Mark Latham Commodity Equity Intelligence Service

Wednesday 15th March 2017
Background Stories on www.commodityintelligence.com

News and Views:

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    Macro

    China Jan-Feb power generation rises 6.3pct YoY


    China generated 931.5 TWh of electricity over January-February, gaining 6.3% year on year, showed data from the National Bureau of Statistics (NBS) on March 14.

    Of this, thermal power output stood at 728 TWh, or 78.2% of the total power generation, rising 7% year on year; while hydropower output reached 122.9 TWh, or 13.2%, down 4.7% from the year prior; followed by wind power output at 39.8 TWh, rising 26.9% from a year ago; nuclear power output at 33.4 TWh, rising 12.4% year on year; and solar power output at 7.5 TWh, increasing 29.6% from the previous year.

    That equated to a daily output of 15.79 TWh on average in the first two months, up 6.3% year on year, data showed.

    China will eliminate, halt or delay construction of coal-fired power capacity by more than 50 GW, in order to covert risks of surplus capacity and enhance efficiency of the industry, said Premier Li Keqiang while presenting government work report on March 5.

    Relevant authorities have revealed detailed tasks of the move, with 5 GW of outdated thermal power generation capacity to be eliminated, construction of illegal projects totaling 38 GW to be halted and construction of projects totaling over 7 GW to be delayed.

    http://www.sxcoal.com/news/4553418/info/en

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    China's fixed-asset investment up 8.9pct in Jan-Feb


    China's fixed-asset investment (FAI) grew 8.9% year on year to 4.1378 trillion yuan ($598.3 billion) in the first two months this year, up from 8.1% in 2016, the National Bureau of Statistics (NBS) said on March 14.

    Fixed-asset investment includes capital spent on infrastructure, property, machinery and other physical assets.

    FAI by state-owned enterprises climbed 14.4% year on year during the period, according to the NBS.

    Private sector FAI, which accounts for more than 60% of the total FAI, grew 6.7% in the first two months, accelerating from 3.2% in 2016 and marking the fastest growth since March 2016.

    In the agricultural sector, fixed-asset investment jumped the fastest, up 19.1% year on year. It was followed by 12.2% growth for the service sector and 2.9% for the industrial sector, the NBS data showed.

    Infrastructure investment expanded 27.3% in the first two months, while FAI in high-tech industries surged 18.4% during the period, according to NBS data.

    Other indicators released by the NBS included industrial production and retail sales, pointing to stabilization in the world's second-largest economy.

    http://www.sxcoal.com/news/4553451/info/en
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    Zimbabwe mines output threatened by foreign payment delays


    Zimbabwe's mining output is under threat because banks are delaying processing foreign payments by up to three months due to a shortage of dollars, the southern African country's mining chamber warned on Monday.

    Mining generates more than half of Zimbabwe's foreign exchange and should be given priority by the central bankwhen making offshore payments, Chamber of Mines economist Pardon Chitsuro told a Parliamentary committee.

    Zimbabwe introduced a so-called bond note currency, which is denominated in US dollars, in November in a bid to ease cash shortages, but long queues continue outside banks while US dollars are slowly disappearing from circulation.

    Some businesses, especially those importing goods, are offering discounts on cash purchases in US dollars, while charging more for mobile or card transactions.

    Mining companies need to import machinery and inputs such as explosives and chemicals.

    Importers say they are struggling to pay for goods abroad because accounts held by local banks overseas have been depleted of foreign currency.

    "We have been facing a foreign payments gridlock with delays of up to 12 weeks impacting negatively on production," Chitsuro said.

    The world's two largest platinum producers Anglo American Platinum and Impala Platinum have operations in Zimbabwe, alongside local firms Bindura Nickel and Hwange Colliery Company.

    Bankers Association of Zimbabwe president Charity Jinya acknowledged the delays, which she blamed on a lack of dollars and depleted offshore accounts of local banks.

    Last month, the central bank said Zimbabwean banks only had enough cash in offshore accounts to finance about two weeks' worth of imports.

    Zimbabwe needs an average $430-million a month to pay for imports, according to central bank figures for 2016.

    http://www.miningweekly.com/article/zimbabwe-mines-output-threatened-by-foreign-payment-delays-2017-03-14
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    Oil and Gas

    OPEC says oil stocks keep rising despite supply cut deal


    OPEC said on Tuesday oil inventories had continued to rise despite the start of a global deal to cut supply and raised its forecast of production in 2017 from outside the group, suggesting complications in the effort to clear a supply glut.

    The Organization of the Petroleum Exporting Countries is curbing its output by about 1.2 million barrels per day (bpd) from Jan. 1, the first cut in eight years. Russia and 10 other non-OPEC producers agreed to cut half as much.

    But in its monthly report OPEC said oil stocks in industrialized nations rose in January to stand 278 million barrels above the five-year average, of which the surplus in crude was 209 million barrels and the rest products.

    "Despite the supply adjustment, stocks have continued to rise, not just in the U.S., but also in Europe," OPEC said in the report.

    "Nevertheless, prices have undoubtedly been provided a floor by the production accords."

    In the report, OPEC pointed to a increase in compliance by its members with their deal to cut output from Jan. 1.

    Supply from the 11 OPEC members with production targets under the deal fell to 29.681 million bpd last month, according to figures from secondary sources that OPEC uses to monitor its output.

    That means OPEC has complied by more than 100 percent with its plan to lower output for those nations to 29.804 million bpd, according to a Reuters calculation. OPEC didn't give a compliance figure in the report.

    But the report revised up its estimate of oil supply from producers outside OPEC this year, as higher oil prices following the OPEC and non-OPEC cut help spur a revival in U.S. shale drilling.

    Production outside OPEC is now expected to rise by 400,000 barrels per day (bpd), 160,000 more than previously thought. U.S. oil output in 2017 was revised up by 100,000 bpd.

