Mark Latham Commodity Equity Intelligence Service

Tuesday 1st September 2015
Background Stories on www.commodityintelligence.com

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    Macro

    China targets $300 bln power grid spend over 2015-20

    China will spend at least 2 trillion yuan ($315 billion) to improve its power grid infrastructure over the 2015-2020 period, a report by a government newspaper said on Monday.

    Despite falling power consumption growth, China is working to upgrade its cross-country power transmission capacity in order to reduce coal consumption along the smog-hit eastern coast and provide markets for energy producers in the resource-rich far west, where electricity demand is considerably weaker.

    It has already built long-distance ultra-high voltage power lines connecting giant thermal power and hydroelectric stations in the west to eastern coastal regions like Shanghai.

    The 2015-2020 investment is likely to provide a boost for sectors like copper. Demand from the power sector accounted for nearly half of China's estimated 8.7 million tonnes of refined copper consumption last year.

    The plan was aimed at increasing the reliability of power transmission, which would favour copper-based cables over cheaper alternative aluminium-based cables, said Yang Changhua, senior analyst at state-backed research firm Antaike.

    He did not give an estimate for copper consumption under the proposal, but said more than 1 million tonnes of copper had been used in power transmission projects in 2014 when the investment was about 170 billion yuan.

    In a report published on the website of the National Energy Administration (NEA), China Electric Power News said the country was aiming to increase the total length of its high-voltage transmission lines to 1.01 million kms (627,585 miles) by the end of 2020, more than double the 2014 level.

    Citing a new government action plan, it said China would work to make prices more flexible in order to reflect changes in costs and fluctuations in demand.

    China's completed investment in grid construction fell 0.8 percent from a year ago to 163.6 billion yuan in the first half of this year.

    Yang said the investment in grid construction could rise in the second half from the first half as the State Grid Corporation stepped up spending to meet its annual target.

    China's wholesale and retail tariffs are currently set by the state. Some regions are introducing "differential prices" for industrial consumers that fail to meet environmental targets, while power producers that have installed clean generation technology also receive a subsidy from the government.

    http://www.reuters.com/article/2015/09/01/china-power-transmission-idUSL4N1171UP20150901

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    Oil and Gas

    A Corner of the Oil Market Shows Why It's So Tough to Read China


    Glencore Plc’s Ivan Glasenberg has lamented the difficulty of reading China’s commodity demand. The nation’s oil traders aren’t helping.

    State-run China National United Oil Corp., a unit of the country’s biggest energy company, bought 36 million barrels of Middle Eastcrude last month as part of a pricing process in Singapore used to determine commodity benchmarks around the world. While thepurchases by the trader known as Chinaoil were unprecedented, what’s more unusual is that the seller of most of those cargoes was another government-owned trading company called Unipec.

    “It’s unsettling and confusing for other players, and defies market logic,” Victor Shum, vice president at IHS Inc., an Englewood, Colorado-based industry consultant, said by phone from Singapore.

    The record buying in Singapore was part of the market-on-close price assessment process run by Platts, a unit of McGraw Hill Financial Inc., where bids, offers and deals are reported by traders through e-mails, instant messages and phone conversations in a fixed period each day. These are used to create end-of-day price assessments for various commodities and form benchmarks for transactions globally.

    “Chinaoil and Unipec each have their own trading book and strategy,” Ehsan Ul-Haq, a senior market consultant at KBC Advanced Technologies, said by phone from London. “The Chinese government will not hinder free trading.”

    The trading activity in Singapore sent prices of contracts used to hedge against Middle east benchmark Dubai crude cargoes loading in October above those for shipments sailing a month later, according to IHS’ Shum. This market structure called backwardation typically signals that demand is outpacing supply.

    Meanwhile, other benchmarks including Brent are reflecting the current global glut because they’re in contango, where near-term supplies cost less than later deliveries. This disparity between the Middle East grade and the rest of the market makes it difficult to assess oil demand, according to Shum.

    “It’s very odd that these two companies are up against each other, pushing front-month Dubai inter-month spreads into backwardation when other benchmarks like Brent are in contango,” said Shum.

    Chinaoil purchased 72 crude cargoes for loading in October as part of the Platts pricing process last month, most of which were sold by Unipec, a unit of China Petroleum & Chemical Corp., or Sinopec, Asia’s biggest oil refiner. Swiss trader Mercuria Energy Group Ltd. was the only other buyer in August with 6 lots, according to data compiled by Bloomberg.

    http://www.bloomberg.com/news/articles/2015-09-01/a-corner-of-the-oil-market-shows-why-it-s-so-tough-to-read-china
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    Russian Oil Firms Raise Profits And Output, Spurred By Rouble Weakness


    Russian oil firms are increasing their rouble profits and raising production as a weak currency protects their business, which has turned into one of the world's most profitable.

    Russia has kept its production, which includes gas condensate, near post-Soviet highs as its producers benefit from getting the bulk of their export revenues in dollars while most of their expenditure is in the domestic currency.

    On Friday, Bashneft, a medium-sized Russian oil producer, posted a 13 percent increase in second quarter net profit to 17.9 billion roubles ($272.7 million), following strong results by Gazprom Neft earlier this month.

