Mark Latham Commodity Equity Intelligence Service

Monday 31st October 2016
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    President Trump a la Brexit

    Micheal Moore.

    Paglia says she has absolutely no idea how the election will go: ‘But people want change and they’re sick of the establishment — so you get this great popular surge, like you had one as well… This idea that Trump represents such a threat to western civilisation — it’s often predicted about presidents and nothing ever happens — yet if Trump wins it will be an amazing moment of change because it would destroy the power structure of the Republican party, the power structure of the Democratic party and destroy the power of the media. It would be an incredible release of energy… at a moment of international tension and crisis.

    Gold Pops Higher on News of Clinton Investigation

    The precious metal is a popular safe haven during political or economic turbulence

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    Long term rates made a Kondratiev cycle low this year?

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    Venezuela court annuls Congress probe of $11 billion missing at PDVSA

    Venezuela's top court on Thursday approved an injunction against a congressional probe that found Rafael Ramirez, the former president of state oil company PDVSA, was responsible for corruption and malfeasance that cost the firm $11 billion.

    A congressional commission this month said the funds had gone missing during Ramirez's time in charge, from 2004 to 2014, citing 11 cases of alleged corruption including overpricing of drilling rigs and a scandal over money laundering through an Andorra bank.

    Ramirez, who denies the charges, had requested an injunction from the Supreme Court to block the investigation. Opposition leaders in Congress had said they could use the probe to hold him politically responsible or take legal action against him.

    A summary of the decision posted on the court's website said the injunction request had been granted. Ramirez, contacted by Reuters, confirmed the decision.

    The report also accused other top executives including the company's current president, Eulogio Del Pino, of corruption.

    PDVSA has been at the center of a number of corruption scandals over the years, the most recent case involving a group of Houston-based businessmen who pleaded guilty in the United States to running a $1 billion kickback scheme to obtain contracts.

    Last year, financial authorities in Andorra intervened in a small bank called BPA following an accusation by the United States that it was linked to billions of dollars in laundered funds including money illegally taken from PDVSA.

    Switzerland has given around $51 million in formerly frozen assets to the United States in connection with a U.S. investigation into alleged corruption at PDVSA, the country's authorities said on Tuesday.

    Venezuela's opposition in December won a majority of seats in parliament and immediately began efforts to document corruption under the ruling Socialist Party.

    The Supreme Court since then has repeatedly sided with the executive branch in its disputes with the legislature.
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    France Might Have Blackouts This Winter?

    At present, 21 of France’s 58 nuclear reactors are offline. The country’s power prices have skyrocketed, as have imports. Power from fossil fuel is increasing, and the country has now postponed its plans to implement a floor price on carbon. Craig Morris explains why.

    “Nuclear doesn’t need coal as a backup like renewables do in Germany,” reads one comment meme. The reading is already silly: Germany backs up renewables with coal because it has cheap coal; if it had gas (or hydro), it would back them up with that. But now, news from France indicates that the model country for nuclear is itself slipping back into fossil.

    In September, the French generated more power from fossil fuel than in any September since 1984, according to Bloomberg. Back then, the news would have surprised France; after all, the government planned to build 170 reactors by 2000 and become fully nuclear for all energy (not just electricity). It never got far beyond 40 percent nuclear and now aims to reduce the share of nuclear in the power sector from 75 to 50 percent by 2025.

    The focus on September is important because monthly power consumption swings with the seasons. It rises as cold weather sets in, mainly due to demand for heat from electricity and for lighting. So the question is whether France is switching more to fossil fuels—and why.

    The short answer is: it can’t switch. France only has 2.9 GW of coal-fired capacity left. And it takes years to build new coal plants (which, it should be remembered, no one has proposed). What’s more, Uniper (a German firm, formerly Eon) says it will close down its coal facilities in France if the country adopts a floor price for carbon like the UK has (strangely, the firm is still in the UK). Nonetheless, this threat and others from industry is one reason why the French government backed down from a proposed carbon floor price in October. But clearly, France won’t return to coal, which it does not have.

    But why the dip in nuclear? The ASN, which regulates French nuclear reactors, is becoming a fierce watchdog. In mid-October, it demanded the closure of five of the eighteen reactors it is investigating based on safety reasons. A total of 21 reactors are now offline, and the French are starting to worry about power outages in the winter, with the head of French utility EDF (which operates all of the reactors) saying at least four but possibly up to twelve units will not be available this winter.

    France may not be able to import enough electricity in case of a shortfall, either. Back in February 2012 (yes, the winter after Fukushima, when many claimed Germany would rely on its nuclear neighbors), power lines from Germany to France were maxed out. Germany saved France from an outage then, and there was no shortfall in French nuclear power production at the time. A bitter cold spell would indeed be challenging.

    Prices on the power exchange are already greatly diverging. French prices are roughly 50% above those in Germany on the day this post was written, and German/Austrian prices remain the lowest in the comparison.
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    IT error in India causes shut-down of production at Statoil refinery… Norway

    Production at Statoil’s Mongstad Refinery was reportedly halted due to an IT error in India, new documents have revealed.

    The Norwegian operator’s computer systems are outsourced to a company after the responsibilities were passed on in 2012.

    According to Norwegian media, evidence has been uncovered which shows 29 incidents where Indian IT workers have broken down barriers to platform.

    Amongst some of the incidents, an IT worker is said to have stopped production at the Mongstad refinery in 2014 because of a typing error.

    Earlier this week staff were called to muster at the Mongstad refinery after a suspected incident.
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    Oil and Gas

    A “New Normal” for the Oil Market

    While oil prices have stabilized somewhat in recent months, there are good reasons to believe they won’t return to the high levels that preceded their historic collapse two years ago. For one thing, shale oil production has permanently added to supply at lower prices. For another, demand will be curtailed by slower growth in emerging markets and global efforts to cut down on carbon emissions. It all adds up to a “new normal” for oil.

    The “new” oil supply

    Shale has been a game changer. Unexpectedly strong shale-oil production of 5 million barrels per day contributed to the global supply glut. That, along with the surprising decision by the Organization of the Petroleum Exporting Countries (OPEC) to keep production unchanged, contributed to the oil price collapse that started in June 2014.

    Although the price collapse led to a massive cut in oil investment, production was slow to respond, keeping supply in excess. What’s more, the resilience of shale production to lower prices again surprised market participants, leading to even lower prices in 2015. Shale drillers significantly cut costs by improving efficiency, allowing major players to avoid bankruptcy. While reduced investment is expected to result in lower production by non-OPEC countries in 2016, production still exceeds consumption. Many experts expect oil markets to balance in 2017, albeit with high level of inventory (Chart 1). That said, there is uncertainty regarding supply, especially regarding the cost associated with extraction as well as production from so-called shale “fracklog”—drilled but uncompleted wells. The latter can add to production flows in a matter of weeks and hence considerably change the dynamics of production compared to conventional oil—that features long lead times between investment and production.

