Mark Latham Commodity Equity Intelligence Service

Wednesday 18th November 2015
Background Stories on www.commodityintelligence.com

News and Views:

Attached Files






    Macro

    China losing out to US in cost advantage

     

    WUHAN - China's manufacturing industry is losing out to the United States in terms of its cost advantage, a new report has suggested.

    Prices of energy, logistics and some raw materials in China have surpassed those in the United States, according to the 2015 China Purchasing Development Report, released on Thursday by the China Federation of Logistics and Purchasing.

    The report said that the United States has slashed its energy costs with exploitation of shale gas, increasing the competitiveness of American manufacturers.

    "Many raw materials are cheaper in the United States," the report said. "For example, US cotton is 30 percent cheaper than that in China." It also pointed out China's price disadvantages with statistics in sectors including logistics and industrial land.

    Citing a survey by the Boston Consulting group, the report said the cost advantage of China's manufacturing industry over the United States has plummeted to 4 percent in 2014 from 14 percent in 2004.

    "If the trend continues, China's cost advantage in manufacturing could be completely wiped out by 2020," the report predicted.

    It suggested China steps up innovation and relies on made-in-China equipment and Chinese brands to sustain growth in the futur


    Attached Files
    Back to Top

    Explosion, Fire Reported At Chinese Chemical Factory (Again)


    Count us incredulous at this point (and we're sure we aren't the only ones), but it looks as though there has been yet another explosion at a Chinese chemical facility, this time in Liaoning





    View image on Twitter
     FollowPeople's Daily,China  ✔@PDChina

    : Chemical plant explosion in Fushun city, Liaoning Province, on Tue

    2:07 PM - 17 Nov 2015

    http://www.zerohedge.com/news/2015-11-17/explosion-fire-reported-chinese-chemical-factory-again

    Attached Files
    Back to Top

    Buyout Bubble Bursts


    Ten years after Symantec paid $13.5bn for Veritas, Carlyle Group agreed in August to buy the data-storage business for just $8 billion (the biggest LBO of the year). Of course, the buyout deal made sense when the cost of funding was negligible and The Fed had your back but, as Bloomberg reports, amid soaring borrowing costs, banks have pulled the $5.5 billion debt offering for Veritas signaling a clear end to the reach-for-yield, nothing is a problem, bond market's risk appetite.. and if 'growthy' deals like this are being killed, what does that say for distressed bets on Energy M&A deals?

    As Bloomberg noted earlier,

    The banks backing Carlyle Group LP’s $8 billion buyout of Symantec Corp.’s data-storage business are facing one of the costliest debt deals of the year to offload part of the financing in the corporate-bond market.

     As investors squirm at the amount of debt being piled onto the unit, known as Veritas, underwriters are discussing yields of 11.5 percent to 12.5 percent to lure potential buyers to a $1.775 billion junk-rated portion of the debt,according to people with knowledge of the talks. That would be one of the highest bond yields of 2015 and shows just how risk-averse fixed-income investors have become as the global economy cools and the U.S. Federal Reserve moves to raise interest rates for the first time in almost a decade.

    Borrowing costs on junk bonds are soaring back toward a three-year high set last month as investors grow wary of increasing their exposure to risky assets in the credit markets.That is beginning to impact banks that have committed to finance buyouts in the last few months and are now finding it difficult to syndicate the debt.

    http://www.zerohedge.com/news/2015-11-17/buyout-bubble-bursts-banks-pull-carlyles-biggest-lbo-year-bond-deal-amid-soaring-cos

    Attached Files
    Back to Top

    Oil and Gas

    OPEC Said to Delay Long-Term Strategy Amid Rift Over Production


    OPEC’s board of governors was unable to agree on the group’s long-term strategy plan and won’t present it to oil ministers when they meet on Dec. 4 in Vienna, two OPEC delegates with knowledge of the matter said.

    Approval of the plan is delayed until at least the next meeting of the board of governors in 2016, said the delegates, who asked not to be identified because the plan isn’t public. Calls to the headquarters of the Organization of Petroleum Exporting Countries in Vienna weren’t immediately answered.

    Governors of the 12-member group couldn’t agree on the final draft of the plan at a meeting in Vienna earlier this month, the delegates said. The governors disagreed on clauses suggested by some members, including about curtailing output, setting production quotas and finding ways to maximize OPEC profit, according to the delegates.

    OPEC ministers are to meet on Dec. 4 to assess the oil market and the group’s output policy. Venezuela and Algeria are among OPEC states most affected by the slump in oil price and have long urged fellow members to curb production and support prices. Saudi Arabia, the world’s largest crude exporter, led the group to switch its strategy in November 2014 to focus on pressuring competitors such as U.S. shale producers and reclaiming market share.

    Oil tumbled since the middle of last year as U.S. stockpiles and production expanded, creating a global oversupply. OPEC decided at its last meeting on June 5 to keep its production target of 30 million barrels a day unchanged, although the group has exceeded the ceiling for the past 17 months. OPEC member Iran has asked OPEC to accommodate its planned production increase once sanctions are lifted.

    http://www.bloomberg.com/news/articles/2015-11-17/opec-said-to-delay-long-term-strategy-amid-rift-over-production

    Attached Files
    Back to Top

    Russia Resolves to Make Most of Soviet Oil as New Finds Delayed


    Russia plans to squeeze all the oil it can from Soviet-era discoveries to hold crude output stable for the next two decades as new finds are delayed by sanctions and slumping prices, according to the Energy Ministry.

    “We’ve got a safety cushion until 2035,” Deputy Energy Minister Kirill Molodtsov said in an interview in Moscow. “The potential for output growth at oil fields already in operation is higher than in unexplored territories.”

    Russia, which relies on oil and gas for almost half of its budget revenue, has repeatedly broken post-Soviet production recordsthis year as drillers benefit from a weakening ruble. Nevertheless future barrels may be at risk as exploration campaigns, mostly in undeveloped areas offshore, have tailed off following investment cuts.

