Mark Latham Commodity Equity Intelligence Service

Wednesday 22nd March 2017
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    Politics, and the art of the deal.

    Democrat Rep. Elijah Cummings On Meeting With Trump

    Heard on Weekend Edition Saturday

    Scott Simon talks with Rep. Elijah Cummings of Maryland, who is a sharp critic of the president, but sounded positive after meeting with Trump about trying to lower the cost of prescription drugs.


    You probably won't find a sharper critic of President Trump than Representative Elijah Cummings of Maryland. But Mr. Cummings met with Mr. Trump this week to discuss the possibility of lowering prescription drug costs, and Mr. Cummings came out of that meeting sounding upbeat. The congressman joins us now. Representative Cummings, thanks so much for being with us.

    ELIJAH CUMMINGS: It's good to be with you, Scott.

    SIMON: You and your fellow Democrat Peter Welch gave the president a proposal that would allow the government to use the leverage of Medicare to try to negotiate lower prices with drug manufacturers. Let me ask you a question from the Democratic primary. If that was such a great idea, why didn't the Democrats do it themselves when they controlled Congress in 2010 and passed the Affordable Care Act?

    CUMMINGS: That's a great question. What happened back then is I think President Obama was trying to get the deal through. And as you know, we got very little, if any, cooperation from the Republicans. And I think that this was...

    SIMON: Well - but you had the votes in your own party to make this a part of the legislation.

    CUMMINGS: Yeah, but, Scott, you know that that doesn't always work that way. It's not that simple because we had a lot of blue dogs. We had people who - Democrats who really didn't even want to go along with the Affordable Care Act. And so there was a lot of compromise there. And part of the compromise was to work through a deal where the prices of Medicare Part B - that is the prescription - drug prices would not be negotiated. I was against that because I thought that we were - I thought that we were bulk purchasing. And as most bulk purchases do, you're usually able to get a discount. But that was a part of the deal to get through the Affordable Care Act, and that's one of the reasons why I think you had a lot of Democrats who were concerned about the act even back then.

    SIMON: Well - but let me ask this - there are some health care economists who have looked the idea of having government negotiate for lower drug prices who say - talk about "The Art Of The Deal" - negotiation only works if one party is willing to get up and walk away from the table. But you can't do that with Medicare, can you? You can't say, well, we're willing to walk away from this deal because millions of people on Medicare need those drugs to survive.

    CUMMINGS: Yeah, but you're missing a point. You may have a - you know, say for example leukemia - just hypothetically. You may have four or five drugs there by four or five different manufacturers. And so you want to add one drug in the formulary that addresses most of those people's needs. So there would be competition, Scott, between those four or five companies. So yeah, it can be done. As a matter of fact, it's done in Rhode Island right now, so that's not unusual. So no, no, no, no, it - definitely room for that. President Trump fully understands it, and he wants to do something about it.

    SIMON: Do you think you have a chance with President Trump that you didn't have with the previous administration?

    CUMMINGS: I think that we have a chance. As a matter of fact, as late as yesterday - last night - he told me that he's going to try to get it into his bill.

    SIMON: He told you this last night, Friday night.

    CUMMINGS: Last night, that's right. So we'll see what happens. You know, with President Trump you - I think you have to wait and see. You're going to have a good conversation. It sounds like he's going in the direction that you're going in, and people have told me you step out of the room and next thing you know maybe something has changed. But the conversation that we had with him was a very good one.

    SIMON: We've got about a minute left. You figured in another headline. You sent - was it November 18? - a letter to Vice President Pence alerting him - if he didn't know already, and he said he didn't - to the fact that Michael Flynn had worked centrally as a foreign agent in behalf of the Turkish government.

    CUMMINGS: That's right. We sure did.

    SIMON: Are you concerned he was appointed anyway?

    CUMMINGS: Yeah, I am concerned. I'm concerned about the vetting process. I also had a conversation with Vice President Pence yesterday, and it's my understanding that he may have missed my letter because they were trying to get up and running, and he had just been appointed to head the transition team, that is Vice President Pence. And those things do happen.

    SIMON: Yeah.

    CUMMINGS: But there were too many warning signs about Flynn, and, you know, that's the reason why we should have very careful vetting. You can't have somebody like that as head of your security team. That's ridiculous.

    SIMON: Thanks so much, Representative Elijah Cummings of Maryland.

    CUMMINGS: All right. Thank you, sir.

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    Judge advocates blockchain for share register in singular case.

    A lawsuit from 2013 involving Dole Foods showed that the company had 12 million more shares of its stock than it had originally thought, exposing a weakness in the overall market system.

    In 2013, David Murdock, who was the chairman, chief executive officer and biggest shareholder of Dole Food Co., took the company private for $13.50 a share. A report from Bloomberg states that shareholders felt that Murdock had purposely driven the value of the company down, so he could buy it cheaply. As a result, they sued and won.

    At the time, it was believed that there were 36,793,758 shares; however, the end figure ended up being 49,164,415 shares.

    Last month, the judge presiding over the Dole case, Delaware Chancery Court vice chancellor J. Travis Laster, indicated in his 17-page memorandum opinion a potential solution to the problem: blockchain technology.

    Laster stated that the Blockchain Initiative of Delaware state might have facilitated Dole to handle the inconsistency in stock figures.

    Blockchain to the Rescue?

    Laster, an advocate for blockchain technology, was reported in October as saying that the blockchain allows for ‘a utopian vision of a share ownership system where there is only one type of owner: record owners’ when it comes to taking back the stockholding infrastructure and share voting.

    According to Laster, the current system is outdated and too complex, making it difficult to determine who actually owns a share and how it’s used in corporate decision making.

    Laster believes that the use of the blockchain could cut down on the cost of money and mistakes, ensuing transparency, giving peace of mind to those involved.

    Such a measure with the Dole Food stock error could have prevented the mistake from occurring in the first place.

    Blockchain Share Voting

    The use of the blockchain has been used for voting purposes in the past.

    Last October, the Abu Dhabi Securities Exchange (ADX) developed an e-voting platform based on the technology. This was to ensure that shareholders of listed companies on the exchange had the chance to fairly and accurately vote during annual general meetings.

    Of course, while it’s too late to solve the issue with Dole, it could provide a solution to prevent a mistake from taking place again in the future.

    With the blockchain’s use expanding as more organizations understand the impact and benefit it can provide, it is proving that it’s a viable alternative for many problems, ensuring transparency and traceability.

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    Hebei Jan-Feb industrial added value up 3.0%

    Hebei posted a year-on-year increase of 3.0% to 169.11 billion yuan in industrial added value over January-February, showed data from Hebei Provincial Bureau of Statistics on March 17.

    During the same period, Hebei's fixed-asset investment (FAI) amounted to 100.46 billion yuan, increasing 10.1% from the preceding year. Of that, state-owned and state-holding's FAI witnessed a year-on-year surge of 14.3% to 22.61 billion yuan; Private's FAI at 75.83 billion yuan, up 7.8% year on year.

    Fixed-asset investment in primary industries in the first two months in Hebei jumped 21% year on year to 4.05 billion yuan, while that in secondary industries posted a year-on-year increase of 4.0% to 41.75 billion yuan; tertiary industries at 54.66 billion yuan, up 14.5% year on year.

    During the same period, investment in real estate development stood at 22.05 billion yuan, climbing 6.8% from the year-ago level.

    Over January-February, Hebei realized a steady development and grew at a moderate pace with accelerating transformation and upgrading, the bureau said.
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    Big banks talking to Rio Tinto's specialist new Ventures arm

    Big banks talking to Rio Tinto's specialist new Ventures arm

    London bankers are vying for contracts after Rio Tinto said it had set up a new unit, Rio Tinto Ventures, to develop more specialized mining prospects as it seeks to reduce its reliance on bulk commodities, three banking sources said.

