Mark Latham Commodity Equity Intelligence Service

Tuesday 28th July 2015
Background Stories on

News and Views:

Attached Files

    Oil and Gas

    Libya Crude Output Drops as Conflict Cuts Power at Oil Fields

    Libya’s crude production dropped below 400,000 barrels a day as the conflict in the divided North African country cut electricity supply at oil fields, according to the state-run National Oil Corp.

    Output in Libya, holder of Africa’s largest crude reserves, has been hampered by a lack of security and maintenance as well as power outages, Mohamed Elharari, an NOC spokesman, said Monday by phone from Tripoli. Crude production was about 411,000 barrels a day in June, according to the most recent OPEC monthly report.

    “The situation is not very good,” Elharari said. “There is poor maintenance, and there are electricity cuts at the oil fields.”

    Libya produced about 1.6 million barrels a day before the 2011 rebellion that ended Muammar Qaddafi’s 42-year rule. The country is today the smallest producer in the Organization of Petroleum Exporting Countries. It has failed to restore output as militias fight for the control of export terminals while tribes and workers block operations at fields and pipelines to seek jobs and better pay.

    The country has been divided since last year between an internationally recognized government that operates from the east and an administration that rules over the capital Tripoli and most of the western region. Es Sider and Ras Lanuf, the nation’s largest and third-largest oil ports, have been shut down since December following attacks by militias loyal to the Tripoli government.

    “There is no change to the situation at the ports,” Elharari said. “We are trying to re-open them, but so far there is no progress.”

    Libya’s challenges in boosting crude production coincide with a global excess in supply over demand for the past five quarters, the most enduring oil glut since the 1997 Asian economic crisis, according to the International Energy Agency.
    Back to Top

    Conoco sells condensate to Trafigura

    ConocoPhillips Said to Sell Bayu-Undan Condensate to Trafigura
    2015-07-28 06:46:26.44 GMT

    By Serene Cheong
         (Bloomberg) -- U.S. co. sells 650kb of Bayu-Undan
    condensate for 1H Sept. loading at ~$1.50-$2/bbl discount to
    Dated Brent, say 3 people who trade the grade.

      * Trafigura has started mktg cargo, said to be the only spot
        shipment of Sept.-loading Bayu-Undan scheduled this mo.

    Back to Top

    Zeebrugge terminal to re-export LNG cargo

    The 155,000 cbm Seishu Maru LNG carrier is scheduled to arrive at Belgium’s Zeebrugge terminal from Sagunto in Spain on August 1, port data reveals.

    The liquefied natural gas carrier will load a cargo of previously imported LNG and depart from Zeebrugge to the Jurong terminal in Singapore on August 2, according to the data.

    It is expected to arrive at Singapore’s first LNG terminal on August 28.
    Back to Top

    BP profits slide, below expectations

    BP's profits have fallen by 50 per cent year on year in the second quarter, undershooting analysts' expectations.

    The UK-based oil major said 'underlying replacement cost profits' - the earnings measure preferred in the industry which strips out one-time items- fell to £1.31bn in the three months to June, down from £2.6bn in the same period last year. Analysts had forecast underlying replacement cost profit of $1.6bn.

    BP cut capital expenditure to $4.7bn in the second quarter, down from $5.4bn in the same period last year.

    The oil major made a loss of $5.8bn during the period, down from a profit of £3.4bn in the second quarter of last year - however this includes the huge Gulf of Mexico payout costs.

    BP's update on the second-quarter showed the oil major had taken a $9.8bn charge following the $18.7bn settlement it reached earlier this month with the US government over the 2010 Gulf of Mexico oil spill.

    Like the rest of the energy industry, BP is grappling with a much weaker crude price than a year ago. Brent crude, the global oil benchmark, averaged just over $108 in the second quarter of last year. That average tumbled to $59 in the second quarter of this year.

    The price of Brent crude has fallen 20 per cent since early May.

    BP shares have fallen 5.7 per cent this year, underperforming the FTSE 100 but faring better than UK-listed rival Royal Dutch Shell. BP's shares have fallen 20 per cent since a mid-April peak.
    Back to Top

    Statoil Second-Quarter Profit Beats Estimates as Output Rises

    Statoil ASA, Norway’s biggest oil and gas producer, said adjusted earnings after tax fell 27 percent in the second quarter following a plunge in crude prices.

