Mark Latham Commodity Equity Intelligence Service

Friday 19th May 2017
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    Macro

    Trump to extend Iran sanctions relief, still developing US policy


    The Trump administration said Wednesday it will extend sanctions relief for Iran given under the 2015 nuclear deal with the Islamic republic.

    In a statement, Stuart Jones, an acting assistant secretary at State, said the administration would continue to waive sanctions as required under the deal, known as the Joint Comprehensive Plan of Action. The waivers were set to expire Wednesday.

    The US continues to "closely scrutinise" Iran's commitment to the Obama-era nuclear deal and the Trump administration is still developing a "comprehensive" Iran policy, Jones said.

    "This ongoing review does not diminish the United States' resolve to continue countering Iran's destabilising activity in the region, whether it be supporting the Assad regime, backing terrorist organisations like Hezbollah, or supporting violent militias that undermine governments in Iraq and Yemen," Jones said. "And above all, the United States will never allow the regime in Iran to acquire a nuclear weapon."

    As a candidate for president, Donald Trump criticised the nuclear deal the Obama administration brokered with Iran as the "worst deal ever" claiming he would negotiate a "better" deal, without offering specifics. On April 18, Secretary of State Rex Tillerson said Iran has complied to date with its requirements under the deal, while calling the deal a failure a day later.

    The US Treasury Department Wednesday announced unrelated, new sanctions in connection to Iran's ballistic missile program.

    Since the nuclear deal was reached in July 2015, Iranian oil production has climbed from 2.8 million b/d to 3.81 million b/d in April, according to the US Energy Information Administration.

    The extension of the sanctions comes ahead of Iran's presidential election on Friday.

    https://www.platts.com/latest-news/oil/washington/trump-to-extend-iran-sanctions-still-developing-21762944
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    Here’s why Colombia’s mining sector is losing its shine


    Foreign investors are likely to flee Colombia’s mining sector in the coming months as the country is failing to protect the interest of global companies operating and exploring in the country, the local mining association warns.

    According to Roberto Junguito, president of the board of governors at the Colombian Mining Association (ACM), the country needs to set clear rules for the industry and prioritize national over local interests.

    His comments to Financial Times (subs. required) come as recent rulings have forced some major miners, including world number three gold producer AngloGold Ashanti (NYSE:AU), to halt operations.

    Recent rulings have forced some major miners, including world number three gold producer AngloGold Ashanti, to halt projects and operations.

    “Recent years have not been easy for mining,” Junguito told FT, citing protests, road blockades, falling commodity prices and a government tax reform introduced late last year.

    “The biggest challenge of them all is judicial uncertainty. A lot of recent court cases have gone against the industry.”

    In April, AngloGold had to halt all exploration work at its La Colosa project in central Tolima after voters overwhelmingly backed a proposal to ban mining in the municipality.

    The company, which had been advancing the project for 14 years, has invested roughly $900 million in Colombia over the past decade and La Colosa was the largest of its three projects in the country, as it has the potential to become on of the world’s largest gold mines.

    A few days earlier, Canada’s Gran Colombia Gold (TSX:GCM) decided to take the Colombian government to court for forcing the company to halt operations at its Marmato project until further consultation with locals has been conducted.

    The Toronto-based company, which acquired the project when it merged with Medoro in 2011, is seeking $700 million in compensations and it’s basing the suit in the Colombian-Canadian free trade agreement.

    Those two cases are not the only ones. Another Canadian firm, junior explorer Zonte Metals (TSX-V: ZON), is locked in a legal battle with local authorities over a permit rejection. In February, a special court granted Zonte rights to proceed with the lawsuit that claims both, Colombia’s Department of Antioquia and the National Mining Agency did not process its exploration application in accordance with the country’s mining code.

    Fear of copycat effect

    At the Colombian Mining Association’s (ACM) annual conference last week, companies voiced their concern the recent incidents could encourage other communities to push for similar votes or try to block multinationals via lawsuits.

    There are 39 local referendums currently in the works, which results could spell troubles for several mining, oil and infrastructure projects.

    The group warned there are 39 local referendums currently in the works, which results could spell troubles for several mining, oil and infrastructure projects, local La FM reported (in Spanish).

    Former Minister of Mines and Energy Amylkar Acosta, said that Colombia’s mining sector will fall victim of social unrest and legal insecurity.

    "The regions and territories where extractive activities take place are plagued with land use conflicts, which have not been solved due to lack of clear rules," he said according to RCN Radio (in Spanish).

    He noted that one of the main bones of contention is the recent change in royalties perceived by municipalities, which went from 70% royalty income to a mere 9%.

    "This triggers discontent because the communities do not see a benefit from mining and that dissatisfaction triggers protests, blockades and other problems," Acosta said.

    Colombia’s top mining sectors are gold and coal, but there has been a spike in interest for potential copper projects in the last years.

    http://www.mining.com/heres-colombias-mining-sector-losing-shine/
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    Oil and Gas

    Most OPEC/non-OPEC deal countries support 9-month extension: Algerian minister

    Most OPEC/non-OPEC deal countries support 9-month extension: Algerian minister

    "I think we have a consensus and the majority of countries support the
    proposal of Russia and Saudi Arabia," Boutarfa told reporters after talks with his Russian counterpart Alexander Novak in Moscow.

    On Monday, Novak and his counterpart from OPEC kingpin Saudi Arabia,
    Khalid al-Falih, said they agreed on the need for a nine-month extension of
    the agreement, which expires at the end of June.

    Boutarfa, who visited Russia after traveling to Iraq last week to discuss
    the issue with Iraqi oil minister Jabber al-Luaibi, also reiterated that he
    supports the proposal.

    The countries participating in the agreement, including OPEC member
    Algeria and non-OPEC Russia, are to meet in Vienna on May 24 and 25
    to discuss the possible extension of the agreement between OPEC and non-OPEC oil producers to reduce oil production by some 1.8 million b/d from October 2016 levels.

    Several African countries have expressed their interest in joining the
    agreement of OPEC and non-OPEC countries, Boutarfa reportedly said, while speaking in Moscow.

    "There are several African countries that have expressed their support to
    the agreements. We'll consider this issue at a meeting in Vienna," he said, as reported by Prime news agency.

    On Tuesday, Novak said some three to five new countries could join
    the agreement next week, declining to name them.

    Boutarfa also expressed satisfaction with the level of compliance with
    production cut obligations among participants.

    MORE SUPPORT

    When asked if he is concerned about Russia fulfilling its obligations,
    Boutarfa said: "As for the last month, the conformity is very high. For OPEC it's more than 100% and also you have good conformity from the non-OPEC countries. It's more than 95%," he said.

    Russia said it has fully meet its obligation to reduce production by
    300,000 b/d by May, with this cut level being achieved in the last days of
    April.

    The average daily output cut in April was at around 252,000 b/d. Unlike
    some OPEC countries, Russia cannot regulate quickly its production and needs some time to achieve the output cut through reduced drilling.

    Earlier this week, Kuwaiti oil minister Essam al-Marzouq lent his weight
    to a growing consensus over the need to extend the OPEC/non-OPEC output cut deal into next year, offering the state's full support to the extension in a statement released by Kuwait Petroleum Corp Tuesday.

