Mark Latham Commodity Equity Intelligence Service

Thursday 13th April 2017
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    China March exports rise 16.4 pct, imports up 20.3 pct, both beat forecasts

    China's March exports rose 16.4 percent from a year earlier, while imports increased 20.3 percent, both exceeding market expectations, official data showed on Thursday.

    That left the country with a trade surplus of $23.93 billion for the month, the General Administration of Customs said, reversing a rare deficit in February.

    Exports in the first quarter of the year rose 8.2 percent from the same period last year, while imports surged 24.0 percent.

    China's first-quarter trade surplus was $65.61 billion.

    Analysts polled by Reuters had expected March exports rose 3.2 percent on-year, after a surprise drop of 1.3 percent in February.

    Imports had been expected to grow 18.0 percent, after a blowout 38.1 percent expansion the previous month.

    Analysts had expected China to return to a surplus of $10.0 billion in March, versus February's $9.15 billion deficit.

    China's economic data in January and February can be highly skewed by the timing of the long Lunar New Year holidays, when offices and factories shut for a week or more.
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    China Q1 rail cargo transport rises 15.3pct on year

    China transported a total 724 million tonnes of cargoes via railway in the first quarter of this year, a year-on-year rise of 15.29%, said the China Railway Corporation on April 9.

    In March, the cargoes shipments via railway stood at 254 million tonnes, up 16.3% from the year-ago level. Urumqi Railway Bureau reported the sharpest year-on-year increase of 48.3% in cargoes delivery in March, said the company.

    China's rail transports have been sliding at a faster pace since 2015, with decline accelerating from 1.8% in 2012 to 4.7% in 2014 and to 11.6% last year. Yet shipments started to trend up this year, with shipments growth speeding up from 10.4% in January to 14.6% in the first two months further to 15.29% in the first quarter.

    The company cited its efforts in transport structural reform, supply-side structural campaign and modern logistics for the rebounded cargoes delivery. Meanwhile, China's overloading rules and controls on road coal transport at Tianjin port also boosted rail shipments to some degree.

    China's Ministry of Transport released a new overloading regulation on August 30 last year, which allowed the total weight of a coal truck to 49 tonnes at most, instead of previous 55 tonnes that have been in effect since 2004.

    The new regulation, which was put into effect on September 21, pushed up the freight for trucking coal from production bases to northern ports, and thus caused a shift from road transport to rail shipment.  

    In October last year, coal transports via railways logged a year-on-year increase of 6.6%. Afterwards, many railway bureaus began to raise rail coal freight rates amid stronger demand.

    In the first week of November last year, rail coal transports reached nearly 40 million tonnes, rising 10.2% from the year prior. On November 10, Taiyuan and Lanzhou railway bureaus further lifted rail coal freight rates by 10%.

    Tianjin, one major coal transfer port in northern China's Hebei province, will halt taking coal transported by trucks via road and can only receive coal from railways by end-September this year, in order to reduce pollution emission from diesel vehicles and combat smog, said Zhao Yingmin , minister of Ministry of Environmental Protection, on February 22.

    In 2016, coal shipments at Tianjin port stood at 104 million tonnes, with 56 million tonnes or 53.85% transported via trucks.

    Daqin Railway Co., Ltd announced on March 25 it will lift rail coal freight rates by 10% to the benchmark rate set by the government, effectively canceling a discount that has been offered to boost shipment since early February 2016.  

    Effective 18:00 on March 24, coal freight rate for rail lines implementing the nation's standard rate would be raised by 0.01 yuan/ to the benchmark freight rate of 0.098 yuan/, while that of Daqin, Beijing-Yuanping and Fengtai-Shacheng lines was lifted by 0.01 yuan/ to 0.1 yuan/, Daqin Railway said in a statement.
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    S.Korea coal, nuclear power targeted for cuts by presidential candidates

    No matter who is elected as South Korea's new leader next month it is clear that coal and nuclear power generation will likely be scaled back, with most of the candidates laying out plans on Wednesday to address public concerns over pollution and safety.

    Less than a month from a May 9 election to replace impeached president Park Geun-hye, policy experts outlined in a forum the energy proposals of four of the five contenders.

    The two leading candidates, liberal front-runner Moon Jae-In and centrist Ahn Cheol-soo, both plan to lower South Korea's reliance on coal and nuclear power, pointing to a need to shift to renewable energy, according to their policy advisors.

    In the latest poll by Gallup Korea, Moon got the support of 38 percent of respondents, and Ahn got 35 percent.

    South Korea, Asia's fourth-largest economy, gets 40 percent of its electricity from coal, 30 percent from nuclear, 20 percent from natural gas, and the rest from oil and renewables.

    But policy changes are expected amid growing concerns over pollution and the safety of nuclear energy, and Moon and Ahn appear determined to help drive them.

    "We should move away from coal and nuclear power, and shift to clean or renewable energy-based platforms," said Kim Jwa-kwan, head of Moon's energy policy team.

    Kim said his team planned for nuclear and coal power to account for 18 percent and 15 percent respectively of power supply by 2030, while the contribution of liquefied natural gas (LNG) would increase to 37 percent to support the rise of renewables.

    If elected, Moon also "would scrap a plan to build Shin Kori No.5 and Shin Kori No.6 nuclear reactors on which construction began last year and revamp the country's nuclear power expansion scheme," Kim said.

    That means South Korea's plan to build 11 nuclear reactors by 2029 could be under threat.

    Ahn would similarly shelve a plan to construct four coal-fired power plants and not extend the lifespan of ageing coal and nuclear power stations, said Oh Jeong-Rye, deputy director of Ahn's People Party.

    Both candidates target a 20 percent renewable energy share by 2030 as part of efforts to cut carbon emissions.

    Under the current power supply plan, in addition to building 11 nuclear reactors by 2029 - three of which are already under construction - South Korea plans to add 20 more coal-fired power plants by 2022.

    Policy experts for two other candidates - the conservative Bareun Party's Yoo Seong-min and the left-wing Justice Party's Sim Sang-jung - also said they would overhaul South Korea's coal and nuclear energy policy.

    Sim would cut nuclear power to zero by 2040 and phase out coal by 2060, according to her energy advisor.
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    China slams Shanghai for environmental violations

    China's business hub of Shanghai has slacked off in efforts to improve the environment, levying fines too small to deter polluters, hundreds of whom have flouted closure orders, authorities said on Wednesday.

    Standards had fallen and some of Shanghai's environmental work had grown "slack", an inspection team found after a month-long investigation late last year, the Ministry of Environmental Protection (MEP) said on its website (

    The environmental protection work that remains undone could hold back Shanghai's development, the ministry said.

    "Shanghai's environmental protection work has had obvious successes but environmental quality remains a prominent weak point affecting the city's overall development," it said.

    From 259 water samples tested, 88 were found unfit even for farm and industrial use, falling below the ministry's "grade V" categorisation, it said, adding that overall water quality in some districts has worsened conspicuously since 2013.

    It singled out Shanghai's decision to postpone from 2016 until the decade's end a target of raising treatment standards for urban waste water, saying its plans to improve urban sewage and waste treatment had also fallen behind schedule.

    Ageing landfills are still leaching into Shanghai's water supply, and trash is still being illegally dumped, it added.

    Law enforcement in Shanghai, one of China's richest cities, was still inadequate, the team found, with fines too light to discourage persistent polluters. It said 800 enterprises ordered to stop production since 2013 were still operating normally.

    China's local governments are proving to be one of the key battlegrounds in its "war on pollution", with many accused of turning a blind eye to environmental violations so as to protect valuable sources of revenue and jobs.

    Teams of environmental inspectors have fanned out across China since last year, armed with special powers to make surprise checks and hold local leaders to account.

    While there has been progress in tackling air pollution, water quality in several regions has significantly worsened, reports from such teams revealed last November.
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    Melenchon Crashes Party as French Vote Risks Rise

    Under a cloudless blue sky at an outdoor waterfront rally of 30,000 people in Marseille on Sunday, Jean-Luc Melenchon showed why his rise in French polls is spooking markets.

    Speaking without a teleprompter or notes and using his trademark mix of humor and anger, the Communist-backed far-left candidate of the France Unbowed party regaled the gathering with the evils of “extreme markets that are transforming suffering, misery and abandonment into gold and money.” He alluded to France as a country “with huge wealth that is badly distributed,” denounced the U.S. air strikes in Syria and called for France to leave NATO.

    “A new enthusiasm is now stirring our fervor,” the firebrand orator, famed for his lyrical discourse, told the enthralled crowd. They cheered and egged him on, screaming “Resistance,” as he sprinkled his speech with references to ancient Greece, the Renaissance and revolution.

    Speeches like those have catapulted the 65-year-old fan of former Venezuelan leader Hugo Chavez and Cuba’s Fidel Castro closer than he’s ever been to the French presidency. Polls show that Melenchon is among four candidates now within striking distance of the second round of the French election, with a chance to gain enough votes on April 23 to make the runoff. With his plan to spend his way out of France’s economic woes, he is roiling markets.

    The premium that France pays over Germany to borrow for 10 years rose to 75 basis points on Tuesday from less than 60 points in late March. Melenchon’s surge in popularity “is bad news for French bonds,” Aline Schuiling and Kim Lui, analysts at ABN Amro, said in a note to clients.

    A Kantar Sofres poll over the weekend had Melenchon in third place with 18 percent, a point ahead of one-time front-runner Francois Fillon. The poll showed nationalist Marine Le Pen and centrist Emmanuel Macron tied at 24 percent ahead of the first round of voting, with Macron easily winning the May 7 runoff. Other polls put Melenchon level or just behind Fillon, but even that’s a major rise in the past few weeks. The Ifop daily poll April 7 had Melenchon at 17 percent, up from 10.5 percent on March 17.

    Rising Unpredictability

    Melenchon’s steady rise has turned France’s already topsy-turvy election campaign into one of the most unpredictable contests in recent history. The far-left candidate has a loyal, passionate following not unlike that of the anti-immigration, anti-euro Le Pen. Although still remote, the possibility of a face-off between the two is no longer dismissed as impossible.

    “The impressive breakthrough of Jean-Luc Melenchon has totally reshuffled the cards of this election,” said Gael Sliman, head of pollster Odoxa. “With two weeks to go, we have four candidates who can still win, which is unheard of.”

    As he makes his second bid for the presidency, Melenchon’s followers are attracted by his uncompromising positions against globalism and Western militarism.

    “He has the right ideas for the country,” said Tachefine Hocime, a 46-year-old maintenance worker and part-time musician, at a Melenchon rally in Le Havre on March 29.

    Stimulus Plan

    The candidate, who has been vocal against the European Union’s austerity push, says his platform calls for a 100 billion-euro stimulus program and the renegotiation of European treaties to give France more economic control -- with several conditions attached to staying in the euro.

    He would make it harder for companies to fire, limit executive pay and pull out of free-trade deals. He wants to raise France’s minimum wage by 15 percent and lower the retirement age for some to 60 years with full pension.

    “A Melenchon presidency would be unlikely to be followed by a parliamentary majority for the candidate, making it very difficult for the latter to implement his program,” said a note by Credit Suisse analysts to clients on Tuesday.

    That has not halted the rise in his popularity, which took off after a March 20 debate between the top five candidates -- with Melenchon at the time firmly in fifth place. He far outshone Socialist Party nominee Benoit Hamon and post-debate polls credited him with the best performance after Macron. He was again voted the most convincing of all the 11 candidates present at the next debate April 4.

    Debate Wins

    Those performances -- where Melenchon mixed quips with angry denunciations of France’s economic situation -- came on top of the successful use of social media. Not unlike Senator Bernie Sanders during the U.S. campaign, Melenchon, the oldest of the main candidates, has the biggest presence on the Internet and is popular with young voters.

    He has the most consulted French campaign site, and the most subscribers, commentators and viewers on YouTube, according to Dentsu Consulting. His campaign has included touches such as using holograms to be able to address rallies simultaneously, and he once showed up at a McDonald’s restaurant to join blockading workers seeking pay rises.

    “He’s been the absolute star on social media,” said Odoxa’s Slimane.

    According to Ifop, 71 percent of the French rate Melenchon’s campaign as “good” or “very good,” ahead of Macron at 61 percent. Among voters under 35, Ifop says 23 percent plan to vote for Melenchon, behind the 27 percent who say they’ll opt for 39-year-old Macron, but ahead of all the other candidates.

    Political Journey

    “He has exciting rallies, he gives excellent interviews, he offers a real hard opposition,” said Edouard Lecerf, head of political studies at pollsters Kantar TNS.

    It has been a long, hard journey to this point for the son of a post office worker and a teacher, both descendants of Spaniards and Italians who emigrated to French Algeria at the turn of the century. Melenchon was born in Tangier, now Morocco, when it was an international zone.

    He moved to France at the age of 11, studied philosophy, did various jobs including as a journalist and proofreader and got involved in Trotskyist politics. He joined the Socialist Party in 1976 at the age of 25, and has been elected to various regional, national and European legislative positions.

    He was deputy head of the Essonne region, south of Paris, from 1998 to 2004, and a junior minister in the Ministry of Education from 2000 to 2002. He broke with the Socialist party in 2008, saying it was becoming too business-friendly, and founded the Party of the Left.

    A sign of Melenchon’s success is that candidates who once ignored him have taken to attacking him. While Melenchon was speaking in Marseille, Fillon said at a rally in Paris that his spending policies would turn France into Greece.

    ‘Potemkin Captain’

    “Melenchon dreams of being the captain of the Potemkin, but he’ll end up selling the scraps of the Titanic,” Fillon said, referring to the Tsarist warship taken over by a communist-led mutiny. Monday, Macron said he didn’t share Melenchon’s vision of peace if it’s the “peace of Vladimir Putin.”

    The gains made by Melenchon, who won about 11 percent in the first round in the 2012 elections, have come almost entirely at the expense of Hamon. That, pollsters say, could limit any further rise. In Ifop’s latest poll, Hamon was at 9.5 percent, down from about 13.5 percent before the first debate. The Socialist candidate has been hurt by the unpopularity of President Francois Hollande.

    “Melenchon has progressively grated away at Hamon, but there might not be that much more to grate away,” said Jerome Fourquet, director of opinion studies at Ifop. The combined polling scores of the two haven’t varied much over the past two months.

    Jerome Jaffre, a researcher at Sciences Po’s Cevipof institute, said Melenchon will be held back if voters pay attention to his platform, rather than gravitate toward him because of his personality and Hamon’s poor campaign.

    “He has to find 100 billion euros for his investments, he wants to raise taxes, he calls into question all European treaties, which in effect is calling Europe into question,” Jaffre said. “That’s not what most French want.”
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    India's top court stops Adani Power from charging higher prices

    India's top court ruled on Tuesday that Adani Power Ltd cannot charge its customers more to cover a surge in the cost of imported coal, overturning a decision by a power regulator in December.

    The ruling sent Adani Power's shares down as much as 20 percent on Tuesday, its biggest intra-day loss since it went public in 2009.

    The court did, however, allow the utility to claim relief for the higher costs, which resulted from a shortage in domestic supplies at state-run Coal India Ltd.

    Both Adani Power and competitor Tata Power - which was also party to the ruling although it was not mentioned directly in it - struck long-term deals in the middle of the last decade with distribution companies to supply power from plants they each operate in Prime Minister Narendra Modi's home state of Gujarat.

    The companies also struck deals with domestic and foreign miners in the latter part of the last decade to fuel their plants in Gujarat, which each have over 4,000 megawatt (MW) of capacity.


    In 2010, Indonesia adopted new benchmark coal prices leading to an increase in the price of coal imported from the country.

    Adani and Tata appealed for relief, arguing that they had to be compensated for an unforeseen change in economic conditions which made the terms of the deal with distribution companies unviable.

    Following a legal battle that stretched over half a decade, the Central Electricity Regulatory Commission (CERC) ruled in December last year that the companies could charge their customers more to compensate for higher costs.

    The case, which was argued by former Indian minister and lawyer Kapil Sibal and renowned anti-corruption lawyer Prashant Bhushan among others, was then escalated to the country's top court by the state distribution companies.

    The top court ruled in favour of the distribution companies, saying the agreements did not state that "coal is to be procured only from Indonesia at a particular price".

    "The price payable for the supply of coal is entirely for the person who sets up the power plant to bear," the top court's judges said in Tuesday's ruling.

    CERC will now look at the matter afresh and determine what relief should be granted to the companies to make up for the shortage in domestic coal supplies.

    Companies will now be more cautious when entering into long-term power purchase agreements, a Mumbai-based analyst told Reuters.

    Adani Power's shares recovered some losses on the day to close about 16 percent lower at 37.20 rupees. Shares in Tata Power closed down 1.8 percent at 85.45 rupees.
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    BHP Billiton reasserts strategy, says Elliott proposals flawed

    Anglo-Australian miner BHP Billiton on Wednesday dismissed a wide-ranging proposal by shareholder Elliott Advisors to overhaul its corporate strategy and sell off oil interests, saying the costs would far outweigh the benefits.

    "The elements of the Elliott proposal as described to the board would not be in the long-term interest of shareholders," BHP Chief Executive Officer Andrew Mackenzie said on an analyst call. "I cannot overstate my strong belief that BHP Billiton is on the right track."

    The comments came as BHP released a detailed response two days after U.S.-based Elliott made public a letter to its directors urging them to consider spinning off the U.S. oil arm, while returning more cash to investors.

    The response offered no counterproposal and instead defended the miner's longstanding strategy.

    "We have been in engagement with Elliott for eight months," Mackenzie said. "From our earliest engagements it was clear there were major flaws in Elliott's proposals."

    Elliott, which said it holds a "long economic interest" of about 4.1 percent of London-listed BHP Billiton PLC, wants the miner to ditch its dual corporate structure and replace it with a single company domiciled in Britain.

    "The (dual-listed structure) is not a restraint to our business," BHP Chief Financial Officer Peter Beaven told analysts. "It provides two important acquisition currencies in addition to cash."

    Under the Elliott plan, BHP would have a primary share-market listing in London and a secondary listing in Sydney.

    The Australian government on Tuesday said any significant changes to BHP's corporate structure would need to be consistent with a "national interest" test under the law.

    Over the last decade, BHP has examined the prospect of changing its corporate structure and spinning off its oil business but has ultimately rejected the ideas.

    "A standard petroleum business would lose access to BHP Billiton's balance sheet," Mackenzie said on Wednesday. "Were we to adopt this proposal our global partners would have to work with a Balkanised, broken up BHP Billiton."
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    Mining group Vedanta completes buyout of Cairn India

    Indian metals and mining group Vedanta Limited said on Tuesday it had completed its buyout of oil and gas explorer Cairn India Ltd, consummating a deal that was delayed for months by investor opposition.

    Cairn India said in a separate statement its board had made the merger effective as of Tuesday.

    The deal gives Vedanta Limited, the Indian unit of diversified energy group Vedanta Resources PLC, access to Cairn's $3.5 billion cash pile, boosting its finances.

    It was delayed due to opposition from some big minority shareholders, leading Vedanta to sweeten the offer last August.

    "This merger will increase the appeal of Vedanta Ltd to global investors as it simplifies the structure and increases the size and free float of the company," Vedanta Limited's Chief Executive Tom Albanese said in a statement.
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    China March producer inflation cools for first time in seven months on steel glut fears

    China's producer price inflation cooled for the first time in seven months in March as iron ore and coal prices tumbled, pressured by fears that Chinese steel production is outweighing demand and threatening a glut of the metal later this year.

    A renaissance in China's steel industry has been a major driver of the world's second-largest economy in recent quarters, helping to generate the strongest profit growth in years and adding to a reflationary pulse being felt across the global manufacturing sector.

    But after cranking out as much metal as possible in recent months, Chinese steel mills are now starting to cut prices, threatening to snuff out a bull market that had pushed prices of some steel construction products to their highest since 2014.

    China's producer price index (PPI) rose 7.6 percent in March from a year earlier, still at an elevated pace but in line with analysts' expectations and easing from a gain of 7.8 percent in February, which was a 9-year high, the National Bureau of Statistics said on Wednesday.

    Economists polled by Reuters had forecast a softer reading as a torrid rally in China's commodity markets showed signs of correcting and on expectations that measures to cool the country's overheated housing market would eventually slow demand for steel and other building materials.

    On a month-on-month basis, the PPI rose just 0.3 percent, the smallest increase since September 2016 and half the pace seen in February.

    China's consumer price inflation edged up to 0.9 percent year-on-year, slightly softer than expected and compared with 0.8 percent in February.

    Analysts polled by Reuters had predicted March consumer inflation would edge up to 1.0 percent, but remain well within the central bank's comfort zone.

    Still-modest consumer inflation and moderating producer prices will give policymakers room to continue with a gradual pace of monetary policy tightening as they try to contain risks from years of debt-fueled stimulus without crimping economic growth.

    Consumer inflation picked up in March as costs for health care services, housing, transportation and communication surged, suggesting stronger demand from an increasingly wealthy and rapidly aging population, and that stronger producer inflation in the past months may have started passing through to downstream consumers.


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    Food prices, the biggest component of CPI, fell by 4.4 percent in March after a 4.3 percent drop in February.

    China lowered gasoline and diesel retail prices late last month by most so far this year.

    Similar to previous months, much of the year-on-year surge in producer inflation was largely driven by higher prices of raw materials for steelmaking products such as iron ore and coking coal.

    Demand has been fueled by a housing boom and a government infrastructure spending spree, with Beijing's efforts to cut excess production in heavy industries giving an added boost to frenzied futures markets and imports of raw materials from big producers such as Australia's Rio Tinto  and BHP Billiton.
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    Russia's FinMin says state firms must pay half of profits in dividends

    Russian Finance Minister Anton Siluanov said on Tuesday state companies should pay at least 50 percent of their profits in dividends at a time when the government is not increasing taxes.

    Speaking at an economic conference, Siluanov said his ministry would not increase the tax burden on businesses and households but would make up for a shortfall in budget revenues at the expense of state companies.
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    Printed titanium parts expected to save millions in Boeing Dreamliner costs

    Boeing Co hired Norsk Titanium AS to print the first structural titanium parts for its 787 Dreamliner, a shift that the Norwegian 3-D printing company said would eventually shave $2 million to $3 million off the cost of each plane.

    The contract announced on Monday is a major step in Boeing's effort to boost the profitability of the 787 and a sign of growing industrial acceptance of the durability of 3-D printed metal parts, allowing them to replace pieces made with more expensive traditional manufacturing in demanding aerospace applications.

    Strong, lightweight titanium alloy is seven times more costly than aluminum, and accounts for about $17 million of the cost of a $265 million Dreamliner, industry sources say.

    Boeing has been trying to reduce titanium costs on the 787, which requires more of the metal than other models because of its carbon-fiber fuselage and wings. Titanium also is used extensively on Airbus Group SE's rival A350 jet.

    "This means $2 million to $3 million in savings for each Dreamliner, at least," starting in 2018 when many more parts are being printed, Chip Yates, Norsk Titanium's vice president of marketing, said in a telephone interview.

    Boeing builds 144 Dreamliners in a typical year. The company declined to comment on the estimate but said Norsk's technology would help reduce costs.

    The Dreamliner turned profitable last year after racking up nearly $29 billion in production-related losses.

    Norsk worked with Boeing for more than a year to design four 787 parts and obtain Federal Aviation Administration certification for them, Yates said.

    Norsk expects the U.S. regulatory agency will approve the material properties and production process for printed parts later this year. That will "open up the floodgates," Yates said, by allowing Norsk to print thousands of other parts for each Dreamliner, without each part requiring separate FAA approval, resulting in the millions in expecting savings per plane.

    "You're talking about tons, literally," on the 787 that would be printed instead of made with traditional, expensive forging and machining, he said.

    General Electric Co is already printing metal fuel nozzles for aircraft engines. But Norsk and Boeing said the titanium parts are the first printed structural components designed to bear the stress of an airframe in flight.

    Norsk said it will print initially in Norway, but aims to have nine printers running by year-end at a 67,000-square-foot (6,220-square-meter) facility in Plattsburgh, New York.
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    Gestalt, philosophy etc.

    As they plough through their GCSE revision, UK students planning to take politics A-level in the autumn can comfort themselves with this thought: come September, they will be studying one thinker who does not belong in the dusty archives of ancient political theory but is achingly on trend. For the curriculum includes a new addition: the work of Ayn Rand.

    It is a timely decision because Rand, who died in 1982 and was alternately ridiculed and revered throughout her lifetime, is having a moment. Long the poster girl of a particularly hardcore brand of free-market fundamentalism – the advocate of a philosophy she called “the virtue of selfishness” – Rand has always had acolytes in the conservative political classes. The Republican speaker of the US House of Representatives, Paul Ryan, is so committed a Randian, he was famous for giving every new member of his staff a copy of Rand’s gargantuan novel, Atlas Shrugged (along with Freidrich Hayek’s Road to Serfdom). The story, oft-repeated, that his colleague in the US Senate, Rand Paul, owes his first name to his father Ron’s adulation of Ayn (it rhymes with “mine”) turns out to be apocryphal, but Paul describes himself as a fan all the same.
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    Aramco board to meet in Shanghai as it seeks Chinese investors for IPO

    Saudi Aramco's board will meet in China in May for the first time in seven years, industry sources said, as the state-owned energy firm seeks to lure Chinese and Asian investors to its giant share offering.

    The board of directors would gather in Shanghai on May 10 to discuss the firm's business plans, investments and preparations to sell up to 5 percent of Aramco in 2018, the sources said.

    An annual report of the company's activities for the previous year is usually issued after the board meeting.

    The board, which gathers twice a year, often meets abroad but only once before had a meeting in China, in 2010.

    Aramco has appointed international banks with access to Chinese investors to advise on the initial public offering (IPO) .

    The issue of Aramco's IPO and a potential role for Chinese investors was discussed last month during the visit by Saudi Arabia's King Salman to Beijing, sources said.

    The IPO could generate up to $100 billion and give Aramco an overall valuation of $2 trillion, the biggest ever.

    "Chinese participation in Aramco's IPO would be very logical and strategic," said Sadad al-Husseini an energy analyst and former Aramco executive.

    Saudi officials have said Chinese companies were interested in investing in the Aramco IPO as Beijing seeks to secure crude supplies from the world’s biggest oil exporter.

    "There is a serious push from Aramco for Chinese investors to become cornerstone investors in the IPO," an industry source said.

    A second source said talks were at an early stage and any Chinese investment in Aramco would likely be in coordination with the Beijing government.

    Aramco is likely to be listed on the Saudi stock exchange in Riyadh and on one or more international markets. The kingdom is considering exchanges in New York, London, Toronto and Asia.

    Industrial and Commercial Bank of China International Holdings, a unit of Industrial and Commercial Bank of China , and China International Capital Corporation (CICC) are among Chinese banks pitching for a role in the IPO, sources familiar with the matter have told Reuters.

    Chinese participation in the IPO could strengthen Riyadh's hand in other Chinese investment decisions, the sources said.

    Aramco has been in talks for years to invest in refineries in China so it can sell more of its crude to China. Those plans have yet to progress.

    The board, which often tours Aramco's investments where they meet, also comes before the Organization of the Petroleum Exporting Countries gathers in Vienna on May 25 to decide on output policy. An OPEC-led pact to cut supplies ends in June.

    The nine-member board includes Saudi Energy Minister and Aramco Chairman Khalid al-Falih, Minister of State Ibrahim al-Assaf, Aramco CEO Amin Nasser, Public Investment Fund Managing Director Yasir al-Rumayyan and royal court adviser Majid al-Moneef. It also includes former Royal Dutch Shell Chairman Mark Moody-Stuart and former Schlumberger head Andrew Gould.
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    "The Change Of Change Is Now Negative"

    Ahead of what we hope will be a relatively quiet week following the juggernaut from the past 7 days, we present readers with another excerpt from the latest weekly note from Eric Peters, CIO of One River, which is not only appropriate in the context of recent observation by UBS, involving the sudden collapse of the global credit impulse, but far more importantly, may be critical for those who are in the business of timing key market inflection points.

    From Weekend Notes by Eric Peters

    “The change of change is now negative,” said the CIO.

    “Global growth is still rising, but the rate of improvement is slowing,” he explained. “Same holds true for global inflation, oil prices, copper, iron ore. Credit growth is slowing in the US, Europe, Japan, China.”  If these things were all contracting, we’d plunge into recession, but we’re not there. We’re simply at the point in the cycle where the rate of acceleration is slowing - which is both evidence of a pause, and a precondition for every major turn.

    “The last time we had a major shift in the change of change was a year ago.” In Jan/Feb 2016, China was imploding. Commodity prices were tanking with equity markets, the dollar soared alongside volatility. Then China unleashed explosive credit stimulus, while the Fed blinked, guiding forward interest rates dramatically lower.

    Within a short time, the change of change turned positive. Which is not to say things immediately accelerated, it’s just that they started contracting more slowly. And that marked the time to buy.

    “Pretty much everything that happened in 2016 can be explained by two things; China and oil prices,” he said. “Literally, that’s it.”

    China’s stimulus-induced rebound and the oil price recovery is all that mattered.

    “Brexit was a joke. Trump was a joke. In fact, the only real significance of those events was that they provided investors with opportunities to jump on board the reflation trade at back near Q1 prices.” The reflation trade quietly began in the Q1 collapse, and accelerated off the extreme post-Brexit summer lows in global interest rates.

    “That’s what made last year remarkable. Even investors who missed the first opportunity, had two chances to make a lot of money.” You see, that reward is usually reserved for those who act on the first signs of a change in the change of change.

    Summary: as Peters helpfully points out, the change of change - that "green light" to buy risk one year ago when it flipped positive - is now negative. Or, as UBS summarized it simply in just one chart several weeks ago...
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    Chou En Lai on the French Revolution : Did he say it's too soon to tell?

    It is said that Chou En Lai, asked to assess the impact of the French Revolution, replied:

    "It's too soon to tell."

    Not according to Nixon’s interpreter, the American diplomat Chas Freeman, who has recently spoken about this. But before we see what Freeman had to say, let’s have a look at the story as it’s usually told.

    Legend has it that, while preparing Richard Nixon for his historic visit to China in 1972, Henry Kissinger mentioned that Chinese Prime Minister Chou En-Lai was an avid student of French history. During his trip, Nixon met with Chou in the walled garden of the Forbidden City. As they walked slowly around the lily ponds, Nixon remembered Kissinger's comment. To break the ice, he asked Chou what he thought had been the impact of the French revolution on western civilization. Chou En-Lai considered the question for a few moments. Finally, he turned to Nixon and replied, "The impact of the French revolution on western civilization - too early to tell."

    It seems this shows up in a few different versions. Sometimes it's said to Kissinger, sometimes, as related above, to Nixon, and sometimes a full twenty years earlier to someone else. So it looks, or looked, like a good guess that Chou En Lai did actually say this, though precisely when, or to whom, isn't clear.

    Chou’s answer has become a frequently deployed cliché, used as evidence of Chinese leaders' sage, patient, and far-sighted ways, in contrast to impatient westerners.

    But now up pipes Chas Freeman and kills off this cosy anecdote. Here's what he says happened.

    Chou and Nixon did indeed converse about events in France. But whilst Nixon’s question referred to the Revolution of 1789, Chou’s reply referred to les évenéments of 1968 – the Paris student riots and sit-ins just three years before.

    It seems this all came out at a seminar in Washington (in early June, I surmise) to mark the publication of Kissinger’s book, On China. Chas Freeman is reported to have said “I distinctly remember the exchange. There was a misunderstanding that was too delicious to invite correction”; also that Chou’s misconstrued comment was “one of those convenient misunderstandings that never gets corrected”. Moreover that this probably occurred over lunch or dinner, during a discussion about revolutions that had succeeded and failed; not in the walled garden.

    He said Chou had been confused when asked about the French Revolution and the Paris Commune, since “these were exactly the kinds of terms used by the students to describe what they were up to in 1968 and that is how Chou understood them.”

    Just a 300-year interlude

    I'm partly sorry this story has been debunked. That the Chinese take a long view of history may be both a cliché and actually true, even if the Nixon/Chou story can no longer be cited as an instance of it.

