Mark Latham Commodity Equity Intelligence Service

Thursday 7th April 2016
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    Brazilian Impeachment Vote Gets Go-Ahead in Congress Report

    Dilma Rousseff’s political future hung in the balance on Wednesday as a congressional report recommended impeachment proceedings move ahead, while the Brazilian president’s biggest ally stopped short of defecting from the government.

    The report, drafted by the rapporteur of the lower house committee on impeachment, Jovair Arantes, says there are grounds for the impeachment process to advance. He sided with the main argument behind the request to oust her, saying there is sufficient evidence that Rousseff used illegal financing to mask the size of the budget deficit.

    "The accusation fulfills all the legal and political conditions required for its admission,” Congressman Arantes wrote in the report that is published on the committee website. Rousseff says that the charges against her are baseless.

    Arantes also said lawmakers could take into account allegations of graft at state-run oil company Petrobras when considering whether to remove the president. Investigators haven’t accused Rousseff of accepting kickbacks in the Petrobras scandal, though they are probing whether her campaign received illegal donations from the scheme. Her Workers’ Party denies the allegations.

    Arantes read the 128-page report out loud in the committee session on Wednesday, saying he has tried to remain impartial and is well aware he will be labeled both a hero and villain for his work. The session got off to a tumultuous start, as committee members shouted at each other over procedural issues. Lawmakers on both sides of the aisle brandished signs, with government supporters denouncing what they say is an attempted "coup" and opponents calling for "impeachment now."

    While there are still several key steps in the impeachment process, the report could sway some legislators in what appears to be shaping up as a tight vote on the floor. As of Wednesday afternoon, anti-government group VemPraRua said there were 267 votes for and 119 against impeachment in the house. A group of Rousseff allies, including members of her Workers’ Party, said there were 129 votes against the president’s ouster.

    The committee may extend deliberations into the weekend so it can vote as early as Monday on Arantes’s report. Its recommendation will then go to the full house, which will decide whether there are grounds to oust the president. If 342 of 513 lower house lawmakers back impeachment, the case moves to the Senate.

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    Venezuela decrees Fridays a holiday to ease energy crisis

    Venezuela's President Nicolas Maduro has decreed that all Fridays for the next two months will be holidays, in a bid to save energy in the blackout-hit OPEC country.

    "We'll have long weekends," Maduro said in an hours-long appearance on state television on Wednesday night, announcing the measure as part of a 60-day plan to fight a power crunch.

    A severe drought, coupled with what critics say is a lack of investment and maintenance in energy infrastructure, has hit the South American nation, which depends on hydropower for 60 percent of its electricity.

    Venezuela's opposition slammed the new four-day work week as reckless in the face of a bitter recession, shortages of foods and medicines, and triple-digit inflation.

    The measure comes on the heels of Maduro decreeing a week-long break over Easter, ordering some shopping malls to generate their own power, and shortening daily working hours.

    "For Maduro the best way to resolve this crisis is to reduce the country's productivity," said Caracas city councillor Jesus Armas. "Fridays are free bread and circus."

    Some Venezuelans took to social media to express their surprise. "You must be kidding???," one Twitter user said. Many others wondered how the measure would impact schools, bureaucratic procedures and supermarkets.

    It was not immediately clear how the non-working Fridays would affect the public and private sector.

    The 60-day plan's fine print will be announced on Thursday, said Maduro during the television program, which included music, dancing and giant pictures of late leader Hugo Chavez.

    "I think we can overcome this situation without increasing fares or rationing," added Maduro.

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    South African FirstRand's retail bank closes accounts held by Zuma friends

    A South African company owned by friends of Jacob Zuma, said on Wednesday First National Bank has closed its accounts, the latest local company to shun the Gupta family due to a scandal over its relationship with the president.

    "Oakbay has received no reason whatsoever justifying FNB's actions. We are already in the process of moving our accounts to a more enlightened institution," Oakbay Investments said in a statement. FNB is a unit of FirstRand

    Three other South African companies, including KPMG and Barclays Africa, have severed ties with a firm owned by the Guptas, a family of Indian-born businessmen.
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    Williams sues Energy Transfer over preferred share offering

    Williams Companies Inc has sued Energy Transfer Equity LP to block a private preferred share offering disclosed last month, saying it was a breach of their merger agreement.

    The lawsuit comes after the two U.S. pipeline companies clashed publicly last month over Energy Transfer's efforts to finance its $14 billion takeover of Williams.

    The offering provides certain Energy Transfer investors preferential treatment on its distributions, Williams said in a statement on Wednesday.

    Williams also said it was suing Kelcy Warren, chairman of the general partner of Energy Transfer.

    Energy Transfer said last month it had originally intended to offer the units to all of its shareholders, but Williams did not consent to a public offering.

    Energy Transfer said it has not asked Williams for its consent on the private offering.

    Shareholders, including Warren, who hold around 31.5 percent of Energy Transfer's units participated in the offering and agreed to take smaller distributions for up to nine quarters.