    Against that backdrop, OPEC countries and Russia have been increasing output, and Iran’s return to markets has added even more supply. (While OPEC members have recently agreed to cut production, that agreement is yet to be finalized.) There are other factors at play. Recent data suggest that shale-oil production may be once again more resilient than expected. And the anticipation of an OPEC production cut in cooperation with other exporters has boosted prices to the level that will further stimulate output by many shale producers.

    The “new” oil demand

    Falling prices spurred oil-demand growth, which rose to a record high of about 1.8 million barrels per day in 2015. That’s expected to slow to the trend level of 1.2 million barrels per day in 2016 and 2017. Using basic estimates for demand elasticity with respect to price suggests the “price effect” accounts for a 0.8 million-barrel per day increase in demand. A sizable share of oil demand growth is attributable to the price drop rather than income gains. With limited scope for further declines in prices in dollar terms, increases in oil demand will depend largely on prospects for global economic growth.

    The outlook for demand growth isn’t encouraging. In the past couple of years, oil demand has been driven by China and other emerging-market and developing countries. While China accounts for just 15 percent of world oil consumption, its contribution to oil demand growth is significant (Chart 2) because its economy is growing much faster than those of advanced nations (the same is true of some other developing nations). Further slowdowns in emerging and advanced economies can change the demand picture significantly. Structural shifts in emerging economies, especially China’s effort to shift from an investment and export led growth model to a domestic demand led growth model, can also potentially have major implications.

    Over the medium to long run, the transition away from oil and other fossil fuels further clouds the outlook for oil demand albeit lower prices may delay the transition. Energy policies will have to be altered significantly to meet the goals set at the December 2015 Paris Climate Conference (COP21), and a significant portion of oil reserves will have to remain under the ground and unburned. Lack of clarity about the specific actions needed to achieve those goals only adds to uncertainty about the oil-demand outlook.

    Granted, futures markets point to slight gains in oil prices. But a glance at shifts in futures-price curves in the past few months suggests that the prospects for higher prices have been worsening (see Chart 3). That shouldn’t come as a surprise. Downward revisions to global growth forecasts, especially for emerging markets, offset supporting factors, such as the growth in oil demand buoyed by lower prices in the past year. Turmoil in financial markets, plus a strong dollar, has put downward pressure on oil prices. These trends, along with the secular drop in petroleum consumption in advanced economies and the growth of shale, all point to a “lower for longer” scenario for oil prices.
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    Oil Extends Decline as OPEC Splits Prevent Deal to Curb Supply

    Oil declined for a second day as OPEC’s internal disagreements undermined efforts among major suppliers to reach an agreement in Vienna on trimming output to support prices.

    Futures fell as much as 1.1 percent in New York after sliding 2.1 percent at the end of last week. The Organization of Petroleum Exporting Countries ended a meeting on Friday without reaching a deal on country quotas, according to delegates who took part in the discussions. Non-OPEC nations finished talks with the group on Saturday without any supply commitments, Brazil’s Oil and Gas Secretary Marcio Felix said. Brazil attended as an observer.

    Oil has fluctuated near $50 a barrel amid uncertainty over whether OPEC can implement the first supply cuts in eight years at its official November meeting. As the gathering opened in Vienna last week, OPEC Secretary-General Mohammed Barkindo warned of the consequences if producers don’t follow through on an agreement to reduce output. The price recovery has already taken far too long and suppliers can’t risk delaying it further, he said.

    “Talks over the weekend make it seem less likely there will be an agreement on production cuts,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. “The market has probably made a fair bit of the adjustment, but I wouldn’t be surprised to see oil fall further into the $47 range.”

    OPEC agreed in Algiers last month to trim output to a range of 32.5 million to 33 million barrels a day and is due to finalize the deal at its Nov. 30 summit in Vienna. The accord helped push prices to a 15-month high above $50 a barrel earlier this month, although they have subsequently fallen amid doubts the group will follow through on the pledge. More than 18 hours of talks over two days in the Austrian capital this weekend yielded little more than a promise that the world’s largest producers would keep on talking.

    Some progress was made at the Friday meeting on the methodology to be used for allocating output quotas to OPEC members, said one delegate, who asked not to be identified because the talks were private. Russia reiterated that it’s willing to freeze production, rather than cut, but only if there is an OPEC agreement first, according to participants in Saturday’s meeting.
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    OPEC Exports!


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    Libya Crude Oil Production Rises

    Libya Crude Oil Production Rises to 640k B/D: NOC Official

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    Iraq Reveals Oilfields Output to Win Over OPEC Ahead of Meeting

    Iraq published data showing a rare level of detail for its oil production and exports, a week after inviting energy reporters to Baghdad to make a case that the country is pumping more crude than analysts and OPEC acknowledge.

    The country’s state oil marketing agency released a statement on Sunday showing September production figures for each of the 26 fields it controls, plus a single output figure for the semi-autonomous Kurdish region, which manages its crude independently. Previous monthly statements showed just two figures: total production and total exports. The Oil Marketing Co., known as SOMO, also provided detailed data on exports and domestic consumption.

    OPEC’s second-largest producer says it pumped more than 4.7 million barrels a day last month, several hundred thousand barrels a day more than oil-industry watchers recognize. The Organization of Petroleum Exporting Countries assesses output for its 14 members based on such secondary sources. Iraq wants the group to accept the ministry’s figures before a Nov. 30 meeting at which OPEC could limit production for its members.

    Oil Minister Jabbar al-Luaibi complained about OPEC data at a meeting in September in Algiers. He adopted a milder approach last week, inviting reporters to Baghdad for a tour of the national museum and a detailed discussion of production figures. “We want you to see for yourselves what our production is,” he said on Oct. 23.

    Transparency Push

    The field-specific data for September sheds light on how SOMO calculates Iraqi production. However, it doesn’t provide a breakdown of Kurdish production, which accounts for much of the difference between the data cited by SOMO and secondary sources.

    “It’s an effort of transparency and backing up their numbers, but I’m not quite sure how effective it’s going to be,” Robin Mills, chief executive officer of consultant Qamar Energy, said by phone from Dubai. “The biggest discrepancy is likely to be in the Kurdish fields.”

