Mark Latham Commodity Equity Intelligence Service

Tuesday 22nd November 2016
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Quarterly: All Change!

In which we move our focus from Gold/Oil to 'Activity'. 

Politics matters. Image title

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Trump outlines plans for first day in office, meets with Cabinet hopefuls

U.S. President-elect Donald Trump outlined plans on Monday for his first day in office, including withdrawing from a major trade accord and investigating abuses of work visa programs, and met with Cabinet hopefuls at his Manhattan office tower.

Trump met with Oklahoma Governor Mary Fallin, Democratic U.S. Representative Tulsi Gabbard and former Texas Governor Rick Perry. But he announced no further appointments, keeping candidates and the public guessing about the shape of the administration that will take office on Jan. 20.

Fallin, Gabbard and Perry were the latest of dozens of officials who have made their way across the opulent lobby of Trump Tower for talks with the Republican president-elect in a relatively open - and unconventional - transition process since his election victory on Nov. 8.

Trump, who has not held a news conference since his election, issued a video on Monday evening outlining some of his plans for his first day in office, including formally declaring his intent to withdraw from the Trans-Pacific Partnership, or TPP, trade deal, which he called "a potential disaster for our country."

The 12-nation TPP is Democratic President Barack Obama's signature trade initiative and was signed by the United States earlier this year but has not been ratified by the U.S. Senate.

The president-elect said he would replace the accord with bilaterally negotiated trade deals that would "bring jobs and industry back onto American shores."

"My agenda will be based on a simple core principle: putting America first. Whether it’s producing steel, building cars or curing disease, I want the next generation of production and innovation to happen right here on our great homeland, America, creating wealth and jobs for American workers," he said.

Japanese Prime Minister Shinzo Abe said on Monday the TPP "would be meaningless without the United States."

Trump said he would cancel some restrictions on producing energy in the United States on his first day in office, particularly shale oil and "clean coal," which he said would create "many millions of high-paying jobs."

He promised to direct the Labor Department to investigate abuses of visa programs for immigrant workers. The main U.S. visa program for technology workers could face tough scrutiny under Trump and his proposed attorney general, U.S. Senator Jeff Sessions, a longtime critic of the program.

Trump had made eliminating regulations and withdrawing from the TPP central to his campaign, but he sent mixed signals during the campaign about his views on visa programs including the main H-1B visa for high-tech industry workers.


Trump has so far picked two Cabinet members and three top White House advisers, but aides said he was not expected to make further announcements on Monday.

"They could come this week, they could come today, but we're not in a rush to publish names," Kellyanne Conway, a senior adviser, told reporters. "We've got to get it right."

Trump spoke often with reporters camped out at his New Jersey golf course over the weekend, but has not held a traditional news conference to talk about his priorities. He held an off-the-record meeting with a group of television anchors and executives on Monday afternoon and was scheduled to meet with print media representatives on Tuesday.

The Washington Post reported that four participants at Monday's meeting described it as a contentious but generally respectful session.

They told the Post that Trump singled out reporting of his campaign by CNN and NBC that he considered to be unfair.

Trump also returned to Twitter on Monday night, saying "many people" would like to see Brexit campaigner Nigel Farage as British ambassador to the United States. "He would do a great job!"

Farage, who helped lead the successful referendum fight for Britain to leave the European Union, spoke at a Trump rally during the U.S. campaign and visited the president-elect after his victory.

Trump's first meeting on Monday was with Iraq war veteran Gabbard, a representative from Hawaii who backed U.S. Senator Bernie Sanders in his unsuccessful 2016 Democratic presidential nominating contest against Hillary Clinton.

The "frank and positive" discussion focused on the war in Syria, counterterrorism and other foreign policy issues, Gabbard said in a statement. She did not say whether a Cabinet role was part of the discussion.

Gabbard has veered from Democratic Party positions at times, backing policies cracking down on immigration to the United States by Muslims.

Fallin told reporters she was not offered a position but discussed "a wide range of topics" with Trump. The Republican governor's spokesman said that included a focus on the Interior Department, an agency whose responsibilities include oversight of oil and gas leases on public lands.

Former Republican U.S Senator Scott Brown of Massachusetts told reporters he had a "great" meeting about veterans' issues with Trump.

Trump also met with former House of Representatives Speaker Newt Gingrich and Elaine Chao, the U.S. labor secretary under former President George W. Bush, advisers said.

Trump's transition team said Perry, the former Texas governor, was being considered for Cabinet posts including defense, energy and veterans affairs.

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China's energy guzzlers Oct power use edges up 2.7pct

Power consumption of China's four energy-intensive industries rose 2.7% on year to 152.0 TWh in October, accounting for 31.1% of the nation's total power consumption, the China Electricity Council (CEC) said on November 17.

Of this, the chemical industry consumed 35.8 TWh of electricity, dropping 1.0% on year; while power consumption of building materials industry stood at 29.6 TWh, rising 9.7% from the year-ago level, non-ferrous metallurgy industry ferrous metallurgy industry consumed 42.9 TWh and 43.7 TWh, separately, rising 2.2% and 1.8% compared to the same month last year, respectively.

In the first ten months of the year, the four energy guzzlers consumed 1435.9 TWh of electricity in total, or 29.4% of the country's total power consumption, declining 1.5% from the year-ago level, compared to a 2.4% drop a year prior.

The ferrous metallurgy industry consumed 396.4 TWh of electricity during January to October, falling 6.2% year on year, compared to the drop of 7.8% from the previous year; while the non-ferrous metallurgy industry used 419.9 TWh of electricity, down 1.2% year on year, against a 3.7% rise from the year prior.

The chemical industry consumed 358.6 TWh of electricity over the same period, up 1.5% year on year, against a 2.2% rise from a year ago; while power consumption of building materials industry increasing 1.8% year on year to 261.1 TWh, compared to a 6.5% decline a year ago.

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Companies told to halt production in northern Chinese city in anti-pollution drive

Residents on their bicycles and electric bikes wait for the traffic at an intersection amid heavy smog in Shijiazhuang, Hebei province, China, December 10, 2015. Picture taken December 10, 2015. REUTERS/Stringer

About half a dozen listed Chinese companies, mainly in the pharmaceutical sector, have temporarily halted production in China's northern city of Shijiazhuang as part of a Chinese government anti-pollution drive, the companies said on Monday.

Shijiazhuang has suspended factory production in seven industries until the end of this year, affecting plants in the pharmaceutical, cement, foundry, iron and steel, coal-electricity, coking and boiler sectors, the companies said.