    This followed Monday comment by Mohammed al-Rumhy, the oil minister of Oman, a key non-OPEC Arab producer, who also supported the extension.

    Before Novak and Falih announced their proposal on Monday, a number of
    other countries had expressed their support for the production cut extension, but at the time there was a perception that the possible extension would be for six months only. Among those who expressed their support then were OPEC members Iran, Iraq and Angola.

    At the same time, Brazil's Petrobras on Tuesday ruled out joining the
    non-OPEC group of countries participating in the deal, with its CEO Pedro
    Parente saying in an interview with S&P Global the company is very heavily in debt and its financial situation would not allow it to do that.

    Brazil was among a number of oil producers that were invited, but did not
    join, the current OPEC-led output cut deal designed to reduce global oil stock levels and support oil prices.

    Other countries that turned down an invitation to join the cuts included
    Bolivia, Colombia, Turkmenistan, Trinidad and Tobago, Egypt, the Republic of Congo, and Uzbekistan.

    https://www.platts.com/latest-news/oil/moscow/most-opecnon-opec-deal-countries-support-9-month-27832525
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    Aiming To Lift Production, Kazakhs May Not Play Along With OPEC Cuts


    While many oil producers part of the OPEC/non-OPEC agreement to curb production have already stated their support to the deal extension for another nine months, Kazakhstan is going into next week’s meeting with little enthusiasm for rolling over its production cuts, as it plans to raise output from its major oil fields.

    Kazakhstan’s Energy Minister Kanat Bozumbaev said earlier this week that his country would attend the meeting at which OPEC and partners are expected to hammer out the details of the cuts extension.

    In the deal from November 30, OPEC pledged to cut 1.2 million bpd of its production, while Azerbaijan, Bahrain, Brunei Darussalam, Equatorial Guinea, Kazakhstan, Malaysia, Mexico, Oman, Russia, Republic of Sudan, and Republic of South Sudan committed to a collective cut of 558,000 bpd.

    At that time, Kazakhstan promised to cut output by 20,000 bpd from an average 1.5 million bpd, Radio Free Europe says.

    According to Bloomberg, Minister Bozumbaev has said that his country won’t automatically roll over the cuts it is implementing now.

    Kazakhstan is seeking to increase production at its giant fields, especially Kashagan, which after years of delays and setbacks, resumed commercial-scale production in October 2016 at a rate of 90,000 bpd. In January, the company operating the field said that it was ramping up production to 180,000 bpd.

    Just days before Saudi Arabia and Russia said that they agreed that the production cuts should be extended by nine months to March 2018, Bozumbaev said that Kashagan currently produces 140,000-150,000 bpd, and output would rise to 200,000 bpd in the second half of the year, and possibly to 300,000 bpd at the end of the year.

    But the minister noted that it’s important for Kazakhstan that the price of Brent not drop below US$50 per barrel. The country’s budget is based on a US$50 Brent price, and therefore Kazakhstan will discuss the possibilities of an output cut extension.

    A recently approved expansion at another field, Tengiz, plans for production to increase by some 260,000 bpd, to around 850,000 bpd.

    Given its ambitious plans to grow production, Kazakhstan may be reluctant to sign up to cutting its output for another nine months.

    http://oilprice.com/Latest-Energy-News/World-News/Aiming-To-Lift-Production-Kazakhs-May-Not-Play-Along-With-OPEC-Cuts.html
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    Full tanks and tankers: a stubborn oil glut despite OPEC cuts

    Full tanks and tankers: a stubborn oil glut despite OPEC cuts

    After the first OPEC oil production cut in eight years took effect in January, oil traders from Houston to Singapore started emptying millions of barrels of crude from storage tanks.

    Investors hailed the drawdowns as the beginning of the end of a two-year supply glut - raising hopes for steadily rising per-barrel prices.

    It hasn't worked out that way.

    Now, many of those same storage tanks are filling back up or draining more slowly than investors and oil firms had expected, according to global inventory estimates and more than a dozen oil traders and shipping sources who told Reuters about storage in facilities that do not make their oil volumes public.

    The stalled drawdowns shed light on the broader challenge facing OPEC - the Organization of the Petroleum Exporting Countries - as it struggles to steer the industry out of the downturn caused by oversupply. With U.S. shale oil production surging, inventories remain stubbornly high and prices appear stuck in the low-$50s per-barrel range.

    The market has not strengthened enough to drain many major storage facilities around the globe - which OPEC oil ministers had hoped would be a first step toward rebalancing what has been a buyer's market since late 2014.

    Estimated inventories in industrialized nations totaled 3.025 billion barrels at the end of March - about 300 million barrels above the five-year average, according to the International Energy Agency’s latest monthly report.

    Preliminary April data indicated stocks would rise further, the IEA said. Crude stocks stood at a record 1.235 billion barrels.

    OPEC and other non-OPEC nations - most notably Russia - are now widely expected to extend production cuts for another nine months, through March 2018.

    The ongoing struggle to thin supplies has forced economists to cut their oil price forecasts. Bank of America, for instance, last week lowered its 2017 target for Brent crude LCOc1 by $7 a barrel to $54.

    During the two-year price war started by OPEC, about half a billion barrels of crude and refined products flowed into storage facilities as oil prices hit lows of less than $30 a barrel in early 2016.

    Much of the inventory build-up came as traders started using storage to make easy money on the widening spread between rock-bottom spot oil prices and substantially higher prices for contracts to deliver the oil in future months.

    That price spread - a market structure known as contango - allowed traders to profit even after they paid for expensive storage in facilities such as the Louisiana Offshore Oil Port (LOOP) - the only deep-water U.S. oil port and a major conduit for crude imports - or supertankers parked offshore in Singapore.

    Although the storage trade has been less profitable since the OPEC production cuts, much of that oil remains in tanks, said Chris Bake, an executive committee member at Vitol, the world's largest independent trader, during an industry conference last week in London.

    "This 550 million barrel-plus inventory build of crude and products that started in 2014 is still very much there," he said. "How much is going to come out? That is an ongoing debate among all of us."

    "CLOGGED" WITH OIL

    From the Malacca Straits in Asia to the ports of Northern Europe and the Gulf of Mexico, drawdowns of global inventories have slowed or even reversed.

    In the Amsterdam-Rotterdam-Antwerp (ARA) region – one of the most expensive areas in Europe to store oil and the benchmark pricing point for fuel - crude is starting to flow back into storage because refiners are "clogged" with oil, an industry source handling deals in that region told Reuters.

    Refined fuel inventories have also jumped suddenly, with gasoil in tanks in the ARA hub rising to an eight-month high earlier this month, according to Dutch consultancy PJK International. Gasoil includes jet fuel, diesel and heating oil.

    At one of the world's largest oil storage facilities - on the shores of Saldanha Bay in South Africa - millions of barrels were sold in recent months, traders told Reuters.

    But more cargoes are flowing right back into its tanks, which can hold 45 million barrels,
    as sellers struggle to find refiners to buy freshly loaded oil, the traders said.

    In the Houston region, stored oil stocks touched record levels at the end of March, according to energy information provider Genscape.

    The state of inventories appears more mixed in Asia.

