Mark Latham Commodity Equity Intelligence Service

Wednesday 31st August 2016
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    Oil and Gas

    Iraq Pledges to Support an OPEC Freeze Deal, Shifting Its Stance

    Iraq Pledges to Support an OPEC Freeze Deal, Shifting Its Stance

    Iraq would support a proposal for OPEC and other major oil producers to freeze output at talks in Algeria next month, Prime Minister Haidar Al-Abadi said in Baghdad.

    The endorsement marks a slight shift by Al-Abadi, who was quoted by Reuters on Aug. 23 saying that Iraq still hadn’t raised production sufficiently. The country’s deputy oil minister, Fayyad Al-Nima, said the following day that Iraq would support measures to establish fair crude prices.

    The Organization of Petroleum Exporting Countries will hold informal talks during an industry conference in Algiers in September, fanning speculation the group could revive an initiative with non-members such as Russia to limit output. A previous attempt collapsed in April amid political tensions between Saudi Arabia and Iran.

    “Our opinion is to freeze output to support prices,” Al-Abadi said. “The drop in oil prices is causing volatility and this is harming Iraq because our revenues are based on oil.”

    Iraq is the second-biggest member of OPEC, whose other major producers have signaled only qualified backing for an output accord.

    Saudi, Iran

    Saudi Arabian Energy Minister Khalid Al-Falih said Aug. 26 that while a freeze would be “positive” for market sentiment, no “intervention of significance” is required as global markets are rebalancing by themselves.

    Iranian Oil Minister Bijan Namdar Zanganeh said that the country expects to recover its market share -- eroded during years of international sanctions -- as a condition of co-operating with OPEC, according to an Aug. 26 report by news service Shana.

    OPEC gave Iraq an exemption from the individual quotas imposed on members from 1998 as the country contended with years of sanctions and war. While Iraq has boosted output in recent years after signing deals with international companies, its production was still below capacity in July, according to the International Energy Agency.

    Iraq has shown more willingness to co-operate with OPEC as the plunge in oil prices -- down 50 percent since 2014 -- and the fight against Islamic State battered its finances. The country has secured a $5.3 billion loan from the International Monetary Fund to stabilize its reeling economy.  

    The nation’s current expansion plans may be difficult to reconcile with a production freeze. Iraq told international oil companies to boost output after reversing previous instructions to cut investment, Iraq Oil Report said Aug. 23.
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    Mystery of Oil Held on Chinese Islands Puzzles Crude Markets

    China’s got the world puzzling over its oil hoard.

    From underground caverns by the Yellow Sea to a scattering of islands in the Yangtze River delta, the government has been stockpiling crude for emergencies in a network of storage sites dotted around the country. Record purchases this year by the world’s biggest energy consumer have helped oil prices recover from the worst crash in a generation. What the country plans to do next could determine where they go from here.

    The difficulty is that nobody outside China really knows for certain. The government won’t say how much it’s holding or when the tanks will be full. Energy Aspects Ltd. says the country will probably keep buying and fill up commercial tanks if it has to, while the likes of JPMorgan Chase & Co. say the purchases may soon stop. The difference in opinion is equivalent to about 1.1 million barrels a day, or more than the Asian country buys from Saudi Arabia.

    “China seems to feel no obligation to report on its strategic stocks, and that might confer a genuine advantage in its favor,” said John Driscoll, the chief strategist at JTD Energy Services Pte, who has spent more than 30 years trading crude and petroleum in Singapore. “The scope of their purchases can dramatically affect fundamentals and prices. However, since they will likely be shrouded in secrecy, it will remain challenging to quantify the impact.”

    China outlined in 2009 its plans to build reserves equivalent to 100 days of net imports. But since then it’s only provided sporadic scraps of detail on its strategic petroleum reserves, or SPR. That stands in contrast to the U.S., where the Energy Department has been detailing data on American inventories for more than three decades.

    The Asian country had about 191 million barrels of crude in its SPR as of the middle of last year, according to a statement on the website of the National Bureau of Statistics in December. But it also said at the time that total combined capacity of seven above-ground sites and one location with underground caverns was the equivalent of only 180 million barrels. The figures haven’t been updated since.

    The government also said at the time it has leased space in commercial sites, signaling it could buy additional oil while more of its own tanks are constructed. Nobody replied to a fax sent to the press office of the National Energy Administration asking for details about the SPR.

    “SPR has been a China mystery due to the lack of government data disclosure,” said Ying Wang, a Hong Kong-based analyst at JPMorgan. The bank estimates the amount of crude China is putting into stockpiles by calculating how much more oil the country is buying and producing than it’s using.

    Surplus Crude

    That amounted to about 1.2 million barrels a day over the first half of the year, according to JPMorgan. The bank estimates the country built up a total of about 400 million barrels by mid-2016 out of a targeted 511 million barrels. That means at the current rate of stockpiling, the storage would be filled up by August, leading to a potential drop in imports in September.

    Energy Aspects looks at it differently. Because China can shift oil between commercial and strategic storage, the government may be able to increase purchases even if it runs out of its own space, said Michal Meidan, a London-based analyst for the industry consultant. Another 150 million barrels of commercial storage space is coming online by the end of next year that can be filled, she said. That means that while reserve buying may slow, it won’t fall significantly.

    “Even if SPR tanks only come online later in the year, more commercial tanks are starting up,” Meidan said. Energy Aspects sees demand for the reserves dropping by only 100,000 barrels a day in the second half of the year to 300,000 barrels daily.

    China’s oil imports have averaged an unprecedented 7.5 million barrels a day so far this year, government data show. The purchases, along with temporary production outages in Nigeria and Canada, helped rebalance supply and demand in the market, leading Brent crude, the benchmark for more than half the world’s oil, to jump almost 90 percent from mid-January to June.

    Brent crude futures in London traded 0.1 percent lower at $48.31 a barrel by 11:09 a.m. Singapore time. They were at more than $115 a barrel in mid-2014.

    In the U.S., supplies in the strategic reserve were at 695 million as of Aug. 26, enough to support 149 days of import protection, according to data from the Energy Department. The government regularly reports how much oil is at each of its four sites and even breaks down the quantity of crude that’s held by sulfur level. When it purchased supplies for the reserve last year, it did so in a bidding system in which the sellers and even the price were publicly announced.

