago, would give one of the world's largest makers of extruded aluminum products access to U.S. technology and customers, which include Boeing Co and U.S. and European automakers that are increasingly turning to aluminum.

    It comes as another Zhongwang subsidiary is embroiled in a dispute over U.S. import duties amid broader trade tensions between the U.S. aluminum industry and China.

    The U.S. Commerce Department is currently investigating China Zhongwang Holdings Ltd over allegations that it has been evading U.S. import duties on extruded products by shipping them through third countries.

    The letter to Lew was signed by Republican Rob Portman of Ohio, where Aleris is based, and Democrats Ron Wyden, Charles Schumer, Bob Casey, Joe Manchin, Kirsten Gillibrand, Joe Donnelly, Debbie Stabenow, Jeff Merkley, Amy Klobuchar, Tammy Baldwin and Al Franken.

    They said the review committee needed to be cautious about the potential for sensitive research data to be transferred to China, including data with military applications such as advanced modeling techniques, high-strength alloys and the design of light armor material.

    "Despite the national security importance of our nation’s aluminum sector, the industry continues to be decimated by China’s market distorting policies that contribute to vast overcapacity," the senators wrote.

    "China’s overcapacity in aluminum has directly contributed to severe reductions in U.S. domestic production as smelters unable to compete have been forced to close. Each such closure further imperils our nation’s ability to ensure a reliable supply of strategic materials in times of crisis," they wrote.

    A Treasury spokeswoman declined to comment on the letter, adding that information filed with CFIUS by law cannot be disclosed to the public and that Treasury does not comment on specific CFIUS cases.

    Aleris said in a statement reacting to the letter that the company's U.S. facilities produce no defense-related products, and the technology for aluminum plate used in some defense products was widely used in the industry.

    "Our facilities in the U.S. produce aluminum for car and truck exteriors, gutters and roofing material," Aleris said. " Less than one percent of our sales go into defense applications, and none of those goods are produced in the U.S."

    A Zhongwang spokeswoman said in a statement that the CFIUS filing for the transaction is voluntary and that the company and its U.S. subsidiary have no connection with the Chinese government. She added that the transaction will bring in additional resources and capital to Aleris and there will be no changes to management, employees or business strategies.

    Attached Files
    Back to Top

    Outage at New Caledonia nickel producer SLN hits production

    New Caledonia nickel producer Societe Le Nickel, a subsidiary of French conglomerate Eramet , on Wednesday said a series of explosions at a smelter had temporarily disrupted output earlier this week.

    SLN spokesman Olivier Beligon said one of the Doniambo nickel smelter's three furnaces was shut for 24 hours after the explosions caused a leak and staff were evacuated.

    "The furnace started to resume operations yesterday and we are now back to normal," Beligon said by telephone from New Caledonia's capital Noumea, adding that specifics on lost production were not yet available.

    The SNL smelter in Noumea is a leading world supplier of ferronickel, used to make stainless steel. SNL has forecast production of around 53,000 tonnes of nickel this year, or 5 percent of total global output.

    New Caledonia, a French Pacific territory, holds around a quarter of the world's reserves of nickel. Two other smelters are owned by Glencore and Vale.

    Attached Files
    Back to Top

    Steel, Iron Ore and Coal

    China calls another meeting to take coal miners to task for price rally

    labourer searches for usable coal at a cinder dump site on the outskirts of Changzhi, Shanxi province October 27, 2009. REUTERS/Stringer/File Photo

    China's state planner has called coal producers to a meeting on Thursday, its fourth last-minute gathering with the industry in two weeks, to admonish them for not doing enough to calm the red-hot market, according to a document seen by Reuters.

    In a notice, the National Development and Reform Commission (NDRC) said it sought to "prevent volatile coal prices moves," calling for a meeting "to admonish producers for not regulating their pricing activities."

    The gathering in Beijing was to be held at 2:30 p.m.

    The strongly-worded notice comes a week after the NDRC asked miners to cap their price limits on 2017 contracts and pressed them to sign more long-term deals, in an apparent effort to end the months-long rally the government has said is not justified by fundamentals.

    The NDRC did not respond to requests for comment.

