Mark Latham Commodity Equity Intelligence Service

Friday 3rd March 2017
Background Stories on www.commodityintelligence.com

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    Fed hike. Animal Spirits.

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    Americans are feeling great about the future of the U.S. economy.

    Stock markets are at all-time highs. Consumer confidence has shot up. Business owners are feeling more and more optimistic.

    But none of President Trump's policies have actually been put in place yet, nor is that rising confidence reflected yet in the economic numbers since the U.S. election.


    Donald Trump has unleashed animal spirits – but beware stock market optimism






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    China's top political advisory body starts annual session

            
    China's top political advisory body started its annual session Friday in Beijing, ushering in a political high season that will continue with the opening of the country's top legislature Sunday.

    Yu Zhengsheng, chairman of the Chinese People's Political Consultative Conference National Committee, delivered a work report to more than 2,000 political advisors who gathered to discuss major political, economic and social issues in the world's most populous nation and second-largest economy.

    Top Communist Party of China and state leaders Xi Jinping, Li Keqiang, Zhang Dejiang, Liu Yunshan, Wang Qishan and Zhang Gaoli attended the opening meeting at the Great Hall of the People.

    http://news.xinhuanet.com/english/2017-03/03/c_136099413.htm
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    Flush with cash, global miners promise prudence, dividends


    For the first time in four years, the world's biggest miners are awash in cash, riding a wave of cost cuts and a recovery in raw material prices from coal to zinc last year.

    But instead of using their newfound bounty to unveil lavish growth plans, as they did in 2012 just as metals prices started plummeting, the cash is going to more sober uses this time: paying dividends and slashing debt.

    Spending on growth projects ranks third in priority, delegates and companies said at a mining industry conference in Florida this week. That raised the prospect of limited mine production increases that could support commodity prices especially for copper and zinc.


    "Companies who said they are going to spend more on capital (projects) or do not have a clear dividend policy, they've all been penalised (in the stock market)," said Charl Malan, senior analyst at New York-based fund management firm Van Eck Associates.

    The world's four biggest diversified miners, including BHP Billiton and Rio Tinto, last year raked in more than $20-billion in free cash flow before dividends and share buybacks, said Clarksons Platou analyst Jeremy Sussman. That left them with about $30-billion in cash and cash equivalents.

    They were helped by deep cost cuts and a rally in metals such as steelmaking coal that tripled while zinc surged 60%.

    Those miners were able to reduce gross debt - racked up during the last big cycle of mergers and acquisitions and new mine projects - by more than $20-billion in 2016, Sussman said.

    Memories of ill-timed acquisitions and a mine build spending spree just as metal prices peaked in 2011, are still fresh in the minds of miners and their shareholders.

    'DIVIDEND FRONT AND CENTER'

    Teck Resources shares slumped 10% on February 15 even as the company reported better-than-expected earnings. Shareholders were disappointed by a lack of clarity on its dividend policy.

    Chief Executive Officer Donald Lindsay tried to clear things up this week at the Florida conference, saying that while debt reduction is the top priority, targets will be met soon, likely by the end of June.

    "Thereafter the dividend is going to be front and center for the board," he said in a presentation at the conference.

    In recent earnings reports, BHP and Rio both rewarded shareholders with bigger-than-expected dividend payouts while Glencore said it was in a good position to pay a special dividend.

    For Chilean copper miner, Antofagasta, excess cash will first go to sustain existing operations, then to dividends and lastly to growth, CEO Iván Arriagada told Reuters on the sidelines of the conference. The miner is focused on expanding two of its existing operations rather than big, new projects, he added.

    Still, some commodity prices, notably for uranium and fertiliser, remain stubbornly low, forcing some big producers to cut production and dividends.

    "Today we're not investing even one dime in any kind of new production," Cameco Corp CEO Tim Gitzel said at the conference. Uranium spot prices touched 13-year lows late last year, and further production cuts even at low-cost mines are possible, he said.

    http://www.miningweekly.com/article/flush-with-cash-global-miners-promise-prudence-dividends-2017-03-02

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    Ineos Styrolution announces EU March polystyrene price hikes above styrene monomer monthly rise


    Global Styrenics producer Ineos Styrolution has announced polystyrene price increases for March which are larger than the increase in the styrene monomer contract price, according to an announcement on its website.

    GPPS and HIPS nominations have increased Eur110/mt and Eur120/mt respectively over February, the company said.

    The March styrene contract price was fully settled at Eur1,650/mt, increasing Eur90/mt from February, indicating that GPPS and HIPS monthly increases are Eur20-30/mt larger than styrene.

    Styrolution added that "Ineos Styrolution's customers buying a mix of GPPS and HIPS, the surcharge for HIPS is plus Eur100/mt."

    http://www.platts.com/latest-news/petrochemicals/london/ineos-styrolution-announces-eu-march-polystyrene-26676079
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    Mining royalties Glencore said were for Congo went to Israeli billionaire


    Tens of millions of dollars in royalties and signing bonuses that Glencore told an independent transparency board it had paid to Congo's state mining company actually went to a business controlled by Israeli billionaire Dan Gertler, advocacy group Global Witness said in a report on Friday.

    Glencore-controlled Kamoto Copper Co (KCC) told the Extractive Industries Transparency Initiative (EITI) in 2013 and 2014, in publicly-available disclosures, the payments were made to Gecamines, the state company.

    EITI audits payments by mining companies to governments annually, an initiative the companies sign up to voluntarily.

    Glencore acknowledged in a statement to Reuters that KCC paid the royalties and signing bonuses in 2013 and 2014 to Africa Horizons Investment Ltd (AHIL), a wholly owned subsidiary of Gertler's Fleurette Group, rather than Gecamines. But Glencore said this was what Gecamines instructed it to do. Glencore said the payments to AHIL "discharged KCC's obligation to make these payments to Gecamines."

    Glencore said KCC made the payments to AHIL "in accordance with the payment instruction from Gecamines and the subsequent tri-partite royalties agreement between KCC, Gecamines and AHIL". Reuters was not able to review the documents providing these instructions. The chairman of the Gecamines board and its interim director-general could not be reached for comment about the payment of royalties and signing bonuses. Fleurette confirmed that it received the payments. Glencore has said in the past that it adheres to strict anti-corruption standards.

    Some Campaign groups including Global Witness have accused Gertler of exploiting his friendship with Congo President Joseph Kabila to ink sweetheart deals with the state that have cost the Congolese treasury millions.

    Gertler and Kabila have both denied that. Gertler has long denied any improper conduct and says his investments have contributed to Congo's economic development.

    AHIL has been receiving Gecamines' 2.5 percent royalty stream since at least 2013, though this was only made public last November in a separate report by Global Witness. Fleurette has said AHIL bought the royalty right from Gecamines, although it has not disclosed for how much.

    Reuters could not determine how AHIL acquired the rights to the signing bonuses. Fleurette did not respond to a Reuters question about the signing bonuses but said in a statement that Gecamines stood to benefit from having sold the royalty stream, which Fleurette has said proved less lucrative for AHIL than anticipated.

    According to EITI reports and KCC's 2014 financial statement, reviewed by Reuters, KCC paid more than $70 million in signing bonuses and royalties to AHIL in 2013 and 2014.

    Last month, Glencore bought Fleurette Group's 31 percent stake in the Mutanda copper mine in southeastern Congo and its smaller stake in KCC for a total of $960 million.

