Mark Latham Commodity Equity Intelligence Service

Thursday 20th April 2017
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    China sees higher risk of mass unemployment, pledges more support

    China's cabinet said on Wednesday that risks of mass unemployment in some regions and sectors have increased and pledged more fiscal and monetary- policy support to address the potential rise in the jobless rate.

    The government plans to cut further excess and inefficient capacity in its mining sector and "smokestack" industries this year, part of efforts to upgrade its economy and reduce pollution, but the move threatens to throw millions more out of work.

    The State Council said China faces "intensified structural conflicts" in its current job market, but it must place employment as a top policy priority and address the new challenges to keep its employment rate stable.

    China's official unemployment rate - which only accounts for urban, registered residents - has held around 4 percent for years, despite a slowdown that has seen growth cool from the double-digits to quarter-century lows of under 7 percent.

    In a guideline post on its website that sets the policy tone on employment issues, the State Council said provincial governments in those regions should take measures such as increasing the stipend for firms under job-shedding pressures.

    "If new urban jobs shrink or jobless rate jumps, (China) should step up fiscal and monetary policy support," it said.

    The government will continue to encourage entrepreneurship and help small enterprises thrive as key ways to create more jobs, by building more start-up industrial parks and incubation bases, along with more tax policy bonus for start-ups.

    University graduates and workers from sectors affected by capacity cuts such as steel, coal, and coal-fired power were identified as "key groups" that needed extra support, the guidelines said.

    Data from the Ministry of Human Resources and Social Security showed 7.95 million students are expected to graduate from university this year in June, 300,000 more than in 2016.

    Graduates will be encouraged to diversify their employment options, such as working in less-developed countryside areas and working for small enterprises. China will also appropriately reallocate affected workers, it said.

    China created 3.34 million new jobs in the first quarter of the year and helped some 720,000 laid-off workers find new jobs last year, according to state media reports.

    Beijing aims to create more than 11 million jobs this year, 1 million more than last year's target, according to this year's government work report.

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    Taxes, costs cut to help businesses grow in China

    New tax cuts to spur economic dynamism were approved at the State Council's executive meeting, presided over by Premier Li Keqiang, on April 19, China Daily reported.

    Some pilot taxation incentives will be expanded, and the value added tax will be consolidated.

    They are the first tax incentives since the two sessions legislative and advisory meetings, and they must be fully implemented in a timely manner, Li emphasized.

    Tax burdens on businesses will be eased by about 350 billion yuan ($50.8 billion), a goal set in this year's Government Work Report in March. The government will further streamline tax structures as part of a flatter and more transparent tax system.

    Li promised to cut businesses' taxes and the costs of internet, electricity and logistics by about 1 trillion yuan.

    The meeting produced a series of tax measures:

    • The nationwide value-added-tax reform will have a flatter structure. Starting in July, four VAT brackets will be streamlined into three, with tax rates of 17%, 11% and 6% on different products.

    • Tax incentives for small enterprises with limited profits are being applied to more companies between 2017 and 2019. Eligibility is extended to businesses with income under 500,000 yuan, instead of the previous 300,000.

    • Pretax deductions for innovation-based tech firms will be expanded from 50 to 75% of primary research and development costs from 2017 to 2019.

    • Tax incentives for venture capital firms will be available to fledging high-tech companies in eight designed locations as well as at Suzhou Industrial Park starting this year.

    • Additional tax cuts for commercial health insurance will be applied nationwide, with an upper limit on deductions of 2,400 yuan per person.

    It also was decided that a package of tax cuts that expired in 2016 will be available for the next three years.

    The above measures are expected to cut taxes by 380 billion yuan this year.

    China's efforts to ease financial burdens for businesses are paying off, as figures released on Monday show GDP growth hit 6.9% for the first quarter, with investment picking up and retail rebounding.

    "At the same time, we must drop unnecessary nontax charges for enterprises for a greater competitive edge," Li said.

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    SDIC Power Q1 electricity output up 12.31% on year

    SDIC Power Holdings Co., Ltd, a listed subsidiary of State Development & Investment Company (SDIC), generated 28.93 TWh of electricity over January-March this year, up 12.31% from a year earlier, said the company in a statement released late April 18.

    On-grid electricity totaled 28.14 TWh in the first quarter, a year-on-year increase of 12.12%; the average on-grid electricity price slid 1.91% year on year to 0.132 yuan/KWh, data showed.

    Over the same period, hydropower output of the company was 18.31 TWh, up 6.7% from the year-ago level; on-grid hydroelectricity amounted to 18.21 TWh, up 6.71% year on year; the average on-grid price was 0.286 yuan/KWh, down 8.17% from a year earlier.

    Thermal power output stood at 10.28 TWh, surging 23.26% from a year ago; on-grid thermal electricity was 9.60 TWh, up 23.36% year on year; the average on-grid price was 0.354 yuan/KWh, up 9.21% from the year before.

    Wind power generation stood at 300 GWh, up 32.18% year on year; on-grid wind power stood at 293 GWh, up 32.57% year on year; the average on-grid price was 0.496 yuan/KWh, down 13.55% from a year earlier.

    Solar power generation stood at 46 GWh, up 25.43% from the year-ago level; on-grid solar power was 45 GWh, up 24.03% year on year; the average on-grid price was 1.034 yuan/KWh, down 7.89% year on year.

    Fluctuation in average on-grid power price was mainly caused by continuous reform of the power trading market and power price regulation in some cities and provinces.

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    Oil and Gas

    OPEC hopes more non-OPEC producers will help manage market: Barkindo

    OPEC is hoping to attract other oil producers from outside the bloc to join in its efforts to manage the oil market, Secretary General Mohammed Barkindo said Wednesday.

    OPEC in December signed a deal with 11 key non-OPEC producers led by Russia to cut a combined 1.8 million b/d to hasten the market's rebalancing, but Barkindo told S&P Global Platts on the sidelines of the GCC Petroleum Media Forum in Abu Dhabi there is still time for other non-OPEC nations to sign on.

    "We are calling on all non-OPEC producers who are not yet part of the broad platform of the 24 countries that signed the declaration of cooperation," he said. "But it is in their interest to join this platform. It's a broad global platform that is in the best interest of the industry as well as the global economy. So if I am a producer who has not signed the declaration of cooperation I would rush to do it now. This is the time to join."

    No other countries have committed so far, Barkindo acknowledged, but he said he was "using this opportunity to invite them."

    As for OPEC members Libya and Nigeria, which are exempt from the production cut deal, the secretary general told reporters "it is not on the card at the moment" for them to participate in the cuts.