    Exploration drilling dropped 21 percent in the nine months through September after increasing in 2012 to 2014, government data show. State-run energy giants Rosneft OJSC and Gazprom PJSC are delaying some offshore drilling by two to three years, according to the Natural Resources Ministry.

    Production Outlook

    Exploration drilling is first in line when companies trim spending, according to Molodtsov. Adding wells at existing fields or using chemicals or fracturing to push out more oil provide a quicker return than tapping new territories, he said, estimating steady annual output of 525 million metric tons (about 10.5 million barrels daily) through 2035 even in a conservative scenario.

    A tax system that provides the right incentives could help drive volumes to 540 million tons in the coming years, he said.

    Russia plans to boost offshore oil production by 33 million tons to 50 million tons in the next two decades, according to its long-term energy strategy.

    Alternatively, “with the right motivation we can get those 33 million tons in West Siberia,” Molodtsov said. Russia has 21,500 idle wells in its main oil-producing province, the Khanty Mansiysk region, mostly explored during the Soviet Union era. It’s there that production needs to be “intensified,” according to the deputy minister.

    Insufficient Capacity

    The International Energy Agency has taken a less optimistic view on Russia. The nation doesn’t have the capacity to wring enough crude from existing fields to support longer-term growth, the IEA said in its World Energy Outlook 2015 report published this month.

    For more than three years, Molodtsov’s ministry has been pushing the government to agree to a new profit-based tax system to spur crude output, while the Finance Ministry has suggested Russia should wait until at least 2017 given the economy’s recession.

    Russia’s oil and gas industry deserves incentives because it’s “the driver of the economy,” Molodtsov said. The country should encourage its “strongest” players by stimulating output at existing fields, he said.

    http://www.bloomberg.com/news/articles/2015-11-17/russia-resolves-to-make-most-of-soviet-oil-as-new-finds-delayed
    Back to Top

    Russian oil output may fall by up to 10 mln tonnes in 2017


    Russian oil production may fall by up to 10 million tonnes in 2017 from projected levels for 2015 and 2016, affected by western sanctions that reduce companies' ability to raise funds, First Deputy Energy Minister Alexei Texler said on Tuesday.

    Russian oil and gas condensate production hit a new post-Soviet high in October, rising by 0.4 percent month on month to 10.78 million barrels per day (bpd).

    Texler told reporters the ministry was forecasting oil output at around 533 million tonnes this year or 10.7 million bpd, with the same projection for next year when oil output should be supported by bigger gas condensate production.

    "Possible reduction may come in 2017, with a potential decline of up to 10 million tonnes," Texler said, adding that Russian oil firms are lacking foreign financing due to sanctions imposed over Moscow's role in the Ukraine crisis.

    Russia has constantly refused to cooperate with OPEC on supporting oil prices, currently under $50 per barrel due to global oversupply, which analysts expect to persist at least for some time next year until a natural reduction in output comes.


    Read more at Reutershttp://www.reuters.com/article/2015/11/17/russia-oil-output-idUSL8N13C35L20151117#3IdAgEyCDZXyIXiT.99

    Attached Files
    Back to Top

    India's Oct fuel demand surges at fastest pace in nearly 12 years


    India's annual fuel demand in October surged at its fastest pace in nearly 12 years driven by higher sales of gasoil and gasoline ahead of festival season in Asia's third-largest economy.

    Fuel consumption, a proxy for oil demand, rose 17.5 percent in October from a year ago, the biggest jump since April 2004, according to data from the Petroleum Planning and Analysis Cell (PPAC) of the oil ministry.

    India last month consumed 15.2 million tonnes of refined oil products, the data showed, with gasoil sales rising to their highest level in five months.

    Consumption of gasoil or diesel, which makes up about 40 percent of refined fuels used in India, rose 16.3 percent to 6.34 million tonnes. Campaigning ahead of an election in the eastern Bihar state also fuelled diesel demand last month.

    Sales of gasoline climbed 14.5 percent to 1.85 million tonnes from a year earlier on robust passenger vehicles sales in the month.

    Cooking gas or liquefied petroleum gas (LPG) sales increased 12.5 percent to 1.69 million tonnes, while naphtha sales rose 31.32 percent to 1.05 million tonnes.

    Construction activity also likely rose due to drier conditions with the data showing sales of bitumen, used for making roads, were 64.99 percent higher, while fuel oil use was up 27.98 percent in October.


    Read more at Reutershttp://www.reuters.com/article/2015/11/17/india-fuel-demand-idUSL3N13C3D820151117#DOSX0t7WpAqOM0jo.99

    Attached Files
    Back to Top

    Iran Won’t Seek OPEC’s Permission Before Boosting Oil Exports


    Iran won’t negotiate with OPEC or seek the group’s permission before boosting oil exports by a planned 500,000 barrels a day once sanctions are removed from the nation’s economy.

    The Persian Gulf state is unconcerned about the impact this additional supply may have on crude prices, which already reflect the expected increase in Iranian shipments, Oil Minister Bijan Namdar Zanganeh said Tuesday at a news conference in Tehran. The fifth-largest producer in the Organization of Petroleum Exporting Countries will inform the group after it increases exports, he said.

    “The drop in prices won’t be a concern for us,” Zanganeh said. “It should be a concern for those who have replaced Iran.” Iran doesn’t expect difficulties selling the additional barrels, and “the market has taken into account our return,” he said.

    Iran has struggled to sell its oil due to international sanctions over its nuclear program and is eager to reclaim its share of global sales. Sanctions are widely expected to be lifted next year as a result of an accord the country reached with six world powers in July. Iran produced 2.7 million barrels a day of oil in October, according to data compiled by Bloomberg, down from more than 4 million before the U.S. and other nations imposed curbs on its energy and financial industries.

