Mark Latham Commodity Equity Intelligence Service

Friday 10th February 2017
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    Chinese exchanges block Bitcoin withdrawals

    At least two of China's biggest bitcoin exchanges announced they are blocking customers from withdrawing their bitcoins. It was down as much as 10% before paring its losses. The announcements follow Wednesday's meeting between the People's Bank of China and the bitcoin exchanges.

    Thursday's announcements are notable because nearly 100% of all bitcoin transactions take place on Chinese exchanges. The cryptocurrency has had a wild start to 2017 after gaining 120% in 2016, becoming the top performing currency two years in a row.

    Bitcoin started 2017 with a gain of more than 20% in the opening week of the year before crashing 35% on concerns China was going to start cracking down on trading. Recently, China's largest bitcoin exchanges announced they would charge a flat fee of 0.2% on all transactions.  

    Thursday's steep slide has pushed bitcoin to its lowest level since the final trading day of January.  It is still higher by 3.6% for the year.
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    Concerns about illicit funding flows dog mining companies in Africa

    Concerns about illicit funding flows dog mining companies in Africa

    A World Bank report has raised concerns about tax compliance by mining companies in Africa, tax loopholes and the illicit flow of funds in a range of African countries.

    The report, ‘Transfer Pricing in Africa, with a focus on Africa’, has shown that several countries on the continent have struggled to achieve a tax to gross domestic product ratio of 15%, against an average of over 33.6% for Organisation for Economic Cooperation and Development countries since 2000.

    “It is critical that African jurisdictions continue to pay a fair amount of taxes on the profits generated in a country,” World Bank lead mining specialist Boubacar Bocoum told delegates at the 2017 Investing in African Mining Indaba, in Cape Town.

    He said the report, compiled by an international team of mining and tax experts, would support a series of workshops with African tax officials starting early this year.
    The report says multinational enterprises (MNEs) often undercharge for mineral products they export and overpay for routine corporate services and specialised goods and services, such as insurance and logistics. By doing this, they reduce the profit of the mining subsidiary and the tax collected in the host country.

    “While some tax practices may be technically legal, it may be argued they are ethically questionable,” says the report.

    MNEs have tended to structure their businesses by consolidating high-value functions and related intangible assets in hubs that provide goods and services to their global operations. They locate them in low-tax jurisdictions or in jurisdictions allowing the establishment of preferentially taxed special purpose entities.

    The way MNEs organise their global corporate structures often leads to the eroding of the tax base of the host country as profit is shifted abroad. The functions of the miningsubsidiaries are often stripped down to mostly routine activities using primarily less skilled employees and tangible assets, the report reveals.

    The report says few mining companies are fully vertically integrated, while, increasingly, mining companies are entering into cross-border transactions which provide for high-value, specialised services and assets and financing.

    The World Bank has called on tax authorities to question whether the profits of mining subsidiaries and of overseas related customers and service providers match the value actually added by each of them.

    The report says African governments need to look at how to strengthen their capacity in the area of tax administration. They have to research the structures, value chain characteristics and processes of the mining industry in their countries.

    “While most jurisdictions already have adequate legislation, the challenge now is to put in place supporting regulations, structures and adequate administrative capacity to effectively enforce it,” suggests the study.

    The report says the “extreme complexity and artificiality” of some multilayered structures shows evidence that some conduit companies are effectively just “mailboxes” with no clear business purpose, adding little or no value. There are indications that they are primarily designed to cut the tax paid by multinational companies at the consolidated level.

    Civil society participants attending the special session on transparency within mining, also raised deep concern, saying mining companies were not open and transparent.
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    Robust China trade data a boon for Asia as protectionist risks loom

    China posted much stronger-than-expected trade data for January as demand picked up at home and abroad, an encouraging start to 2017 for the world's largest trading nation even as Asia braces for a rise in U.S. protectionism under President Donald Trump.

    Trump criticized China, Japan and Germany last week, saying the three key U.S. trading partners were engaged in devaluing their currencies to the harm of U.S. companies and consumers.

    But he has not followed through yet on threats to label China a currency manipulator and slap heavy tariffs on Chinese goods, and took a major step on Thursday to improve ties by holding a phone call with President Xi Jinping.

    "China's trade data are going to be pretty good in the first part of this year because of the very good run that we had in the last part of 2016," said Louis Kuijs, head Of Asia economics at Oxford Economics in Hong Kong.

    "The worry we have is really about U.S. trade policy, which is undeniably turning more protectionist...It is pretty obvious to me that the climate for exports to the U.S. is going to be much harsher in the coming years."

    China's imports in January rose at the fastest pace in four years, fueled by a continued construction boom which is boosting demand and global prices for resources from copper to steel, preliminary customs data showed on Friday.

    The 16.7 percent bounce easily eclipsed an expected rise of 10.0 percent in a Reuters poll.

    China's imports from the United States rose 23.4 percent in January, the fastest pace in at least a year, while its monthly trade surplus with the U.S. dipped to $21.37 billion.

    Both Chinese and U.S. data show China's surplus with the U.S. narrowed last year, but it remained well above the sustained level of more than $20 billion that is one of three criteria used by the U.S. Treasury to designate another country as a currency manipulator.

    The surplus decreased $20.1 billion to $347.0 billion in 2016, the U.S. Commerce Department said Tuesday, while Chinese data put it somewhat lower.

    Led by electronics, China's January exports climbed the most in almost a year, adding to evidence that Asia's long trade recession may be bottoming out.

    January shipments rose 7.9 percent, more than twice as much as expected, after 2016 exports slumped nearly 8 percent.

    China had been lagging a recent export recovery seen in Japan, South Korea and Taiwan, dragging on the regional supply chain. Its integrated circuit shipments rose 14.5 percent last month, while exports of mobile phones rose 7.9 percent.

    That left the country with a initial trade surplus of $51.35 billion for the month, the highest in a year. Customs is due to release updated data for trade on Feb. 23.

    "The export outlook for China is good, except for the potential risk of a Sino-U.S. trade war. The most important risk for China is what the Trump administration will do," Jianguang Shen, chief economist at Mizuho Securities in Hong Kong.

    China watchers warned the long Lunar New Year holidays may have distorted the data to some degree, with companies pumping up production or rushing to build inventories before the break, which can last for weeks.

    But most economists agreed the trend backed the view that manufacturing demand is improving in China and globally.


    The world's second-largest economy continued to hoover up commodities ranging from coal and iron ore to soybeans.

    Iron ore imports were the second highest on record, while crude oil imports were the third highest ever. Coal purchases also soared, for use in both power generation and steelmaking.

    "Steel mills are making really good money. So that means they can afford to pay for more iron ore," said Lachlan Shaw, an analyst at UBS in Melbourne, adding that government efforts to reduce excess capacity were aiding the trend.

    Chinese futures prices for steel reinforcing bars used in construction have surged some 80 percent since last February, adding to views that price pressures are slowly building in the economy.

    But analysts are not sure how much longer the commodities buying frenzy will last, noting that inventories are building up at Chinese ports and pointing to signs that a year-long housing boom is cooling off.

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    Trump Says He Will Announce "Something Phenomenal On Taxes In Next 2-3 Weeks"

    After a few hours of relative calm, President Trump has injected some renewed chaos into capital markets this mornings after comments that he will release "something phenomenal on taxes in the next 2-3 weeks" among other things...

    “We are going to be announcing something over the next two or three weeks that will be phenomenal in terms of tax,” President Trump says in meeting with airline CEOs.

    USD spiked, bonds dumped, and gold dropped...
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    Foreign Companies leave China

    Why foreign companies are shutting shop in China

    Sony Electronics, Marks & Spencer, Metro, Home Depot, Best Buy, Revlon, and L’Oreal – some of the big names to have closed Chinese operations

    US-based Seagate, the world’s biggest maker of hard disk drives, closed its factory in Suzhou near Shanghai last month with the loss of 2,000 jobs, in a move that has rekindled fears that China is becoming increasingly hostile towards foreign firms operating in the country.

    A passionate speech presented by Chinese president Xi Jinping at the World Economic Forum meeting in Davos in early January had been hoped to address the issue, and reassure investors that China’s remained open to foreign investment.

    Xi defended globalisation and promised improved market access for foreign companies, a positive sign seen by many that China is still sticking firmly to its opening up policies, first rolled out by late leader Deng Xiaoping in the 1980s.

    Yet, Seagate joined a spate of foreign companies to shutter operations in China in recent years, for various reasons, but most have attributed the country’s high tax regime, rising labour costs and fierce competition from domestic companies.

    Panasonic, for instance, stopped all its manufacturing of televisions in the country in 2015 after 37 years of operating in China.

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    Bitcoin Slides After China's Central Bank Holds "Closed-Door" Meeting With Exchanges

    The Chinese were bust over the Golden Week holiday... buying Bitcoin (up from 6350 to 7550 in Yuan). But now that the vacation is over, China's central bank is back to its crackdown and following reports of "closed-door" meetings with various Bitcoin exchanges, the virtual currency was sent tumbling this morning.

    As Bloomberg reports, officials from the People’s Bank of China are meeting Wednesday afternoon with representatives from a number of the nation’s trading venues, the people said, asking not to be named because the meeting is private. Money laundering is among the topics on the agenda, said one person without elaborating.

    The cryptocurrency has reacted sharply to reports in the past that China may tighten rules on the digital currency to curb capital outflows. The Wednesday pow-wow follows a regulatory inspection of exchanges including OkCoin, Huobi and BTCC in January. Bitcoin had risen by 120 percent over the past year as investors made purchases to hedge against yuan depreciation. The central bank didn’t respond to a faxed request for comment.

    “There are a lot of people shorting bitcoin now, one because of the regulatory environment, another because the price is relatively high,” said Tian Jia, a Beijing-based trader of bitcoin. “The fact that PBOC continues to look into this issue might make people think that the whole thing isn’t over, and based on past trends, whenever the central bank holds meetings with exchanges the price will drop.”

    China has taken a central role in the bitcoin market in recent years as its citizens have become leading traders and miners of the cryptocurrency. Their interest has been fueled by the hunt for alternative assets, zero exchange fees and the low cost of electricity to run the computers needed to mine the currency. But any increased scrutiny from government authorities may dampen purchases of bitcoin in China.

    The last time PBOC 'probed' the exchanges the reaction was dramatic (but as is evident, the effect was to kill volumes and control that capital outflow)
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    White House eyeing executive order targeting 'conflict minerals' rule - sources

    President Donald Trump is planning to issue an executive order targeting a controversial Dodd-Frank rule that requires companies to disclose whether their productscontain "conflict minerals" from a war-torn part of Africa, according to sources familiar with the administration's thinking.

    Reuters could not learn the precise timing of when the order will be issued, or exactly what it will say.
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    Border Adjustment: Explained

    The House Republicans' plan to upend how the U.S. collects corporate taxes


    Republicans are proposing a tax concept common in other countries but novel in the U.S. The idea is "border adjustment." Under the plan, companies wouldn't be able to deduct the cost of imports from their revenue, a move that today enables them to lower their overall tax burden. At the same time, exports and other foreign sales would be made tax-free. The plan would operate like a tax on the trade deficit and raise about $1 trillion over a decade, according to independent estimates, which could help pay for lower tax rates and other provisions.

    See the graphics:
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    Babcock to launch new equipment, says customers upbeat about 2017

    Engineering support services company Babcock will, during the course of this year, launch new “ground-breaking construction equipment”.

    “Babcock is renowned and respected for delivering high-production machinery that is also fuel efficient. Therefore, this year, we are adding the Volvo A60H, the largest articulated dump truck (ATD) to ever be launched commercially by Volvo, to our product range,” Babcock Equipment MD David Vaughan said at the Investing in African Mining Indaba.

    He remarked that the Volvo A60H’s higher payload represented a 40% increase on that of Volvo’s A40 model, thereby significantly lowering the cost-per-tonne ratio for hauler customers, while its stability, comfort and high hauling speeds are ensured by the matched drivetrain, automatic drive combinations, all-terrain bogie, hydro-mechanical steering and active suspension, further optimising production and minimising operating costs.

    Vaughan commented that the first Volvo A60Hs were expected to reach South Africa’s shores by March and would be launched into the Southern African market by May, together with the new Volvo EC950E, a 90 t crawler excavator that combined power and stability to handle a higher capacity in the toughest applications.

    “The A60H is ideal for hard-rock mining, coal mining, general mining and big quarry applications and the EC950E has been designed to load the massive A60H; therefore, they work hand-in-hand.”

    Vaughan pointed out that Babcock had already presold three Volvo A60H articulated haulers, as well as one Volvo EC950E excavator to Burgh Plant Hire – a long-standing customer of the company’s.

    Burgh Plant Hire CEO and owner Stanley van der Burgh said the company owns a fleet of more than 100 Volvo that are used in coal mining operations – the majority of them articulated haulers – demonstrating that he had full confidence in the new model.

    Additionally, Vaughn said Babcock would also offer Volvo’s A45G articulated hauler to South African customers during the course of this year.

    He stated that the A45G was designed for heavy hauling in extreme offroad operation. It has a 2 t larger payload than its predecessor the A40.

    Terex Trucks sub-Saharan Africa business manager Erik Lundberg noted that another first for Babcock in 2017 would be the introduction of the company’s Generation 10 TA300 and TA400 ATDs.

    He pointed out that the Generation 10 ADTs were the first new Terex Trucks products to be launched by the company, since Volvo acquired the Terex Trucks brand in June 2014, and Babcock was subsequently appointed as the official distributor in Southern Africa of these articulated haulers and rigid haulers.

    Further, Vaughan commented that demand for larger construction equipment continued as customers were continuously searching for the most cost-effective way to move material.

    “With indications of recovering commodity prices, our customers are positive about the outlook for 2017,” said Vaughan. He stated that the mining sector remained an integral market for Babcock, particularly as it had several high-profile customers operating in the coalfields of Middelburg, in Mpumalanga.


    Vaughan recounted that, at the beginning of last year, the company opened an ultramodern sales, parts and service dealership in Middelburg to offer responsive support and service across its entire equipment product range to customers in the region.

    “From this new flagship branch, we have been able to deliver improved service and a faster turnaround time and the response from our customers has been exceptionally positive,” he enthused.

    Opencast coal mining subcontracting company Atlantis Mining MD Mark Johnstone affirmed that Babcock’s Middelburg facility was “world-class and well-stocked with inventory lines”, therefore, it was very seldom that the company had to wait for parts. “The sales team is always willing to assist us at the drop of a hat,” he added.

    Babcock is the exclusive distributor of various international equipment brands in Southern Africa, including Volvo Construction Equipment, Terex Trucks, Tadano and Sennebogen cranes, Winget concrete handling equipment and Shandong Lingong Construction Machinery construction equipment.
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    Speaking in London-All Welcome!

    We are pleased to invite you to attend the third global independent research conference which will take place on March 9, 2017 at 1 Wimpole Street in London.

    As Commodity Intelligence is taking part in the commodities panel, we have been given some free tickets for buy-side firms which we would like to share with you.

    Organised by Research for Investors and supported by Euro IRP (the European association of Independent research providers) this conference aims to provide independent investment advice to the buy-side community. Independent research providers will be debating their views on a range of investment topics through panel discussions.

    You will find bellow the link to the latest brochure for your perusal and should you want to attend as our guest, please let us know and we will get Research for Investors to send you a confirmation email.

    We look forward to hearing from you.
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    Mitsui raises FY16/17 profit f'cast on higher metal prices

    Japanese trading house Mitsui & Co Ltd on Wednesday raised its profit forecast for the current financial year by 36 percent because of higher prices for coking coal and iron ore.

    The revised forecast of 300 billion yen ($2.67 billion) is higher than a consensus profit estimate of 252 billion yen from 11 analysts polled by Thomson Reuters I/B/E/S.

    A surge in coal prices and rising iron ore prices helped boost its full-year profit estimate at its metals segment to 175 billion yen from an earlier prediction of 110 billion yen, Mitsui chief financial officer Keigo Matsubara told a news conference.

    "An improvement in metals markets as well as cost cuts at energy operations and solid income from the Independent Power Producer business were behind the upward revision for the full-year profit estimate," he said.

    Coking coal futures on the Singapore Commodity Exchange soared in the second half of last year as top commodity consumer China clamped down on local production as part of a campaign against pollution.

    They have since dropped by more than 40 percent to around $165 a tonne, but are still double what they were in mid-2016.

    Iron ore prices on the Dalian Commodity Exchange have more than doubled from the end of March last year to around 640 yuan ($93) a tonne.

    But Mitsui, which owns large iron ore assets, sees uncertainties over metals prices going forward, including impacts from the "America First" policies by the new U.S. presidential administration and China's regulations on coal mining, Matsubara said.

    For the nine months through Dec. 1, the Japanese trading firm reported a 71 percent jump in net profit to 230.33 billion yen, propelled by robust profits from metals.

    As a result of higher full-year profit outlook, Mitsui said it would buy back up to 1.56 percent of its outstanding shares, as an extra measure to increase shareholder return.
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    3D Printing of Rocket Engines?

    Yes, and it’s not only possible, it’s happening with ARC Engines. Kyle Adriany explains the rocket engines and components now possible with ARC’s patented technology.

    Following in the footsteps of the likes of Richard Branson and Elon Musk, Arc Engines is revolutionizing the space industry by testing and developing the first ever 3D printed rocket engine. They’ve also developed cost effective methods to commercialize space travel.

    Through using methods such as Direct Metal Laser Sintering (DMLS), they can shape strong metals such as nickel super alloy, transforming them to produce ground breaking products.

    ARC Engines uses stable fuel injection systems for efficient combustion, producing something worthwhile in the aerospace industry.
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    Argentina requests information in spy chief bribery probe: news report

    A federal judge in Argentina will request information from Brazil and Switzerland to determine if President Mauricio Macri's spy chief received bribe money from a builder in 2013, state-run news agency Telam reported on Tuesday.

    Prosecutors publicly announced two weeks ago that they are investigating whether National Intelligence Agency Director Gustavo Arribas received a bribe from Brazil-based Odebrecht SA  in the form of a $600,000 bank transfer from a Brazilian money changer.

    Arribas denied taking bribes or having any link to Odebrecht in a statement last month, when reports of an alleged bribe first appeared in local media. He said he was living in Sao Paulo in 2013 and had declared all of his bank accounts to Argentine authorities. Arribas' lawyers could not be reached on Tuesday.

    Odebrecht is at the center of a global graft scandal. As part of a $3.5 billion settlement with Brazilian, U.S. and Swiss authorities in December, the company admitted to paying bribes in 12 mostly Latin American countries including $35 million in Argentina.

    Prosecutors in Argentina are also investigating four projects involving Odebrecht, the largest construction firm in Latin America, for corruption.

    The formal requests for information will be sent after Feb. 21, Telam reported. The judge overseeing the case, Canicoba Corral, was not immediately available for comment.

    Argentina wants access to movements in Arribas's Credit Suisse account from Switzerland and plea bargain testimony from the money changer in Brazil, Telam reported.

    The bank transfer being investigated took place well before Macri was elected in November 2015.

    Odebrecht declined to comment on active investigations. The company said in a statement to Reuters that it was working to adopt measures to improve its commitment to ethical business practices and to promote transparency.
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    Colombia president's campaign allegedly took Odebrecht cash: official

    Colombian President Juan Manuel Santos's 2014 election campaign allegedly received as much as $1 million from Brazil's Odebrecht SA, the country's attorney general said on Tuesday, as fallout from a massive corruption scandal continued.

    A portion of some $4.6 billion allegedly paid by engineering company Odebrecht to Otto Bula Bula, a former Liberal Party senator, was designated for the Santos reelection campaign, Colombia's Attorney General Nestor Humberto Martinez said in a statement.

    "It has been established that of that amount, in 2014 Mr. Otto Bula sent two transfers to Colombia, which were cashed at the time, for $1 million, and whose final beneficiary was the campaign management of "Santos for President - 2014," he said.

    The president's campaign chief Roberto Prieto denied the accusation and Camilo Enciso, the president's transparency secretary, said the allegations were untrue.

    Telephone calls to Odebrecht in Sao Paulo went unanswered after hours.

    Bula, who was arrested last month on charges of bribery and illicit enrichment, was tasked by Odebrecht with ensuring a certain number of higher-priced tolls were included in a contract to build a highway, Martinez has said.

    Bula has denied those charges.

    The campaign of Santos's rival in the election, Oscar Ivan Zuluaga, is also being investigated for receiving money from Odebrecht. Zuluaga was the candidate for former President Alvaro Uribe's right-wing Democratic Center party.

    Odebrecht's reputation has been hit after prosecutors in Brazil unearthed a bribes-for-contracts scandal that has extended into other countries.

    U.S. prosecutors allege that Odebrecht paid hundreds of millions of dollars in bribes in association with projects in 12 countries, including Brazil, Argentina, Colombia, Mexico and Venezuela, between 2002 and 2016.

    Prosecutors in Peru on Tuesday asked a judge to order the arrest of former President Alejandro Toledo for suspected involvement.
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    Brazil prosecutors claim JBS's Batista, Eldorado's CEO broke agreement

    Federal prosecutors asked a court on Monday to re-impose preventive measures against two key suspects in a corruption probe dubbed Operation Greenfield, which is investigating fraud at state-run companies' pension funds.

    According to the prosecutors' statement, defendants Joesley Batista, from the family that controls meatpacker JBS SA , and José Carlos Grubisich Filho, chief executive of pulp producer Eldorado Brasil Celulose SA, breached an agreement that had been signed with the prosecutors related the investigation.

    Asking the court to recognize that the defendants "violated principles of good faith" contained in the agreement, the prosecutors petitioned a judge to block assets worth as much as 3.8 billion reais ($1.22 billion) belonging to the investigated parties.

    The sum, said the prosecutors, would serve as "a guarantee" to compensate losses allegedly caused by the defendants in their business dealings with state-run companies' pension funds, as well as state-bank Caixa Econômica Federal and the FGTS workers' severance fund.

    The probe of the pension funds is one in a string of corruption investigations into the vast overlap of Brazilian business and politics.

    J&F, the Batista family holding company that controls both JBS and Eldorado, did not have an immediate comment.
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    Cereal box-sized spacecraft could sample asteroids for mining potential

    It may not be necessary to fire a billion-dollar spacecraft into orbit in order to find out the potential of mining asteroids. Instead, tiny spacecraft no bigger than a cereal box could be launched  with the intention of intercepting potential mineral-bearing asteroids in order to see how likely it is they contain metals worth mining and returning to Earth.

    Sound far-fetched? Possibly, but if the cost of asteroid mining exploration can be brought down to the millions from the billions, it could propel the yet-to-be-proven mining method closer into the realm of the probable. At least, that is the hope of a group of scientists who presented the concept at the annual fall meeting of the American Geophysical Union (AGU) in San Francisco.

    The cereal box-sized "motherships" could be built for $10-20 million, a fraction of the cost of current asteroid-exploration spacecraft.

    Called MIDEA (Meteoroid Impact Detection for Exploration of Asteroids), the mission concept "would launch tiny robotic scouts to rendezvous with asteroids and then study the material that minuscule impactors blast off them," according to a post in The results could reveal which space rocks make good mining targets.

    The best part? The cereal box-sized "motherships" could be built for $10-20 million, a fraction of the cost of current asteroid-exploration spacecraft.

    At the moment MIDEA is only conceptual, but it is receiving funding from NASA's Early Stage Innovations program. According to, construction is a ways off, with a space flight likely to be at least five to 10 years away.

    For now, the eyes of asteroid-mining enthusiasts will be on OSIRIS-REx.

    In September NASA's $1 billion spacecraft began a two-year journey to the asteroid Bennu, from which it will try gathering around 60 grams of dust, soil and rubble and return it to Earth.

    Once OSIRIS-REx arrives at Bennu in 2018, it will spend a couple of years surveying the asteroid’s body using its five instruments — three spectrometers, a camera suite and a laser altimeter — to select a suitable site for sampling.

    The craft will then carefully approach the celestial body — though it will never actually land on it — and extend a 3.3-metre arm that will fire nitrogen gas at the surface. This jet will break off samples to be collected and returned to Earth in 2023.

    Geologists believe asteroids are packed with iron ore, nickel and precious metals at much higher concentrations than those found on Earth, making up a market valued in the trillions of dollars.
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    China's forex reserve falls to six-year low in January

    China's forex reserve continued to shrink in January, falling for the seventh straight month to below the closely watched 3 trillion U.S. dollars, official data showed Tuesday.

    Foreign exchange reserves stood at about 2.99 trillion U.S. dollars last month, down from about 3.01 trillion U.S. dollars in December, the State Administration of Foreign Exchange said, citing figures from the central bank.
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    Tax Reform: No quick solutions.

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    "Just one word, son: plastics!"

    It’s not just polypropylene prices that are on the rise this year. Prices for solid polystyrene also climbed an average of 5 cents per pound in January, and prices for nylon 6 and 6/6 resins are under upward pricing pressure as well.

    The 10-cent PP hike is a sharp reversal from a combined 11.5 cents in price drops that market had seen in the last three months of 2016. The January hike was the result of tight supplies of polymer-grade propylene feedstock.

    The PetroChem Wire consulting firm in Houston said that propylene prices in December did not reflect a tight market, because the situation was masked by year-end destocking. When demand resurfaced in January, propylene buyers found they had to pay dramatically higher prices.

    PetroChem Wire added that the run-up in propylene costs caught PP buyers off guard and caused some to lower their order volumes for January.

    The 5-cent PS hike for January wasn’t completely unexpected, as prices for benzene feedstock had climbed for two straight months. North American benzene prices shot up 33 cents to $2.67 per gallon. Prices for that material also had increased 11 cents in December, but the market couldn’t settle on an increase amount for PS resin.

    As a result, regional PS prices were flat in December. PS prices in the region had fallen 2 cents per pound in November after being flat in October. Several factors have caused benzene prices to move up by almost 20 percent in the last two months, according to Robin Chesshier, a market analyst with RTI.

    Those reasons include tight supplies, lack of imports, stronger demand, pull from higher prices in other regions and a move from oil-based naphtha back to natural gas-based ethane as a precursor. Ethane produces less benzene per unit than naphtha does.

    PS maker Americas Styrenics LLC now is seeking an increase of 8 cents per pound effective Feb. 1. North American PS sales for full-year 2016 essentially were flat at just under 4.4 billion pounds, according to ACC. But the largest end market — food packaging and food service — saw sales growth of 1.3 percent, to more than 2.7 billion pounds.

    Pending increases for nylon
    The North American nylon resin market also is facing upward pricing pressure. BASF AG has announced increases of 28 cents per pound for nylon 6 resins since Jan. 1. The firm also planned to increase prices for compounds based on those materials by 7 cents per pound on Jan. 30. That affects compounds sold under the Ultramid, Capron and Nypel brand names.

    Solvay Group is increasing global prices for its Stabamid nylon 6/6 resins and Technyl nylon 6 and 6/6 compounds by an average of 15 cents per pound. Officials with Brussels-based Solvay announced the move Jan. 23. In a news release, they said that the dramatic rise of raw materials costs is affecting the entire nylon value chain.

    Solvay Performance Polyamides President Vincent Kamel said that despite “considerable efforts” to offset cost pressures since mid-2016, Solvay “is now compelled to increase price levels globally to remain a reliable and long-term partner for our customers.”

    DuPont Co. on Feb. 2 announced global price increases of 13-14 cents per pound on all Zytel nylon 6/6 resins and compounds effective Feb. 15. In a news release, officials said the increases “are needed as a result of rapidly rising costs of certain key raw materials.”

    One market watcher said the BASF price move was “too aggressive” and that the firm already was seeing “market pushback.

    “The producers will get something, but how much will need to be negotiated,” the contact said. Some nylon 6 and 6/6 buyers saw price hikes in January, but most are expecting hikes of 5-8 cents per pound to take hold by the end of February. No changes are being shown on this week’s Plastics News resin pricing chart.

    North American nylon 6 resin prices already had climbed an average of 10 cents per pound since August, due in part to tightness of caprolactam feedstock. BASF in September announced plans to remove more than 200 million pounds of annual caprolactam production in Europe by early 2018.

    Higher benzene prices also are putting upward price pressure on nylon resins, market watchers said.

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    South Africa to publish contested mining charter by March - minister

    South Africa will publish its revised Mining Charter by next month, a minister said on Monday, bringing closer legislation meant to redress racial economic inequality but which has concerned companies struggling with lower commodity prices.

    A separate Mineral and Petroleum Resources Development Act will be finalised by June, proposing to give the state a 20 percent free stake in new energy projects and the ability to buy further shares.

    The Mining Charter was introduced in 2002 to increase black ownership of the mining industry, which accounts for around 7 percent of South Africa's economic output.

    However, industry body the Chamber of Mines, has taken the government to court over ownership interpretations in the latest draft, which requires companies to keep black ownership at 26 percent even if black shareholders sell their stakes.

    "We are not challenging the charter. We are fully supportive of the entire transformation journey, but we just need the rules to be absolutely clear to make sure we don't end up making targets that are unobtainable but are pragmatic and realistic," said Roger Baxter, chief executive of the Chamber of Mines.

    In a separate court case, a local law firm is challenging the entire Mining Charter, arguing it is unconstitutional.

    The new charter, which was revised in 2010 as part of a consultative approach to regulations, also requires companies to provide housing and other amenities in mining communities, many of which are mired in poverty and neglect.

    "If government goes ahead and implements the charter in its current form it will be very unfortunate, because it would have a pretty dramatic effect on investment in mining in South Africa," said Peter Leon, a partner at law firm Herbert Smith Freehills African practice.

    South Africa is the world's top platinum producer and has a significant gold industry but firms are struggling with depressed prices, rising costs and bouts of labour unrest.

    "For investors, it goes without saying that regulatory certainty and the sanctity of private ownership under the constitution is paramount," Anglo American Chief Executive Mark Cutifani told delegates at a mining summit in Cape Town.

    Mining companies say they were not consulted in the latest draft but Minister of Mineral Resources Mosebenzi Zwane denied this and sought to reassure investors.

    "We have consulted extensively with stakeholders," Zwane said in a speech at the opening of the summit.

    "We call upon investors to come to South Africa and engage us frankly as we move towards transformation of our economy. We will continue to have an open door policy."

    With rising unemployment, the ruling African National Congress is under increasing pressure to address gaping inequality that persists 23 years after the end of apartheid.

    Black South Africans make up 80 percent of the 54 million population, yet most of the economy in terms of ownership of land and companies remains in the hands of white people, who account for around 8 percent of the population.
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    Chevron Phillips says plans to raise US PE prices by 6 cents/lb in March

    Chevron Phillips plans to raise US polyethylene prices by 6 cents/lb in March, in addition to its increase currently sought for February, the company said in a letter to customers seen Friday by S&P Global Platts.

    Chevron Phillips joins ExxonMobil Chemical and Dow Chemical who informed customers this week and Equistar Chemicals last week in seeking higher March prices. Equistar told customers last week that it was seeking a second increase on top of the 5 cents/lb producers are attempting to implement for February.

    The letter to customers, sent Thursday, did not provide a reason for the increase.

    Strong domestic demand to open 2017, as well as planned maintenance work and limited supply as factors playing into additional price hikes, sources said.

    February domestic contracts were assessed Wednesday at 61-62 cents/lb ($1,345-$1,367/mt) delivered rail car basis for blowmolding, 61-62 cents/lb ($1,345-$1,367/mt) for injection and 64-65 cents/lb ($1,411-$1,433/mt) for HMW film. Linear low-density butene polyethylene contracts were assessed at 59-60 cents/lb ($1,301-$1,323/mt) for delivered rail cars; and low-density polyethylene contracts were assessed at 71-72 cents/lb ($1,565-$1,587/mt) for delivered rail cars.

    Market sources have said the 5-cent increase will likely go through in February, pointing to strong sales in January amid restocking.
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    German coal, gas plant output at 5-year high in January

    German coal and gas-fired power plant output in January rose to its highest in almost five years as cold weather boosted demand while below average wind and record-low winter nuclear availability reduced supply, according to power generation data compiled by think-tank Fraunhofer ISE.

    The increased need to ramp up even less efficient thermal power plants helped to lift the day-ahead monthly average power price to its highest since February 2012 with spot prices spiking at their highest since 2008 at the height of the cold spell in late January, S&P Global Platts data shows. Output from coal-fired power plants was 12.9 TWh in January, up 37% on year and averaging around 17.3 GW for the whole month, a level not reached since the extended cold spell back in February 2012, the data shows.

    Coal also removed lignite from the top of the power mix in January with lignite plants already running near maximum available capacity.

    The increased coal burn may also have aggravated supply issues for coal transport on barges down the River Rhine with both RWE and EnBW warning of potential supply interruptions for some power plants inland and especially in southern Germany.

    Very low Rhine levels still prevent barges from being fully loaded with coal, adding a premium to transport, according to sources.

    Cold weather across Europe also lifted demand not just in Germany but also neighboring countries, especially France and the Alpine region.

    Load in Germany itself was around 7% higher on year at 45.2 TWh, according to the Fraunhofer 'energy charts' data mainly based on TSO reports.

    Output from gas plants also rose to its highest level since February 2012 at 5.6 TWh, up 14% on year, but with only a limited number of gas-fired plants reporting.

