Archive for December, 2015

Company Investors going wild for world no 1 commodities player

Friday, December 11th, 2015

Copper-Smelter-Altonorte-Glencore-333-300x250

At the end of trading in London on Thursday shares in Glencore plc (LON:GLEN) was priced at 89p, up 7.4% in colossal volumes of more than 134 million shares traded.

In New York Glencore’s (GLCNY) over the counter stock advanced by more than 10% in equally busy trade bringing the company’s market value back to within shouting distance of $20 billion.

The reason behind the surge is the Swiss mining and commodities trading giant’s announcement that it has increased its debt reduction target and cut spending plans. Again.

That these type of corporate initiatives (which are now a common feature of the industry) can inspire such a frenzy is a good indication of just how much turmoil and uncertainty there is in the mining sector.

The Baar-based company said it now aims to reduce its debt load by $13 billion from the previous target of just over $10 billion. Some $8.7 billion has been cut under the plan. By the end of next year Glencore wants the pile down to $18 billion to $19 billion.

Down 70% just this year despite today’s bump, Glencore is now worth $15 billion less than before the Xstrata takeover

Glencore CEO Ivan Glasenberg also announced its capital expenditure for 2015 will come in at $5.7 billion, $300 million below previous targets while next year’s outlays will be cut to $3.8 billion from $5 billion.

Apart from idling copper mines in central Africa, cutting coal production in Australia, reduce lead and zinc production in central Asia and inking streaming deals for its precious metals byproducts in South America, Glencore is also putting up assets for sale to cut costs and raise money.

In October, Glencore said it began the sales process for its Australian copper mine New South Wales and its Lomas Bayas copper mine in the Atacama desert in Chile. The company expects initial bids by mid-December and completion some time during the first half of 2016. Glencore has the same timeline to sell a stake in its agriculture business.

Glencore was first floated in May 2011 and two years later the company acquired coal giant Xstrata, turning it into the world’s fourth largest miner. Down 70% just this year despite today’s bump, Glencore is now worth $15 billion less than before the Xstrata takeover.

Image supplied by Glencore show Anibal Contreras clearing slag at the company’s Altonorte metallurgical facility, northern Chile.

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Henry Sapiecha

 

Why is the US reluctant to bomb ISIS oil fields?

Saturday, December 5th, 2015

oil rig image www.www-globalcommodities.com

There has been some revealing new information coming out recently regarding the strategy against ISIS. One aspect many find troubling is the apparent failure of U.S. and coalition forces to sufficiently target and destroy oil infrastructure located in ISIS territory, which accounts for a significant portion of the terror group’s annual income. The argument goes, if we want to impact their operations, we should target their primary sources of income, and choke off their operational funds. So, why does ISIS oil infrastructure still stand? Is this the result of an intelligence failure? Negligence? Or, is there a more purposeful reason?

Using data from the Department of Defense, we can see the targeting of oil infrastructure has indeed been a relatively low priority. Buildings and military positions receive the bulk of coalition attention, and only 260 oil-related targets have been destroyed since operations began, out of 16,075 targets damaged or destroyed. And, we now know just how many of these oil-related targets remain. So, what reason could coalition forces have for holding off?

We now know with a high degree of certainty that ISIS receives the majority of its oil income selling unrefined crude, at the pump. There was some idea this was the case, but now it is more certain. This means the ISIS oil trade goes as far as pumping oil from the ground, and then selling it to a long line of waiting tanker trucks that are typically not affiliated with the group. And, while ISIS used to run some marginal refining operations, that appears to no longer be the case. Additionally, we now know the organization’s largest market is not from exports, but through sales to its local, monopolized market in northern Syria. The fact that most of the income is local, and not from exports is even more fascinating when you learn that not only does this oil find its way to local civilians that need fuel for power generation, but that much of the fuel finds its way to Assad’s government forces and the various rebel groups that are arrayed against ISIS itself.

We also now have a better understanding of the extent of ISIS’ diverse revenue stream outside of oil. For instance, last year, in the midst of the chaos in northern Iraq, the terror group turned to robbery, and stole well over $500 million from Iraqi banks. They also onerously tax the locals that are unfortunate enough to live under their rule. And, most surprising are the large revenues garnered from farming on very fertile Syrian and Iraqi land. These sources are far more important than the oft-reported revenues from hostage taking and the selling of sex slaves. This tells us oil is important, but not a silver bullet to disrupt operations.

