Mark Latham Commodity Equity Intelligence Service

Thursday 26th May 2016
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    China Wants to Set Prices for the World's Commodities

    China has put the world’s traditional financial centers on notice that it wants to develop its raw material markets as hubs for setting prices, seeking to marry the country’s commercial heft with a much greater say in determining how much commodities cost.

    “We’re facing a chance of a lifetime to become a global pricing center for commodities,” Fang Xinghai, vice chairman of the China Securities Regulatory Commission, said at the Shanghai Futures Exchange’s annual conference in the city on Wednesday. “On the way to realize this goal, we’ll see very intense competition. We have the advantage of trading size and economic growth, but our legislation is still not sound and we lack enough talent.”

    China is the world’s largest user of metals and energy, but its traders and companies rely on financial centers outside the country -- typically London and New York -- to set benchmark prices for most of the commodities they handle and consume. While raw materials trading in the nation remains largely off-limits to overseas investors -- who also face currency restrictions -- China has long pledged to open up. Fang vowed to press on with that process, while also seeing tough challenges from rival centers as it does so.

    ‘Starting Point’

    “We plan to use crude oil, iron ore and natural rubber futures as the starting point in our efforts to open the domestic market to more foreign investors,” Fang told the audience. China shouldn’t underestimate “the determination of current pricing centers to maintain their status,” he said.

    Raw-material futures markets in Asia’s top economy became a focal point earlier this year after being engulfed in a speculative frenzy, with a rapid run-up in prices and unprecedented volumes in March and April. The outburst prompted a crackdown from the CSRC and exchanges, which tightened rules and raised fees. The intervention was successful, and for China to now expand its role as a global center, effective supervision is critical, according to Fang.

    “Recently, we experienced huge volatility and trading volumes in some commodity futures,” said Fang. “We supervised the exchanges to take measures, which have seen a notable effect.”

    Data from the three biggest commodity exchanges in China show that aggregate volumes are less than half of what they were at the peak of the fever. Still, Chinese speculators will probably continue to seek very short-term commodity exposure thanks to easy credit access and the poor performance of alternative investments, according to Morgan Stanley.
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    China sets Yuan at lowest rate since 2011

    The People's Bank of China fixed the Chinese yuan to its lowest level since March 2011.

    The PBoC set the midpoint of its yuan fix at 6.5468 per dollar, down 0.34% from Tuesday.

    This decision comes as the central bank looks to soften the blow of a potential Fed interest-rate hike. Members of the FOMC have hinted that the hike could come as early as June 15.
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    Oil and Gas

    Iran-Saudi row threatens any OPEC deal, puts role in question

    OPEC's thorniest dilemma of the past year - at least from a purely oil standpoint - is about to disappear.

    Less than six months after the lifting of Western sanctions, Iran is close to regaining normal oil export volumes, adding extra barrels to the market in an unexpectedly smooth way and helped by supply disruptions from Canada to Nigeria.

    But the development will do little to repair dialogue, let alone help clinch a production deal, when OPEC meets next week amid rising political tensions between arch-rivals Iran and oil superpower Saudi Arabia, OPEC sources and delegates say.

    Earlier this year, Tehran refused to join an initiative to boost prices by freezing output but signaled it would be part of a future effort once its production had recovered sufficiently. OPEC has no supply limit, having at its last meeting in December scrapped its production target.

    According to International Energy Agency (IEA) figures, Iran's output has reached levels seen before the imposition of sanctions over its nuclear program. Tehran says it is not yet there.

    But while Iran may be more willing now to talk, an increase in oil prices has reduced the urgency of propping up the market, OPEC delegates say. Oil has risen toward a more producer-friendly $50 from a 12-year low near $27 in January.

    "I don't think OPEC will decide anything," a delegate from a major Middle East producer said. "The market is recovering because of supply disruptions and demand recovery."

    A senior OPEC delegate, asked whether the group would make any changes to output policy at its June 2 meeting, said: “Nothing. The freeze is finished.”

    Within OPEC, Iran has long pushed for measures to support oil prices. That position puts it at odds with Saudi Arabia, the driving force behind OPEC's landmark November 2014 refusal to cut supply in order to boost the market.

    Sources familiar with Iranian oil policy see no sign of any change of approach by Riyadh under new Saudi Energy Minister Khalid al-Falih - who is seen as a believer in reform and low oil prices.

    "It really depends on those countries within OPEC with a high level of production," one such source said. "It does not seem that Saudi Arabia will be ready to cooperate with other members."

    Iran has managed to increase oil exports significantly in 2016 after the lifting of sanctions in January.

    It notched up output of 3.56 million barrels of oil per day in April, the IEA said, a level last reached in November 2011 before sanctions were tightened.

    Saudi Arabia produced a near-record-high 10.26 million barrels per day in April and has kept output relatively steady over the past year, its submissions to OPEC show.