    The Fraunhofer ISE data does not capture the full picture for gas plants with many combined heat-power plants (CHP) not accounted for in that data, but cold weather in general will see CHP plant output ramped to near maximum levels with a number of new CHP plants helping to boost overall gas-fired power output.


    Wind power output in January dropped below 8 TWh, down 15% on year and averaging around 10.7 GW despite reaching a new hourly record just below 36 GW, the data shows.

    Daily average wind production swung between 29.5 GW on January 4 and just 1.3 GW on January 24 when German spot power prices spiked above Eur100/MWh for the first time since 2008, the data shows.

    German day-ahead baseload power prices averaged at Eur51.51/MWh this January, 74% above last January, Platts pricing data shows. Finally, nuclear output registered the biggest monthly deficit, down by over 2 TWh compared to last year with just 5.7 TWh generated, the lowest for a winter month in the modern nuclear era -- amid an unprecedented winter refueling schedule for four of the remaining eight reactors due to the expiry of the nuclear fuel tax at the end of 2016.

    German nuclear operators had the short refueling stops scheduled many months in advance amid generally very low power prices over recent years.

    However, this January an extended spell of very cold and calm weather coincided not only with the German nuclear outages, but also reduced nuclear availability in France and Switzerland as well as continued dry weather adding pressure on hydro reserves with both Swiss and French Alpine hydro levels falling to a 20-year low.
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    Peru to seek arrest of ex president Toledo in mega graft inquiry

    Prosecutors in Peru were preparing to request the arrest of former president Alejandro Toledo on Saturday after uncovering evidence that implicates him in $20 million in bribes that the Brazilian conglomerate Odebrecht has acknowledged distributing to win a contract during his government, a source said.

    Authorities searched a house owned by Toledo in Lima early on Saturday, the attorney general's office said on Twitter without providing additional details.

    A source in the attorney general's office who was not authorized to make public comments said the raid follows the detection of $11 million transferred to an associate of Toledo that prosecutors believe is part of $20 million in bribes that Odebrecht has said it gave to help secure an infrastructure contract during his 2001-2006 term.

    A representative of Toledo did not immediately respond to requests for comment. Toledo, reached by phone from Paris by the local daily El Comercio, denied taking any bribes, according to audio of the interview posted on the newspaper's website.

    Peru already has imprisoned one of its former presidents for graft - ex-authoritarian leader Alberto Fujimori, who is serving a 25-year sentence for convictions that include human rights abuses.

    Toledo rose to power denouncing Fujimori and promising to usher in a democratic era free of corruption.

    In a settlement with U.S. prosecutors in December, Odebrecht acknowledged distributing $29 million in bribes to secure public work contracts in Peru over a period spanning three presidencies.

    The agreement said the family-owned engineering conglomerate made $20 million worth of corrupt payments between 2005 and 2008 to benefit an unnamed high-ranking official that offered to help the company win an infrastructure contract in 2005.

    Current President Pedro Pablo Kuczynski was Toledo's finance minister and prime minister and has denied any involvement in Odebrecht's kickback schemes.

    "Justice must be the same for everyone," Kuczynski said on Twitter. "If someone committed acts of corruption, they must be penalized. I've ordered the executive to collaborate with whatever is necessary to guarantee the investigation is efficient. Corruption never again."

    Kuczynski is the subject of a separate preliminary investigation regarding a law he signed off on in 2006 that removed legal obstacles to highway contracts awarded to Odebrecht and other Brazilian companies. He has denied wrongdoing.

    Odebrecht has acknowledged doling out hundreds of millions in bribes to win public work contracts in Latin America, spurring inquiries from Peru to Panama that have shaken the region's elites.
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    US Senate kills SEC "resource extraction" rule

    The Republican-led Congress early Friday morning killed a controversial U.S. securities rule disclosure rule aimed at curbing corruption at big oil, gas and mining companies.

    In a 52 to 47 vote, the Senate approved a resolution already passed by the House of Representatives that wipes from the books a rule requiring companies such as Exxon Mobil and Chevron Corp to publicly state the taxes and other fees they pay to governments.

    Republican President Donald Trump is expected to sign it shortly.
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    Metso yet to benefit from mining industry recovery

    Finnish engineering group Metso on Friday reported fourth-quarter profit below market expectations, a sign that demand from its mining customers is not picking up despite a recovery in commodity prices.

    The maker of grinding mills and crushers for miners as well as valves and pumps for the oil and gas industry has been battling tough market conditions resulting from miners' spending cuts and uncertainty over growth in top metals consumer China.

    Hurt by lower volumes and project overrun costs at its minerals business, Metso's fourth-quarter profit slumped 30 percent from a year ago and net sales fell 10 percent to 676 million euros ($727 million), well below analyst estimates in a Reuters poll.

    The company said it expected its overall market to improve slightly in 2017, but remain weak for mining equipment and satisfactory for mining services.

    "The year has started in a relatively positive way, but it is still too early to announce a meaningful recovery," Chief Executive Matti Kahkonen said in a statement.

    The company's shares were down 5.4 percent at 1015 GMT.

    Metso's cautious outlook contrasts with its Nordic rivals Atlas Copco and Sandvik, which reported strong fourth-quarter results on the back of rising orders from miners.

    The Swedish mining gear makers both said they expected demand from the mining industry continue to improve in the near term.

    "The companies involved in quarrying and ore finding are the first to benefit from the rising commodity prices, and Metso is further down the chain," said Pekka Spolander, analyst at OP Equities, which has an "accumulate" rating on the stock.
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    US Unleashes New Sanctions On Iran; Russia Says "Counter-Productive"

    The U.S. imposed fresh sanctions on Iran as President Donald Trump seeks to punish Tehran for its ballistic missile program after warning the Islamic Republic that it is “playing with fire." As Bloomberg reports, the Treasury Department published a list of 13 individuals and 12 entities facing new restrictions, some for contributing to proliferation of weapons of mass destruction and others for links to terrorism.

    Ahead of the announcement, Iran’s foreign minister, Mohammad Javad Zarif, said, "Iran unmoved by threats as we derive security from our people." He added later: "We will never use our weapons against anyone, except in self-defense." In retaliation, Iran also announced it would bar the American wrestling team from a major international meet this month in response to President Trump’s order severely limiting travel from several Muslim-majority countries, including Iran.

    Meanwhile, RIA is reporting that Russian foreign ministry officials have remarked that "sanctions against Iran are counter-productive.

    List below:
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    Officials 'drawing up plans' for diesel scrappage scheme to cut emissions

    Ascrappage scheme for diesel cars could be introduced within months as part of a plan to lower emissions and improve air quality across the country, the Telegraph understands.

    Work is underway by officials in the Department for Transport and Defra on a scheme to offer cashback or a discount on low emission cars if people trade in their old polluting vehicles.

    A Government source confirmed that talks have taken place with the Treasury, which would finance the plan, and officials are developing a scheme which could focus on geographical areas around the country where pollution is worst.

    Chris Grayling, the Transport Secretary, reportedly told industry experts that he supports plans for a scrappage scheme during a private meeting earlier this month, but that it must be properly targeted.

    It came as Mr Grayling said high pollution levels are something ministers "have to deal with now".

    He told the House of Commons: "We have to find the right way to migrate the nature of the cars on our roads and the vehicles on our roads to a point where they cause much less of a pollution problem than they do at the moment."

    An industry source confirmed Mr Grayling spoke of his support for a scrappage scheme at a private meeting two weeks ago where the MP also committed to an expansion of electric cars and charging points for the technology.

    The oldest and most polluting diesel vehicles in areas where emissions levels are particularly high are likely to be the target, the Telegraph understands.

    It follows a dramatic warning earlier this month after a number of London boroughs recorded toxic air quality levels forcing the city's Mayor to call on people to stay indoors and put off exercise until the levels improved.

    Former chancellor George Osborne is understood to have previously blocked the scheme

    It also came as Westminster council introduced a 50 per cent surcharge on parking for diesel cars in a bid to drive them out of the borough.

    Mr Grayling told the BBC: "The irony is that a decade ago, because of concerns about carbon emissions there was a drive towards diesel... that we now know has a different set of negative effects and the department for the environment is currently preparing, and will launch shortly, our strategy to take tackling the diesel problem to the next level.

    "There is no question that in the future we are going to have to move to lower emission vehicles. We need to do it soon... I would like to see a migration of people away from current technologies to lower emission technologies. We are providing  incentives to do that now and we will be doing more in the months ahead."

    Former transport secretary Patrick McLoughlin suggested last year that the Treasury should rethink schemes that encourage people to buy diesel cars or increase taxes in order to deal with the problem.

    Sources said George Osborne, the former Chancellor, was opposed to a diesel scrappage scheme but that Philip Hammond is more open to the idea if it can be proven to work.

    The Telegraph understands MPs on the transport committee have also been in discussion with the Department for Transport about the viability of such a scheme.

    One MP said: "The department is looking at this in a serious way but it simply won't go far enough to tackle the real problem of heavily polluting HGVs, farm vehicles and ships."

    But campaigners and the car industry support the idea, which mirrors a scheme developed by the French Government to remove old diesel vehicles from the roads because of the high levels of pollution they emit.

    Howard Cox, founder of the FairFuelUK Campaign, said: "The decision by Westminster Council to add 50 per cent to the cost of parking diesel vehicles is just greedy unscrupulous money grabbing using dubious emissions evidence as the reason to fleece hard-working motorists.

    “There must be incentives for hard-pressed motorists of older diesels to want to change to EVs, hybrids or ultra-low emission vehicles, such as in the French approach. Punishing millions of diesel drivers for mistakes in past UK government policy is neither fair nor honest. There will be a cost in any scrappage scheme, but in the long term the economy and the environment will be the winners.”

    A Treasury spokesman said: "The Government continues to keep all taxes under review and any changes are announced at fiscal events.”

    While a Department for Transport spokesman said there are currently "no plans" to introduce a scrappage scheme.

    It came as Mr Grayling also announced a consultation into Heathrow expansion and changes to the way air traffic control works in the UK.

    The Transport Secretary promised new technology to cut jet noise from Heathrow runways and announced a  “compensation fund" for noise insulation and community projects in the wake of the decision.
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    ClimateGate 2: NOAA Ret'd scientist cries 'Fowl!'

    Image title

    NOAA’s 2015 ‘Pausebuster’ paper was based on two new temperature sets of data – one containing measurements of temperatures at the planet’s surface on land, the other at the surface of the seas.

    Both datasets were flawed. This newspaper has learnt that NOAA has now decided that the sea dataset will have to be replaced and substantially revised just 18 months after it was issued, because it used unreliable methods which overstated the speed of warming. The revised data will show both lower temperatures and a slower rate in the recent warming trend.

    The land temperature dataset used by the study was afflicted by devastating bugs in its software that rendered its findings ‘unstable’.

    The paper relied on a preliminary, ‘alpha’ version of the data which was never approved or verified.

    A final, approved version has still not been issued. None of the data on which the paper was based was properly ‘archived’ – a mandatory requirement meant to ensure that raw data and the software used to process it is accessible to other scientists, so they can verify NOAA results.

    Dr Bates retired from NOAA at the end of last year after a 40-year career in meteorology and climate science. As recently as 2014, the Obama administration awarded him a special gold medal for his work in setting new, supposedly binding standards ‘to produce and preserve climate data records’.

    Yet when it came to the paper timed to influence the Paris conference, Dr Bates said, these standards were flagrantly ignored.

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    Oil and Gas

    South Korea's KOGAS says interested in U.S. shale gas projects

    Korea Gas Corp (KOGAS), the world's No.2 buyer of liquefied natural gas (LNG), would be "interested" in participating in U.S. shale gas projects, with such investment curbing any potential trade pressure on South Korea from the U.S. government.

    U.S. President Donald Trump, who has dropped out of the 12-nation Trans-Pacific Partnership pushed by his predecessor Barack Obama, has repeatedly criticized the trade policies of South Korea's neighbors, Japan and China.

    "U.S. trade pressure is likely to increase, but U.S. gas investments can work as a tool against trade pressure," Lee Seung-hoon, CEO of state-run KOGAS, said at a forum in Seoul.

    Expected to become an importer of LNG just a decade ago, the shale gas revolution in the United States unlocked cheap, abundant gas supplies, allowing the country to become an exporter instead.

    Benefiting from the Panama Canal expansion last year that allows bigger ships to cross from the Gulf of Mexico into the Pacific, it has been pushing to ship more cargoes to meet surging demand in parts of Asia.

    "Securing U.S. shale gas is crucial because it's an important resource," said Lee, adding that such imports would help keep its supplies stable.

    KOGAS in 2012 signed a deal with Texas-based Cheniere to bring in 2.8 million tonnes of LNG annually for 20 years starting from this year. Lee said the first cargoes from the deal were expected to arrive in South Korea this summer.

    Lee also said that the company could eventually import LNG from both the United States and Iran without so-called 'destination restrictions', or clauses in contracts that limit possible buyers for any resales of the cargoes.

    "When new suppliers enter, they cannot request destination restrictions ... we can secure supplies that don't carry destination restrictions," he said.

    Iran, despite having some of the world's biggest natural gas reserves, does not have LNG export facilities, so shipping its gas to South Korea would require vast investment and would take many years to develop.

    But Lee said that South Korean demand for LNG would keep falling in the short-term due to increased electricity output from nuclear and coal-fired power plants. The country is the world's second-biggest LNG importer after Japan. 

    "This year South Korea's LNG demand is expected to remain flat at around 30 million tonnes," Lee told Reuters on the sidelines of the event.
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    OPEC Keeps Its Promise About Crude Oil Cuts, IEA Says

    OPEC achieved the best compliance rate in its history at the outset of an accord to clear the oil glut, a plan that’s being supported by surprising strength in demand, the International Energy Agency said.

    The Organization of Petroleum Exporting Countries implemented 90 percent of promised output cuts in January, the first month of its agreement, as key member Saudi Arabia reduced production by even more than it had committed, the agency said. Resilient oil demand is aiding OPEC’s bid to re-balance world markets, growing more than expected last year and poised to do so again in 2017.

    OPEC “appears to have made a solid start to what is a six-month process,” said the Paris-based IEA, which advises most of the world’s major economies on energy policy. “The first cut is certainly one of the deepest in the history of OPEC output cut initiatives.”

    OPEC and Russia are leading a push by global oil producers to end a three-year oil surplus that has depressed prices and battered the economies of energy-exporting nations. While their pact initially sparked a 20 percent rally in oil prices, gains have since faltered on concern that U.S. shale drillers could revive output and undo OPEC’s efforts.

    The IEA increased its 2016 estimates for world oil demand growth for a third month, and boosted its outlook for 2017, anticipating an increase of 1.4 million barrels a day this year.

    World oil inventories will fall by 600,000 barrels a day during the first half of the year if OPEC sticks to its agreement, the IEA said. While stockpiles in industrialized nations have declined for five months in a row, and fell in the fourth quarter by the most in three years, they remain significantly above average levels.

    “This stock draw is from a great height,” said the IEA. “The continued existence of high stocks,” plus concern that OPEC’s cuts will only stimulate supplies elsewhere, explains why oil prices remain capped in the mid-$50s, according to the agency.

    OPEC is being joined by 11 non-members including Russia and Kazakhstan, who collectively agreed to reduce supply by 558,000 barrels a day. While the agency didn’t give an estimate for compliance among these countries in January, its projections assume they will curtail output.

    Even if those reductions are made, total supply from outside OPEC will increase by 400,000 barrels a day this year after plunging in 2016, due to gains in Brazil, Canada and the U.S. Non-OPEC nations will pump an average of 58 million barrels a day in 2017, about 100,000 a day more than predicted in last month’s report.

    The 11 OPEC nations bound by the accord reduced output by 1.12 million barrels a day to 29.93 million a day last month, with Saudi Arabia delivering 116 percent of the curbs it had promised.

    While the IEA based its estimate of compliance on how much of the total cut OPEC delivered, the group also set a collective target for its members at the level needed to reduce inventories. With output rising from the two members exempt from making cuts -- Libya and Nigeria -- OPEC’s compliance with that total is only about 60 percent, according to a Bloomberg survey of analysts, oil companies and ship-tracking data.

    Attached Files
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    Iran takes market share from OPEC rivals

    Rise in flows bucks OPEC trend, bodes well for heavy crudes Iran's crude oil and condensate exports rose 3% month on month in January as it continued to regain market share, widening its appeal among refiners around the globe in the process.

    * Iran's oil exports rise 3% in January
    * India emerges as largest crude buyer

    Total estimated export volume on Aframaxes, Suezmaxes and VLCCs from Iranian ports in January climbed to 2.162 million b/d from 2.102 million b/d in December, data from cFlow, S&P Global Platts trade flow software, showed.

    Iran was the only Middle Eastern producer to see exports rise in January, as others, like Iraq, Kuwait, Saudi Arabia, and the UAE, saw a fall in loadings, in line with agreed OPEC-led output cuts by crude producers. Unlike its peers under the landmark OPEC-led agreement, Iran has wiggle room to boost production to 3.80 million b/d.

    Iranian crude is similar in quality to barrels from other OPEC countries in its region, meaning this is an ideal time for it to broaden its customer base, sources said. Output in January rose to 3.72 million b/d, up 30,000 b/d from December, a monthly survey of OPEC output by Platts found, meaning Iran seems intent on reclaiming ground lost under years of sanctions that crippled its oil sector.

    One of the main reasons for the rise in output has been a gradual increase in production from the South Azadegan field, in the strategic West Karun region, according to sources and oil ministry officials. In recent months, Iran has signed a number of upstream development deals as part of its plans to boost oil and gas exports to pre-sanctions level of four million b/d.


    Exports to Asia accounted for 61%, or 1.323 million b/d, of outflows, marking an increase of almost 200,000 b/d from December. India emerged as the largest buyer of Iranian crude, with exports in January totaling 571,387 b/d, more than double the 281,065 b/d in December.

    Rising demand for Iranian crude from India bodes well for Iran, as the South Asian country is one of the main drivers of oil demand growth this year. The bulk of these exports traveled to Essar Oil's 400,000 b/d Vadinar refinery on the west coast of India, the second-largest privately held refinery in India, after Reliance Industries' Jamnagar plant.

    Essar Oil is one of the biggest buyers of Iranian crude and its purchases have increased significantly post-sanctions, boosted by the ease of using of shipping insurance, as its refinery relies heavily on sour crudes from the Persian Gulf and Latin America.

    The rest of the loadings to India went to the country's newest refinery at Paradip operated by IOC along with refineries in Chennai and New Mangalore.

    Exports to China in January fell to 369,484 b/d from 413,710 b/d the previous month. China was the largest buyer of Iranian crude in 2016, averaging more than 600,000 b/d, according to estimates by Platts.

    China's interest in crude priced off Dated Brent, like grades from the North Sea and West Africa, has increased as the OPEC-led cuts have decreased exports from countries like Iraq, Kuwait, Saudi Arabia and the UAE, narrowing the spread between the Platts Dated Brent and Platts Dubai benchmarks.

    Japan, a major buyer of Iranian condensate, saw its interest fall month on month to 212,161 b/d in January, down 35,678 b/d. But flows to South Korea rose to 170,839 b/d from 119,774 b/d in December. South Korean imports of Iranian oil jumped sharply last year, up 164% to 112 million barrels, according to Korea National Oil Corp. data.

    This rise is attributable to more condensate imports, as oil refiner Hyundai Oilbank started commercial operations at its 130,000 b/d condensate splitter in November. The splitter is running mainly on South Pars condensate as a feedstock, traders said, along with some Qatari condensates.

    Trading sources also said South Korean refiners found Iranian oil more price-competitive than other oil suppliers in the Middle East. In Europe, Turkey and France were the major destinations, with 209,774 b/d and 170,419 b/d, respectively, exported from Iran in January.

    Demand from Greece, Italy and Spain fell month on month but traders have said European refiners remained interested in Iranian crude due to its competitive pricing. The cracking margins in Europe for Iran Heavy compared with Saudi Arabia's Arab Medium are also providing better yields, sources said.


    Last month, the International Group of P&I Clubs said it will soon provide nearly full coverage of reinsurance of around $7.8 billion per tanker for shipping Iranian oil, in addition to resuming reinsurance coverage for the National Iranian Tanker Co.'s oil tankers. That can boost Iran's already increasing oil exports as ongoing US sanctions had created hurdles on the availability of ships to carry Iranian barrels, sources said.

    With it now easier for a wider pool of charterers and shipowners to transport and trade Iranian oil, the past month saw some old buyers returning. In the next few days, two Iranian VLCCs -- the Huge and the Snow -- will discharge a mix of Iranian heavy and light crude grades in the Rotterdam refining hub for the first time in five years.

    The National Iranian Oil Company sold a cargo of Iranian Light crude to Indonesia's state-owned Pertamina for February loading as a test sale, the first direct crude sale between NIOC and Pertamina for around 15 years, according to sources close to the matter.

    The Philippines' PNOC has also recently signaled it was seeking to resume crude oil imports from Iran. PNOC president and CEO Pedro Aquino said recently his company and NIOC were in negotiations for the long-term sale of four million barrels of Iranian crude oil per month to the Philippines.
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    Iraq's Basra oil export terminal resumes loadings after 24 hour halt

    Iraq's main oil export terminal, off the southern city of Basra, resumed loading after a 24-hour halt because of work to install a new pipeline feeding the facility, an executive at state-run South Oil Co said on Thursday.

    Loadings stopped at midnight Tuesday and resumed midnight Wednesday, he said.

    The terminal's loading capacity is estimated at around 1.8 million barrels per day (bpd).

    Loading offshore at three single-point moorings (SPMs) connected with the Basra terminal was not affected.

    OPEC's second-largest producer after Saudi Arabia, Iraq exported a record 3.51 million bpd in December from the southern ports.
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    UAE's Dana Gas freezes Egypt investments over debts

    Dana Gas will not make new investments in Egypt because of delays in obtaining payments owed to it there, the chief executive of the United Arab Emirates company said.

    Political and economic turbulence in Egypt and Iraqi Kurdistan mean Dana has struggled to secure revenues in either country, once again hitting its profit on Thursday.

    Dana posted a $7 million net profit in the three months to Dec. 31, versus $134 million in the same period of 2015 when it benefited from a one-off legal settlement. Shares in Dana fell 3.7 percent following the results.

    The amount owed by Egypt was $265 million as of Dec. 31, up from $221 million at the end of 2015, Dana said. Unpaid receivables from the Kurdistan Regional Government were $713 million, down slightly from $727 million in 2015.

    "As uncertainty remains we must therefore be rigorous in balancing any additional capital investment in Egypt with actual collections," CEO Patrick Allman-Ward told reporters.

    Dana will complete current Egyptian investments in critical health, safety, security and environmental areas and all of its up-and-running projects, but all non-critical projects have been paused since the start of the year, he said.

    The Egyptian government has been seeking to draw foreign investors back to its energy sector to boost shaky public finances, but it has failed to meet self-imposed deadlines for paying back international oil companies.

    Dana had thought that part of a $12 billion loan from the International Monetary Fund loan agreed with Egypt in November would be used for payments to the petroleum sector, but the money had been "used for other purposes", Allman-Ward said.

    He now hoped part of a combined $5.5 billion that Egypt has secured through an international bond issue and loans from the World Bank and African Development Bank would be used to meet outstanding petroleum debts.

    Dana's investment freeze would be reviewed once it had been paid by the Egyptian government, Allman-Ward said, adding that the company wanted to continue developing its assets there.

    Production from Egypt in the fourth quarter rose to 40,500 barrels of oil equivalent per day (boepd), up 31 percent on the year-ago period, Dana said, although it took a $20 million charge last year because of currency depreciation.
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    Total Lifts Dividend, Plans Growth as Profits Beat Estimates

    Total SA raised its dividend by 1.6 percent and said it may give the go-ahead for almost a dozen new projects in the next 18 months after fourth-quarter profit beat analysts’ estimates.

    “We’re going to propose to increase the dividend as we have confidence in the future,” Chief Executive Officer Patrick Pouyanne told reporters in Paris. “My goal is to launch new projects to prepare the future, while remaining disciplined and cutting costs further because crude prices might drift lower.”

    Total’s confident appraisal of the year ahead belied what was otherwise a difficult fourth quarter for major oil companies. The French producer’s peers BP Plc, Royal Dutch Shell Plc and Exxon Mobil Corp. all fell short of analysts’ estimates as rising profits from oil and gas production failed to fully offset weaker earnings from refining and trading.

    Total’s adjusted net income climbed 16 percent from a year earlier to $2.41 billion due to rising oil and gas production and cost cuts, the company based in Courbevoie near Paris said Thursday. Analysts polled by Bloomberg had expected a profit of $2.23 billion.

    “We view this as a solid release, with a small beat to consensus, further cost-reduction targets and a small hike in dividend signaling management confidence,” Goldman Sachs Group Inc. analysts wrote in a note.

    Total shares gained as much as 2 percent and were up 0.6 percent at 47.10 euros as of 11:22 a.m. in Paris. The stock has climbed 28 percent in the past 12 months.

    Funding Dividend

    Adjusted net operating income jumped 51 percent from a year earlier to $1.13 billion in Total’s exploration and production business, and rose 13 percent to $1.14 billion in the refining and chemicals division. After writing down the value of gas assets in Australia, Angola and the U.K. due to falling oil and gas prices, Total reported net income of $548 million compared with a loss of $1.63 billion a year earlier.

    The company said it would raise its quarterly dividend by 1 cent to 62 euro cents, the first increase in three years, while maintaining the option for shareholders to be paid with new Total shares. It said it should be able to fund operations and the cash part of its dividend without needing to borrow with crude at about $50 a barrel this year -- $5 lower than both its September estimate and the current price of Brent crude.

    Exxon and Shell both said in the past week that cash flow covers their spending and dividends at current oil prices, while the U.K.’s BP needs Brent to rise to $60 a barrel this year to achieve that goal.

    Investment Decisions

    The price rebound and lower drilling costs have encouraged Total to sign preliminary deals to produce gas in Iran and invest in oil projects from Brazil to Uganda. The final go-ahead for Iran’s South Pars 11 project may be made “before the summer” if the U.S. doesn’t impose new sanctions on Iran, the CEO said. The Libra 1 project in Brazil may also be approved within a similar time frame, Pouyanne said.

    The company said it plans to make final investment decisions on 10 oil and gas production projects in the next 18 months, in countries including Nigeria, Angola, Azerbaijan and Argentina. It also expects to decide on a petrochemical project at Port Arthur in the U.S. this year. Total reiterated its plan to boost oil and gas production by 5 percent a year from 2014 to 2020.

    The company also said that:
    * Output increased by 4.7 percent in the fourth quarter from a year earlier to 2.462 million barrels of oil equivalent a day; volumes will rise by more than 4 percent this year
    * Operating costs were cut by $2.8 billion last year compared with 2014
    * Targeted savings to climb to $3.5 billion in 2017 and $4 billion in 2018
    * Organic investments including resource renewal will be between $16 billion and $17 billion in 2017, down from $18.3 billion in 2016
    * Net debt rose to $27.1 billion at the end of 2016 from $26.6 billion a year earlier
    * It may divest as much as $2 billion of pipelines and small fields this year after completing the $3.2 billion sale of its Atotech unit last month

    French oil company Total is on the hunt to buy assets from struggling rivals, it said on Thursday, after reporting better than expected fourth quarter net profit thanks to cost cuts, and raising its dividend.

    "We are in a field of opportunities," Pouyanne told reporters. "After two years of very low prices, there are companies around the world that have good assets but are struggling."
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    Occidental Petroleum loss bigger than expected due to higher costs

    Oil and gas producer Occidental Petroleum Corp reported a larger-than-expected quarterly loss as a rise in oil prices failed to offset higher costs, and the company said it expected to spend less this year than it had originally estimated.

    The company said it expects to spend $3.0 billion to $3.6 billion this year, lower than a preliminary estimate of $3.3 billion to $3.8 billion it gave in November.

    Occidental spent under $3 billion last year.

    Global oil prices have rallied, thanks in part to OPEC's decision to cut supply, prompting oil and gas producers to ramp up spending.

    Occidental's total cash operating costs rose nearly 19 percent per barrel of oil equivalent (boe) in the fourth quarter ended Dec. 31.

    However, operating costs per boe in Texas' Permian Basin - the focus of Occidental's oil and gas operations - fell 25 percent.

    General, administrative and other expenses shot up 38 percent per boe, while exploration expenses rose 31 percent.

    Total production fell to 607,000 boe per day, on average, from 680,000, a year earlier.

    Net loss attributable to shareholders narrowed to $272 million or 36 cents per share, from $5.18 billion or $6.78 per share a year earlier. (

    The year-ago quarter included impairment and related charges of $4.9 billion.

    Core loss was 13 cents per share, much steeper than the analysts' average estimate of 2 cents, according to Thomson Reuters I/B/E/S.
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    Eni CEO charged with international corruption

    Italian prosecutors have reportedly charged Eni and its CEO Claudio Descalzi with international corruption over the controversial acquisition of an offshore block in Nigeria in 2011.

    Apart from Descalzi, the charge reportedly extends to the former CEO Paolo Scaroni and nine other people involved in the $1.3 bilion deal. Scaroni served as the Chief Executive Officer of Eni  from June 2005 to May 2014, when he was succeeded by Descalzi.

    According to the Financial Times, apart from Eni and its former and current members, Shell has also been charged.

    This is continuation of the case stemming from Eni’s and Shell’s joint acquisition of the block named OPL 245 in Nigeria. In 2014, the Milan Prosecutor’s office launched an investigation to see where the payment went and whether Eni and Shell knew, as it has been alleged that the money didn’t end up in the state coffers but was passed on further to the former oil minister Dan Etete.

    Both Eni and Shell have been denying any wrongdoing ever since the start of the investigation.

    In a statement on Thursday, responding to latest info on the Italian prosecutors seeking trial for Descalzi, Eni’s Board again denied any wrongdoing and backed up its CEO.

    The company said: “With regard to the news reported by the media on the request for trial by Milan prosecutors relating to the 2011 acquisition of a stake in OPL 245 in Nigeria, Eni’s Board of Directors, following an in-depth legal analysis, confirms its total confidence that Eni is entirely free of any involvement in the alleged corrupt conduct subject to investigation.

    The Board of Directors also confirms its total confidence that the company’s CEO, Claudio Descalzi, was not involved in any way in the conduct under investigation, and maintains their upmost support for him as CEO. The Board of Directors also confirms its total confidence in the judiciary.”
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    BHP approves Mad Dog 2

    Diversified giant BHP Billiton has approved a $2.2-billion investment for its share of the Mad Dog Phase 2 development, in the Gulf of Mexico.

    The Mad Dog Phase 2 project, in which BHP holds a 23.9% interest, is a southern and south-western extension of the existing Mad Dog field, and includes a new floating production facility with the capacity to produce up to 140 000 gross barrels of crude oil a day from 14 production wells.

    Production is expected to start in 2022.

    “Mad Dog Phase 2 is one of the largest, discovered and undeveloped resources in the Gulf of Mexico, one of BHP Billiton’s preferred conventional deep water basins,” said BHP’s president for petroleum, Steve Pastor.

    “It offers an attractive investment opportunity for BHP and aligns with our strategic objective to build our conventional portfolio through the development of large, long-life, high quality resources.”

    The Mad Dog field is operated by oil major BP, which olds a 60.5% interest in the project, with the balance of the asset belonging to Union Oil Company.

    The project was placed on ice in 2013 after the initial designproved too complex and costly, however, in December of last year BP sanctioned the $9-billion Mad Dog Phase 2 projectafter the project partners worked to simplify and standardize the platform design, reducing the overall project cost by some 60%.

    The Mad Dog 2 platform will be moored about six miles to the south-west of the existing Mad Dog platform, which has a capacity to produce 80 000 bbl/d of oil and 60-million cubic feet a day of natural gas.

    Attached Files
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    Indonesia needs $70-80 bil in gas investments to avoid shortage: Pertamina

    Indonesia needs to invest $70 billion to $80 billion in gas infrastructure through 2030 to avoid a potential gas shortage, as domestic consumption growth outpaces supply, state-owned energy business Pertamina said Tuesday.

    An expanding economy and growing middle class are the key drivers of energy consumption, which continues to grow by around 4-5% a year.

    Natural gas accounts for approximately 15% of the country's energy needs, and its growth is primarily supported by expanding demand from the power, refinery, fertilizer and transport sectors.

    "Indonesia needs new investment to explore and develop new gas resources and to build gas infrastructure," said Yenni Andayani, chairman of Indonesia Gas Society and acting president director of Pertamina.

    "Gas infrastructure investment requires coordination with all stakeholders, incentives, competitive prices and a good domestic investment climate," he said, at the opening of the International Indonesia Gas Conference and Exhibition 2017.

    Indonesia is a major LNG supplier, with Bontang, Tangguh and Donggi Senoro LNG facilities having produced a total of 18.83 million mt of LNG in 2016, up by 4.3% from the 8.05 million mt produced in 2015, according to Platts Analytics.

    Of the total, 3.016 million mt was delivered to one of Indonesia's three import terminals supplying the highly populated centers of Java and Sumatra, up by more than 30% from 2.281 million mt received in 2015.