Companies including ENN Ecological Holdings Co Ltd and Jikai Equipment Manufacturing Co Ltd were told by the Shijiazhuang government to suspend production at their factories, they said in separate statements.

Several pharmaceutical companies, including CSPC Pharmaceutical Group Ltd, SSY Group Ltd, North China Pharmaceutical Co Ltd, received similar orders, according to their statements.

"The group has been actively cooperating with the government on environmental protection work and is making an application to the Shijiazhuang municipal government for permission to

continue its normal pharmaceutical production in Shijiazhuang," CSPC said in a filing to the Hong Kong stock exchange

China has been trying to tackle pollution over the past few years by implementing various measures to reduce the blankets of smog which shroud many of the country's northern cities in the winter and have been hazardous to health and traffic.
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Japan's Fukushima hit by 7.3 magnitude earthquake

A 7.3 magnitude earthquake hit offshore Fukushima early Tuesday, leading to a coal-fired power plant being shut and the suspension of oil product shipments from northeastern Japan.

The earthquake hit at a depth of 10 km offshore Fukushima in northeastern Japan at 5:59 am local time Tuesday (2059 GMT Monday), the Japan Meteorological Agency said.

Tsunami warnings were issued for Fukushima and Miyagi prefectures in the northeast, and advisories for the Pacific Coast in Aomori, Iwate, Ibaraki and Chiba prefectures, the JMA added.

The impact of the 7.3 magnitude earthquake is given below, based on company reports as well as information from the Ministry of Economy, Trade and Industry. METI information is current as of 9:30 am local time.


The 600 MW No. 9 coal-fired Nakoso unit operated by Joban Joint Power Company had an automatic shutdown as a result of the earthquake, and it was not immediately clear when it will be restarted, according to METI.


Japan's largest refiner JX Nippon Oil & Energy on Tuesday suspended truck and waterborne oil product shipments from its 145,000 b/d Sendai refinery in the northeast and the 252,500 b/d Kashima refinery on the east coast as a result of the earthquake, a company official said.

JX had restarted its truck oil product shipments at its Sendai refinery at 12:40 pm local time but its waterborne shipments at its Sendai and Kashima refineries remain suspended, the official said.

Refining operations were not affected, the official added.

JX and Cosmo Oil have also restarted oil product shipments from the Hachinohe terminal at Aomori in northern Japan and Onahama terminal in Fukushima in the northeast after suspensions earlier in the day, according to company officials.

Cosmo Oil's Shiogama truck oil products shipments have also been restarted after suspension, according to a company official.

Waterborne and truck oil product shipments from Idemitsu Kosan's Hachinohe and Shiogama terminals have also been restarted after suspension earlier in the day, a company official said.

Refining operations and oil product shipments at the Chiba facilities of Idemitsu Kosan and Cosmo Oil were unaffected by the earthquake, company officials said.


A cooling system for nuclear fuel pool had an automatic shutdown of the No. 3 reactor at the Fukushima-2 nuclear power plant in the northeast at around 6:10 am but the system was restarted at 7:47 am local time, Tokyo Electric Power Company Holdings said.

METI reported that there were no other abnormalities at nuclear power plants, including Fukushima-1 and Tohoku Electric's Onagawa plant, all of which were currently not operating.


METI said that no incidents were reported at gas facilities following the earthquake.


Operations were suspended at the 260,000 mt/year Onahama copper smelter in Fukushima prefecture early Tuesday following the earthquake and tsunami warning, a spokesman for Mitsubishi Materials said.

The melting furnace was shut for safety inspections, he added.
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FX Markets Signal Brexit-Like Disruption As Italy Referendum Looms

FX traders are pricing in as big a potential disruption event for Italy's referendum as they did (correctly) for the Brexit vote. So-called 'currency-vigilantes' are buying EURUSD protection across the Dec 4th date of the vote in size as Italian bond spreads (over Bunds) push to 30-month highs.

Anticipated euro-dollar price swings for the period of the Italian vote surged. Two-week implied volatility climbed to 12.5 percent, approaching the highest since the aftermath of the Brexit vote in June... and the premium for that protection across the referendum date is now at its highest since Brexit...

As Bloomberg reports, selling the euro before Italy’s vote “makes a lot of sense given the potential for more expansionary fiscal and tighter monetary policy in the U.S., coupled with the increased focus on political risk and the increased likelihood of more policy from the ECB,” said James Athey, a money manager in London at Aberdeen Asset Management Plc, which oversees more than $400 billion.

“For FX, politics is the new economics,” HSBC Holdings Plc analysts including David Bloom wrote in a note last week. “QE has constrained the bond market, distorted equity prices and narrowed yield differentials. This means FX is uniquely placed to reflect political developments.”

Trump’s election has boosted speculation that Italians will reject the reforms on which Renzi has staked his political future. Deutsche Bank AG economists say there’s a 60 percent chance the vote will fail, while political risk-advisory firm Eurasia Group changed its call this month, and now assigns a 55 percent probability to a “no” vote.

“Markets are anticipating two risks at the moment: reflation and populism in Europe,” said Marc Chandler, head of currency strategy at Brown Brothers Harriman & Co. in New York. “If one thinks that the Italian referendum is going to be lost, and it’s not priced in, selling the euro -- which is also being weighed down by other factors -- seems the path of least resistance compared with a rate position.”
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Oil and Gas

Record ME oil loadings

Middle East OPEC members (Iran, Iraq, Kuwait, Qatar, Saudi, UAE) had record crude oil export loadings last week


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Why Saudi Arabia’s Oil Giant Aims to Be Big in Chemicals, Too

Saudi Arabian Oil Co. has been the world’s single largest crude producer for decades. It wants to be a lot more than that now, as a new petrochemical complex shows.

Aramco, as it is commonly known, until recently focused on pumping great quantities of oil and, like the Standard Oil companies of John D. Rockefeller, processing it through its refineries. Aramco now aims to vastly expand its petrochemical operations, turning itself into a modern integrated energy company along the lines of Exxon MobilCorp.

Thousands of miles away, near the Saudi Arabian city of Al Jubail on the Persian Gulf, an army of workers is finishing the $20 billion Sadara petrochemical complex, an Aramco joint venture with Dow Chemical Co. Sadara will use ethane refined by Aramco nearby to make a petrochemical called butadiene to ship world-wide to facilities, likely including its Dutch plant.

Aramco's Shifting Flow

Saudi Arabian Oil Co., the world's largest crude producer for decades, is expanding into petrochemicals to become an integrated energy company.

“Aramco’s capabilities will be fully unleashed,” Saudi oil minister and Aramco Chairman Khalid al-Falih said in a briefing with several reporters this year. “The company will be able to go global in multiple ways.”

