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Indonesia’s consumer and natural resources boom falters – by Ben Bland (Financial Post – August 2, 2013)

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Jakarta – Mitra Adiperkasa, the retail group that operates Burger King, Zara and a host of other international food and fashion brands in Indonesia, has ridden the wave of middle-class consumption that transformed Southeast Asia’s biggest economy into one of the world’s hottest emerging markets.

But the group is scaling back its expansion plans and capital expenditure next year, for the first time since 2009, as Indonesian companies contend with problems including rising inflation and slowing Chinese growth.

“The main challenge for us is rising costs,” says Fetty Kwartati, head of investor relations at Mitra Adiperkasa, with salary and rental expenses increasing more quickly than sales. The company plans to open 60,000-70,000 square metres of new space next year, down from 90,000 square metres this year. Rising consumer spending has been one of the two pillars of Indonesia’s exuberant growth in recent years, alongside burgeoning natural resource exports.

But the latter has been badly affected by the slowdown in China, a major buyer of Indonesia’s coal, palm oil and rubber.

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Nickel producers fend off output cuts as losses mount – by Melanie Burton and James Regan (Reuters U.S. – August 2, 2013)

http://www.reuters.com/

SINGAPORE/SYDNEY Aug 2 (Reuters) – Nickel miners are clinging to plans to maintain production, despite a growing supply glut and prices around four-year lows, raising the risk of more writedowns and losses being unveiled in the current financial reporting season.

France’s Eramet this week reported a first-half operating loss and warned the second half would be worse due to weak nickel prices, while other top producers such as Vale SA , Glencore Xstrata and BHP Billiton report in the next few weeks.

Between a quarter to a half of the nickel sector could be running at a loss, according to industry estimates, hit by weak demand from China, the world’s top producer and consumer of stainless steel. Nickel is a key component of stainless steel.

Nonetheless, few miners have yet made deep cuts in output and the trend is set to put more pressure on depressed prices.

“It’s a staring contest, no one wants to be the first to take the pain,” said Robin Bhar, an analyst at Societe Generale in London.

Three month nickel on the London Metal Exchange hit $13,205 a tonne on July 9, the lowest since May 2009 and down from nearly $19,000 in February. Nickel is the worst performer on the exchange so far this year, down nearly 20 percent.

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COLUMN-China’s moves to cut metal capacity just getting started – by Clyde Russell (Reuters U.S. – August 1, 2013)

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Aug 1 (Reuters) – China’s plans to force more than 1,900 companies to cut excess capacity in bloated industries including aluminium, steel and copper have met with an underwhelming response from the market.

Certainly, the moves to make China’s heavy industries more efficient will have little immediate market impact, but what analysts and investors may be shrugging off a little too lightly is that once trends and processes start, they tend to gather momentum.

The edict to close some capacity by September will do very little to end surpluses in aluminium and steel production in China, as they will impact less than 1 percent of capacity.

In aluminium, about 260,000 tonnes of annual capacity may be shut, a fraction of the existing capacity of about 27 million tonnes, which is already about 28 percent higher than demand of about 21 million tonnes.

For steel, the ruling may result in about 7 million tonnes of annual output being idled, but the China steel association says there is 300 million tonnes of surplus capacity. In copper, some 654,000 tonnes of production may be closed, which is insignificant when compared with the existing idle capacity of more than 7 million tonnes.

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COLUMN-Pain of drop in China coal imports isn’t evenly shared – by Clyde Russell (Reuters U.S. – July 29, 2013)

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Clyde Russell is a Reuters market analyst. The views expressed are his own.

LAUNCESTON, Australia, July 29 (Reuters) – The sharp drop in China’s coal imports in June helped to finally bring growth in imports closer to that for power output and was validation of the view that inbound cargoes had been unsustainably high.

While a pullback in imports had been expected for several months, the breakdown of the customs data shows the pain hasn’t been evenly spread amongst China’s major suppliers. Total imports in June were 18.037 million tonnes, down 22 percent from May and 19.6 percent from the same month a year earlier.

This was enough to drag the year-to-date growth in coal imports down to 13.9 percent in June from May’s 22.3 percent. The rate is also less than half the 28.7 percent jump in imports achieved in 2012 over 2011.