    “Our oil will probably double within a short while of sanctions being lifted,” Zanganeh said, without specifying the amount of such an increase in exports. “So if the price does go down, it won’t worry us because it means, for instance, if the price drops but then export volumes increase, the income will stay the same as before.”

    All phases of the South Pars natural gas field except for one, the 14th phase, will be open by the time President Hassan Rouhani’s presidential term ends in June 2017, Zanganeh said at the conference. Iran has the world’s biggest gas reserves, according to BP Plc data.

    http://www.reuters.com/article/2015/11/17/russia-oil-output-idUSL8N13C35L20151117#osxez6cDYSPq7y2Q.97

    Attached Files
    Back to Top

    U.S. and Russian gas exporters square up over Europe


    The first exports of U.S. gas to Europe will head for Lithuania, two industry sources say, a gesture to the Baltic states, reliant on Russia for supply, and the likely first shot in a price war over market share in Moscow's backyard.

    The February delivery will be of U.S. liquefied natural gas (LNG) transported by sea to custom built terminals, challenging Russia's land locked pipelines, as producers turn from the wilting Asian market to Europe.

    Europe has attained strategic importance for the United States, where companies that have already invested $60 billion in building four giant export schemes are offered a lifeline by the continent's deep markets and dozens of under-used import terminals.

    Talks are ongoing on the inaugural U.S. shipment, though Lithuania's state-run Lietuvos Energija wants a discount to Russian piped deliveries, one source said.

    With U.S. exports set to top 60 million tonnes/year in 2019, EU regulators see LNG as the solution to rising Russian market dominance as they challenge the legality of Russia's Gazprom's pipeline strategy.

    The European Commission says it will also scrutinise Gazprom's planned Nord Stream pipeline expansion to Germany which is part of the company's plan to boost European sales by offering gas direct into freely-traded markets.

    But for all the Commission's LNG enthusiasm, analysts and utility sources are split over how much U.S. gas will reach Europe.

    "If you have massive U.S. LNG building up in 2017 and 2018, new Australian supply and Qatar - this means lots of LNG into Europe, at that point Russia will have to fight," senior gas analyst Thierry Bros of Societe Generale said.

    The question is whether Gazprom will defend market share by upping output and lowering prices or by restraining production, as it did during the last gas market glut in 2008-2009, and waiting for prices to recover, Stephen O'Rourke, director of gas research at Wood Mackenzie, said.

    He said Gazprom would need to bring spot gas prices below $4 per million British thermal units (mmBtu), versus around $5.65 per mmBtu now, to shut Europe off to U.S. imports - a level Goldman Sachs expects could be reached by 2018/2019.


    Read more at Reutershttp://www.reuters.com/article/2015/11/17/usa-russia-gas-europe-idUSL8N13B4OB20151117#dd4CqpSTjieBGkXR.99

    Attached Files
    Back to Top

    Middle East, North Africa rig count


    Saudi rig count=71 up 4 YoY. 
    Kuwait=32, up 1 YoY. 
    Abu Dhabi=44 up 8 YoY. 

    Iraq=50, down 6. 
    Algeria=38, up 6. 
    Iran doesn't give data

    ‏@OilandGasInvest

    Attached Files
    Back to Top

    Brazil oilworkers local tells members to quit Petrobras platforms


    The Brazilian oilworkers union local responsible for the bulk of the country's oil and gas output told its members on Tuesday to leave all Petroleo Brasileiro SA vessels in the Campos Basin, Brazil's most productive oil district.

    The action by the local, Sindipetro Norte Fluminense, defied its national federation FUP, which on Friday recommended members accept a contract offer from state-run Petrobras, as the company is known, and end a two week strike.

    The members want Petrobras to pay them for all their days on strike, rather than the half offered by company negotiators, and to expand the scope of a union-management committee being established to review Petrobras budget cuts and planned asset sales.

    Petrobras on Tuesday agreed to talk about compensation for days on strike, FUP said in a statement.

    "We want to see if Petrobras can maintain production without our people," said Tezeu Bezerra, a SindipetroNF leader.

    SindipetroNF members on 51 offshore units, including production platforms, drillships and support vessels, voted on Saturday against accepting the offer, the union said. Many have been on board their vessels since the strike started, the union said.

    The Campos Basin is responsible for 64 percent of Brazil's oil output and 34 percent of natural gas output, the vast majority of it from Petrobras offshore platforms.

    Petrobras last week offered workers a 9.53 percent wage hike and promises that the union-management committee will present a report on possible increases in investment to the government and board of directors within 60 days.

    Petrobras has slashed nearly $100 billion from planned five-year investments to trim nearly $130 billion of debt, the largest in the oil industry.

    On Tuesday Petrobras said its Brazil oil production is being cut by about 100,000 barrels a day, or about 4.8 percent of pre-strike output. Earlier in the strike, which is the most disruptive at Petrobras in 20 years, output was cut by about 13 percent, according to Petrobras.

    Petrobras is under-reporting production cuts, which have been as high as 400,000 barrels a day, or 19 percent of pre-strike output, the union has said.


    Read more at Reutershttp://www.reuters.com/article/2015/11/17/brazil-petrobras-strike-idUSL1N13C2FE20151117#rUAtW86sQFfz5gQA.99

    Attached Files
    Back to Top

    Ecopetrol profit falls 62 pct on oil price drop


    Colombia's state-controlled oil producer Ecopetrol on Tuesday reported a 62.2 percent drop in quarterly profit due to the global plunge in oil prices and costs incurred because of rebel attacks.

    The company posted a third quarter net profit of 654.1 billion Colombian pesos ($212.8 million), compared with 1.73 trillion pesos in the year-ago period.

    Earnings before interest, taxes, depreciation and amortization fell 25.9 percent to 4.69 trillion pesos in the third quarter.

    The company's consolidated oil and gas production for the first nine months of the year was 761,000 barrels per day, despite attacks on pipelines by leftist rebels, the company said in a filing to Colombia's financial regulator, a 1.1 percent increase from a year ago.

