Mark Latham Commodity Equity Intelligence Service

Wednesday 12th April 2017
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    Macro

    Russia's FinMin says state firms must pay half of profits in dividends


    Russian Finance Minister Anton Siluanov said on Tuesday state companies should pay at least 50 percent of their profits in dividends at a time when the government is not increasing taxes.

    Speaking at an economic conference, Siluanov said his ministry would not increase the tax burden on businesses and households but would make up for a shortfall in budget revenues at the expense of state companies.

    http://www.reuters.com/article/russia-budget-dividend-idUSS8N1HJ000
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    China March producer inflation cools for first time in seven months on steel glut fears


    China's producer price inflation cooled for the first time in seven months in March as iron ore and coal prices tumbled, pressured by fears that Chinese steel production is outweighing demand and threatening a glut of the metal later this year.

    A renaissance in China's steel industry has been a major driver of the world's second-largest economy in recent quarters, helping to generate the strongest profit growth in years and adding to a reflationary pulse being felt across the global manufacturing sector.

    But after cranking out as much metal as possible in recent months, Chinese steel mills are now starting to cut prices, threatening to snuff out a bull market that had pushed prices of some steel construction products to their highest since 2014.

    China's producer price index (PPI) rose 7.6 percent in March from a year earlier, still at an elevated pace but in line with analysts' expectations and easing from a gain of 7.8 percent in February, which was a 9-year high, the National Bureau of Statistics said on Wednesday.

    Economists polled by Reuters had forecast a softer reading as a torrid rally in China's commodity markets showed signs of correcting and on expectations that measures to cool the country's overheated housing market would eventually slow demand for steel and other building materials.

    On a month-on-month basis, the PPI rose just 0.3 percent, the smallest increase since September 2016 and half the pace seen in February.

    China's consumer price inflation edged up to 0.9 percent year-on-year, slightly softer than expected and compared with 0.8 percent in February.

    Analysts polled by Reuters had predicted March consumer inflation would edge up to 1.0 percent, but remain well within the central bank's comfort zone.

    Still-modest consumer inflation and moderating producer prices will give policymakers room to continue with a gradual pace of monetary policy tightening as they try to contain risks from years of debt-fueled stimulus without crimping economic growth.

    Consumer inflation picked up in March as costs for health care services, housing, transportation and communication surged, suggesting stronger demand from an increasingly wealthy and rapidly aging population, and that stronger producer inflation in the past months may have started passing through to downstream consumers.

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    Food prices, the biggest component of CPI, fell by 4.4 percent in March after a 4.3 percent drop in February.

    China lowered gasoline and diesel retail prices late last month by most so far this year.

    Similar to previous months, much of the year-on-year surge in producer inflation was largely driven by higher prices of raw materials for steelmaking products such as iron ore and coking coal.

    Demand has been fueled by a housing boom and a government infrastructure spending spree, with Beijing's efforts to cut excess production in heavy industries giving an added boost to frenzied futures markets and imports of raw materials from big producers such as Australia's Rio Tinto  and BHP Billiton.

    http://www.reuters.com/article/us-china-economy-inflation-idUSKBN17E05S
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    Melenchon Crashes Party as French Vote Risks Rise


    Under a cloudless blue sky at an outdoor waterfront rally of 30,000 people in Marseille on Sunday, Jean-Luc Melenchon showed why his rise in French polls is spooking markets.

    Speaking without a teleprompter or notes and using his trademark mix of humor and anger, the Communist-backed far-left candidate of the France Unbowed party regaled the gathering with the evils of “extreme markets that are transforming suffering, misery and abandonment into gold and money.” He alluded to France as a country “with huge wealth that is badly distributed,” denounced the U.S. air strikes in Syria and called for France to leave NATO.

    “A new enthusiasm is now stirring our fervor,” the firebrand orator, famed for his lyrical discourse, told the enthralled crowd. They cheered and egged him on, screaming “Resistance,” as he sprinkled his speech with references to ancient Greece, the Renaissance and revolution.

    Speeches like those have catapulted the 65-year-old fan of former Venezuelan leader Hugo Chavez and Cuba’s Fidel Castro closer than he’s ever been to the French presidency. Polls show that Melenchon is among four candidates now within striking distance of the second round of the French election, with a chance to gain enough votes on April 23 to make the runoff. With his plan to spend his way out of France’s economic woes, he is roiling markets.

    The premium that France pays over Germany to borrow for 10 years rose to 75 basis points on Tuesday from less than 60 points in late March. Melenchon’s surge in popularity “is bad news for French bonds,” Aline Schuiling and Kim Lui, analysts at ABN Amro, said in a note to clients.

    A Kantar Sofres poll over the weekend had Melenchon in third place with 18 percent, a point ahead of one-time front-runner Francois Fillon. The poll showed nationalist Marine Le Pen and centrist Emmanuel Macron tied at 24 percent ahead of the first round of voting, with Macron easily winning the May 7 runoff. Other polls put Melenchon level or just behind Fillon, but even that’s a major rise in the past few weeks. The Ifop daily poll April 7 had Melenchon at 17 percent, up from 10.5 percent on March 17.

    Rising Unpredictability

    Melenchon’s steady rise has turned France’s already topsy-turvy election campaign into one of the most unpredictable contests in recent history. The far-left candidate has a loyal, passionate following not unlike that of the anti-immigration, anti-euro Le Pen. Although still remote, the possibility of a face-off between the two is no longer dismissed as impossible.

    “The impressive breakthrough of Jean-Luc Melenchon has totally reshuffled the cards of this election,” said Gael Sliman, head of pollster Odoxa. “With two weeks to go, we have four candidates who can still win, which is unheard of.”

    As he makes his second bid for the presidency, Melenchon’s followers are attracted by his uncompromising positions against globalism and Western militarism.

    “He has the right ideas for the country,” said Tachefine Hocime, a 46-year-old maintenance worker and part-time musician, at a Melenchon rally in Le Havre on March 29.

    Stimulus Plan

    The candidate, who has been vocal against the European Union’s austerity push, says his platform calls for a 100 billion-euro stimulus program and the renegotiation of European treaties to give France more economic control -- with several conditions attached to staying in the euro.

    He would make it harder for companies to fire, limit executive pay and pull out of free-trade deals. He wants to raise France’s minimum wage by 15 percent and lower the retirement age for some to 60 years with full pension.

    “A Melenchon presidency would be unlikely to be followed by a parliamentary majority for the candidate, making it very difficult for the latter to implement his program,” said a note by Credit Suisse analysts to clients on Tuesday.

    That has not halted the rise in his popularity, which took off after a March 20 debate between the top five candidates -- with Melenchon at the time firmly in fifth place. He far outshone Socialist Party nominee Benoit Hamon and post-debate polls credited him with the best performance after Macron. He was again voted the most convincing of all the 11 candidates present at the next debate April 4.

    Debate Wins

    Those performances -- where Melenchon mixed quips with angry denunciations of France’s economic situation -- came on top of the successful use of social media. Not unlike Senator Bernie Sanders during the U.S. campaign, Melenchon, the oldest of the main candidates, has the biggest presence on the Internet and is popular with young voters.

    He has the most consulted French campaign site, and the most subscribers, commentators and viewers on YouTube, according to Dentsu Consulting. His campaign has included touches such as using holograms to be able to address rallies simultaneously, and he once showed up at a McDonald’s restaurant to join blockading workers seeking pay rises.

    “He’s been the absolute star on social media,” said Odoxa’s Slimane.

    According to Ifop, 71 percent of the French rate Melenchon’s campaign as “good” or “very good,” ahead of Macron at 61 percent. Among voters under 35, Ifop says 23 percent plan to vote for Melenchon, behind the 27 percent who say they’ll opt for 39-year-old Macron, but ahead of all the other candidates.

    Political Journey

    “He has exciting rallies, he gives excellent interviews, he offers a real hard opposition,” said Edouard Lecerf, head of political studies at pollsters Kantar TNS.

