Tuesday, June 25, 2019

Top Copper Miner Strike Seen Wiping 10,000 Tons From Market

Works at Codelco’s iconic Chuquicamata mine down tools

  • Chuquicamata stoppage enters 12th day as talks remain stalled
  • Workers rejected Codelco’s latest offer in a vote on Saturday
A strike at a major copper mine in the world’s largest producer of the metal risks wiping out 10,000 metric tons from a market that’s already expected to end the year in deficit, according to an industry consultant.

The stoppage at the Chuquicamata mine in northern Chile could cost No. 1 global supplier Codelco $50 million as it loses production if it lasts two weeks, said Juan Carlos Guajardo, executive director at Santiago-based consultancy Plusmining. The strike at the mine, which produced 321,000 tons of copper last year, entered its 12th day on Tuesday with no signs of agreement between the company and unions.

“Codelco has been quite clear that they are offering the best possible terms for workers,” Guajardo said in a telephone interview Monday. “And workers say the only way to end this conflict is not higher bonuses, but equal conditions between existing and new workers.”

Copper futures rose in New York Tuesday as supply risks mount at Chile’s state-owned Codelco. The disruption at Chuquicamata, the company’s third-largest mine, has helped lift the outlook for prices at a time when supply is already tight, with the International Copper Study Group forecasting a deficit of 189,000 tons by the end of this year.

BMO Capital Markets was expecting 3% of global production in the copper market would be disrupted in 2019, when it calculated its supply and demand outlook for the year, according to analyst Colin Hamilton. The Chuquicamata strike adds to production losses earlier in the year, including rains in northern Chile and stoppages at several smelters in Zambia, shaving about 5% of output so far this year.

“While we have expectations of a prolonged period of trade friction, copper will struggle to get in the good books of macro asset allocators,” Hamilton said. “But the deficit the copper market has been waiting on for years is now here.”
Workers Vote for Strike at Codelco's Third-Largest Copper Mine
Copper miners celebrate the rejection of the state-run Codelco Chuquicamata mine's final offer for a contract at union headquarters in Calama, Chile on May 29, 2019.
Photographer: Cristobal Olivares/Bloomberg

Talks stalled

No talks are scheduled between Codelco and Chuquicamata’s Unions 1, 2 and 3, which represent around 3,200 workers at the mine, Liliana Ugarte, president at Union No. 2, said Tuesday by telephone. Chuquicamata workers blocked the road that leads to the company’s northern division, and to Freeport-McMoRan Inc.’s El Abra mine for a few hours on Tuesday for the second consecutive day in a protest that delayed workers from reporting to the facility.

A Codelco official declined to comment on the state of negotiations or the effects of the protests on Monday. While El Abra operations are running normally, Freeport is monitoring the situation, a company official said by email Monday.

On Saturday, 55% of workers voted to reject the company’s latest offer and continue the strike. Under Chilean labor rules, Codelco can make a new offer on June 28, or workers can abandon the strike individually from June 29, automatically accepting a previous offer from the company.

One central issue in the negotiations is the retirement plans of about 1,700 workers whose jobs will be cut once the mine transitions from open pit to underground operations in the next 12 months. Younger workers -- who joined the company after the last commodities downturn with lower salaries and fewer benefits -- also want the same package of benefits as experienced workers.

“When the older workers leave as part of the retirement plan, it will be the young guys with precarious jobs who will replace them,” Rolando Milla, president at Union No. 3, said by phone. “The strike ends with equal conditions for all workers, that’s it.”

— With assistance by Danielle Bochove

Monday, June 24, 2019

Gulf war risk insurance soars

US Navy helping ships in Gulf of Oman after distress calls

War risk insurance has soared to around $185,000 for tankers passing through the Strait of Hormuz area, according to a report from Bloomberg.
 
This was,due to increased tensions in the Gulf region, following the 13th June attacks on two tankers in the Gulf of Oman.

Following the earlier incidents in May at Fujairah, the war risk insurance had risen to  $50,0000 per vessel.

A day after the two recent attacks, Royal Boskalis Westminster was appointed salvor for both vessels.
Shortly after the incidents, the insurers of both vessels appointed Boskalis subsidiary SMIT Salvage to salvage the vessels and their cargo.

The salvage operations were undertaken in close consultation with the relevant local authorities, including the Marine Emergency Mutual Aid Centre (MEMAC).

Frontline said that the ‘Front Altair’s’ crew members had either returned home or have re-embarked on the vessel to assist with recovery operations and ship-to-ship transfer of cargo into another Frontline operated vessel. 