    Deadline Delay

    China plans to build emergency reserves equivalent to 100 days of net imports by 2020, the nation’s top refiner said in 2009, citing a plan approved by the State Council. It pushed back completion of the stockpile to beyond the 2020 deadline, according to a Five Year Plan released in March 2016.

    “The Chinese seem to embrace the concept of asymmetric information which holds that those in possession of proprietary information and data hold a critical, strategic advantage over the less-informed,” JTD Energy’s Driscoll said.
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    Oil Discoveries at 70-Year Low Signal Supply Shortfall Ahead

    Explorers in 2015 discovered only about a tenth as much oil as they have annually on average since 1960. This year, they’ll probably find even less, spurring new fears about their ability to meet future demand.

    With oil prices down by more than half since the price collapse two years ago, drillers have cut their exploration budgets to the bone. The result: Just 2.7 billion barrels of new supply was discovered in 2015, the smallest amount since 1947, according to figures from Edinburgh-based consulting firm Wood Mackenzie Ltd. This year, drillers found just 736 million barrels of conventional crude as of the end of last month.

    That’s a concern for the industry at a time when the U.S. Energy Information Administration estimates that global oil demand will grow from 94.8 million barrels a day this year to 105.3 million barrels in 2026. While the U.S. shale boom could potentially make up the difference, prices locked in below $50 a barrel have undercut any substantial growth there.

    New discoveries from conventional drilling, meanwhile, are “at rock bottom,” said Nils-Henrik Bjurstroem, a senior project manager at Oslo-based consultants Rystad Energy AS. “There will definitely be a strong impact on oil and gas supply, and especially oil.”

    Global inventories have been buoyed by full-throttle output from Russia and OPEC, which have flooded the world with oil despite depressed prices as they defend market share. But years of under-investment will be felt as soon as 2025, Bjurstroem said. Producers will replace little more than one in 20 of the barrels consumed this year, he said.

    Global spending on exploration, from seismic studies to actual drilling, has been cut to $40 billion this year from about $100 billion in 2014, said Andrew Latham, Wood Mackenzie’s vice president for global exploration. Moving ahead, spending is likely to remain at the same level through 2018, he said.

    Exploration is easier to scratch than development investments because of shorter supplier-contract commitments. This year, it will make up about 13 percent of the industry’s spending, down from as much as 18 percent historically, Latham said.

    The result is less drilling, even as the market downturn has driven down the cost of operations. There were 209 wells drilled through August this year, down from 680 in 2015 and 1,167 in 2014, according to Wood Mackenzie. That compares with an annual average of 1,500 in data going back to 1960.

    10-Year Effect

    Ten years down the line, when the low exploration data being seen now begins to hinder production, it will have a “significant potential to push oil prices up," Bjurstroem said.

    “Exploration activity is among the easiest things to regulate, to take up and down," Statoil ASA Chief Executive Officer Eldar Saetre said Monday in an interview at the ONS Conference in Stavanger, Norway. “It’s not necessarily the right way to think. We need to keep a long-term perspective and maintain exploration activity through downturns as well, and Statoil has."

    The Norwegian company will drill “a significant number” of wells in the Barents Sea over the next two to three years, exploration head Tim Dodson said Tuesday at the same conference. Given current levels of investment across the industry and decline rates at existing fields, a “significant” supply gap may open up by 2040, he said.

    Oil prices at about $50 a barrel remain at less than half their 2014 peak, as a glut caused by the U.S. shale boom sent prices crashing. When the Organization of Petroleum Exporting Countries decided to continue pumping without limits in a Saudi-led strategy designed to increase its share of the market, U.S. production retreated to a two-year low.

    Global benchmark Brent advanced 0.7 percent to $49.59 a barrel at 10:56 a.m. in London on Tuesday.

    Creating Opportunities

    Kristin Faeroevik, managing director for the Norwegian unit of Lundin Petroleum AB, a Stockholm-based driller that’s active in Norway, said it will take "five to eight years probably before we see the impact" on production from the current cutbacks. In the meantime, he said, "that creates opportunities for some.”

    Oil companies will need to invest about $1 trillion a year to continue to meet demand, said Ben Van Beurden, the CEO of Royal Dutch Shell Plc, during a panel discussion at the Norway meeting. He sees demand rising by 1 million to 1.5 million barrels a day, with about 5 percent of supply lost to natural declines every year.

    Less Risk

    Persistently low prices mean that even when explorers invest in finding new resources, they are taking less risk, Bjurstroem said. They are focusing on appraisal wells on already-discovered fields and less on frontier areas such as the Arctic, where drilling and developing any discovery is more expensive. Shell and Statoil, among the world’s biggest oil companies, abandoned exploration in Alaska last year.

    “Traditionally, it’s the big companies that have had the means to gamble, and they might be the ones that have cut the most,” Bjurstroem said.

    Overall, the proportion of new oil that the industry has added to offset the amount it pumps has dropped from 30 percent in 2013 to a reserve-replacement ratio of just 6 percent this year in terms of conventional resources, which excludes shale oil and gas, Bjurstroem predicted. Exxon Mobil Corp. said in February that it failed to replace at least 100 percent of its production by adding resources with new finds or acquisitions for the first time in 22 years.

    “That’s a scary thing because, seriously, there is no exploration going on today,” Per Wullf, CEO of offshore drilling company Seadrill Ltd., said by phone.

    Attached Files
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    Oil Companies Seen Investing $8 Billion to Start Uganda Output

    Uganda expects three oil companies to invest $8 billion in the East African nation before they start producing oil in 2020, Energy Minister Irene Muloni said.

    The government on Tuesday issued production licenses to London-based Tullow Oil Plc and Total SA of France and said that together with Cnooc Ltd., the state-owned Chinese producer, the country expects to pump as much as 230,000 barrels per day of crude.

    “The companies are expected to invest over $8 billion in the infrastructure required for all the production licenses,” Muloni said in the capital, Kampala. “This investment will be for the drilling of about 500 wells, construction of central processing facilities and feeder pipelines, among others.”

