London Commodity News Monday 21st March 2011

© London Commodity Brokers of 35 Monday, March 21, 2011

TABLE OF CONTENTS CONTACT DETAILS................................................................................................................................ 2 COAL PRICES......................................................................................................................................... 3

Coal Market Overview ........................................................................................................................... 3 Coal Market Prices ................................................................................................................................ 3 SGX AsiaClear OTC Sub-Bituminous Coal FOB Indonesia Swaps.......................................................... 3

COAL MARKET NEWS............................................................................................................................ 5 Australian thermal coal prices extend falls on Japan quake..................................................................... 5 Coking Coal Mixed on Doubts on Demand, Energy Publishing Says ....................................................... 5 New South African port to cost US$14B ................................................................................................. 5 Coal falls on lower Japanese imports ..................................................................................................... 6 International Raw Material Market After Earthquake Hit Japan................................................................ 6 U.S. coal use off 6 pct from previous week-Genscape ............................................................................ 7 Biggest aftershock reserved for energy .................................................................................................. 8 Japan quake impact on energy, commodities and ports.......................................................................... 9 TEPCO venture keeps quake-hit coal power units shut......................................................................... 10 Devastation in Japan to have short-term effect on Australia's exports: Treasurer ................................... 10 Asian neighbours ramp up fuel exports to quake-hit Japan ................................................................... 11 Rio Tinto extends $3.9 billion bid for Riversdale by three days .............................................................. 11 RBS under fire over links to coal-mining companies.............................................................................. 12 BHP Billiton makes a move - finally ...................................................................................................... 12 Indonesia ready to export more coal to Japan ...................................................................................... 12 CIC takeover deadline extended again................................................................................................. 12 Coal India production to stay flat in 2010-11: Jha.................................................................................. 12 India: It boils down to securing coal..................................................................................................... 13 Thai PTT seals Australian International Coal deal................................................................................. 14 AOM bails out of Indonesian coal project.............................................................................................. 14 PLN to build dedicated power plants for Antam..................................................................................... 14 Govt to have South Sumatra major energy supplier for greater Sumatra................................................ 15 Coal Mine Explosion in Pakistan Kills 6, Traps 46................................................................................. 15 Mhlatuze accepts loss of coal mandate after scandal............................................................................ 15 Botswana mine raises funding ............................................................................................................. 16 Hwange Colliery of Zimbabwe Borrows $20 Million, Herald Reports ...................................................... 16 QHD coal shipment near 5Mt last wk.................................................................................................... 16 Inner Mongolia to put 2nd Jibao double track into operation by end-2011.............................................. 16 China to issue another 20mt coal export quotas ................................................................................... 16 S China ports coal prices rise last wk ................................................................................................... 16 Coke futures win passport ................................................................................................................... 17 China’s Shandong Province to Set Up Alternative Energy Group, Radio Says ....................................... 17 Huaneng plans coal gasification in Inner Mongolia................................................................................ 17 Chalco to mine coal in Qingyang city, studying aluminium -city official................................................... 17

FREIGHT ............................................................................................................................................... 18 Freight markets could soften next week due to Japanese ports closures and Libyan crisis..................... 18

OIL......................................................................................................................................................... 20 Oil Rises After U.S., U.K., France Begin Military Strikes Against Qaddafi .............................................. 20

STEEL ................................................................................................................................................... 21 CISA: China Steel Market to Fluctuate in the Later Stage ..................................................................... 21 Ukrainian steel industry gas consumption decreases in February.......................................................... 21 Sumitomo Metal delivers 1200 tonnes of steel from stocks ................................................................... 21 Japanese earthquake – status of JFE steel .......................................................................................... 22 Steel shipments from US and Canada service declined in Feb.............................................................. 22

IRON ORE ............................................................................................................................................. 23 IRON ORE NEWS .................................................................................................................................. 26


Iron Ore-Shanghai rebar sags on demand view, China tightening ......................................................... 26 Iron ore prices to drop for first time in five years.................................................................................... 27 China to launch iron ore import agent regime ....................................................................................... 27 China to set national standard for imported iron ore.............................................................................. 28 Vale keeps steelmakers sweet on pricing ............................................................................................. 28 Mbalam iron ore project more than doubles indicated resources - Sundance......................................... 29

FORTHCOMING CONFERENCES ......................................................................................................... 30

CONTACT DETAILS

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Office +44 (0) 20 7240 1112 Coal desk +44 (0) 20 7010 7500 Options Desk +44 (0) 20 7010 7502 Fax +44 (0) 20 7240 5122 Email: [email protected]

Clive Murray - CEO Paul Graham-Clarke - Director James Graham-Clarke Jessica Hydleman Helene Mitreva Stephen Petchey Jamie Jones Myles Clement Chris Hudson Kenny Groth Ted Larmour Ben Webb Steve Gong

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Gareth Hudson - Singapore Manager

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Stuart Murray - Hong Kong & China Manager Victor Chow Claire Cheng

China Office 2111-B, Flagship Tower, Cyber Port, 40 Hong Kong Mid Road Qingdao China 266071 T +86 532 8667 8682 F +86 532 8667 8683

Becky Bi 中國山東省青島市

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電話號碼: +86 532 8667 8682

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COAL PRICES

Coal Market Overview Friday 18th March, 2011, a quiet Friday market the end of an restless week –we opened about 1$ stronger before correcting downwards and ending a dash lower than yesterday’s close. Two physical trades in the early morning gave a lower push to the market with an April Newcastle phys 135kt cargo trading at US$120.5 and a Q311 FOB Richards Bay trading at US$123.75, one dollar under yesterdays trade for the same period. There was no activity whatsoever in the afternoon as we were all looking forward to the weekend after the exhausting week. Hélène Mitreva Coal Market Prices SGX AsiaClear OTC Sub-Bituminous Coal FOB Indonesia Swaps

Daily Settlement Prices of SGX AsiaClear OTC Sub-Bit Coal FOB Indonesia Swaps

Contract Period

Daily Settlement

Price

Prev Daily Settlement

Price US$

Change %

ChangeMar-11 84.00$ 84.00$ -$ 0.00%Apr-11 84.00$ 83.50$ 0.50$ 0.60%May-11 83.83$ 84.00$ (0.17)$ -0.20%Jun-11 83.58$ 84.50$ (0.92)$ -1.09%Jul-11 83.63$ 85.13$ (1.50)$ -1.76%Aug-11 83.63$ 85.13$ (1.50)$ -1.76%Sep-11 83.63$ 85.13$ (1.50)$ -1.76%Oct-11 83.79$ 85.13$ (1.34)$ -1.57%Nov-11 83.79$ 85.13$ (1.34)$ -1.57%Dec-11 83.79$ 85.13$ (1.34)$ -1.57%Jan-12 83.94$ 84.25$ (0.31)$ -0.37%Feb-12 83.94$ 84.25$ (0.31)$ -0.37%Mar-12 83.94$ 84.25$ (0.31)$ -0.37%

Period Average DSP Prev Averag

DSP US$

Change %

Change Product Name:Q211 83.8 84 -0.2 -0.23% Contract Size:Q311 83.63 85.13 -1.5 -1.76%Q411 83.79 85.13 -1.34 -1.57%Q112 83.94 84.25 -0.31 -0.37%Cal 12 84.38 84.25 0.13 0.15%

Source: www.sgx.com/asiaclearhttp://www.sgx.com/wps/portal/marketplace/mp-en/products/asiaclear/commodities

Indonesian sub-bituminous coal specs: 4,900 NAR, 28% max Total Moisture, 40% Vols, 10% max Ash, 1.0% max Sulphur, 1,200C AFT (IDT), basis 20,000t / day loadingrefer: http://cr.mccloskeycoal.com/

Below daily settlement prices are summarized below in quarterly and yearly basis and are for reference only

Below are the Daily Settlement prices of SGX AsiaClear OTC Sub-Bituminous Coal FOB Indonesia Swaps as at 8.00pm Singapore times on Friday, 18th March, 8pm Singapore time).

SGX OTC Sub-Bituminous Coal FOB Indonesian Swap1 lot = 1,000 metric tonnes

For more information please contact Mr. Tan Say Liang at [email protected] (DID: +65 6236 5130) or Mr. Kenneth Ng at [email protected] (DID: +65 6236 8388).

# Above daily settlement prices are for market-to-market open positions on contract month basis

8.00am - 4.00amLast Trading Day : 8.00am - 8.00pm

Trade Registration hours (Singapore

Time)

Last publication day (Friday) of IHS McCloskey Indonesian Sub-Bitumous FOB marker in the contract month

Cash Settlement using the arithmetic average of all publications of HIS MCCloskey Indonesian Sub-Bitumous FOB marker in the expiring contract month, rounded to 2 decimal places

Last Trading Day Final Settlement

price

The Indonesian sub-bituminous FOB marker is an assesment of the price of this quality coal delivered into ocean going vessels from a range of East and South Kalimantan load-outs. It represents the types of coal currently supplied by Adaro, Kideco, Bumi Resources (Melawan), ABK (Loajanan) and Straits Asia (Jembayan) amonst others

Daily Settlement prices for SGX AsiaClear OTC Indonesia Sub-Bit Coal Swaps

$65.00

$70.00

$75.00

$80.00

$85.00

$90.00

$95.00

$100.00

$105.00

Mar-11

Apr-11

May-11

Jun-11

Jul-1

1

Aug-11

Sep-11

Oct-11

Nov-11

Dec-11

Jan-12

Feb-12

Mar-12

Contract Months

Daily Settlement Price

Prev Daily Settlement Price

http://www.sgx.com/asiaclear

http://www.sgx.com/wps/portal/marketplace/mp-en/products/asiaclear/commodities

http://cr.mccloskeycoal.com/




Date 日期

Bid 出价

Offer 供价

API #2 Paper Mid

期货价 Bid 出价

Offer 供价

API#4 Paper Mid 期货价

Bid 出价

Offer 供价

NEWCPaper Mid 期货价

Mar-11 125.50$ 121.25$ 126.50$

Apr-11 127.70$ +#$0.50 121.50$ 121.50$

May-11 -#$1.00 127.55$ +#$1.50 121.50$ 122.75$

June-11 127.55$ 121.50$ 124.00$

Q2 11 127.60$ 121.50$ 122.75$

Q3 11 128.60$ +#$0.50 +#$0.25 +#$1.00 123.25$ 125.25$

Q4 11 +#$0.35 129.75$ +#$0.50 +#$0.50 +#$1.00 124.65$ 127.25$

Q1'12 130.00$ 124.30$ 127.40$

CAL 12 +#$1.25 129.00$ +#$0.15 123.85$ 127.60$

CAL 13 129.50$ 124.50$ 127.25$

CAL 14 131.00$ 125.75$ 127.75$

FOB Newcastle 纽卡斯尔离岸价

DES / CIF ARA 欧洲港口到岸价

FOB Richards Bay 理查湾离岸价

Below is a list of prices that we offered the market Friday, 18th, March 2011, the prices are fixed prices, the prices represented by # refer to those that are index based. The coal paper mid rate is the point between the bid and offer spread on coal derivatives.

