Mark Latham Commodity Equity Intelligence Service

Monday 23rd January 2017
Background Stories on www.commodityintelligence.com

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    Macro

    German Foreign Minister: With Trump, ‘Old World of the 20th Century is Finally Over’


    German Foreign Minister Frank-Walter Steinmeier says U.S. President Donald Trump’s election marks the end of an era, and Berlin will move quickly to secure “close and trusting trans-Atlantic cooperation based on common values” with the new administration.

    Steinmeier wrote in Bild newspaper on Sunday that “with the election of Donald Trump, the old world of the 20th century is finally over” and “how the world of tomorrow will look is not settled.”

    He says with any power change there are “uncertainties, doubts and question marks,” but a lot more is at stake “in these times of a new global disorder.”

     Steinmeier says he will promote free trade and joint efforts against extremism with Washington.

    He added he’s certain Germany will “find interlocutors in Washington who know big countries also need partners.”

    http://www.breitbart.com/london/2017/01/22/german-foreign-minister-trump-old-world-20th-century-finally/
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    India extends 4.5% service tax on freight for CFR import cargoes


    India will impose a total of 4.5% service tax over freight on cargoes imported on a delivered or CFR basis from January 22, shipping market participants said Thursday.

    This service tax was already being levied since June last year on cargoes that were imported on a FOB basis and ships chartered by importers domiciled in India.

    The move is significant because it will make cargoes of commodities such as oil and coal costlier since shipowners will pass on the service tax to Indian importers, shipbrokers said.

    "The implementation of changes in India's local service tax clause implies that there will be additional burdens on importers of cargoes," one broker in Singapore said.

    Any cargo imported into India such as crude, refined petroleum products, coal, coke, phosphoric acid, gypsum and limestone among others, will become costlier.

    The total tax on imported goods will include the 4.2% service tax along with the Swachh Bharat (Clean India) Cess and Krishi Kalyan (Farm Welfare) Cess at 0.15% each.

    When the service tax was first introduced on freight for imported goods in June 2016, most experts were of the opinion that the service tax was not payable if the owner and the charterer of the ship were not residents of India.

    Since June last year, when the contract of supply was on a FOB basis and the vessel was chartered by the Indian importer, the service tax on the freight was paid by the Indian importer, the tanker broker said.

    On January 12, the Indian government made a fresh attempt to bring the freight component of CFR or delivered contracts -- where the foreign supplier chartered the vessel - into the service tax net.

    The new notification removes the exemption given to non-resident service providers of freight.

    According to the notification, the person responsible for the service tax will be the person who complies with the Indian Customs Act, which in this case is the agent of the foreign ship operator, a dirty oil tankers broker in Singapore said.

    Now even CFR contracts, where both charterer and ship operator of the cargo imported are located outside India, are covered under this service tax of 4.5%, the tanker broker said.

    When the contract of supply was on a CFR basis, where the foreign supplier of cargo was chartering the vessel and residing in a non-taxable territory, this service tax was not levied. "This tax exemption is now removed for all practical purposes," the tanker broker said.

    "Earlier the government did not know what to do about service tax on the freight for CFR sales where the foreign buyer chartered a foreign operator's vessel and the matter remained in limbo till the new notification was issued last week," the tanker broker added.

    Meanwhile, sources said the new notification has created confusion among charterers and shipowners.

    The standard charter party agreement notes that "all taxes on cargo voyage freights are to be for the charterer's account except income tax and taxes on time charter hire levied in the country of vessel and/or her owner's domicile. All dues, duties, charges and/or taxes on crew and/or stores are to be for the owner's account."

    However, there are instances where charterers negotiate the freight tax to be included into the owner's account, which the owner would factor into the freight cost.

    "This is OK to be implemented with some [notice] included, But this [the move by the Indian government] is too quick for owners to factor into their costs," a dry bulk shipowner operating Supramax vessels said.

    http://www.platts.com/latest-news/shipping/singapore/india-extends-45-service-tax-on-freight-for-cfr-27755165
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    Argentina, Chile advance towards gas, power swaps: minister



    Chile and Argentina are advancing in talks to agree on reciprocal exchanges of electricity and natural gas between the two countries, Chilean Energy Minister Andres Rebolledo said Thursday.

    Speaking to correspondents in Santiago, the minister said he will present Argentine counterpart Juan Jose Aranguren next week with a draft proposal for regulations allowing such swaps.

    "It would be very interesting to have a model that would allow you to sell electrons or molecules of electricity or gas at one point and import them at another," Rebolledo said.

    A decade ago, Chile was a major importer of natural gas from its neighbor, but flows along the pipelines were reversed last year as Argentina struggles with a lack of capacity in its energy infrastructure.

    Between May and August last year, Chile exported 361 million cu m of natural gas to Argentina, which had been imported as LNG from Trinidad and Tobago and the US.

    State energy firm ENAP is currently in talks with its Argentine counterpart ENARSA to repeat the exports this year.

    Chile also exported 101 GWh of electricity to its neighbor along an existing line to northwest Argentina.

    But greater synergies could be gained by balancing imports and exports at different points along the border.

    "This is super attractive as our country breaks up in the south we are not physically integrated," Rebolledo said.

    ENAP has discovered significant reserves of unconventional gas in Chile's southernmost Magallanes region, which is much closer to Argentina's Patagonia than the Chilean capital Santiago, 2,000 km to the north.

    Argentina could export gas from its Neuquen field to southern Chile via the Gas del Pacifico pipeline as it lacks sufficient internal domestic capacity to move that gas to Buenos Aires.

    Chile is also keen on developing an interconnection between its northernmost city Arica and the Peruvian city of Tacna, 50 km away. The line would also allow Chile to export excess solar power to its neighbor during the day, receiving electricity generated from Peruvian natural gas at night.

    Broader energy integration across the region would require the development of a lateral regulatory framework. But Rebolledo said recent economic and political developments made it a favorable time for such a deal.

    Argentina, Brazil and Peru have also gained new pro-business presidents since the end of 2015.

    http://www.platts.com/latest-news/natural-gas/santiago/argentina-chile-advance-towards-gas-power-swaps-21653890
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    S Korean leading presidential candidate pledges less coal, nuke, while pursuing Russian natural gas


    South Korea's leading presidential candidate Moon Jae-In has pledged to reduce coal-fired power plants and phase out nuclear reactors in the country, while seeking to buy Russian natural gas to meet power demand and combat climate change.

    "We should reduce consumption of fossil fuels, coal in particular," he said Wednesday night at a group interview that included S&P Global Platts. "Coal-fired power plants are accused of air pollution and fine-dust emissions," said Moon, former leader of the progressive opposition Democratic Party.

    Shutdown of aged coal-fired plants would not greatly affect the country's power supply if the country makes more investments in renewable power projects, Moon said, stressing that South Korea's fuel-mix for power generation should be more environment-friendly and low-carbon oriented.

    Moon is the front-runner in South Korea's next presidential elections, outpacing ex-U.N. Secretary-General Ban Ki-Moon by more than six percentage points in terms of popularity, according to recent public surveys.

    The current president, Park Geun-Hye, was suspended from duty in December 2016, after the national assembly voted to impeach her. The constitutional court is currently deciding whether to uphold the motion.

    The presidential elections will happen in 60 days if the constitutional court approves Park's impeachment that would come between March and June, which means, the next president could be elected by May.

    Moon is the top candidate from the Democratic Party, the biggest party, with 121 seats in the 300-seat National Assembly.