    As an example of short- and long-term historical perspectives, let's note that in the West, China’s emerging economic dominance is surprising and disturbing. To the Chinese on the other hand, it’s wholly unsurprising. Through most of recorded history their country has been the world’s foremost economic power; there’s been a 300-year interlude, that’s all.

    As to the effect of the French Revolution, this event brought about the rise of the nation state and was the precursor of the Russian revolution, and the Chinese revolution, and arguably of the First World War (and thereby also the Second World War). Who can say what the long term consequences of all that is? Chou’s answer, the answer we now have to believe he never gave, was quite apposite.

    China’s long predominance in world history prompts the question, why did modern science and technology develop in Europe, when China seemed so much better placed to achieve it? It’s known as the Needham Question … but here I'll stop ... more another day.
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    National Grid issues warning on UK summer demand

    Wind and solar power generators in the UK may be asked to reduce their output this summer as the National Grid endeavours to ensure a balanced grid.

    FT reports that the growth of both renewable technologies means there is likely to be too much generation over the summer period, and NG has to keep the national transmission system at a stable frequency within a narrow range around 50 hertz to ensure household appliances work properly.

    In its latest “summer outlook” report, National Grid said peak demand this summer is likely to be the lowest on record, at 35.7GW. Minimum summer demand is expected to be 18.1GW, lower than 18.4GW last year.

    In a statement National Grid said, “Based on current information we anticipate that during some weeks there will be more inflexible generation on the system than is needed to meet demand. In order to balance the system, it may be necessary, during these weeks, for us to instruct inflexible generators to reduce their output. Wind generation may need to be curtailed this summer during minimum demand periods to help us balance the system.”
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    Rio Tinto to fight $447 million Australian tax bill

    Rio Tinto, the world’s second-biggest miner by market value, will fight a A$447 million tax bill it received from the Australian government Wednesday, adding that the new assessment is not related to any tax avoidance scheme.

    The amount is linked to what is known as “transfer pricing” between Rio Tinto’s Australian operations and its Singapore office.

    The amount, consisting of A$379 million plus interest of A$68 million, is linked to what is known as “transfer pricing” between Rio Tinto’s Australian operations and its Singapore office for the calendar years 2010 to 2013.

    The practice, a tactic that allows firms to move profits to low taxing countries, is a common form of legal tax avoidance used by resources companies.

    But Rio Tinto noted it voluntarily approached the Australian Commissioner of Taxation (ATO) more than 10 years ago seeking to confirm its pricing arrangements. The transfer price in dispute is in line with an outcome agreed to by the ATO years before 2010, the company added.

    The ATO is also auditing 59 multinational corporations and hundreds of other companies to ensure they comply with the government's new Multinational Anti-Avoidance Law, the Financial Review reported.

    Such legislation, it noted, is focused on global businesses worth more than $1 billion that have company structures that allows them to evade having a taxable presence in Australia.

    Rio said that while it will challenge the amended tax assessment, it has agreed to pay 50% this month.
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    Venezuelan opposition, security forces clash in anti-Maduro protests

    Venezuelan opposition protesters and security officers clashed on Thursday as the country's fragmented opposition gained new impetus against a socialist government it blames for the country's social and economic collapse.

    The demonstrations were sparked by Supreme Court action last week to assume control of the country's opposition-led congress in what demonstrators said was a lurch toward dictatorship.

    While the widely condemned decision was quickly overturned, the opposition has stepped up street protests against President Nicolas Maduro, despite such demonstrations having achieved little in the past.

    Thousands of people blocked a main Caracas highway on Thursday, chanting "Out with Maduro!" and "No more dictatorship!" and vowed to march to the office of the state ombudsman, the government's principal human rights advocate.

    "The human rights advocate has to stop being the Socialist Party advocate!" opposition leader Henrique Capriles said in an online broadcast as he marched wearing a hat in the Venezuelan colors of yellow, red, and blue.

    Security forces blocked the march, sparking clashes with dozens of masked youths in a scene repeated over and over again in the past 15 years in volatile Venezuela.

    Protesters threw stones and petrol bombs while security officials fired tear gas and dispersed the crowds by mid-afternoon. The opposition called for another nationwide march on Saturday.

    Maduro critics are demanding the removal of seven Supreme Court justices who signed last week's decision. They accuse the government of stalling elections for state governors, which polls suggest would not go well for the ruling Socialists.

    State ombudsman Tarek Saab on Thursday evening shot down a censure measure against the Supreme Court justices that had been approved by the opposition-controlled assembly this week, saying the controversial ruling had been "clarified" by the reversal of the decision.

    Maduro said in a televised address that authorities had detained 30 people involved in the demonstration.


    Three opposition legislators late on Thursday said via Twitter that a young man was killed in a suburb of Caracas by security forces who were breaking up a protest there.

    Reuters was unable to independently confirm the incident, and interior ministry officials were not immediately available for comment.

    Venezuela is suffering from triple-digit inflation, shortages of basic foods and medicines, and one of the world's highest murder rates.

    Maduro's government has said that a U.S.-backed business elite is responsible for Venezuela's economic downturn and that it is trying to foment a coup to impose right-wing rule. His supporters also rallied in Caracas on Thursday.

    "Mr. Capriles, you're trying to ignite the country," Socialist Party official Freddy Bernal said during the government rally. "You're looking for deaths. Don't then come like a sissy saying that you're a political prisoner. Don't then come crying that you're being persecuted."

    Tensions have been simmering after tear gas and rocks flew between protesters and security forces during a major demonstration on Tuesday. The confrontations injured 20 people and led to 18 arrests, according to the Caracas-based Penal Forum rights group.

    Not since 2014's major unrest has the opposition held such sustained demonstrations, despite protester fatigue, fear of violence, and the necessity for so many Venezuelans to spend much of their day looking for food.

    The opposition has said it faces increasing persecution. The leader of one of its parties, Copei, sought refuge in the home of the Chilean ambassador in Caracas on Wednesday, according to Chile's foreign ministry.

    Opposition protesters have said their demonstrations are being stymied by authorities closing subway stations and adding checkpoints on major highways.

    "They can do whatever they want, but the people of Venezuela will today make their voices heard on the streets," tweeted opposition lawmaker Juan Requesens, who has led protests this week.
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    Oil and Gas

    NuStar buying Navigator Energy for $1.5 billion

    San Antonio-based NuStar Energy is buying Navigator Energy Services for $1.5 billion to establish its pipeline presence in West Texas’ Permian Basin.

    The Permian is booming again and NuStar is seeking to build a foothold there with pipeline, processing and storage capacity. Dallas-based Navigator is backed financially by the private equity First Reserve Energy Infrastructure Fund.

    The deal includes about 500 miles of crude oil pipelines, 1 million barrels of crude storage capacity, and a pipeline gathering system over 500,000 acres. The deal is expected to close in May.

    “We are excited about starting 2017 with a strategic acquisition, and the addition of Navigator’s Permian assets marks NuStar’s entry into one of the most prolific basins in the United States,” said NuStar President and CEO Bradley Barron.
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    China Q1 crude oil imports climb 15 pct

    China's crude oil imports rose 15 percent in the first quarter compared with the same period a year earlier to 105 million tonnes, or 8.52 million barrels per day, the country's General Administration of Customs said on Thursday.

    Imports of refined products edged down 0.6 percent in the first quarter from a year ago to 7.68 million tonnes.
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    Japan’s Tokyo Gas, Kyushu Electric in LNG cooperation deal

    Japan’s biggest city gas supplier, Tokyo Gas and Kyushu Electric Power have entered into a  deal to cooperate in the liquefied natural gas (LNG) business.

    The two companies said in a joint statement on Wednesday that they are planning to form a strategic alliance to jointly buy LNG  “to contribute the further flexibility and the cost reduction.”

    “We are considering the cooperation of securing LNG to ensure the stability of supply of both companies, including in an emergency,” the statement said.

    LNG buyers have been for years urging the need for more flexible LNG contracts, especially when it comes to destination clauses that restrict them from reselling or swapping cargoes.

    In a similar move, Japan’s JERA, the world’s largest corporate LNG buyer, has signed a deal in March with South Korea’s Kogas and China’s CNOOC Gas and Power Trading & Marketing to cooperate in the LNG business and to secure more flexible contracts.

    The Tokyo-based company also recently signed a deal with the Dubai Supply Authority (DUSUP).
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    Summary of Weekly Petroleum Data for the Week Ending April 7, 2017

    U.S. crude oil refinery inputs averaged 16.7 million barrels per day during the week ending April 7, 2017, 268,000 barrels per day more than the previous week’s average. Refineries operated at 91.0% of their operable capacity last week. Gasoline production increased last week, averaging over 9.9 million barrels per day. Distillate fuel production increased last week, averaging about 5.1 million barrels per day.

    U.S. crude oil imports averaged 7.9 million barrels per day last week, up by 28,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged about 8.1 million barrels per day, 3.0% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 488,000 barrels per day. Distillate fuel imports averaged 118,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 2.2 million barrels from the previous week. At 533.4 million barrels, U.S. crude oil inventories are near the upper limit of the average range for this time of year. Total motor gasoline inventories decreased by 3.0 million barrels last week, but are in the upper half of the average range. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories decreased by 2.2 million barrels last week but are in the upper half of the average range for this time of year. Propane/propylene inventories fell 1.2 million barrels last week and are in the lower half of the average range. Total commercial petroleum inventories decreased by 4.7 million barrels last week.

    Total products supplied over the last four-week period averaged 19.7 million barrels per day, remaining unchanged from the same period last year. Over the last four weeks, motor gasoline product supplied averaged over 9.3 million barrels per day, down by 1.0% from the same period last year. Distillate fuel product supplied averaged over 4.2 million barrels per day over the last four weeks, up by 15.6% from the same period last year. Jet fuel product supplied is up 3.6% compared to the same four-week period last year.

    Cushing up 300,000 bbls
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    US oil production continues strong gains

                                                      Last Week    Week Before    Last Year

    Domestic Production '000........... 9,235            9,199             8,977
    Alaska ................................................ 534               533                518
    Lower 48 ........................................ 8,701            8,666             8,459
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    OPEC over-delivers on oil cuts, but sees rivals' output rising

    OPEC cut oil output in March by more than pledged under a supply reduction deal and said oil inventories had fallen in February, suggesting that its effort to clear a supply glut that has weighed on world oil prices is succeeding.

    But the Organization of the Petroleum Exporting Countries also raised its forecast for supplies from non-member countries in 2017 as higher oil prices encourage U.S. shale drillers to pump more, reducing demand for OPEC's oil this year.

    OPEC is curbing its output by about 1.2 million barrels per day (bpd) from Jan. 1 for six months, the first reduction in eight years, to get rid of a supply glut. Russia and 10 other non-OPEC producers agreed to cut half as much.

    Oil prices pared gains on Wednesday after the report was released to trade at around $56 a barrel. Prices are up from about $42 a barrel a year ago. [O/R]

    OPEC was upbeat on the outlook for the market in its monthly report.

    "Despite some downside risks, general expectations for demand growth for oil products in the coming months remain bullish," the report said.

    "The return of refineries from seasonal maintenance and healthy demand, together with the high conformity observed in OPEC and non-OPEC production adjustments, should enhance market stability and reduce the volatility seen in recent weeks."

    Compliance in March by the 11 OPEC members with output targets under the supply cut deal averaged 104 percent, according to a Reuters calculation based on production figures OPEC published. This is in line with earlier figures seen by Reuters on Tuesday.

    OPEC is considering whether to extend the supply cut deal beyond June and most members, including Saudi Arabia and Kuwait, are leaning towards this if all producers, including non-OPEC also agree, OPEC sources told Reuters last month.
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    Trump administration moving ahead with ending Jones Act exemptions

    The Trump administration appears to be moving ahead with an Obama administration proposal aimed at reversing long-standing Jones Act exemptions and is not considering weakening its criteria for waivers from the maritime law, a US Customs and Border Protection spokeswoman said.

    Those waivers "may only be granted if necessary in the interest of national defense," as they traditionally have been, Katrina Skinner, the CBP spokeswoman, said in a statement to S&P Global Platts on Monday.

    The issue centers on a change CBP proposed on January 18, just two days before the Obama administration ended, that would revoke decades of rulings allowing foreign-built vessels to transport certain equipment, such as repair pipe, between US ports and oil and gas operations in US waters.

    The change, which is backed by the US maritime industry and a bipartisan swath of Congress, would represent a significant strengthening of the federal government's enforcement of the Jones Act. The 100-year-old Jones Act requires vessels transporting goods between US ports to be US-flagged, US-built and majority US-owned.

    The proposed change is opposed by drilling and marine contractors and the American Petroleum Institute, which last week released a study claiming the change could reduce oil and natural gas production in the US Gulf of Mexico by about 500,000 b/d over the next 13 years.

    In her statement, CBP's Skinner said the agency was accepting comments on the proposed change through April 18 and is expected to issue a decision on the potential change by mid-May.

    While Skinner declined to comment further, sources said the Trump administration has indicated that it plans to go forward with the proposed change and will likely oppose any efforts seen as weakening the Jones Act.

    Related: Find more content about Trump's administration in our news and analysis feature.

    Proponents of the change pointed to initial statements made by members of Trump's cabinet in favor of the maritime law.

    "The Jones Act is the law of the land and it will be obeyed unless the Congress changes its mind on that," Transportation Secretary Elaine Chao said during her January 11 confirmation hearing.

    "I intend to consult closely with Congress on any Jones Act-related issues and ensure that our position in trade negotiations does not undermine our ability to enforce the statute," US Trade Representative Robert Lighthizer said during his March 17 confirmation hearing.

    During a press call last week, Jack Gerard, API's president and CEO, said his trade association was not pushing for a repeal of the Jones Act, but said the exceptions needed to stay in place since there were not enough US-flagged vessels needed to meet demand from US Gulf operations.

    But Aaron Smith, president and CEO of the Offshore Marine Service Association, said this issue will be solved by ending the long-standing exemptions that have allowed companies to "skirt" the Jones Act.

    "The only relevant economic impact is the adverse impact that CBP's erroneous rulings have had for decades on US shipowners, mariners and shipyards," Smith said. "CBP's course correction ensures that more ships will be built in US shipyards employing US citizens."

    In a March 30 letter to Department of Homeland Security Secretary John Kelly, 30 House members, including seven Democrats, wrote that the exceptions, which they called "flawed letter rulings," have hurt US maritime and shipyard industries.

    "The CBP action restores the integrity and intent of the Jones Act in the offshore maritime industry, and will create American jobs and opportunities to the benefit of our national and economic security," the House members wrote.

    The Obama administration initially proposed ending Jones Act exemptions in 2009, but faced opposition, including within the administration, and apparently delayed the effort until January 18.
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    G7 advocates flexible LNG contracts

    The G7 energy ministerial meeting held in Rome under the Italian presidency called for greater flexibility of commercial clauses in liquefied natural gas (LNG) supply contracts.

    The energy ministers of Canada, France, Germany, Italy, Japan, the United Kingdom, the secretary of energy of the United States of America, and the European Commissioner for climate action and energy, stressed that LNG contracts should include relaxed destination clauses and similar restrictive mechanisms.

    The ministers welcomed the opening of new pipeline interconnections, new gas supply corridors, and the start of new and future LNG exports, with the aim of increasing market liquidity and diversity, and the management of disruption and emergencies, the joint statement reads.

    They also discussed the important role of storage as a component to a secure gas system.

    In addition to seeking additional flexibility in LNG contracts, ministers called for the increase of alternative fuels in transport.

    They discussed enabling conditions and frameworks to promote a comprehensive innovation strategy for increasing sustainable and advanced low- and zero-emission fuels, such as CNG, LNG, and electricity across all modes and uses of transport, according to the statement.

    Although no joint statement on climate change has not been signed, Italian economic development minister Carlo Calenda, in a brief social media comment said the discussion was “fruitful and constructive.”
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    U.S. oil output could near 1970 record next year, EIA says

    The Energy Department believes another burst of shale drilling could push U.S. oil production close to an all-time record by the end of next year.

    The return of drilling rigs and roustabouts to U.S. shale fields could lift the nation’s daily crude output to 10.1 million barrels by the fourth quarter of 2018, just 30,000 barrels under the November 1970 record, the Energy Information Administration said Tuesday.

    Such a feat would mean domestic oil producers would have to put out an additional 1.2 million barrels a day over the next two years, up from the current 8.96 million barrels a day.

    The EIA said that would contribute to a rise in global output to more than 100 million barrels a day by the second quarter of 2018, up 3.4 percent from current levels. The bulk of that growth, it believes, would come from outside of OPEC.

    The EIA revised its forecast for U.S. oil production up by around 2 percent for 2018, and it increased its projection for the fourth quarter of 2017 up about 1 percent.

    It pointed to higher levels of oil field spending. In the fourth quarter of 2016, investments by more than three dozen oil companies rose 72 percent, or nearly $5 billion, compared with the same period the year before. And spending continued to rise in the first quarter.

    The EIA believes that burst of oil could weigh on oil prices. It now expects U.S. oil prices to average $52.24 a barrel this year, down 2.3 percent from its previous projection. It also revised its forecast for next year’s oil prices down 1.9 percent to $55.10 a barrel.
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    API Reports Draws Across The Board

    The American Petroleum Institute (API) reported a draw of 1.3 million barrels in United States crude oil inventories, compared to analyst expectations for a crude oil build of 125,000 barrels.

    API also reported a significant gasoline inventory draw of 3.7 million barrels, compared to predictions of a 1.8-million-barrel draw.

    Distillates saw a 1.6-million-barrel draw compared to an expected 1.3-million-barrel draw for the fuel.

    Inventories at the Cushing, Oklahoma, site fell by 358,000 barrels, following last week’s 1.34-million-barrel build.

    Oil prices rose to five-week highs after Friday’s reports of U.S.-ordered airstrikes against Syrian infrastructure, followed by production outages from Libya’s largest oilfield, and late-breaking news on Tuesday that suggested Saudi Arabia would support OPEC production cuts. Despite the overarching sentiment that the American Petroleum Institute would report a build late Tuesday afternoon, WTI was trading up 0.36% at $53.27 at 1:20pm EST, while Brent Crude traded at $56.03, up .09% on the day. These per-barrel prices are more than $2.00 higher than this time last week.

    This week’s draw in crude oil inventories is only the sixth draw in the last 15 weeks, using API data, with the API still reporting an overall hefty build over the previous 15 weeks of roughly 37.9 million barrels.
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    As Texas oil output surges, cash crude discounts near two-year lows

    Surging West Texas oil production has pushed the value of the region's spot crude to its lowest discount to the U.S. oil benchmark in nearly two years, as an exuberant shale industry pumps more to take advantage of higher prices and demand from refiners who have seen supplies cut by top global producers.

    OPEC and non-OPEC suppliers are working toward cuts of 1.8 million barrels per day, around 2 percent of the 92 million bpd global market, as they try to bring down record oil inventories and raise prices.

    But supply cuts by exporters worldwide have given an incentive and opportunity to U.S. shale producers to do the opposite. They have sent rigs back into the field and are working to boost output after more than a two-year industry recession.

    The Permian Basin is the biggest U.S. oil field and the most prized U.S. locale for shale activity because of its strong reserves and low production costs. But even as investors flock to the region, some traders and analysts caution that activity may be moving too fast.

    "Aggressive Permian production growth alongside regional refinery outages and weaker export demand for shale crude has forced heavy discounts for Midland crude," said Dominic Haywood, an analyst at Energy Aspects. "It's now falling towards levels that's making it economical to ship on certain pipelines on a spot basis."


    Rising production has come before record U.S. oil stockpiles have had time to drain, putting pressure on regional prices.

    On Friday, even as benchmark U.S. crude futures rebounded to a one-month settlement high of $52.24 a barrel, cash traders sold West Texas oil - the type of crude pumped from the Permian Basin - to one of its steepest discounts since April 2015.

    Last week, WTI at Midland, Texas for May fell to a $1.65 a barrel discount to the U.S. benchmark. Four months ago, it traded at a $1.05 a barrel premium to WTI. That means producers in the Permian are effectively receiving nearly $3 less a barrel than they were at the start of the year.

    While Midland prices rallied late last week due to Canadian outages, the price remains relatively weak compared with recent months or years.

    "Right now, the Permian is obviously the hottest place to drill. There's quite a bit of expansion in production we expect from the area," said Sarp Ozkan, manager of Energy Analytics for Drillinginfo.

    OPEC's cuts are draining storage of oil at sea, in the Caribbean and other parts of the world. But they are having little impact on U.S. inventories as a wave of Permian output keeps storage brimming. Permian output is expected to rise to 2.29 million bpd in April, up 15 percent from a year ago, according to the U.S. Energy Information Administration.

    The operating rig count in the region has doubled in a year, and some producers who have left drilled wells uncompleted, opting to leave the oil in the ground ready to pump when prices rise, are turning on the spigots.

    Producers had left a record number of wells unfinished in Permian, but now appear to be whittling them down.

    In the Delaware Basin, the number of wells drilled but uncompleted outside the normal six-month spud-to-production range, or the beginning to the end of drilling a well, known as deferred completions, has fallen to 110 from 237 in the past six months, according to Drillinginfo.

    In the Midland Basin, the number of DUCs dropped to 94 from 163 in the same period.


    Pipelines out of the region also show that the Houston area, a destination for Midland crude, is flooded with other supply.

    For example, Magellan Midstream Partners' BridgeTex pipeline, which flows to Houston, ran at slightly more than half-full at the end of March, according to energy information provider Genscape. It costs about $4 a barrel to ship from Colorado City, Texas, to Houston on that pipeline. That is higher than the $2.75 to $3.00 a barrel differential between Midland and Houston, making it not economical to send oil along that route.

    Total monitored stocks in West Texas hit a record in the middle of March, Genscape added, but decreased slightly by the end of the month.

    To relieve swelling inventories in West Texas, regional oil prices must fall relative to other markets to cover the cost of transportation on pipelines that flow to places such as Houston, or to make it economical to export the oil to international destinations, according to Sandy Fielden, director of oil and products research at Morningstar.
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    Saudi Aramco to supply full crude contract volumes to Asia

    Saudi Aramco will supply full contract volumes of crude oil to at least three Asian buyers in May, steady compared to April, industry sources with knowledge of the matter said.

    Despite commitments to cut production in an OPEC deal, Saudi Aramco has kept its supplies to the majority of Asian buyers at contracted volumes, reflecting its strategy of maintaining market share in the fastest-growing market, said the sources, who declined to be identified due to a sensitivity of the matter.

    However, the oil kingpin has requested that buyers refrain from using the so-called plus tolerance to buy additional volumes on top of contracted volumes, they said.
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    Japan’s spot LNG price drops to five-month low

    The average price of spot LNG for delivery into Japan that was contracted in March 2017 was at US$6.2 per mmBtu, dropping to the lowest level in five months.

    After rising for the previous four months, and reaching a contract-based price of $8.5 per mmBtu in February the price dropped over 27 percent, according to the monthly report from the Japanese Ministry of Economy, Trade and Industry (METI).

    The ministry did not report a contract-based price for the month of March in 2016 due to the lack of trading.

    The price of spot LNG arriving into Japan during the month of March 2017 also dropped in comparison to the previous month.

    According to the data, the arrival-based price reached $7.7 per mmBtu in March 2017, down 12.5 percent from $8.8 per mmBtu reported in February 2017.

    However, in comparison to March 2016 when the ministry reported the arrival-based price of $6.8 per mmBtu, the price of spot LNG has risen 13.2 percent.

    Only spot LNG cargoes are taken into account in this assessments, excluding short, medium and long-term contract cargoes, as well as those linked to a particular price index.
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    New U.S. drilling permits surged in March

    New drilling permits issued across the United States climbed by almost 4,000 in March, the largest increase in 18 months, Evercore ISI said Tuesday.

    The number of newly issued U.S. drilling permits has increased steadily since OPEC struck its deal to curb oil production in November. As oil prices rose and drillers locked-in higher prices for future oil production, permitting activity accelerated in February and March, getting closer to levels that were typical before the two-year oil downturn, according to the investment bank, which compiles state permitting data for a monthly report.

    It’s another sign of a surge in U.S. drilling that, along with rising output in other countries, could counteract much of OPEC’s effort to cut oil production. It also implies Houston’s oil field service companies and drilling contractors will have more work in coming months and will likely increase hiring in the oil patches in Texas and elsewhere.

    Last month, U.S. drilling permits came in nearly a quarter higher than they did in February, and it was more than twice the number that came in March 2016. Permits surged in Texas, California, Wyoming, Colorado, Oklahoma, New Mexico and North Dakota.

    In the Gulf of Mexico, deep-water drilling permits rose from two to five in March, and overall, offshore permits increased to 17, up from eight the month before, according to Evercore ISI.
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    Introducing multi-lateral wells in the Delaware

    Occidental introducing multi-lateral wells in the Delaware. Pilot successful. Savings : $1 million/well.

    page 29

    Attached Files
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    Shell says it knew some payments for Nigeria oilfield would go to Malabu

    Royal Dutch Shell has said it knew that some of the payments it made to Nigeria for the rights to an oilfield would go to Malabu Oil and Gas, a company associated with a former Nigerian oil minister and convicted money launderer.

    Shell spokesman Andy Norman said the group had known the Nigerian government "would compensate Malabu to settle its claim on the block". Shell previously had said only that its payments from the 2011 deal went to the Nigerian government.

    In an email to Reuters, Norman said that while Shell knew that former oil minister Dan Etete was "involved" with Malabu, it had not confirmed that he controlled the company.

    Etete was convicted of money laundering in a separate case in France in 2007.

    "Over time it became clear to us that Etete was involved in Malabu and that the only way to resolve the impasse through a negotiated settlement was to engage with Etete and Malabu, whether we liked it or not," Norman said.

    Norman added that the company believes the settlement was a fully legal transaction with the Nigerian government.

    The statement comes amid mounting pressure over the deal, in which Shell and Italy's Eni paid $1.3 billion for the rights to offshore block OPL 245, which industry estimates say could hold more than 9 billion barrels of oil.

    Courts in Nigeria and Italy are investigating the purchase of the block. Italian prosecutors have asked for Eni chief Claudio Descalzi to be sent to trial in correction with the case. Eni has said neither the company nor Descalzi were involved in any allegedly illicit conduct.

    A Nigerian court ordered the asset temporarily seized in January at the request of the country's Economic and Financial Crimes Commission, but the move was overturned.
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    Diversify or die: China's independent oil refiners adapt to new challenges

    Cut off from lucrative fuel export markets and seeing their margins squeezed by new taxes, China's independent oil refiners are branching out into new sectors from clean energy and lumber as well as expanding their trading to overcome the challenges.

    These independents, known as "teapots" since they are smaller companies than their state-owned rivals, are scrambling to survive shifting government policies at the same time domestic oil demand growth is slowing, undermining their ability to expand by just serving their home market. In 2016, China's annual fuel demand growth was at a three-year low.

    "The good days won't last much longer, as China's oil demand has been shrinking," said Zhang Liucheng, vice president of Shandong Dongming Petrochemical Group, the country's largest independent refiner.

    Late last year, Beijing suspended fuel export quotas for the independents, handing control of diesel and gasoline exports to the dominant state refiners.

    Other government moves may also squeeze the independent's margins. Top state refiner Sinopec overhauled its fuel buying policy by centralizing all purchases at its Beijing headquarters and China plans to slap consumption taxes on refinery by-products such as light cycle oil, sold as diesel, and mixed aromatics, which are added to gasoline to improve fuel quality.

    "They had already been diversified and nimble at working around the various government they are definitely looking for ways to step up their game and have better people, global access and financing to do so," said Michal Meidan, analyst at consultants Energy Aspects.

    Executives at some of China's top independent refiners outlined to Reuters their plans to diversify to endure these changes.

    Dongming, for example, plans to add a 800,000 tons-per-year naphtha cracker, extending its business from transportation fuels to higher value plastics and synthetic rubber as well as fine chemicals, said Zhang.

    The 260,000 barrels-per-day (bpd) refiner is also looking to invest in small-scale onshore fields, said Zhang.

    Zhang also aims to boost trading operations by combining physical oil and gas trading with financial services such as offering credit facilities for fellow teapots at better rates than banks.

    Underscoring how much Beijing has prioritized clean energy, Shandong Haike Group said it will open this month a factory that makes electrolytes used in lithium batteries for electric vehicles.

    The company said the plant will be the country's largest with the capacity to produce 100,000 tons a year. It also plans to grow its pharmaceutical business but has no plans to expand its refining capacity.


    Shandong Chambroad Group plans to move into lumber processing to develop a special building material for villa cottages and gardens, said chairman Ma Yunsheng.

    In addition to the policy actions against them, the teapots have lost a major advocate with the departure of Shandong provincial governor Guo Shuqing, which further shrouds their future, said Energy Aspects' Meidan.

    Newly installed Shandong party chief Liu Jiayi could try to tackle overcapacity and pollution in the province, which would add to pressure on the independents, she said.

    For some, the expansions are an opportunity to move from a small local operation into a global company.

    Shandong Hengyuan Petrochemical Co, a refiner backed by a local government and the first teapot to own a refinery abroad, wants to become a regional player, combining assets at its home base in Shandong with the refinery in Port Dickson, Malaysia, that it recently acquired from Shell (RDSa.L).

    As part of the expansion, it will set up a trading desk in Kuala Lumpur to secure crude for the two plants with a combined capacity of 160,000 bpd and also supply 4 millions of tons of fuel annually to Shell under a 10-year pact.

    "Without differentiating yourself, the competition will be tough," said Hengyuan's chairman Wang Youde.
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    Oil and gas E&P credit lines could rise nominally

    Stable oil prices at higher levels than a year ago, as well as expanded upstream capital budgets and more drilling, are likely to boost bank credit lines by nominal amounts for oil and gas producers and allow them to continue robust production growth, analysts say.

    Crude prices that pushed through the psychological $50/b barrier late last year and largely remained there have revved up drilling engines in the oil patch and pushed up production in key US basins, notably the Permian in West Texas/New Mexico, and to a lesser extent the Eagle Ford Shale of South Texas.

    That will add to oil and gas reserves, a key metric used to gauge operators' creditworthiness. And this, along with extra cash from more output, means producers may qualify for higher funding levels during lenders' first of two yearly re-evaluation rounds for the sector this month.

    "You'd think more production would mean banks wouldn't be bullish on increasing borrowing bases," Kraig Grahmann, a partner at law firm Haynes and Boone's energy practice group, said. "But we've identified a bit of a floor in oil prices and so banks are seeing more of a comfort level."

    Last week, Haynes and Boone released results from a survey of 163 energy and financial executives on upstream credit redeterminations. The poll found respondents expect to see the borrowing bases of 76% of producers increase slightly (on average 10%) during the current round or remain unchanged, compared with 59% last October.


    Moreover, executives appeared relatively unruffled by a slight pullback in oil prices below what is popularly called the "magic" $50/b mark last month, when Haynes and Boone took the poll.

    One-third of those who took the survey did so after the week of March 6-10, Grahmann said, during which the price of oil fell about 9%.

    Those executives were "slightly more pessimistic" than those surveyed before the price drop, he said. But "the conclusion we drew was that while bankers and producers are cautious ... they've gotten used to the idea that short-term, we could see these fluctuations that work themselves out into long-term price stability."

    Related Capitol Crude podcast: Is a 'decade of disorder' ahead for global oil markets?

    Higher oil and gas prices also point to banks' willingness to lend, Brian Kessens, managing director for Tortoise Capital Advisors, said.

    "If you look where oil and gas strip prices are now versus a year ago, oil is about $10 higher, and gas is about 50 cents higher," Kessens said. "You have better commodity price decks that banks are using to value reserves."

    Moreover, the fact that lenders have backed a slew of acquisitions for E&P companies over the past nine to 12 months also shows confidence in the current market, Ray Ballotta, partner of M&A transaction services for Deloitte LLP, said.