    A Fleurette spokesman told Reuters after the sale that the company had retained its royalty streams in Mutanda and KCC.

    http://www.reuters.com/article/us-congo-mining-glencore-idUSKBN16A00C

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    Business conditions sharply higher in Norway's oil region: survey


    Business conditions in Norway's western oil-producing regions rose sharply in the first quarter, hitting a three-year high as demand for goods and services improved, a survey showed on Friday.

    The price of crude oil, Norway's key export, fell sharply from mid-2014 to early 2016 but has since staged a partial recovery, while non-oil exporters are boosted by a weak crown currency.

    First compiled in 2012, the West Coast Current Conditions Index rose by 3.4 points to 65.7 points, the highest level seen since the first quarter of 2014, said polling institute Respons Analyse and bank Sparebanken Vest.

    The six-month outlook meanwhile rose 1.1 points to 60.5 points, the strongest since early 2015. And despite some idle capacity, the outlook for investments hit a four-year high as more and more companies seek to grow, the survey showed.

    "After several quarters of rising demand, firms now signal an increased desire to invest, which may in turn have a positive impact on economic growth. The upturn is solidifying," it said.

    Rising demand was particularly evident at medium-sized exporters, the survey added, and the most significant improvements came in the Rogaland county, home to many large Norwegian oil firms, including top player Statoil.

    The survey covered 700 firms based in the regions of Rogaland, Hordaland, Sogn og Fjordane and Moere og Romsdal. Readings above 50 indicate expansion, while a reading below that level signals contraction.

    http://www.reuters.com/article/us-economy-norway-westcoast-q-idUSKBN16A0E6
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    N Korea: China frowns at the monkey.

    SEOUL—South Korea fears Beijing is widening its offensive against Seoul’s planned missile-defense system to include corporate boycotts, as a report of Chinese retaliation sent shares of South Korean retailers lower.

    The Friday report, by South Korea’s semiofficial Yonhap News Agency, which cited unnamed sources, said Beijing had urged travel agencies to stop selling tour packages to South Korea.

    The developments heightened fears here that China is orchestrating an escalating campaign to punish South Korea for its advancing plan to deploy the U.S.-built Terminal High-Altitude Area Defense, or Thaad, to help defend against North Korea.

    Earlier this week, South Korea’s Lotte Group, one of the country’s biggest conglomerates, approved a land swap that will allow a Lotte golf course in South Korea to be used to deploy the antimissile system.

    Then on Thursday, the website for Lotte’s duty-free shopping website was crippled for a few hours by a denial-of-service attack, a company spokeswoman said. She declined to comment on any motive or a perpetrator.

    That same day, an online retailer that’s part of Ruixiang Group said it wouldn’t sell Korean goods and would destroy all Korean Lotte products. Weilong Foodstuffs Co., a snack manufacturer, said it would no longer sell its products in Lotte supermarkets. The chief executive officer Jumei International Holding Ltd., a Chinese online beauty product retailer, also declined to sell Lotte products.

    “In the future, even if you beat us to death we won’t sell them,” said the CEO, Chen Ou.

    On Friday, an editorial in the Communist Party flagship newspaper the People’s Daily criticized South Korea, calling Thaad a “Pandora’s box.”

    “China firmly opposes South Korea’s deployment of ‘Thaad,’ and in the future will resolutely take steps necessary to protect its security interests, and all consequences must be borne by the U.S. and South Korea,” the editorial said.

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    Oil and Gas

    Saudi Aramco Offers Crude Discounts in Every Region


    Saudi Arabian Oil Co. has lowered prices for almost all of its crude grades for April delivery.

    The world’s largest oil exporter, known as Saudi Aramco, said on Thursday that it had reduced super light and extra light crude prices for its customers in the Far East, its largest market, by 50 cents and 75 cents, respectively.

    Light and medium grades are down by 30 cents a barrel, while heavy is unchanged compared with March.

    Discounting its crude grades should lead to a rise in orders, especially in the Far East.

    In the U.S., extra light, light, medium and heavy grades have been cut by 10 cents to 30 cents a barrel.

    Northwest European customers also received discounts between 45 cents and 60 cents a barrel.

    Mediterranean countries are the only customers that will have a price increase, with heavy grades increasing by 15 cents a barrel.

    Other grades were either cut or unchanged.

    The price-setting process is typically a technical move with little impact on the broader market.

    However, in the past two years, amid a steep drop in global crude prices, the settings have been closely followed by market watchers looking for clues as to the intended direction of Saudi oil policy.

    The Organization of the Petroleum Exporting Countries cut production by over 1 million barrels a day, to roughly 32.3 million barrels a day, in January and February, representing a compliance rate of roughly 94%, according to most estimates.

    Saudi Arabia has been credited as the primary driver of the cuts and reduced output by an additional 80,000 barrels a day in January to give other countries time to rein in their own production.

    https://www.wsj.com/articles/saudi-aramco-offers-crude-discounts-in-every-region-1488506715?mod=e2tw

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    Russia's ESPO crude oil premiums hit multi-month lows as April exports set higher


    Price differentials for ESPO Blend crude extended losses to multi-month lows on Wednesday, as bigger exports volume set for April added further downside pressure to the Far East Russian grade that was already strained by rival Abu Dhabi supplies offered from a nearby region.

    S&P Global Platts assessed the second-month ESPO Blend crude at a premium of $2.50/b to the Platts front-month Dubai crude assessments Wednesday, the lowest cash differential since September 27, 2016 when it stood at a $2.35/b premium.

    Among some of the latest spot deals that took place in Far East Russia, Surgutneftegaz was said to have sold four cargoes of ESPO curde for loading over April 14-18, April 19-23, April 22-26 and April 26-30 to an oil major, a Chinese company, an unidentified trading house and a North Asian refiner, respectively, at premiums of $2.60-$2.90/b to Platts front-month Dubai crude assessments on a FOB basis.

    Furthermore, trade sources said Swiss trading house Tenergy could have sold a cargo of the medium sweet Russian grade for loading in late April at a premium of around $2.52/b, while Trafigura was said to have sold late last week a cargo, for loading in the first half of April, at a premium below $2.50/b to Platts Dubai.

    In comparison, most March-loading ESPO cargoes received premiums of around $3.30-$3.60/b in the previous trading cycle.

    "[ESPO sellers] were already struggling to cope with [rival] Murban [crude barrels offered from South Korean storage units] ... the bigger [April export] program is just a nail in the coffin," said a Singapore-based crude trader.

    Platts reported last week that Abu Dhabi National Oil Co. was offering via private tenders at least 2 million-4 million barrels of light sour Murban crude for April loading from Yeosu, South Korea.

    Regional traders said Murban crude offered from South Korea may have lured some Asian customers away from the Far East Russian market in the past few weeks.

    Trade sources said several Japanese end-users, who were initially planning to pick up some April ESPO cargoes, were expressing their interest in the Yeosu-loading Murban barrels.

    Furthermore, market talk indicated that an unidentified Thailand-based buyer could have bought some of the light sour crude offered from South Korea, but full details couldn't immediately be verified.

    APRIL ESPO CRUDE OIL EXPORTS SET TO INCREASE

    A total of 2.706 million mt of Russian ESPO Blend crude is scheduled for export in April, up 7.2% from March, according to the latest monthly loading program seen by Platts.