Aramco declined to answer detailed questions, referring instead to speeches such as one by Aramco Chief Executive Amin Nasser in September. He signaled why the company was interested in a growing petrochemical industry. He said the Gulf region was home to only 2.5% of global petrochemical revenue and less than 1% of the industry’s jobs.

“Considering the Gulf’s endowment of oil and gas, as well as our geographic proximity to major markets in Europe and Asia,” he said, “both those figures should be much, much higher.”

New jobs, revenue

Aramco’s moves position it for a future when crude demand may peak and when owning reserves won’t be as attractive. Even if electric-vehicle adoption and alternative-fuel use soar, cutting global thirst for fuel, demand for petrochemicals is likely to remain strong. By developing more chemical manufacturing of its own, Aramco could attract jobs and revenue to the kingdom, which recently issued $17.5 billion in bonds to shore up its finances.

Aramco’s reinvention as a public company invested in producing gasoline, diesel and specialty chemicals could mean abdicating Saudi Arabia’s traditional role as de facto head of the Organization of the Petroleum Exporting Countries. Historically, the kingdom, through Aramco, has opened the spigot when prices rise too high and restricted supply when they fall too far. To do this, Aramco has kept unused spare production capacity, which shareholders would frown on, say some oil-industry consultants.

It isn’t clear how much of the change will come to pass at Aramco or in the Saudi economy. The government relies on oil for the vast majority of its revenue and has for decades talked about needing to diversify, without much change.

Richard Mallinson at Energy Aspects, a London global-energy-market consultant, says he thinks the diversification plan “will fall a long way short of the lofty ambitions” and “is just too much of a jump from where they are today.”

The strategy of directly owning more petrochemical plants to create outlets for crude and refined products has long been pursued by large firms such as Exxon Mobil and Royal Dutch Shell PLC. “Aramco is the powerhouse in the area of oil. They want to get bigger in chemistry,” says Matthias Zachert, chairman of Aramco’s German joint-venture partner Lanxess AG. “But you don’t create a leading chemical company overnight.”

Several advisers involved in the IPO planning say the transformation will be so complex it could go beyond 2018. The 5% stake targeted for the IPO is so large—Aramco has been valued at $2 trillion to $3 trillion—that finding a deep enough pool of investors may require Aramco to float the stock on several stock exchanges and to face multiple sets financial-disclosure rules, they say. It is a special challenge for bankers, they say, because the company and the kingdom are so deeply intertwined in ways that aren’t public.

A prince’s role

The company has said it will begin disclosing financial statements in 2017. Its operations are shrouded in secrecy and wouldn't meet governance requirements of most exchanges, such as board diversity. Its board includes no women and few outsiders.

King Salman bin Abdulaziz has already shaken up the kingdom’s ruling elite by empowering his son, Deputy Crown Prince Mohammed Bin Salman. Prince Mohammed is moving ahead with a plan drawn up by McKinsey & Co. consultants to wean the country off its oil dependence. In May, he proposed the IPO and the transfer of proceeds to a sovereign-wealth fund that will invest in other sectors.

Deputy Crown Prince Mohammed Bin Salman is moving ahead with a plan to wean Saudi Arabia off its oil dependence. PHOTO: CHARLES PLATIAU/REUTERS

By taking on the transformation, the 31-year-old Prince Mohammed is challenging the established order in ways that could prove difficult to implement, say people close to the current establishment. Even giving shareholders partial control over Saudi Arabia’s oil reserves would be tough because taking control of those assets was a defining moment for the kingdom.

The prince is working with Mr. Falih, Aramco’s chairman, and a tight circle of advisers to map out the future of Aramco and the Saudi economy, say people familiar with the discussions. They are making many decisions surrounding Aramco with little input from the company’s bureaucracy, these people say.

Members of the company’s board learned of the IPO plans from media reports, rather than from Mr. Falih or Mr. Nasser, Aramco’s CEO, one Aramco official says. “In some occasions even the chief executive is not fully aware of the latest update,” the official says of Mr. Nasser. Aramco didn't make Mr. Nasser, Mr. Falih or other executives available for interviews. A spokesman for the prince declined to comment.

Aramco owns directly or through joint ventures plants capable of processing 5.4 million barrels a day in markets that are its biggest crude customers: the U.S., South Korea, Japan, China and Saudi Arabia.

Making Aramco’s integrated model more lucrative, its operating costs for extracting oil remain among the world’s lowest—perhaps $6 a barrel, compared with an average of $10 in Texas’ Permian Basin, according to oil consultant Wood Mackenzie.

“The idea of control of the end market is very important to them,” says Anas Alhajji, an independent energy economist in Dallas. “This is their outlet to the market.”

Aramco presented an exhibit at a September conference in Bahrain for the refining and petrochemical industries, fields in which the Saudi company is expanding. PHOTO:HAMAD I MOHAMMED/REUTERS

That philosophy led Aramco earlier this year to break up a strategic partnership: Motiva, its two-decade-old joint venture with Shell. A key asset was a Port Arthur, Texas, refinery, North America’s largest.

Motiva had begun buying American crude oil, which was competing with Saudi oil, say people familiar with the Motiva relationship.

Shell spokesman Ray Fisher says ending such a long venture with numerous assets and liabilities is “a very complex process, involving various adjustments and changes along the way before final agreements can be reached.”

The breakup will let Aramco cement its U.S. foothold. From Port Arthur, it could ship gasoline, jet fuel and diesel to military bases in Virginia, airports in the Washington, D.C., area and service stations in New York.

The split will free Aramco from certain limits imposed by the Motiva deal, allowing it to expand, for instance, on the West Coast. The Saudi company has looked at buying a large refinery along the Gulf Coast or a stake in a refinery, say people familiar with the company.

Aramco is negotiating with the Malaysian national oil company, Petronas, to work together on a $21 billion refining-and-petrochemicals project near Singapore, The Wall Street Journal reported in October. The project would operate as a joint venture and serve as another major Asian beachhead for Saudi oil.

Aramco owns a stake in the giant Fujian Refining & Petrochemical complex, supplying oil that is turned into gasoline and plastics for China.

Aramco’s roots

Aramco has its roots in Texaco and Standard Oil of California, which formed a partnership that found enormous oil deposits on the Arabian Peninsula. In the early 1970s, the kingdom bought a stake in Aramco and by the 1980s had acquired it all.

In 1991, Aramco began looking overseas when it bought a stake in a South Korean refiner. In terms that Aramco would repeat, it agreed to supply the refinery with crude for two decades. Over the years, it bought and built more refineries.