Coal Paper Market Mid Point Curve 煤炭市场掉期中点

$90.00

$100.00

$110.00

$120.00

$130.00

$140.00

$150.00

Mar-11

Apr-11

May-11

June-1

1Q2 11

Q3 11

Q4 11Q1'12

CAL 12

CAL 13

CAL 14

API #2 Paper Mid 期货价

API#4 Paper Mid 期货价

NEWCPaper Mid 期货价


COAL MARKET NEWS

Australian thermal coal prices extend falls on Japan quake Australian thermal coal prices weakened further in the week ending Thursday, as the aftermath of Japan's deadly earthquake which shut several coal-fired plants drove prices down. Thermal coal on the Newcastle index for the week to date was $125.39 per tonne on Thursday, down from $129.87 a week earlier. Two of Japan's largest utilities, Tokyo Electric Power and Tohoku Electric declared force majeure on some coal deliveries due to shut power plants and damaged port facilities, with other utilities also expected to declare force majeure. "Certainly more players will declare force majeure," one Sydney-based trader said. Traders and brokers were still trying to place cargoes stranded by the quake, with a number reportedly being placed with other domestic utilities able to receive cargoes. Tohuku was said to be trying to place six cargoes. "First preference is domestic swap, second, sending to South Korea, then Taiwan, then China. I guess you can throw in Thailand and maybe India if you're desperate enough," the trader said. Prices in the Atlantic have risen in the past week on fears of an impending spike in coal demand, as European nations become increasingly sceptical of nuclear power in the wake of Japan's nuclear crises. The globalCOAL index for coal from South Africa's Richards Bay rose to $123.56 per tonne in the week to Thursday, up $3.85 from a week earlier, while the index for DES Amsterdam reached $127.69 per tonne, per $3.67 from a week earlier. Traders in the Pacific may eventually eye the Atlantic as a possible destination for Pacific coal if Newcastle coal prices continue decreasing, some market sources said. "It's just a matter of time before Pacific coal goes to the Atlantic I think," the trader said. But others disagreed, saying Newcastle prices would have to drop to $110 to $115 per tonne for a Pacific shipment into the Atlantic to make economic sense. Australia's coal ports have not felt any impact to exports due to Japan's quake, despite reports that several Japanese utilities have declared force majeure on shipments due to their inability to receive them, ports and industry sources said on Friday. Australia is Japan's largest supplier of thermal coal, and the world's second-largest exporter after Indonesia. Shipments from Australia's largest thermal coal port had not yet been affected, a source said. Another source suggested that the level of impact on Newcastle's coal terminal had been diminished by weather-related production problems. Gladstone Port Corporation has also not experienced any decrease in the number of shipments from the port with around 1.1 million tonnes of coal expected to be exported from the port this week, a spokeswoman said on Friday. About 30% of Gladstone's coal exports are thermal coal. Dalrymple Bay Coal Terminal, which exports about 15% thermal coal, also said there was no impact to its outflows due to the ongoing impact of flooding earlier on in the year on local mines. "We really haven't noticed any difference because over the last couple of months, the mines have been under force majeure anyway," Jesse Knight, an operations manager at the port said. Source: Reuters

Coking Coal Mixed on Doubts on Demand, Energy Publishing Says Coking coal prices on the U.S. spot market were mixed on doubts about demand following natural disasters in Australia and Japan, Energy Publishing Inc. said. Spot prices for low-volatility coking coal fell 70 cents to $320.55 a ton in the week ended today, according to the Knoxville, Tennessee-based data provider. High-volatility coal was unchanged at $270. “As the market deals with the twin upsets of the terrible flooding in Australia and the horrendous events in Japan, participants are getting and sending mixed signals,” Energy Publishing said. The data provider says it surveys buyers and sellers of coal to determine pricing. Source: Bloomberg

New South African port to cost US$14B South African parastatal Transnet has unveiled plans to build a new dugout port in Durban at a cost of around R100B (US$14.3B). Construction of the new port is slated to start in 2015 and its development and operation will be a partnership between Transnet and the private sector. The port will be developed in two phases – each costing costing R50B (US$7.15B) – and expected to be completed in 2019 when the current Durban port, which exports about 70kt of coal monthly, is expected to run out of capacity. Source: coalportal.com


Coal falls on lower Japanese imports Coal prices are continuing to fall on Friday as the potential for increased demand on the back of German reactor shutdowns has been offset by a drop in Japanese imports following last week’s devastating earthquake. The front month contract in the API 2 coal window last traded at USD 128/t, down USD 1.25 on Thursday’s close, while the front quarter contract last changed hands down USD 0.65 at USD 127.85/t, according to one broker. But front quarter prices are still more than USD 7 higher than levels at the start of the week. And a physical June-loading coal cargo for delivery in north-west Europe last changed hands at USD 128/t, up by around USD 8 from levels at the beginning of the month, according to London brokers Global Coal. “There was a big run-up following the Japan earthquake [last Friday], mostly on the ripple effect on nuclear generation around the world, particularly in Germany. But the market was soon overbought,” said a Geneva-based coal trader. “Initially, people thought the nuclear shutdowns in Japan would be bullish for coal,but [while the port infrastructure is still being rebuilt] large volumes of coal are being diverted away from Japan,” he added.However, any possible shutdown of French nuclear plants is very bullish, because like in Germany, they would replace such capacity with coal, said a Spanish coal trader. Germany has shut down seven nuclear reactors for safety checks in the wake of meltdown fears at Japan’s Fukushima plant, while France will also carry out an “audit” of its facilities, though there has been no word of shutdowns as yet. Meanwhile, the front month contract for Brent North Sea crude oil was last seen changing hands at USD 114.55/bbl on the ICE platform, down USD 0.35 on Thursday's close. The contract had traded in a USD 113.07-117.29/bbl range to the time of writing. Oil eased after Libyan foreign minister Moussa Koussa declared an immediate ceasefire, a trader said. Sentiment in the UK gas market remains nervous as participants continue to mull the potential effects of the Japanese reactor crisis on prices after the previous session’s sharp sell-off, traders said. There are fears LNG bound for Europe could be diverted to Japan to make up for a shortfall in nuclear production given several of the nation’s reactors are offline. Day-ahead gas traded in a 63.10-64.40p/th range, compared with previous session’s 63.75p/th close, according to brokers. The contract was last seen trading at 63.10p/th. In the European carbon market, the Dec 11 EUA carbon contract last traded at EUR 16.89/t, up EUR 0.10 day on day. “For the coming days we expect trading volumes to remain high and believe that further price increases are likely amid high volatility,” said Germany’s UniCredit bank. Source: Montel

International Raw Material Market After Earthquake Hit Japan The current global raw material market is also disrupted after the 9.0 magnitude earthquake hit Japan on March 11. As Japan is the world’s second iron ore importer and scrap exporter, global iron ore prices see further declining, while scrap export prices continue the upward trend. Furthermore, the powerful explosion of Japan's nuclear power station after the worst earthquake on record in Japan also drive up global coal prices on the expectation that global demand for coal will increase. Iron ore: spot prices continue falling, while forward market see rebounding The Japanese earthquake has triggered expectation that global demand for iron ore will shrink in a short run on the reason that Japan is one of the world’s largest iron ore importers, second only to China. Currently, some Japanese steel mills, like Nippon Steel and JFE Steel, are forced to suspend operations, suffering from power outage and shutdown of blast furnace. World iron ore prices dropped dramatically after earthquake hit Japan. On March 16, SteelHome iron ore price index hit US$164.3 per tonne, down US$4.8 per tonne compared with March 10. The Metal Bullion Iron Ore Index (MBIOI) was US$162.89 per tonne (CFR, 62%), falling by US$7.92 per tonne versus March 10; Platts IODEX was US$165.0 per tonne (CFR, 62%), a drop of US$6.5 per tonne. China's imported iron ore market is also disrupted by the devastating quake. The spot iron ore prices continue falling despite China's domestic steel prices showed the upward trend since March 14. On March 17, 63.5% grade Indian fines are priced at US$170 per tonne, down US$6 per tonne compared with March 11. However, the global iron ore demand is expected to pick up as Japan's after-quake reconstruction proceeds, which has already been reflected in iron ore forward market. On March 16, iron ore prices (62%, CFR, China ) soared to US$166 per tonne from US$163.75 per tonne on March 11, according to the Singapore Exchange settled swap contracts.


Scrap: prices fall at Japan home market, while keep rising in global market: As Japan is the world’s second largest scrap exporter, it is predicted that the disaster in Japan will have a significant impact on global scrap market. Japan exported 6.47 million tonnes of scrap in 2010, most of which were exported to South Korea, China and other Asian countries. Exports to South Korea and China account for over 90% of Japan's total exports. The earthquake caused damage to Tokyo Bay, which is home to Japan’s major ports. Japan's scrap exports will thus be affected. Actually, Japan's scrap export quotation began to fall as early as before earthquake hit Japan. It is reported that Daehan Steel purchased 15,000 tonnes of H2 scrap from Japan at JPY37,500 per tonne (FOB). After the earthquake, scrap prices also continued to fall at Japan home market. The 2# HMS benchmark price in Japan's Osaka market has dropped to JPY40,000-40,500 per tonne, delivered to steel mills. Although the logistics of scrap in Japan hasn’t struck by the earthquake, Japanese local traders all reduce shipment of domestic scrap so as to attend the scrap export tender held by Kansai Tetsugen. As it takes time to restore the ports damaged by the earthquake, it is predicted that global scrap prices will move up in a short run, while Japan's domestic scrap prices continue slipping. In Turkey, scrap procurement is seen increasing slightly since mid-March. However, scrap prices offered by US and Europe stay firm as the situation in Middle East remains unstable. The latest HMS 1&2 (80:20) export quotation offered by U.S. stays at US$470 per tonne (CFR) and that of shredded scrap at US$475 per tonne (CFR). Europe quotes HMS 1&2 (80:20) at US$455 per tonne (CFR), a small rise of US$15 per tonne. Coal: prices surge up worldwide: The powerful explosion of Japan's nuclear power station after the worst earthquake on record in Japan caused power-supply disruptions. As Japan relies on nuclear power for one-third of its electricity generation, any pullback in nuclear plant construction would be likely to give a boost to the demand for coal. Other countries may also increase coal imports warned by Japan's nuclear accident. Global coal prices now rise significantly. In Europe, the after-quake coal futures prices for 2012 grow by over 7%, as sources say that Germany will close its seven nuclear power stations till June this year, which operated before 1980. The nuclear crisis of Japan may also stimulate the demand for coal in Germany. On spot market, Vinacomin, a Vietnamese mining company, greatly raised export prices of low-quality coal dusts. Russian coal producers like Siberian Coal Energy Co. and Mechel OAO also announced to increase its coal exports to Japan. Russian Deputy Prime Minister Igor Sechin said March 12 that Russia could increase coal exports to Japan by 3 million to 4 million tonnes a year “quite quickly.” Source: steelhome

U.S. coal use off 6 pct from previous week-Genscape U.S. coal consumption fell 6 percent this week, Genscape said Friday, as a series of storms pushed across the country, giving way to above-normal temperatures by the end of the week that reduced overall need for heating. Use of coal dropped 8 percent from the same week in 2010, the power industry data monitor said. In the populous East, including the coal-dependent Midwest and Southeast, coal use fell 6 percent from the previous week and was down 8 percent from the same week last year. In the less populous West, which has fewer coal-fired power plants, coal use was off 6 percent week-to-week and 6 percent below the year-earlier level. Electricity generation in regions where coal competes as a power-generating fuel is down versus last year, and fewer heating-degree days -- a measure of cold temperatures -- are a key reason. Last week's weather patterns were quite varied as frontal systems moved eastward, but overall average temperatures were above normal from the Northeast to the Plains, according to weather service WSI Corp. Only parts of the Southeast near the Gulf Coast saw below-normal temperatures. Coal use swings up and down seasonally, and varies from week to week and region to region, depending on electricity demand to power heaters and run air-conditioners. Winter cold generally has less effect on coal use than summer heat because natural gas and oil meet much of the nation's heating needs. Air-conditioning relies more on electricity. Coal-fired plants produce 50% of U.S. electricity. Power generation accounts for more than 90% of U.S. coal consumption. Genscape's regional indexes are calculated separately from the national index and do not always add up to the separately calculated U.S. total, Genscape has said. Source: Reuters