    In the third quarter, though, production fell 1.8 percent to 740,900 bpd.

    Ecopetrol is the largest producer in Colombia's nearly million barrel-per-day oil sector, followed by Toronto-listed Pacific Exploration and Production Corp, the biggest private player.


    Read more at Reutershttp://www.reuters.com/article/2015/11/17/ecopetrol-results-idUSL1N13C12K20151117#1WG5gmOr0YAufXoR.99

    Attached Files
    Back to Top

    Schlumberger acquires Fluid Inclusion Technologies, Inc.


    Schlumberger announced the acquisition of Fluid Inclusion Technologies, Inc. (FIT), a US-based oil and gas service company specializing in laboratory analysis of trapped fluids in rock material, and advanced borehole gas analysis on drilling wells.

    'FIT offers innovative and proprietary technologies that will further strengthen our ability to deliver integrated rock and fluids solutions to our customers,' said Amir Nessim, president, Testing Services, Schlumberger. 'This acquisition is a natural extension of our comprehensive reservoir fluids and rocks services. Customers can expect even stronger one-stop-shop evaluation of rock and fluids from their developments, which Swe offer through our global network of Schlumberger Reservoir Laboratories.'

    'As a Schlumberger company, we will be able to furthele integrated workflows from Schlumberger field and laboratory services. For example, customers can bring cuttings or rock samples to the Schlumberger Reservoir Laboratory and obtain full analytical information supported by Schlumberger domain knowledge and expertise. Services include integrated studies covering the type and origin of rocks and hydrocarbons, and comprehensive understanding of reservoir heterogeneities and gradients. Through FIT, proprietary geochemical logging technology is being added to Schlumberger's advanced mud gas logging portfolio.

    http://www.oilvoice.com/n/Schlumberger-acquires-Fluid-Inclusion-Technologies-Inc/3a04e77c3a75.aspx?utm_source=twitterfeed&utm_medium=twitter&utm_campaign=Feed%3A+OilvoiceHeadlines+%28OilVoice+Headlines%29
    Back to Top

    Change Coming This Week in How EIA Reports NatGas Storage Data


    It may sound dry as unbuttered toast, but the issue of natural gas storage is a serious business. So serious that the U.S. Energy Information Administration (EIA) tracks natural gas storage each week.

    Natural gas traders, buyers and sellers all watch the numbers closely. As we’ve told you over the years, natural gas is about as pure of a commodity as you can get. It is a classic supply and demand kind of business. The more supply you have (as indicated by how much gas is in storage), without corresponding demand–the lower the price goes.

    We are, as of right now, hitting record storage levels at this point in the year. That means the price of gas isn’t going higher any time soon. There is an important change coming in the way the EIA reports storage data.

    Beginning this Thursday, Nov. 19, the EIA will move from reporting storage data in three regions in the U.S. to reporting it in five regions…

    http://marcellusdrilling.com/2015/11/change-coming-this-week-in-how-eia-reports-natgas-storage-data/?utm_source=dlvr.it&utm_medium=twitter
    Back to Top

    Moody’s: Distressed exchanges becoming more common


    Low prices for crude and strained finances are forcing more oil and gas companies into distressed exchanges, according to debt rating service Moody’s, which may help struggling companies stave off bankruptcy but don’t always help creditors get paid back.

    Moody’s classifies a distressed exchange as when a company, facing liquidity pressure and an untenable debt structure, offers creditors new debt, securities or other assets that lead to a diminished financial obligation when compared to the first set. Under Moody’s rules, the exchange is classified as a default.

    Recently, companies such as Venoco, Halcon Resources Corp. and Goodrich Petroleum Corp. have offered creditors distressed exchanges, according to Moody’s.

    The exchange is intended buy the company more time and delay or avoid bankruptcy until the company’s operations or the broader economic environment recover. When all goes well, the move can have benefits for both companies and creditors, Moody’s said.

    An exchange can keep a company solvent as well as avoid the expenses and the loss of control that comes with filing for bankruptcy. But even if the company still defaults, the exchange can also delay a bankruptcy until market conditions improve.

    Distressed exchanges have become increasingly common since 2009. Through the end of October 2015, distressed exchanges represented 21 of 48 or 43.8 percent U.S. corporate defaults, up from 22 percent of total defaults from 1988 through October 31.

    In the oil and gas sector, distressed exchanges have caught on as companies struggling amid low oil prices look for alternatives to filing for bankruptcy. Many creditors have been willing to agree to swaps that give them less total money but the security of a lien.

    That added protection justifies taking a smaller loss, Moody’s said. And on average, distressed exchanges increase the total recovery rate for every tranche of debt in a first-time distressed exchange as opposed to a first-time bankruptcy.

    But, the firm noted, if the exchange doesn’t solve the company’s issues and another default happens, creditor recoveries plunge. And even extra protection in the form of a lien doesn’t increase the amount creditors can expect to recover significantly.

    “Historically, unsecured-debt facilities have had poor recovery rates, while second-lien debt tranches’ ultimate recoveries were not significantly better than those of their unsecured counterparts since both types were in the same position in the debt structure,” Moody’s wrote. “Distressed exchanges involving the exchange of unsecured debt for second- or third-lien secured debt at least raise the holders’ position in the balance sheet, but the recovery prospects for the new secured debt might only be improved if the amount of debt above is reduced.”

    http://fuelfix.com/blog/2015/11/17/moodys-distressed-exchanges-becoming-more-common/

    Attached Files
    Back to Top

    Suncor Plans Higher Spending of Up to $5.5 Billion Next Year


    Suncor Energy Inc., Canada’s largest crude producer, plans to boost capital spending to as much as C$7.3 billion ($5.5 billion) next year to expand operations and increase efficiency.

    The investment would be an increase from about C$6.3 billion this year, the average of 14 analysts’ estimates compiled by Bloomberg. The program is flexible, within a range starting at C$6.7 billion, to respond quickly to any further deterioration in market conditions, Suncor said Tuesday. Both capital and operating expenditures can be scaled back.