Still, Aramco remained a company almost entirely focused on producing crude. The first inklings of a new strategy emerged in 2011 when Aramco and Dow Chemical agreed to create Sadara, among the world’s largest petrochemical complexes.

After signing the deal, Mr. Falih, then Aramco’s CEO, explained his vision. Aramco, he said, will “become the world’s leading integrated energy company by the year 2020.”

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Israel Gas Partners Close to $4 Billion Financing for Leviathan

The companies that own the rights to Israel’s largest natural gas pool are close to securing the $4 billion financing needed to develop the field, according to the chief executive officer of one of the partners.

"The Leviathan financing agreements are in the final stages of negotiations," Delek Drilling LP CEO Yossi Abu said in a Tel Aviv conference on Monday, referring to the Israeli gas reservoir.

With a large export contract already in hand, obtaining the funds is the next milestone for the gas explorers looking to tap the Leviathan pool, led by U.S.-based Noble Energy Inc. and billionaire Yitzchak Teshuva’s Delek Group Ltd. The partners signed a $10 billion deal with Natural Electric Power Co. of Jordan two months ago.

The companies have been in talks with major banks ever since clearing antitrust issues with Israel’s government earlier this year. Ratio Oil Exploration 1992 LP, which owns a 15 percent stake in Leviathan, has sold new debt and equity this year, raising about a third of its $600 million portion of the project.

The Leviathan partners will decide on a strategy to deploy the funds in December, Abu said.

The TA-Oil & Gas Index rose as much as 1.1 percent, before paring gains to 0.6 percent at 12:54 p.m. in Tel Aviv.
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Petrobras ordered to stop sale of two offshore fields to Karoon

Australian energy company Karoon Gas has hit an obstacle in its efforts to buy stakes in two fields offshore Brazil from the state-owned oil giant Petrobras as the latter was ordered by the court to stop the sale process.

Petrobras revealed back in October this year it was in talks with the Australian company Karoon for the sale of its participation in the Baúna and Tartaruga Verde fields, located in Santos and Campos basins, respectively.

The potential transaction considered the sale of 100% of the stake in the Baúna field and 50% of the stake in the Tartaruga Verde field, where Petrobras would remain the field operator.

At the time, Petrobras noted that the transaction was subject to the negotiation of its terms and final conditions and to the approval by the responsible bodies at Petrobras and Karoon, as well as the approval by the competition supervisory body CADE (Administrative Council for Economic Protection) and the National Agency of Petroleum, Natural Gas and Biofuels- ANP.

Petrobras’ disposal of interest in these two fields was part of the company’s 2015-2016 Divestment Plan.

On Monday, Karoon informed the company has become aware that court proceedings have been initiated by José Hunaldo Nunes Santos against Petrobras and the Brazilian oil and gas regulator ANP.

According to the Australian company, the court proceedings contend that the sales process did not comply with relevant Brazilian regulatory requirements. As part of these proceedings, an interim injunction has been made which orders Petrobras and the ANP to cease the sale process at this time.

The interim injunction is not final and is subject to appeal proceedings which have now been initiated, Karoon stated.

The company also added it is currently investigating the court proceedings, including their possible effects on the timing of any acquisition of an interest in the Baúna and Tartaruga Verde fields by Karoon.
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Rowan, Saudi Aramco create new offshore driller

Offshore driller Rowan Companies and the Saudi Arabian Oil Company (Saudi Aramco) have signed an agreement to create a 50/50 joint venture to own, operate, and manage offshore drilling rigs in Saudi Arabia.

According to the agreement signed through subsidiaries of the two companies, the new joint venture company will use Rowan’s business in Saudi Arabia as its base with a scope of operations covering Saudi Arabia’s existing and future offshore oil and gas fields. The new company is anticipated to start operations in the second quarter of 2017.

Tom Burke, President and Chief Executive Officer, stated, “Rowan has had a long and mutually beneficial relationship with Saudi Aramco and we welcome this opportunity to further strengthen our partnership and extend our commitment to the region.

“The new company will uniquely position Rowan to participate in the growing Saudi Arabian offshore drilling market, and provide Rowan with a compelling opportunity for a long-term partnership with the world’s leading oil and gas company, and create a long-term, profitable growth platform with firm rig commitments.”

At the beginning of operations of the new company, Rowan said it will contribute three of its jack-up drilling rigs and Saudi Aramco will contribute two of its jack-up drilling rigs. Rowan will contribute an additional two jack-up rigs as they complete their current Saudi Aramco contracts in late 2018.

The new company will also manage the operations of five Rowan jack-up rigs currently in Saudi Arabia, until their associated drilling contracts expire, which then may be released, leased by or contributed to the new company thereafter.

In addition, Rowan and Saudi Aramco have committed the new company to purchase future newbuild rigs that will be constructed in Saudi Arabia.
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India gets muted response to small discovered field auction

India's first auction of small discovered fields drew a tepid response with local firms dominating the auction for operating assets estimated to hold 625 million barrels of oil and oil equivalent gas.

India has received 134 bids from 42 companies, including five foreign bidders, for 34 contract areas, according to a government statement issued on Monday. No bids were received for 12 areas.

India, the world's third biggest oil consumer, conducted foreign roadshows and eased rules to lure foreign investment and tap the nation's vast energy resources. India launched the auction after a gap of six years.

The blocks were offered in May under a revenue-sharing model with eased tax rules, offering pricing and marketing freedom to the operators.

Oil and Natural Gas Corp and Oil India Ltd gave up these blocks as uneconomical due to size, geography and low state-set energy prices.

"The bid round took place in a challenging global market environment when oil and gas prices have been volatile and investment in the exploration and production sector has seen substantial decline," the statement added.

However, the oil minister Dharmendra Pradhan tweeted: "This response despite low oil prices is testimony of India emerging as an attractive investment destination."
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Kashagan oil field starts commercial output

The Kashagan oil field has started commercial output, Kazakhstan's energy minister said on Monday, marking a milestone for $55 billion project which is more than a decade behind its original production plan.

The offshore field in the Caspian Sea has produced about 0.5 million tonnes (3.8 million barrels) of oil since test pumping began on Sept. 28, Kanat Bozumbayev told parliament, and daily output has exceeded 75,000 barrels since Nov. 1.

Kashagan has recoverable oil reserves estimated at 9-13 billion barrels and is one of the world's biggest discoveries in the last 40 years, according to the Kazhak oil ministry.

The former Soviet republic expects Kashagan to produce up to 1.1 million tonnes of oil this year and 4.0-8.0 million tonnes next year, helping to offset declines at mature fields in the country.

