Mark Latham Commodity Equity Intelligence Service

Thursday 15th September 2016
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    China's new yuan loans more than double in August

    China's new yuan-denominated lending in August more than doubled from a month ago to 948.7 billion yuan (about 145.95 billion U.S. dollars), official data showed on Wednesday.

    The M2, a broad measure of money supply that covers cash in circulation and all deposits, rose 11.4 percent year on year to 151.1 trillion yuan by the end of August, the People's Bank of China said in a statement on its website.

    The narrow measure of money supply (M1), which covers cash in circulation plus demand deposits, rose 25.3 percent year on year to 45.45 trillion yuan.
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    Plans for North Sea mineral mine near Aberfeldy approved

    Perth and Kinross Council today approved plans to develop a mine that will supply the North Sea industry with a vital mineral for decades to come.

    The proposed mine at Duntanlich near Aberfeldy is the UK’s only known commercially viable barite deposit, according to the firm behind the project.

    Oil service company M-I SWACO, a subsidiary of Schlumberger, said the site would be able to satisfy the UK’s barite demand for the next 50 years, producing up to 120,000 tonnes a year.

    Barite is largely used as a weighting agent for drilling fluids in oil and gas exploration, but is also applied in the automobile, medical and civil engineering sectors.

    M-I SWACO said Duntanlich would replace its mine at Foss, which had become increasingly difficult to mine.

    A previous planning application to develop the Duntanlich resource was turned down in 1996.

    But the latest proposals, informed by three years of environmental studies, were deemed fit for purpose by councillors.

    The submission said there would be minimal visibility of the mine from the surrounding area.

    The development is also expected to create about 30 jobs.

    Ian Hughes, project manager for M-I SWACO, said: “The new mine will ensure that the UK is self-sufficient in barite and will not only have a significant positive local economic impact, diversifying the economy of this rural area where employment is largely reliant on tourism and forestry, but will also have national significance in terms of providing vital continuity of supply for the North Sea oil and gas industry.

    “We learnt a lot from the previous application and were able to make significant improvements to our proposals.”
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    Typhoon Meranti lands in east China

    Typhoon Meranti made landfall in Xiang'an district of Xiamen City, east China's Fujian Province, at 3:05 a.m. Thursday, with gales up to 48 meters per second.

    The world's strongest typhoon so far this year has also been monitored as the strongest one hitting southern Fujian Province since the local meteorological records were kept in 1949.

    The winds shattered windows on high buildings, causing disruption of tap water supplies in many communities in Xiamen.

    "The winds and rain got extremely loud after 3 a.m. The cracking sound of windows and tree branches were also scary. The power went out in the shop for several times," said Su Binglin, a night-shift shop assistant at a 24-hour convenient store.

    He said he had to use a metal plate to strengthen the shop door to prevent it from shattering. He also used boxes filled with mineral water to consolidate the plate.

    At around 6 a.m., the winds abated. Streets in Xiamen are scattered with glass shards, broken tree branches and blown down billboards.

    "It is so wretched. Many trees by road sides are fallen, and there are also pondings blocking traffic," said Hu Rong, a delivery man.

    The Xiamen Power Supply Co. said that the typhoon has made severe damages to the power grid in Xiamen, causing mass blackout. The electricity supply was also disrupted in Xiamen's outlying islands. As the typhoon is further plowing inland, more damages of the power network are likely.

    Thursday coincided with China's Mid-Autumn Festival, which gives a three-day public holiday. Schools and kindergartens in coastal cities of Fuzhou, Xiamen, Zhangzhou, Quanzhou and Putian in Fujian were closed Wednesday in precaution against the typhoon.

    The railway authorities in Nanchang, east China's Jiangxi Province, announced Wednesday to cancel 144 trains that had been scheduled between Wednesday to Saturday to southern and eastern cities in an emergent response to the typhoon.
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    Lula hit with Car Wash charges

    Brazilian prosecutors filed corruption charges on Wednesday against former president Luiz Inacio Lula da Silva and his wife, as well as six others in the sprawling Petrobras kickback scandal known as Operation Car Wash.

    This was the first time Lula - still Brazil's most popular politician despite corruption accusations against him and his leftist Workers Party - was charged by federal prosecutors for involvement in the massive graft scheme at the state-run oil company.

    Prosecutors denounced Lula as the "general" in command of the corruption scheme, allegedly aimed at keeping his party in power.

    Public Prosecutor Deltan Dallagnol told a news conference that the Petrobras scheme caused an estimated 42 billion real ($12.6 billion) in losses.

    Lula's lawyers said in a statement that he strongly denied the allegations and would fight the charges.

    His case will go before crusading anti-corruption judge Sergio Moro, who has jailed dozens of executives and others involved in the scheme.

    Lula could face arrest for receiving a luxury apartment on the coast of Sao Paulo from one of the engineering and construction firms at the centre of the bribery scandal. Lula has denied ownership of the three-floor condo in Guaruja.

    Federal police urged prosecutors last month to bring charges against Lula and his wife, accusing them of receiving some 2.4 million reais ($747,896) in benefits from the builder OAS in relation to the apartment.

    Lula, a charismatic former union leader who was a two-term president from 2003 to 2010, has separately been indicted by a court in Brasilia for obstruction of justice in a case related to an attempt to persuade a defendant in the Petrobras scandal not to turn state's witness.

    Lula's fall, and that of the leftist party he founded in 1980, has been dramatic.

    Last month, his protege and successor as president, Dilma Rousseff, was removed from office in an impeachment trial.

    Rousseff's fall was driven by Brazil's worst recession since the 1930s and its biggest-ever corruption scandal, which has implicated dozens of politicians from her ruling coalition, including several in the Brazilian Democratic Movement Party led by current President Michel Temer.

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    Oil and Gas

    Oil Glut Set to Worsen as Nigeria and Libya Fields Restart

    Amid the most enduring global oil glut in decades, two OPEC crude producers whose supplies have been crushed by domestic conflicts are preparing to add hundreds of thousands of barrels to world markets within weeks.

    Libya’s state oil company on Wednesday lifted curbs on crude sales from the ports of Ras Lanuf, Es Sider and Zueitina, potentially unlocking 300,000 barrels a day of supply. In Nigeria, Exxon Mobil Corp. was said to be ready to resume shipments of Qua Iboe crude, the country’s biggest export grade, which averaged about 340,000 barrels a day in shipments last year, according to Bloomberg estimates. On top of that, a second Nigerian grade operated by Royal Dutch Shell Plc is scheduled to restart about 200,000 barrels a day of flow within days.

    While there are reasons to be cautious about whether the barrels will actually flow as anticipated, a resumption of those supplies -- more than 800,000 barrels a day in all -- could more than triple the global surplus that has kept prices at less than half their levels in 2014. It would also come just as members of the Organization of Petroleum Exporting Countries and Russia are set to meet in Algiers later this month to discuss a possible output freeze to steady world oil markets.