    But the OPEC/non-OPEC monitoring committee set up to oversee the deal will "thoroughly monitor market conditions" before issuing its recommendation at OPEC's next ministerial meeting May 25 in Vienna on whether the deal should be extended and, if so, what conditions should be attached, he said.

    The extension decision will be based on the market fundamentals at the time, in particular stock levels -- both in volume terms relative to the five-year average and in days of forward cover -- Barkindo said.

    "This rise in stock levels over the past several years, the equation has gone out of balance, and to bring this equation back to balance, we'll have to address this variable," Barkindo said at the forum, where Gulf ministers have gathered to discuss the market.


    He said OPEC was "comfortable" with the pace of the market's rebalancing, even though it has taken longer than expected. Stock levels are drawing, he said, and the market was "steadily moving" towards an equilibrium price where supply and demand converge.

    "We would like to see supply and demand converging, we would like to see an equilibrium price of some sort that will again encourage investors to come back not only on short-cycle projects that you are seeing in North America but also in the long-cycle projects which are the load-base for demand," Barkindo said.

    The production cut deal, signed late last year, calls for OPEC to cut 1.2 million b/d from October levels and the 11 non-OPEC producers to cut a combined 558,000 b/d. The agreement runs from January to June.

    The deal came after two years of OPEC's pump-at-will market share policy that helped contribute to the slump in prices.

    The secretary general said compliance among the 23 nations in the pact stood at 94% in March and would likely be even higher in April. The monitoring committee will hold a technical meeting in Vienna on Friday to review the latest production figures and market statistics.

    Russia, however, has only gradually phased in its cuts and has yet to come into full compliance. Russia needs to trim its crude production by roughly another 60,000 b/d to meet its 300,000 b/d cut commitment, according to S&P Global Platts calculations based on energy ministry data.

    But Barkindo said the country's lag in compliance was "quite understandable," given that unlike OPEC members, whose production is monitored monthly by independent secondary sources, including Platts, non-OPEC producers are not accustomed to such close scrutiny.

    "People should not take for granted the fact that they came volunteering and joined in December," he said. "The fact that they have started implementing their obligations and are gradually moving to higher levels of conformity is a great success. And they are also committed in achieving full and timely implementation of their obligations."


    Barkindo will be in Moscow for the May 31 Russia-OPEC Energy Dialogue and then attend the St. Petersburg International Economic Forum June 1-3.

    He said OPEC was now in a position to "dictate the pace of events" in the oil market, rather than react to them. The producer bloc was largely caught off guard by the rise of US shale, and its continued strength remains a bane in OPEC's efforts to draw down inventories.

    The US Energy Information Administration on Monday forecast that US oil production from shale and unconventional plays would grow by 124,000 b/d in May from the previous month to 5.193 million b/d, matching oil growth rates in late 2014, which helped precipitate the current price slump.

    Barkindo has made a determined effort to meet with US shale producers to gain better understanding of their short-cycle operations.

    "For the first time in history in Houston, we broke the ice and we sat side by side across the table with the shale producers in order to...understand ourselves," he said. "The time has come to break those barriers and to work as an industry. We received very warm reception and we began to understand ourselves."

    But the secretary general declined to predict how US shale production would fare going forward.

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    Saudi's balancing act

    Saudi's balancing act

    After a lesser draw than expected to crude inventories, oil is selling off on this third Wednesday in April. As strong imports from the Middle East this week should help to buoy inventories for next week's report.

    Much is being made of Saudi Arabia's February exports, which showed a drop to the lowest since mid-2015, according to JODI data. But we can see in our Clipperdata that this drop is superseded by a solid rebound in March exports. We see exports rebounded to over 7.2 million barrels per day, with flows bound for East Asia (think: Japan, South Korea, China) accounting for 45 percent of loadings.

    This is the second-highest monthly volume heading to East Asia from Saudi on our records. The highest was in January. In the aftermath of the OPEC production cut, East Asia has been strongly favored for OPEC barrels. Total OPEC loadings bound for East Asia in March have clambered above the 10mn bpd level, the highest on our records, although April so far is looking considerably weaker as total OPEC export volumes drop.

    It is also interesting to note that Saudi Arabia oil inventories rose in February amid the export lull. We discussed earlier in the month how JODI data showed that oil inventories dropped to 262 million barrels in January, down from a peak of 329 million barrels in October 2015.  

    After dropping thirteen out of the previous fourteen months - and for seven months in a row - Saudi crude inventories for February rebounded by 2.74mn bpd. This appears due to less crude leaving the country, and more finding its way to be both refined and put into storage:
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    China crude oil stocks rose 49.70 mil barrels in March

    China crude oil stocks rose 49.70 mil barrels in March, highest stock increase in single month, according to PlattsOil calculations


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    US evaluating whether to continue lifting sanctions on Iran oil: Tillerson

    While Iran has complied to date with its requirements under the nuclear deal, its support for terrorism has the US evaluating whether to continue lifting sanctions on its oil sector, US Secretary of State Rex Tillerson said late Tuesday.

    Reimposing sanctions on Iran's oil sector would have a significant impact on the oil markets. Iran has more than doubled its oil exports to about 2.2 million b/d in March since sanctions were lifted in January 2016, when exports were about 1 million b/d.

    In a letter to US House of Representatives Speaker Paul Ryan, Tillerson said President Donald Trump has ordered a National Security Council-led review of the nuclear deal, formally called the Joint Comprehensive Plan of Action, "that will evaluate whether suspension of sanctions related to Iran pursuant to the JCPOA is vital to the national security interests of the United States."

    He did not give a time frame for the review.

    Iran produced 3.77 million b/d of crude oil in March, according to the most recent S&P Global Platts OPEC survey.

    The country has said it aims to regain its pre-sanctions production level of some 4 million b/d, though oil minister Bijan Zanganeh has said Iran would be willing to hold its output at around 3.8 million b/d if an OPEC production cut agreement is extended through the second half of the year.

    The nuclear deal relaxed restrictions on Iran's oil sector in exchange for concessions on its nuclear program.

    It was a signature foreign policy achievement for previous US President Barack Obama, but Trump has vehemently criticized the deal, without definitively saying that the US would unilaterally walk away from it.

    US officials have criticized Iran for its destabilizing activities in the Middle East, including ballistic missile tests.

    In his letter to Ryan, Tillerson said that "Iran remains a leading state sponsor of terror through many platforms and methods."
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    Vietnam's Bach Ho crude likely to flood Asian secondary market: traders

    Low sulfur crude suppliers across Southeast Asia and Oceania may have to put in extra effort to clear their June-loading barrels this month as close to 2.5 million barrels of Vietnamese light Bach Ho crude are expected to flood the Asian secondary market, regional traders said Tuesday.

