Mark Latham Commodity Equity Intelligence Service

Wednesday 13th April 2016
Background Stories on www.commodityintelligence.com

News and Views:

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    Macro

    IMF cuts growth numbers

    The International Monetary Fund just slashed its global growth forecast for the fourth time in a year, underscoring just how much policymakers around the world are struggling to get the economy back to a stronger footing, and offering another red flag for investors, who have shown signs of caution even as U.S. stocks have rebounded from February lows.

    The IMF reduced its forecast of the growth rate by 0.2 percentage point to 3.2% and warned the world economy is increasingly at risk of stalling. The IMF said an exit of the U.K. from the European Union risks “severe” regional and global damage, highlighting yet another risk for the global outlook. A referendum is scheduled this June for the U.K., and market analysts have warned about broad ripples should the U.K. vote to bolt.

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    Is it time to be overweight resources?

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    Did BHP just call the bottom of the mining cycle?


    BHP Billiton chief executive Andrew Mackenzie was upbeat about the outlook for the world's top mining company in an interview published in the The Australian.

    A turnaround in the prices of the commodities the Melbourne-based giant produces would be volatile and prolonged  and in some cases markets will take "a very long time" to come back into balance Mackenzie told the newspaper.

    "If you look at the basket of commodities that we deal with, the numbers are self-evident: the fall has stopped"

    Nevertheless, Mackenzie believes the worst may be over:

    “We’re not looking at the screens and things continue to go down, down and down. And yet we are able to look at our numbers to see costs going down, down, down.

    “If you look at the basket of commodities that we deal with, the numbers are self-evident: the fall has stopped.”

    Given this week's rallies in crude oil (which would also help to stop deflation in other sectors), iron ore, coking coal and base metals, MacKenzie's timing may be spot on.

    All the commodity prices tracked below are now trading above recent troughs, even if some still show declines year to date. In many instances the recovery has been from multi-year slumps and that includes bellwether copper which in January declined to seven-year low below $2.00 a pound even if the red metal is only back in positive territory for 2016 after today's 3% advance.

    After massive back to back rallies iron ore is 58% above its $37 a tonne near decade low struck in December

    Before today's jump in crude oil to $42 a barrel which brought its advance from 13-year lows hit February to 58.9%, iron ore's turnaround was the most impressive.  After massive back to back rallies iron ore is 58.1% above its $37 a tonne near decade low struck December 11.

    Gold and silver seemed to rebound just as 2016 was getting started, but platinum fell to a 2008 low in January before retracing all the way back into a bull market (defined as a 20% move from a low). Palladium has also been dug out of its hole, but year to date the metal is weaker.

    Australian  hard coking coal has followed iron ore higher and the country's thermal coal exports have also inched up although few predict upside from current levels around $55 a tonne. Uranium fell to a near decade low at the beginning of April, but the spot price recovered slightly to $28.50 a pound last week.

    The exception (that hopefully proves the rule) is potash. Producers are currently locked in negotiations with China about contract prices, butpredictions are for a big leg down from last year's $315 a tonne.  Perhaps Mackenzie was referring to potash (and not the usual suspect iron ore) when he said some commodities may be bumping along the bottom for "a very long time."

    http://www.mining.com/did-bhp-just-call-the-bottom-of-the-mining-cycle/
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    Brazil police arrest former senator in Petrobras investigation


    Brazilian police arrested former senator Gim Argello and launched raids in three states on Tuesday as part of a massive corruption investigation centered at state-run oil firm Petrobras, federal prosecutors said.

    The 28th round of police raids in the so-called "Operation Car Wash" was based on evidence that Argello took bribes to ensure executives at major infrastructure companies would not be called to testify at a congressional committee in 2014, prosecutors said.

    "These are alarming facts because they strongly suggest that a congressional investigative committee, which has an important role in our democracy, was used by a senator for corruption instead of fighting it," prosecutor Athayde Ribeiro Costa said in the statement.

    The two-year investigation has uncovered systemic corruption across multiple companies, including state-run oil producer Petroleo Brasileiro SA , and the highest levels of government since the Workers' Party took power in 2003.

    The probe has given powerful momentum to impeachment proceedings against President Dilma Rousseff, even though she herself is not being investigated.

    Prosecutors said construction firms UTC Engenharia SA and OAS SA paid Argello 5 million ($1.44 million) and 350,000 reais ($100,519), respectively. Executives at those firms were arrested at earlier stages of the probe.

    Other builders are being investigated, according to the statement.

    Representatives at UTC and OAS did not respond immediately to requests for comment. OAS requested bankruptcy protection last year.

    Dozens of executives from Brazil's top construction and engineering firms have been charged with bribery and money laundering, and about 50 politicians are being investigated for receiving kickbacks off contracts with Petrobras.

    Tuesday's police raids took place in the states of Sao Paulo and Rio de Janeiro and in the federal district, according to a police statement. Potential crimes under investigation include corruption, money laundering and criminal association.

    http://www.reuters.com/article/brazil-corruption-idUSL2N17F0AX
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    Fitch cuts Saudi Arabia's IDR ratings to 'AA-' from 'AA'


    Fitch Ratings said on Tuesday it had cut Saudi Arabia's long-term foreign and local currency issuer default ratings to 'AA-' from 'AA' with a negative outlook as oil prices remain weak.

