Mark Latham Commodity Equity Intelligence Service

Wednesday 23rd March 2016
Background Stories on www.commodityintelligence.com

News and Views:

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    Macro

    China power sector overcapacity may be above 20pct


    China’s power industry may see surplus capacity more than 20% above the actual demand, predicted Qiao Baoping, president of China Guodian Corporation, at the annual China Development Forum on March 19.

    China’s power capacity has surged to 1.51 TW from 357 GW in 2002, since reformation of the power industry been implemented over the years.

    But as China entered the "New Normal" of slower economic development, demand for electricity is poised to grow at a much slower pace, thus tackling overcapacity has become one new challenge.

    Data of the National Energy Administration showed that utilization of thermal power generating units now decreased to 4,329 hours in 2015, the lowest in the past 69 years.

    China’s power consumption in the first two months of 2016 only increased 2% to 876.2 TWh, indicating downward pressure on power consumption and capacity utilization in the entire year.

    In 2016, the utilization of thermal power generation units was estimated to see a decrease of 300 hours, given the newly added thermal power capacity of more than 0.1 TW.

    China Guodian is the third largest power company in the world, with designed capacity of 140 GW, according to Qiao.

    "We also have the largest wind power capacity of over 20 GW. So in terms of overcapacity elimination, we’re really under great pressure," Qiao noted.

    China’s power companies are also facing growing pressure from environmental protection, as the government implements the strictest control on emissions of pollutants from coal-fired plants to improve air quality.

    China has set specific emission standards for eastern, western and central areas, each by the end of 2017, 2018 and 2020.

    Thus, power enterprises have to accelerate technology reform to meet corresponding standards by further strengthening energy saving and emission reduction.

    Besides, the change of domestic power prices is also influential. The 0.03 yuan/KWh decrease of on-grid power prices (effective from January 2016) will directly cause more than ten-billion yuan slump in Guodian’s annual profits, said Qiao.

    http://en.sxcoal.com/0/143144/DataShow.html
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    Brazil police targets Odebrecht in new anti-corruption raid


    Brazilian federal police were seeking to arrest 15 people on Tuesday as part of the corruption investigation centered on state-run oil producer Petroleo Brasileiro SA (PETR4.SA), police and federal prosecutors said.

    Tuesday's operation, codenamed "Xepa", uncovered a bribe-payment scheme led by Odebrecht SA [ODBES.UL], Latin America's largest engineering and construction conglomerate, police said in a statement.

    It is the 26th raid in the two-year-old corruption probe that has put top executives and political leaders in jail and has raised chances of the impeachment of President Dilma Rousseff in coming months.

    Odebrecht and other major engineering and construction companies have had a high profile in the graft and influence-peddling scandal at Petrobras known as "Operation Car Wash."

    On Tuesday, federal prosecutors said police uncovered evidence that Odebrecht used a so-called structured operations division to coordinate bribe payments in a systematic way.

    The structure, embedded into Odebrecht business model, is evidence that former chief executive Marcelo Odebrecht, sentenced to 19 years in prison, was aware and in charge of the illegal payments, the prosecutors said in a statement.

    "At least 14 executives at different parts of Grupo Odebrecht sent several requests of 'parallel payments' to members of that specific structure," according to the note. "This evidence opens a whole new line of investigation about bribe payments at many public works."

    Representatives of Odebrecht did not immediately respond to a request for comment on the police raids.

    Prosecutors have accused Odebrecht of paying bribes to win multibillion-dollar contracts with Petrobras in a scheme that also funneled money to finance political campaigns of ruling and opposition parties.

    http://www.reuters.com/article/brazil-corruption-idUSL2N16U0D2
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    Mitsui sees around $620 mln annual loss on writedowns on copper, LNG assets


    Japanese trading firm Mitsui & Co said on Wednesday it expected a net loss of 70 billion yen ($623 million) for the business year to March 31, against an earlier forecast for a profit of 190 billion yen, hit by hefty one-off losses in its copper and other resource assets.

    The company will book a total of 260 billion yen in one-off losses, including a 115 billion yen impairment loss on its copper operation in Chile to reflect a revision to its long-term outlook for the price of the metal, it said in a press release.

    Other losses include writedowns on its LNG project in Australia, as well as on other energy and metal assets.

    Like international oil majors and mining companies, Japanese trading firms have been caught flat-footed by the rout in commodities brought about by softening demand from top consumer China where economic growth has slowed.

    http://www.reuters.com/article/mitsui-co-results-idUST9N16904X
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    Rise in Anglo American share price could offer chance to fill its coffers


    The doubling of Anglo American's AAL.l share price since late January means the time could be ripe for a rights issue rather than an asset fire sale to boost its defenses against tumbling commodity prices, fund managers say.

    The London-listed global miner has insisted it does not need to raise cash and that it plans to sell its iron ore, coal and nickel operations as part of a sweeping overhaul to raise $4 billion this year and cut net debt to $10 billion.

    But fund managers say that disposals while commodities prices are bumping along the bottom are likely to take some time, with potential bidders holding off in the hope that assets could become cheaper.