    Award details of recent spot tenders from Vietnam raised concerns among rival producers in neighboring Malaysia as PetroVietnam Oil Corp. recently sold 82,500 b/d of light Bach Ho for loading in June to Socar Trading Singapore, Gunvor, Vitol and Glencore.

    Traders said the entire lot being bought by trading companies made other regional producers worried as there was a high chance that most of the medium sweet Vietnamese crude will slip back into the secondary market.

    "You could say this was possibly the worst-case scenario for [rival] producers [across Asia and Oceania]. The best outcome [for rival suppliers] would have been for a big Chinese end-user to have taken the entire [June barrels offered by PV Oil] ... but it wasn't to be," said a Singapore-based sweet crudes trader.

    Light Bach Ho, with a gravity of 39-40 API, was rarely offered in the spot market in recent years. However, it was offered via spot tender late last month ahead of the upcoming turnaround at the country's 130,000 b/d Dung Quat refinery, market sources said.

    Binh Son Refining and Petrochemical, operator of the refinery, plans to shut the entire plant over May-July.

    PV Oil has not offered light Bach Ho crude in the spot market since July 2016.

    Market participants had been expecting PV Oil to sell some Bach Ho crude, but the large volume took many traders by surprise.


    Traders said that they expected strong competition among regional suppliers in the June trading cycle since the 2.5 million barrels of Bach Ho would add to the already growing pool of light and medium sweet crude supply in the Asian spot market this month.

    A slew of new loading programs for the Oceania crude complex emerged in recent weeks with early indications showing ample supply of light sweet Australian crude for loading in June.

    The Japanese consortium of Mitsui and Co. and Mitsubishi Corp., or MIMI, holds a 600,000-barrel cargo of Cossack crude for loading over June 11-15, while Santos has a similar-sized cargo of Mutineer crude for loading over June 16-20, a market source with direct knowledge of the monthly Australian loading program said.

    Itochu was likely to offer some light sweet Barrow Island crude for loading in June, while Australia's Woodside Petroleum might offer some light sweet Balnaves and/or Varanus crude for loading in June, although no details could be verified.

    Vietnam's PV Oil offered additional 2.05 million barrels of various medium and heavy sweet grades including Ruby, Chim Sao, Te Giac Trang and Thang Long for loading in June, apart from the Bach Ho.


    In Malaysia, fresh loading programs for its benchmark export grades including Kimanis and Kikeh have yet to emerge, but sentiment was fragile as the large volume of Bach Ho for loading in June could hamper regional end-user demand for light sweet Malaysian crudes.

    Kimanis, for one, with a gravity of around 38.6 API, with sulfur content of 0.06%, often competes directly with various medium sweet Vietnamese grades like Chim Sao, Thang Long and light Bach Ho, as they are coveted for their yield of middle distillates such as jet fuel/kerosene and vacuum gasoil.

    "There are several well-known refiners [in Southeast Asia and Australia] that are flexible to process either Malaysian or Vietnamese [crudes]," said a North Asian sweet crude trader, citing Thailand's Rayong refinery, Malaysia's Port Dickson plant, Australia's Kwinana, Lytton and Geelong refineries as examples.

    "If the end-users find Bach Ho more economical, then the Malaysian [grades] could be pushed [back to become the] second or even third option," the trader added.

    Sources said that the four trading companies could have paid a premium of between 10 cents/b and $1.20/b to Platts Dated Brent crude assessments on an FOB basis for the June-loading Bach Ho crude.

    Taking the latest tender award details into consideration, S&P Global Platts assessed the Vietnamese grade at a premium of $1.10/b to Platts Dated Brent crude assessments on an FOB basis Monday, the lowest cash differential since July 15, 2016 when it was pegged at a premium of $1/b.

    In comparison, Malaysia's light sweet Kimanis crude was assessed at a premium of $1.80/b to Dated Brent crude assessments on Monday, while Kikeh was assessed at a premium of more than $2/b.
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    Australia's LNG Exports Face Review Amid Gas Crisis at Home

    Australia’s competition regulator said the possible sale of natural gas intended for the country’s domestic market to overseas customers instead must be reviewed amid high wholesale prices at home.

    Ahead of a meeting Wednesday between Prime Minister Malcolm Turnbull and energy producers over Australia’s potential gas shortages, the regulator said the ability of the Santos Ltd.-led Gladstone LNG project to export third-party gas must be examined. The $18.5 billion project will buy more than 20 percent of gas available for users on the country’s east coast this year due to shortages from its own fields, according to consultancy Wood Mackenzie Ltd.

    GLNG “was clearly short of gas and has had to buy it from the domestic market to meet its overseas contracts,” Rod Sims, chairman of the Australian Competition & Consumer Commission said in an interview. The purchases by Santos, along with state bans on drilling, “has created a crisis for Australian manufacturing, which does need to be addressed.”

    The supply squeeze has contributed to the spot price of wholesale gas in Australia tripling in the last two years, according to a February report from the Australian Industry Group, and led to calls to restrict exports to Asia. Royal Dutch Shell Plc, which operates the Queensland Curtis LNG export plant, said in March that the purchase of gas intended for the domestic market by the state’s LNG exporters had compounded the issue of gas shortages. It didn’t name any specific companies.

    “It is not acceptable for Australia to be shortly the world’s largest exporter of LNG and yet to have a gas shortage on the east coast in its domestic market,” Turnbull said at a briefing Tuesday. “We will defend the energy security of Australians and reliable and affordable gas supply is a key part of that.”

    Gas Pledges

    The Australian government extracted pledges from oil and gas executives a month ago to raise production of the fuel. Supply deals for the domestic market from two of the Queensland LNG operators -- QCLNGand Origin Energy Ltd. have since been announced.

    Santos didn’t answer questions from Bloomberg and referred to an interview Chief Executive Officer Kevin Gallagher gave to Sky News on Tuesday. The CEO said that the Adelaide-based company would be happy to send gas to local markets it can free up but has little supply available because of state restrictions on exploration.

    Australian Energy Minister Josh Frydenberg said in an interview with ABC Radio Wednesday domestic purchases of gas by Santos that are then exported have boosted prices across the country. The minister said he would have a frank conversation with Santos during today’s meeting and say that the situation occurring with gas supplies is “unacceptable.”

    The nation’s leading industry group said Monday a gas swap may alleviate domestic shortages while conceding that gas could again be scooped up for export leaving the local market short.

