Mark Latham Commodity Equity Intelligence Service

Friday 25th November 2016
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    Swiss nuclear exit vote raises prospect of more fossil fuels

    Switzerland votes in a referendum on Sunday on whether to make a speedy withdrawal from atomic energy production, a move that would reduce nuclear risks but raise reliance on fossil fuels from Germany or imported nuclear power from France.

    The opposition Swiss Greens and Social Democrats have pushed for a vote since the 2011 Fukushima disaster in Japan, but the government and industry oppose a quick exit, saying Switzerland would be unable to replace power supplies with renewable energy.

    Recent surveys from the gfs.bern polling institute show the "Yes" and "No" camps in the referendum are neck and neck.

    Switzerland prides itself on the fact that two thirds of its power is hydroelectric, from reservoirs in the Alps, but it also counts on nuclear energy for a third of its power output.

    Anti-nuclear groups are pushing for it to follow neighboring Germany, which shut 40 percent of its nuclear reactors after Fukushima and will close the rest by 2022.

    Swiss reactors Muehleberg and Beznau I and II would be closed next year, followed by Goesgen in 2024 and Leibstadt in 2029.

    That would leave insufficient time to develop solar and wind alternatives, the government says. Nor would Switzerland be nuclear free, due to a long-term nuclear energy supply relationship with France which relies on atomic power stations for three quarters of its electricity.

    "The Swiss would relinquish some of their autonomy in power and they would have to get used to the idea of getting more coal- and gas-fired power from cheaper Germany," said Philipp Goetz, a senior consultant at Berlin-based Energy Brainpool.

    Reliance on nuclear energy is being debated across Europe: while Germany is getting out, France is shoring up its industry and Britain recently signed a deal to build its first nuclear plant in decades.

    Advertising by the "No" campaign in the referendum asks the Swiss if they really want "dirty power" from Germany. Supporters of the "Yes" vote for a quick exit say Switzerland's nuclear fleet is aging -- Beznau I, launched in 1969, is the world's oldest operating nuclear plant -- and is too close to urban areas. "Safety of the people is a matter of highest importance," said Regula Rytz, a co-president of the "Alliance for an orderly Atomic Exit" and a Green Party lawmaker. The government wants to phase out nuclear power eventually, but energy minister Doris Leuthard has raised the prospect of blackouts if a referendum vote accelerates the process.

    "In our view, it would be a disorderly exit," Leuthard said last month. "Suddenly, we will have endangered the energy supply for 1.6 million households."

    Swiss power network operator Swissgrid has also said it is unlikely to be ready by 2017 to accommodate the shutdown.

    "Our grid infrastructure cannot be quickly modified to handle the changes," the private company said in a statement.

    Poyry Management Consulting Switzerland has calculated that the impact on prices for consumers would be small as imports would be relatively inexpensive because of a German capacity surplus.


    Germany's move to shut down its nuclear reactors has public backing, but Berlin faces billions of euros' worth of lawsuits as dispossessed operators try to reclaim losses.

    Should the Swiss initiative succeed, the nation's utilities have likewise suggested they would pursue more than 7 billion Swiss francs ($6.89 billion) in "economic damages" from having to shut their plants before the end of their lifespan.

    Swiss utilities argue the best option, at least for now, is to keep nuclear stations running as long as possible, to recoup their investments and stock up on decommissioning and storage reserves amid a transition to different sources of power.

    Alpiq, which owns slices of Goesgen and Leibstadt, has branded a voluntary early shutdown "economically unacceptable."  "Regardless of how the vote goes, exiting nuclear power will cost billions of dollars," an Alpiq spokesman said in an email. "For Alpiq, under the present conditions, continuing to operate the plants is the one option that will cause least damage."
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    Science and Academia are shifting on Climate Change

    Image title

    Carbon has a bad name. 

    But carbon — the element — is not the enemy. Climate change is the result of breakdowns in the carbon cycle caused by us: it is a design failure. Anthropogenic greenhouse gases in the atmosphere make airborne carbon a material in the wrong place, at the wrong dose and for the wrong duration. 

    Rather than declare war on carbon emissions, we can work with carbon in all its forms. To enable a new relationship with carbon, I propose a new language — living, durable and fugitive — to define ways in which carbon can be used safely, productively and profitably. Aspirational and clear, it signals positive intentions, enjoining us to do more good rather than simply be less bad.

    It is easy to lose one’s way in the climate conversation. Few of the terms are clearly defined or understood. Take ‘carbon neutral’. The European Union considers electricity generated by burning wood as carbon neutral — as if it releases no CO2 at all. Their carbon neutrality relies problematically on the growth and replacement of forests that will demand decades to centuries of committed management. 

    Such terms highlight a confusion about the qualities and value of CO2. In the United States, the gas is classified as a commodity by the Bureau of Land Management, a pollutant by the Environmental Protection Agency and as a financial instrument by the Chicago Climate Exchange.

    A new language of carbon recognizes the material and quality of carbon so that we can imagine and implement new ways forward. It identifies three categories of carbon — living, durable and fugitive — and a characteristic of a subset of the three, called working carbon. It also identifies three strategies related to carbon management and climate change — carbon positive, carbon neutral and carbon negative.

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    Copper cable companies in trouble!

    Copper prices rose birth grimace, cable companies are hurt?

    Waste Headlines  2016-11-24  17

    Whether the recent surge in copper prices suddenly make copper terminal companies by surprise? SMM It is understood that the cost of cable companies uplift caused some corporate earnings compressed, and some intermediate processors of copper rod business has therefore been liquidated, even more shocking is that cable companies will then sell the finished product back to the copper plant. But overall, as companies adopted various countermeasures, cable companies have been hit much.

    Copper prices rose birth grimace

    1, the cable and then sell the finished stripping copper Enterprises:

    It SMM understood that, because copper prices pulled up sharply, causing some cable companies produce finished goods inventory increase, leading cable companies will be part of the industry appears finished and then sold to scrap copper wire stripping corporate profits thus obtained more than direct sales of finished .

    2, copper rod business is breach of contract rate rise

    Due to the recent rally in copper cable companies make terminal under more cost pressure, especially the part of the cable manufacturer's product prices are mostly locked in advance.There are copper rods companies said that cable companies have recently when its breach of contract, an adverse effect on the part of the copper rod business. But it is understood, because the maintenance of long-term credit transactions, default minority enterprises.

    3, refined copper scrap spreads widening use ratio rises

    In addition, due to the recent copper prices pulled, refined copper spreads widening sharply, according to SMM statistics, November 15 the average price of refined copper spreads up to 3371 yuan / ton, for the January 2011 highs.

    Section copper rod manufacturers use raw materials, used in a proportion of copper has increased, partly refined copper rod production companies, said copper rod-making enterprises increased their market share in the near future have a certain impact.

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    Oil and Gas

    Russia Tries to Dress Up Oil Freeze as Cut Amid OPEC Pressure

    Facing pressure from OPEC to make a significant output reduction, Russia reiterated its readiness to freeze oil production at current levels, arguing that the offer amounted to a cut compared with next year’s plans.

    A production cap would mean Russia pumping 200,000 to 300,000 barrels a day less than planned in 2017, Energy Minister Alexander Novak told reporters in Moscow on Thursday. That means a freeze would be “quite a difficult and harsh situation for us as our plans envisioned an output growth next year,” he said.

    OPEC, which is seeking to finalize its own supply cuts of as much as 1.1 million barrels a day next week, has asked non-members to cooperate by cutting daily production by 880,000 barrels for six months starting January, Azerbaijan’s Energy Minister Natig Aliyev said in a newspaper article.