    While the OPEC secondary sources said Saudi output fell in February, Saudi Arabia reported to OPEC that it increased

    http://www.reuters.com/article/us-opec-oil-idUSKBN16L1DL

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    Saudi Arabian oil production higher in February than January


    The monthly report by OPEC shows that Saudi Arabia increased production in February back above the level of 10 million barrels a day (to 10.011 million), according to figures submitted by the kingdom.

    Back on November 30, when the OPEC cartel of oil producers collectively agreed to cut production, the Saudis agreed to cut to 10.058 million barrels a day. The latest increase therefore still keeps production below the agreed-upon number.

    http://uk.businessinsider.com/crude-oil-market-update-march-14-2017-2017-3?r=US&IR=T
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    East Libyan forces say they have retaken oil ports


    East Libyan forces said they had regained control on Tuesday of the major oil ports of Ras Lanuf and Es Sider from a rival faction that seized them earlier this month.

    Military spokesman Ahmed al-Mismari told Reuters that the eastern-based Libyan National Army (LNA) was pursuing fighters from the Benghazi Defence Brigades (BDB) towards the town of Ben Jawad, about 30 km (20 miles) west of Es Sider.

    Akram Buhaliqa, an LNA commander in the nearby city of Ajdabiya, also said BDB fighters were retreating towards Ben Jawad. The claims could not be independently verified.

    http://www.reuters.com/article/libya-security-oil-ports-idUSL5N1GR4VZ
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    Iran will keep oil cap at 3.8 million barrels a day in second half 2017


    Iran will keep its oil production cap at 3.8 million barrels per day in the second half of 2017, the country's oil minister said on Tuesday, provided other OPEC members stick to the output level they agreed in November.

    "If OPEC members stay committed to the agreement (on freezing output), Iran will produce 3.8 million BPD of oil in (the) second half of the current year," Bijan Namdar Zanganeh was quoted as saying by state news agency IRNA.

    The Organization of the Petroleum Exporting Countries (OPEC) agreed on Nov. 30 to cut output by 1.2 million bpd to 32.5 million bpd for the first six months of 2017, in addition to 558,000 bpd of cuts agreed to by independent producers such as Russia, Oman and Mexico.

    http://www.reuters.com/article/us-iran-oil-opec-idUSKBN16L1DT
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    Petronas reports higher profits


    Malaysian energy giant Petronas reported a rise in its full year and fourth quarter profits despite the low oil prices and a challenging market environment.

    The company’s profit after tax reached RM23.5 billion (Approx: US$5.2 billion) for the full year 2016, showing a 12 percent increase.

    However, the company’s report shows that the revenue dropped 17 percent to RM204.9 billion from RM247.7 billion in 2015.

    The drop was attributed to the downward trend of key benchmark prices coupled with the impact of lower sales volume.

    The company’s fourth-quarter profit jumped 85 percent compared to the previous quarter reaching RM11.3 billion. The RM5.2 billion increase was driven by higher average realized product prices and sales volume mainly from LNG and processed gas as well as the impact of favorable exchange rate.

    Revenue for the quarter increased 20 percent from RM48.7 billion in the third quarter to RM58.6 billion in the quarter under review.

    Petronas also noted that the capital expenditure for the year dropped 22 percent to RM50.4 billion following project deferment and rephasing as well as cost optimization efforts.

    Petronas’ LNG sales for the year hit 29.01 million tons, marginally higher compared to 28.49 million tons in 2015 mainly contributed by higher volumes from Train 9 in Bintulu and GLNG in Australia, partially offset by lower trading volume.

    Looking ahead, Petronas is maintaining a conservative outlook and expects further price uncertainty through 2017.

    http://www.lngworldnews.com/petronas-reports-higher-profits/
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    Lukoil reports fourth-quarter profit on higher oil price


    Lukoil reported a fourth-quarter profit on Tuesday as higher crude prices helped Russia's No.2 oil producer rebound from a loss a year earlier.

    Its net profit of 46.6 billion rubles ($790 million) was in line with the 45 billion forecast by analysts polled by Reuters.

    A year earlier it suffered a net loss of 65 billion rubles.

    Lukoil's shares were up 1.62 percent as of 1128 GMT, outperforming a 0.73 percent rise in the Moscow broader stock market.

    Last month, Lukoil's larger domestic rival Rosneft reported a small decline in 2016 net income.

    Lukoil, whose name comes from the names of west Siberian towns Langepas, Urai and Kogalym, has struggled with falling oil production at its brownfield sites.

    Its oil output fell by 9 percent last year.

    The average price of Russia's flagship Urals oil blend in the fourth quarter rose by 14 percent to $46.90 per barrel.

    For the whole of 2016, the average price fell by 18 percent to $41.14 per barrel.

    Fourth-quarter earnings before interest, taxes, depreciation and amortization (EBITDA) fell to 183.3 billion rubles from 186.3 billion on revenue of 1.40 trillion, up from 1.37 trillion.

    Free cash flow fell to 54.6 billion rubles from 104.7 billion.

    http://www.reuters.com/article/us-russia-lukoil-results-idUSKBN16L16E
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    Inpex's Ichthys LNG hit by another contract dispute


    Inpex's $37 billion Ichthys Australian liquefied natural gas project was hit by another subcontractor dispute, involving the termination of more than 600 workers, but the Japanese company said it was still on schedule for a July-September start.

    Members of a consortium building LNG storage tanks at the onshore site of Ichthys near Darwin are in dispute with each other and have stopped work, with one of them abruptly letting go 640 workers, said JKC Australia LNG, which is handling overall construction of the project, on Wednesday.

    Inpex said the tanks were 91 percent complete and the project remained on schedule to start shipping LNG to customers in the third quarter.

    Still, the disagreement is the latest potential delay in Australia's $200 billion LNG ramp-up, one of the biggest supply increases ever in the gas industry and which will lift Australia over Qatar as top global exporter of the fuel.

