Mark Latham Commodity Equity Intelligence Service

Monday 13th July 2015
Background Stories on

News and Views:

Attached Files


    Here Is The Flashing Red Light In The Inventory-Sales Ratio

    Recession watchers stay tuned...Wholesale Sales rose a mere 0.3% MoM (missing expectations of a 0.9% rise) but sales tumbled 3.4% YoY - the most since the financial crisis. Hopers will look at the rise in inventories (+0.8% MoM vs +0.3% exp.) as GDP positive but at some point the hope for a sales pick up fades and inventory stuffing stops(Sales -3.4% YoY, Inventories +5.0% YoY). But what should be worrying everyone right now is the inventory-to-sales ratio holding at recession levels.

     And guess where inventories are soaring the most...


    Here's why this matters so much, as we explained previously...


    Despite 22 years of correlations (and obvious causations), asset-gatherers and commission-takers still think this time is different and channel-stuffing and 'if we build it, they will come' inventory overbuilds will be bought away in a swarm of fresh faced crappy creditworthiness consumers... not this time - as peak debt is now upon us.
    Back to Top

    Thai energy firm PTT expands into fast food to boost non-oil revenue

    PTT PCL has signed a franchise deal with U.S.-based fast food chain Texas Chicken as Thailand's largest energy firm tries to boost its revenue from non-oil businesses amid weak crude oil prices.

    PTT plans to invest 1.5 billion baht ($44.2 million) to open at least 70 Texas Chicken branches over the next five years, Buranin Rattanasombat, executive vice-president for PTT's retail marketing, told reporters on Friday, with the first restaurant due to open in November.

    The franchise is PTT's first major investment into Thailand's 30 billion baht ($884 million) fast food market: the company currently operates coffee shops under the Cafe Amazon and Daddy Dough local brands.

    PTT plans to sign more food franchise deals in a bid to make non-oil businesses contribute about half of its overall profit over the next five years from just 20 percent now, Chief Operating Officer Sarun Rungkasiri added.

    Texas Chicken will compete with KFC Thailand, which is operated by U.S. firm Yum Brands Inc. Last month, KFC Thailand, which notches the highest sales among fast food fried chicken restaurants, said it planned to boost the number of its branches in to 800 by 2020 from 532 at end-April.
    Back to Top

    Oil and Gas

    China June crude oil imports up 27 pct on year in challenge to U.S. for top spot

    China's June crude oil imports rose 27 percent on year, customs data showed on Monday, putting the world's second largest economy into contention again for topping the United States as the biggest buyer of the commodity on international markets.

    China imported 29.49 million tonnes, or 7.176 million barrels per day (bpd) in June, data from the General Administration of Customs showed, up 31 percent from a 19-month low in May as demand remains strong amid weak global oil prices.

    The June imports may have surpassed those of the United States for the second month this year, depending on the rate used for converting tonnes to barrels.

    Data from the U.S. Energy Information Administration (EIA) showed that U.S. crude imports in the four weeks to July 3 totalled 7.165 million bpd, although the data has not yet been compiled into monthly reports for May and June.

    China has been taking advantage of oil prices that are half of last year's peak to fill itsstrategic reserves, analysts say, helping to support crude benchmarks that are still under pressure from a global supply glut.

    China's crude imports were up 7.5 percent in the first half of 2015 to 6.59 million bpd, still behind U.S. imports of about 7.2 million bpd for the year so far, according to EIA figures.

    In purchasing more oil than what it needed for its refineries, China accumulated an implied surplus of roughly 41 million barrels in the first five months of the year, according to a Reuters analysis of Chinese government data.

    The surplus, which is only a rough estimate of how much oil is available to fill the reserves, was at 82 million barrels at the same time last year.

    Analysts have said that China's surplus purchases have been going into both strategic and commercial storage tanks, although the government rarely releases any details.

    China's appetite for crude is expected to pick up in the second half of the year as newstorage tanks are finished.

    Beijing has also been opening its crude imports to buyers outside the state-owned sector, and independent refiners with new import allowances may push up shipments.