    Gas Development

    “The apparent travails of Santos and its GLNG partners in meeting even their base level of commitment mean this is a real threat,” Australian Industry Group Chief Executive Officer Innes Willox said in a letter. “Indeed, we are told by producers that some gas has already been sold to help the domestic market, then onsold to GLNG.”

    The most viable short-term source of boosting domestic supply is via the Queensland LNG projects, according to Wood Mackenzie, although challenges remain to get the gas from the northern state down to Victoria and South Australia. New low-cost supplies must be developed over the long-term, the consultancy said.

    “One of the the best prospects for lower cost long term new supply could be onshore gas on Victoria and New South Wales,” said Saul Kavonic, lead analyst for Australia with Wood Mackenzie, in emailed comments. “But policy restrictions on drilling there would need to be lifted for that to be realised.”
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    ConocoPhillips, partners weigh expansion of Darwin LNG

    ConocoPhillips and its partners are considering expanding their Darwin liquefied natural gas (LNG) plant in Australia, with backing from other companies with undeveloped gas resources that could feed the plant.

    ConocoPhillips has previously talked only about developing a new gas field for around $10 billion to fill the plant's single production unit, or train, when supply from its current gas source, the Bayu-Undan field, runs out around 2022.

    The U.S. oil major has also previously said an expansion in the current market would be challenging due to low oil and LNG prices, and costs that have risen steeply since Darwin LNG was built more than a decade ago.

    A $650,000 feasibility study on building a second train is due to be completed this year, the Northern Territory government said on Wednesday, announcing that it would contribute $250,000 toward the study.

    "The Territory Labor Government is supporting the feasibility study because this is a significant investment toward the business case for potential expansion at Darwin LNG, potentially creating thousands of jobs during construction and operation," Northern Territory Chief Minister Michael Gunner said in a statement.

    Five joint ventures with undeveloped gas resources off the coast of the Northern Territory are backing the study, with stakeholders including Royal Dutch Shell, Malaysia's Petronas, Italy's ENI SpA, and Australia's Santos and Origin Energy.

    "With Darwin LNG, five upstream joint ventures and the Northern Territory Government involved, it is a pioneering example of all of industry and government collaborating on solutions to unlock major investments," ConocoPhillips Australia West vice president Kayleen Ewin said in a statement.

    Darwin LNG is co-owned by ConocoPhillips, Santos, Japan's Inpex, ENI, Tokyo Electric Power Co and Tokyo Gas Co.
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    Oil Search revenue declines as LNG expansion plans gather momentum

    Oil Search remained upbeat over its slight drop in revenue in the first quarter as the company saw momentum building behind the LNG expansion plans in Papua New Guinea.

    The company’s revenue reached $343.7 million in the first three months of 2017, in comparison to $345.6 million in the previous quarter.

    Despite a 9 percent drop in total sales which was a result of the timing of liftings, with three LNG cargoes on the water at the end of the quarter, revenue declined only 1 percent as the realized prices recovered.

    Compared to the previous quarter levels, the average realized LNG and gas price was up 9 percent, reaching $7.4 mmBtu, Oil Search said in its quarterly report.

    Commenting on the results, Oil Search managing director, Peter Botten said that the “first quarter production of 7.57 mmboe was one of the highest quarterly outputs ever achieved by the company.”

    He added that the ExxonMobil-operated PNG LNG project, in which Oil Search holds a 29 percent stake, recorded an annualized operation rate of 8.3 mtpa, 20 percent above the nameplate capacity of 6.9 mtpa.

    The report shows that the PNG LNG project sold 26 cargoes during the quarter, of which 23 were sold under long-term contract and three on the spot market, with three cargoes on the water at the end of the quarter.

    PNG LNG recertification opens doors for expansion

    Recent recertification of the resources in all the PNG LNG fields carried out by Netherland, Sewell and Associates during 2016, resulted in a 50 percent increase in the company’s 1P PNG LNG gas reserves compared to the 2015 reserve booking (equivalent to a 2.8 tcf increase on a gross basis) and a 12 percent increase in the 2P gas reserves.

    Botten noted that this confirms “there is more than sufficient gas available” to support the project’s higher level of production.

    He added that this will enable the project to place additional volumes in either term contracts, for uncommitted production above 6.6 mtpa, or in the spot market.

    ExxonMobil recently commenced marketing up to 1.3 mtpa from the project. Consistent production above the nameplate capacity, allows the project to enter into additional term or spot sales.

    In addition to the resource recertification, the completion of appraisal drilling and a technical reassessment of the Elk-Antelope fields in PRL 15 increased Oil Search’s 2C contingent resources by 21 percent. Combined with resources at P’nyang this could underpin at least two additional PNG LNG-sized trains, the report reads.

    Following the completion of its acquisition of InterOil Corporation during the quarter, ExxonMobil became an equity partner in PRL 15.

    “Discussions have now commenced between Total SA, the operator of PRL 15, ExxonMobil and Oil Search on how to optimally develop the Elk-Antelope gas fields,” Botten said.

    Oil Search anticipates that this will be undertaken in conjunction with the development of the P’nyang gas field and will utilize the existing downstream infrastructure of the world class PNG LNG project.

    Talks regarding the next phase of LNG development are expected to continue during 2017 with binding commercial agreements targeted before the end of the year.

    The PRL 15 joint venture is targeting to enter front end engineering and design (FEED) in late 2017 or early 2018 and take a final investment decision in late 2018 or early 2019, according to Botten.

    Botten also said the company expects that the new government, to be formed in August, will have the LNG expansion talks high on its agenda.
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    European polyethylene prices turn bearish as market lengthens

    Sentiment in the European polyethylene market appears to have turned bearish as many in the industry expect price declines in May because of weak demand, an increase in imports and high industry stock levels.

    The high density polyethylene market was heard to be particularly long, with converters leveraging high stock positions to rebuff any proposed price hikes.

    "We have a large stock, so there is no hurry to purchase [HDPE] in April if the price is not low enough," a source said Tuesday. "We have the same expectation for May."

    Similar sentiment was expressed in the low density polyethylene market, with converters heard to be destocking ahead of expected price softening in the coming weeks.

    "There is sufficient material available [in the market] and demand is very slow," another source said Tuesday. "Customers are destocking and waiting for further price decreases in May."

    The European LDPE spot price Tuesday fell Eur20/mt FD NWE to be assessed at Eur1,330/mt.

    Over the past couple of months linear low density polyethylene prices had been bullish amid reportedly tight availability stemming from reduced imports. However, the trend looks to have reversed amid a softening in demand with those industry participants seeking material now able to find it.

    "We haven't experienced as much tightness as we expected," another source said. "The feeling of shortness is just not there."

    Mirroring trends seen in the LDPE market, LLDPE prices fell Eur20/mt Tuesday to be assessed at Eur1,280/mt.

