About 15 million residents in southern China have been affected by the worst flooding in decades in parts of the region as abnormally intense rainfall has swept away buildings and ruined homes.
China’s economy now accounts for about 16% of the world’s output, up from around 9% ten years ago. So, what happens there matters hugely to the rest of us. If China pulls off an upside surprise to growth — as we believe it will — the rest of the world will enjoy stronger export growth, higher commodity prices, improved business confidence and brisker risk appetites for financial investors. Emerging currencies might also strengthen. The principal beneficiaries will be Asian economies.
In our view, the second half of the year will bring a vigorous upturn in the Chinese economy, powered by even more policy stimulus. Chinese leaders have strong political reasons to pull out all the stops to ensure high economic growth this year and next. Yes, it is true that they have signalled that they will not repeat the “flood-like” stimulus efforts in 2008-2009 that they now feel was excessive and created imbalances that they had to struggle with for years. But, even as they will carefully calibrate their measures, the net effect will be a substantial easing of credit policies. They will complement this with a range of other measures that will bring economic growth back to above 6% in 2021.
What is the political incentive for stepping up stimulus?
There are several political reasons why China’s leaders will want an impressively strong economy in the next year or so.
First, Communist parties love anniversaries and the Chinese Communist Party (CCP) is no exception. In July next year, the CCP will mark the 100th anniversary of its founding. Apart from ending a hundred years of humiliation by foreign powers when it took over, the CCP’s claim to legitimacy is that it has delivered unimaginably rapid transformation of the economic lives of ordinary Chinese. Since moving away from its ideological roots, vibrant growth and economic security underpin its claim to be legitimate rulers of China. Thus, to pull off a successful celebration, President Xi Jinping and his colleagues must be able to show off a humming economy that is carrying the Chinese people to ever greater heights of economic well-being.
Second, and related to this, is the goal that the CCP set for itself — to double the size of China’s economy in the decade to 2020. The contraction in economic growth in the first quarter makes that goal almost impossible to achieve but Xi would want to have that in the bag by July next year. The CCP had also promised that by the end this year, it would have brought China to the level of a “moderately prosperous society”. Without a strong spurt of growth in the second half, analysts believe that China would not be able to deliver on some of the specific targets embedded in this promise.
Third, the Chinese leaders know that they are now in a tussle for global influence with the US and its allies. It would serve their geopolitical interests well to demonstrate to the world how superior the Chinese system is to the US and the West. How better to show that than to pull off a miraculous economic recovery just as their rivals are floundering?
Finally, the Chinese leaders are only too aware that the rebound so far has been partial and still somewhat fragile. In particular, there is a risk that a lot of folks who lost their jobs may not be easily re-employed unless consumer demand comes back faster than it is. There is also a huge number of fresh graduates who are struggling to find a job. A weak job market could pose not just an embarrassment but possibly a political threat. Note that while production data such as industrial production has recovered nicely, the data does not show an equivalent bounce-back in demand. A considerable gap has opened up between industrial production growth, which is now back to a normal range of about 4% to 6%, and retail sales, which still fell 2.8% in May. Another indicator of demand — fixed asset investment — shrank 6.3% in May. Policymakers know that they must juice up growth by a bit more to ensure that demand gets back on track.
What are the main policy thrusts?
The latest meeting of the State Council (China’s Cabinet) suggested that policymakers plan to strengthen the credit impulse. Banks have been instructed to give up RMB1.5 trillion (RM907 billion) or about 75% of their retained earnings this year and pass them on in the form of cheaper borrowing costs to the real economy. China’s central bank also announced that it would cut the reserve requirement ratio so as to release more liquidity into the banking system. It also hinted that it wanted a lot more lending to flow to small businesses.
Another tool Chinese leaders will use to boost the economy is to ease up on restrictions placed on the real estate sector, which would then become a stronger driver of domestic demand in the second half of this year. Premier Li Keqiang, in delivering this year’s Government Work Report, repeated the mantra “houses are for living in, not for speculation”, but he omitted a crucial reference to stabilising property prices and market expectations, which the Central Economic Work Conference had emphasised last December. That suggested that China’s leaders feel it is appropriate now to unleash the real estate market. In recent months, policymakers have subtly allowed provincial and city governments more leeway to fine-tune their housing policies. Real estate has multiple spillovers to upstream sectors such as materials (for example, steel) and downstream sectors such as financial services. As home prices start to rise again, the wealth effect will turn positive and support consumer spending as well.
What is also encouraging is that China is using supply-side reforms to power up growth as well. After years of hesitation, they have started to move more energetically on liberalising the hukou laws, which restrict the rights of migrant workers in urban areas. By empowering these workers, China will see an underclass of around 280 million secure higher wages and be allowed to buy property in the smaller cities. Hukou reform itself could thus end up being a driver of growth. China’s leaders are also planning a big surge in spending on research and development in order to reduce reliance on an increasingly hostile America for technology. They are also implementing interesting initiatives on “new urbanisation” that would create gigantic urban clusters and “new infrastructure” comprising data centres, 5G networks and base stations, logistics infrastructure and ultra-high voltage electricity grids that will help expand the use of renewable energy.
Stimulus efforts already feeding into economy
The policymakers’ efforts are yielding good results. Our estimate of the credit impulse now clearly exceeds anything seen in the past 10 years. The growth in the outstanding stock of credit, as measured by aggregate social financing (a broad gauge of Chinese credit flows), accelerated to +12.5% year on year in May 20 — its quickest pace in two years — supported by robust bank lending, local government bond issuance and corporate bond issuance. The data also shows that the most-credit starved parts of the economy — the micro and small-sized enterprises — are gaining access to more loans. When these enterprises get cash, they tend to spend — hiring more workers and buying inputs, and so boosting the economy.
The credit impulse is a reliable lead indicator for the overall economy, its trend bodes well for a strong uptick in economic activity in the second half of the year.
Some forward-looking indicators suggest that the real estate sector is poised to boost economic growth. New home starts, which presage residential fixed asset investment, expanded for the first time this year while developers’ land purchases continued to rise in May, reaching their highest level this year. That indicates that some of the policy-driven increase in liquidity is finding its way into the property market.