    “If you have some restart of Nigeria and some restart of Libya, then the rebalancing gets pushed even further out,” Olivier Jakob, managing director at Petromatrix GmbH in Zug, Switzerland, said by phone. “It complicates matters a lot before the meeting in Algeria.”

    Libya Shipments

    With a few exceptions, crude in New York and London has been stuck below $50 a barrel for months. The current global oil oversupply is about 370,000 barrels a day, according to data from the Paris-based International Energy Agency.

    The resumption of shipments from the three Libyan ports would allow Libya to double crude output to 600,000 barrels a day within four weeks, National Oil Corp. Chairman Mustafa Sanalla said Tuesday in a statement on the company’s website.

    The exports are possible after a substantial improvement in the security situation there, he said Wednesday in a separate statement. The Tripoli-based NOC lifted a measure called force majeure, which gives the company the right not to meet supply commitments.

    Libya has made at least half a dozen failed pledges to restart shipments. What may be different this time is that the NOC has struck a deal with Khalifa Haftar, commander of forces who took control of Es Sider and Ras Lanuf. He also has control of the oil fields and pipelines that feed them.

    Qua Iboe

    Meanwhile Exxon has filled storage facilities at its Qua Iboe export terminal in Nigeria and is awaiting government clearance to resume shipments, a person familiar with the matter said Wednesday. Exxon declined to provide a timeline for a restart and said that a force majeure, in place since July, still stands.

    In Nigeria, militant groups have repeatedly attacked oil infrastructure this year, making any resumption of flow reliant on pipeline and export terminals being secure from further incidents. Qua Iboe has been under force majeure since a “third-party impact” on a pipeline in July, according to Exxon.

    “If it’s true, it’s another downward pressure for the markets because that would be a large amount to return to the market,” Thomas Pugh, commodities economist at Capital Economics, said by phone, adding that he doubts the resumptions will materialize given the situations in both countries.

    West Texas Intermediate, the U.S. benchmark, was 0.3 percent higher at $43.70 a barrel at 12:56 p.m. in Hong Kong. Brent gained 0.5 percent to $46.09 a barrel on the London-based ICE Futures Europe exchange.
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    Iran records sharp rise in exports of gas condensate

    The exports of gas condensate from Iran's South Pars gas field experienced a 67-percent rise in the first five months of current Iranian calendar year, said semi-official Mehr news agency Wednesday.

    "In the first five months of the current year, more than seven million tons of gas condensate were exported to the world markets bringing a profit about 2.9 billion U.S. dollars," Managing Director of Pars Special Economic Energy Zone, Mehdi Yousefi, said.

    Heavy and light polyethylene glycol, diethylene glycol, mono-ethylene glycol, urea, butane, propane, p-Xylene, cement and methanol were among other major products exported from the gas field, he added.

    The overall exports from Iran's South Pars gas field, in the same period, stood at 15.3 million tons and valued at 7.4 billion dollars, he said, adding that the figures show a 55-percent rise in weight and 36-percent rise in value compared with the same time span in the last year.

    The South Pars/North Dome field is a natural gas condensate field located in the Persian Gulf. It is the world's largest gas field, shared between Iran and Qatar.

    According to the International Energy Agency, the field holds an estimated 1,800 trillion cubic feet (51 trillion cubic meters) of in-situ natural gas and some 50 billion barrels of natural gas condensate.

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    China’s oil demand shifting to consumers, not falling, Wood Mac says

    China’s oil demand isn’t really slowing — it’s just changing, and that will help global energy demand to exceed supply by the end of the years, says  energy research firm  Wood Mackenzie.

    The world’s second-largest economy is maturing,  increasingly supported by a growing middle class whose appetite for energy is offsetting wavering demand in Chinese manufacturing, Wood Mackenzie says. Household consumption of gasoline and other petroleum products accounted for 90 percent of the country’s total oil demand growth this year, compared to less than half the demand growth five years ago. Meanwhile, demand growth for diesel and other fuels used by industrial buyers has dropped from more than half to 10 percent over the same half-decade, according to energy research firm Wood Mackenzie.

    “Oil has maintained its growth; in fact, it’s the exact same rate as 2011 despite the slowdown and the collapse in demand we saw in coal and gas,” said Ann-Louise Hittle, oil market analyst at Wood Mackenzie, during a recent meeting with journalists in Houston.

    Chinese car retailers sold 21.1 million vehicles last year, and about 40 percent of those were gas-guzzling SUVs and multipurpose vehicles. Wood Mackenzie estimates China’s oil demand will grow between 350,000 and 450,000 barrels a day this year, the same rate as 2011.

    “Despite the lower [economic] growth, there’s still a rising middle class, and with increasing income there’s a drive for personal mobility,” Hittle said.

    If Wood Mackenzie’s assessment is correct, China’s consistent oil demand growth could be one factor that underpins the oil market’s return to normalcy.

    At first glance, Wood Mackenzie’s conclusion appears starkly different from the recent gloomy report by the International Energy Agency, which on Tuesday predicted oil markets will remain oversupplied for at least the first half of next year, as demand slips further than expected. The report has sent crude prices lower.

    One key element of the IEA’s forecast was its downward revision of global oil demand growth, by 100,000 barrels a day this year. It pointed to China and India as two large players contributing to the slowdown. China, in particular, has had an outsized impact on global energy demand in recent years; crude prices fell to 12-year lows in February in part because of heightened fears that both China’s economy and demand for energy were weakening.

    But the IEA’s revised numbers puts global oil demand growth at 1.3 million barrels a day this year – the same figure Wood Mackenzie has forecast for months.

    The IEA also said increased oil production from the Organization of Petroleum Exporting Countries has “more than offset” declining output from non-OPEC nations like the United States.

    Similarly, Wood Mackenzie believes these offsetting trends will keep oil supply growth flat this year. Where they differ is when they believe the oil market will come back into balance. While the IEA said Tuesday demand and supply will realign after the first half of next year, Wood Mackenzie believes total worldwide oil demand will climb above supply in the fourth quarter of 2016.

    “It’s September, and it’s looking like we’re going to end up with a slight (oil storage inventory) draw,” Hittle said. “We’ve got a rebalancing underway.”
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    UK, Argentina to cooperate on Falklands oil and gas restrictions

    Britain and Argentina have agreed to work together towards removing measures restricting the oil and gas industry, shipping and fishing around the disputed Falkland Islands, Britain's Foreign Office said on Wednesday.

    The two countries fought a war in 1982 over the British-run islands in the South Atlantic, known in Argentina as Las Malvinas, and the issue has continued to cause tensions in the two countries' relationship.