    Bashneft, Russia's fastest growing oil firm by output, saw its average oil production at 387,500 barrels per day (bpd) in the second quarter, up from 350,900 bpd the same period a year ago.

    Gazprom Neft, the oil arm of state gas producer Gazprom , had earlier reported a 47 percent increase in the second quarter net profit, also on the weak rouble, and its output jumped 25 percent.

    Net profit at Surgut was flat in the first half of the year at 135 billion roubles.

    "In our global energy universe, the Russian oils screen (rank) strongly versus global peers on most metrics: highest free cash flow yields, dividend yields, lowest leverage, and lowest sensitivity to changes in oil prices," Goldman Sachs said in a report earlier this month.

    Goldman added that current valuations offer an attractive entry point into the sector, upgrading Bashneft, Gazprom Neft and Rosneft to 'buy' and forecasting Russian oil output to grow by 1.1 percent this year.

    - See more at: http://www.rigzone.com/news/oil_gas/a/140340/Russias_Bashneft_2Q_Net_Profit_Up_13_YOY?rss=true#sthash.YI73pYd2.dpuf
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    Rosneft Profit Exceeds Estimates as Ruble Offsets Oil Price


    OAO Rosneft, Russia’s largest oil producer, said second-quarter profit fell less than analysts expected as a weaker ruble helped counter a slump in crude prices.

    Net income declined to 134 billion rubles ($2 billion) from 171 billion rubles a year earlier, the Moscow-based company said Monday in a statement on its website. That beat the 95.5 billion-ruble estimate of five analysts surveyed by Bloomberg. Revenue dropped 8.6 percent to 1.31 trillion rubles.

    Brent crude has fallen more than 50 percent in the past year after the Organization of Petroleum Exporting Countries chose to defend market share over supporting prices amid a production glut. Russian oil producers have benefited from lower service costs as crude, the country’s biggest export, weakens the ruble.

    “Strong results,” Kirill Tachennikov, an oil analyst at BCS Financial Group, said by e-mail from Moscow. Spending cuts in dollar terms and a weaker ruble helped Rosneft to produce $3.6 billion in free cash flow, he said.

    Capital spending in rubles rose almost 14 percent to 269 billion rubles in the first half, Rosneft said.

    Rosneft increased drilling in the first half of the year as crude output fell 1.1 percent. Production at its largest unit, Yuganskneftegas, rebounded in the second quarter, but was still down 3.4 percent in the first half.

    Natural gas output climbed 16 percent to 1.05 million barrels of oil equivalent a day, pushing total oil and gas production to an average 5.175 million barrels a day in the first half.

    Net debt fell 7.9 percent in the second quarter to $39.9 billion, according to the statement. Rosneft reimbursed $1.3 billion worth of advance payments for supplies, which it accounts for separately from debt, in the first six months of the year.

    http://www.bloomberg.com/news/articles/2015-08-31/rosneft-second-quarter-profit-falls-22-after-crude-prices-slump
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    Eni's credentials boosted by giant gas find in Egypt


    Eni's "supergiant" gas find off the coast of Egypt bolsters its top-flight exploration credentials and gives the Italian energy group access to easy reserves that fit its strategy of seeking growth without sacrificing dividends.

    Eni said on Sunday that its discovery ranked as the largest known gas field in the Mediterranean, covering an area of about 100 square kilometres (39 square miles) and containing a potential 30 trillion cubic feet (tcf) of gas.

    Eni, already Africa's biggest oil and gas explorer, was the first oil major to cut its dividend after a plunge in global oil prices. It is looking to reduce its stake in its Mozambique gas discovery and does not rule out doing the same for its latest find, dubbed Zohr.

    "It's an open door to give value and solidity to Eni's balance sheet," CEO Claudio Descalzi said of a potential Zohr stake sale in an interview published on Monday by Italian newspaper La Repubblica.

    "But it will not be a necessary outcome. There is much less to spend than in Mozambique and the new gas is aimed at the local domestic market, with prices disconnected from those of oil, which today are at six-year lows."

    In July Egypt raised the price it pays Eni for the natural gas it produces, part of its initiative to encourage investment in the energy-hungry country.

    The company's initial investment in Zohr will be about $3.5 billion, an Egypt official said, though the country's state gas company said that the total could stretch to twice that figure.

    "With the full completion of development for the field, investments will (reach) $7 billion," the head of EGAS, Khaled Abdel Badie, told Reuters on Monday.

    The good quality of gas discovered at Zohr and the field's proximity to the shore and existing pipeline infrastructure makes it relatively easy and cheap to develop, especially compared with the more remote discoveries off Mozambique, which had to be developed from scratch.

    The new African find could also help to meet Egypt's gas needs for decades and pose a challenge to other projects in Egypt, Israel and Cyprus. Falling production and rising gas demand has forced Egypt to become a net importer in recent years.

    Key Israeli energy stocks Delek Group, Delek Drilling, Avner Oil, Ratio and Isramco Negev lost 4.5 billion shekels ($1.14 billion) off their combined market capitalisation on Monday.

    http://www.reuters.com/article/2015/08/31/eni-gas-idUSL5N1163EP20150831

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    Asian LNG price faces steep fall as perfect storm brews


    Asian liquefied natural gas (LNG) prices could fall a further 25 percent in coming months as new supply, falling demand and weaker oil prices put it on par with iron ore and coal as the worst performing commodity of recent years.

