Thursday, June 30, 2022

Metals set for worst quarter since 2008 on global downturn angst

Metals set for worst quarter since 2008 on global downturn angst

Qinghai copper smelter in China. (Stock image) 

Base metals headed for the worst quarterly slump since the 2008 global financial crisis as China’s economy recovered only gradually and fears of a world recession intensified. 

The London Metal Exchange Index has tumbled 23% since the end of March, although the decline has been magnified due to prices spiking that month following Russia’s invasion of Ukraine. Tin has been the worst performer, plummeting 38%, while aluminum is down by around a third, and copper has fallen by about a fifth. It will be the first quarterly decline for the entire index since the start of the pandemic. 
LMEX m,etals index

A gauge of Chinese factory activity expanded in June for the first time since February, as virus controls were eased. The improvement was fairly muted, however, and a weak property market continues to weigh on metals demand. The Covid Zero policy also remains intact, despite relaxation of quarantine rules, meaning there’s a constant risk of more restrictions if case numbers pick up again. 

China’s lockdowns have also caused severe knock-on impacts in Japan, where industrial output slumped 7.2% in May, undershooting estimates of a 0.3% decline. The nation is Asia’s biggest importer of aluminum, and stockpiles of the metal in major ports have swelled to the highest in more than six years as automotive demand slumps due to supply-chain constraints. 

The looming threat of a recession in the US, and perhaps even globally, also continues to hang over the market. Federal Reserve Chair Jerome Powell and other central bankers warned the world is shifting to a regime of higher inflation at the European Central Bank’s annual forum in Portugal. At the very least, major economies are heading for a slowdown that will curb construction activity.  

Zinc pared some of its declines Thursday on the London Metal Exchange, trading 2.8% lower to $3,265 a ton at 10:02 a.m. local time. Copper fell 0.9% to $8,324 a ton, while aluminum was 0.9% lower. Despite the chunky quarterly drop, the LMEX gauge is only down about 13% so far this year.

Tuesday, June 28, 2022

Why Is There a Decrease of Worldwide Oil-Refining? 

Drivers around the world are feeling pain as fuel prices greatly increase. Costs for heating buildings, power generation, and industrial production are also rising sharply.

Prices were already up before Russia invaded Ukraine on February 24. But since the middle of March, fuel costs have greatly increased while crude prices are only moderately high.

A big reason for the cost increase is the lack of refining ability to process crude into gasoline and other fuel to meet high worldwide demand.

Crude oil is oil as it exists in the ground. It is not yet ready to be used as fuel. Refining oil involves removing unwanted substances so that oil can be used as fuel.

Production per day

Information from the International Energy Agency (IEA) shows that the world can refine about 100 million barrels of oil a day. A barrel contains 159 liters of oil.

But almost 20 percent of that is not useable. Much of the unusable oil comes from places where there is a lack of investment.


The refining industry estimates that the world lost a total of 3.3 million barrels worth of daily refining ability since the start of 2020.

About a third of these losses happened in the United States, with the rest in Russia, China, and Europe, the experts say. Fuel demand crashed early in the pandemic. Before that, oil refining ability had not fallen in any year for at least 30.

However, global refining ability is set to expand by 1 million barrels per day in 2022 and 1.6 million barrels per day in 2023.

In April, 78 million barrels were processed each day. That is down from the pre-pandemic average of 82.1 million barrels per day.

The IEA expects refining to rise during the summer to 81.9 million barrels per day, when Chinese refiners return to normal operations.

The United States, China, Russia, and Europe are all operating refineries at a lower ability than before the pandemic. Nearly 30 percent of Russia’s processing ability was stopped in May, sources told Reuters. Many Western nations are not accepting Russian fuel.

Other reasons for high prices

The cost to carry products on ships overseas has risen because of high demand around the world and sanctions on Russian ships. In Europe, refineries are limited by high prices for natural gas, which powers their operations.

Who benefits

Refiners that export a lot of fuel to other countries, such as U.S. refiners, are benefiting from the current situation. World fuel shortages have increased refining profit margins to historic highs. Companies like U.S.-based Valero and India-based Reliance Industries have seen large profits.

The IEA said India, which refines more than 5 million barrels per day, has been importing cheap Russian crude for in-country use and export.

China Deal with Aramco Could Help Country Meet Its Energy Needs: Top Executive 

A long-term partnership with Saudi Aramco could help China meet its energy security, economic development, and climate change mitigation goals, according to an official from the firm.

Aramco senior vice president Mohammed Al Qahtani made the claim while speaking at the third Qingdao Multinationals Summit in the Shandong Province, saying his firm’s support will allow China to create a modern, efficient downstream sector in Shandong, with lower emissions.