    It has been a long, hard journey to this point for the son of a post office worker and a teacher, both descendants of Spaniards and Italians who emigrated to French Algeria at the turn of the century. Melenchon was born in Tangier, now Morocco, when it was an international zone.

    He moved to France at the age of 11, studied philosophy, did various jobs including as a journalist and proofreader and got involved in Trotskyist politics. He joined the Socialist Party in 1976 at the age of 25, and has been elected to various regional, national and European legislative positions.

    He was deputy head of the Essonne region, south of Paris, from 1998 to 2004, and a junior minister in the Ministry of Education from 2000 to 2002. He broke with the Socialist party in 2008, saying it was becoming too business-friendly, and founded the Party of the Left.

    A sign of Melenchon’s success is that candidates who once ignored him have taken to attacking him. While Melenchon was speaking in Marseille, Fillon said at a rally in Paris that his spending policies would turn France into Greece.

    ‘Potemkin Captain’

    “Melenchon dreams of being the captain of the Potemkin, but he’ll end up selling the scraps of the Titanic,” Fillon said, referring to the Tsarist warship taken over by a communist-led mutiny. Monday, Macron said he didn’t share Melenchon’s vision of peace if it’s the “peace of Vladimir Putin.”

    The gains made by Melenchon, who won about 11 percent in the first round in the 2012 elections, have come almost entirely at the expense of Hamon. That, pollsters say, could limit any further rise. In Ifop’s latest poll, Hamon was at 9.5 percent, down from about 13.5 percent before the first debate. The Socialist candidate has been hurt by the unpopularity of President Francois Hollande.

    “Melenchon has progressively grated away at Hamon, but there might not be that much more to grate away,” said Jerome Fourquet, director of opinion studies at Ifop. The combined polling scores of the two haven’t varied much over the past two months.

    Jerome Jaffre, a researcher at Sciences Po’s Cevipof institute, said Melenchon will be held back if voters pay attention to his platform, rather than gravitate toward him because of his personality and Hamon’s poor campaign.

    “He has to find 100 billion euros for his investments, he wants to raise taxes, he calls into question all European treaties, which in effect is calling Europe into question,” Jaffre said. “That’s not what most French want.”

    https://www.bloomberg.com/politics/articles/2017-04-12/melenchon-crashes-front-runners-party-as-french-vote-risks-rise
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    Printed titanium parts expected to save millions in Boeing Dreamliner costs


    Boeing Co hired Norsk Titanium AS to print the first structural titanium parts for its 787 Dreamliner, a shift that the Norwegian 3-D printing company said would eventually shave $2 million to $3 million off the cost of each plane.

    The contract announced on Monday is a major step in Boeing's effort to boost the profitability of the 787 and a sign of growing industrial acceptance of the durability of 3-D printed metal parts, allowing them to replace pieces made with more expensive traditional manufacturing in demanding aerospace applications.

    Strong, lightweight titanium alloy is seven times more costly than aluminum, and accounts for about $17 million of the cost of a $265 million Dreamliner, industry sources say.

    Boeing has been trying to reduce titanium costs on the 787, which requires more of the metal than other models because of its carbon-fiber fuselage and wings. Titanium also is used extensively on Airbus Group SE's rival A350 jet.

    "This means $2 million to $3 million in savings for each Dreamliner, at least," starting in 2018 when many more parts are being printed, Chip Yates, Norsk Titanium's vice president of marketing, said in a telephone interview.

    Boeing builds 144 Dreamliners in a typical year. The company declined to comment on the estimate but said Norsk's technology would help reduce costs.

    The Dreamliner turned profitable last year after racking up nearly $29 billion in production-related losses.

    Norsk worked with Boeing for more than a year to design four 787 parts and obtain Federal Aviation Administration certification for them, Yates said.

    Norsk expects the U.S. regulatory agency will approve the material properties and production process for printed parts later this year. That will "open up the floodgates," Yates said, by allowing Norsk to print thousands of other parts for each Dreamliner, without each part requiring separate FAA approval, resulting in the millions in expecting savings per plane.

    "You're talking about tons, literally," on the 787 that would be printed instead of made with traditional, expensive forging and machining, he said.

    General Electric Co is already printing metal fuel nozzles for aircraft engines. But Norsk and Boeing said the titanium parts are the first printed structural components designed to bear the stress of an airframe in flight.

    Norsk said it will print initially in Norway, but aims to have nine printers running by year-end at a 67,000-square-foot (6,220-square-meter) facility in Plattsburgh, New York.

    http://www.reuters.com/article/us-norsk-boeing-idUSKBN17C264
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    Mining group Vedanta completes buyout of Cairn India


    Indian metals and mining group Vedanta Limited said on Tuesday it had completed its buyout of oil and gas explorer Cairn India Ltd, consummating a deal that was delayed for months by investor opposition.

    Cairn India said in a separate statement its board had made the merger effective as of Tuesday.

    The deal gives Vedanta Limited, the Indian unit of diversified energy group Vedanta Resources PLC, access to Cairn's $3.5 billion cash pile, boosting its finances.

    It was delayed due to opposition from some big minority shareholders, leading Vedanta to sweeten the offer last August.

    "This merger will increase the appeal of Vedanta Ltd to global investors as it simplifies the structure and increases the size and free float of the company," Vedanta Limited's Chief Executive Tom Albanese said in a statement.

    http://www.reuters.com/article/cairn-india-ma-vedanta-idUSL3N1HJ4H7
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    BHP Billiton reasserts strategy, says Elliott proposals flawed


    Anglo-Australian miner BHP Billiton on Wednesday dismissed a wide-ranging proposal by shareholder Elliott Advisors to overhaul its corporate strategy and sell off oil interests, saying the costs would far outweigh the benefits.

    "The elements of the Elliott proposal as described to the board would not be in the long-term interest of shareholders," BHP Chief Executive Officer Andrew Mackenzie said on an analyst call. "I cannot overstate my strong belief that BHP Billiton is on the right track."

    The comments came as BHP released a detailed response two days after U.S.-based Elliott made public a letter to its directors urging them to consider spinning off the U.S. oil arm, while returning more cash to investors.

    The response offered no counterproposal and instead defended the miner's longstanding strategy.

    "We have been in engagement with Elliott for eight months," Mackenzie said. "From our earliest engagements it was clear there were major flaws in Elliott's proposals."

    Elliott, which said it holds a "long economic interest" of about 4.1 percent of London-listed BHP Billiton PLC, wants the miner to ditch its dual corporate structure and replace it with a single company domiciled in Britain.

    "The (dual-listed structure) is not a restraint to our business," BHP Chief Financial Officer Peter Beaven told analysts. "It provides two important acquisition currencies in addition to cash."

    Under the Elliott plan, BHP would have a primary share-market listing in London and a secondary listing in Sydney.

    The Australian government on Tuesday said any significant changes to BHP's corporate structure would need to be consistent with a "national interest" test under the law.

    Over the last decade, BHP has examined the prospect of changing its corporate structure and spinning off its oil business but has ultimately rejected the ideas.

    "A standard petroleum business would lose access to BHP Billiton's balance sheet," Mackenzie said on Wednesday. "Were we to adopt this proposal our global partners would have to work with a Balkanised, broken up BHP Billiton."

    http://www.reuters.com/article/us-bhp-billiton-shareholders-idUSKBN17E0C0
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    India's top court stops Adani Power from charging higher prices


    India's top court ruled on Tuesday that Adani Power Ltd cannot charge its customers more to cover a surge in the cost of imported coal, overturning a decision by a power regulator in December.

    The ruling sent Adani Power's shares down as much as 20 percent on Tuesday, its biggest intra-day loss since it went public in 2009.

    The court did, however, allow the utility to claim relief for the higher costs, which resulted from a shortage in domestic supplies at state-run Coal India Ltd.

    Both Adani Power and competitor Tata Power - which was also party to the ruling although it was not mentioned directly in it - struck long-term deals in the middle of the last decade with distribution companies to supply power from plants they each operate in Prime Minister Narendra Modi's home state of Gujarat.

