Mark Latham Commodity Equity Intelligence Service

Tuesday 14th February 2017
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    The Hidden Side to the Reflation Trade Is China's Surging Prices

    Forget about Donald Trump. The global reflation trade may have another driver that proves to be more durable: China’s rebounding factory prices.

    The producer price index has staged an 10 percentage-point turnaround in the past 10 months, posting for January a 6.9 percent jump from a year earlier. Though much of that reflects a rebound in commodity prices including iron ore and oil, China’s economic stabilization and its efforts to shutter surplus capacity are also having an impact.

    For the global economy, it’s the pass-through of China’s rising costs via exports that matters, and Chinese manufacturers long squeezed by increasing wages have been raising their asking prices. For some market participants, it’s China rather than the U.S. that’s provided the main boost to global bond yields from their mid-2016 lows, rather than hopes for reflation from the new Trump administration’s tax and regulatory reforms.

    "The potential of the ‘reflation trade’ constructed around the narrative of a new administration stimulating the U.S. economy looks to be overstated," said Michael Shaoul, chief executive officer at Marketfield Asset Management in New York. "But the alternative version that is based on a solid recovery in the global economy that comfortably beats the muted expectations of investors would still seem to have plenty of time ahead of it."

    And the key to that turnaround is China, says Shaoul.
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    Telecommuting consumer uses less gasoline?

    "Stealth Recession" - The Mystery Of The Teleporting Commuter

    The game is afoot: call it the “Mystery of the Teleporting Commuter”.  Starting in October 2016, the amount of gasoline supplied to the US market started to decline on a year over year basis.  This negative trend accelerated in January, leaving both energy analysts and macroeconomic pundits to wonder if the US has entered a stealth recession.

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     We regularly look at US gasoline production in relation to the Department of Transportation’s “Miles Driven” data, and when you add that variable to the mix the mystery starts to clear.  Even though gasoline supplied was down 1.6% in October and -0.3% in November, the DOT data (November last month available) shows miles driven up 1.6% and 4.3%, respectively.  By this math, imputed fuel efficiency for the US fleet is improving noticeably compared to historical trends that date back to the 1970s – a trend that is worth watching in 2017.

    And while that’s an important piece of the puzzle, the real upshot is the gasoline data alone is not enough to conclude that the US economy has grabbed a lower gear or slipped into reverse.  The miles driven data shows we can (and probably are) still cruising along.

    Are you an American male between the ages of 35-54?  If so, congratulations (of a sort).  According to the US Department of Transportation’s Federal Highway Administration you drive more than any other age cohort/gender demographic.  A lot more, as it turns out: you clock an average of 18,858 miles/year, some 14% more than the national average of 16,550 miles/year.  The group least likely to get behind the wheel:  women over the age of 65, who drive an average of 4,785 miles/year.  If you are in neither camp, you can see how your demographic stacks up here:

    Regardless of where you are on that continuum, Americans do a lot of driving.  In fact, over the last 12 months ending November 2016, we put a collective 3,215 billion miles on the odometer.  That is the equivalent of driving back and forth to the Sun every 3 weeks.  And since most Americans (86% according to a 2009 Census study) commute to work alone in their car, taking an average of 25 minutes door-to-door, driving is closely correlated with employment levels.  All those miles behind the wheel are therefore an important economic indicator.

    It is for this reason that a Goldman Sachs note out this week about the decline of gasoline supplied to the US market caught a lot of attention.  Less gas consumption should, logically, mean fewer people doing the daily commute.  Not to mention shopping, going out to eat, and everything else Americans like to do.

    The upshot is this: implied gasoline supply to the US based on data from the EIA was down 5.2% in January.  These are levels consistent with a recession, even though Goldman is careful to point out that they don’t expect one is in the works.  So what’s going on?

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    China mulls radical output cuts, port coal ban in war on smog - document

    China is considering forcing steel and aluminium producers to cut more output, banning coal in one of the country's top ports and shutting some fertiliser and drug plants as Beijing intensifies its war on smog, a draft policy document shows.

    The Ministry of Environmental Protection (MEP) has proposed the measures in the document seen by Reuters. If implemented, they would be some of the most radical steps so far to tackle air quality in the country's most polluted cities.

    The move comes after China's northeast has battled some of the worst pollution in years as emissions from heavy industry, coal burning in winter and increased transport have left major cities including Beijing blanketed in thick smog.

    The document outlines plans to cut steel and fertiliser capacity by at least half and aluminium capacity by at least 30 percent in 28 cities across five regions from around late November to late February.

    By July, it would stop Tianjin, one of the nation's busiest ports, handling coal, with shipments diverted to Tangshan, 130 kms (80 miles) to the north, which would shift large volumes of coal transport from trucks to rail.

    Tianjin, China's second largest by cargo volume, is the key hub for trading 100 million tonnes a year of seaborne coal and domestic coal that flows south from Inner Mongolia, the report said.

    By September, ports in Hebei province would not be allowed to use trucks to carry coal from railways to ships.

    Based on the cuts over three months, the measures would reduce China's total annual steel output by 8 percent annually and aluminium output by 17 percent, according to Reuters calculations.

    A source with direct knowledge of the proposal said the environmental watchdog has distributed the draft to relevant local governments and companies seeking reaction.

    The Ministry declined to comment on the draft. The Ministry of Transportation did not respond to requests for comment.

    It's not known when the Ministry expects to decide on whether to implement the plan, one of the most extreme since the government launched its offensive on pollution three years ago.


    If introduced, the steps would likely further support rallies in aluminium, steel and coal prices, which have been buoyed by China's efforts to shut excess capacity and clean up polluting sectors.

    Highlighting the difficulties enforcing that policy, Greenpeace said on Monday that China's operational steel capacity actually rose in 2016 after a high-profile closure program concentrated on already idled plants.

    Still, prolonged cuts in capacity will reignite worries about demand for raw materials like iron ore and coking coal.

    The steps will also cause major upheaval for utilities, miners and traders, as they seek alternative routes and storage for their coal.

    "I think these proposals are too radical. (The government) hasn't thoroughly considered the likely consequences and solutions to make it happen," said a coal trader based in China.

    The plans go further than an earlier proposal by Beijing's regional environmental watchdog to ban coal trucks and storage in Tianjin, which it estimated would cost the port 670 million yuan ($97 million) a year in business.


    The five regions affected are some of the most populated and most smog-plagued: Beijing, the port city of Tianjin and the neighboring province of Hebei, as well as Shandong, Shanxi and Henan.

    They account for one third of China's crude steel output, while Hebei, Henan and Shandong are the top three aluminium producing regions accounting for around 70 percent of total output.

    The Ministry also plans to close pesticide and pharmaceutical factories and fertiliser plants that use urea unless the chemicals and drugs are critically needed for the population, according to the document.

    The news comes as the country's northern regions braces for more heavy smog this week. On Monday, state media reported Chinese cities that sit on three pollution "highways" have been told to coordinate efforts to reduce emissions.

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    Panama detains Mossack Fonseca founders on corruption charges

    The two founders of Panamanian law firm Mossack Fonseca were arrested on Saturday, the attorney general's office said, after both were indicted on charges of money-laundering in a case allegedly tied to a wide-ranging corruption scandal in Brazil.

    Firm founders Jurgen Mossack and Ramon Fonseca were detained because of the risk they might try to flee the country.

    Attorney General Kenia Porcell told reporters on Saturday that the information collected so far "allegedly identifies the Panamanian firm as a criminal organization that is dedicated to hiding assets or money from suspicious origins."