    The companies are expected to make their final investment decisions within 18 months, Muloni said. The licenses will run for 25 years, with the possibility of them being renewed for a further five years, she said.
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    Norway’s Statoil opens North Sea Christmas present early

    Statoil today said it had unwrapped one of its Christmas presents four months early.

    The Statoil-operated Gullfaks Rimfaksdalen field in the Norwegian North Sea was slated to start production on Christmas Eve, but is already on stream.

    The company, which owns 51% of the field, also managed to cut costs to NOK 3.7billion from NOK 4.8billion.

    Statoil said Gullfaks Rimfaksdalen was an example of one of its fast-track projects that are completed quickly and cheaply through the use of existing infrastructure.

    Gas is taken from the field to the Gullfaks A platform using a pipeline that was already in place.

    It is then transported to a processing plant at Karsto north of Stavanger for processing ahead of export to Europe.

    The field contains recoverable reserves of about 80 million barrels of oil equivalent, mostly gas.

    The other licensees are Petoro, with a 30% stake, and OMV, with 19%.

    Torger Rød, senior vice president for project development in Statoil, said: “I am pleased to see that the project starts up four months ahead of plan, demonstrating good and efficient project management.

    “Over time we have focused on reducing costs and raising the profitability of our projects to ensure long-term activity and value creation on the Norwegian continental shelf (NCS).

    “Based on a smart concept using standard solutions and existing infrastructure, Gullfaks Rimfaksdalen strongly proves that we are on the right track to succeed on this work.”

    Arne Sigve Nylund, Statoil’s executive vice president for development and production in Norway, said: “The volumes from Gullfaks Rimfaksdalen help us reach our ambition of maintaining production and a high activity level on the NCS beyond 2030.

    “We have a well-developed infrastructure and we will keep realising opportunities in the North Sea.

    “This development leads to more production, improved value creation and higher activity level on Gullfaks, and also throughout the value chain related to the field.”
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    Rebound in Asian refining margins may be short-lived

    A rapid rebound in Asian refining margins ahead of the autumn maintenance season could prove short-lived as it may prompt refiners to lock in quick profits by increasing their run rates.

    Singapore refining margins to Dubai crude DUB-SIN-REF hit a 10-month high of $3.32 a barrel on Friday. Though they have since fallen back to $2.19 a barrel on Tuesday, they are still at the highest level since January and more than double levels seen this time last year of around $1.

    Margins typically rise in August before refineries close for maintenance but this year's rise in Asia has been accentuated by two other factors.

    "The rebound is driven mainly by gasoline and weakness in the Dubai benchmark which is flipping back to contango," said Nevyn Nah, an oil products analyst at research firm Energy Aspects.

    Indonesian motorists are buying more petrol amid cheaper pump prices and gasoline supplies in the United States have tightened after hurricanes in the Gulf of Mexico delayed shipments, analysts said.

    Refiners also enjoy better margins when the crude market is in contango as it means their feedstock costs are lower. In a contango market, prices of oil for delivery today are lower than those in the months ahead.

    However, Asian refining margins could start to fall if their current strength encourages refiners operating below capacity to maximise refinery run rates where possible. Some could even postpone some planned September/October maintenance work to take advantage of fat margins, traders said.

    "I think refineries will make hay whilst the sun is at least peeking out, not shining," said Matt Stanley of brokerage Freight Investor Services (FIS) in Dubai. "But alas with higher runs of products, the global product glut could increase, further putting pressure on prices."

    That could dash refiners' hopes that demand for the autumn refinery maintenance season in September and October would help draw down product inventories and reduce the glut in global product supplies.

    The oil markets expect upcoming winter demand for products to rise from 2015 when a warmer than expected winter depressed demand, but that may not enough.

    "This temporary rebound in margins would basically unravel the rebalancing of the products market that has just started, which means that winter would have to be extraordinarily cold in order to draw down product supplies," Nah said.
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    Militants attack Niger Delta pipeline

    A militant group has taken responsibility for an attack on a pipeline operated by the Nigerian Petroleum Development Company (NPDC).

    The incident comes after the Niger Delta Avengers (NDA) said they had halted hostilities after months of attacks in the region.

    In a statement, the Niger Delta Greenland Justice Mandate said it had attacked the Ogor-Oteri pipeline in Niger Delta state, operated by the NPDC and Nigerian energy company Shoreline at around 3am.

    A spokesman for the NPDC and Nigerian energy company Shoreline said the incident happened in the early hours of Tuesday morning.

    OPEC member Nigeria has seen its oil output fall by around 700,000 barrels a day to 1.56 million bpd due to attacks on oil pipelines in the southern energy hub, home to much of the country’s oil and gas wealth, since the start of the year.
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    Gazprom Profit Falls Less Than Expected as Ruble Strengthens

    Gazprom PJSC’s profit shank less than expected in the second quarter as a strengthening ruble helped ease the world’s biggest natural gas producer’s debt burden.

    Net income fell 17 percent from a year earlier to 244.9 billion rubles ($3.8 billion), the Moscow-based company said in a statement late Monday. That compares with an estimated 186 billion rubles in an Interfax survey. Earnings before interest, taxes, depreciation and amortization, or Ebitda, also beat estimates. The producer booked a net gain related to the stronger currency of about 152 billion rubles.

    “The second quarter was the worst for Gazprom this year, and the results are better than expected,” said Andrey Polischuk, an analyst at Raiffeisen Bank in Moscow. The company’s gas prices in its most lucrative markets, Europe and Turkey, are set to recover until the end of the year. “Gazprom even has a chance to see a positive cash flow -- close to zero but still positive -- if oil remains at about $50 a barrel and depending on the cold season.”

    The Kremlin-backed exporter, which supplies about 30 percent of the European gas needs, has faced a drop in its dollar-denominated gas-export earnings to the lowest since at least 2005 as most of contracts are linked to crude prices with a time lag of six to nine months.

    Even with oil hovering below $50 a barrel, the company expects positive free cash flow this year, deputy head Andrey Kruglov said in June, declining to elaborate on the outlook.

    Revenue increased 4.9 percent to 1.33 trillion rubles. Net debt fell 15 percent from the start or the year to 1.76 trillion rubles, mostly because of the currency strengthening.
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    Shell Says: While Gas Is the Future, It Won’t Be Traded Like Oil

    Natural gas is rapidly becoming one of the most traded global commodities, but that doesn’t mean it will have a global price, according to Royal Dutch Shell Plc.