    In China, the world's second-largest oil consumer behind the United States, commercial crude stocks hit their lowest level in four years in March, according to the government-controlled Xinhua News Agency. But in nearby South Korea, inventories were near a record, according to the Korea National Oil Corp.

    SLOW PROGRESS

    While global inventories remain bloated, there are some signs that the OPEC cuts have dented supplies.

    Recent data from the U.S. Energy Information Administration showed that nationwide stocks started draining in April this year - the first decrease for that month since 1999.

    Declining costs for storage is another indication that traders and oil companies are putting less oil in storage than at the height of the price war.

    At the largest U.S. storage facility at Cushing, Oklahoma, storage tanks costs about 35 cents a barrel per month, traders say, compared nearly 50 cents a year ago.

    Parking oil in a supertanker off the shore of Singapore, Asia's refining hub, costs anywhere from 30 to 40 cents a barrel per month, down from 50 to 80 cents just a few months ago.

    The futures contract LOSc1 for oil storage at the LOOP, off Louisiana's coast, dropped to about 24 cents per barrel recently, one of the lowest prices this year.

    Still, the patchy evidence of draining storage has fallen far short of what investors expected after OPEC and non-OPEC nations agreed on production cuts last November.

    "People were impatient and thought we'd start drawing 10 million barrels a day since the first week of January," said Amrita Sen, chief oil analyst at Energy Aspects. "We're still in excess, and there's lots of inventory around."

    http://www.reuters.com/article/us-global-oil-stocks-analysis-idUSKCN18F0EO

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    WAF VLCC freight rates soft due to weak China buying, slow Persian Gulf market


    The cost of taking crude oil from West Africa to China on VLCCs has hit a near two-month low, due to slack demand from China and a weak Persian Gulf market, sources said.

    The VLCC route from West Africa to China, basis 260,000 mt, was assessed at $11.95/mt on Tuesday, the lowest level since March 31, when it was valued at $11.85/mt, according to S&P Global Platts data.

    NPI was heard to have taken the VLCC vessel Kondor on subjects at w55.5 for a voyage from West Africa to China with June 14-16 loading dates, which equates to $11.95/mt.

    The leading VLCC market in the Persian Gulf is weak and this is depressing the Atlantic market as well, sources said.

    Shipbroking sources estimate the tonnage over-hang at approximately 38 VLCC ships in the Persian Gulf, which is close to the highest level in three years.

    "We are looking to the Atlantic for some hope, but the Caribs can't take everything, and there is not much to take Arabian Gulf ships away and reposition them in the Atlantic," said one shipbroker.

    Chinese demand for Angolan crude has been slightly lower for May and June cargoes, with the country's teapot refineries reducing their purchases from earlier in the year.

    "We have had high global refinery maintenance and don't have peak runs. The teapots haven't come back into the market and a lot of them have already used up their import quotas," said one trader.

    The lower Chinese demand has placed downward pressure on Angolan differentials and made these barrels more attractive to European refiners. As the voyage time from Angola to Europe is considerably shorter than from Angola to China, VLCC ton mile demand has been reduced by the lower Chinese demand for Angolan crude.

    https://www.platts.com/latest-news/shipping/london/tankers-waf-vlcc-freight-rates-soft-due-to-weak-26739920

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    China resumes light cycle oil imports amid tax uncertainty - sources


    China has resumed imports of light cycle oil (LCO) after buyers cancelled shipments in April, as a planned Chinese consumption tax has not been announced, four industry sources said this week.

    Less than 1 million tonnes of LCO are being shipped from South Korea to China in May and June, compared with a peak of 2 million to 3 million tonnes, said two of the sources, both from South Korean refiners. The lower volumes reflects cautious buyers, they said.

    China had planned to impose consumption taxes on oil by-products such as mixed aromatics, light cycle oil and bitumen blend. The tax would close a loophole that allowed Chinese buyers to import light cycle oil, then sell it locally as low-grade diesel, avoiding taxes that would normally be levied on diesel.

    The proposed tax was initially expected to be levied in May but no official announcement has been made, increasing uncertainty among buyers, the sources said.

    At least two LCO cargoes for late-April loading from South Korea were cancelled last month ahead of the planned tax.

    But shipments have resumed for May-loading cargoes, the sources said. They are likely being used for blending into fuel oil instead of being re-sold as diesel, one of the sources said.

    Light cycle oil is the residue produced after running fuel oil through a catalytic cracking unit to produce gasoline and diesel.

    LCO cargo premiums have dropped by about one-sixth from their peak, which is reducing the incentive for refiners to produce the oil and instead maximize their output of jet fuel and diesel, one of the sources said.

    Premiums have also dropped to below $1 a barrel on a free-on-board (FOB) Korea basis for the cargoes, compared with a peak of about $6 a barrel earlier this year and $2 to 3 a barrel in April, the sources added.

    "Buyers are still wary as no one knows the status of when the tax will be implemented," the source said

    http://www.reuters.com/article/china-oil-imports-idUSL4N1IK310
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    Crude stocks at China's Shandong ports rise on maintenance at independent refineries

    Crude stocks at China's Shandong ports rise on maintenance at independent refineries

    Crude oil stocks at major ports in eastern China's Shandong province had risen to a 13-month high because of heavy maintenance at independent refineries and high crude imports in the previous months, port sources told S&P Global Platts Thursday.

    Discharge operations at the ports however, were not affected, they added.

    Total crude inventory at the major ports of Qingdao, Longkou, Laizhou and Rizhao in Shandong rose 10% from mid-April to around 2 million mt as of May 11, the highest since April 2016, according to JLC data. JLC is a Beijing-based energy information provider formerly known as JYD.

    And at Qingdao port, stocks have been hovering at relatively high levels of around 750,000-800,000 mt in recent weeks -- slightly above the average level of 700,000 mt over January-April.

    A source at Qingdao port attributed the build in stocks to several independent refineries deferring moving crude from the port to their facilities in recent weeks, as they are facing ullage issues at their own crude storage tanks during turnarounds.

    A total 12.8 million mt/year (256,000 b/d) of independent refining capacity had been shut for maintenance in May, up 41% from 9.1 million mt/year last month, according to Platts calculations.

    Wantong Petrochemical's 4.3 million mt/year refinery was shut on April 28 for a month-long maintenance until end-May, while the 3.5 million mt/year Lijin refinery was shut on May 3 for a turnaround lasting one month. The 5 million mt/year Lianhe Petrochemical will restart in end-May from an ongoing maintenance that started in end-April.

    With those plants undergoing full turnarounds, crude consumption is estimated to have been cut by about 1 million mt this month, according to sources.

    Adding to a heavy turnaround program, high crude imports over the past months have also contributed to the build in crude stocks at the ports, according to sources.

    Crude imports by Shandong independent refineries came at 8.3 million mt in April, down 17% from a record high of 10 million mt in March, a separate Platts monthly survey showed.

    Despite the month-on-month drop, April crude imports were still the second highest level seen since Platts started tracking independent refinery imports in January 2016.

    And imports are likely to fall further in May, as fewer crude cargoes have called at the berths this month, given that a few independent refineries are running low on import quotas.

    CRUDE DISCHARGE OPERATIONS NOT AFFECTED

    Meanwhile, crude discharge operations at the ports have not been affected by the high port stocks, according to sources at Qingdao and Laizhou ports.