Biggest aftershock reserved for energy

STOCK markets will go up and down, but one of the longer lasting features of Japan’s earthquake and subsequent tsunami is their effect on the world’s energy market. According to Deutsche Securities, energy will be most affected of the four broad commodity markets since Japan imports 85% of its energy use. The bank believes about half of the power loss from Japan’s shattered nuclear stations in could be offset with coal, resulting in an additional 3 million tonnes of thermal coal demand in 2012. The market may then be in deficit in 2011. Industrial capacity in Japan – the world’s third-largest economy at 8.2% of global gross domestic product (GDP) – will also fall off and may provide a compensatory affect. The fact remains, however, that imports of fossil fuels into Japan will be above normal levels, at least in the next quarter. Astonishingly, the plume of gas above the Fukushima plant, and faintly ridiculous efforts to douse a radioactive meltdown risk with sea water, have led other industrial nations to review the safety of aged nuclear facilities in their countries. On March 16, China announced it had suspended the approval of several nuclear plants, while German Chancellor Angela Merkel said seven nuclear reactors equal to 6.2 gigawatts and commissioned before 1980 would have to close, at least temporarily. This is obviously bad news for uranium oxide producers, the mineral patted into yellow cake and shipped off to nuclear plants where it is further refined. Surely the response of world leaders is, at best, a political one and at worst, sentimental over-reaction? Well, you can’t be too sure when it comes to the nuclear power industry. It is uniquely vulnerable to the caprice of popular consciousness which affects the permitting and development of new plants. You can see old chestnuts about risky nuclear energy being voiced in the media already. Take The Daily Beast, an online publication which is running a story on a nuclear meltdown survivor, one of the engineers at Three Mile Island. It’s worth noting that in the wake of the Three Mile Island and Chernobyl disasters in 1979 and 1986 respectively, the uranium market went into hibernation for close on 20 years. Quoted in the Financial Post on March 14, stockbroker BMO Markets highlighted a similar market risk: “The market’s expectations for nuclear power expansion may be reduced in the near term while the world considers its options.” In my view, other factors were at play to suppress uranium prices in the 1980s. There are now fewer inventories from nuclear weaponry, while the forecast double-digit growth China’s GDP means the country is developing the capacity of Eskom every year for the foreseeable future. This will surely require, in some part, a nuclear energy response. As for short-term uranium market risks, these are limited. About 80% of the world’s uranium is negotiated in long-term contracts. Even though Japan accounts for 12% of uranium demand, uranium price switches are mostly speculative floss. The prospects for coking and thermal coal through this crisis are a question of perspective. Interestingly, a Goldman Sachs report dated March 16 focuses almost exclusively on the short-term risk factors. Japanese ports within a 275-mile radius of the earthquake handled 46 million tonnes (mt) of coal (thermal and coking coal), as well as 50 mt of iron ore in 2010. The assumption is that at least part of these volumes are at risk in the short term while salvage efforts continue in the region. In the short term, the suspension of operations at Sumitomo Metal Industries Kashima plant is most significant. The likelihood is that some coal and iron ore for that matter - will be diverted into the spot market, which will place short-term pressure on the coking coal price. Most affected are the Australian coking coal producers, which export about a quarter of total output to Japan. In the longer term - amid a potential rethink of how nuclear energy is installed, while aged plants are maintained safely - it’s now possible to view the Japanese and European coal markets as growth areas again. Enter Exxaro Resources. The company is being tipped as the go-to coal stock on the JSE as the exposure offered by BHP Billiton, Anglo American and Xstrata, all significant exporters of thermal coal from South Africa, are somewhat diluted by their mineral diversity. Thermal coal comprises 33% of Exxaro’s net asset value, and 67% of group reported pre-tax profits. Moreover, Exxaro has decent exposure to the spot market for thermal coal. Of total coal derived revenue, including that supplied on contract to Eskom, 57% is from the spot coal market, even though this is only equal to a fifth of total volume produced. Optimum Coal Holdings is additional exposure for South African investors, but you have to get hold of the share first owing to a lack of liquidity. Source: Miningmx


Japan quake impact on energy, commodities and ports UTILITIES: - White smoke or steam rises from three reactors, Nos. 2, 3 and 4, at the quake-damaged Fukushimi Daiichi nuclear plant in northeastern Japan. - Japanese Safety Agency aims to restore electricity to reactors No. 3 and 4 by Sunday. Power blackouts can be avoided in the Tokyo area if demand stays at the current level, the trade ministry said. Tokyo Electric Power says radioactivity levels at the earthquake-crippled Daiichi nuclear facility are declining. TEPCO declares force majeure on some coal vessel deliveries due to outages at its coal-fired plants. TEPCO has announced rolling blackouts after its power generation was cut. Japanese utility Tohoku Electric declares force majeure on its near-term thermal coal shipments due to port damage. TEPCO 350-MW No.2 unit at the Ohi power station in Tokyo plant remains closed. REFINERIES: JX Nippon Oil & Energy Corp, an oil refining unit of JX Holdings, boosts oil product output at two refineries in western Japan by 30,000 barrels per day in the wake of a supply shortage in the east of the country. - Oil product output in Japan will recover to 3.4 million barrels per day by the end of March, a level above domestic demand, as idled refineries resume operations, said an oil industry body. - The government has asked 13 refineries in operation in West Japan to boost their running ratio to help ease the supply shortage. JX Holdings is in talks with South Korea and China on oil products imports to help Japan meet its energy needs. AOC Holdings says its refiner Fuji Oil Co has increased runs at the two fluid catalytic cracking units at its 140,000 bpd Sodegaura refinery after briffly reducing operations after the earthquake. Three Japan-bound naphtha shipping fixtures from the Middle East, totalling 205,000 tonnes, fails to be completed due to the shutdown of several Japanese crackers. Valero Energy said it is ready to supply refined products, such as gasoline and diesel, from its U.S. West Coast refineries to Japan. JX Holdings says the refinery of subsidiary Kashima Oil Co remains shut. JX Holdings declares force majeure on its refined product supplies as its stocks are depleted and distributions disrupted. The company is working to boost output at its refineries that are still operating and diverting products to domestic use instead of exports to meet a supply shortfall. Maruzen Petrochemical Co Ltd shuts its sole naphtha cracker in Chiba, east of Tokyo, with capacity to produce 480,000 tonnes per year of ethylene. Kyokuto Petroleum has restarted its 175,000 barrels per day (bpd) Chiba refinery. JX Holdings shuts its 404,000 tonnes per year Kawasaki naphtha cracker near Tokyo. Japan's Exxon Mobil group refiner Tonen General Sekiyu KK prepares to restart its 335,000 barrels per day Kawasaki plant, near Tokyo. Mitsubishi Chemical halts two naphtha crackers at its Kashima plant after a power outage. LNG: - Analysts say Japan may need to import about an extra 1 billion cubic feet of liquefied natural gas per day to make up for its lost nuclear power. Asian spot prices have risen by around 10 percent since the quake on expectations of higher demand. Royal Dutch Shell said on Friday two extra shipments of LNG from a Brunei plant have unloaded in Japan. Indonesia may export surplus LNG to Japan. Energy officials could not say how much gas was available from a field operated by Total, but one government minister said the decision would go up to the president, given Indonesia is trying to conserve LNG for its own growing domestic demand but also please Japan, a major infrastructure investor. - South Korea said on Friday Korea Gas Corp, the world's top corporate buyer of LNG, would supply 400,000 to 500,000 tonnes to Japan. Top exporter Qatar says it is ready to increase shipments to Japan, its long-term buyer. Energy trading house Vitol has offered two cargoes of LNG to Japan's Tokyo Electric Power Co. METALS: China's term shipments for refined copper from Japan may stay normal in March and April, though May and June remain a question mark after a massive quake forced some Japanese copper producers to stop production Toho Zinc Co stops operations at its 139,200 tonnes per year Annaka zinc smelter and Onahama plant, which is used to treat zinc for smelting. Japanese steel mills divert metallurgical coal cargoes due to plant outages. Possible destinations for the coal include South Korea and China. Production at JFE Steel Corp's 10-million-tonne per year Higashi Nihon plant is still halted due to power outages. JFE Steel is the world's No. 5 steelmaker. Fourth-ranked Nippon Steel has suspended operations at one small plant. Sumitomo Metal Industries Ltd, Japan's No. 3 steelmaker, says production at its main Kashima plant in Ibaraki prefecture remains suspended.


Sumitomo Metal's main Kashima plant has a fire in a gas holder, which has been extinguished but the company says it does not know yet when the plant will resume operations. Sumitomo Metal has a total capacity of 14 million tonnes a year and the Kashima plant produces 8.3 million tonnes. Nippon Steel's small Kamaishi plant, which had produced 60,000 tonnes a month of downstream steel products, remains shut. The company has resumed operations at a small seamless steel plant in Tokyo after briefly shutting it on Monday due to rolling power outages. PORTS: - Two piers at the medium-sized Onahama seaport in Fukushima prefecture are now available for 30,000 tonne vessels. Two smaller seaports further up the coast, Miyako in Iwate prefecture and Hachinohe in Aomori prefecture, will restore functions by the end of Thursday. Japan's Sendai Gas says it will likely take more than a month to restart its Shinminato liquefied natural gas facility. All the remaining LNG terminals in Japan are in operation. Three Japan-bound naphtha shipping fixtures from the Middle East, totalling 205,000 tonnes, fail to be completed after last week's quake forced the shut down of several Japanese crackers. The northeast coast ports of Hachinohe, Sendai, Ishinomaki and Onahama are so severely damaged that they are not expected to return to normal operations for months. Hachinohe handles a wide variety of goods, including fuel products to the local fishing fleet and U.S. military installations in Japan and South Korea. Other ports handle goods ranging from coal and rubber to LNG and machinery. The large container and oil port of Kashima is also closed, but officials expect four out 11 berths to resume operations in two weeks. Other damaged ports include Hitachinaka, Hitachi, Soma, Shiogama, Kesennuma, Ofunato, Kamashi and Miyako. The ports handle products ranging from sugar and non-ferrous metals to cars and wood products. Japan's top crude oil and LNG port Chiba resumes some operations with only one terminal, operated by Cosmo Oil, currently shut. The quake has damaged or destroyed three dry bulk vessels operated by Nippon Yusen Kaisha, one from Kawasaki Kisen Kaisha and one from Mitsui O.S.K. Lines. Source: Reuters

TEPCO venture keeps quake-hit coal power units shut A joint venture of Tokyo Electric Power Co and Tohoku Electric Power Co said its two 1,000 megawatt (MW) coal-fired generators at a plant in northern Japan remained shut and it had no timetable for a restart after they were damaged by a powerful quake a week ago. Soma Kyodo Power Co Ltd, the 50-50 joint venture, had shut one of the generators at the Shinchi plant, in Fukushima Prefecture, on March 5 -- prior to the quake -- for planned maintenance. Source: Reuters

Devastation in Japan to have short-term effect on Australia's exports: Treasurer Australian Treasurer Wayne Swan on Sunday said the devastation in Japan is likely to have a short- term effect on Australia's exports. While Swan said it was still too early to predict the full economic consequences, he said Australian exports could feel the impact in the coming months. "There is likely to be a short-term impact on some of our exports in coming quarters," he said in weekly economic note released on Sunday. "For instance, Japanese demand for steel-making inputs could fall in the near term following the closure of several large steel- making plants and the disruption to Japanese manufacturing. "But Japanese demand for energy products such as liquefied natural gas (LNG) and thermal coal could increase." Meanwhile, Prime Minister Julia Gillard earlier on Sunday said the nuclear crisis in Japan has no impact on Australia's uranium experts. "What is happening in Japan doesn't have any impact on my thinking about uranium exports," she told Sky News on Sunday. "We do export uranium and we will continue to export uranium." "Countries around the world will make their own choices about how they source their energy." Asked if it was time for an international debate on the use of civilian nuclear energy, Australian Foreign Minister Kevin Rudd said that there will be a time and a place for a full debate on that given what has happened in Japan, but he does not think that time and place is right at this very moment. Source: Xinhua.net