Moreover, home prices rose at the fastest pace in seven months in May, with new-home prices in the 70 major cities up 0.49% and existing home prices rising 0.24%. The rebound was strongest in the four megacities including Beijing and Shanghai, but the pattern of price increases were broad-based across first, second and third-tier cities.
There is also a growing likelihood that investment will revive. The survey of purchasing managers shows the construction sector rebounding very strongly. Moreover, the strong trend in sales of excavators recently also reflects that the construction sector is already reviving. We envisage infrastructure investment, which accounts for roughly 30% of the total, to grow in the high single-digit range by the end of 2020.
Conclusion: Impact on the rest of Asia will be large and positive
We see a successful expansion of policy support resulting in the economy growing by 2% to 2.5% this year, higher than the World Bank’s estimate of 1% and then surging by more than 6% in 2021. Such a recovery will provide a good boost to the global economy and Asia.
First, Chinese imports account for about 10% of total world trade, so the demand for energy, primary commodities, intermediate goods and finished consumer and capital goods will grow. As Asian economies export a lot of commodities and intermediate goods to China, their exports will rise.
Second, China remains the single largest importer of raw materials. Its recovery will bolster the prices of oil, thermal coal, coking coal and base metals. That will help primary commodity exporters.
Third, a stronger Chinese economy will help improve business confidence while reducing one source of anxiety for companies — if at least the second largest economy in the world is on a solid trajectory, things might not be so bad.
Fourth, a vibrant Chinese economy should improve the risk appetites of global investors and raise their interest in investing in emerging market assets.
Fifth, as China’s economy regains traction, its companies are likely to resume outward investment. Since geopolitical tensions make it more difficult to invest in developed economies, they will probably look at emerging economies, especially those that are close neighbours.
Finally, once the Chinese economy is on a sound footing, the Chinese government will feel more confident in reviving its ambitious Belt and Road Initiative, channelling large amounts of Chinese capital into building infrastructure in developing countries, mostly in Asia.
In short, there is good reason to believe that China will pull off a better-than-expected economic recovery and that its Asian neighbours will be the principal beneficiaries.
Manu Bhaskaran is CEO of Centennial Asia Advisors
Saudi Arabia could enter into another oil price war as Nigeria and Angola refuse to conform to the production cuts agreed by the Organization of Petroleum Exporting Countries and its allies, the Wall Street Journal reported Wednesday.
The country's oil minister Prince Abdulaziz said at a June 18 OPEC virtual meeting that the kingdom will sell its oil at a discount to undercut Nigeria and Angola after they denied to make specific production cuts, according to the Journal.
"We know who your customers are," Abdulaziz is reported to have told the representatives of the two countries which count China and India as their biggest clients.
Why It Matters
Saudi Arabia last engaged with Russia in a price war in March as the two OPEC allies failed to find common footing on supply cuts, crashing oil prices to historic lows.
The OPEC+ countries, as OPEC and its allies are referred to, ultimately agreed to production cuts for three months in April, and further extended the cuts to July last month.
Brent oil futures traded nearly 0.76% higher at $42.35 a barrel at press time on Thursday. West Texas Intermediate crude oil futures were similarly up 0.68% at $40.09.
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Singapore — Asia's natural gas demand has picked up since the COVID-19 lockdowns in the first and second quarters of 2020, but the recovery is haphazard and LNG markets have struggled.
Countries that emerged early, like China, are now seeing gas demand saturate, while others like India are still seeing a rebound in LNG imports into June. But gas demand growth remains fragile through summer due to secondary outbreaks and economic damage.
**The S&P Global Platts JKM for August was assessed at $2.150/MMBtu on June 30, slightly above record low prices and down from over $5/MMBtu at the start of the year.
**Oil-linked prices for contracted LNG has fallen sharply end-March, converging with spot JKM prices, in line with crude prices falling to $20s/b. But the rebound in oil prices in May has seen spot LNG and oil-linked LNG prices diverge again.
**S&P Global Platts Analytics expects JKM and TTF to find support from a bullish rally in coming months on the back of emerging fundamentals including production cuts in the US and Asia.
**China imported 5.2 million mt of LNG in May, up 18% year on year and 2.7% higher from April, customs data showed. This was the strongest year-on-year growth since August 2019, and higher than the 7.6% growth recorded in May 2019. But June LNG arrivals are slowing as China's post-COVID-19 recovery peaks.
**India's April LNG imports were at its lowest in over three years. But in May it rebounded 22.4% month on month to 2.38 Bcm, official data showed, reflecting a gradual relaxation of lockdown measures. Its LNG imports are set to continue rising sharply in June as the recovery takes hold.
**Kogas' LNG sales in May dropped 24.1% from a year earlier to just 1.632 million mt, its third consecutive monthly decline and the biggest year-on-year decline in more than a decade since Platts started compiling such data in January 2010. May demand was down 27.9% from 2.263 million mt in April.
**South Korea's gas purchases by power generators in May declined 36% year on year, while sales to retail gas companies for households and businesses declined 13.3%. Low downstream sales means that inventories are stressed and June LNG arrivals into South Korea are on track to be even lower than May, declining to multi-month lows.
**Japan imported 4.6 million mt of LNG in May, down 18% year on year and 12% lesser than April, its lowest since mid-2009, official data showed. Japanese energy demand typically slumps in May due to the Golden Week holidays, but this year was far worse. June LNG arrivals into Japan are slightly better, but not a huge improvement as downstream demand remains challenged.
**Thailand imported 445,778 mt of LNG in May, down 35.7% from last year, and 29.1% lower than April, customs data showed. Platts Analytics said Thailand's total gas supply in April fell to its lowest since 2014, with declines in domestic production, pipeline and LNG imports reflecting a weaker economy and lower consumption. June LNG arrivals remain strong.
INFRASTRUCTURE (Supply and macroeconomic fundamentals)
**Malaysia, the world's fifth largest LNG exporter, is indicating supply cuts of about 20% to 25% from its terminals from peak January levels, in line with Petronas' strategy of optimizing supply to help the market rebalance. The supply cuts are likely to trend well into June and July.
**More than 40 US LNG cargoes scheduled for August loading were canceled by customers, taking the total number of US cargo cancellations to about 130 since April, according to Platts calculations. Several of these were cancelled by Asian offtakers, indicating oversupply challenges for summer 2020.