    Iran, according to delegates from other OPEC members, is unlikely to restrain supplies, given that it believes Saudi Arabia should cut back itself to make room for Iranian oil.
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    Iran Floating Storage Update

    The amount of Iranian oil on floating storage has decreased by

    1.9 M Barrels

    As the Diamend leaves the fleet

    The Current Amount Of Oil Stored

    48.6 M Barrels

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    Militant group purportedly claims new attack in Nigeria's Delta

    A militant group has purportedly claimed a new attack on a Chevron oil facility in Nigeria's restive Delta region, a message on a Twitter feed previously used by the group to take credit for strikes against oil facilities said.

    There was no immediate confirmation of the attack from residents of the area or Chevron.

    A militant group called Niger Delta Avengers has claimed a string of attacks in the southern region which have helped reduce Nigeria's oil output to nearly a 20-year low. "We Warned #Chevron<here but they didn't Listen. @NDAvengers<> just blow up the Escravos tank farm Main Electricity Feed PipeLine," the message on the Twitter account in the name of the group said. The same account was previously used by the group to claim attacks on Chevron and Shell oil facilities.

    The message was tweeted to @reuters and other foreign and local media.

    A Chevron spokeswoman had no immediate comment. It was not possible to get confirmation from residents after the message was issued late on Wednesday night.

    The Avengers, who say they are fighting for a greater share of oil profits, an end to pollution and independence for the swampy southern region, have warned oil firms to leave before the end of the month, according to a series of statements issued on its website or Twitter feed.

    Nigeria has moved in army reinforcements to hunt the militants but British Foreign Minister Philip Hammond said this month President Muhammadu Buhari needed to deal with the root causes of the conflict.

    Crude sales from the Delta account for 70 percent of national income in Africa's biggest economy but residents, some of whom sympathize with the militants, have long complained of poverty.

    Buhari has extended an amnesty deal signed with militants in 2009 that stepped up funding for the region. But he has cut funding for the deal and canceled contracts with former militants to protect the pipelines they used to attack.
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    Putin blesses Gazprom Neft's oil loadings from new Arctic field

    Russia's Gazprom Neft, under the gaze of President Vladimir Putin, has started loading a tanker with crude from its new Novoportovskoye field in the Arctic, which will help Moscow maintain record-high oil production.

    The project will help the company to reach its target of 100 million tonnes per year, or 2 million barrels per day, of oil production by 2020.

    It will also help Russia to keep its oil production at more than 10 million barrels per day, a post-Soviet record-high, and adding further to the global oil glut which has pressured prices since mid-2014.

    Putin watched the launching ceremony via video link from the Kremlin. The oil will be shipped from a terminal called the Arctic Gates with capacity of 8.5 million tonnes per year.

    Gazprom Neft has planned to produce 2.5 million tonnes of oil at Novoportovskoye this year, however sources told Reuters that the volumes would be smaller.

    The company has put the field's oil reserves at more than 250 million tonnes of oil and gas condensate as well as more than 320 billion cubic metres of natural gas.

    The relatively high volumes of the field's light low-sulphur oil could also allow the creation of a new oil grade to feed refineries in northwest Europe.

    Alternatively, oil could be shipped to Asia, though this could only be done over short periods because of difficulties navigating through winter ice.
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    Shell to cut 2,200 more jobs in face of weak oil prices

    Royal Dutch Shell will cut a further 2,200 jobs, taking its target for layoffs to 12,500 by the end of the year, the Anglo-Dutch oil firm said on Wednesday, as it cuts deeper in the face of weak oil prices.

    Shell let go 7,500 staff and direct contractors last year and previously said 2,800 jobs would be cut with the integration of BG Group.

    Whilst the cuts are small in comparison to the overall amount of people employed in the oil and gas industry, Shell's 12,500 job reductions are equal to the entire workforce of social media company Facebook.

    The combined Shell-BG company employed around 94,600 staff at the end of 2015.

    Shell announced that out of the additional 2,200 job losses, 475 will come from its upstream UK and Ireland business.

    "Despite the improvements that we have made to our business, current market conditions remain challenging," said Paul Goodfellow, Shell's vice president for UK & Ireland, after breaking the news to employees in Scotland's Aberdeen.

    The oil major has significantly reduced its annual spending target to below $30 billion and is selling $30 billion worth of assets to weather weak oil prices which brought its 2015 earnings to the lowest in over a decade.

    Shell said it expects net job losses in 2016 to be lower than 5,000 due to recruitment in IT and at the graduate level.

    Shell started offering employees in Britain and the Netherlands voluntary redundancy last month.
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    World’s Biggest LNG Buyer Becomes Seller as Gas Glut Builds

    Japan’s Jera Co., one of the world’s largest buyers of liquefied natural gas, agreed to sell the fuel to a unit of France’s Electricite de France SA.

    Jera, a joint venture between Tokyo Electric Power Co. and Chubu Electric Power Co., will sell as much as 1.5 million metric tons of LNG between June 2018 and December 2020, it said in a statementThursday. The price of the LNG will be linked to European gas market prices, according to the statement.

    Jera’s debut as a seller to Europe underscores how the oversupplied market has challenged traditional exporters, who have relied on steady, one-way demand from buyers in countries like Japan, the world’s largest consumer of the fuel. Japan’s new role as a middleman adds further pressure on LNG producers, who are losing bargaining power because of the glut.