    Net income excluding financial and other items fell to 7.2 billion kroner ($882 million) from 9.9 billion kroner a year earlier, the Stavanger-based company said Tuesday. Profit beat the average 5.5 billion-krone estimate in a Bloomberg survey of 20 analysts.

    “Statoil delivered encouraging operational performance with good production growth and high regularity, whilst continuing to reduce cost,” Statoil’s Chief Executive Officer Eldar Saetre said in a statement. “Our financial results were characterized by gains from divestments and lower prices.”

    Statoil and competitors such as Royal Dutch Shell Plc and Total SA are cutting investments and operational costs after oil prices fell by about 50 percent over the last 12 months. Statoil, which operates more than 70 percent of Norway’s oil and gas production, said earlier this year it will reduce spending by 10 percent in 2015 and cut thousands of jobs in the three years through 2016.

    The company, of which the Norwegian state owns a 67 percent stake, will pay 1.8 kroner a share in dividends for the quarter, after saying in February it would maintain payouts at that level in the year’s first three quarters despite lower oil prices. The company has been raising debt and selling assets to afford dividends and investments over the past years.

    Output in the quarter rose 4 percent to 1.87 million barrels of oil equivalent a day from a year earlier, the company said.
    Back to Top

    Shale gas well discovered in Henan

    A shale gas well has been discovered for the first time at a farmland undergoing urban development in the city of Kaifeng, Henan Province, a breakthrough in shale gas detection.

    The Mouye No.1 well was discovered in a farmland in Xiangfu district in Kaifeng, with a reserve of 12.7 billion cubic meters, the provincial land resources department told the Xinhua News Agency on Sunday.

    Xinhua quoted experts as saying that detecting shale gas resources in city planning areas is of great importance for developing and exploiting future energy resources for cities.

    However, Lin Boqiang, director of the Center for Energy Economics Research at Xiamen University, told the Global Times that it will be more difficult to exploit shale gas wells near populated areas because of the pollution and noise caused by such explorations.
    Back to Top

    Mexico Gas imports surging

    Image title
    Back to Top

    Is US oil production surging again??

    Image title
    WTI makes new lows.

    Image title
    Brent is nowhere near new lows.

    Attached Files
    Back to Top

    North Dakota crude breakeven prices as low as $24/b: state agency

    US crude prices would still need to drop significantly before falling below breakeven prices in North Dakota's four most prolific counties, according to data released by the state Department of Mineral Resources Monday.

    Breakeven prices for rigs in North Dakota's Dunn, McKenzie, Mountrail and Williams counties range from $24/b in Dunn to $41/b in Mountrail, according to the data.

    Those four counties accounted for 63 of the state's 68 oil rigs on Monday, according to the data.

    The breakeven prices ranged from $28/b to $42/b in the four counties when the DMR published its last such data in October 2014.

    At the same time, breakeven prices have fallen dramatically in counties with far less drilling activity, the data shows. The breakeven price is $62/b in Divide County, which has three working rigs. Previously, the breakeven price in Divide was seen to be $85/b, when the county had eight working rigs. McLean County saw its breakeven price fall to $25/b from $73/b, although there are no longer any working rigs there, according to the data.

    The drop in breakeven prices comes as North Dakota's crude production has grown as rig counts and prices have dropped. Earlier in July, the state's oil and gas regulator reported that crude production topped 1.2 million b/d in May, compared with April production of less than 1.17 million b/d and just shy of the all-time record of 1.23 million b/d, set in December 2014.

    This production boost, aided by improved drilling technology and increased efficiencies, came as the statewide rig count in May fell to 83. The all-time of 218 was posted in May 2012.
    Back to Top

    Atlas Resource Partners Reaffirms $750 Million Borrowing Base

    Atlas Resource Partners, L.P. announces that its syndicated lending group has reaffirmed the borrowing base of $750 million on ARP's senior secured revolving credit facility.

    Atlas Resource Partners, L.P. is an exploration & production master limited partnership which owns an interest in over 14,500 producing natural gas and oil wells, located primarily in Appalachia, the Barnett Shale (TX), the Mississippi Lime (OK), the Eagle Ford Shale (TX), the Raton Basin (NM), Black Warrior Basin (AL) and the Rangely Field (CO).  ARP is also the largest sponsor of natural gas and oil investment partnerships in the U.S.