Asian neighbours ramp up fuel exports to quake-hit Japan Japan's neighbours pledged to ramp up liquefied natural gas exports to the quake-stricken nation on Friday, helping the world's third-biggest economy to replace the power supply crippled by the disaster. Japan's worst earthquake on record has sparked a nuclear crisis and caused the loss of around 9,700 megawatts of nuclear and 10,831 MW of thermal power generation, leaving millions without electricity in the midst of wintry weather. Delays and damage at Japanese ports following the 9.0 magnitude quake and tsunami, which also forced the shutdown of several coal-fired power plants, prompted the diversion of coal shipments bound for Japan to other countries. South Korea would supply 400,000-500,000 tonnes of LNG to its neighbour, as requested by Japanese utilities, while Indonesia, Japan's third-largest LNG supplier, said it may export excess LNG supplies to its major infrastructure investor. "We will continue to discuss with Japan possible further supplies if needed, while we maintain sufficient inventory levels," said a Korean government source with direct knowledge of the matter, who declined to be identified. The source is not authorised to speak to the media. South Korea's current LNG inventory stands at 1.5 million tonnes, and the source added that the supply to Japan would come from incoming shipments, not current inventory. Evita Legowo, director general for oil and gas at Indonesia's energy ministry said the Bontang plant, on Borneo island, is expected to see output fall 6 % this year, but it has surplus LNG left over from last year that could be shipped to Japan. "We may do that for the non-export committed LNG from the Bontang plant," Legowo told reporters. Energy officials could not say how much gas was available from a field operated by Total, but one government minister said the decision would go up to the president, given Indonesia is trying to conserve LNG for its own growing domestic demand but also please Japan, a major infrastructure investor. Indonesian oil and gas watchdog BPMigas said 20 LNG cargoes from Pertamina's Bontang plant were available for auction. Japan is the world's top importer of LNG, bringing in 70 million tonnes of the fuel in 2010, and may need to import an extra 1 billion cubic feet per day to compensate for the 9 gigawatts of nuclear power lost. Japan has largely relied on deals directly with producers and state governments to procure the additional LNG it needs, a strategy which has put a cap on LNG spot prices. Still, global LNG prices rose about 10% this week, with prices between $10 and $11 per million British thermal units (mmBtu), up from below $10 per mmBtu before the quake. China and South Korea have also signalled they will increase oil product supplies to Japan, with Petro China selling 200,000 tonnes to Japan, and South Korea's four refiners seeking to ship about 4.5 million barrels so far, as Japanese refiners struggle with the loss of a third of their 4.5 million barrel-per-day refining capacity. PetroChina supplied Japan 170,000 tonnes of gasoline, diesel and fuel oil from its 115,000 barrel-per-day joint-venture refinery in Osaka, barrels that were diverted from other buyers. The supply diversion from South Korea comes as regional diesel, jet fuel and fuel oil markets are supported by expectations of stronger demand for utility fuel in Japan to replace the loss of nuclear power and refining production, coming on the back of fears over Middle East tensions. But Japan is turning away coal and some crude shipments due to the loss refining capacity, shutdowns of coal-fired power plants and port disruptions. Indonesian coal shipments are being re-directed to China as two of Japan's largest utilities, Tokyo Electric Power and Tohoku Electric declared force majeure on some coal deliveries due to shut power plants and damaged port facilities, with other utilities expected to declare force majeure as well. "A couple of ports have already declared force majeure," Bob Kamandanu said. "A couple of vessels have also been re-directed. It could be to China because China is still short." He could not give details on quantities, but Kamandanu said the damaged north-east Japanese power plants use around 10 million tonnes of coal per year and he expected the quake-hit ports to be out of action for a minimum of six months. Source: Reuters

Rio Tinto extends $3.9 billion bid for Riversdale by three days Global miner Rio Tinto has extended its sweetened $3.9 billion bid for Mozambique-focused coal miner Riversdale Mining by three days. Riversdale shareholders will receive A$16.50 a share if Rio Tinto gets more than 50% acceptances by March 28, Rio Tinto said. As of Monday morning, Rio Tinto received acceptances on 34.94% of Riversdale shares. The offer will revert to A$16 a share if it does not reach the 50% mark by then, and will remain open for three extra days until April 6. Source: Reuters


RBS under fire over links to coal-mining companies ROYAL Bank of Scotland has come under fire after it emerged the bank - a main sponsor of a climate-change initiative - is a major investor in the coal sector. Friends of the Earth Scotland said a report, put together with a consortium including Platform and People & Planet, reveals RBS was involved in providing finance worth nearly €8 billion to the world's biggest coal mining and coal power generating companies over three years. The Edinburgh-based bank is a sponsor of Climate Week, which begins today. Mary Church, of Friends of the Earth Scotland, said: "Instead of using initiatives like Climate Week as greenwash, RBS should put its money where its mouth is and start financing the urgently needed transition to a green economy." Entitled Dirty Money, Corporate Greenwash and RBS Coal Finance, the report claims RBS provides more financing to coal mining and power companies than any other UK bank. A spokesman for RBS said: "We are committed to supporting the economy through the transition to more sustainable forms of energy generation." Source: The Scotsman

BHP Billiton makes a move - finally BHP Billiton has reportedly moved, finally, to table a coking coal price in India, but there is a twist. According to sources, BMA has told coking coal customers it will release provisional monthly prices next week with no quarterly pricing. The source said BMA today released a $300 provisional monthly price in India. At this stage it is unclear whether BMA will roll out this model globally or only to Indian buyers. The development will come as little surprise to coking coal buyers. BMA has been trying to push buyers to accept monthly pricing since the start of negotiations for 1Q of the Japanese fiscal year. Japanese steel mills reportedly refused to meet with the company and settled instead with Anglo Coal at $330/t for the first quarter. Source: coalportal.com

Indonesia ready to export more coal to Japan Indonesia is ready to provide more coal to Japan to meet a surge in demand following the 9.0-magnitude earthquake last week, the Indonesia Coal Mining Association said. Thousands of people have been left without hot water and power following the earthquake and the subsequent explosions at Fukushima Dai-Ichi nuclear power plant. Indonesian Coal Mining Association vice-chairman Kaz Tanaka told Reuters that the country was ready to provide additional coal to Japan to meet the expected surge in coal use. Though the additional demand for coal is likely to be limited to five to ten million tons over the rest of the year, it may increase if nuclear power plants damaged by the earthquake may not restart soon. Indonesia ships over 70% of coal to the Asian market, with Japan being the top buyer. Source: Ship Technology

CIC takeover deadline extended again CIC Energy has extended the deadline for its proposed takeover by India’s JSW Energy to May 31. It is the second time the deadline has been extended since JSW first agreed to buy the Canadian listed company for US$7.85/share. C$7.75/chare CIC Energy at “We continue to work to fulfill the conditions required for the transaction to close as soon as possible, but no later than May 31,” CIC chairperson and CEO Warren Newfield said. CIC is developing the Mmamabula Energy Complex in Botswana. Source: coalportal.com

Coal India production to stay flat in 2010-11: Jha Coal India Ltd (CIL) production is expected to be down marginally at about 430 million tonnes this fiscal over the last year's but profit would jump to close to Rs.11,000 crore, a top company official said on Friday. “The production will be less by one million tonne over the previous year,” Coal India's acting Chairman N. C. Jha said here on the sidelines a function here. However, despite de-growth in production as against 6.8 per cent rise in production in 2009-10, the company was looking forward for jump in net profit to close to Rs.11,000 crore, Mr. Jha said. In 2009-10, the net profit was Rs.9,830 crore. With the hike in coal price and higher realisation from e-auction of coal, the company is confident for registering higher profit. The company had blamed environmental clearances and restrictions for many new coal mining projects. On the after-effects of the Japan earthquake, Mr. Jha said this could lead to an increase in demand for coal as there might be some slowdown in the nuclear energy sector. Source: The Hindu


India: It boils down to securing coal Coal availability has become a major issue for thermal power projects. Earlier, the delays in projects would neutralise the delay in coal production. However, coal production in recent times has been lagging behind capacity addition as execution delays are shrinking, especially in the case of private sector projects. While the Ministry of Power is desperately trying to reduce the demand-supply gap in electricity, this is contingent on the availability of coal supply, given that two-thirds of the power projects to be commissioned during the current Plan are coal-based. Hence, JSW Energy in the December 2010 quarter saw its fuel expenses double year-on-year, even as power generation and revenues only went up by 45 per cent and 39 per cent respectively. This has been the case with most other utilities which did not have the flexibility to pass on the rising fuel cost by way of regulated tariff. Sharp rise in fuel cost was a function of international spot coal prices shooting up due to the Australian floods stalling coal production. WIDENING GAP: The coal demand this fiscal is estimated to grow by 43 per cent more than the 2006-07 demand levels while the production may rise by only 32 per cent, widening the gap. According to the Central Electricity Authority, another 20,000 MW of coal projects or (21 per cent of the current capacity) are expected to be added over the next 14 months while the coal production will only grow at historic rates of 6-7 per cent. This coupled with huge capacity-addition targets for 12th Plan aggravate the problem of fuel availability over the next five years. In 12th Plan (FY13-FY17), around 74,000 MW of thermal power capacity is expected to be commissioned, with a majority of it being coal-based. Lack of definitive fuel supply may also hamper the financial closure of the projects in the 12th Plan, as financial institutions insist on coal availability. In 2011-12, according to the Annual Plan Document, the import of coal is estimated to be 137 million tonnes as against 83 million tonnes in the current fiscal. The eleventh plan projections at 51 million tonne were revised higher due to slippages in production of Coal India . The import gap takes into account non-power sector demand also. Such high levels of imports are exposing the coal-dependent sectors to volatile international prices, which have risen significantly over the past few months. In the medium term, power players with their own captive blocks, if developed, will be better placed to tide over the widening demand-supply gap, followed by those with coal linkages. This category is followed by the companies which own mines abroad. These high quality mines are expensive compared with domestic mines, which would mean higher power tariffs to make the same returns. The last category, which sources coal in the e-auction market of CIL or global spot market, are most vulnerable to both fuel price and procurement risk. These projects typically sell in the short-term merchant market to improve their profitability. COAL BLOCKS AND LINKAGES Of the 208 captive coal blocks, around 113 have been allocated to private companies. The reserves of these projects are huge (49 billion tonnes of reserves), however, only 26 blocks are operational. These coal blocks, in 2009-10, cornered a modest 6.5 per cent of the total coal production. Of the 74,000 MW capacities to come up in 12th Plan, 44,000 MW capacity would have access to captive blocks. The Ministry of Power is concerned about the delays in developing these mines, on account of environmental clearances, obtaining mining lease and land acquisition. Most of the coal supply for the power sector is however through coal linkages. . More than 90 per cent of the non-coking coal mined by CIL is supplied to the power sector through this route. The ones with coal linkages would be subject to procurement risk while price risk is mitigated. But lack of adequate infrastructure for speedy movement of coal produced is a concern due to remote location of the mines and coal wagon shortage. MINES ABROAD Tata Power, Adani Enterprises, Reliance Power, Lanco Infratech , Essar Power and JSW Energy have acquired full or part-equity stakes in coal mining companies abroad (Australia, Indonesia and South Africa). Tata Power bought 30 per cent equity stake in PT Bumi Resources in Indonesia for taking care of its Mundra UMPP requirements. Reliance Power acquired two coal mining companies in Indonesia for its Krishnapatanam UMPP. Adani Enterprises has been the most aggressive of the lot in acquiring coal mines as it invested heavily in Australia and Indonesia, which will not only take care of its coal trading requirements but also the demand from its subsidiary, Adani Power. While these acquisitions will bring down the costs and increase the certainty of fuel availability, there areconcerns about logistics.