    While the fuel can be transported anywhere on liquefied natural gas carriers, it will probably remain regionally priced for the time being, with some contracts continuing to track oil, said Roger Bounds, senior vice president for global gas at Shell. Prices will depend on location, regulation and infrastructure, as some countries replace coal in electricity generation to cut carbon emissions.

    “I shouldn’t say it’s not possible, but what would it take for such a price to be possible?” Bounds said in an interview in Stavanger, Norway. “We have some way to go.”

    For a global gas price to emerge, pipelines would need to shed some interstate regulations like in the U.S., trade data would need to be more transparent and widely available and buyers and sellers would need more confidence their contracts will be respected, he said. Europe is partly on that path with some hub pricing, he said.

    “We’re somewhere back from that in a number of other markets,” Bounds said. “We’re not that close to that in India, we’re not close to that in China.”

    Interchangeable Sources

    Until then, there will be many two-party gas trades. Additionally, conventional contracts that link the price of gas to the price of oil will remain, partly because the two will become increasingly interchangeable as energy sources.

    Those changes to the global gas market structure will come amid a renaissance for the fuel, Shell says. It will probably be used more because when transitioning to a lower-carbon economy, gas complements renewable energy sources, which aren’t yet able to consistently provide uninterrupted electricity to customers during peak periods.

    Additionally, some European countries may introduce a floor on the price of carbon that could hasten a switch to gas-fired power.

    “There’s been a period of weakness in carbon prices in Europe but in the near future we’re likely to see that starting to bite,” Bounds said. When that happens, “we think more gas will get drawn into the system,” he said.

    LNG Consumption

    European Union carbon has dropped 85 percent from its peak in 2006 as lawmakers struggle to deal with a glut. The price hasn’t been high enough to rid Europe of coal use.

    Bounds expects global LNG consumption to climb by 5 percent to 7 percent a year. A trend of declining usage in Europe may also reverse due to the higher demand, with supply coming from U.S. export terminals and fields in Russia and North Africa. Shell CEO Ben Van Beurden said on Monday that he expects gas demand to grow at twice the pace of oil.

    At the moment, there is a global glut of natural gas as producers scramble to gain a foothold in the expanding market. That will probably balance out in the early 2020s, said Bounds.

    Attached Files
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    API data shows rise in US oil inventory

    U.S. crude stocks rose by 942,000 barrels in the week to Aug. 26 to 525.2 million, nearly in line with analysts' expectations for an increase of 921,000 barrels, data from industry group the American Petroleum Institute showed on Tuesday.

    Official U.S. oil inventories data published by the EIA is due for release on Wednesday.

    Concerns over refinery production outages caused by storm threats in the Gulf of Mexico have done little to support prices as a product glut in the United States persists.
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    Shell divests Gulf Of Mexico assets for $425 million plus royalty interests

    Shell divests Gulf Of Mexico assets for $425 million plus royalty interests

    Royal Dutch Shell plc, through its affiliate Shell Offshore Inc. (Shell), today announces it has an agreement to sell 100 percent of its record title interest in Gulf of Mexico Green Canyon Blocks 114, 158, 202 and 248, referred to as the Brutus/Glider assets, to EnVen Energy Corporation, through its affiliate EnVen Energy Ventures, LLC. In line with Shell's global divestment plans, this transaction includes $425 million in cash.

    The transaction is expected to close in October.

    The Brutus/Glider assets include the Brutus Tension Leg Platform (TLP), the Glider subsea production system, and the oil and gas lateral pipelines used to evacuate the production from the TLP. The Brutus/Glider assets have a combined current production estimate of approximately 25,000 barrels of oil equivalent per day (boe/d).
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    ExxonMobil, BP, ConocoPhilips back out of Alaska LNG

    ExxonMobil, BP and ConocoPhilips are looking to exit the Alaska LNG project following a report by Wood Mackenzie stating the project’s competitiveness ‘ranks poorly’ under current market conditions.

    Speaking to the Alaskan House and Senate Resource Committees, David  Van Tuyl, regional manager for BP in Alaska, noted the project is commercially challenged.

    The pre-FEED work on the Alaska LNG project is over 90 percent complete, however, Van Tuyl noted that the next phase will likely cost over one billion dollars.

    “We  don’t  want  to  rush  into  the  largest  energy  project  in  North  America  only  to  end  up  losing  lots  of  money  for  all  of  us.   So  right  now  is  not  the  time  to  make  that  commitment,” he said.

    He stressed BP has not given up on the project but noted the cost of supply have to be reduced in order to make the project competitive.

    Bill McMahon, ExxonMobil’s senior commercial advisor for the project said that the company supports the state’s plans to assume full management of the project through Alaska Gasline Development Corp.

    The company will be a part of the development of Alaska’s North Slope natural gas resources through investment in the development of Prudhoe Bay and Point Thomson and by making gas available for sale for the project.

    Alaska’s governor Bill Walker commented on the report by Wood Mackenzie stating that at current LNG market prices, Alaska LNG project could struggle to make “acceptable returns even under US$70/bbl price,” saying that there is still potential for the project to be viable.

    By exploring alternative project structures it could be economically viable even at $45/bbl oil prices, Walker said.

    AGDC, that is currently holding transition meetings with BP, ConocoPhillips, and ExxonMobil, said it expects the transition to be completed by the end of the year.

    According to AGDC’s plans, FEED work could start in 2018 while the construction could begin in 2019.

    The liquefaction and export facility of the $45 billion-plus Alaska LNG project will be built on the eastern shore of Cook Inlet on the Kenai Peninsula. The plant would receive gas via an 800-mile pipeline from the North Slope and is expected to be able to produce about 20 mtpa of LNG from three liquefaction trains.
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    Cabot to Double PA Gas Production by 2019 – Without Constitution

    It’s no secret that Marcellus and Utica drillers need new pipelines–and they need those pipelines urgently. Especially in Pennsylvania where lack of pipelines is keeping inventories high and prices for natural gas the lowest in the country.

    However, drillers must deal with reality as it is–today. Pipelines take time to build, and recent efforts to block pipelines are delaying important projects like the Constitution and PennEast pipeline projects.