    The June import volumes came in higher than an earlier estimate by Thomson Reuters Oil Research and Forecasts of 26.87 million tonnes. July imports are forecast to fall about 2 million tonnes from June's actual volumes.
    Back to Top

    Shell Buys Morgan Stanley’s Europe Gas, Power Trading Portfolio

    Royal Dutch Shell Plc agreed to buy Morgan Stanley’s European natural gas and power trading portfolio, adding to a business that’s already among the world’s biggest.

    Shell Energy Europe Ltd. will acquire Morgan Stanley’s book of physical and financial gas and power contracts, Shell said in an e-mailed statement Friday. Shell, the second-biggest oil company by revenue, didn’t disclose the value of the transaction.

    Trading of oil and gas helped Shell beat analysts’ earningsforecasts in the quarter ended March 31 as it profited from storing crude to sell later at a higher price. Shell’s trading business also allows it to sell more natural gas than it produces, helping the company take advantage of differences in prices around the world.

    “This provides innovative solutions for customers to deliver a reliable source of energy, and also to manage the price risk inherent in global commodity markets,” Slavko Preocanin, president of Shell Energy Europe, said in the statement.

    Shell, BP Plc and Total SA are the world’s biggest energy traders, handling enough crude oil and refined products every day to meet the consumption of Japan, India, Germany, France, Italy, Spain and the Netherlands.
    Back to Top

    China LPG prices extend falls as outlook stays bearish on ample supply, weak demand

    Imported and domestically produced LPG prices across southern and eastern China extended falls this week on ample supply and weak demand amid bearish outlook, trade sources said Friday.

    In the Asian spot market, prices slid to a near six-month low Wednesday, weighed down by the plunge in crude oil prices, though it has since rebounded slightly on Thursday. CFR South China refrigerated LPG was assessed at $454/mt for propane and $481/mt for butane Thursday, down from $468/mt and $501/mt, respectively, a week ago, Platts data showed.

    The fall in international crude oil and LPG has further dampened market sentiment this week, trade sources noted.

    "Based on the recent Asian LPG values, import cost for H1 August-delivery refrigerated cargoes is estimated to be around Yuan 3,150/mt ($515.10/mt) for propane and Yuan 3,350/mt for butane after adding taxes -- lower than the spot prices in the wholesale market currently," a trader in South China said.

    In China's southern Guangdong province, imported LPG cargoes of mixed propane and butane traded at around Yuan 3,350-Yuan 3,450/mt in the wholesale market this week, down by around Yuan 100/mt from the previous week, though no LPG import terminals received refrigerated LPG this week, trade sources said.

    Given lower prices this week, many LPG import terminals were said to have started incurring losses as the import cost for their LPG inventories is estimated to be around Yuan 3,500/mt, higher than the spot prices in the wholesale market, another trader with a major domestic LPG import terminal said.

    But many LPG import terminals still had to sell as they were afraid prices would be lower in the future, the trader said. Besides, domestically produced LPG was said to have traded at Yuan 3,300-Yuan 3,400/mt in the region, also down around Yuan 100/mt from last week, according to trade sources.
    Back to Top

    Japanese utilities use less LNG in June

    LNG use by Japan’s ten independent regional electric power companies dropped 8 percent in June, as compared to the same month a year before.

    The companies consumed 4.16 million mt of the chilled gas in June, according to data from the Federation of Electric Power Companies of Japan (FEPC).

    The 10 utilities bought 4.50 million mt of LNG in June, down 6.1 percent from the same month last year.

    Total electricity generated and purchased across the ten companies declined by 3.7% from a year earlier to 67.22 billion kWh, FEPC said.

    Nuclear power plants in Japan remained shut down in June resulting in no electricity production at all.
    Back to Top

    BG Commences Operations at QCLNG Train 2 in Australia

    BG Group plc, a world leader in exploration and liquefied natural gas (LNG), announced Monday that it has started up and loaded its first LNG from the second production train at the Queensland Curtis LNG (QCLNG) facility in Australia. The first LNG from Train 2 set sail on the Maran Gas Posidonia.