    Williams said the lawsuit is intended to ensure that Williams' stockholders receive the consideration to which they are entitled under the merger agreement.
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    Oil and Gas

    Asia buys more Mideast heavy crude as Latam supplies fall

    Asian oil buyers are seeking more heavy crude from the Middle East this year as Latin American supplies have become more expensive relative to other grades, while port and production outages have disrupted exports from Venezuela, Peru and Brazil.

    Strong demand for replacements for South American crudes has driven up spot premiums for grades such as Iraq's Basra Heavy for loading in April and May, and buyers are also looking more to Saudi Arabia, Kuwait and Iran for oil of similar quality.

    The switch comes as U.S. oil prices strengthened against other regional benchmarks late last year after Washington lifted a ban on U.S. crude exports, a move that could help producers in the United States work down a domestic supply surplus.

    Unplanned outages at ports and pipelines and necessary maintenance work at oilfields all across South America have also tightened exports from a region that pumps about a tenth of the world's oil.

    "This is mainly in Venezuela, where the outage of a major port has led to the loss of 300,000 barrels per day (bpd) of crude exports," FGE analyst Tushar Bansal said.

    Venezuela's output could fall by 400,000 bpd this year due to a lack of investment in the upstream sector and not enough funds available to buy light oil for blending, Bansal said.

    Latin American crude sold to Asia fell 1 percent in the first three months of 2016 from a year ago, while Middle East exports to Asia rose 7 percent in the first quarter, data from Thomson Reuters Trade Flows shows.

    India saw the sharpest drop in Latin American supplies, down 13 percent during the quarter, although top Asian buyer China bucked the trend with an 11 percent rise in imports from South America, some taken in repayment for government loans.

    "It's not so easy for Latin American crude to make their way into Asia," a Singapore-based trader said, pointing to a narrower price spread between West Texas Intermediate (WTI) and Brent after the United States ended its crude export ban.

    Indian refiners, for instance, are instead snapping up the next cheapest alternative, Iraqi Basra Heavy, the trader said.

    Strong demand for this grade has pushed up its spot premium to $1-$2 a barrel for cargoes loading in April and May, traders said, even as a huge tanker traffic jam at Basra ports is delaying shipments.

    This is all happening at just the right time for Iran, with sanctions targeting its nuclear programme lifted only in January.

    Iran is expected to raise output by another 300,000 bpd in the second half of this year, which will be mostly heavy crude, FGE's Bansal said.

    More heavy crude supply could come from the Khafji field jointly operated by OPEC kingpin Saudi Arabia and Kuwait.

    Kuwait said in late March that it has reached an agreement with Saudi Arabia to restart the field which was shut in October 2014.

    Analysts expect the Khafji restart to take two to six months before supply is added in the market.

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    China's Shale Gas Reserves Jump Fivefold as Output Lags Target

    China boosted its recoverable shale gas reserves more than fivefold last year as the country missed its production target for the fuel.

    Recoverable shale gas reserves, or those that can be commercially produced, rose 109 billion cubic meters last year, said Yu Haifeng, director at the department of mineral resources in the Ministry of Land and Resources, according to a transcript of a briefingWednesday. That increases the country’s total shale gas reserves to 130 billion cubic meters.

    “Oil and gas reserves maintained a high level of growth, with shale gas reserves rose significantly,” Yu said. “The ministry spared no efforts in searching for new resources in 2015” as it followed guidance laid out by the State Council, the country’s highest policy making body, he said.

    Premier Li Keqiang reiterated last month China’s goal of boosting production and use of natural gas as a substitute for coal. While conventional gas production is rising, China missed its annual shale gas target of 6.5 billion cubic meters last year and earlier cut its 2020 production goal to about a third of its original estimate, citing difficult geology, lack of infrastructure and limited exploration rights. China produced 4.47 billion cubic meters of natural gas from shale in 2015, a more than threefold increase from the year before, the ministry said Wednesday.

    Exploiting the country’s shale gas resources have proved challenging for international oil companies including Royal Dutch Shell Plc, which last week said it was no longer pursuing it’s China shale venture. BP Plc the same week signed its first shale-gas production deal in the country, joining the nation’s biggest oil company, China National Petroleum Corp., to target the same areas on the Sichuan basin that ConocoPhillips earlier walked away from.
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    India crude import policy overhaul gives state refiners leeway

    India's cabinet on Wednesday agreed to let state-owned oil refiners devise their own crude import policies so they can secure cheaper oil cargoes in an oversupplied market and improve profitability.

    The new policy puts state-owned refiners on a par with private firms such as Reliance Industries and Essar Oil that are not bound by government rules and can earn hefty refining margins.

    The previous policy limited purchases by state refiners to a handful of companies and refiners were also missing out on the chance to grab cheap, distressed cargoes as they were required to launch spot tenders two months before receiving the oil.

    State refiners Indian Oil Corp (IOC), Hindustan Petroleum Corp, Bharat Petroleum Corp, and Mangalore Refinery and Petrochemicals Ltd control 60 percent of India's 4.6 million barrels per day (bpd) capacity.

    "Now, with this flexibility, state refiners can encash the opportunity to buy distress cargoes and negotiate prices with sellers," Hindustan Petroleum's (HPCL) refineries head B. K. Namdeo said.