    "The downward revision of our oil price assumptions for 2016 and 2017 to $35/b and $45/b, respectively, has major negative implications for Saudi Arabia's fiscal and external balances," the ratings agency said in a statement.

    Brent crude was trading at $43.42 on Tuesday.

    Fitch also said it also considered Saudi Arabia's geopolitical risks to be high relative to 'AA'-rated peers, noting tensions with longstanding rival Iran and Riyadh's military intervention in Yemen and Syria.

    The agency said it expected Saudi Arabia's deficit-to-GDP ratio to narrow only marginally in 2016 and more substantially in 2017 on the back of a moderate recovery in oil prices.

    The government's deficit widened to 14.8 percent of GDP in 2015 from 2.3 percent in 2014 after continuous surpluses since 2010, Fitch noted.

    Fitch said Saudi Arabia's real gross domestic product growth would likely slow to 1.5 percent in 2016 from 3.4 percent in 2015, with 1.7 percent growth expected in 2017.

    "We expect oil output to stabilise and non-oil GDP to be hit by fiscal consolidation measures and weaker confidence," Fitch said.

    The agency said monetary policy remained constrained by the peg to the U.S. dollar but a change in the peg was highly unlikely despite heightened speculation about a devaluation.

    http://www.reuters.com/article/saudi-ratings-fitch-idUSL3N17F399
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    US Import Prices Tumble For 20th Month In A Row As China Exports Most Deflation Since 2009


    For the 20th month in a row, US Import Prices dropped YoY (down a worse than expected 6.2% YoY) with China exporting deflation at the fastest pace since 2009...
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    The overall deflationary streak is the longest since 1999.

    http://www.zerohedge.com/news/2016-04-12/us-import-prices-tumble-20th-month-row-china-exports-most-deflation-2010

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    Shandong Shanshui Cement says courts order it to pay creditors $372 mln


    Chinese courts have ordered cash-strapped Shandong Shanshui Cement Group Ltd to pay back its creditors 2.4 billion yuan ($372 million), the company said in a statement posted on the Shanghai Clearing House website on Tuesday.

    The company said it was unlikely to be able to make the required payments due to financial difficulties, and the courts would take steps such as auctioning off the firm's assets to meet these obligations.

    Defaults have accelerated among Chinese companies, particularly in the heavy industrial sectors including steel and cement, which have been hard hit by China's economic slowdown.

    Bond defaults by the cement maker, a subsidiary of Hong Kong-listed China Shanshui Cement Group Ltd, had led creditors to turn to legal avenues to seek repayments.

    Shandong Shanshui Cement's statement to the clearing house outlined the current status of almost 100 suits against the indebted company and showed that various courts had ordered it to pay back principal and interest to creditors burnt by unmet bond repayments.

    Reuters was unable to reach Shandong Shanshui Cement for comment.

    Courts have ruled on eight out of a total 96 cases against the company, although these were some of the largest suits, the statement showed. The total amount being sought is around $764 million.

    The courts have ordered repayments to be made to creditors including China Merchants Bank, Qilu Asset Management and regional lender China Guangfa Bank (CGB).

    http://www.reuters.com/article/shanshui-cement-default-idUSL3N17F34P
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    Iceland's Pirate Party Polls At Stunning 43% Following PM's Resignation


    So what is the Pirate Party? Motherboard explains:

    Founded in 2012, the Icelandic Pirate Party was modeled after the Swedish organization of the same name founded six years earlier. An anti-establishment party founded on principles of direct democracy, copyright reform, and personal privacy, the Icelandic Pirate Party elected its first representatives to Parliament in 2013.

    Sounds good to me.

    In recent years, the Pirate Party has enjoyed an astounding level of popularity in the country, becoming the most popular political party in Iceland in early 2015. In the wake of the Panama Papers scandal the Party’s popularity has only increased, with a recent poll suggesting that 43 percent of the roughly 320,000 people that call Iceland home support the Pirates.

    Although the Pirates have yet to name a candidate for prime minister, Helgadóttir expects the Party to put forth a nomination in the near future. She remains optimistic that the Pirates will have a solid base going into the elections and anticipates the party gaining several more seats in Parliament. Beyond that, said Helgadóttir, she and her colleagues are just taking things one day at a time, waiting to see how Iceland’s political drama unfolds.

    “I’m really excited to see who is going to answer our call when we ask people to join us,” said Helgadóttir. “It’s going to be a real party, not just a political party. This is a chance to fix this broken democracy that we have and maybe it will survive this crisis that democracies all around the world are facing. We’re going to have so much fun together, and if [our agenda] goes through, democracy might have some hope in this world.”

    And yes, there is a United States Pirate Party.

    http://www.zerohedge.com/news/2016-04-12/icelands-pirate-party-polls-stunning-43-following-pms-resignation

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    Oil and Gas

    Russia, Saudi Arabia Reach Oil-Freeze Consensus, Interfax Says


    Saudi Arabia and Russia have reached an agreement that means the Persian Gulf nation will make a final decision on freezing oil production regardless of whether Iran agrees to join, Interfax reported Tuesday.

    The consensus was reached during talks between the two nations on Tuesday, Interfax reported citing an unidentified “informed diplomatic source.”

