Mark Latham Commodity Equity Intelligence Service

Wednesday 9th November 2016
Background Stories on www.commodityintelligence.com

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    Macro

    President Trump and Energy.

    AN AMERICA FIRST ENERGY PLAN

    DONALD J. TRUMP’S VISION

    • Make America energy independent, create millions of new jobs, and protect clean air and clean water. We will conserve our natural habitats, reserves and resources. We will unleash an energy revolution that will bring vast new wealth to our country.
    • Declare American energy dominance a strategic economic and foreign policy goal of the United States.  
    • Unleash America’s $50 trillion in untapped shale, oil, and natural gas reserves, plus hundreds of years in clean coal reserves.
    • Become, and stay, totally independent of any need to import energy from the OPEC cartel or any nations hostile to our interests.
    • Open onshore and offshore leasing on federal lands, eliminate moratorium on coal leasing, and open shale energy deposits.
    • Encourage the use of natural gas and other American energy resources that will both reduce emissions but also reduce the price of energy and increase our economic output. 
    • Rescind all job-destroying Obama executive actions. Mr. Trump will reduce and eliminate all barriers to responsible energy production, creating at least a half million jobs a year, $30 billion in higher wages, and cheaper energy.


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    Energy impacts of Trump's surprise US presidential victory


    Republican Donald Trump has won the US presidential election in a surprise upset after polls had predicted a comfortable lead for his Democratic opponent, Hillary Clinton, the Associated Press is projecting.

    While Trump has given few concrete details about his energy plans, his statements during the campaign indicate he would likely adopt policies that attempt to expand fossil fuel production, ease regulations on industry and roll back President Barack Obama's clean air policies.

    Here is a snapshot of some of Trump's energy-related statements:

    SUPPLY

    Trump has said he supports all forms of energy and wants the market to decide which ones succeed. He has promised to open all federal lands and waters to fossil fuel production, in contrast to Clinton, who had called for new, stricter limits on oil and gas production on public lands and indicated she wanted US offshore production confined to only the Gulf of Mexico.

    Analysts say it is impossible to determine just how much of an impact a Trump administration may have on domestic supply because of a number of shifting factors, particularly prices.

    Article Continues below...


    Platts US Election Webinar
    Nov. 11, 2016 • 1 p.m. Eastern

    How will the newly elected president impact policies, and how will these policies impact commodity markets? Please join S&P Global Platts for a free webinar, Platts US Election Webinar: What to expect in petroleum, natural gas, power, and metals, on Friday, November 11 at 1 p.m. EDT as we take a deep dive into these issues.

    LEARN MORE AND REGISTER


    But Trump, widely seen as a far bigger supporter of the oil and natural gas industry, will likely rebuff any environmentalist attempts to curb domestic fossil fuel production and will likely give US producers access to far more on and offshore plays than Clinton would have.

    "I think it's like the production of anything, if you have access to more of it, you're going to have more," North Dakota Representative Kevin Cramer, a Republican and top Trump energy adviser, told S&P Global Platts. "In fact, whether it correlates to more overall production or not, it certainly provides a diversity of opportunities for producers so that, with a low market price, they can pick the most productive places to drill with the greatest efficiencies."


    DEMAND

    Trump has said he will pursue a policy path to open up more US lands and waters to drilling and, in turn, boost consumption of even cheaper domestic oil and other fossil fuels. Analysts say his broad plans to boost US production and eliminate many of President Obama's regulatory efforts to combat climate change may result in less demand reduction than if Clinton were elected.

    Trump would likely quash efforts to institute new greenhouse gas performance standards for petroleum refineries and may push to weaken future fuel economy standards for light-duty vehicles, but those possible moves would not necessarily correspond with an increase in demand, particularly since efficiency gains already in place in the US vehicle fleet are already forecast to cut gasoline demand as much as 500,000 b/d by 2020.

    At the same time, oil demand is driven by a country's gross domestic product and will likely be defined by economic factors largely outside the new president's control, said Stewart Glickman, head of energy equity research for S&P Global Market Intelligence. In spite of any policy changes, if GDP goes up, people will likely drive more and demand will increase, Glickman added.


    REGULATIONS

    Trump has promised to either dismantle or overhaul the Environmental Protection Agency and roll back Obama administration regulations to curb coal industry pollution. Cramer said Trump believes EPA needs to return to its core mission of protecting clean water and clean air, and that Congress has granted it too much leeway in interpreting legislation.

    Trump is expected to try to scrap the Clean Power Plan. He questions the widely held scientific consensus that human activity is causing climate change.

    Trump is expected to abandon, or at least weaken, efforts by EPA and the Department of the Interior to regulate methane emissions from oil and gas operations and also could weaken future car and truck fuel-economy standards.


    INFRASTRUCTURE

    Trump has not addressed the Dakota Access Pipeline controversy, but he holds personal investments in project sponsors Energy Transfer Partners and Phillips 66. He has said that, if elected, he would urge TransCanada to renew its Keystone XL permit application, which the Obama administration rejected in late 2015 after years of debate.

    Aside from those high-profile pipeline controversies, it's unlikely the next president will have a big impact on future midstream projects, since authority over most oil and gas pipelines falls outside the administrative branch. But LNG export facilities and cross-border oil and gas pipelines must receive a presidential permit, and Trump's appointees will be weighing those applications.

    Trump has said he would spend "at least double" what Clinton planned on infrastructure, funding it with new debt to take advantage of still-low interest rates.


    RENEWABLE ENERGY

    Trump's possible efforts to end incentives for alternative energy development would boost near-term demand for fossil fuels. For example, a potential cut in the Investment Tax Credit to 10% from the current 30% would slash solar installation demand by 60%, according to S&P Global Market Intelligence.


    BIOFUELS

    Trump has offered broad public support to the Renewable Fuel Standard, but in September he unveiled an economic policy package that included a statement that the market underpinning the RFS, the EPA's Renewable Identification Number program, "penalizes" refiners for not meeting "impossible" requirements. After these statements were criticized, they were removed from Trump's campaign website and staffers claimed they were posted in error.

    https://twitter.com/PlattsOil/status/796261172358053888
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    Trade

    1. Withdraw from the Trans-Pacific Partnership, which has not yet been ratified.

    2. Appoint tough and smart trade negotiators to fight on behalf of American workers.

    3. Direct the Secretary of Commerce to identify every violation of trade agreements a foreign country is currently using to harm our workers, and also direct all appropriate agencies to use every tool under American and international law to end these abuses.

    4. Tell NAFTA partners that we intend to immediately renegotiate the terms of that agreement to get a better deal for our workers. If they don’t agree to a renegotiation, we will submit notice that the U.S. intends to withdraw from the deal. Eliminate Mexico’s one-side backdoor tariff through the VAT and end sweatshops in Mexico that undercut U.S. workers.