“This includes our special interest in large, integrated downstream projects with high conversion into chemicals. In fact, with SABIC joining the Aramco family, and with nearly 3,000 chemical enterprises already in Shandong Province, we could jointly create a chemicals sector to rival any in the world,” he added.

Shandong is China’s third-largest province in terms of gross domestic product and accounts for 26 percent of the nation’s refining capacity.

Al Qahtani said: “Saudi Vision 2030 offers major new supply chain opportunities for Shandong companies in the Kingdom. The impact of an Aramco ‘one-stop shop’ on Shandong would be profound. And it would solidify Shandong’s crucial role in making some of China’s most important goals a reality.”

U.S. Oil Refining Capacity Down in 2021 for Second Year -EIA 

Capacity for U.S. oil refiners fell in 2021 for the second year in a row, the most recent government data showed on Tuesday, as plant shutdowns kept whittling away on their ability to produce gasoline and diesel.

Pump prices are near $5 a gallon nationwide as soaring demand for motor fuels collides with the loss of about 1 million barrels of processing capacity in the last three years due largely to closings to plants that were unprofitable when fuel demand cratered at the height of the COVID-19 pandemic.

The U.S. Energy Information Administration figures showed a capacity decline of 125,790 barrels per day (bpd) last year on top of the 800,000 bpd drop in 2020.

Sky-high gasoline prices may soon crimp fuel demand as if drivers cut travel, a Dallas Federal Reserve Bank economist said. The nationwide average for a gallon of regular unleaded was $4.968 on Tuesday, up 62% from a year ago.

While current pump prices are not historically high in inflation-adjusted terms, they may be “closer to consumers’ pain threshold than inflation-adjusted prices might suggest,” wrote Garrett Golding, senior business economist with the Dallas Fed. “And if prices climb higher, expect consumers to respond by cutting back on fuel consumption and overall spending sooner than later.”

U.S. refining capacity has fallen by 5.4%, or 1.03 million bpd to 17.9 million bpd since it peaked in 2019 at 18.98 million bpd. Capacity in 2021 dropped 4.5% to 18.13 million bpd.

Profit margins at U.S. refiners are up sharply despite higher oil and gas costs as demand soars for gasoline, diesel and jet fuel. Analysts say the demand could continue to rise with low U.S. unemployment and pent-up demand for travel.


The biggest factor in the latest decline of refining capacity was closure of the 255,600-bpd Alliance, Louisiana, refinery, following extensive damage from last year’s Hurricane Ida. That was only partially offset by capacity expansions at other refineries, the EIA said.

With capacity down, fuel demand is up thanks to the global recovery from the COVID-19 pandemic. Also, shifts in market flows due to the Russian invasion of Ukraine have placed new strains on U.S. refiners. The nation’s plants are running at about 94% of operable capacity, the highest since September 2019.

The high level of capacity utilization and relatively low levels of storage have experts worried about possible fuel shortages given this year’s forecasts for a well-above average hurricane season. About half of the nation’s refining capacity is on U.S. Gulf Coast, where storms often make landfall.

National capacity could decline further if there is an early shutdown of Lyondell Basell Industries (LYB.N) 263,776 barrel-per-day (bpd) Houston refinery.

Lyondell announced in April it will permanently close the refinery at the end of 2023. Sources familiar with plant operations have told Reuters the refinery would also permanently close if a major production unit shuts down prior to December 2023 and can not be quickly returned to operation.

Six refineries, accounting for the shut capacity, have permanently shut since the pandemic began in 2020, with two converting to renewable diesel production.

One other refinery, Shell Plc’s (SHEL.L) Convent, Louisiana, refinery is under consideration for conversion to renewable diesel production.

Phillips 66 is converting the Alliance refinery to a refined fuels terminal.

US court upholds Arizona land swap deal for Rio Tinto copper mine


 US court upholds Arizona land swap deal for Rio Tinto copper mine

Welcome to Arizona sign. (Image from Pxhere). 

A US appeals court has ruled that the federal government may give thousands of acres in Arizona to Rio Tinto Plc for a copper mine, upholding a lower court’s ruling and rejecting a request from Native Americans who said the land has religious and cultural import.

The 2-1 ruling from the San Francisco-based 9th US Circuit Court of Appeals, issued late Friday night, essentially defers to a 2014 decision made by the US Congress and then-President Barack Obama to give the land to Rio for its Resolution Copper project as part of a complex land swap deal.
Apache Stronghold, a nonprofit group comprised of members of the San Carlos Apache tribe and others, said it would appeal to the US Supreme Court.

The Arizona dispute centers on the federally owned Oak Flat Campground, which some Apache consider home to deities and which sits atop a reserve of more than 40 billion pounds of copper. If a mine is built, it would create a crater 2 miles (3 km) wide and 1,000 feet (304 m) deep that would destroy that worship site.

Rio and minority partner BHP Group Plc have already spent more than $1 billion on the project without producing any copper.