    Suncor has announced 1,000 job cuts, lowered its 2015 capital budget by $1 billion and delayed projects to weather collapsing prices. The company, along with Canadian Natural Resources Ltd., Cenovus Energy Inc. and other competitors, has squeezed spending in the oil sands, one of the world’s most expensive reserves to develop.

    “We’re well-positioned to invest in our base business and growth projects, even in a lower for longer oil price environment,” Chief Executive Officer Steve Williams said in the statement. “We remain focused on achieving further reliability improvements across our operations.”

    The Calgary-based company estimates production of 525,000 to 565,000 barrels of oil equivalent a day next year, down from guidance of 550,000 to 595,000 barrels for 2015, due to maintenance work. Approximately 55 percent of the 2016 capital spending program has been allocated toward growth projects, Suncor said.

    Oil-sands cash operating costs per barrel, excluding the Syncrude venture in northern Alberta, will be C$27 to C$30, “continuing a multi-year trend that has seen Suncor reduce its oil sands cash costs by over 25 percent since 2011,” the company said. The company’s share of Syncrude output will drop to 30,000 to 35,000 barrels a day in 2016, from 32,000 to 36,000 barrels this year.

    Suncor has urged shareholders of Canadian Oil Sands Ltd., its partner in the Syncrude project, to accepts its C$4.7 billion ($3.5 billion) hostile takeover offer, while the target company’s board has rejected it.

    http://www.bloomberg.com/news/articles/2015-11-17/suncor-plans-capital-spending-of-up-to-5-5-billion-next-year

    Attached Files
    Back to Top

    Agriculture

    Monsanto could take lead role in agchem acquisitions-executives


    Monsanto Co. executives are discussing whether they should acquire rivals, including top pesticide maker Syngenta AG, company executives said on Tuesday, as talk of consolidation continues in the global agrochemical industry.

    "We've had conversations inside" about Syngenta and other agricultural companies, Monsanto President Brett Begemann said at an investor meeting at its headquarters in St. Louis.

    Company executives were studying every possibility for consolidation in both the seed and agrochemical sectors.

    Monsanto's chief executive, Hugh Grant, also speaking at the investor meeting on Tuesday, said the company is "best placed to be a leading consolidator or a leading partner in an industry that is changing."

    The world's largest seed company abandoned a $45 billion bid for rival Syngenta in August and since then, nearly all of the major players in the farm chemicals and seeds business have been the subject of consolidation talk, amid a landscape of plummeting grain prices and farm income.

    Last week, Syngenta rejected a $42 billion offer from state-owned China National Chemical Corp, Bloomberg reported. Dupont Co, Dow Chemical Co. and BASF DE have also featured in reports of talks on mergers and acquisitions.

    Monsanto's internal discussions, which have been going on since the company walked away from its latest bid for Syngenta, include weighing the benefits of bidding for rivals, Begemann said.

    In particular, he said Monsanto is keeping a close eye on farm chemical product lines it could acquire if rivals merged their agricultural businesses -- such as Dow Chemical and Dupont -- and were forced to spin-off assets in order to meet regulatory approvals.

    But Begemann said they were focusing on chemistry, not seed, assets for such potential acquisitions.

    Grant told investors that he considers China an "opportunity" for Monsanto as rising soybean consumption there drives demand for growing more beans in the United States and South America. In addition, he pointed to the potential for new traits created specifically for China and possibly licensing those traits.

    Grant said any deals would need to be a "strategic fit" for Monsanto and provide incremental growth.

    But he noted that Monsanto does not need to buy or partner with an agrochemical rival in order to meet its financial forecasts or growth plans.

    The Wall Street Journal has reported that Syngenta has been talking to Dupont about merging with its agricultural unit, while Dupont has separately been in talks with Dow


    Read more at Reutershttp://www.reuters.com/article/2015/11/18/syngenta-ag-monsanto-ma-idUSL1N13C26L20151118#mHZdgJ7CHvMqkcmw.99

    Attached Files
    Back to Top

    Precious Metals

    Gold is collapsing to new lows


    Gold fell towards a fresh six-year low on Tuesday.

    Gold was down by just over 1% in New York, near $1,064.50 an ounce, around levels it has not traded at since 2009.

    Other precious metals including platinum and silver were also lower in trading.

    Gold has dropped roughly 6% this month.
    Image title




    Attached Files
    Back to Top

    Base Metals

    Teck Announces Dividend, $650 Million in Cost Reduction Measures


    Teck Resources Limited announced today that it will pay an eligible dividend of $0.05 per share on its outstanding Class A common shares and Class B subordinate voting shares on December 30, 2015, to shareholders of record at the close of business on December 14, 2015.

    In response to persistent low commodity prices, Teck is implementing additional measures to reduce costs and conserve capital:

    Reduction in total spending of $650 million in 2016, to be achieved through $350 million of capital spending reductions and deferrals and $300 million of operating cost savings identified as part of the 2016 operating budget.
    Elimination of an additional 1,000 positions across Teck's global offices and operations, through a combination of layoffs and attrition. This will include a reduction in senior management positions and brings total labour force reductions over the past 18 months to approximately 2,000 positions.
    Withdrawal of the Coal Mountain Phase 2 (CMO Phase 2) project from the Environmental Assessment process and suspension of further work on the project.

    The capital reductions and deferrals described above are in comparison to preliminary 2016 capital spending plans. The 2016 capital budget is still under review and Teck will announce forecast 2016 capital spending in February 2016.

    http://www.marketwired.com/press-release/teck-announces-dividend-650-million-in-cost-reduction-measures-tsx-tck.a-2074802.htm
    Back to Top

    Steel, Iron Ore and Coal

    OECD agrees deal to restrict financing for coal technology


     Members of the Organisation of Economic Cooperation and Development (OECD) struck a deal on Tuesday to restrict subsidies used to export technology for coal-fired power plants, ending months of wrangling.