    5. Instruct the Treasury Secretary to label China a currency manipulator.

    6. Instruct the U.S. Trade Representative to bring trade cases against China, both in this country and at the WTO. China's unfair subsidy behavior is prohibited by the terms of its entrance to the WTO.

    7. Use every lawful presidential power to remedy trade disputes if China does not stop its illegal activities, including its theft of American trade secrets - including the application of tariffs consistent with Section 201 and 301 of the Trade Act of 1974 and Section 232 of the Trade Expansion Act of 1962.

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    Foreign Policy.

    • Peace through strength will be at the center of our foreign policy. We will achieve a stable, peaceful world with less conflict and more common ground.
    • Advance America’s core national interests, promote regional stability, and produce an easing of tensions in the world. Work with Congress to fully repeal the defense sequester and submit a new budget to rebuild our depleted military.
    • Rebuild our military, enhance and improve intelligence and cyber capabilities.
    • End the current strategy of nation-building and regime change.
    • Ensure our security procedures and refugee policy takes into account the security of the American people.

    Read Donald J. Trump’s Plan to Make America Safe and Respected Again, here.

    • Work with our Arab allies and friends in the Middle East in the fight against ISIS.
    • Pursue aggressive joint and coalition military operations to crush and destroy ISIS, international cooperation to cutoff their funding, expand intelligence sharing, and cyberwarfare to disrupt and disable their propaganda and recruiting.
    • Defeat the ideology of radical Islamic terrorism just as we won the Cold War.
    • Establish new screening procedures and enforce our immigration laws to keep terrorists out of the United States.
    • Suspend, on a temporary basis, immigration from some of the most dangerous and volatile regions of the world that have a history of exporting terrorism.
    • Establish a Commission on Radical Islam to identify and explain to the American public the core convictions and beliefs of Radical Islam, to identify the warning signs of radicalization, and to expose the networks in our society that support radicalization. 

    Read Donald J. Trump’s Detailed Plan to Defe

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    The Economy.

    Today, I’m going to outline a plan for American economic revival – it is a bold, ambitious, forward-looking plan to massively increase jobs, wages, incomes and opportunities for the people of our country.

    My plan will embrace the truth that people flourish under a minimum government burden, and it will tap into the incredible unrealized potential of our workers and their dreams.
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    Democrats leaving the US?


    Canada immigration website apparently crashed on Tue night as Donald Trump’s prospect of winning Election 2016

    @PDChinaImage title
    EU Reactions.

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    U.S. says it has established WTO panel over Chinese trade of 11 raw materials


    The United States has successfully established a dispute-settlement panel at the World Trade Organization to examine China's "unfair export duties and quotas" on 11 raw materials, U.S. Trade Representative Michael Froman said on Tuesday.

    "We will aggressively pursue this challenge on behalf of U.S. steelworkers, auto workers, aerospace workers, and the many Americans whose businesses, jobs, and livelihoods depend on the strength of these and other industries," Froman said in a statement.

    The raw materials include antimony, chromium, cobalt, copper, graphite, indium, lead, magnesia, talc, tantalum, and tin. Froman had said last month that he had asked the WTO to establish the panel.

    http://www.reuters.com/article/usa-china-trade-idUSL1N1D915O
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    Iranian miner seeks up to $4 bln for copper, steel projects


    A private Iranian company is seeking joint venture partners to help develop copper, steel and other projects in the country, managing director Ebrahim Sadeghi of Mahan Company for Mines and Industries Development (MACMID) said on Tuesday.

    MACMID has two copper mines already under development, the Chah Firuzeh mine and the Daralou mine, both of which are being developed with a conglomerate that includes state-owned National Iranian Copper Industries.

    The group is seeking $600 million from one or more international joint venture partners to help develop the two copper mines and associated processing plants, each aiming to produce about 26,000 tonnes of copper a year by about 2019.

    "We are looking to bring in international partners to jointly develop local deposits," Sadeghi said through an interpreter on the sidelines of a mining conference. "Iran has some of the richest deposits in the Middle East. Gold, copper zinc."

    Construction of the Chah Firuzeh mine is about 20 percent complete, and Daralou is around 35 percent complete, he said.

    MACMID was set up in 2013 as a private joint stock company, backed by Iran's Tourism Financial Group.

    It eventually aims to put in place a range of projects, including production of steel slab and a fertiliser business, and hopes to raise $4 billion in foreign investment after having secured $1 billion from local investors, Sardeghi said.

    MACMID had a mandate to use European technology only in its developments.

    Sardeghi said the investment climate in Iran had improved since the lifting of a range of international sanctions in mid-January.

    "The climate is not cold, the process just takes time," he said.

    MACMID expected commodity prices to increase, while the copper projects would break even at prices as low as $4,000 a tonne, he said. Copper is currently above $5,000.

    "In 2018, it is going to be a better market for iron ore and steel. It won't be a return to the golden age, but it won't be as bad as 2016, 2017," he added, due to capacity cuts in China and a global recovery.

    http://www.reuters.com/article/imarc-mining-iran-idUSL8N1D902J
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    India abandons large bank notes.

    India Surprises with a Wealth Tax on the Black Market

    by  on November 8, 2016at 12:01 pmin Current Affairs, Economics | Permalink


    TheEconomicTimes: In a move to curb the black money menace, PM Narendra Modi declared that from midnight currency notes of Rs 1000 and Rs 500 denomination will not be legal tender.

    In his 40-minute address, first in Hindi and later in English, the Prime Minister said the notes of Rs 500 and Rs 1000 “will not be legal tender from midnight tonight” and these will be “just worthless piece of paper.”

    This is a big deal as these notes account for at least 80% of all cash in circulation! Ken Rogoff has argued for eliminating cash but this doesn’t seem to be a move in that direction since the notes will be replaced with new Rs 500 and Rs 2000 notes. Rather it seems to be a wealth tax on the black market. Old notes can be turned into a bank for replacement so ordinary people won’t lose money. People in the black market, however, probably have a lot of cash that they are unwilling to turn into a bank because they don’t want to reveal their wealth. Imagine walking into a bank and depositing a million dollars in cash–that is going to create a record that the tax authorities can follow. The wealth tax on the black market interpretation is consistent with the surprise–if people knew that this was coming they could have laundered the money but that is going to be more difficult and costly now.

    It’s impressive that a government could pull off this level of secrecy. Good for Modi’s image as competent, uncorrupt and technocratic. Indians are calling it a “surgical strike on black money” which is the imagery Modi wants. But what will happen tomorrow when people don’t have enough cash to buy goods and services?

    And there is another issue. Why is the black market so large to begin with? The wealth tax will punish current holders of cash but if the policies that generate the black market aren’t addressed the black market will grow again perhaps using gold, USD or bitcoin (see my addendum). It would be better to reduce barriers to entry and encourage more economic activity to move out of the black market and into the formal sector.