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    China gathers state-led consortium for Aramco IPO - sources

    China is creating a consortium, including state-owned oil giants and banks and its sovereign wealth fund, that will act as a cornerstone investor in the initial public offering of Saudi Aramco, people with knowledge of the discussions told Reuters.

    Saudi Aramco, a key exporter to China along with Russia's Rosneft (ROSN.MM), is due to list next year, with a potential $100 billion equity sale that is expected to be the world's largest to date.

    The planned Chinese investment makes it more likely that the national energy giant would seek a listing in Asia, with Hong Kong currently the frontrunner among bourses in the region, the same people said.

    Reuters reported earlier this month that Saudi Aramco's board would meet in Shanghai in May, its first meeting in China in seven years, as Chinese and Asian investors eye the share offering from the world's biggest oil exporter.

    Saudi officials have said Chinese companies were interested in investing in the Aramco IPO as the country - the second biggest consumer of oil globally - seeks to secure crude supplies, but have not commented on how that would be done.

    Half a dozen sources with knowledge of the discussions said China Investment Corporation (CIC), the country's $800 billion sovereign wealth fund, oil majors Sinopec (600028.SS) and PetroChina (601857.SS) (0857.HK), and the country's state-run banks were among the state-backed entities set to participate in the Chinese investment consortium.

    They did not name the banks. Reuters reported in February that Industrial and Commercial Bank of China International Holdings, a unit of Industrial and Commercial Bank of China (601398.SS), and China International Capital Corporation (CICC) were among the Chinese banks pitching for a role in the IPO.

    One person involved in discussions between Aramco and potential Chinese investors said the ultimate size of the consortium's stake had not yet been decided. That source said the entity that would lead the consortium had also not been decided, with many state-run groups keen to take on the high-profile role. That is likely to be decided by China's cabinet, the State Council, over the coming months.

    "The IPO will help decide whom, or which country, can secure the crude supplies from the company and Saudi Arabia going forward," the person said, adding the size of each company's stake in the Chinese consortium would depend on its current relationship with Aramco and the Saudi government.

    "For instance, if you were already a strategic investor or plan to become one in the long-term, things would become easier."

    The State Council Information Office, CIC, Sinopec and PetroChina did not respond to requests for comment.

    Last month, PetroChina's president and vice chairman, Wang Dongjin, said the company would consider participating in the IPO depending on market conditions, while Sinopec has said the oil giant would discuss the IPO with Aramco.

    Saudi Aramco said in an email it did not comment on "rumor or speculation".


    Saudi authorities plan to list up to 5 percent of Aramco on the Saudi stock exchange in Riyadh, the Tadawul, and also one or more international markets.

    The $100 billion IPO price tag is based on Aramco being valued at $2 trillion, although some analysts believe the ultimate valuation could be much lower.

    One of the sources who spoke to Reuters said the Chinese government was pushing hard for Aramco to list in Hong Kong in return for the consortium's investment, while three other sources said Aramco was leaning towards having an Asian - likely Hong Kong - listing along with possibly a London listing.

    A final decision has not been made, the sources said.

    Other mooted Asian options include Tokyo and Singapore.

    "The Saudis are serious about Asia. They can maintain market share there. At the end of the day, Aramco needs to sell its oil. This is just another way of guaranteeing a long-term market," one industry source said.

    This month, British Prime Minister Theresa May and London Stock Exchange Group CEO Xavier Rolet visited Saudi in a bid to win the London listing. A spokesman for the LSE Group declined to comment.

    In February, HKEX chief Charles Li said the bourse was working "very hard" to snag the deal.

    On Tuesday, a HKEX spokesperson said the exchange was an attractive venue for international companies because it can serve as a gateway to Greater China's "vast liquidity pool".
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    Santos bumps revenue as costs drop

    Australian LNG operator Santos further reduced its debt and costs in the first quarter of 2017, as sales revenue rose compared to the corresponding quarter year.

    The company reported a revenue of US$684 million, up 14 percent from $600 million in the first quarter of 2016.

    Speaking of the results, the company’s managing director and CEO Kevin Gallagher said the 2017 forecast free cash flow breakeven has been reduced from $47 per barrel mark at the beginning of 2016 to $34 per barrel.

    “Strong free cash flow combined with cash proceeds from asset sales and the share purchase plan enabled us to reduce net debt by $380 million in the first quarter,” Gallagher said.

    The net debt currently stands at $3.1 billion, down from $3.5 billion at the start of the year and the company is still targeting a $1.5 billion reduction in net debt the end of 2019.

    In April the company made an early repayment of $250 million of its $1.2 billion export credit agency supported uncovered syndicated facility, scheduled to mature in 2019, and extended the term of $860 million of bilateral bank loan facilities to 2022.

    Santos noted in its quarterly report that the 2017 guidance remains unchanged with capital $700-750 million range.
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    US lower 48 oil production increases 21,000 bbls in last week

                                                       Last Week  Week Before  Last Year

    Domestic Production '000.......... 9,252           9,235           8,953
    Alaska .............................................. 530               534               513
    Lower 48 ...................................... 8,722   .        8,701          8,440
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    Summary of Weekly Petroleum Data for the Week Ending April 14, 2017

    U.S. crude oil refinery inputs averaged over 16.9 million barrels per day during the week ending April 14, 2017, 241,000 barrels per day more than the previous week’s average. Refineries operated at 92.9% of their operable capacity last week. Gasoline production decreased last week, averaging 9.8 million barrels per day. Distillate fuel production increased last week, averaging just about 5.2 million barrels per day.

    U.S. crude oil imports averaged over 7.8 million barrels per day last week, down by 68,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged over 7.9 million barrels per day, 2.0% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 843,000 barrels per day. Distillate fuel imports averaged 167,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 1.0 million barrels from the previous week. At 532.3 million barrels, U.S. crude oil inventories are near the upper limit of the average range for this time of year. Total motor gasoline inventories increased by 1.5 million barrels last week, and are near the upper limit of the average range. Finished gasoline inventories decreased while blending components inventories increased last week. Distillate fuel inventories decreased by 2.0 million barrels last week but are in the upper half of the average range for this time of year. Propane/propylene inventories fell 0.7 million barrels last week and are in the lower half of the average range. Total commercial petroleum inventories decreased by 1.7 million barrels last week.

    Total products supplied over the last four-week period averaged over 19.7 million barrels per day, down by 0.8% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged over 9.3 million barrels per day, down by 0.7% from the same period last year. Distillate fuel product supplied averaged 4.3 million barrels per day over the last four weeks, up by 9.9% from the same period last year. Jet fuel product supplied is up 7.3% compared to the same four-week period last year.