While two judges said they were sensitive to Apaches’ religious concerns, they stressed their ruling was narrowly tailored to the question about whether the government can do what it wants with its own land and whether the land transfer would prevent Apaches from practicing their religion.

“As we reach this conclusion, we do not rejoice. Rather, we recognize the deep ties that the Apache have to Oak Flat,” the court said it its 58-page ruling. “This dispute must be resolved as are most others in our pluralistic nation: through the political process.”

The dissenting judge said it was “absurd” and “illogical” to think the land swap would not impede Apaches’ religious rights.

A bill under consideration in the US Congress would undo the 2014 land swap, though its fate is unclear. President Joe Biden took steps to pause the land swap last year, though he has few options to delay it indefinitely.

“All the evidence suggests that the land exchange was meant to facilitate mineral exploration activities – nothing more and nothing less,” the court said in the ruling. The proposed mine project comes as demand jumps for copper to make electric vehicles (EVs) and other electronic devices.

Wendsler Nosie, one of the leaders of Apache Stronghold, denounced the decision. “My children, grandchildren, and the generations after them deserve to practice our traditions at Oak Flat,” he said.

Rio, which is based in Australia and Britain, said it would continue to talk with Apaches and others opposed to the mine. “There is significant local support for the project, however, we respect the views of groups who oppose it and will continue our efforts to understand, address and mitigate these concerns,” said Rio spokesperson Simon Letendre.

Mila Besich, the Democratic mayor of Superior, the town closest to the campground, and a supporter of the mine, said she was relieved by the ruling. “The 9th Circuit ruling provides further confirmation that the permitting must continue,” Besich said.

Representatives for BHP were not immediately available to comment. Terry Rambler, chairman of the San Carlos Apache tribe, was not immediately available to comment.

(By Ernest Scheyder; Editing by Chizu Nomiyama)

Monday, June 27, 2022

Biden's war against American energy has not hit 'ground zero': Rep. Andy...

Fox News' Peter Doocy grills White House on skipping oil exec meeting

Ecuador to halt pumping oil within 48 hours amid protests - Bloomberg News 

June 27 (Reuters) - Ecuador will likely suspend oil production completely within 48 hours if road blocks and vandalising of oil wells continue, Bloomberg News reported on Sunday, citing an emailed statement from the Energy Ministry.

The former OPEC country would have to halt oil operations "due to the acts of vandalism, takeover of wells and closing of roads," the report said quoting the ministry.

Ecuador has been embroiled in mass anti-government protests since June 13 with calls for lower prices for fuel, food and other basics and has led to its oil production falling by more than half.

President Guillermo Lasso said on Sunday he would cut prices for gasoline and diesel by 10 cents a gallon, a day after the government and indigenous leaders held their first formal talks since the protests began. read more

Reporting by Deep Vakil in Bengaluru; Editing by Edmund Blair

Our Standards: The Thomson Reuters Trust Principles.

Lithium king crowned in dictatorship sees $3.5bn fortune at risk

Electric cars to account for 73% of lithium demand by 2030: Chile

SQM’s evaporation pools in Chile’s Atacama Desert. (Image courtesy of SQM.) 

Few people are better positioned for the electric-vehicle revolution than the billionaire Julio Ponce Lerou.

He retired years ago, but the former son-in-law of late dictator Augusto Pinochet is still known in Chile as the lithium king. And Ponce has never been richer: The shareholder group he leads has seen its approximately 25% stake in SQM, the world’s No. 2 lithium miner, quintuple over the past seven years amid record profit, increasing the value of the portion he owns to $3.5 billion.

Like billionaires across the globe who have seen their wealth soar, from Elon Musk to Chinese property moguls, Ponce, 76, has become a target at home amid the boom times for lithium, a key mineral for making electric vehicle batteries. One of his main adversaries may turn out to be Chile’s 36-year-old president, Gabriel Boric, who supports a constitutional rewrite that may impose environmental curbs on mining and wants to create a national lithium company that could compete with SQM, which sits on the planet’s richest deposit.

Boric’s brand of left-wing politics is much more investor friendly than that of Salvador Allende, whose 1971 nationalization of US-owned mines led to the creation of state copper giant Codelco. But there are signs that the lithium business is about to get increasingly complicated in Chile, with authorities recently rescinding new contracts amid calls for the state to get a bigger share of the mineral windfall.

The shifting landscape for the lithium king has its roots in a wave of street protests in 2019, which led to a rewrite of a constitution born in the Pinochet era that enshrines private property, including minerals and water. Writers of a new charter want to tip the balance back toward community rights, environmental protection and state-run social services, with a greater say for indigenous groups in where and how natural resources including lithium are extracted.

Lithium King crowned in dictatorship sees $3.5bn fortune at risk
Julio Ponce Lerou. (Screenshot 24 Horas | YouTube.)