    The April loading program, which runs from March 31 to April 30, will comprise a total of 27 cargoes, 26 of which are 100,000 mt each and a single cargo of 106,000 mt.

    In comparison, Russia is set to export 2.525 million mt of ESPO crude in March, comprising 20 stems of 100,000 mt each and five of 105,000 mt each.

    The April loading rate will average at around 639,838 b/d, up from 544,360 b/d scheduled for March. The March loading program runs from February 27 to April 1.

    The April program showed state-owned Rosneft holding nine cargoes, Russia's Surgutneftegaz with eight, and six cargoes for Swiss-based Tenergy. As for the rest of the equity holders, Gazpromneft has two cargoes and Lukoil holds one cargo for April.

    http://www.platts.com/latest-news/oil/singapore/russias-espo-crude-oil-premiums-hit-multi-month-26676062

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    Tankers: Sharp rise in Iran's crude oil shipments to Europe


    Iran is making rapid forays into the European crude oil market and selling its parcels to countries such as France, Italy, Greece and Spain, UK-based global shipping consultancy, VesselsValue said Wednesday.

    "Following the removal of sanctions, new players have emerged in the mix," VesselsValue said in a report. Iran's crude oil shipments have been delivered to destinations ranging from Malaysia and Singapore in Asia to Syria in Africa, it said.

    In 2016, the number of voyages delivering crude from Iran to France are estimated at 21, while Italy, Greece and Spain took 15, 14 and 13 shipments respectively, it said. This includes shipments in VLCC, Suezmaxes and Aframaxes.

    In July 2012, the European Union had banned the import of Iranian crude by its member countries and also the provisions of EU-linked insurance which included protection and indemnity cover for any shipments of Iranian crude, regardless of destination. The sanctions were relaxed in January last year.

    There has also been a significant change in the geographical mix of owners whose ships were used to lift Iranian cargoes of crude.

    Prior to the lifting of sanctions, the National Iranian Tanker Company, or NITC was the largest provider of tonnage to load cargoes from Iran, besides Irano Hind, Idemitsu Tanker, JX Ocean and KLine. The Iranian ships were provided local insurance cover but there were always concerns over the possibility of any potential liability in event of maritime accidents in waters of importing countries which were permitted to purchase crude from Tehran.

    During the period of sanctions, India permitted Iranian ships to call at Indian ports based on Tehran's local insurance cover, China used ships of domestic companies while the Japanese government provided insurance cover only for VLCCs. South Korea and Taiwan also took deliveries of cargoes purchased on a CFR basis.

    Now, "the group of shipowners lifting crude from Iran has changed dramatically to include those from Greece and Belgium," VesselsValue said.

    "The influx of owners from Greece has significantly increased the number of Suezmaxes plying on the ex-Iran voyages to 81 last year, compared with 15 in 2015," the report said.

    While NITC continues to be the market leader in terms of the number of ships deployed for loading crude from Iran, other companies with ships loading from the country include Dynacom, Delta Tankers, Euronav, Polembros, COSCO, Avin International, Olympic Shipping and Management, New Shipping and Thenamaris, it said.

    Last month, two Iranian VLCCs, the Huge and the Snow delivered a mix of the country's heavy and light crude grades to Shell at Rotterdam, according to trade sources and S&P Global Platts trade flow software cFlow.

    In late January, Iran's oil minister Bijan Zanganeh said that the country was producing 3.9 million b/d crude and was set to reach its 4 million b/d target by the end of the Iranian year on March 20. This will mark the return of Iran's output to levels last seen before 2012, when international sanctions were imposed on the country.

    A Platts survey released February 6 estimated Iranian production at 3.72 million b/d in January, up 30,000 b/d from December. While cuts in crude production have been initiated under an OPEC-led agreement, Iran is allowed to boost its output to 3.797 million b/d. If this fructifies, Iran's output would exceed its OPEC quota by more than 100,000 b/d.

    This is expected to translated into more crude shipments from Iran. According to VesselsValue, the seaborne exports of Iranian crude is rising significantly. The number of crude laden shipments from Iran increased to 563 last year, up from 66 in 2012 and 277 in 2015, their data showed.

    Notwithstanding these gains, the growth prospects of Iranian crude exports remains uncertain. US primary sanctions against Iran are still in place and the Implementation Day or January 16 last year marked the lifting mostly of the trade and financial restrictions imposed by the European Union. In case of the US, only secondary sanctions were eased.

    Shipping companies with direct links to the US stock exchanges and banks already desist their ships from calling at Iranian ports. Last month, US slapped a series of new sanctions against Iran following a ballistic missile launch by the Persian Gulf nation.

    "Iran's crude export program could be curtailed even more if there are any further provocations from" them, VesselsValue said.

    http://www.platts.com/latest-news/shipping/singapore/tankers-sharp-rise-in-irans-crude-oil-shipments-26674925
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    High local demand, policy changes hit China transport fuel exports


    China's exports of transport fuels plunged in January on the back of high domestic demand, a clampdown on overseas sales by independent refiners and port delays, but are are expected to bounce back in February because of stronger refinery operating rates.

    Exports of gasoline and gasoil in January dropped 37% and 46%, respectively, from December to 599,339 mt and 964,962 mt, according to data from the General Administration of Customs. But some refineries reported that actual export volumes were higher than the levels reflected in customs data.

    "Given that January export levels for both gasoil and gasoline fell to levels that were lower than we expected, we expect outflows to rebound in February, particularly as refinery runs stayed strong during the month. Gasoil demand in particular was subdued in February," said Song Yen Ling, senior analyst at S&P Global Platts' China Oil Analytics.

    "We expect 330,000 b/d (1.24 million mt) of exports for gasoil in February and about 250,000 b/d (823,000 mt) for gasoline," Song added.

    China exported 956,607 mt of gasoline in December when outflows from independent refineries peaked at around 184,000 mt as they rushed to use up their 2016 export quotas.

    But in 2017, independent refiners have not exported any cargoes so far as Beijing has withdrawn its permission and has only allocated product export quotas to refineries under Sinopec, PetroChina, CNOOC and Sinochem.

    In addition, the month-on-month drop in gasoline exports was due to the decision by some refiners to keep more barrels at home in order to meet the relatively strong domestic demand ahead of the seven-day Chinese New Year holidays at the end of January.

    PetroChina Guangxi canceled all its gasoline exports in January because of local demand, although it had initially planned to send out a total of 108,000 mt in the month.

    "Normally, demand for gasoline is strong in the holiday season as people tend to drive a lot on short journeys, boosting consumption of gasoline," said a Beijing-based analyst.


    GASOIL EXPORTS


    While gasoline exports fell because of buoyant domestic demand, it was a different story for gasoil. Outflows of gasoil fell despite weak demand at home because of a combination of factors.

    Only 23,000 mt of the month-on-month fall in exports could be attributed to the lack of quotas for independent refineries.

    Platts survey also suggested that 10 key exporting refineries lifted their exports in January by 2.9% from December, but customs data showed a 45.9% decrease in exports, falling from a historical high level of 1.78 million mt in December.

    The increase in planned exports included PetroChina Guangxi's plan to ship out round 78,000 mt of gasoil in January, resuming exports after restarting operations in early December following a full maintenance. The refiner actually carried out the plan and exported the volume through the Nanning customs in January, a refinery source said on Tuesday. But the figure released by the GAC stood at only 149 mt instead, meaning the shipments were not reflected.