    Porcell said the one-year investigation that led to the arrests has been aided by prosecutors in Brazil, Peru, Ecuador, Colombia, Switzerland and the United States.

    Mossack Fonseca is also at the center of a separate case known as the Panama Papers, which involved millions of documents stolen from the firm and leaked to the media in April 2016.

    The fallout from the leaks provoked a global scandal after numerous documents detailed how the rich and powerful used offshore corporations to hide money and potentially evade taxes.

    On Thursday, prosecutors raided Mossack Fonseca offices seeking evidence, and the homes of the firm's founders were searched on Friday.

    Fonseca, a former presidential adviser in Panama, has previously denied that the firm had any connection to Brazilian engineering company Odebrecht, which has admitted to bribing officials in Panama and other countries to obtain government contracts in the region between 2010 and 2014.

    "This investigation in principle is not related to Odebrecht, but to the Lava Jato case," Porcell said, referring to the probe centered on Brazilian state-run oil company Petrobras.

    Fonseca has also denied any relationship with the Lava Jato case.

    Following the arrests, Mossack Fonseca defense lawyer Elias Solano called the accusations against the firm's founders "weak" and said he would challenge the evidence presented against his clients.

    A source in the prosecutors office told Reuters that an unidentified third lawyer with the firm had also been arrested, while a fourth faces an arrest warrant, but her whereabouts are unknown.

    The two additional lawyers were not named by Porcell.

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    Sinochem in early talks to buy stake in Noble Group

    China’s state-owned Sinochem is in early talks with Noble Group to buy an equity stake in the embattled trader, three sources familiar with the matter said, in a move that would help it gain access to the commodity trader’s global supply chain.

    Taking a stake in an internationally active trading house like Noble would help Sinochem, a big oil, gas and petrochemical company, in its ambitions to become a more globally active energy trader, and also develop China’s gas industry.

    The discussions are taking place as Noble looks to rejig its business units, cut debt and boost liquidity to fight a long-term downtrend in commodity prices.

    In November, Hong Kong-headquartered Noble said it had met its capital raising target of $2 billion as it sold assets, completed a rights issue and restructured its operations.

    The sources said the talks have not been completed and there is no assurance that a deal will be finalised.

    They said senior Noble executives visited China in recent months to hold talks with Sinochem’s management, and both sides also met at Noble’s U.S. regional hub in Stamford, Connecticut.

    The sources declined to be identified as they were not authorised to speak to the media.

    Sinochem did not immediately return a request for comment, and an external spokeswoman for Noble declined comment.

    Noble already has the backing of Chinese sovereign wealth fund China Investment Corp. (CIC), which participated in the company’s rights issue last year. The capital raising followed a slump in investor confidence as Noble’s accounting practices were questioned by Iceberg Research.

    CIC has a 9.6 percent stake in Noble, while Noble Chairman Richard Elman holds a stake of about 18 percent.

    The size of the planned stake or the amount to be invested by Sinochem has not yet been finalised, and any deal could face scrutiny in China as authorities there try to control capital outflows, sources said.

    The appeal of Noble for Sinochem is likely to be access to its global supply chain.

    A Sinochem source said the company was still conducting due diligence on Noble, which typically takes six months to a year. He said the company was looking at Noble’s North America energy trading, which could complement Sinochem’s existing portfolio.

    Noble specialises in shipping and storage logistics, rather than owning large production assets or refineries, and is also a major player in gasoline blending in the United States.

    Noble is also targeting Asia’s emerging liquefied natural gas (LNG) market as a core growth area, while Sinochem is likely to play a key role in China’s plans to expand its natural gas sector to reduce the share of polluting coal in its energy mix.

    Access to Noble’s LNG trading network could help with the Chinese plans.
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    Oil and Gas

    Saudi Arabia Tells OPEC It Cut Oil Output by Most in 8 Years

    Saudi Arabia told OPEC that it cut oil production by the most in more than eight years, going beyond its obligations under a deal to balance world markets.

    The kingdom reported that it reduced output by 717,600 barrels a day last month to 9.748 million a day, according to a monthly report from the Organization of Petroleum Exporting Countries. The group’s own analysts, who compile data from external sources, estimated that Saudi Arabia made a smaller 496,000 barrel-a-day cut -- in line with last year’s supply agreement.

    “OPEC has done particularly well, they’ve surprised most analysts,” Spencer Welch, director of oil markets and downstream at IHS Markit, said in a Bloomberg radio interview before the report was published. “Saudi Arabia has made a particular effort to boost compliance.”

    OPEC and Russia are leading a push by global producers to end a three-year oil surplus that sent prices crashing and battered their economies. While prices initially rallied 20 percent in the weeks after OPEC’s Nov. 30 agreement, the gains have since faltered on concern that rebounding U.S. output will fill the gap left by OPEC’s cuts.

    Saudi Arabia’s data indicate it’s pumping about 310,000 barrels a day below its specified target. Saudi Arabian Energy Minister Khalid Al-Falih had said on Dec. 10 that the kingdom was willing to cut even more than was required to demonstrate its commitment to the accord.

    In the same monthly report, Iraq, Venezuela and Iran told the organization they pumped more than allowed by the accord.

    Data Dispute

    The negotiations leading to OPEC’s agreement in November were marked by a dispute over which production data to use. The group’s so-called “secondary sources” numbers -- derived from six external estimates -- form the baseline for the accord, even though Iraq had argued that the figures weren’t accurate and initially insisted that only statistics supplied by member governments should be used.

    Iraq’s own data show that it’s exceeding its target by about 279,000 barrels a day, Venezuela’s show a surplus of 278,000 and Iran’s of 123,000 a day, according to the report.

    OPEC secondary sources estimates indicate a far higher degree of compliance, with the 11 countries subject to the accord complying by more than 90 percent. The group’s output fell by 890,200 barrels a day from a month earlier to 32.139 million in January, the data show.

    OPEC agreed in November to reduce production to 32.5 million barrels a day, although that total included about 750,000 barrels a day from Indonesia, which has since suspended its membership.

    Urging Compliance

    The 11 non-OPEC producers such as Russia, Kazakhstan and Oman who agreed to join in with output cuts haven’t complied as much, implementing a bit more than 50 percent of their pledged reduction, Kuwaiti Oil Minister Essam Al-Marzooq said Monday in Kuwait City. Kuwait, which chairs the committee that oversees compliance, is urging those countries to fulfill their commitments, he said.

    “At the time when producers signed the deal, the initial commitments were to gradually increase cuts until April and May, so we were expecting to see some producers not fulfilling the 100 percent cuts,” Al-Marzooq said. “We understand the circumstances, and in February we are talking to non-OPEC producers to raise their cuts according to their commitments.”

    OPEC’s January output still isn’t low enough to bring the oil market back into balance, let alone clear an inventory surplus the group estimates at about 300 million barrels, data from the report indicate.

    If the organization keeps output at January levels, that would be about 800,000 a day more than it expects the market to require in the first six months of the year -- adding about 140 million barrels to world stockpiles.

    The re-balancing process may be assisted by stronger-than-expected demand, OPEC said. The organization boosted its estimates for growth in world fuel consumption in 2017 by 35,000 barrels a day to 1.19 million a day.
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    IRANIAN Floating Storage is now at a new low!

    The IRANIAN Floating Storage is now at a new low! The tanker "DOVER" took off to South Korea just a while ago
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    LNG-Prices slide as supplies emerge from key regions

    Asian spot prices for LNG delivery in March fell during the week ended Feb. 10 on weak demand and steady supplies despite loading disruptions caused by bad weather at some Australian ports.

