Oil
Other Brazil (Oil): A Boost to Brazilian Crude Oil Exports to Asia
24-Feb-2017
Restriction on OPEC production has prompted Asian buyers to source crude oil from other producing regions. Brazilian crude exports into Asia rose nearly 20% from 2015 to 2016 and so far this year, Asian arrivals are up by another 20%. The last three months of exports to Asia averaged 526kbpd. The majority of Brazilian crude makes its way to China, but since 2017 volumes into India have picked up.
Brazilian oil output has not been affected by the current industry downturn because its large offshore projects have long development periods and FIDs were reached before the price collapse in 2014.
Production in Brazil is on track of reaching 4.5Mbpd by mid-2020s, with more than half of that coming from pre-salt formations. Nearly 1.3Mbpd is already coming from pre-salt deposits, with the Lula field now the largest producer in the country at 711kbpd.
Sakhalin-III: Gazprom to Begin First Exploration Well at Ayashsjy Block in Russia
24-Feb-2017
Russia's Gazprom Neft is set to drill the first exploration well on the Ayashsky Block in the Sea of Okhotsk in mid-2017. Gazprom acquired a license for the exploration, development and production of hydrocarbons at the Ayashsky Block earlier this year. The block is next to the Sakhalin-1 and 2 projects and forms a part of the future Sakhalin-3 project. Gazprom estimates the project has a recoverable reserve base of The Ayashsky block is next to the developed fields of the Sakhalin-1 and Sakhalin-2 projects in this already proven oil- and gas-bearing region, forms part of the Sakhalin-3 project. Recoverable reserves the project are estimated at more than 790Mboe.
Gas
Leviathan: Partners at the Giant Leviathan Gas Field Reach FID
24-Feb-2017
Partners in the giant Leviathan natural gas field approved a US$3.75bn final investment decision (FID) for the first phase of development, the largest energy project in Israel's history.
The US$3.75bn budget will add to US$1bn already invested in the field to date, in various exploration, appraisal, and planning activities.
The reservoir, located 100km west of Haifa, was discovered in 2010 and is one of the largest global offshore natural gas discoveries in the previous decade.The project is expected to be completed within the next three years and gas made available to the Israeli markets by the end of 2019.
Sakhalin-III: Gazprom to Begin First Exploration Well at Ayashsjy Block in Russia
24-Feb-2017
Russia's Gazprom Neft is set to drill the first exploration well on the Ayashsky Block in the Sea of Okhotsk in mid-2017. Gazprom acquired a license for the exploration, development and production of hydrocarbons at the Ayashsky Block earlier this year. The block is next to the Sakhalin-1 and 2 projects and forms a part of the future Sakhalin-3 project. Gazprom estimates the project has a recoverable reserve base of The Ayashsky block is next to the developed fields of the Sakhalin-1 and Sakhalin-2 projects in this already proven oil- and gas-bearing region, forms part of the Sakhalin-3 project. Recoverable reserves the project are estimated at more than 790Mboe.
Coal
Metropolitan: South32’s Acquisition of Peabody’s Metropolitan Mine Challenged
24-Feb-2017
The Australian Competition and Consumer Commission (ACCC) has expressed its concern that South32’s purchase of Peabody’s Metropolitan mine may reduce competition in the local region in the form of domestic supply to the Port Kembla steelworks, owned by Bluescope Steel. South32 announced in November 2016 that it had purchased a 100% stake in the mine and an associated 16.67% stake in the Port Kembla Coal Terminal (PKCT) from Peabody Energy for a total of US$200 million. With the only other, Non-South32 owned, substantially producing mine in the region, Glencore’s Tahmoor mine, set to close in 2018, South32 will control almost all metallurgical coal production in the region. A final ruling on the sale is expected in April 2017. AME expects the sale will go ahead with strict conditions on domestic availability and pricing.
Drayton South: Anglo’s Drayton South Project Rejected by NSW PAC for the Third Time
24-Feb-2017
Anglo American’s Drayton South project in the NSW Hunter Valley has been rejected by the NSW Planning Assessment commission (PAC) for the third time. Each time, Anglo has resubmitted a downscaled version of the project. The most recent submission was for a 5Mtpa mine with a mine life of 15 years. Originally, operations were expected to transfer seamlessly from Drayton to Drayton south as reserves were depleted at Drayton, However, Drayton closed in October 2016 and it is appearing that the Drayton South project is unlikely to go ahead is any form due to strong opposition from local residents and industry, as well as the PAC’s environmental concerns. AME believes it unlikely that Anglo American will submit a fourth application and will possibly sell the project as is.
Bengalla: New Hope Coal Reports Strong Q4 2016 Performance
24-Feb-2017
New Hope Coal has reported strong production in its latest quarterly report, ending 31st January 2017. Queensland raw coal production was up 1.8% year on year to 2.4Mt and saleable production rose 10.5% to 1.3Mt. Queensland coal sold and exported, however, fell 16% and 12% to 1.1Mt and 1.5Mt respectively, with exports adversely impacted by storm damage to its export terminal during the quarter. The terminal was out of action for almost a month, and so AME expects higher sales and exports in the next quarter.
New hope’s recent acquisition of a 40% in Bengalla netted the company 1.1Mt of raw coal production and 0.9Mt of saleable coal production during the quarter. Production was up 11% quarter on quarter which the company has attributed to mine sequencing. A seventh excavator was commissioned during the quarter to ensure that medium-term overburden removal targets are achieved.