INTERESTING OPTIONS CIL is a good bet for investors, given that it is making up for the fall in production due to slippages by hiking prices. While the fuel price hike for power utilities is due, its concentration on e-auction prices, which are pegged to international spot prices, is margin-accretive. It is also increasing its focus on coal beneficiation (quality enhancement) which would mean strong growth in realisations, despite missing the annual production targets. The uncertainty on environmental concerns may continue to limit the new capacity additions. However, some clarity from the statutory standpoint is a positive for the stock. mong the power bets, the companies which have operational mines, such as Jindal Steel and Power, or Tata Power, which has operational mines abroad, are good bets. Investors should look out for companies with majority of the projects having coal linkages. For a company such as NTPC, all expenses are recovered through tariffs. Therefore, it is much safer bet compared to other private peers.Reliance Power has one of the largest domestic private coal resource bases; however, it will be a long time before one could see some production coming out of these mines. Once there is some clarity on production from its mines, it may turn out to be a good bet. Source: Hindu Business Line

Thai PTT seals Australian International Coal deal Says wholly owned subsidiary PTT Mining Limited (PTTML) completes acquisition of shares in International Coal Holdings Limited ("ICL") for A$544.1 million. * Says all shares in ICL have now been registered in the name of PTTML and an application to delist ICL from the Australian Securities Exchange will be made in due course. Source: Reuters

AOM bails out of Indonesian coal project ASX-listed Australia Oriental Minerals is exiting the coal industry through the sale of its 30% share holding in Indonesian coal mining concession holder Asiatic Coal for about US$1.08M. Asiatic Coal has a concession at Muara Teweh in Central Kalimantan where mining remains suspended pending regulatory approval from Indonesian authorities. Source: coalportal.com

PLN to build dedicated power plants for Antam PT PLN says it will build two dedicated power plants in Halmahera, Maluku, to give state mining firm PT Aneka Tambang (Antam) with 260 megawatts of electricity. The state electricity firm’s president director, Dahlan Iskan, said on Friday that the plants would service Antam’s proposed ferronickel smelter. “The investment will be around US$600 million, but if we can minimize the budget, we will only spend around $400 million,” Dahlan said as quoted by kontan.co.id news portal after signing an agreement with Antam’s representative in Jakarta. Dahlan said PLN would fund the project internally and sign an electricity purchase deal with Antam in November so construction could begin in 2012. “We are preparing the blueprints for the project and expect construction to be completed by 2014,” Dahlan said. PLN business and risk management director Murtaqi Syamsudin said that the project would be comprised of a 10x17 MW diesel power plant with a total capacity of 170 MW and a 3x30 MW coal power plant with a total capacity of 90 MW. Dahlan said electricity purchase deals were new to PLN as the firm typically supplied power to industrial firms with existing power plants. “This new business model is an effort to increase our income. Besides Antam, PLN will also build other power plants to provide electricity exclusively to companies,” he said. Meanwhile, Antam president director Alwinsyah Lubis said the company would invest around $1 billion to build the smelter using internal funds and bank loans. “It is also possible that we will generate funds from issuing bonds to finance the smelter,” he said. The smelter would be finished this year and produce 27,000 tons of ferronickel a year in 2012 and 40,000 tons in 2014, Lubis said. Antam is reportedly cooperating with the Mitsubishi Corporation in Japan and the French firm Eramet to finance the project. The mining firm also signed an agreement with state construction firm Hutama Karya to build a company town in Tanjung Buli, East Halmahera. The development of such a company town site along with the dedicated power plants would give a boost to the economic growth in the eastern part of the nation, according to Antam. (lnd) Source: The Jakarta Post


Govt to have South Sumatra major energy supplier for greater Sumatra

The government wants South Sumatra to become the main supplier of energy for regions of Sumatra Island and surrounding areas, as part of the implementation of the new economic corridor policy. Coordinating Economics Minister Hatta Rajasa said the province had the potential to be the major supplier because it was rich in gas, coal and coal-bed methane. “South Sumatra is the warehouse of coal, however, not even a single coal-fired power plant has been built here,” Hatta said Sunday in Palembang as quoted by kompas.com. “We can develop [the energy supplier] under the economic corridor context with South Sumatra as a major energy supplier for the entire island,” he added. Under the new economic corridor policy, regions are divided into clusters, or economic corridors, based on their proximity; and they are developed on a cluster basis. The government, Hatta said, was also set to develop an export port in Tanjung Api-api in the South Sumatra town of Banyuasin, which is to serve as a gate for exports of coal, rubber and palm oil. The minister added that South Sumatra had a present coal reserve totaling 50 millions tons. Source: The Jakarta post

Coal Mine Explosion in Pakistan Kills 6, Traps 46 A methane gas explosion in a coal mine in southwestern Pakistan killed at least six miners Sunday and trapped 46 others, a top mining official said. The mine, which is located in Baluchistan province, was declared dangerous two weeks ago, but the warning was ignored, said Iftikhar Ahmed, a top mining inspector. The mine is owned by the state-run Pakistan Mineral Development Corporation but leased to a contractor, he said. Rescue workers were trying to reach the trapped miners, but methane gas was hampering their attempts, Ahmed said. "We are trying to make a path, but the presence of gas is restricting the rescue effort," he said. The mine is located some 25 miles (40 kilometers) east of the provincial capital, Quetta. Source: Market watch

Mhlatuze accepts loss of coal mandate after scandal THE Mhlatuze Bay Coal Administrators (MBCA) which had its mandate removed by the Department of Mineral Resources because of allegations of misappropriation of at least R5,5m by one of its former members, will not contest the department’s decision and will continue its own internal investigation into the matter. The department said it had granted the administrative role to former trade and industry minister Alec Erwin’s Ubu Logistics over the Quattro programme. Quattro secures 4-million tons a year of export capacity through Richards Bay Coal Terminal for junior, black-empowered coal producers. The department said it had decided to "prevent further misappropriation of Quattro funds". Mhlatuze said it had uncovered the abuse of funds by an employee after he had left the board and the not-for-profit company had told its members of the missing funds at an annual general meeting in July. Mhlatuze director Bill Lamont said the company would not contest the department’s decision to remove it as an administrator and would continue its investigation and legal actions against the former employee. He said: "Whilst the (department) has conceded that it has no legal authority to replace MBCA, and this position is solidly supported by legal opinion taken by MBCA, the influence of the (department) as a participant in the administration of the Quattro programme is enormous and it would ultimately only be to the detriment of members to have an openly confrontational relationship. The company’s members have therefore already decided … not to institute legal action." Neither the company nor the department will identify the former employee. Mr Lamont said: "The decision that MBCA will definitely be continuing to pursue its internal investigations, headed by an independent consultant, has already been taken and endorsed by a general meeting of the members. The directors of MBCA are also fully cognisant of their fiduciary duties in respect of the recovery the amount misappropriated and will continue the civil action instituted against its former employee." Mhlatuze would assist the police in the matter. The department said that there had been "incessant" complaints by black-empowered coal producers that Quattro was being exploited by traders and large mining companies. Source: Business Day


Botswana mine raises funding The Morupule Colliery in Botswana has successfully completed capital raising for its Phula1.7B (US$258M) expansion project. The loans will allow Morupule Colliery to increase coal production capacity from 1Mtpa to 3.2Mtpa. Morupule is located near Palapye, 260km north-east of the capital, Gaborone. It is currently Botswana's only operating colliery and its principal customer is the state-owned utility Botswana Power Corporation (BPC). BPC is constructing the 600MW Morupule B power station, which is scheduled to commence commissioning in 3Q 2011 and commercial operations in 2012. This facility will secure the bulk of Botswana's power supply for the foreseeable future, replacing imports from Eskom in South Africa. Source: colaportal.com

Hwange Colliery of Zimbabwe Borrows $20 Million, Herald Reports Hwange Colliery Co. borrowed $20 million from the Development Bank of Southern Africa and another unidentified lender, the Herald reported, without saying where it got the information. Hwange, Zimbabwe’s biggest coal miner, will use the funds to resume mining operations and buy equipment, the Harare-based newspaper said today. The company said last year it was seeking $175 million to rehabilitate old equipment, the Herald said. Source: Bloomberg

QHD coal shipment near 5Mt last wk Qinhuangdao port, China’s top loading port of the fuel, handled a total of 4.8 million tonnes coal in the week from Mar 14 to 20, reported Qinhuangdao Seaborne Coal Market. An average of 686,600 tonnes coal was shipped last week, dropping 10.29% from a week ago, showed data. And, statistics showed coal transported to the port via railway slipped 0.48% from last week to 4.78 million tonnes, averaging 682,300 tonnes per day. Source; en.sxcoal.com

Inner Mongolia to put 2nd Jibao double track into operation by end-2011 The second double track of Jibao railway in North China’s Inner Mongolia autonomous region will be completed and commence operation on Nov 30, 2011, Xinhua News Agency reported, citing the head of the region’s land and resources office. This line starts from Jining of Ulanqub in the east and reaches Baotou in the west, passing through Hohhot, the official was cited as said. The second double track is the western section of Jingbao railway (Beijing to Baotou). Completion of the double track would boost the cargo shipment of Dabao railway (Datong to Baotou) by 50 million tonnes per year. It is an important channel to transport coal out of western Inner Mongolian and one main channel for China to develop economic and trade cooperation with Mongolia and Russia. Source: China Coal Resource

China to issue another 20mt coal export quotas The NDRC will handed out another 20mt coal export quotas for this year, following the first 18mt issued in January, according to NDRC’s announcement on March 17. The new licences will add up this year’s total to 38mt, an increase of 49% from last year’s 25.5mt. However, this year’s licences are thought far more than demand, as exports in the first two months are only 3.19mt, annualizing just 19.14mt, according to customs statistics. Last year only exported 19.03mt, leaving 6.47mt licences unused. No big increase can be expected this year, as China’s domestic demand will also see a solid growth. It’s understood that the Chinese government doesn’t want to obstruct exports this year given the ongoing crisis in Japan, and lets exporters to decide their own deliveries. Source: China Coal Times

S China ports coal prices rise last wk Coal prices at ports of South China rose in the week from Mar 12 to 18, according to Qinhuangdao Seaborne Coal Market. At Guangzhou port, the price of premium mixed coal with heating value of 5000Kcal/kg rose 25 yuan/t or 3.27% from last week to 790yuan/t and that of 5500Kcal/kg increased 15 yuna/t to 885 yuan/t, data showed. And, the price of Shenmu slack with calorific value of 6000Kcal/kg was 955 yuan/t at Ningbo port and that of 6500Kcal/kg was 1200 yuan/t. The increasing demand for coal from downstream would relieve the slack supply and demand of coal market. As of Mar 17, Guangzhou port had 2.31 million tonnes coal in stock. Source: en.sxcoal.com


Coke futures win passport

Coke futures have got approval from the State Council to be launched on Dalian Commodity Exchanges, announced Shanxi Coke Association yesterday. It is expected that Shanxi, the largest coke producer in China, will prevail the price forming of the futures. Of China’s total coke output of 387.57mt in 2010, Shanxi took 84.76mt, or 22%, an increase of 11.1% year on year. Trading details and specific launching schedule are not available yet. Source: China Coal Times

