12 / 12 / 09 We can't afford to ignore our coal resources AS world leaders gather in Copenhagen for the climate change summit, the UK delegation sho..
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22 / 06 / 09 Anglo stresses early-stage nature of Xstrata 'proposal' The board of diversified mining group Anglo American confirmed on Sunday that it had indee..
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14 / 04 / 09 China economy shows signs of recovery China's economy is showing signs of a nascent recovery, but even officials who want to boo..
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02 / 01 / 09 China turns screws on iron ore giants JUST days into the new year the signs from China for our battered big miners are ominous.
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28 / 04 / 10 in
China oil giant PetroChina says profit up 71 pct
PetroChina Ltd., Asia's biggest oil producer, said Tuesday its first-quarter profit was up 71.2 percent from a year earlier as demand inside China and crude oil prices rose.
Profit for the three months ending March 31 was 32.5 billion yuan ($4.7 billion) or 0.18 yuan (3 cents) per share, compared with 18.9 billion yuan, or 0.10 yuan per share, a year earlier, the Beijing-based oil company reported.
PetroChina, with shares traded in New York, Hong Kong and Shanghai, is the world's most valuable company by market capitalization after Exxon Mobil Corp.
The company is coming back from a year in which it was hit by sluggish demand and controls on prices for its processed products. Its net profit fell 9.7 percent in 2009.
But China's demand for oil rose 12.8 percent in March from a year earlier as the Chinese economy returned to rapid growth and refining capacity expanded, according to a report earlier this month. The analysis of official data by Platts, the energy information arm of McGraw-Hill Cos., said March was the seventh month in a row of double-digit increases in demand for China.
Platts said the increase was helped by new refining capacity at state-owned companies such as Sinopec, PetroChina and China National Offshore Oil Corp.
Shares of PetroChina declined 2.2 percent to 11.93 yuan Tuesday.
21 / 04 / 10 in
China oil demand up on double-digit growth
China's demand for oil rose 12.8 percent in March as the Chinese economy returned to rapid growth and refining capacity expanded, according to a report Tuesday.
Apparent oil demand rose to 8.12 million barrels per day over the year ago March according to an analysis of official data by Platts, the energy information arm of McGraw-Hill Cos.
It was the seventh month in a row of double-digit increase in demand for China. But it was short of the all-time high in February of 8.5 million barrels per day.
Platts said the increase was helped by new refining capacity at state-owned companies like Sinopec, PetroChina and China National Offshore Oil Corp.
Also driving demand was the resurgence of the Chinese economy, which posted gross domestic product growth of 11.9 percent in the first quarter. Industrial production and gasoline demand were also up during that time.
08 / 04 / 10 in
BHP hikes iron ore price by 99.7pc
MINING powerhouse BHP Billiton has won a 99.7 per cent rise in the price paid by Asian buyers for its iron ore, according to Macquarie analysts.
BHP will be paid about $US120.08 ($129.57) a tonne by most of its Asian customers for iron ore fines in the April to June quarter, a Macquarie commodities report said yesterday citing Japanese steel industry sources.
"(This) represents a massive 99.7 per cent rise over 2009 Japanese financial year contracts," the report said.
The price paid for iron ore lump will be 88 per cent above last year's levels at $US135 a tonne, it said.
BHP, the world's third biggest producer of the steel ingredient behind Brazil's Vale and Rio Tinto, last month revealed its groundbreaking win in striking quarterly contracts with a "significant number" of its Asian customers.
It did not disclose the price involved, but analysts had suggested it would gain almost 100 per cent on last year's benchmark.
BHP declined to comment on the Macquarie report yesterday.
Rio has yet to make a formal announcement about iron ore prices, but it has reportedly also suggested the move to quarterly contracts.
Steel prices could jump 23 per cent by the first half of the next financial year as steel mills pass on higher raw material costs, a Royal Bank of Scotland report said yesterday.