    Production from the Kurdish enclave in northern Iraq averaged 546,000 barrels a day last month, according to SOMO. That figure is an estimate because the central government has not received the latest production data from Kurdish authorities, SOMO Director General Falah Al-Amri said last week. SOMO bases its estimate on what Kurdish production was in 2013 and 2014, he said.

    In the north of the country, the Kirkuk and Baba Gurgur fields produced 93,000 barrels a day for the federal North Oil Co., SOMO said. The nearby Bai Hasan and Avana fields pumped 275,000 barrels a day for the NOC.

    The BP Plc-operated Rumaila oil field, Iraq’s largest, pumped an average of 1.4 million barrels a day in September, SOMO said. The two fields at West Qurna produced a combined 870,000 barrels a day, while output from Zubair was 390,000; Majnoon, 214,000; and Halfaya, 204,000.
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    The Beginning Of The End For Europe’s Natural Gas War

    Russia’s Gazprom is on the verge of striking a deal with EU regulators to settle a half-decade old dispute over natural gas pricing, and the resolution could change the way Gazprom does business and lead to lower gas prices for much of Eastern Europe.

    The conflict began back in 2011 when EU antitrust regulators began investigating Gazprom for anticompetitive behavior, citing Gazprom’s practice of pricing natural gas differently to different countries depending on how compliant they were to Moscow. The EU Commission launched a formal investigation that ultimately led to negotiations, which were temporarily put on ice after Russia’s takeover of Crimea.

    The details are arcane, but Gazprom is about to offer concessions to the EU in order to avoid potentially having to pay billions of dollars in fines. These include allowing recipients of Russian gas to resell that gas. Gazprom has opposed that practice because it undercuts their ability to demand certain prices from individual customers and countries. Gazprom and Russia were much happier under the old system, in which they could sign an array of bilateral deals on an individual basis, rather than negotiating with European countries collectively. That allowed the company to tie gas contracts to political aims – should a European country lend its support to a Russian cause, such as a pipeline, they would receive better terms.

    That leads to the second concession that Gazprom will have to grant Europe: they will have to charge customers similar rates for natural gas. But the agreement stops short of entirely breaking Gazprom’s practice of linking gas prices to oil prices.

    “We are now putting the final touch to our commitment proposal. It will be sent to the European Commission shortly,” Alexander Medvedev, Gazprom’s deputy chairman, said this week after meeting with the EU’s top antitrust official, Margrethe Vestager. The deal is not yet secured – it still needs to be reviewed by European countries – but if it is, Gazprom will avoid having to pay billions of dollars in fines. However, the agreement could then become legally binding, subjecting Gazprom to European law, something it has objected to up until now. Gazprom would have to pay fines if it violates the terms of the agreement.

    The settlement would seem to bolster relations between Russia and Europe, which had become strained in recent years after the conflict in Ukraine. Some countries in Eastern Europe are wary of such a thaw and have demanded a much tougher line from European officials. Others in Europe that are at odds with Russia’s actions in Ukraine and Syria are not eager to soften the tone either. To be sure, the settlement over the antitrust charges still needs to survive input from European governments. Poland, in particular, is not happy with the deal. “These decisions pose a real threat to the stability of gas supplies to central and eastern Europe,” the Polish state-owned oil and gas company PGNiG said in a statement.

    Resolving the conflict could also lead to more Russian gas flowing into Europe, which already depends on Russia for about one-third of its gas needs. Russia is hoping to double the gas flows through the Nord Stream pipeline, hoping to gain some market share in a market that is no longer growing. Again, European officials, especially in Eastern Europe, are not keen to see a greater reliance on Russian gas. But the business interests involved in building the expansion of the Nord Stream pipeline, as well as German officials who feel comfortable with Russia as a reliable source of energy, are pushing the deal forward.

    “Another missing point of these puzzles is the future of Nord Stream 2,” a Polish official told the FT. “Now, it looks like they give the Russians too much.”

    Overall, though, the deal would solidify some changes already underway. Gazprom has already begun to link its gas prices closer to hub prices. It needs to do that anyway because it is seeing increased competition from other sources of natural gas, particularly LNG. The U.S. began sending LNG to Europe, and several new LNG ships and import terminals are allowing a few European countries, such as Lithuania, to gain leverage over Gazprom. No longer at the mercy of one supplier, parts of Europe are becoming emboldened to demand lower gas prices from Russia. Whether EU officials will force Gazprom’s hand or not, the Russian gas giant will be forced to keep a lid on its gas prices if it wants to avoid losing market share.
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    Gazprom approves small scale LNG production development programme

    Gazprom has approved the 2017 – 2019 programme for the construction of gas filling infrastructure at the industrial sites of Gazprom subsidiaries, as well as the development programme for small scale LNG production and use.

    Gazprom stated that the broader use of gas as a vehicle fuel was a priority for in the company’s domestic market. The current share of natural gas vehicles (NGVs) throughout Gazprom subsidiaries accounts for 26% (approximately 7200 vehicles) of the group’s vehicle fleet. Gazprom plans to increase this share up to 70% by the end of 2020.

    The approved Program for the construction of gas filling infrastructure outlines a set of measures for converting Gazprom’s vehicle fleet to natural gas and installing gas filling units at the industrial sites of the group’s subsidiaries.

    Gazprom added that LNG production and marketing remains an important part of the company’s efforts aimed at expanding the domestic NGV market. The company sees vast potential for using LNG as a fuel in motor vehicles for long-distance passenger and cargo transportation, in water and rail transport, and in mining and agricultural industries.

    The development programme for small scale LNG production and use includes a list of gas distribution stations (GDSs) and liquefaction technologies most suitable for LNG production. The document provides for the construction of new marketing infrastructure, namely fixed cryogenic filling facilities and mobile LNG filling stations.

    The company is currently working on a number of pilot projects for using LNG in transport.
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    EU confirms to lift cap on Gazprom's use of Russia's Nord Stream pipeline link

    The European Commission confirmed on Friday it had lifted limits on Gazprom's use of a key link from its offshore Nord Stream pipeline to Germany, allowing Russia to pump more gas supplies to Europe bypassing traditional routes via Ukraine.

    The decision allows Gazprom to bid for an additional 7.7 and 10.2 billion cubic meters (bcm) more volumes at auction on top of its existing access to half of the Opal pipeline's capacity, a Commission official said.

    As Reuters exclusively reported, it requires at least 10 percent and as much as 20 percent of capacity be made available to other suppliers. If there is no demand, Gazprom would then also be allowed to bid for those volumes as well.