    Experts and miners say the frequency of the gatherings reflect Beijing's increasing worries about runaway prices ahead of the winter.

    An official government newspaper reported on Thursday that major producer China National Coal Group Corp (ChinaCoal) has cut its thermal coal prices by 10 yuan per ton.

    Spot prices for 5,500 kcalorie thermal coal gained 4 yuan on Thursday to 697 yuan ($103.12) per ton, data provided by Fenwei Energy showed.
    Back to Top

    As first cold snap of winter grips China, utilities face coal crunch

    As the first major cold snap of the winter grips northern China this week, utilities are desperately trying to overcome a shortage of the coal they need to produce power as customers crank up heating to fight the chill.

    With coal inventories languishing below 20 days of use, well under the five-year average, power companies will be forced to stick with their record pace of imports for the rest of the year, stoking an unprecedented rally that has seen international prices more than double in 2016.

    The rush for foreign coal used to make electricity showed no sign of easing this week, with the Pacific benchmark Newcastle coal price on Tuesday settling at its highest since early 2012 at $114.75 per tonne.

    One trader based in the major Rizhao coal port reported North Korean coal offered at as much as 800 yuan ($118.29) per tonne. The price could not be verified, but it would be almost 150 yuan above the current domestic market.

    "The price is insanely high, but there is a market for it," said the trader, declining to be identified as he was not authorized to speak to media.

    The crunch comes after Beijing pushed to slash local coal output as part of its 'war on pollution', underscoring the challenges of balancing ambitions for clean air with the reality of an economy that has relied so heavily on dirty fuels.

    It also follows an unusually cold winter last year and a blistering summer in some regions that drained inventories.

    Chan Yijun, head of consultancy Shanxi Fenwei Energy, said imports in the fourth quarter would remain at the all-time high set over the previous three months at about 60 million tonnes.

    Shipping data in Thomson Reuters Eikon shows China's seaborne coal imports were 20.03 million tonnes for October, the biggest monthly total since Thomson Reuters started assessing the figures in January 2015.

    In the short term, that kind of appetite could push prices up by another 100-200 yuan per tonne, an informal survey of five traders and analysts by Reuters showed, despite the government repeatedly saying there are no fundamentals to support further gains.


    Thomson Reuters Eikon weather data shows temperatures in Beijing are expected to remain around 2 degrees Celsius below the seasonal norm until at least mid-December, piling pressure on coal stocks.

    Low hydro levels, including at the massive Three Gorges Dam, have also been ramping up the burden on coal-fired power generation.

    In the first nine months of the year, China's accumulated supply deficit for thermal coal was more than 138 million tonnes compared with a surplus of 18.54 million tonnes in the same period last year, data provided by Fenwei Energy showed. The deficit is also more than the volume China imported in the first three quarters of 2016.

    That pushed weekly thermal coal inventory in early September to its lowest level since 2008. Though it has climbed slightly since, stocks have been hovering under 20 days of use since April, levels considered critically low, data shows.

    "Markets are worried that the pace of increase in coal output is not matching the surge in winter demand," said Shanxi Fenwei's Chan.

    Only after the winter, well into 2017, will domestic stocks likely be replenished as Chinese mines step up output again, helping ease prices.

    In a reversal of its previous pledge, China's state planner has allowed 900 coal mines to boost thermal production, upping output by 1 million tonnes per day.

    It has also asked the nation's top coal miners to cap their 2017 supply contracts at or below current spot market levels, sources said, a highly unusual move that reflects Beijing's growing panic about runaway prices.

    "A key question hanging in everyone's mind is how fast coal mines can ramp up production to help relieve worries," said Zhang Xiaojin, a Zhengzhou based analyst with Everbright Futures.

    Attached Files
    Back to Top

    Hohhot railway raises coal freight rate by 10%

    Hohhot railway bureau in China's Inner Mongolia autonomous region raised rail freight rate for both coal and coke by 10%, effective November 1, said industry insiders, citing a notice released by the bureau lately.

    It is expected to bring about a 19-20 yuan/t increase in rail freight for coal delivered from Inner Mongolia to northern ports in China, said industry insiders.

    Some other railway authorities had adjusted rail freight rates in mid-October, adding further cost to coal deliveries that have been hit by increased cost from stricter truck transport rules.