    The companies also struck deals with domestic and foreign miners in the latter part of the last decade to fuel their plants in Gujarat, which each have over 4,000 megawatt (MW) of capacity.

    LENGTHY LEGAL BATTLE

    In 2010, Indonesia adopted new benchmark coal prices leading to an increase in the price of coal imported from the country.

    Adani and Tata appealed for relief, arguing that they had to be compensated for an unforeseen change in economic conditions which made the terms of the deal with distribution companies unviable.

    Following a legal battle that stretched over half a decade, the Central Electricity Regulatory Commission (CERC) ruled in December last year that the companies could charge their customers more to compensate for higher costs.

    The case, which was argued by former Indian minister and lawyer Kapil Sibal and renowned anti-corruption lawyer Prashant Bhushan among others, was then escalated to the country's top court by the state distribution companies.

    The top court ruled in favour of the distribution companies, saying the agreements did not state that "coal is to be procured only from Indonesia at a particular price".

    "The price payable for the supply of coal is entirely for the person who sets up the power plant to bear," the top court's judges said in Tuesday's ruling.

    CERC will now look at the matter afresh and determine what relief should be granted to the companies to make up for the shortage in domestic coal supplies.

    Companies will now be more cautious when entering into long-term power purchase agreements, a Mumbai-based analyst told Reuters.

    Adani Power's shares recovered some losses on the day to close about 16 percent lower at 37.20 rupees. Shares in Tata Power closed down 1.8 percent at 85.45 rupees.

    http://www.reuters.com/article/tata-power-adani-power-court-idUSL3N1HJ317
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    Oil and Gas

    Saudi Aramco to supply full crude contract volumes to Asia


    Saudi Aramco will supply full contract volumes of crude oil to at least three Asian buyers in May, steady compared to April, industry sources with knowledge of the matter said.

    Despite commitments to cut production in an OPEC deal, Saudi Aramco has kept its supplies to the majority of Asian buyers at contracted volumes, reflecting its strategy of maintaining market share in the fastest-growing market, said the sources, who declined to be identified due to a sensitivity of the matter.

    However, the oil kingpin has requested that buyers refrain from using the so-called plus tolerance to buy additional volumes on top of contracted volumes, they said.

    http://www.reuters.com/article/us-saudi-supply-asia-idUSKBN17E03D
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    China data: Independent refiners' Mar crude imports hit new record high, up 21% on month

    China data: Independent refiners' Mar crude imports hit new record high, up 21% on month

    Independent refineries in China's eastern Shandong province, Hebei province and Ningxia province had imported in March a total of 10 million mt, or 2.36 million b/d, of crude oil, up 21% from a revised 8.03 million mt in February, a monthly survey by S&P Global Platts showed Friday.

    The February imports were revised up as several cargoes imported in late February which also finished offloading discharges were also included.

    The higher import level for the month, was in line with the increasing feedstock demand at refineries, which had raised runs in March.

    Operating rates at the 42 independent refineries surveyed by Beijing-based energy information provider JLC rose to 61% of capacity in March from 56% in February, suggesting that consumption of feedstock also have increased.

    The cargo count for March comprises parcels that arrived into ports in Shandong and Tianjin and completed discharge operations through the month, as well as a few cargoes that arrived in late-February but only completed offloading in early-March.

    Crude cargoes counted for the month include imports by refineries that have import quotas, as well as those that have no quotas but are buying from those with quotas.

    The volumes imported by trading companies like PetroChina, Sinochem, Mercuria, Trafigura, Kunyang and Yijia that are dedicated for independent refineries are also included.

    A total of 19 independent refineries with quotas on hand in March, including 16 independent refineries in Shandong, Xinhai Petrochemical in Hebei and Baota Petrochemical in Ningxia, received 7.89 million mt of crude, up 40% from the previous month.

    The biggest increase was seen from the imports by Hongrun at 323%. The refiner last month had imported a total of 1.237 million mt of crudes, including a 270,000 mt of Arab light crude, 210,000 mt of Vasconia crude, as well as Djeno, Sapinhoa, Saturno, Clov, Forties and Azeri light, each of 1 million barrels.

    Those 19 refineries have imported a total of 18.194 million mt of crudes over January-March, leaving unused quotas for the first batch at 33.806 million mt, according to Platts calculations.

    QUOTAS SHORTAGE

    Several independent refineries in Shandong, however, have recently been suffering from a quota shortage.

    The refiners in this category include Shandong-based Chambroad Petrochemical, Haiyou Petrochemical and Baota Petrochemical in Ningxia province, which had been allocated the lowest proportion against its ceiling volume.

    Haiyou in March had failed to take one cargo of Angola crude imported by CNOOC, as it did not have enough quotas left, according to market sources.

    Those refineries have already submitted applications for the new round of quota allocation to provincial department of commerce in the past weeks, but were told the new round was unlikely before the end of June.

    The refiners will either need to lower throughputs or buy barrels from the domestic spot market if the new allocations are not issued on time, market sources said.

    In addition, some refineries also were buying quotas from those with more quotas left. Therefore, the fee of buying the quotas were also raised to around Yuan 150/mt in March, from Yuan 120/mt in February.

    On the other hand, some traders were also hesitant to take positions in the international crude market, fearing not being able to find buyers with enough quotas on hand.

    TOP SUPPLIERS

    Russian crudes, including ESPO, Sokol and Sakhalin were the top choices for independent refineries in March at 1.575 million mt, up 45% from February. Meanwhile, Angola crudes also increased 94% to 1.53 million mt in March.

    But imports of Venezuelan crudes have shrunk by 23% month on month to 961,000 mt in March, which was in line with the market expectations.

    Outputs of heavy crudes have been cut after the OPEC agreement, thus the supply of Venezuelan heavy crudes have become tight, said a trader source. Prices of Venezuelan Merey crudes have increased to the same level of WTI, up from WTI minus $2 weeks ago. Nevertheless, buyers still need to pay the full cargo value in advance and then wait for weeks for the delivery to come, according to the trader source.

    In combination with the tight supply of Merey crude, strong demand of asphalt in recent weeks also supported the buying appetite of Merey crudes, which has a better yield of asphalt.

    Chambroad and Dongming Petrochemical have been the major buyers of Merey crudes in recent months.

    Crudes from UK -- Forties, Ekofisk have gained popularity among independent refineries in March, with total imports rising 388% month on month to 395,000 mt.

    MORE CRUDES FROM US

    Other than these regular crude grades, independent refineries also have started to try out new grades in March, with more cargoes from the US to come in April and May.

    Independent refineries usually choose the most economical crude grades among those offered to them.

    Looking to April, Wonfull Petrochemical is looking to receive 1 million barrels each of Mars and Thunderhorse cargoes, and Dongming Petrochemical to receive 1 million barrels of SGC crude from the US.

    "We bought because they are quite economical," said a source with Wonfull.

    Wonfull in May will continue to receive 1 million barrels of Mars crude from the US.

    http://www.platts.com/latest-news/oil/singapore/china-data-independent-refiners-mar-crude-imports-27811266
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    Reeling with debt, Shandong Molong raises 'significant doubts' on future


    Shandong Molong Petroleum Machinery Co Ltd said on Tuesday it had "significant doubts" about its ability to continue operating with its liabilities exceeding assets by 15.83 billion yuan ($2.3 billion) at the end of 2016.

    The petroleum equipment maker, however, said it also had sufficient funds to maintain normal production and operation, but did not say for how long.

    The firm said it was taking measures to reduce production costs, expand its financing channels and diversify its sources of income. Controlling shareholder Zhang Enrong will also provide financial support, the company said in a filing to the Hong Kong bourse.

    The company's shares in Hong Kong, which fell 20 percent on Monday, climbed 8.4 percent in early trade on Tuesday.

    Shandong Molong said it failed to maintain effective internal controls of its financial reporting at the end of last year.

    The company, along with Enrong and its general manager, are under investigation by China Securities Regulatory Commission for possible securities violations.