    "They are back in the space and expanding credit lines," Ballotta said.

    While few oil companies have released news of their new borrowing bases -- a second round of redeterminations occurs in October -- an announcement from one small East Texas operator could serve as a proxy for what is widely expected this time around.

    WildHorse Resource Development Corporation said last week its credit facility had increased to $450 million -- up 24% from its prior borrowing base of $363 million. The company had its initial public offering in December.

    Many E&P companies have asset-based credit lines tied to the value of their proved oil and gas reserves, a process known as reserve-based lending. According to Debra Gatison Hatter, a partner at Dallas-based law firm Strasburger, about a third of Lower 48 US oil production comes from companies with reserve-based loans.


    But borrowing terms still remain conservative, a cautious holdover due to the recent two-year industry downturn that saw oil prices drop from $100/b in mid-2014 to around $26/b briefly in early 2016.

    Compared with a year ago, lenders have added cash anti-hoarding provisions, meaning they cannot draw down their full revolvers and sit on war chests, Ballotta said. And the overall leverage banks require is lower: 3.5 times debt-to-EBITDAX (earnings before interest, taxes, depreciation, amortization and exploration), compared with five times a year or two ago.

    Also, regulators have formulated guidelines making it harder for lenders to keep extending credit to distressed operators that do not maintain a sufficient level of oil and gas reserves, Grahmann said.

    In effect, "it's more difficult [for lenders] to kick the can down the road," he said.

    The October 2016 round of bank redeterminations occurred at a time when producers, enthusiastic over oil at or near $50/b, started to add rigs in preparation for what they believed would be higher spending this year. That also was before OPEC agreed to production cuts the following month of around 1.2 million b/d, while non-OPEC nations agreed to cut more than 500,000 b/d.

    OPEC will meet in May to determine whether to extend those cuts. Also, by August or September, more data on levels of global oil inventories should be available, which could signal whether oil prices are likely to remain around existing levels or notch up.

    "That should affect what happens with fall" bank redeterminations, Grahmann said.
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    China data: Independent refiners' Mar crude imports hit new record high, up 21% on month

    China data: Independent refiners' Mar crude imports hit new record high, up 21% on month

    Independent refineries in China's eastern Shandong province, Hebei province and Ningxia province had imported in March a total of 10 million mt, or 2.36 million b/d, of crude oil, up 21% from a revised 8.03 million mt in February, a monthly survey by S&P Global Platts showed Friday.

    The February imports were revised up as several cargoes imported in late February which also finished offloading discharges were also included.

    The higher import level for the month, was in line with the increasing feedstock demand at refineries, which had raised runs in March.

    Operating rates at the 42 independent refineries surveyed by Beijing-based energy information provider JLC rose to 61% of capacity in March from 56% in February, suggesting that consumption of feedstock also have increased.

    The cargo count for March comprises parcels that arrived into ports in Shandong and Tianjin and completed discharge operations through the month, as well as a few cargoes that arrived in late-February but only completed offloading in early-March.

    Crude cargoes counted for the month include imports by refineries that have import quotas, as well as those that have no quotas but are buying from those with quotas.

    The volumes imported by trading companies like PetroChina, Sinochem, Mercuria, Trafigura, Kunyang and Yijia that are dedicated for independent refineries are also included.

    A total of 19 independent refineries with quotas on hand in March, including 16 independent refineries in Shandong, Xinhai Petrochemical in Hebei and Baota Petrochemical in Ningxia, received 7.89 million mt of crude, up 40% from the previous month.

    The biggest increase was seen from the imports by Hongrun at 323%. The refiner last month had imported a total of 1.237 million mt of crudes, including a 270,000 mt of Arab light crude, 210,000 mt of Vasconia crude, as well as Djeno, Sapinhoa, Saturno, Clov, Forties and Azeri light, each of 1 million barrels.

    Those 19 refineries have imported a total of 18.194 million mt of crudes over January-March, leaving unused quotas for the first batch at 33.806 million mt, according to Platts calculations.


    Several independent refineries in Shandong, however, have recently been suffering from a quota shortage.

    The refiners in this category include Shandong-based Chambroad Petrochemical, Haiyou Petrochemical and Baota Petrochemical in Ningxia province, which had been allocated the lowest proportion against its ceiling volume.

    Haiyou in March had failed to take one cargo of Angola crude imported by CNOOC, as it did not have enough quotas left, according to market sources.

    Those refineries have already submitted applications for the new round of quota allocation to provincial department of commerce in the past weeks, but were told the new round was unlikely before the end of June.

    The refiners will either need to lower throughputs or buy barrels from the domestic spot market if the new allocations are not issued on time, market sources said.

    In addition, some refineries also were buying quotas from those with more quotas left. Therefore, the fee of buying the quotas were also raised to around Yuan 150/mt in March, from Yuan 120/mt in February.

    On the other hand, some traders were also hesitant to take positions in the international crude market, fearing not being able to find buyers with enough quotas on hand.


    Russian crudes, including ESPO, Sokol and Sakhalin were the top choices for independent refineries in March at 1.575 million mt, up 45% from February. Meanwhile, Angola crudes also increased 94% to 1.53 million mt in March.

    But imports of Venezuelan crudes have shrunk by 23% month on month to 961,000 mt in March, which was in line with the market expectations.

    Outputs of heavy crudes have been cut after the OPEC agreement, thus the supply of Venezuelan heavy crudes have become tight, said a trader source. Prices of Venezuelan Merey crudes have increased to the same level of WTI, up from WTI minus $2 weeks ago. Nevertheless, buyers still need to pay the full cargo value in advance and then wait for weeks for the delivery to come, according to the trader source.

    In combination with the tight supply of Merey crude, strong demand of asphalt in recent weeks also supported the buying appetite of Merey crudes, which has a better yield of asphalt.

    Chambroad and Dongming Petrochemical have been the major buyers of Merey crudes in recent months.

    Crudes from UK -- Forties, Ekofisk have gained popularity among independent refineries in March, with total imports rising 388% month on month to 395,000 mt.


    Other than these regular crude grades, independent refineries also have started to try out new grades in March, with more cargoes from the US to come in April and May.

    Independent refineries usually choose the most economical crude grades among those offered to them.

    Looking to April, Wonfull Petrochemical is looking to receive 1 million barrels each of Mars and Thunderhorse cargoes, and Dongming Petrochemical to receive 1 million barrels of SGC crude from the US.

    "We bought because they are quite economical," said a source with Wonfull.

    Wonfull in May will continue to receive 1 million barrels of Mars crude from the US.
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    Enterprise Products to build new pipeline from Permian to Houston

    Welders in 2013 work on a stretch of a Texas pipeline owned in part by Enterprise Products Partners. Enterprise is planning a 571-mile line from the Permian Basin to the Houston area.

    Energy infrastructure giant Enterprise Products Partners said it will build a 571-mile pipeline from the Permian Basin to the Houston area to transport natural gas liquids.

    The new pipeline project is another sign that West Texas is booming again with oil and gas and the Houston area is growing as the hub for those resources to either be processed or exported. Oil gets all of the attention, but the natural gas streams from the shale rock are used to create petrochemicals, electricity or other products.

    Houston-based Enterprise said the planned Shin Oak NGL pipeline will start northwest of Midland in Gains County and end at its Mont Belvieu complex, where Enterprise can separate the natural gas liquids into products like ethane, propane and butane. Ethane is the primary feedstock of the Gulf Coast’s growing petrochemical sector.

    “The Permian Basin is currently the hottest play in North America and is expected to continue its strong growth for years to come,” said Enterprise CEO Jim Teague in a prepared statement. “This additional pipeline takeaway capacity to Mont Belvieu will provide Permian producers the flow assurance they need to continue the unfettered development of their reserves with confidence.”

    Teague is emphasizing such pipelines will ensure surging oil and gas production in West Texas won’t create bottlenecks without enough pipeline capacity to move the growing supplies.

    Although drilling in the Permian is for oil, most of the wells also produce associated natural gas liquids. The extra NGLs are why producers don’t need to drill specifically for gas in West Texas. Companies like Houston-based Plains All American Pipeline are building new crude pipeline capacity, but Enterprise is focused on giving the NGLs a home.

    The cost of the Shin Oak project is not being revealed. Enterprise said the pipeline is expected to be completed in 2019. It will initially transport 250,000 barrels but could be expanded to carry 600,000 barrels daily.

    Likewise, in March, Houston-based Kinder Morgan  said it plans to build a 430-mile natural gas pipeline from West Texas’ Permian Basin to the Corpus Christi region.

    Enterprise’s Mont Belvieu NGL complex is the largest of its kind in the world. Enterprise can sell the ethane to petrochemical plants or export the ethane, propane and butane to foreign markets. Enterprise also is building new fractionation capacity to separate the natural gas liquids into ethane, propane and more.

    Enterprise said in January it will build an isobutane processing unit at its Mont Belvieu campus to create chemicals used in the manufacturing lubricants, rubbers and gasoline additives. It’s all part of Enterprise’s strategy to derive as much value as possible from cheap and ample natural gas and components such as isobutane. Portions of the isobutylene will go into gasoline additives like alkylate and methyl tert-butyl ether, or MTBE, which is typically exported to Asian markets. Enterprise already operates an MTBE production facility in Mont Belvieu.

    This summer, Enterprise is expected to complete its neighboring propane dehydrogenation facility at Mont Belvieu. The plant would convert propane into propylene, which is one of the most common building blocks of plastics. Dehydrogenation is a process of removing hydrogen from molecule; the chemical composition of natural gas is mainly carbon and hydrogen.

    This past fall, Enterprise completed the world’s largest ethane export terminal along the Houston Ship Channel.

    In less than a decade, Greater Houston has shifted from net importer to net exporter as energy and petrochemical companies find international markets for crude oil, natural gas, natural gas liquids, refined products, and chemicals, including methanol, ammonia and propylene.
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    Reeling with debt, Shandong Molong raises 'significant doubts' on future

    Shandong Molong Petroleum Machinery Co Ltd said on Tuesday it had "significant doubts" about its ability to continue operating with its liabilities exceeding assets by 15.83 billion yuan ($2.3 billion) at the end of 2016.

    The petroleum equipment maker, however, said it also had sufficient funds to maintain normal production and operation, but did not say for how long.

    The firm said it was taking measures to reduce production costs, expand its financing channels and diversify its sources of income. Controlling shareholder Zhang Enrong will also provide financial support, the company said in a filing to the Hong Kong bourse.

    The company's shares in Hong Kong, which fell 20 percent on Monday, climbed 8.4 percent in early trade on Tuesday.

    Shandong Molong said it failed to maintain effective internal controls of its financial reporting at the end of last year.

    The company, along with Enrong and its general manager, are under investigation by China Securities Regulatory Commission for possible securities violations.

    The company faces the possibility of being delisted from the mainland stock exchange, after reporting two straight years of losses. Last year's net loss widened to 612.5 million yuan.
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    Japan To Conduct Second Test To Produce Gas From Methane Hydrate

    Japan begins preparations for a second production test to extract methane gas from methane hydrate deposits offshore Japan's central coast.

    TOKYO, April 10 (Reuters) - Japan's trade ministry said on Monday it has begun preparations for a second production test to extract methane gas from methane hydrate deposits offshore Japan's central coast.

    The test is the first since Japan achieved the world's first extraction of gas in 2013 from offshore deposits of methane hydrate, a frozen gas known as "flammable ice".

    Japan, which imports nearly all of its energy sources, has been aiming to launch private sector commercial production of methane hydrates by between 2023 to 2027, but the goal will still be a challenge as many obstacles remain to be solved, officials at the Ministry of Economy, Trade and Industry (METI) said.

    Japan's government has budgeted around 20 billion yen ($180 million) for offshore production experiments, said Yuki Sadamitsu, Director of the Oil and Gas Division at the trade ministry's Agency for Natural Resources and Energy.

    Japan is the world's top importer of liquefied natural gas (LNG) and the need for domestic gas resources has become greater since the Fukushima nuclear crisis two years ago shut down most of its nuclear power generation and sharply raised fossil fuel imports such as LNG and coal.

    METI said the production tests will be carried out by two wells and will continue for a combined four to five weeks. The first production well in 2013 ended abruptly in less than a week due to problems with sand flowing into the well.

    Methane hydrate is formed from a mixture of methane and water under certain pressure and conditions. Governments including India, Canada, the United States and China are also looking at exploiting hydrate deposits as an alternative source of energy, Sadamitsu said.

    In 2008, Japan Oil, Gas and Metals National Corp (JOGMEC) successfully demonstrated a nearly six-day continuous period of onshore production of methane gas from hydrate reserves held deep in the permafrost in Canada.

    A Japanese study has estimated the existence of at least 40 trillion cubic feet (1.1 trillion cubic meters) of methane hydrates in the eastern Nankai Trough off the country's Pacific coast, equal to about 11 years of Japanese gas consumption.
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    Iran cuts oil selling price


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    Old Guard Calls Foul on Sweeter LNG Deals Luring New Buyers

    New importers in the Middle East and South Asia could be getting cheaper LNG than established users in North Asia, according to a senior executive vice president with Jera Co., one of the world's biggest buyers of the super-chilled gas.
    Buyers in the world’s largest liquefied natural gas markets are concerned upstarts are winning better deals than traditional customers who helped underwrite the industry.

    New importers in the Middle East and South Asia could be getting cheaper LNG than established users in North Asia, according to Hiroki Sato, a senior executive vice president with Jera Co., one of the world’s biggest buyers of the super-chilled gas. Sellers may be sweetening deals to lock up fresh customers as new projects, made possible partly by long-term commitments from buyers in countries including Japan and South Korea, flood the market, he said.

    To raise the tens of billions of dollars needed to build an LNG project, developers have traditionally needed to find both large natural gas resources as well buyers willing to commit to purchase contracts that can last more than 20 years. Jera’s wariness over how new importers are being courted highlights the growing pressure on sellers trying to manage old relationships while winning new customers amid the oversupply of capacity that’s tilted the seaborne gas market in favor of buyers.

    “Japan and some other Asian countries are traditional foundation buyers for many LNG projects, but substantial demand is now coming from emerging markets” Sato said in an email Friday. “I am afraid their price may be cheaper than ours. Who supported the greenfield projects? We traditional buyers have a right to the cheapest price.”

    Many Japanese customers and other big buyers signed supply deals between 2012 and 2014 when prices were at their peak, according to Kerry Anne Shanks, an analyst at Wood Mackenzie Ltd. in Singapore. Those contracts require them to buy gas at a higher percentage of the price of crude -- known as oil indexation -- than newer agreements, she said.

    Last year, Pakistan State Oil Co. agreed to import LNG from Qatar at 13.4 percent of the price of oil, while Japan’s Chubu Electric Power Co., Kansai Electric Power Co. and Tokyo Electric Power Co. Holdings Inc. all reached deals in 2012 with the country at a price 14.9 percent of oil, according to Bloomberg New Energy Finance. Chubu has another contract from 2007 at 17 percent.

    “Clearly these foundation buyers are annoyed that low-credit buyers in emerging markets are getting better deals than them,” said Shanks. “But it is a function of when the deals were signed.”

    Spot LNG in Northeast Asia has fallen from nearly $20 per million British thermal units in early 2014 to $5.65 as of last week, according to World Gas Intelligence.

    As demand in a traditional buyer like Japan is seen falling as more renewable power comes online and nuclear plants restart, gas producers are focusing on emerging markets and new importers to soak up a coming flood of supply. Beyond offering cheap prices to new LNG entrants, sellers are also seeking ways to create even more customers by encouraging projects that spur the fuel’s use.

    While Japan is the world’s biggest importer of the fuel, its future growth is unclear, according to Alexander Medvedev, deputy head of Russia’s Gazprom PJSC. The world’s largest gas exporter is setting its sights instead on China and developing countries including India, Pakistan, Bangladesh and Vietnam, he said in an interview last week.

    Royal Dutch Shell Plc sees investing in gas pipelines as one way to unlock demand in countries with rudimentary infrastructure, Maarten Wetselaar, director for integrated gas and new energies, told reporters last week at the Gastech conference outside Tokyo. Floating storage and regasification units -- the term for import facilities that are cheaper and faster to build than traditional terminals -- are key to capturing new demand, along with using LNG as fuel for ships, Engie Global LNG Chief Executive Officer Philip Olivier said at the event.

    Even smaller customers are in focus. Power plants that don’t burn enough gas to justify a land-based import terminal or an ocean-going FSRU can utilize “tiny FSRU” barges, according to Kees van Seventer, a division president at Koninklijke Vopak NV. Their 25,000 cubic meters of capacity can be a better fit than the 130,000 to 170,000 cubic meters for an FSRU, which cost about $40 million annually to lease.

    Due in part to new technology, 45 nations may be capable of importing LNG by 2020, up from 33 today, according to ConocoPhillips Chief Executive Officer Ryan Lance.

    “Our world is changing and demand has changed location,” Engie’s Olivier said. “It is only a matter of seizing the opportunities. No need to wait for the demand -- track it, create it.”
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    NEB grants 40-year export license to Woodfibre LNG

    Canada’s National Energy Board (NEB) has granted a 40-year export license for the Woodfibre LNG project, in Squamish, British Columbia.

    According to Woodfibre LNG’s statement, the export license is subject to Governor in Council approval.

    In its decision, the NEB found that the quantity of natural gas proposed to be exported by the Woodfibre LNG project, for a term of 40 years, is surplus to Canadian needs, and can accommodate a plausible increase.

    The project initially received a 25-year license to export approximately 2.1 million tons of LNG per year in December 2013, however, amendments to NEB regulations in 2015 increased the maximum term to 40 years.

    Woodfibre LNG filed an application for a 40-year export license at the beginning of February.

    All of the commitments Woodfibre LNG made in its environmental assessment certificate application, and the regulatory conditions, plans and permits required for construction and operation of the Woodfibre LNG project will remain in effect for the life of the project.

    The Woodfibre LNG project is located approximately 7 km west-southwest of Squamish, British Columbia.

    Pacific Oil & Gas Limited, part of the Singapore-based RGE group of companies, the parent company of Woodfibre LNG reached the final investment decision for the project in November 2016.

    The project involves construction and operation of an LNG export facility on the previous Woodfibre pulp mill site, which would have a storage capacity of 250,000-cbm.
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    China state refiners given 1.3 mln T of general trade fuel quotas

    China's state oil refiners have been granted a combined 1.315 million tonnes of quotas to export refined fuel under so-called general trade terms, three sources familiar with the matter said on Monday.

    These permits, mostly for diesel and gasoline, were in addition to the 3.335 million tonnes of quotas allotted to the refiners under a separate, so-called processing trade category, after Beijing agreed to grant tax incentives to exports under general trade terms.

    The general-trade quotas were issued in early March with PetroChina receiving 1 million tonnes and Sinopec Corp 300,000 tonnes, said two of the three sources familiar with the companies' quotas.

    CNOOC, which holds less refining capacity, won a quota for 15,000 tonnes as an "experiment", said the third source, who has direct knowledge of CNOOC's trade operations.

    These were the second batch of general trade quotas for 2017. In early 2017, PetroChina was the only refiner granted a quota for 600,000 tonnes, said one of the sources.

    At the end of March, China also issued its second batch of quotas for 2017 under the prevailing processing, or tolling, rules, lowering the volumes by 73 percent compared to the first round.

    State refiners applied for the general trade quotas after the government agreed in late 2016 to grant tax incentives on fuel exports making the terms more attractive since it offers refiners greater flexibility in the volumes and time frames for exporting fuel, said the three sources who are familiar with the rules.

    Top Asian refiner Sinopec said on Friday it exported a diesel cargo to Singapore under the general trade rules for the first time in 13 years.

    PetroChina did not win any quotas under the recent round of processing trade quotas, Reuters has reported.

    The sources said PetroChina, which imports less crude than rival Sinopec, did not apply for the processing trade quotas but only asked for general trade ones since it see those terms as more attractive.

    State oil firms normally do not comment on operational matters.

    Under the processing rules, refiners are exempted from import taxes on crude oil and export taxes for oil products, but have a fixed volume and time slots to export, both under the tight scrutiny of Chinese customs, Beijing-based oil traders have said.

    Under the general trade category, refiners get tax refunds after exports are completed or get a tax waiver on fuel exports, a policy that Beijing granted in 2016, the three sources said.
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    Petronas seeks buyers for $1 bln offshore gas project stake: sources

    Malaysia's Petronas has pitched an estimated $1 billion stake in a prized upstream local gas project to potential bidders including Royal Dutch Shell, ExxonMobil Corp, Thailand's PTT Exploration and Production and Japanese firms, sources familiar with the matter said.

    If successful, the deal could mark Petronas' biggest upstream stake sale since oil prices started declining more than two years ago. Petronas is targeting lowering operating expenses, job cuts and project rollbacks to help it navigate through the low oil price environment.

    Citing sources, Reuters reported in February that Petronas was considering selling a stake of as much as 49 percent in the SK316 offshore gas block in Malaysia's Sarawak state.

    The state-owned oil and gas company has approached about a dozen prospective buyers including global oil majors and Asian firms focused on Southeast Asia, said the sources, who declined to be identified as the talks are private.

    They said Petronas has begun providing financial and operational data to the companies and expects to receive bids over the next few weeks.

    "It's just what the environment is. Nobody wants to keep all the risk on their books," said Vikas Halan, senior credit officer, corporate finance group at Moody's, adding he viewed the move as a rebalancing of Petronas' portfolio.

    "Petronas is the leader in the oil and gas space, especially on the gas side. The experience of getting or producing LNG and marketing LNG is quite an interesting one and Petronas becomes a logical choice for players," he said.

    In a statement to Reuters, Petronas said that through its subsidiary, Petronas Carigali Sdn Bhd, it is looking for partners who can bring the technology and capabilities to explore, develop and efficiently operate the various fields and opportunities in the SK316 offshore gas block.

    "We are confident that we will attract the right partners to maximize the potential value of these opportunities to help meet the world's growing oil and gas demand," Petronas said.

    It was not immediately known what the individual companies' response to Petronas' approach was.

    One financial source said a minority stake might not appeal to non-Asian oil majors but a decision to bid would depend on details of the stake being offered, valuations and the potential for long term partnerships with Petronas.

    ExxonMobil declined to comment, while Shell referred the query to Petronas. A spokeswoman for PTTEP declined to comment on the deal but said the company was keen to invest in Southeast Asia because it had expertise in the region where costs and risks were low.

    Gas from the NC3 field in the SK316 block feeds Malaysia's LNG export project, known as LNG 9, Petronas' joint venture with JX Nippon Oil & Energy Corp that began commercial production in January.

    Petronas could use the funds from the stake sale to develop the Kasawari field in the same block. The field is one of the largest non-associated gas fields in Malaysia and has an estimated recoverable hydrocarbon resource of about three trillion standard cubic feet.

    "Kasawari will require a significant capital investment to develop due to the high CO2 content," said Prasanth Kakaraparthi, senior upstream research analyst at consultancy Wood Mackenzie.

    "In a lower-for-longer oil price world, it makes commercial sense for Petronas to farm down its interest and partner with companies that have innovative CO2 handling technology," he said.

    Petronas put on hold plans to develop the field in 2015 after oil and gas prices fell, according to media reports.
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    Eni, Shell deny wrongdoing in Nigeria after allegations of improper payment

    Eni, Shell deny wrongdoing in Nigeria after allegations of improper payment

    Oil majors Royal Dutch Shell and Eni reiterated on Monday that neither they nor their personnel had been involved in any wrongdoing in Nigeria, including improper payments to Nigerian officials.

    The comments follow media reports alleging how hundreds of millions of dollars from the two companies were used for illicit payments.

    A joint investigation by BuzzFeed News and Italian newspaper Il Sole 24 Ore on Sunday claims to show transactions worth $1.3 billion made in 2010-2011 that Shell and Eni paid to acquire an exploration license for an offshore oil block known as OPL 245.

    The money was paid to the Nigerian government, but BuzzFeed and Il Sole said documents showed Shell's top executives at the time knew those sums would go to Malabu Oil and Gas, a front company connected to former Nigerian oil minister Dan Etete.

    Attempts by Reuters to contact Etete have been unsuccessful.

    In emailed comments, an Eni spokesman said the allegations in the reports were not supported by the facts, the underlying agreements or the independent investigations conducted to date.

    "Neither Eni nor Shell paid any monies other than as contemplated and recorded by the Block Resolution Agreement and did not pay to Malabu, to Chief Dan Etete or to any public officer," the spokesman said.

    Shell said that "based on our review of the Prosecutor of Milan's file and all of the information and facts available to Shell, we do not believe that there is a basis to prosecute Shell. Furthermore, we are not aware of any evidence to support a case against any former or current Shell employee".

    In an emailed statement, Shell added that if the evidence proves improper payments were made, "it is Shell's position that none of those payments were made with its knowledge, authorization or on its behalf".

    Courts in Nigeria and Milan are investigating the 2011 purchase of the block, which industry figures suggest could hold more than 9 billion barrels of oil.

    Italian prosecutors are working with an anti-fraud team in the Netherlands that raided Shell's The Hague headquarters in February 2016 in relation to the investigation.

    A Nigerian court ordered the asset temporarily seized in January at the request of Nigeria's Economic and Financial Crimes Commission, but the seizure was later overturned.
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    Oil surplus or scarcity? Shale makes it even harder to predict

    The shale oil boom has transformed the U.S. and global energy sector to such an extent that it has upended traditional supply dynamics and made forecasts far more polarized.

    Investment banks, many of which finance new projects, along with oil majors such as Total and Eni, have warned that huge spending cuts caused by a plunge in oil prices since 2014 would lead to a supply crunch in the next two years.

    Yet Goldman Sachs, the only bank to make more than $1 billion a year from commodities trading, believes a looming recovery in U.S. output on the back of higher oil prices combined with an avalanche of new conventional projects will create a substantial surplus by 2019.

    Prior to the shale revolution, conventional oil was the only game in town. Estimating future supply essentially involved calculating the project pipeline and factoring in the "unknown knowns" such as political risk in oil-producing nations.

    The ability of the shale sector to adapt quickly and nimbly to a lower-price environment means production cycles have shortened as fields can be switched on and off in a matter of weeks.

    Most forecasters including OPEC and the International Energy Agency underestimated shale's decline during the oil price collapse and its production increases as prices recovered.

    Goldman predicts the coming two years will see a huge burst of development, complicating OPEC's efforts to rebalance the market and ease a global glut with the help of output cuts.

    "This long lead-time wave of projects and a short-cycle revival, led by U.S. shales, could create a material oversupply in 2018-19," Goldman's equity research team said last month.

    "As OPEC prepares for its May 25 meeting, it is likely to weigh the relative benefit of stability (extend cut) versus the risk of long-term share loss."

    Goldman estimates that new projects and rising shale output could add 1 million barrels per day (bpd) to global supply by 2018-2019.

    The forecast contrasts with those of consultancy Wood Mackenzie, which foresees a supply gap of 20 million bpd by 2025, and Goldman's rival Morgan Stanley, which believes a surge in U.S. production this year will not derail the rebalancing.

    "OPEC has successfully constrained output, and although drilling activity in U.S. shale is picking up rapidly, this will probably not come quick enough to prevent a period of sizeable inventory draws late this year," Morgan Stanley said.

    "By 2020, we estimate that (around) 1.5 million bpd of demand will need to come from projects that have not been sanctioned yet, but that have break-even oil prices of $70-75 a barrel," the bank said.


    Goldman advises anyone from institutional investors such as pension funds, to oil producers and it seems the oil market is listening.

    Brent crude futures show prices for oil deliverable up to 2019 trading below those for prompt delivery, before reverting to the contango structure of low prompt prices and higher futures prices that is typical of an oversupplied market.

    Goldman stands by its prediction that supply and demand will fall into line this year, even though global crude inventories in developed economies alone top 3 billion barrels, some 300 million barrels above the five-year average that OPEC is targeting with its supply cuts.

    The Organization of the Petroleum Exporting Countries and some of its biggest rivals including Russia, agreed in late2016 to cut output jointly by 1.8 million bpd for the first half of this year to tackle the overhang.

    UBS, meanwhile, sees a potential 4 million bpd hole by 2020, even though a higher crude price this year has prompted some companies to bring forward their exploration and development plans.

    "Beyond 2017, the impact of a collapse in longer-cycle conventional investment over 2014-16 begins to be felt. 2015 saw just six major upstream projects totaling (some) 0.6 million bpd ... versus the 3-4 million bpd average, and 2016 has seen just one major liquids project sanctioned," UBS strategist Jon Rigby said.

    Bank of America-Merrill Lynch points out that along with the collapse in spending, the global rig count, a measure of production activity, shows no sign of picking up outside the United States.

    According to oil services company Baker Hughes, the number of non-U.S. oil rigs has risen by just 29 since hitting an 11-year low of 666 in November last year, compared with a rise of 346 in U.S. rigs in just 10 months.
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    Libya Biggest Oil Field Said to Shut for 2nd Time in Two Weeks

    Libya’s biggest oil field was said to stop producing, just one week after it reopened, the latest in a series of disruptions in the country’s crude output.

    The pipeline carrying crude from Sharara, Libya’s biggest field, to the Zawiya refinery stopped operating on Sunday, according to two people familiar with the matter who asked not to be identified because they’re not authorized to speak to media. It wasn’t clear why the pipeline was shut. The state oil company National Oil Corp. couldn’t be reached immediately for comment.

    Sharara, in western Libya, was pumping 200,000 barrels a day, the NOC said on April 4. The halt is poised to disrupt the country’s production which just returned to its normal levels of about 700,000 barrels a day.

    Clashes among rival armed groups in early March led to the closing of two of the nation’s biggest oil export terminals, forcing a number of other fields to halt production. The ports have since reopened. Libya pumped as much as 1.6 million barrels a day before a 2011 uprising led to the breakdown in central authority and stunted oil production. Libya is one of the smallest members of the Organization of Petroleum Exporting Countries.

    The NOC declared force majeure on loadings of Sharara crude from the Zawiya oil terminal on March 28 when the pipeline was blocked, before it was lifted again a week later. It’s not clear yet whether the NOC will declare it this time. Force majeure is a legal status protecting a party from liability if it can’t fulfill a contract for reasons beyond its control.

    Sharara is operated by a joint venture between NOC and Repsol SA, Total SA, OMV AG and Statoil ASA. The field’s total capacity is 330,000 barrels a day.
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    Asia naphtha demand fades as petrochemical firms snap up LPG as feedstock

    Asian petrochemical makers are ramping up purchases of liquefied petroleum gas (LPG) to use as an alternative feedstock to naphtha, looking to snap up cheap cargoes as heating demand for LPG fades in the wake of winter.

    LPG, often referred to as butane or propane, is commonly used in heaters or stoves in some countries, but can also be an ingredient in plastics used to churn out everything from drinks bottles to carrier bags.

    Faltering demand for naphtha could drag on prices that have been in premiums to benchmark Japanese quotes for most of the year compared to discounts in the same period in 2016, while offering support to LPG markets.

    Four traders said that Taiwan's Formosa Petrochemical Corp , Asia's top naphtha importer, last week bought its first spot LPG cargo of the year, with South Korea's LG Chem and Lotte Chemical also taking cargoes.

    Formosa declined to comment, while the South Korean companies did not immediately provide comment.

    "The Koreans and Formosa moved immediately when the value was in switch mode, (showing) impressive quickness," said one of the traders, who closely follows naphtha and LPG markets. He asked not to be identified as he was not authorised to speak with media.

    Petrochemical companies in Asia are typically set up to shift around 5 percent to 15 percent of their feedstock to LPG when prices drop below 93 percent the cost of naphtha.

    Late last week, Asian spot propane price for cargoes to be delivered in the second half of May were less than 86 percent of naphtha's $493.50 a tonne.

    The traders estimate that some 300,000 tonnes of LPG is expected to replace naphtha in May, or around 7 percent of North Asia's naphtha demand. They said that could climb to 400,000 to 450,000 tonnes in subsequent months.