    The Commission's decision modifies a proposal by German regulators in May that would have given Gazprom almost full access to the pipeline, with only between 4 and 8 percent reserves for rivals.

    "The European Commission has today adopted stricter exemption conditions for the operation of the Opal gas pipeline," it said in a statement.

    Under an EU ruling to prevent energy suppliers from dominating infrastructure, Gazprom has only been allowed to use 50 percent of Opal, which provides a land link from Russia's undersea Nord Stream pipeline to Germany and the Czech Republic.

    A condition for Gazprom to have full access to Opal, under the earlier exemption, was for it to implement a gas release program for 3 bcm.
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    ExxonMobil Earns $2.7 Billion in Third Quarter of 2016

    Exxon Mobil Corporation (NYSE:XOM) today announced estimated third quarter 2016 earnings of $2.7 billion, or $0.63 per diluted share, compared with $4.2 billion a year earlier. Results reflect lower refining margins and commodity prices.

    “ExxonMobil’s integrated business continues to deliver solid results,” said Rex W. Tillerson, chairman and chief executive officer. “While the operating environment remains challenging, the company continues to focus on capturing efficiencies, advancing strategic investments, and creating long-term shareholder value.”

    During the quarter, Upstream earnings were $620 million. Volumes for the quarter declined 3 percent to 3.8 million oil-equivalent barrels per day compared with a year ago, due to unplanned downtime, primarily in Nigeria, and field decline partially offset by increased production from recent project start-ups.

    Third quarter Chemical earnings of $1.2 billion, comparable with prior year results, reflect higher maintenance costs, partially offset by increased specialty product sales. Downstream earnings declined to $1.2 billion primarily due to weaker refining margins.

    During the quarter, capital and exploration expenses were reduced by 45 percent to $4.2 billion.

    The corporation distributed $3.1 billion in dividends to shareholders in the third quarter.

    Third Quarter 2016 Highlights

    •Earnings of $2.7 billion decreased $1.6 billion, or 38 percent, from the third quarter of 2015.
    •Earnings per share assuming dilution were $0.63.
    •Cash flow from operations and asset sales was $6.3 billion, including proceeds associated with asset sales of $1 billion.
    •Capital and exploration expenditures were $4.2 billion, down 45 percent from the third quarter of 2015.
    •Oil-equivalent production was 3.8 million oil-equivalent barrels per day, with liquids down 5.1 percent and natural gas up 0.8 percent.
    •The corporation distributed $3.1 billion in dividends to shareholders.
    •Dividends per share of $0.75 increased 2.7 percent compared with the third quarter of 2015.
    •ExxonMobil and InterOil Corporation announced an agreed transaction worth more than $2.5 billion, under which ExxonMobil will acquire all of the outstanding shares of InterOil. The acquisition will give ExxonMobil access to InterOil’s resource base, which includes interests in six licenses in Papua New Guinea covering about four million acres. The transaction is pending the outcome of a shareholder appeal of the court decision approving the transaction.
    •ExxonMobil Kazakhstan Ventures Inc., a 25 percent shareholder in Tengizchevroil LLP, has approved the final investment decision for the Future Growth and Wellhead Pressure Management Project as part of the next expansion phase of the Tengiz oil field.
    •In Guyana, the Liza-3 appraisal well was successfully completed in October, confirming a world-class resource discovery in excess of 1 billion oil-equivalent barrels. Also in October, the Owowo-3 exploration well, located offshore Nigeria, confirmed a discovery of 500 million to 1 billion barrels of oil.
    •ExxonMobil announced plans to increase production of ultra-low sulfur fuels at the Beaumont, Texas, refinery by approximately 40,000 barrels per day. The new unit will use proprietary technology to remove sulfur while minimizing octane loss, and will ensure gasoline meets the latest environmental standards.
    •The company announced plans to expand its specialty elastomers plant in Newport, Wales. The project is expected to be completed in late 2017 and will result in a 25 percent increase in global capacity to manufacture Santoprene thermoplastic vulcanizate, high-performance elastomers used for automotive, industrial and consumer applications.
    •ExxonMobil and Saudi Basic Industries Corporation (SABIC) are considering the potential development of a jointly owned petrochemical complex on the U.S. Gulf Coast. The project would include a steam cracker and derivative units, and would be located in Texas or Louisiana near natural gas feedstock. A final investment decision will be made upon completion of necessary studies.
    •During the quarter, the company announced new developments in its relationships with the Georgia Institute of Technology, Princeton University and the University of Texas at Austin to pursue technologies to help meet growing energy demand while reducing environmental impacts and the risk of climate change.
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    PetroChina Profit Slumps as Gas Earnings Follow Oil’s Slide

    PetroChina Co. posted a 77 percent decline in third-quarter profit as a suppressed international oil market and lower domestic natural gas prices eroded earnings at the country’s biggest producer.

    Net income fell to 1.2 billion yuan ($177 million) in the July-September period, the Beijing-based company said in a statementto the Hong Kong stock exchange on Friday. Higher earnings from refining and chemicals were overwhelmed by losses on production and weaker performance from its natural gas and pipelines units. Revenue dropped 3.8 percent to 411.4 billion yuan.

    “PetroChina has done a good job controlling costs and managed to get a small profit despite lower crude prices in the third quarter,” said Gordon Kwan, head of Asia oil and gas research at Nomura Holdings Inc. in Hong Kong. “Oil prices should be significantly higher in the fourth quarter, which will help improve PetroChina’s profit in the winter, especially if the government raises natural gas prices.”

    The state-owned company dominates the oil and gas industry of the world’s largest energy consumer. It pumps more crude than its domestic rivals, China Petroleum and Chemical Corp. and Cnooc Ltd., and is the country’s second-biggest refiner. It imports the bulk of the country’s natural gas and operates a pipeline system that stretches from China’s western borders with Central Asian nations to the population centers along the east coast.

    During the third quarter, the company swung to an operating loss of 1.5 billion yuan from exploration and production, according to Bloomberg calculations based on the company’s half-year and nine-month data. PetroChina doesn’t release third-quarter operational figures. Earnings from natural gas and pipeline operations fell 39 percent to 6.4 billion yuan, while refining, chemicals and marketing surged to a 9 billion yuan gain from a 5.4 billion yuan loss a year ago, Bloomberg calculations showed.

    ‘Decrease Substantially’

    As the country’s largest natural gas producer and distributor, the company is vulnerable to changes in government-set prices. The administration of President Xi Jinping cut prices twice last year in an effort to encourage consumption, most-recently in Novemberwhen they were lowered by roughly one-quarter.