    Atlas Energy Group, LLC (ATLS) is a master limited partnership which owns the following interests: all of the general partner interest, incentive distribution rights and an approximate 26% limited partner interest in its upstream oil & gas subsidiary, Atlas Resource Partners, L.P.; the general partner interests, incentive distribution rights and limited partner interests in its private E&P development subsidiary; and a general partner interest in Lightfoot Capital Partners, an entity that invests directly in energy-related businesses and assets.
    Back to Top

    Southwestern Energy Announces Second Quarter 2015 Results

    Southwestern Energy Company today announced its financial and operating results for the quarter ended June 30, 2015. Second quarter highlights include:

    Record production of 245 Bcfe, including 2 Bcfe associated with the East Texas and Arkoma assets that were divested during the second quarter;
    Total Appalachia net production of 122 Bcfe, comprised of 87 Bcf from Northeast Appalachia (a 43% increase compared to year-ago levels) and 35 Bcfe from Southwest Appalachia;
    Increased 2015 production guidance to 973 Bcfe to 982 Bcfe, including 6 Bcfe associated with the asset divestiture noted above, while decreasing 2015 capital expenditures guidance to $1.875 billion;
    Expanded firm transportation and sales portfolio in Southwest Appalachia, bringing long-term takeaway capacity to approximately 800 million cubic feet per day and additional firm sales enabling robust growth in 2016 and 2017;
    Early well results in Southwest Appalachia significantly outperforming offset wells;
    Favorable results from test wells in unproven acreage of Northeast Appalachia;
    Adjusted net loss attributable to common stock (a non-GAAP measure reconciled below) of $9 million, or $0.02 per diluted share when excluding a non-cash ceiling test impairment of natural gas and oil properties and certain other items; and
    Net cash provided by operating activities before changes in operating assets and liabilities (a non-GAAP measure reconciled below) of approximately $339 million.

    "The second quarter presented challenges to the energy industry, but just as we have done historically, Southwestern Energy delivered another strong quarter," remarked Steve Mueller, Chairman and Chief Executive Officer of Southwestern Energy. "We have increased guidance on our already record production levels, reduced our 2015 capital investments, added new economic locations and after only seven months, are operationally performing alongside the best in our industry in our newest acquisition in southwest Appalachia.  Our low cost structure and our unique portfolio continues to demonstrate our ability to thrive in an environment where many in the industry are focusing on how to survive. The operational momentum that we have built in 2015 is setting up an enduring future of delivering significant returns for our shareholders."

    Attached Files
    Back to Top

    EXCO Resources, Inc. Reports Second Quarter 2015 Results

    2015 Second Quarter Highlights

    -Drilled 9 gross (4.4 net) and turned-to-sales 22 gross (5.7 net) operated horizontal wells in the second quarter 2015, consistent with the capital budget.
    -Produced 361 Mmcfe per day, or 33 Bcfe, for the second quarter 2015, which exceeded the midpoint of guidance. Production increased 22 Mmcfe per day from the first quarter 2015.
    -Adjusted EBITDA, a non-GAAP measure, was $69 million for the second quarter 2015, 19% above adjusted EBITDA for the first quarter 2015, primarily due to higher production as well as lower operating and general and administrative costs.
    -Cost saving initiatives resulted in general and administrative costs and gathering and transportation costs that were 7% and 6%, respectively, below the low-end of guidance, as well as operating costs within guidance. Reduced drilling and completion costs through negotiations with key vendors.
    -Enhanced completion design in East Texas Shelby area yielded strong results as evidenced by a 15% increase in estimated ultimate recoveries ("EUR") for undeveloped Haynesville shale locations to 1.5 Bcf per 1,000 lateral feet. The Company believes further upside is achievable based on certain of its proved developed producing wells in this area with EURs of 1.75 Bcf per 1,000 lateral feet.
    -Adjusted net income (loss), a non-GAAP measure, was a net loss of $12 million, or $0.05 per diluted share, and GAAP net income (loss) was a net loss of $454 million, or $1.67 per diluted share, for the second quarter 2015. The GAAP net loss was primarily due to the $394 million impairment of the Company’s oil and natural gas properties pursuant to the ceiling test in accordance with full cost accounting.
    -Pro forma liquidity was $368 million as of the end of the second quarter 2015, after giving effect to the amendment to the Company's credit agreement that is anticipated to close this week. EXCO is evaluating transactions that would enhance its liquidity and provide additional financial flexibility.

    EXCO Resources reported second quarter 2015 loss per share of 5 cents, which compared favorably with the Zacks Consensus Estimate of a loss of 8 cents per share.