Ultimately, the moves could force SQM to adopt extraction techniques that push up costs or limit production, potentially marking an end to booming profits. Ponce — Chile’s second-richest person — is the only disclosed name from the shareholder group, whose entire stake is worth more than $6 billion. Filings show his portion is equivalent to about 16% of SQM. The shares fell 3.2% in Santiago trading Thursday.

The movement is increasing scrutiny of SQM’s business model, which is based on pumping up vast amounts of brine from beneath a salt flat in northern Chile’s Atacama Desert and storing it in giant evaporation ponds for a year or more — a footprint that can be seen from space. The resulting concentrate is turned into lithium carbonate and hydroxide at nearby plants and sent off to Chinese and Korean battery makers.

As simple as it is profitable, the process uses far less fresh water, chemicals and energy than hard-rock mining. But the solar evaporation technique means billions of liters of brine are extracted and then vaporized in one of the most arid places on Earth, which some say is a threat to wildlife such as pink flamingos that inhabit its Mars-like landscape. 

Radical proposals such as nationalizing the entire industry have fallen short in the constitutional process. But if the new charter opens the way for the mineral-rich brine under the Atacama to be considered a type of water — an idea the company disputes — that type of mass extraction may come under threat.

There are already calls from some communities and politicians to move to a more selective or direct process of mining that would mean far less evaporation — and probably less output and profit. Both SQM and Albemarle Corp., the only two lithium producers in Chile, are investigating such techniques, which are relatively untested commercially.

Across the developing world, the growth in EVs has created a new demand for minerals from Atacama lithium to nickel in Russia’s Siberia to cobalt in the Democratic Republic of Congo. Powering the world with less fossil fuels presents a new set of social and environmental challenges. In the short term, it’s made mineral moguls like Ponce fabulously wealthy. 

But the energy transition is leaving behind the communities where the metals are extracted, says 70-year-old Sara Plaza, an indigenous resident of Peine, a village near the Atacama operations.

“Mining dried out the salt flats,” she said from her modest home, with a view to the chalky expanse and mountaintops that surround her town. “Julio Ponce has done whatever he wanted.”

Ponce’s shareholder group didn’t respond to requests for comment made through SQM.

SQM says it is reducing its brine pumping rates even as it ramps up production, through efficiencies and by focusing on lithium and less on minerals used in fertilizers. The company is also spending a lot more time and money trying to win indigenous groups’ favor, and points out that its contribution to state coffers of about 60% of earnings is among the biggest in the industry.

The company has a new marketing campaign that highlights its contributions, and even plans to put up a sign at its Santiago headquarters for the first time to boost local visibility. All this comes as it prepares for talks to renew its mining lease with the government that expires in 2030.

“We want to tell people what we do,” said Carlos Diaz, SQM’s head of lithium. Namely, production of a critical mineral that “helps to decarbonize the world.”

As for Ponce, his journey to lithium king took many twists and turns.

Ponce in 1969 married Veronica Pinochet Hiriart, whom he met because their families had neighboring beach houses. Four years later, Pinochet led the bombardment of Chile’s presidential palace in the coup that brought him to power. 

Ponce in 1969 married Veronica Pinochet Hiriart, daughter of dictator Augusto Pinochet. (Screenshot Biblioteca del Congreso Nacional de Chile | Wikimedia Commons.)

Ponce was working at a sawmill deep in the jungle of the Darien Gap at the time and heard about the attack from a television in Panama. Under Pinochet’s rule, his fortunes quickly began to change.

During the dictatorship, the former forestry student was named president of a state cellulose company, and helped guide its privatization. He rose to lead other companies controlled by the government and, eventually, the development agency in charge of converting state-run enterprises into private businesses, Corfo. The agency had also commissioned early research on critical minerals in the Atacama, including lithium.

Ponce stepped away from those roles in 1983 to fight allegations of illegal enrichment in the acquisition of ranch lands, of which he was acquitted. When Soquimich, as SQM is also known, sold shares in 1986, he was back in the privatizations, but this time on the buy side. He and his family members bought shares, and when Ponce became chairman in 1987, the board was still stacked with military officials. Years later, Chile’s comptroller found that parts of Soquimich were privatized for as little as a third of market value.

Maria Monckeberg, a Chilean author who is an expert on the fortunes derived from Pinochet-era privatizations, said the reforms urged by economic advisers who studied at the University of Chicago — known as the Chicago boys — opened the way for Ponce’s wealth boom. 

“Thanks to the roles he had in Corfo, he detected the importance of Soquimich,” Monckeberg said of Ponce. “And he began designing the plan to own it.”

Chile was only beginning to discover lithium’s potential in the Pinochet era. A copper miner called Anaconda documented deposits when it went on a search for water resources in the Atacama desert in the 1960s, according to Monckeberg’s book. In 1969, a research institute tied to the development agency noted the location of the deposits could make for relatively cheap extraction.

