Mark Latham Commodity Equity Intelligence Service

Monday 21st September 2015
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    An index that China's leaders use to measure economic growth looks horrible

    The office of China's Premier, currently Li Keqiang, has traditionally been tasked with monitoring the economy.

    And in the past, Li Keqiang has said openly that he doesn't necessarily use GDP to track how fast it's growing. He uses a combination of metrics put together — a composite of electricity output, rail freight and loan growth.

    Right now, all of those metrics are screaming major slow down — something like growth around 2%-4% — despite the fact that the government has said time and time again that the country's GDP is growing at 7%.

    Here's what Premier Li's metric looks like, via Bloomberg economist, Tom Orlik:
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    China consumes..

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    China’s energy guzzlers Jan-Aug power use down 2.1pct on year

    Power consumption of China’s four energy-intensive industries declined 2.1% on year to 1,107.3 TWh over January-August this year, accounting for 30.1% of the nation’s total power consumption, the China Electricity Council (CEC) said on September 18.

    Of this, the ferrous metallurgy industry consumed 337 TWh of electricity over January-August, falling 7.9% year on year, compared to the growth of 2% from the previous year; while the non-ferrous metallurgy industry used 287.5 TWh of electricity, up 4.2% year on year, compared a 4.9% growth from the year prior.

    The chemical industries consumed 280.7 TWh of electricity over January-August, up 2.5% year on year, lower than a 4.9% growth a year ago; while power consumption of building materials industry dropped 6.4% year on year to 202.2 TWh, compared to a 7.8% rise in the preceding year.

    In August, the four industries consumed a total 145.2 TWh of electricity, down 2.7% year on year, accounting for 28.3% of China’s total power consumption.

    Of this, the ferrous metallurgy industry consumed 43.8 TWh of electricity in August, dropping 8.6% on year and up 2.1% on month; while the non-ferrous metallurgy industry used 36.2 TWh of electricity, up 0.5% from a year ago but down 0.55% on month.

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    Foreign exodus from China accelerates?

    Here is the most complete list of foreign Paolu 2015:

    Earlier this year, Microsoft announced the closure of the factory is located in Nokia Beijing and Dongguan. Close Chinese factory, some of the equipment was transferred to the factory in Hanoi, Vietnam;

    Japan Citizen watch company in liquidation before the Spring Festival this year announced the dissolution of the production base in Guangzhou;

    Panasonic washing machine and microwave the vertical transfer of production from China to Shizuoka Prefecture and Kobe City plant;

    Sharp plans to Tochigi yaita Yao City, Osaka plant and factories are producing more models of LCD TV and fridge, advancing to move back;

    Daikin Industries company plans to launch the Japanese domestic market further home air conditioning production back from China factory located in Shiga Prefecture;

    TDK famous brand electronics industry will also take part of the electronic components is expected to shift production from China to Akita Prefecture and other places of the plant;

    Samsung built in China dedicated foundry declared bankruptcy Puguang Suzhou, Dongguan Puguang also dying;

    Uniqlo parent Fast Retailing plans to begin low-cost clothing brand GU, Bangladesh, Indonesia plant increased OEM orders. Fast Retailing Group, about 85% of the product was originally manufactured in China, but with Chinese labor costs continue to rise, now decided outside of China by 20% to 30% of the production rate increased to 50%;

    Muji program three years after the partner factories in China decreased from 229 to 86, from China's purchase rate lowered from 60% in half.

    Moreover, since Recently, even Huawei, millet, Lenovo, TCL and other companies have begun withdrawing from the Chinese nation.

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    Looking for reform success, India's Modi readies electricity rescue plan

    India is preparing a rescue package for power utilities owing tens of billions of dollars, but Prime Minister Narendra Modi must first convince states to make politically hard choices as he seeks a victory for reforms needed to galvanise the economy.

    Modi, who has had mixed success pushing through his reform agenda since coming to power 16 months ago, has prioritised tackling a problem that is stifling bank lending needed for a revival in Asia's third largest economy, three senior government sources with direct knowledge of the plan said.

    Problematic utility debts account for a quarter of all restructured bank loans in India.

    In total, utilities owe $66 billion. New Delhi has identified about 1.5 trillion rupees ($22.7 billion) of debt held by financially stretched utilities as most at risk, one of the sources said, adding to the urgency to relieve a banking system weighed down by bad loans.

    Under the proposal, New Delhi wants to persuade state governments to take over some of their utilities' debt.

    In return, the electricity distributors would commit to re-investing interest savings in new lines and metering, improving billing and cutting rampant power theft, the sources said, declining to be named because the plan is not public.

    To make it work, the distributors are likely to come under pressure to raise electricity tariffs for consumers used to low prices.

    One top power ministry official said the proposal was "very close" to being finalised and that states with the biggest problems agreed to back it.