    The Ichthys dispute is not good news for the project's timely completion, said Saul Kavonic, a Perth-based analyst for global resource consultancy Wood Mackenzie.

    "Inpex is targeting a very aggressive construction completion ... to get a first cargo out by the end of September, given the central processing facility, the largest in the world, is still in a Korean ship yard," Kavonic said.

    Inpex is not directly involved in the disagreement because it's a matter between subcontractors, so it is not in a position to comment, the Japanese company said.

    The disagreement between consortium members Kawasaki Heavy Industries and Laing O'Rourke PLC involves a payment dispute, with JKC saying the latter has released about 245 local hires and 395 other workers that fly in and out.

    Ichthys was hit by an earlier contractual dispute in January when an engineering company building a power plant for Ichthys pulled out of the project.

    The Australian Manufacturing Workers' Union in a statement said the lay-offs were "due to an ongoing contractual dispute on the project regarding payments."

    Kawasaki Heavy has not paid its partner for work on the project for several months, Laing O'Rourke said in a statement.

    Kawasaki Heavy could not immediately comment.

    Most of the LNG plants being built in Australia, including Chevron's huge Gorgon facility and Royal Dutch Shell's floating Prelude production vessel, are having trouble keeping within budget and on schedule. More delays are expected.

    Once completed, Ichthys will produce 8.9 million tonnes of LNG per year.

    Inpex holds 62.245 percent of Ichthys and France's Total 30 percent. The rest is spread amongst Taiwan's CPC Corp and Japanese utilities Tokyo Gas, Osaka Gas, Kansai Electric, JERA Corp and Toho Gas .

    http://www.reuters.com/article/australia-lng-ichthys-idUSL3N1GS1JA

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    Argentina's Pampetrol restarts oil field after exit of private operator


    Pampetrol, the state oil company of Argentina's La Pampa province, has brought back into production a formerly privately operated block, with an eye to boosting output, the provincial government said.

    "Pampetrol has started the first four production wells," the government said, adding each of the wells on Salina Grande I was producing an average of 94 b/d.

    The La Pampa government said these were the first of 10 existing wells that Pampetrol will gradually put back into operation on the block in the south-central province. The block had been inactive for a year, it said.

    Last August, La Pampa revoked the exploration and production permit of Salina Grande I's private consortium, saying the group had failed to comply with license requirements in terms of the pace of investment since winning the permit in 2006. The consortium was made up of Gregorio, Numo y Noel Werthein, Petrosiel and Energial, the latter of which was the operator of the block.

    La Pampa has also taken back under state control other blocks like Jaguel de los Machos from Brazil's state-run Petrobras.

    La Pampa produces 3.8% of the country's 511,000 b/d of crude and 0.8% of its 123 million cu m/d of gas, according to the Argentine Oil & Gas Institute, an industry group.

    http://www.platts.com/latest-news/oil/buenosaires/argentinas-pampetrol-restarts-oil-field-after-21143223
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    Australia might 'change the ground rules' for east coast LNG exporters: PM


    Australia's Federal Government is considering implementing a gas reservation policy to tackle the country's gas and electricity supply concerns, which may also impact the east coast LNG businesses operations, Prime Minister Malcolm Turnbull said Friday.

    Platts Analytics has Australia tipped to become the world's largest exporter of LNG, surpassing Qatar, in 2019 aided by the boost in volumes by the start-up of shipments from the east coast's Australia Pacific, Gladstone and Queensland Curtis LNG terminals in the last couple of years.

    But those terminals have been blamed for playing a part in putting the eastern and south-eastern states of the country on a collision course for a gas supply crunch by the end of the decade.

    Now, the Federal Government is exploring options to deal with the looming crisis, including a gas reservation policy, with Turnbull saying national energy security will come before the interests of the LNG exporters.

    "What the gas companies would say -- their response to an imposing reservation on them would be to say 'you're changing the ground rules. We did this exploration. We built these LNG trains on the basis that there would not be a constraint on what we could export,'' Turnbull said on FIVEaa radio.

    "But clearly, security is the first responsibility of every government -- national security and energy security," he added.

    The Prime Minister is due to meet with the CEOs of east gas companies this week to discuss the matter.

    "They've been put on notice. I need to hear from them. I'll be demanding from them their explanation as to how they are going to deliver security for their customers," he said.

    The eastern state of Queensland -- where the east coast's LNG terminals are located -- is already testing the water in terms of a gas reservation policy.

    The State's Government announced in January it is allocating a small volume of potential gas supplies from freshly released land for exploration with strict Australia-only sale conditions.

    Opponents to the idea of a gas reservation policy say more regulation on gas developments will result in less being produced.

    "It's a very strange idea to think that the way to get more of a product is to increase regulation around that product and increase the costs of development," the Australian Petroleum Production and Exploration Association chief executive Malcolm Roberts said last month.

    APPEA last week said warnings of gas shortages in the region -- which Australia's energy market operator forecasts could be seen as soon as summer (December-February) of 2018-2019 -- are "the consequence of many years of policy failure by successive state governments in Victoria and New South Wales."

    "The response [to the warnings] has been policy indecision, restrictive regulations and politically motivated bans and moratoriums that have stymied exploration and development of local gas supplies," Roberts said.

    The Victorian Government announced last week that Parliament passed legislation that bans all onshore unconventional gas development in that state and extends a moratorium on onshore conventional gas development until 2020. Turnbull also blamed the State Government bans and moratoriums on onshore gas production as contributing to the crisis.

    "We have massive gas resources. We have so much gas. The problem we've got at the moment is the political opposition to its exploration," he said.

    "I encourage all parties, Liberal and Labor, to support the development of our gas resources," he added.