    The Organization of Petroleum Exporting Countries reached a preliminary agreement in September to reduce collective output to 32.5 million to 33 million barrels a day, compared with the group’s estimate of 33.6 million in October. Talks on individual production quotas continued this week with the aim of securing a final pact by the ministerial meeting in Vienna on Nov. 30. It will meet with non-OPEC producers to discuss cooperation on Nov. 28.

    While Russia, the largest crude supplier outside OPEC, has reiterated its preference for a freeze over a cut for several months, members of the group including Saudi Arabia had been expecting the nation would eventually join a cut, according to people briefed on the matter. If Russia and other non-OPEC producers balk at the idea of cutting output, the exporters’ group could reconsider pushing ahead, the people said.

    Russia’s position “has remained unchanged and consistent,” Novak said Thursday. “As our president said earlier, we are ready to freeze production at the current levels.” Russian President Vladimir Putin on Monday reaffirmed Russia is willing to freeze, adding he sees no obstacles to an OPEC agreement this month after the group made major progress in overcoming differences.

    Russia drafts its 2017 budget using an oil-production estimate at about 11 million barrels a day compared to an average 10.9 million expected this year. Output increased to a record 11.205 million barrels a day in November, near a post-Soviet record. The country has raised its production forecasts several times a year since 2015.

    A delegation from Moscow is scheduled to meet OPEC experts in Vienna on Monday. Azerbaijan and Mexico are also set to participate, according to people familiar with the arrangements. Azerbaijan’s Aliyev co-chaired similar talks last month.

    "While there’s actually nothing new from Russia today, Moscow is changing its rhetoric to show its commitment to a deal,” said Alexander Kornilov, an analyst at Aton LLC in Moscow. “The new wording shows Russia is trying to convince OPEC partners.”

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    Oil Companies Shoulder Pain Of Downturn With Lower Output

    The world's listed oil companies have slashed oil output by 2.4 percent so far this year during one of the industry's worst downturns as OPEC battles to agree on its first production cut since 2008.

    The aggregated production of 109 listed companies that produce more than a third of the world's oil fell in the third quarter of 2016 by 838,000 barrels per day from a year earlier to 33.88 million bpd, data provided by Morgan Stanley showed.

    By comparison, the Organization of the Petroleum Exporting Countries produced 33.64 million bpd in October. OPEC has struggled to agree on a joint production freeze or cut to support oil prices before its Nov. 30 meeting in Vienna.

    In the second quarter of 2016, the companies reduced production by nearly 930,000 bpd, according to Morgan Stanley.

    The firms include national oil champions of China, Russia and Brazil, international producers such as Exxon Mobil and Royal Dutch Shell, as well as U.S. shale oil producers like EOG Resources and Occidental Petroleum .

    The drop in oil companies' output is particularly compelling given the increase in 2015, when third-quarter production rose by some 1.9 million bpd.

    "Clearly, we have seen a large swing in the year-on-year trend in production, from strong growth as recent as a year ago, now to steep decline. This is the outcome of the strong cutbacks in investment," Morgan Stanley equity analyst Martijn Rats said.

    Capital expenditure for the companies combined more than halved from $136 billion in the third quarter of 2014 to $58 billion in the same period this year, according to Rats.

    Oil executives and the International Energy Agency have warned that a sharp drop in global investment in oil and gas would result in a supply shortage by the end of the decade.

    Large oilfields, such as deepwater developments off the coasts of the United States, Brazil, Africa and Southeast Asia, typically take three to five years and billions in investment to develop.

    Cost reductions and increased efficiencies have only partly offset the drop in production as a result of the lower investment. Technological advancements have also helped boost onshore U.S shale production.

    "These declines should temporarily soften in 2017 as new fields are coming on-stream in Canada, Brazil, the former Soviet Union and U.S. tight oil probably stabilises," Rats said.

    "Still, unless investment rebounds relatively soon, this steep downward trend is likely to resume in 2018 and beyond."
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    India Cavern for crude is now full

    Vizag unit helps India join the US, Japan, China that have strategic reserves.
     India’s first massive underground strategic storage facility at a rock cavern built at Vizag to store crude oil for emergency requirements of the country is all tanked up.

    Visakhapatnam: India’s first massive underground strategic storage facility at a rock cavern built at Vizag to store crude oil for emergency requirements of the country is all tanked up. The facility, developed by India Strategic Petroleum Reserves Ltd (ISPRL), has been commissioned. It was to have been commissioned by Prime Minister Narendra Modi last year. The filling of another cavern built at Mangalore has also begun in October.

    The ISPRL planned caverns at Vizag, Mangalore and Pudur. The Vizag’s cavern storage capacity is 1.3 million metric tonnes and the facility is a 7.5-km long tunnel with several caverns to store various grades of crude oil. The roof of these caverns is 162 metres below sea level. Its initial capa-city of 1 MMT was later increased by 0.3 MMT, and cost Rs 1,129 crore. The total capacity of the thr-ee facilities will be 5.3 MMT and can meet 90 days of energy needs in case of oil supply disruption due to any emergency.

    Consignments of the crude oil were brought in Very Large Crude Carrie-rs and unloaded at HPCL’s single point moo-ring berth at Vizag port. “Under Strategic Petro-leum Reserve project Ph-ase-I, underground rock caverns for total storage of 5.33 MMT of crude oil at three locations, Visak-hapatnam (1.33 MMT), Mangalore (1.50 MMT) and Padur (2.5 MMT) ha-ve been created. The Vis-akhapatnam and Mangalore storage facilities have already been commissioned. The facility at Vizag has already been filled up and nearly one-fo-urth of Mangalore storage facility has also been filled. The storage facility at Padur has also been completed. The total app-roved expenditure is Rs 4,098.35 crore of which Rs 3,552.59 crore has alrea-dy been disbursed,” said Union petroleum minister Dharmendra Pradhan in reply to Congress Lok Sabha member Veer-appa Moily. India joined countries like the US, Japan, and China that have strategic reserves with the Vizag facility coming into operation.
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    Nigerian Oil Misses Goals After Legal Gridlock Deters Investors

    When OPEC exempted Nigeria from its plan to cut oil output for the first time in eight years, it highlighted how far Africa’s biggest producer has fallen.

    From January to October, just over three wells a month were drilled in Nigeria, down from a monthly average of almost 22 in 2006, according to petroleum ministry data. While output rebounded to 2.1 million barrels a day from the 27-year low in August, that’s just half the government’s goal at the start of the millennium.

    While OPEC members try to implement a deal in Vienna next week, Nigerian lawmakers in Abuja must unblock an eight-year legislative impasse that’s seen oil majors from Royal Dutch Shell Plc to Chevron Corp. quit fields in the West African nation. To end the regulatory uncertainty, Nigeria needs to set tax rates that spur investment in a stagnating deep-water sector and address unrest that has disrupted production in the Niger Delta.

    “Any business requires clarity on the operating environment before committing to investments,” said Pabina Yinkere, an energy analyst and head of research at Lagos-based Vetiva Capital Ltd. “The uncertainty surrounding the passage of the petroleum industry bill definitely stalled possibly hundreds of billions of dollars commitments on many projects.”

    Since the oil bill was first sent to Nigerian lawmakers in 2008, international producers have sold at least $5.2 billion of assets to local companies. Most of those sales came before oil prices slumped in mid-2014.

    Officials at Shell, Exxon Mobil Corp., Chevron, Total SA and Eni SpA declined to comment on the impact of regulatory uncertainty on their operations. Oil majors in joint ventures with state-owned Nigerian National Petroleum Corp. pump about 80 percent of the country’s oil.