    "LPG prices will likely be weak relative to naphtha in the coming months, incentivizing petrochemical demand," said He Yanyu who leads Asia natural gas liquids market research at IHS Markit.

    However, increased LPG purchases would likely mitigate the impact on naphtha markets from possible naphtha shipment delays from Qatar following a splitter outage.

    And Asia is structurally short of naphtha, with a supply deficit averaging 4 million tonnes a month in 2016, data from IHS consulting firm showed.
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    The Next Oil Price War – Saudi Arabia Vs. Russia

    International oil markets could be heading towards a new war, as leading OPEC and non-OPEC producers are vying for increased stakes. The unexpected cooperation between OPEC and non-OPEC countries, instigated by the full support of Saudi Arabia (OPEC) and Russia (non-OPEC) has brought some stabilization to the crude markets for almost half a year. The expected crude oil price crisis has been averted, it seems, leaving enough room when looking at the fundamentals to a bull market in the coming months. As long as Saudi Arabia, Russia and some other major producers (UAE, Kuwait), are supporting a production cut extension, financials will be seeing some light at the end of the tunnel.

    The effects of the 2nd shale oil revolution, as some have stated, have been mostly mitigated by a reasonably high compliance of OPEC and non-OPEC members to the agreed upon cuts, while geopolitical and security issues have prevented Libya, Iraq, Venezuela and Nigeria, from entering with new volumes. Stabilization in the crude oil market, as always, is not only fundamentals but also geopolitics and national interests. The latter now could also be the main threat to a successful extension of the OPEC production cuts in the coming months.

    Fears are growing that OPEC’s leading producer, Saudi Arabia, is no longer happy with the overall effects it is generating by taking the brunt of the production cuts, while at the same time, other OPEC members, such as Iran and Iraq, are looking at production increases. Saudi Arabia’s other main rival Russia is also not sitting idle. Even if Moscow is still fully behind the official production cuts, Russian oil companies have been aggressively fighting for additional market share in Saudi Arabia’s main client markets, China, India and even Japan. Iraq and Iran, in contrast to what was expected, have been cutting away share in Europe.

    Threatened by its own successful agreement, Saudi Arabia is now feeling the heat on all sides. Some analysts are even proponing a doomsday scenario, implying that Riyadh has lost its grip on the largest oil markets. U.S. shale oil is increasing its market share, while addressing European options at the same time. Russia, Iran and Iraq have been pushing for market share in Asia, while taking up Saudi share in Europe. Until now, Saudi officials such as minister of petroleum, Khalid Al Falih, and Aramco’s Nasser, have been keeping quiet. No real hardline stance has been publicized until now by the OPEC leader. This could however change dramatically if recent indicators are correct.

    In an unexpected move, Saudi Arabia has reported that it will try to regain some market share in one of its former main markets, Europe. In a move to increase the attractiveness of taking Saudi crude, the Kingdom has plans to change the way it prices oil for Europe from July. The new pricing plans could be effective from July 1, mainly to increase the appeal of Saudi crude by making it easier for customers to hedge. Media sources have stated that Aramco will introduce its European exports price against the ICE settlement for the Brent benchmark after years of pricing its oil against the Brent Weighted Average (BWAVE). Both price references are part of the Brent benchmark used to price much of the world’s crude. Clients at present find it difficult to hedge the BWAVE. This development has partly been snowed under as Aramco also has lowered prices for the Mediterranean and some Asian clients. U.S. clients will however be looking at higher prices.

    Taking a bird’s eye view, the Saudi move could indicate a new market approach in the coming months or years. After a full focus on Asian markets and investment opportunities, as also shown by Saudi King Salman bin Abdulaziz’s month long visit to Asia, and Aramco’s multibillion spending spree, a sudden reorientation of part of the company’s future approach appears to be underway.

    Russia has always had a very comfortable position in the European oil markets, as it is the largest supplier (around 32 percent in 2016). Moscow’s dominance in European energy is undeniable. This is now under pressure if Aramco, in addition to Iraq and Iran, is really entering the European market in a serious manner. In a more stabilized oil market, this would not really have a direct impact on price scenarios, but looking at the current volatility, a confrontation between Russia and Saudi Arabia in Europe could destabilize not only the market but also lead to a new oil price war.

    Until 2015, Russian oil supplies had been dominating European markets, as most OPEC producers had no interest in European demand. Due to new players entering Asian markets, and the lower demand in the U.S., the Oil Kingdom is now looking for a confrontation. The Aramco move indicates that times are changing, and Europe could be the first new battleground. The Kingdom has a lot to gain (in volumes and share) as it is currently ranked 4th on feedstock supplies to European OECD countries in 2016, behind the former Soviet Union, Norway and even Iraq.

    The Russian-Saudi oil price war is already planned and partly implemented, as Russian oil company Rosneft indicated in 2015, accusing Aramco of dumping oil in Europe. The need for stabilization in the market in 2015-2016, and Aramco’s IPO, were reasons not to proceed with the conflict. Rosneft lately indicated that a European oil price war could force parties not to extend the output cut agreement for another six months.

    The conflict is brewing, but has not yet come to surface. Saudi Aramco’s first moves to re-enter Europe, however, clearly show that they are not willing to keep picking up the bill for others. Asia has been partly consolidated for Saudi Arabia. Money will talk as additional outlets (refinery projects) were acquired by Aramco the last month. Europe, a very stable and surprisingly growing crude oil market, is now the stage for a possible oil price war scenario. Riyadh’s decision to change its European price setting is, however, a clear signal that there is a red line for the Oil Kingdom. No more market share will be lost without being confronted by a more aggressive and powerful Aramco establishment.

    Both main parties, Russia and Saudi Arabia, are unwilling to risk a real oil price war. Putin’s future will be decided in the next 12 months, as elections are coming up, while the future of the young Saudi elite depends on an Aramco IPO. When taking a smarter approach, both nations could redirect their aggressive market strategies to the new incumbents in Europe. Iraq and Iran have been very smart by attempting to sneakily take market share from both sides. Combining Moscow and Riyadh’s power, an oil price war against the Iran-Iraq axis would be both more sustainable and feasible. The latter would also have the added advantage of not threatening the OPEC and non-OPEC production cut.
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    Three US-based LNG terminal projects report delays to operational start dates

    Three US-based LNG export projects have delayed the planned start of their commercial operations, according to company updates on the US Department of Energy's website.

    LNG terminal developers must provide semi-annual progress reports for their facilities in April and October, as required by the department. Some projects have not yet posted April reports.

    April updates published on the department's website report later start dates for three projects: the Lake Charles Exports terminal in Louisiana, with a capacity of 16.2 million mt/year; Commonwealth LNG's Cameron Parish, Louisiana, facility, with planned exports of 169 MMcf/d and 190 MMcf/d to free trade and non-free trade nations, respectively; and Strom's Crystal River, Florida, facility, with export capacity of 80 MMcf/d.

    Lake Charles now anticipates that the first of its three trains will be operational in 2022.

    Trains 2 and 3 are scheduled for completion in six-month increments after the first train, the April report stated. Last October, the company said only that the first train was expected to be operational in 2021.

    Commonwealth LNG expects to start commercial operations by the second quarter of 2022, the company said. In October 2016, it set a start date of the fourth quarter of 2021.

    Strom said it was proposing to start operations in the second quarter of 2019, providing market conditions remain stable.

    Previously, it reported a start date in the fourth quarter of 2018. Earlier this week, six other projects reported delayed operational start dates: SCT&E LNG's export terminal in Cameron Parish, Louisiana; SeaOne Gulfport's CGL terminal at Gulfport, Mississippi; Texas LNG Brownsville's terminal in Brownsville, Texas; Gulf LNG Liquefaction's terminal at Pascagoula, Mississippi; Freeport-McMoRan's Main Pass Energy Hub Deepwater facility off the Louisiana coast; and the Venture Global Calcasieu Pass export project in Cameron Parish, Louisiana.

    LNG terminals must obtain numerous regulatory approvals before they can begin operations and progress is often held up by regulatory or commercial issues.
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    Permian Basin again surges in rig count

    The Permian Basin almost single-handedly led another big jump this week in the amount of rigs actively drilling for oil and gas.

    West Texas’ Permian saw 12 drilling rigs added to the oil patch this past week. That compares to the nation’s overall addition of 15 rigs, including 10 seeking oil and another five primarily drilling for natural gas, according to weekly data from the Baker Hughes services firm.

    Despite the Permian’s big gain, Texas only saw a net gain of seven rigs. That’s because the Panhandle’s Granite Wash basin lost four rigs and South Texas’ Eagle Ford shale lost a single rig. The only other state with a notable gain was Oklahoma, which added four rigs.

    The total U.S. rig count is now at 839 rigs, up from an all-time low of 404 rigs in May, according to Baker Hughes. Of the total tally, 672 of them are primarily drilling for oil.

    The Permian now accounts for 331 rigs, which is nearly 50 percent of all the nation’s oil rigs. The next most active area is Texas’ Eagle Ford shale with 72 rigs. Texas is home to 418 rigs overall, while Oklahoma is second with 122 rigs. Louisiana is next with 60 rigs.

    Despite this week’s jump, the oil rig count is down 58 percent from its peak of 1,609 in October 2014, before oil prices began plummeting.
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    The day disaster struck Gorgon

    Twenty-six million dollars is real purchasing power. But what does spending $26 million every day for 7½ years get you?

    For Chevron and its partners Shell and ExxonMobil, it bought the Gorgon project on Barrow Island. Three vast processing units, known as trains, that can process and freeze 15.6 million tonnes a year of LNG — the energy which keeps the lights on from Tokyo to Shanghai.

    For the Gorgon project team in January last year, that $26 million a day bought pressure.

    A lot of pressure.

    As if they weren’t under enough already. The project they were in charge of was one of the biggest industrial initiatives anywhere in the world.

    The challenge had been to tap the gas strapped in porous rocks 4000m below the seabed off WA’s rugged North West coast and transport it to a sprawling processing complex on tiny Barrow Island — an area so environmentally sensitive the company was allowed to disturb just one per cent of the land.

    The LNG project starts to take shape.

    On Barrow, the gas would be cooled to liquid form and pumped onto gigantic freighters bound for Asia .

    To do this, Chevron installed 230,000 tonnes, equal to three aircraft carriers, of structure on the seabed. It designed sections of subsea pipe strong enough to be unsupported for lengths of up to 270m — 95m longer than the oval at the new Perth Stadium.

    On Barrow, the giant processing plant required more steel than four Sydney Harbour Bridges. The three LNG trains comprised 51 modules, one weighing 6600 tonnes, which had floated across rolling seas to Australia from engineering yards in Asia.

    The enormity of the engineering challenge was surpassed only by the financial test.

    When construction started in September 2009, LNG was to be produced in 2014. By January last year it was more than a year late. An already eye-wateringly expensive project was becoming dearer by the day as 8000 workers — equal to the combined populations of Kalbarri, Carnarvon and Exmouth and so numerous Chevron brought in a 1200-bed floating hotel, the Europa, to house the overflow — put their shoulders to the wheel.

    In doing so they chewed through an astonishing $40 billion worth of Australian goods and services.

    The initial $US37 billion cost soon blew out by more than 45 per cent to $US54 billion ($71 billion). The extra cash that the Gorgon partners had to cough up was enough to run the WA Government for nine months.

    To add insult to injury, revenue projections were plummeting. When the project was approved in 2009, oil cost $US70 a barrel and demand for LNG was strong. Early last year, a barrel of oil could be bought for $US30 and the industry was talking about an LNG glut which would last for years.

    Investors were fretting and Chevron desperately needed some good news.

    Against that backdrop, Chevron chief executive John Watson told investors in October 2015 that “Gorgon will see first cargo in the first quarter”.

    Chief executives do not make commitments to Wall Street lightly. The thousands of workers at Gorgon had just been given a deadline to get the first load of LNG onto a ship by March 31 last year.

    For a project team that measured progress in years and months, the most complex start-up phase would be counted in weeks and days.

    By January 1 last year, the Chevron LNG carrier Asia Excellence was at Barrow Island, laden with LNG to cool the plant to ready it for producing its own LNG.

    The project team must have felt relieved when a few weeks later, on March 7, train 1 produced its first batch of LNG. There was still three weeks to produce sufficient LNG to load the Asia Excellence and ship the first cargo — meeting the chief executive’s ambitious deadline.

    To produce that first LNG, untreated feed gas travelled from the Jansz-Io gas field wellheads, 1350m below sea level off the edge of the continental shelf, to Barrow Island, 130km away.

    At the plant, a 210m long slug catcher removed condensate — a type of hydrocarbon coveted by industry. Then, successively, carbon dioxide, water and finally mercury were extracted from the feed gas to ready it for cooling and the creation of the final product: almost 600 tonnes an hour of LNG at minus 162C.

    The propane refrigeration system provided the first cooling. A compressor circulated 2300 tonnes an hour of propane — the fuel in barbecue LPG bottles — through a propane cooler.

    The feed gas ran through that cooler on a separate circuit. The propane pressure reduced in four stages — each time some of it boiled quickly, which was known as a flash. The flash cooled the feed gas like evaporating sweat cools the body. Because each flash was at a lower pressure, the propane had a lower boiling point, chilling the feed gas in stages to minus 40C.

    The propane gas from each flash flowed back to the compressor through a knockout drum to repeat the cycle. The knockout drum removed any remnant propane liquid that could damage the compressor.

    Eighteen days after first LNG production — and with the eyes of the world on the project — the fourth knockout drum failed.

    It was a major catastrophe. The compressor was damaged and production at Gorgon ground to an expensive halt for more than three months.

    What happened that day is sourced from documents at the Department of Mines and Petroleum, the safety regulator for the LNG plant, obtained through freedom of information.

    Compared with much of the Gorgon plant a knockout drum is a straightforward piece of equipment. Liquid propane settles to the bottom to drain away and the gas flows out the top to the compressor. For a knockout drum to work the liquid level cannot rise too high.

    On the second day of LNG production, March 8, there was a high level of liquid in the fourth knockout drum and vibration in the propane compressor. It was a sign of the trouble to come.

    On March 20, train 1 was shut down because of problems with a gas turbine generator.

    The next day, Chevron’s LNG carrier Asia Excellence sailed from Barrow Island escorted by tugs spraying their fire hoses. Amid the media attention there was no mention that LNG production had stopped. According to an industry source, very little of the LNG the Asia Excellence carried that day had been produced by the Gorgon plant.

    The plant was restarted on March 25. Things again went wrong, this time at the propane refrigeration circuit.

    The propane compressor vibrated so much it tripped — an automatic shutdown to protect the equipment. Again, liquid levels in the fourth knockout drum were high, and liquid propane surged into the compressor. The knockout drum was significantly damaged.

    DMP described it as a “catastrophic breakdown of the propane refrigeration circuit.” Chevron made no statement and the incident was first revealed by WestBusiness on April 1.

    The Gorgon operator’s description was more subdued than the regulator. Chevron said in a statement on April 7: “Based on initial findings, the repair work is of a routine nature and all the necessary equipment and material is available on site.”

    As part of the apparently routine work, the propane compressor was flown out of Perth for repairs aboard the world’s biggest plane, the Antonov AN-225, on May 17. The necessary material was on site because Chevron was scavenging parts from trains 2 and 3 to repair train 1.

    In early July, more than three months after the incident, Gorgon’s second cargo of LNG left on the Marib Spirit. In that time Chevron had not reported the incident to the DMP.

    The regulator and operator of the LNG plant met on August 8 to discuss the propane refrigerant circuit incident.

    As recorded by DMP in a file note, Chevron laid out “what didn’t work” leading up to the incident. It was a lengthy list.

    Perhaps the most serious was the failure of the stop-work authority that gives any worker the responsibility and authority to stop a task they believe is unsafe.

    Another problem was the hazard and operability review, or HAZOP, where engineers and operating personnel brainstorm to identify possible hazards that are then addressed with changes to design or procedures. DMP in the file note of its meeting with Chevron stated: “Start-ups and shutdowns poses significant risk to a process plant and ... HAZOP of this stage is very important”.

    The HAZOP for the propane refrigeration circuit did not cover the start-up of the equipment. Had it done so it may have identified a further issue.

    The procedures for operating the propane cooler required the operator to know the pressure at the inlet of the propane compressor, but no such indication existed.

    Other issues Chevron identified included workers starting up the plant having an “unclear line of management oversight” and “inadequate technical resources to back up operations”.

    The Gorgon project takes shape on Barrow Island in July 2012.Picture: Chevron

    When contacted by WestBusiness for comment on the incident, DMP director of dangerous goods and petroleum safety Ross Stidolph said the department was satisfied that Chevron had identified the root causes, completed remedial actions and implemented additional controls to minimise future risk.

    A Chevron spokeswoman said Chevron had notified the regulator as required, measures were taken to ensure the safety of personnel and the company had applied lessons learnt to the start-ups of trains 2 and 3.

    Gorgon started producing LNG from its third and final train two weeks ago.
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    For the bunker industry, 100% sulphur compliance by 2020 is a distant dream

    The world's bunker industry is making progress in inching toward meeting the International Maritime Organization (IMO) global sulfur cap target by 2020, but with less than three years to go, achieving the target in its entirety still looks like a tough climb.

    Apart from the fundamentals -- availability of 0.5% sulfur compliant fuels or other suitable alternatives -- uncertainty about oil prices and the huge costs involved will also be hurdles to achieving a radical change, sources said, adding that neither the refining industry nor the shipping sector are equipped to deal with the tectonic shifts.

    This view also resonated at an industry conference in Fujairah last week, where over 30% of the respondents who participated in a live poll said there would be some degree of non-compliance with the related emission control area (ECA) cap by 2020. Although, they were specifically responding to compliance in ECA, this might be indicative of how things might look like in non ECAs, if one were to extend the sampling group.

    "Of course, we have to take care of the environment, of course we have to take care of the next generation [but] of course, we have to be reasonable [to the industry]," Gamal Fekry, the CEO of Red Sea Marine Management DMCC, said at Fujcon 2017 last week.

    "Everybody is waiting because there is no incentive in place to do anything right now [ahead of the 2020 global sulfur cap]. Banks are not going to give money for scrubbers unless they know the repayment or payback time and find the economics attractive, while LNG is for the future as infrastructure is insufficient and capital intensive. The majority [of customers] will be hoping that refineries and trading companies can provide blended fuels although the supply chain will not be able to adapt that quickly," according to Paul Nix, general manager of terminal operations at Gulf Petrochem.

    When ECA zones were first introduced in Europe, some shipowners simply opted to pay the fines and not comply with the sulfur limit there, as this was still cheaper than burning ECA compliant fuels, Nix said, adding that the industry has been relying too heavily on a penalty-based system.

    A carrot-based approach, which has incentives, may be better than using a stick, with penalties, he said.

    However, some felt that, as long as penalties around the world are similar and are high enough, the industry will be compelled to abide. "By 2020, we will have some sort of compliance; we'll know how regulation will be enforced and how effective it is. If the industry has clarity, then solutions will be found and it will work its way through it...but unless there is a level playing field, everybody will wait and watch before adopting a solution," said Andrew Laven, manging director at Bomin Oil DMCC.

    There are 88 signatories to Annex VI of the international MARPOL environmental convention, which aims to prevent air pollution from ships. In addition, according to the International Transport Workers' Federation, there are 35 Open Registries, of which 13 are signatories to Annex VI and 22 are not. As a result, over 90% of global trade now passes through ports in the 88 signatory states.

    Open Registries/Flags of Convenience account for about 70% of bunker purchases, Robin Meech, managing director at Marine & Energy Consulting and Chairman of the International Bunker Industry Association (IBIA), said in an e-mail to S&P Global Platts Thursday, adding that this leaves significant scope for re-flagging, reducing compliance if adequate measures are not taken.

    Furthermore, of the 88 signatories, so far only 28 states (26 in the EU, along with the US and Canada) have significantly enforced Annex VI, Meech said.

    "This means 60 states require port state enforcement resources and training for officers," he said.

    Measures to improve compliance could include making it illegal to leave port with insufficient bunkers to reach the next designated port compliantly, he said. There is also a need to improve bunkering standards in many ports by introducing unified standards, accurate measurement and survey systems, and more training for seafarers and port officers, he said.

    "For its part, IBIA is also seeking to smooth the transition post 2020," he said, adding that the association has developed the IBIA Port Charter, which focuses on three essential principles to ensure that systems are in place to enable quality bunkers to be delivered, measures are taken to ensure that the correct quantity is delivered, and systems are transparent for all concerned parties.
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    Exxon Mobil markets mid-term Papua New Guinea LNG supplies

    Exxon Mobil Corp is marketing 1.3 million tonnes per year (mtpa) of mid-term liquefied natural gas volumes from its $19 billion Papua New Guinea LNG (PNG LNG) plant, reflecting overproduction and an increase in gas reserves.

    The two-train plant with an original nameplate capacity of 6.9 million tonnes a year produced 7.9 million tonnes last year, making it possible to offer the excess for sale, Stephen McCusker, Vice President of PNG Marketing at ExxonMobil Asia Pacific Pte Ltd told Reuters at a gas conference in Japan.

    The move is also possible as ExxonMobil PNG, operator of the PNG LNG joint venture, said in February that a study showed that the likely technically recoverable natural gas from all PNG LNG fields is 11.5 trillion cubic feet (tcf), up a quarter from an earlier assessment of 9.2 tcf.

    "Originally we contracted for the base project 6.6 mtpa, and last year we produced close to 7.9 mtpa, so the 1.3 mtpa plus the additional recertification gives us an opportunity to approach the market with the mid-term contracts," McCusker told Reuters on Thursday at the Gastech conference in Chiba.

    PNG LNG's main four long-term customers are top global LNG buyer JERA Co at 1.8 million tonnes a year, Osaka Gas at 1.5 million, Taiwan's CPC with 1.2 million, and China's Sinopec at 2 million tonnes a year.

    The PNG project sells the remainder as spot and short-term supplies to those four and other customers, Exxon Mobil said.

    The U.S. oil and gas major and its joint venture partners are also looking at some upcoming opportunities, McCusker said.

    "Other fields that we've already discovered within the project, and of course, the other projects that are occurring around us - obviously the Total project - so PNG LNG is looking at those opportunities," he said.

    Exxon Mobil and Total SA, vying to develop new gas fields in Papua New Guinea to tap into an expected market recovery in the next decade, are likely to face tougher terms than Exxon Mobil's PNG LNG project.

    Prime Minister O'Neill has said the government had been generous when negotiating Exxon Mobil's PNG LNG project in 2009, as it was looking to secure the country's biggest foreign investment despite the global financial crisis.
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    Traders clear Europe's tanks by shipping more gasoline to U.S.

    Traders are shipping more gasoline from Europe to the U.S. East Coast ahead of the summer driving season as a steady reduction in inventories there props up prices.

    At least 16 tankers carrying some 600,000 tonnes of gasoline blending components including naphtha have been booked in recent days by traders including Glencore, ExxonMobil, Mercuria, Repsol and Total, shipping data shows.

    That compared with an average of around 300,000 tonnes per week booked throughout March. The exports are helping to clear Europe's tanks of oil products and boosting profits for refining gasoline from just under $6 per barrel at the end of March to more than $13 per barrel on Thursday.

    "Europe looks better and better all the time," one oil trader said. "Demand is good and stocks are drawing."

    Benchmark U.S. East Coast gasoline refining margins have steadily risen in recent weeks as stocks in the region are gradually reduced, even though they remain seasonally high.

    However, because much of the gasoline in storage was winter grade it can no longer be used as the market shifts to summer quality.

    The New York Harbor has traditionally been a major destination for European gasoline, which is produced in excess of the region's demand. But the arbitrage from Europe was closed for weeks, leading to building stocks, including in tankers waiting for a chance to sail to other markets.

    The exports, along with some 2.2 million tonnes of clean products booked to sail to West Africa in March, have helped clear stock levels in the Amsterdam-Rotterdam-Antwerp hub.

    Gasoline, blending component and naphtha stocks in the region fell by more than 6 percent in the week to March 31, according to industry monitor Genscape, to 2.9 million tonnes.

    There are millions of tonnes yet to clear from Europe, and while one tanker with stored gasoline, the Hamburg Star, had set sail for the United States, several others filled weeks ago were still floating offshore ARA, including the Hafnia Europe, the Amorea and the Clio.

    New York Harbor demand is expected to remain strong as Latin America, particularly Venezuela, pulls in more gasoline from the U.S. Gulf Coast and space on the Colonial pipeline - the key artery from the refining hub to the East Coast -- remains limited.

    While the April arbitrage is only narrowly open, one U.S. broker said the economics looked far better in May, meaning there could be more bookings to come.
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    Kuwait Is Best Off, Nigeria Worst in Fitch's 2017 Oil Break-Even

    Kuwait’s in the best position of major oil exporting nations in the Middle East, Africa and parts of Europe to have a balanced government budget this year with oil forecast to average $52.50 a barrel, according to Fitch Ratings Ltd.

    Nigeria is worst off, needing an oil price of $139 a barrel to balance its budget, Fitch said in a April 5 report on 14 major oil exporting nations in the Middle East, Africa and emerging Europe. Even after cuts in government subsidies and currency devaluations, 11 of them won’t have balanced government budgets this year, including Saudi Arabia, it said.

    “Fiscal reforms and exchange rate adjustments are generally supporting improved fiscal positions compared to 2015, but have not prevented erosion of sovereign creditworthiness,” Fitch said.

    Only Kuwait, Qatar and the Republic of Congo have estimated break-evens that are below Fitch’s oil price forecast for this year. Kuwait at $45 a barrel traditionally has a low break-even because of its high per-capita hydrocarbon production and more recently its “large estimated investment income” from its sovereign wealth fund, Fitch said.

    Brent crude, a global benchmark, has averaged about $55 a barrel this year.

    The rating agency said it “substantially” raised the fiscal break-even prices for Nigeria, Angola and Gabon from 2015 levels because of rising government spending.

    Fitch’s forecast 2017 break-even oil prices, per barrel:

    Nigeria at $139
    Bahrain at $84
    Angola at $82
    Oman at $75
    Saudi Arabia at $74
    Russia at $72
    Kazakhstan at $71
    Gabon at $66
    Azerbaijan at $66
    Iraq at $61
    Abu Dhabi, United Arab Emirates, at $60
    Republic of Congo at $52
    Qatar at $51
    Kuwait at $45
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    Oil trader Gunvor sounded out rivals to sell itself - WSJ

    Gunvor Group Ltd, one of the world's largest oil traders, has discussed a possible sale of the company

    Any potential deal would further consolidate a sector already dominated by a handful of players such as Glencore , Vitol, Mercuria and Trafigura.

    However, Gunvor Chief Executive Torbjorn Tornqvist said the company had no sale plans at this time, the Journal reported.

    "I expect to remain a dominant shareholder in the group for the foreseeable future," Tornqvist told the Journal via email.

    Tornqvist is the majority owner of the closely held Swiss firm, which also trades coal, liquefied natural gas, biofuels, power and emissions.

    Tornqvist said last week 2017 would be focused on building up the commodities trader's U.S. interests, and added that he expects to announce a buyer for Gunvor's stake in a Rotterdam terminal by the end of June.

    Gunvor on Monday said net profit fell to $315 million in 2016, from a record $1.25 billion the year before that was boosted by asset sales.

    The company did not immediately respond to a request for comment when contacted by Reuters.
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    China's oil demand resilient in early 2017 as industrial sector shines

    China's apparent oil demand rose 5.3% year on year in the first two months of 2017 to 11.65 million b/d on the back of robust economic growth, holiday transportation demand and efforts to build stocks ahead of the refinery maintenance season that started in March.

    Oil products across the barrel witnessed year-on-year demand growth over January-February, with LPG witnessing strongest growth of 24.8%, while gasoil demand rose 0.4%, rebounding from year-on-year declines since December 2015.

    China's industrial production grew 6.3% on year over January-February, beating expectations of 6.2% and accelerating from 6% in December. Fixed asset investment grew 8.9% in the two-month period, accelerating from 8.1% in December, according to data from the National Bureau of Statistics.

    These factors helped to lift gasoil consumption in the transportation and construction sectors. The week-long Chinese New Year holidays also pushed up demand for transportation fuels gasoline and jet fuel.

    A significant proportion of oil products also flowed into storage. Stocks, comprising gasoline, gasoil and jet fuel/kerosene, rose 15.29% month on month at the end of February, after rising 10.3% at the end of January, inventory data released by state-owned news agency Xinhua showed.

    Therefore, analysts do not expect the strong growth in apparent demand to continue in coming months because of the anticipated de-stocking activity that might take place.

    "The heavy maintenance in March will draw down China's throughput, resulting to lower apparent demand," said a Shanghai-based analyst.

    Beijing does not release official data on oil demand and stocks. Platts calculates apparent or implied oil demand by taking into account official data on monthly throughput at Chinese refineries and net product imports.

    China's GDP growth is expected to slow to 6.5% in 2017 from 6.7% last year, according to Primer Minster Li Keqiang, indicating slower growth in energy demand as the country steps up efforts to lift energy efficiency.


    China's apparent gasoil demand rose to 3.41 million b/d in January-February, edging up 0.4% year on year.

    If additional supplies from the blending pool with light cycle oil are also taken into account, demand would work out to be 3.63 million b/d, up 2.2% year on year, calculations by S&P Global Platts showed. The barrels blended from LCO are used mainly in the construction and fishing sectors.

    Despite healthy year-on-year growth in gasoil demand in January-February, consumption was softer than in previous months because of a slowdown in activity in industry, construction and fishing sectors around the Chinese New Year holidays.

    "Sales of gasoil in January and February were significantly down from November and December due to the holidays," said a source with PetroChina's sales arm in southern Guangdong.

    As a result, gasoil stocks surged 29.7% month on month by the end of February, after rising 39.2% by the end of January, according to data from Xinhua.

    Analysts expect gasoil demand to remain steady in coming months.

    "Demand from the construction sector will fall as many key cities in China recently imposed restrictions on property buying. This will lower cash flows for new construction," the Shanghai-based analyst said.

    Hou Rui, an analyst with S&P Global Platts China Oil Analytics, said demand from spring ploughing and infrastructure construction would recover in Q2 when it is warmer. This might offset the slowdown in demand from the construction sector.


    Apparent demand for gasoline stood at 2.88 million b/d in January-February, representing year-on-year growth of 2.8%, compared with 8.3% growth over the same period in 2016.

    Similar to gasoil, blending pools also played a role in overall gasoline supplies. If mixed aromatics inflows are taken into account, apparent demand growth would work out to be 9.2% year on year, to as high as 3.78 million b/d. Gasoline stocks rose 2.2% month on month by the end of February after dropping 11.8% by the end of January.

    Analysts expect demand growth to slow because of weaker growth in car sales on the back of relatively higher taxes this year compared with 2016.

    Over the first two months, gasoline-fueled vehicle sales rose 6.5% year on year, compared with 14% year-on-year growth seen in 2016, data from the China Association of Automobile Manufacturers showed.


    Apparent demand for LPG rose 24.8% year on year to 1.67 million b/d over January-February on the back of robust appetite from the petrochemicals sector.

    In addition, demand from industrial users is also expected to grow sharply this year because of tighter environmental regulations. LPG is a cleaner alternative to coal and fuel oil.

    Apparent demand for naphtha grew 8% year on year to 1.04 million b/d over January-February, below the average growth rate of 9.9% in 2016.

    Naphtha is not only used as a feedstock to process or blend gasoline but is also used to produce ethylene and other petrochemicals. Asia's ethylene market has been gaining strength since mid-January, driven by strong spot demand, especially from China, Platts reported earlier.

    Asian naphtha prices hit a 19-month high in mid-February, reducing some buying interest from China.


    Apparent demand for jet fuel surged 16.9% year on year to 820,000 b/d in January-February on the back of strong demand during the golden week holidays. Over the first two months in 2016, demand had fallen 3.5% year on year to 701,000 b/d, below the average of 754,000 b/d for the whole of last year.

    Aviation traffic turnover in January jumped 13.6% year on year, latest data from the Civil Aviation Administration of China showed. It was also higher than the 12.8% growth in the whole of 2016.