    At least 16 nations including the world’s two largest crude oil producers will gather in Doha on April 17 to discuss freezing output at January levels in order to stabilize an oversupplied oil market. Saudi Arabia has insisted it would only commit to a production cap if Iran follows suit, a proposal that Iran’s oil minister has dismissed as “ridiculous.”

    http://www.bloomberg.com/news/articles/2016-04-12/russia-saudi-arabia-reach-oil-freeze-consensus-interfax-says
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    Andurand Capital sees large oil inventory draws from next year


    Prominent oil trader Pierre Andurand said on Tuesday he expects global oil stocks will stop growing in the next few months and there will be large inventory draw downs from next year.

    Andurand, the managing partner of London-based hedge fund Andurand Capital, said at the FT commodities global summit that he expected oil prices to rise to $60 per barrel later this year and $80 in 2017.

    http://www.reuters.com/article/andurand-oil-inventory-idUSL5N17F3FT
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    Engie, Gazprom agree on long-term gas price revision


    French gas and power group Engie and Russia's Gazprom Export have agreed to adapt the price of long-term gas supply contracts to fit market conditions, Engie said in a statement on Tuesday.

    Gazprom had said in February that Engie was suing its Gazprom Export unit to revise prices on a natural gas supply contract. Engie filed a suit at the Arbitration Institute of the Stockholm Chamber of Commerce late last year, Gazprom said.

    "With this agreement, Engie has de-risked its long-term supply contracts for the next years by adjusting their pricing to market conditions," Engie Executive Vice-President Pierre Chareyre said in a statement.

    A source close to Engie said that the gas price, which before had been indexed mainly to oil prices, would now be linked more to market prices for gas, notably the PEG Nord (Point Echange Gaz) in France's northern gas price zone.

    He declined to elaborate on the details.

    On Monday, Gazprom also said it had reached an agreement with Engie and that the French energy group had halted arbitration proceedings.

    Engie said it signed its first gas supply contracts with Russia more than 40 years ago. Engie's supply contracts with Gazprom Export this year represent about 22 percent of the group's long-term supplies in Europe, it added.

    http://www.reuters.com/article/engie-gazprom-idUSL5N17F4CU

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    Schlumberger to limit Venezuela operations on payment problems


    Oilfield services provider Schlumberger Ltd said it would reduce its operations in Venezuela due to payment problems, a further sign of the cash crunch facing the OPEC nation because of weak oil markets.

    Venezuelan state oil company PDVSA, the exclusive operator of the country's oilfields, has built up billions of dollars in unpaid bills to service providers as a result of cash-flow problems.

    "Schlumberger appreciates the efforts of its main customer in the country to find alternative payment solutions and remains fully committed to supporting the Venezuelan exploration and production industry," the company said in a statement.

    "However, Schlumberger is unable to increase its accounts receivable balances beyond their current level."

    The company said the reduction will take place through this month, allowing for a safe wind-down of operations.

    Schlumberger in 2013 gave PDVSA a $1 billion credit line to allow it to continue delivering services despite the accumulating debts. It took a $49 million loss last year due to Venezuela's currency devaluation and another $472 million in 2014 for the same reason.

    PDVSA in a statement said it "categorically denies information reflected in certain international media regarding a supposed reduction in operations by services firm Schlumberger, Ltd."

    It added that "additional work required by the corporation will be distributed to other companies that provide similar services," without elaborating.

    A slew of major U.S. corporations have taken sizeable writedowns for their Venezuela operations due primarily to a steadily weakening currency.

    Schlumberger, which in March forecast a 15 percent drop in first-quarter revenue from the fourth, reaffirmed the $6.5 billion forecast on Tuesday. Houston-based Schlumberger's shares were up 2.3 percent at $75.55 in extended trading.

    http://www.reuters.com/article/schlumberger-venezuela-idUSL3N17F4PF

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    China March crude oil imports off record, Q1 gains 13 pct on year


    China's crude oil imports rose nearly 22 percent on a daily basis in March from a year earlier, off a record-high in February, while imports for the first quarter grew over 13 percent from the same period in 2015, official data showed.

    Chinese imports have been picking up in recent months due to strong demand from independent refiners and better refining margins. Robust purchases from these so-called "teapot" plants have caused severe port congestion in eastern Shandong province, a hub for the independents.

    March imports stood at 32.61 million tonnes, or 7.68 million barrels per day (bpd), easing from a record rate in February of 8 million bpd, according to numbers issued on Wednesday by the General Administration of Chinese Customs C-CNIMP-PRM.

    For the first quarter, imports rose 13.4 percent on the year to 91.1 million tonnes, or about 7.31 million bpd. That would be an increase of nearly 800,000 bpd on average during the period.

    Independent refineries have been ramping up their crude processing rates and boosting fuel sales as low global oil prices provide higher margins. The jump in their crude runs has even forced many state oil firms to make rare cuts in refinery throughput.

    But hefty levels of imports may not last into the second quarter as inventories have swollen.

    "China's crude import growth is unlikely to sustain at Q1 levels because demand is seasonally lower in Q2 and there has been some port congestion issues which will slow buying," said Virendra Chauhan of consultancy Energy Aspects.

    A senior official with Sinopec's trading unit said on March 31 that China's crude oil imports were expected to rise to 7.5 million bpd in 2016, likely trumping the United States as top importer.

    Fuel exports in March rose 25.4 percent over February to 3.75 million tonnes, as China continues to export more diesel and gasoline amid a growing supply surplus and weak domestic demand for diesel fuel from the industrial and construction sectors.