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    Incitec Pivot posts lower profit, warns 2017 will be challenging


    Australian explosives and fertiliser maker Incitec Pivot warned on Tuesday it expects markets for its key products to remain weak in 2017, after reporting a 26 percent drop in annual underlying profit on Tuesday, in line with analysts' forecasts.

    The world's No. 2 maker of commercial explosives behind Orica has been hit by a mining slump - especially in the coal industry - which has resulted in less demand for ammonium nitrate.

    The company said miners' focus on cost-cutting was also biting.

    "The explosives sector is expected to remain challenged through 2017 largely due to regional oversupply of ammonium nitrate and ongoing customer cost focus," Incitec Pivot said in a statement.

    It said fertiliser demand may increase in the year ahead following wetter- than-average conditions in the second half of 2016, but warned that "depressed global fertiliser prices may persist in the short term."

    Net profit before one-offs fell to A$295.2 million ($228 million) for the year to September from A$398.6 million a year earlier, which was a touch better than analysts' forecasts of around A$289 million.

    Analysts are forecasting 18 percent growth in underlying profit for the 2017 financial year.

    Incitec's full-year dividend of 8.7 cents a share was slightly below forecasts for 9 cents.

    http://www.reuters.com/article/incitec-pivot-results-idUSL4N1D85IO

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    Oil and Gas

    Libya’s Largest Oil Port May Be Ready Next Week for Shipments


    Libya’s largest oil export terminal may re-open as early as next week in a move that would provide relief for the cash-strapped country holding Africa’s largest crude reserves.

    Tankers may be able to load at Es Sider port by next week as maintenance work at the terminal is almost complete, a National Oil Corp. official said by phone on Tuesday, asking not to be identified because he’s not authorized to speak with news media. Es Sider hasn’t exported crude since force majeure, a legal status protecting a party from liability if it can’t fulfill a contract for reasons beyond its control, was declared on loadings almost two years ago.

    Libya currently produces 2the official said. This compares with production of about 1.6 million barrels a day before the 2011 uprising that ousted longtime leader Moammar Al Qaddafi. Output withered after international oil companies withdrew amid the conflict between rival governments and armed groups over the nation’s oil fields, ports and pipelines.

    Libya, a member of the Organization of Petroleum Exporting Countries, is struggling to boost crude production and exports since the NOC reached an agreement in September with Khalifa Haftar, the commander of forces controlling important oil ports. As a result of the deal, the country was able to ship 781,000 barrels from the port of Ras Lanuf on Sept. 21, the first international cargo from that terminal since force majeure was declared in December 2014.

    Loading Plan

    The North African producer plans to ship nine cargoes this month from the eastern port of Brega, according to a loading program obtained by Bloomberg. The shipments will total 6.87 million barrels, or the equivalent of 229,000 barrels a day, the plan showed.

    Es Sider is ready to export as much as 1.5 million barrels and has storage capacity of 2.5 million, the NOC official said. The terminal has yet to receive formal instructions from NOC to re-start, Ghaith Abdul Qader, an official in Es Sider’s control department, said in a phone interview.

    Al-Waha Oil Corp., which operates Es Sider, resumed production last month and currently pumps 65,000 barrels a day, Abdul Qader said. Al Waha is storing its crude in storage tanks belonging to Harouge Oil Operations Co., he said.

    http://www.bloomberg.com/news/articles/2016-11-08/libya-s-largest-oil-port-may-be-ready-next-week-for-shipments

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    Another Niger delta bombing


    Oil pipeline bombed Tuesday in Niger Delta, security sources say. 2nd attack in < wk on pipelines feeding Nigeria's Forcados line

    @HermsTheWord  1m
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    Saudi private sector dues to be cleared by Dec. 31; signing of SR1 trillion mega projects halted


    A package to clear all the government dues owed to private sector firms before the end of 2016 has been announced.

    This is part of a raft of measures and procedures approved during a meeting of the Council of Economic and Development Affairs (CEDA), chaired by Deputy Crown Prince Muhammad Bin Salman, second deputy premier and minister of defense, at Al-Yamamah Palace in Riyadh on Monday night.

    The meeting has authorized the Deputy Crown Prince, who is also chairman of CEDA, to present the package to Custodian of the Two Holy Mosques King Salman.

    The measures include reviewing a number of projects and rearranging priorities of spending, in addition to halting the signing of several mega projects amounting to a total of SR1 trillion.

    The meeting came out with a package of solutions and procedures for the settlement of dues that fulfilled the requirements. The package entails quick start of settling the dues and complete them before Dec. 31, the last day of the current fiscal year, the Saudi Press Agency reported.

    The meeting discussed a number of economic and development issues including complete payment of amounts owed to the private sector, while noting that this has been delayed in light of a sharp decline in oil revenues.

    The Council discussed the mechanism for the disbursement of these dues based on rearranging priorities of spending by achieving the highest degree of transparency through an electronic portal so as to become a tool to provide accurate information about public expenditure.

    The Council discussed the state of completed government projects, associated measures taken by the state to review a number of projects and rearranging priorities of spending, according to their significance and efficiency, including the application of procedures by overcoming operational obstacles.  

    The meeting also discussed the reports of government agencies as well as that of the Office to Raise Efficiency of Spending about the actions taken to raise the efficiency of government spending, including orders and decisions of restructuring some government sectors and the actions taken for reviewing the amounts approved for a number projects in alignment with the priorities, developmental needs and standards of efficiency in spending.

    These included a review of hundreds of contracts so as to re-schedule execution of some of them, modify contractual formulas and technical specifications for others, in accordance with the statutory regulations and the terms of the contract that contributed to the savings of tens of billions of riyals.

    http://saudigazette.com.sa/saudi-arabia/private-sector-dues-cleared-dec-31-signing-sr1-trillion-mega-projects-halted/
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    Australia set to boost imports of diesel to power coal mines

    Australia set to boost imports of diesel to power coal mines

    Australian imports of diesel are set to grow as miners in the country rev up generators used to power pit operations following a resurgence in coal markets, trade sources said on Tuesday.

    Prices for coal have more than doubled this year after China moved to buy more overseas, with miners in top producers such as Australia pushing to meet demand.

    That is expected to ramp up appetite for the diesel they need to power mines, stoking the amount of profit made on refining the fuel, which in early November had already hit its highest in nearly a year.

    "Demand (for diesel) is better this year than last year ... the (coal) mines are restarting slowly," said a trader who supplies diesel to Australian mines. He declined to be identified as he was not authorised to speak with media.

    A second trader added that the increased Australian demand would likely result in about one additional medium-range diesel cargo every two months, or about 300,000 barrels.