    The Foreign Office said London and Buenos Aires had agreed their first positive statement about South Atlantic issues since 1999.

    It said the discussions that had taken place did not affect the sovereignty issue and Britain remained clear in its support of the islanders, the majority of whom want the islands to remain under British control.
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    BP has no plans to raise annual investments this decade -CEO

    BP does not plan to increase annual investments this decade but still expects to bring nine new projects online in 2017 as it focuses on improving efficiency, Chief Executive Bob Dudley said in an interview on Wednesday.

    Dudley met with government officials during an investment forum in Argentina and said BP was testing in the Vaca Muerta shale area, where U.S. rivals Exxon and Chevron have invested, and expected results next month.
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    US Crude production rises

                                                                           Last Week   Week Before   Last Year

    Domestic Production '000................. 8,493             8,458              9,117
    Alaska ............................................    458                 428                 469
    Lower 48 ....................................... 8,035              8,030             8,648
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    Summary of Weekly Petroleum Data for the Week Ending September 9, 2016

    U.S. crude oil refinery inputs averaged over 16.7 million barrels per day during the week ending September 9, 2016, 200,000 barrels per day less than the previous week’s average. Refineries operated at 92.9% of their operable capacity last week. Gasoline production decreased last week, averaging 9.9 million barrels per day. Distillate fuel production decreased last week, averaging over 4.9 million barrels per day.

    U.S. crude oil imports averaged about 8.1 million barrels per day last week, up by 993,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged 8.2 million barrels per day, 10.1% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 650,000 barrels per day. Distillate fuel imports averaged 140,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 0.6 million barrels from the previous week. At 510.8 million barrels, U.S. crude oil inventories are at historically high levels for this time of year. Total motor gasoline inventories increased by 0.6 million barrels last week, and are well above the upper limit of the average range. Finished gasoline inventories decreased while blending components inventories increased last week. Distillate fuel inventories increased by 4.6 million barrels last week and are above the upper limit of the average range for this time of year. Propane/propylene inventories rose 2.0 million barrels last week and are above the upper limit of the average range. Total commercial petroleum inventories increased by 6.0 million barrels last week.

    Total products supplied over the last four-week period averaged 20.6 million barrels per day, up by 5.7% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged over 9.5 million barrels per day, up by 4.2% from the same period last year. Distillate fuel product supplied averaged over 3.6 million barrels per day over the last four weeks, up by 1.3% from the same period last year. Jet fuel product supplied is up 2.7% compared to the same four-week period last year.

    Cushing falls 1.245 mln bbl

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    Survival, for now, equals success in Eagle Ford

    Now, instead of looking for a pop in oil prices just around the corner, companies working in the 400-mile Eagle Ford Shale oil and gas field in South Texas have shifted their focus to what will keep them alive: trimming costs and making technical improvements.

    “We have to lower our cost to survive in this sub-$50 oil world out there,” said Richard Mason, chief technical director of Hart Energy.

    The company opened its DUG Eagle Ford and Midstream Texas conferences in San Antonio on Monday with a networking reception. The conferences got into the nitty-gritty Tuesday and Wednesday at the Convention Center with an exhibition and talks from energy executives and analysts.

    “Hopefully, prices recover, but I think we need to be prepared to be in this kind of world for some time yet,” Mason said.

    He said the industry is cautiously optimistic that the worst is in the past — likely at $26-per-barrel oil in January and February, though prices haven’t moved high enough to support a big expansion of activity in the Eagle Ford.

    Drilling in the Eagle Ford started in late 2008 during a long period of high oil prices.

    U.S. energy companies had figured out they could unlock oil trapped in tight shale rock with a combination of technologies: horizontal drilling with hydraulic fracturing, which pumps millions of gallons of water, chemicals and sand at high pressure to break the rock and prop open the cracks, releasing oil and gas.

    U.S. production soared, and Texas oil reversed the long death spiral it had been stuck in since the early 1970s. But the price of a barrel of the benchmark West Texas Intermediate peaked around $107 in June 2014. It closed at $45.65 Friday.

    Energy companies have slashed spending and jobs in response.

    In the Eagle Ford, the budget cuts have slowed the flow of oil from the field. Production peaked at more than 1.7 million barrels per day in March 2015 and has fallen to just above 1 million barrels daily this month, the U.S. Energy Information Administration reports.

    Mason said the mood varies from despair to optimism, depending on which sector of the oil and gas industry someone works in.

    On the finance side, people looking to invest in projects have a two- to five-year timeline and have a positive outlook.

    Those who are closest to the oil field, though, continue to feel the pain. Services companies, which supply the workers and equipment for the workaday tasks of the oil patch, are fighting for business and survival.

    “There’s so much excess capacity. People are bidding jobs at below cost,” Mason said. For companies that provide fracking services in particular, “it’s a knife fight at midnight as people try to capture market share.”

    George Wommack, founder and CEO of Petro Waste Environmental, which disposes of solid and water waste in the Eagle Ford and Permian Basin, said service companies of all kinds are under pressure to lower costs to the break-even point.

    “They’re providing services at what they think is break even, and many times it’s not,” Wommack said. “The service companies are having to have those difficult conversations with their operators where they have to say they’re losing money on the account and they can’t keep doing the work at that price. Everyone is of the sentiment that they have to find a way to make money at $40 oil.”

    Wommack said the activity indicator he’s looking for — a healthy rise in the drilling rig count — hasn’t happened in the Eagle Ford.

    The number of drilling rigs in the Eagle Ford soared as high as 259 in 2012, when it took longer to drill shale wells and, in a necessary but time-consuming exercise, rigs raced from ranch to ranch to drill a well before a mineral lease could expire. The rig count dipped into the lower 200s through the end of 2014, as drillers got faster and operators started putting several wells on the same small patch of gravel.

    After oil prices busted, the number of drilling rigs in South Texas spiraled from 200 at the start of 2015 to 29 in late May. It rose to 38 rigs last week, according to the Baker Hughes rig count.

    Mason said there’s reason for optimism in the field, with drilling in the Austin Chalk, the rock layer that sits atop the Eagle Ford, the opportunity to sell natural gas in Mexico and continued technical improvements that squeeze more oil from the Eagle Ford.

    “The Eagle Ford has been a place where the industry has been good about innovating,” Mason said. “We’re getting better at what we do. At $100 oil, we were all geniuses. Everything worked. The other side of $100 is there’s a lot of waste. At $45 to $50 oil, we can make it work.”

    Around 1,500 people are expected at the event, which hosted more than 4,000 attendees during the boom times.

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    Trudeau said to plan pipeline approval, favour Kinder Morgan

    Canadian Prime Minister Justin Trudeau plans to approve at least one new oil pipeline project in his first term, with Kinder Morgan’s Trans Mountain expansion to the Pacific Coast the most likely candidate, people familiar with his plans said.