    Companies including U.S. LNG producer Cheniere Energy and Royal Dutch Shell were said by traders to be offering several cargoes over coming months, helping accelerate a downward trend in spot prices since January.

    Spot prices for March delivery were seen at around $7.20 per million British thermal units (mmBtu), 30 cents below the last assessment level, while April prices dipped below the $7 per mmBtu mark, traders said.

    In one of the biggest tender awards so far in 2017, Argentina filled requirements for 16 shipments over April-August, awarding 11 to Trafigura, three to Glencore and two to Cheniere.

    The transactions were done at a premium to gas prices at the UK's National Balancing Point (NBP) trading hub, varying in size depending on which of Argentina's terminals the gas would be delivered to, they said.

    Deliveries to Argentina's Bahia Blanca terminal, for example, show a 30-40 cent premium to NBP, some sources said.

    April gas prices at the NBP currently traded around $6.40 per mmBtu.

    Loading of cargoes from Australia's North West Shelf (NWS) liquefaction plant were briefly halted due to bad weather last week, shrugged off by traders as a fleeting hindrance.

    Thailand's state-owned oil and gas firm PTT is seeking an LNG shipment for the second half of March via a tender which will close on Feb. 15. The Thai firm was looking for a "wide spec" LNG cargo that means offers for lean or slightly-rich gas will be considered.

    Meanwhile, Britain is to take in its first-ever LNG from Peru later this month as converging prices between the two global benchmarks - the UK's NBP gas trading hub and Asian spot prices - made it more attractive to offload cargoes in Europe.
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    Venezuela falls behind on oil-for-loan deals with China, Russia

    Venezuela's state-run oil company, PDVSA, has fallen months behind on shipments of crude and fuel under oil-for-loan deals with China and Russia, according to internal company documents reviewed by Reuters.

    The delayed shipments to such crucial political allies and trading partners - which together have extended Venezuela at least $55 billion in credit - provide new insight into PDVSA's operational failures and their crippling impact on the country's unravelling socialist economy.

    Because oil accounts for almost all of Venezuela's export revenue, PDVSA's crisis extends to a citizenry suffering through triple-digit inflation and food shortages reminiscent of the waning days of the Soviet Union.

    The total worth of the late cargoes to state-run Chinese and Russian firms is about $750 million, according to a Reuters analysis of the PDVSA documents.

    At the end of January, PDVSA was late on nearly 10 million barrels of refined products that the company owes the firms - with shipments delayed by as much as 10 months, according to the documents. It also failed to make timely deliveries of another 3.2 million barrels of crude shipments to China's state-run China National Petroleum Corporation (CNPC).

    Shipments to China and Russia are critical for PDVSA's financial health because firms from the two countries purchase about a third of the PDVSA's total oil and fuel exports. The administration of Venezuela president Nicolas Maduro has for years relied on credit from the two nations, particularly China, to finance infrastructure and social investment in Venezuela.

    PDVSA did not respond to requests for comment. Venezuela's Petroleum Ministry declined to comment.

    During the decade-long oil boom that ended in 2014, Venezuela borrowed nearly $50 billion from China that it agreed to pay back in crude and fuel deliveries to state-run Chinese firms. Venezuela was the seventh largest crude supplier to China in 2016 and the largest in Latin America.

    Russia's state-run Rosneft (ROSN.MM) lent at least $5 billion under similar arrangements, but the details of those deals have not been disclosed.

    Now, PDVSA is struggling to make good on those promises. A total of 45 cargoes bound for Russian and Chinese companies are late for a variety of reasons, according to internal operational reports about shipments of crude and refined products.

    The problems include operational mishaps, such as refining outages and delayed cleaning of tanker hulls, and financial disputes with service providers owed money by PDVSA.

    The backlog of delayed or cancelled fuel cargoes represents about three months of the 88,000 barrels per day (bpd) of jet fuel and diesel that PDVSA must deliver under financing deals to Russia's Rosneft, China's PetroChina (601857.SS) and ChinaOil.
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    China’s independent refiners could get regulated away: Fuel for Thought

    China’s regulatory pendulum has swung from supporting independent refiners by encouraging competition and deregulation to favoring state-owned oil companies, which could have the impact of regulating many of the independents out of business.

    In early 2015 China’s independent refiners, or teapots, were set to soar. Beijing’s policy makers gave teapots permission to import crude and export refined products.

    Regulators are now reminding independents that they really are not independent. In 2017, rather than giving teapots full year import quotas, regulators will allot the quotas in several rounds, and the first round was delayed by half a month.

    If the allocation had been further delayed, “we would not have enough feedstock to sustain normal runs in the refinery in addition to having to pay a high demurrage,” said a source at a Shandong-based independent refiner.

    The government has also yet to award refined product export permits to independents, which under what is called the “processing trade route,” allows refiners to not pay taxes on the exports.

    Without the export permits, independents would end up paying taxes on refined products exports, forcing them on the domestic retail market, where they lack a competitive edge.

    Fueling stations, which supply about 80% the road transportation fuel in China, are owned by state-owned companies Sinopec and CNPC’s PetroChina. To be competitive, independents have to sell gasoline at about Yuan 1,000-Yuan 2,000/mt lower than their state-run competitors, an amount they can ill afford to charge and stay profitable.

    Why the about face on teapots?

    China’s government wants to reduce excess refining capacity and clamp down on independent refiners’ environmental non-compliance and tax evasion.

    The state-owned CNPC’s research arm estimated China currently has 15.14 million b/d of refining capacity, with teapots making up roughly 4.5 million b/d of that.

    China processed just 10.83 million b/d of crude oil in 2016, according to data from the National Bureau of Statistics, suggesting nearly one third of the capacity is surplus.

    Independents typically operate well below capacity, but with crude import quotas and product export quotas they were able to boost utilization rates to nearly 60% in 2016 from 30%-40% before 2015.

    But the independents have run afoul of regulators when it was found they were violating certain aspects of the import quota agreement. The refiners were found guilty not only of tax evasion, illegally reselling imported crude to non-quota holders, but also failing to fulfill their promises of phasing out refining capacities or building LNG storage.

    Nearly all of those investigated, big or small, were fined up to Yuan 1 billion ($145 million) in 2016, market sources said, and import rules became more strict.

    It’s difficult for us to make a profit without tax evasion,” said a Shandong-based independent refiner, a sentiment echoed by many of the others in the province. China’s teapots may also have simply lived out their usefulness as a supply stopgap during a widespread anti-corruption campaign against state-run refiners launched a few years ago under President Xi Jinping.

    The campaign resulted in the removal of several high profile senior officials from the three biggest state-owned companies—CNPC, Sinopec and CNOOC.

    While the anti-corruption investigations were ongoing there was a worry that the nation’s energy security could be at risk and independent refiners were given greater liberties in order to maintain China’s growing appetite for oil products.

    But since the purge of top executives, the state-owned firms are found to be running smoothly and the need for independent refiners has come into question.

    Even without permits, independent refiners can still export refined products, but would need to pay taxes, including a VAT and consumption tax. China’s government last month allowed a rebate on the VAT for refined products, and has indicated it may allow a rebate on consumption.

    The VAT rebate may help independent refiners, although even with a consumption tax rebate, independents would continue to have cash-flow issues as they must pay all taxes up front.