    Asia's LNG market has already fared worse than slumping oil markets, with spot prices LNG-AS down 60 percent since 2014 to $8 per million British thermal units (mmBtu), ending half a decade of high prices.

    While crude demand remains strong, research group Energy Aspects estimates Asian LNG imports fell 8.5 percent in the first half of 2015 from the same time last year, as the region's economies slow.

    Add to the mix El Nino, which usually means milder winters in northern Asia, and a unique cocktail for falling prices may appear.

    "The traditional power houses in north Asia are all showing signs of (demand) weakness at a point when there is lots of supply coming on to the market," said Neil Beveridge of Bernstein Research.

    China's LNG imports have slumped from double digit growth in recent years to a three percent fall in the first half of 2015 from a year earlier.

    For Japan, the world's top LNG importer, the restart of its nuclear power plants is eating away at LNG's market share in an environment of generally falling energy demand.

    Imports into South Korea have also fallen due to a slowing economy and rising nuclear power output.

    The slowing demand comes just as output soars. Following $200 billion of investments into LNG projects, Australia's exports are soaring, tripling its capacity to 86 million tonnes before 2020, which would make it the world's biggest LNG exporter ahead of Qatar.

    Australia's soaring output comes at the same time as the United States starts exporting for the first time towards the end of this year.

    A 25 percent fall in oil prices since June is adding to LNG weakness.

    "The latest leg down in oil prices is in the process of feeding through into gas prices," consultancy Timera Energy said, as oil-indexation in LNG contracts meant crude movements would be priced into LNG with several months delay.

    http://www.reuters.com/article/2015/08/31/asia-lng-prices-idUSL5N11303420150831

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    Qatar sends more LNG to Belgium


    Fluxys-operated Zeebrugge LNG terminal is scheduled to receive its second cargo of the chilled gas in September from Qatar.

    The 159,983 cbm Yari LNG carrier set off from Qatar’s Ras Laffan on August 27. As shipping data shows the vessel is scheduled to dock at the LNG terminal’s jetty on September 11.

    The Zeebrugge LNG terminal has an annual throughput capacity of nine billion cubic meters of natural gas importing the liquefied natural gas mainly from Qatar. It can receive 110 carriers per year and serves as a gateway to supply LNG into Northwestern Europe.

    The terminal consists of 4 LNG tanks totaling 380,00 cbm, a truck loading station, an existing jetty with one more jetty under construction and due to be completed this year.

    https://twitter.com/LNGWN
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    LNG carrier heads south as Kyushu Electric's tanks full, Nuclear unit running

    LNG carrier Echigo Maru, which was set to deliver a cargo from Indonesia's Bontang facility to Japan's Kyushu Electric, is heading south after idling around Japan as the utility has limited tank space to receive the cargo, market sources said Monday.

    The vessel loaded the cargo from Bontang, Indonesia, on August 15 and had Oita, Kyushu, as its final destination. It sailed up the Sea of Japan coast and was now near Taiwan, Platts ship-tracking software cFlow showed Monday.

    The LNG cargo it is carrying was due to arrive at Kyushu Electric's Oita terminal on September 14, cFlow showed. But the cargo will likely be diverted to another destination, pending permission from Bontang, a source said.

    Kyushu Electric's 890 MW Sendai No 1 nuclear power unit has restarted and the output capacity reached 100% Monday, the company said earlier.

    Power demand in Japan has been also falling.

    Kyushu Electric said last week that its overall power sales fell 2.6% year on year to 6.53 billion kWh in July due partly to cooler temperatures depressing demand for air-conditioning.

    The Sendai reactor connected to the electricity grid on August 14, making it Japan's first unit to come back online under stricter safety standards implemented by the country's Nuclear Regulation Authority following the Fukushima I accident in March 2011.

    http://www.platts.com/latest-news/natural-gas/tokyo/lng-carrier-echigo-maru-heads-south-as-kyushu-21046241

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    EIA revises US oil production estimates lower; June output sank


    The federal government believes daily U.S. crude production fell to 9.3 million barrels in June, down by 100,000 barrels in the prior month, as low oil prices continue to discourage drilling.

    The Energy Information Administration said Monday its monthly report on domestic oil supplies, slated to be released in full soon, will use a new approach to collecting production data. Instead of relying largely on state agencies to provide data, it has begun to survey oil companies that drill in 15 states including Texas and the Gulf of Mexico. It’s an effort to improve the accuracy of its monthly estimates of the nation’s oil output.

    This has led it to revise its monthly production data for January through May downward by at least 40,000 barrels a day and up to 130,000 barrels a day, with the biggest declines coming from Texas. There was also an uptick in production from the Gulf of Mexico.

    Texas’ daily oil production, the EIA said, were revised downward by 100,000 barrels to 150,000 for the first five months of the year. Producers in the Gulf put out 10,000 to 50,000 barrels a day more than the EIA had previously estimated from January to May. The overall average for the year came in at 9.4 million barrels a day.