    "The recovery in Anglo's shares is a strong incentive for a rights issue," said Michael Hulme, a commodities equity fund manager at Carmignac.

    "It might depend on how De Beers is doing, but it's hard to see how they can get away without a capital raise. There are some signs of stabilization, but fundamentals in commodity markets haven't changed."

    Anglo is planning to concentrate on its De Beers diamond business as well as platinum and copper assets.

    The company's share price, at about 544 pence, is more than double the levels of late January, when the stock fell to a record low below 220 pence. However, the sector-wide gains could prove fragile, with rises attributed largely to short-covering rather than long-term investors looking for value.

    Anglo Chief Executive Mark Cutifani last month said that the industry could not rely on a reversal of the commodity price slump any time soon.

    http://www.reuters.com/article/anglo-capital-idUSL5N16U3GR

    Attached Files
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    Caught in the low income trap.

    https://www.stlouisfed.org/publications/regional-economist/october-2015/trapped-few-developing-countries-can-climb-the-economic-ladder-or-stay-there

    The low- or middle-income trap phenomenon has been widely studied in recent years. Although economic growth during the postwar period has lifted many low-income economies from poverty to a middle-income level and other economies to even higher levels of income, very few countries have been able to catch up with the high per capita income levels of the developed world and stay there. As a result, relative to the U.S. (as a representative of the developed world), most developing countries have remained, or been "trapped," at a constant low- or middle-income level.

    Such a phenomenon raises concern about the validity of the neoclassical growth theory, which predicts global economic convergence. Specifically, economics Nobel Prize winner Robert Solow suggested in 1956 that income levels in poor economies would grow relatively faster than income in developed nations and eventually converge with the latter through capital accumulation. (See sidebar.) He argued that this would happen as technologies in developed nations spread to the poor countries through learning, international trade, foreign direct investment, student exchange programs and other channels.1

    But the cases in which low- or middle-income countries have successfully caught up to high-income countries have been few.


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    Oil and Gas

    Iraq seeks financial agreement with Kurds before pumping crude to Turkey


    Iraq will not resume pumping crude through a Kurdish pipeline to Turkey unless it reaches a financial agreement with the Kurdish regional government, the Iraqi oil minister said on Tuesday.

    Adel Abdul Mahdi confirmed on his Facebook page that the central Iraqi government had decided to stop pumping crude from fields under the management of its state-run company in northern Iraq through the pipeline.He said state-run North Oil Company previously fed 150,000 barrels a day into the pipeline that carries crude from the Kirkuk fields and other reservoirs managed by the Kurdish authorities to the Turkish Mediterranean terminal of Ceyhan.

    "We have two options" in order to resume pumping, the minister said, demanding either a return to a previous oil agreement between Baghdad and the Kurdish Regional Government (KRG), or making a new agreement.

    The previous agreement provided for the KRG to transfer to Iraq's central state oil marketing company 550,000 barrels a day of crude produced in the Kurdish region, in return for a 17 percent share in the federal budget, he said. The Kurds stopped all oil transfers to the government in September 2015, at which point they also stopped receiving government funding, he added.

    http://www.reuters.com/article/iraq-oil-pipeline-idUSL5N16U33C
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    PetroChina profit dives 70 pct in 2015 on low oil prices


    PetroChina Co. profit tumbled to the lowest since 1999 as falling crude prices crimped earnings at the country’s biggest oil and gas producer.

    Net income at the Beijing-based explorer dropped 67 percent to 35.5 billion yuan ($5.46 billion) from 107 billion yuan, according to a statement sent to the Hong Kong stock exchange. That compares with a 34.3 billion yuan mean estimate from 11 analysts compiled by Bloomberg. Sales fell 24 percent to 1.73 trillion yuan. The company warned in January that 2015 profit may fall 60 percent to 70 percent.

    Brent, the global benchmark, dropped to an average of about $54 a barrel last year, from roughly $99 the year before, prompting global oil energy companies to write down assets, slash earnings and cut capital expenditure plans. Despite the pain, PetroChina and its state-owned parent China National Petroleum Corp. won’t resort to laying off frontline oil and gas workers as a way to cut costs, Chairman Wang Yilin said this month.

    “In 2015, the global economic recovery slowed down, the downward pressure on China’s economy continuously intensified, the overall supply in the oil and gas market was sufficient and the international oil prices kept dropping at a low level,” the company said in its earnings release.

    Oil has climbed back from a 12-year low this year on speculation that stronger demand and falling U.S. output will ease a global surplus. The Organization of Petroleum Exporting Countries and other producers including Russia plan to meet in Doha next month to discuss limiting output to reduce a global oversupply.

    China’s biggest explorers including PetroChina, China Petroleum & Chemical Corp. and Cnooc Ltd. all posted profit or revenue declines for the first nine months of 2015. PetroChina and CNPC sold pipeline assets in November to raise cash to meet their annual profit target. Capital spending this year will be 5 percent lower at 192 billion yuan, following a 31 percent cut last year.

    The company rose 0.9 percent to HK$5.37 before the earnings announcement, compared with a 0.3 percent loss in the city’s benchmark Hang Seng Index. Shares are down 35 percent in the past year.