    This could be the same with local customs units at other places, such as Huangpu and Shenzhen for Sinopec's Guangzhou Petrochemical and CNOOC's Huizhou Petrochemical.

    The data showed that gasoil exports through these local customs authorities in South China were 27,966 mt, which amounted to an MR-size cargo lower than the total export plan of 68,000 mt by the two refineries.

    "Usually, the import and export data around the Chinese New Year period is quite difficult to match," said another analyst.

    Moreover, market participants said barrels exported under the new general traded route were not recorded on time.

    PetroChina's Dalian refinery exported 33,000 mt of gasoline and 40,000 mt of gasoil under the trade route, but the volume did not get reflected in the customs data. The customs department might need more time to figure out how to register those volumes, a source said.

    In January, Dalian Refinery also had plans to export gasoline and gasoil under the general trading route. It is again not clear whether that data got reflected. Customs data only showed 96,809 mt of gasoline exported under the general trade route last month.

    The holiday period also hit port operations. "The logistics for transporting cargoes from refineries to ports were hit as more workers took leave ahead of the holiday season. As a result, some cargoes could not be exported on time," said a port source.

    http://www.platts.com/latest-news/oil/singapore/analysis-high-local-demand-policy-changes-hit-27780510

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    Russia's Novak says talk of global oil output cuts extension premature


    It is too soon to say if a global deal on oil output cuts will be extended later this year, but the current agreement envisages such a possibility, Russian Energy Minister Alexander Novak told Reuters in an interview.

    The Organization of the Petroleum Exporting Countries and non-OPEC producers, led by Russia, in December reached their first deal since 2001 to jointly curtail oil output, by around 1.8 million barrels per day (bpd).

    The deal is effective until the end of June. OPEC sources told Reuters last month that the group could extend the pact with non-members or even apply deeper cuts from July if global crude inventories fail to drop to a targeted level.

    OPEC's next meeting is planned for May 25.

    "It is premature to talk of what we will discuss in April-May. The technical possibility of the deal extension is envisaged by the agreements," Novak said in an interview cleared for publication on Thursday.

    Officials in the 13-member OPEC, including Saudi Energy Minister Khalid al-Falih, have said global oil stocks need to fall near to their five-year average for the group to say markets are becoming balanced.

    Novak said further action would depend on the size of stocks and how output in other producers, notably in the United States, China and Norway, which did not join the pact, would affect the global balance of supply and demand.

    End-December stocks of crude, natural gas liquids and oil products in OPEC member countries had fallen below 3 billion barrels, but were still 286 million barrels above the five-year average, the International Energy Agency said last month. Stocks also continued to build in China and volumes of oil stored at sea increased.

    Novak said Moscow was unlikely to cut more than it had already pledged if other non-OPEC producers failed to comply with their own promises.

    "Each country is responsible for its production. In particular, oil companies in Russia voluntarily defined their output plans for 2017 and we can only bear responsibility for our own figures," he said.

    Azerbaijan, Bahrain, Bolivia, Brunei, Equatorial Guinea, Kazakhstan, Malaysia, Mexico, Oman, Sudan and South Sudan are the other non-OPEC producers party to the deal.

    Novak said oil production in the United States may rise by between 400,000 bpd and 500,000 bpd this year. That is slightly above a previous forecast of a 300,000 to 400,000 bpd increase.

    Russia itself has pledged to cut output by 300,000 bpd in the first half of the year via a gradual strategy that would see output cut by 200,000 bpd in the first quarter.

    So far, Russia's cuts have amounted to around 100,000 bpd.

    If the output cut deal is not extended, overall Russian oil output for 2017 might rise to 548 million to 551 million tonnes (11.01-11.07 million bpd) from 547.5 million tonnes last year, said Novak.

    He forecast an average Brent oil price for 2017 of $55-60 per barrel and said the price of Russia's flagship Urals blend would likely be $2-$3 per barrel below that.

    http://www.reuters.com/article/us-russia-oil-opec-idUSKBN1691L2

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    Sinopec to spend $29 billion upgrading four refining bases


    China's Sinopec group, parent of Sinopec Corp, will invest 200 billion yuan ($29.05 billion) to upgrade four refining bases between 2016 and 2020 to produce higher-quality fuels, the company said in an emailed statement on Thursday.

    Sinopec's upgrades come as China, the world's second-biggest oil consumer, is embracing more stringent fuel standards in its battle against pollution and suffering an overall glut in refining capacity.

    After the upgrades, the total refining capacity of the four refining sites will reach 130 million tonnes per year, or 2.6 million barrels per day (bpd), while ethylene capacity will reach 9 million tonnes per year (tpy), Sinopec said.

    The sites are in the cities of Shanghai, Nanjing and Zhenhai on the east coast and Maoming-Zhanjiang in southern Guangdong province.

    After the expansions, the bases will make up 45 percent of Sinopec's total refining capacity and 65 percent of its ethylene capacity.

    "It's a strategic move that fits the global industrial trend for clustered and scaled growth and helps transform China's petrochemical products to medium and high quality," the company chairman Wang Yupu was cited as saying in the statement.

    Between the four bases, Sinopec will be able to optimize the product structure and reduce logistics cost.

    Sinopec, Asia's largest refiner, started construction in December of a greenfield oil refinery and petrochemical complex in Zhanjiang that includes a 200,000 bpd refinery and an 800,000 tpy ethylene complex.

    The refinery will mainly produce gasoline and diesel that meets the "national six" specifications, up from the previous Euro V guidelines that cap sulfur content at 10 parts per million (ppm), said Sinopec in the statement.

    The new plant will be geared toward producing gasoline and aviation fuel at the expense of diesel, the firm said.

    After the upgrades, Sinopec estimates the four sites will generate revenue of 800 billion yuan by 2020, based on $54 a barrel crude oil prices.

    http://www.reuters.com/article/us-china-sinopec-idUSKBN1690UB
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    Gazprom natural gas sales in Europe, Turkey slide by 34 million cu m/d in Feb


    Russian natural gas flows to Europe and Turkey in February averaged 582 million cu m/d, down 34 million cu m/d from the January average, Gazprom data released late Wednesday showed.

    Flows of Russian gas to Europe dipped in February, given lower demand and a less attractive oil-indexed price versus the European hubs.

    Gazprom was also unable to use the higher capacity in the OPAL line last month due to ongoing legal action, having boosted supplies via Nord Stream/OPAL in January.

    Its gas deliveries via the Ukraine route also slid in the last week of February, triggering a warning from Ukraine's Naftogaz about record low pressure in the system.

    According to Gazprom data, total sales in Europe and Turkey (but not the countries of the former Soviet Union) were 16.3 Bcm, or an average of 582 million cu m/d.

    That is down from the January total of 19.1 Bcm, or an average of 616 million cu m/d.

    The total for the first two months of 2017 was 35.4 Bcm, still up 21% from the same period last year.

    "In absolute terms, the increase amounted to 6.1 Bcm, which is comparable with the annual volume of deliveries to Austria," Gazprom said.

    Nonetheless, the fall in February will have been noted, and comes as Russian oil-indexed gas prices and the day-ahead price at European hubs converge.