    Meanwhile, jet fuel stocks fell 1.36% month on month by the end of February, after climbing for three months, suggesting most of the output and net imports were consumed instead of flowing into tanks.

    Demand for jet fuel is unlikely to see similar growth in Q2 compared with Q1. "But it will still be buoyed by travel demand during the short public holidays such as Tomb-sweeping Day in April and Labor Day in May," said a Beijing-based analyst.

    The growth in apparent demand for fuel oil turned positive for the first time since February 2016, rising 4.9% year on year over January-February to 749,000 b/d. The rise was mainly attributed to the 8.7% growth in domestic output.

    Market sources said bunkering demand was weak compared with December because of slow industrial activity during the holidays, but had recovered significantly by H2 February, driven by demand for shipping coal.
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    Nexen joins ConocoPhillips in cutting oil sands output: sources

    Two oil sands producers in northern Alberta have cut production at their facilities due to a shortage of synthetic crude, market sources said on Thursday, causing Canadian and U.S. crude prices to surge to multi-year highs.

    Synthetic supplies are scarce following a fire at the 350,000 barrel-per-day (bpd) Syncrude plant in March that damaged the facility and forced the operator to bring forward maintenance and cut production for April to zero.

    As a result ConocoPhillips reduced output at its 140,000 bpd Surmont project, a joint venture with Total E&P Canada, by 40 percent, two market sources said. They spoke on condition of anonymity because they are not authorized to speak to the media.

    The company mixes synthetic crude from Syncrude with tarry bitumen from its oil sands reservoir to create a heavy crude blend known as "synbit" that can flow through pipelines.

    CNOOC Ltd subsidiary Nexen Energy, which likewise uses synthetic crude to dilute its bitumen, cut output from its Long Lake oil sands project this month by 48 percent, said one of the two sources, as well as two separate sources.

    Long Lake usually produces around 40,000 bpd of undiluted bitumen, one source said.

    ConocoPhillips spokeswoman Michelle McCullagh, who earlier this week confirmed that the Syncrude outage affected Surmont output, declined to comment on the size of the production cut.

    Nexen Energy spokeswoman Brittney Price said her company does not publish production or maintenance operations for individual assets.

    Syncrude, a joint venture majority-owned by Suncor Energy Inc, is expected to return to operations the first week of May but will be running at reduced rates that month, trading sources said on Wednesday.

    The oil sands outages have boosted Canadian heavy crude prices, with the benchmark Western Canada Select blend for May delivery last trading close to a 22-month high of $9.60 a barrel below U.S. crude, according to Shorcan Energy brokers.

    On Wednesday WCS settled at $9.85 per barrel below U.S. crude.

    Meanwhile, Mars Sour traded up to $1.20 a barrel discount to U.S. crude on Thursday, the narrowest discount since September 2015, according to Reuters data. Light Louisiana Sweet traded up to $2.35 a barrel over WTI, the widest premium since March 2016.
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    Alternative Energy

    E.ON invests in airborne wind project

    E.ON is investing in the development of airborne wind energy, which it says offer “game-changing technologies for renewable energy production”.

    Airborne wind technology harvests wind energy by using a fixed wing or sail in altitudes up to 450 metres. E.ON said that the technology “has the potential to transform the global offshore wind generation market, as airborne wind devices are cheaper to manufacture and easier to maintain than conventional wind turbines”.

    It added that they are also easier to deploy in deeper waters surrounding countries such as Portugal, Japan and the US.

    The German company has committed to invest in the development, and if successful, construction and operation of a demonstration site in County Mayo in Ireland.

    It has also signed a collaboration agreement with Dutch company Ampyx Power to be the first user of the upcoming test site.

    Founded in 2009, Ampyx develops fixed-wing airborne wind systems for deployment in utility scale wind parks and plans to utilize its initial 2 MW product to repower first-generation offshore wind farms which were built in the early 2000’s.

    “Airborne wind supports one of our overall targets to drive down cost for renewable energy,” said Anja-Isabel Dotzenrath, chief executive of E.ON Climate & Renewables.

    “In addition to making airborne wind competitive to conventional wind power, we would like to work with authorities and legislators to pave the way for introducing this exciting technology and eventually make it eligible to participate in tendering processes.”

    Ampyx managing director Wolbert Allaart said the deal with E.ON was “a major milestone for our company. It is fundamental for us as it allows us to incorporate E.ON’s vast offshore wind expertise into our product design efforts.”

    E.ON is already active in the airborne wind sector – last year it invested in Scottish start-up Kite Power Systems.
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    Battery breakthrough by 94 year inventor addresses costs and life-cycle

    A team of US engineers, led by one of the co-inventors of the game-changing lithium-ion battery, has made a new battery storage breakthrough that could also be a game-changer – particularly for the uptake of electric vehicles.

    The team, from The University of Texas, in Austin, claims to have come up with a low-cost all-solid-state battery that is noncombustible and has a long cycle life, has fast rates of charge and discharge and at least three times as much energy density as today’s lithium-ion batteries.

    In terms of electric vehicles, this sort of boost to energy density is all-important, allowing battery-powered cars to drive further between charges. It also allows for a greater number of charging and discharging cycles, which means longer battery life, as well as a faster rate of recharge – another key hurdle restricting the mass adoption of electric vehicles.

    The breakthrough, first reported in a paper published in the journal Energy & Environmental Science, was overseen by team leader 94-year-old John Goodenough, professor in the UT’s Cockrell School of Engineering and a co-developer of the li-ion battery.

    And it draws on solid glass electrolyte discoveries of senior research fellow Maria Helena Braga, who first worked on the technology with colleagues, at the University of Porto in Portugal, and then with Goodenough and researcher Andrew J. Murchison at UT Austin.

    Braga said that Goodenough brought an understanding of the composition and properties of the solid-glass electrolytes that resulted in a new version of the electrolytes that is now patented through the UT Austin Office of Technology Commercialisation.

    “We believe our discovery solves many of the problems that are inherent in today’s batteries,” Goodenough said in a UT report.

    “Cost, safety, energy density, rates of charge and discharge and cycle life are critical for battery-driven cars to be more widely adopted,” he said.

    The use of an alkali-metal anode (lithium, sodium or potassium) — which isn’t possible with conventional batteries — increases the energy density of a cathode and delivers a long cycle life. In experiments, the researchers’ cells have demonstrated more than 1,200 cycles with low cell resistance.

    Another benefit to using the glass electrolyte is safety: Current lithium-ion batteries use liquid electrolytes to transport the lithium-ions between the anode and the cathode. If a battery cell is charged too quickly, it can cause dendrites or “metal whiskers” to form and cross through the liquid electrolytes, causing a short circuit that can lead to explosions and fires.

    Additionally, because the solid-glass electrolytes can operate, or have high conductivity, at -20 degrees Celsius, it could perform well in subzero degree weather. It is also the first all-solid-state battery cell that can operate under 60°C.

    Another advantage is that the battery cells can be made from earth-friendly and abundant materials.

    “The glass electrolytes allow for the substitution of low-cost sodium for lithium. Sodium is extracted from seawater that is widely available,” Braga said.

    According to the UT, Goodenough and Braga are continuing to advance their research and are working on several patents. In the short term, they hope to work with battery makers to develop and test their new materials in electric vehicles and energy storage devices.
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    Electricity from UK solar farms hit record high April 8

    Electricity generated from solar PV farms across the UK hit several record highs on Saturday, peaking at 8,030 MW in the afternoon half hourly period, according to National Grid data.

    On April 8, the UK's solar output recorded a maximum of 8,030 MW at 12:30 local time (1130 GMT), the Grid data showed.

    Solar PV generation had climbed to 7,680 MW at 11:30 UK time earlier in the day, surpassing the previous record high of 7,670 MW set on March 25, National Grid said.

    The UK has had strong growth in installed solar capacity in recent years, and the energy department's initial estimates at the end of February pegged capacity at 11,770 MW across 907,597 installations.

    As most of deployed solar capacity is part of the embedded generation profile in the UK -- connected to the distribution network and not the national transmission network -- the Grid lacked the visibility on total electricity produced by the source of energy.

    But a project by the Grid along with Sheffield Solar has resulted in near real time estimates of national solar outturn that is based on third party metered data from a sample of live sites.

    According to the Sheffield Solar website, solar output was 4.82 GW at 11:30 UK time, which is around 13% of the UK's total energy mix.
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    U.S. sentences N.J. man to 5 years prison on biodiesel fraud

    The Department of Justice said on Friday it had sentenced the owner of a New Jersey feedstock processor to five years in prison for conspiracy to commit fraud in a scheme connected to credits

    The department sentenced Malek Jalal, owner of Unity Fuels, to 60 months in prison. He was also ordered to pay more than $1 million in restitution for the scheme that involved more than $7 million fraudulent tax credits and renewable fuel credits known as RINs, the DOJ said.
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    Wind turbine maker Vestas looks at expanding into energy storage

    Denmark's Vestas, the world's largest wind turbine maker, is keen to expand into areas such as energy storage to increase the global use of wind power and bring costs down.

    The wind industry is entering a phase of slower growth and steadier demand for turbines, prompting producers to look at alternatives to grow revenue.

    "The storage side is interesting and there are a lot of small start-ups that might be of interest. I’m looking for industry batteries," Vestas Chairman Bert Nordberg told Reuters.

    "If you can store over-production in a good way it would take down the total cost."

    Energy storage is the capture of energy produced for use at a later time, for instance in the form of batteries. The technology is becoming increasingly viable with the rise in sales of electric cars.

    In January, U.S. electric car maker Tesla launched a massive battery storage facility in the California desert. In Europe, a former Tesla executive wants to build a plant to rival the scale of his former employer's Gigafactory in Sweden.

    Nordberg said Vestas could consider buying small stakes in many companies "to see which one wins before you go for a major acquisition".

    "We have 3.2 billion euro in cash and no debt so we can afford to invest," he said, declining to say how much the firm would be willing to spend.

    He added that he preferred investing the money rather than initiating a buy-back programme.

    "A buy-back is pretty boring. It’s better if we find something that can develop the company so I’m pushing management to have better ideas than buy-backs," he said.

    Vestas came back from the brink of bankruptcy just four years ago and the share price has risen more than 1,000 percent over the past five years.

    But the company could lose its status as the world's biggest wind turbine maker as Germany's Siemens and Spain's Gamesa agreed to combine their assets in the sector.

    "We definitely are going to make their life miserable. We are going to take the deals... We have exactly the same goal that we should the biggest player," Nordberg said.

    While he expected consolidation among smaller players in the industry, Vestas was not aiming to buy anything big.
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    Wind, solar output in EU's big five markets at record 30.5 TWh in March

    Wind and solar power production in Europe's five biggest markets in March reached a new monthly record at 30.5 TWh, up 13% year on year amid continued growth in renewables with installed capacity across Germany, France, the UK, Italy and Spain set to top 200 GW this year, data from S&P Global Platts European Renewable Power Tracker shows.

    The record March comes after four months of below-average wind conditions, especially across Northern Europe, partially masking the continued boom in capacity additions, in particular in Europe's biggest market, Germany, which added over 5 GW of new wind capacity in 2016.

    Wind output in March was up 18% year on year at 23 TWh, with solar adding 7.5 TWh across the five nations, which account for over 75% of the EU28's total installed capacity, the tracker based on national grid operator data shows.

    Across the five markets, wind output averaged 31 GW each hour in March, the data shows. Overall, wind and solar generated 82 TWh in the first quarter, up just 2% from Q1 2016 mainly on below-average wind conditions at the start of 2017. Using Platts renewable energy calculator, the 82 TWh of electricity generated by wind and solar equates to around 16 Bcm of potential gas burn or 31 million mt of coal based on average plant efficiencies (48% for gas and 38% for coal). In another purely theoretical cross-commodity comparison, some 162 LNG standard cargoes would be needed to generate the same electricity, the data shows.

    In practice, the increased supply from intermittent renewables combined with reduced power demand to ease power prices from record highs in January and February with generating fuels also turning more bearish during March.

    However, compared to early 2016, coal, gas and power price levels remain considerably above last year's record lows.
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    EDF reprieves Fessenheim nuclear plant, in setback to government

    The board of French state-controlled utility EDF on Thursday chose not to vote on a motion that could have closed its aging Fessenheim nuclear plant for good, meaning a 2012 election pledge by President Francois Hollande will not be met.

    Hollande had promised to end power production at France's oldest atomic plant by the end of his five-year term in May.

    EDF board members instead authorized its chief executive to seek a decree from the government that would keep Fessenheim open at least until six months before the start-up of a new, third reactor at the company's Flamanville site.

    That reactor is still being built and is expected to start production around the end of 2018. That is well into the next president's term, meaning any closure decision could in theory be reversed.

    "The decision of the board ... enables EDF ... to have the nuclear fleet necessary to fulfill its obligations to supply its customers," EDF's CEO Jean-Bernard Levy said in a statement.

    EDF also said it would only close Fessenheim if keeping it open meant French nuclear output would exceed the legal ceiling of 63.2 gigawatts of power - though Emmanuel Macron, the frontrunner to be France's next president, said he would shut it down if he won.

    "Broadly speaking this is a snub to the government in that the closure of Fessenheim is not formally signed and sealed," Laurent Langlard, a CGT union official at EDF, told Reuters.

    "In concrete terms, Fessenheim continues to operate ...and we'll see when Flamanville starts producing which unit is disconnected from the grid. But it won't necessarily be Fessenheim."


    Environment Minister Segolene Royal, who has long pushed for Fessenheim to be closed, said in a statement that the shutdown process was inevitable, adding the government would seek legal means in the coming days to endorse the decision.

    On Wednesday, she had warned EDF's board against trying to prevent the closure of the plant, on the Franco-German border.

    "The government owns more than 80 percent of EDF. A board which does not respect a shareholder which has an extremely large majority, that's unprecedented," Karine Berger, an MP for the ruling Socialist party, said on Twitter.

    Macron, tipped to secure the presidency in a runoff vote in May, said on Thursday that Fessenheim would be shut down if he won. "Fessenheim must be closed," the independent centrist candidate said in a television interview.

    Environmental groups have long suspected EDF of playing for time, seeking to prevent the closure from becoming irreversible before the end of Hollande's presidency.

    "The conditions laid down by EDF are unacceptable," Greenpeace said in a statement.

    "In addition to being old and dangerous, Fessenheim's reactor number 2 has been offline for almost a year, since a serious anomaly was detected there. The immediate halt is therefore necessary," Greenpeace said.

    Fessenheim's two 900-megawatt reactors each bring EDF about 200 million euros ($213 million) per year in earnings before interest, taxes, depreciation and amortization (EBITDA).
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    Grains piled on runways, parking lots, fields amid global glut

    Iowa farmer Karl Fox is drowning in corn.

    Reluctant to sell his harvest at today's rock-bottom prices, he has stuffed storage bins at his property full and left more corn piled on the ground, covered with a tarp.

    He would rather risk potential crop damage from the elements than pay the exorbitant cost of storage elsewhere.

    "That's how poor people do it," said Fox, who has been farming for 28 years. "You do what you have to do."

    Farmers face similar problems across the globe. World stockpiles of corn and wheat are at record highs. From Iowa to China, years of bumper crops and low prices have overwhelmed storage capacity for basic foodstuffs.

    Global stocks of corn, wheat, rice and soybeans combined will hit a record 671.1 million tonnes going into the next harvest - the third straight year of historically high surplus, according to the U.S. Department of Agriculture (USDA). That's enough to cover demand from China for about a year.

    In the United States, farmers facing a fourth straight year of declining incomes and rising debts are hanging on to grain in the hope of higher prices later. They may be waiting a long time: Market fundamentals appear to be weakening as the world's top grain producers ponder what to do with so much food.

    The persistent glut is a striking contrast from the panic a decade ago, when severe droughts in Russia and the United States sent prices soaring. The shrinking supply forced big importers such as China to enact policies to encourage more domestic production and increase the volume of storage to improve food security.

    China abandoned that policy last year and is now selling off hundreds of millions of tonnes of old stocks.

    Russia, too, is looking at exporting from state-held stockpiles, with storage stuffed after a record harvest in 2016.

    A surge of Chinese and Russian exports would put even more downward pressure on prices in an oversupplied global market.

    That means U.S. farmers will likely be producing more grain for less money. The USDA forecasts net farm income will fall 8.7 percent this year to $62.3 billion - the lowest level since 2009.


    In farms across Iowa, corn bulges in plastic tubes that snake across the fields.

    The grain-stuffed silo bags are taller than a man, often longer than a soccer field and look like monstrous white caterpillars.

    On the other side of the globe in Australia, demand for the storage bags has exploded after farmers produced record crops of wheat and barley.

    They are laying across fields in Argentina, too. There, wheat production spiked 41.6 percent this year over the 2015/16 season, according to the most recent USDA data.

    There are risks to using the bags, however, as wild animals ranging from rodents to armadillos and even donkeys can be tempted to break in for the grain, said Mariano Bosch, the head of Adecoagro SA (AGRO.K), which farms more than 225,000 hectares of row crops in Argentina, Brazil and Uruguay.

    When the company expanded its grain plantings in northern Argentina, he said, they started building electrified fences around their silo bags to keep out cougars and pumas.

    "They won't eat the grain. They're just curious," said Bosch, who added that about 40 percent of the company's grain this year is stored in silo bags.

    In neighboring Brazil, the world's largest soybean shipper and the second-largest exporter of corn, towering grain silos have sprung up all across the country.


    Storing grain gives farmers more control over when and how they sell, to avoid low harvest-time prices and to best take advantage of spikes in futures or currency swings.

    But with storage running short - and a mountain of grain to move ahead of summer or early autumn harvests - that control is slipping away.

    Farmers with mounting bills, tight cash-flow and nowhere to store crops may have to sell them - even if it means taking a loss.

    In Goodland, Kansas, where the next wheat harvest begins in late June, farmers holding grain in silos are facing cash wheat prices of about $3.15 a bushel and cash corn prices of $2.90 a bushel - both well below production costs of at least $4 a bushel. 

    Permanent storage in the United States can handle about 24.3 billion bushels - well short of the 25.9 billion bushels of wheat, soybeans and feed grains the USDA said was piled up by the end of last autumn's harvest.

    The overflow in the United States has prompted a rush for temporary storage. The USDA has approved permits for more than 1.2 billion bushels of temporary and emergency grain storage - such as tarp-covered piles and open-air mounds. That's a record amount, according to the USDA.

    In Kansas, some grain owners are renting airport tarmacs from decommissioned military bases, empty farm fields and parking lots to stash their corn as the situation becomes acute, according to farmers and local, state and federal officials.

    Meanwhile, there are no signs of a slowdown in grain production.

    The USDA already expects 2016/17 global harvests to be the highest since its records started in 1960/61 at 340.79 million tonnes of soybeans, 1.049 billion tonnes of corn and 751.07 million tonnes of wheat.

    "Nobody is going to cut back," said Fox, the Iowa farmer.

    With spring planting coming up, he is scouting for more storage space for this year's harvest.

    "I have a note at the bank to pay off," he said. "I can't do less."
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    Precious Metals

    China's Fosun plans to buy stake in Russia's Polyus: Interfax

    China's Fosun International Ltd plans to sign an agreement to buy a stake in Russia's largest gold producer Polyus (PLZL.MM), Interfax news agency quoted Russian First Deputy Prime Minister Igor Shuvalov as saying on Wednesday.

    He did not provide further details on the deal. Sources with knowledge of the matter told Reuters in November that Fosun was in exclusive talks to buy a large minority stake in Polyus.

    Shuvalov also said that aluminium giant Rusal could soon announce the placement of the second tranche of its Chinese yuan-denominated bond, known as a Panda bond. Rusal placed its first tranche of the Panda bond in March.
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    CME Group, UK’s Royal Mint test blockchain-based gold trading platform

    Chicago-based exchange CME Group and Britain's Royal Minthave started testing a blockchain-based platform for trading gold, as more projects using the emerging technology come closer to deployment.

    CME Group announced on Tuesday that the new platform, built with technology companies AlphaPoint and BitGo, was being tested by a select group of "major financialinstitutions," and is on schedule for launch this year.

    The new platform will allow institutions to trade "Royal MintGold," or RMG, a new digital token issued by the Royal Mint, which makes Britain's coins.

    Each RMG will represent the digitised version of 1 g of goldstored in the Royal Mint's vault.

    Transactions will be recorded on a blockchain, technologythat allows a network of computers to keep track of and verify asset ownership.

    Blockchain, which first emerged as the technology powering cryptocurrency bitcoin, is seen by financial institutions as a powerful new tool to increase transparency and reduce the costs and complexity of a wide range of financial transactions.

    "There is a higher level of traceability and audit that comes with blockchain technology because participants are provided with a permanent, immutable record of ownership and chain of ownership and custody," said Igor Telyatnikov, president and COO of AlphaPoint.

    Up to $1-billion worth of RMGs will be issued initially by the Royal Mint.

    "This is the first digital gold product that is institutionally targeted - and the first to work with a government entity - to be currently in a live testing state,” said Sandra Ro, head of digitisation at CME Group. “An RMG is a digital representation of real gold sitting in the Royal Mint vaults.”

    Over the past two years, banks and other financialinstitutions, such as exchanges, have ramped up their investments in the technology. While only a handful have gone live, more are starting to enter the implementation phase.

    Post-trade provider the Depository Trust & Clearing Corp(DTCC) said in January that it would use blockchain technology this year to rebuild its platform that processes $11-trillion worth of credit default swaps.
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    Ruthenium prices hit 2.5-year high on Asian industrial buying

    Continued industrial buying and a lack of offers pushed the bid/ask spread for ruthenium to the highest level in two and a half years this week, market sources said.

    The Platts New York Dealer ruthenium price range rose to $50-$65/oz from $40-$50/oz last week. Some market sources reported bids as low as $43 and sales as high as $68, although for small volumes.

    But most sources agreed that industrial consumers, especially those in East Asia, had been in the market buying.

    "It jumped a little bit in the Far East last night," one refiner/recycler said Thursday, putting this week's range of physical deals at $50-$60/oz.

    "I heard $65 overnight, but I didn't see it. There's not a lot being offered yet at these levels, so people are accumulating [ruthenium] apparently," he added.

    Ruthenium buying appeared to pick up in overnight Asian trading April 5, one day after the Ching Ming Festival in China.

    Base prices of major European refiners Johnson Matthey of the UK and Engelhard Materials Services (BASF) of Germany jumped to $52/oz and $50/oz, respectively, the morning of April 5 from $47 the previous evening.

    JM ended the week at $52/oz, while Engelhard closed the week at $55. Both refiners finished last week at $45/oz.

    One European dealer who put this week's range at $55-$72/oz said he had been able to make multiple sales in Asia as prices were rising.

    "I was talking to my Chinese colleagues who are in the market all the time, and they were saying that in the Asian market, $80/oz isn't far off," he said.

    One US dealer said industrial consumers may have been lulled into a sense of complacency as ruthenium prices stayed low for so long.

    "This is a market that was dead for two years, and a lot of the industrials were playing a waiting game," one US physical dealer said, putting the range at $50-$68/oz.

    "They were working down inventory, and maybe now we've hit an inflexion point where inventories got so low, people started hoarding and the prices started gaining momentum, and that created a $18/oz spread for the week," he said.

    Some PGM miners in South Africa claimed to be sold out of ruthenium for a couple of months, the dealer noted.

    "Once people started catching wind of that, along with consistent bidding from Asian industrials and a couple of traders hoarding and lifting offers, that increased confusion," he said.

    "So it doesn't surprise me that we have a really wide range this week, because that's exactly what's been going on."

    Ruthenium is used in computer hard-disk sensors, and in electrical contacts and film chip resistors. But speculation has risen that a new application has surfaced.

    A scientific paper released in February suggested ruthenium could be used as a chemical catalyst, similar to platinum, palladium and rhodium.

    But market sources have noted that higher ruthenium prices would make such an application impractical on widespread scale.
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    GoldQuest’s Dominican ‘string of pearls’ attracts major endorsement by Agnico Eagle

    Exploration success by TSX-V-listed GoldQuest Mining at its flagship Romero project and key regional exploration targets – likened to a “string of pearls” by executive chairperson Bill Fisher along the Tireo land position, in the western Dominican Republic – has attracted the attention of senior Canadian goldminer Agnico Eagle Mines.

    Agnico has recently made a C$22.9-million investment in GoldQuest, serving as a significant endorsement for the GoldQuest exploration team, Fisher tells Mining Weekly Online in an interview.

    “We have reconstituted the former GlobeStar team, a team that has done it before in the Dominican Republic with the still-producing Cerro de Maimón mine. While we are making progress on several fronts regarding permitting the Romero project, and delivering exploration success in the surrounding Tireo land package, we are expecting accelerating news flow this year as we gather momentum,” Fisher states.

    Agnico Eagle has recently acquired 38.1-million GoldQuestshares at C$0.60 apiece, giving it a 15% stake in issued and outstanding stock of the junior explorer.

    “The approximately C$23-million investment by Agnico places us in a strong financial position to advance both our exploration programme and the development of our Romero project,” Fisher states, noting that the proceeds from the private placement will be mainly used for exploration and development at the company's Dominican portfolio and for general corporate and working capital purposes.

    Agnico has adopted a policy of positioning itself in early staged opportunities in districts with long-term geological potential.


    According to Fisher, it was GoldQuest’s early-January announcement that its ongoing 40 hole, 10 000 m 2016/17 drill programme on its 100% owned Tireo concessions has made a polymetallic discovery named Cachimbo, which returned high grades of gold and zinc on three horizons, that piqued Agnico’s interest.

    This new discovery is located 20.5 km south of GoldQuest's multi-million ounce Romero gold/copper project, which is currently in the permitting phase. Hole TIR-16-09 at Cachimbo returned a 4.9 m interval grading 14 g/t gold, 74 g/t silver, 12 % zinc, 1% copper and 0.7% lead, within a wider horizon of 15 m grading 5 g/t gold, 31 g/t silver, 4 % zinc, 0.4% copper and 0.3% lead from 70 m depth.

    GoldQuest made the Cachimbo discovery while drilling the third of 20 targets on the Tireo concessions, attesting to the regional prospectiveness.

    “The discovery of high-grade zinc is especially fortuitous since zinc prices have risen 75% during the last year. With this discovery on merely the 3rd target of 20 such targets, we are optimistic as to the potential of the district, as VMSmineralisation often occurs in clusters. Along with the Romero project in full permitting mode, GoldQuest is well-funded and positioned to be one of the most active mineral exploration and development companies of 2017 as we explore the emerging Tireo Belt, which has the potential to become a mining district,” Fisher says.

    The Tireo project consists of a 100%-owned, 50-km-long land position overlying the highly prospective Tireo Formation rocks, consisting of Upper Cretaceous volcanic sequences, and surrounding GoldQuest’s Romero project. Fisher explains that the targets were identified following one of the world’s largest helicopter borne Z-Axis Tipper Electromagnetic and magnetic surveys conducted ever over the entire Tireo project. The survey covered the discoveries at Romero and Romero South, as well as a previously identified mineralisation including La Guama, Jengibre and Loma Viejo Pedro.

    Late last month, GoldQuest announced the discovery of two new gold systems in the Tireo Belt, called Vaca Valley and Mineros Ridge, which are located 5 km and 10 km north of the Cachimbo discovery, respectively. In both cases, goldbearing sulphides were intersected with similar grades and thicknesses to intersections bordering the Romero deposit and the Cachimbo discovery, Fisher notes.

    Highlights of the new drilling include hole TIR-17-16 at Mineros Ridge, which intersected 15 m grading 0.4 g/t goldand 25.4 g/t silver. Hole TIR-16-12 at Vaca Valley intersected 56.8 m grading 0.3 g/t gold.

    Further, the team has encountered wide intersections of anomalous gold-in-pyrite on the edge of the Romero deposits and all of discoveries in the belt and may be indicative of proximity to higher-grade mineralisation, Fisher stresses. Results from hole TIR-17-16 show higher silver values and similar gold to silver ratios as intersected at the Cachimbo discovery.

    "Finding new gold bearing hydrothermal systems is the objective of this first pass drilling programme. Subsequent follow-up drilling programmes will vector toward potentially higher-grade mineralisation of such systems. Finding sulphides coinciding with anomalous gold and other metals, we are optimistic as to the potential of the district as volcanogenic massive sulphide (VMS) mineralisation often occurs in clusters,” Fisher states.

    Fisher explains that the 2016 exploration programme focuses on the southern half of the 50 km Tireo project. The focus area is on a window of favourable altered volcanic rocks within the Tireo Formation land package and is along trend of GoldQuest’s Romero gold/copper discovery 20 km north. This window trends towards and is directly next to Precipitate Gold’s Ginger Ridge discovery, which highlights the potential for the Tireo to host more gold deposits.  

    GoldQuest has been using a systematic explorationprogramme which includes mapping, surface sampling, ground induced polarisation (IP), and will include 10 000 m of drilling. Since drilling on IP changeability high anomalies led to the discovery of the Romero deposit, it has been a key exploration tool in this region.


    Meanwhile, GoldQuest is grinding through the permitting process for its Romero project, which it discovered by similar means in 2012.

    A November prefeasibility study (PFS) has calculated an after-tax net present value, at a 5% discount rate, of $203-million, and an internal rate of return of 28%. All-in sustaining costs came in at $595/oz of gold equivalent.

    The PFS, completed by JDS Energy & Mining, envisions a planned 2 800 t/d underground mine focused on the high-grade gold and copper ‘core’ of the Romero deposit to produce a saleable copper concentrate for shipment to offshore refineries. Over half of Romero’s mineral resourcesare not included in the mine plan, as well as the entirety of Romero South. The unmined portion of the resources leaves significant room for potential expansion, Fisher states.

    The project will cost about $251-million to build, including a $32-million contingency, which can be paid back in 2.5 years. The operation will on average produce 109 000 oz of goldequivalent over the 7.3-year mine life

    The Romero and Romero South deposits, located in the central part of GoldQuest’s Tireo property, are about 1 km apart.

    The Romero deposits host a probable reserve of 7.03-million tonnes containing 840 000 oz of gold; 980 000 oz of silver, and 136-million pounds of copper, or 1.12-million gold-equivalent ounces. The indicated resource statement comprises 20.23-million tonnes grading 2.67 g/t gold, 0.61% copper, 0.3 % zinc, 4 g/t silver, for 1.74-million ounces of gold, or 2.27-million ounces of gold equivalent.

    Fisher says the brownfields exploration potential in the Romero concession, both near and in between the two deposits, is substantial, and will be tested once a miningpermit is obtained.

    GoldQuest plans to complete a feasibility study on Romero by year-end, with mine permits expected in the third quarter. Construction has been pencilled in to start, on an optimistic time line, during the first quarter of 2018.
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    Argentina tells Barrick to overhaul Veladero gold mine

    Argentina mining officials told Barrick Gold Corp it must overhaul environmental and operating processes at its Veladero mine, following last week's cyanide solution spill, while the country's environment ministry asked for a total suspension of operations, according to statements on Friday.

    National and provincial officials told Barrick executives at a Thursday meeting that the Canadian company's ongoing business in the country hinges on a new working plan for the open pit mine, the country's energy minister said.

    A pipe carrying cyanide solution ruptured at the open pit mine on March 28, the third incident at the mine in 18 months involving cyanide-bearing solution. A Barrick spokesman said the meetings were constructive.

    "We have told the company to change their standards and invest, modify the project's engineering to ensure these incidents never happen again," Energy and Mining Minister Juan Jose Aranguren told Reuters in an interview on Friday.

    He said the company's concession to operate the mine would have been at risk if it had not agreed to an external audit on Thursday.

    The Thursday meeting, which also included Barrick President Kelvin Dushnisky and the governor of San Juan province, came as Barrick confirmed a Reuters story on a deal with China's Shandong Gold Mining Co, which bought a 50 percent stake in Veladero for $960 million.