    State refiners, on an average, buy 70-80 percent of their oil through annual supply deals, also called term contracts, with the remainder coming through spot purchases.

    India has decided to replace its decades old import policy at a time when major oil producers are focused more on protecting their market share than boosting prices, which has led to a global supply glut and a collapse in prices.

    The decision will give state refiners a high degree of autonomy in operational, financial and investment matters and reduce government interference, Telecoms Minister Ravi Shankar Prasad told a news conference after a cabinet meeting.

    "With the whole market becoming flexible world over, at times we have to make on the spot decisions," Prasad said.

    Under the new policy, state refiners will need board approval for oil purchases and must comply with anti-corruption guidelines.

    "As the government has delegated more power to the companies, we now have to be more responsible to ensure that we get optimum value from the purchases and ensure that we are buying legal barrels," HPCL's Namdeo said.
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    UK's Coryton oil storage terminal opens as glut grows

    The Thames Oilport terminal near London opened on Wednesday after nearly four years of development, at a time a global oil glut and a collapse in fuel prices is making storage an attractive investment.

    A first tanker, the Seaconger, carrying 21,000 tonnes of diesel was discharging at the terminal, built on the site of the Coryton refinery whose owner Petroplus went bankrupt in 2012, operator Greenergy said.

    The terminal is due to be filled to its current capacity of 176,000 cubic metres with fuel, predominantly to serve the London region and southeast England, Thames Oilport said in a statement.

    Thames Oilport is operated and partly owned by Britain's largest oil storage company, Greenergy, while Royal Dutch Shell owns a third.

    The companies plan to add 64,000 cubic metres of capacity by the end of September this year and while the terminal will initially be used to hold diesel, other fuels will be added.

    "Significant progress has been made over recent months, both on site and in the planning process, and we now have a route map to turn Thames Oilport into a fully-fledged import terminal," Greenergy Chief Executive Andrew Owens said.

    The terminal will be capable of taking vessels of up to 60,000 tonnes, Greenergy said.

    Thames Oilport is also connected to pipelines that feed other parts of the United Kingdom, including the CLH Pipeline System and the UKOP system, but neither Shell nor Greenergy have said if they intend to use them.


    The Coryton project has had a bumpy path since its start almost four years ago, with partners scrapping an initial plan for a larger terminal and Dutch storage company Vopak selling its stake.

    But the launch comes at a time when oil producers and traders are scrambling to store fuel as global supplies swell, a fact that has made investments in tanks highly attractive in recent years.

    It also provides a much-needed import point for the United Kingdom, which relies heavily on diesel imports.

    Greenergy last year formed a partnership with Macquarie Capital, the investment arm of Macquarie Group to buy Vopak's UK assets, including its 33 percent stake in Thames Oilport, as well as the North Tees storage assets in Teeside.

    Owens told Reuters he plans to expand Greenergy's operations in the United Kingdom and abroad and was looking for "material transactions".

    Greenergy also operates in Canada, the United States and Brazil.

    Greenergy's sales volumes rose in 2015 to 15.6 billion litres from 15 billion a year earlier while operating profit climbed to 16.4 million pounds ($23.1 million) from 13.6 million in 2014, according to the company's annual report.
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    Halliburton faces $3.5B break-up fee after failed merger

    Halliburton, blocked by federal regulators from buying rival oil-services company Baker Hughes, is staring at another huge disappointment — a $3.5 billion break-up fee.

    That figure amounts to the largest cash break-up fee in history — beating the previous champ, the $3 billion in cash plus $1 billion in spectrum paid by AT&T when it was blocked from buying T-Mobile in 2011, according to Dealogic.

    On Wednesday the Department of Justice filed a suit to stop the $35 billion merger.

    “The proposed deal between Halliburton and Baker Hughes would eliminate vital competition, skew energy markets and harm American consumers,” said federal Attorney General Loretta Lynch.

    Halliburton and Baker Hughes, in a joint statement, said they intend to “vigorously contest” the lawsuit.

    But the companies, in the same statement, said they “may terminate the merger agreement” if the review extends beyond the April 30 date when Baker Hughes can contractually exit the deal and pocket the cash — something insiders believe will happen.

    A federal trial would likely not begin until August, sources said.

    What’s more, if the European Commission, which is reviewing the merger, moves to block the deal it could force a two-year delay.

    “Fighting a war on multiple fronts is a bridge too far,” said a source following the case. “I don’t know how they can fight this.”

    If Halliburton is forced to pay the record break-up fee it would mark a major misstep by its lawyers.

    After failing to buy Baker Hughes in 2014 via a hostile bid, Halliburton reached a merger deal sweetened with a 10 percent break-up fee.

    The normal fee is close to 3 percent.
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    Glass Lewis tells shareholders to vote against BP CEO's $19.6mln pay

    Proxy advisory firm Glass Lewis has recommended shareholders in BP vote against Chief Executive Bob Dudley's proposed $19.6 million remuneration for 2015 after the British oil and gas company recorded its biggest annual loss.

    Shareholders will be asked to vote on the pay of the company's executives at it annual general meeting in London on April 14.