The lightest metal on the periodic table, lithium was discovered in 1817 by Swedish chemist Johan August Arfwedson, and was initially used in tiny amounts to treat depression and bipolar disorder. It later became the focus of military powers interested in the hydrogen bomb, and eventually researchers found a variety of uses: waterproofing, gunpowder, heat-resistant glass, air-conditioning and electric car batteries.

Chilean regulator abandons SQM legal battle
SQM evaporation ponds at the Atacama salt flat. (Image from: SQM Corporate Presentation.)

“With bland consistency, white color and surprising properties, lithium opens the doors to applications of great complexity and sophistication,” said a 1986 book edited by Gustavo Lagos, a scientist at Universidad de Chile. Lithium had “an almost magical meaning, containing in it the hopes that neither copper nor even salt reached in the life of the nation.”

Ponce became chairman of SQM in 1987 and continued building up his stake. Six years later, after Chile had returned to democracy, it obtained a lease for exclusive mineral exploitation rights on 81,920 hectares (202,428 acres) in the Atacama salt flats. The company invested hundreds of millions at the site, initially with a focus on potash.

As SQM became one of Chile’s most profitable companies, Ponce fended off a 2006 takeover attempt by PotashCorp. (now Nutrien), North America’s largest potash producer, by signing a pact with Japanese trading firm Kowa. In 2018, while no longer chairman but still a large shareholder, Ponce got a deal to protect the firm’s trade secrets amid an effort by a larger Chinese competitor, Tianqi Lithium Corp., to take a stake. Ponce’s brother Eugenio remains an adviser to SQM.

He also endured scandals. He resigned from his decades-long reign as chairman in 2015 amid a probe over illicit political campaign financing, which led to a $30 million settlement with the US Securities and Exchange Commission and a fine for SQM’s then-CEO (Ponce himself was not charged). Ponce also fought allegations of market manipulation in courts, and successfully reduced a record $70 million fine — an outcome that critics saw as the sign of a system that unfairly favors elites.

Today, Ponce makes time for visits to his polo club in Santiago, horseback rides at his estate of about 5,000 hectares and even equestrian jumping during the pandemic. His children sometimes join him on rides — all four were banned from SQM management in 2018, but not from SQM holding companies, where his daughters are directors. A Panama-based trust holds SQM shares for benefit of the family. Ponce keeps family close, including his brother Gustavo, a yoga guru who has defended Julio on Chilean TV. 

“It’s not easy to be in his position,” Gustavo said of his brother in text reply to Bloomberg.

But a constitutional rewrite represents a challenge that could be harder for Ponce to resolve than his previous court battles.

Cristina Dorador, one of the members of Chile’s constitutional convention, says the current charter fails to recognize the Atacama salt flats as ecosystems that are affected when large volumes of brine are pumped for lithium extraction. A scientist, she has published studies on the dwindling flamingo presence at lagoons in the vicinity of lithium mining.

SQM says those studies fail to consider the impact of tourism on the migratory birds, adding that while lithium production is up, brine pumping rates are down and food conditions haven’t changed. Monitoring systems show flamingo populations have remained stable over time, SQM said, adding that it welcomes scientific efforts to better understand the relationships between mining and the environment.

Dorador said the promise of addressing climate change by supplying the materials needed for a shift to renewable energies has enriched miners like SQM, but few EV consumers are aware of the new types of environmental problems that the transition is creating.

“If we are going to do any exploitation then it needs to be done using the latest in technology and ensure that the consequences are minimal,” she said. “There has to be a national decision.”

Joe Lowry, founder of advisory Global Lithium LLC, said SQM needs to address environmental concerns, but at these heights — with a lithium shortage propping up prices near record highs — it’s not a “major hurdle,” at least financially. Even a constitutional rewrite is unlikely to upend forces that are working in Ponce’s favor, he said.

“The new government certainly will not want to stop the massive royalty income,” he said.

(By Blake Schmidt and James Attwood)

Friday, June 24, 2022

No Oil Producer Wants to Be the First to Give Up the Fuel. Except Gustavo Petro’s Colombia


Presidential candidate Gustavo Petro and his vice-presidential candidate Francia Márquez of Pacto Historico coalition celebrate after the presidential election first round on May 29 2022 in Bogota, Colombia.
Guillermo Legaria—Getty Images 

Brazil’s former president was laughing at me. I was sitting opposite 76-year-old Luiz Inácio Lula da Silva , in an overly air-conditioned studio in São Paulo this March, interviewing him for a story on Brazil’s October elections , for which he is leading the polls. I had just asked Lula if he would be interested in signing up to a bold climate pledge made by Gustavo Petro —then the leftist front runner in Colombia’s 2022 presidential race and, as of this week, the nation’s president-elect. As part of his campaign, Petro vowed to immediately stop issuing new permits for oil exploration—a big deal in a country where oil makes up 40% of exports, and 12% of government income . Petro also called on Lula, who could become his most important regional ally, to join him . So, would he?