    At plateau production, expected mid-2016, both trains at QCLNG will be producing enough LNG to load 10 vessels per month combined, exporting around eight million tons per year. Since production from the first train commenced in December 2014, 27 cargoes have been shipped.
    BG Group began commercial operations in May, when control of Train 1 formally transferred to QGC, BG Group's Australian subsidiary, from the constructor Bechtel Australia. Train 2 commercial operations will begin once a similar commissioning process has been completed.

    - See more at:

    Attached Files
    Back to Top

    US rig count continues upward creep

    Although the overall US drilling rig count merely edged up a unit to 863 rigs working during the week ended July 10, it represented the third consecutive week of gains and another jump in oil-directed rigs, according to data from Baker Hughes Inc.

    Over the past 3 weeks the overall count has risen 6 units. The warm streak follows 28 consecutive weeks of losses, which has resulted in the count currently having 1,012 fewer units year-over-year.

    During the week, rigs targeting oil gained 5 units to 645, now up 17 units from 2 weeks ago after 29 straight weeks of losses. The count hasn’t risen in successive weeks since September 2014. Meanwhile, gas-directed rigs were down for a second week in a row, dropping 2 units to 217. Rigs considered unclassified lost 2 units to reach 1 rig working.

    Land rigs, up 4 last week, edged down a unit this week to 827. Rigs engaged in horizontal drilling, up last week for the first time in 32 weeks, fell 3 units to 654. Directional drilling rigs lost 9 units to 88.

    Offshore rigs gained 2 units to 31. Rigs drilling in inland waters were unchanged at 5.

    Rising 5 units to 368, Texas led the major oil- and gas-producing states in its second consecutive week of gains after 32 straight weeks of losses. It’s the first time the state was posted a rise in successive weeks since October 2014. Texas still has 530 fewer rigs working year-over-year.

    The Permian led the major basins with a 7-unit jump to 239, all of which are targeting oil. It’s the basin’s biggest rise since October 2014. The Eagle Ford, however, fell 4 units to 102.

    Canada’s rig count also continued its upward momentum, jumping 30 units to 169. Its count has now risen in 7 of the last 9 weeks, gaining 94 units over that time. This week’s gain was spurred by a rebound in oil-directed rigs from last week’s losses. Up 19 units to 91, oil-directed rigs have risen 75 units since a recent nadir on May 8. Gas-directed rigs, meanwhile, gained 11 units to 78. Canada’s overall count is still down 146 year-over-year.
    Back to Top

    North Dakota crude production climbs, gas hits new record

    Despite e a plunge in statewide permitting and the rig count, North Dakota crude oil production climbed roughly 3% from April to May and natural gas output hit a new record high, the state's Department of Mineral Resources said Friday.

    May gas production hit nearly 1.63 Bcf/d, up from 1.53 Bcf/d in April and a new all-time high for the state.

    May oil production totaled more than 37.23 million barrels, or over 1.2 million b/d, compared with April's production of less than 1.17 million b/d.

    Statewide oil production reversed a recent downturn that followed December's all-time high of 1.23 million b/d, the agency said.

    There were 12,659 producing wells in North Dakota in May, also a new record, and up 114 wells from April. At the same time, well completions rose to 114 in May from 102 in April as initial production rates have increased 10-20% a month as producers focus on the "core" areas of the Bakken and Three Forks formations, where 98% of drilling in North Dakota is now targeted.

    The new records came as drilling permits fell to 150, down from 168 a month before, and the rig count fell to 83, compared to the all-time high of 218 in May 2012. The rig count, which averaged 78 in June, fell to 73 on Friday, the lowest since November 2009, when it was 63, the agency said.
    Back to Top

    North Dakota oil-loading hub lays off 10 percent of staff

    One of the largest facilities in North Dakota that loads oil onto railcars laid off 10 percent of its staff this week as it pares operations in an environment of lower oil prices, a source familiar with the company's operations said.