**Australia's Department of Industry, Innovation and Science said downward quantity tolerance triggered by buyers, delayed shipments and changes to maintenance schedules could reduce Australian LNG exports in the second half of 2020 marginally.
**Platts Analytics said liquefaction utilization in the US is expected to fall below 50% in the months ahead, compared with utilization out of Australia and Qatar, which are expected to remain above 80%.
**S&P Global Ratings expects a steeper decline in Asia Pacific's economic growth in 2020, forecasting a 1.3% contraction before growth of 6.9% in 2021, compared with its previous projection of 0.9% and 6.7%, respectively.
**GDP forecast for Asia Pacific for 2020 and 2021 is about $2.7 trillion lower than before the pandemic began, Ratings said. It expects permanent 2%-3% shrinkage of most economies by the end of 2023 compared with pre-COVID-19 trends.
**Early exiters from COVID-19 include China and South Korea, middle exiters include Japan, and late exiters are India and Indonesia. Economic conditions in Asia Pacific may not rebound until the second half of 2021 and the region's activity level may only reach close to pre-COVID-19 trend by 2023, Ratings said.
Caracas — Crude production by state-owned Venezuelan oil company PDVSA and its international partners almost halved during June to 280,000 b/d because of full storage capacity and the collapse in exports due to US sanctions, according to PDVSA technical reports seen by S&P Global Platts.
In May Venezuelan oil production was 550,000 b/d, according to the latest Platts survey of OPEC production.
This drop is the largest since 2002 when a strike by PDVSA employees caused much of the company's operations to grind to a halt.
The June plunge was most pronounced in the Orinoco Belt, the country's main oil reservoir, where production slumped by around two thirds in a single month to 90,000 b/d from 280,000 b/d in May.
In June, production from the western fields (Zulia and Trujillo states) was 30,000 b/d and 160,000 b/d from the eastern fields (Monagas state) was, according to technical reports.
Venezuela, with large hydrocarbon reserves, used to be one of the world's main oil producers and exporters, but its oil potential has been falling due to government expropriations, lack of investment and the deterioration of its oil infrastructure.
No production by JVs
PDVSA and its foreign partners have joint ventures in the four main blocks into which the Orinoco Belt is divided -- Carabobo, Ayacucho, Junin and Boyaca.
According to technical reports, in June average crude production from Carabobo was 30,000 b/d, Ayacucho produced 45,000 b/d, Junin 5,000 b/d and Boyaca 10,000 b/d.
As of June 30, the production of extra heavy crude oil by PDVSA's largest joint ventures with international partners in the Orinoco Belt had been completely halted.
According to the report, in the Carabobo block, the 105.000 b/d capacity Petrolera Sinovensa JV (PDVSA 60%, CNPC 40%) and the 120,000 b/d Petromonagas JV (PDVSA 60% Russian government-owned company 40%), produced nothing in June.
Also in the Ayacucho block the 190,000 b/d Petropiar JV (PDVSA 60% Chevron 40%) had shut down production completely as of June 30, the technical report said.
At Junin block, the 202,000 b/d Petrocedeno JV (PDVSA 60% Total/Equinor 40%) has also closed down the production of extra heavy oil.
PDVSA could not be immediately reached for comment and PDVSA's foreign partners are not authorized to speak to the press.
LONDON (Bloomberg) - OPEC slashed oil production to the lowest level since the Gulf War in 1991, as it escalated efforts to revive global markets just as a resurgence of the coronavirus is threatening demand again.
Saudi Arabia faithfully delivered the extra curbs promised in June, and the laggards, though still trailing in implementing the cuts, stepped up their performance, according to a Bloomberg survey. OPEC and its partners’ record output cuts since May have helped revive the oil market, but a recent surge of Covid-19 infections in countries including the U.S. is highlighting the fragility of the revival.
The Organization of Petroleum Exporting Countries cut production by 1.93 million barrels a day to 22.69 million a day last month, according to the survey. That’s the lowest since May 1991, though membership changes since then affect the comparison.
The survey is based on information from officials, ship-tracking data and estimates from consultants including Rystad Energy A/S, Rapidan Energy Group, JBC Energy GmbH and Kpler SAS.
The intervention by OPEC+, the coalition that spans the cartel plus outsiders such as Russia, has helped more than double benchmark Brent crude from the lows of April, when the virus outbreak is estimated to have taken out about a third of global demand. Prices were above $41 a barrel on Wednesday.
Yet the pullback in the group’s output to the lowest in almost three decades illustrates the scale of the sacrifice involved. OPEC+ pledged 9.7 million barrels a day of cuts at a meeting in April -- about 10% of global supplies -- and some of its Middle East members then promised to voluntarily cut even deeper in June.
Saudi Arabia, the group’s biggest member, cut back by 1.13 million barrels a day to 7.53 million in June, fully implementing its additional voluntary reduction. Fellow Persian Gulf exporters Kuwait and the United Arab Emirates met their OPEC-mandated targets, but fulfilled only a small part of the extra curbs.
Overall, OPEC delivered all of the reduction pledged in the April agreement, though rates of compliance vary significantly between members.
While Iraq, Nigeria and Angola are still lagging behind, their performances improved last month. Iraq implemented 70% of its quota, Nigeria 77% and Angola 83%. At a meeting in early June, the countries agreed to make up for earlier cheating by making extra curbs in the coming months.
Compliance from countries outside OPEC has been stronger than usual, as the scale of the demand collapse and risk of a renewed price decline encourage adherence. Russia pumped close to its target for a second month, and Kazakhstan was on track to hit its quota.
The slump in OPEC’s output also reflects the long-term decline in several members -- most notably Venezuela.
While exempt from having to make deliberate cuts, Caracas is nonetheless seeing output dwindle as U.S. sanctions and prolonged economic recession slam its petroleum industry. It pumped just 340,000 barrels a day last month, the survey showed.
US floating LNG export project struggling to lock in buyers
Delfin LNG, the company behind the floating export development in the Gulf of Mexico, is struggling to secure offtake deals for its 13 mtpa project.
The unit of Delfin Midstream has last year sought and won a 1-year extension from US FERC to build the project’s onshore facilities.
It also pushed its financial investment decision for one year to 2020 and entered into pre-FEED deals for newbuild FLNG vessel with units of Samsung Heavy and Black & Veatch.