    Net fuel exports were 1.30 million tonnes in March. 

    China has granted refiners additional fuel export quotas of more than 14 million tonnes, bringing the total issued so far this year to more than 35 million tonnes, a trade source said last week.

    Earlier on Wednesday, the National Development and Reform Commission said domestic consumption of key transportation fuels gained 7.2 percent on year, with diesel up nearly 3 percent, reversing a decline seen in the first two months of 2016.

    https://mail.google.com/mail/u/0/?shva=1#inbox?compose=1540e4da7489afbe
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    Pioneer to Add Up to 10 Drilling Rigs Once Oil Prices Rebound

    Pioneer to Add Up to 10 Drilling Rigs Once Oil Prices Rebound

    Pioneer Natural Resources Co., an oil and natural gas explorer, will add five to 10 drilling rigs if crude prices rebound to $50 a barrel, said Chief Executive Officer Scott Sheffield.

    West Texas Intermediate, the U.S. benchmark crude, should reach that threshold by the end of the year or in early 2017, Sheffield said at an industry conference in New York on Tuesday. Oil futures were up 3.5 percent to $41.77 a barrel on the New York Mercantile Exchange at 11:40 a.m. Prices are down about 20 percent in the past year.

    The number of active oil rigs in the U.S. as of April 8 declined to the lowest level since 2009, Baker Hughes Inc. data show.

    Irving, Texas-based Pioneer expects "a major drop" in U.S. production in the third quarter and is not yet adding more hedges, Sheffield said.

    Output from U.S. shale formations will drop to 4.84 million barrels a day in May, the lowest in almost two years, a report Monday from the Energy Information Administration showed. Still, American crude supplies probably rose last week, remaining near the highest level since 1930, a Bloomberg survey showed.

    http://www.bloomberg.com/news/articles/2016-04-12/pioneer-to-add-up-to-10-drilling-rigs-once-oil-prices-rebound
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    Alternative Energy

    US Researchers Develop Bacteria-Powered Solar Panel


    A typical "traditional" solar panel on the roof of a residential house, made up of 60 cells in a 6x10 configuration, generates roughly 200 watts of electrical power at a given moment. (Representational Image)

    NEW YORK:  In a first, a team of US researchers has created a bio-solar panel that can generate 5.59 microwatts of energy - a big step in the evolution of bacteria-powered energy to run small devices in remote areas where regular battery replacement is not possible.

    "Once a functional bio-solar panel becomes available, it could become a permanent power source for supplying long-term power for small, wireless telemetry systems as well as wireless sensors used at remote sites where frequent battery replacement is impractical," said study co-author Seokheun "Sean" Choi from Binghamton University.

    The researchers connected nine biological-solar (bio-solar) cells in a 3x3 pattern to make a scalable and stackable bio-solar panel.

    The panel continuously generated electricity from photosynthesis and respiratory activities of the bacteria in 12-hour day-night cycles over 60 hours.

    "This research could also enable crucial understanding of the photosynthetic extracellular electron transfer processes in a smaller group of microorganisms with excellent control over the microenvironment, thereby enabling a versatile platform for fundamental bio-solar cell studies," Mr Choi noted.

    A typical "traditional" solar panel on the roof of a residential house, made up of 60 cells in a 6x10 configuration, generates roughly 200 watts of electrical power at a given moment.

    The cells from this study, in a similar configuration, would generate about 0.00003726 watts. So it isn't efficient just yet but the findings open the door to future research of the bacteria itself.

    "The metabolic pathways of cyanobacteria or algae are only partially understood, and their significantly low power density and low energy efficiency make them unsuitable for practical applications," noted Mr Choi in a paper published in the journal Sensors and Actuators B: Chemical.

    "There is a need for additional basic research to clarify bacterial metabolism and energy production potential for bio-solar applications," he added.

    http://www.ndtv.com/world-news/us-researchers-develop-bacteria-powered-solar-panel-1394688

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    Agriculture

    Germany backs EU plan to approve weedkiller glyphosate


    Germany plans to back an EU proposal that would allow the continued use of glyphosate in weedkillers, according to a letter from the agriculture ministry.

    Glyphosate is used in many herbicides including Monsanto's Roundup, but has provoked a dispute between EU and U.N. agencies over whether it might cause cancers.

    The EU last month delayed a decision on whether to approve a European Commission proposal to extend the authorization of glyphosate for 15 years until 2031. The existing authorization is due to lapse in June.

    In the German letter, first reported by daily Sueddeutsche Zeitung, the ministry's plant protection unit says it agrees with the assessment of the European Food Safety Authority (EFSA), which issued an opinion that glyphosate was unlikely to cause cancer.

    The EFSA's conclusion was at odds with the view of the World Health Organization's International Agency for Research on Cancer (IARC), which has classified glyphosate as "probably carcinogenic to humans".

    Environmental campaigners have called for a ban and a German environmental group said earlier this year it had found traces of the chemical in 14 of the country's most popular beers.

    The EFSA study focused on glyphosate as a single active substance, but the European Commission has said it would seek to identify whether some products should be banned because of the substances they combine with glyphosate, which could add to risks.