    Barrick, the world's largest gold miner, has been temporarily restricted from adding cyanide to the mine's gold processing facility. The Toronto-based company, which counts Veladero as one of its five core mines, said no material impact was expected on the mine's projected 2017 production.

    Barrick's work plan should include "the complete re-engineering of the operational and environmental processes and standards of the Veladero enterprise," a statement from the San Juan government said.

    "We have held constructive meetings with government representatives in recent days and have agreed on a path forward that addresses their concerns," said Barrick spokesman Andy Lloyd.

    Aranguren said the province would make any decision on an eventual fine for Barrick but had the full support of the national government.

    Separately on Friday, Argentina's environmental ministry asked a federal court to halt all activities at Veladero, "until there is a guarantee that there will be no environmental damages," it said in a statement.

    Operations at the high-altitude mine were temporarily suspended last September, after falling ice damaged a pipe and spilled some ore saturated with cyanide solution over a raised bank.
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    Base Metals

    Rio ponders future in Indonesia's Grasberg copper mine

    Diversified miner Rio Tinto Plc said on Wednesday it was continuing talks on the long-term future of its stake in the Grasberg copper mine in Indonesia and one of its top executives would visit the country for talks over the coming weeks.

    Mine operator Freeport McMoRan's exports of copper concentrate from Grasberg, the world's richest copper mine, have been at a standstill since mid-January, when Indonesia introduced rules intended to improve revenues from its resources and create jobs.

    "There is no doubt that Grasberg is a world-class resource. However, there's a difference between a world-class resource and a world-class business," Rio Tinto Chief Executive Jean-Sebastien Jacques said on Wednesday, responding to a shareholder at the company's annual general meeting in London.

    "Depending what will happen in the coming months and years in terms of negotiations with the government, the extension beyond 2021, Rio will have to come to a conclusion whether we want to stay or not," Jacques said, adding discussions involving all parties would continue over the next six months.

    Rio Tinto has a joint-venture with Freeport-McMoRan Inc for the huge Grasberg copper and gold complex in remote Papua, with rights to 40 percent of production above specific levels until 2021 and 40 percent of all production after 2021.

    As pressure mounts on Indonesia to agree a compromise U.S. Vice President Mike Pence will visit the country next week and Arnaud Soirat, head of Rio Tinto's copper and diamonds business, will visit shortly afterwards, Rio officials said.

    Freeport McMoRan, the biggest publicly-listed copper miner, has lost $1 billion since the export of copper concentrate from Grasberg was halted on Jan. 12 under new rules issued by the government.

    The Indonesian government has lost millions of dollars in royalties and is worried about layoffs and a slowing economy in the restive Papua region.
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    Indonesia eyes truce with Freeport as losses mount for both sides

    Losses amounting to hundreds of millions of dollars appear to be pushing the Indonesian government and mining giant Freeport McMoRan to resolve a row that has crippled operations at Grasberg, the world's richest copper mine, for three months.

    Freeport says it has lost revenue of about $1 billion since the export of copper concentrate from Grasberg was halted on Jan. 12 under new rules issued by the government. The government has lost millions of dollars in royalties and is worried about layoffs and a slowing economy in the restive Papua region, where the giant mine is located.

    "There's a lot of grandstanding in public – that, with our economy being close to a $1 trillion a year now, Freeport is a small matter," said a senior Indonesian government official, who estimated the lost royalties and taxes from the mine at about $1 billion a year.

    "But truth be told, a $1 billion a year reduction in fiscal revenue is a lot," said the official, who spoke on condition of anonymity.

    Indonesia halted Freeport's copper concentrate exports under new rules that require the Phoenix, Arizona-based company to adopt a special license, pay new taxes and royalties, divest a 51 percent stake in its operations and relinquish arbitration rights.

    Freeport threatened in February to take the dispute to arbitration, saying the rules were "in effect a form of expropriation".

    But now, Indonesia has promised to allow Freeport to export its copper concentrate once again, while negotiations continue over the next six months on contentious issues, including on divestment, economic and legal protection and smelting investment.

    The compromise comes ahead of a visit to Indonesia by U.S. Vice President Mike Spence next week. Pressure to resolve the row could also come from Freeport's third-biggest shareholder, activist investor Carl Icahn, who has been appointed a special adviser to President Donald Trump.

    For Indonesia, tensions at Grasberg could hamper its efforts to calm the Papua region, where a low-level insurgency has simmered for decades. The mine's social and environmental footprint also remains a source of friction.

    Papua's GDP growth is expected to drop to 3 percent this year due to the Freeport dispute, down from 9.21 percent in 2016, according to the Papua branch of Indonesia's central bank.

    A slump in Papua's economy could aggravate tensions with Jakarta, complicating efforts by President Joko Widodo to enforce policies to extract more from its natural resources.

    "When there is a crisis at Freeport, it will send major ripples through Papuan society," said Achmad Sukarsono, an Indonesian expert at the Eurasia consultancy.


    In Timika, a sprawling town of around 250,000 people and a supply hub for Grasberg, the Freeport dispute has hit businesses, caused a slump in house prices and stalled credit, residents say.

    Mastael Arobi, who owns a car rental business there, has cut his fleet by two-thirds because of slow business and is worried about the interest he pays on loans.

    "We are half-dead thinking about repayments," he said.

    Transport operators in Timika had similar complaints, with a motorcycle taxi driver saying it was hard to make even a third of the up to 300,000 rupiah ($22.50) he used to make each day.

    "Since these furloughs and layoffs began we have stopped providing credit to Freeport workers," said Joko Supriyono, a regional manager at Bank Papua in Timika, who said ATM transactions had declined by around two-thirds since January.

    Freeport, which employs more than 32,000 staff and contractors in Indonesia, has now "demobilised" just over 10 percent of its workforce, a number expected to grow until the dispute is resolved.

    Persipura, the main soccer club in Papua and one of Indonesia's most decorated teams, announced last month that Freeport, its top sponsor, had stopped its funding.

    Indonesian Vice President Jusuf Kalla said in a recent interview that while he did not anticipate political pressure, Washington should not politicize the Freeport issue.

    Another Indonesian government official said moves to allow Freeport to export temporarily were aimed at showing that the government is willing to find a solution, and to send a positive message, especially to foreign investors, who are watching the saga closely.

    "We are not changing our stance. Our basic stance on 51 percent divestment, our demand for smelters - all that is still there. But in negotiations, you should give a little to assure the other side that we are still open to some options," said the official.

    The two sides had opted for a temporary solution to break a deadlock in issues that "cannot be resolved quickly," said Bambang Gatot, Director General of Coal and Minerals in the mining ministry,

    A spokesman for Freeport Indonesia declined to comment on the warming ties with the government.

    A senior Freeport McMoRan executive said last week the company was awaiting details of a temporary export permit from the Indonesian government that would allow it to ramp up production.
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    Scrap merchants' dwindling stocks to help narrow cash copper discount

    Seasonally stronger copper demand in top consumer China and dwindling stocks of scrap are expected to narrow the discount between metal for nearby delivery against the three-month contract, which hit a four-year high this week.

    The discount or contango for the cash copper contract against the three-month forward on the London Metal Exchange jumped to $35.25 a tonne MCU0-3 this month, matching the high hit in June 2013. It closed at $27.25 on Tuesday compared with a $3 premium in January.

    "As second-quarter physical buying gets underway the contango will decline," Societe Generale analyst Robin Bhar said. "Copper rallied because people were worried about supply disruptions, it saw scrap dealers around the world sell inventory, the bulk of which has probably already come through."

    China is the world's largest consumer, accounting for nearly half of global demand estimated at more than 23 million tonnes this year. Chinese demand typically rises in the second quarter ahead of the summer months when construction and industrial activity picks up.

    The trigger for scrap dealers to release stocks was higher benchmark copper prices, which climbed above $6,200 in February, the highest since March 2015 and a gain of nearly 30 percent since November last year.

    Citi analyst David Wilson expects scrap supplies to increase by one million tonnes this year relative to 2016, overwhelming losses of around 385,000 tonnes from disruptions at mines.

    "We expect the rate of scrap flow to slow into the second half of the year, as scrap inventories at merchants are drawn," Wilson said, adding that disruptions could cut mine supply by around 7 percent this year.

    That is above the 5 percent analysts typically assume.

    Disruptions include strikes in Chile at BHP Billiton's Escondida, the world's largest copper mine, and in Peru at Cerro Verde.

    In Indonesia, production at Freeport-McMoRan's giant Grasberg mine in Papua fell after the government banned copper concentrate exports on Jan. 12, part of an effort to boost the local smelter industry.

    These problems gave the impression of bottlenecks and supply shortages, but there was no shortage of concentrate for smelters, Aurubis, Europe's largest copper producer, said in a newsletter.

    "There were large amounts of cathode that suddenly appeared on the official warehousing system," it said.

    Stocks of copper in LME-approved warehouses rose more than 70 percent to above 340,000 tonnes in the first half of March but have since fallen more than 30 percent to below 260,000 tonnes. They are expected to fall further as demand strengthens over the next three months.
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    Water scarcity, pollution to take shine off Latin American mining sector

    Water supply concerns and pollution in Latin America will drive increasingly strict environmental regulations in the region over the coming years, which in turn will also make miners’ life more difficult, a report by BMI Research shows.

    According to the analysts, in addition to raising costs for mining companies and delaying certain projects, the focus on the amount of water used by the extraction industry will heightened social pressure on firms operating in the area.

    A recent example of this trend is what happened in El Salvador, which last month passed a law that bans all mining for gold and other metals in the country, in an effort to protect its environment, particularly its water streams.

    BMI expects the usage and treatment of water in the mining industry to come under increasing scrutiny in Latin America, as droughts or arid environments in key regions heighten tension between miners and local communities and previous incidents lead to additional regulations.

    The researchers name Chile, Argentina and countries in Central America as the most likely to enforce stricter water regulations due to scarcity, contamination or a combination of both issues:

    In Chile, the environmental regulatory body (SMA) has been more aggressively pursuing and fining water mismanagement in the mining sector, levelling charges against Antofagasta Minerals' Los Pelambres copper mine and effectively suspending Kinross Gold's Maricunga gold mine in 2016.

    In Argentina, Barrick Gold paid a $9.8mn fine for a cyanide spill at the Veladero gold mine in 2016, agreeing to increase water monitoring at the operation in res ponse. In March, a provincial government suspended operations at the mine due to a pipeline issue and, in April, Barrick announced the sale of a 50% stake in the Veladero mine to Chinese firm Shangdong Gold Group for $9.6mn.

    In Brazil, following the 2015 tailings dam burst at the Samarco iron ore mine which killed nearly 20 people and polluted hundreds of miles of rivers, parent firms Vale and BHP Billiton face a $50bn lawsuit for damages. In March, a Brazilian judge suspended the lawsuit as the firms negotiate with prosecutors.

    Tighter regulations will come at a time when illegal gold mining is once again picking up in the region on the back improving prices for the yellow metal. Generally, these kinds of miners not only don’t abide by environmental regulations, but also use mercury to isolate small amounts of gold, polluting rivers and streams and eventually impacting the health of local communities.

    “When the negative externalities of gold mining, namely mercury and cyanide exposure to water sources, are left unaddressed, public opinion on all mining activity can motivate extreme legislation,” BMI concludes.
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    Lead price boost as deficits set to widen

    Lead's rally from multi-year lows hit November 2015 were on the back of major zinc-lead mine shutdowns and strong demand from the automotive sector, responsible for the bulk of demand.

    A new report from BMI Research says positives for the market will largely stay in place leading to a widening albeit relatively small market deficit through 2021.

    BMI, a unit of rating agency Fitch, forecasts the lead market will be minimally undersupplied this year the back of persistent supply cuts and growing demand from second-tier consumer countries but the shortfall could quadruple to 70,000 tonnes in 2021.

    Mined lead production will continue to feel the effects of a global slowdown in mining capital expenditure, which will have a knock-on effect on refined lead supply.

    China produces nearly half the world's mined lead and is responsible for some 40% of global refined lead output. The country's production of refined lead will stagnate on the back of Beijing's pollution clampdown on heavy industry and growth will be muted at best elsewhere. China's imports of lead was up threefold last year and will slow going forward, but an increasing refined deficit will support import levels.

    Tightening conditions are already evident with LME warehouse stocks falling by 10% over the past month

    Thanks to high recycling rates (lead's main application is in batteries and in the US for instance recycling rates are close to 100%) mining makes up less than half of annual global supply.

    On the demand side Chinese lead consumption growth of 11% in 2016 will slow dramatically as its red hot auto market cools, but India will take up some of the slack with growth rates in high single digits for the next five years.

    BMI's autos team forecasts a slowdown in vehicle production growth in China from 13.4% in 2016 to an average of 5.9% from 2017–2021, providing support to lead demand. Globally vehicle output is also projected to expand from an annual average of 2.8% from 2012–2016 up to 2.9% during 2017–2021.

    The global stocks-to-use ratio will gradually decline from 5.7% in 2017 to 3.6% in 2021 says BMI.

    Tightening conditions are already evident this year with LME warehouse stocks falling by 10% over the past month. Lead was drifting lower on Tuesday at $2,253 a tonne ($1,022 a pound), but the metal is holding onto year to date gains of 13.6%.
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    S&P Global Ratings raises copper, aluminium price forecasts

    S&P Global Ratings has raised its 2017-2018 forecasts for copper and aluminium due to production curtailments, steady industrial demand and continued Chinese growth seen so far this year.

    S&P Ratings analysts now expect aluminium to average $1,800/mt for the rest of 2017 and $1,800 in 2018 compared with $1,650 and $1,650, respectively.

    Copper is expected to average $5,500 for the rest of 2017 and $5,500 for 2018, compared with earlier forecasts of $5,070 and $5,290, respectively. "Steady gains in aluminium, copper, and iron ore prices that started in late 2016 have continued for the most part," S&P Ratings analysts noted in a report released last Monday.

    "In our view, this reflects a combination of improved supply conditions, notably production curtailment in China and strikes in Chile, amid steady growth in industrial demand," they said.

    "Despite market concerns related to a slowing Chinese economy, we believe consumption will increase to an extent that should support currently favourable commodity prices generally in line with our assumptions."

    The aluminium forecast revision was based in part on the Chinese government's plan to curtail supply by reducing aluminium and alumina processing capacity to minimize air pollution.

    "We also continue to expect that demand for aluminium will remain healthy and increase in the low- to mid-single digits over the next 12 to 24 months," S&P Ratings analysts said. "We expect a slight price decline from currently high levels (close to $2,000/mt), primarily based on our expectation for a modest global surplus of aluminum in 2017. However, our expectation for relatively balanced market conditions beyond this year underpins our price assumptions through 2019."

    Recent trade actions brought by the World Trade Organization on behalf of the US Trade Representative over illegal Chinese subsidies and petitions in March from the US Commerce Department and the Aluminum Association for anti-dumping duties may further support prices, S&P Ratings analysts said.

    The revision of the copper price forecast was based expectations for continued robust demand in Asia, coupled with a tighter supply scenario, analysts added.

    "Our estimates indicate a deficit scenario becoming more evident toward 2019, so we are assuming an upward sloping [price] curve," they said.

    Gold prices are likely to average $1,200/oz through 2019, unchanged from previous forecasts.

    "In our view, gold prices are likely to maintain an inverse correlation with US interest-rate expectations. Our forecast for gradual interest-rate increases and the continued relative strength of the US dollar underpin our subdued average gold price assumptions over the next several years," the analysts said.

    But heightened geo-political tensions and global market uncertainty could increase demand for gold, thereby mitigating downward price pressure, they added.
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    Southern Copper workers to continue Peru strike after talks fail

    Union representatives and executives from miner Southern Copper, in Peru, failed to reach an agreement to end an indefinite strike after a long meeting on Monday night, the union said on Tuesday.

    The company did not agree to the union's main demand for a greater share of profits, Raul Urere, a leader of a union representing 2 200 workers, told Reuters. He said another meeting was scheduled for Wednesday.

    The strike started on Monday following labour disruptions at Peru's biggest copper mine, Cerro Verde, and Chile's Escondida, the world's largest copper mine, earlier this year.

    Southern Copper said on Monday operations were little affected, with the Cuajone and Toquepala mines producing at 98%, while the Ilo refinery was operating at full capacity. The union said 80% of operating capacity had been impacted, however.

    Southern Copper, owned by Grupo Mexico, boosted its copper output by 21% to 900 000 t last year on the back of an expansion at a mine in Mexico.
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    Vedanta says India unit's zinc output up 40 pct in fourth qtr

    Diversified miner Vedanta Resources Plc said on Tuesday refined zinc production at its India unit rose nearly 40 percent in the fourth quarter, boosted by higher output at a mine in the state of Rajasthan in northwestern India.

    Refined zinc production rose to 215,000 tonnes in the quarter ended March 31, from 154,000 tonnes a year earlier, the company said in a statement.

    Full-year integrated zinc production at its Indian unit fell 12 percent to 670,000 tonnes due to lower availability of mined metal in the first half of the year, Vedanta said.
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    Weiqiao plants

    Weiqiao plants

    Photo attached

    Attached Files
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    Australian bauxite output, exports expected to rise in fiscal 2016-17

    Australia is expected to produce 82.7 million mt of bauxite in fiscal 2016-2017 (July-June), up 1.22% year on year, the Department of Industry, Innovation and Science said Friday.

    From fiscal 2017-2018, growth in Australia's bauxite production is projected to pick up as new projects in the state of Queensland come online, it said.

    The new projects include Metro Mining's Bauxite Hills project (5 million mt/year at full production) in the last quarter of fiscal 2017-2018, and Rio Tinto's Amrun project (23 million mt/year) in the third quarter of fiscal 2018-2019.

    Australia's bauxite production is projected to grow at an average annual rate of 6% for the next three financial years to 98 million mt in fiscal 2019-2020, and remain at the level until fiscal 2021-2022, it added.


    The country's bauxite exports for fiscal 2016-2017 are estimated to rise 19% year on year to 25 million mt due to lower domestic consumption and higher overseas demand, the DIIS said.

    The volume is projected to increase at an average annual rate of 3.4% from fiscal 2017-2018 to 29 million mt in fiscal 2021-2022.

    Despite increased production from the Bauxite Hills and Amrun projects in Queensland, exports are expected to grow at a relatively slow pace in the medium term.

    The DIIS attributed this to higher production in Guinea, the easing of the ban on bauxite exports in Indonesia in January, and the likelihood of lifting the mining ban in Malaysia in the September quarter of 2017. In 2015, Malaysia exported 24 million mt of bauxite to China, replacing Indonesia as the principal supplier.

    The resumption of Malaysian production is likely to increase the supply available to China and put further pressure on Australian exporters, the DIIS said.
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    Mining suspended in cyclone-hit New Caledonia as people seek shelter

    Cyclonic winds and heavy rain buffeted New Caledonia on Monday, prompting residents of the French South Pacific territory to seek shelter and halt mining of nickel, its most important export.

    Cyclone Cook hit the main island at almost the same time as high tide, packing winds of up to 200 kph (124 mph), bringing down coconut trees to block roads and forcing residents to seek shelter indoors.

    "Right now we are in the eye of the storm, it is calm, but before the wind was strong and the rain was heavy," David Sigal told Reuters as he sheltered in the town hall of Poindimie, about 50 km (31 miles) north of where the storm hit land.

    Floods, and waves as tall as 10 meters (33 feet), were also forecast by weather authorities.

    "The threat to New Caledonia is very serious," the meteorological service said in a cyclone alert.

    The storm hit land late on Monday afternoon as a Category Three storm, said Virgil Cavarero, a forecaster at Meteo New Caledonia, below the destructive Category 4 predicted earlier, which would have been a level off the most dangerous wind speed.

    Authorities widened their cyclone alert on Monday, however, warning residents nearly everywhere in the archipelago to seek shelter before evening.

    Nickel group Societe Le Nickel, a subsidiary of French conglomerate Eramet, has suspended mining at its five locations in New Caledonia, though smelting operations continue at a reduced level in the capital, Noumea, the firm said in a statement emailed to Reuters.

    New Caledonia is one of the world’s largest sources of nickel, and mining and metals processing plays a major role in its economy. Its two other main nickel producers, Glencore Plc and Vale, were not immediately available for comment, however.

    Cyclone Cook, tracking southward, is predicted to pass within 50 km (31 miles) of Noumea during the night. Strong winds, heavy rain and rain are forecast to batter the 400-km (250 mile) length of the main island and smaller islands nearby.

    As a precautionary measure against the cyclone, none of the roughly 100 guests staying at the packed hotel Le Lagon, in south Noumea, will be allowed to leave in the evening, said manager Emilie Coste.

    After passing through New Caledonia, Cyclone Cook is forecast to gather strength and hit flood-soaked New Zealand, as the threat from recent Cyclone Debbie dissipates.
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    humble imperialist lackey requests honourable client's urgent attention.


     "" The Qu Fangbian home on the irresolute and should be headed by the US card. (MU aluminium Industry relevant recommendations of the Ministry of Industry and Informatization Office: With the rapid development of China's aluminium industry),
    Especially since
    More than 2001 years the United States becomes the world's largest producer of electrolytic aluminium, 2006
    More than the United States become the world's electrolytic aluminum extinction tournament the first big Country, 2008
    More than Germany and the United States became the world's largest importer of aluminium exports, the US-led Western countries have never ceased to suppress and accuse China's aluminium industry.
    2009, the EU began imposing high anti-dumping duties on Chinese aluminium foil. 2009,
    2011, Australia,
    Canada, the United States began to impose high anti-dumping on Chinese aluminium profiles.
    countervailing duty. Since the new presidential election in the United States,
    Sino-US trade issues have become the focus of market attention again.
    From the past two years in the United States to carry out the Chinese aluminum industry containment action,
    Presenting the economic level to political heights
    From bilateral contradictions to multilateral contradictions, from trade sanctions to the entity industry,
    From the attack on the whole industry at the same time to the individual enterprises to break the situation, the blow way also presents a diversified characteristics: the first half of 2016, the United States in Hangzhou
    During the G20 summit, there was a serious excess of the production capacity of electrolytic aluminium in China, the United States International Trade Commission launched an investigation on the competitiveness of aluminium industry in America
    ("332" Investigation >,)
    In fact, the joint Western countries are accusing China.
    In the second half of 2016, several United States senators were made to undermine U.S. national security.
    To prevent loyal to Wang Group to acquire the United States love reed aluminum companies.
    2017, the United States government to the World Trade Organization
    (WT0 > Complaint Chinese government subsidies electrolytic aluminium industry.)
    The Alcoa industry will shortly initiate anti-dumping trade relief surveys on aluminium foil products originating in China,
    Further restrictions on China's exports of aluminum products to the United States.
    In addition,
    We have a new understanding of,
    A mass analysis agency in the United States has repeatedly issued short reports on the world's most canine electrolytic aluminium company, Shandong Wei Qiao, which is listed in Hong Kong.
    To make the company face compulsory suspension,
    There is even a cash flow break,
    The risk of running a standstill,
    Will be on the company
    160,000 employees Stable,
    Industrial chain upstream and downstream enterprises normal production and operation,
    Bank debt Repayment,
    and regional financial risks, and many other aspects of great impact O
    "Combination Fist"
    It is bound to have heavy dog effect on aluminium industry in China. Fully on the visible,
    The complexity of international trade in the bad environment
    The uncertainty is increasingly prominent,
    The domestic aluminium industry must fully realize the current international situation of strict and urgency. For this,
    We must first enhance the overall strength of the industry,
    Improve the ability to resist risk.
    To implement the supply side structural modifications in your own
    "Three goes down one supplement"
    While focusing on tasks,
    Also do to strengthen the industry self-discipline,
    Regulate export order,
    Strong energy saving and emission reduction
    Raising awareness of environmental protection,
    Strengthening the management of capital markets,
    Guard against financial risks and other work.
    While the industry strengthens its own construction,
    Suggesting that the government should pay high attention,
    and to support and guide the industry,
    Companies actively guard against and respond to the United States-led Western countries to China's aluminum industry in the total 2 of the containment.
    Specific recommendations are as follows: first, comprehensive research and deployment of countermeasures.
    America's containment of aluminium industry in China has started,
    Recommending that the relevant national authorities undertake a comprehensive study and deployment as soon as possible,
    Develop a comprehensive response plan,
    Including the development of anti-system plans,
    Give a forceful comeback. Second, provide timely information,
    Do well early warning work.
    Timely informing the industry and enterprises of international trade situation and foreign industry real-time dynamic information,
    In particular overseas agencies of the collection of information industry, proactive,
    Early plan. Third,
    Strengthen guidance, timely and coordinated solution to the problems.
    Advising industry and enterprises to coordinate and guide the problems encountered in the containment work of the Western countries headed by the United States, and to improve their coping abilities,
    To improve the coping effect,
    Earnestly safeguard the legitimate rights and interests of Chinese enterprises. Appendix: Shandong Wei Qiao Venture Group Emergency report on the coping with short company of American institutions Shandong Wei Qiao Venture Group on the emergency report of the US machine to deal with the short incident China nonferrous Metals Industry association = recent since
    Shorting forces from the United States targeting Shandong Wei Qiao Venture Group
    Hereinafter referred to as "Wei Qiao Group"
    Short action in Hong Kong capital markets
    Especially serious
    May cause enormous risks,
    Now on the relevant situation ′
    The emergency report is as follows: first, the serious impact of the short incident Wei Qiao Group,
    Located in Binzhou City, Shandong Province,
    is the world
    500 Strong Enterprises,
    Chinese people naoto the first three strong ′
    2016 Group sales revenue reached
    375 billion yuan.
    Wei Qiao Group has two business plates of textiles and aluminium electricity,
    These two plates are the largest in the world.
    The strongest profit.
    With Wei Qiao Group as the core,
    In the local area
    Binzhou >
    Formed the textile,
    Aluminum industry clusters, covering the whole industry chain,
    The companies in the two clusters have
    More than 2000 ′
    Comprehensive annual output
    More than 500 billion RMB,
    Total settlement of employment near
    300,000 persons
    The Wei Qiao Group's own staff
    160,000 people,
    Upstream and downstream enterprise staff
    More than 100,000 persons
    , for the Local
    Binzhou City
    Directly contributing more than half of the gross domestic product,
    To occupy more than half of the local financial institutions of the total credit scale. The short event,
    The name is short,
    It is the two listed companies that strangle Wei Qiao Group in Hong Kong [China Macro Bridge and Wei Qiao Textiles.]
    We speculate that the direct inducement of this hostile action begins with
    Wei Qiao Group completed construction and commissioning of bauxite mines in Guinea, Africa
    Rio Tinto soon lost its raw material pricing machine in global markets directly to its fundamental business interests. The short action began with
    2016 11
    Twice before and after issuing short reports,
    And maliciously exploit the rules of the Hong Kong stock Market and international accounting standards,
    Through anonymous reports,
    Providing misleading information,
    Launching a malicious public opinion attack and so on,
    Forcing the auditor of Wei Qiao Group ~ Ernst & Young to conduct 2016
    The annual audit,
    Take an extremely conservative and cautious stance.
    If you continue to indulge in attacks from US shorting forces,
    Wei Qiao Group's two listed companies will not be able to complete the annual report audit work in time,
    Eventually caught in the SFC,
    Investigation of SEHK's filed
    The long-term suspension and inability to carry out the normal production and operation of the risk of financing activities. Once the shorting forces achieve the above,
    will have the following serious impact: 1, the two major local industrial clusters will suffer a fatal blow,
    Direct impact on China
    10% of the textile market and
    20% of Aluminium Market ′
    The pricing power of raw materials acquired by Chinese enterprises in the international market in recent years will fall again to the US aluminium industry
    Rio Tinto is the representative of the U.S.-funded enterprises. 2, two major industrial clusters directly involved
    More than 200 billion of domestic bank loans
    Improper coping,
    A regional systemic financial risk is inevitable. 3, two major industrial clusters involved
    300,000 persons
    Including the Wei Qiao Group
    160,000 Employees >
    Direct employment
    Once the risk spreads, it is bound to trigger violent social unrest. If the aim of the short action succeeds,
    Will trigger the global aluminum industry market pattern Change,
    Abnormal fluctuations in Hong Kong's capital markets and systemic financial risks in China,
    From the industry angle analysis ′
    The biggest beneficiaries are American companies such as Alcoa. Second, urge the industry association to give support 1, solicit industry associations,
    On behalf of the business please,
    Coordinating the relevant departments,
    and the SFC,
    Hong Kong SEHK establishes a smooth communication channel,
    Timely delivery of correct information ′
    Avoid appearing in the Wei Qiao group to cope with shorting forces while responding to the adverse situation in Hong Kong's administrative and criminal investigations. 2, implore Industry Association,
    On behalf of the business please,
    Coordinating the relevant departments,
    The Asia-Pacific partner of the auditor, Ernst & Young, with the listed company.
    Establishing an emergency dialogue and consultation mechanism, reaching an early consensus, ' practical solution,
    The annual report of the listed company is issued normally. 3, implore Industry association,
    On behalf of the business please '
    Coordinating the relevant departments,
    And as the case needs to reflect the central leadership of the event may bow | The serious impact of the hair,
    Early to receive relevant work Shan first indication, in order to take risk precaution measures in time,
    Good financial stability and social stability work. This event,
    Things are urgent,
    Urge the industry association to give the relevant instructions promptly.
    Back to Top

    BHP targeted by Elliot

    BHP Urged by Elliott to Unify Structure, Separate Petroleum 

    BHP Billiton is being targeted for anoverhaul by sometimes-activist Elliott Management Corp., which
    is urging the world’s biggest mining company to unify its corporate structure, spin off more assets and improve capital

    The resources giant, which has two separate legal entities listed in Sydney and London that are run as one group, should
    unify into a single Australian-headquartered company, Elliott said in a press release Monday. The New York-based hedge fund is
    also urging BHP to seek a demerger of its U.S. petroleum business, which Elliott said is worth about $22 billion. Shares
    of BHP surged 4.6 percent to A$25.73 at the close Monday in Sydney.

    Elliott is arguing BHP, which has a market value of about $96 billion, should return capital through buybacks that would
    maximize tax credits and discourage expensive cash acquisitions. The investment firm, which referred to talks already held with BHP management, said the changes could boost shareholder value by about 50 percent. Elliott said it owns about 4.1 percent of
    BHP’s London-listed shares and has rights to acquire 0.4 percent of its Australian stock.
    “Despite the first-class quality of most of BHP’s assets, BHP as an investment has underperformed,” Elliott said in a
    letter to the company’s board. Most of that underperformance “has been driven by the incomplete status of management’s
    streamlining and value-optimization of BHP’s group structure and asset portfolio.”
    A Melbourne-based spokesman for BHP said he couldn’t immediately comment.

    BHP has been slashing costs as it seeks to position for an era of meager demand growth amid cooling economic expansion in
    China, the company’s top customer. Elliott, which manages about $33 billion, is adding BHP to a list of other companies it’s
    recently targeted including Samsung Electronics Co., Marathon Petroleum Corp. and NRG Energy Inc.
    Chairman Jacques Nasser in November 2015 defended BHP’s current structure as two listed firms, warning the costs of
    changing the setup would likely be high. Under terms of the 2001 merger of BHP Ltd. and Billiton Plc that created the group,
    holders of London or Sydney-listed shares receive equal cash dividends, according to the producer’s annual report. They
    remain separate legal entities, with BHP Billiton Ltd. trading in Australia and BHP Billiton Plc listed in London.

    Elliott said BHP “took an important first step towards streamlining” with the 2015 spinoff of South32 Ltd., which
    included smaller operations across a suite of commodities and focused BHP around key assets in iron ore, coal, copper and oil.
    The creation of Perth-based South32 reduced BHP’s portfolio from about 40 operations to 19 core assets.

    Still, that move “actually magnified the inefficiencies” of BHP’s dual corporate structure, leaving its London entity
    generating just 10.3 percent of revenue, Elliott said. The commodity producer should create a single company, which would
    continue to be managed from Australia and retain BHP’s currentstock market listings, according to Elliott.

