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Asia Mining

Coal prices turn off investors – by Amanda Saunders (Sydney Morning Herald – September 25, 2015)

http://www.smh.com.au/

First it was tobacco, then alcohol, gambling, then asbestos. Sugar might also be on the nose for investors. But right now it is hard to find a more loathed sector than coal.

Not only are the forces of environmentalists lining up against the commodity. But there seems to be no end in sight for depressed prices.

The gas industry turned rogue on their counterparts in coal a few months ago too, attacking the industry in a bid to position itself as a cleaner source of energy.

And in a fresh kick in the guts, news broke out from the United States on Friday that Chinese President Xi Jinping was preparing to announce a cap-and-trade scheme to curb emissions as part of a climate deal with the US, ahead of climate talks in Paris in December.

China is Australia’s biggest coal customer and as China and US face off in a climate change battle, the commodity is likely to be a victim.

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BHP Billiton in climate caucus as China joins carbon war – by Matthew Stevens (Australian Financial Review – September 25, 2015)

http://www.afr.com/business/

BHP Billiton’s membership of a new coalition of high powered commerce with the lofty aim of assisting the transformation of emerging nations into low carbon economies says much about the gathering pressures of climate change on those who make money in the fossil fuel cycle and just as much about the Global Australian’s radically changed view of its place in the world.

BHP was formally invited to become a foundation member of an “energy transitions commission” in a letter to chief executive Andrew Mackenzie penned by Royal Dutch Shell boss Ben van Beurden.

The Shell initiative, which will be formally announced in Houston on Monday, has been made all the more timely by China’s confirmation that it is contemplating the imminent introduction of a cap-and-trade carbon trading scheme and of stricter limits on the level of public funding for “high carbon projects”.

This is patently a deeply worrying development for big coal. China’s economic development is powered by electricity and that means it sits front and centre to any and all the optimism that the miners can muster about the medium and long-term outlook for coal.

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Vale offers contrarian view of China steel output (Bloomberg/Sydney Morning Herald – September 24, 2015)

http://www.smh.com.au/

Vale reacted to claims steel consumption in China has peaked and, in a view that contrasts with a rising number of global banks, says demand in the top user still has some way to go.

“China’s steel consumption peak is still ahead of us but of course the growth will be much more gradual,” said Claudio Alves, Vale’s global director of ferrous marketing and sales. Vale aimed to boost its market share, he said.

The largest miners are seeking to figure out the implications of slowing growth on China’s demand for everything from iron to copper. While Vale’s view echoes outlooks from Rio Tinto and BHP Billiton, ANZ Bank brought forward its peak-steel estimate to 2014 from 2020 and Credit Suisse Group said local consumption will shrink 10 per cent by 2018. Citigroup warned on Tuesday commodities may see further losses amid excess supplies and a sluggish global economy.

“Despite the slowdown of the growth speed, China still remains the economic engine of the world,” Mr Alves said before the start of a conference in Qingdao. Further urbanisation and infrastructure projects will underpin demand for iron ore, steel, copper and other base metals, according to Alves.

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UPDATE 2-Vale vows deeper iron ore cost cut as China’s steel demand peaks – by Manolo Serapio Jr and Ruby Lian (Globe and Mail – September 23, 2015)

http://www.reuters.com/

QINGDAO, China, Sept 23 (Reuters) – Iron ore miner Vale said it will cut its production cost to less than $13 per tonne by 2018, as the world’s largest producer of the commodity maximises profit margins in an era of weak prices.

A global glut and falling Chinese steel demand have dragged iron ore prices to less than $60 a tonne from a high of nearly $200 in 2011. The price is forecast to drop to $50 over the next two years, a Reuters poll showed.

“Vale is progressing to reach the lowest cash cost of the industry and will be competitive at any price scenario,” Claudio Alves, global director of marketing and sales at Vale, told a conference in China’s port city of Qingdao.