    China exported 3.04 million mt of refined products in January, up 1% year-on-year. Exports are expected to rise this year, although that increase will likely come at the expense of the independents.

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    Petronet LNG’s profit more than doubles

    Petronet LNG, India’s largest importer of the chilled fuel, on Monday reported a 132.5 percent increase in its quarterly net profit.

    The LNG importer said its net profit rose more than two times to 3.97 billion rupees ($59.3m) in the December quarter, as compared to 1.71 billion rupees in the same quarter a year before.

    Petronet LNG’s sales in the December quarter were at 59.77 billion rupees, up 24 percent from 48.21 billion rupees in 2015.

    During the second part of 2016, Petronet commissioned the regasification facilities under the Dahej LNG terminal’s expansion project. The terminal had been expanded from 10 mtpa to 15 mtpa.

    The company also owns the 5 mtpa Kochi LNG terminal in Kerala.
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    As oil price rebounds labour shortage looms in Alberta’s North

    Despite the high number of layoffs that have occurred in Alberta’s oilpatch the last few years, there happens to be a oilpatch labour shortage taking place at the moment in Alberta’s north according to Bruce Covernton of Big Fish Staffing. Bruce’s firm concentrates on connecting employers with suitable employees in Alberta’s energy industry.

    “Field workers are in short supply right now as the Alberta oil business, from producers to service companies, experiences a much anticipated turnaround,” says Mr. Covernton. “I’ve also seen an increase in temporary office jobs, not only field work.”

    With the prices of both oil and gas on the recent rise, there has been a sharp year over year increase in wells spud. Along with drilling activity comes the need for oilfield services. The oil business is subject to volatile commodity price cycles. The current labour shortage, which may seem hard to believe, is symptomatic of how fast activity can turnaround once projects become economic again.

    “For a field worker, there is tonnes of work right now, already this year, I’ve been approached by four different service companies asking if I have able workers that are willing to work field jobs and have the right certification.”

    However for former oilpatch workers, returning to the industry may be a decision that garners more thought than in previous years. And this would help explain why a shortage is even taking place right now to begin with.

    With wages largely not what they once were prior to 2014, workers have to decide whether they want to leave temporary jobs they may have found since being let go, or if still unemployed, go back to the industry knowing full well how cyclical it can be.

    “Contributing to the challenging shortage is the fact that many people have left the province or  the industry and the sustained downturn is leaving some reluctant to return as people are uncertain how long the uptick with last,” says Mr. Covernton. “What’s more, having the uncertainty of future work  is greater when not hired as a full time employee, and when there are mouths to feed and mortgages to pay, that uncertainty becomes harder deal with.”

    Yet as northern Alberta’s unemployment rate continues to stagnate, despite jobs available, Mr. Covernton thinks this gap will inevitably narrow – provided prices and activity show increased signs of stability and certitude.

    “If there’s anything I have learned over the years is that activity will come back, and once that does on a larger scale, jobs will be filled. Until that time people looking for field work should know that yes, there are plenty of good paying jobs available.”

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    Judge denies tribes' request to block final link in Dakota pipeline

    A U.S. federal judge on Monday denied a request by Native American tribes seeking to halt construction of the final link in the Dakota Access Pipeline, the controversial project that has sparked months of protests by activists aimed at stopping the 1,170-mile line.

    At a hearing, Judge James Boasberg of the U.S. District Court in Washington, D.C., rejected the request from the Standing Rock Sioux and Cheyenne River Sioux tribes, who argued that the project would prevent them from practicing religious ceremonies at a lake they contend is surrounded by sacred ground.

    With this decision, legal options for the tribes continue to narrow, as construction on the final uncompleted stretch is currently proceeding.

    Last week, the U.S. Army Corps of Engineers granted a final easement to Energy Transfer Partners LP (ETP.N), which is building the $3.8 billion pipeline (DAPL), after President Donald Trump issued an order to advance the project days after he took office in January.

    Another hearing is scheduled for Feb. 27, as the tribes seek an injunction ordering the Army Corps to withdraw the easement.

    Lawyers for the Cheyenne River Sioux and the Standing Rock Sioux wanted Judge Boasberg to block construction with a temporary restraining order on the grounds that the pipeline would obstruct the free exercise of their religious practices.

    “We’re disappointed with today’s ruling denying a temporary restraining order against the Dakota Access Pipeline, but we are not surprised," Chase Iron Eyes, a member of the Standing Rock Sioux tribe, said in a statement.

    The company needs to build a 1,100-foot (335 meter) connection in North Dakota under Lake Oahe, part of the Missouri River system, to complete the pipeline.

    The line would run from oilfields in the Northern Plains of North Dakota to the Midwest, and then to refineries along the Gulf of Mexico, and could be operating by early May.

    Judge Boasberg ordered Energy Transfer Partners to update the court on Monday and every week thereafter on when oil is expected to flow beneath Lake Oahe.

    The company did not respond to requests for comment.

    Iron Eyes said during an earlier conference call that the pipeline would also cause economic harm to Native Americans.

    In his statement, he said the tribe was still seeking an injunction against the pipeline, which would also be heard in Boasberg's court. They also are continuing to push for a full environmental impact statement that was ordered in the last days of the Obama Administration.

    "We continue to believe that both the tribes and the public should have meaningful input and participation in that process," he said.

    Thousands of tribe members, environmentalists and others set up camps last year on Army Corps land in the North Dakota plains as protests intensified. In December, the Obama Administration denied the last permit needed by Energy Transfer Partners, but with Trump's stated support of the pipeline that victory was short-lived for the tribes.

    The Army Corps has said it would close remaining camps on federal lands along the Cannonball River in North Dakota after Feb. 22.

    Tom Goldtooth, executive director of the Indigenous Environmental Network, one of the primary groups protesting the pipeline, said people would continue to leave the main camp. He said he expected more demonstrations around the country.

    Only a few hundred protesters remained, and crews have been removing tipis and yurts. The Standing Rock tribe has asked protesters to leave.
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    U.S. shale oil output to rise in March by 80,000 bpd: EIA

    U.S. shale oil production for March is expected to rise by the most in five months, government data showed on Monday, as energy companies boost drilling on the back of oil prices that are hovering over $50 a barrel.

    March oil production is forecast to rise by 79,000 barrels per day to 4.87 million bpd, according to the U.S. Energy Information Administration's drilling productivity report. That would be the biggest monthly rise since October.

    In the Permian shale play of West Texas and New Mexico, output is forecast to rise by more than 70,000 bpd to 2.25 million bpd, in what would be the biggest monthly rise since January 2016.

    Meanwhile, Eagle Ford production in Texas is expected to rise by 14,000 bpd to 1.08 million bpd, the first monthly increase since December 2015, EIA data showed.

    In North Dakota's Bakken field, production is forecast to fall by nearly 18,000 bpd to 976,000 bpd, the fifth consecutive month-on-month decrease.
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    Noble Energy increases revenues, cuts 2016 losses

    Noble Energy deeply cut expenses, increased revenues and reduced losses last year by 60 percent, according to earnings released on Monday.

    Noble, an oil and gas production company based in Houston, posted $252 million in losses in the fourth quarter of 2016, or 59 cents per share, $1.8 billion or almost 90 percent better than the $2 billion in losses over the same period in 2015. The company reported year-end losses of almost $1 billion, $1.4 billion better than the $2.4 billion posted in 2015.

    It cut expenses in the fourth quarter by almost 50 percent to $1.4 billion from $2.6 billion in 2015. Year-end spending dropped 15 percent to $4.8 billion last year from $5.7 billion in 2015.