    The Democratic Party is more focused on environment and fair wealth-distribution than the conservative, currently ruling Saenuri (New Frontier) Party. The Saenuri Party has long placed the top priority on economic growth led by big business conglomerates, called chaebol, such as SK Group that runs oil refineries and chemical plants.

    In line with his party?s objectives, Moo said he would seek to raise electricity tariffs for businesses as part of efforts to overhaul energy-intensive manufacturers, which can sap profits of oil refiners and chemical makers mostly run by big conglomerates such as SK Innovation, GS Caltex, Hyundai Oilbank, Hanwha Total and Lotte Chemical.

    Moon's comment on coal-power plants came at a time when South Korea has been increasingly hit by higher concentrations of fine-dust in the air, caused largely by coal-fired power plants, sparking public health concerns.

    Fine-dust refers to particles that are smaller than 10 micrometers and have been known to cause various respiratory problems while also affecting the body's immune system.

    South Korea runs more than 50 coal-fired power plants that supply about 40% of the country?s total electricity, followed by nuclear about (30%), LNG (about 25%), oil (3%), and renewable sources, such as hydropower, solar, wind and fuel cells (2%).

    The coal-fired power plants mostly owned by the state have been usually operated at full capacity, because they, as base-load generators, provide electricity, along with nuclear reactors, as a means to minimize power production costs.

    With increasing demand for power, power plants using more expensive fuel like natural gas increase their electricity production, under South Korea's power trading formula.

    Operating rates at natural gas-fired power plants have decreased to less than 40% since the second half of 2014, from 60% over 2012-2013, due to increased capacity of coal-fired and nuclear power plants and economic slowdown.

    Moon has also pledged to pave the way for achieving 'nuclear zero' by around 2060, to address growing public fears about safety, particularly in the wake of the country's biggest earthquake in September last year, which forced four nuclear reactors to close for three months.

    "I will make South Korea build no more nuclear reactors and close down aged nuclear reactors when their lifespan expire," Moon said. "Through this, South Korea can arrive at nuclear zero in 2060, and until then, we can develop alternative sources," he said.

    The best alternative to coal and nuclear, Moon said, is renewable sources, but it would take a long time for them to meet electricity demand. "So, South Korea needs to consider purchasing natural gas from neighboring Russia by building a pipeline," he said. South Korea's state-run Korea Gas Corp. signed a preliminary agreement with Russia's Gazprom in 2008 to buy 10 Bcm/year of Russian gas for a 30-year period, beginning 2015.

    Under the $90-billion deal, Kogas and Gazprom also agreed to push for a pipeline that runs across North Korea as the preferred delivery option. For their part, Russia and North Korea signed a memorandum of understanding on the proposed cross-border gas pipeline.

    But talks on the project have been suspended due to military tensions across the inter-Korean border following the death of North Korean leader Kim Jong-Il in 2011, which was followed by nuclear and missile tests, as well as Seoul's concerns that North Korea may disrupt gas flows to South Korea to use it as a leverage to win more concessions.

    "South Korea's energy problems can be fully resolved once it can get cheaper and cleaner source of Russian natural gas via the inter-Korean pipeline," Moon said. "For this, I will place a top priority on improving ties with North Korea," he said.

    http://www.platts.com/latest-news/coal/seoul/interview-s-korean-leading-presidential-candidate-26644139
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    ARCTIC SEA ICE GROWS BACK TO 2006 LEVELS

    ARCTIC SEA ICE GROWS BACK TO 2006 LEVELS

    Sea ice charts for 18 January from NSIDC Masie show exactly as much sea ice in 2017 as there was back in 2006 – 13.4 million km^2.

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    Masie image below from 2006 (enlarged and cropped from archived version and label re-inserted) shows the distribution of ice was slightly different than this year (less in Baffin Bay/Davis Strait/Labrador Sea, more in the Barents and Bering Seas):


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    Considering only Canada (where 2/3 of the world’s polar bears live), Canadian Ice Service comparative graphs going back to 1971 show average amounts of ice existed the week of 15 January 2017, but considerably more than the estimates for the 1970s (odd that we never hear about that):



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    Attached Files
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    Oil and Gas

    Oil Supply

    • Global oil supplies fell by more than 0.6 mb/d in December, to 97.6 mb/d on lower OPEC and non-OPEC output. For 2016, world supply was up 0.3 mb/d from the previous year as record OPEC output more than offset a 0.9 mb/d decline in non-OPEC.
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    Asia's unquenchable thirst for oil to outpace 2017 refining growth


    Asia is gearing up to witness new refining capacity growth in at least four countries in 2017, but capacity reductions in some top consuming nations will pull down the net addition to a level that would be lower than the anticipated demand growth the region is likely to see this year.

    While China, India, Taiwan and Vietnam are expected to add to their refining capacities this year, Japan will witness closures, while some independent refiners in China might be forced to give up capacity, analysts and market participants told S&P Global Platts.

    "Oil demand growth in the Asian region is expected to exceed the net refining additions this year," said Sri Paravaikkarasu, Head of Oil, East of Suez, at Facts Global Energy. "And looking at the next five-year horizon, oil products demand growth should exceed net refining additions every single year, helping to clear product surplus somewhat."

    Growth in India is set to be one of the strongest, with the rise in oil demand expected to outpace that of China's for the third year in a row this year, according to Platts Analytics. Indian demand is expected to grow by 7% year on year to 4.13 million b/d in 2017, while China's oil consumption is expected to rise by only 3% to 11.5 million b/d in the same period.

    POCKETS OF EXPANSION

    In China, CNPC's 260,000 b/d PetroChina Anning Refinery in landlocked Yunnan province is expected to come online in 2017, but despite this the net refining capacity addition is seen lower as independent refineries are expected to reduce capacities following government crackdowns.

    "We expect at least about 100,000 b/d of refining capacity [at various Chinese] independent refiners to possibly disappear in 2017," Paravaikkarasu said. "Their crude volumes are getting squeezed."

    In India, state-run Bharat Petroleum Corp. Ltd.'s Kochi refinery is expected to add about 113,000 b/d capacity to its existing 190,000 b/d, while capacity of the Bhatinda refinery of HPCL-Mittal Energy Ltd. is expected to rise by about 42,000 b/d from the existing 180,000 b/d.

    In addition to India and China, Taiwan's Talin refinery is expected to see capacity expansions, while Vietnam will bring online its new Nghi Son refinery this year.

    Taiwan's CPC Corp. expects to complete the construction of its new CDU, hydrotreaters and a condensate splitter at the Talin refinery in the first quarter of 2017, delayed from an initial schedule of end-2016.

    The expansion will boost Talin's total capacity to 350,000 b/d -- or 400,000 including the new condensate splitter -- from 300,000 b/d currently. The plan includes the replacement an older 100,000 b/d CDU.

    Vietnam's new Nghi Son refinery, with a capacity of around 185,000 b/d, is expected to be operational in early 2017.

    "The expansions in India, China, Taiwan and Vietnam should take new refinery capacity additions to about 690,000 b/d in 2017. But we also expect capacity cuts to the tune of 447,000 b/d in Asia, including 347,000 b/d in Japan and 100,000 b/d in China. That should take the net refinery capacity additions in Asia to nearly 250,000 b/d," Paravaikkarasu said.

    Japanese refiners are preparing to cut around 340,000-350,000 b/d of crude distillation capacity by the end of March 2017 to comply with current regulations, which require the refiners to raise their residue cracking ratio to an average of 50% by March 2017, from 45% at the end of March 2014.