    The prime minister is seeking to strengthen environmental standards and build confidence in new regulatory rules while also stoking growth in Canada’s sluggish economy by backing a pipeline. Trudeau therefore plans to neither approve all the projects under consideration nor reject them all, according to the people who spoke on condition of anonymity because the discussions are private.

    Trudeau faces a series of high-profile energy decisions over the next three months, including a final cabinet ruling onKinder Morgan’s Trans Mountain proposal and a legal appeal related to Enbridge Inc.’s Northern Gateway pipeline. Trudeau will also decide on Petroliam Nasional’s PacificNorthWest natural gas project, while TransCanada’s Energy East pipeline is due for a decision in about two years.

    Kinder’s proposal is seen as likeliest to win approval despite opposition among key figures in vote-rich Vancouver, the people said. The Trans Mountain expansion already has conditional regulatory sign-off from the National EnergyBoard.


    Red tape and environmental opposition bogged down major Canadian energy proposals during the nine-year reign of the previous Conservative administration led by Stephen Harper. Northern Gateway, Trans Mountain and EnergyEast have all been delayed in Canada, while the Keystone XL pipeline to the Gulf Coast was rejected by the US government.

    Trudeau’s government believes it must demonstrate to investors the country is capable of reaching consensus to build major energy projects, while not alienating environmentalists who make up a key constituency for the Liberal Party. The government hopes to approve one projectbefore the next election in 2019, the people said.

    The prime minister routinely says, when asked about pipeline issues, that his government is balancing environmentconcerns and the economy. Trudeau didn’t specifically address his plans for Kinder Morgan when asked Tuesday afternoon. “There’s always going to be speculation by one side or the other about what we might do,” he told reporters in Ottawa. “The fact is, we need to get our resources to market in safe and reliable ways.”
    ‘National Interest’

    Natural Resources Minister Jim Carr didn’t directly answer when asked in a recent interview whether the government had decided it must build at least one pipeline.

    “We have an obligation to the proponents and to those people who are involved in each of these major projects to assess it on their own merits, and to determine the national interest on the basis of what’s been proposed, and what has been recommended by the regulator,” he said Aug. 25.

    Trudeau has signaled he doesn’t support Northern Gateway on its current route through British Columbia, and any major new routing could force the company to restart its approval process, the people said. A spokeswoman for National EnergyBoard, however, said that’s not necessarily the case. If a route-change request is made “we will take a look and develop a process for reviewing the application,” spokesperson Sarah Kiley said by e-mail.
    Canadian ‘Alarm’

    Jim Prentice, former Alberta premier and federalenvironment minister, welcomed the news but warnedKinder Morgan’s project alone won’t be enough.

    “We need pipelines, we need pipelines to the West Coast, and most advantageous for Canada of course are pipelines into the Asia-Pacific basin and Trans Mountain would certainly be helpful,” Prentice, a Calgary-based adviser in the energygroup at Warburg Pincus, said Tuesday at the Bloomberg Canadian Fixed Income Conference in New York. “But we also need to bear in mind that Trans Mountain won’t solve the problem” because tankers that can navigate the region are too small to service Asia, he said.

    Canada needs an energy port that can ship up to two million barrels per day to Asia, Prentice said, and Canadians should be concerned that investors are cooling to the country’s oil patch. “The concern that really should alarm us as Canadians is low-cost capital is exiting the Canadian basin,” he said.


    Trudeau is also concerned about the electoral impact o fEnergy East, which is unpopular in Quebec, where the Liberals hold 40 of 78 electoral districts, the people said.TransCanada’s plan would see a new pipeline delivering crude from the oil sands in Alberta to the Atlantic Coast via the second-most populous province, a much longer route than the other proposals.

    The prime minister has spoken favorably about the Kinder Morgan pipeline in the past and his government is said to consider it a net-positive for its so-called “progressive” political movement nationally. Though opposed byVancouver’s mayor, it would be popular in Alberta, where Premier Rachel Notley’s New Democratic Party government is advancing carbon-emissions limits favored by Trudeau.

    Trudeau’s cabinet has until December to make a decision onTrans Mountain. Finance Minister Bill Morneau and Trade Minister Chrystia Freeland are the loudest voices around the table in favor of energy sector development, the people said.

    Kinder Morgan’s C$6.8-billion ($5-billion), 715-mile Trans Mountain expansion would carry Alberta crude toVancouver, tripling capacity of an existing line to 890,000 barrels per day. Vancouver Mayor Gregor Robertson,environmental groups and indigenous leaders have all expressed opposition to the pipeline, though polling shows it’s generally popular in British Columbia and very popular inAlberta.


    “There is no consent there and we are at great risk of impacting Canada’s most successful urban economy,” Robertson told reporters in Ottawa during a June visit to advocate against the pipeline. Fifteen of the 184 Liberal lawmakers elected last year are from the Greater Vancouver area and were “very vocal” in opposing the Kinder Morgan pipeline, the mayor said. “That certainly resonated and helped them get elected.”

    TransCanada’s Energy East proposal has been beset by delays. The members of its regulatory panel resigned last week in the wake of conflict-of-interest allegations stemming from a meeting board members had with former QuebecPremier Jean Charest, who was working for the company at the time. The project also made headlines in last year’s election when it was revealed Trudeau’s campaign co-chair,Dan Gagnier, was advising TransCanada on how to lobby whichever party won the vote.

    Enbridge’s Northern Gateway runs through the Great Bear Rainforest, which the prime minister says regularly is no place for a pipeline. However, Trudeau has also made improving indigenous relations a top priority and Enbridge has expanded the potential stake for indigenous groups in the pipeline. In June, a court rescinded permits for the pipeline that had been approved under Harper. Trudeau has until September 22 to appeal the decision.
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    Patterson-UTI Energy Announces Agreement to Acquire Drilling Technology Company

    PATTERSON-UTI ENERGY, INC. announced today that it has entered into an agreement to acquire Warrior Rig Ltd. and certain related entities.  Based in Calgary, Warrior designs, manufactures and services high-spec rig components with a recent focus on top drive technology for improved drilling performance.  The pending transaction is subject to customary closing conditions, and is expected to close promptly.

    Andy Hendricks, Patterson-UTI's Chief Executive Officer, stated, "This acquisition will enhance our competitive position within the high-spec rig market and expand our technology portfolio.  We are very excited by the innovative technology that Warrior offers, and we look forward to welcoming the highly talented group of people from Warrior into the Patterson-UTI family."

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    Alternative Energy

    New solar glut could push solar module prices as low as 30c/watt

    The cost of solar PV modules is likely to fall dramatically in 2017, driven by a glut in the global manufacturing market that could deliver prices as low as $US0.30/Watt, according to a leading analyst at Bloomberg New Energy Finance.