“Look, Petro has the right to propose whatever he wants,” Lula said, smiling and shaking his head as if we were discussing an eccentric old friend. “But, in the case of Brazil, this is not for real. In the case of the world, it’s not for real.”

For Colombia, it just got a lot realer. Petro, a one-time leftist guerrilla, won 50.47% of the vote in Sunday’s second round vote, narrowly defeating a populist businessman who took 47.27%. After he assumes office on Aug. 7, the president-elect will stop issuing new oil permits on day one. He will then try to establish a 12 year deadline for already-approved exploration to wind down, which would likely require legislative approval. Petro’s advisors say oil produced under those existing contracts is enough to satisfy domestic consumption—if exports are cut—for “at minimum” 23 years if needed. Long before the oil runs out, the government says it will scale up renewable energy infrastructure enough to replace fossil fuels.

How radical is Petro’s plan on oil exploration?

For critics, Petro’s oil policy amounts to “economic suicide.” Many warn his plan to boost agriculture and tourism won’t be enough to make up for lost oil export earnings, potentially leaving a big hole in public finances. Analysts have predicted a significant devaluation of the peso against the dollar as a result of falling investor confidence in Colombia. And oil industry groups claim production could fall too quickly to sustain Colombian demand until alternative fuels are available, forcing the country to rely on imports.

A version of this story first appeared in the Climate is Everything newsletter. To sign up, click here .

Such concerns are voiced by politicians and fossil fuel advocates all over the world, and they have created a global stalemate on oil: almost all of the world’s top 33 oil producers have pledged under the Paris Agreement to try to limit global warming to an average of 1.5°C over the preindustrial era. But none have set timelines to end oil production that align with that goal, according to scientists. To have even a 50:50 shot of achieving the 1.5°C target, according to a March report by the International Institute of Sustainable Development (IISD), rich countries need to stop producing oil and gas by 2034, and countries in Colombia’s middle income-bracket must do so by 2043. In climate terms, Petro’s two-decade production phase-out is not ambitious—it’s just about acceptable.
Storage tanks at the Ecopetrol Barrancabermeja refinery in Barrancabermeja, Colombia, on Tuesday, Feb. 15, 2022. Bloomberg/Getty Images

In political terms, though, Petro’s goal is radical. “This would be absolutely head and shoulders above what other countries are doing,” says Kevin Anderson, a scientist at Manchester University’s Tyndall Center for Climate Change Research, who led the IISD study. Norway is still offering dozens of new oil exploration licenses to companies each year and the U.K. is planning a fresh round of oil and gas contracts, even as their governments profess to be climate leaders, Anderson says. “These are both incredibly wealthy countries and would remain incredibly wealthy [without oil and gas production]. But they are demonstrating an almost complete disregard for climate science.” Petro’s oil policy, he adds, “is the sort of leadership we need on climate change and there’s very, very little of it around.”

No one wants to be the first to give up their oil earnings: of the tiny handful of countries that have put a moratorium on oil exploration in recent years, Belize is the only one where oil contributed more than 1% of GDP. And leaders don’t want to be accused of risking their countries’ energy security—a fear heightened by Russia-E.U. tensions over natural gas since the outbreak of the Ukraine war. “Angela Merkel decided to close all [of Germany’s] nuclear power plants. And today, Europe depends on Russia for energy, ” Brazil’s Lula told me. He has pledged to invest in new domestic oil refinery infrastructure as a way to shield Brazilians from global price shocks.

A vision for the future

Given that global context, how did Petro manage to get a majority of Colombians to back his anti-oil platform? According to Claudia Navas, a Bogotá-based analyst for consultancy Control Risks, Petro didn’t present his oil plan as a stand-alone climate policy, and, on its own, it probably wasn’t a decisive factor for most voters. Rather, the oil phase-out is part of a comprehensive “vision for change” in Colombia, which appealed to working class people who have been excluded from Colombia’s previous economic development, Navas says. After his victory, Petro urged fellow progressives in Latin America “to stop thinking that a future of social justice and wealth redistribution could be built on a foundation of high oil, coal, and gas prices.”

It also helps that Petro could point to renewables as a major opportunity for Colombia. The country already produces almost 70% of its electricity from hydropower, and its varied climates give it above-average potential for both wind and solar , in addition to green hydrogen production. Together, those sources could allow Colombia to export clean energy, rather than oil, in the future.