    Regulatory Uncertainty

    The lack of clarity “was one of the main contributory factors behind divestments by Shell, Chevron and ConocoPhillips,” said Antony Goldman of London-based PM Consulting, which advises on risk in West Africa’s oil and gas industry. “No other international company, including the Chinese, were among the buyers.”

    Nigeria has been granted an exemption from OPEC’s supply-management plan after output fell as low as 1.39 million barrels a day in August, following attacks by militants on oil pipelines supplying the Forcados, Qua Iboe, Brass River and Bonny export terminals. The conflict, combined with lower oil prices, has blighted the economy which is heading for its first full-year recession in 2016 since 1991, according to the International Monetary Fund.

    While exacerbated by low prices and violence in the Niger Delta, the decline in the nation’s oil industry goes back more than a decade as investors reined in exploration, said Goldman. Nigeria’s crude reserves have dropped to less than 32 billion barrels from 37 billion barrels 15 years ago, and far short of a 2010 target for 40 billion barrels, according to Yinkere.

    Lost Investment

    Nigeria may have lost $200 billion in investment, according to the Abuja-based Nigeria Extractive Industries Transparency Initiative.

    Even recent discoveries, such as Exxon’s 1 billion-barrel deep-water asset last month, largely reflect old efforts paying off in a part of the Gulf of Guinea known for its prodigious prospects, said Yinkere.

    President Muhammadu Buhari, who promised to end the legislative logjam after winning elections last year, has yet to present a new draft of a bill that would end squabbling among regions over the distribution of revenues.

    In December, frustrated lawmakers will push a private-members bill to address oil company concerns over proposals to increase tax rates on offshore fields from 50 percent, Senate President Bukola Saraki said in a Nov. 10 interview in Abuja.

    “We have to engage with the operators, hear their views and also look at Nigeria’s interest from our revenue point of view,” Saraki said. “We can’t dictate as government, a take-it-or-leave-it approach. It has to be a win-win.”

    Emmanuel Kachikwu, Nigeria’s minister of state for petroleum, has said he’ll work with the Senate to ensure the reform bill is passed in the next year.

    Without the law and clear “contractual terms” for operators, Nigeria won’t reverse the decline in its oil industry, according to Goldman. “In eight years the bill has gone through many forms and no one knows when that’s going to end.”

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    5-year LNG contracts available from brownfield projects: Australia's Woodside CEO

    LNG contract durations, particularly from brownfield projects, are becoming shorter, and Australia's North West Shelf will be offering "five-year plus" LNG contracts as existing agreements expire, said Peter Coleman, CEO of Australia's Woodside, Thursday.

    However, Coleman also said that new greenfield projects still require long-term LNG contracts for financing purposes.

    He expects that as some of the newer Asian LNG markets mature, they will increasingly prefer long-term LNG contracts to guarantee baseload gas supply for their industrial sectors.

    As for pricing, Coleman said Woodside is prepared to look at non-oil LNG price indices.

    "But the index needs to be related to the market from which it's getting supplied," he said in an interview with S&P Global Platts.

    For that reason, Coleman said, he does not want to use an LNG price index related to the US Gulf of Mexico for pricing Australian LNG supply.

    Most destination clauses have already been negotiated out of Woodside's existing LNG contracts, according to Coleman.

    In return, buyers typically give the supplier flexibility regarding which supply source the volumes are delivered from.

    In the new LNG contracts, destination clauses are unlikely to be signed with Japanese buyers, he said.

    In addition, Woodside is also flexible regarding negotiating other contractual flexibilities with buyers, particularly at price reviews.

    LNG buyers now have a wide range of potential suppliers from whom they can obtain their desired flexibilities, by contracting from a diverse portfolio of supply sources, each with different flexibilities.

    LNG buyers are also becoming more sophisticated by balancing their portfolios across different suppliers and using more transparent LNG trading platforms, according to Coleman.

    Woodside intends to prioritize its LNG investment towards extending the lifespan of its existing producing assets, Pluto and North West Shelf, stated Coleman.

    Following that, the three-field Browse development, containing an estimated 16 tcf of gas, will likely be developed in a phased manner, either via FLNG or onshore infrastructure.

    A more concrete Browse development plan should emerge by mid-2017, according to Coleman. Meanwhile, investment in the proposed Kitimat and Sunrise LNG projects will be evaluated with the other project joint-venture partners and governments, he added.

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    Rosneft approves $17 billion rouble bond programme

    Russia's largest oil producer Rosneft is to return to the county's domestic bond market after a two-year absence with a programme worth 1.071 trillion roubles ($16.6 billion), the company said on Thursday.

    Rosneft said the money raised might be used for foreign projects, new upstream business as well for planned refinancing of outstanding debt. The bonds issued under the programme would have a maturity of up to 10 years.

    Rosneft, which is under Western sanctions due Moscow's role in the Ukraine crisis, faces limits on raising funds outside Russia.

    A large Rosneft bond issue at the end of 2014 coincided with a steep slump in the rouble.

    Russia's central bank declined to comment on Thursday on the possible effects of a new Rosneft bond programme on the country's money and forex markets when contacted by Reuters.

    In December 2014, Rosneft had issued 625 billion roubles of bonds in the domestic bond market. This caused volatility in domestic money markets, which had expected the company to use the money to buy foreign currency. The company said at the time that proceeds were not used to buy foreign currency.

    In January 2015, Rosneft placed another 400 billion roubles in domestic bonds. It has not been active in the domestic bond market since then.

    Rosneft said in a statement the latest bond programme would be conducted in separate issues taking into the account the timing of investments and planned refinancing.

    A Rosneft spokesman declined immediate comment on when first bond issue might take place and the amount.

    The company also said its subsidiaries would be able to buy its bonds as part of the programme.

    Rosneft also said its board has also approved Gazprombank as the arranger for the bond issue and it also might buy up to 173.2 billion roubles in Rosneft bonds. A Gazprombank spokesman was not available for immediate comment.

    Under a state privatisation plan, Rosneft is to buy a 19.5 percent stake from parent company Rosneftegaz in a deal worth around 700 billion roubles. Russia's budget should receive funds from this privatisation by end-2016.
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    Woodside moving forward with Browse, Scarborough projects at similar pace

    Woodside Petroleum is moving forward with its Scarborough area gas fields and its delayed Browse liquefied natural gas (LNG) project at a similar rate, and can't say at this stage which will be developed first, its CEO told Reuters.

    Woodside agreed in September to buy half of BHP Billiton's stake in the Scarborough area fields off Western Australia for $400 million, in a move that could help speed a decision to develop a project that has been stuck on the drawing board since its discovery in 1979.

    With LNG prices depressed, the Australian oil and gas company earlier shelved its Browse project.

    "I honestly don't know," Chief Executive Peter Coleman said, when asked which project would be developed first during an LNG conference in Tokyo on Thursday.

    "We are going to be moving both at the same pace ... Both are very active at this point in time and I wouldn't want to say which one will go first because I will probably get it wrong," Coleman said.

    At a time of plentiful supply, LNG buyers are not committing to long term contracts.

    "On the buyers side, they are looking for flexibility in contracts. In our view, they are not ready to sign up to a lot of long green field project contracts," Coleman said.

    LNG suppliers have been put in a tough spot as demand from the world's top importers of the past few decades, Japan and South Korea, has declined due to slowing economies, more efficient use of power, and switches to coal and renewables. That has led to a number of projects like Browse being delayed.

    It is too early to say whether Scarborough would be able to supply gas to the North West Shelf LNG plant, Australia's oldest and biggest, when its existing fields start to run out of gas in the next decade, Coleman said.
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    Oil India soars 4% ahead of board meet to consider bonus issue

    State-run oil exploration company Oil India   shares gained 4 percent intraday to hit fresh 52-week high of Rs 444.20 Thursday ahead of board meeting for bonus issue. 