    France's health and safety agency said last week it was poised to ban weedkillers that combine chemicals glyphosate and tallowamine because of concerns over possible health risks.

    http://www.reuters.com/article/health-eu-glyphosate-germany-idUSL5N17F35R
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    Vale prepares joint bid with Apollo for Anglo's Brazil fertiliser business


    Brazilian miner Vale is teaming up with US private equity firm Apollo to bid for Anglo American's niobium and phosphates business in Brazil, three sources familiar with the matter said on Tuesday. 

    A sale of the assets, used for making fertilisers, could fetch around $1-billion for Anglo American. 

    The London-listed miner has said it wants to raise as much as $4-billion from divestitures, in order to cut net debt to under $10-billion by the end of the year as it grapples with a commodity price slump. A spokesperson for Anglo said the sale process is progressing as planned. 

    Vale declined to comment, while Apollo did not immediately respond to requests for comment. Two separate sources said that The Mosaic Company, the world's largest phosphate and potash supplier, could also be interested in the sale process, with binding bids expected in a few weeks. 

    Vale is the biggest producer of phosphate in Brazil, which in turn is the planet's fifth-biggest user of fertiliser, according to its website. It owns potash mine Taquari-Vassouras, while Anglo's assets include Ouvidor, Brazil's second-largest producer of phosphate rock. Mining industry sources said that Vale could extract synergies due to the proximity of Anglo's assets to its own, while Apollo could help provide capital at a time when many mining companies are struggling with their balance sheets. 

    Private equity firms have been seeking to capitalise on the commodity price slump, but have struggled to compete with mining companies which can offer higher prices based on potential synergies in deals. 

    Vale is itself seeking to slash its net debt by $10-billion and plans to sell assets to help insulate itself against further falls in iron-ore and nickel prices, after it announced its biggest loss in decades in February. 

    Last week it denied reports that it was seeking to raise cash by selling a minority stake in its fertiliser unit. "They are not selling because they are looking at buying in this area," one of the sources said.

    http://www.miningweekly.com/article/vale-prepares-joint-bid-with-apollo-for-anglos-brazil-fertiliser-business-sources-2016-04-12
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    Precious Metals

    Russia's Polyus Gold plans gradual free float increase -paper


    Polyus Gold, Russia's largest gold producer, may place at least 5 percent of its shares in Moscow in the next few months to comply with listing rules, Vedomosti newspaper reported on Wednesday.

    The company, controlled by the family of Russian tycoon Suleiman Kerimov, has a free float of 5 percent. It needs to raise this to at least 10 percent to meet the requirements for the first listing level, which the Moscow Exchange upgraded it to on Tuesday.

    Polyus plans a gradual increase in its free float but is yet to decide on how to do it, its chief executive Pavel Grachev, told a conference in Moscow on Tuesday.

    The company may sell some of its treasury shares, which it holds after a recent buy-back, or shares may be sold by its controlling shareholder, Vedomosti quoted Grachev as saying.

    It could be done in several private deals or in a public placement, Grachev told Interfax news agency on Tuesday. Polyus did not immediately comment when contacted by Reuters.

    The company's market value was at 705 billion roubles ($10.7 billion) at the market close on Tuesday, up 29 percent so far this year partially thanks to higher global gold prices.

    "We welcome the potential liquidity increase (currently $300,000 traded daily), but this alone would be insufficient to warrant a premium to the market price," analysts at Aton said.

    Polyus secured a credit line worth $2.5 billion from Russia's largest lender Sberbank earlier this year which it used to finance a $3.4 billion buy-back of its shares from its main shareholder.

    http://www.reuters.com/article/russia-polyus-gold-idUSL5N17G13E
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    Base Metals

    China copper imports hit record in March, up 30 pct in Q1


    China's copper arrivals hit a record in March, pushing up total imports 30.1 percent in the first quarter from last year, after price differentials between domestic and international markets favoured imports in previous months.

    Arrivals of anode, refined copper, copper alloys and semi-finished copper products reached 1.43 million tonnes in January to March, data from the General Administration of Customs showed on Wednesday.

    In March, imports were at a monthly record 570,000 tonnes versus the previous record 536,000 tonnes in January 2014. That rose 35.7 percent from the Lunar New Year holiday month of February and 39 percent higher from a year earlier.

    March imports also reflected that importers had scheduled more shipments for expected seasonal demand in April and May, said traders.

    Still, high imports in the first quarter did not reflect domestic demand as the growth in world's second-largest economy has slowed, said traders. Imports added supply pressure in the country, prompting Chinese smelters to consider raising exports.

    "Strong imports were because of good arbitrage ratios. Price differentials between Chinese prices and the LME favoured imports in March, as well as in the whole first quarter mostly," said Zhou Jie, a trade manager at China International Futures (Shanghai).

    Credit had increased to the market in March from the previous two months, supporting importers' buying, he added.

    Zhou said imports in April may stay strong, but that could be off March's record as credit currently was not as good as last month.

    Helen Lau, analyst at Argonaut Securities also sees lower imports in April due to high inventories in China.

    Refined copper stocks monitored by the Shanghai Futures Exchange CU-STX-SGH hit a record on March 18, though they have dropped since.

    Domestic demand for spot refined copper has improved from the past two months as factories bought more metal for the peak production season in April and May, said a trader at a state-owned smelter. The demand was still weaker than the same time previous years.

    Still, a trader at a large copper rods production plant in the southern province of Guangdong said many small factories were struggling with a cash crunch and did not have up-front cash to buy metals, which has forced some to cut orders.