    The good news is that some pipeline projects *are* being built in the northeast, some of which are almost done. Drillers like Range Resources are ramping up new drilling now, about six months in advance of when new pipelines are due to go online.

    That’s about how long it takes to put the pieces in motion.

    The other good news is that some drillers, like Cabot, are finding new markets that DON’T require new pipelines–like selling a tremendous volume of natgas to new gas-fired electric generating plants situated in close proximity to Cabot’s wells.
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    Alternative Energy

    Hollande says Paris climate change deal far from being implemented

    French President Francois Hollande said on Tuesday an international deal on climate change agreed in Paris last year was still far from being implemented and called on countries to ensure it was ratified by year-end.

    "The immediate urgency is to ensure the (climate agreement) is put into action by year-end. That's far from being achieved. I ask you to double your efforts to push countries where you reside to ratify the accord before Marrakech," he said addressing an annual gathering of French ambassadors.
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    Yunnan's power transmission exceeds 500 TWh

    Southwestern China's Yunnan province transmitted a total 500.4 TWh of electricity to eastern cities of China since 1993 till August 9 this year, of which 75% were clean energies, the China News reported on August 31.

    The province, boasting rich resources of water and solar energy yet suffering backward economy, began to supply electricity to Tianshengqiao in Guizhou province through a 220 KV power transmission line in August 1993.

    Later in end-2001, it pledged to vigorously develop power industry to be another pillar industry of the province.

    Over 2006-2015, the installed capacity of power generation in Yunnan increased to 80 GW from 10 GW, which further accelerated the construction of electricity outbound channels.

    Yunnan saw its "West-to-East" power transmission capacity nearly triple to 25.2 GW, compared to 9.3 GW in 2010, accounting for 59% of the total capacity of "West-to-East" power transmission projects from China Southern Power Grid.

    The Yunnan Grid realized asynchronous connection with China Southern Grid on July 1 this year, which upgraded electricity transmission channel consisting of four AC and four DC lines into seven DC power transmission lines. The move was expected to strengthen electricity supply in Guangdong and Guangxi while enhancing the revenue of Yunnan.

    As present, the daily power outbound transmission of Yunnan Grid accounted for over 60% of China Southern Grid.

    Yunnan Grid announced that its "West-to-East" power transmission capacity will increase to 31.2 GW over 2016-2020.
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    Fertilizer giants Potash Corp, Agrium talk merger- Bloomberg

    Canadian fertilizer companies Agrium Inc and Potash Corp of Saskatchewan Inc are in talks to merge, Bloomberg reported on Tuesday, in what would be a tie-up of the world's biggest crop nutrient company by capacity and North America's largest farm retailer.

    The combination could be announced as soon as next week, Bloomberg reported, citing people familiar with the matter.

    No final decisions have been made and the companies could decide against a deal, Bloomberg said.

    Spokespeople for the companies could not be reached.

    Fertilizer companies have suffered lower profits as prices of crop nutrients, especially potash, have tumbled to multi-year lows due to excessive supply and weak demand, tied partly to softer currencies in buyer markets such as Brazil.

    "I think (a merger) will make them a better force to compete on a global scale," said Mohsin Bashir, portfolio manager at Stone Asset Management Ltd, which owns Agrium shares, adding however that regulator approval may be difficult to gain.

    Potash Corp is the third-biggest seller of potash globally, but owns the most capacity, some of which is idle due to the industry's slump. It also produces nitrogen and phosphate fertilizer.

    Merging with Agrium would give Potash a direct channel to U.S. farmers through Agrium's retail stores, which as of May accounted for 17 percent of the U.S. market.

    It also would allow Potash to diversify from its heavy weighting in its namesake nutrient, said Chris Damas, principal of BCMI Research.
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    US growers eye more soybeans, less corn

    Strong demand and profitable hedging opportunities on this year’s crop may convince farmers to boost their soybean acreage again next year, according to Farm Futures first survey of 2017 planting intentions.

    Results of the annual survey, typically the first in the industry, were released on the opening day of the Farm Progress Show, held this year near Boone, Iowa.Growers said they are considering devoting a record 84.4 million acres to the oilseed, up almost 1% from 2016. But at the same time, they plan to put in less corn and wheat.

    Though farmers have shown a preference for corn historically, red ink may trim plantings to only 93.1 million acres next spring. That would be down around 1 million from 2016, when they boosted plantings 7%. Wheat seedings could be lower for the fourth consecutive year, in a market beset by low prices.

    Producers said they were ready to plant 49.1 million acres, down 3.4%, which would be the lowest total since 1970. Most of the cutback would come in hard red winter wheat sown on the central and southern Plains, which had very good yields in 2016, and very weak cash prices as a result. Hard red winter wheat seedings could fall nearly 1.4 million, to 25.1 million.

    Soft red winter wheat could also be down, losing 2.7% to 6.4 million. But growers in the Pacific Northwest could be ready to boost white wheat planting modestly if conditions allow.On the northern Plains, spring wheat ground could fall nearly 2% to 11.9 million, with durum down slightly after an increase in 2016.

    Two other crops besides soybeans could pull a little acreage away from wheat and corn. Growers said they want to boost cotton plantings about one-half of 1% to 10.1 million. Sorghum ground could also be up less than 1% to 7.3 million.The survey queried 1,225 growers from around the U.S. during late July and early August.

    Producers were invited by email to fill out an online survey about their planting plans.With harvest of 2016 crops barely underway, much obviously could change by the time planters start rolling, said Farm Futures grain market analyst Bryce Knorr, who has conducted surveys for the magazine since 1988.“Farmers show a tendency to base planting decisions on what worked the previous year, and soybeans were profitable for growers able to take advantage of hedging opportunities this summer,” Knorr said.

    “Strong buying from China also provides a much better fundamental underpinning for the market compared to corn and wheat, which lack demand drivers.”Knorr said the ratio of new crop soybean to corn futures favors soybeans, though prices for both crops are well below break-even levels.“Another factor to watch is moisture for seeding winter wheat,” he continued. “Above average rainfall is forecast over the central Plains into September, which could convince more farmers to plant wheat, hoping to double crop soybeans behind it.