    "The states have a very clear incentive to do this. The interest cost comes down significantly," he said.

    By forcing tougher action at state level to ensure electricity is paid for and supplies are reliable, Modi hopes to avoid a backlash in parliament, where the opposition has already blocked other economic reforms this year.

    Fixing power would temper criticism that Modi's government is not doing enough to improve the lives of common Indians, having made election campaign promises to replicate his success in Gujarat and deliver 24/7 power across India.

    Though New Delhi is convinced more Indians are willing to pay for electricity if offered reliable supplies, sceptics say it will be hard to force states to make people pay, when it risks alienating important vote banks, like farmers.

    There may be other costs to bear, too. The government may have to relax limits on the size of states' deficits if they are to take over distributors' debts, putting pressure on India's consolidated fiscal position as New Delhi tries to improve its finances.

    Modi has made devolving political power a key plank of his agenda, confident individual states will increasingly compete to reform by themselves. After failing to pass legislation to make land purchases easier, for example, central government is encouraging states to enact their own rules.

    Six states have agreed in principle to take over some of their power distributors' debts, one of the government sources said. But some others are far from convinced.

    The chief secretary of Uttar Pradesh, a vast agricultural northern state with a population bigger than Brazil, said taking on utilities' 420 billion rupees of debt would reduce the state's interest burden by five percentage points but more than double its borrowings.

    "We will have to deliberate a lot before taking a final call," said Alok Ranjan.

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    Long Skirts, Victoriana.

    Models swished along in floor-skimming skirts and fitted coats at Marc Jacobs. They were poised in delicately lacy and ruffled, almost doll-like dresses at Alexander McQueen. They promenaded in moody silk jacquard and jeweled velvet at Givenchy. And at Comme des Garçons, a label whose collections are never easily defined, designer Rei Kawakubo enveloped models in yards of black and white lace for a voluminous and avant-garde take on Victoriana that surely never existed circa 1865.

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    Fedex tries 3D printing


    At its hub in Louisville, Ky., United Parcel Service Inc. recently rolled out 100 industrial-grade 3-D printers to make everything from iPhone gizmos to airplane parts.

    UPS wants to find out if 3-D printing centers could shorten supply chains and cut into its $58 billion-a-year transportation business—or give it a leg up in a potentially emerging market for local production and delivery.

    For Atlanta-based UPS, the difference could be existential. It doesn’t want 3-D printing to disrupt its business the way the Internet pulled the rug out from overnight document deliveries more than a decade ago.

    “Should we be threatened by it or should we endorse it?” asked Dave Barnes, UPS’s chief information officer, during a recent presentation to employees and customers. “We saw the capability of a logistics company to be challenged on one side but on the other be an enabler.”

    An Isreali designer just launched an entire collection for 3D printing online. 

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    Russian investigators announce jewelry haul in governor fraud case

    Russia's top investigative body said on Sunday it had found more than 60 kilograms of jewellery and 150 luxury watches, some of them worth up to $1 million, in a fraud case launched against a regional governor.

    The Investigative Committee said in a statement it had charged the regional governor of the oil-rich northern Komi region, Vyacheslav Gayzer, and his deputy, Alexei Chernov, with organising a criminal group and fraud.

    It also named more than a dozen other suspects, former and current regional officials and businessmen, whom it said were complicit in crimes including fraud and membership of a criminal group.

    Local news wires said Gayzer and a deputy head of the regional government, Konstantin Romadanov, were detained by a Moscow court on Sunday pending trial.

    Both deny the accusations.

    The committee said its servicemen, along with Federal Security Service operatives, had made searches in the residences and offices of the suspects in Komi, St. Petersburg and Moscow.

    "More than 60 kilograms of jewellery, 150 watches worth from $30,000 to $1 million, 50 seals and stamps of corporates have been confiscated," it said.

    Although corruption is widely acknowledged as a major problem in Russia, arrests of senior officials such as regional governors are extremely rare. Prior to this year, only one governor in post-Soviet history had ever been charged with criminal offences while in office, in 2006.
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    Oil and Gas

    Saudi Arabia's Crude Stockpiles at Record High as Exports Fall

    Saudi Arabia’s crude stockpiles rose to a record in July after exports by the world’s biggest oil shipper declined for the third time in four months.

    Commercial petroleum stockpiles increased to 320 million barrels, the highest since at least 2002, from 319.5 million barrels in June, according to data Sunday on the website of the Riyadh-based Joint Organisations Data Initiative. Crude exports slumped 1.2 percent to 7.28 million barrels a day after hitting a record 7.9 million barrels in March. Overseas shipments declined every month since then except in June.

    Brent crude oil prices have slumped 17 percent this year as Saudi Arabia led the Organization of Petroleum Exporting Countries in boosting production to keep market share amid a global supply glut. The failure of producers to cut output fast enough may require prices to fall near $20 a barrel to clear the surplus, Goldman Sachs Group Inc.estimates. Brent was at $47.84 on Monday.