    Australia's LNG exports are forecast at 57 million mt in 2017, before surging to 73 million mt in 2018 and then to 83 million mt in 2019, Platts Analytics said.

    http://www.platts.com/latest-news/natural-gas/sydney/australia-might-change-the-ground-rules-for-east-26683987

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    Australia's ACCC head urges Gladstone LNG operators to supply domestic market


    The chairman of Australia's competition watchdog has urged east coast LNG operators to provide as much supply as possible to the struggling domestic market and raised concerns over their moves to sell additional volumes in the international spot market.

    "They would be well advised to support the domestic market as much as they can at this critical time," Australian Competition and Consumer Commission Chairman Rod Sims said, according to an early copy of his speech to the 5th Annual Australian Domestic Gas Outlook conference in Sydney obtained by S&P Global Platts.

    LNG exports over the past couple of years via the three terminals -- Australia Pacific, Gladstone and Queensland Curtis -- almost tripled demand in the eastern and southeastern states, Sims said.

    This stretched Australia's eastern seaboard's gas supply, pushing up prices, and resulting in warnings of a likely shortage.

    The ACCC conducted an inquiry in April last year and found that the east coast was expected to produce sufficient gas to meet both domestic demand and existing LNG export commitments until at least 2025.

    But, if LNG operators sell in the international LNG spot market, it could change the situation.

    "Most LNG producers are selling gas on the LNG spot market in addition to meeting their contractual commitments and these volumes are expected to increase going forward," he said.

    "The comment that I made [advising the LNG producers to support the domestic market] seems relevant here," he added.

    REGION HAS AMPLE GAS RESOURCES

    Sims called the discussion on the looming gas shortage in Australia and criticism of LNG producers as a strange debate.

    "As our inquiry pointed out, Australia has enormous gas reserves; gas availability is clearly not the issue," he said. "The Inquiry also pointed out that Australia has and will benefit enormously from the three large LNG projects in Queensland. These three projects also saw significant gas resources developed that otherwise would not have been."

    The only criticism of the three LNG gas developers to be made it is that they fell into the "usual commodity project trap of assuming then high $100 plus oil prices would continue," he added.

    Sims said that environmental restrictions, moratoria and bans on onshore gas production caught the market off guard and played a leading role in the creating supply concerns.

    "I doubt anyone in the industry expected Victoria to ban all onshore gas exploration and production, which has stopped even conventional gas projects; nor could they have foreseen the delays and uncertainty over projects in New South Wales and the Northern Territory," Sims said.

    SOUTH AUSTRALIA MOVES TO UNLOCK MORE GAS RESOURCES

    While other states connected to the east coast's gas pipeline network are crimping access to their gas resources, South Australia -- which has suffered from widespread blackouts in recent months -- announced on Tuesday that it will provide incentives for gas exploration.

    "The state government will immediately provide an extra [A]$24 million for a second round of funding to incentivize companies to extract even more gas and create more jobs. This new round will open immediately," the South Australian government said Tuesday in its new energy plan.

    It will also provide 10% royalty to landowners whose property overlies a petroleum field that is brought into production, it said.

    "South Australia has vast untapped gas resources. It is estimated the Cooper Basin alone could potentially supply Australia's energy needs for more than 200 years," it said. The Cooper Basin straddles South Australia and Queensland.

    The South Australian government also said that it would build its own state-owned gas-fired electricity generator.

    "Due to the lack of clear national policy settings, investment in new thermal generation has stalled," it said. "The generator will provide up to 250 megawatts of generation, which can be switched on in times of emergency."

    http://www.platts.com/latest-news/natural-gas/sydney/australias-accc-head-urges-gladstone-lng-operators-27789923
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    Oil Rebounds on U.S. API Stockpile Drop Report as Saudis Lift Output


    Oil rebounded above $48 a barrel as a reported decline in U.S. crude stockpiles countered a boost in output from Saudi Arabia.

    Futures advanced as much as 2.4 percent in New York after slumping almost 11 percent the previous seven sessions. U.S. inventories fell by 531,000 barrels last week, the industry-funded American Petroleum Institute was said to report. Government data Wednesday is forecast to show stockpiles rose for a 10th week. Saudi Arabia’s production climbed back above 10 million barrels a day in February, according to an OPEC report on Tuesday.

    https://www.bloomberg.com/news/articles/2017-03-14/oil-gains-as-api-said-to-report-u-s-crude-stockpiles-decrease
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    U.S. judge denies tribe's request to stop oil flow in Dakota Access pipeline


    A U.S. federal judge on Tuesday denied a request by a Native American tribe for an emergency injunction to prevent oil from flowing through part of the Dakota Access Pipeline, saying such a move would be against the public interest.

    The ruling, issued in court documents ahead of plans to start pumping oil through the pipeline next week, follows months of demonstrations in a remote part of North Dakota, where the Standing Rock Sioux tribe demonstrated in an attempt to stop the Dakota Access Pipeline crossing upstream from their reservation.

    Judge James Boasberg of the U.S. District Court for the District of Columbia issued his decision denying the request by the Cheyenne River Sioux Tribe, saying the court "acknowledges that the tribe is likely to suffer irreparable harm to its members’ religious exercise if oil is introduced into the pipeline, but Dakota Access would also be substantially harmed by an injunction, given the financial and logistical injuries that would ensue."

    The pipeline is nearing completion after President Donald Trump signed an executive order last month smoothing the path for construction. He also cleared the way for the Keystone XL project that would pipe Canadian crude into the United States.

    The Standing Rock Sioux and the Cheyenne River Sioux last week lost a legal bid to halt construction of the last link of the pipeline under Lake Oahe in North Dakota, which they say threatens tribal lands. The pipeline will be ready to carry oil by April 1.

    Among the Republican Trump's first acts in office was to sign an executive order that reversed a decision by the previous administration of Democratic President Barack Obama to delay approval of the Dakota pipeline, a $3.8 billion project by Energy Transfer Partners LP (ETP.N).