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    Precious Metals

    Scientists find way to extract gold from old gadgets

    Scottish scientists have developed a new method for recovering gold from old gadgets such as mobile phones, TV’s and computers, which not only doesn’t require the use of toxic chemicals, such as cyanide, but it is also said to be more effective than current techniques.

    According to the researchers from the University of Edinburgh, who have just published their findings in the journal Angewandte Chemie, their extraction method could help recover about 300 tonnes of the precious metal used in electronics each year.

    Researchers from the University of Edinburgh say their method could help recover about 300 tonnes of the precious metal a year.

    They estimate that electrical waste contains as much as 7% of all the world’s gold as the precious metal is a key component of the printed circuit boards found inside most modern devices.

    The team’s proposed technique involves submerging printed circuit boards in a mild acid to dissolve the metal parts, before adding an oily liquid containing the team's chemical compound. That solution then helps extract gold selectively from the complex mixture of other metals, the researchers say.

    The findings could aid the development of methods for large-scale recovery of gold and other precious metals from waste electronics, the team says.

    "We are very excited about this discovery,” Professor Jason Love, who led the research, said in a statement. “We have shown that our fundamental chemical studies on the recovery of valuable metals from electronic waste could have potential economic and societal benefits."

    The study, funded by the Engineering and Physical Sciences Research Council, is one of many staff and student-led initiatives at the University of Edinburgh to promote the so-called “circular economy,” which encourages reuse of materials and greater resource efficiency.
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    Mothballed Ghana gold mine reveals risk of reliance on minerals

    Two years after AngloGold Ashanti suspended production at its giant but loss-making gold mine in Obuasi, central Ghana, the boom of underground explosions has resumed.

    Lacking any alternative in an area devastated by the mine's closure and the loss of thousands of jobs, hundreds of people broke into the site, dug shafts by hand and grew so bold in their quest for gold they started using explosives.

    Earnings as high as 10,000 cedis ($2,600) a month from the illicitly mined gold mean people are willing to gamble with their lives.

    "This work is risky work. Some people go there and on their first time they don't come back," said Barack Godspeed, 27, who says mining is his only option even though he has a science degree.

    Obuasi's downturn highlights the pitfalls of Ghana's - and Africa's - dependence on its mineral sector and the question of how countries will adjust as natural resources start to dwindle.

    For decades Obuasi and its 100-year-old mine attracted jobs and investment, to the envy of other towns. It even boasted a premier league football team, Ashanti Gold.

    Since the mine fell silent, residents say unemployment soared, crime rose and the town's secondary businesses suffered.

    "None of us really considered that there could be a time when the mine is no more," said Kwabena Kwarteng, a local MP.

    Metals, fuels and ores represent 60 percent of Africa's exports, the World Bank said in a recent report, making it vulnerable to global price swings. The recent slump has reduced average growth in oil-producing countries from 5.4 percent in 2014 to 2.9 percent last year.

    Ghana's experience illustrates the problem. A boom that relied on exports of gold, cocoa and oil saw five years of sustained GDP growth at around 8 percent and lifted Ghana to official 'middle income' status.

    Since 2014, however, growth has slowed sharply, coinciding with the commodities slump.

    The government began following an aid deal with the International Monetary Fund last year to reduce its inflation, public debt and fiscal deficit.

    "You can tell the whole story of the mining industry in Africa and in Ghana in particular through Obuasi," said Emmanuel Kuyole, Africa deputy director of the Natural Resource Governance Institute.

    "There wasn't serious thinking about Obuasi beyond the mine and now the mine has nearly closed and the other investments aren't sustainable," he told Reuters.

    Since the mine stopped producing, AngloGold has maintained social commitments including treating water, providing free power to some communities, building schools, donating medical equipment and running a malaria programme, according to Eric Asubonteng, managing director of AngloGold Ashanti Ghana.

    But that help and payments to unemployed miners cannot sustain the local economy, residents and union officials said.

    Benjamin Annan of the Association of Small Scale Miners in Obuasi said part of the problem was that farmland in the vast mine concession area was off limits or had been damaged, cutting off a potential source of employment.

    Businessman Michael Mensah said trade at his shop, which sells tiles and plumbing equipment, had plummeted since the lay-offs. Even the football club is now in trouble.


    AngloGold officials say at least 25 illegal miners have died this year in accidents.

    The illegal shafts extend down up to 50 metres, stiffened with interlaced branches to prevent collapse. Miners descend with torches and tools and pass sacks of ore to the surface.

    Those shafts now intersect with AngloGold's vast network of tunnels, allowing illegal miners to penetrate deeper.

    Working in gangs, they have reached 2,100 feet in depth and use explosives to try and breach the thick concrete bulwarks erected by the company to prevent access to elevator shafts that lead straight down to the richest seams, company officials said.

    Obuasi's ageing labyrinth of tunnels makes access to the remaining 9.5 million ounces of reserves uneconomic.

    AngloGold is building a tunnel to allow trucks to drive from the surface to the deepest point but the illegal mining has halted the project and also deters potential investors.

    "The best approach to getting things done sustainably ... is to ensure that the mine itself that is the core business is back on its feet in a proper way and ... the illegal mining ... is certainly not helping," said AngloGold's Asubonteng.

    He also says the government failed to keep illegal miners out. The firm has sought arbitration with the Ghanaian government at the International Centre for Settlement of Investment Disputes in Washington.

    "They (the government) are trying to get these guys out without losing one pint of blood," said Toni Aubynn, chief executive of the government's Ghana Minerals Commission.
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    India may auction diamond mine abandoned by Rio Tinto

    India will auction a diamond project that global miner Rio Tinto is abandoning, or allocate it to a state firm, the mines secretary said on Tuesday, adding that the government would move fast to tap the resource.

    The Bunder deposit, about 500 km (300 miles) southeast of New Delhi and discovered by Rio Tinto in 2004, is estimated to contain about 27.4 million carats of diamonds potentially worth billions of dollars.

    But Rio Tinto said this month it would pull out of the project, on which it has spent about $500 million, by the end of the year to conserve cash and cut costs.

    In early August, the company reported a 47 percent slump in first-half profit to its weakest in 12 years and underlined the importance of cost-cutting.