    Representatives of the world's richest countries agreed a deal to end export credits for inefficient coal plant technology to take effect from Jan. 1, 2017, with a review in 2019 that could allow the deal to be strengthened.

    This week's talks at the Paris-based OECD were viewed as a final chance to end export credits for coal, the most polluting of fossil fuels, before the two-week United Nations climate summit on a global deal to curb climate change begins on Nov. 30, also in Paris.

    A senior Obama administration official who participated in the talks said Tuesday OECD countries have financed over $35 billion worth of coal plants over the past seven years.

    "This is a landmark agreement that's the culmination of a long process," the official said.

    While the United States already restricted coal technology exports, the new OECD agreement would force countries like Japan and South Korea to limit theirs for the first time. The European Union plans to end domestic coal subsidies by 2018.

    Japan, wary of regional competition from China, had been at the vanguard of opposition to phasing out coal export credits that benefit companies such as Toshiba Corp.

    But prospects for a deal improved after Japan agreed to a compromise proposal with the United States last month.

    Tuesday's deal modified that agreement and would limit lending for coal plants to the most efficient coal-fired power plants using ultra-supercritical technology.

    A compromise provision tabled by South Korea and Australia added an exception to allow the construction of smaller, less efficient "supercritical" coal plants of up to 500 megawatts in developing countries.

    It would allow some exemptions in emerging economies where up to 90 percent of the country has electricity access, including India, Indonesia, the Philippines and South Africa.

    "The agreement is a victory for multilateral efforts to address climate change though it's a limited victory," said Steve Herz of the Sierra Club, adding that countries like Korea, Japan and Australia "continue to put their interests ahead of global cooperation."

    He added that the deal has the potential to remove around 850 previously eligible coal plant projects out of the global pipeline,

    The coal industry has said coal is still a necessary energy source, especially in poor countries that have few other options.

    At a meeting in Turkey this week, leaders of the world's largest economies, the G20, reaffirmed their commitment "to rationalise and phase out inefficient fossil fuel subsidies".


    Read more at Reutershttp://www.reuters.com/article/2015/11/17/oecd-coal-subsidies-idUSL8N13C47920151117#jvJIXoYQ7J9CdtLD.99
    Back to Top

    Chinese coal miners find it hard to re-enter international market


    Chinese miners are facing difficulties in selling coal into the international market, due to reputation crisis, government intervention and the 3% export tariff, said Huang Teng, a coal expert with Beijing LT Consulting Co., Ltd. during the third Global Thermal Coal Resource & Market Summit.

    China’s coal exports started in 1978 and boomed in the following decades, with export volume peaking at 94 million tonnes in 2003, ranking second in the world after Australia.

    Since the late half of 2003, China’s coal exports started to plunge to meet growing domestic demand on the back of rapid economic growth. Coal exports dropped to 8 million tonnes per year or less.

    Customs data showed China exported 4.54 million tonnes of coal in the first ten months of the year, falling 6.5% on year but up 12.9% on month. Total exports in 2014 stood at 5.74 million tonnes, down 23.5% on year.

    However, oversupply has getting increasingly serious in China’s domestic market since 2012, due to the expansion of mine capacities vis-à-vis a slowdown of domestic economy and increased supply of alternative energy sources.

    Domestic producers had to resort to export to relieve sales pressure. In fact, the demand from international market does exist, according to Huang.

    Data showed China’s neighbors have a total 650 million tonnes of coal demand each year, with India, Japan and South Korea at 200 million, 190 million and 130 million tonnes, respectively. Besides, Taiwan, Thailand and Malaysia also have a demand of 70 million, 20 million and 20 million tonnes each year, separately.

    But Chinese miners still faced problems to sell coal to these potential buyers, Huang said.

    First, Chinese coal producers need to reshape their reputations in the international market to win acceptance after their defaults in the past "Golden Decade" of the coal industry over 2003-2011, which is still impacting buyers’ enthusiasm.

    Second, the Chinese government doesn’t encourage large-scale export of coking coal, due to the scarce resource. The export quota system, which only allows five companies to export coal at present, also greatly weakened the export enthusiasm.

    Third, the country levies a 3% export tariff on coal, without returning the 17% VAT for producers, which added miners' financial burdens.

    In addition, the export quality management system has been outdated after limited exports over the past 10 years, and has to be reestablished, Huang said.

    Based on the above reasons, China’s coal export would be hard to increase extensively in the short run, let alone to help support domestic prices and save the beleaguered sector, Huang concluded.

    Analysts said the reenter of Chinese coal into the international market would intensify global oversupply, resulting in a slump of global coal prices.

    As thus, Chinese coastal consumers may import more, imposing more sales pressure on domestic producers.

    http://en.sxcoal.com/0/135081/DataShow.html
    Back to Top

    Iron ore price craters


    The price of iron ore fell to within shouting distance of all-time lows on Tuesday as worries about oversupply continue to dog the market and steel prices in top consumer China fall to record lows.

    Benchmark 62% Fe import price including freight and insurance at the Chinese port of Tianjin fell 3.2% to $45.80 a tonne, the lowest since July 8 and down 9.5% in a month.

    Today's peg is also the second lowest on record since The SteelIndex began tracking the spot price in November 2008. Iron ore traded at $44.10 a tonne on July 8 this year, before bouncing back more than 9% the very next day. Today's price compares with record highs above $190 a tonne hit in February 2011.

    Ore with 62% content delivered to Qingdao tracked by the Metal Bulletin fared even worse, dropping 4.5% to $45.58 a tonne on Tuesday, also the lowest since the record on July 8, according to Metal Bulletin.

    China forges 46% of the world's steel and consumes for more than 75% of the world's seaborne iron ore trade, but overproduction and unprofitability at the country's giant state-owned mills have seen steel prices in decline for years.

