Mark Latham Commodity Equity Intelligence Service

Wednesday 1st June 2016
Background Stories on www.commodityintelligence.com

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    Macro

    China's factories steadying but weak, hopes for quick recovery fade


    China's manufacturing activity showed signs of steadying in May but remained weak amid soft demand at home and abroad, suggesting the world's second-largest economy is still struggling to regain traction.

    A rebound in March had raised hopes that China's economy was reviving, breathing life into global financial and commodity markets, but analysts said the soggy activity readings and weak April data suggest no quick recovery is in sight.

    China's official factory activity gauge expanded for the third straight month in May, but only marginally, while a private survey showed conditions deteriorated for a 15th straight month. Both showed factories continued to cut staff.

    "The question was whether the March rebound was a one-month story, or whether weakening in April was the outlier. Our expectation is May and June will fall somewhere in-between." said Zhu Haibin, chief China economist at JPMorgan.

    "The real estate market recovery has maintained momentum, the number of new investment projects is strong, and corporate earnings have also improved. The modest recovery will continue."

    The May Purchasing Managers' Index (PMI) was unchanged from April at 50.1, barely above the neutral 50-mark.

    To be sure, higher commodity prices, a better housing market and plenty of government spending have helped the industrial sector, but questions remain as to whether the upturn will last.

    Chinese steel prices posted their sharpest monthly drop on record in May, while more cities are tightening mortgage requirements, fearing house prices are growing overheated.

    "Prices are recovering and inventories are falling. The economy is improving, but we aren't sure it is sustainable. We think the data may decline again starting in July or August," said economist Wang Jianhui at Capital Securities in Beijing.

    The official output index edged up to 52.3, indicating production remains solid despite government pledges to curb overcapacity plaguing sectors such as steel. But new orders expanded more slowly, while growth in export orders stalled.

    A private factory survey painted a darker picture. Faced with shrinking demand, smaller manufacturers continued to cut payrolls at a rate similar to February's multi-year record.

    The private Caixin/Markit Manufacturing Purchasing Managers' index (PMI) fell to 49.2 last month, below market expectations of 49.3 and April's reading of 49.4.

    With the economy not yet on firm footing, economists expect Beijing to keep up its infrastructure building spree but are dialing back expectations for further broad policy easing by the central bank, which has cut interest rates and banks' reserve requirements repeatedly since late 2014.

    Investors have been buzzing over whether China is shifting to a more cautious policy stance since a People's Daily article in May that warned about the dangers of relying on too much debt to stimulate the economy.

    A record first-quarter credit binge boosted investment and industrial output in March, but banks sharply cut April lending.

    A similar survey showed activity in China's services sector continued to expand but at a slower pace, with the official reading dipping to 53.1 from 53.5 in April. Growth was weighed down by a slowing financial services sector.

    http://www.reuters.com/article/us-china-economy-pmi-idUSKCN0YN3CH
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    UN Envoy Kobler Says Libya Is Making ’Important Progress’


    United Nations envoy to Libya Martin Kobler said Libya is making “important progress” in that its unity government has now secured control over the central bank and the national oil company.

    Rebuilding the authority of the Libyan government is key to defeating the Islamic state, though that will necessarily require military force, Kobler said at a briefing in Paris.

    French Foreign Minister Jean-Marc Ayrault said a key challenge for Libya is rebuilding its army.

    http://www.bloomberg.com/news/articles/2016-05-31/un-envoy-kobler-says-libya-is-making-important-progress
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    Libyan security forces pushing Islamic State back from vicinity of oil terminals


    Libyan security forces captured a second town from in as many days from Islamic State, a spokesman said, pushing the militant group back towards its stronghold of Sirte and away from positions near to key oil terminals.

    The Petroleum Facilities Guard took control of Nawfiliyah, about 130 km (80 miles) from Sirte, though fighting outside the town raged on and some PFG members had been wounded, spokesman Ali al-Hassi said. The PFG captured the nearby town of Ben Jawad on Monday after clashes that killed five of its combatants.

    PFG forces say they are fighting on behalf of a U.N.-backed unity government that arrived in Tripoli in March to try to end factional chaos prevailing since Muammar Gaddafi's fall in 2011, with Islamist militants taking root in the security vacuum.

    PFG forces have advanced since separate brigades aligned with the unity government pushed Islamic State back to the outskirts of Sirte from the west.

    Western states are counting on the unity government to bring together Libya's armed factions and tackle Islamic State, which has exploited anarchy in the oil-producing North African state to establish its strongest base outside Syria and Iraq.

    Islamic State (IS) extended its presence along some 250 km (155 miles) of Mediterranean coast on either side of Sirte, and in January began attacking the PFG-secured oil terminals of Es Sider and Ras Lanuf.

    Islamic State has lost no significant population centres in its coastal zone over the last week but if government-backed brigades hold their ground, the jihadists' buffer zone around Sirte would have shrunk significantly.

    The PFG is a thousands-strong paramilitary force set up to protect Libya's oil installations.

    http://www.reuters.com/article/libya-security-idUSL8N18S3BP
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    China finds renewed interest in Bitcoin


    Two years after the first wave of Bitcoin frenzy swept China, Chinese investors are again chasing after the virtual currency, pushing up its price 16 percent in four days.

    The price reached 525.49 U.S.dollars per bitcoin Monday, which means 1.2 billion U.S. dollars were added to the market value since Friday.

    China's government frowns on the trading of Bitcoin, but many Chinese investors are nevertheless paying close attention to the market which is believed to yield high returns.