    Boasberg noted in his decision that any ruling to allow the tribe's request for an injunction preventing oil from flowing through the pipeline would likely be overturned on appeal.

    Thousands of Native American demonstrators and their supporters marched to the White House last Friday to voice outrage at Trump's decision.

    http://www.reuters.com/article/us-north-dakota-pipeline-idUSKBN16L2U0
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    Alternative Energy

    Is the lithium bubble about to burst?


    After rising aggressively, some would argue that lithium prices have already peaked.

    Reuters quotes Paul Robinson, director at consultancy CRU Group saying that prices have little upside because demand growth has been met with aggressive supply build up, similar to rare earths and vanadium in past cycles. Even though demand is projected to soar 60 percent to 300,000 metric tons of lithium carbonate equivalent (LCE) annually by 2020, the newspaper quotes a National Bank Financial report saying new players could flood the market.

    Strong Demand is Company, 60 percent Growth is a Crowd

     “It’s crowded, no doubt about it, and it will get culled,” said Jon Hykawy, president of Stormcrow Capital, calling lithium, the “latest bubble sector.”

    An indication of extent to which lithium fever has gripped investors and junior miners is illustrated in a Bloomberg article which reports that in the wake of President Mauricio Macri’s decision to remove currency and capital controls and taxes introduced by his predecessors, about 40 foreign companies began to consider opportunities in Argentina’s mining industry. More than half of those planning to mine lithium.

    The country may be about to flood the market with lithium,
    the newspaper reports, and while not all the projects are likely to go ahead, if they did, output would reach 165,000 tons/yr or about 45 percent of predicted global supply by 2021, according to government projections. Currently global supply is just 185,000 metric tons, illustrating the rate at which demand is expected to rise.

    Much of the enthusiasm for investment in more lithium production is fueled by a belief electric vehicle battery demand is about to take off.

    Taken in addition to new projects being planned in Chile, the U.S., Australia, and elsewhere, a surge of new supply could potentially lead to a collapse in prices.

    While lower lithium prices would be good for battery costs, too much of a fall would be bad for the industry. What it needs is stability to encourage responsible and well-funded investment for the long term, not boom and bust

    http://www.mining.com/web/is-the-lithium-bubble-about-to-burst/

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    Uranium

    Greenland closer to building world’s fifth-largest uranium mine


    Greenland may soon start building the world’s fifth-largest uranium mine and second-biggest rare earths operation, which could fuel independence dreams in the island, an “autonomous administrative division” within Denmark since 2009.

    The proposed open pit mine in the southern town of Kvanefjeld is expected to process over 100 million tonnes of ore in the coming decades, helping Greenland to diversified its economy. According to Danish Radio, it would also alleviate the island’s dependence on a locked Danish subsidy of 3.2 billion DKK (about $500 million), which constitutes about half of its budget.

    The proposed uranium-rare earths mine could alleviate the island’s dependence on a locked Danish subsidy of 3.2 billion DKK (about $500 million), which constitutes about half of its budget.

    But Greenland Minerals and Energy’s (ASX:GGG) project, which would have an annual processing capacity of 3 million tonnes of ore a year and employ at least 325 locals, is facing opposition from those who don’t want to see major landscape and environmental changes.

    For a start, the proposed operation would dispose of its mining waste, consisting of crushed ore, water and chemicals used for extraction, in a nearby lake. Since that lake is not big enough, the company plans to build two extra dams to help contain the waste. Based on the project’s description, nearly 21,000 tonnes of chemicals will be used each year to extract the sought-after resources.

    Kvanefjeld’s shutdown period is considered by many as too long (it's expected to take another six years) and, after the final closure, it will be filled with rainwater, CHP Post Online reports.

    There is also the common argument raised against uranium mines, this project in particular, that radioactive dust could potentially fall on neighbouring settlements and farmland.

    But the mine, with an expected lifespan of about 37 years and the potential to hire around 800 people, will also be a contributor to the new global green economy, the company says. This, as 80% of the commercial deposits in Kvanefjeld are rare earth minerals, commonly used in wind turbines, hybrid cars and lasers, while uranium accounts for only 10%.

    Kvanefjeld is just one of several mining projects popping up in Greenland since 2013, when the parliament voted to remove the ban on uranium mining, opening the door to that project and many others. In fact, based on official data, there are currently 56 active licences to explore for gold, rubies, diamonds, nickel, copper and other minerals in the island.

    Just in January, Australian Ironbark Zinc Limited (ASX:IBG) was given the green light to begin construction of a zinc and lead mine on the northern coast.

    http://www.mining.com/greenland-closer-building-worlds-fifth-largest-uranium-mine/
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    Base Metals

    Escondida copper mine in Chile says to restart operations


    The Escondida copper mine in Chile plans to restart operations after striking workers again rejected an invitation by controlling owner BHP Billiton to return to negotiations, an executive told reporters late Tuesday.

    The world's largest copper mine will first resume work in two areas of the mine that are unrelated to the current talks, Escondida Mine President Marcelo Castillo said at a news conference in the city of Antofagasta.

    The company will then begin to do additional maintenance work, before finally re-establishing mining operations and restarting copper production.

    "We hope that in some way opportunities for dialogue come about...but with the posture that we saw yesterday (from the union) and that all of you saw yesterday, it's difficult to be able to hope for a conversation in the short term," Castillo said.

    Under Chilean law the mine was allowed to hire temporary workers 15 days after the strike started on Feb. 9, but had said it would wait for 30 days to show its commitment to dialogue. Tuesday marked day 34 of the strike.

    In response to BHP's statement late Tuesday, the union said it was taking a level-headed approach to the latest development.

    "We are calm, and we are reviewing the (company's) statements with calm," a union spokesman told Reuters.

    Copper production has been halted since the 2,500-member union went on strike. On Monday, workers rejected a company invitation to return to the table, saying the invitation did not take into account workers' pre-conditions for dialogue.