    The agency said it based its previous estimates on tax information and state agencies but “given the timetable for EIA’s data products, much of that information is lagged and incomplete at the time of publication.”

    Surging domestic crude production from shale formations in Texas and North Dakota played a big role in the oil-market crash over the past year, but in recent weeks, economic weakness in China and increasing oil supplies from Saudi Arabia and Iraq have overshadowed U.S. crude production as narratives in the market.

    The Organization of Petroleum Exporting Countries have put out 1.5 million barrels a day of additional crude into the market, according to Houston investment banking firm Simmons & Co. International, making any production declines in the United States largely negligible. But “we maintain U.S. oil supply still matters in the equation,” analysts at Houston investment banking firm Tudor, Pickering, Holt & Co. wrote in a note to clients Monday.

    The EIA said its new oil-company surveys will account for more than 90 percent of U.S. output. Outside of the surveys it collects in 15 energy-producing states, it brings in data from the other 35 states as well through its old methodology.

    http://fuelfix.com/blog/2015/08/31/eia-revises-us-oil-production-estimates-lower-june-output-sank/?utm_source=twitterfeed&utm_medium=twitter#30727101=0

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    Petrobras raises cooking-gas price 15 pct; 1st rise in 13 years


    Brazil's state-led oil company Petrobras said late Monday that it would raise the wholesale price of liquefied petroleum gas (LPG) by 15 percent effective Tuesday, the first price adjustment for the essential cooking gas in 13 years.

    Earlier on Monday Reuters reported that Petrobras had informed distributors of the gas-price increase, which is effective for delivery at the refinery gate at 0:00 a.m. (0300 GMT) Tuesday.

    The move is part of efforts by Petroleo Brasileiro SA , as Petrobras is formally known, to reduce losses on fuel sales, a Petrobras source said, requesting anonymity because of a lack of authorization to speak to the press.

    The increase also comes as Brazil's government struggles to cut spending, hold down inflation and restart an economy hamstrung by a plunge in world commodity prices and a corruption scandal that has partly paralyzed its oil industry and major construction firms.

    "With retail prices uncontrolled, the market will have freedom to fix them and the increase at the refinery will increase pressure on the cost of LPG for consumers," Sindigas, a national association of LPG distributors, said in a statement.

    The gas, sold in standard and ubiquitous steel bottles holding up to 13 kilograms of LPG, is essential for cooking and heating for millions in Brazil without access to piped natural gas or steady electricity supplies.

    Because of its importance to many lower-income families and relatively large position in Brazil's benchmark consumer price index, the price of LPG for residential consumers has long been controlled by the government.

    It is one of three fuels, along with gasoline and diesel, that Petrobras has long been forced to partly subsidize, causing losses for its refining division.

    With Petrobras' refineries only able to supply 60 percent to 65 percent of the domestic needs for the fuel, which is essential to tens of millions of Brazilians, Petrobras must import much of Brazil's LPG at a loss.

    The Petrobras source said the impact on consumers will be minimal, resulting in a final retail increase in the cost of gas of 3 percent to 4 percent, or about 2 reais (55 cents).

    http://www.reuters.com/article/2015/09/01/brazil-petrobras-lpg-rise-idUSL1N11705920150901

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    U.S. oil drillers add rigs for the 6th week in a row


    U.S. energy firms added one oil rig this week, the sixth consecutive week of increases even as U.S. oil prices flirted with 6-1/2-year lows, signaling further pressure on a market awash with crude.

    Reflecting plans announced in May and June, when U.S. crude futures averaged $60 a barrel, drillers added one oil rig in the week ending on Aug. 28, bringing the total count up to 675, the highest since early May, oil services company Baker Hughes Inc said on Friday in its closely followed report.

    "It's getting real close to the end of the increases, given the drop in oil," Phil Flynn, an analyst with the Price Futures Group, said. "I would not bet that the increases will last."

    After slashing their rigs by up to 60 percent in the first half of this year, some companies decided to begin drilling more in the second quarter as oil prices stabilized at around $60 a barrel.

    U.S. oil prices were headed for their first positive week since mid-June, rallying from multi-year lows of below $40 hit earlier in the week.

    U.S. crude oil futures have fallen by as much as 21 percent in the past month and were down this week by as much as 37 percent from their six-month high of $61.43 in early June.

    U.S. crude futures fell from over $107 in June 2014 to near $42 in March due to oversupply worries and uninspiring demand growth.

    In response to that 60 percent price collapse, U.S. drillers eliminated thousands of jobs and idled 60 percent of the record high 1,609 oil rigs that were active in October.

    http://www.reuters.com/article/2015/08/28/energy-oil-rigs-baker-hughes-idUSL1N1131FR20150828

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    Alberta to keep oil, gas royalty framework to end-2016


    Alberta's oil and gas royalty framework will remain in place until the end of 2016, Energy Minister Marg McCuaig-Boyd said on Friday, as she gave details on a review of the scheme for the province's new left-leaning New Democrat government.

    McCuaig-Boyd said royalty rates paid by oil and gas companies will not change until 2017, which will help companies budget for the important winter drilling season.

    The review, an election campaign promise, has unsettled oil and gas industry representatives who warn it could lead to higher costs and job losses in Canada's energy heartland. The New Democrat government says it is needed to give Albertans a fair value for the resources.