Discovered in 2000, the field was named after a 19th century Kazakh poet, Kashagan Kurzhimanuly. With its production difficulties, the field has lived up to its name which means "restive, uncontrollable."

Production, originally due to begin in 2005, did not start until 2013 and then was halted shortly afterwards due to technical problems with gas pipelines.

Costs have also ballooned. The initial estimate was $57 billion for the project's 40-year lifetime, but it has already cost about $55 billion to develop, according to analysts' estimates.

The NCOC consortium developing Kashagan comprises China National Petroleum Corp, Exxon Mobil, Eni , Royal Dutch Shell, Total, Inpex and KazMunaiGas.

The field is set to ramp up output further during 2017 thanks to reinjection of sour gas into its reservoir, which will increase production to more than 150,000 bpd in 2017 and 230,000 bpd in 2018. Kazakhstan's total production this year is forecast at about 1.6 million barrels per day.

Kazakhstan, whose economy is dominated by oil, is keen to push up production, but further expansion may be delayed if oil prices remain low, some analysts have said.

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Venezuela's PDVSA says made bond payments despite delay talk

Venezuela's state oil company PDVSA said on Monday it had made bond coupon payments due this month on its 2021, 2024 and 2035 bonds despite a JPMorgan report of delays.

"The information about a PDVSA default spread by the enemies of the fatherland is totally false," PDVSA president and Oil Minister Eulogio Del Pino said on Twitter.

Earlier, JPMorgan analysts said PDVSA had delayed $404 million in payments though they expected the company to make the missing disbursements within a 30-day grace period.

"This highlights the cash difficulties and mismanagement of PDVSA with regards to its liabilities," the analysts wrote.

But PDVSA, in a statement, said it had paid "punctually" its obligations due this month for 2021, 2024 and 2026 papers, and was also "in the process of executing" interest payments for the 2035 bond.

"In this way, PDVSA honors its commitment ... ratifying the financial solidity of Venezuelans' main industry," it said.

The JPMorgan report had noted that PDVSA did make a $135 million coupon payment on its 2026 bond, citing information provided by paying agent Citi and settlement group Clearstream.

Citi did not immediately respond to request for comment.

Prior to PDVSA's response, Torino Capital had said the reported delay appeared to be "a technical mistake" rather than an indication of default.

It noted that payments were being made "through accounts not conventionally used for these purposes" and that some PDVSA management changes had occurred, both of which could have contributed to a delay.

"Our tentative conclusion is thus that the delay in payments likely reflects administrative and technical issues of the type that the 30-day grace period is designed to handle," wrote its chief economist Francisco Rodriguez in a note to clients.

"We do not believe it reflects a change in authorities' willingness to service its international obligations."

Venezuela bonds trade at distressed levels as a result of investor concern that a steep recession and spiraling inflation will leave it without resources to meet heavy commitments.

The country's sovereign bonds on average pay 26 percentage points more than comparable U.S. Treasury Notes, according to JPMorgan's Global Diversified Emerging Markets Bond Index.

Socialist President Nicolas Maduro says the country will meet all its debt commitments and calls default talk a right-wing conspiracy against him.

He has also accused global banks of leading a "financial blockade" that has left Venezuela with few financing options amid the oil market downturn.

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ConocoPhillips selling Kenai LNG export plant

Houston-based energy giant and LNG player ConocoPhillips said it is in the initial stages of marketing the liquefied natural gas export facility on the Kenai Peninsula in Alaska.

According to the company’s statement, the efforts to market the plant are consistent with the company’s efforts to regularly review its assets to ensure it is optimizing its portfolio.

“Our current focus is on our North Slope operations,” the company said in a statement.

ConocoPhillips believes the facility is a strategic asset offering “good opportunities for the right buyer.”

The export plant operated for six months during 2015, liquefying 20 Bcf of natural gas and delivering six LNG cargoes.

“Due to market conditions, ConocoPhillips did not conduct an export program in 2016,” the company’s statement reads, adding that the plant is operational and ready to resume exports.

The facility was the world’s largest plant when it started operations in 1969, and for 47 years has been the only export plant in North America.

Since February, the Sabine Pass LNG plant in Louisana, operated by Cheniere, began exporting liquefied natural gas produced from U.S. shale gas from its Train 1.

The Kenai LNG plant complex includes docking and loading facilities to transport LNG, and has shipped over 1,300 cargoes primarily to Japan.
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USGC distillate exports to Europe at 1 mil mt in Nov to date

A total of about 1 million mt of US Gulf Coast distillates could land in Europe and North Africa in November, according to an estimate based on Platts trade flow software cFlow.

S&P Global Platts calculates cargo volumes based on the size of each ship and standard diesel export sizes from the US to Europe.

In total, 25 vessels were spotted on the US Gulf Coast-Europe route, including eight heading towards the Mediterranean. Of the 17 ships sailing towards Northwest Europe, nine are heading towards the Amsterdam-Rotterdam-Antwerp hub.

Some cargoes originally expected to discharge in Europe diverted over the course of last week, resulting in a lower arbitrage volumes week on week. This notably included the Medium Range tanker Turquoise, originally headed for Milford Haven in the UK and now en route for Brazil.

Trading sources said that on the back of healthy demand, Latin America was competing with Europe to attract US barrels, even though arbitrage economics to ship distillate across the Atlantic remain poor.

In October, about 1.16 million mt of distillates were exported from the US Gulf Coast to Europe.
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Oil Speculation Rule Gets Final CFTC Push Before Trump Takeover

Timothy Massad, the top U.S. derivatives regulator, is trying to push ahead before President-elect Donald Trump takes office with controversial rules that clamp down on traders’ ability to speculate in oil and other commodities, according to people familiar with the matter.

Massad recently gave his latest plan that caps the number of contracts a trader can have to the Commodity Futures Trading Commission’s other two members, the people said. That move raises the prospect that the chairman is trying to schedule a vote before the end of President Barack Obama’s term. Consumer advocates and Democrats have pushed for years for the so-called position limits as a way to reduce excessive speculation that they blame for driving up commodity prices.

The new draft takes into account some industry demands, giving certain traders more leeway to speculate than originally proposed, said one person, who asked not to be named since the plan hasn’t been made public. The version by Massad, who has said repeatedly even prior to the election that he wanted to get the regulation done, may still draw a fight though from exchanges, banks and Republicans who have railed against previous iterations of the rule.

Commissioner J. Christopher Giancarlo, the panel’s only Republican who’s likely to become acting chairman in January, has been a consistent critic of the limits. Industry opponents are already lobbying lawmakers and CFTC officials to try to thwart the effort, according to people familiar with the meetings.

A spokesman for the CFTC declined to comment.