    "Given our concerns regarding bonus payouts and the overall incentive structure, we do not believe shareholders should support the remuneration report at this time," Glass Lewis said in a report,
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    Crude Jumps After DOE Confirms Biggest Oil Inventory Draw Since January

    Following yesterday's API data, which showed the biggest draw of 2016 with a 4.6 million reduction in oil inventories, everyone was keenly looking forward to today's DOE data. Moments ago the DOE indeed confirmed the API data, reporting that in the past week oil inventories declined by 4.949MM, more than the API print, down from last week's 2.3MM and well below the expected 2.850MM increase.

    This was the largest draw since the first week of January.

    However, while in the recent past the crude builds were offset be declines in gasoline and distillate reductions, this time it was a mirror image, as first Gasoline rose by 1.438MM, above the -1.1MM draw, while Distillate increased by 1.799MM, above the -850K draw expected.

    This happened even as Refinery utilization rose 1.0% W/W, above the 0.35% expected, operating at a 91.4% of capacity in the past week.

    As a result Cushing holdings rose by 0.3MM, rising to 66.3MM barrels and once again approaching its operational capacity.

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    US Oil production fall continues

                                                 Last Week  Week Before  Last Year

    Domestic Production '000...... 9,008             9,022           9,404
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    API: natural gas well completions down 70 pct in Q1

    Estimated natural gas well completions decreased 70 percent in the first quarter of 2016 compared to year-ago levels, the American Petroleum Institute (API) said on Tuesday.

    According to API, which represents the interests of the oil and natural gas industry in the U.S., exploratory oil completions fell 90 percent compared to 2015 first quarter estimates.

    Total feet drilled decreased 73 percent, with the largest decrease seen in the footage of exploratory wells, API said.

    “America’s shale energy revolution has helped the U.S. lower our greenhouse gas emissions while making energy cheaper for American consumers,” said Hazem Arafa, director of API’s statistics department.

    “To continue this progress, we must revisit current energy policy, speed up the LNG export approval process and avoid unnecessary regulations to help U.S. producers to compete effectively in the global market under the low-price environment,” Arafa said.

    According to API, the oil and gas industry supports 9.8 million U.S. jobs and 8 percent of the U.S. economy.
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    Moody’s Oil & Gas Liquidity Stress Index Hits New Worst Level

    In March Moody’s Oil & Gas Liquidity Stress Index, a measure of the liquidity health of oil and gas companies, hit a worst-ever high of 27.2%. A month later and the same index has topped the previous bad record–now at 31.6%. Translation: there are a record number of energy companies stretched to the limit, ready to run dry in the cash department. If prices don’t turn around soon, some (many?) of these companies will go under…
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    TransCanada delays restart of Keystone crude pipeline to Tuesday -traders

    TransCanada Corp is delaying the restart of its 590,000 barrel per day Keystone crude pipeline to Tuesday from Friday, four traders familiar with the matter said on Wednesday.

    The line, which delivers crude from Hardisty, Alberta to Cushing, Oklahoma, and to Illinois, was shut over the weekend after a potential leak. TransCanada in a meeting on Tuesday afternoon with committed shippers said the pipeline would restart by next Tuesday at the earliest, sources said.

    A TransCanada spokesman confirmed in an email that the company had informed its customers that the earliest restart date is early next week.

    Time spreads in the benchmark U.S. crude futures contract rallied late on Tuesday following the news, with prompt West Texas Intermediate (WTI) trading as tightly as a 98 cents a barrel discount to the forward month, up from a $1.46 a barrel discount earlier in the day CLc1-CLc2. It settled at $1.22 a barrel.

    On Wednesday, the discount for May barrels relative to June, a structure known as contango, was trading around $1.10 a barrel.

    TransCanada on Tuesday issued a letter notifying shippers of a force majeure on the line as of 1:30 PM EST, April 2. The company will hold another meeting with committed shippers on Wednesday, sources said.

    Canadian heavy crude differentials widened on Wednesday morning on news of the prolonged shut down. Western Canadian Select heavy blend crude for May delivery in Hardisty, Alberta, last traded at $14.90 per barrel below the WTI benchmark, according to Shorcan Energy brokers. That compares with a settlement of $14.20 on Tuesday.

    The outage has also disrupted crude supplies to Midwest refiners, forcing refiner Phillips 66 to cut run rates at its 306,000 bpd Wood River refinery in Roxana, Illinois. On Tuesday, Phillips shut a 64,000 bpd sour crude unit and a 16,000 bpd coker at that facility.

    TransCanada has said it will only restart the line after receiving approval from the Pipeline Hazardous Materials Safety Administration (PHMSA). A spokesman for PHMSA said that it had no updates as of midday.

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    Alternative Energy

    Chevron's $3 billion Asian geothermal assets to draw global suitors

    French utility Engie and Japan's Marubeni are among several suitors preparing to bid for Chevron Corp's Asian geothermal energy blocks valued at about $3 billion, sources familiar with the matter said.

    Potential buyers including Southeast Asian firms are attracted by the opportunity to gain control of large blocks of geothermal assets located in Indonesia and Philippines.