    The company faces the possibility of being delisted from the mainland stock exchange, after reporting two straight years of losses. Last year's net loss widened to 612.5 million yuan.

    http://www.reuters.com/article/shandong-molong-operations-idUSL3N1HJ1GL
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    Diversify or die: China's independent oil refiners adapt to new challenges


    Cut off from lucrative fuel export markets and seeing their margins squeezed by new taxes, China's independent oil refiners are branching out into new sectors from clean energy and lumber as well as expanding their trading to overcome the challenges.

    These independents, known as "teapots" since they are smaller companies than their state-owned rivals, are scrambling to survive shifting government policies at the same time domestic oil demand growth is slowing, undermining their ability to expand by just serving their home market. In 2016, China's annual fuel demand growth was at a three-year low.

    "The good days won't last much longer, as China's oil demand has been shrinking," said Zhang Liucheng, vice president of Shandong Dongming Petrochemical Group, the country's largest independent refiner.

    Late last year, Beijing suspended fuel export quotas for the independents, handing control of diesel and gasoline exports to the dominant state refiners.

    Other government moves may also squeeze the independent's margins. Top state refiner Sinopec overhauled its fuel buying policy by centralizing all purchases at its Beijing headquarters and China plans to slap consumption taxes on refinery by-products such as light cycle oil, sold as diesel, and mixed aromatics, which are added to gasoline to improve fuel quality.

    "They had already been diversified and nimble at working around the various government mandates...now they are definitely looking for ways to step up their game and have better people, global access and financing to do so," said Michal Meidan, analyst at consultants Energy Aspects.

    Executives at some of China's top independent refiners outlined to Reuters their plans to diversify to endure these changes.

    Dongming, for example, plans to add a 800,000 tons-per-year naphtha cracker, extending its business from transportation fuels to higher value plastics and synthetic rubber as well as fine chemicals, said Zhang.

    The 260,000 barrels-per-day (bpd) refiner is also looking to invest in small-scale onshore fields, said Zhang.

    Zhang also aims to boost trading operations by combining physical oil and gas trading with financial services such as offering credit facilities for fellow teapots at better rates than banks.

    Underscoring how much Beijing has prioritized clean energy, Shandong Haike Group said it will open this month a factory that makes electrolytes used in lithium batteries for electric vehicles.

    The company said the plant will be the country's largest with the capacity to produce 100,000 tons a year. It also plans to grow its pharmaceutical business but has no plans to expand its refining capacity.

    UNCERTAIN FUTURE FOR TEAPOTS

    Shandong Chambroad Group plans to move into lumber processing to develop a special building material for villa cottages and gardens, said chairman Ma Yunsheng.

    In addition to the policy actions against them, the teapots have lost a major advocate with the departure of Shandong provincial governor Guo Shuqing, which further shrouds their future, said Energy Aspects' Meidan.

    Newly installed Shandong party chief Liu Jiayi could try to tackle overcapacity and pollution in the province, which would add to pressure on the independents, she said.

    For some, the expansions are an opportunity to move from a small local operation into a global company.

    Shandong Hengyuan Petrochemical Co, a refiner backed by a local government and the first teapot to own a refinery abroad, wants to become a regional player, combining assets at its home base in Shandong with the refinery in Port Dickson, Malaysia, that it recently acquired from Shell (RDSa.L).

    As part of the expansion, it will set up a trading desk in Kuala Lumpur to secure crude for the two plants with a combined capacity of 160,000 bpd and also supply 4 millions of tons of fuel annually to Shell under a 10-year pact.

    "Without differentiating yourself, the competition will be tough," said Hengyuan's chairman Wang Youde.

    http://www.reuters.com/article/us-china-oil-teapots-idUSKBN17D0I2
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    Shell says it knew some payments for Nigeria oilfield would go to Malabu


    Royal Dutch Shell has said it knew that some of the payments it made to Nigeria for the rights to an oilfield would go to Malabu Oil and Gas, a company associated with a former Nigerian oil minister and convicted money launderer.

    Shell spokesman Andy Norman said the group had known the Nigerian government "would compensate Malabu to settle its claim on the block". Shell previously had said only that its payments from the 2011 deal went to the Nigerian government.

    In an email to Reuters, Norman said that while Shell knew that former oil minister Dan Etete was "involved" with Malabu, it had not confirmed that he controlled the company.

    Etete was convicted of money laundering in a separate case in France in 2007.

    "Over time it became clear to us that Etete was involved in Malabu and that the only way to resolve the impasse through a negotiated settlement was to engage with Etete and Malabu, whether we liked it or not," Norman said.

    Norman added that the company believes the settlement was a fully legal transaction with the Nigerian government.

    The statement comes amid mounting pressure over the deal, in which Shell and Italy's Eni paid $1.3 billion for the rights to offshore block OPL 245, which industry estimates say could hold more than 9 billion barrels of oil.

    Courts in Nigeria and Italy are investigating the purchase of the block. Italian prosecutors have asked for Eni chief Claudio Descalzi to be sent to trial in correction with the case. Eni has said neither the company nor Descalzi were involved in any allegedly illicit conduct.

    A Nigerian court ordered the asset temporarily seized in January at the request of the country's Economic and Financial Crimes Commission, but the move was overturned.

    http://www.reuters.com/article/shell-nigeria-idUSL8N1HJ1MZ
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    Japan’s spot LNG price drops to five-month low


    The average price of spot LNG for delivery into Japan that was contracted in March 2017 was at US$6.2 per mmBtu, dropping to the lowest level in five months.

    After rising for the previous four months, and reaching a contract-based price of $8.5 per mmBtu in February the price dropped over 27 percent, according to the monthly report from the Japanese Ministry of Economy, Trade and Industry (METI).

    The ministry did not report a contract-based price for the month of March in 2016 due to the lack of trading.

    The price of spot LNG arriving into Japan during the month of March 2017 also dropped in comparison to the previous month.

    According to the data, the arrival-based price reached $7.7 per mmBtu in March 2017, down 12.5 percent from $8.8 per mmBtu reported in February 2017.

    However, in comparison to March 2016 when the ministry reported the arrival-based price of $6.8 per mmBtu, the price of spot LNG has risen 13.2 percent.

    Only spot LNG cargoes are taken into account in this assessments, excluding short, medium and long-term contract cargoes, as well as those linked to a particular price index.

    http://www.lngworldnews.com/japans-spot-lng-price-drops-to-five-month-low/
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    API Reports Draws Across The Board


    The American Petroleum Institute (API) reported a draw of 1.3 million barrels in United States crude oil inventories, compared to analyst expectations for a crude oil build of 125,000 barrels.

    API also reported a significant gasoline inventory draw of 3.7 million barrels, compared to predictions of a 1.8-million-barrel draw.

    Distillates saw a 1.6-million-barrel draw compared to an expected 1.3-million-barrel draw for the fuel.

    Inventories at the Cushing, Oklahoma, site fell by 358,000 barrels, following last week’s 1.34-million-barrel build.

    Oil prices rose to five-week highs after Friday’s reports of U.S.-ordered airstrikes against Syrian infrastructure, followed by production outages from Libya’s largest oilfield, and late-breaking news on Tuesday that suggested Saudi Arabia would support OPEC production cuts. Despite the overarching sentiment that the American Petroleum Institute would report a build late Tuesday afternoon, WTI was trading up 0.36% at $53.27 at 1:20pm EST, while Brent Crude traded at $56.03, up .09% on the day. These per-barrel prices are more than $2.00 higher than this time last week.

    This week’s draw in crude oil inventories is only the sixth draw in the last 15 weeks, using API data, with the API still reporting an overall hefty build over the previous 15 weeks of roughly 37.9 million barrels.

    http://finance.yahoo.com/news/oil-prices-pull-higher-api-214513283.html
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    New U.S. drilling permits surged in March


    New drilling permits issued across the United States climbed by almost 4,000 in March, the largest increase in 18 months, Evercore ISI said Tuesday.