“Deeply Controversial”

“The position limits rulemaking remains a deeply controversial proposal,” Representative Mike Conaway, a Texas Republican who chairs the House’s Agriculture Committee which oversees the CFTC, said in a letter on Friday to Massad urging him not to move ahead with his efforts. “The final supplement the commission proposed remains far short of a workable rule.”

The surprise election of Trump now makes it more likely that Massad, an Obama nominee who said before the election that he planned to stay on the job until his term ended in April, will step down sooner. While Massad hasn’t yet scheduled a vote on the rule, circulating it through commissioners’ offices is a step toward finalization. The measure would require majority approval by the three-person panel.

The effort could also all be for naught if the next Congress decides to review the regulation and override it, which they could do before it could be implemented next year.

“He took too long,” said Tyson Slocum, energy program director at advocacy group Public Citizen, which has urged for the limits to be put in place. “Having a hard, federally-enforced limit takes a lot of autonomy away from the exchanges.”

Rule Rejected

The rule that the CFTC proposed in 2013 set limits in 28 commodities for derivatives traded on exchanges such as those owned by CME Group Inc. and Intercontinental Exchange Inc., and in the swaps market. That version came after a federal judge in 2012 rejected the agency’s previous final rule in a case filed by the International Swaps and Derivatives Association and Securities Industry and Financial Markets Association.

While the surging gas prices that prompted Congress to include position limits in the 2010 Dodd-Frank Act have subsided, some lawmakers still want to see the rule finished. Senator Debbie Stabenow, the ranking Democrat on the Senate Agriculture Committee, said in an e-mailed statement on Friday that she supports Massad’s plan to complete the rule.

“Position limits are an important tool to ensure Wall Street speculation does not lead to high energy costs for families at home or at the pump,” she said.
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Tesoro Logistics to buy North Dakota energy assets for $700 mln

Tesoro Logistics LP said on Monday it would buy crude oil, natural gas and other gathering systems in North Dakota from a consortium for about $700 million.

Tesoro Logistics also said it would buy terminal and storage assets located in Martinez, California from a subsidiary of oil refiner Tesoro Corp for about $400 million.

Tesoro Corp owns about 34 percent of Tesoro Logistics.

The consortium selling the North Dakota assets include Whiting Oil and Gas Corp, GBK Investments LLC and WBI Energy Midstream LLC, Tesoro Logistics said.
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Elliott asks Marathon Petroleum to consider breaking up company

Hedge fund Elliott Management, which owns about 4 percent of Marathon Petroleum Corp (MPC.N), urged the refiner to conduct a strategic review and consider splitting into three businesses.

Marathon should consider separating its chain of gasoline and convenience stores or break into three businesses, focused on retailing, refining and midstream operations that hold pipeline and storage assets, Elliott said on Monday.

Marathon shares were up 4 percent at $45.02 in early trading.

The activist investor, which also called the company "severely undervalued", said Marathon Petroleum could also look at transferring assets, which could go into a master limited partnership, to MPLX LP.

"Marathon's undervaluation is most glaring when the value of its three businesses is summed together," Quentin Koffey, a portfolio manager at Elliott, said in a letter to Marathon's board.

Elliott said its recommendations could help the company generate $14 billion–$19 billion for shareholders and boost the stock by more than 80 percent.

Marathon said last month it would transfer some assets into MPLX, the master limited partnership that it created in 2012.

The move came after activist hedge fund Jana Partners, which raised its stake in Marathon Petroleum to about 0.8 percent last week, pushed the company to separate its pipeline and other midstream assets.

Jana's managing partner, Barry Rosenstein, said in October he supported the shift of assets to MPLX and the possible changes to Marathon's financial reporting that would result.

Up to Friday's close, Marathon Petroleum shares had fallen about 16.5 percent this year.
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Precious Metals

Platinum market deficit set to shrink in 2017 - WPIC

Platinum market deficit set to shrink in 2017 - WPIC

The platinum market deficit will shrink to its narrowest since 2011 next year, the World Platinum Investment Council said on Tuesday, as a drop in investment and
diesel's waning share of the European car market pressure demand.

The WPIC also cut its expected platinum market shortfall for this year to 170,000 ounces from the 520,000 ounces predicted in September, citing a larger than expected drop in Chinese platinum jewellery demand, and higher recycling.

That deficit will likely shrink to 100,000 ounces in 2017, it said, cutting above-ground stocks of the metal to 2.045 million ounces by the end of next year, the WPIC said.

"It's all good and well to say that metal is available from above-ground stocks, but as soon as the vaulted holdings aren't for sale, any deficit makes for concern, especially from industrial users," the WPIC's director of research Trevor Raymond said.

Autocatalyst demand is expected to decline 1 percent next year, the WPIC said, as diesel's overall share of the autocatalyst market shrinks.
Demand for platinum for use in catalytic converters was flat this year, it said, in the face of concerns that last year's Volkswagen emissions scandal would dent demand for diesel cars, which use a higher loading of platinum in their autocatalysts.
At the moment, the 2016 percentage of diesels on European roads is 50 percent. Our forecast for next year includes a 48.5 percent diesel share, so that's a fairly aggressive fall,"Raymond said. There has also been a move to other forms of
emissions control technology, he said.

Investment in platinum, which is expected to have risen 15 percent this year on the back of strong coin and bar demand, particularly in Japan, is forecast to fall by more than a quarter next year, the WPIC said.

It expects bar and coin investment to lighten, and demand for platinum-backed exchange-traded funds, which tailed off recently after a strong start to the year, to be little changed.

Overall platinum demand is tipped to fall 3 percent this year to 8.04 million ounces, the WPIC said. Jewellery demand is expected to slip by 10 percent, or 300,000 ounces, as buying in number one consumer China drops for a second year.

On the supply side of the market, refined production by mining companies is predicted to have fallen 3 percent this year. The WPIC revised up its forecast for recycled platinum supply this year to 1.86 million ounces from 1.745 million in
September, due chiefly to rising jewellery recycling in China.
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Steel, Iron Ore and Coal

Will coal price retreat be a Dunkirk or Stalingrad?

 It may be a tad early to call a peak in the price of thermal coal in top-consuming region Asia, but at the very least the momentum seems to have been lost from a commodity that has surged some 130 percent in the past 10 months.

If coal prices have already peaked, the question is which of the World War II battles of Dunkirk or Stalingrad will the retreat most resemble.

A Dunkirk-style retreat would see coal prices hold on to much of their gains this year, just as the British Army managed to keep much of its fighting strength by evacuating from France in the face of a German victory in 1941.