    Speaking at this week’s Solar Power International conference in Las Vegas, BNEF’s head of Americas, Ethan Zindler. said the global solar module industry was headed for one of its worst supply gluts in history, and with no booming Chinese market to mop up the excess.

    “We are on the verge of a new era of substantial overcapacity,” Zindler said on Tuesday – a situation fuelled by a slowdown in China’s domestic solar market while many manufacturers continue to churn out panels.”

    BNEF is not the only analyst to suggest big falls. Deutsche Bank is also expecting a fall to around 40c/watt from current levels above 50c/watt. BNEF experts the same, but says there is a risk that the price could fall even further, to 30c/watt.

    That would be great news for the builders of solar plants, and for people putting solar on the roofs of their homes or businesses. It is less good for the health of manufacturers, although it could spark another round of manufacturing efficiencies. Some, though, may not survive.

    As many would keenly recall, the last downturn wound up contributing to the bankruptcy of dozens of PV manufacturers around the world, including major players like Germany’s Q Cells and China’s Suntech, both later acquired by other companies.

    And as ReCharge News notes, it was brought to an end when China’s own domestic solar market took off, sopping up most of the excess supply and delivering the world’s largest solar market by far, with China adding close to 20GW in the first half of 2016 alone.

    But with no such “solar sponge” waiting in the wings this time around, the fallout could be much worse… for manufacturers, that is.

    For PV installers and end users, however, the news is good, with cheaper modules likely to spur another wave of market growth around the world.

    For Australia, as RenewEconomy observed last month, the combination of the international market glut and local policy incentives could result in one of our biggest ever booms in large-scale solar construction over the next year.

    Locally, the situation in Australia is being enhanced by the continued high price of large-scale renewable energy certificates, the imminent results of a major solar tender by the Australian Renewable Energy Agency, and the growing appetite for solar investments by financiers and equity investors.

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    New record for cheapest offshore wind farm

    The cost of building offshore wind farms has fallen to a new low, with Sweden's Vattenfall winning contracts to build two projects in Danish waters for just over €60 (£51) per megawatt-hour (MWh).

    That undercuts a previous record set by Denmark's Dong Energy, which in July won a contract for a project in the Netherlands at €72.70/MWh.

    Although the prices are not directly comparable with those awarded in the UK, because they exclude grid connection costs which can be up to €30/MWh, they are nevertheless substantially cheaper than the most recent UK deals, awarded early last year for about £120/MWh.

    Magnus Hall, Vattenfall chief executive, said the deals showed it was "able to reduce the costs of offshore wind faster than had been expected, only a few years ago".

    A turbine being installed last week at Burbo Bank Extension wind farm which has a price of £150/MWh CREDIT: MHI VESTAS

    The award was also seized upon by critics of the Hinkley Point nuclear plant - which has provisionally been offered £92.50/MWh for 35 years - as fresh evidence that the EDF-led project is too expensive.

    Doug Parr, chief scientist at Greenpeace, said: "We can expect more and more offshore wind bids to break records with falling prices in the coming years. This will make the price of electricity guaranteed for Hinkley look even more ill-advised."

    Despite the record-breaking low price of the new Vattenfall contracts, the Danish government has warned it could yet scrap the projects as it is concerned the subsidy bill is still too high.

    Plunging wholesale power prices in Denmark, as in the UK, have pushed up the subsidy required for fixed-price low carbon energy contracts.

    "By not erecting the [wind]mills, we can cut the large bill from the green transition," Lars Lilleholt, the Danish energy minister said on Monday.

    Vattenfall criticised the "very confusing message", telling Reutersit "creates a completely unnecessary uncertainty about what Denmark wants".

    Another factor helping lower the price for the new Danish sites is that they are only about 5 miles offshore, cutting the installation costs compared with some UK projects that are as far as 75 miles offshore.

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    Danish watchdog asks audit office to investigate DONG Energy IPO

    A Danish political watchdog on Wednesday asked the national audit office to investigate the role of key parties involved in the share market flotation of offshore wind farm developer DONG Energy, including Goldman Sachs.

    DONG Energy's initial public offer (IPO) in June raised a gross 17 billion crowns ($2.6 billion) for the Danish state and a consortium of investors led by Goldman Sachs.

    The sale meant the Wall Street bank doubled an 8 billion- crown investment made just two and a half years earlier, fuelling criticism in Denmark that the previous government sold an 18 percent stake to the Goldman consortium too cheaply.

    The watchdog, the Public Accounts Committee, asked the audit office to investigate a wide range of issues related to the sale and subsequent IPO, including the role of the company's management and the finance ministry in the valuation and sale of shares.

    It also asked to look into DONG Energy's dividend payout to Goldman Sachs and the Danish state since the flotation as well as the share price since the IPO on June 9.

    Having built more than a quarter of the world's offshore wind farms, the company is a major operator in Britain and Germany.
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    ExxonMobil and US uni to research solar and battery tech

    ExxonMobil has joined forces with a US university to work on solar energy and battery technology projects.

    The oil and gas firm and Princeton University will look into how new photovoltaic materials, particularly those polymeric in nature, can be applied in forms of coatings and building materials.

    Their second project will focus on battery technologies and will use diagnostic tools to study degradation pathways of electric vehicle batteries and how they might impact follow-on use in applications on the power grid.

    The two organisations will also research plasma physics, Arctic sea-ice modeling and the impact of Carbon Dioxide absorption on the world’s oceans.

    The news follows ExxonMobil’s announcement to invest $5 million (£3.75m) in the university’s energy programme in five years.

    Eric Herbolzheimer, Senior Scientific Advisor and Section Head of Engineering Physics at ExxonMobil Research and Engineering Company said: “Each of the five selected projects is a potential game-changer in terms of new energy development and better understanding of our natural environment.”
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    Solar, wind developers: U.S. desert plan hurts renewable energy

    The United States on Wednesday unveiled a long-awaited plan for desert renewable energy development that the solar and wind industries said unfairly favors land conservation and severely limits the ability to build projects critical to meeting the nation's climate goals.

    The Desert Renewable Energy Conservation Plan, eight years in the making, was designed to streamline development of wind and solar projects on federal and private lands in California while preserving pristine desert habitats.

    On Wednesday, the U.S. Department of Interior unveiled the first phase of the plan, covering 10.8 million acres of federal lands managed by the Bureau of Land Management. It designates 388,000 acres of those lands as best for renewable energy development. Applications for projects in those areas will receive a streamlined permitting process and possible financial incentives, the agency said in a press release.

    A coalition of five wind and solar energy trade groups said the size of the area set aside for development in the plan falls far short of what California and the United States will need to meet carbon reduction goals.