    Decreasing supply expectations are also fueling the price spike, analysts said.

    The virtual currency is created by a complicated computing process called "mining," and a mechanism was installed in place to limit the speed at which the coin is produced.

    http://news.xinhuanet.com/english/2016-05/31/c_135402536.htm
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    Oil and Gas

    OPEC oil output falls from near-record in May on Nigeria outages


    OPEC's oil output fell in May from near a record high, a Reuters survey found on Tuesday, as attacks on Nigeria's oil industry and other outages outweighed increases in Iran and Gulf members.

    A rise in supply from Saudi Arabia plus Iran suggests the group's top producers remain focused on market share, following the failure of an initiative in April between OPEC and non-OPEC producers to support prices by freezing output.

    With OPEC meeting in Vienna on Thursday, outages are effectively achieving the supply restraint on which producers could not agree. Those disruptions are supporting oil prices, which are close to 2016 highs, and the rally has reduced the urgency of any new attempt at deliberate supply curtailment.

    "There is a tiny chance of a bullish surprise but as things stand right now, the odds are the continuation of OPEC's market-share policy," said David Hufton, of oil brokers PVM.

    Supply from the Organization of the Petroleum Exporting Countries fell to 32.52 million barrels per day (bpd) this month, from 32.64 million bpd in April, according to the survey, based on shipping data and information from sources at oil companies, OPEC and consultants.

    OPEC output has surged since the group abandoned in 2014 its historic role of cutting supply to prop up prices, in a shift led by Saudi Arabia. There are more indications, however, that some producers are struggling to maintain supply.

    May's biggest decline occurred in Nigeria due to militant attacks on the country's oil industry. The disruption has pushed output to its lowest in more than 20 years.

    Libyan output declined further due to a blockage of shipments from the port of Hariga. Loading difficulties and other problems made a further dent in Venezuela's supply, sources in the survey said.

    Iraq, the fastest source of OPEC production growth in 2015, also pumped less as power outages limited southern exports, which in April were at a near-record.

    Of the countries boosting output, Iran managed a further increase after the lifting of Western sanctions in January.

    At 3.55 million bpd, Iranian output has more than matched the 3.50 million bpd it pumped at the end of 2011 before sanctions were tightened, according to Reuters surveys. However, any further rises will be smaller, sources said.

    "Getting back to pre-sanctions output was not a problem," said a source familiar with Iranian thinking. "Getting beyond that will be harder."

    Saudi Arabian output edged up to 10.25 million bpd, compared with 10.15 million bpd in April, the survey found.

    "Exports are higher," said an industry source who monitors Saudi output. "But production is not really changing very much."

    Other increases came from the United Arab Emirates, following the end of maintenance on oilfields, and Kuwait as supply rebounded after a three-day workers' strike in April cut output.

    http://www.reuters.com/article/us-opec-oil-survey-idUSKCN0YM239
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    Saudi Aramco Plans to Boost Capacity on Oil Pipeline to Red Sea


    Saudi Arabian Oil Co., the world’s largest crude producer, plans to increase the capacity of its main cross-country pipeline by 40 percent as the company expands oil fields in the eastern part of the nation and builds refineries on the western coast.

    Capacity of the 1,200-kilometer (746-mile) East-West pipeline will increase to 7 million barrels a day by late 2018, from 5 million barrels a day now, the company said on its Twitter account on Tuesday. The pipeline starts near Saudi Aramco’s headquarters in Dhahran to Yanbu on the west coast near the Red Sea where it’s expanding refining and petrochemical plants.

    “There’s no let up in Aramco’s plans for downstream expansion, so this would help in making sure they eliminate any bottlenecks in shipping crude,” Edward Bell, a commodities analyst at lender Emirates NBD PJSC, said by phone from Dubai. “There’s room for considerable demand growth both domestically and for export.”

    Saudi Arabia’s main oil deposits, including Ghawar, the world’s largest, are in the eastern part of the country. Saudi Aramco is expanding capacity at the Shaybah oil field in the Rub Al-Khali desert in southeastern Saudi Arabia by 33 percent to 1 million barrels a day. It reached full production for its 900,000 barrel-a-day Manifa field offshore in Gulf waters in 2014.

    The Manifa field produces the heavy crude grade that’s processed in Aramco’s joint venture refinery with China Petrochemical Corp. at Yanbu on the Red Sea. The company is building a refinery at Jazan along the southwest coast and is considering adding units to a separate crude-processing facility at Yanbu, according to its annual review released last week.

    The country’s main crude export terminal is at Ras Tanura in the Persian Gulf. The East-West pipeline gives Saudi Arabia a potential alternative outlet for crude shipments in the event of an interruption in the Strait of Hormuz. The Strait at the mouth of the Persian Gulf is the world’s most important choke point for crude exports, with about 17 million barrels of oil passing through it daily, according to the U.S. Energy Information Administration.

    http://www.bloomberg.com/news/articles/2016-05-31/saudi-aramco-plans-to-boost-capacity-on-oil-pipeline-to-red-sea
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    LNG Glut Seen by FGE Pushing Prices to $3 as Soon as Next Year


    Liquefied natural gas spot prices will fall to $3 per million British thermal units by mid-2017 or 2018 as new projects worsen a global glut, according to energy consultant FGE.

    A bevy of new export projects scheduled to start over the next few years will create more LNG than users around the world can burn, FGE Chairman Fereidun Fesharaki said in an interview Tuesday in Singapore. Most of the direct buyers of the supply are middlemen, not end users, and they will have to offer lower and lower prices to find customers.