    The Taiyuan and Zhengzhou railway bureaus resumed the standard freight rate set by the central government by cancelling the previous 10% discount.

    The Xi'an bureau called off a 0.01 yuan/ discount for coal deliveries within its administration, while the Urumchi Bureau also increased freight rate by 5% from the national standard.

    The demand for coal will continue to swell with the coming of peak winter demand in northern China, and downstream utilities are still seeking to replenish coal stocks.
    Back to Top

    Adaro reports a 23% rise in 9M earnings

    Adaro Energy, a leading coal mining company in Indonesia, reported a core earnings of $281 million for the first nine months of 2016, a year-on-year rise of 23%, World Coal reported on November 2, citing the company's latest quarterly report.

    The rise in core earnings comes despite a 16% year-on-year fall in net revenue over the period, as cost efficiency initiatives at the company resulted in a 22% fall in the cost of revenue.

    Its coal production in the first nine months was level with the same period last year at 39.33 million tonnes, and remains on track to achieve 2016 production guidance of 52-54 million tonnes.

    The company produced 13.47 million tonnes of coal in the third quarter this year, rising 2% from the previous quarter, despite heavy rainfalls in July and September.

    Coal sales of Adaro stood at 40.45 million tonnes over the same period, falling 2% from the previous quarter and down 9% year on year.
    Back to Top

    ChinaCoal to cut coal price on rising supply expectations

    China National Coal Group Corp (ChinaCoal), China's second-largest state-owned coal producer after Shenhua Group, will cut its thermal coal price by 10 yuan ($1.48) per tonne from Thursday, as it expects rising coal production to ease prices, a government newspaper reported.

    ChinaCoal expected overheated coal prices to cool after the government's latest measures to speed up output hikes to alleviate the shortage, while coal shipments and inventories at ports and users have been rising, China Reform Daily reported late on Wednesday.

    The newspaper is owned by the National Development & Reform Commission (NDRC), the country's economic watchdog. Industry sources said the cut will only be imposed for physical settlement based on the Bohai-Rim Steam-Coal Price Index.

    The marginal cut is seen by industry sources as the first sign that coal producers may be falling into line with the NDRC, which has urged coal miners to sign long-term deals with utilities at a fixed price to ensure supplies and avoid a big hike in residential power costs.

    Top coal miners including Shenhua have declined to reach an agreement with power generators to set the prices for their 2017 long-term supply contracts at prices below market levels.

    China's thermal coal prices on the Zhengzhou Commodity Exchange edged lower by 0.5 percent to 634.8 yuan a tonne by 0248 GMT.

    However, open interest for the benchmark contract stood at 469,648 lots, not far off a record level hit on Monday. Traders had been expecting prices to go higher, but are waiting for clearer signals on any potential policy moves.

    The unexpected coal supply shortage and recent price spike followed moves by the Chinese government to slash capacity and shut coal mines as part of its efforts to tackle overcapacity.
    Back to Top

    CIL Oct output up 23pct on month, missing target

    Coal India Limited, India's largest coal miner, produced 43.51 million tonnes of coal in October, up 1.9% year on year and 23.47% month on month, the state-owned company said in a regulatory filing to the Bombay Stock Exchange on November 1.

    The output for October was 8.37 million tonnes below the target of 51.88 million tonnes.

    In the first seven months of the fiscal year 2016-2017 (April-March), CIL produced 273.57 million tonnes of coal, also missing the targeted output of 307 million tonnes.

    During the same period, CIL's coal sales to consumers totaled 292.16 million tonnes against the target of 331.76 million tonnes.

    Among this, CIL posted an offtake of 43.04 million tonnes in October versus the targeted 47.96 million tonnes, the company said.

    CIL has a production target of 598 million tonnes for the ongoing fiscal year and it is planning to produce 1 billion tonnes per year by 2020.
    Back to Top

    Cloud Peak 3Q loss narrows on good demand

    Cloud Peak Energy, one of the largest coal producers in U.S., saw its loss narrow to $2.7 million in the first three quarters, compared with a loss of $48.7 million over the first nine months of 2015, World Coal reported on November 1.