    At current gas demand growth rates, there could be a supply gap of 27.9 Bcm by 2025, the equivalent of more than 20 million mt of LNG, Platts has previously reported.

    The country, which has not yet imported LNG from the international markets, is to import 1.52 million mt/year from 2019, as part of a 20-year contract between Pertamina and Houston-based Cheniere Energy.

    Indonesia's proven reserves stand at 3.7 billion barrels of oil and 101.54 Tcf of gas.

    Crude oil production peaked at 1.6 million b/d in 1995 and has since been declining, owing to ageing fields and limited investor interest due to the country's complex bureaucracy and contract system. Indonesia produced 831,000 b/d in 2016.

    Gas production is expected to rise to 9.35 Bcf/d over the next few years from 8 Bcf/d currently, but growth in demand is expected to outpace supply.
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    CONSOL Energy Announces 11% Increase in Proved Reserves to 6.3 Tcfe

    CONSOL Energy Announces 11% Increase in Proved Reserves to 6.3 Tcfe

    CONSOL Energy Inc. today announced total proved reserves of 6.3 Tcfe, as of December 31, 2016, which is an 11% increase compared to the previous year. Oil, condensate, and liquids account for 423 Bcfe, or 6.8%, of the 6.3 Tcfe total proved reserves, of which the Marcellus and Utica Shale represent 99% of these heavier hydrocarbons.

    During 2016, CONSOL Energy added 720 Bcfe of proved reserves through extensions and discoveries, which resulted in CONSOL Energy replacing 183% of its 2016 net production of 394 Bcfe.

    In 2016, total capital costs incurred were $165 million. Total capital costs incurred divided by the summation of 720 Bcfe for extensions and discoveries, 1,444 Bcfe for the purchase of reserves in-place, negative 871 Bcfe for the sale of reserves in-place, and negative 290 Bcfe for revisions, yields an all-in finding and development (F&D) cost for proved reserve additions of $0.16 per Mcfe.

    In 2016, drilling and completion costs incurred directly attributable to extensions and discoveries were $144 million. When divided by the extensions and discoveries of 720 Bcfe, this yields a drill bit F&D cost of $0.20 per Mcfe, compared to $0.66 per Mcfe at year-end 2015.

    Future development costs for proved undeveloped (PUD) reserves are estimated to be approximately $1.191 billion, or $0.46 per Mcfe, compared to $0.48 per Mcfe at year-end 2015.
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    Without a quorum, US FERC cancels monthly open agenda meetings

    Without a quorum, US FERC cancels monthly open agenda meetings

    The US Federal Energy Regulatory Commission has canceled its regular monthly open meetings until further notice because it lacks a quorum, the remaining sitting commissioners -- acting Chairman Cheryl LaFleur and Commissioner Colette Honorable -- announced Wednesday.

    The next agenda meeting, at which the commissioners typically consider, discuss and vote on a full slate of official orders, was scheduled to occur February 16.

    FERC, for the first time in its history, finds itself without the minimum three commissioners needed to do the bulk of its major caseload. Norman Bay, who served as FERC chairman for nearly two years, abruptly left the commission, effective February 3, after President Donald Trump designated LaFleur acting chairman.

    The five-member commission normally has a majority of sitting commissioners, including the chairman, who are members of the president's party. The three open seats are expected to be filled by Republicans, as both LaFleur and Honorable are Democrats. But vetting prospective commissioners and moving them through the Senate nomination and confirmation procedures can take months.

    Until the US Senate confirms the replacements, the commission will be unable to act on significant orders, petitions, rules and policy pronouncements. Some routine business can continue under authority delegated to office directors.

    In the last few days before Bay left, the commission rushed out dozens of orders, including one clarifying the delegated authority that can be used by senior commission staff to process certain types of filings and orders.

    Numerous names have been floated regarding who Trump may nominate to bring the commission to full mast: Neil Chatterjee, long-time energy adviser to Senate Majority Leader Mitch McConnell; Crowell & Moring partner Richard Lehfeldt; Greenberg Traurig attorney and shareholder Kenneth Minesinger; Bracewell managing partner Mark Lewis; American Transmission Company General Counsel Bill Marsan; Montana Public Service Commission Vice Chairman Travis Kavulla and Janet Sena, senior vice president and director of policy and external affairs at North American Electric Reliability Corporation.

    Unless otherwise announced, FERC will continue to hold previously scheduled meetings and events, including the joint meeting between FERC and the Nuclear Regulatory Commission February 23 and the upcoming Hydropower Regulatory Efficiency Act of 2013 workshop March 30.

    FERC also will continue to schedule future meetings, technical conferences and workshops as appropriate, the Wednesday announcement said.
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    U.S. to sell 10 mln barrels of SPR oil in Feb -Energy Dept

    The U.S. Energy Department said on Wednesday it will sell 10 million barrels of oil from the government's emergency crude reserve in late February.

    The sale from the Strategic Petroleum Reserve (SPR) was required by a law passed last year as a way to help increase funding for medical research. The law mandated sales of 25 million barrels from the SPR over three years, starting with the sale of 10 million barrels this year.

    The reserve, a series of heavily guarded underground salt caverns along the coast in Texas and Louisiana, currently holds about 690 million barrels of mostly sour oil, a type containing high sulfur that many U.S. refineries can process.

    It will be the second sale of oil from the emergency stash this year. Last month, Shell bought 6.2 million barrels from the reserve and Phillips 66 bought 200,000 barrels.

    The federal government held that sale to fund a modernization of the SPR. More sales are expected be held in coming years to fund up to $2 billion for the revamp.

    Attached Files
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    Japan spot LNG contract price hits two-year high in January

    Prices for liquefied natural gas (LNG) spot cargoes for Japan, the world's top buyer, rose to a two-year high in January, official data showed on Thursday.

    The average price of spot LNG bought last month was $8.40 per million British thermal units, up from $8 in the previous month and the highest since January 2015, according to monthly data from the Ministry of Economy, Trade and Industry (METI).

    Spot gas prices in Asia LNG-AS had fallen to $7.75 per million British thermal units (mmBtu) by the end of January from $9.75 earlier in the month, as oversupplied Japanese utilities sought to offload cargoes and as key European gas benchmarks softened.

    METI surveys spot LNG cargoes bought by Japanese utilities and other importers, but excludes cargo-by-cargo deals linked to benchmarks such as the U.S. natural gas Henry Hub index.

    It only publishes a price if there is a minimum of two eligible cargoes reported by buyers.
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    Suncor Energy reports fourth quarter 2016 results

    “Suncor generated $2.4 billion in cash in the fourth quarter thanks to strong contributions from all of our assets and our focus on cost management,” said Steve Williams, president and chief executive officer. “Reliable performance throughout the year has helped us overcome challenging crude pricing and the major production outage associated with the Fort McMurray forest fires, resulting in annual cash flow significantly exceeding our annual sustaining capital and dividend commitments.”

    Funds from operations (previously referred to as cash flow from operations) of $2.365 billion ($1.42 per common share), driven by higher benchmark crude pricing, increased production at Oil Sands and Exploration and Production (E&P), lower operating costs at Oil Sands operations and E&P, as well as solid Refining and Marketing (R&M) earnings. Cash flow provided by operating activities, which includes changes in non-cash working capital, was $2.791 billion ($1.68 per common share).
    Operating earnings of $636 million ($0.38 per common share) and net earnings of $531 million ($0.32 per common share), including an R&M first-in, first-out (FIFO) gain of $114 million.
    Suncor achieved a new quarterly crude production record of 738,500 barrels of oil equivalent per day (boe/d), which included 187,000 barrels of oil per day (bbls/d) of Syncrude production, reflecting additional Syncrude working interests acquired in 2016 and significantly improved Syncrude reliability.
    Oil Sands operations cash operating costs per barrel decreased to $24.95 for the fourth quarter of 2016 from $28.00 in the prior year quarter. During the same periods, Syncrude cash operating costs per barrel decreased to $32.55 from $40.15.
    Suncor successfully reached agreements to sell its Petro-Canada lubricants business and its interest in the Cedar Point wind facility. Both transactions closed in the first quarter of 2017, with cash received of $1.4 billion. This brought total anticipated divestment proceeds to $2.0 billion since the start of 2016, significantly exceeding the company’s target of $1.0 to $1.5 billion.
    Subsequent to the end of the quarter, Suncor’s Board of Directors approved an increase to the company’s dividend to $0.32 per common share, an increase of 10%, demonstrating the company’s commitment and ability to generate cash flow and return cash to shareholders, even in a low commodity price environment.

    Financial Results

    Suncor recorded fourth quarter 2016 operating earnings of $636 million ($0.38 per common share), compared to an operating loss of $26 million ($0.02 per common share) in the prior year quarter. The increase in operating earnings is primarily attributed to improved benchmark crude pricing, an R&M FIFO gain and higher Syncrude operating earnings, which were a result of the acquisition of additional working interests in 2016 and significantly improved Syncrude upgrader reliability. Lower operating costs at both Oil Sands operations and E&P also contributed to the improvement.

    Funds from operations (previously referred to as cash flow from operations) was $2.365 billion ($1.42 per common share) compared to $1.294 billion ($0.90 per common share) in the fourth quarter of 2015, with the improvement being attributed to the same factors noted above in operating earnings.

    Net earnings were $531 million ($0.32 per common share) in the fourth quarter of 2016, compared with a net loss of $2.007 billion ($1.38 per common share) in the prior year quarter. In addition to the operating earnings factors noted above, net earnings for the fourth quarter of 2016 included an unrealized after-tax foreign exchange loss of $222 million on the revaluation of U.S. dollar denominated debt, a non-cash after-tax mark to market gain of $188 million on interest rate derivatives for future debt issuance and $71 million of after-tax derecognition charges. The net loss in the prior year quarter included $1.599 billion of non-cash impairment charges and an unrealized after-tax foreign exchange loss of $382 million on the revaluation of U.S. dollar denominated debt.

    Operating Results

    Suncor’s total upstream production achieved a new quarterly record of 738,500 boe/d in the fourth quarter of 2016, compared with 582,900 boe/d in the prior year quarter. The increase was primarily due to the additional 41.74% ownership interest in Syncrude acquired during 2016, combined with significantly improved Syncrude upgrader reliability. Higher E&P production in the fourth quarter of 2016 was offset by slightly lower production at Oil Sands operations, when compared to the prior year period.
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    US oil production on the rise

                                                         Last Week  Week Before   Last Year

    Domestic Production '000.......... 8,978           8,915           9,186
    Alaska ............................................... 518              528             513
    Lower 48 ..................................... 8,460           8,387           8,673

    Attached Files
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    Summary of Weekly Petroleum Data for the Week Ending February 3, 2017

    Summary of Weekly Petroleum Data for the Week Ending February 3, 2017

    U.S. crude oil refinery inputs averaged 15.9 million barrels per day during the week ending February 3, 2017, 54,000 barrels per day less than the previous week’s average. Refineries operated at 87.7% of their operable capacity last week. Gasoline production increased last week, averaging 9.8 million barrels per day. Distillate fuel production increased last week, averaging 4.8 million barrels per day.

    U.S. crude oil imports averaged about 9.4 million barrels per day last week, up by 1.1 million barrels per day from the previous week. Over the last four weeks, crude oil imports averaged about 8.5 million barrels per day, 10.0% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 811,000 barrels per day. Distillate fuel imports averaged 209,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 13.8 million barrels from the previous week. At 508.6 million barrels, U.S. crude oil inventories are above the upper limit of the average range for this time of year. Total motor gasoline inventories decreased by 0.9 million barrels last week, but are above the upper limit of the average range. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories remained unchanged last week and are above the upper limit of the average range for this time of year. Propane/propylene inventories fell 6.9 million barrels last week but are in the middle of the average range. Total commercial petroleum inventories increased by 1.4 million barrels last week.

    Total products supplied over the last four-week period averaged about 19.9 million barrels per day, up by 0.3% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged over 8.3 million barrels per day, down by 6.0% from the same period last year. Distillate fuel product supplied averaged about 3.9 million barrels per day over the last four weeks, up by 7.6% from the same period last year. Jet fuel product supplied is up 6.4% compared to the same four-week period last year.

    Cushing up 1.2 mln bbl

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    NWE butyl acetate prices hit all-time high on Oxea, BASF force majeures

    NWE butyl acetate prices hit all-time high on Oxea, BASF force majeures

    Northwest European butyl acetate prices have surged to an all-time high on the back of two out of three producers now under force-majeure, according to sources and S&P Global Platts data.

    Spot prices rose Eur500 ($535), the single biggest week-on-week increase since Platts records began in 1994, to Eur1,500/mt FD NWE Tuesday.

    The previous highs for butac were in May 2011 at Eur1,440/mt and April 1995 at Eur1,308/mt, but both times prices rose in moderate increments.

    The finally balanced butac market was shaken by Oxea declaring force majeure last week.

    Markets were already tight because of BASF's force majeure from October, which the company confirmed as still in place.

    The two force majeures left Ineos as the sole significant producer.

    "Ineos is now the last man standing so it can basically charge whatever it wants," a source said.

    Following the Oxea force majeure, there were reports that prices even broke above Eur2,000/mt but then fell back as the market calmed down.

    Oxea is the largest producer of butac in Europe with a capacity of 100,000 mt/year at its Marl, Germany, plant.

    BASF is close behind with a capacity of 90,000 mt/year in Ludwigshafen, Germany plant.

    Ineos is the smallest of the three with an annual capacity of 60,000 mt in Antwerp, Belgium.
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    Norway's Grane crude oil at five-month high on demand for heavy grades

    Norwegian crude Grane has hit a five-month high versus the Dated Brent benchmark, lifted by buoyant trading levels on competing heavy crudes such as Angola's Dalia, sources said.

    Grane was assessed 25 cents/b higher at Dated Brent minus $1.25/b Tuesday, its highest since early September, S&P Global Platts data showed.

    The volume of Dalia clearing to the East had increased local demand for heavier North Sea crudes like Grane, according to traders, adding the six March-loading Dalia cargoes have been sold to end-users.

    "Look at Dalia which is a competitor and has been trading at very high levels," one trader said.

    "The heavy crudes have cleared in WAF and Middle East allocations to Europe have gotten smaller. Margins are favoring heavier cuts, so Grane is looking good. Margins are OK but supply has been lower from other regions."

    Dalia has seen its value soar during the March trading cycle. On Tuesday, Platts assessed Dalia at a discount of 75 cents/b FOB to the 30-60 day Dated Brent strip, its highest since August 2, 2013.

    "Angola and the heavy grades have moved even further up [over the course of March trading]. it Is crazy," said one West Africa crude trader.

    Dalia, along with other heavy Angolan crudes Hungo and Pazflor, have hit their highest levels versus Dated Brent in a number of years on buying from Asia as a result of a narrow Brent/Dubai EFS, lower freight rates, and tighter supply of heavy barrels globally.

    OPEC production cuts which began in January have reduced the supply of heavy sour crude because most of the group's members produce this quality, which is high in sulfur and yields a good amount of fuel oil and vacuum gasoil. Due to the shortfall of heavy crude in the Middle East, China has been leaning more on such crudes from Angola, including Dalia.

    "Eastern buyers are attempting to buy more of the heavier grades because currently with light sweet grades you are able to find lots of alternatives, while for heavy grades it is not as easy," said a second trader active in the Angolan crude market.

    While Grane is still classified as a heavy crude, the addition of the Ivar Aasen field in December had been expected to result in a lighter Grane Blend, with an API gravity of 28.4 degrees, according to a 'simulated' assay from Statoil, compared with 19 degrees for the original Grane crude.

    According to Ivar Aasen's field operator BP, the field will eventually reach peak output of 65,000 b/d.
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    OPEC Ministers Say the Market Might Need More Oil Cuts

    OPEC and other major crude-producing nations may need to extend output cuts into the second half of the year to re-balance the market, oil ministers for Iran and fellow group member Qatar said.

    Global oil supplies have decreased as the Organization of Petroleum Exporting Countries and producers outside the group comply with a six-month deal to curb output that took effect on Jan. 1, Qatar’s Energy Minister Mohammed Al Sada said Wednesday at a news briefing in Doha. “It’s too early to make a judgement,” he said, adding that markets may re-balance in the third quarter.

    In principle, OPEC will have to cut output in the second half, Iran’s Oil Minister Bijan Namdar Zanganeh said, according to the Fars news agency. The issue needs further study before the group can make a decision, Zanganeh said, after meeting in Tehran with his counterpart from Venezuela, also an OPEC member.

    The organization agreed in November to impose quotas on its members for the first time in eight years, in an effort to stem a supply glut that had depressed crude prices. OPEC enlisted support from 11 other producers on Dec. 10 in an historic deal to remove as much as 1.8 million barrels of oil a day from the market. OPEC expects to decide whether to extend the cuts at its bi-annual meeting in Vienna in May.

    Benchmark Brent crude fell as much as 61 cents in London on Wednesday and was trading at $54.64 a barrel at 10:03 a.m. local time, on course for a third daily decline after industry data showed U.S. stockpiles surged.

    Most OPEC members are happy with a crude price of about $60 a barrel, Zanganeh said, according to the Tasnim news agency. OPEC’s compliance with the accord on output has been very good, and non-OPEC producers have begun cutting production and pledged to reach their targets quickly, the Oil Ministry’s Shana news service reported him as saying. Iran is the third-biggest producer in OPEC, behind Saudi Arabia and Iraq, while Qatar ranks 11th.

    A committee in charge of monitoring compliance with the deal is due to release its first report on Feb. 17, disclosing January production levels for participating countries, Qatar’s Al Sada said. The five-member committee, chaired by Kuwait, will use as many as six sources of data to measure output, he said.

    Last month, Saudi Arabia’s Energy and Industry Minister Khalid Al-Falih said an extension of the agreement probably wouldn’t be necessary, given high levels of compliance and expectations of strong demand. Nonetheless, “all players have indicated their willingness to extend, if necessary,” he said on Jan. 16 in Abu Dhabi.

    The oil market would be re-balanced when global inventories, currently near record highs, approached their five-year average level, Al Sada said. The third quarter of this year would be a “good estimate” for when this is likely to happen, he said.

    Investment in the oil industry has tumbled during the past three years, and a failure to reverse this trend could hurt future supply and cause a shortage three years from now, Al Sada said. Current oil demand is healthy and will increase by 1.1 million to 1.2 million barrels a day in 2017, he said.

    Attached Files
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    Trafigura to bring UK’s Teeside LNG facility back to life

    Trafigura, one of the world’s largest commodities trading firms, plans to reopen the UK’s Teeside LNG import facility which was closed in 2015.

    The trading house is investing about $30 million in the LNG import terminal and aims to start operations at the facility in the middle of next year, a Trafigura spokeswoman confirmed to LNG World News on Wednesday.

    The facility will be supplied with natural gas by floating storage and regasification units (FSRUs).

    Trafigura said it has already taken a long-term lease from PD Ports on the LNG terminal site.

    However, the project is subject to obtaining necessary permits from the authorities.

    The Teesside terminal located near Middlesbrough was placed in service in February 2007 by U.S.-based floating LNG player Excelerate Energy. It was the world’s first dockside floating regasification facility, according to Excelerate.

    The terminal was decommissioned in 2015 as only a small number of cargoes were imported via the facility and it was not commercially viable to continue to operate it.
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    Iran Reports 15 Billion Barrel Oil Find

    Iran has struck new crude oil reserves totaling 15 billion barrels of which 2 billion barrels are recoverable, according to the managing director of the National Iranian Oil Company Ali Kardor. Along with the crude, there were 1.8 trillion cu m of natural gas in the new deposits, details of whose location were not divulged. Half of this was recoverable, Kardor also said, as quoted by local media.

    The exploitation of these newly found reserves would require massive investments and modern technology, which Iran does not have at the moment. The discoveries are likely to lead to more tenders targeting international oil companies, which have the technology to tap them.

    This could turn tricky if the U.S. decides to impose more sanctions against Tehran, after last week the Trump administration slammed the country with fresh sanctions against individuals and entities linked to the special forces of Iran’s army, the Revolutionary Guards. The sanctions followed non-nuclear ballistic missile testing in Iran and were seen by senior U.S. defense officials as the first move in a campaign aimed at deterring Iran from expanding its military capabilities.
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    US Army Corps approves easement needed to complete Dakota Access oil pipeline

    The US Army Corps of Engineers has approved the final easement needed to complete the Dakota Access Pipeline and will issue the document to the company in no more than 24 hours, the government said Tuesday in a notice to Congress.

    Paul Cramer, deputy assistant secretary of the Army, said the agency would waive a two-week waiting period often observed between the notification to Congress and the issuance of the easement.

    The approval will allow Dakota Access to finish a section underneath Lake Oahe, a dammed section of the Missouri River in North Dakota that became the focal point of months of protests against the project.

    The delayed 470,000 b/d Bakken crude oil project could start commercial service no sooner than early May, based on a timeline the company's lawyer gave in court Monday.

    Dakota Access said it can have oil flowing under Lake Oahe within 60 days of receiving the easement and start commercial operations within 83 days.

    President Donald Trump signed an executive memorandum January 24 directing the Corps to "review and approve" Dakota Access "in an expedited manner, to the extent permitted by law and as warranted, and with such conditions as are necessary or appropriate."

    The four-state, $3.8 billion pipeline is designed to deliver Bakken and Three Forks crude to Patoka, Illinois, where it connects with the Energy Transfer Crude Oil Pipeline to Texas.

    Energy Transfer Partners, Sunoco Logistics and Phillips 66 own shares in the project. Enbridge Energy Partners and Marathon Petroleum announced plans in August to acquire a major stake, but that deal has not closed.

    Attached Files
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    Plains All American profits fall, revenues grow

    Houston oil pipeline giant Plains All American saw its net income fall in the fourth quarter as it ramps up spending for a build out of pipeline infrastructure from the booming Permian Basin to the Houston region.

    Plains reported Tuesday its fourth-quarter net income fell 49 percent from $247 million at the end of 2015 down to $126 million last quarter. However, Plains’ quarterly revenues grew 19 percent to $5.95 billion from $5 billion. For the full year, Plains posted a $726 million profit versus $903 million in 2015.

    However, Plains is focused on new spending to expand in West Texas and New Mexico. Plains announced in January it will buy the Alpha Crude Connector pipeline gathering and storage system for $1.2 billion from Midland-based Concho Resources and Dallas private-equity firm Energy Spectrum Capital. Plains also said it will expand its existing BridgeTex and Cactus pipeline systems in West Texas.

    Plains Chairman and Chief Executive said he’s focused on capitalizing off of growing drilling and production activity in the Permian.

    “These activity levels have increased our conviction in significant Permian Basin production growth in 2017,” Armstrong said in a prepared statement.
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    US EIA cuts 2017 world oil demand growth forecast

    The U.S. Energy Information Administration on Tuesday cut its 2017 world oil demand growth forecast by 10,000 barrels per day to 1.62 million bpd.

    In its monthly forecast, the agency cut its oil demand growth estimate for 2018 by 50,000 bpd to 1.46 million bpd.
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    BP and Shell Hit After OPEC Output Cuts Halt Oil-Trading Bonanza

    The oil-trading boom that cushioned the profits of Royal Dutch Shell Plc and BP Plc through the price slump of 2015 and early 2016 is over.

    BP said on Tuesday it made a “small” loss trading oil in the fourth quarter, while Shell last week said trading profits “flattened” in late 2016. The fall off in trading contributed to worse-than-expected fourth-quarter profits at Europe’s largest oil and gas producers.

    Although better known for their oilfields, refineries and gas stations, Shell and BP are the world’s top energy traders, handling about 20 percent of the world’s oil demand between them and dwarfing independent trading houses such as Vitol Group BV, Trafigura Group and Glencore Plc.

    BP “simply had a weak fourth quarter” in oil trading, Brian Gilvary, the company’s chief financial officer, said in an interview, adding that BP managed to make a profit in overall trading once natural gas was included.

    Oil traders thrived in 2015 and 2016 by taking advantage of an oversupply that led to an unusually strong contango market structure — where contracts for future delivery trade higher than spot prices. The contango allows traders to buy oil cheap, store it and profit later by locking in their profit through derivatives in so-called “cash-and-carry” deals.

    As onshore depots filled up over the last two years, oil traders relied on supertankers for “floating storage” deals, at times anchoring ships for months in natural ports or near trading centers like Singapore.

    The contango has narrowed sharply since the Organization of Petroleum Exporting Countries and Russia cut production. The price difference between Brent crude for immediate delivery and the one-year forward dropped to a contango of $0.52 a barrel on Friday, the narrowest since September 2014 and well below the 2015 peak of $12 a barrel.

    Oil traders predict the market could flip later this year into the opposite condition, backwardation, where prices for immediate delivery trade at a premium to forward contracts.

    Oliver Wyman, a consultancy that publishes a benchmark annual review of the commodities trading industry, said the trading arms of BP and Shell enjoyed in 2015 their best year ever thanks to “low, volatile spot prices that created cash-and-carry opportunities.”

    Total, the other major oil company with significant trading operations, reports quarterly earnings Thursday. In contrast to their European rivals, Exxon Mobil Corp. and Chevron Corp. have smaller trading operations.

    Independent commodity trading houses have also seen profits from energy trading decline. Vitol, the largest independent oil trader, reported a 42 percent drop in first-half 2016 profit, according to people familiar with the matter. Trafigura, the third-largest independent oil trader behind Vitol and Glencore, said in December that full-year gross profit from crude and petroleum product trading fell 13 percent.
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    Parsley Energy to buy Permian Basin assets for about $2.8 billion

    Parsley Energy Inc said on Tuesday it would buy certain assets in the oil-rich Permian Basin for about $2.8 billion from Double Eagle Energy Permian LLC, its second deal in the largest U.S. oil patch in less than a month.

    The energy industry overall poured more than $28 billion into land acquisitions in the Permian Basin of West Texas last year, more than triple what they spent in 2015.

    Permian Basin producers make money at the current crude price CLc1 of about $52-$53 per barrel because of the region's sprawling pipeline network, abundant labor and supplies, and warm winters that allow year-round work. Double Eagle and its predecessor companies have made a fortune buying and selling Permian acreage starting in 2009.

    Parsley said the deal, which includes undeveloped acreage and producing oil and gas properties, would add about 71,000 net acres to its acreage in the Midland Basin, bringing its total acreage in the Permian Basin to about 227,000 acres.

    The oil producer's shares were down nearly 4 percent in after-hours traded, recovering somewhat from a drop of more than 7 percent, after the company said it would sell stock to fund the acquisition.

    Parsley said on Jan. 10 that it would buy acreage in the Permian Basin for about $607 million and said on Tuesday it would increase its activity in the region and raised its production forecast and capital budget for 2017.

    Parsley hiked its 2017 capital budget to $1 billion to $1.15 billion from $750 million to $900 million.

    It expects full-year production of 62,000-68,000 barrels of oil-equivalent per day (boed), up from its previous forecast of 57,000-63,000 boed.

    The company estimated it produced 38,100-38,300 boed in 2016 and had total development expenditures of $493-$499 million, within the estimated production and spending ranges it gave on Jan. 10.

    Parsley said it intends to finance the cash portion of the latest acquisition through an offering of 36 million shares and debt.
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    BP sees Q4 realised European natural gas price recover by 22% vs Q3

    BP said Tuesday its average realised gas price in Europe in the fourth quarter of 2016 jumped by 22% on the quarter to $4.81/Mcf ($4.70/MMBtu) as market conditions improved significantly across Europe toward the end of the year.

    The increase mirrored that of fellow European major Shell which last week also reported a sharp rise in its average Q4 gas sales price in Europe.

    Gas prices across Europe rallied in Q4 from multi-year lows throughout the rest of 2016 on a tighter-than-expected gas market caused by colder weather, limited LNG availability and nuclear outages in France.

    BP's realised European price had fallen to a multi-year low in Q3 last year of just $3.94/Mcf.

    BP's European gas price boost helped push its global average realised gas price in Q4 to $3.08/Mcf from $2.77/Mcf in Q3 2016.

    CFO Brian Gilvary also said BP's gas trading division had a good quarter. "Gas trading had a good result in the fourth quarter," he said on a conference call with analysts.

    However, the Q4 realised prices are still below the same period of 2015 when BP registered an average price of $6.08/Mcf in Europe and $3.47/Mcf globally.


    BP has been particularly hard hit by the continued low Henry Hub gas price in the US in the wake of the shale gas boom.

    BP is more exposed to US gas prices than its European peers given its large portfolio of producing assets in the US.

    It realised a price of just $2.29/Mcf in the US in Q4, up from $2.19/Mcf the previous quarter.

    "US prices rose in Q4 on falling production and higher demand," Gilvary said.

    Gilvary said the company expected prices to rise in 2017 which would support its realised prices.

    "We see a modest improvement in the Henry Hub price," Gilvary said.

    BP's US gas production in Q4 averaged 1.68 Bcf/d, compared with just 268 MMcf/d in Europe.

    Total gas output in the period was 5.85 Bcf/d, with the rest of the world accounting for the balance.

    The total was a 2.6% increase from 5.7 Bcf/d in Q3, but a 3.3% decrease year on year from 6.05 Bcf/d.


    Elsewhere in BP's upstream business, CEO Bob Dudley said the company hoped to start production from the 5 Tcf West Nile Delta gas project this summer, earlier than expected.

    "The West Nile Delta project will come on toward the summer rather than the fall which we had planned on," Dudley said.

    He also stressed the company's commitment to Egypt, where last year BP bought a 10% stake in the giant Eni-operated Zohr field.

    "Egypt is very strategic. We think it has great potential as a gas market, and as [new projects] come online Egypt's position -- potentially moving to a gas exporting country -- is in very good shape," Dudley said.

    Egypt began importing LNG in April 2015 to meet a growing supply-demand gap caused by a major slowdown in domestic gas development.

    No new upstream deals were signed between 2010 and 2013 during Egypt's political transformation, meaning the country quickly went from being a net exporter to net importer of gas.

    Gilvary said the risk profile of Egypt was much better than it was during the Arab Spring.

    "The risk is significantly reduced from where we were four to five years ago in terms of the portfolio we have. Being part of Zohr balances that risk," Gilvary said.

    He added that BP was benefiting from an improved payment environment in Egypt.

    "Receivables were coming under some stress three years ago, but that is vastly reduced now," he said.

    Dudley, meanwhile, also hinted as some possible gas project final investment decisions in 2017, including in Oman and in India.
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    Pioneer Natural results beats Street on cost cuts, rising oil prices

    U.S. shale oil producer Pioneer Natural Resources Co (PXD.N) on Tuesday posted a better-than-expected adjusted quarterly profit helped by cost cuts and rising crude prices CLc1.

    The results reflect the slow-but-steady improvement across the energy sector due to improving commodity prices. Pioneer said it would spend about $2.8 billion this year due to that improvement, about 8 percent above last year's levels.

    The company posted a net loss attributable to common shareholders of $44 million, or 26 cents per share, compared to a loss of $623 million, or $4.17 per share, in the year-ago period.

    Excluding one-time items, Pioneer earned 49 cents per share.

    By that measure, analysts expected earnings of 33 cents per share, according to Thomson Reuters I/B/E/S.

    Production rose 13 percent to 241,833 barrels of oil equivalent per day.
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    Oil extends losses after API reports huge U.S. crude build

    Oil prices that tumbled more than 1 percent Tuesday fell further after settlement, pressured by growing crude stockpiles in the United States as evidence of a burgeoning revival in U.S. shale production could complicate efforts by OPEC and other producers to reduce a supply glut.

    Weekly data from trade association the American Petroleum Institute estimated that U.S. crude stockpiles had surged 14.2 million barrels last week.

    If U.S. Energy Information Administration data due on Wednesday at 10:30 a.m. confirms the stockpile surge, it will be the largest build since October.

    Analysts have forecast that U.S. crude stockpiles rose 2.5 million barrels last week - a fifth straight weekly build - while gasoline inventories grew 1.1 million barrels - a sixth consecutive weekly build.

    U.S. gasoline stocks are rising much faster than normal at the start of the year, threatening to leave refiners struggling to clear an overhang of motor fuel later in the year.

    U.S. gasoline futures RBc1 fell to settle at $1.4875 a gallon, after dropping earlier in the session below the 200 day moving average on a continuous chart, a bearish technical signal.

    "It's a supply-driven setback ... We are within 2 million barrels of the record in U.S. gasoline stocks that we saw last February," said Tony Headrick, energy markets analyst at CHS Hedging. "A strong build in inventory reports could weigh on gasoline in a seasonal time frame where gasoline demand is weak."

    The oil market has been supported for two months as the Organization of the Petroleum Exporting Countries and other exporters have agreed to cut output by almost 1.8 million barrels per day (bpd) since the start of the year. OPEC and Russia have together cut at least 1.1 million bpd so far.

    But market players are concerned that rising U.S. shale production and signs of slowing demand growth could offset these efforts.

    The U.S. government slightly trimmed its forecast for 2017 production but the market shrugged off the monthly report as its demand forecast was little changed.

    "The general perception is that OPEC is cutting production, which is supporting prices, but high stock levels, rising rig counts and growing U.S. production are capping gains," said Tamas Varga, analyst at London brokerage PVM Oil Associates.