So, a possible reason for not decisively interrupting oil operations could include preservation of infrastructure for rebuilding after the conflict. This certainly has precedent, since coalition forces have tried this in Iraq and Afghanistan most recently, and territorial shifts occur rapidly in this current conflict. Consider this a lesson learned from Kuwait in 1991.

Another possibility is the US does not want to cause any environmental damage in the surrounding region, having learned another hard lesson from the First Gulf War. This is possible, but highly unlikely. In the face of open war and killing enemies, it is extremely difficult to imagine any government placing environmental concerns over decisive strikes against an enemy. This approach does not have precedent.

Another scenario, which may be the be most plausible, is a play for local fighters to turn on ISIS, prevent further humanitarian issues in the region, and to maintain supplies to rebel groups fighting both ISIS and Assad. A loss of fuel in this region would be extremely detrimental to the local population, which relies overwhelmingly on generators for power, fueled by ISIS oil. The same goes for all the groups fighting ISIS – they all receive fuel from their enemies’ oil pumps. Without fuel, this could hamper the war effort on the ground, and even draw the local population into further compliance with ISIS. Since oil provides the lifeline for many civilians under ISIS rule, this must be taken into account for any long-term strategy in the region.

Some might mock the fact that the U.S. Air Force, before a recent strike, dropped pamphlets on the oil transport vehicles giving the occupants 45 minutes to vacate their tankers before air attacks would commence. This is simply a recognition of how crucial a local population is to combatting insurgencies and terrorist groups. We know the tanker drivers are most likely not affiliated with ISIS in any way, and might even despise the terror organization. They might even be retrieving fuel to be delivered to the very forces that are fighting against ISIS.

It’s incredibly important to keep in mind the limits of military power when waging counter-terror and counter-insurgency operations, a fact not lost on top military officials in Washington. Our understanding as to how to effectively combat terror groups has grown immensely in recent years, and key aspects of this are to allow for the creation of divisions in the territory and the terror organization itself and to ultimately draw in the local population to your side. The former involves containing the group and allowing those divisions to bubble to the surface over time.

This is a key point by terrorism expert Daniel Byman, where he makes the case for “containment” and “de-legitimation” in a scholarly work from 2007. In a sense, this was U.S. counterterrorism strategy globally before 2001. The other component is key, and was effectively used in Iraq in 2006-2007, when the Sunni Awakening went into effect after local tribal groups cut deals with U.S. forces, and turned on al Qaeda. This was a vital juncture in the campaign in Iraq ushering in relative calm in a turbulent part of the world.

It’s important to note that the available information provides a conflicting picture and we can’t be entirely clear on motives at this point. However, the evidence does plausibly point toward forcing realignment of local tribal groups against ISIS, and the maintenance of crucial supplies to resistance groups throughout the region, both corroborated with past actions by U.S. and coalition forces, and counterterrorism strategy. It also remains to be seen if the United States is forced to abandon this strategy given recent attacks and Russian involvement in the region. It may now simply be untenable, for any reason, to forgo attacks on oil infrastructure in the region.

Article Source: http://oilprice.com/Geopolitics/Middle-East/Why-Is-The-US-Reluctant-To-Bomb-ISIS-Oil-Fields.html

By Ryan Opsal for Oilprice.com

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Henry Sapiecha

 

 

China’s steel giants lost $11 billion in first 10 months of 2015

Saturday, December 5th, 2015

china-poster-industry-image www.www-globalcommodities.com

Chinese steelmakers, determined to keep their world’s leadership in the sector, have been neglecting profits to the point that they churned out a combined $11 billion (Rmb72bn) from January to October this year, or more than double the profits reaped in 2014.

As domestic demand began waning, the country’s exports of the metal went the opposite way — they increased 25% to 92 million metric tons in the same period. But, as Financial Times reports, the boost in shipments was not enough to offset the effects of a declining local market. This, as Beijing has only cut 50m tonnes of steel manufacturing capacity this year, or a mere 4% of its total 1.14 bn tonnes of capacity, the paper said quoting data from HSBC:

The bank calculates China would need to cut an additional 120m to 160m tonnes of capacity next year for the industry-wide utilization rate to reach a “relatively healthy” level of 80 per cent.