In a new move, Delfin LNG is seeking from FERC an additional 1-year extension to build the project’s onshore faclities.
According to a FERC notice, the company is having difficulties to attract LNG buyers citing “global coronavirus pandemic, U.S. trade disputes with China, and the drop in global oil prices”.
Delfin said it continues to negotiate LNG offtake deals and requests an extension of time until September 28 next year to complete construction of the onshore facilities and place them into service.
The onshore facilities include metering, compression, and piping facilities located in Cameron Parish, Louisiana.
These will transport and deliver natural gas to Delfin LNG’s deepwater port in federal waters offshore Louisiana.
Delfin initially partnered with Golar LNG for the development but the latter backed out of the FLNG project last year.
The US company plans to install up to four FLNG vessels that could produce up to 13 mtpa of LNG or 1.7 billion cubic feet per day of natural gas.
It previously said that LNG production should start in the second half of 2023.
Delfin is also developing the 8 mtpa Avocet LNG project with slots for two additional FLNG vessels.
A coronavirus-driven collapse in fuel demand is threatening Australia's oil refining industry, just as supply chain disruptions wrought by the pandemic have focused the government on the need to shore up fuel security.
Already dependent on imports for more than half its fuel needs after the closure of four refineries since 2003, industry and analysts say at least one of the country's four remaining refineries could close unless the government steps in.
Pandemic lockdowns decimated demand for gasoline, jet fuel, diesel and shipping fuel, hitting refiners that only recently enjoyed a return to profitability after years in the red.
"When the global margin environment weakens and gets tougher, the threat of closure definitely increases," said Sushant Gupta, head of Asia Pacific downstream oil and gas research at consultants Wood Mackenzie.
Seeing an existential threat facing the four refineries - owned by global majors BP Plc and Exxon Mobil Corp, and Australian-listed Ampol Ltd and Viva Energy - the government stepped in last month.
As well as seeking proposals to build fuel storage, Energy Minister Angus Taylor launched talks with the industry on how to shore up the refineries, aiming to "protect Australia's national sovereignty".
"I'm sure the government is very keen to make sure the country doesn't lose the majority of them," said Mark Samter, an analyst at MST Marquee.
It's already tough for Australia's four ageing plants to compete with Asia's newer, mega refineries.
Combined, the four refineries have a capacity of just 464,000 barrels per day (bpd), compared with Asia's biggest refinery, the 1.24 million bpd Jamnagar plant in India.
There is also some uncertainty over the majors' long-term commitment to refining in Australia, with Exxon having put long-held local oil and gas assets up for sale and BP's energy priorities shifting.
Graphic: Refining net profits on all products: 2002-03 to 2017-18
Critically, the pandemic has smashed earnings just as the refiners face decisions on whether to invest a total of A$1 billion ($690 million) to upgrade their plants to produce gasoline with lower sulphur content from 2027. Work would have to begin in 2022 to meet the deadline.
"Whilst we support the investment and support the outcomes it will deliver, it is an investment that's not going to deliver any extra return for the refinery, therefore it's a difficult one to make, and it's obviously a sizable one," Viva Energy Chief Executive Scott Wyatt told Reuters.
Exxon Mobil Australia Chairman Nathan Fay noted the "challenges" in competing with Asia's big refiners at an energy conference last month.
Options to help the industry could include direct subsidies for plant upgrades, a government-underwritten minimum refining margin, or fuel excise relief, Samter said.
Viva's Wyatt said the government could also provide incentives for refiners to produce higher quality gasoline earlier than 2027.
Another option could be to skip the expensive refinery upgrades and instead run at lower rates locally while importing higher quality fuel as there will likely be a global gasoline surplus, said WoodMac's Gupta.
If any refineries close, the most likely would be Exxon's Altona facility in Victoria state, the oldest, and Ampol's Lytton plant in Queensland, which has already been shut for extended maintenance, said Samter.
Ampol sees no problem with relying on imports.
"We remain of the view that there is no issue with security of supply, and we have very secure supply chains," Ampol Chief Executive Matt Halliday told Reuters.
"But we also understand that the government is looking at supply security through a slightly different lens at the moment."
($1 = 1.4499 Australian dollars)
NEW YORK (Reuters) – U.S. pipeline company Energy Transfer (N:) has taken the rare step of invoking force majeure – normally used in times of war or natural disaster – to prevent oil firms from walking far from a proposed expansion of the controversial Dakota Access pipeline, in accordance with two sources familiar with the situation.
Energy Transfer desires to nearly double the size of the line, plus some companies that signed up say it is no more necessary because of the sharp fall in U.S. oil production following the coronavirus pandemic. North Dakota is one of the costliest spots in the United States to make crude, and its particular output has dropped by about one-third from a year ago, more than other oil-producing states.
DAPL is the largest pipeline running out of North Dakota’s Bakken shale basin. It has capacity to ship 570,000 barrels each day (bpd) of crude to its endpoint in Illinois. Users say an expansion to 1.1 million bpd is unlikely to be filled since the state’s production is not anticipated to rebound soon.
“Honestly, DAPL is not needed,” said one customer who committed to space on the expanded line, speaking on condition of anonymity. “They’re trying to build a house that all these people signed up for. Even if there’s no longer a need for the house, you can’t really walk away from it. Would I like to get out? Yes, for sure.”
Energy Transfer, however, has invoked force majeure as it could not have the permits with a certain date, according to one shipper on the line and yet another familiar with the declaration. That buys the business more time to obtain regulatory approvals and prevents customers from walking far from their commitments.
The company declined to comment on the force majeure. Energy Transfer spokeswoman Lisa Coleman reiterated previous company statements that it has received enough interest to boost the pipeline’s capacity.
Pipelines are often built after companies find customers prepared to commit to shipping oil. That helps pipeline builders to line up financing for such projects, which take years to complete. Contracts to use future pipeline space usually allow customers to walk away from those agreements when substantial delays occur.
In an April filing with Illinois regulators, Energy Transfer said that “not one shipper has sought to withdraw from an existing agreement” despite the oil downturn and that demand exceeds DAPL’s current capacity. The company said in legal filings that the downturn is temporary.
North Dakota’s production has dropped by 450,000 bpd, down from a peak of not quite 1.5 million bpd reached a year ago, according to the Energy Information Administration’s data.
The expanded line is expected to enter service in late 2021.