Analyst Todd Scott said the price of hot-rolled coil could reach $825 a metric tonne from $604 a tonne in the current half. He said Asian steelmakers had pushed through price rises of $165 a tonne since December to cover costs.
Tension between Vale and European steelmakers intensified yesterday as the Brazilian miner denied allegations by European industry group Eurofer that it had harmed competition in negotiations to set prices.
Eurofer last week asked the European Commission for an inquiry, claiming that Vale, Rio and BHP acted as an "oligopoly" to boost iron ore prices. Vale yesterday hit back, saying it didn't share any information on its pricing policy.
30 / 03 / 10 in
China to support oil sector in Uganda
CHINA is increasingly looking beyond Africa's established markets to tap into opportunities in Uganda, which is expected to become a crucial new frontier in the continent’s oil industry.
China strengthened its foothold in Uganda's oil interests when it’s company China National Offshore Oil Company (CNOOC) partnered with Tullow Oil and Total to develop the oil sector.
The deal is, however, subject to the Government approval.Uganda has confirmed petroleum resources in the Lake Albertine region, estimated at about 2 billion barrels.
Fu Chengyu, the CNOOC president, was in town last week to give a key note address at the launch of the Uganda Chamber of Mines and Petroleum (UCMP).
Chengyu was recently named the 13th most influential business leader in China Elly Karuhanga, the chamber chairman, said the partnership between Tullow oil, CNOOC and Total was a positive signal to investors, adding that the combined experience, technology and resources that the companies bring on board would take the oil sector to another level.
“This partnership makes Uganda an attractive investment destination. “The multiplier effect of this collaboration will be reflected in opportunities created in the different sectors like infrastructure, accounting, transport, education, hotel business that will support the oil industry,” he said in an interview.
Tullow sold some of its stake in the oil fields to secure funding for the development of the fields.
“Further exploration by Tullow will require between $5b and $10b because it will be done on the lake. “Tullow, therefore, needed to bring partners with more funds and experience to take the process beyond getting oil from the ground to refining, electricity generation and construction of an export pipeline.”
Karuhanga said the legal agreement with the Government and the three companies was expected to be concluded by April. This will pave way for implementation of the plans to develop the sector.
Fu Chengyu could not disclose how much investment his company would bring on board, but underscored the importance of human resource development.
“This is a huge project that will cost millions of dollars. However, I must emphasise that it’s not about the money, but transfer of knowledge and skills.”
Chengyu added that he expected strategic partnership between China and Uganda in the energy sector. “The success in developing our oil and gas sector would provide a useful model industry for establishing your own oil industry,” he said.
China is the second largest market for petroleum products and sixth largest producer of oil and natural gas.Uganda is expected to benefit from CNOOC’s expertise since it is China’s leading national oil company with an international footprint.
The country’s daily oil and gas production has increased from 2,000 barrels of oil equivalent in China to 647,000 barrels of oil equivalent worldwide over the past three decades.
“We have been able to build a fully integrated operation from scratch, covering oil and gas exploration, development and production, refining, marketing, pipeline transportation, power generation, fertiliser and other chemicals, oil services, equipment and engineering,” he added.
According to Chengyu, the company’s direct investments to Africa have exceeded $5b to date.“It’s our strong belief and our core principle that our investment must benefit the host nation, their people and the surrounding communities, while we realize reasonable returns.”
23 / 03 / 10 in
The dragon and the elephant in a contest for oil
The elephant appears to be trailing the dragon through the jungles of the oil world.
The state-owned Indian Oil Corporation is in talks to acquire Gulfsands Petroleum, a UK company active in Syria. It was only last August that Sinochem, China’s fourth-largest oil company, bought Emerald Energy, Gulfsands’s partner in Syria.
Is this a battle India can win? Is it a battle India should even be fighting?