The cost reduction will come after the completion of Vale’s 90-million-tonne expansion project known as S11D in the Brazilian Amazon, Alves said, as the miner focuses on producing more high-quality material.

Vale’s overall cost stood at $15.80 per tonne by the second quarter.

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Global Mining Stocks Plunge on Fed, China Demand Fears – by Alex MacDonald and John W. Miller (Wall Street Journal – September 22, 2015)

http://www.wsj.com/

Fed’s decision not to raise interest rates also renewed fears over sluggish pace of global growth

LONDON—Mining company stocks plunged across the world on Tuesday on continued fears that China’s economic slowdown would cause metal prices to tumble further.

The carnage was most apparent at Switzerland-based trader and producer Glencore PLC, where shares fell below £1 ($1.55) for the first time, down more than 16%. The beleaguered company’s shares recovered slightly but closed down 10%.

But Tuesday’s tumble was another hammer on the head of almost all mining companies.

Freeport-McMoRan Inc., the biggest American miner, lost almost 1.5% of its value in afternoon trading in the U.S. In the U.K., Anglo American PLC fell 6.73%, while Anglo-Australian miners BHP Billiton Ltd. and Rio Tinto PLC ranked among the 10 biggest losers in London trading.

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China’s rising output, price rout deepen aluminum industry gloom – by Luc Cohen (Reuters U.S. – September 21, 2015)

http://www.reuters.com/

NEW YORK, Sept 21 (Reuters) – Sinking aluminum prices and a ballooning surplus of the metal have deepened the industry’s worst crisis in years, intensifying pressure on high-cost smelters to embark on another round of production cuts to revive prices from their malaise.

The 25 percent drop since last September has pushed benchmark London Metal Exchange prices to six-year lows, and the unprecedented plunge this year in premiums, surcharges paid for physical delivery, to their lowest in 3-1/2 years are the biggest test for producers’ margins since the 2008 financial crisis.

More than 10 percent of smelting capacity outside of China, or 3.5 million tonnes of production, is running in the red with a combined LME and U.S. premium of $1,800 per tonne, according to Wood Mackenzie data from second-quarter results. On Friday, three-month aluminum was at $1,621, with a U.S. premium of $175 a tonne.

The data illustrates the increasing pain across the sector as producers worry about growing exports from China and production costs such as power remain relatively high.

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India’s Gold Mining Sector Could Experience A Massive Renewal Soon – by Dave Forest (Oil Price.com – September 17, 2015)

http://oilprice.com/Metals/

I mentioned yesterday how global gold production hasn’t fallen much in the face of lower prices.

And this week we got some indications that supply could actually expand. With one of the world’s most famous gold mining districts looking to re-open, for the first time in nearly 15 years.

The place is the Kolar Gold Fields in India. One of the world’s legendary gold mines — with a production history that dates back to 1880.

According to local press, India’s government is very close to putting forward a plan to revive the Kolar. With officials saying they will table the scheme “within a month.”

The effort will reportedly include rehabilitating existing mining infrastructure — which consists largely of underground facilities, some extending two to three kilometres below surface. As well as reprocessing large amounts of gold-bearing tailings left behind by previous mining operations.

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Petcoke: the ticking time bomb at the heart of aluminum – by Andy Home (Reuters U.S. – September 16, 2015)

http://www.reuters.com/

LONDON – The world is producing too much aluminum. That’s what the price says. London Metal Exchange metal for three-month delivery is currently trading just above $1,600 per tonne, a level which is simply not sustainable for many higher-cost producers.

There have been plenty of smelter closures and curtailments. But not enough, particularly in China, which is exporting its surplus to the rest of the world in the form of semi-fabricated products.

Widespread allegations that some of these are “fake semis” have added extra heat to already simmering trade tensions. Aluminum’s problems have a lot to do with the metal’s production process.