    The oil-indexed range is still slightly cheaper than the TTF hub, but the two have been converging in recent weeks and the TTF price is set to fall well into the oil-indexed price range in the near future, according to Platts analysis.

    Gazprom said its supplies to Germany rose 23.8% year on year in the first two months of 2017, while supplies were also up year on year in France (38.2%), Slovakia (11.5%) and Greece (20.6%).

    "Our European customers are steadily increasing imports," CEO Alexei Miller said.

    Last year, Gazprom hit an all-time high sales level of 179.3 Bcm and Gazprom officials have said that the company could exceed that level in 2017.

    http://www.platts.com/latest-news/natural-gas/london/gazprom-natural-gas-sales-in-europe-turkey-slide-26676063
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    Gail India awards tender for April LNG shipment - trade sources


    Gail India has awarded a tender for a liquefied natural gas (LNG) shipment delivering in April at a price of around $6 per million British thermal units (mmBtu), traders said.

    Estimates of the transaction price by traders ranged from slightly below to slightly above that level.

    The supplier could not be immediately identified.

    http://in.reuters.com/article/gail-india-lng-idINKBN16851F
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    Iraqi Kirkuk Oil Exports at Risk as Kurds Seize Pump Station


    Iraqi oil shipments of about 105,000 barrels a day were halted briefly on Thursday after Kurdish troops seized control of a pumping station in disputed Kirkuk province and demanded that crude shipments to the country’s central government be stopped.

    Oil from Kirkuk stopped flowing into a Kurdish-built export pipeline to Turkey after fighters loyal to the Patriotic Union of Kurdistan political party took control of the province’s main pumping station, Najat Hussein, a member of Kirkuk’s oil, energy and industry committee, said by phone. The shipments resumed several hours later, he said.

    The PUK, one of two parties in the Kurdistan Regional Government, has controlled much of Kirkuk since sending forces to protect oil facilities there after Islamic State militants captured swathes of northern Iraq in 2014. Kirkuk lies outside the KRG-run Kurdish region and is a potential flashpoint between Kurds and Iraqi Arabs. The KRG struck a deal with the federal government in Baghdad last August to share revenue from Kirkuk oil exported through the Kurdish-operated pipeline.

    By seizing the station that controls oil flowing into the export pipeline, the PUK was trying to pressure the federal government to allocate money to Kirkuk from sales of the province’s oil, Hussein said. The PUK will cut exports again if no agreement is reached within one week, he said.  

    “Today’s storming of the North Oil Co. in Kirkuk was provocative and irresponsible local behavior,” Safeen Dizayee, a KRG spokesman, told the Kurdish Rudaw news agency late Thursday. “It was not necessary to take this irresponsible step.”

    Iraq, the second-biggest member of the Organization of Petroleum Exporting Countries, pumps most if its crude at fields in the south and exports it by sea from the southern port of Basra. Total exports increased to 3.85 million barrels a day last month, about 39,000 barrels a day more than in January, according to port-agent reports and ship-tracking data compiled by Bloomberg.

    https://www.bloomberg.com/news/articles/2017-03-02/iraq-s-kirkuk-oil-exports-at-risk-as-kurds-seize-pumping-station
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    Diesels lose appeal in weaker German car market


    Sales of new cars in Germany fell last month for the first time since October, with diesel models worst hit as authorities debate tighter regulation to help tackle pollution.

    Car sales in Europe's largest vehicle market fell 2.6 percent in February to 243,602 vehicles, motor vehicle authority KBA said on Thursday.

    Adjusted for one less selling day, car sales would have risen by about 2 percent last month, according to analysts. However, that represents a slowdown from a jump of more than 10 percent in January.

    "February dealt a blow to the German new car market," Peter Fuss, a senior partner and automotive specialist in Ernst & Young's German practice, said, adding rising inflation and higher energy costs were deterring buyers.

    Diesel models' share of new car sales plunged 11 percent in February to 43 percent, reflecting similar drops in France and Spain, and may shrink further in months ahead, Fuss said.

    Buyers are shunning diesel car purchases as Germany discusses driving bans and because of increases in car selling prices expected on the back of manufacturers' efforts to improve emissions-control technology, Fuss said.

    Stuttgart, home to premium carmakers Mercedes-Benz (DAIGn.DE) and Porsche (VOWG_p.DE), has said it will next year ban diesel cars which do not comply with latest emissions limits from the city on days when pollution is heavy.

    Diesel emissions are in focus following the disclosure in September 2015 of the Volkswagen scandal involving cheating software in as many as 11 million cars worldwide which made them appear cleaner during routine testing.

    Other key European markets showed a mixed picture in February with new car sales up 6.2 percent in Italy, down 2.9 percent in France and flat in Spain.

    http://www.reuters.com/article/us-germany-autos-idUSKBN1691GX

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    U.S. EPA withdraws request for methane information from oil, gas companies


    The U.S. Environmental Protection Agency on Thursday withdrew a requirement for the oil and gas industry to provide information on methane emitted from its operations, one of what will be several moves to undo the Obama administration's climate change regulations.

    In November, two days after Donald Trump was elected president, the EPA issued a request for information from companies needed to help it determine how to reduce methane and other emissions from existing sources. That information request was the agency's first step as it sought to regulate methane emissions from the oil and gas sector.

    http://www.reuters.com/article/usa-epa-methane-idUSL2N1GF1YS
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    Canadian Natural Resources Limited Announces 2016 Fourth Quarter and Year End Results


    Commenting on 2016 results, Steve Laut, President of Canadian Natural stated, “Throughout 2016 Canadian Natural continued to execute on our defined strategy with another strong operational year. In 2016 we were able to keep our capital program intact, complete the Phase 2B expansion at Horizon, continue to lower our cost structures, operate our properties in a safe and effective manner and increase returns to shareholders.

    2016 was a milestone year for Canadian Natural with the continued transition to a long life low-decline asset base with the strong execution and operational results of Horizon Phase 2B. In the fourth quarter of 2016 the Company achieved record SCO production of 178,000 bbl/d and record low operating costs of $22.53 were realized as cost efficiencies continue to be a focus. Production levels at Horizon continue to be in excess of our 182,000 bbl/d nameplate capacity with December, January and February production averaging approximately 184,000 bbl/d, 195,000 bbl/d and 202,600 bbl/d respectively. Strong production combined with record low operating costs is delivering substantial cash flow generation and as a result our balance sheet is strengthening quickly. This will allow for greater returns to shareholders, as demonstrated by today’s 10% dividend increase, economic development of our asset base and potential for opportunistic acquisitions.

    2017 will be equally as transformational as Canadian Natural targets to deliver 6% production growth with a $3.9 billion capital program. With approximately $1.05 billion of Horizon Phase 3 expansion capital remaining to be spent in 2017 as a part of this capital program, an additional 80,000 bbl/d of SCO will be added at Horizon. Phase 3 is targeted to start-up in the fourth quarter of 2017 and will further strengthen the Company’s long term sustainability in any commodity price cycle.”

    Canadian Natural’s Chief Financial Officer, Corey Bieber, continued, “In 2016 Canadian Natural demonstrated the strength and resilience of the Company’s operations and assets. While navigating a US$43/bbl average WTI price in 2016, the Company’s net ending debt was largely unchanged compared with 2015 levels, all the while growing proved reserves 4%, increasing dividends, maintaining entry to exit production levels and investing approximately $1.9 billion in the Horizon expansion. A significant achievement in a low commodity price environment. In the fourth quarter of 2016, the Company generated approximately $1.0 billion in free cash flow after capital and dividend requirements. As a result, liquidity and key balance sheet metrics of the corporation strengthened in 2016.