    Saudi Arabia cut back on oil production by 1.9 percent in July, the first drop since February, to 10.36 million barrels a day, according to the JODI data. Saudi Arabia told OPEC its June production of 10.564 million barrels daily was a record, exceeding a previous all-time high set in 1980.

    “It seems that the Saudis are determined to keep their market share at above 10.2 million barrels a day,” Essam al-Marzouq, Kuwait-based independent oil analyst and former vice president at Kuwait Petroleum International, said by phone on Sunday. “In the case when exports are down, they will not scale back on production and will store the crude at home or even abroad."

    Saudi Arabia boosted diesel exports in July to 441,000 barrels a day from 308,000 barrels in June even as production declined to 941,000 barrels from 1.01 million barrels, JODI data show.

    The nation wants to keep storage tanks full, partly to feed two new refineries, a person with direct knowledge of the matter said in July. Refineries processed 2.21 million barrels a day in July, up from 2.09 million barrels in June, according to JODI. Saudi Arabia has built storage tanks with new refineries at Yanbu and Jubail, and domestic capacity will increase after the new Jazan refinery starts in 2017, the person said.

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    Russia actively deploying troops/tanks/helicopters into Syria

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    There's no question that Tanks and support vehicles are arriving in Syria.

    The troops and equipment are coming out of southern Russia, the U.S. officials said. The first passenger flight flew over Bulgaria and Greece, but after that route was shut down all subsequent flights have gone over the Caspian Sea and through Iran and Iraq.

    A couple of Russian amphibious ships have also unloaded equipment at its naval base in Tartus, Syria, which is about 60 miles away from Latakia.

    Moscow, which has backed Syrian President Bashar Assad throughout the nation's 4 1/2-year civil war, said its military experts are in Syria to train its military to use weapons supplied by Russia.

    Russian Foreign Ministry spokeswoman Maria Zakharova accused the West of creating "strange hysteria" over Russian activities there, saying that Moscow has been openly supplying weapons and sending military specialists to Syria for a long time.

    "Russia has never made a secret of its military-technical cooperation with Syria," she said, adding that she could "confirm and repeat once again that Russian military specialists are in Syria to help them master the weapons being supplied."

    President Vladimir Putin and other Russian officials have sought to cast weapons supplies to Assad's regime as part of international efforts to combat the Islamic State of Iraq and Syria, or ISIS, and other militant organizations in Syria.

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    Russian finance ministry proposes move to raise tax on oil extraction - RIA

    Russia's finance ministry has proposed changing the calculation method for Mineral Extraction Tax for oil companies by including a so-called "rouble deduction" that would significantly boost revenues, news agency RIA reported on Saturday, citing finance ministry documents.

    The plan would raise an additional 1.6 trillion roubles ($24.1 billion) in revenues in 2016-2018, RIA reported.

    The reported plan comes as Russia is struggling to find ways of making its budget numbers add up, following a renewed slide in the price of oil that has blown a hole in government revenues largely dependent on energy taxes.

    RIA said the oil tax proposal would involve changing the method used to calculate a so-called cut-off price of $15 per barrel that determines what proportion of oil companies' revenues is not subject to the extraction tax.

    Presently the cut-off price is converted into roubles using the exchange rate that exists when the tax is paid. This is forecast by the finance ministry at 63.5 roubles per dollar in 2016, 64.8 roubles per dollar in 2017 and 65.8 roubles per dollar in 2018, RIA reported.

    Under the new proposal the conversions would instead by made using the 2014 exchange rate indexed by inflation, implying a dollar/rouble exchange rate of 43.8 in 2016, 47.1 in 2017 and 49.8 roubles in 2018, as a result of which more of oil companies' revenues would be subject to the tax.
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    Iran to unveil new oil contracts "in coming weeks"

    Iran's deputy oil minister Rokneddin Javadi was quoted as saying the country would unveil new oil contracts in the coming weeks, earlier than previously expected.

    The prospect of sanctions-free Iran adding more barrels to an already oversupplied market is fueling bearish momentum. Javadi also reiterated Iran's plans to regain its oil production share once Western sanctions are removed.
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    India not making subsidy payments

    Federal Government's failure to meet its obligations on petrol subsidy claims, which has accumulated to over N500 billion is putting pressure on the marketers and the banks, THISDAY’s investigation has revealed.

    THISDAY gathered that the current administration had not made any subsidy payments as against the sporadic payments of its predecessors. The last time marketers were paid was in March 2015 and that was for deliveries made in October 2014.

    Investigations at Ministry of Finance revealed that the main reason for non-payment of subsidy claims was the massive reduction in government revenues as a result of the slump in oil prices and the belief by the Buhari government that there was still a large amount of waste in the administration of the subsidy payments.