    The number of newly issued U.S. drilling permits has increased steadily since OPEC struck its deal to curb oil production in November. As oil prices rose and drillers locked-in higher prices for future oil production, permitting activity accelerated in February and March, getting closer to levels that were typical before the two-year oil downturn, according to the investment bank, which compiles state permitting data for a monthly report.

    It’s another sign of a surge in U.S. drilling that, along with rising output in other countries, could counteract much of OPEC’s effort to cut oil production. It also implies Houston’s oil field service companies and drilling contractors will have more work in coming months and will likely increase hiring in the oil patches in Texas and elsewhere.

    Last month, U.S. drilling permits came in nearly a quarter higher than they did in February, and it was more than twice the number that came in March 2016. Permits surged in Texas, California, Wyoming, Colorado, Oklahoma, New Mexico and North Dakota.

    In the Gulf of Mexico, deep-water drilling permits rose from two to five in March, and overall, offshore permits increased to 17, up from eight the month before, according to Evercore ISI.

    http://fuelfix.com/blog/2017/04/11/new-u-s-drilling-permits-surged-in-march/?utm_content=buffer745dc&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer
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    As Texas oil output surges, cash crude discounts near two-year lows


    Surging West Texas oil production has pushed the value of the region's spot crude to its lowest discount to the U.S. oil benchmark in nearly two years, as an exuberant shale industry pumps more to take advantage of higher prices and demand from refiners who have seen supplies cut by top global producers.

    OPEC and non-OPEC suppliers are working toward cuts of 1.8 million barrels per day, around 2 percent of the 92 million bpd global market, as they try to bring down record oil inventories and raise prices.

    But supply cuts by exporters worldwide have given an incentive and opportunity to U.S. shale producers to do the opposite. They have sent rigs back into the field and are working to boost output after more than a two-year industry recession.

    The Permian Basin is the biggest U.S. oil field and the most prized U.S. locale for shale activity because of its strong reserves and low production costs. But even as investors flock to the region, some traders and analysts caution that activity may be moving too fast.

    "Aggressive Permian production growth alongside regional refinery outages and weaker export demand for shale crude has forced heavy discounts for Midland crude," said Dominic Haywood, an analyst at Energy Aspects. "It's now falling towards levels that's making it economical to ship on certain pipelines on a spot basis."

    PRICE PRESSURE

    Rising production has come before record U.S. oil stockpiles have had time to drain, putting pressure on regional prices.

    On Friday, even as benchmark U.S. crude futures rebounded to a one-month settlement high of $52.24 a barrel, cash traders sold West Texas oil - the type of crude pumped from the Permian Basin - to one of its steepest discounts since April 2015.

    Last week, WTI at Midland, Texas for May fell to a $1.65 a barrel discount to the U.S. benchmark. Four months ago, it traded at a $1.05 a barrel premium to WTI. That means producers in the Permian are effectively receiving nearly $3 less a barrel than they were at the start of the year.

    While Midland prices rallied late last week due to Canadian outages, the price remains relatively weak compared with recent months or years.

    "Right now, the Permian is obviously the hottest place to drill. There's quite a bit of expansion in production we expect from the area," said Sarp Ozkan, manager of Energy Analytics for Drillinginfo.

    OPEC's cuts are draining storage of oil at sea, in the Caribbean and other parts of the world. But they are having little impact on U.S. inventories as a wave of Permian output keeps storage brimming. Permian output is expected to rise to 2.29 million bpd in April, up 15 percent from a year ago, according to the U.S. Energy Information Administration.

    The operating rig count in the region has doubled in a year, and some producers who have left drilled wells uncompleted, opting to leave the oil in the ground ready to pump when prices rise, are turning on the spigots.

    Producers had left a record number of wells unfinished in Permian, but now appear to be whittling them down.

    In the Delaware Basin, the number of wells drilled but uncompleted outside the normal six-month spud-to-production range, or the beginning to the end of drilling a well, known as deferred completions, has fallen to 110 from 237 in the past six months, according to Drillinginfo.

    In the Midland Basin, the number of DUCs dropped to 94 from 163 in the same period.

    SWELLING STOCKS

    Pipelines out of the region also show that the Houston area, a destination for Midland crude, is flooded with other supply.

    For example, Magellan Midstream Partners' BridgeTex pipeline, which flows to Houston, ran at slightly more than half-full at the end of March, according to energy information provider Genscape. It costs about $4 a barrel to ship from Colorado City, Texas, to Houston on that pipeline. That is higher than the $2.75 to $3.00 a barrel differential between Midland and Houston, making it not economical to send oil along that route.

    Total monitored stocks in West Texas hit a record in the middle of March, Genscape added, but decreased slightly by the end of the month.

    To relieve swelling inventories in West Texas, regional oil prices must fall relative to other markets to cover the cost of transportation on pipelines that flow to places such as Houston, or to make it economical to export the oil to international destinations, according to Sandy Fielden, director of oil and products research at Morningstar.

    http://www.reuters.com/article/us-usa-oil-texas-idUSKBN17E0DA
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    Oil and gas E&P credit lines could rise nominally


    Stable oil prices at higher levels than a year ago, as well as expanded upstream capital budgets and more drilling, are likely to boost bank credit lines by nominal amounts for oil and gas producers and allow them to continue robust production growth, analysts say.

    Crude prices that pushed through the psychological $50/b barrier late last year and largely remained there have revved up drilling engines in the oil patch and pushed up production in key US basins, notably the Permian in West Texas/New Mexico, and to a lesser extent the Eagle Ford Shale of South Texas.

    That will add to oil and gas reserves, a key metric used to gauge operators' creditworthiness. And this, along with extra cash from more output, means producers may qualify for higher funding levels during lenders' first of two yearly re-evaluation rounds for the sector this month.

    "You'd think more production would mean banks wouldn't be bullish on increasing borrowing bases," Kraig Grahmann, a partner at law firm Haynes and Boone's energy practice group, said. "But we've identified a bit of a floor in oil prices and so banks are seeing more of a comfort level."

    Last week, Haynes and Boone released results from a survey of 163 energy and financial executives on upstream credit redeterminations. The poll found respondents expect to see the borrowing bases of 76% of producers increase slightly (on average 10%) during the current round or remain unchanged, compared with 59% last October.

    UNRUFFLED BY PRICE PULLBACK

    Moreover, executives appeared relatively unruffled by a slight pullback in oil prices below what is popularly called the "magic" $50/b mark last month, when Haynes and Boone took the poll.

    One-third of those who took the survey did so after the week of March 6-10, Grahmann said, during which the price of oil fell about 9%.

    Those executives were "slightly more pessimistic" than those surveyed before the price drop, he said. But "the conclusion we drew was that while bankers and producers are cautious ... they've gotten used to the idea that short-term, we could see these fluctuations that work themselves out into long-term price stability."

    Related Capitol Crude podcast: Is a 'decade of disorder' ahead for global oil markets?

    Higher oil and gas prices also point to banks' willingness to lend, Brian Kessens, managing director for Tortoise Capital Advisors, said.

    "If you look where oil and gas strip prices are now versus a year ago, oil is about $10 higher, and gas is about 50 cents higher," Kessens said. "You have better commodity price decks that banks are using to value reserves."

    Moreover, the fact that lenders have backed a slew of acquisitions for E&P companies over the past nine to 12 months also shows confidence in the current market, Ray Ballotta, partner of M&A transaction services for Deloitte LLP, said.

    "They are back in the space and expanding credit lines," Ballotta said.

    While few oil companies have released news of their new borrowing bases -- a second round of redeterminations occurs in October -- an announcement from one small East Texas operator could serve as a proxy for what is widely expected this time around.

    WildHorse Resource Development Corporation said last week its credit facility had increased to $450 million -- up 24% from its prior borrowing base of $363 million. The company had its initial public offering in December.

    Many E&P companies have asset-based credit lines tied to the value of their proved oil and gas reserves, a process known as reserve-based lending. According to Debra Gatison Hatter, a partner at Dallas-based law firm Strasburger, about a third of Lower 48 US oil production comes from companies with reserve-based loans.