    PetroChina, which posted its first-ever quarterly loss in the January-March period this year, barely managed to break even in the first half of the year even after booking a 24.5 billion yuan one-off gain from pipeline sales. Net income during the first nine months of the year fell 94 percent to 1.73 billion yuan, the company said Friday. Full-year results are expected to “decrease substantially” from 2015, it said in the statement.

    Brent oil, the global oil benchmark, averaged about $47 a barrel during the third quarter, down roughly 8 percent from the same period a year ago. PetroChina in August cut its domestic crude output target for this year to 103 million tons (about 755 million barrels), from 106 million tons set at the beginning of the year, as it shut some high-cost fields.

    Sliding Output

    Total oil and gas production in the third quarter dropped about 4 percent from the same period last year to 353 million barrels of oil equivalent, according to Bloomberg calculations. The company refined 224.5 million barrels of crude, down 8.7 percent from a year ago.

    China’s total crude output fell 6.1 percent in the first nine months of the year, helping spur record-high imports as the country’s reliance on overseas supply rises. Output by the world’s biggest consumer after the U.S. will stabilize with prices around $50 a barrel and may not rebound until they are above $60, Neil Beveridge, a Hong Kong-based analyst at Sanford C. Bernstein, said earlier this month.

    PetroChina’s domestic crude production in the third quarter slid almost 7 percent at 189.9 million barrels, Bloomberg calculations showed, while production during the first nine months of the year totaled 575 million barrels, down 5.1 percent.

    Capital expenditures during the third quarter dropped 27 percent to 63 billion yuan, according to Bloomberg calculations. Spending during the first three quarters totaled 114 billion yuan, down 23 percent from the same period last year, according to the statement Friday. Lifting costs during the nine-month period were down 9.9 percent to $11.56 a barrel, while the company’s realized oil price during that period was down 30 percent at $35.79 a barrel, it said in filing Friday.

    PetroChina shares fell 0.6 percent to HK$5.38 before the release of its earnings. The stock has gained 5.9 percent this year, compared with a 4.8 percent rise in the city’s benchmark Hang Seng Index.

    China Petroleum, known as Sinopec, said Thursday that third-quarter profit rose sixfold to 10.2 billion yuan as refining gains helped overcome deepening losses from oil and gas production. Cnooc, China’s biggest offshore oil and gas producer, reported Wednesday a 15 percent fall in third-quarter sales as output and capital spending declined.
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    Chevron earnings beat big, trouncing estimates by 31 cents a share

    "We have made progress toward our goals of lowering the cash breakeven in our upstream business and getting cash balanced," Chairman and CEO John Watson said in a statement. "Capital spending and operating and administrative expenses have been reduced by over $10 billion from the first nine months of 2015 as a result of a series of deliberate actions we have taken."

    The oil company reported third-quarter earnings of $1.3 billion, or 68 cents a share, on revenues of $30.14 billion. That profit was down 37 percent from a year ago, when Chevron reported earnings of $2 billion, or $1.09 a share, on revenue of $34.3 billion.

    Analyst had forecast earnings of 37 cents on revenue of $30.3 billion.

    Chevron has reduced capital spending and expenditures on exploration by about $8 billion year to date. Spending on upstream exploration and production operations accounted for 91 percent of all expenditures in the third quarter.

    Production of oil, natural gas and other fossil fuels ticked down slightly from a year ago. Chevron narrowed its loss in its U.S. upstream business by nearly $400 million due to lower expenses and taxes. The loss was offset by a profit of $666 million in Chevron's international drilling segment, which was up slightly from a year ago.

    Earnings in Chevron's U.S. downstream business — which includes refining fuels and products that are marketed to consumers — fell by $727 million from a year ago due to lower margins for refined products. Integrated oil companies such as Chevron have seen their refining margins contract as crude oil prices rise. Crude is the raw material for many fuels.

    On Wednesday, Chevron raised its quarterly dividend by a penny to $1.08 a share.

    One day earlier, a militant group known as the Niger Delta Avengers claimed responsibility for an attack on a pipeline to the Escravos offshore terminal operated by a Chevron subsidiary. Chevron briefly closed the facility in the spring due to militancy Nigeria's restive southern delta region. The company declined to comment.

    Chevron is better-positioned than its larger U.S.-peer ExxonMobil to reap upside from rising oil prices, but a number of large-cap exploration and production companies are likely to outperform both majors, analysts told CNBC's "Power Lunch" on Thursday.

    "We think that Chevron just has too much risk right now. It's trying to balance pretty … hefty dividend spending, along with trying to streamline the company, along with trying to grow production. We're worried that production is eventually going to turn into a shortfall," CFRA energy analyst Stewart Glickman said.

    Last quarter, a group of integrated oil companies led by Chevron announced it would invest $36.8 billion in a project that will boost production at Kazakhstan's Tengiz field, marking one of the largest investment decisions since the beginning of the oil price downturn.

    Chevron has flagged a US$5 billion cost blowout at the under-construction Wheatstone gas-export facility, a further blow after the overrun and delays seen at the energy company's other large gas project in Western Australia.

    Read more:

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    India Scours Globe for Bargain LNG as Domestic Plants Idle

    India is scouting for new liquefied natural gas contracts globally as part of a push to secure cheap supplies for its under-utilized gas-fired power plants.

    Australia, Qatar and Iran could all act as potential suppliers of long-term LNG contracts, Power Minister Piyush Goyal said in Sydney on Thursday. The global search for LNG comes as India’s gas-fired plants, which can generate nearly 25 gigawatts of power, run at less than a quarter of their capacity because of a shortage of the fuel at affordable prices.

    “I think gas needs to be between $5 and $5.50 landed at my power plant. That is what I’m looking for in the medium- to long-term,” Goyal said in an interview. “Otherwise I won’t be able to start those gas plants.”

    NTPC Ltd., India’s biggest power producer, is said to be seeking to terminate a long-term supply contract for LNG because the fuel is too expensive to be used in power generation. That highlights the country’s difficulty in switching from coal to natural gas for power generation, undermining Prime Minister Narendra Modi’s efforts to cut carbon emissions and promote clean energy.

    “As of now I don’t have any credible offer on the table but I’m fairly confident from talking to people across the world that if not Australia, maybe Qatar will give it to me, or Iran might be able to get me something,” Goyal said. “I’ll go to Europe next week to discuss the same thing. I am sure I’ll find a seller.”

    Energy consultant Wood Mackenzie Ltd. said India may struggle to attract the interest of LNG producers at those prices.