    "It's just a complete disconnect with our climate change ambitions," said Nancy Rader, executive director of the California Wind Energy Association.

    Environmentalists cheered the move, saying it struck the right balance between preserving wildlife and plant habitats and allowing for ample wind and solar development.

    The desert is not the only place to site renewable energy, said Sierra Club Senior Representative Barbara Boyle, who pointed to efforts to develop projects on private lands in rural areas as well as import renewable energy from other states.

    "The California desert is just one piece of the puzzle, and we believe that this is more than enough acreage."

    Wind and solar developers worry that much of the 388,000 acres set aside for them will not actually make sense for their projects. The areas have not yet been cleared for potential conflicts with military exercises and have yet to be surveyed for impacts to avian species.

    The government also has imposed new environmental restrictions on those areas that will drive up the cost of development, according to Christopher Mansour, vice president of federal affairs for the Solar Energy Industries Association.

    "The BLM has chosen to greatly restrict the where we develop, and also restricted the how we can develop these projects," Mansour said.

    The BLM said another 400,000 acres could be considered for renewable energy development.
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    Hinkley point goes ahead on...2012 assumptions

    Image title
    This wasn’t an entirely unreasonable proposition in 2006. I believed it myself – then. But by 2012 it was becoming doubtful, but not doubtful enough for DECC who predicted fuel prices based on low, central and high: “scenarios”.  Scenarios are narratives, in short a story.  Scenarios are also predictions, guesses, or bets, but it sounds so much better if the experts, who charge money for them after all, wrap them up as scenarios.

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    Agrium-Potash Corp Merger Terms Favour Agrium Shareholders

    Given our stand-alone company fair value estimates--$20 per share for Potash Corp and $96 per share for Agrium--the deal terms (52% ownership of the combined company by Potash Corp shareholders) favour Agrium shareholders, in our view. Excluding synergies and using the announced share exchange ratio, our Potash Corp fair value estimate would fall about 10% and our Agrium fair value estimate would rise by a similar percentage. This is a function of our belief that PotashCorp is more undervalued than Agrium. Including our estimate of cost synergies, our Potash Corp fair value estimate remains $20 (CAD 26) and our Agrium fair value estimate jumps to $114 (CAD 149). We don’t think the merger will affect fertilizer pricing much, and our long-term pricing assumptions are unchanged.

    We think management’s synergy target will prove optimistic. The company hopes to achieve an annual run rate of $500 million in operating synergies two years after the deal closes (expected in mid-2017). Although we think opportunities in selling, general, and administrative costs are ripe for cutting, procurement targets, for example, could be harder to achieve. In general, we think it’s best to take merger management synergy targets with a grain a salt, given that enthusiastic targets are difficult to verify ex-post. We include a run rate of roughly $350 million in annual cost cuts in our model.

    We think antitrust regulators will allow the deal to proceed, since fertilizer markets would remain competitive with Agrium controlling less than 3% of global potash capacity. We expect to award the combined company a narrow economic moat rating, based on cost advantages in potash for both PotashCorp and Agrium and Agrium’s solid cost position in nitrogen.

    As we expected, enthusiasm for this deal outside the effects on Potash Corp and Agrium, as exemplified by the positive moves in other fertilizer stocks following the disclosure of deal talks, has faded. In particular, Mosaic’s (MOS) shares, which jumped a surprising 9% when the Agrium-Potash merger rumours surfaced, are now trading below their pre-rumour price.

    We think the likelihood of higher potash prices directly related to the deal is limited as Agrium is a second-tier player in the global potash market. Agrium controls roughly 2 million metric tons of the 60 million metric ton market and already comarkets its potash sales outside North America with PotashCorp and Mosaic. Combining operations would give the merged company a bigger piece of the already concentrated market pie, but through their relationship in Canpotex, PotashCorp and Agrium already comarket potash sales outside North America, which accounts for more than one third of Agrium’s volume.

    Perhaps the North American market would be slightly less competitive, thus leading to higher pricing, but we think the opportunity for price hikes are very limited. Mosaic will still stand as a large North American competitor, and if prices in the region rise too quickly, Eastern European producers would be quick ramp up exports to North America, as they have done in the past to exploit regional pricing differentials.

    The combined company could decide to shut in more potash production to aid prices and tighten the market, but we doubt the shutdowns would be severe enough to catalyze a dramatic rebound in prices. Agrium just doesn’t control a large piece of the total potash market, and each ton shut down obviously means lower sales volume and a hit to profits.

    In phosphate and nitrogen, which are more fragmented markets, the possibility of more concentration leading to higher pricing is even more limited. In nitrogen, Agrium’s largest fertilizer business, the 10 largest nitrogen producers account for less 20% of global ammonia capacity. Compare this with the potash market, where the top 10 producers account for well over 90% of industry capacity. For these reasons, we think this deal could pass antitrust regulators without meaningful asset divestitures.
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    ChemChina seals combination of Israel's Adama with Sanonda

    ChemChina is selling Israeli crop protection company Adama Agricultural Solutions to a firm it controls for $2.8 billion, paving the way for completing a previously announced combination of the two businesses and listing it on the stock market.

    China National Chemical Corp (ChemChina) [CNNCC.UL], as the state-owned firm is officially called, is selling Adama to Hubei Sanonda Co Ltd (000553.SZ) for about 18.6 billion yuan ($2.8 billion), Sanonda said.

    Israel's Discount Investment Corp (DISI.TA) agreed to sell a 40 percent stake in Adama to ChemChina in July for $1.4 billion including debt, paving the way for the two businesses to combine. ChemChina already owned 60 percent of Adama before the July deal.

    The deal, expected to be fully complete in the first half of 2017 and still subject to various approvals, values Adama at $5 billion including $1 billion in debt.

    It comes as China, the world's largest agricultural consumer, is looking to secure food supply for its population.

    The reverse merger allows Adama, which is 10 times Sandona's size, to be listed on the Shenzhen Stock Exchange and gain a foothold in China, where foreign firm can have a difficult time.

    Global companies have less than a 25 percent share of China's $5 billion agrochemical market, with Adama's share about 4 percent, Adama Chief Executive Chen Lichtenstein said.

    "This is our opportunity in the Chinese market," he told Reuters. "Over time, we should grow organically to more in the line of a double-digit market share five, six years out."

    That compares with 7 percent in Europe, 5 percent in Latin America and 4 percent in North America.

    "We feel we can grow in China faster than growth in the rest of the world," Lichtenstein said, noting all regions were growing.


    Although Adama is a generics firm its success largely stems from taking more than one off-patent ingredient and mixing two, three or four together and selling the mixture to farmers.

    Agrochemicals companies have been consolidating, partly due to falling commodities prices hitting farm incomes.

    ChemChina itself is finalizing a $43 billion takeover of Syngenta AG (SYNN.S), extending by almost two months a deadline for investors in the Swiss pesticides and seeds group to tender their shares.