    Currently, Qingdao port is not facing any congestion and it takes about a week for a cargo to be discharged, which is the normal timing, said the Qingdao source.

    Sources at Laizhou port also confirmed that there is no congestion, simply because fewer cargoes have arrived in the first half of the month.

    A total 300,000 mt of crude have been discharged in the first half of May, falling nearly 29% from around 420,000 mt in the first half of April, according to the source.

    No vessels were waiting outside Laizhou port as of Thursday. In contrast, three to four 100,000-mt vessels have waited outside port limits each day at its peak.

    At Qingdao port, around six vessels were waiting to discharge on Thursday. This compares to a peak of around 15 vessels last year due to logistic issues.

    https://www.platts.com/latest-news/oil/singapore/crude-stocks-at-chinas-shandong-ports-rise-on-27832617

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    China succeeds in mining combustible ice in South China Sea


    China has succeeded in collecting samples of combustible ice in the South China Sea, a major breakthrough that may lead to a global energy revolution, Minister of Land and Resources Jiang Daming said Thursday.

    This is China's first success in mining flammable ice at sea, after nearly two decades of research and exploration, the minister said at a trial mining site in the Shenhu area of the South China Sea Thursday.

    China found flammable ice, a kind of natural gas hydrate, in the South China Sea in 2007.

    International scientific circles have predicted that natural gas hydrate is the best replacement for oil and natural gas

    http://news.xinhuanet.com/english/2017-05/18/c_136294670.htm
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    Rosneft working to be ready for competition post-oil output cuts: Sechin


    Russia's Rosneft, the world's top listed oil company by output, is working to be ready to compete on global oil markets after the deal with OPEC on oil curbs expires, Chief Executive Igor Sechin said on Thursday.

    Rosneft is key for Russia's efforts to meet obligations under the deal with the Organization of the Petroleum Exporting Countries, under which Moscow has promised to cut production by 300,000 barrels per day.

    This week, Russia, which delivered the cut in full last month, and Saudi Arabia agreed on the need to extend the global deal until March 2018.

    Sechin, on a visit to Berlin to open the Rosneft Deutschland office, said Rosneft will plan its work this year so as to be competitive on the global oil market when the agreement expires.

    "We will plan our work till the year-end in the way that while complying with the agreements, paying a special attention to mature fields not to lose oil resources and do preparations needed for new field launches, so in case the deal is stopped be ready for competitive work on the markets and not to lose our market share," Sechin said.

    He added Rosneft was cutting production at its newest fields under the OPEC deal, not touching mature fields as there was a risk that they may not come back on-line in full after the cuts.

    Sechin repeated that both Russia and Saudi Arabia should work out mechanisms for a "smooth" exit from the agreement when it is over to avoid market shocks.

    "I would not think beyond March of the next year," Sechin said when asked if the market would be balanced by then and if a further extension of the global deal may be needed. "We should see how shale oil production (in the United States) will perform."

    http://www.reuters.com/article/us-russia-oil-rosneft-idUSKCN18E2P5

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    Halliburton's incoming CEO sees significant price hike


    Halliburton Co, the No. 2 oilfield service provider, expects to raise prices at least 10 percent and in some cases 20 percent or more this year, higher increases than many customers expect but ones that company executives said were crucial to fuel the oil industry's nascent growth.

    The rising business activity comes as Jeff Miller prepares to become the 98-year-old company's chief executive officer next month, taking over from Dave Lesar, CEO since 2000.

    "We will continue to implement our strategy," Miller said in an interview at the company's Houston headquarters just outside George Bush Intercontinental Airport. "North America is absolutely our growth story today."

    Miller, Lesar and other executives have been in talks with customers for months about raising rates for Halliburton's myriad services, highlighting not only the company's scale but its experience.

    Halliburton was the first company to hydraulically fracture, or frack, a well, pioneering the process in 1949.

    Many customers had locked in service rates during the two-year price downturn when Halliburton laid off more than 35,000 employees. Today, with the American shale oil industry whirring again, Halliburton is at max capacity for many services and itching to charge more.

    Like peers, Halliburton has said it will not refurbish old equipment for field use until prices rise and has no North American fracking crews available until at least the fall. That limits the ability of customers to bring new wells online.

    "Customer urgency is the most-important part of that discussion today," said Miller, an accountant by training.

    Lesar, who will retire as CEO but remain executive chairman until Dec. 2018, echoed those comments in an interview, adding that Halliburton is keen to work with producers to prevent rampant cost inflation.

    "We and our customers have to co-exist in this environment," said Lesar, who became CEO after predecessor Dick Cheney was nominated to be U.S. vice president. "Everybody has got to make money."

    Shares of Halliburton, which have lost about 14 percent this year, rose 24 cents, or 0.5 percent, on Thursday to close at $46.58.

    OIL PRICES

    Both executives expect oil prices CLc1 to remain near $50 per barrel for the foreseeable future, a level they believe will allow North American shale customers and Halliburton to grow in tandem.

    "Clearly, the rising star at this point in time is the Permian" shale basin of Texas and New Mexico, Lesar said, adding that the DJ Basin in Colorado and the Utica in Ohio are other shale areas where Halliburton is growing.

    Costs for sand used in fracking pressured Halliburton over the winter, since many mines are located in the northern United States. Still, both executives said they believe their supply costs should stabilize this year.

    STAFFING & COMPETITION

    Halliburton has hired more than 2,000 workers since the oil industry started to recover, more than half of them former employees. That points to the company's lucrative salary and perks, as well as its culture, both executives said.

    "We've got a very loyal workforce," Miller said.

    "Our position in North America is second-to-none," Lesar said. "We intend to hold that, no matter what the competition does."

    http://www.reuters.com/article/us-halliburton-executives-growth-idUSKCN18E2Q4
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    WTI Stays near $49 if OPEC Cuts Continue: EnerCom

    WTI Stays near $49 if OPEC Cuts Continue: EnerCom

    OPEC’s meeting to decide the future of production cuts is quickly approaching, and many expect that the group will extend their deal through at least the end of this year.

    The production cuts, when they were first initiated, helped to bring both WTI and Brent crude oils back above $50 per barrel, but prices have struggled to maintain that position or go higher as unconventional drilling and U.S. production continue to ramp up.

    In EnerCom Analytics’ Monthly Energy Industry Data & Trends for April, the firm examined the possible effects of OPEC’s decision making on WTI prices and forecasted that oil prices would hit $49.29 per barrel if the group maintained cuts and the members exempt from the deal reached their production targets.

    When the deal was originally announced,  Libya and Nigeria were given exemptions from production cuts.

    Iran has stated that it hopes to achieve 4 MMBOPD of output, the same amount it was producing prior to the implementation of international sanctions. Production in the Islamic Republic ramped up quickly following the end of sanctions, but many believe that it will need to attract foreign investment and partners in order to hit its 4 MMBOPD mark as it stretches its existing projects to the limits of their current capacity.

    Libya has repeatedly claimed force majeure on its production as the country continues to struggle with a civil war, and Nigeria’s oil infrastructure continues to be a target for factions that are unsatisfied with the current government, making it difficult for either to increase and maintain, production.