    "There's a lot of jostling going on to see who's teaming up with whom. I expect to see companies forming consortiums for this big sale," said one banker involved in the process. "The Japanese are key as whoever ties up with them would have access to low cost funding and that boosts their chances," he added.

    Indicative bids for the assets are due this month, said some of the sources, who declined to be identified as the information is not public.

    Like many rivals, Chevron is selling assets, cutting jobs globally and slashing capital spending to save cash in a bid to preserve its dividend amid weak oil prices.

    Chevron, which hired Citigroup (C.N) as its adviser for the sale, kicked off the auction last month, sources said. Chevron, Marubeni, Engie and Citigroup declined comment.

    "For global players, it provides an entry into the geothermal markets in Indonesia and possibility of further expansion," said consultancy Wood Mackenzie's principal power analyst Bikal Pokharel.

    Two Chevron subsidiaries operate geothermal projects in Salak and Darajat fields in west Java with a capacity to generate nearly 650 megawatts of electricity. The combined output produces enough renewable energy to supply about 3 million homes, according to Chevron's website.

    Pokharel said Indonesia had estimated a geothermal potential of 27,700 megawatts, the highest in the world, but its current installed capacity was less than 5 percent of the potential.

    He said contradictory and untested regulations, land acquisition, building transmission infrastructure and lack of clarity in pricing methodology remained major challenges.

    Medco Power, which operates two geothermal projects in Indonesia, is keen to buy the assets and would consider looking for a partner due to the large value of the assets.

    "We have expressed our interest in seeing the data on its asset," Fazil Alfitri, president director of Medco Power, a subsidiary of Medco Energi Internasional (MEDC.JK), told Reuters.

    Indonesia has unveiled land and regulatory reforms aimed at boosting production of geothermal energy, but investment in renewables has been slow in Southeast Asia's largest economy.

    Geothermal energy is created by the heat of the earth. It generates reliable power and emits almost no greenhouse gases.

    Chevron also has a 40 percent interest in Philippine Geothermal Production Company, Inc., which produces steam energy for third party-owned geothermal power plants. They have a combined generating capacity of 692 megawatts.

    Southeast Asian power firms Aboitiz (AP.PS) and Banpu Power (BAP.BK) may bid for Chevron's assets, said the sources. Banpu said it would consider the terms and size of the assets before making a decision.

    Sources said Chinese power firms are also expected to participate in the auction.

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    Graphene layer could allow solar cells to generate power when it rains

    Solar energy is on the rise. Many technical advances have made solar cells quite efficient and affordable in recent years. A big disadvantage remains in the fact that solar cells produce no power when it's raining. This may change, however: In the journal Angewandte Chemie, Chinese researchers have now introduced a new approach for making an all-weather solar cell that is triggered by both sunlight and raindrops.

    For the conversion of solar energy to electricity, the team from the Ocean University of China (Qingdao) and Yunnan Normal University (Kunming, China) developed a highly efficient dye-sensitized solar cell. In order to allow rain to produce electricity as well, they coated this cell with a whisper-thin film of graphene.

    Graphene is a two-dimensional form of carbon in which the atoms are bonded into a honeycomb arrangement. It can readily be prepared by the oxidation, exfoliation, and subsequent reduction of graphite. Graphene is characterized by its unusual electronic properties: It conducts electricity and is rich in electrons that can move freely across the entire layer (delocalized). In aqueous solution, graphene can bind positively charged ions with its electrons (Lewis acid-base interaction). This property is used in graphene-based processes to remove lead ions and organic dyes from solutions.

    This phenomenon inspired researchers working with Qunwei Tang to use graphene electrodes to obtain power from the impact of raindrops. Raindrops are not pure water. They contain salts that dissociate into positive and negative ions. The positively charged ions, including sodium, calcium, and ammonium ions, can bind to the graphene surface. At the point of contact between the raindrop and the graphene, the water becomes enriched in positive ions and the graphene becomes enriched in delocalized electrons. This results in a double-layer made of electrons and positively charged ions, a feature known as a pseudocapacitor. The difference in potential associated with this phenomenon is sufficient to produce a voltage and current.
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    Monsanto profit, revenue miss estimates on seed discounts

    Monsanto Co, the world's largest seed company, reported lower-than-expected quarterly profit and revenue, as it steeply discounted its seeds to cater to farmers who are cutting spending, sending its shares down about 2 percent in premarket trading.

    Farmers in the U.S. have been spending less on everything from fertilizers to seeds as the prices of grains hover near five-year lows and incomes have fallen to their lowest since 2002.

    This has forced companies including Monsanto and DuPont Pioneer to offer the steepest discounts in at least six years.

    Monsanto has also been under pressure to look at acquisitions as the global seed and crop protection market continues to suffer from high inventories and low prices for agricultural commodities.

    Monsanto had approached Bayer AG and expressed interest in its crop science unit, including a potential acquisition worth more than $30 billion, Reuters reported in March, citing sources.

    Switzerland's Syngenta AG, which rejected Monsanto's takeover approaches last year, agreed in February to be acquired by ChemChina for $43 billion.