    Revenue: Revenues of $94 million came substantially below the year-ago quarter level of $183 million.
    Back to Top

    Gulfport Provides Second Quarter 2015 Operational Update

    Net production averaged 473.9 MMcfe per day for the quarter, exceeding the Company's previously estimated guidance of approximately 445 MMcfe per day to 455 MMcfe per day.
    Realized natural gas price before the impact of derivatives and including transportation costs averaged $2.23 per Mcf, a $0.41 per Mcf differential to NYMEX during the quarter.
    Realized oil price before the impact of derivatives and including transportation costs averaged $50.15 per barrel, a $7.81 per barrel differential to WTI oil price during the quarter.
    Realized natural gas liquids price, including transportation costs, averaged $12.71 per barrel, or $0.30 per gallon, approximately 22% of the average WTI oil price during the quarter.

    Gulfport's second quarter of 2015 Utica Shale production was 457.6 MMcfe per day, or 97% of our aggregate net production, as compared to 93% and 79% of our aggregate production during the first quarter of 2015 and the second quarter of 2014, respectively. During the second quarter of 2015, in the Utica Shale Gulfport spud nine gross (6.7 net) wells and turned-to-sales 19 gross (14.5 net) wells, all located within the dry gas phase window of the play. As of June 30, 2015, Gulfport had approximately 137 gross (103.8 net) wells producing in the Utica Shale.

    Gulfport's realized prices for the second quarter of 2015 were $1.99 per Mcf of natural gas, $0.30 per gallon of NGL and $47.40 per barrel of oil, resulting in a total equivalent price of $2.60 per Mcfe. Gulfport's realized prices for the second quarter of 2015 include an aggregate non-cash unrealized hedge loss of $34.6 million. Before the impact of derivatives, realized prices for the second quarter of 2015, including transportation costs, were $2.23 per Mcf of natural gas, $0.30 per gallon of NGL and $50.15 per barrel of oil, for a total equivalent price of $2.84 per Mcfe.

    Attached Files
    Back to Top

    Goodrich Petroleum sells Eagle Ford Shale assets

    Goodrich Petroleum Corporation today announced that it has entered into a definitive agreement to sell its proved reserves and associated leasehold in the Eagle Ford Shale in LaSalle andFrio Counties, Texas for $118 million, subject to purchase price adjustments as provided for in the Purchase and Sale Agreement. The Company is retaining approximately fifty-eight percent (~ 17,000 net acres) of its undeveloped leasehold in the play for future development or sale. The asset being sold produced an average of approximately 2,850 barrels of oil equivalent ("Boe") per day (~75% oil) during the first quarter of 2015.

    The Company expects to book a gain of approximately $50-60 million on the sale at closing after factoring in customary closing adjustments. The Company plans to pay off its bank revolver and retain the difference in cash from the sales proceeds.

    Regarding the sale, the Company's President Robert Turnham stated, "The monetization of our proved reserves and associated acreage from our drilling efforts to date greatly improves our liquidity while maintaining a position in the Eagle Ford for future development or sale. Acreage retention was an important aspect of this transaction for us as it allows for additional future value creation from the asset in what we believe will be an improved oil price environment. The ability to pay off our bank debt and book the difference in cash in this difficult commodity cycle is an obvious benefit of the transaction as well. We continue to drive our well costs lower yet will remain conservative with our activity level, as we reiterate our full year capital expenditure budget of approximately $100 million, with sharply reduced capital expenditures in the last three quarters of the year."
    Back to Top

    Alternative Energy

    Kenya to build $2.2bn of solar projects

    Kenya to build $2.2bn of solar projects

    Solar projects worth $2.2 billion (£1.4bn) are to be built in Kenya.

    Energy company SkyPower, which is investing the cash, will develop and build the projects in four phases across the country over the next five years.

    They will have a total capacity of 1GW and more than 25,000 jobs are expected to be created.

    The agreement was signed between the company and the Kenyan Ministry of Energy and Petroleum.

    Cabinet Secretary Henry Rotich said: “Sustainable electrification is a central policy issue in Kenya and we are committed to making this a reality for our citizens while accelerating economic growth in the process.”
    Back to Top

    SunPower Acquisition of 1.5-GW of U.S. Solar Power Plant Assets

    SunPower has acquired 1.5 gigawatts of U.S. solar power plant development assets from Australia-based Infigen Energy. With the acquisition, SunPower has assumed ownership of projects in varying stages of development across 11 states.

    Included in the development portfolio are three projects totaling 55 megawatts (AC) with power purchase agreements with Southern California Edison. All three are located in Kern County, Calif. SunPower expects to start construction on these projects later this year with commercial operation anticipated in 2016.