At least a half-dozen U.S. oil pipeline projects have been put on hold indefinitely up to now this year, in accordance with U.S. Energy Department data. U.S. production has dropped from a record 12.9 million bpd in late 2019 to roughly 11 million bpd.
OPPOSITION IN ILLINOIS
DAPL drew 1000s of people to North Dakota in 2016 in support of Native American tribes and environmental groups protesting the line’s initial construction. It eventually started in mid-2017 after months of delays.
To expand the line, Energy Transfer needs approval from regulators in North Dakota, South Dakota, Iowa and Illinois.
The first three have said yes, but environmental groups brought numerous legal challenges in Illinois starting a year ago. They argued the application form was improperly filed and that an expansion increases the danger of large-scale leaks. The challenges may force the company to resubmit its application.
“They’re in force majeure right now because they did not get the permits,” one source with direct familiarity with the matter said.
An administrative law judge in Illinois could issue findings on the legal dispute as early as this month, though there is no timeline for that report. Once those findings are released, and both Energy Transfer and the opposition respond, the Illinois Commerce Commission will vote on perhaps the expansion can go forward. That vote is not scheduled.
Even if producers wished to fight Energy Transfer’s declaration of force majeure, they could be hesitant to initiate legal action because of the time and cost involved, said Ted Borrego, who has practiced oil and gas law for over 45 years and teaches at the University of Houston Law Center.
“Rarely will you see a shipper trying to bail out of a contract,” that he said.
DAPL clients such as Hess Corp (N:) and refiner Marathon Petroleum (N:), which invested in the original DAPL project, declined to comment specifically on any contractual agreements on DAPL or on the proposed expansion. Continental Resources (N:), another large Bakken producer, did not react to requests for comment.
“Hess believes that DAPL has and will continue to be a critical piece of U.S. energy infrastructure, which allows for transportation of crude oil into expanded domestic markets in the U.S. and abroad,” company spokesman Rob Young said.
Bakken crude producers generally break even on drilling at a high price of about $46.50 a barrel, in accordance with Deutsche Bank (DE:) analysts, greater than other parts of the country. The U.S. crude oil benchmark () is trading just below $40, after averaging just $17.50 in April and $33.70 in May.
While output in North Dakota has rebounded somewhat from its fall in May to significantly less than 1 million bpd, production is anticipated to remain less than its peak.
“At the moment I don’t think the demand is there from shippers for more DAPL, given the decline in Bakken output,” said Sandy Fielden, director of oil and services and products research at Morningstar in Austin, Texas.
Exxon Mobil Corp. warned Thursday of steep losses in its refining and oil-and-gas production businesses during the second quarter, signaling that the company is likely to report a second straight quarterly loss later this month.
Exxon said in a regulatory filing that lower oil and gas prices are poised to drag down its production profits by an estimated $2.5 billion to $3.1 billion compared with the first quarter, when that unit of the company reported $536 million in profits.
Exxon expects that tighter margins on turning oil into fuels such as gasoline and diesel and higher costs associated with moving crude around North America will reduce refining profits by some $800 million to $1.2 billion from the prior quarter. The company posted a $611 million first-quarter loss in its refining business.
Oil-and-gas companies are feeling continuing pressure as the coronavirus pandemic leads millions of people to avoid flying and driving, crimping world-wide demand for fossil fuels.
Analysts have said they expect Exxon to report a loss of about $2.3 billion during the second quarter, according to FactSet. It is set to disclose earnings July 31.
Exxon posted a $610 million loss during the first quarter, its first in three decades.
The company's shares were up nearly 2% in Thursday morning trading.
Second-quarter earnings are likely to be brutal across the U.S. oil patch because global oil demand fell by some 18% during the period, according to the International Energy Agency, as people around the world stayed home to keep the new coronavirus from spreading. Oil and gas prices plunged along with consumption.
U.S. benchmark oil prices averaged about $29 a barrel during the second quarter, compared with around $46 a barrel during the first quarter, according to FactSet. Demand was so low and storage so full in April that prices briefly fell below zero for the first time on record.
Benchmark natural gas prices averaged about $1.77 per million British thermal units during the second quarter, compared with around $1.87 during the first quarter, FactSet data show.
Exxon said earlier this year that it planned to cut 2020 capital spending by $10 billion, or 30%, and planned to trim second-quarter production by some 400,000 barrels a day.
Tesla’s stock (TSLA) has turned into a runaway beast, and what gets it back into the cage is a giant unknown right now.
Shares of the electric automaker have surged 183% year-to-date, with 80% of that eye-popping gain coming in the past three months, according to Yahoo Finance Premium data. The push higher comes amid optimism on Tesla’s future business in China but also the pace of recovery in the U.S. as production at the company’s Fremont, Calif. facility gets back up and running post COVID-19.
At this point, noted Tesla bull Dan Ives of Wedbush Securities, Tesla stands alone in the electric auto market. “It’s Tesla’s world, and everyone else is paying rent,” said Ives on Yahoo Finance’s The First Trade.
Tesla’s surprisingly solid delivery numbers out Thursday underscore the point.
The company said it delivered 90,650 cars in the second quarter, trouncing Wall Street estimates for 72,000. In the first quarter, Tesla delivered 88,496 cars. Importantly, Tesla pointed out it has successfully ramped production back up at Fremont to pre-COVID closure levels.
Tesla shares rose as much as 9% on the news.
This photo shows vehicles in the parking lot of the Tesla electric car plant Wednesday, May 13, 2020, in Fremont, Calif. The Alameda County Public Health Department announced on Twitter late Tuesday that the Fremont, California, plant will be able to go beyond basic operations this week and start making vehicles Monday, as long as it delivers on worker safety precautions that it agreed to. (AP Photo/Ben Margot) More
Moments before the delivery numbers, Ives reiterated his $1,250 price target on Tesla’s stock —a Wall Street high. He has a bull case of $2,000 on Tesla, second to only Cathy Wood at Ark Investments in terms of super bullish outlooks for the company.
Ives said he was impressed by the delivery numbers and remains upbeat on Tesla’s long-term outlook.
“I think if you look at these delivery numbers, it speaks to what I believe is on the horizon. I think you’re looking at what’s going to be a million delivered vehicles in the next two to three years,” he said. “But the big piece is China. The China market in our opinion is worth $300 to $400 per share.”