    In the first quarter of 2017 the balance sheet will continue to strengthen as cash flow is targeted to exceed capital expenditures by approximately $230 million per month. In recognition of this financial strength and the strong operational performance at Horizon, our Board of Directors today approved a 10% increase to our quarterly dividend from $0.25 per share to $0.275 per share, for the seventeenth consecutive year. Also, as a result of this financial strength and operational performance, the Board of Directors, subject to regulatory approval, authorized the Company to apply for a normal course issuer bid to purchase up to 2.5% of the Company’s common shares.

    With increased long life low-decline, high value SCO production from Horizon Phase 2B in 2016 and Phase 3 targeted for a fourth quarter start-up, Canadian Natural’s business becomes even more robust and sustainable, allowing for increased capital flexibility going forward.”

    ($ millions, except per common share amounts)Dec 31

                            2016 Dec 31 2016 Sep 30   2015 Dec 31  year 2016 Dec 31
    Net earnings (loss)  $566$            (326)           $131$                (204)$
    Per common share $0.51            $(0.29)          $0.12               $(0.19)

    http://boereport.com/2017/03/02/canadian-natural-resources-limited-announces-2016-fourth-quarter-and-year-end-results/
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    Stage Completions brings Blackbird Energy completions to just 3 days


    Technological innovation has been a major driver of the oil and gas revolution from the very beginning. New ideas led to horizontal drilling and completions, and when the price of oil fell from more than $100 per barrel to less than $30, companies turned to technology again for a solution.

    Over the course of EnerCom Dallas, technological innovation was a constant theme. Even though some of the pressure has come off the oil and gas industry with prices climbing above $50 per barrel, many companies remained focused on making operations even more efficient.

    One of the technologies presented at EnerCom Dallas was privately-held Stage Completion’s SC Bowhead II, a collet-activated fracturing sleeve system designed for cased hole and open hole applications. The Stage system is helping to increase stimulated rock volume, increasing EURs and improving capital efficiencies, Stage management said during their presentation.

     Image title

    Stage completion has been rolling out its completion technology throughout North America and internationally. In Canada, the company has been used in multiple Blackbird Energy (ticker: BBI) wells, with impressive results. BBI’s most recent 3-28 Montney well consisted of 56 stages with 2,765 tons of proppant for $2.3 million in just 54 hours exclusive of maintenance. Blackbird also owns a 10% stake in Stage Completion.

    http://www.oilandgas360.com/lowering-costs-canadian-innovation/

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    Samson Resources emerges from bankruptcy


    The Oklahoma-based Samson Resources Corporation has emerged from bankruptcy and discharged its $4 billion in debt, the company announced on Wednesday.

    The company has restructured, and has transferred nearly all of its remaining assets and subsidiaries to a new company, Samson Resources II, LLC. Samson Resources, an oil and gas production and exploration company that works in East Texas, declared bankruptcy in September 2015. The new company will also be based in Tulsa.

    Samson was part a waive of oil and gas companies that declared bankruptcy in the wake of plunging oil prices in 2015. KKR & Co. had taken Samson private for $7.2 billion in 2011.

    http://fuelfix.com/blog/2017/03/01/samson-resources-emerges-from-bankruptcy/
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    Tellurian’s Driftwood LNG granted FTA export permit


    Tellurian said its Driftwood LNG project received the permit from the United States Department of Energy to export liquefied natural gas to free trade agreement nations.

    The company has also applied for a non-FTA export permit and expects to file its application to the Federal Energy Regulatory Commission (FERC) application later this quarter.

    Tellurian was formed in February 2016, by Charif Souki, former founder and CEO of LNG export player Cheniere Energy and Martin Houston, former COO of BG Group, now owned by Shell.

    At the beginning of February, Tellurian Investments merged with Magellan Petroleum, an independent oil and gas exploration and production company, under a name Tellurian.

    The company proposed to build a 26 million tons per year LNG export facility near Lake Charles, Louisiana in the US Gulf Coast.

    Tellurian expects to begin construction of Driftwood LNG in 2018 and deliver first LNG in 2022, with full operations in 2025.

    http://www.lngworldnews.com/tellurians-driftwood-lng-granted-fta-export-permit/

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    Alternative Energy

    Glencore in pole position to benefit from growing cobalt demand


    Heightened ownership of the Mutanda and Katanga mines in the Democratic Republic of Congo (DRC) puts cobalt in a strong potential earnings position for Glencore, the world’s dominant supplier of the metal that is attracting attention because of its growing use in electric vehicles (EVs).

    In an equity research document on Glencore, Barclays mining analysts Ian Rossouw, Amos Fletcher and James Hutchison point out that the cobalt price has already risen by 50% in the year to date to $22/lb and suggest much scope for it to rise further owing to its increasing use in lithium ion batteries for EVs, laptops, personal computers, smartphones, polyester and tyres.

    Glencore CEO Ivan Glasenberg singled out cobalt as having strong potential during a media conference last week, following the presentation of an excellent set of results by the London-, Hong Kong- and Johannesburg-listed company.

    He made the point that while demand for cobalt is growing, no new copper mines are coming on board that have the cobalt byproducts.

    It is a market of 100 000 t with 50 000 t produced in the DRC.

    Barclays analysts note that Glencore currently produces 32 000 t of cobalt a year, up from 28 000 t in 2016.

    They see cobalt production from Glencore potentially rising to the 50 000 t to 60 000 t level once Katanga is at full production.

    Right now, cobalt accounts for $1.5-billion of the company’s revenue at the spot price, with every 10% price rise adding $150-million to its earnings.

    The cobalt market is expected to remain in deficit for the foreseeable future.

    Before his death just over a year ago, veteran metals research commentator Dr RE (Robbie) Robinson told MiningWeekly Online in a video interview that South African mines could recover more cobalt if they changed their blasting methods in hard-rock narrow-reef gold and platinum mines.

    He urged at the time that, with the world suddenly taking new cognisance of cobalt because of its use in electric cars and microchips, hard-rock, narrow-reef miners should wasteno time in moving to selected blast mining (SBM), which he said also facilitated mine mechanisation in confined stopes that would simultaneously boost overall precious metal recoveries significantly.

    “If you can selectively separate the reef part of the underground ore reserve and throw the waste rock aside, the cobalt concentration, once that ore reaches the surface, is very much higher and becomes easier to recover,” Robinsontold Mining Weekly Online at the time.

    “If you adopt a zero waste, nontoxic philosophy on wasteresidues, it’s easy enough to recover all that cobalt, while also recovering uranium and quite a number of other elements that have potential value.

    “We should be doing this, and it should be started just as soon as we possibly can,” the one-time National Institute for Metallurgy, now Mintek, director advocated.

    With American companies focusing special research into cobalt recovery as a strategic metal, Robinson urged South African mining companies to do better with its squandered cobalt endowment.

    US company Applied Materials, a provider of equipment, services and software used for manufacturingsemiconductors, sees cobalt as a superior metalencapsulation film, the first important change in materials for microchip wiring in 15 years.

    The US technical media wrote of the change that the news was in the word "cobalt" and in the word "wiring", with the headline of another article proclaiming that, “cobalt is the key to future chips”.