    At the same time, the company increased revenues by just under 20 percent in the fourth quarter to $1 billion from $860 million in the last period of 2015. Year-end revenues increased 10 percent to $3.5 billion from $3.2 billion in 2015.

    Recent West Texas purchases, such as the $2.7 billion deal for Midland-based Clayton Williams Energy, closed in 2017 and were not included in last year’s earnings.

    Fourth quarter oil volumes and sales were above expectations, the company said.

    Strong natural gas demand in Israel contributed to a 10 percent increase in sales volumes there, driven by strong demand from industrial customers and displacement of coal to natural gas in Israel’s power generation sector.

    And U.S. onshore wells in West Texas Permian Basin and Colorado’s DJ Basin continued to perform at or above expectations.

    “In total, we outperformed our original 2016 plans by 10 million barrels of oil equivalent, with significantly less capital,” said chief executive David L. Stover. “We are positioned for a tremendous year in 2017.”
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    Jordan Cove LNG ups project capacity, FERC approves pre-filing request

    Jordan Cove LNG project being developed by Calgary-based Veresen filed a new request for the pre-filing review process for the LNG export terminal at Coos Bay, Oregon, increasing the project’s capacity to 7.8 mtpa.

    The United States Federal Energy Regulatory Commission approved Jordan Cove LNG’s request for the pre-filing review process filed on January 23, after initially rejecting the request for rehearing of its decision to deny a permit for the construction of the 6 mtpa Jordan Cove LNG plant and an associated 232-mile pipeline.

    However, in December 2016, Jordan Cove said it intended to file a new application, after altering the facility’s design. Jordan Cove LNG withdrew its application with the Energy Facility Siting Council to build a 420-megawatt power plant adjacent to the LNG facility, reducing the infrastructure footprint.

    According to the new filing, the terminal would consist of a gas processing plant, liquefying equipment, two storage tanks, a transfer line, loading platform, marine berth, and access channel.

    The project also includes the construction and operation of a 233-mile-long 36-inch-diameter pipeline. It would originate at interconnections with the existing systems of Ruby Pipeline and Gas Transmission Northwest near Malin, Oregon and end at Jordan Cove’s terminal at Coos Bay. It would be capable of transporting about 1.2 billion cubic feet per day of natural gas.

    The filing also shows that the project intends to file the application on August 30, 2017.

    The company also said the preliminary agreements reached with Japan’s Jera and Itochu, both booking at least 1.5 mtpa of LNG, stay in place.
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    Williams Making Good on Plan to Double Down in Heart of Shale

    Williams Cos. is following through on a promise to unload assets and double down in a region of the U.S. where natural gas production is still booming: the Marcellus shale formation.

    On Thursday, the master-limited pipeline partnership controlled by Williams Cos. said it had struck a deal with Western Gas Partners LP to exchange its 50 percent stake in a gas-gathering system in Texas for a bigger position in two gathering networks in the northern Pennsylvania area of the Marcellus and a cash payment of $155 million.

    The trade builds on Williams’s efforts to streamline operations and strengthen its position as a pipeline giant in the Marcellus and Utica shale basins of the eastern U.S. — a plan Chief Executive Officer Alan Armstrong laid out in the aftermath of a failed, $33 billion takeover by Energy Transfer Equity LP last year. Gas supplies flowing out of the region have outpaced pipeline capacity, and Williams has heavily invested in projects to bring more of the heating fuel to market.

    In the exchange with Western Gas, “Williams gets more gas right where they want it,” Brandon Blossman, an energy analyst with Tudor Pickering Holt & Co., said by phone. “They want to ‘core down’ to their competency, and their competency is moving gas from the Northeast to end-users in the mid-Atlantic, Southeast and Gulf Coast.”

    While the deal will shrink Williams’s spending in Texas and New Mexico and bring in immediate cash, the company is also giving up “growth potential” in America’s most-active shale basin, the oil-rich Permian, TJ Schultz, an analyst at RBC Capital Markets, said in a note late Thursday.

    “We like the nature of the transaction,” Schultz said, “but do not expect it to be a big near-term needle mover on the stock.”


    Williams said Thursday that it had also reached an agreement with Anadarko Petroleum Corp. to sell its 33.33 percent stake in the Ranch Westex gas-processing plant in the Delaware Basin of West Texas and New Mexico for $45 million in cash.

    Both deals are expected to close by early second-quarter 2017, according to the company’s statement.

    “The Marcellus area hit a record-gathering volume for us in January,” Armstrong said in the statement Thursday, adding that the region stands to further benefit from the construction of its $3 billion Atlantic Sunrise gas pipeline expansion that was approved by federal regulators last week.

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    Alternative Energy

    India optimistic of being coal-free by 2050

    India will not need to build another coal power plant after 2025 if renewables continue to fall in cost at their current rate, according to a report published by the Energy and Resources Institute (TERI) in New Delhi on February 13.

    The reported suggests that as long as renewables and batteries continue getting cheaper, they will undercut coal in less than a decade.

    If that happens, it will reduce the country's carbon dioxide emissions by about 600 million tonnes, or 10%, after 2030, the report said.

    India is the world's fastest growing major polluter, and its ability to curb carbon emissions will be vital in capping the rise in global temperatures. The report suggests that if the Indian ministers get their policies right, they will be able to go much further than they have already promised, and even eliminate coal-fueled power entirely by the middle of the century.

    "This is perfectly achievable if government gets its policies right. India's power sector could be coal-free by 2050," said Ajay Mathur, director-general of TERI.

    India is currently the world's third-largest emitter of carbon dioxide behind China and the US, contributing about 4% of the world's total.

    But its emissions are growing rapidly as its economy expands by more than 7% a year. In 2014, the country became the biggest contributor to global emissions growth after emitting 8.1% more than the previous year. In 2015, it increased by another 5.2%.

    Much of the growth is being driven by the country's increased use of electricity, with Narendra Modi, the prime minister, having made providing reliable power to everyone in the country a priority.

    About 60% of India's electricity is currently fueled by coal, and despite ambitious targets to build more renewables, many more coal-fired power stations are also expected to be built. The country is planning to build an extra 65 GW of coal-fired capacity in the next few years, equivalent to 20 large nuclear power plants.

    There are already disputes about how much of the extra capacity is needed. India currently has 308 GW of capacity, even though the highest amount ever used at once was 156 GW.

    If companies cease building new coal power plants after 2025, the last one is likely to close somewhere around 2050, leaving one of the world's biggest electricity users running its electricity grid almost solely with renewables.
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    Precious Metals

    Newcrest profits soar in half-year

    Gold miner Newcrest Mining has reported a 333% increase in underlying profits for the six months to December 31, as revenues increased by 17% and operating cash flow increased by 64%.

    “I am please with our operational performance this half. Lihir achieved its target mill throughput rate of 13-million tonnes a year and Cadia achieved significant milestones in cave development and interaction,” said Newcrest CEO and MD Sandeep Biswas.

    Underlying profits for the half-year reached A$273-million, while revenue increased to A$1.8-billion and operating cash flow to A$601-million.

    The higher revenue was attributable to a 15% increase in the gold price during the six months under review, as well as a 2% increase in gold sales volumes, as a result of production from the Cadia operation, in New South Wales, increasing by 31% following higher mill throughput and the impact in the prior period of an extended production outage.

    Earnings before interest, taxes, depreciation and amortisation were up 44% to A$783-million.

    Newcrest produced 1.23-million ounces of gold in the six months under review, at an all-in sustaining cost of A$770/oz.