    Refiners can achieve this by either adding more secondary units or cutting their nameplate crude distillation capacity, with all expected to opt for the latter. This will bring Japan's refining capacity down to 3.44 million-3.45 million b/d at the end of March 2017, from around 3.79 million b/d currently.

    REFINING LANDSCAPE

    Despite an anticipated rise in oil products demand in Asia, ample supply from China was seen to be a key factor influencing refining margins in 2017.

    In addition, rising crude prices would also keep margins under pressure.

    "China's oversupply could be a game-changer for Pan-Asia refining," Nomura said in a recent research note. "We expect Asian refining margins to be under downward pressure until the inventory has been drawn down."

    China in 2016 flooded the Asian markets with competitively priced oil products. Its diesel and gasoline exports in the first 11 months of 2016 grew by 112% and 74% year on year, respectively, to 303,000 b/d and 222,000 b/d, as the country aggressively pushed sales overseas amid weak demand at home, according to customs data.

    Analysts expect the trend to continue this year.

    "Margins are expected to remain positive through the first half of the year before turning slightly negative in the second half. Singapore complex margins should average $6/b," Paravaikkarasu said. "We should remember that crude oil prices are recovering too."

    Asia witnessed wild swings in gross refining margins in 2016, with GRMs climbing to above $10/b in early 2016, but weakening to as low as $3/b in August before recovering to $5/b in October, Nomura said in the note. It expects crude oil prices to rise to $60/b in 2017 on the back of OPEC's decision to cut output.

    "We may not see fantastic margins this year in Asia, which witnessed a golden period in 2015 and early 2016. But, still, there is room for margins to hold up well and be in the positive territory in 2017," said a senior Asia-based oil analyst.

    http://www.platts.com/latest-news/oil/singapore/analysis-asias-unquenchable-thirst-for-oil-to-27755117
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    Libya oil production up


    Libya oil production up to 722,000 barrels a day. Was 708.000 early January, 655,000 last week.

    @reportingLibya
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    Investors Bet on Oil Market Rebound


    Hedge funds are showing they have some faith in OPEC.  

    Their bets on rising West Texas Intermediate crude prices reached the highest in data going back to 2006 as the Organization of Petroleum Exporting Countries and other producers reduce output to balance the market. Saudi Arabia, Algeria and Kuwait have already made deeper cuts than required, while Russia has been able to reduce supply faster than expected, ministers from the countries said over the weekend in Vienna as they gathered for the first meeting to monitor adherence to their output-cut accord.

    Funds increased their net-long position, or the difference between wagers on a price increase and bets on a decline, by 14 percent in the week ended Jan. 17, U.S. Commodity Futures Trading Commission data show. WTI advanced 3.3 percent to $52.48 a barrel in the report week. March futures lost 6 cents to $53.16 a barrel at 2:19 p.m. Singapore time on Monday.

    "Money mangers are buying oil, as they say in Texas, like too much ain’t enough," Tim Evans, an energy analyst at Citi Futures Perspective in New York, said by phone. "They are trading based on confidence that OPEC and non-OPEC producers will reduce output enough to send prices higher."

    https://www.bloomberg.com/news/articles/2017-01-23/too-much-ain-t-enough-as-investors-jump-into-oil-market-rebound
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    OPEC/non-OPEC claim compliance but questions linger


    OPEC and non-OPEC producers left their meeting in Vienna Sunday claiming 100% commitment with plans to cut output, but market watchers will have to wait a little longer for hard evidence of full compliance.

    There was certainly convincing rhetoric from the oil ministers and there have been signs of significant cuts, but the market must now determine fact from fiction, given the expected natural declines from some countries, planned maintenance and how output is responding from exempt producers like Nigeria and Libya.

    Saudi oil minister Khalid al-Falih was "positive" that non-OPEC producers were taking part in the cuts, while Russia's Alexander Novak said his expectations have been "exceeded".

    But beyond the ministers' platitudes, the monitoring committee -- made up of representatives from Algeria, Kuwait, Oman, Russia and Venezuela -- still has little to work with.

    Moreover, minister claims that the market could rebalance within the first six months have many analysts wondering if the recovery in US production and shale will derail this process.

    "They claim growing US production is no issue because growing demand will absorb it. That may be true, but that sure sounds a lot like conceding market share to the US, and that OPEC will have to reconsider their game plan yet again in the coming months/years," said Tony Starkey from Platts Analytics, a unit of S&P Global Platts.

    The cut agreement only came into effect on January 1, in the aim of pinning back production by close to 1.8 million b/d. Since then the market has been anxious to gather any news on output reductions.

    Just three weeks in, with next to no published production data yet available, the producers' monitoring committee has attempted to pull together a mechanism to accurately gauge compliance.

    More data will be needed to convince skeptics that the group can keep up with its commitments, and quickly.

    According to OPEC's official statement from Sunday's meeting, each of the 24 signatories to the production cut agreement will nominate a technical representative who is to supply OPEC with production data.

    Falih, who has just taken on the role of OPEC's latest president, summed up the balance between statements of commitment from producers and the absence of cold, hard production figures.

    "We see evidence of a 1.5 [million b/d cut]. Everybody has declared their full commitment. For all I know, and I still hope we will see evidence in February, we are going to get 100% compliance, possibly more", he told journalists after the meeting.

    His "back of an envelope" calculation of compliance, was based on constant communication with customers, and through lifting and loading data, Falih added.

    Novak went even further with his own calculation. "If we take the overall number of countries, it should be 1.7 million b/d. So in my view as a result of statistics that we will have for January we will have an even bigger cut than 1.7 mil b/d", he told the Russia 24 television network.

    MARKET BALANCE EYED BY MID-2017

    Russia has in fact moved ahead with its own production cuts faster than planned, he added, and production since the beginning of January has fallen by more than 100,000 b/d.

    To some extent this is due to abnormally low temperatures in some oil producing areas in early January. However, Russia has committed to a cut of 300,000 b/d over the course of the six months so it still has some way to go to make good on its pledge.

    Saudi Arabia has also exceeded its target, cutting output by more than 500,000 b/d, to less than 10 million b/d, Falih confirmed. But it is not clear how much of this is due to refinery maintenance at Yanbu and lower crude burn in the Persian Gulf winter.

    So too have some other OPEC producers, such as Kuwait. Kuwait was only required to cut output by 131,000 b/d, but having already reached that level, has reduced by a further 6,000 b/d, and plans to go down to 148,000 b/d, officials said.

    Other producers, such as Iraq and Venezuela, have not yet cut down to their quotas, but say they are committed to reaching their required levels in the coming months.

    Venezuela's production was already down by half of its commitment, newly appointed oil minister Nelson Martinez said.

    "The other 300,000 b/d [on top of the 1.5 million b/d the producers already suggest has been cut], for all I know, still happened, we just haven't seen the evidence for it", he said.

    Confirmation of these cuts will go a long way to easing concerns over compliance.

    With the monitoring mechanism now agreed, the evidence will be presented to the committee for review on February 17, with regular monthly updates thereafter on the progress of the deal.

    Novak added that the committee will judge compliance based on secondary source data, and not country self-supplied figures. These secondary sources -- including S&P Global Platts -- compile monthly estimates of each country's output for the preceding month. Their inclusion has been a contentious issue for some countries, such as Iraq, where the two figures have shown significant variance.

    Full compliance, for the entire six months of the deal, and possibly beyond, could bring global crude stock levels back to their five-year average by middle of the year, "lowering oil in storage by around 300 million barrels", Falih said.