    The big miners have traditionally relied on producing high-margin commodities, such as coal and iron, for the largest part of their earnings. 

    But, as the commodity price crash of 2015 and early 2016 underlined, that leaves them exposed to violent swings in commodity prices and ultimately the risk of stranded assets if factors such as a shift to greener fuels or an increase in metals recycling fundamentally change demand.

    Rio Tinto last month said Rio Tinto Ventures was seeking to identify projects aligned with its analysis of such macro trends.

    At least three international banks have pitched for business with Rio Tinto's new unit, based on developing projects for various products ranging from lithium to soda ash, the sources said.

    "We are talking to Rio," one of the sources said. "They are open to exploring projects in more exotic metals."

    Outlining its plans for Rio Tinto Ventures, Rio has said the arm could produce commodities that have not so far been central to its business, giving as an example its discovery in Serbia of the promising new mineral jadarite, which contains lithium and borates.

    "The idea is to capture value beyond our core portfolio with a focus on new and emerging commodities," Bold Baatar, Rio Tinto's chief executive of energy and minerals, said at a conference in South Africa in February.

    "I see this as an opportunity to build upon our capabilities through commercial partnerships, investing in the future of the company in projects and commodities that will create value."

    Partnerships can also help to maximize exploration budgets that mining companies reduced in response to the commodity price crash and are unlikely to restore to pre-slump levels as the chances of success diminish.

    Rio told investors last year it anticipated capital expenditure staying at around $2 billion per year for the next three years, adding that the correlation between exploration spending and discovery rates ceased in around 2005 as finding new, high-quality deposits is proving harder when the best reserves have been depleted.
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    Oil and Gas

    Saudi flows swing west once more

    In the first two months of the year, in the aftermath of the OPEC production cut, Middle East producers have chosen to keep Asian customers well supplied, by swinging their exports east of the Suez. This is illustrated in our ClipperData below, which shows January loadings bound for Asia from Saudi Arabia and Iraq were nearly 800,000 bpd higher than October's reference level, while flows heading west of Suez to North America were up just 50,000 bpd.

    This has flipped in March, however, with loadings bound for North America rising nearly 800,000 bpd versus October's benchmark, while loadings bound for Asia are down nearly 300,000 bpd. We have said before that China is such a big market participant that it 'makes the weather' - dictating global flows - and it appears to be doing so again.

    China's demand for Saudi and Iraqi crude was primarily the driver behind the spike in crude loadings to Asia in January; its waning appetite in March has given way to Middle East loadings swinging west once more.

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    Early boost to Libya oil production

    Libya’s Crude Production Rises to 699k B/D: State Oil Company

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    Chinese independent refiners' crude oil imports set to slow on quota issues

    Chinese independent refiners' crude oil imports set to slow on quota issues

    Crude imports by China's independent refiners are expected to slow down in the coming months as several refiners have used up most of their allocation from the first round of import quotas and will need to wait until June for the second round before resuming purchases.

    Independent refiners need government-allotted quotas to import crude oil. A total of 45.64 million mt of quotas were allocated to 19 independent refineries in the first round in January.

    The refiners have submitted applications for a second batch of quotas, but the government is only expected to allocate fresh quotas in June leaving the refiners with the option of either reducing throughput or buying barrels from the domestic spot market, market sources said.

    China's independent refineries imported a total of 60 million mt (1.2 million b/d) of crude oil in 2016, according to S&P Global Platts estimates.

    This represented 16% of China's total imports of 381 million mt in 2016.

    The quota allotted to each refiner in the first round was based on the volume the refiner had imported in the first 10 months of 2016.

    This resulted in some refiners getting sufficient quotas in the first round to sustain themselves for the entire year, but refiners that imported a relatively small volume in the first 10 months of 2016 are suffering from a quota shortage, especially if they raised runs this year.

    The refiners in this category include Shandong-based Chambroad Petrochemical, Wonfull Petrochemical and Haiyou Petrochemical.


    Chambroad, Wonfull and Haiyou were awarded import quotas of 780,000 mt, 1.67 million mt, and 430,000 mt respectively in the first round. The volume is significantly below their annual ceiling quota of 3.31 million mt, 4.16 million mt and 3.2 million mt, respectively.

    The ceiling quota is set by the National Development and Reform Commission and sets the maximum volume a refiner can import in a given year. The actual quota is allotted by the Ministry of Commerce and cannot exceed the ceiling quota.

    "If we don't get the new quota by the end of this month, we will have to lower our production," a source with Chambroad Petrochemical said, adding that the company had heard that the new round was unlikely before the end of June.

    Chambroad Petrochemical would have imported a total of 593,000 mt crudes over the first three months of the year, leaving 187,000 mt of quota available, below its typical monthly consumption of around 250,000 mt.

    "We hesitate when booking cargoes for April and May arrivals as we are not sure whether we have enough quota to bring them in," the source with Chambroad said.

    Wonfull was expected to receive a total 1.5 million mt of imported crude oil by the end of April, leaving only around 170,000 mt quota available for May delivery, a refinery source with the company said.

    "It is time to book May delivery cargoes. Without additional quotas, we will have trouble maintaining our throughput at 300,000 mt/month," the source said.

    Haiyou faces less of an issue -- the refinery has fixed to import around 269,000 mt of crude oil in Q1, leaving it with 161,000 mt of quota available for the rest of the year -- but it may apply for additional quota in order to have more flexibility.

    China's independent refining sector has lifted utilization rates this year. In January and February, the Shandong-based independent refineries operated their plants at between 58% and 61%, up from 53%-54% a year ago, according to Beijing-based energy information provider JYD.

    The refiners will either need to lower throughput or buy barrels from the domestic spot market if the new allocations are not issued on time, market sources said.
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    Far East Russian crude oil premiums hit record lows as EFS, margins take toll

    Far East Russian crude premiums are being weighed down by a narrow Brent- Dubai spread, faltering middle distillate product margins and an expected drop in Chinese end-user demand, resulting in cash differentials for Sakhalin Blend, Sokol and ESPO Blend hitting fresh lows Monday.

    Latest market talk in Asia indicated that Sakhalin Energy could have sold a total of five 730,000-barrel cargoes of light sweet Sakhalin Blend crude for loading in the second half of May and H1 June to end-users in South Korea, China and Japan, as well as an unidentified trading company.

    The Russian producer was said to have received price differentials of between parity and a premium of around 8 cents/b to Platts front-month Dubai crude oil assessments on a CFR North Asia basis for the cargoes.

    S&P Global Platts assessed Sakhalin Blend crude at a premium of 25 cents/b to Platts front-month Dubai on a CFR North Asia basis Monday, the lowest on record for the light sweet crude.

    Other benchmark Far East Russian export grades have also succumbed to downside pressure in the May trading cycle, with premiums for ESPO Blend and Sokol crude loading in May hitting record lows.

    Platts assessed the second-month ESPO Blend crude at a premium of $1.80/b to Dubai Monday, the lowest since September 25, 2015, when it was assessed at a $1.60/b premium, Platts data showed.

    Russia's Rosneft kicked off the new trading cycle for ESPO on a bearish note last week, with market talk indicating it could have awarded its latest tender, offering two cargoes for loading over May 9-15 and May 22-27, at premiums of between $1.70/b and $2/b.

    Trade sources said Surgutneftegaz could have awarded its tender offering three cargoes for loading over April 30-May 5, May 3-8 and May 5-10 at premiums in the range of $1.50-$1.80/b to Dubai on an FOB Kozmino basis.

    In comparison, most of the April-loading ESPO crude cargoes received premiums in the mid-$2s/b in the previous trading cycle.

    Meanwhile, Sokol was assessed Monday at a premium of $1.40/b to the average of Mean of Platts first-line Dubai and Oman assessments in May, the grade's lowest cash differential on record.