    Monsanto raised its 2016 earning per share guidance on Wednesday to $3.72-$4.48 from $3.42-$4.29, primarily due to a change in timing for accounting restructuring expense. It reiterated its ongoing earning per share guidance of $4.40-$5.10.

    Net income attributable to the company fell to $1.06 billion, or $2.41 per share, in the second quarter ended Feb. 29, from $1.43 billion, or $2.92 per share, a year earlier. Earnings on an ongoing basis was $2.42 per share.

    Total net sales of the company, which is known for its genetically engineered corn, soybeans and the Roundup herbicide, fell 12.8 percent $4.53 billion.

    Analysts on average had expected a profit of $2.44 on revenue of $4.76 billion, according to Thomson Reuters I/B/E/S.

    Up to Tuesday's close, Monsanto's shares have fallen more than 25 percent in the last one year.
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    Iowa corn feeds Brazil’s fuel tanks as demand spurs import surge

    At the Plymouth Energy LLC plant in the heart of the U.S. corn belt — where home-grown fuel from grain was supposed to ease American dependence on foreign oil — every drop of ethanol goes to motorists in Brazil.

    Like many Midwest distillers, Plymouth’s Merrill, Iowa, plant was built a decade ago for a U.S. market that was importing ethanol to satisfy laws mandating increased use of renewable fuels.

    Since then, surplus capacity and a glut of cheap gasoline has left the industry navigating losses and looking for new markets. That has helped spur exports as far away as China, but the biggest surprise buyer in recent months has been Brazil, the world’s No. 2 producer.

    While Brazil makes ethanol from its sugar-cane crops — the world’s biggest — the cost surged as economic and political turmoil led to accelerating inflation.

    As the price of gasoline rose to a record, owners of flex-fuel cars that can switch to ethanol did so, and inventories plunged by 75 percent from a year earlier.

    Last month, imported fuel was the cheapest relative to local supply since 2011, offering at least a temporary lifeline to struggling U.S. producers.

    “The export market is the only hope the U.S. market has for balancing supply,” said Christoph Berg, managing director of commodity researcher F.O. Licht GMbH in Ratzeburg, Germany. “Without it, you may have to close or at least temporarily idle plants.”

    After importing a record 452 million gallons from Brazil a decade ago, the U.S. exported 5.7 percent of its production in 2015, which is more than triple the average rate in the years before 2011, government data show.

    Brazil has become the No. 2 buyer of U.S. ethanol, after Canada. The Philippines, China, South Korea and India round out the list of top importers.

    Overseas sales have helped ease the pain for some U.S. distillers, including Plymouth, which can produce 50 million gallons a year. The company’s shipments to Brazil have jumped to 100 percent of output, compared with periodic exports that began in 2012 and included sales to Europe, India, Peru and the United Arab Emirates, Chief Executive Eamonn Byrne said.

    “There’s just too much of it here,” said Byrne, adding that he never expected to be shipping fuel outside the U.S. “These markets are very, very heavy.”

    Demand from Brazil may accelerate this year because of a widening gap between the cost of domestic supply and imports, said Mark Marquis, founder and CEO of Marquis Energy LLC, a Hennepin, Illinois-based ethanol producer.

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    Brazil's Vale, Yara deny in talks over fertilizer unit stake

    Vale SA denied a report on Wednesday that it was negotiating a sale of fertilizer assets to Norway's Yara International as the Brazilian miner seeks to raise cash following its biggest quarterly loss in decades.

    Valor Economico, a Brazilian business newspaper, reported Vale could sell a minority stake in its fertilizer unit by the end of the year and suggested the Norwegian firm would be a good match for the assets. Citing unnamed sources, Valor said the deal could yield Vale $1.2 billion.

    Yara, in an email to Reuters, also denied any negotiations were under way.

    Vale is seeking to sell $10 billion in assets over the next 18 months after taking a massive loss in the fourth quarter of 2015, but analysts have told Reuters a fire sale could destroy equity value.

    Meanwhile, Yara has said it plans to increase investment in a bid to become more competitive and grow its business.
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    Precious Metals

    Indonesia Bumi Resources Minerals' shares up on hopes of Newmont unit stake sale

    Shares of PT Bumi Resources Minerals Tbk surged as much as 22 percent on Wednesday on hopes that the Indonesian miner would reap profits from selling a stake in Newmont Mining Corp's Indonesian operations to a consortium.

    The deal is expected to be announced this week, Indonesian businessman Arifin Panigoro, a key member of the group, told reporters on Tuesday. A unit of Bumi ResourcesMinerals owns a 24 percent stake in Newmont Nusa Tenggara, which operates the second-biggest copper mine in Indonesia.

    Shares of Bumi Resources Minerals hit 62 rupiah on Wednesday, the highest level since October last year. The broader Jakarta stock exchange was up 0.4 percent.

    Bumi Resources Minerals is controlled by family-owned conglomerate Bakrie Group.
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    Base Metals

    Copper Demand: Better than the market thinks?

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    China set to shake up world copper market with exports as stockpiles rise: traders

    China may be about to shock the global copper market by unleashing some of its stockpiles of the metal, which are near record highs, onto the global market.