China’s oil deals have attracted a lot of attention, particularly in Washington. Three of its leading players, China National Offshore Oil Corporation, PetroChina and Sinopec, have recently been buying assets in Argentina, Canada and West Africa, and featuring prominently in the Iraqi oil auctions.
China also took advantage of other countries’ financial struggles and a general shortage of capital to lend US$45 billion (Dh165.26bn) to Kazakhstan, Russia, Angola, Venezuela and Brazil in return for guaranteed future oil supplies.
By comparison, India has been much lower-key. The leading state company Oil and Natural Gas Corporation bought the UK-listed Imperial Energy for $2.1bn early last year to gain access to West Siberia. Otherwise, the Indian companies have mainly concentrated on picking up exploration acreage and negotiating with governments.
India has to be realistic about its ability to compete with China. In 2006, the two countries signed a deal to avoid competing for oil acquisitions. They sealed the pact with a joint purchase of Syrian assets. This came after deals in which Chinese companies outbid the Indians in Kazakhstan and Angola.
New Delhi’s financial resources are much less than Beijing’s. The Chinese economy, almost four times the size of India’s, runs a large trade surplus, while India has a deficit. India needs large amounts of domestic capital to improve its inadequate infrastructure, while China has embarked on a huge construction programme and is in danger of over-investing at home. Chinese oil companies are much larger than their Indian counterparts and operate big domestic fields.
India cannot therefore beat China in a battle of the big wallets. But this does not mean Indians are doomed to run short of oil. Merely owning interests in foreign oilfields does not guarantee a supply of fuel. Oil is traded in world markets. Chinese oil production in Angola or Colombia does not entitle the Chinese to special prices. And Japan and South Korea have become wealthy without major oil investments.
If wars are ever fought over resources, as some gloomy futurists predict, having commercial stakes in oilfields will be useless. The control of that oil will be determined by military force. Dutch ownership of Indonesian fields did not stop the Japanese takeover in the Second World War.
In this regard, India is better placed than China. India is much closer to the Middle East, and the tanker route does not pass through the narrow waterways of South East Asia.
India is also well sited for overland routes from Central Asia and Iran. It is 3,000km from the main Kazakh fields to New Delhi, but more than 5,000km to Beijing. Yet the Chinese have succeeded in opening oil and gas pipelines from the Caspian to western China.
Meanwhile, Iranian controversy, Afghan instability and, above all, the troubled relationship with Pakistan have prevented India from capitalising on its geographic advantages. Reducing tensions with Pakistan could lay the foundation for greater Indian energy security.
As many as 6 million Indians live and work in the GCC. India also has a large Muslim population and long historic and cultural links with the Gulf. At a time when OPEC states are worrying about security of western demand, India can become a key partner.
As a democracy, India should build on its moral authority. Supporting unstable or unsavoury regimes, as China is often alleged to do in Sudan, Zimbabwe and Burma, should not be an option for India. Relying on pariah states is hardly a recipe for energy security, and in any case, without a UN Security Council veto, India has less to offer such countries diplomatically.
Less able than China to externalise its energy policy, India needs to look domestically. Recent encouragement of exploration has yielded big discoveries in Rajasthan and the eastern offshore. With pipelines from Turkmenistan and Iran less emphasised, India should continue to expand its purchases of liquefied natural gas.
Abundant coal resources can also yield gas, but India has made little progress on plants to convert coal to oil, unlike China and South Africa, or on trapping carbon dioxide emissions for underground disposal.
Progress in renewable energy, particularly wind, and the 2008 deal with the US on nuclear power opens up the prospect of clean, non-fossil-fuel energy.
The key actions, though, are less on energy supply and more on demand. The increase in fuel prices in the latest budget should be just the first step. There are better ways to protect the poor than wasteful oil subsidies.
India’s immense railway network and the excellent Delhi Metro show the way to extensive public transport. Compressed natural gas, cheaper and cleaner than oil, is popular for Delhi taxis and buses. Gas should become the fuel of choice in power generation and industry.