    Platts took into consideration several deals heard in the spot market, including ExxonMobil's latest tender results, which indicated that the oil major could have sold a 700,000-barrel cargo each for loading over May 15-17 and May 25-27 to Shell and a Japanese company at premiums of $1.70-$1.80/b to Platts Dubai on a CFR North Asia basis.


    The narrow Brent/Dubai Exchange of Futures for Swaps spread -- a key indicator of ICE Brent's premium to benchmark cash Dubai -- has not been kind to the Far East Russian crude complex to date this year, market participants said.

    One Singapore-based crude trader said the EFS spread of less than $2/b would keep the Dubai-linked Far East Russian grades less price competitive against several Asia Pacific, European and West African grades linked to the European benchmark.

    "What used to be more than $2/b [spread last year] is barely mid-$1s/b this year ... Dubai [-linked grades are looking] very expensive because of that," said a Singapore-based sweet crude trader.

    The second-month EFS has averaged $1.42/b to date in March, the lowest since August 2015, when it averaged 79 cents/b, Platts data showed.

    The latest downtrend in refining margins has also worked against Far East Russian crude suppliers in recent weeks, traders said.

    "It's double, triple whammy really ... narrow EFS is bad enough but weak margins and [North Asia's] maintenance season [are also weighing on the premiums]," said a North Asian sweet and sour crude trader.

    Platts data showed the second-month jet fuel/kerosene to Dubai crude swap crack has averaged $11.34/b to date this month, the lowest since August 2016, when it averaged $11/b.


    Premiums for ESPO Blend crude have plunged as demand from baseload buyers in China dissipated for May-loading cargoes due to turnarounds, while China's independent refiners used up most of their government-allotted crude import quotas, Asian traders said.

    Crude imports by the independent refiners were expected to slow down as several have used up most of their allocation from the first round of import quotas. These refiners will need to wait until June for the second batch of quotas to be allocated by the government before they can resume purchasing, market sources said.

    A total 45.64 million mt of quota allocations were issued to 19 independent refineries in the first round in January. An allocation was based on the volume the refiner had imported in the first 10 months of 2016.

    This resulted in some refiners getting sufficient allocation in the first round this year to cover their entire year's requirements and some that had imported a relatively small volume in those 10 months facing a shortfall, especially if they have raised runs this year.

    Meanwhile, turnarounds in China are ramping up from March, with substantially more maintenance expected this year than in the same period last year, according to Platts Oil Analytics.

    About 550,000 b/d of primary distillation capacity will go offline in March, rising to almost 1 million b/d in April and 750,000 b/d in May. In comparison, a maximum 550,000 b/d was offline for turnarounds over March to May last year.

    "Chinese [buyers] are the first tier market for ESPO... without demand from China, ESPO's premiums will fall," said another Singapore-based crude trader.
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    Indonesia police say Interpol issues red notices for three Sinopec executives

    Indonesian police said on Tuesday Interpol has issued red notices, the closest to an international arrest warrant, for three Chinese executives suspected of fraud linked to a more than $800 million Sinopec oil terminal development in Indonesia.

    China Petroleum and Chemical Corp, or Sinopec, is the second major Chinese state oil firm in less than three years to find staff facing allegations of corruption in Indonesia, where the resources sector is riddled with graft and legal and contractual uncertainty.

    "The three red notices have been published for those wanted people," said National Police spokesman Boy Rafli Amar.

    Indonesian authorities filed a request for Interpol assistance on Feb. 21 regarding the three executives, suspects in the alleged embezzlement of an undisclosed sum of money from the West Point Terminal project, Amar said. He identified the three as West Point Terminal finance director Zhang Jun, chief executive Feng Zhigang and chairman Ye Zhijun.

    A Sinopec spokesman declined to comment. Reuters has not yet been able to find telephone numbers or email addresses for the three executives, so has been unable to contact them for comment.

    Interpol's General Secretariat press office said in an emailed response to questions on the matter that it did not "comment on specific cases or individuals except in special circumstances".

    A red notice is Interpol's highest alert and is a request to locate and provisionally arrest an individual pending extradition. It is not an international arrest warrant as Interpol cannot compel any member country to arrest an individual who is the subject of a red notice.

    Indonesia, an archipelago of some 250 million people rich in resources, is routinely ranked by watchdog Transparency International as one of the world's most corrupt countries.

    Former Indonesian energy minister Jero Wacik is serving an eight-year prison term for involvement in extortion and kickbacks worth about $840,000.


    Defrizal Djamaris, a lawyer representing West Point Terminal's 5-percent stakeholder, PT Mas Capital Trust (MCT), said MCT reported suspicions of fraud on the project to local police in 2015.

    The red notices were issued because the three executives had left the country and "not cooperated" with local police investigations, Djamaris said. The police's Amar did not confirm this.

    The West Point Terminal was touted to be Southeast Asia's largest and was initially expected to be operational by mid-2016, but has faced a series of setbacks including a lawsuit filed by Indonesian shareholders in November.

    The project in Indonesia's Batam free trade zone to the south of Singapore is 95-percent owned by Sinopec Kantons Holdings, a subsidiary of Sinopec.

    Sinopec Kantons bought into the project in January 2012, aiming to develop a 2.6 million-tonne storage facility worth more than $800 million.

    The project was delayed by several years due to slow demand for tank space, Reuters reported. An official at Indonesia's energy ministry said the downstream operations permit for the West Point Terminal expired in late 2014.

    Sinopec's only other Indonesian asset is an 18-percent stake in Chevron's deep water project, bought in 2010.

    Sinopec Kantons, which is one of Sinopec's smallest subsidiaries, was not immediately available for comment.
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    Chevron's $1 Billion Sale of China Oil Fields Stalls

    Chevron Corp.’s sale of its stakes in Chinese offshore oil fields operated by state-owned CNOOC Ltd. has stalled, people with knowledge of the matter said.

    Bids that Chevron received for its interests in three fields in China’s Bohai Bay didn’t meet its expectations, according to the people. Chevron had aimed to sell the assets for as much as $1 billion, the people said, asking not to be identified discussing private information.

    The U.S. oil and gas explorer is considering keeping the Bohai Bay holdings for now, the people said. The assets had drawn interest from Chinese suitors including AAG Energy Holdings Ltd., Brightoil Petroleum Holdings Ltd.and Shanghai-traded Meidu Energy Corp., according to the people.

    Oil majors such as Royal Dutch Shell Plc and BP Plc have been looking to shed overseas assets to focus on their home markets. Chevron, based in San Ramon, California, has said it wants to raise as much as $10 billion from asset sales this year and it agreed in December to sell Asian geothermal assets to Ayala Corp. Shell is considering a sale of its stake in a Malaysian liquefied natural gas export plant, people familiar with the matter said last year.

    Chevron owns a 24.5 percent working interest in the QHD32-6 field, as well as a 16.2 percent each in the Bozhong 25-1 and Bozhong 19-4 fields, according to its website. CNOOC holds the remaining stake in each field and is the operator.

    There’s still a chance a buyer could emerge for the assets, the people said. Representatives for Chevron and Brightoil declined to comment. A representative for Meidu said he couldn’t immediately comment, while AAG didn’t respond to an email and phone calls seeking comment.
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    India targets national LNG auto fuel norms in fiscal year 2017-18

    The Indian government has in-principle cleared the decks for LNG to be used as an auto fuel, with draft norms for its application in road vehicles to be ready in the new fiscal year from April, officials told S&P Global Platts on Monday.

    As the industry awaits detailed guidelines and the timing for the official implementation of the decision, India's plan to push toward LNG comes at a time when many countries are assessing an array of options to not only reduce transportation costs but also curb emissions as part of their commitment to tackle global warming.

    The standards for LNG as a transportation fuel will be developed in consultation with the ministries of highways, shipping, and the environment, the officials said, adding that the basic norms for a national auto fuel LNG policy would be ready after internal consultations among the ministries conclude.