In Barrancabermeja, a northern oil town with a strong leftist tradition , residents appear to have trusted that Petro’s plans won’t leave them jobless, voting overwhelmingly for him . As he congratulated the president-elect, the town’s mayor expressed hope that the area would not lose its “energy capital” status. “We hope that your energy transition proposal will open job opportunities for the industry that has historically sustained Barrancabermeja and the country’s economy.”

None of this is to say that fears for Colombia’s economy are unfounded. In the coming months and years, Petro will need to match his lofty rhetoric with a concrete plan for expanding low-carbon industries to replace fossil energy and revenues, in towns like Barrancabermeja and nationally. Petro’s performance will weigh heavily on leaders in other oil producing nations like Brazil. “The implementation will determine if Petro’s policy generates greater fear in the region about the energy transition,” Navas says, “or pushes people towards it.”

God Told Me About a Coming Oil Boom - Prophecy | Troy Black

Thursday, June 23, 2022

Switzerland imports Russian gold for first time since war

Swiss National Bank. Stock image. 

Switzerland imported gold from Russia for the first time since the invasion of Ukraine, showing the industry’s stance toward the nation’s precious metals may be softening.

More than 3 tons of gold was shipped to Switzerland from Russia in May, according to data from the Swiss Federal Customs Administration. That’s the first shipment between the countries since February.

The shipments represent about 2% of gold imports into the key refining hub last month. It may also mark a change in perception of Russian bullion, which became taboo following the invasion. Most refiners swore off accepting new gold from Russia after the London Bullion Market Association removed the country’s own fabricators from its accredited list.

While that was viewed as a de facto ban on fresh Russian gold from the London market, one of the world’s biggest, the rules don’t prohibit Russian metal from being processed by other refiners. Switzerland is home to four major gold refineries, which together handle two-thirds of the world’s gold.

Almost all of the gold was registered by customs as being for refining or other processing, indicating one of the country’s refineries took it. The four largest — MKS PAMP SA, Metalor Technologies SA, Argor-Heraeus SA and Valcambi SA — said they did not take the metal.

In March, at least two major gold refineries refused to remelt Russian bars even though market rules permit them to do so. Others, such Argor-Heraeus, said they would accept products refined in Russia prior to 2022, so long as there were documents proving that the gold had not been exported from Russia after beginning of the war, and that accepting them would not benefit Russia, a Russian person or entity anywhere in the world.

Some buyers remain wary of Russian precious metals, including bars minted prior to the war which are still tradeable in western markets. In palladium, it’s created a persistent dislocation between spot prices in London and futures in New York, due to the greater risk of receiving ingots from Russia in the latter.

Switzerland has been importing small quantities of palladium from Russia — the world’s biggest miner of the metal — since April.

(By Eddie Spence)

Wednesday, June 22, 2022

Glencore unit pleads guilty to bribery in Africa

Glencore unit pleads guilty to bribery in Africa

Glencore pleaded guilty to seven counts of bribery in connection with oil operations in five African countries. (Image courtesy of Glencore.

A British subsidiary of Glencore (LON: GLEN) formally pleaded guilty on Tuesday to the seven charges of bribery brought against the mining and commodities trader by the UK Serious Fraud Office (SFO), which relate to the firm’s oil operations in Africa.

Glencore Energy confessed to paying $28 million in bribes to secure preferential access to oil, including increased cargoes, valuable grades of oil and preferable dates of delivery in Cameroon, Equatorial Guinea, Ivory Coast, Nigeria and South Sudan.
The company, which also admitted to generating illicit profits between 2011 and 2016, will be sentenced on November 2 and 3, the SFO said.

The successful prosecution is the SFO’s third corporate conviction under the 2010 Bribery Act and makes Glencore the first company to admit to paying off an institution or person under those rules.

The anti-corruption office is still mulling prosecutions against individuals as it, so far, has not targeted any people at the company, triggering criticism.

Glencore has been the subject of multiple investigations in the UK, the United States and Brazil over the past four years for alleged money laundering and corruption. 

The company announced in February it had set aside $1.5 billion to cover the costs of settlements it hoped to reach this year.

The Swiss firm in May tackled international bribery charges in the US, pleading guilty to violating the Foreign Corrupt Practices Act. Glencore agreed to pay $1.1 billion to resolve the case spanning seven countries. It also accepted separate fines for manipulating oil prices at US shipping ports.

It further agreed to pay more than $39.5 million under a resolution signed with the Brazilian Federal Prosecutor’s Office (MPF) in connection with its bribery investigation.

Glencore, which is also subject to investigations from Swiss and Dutch authorities, has said the timing of those probes remains uncertain but would expect any possible resolution to avoid duplicate penalties for the same conduct.

Copper price rises as looming strike in Chile adds to supply worries

Copper price rises as looming strikes in Chile add to supply worries

Image courtesy of Codelco. 

The copper price rose on Tuesday on concerns about an expected strike in top producer Chile.