Keppel Data Centres, Chevron, Pan-United, and Surbana Jurong, with the support of Singapore’s National Research Foundation, have signed a memorandum of understanding (MOU) to jointly develop the first end-to-end decarbonisation process and carbon capture system in Singapore.
Keppel said on Thursday that this collaboration was aimed at accelerating the development of energy-efficient carbon capture, utilisation, and sequestration (CCUS) system that can lead to a low-carbon economy and potential commercial developments for Singapore.
Carbon emissions make up 97 per cent of Singapore’s total greenhouse gas emissions. Under the Paris Agreement, Singapore has pledged to reduce its emissions intensity by 36 per cent from 2005 levels by 2030.
Also, the Singapore Government announced its long-term strategy to halve emissions from its 2030 peak and achieve net-zero emissions as soon as viable in the second half of the century.
To this end, the partnership will develop CCUS technologies which will be implemented in Singapore’s key industries such as energy, chemicals, and construction.
Under the MOU, the four companies will jointly explore, identify, and develop mature carbon capture technologies, coupled with novel technologies that utilise cryogens, membranes, and hydrogen.
When commercially viable, the CCUS technologies are expected to help reduce carbon intensity across the industry sectors and help Singapore halve emissions from its peak to 33 million tonnes of CO2 emissions (MtCO2e) by 2050.
On behalf of Keppel, Thomas Pang said: “Keppel is committed to sustainable development and combatting climate change.
“This MOU augments the different efforts that the Group has taken to reduce the carbon footprint of data centre operations, including exploring floating data centres as well as LNG and hydrogen infrastructure for power generation.
“The CCUS technologies are scalable and can potentially be implemented in Keppel Data Centre’s local and overseas operations, as well as other parts of the Keppel Group, thus contributing to the circular economy and advancing climate action”.
Law Tat Win, Chevron Singapore country chairman, stated: “Chevron shares the society’s concerns about climate change. We are committed to advancing technologies and forming strategic partnerships in our efforts to deliver reliable, and ever cleaner energy. I am excited that Chevron will be working with like-minded partners in Singapore to progress polymeric membrane research for carbon capture solutions across various applications and industries”.
Wong Heang Fine, Group CEO of Surbana Jurong added: “Together with our partners, we are excited about exploring new solutions in carbon capture, use and storage that can scale and be commercially deployed to help us get to a net-zero future”.
Low Teck Seng, CEO of the National Research Foundation, said: “While Singapore, like the world, is still dependent on fossil fuels for our energy needs, technologies that enable efficient CCUS would help mitigate our emissions greatly. CCUS also presents opportunities for converting carbon dioxide into novel chemicals, materials and fuels, offering potential in growing new industries”.
Carbon capture and hydrogen are all the rage
Carbon capture, or CCS, is slowly becoming a go-to technology for solving the carbon emissions problem and it is often followed with solutions for hydrogen production.
On Wednesday, oil major Equinor announced it was leading a project to develop one of the UK’s – and the world’s – first at-scale facilities to produce hydrogen from natural gas in combination with carbon capture and storage.
The company already has such projects in Norway like the Sleipner CCS project and is also developing the Northern Lights offshore CCS project in cooperation with Shell and Total.
Earlier this month, Danish offshore drilling contractor Maersk Drilling is joining a new CO2 storage consortium formed by INEOS Oil & Gas Denmark and Wintershall Dea.
The consortium is maturing one of the most progressed carbon capture and storage projects inside Danish jurisdiction and targets the development of CO2 storage capacity offshore Denmark based on reusing discontinued offshore oil and gas fields for permanent CO2 storage.
Also, Sweden’s largest test facility for carbon dioxide capture has begun operation at Preem’s refinery in Lysekil late last month.
It is worth noting that Keppel, Mitsubishi Heavy announced a study for the use of hydrogen to power data centres in Singapore.
The world’s first 3D-printed vegan steak is here and it could be hitting restaurants soon
Just when you thought 2020 couldn’t possibly get any more bizarre, a company has brought out the world’s first 3D-printed vegan steak. Redefine Meat, an Israeli company based in Rehovot, has unveiled an ‘Alt-Steak’ which replicates the texture, flavour and appearance of real-life meat – all thanks to 3D-printing technology.
The new Alt-Steak is made out of soy and pea proteins, coconut fat and sunflower oil, along with natural colours and flavours.
Designed to recreate the muscle structure of beef, the faux steak is high in protein and – being plant-based – has no cholesterol.
It seems no details have been spared with this creation either. Working with leading butchers, chefs, food technologists and taste experts, Redefine Meat has digitally mapped more than 70 different sensory factors – including the cut’s texture, juiciness, fat distribution, feel in the mouth and more.
The company is expected to start testing the alternative beef cuts in high-end restaurants in Israel as earlier as next month – with plans to roll it out in European restaurants next year and at supermarkets in 2022.
The people behind the Alt-Steak are saying the invention could mean big things for the food industry, too.
Eshchar Ben-Shitrit, CEO and co-founder of Redefine Meat, told The Media Line: ‘This is the world’s first 3D-printed steak that can really pass the test of what is a steak.
‘We’ve reached a milestone because we can print steaks on a large scale and the taste and texture are amazing.
Inflation expectations continue to creep up; the stronger than anticipated consumer confidence numbers out of the U.S. are somewhat of a validation, suggests Omar Ayales, editor of Gold Charts R Us — and a speaker at the MoneyShow Canada Virtual Event on July 8-9.
Broadly speaking assets are rising, particularly those that tend to rise in an inflationary environment. And they’re poised to rise further.
Consider not only have central banks across the globe coordinated to implement the loosest monetary policy probably ever, but central governments have also opened the spigot of fiscal stimulus.
Gold pierced $1800 for the first time in 8 years. The bullish pattern on gold formed by the April resistance and the March uptrend (ascending triangle) suggests a continued rise to test the all-time highs near $1900 is now likely.
Be sure to own some resources or resource companies. It could be their turn to shine. Resources continue to catch bids. The lockdown unwind continues fueling risk appetite.
We’re trading resources through an overweight position in BHP Billiton (BHP). Based in Australia, BHP is a huge conglomerate producing and selling natural resources around the world.