    LNG on the spot market near Singapore has fallen 68 percent since October 2014 to $4.43 per million Btu this week, according to Singapore Exchange Ltd. Prices will have to keep declining until they drop low enough to force some producers, probably in the U.S. or Australia, to reduce output, Fesharaki said.

    “Some people are going to have to lose billions,” Fesharaki said.

    LNG hasn’t been as cheap as $3 since July 1999, according to import data from LNG Japan Corp., which tracks both term and spot prices for imports by world’s largest buyer of the fuel. Global LNG production capacity is expected to rise to 420 million tons a year by 2020, up from 333 million this year, Goldman Sachs Group Inc. said in February. Demand by 2020 is only expected to be about 323 million tons a year, the bank forecast.

    http://www.bloomberg.com/news/articles/2016-05-31/lng-glut-seen-by-fge-pushing-prices-to-3-as-soon-as-next-year
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    China issues draft rules for strategic oil reserves

    China issues draft rules for strategic oil reserves

    China is planning changes to the way it handles oil reserves by allowing private companies to build and operate some of its strategic stockpiles, while also requiring companies to maintain compulsory inventories, potentially boosting its future imports.

    Beyond allowing private companies to build and operate some strategic petroleum reserves (SPR), draft rules issued by the National Energy Administration (NEA) on Tuesday will also oblige companies to keep compulsory oil reserves.

    These stocks must be kept separately from commercial reserves, and the draft states that such compulsory reserves could only be used at the direction of the state council or cabinet.

    The government determines the size of such mandatory reserves based on oil consumption, the rules published on the NEA website said (www.nea.gov.cn).

    Although no specific volumes were published and no implementation timetable given, traders said that such requirements would boost China's oil imports further, if implemented.

    "Potentially it is supportive of the oil market as it may increase imports and reduce exports of products. However, the devil is in the detail so we need a clearer picture," said Oystein Berentsen, managing director for crude at oil trading firm Strong Petroleum in Singapore.

    China is the world's second-biggest crude importer, importing 32.58 million tonnes (or around 8 million barrels per day) and challenging the United States' for top spot.

    China is expected to add 70-90 million barrels to its strategic crude oil purchases in 2016 as it takes advantage of low prices, a Reuters survey has shown.

    By mid-2015, China had stockpiled about 190.5 million barrels under its SPR programme, or roughly one month of net crude imports.

    Beijing's goal is to stockpile reserves amounting to 90 days of net imports, which is the standard for SPRs in most western countries.

    In the draft rules, the government defines the country's SPRs as including government stockpiling and companies' compulsory stockpiling reserves.

    China's stockpiling programme has so far been led largely by state-owned energy giants Sinopec and CNPC, with ChemChina recently striking a deal with privately-run CEFC China Energy to lease out tanks in the southern island province of Hainan.

    Approval to use strategic oil reserves must come from the state council, the draft rules stipulated.

    Circumstances under which the reserves may be used include during an unexpected emergency when oil supplies are either blocked or significantly reduced, or when macro-economic adjustments are needed.

    The strategic oil reserves include crude oil and oil products like gasoline, diesel and jet fuel.

    The NEA is seeking public feedback on the draft rules until June 18.

    http://www.reuters.com/article/china-energy-strategic-oil-reserves-idUSL4N18S3W0
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    Gazprom sees no need for Europe price war, no U.S. LNG threat


    Russia's Gazprom sees no need to wage gas price wars in Europe to squeeze out rivals, including expected liquefied natural gas (LNG) from the United States, Deputy Chief Executive Alexander Medvedev said on Tuesday.

    Gazprom provides a third of the gas used in the European Union but relations have soured over Ukraine, prompting the EU to look for alternatives to Russian energy imports.

    One potential alternative for gas is LNG from the United States where exports are expected to rise sharply between now and 2019.

    "There has been a lot of talk that LNG from the United States is a panacea (for those looking to switch away) from Russian gas... But at the moment there are more preferable destinations for U.S. LNG than Europe," Medvedev said.

    "Price will determine the competitiveness of U.S. LNG. I don't see U.S. LNG flowing to Poland or Portugal."

    Medvedev reiterated that Gazprom's exports to the EU and Turkey may exceed a record-high 165 billion cubic metres (bcm) per year, topping deliveries of 159 bcm in 2015.

    Gazprom generates more than half of its revenue in Europe where Medvedev said sales would reach $28 billion this year.

    Some analysts have said that in order to preserve its market share in Europe, Gazprom would have to cut prices.

    "We don't see any need to wage a pricing war," Medvedev told reporters.

    He said gas prices in the second quarter would be the lowest this year but would rise from the third quarter.

    Last week, he said the company sees Russian gas prices in Europe this year averaging $167 to $171 per 1,000 cubic metres. That is down from about $240 in 2015, reflecting lower crude prices hitting indexed gas pricing.

    "We don't need astronomically high gas prices, we need prices which allow us to do our job," Medvedev said.

    He said that Gazprom's production costs are one of the industry's lowest at around $20 per 1,000 cubic metres.

    http://uk.reuters.com/article/russia-gazprom-idUKL8N18S230
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    Technip signs $500 mln deal to refurbish Libya's Bahr Essalam oil platform


    French oil services company Technip has signed a deal worth $500 million with a consortium that includes Libya's National Oil Company and Italy's oil and gas major ENI to refurbish an offshore oil platform.