    BORROWING TERMS STILL CONSERVATIVE

    But borrowing terms still remain conservative, a cautious holdover due to the recent two-year industry downturn that saw oil prices drop from $100/b in mid-2014 to around $26/b briefly in early 2016.

    Compared with a year ago, lenders have added cash anti-hoarding provisions, meaning they cannot draw down their full revolvers and sit on war chests, Ballotta said. And the overall leverage banks require is lower: 3.5 times debt-to-EBITDAX (earnings before interest, taxes, depreciation, amortization and exploration), compared with five times a year or two ago.

    Also, regulators have formulated guidelines making it harder for lenders to keep extending credit to distressed operators that do not maintain a sufficient level of oil and gas reserves, Grahmann said.

    In effect, "it's more difficult [for lenders] to kick the can down the road," he said.

    The October 2016 round of bank redeterminations occurred at a time when producers, enthusiastic over oil at or near $50/b, started to add rigs in preparation for what they believed would be higher spending this year. That also was before OPEC agreed to production cuts the following month of around 1.2 million b/d, while non-OPEC nations agreed to cut more than 500,000 b/d.

    OPEC will meet in May to determine whether to extend those cuts. Also, by August or September, more data on levels of global oil inventories should be available, which could signal whether oil prices are likely to remain around existing levels or notch up.

    "That should affect what happens with fall" bank redeterminations, Grahmann said.

    http://www.platts.com/latest-news/oil/newyork/feature-oil-and-gas-eampp-credit-lines-could-21410279
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    Introducing multi-lateral wells in the Delaware

    Occidental introducing multi-lateral wells in the Delaware. Pilot successful. Savings : $1 million/well.

    http://www.oxy.com/investors/Documents/3.28.17WebsitePresentationScotiaHowardWeil.pdf

    page 29

    Attached Files
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    Enterprise Products to build new pipeline from Permian to Houston


    Welders in 2013 work on a stretch of a Texas pipeline owned in part by Enterprise Products Partners. Enterprise is planning a 571-mile line from the Permian Basin to the Houston area.

    Energy infrastructure giant Enterprise Products Partners said it will build a 571-mile pipeline from the Permian Basin to the Houston area to transport natural gas liquids.

    The new pipeline project is another sign that West Texas is booming again with oil and gas and the Houston area is growing as the hub for those resources to either be processed or exported. Oil gets all of the attention, but the natural gas streams from the shale rock are used to create petrochemicals, electricity or other products.

    Houston-based Enterprise said the planned Shin Oak NGL pipeline will start northwest of Midland in Gains County and end at its Mont Belvieu complex, where Enterprise can separate the natural gas liquids into products like ethane, propane and butane. Ethane is the primary feedstock of the Gulf Coast’s growing petrochemical sector.

    “The Permian Basin is currently the hottest play in North America and is expected to continue its strong growth for years to come,” said Enterprise CEO Jim Teague in a prepared statement. “This additional pipeline takeaway capacity to Mont Belvieu will provide Permian producers the flow assurance they need to continue the unfettered development of their reserves with confidence.”

    Teague is emphasizing such pipelines will ensure surging oil and gas production in West Texas won’t create bottlenecks without enough pipeline capacity to move the growing supplies.

    Although drilling in the Permian is for oil, most of the wells also produce associated natural gas liquids. The extra NGLs are why producers don’t need to drill specifically for gas in West Texas. Companies like Houston-based Plains All American Pipeline are building new crude pipeline capacity, but Enterprise is focused on giving the NGLs a home.

    The cost of the Shin Oak project is not being revealed. Enterprise said the pipeline is expected to be completed in 2019. It will initially transport 250,000 barrels but could be expanded to carry 600,000 barrels daily.

    Likewise, in March, Houston-based Kinder Morgan  said it plans to build a 430-mile natural gas pipeline from West Texas’ Permian Basin to the Corpus Christi region.

    Enterprise’s Mont Belvieu NGL complex is the largest of its kind in the world. Enterprise can sell the ethane to petrochemical plants or export the ethane, propane and butane to foreign markets. Enterprise also is building new fractionation capacity to separate the natural gas liquids into ethane, propane and more.

    Enterprise said in January it will build an isobutane processing unit at its Mont Belvieu campus to create chemicals used in the manufacturing lubricants, rubbers and gasoline additives. It’s all part of Enterprise’s strategy to derive as much value as possible from cheap and ample natural gas and components such as isobutane. Portions of the isobutylene will go into gasoline additives like alkylate and methyl tert-butyl ether, or MTBE, which is typically exported to Asian markets. Enterprise already operates an MTBE production facility in Mont Belvieu.

    This summer, Enterprise is expected to complete its neighboring propane dehydrogenation facility at Mont Belvieu. The plant would convert propane into propylene, which is one of the most common building blocks of plastics. Dehydrogenation is a process of removing hydrogen from molecule; the chemical composition of natural gas is mainly carbon and hydrogen.

    This past fall, Enterprise completed the world’s largest ethane export terminal along the Houston Ship Channel.

    In less than a decade, Greater Houston has shifted from net importer to net exporter as energy and petrochemical companies find international markets for crude oil, natural gas, natural gas liquids, refined products, and chemicals, including methanol, ammonia and propylene.

    http://fuelfix.com/blog/2017/04/10/enterprise-products-to-build-new-permian-to-houston-pipeline/
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    Alternative Energy

    Electricity from UK solar farms hit record high April 8


    Electricity generated from solar PV farms across the UK hit several record highs on Saturday, peaking at 8,030 MW in the afternoon half hourly period, according to National Grid data.

    On April 8, the UK's solar output recorded a maximum of 8,030 MW at 12:30 local time (1130 GMT), the Grid data showed.

    Solar PV generation had climbed to 7,680 MW at 11:30 UK time earlier in the day, surpassing the previous record high of 7,670 MW set on March 25, National Grid said.

    The UK has had strong growth in installed solar capacity in recent years, and the energy department's initial estimates at the end of February pegged capacity at 11,770 MW across 907,597 installations.

    As most of deployed solar capacity is part of the embedded generation profile in the UK -- connected to the distribution network and not the national transmission network -- the Grid lacked the visibility on total electricity produced by the source of energy.

    But a project by the Grid along with Sheffield Solar has resulted in near real time estimates of national solar outturn that is based on third party metered data from a sample of live sites.

    According to the Sheffield Solar website, solar output was 4.82 GW at 11:30 UK time, which is around 13% of the UK's total energy mix.

    http://www.platts.com/latest-news/electric-power/london/electricity-from-uk-solar-farms-hit-record-high-26707854
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    Battery breakthrough by 94 year inventor addresses costs and life-cycle


    A team of US engineers, led by one of the co-inventors of the game-changing lithium-ion battery, has made a new battery storage breakthrough that could also be a game-changer – particularly for the uptake of electric vehicles.

    The team, from The University of Texas, in Austin, claims to have come up with a low-cost all-solid-state battery that is noncombustible and has a long cycle life, has fast rates of charge and discharge and at least three times as much energy density as today’s lithium-ion batteries.

    In terms of electric vehicles, this sort of boost to energy density is all-important, allowing battery-powered cars to drive further between charges. It also allows for a greater number of charging and discharging cycles, which means longer battery life, as well as a faster rate of recharge – another key hurdle restricting the mass adoption of electric vehicles.

    The breakthrough, first reported in a paper published in the journal Energy & Environmental Science, was overseen by team leader 94-year-old John Goodenough, professor in the UT’s Cockrell School of Engineering and a co-developer of the li-ion battery.

    And it draws on solid glass electrolyte discoveries of senior research fellow Maria Helena Braga, who first worked on the technology with colleagues, at the University of Porto in Portugal, and then with Goodenough and researcher Andrew J. Murchison at UT Austin.

    Braga said that Goodenough brought an understanding of the composition and properties of the solid-glass electrolytes that resulted in a new version of the electrolytes that is now patented through the UT Austin Office of Technology Commercialisation.

    “We believe our discovery solves many of the problems that are inherent in today’s batteries,” Goodenough said in a UT report.