    Cushing down 800,000 bbls
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    Last stand: Nebraska farmers could derail Keystone XL pipeline

    When President Donald Trump handed TransCanada Pipeline Co. a permit for its Keystone XL pipeline last month, he said the company could now build the long-delayed and divisive project "with efficiency and with speed."

    But Trump and the firm will have to get through Nebraska farmer Art Tanderup first, along with about 90 other landowners in the path of the pipeline.

    They are mostly farmers and ranchers, making a last stand against the pipeline - the fate of which now rests with an obscure state regulatory board, the Nebraska Public Service Commission.

    The group is fine-tuning an economic argument it hopes will resonate better in this politically conservative state than the environmental concerns that dominated the successful push to block Keystone under former President Barack Obama.

    Backed by conservation groups, the Nebraska opponents plan to cast the project as a threat to prime farming and grazing lands - vital to Nebraska's economy - and a foreign company's attempt to seize American private property.

    They contend the pipeline will provide mainly temporary jobs that will vanish once construction ends, and limited tax revenues that will decline over time.

    They face a considerable challenge. Supporters of the pipeline as economic development include Republican Governor, Pete Ricketts, most of the state’s senators, its labor unions and chamber of commerce.

    "It’s depressing to start again after Obama rejected the pipeline two years ago, but we need keep our coalition energized and strong," said Tanderup, who grows rye, corn and soybeans on his 160-acre property.

    Now Tanderup and others are gearing up for another round of battle - on a decidedly more local stage, but with potentially international impact on energy firms and consumers.

    The latest Keystone XL showdown underscores the increasingly well-organized and diverse resistance to pipelines nationwide, which now stretches well beyond the environmental movement.

    Last year, North Dakota's Standing Rock Sioux, a Native American tribe, galvanized national opposition to the Energy Transfer Partners Dakota Access Pipeline. Another ETP pipeline in Louisiana has drawn protests from flood protection advocates and commercial fishermen.

    The Keystone XL pipeline would cut through Tanderup's family farm, near the two-story farmhouse built in the 1920s by his wife Helen's grandfather.

    The Tanderups have plastered the walls with aerial photos of three "#NoKXL" crop art installations they staged from 2014 to 2016. Faded signs around the farm still advertise the concert Willie Nelson and Neil Young played here in 2014 to raise money for the protests.

    The stakes for the energy industry are high as the Keystone XL combatants focus on Nebraska, especially for Canadian producers that have struggled for decades to move more of that nation's landlocked oil reserves to market. Keystone offers a path to get heavy crude from the Canada oil sands to refiners on the U.S. Gulf Coast equipped to handle it.

    TransCanada has route approval in all of the U.S. states the line will cross except Nebraska, where the company says it has been unable to negotiate easements with landowners on about 9 percent of the 300-mile crossing.

    So the dispute now falls to Nebraska's five-member utility commission, an elected board with independent authority over TransCanada’s proposed route.

    The commission has scheduled a public hearing in May, along with a week of testimony by pipeline supporters and opponents in August. Members face a deadline set by state law to take a vote by November.


    TransCanada has said on its website that the pipeline would create "tens of thousands" of jobs and tens of millions in tax dollars for the three states it would cross - Montana, South Dakota and Nebraska.

    TransCanada declined to comment in response to Reuters inquiries seeking a more precise number and description of the jobs, including the proportion of them that are temporary - for construction - versus permanent.

    Trump has been more specific, saying the project would create 28,000 U.S. jobs. But a 2014 State Department study predicted just 3,900 construction jobs and 35 permanent jobs.

    Asked about the discrepancy, White House spokeswoman Kelly Love did not explain where Trump came up with his 28,000 figure, but pointed out that the State Department study also estimates that the pipeline would indirectly create thousands of additional jobs.

    The study indicates those jobs would be temporary, including some 16,100 at firms with contracts for goods and services during construction, and another 26,000, depending on how workers from the original jobs spend their wages.

    TransCanada estimates that state taxes on the pipeline and pumping stations would total $55.6 million across the three states during the first year.

    The firm will pay property taxes on the pumping stations along the route, but not the land. It would pay a different - and lower - "personal property" tax on the pipeline itself, said Brian Jorde, a partner in the Omaha-based law firm Domina Law Group, which represents the opposition.

    The personal property taxes, he said, would decline over a seven-year period and eventually disappear.      


    The Nebraska utilities commission faces tremendous political pressure from well beyond the state it regulates.

    "The commissioners know it is game time, and everybody is looking," said Jane Kleeb, Nebraska's Democratic party chair and head of the conservation group Bold Alliance, which is coordinating resistance from the landowners, Native American tribes and environmental groups.

    The alliance plans to target the commissioners and their electoral districts with town halls, letter-writing campaigns, and billboards.

    During the televised ceremony where Trump awarded the federal permit for the pipeline, he promised to weigh in on the Nebraska debate.

    "Nebraska? I'll call Nebraska," he said after TransCanada Chief Executive Russell Girling said the company faced opposition there.
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    Exxon confirms Texas site for $10B petrochemical complex

    Exxon Mobil and its Saudi partner have agreed on a spot near Corpus Christi for a proposed $10 billion petrochemical facility, the companies said Wednesday.

    The Irving-based oil company and the Saudi Basic Industries Corporation, known as SABIC, still don’t expect to make a final decision on whether to assemble the joint-venture project until next year.

    But selecting a San Patricio County site for the ethane cracker moves Exxon a step closer to plans for a $20 billion spending surge on Gulf Coast projects over the next decade.

    Exxon’s plans for the site got a boost last month when the Gregory-Portland School Board delivered tax breaks worth $460 million in a late-night vote.

    The proposed ethane cracker would each year produce 1.9 million tons of ethylene, a chemical used to make plastics. The companies believe that would make it the largest facility of its kind in the world, and that it would be in a spot where it could take advantage of cheap shale gas still gushing across the United States.

    The next step, Exxon Mobil said, is applying for air and wastewater permits form the Texas Commission on Environmental Quality. The joint venture partners also plan to study initial engineering designs and the technical and commercial aspects of the project before making a final investment decision, SABIC said in a statement on the Saudi stock exchange.
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    US Gulf Coast distillate exports to Europe for April to exceed 1 million mt

    Around 1.150 million mt of distillates have departed the US Gulf Coast for arrival in Europe in April, according to data from cFlow, S&P Global Platts trade flow software.

    Six vessels have departed over the past week, constituting around just under 300,000 of middle distillates -- the overwhelming majority 10 ppm ultra low sulfur diesel -- based on estimate derived from the vessels' deadweight tonnage.