    Societe Generale oil analyst Michael Wittner said U.S. shale oil output was recovering faster than expected.

    "Rig counts are increasing at an accelerating pace, and given the technological advances of the past three years, this should translate into significant supply," Wittner said.

    "U.S. shale is coming back, and it’s coming back strong."

    Chinese oil demand grew in 2016 at the slowest pace in at least three years, Reuters calculations showed, the latest sign of slower demand from the world's largest energy consumer.
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    High Asia TDP run rates on firm benzene boosts toluene prices: sources

    High run rates at toluene disproportionation units in Asia to meet strong demand for benzene has boosted demand and prices for toluene, but also led to a glut of isomer-grade mixed xylene, market sources said, in line with S&P Global Platts data.

    The isomer-MX versus toluene spread was mostly in positive terrain in 2016, and hit a high of $134/mt on August 5, but narrowed towards the end of the year and flipped to negative on January 5 at minus $3/mt.

    On Monday it hit minus $29/mt, with isomer-MX FOB Korea at $737/mt and toluene FOB Korea at $766/mt.

    Toluene is the feedstock to make benzene and mixed xylenes in TDP units.

    Market sources said demand for toluene into TDP units was boosted by on-purpose benzene production, as benzene prices have hovered around more than two-year high levels recently, last assessed at $1,054/mt FOB Korea, the highest since November 3, 2014, then at $1,067/mt FOB Korea.

    "It means toluene is on an uptrend, MX is on a downtrend," a South Korean producer source said, adding that MX supply was set to increase as TDP units would be running as high as possible at the moment.

    A TDP unit will typically produce around half-half of benzene and isomer-MX if it runs on toluene only, thereby maximizing its benzene output, the producer said. Other potential feeds could be mixed aromatics.

    "We are trying to run it as much as possible," another South Korean producer source said about its TDP unit's run rate.
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    Strict EU regulations remain burden for European refineries

    Stringent European Union environmental regulations continue to pose a challenge to refineries in the region, according to delegates at an EU refining forum in Brussels.

    The forum, which started in 2012 and is chaired by the EU, aims to examine excessive legislation and its impact on the refining industry.

    While the EU recognizes the importance of the refining sector, its drive to lowering carbon emissions remains fully in force.

    "The European Union will stick to its commitment to a low carbon economy," was the message by European Commissioner for climate action and energy Miguel Arias Canete, who added that "clean energy transition is here to stay," and that the refinery sector "must adapt to decarbonization."


    But refiners appealed to EU policy makers to implement a "broader and more rational approach" and to "have regulation aligned with the rest of the world," as Cepsa CEO Pedro Miro Roig said.

    The very strict environmental regulations in Spain have resulted in the idling of Cepsa's Tenerife refinery three years ago, and the plant is unlikely to restart, Miro Roig said. The EU regulations are also posing "a heavy burden" for Cepsa's two operating refineries in Spain, adding $2/barrel to the cost "to comply with the regulations."

    "We can't focus on short-term policies and strategies," Miro Roig said.

    The EU legislation has reduced competitiveness of the refining sector by 25%, according to the "fitness check" published by the European Commission, reminded Jaime Martin Juez, Repsol's director of technology and sustainability. He also noted that products with carbon cost embedded in them are imported in Europe without any checks.

    The so-called fitness check looked at the impact of EU legislation on costs and productivity in the refining sector over the period 2000-12 and was finally published by the European Commission after much delay in 2015.

    Delegates at the current forum asked for the fitness check to be updated with the impact of the post-2012 legislation.

    Delegates also suggested that the next meetings of the forum should address the challenges posed by the new IMO sulfur cap to be enforced in 2020.

    The global implementation of the sulfur cap on marine fuels "is a major concern," said John Cooper, director general of FuelsEurope, adding that the level of compliance globally will be critical.

    Meanwhile, increasing the competitiveness of European refineries "is critical for our future," said Repsol's Martin Juez.

    Declining demand for products "will involve further refinery closures," Cepsa's CEO warned.

    After closing five refineries, Italy still has an excess of production capacity and faces problems of competition, said an Italian delegate.

    In order to adapt to changes of demand, European refineries will require "significant investments" but investors need to "have confidence in the future of the industry," Cepsa's CEO said.

    While ExxonMobil is committed to its investments in upgrades at its Rotterdam and Antwerp refineries, it said it needs "support to provide solutions to the challenges we face." "We need transparent, predictable EU energy policy -- market-based," said ExxonMobil's Janet June Matsushita.

    Meanwhile, any risks to the European refineries could have repercussions to the closely linked petrochemical sector.

    More than 55% of the feedstock of the petchems industry comes from refineries, so "any risk to our refineries means risk to survival to our petchems industry," Miro Roig said.


    Among other challenges to European refiners is the expected rising share of alternative and renewables fuels, such as electrical cars, natural gas, LPG and biofuels. The EU has an ambition to "become world number one in renewables," said Commissioner Canete.

    Yet delegates noted some constraints and weaknesses.

    While electrical cars are becoming more popular, storing electricity remains a challenge even though technology is "advancing rapidly," Laszlo Varro, chief economist of the International Energy Agency, said. He also noted that the integration of electricity cars into the electricity network needs "to be managed carefully," and that based on current policy assumptions they are unlikely to have a significant impact on the oil industry in the next 15 years.

    Meanwhile FuelsEurope's Cooper pointed to the fact that electrical vehicles also have CO2 emissions embedded in their manufacturing and that regulations should "consider the carbon life cycle throughout the vehicle manufacturing, energy production and recycling."

    "There is no such thing as zero emission vehicle," said Cooper.

    FuelsEurope expects that smaller passenger cars in Europe will be shifting to gasoline rather than diesel, while the IEA expects that overall passenger cars will be consuming less oil at the expense of electrical cars and biofuels.


    On a more positive note for many delegates, data presented at the forum suggests that demand for oil products will remain predominant in the EU and by 2030 will still represent 86-87% of European transport sector needs, down from 94% today. Oil also represents around 34% of the inland energy consumption in Europe, according to EU data.

    Hence maintaining a "solid refining sector in Europe" is crucial, and "we can't see all this industry relocated," said Dominique Ristori, director general for Energy at the commission.

    As a way of improving conditions, the EU is looking at reducing the differences in the costs of energy -- gas, electricity -- between refineries within the EU. "Some refineries pay four-five times more [than others]," said Canete, adding "We should be able to reduce these differences."

    But energy costs can reach up to 60% of the operational costs for European refiners, said Canete, adding that they face higher energy costs compared to their competitors.

    And while refinery closures have slowed down since the 2011-14 peak, competitive pressures "remain high," Canete said.

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    International offshore rig count sinks in January

    The international offshore rig count for the first month of the year was down both sequentially and year over year, according to rig count reports by the oilfield services provider Baker Hughes.

    Baker Hughes’ report shows that the international offshore rig count for January 2017 was 206, down 4 from the 210 counted in December 2016, and down 36 from the 242 counted in January 2016.

    Furthermore, the report shows that the international rig count for January 2017, which includes land and offshore units, was 933, up 4 from the 929 counted in December 2016, and down 112 from the 1,045 counted in January 2016.

    The average U.S. rig count for January 2017 was 683, up 49 from the 634 counted in December 2016, and up 29 from the 654 counted in January 2016.

    The average Canadian rig count for January 2017 was 302, up 93 from the 209 counted in December 2016, and up 110 from the 192 counted in January 2016.

    The worldwide rig count for January 2017 was 1,918, up 146 from the 1,772 counted in December 2016, and up 27 from the 1,891 counted in January 2016.

    The worldwide offshore rig count for January 2017 was 231, down 4 from 235 counted in December 2016, and down 40 from the 271 counted in January 2016.
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    High infrastructure costs, low returns delay US use of LNG for bunkering

    The use of LNG for bunkering in the US maritime industry will take some time as shipowners and suppliers consider the costs of building infrastructure and assess the risks, according to industry sources.

    "Most companies won't even look at that type of project unless the return on investment is at least 10% and depending on the capital leverage the return on investment may need to be closer to 18%-20%.

    The return on investment is largely determined by the cost of capital leverage," a shipping expert with more than 50 years of industry experience said.

    The International Maritime Organization decided October 27 to reduce emissions by nearly 87% for oceangoing ships sailing in international waters. Starting in January 2020, ships will be required to burn fuel with a maximum sulfur content of 0.5%, except when traveling in designated Emission Control Areas where the sulfur limit is 0.1%.

    Although in Asia and Europe shipowners and port authorities are working on the transition to LNG fueling ahead of the new regulations, in the Americas the shipping industry is still assessing how feasible the utilization of LNG can be.

    "The concern from an owner/operator of tramp ships -- a ship with no fixed schedule -- would be for the availability of fuel where we need it. So unless we see massive investment in LNG installations around the world, I am afraid the availability of fuel will be a major concern," said Mikkel Borresen, vice president of Dampskibsselskabet Norden, a shipping company which operates a fleet of about 238 ships and resupplies marine fuel in major ports such as Rotterdam, Singapore and Houston.

    The IMO's decision is more a call for shipowners than for refiners, an oil refinery source based in Houston said, because with current market conditions refiners have less interest in processing residuals and are more focused on diesel, which is in high demand because it is "clear and bright."

    But he also said it is unfair to ask shipowners to provide a solution to the issue when the maritime industry is still recovering from the impact of the bankruptcy of South Korean-based shipping company Hanjin in late August.

    The estimated cost of building an onshore regasification LNG unit is around $1 billion, according to market sources.

    In the US there is one facility in operation designed specifically for LNG bunkering. The facility in Port Fourchon, Louisiana, is owned by the marine transportation company Harvey Gulf International Marine.


    When the IMO first implemented the ECA zones in 2010, the change had a minimal impact and represented a low-cost investment, as some ships had to change parts of the piping system and some had to change the bunker tank configuration, sources said.

    But the tankage and other systems needed to contain and consume LNG as a fuel are more complex and larger than traditional bunker fuel engines. Ships would lose space, which is used to hold the cargo being transported, which would affect the amount of money the ship is able to generate, sources said.

    "LNG capacity is around 1.6-2 times greater than that of conventional fuel, and with the necessary equipment the actual loss is even greater, and could be as high as 3-4 times," according to a Poten source.

    The infrastructure needed for liquefaction of the gas and storage are the primary contributors to the high cost of retrofitting a ship.

    There are additional costs not related to infrastructure, such as crew training or the time lost during the engine conversion process, which shipowners also take into account.

    The large-scale adoption of LNG bunker fuel will be an "evolution" and is decades away, the Poten source said.

    Retrofitted vessels alone will not have a meaningful impact on LNG bunker fuel demand because there will not be many of those ships due to the high cost of capital needed, he said.

    The lifespan of a ship is typically 20-30 years. Shipowners prefer to wait out the life of the ship rather than invest in retrofitting as the return on investment would outlast the ship life. Many sources believe that meaningful LNG bunkering demand will come from newly built ships.
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    China to take first cargo of Eastern Canadian crude: sources

    Eastern Canadian crude will make a first-of-its-kind voyage into the Caribbean and on to China, as weakening prices have opened the unique arbitrage to East Asia, crude traders said Monday.

    The unusual voyage is also supported by depressed shipping rates, Brent's narrowing premium to benchmark Dubai and a shrinking Middle East supply due to OPEC-led production cuts.

    Crude traders said a 710,000-barrel cargo of White Rose, 30.56 API and 0.28% sulfur, and a partial cargo of Hibernia, 36 API and 0.40% sulfur, will lift mid- to late February out of the NTL terminal in Whiffen Head, Newfoundland. It's unclear, however, which companies bought and sold the cargoes. Traders said the grades will first head to NuStar's Statia Terminal in St. Eustatius, where they will be co-loaded with an unspecified Latin crude grade onto a ship bound for China, likely a VLCC.

    The East Coast Canada barrels will most likely be co-loaded with a cargo of Venezuelan extra-heavy sour crude Merey, according to an industry source familiar with the Latin American markets. Produced in Venezuela's Orinoco Belt, Merey crude has a typical API gravity of 16 degrees and sulfur content of 2.45%. In January, about 3.668 million barrels of Venezuelan crude were shipped from Jose Terminal to St. Eustatius, from where they are presumably distributed to buyers in other markets.

    According to the latest import data from Platts China Oil Analytics, China imported an average of 403,000 b/d of Venezuelan crude in 2016, representing a year-on-year increase of 79,000 b/d, or 24.4%. A narrowing spread between the front-month swap value for Brent and Dubai has provided and incentive for imports of Brent-based crudes to China, including Venezuelan, Colombian and Brazilian grades, according to a second Latin American industry source.

    During the past six months, the spread between front-month Brent and Dubai swap values has decreased $1.61/b, falling to $1.77/b on Monday.

    Easing freight rates in the Americas have further opened the arbitrage window between the Americas crude markets and China, helping to keep total costs low for additional barrels needed to help make up for cuts in OPEC production. A majority of freight rates across vessel classes have trended downward since the start of the year.

    The regional VLCC market experienced the deepest lull in activity in the previous two weeks, as holidays in Northeast Asia had put any deals on pause. Replenished tonnage and more newbuilds coming online in the Arab Gulf have lately flooded the global VLCC market, adding further pressure on rates in the Atlantic Basin.

    Platts on Monday assessed the Caribbean-China run, basis 270,000 mt, at $5.8 million lump sum. That rate has gradually descended from an eight-month high of $6.3 million on January 11.

    Freight for Suezmaxes had fallen as well, as the glut in tonnage appeared to be outpacing working cargoes system-wide, leading several market participants to brace for a bearish outlook.

    The US Gulf Coast-Singapore trip, basis 130,000 mt, was assessed at $2.6 million lump sum on Monday. Trafigura placed a Heidmar vessel to be named on subjects for a USGC-Singapore voyage at $2.625 million lump sum for a February 16 fuel oil loading, but it was believed to be done prior to current market conditions.

    "A lot of ships prompt," a broker said. "[There are] openings for today and tomorrow," suggesting that Suezmax rates in the Americas had not bottomed out.

    The Eastern Canadian grades typically sell about 40 days before loading, meaning the cargoes were likely sold in early January as the price differentials for the crudes were on one of their biggest downward plunges of the past few years. S&P Global Platts assessed White Rose at Dated Brent plus 30 cents/b on December 30, and it fell to minus 30 cents/b by January 13. At the time, that was its lowest point since December 22, 2015, when it was Dated Brent minus 40 cents/b. Over the same period, Hibernia dropped from Dated Brent minus 55 cents/b to minus $1.15/b. That would put the outright price of the cargoes on January 13 at $44.735/b for White Rose and $53.885/b for Hibernia during the February loading period.

    The grades have been pressured by competing Bakken grades and seasonal East Coast refinery maintenance.

    Aligning with the weakened differentials was a decreased supply of Middle Eastern crudes, which often travel to China, due to OPEC-backed production cuts. The milestone 2016 agreement saw January output from the 13 members, not including Indonesia, at 31.16 million b/d in January, down 690,000 b/d from December, according to a Platts survey released Monday.

    This will mark the second time in four months that an Eastern Canadian grade has made a breakthrough trip. Uruguay's ANCAP purchased a Hibernia cargo in October that lifted in mid-November. That trip was made possible by the grade's low price and high fuel oil yield. It's also the second time that White Rose will pioneer a move into Asia. In November 2013, Indian Oil Corp. bought about 1 million barrels of White Rose light crude produced by Husky Energy.

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    O&G operators to shift away from troubled deepwater areas

    Hydrocarbon production from the ‘Golden Triangle’ will peak in 2019 due to the lack of projects sanctioned in recent years, the energy intelligence group Douglas-Westwood said in its DW Monday report.

    The Golden Triangle incorporates the deepwater (>500 m water depth) plays of Brazil, the U.S. Gulf of Mexico and West Africa.

    According to the report, production data from Douglas-Westwood’s new online analysis tool, SECTORS, shows combined oil & gas production will reach its crux in two years’ time at some 7.1 million barrels of oil equivalent per day (mmboe/d) before declining into the 2020s. This is largely due to Petrobras’ continuing financial and tendering problems in addition to significant delays to large developments in West Africa – notably Bonga South-West (Shell) and Zabazaba (Eni), DW stated.

    Outside the ‘Golden Triangle’, deepwater hydrocarbon production triples over the next seven years – rising from 1.3 mmboe/d this year to 3.9 mmboe/d. Of this 2.6 mmboe/d growth, 80% is natural gas. This reflects the increasing diversification of the deepwater sector as operators shift focus towards monetizing gas reserves discovered in recent frontier gas plays.

    In the Gulf of Mexico, the larger discoveries in recent years have been in technically-challenging oil reservoirs with higher costs, like the Palaeogene. Operators have therefore focused more on the emerging gas provinces including LNG in East Africa and especially the eastern Mediterranean, where pipeline exports to local markets are possible.

    Additionally, Asia – historically a shallow water-producing region – is now seeing an increase in deepwater projects, with CNOOC exploiting fields in the South China Sea and ONGC and Reliance Industries investing in deepwater gas fields in the Krishna Godavari basin, offshore eastern India.

    DW said it expect operators worldwide to continue to shift away from the troubled waters of the traditional deepwater areas, seeing non-Golden Triangle output climb further from the mid-2020s. Countries within the ‘Golden Triangle’ will need to take steps to maintain production in the long-term by making the investment climate more attractive.
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    U.S. East Coast Has a Growing Appetite for Foreign Oil

    U.S. East Coast refineries, which have thrived for a few years on a boom of production from the Bakken shale play in North Dakota and eastern Montana, are increasingly looking abroad to supply their needs.

    Last year through November, the region imported 884,000 barrels a day, which would be the highest full-year total since 2011, data from the U.S. Energy Information Administration show. Angola, Nigeria and Brazil have increased shipments to the East Coast this year. Rising supplies overseas made imported oil cheaper than domestic for the first time since 2013, data from the U.S. Energy Information Administration show. Canada is usually the leading importer to the region.

    The price switch opened the doors for refineries like PBF Energy Inc., Philadelphia Energy Solutions and Phillips 66 to boost imports, says Andy Lipow, president of Lipow Oil Associates LLC in Houston. He said the new Dakota Access Pipeline, one of the energy projects supported by President Donald Trump, will make the East Coast even more reliant on imports.

    The 1,172-mile line developed by Energy Transfer Partners LP may start moving crude June 1, according to a person familiar with the matter. It will connect the Bakken to Patoka, Illinois. Existing pipelines can take oil from Patoka to refineries in the Midwest and on the Gulf Coast, not to the East Coast. The East Coast relies mostly on rail to get Bakken oil.

    “When the Dakota Access Pipeline starts, you will see less availability of Bakken in the East Coast and more imports coming,” Lipow said in a phone interview. “It will be more economical to ship Bakken oil to the Gulf Coast by pipeline than rail it to the East Coast.”

    Brazilian Oil

    Angola, Nigeria and Brazil produce the light to medium grades that make up the bulk of imports in the region, Gurpal Dosanjh, an analyst for Bloomberg Intelligence, says by phone from New York.

    “Brazilian production has increased quite a lot because of offshore production,” he said. “We should see these supplies keep coming.”

    Tankers carrying 2.5 million barrels of Brazilian oil are on their way for delivery to East Coast refineries, ship-tracking data show. This would be the most since at least 2002, according to data from the EIA. The vessels are set to deliver Sapinhoa, Ostra and Iracema grades into Philadelphia, where refiners including Philadelphia Energy Solutions and PBF Energy Inc. have bought Brazilian oil.

    Philadelphia Energy Solutions and Phillips 66 declined to comment on their oil purchases. PBF didn’t return calls or e-mails seeking comment.

    Front-month West Texas Intermediate closed at $53.01 a barrel Monday on the New York Mercantile Exchange, up 72 percent in the past year. Prices have held in the $50-$55 range this year since the Organization of Petroleum Exporting Countries and other producers like Russia agreed in November to cut production.

    Those higher prices should spur rig counts and boost U.S. production, which may eventually prompt East Coast refineries to import less, John Auers, executive vice president at energy consultant Turner Mason & Co., said in a phone interview from Dallas. If the U.S. implements a border adjustment tax on imports from Mexico, for example, the East Coast refineries would look to domestic supplies again.

    “Certainly if a BAT is enacted, that would magnify the decline,” he said. “With or without a BAT, I think the overall imported volume may fall with higher output in the Bakken.”
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    Statoil’s earnings drop

    Norwegian energy giant and LNG operator Statoil reported a 58 percent drop in its adjusted operating profit for the year 2016.

    Adjusted earning were at US$4 billion for 2016, down from $9.63 billion in the previous year.

    The company’s adjusted earnings in the fourth quarter of 2016 were $1.66 billion, 6 percent down from $1.78 billion in the same period in 2015, attributing the dip to exploration well expenses and the lower European gas prices.

    Statoil reported a net operating income of $80 million for the twelve months period, dropping 94 percent from the 1.37 billion the year before. It also reported a  loss of $1.90 billion in the fourth quarter compared to an income of $152 million in the same period of 2015.

    The company said in its quarterly report that the result was impacted by $2.3 billion in net impairment charges mainly due to reduced long-term price assumptions.

    Eldar Sætre, president and CEO of Statoil said the “result was impacted by the negative result from our international operations due to expensed exploration wells, high maintenance activity and impairment charges,” adding that the company achieved strong results in its improvement programme, saving $700 million above target of $2.5 billion.

    Statoil delivered equity production of 2,095 mboe per day in the fourth quarter compared to 2,046 mboe per day in the same period in 2015.

    The increase was primarily due to the ramp-up of new fields and strong operational performance. Excluding divestments, the underlying production growth was 2 percent compared to the fourth quarter last year.

    Statoil updated its outlook for 2017-2020 period expecting a capital expenditure of around $11 billion for 2017. The company estimates a 4-5 percent production growth in 2017 from 2016, and an annual production growth of around 3 percent from 2016 to 2020.
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    BP turns to profit in 2016

    UK-based energy giant and LNG player, BP reported a slight net profit for 2016, recovering from heavy losses the company logged the previous year.

    BP posted a profit of $115 million, compared with the headline loss of $6.5 billion reported for 2015.

    Theses figures included a total of $4 billion non-operating charges taken through the year associated with resolution of the remaining legacy of the 2010 oil spill.

    BP’s underlying replacement cost profit, the company’s definition of net income, was at $2.59 billion compared to #5.91 billion the year before.

    The company said on Tuesday that the 2016 price environment was “challenging” as the average Brent oil price of $44 per barrel was the lowest for 12 years. The Henry Hub gas marker prices averaged $2.46 per million British thermal units and the refining marker margin was also the lowest since 2010, BP said.

    In the fourth quarter of 2016, BP’s underlying replacement cost profit fell to $400 million, compared with $560 million expected by analysts but better than $196 million made a year earlier, according to Reuters.

    BP said it will balance its books at an oil price of around $60 per barrel by the end of 2017 and expects organic capital expenditure to be in the range of $16-17 billion in 2017.

    BP annual earnings dip to 10-year low, warns OPEC cut could affect 2017 production

    Perhaps the worst is that BP now says it will need $60 a barrel to balance its books in 2017, up from the $50-$55 it has previously guided

    Attached Files
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    Disruption at UK's Rough gas storage site to extend beyond April

    Britain will not be able to inject additional supplies to its largest gas storage site after six of its wells failed tests, delaying a plan to have them back in service by the end of April, operator Centrica Storage Limited (CSL) said.

    Concerns about integrity of wells at the Rough site, off England's east coast, prompted Centrica to impose limits last year on how much gas could be stored there as a safety precaution.

    Following investigations, Centrica shut down the facility for injections and withdrawals of gas. Withdrawals resumed in December but injections were on hold until April.

    "The return to injection operations in 2017 remains subject to successfully completing well testing on all wells and confirmation that Rough can be safely returned to service," it added.

    Gas is injected usually in the summer months when demand and prices are low. Britain depends on stored gas reserves to help manage winter demand spikes and to ensure security of supply.

    Rough usually provides more than 70 percent of Britain's gas storage capacity. The site is more than 30 years old and repeated outages have highlighted its vulnerability.

    In a review by the Competition and Markets Authority last year, CSL said Rough was an ageing asset which had outlasted its original design life of 25 years and that its reliability was likely to worsen over time.

    If there is reduced injection capacity over the summer months at Rough, other, smaller storage sites will have to be used.

    There could be a risk of low levels of gas in storage for the winter 2017/18 season, traders said. Britain could have to pay for more liquefied natural gas deliveries and imports from Norway and the Netherlands.

    Market reaction was muted. The Summer 2017 wholesale gas contract was down 0.55 pence at 45.95 pence per thermo.

    CSL said it had completed calliper surveys on 20 out of 24 wells at the site and completed pressure testing on 12 of those 20 wells.

    Eight of those 12 passed the tests but two will need further work and will not be able to return to service by April 30.

    Four out of the 12 did not pass the tests and will not return to service by that date either, CSL said.

    "All 6 wells that are not capable of returning to service by 30 April 2017 have been isolated from the reservoir," the firm said in a statement.

    The firm said it is evaluating the consequences of the test results and will provide another market update as soon as it can. CSL is still testing remaining wells.

    "The return to injection operations in 2017 remains subject to successfully completing well testing on all wells and confirmation that Rough can be safely returned to service," it added.

    Withdrawal operations remain unaffected, CSL said.
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    Jan crude oil output 32.16 million b/d, down 690,000 b/d from Dec: Platts survey

    The 10 OPEC members obligated to reduce oil output under the landmark agreement signed late last year achieved 91% of their required cuts in January, with their production falling 1.14 million b/d from October levels, according to an S&P Global Platts survey released Monday.

    Those cuts were, however, offset partly by output gains in Libya and Nigeria, which are exempt from the accord, and Iran, which is allowed to increase its production slightly.

    Related: Find more OPEC information in our news and analysis feature.

    In all, OPEC's 13 members -- not including Indonesia, which suspended its membership at the group's last meeting -- produced 32.16 million b/d in January, a 690,000 b/d decline from December, the Platts survey showed.

    With Indonesia, the organization's January production totaled 32.89 million b/d.

    Under the agreement, OPEC pledged to cut 1.2 million b/d from its October output levels for six months starting from January 1 and freeze production at around 32.5 million b/d, including Indonesia.

    Eleven non-OPEC countries led by Russia have also agreed to cut output by 558,000 b/d in the first half of 2017.

    The survey shows that several OPEC countries covered by the agreement still need to make some progress in lowering output to their allocations, though the overcompliance of Saudi Arabia, Kuwait and Angola helps compensate.

    Since the deal covers an average of January to June output, some month-to-month fluctuations are to be expected.

    Saudi Arabia has backed up the strong words of its energy minister Khalid al-Falih, who played a key role in negotiating the agreement, with its January production falling to 9.98 million b/d, according to the Platts survey.

    That is below its allocation of 10.06 million b/d under the deal, as crude exports declined by more than 500,000 b/d in the month, Platts shipping tracker cFlow showed. It is also the first month Saudi production has been below 10 million b/d since February 2015, according to the survey archives.

    Falih in recent weeks had said that the kingdom would "strictly adhere to our commitment" and signaled that it would make deeper cuts in February.

    Likewise, Kuwaiti oil minister Essam al-Marzouq, who chairs a five-country committee that will monitor and enforce the production agreement, has said that Kuwait would "lead by example."

    Accordingly, Kuwait's production for January was under its quota of 2.71 million b/d, coming in at 2.7 million b/d, a 130,000 b/d drop from December, the survey showed.

    Besides Kuwait, the monitoring committee comprises fellow OPEC members Algeria and Venezuela, along with non-OPEC Russia and Oman.


    Algeria is slightly above its quota of 1.04 million b/d, with January production at 1.05 million b/d, while Venezuela also exceeds its allocation of 1.97 million b/d, producing 2.01 million b/d in the month, according to the survey.

    Angola is below its allocation of 1.67 million b/d, with January output at 1.63 million b/d, as its crude loadings showed declines in the month.

    Iraq, which had sought an exemption from the deal, has the most barrels to cut to reach its allocation, with January output at 4.48 million b/d, according to the survey, while its quota is 4.35 million b/d.

    The January figure, however, was a decline of 150,000 b/d from December production, as exports from Iraq's southern terminals showed a significant decline from the previous month's record levels.

    Iran, which is allowed to boost production to 3.80 million b/d under the deal, had January production of 3.72 million b/d, a 30,000 b/d increase from December.

    Meanwhile, exempt Libya and Nigeria showed increases of 50,000 b/d and 210,000 b/d, respectively, as they continue to recover from militancy-related outages.

    Libyan output had reached 715,000 b/d during the month, but frequent power shortages and a fire at the Sarir field caused production to fall towards the end of January, for a full-month average of 670,000 b/d, according to the survey.

    Nigerian output saw good signs of recovery after recent attacks on infrastructure in the Niger Delta, as well as the return of key export grade Agbami from maintenance last month, averaging 1.65 million b/d in January.

    The Platts estimates were obtained by surveying OPEC and oil industry officials, traders and analysts, as well as reviewing proprietary shipping data.

    Attached Files
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    Gazprom Supply Jitters Roil Gas Market Facing Return of Freeze

    European gas traders are once again focusing on exports from its biggest supplier as freezing weather is set to return to the region.

    Moscow-based Gazprom PJSC said on Wednesday that it reduced shipments through the Opal pipeline in Germany, which delivered about 15 percent of Russia’s gas exports outside the former Soviet Union last month, following a legal challenge led by Poland. The relatively minor cut rekindled memories of shutoffs during freezing weather eight years ago and helped to push prices to the highest in almost two years.

    While the reductions along Opal are equal to just 5 percent of Russia’s overall supplies to the 28-nation European Union, they come as the region faces depleting inventories and the return of a winter cold snap. While Gazprom is able to boost deliveries through Ukraine, the cuts helped heating prices in Europe, according to analysts including BMI Research.

    “People react jumpy to Gazprom reducing supplies all the time, often with a valid reason,” said Sijbren de Jong, a strategic analyst at The Hague Center for Strategic Studies. “But here it’s difficult to determine if something more is going on.”

    Day-ahead gas on the Title Transfer Facility in the Netherlands, Europe’s biggest market for the fuel, rose 17 percent last week, the biggest gain since April, according to broker data compiled by Bloomberg. The close at 23 euros a megawatt-hour ($7.25 a million British thermal units) was the highest since April 2015.

    Gazprom only increased flows through Opal in December after the European Commission eased some limits after years of disputes on the use of the pipeline, which is seen as a threat by transit nations including Poland and Ukraine because it can bypass their roles in transit to western Europe. Poland successfully challenged the commission’s decision and Gazprom returned to using about half of Opal’s capacity from Feb. 1.

    Some traders may face a cut in Gazprom supplies down to contractual volumes if they increased orders now, Russia’s Kommersant newspaper reported Thursday, citing people with knowledge of the matter it didn’t identify. The company’s press service declined to comment.

    While there’s no substantial risk to Russian gas shipments, or European gas supply as a whole, prices “could rise more aggressively if the weather turns cold over February,” said Christopher Haines, head of oil and gas at BMI Research.

    After the worst cold blast in a decade and a warmer than usual start to February, temperatures are expected to fall below the seasonal average throughout Europe. The northwest European average is forecast to be 0.4 degrees Celsius next week (33 Fahrenheit), compared with a 10-year mean of 3.3 degrees Celsius.

    European gas storage levels have been drained below 5-year averages after January’s abnormally chilly temperatures. Meanwhile, there has been a dearth of liquefied natural gas imports, with the U.K., Netherlands and Belgium receiving just four cargoes in 2017 through Friday, compared with 13 in the same period last year.

    “Higher prices on European benchmarks will pull in more LNG, particularly as Asian prices soften,” Haines said.

    The Opal pipeline, which is co-owned by Gazprom and BASF SE’s Wintershall AG subsidiary, runs for 472 kilometers (293-mile) from the arrival point of the Nord Stream link on Germany’s Baltic coast toward the Czech Republic. It has a capacity of 36 billion cubic meters of gas a year, with actual supplies of 20 billion cubic meters in 2016
    The EU and Dusseldorf courts handling Poland’s claims don’t disclose hearing schedules. While the procedures may drag on, there could be some interim solution that will allow Gazprom to use more capacity “in emergency situations,” said BMI’s Haines.
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    Qatar Petroleum is in growth mode, seeks international projects: CEO

    State-owned energy giant Qatar Petroleum aims to expand its liquefied natural gas (LNG) assets abroad, increasing its reserves and production capacity, chief executive Saad al-Kaabi said on Monday.

    "You will see us going internationally with some of the partners we have in Qatar, this year and next year...We are in growth mode," Kaabi told reporters at the company's headquarters in Doha.

    "We will continue to be in growth mode for a while. Some (growth) will be national but the majority will be international."

    Kaabi also said supplies of LNG from the United States were not a threat to business and that his company was interested in exploring in the area of Cyprus.
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    Iran to finally launch Azadegan tender in March: NIOC

    State-owned National Iranian Oil Co, or NIOC has started talks with international oil companies ahead of a new licensing round for Azadegan, one of its prized oil fields, a senior NIOC official said Saturday.