    "For 16 months companies and investors can operate with certainty, knowing there will be no changes in the royalty framework. If and when changes are made, any incremental revenues will go to the (province's) heritage fund," she told a news conference.

    The government also announced that Leona Hanson, mayor of the town of Beaverlodge in northern Alberta, Peter Tertzakian, chief energy economist at energy-focused private equity company ARC Financial Corp, and Annette Trimbee, president and vice-chancellor of the University of Winnipeg and former senior Alberta bureaucrat, would join the panel leading the review.

    Alberta appointed Dave Mowat, the chief executive of the provincially owned financial services agency ATB Financial, in June to lead the review and report to government by January.

    McCuaig-Boyd said panel members needed to be "tough" in order to deliver effective solutions that do not stand in the way of a recovery during an economic downturn, but provide the full value of the resource during boom periods.

    Oil and gas companies in Alberta, home to vast oil sands deposits and the largest source of U.S. crude oil imports, have laid off thousands of workers in recent months due to slumping global prices.

    Canada's biggest oil and gas industry lobby group, the Canadian Association of Petroleum Producers, estimates recent government moves to increase carbon levies and corporate income tax rates would increase costs by about C$800 million ($618.33 million) over the next two years. Tim McMillan, the association president, said in an interview that the government should pursue policies that encourage more investment and development in Alberta.

    Alberta's royalty rates can now vary between 5 and 40 percent depending on factors that include type of development, oil prices, crude volumes, well depths and speed of cost recovery.

    http://www.reuters.com/article/2015/08/28/alberta-royalty-idUSL1N1131H320150828
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    Berkshire Wagers That Americans Still Thirst for Gasoline


    In its most significant energy investment in two years, Berkshire has amassed a $4.5 billion stake in Phillips 66, making it the biggest shareholder in the largest U.S. oil refiner. Berkshire owns almost 58 million shares in Phillips 66, more than 10 percent of the total outstanding, up from the 7.5 million it reported at the end of the first quarter, according to a regulatory filing issued late Friday by the Omaha, Nebraska-based company.

    Phillips 66 climbed 2 percent to $78.78 at 10:25 a.m. in New York, the best-performing energy company on the Standard & Poor’s 500 Index Monday. The bet on fuel processing is a wager that an unexpected and significant rally by refiners during the shale boom will continue as low oil prices spur demand for gasoline, diesel and other petroleum products produced by the so-called downstream sector. Since oil fell by half last year, gasoline demand in the U.S. has surged to an 8-year high, as drivers see per-gallon prices fall below $3 and take to the road.

    “As oil prices have dropped, it’s obvious to people in the business that refiner stocks are your best bet,” Carl Larry, head of oil and natural gas for Frost & Sullivan LP, said by phone from Houston. “When people say the oil industry is failing -- well, upstream might be, but downstream has never been better.”

    An index of four refiners on the Standard & Poor’s 500 is up 12 percent this year through Friday, compared with the larger energy index, which is down 18 percent. Phillips 66 closed at $77.23 on Friday in New York, up 7.7 percent this year. The increase at Phillips 66 has trailed the results of some other U.S. refiners -- Valero Energy Corp. has gained 19 percent this year and Tesoro Corp. has climbed 26 percent. Marathon Petroleum Corp. is up 4.6 percent for the year.

    http://www.bloomberg.com/news/articles/2015-08-30/berkshire-wagers-that-americans-are-still-thirsty-for-gasoline
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    Fire damages Canadian Syncrude equipment, forces firm to halt production


    Canadian Oil Sands, the main owner of the giant Syncrude oil sands project, has halted production after the fire that damaged equipment at its synthetic crude oil processing facility in northern Alberta.

    The company said the fire, which happened early Saturday and was extinguished without any injuries, affected pipes connected to a water treatment unit at Syncrude’s heavy oil upgrader on the site of its Mildred Lake oil sands surface mine. The cause of the blaze remains under investigation.

    The operation is a 326,000 barrel-per-day mining and upgrading project, where oil sands bitumen is upgraded into refinery-ready synthetic crude.



    Canadian Oil Sands holds a 37% stake in Syncrude Canada and six other companies own the rest, including Suncor Energy Inc, Imperial Oil Ltd, Nippon Oil subsidiary Mocal Energy Ltd, Murphy Oil Corp, China’s Sinopec, and CNOOC subsidiary Nexen.

    Aside from plunging crude-oil prices, Canadian Oil Sands is facing a number of other challenges. It recently swung to a loss and was affected by unplanned equipment outages and Moody’s Investors Service’s decision to cut its credit rating last week.

    http://www.mining.com/fire-damages-canadian-syncrude-equipment-forces-firm-to-halt-production/

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    Uranium

    China National Nuclear Power H1 profits soar 150.5pct


    China National Nuclear Power Co. Ltd. (CNNP), the country’s first listed company specializing in nuclear power generation, realized net profits at 2.47 billion yuan ($404.1 million) in the first half of the year, soaring 150.45% on year, showed data from the company’s semi-annual report on August 31.

    The company posted revenue of 12.9 billion yuan during the same period, up 52.53% on year, despite a slow growth in domestic power use caused by inactive domestic economy over January-June.