    A marketer who declined to be named declares: “This long period of non-payment is a real threat to the health of the financial system, the companies involved in petroleum products importation and to whom subsidy payments are owed and the sustenance of uninterrupted and stable supply of petroleum products to the country.”

    The CEO of a major oil marketing company said: “The government is putting companies in a position where they will fail because it is not meeting its obligation. We are keeping a subsidy system that we obviously have difficulty maintaining and which we are maintaining at the expense of the operators. The issue is that these operators are now dying. This could lead to another round of defaults in the banking sector and a devastation of the downstream marketing sector."

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    China's CNOOC sells one LNG cargo each to BG Group and BP

    China National Offshore Oil Corporation has sold one liquefied natural gas (LNG) cargo each to BG Group and BP, marking the completion of its first ever sell tender, trade sources said.

    CNOOC is selling both cargoes from Australia's newly launched Queensland Curtis export plant.

    The first cargo loads in late October and the second in November.

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    NNPC secures financing

    Nigeria's state oil company has secured a $1.2 billion multi-year drilling financing package to contribute to the running of 36 oil wells to be operated as part of a joint venture deal, according to reports.

    The Nigerian National Petroleum Corporation (NNPC) said the package, financed by a consortium of Nigerian and International lenders, would be used to supplement its contribution to a joint venture operation with Chevron Nigeria, Reuters reported.

    The $1.2 billion package is to be channelled into the development of 23 onshore and 13 offshore wells in two stages over the next three years.

    The first stage, comprising of 19 wells, is projected to deliver 21,000 barrels of crude oil and condensate per day alongside 120 million standard cubic feet of gas each day in 2015 and 2016.

    And the second stage, comprising of 17 wells, is projected to yield 20,000 barrels of crude oil and condensate per day alongside gas production of 7 million standard cubic feet of gas each day between 2016 and 2018.

    Nigeria is Africa's top oil producer and relies on crude sales for around 70% of government revenues.

    The state oil company's ability to maintain its contributions to joint ventures has been hit by the fall in oil prices, and the resulting drop in revenues from crude sales, over the last year.
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    U.S. Oil-Rig Count Falls in Latest Week

    The U.S. oil-rig count fell by eight to 644 in the latest reporting week, the third-straight decline after six consecutive weeks of increases, according to Baker Hughes Inc.

    The number of U.S. oil-drilling rigs, which is viewed as a proxy for activity in the oil industry, has fallen sharply since oil prices started falling last year.

    The rig count dropped for 29 straight weeks before climbing modestly in recent weeks.

    Despite recent increases, there are still about 50% fewer rigs working since a peak of 1,609 in October.

    According to Baker Hughes, the number of gas rigs rose by two to 198.

    The U.S. offshore rig count was 31 in the latest week, unchanged from last week and down 31 from a year earlier.

    For all rigs, including natural gas, the week’s total was down six to 842.
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    Exxon Said to Be on the Hunt for West Texas Shale Bargains

    Exxon Mobil Corp. is adjusting the way it structures shale acquisitions as the global energy giant expands in West Texas, the largest U.S. oil-producing region.

    Executives with Exxon’s shale-drilling unit, XTO Energy, are meeting with small,closely held producers in the Permian Basin to negotiate possible purchases and joint ventures, according to three people familiar with the talks. The company is expanding its use of a new strategy first deployed in the region last year that offers operators a cut of future proceeds rather than big upfront stock or cash payouts, say the people, who asked not to be named because the meetings were private.

    Stung by the 58 percent plunge in U.S. oil prices since June 2014, many drillers face stark choices: shut down rigs to conserve capital and wait out the bust, or surrender some independence to a deep-pocketed savior in exchange for a shot at a future windfall. Exxon is expanding at a time when $40-a-barrel crude is crippling more-indebted companies.

    “You’re going to see more pain,” Ted Harper, a senior fund manager who helps oversee $10 billion at Frost Investment Advisors LLC in Houston, said in a telephone interview. “Some folks are going to be scrambling for alternatives.”

    The XTO executives dispatched from the unit’s Fort Worth, Texas, headquarters have been working since last year to structure prospective deals to provide long-term returns rather than upfront riches, the people said.

    The company is offering to cover all drilling and appraisal costs on a given parcel; in exchange, Exxon promises as much as one-third of revenue from any discoveries to its partner, with Exxon keeping the rest, the people said.

    The Permian Basin is a cluster of oil fields beneath Texas and New Mexico that pumps more crude than half the nations in the Organization Of Petroleum Exporting Countries. Oil production across the region probably will rise more than 1 percent next month to 2 million barrels a day as technological advances enable drillers to extract more crude from each well, Bloomberg Intelligence analysts Vincent Piazza and Gurpal Dosanjh said in a note on Friday.