Part of the reason imports had been strong in the first five months of 2013 was that prices were competitive with domestic producers. Falling domestic prices as demand for power generation eased caught up with imports in June. But it’s not necessarily the higher-cost suppliers that are being squeezed out of the market.

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India eyes B.C.’s coal reserves as it ramps up steel production – by Gordon Hoekstra (Vancouver Sun – July 28, 2013)

http://www.vancouversun.com/index.html

Delegation meets with B.C.’s premier, new international trade minister

India wants to buy a bigger chunk of B.C.’s vast metallurgical coal reserves to feed its growing steel industry, a potential boost to the province’s No. 1 export business, worth $5.7 billion a year.

A high-level delegation led by India’s Steel Minister Beni Prasad Verma was in B.C. this month and met with Premier Christy Clark, International Trade Minister Teresa Wat and B.C. coal industry representatives.

The Indian government forecasts that by 2017 the country will need twice as much metallurgical coal. The additional 47 million tonnes of metallurgical coal India forecasts it’ll need every year is more than B.C.’s entire annual production of 24 million tonnes.

However, British Columbia sits on vast coal reserves of an estimated 13 billion tonnes with several proposed metallurgical coal mines in the environmental assessment process. Karina Brino, president of the Mining Association of B.C., said the province’s coal industry is paying close attention to the burgeoning Indian market.

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Good money in mining – by Hanim Adnan and Choong En Han (Malaysia Star – July 27, 2013)

http://www.thestar.com.my/

MINING in Malaysia is not the big business it used to be. Tin mining tycoons are now corporate folklore, no thanks to the collapse of the global tin market in 1985.

The industry was then overshadowed by industrialisation and the oil palm industry. Its glorious past is manifested by the oil and gas industry which is the multi-billion ringgit industry it deserves to be due to planning and the work undertaken by Petroliam Nasional Bhd.

Apart from oil and gas, minerals are being mined by small-time miners in a rather ambiguous manner in most mineral-rich states. But that is about to change. The sector is now focusing on large-scale mining of major minerals such as gold, iron ore and coal. It’s no longer the domain of tin.

Last year, iron ore topped other major minerals in terms of production with 10.7 million tonnes mined valued at RM2.02bil. That is followed by gold with 4.6 million gm (RM700.8mil), coal at 2.95 million tonnes (RM442.2mil) and tin-in-concentrate at 3.66 million tonnes (RM236.5mil) respectively.

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POSCO’s global expansion plan hits India roadblock – by Hyunjoo Jin (Reuters India – July 25, 2013)

http://in.reuters.com/

SEOUL – (Reuters) – Some investors in South Korean steelmaker POSCO are starting to sour on a long-delayed $12 billion project for a steel mill in Odisha that was once hailed as a profit driver.

The investment is part of a global expansion spree led by POSCO Group Chairman and Chief Executive Chung Joon-yang, a nearly decade-long strategy that was intended to capitalise on rapid emerging economy growth and help reduce the company’s reliance on its domestic market.

But a series of acquisitions left POSCO with a debt burden that has more than doubled over the past three years, while slowing growth in major markets such as China has hurt steel prices and margins. Last week, the steelmaker said it will bow out of a $5.3 billion steel mill development in Karnataka.

“The steel market is not in good shape, and we share investors’ concerns about the overall market conditions,” a POSCO executive told Reuters, speaking on condition of anonymity because he was not authorised to talk to the media. “The Odisha investment would be a burden to us.”

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Financial, human toll of ‘horrific’ Big Gossan accident costs FCX dearly – by Dorothy Kosich (Mineweb.com – July 24, 2013)

http://www.mineweb.com/

28 fatalities, the loss of millions of pounds of copper and thousands of ounces of gold, as well as creating a new oil & gas subsidiary, slammed FCX’s 2Q.

RENO (MINEWEB) – The tunnel collapse in a Freeport-McMoRan Copper & Gold training facility in Indonesia “was an incredibly horrific convergence of events that came together because of the geology of the rock and the influence of water and air on our ground support facilities, and unfortunately just happened as we were having this training meeting,” CEO Richard Adkerson told analysts during a conference call Tuesday.

On May 14th, the accident occurred at PT Freeport Indonesia, which resulted in 28 fatalities and 10 injured when the rock structure above an underground ceiling for a training facility collapsed in an unprecedented and unexpected event. While the accident occurred outside of mining operations, mining and processing activities at the Grasberg complex were temporarily suspended as Indonesian government authorities also conducted inspections.