    "The board of directors would consider issue of bonus shares in the board meeting scheduled to be held on November 28, 2016," the company said in its filing. On the same date, the board members will also approve unaudited financial results for the quarter and half year ended September 30, 2016 (Q2) on standalone basis. 

    Therefore, the trading window for insider trading will be closed between November 18-30 (both days inclusive), Oil India said. 

    The last bonus issue, which was in the ratio of 3 shares for every 2 shares held, was announced by the company in 2012. The Government of India holds 67.64 percent stake in the company that has 39 oil exploration blocks in India and 15 blocks globally.

    Read more at:
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    New Exillon Energy chief sees robust future for Russian independent sector

    The head of Russia's Exillon Energy, Dmitry Margelov, has predicted a secure future for the country's independent upstream sector, but says a surge of merger and acquisition activity could be on the cards in the next two to three years.

    In an interview, Margelov, who became chief executive of the London-listed company in March, said he saw little threat to the independent sector from the centralizing tendencies seen in Russia's oil industry in recent years. He also played down the significance of any effort by Moscow to curb oil output in collaboration with OPEC, saying the burden of such a move would probably fall on large companies.

    "I think our government is interested in having independent producers," Margelov said. "For now I don't see any political risks for our company." "Yes, there is a process of centralization, but from my point of view this pretty strange and unpredictable situation with Bashneft is not a sign that now all assets will go to Rosneft," he said, referring to state-controlled Rosneft's recent acquisition of Bashneft, a deal that led to bribery charges against a government minister.

    As a company, "we are in a very strong position and we have every chance to develop our production and sometime maybe in future to acquire new assets," he added.

    Exillon is currently producing around 15,000 b/d of light, low-sulfur oil, most of it from the Kayumovskoe and Lumutinskoe fields in West Siberia, plus some in the Timan Pechora basin in Russia's far north. It plans a new drilling program in the first half of next year aimed at reviving its declining output.

    The reboot of the company follows a change of ownership in 2013 in which property investors Alexei Khotin and Alexander Klyachin took the place of Kazakh businessman Maksat Arip as its largest shareholders.

    Margelov said Exillon had slashed its drilling expenditure at the time of the oil price downturn in 2014, but had now accumulated $100 million of cash, enabling it to take advantage of much-reduced prices in the supply chain and associated rig availability.

    This is likely to mean horizontal drilling, but from existing wells. Exillon's core West Siberian fields benefit from a tax exemption applicable to challenging geologies, but its estimated lifting costs last year were just $3.3/b and it benefits from easy access to transport infrastructure.

    The company has avoided entering long-term sales contracts, preferring to be flexible on how it sells its oil, which has an API gravity of around 41 and sulfur content of just 2.2% for the west Siberian fields. The majority of its revenue was from domestic sales last year and it has estimated oil reserves of 500 million barrels.

    In terms of costs, Margelov said the tendency of larger companies to carry out more drilling in-house and reduce their use of service companies was a boon for upstream independents. "Prices for drilling services in Russia are now really low. There are a lot of companies that have their drill rigs standing with no bidders -- they're very flexible, both on pricing and in terms of payment."

    Concerning Russia's offers to join OPEC in curbing output, a suggestion balked at by some large producers, Margelov said he was confident Exillon and others like it would be unaffected, not least due to questions of implementation.

    "I don't think someone would ever want to freeze the production of a small and independent producer like Exillon -- they don't have any mechanism to do this. I don't think [the government] would like to change taxation right now because people are worried about this," he said.

    The government "would take measures that would apply to governmental companies like Gazprom Neft, Rosneft, because it's easier."


    As for the Russian upstream market, Margelov said asset holders currently tended to have an inflated view of the value of their assets, but were likely to modify this as financial stresses on the sector increase. If past cycles are anything to go by, some upstream assets may end up in the hands of banks, which would then want to offload them, he added.

    "There are some assets that are intended to be sold, but their owners still believe the oil price is around $100/b and expect too much. It takes time for asset owners to understand what the fair price is. Now we will see that some companies will not be able to pay their debts to commercial banks and maybe in some years we will see that some banks got some nice assets just as security... Then of course they would like to sell them," Margelov said.

    "In two or three years we will see a wave of interesting M&A transactions in Russia."
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    Israeli refinery Paz inks $700 mln Leviathan natgas supply deal

    Israel's Paz Oil said on Thursday it signed a deal worth up to $700 million to buy 3.12 billion cubic meters of natural gas for its oil refinery from the Leviathan field.

    Paz, Israel's largest distributor of refined oil, said the deal was for 15 years or sooner, if it consumes the amount of the contract in a shorter period.

    Leviathan, which is expected to start production in 2019 or 2020, was discovered in the eastern Mediterranean in 2010 and is one of the world's largest offshore gas discoveries of the past decade. It is owned by Delek Drilling, Avner Oil Exploration, Ratio Oil and Texas-based Noble Energy.
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    Centrica and Tokyo Gas sign LNG deal

    Centrica has signed a Memorandum of Understanding for LNG collaboration with a Japanese company.

    Under the agreement with Tokyo Gas, the companies will swap locations in an effort to achieve LNG transportation savings and lower the overall cost of procurement in the Atlantic and Asia-Pacific markets.

    Both companies also intend to enter into a legally binding contract on the basis of this framework.

    Jonathan Westby, Centrica’s Co-Managing Director of Energy, Marketing and Trading said: “We are delighted to formalise our long-standing relationship with Tokyo Gas and we welcome the opportunity to expand our LNG activities in Asia Pacific.

    “Building alliances, such as this, helps towards lowering LNG procurement costs and this can benefit customers around the world.”
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    Canada: B.C. signs LNG benefits agreement with Saulteau First Nations

    Saulteau First Nations and the B.C. government have reached a new agreement on the Coastal GasLink natural gas pipeline project to help ensure that the Saulteau community can participate in and benefit from B.C.’s LNG opportunity.

    Pipeline benefits agreements with First Nations are part of the B.C. government’s plan to partner with First Nations on LNG opportunities, which also includes increasing First Nations’ access to skills training and environmental stewardship projects.

    As part of the agreement, Saulteau First Nations will receive approximately C$3.9 million in funding as construction related milestones are reached. In addition, Saulteau and other First Nations along the natural gas pipeline route will share C$10 million per year in ongoing benefits once the pipeline is in service.

    Partnering with Saulteau First Nations is part of the B.C. government’s efforts to build meaningful relationships and partnerships with First Nations.

    In 2015, the government and Saulteau signed a New Relationship and Reconciliation Agreement which will help to protect areas of traditional importance and guide natural resource development in the province’s Northeast.

    B.C. has so far reached 62 pipeline benefits agreements with 29 First Nations for four proposed natural gas pipelines, Prince Rupert Gas Transmission (PRGT), Coastal GasLink (CGL), Pacific Trail Pipeline (PTP) and the Westcoast Connector Gas Transmission (WCGT) natural gas pipeline project.

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    Alternative Energy

    EPA raises ethanol mandate higher, riling oil companies

    Corn is unloaded from trucks into the grain elevator at the Mid Missouri Energy ethanol plant in Malta Bend, Missouri. (Patrick Fallon/Bloomberg)

    The amount of ethanol and other biofuels that must be blended into the nation’s fuel supply must increase by 6 percent next year, the U.S. Environmental Protection Agency announced Wednesday.

    That represented a significant gain over the four percent the EPA put forward in a draft proposal in May, which had drawn protests from biofuel producers arguing the EPA was failing to keep pace with the schedule outlined by Congress when they passed a renewable fuel mandate more than a decade ago.