    His view was echoed again by Novak, who said he had reassessed his outlook on the market rebalancing, bringing it forward. "Today, we see that balancing is possible at the end of first half of the year", he said.

    This appears a little optimistic especially given the impact that increased US shale production and response of global demand to higher prices may have on the market balance. Of course, the cuts could also be offset by rising output from Libya and Nigeria, which are exempt from the deal.

    "Demand is expected to be higher again this year, though there have been some worrying signs in terms of US gasoline demand in the past couple of months, as well as a generally trending higher of oil prices along with the US dollar, which may negatively impact demand growth expectations this year, and coupled with the return of OPEC supply, could spell trouble for the oil market in the latter half of 2017," Starkey cautioned.

    http://www.platts.com/latest-news/oil/london/analysis-opecnon-opec-claim-compliance-but-questions-27755876
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    China sets gas supply target by 2020


    China aims to increase supply capacity for natural gas to over 360 billion cubic meters by 2020, according to the 13th Five-Year Plan released by the National Development and Reform Commission and the National Energy Administration.

    The country's proven reserves of natural gas will reach 16 trillion cubic meters by 2020.

    Proved reserves of shale gas will surpass 1.5 trillion cubic meters, the plan said.

    Official data showed China's natural gas output came in at 121.1 billion cubic meters in the first 11 months of 2016. Imports of natural gas reached 63.4 billion cubic meters during the period.

    http://www.sxcoal.com/news/4551551/info/en
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    China LNG imports hit record in December


    China's liquefied natural gas (LNG) imports hit a record high in December, customs data showed on Monday, driven up as the country pushes towards cleaner fuels.

    The world's No.2 economy shipped in 3.73 million tonnes of LNG in December, topping the previous record of 2.66 million tonnes in November and up from 2.10 million tonnes a year ago, the General Administration of Customs said.

    China's government in 2014 launched a "war on pollution" to reverse the damage done by decades of untrammelled growth.

    Trade flow data on Thomson Reuters Eikon shows that Australia and Qatar exported the most LNG to China in December.

    Australia shipped 22 cargoes, equivalent to 1.5 million tonnes of LNG, according to that data, while Qatar exported 9 cargoes.

    For the whole of 2016, China's LNG imports rose 32.8 percent to 26.06 million tonnes, China's customs data showed.

    The nation's December diesel imports climbed 166.1 percent from the same month a year earlier to 110,000 tonnes, while kerosene imports fell 2.3 percent on the year to 290,000 tonnes.
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    Saudi's SABIC to acquire remaining 50 percent of Shell venture for $820 million


    Saudi Basic Industries Corp (SABIC) 2010.SE has signed an agreement to acquire the 50 percent that it does not already own in its petrochemical venture with Shell Arabia, a unit of Royal Dutch Shell (RDSa.L), for $820 million, SABIC said on Sunday.

    "As per the partnership agreement between the two companies that stipulates the right of SABIC to renew or end the partnership by the end of 2020...SABIC decided to acquire the full stake of Shell, which is 50 percent," it said.

    SABIC, one of the world's largest petrochemical firms, said the $820 million figure was based on the net value of the venture's assets. It said the acquisition was in line with a strategy to develop its successful investments.

    The venture, known as SADAF, was established in 1980 and operates six petrochemical plants with total annual output of over 4 million tonnes year of chemicals. It makes products including ethylene, crude industrial ethanol and styrene at a complex in Jubail, on the Gulf coast of Saudi Arabia.

    The acquisition agreement is expected to be carried out before the end of this year, SABIC said, adding that it signed another memorandum of understanding with Shell Arabia on Sunday to boost the companies' cooperation in unspecified international and local investments.

    "We will continue to explore potential future opportunities with SABIC," Graham van’t Hoff, executive vice-president of chemicals at Shell, said in an emailed statement to Reuters.

    In 2014, SABIC and Shell shelved plans to expand SADAF as the results of feasibility studies were not encouraging. The expansion was to have added production of polyols, propylene oxide and styrene monomer.

    Shell is involved in other downstream activities in Saudi Arabia; it has a crude oil refinery with Saudi Aramco in Jubail.

    http://www.reuters.com/article/us-sabic-shell-idUSKBN15609J
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    Nigeria's NNPC calls for tenders for oil product imports under DSDP system


    The Nigerian National Petroleum Corporation has called for tenders under its direct sale, direct purchase import model, an NNPC spokesman said Friday.

    The DSDP model, under which selected overseas refiners are allocated crude supplies in exchange for the delivery of an equal value of gasoline to NNPC, started last year, replacing the controversial crude for oil product swaps and Offshore Processing Agreements.

    "To ensure sustainable petroleum product supply across the country, NNPC has called tenders for the lifting of crude oil in return for the delivery and supply petroleum products under the direct sale of crude oil and direct purchase of petroleum products," the spokesman said.

    Submission of bids will close on February 2, while the program is expected to commence on April 1 and will be for one-year period, he said.

    The spokesman did not specify what volumes NNPC is expecting to place in the tenders.

    Nigeria imports around 1 million mt/month of petroleum products but the NNPC said January 15 that imports should drop following the recent restarts of all four of the country's state-owned oil refineries.

    http://www.platts.com/latest-news/oil/lagos/nigerias-nnpc-calls-for-tenders-for-oil-product-26644134
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    Sonatrach supplying contractual volumes of LNG to France: source


    Algeria's state-owned Sonatrach has met all its French LNG supply contractual obligations, a company source said late Thursday, despite having suffered a three-week unplanned outage at its main Skikda LNG facility.

    The source told Algeria's state news agency APS that France's Engie had requested additional LNG to meet demand during a cold spell that has coincided with saturated capacity between northern and southern France.

    But Sonatrach was unable to meet that request, the source said.

    "Sonatrach is within its rights to turn down the request to make sure it can meet its other customer obligations," the source said.

    On Wednesday, a separate Sonatrach source told S&P Global Platts that the company was in the process of restarting the Skikda LNG plant after a near three-week unplanned outage.

    The 4.7 million mt/year plant went down at the end of December due to a heat exchanger issue, the source said.

    The last LNG cargo from Skikda left the facility on December 29 aboard the Sonatrach vessel, the Cheikh el Mokrani, which was delivered to the French LNG import terminal of Fos-sur-Mer, according to cFlow, S&P Global Platts trade flow software.

    Since the outage, Sonatrach has been meeting its contractual supply obligations by sending LNG from the smaller Arzew export plant.

    Since December 29, 13 LNG cargoes have left Arzew for destinations including Fos-sur-Mer, Revithoussa in Greece and Martas in Turkey, according to cFlow.

    The unplanned outage at Skikda contributed to the recent spike in gas prices in France and Spain.

    In France, the TRS spot price reached a record high last week of Eur40.175/MWh, according to Platts assessments.

    Having fallen back this week, the price jumped again Thursday to Eur34.20/MWh due to expectations of an increased capacity restriction on the North-South link.

    Thierry Trouve, CEO of French grid operator GRTGaz, said Tuesday there had been a recurring bottleneck since the beginning of the winter due to low LNG arrivals at Fos-sur-Mer.

    But Algeria's energy minister Noureddine Boutarfa said Thursday that Algeria had no problems as it was meeting its contractual obligations.