    “Cost, safety, energy density, rates of charge and discharge and cycle life are critical for battery-driven cars to be more widely adopted,” he said.

    The use of an alkali-metal anode (lithium, sodium or potassium) — which isn’t possible with conventional batteries — increases the energy density of a cathode and delivers a long cycle life. In experiments, the researchers’ cells have demonstrated more than 1,200 cycles with low cell resistance.

    Another benefit to using the glass electrolyte is safety: Current lithium-ion batteries use liquid electrolytes to transport the lithium-ions between the anode and the cathode. If a battery cell is charged too quickly, it can cause dendrites or “metal whiskers” to form and cross through the liquid electrolytes, causing a short circuit that can lead to explosions and fires.

    Additionally, because the solid-glass electrolytes can operate, or have high conductivity, at -20 degrees Celsius, it could perform well in subzero degree weather. It is also the first all-solid-state battery cell that can operate under 60°C.

    Another advantage is that the battery cells can be made from earth-friendly and abundant materials.

    “The glass electrolytes allow for the substitution of low-cost sodium for lithium. Sodium is extracted from seawater that is widely available,” Braga said.

    According to the UT, Goodenough and Braga are continuing to advance their research and are working on several patents. In the short term, they hope to work with battery makers to develop and test their new materials in electric vehicles and energy storage devices.  

    http://reneweconomy.com.au/battery-breakthrough-by-94yo-inventor-addresses-costs-and-life-cycle-20181/
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    Agriculture

    Grains piled on runways, parking lots, fields amid global glut


    Iowa farmer Karl Fox is drowning in corn.

    Reluctant to sell his harvest at today's rock-bottom prices, he has stuffed storage bins at his property full and left more corn piled on the ground, covered with a tarp.

    He would rather risk potential crop damage from the elements than pay the exorbitant cost of storage elsewhere.

    "That's how poor people do it," said Fox, who has been farming for 28 years. "You do what you have to do."

    Farmers face similar problems across the globe. World stockpiles of corn and wheat are at record highs. From Iowa to China, years of bumper crops and low prices have overwhelmed storage capacity for basic foodstuffs.

    Global stocks of corn, wheat, rice and soybeans combined will hit a record 671.1 million tonnes going into the next harvest - the third straight year of historically high surplus, according to the U.S. Department of Agriculture (USDA). That's enough to cover demand from China for about a year.

    In the United States, farmers facing a fourth straight year of declining incomes and rising debts are hanging on to grain in the hope of higher prices later. They may be waiting a long time: Market fundamentals appear to be weakening as the world's top grain producers ponder what to do with so much food.

    The persistent glut is a striking contrast from the panic a decade ago, when severe droughts in Russia and the United States sent prices soaring. The shrinking supply forced big importers such as China to enact policies to encourage more domestic production and increase the volume of storage to improve food security.

    China abandoned that policy last year and is now selling off hundreds of millions of tonnes of old stocks.

    Russia, too, is looking at exporting from state-held stockpiles, with storage stuffed after a record harvest in 2016.

    A surge of Chinese and Russian exports would put even more downward pressure on prices in an oversupplied global market.

    That means U.S. farmers will likely be producing more grain for less money. The USDA forecasts net farm income will fall 8.7 percent this year to $62.3 billion - the lowest level since 2009.

    CATERPILLARS, RODENTS AND DONKEYS

    In farms across Iowa, corn bulges in plastic tubes that snake across the fields.

    The grain-stuffed silo bags are taller than a man, often longer than a soccer field and look like monstrous white caterpillars.

    On the other side of the globe in Australia, demand for the storage bags has exploded after farmers produced record crops of wheat and barley.

    They are laying across fields in Argentina, too. There, wheat production spiked 41.6 percent this year over the 2015/16 season, according to the most recent USDA data.

    There are risks to using the bags, however, as wild animals ranging from rodents to armadillos and even donkeys can be tempted to break in for the grain, said Mariano Bosch, the head of Adecoagro SA (AGRO.K), which farms more than 225,000 hectares of row crops in Argentina, Brazil and Uruguay.

    When the company expanded its grain plantings in northern Argentina, he said, they started building electrified fences around their silo bags to keep out cougars and pumas.

    "They won't eat the grain. They're just curious," said Bosch, who added that about 40 percent of the company's grain this year is stored in silo bags.

    In neighboring Brazil, the world's largest soybean shipper and the second-largest exporter of corn, towering grain silos have sprung up all across the country.

    GRAINS ON THE RUNWAY

    Storing grain gives farmers more control over when and how they sell, to avoid low harvest-time prices and to best take advantage of spikes in futures or currency swings.

    But with storage running short - and a mountain of grain to move ahead of summer or early autumn harvests - that control is slipping away.

    Farmers with mounting bills, tight cash-flow and nowhere to store crops may have to sell them - even if it means taking a loss.

    In Goodland, Kansas, where the next wheat harvest begins in late June, farmers holding grain in silos are facing cash wheat prices of about $3.15 a bushel and cash corn prices of $2.90 a bushel - both well below production costs of at least $4 a bushel. 

    Permanent storage in the United States can handle about 24.3 billion bushels - well short of the 25.9 billion bushels of wheat, soybeans and feed grains the USDA said was piled up by the end of last autumn's harvest.

    The overflow in the United States has prompted a rush for temporary storage. The USDA has approved permits for more than 1.2 billion bushels of temporary and emergency grain storage - such as tarp-covered piles and open-air mounds. That's a record amount, according to the USDA.

    In Kansas, some grain owners are renting airport tarmacs from decommissioned military bases, empty farm fields and parking lots to stash their corn as the situation becomes acute, according to farmers and local, state and federal officials.

    Meanwhile, there are no signs of a slowdown in grain production.

    The USDA already expects 2016/17 global harvests to be the highest since its records started in 1960/61 at 340.79 million tonnes of soybeans, 1.049 billion tonnes of corn and 751.07 million tonnes of wheat.

    "Nobody is going to cut back," said Fox, the Iowa farmer.

    With spring planting coming up, he is scouting for more storage space for this year's harvest.

    "I have a note at the bank to pay off," he said. "I can't do less."

    http://www.reuters.com/article/us-usa-grains-storage-analysis-idUSKBN17D0EO
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    Precious Metals

    CME Group, UK’s Royal Mint test blockchain-based gold trading platform


    Chicago-based exchange CME Group and Britain's Royal Minthave started testing a blockchain-based platform for trading gold, as more projects using the emerging technology come closer to deployment.

    CME Group announced on Tuesday that the new platform, built with technology companies AlphaPoint and BitGo, was being tested by a select group of "major financialinstitutions," and is on schedule for launch this year.

    The new platform will allow institutions to trade "Royal MintGold," or RMG, a new digital token issued by the Royal Mint, which makes Britain's coins.

    Each RMG will represent the digitised version of 1 g of goldstored in the Royal Mint's vault.

    Transactions will be recorded on a blockchain, technologythat allows a network of computers to keep track of and verify asset ownership.

    Blockchain, which first emerged as the technology powering cryptocurrency bitcoin, is seen by financial institutions as a powerful new tool to increase transparency and reduce the costs and complexity of a wide range of financial transactions.

    "There is a higher level of traceability and audit that comes with blockchain technology because participants are provided with a permanent, immutable record of ownership and chain of ownership and custody," said Igor Telyatnikov, president and COO of AlphaPoint.

    Up to $1-billion worth of RMGs will be issued initially by the Royal Mint.

    "This is the first digital gold product that is institutionally targeted - and the first to work with a government entity - to be currently in a live testing state,” said Sandra Ro, head of digitisation at CME Group. “An RMG is a digital representation of real gold sitting in the Royal Mint vaults.”

    Over the past two years, banks and other financialinstitutions, such as exchanges, have ramped up their investments in the technology. While only a handful have gone live, more are starting to enter the implementation phase.