    “The move will send a positive signal to investors,” Bob Dinneen, president of the Renewable Fuels Association, said in a statement.

    Dinneen predicted the new biofuel levels will “stimulate new interest in cellulosic ethanol and other advanced biofuels” and  “drive investment in infrastructure to accommodate E15 and higher ethanol blends.”

    Under the mandate for 2017, 15 billion gallons of conventional corn-based ethanol would be blended into the fuel supply – compared to 14.5 billion gallons this year. In addition, 4.3 billon gallons of advanced biofuels like biodiesel and cellulosic ethanol would be added – compared to 3.6 billion gallons this year.

    The hikes follow a recent turnaround in what had been a steady decline in the amount of fuel American motorists were consuming. In August retail gasoline sales exceeded 26.5 million gallons a day, the highest level for that month since 2012, according to the U.S. Energy Information Administration.

    That allowed the EPA to increase ethanol production without increasing ethanol’s share of the total fuel supply to as great a degree.

    The ratio of ethanol to gasoline in the fuel supply has been the source of longstanding debate, with oil companies and the federal government arguing over what percentage represents the “blend wall” – the point at which ethanol could damage conventional car engines.

    Even with rising gasoline consumption, the EPA is projecting the proportion of ethanol in the fuel supply would likely increase to 10.7 percent in 2017 – well above the 10 percent ratio most oil companies argue represents the blend wall.

    “We are disappointed that EPA has taken a step backwards with this final rule,” the American Petroleum Institute’s Downstream Group Director Frank Macchiarola said in a statement. “Today’s announcement only serves to reinforce the need for Congress to repeal or significantly reform the [Renewable Fuel Standard].”

    Rep. Bill Flores, R-Waco, has joined with other congressman on a bipartisan bill that would force the EPA to keep the ethanol mandate at less than 10 percent of the total fuel supply.

    While that bill has gained some support in Congress – a BP executive put the consponsors at 117 House members last week – a number of gas station chains including RaceTrac and Murphy USA are already going ahead and increasing the amount of ethanol in standard gasoline to 15 percent.

    A 2011 study the U.S. Department of Energy declared it was safe to use gasoline mixed with up to 15 percent ethanol on cars manufactured in 2001 or later.

    Cellulosic ethanol, which aims to turn farming and yard waste into fuel, has struggled to achieve the technological breakthroughs envisioned a decade ago. Under the schedule set by Congress, cellulosic production was supposed to hit 5.5 billion gallons next year. The mandate announced by EPA Wednesday only called for 311 million gallons

    Right now there are only two cellulosic ethanol plants operational in the United States, both in Iowa, said Paul Winters, spokesman for the trade group Biotechnology Innovation Organization.

    “We think this rule will provide a a strong signal to investors that EPA supporting this technology,” he said.

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    Economics to Keep Wind and Solar Energy Thriving With Trump

    On the plains of West Texas, new wind farms can be built for just $22 a megawatt-hour. In the Arizona and Nevada deserts, solar projects are less than $40 a megawatt-hour. Compare those figures with the U.S. average lifetime cost of $52 for natural gas plants and about $65 for coal.

    Environmental rules and government subsidies are no longer the key drivers for clean power. Economics are.

    That’s why Donald Trump will have limited influence on the U.S. utility industry’s push toward renewable energy, according to executives and investors. Companies including NextEra Energy Inc., Duke Energy Corp. and others that invest billions in power plants are already moving forward with long-term plans to generate electricity with cleaner and more economic alternatives.

    “We said before the election that whoever is elected president, we would be continuing our efforts to go to a low-carbon fleet and also pursue renewables,” said Tom Williams, a spokesman for Duke, the second-largest U.S. utility owner.

    Wind and solar have been the two biggest sources of electricity added to U.S. grids since 2014 as utilities closed a record number of aging coal-fired generators. Trump has derided clean energy and assailed environmental regulations that hinder jobs, while pledging to revive the mining industry. In an interview Tuesday, Trump softened his view, telling the New York Times that he has an ‘‘open mind’’ on the Paris climate accord and noting that “there is some connectivity” between human activity and climate change.

    And it’s not just cost that makes clean energy attractive to utilities -- it’s time. A solar farm can go up in months to meet incremental increases in utility demand; it takes years to permit, finance and build the giant boilers and exhaust systems that make up a coal plant, and they can last for a generation. A four-year presidential term is hardly a tick in that energy clock, and companies are already planning projects that will commence after Trump leaves office, even if he serves two terms.

    Uneconomical Coal

    Over the next four years, utilities have announced plans to close 12 gigawatts worth of coal plants, largely because cheap natural gas has made them uneconomical -- the equivalent of switching off a dozen nuclear reactors.

    Trump will have some levers at his disposal to influence how they’ll be replaced. He has vowed, for instance, to kill President Barack Obama’s Clean Power Plan, which would require states to reduce emissions from power plants. And two federal subsidies -- the investment tax credit and the production tax credit -- remain key components to making solar and wind affordable.

    He hasn’t indicated whether he’ll push to repeal the tax credits for wind and solar, which were extended for five years at the end of 2015 with bipartisan support. And the Clean Power Plan, which has been suspended pending a U.S. Supreme Court ruling, isn’t scheduled to take effect until 2022. Utilities, meanwhile, are marching ahead.

    “We are moving forward with plans that call for replacing some of our coal generation with natural gas, low-cost wind energy and expanding solar options for customers,” said Frank Prager, vice president of policy and federal affairs for Xcel Energy Inc., which owns utilities in eight states.

    Even without the Clean Power Plan, Bloomberg New Energy Finance forecasts that wind and solar energy will grow 33 percent over the next two years, adding 40 gigawatts. A lot of that will be driven by state, rather than federal, policies.

    More than half of U.S. states require utilities to incorporate renewable energy into their generation mix, including the traditionally Republican strongholds of Texas, Arizona and Montana. California and New York have set goals to source half of their power from clean energy by 2030.

    “I’m skeptical that there is a lot you can do to stop this coal plant replacement cycle from happening,” said Bryan Martin, a managing director at D.E. Shaw & Co., a New York hedge fund that manages about $38 billion and invests in wind and solar projects. “Renewables are the cheapest form of new power in most of these markets.”

    Even if renewable energy loses support from the West Wing, it remains popular in corner offices across America. Electricity-hungry tech giants including Alphabet Inc.’s Google, Inc. and others have increasingly sourced energy in recent years directly from wind and solar farms, signing at least 20 power-purchase agreements totaling 2.3 gigawatts in 2015 alone. Over the next nine years, companies have pledged to buy another 17.4 gigawatts, according to New Energy Finance.

    “Wal-Mart will continue to build stores, and Apple will continue to build energy-intensive data centers that will be powered by renewables,” said Kyle Harrison, a New Energy Finance analyst in New York. “We don’t expect the election to have a significant impact on renewable energy.”

    There are indirect ways Trump may impede clean energy. His proposal to cut corporate tax rates could blunt the effectiveness of the tax credits for wind and solar. He could cut research-and-development funding. Rolling back environmental regulations may make coal more competitive. And Trump will have the opportunity to appoint at least two members to the Federal Energy Regulatory Commission.

    Utilities aren’t waiting to see how it pans out.

    “We’d love to see more funding to ensure that fossil fuels can stay in that framework,” said Nick Akins, chief executive officer of American Electric Power Co., which owns utilities from Texas to Ohio. “But as we go through this process, I think from AEP’s perspective, we’re going to continue the investments that we’re making.”