    CNG pumps like diesel and gasoline retail stations would be a reality in the near future, an official said.

    Analysts view the move to introduce LNG as an auto fuel as positive not only for road transportation but also for the LNG bunkering sector. 


    Prime Minister Narendra Modi's government has already provided a thrust to the use of LNG as a marine fuel on India's inland waterways as well as in coastal shipping.

    Most LNG has no detectable sulfur, and LNG-fueled vessels' emission of particles and nitrogen oxide are considerably lower than those of vessels using other marine fuels.

    The use of LNG as a bunker fuel is projected to cut fuel costs to run ships in India's inland waterway system by a fifth, while its use is also likely to reduce carbon dioxide emissions by 20-25% and nitrogen/sulfur oxide emissions by 90%, according to a shipping ministry note last year.

    The government's LNG bunkering plans include a switch from diesel to LNG in existing barges and the introduction of new LNG-fueled barges in the main waterways on the Ganges, a trans-boundary river that flows through India and Bangladesh.

    The Indian government will also provide a 20% subsidy for the construction of LNG barges at Haldia, Sahibganj, Patna and Ghazipur on the main national waterways over the Ganges.

    Petronet LNG is working in collaboration with state-owned Inland Waterways Authority of India, the regulator for shipping and navigation for domestic inland waterways, to design, construct and operate LNG unloading, storage, bunkering and reloading facilities.

    The waterways in which LNG barges are being targeted over the next two years have the potential to transport 17.5 million mt of cargo by 2020, according to the shipping ministry.

    However, some industry sources believe that LNG bunkering will not manifest itself in any very big way in the short to medium terms.

    "LNG bunkering is already taking place in India but right now it is minuscule. At Kochi, a handful of vessels have been fueled with LNG while making voyages from Asia to the West," one source said, adding that the high infrastructure costs associated with the development of LNG bunkering facilities still continue to act as an impediment to its widespread use.

    The increased use of LNG for bunkering will not only depend on regulation but also how the shipping industry perceives LNG, another source said.

    LNG's popularity in shipping would depend on pricing and its viability compared with other options such as scrubbers with heavy fuel oil, marine gasoil and 0.5% sulfur fuel oils, he said.
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    Petrobras debt, operational metrics improve despite profit miss

    Petróleo Brasileiro SA cut debt by 20 percent and had positive free cash flow for the seventh straight quarter during the fourth quarter, in a further sign of recovery at Brazil's state-controlled oil company in spite of a quarterly profit miss.

    Net income at Petrobras (PETR4.SA) came in at 2.510 billion reais ($812 million) last quarter, reversing a loss of 16.458 billion reais in the July-to-September period. Drastic cost-cutting and higher well productivity helped offset weaker revenue trends, the main culprit behind the profit miss.

    The average consensus estimates of analysts compiled by Thomson Reuters forecast a profit of 3.703 billion reais in the fourth quarter. Net debt fell a bigger-than-expected 20 percent to 314.120 billion reais, helped by a stronger currency and sliding borrowing costs in Latin America's largest economy.

    The results underscore Chief Executive Officer Pedro Parente's success in cleaning up a balance sheet with unrealistically priced investments and scaling back the largest debt burden among the world's major oil companies.

    Free cash flow, the money left for holders of bonds and shares after all operating and financial expenses are paid, reached 11.953 billion reais, down 27 percent from the third quarter but in line with most estimates. Free cash flow generation is key for Petrobras's goal to reduce debt.

    "We had some good results in the quarter, but the job is far from done, the company's debt is still too high," Parente told reporters at an event to discuss results. "Happily, there are very encouraging operational numbers here."

    Chief Financial Officer Ivan Monteiro said at the event that both credit costs and access to financing have improved since Parente took the helm of Petrobras last May. Both elements are key to speed up a reduction in the company's debt metrics in coming months, he added.

    The cost of insuring against a Petrobras bond default for five years PETR5YUSAC=R, a contract commonly known as credit default swap, has dropped about two-thirds in the past 11 months, to 334 basis points.

    Management will further discuss results on Wednesday in a conference call with investors.


    Parente, however, faces several market and operational challenges that include oil price nearing their lowest in a decade, a corruption scandal highlighting governance flaws, and losses incurred over many years because of government-mandated fuel subsidies and money-losing investments.

    This month's ruling by state audit court TCU allowing Petrobras to resume asset sales should propel cash generation and translate into lower capital debt and fundraising needs, both executives said. Petrobras has a goal of about $19 billion in divestitures and new partnerships by December 2018.

    Still, Petrobras will forgo dividend payouts and worker bonuses linked to profit related to last year, until the company's debt and cash positions improve further, Parente said. The company lost a net 14.824 billion reais for the full year.

    "We'd love to resume payouts as soon possible, though," he said at the event.

    A slump in global commodity prices led common American depositary receipts of Petrobras (PBR.N) down 3.9 percent to $8.81 on Tuesday in New York, extending their decline this year to 12.7 percent.


    Net revenue was largely flat from the third quarter, totaling 70.489 billion reais, below consensus estimates of 74.762 billion reais.

    Even as Petrobras had to raise wages above inflation for a collective bargaining agreement, costs fell more than expected in the wake of smaller charges related to a worker retirement program and a 77 percent decline in asset impairments.

    Capital spending surprisingly rose 15 percent last quarter, bucking the 9 percent decline forecast by analysts. Petrobras revised total capital spending planned for the 2017-2021 period to $74.5 billion from $74.1 billion previously.

    Steps to grow output in some offshore fields, sell non-essential assets and keep expenses in check helped drive operational earnings higher, executives said at the event.

    Adjusted earnings before interest, taxes, depreciation and amortization, a gauge of operational profit known as adjusted EBITDA, reached 24.788 billion reais, beating an estimate of 19.707 billion reais.

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    API crude inventories rise greater than expected 4.5 mln bbls

    U.S. crude oil inventories climbed by 4.5 million barrels in the week to March 17 to 533.6 million barrels, the American Petroleum Institute (API) said late on Tuesday.

    "The American Petroleum Institutes' crude inventories stuck the knife into crude overnight, coming in at a 4.5 million barrel increase against an expected increase of 2.8 million barrels," said Jeffrey Halley, senior market analyst at futures brokerage OANDA in Singapore.

    "If the API stuck the knife in, tonight's EIA Crude Inventory figures may twist it. A blowout above the 2.1 million barrel increase expected, may well torpedo oil below the waterline," he added.

    Official U.S. Energy Information Administration (EIA) oil storage data is due on Wednesday.

    The bloated storage comes as U.S. oil production has risen over 8 percent since mid-2016 to more than 9.1 million barrels per day (bpd), levels comparable to late 2014, when the oil market slump started.

    Rising production in the United States and elsewhere, and bloated inventories, are undermining efforts led by the Organization of the Petroleum Exporting Countries (OPEC) to cut output and prop up prices.

    "OPEC's market intervention has not yet resulted in significant visible inventory draw-downs, and the financial markets have lost patience," U.S. bank Jefferies said on Wednesday in a note to clients, although it added that the cutbacks would likely start to show by the second half of the year if OPEC extends its production cuts beyond June.
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    Big Oil’s Plan to Buy Into the Shale Boom

    Exxon Mobil Corp., Royal Dutch Shell Plc and Chevron Corp., are jumping into American shale with gusto, planning to spend a combined $10 billion this year, up from next to nothing only a few years ago.

    The giants are gaining a foothold in West Texas with such projects as Bongo 76-43, a well which is being drilled 10,000 feet beneath the table-flat, sage-scented desert, and which then extends horizontally for a mile, blasting through rock to capture light crude from the sprawling Permian Basin.

    While the first chapter of the U.S. shale revolution belonged to wildcatters such as Harold Hamm and the late Aubrey McClendon, who parlayed borrowed money into billions, Bongo 76-43 is financed by Shell.