A Stalingrad-style defeat would see coal prices surrender most of their gains in a rout similar to what happened when the German Sixth Army was surrounded and annihilated by Soviet forces in the winter of 1942-43 at Stalingrad.

So far, the pullback in thermal coal prices has been very modest, with the Australian benchmark, the weekly Newcastle port index dropping to $100.52 a tonne in the week ended Nov. 18.

This was down from the 44-month high of $109.69 a tonne the previous week, and the first downward move since last August.

The index rose 131 percent between its 10-year low of $47.37 a tonne on Jan. 22 to its peak on Nov. 11.

While this is an exceptionally strong rally, history suggests that the retracement may be quite robust as well.

Between November 2006 and July 2008, the index surged 372 percent, with coal reaching its all-time high of $194.79 a tonne on July 4, 2008.

It then slumped by 69 percent, taking coal back to $60.30 a tonne by March 2009. However, this price was still almost $20 more than the starting point of the prior rally.

From the trough in March 2009, Newcastle coal rallied 126 percent to $136.30 a tonne by Jan. 14, 2011.

That peak marked the start of a five-year downward trend during which coal dropped 65 percent to the low in January this year.

Given that the two previous rallies in the Newcastle index were both followed by pullbacks of more than 60 percent, is it likely that history will repeat itself this time around?


It's still possible that prices may not have peaked yet, given we are just at the start of peak northern hemisphere winter demand period.

But, if the $109.69 a tonne from Nov. 11 does represent the peak of this cycle, then a retreat in the order of 60 percent would take prices back to around $43 a tonne.

This seems extremely unlikely as an entirely different set of circumstances are prevailing this time around compared with the price plunges of 2008-09 and 2011-15.

In the rally up to July 2008 coal prices had been pulled along with other commodities as investors believed China's appetite for natural resources was insatiable.

The 2008 financial crisis and global recession crushed those hopes, and coal fell dramatically in tandem with other commodities as world economic growth stumbled.

In the rally from 2009-11, stimulus spending by China provided a platform for rising prices, especially since the supply response was slow in coming.


Australia shares end at month high led by miners, energy firms; NZ down
Platinum market deficit set to shrink in 2017 - WPIC

But when new mines came on stream and existing ones pumped up output, the rally fizzled and coal was set up for an extended slump as the excess capacity was worked through.

In stark contrast, the rally so far in 2016 has been mainly driven by Chinese domestic considerations, with the most important factor being the decision by the authorities in Beijing to limit the number of days coal mines could operate.

This led to a sharp drop in production, with China's output falling 11 percent in the first 10 months of 2016 from the same period a year earlier.

Imports couldn't make up for this shortfall, hence the sharp rise in the main Asian benchmark prices.

It's likely that this rally will be ended by Chinese political decisions, with Beijing reversing course and allowing mines to operate for 330 days a year, up from 276 before, ensuring supply will be adequate but not enough to collapse prices.

To suggest coal prices are heading for a rout also ignores the fact that there is far less spare capacity around currently, with those mines that survived the five-year slump operating as efficiently as they can.

And the pullbacks after the previous rallies had different dynamics, the first being a global recession and the second being an extended period of oversupply.

Neither of these are currently the case, suggesting that the pullback in coal prices will be more modest.

Given China's primacy in Asian coal markets, it's likely coal will drop to a level at which the majority of Chinese domestic mines can operate profitably and meet their debt obligations, while still selling at a price that won't stoke inflation or damage power utilities.

Where that magic number lies is open to debate, but it's unlikely to be above $100 a tonne or below $60.
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Indian coal imports to reach 160 Mt in FY 2016-17

India is expected to import around 160.16 million tonnes of coal in fiscal year 2016-17 (April-March), down 20% year on year, Minister of State for Coal, Power, Renewable Energy and Mines Piyush Goyal said.

The demand of coal in fiscal year 2016-17 is initially estimated to be 884.8 million tonnes, against which supply plan from indigenous sources has been estimated to be 724.7 million tonnes, leaving a demand supply gap of 160 million tonnes to be met through imports by consuming sectors, he said.

The country has imported 86.5 million tonnes of coal valued at Rs 3,3489.3 crore ($4.92 billion) during April-August in the ongoing fiscal.

Of the estimated supply of 724.71 million tonnes this fiscal year, state-run Coal India Limited (CIL) will supply 598.61 million tonnes.

On account of increased production by CIL in the last financial year, coal imports have fallen 8.22% on the year to 199.8 million tonnes in 2015-16, Goyal added.

In order to meet coal demand internally and make India self-sufficient in coal production, the government is focused on increasing domestic production, which includes efforts to expedite environment and forest clearances, land acquisition and coordinated efforts with the railways ministry for movement of coal, the minister said.

CIL is also aiming to produce 1 billion tonnes of coal by 2019-20.

Attached Files
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Mongolia Jan-Oct coal exports soar 64pct on yr

Coal-rich Mongolia exported 18.70 million tonnes of coal over January-October this year, soaring 64.07% from 11.40 million tonnes the same period last year, showed data from the Mineral Resources Authority of Mongolia.

In October, coal exports of the country dropped 15.9% from September to 2.14 million tonnes, the data showed.

Exports of washed coking coal increased 25.9% on month to 0.16 million tonnes in October, while that of raw coking coal dropped 34.8% from September to 0.70 million tonnes.

The country exported 0.57 million tonnes of thermal coal in the month, rising 21.1% on month.

In the first ten months, Mongolia produced 24.42 million tonnes of coal, with output in October gaining 20.3% on month to 3.70 million tonnes.

Its coal output stood at 24 million tonnes last year, down 1.64% year on year.

Over January-October, Mongolia sold 24.36 million tonnes of coal, with domestic sales at 5.52 million tonnes.

In October, coal sales slid 4.3% on month to 3.03 million tonnes, with domestic sales rising 43.6% on month to 0.89 million tonnes.

Attached Files
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Shaanxi Coal & Chemical cuts coal prices for key utilities

Shaanxi Coal & Chemical cuts coal prices for key utilities

Shaanxi Coal and Chemical further lowered its coal price to local and 6 key utilities from November 22.

The group cut prices 5 Yuan to 6 out of Province utilities. On November 5th the company had lowered its prices by 10 Yuan to the same 6 utilities.
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Iron-ore’s party gives way to hangover as China stockpiles surge

For iron-ore, it is the morning after the night before. Prices have given up most of the gains inspired by Donald Trump’s surprise win and a speculative frenzy in China, with a surge in port stockpiles in the top user reminding investors that fundamentals still count.