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    Canada may phase out farm pesticide that harms midges, mayflies

    A Canadian government agency recommends phasing out an insect-killing chemical used on farms to protect crops, saying that it also harms aquatic bugs, including midges and mayflies.

    The Pest Management Regulatory Agency (PMRA) said on Wednesday that imidacloprid, used on a variety of crops, should be phased out in three years, or five years for uses that do not have alternatives.

    Imidacloprid is part of a group of pesticides called neonicotinoids, also called neonics, that are applied as a seed treatment or spray on plants' leaves.

    Imidacloprid has been shown to harm aquatic insects in farm areas that are food for fish and birds, said Scott Kirby, director general of environmental assessment at PMRA.

    After a consultation period, the phase-out could begin next year.

    The European Union limited use of neonics, including imidacloprid, two years ago, after research pointed to risks for bees, which are crucial for pollinating crops. There is no such ban anywhere in North America yet, Kirby said.

    PMRA is still assessing neonics' risks to bees.

    The decision is a surprise, said Dave Carey, manager of government affairs and policy at Canadian Seed Trade Association, whose members include seed suppliers Syngenta AG , Dupont Pioneer and Monsanto Co.

    "There are always concerns when a product that companies and growers rely on is taken off the market," Carey said.

    But Ron Bonnett, president of Canadian Federation of Agriculture, said phasing out the chemical may not cause problems for farmers because other neonics are still available.

    "I don't see a lot of red flags right now," he said.

    PMRA is also reviewing two other neonics, clothianidin and thiamethoxam.

    The move was greeted with cautious optimism by Canadian beekeepers, who have been concerned about a possible link between neonics and spikes in bee deaths.

    Phasing out imidacloprid may result in fewer bee deaths, but it depends on what chemicals farmers replace it with, said Rod Scarlett, executive director of Canadian Honey Council.

    Environmental Defence, an activist group, said the decision is welcome, but the phase-out is unnecessarily long.
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    Hot, dry weather could hit recovery in Australia cattle industry

    Hot, dry weather is expected to hit Australia's largest cattle producing region over the next three months, potentially curbing the beef industry's recovery from multi-year drought in the world's No.4 exporter of the meat.

    The Australian Bureau of Meteorology on Thursday said the country's east coast had an 80-percent chance of above average temperatures in the coming three months, with just a 35-percent chance of exceeding average rainfall.

    Australia's cattle industry is rebuilding after a three-year drought drove the size of the national herd to at least a 20-year low.

    The government has been pushing to shift the economy away from its reliance on mining, with beef one of Australia's main rural exports.

    "A dry summer will push domestic prices down as it will remove quite quickly restocking demand," said Phin Ziebell, agribusiness economist, National Australia Bank.

    Australia's northeast coast accounts for more than a third of its annual red meat exports of around 1 million tonnes.

    However, analysts said wet weather across the country in recent months meant that farmers would have enough pasture and feed crops to avoid mass slaughtering as long as the dry conditions did not last too long.

    Australia's chief commodity forecaster earlier this year lowered its estimate for beef exports by nearly 7 percent - opening the door to international competitors such as Brazil to expand shipments to markets such as China, a market Australia had almost exclusively supplied as recently as 2014.
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    Base Metals

    China reaches preliminary agreement with Peru to expand Toromocho copper mine

    China's leading mining company Aluminium Corporation of China has reached a preliminary agreement with Peru's government to expand the Toromocho copper mine, China's biggest overseas copper project.

    China's state industry supervisor SASAC, which announced the agreement in a statement on Wednesday, did not give details of the expansion plan for the Chinese-owned mine.

    The mine began operation in 2013 and produced 31,407 tonnes of copper and 5,500 tonnes of zinc in the first quarter of this year, but has also faced problems concerning environmental contamination and strikes by workers demanding higher wages.

    China's President Xi Jinping signed a series of other cooperation agreements with Peru during his visit last week.
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    Atalaya sees quarterly increase in recoveries, ramps up production at Proyecto RioTinto

    Copper production at dual-listed European mining and development company Atalaya’s operations increased 97% quarter-on-quarter, from 4 442 t in the second quarter to 8 752 t in the third quarter, owing to a 83.6% increase in recoveries.

    The miner also maintained copper concentrate grades of over 21%, consistent with the previous quarter, with penalties now well below the maximum levels stipulated by some smelters.

    Further, Atalaya processed 50% more tonnes of ore in the third quarter than in the second.

    Meanwhile, ramp-up at the company’s Proyecto RioTinto, in Spain, is progressing according to plan, as mechanical completion of Atalaya’s expansion project was achieved in May, with minimal additional capital expenditure required until the end of the year. The company is targeting nominal plant capacity of 9.5-million tons a year.

    Proyecto RioTinto’s water treatment plant is now fully operational after successful commissioning during the quarter with the dewatering of the Cerro Colorado openpit progressing according to plan.

    On the financial side, Atalaya’s working capital position improved by €4.2-million in the second quarter, with cash costs reduced to $1.97/lb of copper in the third quarter. The miner has targeted further reductions for the coming months.

    Atalaya’s earnings before interest, taxes, depreciation and amortisation (Ebitda) improved significantly compared with the first half of the year, when it posted a loss of €3.6-million owing to an increase in the volume of copper concentrate sold, lower cash costs and higher realised copper prices.

    It also reported a positive Ebitda of €1.9-million for the period, compared with a negative Ebitda of €1.6-million for the year to date.

    "We are gradually beginning to see the fruits of our efforts, with positive cash flows from our operations. The combination of falling operating costs and improved levels of recovery and production reflect the increasing on-site efficiencies,” commented CEO Alberto Lavandeira.

    He added that the effect of the recent increase in the copperprice on Atalaya’s share price demonstratesd the group’s leverage to copper.

    “With the plant working now almost at nameplate capacity, we are well placed to benefit from any future improvements in the copper price,” he added.
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    Zinc shoots to 8-year high on expected metal deficit

    The last time the benchmark zinc price was this high, Americans were in the throws of an election that saw Barack Obama defeat George W. Bush.

    Worries about mine closures have sent the metal used for galvanizing steel on a wild ride; the benchmark zinc price rose 2.1% today to $2,725 a tonne, which is the highest it's been since March of 2008. The 30-day spot zinc price was at $1.20 a pound, 11.2% higher than it was a month ago. Chinese funds in particular are piling into zinc.

    Apart from steelmaking raw materials iron ore and coking coal, zinc is the best performing mined commodity in 2016; the benchmark price has nearly doubled (up 90%) since it fell to a 6.5-year low in January of $1,444.40 a tonne.

    What's driving the surge? Mine closures. Last year two major mines closed – Australia's Century and the Lisheen mine in Ireland. The two mines had a combined output of more than 630,000 tonnes. The shuttering of top zinc producer Glencore’s  depleted Brunswick and Perseverance mines in Canada in 2012 brings total tonnes going offline since 2013 to more than a million tonnes.

    At the end of October Glencore added another lead and zinc mine to the list, its Black Star open-pit mine at Mount Isa in Queensland, Australia.

    A Reuters survey predicts the zinc market will be in deficit this year by 400,000 tonnes, which portends more good news for the price. Although, dark clouds could be swirling for zinc bulls in the form of zinc inventories built up in London Metal Exchange (LME) warehouses. Reuters notes that Macquarie, an Australian investment bank, estimates 1.4 million tonnes of zinc could trickle into the market, thus offsetting the expected supply deficit.

    Shanghai Metals Market (SMM), a Chinese market intelligence site, is sanguine on the zinc price for the medium term, predicting that zinc smelters may have to suspend production in the first quarter of 2017 due to falling material inventories.