Above all, energy needs to be open to private-sector investment and to be freed of bureaucracy and waste.
India is in the early stages of its growth, and it has the chance to build an energy-efficient economy from the bottom up. India should not imitate Chinese energy strategy, designed for a very different country and circumstances, and then fret that it is losing the race.
New Delhi also needs to be cautious about listening to empire-building chief executives and loud energy nationalists.
The Indian elephant ought to use its own strengths in the search for energy security.
12 / 03 / 10 in
Australia iron ore, coal exports hit record
Australian exports of iron ore and coal hit record levels in the final quarter of last year thanks to strong demand from Asia, official figures showed.
Iron ore exports reached 98 million tonnes and coal shipments passed 74 million tonnes, mainly to South Korea, Japan and China, the Australian Bureau of Agricultural and Resource Economics (ABARE) said.
"The record volumes of bulk commodity exports in the December quarter were underpinned by demand from steel mills and power stations in Japan, the Republic of Korea and China," said ABARE deputy executive director Paul Morris.
Australian officials have forecast a new mining boom lasting years, if not decades, thanks to the mass industrialisation and urbanisation projects under way in some Asian countries.
The record exports came despite a nine per cent rise in the value of the Australian dollar, ABARE said in its report released on Thursday.
Energy and mineral export earnings rose one per cent to A$31 billion (US$28 billion) in the quarter, it added.
04 / 03 / 10 in
China iron ore price hike report seen as "posturing"
A Chinese media report that global miners are offering Chinese steel mills a 50 percent rise in iron ore prices was dismissed as posturing by analysts, who predicted a rise of 65 to 70 percent instead.
China has by far the world's largest steel sector, producing almost half of global crude steel last year, when the country's iron ore imports surged 42 percent to a record 628 million tonnes to feed the rampant production.
The head of the iron ore department of a large Chinese steel mill told the state-run China Daily that the big three iron ore miners -- Vale (VALE5.SA), Rio Tinto (RIO.AX) and BHP Billiton (BHP.AX) -- were seeking a 50 percent hike in term prices from 2009 levels.
BHP and Rio Tinto officials declined to comment on the report as a matter of policy.
However industry analysts said 50 percent looked low, considering soaring spot prices, which have risen more than 50 percent since September, and recent comments from mining companies about the gulf between the benchmark and the market.
"I think this is posturing and very much to be expected this time of year. With the big iron ore producers voicing an interest in spot pricing, it will be very tough for the steel mills to fight a big price increase," said ANZ's senior commodity analyst Mark Pervan, who forecast a 70 percent rise in ore prices.
"Steel mills are getting ready for increased raw material costs. Japanese mills are talking about a 30 percent rise in hot-rolled coil, equivalent to an additional $180 a tonne. But to cover a 70 percent rise in ore and a 72 percent rise in coking coal would only take a 19 percent increase in HRC prices."
Spot iron ore on a landed China basis is trading around $134 a tonne, double the 2009 free-on-board contract.
Iron ore miners, BHP Billiton in particular, have talked at length in recent weeks about the difference between spot and annual prices, hinting that contract prices and the spot market needed to converge.
Last year's contracted iron ore prices were around $62 a tonne and coking coal was $129. Based on 1.6 tonnes of iron and 0.6 tonnes of coking coal to make one tonne of steel, Japanese mills could be positioning product prices for a worst-case scenario of a 100 percent rise in coke and ore costs.
The China Daily quoted the steelmill official as saying Baosteel, which is leading the talks this year, "would wait and see how Japanese and South Korean steel mills react to the proposal before taking a decision".
"If other Asian steel mills accept the new ore prices, then Chinese steel mills will have no other choice but to accept the same, as stopping production is not in the best interests of the industry."
A source at South Korea's top steelmaker POSCO said it had not received any official offers from major iron ore suppliers yet, but added that miners have said, during casual meetings with mills, that prices should return to 2008 levels.