BHP has a solid dividend yield that allows us to keep it thru weakness. Technically, BHP has formed a tight but clear support above $48. If BHP holds, we could then see it rise further to possibly the top side of the up-channel near $56.
Crude oil is starting to form a top near $40. However, it has strong support at $35. As long as crude holds above this level, it’ll look poised to rise further.
Crude oil has been the runt of the litter. It hasn’t risen as boldly as copper or as impressively. But it’s bound to catch up, as it historically has done. Demand for crude should only rise from current levels.
I also have exposure to energy with Exxon Mobil (XOM). It’s under pressure and could be showing renewed downside. However, XOM is a giant.
And if there’s someone who will benefit from many energy companies going bust, it’s the bigger XOM-like companies. Plus, XOM offers a great dividend yield making it easier to keep during weakness.
Vancouver, British Columbia--(Newsfile Corp. - July 2, 2020) - Vendetta Mining Corp. (TSXV: VTT) ("Vendetta" or the "Company") is pleased to announce that it has closed the final tranche of its previously announced Private Placement with a total of 6,326,138 units being issued at a price of $0.04 per Unit for gross proceeds of $253,045.52. Each Unit comprises of one common share and one common share purchase warrant exercisable for three years at a price of $0.06. Together with the proceeds from the first tranche, the Company issued 20,288,188 units for a total of $811,527.52. All securities issued and issuable under the Private Placement are subject to a four-month hold period from the date of closing of the Private Placement, in addition to any other restrictions under applicable law.
Net proceeds from the financing will be used to advance the development of the Companies 100% owned Pegmont Lead-Zinc project and general working capital.
Total commissions of $5,040 were paid in association with the proceeds of the final tranche of the private placement.
Resignation and Appointment of CFO
The Company also announces Jasmine Lau has resigned her position as Chief Financial Officer ("CFO"), Ms. Lau is an associate of Red Fern Consulting Ltd. ("Red Fern"), which provides the Company with accounting services. The Company has appointed Mr. Alastair Brownlow, a senior consultant with Red Fern, to the position of CFO, effective June 23, 2020.
Mr. Brownlow is a Chartered Professional Accountant and a U.S. Certified Public Accountant (Washington) specializing in resource-focused accounting and finance. Mr. Brownlow has accumulated extensive experience working as CFO for TSX:V listed exploration, development and production companies. Mr. Brownlow previously occupied the position of Audit Associate at Davidson & Co. LLP and Assistant Manager at Baker Tilly (BVI) Ltd. Mr. Brownlow has a Bachelor of Business Administration degree with first class honours from Simon Fraser University.
Michael Williams, CEO commented: "We would like to thank Ms. Lau for her contribution to the Company over the last two and a half years and wish her well with her future endeavours. I would like to welcome Mr. Brownlow to the Company and thank he and Ms. Lau for ensuring a smooth transition."
About Vendetta Mining Corp.
Vendetta Mining Corp. is a Canadian junior exploration company engaged in acquiring, exploring, and developing mineral properties with an emphasis on lead and zinc. It is currently focused on advancing the Pegmont Lead Zinc project in Australia. Additional information on the Company can be found at www.vendettaminingcorp.com.
SHANGHAI, Jul 2 (SMM) – The long-anticipated new standards for high-grade copper scrap and aluminium scrap metal—due to come into force on July 1–has yet to be implemented at China’s customs, as the procedure for importing material under these standards has not been finalised, SMM learned from several traders, fabricators and smelters.
That leaves the country’s imports of such materials under the restriction of the quota scheme, which would remain in place until the end of 2020.
China plans to cut imports of solid waste to zero by the end of this year, but published the new standards for high-grade copper scrap and aluminium scrap metal in January to indicate what material will still be allowed into the country after then.
High-grade copper and aluminium scrap meeting the new standards will be classed as a resource rather than waste.
SMM learned from several large fabricators and smelters who have been importing aluminium scrap for a long time that import quotas for aluminium scrap for the third quarter will be barely changed with those for the second quarter.
Houston — The US steel industry is hopeful the entry of the US-Mexico-Canada Agreement will help bolster demand for steel throughout North America, steel industry groups said July 1 as the new trilateral trade agreement took effect.
"For US producers of steel, Canada and Mexico are our two most important export markets, together accounting for nearly 90% of all US steel mill exports," Kevin Dempsey, interim CEO of the American Iron and Steel Institute, said in a statement. "By incentivizing the use of North American steel through its enhanced rules of origin, this agreement will help keep manufacturing supply chains strong for goods made primarily from steel."
The US, Canada and Mexico reached first reached a deal to replace the former North American Free Trade Agreement in November 2018. US steelmakers have been supportive of the updated trade deal as it aims to boost the use of North American steel in automotive production, in addition to strengthening rules of origin and regional value content requirements.
"The USMCA contains significant improvements and modernized approaches to rules of origin, automotive content requirements and labor protections for North American Workers," Philip Bell, president of the Steel Manufacturers Association, said in a statement. "These and other provisions represent the culmination of efforts to update the 25-year-old NAFTA and will help create jobs and expand market access for steel producers in the region."
The most substantial change in the USMCA is new rules of origin requirements, which stipulate that 75% of an automobile to be manufactured in North America to qualify for duty-free treatment, up from 62.5% in the original NAFTA.
The regional value content rules will be phased in over a period of several years depending on the model of car. The US Trade Representatives office has accepted some proposals from companies that could give them an additional two years to reach full compliance.
The USMCA also includes a new labor value content rule, which requires companies to pay a percentage of their workforce $16 per hour to qualify for a reduced tariff rate.
Along with the provisions seen as being beneficial to North American steel demand, the USMCA also includes provisions to promote increased cooperation, transparency and information sharing between the three North American governments to address steel circumvention and evasion of trade remedy orders.
"This increased cooperation strengthens our industry's competitiveness in the face of the continuing challenges to the industry from global steel excess capacity and weakening demand, especially as the industry works to recover from the COVID-19 pandemic," North America steel groups -- including the AISI, SMA, Canadian Steel Producers Association, Canacero, the Committee on Pipe and Tube Imports and the Specialty Steel Industry of North America -- said in a joint statement.
Australia-based infrastructure and rail company, John Holland, has secured a A$130 million ($90 million) contract with Fortescue Metals Group to construct 143 km of railway tracks and signalling at its Eliwana iron ore project in the Pilbara of Western Australia.