    Shanghai rebar prices dropped to a record low on Tuesday with the most active May futures contract exchanging hands for 1,748 yuan or $275 a tonne.

    The scale of the oversupply in this market is such that small supply disruptions are only creating shortlived rallies, if at all

    The decline in Chinese steel consumption is accelerating with use falling –5.7% to 590.47 million tonnes in the January to October period, industry group China Iron and Steel Association said on Friday. That's tracking way below estimates by the  World Steel Organization which forecasts steel demand in China will shrink by -3.5% this year.

    Last month the chairman of one of the largest steelmakers Shanghai Baosteel's Xu Lejiang, said the country's steel demand is weakening at "unprecedented speed" and forecast nationwide output may eventually slump 20%, mirroring similar developments in Europe as the US and markets matured. The view from inside the country is in contrast to projections by the Big Three which sees slow but sustained growth through 2020.

    The slowdown in China comes at just the wrong time for producers as a flood of new supply hits the market.

    The big three producers – Vale, Rio Tinto and BHP Billiton – have been following a scorched earth policy of raising output and slashing costs to weather low prices and push out competitors.

    The decline in the price of iron ore has also not been arrested by disruptions from the suspension of mining by Samarco, a Vale/BP joint venture in Brazil, following a deadly tailings spill. The dam burst also damaged a nearby Vale mine and the company said that up to 19 million tonnes of annual output is affected.

    Those losses will be more than made up by Vale's gigantic S11D project in the Amazon which the Rio de Janeiro-based company said will deliver ore – 95 million tonnes of it every year –way under budget and bang on time at the end of 2016.

    Vale's ambitions are more than matched by the other majors. After a near 15% year-on-year surge in output in the third quarter Rio is well on its way to reach 360 million tonnes in the next few years, while BHP Billiton which grew production 6% last quarter is on target to grow capacity to 290 million tonnes per year some time during 2017.

    World number four producer Fortescue Metals added 5% to its targeted output hitting a rate 165 million tonnes per year in July.

    Unlisted miner Hancock Prospecting's Roy Hill is set to ship its first ore from its Pilbara mine which has a 55-million tonnes-a-year capacity early next year. That would place it within shouting distance of Anglo American which is predicting 53 million tonnes for this year before its Minas Rio mine ramps up to capacity of 26 million tonnes in 2016–2017.

    “The floor of this market is in the hands of the top five mining companies. We will need to see more cuts before there is a sustained recovery.”

    http://www.mining.com/iron-ore-price-craters/

    Attached Files
    Back to Top

    Cliffs Natural to temporarily idle Minnesota plant


    Coal and iron ore producer Cliffs Natural Resources Inc said it would temporarily halt all operations at its Northshore iron ore mine in Minnesota by Dec. 1, aiming to reduce costs at a time when miners are hit by weak prices and low demand.

    Cliffs said it expects the Northshore mine and United Taconite processing facility to be idled through the first quarter of 2016 and that inventory at both mines was adequate to meet current customer demand.

    Cliffs shares were down 3.7 percent at $2.59 in early trading on Tuesday. The stock had fallen 62.3 percent this year.

    The company, which has previously idled the United Taconite mine, said it will continue to operate the Hibbing Taconite mine in Minnesota and the Tilden and Empire mines in Michigan.

    Cliffs and other U.S. miners have been hit by a drop in demand from steel mills and weak iron ore prices due to excess supply from big miners such as Vale SA, Rio Tinto Plc and BHP Billiton Plc.

    "The historic high tonnage of foreign steel dumped into the U.S. continues to negatively impact the steel production levels of our domestic customers," Cliffs Chief Executive Lourenco Goncalves said on Tuesday.

    U.S. steel companies in June had filed a complaint with the U.S. government over cheaper imports of corrosion-resistant steel from China, India, Italy, South Korea and Taiwan.

    Goncalves said Cliffs will immediately ramp up production by restarting idled facilities "as soon as the unfairly traded steel problem subsides and domestic steel production recovers to normal levels".

    The company expects that idling the two operations will cost it $9 million per month.


    Read more at Reutershttp://www.reuters.com/article/2015/11/17/cliffs-natural-restructuring-idUSL3N13C47T20151117#7LmyqLw1ps3XTXGG.99
    Back to Top

    Indian tribe blocks iron ore rail line of Vale protest at disaster


    Financial Review reported that anger in the Brazilian city of Mariana about the Samarco tailings dam disaster is turning to action, with an Indian tribe affected by the tragedy blocking a key iron ore railroad line owned by Vale.

    Many of the 350 members of the Krenak tribe who live on the banks of the Rio Doce in Minas Gerais, hundreds of kilometres downstream from the disaster site, have put on war paint and camped out on the Vale do Rio Doce railroad line that passes near their village, leading Vale to shut down iron ore shipments and other train traffic until the problem is resolved.

    According to the G1 news site, Krenak chief Geovani Krevak said the murky, red-tinged slurry clogging the river water, their only source of potable water, had been undrinkable for a week. "Like us, now the trees and the animals also don't have any water. The river dies, we all die."

    Though the 650 or so survivors from the smashed district of Bento Rodrigues of Mariana have been quickly and peaceably resettled in hotels and have been told they will be relocated to new homes "soon", anger is growing and public protests are being called as the red-tinged iron ore slurry continues its polluting journey to the Atlantic Ocean about 500 kilometres away along one of Brazil's most important rivers, the Rio Doce.

    Samarco said the Krenak tribe had been given 8000 litres of mineral water, 140 water cisterns and a water truck to help them get through the situation. For its part, Vale said it was negotiating with the Krenak to re-establish ore shipments on the line.

    http://steelguru.com/mining/indian-tribe-blocks-iron-ore-rail-line-of-vale-protest-at-disaster/439375
    Back to Top

    China steel prices hit record low as crisis deepens with possible mill closure


    Chinese steel prices hit record lows on Tuesday amid prolonged worries over shrinking demand in the world's top consumer that market sources say has forced one of the country's largest private producers to cease output.