    He added that the increase in imports would take about 6 to 12 months to kick in as it would take a while to restart shuttered coal mines.

    Australia imported 1,457 megalitres, or about 9.2 million barrels, of diesel in August, the highest since May, according to the latest government data.

    The country imported a total of 11,601 megalitres from January to August in 2016, up from 10,872.90 megalitres over the same period last year.

    The uptick comes as appetite for diesel is also growing in other major coal mining nations, with diesel used in Indonesia's mining sector estimated to have risen by 5 to 10 percent over July-September.

    The first trader said that about 30 percent of Australia's diesel imports are used in mining, with the rest going to the transport sector.

    "Diesel demand in retail is (also) good because local car manufacturers are shutting down and the cars (Australia is)importing are all mainly diesel," said another trader.

    Motorists are switching from locally made, big passenger cars to overseas-made small cars and sports utility vehicles which typically use diesel, he added.

    http://www.reuters.com/article/australia-diesel-idUSL4N1D84DO
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    YPF posts $1.97 bln Q3 net loss, $3.64 bln revenue


    Argentina's state-controlled oil firm YPF recorded a net loss of 30.26 billion pesos ($1.97 billion) in the third quarter and revenue of 55.8 billion pesos ($3.64 billion) during the three-month period, the company said on Tuesday.

    http://www.reuters.com/article/argentina-ypf-results-idUSL1N1D91W8
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    OMV's Q3 adjusted operating profit above expectations


    Nov 9 Austrian oil and gas group OMV's adjusted operating profit in the third quarter was above expectations at 415 million euros ($466 million), but down 16 percent from the same period last year, it said on Wednesday.

    To balance low oil prices, OMV is cutting costs and investments, which it has reduced to 2 billion euros this year and 2.2 billion in 2017 - less than a previous estimate of 2.4 billion.

    The average estimate in a Reuters survey of analysts for clean current cost of supplies (CCS) earnings before interest and tax (EBIT) was 376 million euros, while a company poll said 330 million. This measure strips out special items and inventory holding gains or losses.

    http://www.reuters.com/article/omv-results-idUSV9N1AB02B
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    Qld permanently bans UCG, publishes gas discussion paper


    The hunt for underground coal gasification (UCG) in Queensland is now a thing of the past after legislation was introduced into the state Parliament to ban the operations.

    Minister for State Development and for Natural Resourcesand Mines, Dr Anthony Lynham, said on Tuesday that amendments to the Mineral Resources Act would implement an April decision to prohibit UCG in Queensland.

    “The government has carefully considered the results of trials at two UCG pilot projects undertaken to establish the commercial and environmental viability of this potential industry,” Lynham said.

    “The government has concluded that with the potential impacts of UCG activities and the issues associated with the trial projects to date, the risks of allowing UCG projects to grow to commercial scale are not acceptable and outweigh the foreseeable benefits.

    “Accordingly, the government had decided not to allow the development of a commercial-scale UCG industry in Queensland.”

    Lynham said that the ban would also apply to the in-situ underground gasification of oil shale. The legislation also provided for the necessary work involved in decommissioning Queensland’s remaining existing UCG pilot project.

    “While UCG activities will be prohibited in Queensland, the remaining existing UCG pilot project will still need to carry out those activities necessary for environmentalrehabilitation, and the decommissioning and removal of plant and equipment related to carrying out UCG activities.

    “Regulation and monitoring of the UCG decommissioning and rehabilitation activities are being undertaken by the Department of Environment and Heritage Protection.”

    The ban on UCG comes just days after the state government launched its first industry-wide gas discussion paper, filled with 29 reform ideas expected to spark debate.

    “The gas sector is critical to the Queensland economy for the jobs, revenue, regional growth and significant economic benefits it delivers,” Lynham said.

    “Gas helps fuel our homes, businesses and industry and our growing liquefied natural gas (LNG) exports will increasingly deliver important royalties to fund Budget initiatives.”

    He noted that although there was strong demand, and solid foundations for reliable supply for the next 30 years, there were challenges to the industry.

    “That’s why we are developing a Gas Supply and Demand Action Plan to tackle the challenges and maximise supply, economic and job benefits for Queensland. We will deliver an overarching strategy to maximise domestic and industrial supply at affordable prices.”

    Lynham said the discussion paper’s 29 recommendations focus on supply and the gas sector’s “social licence”, the community’s general acceptance of the resources sector and its activities.

    “Building community understanding and confidence in the gas sector and striking the right balance between environmental protection, health and safety and social performance will be critical for its ongoing growth,” he said.

    The Australian Petroleum Production and ExplorationAssociation (Appea) has welcomed the action plan, with CEO Malcolm Roberts noting that with A$70-billion invested in local LNG projects, Queensland was now a world leader in the sector.

    “The industry congratulates the state government for recognising the need for regulatory reforms to boost local exploration and development. It is heartening to see the government accept the need to reduce the regulatory costs of doing business in Queensland, industry has already sharply cut its own operating costs to stay competitive in a depressed global market.

    “The problem is acute for the smaller explorers that play a vital role in finding and developing new gas reserves. They battle to attract investment capital and can face high upfront regulatory costs,” Roberts said.

    He said that reforms in this area would give industry the confidence to boost its needs to turn exploration into production.

    http://www.miningweekly.com/article/qld-permanently-bans-ucg-publishes-gas-discussion-paper-2016-11-08
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    Canning Basin shale gas in Fortescue’s sights


    Operations off Australia’s North West Shelf. Facilities there are close to the Canning Basin.

    One of Australia’s iron ore magnates has made a pre-emptive move into Western Australia’s (WA’s) onshore gas sector, taking a punt on the region’s rich untapped reserve base in the hope gas demand will rebound.

    Western Australian entrepreneur Andrew Forrest, the chief executive of Fortescue Metals Group (FMG), announced last week that he will apply for state government permits to explore for gas across 40% of the onshore Canning Basin through Squadron Energy, a wholly owned subsidiary of FMG’s Minderoo Group.

    http://interfaxenergy.com/gasdaily/article/22689/canning-basin-shale-gas-in-fortescues-sights

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    U.S. crude output in 2016, 2017 to fall less than expected - EIA


    The U.S. Energy Information Administration expects U.S. crude oil productionfor 2016 and 2017 to fall by less than previously expected, according to its monthly short term energy outlook released on Tuesday.

    The statistical arm of the U.S. Department of Energy said 2016 oil production will fall by 580,000 barrels per day (bpd) to 8.84 million bpd. Last month, it had forecasted a 690,000 bpd year-over-year decline.

    Crude production in 2017 will fall by 110,000 bpd to 8.73 million bpd, compared with last month's forecast of a decline of 140,000 bpd.

    The declines were expected to be sharper in certain regions, EIA administrator Adam Sieminski said after the data was released.