The track construction works will connect the new Eliwana Rail Line to the existing Fortescue Hamersley Line to Port Hedland, with the engagement seeing John Holland manage a newly upgraded rail welding facility in Port Hedland as well as the design, construct and integration of the signalling and train control systems.
The company will also procure and manufacture the signalling system wayside equipment from its Canning Vale fabrication warehouse and complete all civil and electrical installations of the wayside signalling systems on site, it said.
In line with this contract award and others in Western Australia, John Holland says it is looking to recruit 400 new workers across its Western Australian projects.
It currently employs more than 5,000 people across its construction, tunnelling, rail and building projects in Australia, and strengthened its rail, engineering and construction capacity after it acquired RCR O’Donnell Griffin’s rail business – saving 400 jobs in the process.
John Holland Operations Manager, Rob Hennessy, said the Western Australia team was very proud to bring this solution to market for Fortescue.
“It has been a goal of the WA rail team to bid for more integrated projects in the WA market and we are pleased to partner with Fortescue and play a significant part in a world-class iron ore project,” he said.
“John Holland is a major Australian employer and continues to honour its 70-year history of contribution to the local community.”
Once completed, the $1.275 billion Eliwana project, which also includes the building of a 30 Mt/y ore processing facility, will maintain Fortescue’s overall production rate of a minimum 170 Mt/y over 20 years, the company said.
Raising their voices in unison against the Centre’s move to open the coal sector to private players, coal workers of the Singareni Collieries Company Limited (SCCL) struck work in all the 46 coal mines spanning across seven districts, virtually paralysing coal production on Thursday.
This was in response to the 72-hour strike called by the five central trade unions of the Coal India Limited (CIL) in protest against the move to auction the coal blocks for commercial mining.
Barring the essential staff, more than 83% of the SCCL’s 36,674 workers on rolls abstained from work in a total of 27 underground coal mines and 19 opencast projects (OCPs) spread in Bhadradri-Kothagudem, Khammam, Jayashankar Bhupalpally, Peddapalli, Mancherial and Kumram Bheem Asifabad districts.
The local unions affiliated to the five central unions — CITU, AITUC, INTUC, BMS and HMS besides the ruling TRS affiliated the Telangana Boggu Gani Karmika Sangham (TBGKS) — participated in the strike.
In a rare show of collective strength, workers owing allegiance to the central trade unions including the RSS-backed BMS staged demonstrations in front of the SCCL’s head office in Kothagudem.
Various departments, including the company’s head office, witnessed thin attendance as about 50 % of the total 9,347 staff turned up for duty.
The strike came at a time when the SCCL renewed its attempts to ramp up coal production after suffering disruptions on account of the coronavirus forced 50-day layoff of its 22 underground mines last month.
The SCCL, the only State-owned coal mining company in south India, has set an ambitious target of 67.5 million tonnes for 2020-2021.
The three-day strike is expected to hit coal production to the tune of about 3 lakh tonnes in the SCCL’s mines.
The output in all the 11 coal mining areas together stood at 18,260 tonnes in the first shift on Thursday. The Yellendu, Bhupalpalli, Ramagundam-I and Bellampalli areas recorded zero coal production.
Meanwhile, in a statement general secretary of the CITU affiliated Singareni Collieries Employees Union (SCEU) M. Narasimha Rao hit out at the Centre for “aggressively pursuing” privatization move to allow big private firms to exploit the precious mineral wealth of coal at the cost of the public sector coal companies and jeopardizing the interests of lakhs of coal workers across the country.
He demanded that the TRS affiliated TBGKS should reconsider its decision to confine itself to one-day strike instead of three-days.
It is imperative for all the trade unions to make the three-day strike a success to exert pressure on the Centre to drop its move to privatise coal blocks of the public sector coal companies, including the SCCL, he said.
In June this year, the purchasing managers' index (PMI) of the steel sector in China’s Hebei Province increased to 51.5 percent, down 2.4 percentage points month on month, as announced by the Hebei Province Metallurgical Industry Association (MIA). In the given month, the trend of the steel sector PMI in Hebei Province was in line with that for the whole of China, which decreased by 1.6 percentage points month on month to 49.3 percent.
In June, the overall new order index for Hebei Province’s steel sector stood at 52.9 percent, down 2.9 percentage points compared to the previous month. In the given month, demand for construction steel (rebar, wire rod) from downstream users slackened amid rainy weather and floods.
The new export order index stood at 40.8 percent, down 1.5 percentage points amid slack demand due to the Covid-19 pandemic, which has caused the world economy and global trade to shrink.
In the given month, the production index for Hebei Province’s steel sector was at 53.5 percent, down 4.3 percentage points month on month.
At the same time, the inventory index for finished steel in Hebei Province rose to 48.4 percent, up 5.4 percentage points month on month. Slack demand contributed to the rises in inventory in the given month.
In addition, the raw material inventory index for the steel sector in Hebei declined to 45.6 percent, down 3.1 percentage points month on month, while the raw material purchasing index rose by 1.5 percentage points to 66.0 percent in June. The high-priced raw materials provided solid support for steel prices.
Wang Dayong, vice president and secretary general of the Hebei Province Metallurgical Industry Association, said that an increasing number of projects started construction in the second quarter of this year, speeding up economic development and stimulating the consumption of steel. However, demand shrank in June amid rainy weather and floods, which will continue to exert a negative impact on steel prices in July.
In the January-May period of this year, Turkey's steel scrap import volume increased by 5.8 percent on year on year to 8.173 million metric tons, according to the data provided by the Turkish Steel Producers' Association (TCUD). The value of these imports totaled $2.288 million, down 7.4 percent year on year.
The import volume in May alone came to 1.168 million mt, up 16.67 percent month on month.
In the first five months of the year, the EU remained the leading supplier of steel scrap to Turkey, accounting for a 62.8 percent share of its scrap imports, followed by the US with 20.5 percent. The main sources of Turkey’s scrap imports in the first five months this year can be seen in the table below:
As mills concluded more bookings for June shipments, the scrap import volumes are expected to indicate a significant month-on-month rise in June. Also, the number of cargoes bought for July shipments was similar to the number bought for June shipment, while the respective tonnages are expected to be similar.