    Union demands include that BHP agrees not to trim benefits in the existing contract, that shift patterns should not be made more taxing for workers, and new workers be offered the same benefits as those already employed at the mine.

    It was the third failed attempt to restart dialogue during the strike, which has pushed global copper prices higher due to supply concerns.

    On Friday, BHP invited the union to return to negotiations, but the union rejected that invitation on the same grounds.

    Throughout the process, negotiations have been tense, with the company at times accusing the union of violence, and the replacement of workers could lead to additional confrontation.

    http://www.reuters.com/article/us-chile-copper-escondida-idUSKBN16L1V1
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    Cerro Verde strike may end next week if Peru rules against it


    A strike at Peru's top copper mine, Cerro Verde, may end next week if the labor ministry declares it illegal, the head of the union said on Tuesday after negotiations with owner Freeport-McMoRan Inc ended without an agreement on labor demands.

    Workers began the strike on Friday to demand better family health benefits and a bigger share of the mine's profits, but the ministry has issued a preliminary decision against the stoppage that the union is appealing, Cerro Verde Union President Zenon Mujica said on a phone call.

    The appeals process will likely take about a week and workers will have to go back to work if the ministry hands down a final ruling against the strike, said Mujica.

    Freeport-McMoRan did not immediately respond to requests for comment.

    Production at the mine, which churned out nearly 500,000 tonnes of copper last year, has fallen by 50 percent since some 1,300 of about 1,650 workers joined the strike, Mujica said.

    News of a possible return to normal operations at Cerro Verde could ease pressure on global copper prices as supply has been disrupted by a labor stoppage at BHP Billiton's Escondida mine in Chile and a dispute over export rights at Freeport's Grasberg mine in Indonesia.

    Mujica said Cerro Verde workers will vote this week on whether to call for regionwide protests.

    http://www.reuters.com/article/peru-copper-strike-idUSL2N1GR1QB
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    Indonesia's Amman Mineral commits to $9.2 billion copper expansion: government official

    Indonesia's Amman Mineral commits to $9.2 billion copper expansion: government official

    Indonesia's Amman Mineral Nusa Tenggara (AMNT) has committed to invest $9.2 billion to expand its mining business, including the construction of a new copper smelter near its mine in Sumbawa, West Nusa Tenggara, a mining ministry official told Reuters on Wednesday.

    AMNT is a unit of PT Medco Energi Internasional Tbk, which bought the Batu Hijau mine from Newmont Mining Corp last year.

    Bambang Gatot, director general of coal and minerals at the mining ministry, said $1 billion of the investment would be used to build a smelter. "It will start this year and to be completed by 2021," he said.

    Amman could not immediately be reached for comment.

    http://www.reuters.com/article/us-indonesia-mining-amman-idUSKBN16M0FM

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    Glencore sells Rosh Pinah, Perkoa to Trevali for $400m


    Glencore is to sell two zinc mine in Africa for $400m to Trevali Mining Corporation, a Canadian listed company with ambitions to become a mid-tier zinc producer.

    The transaction, however, also sees Glencore accept part payment in Trevali shares which will increase Glencore’s stake to 25% from 4% and give it two board seats. Glencore will also market the zinc produced at Trevali’s mines including the African assets.

    "If you were truly bullish on zinc and those assets, you wouldn't let them go, you wouldn't decrease your zinc exposure," Ben Davis, an analyst at Liberum said of this week's deal.

    "But maybe they see more value in the (zinc) offtake than they do in the industrial side."

    The mines in question are Glencore’s 80% interest in Rosh Pinah, a zinc mine in Namibia, and its 90% stake in the Perkoa mine located in west Africa’s in Burkina Faso. Trevali already owns zinc mines in Peru (Santander) and Canada.

    This will be Trevali’s first investment in Africa and give it production of 230,000 tonnes of contained zinc a year – a transaction it described as “transformative”.

    It said the transaction more than doubles its current production scale and placed it among the top 10 of zinc producers worldwide. “The acquisition of Rosh Pinah and Perkoa is an historic event and unique opportunity for Trevali shareholders, and sets the stage for a multi-asset, low-cost global zinc producer,” said Mark Cruise, president and CEO of Trevali.

    The terms of the deal are that of the aggregate $400m consideration, some $244m will be paid by Trevali in cash to Glencore with the remaining $156m paid by Trevali through the issue of about 175.1 million shares. Trevali will also pay Glencore $30m to repay an existing debt facility. The transaction is expected to close by July.

    Investec Securities said in a note that sale price compared favourably against its valuation for the mines which was just over $300m. It added that the transaction underlined Glencore was in high activity mode. “Glencore is mooted to become increasingly active in merger and acquisition but as this shows, it is as happy to divest (at the right price) as it is to acquire,” it said.

    “While not a big amount for Glencore, the $244m cash inflow should be on the margin a small positive for Glencore as it would further allay balance sheet concerns,” said Goldman Sachs.

    Said Daniel Mate, head of zinc marketing for Glencore: “We have been working together as partners since their first mine was built and we share the same vision for the future growth of the business through value-creating organic and inorganic growth opportunities”.

    “We are excited to form part of this unique global zinc vehicle providing pure zinc exposure across a wide geographic footprint,” Mate added.

    Rosh Pinah has been operating since 1969 and is expected to have a further 14 years of operating life. Some 19.92% of the mine is owned by Namibian empowerment companies. Perkoa has a life of mine of a further six years.

    http://www.miningmx.com/top-story/29244-glencore-sells-rosh-pinah-perkoa-trevali-400m/
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    CME Midwest aluminium swaps rebound on rising Asian premiums, stronger demand


    Trader quotes for Midwest aluminium premium financial swaps (AUP) on the CME rose on Friday and Monday back to above 9 cents/lb for all prompt months in 2017, following a recent dip which saw bids move to below 9 cents/lb in early March.