    A statement from the French foreign ministry where a Libyan delegation was visiting on Tuesday, said the platform is for the Libya's Bahr Essalam oil field off Tripoli.

    The deal was signed by NOC's chief executive Mustafa Sanalla and Technip's CEO Thierry Pilenko.

    http://www.reuters.com/article/libya-technip-idUSP6N13V01M
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    Oil tankers in limbo as Venezuela's PDVSA fails to pay BP: sources


    Four tankers carrying over 2 million barrels of U.S. crude are stuck at sea and cannot discharge at a Caribbean terminal because Venezuela's PDVSA has not yet paid supplier BP Plc, according to two sources and Thomson Reuters vessel tracking data.

    The cargoes are part of a tender Petroleos de Venezuela [PDVSA.UL], known as PDVSA, awarded in March to BP and China Oil. The deal was to import some 8 million barrels of West Texas Intermediate (WTI) crude so Venezuela could dilute its extra heavy crudes and feed its Caribbean refineries.

    While three cargoes for this tender were delivered in April, seven other vessels, including BP's four hired ones, are waiting to discharge, leaving up to 3.85 million barrels of WTI in limbo.

    The company's cash crunch, which also affected its oil imports late last year, have added to a backlog of tankers since March due to malfunctioning loading arms at Jose, Venezuela's main crude port.

    PDVSA initially offered to pay for the imports with Venezuelan oil, but negotiations for those swaps failed as the proposed loading windows and crude grades did not work for BP, a source close to the talks said.

    Amid low crude prices, declining exports and a brutal recession at home, PDVSA has since 2015 delayed payments to suppliers. As a result, service firms including Schlumberger, Halliburton and Petrex have curtailed operations in the OPEC country.

    The payment delays are also raising questions about who will pay for demurrage, or the daily costs for delays. Three of the BP tankers have been anchored for over 30 days.

    As China already lifts Venezuelan crude as part of broader oil-for-loans deals, its companies have agreed on swaps for this tender, the sources said.

    Issues with loading arms to receive tankers at Jose port have doubled wait times for shippers since March.

    PDVSA said in a statement that installation of replacement equipment in the port's southern dock were successfully concluded on Tuesday.

    Some 30 dirty tankers are currently waiting around PDVSA's ports in Venezuela and Curacao.

    PDVSA has become one of the largest buyers of U.S. crude since last month even with a narrow arbitrage that makes most exports unattractive, analysts have said, but payment delays could stymie its bid to continue imports.

    http://www.reuters.com/article/us-oil-pdvsa-bp-idUSKCN0YM2OX
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    Golar posts $80 million loss in Q1, says LNG shipping market remains weak


    Bermuda-based Golar LNG, the owner and operator of liquefied natural gas carriers on Tuesday posted a loss of $80.1 million in the first quarter of this year.

    The shipping company’s adjusted operating loss was at $41.2 million in the first quarter as compared to $31.6 million in the fourth quarter of 2015.

    “Although headline shipping rates remained relatively unchanged, utilisation fell from 42% in 4Q 2015 to 24% in 1Q and revenue dropped accordingly from $20.1 million in 4Q of 2015 to $16.6 million in 1Q,”  Golar LNG said on Tuesday.

    Weak LNG freight market

    Golar noted that the weak LNG freight market continued in the early part of 2016, with the majority of fixtures coming from the Pacific basin.

    However, the Pacific basin fixtures were mostly for short periods, and the largest number of idle vessels is located in the basin.  The economics turned in favour of the charterers that took advantage of the overcapacity.

    There were fewer vessels and fewer fixtures in the Atlantic basin, due to subdued reload activity in Europe.

    “Middle Eastern activity was light during 1Q but has picked up as we approach mid-year when the Middle East and South American importers increase gas demand,” Golar said.

    Slower than expected start-ups at Sabine Pass in the U.S., Gorgon in Australia and Angola LNG in Africa have had a negative effect on the shipping market, however, vessels for the projects have been taken off the spot market.

    Enarsa of Argentina recently issued a tender for 35 cargoes which stimulated chartering activity in the early part of the second quarter, although whether this results in an improvement on the first quarter remains to be seen, according to Golar.

    “A gradual recovery, hand in hand with the ramp up and start-up of projects should result in improving utilisation and charter terms, initially for newbuild TFDE tonnage, and then for modern steam vessels,” Golar said.

    For its part, Golar LNG decided to lay up its spot traded Golar Viking and Golar Grand, as round-trip economics result in a lower effective rate, even though rates for newbuild TFDE vessels stay at US$25,000 to $30,000 per day.

    All of Golar’s ten newbuilds are currently operating inside the Cool Pool.

    http://www.lngworldnews.com/golar-posts-80-million-loss-in-q1-says-lng-shipping-market-remains-weak/
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    North Dakota rig count up more than 10 percent


    North Dakota saw the number of rigs actively exploring for or producing oil and gas increase by more than 10 percent from last week, state data show.

    Data from the state government show 28 rigs in service early Tuesday, up 16 percentfrom last week. The increase follows a slow march toward $50 per barrel for West Texas Intermediate, the U.S. benchmark for the price of crude oil. WTI is up about 4 percent from last week.

    Crude oil prices are still about 50 percent lower than they were two years ago, leaving energy companies with less capital to invest in exploration and production. Oil services company Baker Hughes reported no change last week in the total U.S. rig count. Year-on-year, however, the total U.S. rig count is 53 percent lower than it was for the same week in 2015. For North Dakota, the rig count for Tuesday is off by 65 percent from this date last year.