“The problem with China is that they want to sell at any price, not withstanding the losses that they are incurring

“The problem with China is that they want to sell at any price, not withstanding the losses that they are incurring,” Seshagiri Rao, chief financial officer at JSW Steel, India’s third-largest steelmaker, told Bloomberg. That’s an “unfair trade” strategy, Rao said.

The slump in steel prices is, as expected, adding more pain to the already troubled iron ore market. The steel-making ingredient fell to a 10-year-low of $39.40 a tonne, the lowest ever recorded by price assessor The Steel Index (TSI), which began compiling data in 2008. Meanwhile, the most-active iron ore futures in Singapore also sank below $40 a tonne this week for the first time ever.

The decline in Chinese steel consumption is accelerating with use falling almost 6% to 590.47 million tonnes in the January to October period, industry group China Iron and Steel Association said in November. That’s tracking way below estimates by the World Steel Organization, which forecasts steel demand in China will shrink by 3.5% before the end of the year.

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Henry Sapiecha

Giant mine pit ‘swallowing’ 400-year-old Peruvian town

Saturday, December 5th, 2015

Giant-mine-pit-‘swallowing’-400-year-old-Peruvian-town-image www.www-globalcommodities.com

The Peruvian city of Cerro de Pasco, perched high up in the Andes, is about to sink — literally and metaphorically — into the deeps of a half-century-old, open-pit zinc and lead mine

The Peruvian city of Cerro de Pasco, perched high up in the Andes, is about to sink into the deeps of a half-century-old, open-pit zinc and lead mine that has been belching streamers of dust and polluting its surroundings for years.

The locals, National Geographic reports, were submitted to a series of health tests in 1996 when the effects of contamination became more prominent. In 2007, the U.S. Centers of Disease Control and Prevention (CDC) joined the investigation only to verify the fact that more than half the children tested had high lead levels in their blood stream. This drove authorities to declare a “state of environmental emergency” in Cerro de Pasco in May 2012.

cerro-de-pasco-mine image www.www-globalcommodities (1)

OLYMPUS DIGITAL CAMERA

OLYMPUS DIGITAL CAMERA

Very little has changed since. According to the article, locals keep dealing with lead poisoning and its consequences, including lower IQ levels, seizures, organ dysfunction, and even premature death.

Residents have made attempts to reach out to the central government, asking for a permanent solution, especially after 2,070 children were diagnosed with lead levels that implied twice the danger. The authorities’ promised to build a new hospital, however, has yet to become a reality.

cerro-de-pasco-mine image www.www-globalcommodities (2)

Meanwhile, the company that operates the vast mine, Volcan Compañía Minera, continues to expand the pit in the middle of the city, said to be as deep as the Empire State Building is tall.

Half-century mining history

The Spanish found silver in the caverns of Cerro de Pasco about 500 years ago, and through the 20th century its mines enriched many — including prominent Americans. The caverns were opened in 1956 and today the central Peruvian Andes region is still home to 14 mining companies operating at high production levels.

But the wealth extracted from Pasco’s land is, unfortunately, not shared among its people. The latest statistics available show that between 2013 and 2014, Cerro de Pasco was — in fact — the region that saw the highest rise in poverty in the whole country.

In 2008, Peru’s Congress passed Law No. 29293, calling for the resettlement of the entire population of Cerro de Pasco, a city of 70,000. But the government failed to come up with a process to accomplish that, so the law has largely been ignored.

A Volcan’s spokesman told National Geographic that moving the town was not the company’s responsibility. “It is an issue that concerns the national government, in coordination with the regional government and the local government of the city.”

In October, authorities met once again with community members who marched to Peru’s capital Lima. One of the key points agreed upon was that the Ministry of Health would guarantee care for all those with high levels of lead in their blood.

The government, local media reported (in Spanish) also agreed to build a clinic for heavy metals detoxification and a modern toxicology lab.

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Henry Sapiecha

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