    If all three were able to reach their targets, however, with Iran hitting 4 MMBOPD, Libya maintaining its production at its peak of 1.1 MMBOPD, and Nigeria pushing output back to levels seen in 2015 as OPEC ramped up production, WTI prices would reach $49.29 per barrel, assuming compliance with the production deal remained high, according to EnerCom Analytics. WTI closed at $49.35 today, six cents higher than EnerCom’s April prediction.

    At this point, it seems that the market has largely priced in the extended production cuts. If the group does confirm that cuts will continue, oil prices will likely remain largely unchanged.

    Failure to extend cuts:  $47.50 oil

    If the group is unable to reach an agreement on further production cuts and increases output to levels seen in December 2016, WTI could go as low as $47.50 as markets begin to absorb the increased production, according to EnerCom’s models. Even at those prices, however, most U.S. basins would remain economic, the report said.

    At $45 WTI, the Eagle Ford, Delaware, Midland and Bakken are all able to generate 20% IRRs or better, meaning that even if oil fell to $47.50, many operators would be able to continue drilling. This, in turn, caps how far oil price would be able to rise beyond that point, however.

    Adjusting for inflation, these prices are somewhat below the historical average going back to 1974. Over the last 43 years, WTI has averaged $36.26 nominally, but $54.67 per barrel once adjusted for inflation.

    If you like to receive EnerCom’s predictions as soon as they are released, as well as the firm’s insight on a number of other topics, subscribe to Energy Industry Data & Trends. To learn more about the scenarios run by EnerCom, and how U.S. policies and increases in the strength of the dollar might affect WTI oil prices

    https://www.oilandgas360.com/wti-stays-near-49-opec-cuts-continue-enercom/
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    Tidewater files for Chapter 11 bankruptcy as it seeks to cut debt


    U.S. offshore support vessel owner Tidewater has filed voluntary petition under Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the District of Delaware.

    The move is intended to help Tidewater pursue a prepackaged plan of reorganization in accordance with its previously announced restructuring support agreement (the “RSA”) with certain lenders to “effectuate a comprehensive balance sheet restructuring.”

    The company last week said it had entered into a debt restructuring support agreement with certain consenting creditors.

    The U.S.-based vessel company has entered into the deal with lenders under its Fourth Amended and Restated Revolving Credit Agreement, dated as of June 21, 2013, and holders of Tidewater Senior Notes to put into force a proposed prepackaged plan of reorganization of the company.

    As part of its debt restructuring plan, Tidewater plans to reject certain sale-leaseback agreements for leased vessels currently in the company’s fleet, and to limit the resulting rejection damages claims to approximately $131 million.

    However, the Sale Leaseback Parties dispute the amount of the rejection damages claims and a final resolution of the amount of such claims will be subject to litigation, Tidewater said.

    “As a result, there is no certainty as to the final amount of sale-leaseback rejection damages claims that will be treated pursuant to the Prepackaged Plan,” the company added.

    The prepackaged plan is supported by lenders holding approximately 60% of the outstanding principal amount of loans under the Credit Agreement and Noteholders holding 99% of the aggregate outstanding principal amount of the Senior Notes. Collectively, these supporting Lenders and Noteholders also constitute a majority in number of the holders of General Unsecured Claims.

    Debt reduction

    Announcing its agreement with creditors last week, Tidewater said the plan would substantially deleverage its balance sheet and better position Tidewater “to weather the extended downturn in the offshore energy industry while maintaining the company’s position as a worldwide market leader in offshore vessel services.”

    Tidewater expects that it will eliminate approximately $1.6 billion in principal of outstanding debt.

    Under the plan, the consenting creditors will receive their pro rata share of $225 million of cash; common stock and, if applicable, warrants to purchase common stock, representing 95% of the pro forma common equity in reorganized Tidewater, and new 8% fixed rate secured notes due in 2022 in the aggregate principal amount of $350 million.

    Furthermore, Tidewater’s existing shares of common stock will be cancelled, and the existing common stockholders of Tidewater will receive their pro rata share of common stock representing 5% of the pro forma common equity in reorganized Tidewater.

    The existing shareholders will also be granted six year warrants to buy purchase additional shares of common stock of reorganized Tidewater.

    These warrants will be issued in two tranches, with the first tranche (the“Series A Warrants”) being exercisable immediately, at an aggregate exercise price based upon an equity value of the Company of approximately $1.71 billion, and the second tranche (the “Series B Warrants”) being exercisable immediately, at an aggregate exercise price based upon an equity value of the Company of $2.02 billion, Tidewater said. The tranches will enable the existing shareholders to buy a number of shares equal to 15 percent (7.5% per tranche).

    Business as usual

    Tidewater expects to continue to operate the business as debtors-in-possession under the jurisdiction of the Bankruptcy Court and fully expects to continue existing operations and maintain staffing and equipment as normal throughout the court-supervised financial restructuring process.

    “Tidewater has filed a series of motions with the Bankruptcy Court to ensure a seamless transition into chapter 11 and has sought the approval of the Bankruptcy Court to continue paying prepetition employee wages and salaries and to provide employee benefits without interruption. The Company continues to work closely with its suppliers and partners to ensure it meets ongoing obligations and business continues uninterrupted,” the company added.

    Jeffrey M. Platt, Tidewater’s President and Chief Executive Officer states, “After much thought and successful negotiations with certain of our economic stakeholders, we decided that commencing the chapter 11 cases was necessary to create financial stability which would allow Tidewater to remain a formidable competitor given this unprecedented industry downturn. Throughout the chapter 11 process, we anticipate meeting ongoing obligations to our employees, customers, vendors, suppliers, and others. We will continue to provide our customers with dependable, high-quality services.”

    To support and effect the restructuring, Tidewater has filed applications to retain, among others, Weil, Gotshal & Manges LLP as restructuring counsel, Jones Walker LLP as corporate counsel, Lazard Frères & Co. as investment banker, and AlixPartners, LLP as restructuring advisor.

    Subject to the approval of the Bankruptcy Court, the Prepackaged Plan is expected to be consummated in approximately 45 days.

    “Tidewater believes it has adequate liquidity to maintain its operations in the ordinary course and does not intend to seek any debtor-in-possession financing during the pendency of the bankruptcy cases,” the company said.

    http://www.offshoreenergytoday.com/tidewater-files-for-chapter-11-bankruptcy-as-it-seeks-to-cut-debt/
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    Noble Energy Sells Marcellus Midstream to Quantum Energy Partners for $765 Million



    Noble Energy, Inc. today announced that it has signed a definitive agreement to divest the holding company which owns a 50 percent interest in CONE Gathering, LLC and 21.7 million common and subordinated limited partnership units to a portfolio company of Quantum Energy Partners (“Quantum”) for total cash consideration of $765 million. The limited partnership units represent a 33.5 percent ownership interest in CONE Midstream Partners LP . CONE Gathering owns the general partner of CONE Midstream.

    David L. Stover, Noble Energy’s Chairman, President and CEO, commented “CNNX has performed exceptionally well since its IPO in late 2014, exceeding forecasts despite a challenging macro-economic backdrop. Including this transaction, Noble Energy will realise more than $1 billion in total value from our Marcellus midstream business, which represents approximately three times our net invested capital. Going forward, our midstream efforts are focused on Noble Midstream Partners, supporting our DJ Basin and Delaware Basin growth areas.”

    http://boereport.com/2017/05/18/noble-energy-sells-marcellus-midstream-to-quantum-energy-partners-for-765-million/
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    Digital H2O Comes to the Marcellus/Utica


    Digital H2O is a “digital oilfield water management solutions company.” What the heck does that mean?