    Savage Services Corp laid off 12 full-time employees at its 373-acre transloading and pipe logistics facility in Trenton, North Dakota, just outside Williston, the state oil capital, the source said.

    The company said it has roughly 118 full-time employees.

    Most of those laid off were of higher seniority and salary levels, the source said.

    Utah-based Savage confirmed the layoffs at the facility, which can load more than 170,000 barrels of oil per day onto railcars. The company declined to say how many employees had been laid off, but said it had a "modest workforce reduction."

    Savage had told employees as recently as two weeks ago that there would be no layoffs, though the severance letters for the 12 were dated June 10, the source said. The company's spokesman Hymas said the date was a typographical error and had been subsequently clarified with employees.

    The layoffs occurred as demand for railcars to transport North Dakota's Bakken crude oil is at the lowest it has been in three years. The breakneck pace at which oil-by-rail transport grew since the U.S. shale boom began in 2008 has been tempered by the gradualconstruction of new pipelines.

    Savage's Trenton facility operates 24 hours per day, seven days per week, and historically has loaded two 118-railcar trains at once. That likely will be pared back to loading only one train at a time given the reduction in staff, the source said.
    Back to Top

    Teck delays high-cost Canada oil sands project

    Teck Resources Ltd is delaying development of its massive, high-cost Frontier oil sands project in northern Alberta by five years.

    The Vancouver-based mining company said in an update filed with regulators that it now expects first oil from the multibillion-dollar Western Canadian project in the first quarter of 2026, rather than in 2021 as previously planned.

    Construction of the 260,000 barrel-a-day bitumen mine is planned to start in 2019 and occur in two phases, rather than four, to take advantage of economies of scale, the filing with the Canadian Environmental Agency said.

    Production from a second phase is expected in 2037 with mining complete in 2066.

    Teck now expects the project to produce 3 billion barrels of bitumen, up from 2.8 billion, reflecting an expanded resource. Capital costs are down to C$20.6 billion ($16.18 billion), from C$22.9 billion, on optimized engineering and increased production, the diversified miner said.

    It extended its estimates of the mine's life to 41 years, from 2026 to 2066, up from 37 years.

    Teck initially applied in 2011 for approval of the mine, which is 110 kilometers (68 miles) north of the oil sands hub of Fort McMurray, Alberta.

    Teck also has a 20 percent stake in Suncor Inc's much-delayed C$13.5 billion Fort Hills, Alberta, oil sands project.

    A final decision to proceed with the Frontier project will be made by Teck's board of directors.

    "We believe that Teck is considering additional streaming deals on the silver output from its interests in the Antamina and Highland Valley mines," TD Securities analyst Greg Barnes said in a note to clients.

    "We believe that Teck could raise proceeds of between $500 million - $1 billion via the silver stream sales. The monies raised could be applied to debt reduction, funding capex for the Fort Hills project or for copper mine acquisitions."
    Back to Top

    Alternative Energy

    Thailand ignites solar power investment in Southeast Asia

    Come December, Thailand will have more solar power capacity than all of Southeast Asia combined as record sums of money is poured into the sector in the hopes of nurturing a new energy source to help drive the region's second-biggest economy.

    Thailand has been shifting away from natural gas as once-plentiful reserves are expected to run out within a decade, forcing it to rely on imported fuel more than any other country in the region except Singapore. A plunge in solar-component costs and subsidised tariffs have also helped feed the country's solar boom.

    About 1,200-1,500 megawatts of solar capacity will be connected to the grid this year, requiring as much as 90 billion baht ($2.7 billion) of investment, Pichai Tinsuntisook, chairman of the Federation of Thai Industries' renewable energy division, told Reuters.

    Thailand's solar capacity will rise to 2,500-2,800 MW this year from about 1,300 MW in 2014. That is almost six times more than the capacity added last year. The new capacity, while modest compared to Japan or Germany, will turn Thailand into the first significant solar power producer in a region where the sector has barely taken off.

    "Thailand has strong potential for both solar farms and rooftop solar systems," said Sopon Asawanuchit, managing director of advisory firm Confidante Capital, adding that its location in the sunny tropics is an advantage.