    If the big boys are successful, they’ll scramble the U.S. energy business, boost American oil production, keep prices low, and steal influence from big producers, such as Saudi Arabia. And even with their enviable balance sheets, the majors have been as relentless in transforming shale drilling into a more economical operation as the pioneering wildcatters before them.

    “We’ve turned shale drilling from art into science,” Cindy Taff, Shell’s vice president of unconventional wells, said on a recent visit to Bongo 76-43, about 100 miles (160 kilometers) west of Midland, Texas, capital of the Permian.

    Bongo 76-43, named after an African antelope, is an example of a leaner, faster industry nicknamed “Shale 2.0” after the 2014 oil-price crash. Traditionally, oil companies drilled one well per pad—the flat area they clear to put in the rig. At Bongo 76-43, Shell is drilling five wells in a single pad for the first time, each about 20 feet apart. That saves money otherwise spent moving rigs from site to site. Shell said it’s now able to drill 16 wells with a single rig every year, up from six in 2013.

    With multiple wells on the same pad, a single fracking crew can work several weeks consecutively without having to travel from one pad to other. At Bongo 76-43, Shell is using three times more sand and fluids to break up the shale, a process called fracking, than it did four years ago. The company said it spends about $5.5 million per well today in the Permian, down nearly 60 percent from 2013.

    “We’re literally down to measuring efficiency in minutes, rather than hours or days,” said Bryan Boyles, Bongo 76-43’s manager.

    Independent companies are watching the big three’s arrival with ambivalence. Exxon, Shell, and Chevron will be able to spend more than independents can for service contracts and prime drilling acreage. But if the majors pursue acquisition deals, as they’ve done before, the wildcatters stand to reap the benefits.

    Exxon invested big in shale in 2010 when it bought XTO Energy Inc. in a deal valued at $41 billion. For years, however, the major companies spent little on shale, instead focusing on their traditional turf: multibillion-dollar engineering marvels in the middle of nowhere that took years to build. The wells that Big Oil drilled were mostly in deep water, where a single hole could cost $100 million, rather than shale wells that can be set up for as little as $5 million each.

    The machinery used to fracture shale formations inside the Delaware Basin pumps water, sand, and chemicals into the holes already drilled at a Royal Dutch Shell hydraulic fracking site near Mentone, Texas, on Thursday, March 2, 2017.
    Photographer: Matthew Busch/Bloomberg

    All that changed after oil prices crashed in 2014. Big companies were forced to cut costs and focus on projects that delivered cash quickly and could easily be sped up or slowed down. Shale was the solution.

    “The arrival of Big Oil is very significant for shale,” said Deborah Byers, U.S. energy leader at consultant Ernst & Young in Houston. “It marries a great geological resource with a very strong balance sheet.”

    The big three have all hatched ambitious catch-up strategies. Shell plans to spend about $2.5 billion a year, or about one-tenth of its total spending—a bet that’s bigger than those of some pure-play shale companies such as Hamm’s Continental Resources Inc.

    “The majors arrived late,” said Greg Guidry, who runs Shell’s shale business. “We want to be as nimble as the independents but levering the capabilities of a major.”

    Chevron said it estimates its shale output will increase as much as 30 percent per year for the next decade, with production expanding to 500,000 barrels a day by 2020, from about 100,000 now. “We can see production above 700,000 barrels a day within a decade,” Chevron Chief Executive Officer John Watson told investors this month.

    Exxon said it plans to spend one-third of its drilling budget this year on shale, with a goal to lift output to nearly 800,000 barrels a day by 2025, up from less than 200,000 barrels now. The company doubled its Permian footprint with a $6.6 billion acquisition of properties from the billionaire Bass family. Darren Woods, Exxon’s new CEO, said shale isn’t “on a discovery mode, it’s in an extraction mode.”

    The price of oil is starting to reflect rising U.S. output. West Texas Intermediate, the national benchmark, this month dropped below $50 a barrel for the first time this year, down 10 percent from its 2017 peak.

    Big Oil’s dive into shale could weaken the hand of Saudi Arabia and other big exporters by raising U.S. output. Economically, the countries would have to contend with lower oil prices. Geopolitically, their share of the global energy market would fall, and the U.S. would depend less on foreign supplies.

    U.S. domestic production is likely to top 10 million barrels a day by December 2018, a level surpassed only twice, in October and November 1970, according to the U.S. Energy Information Administration.

    Some investors remain unconvinced. Shale, they argue, is a very different business for the big companies. Huge projects, their mainstays, require a big upfront investment before becoming cash cows for decades with relatively little spending. Shale, on the other hand, requires ongoing spending because output quickly falls after an initial burst.

    Guidry, head of Shell’s shale, said the company could make money in the Permian with oil at $40 a barrel, with new wells profitable at about $20 a barrel.

    A lesson of the oil-price crash was how important it was to keep cash on hand. The independents typically overspent, taking on debt to keep drilling, so when prices fell, they slowed their operations. The big three will experience no such pinch, said Bryan Sheffield, the billionaire third-generation oilman who heads Parsley Energy Inc.

    “Big Oil is cash-flow positive, so they can take a longer-term view,’’ Sheffield said. “You’re going to see them investing more in shale.”
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    Going Horizontal in the Permian: Ring Energy Triples CapEx for 2017

    9 X the investment per well to yield 15X the reserves

    With its 2016 reserves up 14% to 27.7 MMBOE from 24.4 MMBOE in 2015, consisting of about 90% oil, a small Midland, Texas-based oil company, Ring Energy (ticker: REI) has decided it’s time to go horizontal.

    Horizontal well pilot program finds success

    Ring anticipates spending about $70 million in 2017, primarily in the Permian basin. The company said it will drill 36 total wells in 2017. Most of these wells will be drilled in the Central Basin Platform of the Permian, where the company owns nearly 26,000 net acres. Ring has previously developed this acreage with vertical wells, with all but three of the 195 drilled wells having vertical designs. The company recently began horizontal development, though, and completed a three well pilot program testing horizontal wells in 2016.

    This pilot program was successful, and 22 of the 28 planned wells in the Central Basin Platform will be horizontals. The company estimates that although horizontal wells are almost nine times more expensive to drill than vertical wells, they produce fifteen times the net reserves.

    Grabbed Delaware basin assets for about $3,750 per acre

    Ring Energy also owns about 20,000 acres in the Delaware basin, a property that was acquired in mid-2015 for $75 million. Eight new wells will be drilled in 2017 in the Delaware, and 12 existing wells will be worked over. Ring is currently exclusively using vertical wells to develop this asset, though horizontal wells may be drilled in the future.
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    Marathon adds to Permian acreage with $700 million buy

    Marathon adds to Permian acreage with $700 million buy

    Marathon Oil Corp said on Tuesday it bought additional acreage in the Permian basin for about $700 million, the company's second purchase in less than two weeks as it focuses on higher-margin, lower-cost U.S. assets.

    The about 21,000 acres, situated in the Northern Delaware basin of New Mexico, was acquired from Black Mountain Oil & Gas and other private players, the company said.

    Marathon, which has said it would exit its Canadian oil sands business, bought up about 70,000 net surface acres in the oil-rich Permian basin for $1.1 billion earlier this month.

    Oil producers have made a beeline for the Permian basin as the region's sprawling pipeline network, abundant labour and supplies and warm winters that allow year-round work help companies make money at current crude prices.
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    Ferus plans small-scale British Columbia LNG facility to serve Yukon, NW Territories

    Ferus is in the early stages of developing a merchant LNG facility in British Columbia to supply natural gas for mining companies in Yukon and the Northwest Territories to replace diesel they use for operations and for power generation, a spokeswoman said Monday.

    A merchant LNG facility is a small-scale plant that is typically not owned by a utility and with a capacity of between 50,000 gallons/day (about 29,000 mt/year or 4.13 MMcf/d) and 500,000 gal/d.