    Parent company CNPC will be among the first state-owned companies to undergo government-guided reforms, transforming into a strategic holding company that will not manage day-to-day operations of its subsidiaries, according to people with knowledge of the situation. As part of the overhaul, China’s government islooking to spin off oil and gas pipelines from its energy companies into independent businesses.

    http://www.bloomberg.com/news/articles/2016-03-23/petrochina-profit-falls-as-crude-s-plunge-punishes-earnings
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    China's vice premier seeks acceleration of gas pipeline with Russia - State TV


    China and Russia should accelerate construction of the Altai natural gas pipeline linking the two countries, vice premier Zhang Gaoli told Gazprom CEO Alexei Miller in Beijing on Tuesday, state television reported.

    The two countries should also expand cooperation in upstream and downstream, natural gas supply services and energy sales, Zhang said, according to China Central Television.

    Gazprom's Miller said Russia would be actively engaged in negotiations with China on the Altai project, according to the broadcaster.

    Russia has been pushing for plans to sell China natural gas through the Altai project, also known as the western route. Analysts have estimated the cost of the Altai pipeline at up to $20 billion.

    http://www.reuters.com/article/china-russia-pipeline-idUSL3N16U3SA
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    Woodside scraps Australian Browse LNG project as glut bites


    Woodside Petroleum and its partners have shelved plans to build the $30 billion Browse floating liquefied natural gas (LNG) project off Australia in the face of global oversupply, spelling the end of an era of mega LNG projects.

    The shelving of the project follows an 80 percent plunge in Asian LNG prices over the past two years after a construction boom that is set to make Australia the world's top LNG exporter.

    Browse is one of five projects now stuck on the drawing board in Australia amid a glut of new supply, including from Chevron's newly commissioned $54 billion Gorgon project and exports from the United States.

    The move came as no surprise after Woodside Chief Executive Peter Coleman flagged last month that now was "not the time to be reckless" in spending capital and that the project had failed to line up any customers for Browse LNG.

    Browse faced tough hurdles as its costs per tonne were higher than rival projects in places such as Papua New Guinea and North America and large-scale floating LNG was unproven technology.

    "These factors, combined with the greatly reduced appetite for large-scale greenfield investments in the current market conditions, made it quite a herculean task to achieve partner alignment to sanction Browse," said Saul Kavonic, an analyst with consultants Wood Mackenzie.

    This is the second time Browse has been sent back to the drawing board. The partners ditched plans in 2013 for an onshore project, that analysts estimated at $45 billion, at a site opposed by green groups and some Aboriginal landowners.

    The partners then spent $100 million redesigning the project to floating LNG, slashing costs by 35 percent. Despite the savings, Coleman said Browse would not have been profitable at today's oil price around $41 a barrel.

    "Unfortunately, with pricing falling away from us, that cost reduction doesn't get us to a breakeven price that's low enough for us to feel comfortable making an investment at this point in time," Coleman told Reuters in an interview.

    "It's very disappointing in the scheme of things as this is a key part of our growth story."

    Not only is it a blow to Woodside, but it's painful for its Japanese partners, Mitsui & Co and Mitsubishi Corp , which together paid $2 billion for a nearly 15 percent stake in 2012, and PetroChina, which paid $1.63 billion for an 11 percent stake in 2013.

    Mitsui said on Wednesday it would book an impairment charge of about 40 billion yen ($356 million) on its Browse investment as a result of the postponed development. Mitsubishi had no immediate comment.

    http://www.reuters.com/article/woodside-lng-idUSL3N16U5C4
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    Indonesia decides against Inpex floating LNG project plan, goes with onshore proposal -president


    Indonesia has decided against a proposal by Japanese oil and gas company Inpex Corp to build a floating liquefied natural gas project in eastern Indonesia and will proceed with plans to process the gas onshore instead, the president said on Wednesday.

    "This is a long-term project that concerns hundreds of trillions of rupiah. From these calculations, we have decided to build it onshore," President Joko Widodo said in a recorded statement obtained from palace officials.

    http://www.reuters.com/article/indonesia-inpex-c-lng-idUSJ9N15Y01C
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    Gazprom asset swap in focus as OMV chief plans Russia visit


    The chief executive of Austrian oil and gas group OMV and Austria's finance minister will visit St. Petersburg on April 1, an OMV spokesman said, as the company seeks to reach a deal on an asset swap with Russia's Gazprom.

    The companies have been working for months on a swap agreement under which OMV would take a stake in the Urengoy gas field in Siberia, but no details have emerged on what assets OMV -- central Europe's biggest energy group -- might offer in return.

    OMV Chief Executive Rainer Seele, who said last month that due diligence for the deal would take several months, will be accompanied on his Russia trip by Finance Minister Hans Joerg Schelling, a spokeswoman for Schelling confirmed.

    Seele is relying heavily on the swap to help OMV to lower production costs and has said he has no Plan B.

    A source close to OMV said that the finance minister's attendance suggests that progress might have been made in the talks about future cooperation.

    Russia's energy minister has said the swap could include OMV oil and gas fields "in third countries" or infrastructure or energy projects in Austria.