    "Since last year, many rods sellers have asked for a cash-for-delivery term because of fears of default. This year, some power cables and wires producers are asking the same, which means the cash crunch is extending," he said.

    Imports of raw material copper ores and concentrates jumped 34 percent from a year ago to 4 million tonnes in the first quarter.

    Ore imports in March stood at 1.37 million tonnes, down 6.2 percent from February.

    Firm domestic aluminium prices limited exports in the first quarter as the prices have risen about 20 percent since a record low in November 2015.

    Exports of primary aluminium, alloy and semi-finished aluminium products fell 11 percent on-year to 1.08 million tonnes in January to March.

    March outflows were 420,000 tonnes, up 50 percent from February 2016 and 16.7 percent higher than a year earlier.

    http://www.reuters.com/article/china-economy-trade-metals-idUSL3N17F28D
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    Taseko signs power cost deferral agreement for Gibraltar Mine


    Taseko announces that an agreement to defer up to 75% of power costs for the Gibraltar Mine has been signed, retroactive to March 1, 2016.

    In February, the Government of British Columbia announced a five-year power rate deferral program for BC mines. This deferral program, which was put in place to help the Province's mining industry during the weak economic environment, allows qualifying mines to defer up to 75% of their electricity costs based on a sliding-scale of metal prices. At today's copper price, the maximum deferral of 75% will apply.

    Russell Hallbauer, President and CEO of Taseko, commented, "Electricity is one of Gibraltar's biggest expenses; accounting for nearly 10% of the mine's total operating costs. This deferral program will reduce Gibraltar's annual spending by up to C$18 million and is another initiative to help the Company ensure sufficient working capital during this extended period of lower copper prices. Along with the other cost containment initiatives implemented over the past year, the Company is well positioned to manage through this challenging time. We have worked aggressively to reduce operating costs, as evidenced by the 15% reduction in cost per ton milled achieved in 2015 to C$9.41 in the fourth quarter. The impact of the cost deferral program is equivalent to a further C$0.60 per ton milled reduction."

    "Cooperative agreements between industry, government and industry associations can only be achieved through strong working relationships which come as a result of management teams with experience in the regions they operate," concluded Mr. Hallbauer.

    http://www.marketwatch.com/story/taseko-signs-power-cost-deferral-agreement-for-gibraltar-mine-2016-04-11-17202490
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    Russian tycoon Abramovich offers to buy Norilsk shares worth $158 mln


    A company controlled by Russian billionaire Roman Abramovich and partners has offered $158 million to buy 0.79 percent of shares in Norilsk Nickel to increase its stake in the mining giant to more than 6 percent, Norilsk said on Tuesday.

    The price offered is equivalent to Norilsk's average share price on April 4-8 and to around $12.63 per American Depository Receipt (ADR), the company said in a statement.

    Norilsk holds the shares following a share buyback programme last year. Abramovich, owner of Chelsea soccer club, and his partners in Crispian Investments Limited already own 5.5 percent of Norilsk, the world's biggest palladium producer and second-biggest nickel producer.

    Norilsk said it will consider the offer at a board of directors meeting on April 18. The purchase would take Crispian's stake to 6.29 percent.

    Norilsk's ADRs in London were trading at $13.08 in London on Tuesday after falling 29 percent in the past year as the company was hit by the commodities slump and weak Russian economy. Its shares in Moscow were down 1 percent on Tuesday.

    http://www.reuters.com/article/russia-norilsk-idUSL5N17F1AZ
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    Steel, Iron Ore and Coal

    China Sinosteel extends bond repayment deadline for 8th time


    Chinese state-owned steelmaker Sinosteel has once again postponed its deadline to pay off interest on 2 million yuan ($309,607.11) of enterprise bonds, the company said in a statement on the website of China's bond clearinghouse.

    That marks the eighth time the company has postponed payment on bonds issued in 2010 with an option to redeem at year five.

    The company became the first steel producer to default on domestic bonds on missing the initial deadline on Oct. 12, 2015 and the second state-owned company to not meet payment on notes behind Baoding Tianwei Group, a manufacturer of power transformers.

    Recovery prospects on the bonds are dubious, analysts say, as China has pledged to fight overcapacity in the steel and coal sectors. It has said it will cut crude steel production capacity by 100 million-150 million tonnes within the next five years and reduce the size of the coal industry.

    http://www.reuters.com/article/china-debt-sinosteel-idUSL3N17F315
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    Peabody, world's top private coal miner, files for bankruptcy


    Peabody Energy Corp, the world's largest privately owned coal producer, filed for U.S. bankruptcy protection on Wednesday in the wake of a sharp fall in coal prices that left it unable to service a recent debt-fueled expansion into Australia.

    The company listed both assets and liabilities in the range of $10 billion to $50 billion, according to a court filing. (1.usa.gov/1YsVlD0)

    Peabody's Chapter 11 bankruptcy filing ranks among the largest in the commodities sector since energy and metals prices began to fall in the middle of 2014 as once fast-growing markets such as China and Brazil began to slow.

    "This was a difficult decision, but it is the right path forward for Peabody," Chief Executive Officer Glenn Kellow said in a statement. "This process enables us to strengthen liquidity and reduce debt, build upon the significant operational achievements we've made in recent years and lay the foundation for long-term stability and success in the future."