    “This deal represents an entry point for Jera into the European market, at a time when the company’s LNG contracts from the U.S. will be ramping up significantly,” Michael Jones, a Singapore-based gas and power analyst at Wood Mackenzie Ltd., said by e-mail. “The demand outlook in Jera’s home market remains uncertain, so EDF gives Jera the ability to offload some flexible U.S. volumes into Europe.”

    Japan’s LNG consumption is expected to fall to 72 million tons in 2020 and 62 million tons in 2030, compared to 85 million tons in 2015, according to data compiled by the government and the International Energy Agency. Global demand is expected to grow by 45 percent between 2014 and 2020, according to a government presentation from earlier this month.

    Chubu Electric Power, along with Osaka Gas Co., struck a deal in 2012 to purchase supplies from the Freeport LNG project in the U.S., which is expected to ship its first cargo in 2018. The agreement doesn’t have a destination clause and the price of the fuel will be based on Henry Hub benchmark.

    “We aren’t just in talks with EDF, we are thinking of cooperating with many different companies,” said Hiroki Sato, vice president of fuel procurement at Jera. “The Asian premium has been shrinking.”

    Attached Files
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    Santos starts up second unit at GLNG

    Oil and gas company Santos has started producing liquefied natural gas (LNG) at the second unit of the GLNG joint venture project, on Curtis Island, in Queensland, marking the successful delivery of the $18.5-billion two-train project. 

    Santos MD and CEO Kevin Gallagher on Thursday described the start-up of train 2 as a milestone for GLNG, which had already produced over two-million tonnes of LNG and shipped 32 cargoes. 

    First LNG production from train 1 occurred in September 2015, with the first GLNG export cargo having been shipped in October. The GLNG project involved the development of gasfields from the Bowen and Surat basins in south-western Queensland and transporting the gas through a 420 km underground pipeline to a two-train LNG plant on Curtis Island, off the coast of Gladstone, with the capacity to produce 7.8-million tonnes a year of LNG at full capacity. 

    Santos’ LNG portfolio also included the Darwin LNG and Papua New Guinea LNG projects. Australian major Santos is the operator and has a 30% interest in the project, while Petronas and Total hold a 27.5% interest each, and South Korea’s Kogas holds the remaining 15%. “GLNG train 2 start-up adds to Santos’ LNG portfolio, which also includes the Darwin LNG and PNG LNG projects,” Gallagher said.
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    BP cuts investment in Tangguh’s third LNG train

    UK-based energy giant BP has decided to cut the investment in its Tangguh Train 3 expansion due to low oil prices, according to BP Indonesia country head DharmawanSamsu.

    Samsu said the investment, previously set at US$12 billion, has been cut down to between $8 billion and $10 billion, Reuters reports.

    A tender for engineering, procurement and construction for the third LNG train is currently being held by BP with the final investment decision on the project expected by mid-year, according to Samsu.

    In April, BP signed a deal with the Indonesian power utility Perusahaan Listrik Negara (PLN) to supply 20 LNG cargoes annually from 2017 to 2019. Additionally, from 2020 to 2033, BP will increase the number of cargoes per year to 44.

    With the PLNG deal, total production capacity from Tangguh’s third liquefaction train has been booked.
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    For Tanker Owners, Shrinking Oil Glut Is Least of Their Worries

    Tanker owners hauling the world’s crude were among the few big winners from an oil-price crash that started in mid-2014. Now for the flip side.

    The slump was caused by most enduring oil glut in a generation, flooding shipping companies with more cargoes than they could handle and driving down fuel costs that are the industry’s biggest expense. Rates got so high that owners embarked on the biggest fleet expansion spree in half a decade. Now, just as that wave of new orders swells the fleet, the glut of crude that lifted rates in the first place is starting to dissipate.

    There will still be lots more oil shipped. About 445 million more barrels will be pumped out of the ground by the world’s producers in 2017 compared with last year, of which about two-fifths moves by sea. The trouble is that, by then, the enlarged fleet will be able to deliver at least an extra 1.5 billion barrels annually.

    "Shipowners rushed to order new tankers to benefit from the surging rates in mid-2014 and 2015,” said Burak Cetinok, senior consultant at Hartland Shipping Services Ltd. in London. “But the market dynamics have changed since then and this huge amount of ships may not have enough crude to carry around. This will of course soften their daily rates.”

    Rates for the three main types of crude tanker will all be lower in 2017 than this year, according to the medians of 12 analyst estimates compiled by Bloomberg for each vessel. The industry’s biggest ships, so-called very large crude carriers or VLCCs, will earn $37,750 a day next year, which would be the least since 2014.

    The fleet of the world’s three biggest tanker types is projected to grow by about 11 percent in the two years through 2017, according to data from Clarkson Research Services Ltd., a unit of the world’s biggest shipbroker. Production of oil will expand by about 1.3 percent over the same period, according to the U.S. Energy Information Administration.

    Hartland estimates 137 crude oil tankers, including 64 VLCCs and 38 Suezmaxes will be delivered this year, Cetinok said. Next year’s deliveries are estimated to be 148, including 47 VLCCs and 63 Suezmaxes, he said.