Bauxite, the key metallic input, is a commonly occurring mineral and one that can be easily scooped out of the ground without the need for “hard rock” mining.

That abundance of supply has been proven by Indonesia’s ban on exports of bauxite to China.

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BHP’s Andrew Mackenzie more bullish on China – by John Kehoe (Australian Financial Review – September 17, 2015)

http://www.afr.com/business/mining/

BHP Billiton chief executive Andrew Mackenzie has signalled that China may have turned a corner, saying he had shifted from a slight “bear” on the world’s second largest economy three months ago to once against siding with the China “bulls”.

Mr Mackenzie, speaking in Washington, said BHP’s key commodities including iron ore, coal, copper and oil were “still flowing” through Chinese ports and there was no inventory build-up.

“If we compare to three or four months ago, things are a little better, not worse,” Mr Mackenzie said after delivering a speech to the US Chamber of Commerce.

BHP’s business activity offers a sneak peak into key sections of the Chinese economy, because the miner is a large supplier of commodities used to construct buildings, bridges, cars and other metals-intensive objects.

A range of recent disappointing economic data suggests Australia’s biggest export market may be slowing faster than most economists had anticipated.

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COLUMN-For Rio Tinto, it doesn’t matter being right on iron ore – by Clyde Russell (Reuters U.S. – September 16, 2015)

http://www.reuters.com/

(Reuters) – There’s been considerable debate over who is right on the outlook for China’s vast steel sector – the bullish iron ore miners or the bearish analysts and steel producers.

Rio Tinto, the Anglo-Australian miner that’s likely to claim top spot among iron ore producers, has resolutely stuck to its view that China’s steel output will top out at 1 billion tonnes per annum, around 2030.

There’s been no shortage of people lining up to challenge that position, and even number three miner BHP Billiton has rowed back slightly from the 1 billion tonne forecast, to expecting peak output around 935 to 985 million tonnes in the mid-2020s.

The Chinese steel sector thinks peak steel was already achieved with last year’s total of around 823 million tonnes, and is forecasting that output will slip slightly in coming years.

There are more bearish forecasts about, with one research house saying in a recent report that steel output will retreat to 650 million tonnes by 2017 as property demand falls back to levels before the stimulus prompted by the 2008 global recession.

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Are concerns about China overblown? – by Patrick Cairns (Mineweb.com – September 15, 2015)

http://www.mineweb.com/

The Chinese economy is in better shape than headlines suggest.

CAPE TOWN – In the wake of the recent market volatility a lot of the talk has been about the Chinese economy. Much has been made of how China is coming off the boil and may even be in some kind of crisis.

Headlines around the world tell a story. “The Chinese economy is on a slippery road to nowhere” was one in Australia, while MarketWatch carried the warning that “China’s economy may be in worse shape than people think”. The Wall Street Journal even ran an article under the headline: “A global recession may be brewing in China” and Forbes asked “Will China collapse?”.

The largely accepted narrative is that China’s economy is not only slowing, but also heading into a debt crisis. The big drop in Chinese stocks during August and the decision to devalue the yuan have been taken by many as confirmation that the economy is in big trouble.

However, this view is not universal. Although largely drowned out by the negative sentiment, a number of other headlines propose a different view of the situation.

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What if the China Panic Is All Wrong? – by Ian Talley (Wall Street Journal – September 3, 2015)

http://blogs.wsj.com/

China’s stock-market routs and economic deceleration are widely cited as the major trigger for the latest round of global market volatility. But what if the dominant narrative about China—that the world’s No. 2 economy is on the verge of falling off a cliff—is wrong?

It would mean the global market turmoil hitting equities, commodities and currencies is an overreaction.

“We may have seen overshooting,” said Hung Tran, executive managing director of global capital markets at the Institute of International Finance, an industry group representing around 500 of the world’s largest banks, funds and other financial institutions.

Even the head of the International Monetary Fund indicated as much earlier this week.