    "This may help LME zinc breach $3,000 per tonne, $3,500 per tonne, or even higher. Nonetheless, there are still some uncertainties from macroeconomic front, such as liquidity, investment, US dollar and Chinese yuan’s trend," according to SMM.
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    Steel, Iron Ore and Coal

    China to probe illegal expansion in coal, steel sectors

    China will send inspection teams to investigate and severely punish illegal expansion by coal and steel firms as part of its efforts to slim down the two industries, Prime Minister Li Keqiang said in an executive meeting of the State Council on November 24.

    With most of the country's steel and coal enterprises making losses in 2015, China promised in February to slash 500 million tonnes of coal production capacity and 100-150 million tonnes of crude steel capacity over the next three to five years in a bid to reduce price-sapping supply gluts.

    The State Council said in a notice that this year's targeted closures had already been "basically completed", but some firms were still illegally expanding capacity.

    China has traditionally struggled to rein in its massive steel and coal sectors, with local governments often turning a blind eye to expansion projects that provide additional local employment and economic growth.

    But this year the country has been trying to keep its regions on a tighter leash, and inspection teams from the Ministry of Environmental Protection have criticized several provincial authorities for failing to restrict capacity growth in the two sectors.

    The State Council statement said it will also encourage "high-quality firms" in the two sectors to step up restructuring efforts along the lines of the merger between the state-owned Baoshan Iron and Steel and Wuhan Iron and Steel groups.

    It added that China would unveil financial incentives for regions currently trying to deal with overcapacity, and would provide more support when it comes to re-employing laid-off workers.

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    China Oct thermal coal imports up 31.4pct on year

    China imported 7.32 million tonnes of thermal coal (including bituminous and sub-bituminous coal) in October, rising 31.42% on year but down 10.07% on month, showed the latest data released by the General Administration of Customs.

    The value of the imports totaled $426.45 million, translating to an average import price of $58.26/t, rising $7.46/t from a year ago and up $0.94/t from the month prior.

    In the first ten months, China imported 75.94 million tonnes of thermal coal, up 9.55% from the year-ago level. Total value stood at $3.78 billion, down 8.44% year on year.

    Meanwhile, China imported 6.95 million tonnes of lignite in October, surging 92.52% year on year but down 19.65% on month, with the value increased 103.63% year on year to $271.7 million.

    Total lignite imports in the first ten months reached 55.65 million tonnes, up 35.9% year on year, with value at $1.91 billion, up 10.73% year on year.

    Separately, the country exported 620,000 tonnes of thermal coal in October, with value at $40.12 million. Thermal coal exports from January to October stood at 3.1 million tonnes, with value at $218.08 million.

    China's export of lignite gained 7.3% on year to 32.38 million tonnes over January-October, with values at $231,000; lignite export in October was 181 tonnes, with value at $2,000.
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    Coal exports to China from Australia's DBCT slumps 38% on month in Oct: DBCT Management

    Coal exports to China from the Dalrymple Bay Coal Terminal in Queensland, Australia, slumped in October by 38% month on month and 44% year on year, at 741,006 mt, according to data released Thursday by the terminal operator.

    The China-bound October shipments were 34% lower than the 12-month rolling average of 1.13 million mt/month, and follows a similar slump in August when a 12-month low of 700,425 mt was sent, data collected from DBCT Management showed.

    Exports to China from Australia had surged in recent months following Beijing placing restrictions on domestic production. Exports peaked in March, when 1.60 million mt was sent to China from DBCT.

    DBCT exports to India, which surged in September, making it the largest export destination for the month, eased back in October.

    The Queensland state government-owned common user facility shipped 909,707 mt to India in October, down 42% month on month but up 241% year on year, the figures showed. The monthly total is 7% above the 12-month rolling average for exports to India of 850,619 mt.

    In September, India was sent the lion's share of DBCT coal with 23%, but its share sank to 17% in October, dropping below both Japan and South Korea.

    Exports to Japan from DBCT were at a seven-month low of 1.12 million mt in October -- down 13% month on month and 17% year on year -- and were 7% lower than the 12-month rolling average of 1.20 million mt.

    Shipments to South Korea fell 11% from September's 1.17 million mt to 1.04 million mt in October, but were up 35% year on year and 19% higher than the 12-month rolling average of 944,203 mt, data showed.

    South America was sent its largest volume in 11 months with 335,467 mt in October, which is up 285% month on month and 200% year on year, and 50% higher than the 12-month rolling average of 223,320 mt, according to the figures.

    Anglo American, BHP Billiton, Glencore, Peabody Energy and Rio Tinto are among the coal producers that ship via DBCT.

    Europe, Taiwan and parts of Asia were among the other destinations for coal sent from the DBCT terminal in October.

    Shipped volumes from DBCT totaled 5.51 million mt in October, according to DBCT Management, which is down 17% from September, up 5% year on year and only slightly below the 12-month rolling average of 5.57 million mt.

    The breakdown of how much coal shipped from DBCT is thermal and metallurgical is not immediately available, however, a source close to the facility said earlier this year that generally it is 18% thermal coal and about 82% metallurgical coal.

    The terminal has an 85 million mt/year shipment capacity, and from January to October, it has shipped 56.90 million mt, which translates to an annualized rate of 68.10 million mt/year, the DBCT Management figures showed.

    On Thursday, there was one coal vessel loading at DBCT and nine at anchor, which is fairly well in line with the average of around two loading and nine queuing seen in October, DBCT Management data showed.
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    China to overfulfil 2016 coal capacity cut target, official

    China is expected to overfulfil its coal capacity cut target of 250 million tonnes per annum (Mtpa) for 2016, said Jiang Zhimin, vice president of China National Coal Association, on November 23.

    Jiang said the outcome to be definitely settled, though official statistics are yet to be available.

    The resettlement of redundant workers and debt disposals are underway, and related financial policies on closed mines have been formulated, Xinhua News Agency reported, citing the vice president as saying.

    China's coal prices have been rising rapidly since July, after edging up steadily in January from declining all the way during last year, while some coal enterprises are still in the red with average selling price lower than the year-ago level, Jiang pointed.

    To cool the red-hot market and stabilize market expectation, Chinese miners and utilities have settled contract price of 5,500 Kcal/kg NAR thermal coal to be supplied next year at 535 yuan/t FOB with VAT, which would be adjusted moderately with the market changes.

    According to Jiang, drastic fluctuation of coal prices may not happen next year, if the term contracts can be implemented strictly.

    The country has also completed 2016 steel capacity cut target of 45 Mtpa, the National Development and Reform Commission announced on November 11.

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    Shandong strives to cut coal use to mitigate emissions

    Eastern China's Shandong province planned to reduce annual coal consumption by 20 million tonnes by the end of 2017 compared to 2012, as it tries to cut high level of emissions, sources learned from a provincial meeting on environment held on November 23.

    Shandong consumes around 400 million tonnes of coal in a year, accounting for 80% of its total energy consumption and 10% of China's total.

    This has led to higher pollutant emissions, with sulfur dioxide, nitrogen oxide and chemical oxygen demand emissions ranking first in the country, and ammonia-nitrogen emissions ranking second.

    The province will popularize efficient and environmental friendly pulverized coal fired boilers, and upgrade around 80% of its industrial coal boilers with capacity above 10 T/h (7 MW) by the end of 2017 and the remaining 20% by end-2018.

    It will also promote ultralow emissions transformation of coal-fired unit; cut down use of 9.12 million tonnes of "sanmei" primarily used for scattered end users like households, by burning clean coal and gas, and adopting centralized heating and electric heating.