    For Exxon investors, the new deals strategy provides an added bonus: because the company isn’t using stockpiled common shares to fund the transactions, there’s zero dilution to individuals’ portfolios.

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    Producers breathe new life into Alaska’s Prudhoe Bay

    Alaska’s Prudhoe Bay producers are using innovating production and drilling techniques—some invented or first applied on the North Slope—to boost ultimate expected recovery rates.

    Producers had originally estimated a 40% recovery rate when Prudhoe was first discovered in 1968. But now they estimate a 60% recovery, or as much as 14.1 to 14.2 billion barrels.

    Gas re-injection for pressure maintenance and a miscible injectant made with natural gas liquids, used in enhanced oil recovery, have also been major factors in improved recovery, along with a field waterflood, said Bruce Laughlin, BP’s manager for Alaska reservoir development. BP is the operator and part-owner of Prudhoe Bay. Other owners include ConocoPhillips and ExxonMobil.

    As an oil field, Prudhoe is showing its age. The Prudhoe Oil Pool, the field’s largest oil reservoir, is now producing about 250,000 b/d, or one-sixth of its original rate of 1.5 million b/d. Its wells once produced 10,000 b/d or more but many are now at 1,000 b/d or less.

    The underlying reservoir, however, is still the largest slope producer and one of the largest US producing fields. It is also the economic linchpin of the North Slope, producing half of the overall slope output of about 500,000 b/d. It would be economically difficult to operate the Trans Alaska Pipeline System without Prudhoe, Laughlin said.

    Over the years Prudhoe has become a kind of laboratory for new technologies, mainly because the field is big enough, and the returns great enough, that the producers can afford to take risks.

    New technologies that Prudhoe Bay has fostered include “multi-lateral” wells, or a single surface well with several underground producing legs, which are in effect several wells drilled below surface. As many as six underground wells, or “sidetracks” are now drilled off a single surface well. These were first done on the slope and are now a mainstay of shale drilling that enabled US shale production to blossom.
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    Alternative Energy

    SunEdison Receives A Big Bite Of India's Growing Wind, Solar Energy Pie

    U.S. company SunEdison , one of the world's largest global renewable energy development names, has announced it has signed a Memorandum of Understanding with the provincial government of Tamil Nadu in India to develop 2 gigawatts of wind and solar energy in the next five years. The 2 gw are part of SunEdison's larger plan to develop 15.2 gw of renewable energy in India by 2022.
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    Wind farms, solar to be 'key part' of Australiia's Government's energy strategy

    Josh Frydenberg says renewables will be "key part" of energy policy
    Renewable energy sector says comments are "extremely encouraging"
    The industry has lost 88 pc of investment in past year

    Former prime minister Tony Abbott was vocal in his opposition to the sector, describing wind farms as "visually awful" and saying he wished the Renewable Energy Target (RET) had never been introduced by the Howard government.

    The industry, which lost 88 per cent of investment over the past year, amid uncertainty over the RET,had been hopeful the Government's attitude would change under new Prime Minister Malcolm Turnbull.

    However Mr Turnbull, who lost the party leadership in 2009 over his support for the Rudd government's proposed Emission Trading Scheme, said he was in favour of retaining the Government's current climate change policies.

    "The climate policy is one that I think has been very well designed that was a very, very good piece of work," he said after he took the leadership last week.

    But today, Mr Frydenberg told 774 ABC Melbourne that "clearly renewable energy is a key part of our energy platform".

    "I think wind farms, I think solar, I think they all have a role to play," he said.

    Mr Frydenberg was asked by host Jon Faine if describing renewable energy as a "key platform" represented a u-turn for the Government.

    "Don't play it up to be bigger than it is Jon, what I'm saying is that we as a Coalition Government have entered into a bipartisan agreement with the Labor Party, on a 23.5 per cent renewable energy target by 2020, this will see a doubling of large scale renewable energy," he said.

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    Biggest IPO in Danish history may price Dong at $11billion

    Biggest IPO in Danish history may price Dong at $11billion

    Denmark is preparing what may become the biggest initial public offering in the nation’s history as it sets a road map for the sale of state utility Dong Energy.

    The government is giving itself a maximum of 18 months, but Finance Minister Claus Hjort Frederiksen made clear he wants the process to be swift. “The sooner we get started, the better,” he said in a phone interview from Copenhagen.

    The whole company, which comprises units in oil, gas, wind parks and distribution networks, could be worth as much as 70 billion kroner ($11 billion), according to Jacob Pedersen, an analyst at Sydbank. It will be a “huge” IPO and likely to attract “enormous attention,” he said. Frederiksen, who said the state will hold more than 50 percent after the IPO, declined to give a valuation when asked.