    Peabody has secured $800 million in debtor-in-possession financing from both secured and unsecured creditors, including a $500 million term loan, $200 million bonding accommodation facility and a letter of credit worth $100 million, the company said in release.

    Peabody's debt troubles date back to its $5.1 billion leveraged buyout of Australia's Macarthur in 2011, a coveted asset at the time meant to position it as a supplier of metallurgical coal for Asian steel mills.

    But as demand for metallurgical coal fell, particularly in China, Peabody's financial woes intensified. It made a $700 million writedown on its Australian metallurgical coal assets last year.

    Producers accounting for about 45 percent of U.S. coal output have filed for bankruptcy in the current industry downturn, based on 2014 government figures.

    http://www.reuters.com/article/peabody-energy-bankruptcy-idUSL3N17G29T
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    China's March coal imports up 15.6 pct as restocking begins


    China imported 19.69 million tonnes of coal in March, up 15.6 percent on the year, the country's customs authority said on Wednesday, as power plants sought to replenish stocks ahead of the peak summer consumption period.

    Imports in the first quarter reached 48.46 million tonnes, down 1.2 percent from the same period of last year, according to the General Administration of Customs.

    "Imports from March have shown a recovery, which is related to the increase in domestic prices, and I believe that the recovery will be sustained into April and May," said Zhang Xiaojin, an analyst at Everbright Futures.

    Zhang said declining stockpiles, tougher domestic production controls and declining import volumes over January and February had raised the appetite of traders.

    China's coal sector has been reeling as a result of slowing domestic demand and excess capacity. This has also curbed the country's appetite for imports, which fell as much as 29.9 percent over the whole of 2015.

    While coal prices at the port of Qinhuangdao in Hebei province SH-QHA-TRMCOAL have gained 5.4 percent so far this year, they are still down nearly 20 percent from a year ago, eroding some of the cost advantages enjoyed by foreign suppliers.

    Foreign suppliers have expressed concern that China could export some of its surplus coal, as it has done with steel and aluminium, but analysts said that was not likely, with Chinese coal still more expensive than coal from Australia and elsewhere.

    "Exports won't rise because although domestic coal prices are relatively cheap, those on the international market are also falling," said Wang Fei of China's Huaan Futures.

    While there will be a seasonal spike in coal demand going into the peak summer power consumption season, analysts are not expecting the market to strengthen in the coming months, or for imports to rise significantly.

    "After one or two months, buying by power plants is likely to slow, and the price trends at that point will depend on upstream capacity cuts and whether small-scale mines will be restructured," said Wang.

    The government has said it would shut 500 million tonnes of production capacity in the coming three to five years as it tries to reduce an annual capacity surplus estimated at around 2 billion tonnes.

    http://www.reuters.com/article/china-economy-trade-coal-idUSL3N17E30L

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    China Mar coal exports soar 297pct on yr


    China exported a total 1.27 million tonnes of coal in March, soaring 296.9% on year and up 39.56% on month, showed data from the General Administration of Customs (GAC) on April 13.

    It was the fourth consecutive rise on both year-on-year and month-on month basis, mainly attributed to low price advantage of China’s coal amid supply glut and falling prices in domestic market. Yet, coal exports still stayed at a relatively low level.

    The value of the March exports was $92.86 million, increasing 166.7% from a year ago and up 30.65% from February. That translated to an average price of $73.12/t, falling $35.69/t on year and down $4.98/t on month.

    In the first quarter of the year, China’s coal exports surged 185.1% on year to 2.79 million tonnes, with value up 90% to $109.4 million.

    http://en.sxcoal.com/0/144289/DataShow.html

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    Coal India cuts prices of top grade coal by up to 40pct


    Coal India has cut its prices of top grade coal by up to 40% on the back of ample coal production as well as a large stockpile, local media reported.

    The decision to cut prices of high energy content coal that competes directly with imported coal by 10-40% for both power producers and non-power producers for the first time in three years, following a global price crash of the commodity.

    "With a rapid fall in international coal prices and a stockpile at pit heads, high energy coal produced mainly from Eastern Coalfields, South Eastern Coalfields and North Eastern Coalfields have been slashed for over 90%," a senior Coal India official was cited as saying by Indian media the Economic Times.

    A senior power sector official said they have been told that the price cut offer will remain valid for the entire FY 2016-17 and it is being introduced on an experimental basis, the report said.

    According to fuel supply agreements signed by Coal India with its consumers, Coal India was to charge a 10% premium over its notified price for more than 90% of contracted quantity of coal supplied in a year. If the coal supplied was between 95% and 100% the premium was to be 20%. Any coal supplied over 100% of the contracted volume was to be charged 40% over the base price.

    "We have now decided to waive the premiums charged for supplying additional coal over 90% of contracted supply volume," said the Coal India official. "Thus the consumers get a 10% discount for receiving between 90% and 95% of the contracted volume.

    The discount would be 20% for volumes between 95% and 100% of the contracted volume and 40% for volumes beyond 100%," the official added.

    Coal India officials said that if the move prompts its consumer to lift more coal, then the company may even consider introducing discounts for cheaper category of coal used by power companies.

    At present, Coal India has a total stock of 58 tonnes while another 39 tonnes of coal is piled up at the power plants.

    http://en.sxcoal.com/0/144278/DataShow.html

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    China Jan-March iron ore imports +6.5 pct y/y - customs


    China's imports of iron ore rose 6.5 percent in the first quarter of the year, the country's customs authority said on Wednesday.