    Three of the vessels are Long Range 1-sized, two of which left Marathon's 539,000 b/d refinery transporting 10 ppm, according to shipping and trade sources.

    The overall volume expected to land in April is the highest since October as maintenance in the US Gulf Coast has ended and European markets have been relatively tight to balanced for 10 ppm diesel recently.

    The Mediterranean, in particular, has been on the short side. The Medium Range tanker Kouros was seen to divert from Antwerp to Valencia, Spain, but others have not redirected yet.

    The lack of inbound flow from US, has served to prop up differentials as the market is more hindered from the supply-side rather than demand, which has been fairly steady of late, according to sources.
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    Alternative Energy

    U.S. wind, solar prices on downward slope, even without tax credits

    Wind and solar power purchase agreement (PPA) prices have declined dramatically in recent years, establishing a trend that continues.

    The levelized prices for power from utility-scale solar projects (5 MW and larger) declined by 73 percent from a capacity-weighted average of $154.20 levelized (in real $2015 dollars) in 2009 to an average of $41.10 per MWh levelized in 2015. Recent solar PPAs in California, the Southwest and Texas are priced as aggressively as $35/MWh levelized, or lower.

    At the same time, wind power PPAs have declined by more than 45 percent since 2009, from an average of $69.06 per MWh levelized (in real 2015 dollars) in 2009 to an average of $37 per MWh levelized in 2015.

    Recent PPAs in the interior U.S. have been cheaper still, within a range of $20.68 to $26.43 per MWh levelized (in real 2015 dollars).

    These steep declines in have been driven by sharp drops in installation costs and improvements in operating efficiencies and performance. All of these PPA prices also have benefitted from subsidies in the form of the wind production tax credit (PTC) and the solar investment tax credit (ITC).

    However, it is becoming widely acknowledged that wind and solar will remain highly competitive even when these subsidies are gone.

    NextEraEnergy (NEE), one of the largest generators of solar energy in the U.S., has said that due to continuing declines in costs, wind power PPA’s will be in the range of $20 to $30 per MWh levelized, even without any subsidies.

    NEE also projects that after 2020 new solar PPA prices will remain in the range of $30 to $40 per MWh levelized, again without any subsidies.

    Further, UBS analyst Julien Dumoulin-Smith agrees that these low unsubsidized prices for wind and solar are achievable by early 2020 due to continued pricing pressures driving down wind and solar installation costs. UBS says that the prices for solar panels are headed down towards $0.20 per Watt, “Just a matter of when this becomes widespread.”

    Thus, by the early 2020s, unsubsidized wind and solar prices will be below the variable costs of operating coal and natural gas plants, just like subsidized prices are today.

    Attached Files
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    China eyes trillion-yuan nuclear power market along Belt and Road Initiative

    Chinese companies are craving access to the colossal untapped potential of the nuclear power industry in Belt and Road Initiative countries, which could yield a market of up to 4 trillion yuan ($580 billion), China Daily reported, citing the chairman of one of the country's largest nuclear power developers.

    "About 72 countries have been or are planning to develop nuclear power, among which 41 are along the Belt and Road Initiative, and most of them are still in the earliest stages of nuclear power development. We estimate that if their nuclear energy were raised to reach development levels comparable to those of the US or Japan, it would spawn a market worth 4 trillion yuan," remarked Wang Shoujun, chairman of China National Nuclear Corp (CNNC).

    The Belt and Road Initiative, proposed by Chinese President Xi Jinping in 2013, aims to build a trade and infrastructure network connecting Asia with Europe and Africa along ancient trade routes, in an unprecedented effort that will unite up to 65 countries.

    As domestic demand for electricity soars in China, and the country accelerates its shift to renewable energy, nuclear power will be one of the highest-priority projects. China currently operates 36 nuclear reactors, and is in the process of building 20 new ones, according to an official with the Ministry of Environmental Protection.

    By the end of 2020, China aims to have 58 million kW of nuclear power capacity in operation and more than 30 million kW under construction, ranking second in the world for number of installed units.

    When it comes to homegrown technologies, China is gathering steam to occupy a position of leadership in the world.

    According to Wang, CNNC has successfully exported six nuclear power units and eight reactors to at least seven countries, and has established links with more than 40 countries for further cooperation spanning the full nuclear industrial chain.
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    China to work off corn stockpile in next three to five years: COFCO executive

    Farmers collect corn for a cargo at a farm in Gaocheng, Hebei province, China, in this September 30, 2015 file photo. REUTERS/Kim Kyung-Hoon/File Photo

    China will work off its corn stockpile in the next three to five years, said an executive at one of the country's top corn processing firms on Wednesday, as firms ramp up processing capacity to use up the grain.

    China National Cereals, Oils and Foodstuffs Corp (COFCO) will boost its annual corn processing capacity to more than 10 million tonnes by 2020 from 6 million tonnes currently, said Tong Yi, general manager of COFCO Biochemical, on the sidelines of a conference.

    China's total corn processing capacity will hit 70 million tonnes by the end of 2018, up from more than 50 million tonnes currently, he added.
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    Agrium completes commissioning of $720m Borger urea plant, Texas

    Agrium has commissioned its new urea plant at the Borger Nitrogen Operations facility, in Texas, having completed its first run of urea production – widely used in fertilisers as a source of nitrogen.

    The Calgary-based company, which controls the largest retail distribution network in North America and is in the process of merging with Canadian counterpart PotashCorp of Saskatchewan to create a new $36-billion entity, said Tuesday that it continued to ramp up output and that it expected to reach full capacity by the end of the current quarter.

    The new $720-million urea facility has a capacity of 610 000 t of urea, of which 100 000 t of urea equivalent will be dieselexhaust fluid (DEF), an aqueous urea solution used to lower smog-related nitrogen oxide concentrations in the dieselexhaust emissions from diesel engines.

    "The successful completion of our first run of urea production from our Borger nitrogen expansion project continues to emphasise our commitment to operational excellence and creating shareholder value at Agrium. We look forward to bringing our reliable and high-quality urea and DEF productsto existing and new customers in this key agricultural region of the US," stated Agrium president and CEO Chuck Magro.

    According to Agrium, nitrogen – the most important crop nutrient in terms of global use and trade – represents about 60% of the total volume of crop nutrients used globally. It is also the crop nutrient for which reduced application rates within a growing season are most likely to immediately and adversely impact yield for most crops.

    For Agrium, nitrogen is the most important nutrient in terms of capacity, production and sales, representing nearly 60% of its nutrient capacity.