“The speed of the recent rally leaves it open to the charge that price action has been too much, too fast,” Dane Davis, an analyst at Barclays in New York, said in a note that asked “After the party....the hangover?” The balance of risk for iron as well as copper is skewed to the downside as the dollar strengthens and the effects of Trump’s win wear off, according to Davis.

iron-ore prices barreled to a two-year high this month as investors celebrated Trump’s victory on the outlook for infrastructure spending at the same time that commodities futures volumes surged in China. The rally has been thrown into reverse after mainland exchanges raised charges to quell the fervor, and the US currency advanced on prospects for higher interest rates. The port holdings data have added to the bearish mix, reinforcing signs of ample supply.

“As it did earlier this year, China has cracked down on speculation in the iron-ore market,” Davis said. “With these stricter standards in place, the iron-ore price should continue to ease off recent highs, though it may find support from continued highs in other steel raw materials, such as met coal, and a domestic steel market that looks to set to grow production in 2016.”


In Asia, the SGX AsiaClear contract was at $67.13 a ton at 2:05 p.m. in Singapore on Monday. That follows a 15% drop last week, and puts prices little above the $64.78 close on Nov. 8, the last day of trade of before Trump’s win. On the Dalian Commodity Exchange, futures are at 562 yuan ($81) a ton, compared with the 519 yuan close on Nov. 8, and the Nov. 14 high of 627 yuan.

Benchmark spot with 62% content at Qingdao fell 8.8% last week to $72.79 on Friday, capping the first weekly drop in almost two months, according to Metal Bulletin Ltd. Prices, which remain 67% higher in 2016, may average $58 this quarter and $50 next year, according to Barclays.

As prices sank last week, port inventories in China climbed to the highest since September 2014, according to Shanghai Steelhome Information Technology Co. The holdings rose 2.6% to 110.58-million tons, the biggest%age increase in more than a year. They’re up 19% in 2016.

Miners’ shares have been whipsawed by iron-ore’s sudden surge and slump. In Sydney, Fortescue Metals Group Ltd., Australia’s No. 3 shipper, dropped 7.8% last week after a 19% advance the week before. Brazil’s Vale gained 15% in the period to November 11, then lost 6% last week.

The recent surge in prices “has to do with speculation, and trading has since become more rational,” said Dang Man, an analyst at Maike Futures Co. in Xi’an, China. “iron-ore’s fundamentals have never been great. The huge increase in port stockpiles doesn’t bode well.”

Attached Files
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About 500 iron ore jobs to go at Rio Tinto

Iron ore accounts for almost 90% of Rio's earnings, but that market is expected to remain oversupplied. (Image of the Paraburdoo operation, in the Pilbara, courtesy of Rio Tinto)

World's second largest miner Rio Tinto is cutting more jobs across its iron ore division in Western Australia as part of a major restructuring of its most profitable division, announced in June.

While the company did not release numbers, it did confirm that  "rolling reductions" were underway, which are estimated to be around 500 jobs or 4% of Rio Tinto’s ore division’s workforce, the Australian Broadcasting Corporation (ABC) reports.

Fresh job cuts at Rio’s iron ore business are part of a major restructuring of the division, the miner’s most profitable one.

This would be Rio’s third major staff cut in the last two years. Currently, the company employs about 11,000 people after shedding about 700 workers early this year and about 800 in March 2015.

"The market outlook remains challenging and we currently have 1,000 initiatives underway across our business to reduce costs, improve productivity and ensure we remain internationally competitive," it said in a statement quoted by ABC.

Speaking to reporters Monday, Western Australia’s Premier Colin Barnett urged Rio to ride out the tough times.

"Companies have got a responsibility to maintain workforce," he said according to AAP. "Only two years ago, they were all saying they didn't have enough workers. The world hasn't changed that much.”

"Let's face it – iron ore prices are pretty good," Barnett said.

Iron ore prices went up close to $80 a tonne early this month and the steelmaking ingredient was selling for $70.34 on Monday, dropping more than $2 per tonne since Friday, according to the Metal Bulletin Index. BHP, Rio Tinto and Fortescue Metals Group have all flagged that they expect iron ore prices to fall further next year, perhaps back to about $40 per tonne.

A Rio spokesman would not comment on the latest job cuts but confirmed the company believes the market remained “challenging”.

Last week, the company announced it would suspend mining at one of its local operations for the first time since the global financial crisis forced Rio to begin to cutting costs.

Attached Files
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India aims to boost low-grade coal sales while global prices high

India is trying to boost sales of its low-quality coal and lower freight costs in a bid to cut imports, while global prices are high, Reuters reported.

State-controlled Coal India, the world's largest miner of the fuel, has sharply boosted output in the past two years but has struggled to sell all of that due to softer domestic demand and the availability of superior-grade foreign coal at competitive rates, until recently.

Benchmark Australian coal prices have more than doubled this year, helped by reduced Chinese mining and strong demand across Asia and Europe just when exporters cut output. But prices have begun to recoil this month as China eased restrictions on domestic mining.

"Our prices are already very competitive," India's Coal Secretary Anil Swarup said. "If transportation costs can be brought down, more and more private companies will bid to buy from Coal India."

Swarup met Railways Minister Suresh Prabhu late last month to discuss lowering the charges to move coal in some routes to lure private firms away from foreign coal.

Daily dispatches of coal had already jumped by a fifth this month to around 1.6 million tonnes, said a senior Coal India official, adding the company is set to make a record amount of coal available to be sold through auctions. The company typically sells only 10% of total output through auctions to private companies but the government has relaxed that limit.

Higher international prices and the rise in local output are expected to cut India's imports by around 20 million tonnes this fiscal year from the 181 million tonnes brought in for the year ended March 31, 2016, said the Coal India official.

Coal imports fell 16% to around 10 million tonnes in September, the lowest level since April 2013, according to brokerage Motilal Oswal.

Attached Files
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China's Hebei province completes 2016 steel capacity cuts

China's biggest steel making province Hebei had eliminated 14.62 million tonnes of steel capacity by the end of October, achieving this year's target of 14.22 million tonnes ahead of schedule, Xinhua news reported on Monday.

Hebei, a northern province near the country's capital, is responsible for nearly a quarter of China's total steel output and has pledged to cut steel capacity by 31.17 million tonnes by 2017 and by 49.13 million tonnes by 2020.

Earlier this year, the province lifted its capacity cutting goals for this year to 14.22 million tonnes from 8.2 million in steel making, and to 17.26 million tonnes from 10.39 million in iron nmaking.

Hebei had eliminated 15.79 million tonnes of iron making capacity by October, 91.48 percent of its target for 2016.

The local government also said Hebei had completed its capacity cutting for coal output ahead of schedule, by reducing 14 million tonnes by October.

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