The company claimed it was able to deploy emergency responders in a timely manner, who extinguished the fire on the vessel within hours of the incident and ensured no pollution resulted.

‘Front Altair’ was in stable condition and anchored off Fujairah. Following transfer of cargo, the LR2s damage will be further inspected and the vessel will ultimately be moved to a shipyard for repair.

As previously reported, the possibility that the damage was caused by mechanical or human error has been ruled out completely. 

Until further information is received regarding the cause of the explosion and the security of this important shipping lane is secured, Frontline will exercise extreme caution when considering new contracts in the region and will consider all possible measures to insure the safety of our crews and vessels operating in the area, the company emphasised.

The other vessel involved in the alleged attacked, the ‘Kokuka Courageous’ was also towed to Fujairah Anchorage. Her crew were reported to be safe.

Meanwhile, VLCC spot freight rates between the Arabian Gulf and China rose 101% in the days between 13th and 20th June 2019, in the aftermath of the attacks, BIMCO’s Peter Sand said.

Spot freight rates for a VLCC reached $25,994 per day on 20th June, the highest level since March and significantly above the May average of $9,979 per day.

Despite this increase, rates on this route only narrowly exceeded the daily breakeven costs of a VLCC, which on average amounts to $25,000 per day.

Measured against global oil demand, around a fifth of global oil consumption sails through the Strait of Hormuz, making the strait a critical choke point for global energy markets, Sand said.

Taking into consideration seaborne transportation of crude oil, the 19.7 mill barrels per day transiting Hormuz represents 49% of the 40.5 mill barrels shipped in total - source: Clarksons Research.

Although spot freight rates for crude oil tankers ex Arabian Gulf have risen sharply, rates for LR2s carrying clean oil products, such as naphtha, remained much more stable. For example, spot freight rates for an LR2 carrying 500,000 barrels of naphtha condensate from the Middle East Gulf to Japan, rose by only 4% between the dates since the attack.

 “The unchanged rates for oil product tankers compared with the jump in freight rates for crude oil tankers, illustrate the differences between the two market as well as the effects of sentiment on crude oil freight rates,” Sand said. “The vast majority of tanker owners are more or less going about with business as usual, although they have ratcheted up their safety and security precautions when trading their ships in the Arabian Gulf.”

These additional measures include speeding up while sailing through the Strait of Hormuz, as well as avoiding sailing through it at night when watchkeeping becomes more difficult.

The added costs of safety measures as well as higher insurance premiums, which rose sharply following the news of the attacks, meant that shipowners will not only face higher risks but also higher costs when trading in the region.

“To avoid major disruption, it is vital for global energy trade that the Strait of Hormuz remains accessible and safe for ships to sail through. As long as tensions aren’t escalated the attacks are unlikely to have a more profound effect. However, the risks that the conflict will escalate remains very present and a great worry to everyone involved with oil trading in the region,” Sand added.

BIMCO has urged all nations to do what they can to de-escalate the situation and allow ships to pass safely through the Strait of Hormuz.

Thursday, June 20, 2019

US Navy drone shot down by Iranian missile over Strait of Hormuz in 'unprovoked attack,' central command says



U.S. military officials returned fire -- verbally -- hours after Iran blasted a Navy high-altitude drone out of the sky over the Strait of Hormuz, with U.S. Central Command leaders on Thursday slamming the "unprovoked" strike and Tehran's subsequent "false" justifications for it.
President Trump said on Twitter that Iran "made a very big mistake!"

The downing of the drone, via surface-to-air missile, is only the most recent Iranian provocation in the region, coming on the heels of a disputed attack on a pair of oil tankers in the Gulf of Oman last week. U.S. officials say Iran was behind the tanker attacks, however, the Islamic Republic has not claimed responsibility and even suggested American involvement in the plot. -- but American officials stated unequivocally the incident occurred in international airspace.

Similarly, Iran claimed the U.S. drone on Thursday was over Iranian airspace when it was shot down -- but American officials stated unequivocally the incident occurred in international airspace.

The U.S. Navy’s RQ-4A Global Hawk drone deployed to the Middle East in the past few days as part of reinforcements approved by President Trump last month.
The U.S. Navy’s RQ-4A Global Hawk drone deployed to the Middle East in the past few days as part of reinforcements approved by President Trump last month. (U.S. Navy/Handout via REUTERS)
U.S. Central Command said in a statement that a U.S. Navy Broad Area Maritime Surveillance ISR aircraft, known as a BAMS-D, was shot down at approximately 7:35 p.m. ET on Wednesday.

"Iranian reports that the aircraft was over Iran are false," Capt. Bill Urban, a U.S. Central Command spokesman, said in a statement. "This was an unprovoked attack on a U.S. surveillance asset in international airspace."