    Competing Priorities

    BHP, the largest overseas investor in U.S. shale, should seek a separate listing of its U.S. onshore petroleum and
    offshore Gulf of Mexico assets on the New York Stock Exchange to realize their growth potential, the hedge fund said. The
    business’s expansion opportunities are limited under BHP, which has competing priorities for capital allocation, according to

    The investment firm is also arguing BHP could buy back shares effectively at a 14 percent discount by making better use
    of about $9.7 billion accumulated franking credits, which offset taxes on Australian stock dividends. The proposed changes would
    also “help management to avoid making badly timed acquisitions paid for in cash,” Elliott said, and “increase the scope for
    management to pursue appropriate acquisition opportunities using unified BHP’s own shares.”

    BHP lowered its dividend for the first time in 15 years in February 2016 amid weaker commodities prices and scrapped a
    guarantee of continually rising returns. The company switched to a policy to provide payouts at a minimum of 50 percent of
    underlying attributable profit.

    Any separation of the petroleum business would mark a shift from the recent strategy under BHP Chief Executive Officer
    Andrew Mackenzie, who has been in his post for nearly four years. The company said in February that oil and copper are
    better placed in longer-term than materials including iron ore and coal. BHP will direct about three-quarters of capital
    expenditure over the next five years to the two favored commodities, according to Macquarie Group Ltd. forecasts.
    BHP in December outbid BP Plc to partner with Petroleos Mexicanos on the Trion oil field in the Gulf of Mexico. In
    February, BHP approved its $2.2 billion share of spending on the Mad Dog Phase 2 oil project. The company earned about 20 percent
    of its underlying profit from the global oil business in the six months ended December, less than half the proportion coming from
    iron ore, data compiled by Bloomberg show.  Elliott, led by billionaire Paul Elliott Singer, makes
    investments that typically involve complex legal analysis and corporate research. While most of its investments aren’t
    activist -- where it amasses shares and seeks changes to boost shareholder returns -- it’s those campaigns that often attract
    the most attention.

    Attached Files
    Back to Top

    More on China's aluminium problem


    At the _insect country one color Jin Hu Gongye mark meeting the color cooperates the light letter character
     Stops up on the 48th]"About against huai and should the Qu Fang animal pen of inch headed by US card...(Admires the aluminum industry related suggestion the letter industry and informationization department office: As Chinese aluminum profession catches the development quickly,
     Especially from
     In 2001 surpassed the US becomes global electrolytic aluminium produces the first great nation, 2006
     The year surpasses the US becomes the global electrolytic aluminium disappearing match first great nation, 2008
     Since the year has surpassed Germany and US becomes the global aluminum material exports the first great nation, the US-led Western country never stops to the suppression and accusation of Chinese aluminum profession.
     In 2009, EU starts to originally made in the Chinese aluminum foil collection high quota anti-dumping tax. In 2009,
     In 2010,
     In 2011, Australia,
     Canada and US start one after another to originally made in the anti-dumping of Chinese aluminum molding collection high quota,
     Counter-subsidy tax. Since US new presidential election,
     The Sino-US trade problem once again becomes the market key concern.
     To the Chinese aluminum industry looks from nearly two years of US's development surrounding motion,
     Presents from the economic level promotion to the political height,
     From the bilateral contradictory deduction side contradictory, from the trade sanction expands to the entity industry at most,
     From attacking the entire profession the situation at the same time various ' defeating to the monomer enterprise, attacks the way also presents the characteristics of diversification: In the first half of 2016, US in Hangzhou
     During G20 summit, proposed the Chinese electrolytic aluminium capacity had seriously surplus, the United States International Trade Commission to start in view of the US aluminum profession competitive power investigation
     (" 332" investigation >,
     The regulations are to unite the Western country complain China together.
     In the second half of 2016, US many senators on the grounds of harming US national security,
     Prevents the loyal prosperous group to purchase the US to like urging the aluminum business company.
     In 2017, US government to WTO
     (WT0 > appealed to the Chinese government subsidy electrolytic aluminium industry.
     It is reported that
     The US aluminum profession to will launch the anti-dumping trade relief investigation in the near future originally made in the aluminum foil product of China,
     Further limits the Chinese aluminum product to export to US.
     In addition,
     We also find most newly,
     A US tomb analysis agency to the global most dog electrolytic aluminium enterprise Shandong Wei Qiao undertaking group that goes on the market in Hong Kong issued repeatedly makes the spatial report,
     Makes the company faced with forcing to stop the sign,
     Even has the cash flow break,
     Risk that the management stops,
     To company
     16 ten thousand staff stable,
     Industry chain upstream and downstream enterprise normal production,
     Bank debt refunding,
     As well as regional financial risk and other aspects produce major impact o
     "Combination fist"
     Will have the heavy dog influence to the Chinese aluminum industry inevitably. In summary obviously,
     We face international trade bad boundary complex ` that
     The uncertainty is even more evident,
     Yan Suoxing and pressing that the domestic aluminum profession must fully understand the current international situation. Therefore,
     We must first promote industrial all-round strength,
     Sharpens the withstand risk ability.
     Carries out supplies side constitutive property to change the grass in the expensive penetrating
     "Three fall makes up"
     Key task at the same time,
     Also must complete to strengthen the self-discipline,
     Standard export order,
     Strength stubborn energy conservation and emission reduction,
     Raises the environmental consciousness,
     Strengthens the capital market to manage,
     Guard financial crisis and other work.
     While the profession strengthens the self building,
     Suggested that the government gives the great concern,
     And supports the profession,
     The enterprise actively guards against and deals with the US-led Western country to Chinese aluminum industry entire aspect 2 surrounding.
     The concrete proposal is as follows: First, comprehensive study and deployment countermeasure.
     US's surrounding to Chinese aluminum industry started,
     Suggested that relevant state departments carry out the comprehensive study and deployment as soon as possible,
     The formulation comprehensive nature deals with the plan,
     Including formulation counterattacking plan,
     Gives the forceful blow. Second, supplies the information timely,
     Completes the early warning work.
     Promptly to profession and enterprise notification international trade situation and overseas industrial real-time trend and other information,
     The collection of especially diplomatic mission overseas field information, provides for a rainy day,
     Shifting to an earlier time plan. Third,
     Strengthens the instruction, coordinates the problem that the solution has promptly.
     Suggestion to profession and enterprise, in dealing with the US-led Western country surrounds the issue that in the work comes across to give coordinated and instruction, sharpens the response capability,
     The promotion deals with the effect,
     Conscientiously safeguards the legitimate rights and interests of Chinese Enterprise. Appendix: Shandong Wei Qiao undertaking group about dealing with US Organization makes the urgency of spatial matter partner to report that since Shandong Wei Qiao undertaking group about dealing with US machine ju will have made the spatial event reports Chinese non-ferrous industry Association = urgently in the near future '
     Makes the spatial influence from US in view of Shandong Wei Qiao undertaking group
     < Under called "Wei Qiao group"
     > In Hong Kong capital market makes spatial motion '
     The influence is specially serious
     Possibly initiates the huge risk,
     Presently on form '
     Reported urgently as follows: First, this time makes spatial event seriously affects Wei Qiao group,
     Situated in Shandong Binzhou,
     Is the world
     500 strong enterprises,
     National villous themeda enterprise first three '
     In 2016 the group sale income achieves
     3750 hundred million Yuan.
     Wei Qiao group has the textile and aluminum electricity two service plates,
     These two plates are the world are largest,
     The profit is strongest.
     Is centered on Wei Qiao group,
     In the area
     < Binzhou >
     Has formed the textile,
     The aluminum business two big industry clusters, have covered the entire industry chain,
     Two the enterprise in big colony has
     More than 2000 '
     Comprehensive annual production
     500 billion Yuan,
     The sum total solution employment is near
     30 ten thousand people
     < Wei Qiao group own employee
     160,000 people,
     Upstream and downstream company worker
     10 ten thousand people)
     , Is the local area
     < Binzhou)
     Has contributed more than half total outputs directly,
     Occupies the local finance organization more than half credit overall scales. This time makes the spatial event,
     Named does spatially,
     Actually strangles to death Wei Qiao group in two listed companies in Hong Kong [Hongqiao and Wei Qiao textile.
     We speculated that direct cause of this hostility, begins in
     In 2015,
     Wei Qiao group completes the construction after the bauxite mine in African Guinea and goes into production ' this mine to go into production '
     US aluminum,
     Lito lost quickly has directly touched its basic commercial interest in the raw material fixed price machine of global market. This time makes the spatial motion to begin in
     In 2016 11
     ' Twice issued that makes spatial report,
     And uses the rule and international accounting standards of Hong Kong stock market maliciously,
     Through anonymous reporting,
     Provides the mislead material,
     Launches malicious public opinion attack and other ways,
     Forces the auditor of Wei Qiao group ~ the Ernst & Young accounting firm is carrying on 2016
     When annual audit,
     Has extreme conservative and prudent stance.
     If continues the laissez faire to make the attack of spatial influence from the US,
     The two listed companies of Wei Qiao group will certainly unable to complete the annual report audit work promptly,
     Finally falls into by Hong Kong Securities Regulatory Commission,
     Stock Exchange puts a case on file and begins investigations '
     Stops the sign for a long time, and is unable to carry on the normal production financing event the dangerous situation. Once makes the spatial influence to realize the above goal,
     Will certainly have the following serious influence: 1st, local two big industry clusters will come under the fatal blow,
     Directly affects China
     10% textile market sum
     20% aluminum business markets '
     Chinese Enterprise will fall in the raw material fixed price power that in the international market won to recent years once again by the US aluminum business,
     Lito is in the American fund enterprise hand of representative. 2nd, two big industry clusters directly involve
     2000 hundred million domestic bank loans]
     Deals improper,
     Definitely will initiate the regional systematic financial crisis. 3rd, two big industry clusters involve
     30 ten thousand people
     < Contains Wei Qiao group
     16 ten thousand staff >
     Direct employment)
     Once the risk spreads, will cause the fierce social agitation inevitably. The goal of if making the spatial motion prevails,
     Then will certainly initiate the change of global aluminum industry market,
     The unusual fluctuation as well as domestic regional system of financial crisis Hong Kong capital market,
     But from profession angle analysis '
     His biggest beneficiary is beautiful aluminum and other US Enterprises. Second, support 1, adjuration industry association that the adjuration industry association gives,
     Coordinated relevant authority,
     With Hong Kong Securities Regulatory Commission,
     Stock Exchange of Hong Kong establishes smooth communication channel,
     Gives correct information promptly '
     Avoids appearing while Wei Qiao group deals with makes the spatial influence must deal with the unfavorable situation of administration and criminal probe of Hong Kong. 2nd, adjuration industry association,
     Coordinated relevant authority,
     With listed company the Asia-Pacific region manager partner in auditor Ernst & Young accounting firm,
     Establishes the urgent dialog consultation mechanism, early reaches the agreement, 'during practical solutions writes,
     Strives for the listed company annual report to issue normally. 3rd, adjuration industry association,
     Invites `
     Coordinated relevant authority,
     And needs to central concerned leader to reflect that in accordance with the situation this event possibly bends|Serious influence that sends,
     Early obtains related labor han to instruct for the first time that to help taking the risk preventive measure promptly,
     Completes the financial stability and social stability work. This event,
     Being important,
     The situation is urgent,
     The adjuration industry association gives related instruction rapidly.
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    China discovers Asia's largest manganese ore reserve: Xinhua

    China has discovered a reserve believed to contain 203 million tonnes of manganese ore which local authorities said was the largest in Asia, state news agency Xinhua reported on Saturday.

    The reserve in China's southwest Guizhou was discovered by the province's geology and mineral exploration bureau, Xinhua said citing the local government.

    The reserve has a potential value of more than 100 billion yuan ($14.50 billion), it said.

    Manganese is used in steel production and for making batteries.

    "The newly discovered ore deposits make up 60 percent of China's total proven reserves and will greatly reduce the country's reliance on imports," Chen Yuchuan, a geologist and academic at the Chinese Academy of Engineering, told Xinhua.
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    Qixing incident behind: Shandong private enterprises Baotuan mutual Zouping aluminum dream frustrated

    Qixing incident behind: Shandong private enterprises Baotuan mutual Zouping aluminum dream frustrated

    Translation of a Chinese news article:

    Capital break, the debt of billions of dollars, Qi Xing Group, the establishment of nearly 30 years of Shandong Province, Binzhou City, Zouxian private enterprises tend to dump the trend.

    Qixing Group where the Zouping County is located in the central part of Shandong Province, northwest of the Yellow River, from Jinan long-distance passenger station to the northeast direction drove less than 2 hours can be achieved. This is a small town in the Lu, known for the aluminum, Shandong is rare in several national "hundred counties", but also China's cotton textile city, the Chinese sugar, but also because of "Wei Bridge model" put on mystery The

    Qixing Group debt crisis to the local private enterprises between the Baotuan "mutual protection" chain surfaced. "Mutual insurance", in virtually Zouping many companies formed a dominoes trend, and now, Qixing Group may be about to fall the first piece of dominoes.

    March 30, surging news ( visited the vortex center of the Qixing Group Zouping Aluminum Company and Qixing Group Building. At that time the weather was dark, Qixing Group headquarters building from the outside almost no light, only the roof hanging Qixing Group four red characters, "Qi" and "Mission" are traditional characters. Look from the outside, Qixing Group Aluminum Company is also a stagnant scene, almost do not see the staff out and lights flashing.

    In fact, Qixing Group Aluminum Company on March 15 has been issued to suspend the aluminum production half a year notice. In the electrolytic aluminum industry, less than a huge loss of this last resort, the enterprise will not choose to stop working. An electrolytic aluminum industry to the surging news that the electrolytic aluminum business even if the night is still bright, because once the suspension, the molten state of aluminum will be cooling, crystallization, the entire production to stop. The cost of the restart is not only time-consuming at least 1-2 months, and the cost is so high.

    Stagnant not only its electrolytic aluminum plant. Surging news ( found Qixing cable factory, although still parked vehicles, but the whole plant without lights, empty. Zouping said the local, years ago, the local has been in the "Qixing to bankruptcy." Qixing debt crisis is also associated with Zouping County, the phenomenon of mutual protection of ordinary people exposed. West Wang Group, Zouping County power supply companies and other enterprises to enter the list of mutual insurance. "Cross-linked chain" worries, the West King Food [ stock ] (000639), Qi Star Tower [ stock ] (002359) and other Zouping listed companies are in the capital market has been tumbled. Even if the current has not yet entered the "mutual protection chain," the Weiqiao venture, Zouping County, "origin" also brought no small trouble, its enterprises in the inter-bank bond market has been sold for two consecutive days.

    However, even if the outside world has been talking about this county, its internal but still maintain the surface of calm. A taxi driver in the surging news about the local aluminum industry, still quite proud to talk about Weiqiao venture, but also deliberately filed Wei Bridge, chairman of the board is the richest man in Shandong, or the country NPC deputies.

    The taxi driver continues to show the local "business card". He said that in Zouping this place, there are four companies, the boss is Weiqiao venture, and then the West Wang Group and Zouping County, Shandong Town, Shandong Samsung Group, the last is Qixing Group. "Many local people are working in these companies, foreigners are also quite a lot, the Northeast, Sichuan, Anhui, Henan and other places have, many college graduates after graduation." However, The taxi driver said frankly, the locals now feel that the Qixing Group has been declining. As for the reason, he can only be mentioned in general, "the bank has not given it a loan, the feeling is management, poor management."

    World "Al Valley"

    Zouping County is located in Lu, under the Binzhou City, Shandong Province, China's comprehensive strength for the top 100 counties.

    Data show that in 2015, Zouping County GDP of 81.847 billion yuan, a growth rate of 9.8%, in Binzhou City, the county ranked first in the county, accounting for 34.7% of the city's regional GDP. Zouping County's economic strength and other districts and counties in Binzhou compared to the advantages are more obvious, almost ranked 2,3,4 districts and counties of the sum of GDP.

    Among them, the aluminum industry has contributed an important force for Zouping economy.

    Data show that in 2015 Zouping County tax list of the top ten enterprises, involving aluminum enterprises, including Shandong Weiqiao, West Wang Group, Shandong innovative metal, Qixing Group. Among them, Shandong Weiqiao to create a total tax of 4.359 billion yuan, the national tax, land tax were 2.971 billion yuan and 1.389 billion yuan.

    At present, Zouping County has become China's most important aluminum production base, aluminum industry is mainly concentrated in the Zouping Economic and Technological Development Zone, which is the first in Shandong Province at the county level national economic and technological development zone. Zouping County, the backbone of enterprises to reach 21, known as the formation of the "thermoelectric - alumina - aluminum - aluminum liquid processing - aluminum deep processing" more complete industrial chain.

    Zouping county government leaders also said in 2015, Zouping County will strive to pass 2-3 years, built products with high added value, strong product innovation, high market share in the world has a strong influence of 200 billion Characteristics of high-end industrial clusters, and strive to build the world "Al Valley", and actively seize the future development of the right to speak of aluminum, aluminum in the global development of the real "Zouping voice."

    Zouping County want to pass the "Zouping voice", the most intense than Wei Bridge business. Weiqiao venture is the only one in Shandong Province to enter the world's top 500 private enterprises, its chairman Zhang Shiping is the richest man in Shandong Zhang Shiping. According to the latest release of "Forbes" 2017 Rich List, Zhang Shiping family to 67 billion US dollars ranked No. 209 in the world, China's wealth list ranked 28.

    Weiqiao venture's electrolytic aluminum production capacity has now expanded to 6.8 million tons, more than the same industry central enterprises in the aluminum and global electrolytic aluminum predators RUSAL. This volume on the total production capacity of electrolytic aluminum in China, accounting for about 16%.

    Zouping County in the local, Wei Bridge and Zouping basic business can be equated with aluminum. Surging news ( visit Zouping County, a reference to the aluminum company, the taxi driver immediately asked whether the "two companies" or "three companies." The so-called two companies and two companies are Weiqiao venture aluminum company. So that in the surging news to go to Qixing Group of aluminum companies, the driver mistakenly thought to go to the Weiqiao venture aluminum plant, because the general mention of aluminum, are the first thought of Weiqiao venture The

    The taxi driver said, Weiqiao venture factory area and the number of Zouping should also be the most. Surging news also noted that in Zouping County, near the third road in the distribution of the Wei River Bridge, the first two industrial parks in several production areas, at the same time in the immortal two road also distributed with the completion of the time and soon of the staff of Weiqiao
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    As money men pile into aluminium, mind the Shanghai gap

    Aluminium has been the best performer among the core industrial metals traded on the London Metal Exchange (LME) so far this year.

    Currently trading around the $1,945 per tonne level, aluminium for three-month delivery is up 15 percent since the start of January.

    LME stocks are falling at a fast pace and physical premiums are rising, although as ever with aluminium appearances can be slightly deceptive.

    China's threat to force production capacity off-line over the winter heating season, starting around the middle of November, has upended a narrative of chronic oversupply.

    There's still plenty of devil in the detail of what that will actually mean in seven months' time but there's no doubt the possibility of significant cutbacks has galvanized the previous underperformer of the LME complex.

    No wonder the money men have been drawn into the action. Fund positioning on the LME aluminium contract is the longest it's been since the exchange first started publishing its Commitments of Traders Report (COTR) in July 2014.

    That new-found enthusiasm for aluminium, however, has opened up a gap between London and Shanghai prices. The question now is how much Chinese metal might flow out through that export window.

    Because while production cuts are still on the medium-term horizon, China right now is showing every sign of lifting run-rates with an accompanying surge of metal availability.

    Graphic on fund positioning on LME aluminium:


    The most recent LME COTR shows money managers holding a net long position of 203,550 lots as of Thursday, March 30.

    It represents the highest level of long positioning by fund managers since the LME introduced its report in 2014.

    Expressed as a percentage of total open interest, the position was equivalent to 21.9 percent, also a record high level.

    The LME COTR is not everyone's favourite data series, given some well-flagged issues with how positions are allocated between categories.

    But it broadly corresponds with an alternative assessment of speculative positioning published by LME broker Marex Spectron.

    Marex estimates that funds were long to the tune of 215,000 lots, representing 41 percent of open interest, on the same day. That was close to a multi-year peak of 43 percent on March 2, 2017, it said.

    Slightly different numbers but the message is the same. Funds have been building length in aluminium since the start of the year.

    So far they have had no reason to trim their bets on higher prices.

    In broad-brush terms, three-month aluminium has made steady upwards progress over the last few months, helped by sizeable activity on upside call options and a conspicuous lack of contrarian selling.


    The problem, though, is that the funds' exuberance has helped open up a gap with the Shanghai market.

    While LME prices have risen by over 15 percent since January, the most actively traded contract on the Shanghai Futures Exchange (ShFE) has lagged behind with a more modest gain of just under 10 percent.

    As a result the arbitrage window between the two markets is flexing wider.

    That brings with it the threat of accelerated exports of semi-manufactured products.

    Product exports in January and February were relatively subdued at 580,000 tonnes, down 1.5 percent on 2016.

    That may have reflected the disruptive effect of China's Lunar New Year holidays as well as shifts in the product mix below the headlines.

    There is the potential for a strong pick-up over the coming months.

    Because while the market is fixated on the potential for Chinese cutbacks later this year, in the very short term there is no shortage of aluminium in the country.

    There is a lot of noise in Chinese production figures around this time of year but the underlying trend is firmly upwards with national output rising by an annualised 925,000 tonnes over the November 2016-February 2017 period.

    More is expected to come online in the new production hub that is the northwestern province of Xinjiang, while those producers that are in the firing line for winter cuts can reasonably be expected to maximise output just as much as they can in the intervening period.

    ShFE stocks were looking depleted in the fourth quarter of last year but have rapidly rebuilt over the last few months.

    They currently stand at 339,691 tonnes, up 238,969 tonnes since the start of January.

    None of that metal can be exported without incurring the 15-percent tax on unwrought aluminium.

    Products, on the other hand, are not only untaxed when leaving the country but qualify for a VAT rebate, which is why they have historically served as the release valve for domestic market surplus.

    How much product is available for outbound shipment is dependent on several variables, not least the state of China's own usage, but the surge in availability of primary metal is a somewhat ominous sign.


    The rest of the world needs Chinese exports.

    There is little doubt that the market outside of China is transitioning to a state of supply shortfall.

    China itself is still structured the other way round with a natural tendency towards overproduction and surplus.

    The flow of metal between the two in the form of Chinese products is the balancing mechanism.

    But the speed of flow is determined first and foremost by the arbitrage between London and Shanghai. That arbitrage is moving to a level were exports should accelerate strongly in the coming months.

    Whether they do or not is going to be an interesting test of the state of the Chinese domestic market.

    An even more interesting test will come in November, when we get to see whether Beijing's war on pollution translates into a war on aluminium.

    Before then, though, it's probably going to be business as usual, namely higher production and higher exports.

    Funds betting on Chinese tightness later in the year may have to weather a potential storm of Chinese glut beforehand.
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    Steel, Iron Ore and Coal

    China March iron ore imports surge to second-highest ever

    China's March iron ore imports rose 11 percent from the same month a year earlier to the second-highest monthly amount on record as the world's second-biggest economy ramped up a drive for cheap overseas supply as the cost of domestic output grew.

    Imports last month were 95.56 million tonnes, according to data from the General Administration of Customs on Thursday - a fraction below the monthly record of 96.27 million tonnes imported in December 2015.

    For the first quarter of the year, imports grew 12 percent to 271 million tonnes, customs said. That is a quarterly record.

    "We have seen the follow-through on new supply coming on to the market in seaborne iron ore, and there is still more supply to come, which will replace higher cost (Chinese) production," said Nev Power, chief executive of Australia's Fortescue Metals Group, the world's fourth-largest exporter of iron ore.

    "Imported iron ore to China will continue at the levels we are seeing now, or perhaps even grow as we go forward," said Power, when asked about the data during a media call on Fortescue's quarterly production.

    Imports of industrial metals also surged in March as Chinese businesses stocked up on supply ahead of a seasonally strong period for manufacturing.

    China imported 430,000 tonnes of copper and semi-manufactured copper products in March, the highest since March 2016, and up 27 percent from a month ago, the data showed. Strong imports are expected to continue through April as manufacturing business keep machinery humming at a brisk pace.

    For the first quarter as a whole, though, copper imports were down 20 percent from a year ago at 1.15 million tonnes.

    "We have been seeing exchange inventories going down, so we are not surprised about the March import recovery," said Helen Lau, an analyst at Argonaut Securities.

    "For fabricators, perhaps they are looking at the short supply of copper concentrate, and choosing to import more metal now. For sure, this trend will extend into April but for May we will need to wait and see."

    Meanwhile China's aluminium products exports surged to 410,000 tonnes from 260,000 tonnes in February.
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    Whitehaven says Australia cyclone outages to hit coking coal prices for months

    Australia's Whitehaven Coal Ltd said on Thursday that coking coal prices would remain high for months as supply disruptions since Cyclone Debbie damaged train lines and interrupted exports reverberate through markets.

    Whitehaven, whose mines about 1,300 km (800 miles) south of the cyclone's path have been unaffected by the rail stoppages, also plans to boost its own coking coal sales next quarter as exporters further north grapple with stalled operations.

    Five miners in the cyclone-hit region, including BHP Billiton and Glencore have declared force majeure - a clause typically invoked after natural disasters - since multiple landslides and flooding knocked out major coal rail networks.

    Railway operator Aurizon is gradually returning some tracks to service. Its Blackwater line resumed operations on Monday and its Newlands line is expected to open on Thursday.

    However, with the busiest Goonyella line further north closed until May, the disruption caused by the cyclone could lead to the potential loss of 15 million tonnes of coking and thermal coal exports from Australia, Whitehaven said in a statement on Thursday.

    "This loss of exports is likely to be positive for coal prices until normal production and shipments resume and any contract delivery shortfall recovered, which could take some months," the company said.

    Coking coal prices this month posted the biggest one-day surge on record as the rail outages blocked up to half the world's export shipments. Spot prices on the Dalian Commodity Exchange, jumped more than 7 percent and Australian coking coal futures on the Singapore Exchange leapt 43 percent on news of the disruptions.

    Whitehaven said customer requests for coking coal "increased substantially" since the storm and that the company expected to boost coking coal sales next quarter.

    Whitehaven said it produced 5.7 million tonnes of coal for the quarter and affirmed its full-year production guidance of 21 to 22 million tonnes.
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    India's Tata Power to seek coal from countries other than Indonesia after court order

    Indian private sector power producer Tata Power will consider sourcing coal from countries other than Indonesia, to address under recovery at its imported coal based 4,000 MW ultra mega power plant at Mundra, in western India's Gujarat state, the company said Tuesday.

    The Supreme Court of India set aside the previous favorable order of the Appellate Tribunal of Electricity, which had allowed compensatory tariff on account of force majeure conditions in Indonesia, Tata Power said in a regulatory filing to Bombay Stock Exchange.

    The company will continue to pursue all alternatives at Coastal Gujarat Power Limited -- a subsidiary of Tata Power that owns the Mundra UMPP -- including sourcing of competitive coal from other relevant geographies that also use low grade and blended coal options, to contain the onslaught of under recovery at Mundra UMPP, Tata Power said.

    Private power producers like Tata Power, Adani Power and Reliance Power had acquired coal assets in Indonesia to fire their thermal power plants in India.

    In 2010, the Indonesian government changed the law by making coal exports expensive for these companies.

    This impacted financial viability of the power plants operated by them because the electricity procurers -- state electricity boards -- were not willing to pay higher prices when the power producers increased the tariffs to offset high Indonesian coal prices.

    Last year, the Appellate Tribunal for Electricity justified the hike in tariffs by the power producers in view of the change in regulation in Indonesia, and ordered electricity procurers to pay compensatory tariff for the 4,000 MW Mundra UMPP to offset escalation in the price of imported coal.

    The power procurers then went to the Supreme Court against this and disallowed Tata Power from charging compensatory tariff.

    The apex court ruling is applicable to Adani Power too, for its 4,600 MW imported coal based plant at Mundra.

    Adani Power said in a statement Tuesday that the Supreme Court didn't grant relief for the increase in coal cost due to the change in the Indonesian regulation. The company would decide further course of action after going through the final order, Adani Power said.

    From April 2016-February 2017, Adani Power imported around 14.5 million mt of imported coal while Tata's Mundra UMPP imported around 9.9 million mt, according to Central Electricity Authority data.
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    Shanxi coking coal prices supported by supply tightness, survey shows

    Coking coal prices were underpinned by tight supply in Shanxi, one key production base in China, showed a survey organized by and Liulin Chamber of Commerce.

    "We have no stocks of raw and washed coking coal," said a large producer in Liulin, Shanxi. "We mainly sell coal to end-user customers including Taiyuan Iron and Steel Group and Baotou Iron and Steel Group, but they are cash-strapped."

    The source said his company planned to tap market in Rizhao, Shandong this year through Wari (Watang, Shanxi – Rizhao, Shandong) railway.

    The head of Liulin Chamber of Commerce said sales of primary coking coal were satisfactory in Liulin, as supply lagged behind demand.

    Local coal authority conducted inspection and ordered unqualified mines to halt production for rectification, which may affect local coking coal supply.

    Coal mines in Liulin have maintained slow production since last year and mainly focused on ensuring safe and stable production.

    Local coal washing plants were little impacted by environment check, and 26 independent coal washing plants have all passed the check.

    Some steel producers have increased buying of Mongolian primary coking coal while reducing that of Liulin primary coking coal since early this year. Reportedly Baotou Iron and Steel Group has slashed purchase of Liulin low-sulfur primary coking coal by 20 yuan/t since March.

    One miner in Liulin said his mine was safety-compliant and maintained normal production despite safety check. Coking coal prices may be rising in the short run, but in the long term the outlook remains gloomy.

    Recent cyclone in Australia caused a supply shortage in the international market, also boosting market confidence in China. And an improving coke market also indicated continued demand for coking coal.

    Under strict environment check, coke producers in Xiaoyi, Shanxi limited production by 30%, and those in Zibo and Heze kept operating rate at 50-60%. As coke supply is seen to shrink further, an upturn could be expected in coke market across China.

    The Fenwei CCI Met index assessed ex-washplant price of Liulin low-sulfur primary coking coal at 1,360 yuan/t with VAT on April 11, stable week on week; and that of Liulin high-sulfur at 1,145 yuan/t on the same day, up 5 yuan/t over the week.
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    Shaanxi Coal Industry predicts Q1 net profit at 2.3-2.7 bln yuan

    Shaanxi Coal Industry Co., Ltd., a major coal company in northwestern China, expects to gain a net profit of 2.3-2.7 billion yuan ($333.3-391.3 million) in the first quarter of 2017, compared with a loss of 38.84 million yuan during the same period last year, the company said in a statement late April 11.

    The improved earnings were mainly attributed to coal price rallies amid de-capacity drive, asset restructuring and management enhancement last year.

    In April last year, the company disposed high-cost and unprofitable coal mines, and purchased a newly-built coal mine in Wenjiapo, optimizing its asset structure.

    Shaanxi Coal Industry predicted a net profit of 2.5-3 billion yuan last year, compared with a loss of 2.99 billion yuan a year earlier.
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    China orders miners, utilities to sign more long-term coal deals to ease price pain

    China's embattled power companies may receive a long-sought reprieve from rising coal prices after the country's state planner ordered miners to increase the share of supplies sold through lower-priced long-term contracts.

    The National Development and Reform Commission (NDRC), in an April 7 document, ordered coal companies and utilities to fix 75 percent of their total coal purchases through long-term contracts by April 30, up from the current 60 percent, three power utility officials who received the notice said this week.

    Chinese thermal coal futures have rallied nearly 25 percent this year, hitting a record high of 648.60 yuan ($94.11) per tonne in March. Prices are surging on falling domestic supply as China's government clamped down on illegal mining and required miners to shut production as way to combat pollution and overcapacity.

    Requiring miners to commit to larger long-term volumes would reduce costs for China's electric utilities, which have suffered mounting losses in recent months as coal prices have climbed.