    The new bid round will be held before the end of the Iranian year on March 20, NIOC managing director and deputy oil minister, Ali Kardor said in a statement released by the oil ministry.

    Negotiations between NIOC and domestic and foreign companies are under way with a view to signing new-style oil contracts. This is after technical and commercial committee of oil contracts has prepared the necessary documents for putting Azadegan out to tender, Kardor said.

    "The first list of international companies cleared to bid for oil projects has been announced, and given the request of some companies to completing their data, another list would be also drawn up," Kardor added.

    Iran's oil ministry has qualified 29 international companies to bid for upstream oil and gas development contracts on its list. For South Azadegan, NIOC has signed about five memoranda of understanding with international companies to study the large onshore field with a view to bidding on development contracts.

    Bid rounds for the development of West Karoun fields -- Yaran and Yadavaran -- will be held once Azadegan is tendered, Kardor said.


    Kardor also touched on negotiations with India's ONGC Videsh Limited for the development of the 18.75 Tcf Farzad-B gas field in the Persian Gulf.

    "The technical model presented by the Indians is almost finalized, but we have yet to reach agreement on the financial framework because we are at odds over the gas price," he said.

    He added that Farzad field would be developed under an engineering, procurement, construction and financing contract in case talks with India did not reach agreement.

    OVL, the overseas arm of Indian state-owned explorer Oil and Natural Gas Corp., was prequalified along with 29 other oil companies to bid on the upcoming tenders. It discovered the Farzad-B gas field in 2008, but so far the field has not been developed.

    Earlier this month, the company said it was in negotiations with Iran for the field's development rights and had submitted a development plan. India's oil ministry had been hopeful in December that OVL could reach an agreement on gas price formula and a master plan for the development before the end of the Iranian year on March 20.

    OVL's $10 billion plan for development of the Farzad-B field includes an accompanying plant to liquefy the gas for transportation in ships. Kardor said Farzad's gas should feed LNG and petrochemical projects.


    Iran's oil production was 3.9 million b/d, while exports were 2.335 million b/d, Kardor said. Oil production is expected to reach 4 million b/d by March, with the addition of new production from the West Karoun area, adding 40,000 b/d, along with 15,000 b/d from the Azar field and 35,000 b/d from the oil layer of the South Pars gas field.

    Condensate production now stood at 550,000 b/d, having been at 325,000 b/d, in 2013, he added.

    Iran had been storing around 75 million barrels of condensates in vessels on the Persian Gulf, up until the signing of its nuclear agreement early last year.

    "After the implementation of the JCPOA [the nuclear deal], 50 million barrels of gas condensate has been sold," he said. The remaining 25 million barrels is expected to be sold by April, at prices at around $40/b.
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    Dubai crude cash spread to swap at three-month high on robust demand

    Frontline cash Dubai crude rose to its highest against the same-month Dubai swap in over three months Monday as demand for medium, heavy sour crudes was expected to remain supported on the prospect of the OPEC output cuts could be more apparent to Asian refiners in the second quarter.

    The April cash Dubai was assessed at a discount of 6 cents/b to April Dubai swaps Monday, compared with a discount of 12 cents/b Friday, S&P Global Platts data showed.

    The spread was last higher on October 31, 2016 when it was assessed at a premium of 9 cents/b.

    During the Platts Market on Close assessment process Monday, Shell was seen bidding for April cash Dubai partials and it traded with Reliance Global at $55.29/b at the end of the MOC.

    "Obviously medium and heavy sour is well supported, but light sour and sweet seems to be plenty around," a Singapore-based crude trader said.

    Intermonth Dubai crude swaps spreads have also largely remained supported Monday after hitting multi-month and multi-year highs on Friday.

    March Dubai crude swaps were assessed at parity to April crude swaps on Monday, while the spreads between April/May and May/June were both assessed in a contango of 2 cents/b, Platts data showed.

    On Friday, the March/April crude swaps spread was assessed in a backwardation of 2 cents/b Friday -- the highest since September 30 last year when it was in a backwardation of 10 cents/b, the data showed.

    The April/May and May/June crude swaps spreads were both assessed at a contango of 1 cent/b on Friday, the highest since August 31, 2016 and August 14, 2014 respectively.

    Traders have said the stronger spreads reflected expectations that OPEC-related production cuts would be felt most acutely in the second quarter as producers look to comply by June 30.

    Also reflecting support for the medium, heavy crude market, cash Oman crude was assessed at 56 cents/b above cash Dubai crude on Monday, the highest since December 30, 2016 when it was assessed at a 70 cents/b premium, Platts data showed.

    The rise in Dubai crude has narrowed the crude's spread to benchmark Brent sweet crude, opening up options for end-users to seek competitively priced grades from outside the Middle East.

    The second-month Brent/Dubai Exchange of Futures for Swaps -- which enables holders of ICE Brent futures to exchange a Brent futures position for a Dubai crude swap -- was assessed at $1.42/b Monday, down from $1.54/b last Friday.

    The second-month EFS averaged $1.65/b in January, the lowest since September 2015 when it averaged at $1.54/b.

    Attached Files
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    Shanxi to increase CBM output to 20 bcm

    North China's coal-rich Shanxi plans to increase coalbed methane (CBM) output to 20 billion cubic meters (bcm) by 2020, local media reported.

    In 2017, Shanxi will accelerate system reform in CBM exploration and extraction, in response to the central government's supply-side reform, said Xu Dachun, director of the provincial Land and Resources Department.

    In April last year, the Ministry of Land and Resources delegated part of CBM extraction approval rights to Shanxi. That was the first time the central government delegated CBM extraction approval rights to local government. So far, Shanxi has approved eight CBM exploration projects.

    In 2015, Shanxi extracted 10.13 bcm of CBM, including 4.1 bcm from ground-based operations and 6.03 bcm from underground, accounting for 94% and 44.4% of the country's total.

    By end-2015, Shanxi's CBM reserves stood at around 560 bcm, accounting for around 88% of the nation's total, official data showed.
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    Israeli firm launches takeover offer for Ithaca Energy

    Israeli energy company Delek Group has launched a takeover offer for the oil company Ithaca Energy.

    According to Canada-based Ithaca, the offer is for a cash consideration of C$1.95 per share – this equates to £1.20 per share based on the exchange rate on 3 February 2017.

    Ithaca’s board  has unanimously recommended the offer and values the entire issued and to be issued share capital of the company at C$841 million (US$646 million).

    The target company, with assets in the UK North Sea, said the offer offer provides shareholders with the opportunity to “crystallise” the value of their holdings in cash and represents a 12% premium to the TSX closing price of C$1.74 per share on 3 February 2017 and a 16% and 27% premium to the 30 day and 60 day volume weighted average prices respectively.

    The offer implies a total enterprise value of approximately US$1.24 billion.

    Brad Hurtubise, Ithaca’s Non-Executive Chairman, said: “We are very pleased to announce the offer, which provides an attractive opportunity for all shareholders to secure a premium cash value for their investment following a sustained period of share price growth and at a favorable point in the Company’s evolution.”

     “A Special Committee of independent Directors has fully assessed the offer, with input from the Company’s financial advisor and an independent valuator, and believes the Offer is fair and in the best interest of the Company and its shareholders and unanimously recommends that the shareholders tender their shares to the offer.”

    Apart from announcing the takeover offer, Ithaca also provided an update on its Stella development in the UK North Sea. The company said that good progress has been made on completing the remedial work on the FPF-1 electrical junction boxes, with the start-up of production from the Stella field still anticipated “later this month.”

    As for the takeover, this is the third major North Sea deal announced in the past month. Late in January BP said it would sell portions of its interests in the Magnus oil field and some associated pipeline infrastructure in the UK northern North Sea and in the Sullom Voe Terminal (SVT) on Shetland to EnQuest.

    Last week, Shell agreed to sell “a package” of UK North Sea assets to Chrysaor for a fee of up to $3.8 billion, as part of its previously announced $30 billion divestment program.
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    Glencore extends major Libyan oil deal - sources

    Swiss-based commodities giant Glencore has extended a deal with Libya's state oil firm to be the sole marketer of one third of the country's current crude oil production, sources familiar with the matter said.

    It was not clear for how long Glencore would continue to have exclusivity over the output and whether some parts of the deal would be renegotiated.

    The deal extends Glencore's dominance over rivals such as Vitol and Trafigura in handling barrels from the North African country for a second year running.

    A spokesman for Glencore declined to comment. Officials at Libya's state-owned National Oil Corp. (NOC) also declined to comment.

    Libya has struggled for years to end a crippling blockade of its oil ports amid a civil war and Islamic State intrusions. Between security fears and erratic supply, refiners eventually stopped attempting to buy from the North African country.

    With a dwindling revenue stream, NOC needed an intermediary that was comfortable managing the risks, able to market the oil globally and pay cash upfront for the cargoes.

    Glencore snapped up the opportunity in September 2015 to resell the only relatively stable onshore output - from the Sarir and Mesla oilfields loaded at the country's easternmost Marsa el-Hariga port. Libya's small offshore production also continued.

    Since 2015, the trader has been the only company able to buy Sarir and Mesla crude output directly from Libya's NOC and is expected to continue as NOC has largely finalised its 2017 allocations.

    Libya's production has recovered to around 700,000 barrels per day (bpd) and NOC hopes output will rise to 1.2 million bpd by the end of the year.

    "It is a big mosaic at the moment, but Glencore has kept a large chunk of the trade," one of the sources said.

    Glencore's deal entitles it to around 230,000 bpd from the Sarir and Mesla oilfields, the sources added. It also regularly delivers crucial refined fuel as Libya's refining system operates well below capacity. Glencore trades about 4.4 million bpd of crude and refined products.

    Vitol and Petraco have also been picking up cargoes but on a small scale, and producers with stakes in oilfields in the country such as Total, Repsol, OMV have returned to loading tankers, as have buyers such as Unipec, the trading arm of China's state-owned Sinopec.
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    GLOBAL LNG-Asia prices hit parity with British gas benchmark

    Asian spot prices for LNG delivery in March fell to parity with European gas benchmarks on Friday, while importers in India, Thailand and Mexico finalised purchases amid healthy supply.

    Traders said Asian prices for March delivery fell 25 cents to about $7.50 per million British thermal units (mmBtu), matching the UK's National Balancing Point trading hub levels.

    Qatar's liquefaction Train 7 - previously idled for maintenance - resumed production on Friday, raising the possibility of more frequent deliveries to Britain from the second-half of March and April, one trader said.

    However, other sources told Reuters that Train 7 may be due to shut down again in March.

    Meanwhile, Australia's AP LNG project is expected to idle half a train's output towards the end of February.

    But output from the giant Gorgon project was steady, with plant operator Chevron readying to bring a third production line on-stream early in the second-quarter.

    Despite colder-than-average forecasts for the next 45-days in South Korea's capital Seoul, which is also a major LNG importer, traders said a combination of pre-Christmas buying, stored reserves and returning nuclear reactors has kept Korea Gas Corp out of the spot market.

    Traders said they had heard Gail India had bought supplies in the low $8 per mmBtu range, while Thailand's PTT bought a cargo in the high $7 per mmBtu level, possibly from Chevron.

    In the Atlantic, Vitol bought a tender cargo from Angola for delivery to Europe, but looks to be in talks to swap it for a different destination, possibly Egypt, one trader said.

    Mexico also purchased two cargoes for February delivery. Steady cargo demand was seen coming from Spain.

    Around six shipments are due to arrive at the Fos terminal in southern France over the coming weeks, alleviating tight gas markets which followed an outage at an Algerian export facility.
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    U.S. FERC approves ETP Rover natgas pipeline from Penn to Ontario

    U.S. energy regulators late on Thursday approved construction of Energy Transfer Partners LP's Rover natural gas pipeline from Pennsylvania to Ontario, according to a filing made available on Friday.

    The 3.25 billion cubic feet per day project is one of several awaiting decisions from the U.S. Federal Energy Regulatory Commission (FERC) while the agency still has a quorum and can make such rulings.

    ETP has said it expected to put the first phase of the $4.2 billion project on line during the second quarter of 2017 and the remainder in service during the fourth quarter.

    FERC leadership changes last week prompted several energy firms to request the agency make decisions this week on proposed gas pipelines to avoid potential construction delays.

    President Donald Trump appointed Cheryl LaFleur as acting chair, which prompted Norman Bay, the former chairman, to announce he would step down on Feb. 3, leaving the commission without the quorum needed to conduct major business.

    Other companies hoping for decisions this week include units of Spectra Energy Corp on the Nexus pipeline, Williams Cos Inc on Atlantic Sunrise, TransCanada Corp on Leach and National Fuel Gas Co on Northern Access.

    Analysts at U.S. financial services firm Cowen and Co said on Friday the approval of construction of Rover was a positive for summer gas differentials in the Appalachia region.

    The premium of gas at the Henry Hub benchmark in Louisiana over the Dominion South hub in southwest Pennsylvania's Marcellus Shale narrowed to a near three-month low on Thursday and put it within a penny of its lowest in two years.

    Cowen said Energy Transfer can start cutting trees, which must be completed by March 31, but cannot build facilities until FERC staff is satisfied on the Stoneman House issue. Stoneman was a historic house in Ohio that the company demolished.

    Cowen said the approval will benefit several companies that plan to ship gas on Rover, including Antero Resources Corp, Eclipse Resources Corp, EQT Corp, Gulfport Energy Corp, Rice Energy Inc, Range Resources Corp and Southwestern Energy Co.

    Analysts at U.S. financial services firm FBR & Co said "failure to issue the Rover permit could have delayed the project by a year due to seasonal construction constraints."

    FBR said FERC may consider Spectra's Nexus and NFG's Northern Access projects before Bay departs. But FERC has not yet issued any notices on Nexus or Northern Access.
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    Top Trader Vitol Sees Oil Rattled as Trump Makes Market Fret

    Donald Trump and global crude producers are set to take prices on a bumpy ride this year, according to the world’s biggest independent oil trader.

    As investors are kept on tenterhooks over U.S. policies and whether OPEC and other nations will curb output as pledged, global benchmark Brent crude may vacillate between $52 and $62 a barrel, according to Kho Hui Meng, the head of the Asian arm of Vitol Group. The market’s structure could also shift in the third quarter, with near-term cargoes turning costlier than those for later delivery, flipping from the other way around.

    “I think this market is going to be very volatile,” Kho, the president of Vitol Asia Pte., said in an interview in Singapore. “People are worrying about U.S. policy. With the new administration, a lot of things are being speculated. So we can’t predict the future, we just have to wait.”

    The sentiment reflects the uncertainty gripping markets amid Trump’s ascent, with traders of everything from currencies to metals and stocks trying to decipher the effects of measures by the leader of the world’s biggest economy. The oil market has been ruffled by the prospect of more geopolitical tensions on his harder line on major producer Iran. He’s also mooted a border tax on imports, which Goldman Sachs Group Inc. says had a low chance of being introduced but could trigger an oil selloff if implemented.

    Trading companies such as Vitol and rivals including Trafigura Group and Glencore Plc could reap rewards from volatility. Vitol’s $1.6 billion in earnings in 2015 were boosted as it profited from price swings in the energy market. It posted a 42 percent decline in first-half 2016 profit amid fewer opportunities to benefit from price changes.

    The company, which is formally incorporated in Rotterdam but operates from locations including Geneva, London, Singapore and Houston, has experienced strong growth over the last 20 years on the back of expanding oil trade, large price swings and, more recently, investment in storage and refining. In 1995, Vitol earned just a little over $20 million.

    Oil traders often look to take advantage of a market structure known as contango -- where future prices are higher than current levels, allowing investors to buy oil cheap, store it in tanks or ships and lock in a profit for a later sale. But with global producers cutting output, the market may be poised to go into backwardation, when prompt crude is costlier than later cargoes.

    The structure is now “quite flat so people are still watching,” Vitol’s Kho said. “Once the backwardation comes in, which we’re not there yet, then people begin to look at the viability of the floating storages and ultimately they’ll come out.”
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    U.S. LNG exports hit record high in January

    U.S. LNG exports hit record high in January

    Cheniere’s Sabine Pass liquefaction plant in Louisiana exported fifteen LNG cargoes in January, setting a new record for U.S. monthly exports, the Energy information Agency confirmed in its weekly natural gas report issued on Thursday.

    The Sabine Pass facility, first of its kind to ship U.S. shale gas overseas, started exporting LNG in February last year and has since then exported more than 65 cargoes worldwide.

    Previously, Sabine Pass monthly exports were the highest in December, with twelve cargoes leaving the facility. These cargoes went mostly to Asia, where cold winter temperatures increased residential heating demand and rising spot LNG prices led to larger price spreads between the Atlantic and Pacific basins.

    According to the agency, natural gas pipeline deliveries to the Sabine Pass liquefaction terminal averaged 1.8 Bcf/d for the week ending February 1, unchanged from the previous week.

    “Four vessels (combined LNG-carrying capacity of 14.1 Bcf) departed Sabine Pass last week,” EIA said in the report.

    Henry Hub drops

    Natural gas spot prices in the U.S. fell at most locations in the week ending February 1 with the Henry Hub price dropping 13¢ from last Wednesday.

    The Henry Hub spot price decreased from $3.25/MMBtu last Wednesday to $3.12/MMBtu two days ago, EIA said in its report.

    The agency noted that temperatures moderated throughout the report week almost everywhere except for in the Northeast. As a result, prices generally fell in the report week.

    At the Chicago Citygate, prices decreased 14¢ to $3.08/MMBtu this Wednesday while prices at PG&E Citygate in Northern California fell 16¢, to $3.50/MMBtu.
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    US Rig Count Increases 17 This Week to 729; Oklahoma up 6

    The number of rigs exploring for oil and natural gas in the U.S. increased by 17 this week to 729.

    A year ago, 571 rigs were active.

    Houston oilfield services company Baker Hughes Inc. said Friday that 583 rigs sought oil and 145 explored for natural gas this week. One was listed as miscellaneous.

    Oklahoma increased by six rigs, New Mexico and Texas were each up by four and Alaska, Arkansas, Colorado and Wyoming each increased by one.

    Louisiana lost one rig.

    California, Kansas, North Dakota, Ohio, Pennsylvania, Utah and West Virginia were all unchanged.

    The U.S. rig count peaked at 4,530 in 1981. It bottomed out in May at 404.
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    IMCA slams ‘hasty’ Jones Act move

    The U.S. Border Customs and Border protection in mid-January issued a document in which it proposes to revise several rulings and amendments to the Jones Act, which prevents foreign-flagged ships from shipping merchandise within the U.S.

    While the foreign-built and flagged ships have been prevented from transporting merchandise between the U.S. coastwise points, over the years some exceptions have been made for construction vessels working in the offshore oil and gas industry.

    Until now, the foreign construction vessels were allowed to carry aboard pipeline repair material; anodes; pipeline connectors; wellhead equipment, valves, and valve guards; damaged pipeline; and platform repair material. This was not seen as a Jones Act violation because the goods have been seen as a necessary equipment.

    However, if the proposal is materialized, foreign-flagged vessels would not be able to carry any of the “items” listed above, and would be violating law if they did.

    While the U.S. vessel owners have welcomed the proposed changes, saying the move will secure work for the U.S. flagged ships and the U.S. workers, not everybody is happy.

    Hasty proposal

    Members of the International Marine Contractors Association (IMCA) with vessels active in US waters, together with their clients, have expressed “serious” concern over the “hasty” proposals by the Customs and Border Protection agency to revoke longstanding decisions made over the last 40 years concerning the Jones Act.

    According to the IMCA, these proposals have been introduced with no prior consultation, in the final two days of the Obama Administration, allowing only 30 days for public comment.

    The intention is to prevent non-Jones Act qualified vessels transporting merchandise between coastwise points. However, the effect may be to prevent all foreign flag construction vessels working in the United States. The proposals would also affect US flag vessels which are not coastwise qualified, the IMCA says.

    “We understand the drive to protect US tonnage given the difficulties in the PSV (platform supply vessel) market today, but the deep-water construction market represents a very different sector with very different vessels and technologies,” says IMCA’s Chief Executive, Allen Leatt. “It is a truly international market, as no single domestic market can support the heavy investments of these assets. Consequently, there is a real risk to damaging the whole Gulf of Mexico market as the unintended consequences do not seem to have been thought through.

    IMCA wants more time

    Leatt said: “The Obama Administration attempted similar changes in 2009, but discontinued the effort in the face of serious and substantial concerns raised by a multitude of stakeholders. We are seeking an extension of time for public comment, so that a proper reflection and analysis of the impact can be assessed.

    “Stability in the workings of the Jones Act has enabled many successful businesses to be established in the US Gulf States, both offshore and onshore, over the last 40 years, creating huge numbers of US jobs. Given the tough times our industry has endured in recent years, this additional risk to jobs is very concerning if oil companies are faced with a lack of capacity in the market and inevitably higher costs.

    “The Trump Administration has called for a freeze pending a review of all regulatory initiatives; equally it is well known that President Trump is ambitious for the US to increase domestic production. These proposals seem to run contrary to both objectives.”

    U.S. industry reps rejoice

    The American Maritime Partnership (AMP) – which describes itself as the voice of the U.S. maritime industry – on Monday said the U.S. Customs & Border Protection (CBP) move would “restore American jobs by correcting previous letters of interpretations of the Jones Act.”

    “The men and women of the American maritime industry commend the U.S. Customs and Border Protection’s efforts to rightfully restore over 3,200 American jobs to the American economy and close loopholes that gave preference to foreign workers and foreign shipbuilding,” said Tom Allegretti, Chairman of the American Maritime Partnership. “We applaud President Trump’s commitment to ‘buy American and hire American,’ and the correct and lawful interpretation of the Jones Act will ensure the preservation of American jobs and maintenance of the U.S. shipyard industrial base, both of which are critical to our economic security and national security.”

    “AMP joins a growing list of government and industry leaders that understand the importance of restoring American jobs to the American economy and support the restoration of this lawful interpretation of the Jones Act, which governs the transportation of equipment and cargo between coastwise points,” the organization said.

    The Offshore Marine Services Assiciation’s President Aaron Smith, also supports the CBP proposal.

    He said: “The Offshore Marine Service Association (OMSA) applauds the Administration’s strong step to restore the congressional intent of the Jones Act. This Notice opens a domestic market to U.S. mariners on U.S.-built vessels, owned by U.S. companies. The offshore service industry is ready, willing, and capable of completing this work, having recently invested $2 billion in U.S. shipyards on vessels tailored to safely completing this work.”
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    U.S. gasoline stocks are rising much faster than usual

    U.S. gasoline stocks are rising much faster than normal at the start of the year, threatening to leave refiners struggling to clear an overhang of motor fuel later in the year.

    Gasoline stockpiles rose by almost 21 million barrels during the first 27 days of 2017, compared with an average increase of less than 12 million barrels at the same time of year during the previous decade.

    Stocks have only risen this fast on one other occasion in the last 10 years, and that was in 2016, when refiners and blenders ended up with a large surplus which lingered through the summer

    Stocks hit a seasonal record of 257 million barrels on Jan. 27, according to an analysis of data from the U.S. Energy Information Administration.

    Stocks are now 4 million barrels higher than in 2016 and almost 26 million barrels higher than the 10-year seasonal average.

    Stocks are rising faster than normal across the eastern United States but especially on the East Coast and in the Midwest.

    East Coast stocks have risen by more than 8 million barrels since the start of the year, almost double the average increase of 4.7 million barrels .

    Midwest stocks are also up by 8 million barrels, more than double the average increase of 3 million barrels at this time of year.

    Gasoline stocks normally rise throughout January and sometimes into early February as refiners and blenders build reserves ahead of the refinery maintenance season.

    But the stock build in 2016 was exceptionally large as healthy gasoline margins encouraged refiners to process an unusually large volume of crude through the winter months.

    Something similar appears to be happening in 2017 with refineries processing much more crude than normal despite unusual stock levels.

    Refinery throughput has been running around 200,000 to 400,000 barrels per day higher than in 2016 since the turn of the year.

    Refining margins have generally been higher than during the winter of 2015/16 which has encouraged refineries to increase their processing ("Key commodity prices and differentials", Valero, Jan 2017).

    Hedge funds have established the largest bullish position in gasoline futures and options since July 2014 in anticipation that prices will rise.

    The forthcoming maintenance season should lower refinery throughput and start cutting reported stock levels in the next 1-2 weeks. If maintenance is longer and heavier than normal it could help eliminate excess inventories.

    But the build up of stockpiles and concentration of hedge fund positions will eventually have to be unwound at some point and could temper any further rise in gasoline margins.
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    Shell 'ramping up construction' on Pennsylvania chemical complex

    Shell Chemicals has been making progress on a petrochemicals complex designed to leverage affordable feedstocks from Northeast US shale-gas plays, the company said Thursday.

    The company has been "ramping up construction" at the site in Potter Township, Pennsylvania, in the Pittsburgh area that will produce 1.6 million mt/year of polyethylene, Shell CEO Ben van Beurden said in a conference call to discuss fourth-quarter results.

    "We are working our way through regulatory approval," he said. "A lot of site preparation is already done."

    Shell has not set a startup date but has previously targeted early 2020s.

    The site will host a seven-furnace ethane cracker which will feed into three polyethylene production lines -- gas-phased high density polyethylene, slurry HDPE, and linear low density polyethylene.

    The location of the project is unique, as recent waves of US ethylene and polyethylene projects have almost exclusively targeted the US Gulf Coast.

    The site will represent the largest ethylene and polyethylene capacities in the region, but Shell pointed to significant advantages in the location.

    "It sits on top of the largest feedstock in the United States," van Beurden said.

    Shell expects to feed the steam cracker with affordable ethane sourced from the Marcellus and Utica shale basins.

    Additionally, more than 70% of North American polyethylene demand stands within a 700-mile radius of Pittsburgh, according to Shell.

    "It's right in the middle of where the main polyethylene demand in North America is," van Beurden said.

    Shell made final investment decision on the project in June. Shell exercised its option to purchase the site in November 2014. In August 2013, Shell said it had secured ethane supply commitments from Hilcorp Energy, Consol Energy, Seneca Resources and Noble Energy.
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    MEPs call for Arctic ban on ships using bunker fuel

    The European Parliament is urging the European Commission to look closely at banning ships from using heavy fuel oil on Arctic shipping routes.

    A resolution adopted by the foreign affairs and environment committees on Tuesday called on the EU "to speak with one voice and push to keep the Arctic an area of cooperation."

    Members of the European Parliament want the commission and member states "to work towards banning the use of heavy fuel oil in maritime transport, through the MARPOL convention," a statement from the European Parliament said.

    "In case this does not prove feasible, the EU should take measures to prohibit the use and carriage of heavy fuel oil for vessels calling at EU ports."

    As ice in the Arctic region is thawing earlier, Arctic shipping lanes have become attractive as a way to save money on transporting goods from Asia to Europe.

    However, a significant drop in the price of bunker fuel in recent years has undermined the commercial case for Arctic transits. The use and carriage of heavy fuel oil is banned in the Antarctic.
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    Surge in USGC HSFO liquidity linked to hedging, export demand: sources

    More than a half-million barrels of US Gulf Coast HSFO have traded in the Platts Market on Close assessment process through just two days due to a combination of export demand and hedging, sources said.

    A total of 585,000 barrels traded in the first two days of February, or around 25% of the total volume in January that traded for USGC HSFO, S&P Global Platts data showed.

    One USGC trader said the beginning of a month is a key time for people who want to manage hedging positions in the paper market. This can also result in higher volume moving in the physical market, the trader added.

    The trader also said some companies who have ships loading for export in Early February may need to fill up on barrels, or want to make sure to bid in the MOC process to keep the arbitrage they made on paper work in the physical market.

    Other USGC traders were less convinced on the amount of export demand currently available in the USGC. A second USGC trader said the arbitrage is closed by as much as 90 cents/b to Singapore, with a third trader saying current bids in the MOC process make it "impossible" to export any material to Asia at a profit.

    "It really doesn't make sense to be buying at these levels," the trader said. The trader also said the USGC was flush with supply, and finding motivated sellers outside the MOC process has not been an issue.

    USGC HSFO was assessed at $46.42/b, the first time the product had been assessed at a premium to the front-month swap since November 22.

    Trafigura purchased 360,000 barrels through the first two trading days, accounting for around 60% of the total volume in February. It also matches the amount the trading house purchased for the entire month of February.

    A fixture of 130,000 mt of dirty petroleum products chartered by Trafigura was heard fixed last week out of the USGC to the Far East for loading February 1-3.

    Sources from Trafigura did not immediately respond to comments on the increased trading activity.
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    Enterprise says Seaway pipeline to resume service by Feb. 7

    Enterprise Products Partners LP's Seaway pipeline is expected to resume service on or before Tuesday following its closure due to a leak in Collin County, Texas, earlier this week, the company said on Thursday.

    The company continued to make progress in repairing its 30-inch (76-cm) diameter pipeline, which was struck by a third-party contractor on Monday, according to a company statement.

    The 400,000-barrel-per-day pipeline, which brings crude from Cushing, Oklahoma, down to the U.S. Gulf Coast, is a joint venture between Enterprise Products Partners LP, the operator, and Enbridge Inc.
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    Border Adjustment will lift WTI?

    The idea — championed by Republican leaders and now under fresh consideration at the White House — includes a “border-adjustment” provision: taxes raised on imports and waived on exports. Commodity traders have been handicapping whether that will happen, and whether it gets applied to oil.

    Analysts at Goldman Sachs Group earlier this week gave such a proposal a 20% chance of passing. But the fact this is even possible makes it worth outlining how dramatic all the changes would be.

    If it passes, the change will be transformative. It would jolt U.S. oil prices up 25% compared to international prices, Goldman said Tuesday. U.S. oil would flip from a $2.50 discount to international oil today to become $10 more expensive. That would drive up U.S. production and refiners would likely buy more of that oil, then pass higher prices directly on to consumers. Drivers would pay an extra 30 cents a gallon at the pump.

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    Alternative Energy

    Solar better for jobs than Coal

    There are now twice as many solar jobs as coal jobs in the US

    Updated by Brad Plumer@bradplumer[email protected] 
    Green workers install a residential grid-tied solar array on a hillside in Malibu, California, USA.
     (Citizen of the Planet/Education Images/UIG via Getty Images)

    Putting solar panels on rooftops and arrays is a labor-intensive process. You need people to design and manufacture the panels. Then people to market the panels to homes, businesses, and utilities. Then people to come and install them.

    It all adds up to a lot of jobs. Even though solar power still provides just a fraction of America’s electricity — about 1.3 percent — the industry now employs more than 260,000 people, according to a new survey from the nonprofit Solar Foundation. And it’s growing fast: Last year, the solar industry accounted for one of every 50 new jobs nationwide.

    The chart below breaks it down by job type. The majority of solar jobs are in installation, with a median wage of $25.96 per hour. The residential market, which is the most labor-intensive, accounts for 41 percent of employment, the commercial market 28 percent, and the utility-scale market the rest:

     (The Solar Foundation)

    To put this all in perspective: “Solar employs slightly more workers than natural gas, over twice as many as coal, over three times that of wind energy, and almost five times the number employed in nuclear energy,” the report notes. “Only oil/petroleum has more employment (by 38%) than solar.”

    Now, mind you, comparing solar and coal is a bit unfair. Solar is growing fast from a tiny base, which means there's a lot of installation work to be done right now, whereas no one is building new coal plants in the US anymore. (Quite the contrary: Many older coal plants have been closing in recent years, thanks to stricter air-pollution rules and cheap natural gas.) So solar is in a particularly labor-intensive phase at the moment. Still, it’s worth thinking through what these numbers mean.

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    EU softens proposal on extension of Chinese solar duties

    The European Commission has proposed extending import duties on solar panels from China by 18 months, a shorter period than initially planned, and with a gradual phase-out, Commission Vice President Frans Timmermans said on Wednesday.

    Anti-dumping and anti-subsidy duties have been in place on Chinese solar panels and cells since 2013 and are currently under review as to whether they should be maintained. A majority of EU countries last month opposed a proposed two-year extension.

    Timmermans told a news conference that it was a sensitive issue. The Commission's proposal, revealed by Reuters on Tuesday, will be put to the EU's 28 member states later this month.

    "The phase-out is also meant to make sure that producers of solar panels in the European Union have the time to adapt to the new situation. The precise conditions are something that will be up for debate, also with member states now," Timmermans told a news conference.

    The Commission faces a delicate balancing act between the interests of EU manufacturers and those benefiting from cheap imports, while also being concerned about the response from Beijing, seen as a possible ally in fights against protectionism and climate change.

    The EU and China came close to a trade war in 2013 over EU allegations of dumping by Chinese solar panel exporters.

    To avoid that, both sides agreed to allow limited tariff-free imports of panels at a minimum price of 0.56 euros per watt, anti-dumping duties of up to 64.9 percent for those outside the agreement and anti-subsidy duties capped at 11.5 percent.

    The case is due to be settled by March 3.
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    China issues first five-year plan for geothermal energy

    China has issued 13th Five-Year Plan for Geothermal Energy, the first such plan in the country, in a bid to boost clean energy development and improve the environment.