    The rise in CME bids came after the Platts spot transaction premium sustained at the 10 cents/lb delivered Midwest despite the recent downwards pressure in financial markets which saw offers for all prompt months at below the spot premium.

    As of Monday morning, a broker report showed the forward curve was flat across 2017, with bids for Q2-Q4, 2017 at 9.20 cents/lb and offers at 9.50 cents/lb. Bids and offers for Cal18 were 9.50 cents/lb and 10 cents/lb respectively.

    "We are hearing the physical is well supported and there might be an uptick this week, which was due to a turnaround as consumers waited for the sell-off to lift," a broker said.

    But the broker added that market perception was that the forward curve was still trading at a discount to the spot market.

    Despite the Platts Midwest premium remaining unchanged for over a month, physical market participants have indicated a growing variability in physical deals with some discounting being offset by deals done at close to 11 cents/lb delivered Midwest including net-30 payment terms.

    On Friday, 20 lots/month of AUP swaps for H2 2017 traded at 9.20 cents/lb, after the same strip of contracts had traded at between 9-9.25 cents/lb on Thursday.

    But this represented a 0.45 cents/lb rise from March 7 when H2, 2017 traded at 8.75 cents/lb.

    "There are a lot more buyers in the market right now with premiums in Japan moving up," a broker said. As of Monday, the Platts Japan spot assessment was $115-$125/mt CIF Major Japanese Ports, up 23% from the end of February.

    Swap quotes for the Japanese contract on the CME (MJP) were also reported lower than spot premiums, with bids and offers over H2, 2017 at $111/mt and $115/mt respectively on Monday. This was up from bids at $108/mt and offers at $111/mt the previous week.

    http://www.platts.com/latest-news/metals/london/cme-midwest-aluminum-swaps-rebound-on-rising-21143241
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    Steel, Iron Ore and Coal

    China cracks down on low-quality coal imports as traders report customs delays


    China is ramping up controls on imports of low-quality coal due to concerns about smog and overcapacity in the world's top coal consumer, a government official said on Wednesday, as traders report some cargoes have been delayed by customs checks.

    "As long as coal meets standards, we don't forbid imports, but we are imposing controls on low-quality coal imports," said Zhi Shuping, head of the Administration of Quality Supervision, Inspection and Quarantine which oversees imports safety.

    "If we let all kinds of coal import into domestic market, it will hit the domestic market," Zhi said, speaking on the sidelines of the annual meeting of China's parliament.

    Sustained checks will unsettle global miners and traders who have enjoyed months of a coal buying spree by China that helped propel prices to multi-year highs, bringing the industry out of a prolonged bear market. Prices have soared to multi-year highs this week amid broader concerns about tighter supplies and robust demand.

    Delays in processing imports could further constrain supply, sending domestic prices higher. That could have the effect of undermining government efforts to keep prices stable as Beijing seeks to close outdated mines, increase use of cleaner, renewable fuels and make bloated heavy industry more efficient.

    Zhi's comments come as some international traders have complained about delays running into weeks in getting some cargoes cleared through customs in China due to tougher inspections for sulphur and mercury content at ports. Last year, Zhi's agency rejected 1.5 million tonnes of imported coal, he said - less than 1 percent of China's total coal imports.

    One official at a global merchant, speaking on condition of anonymity, said his company's shipments into Jiangsu province took longer than usual to get customs clearance.

    It's not clear how widespread the checks are and Zhi did not say when the crackdown started. Some experts said it could be linked to the two-week annual meeting of China's parliament, which ends on Wednesday.

    Last week, a senior politician from Shanxi, one of the country's top producing regions, proposed curbing imports of low-quality coal as a radical measure for curing China's overcapacity problem.

    Speaking on the sidelines of parliament, Wang Fu, vice governor of the province, suggested targeting coal from Indonesia, which accounted for almost 40 million tonnes, or 15 percent of total arrivals, last year.

    The proposal is unlikely to get passed into law and would likely face hefty resistance from power producers, which still rely on coal. But the comment underlines the challenge of getting wary provincial governments on board to tackle excess and close inefficient operations.

    http://www.reuters.com/article/china-parliament-coal-idUSL3N1GS1NE
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    China Jan-Feb coke output up 4.6pct on year


    China coke output totalled 69.26 million tonnes over January-February this year, up 4.6 year on year, showed data from the National Bureau of Statistics (NBS).

    During the same period, China's pig iron output witnessed a year-on-year increase of 5.6% to 113.54 million tonnes; China's crude steel output stood at 128.77 million tonnes over January-February this year, climbing 5.8% year on year, according to the NBS.

    China's steel products output reached 166.55 million tonnes during the same period, up 4.1% from the year-ago level.

    Coke producers at main producing areas started to raise their prices of the steel-making material on the back of favourable sales and low stocks.

    Coke makers may further expand production if the downstream steel market prospers in the future.

    http://www.sxcoal.com/news/4553468/info/en
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    China Jan-Feb coal industry FAI drops 21pct on year


    China's fixed-asset investment (FAI) in coal mining and washing industry amounted to 8.1 billion yuan ($1.17 billion) over January-February, decreasing 21% from the previous year, compared to a 24.2% year-on-year drop in 2016, showed data from the National Bureau of Statistics (NBS) on March 14.

    Private investment in the sector stood at 4.8 billion yuan, falling 28.6% year on year, accelerating from a year-on-year decline of 18.3% in 2016.

    Fixed-asset investment in all mining industry in the first two months in the country increased 4.1% year on year to 40.7 billion yuan; of that, private investment in mining industry stood at 20.8 billion yuan, down 16.7% from the previous year.

    During the same period, the total fixed-asset investment in ferrous mining industry witnessed a year-on-year drop of 0.2% to 4.2 billion yuan; that in non-ferrous mining industry stood at 5.5 billion yuan over January-February, down 15.4% from the year-ago level, according to the NBS data.