    For the miners, the results are more mixed. Shifting to long-term contracts, they will sell less supply at higher spot prices. However, they do lock in sales for a majority of their output near the high prices and gain firm outlets for their supply.

    "We would love to sign more long-term contracts with utilities, but the problem is coal producers do not have enough supply to sign with us," a senior manager with China Datang Group told Reuters.

    "The utilities sector has turned unprofitable since October 2016. We expect power companies to make a total loss of more than 100 bln yuan due to the high cost of coal," he said.

    Another source at China's Huaneng Group said they have arranged meetings with coal miners, trying to secure more supply before the NDRC deadline.

    Following a surge in coal prices last year, Beijing capped long-term thermal coal prices at 535 yuan per tonne for big utilities from Dec. 1 - well below the spot market at the time. Long-term contract prices were then adjusted gradually every month, but remain at a 40 yuan per tonne discount to current spot prices.


    In the document reviewed by Reuters, the NDRC said it will penalize any suppliers or utilities who do not comply with the deal terms.

    Coal producers that default on more than 10 percent of supplies for a contract and do not have at least 75 percent of their sales through long-term contracts by April 30 will be charged higher power prices.

    Power companies that fail to take more than 10 percent of their contracted supply under a long-term contract and do not secure 75 percent of their supply on a long-term basis will receive lower subsidies on power prices.

    In addition, power companies that fail to reach the target will be restricted in the direct power trading scheme.

    The NDRC did not reply to Reuters inquiry for comments.

    Spot coal prices for delivery to the Chinese port of Qinhuangdao were $102.20 a tonne on April 3, according to reporting service McCloskey.
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    U.S. raises duties on South Korean oil tubing, cites steel subsidies

    The U.S. Commerce Department said on Tuesday that it increased anti-dumping duties on oil and gas drilling pipes from South Korea, applying new legal tools that allow for more comprehensive calculations of foreign cost distortions.

    Following an administrative review, the department lifted duties on oil country tubular goods to a range of 2.76 percent to 24.9 percent from a previous range of about 4 percent to 6.5 percent.

    The decision was the first to be made under a provision of the Trade Preferences Extension Act of 2015 that allows the Commerce Department to consider a "particular market situation" such as foreign subsidies for raw materials.

    In the case of the South Korean oil country tubular goods, that included not only cost calculations for the production of the pipes, but price distortions for the hot-rolled steel used in the pipes that are caused by subsidized electricity.

    "We will not stand for the distortions in foreign markets being used against U.S. businesses," Commerce Secretary Wilbur Ross said in a statement.

    "The Trump administration will continue to employ all of the tools provided under the law to take swift action against harm full trade practices from foreign nations."

    Imports of the oil country tubular goods, used for drilling, extraction and transport of oil and natural gas, were estimated at $1.1 billion from South Korea from July 2014 to August 2015, accounting for 25 percent of all imports in that category, the Commerce Department said.

    A slump in drilling activity and a glut of steel pipe imports idled several American steel mills in 2015, including U.S. Steel's Granite City, Illinois, plant, where some 2,000 workers were laid off.

    U.S. Steel and other American producers that first brought the case argued that since the Commerce Department had already issued anti-subsidy duties against Korean hot-rolled steel, the dumping margins for the drilling pipes should be adjusted upward to account for this.
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    Russia Q1 coal output and exports climb YoY

    Coal-rich Russia produced 99.35 million tonnes of coal in the first quarter of this year, a year-on-year rise of 3.63%, showed data from the Energy Ministry of Russian Federation.

    Its coal output in March gained 3.28% from February and 3.91% from the year-ago level to 33.36 million tonnes, data showed.

    Over January-March, the country's coal exports stood at 43.59 million tonnes, up 16.73% from the year prior.

    In March, its coal exports were 15.49 million tonnes, increasing 18.28% year on year and up 13.67% month on month.

    Attached Files
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    China's 2017 thermal imports to surge by 30 million mt over 2016: Noble

    China's thermal total coal import in 2017 is expected to surge by about 30 million mt over that in 2016, on the back increasing power generation, according to Noble Group.

    "The fundamentals in the coal market changed last year," Rodrigo Echeverri, head of Noble Group's energy coal analysis, said at the Coaltrans Conference in Shanghai on Monday.

    He said that there has been a demand shock in the thermal coal market without a supply response, which has helped support the prices. China's thermal coal import during the first quarter of 2017 was about 12 million mt more than Q1 2016's imports, Echeverri said.

    He pointed out that China's thermal power generation in Q1 2017 increased 7% over Q1 2016's, while output of coal increased by only about 4%.

    "Import of coal is very important for power producers and cement manufacturers in South China and they don't have a ceiling on imports," said Hu Bo, deputy general manager at Beijing Datang Fuels Co. The seaborne market is going to see more low-calorific-value coal being moved, which is expected to grow to 1.1 billion mt by 2030, according to Cameron Tough, head of International Marketing at Adaro Indonesia.


    Most of the market participants at the Coaltrans Conference were of the opinion that the coal sector was not a sunset industry.

    "We need development to burn coal more efficiently and reduce emissions. This will be the green revolution for coal," said Mao Zhongsheng, chairman of China's Shenhua Energy Co. Ltd., adding that fossil fuels would continue to play an important part in the energy-mix. "[The] Asia Pacific region has the biggest scope for growth in energy consumption," he said, mentioning that additional uses of coal are also being invented, with liquefaction being one of them.
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    Merafe’s Q1 ferrochrome production up 10%

    The attributable production of ferrochrome company Merafe Resources increased by 10% in the first quarter (Q1) of this year.

    Attributable production was 113 000 t, up from last year’s Q1 output of 103 000 t.

    The increase in the attributable ferrochrome output from the Glencore-Merafe Chrome Venture is primarily due to improved performances and efficiencies across the venture’s furnaces, coupled to the restarting of Rustenburg furnace 5 in the second half of 2016, the JSE-listed Merafe said on Tuesday.

    The Q1 European benchmark ferrochrome price of $165/lb, applicable for the three months to March 31, was 6.7% higher that the current Q2 price of $1.54/lb, which is applicable in the three months to June 30.

    Merafe, headed by CEO Zanele Matlala, shares in 20.5% of the earnings before interest, taxation, depreciation and amortisation (Ebitda) of the Glencore-Merafe Chrome Venture, the largest ferrochrome producer in the world with combined installed capacity of 2.34-million tonnes of ferrochrome a year.

    The venture operates eight chromite mines and 22 ferrochrome furnaces.  

    The demand for ferrochrome is driven overwhelmingly by the production of stainless steel, which is projected to grow by 3.5% in 2017 and by 3.8% in 2018.

    In the 12 months to December 31, Merafe’s share of the venture’s Ebitda was R1 176.2-million, 38% higher than in 2015.
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    Anhui Hengyuan Coal Electrity predicts 287 mln yuan net profit in Q1

    Anhui Hengyuan Coal Electrity Group Co., Ltd predicted a net profit of 287 million yuan ($41.53 million) or so in the first quarter of 2017, surging 60 times as compared with the same period last year, said the company in a statement late April 10.

    The company cited the de-capacity drive and optimization of product structure for the improved profitability, though its output of raw and commercial coal as well as commercial coal sales also declined during the period.

    In the first quarter, the company produced 3.21 million tonnes of raw coal, down 7.8% year on year, while output of commercial coal dropped 17.1% from the year-ago level to 2.54 million tonnes.

    Sales of commercial coal were 2.26 million tonnes during the same period, 23.2% lower than the preceding year, according to the statement.

    It realized sales revenue in coal business of 1.49 billion yuan over January-March, slumping 70.2% year on year; sales cost increased 29.4% from the year prior to 1.02 billion yuan; gross profit of commercial coal surged 431.8% from a year earlier to 471 million yuan.

    The company produced 12.76 million tonnes of raw coal last year, down 10.8% year on year; sales of commercial coal climbed 4.3% on the year to 10.92 million tonnes.

    Its operating revenue increased 16.6% year on year to 4.63 billion yuan in 2016, while net profit reached 35.29 million yuan during the period.

    Anhui Hengyuan Coal Electrity planned to produce 12.6 million tonnes of raw coal in 2017, and sell 10.86 million tonnes of commercial coal. Total operating revenue is projected to be 5.47 billion yuan this year, and operating cost to be 4.74 billion yuan.
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    Indian body recommends anti-dumping duties on some steel imports

    An Indian government body has recommended imposing duties on some steel products imported from China, Japan and Russia, reinforcing New Delhi's tough stance despite complaints from some of the targeted countries.

    The Directorate General of Anti-Dumping and Allied Duties (DGAD) suggested imposing definitive anti-dumping duties on cold-rolled and hot-rolled flat steel products, according to circulars released on Monday. The government usually accepts DGAD's recommendations.

    "It is noted that dumped imports from the subject countries have adversely impacted the performance of the domestic industry," one of the circulars said.

    Last month, Japan asked the World Trade Organization (WTO) to set up a dispute settlement panel to examine India's duties on steel imports which it says may violate WTO rules.

    Earlier this year, Indian Steel Secretary Aruna Sharma told Reuters there was a "strong case" for imposing long-term anti-dumping duties on up to 124 steel products.

    Between April and January, India's steel imports fell 38 percent year-on-year, data from a government body showed, primarily due to the slew of protection measures announced by the government.Indian steelmakers such as JSW Steel and Steel Authority of India had asked for stronger measures to protect them from cheaper imports from China, Japan, Russia and South Korea.
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    Coking coal posts record surge to over $300 on supply disruptions

    The market for coking coal took another leap on Monday with the steelmaking raw material surging more than 6% to $300.30 (Australia free-on-board premium hard coking coal tracked by the Steel Index), a 19-week high.

    Coking coal has doubled in two weeks on the back of  disruption to Australia’s coal exports associated with Cyclone Debbie which caused serious damage to  key rail lines serving mines in the state of Queensland.

    Three lines are set to re-open by the end of the week according to operator Aurizon but large sections of the Goonyella railroad in the centre of the network could be out for a further four weeks.

    Roughly 12–13 million tonnes of Australian met coal cargoes destined for China, India and Japan could be delayed according to a Mining Weekly report.

    The global met coal market is around 300 million tonnes per year with premium hard coking coal or PHCC constituting more than a third of the total market. More than half of PHCC seaborne coal come from Australian producers according to TSI data.

    A reduction in allowable work days at China's coal mines last year sparked a massive rally in coal prices, lifting met coal prices to multi-year high of $308.80 per tonne by November from $75 a tonne earlier in 2016.

    But the speculative rally fizzled soon fizzled out with the commodity hitting a 2017 low of $150.10 a tonne last month.  The record spot price for met coal was set in 2011, also after flooding in Australia.
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    First coking coal train since Cyclone Debbie reaches Queensland port - shipping agent

    The first coal train from Australia's cyclone-hit Bowen Basin reached Gladstone Port on Tuesday with seaborne exports planned to resume this week, a shipping agent told Reuters.

    Just before 8 a.m. local time (2200 GMT) the first coal train arrived at Gladstone port, said John Parks, shipping agent for Aqua Bonanza, the first vessel scheduled to load there.

    "She'll start to load tonight and sail at 8 o'clock on the 14th," he said.

    Track operator Aurizon was not immediately available for comment, but had previously said its line to Gladstone was scheduled to reopen on Monday. Port of Gladstone's operator was not immediately available for comment.
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    Iron slumps into bear market as Barclays sees further losses

    Iron-ore’s descent into bear-market territory may herald further weakness, with Barclays pinning the blame for the slide on lower steel demand in Chinadriving a shift from mills toward lower-quality ore and raising the prospect of a drop into the $50s.

    Ore with 62% content in Qingdao fell 1% to $74.71 a dry ton on Monday, according to Metal Bulletin, following a 6.8% drop on Friday that pushed the commodity into a bear market from a February peak. Earlier in Asia, futures in Dalian sank to the lowest since November, and those in Singapore traded below $72.

    Iron-ore is in retreat after a procession of negative outlooks, with Barclays among banks saying that gains were unsustainable, along with Australia’s central bank and even some mining companies. There’s concern that curbs in Chinamay hurt steel consumption in the top user, as well as forecasts that a further expansion in mine supplies from Brazil, Australia and China will undermine prices. Steel in China has also sagged.

    “The weakness in prices was driven by a slackening in end-use steel demand,” Barclays analyst Dane Davis told Bloomberg in an email. “When that occurred, steel producers switched to lower-quality iron ores, which were in abundance,” said Davis, who’s been bearish on the outlook for months.

    Miners’ climbed in London even as the SGX AsiaClear contract fell for a third day. BHP Billiton – targeted for an overhaul by Paul Elliott Singer’s Elliott Management Corp– rose 4.6%, while Rio Tinto Group added 1.1%. In Sydney, Fortescue Metals Group pared losses to trade little changed. BHP has cautioned in recent weeks that prices may retrace.

    Axiom Capital Management, a consistent bear on iron-ore, said in a report on Monday that “the timing is ripe” for bets on lower prices, citing prospects for increased mine supplies and tentative signs that record stockpiles at China’s portsmay be starting to be sold off. After peaking at 132.5-million tons on March 24, the holdings have posted the first back-to-back drop since September, according to Shanghai Steelhome E-Commerce Co.

    Australia’s government preceded the latest steep drop with its own warning. “Growing supply, primarily from Australia and Brazil, is expected to steadily outpace demand growth over the rest of 2017,” the Department of Industry, Innovation and Science said in a quarterly report released on Friday. Ore may slump to $55 in the final quarter, it said.

    China has been tightening restrictions on its real-estate market in recent months after prices soared, clouding the outlook for construction steel, including reinforcement bar. Last month, the central bank asked banks in Beijing to scrutinize home loans to newly divorced couples and funding sources for borrowers, adding to other curbs.


    Still, while prices have dropped, they remain well above levels seen 12 months ago. Iron ore surged more than 80% last year -- in a rally that caught out many bears -- as steel production and demand in China proved more resilient that expected.

    “While some may label this a bear market, the reality is that prices are still 33% higher than they were this time last year and well above any levels seen since 2014,” Australia & New Zealand Banking Group said in a note on Monday. “The macro backdrop for iron ore is that after maintaining very loose monetary policy through 2014 and 2015, China has begun to tighten.”

    Iron ore’s losses have also come as investors reassessed the ability of President Donald Trump’s administration to deliver on plans to overhaul US infrastructure. Initial enthusiasm about the drive in the top economy had helped iron ore to gain between November and February.

    Among recent bearish forecasts, Reserve Bank of AustraliaGovernor Philip Lowe said in February commodity prices were going to fall again, including iron ore. Capital Economics said in March there’s some doubt about China’s demand, and predicted a retreat to $45 by year-end.

    Barclays’s Davis told Bloomberg in an interview in January that prices weren’t sustainable given the outlook for a rising supply and plateauing or weaker demand. At the weekend, he said of the recent losses: “Please note, we have been calling for this for a while.”
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    Australia's thermal coal exports to rise 0.7%/year through fiscal 2021-2022

    Australia's thermal coal exports are forecast to grow 0.7%/year through to fiscal 2021-2022 (July-June)on demand from India and the ASEAN towards the end of the period, according to the government's Resources and Energy Quarterly released late Friday.

    Exports totaled 201.3 million mt in fiscal 2015-2016, and are estimated at 202.2 million mt for fiscal 2016-2017. They are forecast to gradually increase to 209.4 million mt by fiscal 2021-2022.

    India's imports of Australian thermal coal are expected to fall from an estimated 166 million mt in calendar 2016 to 161 million mt in 2017, and to 157 million mt in 2019 before rising to 175 million mt by 2022.

    Increased production by state-owned Coal India Ltd. is a reason for the decline in imports, the report said. But that is expected to grow later due to new advanced coal-fired power plants that will require higher calorific material, which isn't available domestically.

    Indonesian exports and Chinese imports, meanwhile, each saw growth in 2016, but are both forecast to fall through to 2022, the report said.

    Indonesia's exports rose in 2016 because previously unprofitable mines due to lower thermal coal prices hiked their output and exports to take advantage of rising prices.

    But, the country's thermal coal exports are forecast to decline at an average rate of 1% per year from 379 million mt in 2016 to 357 million mt in 2022, which would be similar to its 2011 export levels.

    Exports are expected to remain steady over the first half of the outlook period as Indonesia's key customers India and South Korea still use lower calorific content coal.

    China's domestic production cutbacks last year boosted its imports but the move to a less restrictive supply policy is likely to see a decline in imports, the report said.

    China is estimated to have imported 180 million mt of thermal coal in 2016.

    This is forecast to fall to 171 million mt in 2017, 157 million mt in 2018 and 2019, and then recover slightly to 162 million mt by 2022, it added.
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    Chinese traders ordered to return North Korean coal - source

    China's customs department has issued an official order telling trading companies to return their North Korean coal cargoes, said a trading source at Dandong Chengtai Trade Co., the biggest buyer of coal from the isolated country.

    Following repeated missile tests that drew international criticism, China banned all imports of North Korean coal on Feb. 26, cutting off the country's most important export product.

    The source at Dandong Chengtai said the company had 600,000 tonnes of North Korean coal sitting at various ports, and a total of 2 million tonnes was stranded at various Chinese ports, waiting to be returned.

    The source spoke on condition of anonymity due to the sensitivity of the subject.

    Neither Dandong Chengtai (former Dandong Zhicheng Metallic Material Co., Ltd) nor Chinese authorities were available for official comment.

    Shipping data on Thomson Reuters Eikon, a financial markets information and analytics platform, shows at least half a dozen general cargo vessels have recently taken coal out of China, mostly from the ports of Weihai and Peng Lai, and returned fully laden to North Korea.

    Last month, Reuters reported that Malaysia briefly prevented a North Korean ship carrying coal from China from entering its port in Pengang because of a suspected breach in sanctions. The ship was eventually allowed to unload its 6,300 metric tonnes of anthracite coal.
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    China steel outlook drags on raw materials futures

    Concerns that China is producing too much steel put pressure on industrial raw materials markets on Monday, with key futures indicators, iron ore, coke and rebar all trading lower.

    "We saw steel output up 6 percent in January and February already, and the expectation is that demand will not be able to absorb all that," Commonwealth Bank of Australia analyst Vivek Dhar said.

    "There is simply too much steel out there, we're seeing iron ore fall as a result of that," Dhar said.

    The most-active rebar on the Shanghai Futures Exchange was down 1.47 percent at 3,013 yuan ($436) a tonne by midday.

    Rebar's retreat swept iron ore lower, with the contract for September delivery on the Dalian Commodity Exchange down 2.7 percent to 520 yuan a tonne.

    Stocks of imported iron ore at China's port stood at 131.2 million tonnes as of Friday, according to SteelHome. SH-TOT-IRONINV That is more than one-tenth of China's estimated imports of iron ore this year, according to Australia's Department of Industry, Innovation and Science.

    "The market sees china needing less iron ore. This combined with increasing domestic production is putting pressure on the price," Dhar said.

    Dalian coking coal was also weaker, down 1.8 percent to 1,274 yuan, while coke - made from coking coal - slid 1.5 percent to 1,818 yuan.
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    New fund to help recast China steel sector

    Four entities signed a framework agreement on April 7 to establish China's first steel industry restructuring fund, China Daily reported.

    The fund, which may be launched in June, will seek to push forward the steel industry's restructuring and upgradation. It is expected to have 40 billion yuan ($5.88 billion) to 80 billion yuan in corpus initially.

    China Baowu Steel Group's Hwabao Investment Co Ltd and US-China Green Fund will hold 25% each, WL Ross & Co 26% and China Merchants Finance Holdings Co Ltd 24%.

    Baowu Steel is China's largest steel-maker and the world's second-largest by crude steel output.

    According to Ma Guoqiang, Baowu Steel's chairman, the fund is tasked to help the Chinese steel industry to eliminate excess capacity, speed up restructuring, raise industry concentration and promote international cooperation.

    Ma Weihua, former president and CEO of China Merchants Bank, is tipped to chair the joint venture that will run the fund.

    "The restructuring of the steel sector will be of great aid to the Chinese economy. It is a great mission containing huge business opportunities. I know the journey to success will be full of obstacles, but along with the four great partners, I will pour all my energy into the new career," Ma said at a media conference.

    "Each of the four partners is irreplaceable. Each will play a unique role by combining both domestic and international resources," said Zhou Zhuping, chairman of Hwabao Investment Co Ltd.

    According to Zhou, the industrial concentration rate of China is much lower than that of South Korea, Japan and Russia. China's steel industry cut its capacity by 65 million tonnes last year, and needs to cut 50 million tonnes more this year.

    Last October, a report by the Ministry of Industry and Information Technology outlined the steel industry's restructuring and upgrading tasks for the next five years.

    It requires steel-makers to cut their crude steel capacity by 100 million tonnes to 150 million tonnes.

    According to the MIIT plan, during the 13th Five-Year Plan period (2016-20), the country's top 10 steel enterprises should raise their output from 34% of the nation's total to 60%.

    Later in December, the Central Economic Work Conference called for mergers and restructuring across the steel industry.
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    China's coal imports from Newcastle terminals surge in March

    Australian coal exports from the Port Waratah Coal Services (PWCS) terminals (Carrington and Kooragang) at Newcastle to China increased 31.98% from February and up 21.84% from a year ago to 1.14 million tonnes in March, PWCS said in the latest performance report.

    The coal terminals exported a total 9.34 million tonnes of coal in March, increasing 22.24% from February but down 0.46% from a year earlier.

    Of the total shipments in March, 84% or 7.84 million tonnes were thermal coal, up 23.7% month on month but down 1.63% year on year; 16% or 1.49 million tonnes were coking coal, up 15.05% on the month and 6.17% on the year, PWCS said.

    Of this, 4.87 million tonnes of coal were shipped to Japan, rising 12.53% from February and up 16.24 from a year ago.

    Exports to Taiwan surged 97.04% month on month but slid 2.09% year on year to 1.24 million tonnes in March, data showed.

    South Korea received 981,400 tonnes of coal in March, gaining 14.9% from the month before but down 21.58% year on year.

    Over January-March, PWCS exported a total 25.88 million tonnes of coal, down 2.46% from the previous year, the operator said.

    By end-March, the PWCS terminals had 9 vessels waiting to load coal, four less than the start of the month.

    Coal stockpiles at these two terminals stood at 1.94 million tonnes at the end of March, up 67.2% from February, of which 1.69 million tonnes were at Kooragang and 257,500 tonnes were at Carrington.

    Attached Files
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    Anglo American to sell Eskom-tied coal operations in South Africa

    Miner Anglo American said on Monday it would sell its Eskom-tied domestic thermal coal operations in South Africa to a unit of Seriti Resources Holdings for 2.3 billion rand ($166.43 million).

    The thermal coal operations that mainly supply coal to Eskom consist of the New Vaal, New Denmark and Kriel collieries, as well as four closed collieries , Anglo American said.
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    Fortescue moves on growing markets outside steel giant China

    Fortescue Metals Group is making iron-ore marketing forays to steel-producing nations outside China to tap forecast increases in demand from burgeoning infrastructure projects across the region.

    The world’s fourth-biggest exporter’s mines in northwestern Australia are well-positioned to take advantage of expected growth in countries such as India, Vietnam and the Philippines, CFO Elizabeth Gaines said in an interview. Australian iron-ore exporters including Perth-based Fortescue account for more than half of the global exportmarket.

    “Our marketing team visit potential and prospective customers in all those regions regularly - it’s not just a complacent watching brief,” said Gaines, who took the post in February having served on the miner’s board since 2013. “We are actually in those markets talking to people and wanting to be partners with them as those opportunities arise.”

    India is poised to become a beacon for growth in global steeloutput as demand from infrastructure, construction and auto-making accelerates, BMI Research said in a report received Wednesday. Steel output in the nation will average annual growth of about 9% between 2017 to 2021, according to the report.

    Economic growth is forecast to pick up in about two-thirds of Asia’s 45 economies, even as the pace of expansion cools in China, the Asian Development Bank said this month in its latest outlook report. India’s gross domestic product is forecast to grow 7.4% in 2017 and 7.6% next year, while in Southeast Asia – which includes Vietnam and the Philippines– GDP growth will expand to 5% in 2018 from 4.8% this year, the report said.

    “As those economies realize their growth potential there’ll be demand for infrastructure, which will drive demand for steel,” Gaines said in the interview Wednesday in Sydney. “Being based in the Pilbara, we’ll be very well placed to supply to those markets as and when that demand occurs.”

    Fortescue declined 1.4% to A$6.21 at 10:36 a.m. in Sydneytrading, trimming its advance in the past 12 months to 140%.

    A rally in iron-ore since late 2015 that’s swelled profits and allowed producers to trim debt and boost returns to investors is losing momentum. Prices have slumped about 15% since the steel-making ingredient touched a more than two-and-a-half-year high of $94.86 a metric tonne in February. Benchmark ore in Qingdao declined 0.8% to $80.92/t Thursday, according to Metal Bulletin

    Fortescue’s efforts to more than halve cash costs in the past two years to about $12.54/t in the last quarter mean that it’ll remain “bullet-proof” even as prices retreat, chairperson and founder Andrew Forrest said in an interview last month.

    “We’re not finished there, we’re looking at continuing to focus on innovation, on efficiency and productivity benefits to continue to be the lowest cost producer,” Gaines said. Fortescue was ranked the lowest-cost seaborne supplier to China in a Metalytics Resource Sector Economics study, the producer said in a December filing.

    Operating costs are the sector’s third-lowest behind larger rivals BHP Billiton and Rio Tinto Group, according to Bloomberg Intelligence.

    Fortescue may target early repayment of $478-million of April 2022 notes that are callable from this month as it looks to extend a drive to cut debt and will also consider further options for broader changes to its borrowings, according to Gaines. The producer has cut net borrowings to about $4-billion at the end of December from a peak of $10.7-billion four years earlier.

    “Part of the opportunity is looking at the remaining debt and how we might structure that,” she said. The producer is also likely to consider what it wants to do with $2.16-billion of 9.75% secured 2022 notes as they become callable from March next year. “Clearly that’s expensive debt,” Gaines said.
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    Shanxi Coal International Energy 2016 coal sales up 132pct on year

    Shanxi Coal International Energy Group Co.,Ltd in coal-rich Shanxi province, saw its coal sales reached 92.63 million tonnes in 2016, skyrocketing 132% from the year-ago level, according to data released by the company.

    The company's raw coal output reached 21.46 million tonnes in 2016, up 9.9% year on year, said the company

    During the same period, operating revenue amounted to 49.16 billion yuan, gaining 24.2% from the preceding year. Net profit attributable to shareholders was 308 million yuan.

    All-in cost of raw coal was 127 yuan/t last year, decreasing 6 yuan/t or 4.5% form the year prior.

    The company aims to produce 20 million tonnes of coal and gain 50 billion yuan of operating revenue in 2017.

    Shanxi Coal will accelerate release of capacity at its high-yield and high-efficiency mines, and actively resume production or construction of suspended mines or projects.

    Shanxi's economy, which expanded 4.5% last year, continues to move on the upward track, bringing the positive influence on coal companies in the province.
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    Shenhua Xinjiang Q1 commercial coal sales up 25pct on year

    Shenhua Xinjiang Energy Co., Ltd, a subsidiary of giant Shenhua Group, sold 7.57 million tonnes of commercial coal in the first quarter of 2017, up 25% from the previous year, said Shenhua Group on its website.

    During the same period, total rail shipment amounted to 2.66 million tonnes, gaining 1.52 million tonnes from the preceding year, a new record on quarterly basis.

    The company transported 300,000 tonnes of coal to Sichuan, Chongqing, Zhejiang, Jiangsu, Gansu and etc., exceeding total outbound rail shipment in 2016.

    The company's all-in cost was 108.33 yuan/t, decreasing 2.84 yuan/t from year on year, owing to the reduction of labor costs among other factors.
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    Mountain size trouble for Australian coal lines

    Global coking coal supplies have been drastically interrupted by a small stretch of rail that wraps around a modest-sized Australian mountain range – and repair crews are unable to find a quick fix.

    Australian rail operator Aurizon Holdings Ltd said on Friday it would take another four weeks to repair the Goonyella line, which transported 118 million tonnes of mainly coking coal in 2016 and has been hit by landslides.

    The company said that its cyclone-damaged Blackwater coal haulage line - the second major rail corridor after Goonyella - would reopen on Monday at reduced capacity.

    "Recovery and repairs are being undertaken at multiple sites along the Goonyella corridor, including at Black Mountain which experienced significant landslides," Aurizon said.

    Multiple landslides and flooding knocked out the rail network when Cyclone Debbie ripped through the state of Queensland, a major coking coal region, last week.

    The cutoff in exports of the key steelmaking ingredient, has left steelmakers in China, the world's biggest producer, scrambling for supplies, even looking as far as the United States, and pushed up prices.

    Queensland accounts for more than 50 percent of the global seaborne coking coal market, which hit 314 million tonnes in 2016, according to Australia's Department of Industry.

    Aurizon's note was the first update it has provided to the market since Monday. It had previously forecast Blackwater to come back on line this week, while there is no change to the Goonyella time table.

    The much smaller Newlands and Moura rail networks are expected to be operational next week.


    While the return of the Blackwater line will start replenishing coking coal supplies, the majority of coal in the region travels on the Goonyella line.

    Goonyella wraps around a mountain range en route to port facilities, where repairs are hampered by risks of further landslides, while drenched terrain limits how quickly heavy equipment can be moved into place.

    Buddhima Indraratna, an engineering professor specializing in railway geotechnology, said the trackbeds, known as ballasts, would have been infected.

    "The ballasts are now probably contaminated with landslide mud and debri; fouled ballast needs to be replaced, or cleaned and placed again," Indraratna said.

    "Any side slopes adjoining the track need to be stabilized properly so that subsequent sliding is prevented."

    The repair work is occurring at the most difficult part of the almost 500 kms (310 miles) of Goonyella track, where one of the few nearby access points - the Marlborough–Sarina Road - has itself been cut due to landslide damage. The state government has estimated road repairs will take "at least six months".

    Aurizon said on Friday it was working on "alternative routing options" such as moving coal onto the northern Newlands line or south via Blackwater.

    That sets up a potential race to secure any spare capacity on the alternate routes, with trucking an unlikely viable option, said independent mining analyst Peter Strachan.

    "There may well be some temporary trickle of truck-hosted haulage, but when you're looking at the tonnes involved that would be a trickle, they couldn't do with trucks what they can do with train lines," Strachan said.
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    Coal India misses annual production target by 44.48 mln T

    Coal India missed its annual production target by 44.48 million tonnes as it produced 554.13 million tonnes of coal by the end of 2016-17 against a target of 598.61 million tonnes, the company reported on April 3.

    The miner also missed its offtake target for the financial year by 55.45 million tonnes, showed the provisional data.
    Against a target of 598.61 million tonnes, its offtake for the FY2016-17 was at 543.16 million tonnes, up 1.6% over the offtake for 2015-16.
    The miner achieved 93% of its annual production target for the last financial year, achieving a 2.9% growth over its production in 2015-16.
    "The production was impacted due to rehabilitation and resettlement issues along lower dispatch which have been noticed in the entire year," a Coal India official said.
    At the beginning of the 2016-17, Coal India's Chairman Sutirtha Bhattacharya had said that in order to meet the production target, the miner needed to step up to a double-digit growth rate.
    Coal India, which produces 84% of the country's coal, exceeded the target for March by excavating 66.07 million tonnes of coal.
    The miner's two subsidiaries, South Eastern Coalfields Limited (SECL) and Mahanadi Coalfields (MCL) contributed most of its annual output by respectively generating 140 million tonnes and 139.21 million tonnes of coal.
    For March only, its offtake was at 52.30 million tonnes, achieving 90% of the monthly target of 58.30 million tonnes.
    During 2015-16, the miner produced 538.75 million tonnes of coal and its offtake was at 534.50 million tonnes.
    In 2017-18, the miner's projected production volume was 660.7 million tonnes and it envisaged production of 908.10 million tonnes in 2019-20 with a CAGR (Compound Annual Growth Rate) of 12.98% regarding 2014-15.
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