    While the bulk of the power will come from solar farms, rooftop solar panels may have enough capacity over the next five years to supply as many as 250,000 households in urban areas, renewables analysts say.

    Thailand aims to increase its solar capacity to 6,000 MW by 2036. That would account for 9 percent of total electricity generation, up from 4 percent in 2014, and be able to meet the electricity needs of up to 3 million households.

    The boom has attracted foreign investors including Japan's Kyocera Corp, U.S.-based First Solar and China's Yingli Green Energy.

    Sena is among the latest companies diversifying into the solar business as the domestic property market slows in line with a sluggish economy.

    Shares in companies which aim to invest in solar power have outperformed the overall Thai stock market this year. Among them are Sena, Superblook, Gunkul Engineering and Communication and System Solution.

    Despite the current boom, some investors are worried solar power may be used as an excuse for some retail punters to speculate in the stock market, the Federation of Thai Industries' Pichai said.
    Back to Top

    Philippine solar industry pushes for more incentives, faster approvals

    Solar companies will push the Philippine government to quadruple the size of an incentive scheme for suppliers of the renewable energy and to speed up project approvals, as the country grapples with precarious electricity supply.

    Industry group the Philippine Solar Power Alliance (PSPA) said it would propose the steps to make it easier to develop projects worth an estimated $4 billion in the pipeline from local firms such as Aboitiz Power Corp and foreign companies like Thailand's Chow Steel Industries PCL.

    Located right above the equator, the Philippines is blessed with plenty of sunlight throughout the year that could be used to help meet soaring power demand as manufacturing grows and call centre businesses boom.

    But worries over the initial expense of solar projects have stymied the sector's development with many projects still at very tentative stages, hampering the country's efforts to shake its dependence on imported fossil fuels.

    Under the government's current incentive programme, 500 megawatts of solar capacity will be entitled to guaranteed prices for 20 years. But the PSPA wants to extend that to around 2 gigawatts.

    "We will draft an industry roadmap, which we will present to the government as the basis of our proposal which is for 2 gigawatts," said Theresa Cruz-Capellan, chief executive of SunAsia Energy Inc and president of the PSPA. The country's solar capacity currently stands at around 110 MW.

    Mario Marasigan, director of the renewable energy management division of the government's energy department, said Manila would need time to assess the impact of more ambitious solar targets.

    The PSPA also said getting regulatory approval such as permission to convert land into solar farms and other environmental clearance had been slow.

    "We have to deal with many people in the government from local to national level to get permits," Cruz-Capellan told Reuters in an interview.

    The proposals would help the Philippines follow regional neighbour Thailand, which has poured record sums of money into its solar sector.
    Back to Top

    Big Oil Worth $100 Billion for Solar After Biggest Plant Ordered

    Solar energy developers may be able to earn $100 billion or more by selling equipment to the oil industry for extracting heavy grades of crude, the head of the company that is developing the world’s biggest solar heat plant said.

    Rod MacGregor, chief executive officer of GlassPoint Solar Inc., said the oil industry’s demand for energy is growing rapidly, and solar can supply much of that power.

    His company, based in Fremont, California, won a contract on Wednesday to supply 1 gigawatt of power at the Amal oilfield in Oman, where the government and Royal Dutch Shell Plc are injecting steam to extract heavy oil. The plant will be the biggest delivering heat from the sun, a landmark for both the oil and solar industries.

    “Its value is way over $100 billion, but that’s just a snapshot, and it’s growing very quickly,” MacGregor said by phone. “A lot of solar companies have viewed oil and gas as an evil empire. What’s going to bring the two together is fundamental economics.”

    The company will install rows of parabolic mirrors that focus the sun’s energy to heat fluid that will make steam for injecting into underground rock formations. That will reduce the viscosity of the crude and help lift more supplies to the surface.

    Traditionally, fossil fuels fed the boilers that make steam for such processes, consuming energy equivalent to a 20 percent of every barrel recovered. Using solar power cuts that energy need and frees up more supplies for export.