    Australia Investments

    “From a LNG producers perspective, India has always been seen as a very price sensitive buyer and not a premium buyer like Japan, Korea or Taiwan,” said Saul Kavonic, an analyst at Wood Mackenzie. “It is a struggle to see why producers would want to lock in such a low price.”

    Spot LNG in Singapore rose to $6.542 per million British thermal units this week, the highest since December, according to the Singapore Exchange Ltd. Prices are up more than 65 percent from a low in April.

    India is also targeting investments in Australian LNG projects and coking coal mines to secure fresh sources of supply, Goyal said.

    “We could buy stakes, we could buy the whole LNG plant itself, we could look at coal mines,” Goyal said.

    Petronet LNG Ltd., India’s biggest LNG importer, signed a pactwith Exxon Mobil Corp. in 2009 for supply of 1.5 million tons of the super-chilled fuel for 20 years from the Gorgon LNG project in Australia. Supplies are expected to begin next month.

    Goyal also expects Indian companies to boost their investments in Australia despite delays to Adani Enterprises Ltd.’s Carmichael mine in Queensland, which was hampered by environmental protests. The Queensland government earlier this month invoked special powers to accelerate the project.
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    Inpex Hits Gas Offshore Japan

    Inpex Corporation announced Friday that gas has been found at an exploration well offshore the Shimane and Yamaguchi prefectures in Japan.

    Drilling operations, which began on June 5, consisted of drilling to a depth of 9,514 feet below the sea floor at a location approximately 80 miles northwest of Shimane Prefecture and approximately 86 miles north of Yamaguchi Prefecture.

    These operations resulted in the discovery of a thin gas reservoir in a shallow zone, as well as some gas indications in deeper zones. Inpex also said that it encountered unexpected, strong gas indications suggesting the presence of a high pressure gas column in the deepest zone.

    Based on the findings of a gas reservoir in the shallow zone and gas indications in the deeper and deepest zones in this area, which has not been drilled since the 1980s, Inpex revealed that it will conduct a detailed analysis and evaluation of data obtained in order to continue the exploration of prospects in this region.
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    General Electric is close to a near-$30 billion deal with Baker Hughes

    General Electric Co is nearing an about $30 billion deal to merge its oil and gas business with Baker Hughes Inc., the Wall Street Journal reported on Sunday.

    The combined entity will be controlled by GE and would have publicly traded shares, the Journal reported, citing people familiar with the matter.

    The deal is to be announced on Monday, the Journal said.

    GE said in a statement last week that it was in talks with the oilfield services provider on potential partnerships but none of those options included an outright purchase.

    Baker Hughes' planned merger with bigger rival Halliburton Co.  fell through in May due to opposition from regulators.

    A partnership with Baker Hughes could help GE to transform its oil and gas division and emerge a larger player in the sector to better compete with oilfield services leader Schlumberger.

    Also, this partnership could give Baker Hughes a chance to redefine itself following the failed merger.

    GE to combine Oil and Gas business with Baker Hughes, GE to own 62.5% of new Baker Hughes

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    Gas drillers send six more rigs to patch; Oil loses two

    The number of oil rigs in U.S. fields fell by two this week, the first decline in 18 weeks, the Houston oilfield services company Baker Hughes reported Friday. At the same time, U.S. gas drillers collectively sent six more rigs to the patch.

    The total rig count climbed to 557, up from a low of 404 in May, the eighth collective rise in 10 weeks. Totals still lag the same period last year, when 775 drilling rigs were operating in U.S. oil and gas fields.

    This week, the number of active oil rigs fell two to 441. Gas rigs rose six to 114. The number of offshore rigs slipped one to 22.

    Drillers operated 256 rigs in Texas, up two from the week prior. North Dakota added five, Pennsylvania two, Wyoming one. Colorado lost two; New Mexico, three.

    Drilling activity has followed the modest rebound in prices, from February’s low of about $26 a barrel to more than $50 over the past week.
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    US Oil Producers Are Hedging At Levels Not Seen Since 2007

    The one agreement players seem to have reached is that oil isn’t able to go much higher.

    That oil's upside is capped at this point is clear; in fact as both Goldman and Citi have warned, unless OPEC can come to a definitive and auditable agreement - no just another verbal can kicking - in which the member states, by which we mean almost entirely Saudi Arabia as most of the marginal producers are exempt or want to be, immediately curtail production, oil will promptly crash to $40 or below.

    But an even more amusing twist is that a plunge in oil prices may be just what US shale producers are waiting for. The reason for that is that while OPEC has been busy desperately jawboning oil higher, US producers have been thinking of the inevitable next step, oil's upcoming reacquaintance with gravity. As a result, as the EIA reports, the amount of WTI short positions held be producers and merchants is just shy of a decade high.

    According to a recent EIA report, short positions in West Texas Intermediate (WTI) crude oil futures contracts held by producers or merchants totaled more than 540,000 contracts as of October 11, 2016, the most since 2007, according to data from the U.S. Commodity Futures Trading Commission (CFTC). Banks have tightened lending standards for some energy companies as crude oil prices declined throughout 2014 and 2015, and some banks require producers to hedge against future price risk as a condition for lending.

    Short positions of WTI futures increased at a faster pace than futures contracts of Brent (an international crude oil benchmark) since summer 2016, suggesting U.S. producers are able to drill for oil profitably in the $50 per barrel range. In the Crude Oil Markets Review section of the October Short-Term Energy Outlook(STEO), the U.S. Energy Information Administration (EIA) discusses an increase in U.S. onshore producers’ capital expenditures that is contributing to rising drilling activity, which EIA projects will lead to an increase in U.S. onshore production by the second quarter of 2017.

    Which closes the circle of irony: almost exactly two years ago, Saudi Arabia set off a sequence of events with which it hoped to crush US shale producers and its high cost OPEC competitors. It succeeded partially and briefly, however now the remaining US shale companies are more efficient, restructured, have less debt, a far lower all-in cost of production; and - best of all - they will all make a killing the next time oil plunges, as it will once OPEC's hollow gambit is exposed.

    Meanwhile, the last shred of OPEC credibility will be crushed, the truly high cost oil exporters within OPEC will suffer sovereign defaults and social unrest, as will Saudi Arabia. The good news for Riyadh is that at least it got a $17.5 billion in fresh cash from a bunch of idiots who will never get repaid. We are curious just how long that cash will last the country which burned through $98 billion just last year, before the threat of social unrest and financial system collapse returns? Two months? Three?#

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    Alternative Energy

    Infigen revenue jumps again on big winds, high electricity prices

    South Australia’s high electricity prices and wild weather continue to bear fruit for ASX-listed renewables group Infigen Energy, which has reported a 56 per cent increase in revenue for the quarter, year on year, due to strong winds and higher merchant power prices in the southern state.