    Total power output of the company during the same period stood at 36.67 TWh, rising 54.51% from a year ago.

    The company has finished 5 overhauls on operating units as scheduled over January-June, accounting for 50% of the annual plan.

    According to the report, net profit of the company is forecasted to rise 30-70% on year in 2015.

    http://en.sxcoal.com/0/130748/DataShow.html
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    Precious Metals

    Evolution hedges more ounces


    Gold miner Evolution Mining has forward sold some 300 000 oz of gold, at an average price of A$1 638/oz, to take advantage of a recent rally in the Australian gold price. 

    The miner noted on Tuesday that 100 000 oz of the gold would be delivered in the 2016 financial year, with the remaining 200 000 oz to be delivered during the January 2018 to December 2019 period. “We saw this as an opportune time to lock in additional hedging with the Australian dollar gold price trading close to three-year highs,” said FD and CFO Lawrie Conway. 

    The latest hedge was in addition to an existing hedge covering 521 311 oz, at a price of A$1 562/oz. “Evolution remains strongly leveraged to any potential upside in the gold price with the hedge book accounting for less than 25% of the company’s expected production over the next five years. The additional hedging for 2016 locks in a higher level of near-term cash flow, which will be used to pay down debt at an accelerated rate,” Conway said.

    http://www.miningweekly.com/article/evolution-hedges-more-ounces-2015-09-01
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    Base Metals

    China's 10 nonferrous metal output up 9.4% in Jan-Jul

     
    The output of the ten nonferrous metals gained 9.4% from a year earlier to 29.49 million tons in the first seven months of this year, according to the latest report released by the National Development and Reform Commission (NDRC).

    According to the statistics, the country's aluminum electrolytic output grew 12% year on year to 18.33 million tons in the seven-month period, while the output of copper, Zinc and alumina oxide expanded 9.1%, 10.4% and 12% over the previous year to 4.41 million tons, 3.58 million tons and 32.88 million tons, respectively.

    Meanwhile, the output of lead shed 3.9% year on year to 2.27 million tons during the seven-month period.

    Last month, the average prices of aluminum electrolytic, lead, Zinc and copper futures on the Shanghai Futures Exchange saw a decline to RMB 12,498, RMB 13,141, RMB 15,552 and RMB 41,939 per ton, retreated 3.9%, 1.4%, 6.1% and 6% from a month earlier, respectively.

    http://en.chinamining.com.cn/News/2015-09-01/1441069132d73576.html
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    Power shortages threaten launch of Chinese-run Congo copper mine


    Power shortages at a new Chinese-run copper mine in Democratic Republic of Congo could delay the expected October start of production or force output targets to be cut, the mine's deputy director said on Friday.

    The Sicomines copper mine, a joint venture between Chinese companies and Congolese state entities in the southeastern mining hub of Kolwezi, is one of Africa's largest with about 6.8 million tonnes in proven reserves.

    Chinese firms Sinohydro Corp and China Railway Group Limited are building roads and hospitals worth $3 billion in exchange for a 68 percent stake in the mine. China's state-run Exim Bank are providing most of the financing.

    Initial annual production of 125,000 tonnes requires a consistent supply of 54 megawatts (MW) but the national utility company has pledged 15 MW and even then only 10-12 MW is available with interruptions, said deputy director Jean Nzenga.

    "Production is set for the month of October of this year," Nzenga told Reuters. "But there are conditions like energy. We need to have energy .... With less (energy) we are going to see what needs to be prioritized."

    The mine has secured another roughly 15 MW from southern African countries, including neighbouring Zambia and will try to obtain more next month, Nzenga said.

    Work on a 240 MW dam to supply Sicomines has been delayed by red tape and remains at least five years from completion.

    Congo is Africa's leading copper producer, having mined 1.03 million tonnes of the metal in 2014. Its chamber of mines has said it expects output to decrease slightly in 2015 due to a power deficit.

    Nzenga said Sicomines had not yet been affected by sharp declines in copper prices linked to fears of a slowing economy in China, the world's top industrial metals consumer.

    Benchmark copper on the London Metal Exchange was up 0.8 percent at $5,179 a tonne at 1421 GMT on Friday after dropping to six-year lows earlier in the week at $4,885.

    "Let's hope that the price of copper doesn't drop too much," Nzenga said. "If that continues, it's going to affect a lot of projects."

    Sicomines is part of a $6 billion "minerals for infrastructure" deal first signed in 2007 between the Congolese government and a consortium of Chinese companies.

    http://www.reuters.com/article/2015/08/28/congodemocratic-mining-idUSL5N1133MO20150828

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    Union mulling action on job cuts at Freeport Chile copper mine


    A Chilean union that represents copper mine workers rejected a move by Freeport-McMoRan Inc to drastically cut staff at its El Abra mine and said on Monday it was considering action.

    Last week, Arizona-based Freeport, which owns a 51 percent stake in the mine in northern Chile, became one of the first big global miners to announce it was slashing production because of slumping copper prices.

    That would include reducing mining rates at El Abra by about 50 percent to cut and defer costs, and extend the mine's life, the company said.