    “All assets continue to be free cash flow positive before tax and we continue to work to maximise their value potential through productivity efficiencies and cost reductions,” Biswas said on Monday.

    “We remain on track to achieve our annual guidance for the fourth year in a row.”

    Biswas pointed out that Newcrest’s near-, medium- and longer-term growth options remained on track, pointing out a target of 14-million tonnes a year of sustainable mill throughput at the Lihir operation, in Papua New Guinea, by December this year, and an aspirational target of 17-million tonnes a year in the near future.

    “At Cadia, we have achieved plant throughput in the December quarter to above its nameplate capacity and we continue with a prefeasibility study on the plant expansion. We continue to progress Golpu, brownfield exploration at Gosowong and Telfer and the expansion of our portfolio of early-entry exploration opportunities.”
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    Base Metals

    Freeport halted output at key Indonesia copper mine

    Freeport-McMoRan Inc has halted production of copper concentrate in Indonesia and has begun to send home workers at Grasberg, the world's second-largest copper mine, a spokesman for the company's local unit said.

    Indonesia introduced rules on Jan 12 that restrict copper concentrate exports from the country in an effort to promote the domestic smelting industry. Freeport previously said the suspension of concentrate exports would require that Grasberg reduce output by around 70 million pounds of copper per month.

    "The processing plant has not been producing concentrate since last Friday," Freeport Indonesia spokesman Riza Pratama told Reuters on Tuesday. The world's biggest publicly-traded copper miner has also started sending workers home from Grasberg, Pratama said.

    The company previously said it had warned the government that it would need to slash production to about 40 percent of capacity if it did not get an export permit by mid-February, due to limited storage.

    But a strike at Freeport's sole domestic offtaker of copper concentrate, PT Smelting, expected to last at least until March, has limited Freeport's output options, and Grasberg's storage sites are now full.

    The Grasberg halt come after BHP Billiton said last week that its Escondida mine in Chile, the world's largest, could not meet contractual obligations on shipments after a workers' strike brought production to a standstill. The Escondida strike entered its fifth day on Monday.

    Subsequent supply jitters sent copper prices to their highest in more than 20 months at $6,204 a tonne on the London Metal Exchange on Monday. The prices have dropped to around $6,137.50 a tonne on Tuesday.

    Under Indonesia's new mining rules, Freeport must switch from its contract of work to a special mining permit before it can apply for a new export permit.

    A special mining permit was issued to Freeport on Friday, and includes taxes and royalties from which the miner was previously exempt. The new permit also includes a larger divestment requirement, with up to 51 percent of the Indonesian operation to go to the government, from a previous requirement of 30 percent stake. Freeport has to date divested a 9.36 percent stake.

    The Phoenix, Arizona-based company argues that the export restrictions contravene its legally-binding contract with the government and said it would only agree to a new permit with the same fiscal and legal protection.

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    Glencore agrees $960 million copper and cobalt deal with Fleurette

    Glencore has increased its hold on Democratic Republic of Congo's copper and cobalt resources by buying the remaining stake in the Mutanda mine from resource group Fleurette and increasing its share in Katanga for a total of $960 million.

    Company statements said Glencore now owns 100 percent of the Mutanda mine and about 86 percent of Toronto-listed Katanga Mining Limited.

    Taking into account loans it had made to Fleurette, Glencore is paying $534 million in net cash for the assets.

    Copper and cobalt are among the commodity markets with the strongest fundamentals.

    The copper market faces a possible supply shortfall as some of the world's best assets become depleted and cobalt, used in batteries, faces the prospect of a supply surge from electric vehicle demand.

    Israeli billionaire Dan Gertler, senior adviser to Fleurette, said the group was committed to Congo, where it has operated for two decades, but it was the right time to sell its Mutanda and Katanga assets.

    "With the mine now operating at full capacity, we feel now is the right time to exit our investment and to re-invest in further brown and greenfield opportunities," he said.

    Mutanda has been operating at more than 200,000 tonnes of copper per year.

    In addition to selling its 31 percent stake in Mutanda for $922 million, Fleurette said it also sold to Glencore its remaining 11.05 percent shareholding in Katanga for $38 million.

    Katanga announced an 18-month suspension of operations in 2015, when it was producing around 113,000 tonnes of copper, and has been undergoing upgrades aimed at cutting costs.

    Glencore said the mine complex had the potential to become Africa's largest copper producer and the world's largest cobalt producer.

    Many mining companies are keen to acquire good quality copper assets, but have hesitated to move into Democratic Republic of Congo because of political risk.

    Analyst Paul Gait of Bernstein said Glencore had done well to consolidate a leading position in Democratic Republic of Congo.

    "We have long held that the DRC will play a critical role in supplying the world’s future demand for both copper and cobalt," he said.

    "The first mover advantage here will be key. Glencore is prepared to invest in the DRC and will reap the rewards that accrue from being prepared to do so."
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    Aluminium's parallel universes are colliding: Andy Home

    There was a time when the global aluminium market could be seen as two parallel universes, to borrow a phrase coined by Klaus Kleinfeld, chairman and chief executive of Alcoa.

    There was China. And there was the rest of the world.

    The great dividing wall was China's 15 percent export tax, effectively preventing the flow of primary metal out of what was already the world's biggest volume producer.

    There was always an element of wishful thinking in Kleinfeld's parallel vision, ignoring as it did the flow of semi-manufactured aluminium products out of China. But in terms of physical and paper trading of commodity-grade aluminium, the analogy just about held, until only a few years ago.

    Alcoa has since divided itself into two separately listed companies but the two parts of the global aluminium market have moved ever closer.

    The physical export flow of "semis" has steadily increased with over four million tonnes leaving China in both 2015 and 2016.

    And, equally significantly, the two main trading venues of London and Shanghai have started to connect, with the eastern universe exerting increasing influence over the western.


    Arbitrage between the London Metal Exchange (LME) and the Shanghai Futures Exchange (ShFE) has been long established in markets such as copper. But in aluminium it's a newer phenomenon dating to the end of 2015.

    That's when the Shanghai aluminium contract experienced a step-change in usage with market open interest and volumes exploding.

    At the time it looked like one of those crowd trades that have roiled other Chinese commodity exchanges at various times over the last couple of years.

    Producers lashed out at "irrational" speculation as prices collapsed under a torrent of short-selling. And maybe it was.

    But Shanghai's new aluminium friends have stayed with it ever since. Volumes almost doubled last year and market open interest remains a multiple of what it was prior to the fourth quarter of 2015.

    That in turn has generated greater connectivity with the London market.

    The clearest manifestation is the higher trading volumes during the overlap between the Shanghai and London trading days, according to the LME's "Insight" team of analysts.

    So-called LME "Asian hours" trading jumped from five percent of the daily total in the third quarter of 2015 to nine percent in the fourth quarter of that year. That ratio held pretty steady last year, averaging eight percent.

    Moreover, "the LME-ShFE arbitrage has swung more aggressively since Q4 2015 and LME prices have been more volatile in Asian hours," particularly during times of high Shanghai turnover, according to the LME. ("LME Aluminium: West to East as Asian influence rises") The precise origin of this liquidity boost is unclear.

    It may well be that the increased flow of semi-manufactured products out of China has generated increased arbitrage between the two markets.

    But as the LME's Insight analysts concede, "a genuine increase in intraday activity suggests the relationship has widened beyond just merchants hedging physical profits."