    Natural gas is the primary input for producing ammonia – the base for virtually all nitrogen products. Ammonia can be applied directly as a fertiliser, or upgraded to products such as urea, UAN [a solution of urea and ammonium nitrate in water] solutions and ammonium nitrate.

    Agrium currently has global nitrogen capacity of about 5.7-million tonnes a year, placing the company among the world’s top five publicly traded nitrogen producers.
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    Precious Metals

    The GDXj: too big for its opportunity set!

    How An ETF Gets Too Big For Its Index

    April 10, 2017


    Can an exchange-traded fund get too big for its index? That's the question investors in one popular gold miner ETF are grappling with after rapid asset growth pushed it to significantly deviate from its underlying index.

    The ETF in question is the VanEck Junior Gold Miners ETF (GDXJ), which tracks the MVIS Global Junior Gold Miners Index. Since early 2016, assets in the fund ballooned from a little more than $1 billion to $5.4 billion currently. Some of that was due to rising share prices―GDXJ nearly doubled from $19.80 at the start of 2016 to $36.71 today, an 85% gain, thanks to the rebound in gold.

    But a lot of it had to do with the enormous amount of new money that came into the fund. Since Jan. 1, 2016, inflows into the ETF have totaled $3.3 billion. For almost any ETF, that's a big amount, but especially for one that targets a relatively niche area like junior gold miners.

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    China's Shandong Tyan says talks over on bid for Barrick's Kalgoorlie over

    Shanghai-listed Shandong Tyan Home said on Wednesday its negotiations with Barrick Gold Corp to buy a 50-percent stake of the Canadian operator's Kalgoorlie mine have ended without a deal, citing new capital and acquisition rules in China.

    Reuters reported in November that Toronto-based Barrick was reviewing the financial backing behind an approximate $1.3 billion bid for its stake in Kalgoorlie mine by Minjar Gold, a unit of Shandong.

    Barrick, the world's largest gold producer, was not immediately available for comment.

    Shandong said in a filing to the Shanghai stock exchange on Wednesday that it had been in contact with Barrick about buying a stake in the mine, but did not reach any formal investment agreement. Due to the recent capital outflow curbs and tightened review of overseas acquisitions "we did not continue the negotiation," it said.

    Shandong had trumped offers by Australian, Chinese and Canadian companies for the asset, sources had told Reuters.

    Newmont Mining, Barrick's joint venture partner at Kalgoorlie and mine operator, has said it was interested in buying the remaining stake, but price has been a sticking a point.
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    Base Metals

    Peru's Southern Copper workers mark 10 days on strike

    Workers at mining company Southern Copper in Peru completed their tenth day of an indefinite strike on Wednesday, though the company said it had not significantly impacted output.

    Jorge Campos, the secretary general of the Unified Union of Workers of Southern Copper, said some 3,000 workers have walked off the job demanding a greater share of profits and more medical benefits.

    "We are completing 10 days of a general indefinite strike... the company is sending letters of dismissals to the workers and other measures of intimidation when the administrative processes in the strike have not even been completed," Campos told reporters after visiting Peru's Congress.

    A Southern Copper representative said the strike had not "significantly" affected production as the company was operating at 92 percent capacity on average in Peru and had sub-contracted workers. The refinery was operating at 100 percent capacity, the company said.

    Campos said workers and the company would attend talks with Peru's labor ministry on Thursday.

    Southern Copper operates the Toquepala and Cuajone mines and the Ilo refinery in Peru. Toquepala and Cuajone, both in southern Peru, together produced some 310,000 tonnes of copper last year, according to government data.

    Southern Copper, owned by Grupo Mexico, boosted its copper output by 21 percent to 900,000 tonnes last year on the back of an expansion at a mine in Mexico.
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    Steel, Iron Ore and Coal

    CSX Q1 coal revenues soar 31% with improved export markets

    CSX saw a slight climb year on year in its first-quarter coal traffic, but a 31% surge in revenues from the sector as a result of an improved export market, the company said Wednesday in its earnings report.

    The railroad's Q1 coal volumes grew by 500,000, or 5,000 carloads, compared with the same quarter last year, but revenues climbed to $522 million from $399 million thanks to port deliveries. Income was boosted by a 28% increase in revenue per unit to $2,546 from $1,995.

    The company said "temporal strength in export coal" led to increased profits.

    CSX's Q1 total export volumes rose 50% year on year to 8.7 million st. Metallurgical coal volumes grew 23% to 5.3 million st and thermal volumes more than doubled with a 127% increase to 3.4 million st.

    Domestic thermal volumes coal fell 11% year on year to 11 million st for the most recent quarter and domestic coke and iron ore volumes fell 24% to 3.5 million st.

    CSX will host an earnings call Thursday with investors and media.

    Attached Files
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    Rains cut Rio first-quarter iron ore output 3 percent

    Global miner Rio Tinto on Thursday said first-quarter iron production from Australia fell 3 percent from the same period a year ago due to wet weather at its mines, but kept its full-year guidance intact despite weakening ore prices.

    Pilbara mines output totaled 77.2 million tonnes, the company said.

    Full-year shipping guidance was kept at 330 million-340 million tonnes.

    Shipments from the Australian mines in the first quarter were flat at 76.7 million tonnes against the year-ago period, but down 13 percent from the previous quarter.

    Ship loading was impacted by a cyclone, with parts of its rail line hit by heavy rainfall.

    "Despite these disruptions, shipments were in line with the first quarter of 2016 and guidance for 2017 remains at 330 to 340 million tonnes," the company said.

    Rio Tinto and rivals Vale, BHP Billiton and Fortescue Metals Group are facing a rapidly declining iron ore price amid waning demand from China, the biggest market for ore.

    The worldwide iron ore surplus reached 70 million tonnes last year - more than total U.S. consumption last year - and could balloon to 90 million tonnes in 2017, according to Citigroup.

    Iron ore prices are down more than 33 percent since a mid-February peak of $94.86 a tonne and forecasters are warning of a further pullback.

    Australia’s Department of Industry, Innovation and Science predicted iron ore prices would backtrack to U$55 a tonne in the fourth quarter.

    Next year’s forecast calls for iron ore prices to reach $51.60 a tonne, according to the department.

    In other minerals, Rio Tinto stuck to a full-year target of producing between 3.5 million 3.7 million tonnes of aluminum following a 2 percent rise in first-quarter production.

    But mined copper guidance was reduced to 500,000-550,000 tonnes from as much as 665,000 tonnes as a result of a strike at the Escondida mine in Chile and the curtailment of production at the Grasberg mine in Indonesia.

    Refined copper production guidance remains unchanged at 185,000 to 225,000 Rio said.
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