    "It's not up to us to worry about the French," he said.

    http://www.platts.com/latest-news/natural-gas/algiers/algerias-sonatrach-supplying-contractual-volumes-26644135
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    EIA: U.S. LNG exports continue to break records


    U.S. liquefied natural gas (LNG) exports are continuing to remain high in January following record high levels in the previous two months, according to the Energy Information Administration.

    To remind, Cheniere’s Sabine Pass liquefaction terminal in Louisiana exported twelve LNG cargoes in December, setting a new record for U.S. monthly exports.

    The agency said in its latest weekly report that exports from Sabine Pass in January remain high, with 8 cargoes already exported and several more vessels currently en route to the terminal.

    Feedstock gas deliveries to Sabine Pass also set a new record in January, averaging 1.7 billion cubic feet per day (Bcf/d) to-date, according to data from PointLogic.

    Since this volume exceeds the maximum combined nameplate capacity of Train 1 and Train 2 of 1.4 Bcf/d, feedstock gas deliveries may indicate the start of commissioning of Train 3, EIA said.

    Cheniere previously said that Train 3 is expected to reach “substantial completion” by June 2017 and to start exporting LNG in April 2017.

    Cheniere started exports from the Sabine Pass liquefaction plant, currently the only such facility to ship U.S. shale gas overseas, in February last year with the majority of cargoes landing in Latin America.

    However, in December this trend changed with the majority of Sabine Pass cargoes leaving for Asia where cold winter temperatures increased residential heating demand and rising spot LNG prices led to larger price spreads between the Atlantic and Pacific basins, providing greater incentive for exports from the U.S.

    The U.S. is expected to become the world’s third-largest LNG supplier by 2020 with an export capacity of 60 million mt coming from five export terminals.

    Henry Hub down

    Natural gas spot prices in the U.S. dropped in most locations in the week ending January 18, with the Henry Hub price slipping 3¢ from last Wednesday, EIA said.

    The Henry Hub spot price dropped from $3.28/MMBtu last Wednesday to $3.25/MMBtu two days ago.

    “Temperatures were relatively consistent between last Wednesday and yesterday, resulting in relatively minor price movements through the week,” EIA said.

    At the Chicago Citygate, prices decreased 3¢ to $3.22/MMBtu two days ago. By contrast, prices at PG&E Citygate in Northern California gained 8¢, rising to $3.61/MMBtu this Wednesday.

    http://www.lngworldnews.com/eia-u-s-lng-exports-continue-to-break-records/
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    Schlumberger revenue beats on uptick in North America activity, prices


    Schlumberger NV reported better-than-expected quarterly revenue as oil producers put more land rigs back to work in North America and prices for oilfield services recovered slightly in the region.

    Shale companies, encouraged by a rise in crude oil prices after a slump of more than two years, have been drilling more wells, boosting demand for services provided by Schlumberger and other service providers.

    Schlumberger, the world's No.1 oilfield services provider, said its fourth-quarter revenue from North America rose 4 percent to $1.77 billion compared with the third quarter.

    The company said revenue from onshore operation in the United States grew double digits in percentage terms due to "higher activity and a modest pricing recovery."

    Revenue growth in international markets was slower, rising 1 percent to $5.28 billion from the third to the fourth quarter.

    Schlumberger Chief Executive Paal Kibsgaard said a recovery in international markets this year would "start off more slowly."

    Net loss attributable to Schlumberger fell to $204 million, or 15 cents per share, in the three months ended Dec. 31, from $1.02 billion, or 81 cents per share, a year earlier. (bit.ly/2jGqJn7)

    The latest quarter included a $536 million restructuring charge as well as a $139 million charge related to the acquisition of Cameron International and a currency devaluation loss in Egypt. It recorded more than $2 billion in restructuring and asset impairment charges in the year-ago quarter.

    Excluding items, Schlumberger earned 27 cents per share in the latest quarter, which was in-line with analysts' average estimate, according to Thomson Reuters I/B/E/S.

    Revenue fell 8.2 percent to $7.11 billion, marginally beating analysts' estimate of $7.07 billion.

    Schlumberger shares were little changed in premarket trading on Friday. They had risen a little more than 20 percent in 2016.

    http://www.reuters.com/article/us-schlumberger-results-idUSKBN1541IF
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    U.S. Oil Producers Ramp Up Spending


    U.S. oil producers, optimistic that higher crude prices are here to stay, have issued 2017 budgets that call for dramatically greater spending to tap new wells.

    Preliminary capital-spending plans released in recent weeks by more than a dozen American shale drillers, including  Hess Corp. and Noble Energy Inc., show an average 60% budget increase for the group.

    The trend comes after two years of austere budget cuts and layoffs at shale companies to help them cope with a protracted oil bust. The price of U.S. crude started to collapse in 2014 from over $100 a barrel to below $30 in early 2016, prompting drillers to idle rigs and lay off more than 150,000 workers in the U.S.

    Many more energy firms will announce capital budgets in the coming weeks, and early indications are that they expect to spend more, as well as pump more oil and natural gas this year.

    Praveen Narra, an energy analyst with Raymond James & Associates, predicts a surge in shale spending based on an improved outlook for the sector. Raymond James is forecasting that crude prices will average $70 a barrel this year, up from a $43 average in 2016. U.S. oil prices closed at $51.37 a barrel Thursday.

    “That willingness to spend is certainly there,” Mr. Narra said. “People are just optimistic that we have put the worst behind us.”

    Wall Street darling RSP Permian Inc., which drills exclusively in West Texas, is boosting this year’s budget by 97% to $600 million. RSP’s stock price has more than doubled in the last year to a recent $42.41 per share.

    Last week, Hess, one of the biggest drillers in North Dakota, unveiled a $2.25 billion budget for 2017, an 18% increase over the $1.9 billion it spent last year. The company will spend a significant amount putting more rigs back to work in the Bakken formation, and production is expected to rise by about 10% this year, according to Greg Hill, president of Hess.

    Noble has said it would spend up to $2.5 billion this year, a potential 67% jump over last year’s $1.5 billion budget, as it doubles its rig activity from Texas to Colorado. Earlier this week, the company said it would buy Clayton Williams Energy Inc., based in West Texas, for $2.7 billion, giving it another 2,400 prospective wells to tap.

    The oil price stabilized over $50 a barrel in the fall thanks, in part, to an agreement to curb output by members of the Organization of the Petroleum Exporting Countries, such as Saudi Arabia, as well as other major producers such as Russia.

    Several U.S. oil producers, including Pioneer Natural Resources Co. and EOG Resources Inc., have said that advanced technology and efficiency gains implemented during the oil-price downturn will allow them to not just survive but thrive at $55 a barrel.

    Spending by oil and gas producers world-wide is expected to jump 7% in 2017, according to Barclays PLC, a British bank which recently surveyed 215 energy companies about their plans.

    U.S. onshore oil and gas producers will lead the way, particularly as larger shale drillers ramp back up, said J. David Anderson, a Barclays analyst. He estimates that spending among American exploration and production companies will rise more than 50%, setting off a wave of activity that may surprise OPEC and other foreign competitors. “They’re about to find out how efficient the U.S. producers have become,” Mr. Anderson said.

    There are already signs of increased U.S. oil activity. The number of oil and gas rigs drilling from Colorado to Oklahoma has been steadily on the rise in recent weeks. There were 634 rigs drilling onshore in the U.S. at the end of last week, up from a low of 380 in May. Earlier this month, U.S. oil production surpassed 8.9 million barrels a day, its highest level in nine months, and has stayed roughly at that level, according to the latest weekly federal data.