    By adopting the hydrometallurgical approach to platinumprocessing, cobalt is said to be recoverable as a high-purity cobalt metal.

    Every narrow-reef gold mine has some cobalt in it, but it ends up as one of the toxic elements in acid mine drainage (AMD), which is currently also seldom out of the headlines.

    Currently, South Africa’s approach to dealing with AMD is to precipitate it with lime and to put it on a waste dump and as the waste dump gradually weathers and leaches away, the toxic cobalt gets into the streams.

    Robinson contended that this need not be so because there processes are available that, in a relatively easy way, can recover that cobalt and produce it as a cobalt oxide, which can be dissolved, electrolysed and made into metal.

    Cobalt arises primarily from the Zambian/DRC copperbelt and as a by-product of the Bushveld platinum mines in South Africa.

    The Chamber of Mines of South Africa says on its website that cobalt is found as a minor element in the base-metal sulphides of the Merensky reef of the Bushveld Igneous Complex (BIC), from which platinum-group metals are extracted, and also in a number of the BICs chromite layers – but makes no mention at all of its presence in gold-bearingreef.

    Also used in many other diverse industrial and military applications, the US remains the world’s largest consumer of cobalt, but does not mine cobalt, apart from negligible quantities of by-product cobalt produced as intermediate products from some mining operations.

    Other countries, including Australia, have woken to the cobalt opportunity, with a study into ASX-listed Broken Hill Prospecting’s New South Wales cobalt deposits pinpointing a new commercial opportunity that could deliver revenues of up to A$381.5-million a year, over a 20-year period.

    In South Africa, it was Robinson’s contention that SBM could be satisfactorily carried out using shock tubes and delayed detonators and had the potential to resuscitate areas where gold mining has ceased.

    http://www.miningweekly.com/article/glencore-in-pole-position-to-benefit-from-growing-cobalt-demand-2017-03-01

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    EU regulators to approve Siemens, Gamesa wind deal - sources


    EU antitrust regulators are set to approve a plan by German engineering company Siemens (SIEGn.DE) and Spain's Gamesa (GAM.MC) to create the world's biggest wind turbine maker, two people familiar with the matter said on Thursday.

    The European Commission had not asked for concessions, the people said.

    The deal will combine Siemens' strength in offshore windpower and Gamesa's strong presence in emerging markets. The wind industry has seen a wave of consolidation in recent months as companies seek to rein in costs and remain competitive.

    http://www.reuters.com/article/us-gamesa-m-a-siemens-eu-idUSKBN1691H3
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    Precious Metals

    Jubilee gets go-ahead for Tjate project


    Dual-listed Jubilee Platinum has been awarded a mining right for its 63%-owned, 22.3-million-ounce Tjate platinum-group metals project, in the eastern limb of the Bushveld complex.

    Describing it as a significant milestone for the company, CEO Leon Coetzer noted that the mining right confirmed the potential value of the project. “The timing of the mining right coincides with the continued global recovery supporting the anticipated improvement in the platinum markets,” he said.

    The company is now also required to issue 4.96-million ordinary shares at 1p apiece to its black economic-empowered shareholder New Plats, as part of an agreement signed in 2009.

    http://www.miningweekly.com/article/jubilee-gets-go-ahead-for-tjate-project-2017-03-02
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    Base Metals

    Aurubis to expand from copper into other non-ferrous metals


    Aurubis AG, Europe's biggest copper smelter, plans to expand into production of other non-ferrous metals, new CEO Juergen Schachler said on Thursday.

    He did not name specific metals, but told the group's annual shareholders' meeting that Aurubis should become a "multi metals producer."

    He also said the group's new corporate strategy, dubbed Vision 2025, could involve buying suitable non-ferrous metal production companies. But the strategy will not include an expansion into mining, said Schachler, who took over in July 2016.

    Aurubis' last acquisition was in 2011 when it took over the rolled copper operations of the Luvata group.

    Aurubis should concentrate on its core expertise of metal production, metal recycling and metal product production, Schachler said in a speech to shareholders.

    The group is already involved in gold, silver, nickel and selenium production and these sectors could also be built up, said Schachler. Traces of such metals are contained in copper concentrates (ore) and scrap.

    "We can and will expand this in the framework of our metallurgy expertise," Schachler told shareholders. "We will take a more consistent route away from copper towards becoming a multi metals producer and we will establish ourselves a wider basis."

    He said the group would seek both "internal and external growth," which "can include the expansion of existing capacity or also acquisitions, when these in terms of content and geography make sense and fit."

    But it made "no sense" to become a mining company, he said. "This is not part of our metallurgical expertise and we will not do this," he said.

    The group would concentrate on metal smelting and product output. He gave no indication of which geographical areas could be assessed for expansion.

    Alongside major copper smelters in Hamburg and Luenen in Germany, Aurubis also has copper and copper product activities including in Bulgaria, Belgium, Italy, the Netherlands, Finland, and the United States.

    http://www.reuters.com/article/aurubis-strategy-idUSL5N1GF2UW
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    Philippines may consider ban on exports of unprocessed minerals - official


    The Philippines may consider banning exports of unprocessed minerals in an effort to promote value addition in the mining sector, a senior environment official said on Friday.

    The Philippines is the world's top nickel ore supplier, shipping nearly all of its output to China. Previous governments have supported calls to spur domestic processing of raw minerals but earlier efforts in Congress to enact appropriate laws have failed to take off.

    "It's one of the things we're considering for any mine that we think should remain operating," Environment and Natural Resources Undersecretary Maria Paz Luna told reporters. "In the long term that will help our economy because that will increase the value of the products."

    "It is one of the options that has to be considered not only by the DENR (Department of Environment and Natural Resources) but by the entire government," she said.

    Luna spoke after a meeting with other officials of the government's Mining Industry Coordinating Council tasked to conduct a second review of 28 mines ordered closed or suspended by the environment ministry.

    The Philippines became the world's top nickel ore exporter after Indonesia banned exports of unprocessed ore in 2014.

    Congressman Erlpe John Amante in August revived his proposal to ban ore exports after three to five years and force miners to invest in local processing plants.

    The Southeast Asian nation has four mineral processing plants, two for gold and two for nickel.

    The second review will initially cover 23 mines ordered shut by the environment ministry to protect watersheds and another five that were suspended.

    Finance Secretary Carlos Dominguez said the three-month review, announced in February, would continue even if the appointment of Environment Secretary Regina Lopez who ordered the mine closures is not confirmed by Congress.

    http://www.reuters.com/article/philippines-mining-ban-idUSL3N1GG1Z4
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    Steel, Iron Ore and Coal

    Lu'an Group cuts washed coal prices in March


    Effective March 1, Changzhi-based Lu'an Group, a major coking coal producer in Shanxi, cut prices for rail-delivered washed coal by 60 yuan/t ($8.7/t) and offered discounts for large-volume buyers, market sources confirmed.

    The group is now offering washed coal from Zhangcun mine at 980 yuan/t to buyers with purchase volume above 10,000 tonnes and 970 yuan/t to buyers with purchase volume above 20,000 tonnes, free-on-rail basis with VAT.

    If offered coal from Gaohe and Wangzhuang mines at 1,000 yuan/t and material from Sima mine at 1,070 yuan/t, free-on-rail basis with VAT.