    Water is not only the key ingredient in life, it’s also the key ingredient in the shale industry. It takes a lot of water to drill and frack a shale well. Locating sources for that water, getting it shipped to and then from a well pad, and disposing of it, is a logistical challenge.

    Digital H2O helps helps drillers source water, transport it, and dispose of it–at a cheaper cost than they otherwise could have. Digital H2O accomplishes this magic with a sophisticated computer software program–populated with all sorts of information (i.e. data).

    Until now, Digital H2O has concentrated its service on the Permian and Bakken shale regions in Texas, North Dakota, and New Mexico. The company has now turned its attention to the Pennsylvania Marcellus and now offers it service in our neck of the woods…

    http://marcellusdrilling.com/2017/05/digital-h2o-comes-to-the-marcellusutica/
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    Alternative Energy

    France needs 'massive' renewables growth, nuclear not only energy solution, says PM


    France needs "massive and rapid" growth in renewable energy capacity and nuclear power is not the country's only energy solution, new Prime Minister Edouard Philippe said on Thursday.

    Philippe, who was appointed by newly inaugurated President Emmanuel Macron, used to work as head of public affairs for state nuclear energy group Areva, parts of which are set to be absorbed by EDF, the state power utility which operates the nation's ageing nuclear power station fleet.

    On Wednesday, Macron appointed environmentalist Nicolas Hulot as his environment minister with responsibility for energy matters - a move that hit EDF's share price.

    Nuclear power accounts for about three-quarters of French power generation at present.

    France needs "to reach the objectives set out by the President," Philippe said on France Inter radio. "That means an approach founded on the secure base of nuclear and a rapid, massive and visible development of renewables," he added.

    Philippe also said the government would take a "pragmatic" approach regarding France's future energy and power supplies.

    http://www.reuters.com/article/france-energy-idUSL8N1IK1T1
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    Daimler, Vivint Solar in exclusive deal on U.S. home batteries


    German automaker Daimler AG will enter the nascent U.S. market for home batteries through a collaboration with residential rooftop solar installer Vivint Solar Inc, the two companies said on Thursday.

    The exclusive partnership, Vivint's first foray into energy storage, will allow the companies to compete against similar offerings from automaker Tesla Inc, solar installer Sunrun Inc, battery maker LG Chem Ltd and others.

    The market for energy storage is small, but growing rapidly as the costs of lithium-ion batteries fall. Last year the industry generated $320 million in revenue in the United States, though residential systems made up just 4 percent of the total.

    Home battery systems allow customers to store solar power generated during the day for use after sunset, a time when they might charge an electric vehicle. Eventually, as utilities move to charging higher rates for power used in the evening, when demand is greatest, the batteries could bring customers significant savings. They can also provide backup power.

    Daimler will sell the batteries through its Mercedes-Benz Energy subsidiary established last year, bringing its aspirational car brand to the home energy market in much the same way Tesla has with its Powerwall batteries.

    The head of Mercedes-Benz Energy Americas, Boris von Bormann, said entering the home storage market was a natural evolution for the luxury car brand.

    "In the future when someone steps into a dealership and they are looking to purchase an EV, they are asking for several solutions and storage will be one of them," he said in an interview.

    Vivint Chief Executive Officer David Bywater said solar customers are increasingly demanding an energy "ecosystem" that includes home energy management, storage and electric vehicle charging.

    Mercedes-Benz "will help us both on the home storage as well as the EV charging stations over time," Bywater said.

    The energy storage systems will be made up of 2.5 kWh modular batteries that can be combined to create a system as large as 20 kWh. The largest size would cost about $13,000 fully installed, Bywater said.

    By comparison, a 14 kWh Tesla Powerwall costs $6,200, not including up to $2,000 in installation costs, according to pricing information on Tesla's website.

    The systems are available immediately, and Vivint plans to sell them both online and through its primary door-to-door sales operation.

    http://www.reuters.com/article/daimler-vivint-batteries-idUSL2N1IJ1OA
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    Uranium

    Indian cabinet approves plans to build 10 nuclear reactors


    India's cabinet approved plans on Wednesday to build 10 nuclear reactors with a combined capacity of 7,000 megawatts (MW), more than the country's entire current capacity, to try fast-track its domestic nuclear power program.

    The decision by Prime Minister Narendra Modi's government marks the first strategic response to the near collapse of Westinghouse, the U.S. reactor maker that had been in talks to build six of its AP1000 reactors in India.

    Westinghouse, owned by Japan's Toshiba, filed for Chapter 11 bankruptcy in March after revealing billions of dollars in cost overruns at its U.S. projects, raising doubts about whether it can complete the India deal.

    India has installed nuclear capacity of 6,780 MW from 22 plants and plans to add another 6,700 MW by 2021-22 through projects currently under construction. The 10 additional reactors would be the latest design of India's Pressurised Heavy Water Reactor.

    "This project will bring about substantial economies of scale and maximize cost and time efficiencies by adopting fleet mode for execution," the government said in a statement.

    "It is expected to generate more than 33,400 jobs in direct and indirect employment. With manufacturing orders to domestic industry, it will be a major step towards strengthening India’s credentials as a major nuclear manufacturing powerhouse."

    Westinghouse has said it plans to continue construction of its AP1000 plants in China and expects to bid for new plants in India and elsewhere, without elaborating on how it plans to do so.

    Indian companies such as Larsen and Toubro, Kirloskar Brothers Limited and Godrej & Boyce welcomed the government's move.

    Sanjay Kirloskar, chairman of Kirloskar Brothers Limited, said: "nuclear power plants will go a long way in reducing the perennial energy deficit," while Larsen and Toubro's director S.N. Roy called the move "bold and historic."

    http://www.reuters.com/article/us-india-nuclear-idUSKCN18D21X
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    Agriculture

    Rising Chinese hog output set to erode profits by 2018: analysts


    China's pig farmers will start to lose money next year as the country's herds are close to full capacity, analysts said on Thursday, which may undermine planned expansions of pork production.

    China's farmers had earlier culled herds after a spell of losses, which pushed prices to a record 22 yuan ($3.19) per kg last year. As a result, companies including Cofco Meat, New Hope Liuhe and Guangdong Wen's Foodstuffs embarked on a building spree to expand production to chase profits of more than $100 per pig.

    But prices have been falling for several months, driven by the replenishing of sows, said Feng Yonghui, chief analyst at consultancy Soozhu.com.

    "Sows are not yet in overcapacity, but it will be very soon, within two or three months. Which means by next year this profit-making cycle will end and turn to losses," he told an industry seminar.

    Prices have already tumbled from last year's peak to about 14.5 yuan per kg and are set to keep falling sharply, said Feng.

    "Next year they'll fall to more than 5 yuan per half kg," he told Reuters on the sidelines of the seminar.