    "Although average annual U.S. crude oil production is expected to be slightly below this year's level in 2017, increased drilling activity in West Texas and southeastern New Mexico, along with rising oil output in the Gulf of Mexico, are expected to partially offset lower production in other areas of the country and make the decline smaller than previously forecast," Sieminski said.

    Oil production onshore has declined more rapidly than in the Gulf of Mexico, where expensive deepwater drilling often requires a multi-year commitment, and is less reactive to price fluctuations.

    The EIA increased 2016 U.S. oil demand growth to 110,000 bpd from 70,000 bpd previously. For 2017, the EIA said U.S. oil demand will grow by 260,000 bpd from 230,000 bpd previously.

    http://www.reuters.com/article/usa-oil-eia-steo-idUSL1N1D9190

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    Japex to delay Canada oil sands expansion project to mid-2017


    Japan Petroleum Exploration (Japex) said on Tuesday it plans to delay the launch of its Hangingstone oil sands expansion project in Alberta, Canada, by a few months to mid-2017, a move that also pushes up costs by C$250 million ($187 million).

    The oil and gas developer said investment by a subsidiary in the expansion project is set to rise to C$1.5 billion from C$1.25 billion.

    Japex aims to produce 20,000 barrels per day of bitumen from the project, where a subsidiary owns a 75 percent stake, while Nexen Inc holds the rest.

    The company also said on Tuesday it will keep the Hangingstone oil sands concession known as 3.75 section closed, after shutting down production in May due to low prices, even after devastating fires in the area were brought under control.

    http://www.reuters.com/article/us-canada-wildfire-japex-idUSKBN1330YK
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    Alternative Energy

    Dong Energy earnings increase, surge in wind power demand


    Dong Energy said earnings increased by 7% in its third quarter results driven by a 19% increase in wind power.

    The firm said the move was also supported by the positive effect from a lump sum payment in connection with the completed renegotiation of a gas purchase contract.

    The firm said the increase was partially offset by lower oil and gas prices as well as reduced volumes from the Ormen Lange field.

    Profit for the third quarter was DKK3.3billion, an increase of DKK2.9billion the same time last year.

    Dong said in the third quarter of 2016, free cash flows amounted to DKK -1.9 billion compared with DKK -5.4 billion in the third quarter of 2015.

    Henrik Poulsen, chief executive, said:”The Group continues to develop positively and according to our strategic and financial plans. We maintain our outlook for 2016 of DKK 20-23 billion in EBITDA and gross investments of DKK 18-21 billion.

    “We have decided to initiate a process with the aim of ultimately exiting from our oil and gas business. This should be seen in the context of DONG Energy’s strategic transformation towards becoming a global leader in renewables and a wish to ensure the best possible long-term development opportunities for our oil and gas business.

    “There can be no assurance as to the outcome or the timing of the completion of the process.

    “O&G continues the substantial restructuring of the business and delivered a strong operational performance in the first nine months.

    “Cost performance continues to improve, driven by continued renegotiation of supplier contracts, reduced exploration spending and improved operational efficiency, with total cash spend decreasing by 36% compared with the same period last year.

    “We now expect O&G to be cash flow positive in 2016, a year earlier than previously communicated.

    “We currently have seven large offshore wind farms under construction. The construction programme totalling 4.4GW is well on track. In parallel, we continue to shape our pipeline of offshore wind project opportunities for the period beyond 2020.”

    https://www.energyvoice.com/marketinfo/123679/dong-energy-earnings-increase-surge-wind-power-demand/
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    Vestas Q3 beats estimates, lifts 2016 outlook


    Nov 8 Wind turbine maker Vestas posted third-quarter results on Tuesday that exceeded expectations, while lifting its forecasts for the year on the back of a 17 percent increase in orders between July and September.

    Vestas said it expected 2016 revenue of 10.0-10.5 billion euros ($11.1-11.6 billion) compared with a minimum of 9.5 billion euros previously.

    It also lifted its guidance for the margin on earnings before interest and tax (EBIT) before special items to 13-14 percent from a minimum of 12.5 percent before, and said it expected free cash flow of at least 1 billion euros compared with a minimum of 800 million euros previously.

    "The upgrades are based mainly on improved delivery visibility for the remainder of the year," the company said in a statement.

    Third-quarter operating profit before special items rose 87 percent to 433 million euros, beating the 312 million expected by analysts in a Reuters poll.

    Revenue for the quarter came in at 2.90 billion euros, also beating expectations of 2.48 billion.

    http://www.reuters.com/article/vestas-wind-results-idUSL8N1D91YL
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    Precious Metals

    China's Jan-Sept gold consumption drops nearly 13%


    China's gold consumption in the first nine months of 2016 dropped 12.8 percent from the year before to 720.7 tonnes, China Gold Association data showed on Tuesday.

    The country also cut its production of the precious metal over the period by 2.6 percent to 347.8 tonnes, the industry body said.

    The world's top gold consumer bought 478 tonnes of golden jewellery, down 20 percent year-on-year. Investment gold appetite continued to edge up, with 4.1-percent and 12.9-percent increases in demand for gold bars and gold coins respectively.

    http://www.chinamining.org/News/2016-11-02/1478066951d77835.html
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    Franco-Nevada lifts FY guidance as Q3 results beat several records


    Commodity royalty streaming firm Franco-Nevada reported a stellar performance for the third quarter ended September 30, setting several new production and financial records for the period.

    After market close on Monday, Toronto-based Franco-Nevada reported operating and financial results for the period, lifting net income to $54.4-million, or $0.31 a share, compared with $15.2-million, or $0.10 a share, for the same period a year earlier.

    Excluding special items, adjusted net income was $53.5-million, or $0.30 a share, compared with $19.4-million, or $0.12 a share, beating Wall Street analyst forecasts of earning $0.25 a share, on an adjusted basis.

    Franco-Nevada ascribed the improved performance to higher revenues on the back of the Antamina and Antapaccay streamacquisitions, completed in October 2015 and February 2016, respectively.

    The company reported record revenue of $172-million for the quarter, up 66% year-on-year.

    Franco-Nevada continued to see significant growth in goldequivalent ounces (GEOs), with mineral assets contributing 123 065 GEOs in the period, an increase of 43.7% over the third quarter of 2015. The impact on revenue of the growth in the number of GEOs received was further enhanced by higher average precious metal prices.

    IMPROVED OUTLOOK

    Franco-Nevada also on Monday announced significant increases to its 2016 production guidance.

    The company now expected to produce between 445 000 GEOs and 455 000 GEOs, up from between 425 000 GEOs and 445 000 GEOs forecast earlier this year.

    Expected full-year revenue from its oil and gas assets increased from between $15-million and $25-million to between $25-million and $30-million, which was partially enhanced by a newly acquired oil and gas royalty package.