“In the quarter, we lost roughly 125 million pounds of copper and 125,000 ounces of gold,” said Adkerson. “The full year impact will be greater than that. We estimate 230 million pounds of copper and 250,000 ounces of gold.”

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INDIA HUNTS FOR COAL IN BC (Asia Pacific Post – July 23, 2013)

http://www.asianpacificpost.com/

India has announced that it is exploring options for sourcing coal from British Columbia, including equity participation in assets and acquisition of mines just as Vancouver city council voted to ban the handling, storage and trans shipment of coal at its marine terminals and berths.

The ban, mostly symbolic, was passed as Port Metro Vancouver, the No. 2 exporter of coal in North America triggered controversy over planned expansion of its facilities. Vancouver city council has no jurisdiction over the port operations.

Even before the ink was dry on the 9 to 2 vote which aims to curb greenhouse gas emissions and set the air quality target to “breath the cleanest air of any major city in the world”, a high powered delegation from India met with British Columbia Premier Christy Clark to scour for coal resources.

The Indian delegation was led by Steel Minister Beni Prasad Verma who is looking to feed India’s steel industry which is growing at a fast pace and needs additional quantities of coking coal. “The delegation held a series of discussions with the coal asset owners and various avenues for sourcing coking coal to India to meet its ever-growing requirement were discussed,” an official statement said.

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UPDATE 2-ArcelorMittal abandons dormant Indian project – by Krishna N Das (Reuters India – July 17, 2013)

http://in.reuters.com/

NEW DELHI, July 17 (Reuters) – ArcelorMittal, the world’s top steelmaker, said it would scrap a planned steel plant in India due to delays in acquiring land and an iron ore mine, obstacles that have also caused South Korea’s POSCO to abandon plans.

The decision to scrap the planned 12 million-tonnes-a-year (MTA) plant in the eastern state of Odisha, comes a day after the world’s fifth biggest steelmaker, POSCO, said it was ditching a 6 MTA plant in the southern Karnataka state because of delays in receiving iron ore mining rights and opposition from residents which had held back land acquisition.

The failed projects will be a blow to India’s federal government, which on Tuesday relaxed foreign investment rules to draw in funds needed to turn around slowing economic growth and support a weak rupee.

ArcelorMittal India and China Chief Executive Vijay Bhatnagar said the company’s other two projects in mineral-rich states of Jharkhand and Karnataka were making “steady progress” and it would continue to pursue them.

The Jharkhand plant is expected to have an annual capacity of 12 million tonnes, while the one in Karnataka is expected to have capacity of 6 million tonnes.

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Gold Imports by India Seen Shrinking as Curbs Increase Costs – by Swansy Afonso & Pratik Parija (Bloomberg News – July 17, 2013)

http://www.bloomberg.com/

Gold imports by India, the world’s biggest consumer last year, may tumble in the second half as the government curbs shipments to contain a record current-account deficit and stem a slide in the currency.

Inbound shipments may drop 22 percent to 372.5 metric tons in the six months through December from 478 tons a year earlier, according to a median of estimates from 10 importers, jewelers, analysts and trade groups compiled by Bloomberg.

That may still boost full-year imports to about 902 tons from 860 tons in 2012, according to Bloomberg calculations based on data from the World Gold Council and the All India Gem & Jewellery Trade Federation.

Falling Indian demand for physical gold may deepen a bear market in bullion as some investors sell the metal amid signs of an improving U.S. economy. Shoppers from India to China and Turkey crowded retail outlets to buy jewelry, coins and bars in April after the precious metal posted the biggest two-day loss in three decades. Goldman Sachs Group Inc. says that gold will reach $1,050 by the end of 2014, while Credit Suisse Group AG forecasts $1,150 in about a year.

“I see no reason to buy more gold,” said Bharti Chandra, a 38-year-old housewife, dressed in a salwar, who was selling an old necklace in Mumbai’s Zaveri Bazaar, the largest bullion market in the country.

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Special report: In tax case, Mongolia is the mouse that roared – By Anthony Deutsch and Terrence Edwards (Reuters India – July 16, 2013)

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AMSTERDAM/ULAN BATOR – (Reuters) – Turquoise Hill Netherlands is a little-known Amsterdam-based company with three employees, no office, and not even its own mailbox. To the government of Mongolia, though, the company represents billions in taxes that it will never see.