The collapse of financial markets in 2008 prompted a 33 percent fall in annual iron ore prices settled with Japan and South Korea.
Steep prices may force steelmakers to shift away from decades-old annual benchmark pricing and adopt a hybrid annual or quarterly set pricing model, the POSCO source added.
"Steelmakers will have to use a differential negotiating system -- i.e., partly accepting a quarterly index system. While we cannot say officially that we would accept it, there should be a certain momentum to change the system."
IRON GIANT
The China Daily said China's crude steel output was expected to rise 8.6 percent to 621.5 million tonnes in 2010, a slower rate of annual growth than last year's 13.5 percent, without citing a source for the forecast.
That would imply a rise in annual production of 54 million tonnes, compared to 68 million tonnes last year.
Shipments of iron ore dropped in January but are expected to rebound to a monthly record of more than 60 million tonnes in March, the China Securities Journal reported, citing industry analysts.
"The physical market is being driven by Chinese demand, supported by a continuing recovery in steelmaking across the developed economies," said managing consultant David Tucker at Hatch Beddows.
"Combined with falling freight rates this has resulted in a period of sustained price premiums between the Chinese spot market and the equivalent Brazilian and Australian FOB prices."
The firm has lifted its projected outcome for a price settlement to a 65 percent rise from 33 percent in January.
"At the end of last week we calculated the benchmark to spot premiums as 86 percent and 115 percent for Brazil and Australia respectively. In early December the Brazilian FOB benchmark was still at parity with the CFR China spot market and this tempered our January forecast."
With all three big miners likely to be comfortable accepting spot prices for their products, there may not be a settlement at all, Tucker added.
22 / 02 / 10 in
S&P, Moody's May Raise Rio Ratings
Rio Tinto Group, the world's third- largest mining company, may have its credit ratings raised by Standard & Poor Corp. ‘s and Moody's Investors Service because higher iron ore prices, National Australia Bank Ltd. said.
There is increased confidence that annual contract iron ore prices may rise by plus 40 percent this year “and this will further underwrite an upgrade,” the bank said today in a credit research note. Standard & Poor's and Moody's may increase their ratings within six months, it said.
Fitch Ratings raised its rating on Rio Tinto on Feb. 19 to “A-” from “BBB+” after the London-based company cut its debt and as China’s demand for raw materials increases.
Rio Tinto agreed last year to form an iron ore joint venture with BHP Billiton Ltd. and will receive about $5.8 billion as an equalization payment. Rio may use the money to support higher spending rather than reduce debt, Fitch said.
Credit-default swaps on Rio dropped 10 basis points to 95 basis points as of 10:55 a.m. Sydney time, according to Deutsche Bank AG. A decline indicates improved perceptions of credit quality.
Standard & Poor's has a “BBB+” rating on Rio Tinto and Moody's has a “Baa1” rating on the company.
16 / 02 / 10 in
Palmer Says China Coal Deal Binding After Name Error
Australian mining magnate Clive Palmer said a deal to sell $60 billion of coal to China is “binding,” four days after incorrectly naming the customer for a mine he is yet to build.
Palmer’s Resourcehouse Ltd. made a “mistake” in a Feb. 6 statement, wrongly naming China Power International Development Ltd. as the buyer, he said in Perth today. The agreement, which Palmer says is Australia’s largest export deal, is with unlisted China Power International Holding Ltd., he said yesterday.
The confusion may hamper plans by Palmer, Australia’s fifth-richest man, to raise as much as $3 billion in a Hong Kong initial public offering to fund the development of his coal and iron ore projects.
“I presume it will affect the investors as the company hasn’t got those details correct in the first place,” said Lewis Wan, chief investment officer for Pride Investments Group in Hong Kong, which manages $150 million. “However, the actual impact on the deal should not be very big.”