    "Our proposed Fort Nelson LNG facility consists of two phases each of 300,000 gal/d with a targeted final investment decision in 12 to 18 months," the spokeswoman, Blaire Lancaster, said in an e-mail.

    Calgary-based Ferus has not yet started the regulatory process to build the facility, but the first phase is targeted for start up in 2020. The second phase is due for commission in 2022, Lancaster said.

    Last fall, Vancouver-based Casino Mining Corp. and Selwyn Chihong Mining signed a memorandum of understanding with Ferus for LNG supplies to their mine projects in Yukon and the NWT.

    Besides reducing greenhouse gas emissions by nearly 30%, the LNG to be supplied from North Nelson will have a delivered price of "just less than C$15/gigajoule ($11.22/GJ) and this is compared with a price of C$27.12/GJ for diesel," she said.

    The heat content for a gallon of LNG is 83,000 Btu, compared with 140,000 Btu for a gallon of diesel.

    Ferus will supply the gas after compression in either trucks or in rail cars, Lancaster said.

    In neighboring Alberta, where Ferus owns and operates a 50,000 gal/d merchant LNG at Elmworth, a second phase development is planned to be operational in 2018, she said.

    Output from the Elmworth facility is currently supplied to the oil and gas industry in Western Canada to displace diesel in drilling rigs and fracking operations and power generation in Yukon and the NWT, Lancaster said.


    In the US, Ferus-owned Maxville LNG is due to start by the summer a liquefaction facility at Jacksonville in Florida with a 1 million-gal storage tank and an LNG truck-loading system, she said.

    With a nameplate capacity of 200,000 gal/d, the project will have an output of 87,000 gal/d at the initial stage and will serve nearby island markets, Lancaster said.

    Another Ferus-owned subsidiary, Eagle LNG, is building a fuel depot dockside at Talleyrand on the St John's River in Florida. The terminal, which is due to be operational this summer, will have a 500,000gallon storage capacity for bunkering operations, she said.

    The Maxville liquefaction facility and Talleyrand have Crowley Maritime Corp as the anchor customers, Lancaster said.

    Crowley transports cargo from the US to Puerto Rico in its own vessels.

    Separately, a second liquefaction facility proposed by Eagle LNG is also planned at Jacksonville that is currently undergoing a Federal Energy Regulatory Commission process.

    "We filed the application on January 31 and anticipate completion of the project in 2019," Lancaster said.

    The proposed facility will have processing capacity of 1.5 million gal/d, with an on-site LNG storage of 12 million gallons and output from the project will be sold to the Caribbean to replace diesel that is used for power generation.
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    China nuclear cos take a step closer to joining forces

    China moved one step closer to merging two of its nuclear power developers, as the country drives through consolidation in many of its state-owned enterprises, including the railways, shipping, nonferrous metals, construction materials and steel sectors, China Daily reported.

    The Shanghai-listed units of China National Nuclear Corp, a holding company for reactor design and technology, and China Nuclear Engineering Corporation Group, a company that focuses on construction, said in regulatory filings on March 20 that a strategic reorganization of the two nuclear giants is underway.

    The units said the reorganization requires regulatory approval, but does not involve major assets of the listed companies and would not affect normal operations.

    Joseph Jacobelli, a senior analyst of Asian utilities and infrastructure at Bloomberg Intelligence, said the nuclear sector plays a significant role in the country's advanced manufacturing exports, and the merger means not only streamlining the SOEs, but also helping China's nuclear companies better export their technology to the global market.

    He said the combination would be a joint force with a better share of the international market.

    Jacobelli added that the plan is to boost internal efficiencies in the country's nuclear sector and external competitiveness.

    China suspended approving new nuclear power plants after Japan's Fukushima nuclear disaster in 2011. However, nuclear power generation in recent years, especially in the first two months of the year, continued to see sharp growth.

    Jacobelli said China's nuclear energy developers are believed to be commissioning many more reactors during the 13th Five-Year Plan (2016-20), because nuclear power is a key source of clean energy along with hydropower.

    Installed nuclear capacity more than doubled to 27.17 GW in the 12th Five-Year Plan (2011-15) and is expected to double again by 2020 to 58 GW.

    Being the world's fastest-growing nuclear market, China said it would further cut industrial overcapacity and introduce market-based reform, in an attempt to accelerate restructuring of the nation's bloated SOE sector.

    It also vowed to further expand its nuclear sector to reduce its reliance on coal and help achieve its climate-change commitments.

    China will develop nuclear power in a safe and highly efficient way, Premier Li Keqiang said in the Government Work Report delivered during the fifth session of the 12th National People's Congress on March 5.

    Wang Shoujun, former chairman of China Nuclear Engineering Corporation Group, has taken over as CNNC chairman, after former chairman Sun Qin stepped down on reaching retirement age last year.

    CNNC is principally engaged in the development, investment, construction, operation and management of nuclear power projects. It is also involved in the research of technology, for nuclear power operational safety and related technical services and the consultation business.
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    China calls on Brazil to take stricter safety measures on food shipments

    China on Tuesday called on Brazil to take stricter safety measures in its food shipments, as Brazilian officials scrambled to limit the fallout from a corruption scandal that led Beijing to suspend meat imports from its top supplier.

    China this week suspended imports of all Brazilian meat following a scandal in the South American country over the alleged bribery of health officials to allow the sale of tainted meat.

    "China is concerned by the quality problems of some meat products in Brazil," foreign ministry spokeswoman Hua Chunying told reporters.

    "We hope that the Brazilian side will conduct a thorough investigation of the case...and take more stringent measures to ensure safe and reliable food exports to China."

    She declined to comment on when the temporary ban on Brazilian meat imports might be lifted. That decision will be made by China's Administration of Quality Supervision, Inspection and Quarantine (AQSIQ).

    Senior Brazilian government officials spoke with AQSIQ's vice minister about the issue in a video conference on Tuesday, said a source briefed on the matter.

    The meeting was the highest level discussion yet between the two nations, underscoring the urgency with which Brazil and China want to avoid further disruption in trade.

    The source, who asked not to be named because of the sensitivity of the information, did not elaborate on the meeting.

    AQSIQ did not immediately respond to a request for comment.

    Brazil is the top supplier of beef to China, accounting for about 31 percent of its imports in the first half of last year. The second supplier, Australia, is still rebuilding its herd after drought and is not seen to be able to meet China's fast-growing demand.

    Other major producers, such as the United States and some smaller European markets, are banned from supplying to China due to bird flu outbreaks.
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    China approves fewer GMO crop imports, hampering trade: U.S. industry group

    China is approving fewer new biotech crops for import than before, hampering the launch of new products globally and hurting trade, an American industry group said on Tuesday.

    China does not permit the planting of any genetically modified varieties of staple food crops amid deep-seated consumer opposition. But it does allow the import of GMO crops, such as soybeans for use in its huge animal feed industry.

    The number of annual approvals has fallen to just one last year, down from three in previous years, according to China's agriculture ministry.

    "The trend is moving in the wrong direction in terms of the product being approved in the past few years," said Gao Yong, co-chairman of the agriculture group at the American Chamber of Commerce in China.

    Gao, who is also China president at global biotech giant Monsanto Co, told reporters he was not sure why there were fewer approvals.

    Chinese government officials were not immediately available for comment.

    The United States is the biggest producer of GMO crops and one of China's top suppliers of soybeans. It has long been a pioneer in technology aiming to protect crops against insects or allow them to resist herbicides.

    China has said it supports biotechnology to raise the efficiency of its agriculture sector and that it plans to commercialize new GMO varieties of corn and soybeans in coming years.

    But public acceptance of biotechnology is a key challenge for the future introduction of GM crops in China, and despite attempts by the government to persuade consumers of the safety of such foods, opinions remain highly polarized.