Turquoise Hill was created in 2009, five years after Mongolia and the Netherlands signed a tax treaty to avoid double taxation and boost investment in Mongolia. But in 2011, Mongolia decided to cancel the pact, arguing that it would cost the country income from one of the most lucrative gold and copper mines in the world.

The move was rare – tax experts say only a handful of such deals between countries have ever been cancelled – and it highlights a big contradiction.

The Netherlands, which has more than 90 such treaties globally, spent roughly 13 million euros ($17 million) on three aid programs to Mongolia in 2009 and 2010. Globally its aid budget is about $5.5 billion – the fifth most-generous rate among rich nations at 0.71 percent of Gross National Income, according to the OECD.

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UPDATE 3-POSCO drops $5.3 bln Indian steel mill, keeps main project alive – by Hyunjoo Jin (Reuters India – July 16, 2013)

http://in.reuters.com/

SEOUL, July 16 (Reuters) – South Korea’s POSCO said on Tuesday it will pull out of a $5.3 billion steel mill development in India’s Karnataka state, but will proceed with another $12 billion project billed as the country’s largest foreign direct investment.

POSCO said in a regulatory filing that it had agreed to cancel the project with the government of southern Karnataka state because of delays in receiving iron ore mining rights and opposition from residents which had held back land acquisition.

The move could provide fresh impetus to POSCO’s main steel project in the eastern state of Odisha. Already eight years in the making, it has recently gained momentum with the clearing of legal obstacles to the granting of an iron ore exploration licence.

“We will proceed with a steel mill project in Odisha, which is making progress. The latest move will make us more focused on the project,” POSCO spokeswoman Kim Ji-young said. POSCO, the world’s fifth-biggest steelmaker, had pursued three steel mills in India as a way of hedging its bets on the slow-moving Odisha project.

In 2010, POSCO signed a preliminary agreement with the Karnataka state government to construct a mill capable of producing 6 million tonnes of steel a year. A year earlier it signed a separate steel mill deal with state-run Steel Authority of India Ltd (SAIL).

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Bruised by purity rule, Indonesia tin exporters face trading overhaul – by Michael Taylor and Yayat Supriatna (Reuters India – July 12, 2013)

http://in.reuters.com/

JAKARTA, July 12 (Reuters) – Indonesia’s plans to force tin producers to trade through a domestic exchange could be a new source of disruption for shipments by the world’s top exporter, coming just as firms are trying to meet new tin purity rules, industry sources said.

The Southeast Asian nation has been trying to boost its profile in commodities markets in the hope of setting its own price benchmarks, but so far has faced an uphill task to attract enough liquidity to challenge benchmarks on overseas exchanges.

Under the new rules, all 51 registered tin exporters must trade on a domestic exchange after August 29. The trading plan is in addition to new rules brought in this month to raise minimum purity levels for tin exports to 99.9 percent, which are already expected to slash exports over the next few months, potentially lifting tin prices.

The Indonesia Commodity and Derivatives Exchange (ICDX) launched the country’s only physical tin contract last year, although it has struggled to challenge the dominant London Metal Exchange (LME) contract. “The new trading rules will promote sustainable tin mining, (and) will be good for producers and Indonesia,” said Megain Widjaja, ICDX’s chief executive, assuring there could be a transparent market with a fair price for producers and buyers.

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POSCO may soon get iron ore licence for Odisha plant – by Krishna N Das (Reuters India – July 10, 2013)

http://in.reuters.com/

REUTERS – India is expected to grant an iron ore exploration licence to POSCO(005490.KS) for its planned $12 billion steel plant in the country, two government officials told Reuters, in a step that should speed up the project stuck for eight years.

The Supreme Court in May handed a decision on a licence to the government, raising the South Korean firm’s chances of getting access to iron ore for the project billed as India’s largest foreign direct investment.

“POSCO India should get the license in a month or so,” said a senior government official involved with the decision-making. “The government is looking at it positively.”

Another official directly involved in the matter said the government was speeding up the process given that the Supreme Court has already ruled against a lower court order declining a prospecting licence for POSCO. Prospecting licences are generally valid for three years, after which a prospector has to apply for a mining lease.

Access to iron ore, the main raw material in making steel, is the most important factor in POSCO deciding to set up the plant in India, experts have said.

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