    The fixed-asset investment in non-metal mining industry stood at 10 billion yuan during the same period, down 4.9% from the year-ago level.

    http://www.sxcoal.com/news/4553460/info/en
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    Shaanxi Feb raw coal output slides 25.2pct on month


    Shaanxi province, one major coal production base in northwestern China, produced 25.52 million tonnes of raw coal in February, climbing 9.48% from the year-ago level but dropping 25.2% from January, showed the latest data from the Shaanxi Administration of Coal Mine Safety.

    In the first two months, the province's coal output stood at 59.65 million tonnes, edging down 0.15% year on year, data showed.

    Coal mines owned by the central and provincial governments produced 14 million and 19.71 million tonnes of raw coal over January-February, decreasing 3.94% and rising 4.71% from the year prior, respectively.

    Coal output of the mines owned by municipal and prefecture governments stood at 25.94 million tonnes, dipping 1.52% year on year.

    In February, raw coal sales stood at 24.72 million tonnes or 96.87% of the total coal output of the province, gaining 36% year on year but falling 25.7% from January.

    Coal sales in the first two months increased 8.43% from the preceding year to 57.99 million tonnes, accounting for 97.23% of its total coal output.

    http://www.sxcoal.com/news/4553440/info/en
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    China's Shanxi province launches crackdown on illegal coal mines: document


    China's Shanxi province has launched a new campaign against illegal coal mining, according to a document seen by Reuters on Tuesday, as one of China's top producing regions seeks to get tough on cutting overcapacity.

    Shanxi province accounts for a quarter of China's coal output and has pledged to cut 20 million tonnes of overcapacity this year as part of Beijing's plan to remove 150 million tonnes across the whole industry as it battles smog and tries to make heavy industry more efficient.

    But recent price gains have tempted some coal mines into producing more than they have been allowed, the Shanxi Administration of Coal Mine Safety and the Shanxi Coal Industry Bureau said in the document, dated March 12.

    Two sources who received the document confirmed its authenticity.

    The agencies declined to comment when asked to confirm the move.

    "We will pay surprise visits, sometimes at night, and increase the frequency checks on state-owned mines," they said in the document.

    Coal mines that are still subject to production limits should operate 276 days a year or at 84 percent of their capacity, they said.

    In addition, coal mines that are vulnerable to seismic activity should operate at 80 percent of the capacity.

    News of the stricter controls on production provided further support to coal prices, analysts said.

    Most-active May futures rallied over 3 percent to 619 yuan per tonne, their highest since the contract launched in May 2015.

    The Shanxi authorities said in the document that they had found some coal mine operators using "fake invoices, fake data, fake graphics" to avoid supervision, and some mines that had been shut down had been reopened.

    The Shanxi government will suspend production for at least one month at coal mines that produce 10 percent more than they're allowed.

    Coal mines that reported more than one major accident over a three-month period will be closed if they are still operating, it said.

    http://www.reuters.com/article/us-china-coal-shanxi-idUSKBN16L19O

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    Steel plate prices in the US continue to trend upwards


    Steel plate prices were on the rise following price increase announcements approximately 10 days ago, sources said Monday.

    New prices following the $30-$50/st increases, dependent on product and producer, plate mills looked determined to approach $800/st on a delivered basis.

    A mill source said he was seeing "a lot of optimism" after meeting with customers at a recent industry event. New plate prices were being quoted between $760-$800/st on a delivered basis but it was "too early to tell if $800/st is the new number after the most recent increase," the mill added.

    New prices were likely between $770-$780/st on a delivered basis, according to one service center source. He was skeptical he could still buy at a $760/st level. However, he had not actively tried to buy any new spot material since the increases.

    A second service center source was also skeptical of being able to still buy at $760/st on a delivered basis. He agreed price levels were between $770-$790/st on a delivered basis.

    The energy sector was helping to drive some of the growth in the plate market, according to a second mill source.

    "We are seeing optimism that has not existed for some time," he added. New prices were between $770-$790/st on a delivered basis, the mill source agreed.

    "The plate market has some positive signs and the mills are holding firm to the prices," according to a third service center source. "Time will tell how this all unfolds, but demand will ultimately be the driver."

    S&P Global Platts increased its daily A36 plate price assessment to $730-$740/st from $700-$720/st on an ex-works Southeastern US mill basis.

    http://www.platts.com/latest-news/metals/pittsburgh/steel-plate-prices-in-the-us-continue-to-trend-21143224

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    'Millions of tons' of line pipe capacity available for pipeline work: producers group


    US line pipe producers have "millions of tons" of capacity available to ramp up to provide the steel needed for future US pipeline projects, the American Line Pipe Producers Association said Thursday.

    Voicing its support for President Donald Trump's memorandum promoting the use of American-made pipe and steel in constructing new US pipelines, the group said its members and other US line pipe producers have "substantial available production capacity and stand ready to meet demand."

    "As a result, using American-made line pipe will not require new mills to be built or prevent pipeline companies from acquiring enough line pipe for their projects," the group said in a statement. Stupp Corp., American Steel Pipe, Berg Pipe and Dura-Bond formed the American Line Pipe Producers Association earlier this year, focusing on the large-diameter segment of the market.

    In his first week in office, Trump signed a series of executive memorandums to revive the Keystone XL and Dakota Access pipeline projects and has directed the US Commerce Department to make sure all future pipelines built in the US are constructed out of steel melted and finished in the US.

    The Dakota Access and Keystone XL pipelines, however, will not be required use US steel as Trump's memorandum is specific to new pipelines or those that are being repaired, the White House said last week. Since Trump's announcement, concerns have been raised that US producers may not have the capabilities to furnish the type of pipe needed, however as imports of large-diameter line pipe have "undercut the US market in recent years ... most US producers [are] operating well below their capacity levels," the association said.

    http://www.platts.com/latest-news/metals/houston/millions-of-tons-of-line-pipe-capacity-available-21142901
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