    Over 2016-20, China will add geothermal power installed capacity by 500 MW, which could drive investment worth 40 billion yuan ($5.8 billion). During the same period, China will also add geothermal heating (cooling) area by 1.1 billion square meters.

    By 2020, the country aims for geothermal power installed capacity of 530 MW and geothermal heating (cooling) area of 1.6 billion square meters.
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    Clean Energy signs three LNG fueling deals

    Clean Energy Clean Energy Fuels, one of the largest providers of natural gas fuel for transportation in North America, signed three LNG fueling contracts in Washington and California.

    The company signed the first of three agreements with Castan, a drayage truck operator based out of Edgewood, Washington which operates in the ports of Seattle and Tacoma.

    Castan, that expects to have its full fleet running on liquefied natural gas by the end of 2017, will fuel at Clean Energy’s LNG station in Fife.

    The signed two more deals in California, one with the city of Bakersfield under which it will deliver the chilled fuel to the city’s two LNG stations which are operated and maintained by Clean Energy. The city is anticipated to use approximately 760,000 gallons per year.

    The second deal in California has been signed with Burrtec Waste Industries, a private solid-waste company.

    Under the contract, Clean Energy will deliver approximately 190,000 gallons of LNG to Burrtec’s facility in Palm Desert each year.
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    Vestas Q4 in line with expectations; says 2017 sales could fall

    Wind turbine maker Vestas Wind Systems on Wednesday posted fourth-quarter operating profit in line with expectations but said revenue this year could fall from 2016's record level.

    The Danish company said its board of directors would recommend a dividend payout of 9.71 Danish crowns per share, compared with 6.82 crowns last year.

    "I am extremely pleased with Vestas' 2016 performance, delivering a record year on revenue, EBIT margin, net profit, free cash flow, order intake, and combined order backlog," Chief Executive Anders Runevad said in a statement.

    Vestas said it expects 2017 sales of between 9.25 billion and 10.25 billion euros, compared with 10.24 billion in 2016.

    Vestas is set to lose its status as the world's biggest wind turbine maker as Germany's Siemens and Spain's Gamesa have agreed to combine their assets in the sector.

    The company delivered 2,544 megawatts of wind turbine capacity in the fourth quarter, up from 2,150 MW a year earlier.

    Operating profit before special items rose 25 percent in the fourth quarter from a year earlier to 504 million euros, bang in line with the figure forecast in a Reuters poll of analysts.

    Vestas and its rivals are benefiting from a new focus on renewables, encouraged by the Paris Agreement on climate change in Dec. 2015 and a five-year extension of a key U.S. Production Tax Credit.

    Vestas' share price came under pressure after it warned in November of a slowdown in the U.S. market in 2017, coupled with the election win by Donald Trump, who had expressed support for conventional fossil fuels.

    Attached Files
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    Mt Marion ships its first lithium

    The Mt Marion lithium project, in Western Australia, has shipped its first lithium concentrate.

    Project partners Mineral Resources and Neometals on Tuesday said the first shipment of 15 000 t of lithium concentrate was loaded at the port of Kwinana, for delivery to Chinese offtake partner Ganfeng Lithium.

    The first shipment of lithium concentrate followed the successful commissioning and the continued ramp-up of production at the Mt Marion operation, which was expected to produce 400 000 t/y at full capacity.

    Ganfeng, which has a 13.8% interest in the project through Jiangxi Ganfeng Lithium, has agreed to an offtake of 200 000 t/y of spodumene concentrate of between 4% and 6% lithium-oxide content.

    Mineral Resources previously flagged the possibility of divesting of its 43.1% interest in the Mt Marion project.
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    China's solar power capacity more than doubled in 2016

    China's installed photovoltaic (PV) capacity more than doubled last year, turning the country into the world's biggest producer of solar energy by capacity, the National Energy Administration (NEA) said on February 4.

    Installed PV capacity rose to 77.42 GW at the end of 2016, with the addition of 34.54 GW over the course of the year, data from the energy agency showed.

    Shandong, Xinjiang, Henan were among the provinces that saw the most capacity increase, while Xinjiang, Gansu, Qinghai and Inner Mongolia had the greatest overall capacity at the end of last year, according to the data.

    China will add more than 110 GW of capacity in the 2016-2020 period, according to the NEA's solar power development plan.

    Solar plants generated 66.2 billion kWh of power last year, accounting for 1% of China's total power generation, the NEA said.

    The country aims to boost the mix of non-fossil fuel generated power to 20% by 2030 from 11% today.

    China plans to plough 2.5 trillion yuan ($364 billion) into renewable power generation by 2020.
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    Solar power, electric vehicles to upend oil, gas markets by 2050: report

    Rapid growth in solar photovoltaic (PV) power and storage could completely replace coal in power generation and cut natural gas' share of the market to just 1% by 2050, according to a new report by environmental group Carbon Tracker Initiative.

    At the same time, electric vehicles could reach two-thirds of the global road transport market, cutting demand for oil by 25 million b/d compared with current levels.

    The report, titled "Expect the Unexpected", concludes that "a 10% shift in market share can be crippling for incumbents, such as in the value destruction experienced by EU utilities and the near collapse of the US coal sector."

    The authors concede that this has yet to be tested in the oil or gas sectors.

    The 10% threshold "is a hypothetical threshold that we derive from previous experience," Luke Sussams, one of the report's authors, said in an interview. "Because this 10% share hasn't yet been captured by solar or PV, there is no way to know how the oil and gas sectors will react."

    The cost for solar PV cells have dropped by 85% since 2010, according to the report, and this unexpectedly rapid development caught European utilities unawares.

    "Between 2008 and 2013, renewable power generation, of which solar PV was a big part, grew by 8% in total," according to the report. "The five major European utilities were very much misaligned with this shift, costing them Eur100 billion in value over the period."

    In a scenario where nations adopt ambitious commitments to UN climate targets, including widespread deployment of renewables, "coal is phased out of the power mix by 2040 -- 10 years earlier than with original solar PV cost assumptions -- and natural gas follows soon afterwards."

    The report says most projections of the decrease in solar costs are conservative compared with historical evidence, and that this may persuade incumbents that growth will be slower than Carbon Tracker forecasts.

    The trajectory for electric vehicle (EV) costs has followed a similar pattern, according to the report's authors. "According to 2016 research by the US Department of Energy, battery costs have fallen from $1,000/kWh in 2008 to $268/kWh in 2015; a 73% reduction in seven years."

    As a result, electric passenger vehicles are expected to be cost-competitive with internal combustion vehicles as soon as 2020, and under the most conservative scenario may hold a market share of as much as 21% by then.

    "We're crossing the threshold where EVs are competing with internal combustion vehicles," Sussams said. "Our scenario is that EVs are fully competitive by 2020, when battery costs are around $100/kWh. Tesla and General Motors are saying they will be able to deliver batteries at that cost."

    The outcome of the most favorable scenario would be a decline in oil demand of 16.4 million b/d by 2040, and a decrease of 24.6 million b/d in demand by 2050, Sussams said.

    Many oil companies, as well as the International Energy Agency, forecast oil demand reaching more than 100 million b/d by 2040, from its current level of around 96 million b/d.

    The forecast for EV numbers exceeds predictions from the International Energy Agency. Carbon Tracker predicts a global EV fleet of 1.1 billion by 2040, whereas the IEA's recent EV Outlook report sees 150 million vehicles on the road by the same point.

    "We think cost savings will overwhelm what are partly consumer preferences," Sussams said. "We're using a least-cost model that doesn't take into account exogenous factors," such as policy options available to governments.

    Under most of the scenarios modeled by Carbon Tracker, coal demand peaks in 2020 at around 3.7 billion mt of oil equivalent (toe) a year before falling back to 1.5 billion mtoe/year in 2050, while oil demand reaches its highest level between 2020 and 2030 at more than 4 billion mt/year before falling back to 3.3-3.4 billion mt/year in 2050.

    However, despite its prediction that natural gas' market share in the power sector may decline to as little as 1% by 2050, most Carbon Tracker scenarios see total demand for gas increasing from about 3.8 billion mtoe/year in 2020 to between 4 billion mtoe/year and 4.5 billion mtoe/year by 2050, due mainly to increased heating consumption.

    "There are certain elements of the model that see an uplift in gas demand," Sussams said. "Higher EV deployment would incentivize industry and domestic sectors to consume more."

    Attached Files
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    Agrium Q4 profit falls two-thirds as fertiliser market slump weighs

    Calgary, Alberta-based fertiliser producerAgrium Inc, which controls the largest retail distribution network in North America, has reported a 67% slide in net fourth-quarter earnings attributable to equity holders of $67-million, or $0.49 a share.

    The company, which is in the process of merging with Canadian counterpart PotashCorp of Saskatchewan to create a new $36-billion entity, attributed the reduction in net earnings to lower year-over-year nutrient pricing.

    Sales for the year fell 5% to $2.3-billion.

    Despite president and CEO Chuck Magro stating that Agrium has been encouraged by the recent firming in global nutrient markets and the company anticipating solid demand for crop inputs in the coming spring application season, Agrium announced its 2017 guidance range of $4.50 to $6.00 diluted earnings a share, which falls short of average Wall Street analyst forecasts calling for full-year earnings of $5.45 a share.
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    China forecasts corn imports at decade low, spooking exporters

    China forecasts corn imports at decade low, spooking exporters

    China's forecast on Thursday of a drop in corn imports to their lowest in at least a decade may end a years-long bonanza for global merchants and producers as maize prices in the world's biggest grains market have dropped below global prices.

    In its monthly crop report, the Ministry of Agriculture forecast imports for the 2016/2017 crop year that ends in September as low as 800,000 tonnes, down 200,000 from last month's estimate.

    That would be down from 3.2 million tonnes for the calendar year 2016 and a third of the average for the past decade.

    Other estimates, however, point to higher imports for the year. The U.S. Department of Agriculture expects imports at 3 million tonnes and state think-tank National Grain and Oils Information Center estimates 2 million tonnes.

    Still, the drop reflects the waning appetite for foreign grain after the government abandoned its longstanding price support program last year.

    It will likely spook global merchants and producers that enjoyed a prolonged boon in business as the world's second-largest economy scooped up foreign crops to feed its growing urban population and livestock.

    Removing the price supports has shifted the long-held premium of domestic corn over international prices to a discount.

    Last month, Chinese corn traded at a rare discount of 120 yuan ($17.48) to duty-paid imports in southern ports last month, the report said. That is down from a premium of 1,000 yuan per tonne in recent years.

    China will eventually need imports once it has reduced its stocks and the price gap may diminish if physical prices catch up with the rally in Chinese corn futures.

    The import decline could combine with bumper crops in the United States and other major producers to lower global prices further. U.S. corn futures are languishing close to multi-year lows.

    Ukraine accounted for the majority of last year's imports, followed by the United States. [GRA/CN]

    Traders said they do not expect a pick-up any time soon. Meng Jinhui, analyst with COFCO Futures, said the arbitrage should remain in favor of domestic farmers until at least July.

    The forecast provides further evidence that 2017 could be a pivotal year for China as Beijing doubles down on efforts to boost domestic demand and curb output to get rid of its ageing reserve and reduce imports.

    Chinese corn futures rose to an 18-month high this week on expectations for an inventory decline. Prices have gained 20 percent since Sept. 30.

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    Russia's Phosagro launches secondary share offering

    Russian fertiliser producer Phosagro said on Wednesday it planned to sell up to 5 percent of its share capital as investors' appetite for Russian assets recovers.

    The company offered shares at 2,500-2,600 roubles ($42.19-$43.88) each in the secondary share placement, a financial source and a source close to the placement told Reuters.

    "The books have been signed in this range (2,500-2,600 roubles per share)," one source said.

    That price guidance, a discount to the closing price of 2,700 roubles per share, was later confirmed by the bookrunner, which said the books were covered throughout the range.

    Phosagro is one of the world's largest producers of phosphate rock, an essential agricultural nutrient. It also sells compound fertiliser, a blend of processed phosphates, nitrogen, potash and often sulphur.

    Phosagro has benefited from Russia's rouble devaluation giving it lower costs and higher export revenues and expects at least stable revenues, core earnings and profits in 2017.

    At the company's current share price, a 5 percent stake is valued at around 17.5 billion roubles ($296 million).

    Phosagro, which gave no price guidance, said it will not receive any proceeds from the sale.

    The shares being sold are held by a trust, the economic beneficiaries of which are Deputy Chairman of the board of directors Andrey Guryev and members of his family.

    The final number of shares to be sold and the price will be decided after the bookbuilding.

    The company said it would offer for sale 6,475,000 ordinary shares.

    The Russian Direct Investment Fund (RDIF) said it has formed a consortium comprising leading investors to participate in the offer.

    "The RDIF-led consortium will include six leading sovereign wealth funds from Asia and the Middle East, as well as other investors," RDIF said.

    A source, familiar with the offering details, said RDIF was eyeing up to $200 million worth of Phosagro shares. The source also said the fund has offered $14.84 per Phosagro share, which is a three percent discount to the closing price.

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    Mosaic profit beats; cuts dividend on 'gradual' market improvement

    Mosaic Co reported a better-than-expected quarterly profit as it kept a tight leash on costs, and the company slashed its annual dividend as it expected only a "gradual" improvement from a prolonged slump in the fertilizer market.

    The company's shares were down 6.6 percent at $29.90 in light premarket trading on Tuesday.

    The world's largest producer of finished phosphate products said it would cut its annual dividend by 45.4 percent to 60 cents per share, effective with the next declaration.

    A capacity glut and soft crop prices have pushed potash and phosphate prices to multi-year lows.

    "While we are confident the market bottom is behind us, the pace of improvement is expected to be gradual," Chief Executive Officer Joc O'Rourke said in a statement.

    Potash MOP (muriate of potash) cash production costs dropped 28 percent in the fourth quarter from a year earlier, while phosphate conversion costs fell 15 percent.

    Net earnings attributable to Mosaic fell to $12 million, or 3 cents per share, in the three months ended Dec. 31, from $155 million, or 44 cents per share, a year earlier.

    On a per share basis, the company recorded a charge of 23 cents, compared with 16 cents a year earlier.

    Excluding items, the company earned 26 cents per share, according to Thomson Reuters I/B/E/S, handily beating estimates of 13 cents.

    Plymouth, Minnesota-based Mosaic's net sales fell to $1.86 billion, but was slightly above analysts' average estimate of $1.80 billion.

    Mosaic recently bought Vale SA's fertilizer business for $2.5 billion, the latest in the global fertilizer market as companies seek ways to beat the slump in prices.

    The deal, which makes the Brazilian iron ore miner the biggest shareholder in the U.S. company, is expected to close in late-2017.

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    Scientists find crop-destroying caterpillar spreading rapidly in Africa

    Scientists tracking a crop-destroying caterpillar known as armyworm say it is now spreading rapidly across mainland Africa and could reach tropical Asia and the Mediterranean in the next few years, threatening agricultural trade.

    In research released on Monday, scientists at the Britain-based Centre for Agriculture and Biosciences International (CABI) said the pest, which had not previously been established outside the Americas, is now expected to spread "to the limits of suitable African habitat" within a few years.

    The caterpillar destroys young maize plants, attacking their growing points and burrowing into the cobs.

    "It likely traveled to Africa as adults or egg masses on direct commercial flights and has since been spread within Africa by its own strong flight ability and carried as a contaminant on crop produce," said CABI's chief scientist Matthew Cock.

    Armyworm, known as "fall armyworm" in the United States due to its tendency to migrate there in autumn, or fall, is native to North and South America and can devastate maize, a staple crop crucial to food security in large parts of Africa.

    Suspected outbreaks have already erupted in Zambia, Zimbabwe, Malawi and South Africa and the U.N. Food and Agriculture Organization said last week it had spread to Namibia and Mozambique.

    The CABI research found evidence of two species of fall armyworm in Ghana for the first time and scientists are now working to understand how it got there, how it spreads, and how farmers can control it in an environmentally friendly way.

    "This is the first time it has been shown that both species or strains are established on mainland Africa," Cook said. "Following earlier reports from Nigeria, Togo and Benin, this shows they are clearly spreading very rapidly."

    While armyworm mainly affects maize, it has also been recorded eating more than 100 different plant species, causing major damage to crops such as rice and sugarcane as well as cabbage, beet and soybeans.

    Cook warned that outbreaks can cause devastating losses and mounting debts for farmers and said urgent action is now needed to help farmers figure out the best strategies to control the pest.

    South Africa's agriculture ministry said last week it was registering pesticides for use against armyworm.
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    Precious Metals

    RBPlat to post FY earnings in turnaround from 2015 losses

    JSE-listed Royal Bafokeng Platinum(RBPlat) expects to report earnings per share (EPS) of between 81c and 92c and headline earnings per share (HEPS) of between 80c and 91c for the year ended December 31.

    This compares with a loss per share of 1 589.2c and headline loss per share of 83.2c in 2015.

    The increase in earnings is largely attributed to the net effect of a 9.8% increase in revenue, mainly as a result of a higher realised revenue basket price, combined with a nominal 0.6% increase in cost of sales.

    “The improved earnings, combined with a strong cash flowcontribution from on-reef development revenue at the Styldrift I project, in the North West, resulted in the group having a substantial cash balance at the end of the year,” the company said in a statement on Thursday.

    Cash preservation continues to be a priority and RBPlat remains unleveraged with a robust balance sheet that positions it well for the next phase of Styldrift I’s ramp-up to a 150 000 t/m operation.

    RBPlat expects to release its results on February 28.
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    Goldcorp buys back gold stream on giant Chile project

    World number four gold producer Goldcorp announced on Wednesday it's acquiring New Gold’s 4% gold stream on its El Morro project in Chile for $65 million in cash.

    El Morro is part of a joint venture between Goldcorp and Teck Resources. The Vancouver-based companies merged the El Morro and Relincho deposits in  2015 to create NuevaUnion in the Atacama region of Chile. Goldcorp bought New Gold's 30% share in El Morro for $90 million cash plus the stream at the same time the merger was announced.

    The partners hope to complete a pre-feasiblity study on the giant project in the second half of this year. NuevaUnion is expected to cost around $3.5 billion to bring into production. Ore would be transported from the El Morro to a mill and concentrator facility at Relincho with an initial capacity of 90kt – 110kt a day.

    NuevaUnion will have a 32-year lifespan and produce an average of 190kt copper and 315koz gold a year, over the first decade. NuevaUnion is located 4,000m above sea level and the underground operation, like many in Chile, will rely on desalinated water.
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    Rio hands diamond mine over to Madhya Pradesh government

    Diversified miner Rio Tinto will "gift" the Bunder diamond project, in India, to the government of Madhya Pradesh.

    Rio last year announced that it would not proceed with the development of the Bunder mine, owing to commercial considerations, and that it would close all projectinfrastructure.

    The government of Madhya Pradesh signed an order in January, under which it will accept ownership and take responsibility for the Bunder assets.

    Rio copper & diamonds CEO Arnaud Soirat said Rio’s exit from Bunder is the latest example of the company streamlining its asset portfolio, adding that it simplifies the business, allowing the company to focus on its world-class assets.

    “We believe in the value and quality of the Bunder project and support its future development and the best way to achieve that is to hand over the assets to the government of Madhya Pradesh.”

    Soirat noted that the assets being handed over to the government will include all land, plant, equipment and vehicles at the Bunder project site. The inventory will also include diamond samples recovered during exploration.

    It is believed that this approach will assist the government to package the assets if it is to proceed with an auction process for the Bunder mineral rights.

    “Rio Tinto has long and enduring ties with India and we continue to see the nation as an important market for our metals and minerals and as a key hub for Rio’s businessservices.”

    Soirat said the company remains committed to its diamonds business and the Indian diamond industry through its world-class underground mines, the Argyle diamond mine, in Australia, and the Diavik diamond mine, in Canada.
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    Gemfields’ Q2 emerald output nearly halves

    Production of emerald and beryl at Aim-listed Gemfields’ 75%-owned Kagem mine, in Zambia, nearly halved to 4.7-million carats in the three months to December 31, compared with the 8.2-million carats produced in the three months to December 2015.

    CEO Ian Harebottle said the mine experienced a mixed second-quarter with lower production volumes, as a result of the varied nature of the mineralisation at the deposit, which was offset to some extent by the efforts of the operating team on site.

    Meanwhile, Gemfields’ 75%-owned Montepuez ruby mine, in Mozambique, continued to deliver strong results, with a significant increase in ore processed relative to the prior comparable period as a result of improved operational efficiencies.

    The mine, however, produced 1.1-million carats of ruby and corundum in the quarter under review, compared with the 1.6-million carats in the prior comparable period, as lower-grade but higher-value material was processed.


    Fabergé sales orders increased by 95% year-on-year in the quarter under review.

    “It is pleasing to see that the luxury market has started the year off with a buoyant note with Fabergé showing solid January sales demand,” Harebottle said.

    The number of sales transactions increased by 48% year-on-year, while the average selling price per piece increased by 12% year-on-year.

    Total operating costs for the quarter increased by 2% largely owing to increased marketing and events spend.
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    European Election Anxiety pushes Gold

    Funds increased gold net-long by 21% to 72k lots in wk to Jan 31. The 12k rise (longs +6k, short -6k) took the net-long to 8 wk high.

    "Paper" demand for gold picking up. ETP demand jumped the most in 6 mths last week. Funds lifted bullish futures bets to a two-months high.

    Gold Spikes As European Election Anxiety Spreads


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    Randgold proposes 52% dividend-payout increase as FY16 profits rise 38%

    Africa-focused Randgold Resources has increased production for the sixth consecutive year in 2016, while reducing total cash cost per ounce, and remains upbeat about its future prospects despite global uncertainties.

    Speaking to Mining Weekly Online on the sidelines of the Investing in African Mining Indaba, on Monday, CEO Dr Mark Bristow noted that, with profits of $294.2-million up 38% on the previous year, the board had proposed a 52% increase in the dividend to $1 a share from $0.66 a share in the previous year.

    The dividend will be paid in cash with no scrip alternative being made available. The company’s board agreed that the resolution for the dividend would be submitted to shareholders for approval at the company’s annual general meeting scheduled for Tuesday, May 2.

    Randgold FD Graham Shuttleworth highlighted that, since Randgold paid its first dividend in respect of the 2006 financial year, the company had maintained a progressive dividend policy, with dividends having increased yearly and by 900% over this period, notwithstanding the drop in the gold price since 2011.

    “This increase in dividends validates the business model and reflects the profitability and financial strength of the group,” he said.

    The company’s flagship Loulo-Gounkoto gold mine, in Mali, exceeded its production guidance for the year by 37 000 oz, while also achieving its lowest-ever total cash cost per ounce. Its other mines also recorded solid performances that contributed to the record group production of 1.2-million ounces.

    The group’s total cash cost of $639/oz was down 6% from the $679/oz recorded in the previous year.

    Further, Bristow pointed out that Randgold had passed its net cash target of $500- million, with $516.3-million in the bank at the end of 2016 and no debt.


    Meanwhile, Bristow highlighted that Randgold had been involved in Mali for the past 20 years and, in that time, had made an “enormous difference” for the better in the country. He commented that, at the national level, it had paid more than $2-billion to the government in taxes and dividends and contributed another $2.9-billion to the economy in the form of salaries, community investments and payments to local suppliers.

    “Our Malian operations routinely account for between 6% and 10% of the country’s total gross domestic product,” Bristow stated, adding that the miner had taken great care to ensure that all its stakeholders – and not least the host government and the local communities – had shared equitably in the value that the company had created in the country.

    He said that, in partnership with the government, Randgold had also developed Mali into “one of the world’s premier gold exploration and mining destinations”, by creating a solid foundation for general economic growth, which, together with the new mining companies in the industry, could still be improved upon.

    “At Randgold, we are committed to further investment in Mali, not only with regard to exploration and its own mining businesses, but also in community projects aligned to its sustainability-focused social responsibility policy,” Bristow concluded.
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    Base Metals

    Co-owner of Russia's Rusal considers share sale -sources

    Onexim Group, which manages the assets of Russian tycoon Mikhail Prokhorov, is considering selling some of its 17 percent stake in Russian aluminium giant Rusal, two banking sources and two industry sources told Reuters on Thursday.

    Reports of a possible share sale came on the same day two sources close to Rusal and a banking source told Reuters the Hong Kong-listed company was also looking at listing in London.

    Rusal denied on Friday it was considering such a move.

    "The company has not considered or discussed any such secondary public offering of shares in London," it said in a statement to the Hong Kong bourse.

    Russian companies have seen a long-expected revival in investment demand this year amid signs of stabilisation in the country's economy situation after several years of crisis.

    Three Russian firms have already raised a total of almost $800 million in share sales in 2017, in addition to a number of debt issues, including Rusal's own $600 million Eurobond.

    "It is a good time for the share sale taking into account the high interest in Russian shares. However, maximum mutual benefit will only be reached if Onexim sells this stake via Rusal," said Kirill Chuyko at BCS Investment Bank.

    All four sources said Onexim could start accelerated book building for the stake sale in the near future. According to one of the banking sources, Onexim is considering selling about 5 percent of Rusal.

    Onexim declined to comment.

    Earlier on Thursday, sources said Rusal was considering a London listing, with one saying the aluminium giant could offer up to 20 percent of its shares on the London Stock Exchange.

    "Rusal has a programme aimed at increasing liquidity (of its shares) and a listing in London is being considered as a part of it," another source close to Rusal said.

    Russian tycoon Oleg Deripaska's En+ Group owns 48.1 percent of Rusal, with 15.8 percent owned by Viktor Vekselberg and Leonard Blavatnik's Sual Partners. Glencore holds 8.75 percent and the remaining 10 percent is listed in Hong Kong.
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    Rio Tinto looking at exit from giant Indonesia mine

    Rio Tinto is considering walking away from its interest in the huge Grasberg copper mine operated by Freeport McMoRan Inc in Indonesia, amid uncertainties over the future operation of the mine.

    The world's No.2 copper mine is facing a stoppage in its copper concentrate exports and permit issues with the Indonesian government, which Freeport has warned could force it to slash production and its local workforce.

    A strike at the country's biggest copper smelter, which is Freeport's sole domestic buyer of copper concentrate, has added to pressure on the partnership.

    "There is no doubt that Grasberg is a world-class resource. But the key question, especially in the light of what happened three weeks ago, is: is Grasberg a world-class business for us?" Rio CEO Jean-Sebastian Jacques said, according to a transcript of an analyst briefing.

    "Everyone was taken by surprise," he said, referring to Indonesia's stoppage of copper exports from Grasberg on Jan. 12. Freeport CEO Richard Adkerson was "on his way back to Jakarta" for talks with the government, Jacques added.

    Rio, which reported earnings on Wednesday, will decide in "coming weeks and months" whether to sell or walk away from its option to take an effective 40 percent stake in Grasberg in 2021, he said.

    "If we want to have a meaningful offtake and stream beyond 2021, we would need to invest in a big way in the coming years," Jacques said.

    "We're going to watch very carefully what's happening before we commit additional material money into this project."

    A spokesman for Rio Tinto in Australia could not be reached for comment on Thursday.


    Under a joint venture deal it inked with Freeport in 1995, Rio gets a 40 per cent share of Grasberg's production above specific levels until 2021, then 40 per cent of all production after 2021.

    Rio said last month it was expecting to benefit from a share of production in 2017, but the miner has not had any production from Grasberg since 2014, when its share was just 7,700 tonnes of copper. Freeport's share of copper production from the joint venture was nearly 300,000 tonnes that year. Freeport Indonesia spokesman Riza Pratama told reporters that amid the export stoppage, Grasberg's copper concentrate stockpile warehouse was now "almost full", indicating that a production cut would be imminent without a breakthrough.

    He declined to comment on Freeport's partnership with Rio.

    Analysts have noted that muddled policies are complicating matters for miners in Indonesia.

    "What this signals is that politics rule in Indonesia. At the moment it is very difficult for any investor to navigate through the mining sector in Indonesia," Achmad Sukarsono, Asia political analyst at Eurasia Group, said.

    However, he saw a resolution.

    "I think it will end with an agreement. The ball is now in Freeport's court - to what extent they want to concede."

    Attached Files
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    Southern Copper wants to shoot the lights out

    Southern Copper Corp the world's fifth largest copper producer in terms of output, has plans to increase copper production by two-thirds in just six years thanks to a raft of projects coming on stream towards the latter part of the decade.

    Last year the company, controlled by diversified resource and infrastructure giant Grupo Mexico, produced 906,000 tonnes of the red metal but according to company CFO Raul Jacob that could grow to 1.5 million tonnes on the back of a more than $5.6 billion capital spending program.

    Southern Copper, worth some $30 billion on the NYSE after a 20% jump in the share price year to date, has already spent some $1 billion expanding its flagship Buenavista copper-molybdenum-zinc-silver mine in Mexico and most of the outlay will occur before the end of the decade.

    Projects include the massive El Arco property in Baja California which has the potential to become a 190kt copper and 105kt gold mine, and two other projects in the country called El Pilar and Pilares.  In Peru, the $1.2 billion Toquepala concentrator expansion will add 100kt per year by mid-2018 while additional Cuajone expansions is planned for after 2020.

    The brownfield 120kt Tia Maria project which has run into fierce community opposition requires $1.4 billion in capex while the Los Chancas projects in Peru is a $1.8 billion undertaking that could produce 100kt per year. The company is also spending more than $1 billion on a copper smelter and refinery in Mexico.

    Southern Copper claims the world's largest copper reserves pegged at just over 70 million tonnes (Chilean state-owned Codelco is second at 57 million tonnes and US-based Freeport McMoRan a distant third). Cash costs for the company are a mouth-watering $1.49 a pound copper and less than $1 taking into account byproducts. Copper was last trading at $2.65 a pound in New York.
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    First Quantum Minerals asks court to dismiss Zambia's $1.4bn claim

    First Quantum Minerals has asked a Zambian court to dismiss a $1.4-billion claim by a state-owned firm, which accused the Canadian company of irregular transactions with its local subsidiary.

    The claim by Zambia Consolidated Copper Mines Investment Holdings (ZCCM-IH), which holds minority stakes in most of the country's copper mines, includes $228-million in interest on $2.3 billion of loans that it said First Quantum wrongly borrowed from the Kansanshi Copper Mine, as well as 20% of the principal amount, or $570-million.

    First Quantum said in court papers seen on Wednesday in the Lusaka high court that the action taken by ZCCM-IH was started without the approval of the state firm's board, which was dissolved when the action commenced.

    ZCCM-IH, in which the Zambian government has a 77% stake, said in papers filed in the Lusaka High Court on Oct. 28, 2016 that First Quantum used the money as cheap financing for its other operations.

    First Quantum says the loans were at a fair market rate.

    Canada's First Quantum Minerals plans to invest over $1 billion in a new smelter and modernisation of a copper mine in Zambia, a senior Zambian official said on Wednesday, but the company said the investment was "very conditional".

    Zambia's high commissioner (ambassador) to South Africa Emmanuel Mwamba told Reuters by telephone that First Quantum Minerals Chief Executive Officer Phillip Pascal had announced the investment on Wednesday when he met Zambian officials attending a mining conference in Cape Town.

    First Quantum planned to invest $700 million in a new smelter whose location the company did not specify and $350 million would be invested in modernising its Kansanshi copper mine, Mwamba said.

    "These are fresh investments which should help boost Zambia's economic growth," Mwamba said.

    First Quantum owns 80 percent of the operator of Kansanshi, Africa's largest copper mine in northwestern Zambia.

    Clive Newall, First Quantum's president, told Reuters in Canada that the possible new investment was "very conditional".

    "Our intentions are at some point to invest a lot of money," Newall told Reuters by telephone, without confirming the $1 billion figure.

    "But there are a number of conditions that need to happen before we do that, some of which are our own, you know balance sheet issues," he said. "Some are practical: We are building a very major project in Panama, which is taking up a lot of our energy."

    "We need demonstrable fiscal stability in Zambia over a period of time before we do it," he said, summarising what he said First Quantum had told the Zambian officials.

    Zambia proposed measures in November to curb its budget deficit at a time when slumping commodity prices have seen the country face mine closures, rising unemployment, power shortages and soaring food prices.

    First Quantum had invested $5.7 billion in Zambia as of 2015 with $2.6 billion going into the Kansanshi Mine, $1 billion in the Kansanshi smelter and $2.1 billion in the Trident Project, which includes the Sentinel and Enterprise mines.

    First Quantum has asked a Zambian court to dismiss a $1.4 billion claim by a state-owned firm, which accused the Canadian company of irregular transactions with its local subsidiary, according to court papers.
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    Protests in Peru block roads to MMG's Las Bambas copper mine

    Protests in a remote highland region of Peru have blocked roads used by MMG Ltd to transport copper concentrates from its mega mine Las Bambas, a representative of the ombudsman's office said on Wednesday.

    Residents of the town of Challhuahuacho took to the streets on Monday to demand that the government of President Pedro Pablo Kuczynski build a hospital and a sewage system, said Artemio Solano with the ombudsman's office in the region of Apurimac.

    Protest leaders want Kuczynski to travel to the town, at an altitude of more than 12,000 feet (3,658 meters)in Peru's southern Andes, to negotiate a solution, said Solano.

    Kuczynski's office and a representative for Las Bambas' did not immediately respond to requests for comment.