    OMV has upstream operations in the North Sea, Romania, Austria, Australia, New Zealand, the United Arab Emirates, Tunisia, Gabon, Kazakhstan, Namibia and Madagascar, as well as idled operations in Libya and Yemen.

    It is in the process of taking over gas trading company EconGas, has a majority stake in the Central European Gas Hub (CEGH) in Austria, owns gas storage facilities in Austria and refineries in Austria, Germany and Romania.

    It wants to sell its Petrol Ofisi petrol station business in Turkey and is in the process of selling a minority stake in Gas Connect Austria, though it has ruled out Gazprom as a buyer.

    OMV has said maximum output from the Urengoy area in which it is interested is expected to be 60,000 to 80,000 barrels of oil equivalent (boe) per day over the next 20 years. OMV's current total output is about 309,000 boe per day.

    http://www.reuters.com/article/omv-russia-idUSL5N16U3UB
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    Qatargas eyes expanded LNG supply deals with UK, Dutch terminals


    Qatargas is looking to Britain and the Netherlands in an effort to weather a looming global glut of gas supplies by expanding import deals into Europe's most liquid markets, industry sources said.

    The world's biggest exporter of liquefied natural gas (LNG) must lock in buyers for its unsold supply just as new Australian and U.S. producers muscle into its prized Asian markets.

    Slowing demand globally is only adding to producer woes, thrusting Europe's gas markets and dozens of under-used import terminals into the spotlight.

    Qatargas has held talks with Petronas UK Ltd to gain greater access to the Dragon import terminal in Wales, as well as with Uniper, formerly known as E.ON Global Commodities, for the Gate terminal in Rotterdam, two sources said.

    Uniper declined to comment, while Qatargas and Petronas did not respond to requests for comment.

    Stefaan Adriaens, commercial manager at Gate, said he could not comment on whether Qatargas was interested in increasing capacity at the terminal either via Uniper or directly.

    "They see competition in Asia, so if they are looking for capacity, then I presume it's to have an alternative to Asia," he said.

    Dong Energy, EconGas, Uniper, Shell and Eneco hold Gate capacity but around 0.9 billion cubic metres remains available.

    Unlike the last four years, import capacity at Gate and other northwest European terminals is becoming more valuable in response to the start of U.S. LNG exports.

    "As more people are looking to Europe the capacity value has increased, whereas in other areas it's quite the contrary. Everybody was hoping for Asia demand but there demand was slower so I think capacity value has decreased there," he said.

    TALKS

    In 2013, Qatargas signed a five-year deal to supply 1.14 million tonnes a year (mtpa) to Petronas' half-share of the Dragon terminal at Milford Haven.

    Qatargas 4, a joint venture between Qatargas and Royal Dutch Shell, signed the deal with Petronas, followed by a five-year agreement with E.ON Global Commodities to ship 1.5 mtpa to the Gate terminal.

    Both deals are flexible, according to the original announcements, meaning Qatar is not obliged to ship any LNG to Britain or the Netherlands and can divert cargoes at will.

    At the time, companies with import rights at Dragon and Gate were eager to drum up business and effectively gave Qatar free options to make use of their capacity.

    While Qatari deliveries to Dragon/Gate have been rare up to now, weak Asian demand coupled with surging supply makes Europe an increasingly attractive destination for cargoes.

    Talks between Petronas and Qatargas over expanding the existing deal at Dragon initially sought to double volumes and extend the duration of the deal by up to 10 years, one of the sources said.

    A proposal was also made to commit Qatargas to delivering a third of the overall volume, he said.

    At Gate, the choices boil down to exacting supply guarantees from Qatargas or making it pay for optional import slots, sources said.

    https://au.news.yahoo.com/world/a/31165603/qatargas-eyes-expanded-lng-supply-deals-with-uk-dutch-terminals/?cmp=st
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    BG Egypt halts some development wells over price dispute -source


    BG Egypt has suspended work at some Egyptian development projects after it failed to agree with the government on the price of gas, an Egyptian General Petroleum Corp (EGPC) official told Reuters on Tuesday.

    "BG has stopped work at 9A+ and 9B after failure to reach an agreement on the fixed price to be paid for extracted gas, and it withdrew rigs working on the 9A+ wells on the seventh of March," the EGPC official said.

    Egypt's Ministry of Petroleum denied BG Egypt had stopped development as a result of price disagreements and said in a statement that "negotiations over timelines for the projects" are ongoing.

    The development areas include several deepwater wells in the West Nile Delta.

    BG Egypt, a subsidiary of Royal Dutch Shell, is looking to raise the price it is paid for gas to $5.88 per million British thermal units from $3.95 currently, the official said.

    Egypt has over the past year raised the price it pays many international oil companies for natural gas production in order to encourage more investment.

    BG Egypt has worked out deals with Egypt's EGPC to earn the higher price of $5.88 at other development wells, which it is continuing work on.

    Egypt, which is facing an acute foreign currency shortage, has delayed paying foreign petroleum companies their arrears, which reached about $3 billion at the end of December 2015.