    The extra tankers will carry an equivalent of about 370 million barrels. Ships normally make between 5 and 12 deliveries a year, depending on their size and trade. The U.S. Energy Information Administration forecasts about 1.2 million barrels a day of more oil will be produced in 2017 compared with last year.

    Rates for oil tankers boomed at the end of 2014 as Saudi Arabia led members of the Organization of Petroleum Exporting Countries in a strategy of defending market share rather than propping up prices. The approach flooded markets with cargoes as the world’s biggest exporter ramped up exports to the highest in decades while shipments from Iraq, the United Arab Emirates and Kuwait also surged.

    Attached Files
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    Apache sues former executive over trade secrets

    Apache Corp. has filed suit against the former head of its Egyptian operations, alleging that the executive  misappropriated sensitive trade secrets earlier this year when he left the Houston oil and gas company to help create a start-up firm that would compete with Apache for business.

    At Apache’s request, Harris County District Judge Jeff Shadwick issued a temporary restraining order Tuesday prohibiting Thomas M. Maher and the start-up, Apex International Energy Management, from using or disclosing any of Apache’s trade secrets and ordered  them to surrender the trade secrets to their lawyers.

    “Apache is very concerned with the information it has confirmed regarding the actions and details of Mr. Tom Maher’s departure from the company,” Apache spokeswoman Castlen Kennedy said in a written statement. “We take the security of our proprietary, confidential, and trade secret information seriously, which is why we have requested immediate court action.”

    Houston attorney Craig Smyser, who is defending Maher and Apex, declined to comment on the lawsuit, but said his clients agreed to the terms of Tuesday’s court order.

    Maher is former head of Apache’s Egypt operations, and left the company for Apex earlier this month, the lawsuit says. Apache alleges Maher downloaded more than 230,000 Apache files to as many as nine portable USB drives between February and has last day at Apache on May 9 and brought the files over to his new job at Apex, where he serves as president and chief operating officer.

    Among other things, the files include Apache’s “well, seismic survey, concession-bidding and financial information,” the lawsuit says.

    According to Apache, Maher began communicating with Apex executives as early as November of last year, including Apex CEO Roger Plank, who is a former Apache president.

    In addition to misappropriating trade secrets, the lawsuit alleges that Maher “played double agent, cementing his position at Apex while simultaneously remaining privy to the most sensitive of Apache internal discussions at the executive and board levels.”

    This included meetings Maher arranged on behalf of Apex with top Egypt officials to inform them of “Apex’s intent to do business in Egypt as an Apache competitor and to begin to solicit” the Egypt officials, which include the minister with ultimate authority of oil and gas operations in Egypt, especially with respect to foreign investment, the lawsuit says.

    “As a direct and proximate result of defendants’ conduct, Apache will suffer irreparable harm,” the complaint says. “Specifically, defendants are using Apache’s confidential, proprietary and trade secret information to gain an illegal advantage over Apache.”

    Besides the restraining order, Apache’s lawsuit asks for monetary damages to be awarded, including any compensation Maher and Apex received “as a result of their misappropriation of Apache’s trade secrets.”

    The temporary restraining order expires on June 24. Apache’s request for further injunction of the defendants from using its trade secrets will be determined at a June 20 hearing.
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    Summary of Weekly Petroleum Data for the Week Ending May 20, 2016

    U.S. crude oil refinery inputs averaged 16.3 million barrels per day during the week ending May 20, 2016, 92,000 barrels per day less than the previous week’s average. Refineries operated at 89.7% of their operable capacity last week. Gasoline production decreased last week, averaging about 9.9 million barrels per day. Distillate fuel production decreased last week, averaging about 4.7 million barrels per day.

    U.S. crude oil imports averaged over 7.3 million barrels per day last week, down by 362,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged 7.6 million barrels per day, 10.9% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 933,000 barrels per day. Distillate fuel imports averaged 193,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 4.2 million barrels from the previous week. At 537.1 million barrels, U.S. crude oil inventories are at historically high levels for this time of year. Total motor gasoline inventories increased by 2.0 million barrels last week, and are well above the upper limit of the average range. Finished gasoline inventories remained unchanged while blending components inventories increased last week. Distillate fuel inventories decreased by 1.3 million barrels last week but are well above the upper limit of the average range for this time of year. Propane/propylene inventories fell 0.1 million barrels last week but are above the upper limit of the average range. Total commercial petroleum inventories decreased by 0.9 million barrels last week.

    Total products supplied over the last four-week period averaged about 20.4 million barrels per day, up by 3.0% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged 9.6 million barrels per day, up by 3.9% from the same period last year. Distillate fuel product supplied averaged 4.1 million barrels per day over the last four weeks, down by 0.9% from the same period last year. Jet fuel product supplied is up 5.5% compared to the same four-week period last year.

    Cushing inventories drop 700,000 bbl

    Attached Files
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    Another small fall in US production

                                                  Last Week    Week Before     Last Year

    Domestic Production '000........ 8,767             8,791               9,566
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    Shale Boom Royalties Come Back to Bite Chesapeake

    Chesapeake Energy Corp. has agreed to pay nearly US$53 million dollars to settle a suit over unpaid royalties in north Texas, according to Oklahoma state media reports.