    Denmark had initially earmarked Dong for a public sale by 2018. The company was at the center of a dispute that resulted in a junior coalition member quitting the previous administration in protest after part of Dong was sold to Goldman Sachs last year. The Wall Street bank paid about $1.5 billion for an 18 percent stake. A number of lawmakers questioned the price, which they argued was too low. The government at the time said the cash injection Goldman delivered came at a crucial moment and under terms others weren’t ready to accept.

    Dong said the IPO process will include a review of its Exploration and Production unit, which “operates in a structurally different market environment currently characterized by the significant drop in oil prices over the past 12 months.”

    Credit analysts have argued in favor of a sale of the unit, which Bloomberg Intelligence estimates may be worth between $3.6 billion and $8 billion. “It’s a very wise move for utilities like Dong to sell their upstream units because they are becoming riskier,” Elchin Mammadov, an analyst at Bloomberg Intelligence in London, said by phone. “However, the timing is bad now, and they should probably wait a bit for the oil price to go up.”

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    Precious Metals

    Volkswagen could face fines of up to $18 billion, vehicles gave false emissions data,

    Volkswagen shares fell by up to 14 percent on Monday, after it told U.S. dealers to halt sales of some 2015 diesel cars, following regulators' discovery that software it designed for the vehicles gave false emissions data,

    In a statement published by the carmaker on Sunday, Chief Executive Officer Martin Winterkorn said, "I personally am deeply sorry that we have broken the trust of our customers.

    "Volkswagen has ordered an external investigation of this matter," he said.

    The U.S. Environmental Protection Agency (EPA) said on Friday the software deceived regulators measuring toxic emissions, adding that Volkswagen could face fines of up to $18 billion as a result.

    Volkswagen told to recall nearly 500K vehicles

    "This is not your usual recall issue, an error in calibration or even a serious safety flaw," Bernstein analysts wrote in a note on Sunday. "There is no way to put an optimistic spin on this - this is really serious."

    Cynthia Giles, an enforcement officer at the EPA, said on Friday the cars in question "contained software that turns off emissions controls when driving normally and turns them on when the car is undergoing an emissions test".

    The feature, which the EPA called a "defeat device," masks the true emissions only during testing. When the cars are on the road, they emit as much as 40 times the level of pollutants allowed under clean air rules meant to ensure public health is protected, Giles said.

    "We have admitted to it to the regulator. It is true. We are actively cooperating with the regulator," a Volkswagen spokesman said on Sunday.

    Volkswagen could face civil penalties of $37,500 for each vehicle not in compliance with federal clean air rules. Some 482,000 four-cylinder VW and Audi diesel cars sold since 2008 are involved in the allegations.

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    Base Metals

    Glencore inventory sale could sink world zinc prices further

    Substantial amounts of base metal zinc could be released onto world markets, weighing further on fast falling prices, as major producer Glencore implements a plan to liquidate some of its commodity inventories to help pay off debt.

    The overhang of inventories in London Metal Exchange (LME) storage facilities, which has surged more than 40 percent since early August, has wrong-footed investors who had earlier this year targeted zinc as a top bet in metals due to closures of big mines that would create shortages.

    Zinc, mainly used to galvanize steel to protect against rust in autos and construction, has slumped from being one of the best performing industrial metals earlier in the year to one of the worst due to the inventory change.

    "It's been a big shock to the market, this massive flood into the LME warehouses," said Stephen Briggs, metals strategist at BNP Paribas.

    But mining and trading company Glencore may add further to a plentiful supply situation after announcing a raft of measures to slash its net debt of $30 billion.

    At interim results last month, Glencore said it was cutting "readily marketable inventories" by $1.5 billion. Last week it said it was further reducing working capital by an additional $1.5 billion, partly from liquidating more inventories.

    Swiss-based Glencore gave no details about which inventories it was selling off and a spokesman declined to comment.

    Glencore had inventories worth $23.6 billion at the end of June, but financial statements did not provide a breakdown of inventories by commodity. Glencore has operations ranging from metals to coal to grains.

    Glencore is one of the world's biggest producers of both zinc concentrate, or partially processed ore, and the refined metal. It increased its overall output of zinc by 12 percent in the first half of the year to 730,300 tonnes.

    "I can't confirm it (Glencore selling metal stocks) ... but it is much easier to liquidate LME (refined) metals than concentrates," Briggs said.


    LME zinc inventories MZNSTX-TOTAL have surged 43 percent to 608,885 tonnes since August 7, with the bulk of metal arriving at warehouses in New Orleans.

    Glencore's warehousing unit, Pacorini Metals, dominates activity in New Orleans, owning nearly two-thirds of the 42 depots in the city.

    Benchmark zinc on the London Metal Exchange jumped to an eight-month peak of $2,404.50 a tonne in May, but has since slid nearly 30 percent to $1,740.

    Analysts said some of the material appearing in LME sheds was probably being shifted from non-LME facilities, but some was also likely to be the result of Glencore selling off stocks.