    Sows removed from farms that have been shut in southern China to tackle water pollution are simply being transferred elsewhere, which is not leading to an expected further reduction of the hog herd, said Feng

    Meanwhile, large farming groups have built new capacity further north, and many are still planning new projects. Top producer Wen's is targeting production of 27.5 million hogs by 2019, up from 17 million last year.

    Productivity in China is also increasing, said Pan Chenjun, executive director of food and agriculture research at Rabobank Hong Kong, with the average piglets per sow now around 17.

    "I agree with Feng that by middle of next year some farmers will be losing money," she told Reuters.

    "Although a lot of farms have closed since 2016, it hasn't led to a real drop in production capacity."

    She estimated pork production will increase by 2 percent this year, pressuring prices.

    Soozhu.com's Feng added that the loss-making cycle could last as long as six years, around double the typical period for a down cycle, with major pork firms unwilling to relinquish market share.

    "Smallholders also made a lot of money last year so they won't want to slaughter sows either," he added.

    China's sow inventory fell from about 50 million head in 2014 to 37.5 million currently, according to official data.

    http://www.reuters.com/article/us-china-pork-idUSKCN18E1FF
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    EU to propose 10-year license renewal for weed killer glyphosate


    The European Commission will propose extending by 10 years its approval for weed-killer glyphosate, used in Monsanto's Roundup, a spokeswoman said on Wednesday.

    A transatlantic row over possible risks to human health has prompted investigations by congressional committees in the United States, and in Europe has forced a delay to a re-licensing decision for Monsanto's big-selling Roundup herbicide.

    A new study issued in March by the European Chemical Agency (ECHA) paved the way for the Commission's decision to restart negotiations with EU nations over renewing the license for glyphosate, despite opposition from environmental groups.

    The EU body, which regulates chemicals and biocides, said glyphosate, the key ingredient in Roundup, should not be classified as a substance causing cancer.

    A spokeswoman for the Commission said it had "taken into account the latest state of scientific research and would "work with the Member States to find a solution that enjoys the largest possible support."

    No date has yet been set for when discussions with representatives of EU member states will start.

    Pending the results of the ECHA study, the EU granted an 18-month extension last July of its approval for the weed killer after a proposal for full license renewal met opposition from member states and campaign groups.

    While the World Health Organization’s cancer agency, the International Agency for Research on Cancer (IARC), classifies glyphosate as "probably carcinogenic", many other government regulators, including in the United States, see the weed killer as unlikely to pose a cancer risk to humans.

    The European Food Safety Authority (EFSA), which has found that glyphosate is "unlikely to pose a carcinogenic hazard to humans", welcomed ECHA's opinion on Wednesday, as did lobby groups for farmers, who make wide use of products containing glyphosate.

    But environmental groups said doubts remain over its safety.

    "It makes no sense to accept the wide range of risks associated with glyphosate," said Bart Staes, a Green group member of the European Parliament.

    The decision to seek a 10-year rather than a longer approval was also criticized by supporters of the herbicide. The European Crop Protection group called it "short-sighted", saying it pandered to activists.

    According to data published by IARC, glyphosate was registered in over 130 countries as of 2010 and is one of the world's most heavily used weed killers.

    Analysts have estimated that Monsanto could lose out on up to $100 million of sales if glyphosate was banned in Europe.

    http://www.reuters.com/article/us-health-eu-glyphosate-idUSKCN18D2D3
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    Precious Metals

    De Beers diamond sales down by 11%


    The company said it continues to see steady demand despite the industry entering a typically quieter season. 

    De Beers, the world’s largest rough diamond producer by value, saw its sales declining by 11% during the fourth cycle of the year compared with the previous cycle.

    The Anglo American’s unit said provisional diamond sales of $520 million for the fourth sales cycle ended May 15, compared with $586 million generated in the previous sales cycle. Sales for the fourth cycle of 2016 were $636 million.

    The company, however, said it continues to see steady demand despite the industry entering a typically quieter season.

    "Sentiment remains positive as we head towards the important Las Vegas trade show in early June,” chief executive Bruce Cleaver said in the statement.

    http://www.mining.com/de-beers-diamond-sales-11-per-cent/
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    Base Metals

    $5.48bn Panama project on track for 2018 commissioning


    The $5.48-billion Cobre Panama copper project, being developed by First Quantum Minerals, is on track for commissioning in 2018.

    Speaking at the Paydirt Latin America Down under conference, in Perth, First Quantum global exploration director Mike Christie said on Thursday that the company was targeting a throughput rate of 60-million tonnes by the end of December, with full capacity of 75-million tonnes a year targeted in 2019, to deliver around 320 000 t/y of copper.

    First Quantum would spend about $1-billion on project construction in 2017, Christie said, noting that the project was some 50% complete by the end of April this year.

    A further $830-million on project capital will be spent in 2018, with a final $110-million to be spent in 2019.

    Once in full production the Cobre Panama project, which is the largest capital project in Panama, rivalling the PanamaCanal in terms of capital spend, will push First Quantum’s total copper production to over 900 000 t/y, making the company one of the largest copper producers in the world.

    Christie pointed out that the development of First Quantum’s Haquira copper project, in Peru, and its Taca Taca copperproject, in Argentina, would place the company in the ranks of top global producers, including BHP and Glencore.

    First Quantum is currently working on an environmental impact assessment at both the Haquira and Taca Taca projects.

    http://www.miningweekly.com/article/548bn-panama-project-on-track-for-2018-commissioning-2017-05-18
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    China likely to boost refined zinc imports as concentrate shortfall bites


    China is likely to step up imports of refined zinc from this month, industry sources said on Friday, as dwindling global supplies of concentrate hit local output of the metal, used to galvanise steel.

    China's refined zinc output marked its lowest in more than two years in April as the impact from the closure of major mines in places such as Australia and Ireland stifled the concentrate supplies China relies on to churn out finished metal.

    The nation's 'war on pollution' has also curbed output as Beijing clamps down on mining and heavy industry in a drive to clear its skies.

    That will likely push buyers of refined zinc to look overseas for supplies, boosting international prices that this week marked their weakest since November at a touch below $2,500 per tonne, after chalking up substantial gains last year.

    "It is starting to bite," said analyst Daniel Hynes of ANZ in Sydney. "The tightness is pretty much upon us."

    "We are looking for zinc to push back to $2,800 in the second half ... The zinc market is set to stay tight over the short to medium term. This certainly should provide a bit of a reality check for the bears."

    Imports of refined zinc from China's bonded zones could be resold on the local market for a profit of as much as $45 this week, Reuters calculations show, near the strongest since January 2016, when the country shipped in around 60,000 tonnes of refined metal.

    China brought in just 25,600 tonnes in March and total imports are down by two thirds this year.

    Traders have already been turning to local exchange stocks. Shanghai Futures Exchange zinc stocks have halved since February to near 100,00 tonnes, the lowest since February 2015. ZN-STX-SGH

    Meanwhile, China's 'war on pollution' is entering its fourth year as it looks to dilute the environmental damage caused by years of breakneck economic growth, likely hitting production of base metals.

    "The Chinese government is going to put a lot of pressure (on metals producers) to reform from an environmental perspective," said the head of metals at a China commodity trade house.