The U.S. Navy’s RQ-4A Global Hawk drone was over international airspace and about 17 miles from Iran at the time, a military source told Fox News.  The drone provides real-time intelligence, surveillance, and reconnaissance missions  "over vast ocean and coastal regions," according to the military.

Iran also tried to shoot down another drone, but missed, U.S. officials told Fox News. Officials are now scrambling to find the wreckage in the water before Iranian forces recover it.

The Navy RQ-4A Global Hawk drone that was shot down by Iran.
The Navy RQ-4A Global Hawk drone that was shot down by Iran. (Fox News)
The Navy RQ-4A Global Hawk drone deployed to the Middle East in the past few days as part of reinforcements approved by President Trump last month.

The high-altitude drone can fly up to 60,000 feet or 11 miles in altitude and loiter for 30 hours at a time. It's used to spy on Iranian military communications and track shipping in the busy waterways. Each drone costs up to $180 million dollars. 

The U.S. Navy’s RQ-4A Global Hawk drone is a high-altitude drone can fly up to 60,000 feet or 11 miles in altitude and loiter for 30 hours at a time.
The U.S. Navy’s RQ-4A Global Hawk drone is a high-altitude drone can fly up to 60,000 feet or 11 miles in altitude and loiter for 30 hours at a time. (U.S. Navy/Handout via REUTERS)
Besides the drone incident, U.S. officials told Fox News that Iranian-backed forces fired cruise missiles Wednesday night into Saudi Arabia, hitting a power plant. The spate of recent attacks come amid the backdrop of heightened tensions after the U.S. decision a year ago to withdraw from Tehran's nuclear deal reimpose sanctions.

A commander for Iran's Revolutionary Guard claimed the drone was shot down over Iranian airspace to send a "clear message" to the U.S., and marked the first direct Iranian-claimed attack of the crisis.
"We do not have any intention for war with any country, but we are fully ready for war," Revolutionary Guard commander Gen. Hossein Salami said in a televised address.

Iran's paramilitary Revolutionary Guard, which answers only to Supreme Leader Ayatollah Ali Khamenei, said it shot down the drone on Thursday morning -- causing some confusion about the timeline of the incident -- when it entered Iranian airspace near the Kouhmobarak district in southern Iran's Hormozgan province. Kouhmobarak is some 750 miles southeast of Tehran and close to the Strait of Hormuz.
 
The Guard said it shot down the drone at 4:05 a.m. after it collected data from Iranian territory, including the southern port of Chahbahar near Iran's border with Pakistan. Iran used its air defense system known as Third of Khordad to shoot down the drone — a truck-based missile system that can fire up to 18 miles into the sky, the semi-official Fars news agency reported.

The Panama-flagged, Japanese owned oil tanker Kokuka Courageous, that the U.S. Navy says was damaged by a limpet mine, is anchored off Fujairah, United Arab Emirates, during a trip organized by the Navy for journalists, Wednesday, June 19, 2019.
The Panama-flagged, Japanese owned oil tanker Kokuka Courageous, that the U.S. Navy says was damaged by a limpet mine, is anchored off Fujairah, United Arab Emirates, during a trip organized by the Navy for journalists, Wednesday, June 19, 2019. (AP Photo/Fay Abuelgasim)
The Guard described the drone as being launched from the southern Persian Gulf but did not elaborate. American RQ-4A Global Hawks are stationed at the Al-Dhafra Air Base in the United Arab Emirates, near the capital, Abu Dhabi.

Salami, speaking to a crowd in the western city of Sanandaj, described the American drone as "violating our national security border."

"Borders are our red line," Salami said. "Any enemy that violates the borders will be annihilated."

The U.S. said Iran fired a missile at another drone last week that responded to the attack on two oil tankers near the Gulf.

Another senior U.S. official told Fox News last week that an MQ9 Reaper drone was fired on by the Iranians shortly after it arrived at the scene where the MV Altair tanker sent out a distress signal.

Sailors stand on deck above a hole the U.S. Navy says was made by a limpet mine on the damaged Panama-flagged, Japanese owned oil tanker Kokuka Courageous, anchored off Fujairah, United Arab Emirates, during a trip organized by the Navy for journalists, Wednesday, June 19, 2019.
Sailors stand on deck above a hole the U.S. Navy says was made by a limpet mine on the damaged Panama-flagged, Japanese owned oil tanker Kokuka Courageous, anchored off Fujairah, United Arab Emirates, during a trip organized by the Navy for journalists, Wednesday, June 19, 2019. (AP Photo/Fay Abuelgasim)
Secretary of State Mike Pompeo has blamed Iran for the "blatant assault" on oil tankers in the Gulf of Oman.