    In a paper on China's agricultural policy, the American Chamber of Commerce said the government and academics have helped to improve public understanding of biotech products.

    But Gao said the industry was "extremely disappointed" that China only approved one new biotech product for import in 2016, a Bayer CropScience Ltd soybean. Eight other products were seeking approval.

    There were also nine products waiting for approval for local field trials, the step prior to applying for a safety certificate and full import approval. One of those - a Monsanto soybean product - was approved, said Gao.

    Other products seeking China market access include GMO corn and cotton.

    Approvals of imported biotech products currently takes about six years in China, compared with up to three in other major markets, Gao said.

    Beijing has reduced the number of times its expert committee meets to review applications from three to "at least two". Decisions to approve the applications were only made once a year.
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    Base Metals

    China eyes 4.4 mil mt 2020 recycled copper, 9 mil mt aluminium output

    China is aiming to produce 4.4 million mt recycled copper and and 9 million mt of recycled aluminium by 2020, in line with the central government's goal of using more recycled resources to be eco-friendly, the Henan Provincial Nonferrous Metals Guild said in a report in its website Tuesday.

    Henan Provincial Nonferrous Metals Guild, a metals industry association, with over 100 member producers, advises the government on nonferrous metal industry policy, laws and does metal research.

    The 2020 output target is 44% and 57% higher than realized recycled copper and recycled aluminium output of 3.05 million mt and 5.75 million mt in 2015. The 2016 data is not yet available.

    The guild said China set output goals of 2.5 million mt for recycled lead and 2.1 million mt for recycled zinc by 2020, which is 67% and 53% more than realized output of 1.5 million mt and 1.37 million mt back in 2015.

    Figures from the guild showed that China set recycled nonferrous metals production goal of 18 million mt by 2020, up 54% from realized output of 11.67 million mt in 2015.

    The higher recycled nonferrous metals output is to keep in line with the the Ministry of Industry and Information Technology, Ministry of Commerce and Ministry of Science and Technology's guidance notes for speeding up growth in the mainland Chinese recycled resources sector, the guild said.

    China's is forecast to utilize recycled resources of 350 million mt by 2020, according to MIIT.

    The growing Chinese recycled metal sector has greatly eased the supply and demand imbalance in primary metal resources, helping the country set up a circular economy, cutting emissions and saving energy, according to MIIT.
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    Freeport Indonesia resumes copper concentrate production

    Freeport McMoRan Inc's Indonesian unit has resumed production of copper concentrate at its giant Grasbergmine, a spokesman told Reuters on Tuesday, ending a more than one-month stoppage.

    "We have begun to resume operations in stages," Freeport Indonesia spokesman Riza Pratama said, confirming that copper concentrate production had resumed on Tuesday.

    Freeport stopped producing copper concentrate on February 11 after Indonesia prevented it from exporting the material used to make refined copper, and its sole domestic buyer halted operations due to a strike.
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    Global copper market ends 2016 in 50,000 mt deficit: ICSG

    A 2.5% increase in apparent Chinese demand put the global refined copper market in a 50,000 mt deficit in 2016, according to preliminary data released Monday by the International Copper Study Group.

    Adjusting for changes in Chinese bonded stocks, the deficit narrowed to about 42,000 mt, the Lisbon-based research group said in a report, adding that December saw a small surplus of 20,000 mt.

    Global copper mine production last year grew an estimated 5%, or 1 million mt, to 20.15 million mt, with concentrate production increasing by 7% and solvent extraction-electrowinning (SX-EW) declining by 2%, according to ICSG data.

    The mine production increase was due mainly to a 38% increase (650,000 mt) increase in Peruvian concentrate output that benefited from new and expanded capacity brought online in the last two years, the ICSG said.

    Additional factors included a recovery in production levels in Canada, Indonesia and the US, and expanded capacity in Mexico, as well as supply disruptions from strikes, accidents or adverse weather conditions.

    "However, overall growth was partially offset by a 3.8% (220,000 mt) decline in production in Chile, the world's biggest copper mine producer, and a 4.5% decline in [the Democratic Republic of Congo], where output is being constrained by temporary production cuts," ICSG analysts said.

    On a regional basis, production rose by 6% in the Americas and 11.5% in Asia but declined by 3.5% in Africa while remaining essentially unchanged in Europe and Oceania, they added.

    World refined production is estimated to have increased by about 2.5% (530,000 mt) in 2016 to 23.40 million mt, with primary production (electrolytic and solvent extraction-electrowinning) increasing by 3% and secondary production from scrap declining by 2%.

    "The main contributor to growth in world refined production was China (increase of 6%, or 470,000 mt), followed by the United States and Japan, where production increased by 7% and 5%, respectively, and by Mexico (16%) where expanded SX-EW capacity contributed to refined production growth," according to the ICSG.

    "However, overall growth was partially offset by a 3% decline in Chile, the second world leading refined copper producer."

    Although primary electrolytic refined production increased by 4.5%, electrowinning production declined by 6.5% due to definitive/temporary closures of SX-EW mines, ICSG analysts said.

    Production in the DRC and Zambia also declined by an aggregated 11% mainly due to the impact of temporary production cuts.

    On a regional basis, refined output is estimated to have increased in the Americas (1%) and Asia (6%) while declining in Africa (10%) and in Europe (including Russia) (2%) and remaining essentially unchanged in Oceania.

    World apparent refined usage is estimated to have increased by around 2% (430,000 mt) in 2016 to just over 23.46 million mt, the ICSG said.

    "Growth was mainly due to an increase in Chinese apparent demand, as world usage excluding China is estimated to have increased by only 0.9%. Chinese apparent demand (excluding changes in unreported stocks) increased by around 2.5% based mainly on 6% growth in refined production as in fact net imports of refined copper declined by 7.5%," ICSG analysts said.

    Usage in the US and Japan, the second and third leading refined copper using countries, was down by 2% and 2.5% respectively.

    On a regional basis, usage is estimated to have increased by 3% in Asia (excluding China, Asia usage increased by 3%) and by 2% in Europe (by 1.5% in the European Union), while declining by 3% in the Americas, the ICSG said.
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    China Hongqiao: Auditor suspends work.

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    Emirates Global Aluminium plans IPO, banks pitch for role: sources

    Emirates Global Aluminium (EGA), one of the world's top five producers, has invited banks to pitch for a role in its planned initial public offering, sources told Reuters.

    The IPO could take place later this year, on either the Dubai or Abu Dhabi stock exchange, but the size of the offering has yet to be determined, the sources said.

    EGA was created in 2013 when state-owned companies Dubai Aluminium (Dubal) and Abu Dhabi's Emirates Aluminium (Emal) merged. Its enterprise value was put at $15 billion at the time of the merger.

    It is owned by Abu Dhabi state fund Mubadala Investment Co and Investment Corporation of Dubai (ICD). Mubadala, which recently merged with International Petroleum Investment Co, has been reviewing its investments in the wake of low oil prices and could see more changes in its strategy, banking sources said.

    A request for proposals on the IPO was sent to banks, and submissions were due last week, according to three sources familiar with the matter, who spoke on condition of anonymity as the information is not yet public.

    Emirates NBD ENBD.DU, National Bank of Abu Dhabi NBAD.AD, and a U.S. bank have pitched for the role, according to a banking source.

    EGA is working with banks to determine the valuation of the company and the size of the IPO, with a listing in the United Arab Emirates, either the Dubai Financial Market or the Abu Dhabi Securities Exchange, two other sources said.

    Mubadala's team is working on the offering, one of the two sources said.

    EGA, Mubadala, Emirates NBD and National Bank of Abu Dhabi declined to comment. ICD was not immediately available to comment.