    A total of US$29.4 million in cash will be paid to the plaintiffs in the class-action suit and another US$10 million will be distributed through a promissory note payable in three years. French Total SA, Chesapeake’s joint venture partner, agreed to pay US$13.1 million on top of its partner’s offerings.

    “We are pleased to have reached a mutually acceptable resolution of this legacy issue and look forward to further strengthening our relationships with our royalty owners,” Gordon Pennoyer, a spokesperson for Chesapeake said in a statement carried by the Oklahoman.

    At least 90 percent of the plaintiffs have to approve the deal for the money to be split and distributed. If adopted, the agreement would end the lawsuit lodged by landowners in Tarrant and Johnson counties. The plaintiffs said the company underpaid royalties for natural gas extraction on their land in the Barnett Shale by several hundred million dollars.
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    Third leg of Sacagawea pipeline approved, will be largest pipeline out of the Bakken

    North Dakota regulators on Tuesday approved the third leg of a pipeline that will provide a link across Lake Sakakawea to the $3.8 billion Dakota Access pipeline, which is now under construction and will be the largest crude oil pipeline out of the Bakken.

    During a special meeting, the Public Service Commission voted 3-0 to grant a route permit for Sacagawea Pipeline Co. for a 15-mile, $22.8 million pipeline in McKenzie County.

    Most of the 16-inch-diameter pipeline approved Tuesday will extend from a service site near Johnson’s Corner to the Keene crude oil terminal owned by Paradigm Midstream Services.

    But a supplemental 2-mile-long segment also will extend from the service site to an interconnection with the 1,168-mile Dakota Access pipeline, which will export up to 450,000 barrels per day of Bakken crude to a hub in Patoka, Ill., with a capacity of up to 570,000 barrels per day or more.

    Commissioners said construction began last week on the North Dakota portion of the Dakota Access pipeline, which still needs U.S. Army Corps of Engineers’ approval for water crossings, including two Missouri River crossings. Dallas-based Energy Transfer Partners, the company building the pipeline, expects it to be in service by the fourth quarter of this year, pending regulatory approvals.

    Commissioners granted permits earlier this year for Sacagawea’s $125 million, 70-mile pipeline under Lake Sakakawea and an $18 million, 8-mile leg that will transport oil from the Palermo Rail Facility owned by Phillips 66 to the Enbridge oil terminal in Stanley.

    Commission chairwoman Julie Fedorchak said the pipeline approved Tuesday is expected to initially transport 75,000 barrels per day, with a maximum capacity of 100,000 barrels per day, and will be continuously monitored from a control center in Oklahoma.

    “We’ve given this a thorough review,” she said.

    In total, the Sacagawea pipeline connecting the Dakota Access and Enbridge facilities will have a maximum capacity of 100,000 to 200,000 barrels per day, Fedorchak said. She noted it’s one of the only new pipelines crossing the Missouri River and will be bi-directional.

    “It just offers them the flexibility to get the oil where their customers want it to go,” she said.

    Sacagawea Pipeline Co. is a joint venture between Irving, Texas-based Paradigm Energy Partners, Phillips 66 and Grey Wolf Midstream, which is owned by the Three Affiliated Tribes and is an investor in the project.
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    Alternative Energy

    Japan’s Program to Boost Clean Energy Starts to Show Progress

    Japan’s program to encourage more clean sources of energy in the wake of the Fukushima nuclear disaster in 2011 is seeing signs of progress, with the latest government data showing that the nation produced 45 percent more electricity from renewables such as solar and wind in the fiscal year ended in March compared with a year earlier.

    Clean energy output, excluding hydro power, increased to 39.2 terawatt hours in the 12 months ended March 31, according to data released Wednesday by the Ministry of Economy, Trade and Industry. Solar outpaced other renewable sources, increasing 61 percent to 31.3 terawatt hours. Wind inched up 7 percent to 5.4 terawatt hours.

    By comparison, the Fukushima Dai-Ichi nuclear plant that melted down in March 2011 produced 29.3 terawatt hours in 2010 before the disaster, according to figures from the International Atomic Energy Agency.

    Overall, Japan derived 4.7 percent of its electricity from renewables last fiscal year when hydro isn’t included, according to the Federation of Electric Power Companies of Japan. The government is aiming to derive about 14 percent of its electricity by 2030 from sources such as wind, solar and geothermal.

    The increase comes after the introduction of a feed-in tariff program that boosted installations of clean energy, especially solar. But the boom is now showing signs of weakening, with domestic shipments of solar modules falling 23 percent last fiscal year, marking the first annual drop since the introduction of the incentive program.

    The system where feed-in tariffs are offered to any developer whose project qualifies has led to quick booms in installations from Germany to Spain along with other markets where it’s been tried.

    Attached Files
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    German power firms to partner carmakers in electric future -RWE

    German utilities are likely to partner with automakers to tap into a 1 billion euro ($1.1 billion) government incentive scheme for electric cars, an RWE executive said.

    Driven by fear that energy will be dominated by the likes of Google and Apple, both of which have made forays into the sector, power firms are focusing on vehicle-to-grid communication as a possible source of revenue.

    "We assume there will be partnerships between utilities and carmakers in the near future," Thomas Birr, head of strategy at RWE, Germany's second-biggest utility, told Reuters.