    Sanonda, based in China's central Hubei province, is issuing 1.82 billion new shares to ChemChina at a price of 10.20 yuan each to pay for Adama.

    Sanonda also said it plans to raise up to 2.5 billion yuan in a private placement of 245.1 million shares at the same price to help fund Adama's production and expansion projects.

    ChemChina was already the biggest shareholder of Sanonda with a 31 percent stake through subsidiary China National Agrochemical Corporation (CNAC) and will own 75 percent after the two share sales, Sanonda said.

    Guotai Junan Securities acted as financial adviser to Sanonda.

    "The listed company aims to boost synergy and enhance overall profitability through a merger with Adama," Sanonda said in the filing.

    Shares of Sanonda, which trades on the Shenzhen stock exchange, have been halted since August 2015, when Adama and Sanonda first unveiled plans for a potential combination.

    Lichtenstein said Adama was building formulation and packaging and research and development facilities in China with the aim of selling within China and the rest of the world.
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    Base Metals

    Japanese Q4 aluminium agreed at $75/mt plus LME CIF, for over 5,000 mt

    Several Japanese buyers and producers have agreed to set the premiums for aluminium imports into Japan in the fourth quarter at $75/mt plus London Metal Exchange cash CIF Japan, for over 5,000 mt in total, sources said Wednesday.

    Five deals were reported done between two Japanese buyers and several producers.

    Three deals were for volumes of 1,000 mt/month or greater, for ingot of P1020/P1020A specification with 99.7% minimum aluminium content.

    Two Japanese traders have said they have rejected Q4 offers at $75/mt plus LME cash CIF Japan. One said he was seeking to buy below $70/mt plus LME cash CIF Japan.

    The 5,000 mt settlement is only a fraction of the around 50,000 mt/month of ingot Japanese traders and consumers buy from Rio Tinto Japan, Rusal and three other producers currently in negotiation.

    Nine or more Japanese buyers are believed to be continuing talks with those five producers.

    Japan imported a total 115,000 mt/month of aluminium ingot in the first half of 2016 from 22 countries, customs data showed.
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    Philippines delays release of mining audit outcome

    The Philippine government will release the results of a review of the operations of the country's 40 metallic mines on Sept. 22 instead of this week, the mining minister said on Thursday.

    The world's top nickel ore supplier has so far suspended operations of 10 mines, eight of them nickel, for violating environmental rules, and the government has said more mines will be halted.

    Environment and Natural Resources Secretary Regina Lopez, a committed environmentalist who opposes open-pit mining, said the delay was due to scheduling issues, while the operators of additional mines to be suspended had yet to be informed.

    "We are doing three days of show cause, then we suspend," Lopez told Reuters in a text message.

    The crackdown is aimed at enforcing stricter environmental protection measures, with tough-talking President Rodrigo Duterte warning in August that the nation could survive without a mining industry.

    Miners have labelled the review a "demolition campaign", and questioned the inclusion of anti-mining activists in the audit teams which completed their inspections at the end of August.
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    Steel, Iron Ore and Coal

    China to support debt-to-equity transfers for steel, coal firms

    China will support asset management companies converting debt into equity stakes for steel and coal firms, and provide credit support to competitive companies with overcapacity issues, the country's top banking regulator said.

    Debt has emerged as one of China's biggest challenges, with the total load rising to 250 percent of gross domestic product (GDP) last year.

    The International Monetary Fund warned in June that China's high corporate debt ratio of 145 percent of GDP could erode economic growth if not addressed.

    In a bid to rejuvenate its economy, China is aiming to eliminate failing, debt-ridden firms, but it has also pledged to help "restructure" companies that are suffering severe operational challenges but remain basically competitive.

    Officials have insisted that the new debt-to-equity programme would not be used to prop up so-called "zombie enterprises", those that would not survive without life support from local banks and governments.

    Speaking at a meeting of Chinese banks, Shang Fulin, head of the China Banking Regulatory Commission, said such zombie firms which have long been loss making and are uncompetitive will be taken out of the market or restructured in an orderly way.

    Competitive firms which have a market and are in sectors hit by overcapacity will continue to get credit support, he added.

    Asset management companies will be supported, in accordance with legal and market principles, to convert debt to equity for steel and coal companies, Shang said.

    His comments were carried on the regulator's website late on Wednesday. There were no details on what kind of support that would involve.

    Shang also said banks have an important responsibility to society to prevent financial risk and need to step up their risk management abilities.

    Chinese banks are struggling with rising non-performing loans, exceeding two trillion yuan ($301 billion) and accounting for 2.15 percent of total bank lending as of the end of May, according to July comments by a official.

    Banks need to put risk management in a more prominent position and "prevent credit risk contagion from expanding", Shang said.

    Banks should drawn up lists of "zombie" firms and those affected by overcapacity, and strengthen stress tests and risk analysis on property loans, he added.
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    Indonesia's Adaro sees coal prices, demand improving in 2017

    The CEO of Adaro Energy,Indonesia's biggest coal miner by market capitalisation, said thermal coal prices have bottomed and will increase in 2017 along with rising import demand from China and Southeast Asia.

    Cargo prices for Australian thermal coal from Newcastle, seen as the Asian benchmark, have soared more than a third this year to above $70/t – the highest since a spike in April last year – pushed by surprise increases in Chinese imports.

    China's coal industry is struggling with excess supply and the government has vowed to slash mine capacity by 250-million tonnes this year, as the world's top producer and consumer ofcoal shifts to a more consumer-driven economy.

    "As a result of the closures, supply will decline. If supply declines, they will probably import," Adaro CEO Garibaldi Thohir told reporters.

    "Prices will definitely improve," he said. "They can't just turn off (the power) like that."

    Demand will also increase slightly next year, Thohir said, due to purchases from India, Vietnam, Thailand and others inSoutheast Asia.

    Adaro is on track to reach its production target of 52-million to 54-million tonnes this year, Thohir said, up from output of 51.46-million tonnes in 2015. About three-quarters of the production will be exported.

    "We will stick to our plan," Thohir said, noting that it was not easy for the company to increase output despite improving prices and demand this year.

    Indonesia, the world's biggest exporter of thermal coal, has seen its output fall during a price lull that began early last year, and many of its miners have been unable to raise production due to debt constraints.

    In June, Thohir said he expected fewer than 10 Indonesiancoal producers would survive out of hundreds as cash flows dried up because of low prices.

    The amount of coal-fired power generation under development worldwide has shrunk by 14% this year, driven down by China as it struggles with oversupply and tries to promote cleaner energy, a study showed last week.
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    Lu'an Group's five coal mines approved as advanced capacity

    Five coal mines of Shanxi Lu'an Mining Group have been approved as part of the first batch of coal mines with advanced capacity by China's top economic planner, according to an announcement released by the company on its website.