    EGA, which supplies aluminum to 300 customers in more than 60 countries, reported last month a 10 percent rise in 2016 net profit to 2.1 billion dirhams ($572 million) despite a fall in revenue.
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    Steel, Iron Ore and Coal

    China Coal Energy Feb coal sales up 57.6pct on month

    China Coal Energy Co., Ltd, the listed arm of China National Coal Group, sold 10.45 million tonnes of commercial coal in February, rising 13.6% year on year and surging 57.6% month on month, the company said in its latest statement.

    Of the sales, 7.18 million tonnes were self-produced commercial coal, increasing 23.4% year on year and up 48.7% from January.

    The increased sales were partly attributed to increased demand from downstream utilities. Data showed that daily coal consumption of China's six major coastal power companies averaged 550,500 tonnes in February, up 40.7% from an average of 391,300 tonnes in corresponding period last year.

    In the first two months, the company sold 12.01 million tonnes of commercial coal, falling 10% from the year before.

    China Coal produced 6.34 million tonnes of commercial coal in February, up 4.4% year on year but down 8.1% from a month earlier.

    The production during January-February stood at 13.24 million tonnes, sliding 1.1% from the year prior.

    China's coal market began to gain upward momentum in mid-February, thanksto recovery of economy, low hydropower generation and relatively low coal output at mines after the Lunar New Year.

    Coal production has started to increase recently after the two parlimentary sessions ended in mid-March, and more mines in Yulin are getting back to production, said traders.

    On March 21, coal stocks at Qinhuangdao port stood at 4.75 million tonnes, up 10.9% from 4.29 million tonnes on March 10.

    China Coal expected its net profit to be 1.8 billion-2.2 billion yuan in 2016.
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    Daqin spring maintenance to start on April 6

    The routine spring maintenance to China's coal-dedicated Daqin rail line will start on April 6, beating market expectation for postponing to some later time, one source with the Taiyuan Railway Administration dislclosed to

    The maintenance will last 3-4 hours each morning for some 25 days.

    Total rail coal transport during the maintenance may decrease 16.6%, with daily transport likely to fall from 1.2 million tonnes to 1-1.05 million tonnes.

    The news may push utilities to make intensive coal buying in the days ahead of the maintenance, as their daily coal burn remained high above 640,000 tonnes.

    Days of use fell to below 10 at some coastal utilities, indicating urgent need to replenish inventories.

    After one-month rally, thermal coal prices showed signs of decline at northern China ports, as mines were gradually returning to normal production after the two parliamentary sessions.

    On March 20, the Fenwei CCI Thermal Index assessed domestic 5,500 Kcal/kg NAR coal traded at Qinhuangdao port at 692 yuan/t FOB with 17% VAT, stable day on day but up 20 yuan/t week on week.

    On the same day, the price of domestic 5,000 Kcal/kg NAR coal was assessed at 615 yuan/t, FOB basis with 17% VAT, falling 4 yuan/t from the previous day but up 14 yuan/t from a week ago.

    The rail authority arranged the spring maintenance to Daqin line in April, as it is a slack demand season when utility coal burn will be relatively low and coastal coal market will be little affected.
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    Indian power utilities' Apr 2016-Feb 2017 thermal coal imports fall 20% on year

    Indian power utilities imported 60.38 million mt of thermal coal over April 2016-February 2017, down almost 20% year on year, according to data released by the Central Electricity Authority, seen by S&P Global Platts Tuesday.

    The April-February imports registered a growth of 10.8% month on month.

    Of the total quantity, 18.50 million mt was imported by 29 utilities for blending with domestic coal, while 41.88 million mt was imported by 11 utilities for power plants that use only imported coal.

    Fifteen utilities did not import any coal during the 11 months of the ongoing Indian fiscal year, while no data was available for one utility.

    Private sector power company Adani Power imported the largest volume of thermal coal during the 11-month period at around 14.5 million mt. Tata's Mundra Ultra Mega Power Project followed with around 9.9 million mt.

    On a monthly basis, February imports stood at 5.63 million mt, falling by around 16% year on year.

    The government plans to reduce the country's dependency on imported coal, to facilitate the consumption of the surplus fossil fuel produced by state-run miner Coal India Limited.

    CEA has not assigned any targets for power utilities for the current fiscal year. However, they can procure imported coal if they find it to be more economical than using domestic coal, especially for coastal power plants.

    Power utilities had imported around 80.47 million mt of thermal coal in fiscal 2015-2016 (April-March), down 11.8% year on year, and below the target of 84 million mt.
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    Iron Ore Dives As Chinese Banks Move To Cool Housing

    Iron ore futures traded in China tumbled 4.4% to 665.5 per tonne on Wednesday after worries arise that local governments will move to cool down the bubbling property market.

    Data released last weekend showed that home price gains had spread to more cities in February and more cities were escalating tightening measures. The most extreme was the capital city of Beijing, which now asks second-home buyers to stump up 60% down payments.

    State-owned Xinhua News Agency reported today that the Beijing city government has asked 16 banks to raise their down payment ratio and halt the approval of 25-year mortgage loans. Even first-home buyers can’t get much of a mortgage loan discount any more. The local government now requires a maximum 5% discount to the benchmark mortgage rates.

    Meanwhile, China’s interbank lending rates are on the rise. See my earlier blog “Liquidity Squeeze? China’s Interbank Rates At 2014 High”

    If local Chinese governments can successfully cool down the property market, it will mean less construction, less steel and less demand for iron ore.

    To be sure, there are also global concerns that U.S. President Donald Trump is now wasting his political capital bickering over Obamacare instead of implementing his $1 trillion infrastructure spending proposal and tax cut reforms.

    Iron ore miners and steel companies tumbled today. Australia’s Fortescue Metals (FMG.Australia) slipped 5.5%, BHP Billiton (BHP) dropped 3.1%, and Rio Tinto (RIO) fell 2.8%. Korea’s POSCO (005490.Korea) tumbled 4.3%

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    Hebei Steel gets approval for $6 billion upgrade project

    Hebei Steel Group, China's biggest steelmaker by output, has won approval for a 42.4 billion yuan ($6.2 billion) project that will reduce its steel capacity by nearly 2 million tons and upgrade old technology, Hebei province's economic planner said.

    China, the world's biggest producer and consumer of steel, is prioritizing supply-side reform in its steel and coal sectors, seeking to tackle pollution and cut an output capacity glut that has weighed on both domestic and global prices.

    The Development and Reform Commission (DRC) of Hebei, China's largest steelmaking province, approved the project for four units of the Hebei Steel Group in a March 16 document that was published by China Steel News on March 19.

    An official surnamed Wei from the project registration office of the DRC confirmed the document's content to Reuters.

    The four entities, including two units of listed subsidiary Hesteel Co Ltd and Xuansteel Co, have vowed to phase out 9.15 million tons of iron capacity and 9.34 million tons of steel capacity, according to the document.

    "To cut excess capacity, upgrade technology and clean up the air for the coming Winter Olympic Games, Hebei Steel Group has planned to upgrade and relocate Xuansteel," Wei told Reuters, declining to give his full name.

    "Xuansteel will build new modernized plants in Laoting. After the new facilities pass assessments, a number of out-dated steel mills of Hebei Steel Group will be halted," Wei said.

    Xuansteel will build four new blast furnaces and five new converters with total iron and steel capacity of 7.32 million tons and 7.47 million tons, respectively.

    Then, when the outdated steel mills are phased out, that will cut Hebei Steel's annual iron capacity by 1.8 million tons and drop its steel capacity by about 1.9 million tons.

    Laoting is a seaside county in the Tangshan city area in Hebei province.

    Hebei is home to 104 mills that account for nearly a quarter of China's total steel output. The province has pledged to cut steel and iron making capacity by 31.17 million tonnes by 2017 and by 49.13 million tons by 2020.

    China has launched a campaign to shut down substandard steel output in its war on pollution and industrial overcapacity. It is planning to close 100-150 million tons of annual steel production capacity over the 2016-2020 period.

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