    "On-screen traders are increasingly trading the aluminium arb or, at least, allowing the direction of one market to influence trading on the other."

    Liquidity, in other words, begets more liquidity. This is true of all exchanges but maybe particularly true of China where speculators hunt in packs.


    Working in parallel, as it were, with this increased trading connectivity has been a steady shift in the location of LME stocks away from the United States and Europe towards Asia.

    As of the end of January over 60 percent of "live" LME stocks, meaning those not in the form of cancelled warrants, were located at Asian locations.

    It's the highest ratio since 2007, although the historical comparison is muddied by the fact that LME stocks were much lower prior to the 2008-2009 global financial crisis.

    This in part may also reflect that steady stream of semi-manufactured product leaving China. If it is displacing primary metal in the rest of the world, it is logical that the hardest impact would be in the closest geographical region.

    But in part it's also down to the LME's own policy of targeting excessive load-out queues at some of its locations in Europe (Vlissingen) and the United States (Detroit).

    Recent tightness in the LME contract's time-spreads have incentivised physical deliveries into the exchange's warehousing network. With some queue-affected operators elsewhere reluctant to take in more metal, the default delivery location has shifted from west to east.

    In terms of physical liquidity of underlying stocks the LME aluminium contract is shifting towards China just as Chinese exchange trading is exerting ever more influence on Western pricing.


    In some ways aluminium is still catching up with other base metals.

    "Asian hours" trading of LME copper accounted for 16 percent of daily volume last year and nickel an even higher 17 percent, according to the LME.

    Copper in particular has been periodically rocked by trading surges on the Shanghai Futures Exchange, forcing LME traders to wake up to the power of Chinese money when it's on the move.

    Aluminium looks set to follow the same path as the two universes collide.

    In November last year "Asian hours" trading on the LME aluminium contract surged to over 14 percent in response to heightened activity in Shanghai.

    "The average price range for aluminium in the London morning more than doubled" to hit a peak of 1.2 percent, according to the LME's Insight team.

    The problem for the rest of the world, which has grown used to aluminium's relatively low level of volatility, is that all this is happening just as the Chinese aluminium market becomes more unpredictable.

    Now accounting for well over half of the world's production of the light metal, future Chinese output trends are in danger of becoming increasingly beholden to government policy.

    Aluminium smelters were included in a proposal to switch off key industrial sectors over the winter months to alleviate Beijing's choking smog.

    This is still a proposal and it remains to be seen whether it translates into smelter cutbacks.

    But if it does, you can be sure there's going to be a reaction in the Shanghai price.

    And increasingly that's going to generate a reaction in the London price.

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    Philippines' minister extends mining crackdown, cancels 75 contracts

    The Philippines' environment minister on Tuesday ordered the cancellation of 75 mining contracts, stepping up a campaign to stop extraction of resources in sensitive areas after earlier shutting more than half of the country's operating mines.

    The contracts are all in watershed zones, with many in the exploration stage. They cover projects not yet in production and the latest action by Environment and Natural Resources Secretary Regina Lopez suggests she will not allow them to be developed further.

    "You kill watershed, you kill life," Lopez told a media briefing.

    A long-time environmentalist, Lopez ordered the closure of 23 of the Philippines' 41 mines on Feb. 2 for damaging watersheds and for siltation of coastal waters and farmlands. Another five mines were suspended, causing an outcry from the industry.

    The contracts ordered canceled on Tuesday, known as mineral production sharing agreements, include the $5.9 billion Tampakan copper-gold project in South Cotabato province in Mindanao island, the biggest stalled mining venture in the Southeast Asian country.

    Tampakan failed to take off after the province where it is located banned open-pit mining in 2010, prompting commodities giant Glencore Plc (GLEN.L) to quit the project in 2015.

    "We're canceling this as a gift of love to the people of Cotabato," Lopez said.

    Some miners facing a shutdown of their operations have threatened legal action, with some miners saying on Tuesday they have received a formal closure order from the environment agency.

    Top Philippine nickel ore producer Nickel Asia Corp said it "will pursue all legal remedies to overturn the said order because of due process violations and the absence of any basis" that would warrant a suspension or closure of operations of its unit Hinatuan Mining Corp.

    Hinatuan was told that its operation has "impaired the functions of the watershed in the area," according to a copy of the closure order.

    The decision to close or suspend existing mine operations followed a months-long audit of the mines, although a government team that reviewed the audit recommended only suspensions and fines.

    President Rodrigo Duterte on Sunday said he would not stand in the way of Lopez's decision to shut several mines in southern Philippines, the second time he has thrown his support behind the minister he appointed last June.

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    Indonesia's Antam has 5 mln tonnes low-grade nickel ore for export

    Indonesian state-controlled miner PT Aneka Tambang (Antam) has an estimated 5 million tonnes of low-grade wet nickel ore available for immediate shipping, corporate secretary Trenggono Sutioso told Reuters on Monday.

    "Antam is ready in principle to follow government regulations including export taxes," Sutioso said. "The estimated potential low grade nickel ore that can be utilised immediately is 5 million tonnes wet low grade nickel ore."

    Indonesia eased mining export rules last month, allowing export of unprocessed ore under certain conditions.

    A ban on unprocessed ore exports was imposed in 2014 to encourage investment in value-added smelting projects but this restriction hit government revenues, contributing to a hefty budget deficit. The government missed its 2016 revenue target by $17.6 billion.

    Antam is waiting for further guidance from the government before starting to export, Sutioso said when asked how soon Antam could start making shipments.

    Separately, the Indonesian government said on Monday it had set new tax rates for mineral exports, including a flat 10 percent tax for nickel ore with a nickel content of less than 1.7 percent.
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    Steel, Iron Ore and Coal

    Henan to ban burning of "San Mei" in 2017

    Henan province will vigorously ban sales and burning of "San Mei" – a coal variety typically used to heat families, hotels or restaurants or to be burned by industrial boilers – by end-October this year, said local officials.

    The move may alleviate air pollution, as "San Mei" is considered one main culprit for the recent smog engulfing large parts of China.

    Many cities in Henan rolled out subsidy plans to encourage substitution of the material for clean energy, and Anyang city set up reporting rewards system to achieve the goal.

    Presently, a total of 26,140 users have completed the substitution, and about 1,360 tonnes of "San Mei" are taken back.

    The substitution amount of "San Mei" for natural gas is likely to reach 80 million cubic meters by the end of this year, with additional 40,000 rural families using natural gas to cook, said Ma Linqing, director of the provincial Administration of Industry and Commerce.
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    Anhui aims for 132.74 Mtpa coal capacity by 2020

    Eastern China's Anhui province aims to reduce coal production capacity to 132.74 Mtpa by 2020, with 37 mines to be in operation, according to a draft plan for coal industry development over 2016-2020.

    By 2020, combined coal capacity of large and super-large mines will reach 130.55 Mtpa or 98.4% of the province's total capacity. Coal output will be capped at 130 million tonnes, and 97% of the raw coal produced will be washed by 2020.

    A total of 7.45 Mtpa coal capacity will be put into operation by 2020, said the plan.

    The province plans to eliminate 32 Mtpa coal capacity from 2016 to 2020, through closure of 18 mines, and reduce 0.2 Mtpa capacity by mines consolidation.

    By 2020, The province will foster one large coal firm with 1 billion tonnes per annum capacity (including capacity outside the province) and one firm with 50 Mtpa capacity, which may together account for 69.7% of the province's total capacity.