    Glencore, whose biggest refined zinc output is in Europe, would be keen to send material to the United States to keep premiums firm in its key European market, an industry source said.

    "They may want to move the inventory off their balance sheet and also provide a bit of a prop, or a floor, to European premiums," said the source, who declined to be named.

    Industrial consumers pay a premium or surcharge over the LME cash price for immediate delivery of metals.

    The heavy flow of inventories is dampening the impact of the closure of big mines this year, which had been expected to tighten the supply balance and create a deficit.

    This year, China-owned MMG is closing its Century Mine in Australia while Vedanta Resources is shutting down its Lisheen Mine in Ireland.

    "It's (inventory rises) creating negative sentiment around zinc," said analyst Vivienne Lloyd at Macquarie in London.

    "The market remains in a technical deficit for refined metals, but the stocks should be able to easily feed any actual shortfall in the marketplace."

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    Investor Groups Balk at Glencore’s Share Sale

    Two British investor groups on Thursday criticized commodities giant Glencore PLC for not considering all of the company’s shareholders on an equal basis when it issued $2.5 billion worth of new shares to cut its net debt.

    The Investment Association and the National Association of Pension Funds said 22% of the new shares were bought by Glencore employees, including Chief Executive Ivan Glasenberg and Chief Financial Officer Steven Kalmin, with the rest being offered to select institutional investors by three banks. Many regular Glencore shareholders were left out of the sale, the associations said.

    Glencore chose to issue the shares as part of a series of measuresaimed at cutting its net debt by a third to around $20 billion and safeguarding its investment grade credit rating. The company has been hit hard by a commodities price rout that has affected nearly all of the materials it buys, sells and producers, from copper to oil to zinc.

    The two associations said Glencore’s board agreed at the company’s annual shareholders’ meeting in May to adhere to the “principles of pre-emption,” a business practice in which companies consider all shareholders equally when issuing new stock that could dilute the value of current shareholders.

    “Whilst shareholders generally recognize that the company needed to strengthen its balance sheet, the use of the authority [to issue shares] in this manner is a serious and unnecessary breach of the principles,” the associations said. “This sets a very damaging precedent for market practices.”

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    Freeport-McMoRan Completes $1 Billion at-the-Market Equity Offering, wants more

    Freeport-McMoRan Inc. announced today the completion of its at-the-market offering of common stock announced on August 10, 2015. FCX raised $1 billion in gross proceeds through the sale of 96.7 million shares of FCX common stock in open market transactions since August 10, 2015. The shares were issued pursuant to FCX’s shelf registration statement.

    FCX also announced today that it has filed with the Securities and Exchange Commission (SEC) a prospectus supplement under which it may offer and sell additional shares of common stock having aggregate gross proceeds of up to $1 billion from time to time through designated sales agents. Sales of the common stock, if any, would be made by means of ordinary brokers’ transactions or block trades on the New York Stock Exchange at market prices or as otherwise agreed with its agents.

    FCX intends to use the net proceeds from these offerings for general corporate purposes, which may include, among other things, the repayment of amounts outstanding under its revolving credit facility and other borrowings and the financing of working capital and capital expenditures.

    FCX also announced that it continues to engage in discussions to partner with strategic investors interested in investing capital in the development of its oil and gas properties and to consider the previously announced potential initial public offering of a minority interest in Freeport-McMoRan Oil & Gas Inc. (FM O&G) as market conditions warrant. These actions, together with previously announced capital cost revisions, are being pursued as required to fund oil and gas capital spending within cash flow for 2016 and subsequent years.
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    Private equity firm EMR teams up to buy Australian copper miner

    Private equity firm EMR Capital has teamed up with the former head of Equinox Minerals to buy a small Australian copper mine for up to A$15 million ($10.75 million) plus taking on about A$40 million in rehabilitation bond costs, the companies said in a joint statement.

    The mine in Queensland state will be bought from Aditya Birla Minerals Ltd, a unit of India's Hindalco .

    The deal comes despite copper prices currently being mired near six-year lows around $5,000 a tonne, which has forced some companies to suspend production.

    EMR is working with Lighthouse Minerals, a mining company set up by Crag Williams, the former chief executive of Equinox Minerals, a Zambia-focused copper producer that was taken over by Canada's Barrick Gold for $7.5 billion in 2011.

    EMR and Lighthouse aim to turn the Mt Gordon mine, which has been on care and maintenance since April 2013, into a mid-tier Australian copper producer.

    The mine, which will be run by managing director of Lighthouse Minerals Carl Hallion, is expected to produce approximately 1.4 million tonnes a year of copper concentrate.

    "The primary focus for now will be building up and making sure we have a successful restart at Mt Gordon," Hallion told Reuters, adding that the company was open to further acquistions should the restart prove a success.