    Mines Secretary Balvinder Kumar told Reuters in an interview the withdrawal was a surprise as the company was close to getting a forest clearance for the mine from the environment ministry.

    Rio Tinto's decision came at a time when the government was seeking the help of it and its rivals, such as Anglo American, to explore for diamonds and gold to make India a major mineral producer.

    "It's a commercial decision taken by their headquarters in which we could have not done anything," said Kumar, who has been briefed by Rio Tinto India management on the exit.

    "Bunder is one of the best deposits in India and we would like to make sure that it is tapped."

    Kumar said he would talk to parties interested in Bunder when Rio Tinto formally hands the project back to the state government of Madhya Pradesh, where it is located.

    He said Madhya Pradesh already had a lot of data on the mine that can be shared with potential bidders or any government company willing to develop it.

    Rio Tinto has said the company would work with the government on the future of Bunder and was "looking at options for a third-party investor to carry forward the development of the project".
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    Base Metals

    Mongolia asks Rio Tinto to speed up work on giant copper mine

    Mongolia's Prime Minister has asked Anglo-Australian miner Rio Tinto to step up the pace of construction at the giant Oyu Tolgoi copper/goldmine, part of efforts to revive the country's debt-ridden economy.

    Jargaltulga Erdenebat assured Rio Tinto's copper chief Arnaud Soirat that Mongolia would honour its past agreements with Rio Tinto, and called on the company to do the same.

    "For Oyu Tolgoi, the Mongolian policy to work together with Rio Tinto is already set," he was quoted as saying in a statement posted on Mongolia's official government website.

    "You need to comply with contract obligations and speed up the momentum of work," he told Soirat, adding that Oyu Tolgoi should procure construction materials like cementfrom Mongolian service providers only.

    The launch of Oyu Tolgoi in 2009 helped kickstart a mining-driven economic boom in Mongolia, but it quickly sparked concerns that the country's resources were being sold off on the cheap, and legislators repeatedly tried to renegotiate the terms of the original agreement in a bid to raise Mongolia's stake.

    Rio Tinto's majority-owned Turquoise Hill Resources has a 66% stake in the mine, with the Mongolian government holding the remainder.

    Dale Choi, an analyst for research firm Mongolian Metals &Mining, said the Prime Minister has made it clear thatMongolia would not repeat past mistakes by interfering with the running of Oyu Tolgoi.

    "The Prime Minister understands that the more quickly Oyu Tolgoi develops, the more profitable it is for the government," he said.

    The expansion of Oyu Tolgoi was delayed for two years amid concerns about rising costs, and revenues have suffered as a result, with the project still dependent on lower-quality ore dug from its openpit mine, which has been in operation since 2013.

    Work on the lucrative underground phase finally got underway this year, and Rio Tinto has received $5.3-billion inproject financing from banks with the option to draw down an additional $1.6-billion.

    Elected in a landslide in late June, Mongolia's new government has pledged to restore the confidence of foreign investors. It is now grappling with a 20.6% budget deficit, a currency in freefall and a decline in coal and copper demand from its major customer, China.
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    Chile produces 447,558 mt of copper in July, down 1.5%

    Chile produced 447,558 mt of copper in July, down 1.5% from the same month of last year, statistics institute INE said Tuesday.

    INE attributed the decline to lower ore grades at a number of copper mines.

    But the fall is lower than the monthly drop of more than 5% recorded in the previous three months.

    Copper production during the first seven months of the year totaled 3.227 million mt, down 5% from the same period of 2015.

    Chile is the world's largest producer of copper, accounting for around 30% of global mine production.

    However, production has been hit in recent years by falling ore grades, water shortages, flooding and mine closures as a result of the drop in the copper price.

    Last month, the Chilean Copper Commission predicted that copper production would fall 0.5% this year to 5.738 million mt, largely on lower production at BHP Billiton's Escondida operation, the world's largest copper mine, where output has been curtailed by lower ore grades.

    According to Cochilco, the mine produced 539,800 mt of copper during the first six months of 2016, down 21.9% from the first half of last year.
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    Chile orders two copper mines suspended after fatal accidents

    Chile's mining regulator on Tuesday ordered a halt to all operations at two major copper mines, state-owned Codelco's Chuquicamata and Freeport-McMoran's El Abra, to investigate separate fatal accidents.

    "We are concerned that today August 30 we had two accidents with three lost lives," said Rodrigo Alvarez, the head of the Sernageomin regulator, in a tweeted video comment.

    "We've made two very difficult decisions for the industry. We've ordered the provisional and total suspension of both mines," Alvarez added.

    Codelco, the world's No 1 copper producer, suspendedoperations at century-old Chuquicamata after two workers were killed when the vehicle they were driving collided with agiant mining truck at around 1 pm local time.

    El Abra said that a worker died after an accident at its acid unloading terminal.

    "All the workers are affected," the president of El Abra's union, Juana Mejias, said as she choked back tears. "This is really terrible and it hurts and is a product of excess workload in which the company cares about producing and producing and has pushed safety to the sidelines."

    When asked about the union leader's comments, Freeportreferred to an earlier statement that said the company reiterates its commitment to worker safety.

    The accidents come at a time when mining companies across the industry have cut costs and laid off workers to cope with plummeting copper prices.

    Century-old Chuquicamata produced 309 000 t of copper in 2015. El Abra, which is 51% owned by Freeport and 49% owned by Codelco, produced around 147 000 t of copper last year.
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    Steel, Iron Ore and Coal

    Indian July coal imports dip 11pct on year

    India imported 18.03 million tonnes of coal in July, declining 11.14% from the year-ago level on the back of higher domestic availability of the fossil fuel, showed data from Indian mjunction services limited, an online procurement and sales platform jointly floated by Steel Authority of India and Tata Steel.

    Of the coal imported, 68.72%, or 12.39 million tonnes, was non-coking coal, followed by coking coal at 20.85% (3.76 million tonnes) among others.

    The ecommerce company attributed the decline in July imports to number of factors including monsoon, when imports generally come down, said Viresh Oberoi, CEO and MD of mjunction.

    "In addition, firmness in international coal prices since beginning of June and higher availability of domestic coal also impacted imports," added Oberoi.

    According to PwC's Kameswara Rao, thermal coal imports, after a dip last year, will be at similar levels, indicating a flat trend on the whole.