    Infigen reported on Monday revenue of $62.8 million for the three months ended 30 September 2016 (Q1 FY17) and an 11 per cent increase in wind energy production compared to the prior corresponding period.

    In a statement on the ASX, the company said the 44GWh boost to production was primarily due to better wind resource in New South Wales and South Australia (SA).

    The 56 per cent or $22.5 million increase in revenue was attributed to that increase in production, as well as to higher merchant electricity prices in SA and to a lesser extent in NSW, and higher large-scale generation certificate (LGC) prices.

    The average bundled price for the sale of electricity and LGCs was $143.71/MWh, up $41.21/MWh or 40% on the previous corresponding period.

    It’s another positive result for Infigen, which last quarter reported an increase in revenue of 47 per cent, compared to Q4 FY15.

    Earlier this month, the company’s long-serving managing director, Miles George, announced he would retire from the position at the end of the calendar year.

    Taking his place will be Ross Rolfe, a former coal and gas industry executive of many years’ experience, who has also served on the Infigen board for the past five years.

    In an interview with RenewEconomy, George described the choice of Ross Rolfe as “a great one” and said his background in fossil fuels was not cause for concern.

    “He has been on our board for the last five years and has an intimate knowledge of our strategy. His intention is to continue that and to build on that and to take the business forward… and to continue developing our pipeline of assets.”

    Infigen’s development pipeline comprises approximately 1,100 megawatts of large-scale wind and solar projects spread across five states in Australia. In South Australia it has three operational wind farms: Lake Bonney 2 (159MW) Lake Bonney 1 (80.5MW) and Lake Bonney 3 (39MW).
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    Precious Metals

    South Africa's AMCU union to sign wage deals with platinum trio

    South Africa's AMCU union said on Sunday it is ready to sign three-year wage deals with the country's big three platinum producers.

    The Association of Mineworkers and Construction Union (AMCU) said on Thursday it had agreed a pay rise deal with Anglo American Platinum, but had yet to say whether it would agree to deals with Impala Platinum and Lonmin .

    "Members have given the leadership the mandate to sign all three wage agreements with the platinum companies," the union said on its twitter page on Sunday, without giving details.

    AMCU spokesman Manzini Zungu could not be contacted immediately by Reuters, but the union was due to hold a media briefing on Monday to disclose details of the agreements.

    Implats spokesman Johan Theron and Lonmin spokeswoman Wendy Tlou said they would wait for the official signing before disclosing details.

    Amplats and AMCU agreed to pay hikes of between 7 percent and 12.5 percent annually over the next three years, depending on the level of employment.

    AMCU, known for its militancy and aggressive stance in wage talks, had pushed for wage hikes of close to 50 percent.
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    Base Metals

    Grupo Mexico says profit fell, no rail IPO for now

    Mexican mining, rail, and infrastructure company Grupo Mexico reported a 25.6 percent drop in quarterly net profit that it blamed on an "other income" loss, despite rising revenue from copper production.

    Grupo Mexico in a filing dated Oct. 27 reported a third-quarter net profit of $220.6 million, compared with $296.5 million a year earlier.

    The company's revenue rose 9.9 percent to $2.1 billion, boosted by an increase in low-cost copper production resulting from expanded operations at its Buenavista mine in northern Mexico.

    The company said, however, it had an "other income" loss of $81.8 million, compared with a gain of $150.5 million in the same period in 2015.

    On a later conference call with analysts, executives said the long-delayed initial public offering of the company's rail unit was not viable right now but that Grupo Mexicowould revisit the situation again in the first quarter of 2017.
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    Peru copper miner MMG bypassing protesters at Las Bambas to ship ore

    Chinese-owned miner MMG Ltd is using an alternate route to move copper from its Las Bambas mine to port as a key road in Peru remained blocked by protests on Friday, the company said.

    Four communities in the remote Andean region of Apurimac oppose a deal that the government recently struck with other towns to lift protests that had shut down ground transportation from the mine, said Las Bambas spokesman Domingo Drago.

    The four Quechua-speaking communities have demanded payment for the company's use of a local road that they say pollutes their lands when hundreds of trucks carrying copper concentrates pass by daily.

    Talks between community leaders and government mediators broke down earlier this month after a protester was shot dead in clashes with police trying to end their weeklong blockage of the road.

    Government officials said earlier this week that they expected the four communities to sign onto the preliminary agreement brokered with other towns that had joined protest in a bid to push for broader development in the province of Cotabambas.

    The protest halted Las Bambas' exports from the port of Matarani as stocks were depleted and road blockages threatened to choke off supplies needed to keep operating the mine.

    Drago said he was not sure if exports had resumed on Friday. The company said earlier this week that it expected to start shipping again at the end of October or beginning of November.

    MMG said has said production has not been affected by the protests and that it still expects Las Bambas to churn out 250,000 to 300,000 tonnes of copper this year.
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    Aluminium: Intrigues.

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    Steel, Iron Ore and Coal

    Daqin Railway net profit slump 54pct in 3Qs

    Daqin Railway Co., Ltd., the operator of China's leading coal-dedicated Daqin rail line, saw its net profit slide 54.01% to 5.15 billion yuan ($768.1 million) in the first three quarters of the year, the company said in its quarterly report on October 27.

    Operation income of the company dropped 21.8% on year to 31.59 billion yuan in the same period, data showed.

    The decrease was mainly due to slumped coal transport demand and a 0.01 yuan/ cut in rail coal transport freight from February 4 this year, the company said.

    Daqin is losing its dominance in transporting coal from western China to the east, due to reduced coal demand amid China's de-capacity campaign, miners' output cut and the operation of other railways such as Zhunchi (Zhunger- Shenchi) line.

    Daqin's coal transport stood at 241.73 million tonnes in the first nine months, falling 20.75% year on year.
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    Rio Tinto, Chinalco agree non-binding deal for stake in Guinea's Simandou

    Major miner Rio Tinto announced an agreement on Friday to sell its stake in a project to develop the world's biggest untapped iron ore reserves in Guinea to Chinalco.

    Rio has a 46.6 percent stake in the Simandou project, while Chinalco, a state-owned Chinese metals producer, has 41.3 percent and the Guinea government owns 7.5 percent.

    If the deal goes ahead, Rio Tinto will receive payments of $1.1 billion to $1.3 billion based on the timing of the development of the project, it said in a statement, adding the aim was to seal a final deal in less than six months.