    Franco-Nevada on Monday announced that it had agreed to acquire a $100-million package of royalty rights in the STACK shale play, in Oklahoma’s Anadarko basin, from a private party. The top two operators of the lands are Newfield Exploration and Devon Energy. The land package will provide an estimated royalty rate of 1.61%.

    Meanwhile, in October Kirkland Lake Gold exercised its option to buy back 1% of an overlying 2.5% net smelter return royalty for $30.5-million on Kirkland Lake's properties. Sibanye Gold also announced on October 27 that it had stopped production at the Cooke 4 underground mine, which the company disclosed it carries at a value of $69-million. This might portend booking a fourth-quarter impairment charge on the asset. Further, construction at First Quantum’s Cobre Panama mine continues to advance on schedule for a phased commissioning in 2018.

    http://www.miningweekly.com/article/franco-nevada-lifts-fy-guidance-as-q3-results-beat-several-records-2016-11-09
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    Steel, Iron Ore and Coal

    China Says It's Going to Use More Coal, With Capacity Set to Grow 19%

    China Says It's Going to Use More Coal, With Capacity Set to Grow 19%

    China’s coal power generation capacity will grow as much as 19 percent over the next five years even as the world’s biggest energy consumer expands use of non-fossil fuels.

    While coal-fired plant capacity will increase, it will still remain below 1,100 gigawatts, National Energy Administration Chief Engineer Han Shui said Monday in a webcast posted on the agency’s website. Non-fossil power will increase 48 percent to about 770 gigawatts over the five-year period through 2020 as total capacity expands by 31 percent to 2,000 gigawatts.

    President Xi Jinping’s government is seeking to replace coal with cleaner fuels to help cut pollution that has plagued some of China’s biggest cities including Beijing, Tianjin and Shanghai. The country has said it plans to raise natural gas consumption to 10 percent of its total energy mix by 2020 from around 6 percent now.

    “Coal consumption growth over the next five years is projected to be stronger than previously expected,” Helen Lau, an analyst at Argonaut Securities Asia Ltd., said by phone. “That implies that coal production must not be reduced further, otherwise, the coal market will be in deficit.”

    Confronting Coal

    China will need to cut about 150 gigawatts of coal-fired power from projects that are either approved for construction or already under construction to maintain the 1,100-gigawatt limit, Huang Xuenong, director of the power generation division of NEA said during the webcast. Without restrictions the country’s coal-fired power capacity could reach about 1,250 gigawatts by 2020, he said.

    Hydro-power will account for about 340 gigawatts of the projected 770 gigawatts of non-fossil-fuel generation capacity by 2020. Wind will make up about 210 gigawatts and nuclear power 58 gigawatts, according to the NEA.

    Global Emissions

    China’s 2015 coal and gas-fired generation capacity was 990 gigawatts, according to the NEA, which didn’t separate the two. Gas accounted for 66 gigawatts that year, according to the China Electricity Council.

    China’s total power consumption may increase to between 6.8 trillion kilowatt hours to 7.2 trillion kilowatt hours by 2020, with an average annual increase of about 3.6 percent to 4.8 percent from 2016 to 2020.

    China and the U.S., the two countries that account for 38 percent of global carbon emissions, ratified the Paris Climate Accord this year, promising to reduce carbon emissions to limit temperature increases.

    Global green power rose by a record 153 gigawatts, equivalent to 55 percent of newly installed capacity in 2015, allowing renewable energy to overtake conventional power for the first time, the Paris-based International Energy Agency said last month.

    http://www.bloomberg.com/news/articles/2016-11-07/china-coal-power-generation-capacity-may-rise-19-in-5-year-plan
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    Under govt pressure, China's top coal miners to cut long-term prices


    China's state economic planner said two of the nation's top coal mines signed long-term supply contracts with utilities at a quarter below current spot market rates, as the government ramps up its efforts to cool the red-hot market.

    Shenhua Energy Co and ChinaCoal Energy Co agreed to sell their coal at 535 yuan ($79) per tonne under long-term deals which start as soon as Dec. 1, Xu Kunlin, vice secretary general of the National Development & Reform Commission (NDRC), said at a briefing on Wednesday.

    Traders said the price would not necessarily set a trend for the market if other miners do not agree to the terms. One Asian trader said the deals would be "meaningless" without broader industry support.

    While markedly lower than the record-setting spot market, the price is still relatively high historically. However, it does suggest that the months-long rally may not be sustained as more supply hits the market in the new year, three coal traders said.

    "It is still a fair deal for ChinaCoal and Shenhua, even though the spot price is at 700 yuan," said Wang Fei, analyst at HuaAn Futures.

    Coal was being offered as high as 740 yuan per tonne on Wednesday, the traders said.

    This is the first time the NDRC has held a press briefing to discuss this year's historical coal price rally and concerns about tight supplies.

    Thermal coal prices have hit fresh records on an almost daily basis in recent weeks after government-enforced closures earlier this year tightened supplies for electric utilities, triggering a scramble ahead of the winter.

    Getting miners to fix prices has been a key part of the government's effort to tame the price spike that it says is unjustified by fundamentals. The news on Wednesday follows a series of changes to the way China, the world's top energy market, prices the commodity.

    On Tuesday, China's three major commodity exchanges launched a series of fee hikes and margin increases for some of their most volatile, niche contracts, including coal, as authorities cracked down on speculation.

    The NDRC, which has pledged to ensure coal supplies over the winter months, also said at the briefing it was investigating a Shanxi-based coal data firm because its data "has problems".

    While the NDRC did not give any details, FenWei Energy, also a Shanxi-based coal data company, late on Tuesday suspended its spot physical thermal coal price index - used as the domestic industry benchmark - saying its prices did not reflect the majority of business transacted in the country.

    Also at the briefing, the government said it would extend a rule limiting some mines to operate only between 276 and 330 days in a year until the end of spring.

    http://www.reuters.com/article/china-coal-idUSL4N1DA24B

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    Met coal tops $300 first time since 2011 Australian floods


    Spot metallurgical coaltopped $300 a metric ton for the first time since flooding in Australia curbed output from the world’s biggest seaborne exporter five years ago.

    Hard coking coal rose to $307.20/t on Tuesday, extending a surge that has seen the price more almost quadruple since the start of June.

    Miners and Japanese steelmakers agreed to a three-month supply contract at a record $330 for the second quarter of 2011 after heavy rain and flooding crimped production in Queensland. Chinese demand has driven the price surge this year.

    China’s efforts to cut overcapacity in its coal industry have reduced domestic supply and boosted imports of both metallurgical and the variety burned in power stations. While Chinese purchases remained above 20-million tons in October for a fifth month, producers from BHP Billiton to Japan’s biggest trading houses predict prices will ease for coking coal.