    One of the most pronounced increases in planned spending was announced by Denver-based Extraction Oil & Gas Inc. The company was the first initial public offering of a U.S. oil and gas producer in two years when it made its debut on the Nasdaq Stock Market in October.

    Extraction said it would spend about $865 million in 2017, up 137% from the $365 million it budgeted for 2016. The company expects to boost output this year by nearly 76% to 51,000 barrels of oil equivalent a day.

    Mark Erickson, Extraction’s chief executive, said $45 oil has proven to be a sweet spot for the company, and any improvement in price just means stronger returns and more activity are on the way.

    “We’re looking at this just being a very high-growth year,” he said.

    http://www.wsj.com/articles/u-s-oil-producers-ramp-up-spending-1484908206

    Attached Files
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    GE Misses Revenue Estimates, Weighed Down by Slump in Oil Market


    General Electric Co. reported fourth-quarter sales below analysts’ estimates as the persistent slump in the oil market weighed on sales of industrial equipment.

    “Revenue clearly was a bit light. Their cash flow was a bit light,” Nicholas Heymann, an analyst with William Blair & Co., said by telephone. “I don’t see any signs of big problems, but it was a grind quarter.”

    GE is looking to regain momentum after a sluggish economy constrained growth in 2016 and pressured the company’s efforts to sharpen its focus on machinery such as gas turbines and jet engines. Chief Executive Officer Jeffrey Immelt is building a software business to complement the manufacturing operations while pursuing major deals, such as combining GE’s oil division with Baker Hughes Inc.

    Revenue fell 2.4 percent to $33.1 billion, the Boston-based company said in a statement Friday. That was below the $33.9 billion predicted by analysts, according to the average of estimates compiled by Bloomberg.

    While GE said it is “optimistic” about the U.S. economy, it cited a “slow-growth and volatile environment” in the fourth quarter, according to slides accompanying the release.

    The shares declined 1 percent to $30.90 at 7:21 a.m. in New York before regular trading. GE gained 9.5 percent in the 12 months through Thursday, compared with a 20 percent advance for the Standard & Poor’s 500 Index.

    Adjusted earnings fell to 46 cents a share, matching analysts’ estimates. Orders rose 4.3 percent in the quarter, but declined slightly on an organic basis.

    Sales Breakdown

    Revenue climbed 20 percent in the power division, which is seeing higher shipments of a new gas turbine. GE Aviation, which is boosting production of a new jet engine, posted a 6.7 percent increase.

    Sales tumbled 22 percent in the oil and gas unit, which has struggled amid the plunge and sluggish recovery of crude prices. GE hopes to capitalize on an eventual rebound through the Baker Hughes deal, which would create the world’s second-largest oilfield service provider and equipment maker. GE would own 62.5 percent of the combined company.

    The manufacturer also is selling two divisions, water and industrial solutions, to help fund restructuring and free up cash for potential acquisitions. GE has said the water unit, which makes products for desalination and wastewater treatment, is generating significant interest from prospective buyers.

    Operating earnings in 2017 will be $1.60 to $1.70 a share, GE said, reaffirming a forecast the company gave last month. Organic revenue is expected to increase 3 percent to 5 percent.

    https://www.bloomberg.com/news/articles/2017-01-20/ge-matches-profit-estimates-on-gains-in-power-aviation-units
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    Base Metals

    Curb your copper price enthusiasm – report


    Moody's issued a new report on the global base metal sector, noting that "a couple of weeks into 2017, we have witnessed a starkly different picture, with higher metal prices and, for the most part, stronger company balance sheets, better liquidity, and better debt-maturity profiles."

    But Carol Cowan, a Moody’s Senior Vice President and the author of the report added a warning that "the run-up in base metal prices, particularly after the US Presidential election, may be getting ahead of fundamentals":

    "[Base metal prices] will fall back over the course of the year. With the exception of zinc, the higher prices do not stem from meaningful improvement in supply/demand fundamentals.

    "Nonetheless, we anticipate political issues and speculation will continue to drive shorter-term market activity and high volatility."

    The major driver of the rally in base metals and positive investor sentiment towards mining came on the back of improving data from China that largely reflects stimulus spending by the Beijing government last year and expectations that the new US administration will increase infrastructure spending according to the report:

    "We do not believe this level of optimism is justified but rather reflects trading activities and increased demand expectations that may not materialize.

    On a fundamental basis, with the exception of zinc, there has not been material improvement in supply/demand fundamentals in the base metals complex."

    Moody's expects prices, including for zinc, to fall back over the course of the year. However, despite expectations for more pronounced volatility, "some level of improvement in base metal prices is expected to hold."

    Moody's recently revised upwards expectations for Chinese GDP expansion to 6.6% and 6.3% in 2016 and 2017 respectively from 6.3% and 6.1% before, but the authors need to see further improvement in global economic conditions before it would change its outlook for base metals to positive:

    “On a fundamental basis, with the exception of zinc, there has not been material improvement in supply/demand fundamentals"

    "Moody’s global GDP growth forecast would need to be higher than 4% and purchasing managers' indices for the US, Europe and China would need to exceed 55 for at least three consecutive months. But while its Global Macro Outlook for 2017-18 predicts G20 economic growth of about 3% and the three major PMI indexes are all above the breakeven growth point of 50, none has yet reached the 55 mark."

    Moody's has adjusted upwards the price sensitivities by which it measures mining companies' operating performance over the medium term and the agency now sees copper trading in a range of $2.15 – $2.40 a pound ($4,740–$5,291 a tonne) through 2018, up slightly from previous bands. Moody's does not rate to the spot price which for copper on Thursday was well above its range at $2.60 a pound.

    Moody's view of the nickel price has improved more than bellwether copper and the firm now sees the steelmaking raw material priced at between $4.75 and $5.00 a pound ($10,472–$11,025 a tonne) this year and next. Aluminum should move between $0.70 and $0.80 ($1,540–$1,764) and zinc at $0.90–$1.10 ($1,985–$2,425).

    http://www.mining.com/curb-copper-price-enthusiasm-report/
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    Steel, Iron Ore and Coal

    CRC, China major miners and power generators sign tripartite agreement


    China Railway Cooperation (CRC) signed a tripartite arrangement with four leading miners and the top five power generators in the country to ensure coal supply and transport in 2017, CRC said on January 22.

    Three local railway bureaus under CRC signed the agreement, including Beijing, Shanxi-based Taiyuan and Shaanxi-based Xi'an bureaus.

    Coal suppliers were Shenhua Group, China National Coal Group, Yangquan Coal Industry Group and Shaanxi Coal and Chemical Industry Group, and buyers included State Power Investment Corporation, China Huaneng Group, China Huadian Corporation, China Datang Corporation and China Guodian Corporation.

    The agreement stipulated 2017 supply and transport volumes along with rights and responsibilities from the three sides. It particularly elaborated economic responsibility of default, which will effectively ensure thermal coal supply and stabilization of domestic market.

    http://www.sxcoal.com/news/4551668/info/en
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    China 2016 coal industry FAI drops 24.2pct on yr


    China's fixed-asset investment (FAI) in coal mining and washing industry amounted to 303.8 billion yuan ($44.16 billion) in 2016, with the year-on-year fall further expanding 1 percentage points from a month ago to 24.2%, showed data from the National Bureau of Statistics (NBS) on January 20.

    By December, the FAI in coal mining and washing industry has been declining on a year-on-year basis since April 2014, the NBS data showed.