    North Dakota, home to the Bakken shale oil reserve, last week broke a record low for rig counts set in July 2005 with 25 in service. The all-time low point for rigs in North Dakota is zero.

    Rig counts serve as a loose barometer for the health of the oil and gas industry, which has been bruised by weak economics. Hess Corp., one of the more active players in North Dakota, said its first quarter spending on exploration and production was $544 million, down nevertheless 56 percent year-on-year.

    Lynn Helms, the director of the state's oil and gas division, said energy companies working in the state are committed to running only a small number of rigs.

    State data show oil production in March, the last full month for which figures are available, at 1.11 million barrels per day, a decline of about 1 percent from February. Natural gas production, however, reached an all-time high for the state last month at 1.7 million cubic feet per day.

    http://www.upi.com/Business_News/Energy-Industry/2016/05/31/North-Dakota-rig-count-up-more-than-10-percent/3281464693852/
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    U.S. March oil demand rises 2 percent year-on-year -EIA


    U.S. total oil demand rose for the second consecutive month in March, fueled in part by the continued strength in demand for gasoline, federal data released on Tuesday showed.

    U.S. oil demand rose by 2 percent, or 378,000 barrels per day, from a year ago to 19.61 million bpd, data from the U.S. Energy Information Administration showed.

    The March figures mark the fourth year-over-year increase in total oil demand in the last nine months, including February's growth of 1.5 percent, EIA data shows.

    The demand growth was led by gasoline, which jumped 3.8 percent, or 344,000 bpd, from a year ago to 9.4 million bpd, according to the EIA's petroleum supply monthly report.

    The gasoline demand numbers were strong enough to overcome weaker demand for distillates, which fell to 2.8 percent, or 113,000 bpd, versus last year.

    The U.S. Department of Transportation released figures last week that showed motorists logged 5 percent more miles on U.S. roads in March than they did a year earlier, fueling a record pace in vehicle miles traveled for the first three months of the year.

    The 5 percent increase resulted in 273.4 billion miles being driven in the month, an historic high for March.

    http://www.reuters.com/article/usa-oil-eia-psm-idUSL1N18S1ET
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    Valvoline Files for IPO as Parent Shifts Focus to Chemicals


    Valvoline Inc., the second-largest U.S. operator of oil-change stores, filed to sell stock in an initial public offering as parent Ashland Inc. sharpens its focus on specialty chemicals.

    The sale of as much as 20 percent of Valvoline shares is being targeted for the fourth quarter with the rest of the stock to be distributed later to Ashland shareholders, the Covington, Kentucky-based chemical maker said in a statement Tuesday. Subject to investor approval, Ashland will reincorporate in Delaware as Ashland Global Holdings Inc. to minimize separation-related taxes.

    The Valvoline IPO, which was first announced in September, is the latest phase of a decade-long transformation in which Ashland has sold a stake in an oil refiner and disposed of a road-paving business and a chemical-distribution operation. The company, led since last year by Chief Executive Officer William Wulfsohn, has also bought makers of specialty chemicals such as those used in pharmaceuticals, hair gels and anti-wrinkle products.

    Valvoline, which had net income last year of $196.1 million on sales of $1.97 billion, traces its history to the discovery in 1866 that crude oil makes a good lubricant, according to a filing. Valvoline was trademarked six years later and was subsequently recommended for use in the Ford Model T.

    The company sells lubricants through 1,050 Valvoline branded quick-lube franchises and company-owned stores, more than 30,000 retailers and 12,000 car dealers, repair shops and competing quick lube outlets. Division President Sam Mitchell was named as Valvoline CEO in September when plans for the IPO were first announced.

    The new company will be based in Lexington, Kentucky, and will trade under the ticker symbol VVV.

    The IPO managers are Bank of America Corp., Citigroup Inc. and Morgan Stanley.

    http://www.bloomberg.com/news/articles/2016-05-31/valvoline-files-for-ipo-as-parent-focuses-on-specialty-chemicals
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    Alternative Energy

    Germany ends row with states over green energy roll-out


    Chancellor Angela Merkel hammered out the framework for a deal with state premiers on Wednesday on reforms to Germany's renewable energy law aimed at curbing the costs and controlling the speed of the future roll-out of green power sources.

    After a meeting with the leaders of Germany's 16 states that stretched into the early hours of Wednesday, the government agreed to limit the expansion of onshore wind at 2.8 gigawatts in capacity per year, equivalent to about 1,000 wind turbines.

    In addition, only a certain amount of new capacity will be permitted in north Germany to avoid overburdening the electricity grid.

    "We have come a long way," Merkel told reporters following the meeting.

    Saxony-Anhalt Premier Reiner Haseloff spoke of a "breakthrough," while his counterpart in Bremen, Carsten Sieling, said they had covered 90 percent of the ground.

    Generous green subsidies have led to a boom in renewable energy, such as wind and solar power. But the rapid expansion has pushed up electricity costs in Europe's biggest economy and placed a strain on its grid.

    The latest reforms are aimed at slowing the growth in renewables, which accounted for around a third of Germany's electricity last year.

    With the government sticking to its target for an increase in the share of renewable sources to 40 to 45 percent of total electricity production by 2025, it will have to put the brakes on growth to avoid overshooting.

    One of the biggest sticking points in the talks were plans to limit the amount of onshore wind, with critics saying that would endanger Germany's long-term energy goals and put jobs in the sector at risk.