    “The impact on Chinese domestic supply has resulted in significant import demand,” said Daniel Hynes, an analyst at Australia & New Zealand Banking Group. “We could see prices slip about $150 lower than where they are at the moment, but I don’t think the market will be pushed in that direction in the short term. We’re just not expecting to see supply adjust that quickly.”

    Spot hard coking coal advanced $17.90, or 6.2%, on Tuesday, according to data from The Steel Index. Monday’s rise was the biggest daily gain since the index was started in January 2013. Newcastle thermal coal increased 34% in October, the most since February 2008. Prices closed at $109.40 on Monday.

    Japanese steelmaker Nippon Steel & Sumitomo Metal agreed to pay $200/t for metallurgical supplies during the fourth quarter, the highest contract price since 2012. Australian miner Whitehaven Coal and consultant Wood Mackenziepredict prices will remain at elevated levels in the short-term.

    “Unless China decides to lift its restrictions and flood the market, you would expect prices to remain around these levels in the short to medium term,” Whitehaven chairperson Mark Vaile said in an interview Tuesday. Shares in the Sydney-based company have more than quadrupled this year.

    http://www.miningweekly.com/article/met-coal-tops-300-first-time-since-2011-australian-floods-2016-11-08
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    Delay threatens tax benefit as Kemper plant nears $7B


    Mississippi Power Co. now says it won’t complete its Kemper County power plant until the end of the year, a delay of a month that pushes the price tag up by $25 million to nearly $7 billion.

    The company announced the delay Friday as its Atlanta-based parent Southern Co. filed quarterly stock disclosures, saying ratepayers wouldn’t have to pay the $25 million.

    The documents show that if the coal-fueled plant doesn’t start commercial operation by Dec. 31, Mississippi Power would have to repay $250 million of previously received tax benefits. Mississippi Power spokesman Jeff Shepard didn’t immediately respond to questions about the potential repayment.

    The plant and associated coal mine were originally supposed to cost $2.9 billion at most, and earliest estimates were lower. Stockholders have absorbed $2.6 billion in losses, while customers could be asked to pay more than $4.2 billion.

    Mississippi Power said it decided Wednesday that it must shut down one of the two units that turn coal into a burnable gas to improve ash removal systems. The company says that by Dec. 31, it will start the second gasifier, make the improvements on the first one and synchronize them. The plant has been making power using natural gas since 2014 and made electricity by burning synthetic gas for the first time last month.

    Kemper is designed to remove carbon dioxide from the synthetic gas, cutting carbon dioxide emissions to the level of a similarly sized natural gas plant. That’s why the federal government has given what Mississippi Power calls Plant Ratcliffe hundreds of millions of dollars in aid.

    Brett Wingo, an engineer who formerly worked at the plant, claims Southern has misled investors and others about previous schedule delays. Southern said Friday that the U.S. Securities and Exchange Commission continues to investigate those claims. Wingo has told The Associated Press that internal schedules had at one time called for six months between first production of synthetic gas and full operation. Southern Co. CEO Tom Fanning told investors in July that integrating the plant’s systems would be more complicated than a typical power plant startup.

    In December, the Mississippi Public Service commission agreed to let Mississippi Power raise rates on its 186,000 customers by $126 million a year to pay for $1.1 billion worth of Kemper equipment already generating electricity by burning conventional natural gas.

    Mississippi Power has lost $222 million on Kemper this year alone, far outweighing the $40 million profit the company has posted.

    The company says further delays would cost $25 million to $35 million a month that the company would pay, plus $18 million or more monthly in interest and other costs that customers could be asked to pay. The company has taken on a heavy debt to build Kemper, and its liabilities currently outweigh its assets by $411 million, in part because of $300 million in borrowing that came due Oct. 15.

    http://linkis.com/clarionledger.com/r5zx7

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    Rio Tinto suspends senior executive after uncovers Guinea payments


    Global miner Rio Tinto said on Wednesday it has suspended a top executive over $10.5 million in payments to a consultant on its Simandou iron ore project in Guinea, and has alerted U.S. and UK authorities. A second senior executive has stepped down.

    Rio Tinto took the steps at a time when mining companies have come under scrutiny in corruption probes, with the world's biggest miner BHP Billiton last year paying $25 million to settle charges that it violated a U.S. anti-bribery law in failing to properly monitor its program sponsoring foreign government officials at the 2008 Olympics in Beijing.

    Rio Tinto said it became aware in August of emails from 2011 "relating to contractual payments totalling $10.5 million made to a consultant providing advisory services on the Simandou project in Guinea".

    An internal investigation led it to flag the issue to U.S. and UK agencies, and it said it was in the process of contacting Australian authorities as well.

    The company has suspended the head of its energy and minerals division, Alan Davies, who was in charge of Simandou in 2011.

    Davies was not immediately available to comment.

    The group's legal and regulatory affairs executive, Debra Valentine, who was due to retire next May, has also stepped down, Rio Tinto said.

    "Rio Tinto intends to co-operate fully with any subsequent inquiries from all of the relevant authorities. Further comment at this time is therefore not appropriate," the company said in a statement to the Australian stock exchange.

    Investors shrugged off the prospect of a bribery probe and the suspension of Davies, whom analysts said is well respected. Rio Tinto's shares rose as much as 1.8 percent in early trade to a more than 16-month high after the announcement in line with gains in the broader market.

    "It's too early to say anything, it's an investigation right now. They're just doing the prudent thing," Macquarie analyst Hayden Bairstow said.

    "With iron ore at $69, met coal (coking coal) at $307, the whole sector is riding the spot price moves," he said.

    Rio Tinto long chased plans to develop Simandou, which it touted as one of the world's most valuable iron ore deposits.

    It even sued rival Vale in the United States, alleging the Brazilian giant had conspired with Israeli billionaire Beny Steinmetz and BSG Resources to misappropriate its rights over half the lode in 2008.

    That case was dismissed a year ago as the judge ruled Rio Tinto had waited too long to file a case under the Racketeer Influence and Corrupt Organizations Act.

    Last week Rio Tinto agreed to sell its stake in the $20 billion project to Chinese state-owned Chinalco, after writing off its investment in Simandou earlier this year on diminished prospects of it being developed anytime soon.

    http://www.reuters.com/article/us-rio-tinto-guinea-corruption-idUSKBN1332QE
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    U.S. probe finds dumping of steel plate from nine exporters


    The U.S. Commerce Department said on Monday it had made a preliminary finding of dumping of certain imports of carbon and alloy steel cut-to-length (CTL) plate from Austria, Belgium, China, France, Germany, Italy, Japan, South Korea and Taiwan.

    The department said in a statement it established preliminary antidumping duties of up to 130.63 percent, on an Italian company. The finding followed an investigation prompted by a petition from Nucor Corp and U.S. subsidiaries of ArcelorMittal SA and SSAB AB, it said.