    "The magnitude of this acquisition speaks to SunPower's financial strength as well as our expertise and leadership in global power plant development," said Tom Werner, SunPower CEO and president. "It provides an expanded and geographically diverse portfolio of solar projects in the U.S. that may all be generating cost-effective, emission-free power by the end of this decade."

    "SunPower brings significant experience and proven technology to ultimately transform these development assets into high-performing solar power plant projects, designed to reliably deliver value over the long term," said David Smith, CEO of Infigen Energy US. "Infigen is pleased to have completed this transaction with SunPower."

    SunPower expects to offer some of the acquired projects for sale to 8point3 Energy Partners LP (Nasdaq: CAFD), the YieldCo joint venture formed by SunPower and First Solar.

    "We expect this acquisition to deliver additional value to our shareholders through long-term power purchase agreements with leading energy buyers, while providing further growth opportunities for SunPower," continued Werner.
    Back to Top

    Offshore wind power gets foothold in US with Rhode Island project

    Rhode Island's Deepwater Wind began installing the foundations for North America's first offshore wind farm on Monday, a milestone the company says could pave the way for an industry long established in Europe but still struggling with opposition in the United States.

    The 30-megawatt wind farm, which will include five turbines located three miles (4.8 km) off the coast of the bucolic summer tourist destination of Block Island, will take more than a year to build and is scheduled to produce electricity for the tiny island community and the mainland by the end of next year.

    "Our belief is once Block Island is up and running, it will bring offshore wind from theory to reality in the United States and open up opportunities to build larger projects," said Jeffrey Grybowski, Deepwater Wind's CEO.

    A rival project, Cape Wind's proposed 130-turbine wind farm off Nantucket Sound, for example, was for years expected to be America's first such project but stalled in part due to a lack of local support. Other offshore wind projects are in limbo off Delaware, New Jersey and New York.

    Deepwater's project fits a different mold, according to Grybowski and the project's backers, French bank Societe Generale and Ohio-based Key Bank: It was relatively small and therefore easier to finance and is set in a location that has substantial built-in government and local support.

    "Rhode Island was very forward-thinking and had designated a specific development area," said Alexander Krolick, Societe Generale's energy project finance director for the Americas. SocGen and Key Bank have provided about $300 million for the project, according to Deepwater, which is based in Providence.

    Block Island was chosen as a wind power site by the state in 2007 in part as a solution to the island's own energy woes: Its 1,000 residents have for years relied on costly diesel-fired generators for electricity. Once the wind farm starts up, prices will drop 40 percent, according to a study by the Block Island Utility Task Group.

    "We have some of the country's highest electricity prices," said David Kane, who retired to the island a few years ago. "This is going to help us a lot."

    About 90 percent of the wind farm's power will be shipped to Rhode Island's mainland via an undersea cable where utility National Grid will buy it for 26 cents/kwh and mix it into the rest of the state's supply, which generally ranges between 6 and 10 cents/kwh. Although it will account for only 1 percent of the state's power supply, the higher cost represents the industry's biggest challenge.
    Back to Top


    Holiday baking season boosts egg prices.

    Image title

    Chicago • U.S. egg prices, already at a record after an outbreak of avian influenza earlier this year, will rise even higher in the fall with the onset of the so-called holiday baking season, according to one supplier.

    While prices are stabilizing now, supplies of eggs won't recover until farms affected by bird flu come back online, which may take about 18 months, said Charles Lanktree, chief executive officer of Eggland's Best Inc.

    In November with colder temperatures, Americans will fire up their ovens to bake holiday fare such as Christmas cookies, weakening supplies and lifting prices again, he said Monday in a Bloomberg Television interview.

    Attached Files
    Back to Top

    Precious Metals

    The price of diamonds is collapsing

    Market prices for diamonds are in a long, slow, five-year decline and it's causing havoc for diamond producers.

    Petra Diamonds reported a 10% sales drop in the first half of the year to $425 million today, while luxury brand De Beers saw a 23% collapse in profits to $360 million last week.

    The diamond price is to blame, driven by falling demand in, you guessed it, China. Diamond prices have dropped about 12% over the last five years.

    Here's the Idex diamond benchmark over the last five years:


    De Beers, 85% owned by mining company Anglo-American, said that Chinese retailers hold more inventory than they first thought.

    They were hit by a slowdown in luxury spending in Hong Kong and Macau, which in turn has been blamed on the Chinese government's corruption crackdown.