    The National Development and Reform Commission (NDRC) approved Yuwu Coal Industry, Gaohe Energy, Zhangcun Coal Mine, Sima Coal Industy and Changcun Coal Mine –subsidiaries of Lu'an – to be advanced coal mines at an industry meeting on stabilizing coal supply and prices.

    By the end of 2015, these coal mines had a combined capacity of 30 million tonnes per annual (Mtpa) under the 330-workday schedule, with respective capacity at 7.5 Mtpa, 7.5 Mtpa, 4 Mtpa, 3 Mtpa and 8 Mtpa, showed data from the National Energy Administration.

    While under the 276-workday reform, total capacity of the five coal mines stands at 25.2 Mtpa.

    The NDRC confirmed 74 coal mines as advanced at the meeting, with 16 in Shanxi, which meet standards of advanced capacity, as well as undertake the task of adjusting coal supply to maintain market stabilization.

    These 74 mines, with annual capacity at 850 Mtpa, is hopeful to contribute additional output of 6-14 million tonnes per month, if they are allowed to increase daily output as much as 0.5 million tonnes.

    This, according to analysts, may help domestic thermal coal prices stabilize around 460-500 yuan.

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    China Coal Energy Aug coal sales up 17pct on month

    China Coal Energy Co., Ltd, the listed arm of China National Coal Group, sold 12.78 million tonnes of commercial coal in August, sliding 0.6% year on year but up 17.03% month on month, the company said in its latest statement.

    Of the sales, 6.74 million tonnes were self-produced commercial coal, dropping 27.3% from July.

    In the first eight months, the company sold 89.17 million tonnes of commercial coal, falling 1.6% from the year before, with sales of self-produced commercial coal dropping 15.5% to 54.25 million tonnes.

    The company produced 6.37 million tonnes of commercial coal in August, falling 27.9% on year and down 5.21% from July.

    The production during January-August stood at 53.47 million tonnes, sliding 16.6% from the year prior.
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    Rinehart’s iron ore mine won’t reach capacity this year

    The target of 55 million metric tons a year is now expected to be reached early in 2017, instead of late this year, Roy Hill Holdings chief executive officer Barry Fitzgerald told reporters on Wednesday at the mine in the Pilbara region. The producer experienced some faults with components at its port and is addressing some construction issues related to the processing plant, he said.

    “We set an aggressive target to try and get there by this year. We have not made that,” Fitzgerald said. “We will go reasonably close to it.”

    Roy Hill is raising output after it began shipments in December from Australia’s largest single iron ore mine. The commodity has rallied in 2016, confounding a slew of predictions earlier in the year that lackluster demand in China and rising low-cost supply would combine to drag prices lower.

    China’s government stimulus is helping to support steel demand, though is aimed more at “maintaining capacity, rather than increasing capacity,” Fitzgerald said. Almost 90% of output from Roy Hill is under long-term contract, including more than half earmarked for partners outside China, the producer said last year.

    Futures on China’s Dalian Commodity Exchange rose to as high as 396 yuan ($59.36) a ton in trading on Wednesday and were 0.1% lower at 393 yuan a ton at 4:15pm in Sydney. Iron ore with 62% content delivered to Qingdao in China declined 2.9% on Tuesday to $56.09 a dry ton, the lowest since July 22, according to Metal Bulletin.

    The impact of new seaborne supply — including from Roy Hill — won’t have as much influence on prices as forecast, according to Cliffs Natural Resources, the biggest US producer. Iron ore will probably be sustained between $50 and $60 a ton, chief executive officer Lourenco Goncalves said in an interview this week.

    BHP Billiton, the biggest mining company and No. 3 iron ore shipper, sees prices as likely to retreat as new supply arrives into the export market from Brazil and Australia.
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    BHP-Vale Brazil mine said to weigh missing next bond coupon

    Samarco Mineracao is considering skipping bond coupon payments that are due as soon as this month as the stalled Brazilian iron-ore miner runs out of money, according to people with knowledge of the matter.

    Without knowing when it can restart mining, the venture owned by BHP Billiton and Vale is yet to engage in formal restructuring talks with bondholders, two of the people said, asking not to be named because the matter is private. As a result, there’s not enough time to reach a restructuring deal before the coupons are due, they said.

    Once the world’s second-largest producer of iron-ore pellets, Samarco also is seeking an agreement on about $1.6-billion in bank loans to postpone payments until it restarts mining, people with knowledge said last month. A bankruptcy protection filing is among options being considered, one of the people said.

    Evaluating the prospect of bankruptcy protection, Solitaire Aquila's Patrik Kauffman, who helps manage $11-billion in assets, said “it’s always difficult.”


    “For the moment they are not operating,” Kauffman said by phone from Zurich. “It would be much better to reach out to bondholders and offer them something, and have a proactive discussion with them.”

    Samarco’s mining operations remain on hold ten months after a deadly tailings dam collapse released billions of gallons of sludge into communities and waterways in what the government described as the country’s worst everenvironmental disaster. As many as 19 people died.

    While Melbourne-based BHP, the world’s largest miningcompany, and Rio de Janeiro-based Vale are putting up money for Samarco’s working capital and repair and relief work, they aren’t covering debt payments. BHP, Vale and Samarco declined to comment.

    Coupon payments on dollar-denominated bonds due in 2022 are scheduled for as early as September. The notes were trading at 37.8 cents on the dollar at 11:37 a.m. in New Yorkcompared with about 60 cents in early May after hopes faded for a swift resumption of operations.

    After previously flagging a 2016 restart, the mine may not get new permits until late next year or 2018 amid regulatory scrutiny into the incident.

    A more likely restart date would be by the end of next year, with an earlier forecast of mid-2017 an optimistic scenario,Peter Poppinga, Vale’s head of ferrous minerals, said Tuesday in an interview in London.
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    Baosteel raises Oct steel prices by 100-260 yuan/t

    Baoshan Iron & Steel (Baosteel), China's top listed steelmaker, has decided to raise prices of its steel products by 100-260 yuan/t for October deliveries, the company announced on September 12.

    According to the announcement, Baosteel will raise ex-works price of its hot-rolled plate by 100 yuan/t, plain plate by 150 yuan/t, and hot-dipping zinc galvanized plate by 260 yuan/t.

    The price hike, following the company's steady pricing for the three products futures in August, comes on the back of strong demand for automotive steel, indicating the steelmaker's intention to uphold the market that has seen demand slackening ahead of China's traditional festival Mid-autumn Day.

    On September 13, the ex-works price of Tangshan steel billet stood at 2110 yuan/t, inclusive of VAT, down 130 yuan/t on week and 170 yuan/t on month.
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