    BG Egypt has made setting a timetable for repayment of its arrears a condition for re-starting work at the suspended development wells, the EGPC official said.

    Once an energy exporter, Egypt has turned into a net importer because of declining oil and gas production and increasing consumption. It is trying to speed up production at recent discoveries to fill its energy gap.

    http://www.reuters.com/article/egypt-gas-prices-idUSL5N16U1W6

    Attached Files
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    Novatek sees 2016 liquids production up 30 pct


    Russia's No.2 natural gas producer Novatek expects its production of crude oil and gas condensate to increase by 30 percent this year, Chief Executive Leonid Mikhelson told Rossiya-24 TV channel.

    In December, Novatek started commercial production at the Yarudeyskoye oil field in northern Russia.

    http://www.reuters.com/article/russia-novatek-outlook-idUSR4N16N05E
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    Vitol Sees Record Oil Volumes as Market `Favors' Traders


    Vitol Group, the world’s largest independent oil trader, said it handled a record volume of 6 million barrels a day of crude and refined products last year as it benefited from a market that “favors” traders.

    At a time when oil-rich countries are suffering and major energy companies are retrenching, the closely-held trader’s net income was $1.25 billion in the first nine months of last year, up 59 percent from the same period of 2014, according to a person familiar with the company’s accounts.

    The financial performance until the end of September and the record full-year trading volumes suggest Vitol is heading for one of its best years ever. The company, headed by Chief Executive Officer Ian Taylor, posted a record profit of $2.28 billion in 2009, according to data compiled by Bloomberg. The current market “favors a physical trader,” but is challenging for the wider industry, Taylor said.

    “Whilst opportunities in the physical market continue to exist, we are increasingly vigilant in respect of counterparty risk as current price levels will inevitably test some market participants,” Taylor said in a statement on Tuesday. “The absolute price levels and market volatility are causes for caution” as the risk of defaults increases, he said.

    Increased Volatility

    While Vitol only releases publicly its traded volumes and revenue, it does provide financial information to its lenders and some other groups. The person familiar with the accounts asked not to be named, citing confidentiality clauses.

    Oil traders such as Vitol and rivals Trafigura Group Ltd Pte, Glencore Plc, Gunvor Group Ltd., Mercuria Energy Group Ltd. and Castleton Commodities International LLC are profiting from the increase in price volatility. They are also filling storage to take advantage of contango -- a situation where future prices are higher than current levels, allowing investors to buy oil cheap, store it in tanks and lock in a profit for a later sale using derivatives.

    In an interview in February, Taylor said that Vitol, which celebrates its 50th anniversary this year, would report net income for 2015 above the $1.35 billion it earned in 2014. However, he said the company wouldn’t match the record of 2009. The company, which is owned by its senior staff, planned to take writedowns in its exploration and production business and make provisions against customers defaulting on contracts, he said.

    Cautious Approach

    Vitol’s traded volumes of crude and oil products rose 13 percent from a year earlier to 303 million metric tons, equal to about 6.2 million barrels a day. That’s enough to meet the combined oil consumption of Germany, France, Italy and Spain. Revenue, which rises and falls in parallel to commodity prices, plunged 38 percent to $168 billion as oil fell.

    The trading house, which is formally incorporated in Rotterdam but has its main operations in Geneva, London, Singapore and Houston, has experienced strong growth over the last 20 years on the back of rising oil trade, large price swings and, more recently, investment in storage and refining. In 1995, Vitol earned just $20 million.

    Taylor said the current environment "vindicates the extremely cautious approach we have long taken towards risk and debt."

    While the company’s refinery assets performed well in 2015, slowing global growth and a rebalancing of the Chinese economy are “likely to impact parts of the portfolio and we expect a slowdown in the rate of demand in some energy markets,” Taylor said. Stockpiles of crude and products will continue to build and weigh upon the market, he added.

    Ship journeys conducted by Vitol rose 9.5 percent to 6,629 during the year. Natural gas sales fell 43 percent to 683 terawatt hours, while power sales declined 13 percent to 102 terawatt hours and coal sales slipped 41 percent to 20 million tons, the company said.

    http://www.bloomberg.com/news/articles/2016-03-22/vitol-says-oil-rout-boosts-counterparty-risk-as-volumes-rise-13

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    Chesapeake: The Riskless Trade Everybody Loves


    Chesapeake just produced an incredible risk-free trade.

    This Friday an interesting Chesapeake Energy 8-K hit EDGARonline. It's a short 8-K so I'll transcribe the important part here:

    Chesapeake Energy Corporation (the "Company") has entered into privately negotiated purchase and exchange agreements under which it has and will exchange (the "Exchanges") in reliance on Section 3(a)(9) of the Securities Act of 1933, as amended (the "Securities Act"), shares of the Company's common stock, par value $0.01 per share (the "Common Stock") for outstanding 2.5% Contingent Convertible Senior Notes due 2037 (with May 2017 put rights) and 6.5% Senior Notes due 2017 (collectively, the "Outstanding Senior Notes") of the Company. As of March 18, 2016, the Company has issued or agreed to issue an aggregate of 17,255,347 shares of Common Stock, representing approximately 2.6% of the Company's outstanding Common Stock, in exchange for $105.0 million aggregate principal amount of its Outstanding Senior Notes.