China’s Shandong Province to Set Up Alternative Energy Group, Radio Says China’s Shandong province will combine six local coal companies to form an energy group tomorrow, the China National Radio reported today. Yanzhou Coal Mining Co. isn’t included in the six companies, according to the report posted on its Web site. Shandong Energy Group will explore new energy businesses, including solar, wind, biomass, and nuclear energy, according to the report. Source: Bloomberg

Huaneng plans coal gasification in Inner Mongolia Huaneng, China’s largest power group, plans to build a large coal gasification project in Bayanha of Inner Mongolia’s Hulunbuir and has completed feasibility study currently. The project, able to produce 4bn m3/yr, is expected to involve RMB21bn investment and will require 18.7mt/yr of brown coal to be sourced from local mines. Eastern Inner Mongolia has rich brown coal resources suit for coal gasification. China’s second largest power group Datang is also working on two 4bn cbm/yr gasification projects, including the Keshiketeng project to be completed by 2012 in Inner Mongolia and the Fuxin project to come on line in 2014 in Liaoning province. Source: China Coal Times

Chalco to mine coal in Qingyang city, studying aluminium -city official Aluminum Corp of China Ltd (Chalco) has agreed to develop a coal mine in Qingyang city in the northwestern Chinese province of Gansu as part of a broader project to build a power plant and aluminium smelter, a city government official said on Friday. Chalco signed an agreement with Tangshan Jia Hua Group to jointly develop the Luochuan coal mine, expected to produce ramp up from an initial 1 million tonnes a year when completed in 2015 to 10 million tonnes annually, the city official said, a long-term output estimate bigger than the 5 million tonnes Chalco planned. Chalco, China's top aluminium producer, will hold a majority stake in the coal mine, a statement on the firm's website showed. (www.chalco.com.cn) The statement did not provide other details. Three Chalco officials were not immediately available to comment on Friday. Chalco is not expected to finalize details of the aluminium smelter until 2015 when the coal mine and a power plant are due to be finished, said an official at the secretariat of the Qingyang government. "They are doing preparation work for the aluminium smelter," the city official said, adding that the aluminium study was based on a designed capacity of 500,000 tonnes a year of metal. He said Chalco was expected to be the sole investor for the power plant and the aluminium smelter. Chalco plans to raise its aluminium production by nearly 5 percent to 4.03 million tonnes this year. Its alumina production would rise over 18 percent to 11.96 million tonnes in 2011. Source: Reuters

http://www.chalco.com.cn)


FREIGHT

Port of Newcastle – Daily Performance Report (as at midnight of 20th March 2011) There are currently 2 vessels assembled with 27 vessels currently in queue. The average waiting time last week was 17 days compared to 12 days from the previous week. Port Coal Stocks on hand 772,000 tonnes. Target volume throughput for February 95.9 MTPA. Source: Hunter Valley Coal Chain Logistic Team Richards Bay - Coal loading (as at 0600 on 18th March 2011) There are 4 vessels alongside this morning. There are 5 vessels at anchorage. There are a total of 6 berths available for loading. Source: LBH South Africa Price Indication: Capesize – RBCT – Rotterdam $ 9.25 Previous – $ 9.25 Panamax – RBCT – Rotterdam $15.61 Previous – $15.61 Source: Clarksons Daily Coal Report – 18th March 2011

Freight markets could soften next week due to Japanese ports closures and Libyan crisis The BDI was down by 1.98 pct (closing at 1531 points) mainly due to Cape index which was down by almost 11 pct and closed 1687 points. The panama index was down by only 1.78 pct and closed at 2094 points. The Supramax and Handy size index were holding which was up by almost 3 pct and closed at 1574 points and 755 points respectively. The Supramax vessels opening Feast/SE Asia region were seen fixed at healthy levels at around 16000 delivery N. China. The effects of 10-12 Japanese ports closure and the Libyan crisis will have an effect on shipping and it appears the markets could soften next week. The average charter rates was at Cape/US$ 9369 per day , Panamax/US$ 16821 per day , Supramax/US$ 16458 per day and Handy size/US$ 11336 per day. The Supramax index in the feast (S6 route) continued to be steady and was and was up by 1.28 pct (up by US$ 202 per day) and closed at US$ 15995 per day (last week US$ 15793 per day). The EC India/ China (S7 route) continued to softened and was down by 4.92%and closed at US$ 15938 per day. The S6 route is likely to continue to be steady/soft , whereas the S7 is likely to remain soft. The futures for three years (2011-2013) was at around Cape/US$ 19000 per day, Panamax/US$ 16500 per day, Supramax/US$ 15000 per day , Handy size/US$ 11500 per day. The congestion in EC Australia almost at same levels at 72 vessels this week (last week 81 vessels). The vessels waiting at main coal loading ports were at Hay point/5, DBCT/18, Gladstone/10, Abbot Point/1l, New Castle/36, Port Kembla/2 vessels. On the WC Australia iron ore vessels waiting reduced to 42 vessels (last week 61 vessels). The waiting at Indian ports for coal vessels was quite normal. The crude oil prices continued to be firm and closed at US$ 114.51 per barrel (last week US$ 113.47 per barrel). Bunker prices also firmed up during the week but closed lower US$ 643.00 pmt (last week US$ 638.50 pmt) for IFO 380 cst ex Singapore on 18th March 2011. Click here for Vistaar’s forecasted (terms & conditions apply) spot freight rates for coal & Iron-ore cargo for specific routes (cs) Source: Vistaar Shipping, Singapore INDICATIVE FREIGHT RATES


Source: Bulk Marine Ltd


OIL

Oil Rises After U.S., U.K., France Begin Military Strikes Against Qaddafi Oil climbed in New York after the U.S., U.K. and France launched cruise missiles and airstrikes at targets in Libya and as continuing unrest in the region renewed concerns the turmoil may spread and disrupt supplies. Futures advanced as much as 2.3% after Libyan leader Muammar Qaddafi vowed to repel allied forces pounding military installations. Ninety percent of Bahrain Petroleum Co.’s employees went on strike last week in response to a police crackdown on anti-government demonstrations, while Yemen declared a state of emergency on March 18. “Bahrain is more of the hotspot rather than Libya,” said Jonathan Barratt, MD of Commodity Broking Services Pty in Sydney. “The focus will have to be on Saudi Arabia and Iran, that is where the powder keg is at the moment and it’s based on Bahrain.” Crude oil for April delivery gained as much as $2.28 to $103.35 a barrel, in electronic trading on the New York Mercantile Exchange, and was at $103.26 at 12:58 p.m. Sydney time. The contract, which expires tomorrow, dropped 35 cents to $101.07 on March 18. The more-actively traded May contract rose as much as $2.42 to $104.27. Brent crude oil for May settlement increased $2.01, or 1.8 percent, to $115.94 a barrel on the London-based ICE Futures Europe exchange. The contract fell 97 cents, or 0.8 percent, to end the session at $113.93 a barrel on March 18. A no-fly zone is now in place over Libya, Admiral Mike Mullen, chairman of the U.S. Joint Chiefs of Staff, said yesterday. The coalition ordered Qaddafi to withdraw his forces from major cities after weeks of fighting with rebels that has left hundreds dead in the bloodiest of popular uprisings to have swept the Middle East this year. Bahrain’s government declared a three-month state of emergency on March 15 after troops from Saudi Arabia and other Arab Gulf states arrived to support the administration in quelling more than a month of protests led by the Shiite Muslim majority, which is calling for democracy and civil rights in the Sunni-ruled kingdom. Libyan output has fallen to less than 400,000 barrels a day, about a quarter of the production before the crisis, and may stop, Shokri Ghanem, chairman of Libya’s National Oil Co., said on March 19. The country produced 1.59 million barrels a day in January, according to estimates compiled by Bloomberg. Libya’s oil exports may be halted for “many months” because of damage to facilities and sanctions following a rebellion against Qaddafi, the International Energy Agency said in its monthly Oil Market Report on March 15. There is no need to call a special meeting of the Organization of Petroleum Exporting Countries to address the situation in Libya, said Abdullah Al-Attiyah, Qatar’s deputy prime minister and former oil minister. OPEC supplies about 40 percent of the world’s crude. Hedge funds slashed bullish oil bets from an all-time high on concern that demand in Japan will tumble after the country’s biggest earthquake. About 29 percent of the country’s refining capacity has been shut, Petroleum Association of Japan data show. The funds and other large speculators decreased net-long positions, or wagers on rising prices, by 13 percent in the seven days ended March 15, the most since the week ended Jan. 25, according to the Commodity Futures Trading Commission’s weekly Commitments of Traders report. Source: Bloomberg


STEEL

CISA: China Steel Market to Fluctuate in the Later Stage China steel market fell down in February and it is predicted to undergo fluctuation in the later stage, according to a monthly report from China Iron and Steel Association (CISA). CISA pointed out in the report that China steel market will face a more complicate environment in March. The two sessions, development program of the 12th five-year plan, 9-magnitude earthquake and tsunami in Japan will bring diverse impacts to China steel market. The nation will highlight the quality and efficiency of development when speeding up the transformation of economic growth and economic restructuring this year. China steel demand is expected to keep growing but the pace will slow. China will further optimize the composition of export goods and strictly control exports of high energy consumption and high pollution products. In this case, it is predicted that China steel industry will face a tougher export situation in the later stage. The relationship between supply and demand at domestic market will worsen as steel production remains high and buying activity slows. The inventory of five major steel products amounted to 18.53 million tonnes in 26 domestic key markets by the end of Feb. 2011, up 25.85 percent month on month. It increased for successive three months. Rebar and wire rod inventory rose by 43.26 percent and 51.62 percent respectively; HR coil inventory climbed 7.08 percent; medium plate and CR sheet inventory went up 13.75 percent and 7.76 percent. Steel inventory will continue rising in March, which will weigh heavily on the future market. Chinese steelmakers should keep a close watch on raw material and steel price change at world market as Japanese earthquake will impact on steel market, suggested CISA. Steelmakers should consciously control excessive fast growth of steel production and further optimize product mix to ease the oversupply pressure. Moreover, they are suggested to hold the line on ex-works prices and to strengthen efforts on cost efficiency. Steel price kept rising in the first twenty days of February as post-festival market was expected to continue booming and operating cost remained high, however, it obviously fell down in late Feb. as the nation continued tightening monetary policy, steel demand didn't perform as good as expected and steel inventory ran up to a relatively high level. Prices of eight major steel products monitored by CISA witnessed a monthly increase. High speed wire rod, rebar and angle price rose by 1.32%, 1.91% and 2.20% respectively; medium plate, HR coil, CR sheet and galvanized sheet price climbed 2.04%, 2.06%, 1.11% and 1.39%; HR seamless steel pipe price registered the largest increase of 2.96 percent. CISA attributed the price fall in February to: a) oversupply pressure emerged in the marketplaces as buying activity from steel-using industries slowed; b) raw materials price hike further pushed up operating cost of steelmakers; c) yuan-denominated new lending dropped sharply and liquidity tightened. Source: steelhome

Ukrainian steel industry gas consumption decreases in February

It is reported that in February this year, the Ukrainian steel industry consumption of natural gas declined by 36 million cubic meters compared to January to 480 million cubic meters, while the average daily consumption of natural gas during the month totaled 17.2 million cubic meters up from 16.6 million cubic meters in the previous month. According to the Ukrainian association of metal producers Metallurgprom, in January-February this year the domestic steel industry's average daily consumption of natural gas amounted to 16.9 million cubic meters. In addition, in January to February 2011, Ukraine steel industry decreased its power consumption by 0.2%YoY to 6.341 billion kWh. Source: SteelOrbis