    Post-trade provider the Depository Trust & Clearing Corp(DTCC) said in January that it would use blockchain technology this year to rebuild its platform that processes $11-trillion worth of credit default swaps.

    http://www.miningweekly.com/article/cme-group-uks-royal-mint-test-blockchain-based-gold-trading-platform-2017-04-12
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    Base Metals

    Southern Copper workers to continue Peru strike after talks fail


    Union representatives and executives from miner Southern Copper, in Peru, failed to reach an agreement to end an indefinite strike after a long meeting on Monday night, the union said on Tuesday.

    The company did not agree to the union's main demand for a greater share of profits, Raul Urere, a leader of a union representing 2 200 workers, told Reuters. He said another meeting was scheduled for Wednesday.

    The strike started on Monday following labour disruptions at Peru's biggest copper mine, Cerro Verde, and Chile's Escondida, the world's largest copper mine, earlier this year.

    Southern Copper said on Monday operations were little affected, with the Cuajone and Toquepala mines producing at 98%, while the Ilo refinery was operating at full capacity. The union said 80% of operating capacity had been impacted, however.

    Southern Copper, owned by Grupo Mexico, boosted its copper output by 21% to 900 000 t last year on the back of an expansion at a mine in Mexico.

    http://www.miningweekly.com/article/southern-copper-workers-to-continue-peru-strike-after-talks-fail-2017-04-11
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    Vedanta says India unit's zinc output up 40 pct in fourth qtr


    Diversified miner Vedanta Resources Plc said on Tuesday refined zinc production at its India unit rose nearly 40 percent in the fourth quarter, boosted by higher output at a mine in the state of Rajasthan in northwestern India.

    Refined zinc production rose to 215,000 tonnes in the quarter ended March 31, from 154,000 tonnes a year earlier, the company said in a statement.

    Full-year integrated zinc production at its Indian unit fell 12 percent to 670,000 tonnes due to lower availability of mined metal in the first half of the year, Vedanta said.

    http://www.reuters.com/article/vedanta-results-idUSL3N1HJ2DX
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    Steel, Iron Ore and Coal

    China's 2017 thermal imports to surge by 30 million mt over 2016: Noble


    China's thermal total coal import in 2017 is expected to surge by about 30 million mt over that in 2016, on the back increasing power generation, according to Noble Group.

    "The fundamentals in the coal market changed last year," Rodrigo Echeverri, head of Noble Group's energy coal analysis, said at the Coaltrans Conference in Shanghai on Monday.

    He said that there has been a demand shock in the thermal coal market without a supply response, which has helped support the prices. China's thermal coal import during the first quarter of 2017 was about 12 million mt more than Q1 2016's imports, Echeverri said.

    He pointed out that China's thermal power generation in Q1 2017 increased 7% over Q1 2016's, while output of coal increased by only about 4%.

    "Import of coal is very important for power producers and cement manufacturers in South China and they don't have a ceiling on imports," said Hu Bo, deputy general manager at Beijing Datang Fuels Co. The seaborne market is going to see more low-calorific-value coal being moved, which is expected to grow to 1.1 billion mt by 2030, according to Cameron Tough, head of International Marketing at Adaro Indonesia.

    COAL GREEN REVOLUTION

    Most of the market participants at the Coaltrans Conference were of the opinion that the coal sector was not a sunset industry.

    "We need development to burn coal more efficiently and reduce emissions. This will be the green revolution for coal," said Mao Zhongsheng, chairman of China's Shenhua Energy Co. Ltd., adding that fossil fuels would continue to play an important part in the energy-mix. "[The] Asia Pacific region has the biggest scope for growth in energy consumption," he said, mentioning that additional uses of coal are also being invented, with liquefaction being one of them.

    http://www.platts.com/latest-news/coal/singapore/chinas-2017-thermal-imports-to-surge-by-30-million-27811600
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    Anhui Hengyuan Coal Electrity predicts 287 mln yuan net profit in Q1


    Anhui Hengyuan Coal Electrity Group Co., Ltd predicted a net profit of 287 million yuan ($41.53 million) or so in the first quarter of 2017, surging 60 times as compared with the same period last year, said the company in a statement late April 10.

    The company cited the de-capacity drive and optimization of product structure for the improved profitability, though its output of raw and commercial coal as well as commercial coal sales also declined during the period.

    In the first quarter, the company produced 3.21 million tonnes of raw coal, down 7.8% year on year, while output of commercial coal dropped 17.1% from the year-ago level to 2.54 million tonnes.

    Sales of commercial coal were 2.26 million tonnes during the same period, 23.2% lower than the preceding year, according to the statement.

    It realized sales revenue in coal business of 1.49 billion yuan over January-March, slumping 70.2% year on year; sales cost increased 29.4% from the year prior to 1.02 billion yuan; gross profit of commercial coal surged 431.8% from a year earlier to 471 million yuan.

    The company produced 12.76 million tonnes of raw coal last year, down 10.8% year on year; sales of commercial coal climbed 4.3% on the year to 10.92 million tonnes.

    Its operating revenue increased 16.6% year on year to 4.63 billion yuan in 2016, while net profit reached 35.29 million yuan during the period.

    Anhui Hengyuan Coal Electrity planned to produce 12.6 million tonnes of raw coal in 2017, and sell 10.86 million tonnes of commercial coal. Total operating revenue is projected to be 5.47 billion yuan this year, and operating cost to be 4.74 billion yuan.

    http://www.sxcoal.com/news/4554602/info/en
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    Indian body recommends anti-dumping duties on some steel imports


    An Indian government body has recommended imposing duties on some steel products imported from China, Japan and Russia, reinforcing New Delhi's tough stance despite complaints from some of the targeted countries.

    The Directorate General of Anti-Dumping and Allied Duties (DGAD) suggested imposing definitive anti-dumping duties on cold-rolled and hot-rolled flat steel products, according to circulars released on Monday. The government usually accepts DGAD's recommendations.

    "It is noted that dumped imports from the subject countries have adversely impacted the performance of the domestic industry," one of the circulars said.

    Last month, Japan asked the World Trade Organization (WTO) to set up a dispute settlement panel to examine India's duties on steel imports which it says may violate WTO rules.

    Earlier this year, Indian Steel Secretary Aruna Sharma told Reuters there was a "strong case" for imposing long-term anti-dumping duties on up to 124 steel products.

    Between April and January, India's steel imports fell 38 percent year-on-year, data from a government body showed, primarily due to the slew of protection measures announced by the government.Indian steelmakers such as JSW Steel and Steel Authority of India had asked for stronger measures to protect them from cheaper imports from China, Japan, Russia and South Korea.

    http://www.reuters.com/article/us-india-steel-antidumping-idUSKBN17C1TR
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    Merafe’s Q1 ferrochrome production up 10%


    The attributable production of ferrochrome company Merafe Resources increased by 10% in the first quarter (Q1) of this year.

    Attributable production was 113 000 t, up from last year’s Q1 output of 103 000 t.

    The increase in the attributable ferrochrome output from the Glencore-Merafe Chrome Venture is primarily due to improved performances and efficiencies across the venture’s furnaces, coupled to the restarting of Rustenburg furnace 5 in the second half of 2016, the JSE-listed Merafe said on Tuesday.

    The Q1 European benchmark ferrochrome price of $165/lb, applicable for the three months to March 31, was 6.7% higher that the current Q2 price of $1.54/lb, which is applicable in the three months to June 30.

    Merafe, headed by CEO Zanele Matlala, shares in 20.5% of the earnings before interest, taxation, depreciation and amortisation (Ebitda) of the Glencore-Merafe Chrome Venture, the largest ferrochrome producer in the world with combined installed capacity of 2.34-million tonnes of ferrochrome a year.

    The venture operates eight chromite mines and 22 ferrochrome furnaces.  

    The demand for ferrochrome is driven overwhelmingly by the production of stainless steel, which is projected to grow by 3.5% in 2017 and by 3.8% in 2018.

    In the 12 months to December 31, Merafe’s share of the venture’s Ebitda was R1 176.2-million, 38% higher than in 2015.

    http://www.miningweekly.com/article/merafes-q1-ferrochrome-production-up-10-2017-04-11
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