    This could involve integrating electric cars into the grid and using their power to satisfy peak demand or to store surplus energy, a market expected to grow to $7.5 billion by 2020.

    Earlier this month Nissan said it was launching a trial this year with Italy's Enel to allow electric car owners in Britain to sell electricity back to the National Grid and potentially make money in the process.

    While there has been little uptake for electric cars in Germany so far, a government support programme announced last month raised hopes that demand will improve and drive the need for infrastructure, including charging stations.

    RWE, which is in the process of pooling its renewable, grid and service units into an entity separate from its loss-making power plant business, has already installed more than 3,100 such stations, more than half of Germany's roughly 5,800.

    But rather than just focusing on building more, RWE is looking at how it can earn money by integrating the rising number of electric vehicles into the power grid, which already needs to cope with a major surplus in renewable energy output.

    "What you don't want is the power grid to collapse if there happen to be three electric cars charging in the same street at the same time," Birr said.

    Utilities say that selling power alone will not be enough to keep them going in the future and are banking instead on their expertise in managing power grids at a time when Germany's energy supply becomes more decentralised.
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    Saudi Arabia to Revive Its Solar Power Program at Smaller Scale

    Saudi Arabia is seeking to revive its stalled solar-power program, scaling back more ambitious targets it set four years ago after making little headway in transforming the energy supply of the world’s biggest oil exporting nation.

    The kingdom plans to install 9.5 gigawatts of renewable energy under its Vision 2030 program announced last month, about a quarter of the previous goal. The new target is about 14 percent of the country’s current generating capacity and is achievable because of a plunge in the cost of photovoltaics, government officials said.

    “Solar should be the fundamental solution for Saudi Arabia,” Ibrahim Babelli, the country’s deputy minister for economy and planning, told reporters at a conference in Dubai.

    The goals reflect work by Prince Mohammed bin Salman to overhaul the economy of Saudi Arabia, selling off a stake in the state owned Saudi Arabian Oil Co. to diversify away from fossil fuels as a primary revenue source. The desert kingdom relies on oil and natural gas for almost all of its power generation, sapping what it earns from crude it could export.

    The energy ministry is working to establish the framework for the new renewable energy plan and needs more time to complete its planning, said Babelli, who directed strategy at the body previously responsible for renewable energy policy. Currently, the nation has almost no solar power.

    The solar program at one point envisioned more than $100 billion pouring into renewables over the next two decades. The government scaled back the program once before, in January 2015, saying it needed more time to assess the technologies it would use.

    Babelli was previously chief strategist at the King Abdullah City for Atomic and Renewable Energy, the body set up by Saudi Arabia’s former monarch in 2010 to push into renewables.

    Its plans failed to take off because Saudi Arabia’s state-owned utility didn’t want to allow private companies to build power plants and aimed to control the process itself, he said.

    Now, the kingdom is returning to its effort to tap new energy resources that would free up more crude for export and provide affordable power for industry and homes. The cost of building solar power plants is declining globally as Chinese panel makers boost manufacturing capacity and slash costs.

    “The trend will continue,” Timothy Polega, a manager in the renewables department at state-owned oil company known as Aramco, said at the conference.

    Aramco is waiting for further details about the kingdom’s energy plan before deciding on its own renewable energy plans, Polega said. The price of solar power in projects in the Persian Gulf over the last year has plunged by about 50 percent and plant developers will be able to achieve similar prices in Saudi Arabia,
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    Dong Energy IPO Set to Value Company as High as $16 Billion

    Dong Energy A/S may be valued as high as 106.5 billion kroner ($16 billion) in an initial public offering, marking what looks set to become Denmark’s biggest public share sale in decades.

    Dong plans to sell between 15.1 percent and 17.4 percent of its existing shares in an IPO with trading set to take place in the second week of June, the utility said in a statement to the stock exchange on Thursday. No new shares will be issued at the IPO, though there is room for an over-allotment, Dong said.

    The company is targeting a share price of 200 kroner to 255 kroner, corresponding to an implied valuation of the whole company of 83.5 billion kroner to 106.5 billion kroner, it said. The offering period starts on Thursday with the first trading day set as June 9.

    Chief Executive Officer Henrik Poulsen said the company has been “encouraged by the positive feedback we have received so far in the process from the investors that we have seen around the world over the past couple of months,” in comments made during a conference call after the announcement.

    The Danish state, which currently holds 59 percent of Dong, plans to maintain a holding of just over half the company after the IPO. Goldman Sachs is the second-largest owner of Dong, with an 18 percent stake. The Wall Street bank has consistently underscored its commitment to being a long-term holder of the company.

    The IPO puts an end to years of hand wringing, with successive governments since 2004 planning, and then pulling, a sale of Dong as markets shifted. Dong has tried, and so far failed, to sell its oil unit and wants to rebrand itself as a company focused on greener technology. It’s already the world’s biggest offshore wind-farm operator.
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    Strike cuts 4,000 MW in French nuclear power capacity - grid operator

    French nuclear power capacity was cut by at least 4 gigawatts (GW) on Thursday after hardline CGT union workers joined a rolling nationwide strike against planned government reforms, grid operator RTE showed on its website.