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    CIL Q3 profit falls 22.42pct on year

    Coal India Ltd (CIL) realized a consolidated net profit of Rs2,884.4 crore for the third quarter ended December 2016, declining 22.42% compared to the corresponding period a year ago, the company said in a regulatory filing released on February 11.

    However, the company's total income rose to Rs21,531.2 crore in the quarter from Rs20,928.4 crore in the year-ago period. Net sales during the quarter rose to Rs19,704 crore compared to Rs18,971.5 crore in the corresponding quarter of the previous fiscal.

    At the same time, total expenses also increased to Rs17,260 crore as compared Rs15,407.5 crore.
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    Indigenous and use agreements moratorium puts Adani's Australian coal mine in jeopardy

    Indian Adani Group's giant A$21.7 billion ($16.63 billion) Carmichael thermal coal project in Galilee Basin in the Australian state of Queensland is facing further potential delays following the country's National Native Title Tribunal last Friday declaring a moratorium on the registration of all indigenous land use agreements, or ILUAs.

    The moratorium followed the federal court in Western Australia on February 1 rejecting a native title deal with local indigenous people because some representatives did not sign off on it.

    "This ruling will affect new projects and has the very real possibility of halting a significant number of projects in Queensland," mining industry group Queensland Resources Council chief executive Ian Macfarlane said Monday.

    Members of the Wangan and Jagalingou Traditional Owners Council said on Sunday that they have not given Adani consent for its proposed mine.

    "We have already put evidence before the National Native Title Tribunal to prove that Adani does not have an agreement with the W&J Traditional Owners for its mine of mass destruction, which will destroy our ancestral homelands and waters, the cultural landscape and our heritage," a spokesman for the W&J Council, Adrian Burragubba, said.

    W&J youth leader and council spokeswoman Murrawah Johnson said: "In April last year, there was a meeting organized and paid for by Adani, at a cost estimated to be in excess of half a million dollars.

    Adani paid for aboriginal people to attend who had never claimed native title on Wangan and Jagalingou traditional country.

    "There were hundreds of people who aren't direct descendants of our W&J ancestors in attendance, to sign up to an ILUA. This meeting was a sham, stacked with a rent-a-crowd," she said.


    QRC's Macfarlane said the country's federal Attorney-General George Brandis has moved to amend present legislation to negate the federal court decision.

    "The Queensland Resources Council today welcomes the federal Attorney General George Brandis' announcement that the federal government will this week present legislation amending the Native Title Act as it related to Indigenous Land Use Agreements," Macfarlane said Monday.

    "Future ILUAs could be at risk, which creates a massive strain on our country's sovereign risk profile and makes foreign investors extremely nervous," he added.

    However, W&J council's Burragubba said: "Any move by the federal Attorney-General to introduce an 'Adani amendment' to the Act, to hand the tools to the mining sector to further divide and conquer aboriginal people, will be actively resisted."

    The Carmichael project -- which has spent around seven years going through the environmental approvals process -- is planned to initially have a production of 25 million mt/year before increasing to 40 million mt/year around five to seven years into the mine's life. A decision is then intended to be made on the timing of an upgrade to 60 million mt/year.

    A spokesman for Adani told S&P Global Platts Monday that the company will watch developments with interest but is not anticipating any delays to the project's start up.

    "We're on time, we're on schedule, we're on track," he said.

    There has been no adjustment made to the plan for construction to begin in the July-September quarter, he added.

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    Surging iron-ore won’t ‘fall off a cliff,’ says Rio Tinto

    Iron-ore will defy forecasts for a dramatic price collapse as China’s economy remains strong and the top buyer boosts demand for higher-quality imports, according to Rio Tinto Group, the second-largest exporter.

    “I wouldn’t necessarily say that it’s going to fall off a cliff,” Chief Financial Officer Chris Lynch said Monday in an interview with Bloomberg Television’s Daybreak Australia. “I guess the key issue is that we have to be robust in case the price goes up, down or sideways, and that’s what we set out our business to do.”

    Global exporters are benefiting as mills in China, the world’s top steelmaker, increasingly prefer higher-quality raw materials to raise efficiency and cut pollution, according to Lynch. iron-ore, which accounted for about 60% of Rio’s profits last year, soared in 2016 to defy predictions that rising supply would overwhelm demand. Benchmark prices jumped the most in two months on Monday to the highest in more than two years.

    “There’s another fundamental shift going on in China and that’s the preference for the more efficient and less polluting end of the industry,” Lynch said in the interview. The switch by mills to higher-quality imports will support Rio and other exporters, while China’s growth becomes less reliant on commodities as it balances toward consumption and servicesfrom a focus on infrastructure and construction, he said.

    The raw material, which has surged as stimulus in Chinasupported steel output and consumption, is poised to correct sharply in the second half on rising supply from Australia and Brazil, according to Citigroup Inc. Prices will fall each quarter this year to $55 a metric ton in the final three months, according to the median of 13 analysts’ forecasts compiled by Bloomberg.

    iron-ore will plunge back below $50 as an extra 90 million tons of seaborne ore hits the market in 2017 with holdings at China’s ports are already at an all-time high, Liberum Capital analyst Richard Knights said last week in an interview.

    “We like the idea of higher prices, but there’s not a lot you can do about it,” Lynch said. “I can’t give you any justification for why it’s $2 higher today than it was yesterday.”

    China’s imports jumped to an all-time high of more than 1 billion tons last year. Stockpiles rose 2.8% last week to a record 127 million tons, Shanghai Steelhome Information Technology Co. said Monday.

    Ore with 62% content in Qingdao rallied 6.5% on Monday to $92.23 a dry ton, the highest since August 2014, according to Metal Bulletin Rio climbed 1.4% by 10:40 a.m. in London, trading near a four-year high.

    Higher prices are boosting earnings for the top producers including Rio, which last week reported its first annual profit gain since 2013, though the company has maintained its disciplined approached to acquisitions, according to Lynch. It has looked at “a hell of a lot” and a lot more than than “we’ll ever pull the trigger on,” he said.

    “We looked at a lot of things, there was a lot of stress on a lot of our competitors through the early part of last year,” Lynch said. “Notwithstanding the drop in market caps, the enterprise value didn’t change that much given that the debt was still there at 100 cents in the dollar.”

    While London-based Rio sees “a fairly robust future in China,” the producer is no longer focused as exclusively on the nation in its demand outlook, according to Lynch. Higher infrastructure spending under President Donald Trump and faster approvals for projects in the U.S. are both potential positives for Rio, he said.

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    China's Jan steel exports hit a 30-mth low

    China exported 7.42 million tonnes of steel products in January, falling 23.2% year on year and down 8.62% month on month, hitting a new low in recent 30 months, showed the latest data from the General Administration of Customs (GAC).

    China's domestic demand for steel products was proven better than expected, and there was a favorable profit margin s in the spot market.

    Meanwhile, fierce competition at the global market and anti-dumping investigations on Chinese exported steel products also frustrated coal exporters. China's steel exports became less competitive in the world, as cost of domestic steelmaking material – mainly iron ore – stayed high.

    With the Chinese Spring Festival drawing near, more exporter preferred to wait and see, leading to a decline in steel exports.

    A narrowing price gap between domestic and overseas products, which was impacted by domestic capacity cut policy, was mainly responsible for the drop, as it curbed enterprises' enthusiasm to sell products to other countries.

    China imported 1.09 million tonnes of steel products in January, climbing 17.7% year on year but down 1.8% from last December.

    China imported 91.98 million tonnes of iron ore in November, 12% higher than last year and up 0.02% from last December.
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