    Four traders of copper, including two from state-owned Chinese smelters, said they expect China to raise its copper exports - which are usually tiny - in the next few months. China's refined copper exports averaged less than 10,000 tonnes a month in the first two months of 2016, and around 17,000 a month in 2015.

    If higher exports materialize, they will be a major jolt to producers and investors in the metal across the world - in particular because it would come during what is traditionally the strongest period of demand for copper from China, the world's largest consumer of the metal.

    It will also be a further sign that the Chinese economy is still struggling against headwinds. Some sectors that buy copper - such as construction and manufacturing - have been hit especially hard in the past couple of years.

    Traders and analysts in China say slowing building construction and electronics manufacturing has stifled demand for refined copper from the nation's massive smelting sector at a time when the country is already swimming in the metal.

    China's copper consumption has been a crucial measure of the country'seconomic growth as the metal forms the essential network of its infrastructure, carrying water, conducting electricity and comprising the circuits in its machines.

    "The situation for copper smelters in China is probably the worst it has been in 20 years. But they won't admit it.

    It wouldn't surprise me in the least if they start exporting," said a source at an Asian copper producer, who declined to be named because he is not authorized to speak to the media.

    Increasing Chinese exports would mark an abrupt turnaround in global copper trade flows as China's refined copper imports hit a record in 2015.

    Any exports could deliver a major psychological blow to market sentiment that has been buoyed lately by a more than 10 percent rally in prices since mid-January.

    The outbound flow of metal would also question the wisdom of the world's top mining companies to dial up copper production on the assumption of strong long-term demand out of China.

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    China ramps up aluminium output as 20% rally allows restarts

    Aluminum smelters in China, which supply more than half the world’s metal, are restarting idled plants after a price rally, according to the industry group that brokered an agreement in December to curb capacity.

    As much as half of Chinese smelter capacity is profitable at current prices, Wen Xianjun, deputy chairman of the China Nonferrous Metals Industry Association, said in a phone interview, adding the restarts weren’t a breach of the December accord because the pact allowed for flexibility in production.

    Prices of the metal used to make everything from window frames to aircraft have climbed more than 20% from a low in November on the Shanghai Futures Exchange as Chinese policymakers signaled their willingness to bolster growth. The new production may reverse a decline in exports after they flooded world markets last year and hurt producers from the US to India.

    “While we’re continuing to limit strictly the addition of new capacity, we’re encouraging those who can achieve positive cash flow to restart output because demand is good,” Wen said from Beijing on Wednesday.

    The move fulfills a prediction from Macquarie Group that rising prices of aluminium and steel would bring back output, threatening the rebound. Rates had shot beyond expectations, partly because companies that closed smelters and furnaces doubted the rally’s sustainability, Ian Roper, a director in the commodities research division, said in an interview last week.

    China Hongqiao Group, the world’s biggest aluminium producer, already announced an increase in supply. The company will expand capacity by 16% this year to about 6 million metric tons, chief executive officer Zhang Bo said last month. That came after the country’s aluminium production fell in the first two months as companies cut output to stem losses.

    Smelters mainly in the southern provinces such as Guizhou will restore 1.4 million tons of capacity this year, including around 800 000 tons in the first half, said Wan Ling, chief aluminium analyst with consultancy CRU Group. New supply will reach the market as early as June, pressuring global prices, Wan said. The country idled 3.8 million tons in 2015, according to Wan.

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    U.S. International Trade Commission launches aluminium trade probe

    U.S. International Trade Commission launches aluminium trade probe

    The U.S. International Trade Commission said on Wednesday it had launched an investigation into the U.S. aluminium industry and the global trade in the metal, a move that analysts said was aimed at staunching a steady flow of exports from China.

    The investigation is the first formal move by U.S. regulators to probe the impact on domestic smelters of lower-cost imports following a prolonged campaign by Century Aluminium Co, which is majority-owned by Glencore PLC.

    The commission said it would "report on factors of competition in major unwrought and wrought (semi-fabricated) aluminium producing and exporting countries, including the United States".

    The report did not specifically refer to China, the world's biggest producer and consumer of aluminium, which has been churning out much more of the metal than it can use, buttressed by local government subsidies to an industry that is a major employer.

    U.S. producers, along with United Company Rusal have accused Chinese producers of circumventing a 15-percent export tax on primary aluminum by shipping so-called "fake" semi-fabricated products that are intended to be re-melted later, piling pressure on overseas rivals.

    The announcement comes just days after Alcoa Inc stopped production at one of the last remaining U.S. smelters. Its 269,000 tonne Warrick Operations smelter in Evansville, Indiana, closed at the end of March.

    "The principal driver of exports is China's oversupply. That's not likely to change in the near term because production is still well over demand," said Paul Adkins, managing director of Beijing-based consultancy AZ China.

    AZ China expects China's output to grow by 2 million tonnes this year. China produced 31.4 million tonnes last year, according to government statistics, and exported a record 4.2 million tonnes of semi-finished products.

    The commission said that it expected to deliver a report by June 24, 2017.