    Protests in the region last year suspended shipments of copper from the mine and nearly halted its operations. One protester was killed in clashes with police who tried to restore transportation on a road used by the mine.

    Challhuahuacho's population has grown rapidly in the past decade as the open-pit mine was built, fueling calls for new public work projects to support newcomers in one of Peru's poorest regions.

    Peru is the world's second biggest copper producer but is rife with conflicts over mining in far-flung regions where basic services such as running water and paved roads are scant.

    Las Bambas produced some 300,000 tonnes of copper in the first 11 months of 2016, according to the energy and mines ministry.

    Attached Files
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    S Korea aluminium premiums rise $3/mt on restocking, US, contango

    Platts South Korean aluminium spot premium weekly assessment rose $3/mt week on week to $100-$105/mt plus LME cash, CIF Busan Wednesday from $97-$102/mt a week earlier.

    Market participants noted that premiums in South Korea have surpassed Japan as buyers are having to compensate for having slashed term contract purchase volumes.

    Strong bullish momentum in the US was pushing up global premiums and South Korean traders and consumers are having to raise their bids in order to secure tons.

    The LME's contango curve also put upward pressure on premiums, as stockholders were more prone to sitting on their tons in anticipation of higher returns.

    Bid, ask levels appeared to be wide in South Korea. A South Korean trader reported bidding for 1,000-2,000 mt of March units at premiums of $95-$100/mt CIF Busan for metal of Australian, Indian or any duty-free origin.

    Another trader said his bid ceiling was $100/mt for shipments into the North Asia. Suppliers were generally holding out for higher.

    Mainstream sellers guidance appeared to center on $105-$110/mt CIF Busan. There were mutterings that Indian ingots may be available at competitive rates, possibly as low as $90/mt CIF Busan, but this could not be confirmed.

    A producer put $100-$105/mt CIF Busan as a reasonable valuation for March shipments from Australia, India and other duty free origins.

    The range appeared to be validated by a notable number of regional and western traders.

    Two traders felt strongly that sellers could reasonably expect to achieve $110/mt CIF Busan.

    A third trader said $110/mt could easily be reached for shipments to Incheon, but that Busan was closer to $100-$105/mt.


    Warehouse tons in Korean warehouses appeared to center on $115-$125/mt FCA Busan, depending on terms and optionalities.

    Western traders may generally be able to offer lower ex-warehouse premiums, but the terms and optionalities would typically be more restricted, including currency options.

    Following a warning by warehousing firm Access World on January 27 of forged warehouse receipts in their name circulating in the metals market, participants have said they were not aware of many fraudulent cases that have been detected in South Korea.

    Platts surveyed market participants earlier on how they would convert FCA Busan values to CIF, and a number indicated that CIF values would typically be about $12/mt below FCA. Others have cited price differentials ranging from $5-$15/mt or none at all.

    The conversion differences appear to stem from varying credit terms, trucking cost arrangements, discharge rates at ports, terminal handling charges, bulk and containerised freight rates and in certain cases currency upcharges as well.

    The conversion differences may also be related to whether the metal is stored in a LME-registered or non-LME registered warehouse, a trader said.

    Platts South Korean aluminium spot assessment reflects the premium or discount to the LME cash price for P1020A ingots CIF Busan basis, for P1020 of any origin, with a typical trade volume of 200-2,000 mt for loading in the next 30 days, duty unpaid.

    The specifications are P1020A ingots to meet minimum LME specification, 99.7% Al min, max 0.1% Si, 0.2% Fe, 0.03% zinc, 0.04% gallium and 0.03% vanadium.

    The assessment is normalised to reflect metal with a maximum iron content of 0.14%, reflecting dominant trading patterns in South Korea.
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    Arconic challenges Elliott's revised analysis in proxy fight

    Arconic Inc raised questions on Tuesday about the analysis behind Elliott Management's proxy campaign, further escalating the battle between the specialty metals maker and its largest shareholder.

    Arconic said in a press release that Elliott has posted five different versions of the presentation it originally disclosed on January 31, the day it launched its proxy fight against the company by nominating five directors for its board.

    The presentation, titled "New Leadership Is Needed At Arconic," is part of the largest proxy fight of the year so far. It pits Arconic, a $10-billion maker of high-end aluminium and titanium alloys, against the world's largest activist investor, with more than $30-billion in assets.

    Arconic separated from aluminium producer Alcoa Corp last November, in a move led by Klaus Kleinfeld, Alcoa's CEO since 2008 who became Arconic's chief executive after the split.

    Arconic cited several changes that Elliott has made to the presentation.

    For instance, the company said, the hedge fund significantly cut the magnitude of its projected share price appreciation from potential cost savings in the company’s global rolled products business.

    The original slide No 8 says global rolled products could save up to $750-million, which would translate into a $13.50 per share margin improvement for that business line.

    An updated version of the presentation, posted on Elliott's Arconic campaign website revises the figure down to $245-million, or $4.41 per share. Elliott lowered the figure to reflect the midpoint of the industry average and a top performer in the sector.

    The updated presentation was filed to the SEC on Monday.

    The revision "calls into question Elliott’s grasp of Arconic’s business and industry," the company said in a statement.

    Elliott responded that the only changes Arconic’s shareholders care about are the company's own downward revisions that led it to miss 2016 earnings guidance for its business units.

    "We have been completely transparent about our work, including updates which show that the upside to Arconic’s stock is significant even under a highly conservative set of assumptions," an Elliott spokesperson said in an emailed statement.
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    Workers at Chile's Escondida copper mine to strike Thursday: halt output

    Workers are set to strike on Thursday at BHP Billiton Plc's Escondida copper mine after contract talks mediated by the Chilean government failed to reach a deal, the main union at the world's largest copper mine told Reuters.

    The union has warned that a strike at the Chilean copper mine could be lengthy, potentially affecting global supplies of a metal used in everything from construction to telecommunications.

    BHP Billiton said it planned to halt production during the strike since it could not guarantee the safety of the 80 workers the government had authorized to remain at the mine to perform "critical duties", such as equipment upkeep and adherence to environmental protocols.

    "The company doesn't want to change its position, so we understand that there is nothing left to negotiate ... there is nothing left to talk about, we've already talked a lot and we are definitely going on strike," union spokesman Carlos Allendes said on Tuesday.

    The strike is planned to start at 8 a.m. (1100 GMT) on Thursday.

    "We've decided not to replace workers, at least during the first 15 days of the strike. With complete conviction, we have accepted that we will not be producing during this phase because the safety of our workers cannot be guaranteed during a strike," said Patricio Vilaplana, Escondida's vice-president of corporate affairs.

    The two sides on Friday started a five-day government-mediated period of negotiations that effectively delays a work stoppage the Escondida Union No. 1 voted for last week.

    A strike can only legally begin on Thursday since Wednesday will be the last day of the scheduled negotiations if talks are not actually held. If there is a sudden change of heart, both parties can agree to an extension.

    Allendes warned that the union has decided not to sit down to negotiate with the company on Wednesday.

    "There will be no talks tomorrow," Allendes said.

    In a statement on Monday, the union said BHP had not committed to a benefits scheme that places new and longtime workers on equal footing. The union, which considers equality of benefits essential to any agreement, added that it tried to discuss the issue with the company, which asked to put it off to the end of negotiations.

    Labor negotiations at Escondida, which have a long history of being tricky, are seen as a benchmark for the industry at large. The last wage talks four years ago, when copper prices were considerably higher, ended with Escondida offering each worker a bonus worth some $49,000, the highest ever offered in Chile's mining industry.

    Falling profits at Chile's copper mines because of lower prices of the metal have caused belt-tightening that makes labor negotiations more difficult. Labor problems at Escondida could portend tough negotiations this year at other Chilean copper mines, such as Anglo American and Glencore's Collahuasi and Antofagasta's Los Pelambres.

    Escondida is majority-controlled by BHP, with Rio Tinto and Japan's JECO also holding stakes.
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    Japan's JX sees higher output from Caserones copper mine

    Japan's JX Holdings Inc expects to exceed the copper concentrate output target at its Caserones copper mine in Chile in the fiscal year ending March 31, reflecting robust output projected in January-March, an executive said on Tuesday.

    The company is aiming for output of a little more than 98,000 tonnes in the current business year, up from its November outlook of 97,000 tonnes, Katsuyuki Ota, JX Holdings director and executive officer, told a news conference.
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    Sumitomo Metal forecasts 2017 loss on Chile copper mine impairment

    Sumitomo Metal forecasts 2017 loss on Chile copper mine impairment

    Sumitomo Metal Mining 5713.T on Tuesday forecast a loss of 15 billion yen ($134.08 million) for the year ending in March, down from a previous profit forecast, because of an impairment at a copper mine in Chile.

    Japan's second-biggest copper smelter said it booked a 79.9 billion yen ($714.5 million) impairment loss in the October-December quarter for the Sierra Gorda copper mine, co-owned by Poland's KGHM and trading firm Sumitomo Corp, due to a ramp-up delay.

    Sumitomo Metal owns a 31.5 percent stake in the Sierra Gorda mine. In November, it cut its 2016 output estimate for the mine to 92,000 tonnes in copper concentrate from its May projection of 97,000 tonnes.

    The revised full-year forecast is lower than the consensus estimate of 28.58 billion yen profit from 9 analysts polled by Thomson Reuters I/B/E/S.

    For the last financial year, the company posted an impairment loss of about 69 billion yen on the Sierra Gorda mine, forcing it to book a net loss.

    Also, Sumitomo Metal reported a 19 percent drop in operating profit to 48 billion yen for the nine months through Dec. 31.
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    China's 2016 copper concs output surges 11%, moly concs production falls

    China's output of copper concentrate surged 10.9% year on year to 1.85 million mt in 2016, but that of moly concentrate -- 45% pure moly -- fell 5% year on year to 287,000 mt, the Ministry of Industry and Information Technology said in a report on its website over the weekend.

    The higher output of mined copper was attributed to the commissioning of new projects, including the 45,000 mt/day Zijinshan Gold & Copper Mine owned by Zijin Mining Group in Fujian province, and other projects in Anhui and Gansu provinces, according to the Ministry of Land and Resources.

    The lower output of moly concentrate was attributed to less production in central and northwestern China.

    Meanwhile, China's output of top 10 nonferrous metals hit 52.83 million mt in 2016, up 2.5% year on year. The country's production of refined copper and aluminum stood at 8.44 million mt and 31.87 million mt respectively in 2016, up 6% and 1.3% year on year, MIIT data showed.

    China produced 4.67 million mt and 6.27 million mt respectively of refined lead and zinc in 2016, up 5.7% and 2% year on year.

    The higher output of refined copper was attributed to demand from the power and vehicle sectors as well as the clean energy sector.

    China produced 60.91 million mt of alumina last year, up 3.4% year on year. Output of copper and aluminium products hit 20.96 million mt and 57.96 million mt respectively, up 12.5% and 9.7% year on year, MIIT data showed.
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    Teck Resources extends contracts with two Chile copper mine unions

    Teck Resources said on Friday that two of the three unions at its Quebrada Blanca copper mine in Chile have agreed to extend their current contracts for 15 months.

    The managers' union will extend its contract through January 2019 and another union representing other workers will do so through March 2019.

    Those contracts cover some 354 employees at the mine.

    The extensions help Teck avoid the possibility of prolonged contract negotiations that could lead to strikes and lost production.

    Quebrada Blanca, which produced 31,900 tonnes of copper in from January through November 2016, is relatively small by Chilean standards.
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    Freeport warns of cuts as it awaits Indonesian export permit

    Freeport-McMoRan Inc, the world's biggest publicly-listed copper miner, said on Friday it will cut staff, spending and production in Indonesia if it does not get a new export permit by mid-February, amplifying a warning it made last week.

    The Phoenix-based miner said it continues to work with the Indonesian government to resolve issues after exports of its copper concentrate were halted Jan. 12. The Southeast Asian country banned export shipments of semi-processed ore to boost its local smelter industry.

    Freeport shares were trading 5.7 percent lower at $15.85 on Friday afternoon. Last week, the stock dropped nearly 6 percent after the company outlined its Indonesian challenges, issued disappointing financial results and cut its 2017 production forecast.

    Freeport said it has the right to export copper concentrate from its Grasberg mine in Indonesia without restriction or export duties under its current contract, and was considering alternatives to enforce its rights.

    For every month it awaits export approval, Freeport said its share of production will be reduced by about 70 million pounds of copper and 70,000 ounces of gold.

    "A prolonged production cut could push the market into deficit and prices much higher," RBC Dominion analyst Fraser Phillips said in a note to clients.

    Copper prices touched a two-month peak earlier this week as workers at the world's largest copper mine, Escondida in Chile, voted to strike. On Friday, prices drifted down to $5,772 a tonne, near a two-week low, as the mine's workers resumed wage talks.

    If the export delay in Indonesia continues, Freeport said it would need to make "near-term" production cuts to match capacity at its smelter, which processes about 40 percent of its concentrate production.

    It will also need to "significantly adjust its cost structure," reduce staffing, investments on underground development projects and a new smelter, and spending with suppliers.

    Delays for another new export license, for anode slimes required in smelter operations, could further hurt operations, Freeport said.

    To gain a new special mining license, Freeport must agree to pay taxes and royalties that it is currently exempt from and divest up to 51 percent of its Indonesian unit, up from 30 percent under current rules. To date, it has divested only 9.36 percent.
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    Southern Copper sees 1.5 million mt/y copper production by 2023

    Southern Copper expects to increase copper production by 66% to 1.5 million mt/y by 2023 based on a $5.65 billion pipeline of projects in Peru and Mexico, CFO Raul Jacob said Thursday.

    The company aims to match last year's 900,000 mt output in 2017, with annual production rising to 972,300 mt in 2018 and 1.01 million mt and 1.13 million mt in 2019 and 2020, respectively, Jacob said. The company also expects to produce 80,800 mt of zinc, 19,700 mt of molybdenum and 16.6 million oz of silver this year.

    New copper output will come from the company's El Arco, El Pilar and Pilares projects in Mexico, and the Toquepala and Cuajone expansions and Tia Maria and Los Chancas projects in Peru, Jacob said.

    "We believe we can achieve this through one of the best pipelines of profitable projects," Jacob said on an earnings conference call.

    Southern has approved $1.1 billion in capex for this year, with $1.6 billion and $1.2 billion planned for 2018 and 2019, respectively, Jacob said. Southern has lined up $2.9 billion in projects in Peru alone, he said.

    The company aims to finish a feasibility study this year for the $1.8 billion Los Chancas project and hopes to secure government approval for an environmental impact study by 2019, Jacob said. The project will produce an estimated 100,000 mt/y of copper and 4,500 mt/y of molybdenum.

    Southern been has working on community relations at the $1.4 billion Tia Maria project since environmental protests in 2015 left four dead, 300 injured and dozens arrested, forcing the government to declare a state of emergency in the area. Tia Maria is expected to produce 120,000 mt/y of copper.

    Southern, which cut cash costs to 95 cents/lb last year, aims to further reduce costs to 80 cent/lb this year due to lower energy costs in Peru and higher credits from byproducts such as silver and molybdenum, he said.

    Economic recovery in China and the EU plus strong growth in the US and a dearth of new mines are driving copper prices, according to Jacob. Southern expects copper demand to increase by 2%-2.5% this year and copper supply to rise by 0.5%-1%, he said.

    "We're starting 2017 seeing the first signs of the market showing a structural deficit caused by lack of investment," Jacob said. "After five years of copper price reductions, we're seeing supplies underperforming market demand."

    Southern's fourth-quarter profit almost tripled to $172 million as sales rose 11.5% to $1.4 billion and costs fell, the Phoenix, Arizona-based company reported February 1.
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    Steel, Iron Ore and Coal

    China's key steel mills daily output down 2.5pct in mid-Jan

    Daily crude steel output of China's key steel mills slid 2.51% from ten days ago to 1.62 million tonnes over January 11-20, hitting a new low since early August last year, according to data released by the China Iron and Steel Association (CISA).

    The country's total crude steel output was estimated at 2.19 million tonnes each day on average during the same period, climbing 0.37% from ten days ago, the CISA said.

    Some steel mills in Shanxi suspended production for environmental concerns in mid-January. Steel mills in other areas gradually resumed production after regular maintenances to benefit from good profit.

    Yet it took time for some furnaces to start operation, which, however, impacted daily output of steel products to some degree.

    By January 20, stocks of steel products at key steel mills stood at 12.31 million tonnes, down 2.28% from ten days ago, the CISA data showed.

    By February 3, stocks of major steel products totaled 13.49 million tonnes, increasing 22.2% from January 20, as market participants were active in replenishing stockpiles amid bullishness toward the post-holiday market.

    In mid-January, rebar price increased 2.7% from ten days ago to 3,299.2 yuan/t; wire price climbed 2.9% from ten days ago to 3,397.7 yuan/t, showed data from the National Bureau of Statistics.

    Attached Files
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    Cliffs Natural profit beats as iron ore pellet sales soar

    Cliffs Natural profit beats as iron ore pellet sales soar

    Iron ore producer Cliffs Natural Resources (CLF.N) reported a quarterly profit that handily beat analysts' estimates, driven by a surge in iron ore pellet sales.

    The company's shares were up 6.4 percent at $10.12 in premarket trading on Thursday.

    Demand for iron ore pellets, a raw material used in making steel, is rising due to lower Chinese exports, anti-dumping measures and higher demand.

    U.S. President Donald Trump's $550 billion stimulus plan for infrastructure spending is expected to further boost demand for steel.

    "A much more favorable business environment in the U.S. and a newly adopted rational behavior in the international iron ore market support the work we have done internally," Chief Executive Lourenco Goncalves said in a statement.

    The company said sales volume in its U.S. iron ore pellet business rose about 53 percent to nearly 6.9 million tonnes in the fourth quarter ended Dec. 31.

    Cliffs Natural also said it expected sales volume in its U.S. iron ore pellet business to rise 4.3 percent to 19 million tonnes in 2017.

    The company said net income attributable to shareholders was $79.1 million, or 34 cents per share, in the fourth quarter ended Dec. 31, compared with a loss of $60.3 million, or 39 cents per share, a year earlier.

    Analysts' on average had expected earnings of 23 cents per share, according to Thomson Reuters I/B/E/S.

    Revenue rose 58.4 percent to $754 million, also above estimate of $675.2 million.

    Cliff Natural's shares had jumped more than five-fold in 2016.
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    Choking China Backs Race to Mine Greener Iron Ore for Top Mills

    Chinese engineers who carved a railway through the Tibetan plateau and built the world’s longest sea-bridge across Hangzhou Bay have a new challenge: developing a $3.4-billion project on Australia’s remote Eyre Peninsula to meet increased demand for cleaner iron ore.

    China Railway Group Ltd., the world’s second-largest infrastructure builder, is backing the mine, port and rail-road project that aims to supply high-quality, lower-emission ore to Chinese steel mills facing stricter environmental rules.

    The project would be a major step toward South Australia’s goal of securing A$10-billion ($7.6-billion) of investments to fund a stable of new iron ore mines by 2021. China Railway’s partner  Iron Road Ltd. aims to bring the 24-million ton-a year mine into production in late 2020 after tests showed its product can help customers meet the tougher standards.

    “China’s demand for higher quality iron ore will increase, driven by stricter environmental protection regulations and improved profitability of steel mills,” said Yi Zhu, an analyst at Bloomberg Intelligence in Hong Kong. A restructuring of China’s steel sector will also boost demand for premium quality imports, according to researcher CRU Group.

    China, the world’s biggest carbon emitter, plans to invest 2.5-trillion yuan ($360 billion) in renewable energy through 2020 to reduce greenhouse gases and is seeking to curb emissions by iron and steel producers. Mills are being compelled to upgrade their plants or cease operations if they fall short of standards, according to Bloomberg Intelligence.

    Iron Road’s iron ore will never solve all of the problems facing Chinese steel mills but “it will certainly help them,” Managing Director Andrew Stocks said by phone from Adelaide.  “We see an increase in productivity, a decrease in fuel use and a decrease in atmospheric emissions --  it’s not quite the Holy Grail, but there are three very positive attributes to improve the steel mills.”

    Stocks is planning to meet with banks in Beijing and Shanghai this month and expects a final investment decision to be made this year. Under an interim 12-month accord signed last year, state-controlled China Railway anticipates taking as much as a 15 percent stake in the project, if approved, and will be the prime construction contractor, Iron Road said in a filing.

    China Railway views the Eyre Peninsula as the preferred development location for a large scale, long life, high-grade iron concentrate development as opposed to competing locations in Western Australia, Eastern Canada and West Africa, according to an Iron Road filing. Calls to ChinaRailway’s Beijing office weren’t answered and e-mails to an address on the company’s website received no reply.

    In 2016, China shed more than 65-million tons of excess steel capacity and 290 million tons of inefficient coal miningcapacity, Premier Li Keqiang said last month.

    New Demand

    South Australia’s government believes it has the right ore to meet the new demand -- about 14 billion tons of untapped magnetite, a higher-quality ore that contains more of the metal and fewer impurities than dominant market rival hematite. While it costs more to process magnetite, the product commands a premium from mills producing high-quality steel.

    The state’s ambition to export 50 million tons of magnetite by 2030 is dwarfed by the predominantly hematite ore production in neighboring Western Australia, which accounts for more than half of global exports and is forecast to ship more than 860 million tons this year. Magnetite currently accounts for only between 15 to 20 percent of the seaborne export market, according to researcher AME Group.

    Iron ore with 62% content in Qingdao rose 0.3% to $83.53 a dry ton on Wednesday, according to Metal Bulletin Ltd. The commodity touched a two-year high last month.

    Hurdles from securing finance to displacing China’s homegrown magnetite supplies also present challenges to South Australia’s dream of reviving its iron ore sector. The state saw the nation’s first mining of the material in the late 19th Century and sent cargoes to markets including the US, the Netherlands and Japan.

    The existing market for magnetite exports is well supplied and hasn’t shown major growth, though more higher quality material is likely to be required in the future, according to Fortescue Metals Group Ltd., the fourth-largest exporter. The West Australian company is yet to proceed with its Iron Bridge magnetite joint venture with Baosteel Group Corp. and Formosa Plastics Corp.

    “South Australia has some difficulties,” Fortescue Chief Executive Officer Nev Power said in a phone interview. While the region holds good deposits, cargoes would probably take three days longer to reach China than from Western Australian ports, adding “a significant cost penalty for them,” he said.

    ‘Genuine Pressure’

    As well as in China, demand is building for the higher-quality exports in the Middle East, where steel plants in Algeria to Oman also require the material, supporting the case for new mines, according to Gordon Toll, chairman of Magnetite Mines Ltd.

    Magnetite Mines plans to begin output from South Australia’s Braemar district with a A$400-million, 2.5-million ton-a year mine within two years, said Toll, previously a chairman of Fortescue. The developer signed a sales agreement with Ningbo Iron & Steel Co. last month and is in talks with potential partners and investors in China, Japan, South Korea and the Middle East.

    “There’s genuine pressure in China” for more environmentally friendly mills, Toll said by phone, forecasting the wider Braemar district could deliver exports of 100-million tons a year within a decade.

    Attached Files
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    Japanese scrap prices drop in monthly auction

    The highest bid in Thursday's monthly auction for Japanese H2 grade ferrous scrap, for export from Tokyo Bay by March 31, was Yen 26,051/mt ($232/mt) free alongside ship, a decrease of Yen 1,179/mt on last month's highest winning bid, the organizer said.

    The monthly auction held by the Kanto Tetsugen group of scrap dealers around Tokyo received 18 bids for a total of 158,000 mt of scrap, with the average being Yen 24,623/mt FAS.

    The first and the second bids were both at the same price, 10,000/mt, and placed by JFE Shoji Trade, a JFE Steel group trader, according to sources who attended the auction.

    JFE Shoji Trade officials in charge of the auction were not available for comment about the award Thursday. But a Tokyo-based scrap trader said the winning bid was higher than the current prices traders are paying to collect H2 material for export.

    "I believe the winner is planning to use the parcels to fill back orders which it contracted at higher prices," he said.

    Japanese traders are currently paying Yen 24,500-25,000/mt FAS to collect H2 material to be exported from eastern Japan.

    Another scrap trader in Tokyo said that the average price of Yen 24,623/mt FAS among all the bids lodged was about same, as traders are currently paying to companies collecting the scrap.

    "It probably means traders are unclear about where scrap prices are heading," he said. "Japanese scrap prices are these days being more influenced by international scrap price trends."

    Japan's leading mini-mill, Tokyo Steel Manufacturing, cut its scrap buying prices by Yen 500/mt from February 8, the company's first price-cut for scrap since July 9, 2016, as previously reported. However, the reduction only applied to deliveries to its Utsunomiya works, north of Tokyo.

    S&P Global Platts assessed the H2 scrap export price at Yen 24,500-25,000/mt ($218-$222/mt) FOB Tokyo Bay on February 8.
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    Indonesian Bumi targets coal output of 93-94 mln T in 2017

    Indonesia's biggest coal producer, Bumi Resources, is targeting production of 93 million to 94 million tonnes of coal in 2017, Reuters reported on February 9, citing Director Dileep Srivastava.

    That would be up to 9% higher than the 86.5 million tonnes produced in 2016.

    Sixty percent of Bumi's projected 2017 sales is already committed and this is expected to rise to 75% at end of the first quarter, with the finalization of annual contracts with Japan, the company said in a statement.

    Outlook for coal price in 2017 is optimistic and benchmark Coal Price presently is around $80/t, said the company.
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    JSW Steel crude steel output jumps 49pct in Jan

    India's JSW Steel has posted a 49% year-on-year growth in crude steel production at 1.39 million tonnes in January 2017, Press Trust of India reported.

    The crude steel production was 0.93 million tonnes in the year-ago period, data showed.

    Among the rolled products, the flat products registered a jump of 38% at 1.03 million tonnes and long products up 18% at 279,000 tonnes.

    JSW Steel is a part of diversified JSW Group, which has presence in steel, energy, infrastructure and cement. JSW Steel has an installed steel-making capacity of 18 Mtpa.
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    Colombia Dec coal exports surge 81pct on mth

    Colombia exported 9.99 million tonnes of coal in December 2016, surging 81.15% from November and 41.01% year on year, showed data from the National Administrative Department of Statistics of Colombia.

    That valued $599 million, soaring 67.16% year on year and 75.75% month on month. That translated to an average price at $59.98/t, down 2.98% on the month but rising 18.55% on the year.

    During 2016, the country's coal exports stood at 85.13 million tonnes, a year-on-year rise of 13.94%.

    The value of coal exports totalled $4.64 billion last year, gaining 1.73% from the year prior.
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    Tata Steel agrees to sell speciality steel biz to Liberty House

    India's Tata Steel Ltd said on Thursday its British arm has signed a definitive agreement to sell its speciality steel business to Liberty House Group for 100 million pounds ($125.55 million).

    The deal covers several South Yorkshire-based assets including the electric arc steelworks and bar mill at Rotherham, Tata Steel said in a filing to Indian stock exchanges.

    Speciality Steels directly employs about 1,700 people making steel for aerospace, automotive, and oil and gas businesses, it said.

    Tata and Liberty House had entered into exclusive talks in November as the Indian group seeks to offload its money-losing assets and restructure European operations.
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    Shanxi major miners lock rail capacity for 7.3 mln T coal

    Shanxi Coking Coal Group, Datong Coal Mine Group and Yangquan Coal Industry Group -- three major miners in northern China's Shanxi province, have locked Taiyuan Railway Bureau's transport capacity for 7.3 million tonnes of contract coal to be supplied to ten end users, Shanxi Daily reported on February 8.

    These products will be directly railed to Shandong Iron & Steel Group, Datang International Power Generation Co., Ltd., Sinopec Qilu Petrochemical Company and other seven buyers.

    This was part of the initiative launched by the Chinese government last month – transport contracts being signed by miners, railway bureaus and buyers -- in a bid to facilitate long-term contracts implementation and strengthen cooperation among the production, transport and sales sectors of the coal industry.

    Coal shipment through railways under Taiyuan Railway Bureau accounted for 1/3 of the nation's total.
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    Rio Tinto denies Guinea iron-ore sale has stalled after investigation

    Rio Tinto shrugged off concerns on Wednesday that its sale of Guinea's Simandou project to Chinalco had stalled after an investigation into payments to a consultant who helped it win rights to the huge iron-ore deposit.

    Rio signed a preliminary deal in late October to sell its stake in Simandou, the world's largest untapped iron-ore reserves.

    But the following month, the world's second-largest miner axed two of its top ten executives amid a probe over $10.5 million in payments to a consultant providing advisory services on the Simandou project.

    Rio has alerted US, British and Australian regulators about the payments, but there is no suggestion that the officials or consultant acted illegally.

    China, the world's largest iron-ore consumer, provides an obvious market for Simandou, but industry sources have questioned whether China would ever develop the project.

    "Why do you say stalled?," Rio Tinto CE Jean-Sebastien Jacques said during a results conference call in response to a question.

    "The two (negotiating) teams are working as we speak. The Rio team was in Beijing last week again and we'll be in China next week again."

    Jacques declined to say if he was confident that Rio and Chinalco would finalise the deal within the original six-month timeframe.

    "We are progressing, it's a complicated process, it takes some time. We're just moving as quickly as we can," he said.

    If the deal to sell its 46.6 percent stake in Simandou to Chinalco went ahead, Rio Tinto would receive payments of between $1.1-billion and $1.3-billion based on the timing of the project's development, it said in October.

    Rio pleased investors on Wednesday when it beat full-year profit forecasts and announced a bigger-than-expected annual dividend, but it also warned that the investigation "could ultimately expose the group to material financial cost".

    "At this point in time it's early days," Jacques said.

    "We don't know if there will be any provision... but it was important due to disclosure requirements to put out that there could be something."
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    Iron Ore to plummet...

    Iron Ore Will Plummet Into $40s, Says ‘Very Bearish’ Liberum 

    Iron ore will probably collapse below $50 a metric ton in the second half as global supply exceeds demand,
    according to Liberum Capital Ltd., which highlighted prospects for additional output coupled with lackluster growth in
    consumption and record port stockpiles in China. Prices will be back in the $40s as an extra 90 million tons
    of seaborne ore will hit the market in 2017, analyst Richard Knights said in an interview. The increase comes at a time when
    holdings at ports in China are already at an all-time high, while steel consumption in the top user could be flat, he said.
    “There’s a perception that demand is better than it actually is,” Knights said by phone from London on Tuesday. “The
    market -- despite that apparent pickup in demand in the fourth quarter -- is in significant oversupply, as evidenced by the
    amount of iron ore inventory. And supply is not decelerating,  it’s accelerating this year.”

    Iron ore took many investors by surprise in 2016 by surging more than 80 percent as stimulus in China supported steel output
    and consumption, even as low-cost mine supply expanded. Plenty of analysts have now flagged the potential for a selloff this
    year, with Citigroup Inc. seeing a sharp correction and top forecaster RBC Capital Markets describing prices as unsustainable. With supply set to increase, Knights said that he’s “very bearish.”

    ‘Every Incentive’

    “Particularly with prices where they are, there’s every incentive in the world to bring iron ore supply on,” said
    Knights, adding that there’s scope for the port stockpiles to expand further, before they slump. “It’s just as simple as
    supply exceeding demand, which obviously isn’t reflected in the price.”

    Ore with 62 percent content in Qingdao rose 0.3 percent to $83.53 a dry ton on Wednesday, according to Metal Bulletin Ltd.
    The commodity hit a two-year high of $83.65 on Jan. 16, and it’s up about 6 percent this year after rising in January to post a
    fourth monthly gain. On Thursday, futures fell in Singapore and Dalian, signaling lower Metal Bulletin prices.
    The resurgence has boosted miners, including Rio Tinto Group, which this week reported its first profit gain since 2013, BHP Billiton Ltd. and Fortescue Metals Group Ltd. Brazil’s Vale SA has seen its stock surge 25 percent this year as prices
    gain and it jacks up output from the giant new S11D mine. The record bout of restocking in China has driven iron ore
    prices to “irrational” levels that are soon to correct, Gordon Johnson, an analyst at Axiom Capital Management Inc., wrote in a
    note received Wednesday. Looking at days of inventory at Chinese mills and stockpiles at ports, both have never been this high,
    he said.

    ‘Forcefully Lower’

    “Should steel capacity in China come offline as inventory is being destocked, we feel this would push iron ore prices
    forcefully lower,” Johnson said. Axiom sees iron ore at $57 in 2017 and $45 next year.
    Not everyone is bearish. Prices may average $73 this year, according to JPMorgan Chase & Co., which sees them at $71 in the
    third quarter and $66 in the final three months. Last month, Singapore Exchange Ltd., which operates derivatives contracts
    that help to set global prices, said a survey of industry participants showed most expected rates to hold firm or gain.
    Inventories at China’s ports climbed to 123.5 million tons last week, according to Shanghai Steelhome Information
    Technology Co. The stockpiles are at about 75 percent of the ports’ holding capacity and are still growing fairly quickly,
    according to Knights. A further 20 million tons would bring them to about 90 percent of capacity, which could see a $20 to $30
    drop in prices, he added.