    "Definitely we are going to see companies with limited domestic availability of concentrate. We should see some opportunities for imports of refined metal," he said, declining to be identified as he was not authorised to speak with media.

    http://www.reuters.com/article/china-zinc-imports-idUSL4N1IL216
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    Steel, Iron Ore and Coal

    China's April raw coal production jumps 10% on year to 290 mil mt: NBS



    China's raw coal production rose 9.9% year on year to 290 million mt in April, National Bureau of Statistics data released Wednesday showed.

    Over January-April, raw coal production rose 2.5% year on year to 1.11 billion mt.

    Coal production rose 5% year on year in April in Shanxi, Inner Mongolia and Shaanxi, which account for 67% of China's total coal production.

    Output in Jiangxi, Hubei, Hunan and Chongqin, where medium to small miners are clustered, fell more than 30% over the same period.

    China's power generation in April rose 5.4% on year to 476.72 TWh, and over January-April rose 6.6% to 1,938.24 TWh.

    NBS said thermal power generation rose 5.7% year on year to 352.18 TWh in April, but was down 2% from March, while hydro power generation was down 5.4% year on year at 74.34 TWh in April due to lower rainfall, but was still up from 72.5 TWh in March.

    https://www.platts.com/latest-news/coal/singapore/chinas-april-raw-coal-production-jumps-10-on-27832337

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    Inner Mongolia to cap energy use at 225 Mt standard coal by 2020


    Inner Mongolia in northern China planned to cap total energy consumption at 225 million tonnes of standard coal by 2020, in a move to save energy and lower carbon emission, said the local government in a recent notice.

    The autonomous region also would control the average annual growth of energy consumption within 3.5% by the last year of the 13th Five-Year Plan period, according to the notice.

    By 2020, the energy consumption per 10,000 yuan GDP in Inner Mongolia will decrease 14% from 2015.

    http://www.sxcoal.com/news/4556208/info/en
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    China's key steel mills output up 7.53pct in April

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    China's ferrous scrap exports may be a longer-lived anomaly in 2017


    China depends on imported iron for around 80% of its needs, yet the country's burgeoning ferrous scrap exports highlights a reliance on iron ore and coking coal at ever bigger blast furnaces in China's steel industry.

    China is expected to utilize a growing pile of ferrous scrap originating from its economy's stellar growth, providing likely unmatched scale and speed in scrap generation from automobiles to buildings.

    However, adapting the local blast furnace-focused steel industry to use more scrap may take time, as government-ordered closures of electric furnaces unleashes new scrap supplies.

    China has become the world's biggest user of scrap, but as a proportion of crude steel production at 808 million mt in 2016, the ratio is small, at just over 10%.

    In the US, the ratio is over 70%. And to put it in context, an increase in crude steel production in the US of 5% based on current feedstock trends may require a similar amount of scrap the US exported last year to Turkey, the biggest scrap importer.

    INDUCTION

    The Chinese government's directive to eliminate scrap-fed induction melting furnaces in the country by June 30, led to a huge turnaround. According to industry estimates, China's induction furnaces produced around 30-50 million mt last year of steel, and capacity totaling 80-120 million mt/year of finished steel output will go.

    Based on the output range last year, 33-55 million mt of scrap would need to find a home.

    Chinese export scrap availability, despite a 40% export duty being imposed, is expected to depress scrap prices in Asia.

    Regional scrap importers Tokyo Steel and Taiwan's Feng Hsin have ordered trial lots of Chinese scrap. South Korea's Hyundai Steel is inspecting scrap in China this month.

    Chinese scrap has been offered into Southeast Asia, and as far afield as India.

    Scrap used at integrated mills in China may be currently limited to well under a 10% rate per ton of crude steel, and the addition of domestic feed earlier sourced for induction furnaces may be harder to absorb.

    In the US, scrap charging rates may be up to three times as much. Some Europe mills are flexible in charging more scrap, while 10% is a typical ratio. This is depending on raw materials availability and relative pricing, qualities of scrap and final steel, and impact around wider operations and costs.

    In China, more scrap was fed when coke prices rose sharply, with Shagang booking bulk scrap from the US in response.

    However, scrap demand in China's steel sector is determined on short-term price comparisons with other raw materials, and access to qualities.

    Chinese blast furnace operators may be reluctant to adapt rates and utilize more scrap if the availability proves short-lived.

    Global scrap prices are relatively high, around 30% above a trough seen in September 2016 for Turkey's benchmark import prices.

    A catalyst for embracing more scrap in China may be emissions restrictions, which could hit iron ore sintering and pelletizing plants and cokemaking.

    However, with ready supplies of imported lump ore at ports, at current low price premiums, paying up for scrap may not be so attractive.

    "China reduced its steel scrap imports by 7.1% [in 2016] and, therefore, clearly used more steel scrap from the domestic market," said Rolf Willeke, statistics adviser at the BIR Ferrous Division, in a report this month.

    "The proportion of steel scrap used in the country's steel production increased from 10.4% in 2015 to 11.1% in 2016," Brussels-based Bureau of International Recycling said in the report.

    In April, iron ore and premium HCC imports into China, based on Platts benchmark spot price assessments, averaged at around $182/mt CFR China based on industry ratio needed per ton of hot metal, while scrap benchmark HMS 80:20 East Asia CFR prices were 1.5 times higher.

    The same comparative ratio averaged at over 2:1 scrap import prices to the mix of iron ore and coking coal prices adjusted per ton of hot metal in 2016.

    Even accounting for 40% China export tax, and adjusting for quality, scrap prices remain higher than the mix of iron ore and Premium HCC, while the final evaluation may be complicated by individual fixed and cash costs in utilizing the inputs.

    China's steel scrap reserve may easily outpace any future growth in demand. Latent supplies may reach 7.8 billion mt by 2017, 10 billion mt by 2025, and 12 billion mt by 2030, estimates Li Xinchuang, president of China Metallurgical Industry Planning and Research Institute.

    China's scrap consumption estimated currently at 100 million mt may exceed 200 million mt by 2025 or take another five years to 2030 before reaching the level, based on the group's forecasts.

    https://www.platts.com/latest-news/metals/london/feature-chinas-ferrous-scrap-exports-may-be-a-26739827
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    Molybdenum slips as market slows


    A lack of activity in the molybdenum market took its toll on prices as sellers said they were receiving little interest.

    Sellers said they had not received any inquiries during the day and felt the market had turned very quiet since last week.

    "It's not difficult to find material if you need it," a European trader said. "There are more sellers compared to buyers."

    Offers were heard in Europe at $8.30/lb but market participants said sellers were biddable. "It's a whole lot of nothing today," a second European trader said.

    In Asia, a trader said there were no inquiries and would consider selling at $8.30/lb if he could find a buyer.

    S&P Global Platts daily dealer oxide assessment stood at $8.30-$8.35/lb Tuesday from $8.30-$8.45/lb Monday.

    Platts daily European ferromolybdenum assessment was also lower Tuesday at $20.50-$20.80/kg from $20.50-$20.90/kg Monday.

    Ferromolybdenum offers were heard at $20.80/kg and higher but there were doubts that sales could be concluded at this level.

    Others said they were having offers rejected at $20.60/kg as there was no demand from mills or traders.

    https://www.platts.com/latest-news/metals/london/molybdenum-slips-as-market-slows-26738907

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