    "The USITC will examine industry characteristics, recent trade trends and developments, competitive strengths and weakness, factors driving unwrought-production capacity increases, and government policies that affect aluminum production and exports in these countries."

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    Steel, Iron Ore and Coal

    China's coal offtake from Australia's Gladstone port recovers strongly in March

    Australia's Gladstone port shipped 415,000 mt of coal exports to China last month, spiking 176% from February's 150,000 mt, which was a seven-year low at the time, Gladstone Ports Corporation said in an operating report.

    China's offtake of coal exports at Gladstone port last month was less than half its 983,000 mt in March 2015, GPC data showed.

    Over January-March, China took delivery of 1.13 million mt of Gladstone coal shipments, down 56.5% year on year from 2.6 million mt in January-March 2015, according to the data.

    India's offtake of coal exports at Gladstone port rose 10% month on month in March to 1.3 million mt from 1.18 million mt in February, and its shipment volume was 1.25 million mt in March 2015, the data showed.

    A total of 3.6 million mt of coal exports were shipped to India from Gladstone port in the January-March quarter, up from 2.8 million mt in the corresponding 2015 period.

    Customers in Japan booked 1.99 million mt of Gladstone's total coal shipments of 5.66 million mt in March, making it the leading destination for coal exports, according to the GPC operating report.

    Japan's offtake was up 27.5% month on month from 1.56 million mt in February, said the report.

    Shipments to South Korea from Gladstone's coal terminals were steady in March at 1.3 million mt, from 1.26 million mt in February, bringing its total for the January-March quarter to 4.1 million mt.

    For the year-ago quarter, Gladstone had shipped 2.58 million mt of coal cargoes to South Korea.

    Fifteen mines operated by companies including BHP Billiton-Mitsubishi Alliance, Ensham Resources, Jellinbah Resources, Wesfarmers and Yancoal Australia supply coal exports to Gladstone port and its three coal terminals in Queensland.
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    Vale cuts spending, management salaries

    Brazil’s Vale, the world’s largest iron ore and nickel producer, is once again reducing its expected capital spending for the year to $5.5 billion from the previously forecast $6.2 billion.

    The mining giant is also slashing allocated compensations for its management and members of board. According to Noticias de Mineracao(in Portuguese), the firm has set apart this year US$24 million (90 million Reals) for its top executives’ salaries. The figure, adds the report, represents a 9.8% drop from 2015 levels and it follows a US$7.3 million-cut (27 million Real) in bonuses paid to directors.

    Vale has had to repeatedly tighten its capital budget in recent years as commodity prices declined.

    The situation contrasts dramatically with the firm’s situation in 2014, when Vale's senior executives got a nearly 20% pay rise, including bonuses for targets achieved the year before.

    In a presentation Wednesday, Vale reiterated it plans to sell core assets and use that money to reduce debt by $10 billion through 2017.

    The Rio de Janeiro-based company noted that capital expenditures in 2015 came in about $200 million higher than projections.

    The miner said its free cash flow is already near balance for the year and that the oversupply in iron ore markets should ease. Regardless of price conditions, Vale expects cash flow to exceed capital spending, especially since the company has already finished work on major expansion projects, such as its $14 billion S11D mine in Brazil’s Amazon.

    Vale has had to repeatedly tighten its capital budget in recent years as a result of a rout in commodity prices that hit two of its main divisions — iron ore and nickel — the hardest.
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    Brazil wants Samarco to stop leaks before operations resume

    Samarco Mineração SA will not receive Brazilian government authorization to resume iron ore mining operations at the site of a dam burst that killed 19 people until leaks of tailings are stopped, environmental protection officials said on Wednesday.

    Samarco, which is jointly owned by mining companies Vale SA and BHP Billiton Plc, hopes to resume operations at the start of the first quarter to be able to pay for a 20 billion real (US$5.53 billion) damages settlement.

    The restart depends on authorization from the Minas Gerais state environmental agency Semad, which told Reuters that the miner needs to find a solution for the leaks from dikes built after the dam burst. Tailings are mineral waste and water sludge left over from mining operations and stored in ponds.

    Samarco has taken first steps toward reopening the mine, applying for permission to use old mining pits to store tailings. A permit, however, will only be issued once the leaks are stopped, Semad deputy director Geraldo Abreu said.

    Abreu said he expected Samarco to find a solution to the leaks in the six months that it will take to issue a permit.

    Federal environmental protection agency Ibama said the leaking was allowing water with above-permitted turbidity levels to flow down to the Rio Doce river.

    Ibama coordinator for emergencies, Fernanda Pirillo, said half of the 24 million cubic meters of tailings that remained in the dam after it burst have leaked into the provisional dikes, which are leaking the turbid water into the environment.

    Samarco representatives said provisional measures taken by the miner comply with environmental norms and a final solution was being sought.

    Samarco Chief Executive Roberto Carvalho said last month that iron ore pellet production for the initial two to three years would likely be at a reduced 19 million tonnes per year as the company develops a long-term plan to store the mining waste known as tailings. Before the dam disaster, Samarco was producing about 30 million tonnes per year.
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