Sumitomo Metal delivers 1200 tonnes of steel from stocks Japanese steelmaker Sumitomo Metal has made its first shipment of steel from inventories at its Kashima plant by truck to domestic customers after the incident. The shipment is mainly consisted of 1,200 tonnes of light weight H beam, pipe piles and steel sheet. The Company's facility in the eastern prefecture of Ibaraki suffered major damage by the earthquake and currently there is no exact time frame for the recovery. In fact, the plant produced 6.82 million tonnes of crude steel in 2010 and consists of mills producing pipe, tube, hot and cold rolled strip and plate while also consisting of galvanizing lines. Source: YIEH.com


Japanese earthquake – status of JFE steel

JFE Steel Corporation last week expressed its most heartfelt sympathies to the victims of the Tohoku-Pacific Ocean Earthquake, and its sincerest wishes for their earliest possible recovery. It said “Every possible step is being taken to confirm and secure the safety of all employees and families of the company, group companies and partner companies in the Tohoku region. Meanwhile, for East Japan Works operations in the Chiba and Keihin areas,all employees of JFE Steel and group and partner companies have been confirmed to be safe.” It said “Blast furnaces in the East Japan Works, including in both the Chiba and Keihin areas, have been blown in again following precautionary maintenance and inspection.” It added “Maximum efforts are being made to conserve energy due to the tight supply of electricity.” JFE said “Facilities of the West Japan Works and Chita Works have experienced no damage due to the earthquake and are operating normally.” It also said “Going forward, JFE Steel and its group companies would deeply appreciate all possible understanding and assistance for efforts to recover in the fastest time achievable.” Source: Steelguru

Steel shipments from US and Canada service declined in Feb The Metals Activity Report from the Metals Service Center Institute shows that inventory to sales ratios of steel and aluminum products at North American metals service centers rose in February 2011 as shipments of those products, while still above levels of a year ago, rose at lower growth rates than in January 2011. February shipments of steel products from US metals service centers totaled about 3.2 million tons or 20.2% greater volume than during February 2010. Those shipping levels, although good, lagged the 3.42 million tons and 32.5% YoY growth rate achieved in January. For the first two months of the year, US metal center shipments of steel totaled 6.61 million tons, 26.2% more than the same period last year. At current shipping rates, month end inventories of nearly 7.94 million tons of steel were equal to a 2.5-month supply. Shipments of steel from Canadian metals service centers totaled 500,300 tonnes in February 2011, a rise of 12.2% YoY but below January 2011 shipments of 545,100 tonnes or 22.7% more than shipments of January 2010. Total steel shipments for the first two months of the year of 1.05 million tonnes were 17.5% YoY greater than during the same months last year. Month end steel inventories totaled 1.52 million tonnes, up by 20.2% YoY and equal to a 3.0 month supply at current shipping rates. Source: Steelguru


IRON ORE

Monday 21st March 2011 Physical: The physical market has indeed found a base level and there are more trades seen in the market. The Indian exporters holding cargos at port still finding the prices lower than their cost and holding on for the price to recover further. This week may see a mixed reaction when the steel futures on Friday closed negative and on the other hand mills had not bought actively in spot market for almost 4 straight weeks. The iron ore indices continued its positivity. Swaps: The IOS market witnessed a substantial rally over the last few days, the April trading up to $160 on the day before retracing slightly in the afternoon. Some renewed vigour on the deferred periods have seen bids get more adventurous and the cal12 is comfortably over the $140s again after having dipped under over the last few weeks. The TSI printed up $0.80cent to $164.7 with Platt’s up $2 on the day to $168.50. 62% Swap Curve (62%掉期价格）

Change 变动 Previous 昨日

Period 时期Mid Point 中间价

Mid Point 中间价 Period时期

Mid Point 中间价

Mar-11 168.50$ $0.00 Mar-11 168.50$ Apr-11 159.00$ -$0.50 Apr-11 159.50$ May-11 156.50$ $0.00 May-11 156.50$ Jun-11 154.50$ $0.00 Jun-11 154.50$ Q2 11 156.50$ $0.00 Q2 11 156.50$ Q3 11 153.00$ $0.00 Q3 11 153.00$ Q4 11 151.00$ $2.00 Q4 11 149.00$ Q1 12 146.50$ $0.50 Q1 12 146.00$ Cal 12 142.00$ 0.75 Cal 12 141.25$

62% Swap Curve (62%掉期价格）

$135.00

$145.00

$155.00

$165.00

$175.00

$185.00

Mar-11 Apr-11 May-11 Jun-11 Q2 11 Q3 11 Q4 11 Q1 12 Cal 12

Current Mid-Point Previous Mid-Point

Source: TSI, Platts, Metal Bulletin

Recent TSI, Platts and Metal Bulletin Indeces

155

160

165

170

175

180

185

190

195

27-D

ec

28-D

ec

29-D

ec

30-D

ec

31-D

ec3-

Jan4-

Jan5-

Jan6-

Jan7-

Jan

10-Ja

n

11-Ja

n

12-Ja

n

13-Ja

n

14-Ja

n

17-Ja

n

18-Ja

n

19-Ja

n

20-Ja

n

21-Ja

n

24-Ja

n

25-Ja

n

26-Ja

n

27-Ja

n

28-Ja

n

31-Ja

n1-

Feb4-

Feb7-

Feb8-

Feb9-

Feb

10-F

eb

11-F

eb

14-F

eb

15-F

eb

16-F

eb

17-F

eb

18-F

eb

21-F

eb

22-F

eb

23-F

eb

24-F

eb

25-F

eb

28-F

eb1-

Mar

2-Mar

3-Mar

4-Mar

7-Mar

8-Mar

9-Mar

10-M

ar

11-M

ar

14-M

ar

15-M

ar

16-M

ar

17-M

ar

18-M

ar

US$

/t C

FR N

. Chi

na

TSI 62% MB 62% Platts 62%


TSI, Platts and Metal Bulletin Historical Data

50

70

90

110

130

150

170

190

10-N

ov-08

3-Dec

-08

31-D

ec-08

28-Ja

n-09

20-Feb

-09

17-M

ar-09

9-Apr-

09

5-May

-09

28-M

ay-09

22-Jun

-09

15-Ju

l-09

7-Aug

-09

1-Sep-0

9

24-Sep

-09

19-O

ct-09

11-Nov

-09

4-Dec

-09

31-D

ec-09

26-Ja

n-10

18-Feb-10

15-Mar-1

0

7-Apr-

10

4-May

-10

27-M

ay-10

22-Ju

n-10

15-Ju

l-10

9-Aug

-10

1-Sep

-10

24-Sep

-10

19-O

ct-10

11-N

ov-10

6-Dec

-10

29-Dec

-10

21-Ja

n-11

17-Feb

-11

14-M

ar-11

US$

/t C

FR N

. Chi

na

TSI 62% MB 62% Platts 62%

Indicative Iron Ore Prices in China （铁矿石中国现货和期货价）

China Local Spot Prices 中国现货价格

品名 RMB/wmt 湿吨58印粉 Indian Fines 990.00￥ 61印粉 Indian Fines 1,150.00￥ 63印粉 Indian Fines 1,260.00￥

62澳粉 OZ Fines 1,280.00￥ 65巴粉 BZ Fines 1,360.00￥

CIF China Import Prices 中国CIF进口价格品名 US$/dmt 干吨

63.5/63印粉 Indian Fines $171.00 62/61印粉 Indian Fines $160.0061/60印粉 Indian Fines $153.0060/59印粉 Indian Fines $145.00 59/58印粉 Indian Fines $135.00 58/57印粉 Indian Fines $128.00

CIF China Import Prices CIF 中国进口价格

$60$80

$100$120$140$160$180$200$220

3-May-1

0

19-May-1

0

7-Jun-1

0

23-Jun-10

9-Jul-10

27-Jul-10

12-Aug-10

08/30/2010

15-Sep-10

1-Oct-

10

28-Oct-1

0

15-Nov-10

1-Dec-10

17-Dec-10

5-Jan-11

21-Jan-1

1

10-Feb-11

28-Feb-11

03/16/11

US$

/ dm

t 干吨

IN FeO Fines 63.5/63 IN FeO Fines 62/61IN FeO Fines 60/59 IN FeO Fines 59/58


CIF China Import Prices CIF 中国进口价格

￥500

￥700

￥900

￥1,100

￥1,300

￥1,500

￥1,700

3-May

-10

19-M

ay-10

7-Ju

n-10

23-Ju

n-10

9-Ju

l-10

27-Ju

l-10

12-A

ug-10

08/30/2

010

15-S

ep-10

1-Oct-

10

28-O

ct-10

15-N

ov-10

1-Dec

-10

17-D

ec-10

5-Ja

n-11

21-Ja

n-11

10-F

eb-11

28-F

eb-11

03/16

/11

cny/

dmt 干吨

IN FeO Fines 58 IN FeO Fines 61 IN FeO Fines 63

AUS FeO Fines 62 BRZ FeO Fines 65

NOTE: Above prices may reflect a difference in relation to the financial price as Import Tax of 17%, Port handling charges and Rail Freight are included. Source: Umetal

Capesize Freight Routes C3, C5, FFA (Cape C3,C5运费及远期运费协议） FFA远期运费协议

Period 日期 Bid 买价 Ask卖价

Apr-11 10,750 11,500

Q2 11 13,650 14,000

Q3 11 15,000 15,500

Q4 11 16,000 16,500

CAL 12 17,000 17,150

Source: Cape Market Report 17th March 2011

Routes 航线 Cost 价格

(US$/t)

Movement 变动

(US$/t) C3 - Tubarao - Qingdao, China中国青岛 19.150 -0.258C5 - W Australia 澳洲西岸 - Qingdao, China中国青岛 7.367 -0.215

LDB Market Metric （LDB 市场矩阵） Maturity of Rebar Future 螺纹钢期货到期月 Oct-11Maturity of Iron Ore Swap 铁矿石掉期到期月 Oct-11TSI 62% Iron Ore Swap 铁矿石掉期价 US$/t 151.00$ Implied Input Cost Iron Ore to Steel (1:1.6) 钢材隐含价 US$/t 241.60$ Rebar Shanghai Futures Exchange 上海螺纹钢期货价（人民币） RMB/t 4,791￥ Exchange Rate 汇率 CNY/USD 6.5660Rebar Shanghai Futures Exchange 上海螺纹钢期货价（美金） US$/t 729.67$ London Dry Bulk Red Hot Spread LDB 红色价差 US$/t 488.07$


Red Hot Spread 红色价差 (US$/t)*:

$350.00

$400.00

$450.00

$500.00

$550.00

$600.00

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7/10/

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7/30/

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9/30/

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10/27

/2009

11/16

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12/4/

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1/5/2

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2/22/

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26/10

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11/15

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12/3/

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12/23

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2011

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2011

IRON ORE NEWS

Iron Ore-Shanghai rebar sags on demand view, China tightening Shanghai steel rebar futures fell more than 1 percent on Monday after China further tightened the amount of funds banks can lend and on demand uncertainty. The decline in steel prices in China, the world's biggest producer, could stall a nascent recovery in iron ore prices which rose for a second day on Friday after declining for about a month. "The rise in steel prices last week was pushed by traders, not end-users. We haven't really seen much cargo from our suppliers," said an iron ore trader in China's eastern Shandong province. "We need to wait and see whether real demand will pick up or not this week. This is quite essential to determine which direction the iron ore market will go." Adding to demand concerns, China on Friday again raised banks' required reserves, the latest installment in its monetary tightening cycle that many had thought would be put on hold after Japan's devastating earthquake. "It's getting more and more difficult to get a loan from the bank. This will definitely impact the market," the trader said. The most briskly traded rebar contract for October delivery on the Shanghai Futures Exchange fell 1.4% to 4,691 yuan a tonne by 0241 GMT, dropping for a third day in a row. The contract hit a one-week low of 4,684 yuan earlier. Key iron ore indexes, based on spot transactions in China, rose on Friday. Platts' 62% iron ore index IODBZ00-PLT jumped $2 to $168.50 a tonne, including freight, and The Steel Index's 62% benchmark .IO62-CNI=SI gained 80 cents to $164.70. Metal Bulletin's 62% gauge .IO62-CNO=MB rose 81 cents to $164.30. The indexes, which global miners use in setting quarterly contract rates, had slid 15 percent since hitting record highs near $200 in mid-February before regaining some ground last week as some Chinese steel mills replenished dwindling stockpiles. Top iron ore miner Vale said on Friday it will stick with quarterly pricing for sales to steelmakers, even as rival BHP Billiton sells some of its material on a monthly basis and would like its contracts to move even closer to daily spot prices. Source: Reuters