    The government also wants to move away from guaranteed set payments to a competitive auction system where green energy producers only receive payments for their power if they win a tender.

    According to the proposals, an upper limit of 600 megawatts will be placed on solar power expansion. Installations that are smaller than 750 kilowatts of capacity will continue to receive support so as not to discourage rooftop solar panels.

    The government and states failed to agree on upper limits for biomass, which is important in the southern state of Bavaria, while questions remain over the future expansion of offshore wind plants.

    The government now hopes to approve the proposals in the Cabinet in coming weeks. The draft law is due to come into force at the start of 2017.

    http://www.reuters.com/article/us-germany-renewables-idUSKCN0YN31H
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    Pollen in batteries

    Energy storage is an extremely hot area of the energy and utility markets right now, with new innovations and investment opportunities appearing all the time. Add to that the breakneck growth of the energy storage market and you have a recipe for a burgeoning industry with massive potential. One of the most innovative technologies recently though is under development at Purdue University. Researchers in the Chemical Engineering Department there are working on a battery that uses plant pollen as a component.

    The pollen would act as an anode in the Purdue battery in place of the current standard which uses tiny graphite particles. The innovation is using high temperature argon environments to char the pollen, leaving residual pure carbon in its place. The residual carbon components retain the same small geometric structure as pollen, which means that they are very complex surfaces covered with spikes, crevices, and pits. In nature, that surface allows pollen to effectively stick to bees and other insects helping plants to propagate effectively.

    In batteries, the complex structure of the residual carbon particles creates a greater surface area, which in turn allows for better ion storage in the batteries. That makes the batteries more efficient and gives them a greater energy capacity. The technology has significant promise since energy storage capacity in batteries is one of the key issue that constrains the industry.

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    Agriculture

    India starts talks on new potash import contracts -industry officials


     Indian buyers have started talking with potash suppliers on new import contracts, trying to settle them at a steep discount to last year's price, two industry officials told Reuters, as plentiful supplies gave purchasers new bargaining power.

    Contracts signed by India and China are considered benchmarks in Asia, and are closely watched by other potash buyers such as in Malaysia and Indonesia.

    India typically opens negotiations for imports of the key fertiliser ingredient in February, aiming to sign new contracts before the start of the next fiscal year on April 1.

    However, India halted potash imports in February this year and delayed negotiations after successive droughts dented demand in one of the world's biggest fertiliser consumers.

    "We are negotiating with suppliers. Hopefully negotiations will be over this week," a senior official with an Indian fertiliser company told Reuters over the phone from Moscow, where he was attending a conference.

    "If negotiations fail this week, then suppliers could visit New Delhi in June to settle the new contract," he said.

    Under the previous contract, India was buying potash at $332 a tonne on a cost and freight basis (CFR).

    Indian buyers are seeking a steep reduction as global potash prices have fallen to their lowest in a decade, weakened by declining U.S. farmer incomes, falling currencies in consuming markets such as Brazil and bloated mining capacity.

    "Miners have to accept the fact that it is an oversupplied market. They have to reduce prices to boost the consumption," said an official with a co-operative fertiliser company.

    India's imports of potash could rise if the suppliers reduce prices as the monsoon is forecast to deliver surplus rainfall, the official said.

    Monsoon rains in June-September deliver about 70 percent of the country's annual rainfall and sustain the half of India's farmlands which lack irrigation.

    State-run Indian Potash Ltd, the country's biggest importer, cut retail prices of muriate of potash for farmers by 1,000 rupees ($15) per tonne to boost the consumption, said P.S. Gahlaut, managing director of the company.

    India imported around 3 million tonnes of potash in the 2015/16 fiscal year that ended on March 31.

    Major potash suppliers to India include Uralkali, Potash Corp of Saskatchewan , Agrium Inc, Mosaic, K+S, Arab PotashCo and Israel Chemicals.

    http://finance.yahoo.com/news/india-starts-talks-potash-import-101047534.html
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    Precious Metals

    Alrosa doubles net profit on strong diamond sales


    Russian diamond miner Alrosa , the world's largest producer of rough diamonds in carat terms, more than doubled its quarterly net profit on the back of strong sales, it said on Tuesday. 

    Alrosa, with its key production assets located in the Yakutia region in Russia's Far East, posted a first-quarter net of 49.9-billion roubles ($757-million), up from 22.2-billion in the same period a year ago, on revenue up 37% at 102.3-billion. 

    The company, which along with Anglo American unit De Beers produces about half the world's rough diamonds, said earnings before interest, taxes, depreciation and amortisation (EBITDA) grew 38% to 59.3-billion roubles. Alrosa had said last month its first-quarter sales rose 34% year-on-year to 12.1-million carats. 

    The group is among state assets set for privatisation later this year, with the government aiming to earn more than 60-billion roubles from selling a 10.9% stake in the company. 

    Alrosa plans to hold meetings with investors in the United States and Britain in June ahead of the stake sale. Proceeds from the sell-off will assist the government's efforts to keep the budget deficit within its target of 3% of gross domestic product. 

    Alrosa plans to produce up to 39-million carats of diamonds in 2016, compared with 38-million produced and 30-million sold in 2015. Its 2016 sales are expected at more than $3.5-billion. Diamond sales stagnated in 2015, hit by a weaker Chinese economy. However, producers are seeing scope for recovery, especially in the US, which accounts for some 45% of demand.

    http://www.miningweekly.com/article/alrosa-doubles-net-profit-on-strong-diamond-sales-2016-05-31
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    Barrick Gold reaches $140 million accord in U.S. investor lawsuit


    Barrick Gold Corp has agreed to pay $140 million to resolve a U.S. lawsuit accusing the gold producer of concealing problems at a South American mine and of fraudulently inflating the company's market value, according to court papers.