    What do we have here? Given CHK's recent share and bond behavior, we have the description of what was a riskless trade for those taking it. The riskless trade consisted in:

    Buying those 2017, 2037 bond issues.
    Exchanging them for shares.
    Selling the shares in the market.

    Why was the trade riskless? Because:

    Those 2017, 2037 bonds were trading at very depressed levels, like the rest of CHK's debt.
    The principal amount retired/number of shares is the same as issuing shares at ~$6.09.
    CHK stock traded over $5 per share on high volume 11 market sessions ago, and did so for 3 market sessions, including the market session on Friday.
    $5/$6.09 = ~82.1 cents paid per dollar of principal on those bonds. Of course 82 cents is a high price for a CHK bond.

     http://seekingalpha.com/article/3959916?source=ansh

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    Single Investor Buys ~$56Mln of Rice Energy Stock in 1Q16


    Investors constantly sink money into, and pull money out of, oil and gas companies. Managers of those companies also buy and sell stock in their own companies.

    From time to time we highlight such cases–but lately, we only highlight it if it’s a really big investment. This is one of those really big investments. Billionaire Steven Cohen, founder of Point72 Asset Management, has snapped up 5.6 million shares of Rice Energy during the first almost three months of this year–so far. Rice’s stock currently trades at $12.69 per share.

    Over the past three months the price per share has varied from a low of $8.48/share to a high of $13.08/share. Let’s pick a number and say Cohen paid an average of $10 per share for his 5.6 million shares. That means he ponied up something on the order of $56 million–a sizable chunk of ownership in the company…

    http://marcellusdrilling.com/2016/03/single-investor-buys-56m-of-rice-energy-stock-in-1q16/?utm_source=dlvr.it&utm_medium=twitter
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    Alternative Energy

    Siemens willing to buy Areva JV in Gamesa deal: paper


    German industrial group Siemens is prepared to buy Spanish-French wind power joint venture Adwen as part of the planned merger of its wind assets with those of Spain's Gamesa, Germany's Sueddeutsche Zeitung reported on Tuesday.

    Citing sources close to the negotiations, the newspaper said Siemens Chief Executive Joe Kaeser was now ready to buy French state-owned energy firm Areva's stake in the venture as part of the cost of doing the deal.

    Siemens declined to comment on the report.

    Siemens and Gamesa plan to combine their wind assets to form the world's biggest wind farm manufacturer with approximately 10 billion euros ($11 billion) in annual sales, overtaking current market leader Vestas of Denmark.

    But the deal has stumbled over the Adwen venture.

    Two sources told Reuters last week that Siemens did not want to fulfill certain elements of contracts won by Adwen, which included an obligation to develop and build a jumbo offshore turbine in France.

    Siemens' Chairman Gerhard Cromme is due to meet French Economy Minister Emmanuel Macron in Paris on Tuesday morning, according to Macron's agenda.

    http://www.reuters.com/article/us-gamesa-siemens-idUSKCN0WO0YR
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    SunEdison in debtor-in-possession financing talks: Debtwire


    Embattled solar company SunEdison Inc is in talks with holders of its second-lien loans to fund a debtor-in-possession financing facility, Debtwire reported, citing two sources familiar with the matter.

    Shares of the company, which is grappling with a huge debt load caused by its aggressive acquisition strategy, fell as much as 19.4 percent to $1.62 on Tuesday.

    The talks this week have focused on providing the company with about $300 million in new liquidity, Debtwire reported.

    "DIP negotiation means that the company has effectively run out of cash and they get to pay their creditors 'fair market value' for the secured assets versus the contracted value," Axiom Capital analyst Gordon Johnson told Reuters.

    The talks follow unsuccessful attempts by second-lien lenders to reach an out-of-court solution for the company's cash shortage and debt issues, Debtwire reported, citing the sources.

    The investor group includes those holding term loans of a total of $725 million, Debtwire reported.

    "We decline to comment on rumors and speculation," SunEdison spokesman Ben Harborne said in an email.

    SunEdison delayed filing its annual report for the second time on March 16 after identifying "material weaknesses" in its financial reporting, primarily related to problems with a newly implemented IT system.

    The company had outstanding debt of $11.67 billion and cash and cash equivalents of $2.39 billion as of Sept. 30.

    Solar panel installer Vivint Solar Inc earlier this month terminated a deal to be taken over by SunEdison, amid concerns about SunEdison's weak finances.

    http://www.reuters.com/article/us-sunedison-inc-dip-idUSKCN0WO2HY

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    Base Metals

    Jiangxi Copper plans output cuts after profit fall


    Jiangxi Copper Co Ltd , China's biggest integrated copper producer, said it plans to cut refined copper output by 6.7 percent this year, in line with a proposal by the country's big smelters to reduce output to support prices.

    The move would cut production by 80,000 tonnes to 1.175 million tonnes, and follows a pledge last week by No. 2 producer Tongling Nonferrous Metals Group to reduce output by 110,000 tonnes.