    Read more:
    Back to Top

    First Majestic announces friendly acquisition of Silvercrest Mines

    First Majestic Silver Corp. and SilverCrest Mines Inc. are pleased to announce that the companies have entered into a definitive agreement pursuant to which First Majestic has agreed to acquire all of the issued and outstanding common shares of SilverCrest for consideration of 0.2769 of a common share of First Majestic plus C$0.0001 in cash per SilverCrest common share.

    The offer implies a value of C$1.30 per SilverCrest share based on the closing price of First Majestic's common shares on the Toronto Stock Exchange on July 24, 2015. The offer represents a premium of approximately 37% to SilverCrest's 30-day volume-weighted average price on the TSX for the period ending July 24, 2015 and a 35% premium to SilverCrest's previous closing price.

    The transaction will be implemented by way of a plan of arrangement (the "Arrangement") under the Business Corporations Act (British Columbia).

    In addition, shareholders of SilverCrest will receive shares in a newly formed company ("New SilverCrest") which will hold certain exploration assets currently held by SilverCrest and First Majestic.
    Back to Top

    Base Metals

    Indonesia, Freeport agree 6-month export permit extension

    Indonesia and Freeport-McMoRan reached a deal on Monday that will allow the U.S. mining giant to export up to 775,000 tonnes of copper over the next six months.

    The agreement is a relief for the Phoenix, Arizona-based company, which saw its stock sink last week due to uncertainty over its mining contract at the Indonesian mine in West Papua.

    “Freeport principally has fulfilled the requirements, so tomorrow the government can issue export approval for the next six months,” Coal and Minerals Director General Bambang Gatot told reporters.

    As part of the deal, the company agreed to deposit the last $20 million installment into an escrow account for the building of a second copper smelting facility.

    A Freeport official said the company expected copper shipments from one of the world’s largest copper mines to take place this weekend.

    The government may also lower Freeport’s export tax to 5 percent from 7.5 percent, as it progresses in building smelters in the Southeast Asian nation.

    The two sides also continue to negotiate terms of a contract or license that could extend to 2041.

    A current contract of work expires in 2021, but by law in Indonesia they cannot extend this contract until 2019 at the soonest.

    Contract certainty is crucial, Freeport has said, because it will spend $15 billion on an underground expansion at its Grasberg copper and gold mine, and must commit to a new smelter, estimated at $2 billion-$2.5 billion.
    Back to Top

    Does Teck have a problem?

    Image title
    Back to Top

    Glencore CDS surges too

    Image title
    Back to Top

    First Quantum says Zambia power cuts hit mining operations

    Canadian-based copper miner, First Quantum Minerals, said that power cuts imposed by Zambia's state-run electricity company have hit its mining operations in the north western province of the country.

    "Facilities at the Kansanshi mine, smelter and the Sentinel project are currently operating at reduced capacities while various options to alleviate the effect on production are being evaluated," it said in a statement released on Monday.

    First Quantum said it was unable to provide estimates on how long the power supply reduction would last or its impact on production.

    Zambia, Africa's No.2 copper producer, said earlier in July that it planned to cut power supplies to mines by up to 30 percent after water levels at its hydro-electric projects dropped due to drought, sources told Reuters.

    The country's power provider ZESCO has contracted independent power producers to procure more electricity by the end of 2015, First Quantum said.

    First Quantum's Zambian smelter, which ramped up in February, is expected to produce over 300,000 tonnes of copper metal from around 1.2 million tonnes of concentrate a year, when it reaches full operation.

    Other foreign companies running mines in the southern African nation include Glencore, Barrick Gold Corp and Vedanta Resources
    Back to Top

    Steel, Iron Ore and Coal

    EU tries again for compromise on deal to phase out coal aid

    EU bosses are pushing to resolve a clash between industry and environmental policy with a new strategy to phase out funding to export coal technology to developing nations, ahead of a meeting of leading economic powers on the issue.

    The European Commission, the EU executive, urges tougher rules on when subsidies, known as coal export credits, can be used in a paper seen by Reuters, ahead of interim talks this week.

    Political pressure is growing to reach agreement on restricting the coal subsidies before United Nations climate change talks in Paris at the end of the year. But opposition is also strong.

    Negotiations at the Paris-based Organisation for Economic Cooperation and Development (OECD) in June ended in statemate as Japan, the biggest user of export credits that help companies such as Toshiba Corp to sell coal plant and mining technology abroad, led resistance.