    GlassPoint’s innovation is in installing agricultural greenhouses over the fragile mirrors, protecting the units from the Middle East’s violent sandstorms.

    The company is targeting deals for further large-scale sites. MacGregor said that areas where the technology could be used include western China, Madagascar, parts of Venezuela, California and the Gulf region.

    “These giant deals generally take some time to mature,” he said. “We have a very healthy pipeline of giant projects. We’re in discussions with pretty much every producer of heavy oil in the world.”
    Back to Top

    Great Wall Seeks Up to $2.7 Billion for New-Energy Cars

    Great Wall Motor Co., China’s largest sport utility vehicle maker, plans to raise as much as 16.8 billion yuan ($2.7 billion) in a private share placement to fund research and development of new-energy vehicles.

    Great Wall’s board approved the proposal to issue as many as 387 million A shares in Shanghai at 43.41 yuan each to fewer than 10 securities investment and management companies, the company said in a statement to the Hong Kong stock exchange.

    The maker of China’s best-selling SUV model is raising funds to pay for the research and development of new-energy vehicles. Policy makers are tightening fuel standards and promoting electric vehicles in order to control pollution and reduce a reliance on imported oil.

    Great Wall boosted sales in the first half by 20 percent to 415,339 units, led by the 49 percent jump in demand for its Haval and M series SUVs. Great Wall will resume trading on July 13.
    Back to Top

    Yingli Supplies 240 MW of Solar Panels for Hybrid Solar Power Plants

    Phase 1 delivery already completed and phase 2 delivery will begin in August 2015

    Yingli Green Energy Holding Company Limited, one of the world's leading solar panel manufacturers, today announced that it is supplying 240 megawatts (MW) of solar panels for Latin America's two largest hybrid solar photovoltaic (PV) and concentrated solar power (CSP) power plants. Both projects, located in northern Chile, will also be equipped with 110 MW of CSP and 17.5 hours of thermal storage each.

    As the power plants' sole PV supplier, Yingli is providing over 780,000 multicrystalline utility-scale YGE 72 Cell solar panels to the projects, which be installed in two phases. The first phase of panel deliveries was recently completed, and the second phase will start in August. The first power plant is expected to be operational by mid-2016.

    Once complete, the PV portion of the solar power plants will occupy nearly 100,000 acres of land in total. Both projects will be connected to the national utility grid and deliver an uninterrupted power supply to commercial, industrial, and residential customers throughout Chile, offsetting approximately 385,000 tons of carbon emissions each year.
    Back to Top

    Precious Metals

    Amplats' half-year earnings expected to surge

    Prior to publishing its half-year results next week, Anglo American Platinum (Amplats) on Monday said in a revised update to the market that a significant surge in earnings was expected for the six months to June 30. 

    The expected rise in earnings was attributed to an improvement in operational performance following the protected industrial action in the comparative period, an increase in sales volumes and the weakening of the rand against the US dollar.

     Further, the company benefited from an after-tax gain of R1.56-billion – contributing 600c a share – through its increased estimate of the quantity of inventory based on the outcome of the physical count of in-process metals, Amplats said. While the group initially expected a 20% plus rise on headline earnings and headline earnings per share (HEPS), the JSE-listed mining company now believed headline earnings for the six months under review would increase to between R2.45-billion and R2.48-billion – a 1 461% to 1 480% jump on the prior year – with HEPS rising to 940c to 950c a share, or between 1 467% and 1 483%, compared with the corresponding period last year. 

    Amplats reported headline earnings and HEPS of R157-million and 60c apiece respectively in the first six months of 2014. Amplats’ revised basic earnings for the period were expected to increase to between R2.4-billion and R2.48-billion for the six months to June 30, equating to a 459% to 478% rise on the R429-million in the corresponding period the year before. 

    Earnings per share (EPS) during the period under review would likely rise to between 915c and 945c, or between 458% and 476%, compared with the EPS of 164c in the comparative period the year before. Amplats would publish its half-year results on July 20.
    Back to Top

    Base Metals

    LME tin spreads tighten but is there any shortage?