    The company sold 17.1 million short tonnes (15.5 million tonnes) in the third quarter, compared with 20.8 million short t a year before.

    It realized revenue of $217.1 million over the same period, with a net loss of $1.6 million for the quarter.

    Cloud Peak's domestic coal shipments increased to an average of 5.7 million short tonnes per month in the third quarter, up from just 4.1 million short tonnes in the first quarter this year, thanks to a high coal burn at its customers' power plants amid strong summer electricity demand and increased natural gas prices.

    And the company expects more in the fourth quarter, noting that with natural gas prices moving above $3 per million Btu, some utilities are operating their coal units through the normal fall maintenance period.

    "During September, the company started receiving an increase in requested for proposals with customers looking to contract for more of their future requirements," the company said in its quarterly earnings statement. "There has been an increase in Powder River Basin pricing and the company is optimistic this trend will continue as coal demand recovers from the very low levels experienced in the first quarter this year."

    Following an uptick in global thermal coal prices, the company also reported a return to coal exports, saying it had sold around 1 million short tonnes to its Asian customers for delivery between November 2016 and February 2017.

    "The turnaround in international thermal coal prices has been significant," said Colin Marshall, the company's President and CEO. "If prices are sustained, we expect to be able to export additional tonnage next year."
    Back to Top

    South32 to pay $200 mln for Peabody Australia coal mine

    Nov 3 Australia's South32 said on Thursday it will pay $200 million to acquire Peabody Energy's Metropolitan coal mine in Australia amid a resurgence in demand for coal to make steel.

    Peabody, the biggest U.S. coal miner, filed for bankruptcy protection in April after a sharp drop in coal prices left it unable to service its $10.1 billion debt, much of it incurred for expansion in Australia.

    The bankruptcy ranks among the largest in the commodities sector.

    "The Metropolitan Colliery is a natural fit within our portfolio and the acquisition is consistent with our strategy to invest in high quality mining operations where we can create value," South32 Chief Executive Graham Kerr said in a statement.

    The deal comes as coking coal prices stage a rally that's seen prices rise more than 200 percent this year to about $230 per tonne.

    A drop in domestic production in China has been cited for the increase.
    Back to Top

    Shagang Group raises early Nov steel price by 100-380 yuan/t

    China's largest private sector steelmaker Shagang Group raised prices by 100-380 yuan/t for its major products to be delivered over November 1-10, compared with late October, mainly supported by increased coke prices.

    The company raised prices of rebar by 100 yuan/t, hot-rolled steel by 380 yuan/t and medium plate by 260 yuan/t.

    As of November 1, billet price climbed 100 yuan/t in Tangshan from ten days ago to 2,320 yuan/t with 17% VAT, ex-plant basis.  

    Steel spot market was buoyant and bullish lately, with resilient rebar future prices and persistent rise of coke price.

    By the end of September, the steel and coal sectors had fulfilled more than 80% of de-capacity target for 2016, and were likely to reach the target ahead of end-2016.

    Analysts expected the steel market to fluctuate at a relatively high level in November, as steel stocks are unlikely to climb rapidly despite gradually released capacity.
    Back to Top
    Commodity Intelligence LLP is Authorised and Regulated by the Financial Conduct Authority

    The material is based on information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. Opinions expressed are our current opinions as of the date appearing on this material only.

    Officers and employees, including persons involved in the preparation or issuance of this material may from time to time have "long" or "short" positions in the securities of companies mentioned herein. No part of this material may be redistributed without the prior written consent of Commodity Intelligence LLP.

    Company Incorporated in England and Wales, Partnership number OC334951 Registered address: Highfield, Ockham Lane, Cobham KT11 1LW.

    Commodity Intelligence LLP is Authorised and Regulated by the Financial Conduct Authority.

    The material is based on information that we consider reliable, but we do not guarantee that it is accurate or complete, and it should not be relied on as such. Opinions expressed are our current opinions as of the date appearing on this material only.

    Officers and employees, including persons involved in the preparation or issuance of this material may from time to time have 'long' or 'short' positions in the securities of companies mentioned herein. No part of this material may be redistributed without the prior written consent of Commodity Intelligence LLP.

    © 2018 - Commodity Intelligence LLP