    Nine of China's large copper smelters agreed last year to cut output by at least 350,000 tonnes in 2016, and said they could deepen the cuts if prices and profitability deteriorate.

    Copper prices have come under pressure from high supply and reduced demand in China, the world's top consumer, but have recovered around 7 percent this year, supported by output cuts from firms like Glencore and Freeport McMoRan.

    Jiangxi Copper on Tuesday reported a fourth straight fall in annual earnings, with 2015 net profit tumbling 77 percent to 637.2 million yuan ($98.2 million) due to lower metal prices, it said in a filing to the Shanghai stock exchange.

    Economic conditions could restrict demand growth for nonferrous metals this year, the company said, but forecast a 6 percent rise in global copper mine production, adding pressure to prices.

    "There was an imbalance in demand and supply in 2015. Copper prices plunged due to oversupply and other factors, such as a relatively stronger U.S. dollar," its said in its earnings report.

    The move to cut output came after Jiangxi produced 1.259 million tonnes of refined copper in 2015, up about 50,000 tonnes from the previous year.

    The company said it would also cut gold and silver production, taking gold to 25 tonnes from 26.115 tonnes in 2015 and silver to 530 tonnes from 570.8 tonnes.

    It would also trim production from its copper mines but planned to raise output of semi-finished copper products such as rods by 50,000 tonnes in 2016 to 1 million tonnes.

    The results came after China and Hong Kong markets closed on Tuesday. Its Shanghai shares were down 1.8 percent while its Hong Kong stock fell 2 percent, both underperforming the main index in their respective markets.

    http://www.reuters.com/article/jiangxi-copper-results-idUSL3N16V1NM
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    Some Japanese aluminium buyers agree to Q2 premium of $115/T -sources


    Some Japanese aluminium buyers have agreed to pay a premium of $115 per tonne for primary metal for shipment in the April-June quarter, three sources directly involved in the quarterly pricing talks said.

    The premium was reached with one global metal producer and is 4.5 percent higher than the $110 per tonne premium PREM-ALUM-JP in the previous quarter, a second straight quarter-on-quarter increase. The increase reflected lower inventories in Japan, the sources said.

    Japan is Asia's biggest importer of aluminium and the premiums it agrees to pay for primary metal shipments each quarter over the London Metal Exchange (LME) cash priceset the benchmark for the region.

    The deals were struck over the past week with one producer that cut its proposal from an initial offer of $125 per tonne, a source at a trading firm told Reuters, declining to be named due to the sensitivity of the talks.

    Japanese buyers are still negotiating with global smelters, with further deals expected in the coming weeks.

    Aluminium stocks at three major Japanese ports hit a record high of 502,200 tonnes in May last year as buyers elsewhere in Asia bought cheaper semi-fabricated products from China, prompting more primary metals to head to Japan to look for buyers.

    But, by the end of February the stockpiles had dropped 27 percent from May to 365,600 tonnes as buyers reduced imports, according to trading house Marubeni Corp.

    The latest quarterly pricing negotiations began last month between Japanese buyers and global producers, including Alcoa Inc, Rio Tinto and South32 Ltd, with initial offers ranging between $125 and $130 a tonne, according to sources.

    http://www.reuters.com/article/japan-aluminium-premiums-idUSL3N16U31P

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    Steel, Iron Ore and Coal

    Mounting debts could derail China plans to cut steel, coal glut


    China's campaign to slim down its bloated industries could be derailed by more than $1.5 trillion of debt in its steel, coal, cement and non-ferrous metal sectors, which threatens to overwhelm local banks, Reuters reported on March 23.

    The four sectors targeted in the battle against overcapacity owe around 10.2 trillion yuan ($1.56 trillion), according to documents submitted to parliament by Wang Mingsheng, head of Anhui-based coal firm Huaibei Mining.

    China is providing more than 100 billion yuan ($15 billion) in the next two years to handle layoffs from coal and steel, but that will only be made available once debts have been settled.

    Costs for the estimated 1.3 million coal-sector layoffs alone are as much as 195 billion yuan, and coal industry delegates attending parliament urged government to provide more support to deal with the mounting debts of hundreds of stricken "zombie" firms.

    China's statistics bureau puts coal and steel debts alone at 8 trillion yuan, of which about a third is bank debt.

    If 20% of that were to go bad in 2016, which industry analysts say is not unrealistic, it would raise Chinese banks' non-performing loans by nearly half.

    Bankers say city and regional banks set up by party or provincial government officials are most exposed, and that official NPLs, which already doubled last year, underestimate the scale of their problem lending.

    "China needs to set up a new organization, a special bank just to take over these debts in order to avoid the local banks going bankrupt," said steel industry consultant Xu Zhongbo.

    As well as seeking cuts in value-added tax and relief from expensive "social functions" like healthcare and education, the coal delegates urged government to provide additional funding and policy support, and establish "debt-to-equity" mechanisms to handle the problem.

    In plans published in February, Beijing promised to slash 100-150 million tonnes, or up to 12.5%, of crude steel capacity and as much as 500 million tonnes, or 9%, of coal production in over three to five years.