    Private investment in the sector stood at 186.4 billion yuan, falling 18.3% year on year, compared to a drop of 16.5% a month ago.

    During the same period, fixed-asset investment in all mining industry in the country posted a yearly decline of 20.4% to 1.03 trillion yuan; of this, private investment in mining industry stood at 616.2 billion yuan, dropping 13% from the previous year.

    Meanwhile, the total fixed-asset investment in ferrous mining industry in the first eleven months witnessed a yearly drop of 28.4% to 97.8 billion yuan; while that in oil and natural gas industry dropped 31.9% on year to 233.1 billion yuan, according to the NBS data.

    The fixed-asset investment in non-ferrous mining industry stood at 142.9 billion yuan during the same period, down 10% from the year-ago level, data showed.

    http://www.sxcoal.com/news/4551588/info/en
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    International coking coal price drops further


    The year to date fall in the price of International coking coal has already topped 23%, Mining.com reported on January 20.

    As of January 20, price of the steelmaking raw material stood at $172.6/t, $136/t or 44.1% below its multi-year high of $308.8/t (Australia free-on-board premium hard coking coal tracked by the Steel Index) hit in November.

    There was a more than $100/t differential between the spot price average and the fourth quarter contract benchmark, but that situation has now completely reversed. Benchmark contract prices for the first quarter of 2017 were settled between Australian miners and Japanese steelmakers at $285/t.

    A recent note from the Singapore Exchange predicts that volatility in the met coal market will continue even after average daily spot price volatility for coking coal more than doubled in 2016 from 2015.

    With uncertainty around Chinese policy decisions over implementation of the 276-day rule, and with its primary focus being on thermal coal, price volatility may remain one of the themes in the international coking coal market this year.

    Quarterly price fix settlements generally following spot pricing, and greater spot price volatility has resulted in major divergences between what different regional steelmakers are now paying for their coking coal, which is likely to cause strains for some market participants.

    The Steel Index monthly review noted that supply is beginning to respond to higher prices.

    The US is expected to increase its coking coal production in 2017 and that around 9 million tonnes of US met coal will be added to the export market. Companies such as Warrior Met Coal, Rosebud Mining and Ramaco already plan to start operations in the new year.

    Australian coking coal mines owned by miners South32 and Anglo American are expected to once again produce at full capacity in 2017 following force majeure stoppages in late 2016, while Conuma Coal Resources is restarting production at its Wolverine mine in BC, Canada exporting around 1.5 million tonnes of coking coal a year starting in April.

    Despite the pullback metallurgical coal is up 130% from multi-year lows reached in February last year. Coking coal averaged $143/t in 2016 (about the same as it did in 2013). Consensus forecast is for the price to average about the same in 2017.

    http://www.sxcoal.com/news/4551689/info/en
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    A$900m New Hope’s Acland expansion gains federal approval


    The federal government has approved coal miner New Hope’s A$900-million New Acland Stage 3 continuation project, .

    The New Acland Stage 3 project will expand the mine’s yearly output from 4.8-million tonnes to 7.5-million tonnes and will extend the operation’s life beyond the current end-date of 2017/18.

    The expanded operation will see a further 260 people employed at the mine, and could inject some A$12-billion in local, state and federal revenues over the life of the project.

    The federal environmental nod takes the project approval process one step closer to completion. However, Queenslandstill has to grant an environmental authority, a mining lease and associated water licences before the company can make a final investment decision.

    New Hope said on Friday that expected that the application for the Mining Lease and Environmental Authority to be finalised by April.

    New Hope last year warned that the expansion of the Acland mine was in jeopardy following the passing of new environmental legislation, which could stall the expansion by as much as two years as the company would have to apply for an associated water license, which would require a mininglease approval and baseline assessment.

    The Queensland Resources Council (QRC) on Friday welcomed the federal government approval for the New Acland Stage 3 continuation project, with CEO Ian Macfarlane describing the decision as a “relief” after years of delays.

    “The federal government has stepped up today to help create up to 260 construction jobs and ongoing employment of up to 435 jobs and indirectly 2 300, worth about A$12-billion in economic benefits over the life of the project,” Macfarlane said.

    “This project has been scrutinised by both state and federal governments, and has held up under the scrutiny of experts to meet some of the highest environmental standards in the world.

    “We now call on the state government to do its part to help New Hope gain the remaining critical approvals before the current resource runs out.”

    http://www.miningweekly.com/article/a900m-new-hopes-acland-expansion-gains-federal-approval-2017-01-20
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    Holiday on ice as coal mines get skates on to beat Beijing curbs


    Chinese coal miners are so determined to cash in on a window of high prices that many are slashing holiday leave for workers and raising pay through the Lunar New Year celebrations before government introduces limits on output again.

    Prices in China, the world's biggest coal user, have slipped back 16 percent from their two-year peak of 610 yuan ($88.83) per tonne two months ago, but they are still profitably high after a couple of barren years for miners.

     "At current price levels, we would love to have 73 hours in a day, so that we can produce as much as possible," a private coal mine owner based in Wuhai, Inner Mongolia, told Reuters.

    That urgency reflects a broad expectation among analysts and mining executives that Beijing will order them to reduce output after the festivities, once winter heating demand has peaked.

    In April 2016, with many miners failing to turn a profit, government ordered mines to limit the number of days they operate each year to 276 days from 330 as part of its effort to cut inefficient surplus capacity.

    By November, however, it was forced to ditch that policy to avert a winter energy crisis after a double-digit percentage drop in output triggered a sharp rally in prices.

    Now miners are determined not to be caught on the hop, and are racing to get their coal to market, aware that Beijing still aims to slash 500 million tonnes of output by 2020, just over 16 percent of current levels.

    Major producers including Shanxi Kaijia Energy Group, ChinaCoal and Shandong Yulong Group in Shandong, Hebei, Shanxi and Shaanxi, are allowing workers an average of seven days' leave for the festival this year, according to China Sublime Information Group, which surveyed 30 companies.

    That is well down on the last two years, when prices were below break-even for many miners, who in response typically gave workers a generous 45-60 days off for the occasion, mining executives and analysts said.

    "In 2015 and 2016, most of the coal mines we visited were shut down starting Jan. 1. This year, they are postponing the holiday to as late as January 27," said Zhang Min, coal analyst at Sublime.

    GLOBAL IMPACT

    Reuters spoke to five coal mines in Inner Mongolia, China's largest producing region, and they, too, said they had cut leave to around 10-20 days for the festivities, which officially begin on Jan. 27 and last for a week, down from about 30 days in 2016.

    Two of them said they were raising wages by 30 and 50 percent through the period, too.

    The consequences for such price fluctuations are felt globally, as the fundamentals of China's coal market determine world prices. Last year international miners boosted shipments to China by a quarter as Beijing's output restraints drained supply.

    "Price fluctuations in the domestic Chinese market as policymakers adjust output and prices to their desired levels will likely be a key driver of the international markets over the months ahead," said Adrian Lunt, commodities research head at Singapore Exchange, in a note.

    But this year, though analysts and mining executives expect government to announce restraints again before March, they think policymakers will take a more flexible approach, chastened by the wild price lurches in 2016.

    Lunt said Beijing may be prepared to tweak the limits if prices breach certain thresholds around 535 yuan per tonne, which was the basis price for annual supply contracts that miners signed with utilities.

    In the meantime, workers in the industry are in two minds about their employers' big push.

    “I cannot make the reunion with my family until the Lunar New Year eve. That’s unusually late for me," said Li Zhuang, a coal worker in Inner Mongolia, who will travel about 1,000 kilometers (625 miles) back to his family home in Shandong province.