    Over the weekend Freeport began to send out letters announcing the dismissals and refusing to negotiate, said Juana Mejias, who heads the mine's local union, adding that around 700 workers were being fired.

    "The situation is complex and a true massacre that they have carried out by dismissing 50 percent of the workforce," she said in a statement on Monday.

    However, a spokesman for Freeport said that termination notices had not yet been issued.

    "Plans for reductions in the workforce are being developed," he said.

    Gustavo Tapia, head of the Chile Mining Federation union, dismissed the fall in the copper price as a "cyclical issue" and said multinational companies had sufficient profits to ride it out.

    "In the coming hours we will decide the measures we will adopt as an organization," he said.

    El Abra produced around 166,000 tonnes of refined copper last year out of Chile's total 5.7 million, according to figures from state copper commission Cochilco. That placed it just outside the top 10 biggest mines in Chile, which produces about one-third of the world's copper.

    El Abra's workforce comprised about 1,600 employees and 1,400 contractors.

    Any labour action would be a fresh headache for state-run Codelco, which owns the remaining 49 percent stake in El Abra. Codelco has just resolved a three-week dispute with contractor workers across its operations, which cost some 17,000 tonnes in lost output.

    http://www.reuters.com/article/2015/08/31/chile-mine-abra-idUSL1N11626520150831

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    Asarco curtails Arizona copper output, catching USW off guard


    A decision by US copper producer Asarco LLC to curtail operations at its Ray mine in Arizona and shut its Hayden concentrator there was not expected, an official with the United Steelworkers union said Monday.

    Citing low copper prices, the Grupo Mexico subsidiary said Friday it would reduce its production by about 67 million lb/year by cutting back on stripping for leaching output at the Ray mine and indefinitely shutting its Hayden concentrator, with the latter move set for October.

    "I thought they were in a position to weather the storm," Armenta said in an interview. "Contractually, they have the copper concentrate sold."

    Armenta said the company is producing copper for just over $2/lb. Asarco is shutting the concentrator because "they're claiming that's more expensive to operate," Armenta said, adding that 78 employees at the Ray mine lost their jobs on Monday.

    Asarco officials could not be reached for comment Monday. But in the Friday statement, the company said its cost structure and current market conditions "require operational adjustments in order to ensure its viability and sustainability, as well as protect its mineral reserves for the longer term."

    Asarco said 211 hourly workers could be affected by the Ray and Hayden cuts, adding it had officially notified the union of the plan about a week before.

    Asarco said the cuts, combined with a $110 million reduction in capital expenditures for 2015-2016, would "improve the company's overall costs and free cash flow." The company said it would continue to monitor market conditions and could make adjustments, as warranted.

    In addition to Ray, Tucson-based Asarco also operates the Silver Bell and Mission copper mines in Arizona. Together, the three mines produce about 400 million lb/year of copper. The company's Hayden smelter in Arizona produces 720,000 tons/year.

    Asarco also owns the Amarillo copper refinery in Texas, capable of producing 279.5 million lb/year.

    http://www.platts.com/latest-news/metals/louisville-kentucky/asarco-curtails-arizona-copper-output-catching-21049587
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    Steel, Iron Ore and Coal

    China coal giants run over 100pct CTO capacity in H1


    China’s coal giants Shenhua Group and China Coal Energy Co., Ltd. operated their coal-to-olefin projects at over 100% capacity in the first half of the year, despite falling oil prices, showed the half-year reports released late August.

    Capacity utilization of Shenhua’s 60,000-million-tonne coal-to-olefin project at Baotou, Inner Mongolia reached 107% on average over January-June, the company said in its half-year report on August 22.

    The group produced 161,200 tonnes of polyethylene (PE) and 160,000 tonnes of polypropylene (PP) during the same period, up 10.6% and 7.5% year on year, respectively.

    However, operating revenue and profit of the project amounted to 2.97 billion yuan ($463.9 million) and 561 million yuan, down 13.4% and 42.6% on year, mainly due to an over 1,000 yuan drop in PE and PP sales prices.

    Meanwhile, China Coal Energy posted average capacity utilization of 115% in its 600,000-million-tonne CTO project in Yulin, Shaanxi province.

    It produced 178,000 tonnes of PE and 168,000 tonnes of PP between January and June, while operating revenue and net profit totaled 2.87 billion and 529 million yuan, respectively.

    In a time of overcapacity and low prices, CTO project has showed strategic value for coal companies, and is expected to see increased profitability as oil prices rebound in the future.

    http://en.sxcoal.com/0/130534/DataShow.html
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    China's third and fourth largest coal miners report substantial losses


    Shannxi Coal Industry Co. Ltd., the third-largest listed coal miner by volume in China, saw its net loss reach 955 million yuan over January-June, compared with a net profit of 825.8 million from the same period last year, showed data from the half-year report of the company.

    During the same period, total revenue of the company stood at 18.98 billion yuan or 44.83% of the annual plan, falling 10.11% from a year ago.

    The average price of the company’s commercial coal fell 12.51% on year to 267.73 yuan/t over January-June, with the price of self-produced coals falling 25.73% to 181.27 yuan/t.

    Coal output from Shaanxi Coal stood at 53.02 million tonnes or 50% of the annual plan during the same period, a drop of 7.92% on year.