Palmer, a law school dropout who made his first fortune from real estate on Australia’s Gold Coast, says he’s been to China more than 50 times. Business Review annual rich 200 list published in May, named him as the nation’s fifth-richest man with a fortune valued at A$3.4 billion ($3 billion).
Accord Affirmed
China Power International Holding, a unit of China Power Investment Corp., yesterday affirmed an accord with Resourcehouse to buy 30 million metric tons of coal a year for 20 years from the proposed China First project in Queensland.
In a video presentation shown after the press conference today in Perth, Zhao Yazhou, Vice President of China Power Holding International Holding Ltd., speaking through an interpreter, referred to the accord with Resourcehouse as a “framework agreement” and said it was pending final approval.
Earlier yesterday, China Power International Development Ltd. said in a statement to the Hong Kong stock exchange that it hadn’t signed any accord with Resourcehouse.
Resourcehouse wants to sell coal and iron ore to supply steel mills and power companies in China, challenging producers such as BHP Billiton Ltd. and Rio Tinto Group. China, the world’s largest consumer of coal and metals, last year announced $32 billion of resource acquisitions to fuel the world’s fastest-growing major economy.
Last Emperor
Palmer awarded an $8 billion engineering and construction- management contract for the China First project to Metallurgical Corp. of China Ltd., according to the Feb. 6 statement. Metallurgical Corp. signed an accord to buy $200 million of shares in Resourcehouse, the Chinese company said Feb. 3 in a filing to Shanghai’s stock exchange.
Palmer has long-term personal contact with China stretching back to 1962 when as a boy he met Pu Yi, the last Emperor of China, in Beijing while on a visit with his businessman father.
A licensed real estate agent and owner of the Gold Coast United soccer team, Palmer retired at 29 after he’d amassed a fortune of about A$40 million through real estate investment on the Gold Coast, a tourist strip with 70 kilometers (44 miles) of beaches and home to Q1, the world’s tallest residential tower. He came out of retirement two years later to buy the Australian assets of U.S.-based Hanna Mining Co.
His reputation in China hasn’t been damaged by the naming blunder, he said.
Government Approvals
“The biggest hurdles we’ve got to jump over for the project overall, and you can take that to mean the contracts too, is the Australian government and Queensland government making sure approvals go through on time,” Palmer said.
His IPO, should it be sold at the top of its $2 billion to $3 billion range, may be the biggest in the industry since Eurasian Natural Resources Corp.’s $3 billion share sale in 2007, according to data on the Bloomberg. The sale has been delayed for a second time to March, the Australian newspaper reported Jan 25. Palmer said today there had been no delay because no timetable had been set.
Resourcehouse also has the rights to 10 billion tons of iron ore in Western Australia, according to Macquarie Group Ltd., one of the IPO managers.
04 / 02 / 10 in
In 2010, China coal output to reach around 3.3bln tons
It is expected that China's coal production in 2010 will reach around 3.3bln tons.
It is predicted that in the first quarter of 2010, the tight coal supply still last, and the high coal price still continues rising. In the second quarter, due to the seasonal drop in demand, the price may fluctuate, but the price in the entire year still post the climb trend during the stability.
In 2010, two favorable aspects have the impact on coal market. One is that the global economy recovering trend is basically emerged, the global power and steel production started to slightly increase, with the economic rebound, the crude oil and coal demands will continuously jump. The other is that China's economy gets warmer, affected by the governmental positive finance policy and moderately loose currency policy, the overall economy will pick up. The coal demand from power, steel, chemical, construction still rapidly increases, supporting the domestic coal demand to hike.
In 2010, the overcapacity and pollution in coal industry will be important task of macroeconomic control.
In 2010, the domestic coal production will come to around 3.3bln tons, China's coal demand still upswings. From the current high international coal price and international energy demand situation, the coal import scale should be lower than 2009, the coal imports in the full year will remain around 100mln tons, the coal exports probably reach 25mln tons.
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