    “What will happen is the price will fall and also there will be an incentive for people to start drawing on those port
    stocks,” Knights said. “I’d expect that traders who hold that inventory would just start cutting the price to try and get rid
    of it, unless we’re bailed out by very, very strong demand in the first and second quarter, which is possible, but it’s not my
    base case.”

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    Guangdong cuts coal consumption share to optimise energy mix

    Guangdong province in southern China cut coal consumption share of its total energy use to less than 42% in 2016, as part of efforts to optimize energy mix and prevent air pollution, according to the provincial Development and Reform Commission.

    Meanwhile, its non-fossil fuel consumption's share increased to over 21% last year, greatly reducing pollutant emissions brought by fossil fuel burns, said the commission.

    In 2015, Guangdong reported a coal burn reduction of 12.27 million tonnes compared with 2012, completing the target in advance set by Chinese authorities.

    The province will continue to optimise energy structure, and further boost clean energy consumption, including nuclear, solar, wind power and natural gas, in order to realise sustainable and healthy development.

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    Peabody expects U.S. coal consumption to rebound in 2017

    Peabody Energy Corp projects demand for seaborne thermal coal to rise modestly by 25 million to 35 million tonnes from 2016 through 2021, Reuters reported on February 2.

    In U.S., coal demand rebounded in second half of 2016 as natural gas prices rose sharply from lowest levels in approximately 15 years.

    For a longer term, Peabody forecasts U.S. coal consumption will decline 5 million to 15 million tonnes between 2016 and 2021.

    By 2021, Peabody Energy Corp expects coal to supply an estimated 29% of U.S. electricity generation, down from 33% in 2015.

    About 180 GW of power generation capacity are expected by Peabody to be added in China, 64 GW added in India, 72 GW added in other Asian countries.

    "Peabody expects longer-term metallurgical coal pricing to retreat to more stable levels, driven by Chinese policies restricting supply," said the company.

    In seaborne metallurgical coal, demand is forecast to increase 30 million to 35 million tonnes, or 10% - 15% during the same period, according to Peabody.
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    Australia probes coal spill near Great Barrier Reef

    Coal has washed up in waters dangerously close to Australia's Great Barrier Reef, environmental authorities said on Wednesday, following an investigation into complaints of black dust on nearby beaches.

    Ship-loading facilities at the port of Hay Point, which ships tens of millions of tonnes of coal annually to export markets worldwide, are at the center of the investigation by authorities in the northeastern state of Queensland.

    But it was too early to say if the Hay Point port was the source of the coal and fine dust that washed up on the nearby beaches of East Point and Louisa Creek, the state's environment minister, Steven Miles, told reporters.

    "The impact on marine life and the reef is likely to be quite localized," Miles added. "Provided the source can be identified and we can ensure it is not continuing to spill, it is likely to be possible to clean up."

    Hay Point is the largest of several coal ports located near the Great Barrier Reef Marine Park and a flashpoint for environmentalists concerned over runoff contamination of the reef, a World Heritage site.

    "This is another example of why coal and the Great Barrier Reef don’t mix," said Sam Regester, campaigns director for the activist group GetUp! "We know more ships and more coal equals more accidents."

    In December, Australia earmarked expenditure of A$1.3 billion ($992 million) over the next five years to improve the water quality of the reef, to keep it off the United Nation's "in danger" list.

    Activists say the money is insufficient and want to see more concrete action to protect the reef.

    More than two million people visit the reef each year, generating more than A$2 billion ($1.53 billion) in tourism dollars, an Australian government report showed in 2016.
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    Billion-dollar Alberta coal company goes bankrupt

    A coal company in west-central Alberta that in 2011 sold for $1-billion is bankrupt, killing hopes that its mine might re-open in the first quarter.

    The Calgary Herald reported that Grande Cache Coal sent a letter to the town bearing the same name, warning that the company is heading into receivership, thus allowing it to restructure. The letter also said the metallurgical coal mine would re-open in July. According to the newspaper, Grande Cache Coal was forced into bankruptcy last week after the mining company's owner, Chinese coal producer Up Energy Development Group Ltd., defaulted on debt payments in 2016, having owed hundreds of millions of dollars.

    About 220 employees lost their jobs in 2015 when the mine shut down, a victim of low met-coal prices. But it looked like the mine was going to enjoy a phoenix-like rise, when in November 2016 Grande Cache Coal and Up Energy said that surface-mine operations were expected to restart in Q1 2017. The restart – no doubt prompted by rocketing coal prices – would however depend on "shareholders' approval and the negotiation of key contracts," Grande Cache Coal said at the time. Steelmaking coal prices reached a multi-year high of $308.80 per tonne in November, but have since been in freefall. They settled at $167.80 on Friday, which is still better than 2016, when coking coal averaged $143 a tonne.

    The bankruptcy is devastating for the small town of 4,000 northwest of Edmonton, where Grande Cache Coal is the main employer; a  year before it closed, the mine had a payroll of 500.

    It's an unfortunate end to what looked like a bright future for Grande Cache Coal, which in 2011 was purchased for a whopping $1-billion by two Asian companies: Winsway, a Hong Kong-listed public company which imports coking coal for the Chinese steel industry, and Marubeni, a large Japanese trading house.The company was later purchased by Up Energy. At the time, coal prices had not yet been crushed by oversupply, waning demand and increasing regulatory burdens which threw the market into disarray. Most of the coal mined by Grande Cache was exported to Asia, where it was used for making steel.

    According to the Herald a court-appointed receiver will put its Alberta mining assets up for sale, which include leases covering over 29,000 hectares, with an estimated 346 million tonnes of coal resources in the Smoky River Coalfield of west-central Alberta.
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    Baoshen Railway Jan coal transport at 14.91 mln T

    Baoshen Railway Co., Ltd, a controlling subsidiary of Shenhua Group, transported 14.91 million tonnes of coal in January, 590,000 tonnes more than the delivery goal for the month, according to Shenhua Group website.

    Of this, 14.32 million tonnes was contributed by Bazhun line, which starts from Ordos city and links to Datong-Zhunger railway, and south and north lines of Baotou-Shenmu railway that connects Baotou city in Inner Mongolia with Shenmu county in Shaanxi province. The transport volume was 640,000 tonnes more than the monthly target set by Shenhua Group.

    Ganquan rail line, stretching from Ganqimaodu Border Crossing to Wanshuiquan station of Baotou-Shenmu line, realized coal delivery of 688,000 tonnes in January, surging 288.7% from the same period last year.

    Tahan rail line, starting from Hanjiacun station of Baotou-Shenmu railway to Ordos city, delivered 465,000 tonnes of coal in the month, increasing 305.4% year on year.

    In January, Shenshuo Railway transported 21.1 million tonnes of coal, 326,000 tonnes more than planned. Its profit stood at 270 million yuan in the month, up 25% from a year earlier.

    The 266-km line, which starts from Daliuta in Shaanxi province and ends in Shuozhou in neighboring Shanxi province, mainly delivers coal from Shenfu and Dongsheng coalfield owned by Shenhua Group.
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    Rio Tinto boosts dividend on commodities recovery

    Global miner Rio Tinto said on Wednesday it will pay a bigger-than-expected annual dividend of $1.70 per share on the back of a strong recovery in mineral commodities markets in 2016 and cost-cutting.

    Underlying earnings for the world's second-biggest mining house rose by 12 percent to $5.1 billion, beating analysts' estimates for around $4.87 billion, according to an externally compiled consensus.

    The result marks a turnaround from 2015, when the world's No. 2 miner posted its worst underlying earnings in 11 years and scrapped its generous payout policy amid tumbling commodity prices.

    "We enter 2017 in good shape. Our team will deliver $5 billion of extra free cash flow over the next five years from our productivity programme," Chief Executive Jean-Sebastien Jacques said in a statement.

    The market had been expecting a dividend of about $1.33 a share, according to the external consensus. The annual payout is still below 2015's dividend which partly included the previous payout policy of never cutting payments year to year.

    Analysts are mixed on whether Rio Tinto will increase returns to shareholder in 2017 or hold on to more cash amid forecasts for a retraction in commodities prices.

    The price of iron ore surged 81 percent last year and now sells for around $80 a tonne, despite analysts' expectations for a retreat to around $55.

    The concern is that millions of tonnes of additional low-cost supply from Australia and Brazil will overwhelm demand in 2017 and send prices into retreat.
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    Asian Q1 ferrochrome contract prices set at 110-128 cents/lb CIF

    Specialty steelmakers in Asia set first quarter high-carbon ferrochrome contract prices in a wide range of 110-128 cents/lb CIF because different mills bought at different times over the last four months, market sources said Monday.

    One mill had bought as early as October while the most recent Q1 contract closed in January.

    Q1 prices were at least 10% higher than in Q4, sources said.

    Asian mills typically buy one or two months before the quarter starts.

    Purchase decisions were pushed ahead or postponed due to a rapid rise in ferrochrome prices in Asia and fears that a rise in Chinese stainless steel demand could lead to a shortage of ferrochrome, sources added.

    In 2016, 24.9 million mt of crude stainless steel was produced, up 15.7% year on year, the Stainless Steel Council of China Special Steel Enterprise Association said.

    A steelmaker set the Q1 contract price in October at $1.10/lb CIF main Asian port, for over 500 mt/month, the mill source said.

    The Indian material was 10-50 mm lumps with minimum 60% chrome, maximum 3% silicon, 8% carbon, 0.04% phosphorous and 0.05% sulfur.

    Another steelmaker bought Q1 supplies in mid-December at $1.26-$1.28/lb CIF main Asian port, for over 1,000 mt/month, said a seller.

    The mill bought supplies of mixed origin with 10-50 mm lumps and chrome content of 50-60%, he added. This could not be confirmed with the mill, however.

    A third steelmaker bought in January at around $1.20/lb CIF main Asian port, for over 2,000 mt/month, sources said. The material was 10-50 mm lumps with minimum 60% chrome, maximum 3-4% silicon and 8-9% carbon.

    The different Q1 settlement levels reflected market conditions at the time of purchase, sources said.

    In October, the spot price of 58-60% high-carbon ferrochrome imports in China, the largest importer in Asia, averaged 90.13 cents/lb CIF, S&P Global Platts data showed.

    In December, the prices averaged $1.22 cents/lb CIF China, while the January it averaged $1.12/lb CIF China.

    The second mill contract was set only a few days after Glencore's December 15 announcement hiking the European Q1 contract price by 50% from Q4 to $1.65 cents/lb, said the seller source.

    "Prices were hitting the peak at the time," he said.

    Asian spot ferrochrome prices softened in January ahead of the Lunar New Year holidays.

    The Platts China high-carbon 58-60% ferrochrome price was last assessed at $1.04-$1.15/lb CIF China on February 3.

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    Indonesia port disruptions cause coal shipping delays

    Loading disruptions at ports in East and South Kalimantan on the Indonesian side of Borneo island are causing a coal supply shortage in one of the world's most important export regions, causing delays as ships wait to take on new cargoes.

    Shipping data in Thomson Reuters Eikon and port loading schedules seen by Reuters show 136 ships were offshore Indonesia as of Feb. 6, waiting to take on coal.

    The affected coal ports and anchorage zones include Samarinda in the province of East Kalimantan and Taboneo, near the capital of South Kalimantan, Banjarmasin, on the island's southern coast.

    The previous week, that figure stood at 108, the data showed. The two Kalimantan provinces make up one of the world's biggest thermal coal mining regions.

    "The issue is that coal cannot get out because local authorities are blocking it," Pandu Sjahrir, Chairman of the Indonesian Coal Mining Association told Reuters, adding that traders had complained to him about the issue.

    Reuters was unable to confirm with local port authorities what was causing the delays.

    Traders said that the disruptions would likely impact seaborne thermal coal prices, especially from Australia.

    "If there's disruptions in Indonesia, coal buyers will have to turn to alternative sources to meet their demand, and that's Australian coal," said one coal trader.

    Australian prompt cargo prices for coal from its Newcastle terminal last settled at $81 per tonne.

    Indonesia is targeting production of 470 million tonnes of coal in 2017, the bulk of which will be exported to Asia.

    Among the country's biggest coal producers are Bumi Resources, Adaro Energy and Bukit Asam .
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    Vale expects to book $1.2bn Q4 fertiliser impairment

    Diversified Brazilian mining major Vale expects to book a $1.2-billion after-tax impairment charge on its fertiliser business for the fourth quarter.

    The company, which expects to report fourth-quarter and full-year results on February 23, said in regulatory filing on Monday that the charge arises from the December agreement to sell certain assets in its fertiliser division to Mosaic Co for $2.5-billion.

    Vale, which is headed up by CEO Murilo Ferreira, added that owing to a lower price outlook for certain products, it expects to recognise further impairments (with no cash effect) in its base metals operations in Vale Newfoundland and Labrador and Vale New Caledonia (VNC).

    While the miner is still finalising the exact figures of these impairments, it expects these to be “significantly less” than the $4.9-billion impairment booked on these assets in 2015.

    Vale also said it plans to reopen a 2026 bond issue and use the proceeds to redeem bonds maturing in March 2018. The investment banking units of Banco Bradesco, Banco do Brasil, JP Morgan Securities, MUFG Securities Americas and Santander Investment Securities will manage the issue, according to the filing.
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    US Hampton Roads coal exports in January highest since March 2015

    US Hampton Roads coal exports in January highest since March 2015

    Coal exports from terminals in Virginia's Hampton Roads region totaled 2.59 million st in January, up 25.3% from the prior month and up 40.3% from the year-ago month, according to Virginia Maritime Association export data released Monday.

    It was the highest monthly total since March 2015.

    The increase is likely due to a number of deals booked late last year as higher international seaborne prices brought increased demand for US thermal and metallurgical coals.

    At the three individual terminals in Hampton Roads, Lambert's Point, also known as Pier 6, exported 1.15 million st in January, up 22.3% from December and up 32.7% from last year.

    It was the also highest monthly total for the Norfolk terminal, which is owned and operated by Norfolk Southern since March 2015.

    Pier IX, based in Newport News, exported 716,892 st in January, up 205.6% from the previous month and up 408.6% compared with the year-ago month. It was also the highest monthly total since 2015 for the terminal, which is owned and operated by Kinder Morgan.
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    Japan Dec coking coal imports up 15pct on mth

    Japan imported 6.48 million tonnes of coking coal in December, gaining 14.98% from November and 26.78% from a year ago, the latest customs data showed.

    Australia remained the largest supplier of coking coal to Japan in December, shipping 2.78 million tonnes, up 3.84% month on month and 26.95% year on year, of which 33.69% or 937,300 tonnes were primary coking coal, rising 1.21% on the year but down 6.15% on the month.

    Japan imported 1.66 million tonnes of coking coal from Indonesia in the month, decreasing 2.74% from the year-ago level and down 13.84% from the previous month.

    Meanwhile, Canada sent 798,200 tonnes of coking coal to the Asian country, increasing 53.21% on the year and 144.17% on the month.

    In 2016, coking coal imports of Japan rose 4.22% year on year to 73.89 million tonnes.

    Total coal imports of Japan in December stood at 16.32 million tonnes, climbing 3.91% from the year prior but down 0.92% from November.

    Total value of Japan's coal imports in December reached 203.86 billion yen ($29.63 billion). That translated to an average imported price of 1,248.98 yen/t, rising 21.77% from November.

    In 2016, the country's coal imports totaled 189.76 million tonnes, edging down 0.5% from 2015.
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    Jinneng Group predicts a 5.7% rise in 2017 output

    Jinneng Group predicts a 5.7% rise in 2017 output

    Shanxi-based Jinneng Group, a key energy producer owned by the provincial government, expected a year-on-year rise of 5.7% in coal production to reach 75.4 million tonnes this year, said President Wang Qirui at a work meeting held days earlier.

    In 2017, its total coal trades may hit 147 million tonnes, increasing 11.3% from the year prior, Wang added. Last year, its coal sales via railways and roads were 32.59 million and 85.41 million tonnes.

    The company expected to realize 85 billion yuan of operating revenue and 380 million yuan of profit this year.

    In 2016, its operating revenue was 69.66 billion yuan, while profit stood at 260 million yuan.

    Last year, Jinneng Group put a total of 17 coal mines into operation or trial run, adding 14.4 million tonnes per annum (Mtpa) of capacity. Presently, the group has 68 mines in operation or on trial run, with capacity totaling 76.1 Mtpa.

    The group closed two coal mines in 2016, slashing 1.2 Mtpa of capacity, and planned to shut 2.4 Mtpa of capacity at five mines this year, according to Wang.
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    Rebel creditors file emergency appeal against Peabody reorganization

    Opponents of Peabody Energy Corp's reorganization plan have filed an emergency appeal against a key piece of the coal producer's proposal they say violates U.S. bankruptcy law by prematurely requiring creditors to promise support it.

    At the heart of creditors' complaints are the terms of a $1.5 billion private recapitalization that Peabody has proposed as part of a plan to slash $5 billion of debt and exit Chapter 11 protection.

    The plan by the world's largest private-sector coal company could provide lucrative returns for early subscribers. In order to sign up for the private offering, creditors had to support Peabody's broader reorganization plan, a complex and lengthy document, within days of its publication on Dec. 22 and almost a month before it went to bankruptcy court for approval.

    U.S. Bankruptcy Judge Barry Schermer blessed the plan on Jan. 26, overruling objections from a range of parties and opening the door for Peabody to officially begin seeking creditor votes.

    In a filing with the U.S. Court of Appeals for the 8th Circuit on Friday, an ad hoc committee of dissenting creditors said Peabody "improperly" forced the majority of creditors to commit their votes in favor of the plan well before it received court approval.

    "The choice was to support the plan or suffer severe economic loss," they said in a motion to expedite the appeal, adding that the move undermined "the creditor democracy at the core of Chapter 11."

    In an emailed statement, Peabody spokesman Vic Svec said the company continued to support its plan as submitted.

    While it is normal for a company in Chapter 11 to try to build creditor support for its plan early on, Peabody's opposing creditors say the company negotiated for months with "a favored few" to develop a complex plan and then forced others to quickly accept, according to court papers.

    The select group included Aurelius Capital Management and Elliott Management Corp, some of Wall Street's most litigious investment funds. When Peabody filed for Chapter 11 the two funds disputed the value of its assets, but the disagreement with other lenders later dissipated when coal prices rose, increasing many creditors' chances for recovery.

    Peabody, with attractive coal mines in Australia and the United States, hopes to emerge from bankruptcy in April, a year after its Chapter 11 filing during a commodities crash, with over $8 billion of debt.
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    Iron ore stockpiles at Chinese ports hit new high

    Iron-ore stockpiles at Chinese ports hit a new high, rising +3.3% to 123.5mln tons. This marks the biggest weekly percentage gain in fifteen months, Livesquawk reports data compiled by Bloomberg.

    Analysts at Citi expect iron-ore prices to retreat sharply to $ 53/ ton in 2H 2017.
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    Domestic coal sales becoming more important than export market – Prevost

    South Africa’s coal exports are dwindling to the point where it will become a minimal part of the market, says XMP Consulting senior coalanalyst Xavier Prevost.

    Speaking at IHS Markit’s 2017 South African Coal ExportConference, in Cape Town, last week, he said that, in 2016, South Africa produced about 253-million tons of coal, which was a small increase of 1.4-million tons from 2015.

    South Africa exported about 69-million tons of coal last year. “It is very important to note that we generated R47-billion from coal exports at an average of R688/t. However,

    South Africa’s local sales of coal, which equated to about 183-million tons created revenue of R60.8-billion in the past year,” he noted.

    Prevost, hence, highlighted that South Africa created more revenue from its local coal market than from the exportsector. He remarked that this was not the case in previous years, as the export market was the “real money maker” for local coal miners.


    South Africa’s Mpumalanga coalfields have traditionally been the most important in South Africa; however, as these deplete, other coalfields have been touted as potential replacements, such as those located in the Waterberg region of Limpopo.

    Prevost highlighted, however, that there were challenges to unlocking the coal in the Waterberg, including that the geology of the Waterberg was totally different from that found in the Mpumalanga Central coal basin.

    He explained that coal from the Mpumalanga coalfields was significantly easier to mine, had better coal qualities and did not require the same expertise in terms of the washing process.

    Prevost further noted that the Waterberg coalfields required specific types of washing plants and highly-skilled technicians to transform the coal into a usable product.

    “These factors could seriously limit the value of the Waterberg,” he warned.

    Meanwhile, Prevost revealed that XMP had recently conducted a study on behalf of power utility Eskom about the coal reserves that were still available for extraction in South Africa for power generation purposes. The study determined that – subject to the use of new technologies and correct mining methods – it possessed about 34-billion tons of coal.


    Anglo American is the single-largest producer of coal in South Africa, accounting for 20.4% of all local production. Small-scale miners contribute 21.8%, Exxaro 17.5%, Sasol 15.6%, South32 13.3% and Glencore 11.4% of all production.

    Prevost predicted that Exxaro would become the largest single local coal producer over the next two years, as Anglo continued to scale back its coal portfolio.
    He also pointed out that, in 2016, South Africa had exported 69% of its coal to the Far East, 11% to Europe, 10% to the rest of Africa, 10% to the Middle East and 2% to North America.

    India is the largest buyer of South African coal, accounting for 55% of the export market, while Pakistan is the second-largest importer of South African coal at 7%.

    Prevost commented that there were “substantial opportunities” for growth into the Pakistani market, as the country was seeking to expand its coal power stations in the coming years to meet growing energy demand.

    However, he noted that South Africa was also facing increased competition from Colombia, which, on average, sold coal at “slightly cheaper prices” and at a similar quality to South Africa.
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    Kailuan kicks off two coal chemical projects

    Kailuan Group, a leading state-run coal enterprise in northern China's Hebei province, put two coal chemical projects -- adipic acid and methanol fuel Phase I projects into operation recently, state media reported.

    The designed production capacity of the adipic acid and methanol projects stood at 150,000 tonnes and 100,000 tonnes per annum, respectively.

    The adipic acid project, a key coal chemical project of the company, will realize deep processing of refined benzene and improve added value of products.
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    India keen to buy foreign coking coal assets - Minister

    Coal India Ltd, the world's top coal miner, plans to acquire coking coal assets abroad as India lacks technology to economically develop local reserves, Coal Minister Piyush Goyal said.

    "The recent spurt in global coal prices, particularly for coking coal, is expected to create an encouraging scenario for such acquisition process," Goyal told lawmakers in a written reply.

    Coking coal futures on the Singapore Commodity Exchange soared in the second half of last year as top consumer China clamped down on local production as part of a campaign against pollution.

    They have since dropped by about 40 percent to around $170 a tonne, but are still double what they were in mid-2016.

    Coal India has surrendered two mining licenses in Mozambique, and currently does not own any foreign coal assets, he said.
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    Shenhua cuts Feb spot thermal coal prices by 16-20 yuan/t

    China's coal giant Shenhua Group has lowered spot prices of thermal coal by 16-20 yuan/t for February, reflecting its downbeat view on the market.

    Shenhua offers spot 5,500 Kcal/kg and 5,000 Kcal/kg NAR coal at 610 yuan/t and 555 yuan/t FOB with VAT, down 20 yuan/t and 18 yuan/t from a month ago, respectively.

    For long-term customers, the price of 5,500 Kcal/kg NAR coal is at 569 yuan/t FOB, down 7 yuan/t from the preceding month, and that of 5,000 Kcal/kg NAR coal is 7 yuan/t lower at 517 yuan/t FOB.

    Weak demand further dragged down the spot price for the same coal grade to 598 yuan/t FOB on February 3, a drop of 17 yuan/t from a month earlier, showed the Fenwei CCI Thermal index.

    The price spread between spot and contract coal seems narrowing, and the price downtrend may continue in the months ahead.
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    Port Hedland says weather cuts January China iron ore exports

    Shipping interruptions caused by stormy weather cut iron ore shipments to China from Australia's Port Hedland terminal in January by 7.8 percent from a month ago, port authorities said on Monday.

    The port, used by BHP Billiton and Fortescue Metals Group, saw exports to China slip to 34.5 million tonnes from 37.4 million tonnes in December, after a tropical low swept across the Pilbara iron ore district on Jan. 27, triggering an emergency clearing of vessels for just under 18 hours.

    Overall shipments from the world's biggest iron ore export terminal fell to 40.3 million tonnes in January from 43.9 million tonnes in December, according to the Pilbara Ports Authority.

    Shipping was also suspended for 38 hours at the nearby Dampier port, used by Rio Tinto to ship iron ore, the port said.

    The port interruptions would have a minor impact on overall second-half output from Australia, said two equity analysts who spoke on background. But the impact could be overcome if the miners recover the lost time over the next several months, they said.

    Iron ore was one of the best-performing commodities in 2016, defying analyst forecasts for a correction on the back of plentiful supply and an expected slip in demand from China, the world's biggest buyer.

    This has prompted producers to mine and ship at or near record levels.
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    Smoggy Beijing to cut coal use 30 percent this year: mayor

    ntensify its battle against choking air pollution this year and aims to cut coal use by 30 percent, state news agency Xinhua cited mayor Cai Qi as saying.

    Despite repeated pledges to get tough, large parts of northern and central China have been engulfed in thick smog again this winter, often for days at a time, disrupting flights, port operations and schools.

    Cai said the government will take even more steps this year, including cutting coal use by helping residents of 700 villages to use clean energy, Xinhua said.

    "We will try to basically realize zero coal use in six major districts and in Beijing's southern plain areas this year," Cai said.

    "We will slash coal use by 30 percent to less than 7 million tonnes in 2017," he added.

    Beijing will also remove 300,000 old vehicles from the roads this year and promote the use of new energy cars, Xinhua said.

    Cai added that better regional coordination was needed.

    "It is an urgent task for Beijing and its neighboring areas to work together and improve air quality in the region."
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    Japan ferrochrome price rises as low offers disappear amid active trade

    Japan ferrochrome price rises as low offers disappear amid active trade

    The S&P Global Platts CIF Japan ferrochrome price rose to $1.13-$1.20/lb CIF Japan Friday, from $1.10-$1.15/lb CIF Japan a week ago as offers as low as $1.10/lb were no longer heard amid active trade.

    One Japanese steelmaker bought 200-300 mt at around $1.13/lb CIF main Japanese port this week, for delivery over March-May.

    An Indian producer reported a sale at $1.25/lb CIF Japan for a few container loads.

    One Japanese trader said he bought at around $1.20/lb CIF Japan, but declined to elaborate further.

    A second Japanese trader said he was offered $1.19/lb CIF Japan, while a third Japanese trader was offered $1.13/lb CIF Japan.

    The deals and offers were for 10-50 mm lumps with 60%-65% chrome, maximum 8%-9% carbon, 8%-9% silicon, 0.03%-0.05% phosphorous and 0.05%-0.06% sulfur.

    Another Japanese consumer bought over 200 mt of low-silicon material at $1.28-$1.29/lb CIF Japan, loading February or later, said two sources familiar with the deal.

    Offers were $1.35-$1.40/lb CIF in Asia, one producer said two weeks ago. The consumer bought 10-50 mm lumps with minimum 65% chrome, maximum 2% silicon, 8%-9% carbon, the sources said.

    Spot trade was active as Japanese consumers who have finalized April 2017-March 2018 production plans started to source for the upcoming quarter, traders said.

    Three other steelmakers are expected to issue buy tenders this month, for April-June consumption, said sources.

    Japanese market participants are closely monitoring the reorganization of Japanese specialty steelmakers as it may impact raw material supply flow.

    Two stainless steelmakers Nippon Steel & Sumikin Stainless Steel Corp. (NSSC) and Nisshin Steel will merge next month, and JFE Bars & Strip's Sendai steelmaking plant will move to JFE Steel in April.

    The mills are currently discussing optimization of their steel production facilities, that may lead to closure of some lines or furnaces. Decisions on raw material procurement have not been made yet, mill sources said.

    "The stainless mills use mostly South African and Kazakhstan ferrochrome, on long-term contracts. It is a matter of spreading out the volume shares among the three producers who have contracts," said one trader.

    JFE B&S Sendai plant has been buying ferrochrome via quarterly tenders, mostly from India. Meanwhile, JFE Steel sources from Kazakhstan and South Africa on contracts.

    It was still uncertain whether JFE B&S will continue the quarterly tenders. The mill has not used Kazakhstan ferrochrome -- with higher chrome content but less iron -- but its furnace is capable of using Kazakh grade, said sources in the JFE group.

    "The likely scenario is that the Sendai plant will be sustained and will inherit the work of JFE Steel. Raw material purchase means will depend on prices realized by spot tenders and term contracts, which is cheaper," said one source.

    Elsewhere in Asia, one major steelmaker has closed January-March term contract at around $1.20/lb CIF for 10-50 mm lumps with minimum 60% chrome, maximum 8%-9% carbon, 3%-4% silicon. The volume is over 3,000 mt/month, sources said.

    The 48%-52% charge chrome was assessed at $1.04-$1.30/lb CIF China Friday, unchanged from a week ago. The 58%-60% ferrochrome was assessed at $1.04-$1.15/lb CIF China this week, up from $1.04-$1.05/lb CIF a week ago.

    Producers said they were not accepting Chinese buyers' bids at $1.04/lb CIF as sales to Japan and South Korea have closed 10-15 cents/lb higher in the past two weeks.

    Attached Files
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    Indonesia's February HBA thermal coal price falls 3% on month

    Indonesia's Ministry of Energy and Mineral Resources set its February thermal coal reference price, also known as Harga Batubara Acuan or HBA, at $83.32/mt, down 3.4% from January but up about 64% from a year ago.

    The ministry had set the February 2016 HBA price at $50.92/mt, the lowest recorded since the HBA's inception in January 2009. The January 2017 HBA was set at $86.23/mt.

    The HBA is a monthly average price based 25% on the Platts Kalimantan 5,900 kcal/kg GAR assessment; 25% on the Argus-Indonesia Coal Index 1 (6,500 kcal/kg GAR); 25% on the Newcastle Export Index -- formerly the Barlow-Jonker index (6,322 kcal/kg GAR) of Energy Publishing -- and 25% on the globalCOAL Newcastle (6,000 kcal/kg NAR) index.

    In January, the daily Platts FOB Kalimantan 5,900 kcal/kg GAR coal assessment averaged $72.11/mt, down from $75.94/mt in December, while the daily 90-day Platts Newcastle FOB price for coal with a calorific value of 6,300 kcal/kg GAR averaged $83.73/mt, down from $86.31/mt in December.

    The HBA price for thermal coal is the basis for determining the prices of 75 Indonesian coal products and calculating the royalty producers have to pay for each metric ton of coal they sell.

    It is based on 6,322 kcal/kg GAR coal, with 8% total moisture content, 15% ash as received and 0.8% sulphur as received.
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    Inner Mongolia 2016 coal imports surge 86.3pct on year

    North China's Inner Mongolia autonomous region imported 25.5 million tonnes of coal in 2016, surging 86.3% year on year, data from Hohhot customs showed on February 3.

    The average import price stood at 246.2 yuan/t ($35.7/t), up 6.9% from the previous year, data showed.

    Meanwhile, Inner Mongolia imported 9.74 million tonnes of iron ore in 2016, with average price at 305.4 yuan/t.

    Ganqimaodu border crossing in the region imported 12.87 million tonnes of coal from neighboring Mongolia in 2016, soaring 108.91% year on year, accounting for 50.5% of the total coal imports.
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    Brazil's Vale more optimistic than market on iron-ore prices – exec

    Brazilian miner Vale is more optimistic than the market consensus in terms of iron-ore prices for 2017, Investor Relations Director Andre Figueiredo told reporters on Thursday.

    Figueiredo also said Vale had likely made a profit in 2016, and should pay dividends equivalent to about 25% of net profit.
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    Glencore 2016 coal production slumps 5% on year to 125 mil mt

    Glencore 2016 coal production slumps 5% on year to 125 mil mt

    Diverse miner Glencore produced 124.9 million mt of coal during 2016, falling 5% year on year, primarily due to the divestment of Optimum Coal in South Africa, the company said Thursday.

    The company said in its 2016 production report that South African export thermal coal output for the year fell 13% from 2015 to 17.2 million mt, while domestic output from its mines in the country dropped 30% to 12.1 million mt. Glencore disposed of Optimum Coal to Tegeta Exploration & Resources in April after having started business rescue proceedings in early August last year. It also closed some smaller mines in the country during the year.

    Australian export thermal coal production for 2016 was steady on the year at 52.5 million mt, while Australian domestic production climbed 44% to 5.6 million mt, the miner said.

    The miner attributed this to planned increases at the Mangoola, Rolleston and Ravensworth North mines and improved production at South Blakefield, which had experienced "geological challenges" in 2015.

    Its Australian mines produced 10% less coking coal during the year at 5.3 million mt due to geological issues at the Oaky Creek mine earlier in the year, with semi-soft coal output up 17% on-year to 4.2 million mt.

    In Colombia, heavy rainfall resulted in thermal coal production from Glencore's Prodeco mine dropping 2% on-year to 17.3 million mt.

    Its 33.3% pro-rata share of production from the Cerrejon mine for the year was 10.7 million mt, 4% lower from 2015, also due to weather-related disruptions.

    Glencore said it planned to produce around 135 million mt of coal in 2017.
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