    Although the project holds huge potential, Rio has voiced its frustration over drumming up financing.

    In August, Rio CEO Jean-Sebastien Jacques said there had been no progress on finding infrastructure funding for the project and in October the International FinanceCorporation (IFC), an arm of the World Bank, said it was exiting the project.

    The West African country is counting on the project to spur economic growth after Guinea was hit by a crippling Ebola epidemic that officially ended in June.

    When fully operational, Simandou has the potential to double Guinea’s GDP, the project partners have said, while China, the world's largest iron ore consumer provides an obvious market.
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    China Jan-Sept steel exports rise by 2.4%

    The Asian market has been the main contributor to the growth of steel exports in the first nine months of this year, according to a top official of the China Iron & Steel Association in a news release.

    Steel exports in the first nine months stood at 85 million metric tons, up 2.4 percent from the same period last year.

    Wang Yingsheng, deputy president of CISA, said that the 2.4 percent steel export volume growth in the first three quarters was generated by the Asian market, especially the emerging markets where construction demand is high.

    He said that given the current situation, steel exports to Asia are not going to drop. With the Belt and Road Initiatives, they are expected to increase.

    The number of anti-dumping and anti-subsidy cases overseas was 38 in the first three quarters, compared to 37 in the whole year of 2015.

    "Increasing trade frictions have prompted many steel companies to stabilize their overseas market and turn to direct sales, circumventing trade companies so that they have first-hand information on the requirement of their buyers," said Wang.

    Wang said that developed countries' demand for steel has remained lackluster since the financial crisis in 2008, while demand in Asia, especially ASEAN countries, has been on the rise.

    "Locally produced steel in countries in Asia and the Middle East is generally of small volume, creating markets for China's exports," said Wang.

    This year has seen the steel market rebounding from across the board losses last year. The 373 CISA-member steel smelters, which account for around 80 percent of the country's capacity, had 25.2 million yuan ($3.7 million) profits.

    "The main driver for profitability this year is the significant reduction of costs. It should be noticed that the profit rate (net profit/cost) is merely 1.27 percent, far lower than the average 5 percent among industrial companies. Therefore, steel companies' profitability is still very vulnerable," said Chen Yuqian, director of the fiscal and asset department of CISA.

    The main consumers of steel in the fourth quarter will be real estate, construction and machinery manufacturing, said Chen.

    "Property, transportation, environmental-management and irrigation facilities will generate a lot of demand for steel. Machinery manufacturing, such as automobile production, which has been growing by roughly 10 percent year-on-year in recent years, is also a key engine of steel demand. Yet the demand won't be robust in the rest of the year," said Chen.

    Chen warned that the increase in steel output in the fourth quarter needs to be closely monitored to avoid price wars if supply outstrips demand.
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    Japan steelmaker JFE says surging coal prices to hit profits

    Japan's second-biggest steelmaker JFE Holdings Inc halved its full-year profit forecast on Friday, blaming the recent surge in prices for coking coal.

    "We hadn't expected coking coal prices to climb this much," JFE executive vice president Shinichi Okada told a news conference.

    "Things may change in a year or so, but given China's effort to tackle overcapacity issue, coking coal prices may stay at high levels at least until March," he said, pointing to the company's assumption of coking coal prices at $200 per tonne for the October-March half.

    Spot prices for premium hard coking coal .PHCC-AUS=SI in Australia, which dominates global exports, this week surged to over $250 a tonne.

    That took the rally so far this year to more than 200 percent, after China moved to cut overcapacity in its mammoth coal sector. Coking coal is used to produce steel.

    JFE, the world's No.8 steelmaker in 2015, now expects its annual consolidated recurring profit for the current financial year to come in at 30 billion yen ($285 million), down from its previous estimate of 65 billion yen and an actual profit of 64.2 billion yen a year earlier.

    The revised guidance missed a consensus forecast of 55.26 billion yen in a Reuters's poll of 11 analysts.

    For the April-September half, it booked a recurring loss of 10 billion yen, versus a profit of 48.4 billion yen a year earlier, hit by a weak steel market and a stronger yen, which has climbed more than 10 percent against the U.S. dollar this year.

    Steel prices in China have rallied 50 percent this year as Beijing's efforts to reduce a crippling overcapacity in the sector there have led to lower inventories of the alloy.

    Still, Okada said the market is not in a real recovery phase yet due to excess supply.

    Blaming poor earnings, JFE skipped paying an interim dividend and did not give a dividend prediction for the second-half.

    The company stuck to its crude steel output plan of above 28 million tonnes on a parent basis for this year, above 27.36 million tonnes a year earlier.
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    China asks coal miners at latest meeting to cap 2017 prices - sources

    China's government has 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.

    The National Development and Reform Commission (NDRC) at an emergency meeting on Thursday asked miners to agree to set the prices for their 2017 long-term supply contracts at or below 12 cents per kilocalorie (kcal) for 5,000 kcal thermal coal and for 5,500 kcal thermal coal, two sources who were briefed on the meeting told Reuters.

    Those prices are equivalent to 600 yuan ($88.63) per tonne and 660 yuan per tonne respectively, according to Reuters calculations.

    This was the third meeting that the NDRC, China's top economic planner, has held with the coal industry in a week and the participants included state-owned Shenhua Group Corp, the nation's largest miner, the sources said.

    The sources asked to remain anonymous as they are not authorized to speak to the press.

    The NDRC did not respond to requests for comment.

    No agreement was reached in the meeting, but the sources expect negotiations overseen by the government to continue over the next few months.

    Coal prices have skyrocketed over the past two months to record highs as government-enforced mines closures choked supplies to power companies and forced many to import feedstock.

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    Tangshan cuts 32 Mtpa of steel capacity

    Tangshan, a major steel producing city in northern China's Hebei Province, has cut 31.86 million tonnes per annum (Mtpa) of steel capacity in the past four years, local authorities said on October 30.

    Tangshan had a steel capacity of 150 Mtpa before 2013, but its annual output then stood at about 100 million tonnes, the municipal government said.

    According to the Hebei provincial government, Tangshan needed to cut 40 Mtpa of steel capacity in the five years to 2017. So far this year, the city has closed 8.29 Mtpa of capacity, meeting its annual target.

    China's steel sector has been through years of plunging prices and factory shutdowns. Cutting overcapacity is high on the reform agenda as excess capacity has weighed on the country's overall economic performance.

    By the end of October, the city has slashed 18.67 Mtpa of iron capacity during the past four years. It also cut down 7.80 Mtpa of the material entering 2016, fulfilling its annual target.

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