    Tin spreads on the London Metal Exchange (LME) have flared into backwardation this week. The benchmark cash-to-three-months period CMSN0-3 ended Wednesday valued at $54 per tonne backwardation. That's the highest cash premium since the fourth quarter of last year.

    As ever with tin, one of the less liquid base metal contracts traded on the LME, the flip from comfortable contango to nearby tightness has happened at accelerated speed. But is the market really tight?

    The outright price touched a six-year low of $13,365 at the end of June and is currently languishing around the $14,000 level.

    Sure, tin has been swept up in the general panic emanating from the Chinese stocks crash, but the soldering metal was already the worst performer among the core LME metals even before the tumultuous events of the last two weeks.

    That's largely down to a collective negative reassessment of this market's dynamics after the unexpected emergence of a major new supply source in the shape of Myanmar.

    There was a certain inevitability about some sort of spreads reaction to the steady downtrend in LME stocks of tin. Headline stocks of 7,080 tonnes have fallen by 5,055 tonnes, or 42 percent, so far this year.

    More significantly in terms of shorts looking to roll positions, the amount of live tonnage, excluding that earmarked for physical drawdown, is just 6,025 tonnes.

    Such a depleted level of stocks has been associated with spread tightness in the past. Indeed, given such a low physical liquidity pool, it is surprising that there are no significant cash-date longs showing up in the LME's market positioning reports.

    Which is presumably why there is no squeeze at the very front end of the curve. Rather, the tightness is focused on the August-September spread, valued at $30 backwardation at Thursday's close.

    The positioning landscape in August <0#LME-FBR> looks more interesting with one major long holding positions equivalent to between 30 and 40 percent of open interest, or around 2,800-3,800 tonnes. There are six shorts on the same Aug. 19 prompt date.

    It looks as if one or more of those shorts is preemptively on the move, one eye no doubt on that stocks downtrend. And quite possibly with the other eye on Indonesia, the world's largest and most unpredictable exporter of tin.

    Indonesian producers are supposed to be limiting exports in a bid to support prices, but you'd be forgiven if you hadn't noticed.

    Exports are currently running at a strong pace. June's tally of 8,337 tonnes was the highest so far this year and cumulative exports of 39,356 tonnes are down by only a couple of thousand tonnes on the first half of 2014.

    The difference can largely be explained by this year's clamp down on exports of solder and "products", all part and parcel of the Indonesian authorities' ongoing campaign to instil some order on the notoriously chaotic smaller producers clustered on the islands of Bangka and Belitung.

    Exports of tin ingot are actually up on year-earlier levels, suggesting the most recent price-support scheme by the country's producers is proving as ineffective as so many previous attempts to bully up prices.

    A new turn of the screw by Jakarta might do more to limit exports than any voluntary restraint.

    From the start of August the newest batch of official export rules will extend to checking actual mining licences and mining practices, a level of scrutiny that many smaller operators may not pass.
    Back to Top

    Indian aluminium industry demands import duty hike

    PTI reported that to protect the interest of homegrown companies from rising imports of aluminium metal and its scrap, the aluminium industry has demanded that the Centre increase import duty on these products.

    As per statistics of Aluminium Association of India, Indian Aluminium Industry has seen a huge surge in imports in recent years from 8.81 lakh tonne in the year 2010-11 to 15.63 lakh tonne in 2014-15 financial year primarily from Middle East and China. Similarly, the import of aluminium waste and scrap has increased at a compound annual growth rate of 16 % in the same period.

    Vice President, Community Relations of Balco (Bharat Aluminium Company), Mr BK Shrivastav told PTI "The Indian Aluminium Industry is at a critical phase where it requires support from the government to maintain not only its current viability but also protect its growth plans that have significant economy contributions and benefits.”

    He told "Indian aluminium industry is facing big challenge from increasing import of primary aluminium metal and aluminium scrap. The rising imports are endangering the very basis of these large investments and their viability. Sale of domestic producers in the country is going down as imports are on the rise.”