One of the chief problems is that it’s difficult to gauge China’s black-box economy. The country’s true growth is a guessing game given a number of statistical factors. That’s why growth forecasts show a range spanning several percentage points. Lombard Street Research, for example, estimates the economy will only expand by 3.7% this year, nearly half Beijing’s official growth forecast.

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New Study: We’re Nowhere Near Peak Coal Use in China and India – by Frank Holmes (U.S. Global Investors – September 15, 2015)

http://www.usfunds.com/

Resource investors, take note: By 2025, just 10 years from now, energy consumption in Asia will increase a whopping 31 percent. A whole two-thirds of that demand, driven largely by China and India, will be for fossil fuels, most notably coal.

That’s according to a new research piece by financial services group Macquarie, which writes that the estimated rise in fossil fuel demand is equivalent of “three times Saudi Arabia’s current (all-time-high) oil production.”

Macquarie’s research is in line with BP’s “Energy Outlook 2035,” released earlier this year, which predicts that more than half of the world’s energy consumption will come from China and India by the year 2035.

Many readers might approach this news with a healthy dose of skepticism. Haven’t we been told that fossil fuels are falling out of favor? Aren’t governments placing caps on coal use to appease environmentalists and climate change crusaders?

It’s true that coal demand in China has declined a huge 6 percent so far in 2015, the result of anti-air pollution laws that temporarily restricted not just coal use but also factory operations and the amount of driving you can do.

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Coal Isn’t Dead Yet – by Jason Bordoff (Wall Street Journal – September 15, 2015)

http://blogs.wsj.com/

According to recent news reports, coal is a dying fuel. A New York Times headline from early August, “King Coal, Long Besieged, Is Deposed by the Market,” reflects the prevailing consensus around coal’s demise.

As the U.N. climate change talks approach in December, the popular narrative around the death of coal—by far the most carbon-intensive fuel—makes the prospect of reaching an ambitious climate agreement seem that much easier. But this understates the severity of the challenge. Real progress on a global scale will require acknowledging that the world’s coal consumption will remain a growing concern for decades.

It certainly is true that coal firms in the U.S. are in a tough spot. The Dow Jones U.S. Coal Index, which captures the largest listed coal companies, has fallen 88% in the last five years. By comparison, the S&P 500 is up more than 70% over the same period.

Alpha Natural Resources, once the second-largest coal producer in America, filed for bankruptcy in August; six other smaller producers did the same over the past year. Domestic coal prices have fallen by more than 40% since 2011. Coal’s share in U.S. power generation is down from 50% in 2005 to 36% today, and the Clean Power Plan is projected to push it below 30% by 2030.

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Ex-Centerra CEO remains in Bulgarian limbo as extradition hearing delayed – by Jeff Gray (Globe and Mail – September 15, 2015)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

Former Centerra Gold Inc. chief executive officer Len Homeniuk, who was arrested by Bulgarian border police in July at the request of Kyrgyzstani authorities, is now expected to remain in limbo under house arrest in Bulgaria with his wife until at least Oct. 7.

Toronto-based Centerra operates the massive Kumtor gold mine in Kyrgyzstan and is locked in contentious talks with the government there over the country’s stake in the mine, which the former Soviet republic has in the past threatened to nationalize.

The 68-year-old Mr. Homeniuk, a Canadian-U.S. dual citizen who lives in California, retired as CEO in 2008. He was picked up in late July while on holiday with his family on a boat cruise on the Danube after Kyrgyzstan last year put him on Interpol’s wanted list, alleging he was involved in “corruption” while at the helm of Centerra. Mr. Homeniuk and Centerra dismiss the allegations as baseless, and Mr. Homeniuk says the allegations are nothing more than an attempt to pressure Centerra in the current talks.

In a phone interview, Mr. Homeniuk said on Monday a Bulgarian extradition hearing that had been scheduled for Wednesday has now been put off until Oct. 7.

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