After the tanker incident, Pompeo said his assessment was based on "intelligence, the weapons used, the level of expertise needed to execute the operation, recent similar Iranian attacks on shipping, and the fact that no proxy group operating in the area has the resources and proficiency to act with such a high degree of sophistication.”

Fox News' Jennifer Griffin, Lukas Mikelionis and The Associated Press contributed to this report

Wednesday, June 19, 2019

Limpet mine used in oil tanker attacks 'bears striking resemblance' to similar Iranian Mines, US Navy says


The limpet mine used on a Japanese-owned oil tanker in the Strait of Hormuz “bears a striking resemblance” to other Iranian mines, U.S. Navy officials said.
The limpet mine used on a Japanese-owned oil tanker in the Strait of Hormuz “bears a striking resemblance” to other Iranian mines, U.S. Navy officials said. (U.S. Navy)

https://www.foxnews.com/world/limpet-mine-oil-tanker-striking-resemblance-iranian-mines

The limpet mine used on a Japanese-owned oil tanker in the Strait of Hormuz “bears a striking resemblance” to other Iranian mines, U.S. Navy officials said Wednesday.

Cmdr. Sean Kido of the U.S. Navy’s 5th Fleet claimed Wednesday that the damage done to the tanker was “not consistent with an external flying object hitting the ship.”

The remark contradicts the claim made by the ship’s owner who insisted that eyewitnesses aboard saw “flying objects” before the attack in the Gulf of Oman.

The Navy official added that investigators have recovered fingerprints and a handprint from the side of the ship after the attack.

The revelation follows ever-increasing tensions in the region. The Iraqi military said three rockets hit an installation north of Baghdad on Monday that was used by Iraqi troops American trainers.

The attack on camp Taji, about 17 miles north of Baghdad, was the second on a military post housing U.S. personnel. An attack on an airbase, also housing U.S. trainers, north of Baghdad on Saturday caused a small fire.

The U.S. claimed the Iranian regime was responsible for the “blatant assault” on two oil tankers last week, bringing the Middle East on a brink of a military conflict.

Secretary of State Mike Pompeo said Iran’s culpability was based on “intelligence, the weapons used, the level of expertise needed to execute the operation, recent similar Iranian attacks on shipping, and the fact that no proxy group operating in the area has the resources and proficiency to act with such a high degree of sophistication.”

The so-called limpet mines got the name from the real limpets, small sea snails that easily cling to hard surfaces and rocks.

The weapon was first developed by the British during World War 2 and is often used in covert action in order to damage ships because they are easily attachable.

There are certain variations, with some detonated by a time fuse while others explode only after the vessel to which the mine is attached travels a specific distance.

In most cases, the mines are magnetic and are easily attachable to the hulls of a ship. They normally just disable rather than sink a vessel.

This wouldn’t be the first time Iran used the mines to attack oil tankers. In the 1980s, the “Tanker War” erupted in the midst of the eight-year conflict between Iran and Iraq, threatening to disrupt the global oil supply.

The U.S. government has been working to provide enough credible evidence linking Iran with the oil tanker attacks. Pictures of pieces of a limpet mine were released as part of that effort by the U.S. Navy on Tuesday.

Last week, U.S. officials released a video last week supposedly showing Iran’s Revolutionary Guard removing an unexploded limpet mine from one of the vessels.
Image result for black and white photo of iran ship 

The black-and-white footage, as well as still photos released by the U.S. military’s Central Command on Friday, appeared to show the limpet mine on the Japanese-owned Kokuka Courageous, before a Revolutionary Guard patrol boat pulled alongside the ship and removed the mine, Central Command spokesman Capt. Bill Urban said.

U.S. Central Command (CENTCOM) also released additional images Monday showing the aftermath of mine attacks against the oil tankers, including some images purporting to show Iranian forces removing an unexploded device from the hull of one of the vessels.

Iranians dismissed the allegations, with Iranian Defense Minister Gen. Amir Hatami saying they were unfair and aimed at tarnishing the country’s image.
“The accusation against Iran is totally a lie and I dismiss it firmly.”
— Iranian Defense Minister Gen. Amir Hatami
“The accusation against Iran is totally a lie and I dismiss it firmly,” he said, according to the semi-official Fars news agency on Wednesday.

While the U.S. claims of Iran’s responsibly are viewed cautiously in Europe, with Britain being a notable exception, some European countries are warning that the risk of war cannot be ruled out.