    The settlement, disclosed in papers filed on Tuesday in Manhattan federal court, would resolve a class action accusing Barrick of deceiving investors about environmental problems afflicting its Pascua-Lama project on the border of Argentina and Chile.

    "I am pleased we were able to reach this resolution for investors," James Hughes, a lawyer for the plaintiffs at the law firm Motley Rice, said in a statement.

    Barrick in a statement confirmed the $140 million accord and said the value of the settlement is insured.

    "Barrick continues to believe that the claims alleged by the lead plaintiffs in the litigation are unfounded, and under the terms of the settlement agreement, the company has not accepted any charges of wrongdoing or liability," the company said.

    The settlement, which requires court approval, comes two months after a federal judge cleared the way for shareholders who bought or acquired Barrick stock between May 7, 2009 and Nov. 1, 2013 to pursue the case as a class action.

    Barrick bought the Pascua-Lama project in 1994, and had been counting on it to generate a large percentage of its overall gold production.

    But cost overruns, environmental issues, labor unrest, political opposition and falling bullion prices contributed to Barrick's decision on Oct. 31, 2013 to indefinitely halt the project, after it had already spent more than $5 billion.

    Investors in the lawsuit contended Barrick touted Pascua-Lama during this period as a "world-class project that will contribute low-cost ounces at double-digit returns," even as it became clear the project would fall short of expectations.

    http://www.reuters.com/article/us-barrick-gold-lawsuit-idUSKCN0YM2LI
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    Base Metals

    Workers to strike at Colombia's Cerro Matoso nickel mine


    Union workers at Colombia's Cerro Matoso mine, one of the world's largest producers of ferronickel, will begin an indefinite strike on June 14 in protest of work and pay conditions, the union president said. 

    A strike at Cerro Matoso, owned by Australia's South32, could impact global nickel prices as production stalls. Miners last year went on strike at the mine for two weeks before reaching agreement on a dispute that had forced previous owner BHP Billiton to declare force majeure. 

    "The union has voted to strike on June 14 because of the negative attitude of the company to resolve workers' demands," Domingo Hernandez, president of the Sintracerromatoso union, told Reuters. "Despite the decision to strike, we maintain an open door to dialogue. A solution to avoid the strike lies with the company." 

    Workers have demanded a pay increase of 9.77%, Hernandez said. Cerro Matoso said in a statement that the union has ignored the crisis sparked by the global drop in mineral prices and reduced output caused by a depletion of reserves. 

    "We insist that Cerro Matoso cannot take work commitments that exceed economic capacity or jeopardize the sustainability of the company," said mine president Ricardo Gaviria, adding that the company would be negatively impacted by a strike. 

    The union's demands would incur additional costs of $12-million, the statement said. Cerro Matoso reported losses of $75-million between July 2015 and March this year. The mine, located in the northern province of Cordoba, produced 36 670 t of ferronickel last year, down 11% from 2014. Cerro Matoso has more than 1 200 employees, 520 of whom belong to the union.

    http://www.miningweekly.com/article/workers-to-strike-at-colombias-cerro-matoso-nickel-mine-2016-06-01
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    Australian micro miner says finds big zinc lode


    Australian penny stock Rox Resources, backed by mining major Teck Resources of Canada, said it has discovered one of the world's largest zinc deposits in northern Australia, although any decision to mine is years away.

    The discovery comes seven months after Chinese conglomerate MMG Ltd shut the nearby exhausted Century zinc mine, once the world's third-biggest, leaving a hole in global supplies of the metal chiefly used to galvanise steel.

    The lode, named Teena, holds 14.2 billion pounds of zinc, as well as 2.1 billion pounds of lead, making it around the same size as the Century deposit. Teena is located eight kms (5 miles) from the Glencore -owned McArthur River zinc mine.

    Rox's stock more than doubled on Wednesday on news of the find to just under three Australian cents a share, giving it a market value of A$34.2 million ($24.8 million), although it would likely be a decade before a mine is built, if at all.

    "We've established that a significant resource is there and now we need to conduct more drilling and metallurgical work, which will not happen overnight," Rox managing director Ian Mulholland said.

    "Realistically, we are still anywhere between five and 10 years away from production," Mulholland said.

    Shares in Metalicity Ltd, another Australian penny stock sitting on a potentially big zinc mine, known as Admiral Bay, have more than tripled so far this year to 7.5 Australian cents.

    "Investors in small miners are hungry to allocate cash even in companies like Rox that have a long way to go," said Keith Goode, an analyst for Eagle Mining Research. "Teena is not a mine yet and will require huge amounts of capital and development work without any guarantees."

    The latest find is 49 percent owned by Rox and 51 percent by Teck, which also runs the world's second-biggest operating zinc mine, Red Dog in Canada.

    Teck holds an option to increase its stake to 70 percent by spending a further A$1.15 million on exploration having already spent A$13.85 million.

    http://www.reuters.com/article/zinc-australia-discovery-idUSL4N18T32H
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    Steel, Iron Ore and Coal

    China steel, iron ore, worst month ever as demand wanes


    Chinese iron ore futures edged higher on May 31 and steel steadied but both were set to end May with their deepest monthly losses on record as seasonal demand in the top global steel consumer fizzles, Reuters reported.