    The February policy documents also said China would create a special mechanism to restructure industry debts and non-performing assets while introducing incentives to write off bad debts or transfer them to specialist asset managers, but officials said more specific measures were required.

    The action plans said China would rely mostly on "market methods" to solve debt problems.

    http://en.sxcoal.com/0/143174/DataShow.html
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    Chinese February thermal coal imports lowest since April 2011


    China imported 5.06 million mt of thermal coal in February, down 13.6% on the year and 13.2% below January to the lowest monthly volume since April 2011, according to data Tuesday from the General Administration of Customs.

    The volume included 3.75 million mt of bituminous material and 1.31 million mt of sub-bituminous coal, but excluded imports of lower CV lignite material.

    During the first two months of 2016, China imported 10.9 million mt of thermal coal, down 20.1% from a year ago.

    Australia remained the largest shipper of thermal coal to China at 2.54 million mt, with the volume dropping 22% on the year but remaining steady month-on-month.

    Imports from Indonesia were 1.78 million mt, up 5% year-on-year but down 16% from January to an eight-month low.

    China's imports of Russian thermal coal slipped back below 1 million mt to 729,020 mt in February, up 6% on the year but 28.6% lower than January's one-year high.

    Total lignite imports in February were steady on the year at 3.79 million mt, but fell 9% from January's four-month high. Of the total, 3.25 million mt was received from Indonesia.

    http://www.platts.com/latest-news/coal/london/chinese-february-thermal-coal-imports-lowest-27383819

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    Beijing to cut coal consumption to 12 mln T in 2016


    China’s Beijing planned to cut coal consumption to around 12 million tonnes this year, a decline of 11 million tonnes or 47.8% from the year of 2012, local media reported.

    The volume will be further reduced to 11 million tonnes next year, in a bid to push for a better air condition.

    The closure of Beijing-based Gaojing Thermal Power Plant under Datang International Power Generation Co., Ltd in July 2014, and that of Shijingshan Thermal Power Plant under Beijing Jingneng Power Co., Ltd and Guohua Thermal Power Plant in March last year would help trim 7,400 tonnes of dioxide carbon emissions in Beijing per year, and sharply reduce emissions of nitrogen oxide and dust.

    A total 30 billion yuan ($4.62 billion) had been invested by Beijing authorities in the work of reducing coal burns in the past three years, and efforts will be made to further cut coal burns at suburbs.

    http://en.sxcoal.com/0/143143/DataShow.html

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    Global crude steel output down 3.3pct in Feb


    Crude steel output from 66 members of the World Steel Association (WSA) amounted to 120 million tonnes in February, sliding 3.3% year on year, the latest data showed.

    Over January-February, global crude steel output declined 5% on year to 248 million tonnes, data showed.

    In February, the capacity utilization of crude steel was 66.2%, falling 5.7 percentage points but 0.9 percentage points higher than January.

    China, the world’s largest crude steel producer, saw its output slipping 4% on year and down 7.44% from January to 58.5 million tonnes in the month.

    Meanwhile, Japan’s crude steel output dropped 1% on year to 8.4 million tonnes; output from the US fell 2.9% to 6.4 million tonnes.

    The global steel price posted a narrower decline than January, signaling a stable and weak trend of the market in the short run.

    http://en.sxcoal.com/0/143158/DataShow.html
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    Tokyo Steel hikes April steel bar prices, 1st rise in over 2 years


    Tokyo Steel Manufacturing , Japan's top electric arc furnace steelmaker, will raise prices of construction-used steel bars for April delivery by 5 percent in its first hike in over two years, reflecting a rebound in spot prices at home and abroad.

    The company will increase prices for steel bars, including rebar, by 2,000 yen ($17.83) to 44,000 yen a tonne, it said in a press briefing on Tuesday.

    That is Toyko Steel's first price hike since January delivery in 2014, possibly indicating that the market has bottomed out after slumping on oversupply.

    Tokyo Steel's pricing strategy is closely watched by Asian rivals such as Posco, Hyundai Steel Co and Baosteel, which export to Japan.

    Prices for the company's main product, H-shaped beams, which are also used in construction, and other products including hot-rolled coils and heavy plates will remain unchanged in April.

    "We believe the domestic steel market has hit a floor following a sharp rebound in overseas prices, led by price hikes by Chinese mills," Tokyo Steel's Managing Director Kiyoshi Imamura told reporters.

    On the Shanghai Futures Exchange, construction-used rebar futures for October delivery hit a nearly nine-month high on Monday, as a recovery in China's housing prices boosted hopes for demand for the commodity.

    "We expect an upward trend in steel prices to continue as domestic demand for construction materials is solid and inventory for that steel is low," said Imamura.

    But Japan's crude steel output fell in February for an 18th straight month, the longest streak since the 1997-99 Asian financial crisis, hit by slow auto demand and low export prices.

    Still, Imamura forecast a stronger pick up in local demand in and after summer as a new national stadium project and other Olympic-related works are poised to start early next year.

    http://www.reuters.com/article/tokyo-steel-prices-idUSL3N16U1HN
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