    It sold 66.58 million tonnes of commercial coal in the first half of the year, edging up 1.4% year on year, it said.

    The company predicted a sharper drop in profit in the second half of the year, given the persisting sluggish coal market.

    http://en.sxcoal.com/0/130637/DataShow.html

    Yanzhou Coal Mining, the listed unit of China's fourth largest coal miner Yankuang Group, plunged into the red in the first half of the year, as cost reduction was insufficient to counter the impact of a sharp drop in coal prices and sales volume.

    Net loss amounted to 50.63 million yuan ($7.91 million) in the half, compared with a profit of 587.24 million yuan in the year-earlier period.

    First-half revenue plummeted 41.4% year on year to 18.14 billion yuan, on the back of a 27.6% decline in coal sales to 43 million tonnes, and a 24.1% tumble in average selling price to 505 yuan/t.

    Output of processed saleable coal produced by its own mine fell 5% year on year to 32 million tonnes in the first half.

    First-half operating profit from coal mining dropped 14% year on year to 406.41 million yuan, which came despite the firm slashing its production cost per tonne by about 15% year on year at its domestic mines, and by 24-28% at its overseas mines.

    Yanzhou said it has cut costs mainly by downsizing staff, "optimization of human resource", streamlining of production systems and processes, and by cutting materials consumption.

    In the year's second half, it said, it would continue to cut costs by "centralized purchasing, competitive negotiation and online procurement for materials and equipment" to control costs.

    http://en.sxcoal.com/0/130633/DataShow.html
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    NRW Holding reports losses at Roy Hill iron ore project


    The West Australian reported that NRW Holdings’ crippling contract dispute at the Roy Hill iron ore project has seen it burn through $120 million cash in the past year and revamp debt facilities. After turning in a $230 million annual loss, the civil and mining contractor conceded it would make an unspecified loss on the $620 million rail works project.

    Project manager Samsung C&T withholding payments for the past four months because of the dispute has put NRW under considerable financial pressure. Samsung has contested adjudications in NRW’s favor of about $26 million, with further claims pending. The WA contractor laid off more than 2200 employees, over 70 per cent of its headcount, during the financial year.

    NRW said “The Roy Hill rail contract loss recognizes that it is unlikely that an outcome can be negotiated which supports a position where the company can at least recover costs incurred on the contract.”

    MD Mr Jules Pemberton said NRW was seeking a fair commercial outcome through talks with Samsung, Supreme Court action and the dispute resolution process. He said “The business has managed through the cash flow impact of Samsung’s decisions to restrict payments to NRW on the Roy Hill rail contract since April, has continued to make all debt repayments when due and is in compliance with banking covenants.”

    While the net loss included non-cash impairments of $157 million, NRW’s cash losses are significant. It held $35 million at June 30, compared with $155 million a year earlier.

    http://steelguru.com/mining/nrw-holding-reports-losses-at-roy-hill-iron-ore-project/433419#tag
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    Arcelor Mittal South Africa to close mills, review largest plant


    ArcelorMittal South Africa is planning to shut two mills and is reviewing operations at its largest plant, it said on Monday, as the money-losing unit of the world's biggest steelmaker struggles with weak demand and lower prices.

    South Africa last week raised the import tariff on steel to 10 percent, the maximum level allowed by the World Trade Organisation, to be in line with its steel making peers .

    ArcelorMittal said in a statement that trading conditions have continued to worsen since it started reviewing its long steel business in July, adding that the higher import duty will only bring relief over the medium to long term.

    ArcelorMittal said it had started discussions with unions about the closure of two mills, cutting as many as 400 jobs, at its plant in Vereeniging, about 60 km south of Johannesburg.

    Operations at the company's largest plant, in the nearby town of Vanderbijlpark, continues to be unprofitable and will be reviewed before the end of October, the firm said.

    "The company will first consider implementing alternatives before retrenchments are implemented, as a last resort," it said.

    ArcelorMittal has also launched applications with South Africa's state-run international trade commission to impose anti-dumping duties on cheap Chinese steel.

    http://www.reuters.com/article/2015/08/31/arcelor-africa-restructuring-idUSL5N11622K20150831
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    China's crude steel output at 476 mln tons down 1,8% in Jan-Jul

     
    China, the world's largest steel producer, saw its crude steel output decrease 1.8% year on year to 476.04 million tons in the first seven months of this year, according to the latest statistics released by the China Iron and Steel Association.

    The commission says that the country's output of steel products up 1.5% year on year to 650.91 million tons in the reporting period. However, its output of iron alloy declined 2.5% to 20.74 million tons.

    China exported 62.13 million tons of steel products in the first seven months, up 26.6% year on year, while its import of steel products reached 7.7 million tons, down 9.1% from a year earlier.

    China's steel prices continue to decrease in Jul 2015, with the domestic composite steel price index decreasing 4.68 points to 63.45 compared with that in Jun this year. The prices of 20 mm steel sheets and 1-mm cold-rolled coils were at RMB 2,146 per ton and RMB 2,861 per ton, down 37% and 30.5% year on year.

    http://en.chinamining.com.cn/News/2015-09-01/1441069080d73574.html
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