German Foreign Minister Heiko Maas said the risk of war in the Persian Gulf region is not ruled out amid the heightened tensions and said the “the situation is serious” and “everything must be done” to avoid further escalation of the tensions in the region.

Iran, meanwhile, said Wednesday that Europe won’t be granted extra time beyond the July 8 deadline to come up with improvements in the nuclear deal to protect the Iranian economy amid U.S. sanctions, Reuters reported.

The spokesman for Iran’s Atomic Energy Organization said Iran will begin enriching uranium to a higher level if Europe did improve the nuclear accord.
The Associated Press contributed to this report.

Tuesday, June 18, 2019

Struggling PDVSA Plans To Restart Curacao Refinery

La Isla Refinery Curacao


Venezuela’s struggling oil company PDVSA plans to resume operations at its Isla refinery on Curacao, a company official who wished to remain unnamed told S&P Global Platts.

The refinery has a nameplate capacity of 335,000 but its actual throughput is a maximum of 270,000-290,000 bpd. It is operated by a local company, Rafineria di Korsou, “under the direction of PDVSA,” according to the company official.

The refinery has suffered its share of the fallout from the U.S. sanctions against Venezuela with scarcity of feedstock forcing all but the suspension of operations. This, in turn, has made the Curacao autonomous government, with which PDVSA has a contract for the operation of the refinery, to look for an alternative operator.

As a result of all this, Isla is facing bankruptcy: "PDVSA will have to make the decision to send some 3 million barrels of crude to generate cash flow to cover expenses from September to December 2019 or send $60 million to honor the contract and avoid claims,” the company official told S&P Global Platts. "If not, Isla will have to declare force majeure and bankruptcy. The refinery is now totally paralyzed. PDVSA promised the reactivation and offered to supply crude in July but through an intermediary."

The Isla refinery received an exemption from the January sanctions the U.S. slapped on Venezuela. Under the exemption, the refinery can continue working with U.S. companies until January 15, 2020 but it has not helped it much, it seems. On top of all its other troubles, it was also targeted by ConocoPhillips in an asset seizure move against PDVSA.

The scenario with PDVSA sending crude for the refinery is the less likely one, as another company official explained. "For PDVSA the refinery has a low priority. Crude production in Venezuela has decreased significantly. In this scenario, sending crude to Curacaco makes no sense, especially when you take in to account that PDVSA cannot sell products from Curacao because of the embargo."

For Curacao, however, the refinery is high priority: it accounts for a tenth of the island’s GDP and a solid portion of its employment.
 
By Irina Slav for Oilprice.com

Monday, June 17, 2019

Stocks Drop Across the Gulf as Oil Tankers Incident Fuels Risk

Equities in Dubai, Qatar, Oman and Saudi Arabia decline. The U.S. Fifth Fleet says two oil tankers were damaged.

Every major stock index in the Gulf retreated after an incident in the Sea of Oman threatened to inflame the already tense relationship Iran has with its neighbors. Bonds also fell.

The benchmark equity indexes in Dubai, Kuwait, Riyadh, Muscat and Doha fell 1% or more. The yield on its 2028 dollar bonds climbed 7 basis points, the most among Gulf peers.

The U.S. Fifth Fleet said two oil tankers were damaged near the Strait of Hormuz, with one of the ships’ operators describing the incident as a suspected attack. The development comes after attacks on oil tankers near the Persian Gulf last month and raises the possibility of a disruption of crude flows.

This is the second time in a month’s time. That is worrying. Shows how sensitive the region is to such news,” said Joice Mathew, head of equity research at United Securities in Muscat. “One can’t really see what’s going to happen, especially when all sides are very stubborn.

The Strait of Hormuz, at the entrance of the Persian Gulf, is a waterway for about 40% of the world’s seaborne oil shipments. While most economies in the region are trying to diversify their income away from crude, revenue from energy sales still accounts for a large proportion of their cash inflow.

The decline may be a knee-jerk reaction, said Nader Naeimi, the head of dynamic markets at AMP Capital Investors Ltd. in Sydney. “Even if it’s not an accident, we have seen incidents like this before and they usually pass, without a prolonged effect. Unless, of course, if a war breaks out!”

Saudi Arabia’s Tadawul All Share Index dropped 1.6% on Thursday, the first decline in five sessions. Al Rajhi Bank, Saudi Basic Industries and National Commercial Bank contributed the most to the decrease.

The question is if we see escalation from here, or efforts to calm tensions,” said Timothy Ash, a strategist at Blue Bay Asset Management in London. “Trump appeared eager to call off the attack dogs in his administration last month. He seems eager to avoid a major war in the Middle East, involving U.S. troops.