    In the Austria investigation, the department set a preliminary dumping margin of 41.97 percent for Voestalpine AG and other exporters. In the case of Belgium, the margins ranged from 2.41 percent to 8.98 percent.

    For China's Jiangyin Xingcheng Special Steel Works Co Ltd, the margin was set at 68.27 percent.

    Margins were set at 12.97 percent and 4.26 percent for Dillinger France SA and Industeel France SA, respectively, and for all other French exporters at 8.62 percent.

    Germany's AG der Dillinger Hüttenwerke was assigned a preliminary dumping margin of 6.56 percent, as were all other German exporters of CTL plate.

    In Italy, NLMK Verona SpA and Officine Tecnosider were assigned margins of 12.53 percent and 6.10 percent, respectively. Marcegaglia SpA declined to participate and was assigned a preliminary margin of 130.63 percent. A margin of 8.34 percent was set for all other Italian exporters.

    A preliminary antidumping margin of 14.96 percent was set for Japan's Tokyo Steel Manufacturing Co Ltd, while a margin of 48.64 percent was established for JFE Steel Corp and Shimabun Corp, which declined to participate in the probe. A margin of 14.96 percent was set for all other Japanese exporters.

    For South Korea's POSCO, the margin was set at 6.82 percent.

    Taiwan's Shang Chen Steel Co Ltd and China Steel Corp received preliminary dumping margins of 3.51 percent and 28 percent, respectively, while those for other Taiwanese producers were set at 3.51 percent.

    In 2015, U.S. imports of CTL plate were estimated as follows: from Austria, $14.2 million; from Belgium, $19.8 million; from China, $70.3 million; from France, $179 million; from Germany, $196.2 million; from Italy, $37 million; from Japan, $54.9 million; from South Korea, $210 million; and Taiwan, $21 million.

    It is used in a wide range of applications, including in buildings and bridgework; agricultural, construction and mining equipment; machine parts and tooling; ships, rail cars, tankers and barges; and large-diameter pipe.

    http://www.reuters.com/article/us-usa-steel-plate-idUSKBN1322NP
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    EU investigates tariff avoidance by Chinese steel firms


    The European Union's anti-fraud office (OLAF) is investigating whether Chinese companies shipped steel through other countries to avoid anti-dumping duties, as trade disputes with the world's largest steel producer heat up.

    OLAF is looking into several cases where Chinese steel firms shipped the metal to another country, disguised its origin, and then shipped it on to Europe in a process known as "transshipment".

    The fraud agency would not give any details on its current investigations. But according to a filing on the Vietnamese trade ministry's website, OLAF is investigating 190 cases of Chinese coated steel coils that arrived in Portugal, Spain and Poland from Vietnam in 2013-2014.

    The EU is ratcheting up trade defences against China, under political pressure from a spate of bankruptcies, capacity closures and job losses in the steel sector that have fired up anti-globalization sentiment.

    OLAF estimates the shipments via Vietnam were worth about $19 million and that the steel was given Vietnamese certificates of origin, the Vietnamese trade ministry said on its website. If confirmed, OLAF would apply retroactive duties of 58 percent on the shipments, it added.

    Chinese trade authorities declined to comment. Vietnamese authorities told Reuters they were ready to receive a delegation from OLAF.

    "We will be co-operating actively with the EU to investigate ... and have appropriate measures in place," said the head of the Vietnam Industry and Trade Ministry's European Market Department, Dang Huu Hai.

    Steel is the second largest industry in the world after oil and gas, with an estimated global turnover of $900 billion. Steelmakers face sluggish demand growth, chronic overcapacity what they say is a flood of Chinese steel sold at a loss.

    Beijing denies it is "dumping" or exporting steel at a loss, saying overcapacity is a global problem. Nevertheless it has committed to cutting 150 million tonnes of capacity by 2020.

    "The (EU's) determination to protect the domestic steel industry remains high...There will be more and more hurdles for the Chinese," said Julius Baer analyst Carsten Menke.

    The latest EU investigations follow news that the U.S. Commerce Department on Monday opened an probe into allegations that Chinese steel producers are diverting shipments through Vietnam to avoid tariffs.

    The United States has slapped anti-dumping duties of more than 500 percent on some Chinese steel products.

    "There is no doubt that EU decision-makers look at what the U.S. is doing, and sometimes there is even coordination. It makes sense... because U.S. measures (if effective) can easily lead to the diversion of trade flows to the EU," said Laurent Ruessmann, a partner at lawyers FieldFisher.

    China's steel output rose for a seventh straight month in September and its exports are on track to beat last year's record 112 million tonnes.

    http://www.reuters.com/article/us-eu-steel-china-idUSKBN1331RF

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    ArcelorMittal sees weak last quarter as coal spike hits margins


    ArcelorMittal warned of slower earnings this quarter citing higher coal prices and lower U.S. steel prices after the world's largest steel producer missed core third-quarter profit expectations on Tuesday.

    ArcelorMittal shares, which have risen by about a quarter since September, were down some 4 percent in early trade.

    "We're all surprised by the rapid and unexpected rise of coking coal," Chief Financial Officer Aditya Mittal told a conference call.

    Mittal said coal prices have risen due to some U.S. mines stopping operations and a cap on production imposed by the Chinese government as part of a shift to clean power.

    Prices for Australian premium hard coking coal .PHCC-AUS=SI have surged to $250 per tonne from around $75 in February.

    Core earnings before interest, taxes, depreciation and amortization (EBITDA) for the third quarter rose 40 percent to $1.90 billion but missed the $1.97 billion expected by 11 analysts polled by Reuters.

    Mittal has forecast a fall in core profit this year to above $4.5 billion from $5.2 billion in 2015.

    ArcelorMittal increased its forecast for working capital to $1 billion from $500 million previously, adding it still expected to have positive cash flow for the year.

    It said average prices for steel rose 7.4 percent in the third quarter, mainly driven by better prices in North America, Brazil and Europe.

    ArcelorMittal also slightly improved its market outlook for China, where it now expects some growth in steel consumption.

    Chinese prices for reinforcing bars used in construction SRBcv1 rose this month to their highest level since September 2014 amid tightening supply.

    Overcapacity in the Chinese steel sector has led to a surge in exports which steelmakers in Europe and the United States have sought to counteract by lobbying for anti-dumping duties.

    Last week, China's Baosteel Group said it would cut steel production capacity by 11 million tonnes over 2016 and 2017, more than it had previously indicated.

    Despite these announcements, Mittal said Chinese exports had so far not decreased and said China was not doing enough to lower exports.

    "There is some progress but not enough. China imposed production limitations on the coal industry. They have the tools but are not acting as aggressively in the steel business," CFO Mittal said.

    http://www.reuters.com/article/us-arcelormitta-results-idUSKBN1330U6

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