    Shandong, one major coal producer in eastern China, produces some 150 million tonnes of coal each year, and had to buy large quantities of coal from other provinces or the abroad to meet local demand.
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    Shuohuang Railway Development completes annual transport target

    Shuohuang Railway Development Company, operator of China's second largest coal-dedicated Shuohuang rail line, has accomplished its annual coal transport target 39 days ahead of schedule, it said on its website on November 23.

    By November 22 this year, the company transported a total 243.56 million tonnes of coal, surging 29.2% year on year, exceeding the annual target of 243.25 million tonnes.

    Shuohuang line, connecting Shuozhou, Shanxi province with Huanghua port in Hebei province, also transported 5.62 million tonnes of non-coal products, accounting for 85% of the annual target.

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    Grande Cache coal mine looking to restart operations

    The Canadian coking coal producer Grande Cache Coal plans to reopen its shuttered surface mine and coal-processing plant next year, CBC News reported.

    The surface mine will resume operations by the end of Q1 2017, and the coal processing plant will start operating within a month of the resumption of mining operations, the company said.

    But the plans depend on shareholders' approval and the negotiation of key contracts, and the pre-production activities would start in January.

    The company also said it plans to apply to the Alberta Energy Regulator to mine one of its underground coal seams and not to abandon it.

    The company was acquired by Chinese coal producer Up Energy Development Group in 2015. In February of that year, Grande Cache Coal suspended surface-mine operations and 175 workers were let go. In December 2015, it ceased underground operations as well, putting 220 more people out of jobs.

    But times have changed in the coal industry. In 2015, the price of coking coal averaged $120/t. Now, it's selling for more than $300/t -- prices not seen in five years.

    Taje said restarting the surface mine could create between 100 and 130 positions. "Current production capacity is about a million tonnes per year, which is relatively small. High prices may allow them to recoup their investments and prepare for a bigger operation," he said.
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    Traders on edge as volatility surges in China's iron ore futures

    Surging volatility in China's iron ore futures is sending global prices on a roller-coaster ride, spelling risks for traders and steel mills, some of whom are losing faith in a market swayed by speculative Chinese money.

    Amid wild swings in futures, spot iron ore prices surged by a record 23 percent in the second week of November, only to fall nearly 10 percent the following week.

    At the same time, steel producers say a near 80 percent rise in spot iron ore prices this year despite plentiful supplies does not reflect physical demand, raising concerns that buyers could be left with costly iron ore in the event of a sharp pullback. Some are sitting out the volatility and holding back purchases.

    "I cannot imagine the price hit $70, it's crazy. Supply of iron ore is bigger than before," said an iron ore buyer for a mill in China's Fujian province.

    Unlike oil, gold and copper, whose benchmark pricing is set in London and New York, iron ore is one of the few commodities whose global pricing takes its cue from China.

    Because of the massive volumes of iron ore futures traded on the Dalian Commodity Exchange, the direction of prices set there virtually dictates the path for the physical market. In March, the futures volume reached a record 7.6 billion tonnes, or more than five times the annual global iron ore trade.

    On Wednesday, the most-active iron ore contract on Dalian posted its most volatile trading day since July 2015 when futures prices hit their lowest since the contract began in 2013, based on Thomson Reuters data.

    The contract has moved in a 10 percent trading range on some days this month, a huge move in the once-staid iron ore market.


    Price moves have been partly driven by an attempt by Chinese commodity exchanges to crack down on speculative trading, which led to a steep selloff last week after a series of sharp rallies. Futures surged back this week, pushing prices to near three-year highs, before coming off again.

    "Prices are changing too fast. It's difficult to strike a deal," said an iron ore trader in Shanghai.

    A sudden price drop could prompt a buyer who bought a cargo at a higher price to walk away from the deal while a trader would try to renegotiate a cargo he sold at a low price when the market abruptly shoots up, he said.

    "This kind of market is not good for anybody," he said.

    Iron ore's surge has surprised many in the market, because unlike supply-deprived coal, there remains plenty of iron ore, with stocks at China's ports the biggest in more than two years.

    While spot prices have tracked futures higher, traded volume in the physical market is "very low," said a trader at a global trading firm in Singapore.

    "Market participants are losing faith in the market. There's too much speculative money in China that is affecting physical prices," he said.

    With the seasonally weak winter period approaching, some Chinese steel producers are holding back from purchasing iron ore and waiting for prices to stabilize, he added.
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    BHP Vale to fund, extend credit over Samarco disaster

    BHP told Reuters in October it expects to complete work by year-end to contain the remaining waste that spewed from the Samarco iron ore project, causing Brazil's worst environmental disaster on record.

    When the Fundao dam burst at the mine, enough mud to fill 12,000 Olympic swimming pools flattened an entire village, killed 19 people and left hundreds homeless.

    BHP said the funds will be released to Samarco subject to the achievement of key milestones.

    "The short-term facility allows BHP Billiton Brasil to

    preserve the value of its investment as options for restart continue to be assessed," it said.
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    U.S. steelmakers push Trump team for more trade defenses

    The top U.S. steelmakers' association said it has been in contact with President-elect Donald Trump's transition team since his election on Nov. 8, as the industry seeks tougher trade defenses under his incoming administration.

    Trade restrictions are tantalizing for an American steel industry struggling with foreign competition, but analysts say new measures could trigger a backlash from U.S. carmakers and other consumers who want unfettered access to overseas markets.

    "We initially communicated with the transition team prior to the election and are continuing that effort post-election," said Lisa Harrison, a spokeswoman for the American Iron and Steel Institute (AISI), whose members include ArcelorMittal USA, Nucor Corp, U.S. Steel and AK Steel Holding Corp.

    She did not comment on the content of the talks or who was involved, but said Trump adviser Dan DiMicco, a former Nucor chief executive who is the leading contender for U.S. trade representative in the Trump administration, is a strong advocate for the industry.

    "We are proud of the prominent role he played in the campaign - and now in the transition," she said.

    DiMicco has accused China, a top world steel producer, of "rampant and destructive trade cheating" in his blog.

    Officials in Trump's transition team did not immediately respond to requests for comment. The New York businessman campaigned on a promise to promote the U.S. steel industry and toughen up trade terms with China and other countries.

    U.S. steel traders said they were confident that the industry's representatives were pushing Trump's transition team hard for more trade restrictions, and expected that DiMicco was bringing those ideas directly to Trump.

    "They have Trump's ear big-time in the form of DiMicco," one of the traders said, asking not to be named.

    But he added that he expected auto manufacturers to push back: "Eventually its going to backfire massively. Carmakers will start screaming. But for now it’s a question of who lobbies the hardest."

    U.S. steel company stocks have surged 25 percent since Trump’s election victory, fueled by bets for stronger trade defenses, tax cuts and infrastructure spending.

    Trump has pledged to spend $1 trillion over 10 years on infrastructure, slash corporateand top-rate individual taxes, redraw trade deals to win back American jobs, and slap punitive import tariffs on Mexican and Chinese goods.

    While investors have cheered his tax cut and infrastructure plans, his protectionist stance on trade has some worried. Protectionism stokes inflation and while this might initially help protected sectors like steel, it risks sparking a trade war that could ultimately damage U.S. and global growth.

    "Higher steel prices are negative for actual economic activity and the risk for steel in the longer term is that price-sensitive demand could ultimately decrease," said Jefferies analyst Seth Rosenfeld.

    Ford said last week that Trump's plan to slap 35 percent tariffs on cars and trucks imported from Mexico would hurt the auto industry and the U.S. economy, and has remained committed to making small cars in Mexico despite the tariff threat.

    "Frankly these jobs that have left, they're not coming back and many jobs haven't left, they've been automated," said a U.S. trade lawyer who represents steel consumers.
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