Steel
Shijiazhuang Steel; Shijiazhuang Steel (New): Shijiazhuang Iron & Steel Will Move to the Industrial Zone from City
24-Feb-2017
China specialty steel producer, Shijiazhuang Iron & S Steel (Shigang) is scheduled to relocate from its current site in Shijiazhuang city to the city outskirts, about 50km from the present location. Shigang is part of the Hebei Iron & Steel Group (Hegang) with a crude steel capacity of 2.6Mtpa, and the new mill has a planned capacity of 2.2Mtpa. Construction of the new plant is scheduled to commence within 2017 and commissioning in late 2018. Once commissioned, Shigang’s city steelworks will be shut. In accordance with the requirements for the transition of new and old facilities that “Building before Demolition, Demolition after Completion”, Shigang has to dismantle the old facilities and equipment used for capacity replacement immediately after commission.
Other - China: CISA Held Meetings Address High Long Steel Product Prices
24-Feb-2017
The China Iron & Steel Association (CISA) held a meeting recently with long steel product producers to tackle the issue of surging domestic steel prices. The meeting called the association members to take joint efforts to stabilize the prices and take leading roles in guiding market expectations. In turn, long product steel producers have requested to be self-disciplined in their contribution to a stable steel market. This meeting shows government’s concern over the price jump, which has put the country’s capacity cut targets in jeopardy. According to Mr Liu Zhenjiang, the General Secretary of CISA, there is no fundamental support for substantial rises in steel prices, and the market would be able to reach a balance between supply and demand this year.
Yenakiieve Iron and Steel Works: Steel Plants and Mines in Ukraine Halt Operations on Trade Blockage
24-Feb-2017
The subsidiaries of Metinvest Group, both Yenakiievo Iron & Steel Works and Krasnodonugol, have been forced to halt operations, due to an ongoing blockage of railway transportation between the controlled and separatist led regions of Ukraine. Yenakievo steel’s iron ore supply and finished goods transport routes utilize the Yasinovata-Skotovata railway line, one of the affected lines, and the blast furnace No. 3 and No. 5, together with the basic oxygen furnace shop have stopped operating. For the same reason, Krasnodonugol has halted coal production at all mines. There is no information when the mills will resume its operation.
Copper
Aktogay: KAZ Minerals Produces First Concentrate at Aktogay
24-Feb-2017
KAZ Minerals reports first copper concentrate was produced from the Aktogay mine in Kazakhstan in February 2017. Construction of the 25Mtpa sulphide concentrator was completed and commissioning commenced in December 2016. KAZ aims to achieve commercial production from the concentrator in the second half of 2017 and expects Aktogay will produce 45–65kt of copper in concentrate in 2017, plus 20kt of copper cathode from the SX/EW facility. After producing first cathode in December 2015, the operation’s 2016 output totalled 18.1kt of copper cathode. AME forecasts the US$2.1bn Aktogay mine will produce an average of 110ktpa of copper over its first ten full years of production, comprising 95ktpa of copper in concentrate and 15ktpa of cathode.
Zinc
Flin Flon: Production from Hudbay’s Flin Flon Smelter on the Lower End of Guidance
24-Feb-2017
Zinc production from Hudbay’s 115ktpa Flin Flon smelter in Manitoba, Canada was on the lower end of guidance in 2016. Over the year, the smelter produced 102.6kt of finished zinc, 1% below 2015. The smelter was expected to produce 100-120kt of zinc in 2016, however, maintenance and concentrate availability reduced output to the lower end of guidance. Operating costs for the smelter were unchanged year on year at CAD$0.45/lb (US$0.34/lb). In 2017, Hudbay is expecting the smelter to produce 95-115kt of finished zinc. Long term, the smelter will start to see a decline in production beyond 2020, as Hudbay has ruled out importing concentrate for the smelter, choosing to reply on the supply from its nearby Flin Flon Complex and Hudson Bay mines. AME is forecasting the Flin Flon complex will close in 2020 and the Hudbay mines in 2027.
Gold
Beatrix: Gold Output Drops at Sibanye’s Beatrix
24-Feb-2017
Half-yearly gold output from Sibanye’s Beatrix gold mine in South Africa was down 7% year on year to 167koz in the second half of 2016, which AME attributes primarily to a drop in in-situ grade in the higher-grade underground segment of the operation. Underground ore milled remained stable year on year at 1.44Mt, but its yield, a product of grade and recovery, dropped by 7% to 3.45g/t gold. Surface ore throughput dropped by 5% to 720kt but the yield remained stable at 0.31g/t. The all-in sustaining cost (AISC) for the half was US$1,010/oz gold, up 10.5% half on half and 13.6% year on year. AME expect Beatrix to produce approximately of 330koz of gold in 2017.
Economics
Germany - Economics: German Economy Powering Into 2017 On Strong Growth
24-Feb-2017
Germany is entering 2017 on a strong footing after taking on the mantle of the fastest growing advanced economy in 2016. December Quarter GDP growth rose to 0.4%, quarter on quarter, up from 0.2% in the previous quarter. This has resulted in 2016 GDP growth of 1.9%, its highest growth rate since 2011. This expansion has been fuelled by consumer demand, with domestic consumption adding 0.9%, and government spending contributing 0.8%. Increased trade is also a feature, with exports up 1.8% in 2016. Exports for the December Quarter were up 1.4% quarter on quarter, following a decline of 0.3% in the previous quarter. Additionally, Germany’s budget surplus has hit a post-reunification high, with official figures from Destatis showing a surplus in 2016 of EUR23.7bn (US25bn), up 13% from 2015. Total government income came in at EUR1.1tn (US$1.2tn), while spending was at EUR1.38tn.