    CGT members at 19 nuclear power plants voted on Wednesday to join the strike which has paralysed French businesses and disrupted fuel supplies in the past week.

    RTE's website showed that at least 9 nuclear reactors reported unplanned outages after the workers voted on Wednesday evening.
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    Precious Metals

    The gold mine Barrick may regret selling

    K92 Mining is poised for production at its Papua New Guinea (PNG) gold project and lists on the TSXV today under the symbol KNT.

    The gold mining startup came together during one of the toughest periods in mining history.

    K92’s main asset is the Kainantu project in PNG, which has a large high-grade gold resource (1.84Moz @ 11.6 g/t AuEq. Inferred, and 240,000oz @ 13.3 g/t AuEq. Indicated, Nolidan, April 15th, 2016) and extensive infrastructure including underground mine development, a mill processing facility, a fully permitted tailings pond and paved roads to the site. The infrastructure means K92 can target to re-start mining in the near-term with minimal capital costs, and look to grow through cash-flow funded exploration on the roughly 405-sq-km property, considered prospective for additional discoveries.

    The Kainantu project was acquired from Barrick Gold (ABX.T), the world’s top gold miner, in 2015. At the time, Barrick was undergoing a corporate rationalization and selling non-core assets. K92 paid Barrick an initial US$2 million to buy the mine and could make up to an additional US$60 million in future payments to Barrick if certain milestones are reached, such as producing more than 1 million ounces of gold over the next nine years.

    Source: K92 Presentation

    K92 picked up the project at a fraction of the cost of prior investment in it, reflecting the depressed state of mining when K92 negotiated the acquisition. Barrick paid US$141.5 million in cash for the asset in December 2007, then spent US$100 million upgrading infrastructure and on other expenses, and an additional $41.3 million on exploration and expansion efforts, including drilling 78,935 metres of core. That’s on top of the estimated US$80 million spent by the previous owner on development. Barrick operated the mine for six months in 2008 before shutting it down to focus on exploration at the property.

    K92 plans to re-start the mine using experienced contract miners, and is targeting near-term production. The roughly $47-million market cap company (fully diluted at $0.35 per share) had $10.7 million in working capital at March 31, 2016 and has arranged the full financing required for the re-start.

    A serious group of mining executives came together to form K92. The team is led by CEO Ian Stalker, a Scottish-born engineer and mine developer with nearly 40 years experience building and operating mines. The former AngloGold Ashanti managing director helped increase gold production there more than tenfold during the 1990s. He was CEO of Uramin when it sold to Areva for US$2.5 billion in 2007, and has worked on mining projects throughout Africa, Asia and Europe. Chairman Tookie Angus has been involved in several successful mining ventures including Ventana Gold and Nevsun Resources. President Bryan Slusarchuk, an ex-Canaccord broker, is helping the company raise money and tell its story. There’s a deep bench of operational talent in PNG, and advisors include Doug Kirwin, a mine finder previously with the Ivanhoe Group, and Alex Davidson, a former Barrick Executive Vice-President.

    K92 plans to start by mining the Irumafimpa deposit, which was previously in production. The nearby Kora deposit will then be explored targeting an expansion of mining operations, as will several untested targets on the broader property, Stalker told CEO.CA in a recent interview.

    “There’s a real chance of a very large mine popping out of this little company,” Stalker said. “And PNG is already the land of large mines,” he added.
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    Base Metals

    Jiangxi Copper says China should prevent excess imports -exec

    China should prevent excess imports of copper to offset output cuts by domestic smelters, a senior executive at Jiangxi Copper said on Thursday.

    Wu Yuneng, vice-president of China's top producer of the metal, also told a conference in Shanghai that banks should not lend to inefficient companies suffering overcapacity.
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    Steel, Iron Ore and Coal

    China’s coal prices to rise 20pct amid production cut, Citi says

    China’s coal price may rise 20% by the end of this year, as government steps to reduce production outpace a decline in demand, according to Citigroup Inc, citing from Bloomberg.

    Power-station coal at the northeastern port city of Qinhuangdao may rise to 450 yuan/t ($69/t) by December from 376 yuan/t now, bank analysts Jack Shang and Claire Jie Yuan said in a research note on May 24. The government has asked domestic mines to cut output by 16% and reduce their operating days to 276 from 330 annually, the report said.

    "We believe the new regulation to reduce operating days is a measure taken in desperate times by the government to avoid too many bankruptcies in the coal industry," the analysts wrote. "We expect the new regulation will be strictly enforced in the coming quarters."

    Raw coal production may fall by 9% this year, more than offsetting a 3.4% decline in demand, Citi said. The world’s largest coal producer is seeking to ease a glut of industrial capacity as it shifts toward consumer-led growth and tries to curb pollution. China plans to shut 500 million tons of nationwide production capacity, or about 9%t of its total, within five years, the country’s state council said in February.

    Separately, four Chinese coal companies including China Coal, China Shenhua Energy Co., Datong Coal Mine Group Co., and Inner Mongolia Yitai Coal Co. may raise retail coal prices by 5-10 yuan/t in June, said Lin Xiaotao, a Guangzhou-based analyst at researcher ICIS C1 Energy. The four companies didn’t respond to requests for comment.