    EMR executive chairman Owen Hegarty, a former managing director of Rio Tinto Asia, will be chairman.

    "While commodity prices and markets remain challenging, we are confident of the medium- and longer term outlook for copper," Hegarty said in a statement.
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    Steel, Iron Ore and Coal

    Baltic Dry Index jumps most since '09 on speculated ship shortage

    The Sydney Morning Herald reported on Saturday that the Baltic Dry Index – a measure of shipping costs for commodities – had its biggest two-day gain since 2009, over speculation that Chinese iron ore purchasing will cause a shortage of vessels, thereby increasing freight rates. The London-based index rose 18 percent, with costs for capesize vessels that transport iron ore from Brazil to China, climbing 16 percent.

    "There's a misunderstanding among investors that China isn't buying iron ore: it is," Jeffrey Landsberg, the managing director of Commodore Research in New York, told SMH. "China is still buying every single ton that global miners want to sell."

    Shipping costs have been in a slump this year as shipbrokers predict too many vessels chasing too few cargoes due to slowing economic growth in the world's biggest commodities consumer.

    Meanwhile the steelmaking ingredient rose for the second straight day on Monday, with benchmark iron ore for immediate delivery to the port of Tianjin, China trading at US$57.10 a tonne. Iron ore hit a 10-week high on September 10, trading at $58.50 a tonne, 30-percent above record lows for the spot market reached on July 8.
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    Patriot Coal says in talks with new bidder - Lawyer

    Image Source: Patriot CoalA company lawyer said that Bankrupt Patriot Coal Corp. is in "advanced stage" talks with a new potential bidder for the bulk of its assets, which could set up a contested auction on Monday.

    Patriot lawyer Stephen Hessler told the U.S. Bankruptcy Court in Richmond, Va., that if the unidentified party made a bid, it would likely be similar to the deal proposed by Blackhawk Mining LLC. He did not elaborate.

    Bids are due Friday for Patriot's assets, which includes mines in West Virginia and reserves in other states. An auction, if necessary, will be held on Monday.

    Patriot said that it will run out of cash as soon as next month and needs to close its sale and confirm a plan to exit bankruptcy on an unusually tight schedule.

    Judge Keith Phillips on Wednesday scheduled a confirmation hearing for Oct. 5 and overruled creditors who said they need much more time to investigate if the bankruptcy exit plan, which will be amended on Friday, is fair.

    The judge said that "There is a liquidity crisis and I don't think that is being made up."

    Blackhawk initially proposed acquiring Patriot's assets not for cash but by issuing to Patriot's creditors new debt and a stake in the company that will own the assets.

    Due to financing problems, Blackhawk's proposal is being reworked, and the final details will be in the plan that Patriot has said it will file on Friday.

    Creditors told the judge on Wednesday that they are going to receive much less than what they had been initially promised.

    Jeffrey Jonas represents investors holding some of Patriot's USD 250 million term loan, and he said his clients' investment "went up in smoke literally overnight" under the revised bid from Blackhawk.

    Mr Ken Ziman, who represents the agent for a USD 200 million credit facility, said that due to the new Blackhawk bid, he would file a motion to convert the case to a Chapter 7 liquidation if Patriot failed to confirm its plan on Oct. 6.
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    Ailing steelmaker SSI halts production at Redcar plant in Britain

    Britain's second-largest steelmaker SSI UK said it was halting iron and steelmaking operations at its Redcar plant in northeast England as its business has suffered from a sharp slide in steel prices.

    Media reports this week said up to 2,000 jobs were at risk after SSI UK, a unit of Thailand's Sahaviriya Steel Industries (SSI), missed several debt repayments to banks, calling its future into question.

    "It is with great regret that we have had to make this announcement. Our decision follows a major deterioration in steel prices affecting our business during the course of this year," said Cornelius Louwrens, SSI UK Business Director and Chief Operating Officer.

    "We are taking this pause in production in order to re-evaluate and assess the situation following the outcome of ongoing discussions with our various stakeholders, including Government and suppliers."

    Louwrens did not mention job losses but said discussions will be held as soon as possible with trade unions and employee representatives.

    Britain's steel industry is in crisis, the government said on Thursday during a debate on the sector that followed reports of problems at SSI.

    SSI, Southeast Asia's largest fully integrated steel sheet producer, bought the Redcar plant in Teeside, northeast England, from Tata Steel in 2011, bringing cheer to locals as it revived 160 years of steelmaking.

    Permanent closure of the plant could put tens of thousands of jobs in the economically deprived north of England at risk.

    Producing steel profitably in Britain has become increasingly difficult due to cheap imports and a strong currency, plus relatively high energy costs and "green" taxes imposed on heavy industry that are some of the highest in the world. Tata Steel announced last month that it would mothball a plant in south Wales due to tough market conditions.
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