    Another OECD meeting on the issue is scheduled for September.

    Experts from EU member states will meanwhile meet in Brussels on Wednesday to debate their position to take to the OECD talks, EU sources said.

    An unpublished paper from the European Commission says the proposal from the chairman of the OECD export committee, which failed to produce a deal in June, was "in principle" balanced, but the EU should strengthen it.

    Changes could include shortening the time period to repay coal export credit preferential loans and reducing the number of countries that could benefit.

    The World Bank, for instance, says there is an argument for exporting coal technology to the very poorest countries that have no other fuel options, while the coal industry says export credits ensure cleaner, more efficient technology is used than would otherwise be the case.

    Environment campaigners disagree and want an early end to all fossil fuel subsidies, especially for coal.

    The European Union, which accounts for around two-thirds of the OECD grouping of major economies, could have a big impact on negotiations. Environment campaigners, however, have voiced concern it might fail to agree a stronger position.

    Despite EU aspirations to be at the helm of any U.N. deal on limiting global warming, some in European industry also oppose an abrupt end to coal export credits and say proposed requirements on carbon capture and storage (CCS) to neutralise emissions have to be realistic as the technology is still in its infancy.

    The Commission paper raises the possibility of allowing coal export credits for plants suitable for CCS, a step back from a previous suggestion they can only be permitted for plants with operational CCS.
    Back to Top

    China's coal output down 5.8% to 1.8 bln tons in H1

    China's coal output delivered a year on year drop of 5.8% to 1.79 billion tons in the first half of this year, according to figures released by the National Development and Reform Commission (NDRC).

    In the first half of this year, China's coal imports plunged 37.5% year on year to 99.87 million tons.

    As of the end of Jun, coal storage at major ports of China shrank 16.4% to 39.67 million tons. Meanwhile, China's national coal storage at major power plants stands at 65.41 million tons and will be available for 22 days by the end of Jun.

    In the Jan-Jun period, total electricity consumption rose a meager of 1.3% to 2,662.4 terawatt hours, 4.1% lower than in the same period of 2014 and hit the lowest level since 1980.
    Back to Top

    China H1 coal industry profit down 67pct

    China’s coal mining and washing industry witnessed a year-on-year slump of 67% to 20.04 billion yuan ($3.27 billion) over January-June, showed data from the National Bureau of Statistics (NBS) on July 27.

    During the same period, the coal mining and washing industry realized revenue of 1.26 trillion yuan, down 13% from a year ago.

    Total profit of the country’s entire mining industry registered a drop of 58.8% on year to 139.6 billion yuan in the first half of the year, data showed.

    Meanwhile, profit in ferrous and non-ferrous metal mining industry dipped 47.5% and 17.4% on year to 18.64 billion and 21.39 billion yuan, respectively.

    However, the power and heat generation industry saw its profit climb 17.7% from the year before to 233.88 billion yuan, attributed largely to the slump in coal prices.
    Back to Top

    Mozambique port accident deals blow to Vale coal project -sources

    A coal stacker has collapsed at the Mozambique port of Nacala, dealing a blow to Brazilian miner Vale's effort to start coal shipments from the African nation in the third quarter, sources told Reuters on Monday.

    The giant piece of machinery, which is used to handle coal and other bulk materials, buckled last week, according to a mining industry source with knowledge of the situation.

    "The contractors are investigating and an official report is expected within a couple of weeks," the source said, adding that no one was hurt in the accident.

    Another source said it could take months to fix the equipment.

    In an emailed statement Vale confirmed that the coal stacker, which was in the final stages of construction, collapsed last week. A team is studying the cause of the accident, the company said.

    Vale is reliant on the port and connecting railway, together known as the Nacala Corridor, to reach capacity at its Moatize coal mine in northwest Mozambique.

    Vale expects Moatize's production to reach 11 million tonnes of coal per year by mid-2016 and 22 million tonnes by 2017. Current output is around 7 million tonnes.

    A third source said Vale had been experiencing problems with its wash plant at the mine site, an issue that could see it miss its production target for this year. In its statement Vale said the outage was due to scheduled maintenance and that processes were working normally.

    Vale's Moatize project has been beset by logistical problems, with the difficulties in building and expanding the Nacala railway and port holding back production increases at the mine.

    The rail line runs for 900 km (560 miles) through land-locked Malawi to the port of Nacala on the Indian Ocean. Vale had originally said it expected to ship coal from the new port in the first quarter of 2015.