    The decline was largely due to strong bargaining from coke makers, who were facing losses amid falling coke prices.

    But most Shanxi miners were optimistic about the coking coal market, as demand from steel and coke market may rebound after the parliamentary sessions in mid- or late March.

    http://www.sxcoal.com/news/4552900/info/en
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    Yancoal fresh loss casts doubts on planned acquisition of Rio’s mines


    Yancoal Australia, the subsidiary of China’s Yanzhou Coal Mining that is trying to buy Rio Tinto’s thermal coal assets in Australia’s Hunter Valley, has posted another annual loss this week, reporting net debt of almost $3.7 billion (A$4.8bn).

    Industry observers believe Yancoal may hit a snag when trying to complete a $2bn equity issue to finance the acquisition of Rio’s mines.

    The loss came despite thermal coal prices climbed 130% between February and October last year, and even though Yancoal received an $84.7 million income tax benefit.

    Such tax credit helped a $311.8 million loss before tax trim down to $227.1 million.

    The company, which has not reported a profit since the 2012 calendar year, is said to be waiting for approval from the Foreign Investment Review Board to formally launch a $2 billion equity issue that would allow it to finance the agreed purchase of Rio’s mines.

    “Renewed global demand buoyed by improved coal prices will continue to strengthen Yancoal’s performance, as we pursue our future growth initiatives and strategic acquisitions in the best interest of our shareholders,” Yancoal chief executive Reinhold Schmidt said in a statement.

    But according to The Australian, the company — which already operates nine mines employing about 2,000 people across the country — may hit a snag when trying to complete the raising:

    “While most Chinese-backed acquisitions in Australia have been bankrolled out of China, Yancoal enters the Coal & Allied deal already carrying a heavy debt burden from prior acquisitions.

    “Raising money for the deal from Australian and other investors will significantly increase the free float in Yancoal, which is thinly traded on the ASX, while also placating Chinese authorities that are cracking down on extending funding to big acquisitions outside China."

    Should the deal fall apart, Yancoal will be able to walk away from it without a severe financial penalty, as Rio Tinto set the termination fee at just $23.5 million.

    http://www.mining.com/yancoal-fresh-loss-casts-doubts-on-planned-acquisition-of-rios-mines/
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    Coal India set to end fiscal with Rs 6,000 crore


    Five profit-making subsidiaries of Coal India will hand over about Rs 6,000 crore to their parent company through a mix of share buybacks and dividends by the end of March, the Economic Times reported, citing a senior Coal India executive.

    This is the first time Central Coalfields, South Eastern Coalfields, Western Coalfields, Mahanadi Coalfields and Northern Coalfields will be purchasing their own shares.

    For the third quarter of 2016-17, Coal India declared a net loss of Rs 39 crore on a standalone basis, mainly because its subsidiaries had not paid any dividend to the company and it had to pay Rs 3,650 crore for buying back its own shares from the government and other shareholders.

    "Once the share buybacks are executed and dividend paid, the coal monopoly will bounce back into black and be in a position of announce dividends for its shareholders too," the executive, who did not wish to be named, said.

    As part of the government's directive, the board of South Eastern Coalfields on February 27 decided to buy back 4.18% of its shares numbering 1.5 lakh of face value Rs 1,000 each from its parent, at Rs 79,777 per share, totalling Rs 1,200 crore.

    Last week, the board of Northern Coalfields, had decided to hand over Coal India Rs 1,244 crore through a 4.3% buyback program. Northern Coalfields would be buying back about 75,000 shares of face value Rs 1,000 at Rs1.63 lakh per share, another Coal India executive added.

    http://www.sxcoal.com/news/4552923/info/en
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    Hebei to shut 9.41 Mtpa coal capacity in 2017


    Hebei province, a leading coal producing base in northern China, planned to close 13 coal mines in 2017, slashing 9.41 million tonnes per annum (Mtpa) of coal production capacity, said the provincial Development and Reform Commission in a notice released on March 2.

    Chengde city will shut 0.15 Mtpa of coal capacity this year by closing one mine; Zhangjiakou city will shut seven coal mines, slashing 1.78 Mtpa of capacity; Tangshan city is expected to close two coal mines, cutting 1.5 Mtpa of capacity.

    Xingtai will close three mines this year, reducing 4.23 Mtpa of capacity, while Handan will shut two coal mines, cutting 1.75 Mtpa of capacity.

    The province will strive to reduce 75.63 Mtpa of surplus coal capacity by closing 141 coal mines over 2016-2020. By 2020, the number of its coal mines is expected to be 60 or less, with coal capacity at 50 Mtpa or so.

    http://www.sxcoal.com/news/4552936/info/en
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    Back from the dead? Chinese iron ore miners plot return as prices surge


    Rocketing iron ore prices may prompt Chinese producers to reopen mines shuttered years ago in a sector downturn, potentially tightening the market for marginal foreign suppliers to the world's biggest importing country, industry executives say.

    A revival could help Chinese steel mills cut raw material import costs, boosting margins amid rising steel prices. If more domestic ore is produced, mills could also use that as leverage to push for better deals on seaborne imports from top suppliers like Vale, Rio Tinto and BHP Billiton , traders say.

    A booming Chinese steel market pushed iron ore .IO62-CNO=MB to $94.86 a tonne last month, its strongest since August 2014. With Beijing expected to boost infrastructure spending, the raw material looks set to rally further, making domestic production more viable.

    "Quite a few Chinese iron ore miners are planning to come back and reopen their mines," said Pan Guocheng, head of medium-sized miner China Hanking Holdings Ltd. While low prices led to closure of more than a third of China's iron ore capacity since 2013, Pan expects nearly half of those mines to restart - if the price stays above $80 for another six months.

    Hanking is now considering restarting one of three mines it closed when times were leaner. "If the price will stay high," said Pan, "we are going to seriously re-evaluate if that mine should be reopened."

    A wave of mine reopenings won't present any immediate threat to Vale, Rio Tinto and BHP Billiton, giants that supply top-grade material that's an essential element of the input mix used in steel mill blast furnaces.

    What's more, Beijing's tighter environmental rules could make life difficult for returning mines, analysts have warned.

    BARGAINING CHIP

    Raw Chinese iron ore only has iron content of about 20 percent, compared to more than 60 percent mined by Vale, Rio and BHP. But processed Chinese ore can go up to 66 percent.

    Some mills prefer to use the best grades of Chinese iron ore they can find, rather than lower grade material from overseas.

    "We are looking to get more local iron ore but we cannot find a lot of it now,"
    said an official from a steel mill in southeastern China, speaking on condition of anonymity because he was not authorised to speak to media. "I think they're just preparing to restart."

    Hanking's Pan said China's best grade ores are competitive with lower grade material from Australia, like those shipped by Fortescue Metals Group.

    But inland Chinese mills buy Fortescue's ore to blend with domestic high-grade ore, Fortescue Chief Executive Nev Power said. "Demand...remains strong and we are making very strong margins at the prevailing market price," Power told Reuters by email.

    Nonetheless, traders are betting that if more domestic high-grade iron ore is produced, Chinese mills could use it as bargaining chip with foreign suppliers.

    "Mills may use it as leverage - if imported price is too high they will shift to domestic ore," said one Shanghai-based trader who declined to be identified.

    http://www.reuters.com/article/china-ironore-idUSL3N1GC1AD

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