    The shutdown by Tangshan Songting Iron & Steel, with an annual capacity of 5 million tonnes, would be one of the biggest in the sector's years-long downturn as the world's No.2 economy slows, traders and analysts said.

    The company, located in the northeastern city of Tangshan, did not answer repeated telephone calls. An official with the local government of Tangshan said it was "dealing with the issue right now in accordance with related law and regulations", without specifically stating the company had ended production.

    Chinese social media showed photos and videos that were apparently of hundreds of disgruntled workers gathered outside a local government building in Qian'an, Tangshan, demanding help in the face of the closure.

    A shutdown would highlight the sector's woes and fuel concerns that more closures are on the way, with a raft of mills already shuttering output.

    While cuts in output would remove some of the surplus capacity that has weighed on prices, traders said the latest shutdown dented overall sentiment on the outlook for the Chinese economy.

    On Tuesday, Chinese steel prices plumbed a record low of 1,748 yuan a tonne, down nearly 37 percent since the beginning of this year. That has also hit demand for steelmaking ingredient iron ore .IO62-CNI=SI, already down over 30 percent in 2015.

    "I think there will be more closures in China and no capacity additions. Steelmakers and local governments don't have the incentive to build new capacity," said Wang Li, an analyst at CRU Group in Beijing.

    "Generally people think that to close a steel plant would be quite difficult in China and maybe unlikely, but the fact is closures are increasing and quicker than people's expectations."

    Tangshan, which is 200 km (124 miles) east of Beijing and produces more steel a year than the United States, has tens of small steel mills and has been on the frontline of China's campaigns to tackle overcapacity and pollution.

    The city has pledged to reduce its annual crude steel capacity by 28 million tonnes from 2013 until 2017, roughly a fifth of its total.

    Around 15 million tonnes of steel capacity in Tangshan has been shut down so far, said Cheng Xubao, an analyst with industry consultancy Custeel said.

    "Local governments want to help, but they are not able to help all. More mills could shut down as demand keeps weakening. Mills are not afraid of losses, but they are worried that there is no demand."

    Apparent steel consumption in China, the world's biggest producer and consumer, fell 5.7 percent to 590.47 million tonnes in the first 10 months of the year, the China Iron and Steel Association (CISA) said.


    Read more at Reutershttp://www.reuters.com/article/2015/11/17/china-steel-tangshan-idUSL3N13C2BB20151117#ZRE3VslgCZctudzV.99

    Attached Files
    Back to Top

    China says cuts capacity, seeks talks to solve steel trade disputes


    China is actively taking measures to cut steel capacity and is looking to strengthen talks with other countries to solve steel trade disputes, China's commerce ministry said on Tuesday.

    China's steel industry, the world's biggest, has been blamed by overseas steel mills for causing them hurt by exporting indiscriminately at unfair prices.

    The nation is expected by analysts to ship a record 100 million tonnes-plus of steel products abroad this year to offset shrinking domestic demand amid a slowing economy.

    "The overcapacity is a common issue facing the global steel industry which is under restructuring. China is actively taking measures and optimising the industry structure, including slashing large capacities," Shen Danyang, spokesman for the Ministry of Commerce, told reporters at a briefing.

    Chronic overcapacity and falling demand has helped drive Chinese steel prices to their lowest level in decades, forcing domestic mills to cut output and some to shut down permanently due to heavy losses and debt.

    World steel producers have complained on several occasions about Chinese steel exports. In the latest instance, nine international steel associations said in a joint statement earlier this month that the Chinese government played a big role in its steel sector and it remains a non-market economy.

    Shen refuted the claims of the associations, saying such concerns should not be used to engage in discriminatory trade practices and steel trade tensions should not be linked with the status of Chinese economy.

    "I don't think steelmakers in China are subsidised and the government's attitude towards the steel industry makers is very clear: Those that are not competitive should be closed," said Wang Li, an analyst with CRU in Beijing.


    Read more at Reutershttp://www.reuters.com/article/2015/11/17/china-steel-exports-idUSL3N13C2UJ20151117#EQQb0c5DkK7T3WHr.99

    Attached Files
    Back to Top

    India needs different tariffs to combat steel imports – Mr Seshagiri Rao


    Mr Seshagiri Rao, Joint Managing Director and Group CFO, JSW Steel  speaking about the outlook for the steel market going forward said even after the imposition of state guard duty, imports haven’t fallen, adding that in fact imports grew by around 42 percent this fiscal. He said “In order to avoid the safe guard duty, the Chinese are under pricing the products, so there has been no relief for the domestic steel producers as such. There is need to introduce different tariffs across the supply chain to combat the problem of imports into India.”.

    http://steelguru.com/steel/india-needs-different-tariffs-to-combat-steel-imports-mr-seshagiri-rao/439288#tag
    Back to Top
    Commodity Intelligence LLP is Authorised and Regulated by the Financial Conduct Authority

    The material is based on information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. Opinions expressed are our current opinions as of the date appearing on this material only.

    Officers and employees, including persons involved in the preparation or issuance of this material may from time to time have "long" or "short" positions in the securities of companies mentioned herein. No part of this material may be redistributed without the prior written consent of Commodity Intelligence LLP.

    Company Incorporated in England and Wales, Partnership number OC334951 Registered address: Highfield, Ockham Lane, Cobham KT11 1LW.

    Commodity Intelligence LLP is Authorised and Regulated by the Financial Conduct Authority.

    The material is based on information that we consider reliable, but we do not guarantee that it is accurate or complete, and it should not be relied on as such. Opinions expressed are our current opinions as of the date appearing on this material only.

    Officers and employees, including persons involved in the preparation or issuance of this material may from time to time have 'long' or 'short' positions in the securities of companies mentioned herein. No part of this material may be redistributed without the prior written consent of Commodity Intelligence LLP.

    © 2017 - Commodity Intelligence LLP