    Ahead of the release of official commodity import and export data for March, the General Administration of Customs also said that crude oil imports over the first three months of the year rose 13.4 percent, while coal imports fell 1.2 percent.

    http://www.reuters.com/article/china-economy-commodities-trade-idUSB9N17A00B
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    Australia's Fortescue says could exceed iron ore output target


    Australia's Fortescue Metals Group shipped a flat 42 million tonnes of iron ore in the March quarter, putting it on track to exceed its annual production target, while lowering cash costs by 6 percent from the previous quarter.

    Chief Executive Nev Power said that marked the ninth consecutive quarterly fall in costs for the world's No.4 producer of the steelmaking raw ingredient, reducing average cash costs between Jan. 1 and March 31 to $14.79 per tonne.

    "Our team has continued to innovate and deliver sustainable cost improvements generating strong cash margins," Power said in a statement on Wednesday.

    Large-scale producers such as Fortescue have been battling to curb costs amid volatility in indexed prices, which have left some smaller miners operating at a loss.

    Spot iron ore. stood at $58.50 a tonne on Wednesday after starting the year at $43.10 a tonne. But it is still way below prices nearing $200 a tonne seen a few years ago, as a slowdown in China's economy saps growth in steel demand.

    "Cash balances have increased by $200 million during the quarter, lowering net debt to $5.9 billion and positioning us for further debt repayment," Power said.

    Fortescue said shipments were running ahead of its annual 165 million-tonne target due to unseasonally mild weather at its mines in west Australia.

    But any upside to full-year guidance remains subject to the impact of weather during the current quarter, the company said.

    Fortescue maintained guidance for a fiscal 2016 average cash cost of $15 a tonne, largely in line with bigger Australian producers Rio Tinto and BHP Billiton.

    Rio Tinto and BHP are also expected to show strong quarterly production when details are released later this month, owing to the mild weather.

    Fortescue sold its ore for an average $45.94 a tonne over the March quarter, representing 95 percent of the Platts benchmark price after adjustments, according to the company.

    http://www.reuters.com/article/us-fortescue-output-idUSKCN0XA01C
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    China March steel exports surge 30 pct from year ago -customs


    China exported 9.98 million tonnes of steel products in March, up 30 percent from a year ago, customs data showed on Wednesday, as Chinese steel mills have managed to ship more abroad despite rising anti-dumping measures against the country.

    Surging steel exports by China, which produces about half of the world's steel output, have triggered fears by other countries that their domestic steelmakers will not be able to compete with Chinese mills. Exports hit a record 11.25 million tonnes in September.

    India's Tata Steel has put its British operations up for sale, blaming the move that leaves thousands of jobs at risk on a flood of cheap Chinese supplies. Those exports are driven by a slowing economy and a supply glut at home.

    March steel exports were up 23 percent from February's 8.11 million tonnes and shipments for the first quarter rose 7.9 percent to 27.83 million tonnes from a year earlier, the General Administration of Customs showed.

    The surge in March exports comes despite warnings from industry officials that Chinese steel exports will fall this year from a record 112 million tonnes in 2015 as protectionist policies are enacted.

    Still, with fewer domestic outlets for their production because of a slowing economy and amid overcapacity in the sector, Chinese steelmakers have turned to export markets to stay in business.

    Chinese steel production in January and February fell 5.7 percent from a year ago, government data last month showed. However, March output has increased at a modest pace amid a seasonal improvement in demand, according to traders. This boosted iron ore imports in March.

    China imported 85.77 million tonnes of iron ore last month, up 6.5 percent from a year ago, customs data showed. Total imports for the first quarter rose 6.5 percent to 241.56 million tonnes on the year, according to the data.

    But, iron ore demand in China is still expected to slow this year as the country aims to attack overcapacity in the steel sector.

    China aims to cut steel-making capacity by between 100 million and 150 million tonnes in the next five years.

    http://www.reuters.com/article/china-economy-trade-steel-idUSL3N17F2P6

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    China late-Mar key steel mills daily output down 1.8pct


    The daily crude steel output of China’s key steel mills dropped 1.87% from ten days ago to 1.63 million tonnes in late March, according to data released by the China Iron and Steel Association (CISA).

    Domestic prices of the six major steel products all increased recently, showed data from the National Bureau of Statistics (NBS), but it is still not enough to change the overall weakness materially. Debts and tight credit continued to restrict production recovery at many steel mills, as the industry undergoes the process of de-capacity.

    For the week ending April 8, 77.49% of the 163 key steel mills’ blast furnaces were in operation, flat on week, with capacity utilization at 83.47%, down 0.04% from a week earlier. Of these mills, 67.48% or 110 mills were in profit, up 6.13% week on week.

    By March 31, stocks of steel products in key steel mills fell 12.35% from ten days ago to 12.06 million tonnes.

    Meanwhile, social stocks of steel products continued to reduce. As of April 8, rebar stocks in 35 main cities stood at 5.20 million tonnes, down 5.83% compared with a week ago, and wires stocks dropped 10.85% on week to 1.07 million tonnes.

    Analysts expected downstream demand to improve further and steel prices to stay high in April, as the economy recovers while stocks stay low and production at reasonable level.

    http://en.sxcoal.com/0/144291/DataShow.html
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