    China’s central bank is tightening financing for coal projects to help accelerate the government’s culling of industrial overcapacity, while encouraging companies to export products and projects overseas.

    Shanxi province, which produces more coal than any other nation, aims to cut at least 100 million tons of production capacity by 2020 as overcapacity, falling prices and losses at miners hurt its economy, the provincial government said in a statement on its website last month.
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    Steel industry calls on G7 to protect it from China

    Twelve global steel associations urged the Group of Seven advanced economies, which meet in Japan this week, to prevent cheap Chinese steel distorting world markets and inflicting further pain on producers.

    Steelmakers have been hit by a plunge in steel prices, which Europe and the United States have blamed on a surge in cheap exports from China that has exacerbated the impact of a collapse in demand following economic crisis.

    Among the casualties are Tata Steel, which in March announced it was selling its British operations as it could no longer sustain deep losses, prompting a political scramble to save the thousands of jobs at stake.

    The White House has already said discussion of actions to reduce global industrial overcapacity, with an emphasis on the steel glut, would be on the agenda for Japan talks starting on Thursday.

    Open letters made public on Wednesday to world leaders from 12 steel industry bodies and other manufacturers said that discussion must include action against countries that do not respect market economy conditions, especially China, and oversupply had to be tackled.

    "If global overcapacity borne of state-supported enterprises' uneconomic operations continues it will threaten the survival of efficient companies operating in environments with little or no government support," Axel Eggert, director general of the European steel body EUROFER, said in an emailed statement.

    Earlier this month, EU lawmakers overwhelmingly rejected any loosening of trade defences against China, whose eligibility for market economy status is being debated by the European Union.

    Beijing says the status is its right, 15 years after it joined the World Trade Organization, and says it is blamed unfairly for a steel crisis by nations it accuses of protectionism.

    Granting market economy status would make it hard for the EU to impose trade restrictions to protect its own industry.

    EUROFER says it is clear China is the root cause and that the nation had built up a 50 percent share of total global steel capacity by 2015, compared with 15 percent in 2000.

    In addition to the steel industry letter, AEGIS Europe, the alliance of manufacturing industries in Europe, wrote to the political leaders of Britain, France, Germany and Italy, as well as EU leaders Donald Tusk and Jean-Claude Juncker, urging them to resist "unjustified demands for treating China as a market economy".

    Attached Files
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    U.S. levies hefty duties on Chinese corrosion-resistant steel

    Corrosion-resistant steel from China will face final U.S. anti-dumping and anti-subsidy duties of up to 450 percent under the U.S. Commerce Department's latest clampdown on a glut of steel imports, the agency said on Wednesday.

    The department also issued anti-dumping duties of 3 percent to 92 percent on producers of corrosion-resistant steel in Italy, India, South Korea and Taiwan, it said in a statement.

    The department hit producers of the flat-rolled steel, which is coated or plated with zinc, aluminum or other metals to extend its service life, with anti-subsidy duties in China, South Korea, Italy and India. Taiwan was exempted.

    The final U.S. anti-dumping duties on the Chinese products replace preliminary ones of 256 percent issued in December 2015.

    China's Commerce Ministry said it was extremely dissatisfied at what it called the "irrational" move by the United States, which it said would harm cooperation between the two countries.

    "China will take all necessary steps to strive for fair treatment and to protect the companies' rights," it said, without elaborating.

    Last week the U.S. Commerce Department slapped punitive tariffs of more than 500 percent on Chinese cold-rolled flat steel, which is widely used for car body panels and appliances.

    China has come under increasing fire from industrialized countries worldwide that have accused it of dumping steel at prices far below production costs to avoid cutting excess capacity in the sector, which faces slowing demand at home.

    Beijing has insisted that it would eliminate 100 million to 150 million tons of annual capacity and said last week it would persist with a steel tax rebate plan to support the sector's restructuring.

    The escalating steel trade fight has grown into a major irritant as senior U.S. and Chinese officials prepare for bilateral economic and foreign policy meetings in Beijing in early June.

    The Commerce Department issued anti-dumping duties of 210 percent on all Chinese-produced corrosion resistant steel. Final anti-subsidy duties ranged from 39 percent for many producers to 241 percent for some of the largest ones including Baosteel (600019.SS), Hebei Iron & Steel Group (000709.SZ) and Angang Group.

    Anti-dumping duties for Indian producers were far lower at 3 percent to 4.4 percent, while their anti-subsidy duties ranged from 8 percent to 29.5 percent for JSW Steel Ltd JSW.NS.

    Italian producer Marcegalia SpA was hit with anti-dumping duties of 92.1 percent, while other Italian steelmakers faced 12.63 percent. Anti-subsidy duties on Italian steelmakers ranged from 0.5 percent to 38.5 percent on Ilva SpA.

    In 2015, U.S. imports of corrosion-resistant steel products from the five countries totaled $1.87 billion, the Commerce Department said. About $500 million of that came from China.

    The original anti-dumping and anti-subsidy complaint was brought by major U.S. steelmakers.

    Attached Files
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