    Last December, it sold a stake in the project to Japanese trader Mitsui & Co Ltd in order to share the cost of getting it up and running. Mitsui bought a stake of just under 15 percent in the mine and 35 percent in the rail and port.
    Back to Top

    India to sell high-grade iron pellets to Iran as ties strengthen

    An Indian state company has agreed to sell high-quality iron ore pellets to Iran, its chairman told Reuters, in what could be a $200 million annual deal that signifies expanding business ties between the countries as sanctions against Tehran ease.

    India had remained one of Iran's top oil buyers despite trade curbs over Iran's nuclear programme and the two countries are now exploring partnerships worth billions of dollars in ports, steel, aluminium and power.

    Iran and India started talks on the pellet deal even before the United States, European Union and United Nations earlier this month agreed to lift sanctions on Iran, in exchange for Tehran agreeing to long-term curbs on its nuclear programme.

    KIOCL Ltd, owned by India's steel ministry, could sell as much as 2 million tonnes of pellets to Iran to meet substantial local demand, Chairman Malay Chatterjee said.

    Keyvan Ja'fari Tehrani, head of international affairs at the Iranian Iron Ore Producers and Exporters Association, said a final agreement was yet to be struck. But he agreed the demand was there.

    "The production of pellets in Iran is not sufficient," Tehrani said, adding there's a need to import between 7 and 8 million tonnes a year. Iran produced 21 million tonnes of iron ore pellets last year while demand reached 28 to 29 million tonnes, he said.

    KIOCL has been in talks with Tehrani as well as Iran's state-owned mines and metal holding company IMIDRO and the Iranian Mines and Mining Industries Development and Renovation Organisation, said Tehrani.

    Negotiations are also going on to bring in 1 million tonnes of low-quality iron ore from Iran, process it at KIOCL's coastal facilities in India, then export pellets to Iran, said Chatterjee.

    A senior steel ministry official confirmed the talks.

    KIOCL will initially buy 80,000 tonnes of high-grade concentrate containing 67 percent iron from Anglo America's Brazil operations by September, convert it into pellets and then sell to Iran for about 500 million rupees ($7.8 million), Chatterjee said.

    Based on that figure, the value of a 2 million tonne deal would be about $200 million.

    Most of Iran's iron ore is low grade and needs to be converted to pellets to be used to make steel. It is targeting annual steel output of 55 million tonnes by 2025, up from about 16 million.
    Back to Top

    First-ever fully laden Valemax discharges iron ore at Chinese port

    Sohar Max, the first-ever fully laden Valemax, discharged iron ore at North China's Dongjiakou port over the weekend, according to local media reports Monday.

    The vessel, of 400,000 dwt, had a draft of 23 meters when she entered the port indicating she was fully laden at the time, according to Platts' vessel tracking tool, cFlow.

    She loaded iron ore from Ponta Da Madeira port in Brazil from June 2-4, and headed directly to Dongjiakou port, without calling at Vale's transshipment hubs in Philippines' Subic Bay or Malaysia's Teluk Rubiah.

    Up to February this year, fully-laden Valemaxes were banned from docking into Chinese ports by the Chinese officials citing safety concerns.

    The ban was lifted by the Ministry of Transport when an amendment was made to the Design Code of General Layout for Sea Ports, allowing the enlistment of dry bulk cargo ships of 400,000 dwt.
    Back to Top
    Commodity Intelligence LLP is Authorised and Regulated by the Financial Conduct Authority

    The material is based on information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. Opinions expressed are our current opinions as of the date appearing on this material only.

    Officers and employees, including persons involved in the preparation or issuance of this material may from time to time have "long" or "short" positions in the securities of companies mentioned herein. No part of this material may be redistributed without the prior written consent of Commodity Intelligence LLP.

    Company Incorporated in England and Wales, Partnership number OC334951 Registered address: Highfield, Ockham Lane, Cobham KT11 1LW.

    Commodity Intelligence LLP is Authorised and Regulated by the Financial Conduct Authority.

    The material is based on information that we consider reliable, but we do not guarantee that it is accurate or complete, and it should not be relied on as such. Opinions expressed are our current opinions as of the date appearing on this material only.

    Officers and employees, including persons involved in the preparation or issuance of this material may from time to time have 'long' or 'short' positions in the securities of companies mentioned herein. No part of this material may be redistributed without the prior written consent of Commodity Intelligence LLP.

    © 2018 - Commodity Intelligence LLP