    The real change is that with surplus generation capacity and adequate supplies of domestic coal, imported coal-based power plants are largely filling in the marginal gaps in demand requirement, taking opportunistic advantage of price movements, he said.

    Further, with many imported coal-based load power plants operating at lower utilisation, the overall volume of imports is likely to remain flat.

    The government had earlier said that coal imports will further come down in the ongoing fiscal year on account of increased domestic output.

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    Australian fund takes over Anglo American's Foxleigh coal mine

    Anglo American, one of the world's largest miners, sold its 70% stake in Foxleigh coal mine in Queensland of Australia to a joint venture led by Taurus Fund Management on August 29, as part of efforts in completely exiting from coal recently announced by Anglo.

    Anglo said the new owners included POSCO, Nippon Steel and Middlemount South Pty – a subsidiary of Taurus Funds Management, yet the sum was not disclosed.

    Scott Graham, chief operating officer of Middlemount South, said the company plans to keep the mine in production, and meet all current sales contracts.

    Anglo bought its majority stake in Foxleigh mine at $620 million in 2007 under former chief executive Cynthia Carroll in a bid to grow its share of the coal market. The mine produces around 2.5 million tonnes of the steel-making commodity a year.

    Anglo was expected to benefit $3-$4 billion from asset sales this year. Yet the miner reported an $813 million loss over the first half of this year, compared with the $3 billion it logged in the same period last year, said Mark Cutifani, chief executive of Anglo.
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    BHP CEO Mackenzie’s bonus axed after fatal Samarco dam failure

    BHP Billiton CEO Andrew Mackenzie won’t get his 2016 bonus following last year’s fatal dam collapse at the Samarco iron-ore mine in Brazil.

    “The tailings dam failure at Samarco in November 2015 was a key consideration, along with the ongoing decline in commodity markets,” a BHP spokeswoman said in an e-mailed statement Wednesday.

    The board’s decision came after Mackenzie had indicated this was an appropriate move, she said. Bonuses for other senior executives will also be discounted.

    Mackenzie, who is paid an annual base salary of $1.7-million, could have earned a maximum of $4-million as a short-term bonus, according to the company’s most recent remuneration report. He was awarded 85% of his short term incentive plan in the year to June 30, 2015, after five fatalities during the year.

    A report this week found the collapse at the mine, a joint venture with Brazil’s Vale SA, was caused by part of the structure liquefying after a series of misguided efforts to fix structural defects hindered drainage. Brazilian prosecutors are finalizing a criminal investigation into the disaster and expect to ask a judge by the end of September to charge employees.

    BHP’s chief commercial director Dean Dalla Valle said after the release of the report that there was no evidence that anyone put production over safety or reason to believe anyone at BHP had any information that indicated the dam was in danger. Samarco and its owners declined to comment on the criminal case.

    The probe indicates that there was evidence that the risk of a dam breach rose in the years prior to the accident, ProsecutorEduardo Aguiar said Tuesday in an interview in Belo Horizonte. Samarco’s decision to continue increasing output, rather than halting operations to properly address the growing dam issues, was one of the major causes of the rupture, he said.

    Samarco, a venture owned by Vale SA and BHP, denies wrongdoing. While the criminal investigation is focusing on the role of Samarco employees, it may eventually shift to Vale and BHP, whose representatives are on the venture’s board of directors.
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    Baosteel sees China's 2016 steel consumption down nearly 3 pct y/y

    Baoshan Iron & Steel , China's top listed steelmaker, expects the country's apparent consumption of crude steel to drop to 680 million tonnes this year from 698 million in 2015, Dai Zhihao, its general manager, told an online briefing.

    The forecast from Baoshan Iron & Steel, or Baosteel, comes at a time when China, the world's top producer of the alloy, is stepping up efforts to slash a huge overcapacity that has boosted cheap exports amid slowing demand at home.

    China has promised to slash steel capacity by 45 million tonnes this year. .

    Dai said Baosteel's parent company, China's No. 2 steel producer - the Shanghai-based Baosteel Group, would cut 12.20 million tonnes of capacity through 2018, in line with Beijing's efforts to curb oversupply in China's steel sector. It had previously planned to reduce 9.2 million tonnes of capacity.

    Overcapacity in China's steel sector has created trade tensions, with India, Australia and the United States imposing duties on Chinese steel exports amid allegations of dumping.

    In fact, U.S. regulators have launched an investigation into complaints from United States Steel Corp that Chinese steelmakers, including Baosteel Group, stole its secrets and fixed prices.

    Dai cautioned that the outcome of this probe would have a big impact on Chinese steel exports to the United States.

    The listed unit, Baosteel, expects to ship out more than 3.4 million tonnes of steel products this year. The company recently reported higher profits for the six months to June, aided by cost-cutting measures.

    Baosteel has previously said it was restructuring, together with Wuhan Steel, amid wide expectations the two firms will be merged.

    Dai declined to disclose the latest progress, but said China's steel sector would require mergers and acquisitions to increase the share of top mills which might take two decades.

    In the short term, Dai expects steel prices to get a boost from a seasonal recovery in demand after the summer and China's crackdown on the sector's overcapacity.

    Shanghai rebar prices fell to their lowest in almost a month on Wednesday on worries about demand, but for the year the market is still up about 43 percent.
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    Shares of two largest steelmakers suspended for at least another month

    Shares of two largest steelmakers suspended for at least another month

    Shares of Wuhan Iron and Steel (Group) Corporation and Baosteel Group Corporation will continue to be suspended for at least one month, as the two state-owned steelmakers restructure their major assets in view of merger, China Daily reported.

    Wuhan Iron and Steel (Group) Corporation, China's fourth-largest steelmaker by output, planned to reorganize the assets of the iron and steel business with one of its rivals Baosteel Group Corporation, Wuhan Iron and Steel (Group) Corporation said in an interim statement.

    The move was preliminary, since they haven't signed the framework or agreement of intent, but the merger between the two largest Chinese iron and steel groups would play a leading role in reducing excess capacity of the industry.

    During the suspension, according to Wuhan Iron and Steel Co Ltd in a statement, the company would carry out audits, address legal and financial issues, and perform a due diligence review.
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