    "The good thing is each of us get around 6,000-9,000 yuan in extra bonus this year,” he added.

    http://www.reuters.com/article/us-china-economy-coal-idUSKBN1540SC
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    US coal train loadings increase again from all major basins: railroads


    For the second straight week, US coal train loadings increased across all major basins, with nationwide volumes rising 8.8% week on week.

    Data filed by the four major US railroads -- CSX, Union Pacific, BNSF and Norfolk Southern -- with the Surface Transportation Board for the week ending January 13 shows US coal train loadings averaged 97.3 trains/day, up from 89.4 in the first week of 2017.

    Powder River Basin loadings were up to 59.5 trains/d from 55.1 the previous week. PRB loadings had dipped to 50.3 trains/d during the Christmas holiday week.

    Central Appalachian loadings increased to 13.8 trains/d from 12.5 the prior week, and Northern Appalachian volumes grew to 10.7 trains/d from 9.2.

    Illinois Basin loadings climbed to 7.3 trains/d from 6.7.

    Utica Basin coal train loadings slipped to 4.1 trains/d from 4.6 the previous week, and loadings from outside the primary basins increased to 1.9 trains/d from 1.3.

    http://www.platts.com/latest-news/coal/houston/us-coal-train-loadings-increase-again-from-all-21666681
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    Newcastle Dec coal exports hit record high


    Coal exports from Australian Newcastle port hit a record high of 15.9 million tonnes in December 2016.

    During last year, coal exported through Newcastle port reached 161 million tonnes, confirming the strong global demand for New South Wales coal, particularly high quality thermal coal from the Hunter, said Stephen Galilee NSW Minerals Council CEO.

    In its most recent report, the independent International Energy Agency (IEA) has forecast an increase in Asian demand for Australian coal - a rise of 0.8% year on year. Indian and South East Asian demand is forecast to grow by 3.6% and 4.4% yearly.

    In the same report, NSW's coal exports are forecast to increase from 350 million tonnes to 410 million tonnes by 2040 and Australia's share of the international coal trade is expected to grow from 32% to 36%, according to Galilee.

    "Many of our trading partners in Asia are building more and more new technology coal-fired power plants so this high level of demand for NSW coal is anticipated to continue for many years to come," Galilee said.

    http://www.sxcoal.com/news/4551702/info/en
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    Yancoal posts YOY rise in coal output, sales


    Australia-listed Yancoal Australia (Yancoal) posted year-on-year rise in both its coal output and sales for 2016, showed data from the latest quarterly announcement released by the parent company Yanzhou Coal Mining Co., Ltd. on January 19.

    In 2016, Yancoal produced 19.81 million tonnes of saleable coal, rising 7% from the previous year. Of this, output of coal in equity interest rose 5% year on year to 15.99 million tonnes.

    The company's coal sales also climbed 8% on the year to 19.31 million tonnes last year, showed the announcement.

    Yancoal announced its fourth quarter saleable coal production jumped 25% to 5.52 million tonnes, and sales of coal in equity interest increased 25% to 6.18 million tonnes.

    Production was largely bolstered by efficiency at Yancoal's open cut mine in the Moolarben complex, which is near Mudgee in New South Wales.

    The coal producer says Chinese and Indian demand also continued to drive positive improvements in global metallurgical and thermal coal prices.

    http://www.sxcoal.com/news/4551609/info/en
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    China crude steel output up 1.2 pct in 2016


    China produced 808.37 million tonnes of crude steel in 2016, an increase of 1.2% from a year earlier, showed data from the National Bureau of Statistics (NBS) on January 20.

    The output growth was curbed last year, as China enforced supply-side structural reform in steel industry. The average annual growth rate once hit 5% over 2010-2015, with output at 800 million tonnes in 2015, a slight pullback from the peak of 820 million tonnes in 2014.

    Last year a total of 45 million tonnes steel capacity was eliminated in the country. And the de-capacity move may progress at a faster pace in 2017, adding the chances of decline in steel output.

    China's crude steel output is forecast to contract to 750-800 million tonnes by 2020.

    The December output was at 67.22 million tonnes, nudging up 3.2% from the preceding year and up 1.4% from the month prior, the data showed.

    In 2016, China produced 1.14 billion tonnes of steel products, up 2.3% compared to the previous year; pig iron output increased 0.7% on the year to 700.74 million tonnes.

    Production of steel products lost 0.2% on the year to 95.71 million tonnes in December, up 0.3% from November; pig iron output stood at 57.47 million tonnes, rising 4.1% from the year prior and up 0.4% from a month ago.

    http://www.sxcoal.com/news/4551598/info/en
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    Japan threatens India with WTO on steel as Trump era heralds rising trade tensions


    Japan is threatening to take India to the WTO over restrictions that nearly halved its steel exports to the South Asian nation over the past year, a step that could trigger more trade spats as global tensions over steel and other commodities run high.

    Such action is rare for Japan. The world's second-biggest steel producer typically tries to smooth disputes quietly through bilateral talks, but with global trade friction increasing, Japan's defense of an industry that sells nearly half of its products overseas is getting more vigorous.

    Besides concern over India's protection of its domestic steel industry, Japan is also worried about the more rough and tumble climate for global trade being engendered by incoming U.S. President Donald Trump, and feels it must make a strong stand for open and fair international markets.

    "We need to stop unfair trade actions from spreading," said a Japanese industry ministry official, explaining a Dec. 20 request for WTO dispute consultations with India over steel safeguard duties and a minimum import price for iron and steel products.

    India imposed duties of up to 20 percent on some hot-rolled flat steel products in September 2015, and set a floor price in February 2016 for steel product imports to deter countries such as China, Japan and South Korea from undercutting local mills.

    "If consultations fail to resolve the dispute, we may ask adjudication by a WTO panel," the industry ministry official said. Such action could come as soon as 60 days - in February - after its consultation request was filed in December.

    Tokyo says India's actions are inconsistent with WTO rules and contributed to the plunge in its steel exports to India, which dropped to 11th-largest on Japan's buyer list in 2016 through November, down from sixth-largest in 2015.

    "We are following the WTO guidelines," said a top official at India's steel ministry, though adding that New Delhi is ready to sit across the table for trade talks.

    As of Friday, the date of a WTO-led consultation had not been set.

    GROWING GLOBAL TRADE DISPUTES

    There has been a series of trade disputes over the past few years amid massive exports of cheap steel products from China, the world's top producer, with Vietnam, Malaysia and South Africa taking or planning measures to block incoming shipments.

    China's steel exports dropped by 3.5 percent in 2016 to 108 million tonnes, still about as much as Japan produces in a year.

    Japan is also monitoring its small volume of imports for signs of dumping, fearing that steel products with nowhere to turn because of import restrictions may head to it own market.

    "All trade need to be fair. If there are trades that violate the rules, we will take necessary actions while consulting with our government," Kosei Shindo, chairman of the Japan Iron and Steel Federation, told a news conference on Friday.

    But in an environment where a new U.S. president is threatening to tear up trade treaties and impose import duties in the world's biggest economy, Tokyo may be at risk of helping to set off a trade war it is trying to avoid.

    "We may see a battle of trade litigations especially after Trump takes the helm in the U.S.," said Kazuhito Yamashita, research director at Canon Institute for Global Studies.

    http://www.reuters.com/article/us-japan-india-steel-idUSKBN1541DX
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