    May's decline follows a spectacular rally over December to April that was fueled by optimism about China's economy. But the bullish sentiment turned into doubts as indicators from retail sales to trade suggested a solid recovery was not yet in place.

    The five-month price surge pushed many shuttered Chinese steel mills to resume operations, increasing supply that could keep steel markets under pressure as seasonal demand slows down with hot weather curbing construction activity from June.

    These mills "just don't start and stop with the flows of seasonal demand," said Daniel Hynes, senior commodity strategist at ANZ Bank.

    "We'd expect those to remain open for the time being and that probably should result in steel production holding up relatively well despite that normal seasonal slowdown."

    The most-traded rebar on the Shanghai Futures Exchange was little changed at 1,995 yuan/t ($303/t) by the midday break.

    Rebar, or reinforcing bar used in construction, has fallen 28% from its April peak. For the month, it has lost 22% so far, the most since the Shanghai exchange launched rebar futures in 2009.

    On the Dalian Commodity Exchange, the most-active iron ore gained 1% to 346.50 yuan/t. The contract is now down 31% from April's high and 24% over May, its biggest monthly decline since launch in 2013.

    Stocks of imported iron ore at China's major ports have continued to rise, standing at 100.65 million tonnes on May 27, the highest since December 2014, according to data tracked by industry consultancy SteelHome.

    With Chinese steel production holding up, ANZ's Hynes said he doesn't expect the iron ore port inventory to rise sharply from current levels.

    Spot iron ore could find strong support at around $50/t, he said.

    Iron ore for immediate delivery to China's Tianjin port slipped 1.2% to $50.30/t on May 30, data compiled by The Steel Index showed.

    The spot benchmark has lost almost 23% so far in May, its biggest monthly drop since August 2012.

    Other steelmaking raw materials coking coal and coke on May 31 recovered from recent lows, rising 1.3% and 1.9%, respectively.
     
    http://en.sxcoal.com/0/147044/DataShow.html
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    SABIC eyes coal-based China petchem complex joint venture


    SABIC has signed an agreement with Shenhua Ningxia Coal Industry Group (SNCG), a unit of China's biggest coal producer– Shenhua Group, to build a joint venture petrochemical complex in Ningxia, the Saudi Arabia-based chemicals major said in a statement issued late on May 30.

    The proposed joint venture complex in north-central China will utilise locally available coal feedstocks to be supplied by SNCG, SABIC said.

    "The parties would proceed with further actions to implement the project in the event of a positive final investment decision and subject to obtaining all necessary governmental approvals," it said.

    Financial details of the agreement and project timeline were not disclosed.

    The two firms will soon conduct a joint feasibility study on the project and seek the required regulatory approvals within three years, it said.

    The Ningxia petrochemical project with SNCG will help protect SABIC against the fluctuations and cyclical movements in feedstock prices in the international markets, SABIC vice chairman and CEO Yousef Al-Benyan said in the statement.

    In the first quarter of the year, SABIC posted a 13.2% year-on-year fall in net profit to around $909 million amid lower product prices, which tracked the global energy prices.

    http://en.sxcoal.com/0/147095/DataShow.html
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    Japan Jan-Apr coal imports drop 3pct on year

    Japan Jan-Apr coal imports drop 3pct on year

    Japan imported 62.96 million tonnes of coal over January-April this year, falling 2.64% year on year, showed data from Japan Customs.

    The coal imports of the country totaled 193.74 million tonnes in 2015, rising 1.01% from the year prior, data showed.

    Of this, thermal coal imports rose 4.8% on year to a record 114.15 million tonnes last year.

    http://en.sxcoal.com/0/147102/DataShow.html
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    Nippon Steel looks to break up Usiminas after CEO appointment: source


    A change of chief executive at Brazilian steelmaker Usiminas has accelerated plans for controlling shareholders Nippon Steel & Sumitomo Metal Corp and Ternium SA to break up the company, a source close to the Japanese firm said on Tuesday.

    Nippon Steel, however, issued a statement later denying that it was planning to break up Usiminas, and a spokesman said the focus was on financial restructuring and completing an equity financing.

    The Usiminas board last week appointed veteran executive Sergio Leite to the top job in a contested vote. He replaced Rômel Erwin de Souza, who had been backed by Nippon Steel.

    In a split, Nippon Steel could take Usiminas' mill in Ipatinga, while Ternium could get the Cubatao mill in the neighboring state of Sao Paulo. The source said no official negotiations had begun.

    The companies have been at loggerheads for nearly two years over control of the Brazilian steelmaker and a break-up has been considered by both sides.

    Usiminas has already stopped steel production at its Cubatao mill, slowed work at its mines and laid off thousands of employees as it suffers through Brazil's worst recession in decades.

    "(Nippon) does not see another solution other than a division of the company," the source said.

    Japan's Nikkei newspaper also reported on Wednesday that Nippon Steel intended to hold talks on dividing production assets of Usiminas with Ternium.

    "The priority issues on Usiminas now are to complete a planned equity finance and financial restructuring," a spokesman for the company said.

    Japan's largest steelmaker is looking to annul the appointment of Leite, arguing it was made without the required consent of its members on the Usiminas board. Nippon Steel has taken the case to a court in the state of Minas Gerais, where Usiminas is based.

    http://www.reuters.com/article/us-usiminas-restructuring-idUSKCN0YM2DH
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