    There are four primary aluminium producers in the country — Balco, Nalco, Hindalco & Vedanta Aluminium.
    Back to Top

    Steel, Iron Ore and Coal

    China June coal imports fall 34 pct on year

    China's coal imports slumped 33.7 percent in June from a year earlier to 16.6 million tonnes, as rising summer power use failed to drive a recovery in sluggish demand, customs data showed on Monday.

    Imports rose 16.5 percent on a month earlier as power plants began to rebuild stockpiles ahead of the summer consumption peak, but first-half imports were still down 37.5 percent at 99.9 million tonnes, according to figures from the General Administration of Customs.

    With coal in plentiful supply, China has been urging local producers to scale back operations and has imposed strict quality restrictions on imported coal that have seen deliveries delayed and even turned away.

    The Minerals Council of Australia said early this month that Australian cargoes were being unfairly rejected at Chinese ports due to the quality restrictions.

    China's Ministry of Commerce told Reuters in a faxed statement that coal was a commodity covered by the free trade agreement between the two countries and that Beijing had not imposed any import restrictions.

    "The rejection of any Australian cargoes at Chinese ports as a result of quality problems is an issue for the inspection and quarantine authorities," it said.

    "Essentially, the decline is caused by falling demand, and the tougher regulations have only made it more difficult to import coals of lower quality from some producers like Indonesia," said Zhang Xiaojin, analyst with Everbright Futures.

    Attached Files
    Back to Top

    US 2015 coal production at lowest level since 1987 - EIA

    Coal analyst for the Energy Information Administration said that US coal production is expected to total an estimated 921.5 million st in 2015, down 7.5% from 2014 and the lowest total since 1987.

    Production totals could get pulled down further as a mild summer and continued low natural gas prices weaken domestic coal demand, said Mr Elias Johnson, who co-authored the Short-Term Energy Outlook for July.

    If demand doesnt really rebound because of a warm summer, we could see consumption go even lower and that could lead to production going down, Johnson said. Well see what the summer does.

    According to the EIA, production is expected to drop in each of the three coal producing regions. The Appalachian region will drop to 237.5 million st, down 12.1% from 2014, the Interior region will drop to 182.2 million st, down 2.7%, and the West will drop to 501.8 million st, down 6.9%. Coal exports also are expected to drop to 87.4 million st, down 10.2% from 2014. In 2016, the EIA projects exports will total 88.2 million st.

    The EIA also projects coal consumption for electricity generation will decline to 794.8 million st, down 6.6% from 851.4 million st in 2014. In 2016, the agency estimates electric power consumption will total 805 million st, up 1.3% from this year.

    Mr Johnson said that factors behind the drop in consumption include low natural gas prices and less demand due to a mild winter. A mild summer could bring down those totals further.
    Back to Top

    South African steel industry is melting down

    The bedrock steel industry in South Africa is suffering a meltdown. The country’s second-largest producer, Evraz Highveld Steel & Vanadium, has only days to go before important deadlines for its business rescue run out. Along with Evraz Highveld’s woes, shares in ArcelorMittal SA slid more than 7% last week, taking the stock to its lowest level since February 2002. The country’s largest steel maker recovered fully the next day, but it has lost nearly 53% of its value since January, and 84% of value since September 2011.

    Mr Paolo Trinchero, CEO of the South African Institute of Steel Construction, says the domestic steel industry is under severe pressure. He said "There is not sufficient market demand for the industry at present. Gross domestic product growth and steel growth are directly proportional. If the GDP growth is below 2%, steel consumption growth is negative.

    He said "From a steel industry perspective failure of the group would remove domestic beneficiation capacity from the economy, and would open up import and trading channels for Highveld’s unique products. These would be very difficult to recover in future.”

    He added "From a general economy perspective we could see massive job losses, possibly permanently harming the Emalahleni (formerly Witbank) community. Reduced steel and vanadium exports would also harm our balance of payments."

    Attached Files
    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.

    © 2018 - Commodity Intelligence LLP