Iron ore prices to drop for first time in five years

For the first time in five years, contract prices of iron ore - the key raw material for making steel - will soften, as Japanese steel mills, that account for about 13% of global iron-ore consumption, have cut down on their requirement following production cutbacks. This will reduce the price of iron ore globally and in turn could cut prices of steel and soften the impact from rising inflation in countries including India , said persons familiar with the iron-ore price setting mechanism. Globally, Japanese steel mills are the first to negotiate with a small but powerful group of Australian miners and the agreed price is used as a benchmark worldwide, including in India. Negotiations for the April-June quarter are currently on and according to senior officials from India's largest iron-ore company, NMDC and user companies, the prices will come down by an unspecified amount in the forthcoming quarter. Spot prices of iron ore delivered to China have already fallen 14.5% since mid-February to $165 a tonne, the lowest since late November, according to agency reports. Indications of a softening contract price have mainly sparked as the spot prices are below the December quarter price of $178. "Prices of iron ore in the short term should come down as Japan has cut down on steel production," says Jatinder Mehra, a director with Essar Group that owns the country's third largest steel manufacturing facility. "But for the long term, given the prospect of a massive rehabilitation in Japan, prices could pick up again," he added. Japan's steel output will sharply decline in March as 20-30% of the nation's manufacturing facilities that have some of the world's high grade players such as Nippon Steel, Sumitomo, have suspended operations due to the earthquake, according to the Japan Iron and Steel Federation. Prices of iron ore had hit record highs in January when they reached $200 a tonne due to strong demand in China and other Asian countries. Low inventory of the ore had also contributed to the spike in prices which have been on a run for four to five years due to construction activity in Asian countries. NMDC, the country's largest iron-ore producer and a leading exporter, says it sends about 10% of its output to Japan based on long term contract. "Most of what we supply to Japan is based on long-term contracts. Spot prices of iron-ore fines may get affected due to perception about Japan's recovery and demand," said a senior NMDC official. NMDC exports 3 million tonne of ore to Japan. NMDC chairman and managing director Rana Som is scheduled to travel to China next week for price negotiations with China. The state-owned miner, which is a major supplier of iron ore for large domestic steel manufacturers like JSW Steel , JSW Ispat, Essar Steel and Rashtriya Ispat Nigam, also says it expects Japan to step up its production and divert more metal to the home market as economic recovery gets underway in the archipelago. "In the short term, say between three weeks to a month, the impact will be more pronounced on iron ore prices. Japan imports close to 135 million tonne of iron ore every year. Since perception plays a big role in pricing, the effect will be more visible in the spot market where we could see a blip," said Kishor Ostwal, chairman and managing director of CNI Research . "However, Japan will soon start rebuilding its economy on a massive scale and will require a lot of steel. Since the country has adequate steel manufacturing capacity to meet its own demand, we can expect a revival in demand for iron ore from Japan in the medium term," he added. Source: The Economic Times

China to launch iron ore import agent regime China will launch the iron ore import agent system in order to regulate the sector, with rumours suggesting that a document has been approved by the State Council and might be published in April as the earliest. Under the new rule, importers can only sell their imports by a fixed commission rate to steel mills, in order to avoid the chaotic trading among traders currently. Commission rate is estimated at 3-5% of the contract value. China allows only 70 steel enterprises and 30 traders to import iron ore presently, and this has led to speculations to achieve personal gains. It is thought a good time to regulate the sector now when market is gloomy. The China Iron and Steel Association estimated weak prices for iron ore this year, given that China’s steel demand is expected to grow 30-50mt and the increased demand for iron ore can be sourced domestically. Source: China Coal Times


China to set national standard for imported iron ore China is preparing to establish a national quality standard for imported iron ores, the Shanghai Securities News reported Friday, citing an industry expert with knowledge of the matter. Luo Bingsheng, former executive vice chairman to the China Iron and Steel Association, said the standard will take into account factors such as water content and impurities, and substandard iron ores will not be imported. Luo also said the steel industry will implement an agent policy within this year to regulate the iron ore import market. Under the policy, agents import iron ores and sell them to steel mills for commission fees. China's steel mills have been struggling to make a profit since costs began rising, especially for iron ore. Market experts speculate that iron ore prices may fall in the near future, because the earthquake and following tsunami that hit Japan on March 11 may result in less demand from Japan. But Zhu Kai, global sales director of Brazil's mining giant Vale, said that no Japanese steel mill has cancelled an order so far, and Vale's sales to Japan may not be affected, according to the newspaper. Japan imports 100 million tons of iron ore each year, and about 31 million tons are sold by Vale, Zhu said. "The impact on Japanese steelmakers has been limited, despite the magnitude of the natural events, and most of them have resumed operations," Vale said according to Bloomberg. Source: China Daily

Vale keeps steelmakers sweet on pricing Top global iron ore miner Vale has told Reuters it will stick with quarterly pricing for sales to its steelmaker customers, sparing them for now a more market-sensitive system which they have fiercely resisted. Its rival BHP Billiton is already selling some iron ore on a shorter term monthly basis and would like its contract prices to move even closer to the daily market price, a spokesman for the company said. Vale, along with the world's top miner Anglo-Australian BHP Billiton and Rio Tinto, dumped a decades-old annual benchmark system and moved to quarterly pricing in 2010. The cumbersome yearly negotiations suited steel makers, shielding them from short term price swings in feedstock ore. But the system collapsed as high profile talks between the top miners and Chinese steelmakers became increasingly intense. China imprisoned Rio Tinto's iron ore head in charge of price negotiations last year for accepting bribes and stealing commercial secrets. "Vale is selling all contracted volumes on quarterly pricing. It is very happy with the quarterly prices and has no intention to switch to monthly prices at this time," Vale's global marketing director Pedro Gutemberg said. "We believe the 3-month period is good enough to avoid major gaps with actual market prices and, on the other hand, smooth volatility of the monthly period." Steelmakers welcomed Vale's decision. "It is the right decision not to move further down this road," said Axel Eggert of for the European steelmakers association Eurofer. "Monthly iron ore pricing is negative for the steel industry and for its customers. It would be even worse (than quarterly pricing) as it would increase price volatility further." But quarterly pricing could be a short-term compromise, analysts say. The industry may eventually move to even shorter index-based pricing mechanisms or even futures contracts. While Vale avoids further stress form major steelmakers, BHP Billiton, already pricing part of its iron ore on a monthly basis, would like contracts to move even closer to daily spot prices. "For all our products we would like to receive the price of the day every day," a BHP spokesperson said. "BHP Billiton has a mix of contracts on various quotation periods as well as some spot sales. These include contracts priced on a monthly or quarterly basis, based on the average index price of the quarter or month, respectively, in which the shipment is due to take place," he added. Rio Tinto is matching Vale in the pace of its pricing strategy. It intends to go into 2011 using the same quarterly system it used in 2010, said Sam Walsh, executive director and chief executive Iron Ore. Anglo American's Kumba Iron Ore, said it is also sticking to quarterly pricing for now but changes are possible with the agreement of customers. "We have moved 100% of our contracts to quarterly prices and this is where we are," Kumba's head of commercial Timo Smit said. "We would like to engage our customers to see what could work for both of us." Australia's third largest iron ore miner Fortescue Metals Group as asked Chinese steel mills to pay an average of Platts index prices over the five days after cargoes have arrived at ports, mills and traders told Reuters. Europe's top producer, Swedish state-owned miner LKAB, said it is likely to stick to annual contracts. Vale and Rio Tinto use a quarterly system in which prices are decided by a three-month average of the Platts North China 62% FE CFR index IODBZ00-PLT beginning four months before the relevant quarter. Source: Miningmx


Vale Sees No Shrinking Demands from Japan, Eyeing Further Expansion

Further Iron ore Expansion: Vale’s production capacity for concentrate and pellet will reach 522 million tonnes by the year 2015, said Michael Zhu, Vale’s global bulk material sales director on March 17, 11. Owning to the outstanding production system, annual capacity of Vale, the largest iron- ore producer in the world, has hiked to 322 million tonnes this year from the 170 million tonnes in 2002. The high grade commodity, freshened logistic solution and sustainable development is making for Vale’s passage deficiency. The superiority of those advantages is to further exert itself in the future. To make it more competitive, Vale is also eying chances in emerging economies and more world-class iron ore reserves in a bid to diversify the assets. Demand in Japan Still Remain in Place: Iron ore shipments to Japan haven’t been affected the earthquake, said Michael Zhu, Vale’s global bulk material sales director on March 17, 11., breaking the previous market projection that the demand for the commodity in Japan will shrink and price is to drop as well. Michael said Japanese clients did not propose a postponement or declare force majeure in deliveries. Japan ’s annual demand for iron ore is around 100 million tonnes, of which 50-60 million tonnes are shipped from Vale.Vale is now keeping their close link with Japanese buyers for further information. Source: steelhome

Mbalam iron ore project more than doubles indicated resources - Sundance Australian mining firm Sundance Resources said on Thursday recent finds at its Mbalam iron ore project in Cameroon had more than doubled the amount of indicated resources in the area. Indicated resources give the West Africa-focused miner, confidence in the potential of iron ore to be mined in the area. Sundance said indicated high-grade hematite had more than doubled to 417.7 metric tonnes, following a large drilling programme in the past 12 months, compared with 169 MT previously reported. News of the find pushed Sundance shares up 9.3% on the day. "This resource estimate further strengthens our confidence of the viability of this project. We are now approaching half a billion tonnes of high quality iron resources and 85 per cent of that is now indicated," Sundance Chief Executive Giulio Casello said in a statement. "We have a globally significant project capable of producing 35 million tonnes per annum of high-quality iron ore for at least 25 years," he said. Casello said the first phase of the project consists of a planned railway and deep water port. The company last year delayed the start-up of production to 2013. The company said in February the estimated $3.4 billion cost of the project was increasing. Source: Mineweb


FORTHCOMING CONFERENCES


Conference and post-conference field trip

As demand for coking increases in these constrained times, Mongolia has made another bold move by exporting coals by rail through to Eastern Russian seaport of Vostochny. This has changed the view that China is Mongolia’s only real customer due to the barriers of distance. Mongolia is in a unique position as one of the largest coking coal deposits in the world, but at present one void of major export infrastructure. With the cost of mining below US$10 tonne this provides the Mongolia coal industry with huge opportunities in the future as the industry develops. We hope to see you at the conference in Ulaanbaatar in April 2011.

Further information

For all general enquiries and for further information please contact: Susie Hansford on +44 (0)1730 236174 or email: [email protected].


London Commodity News Monday 21st March 2011

Documents

Transcript of London Commodity News Monday 21st March 2011