Copper for delivery in July rose 1.1% from Monday’s settlement, touching $4.08 per pound ($9,484 per tonne) Tuesday morning on the Comex market in New York.

Click here for an interactive chart of copper prices

Workers at Chile’s state-owned Codelco will start a nationwide strike on Wednesday to protest the government’s and the company’s decision to close a troubled smelter, a union official said.

“We are going to start on Wednesday in the first shift,” Amador Pantoja, president of the Federation of Copper Workers (FTC), told Reuters on Monday.

Workers had threatened a national strike if the board of directors did not invest to upgrade a troubled smelter located in a saturated industrial zone in Chile’s central coast.

Instead, Codelco said on Friday that it would terminate its Ventanas smelter, which has been closed for maintenance and operational adjustments after a recent environmental incident sickened dozens in the region.

Related: Chile tax reform, mining royalty ‘priority number one,’ Minister says

The unionized workers insist Ventanas needs $53 million for capsules that retain gases and allow the smelter to operate under environmental compliance, which was dismissed by the government.

Meanwhile, China’s strict “zero-covid” policy of constantly monitoring, testing and isolating its citizens to prevent the spread of the coronavirus has battered the country’s economy and manufacturing sector.

At 117,025 tonnes, copper stocks in LME-registered warehouses are down 35% since mid-May.

(With files from Reuters)

Iron ore price sinks amid growing pessimism over demand outlook in China

Iron ore price sinks

Chinese worker welding steel in a tunnel (Stock Image) 

The iron ore price plunged more than 8% on Monday as steel mills idled blast furnaces amid growing pessimism over the demand outlook in China.

Benchmark 62% Fe fines imported into Northern China fell 8.18%, to $111.69 per tonne, the lowest since December 17.

The most-traded iron ore contract, for September delivery on China’s Dalian Commodity Exchange ended daytime trade 11% lower at 746 yuan ($111.60) a tonne, its lowest since March 16.

Mining stocks also slid, with Vale down almost 8% from the previous week, Rio Tinto down 7% and Fortescue down 16%.

“Heavily subdued, covid-afflicted domestic steel consumption” continued to weigh on China’s ferrous complex, said Atilla Widnell, managing director at Navigate Commodities in Singapore.

China’s strict zero-covid policy of constantly monitoring, testing, and isolating its citizens to prevent the spread of the coronavirus has battered much of the country’s economy.

Column: Iron ore suffers short-term demand woes, longer-term China threat |  Reuters

The mainland reported 109 new coronavirus cases for June 19, compared with 159 a day earlier.

“Steel prices have dropped to 16-month lows as inventory rises,” analysts at Westpac said in a note.

Blast furnace rates in Tangshan fell last week for the first time since mid-May, with industry consultant Mysteel saying in a note that more mills are cutting output to do maintenance due to weak margins. An index of Chinese steel profits has plunged by almost 90% so far this month.

“With the slow spot trade, steel product prices have plunged, with more steel mills now losing money and hastening planned maintenance,” said Wei Ying, a ferrous analyst at China Industrial Futures.

“However, given the speed of the drop, iron-ore may have been oversold and there’s likely to be a rebound in the second half.”

Downstream demand remains poor with few spot trades occurring, and the bleak outlook for China’s construction industry continues to test market confidence, Mysteel said in a separate note.

A raft of supportive policy measures from Beijing over the last couple of months have failed to result in persistent price gains, with risks due to the virus and the Zero Covid policy continuing to hang over the market.

“Unless the real-estate sector mounts a stronger rebound soon — which remains far from certain — the tension between high output and weak demand will have to be resolved with lower prices, big cutbacks in production, or both,” Gavekal Dragonomics said in a note by analyst Rosealea Yao.

(With files from Reuters and Bloomberg)

Tuesday, June 21, 2022

Tanker built by Iran for Venezuela to carry fuel components in first trip


Credit: REUTERS/Carlos Garcia Rawlins 

HOUSTON/MARACAY, Venezuela, June 15 (Reuters) - A tanker built by an Iranian shipyard for Venezuela plans to depart next month from the Middle Eastern country with a cargo of fuel components for the gasoline-thirsty nation, three sources with knowledge of the deal told Reuters.

The new vessel is the latest sign of the growing energy collaboration between the two nations under U.S. sanctions. Iran and Venezuela are increasingly swapping crude for diluents and for fuel the South American country desperately needs due to the poor condition of its refining network.

The deals have given a boost to Venezuelan President Nicolas Maduro, who is not recognized by the U.S. government as the country's leader, by helping him revive Venezuela's economy after years of recession and hyperinflation.

The Aframax tanker Yoraco is the second vessel built by Iran's SADRA shipyard for Venezuela, and two more are on order. Maduro, who visited Tehran last week as part of a tour touching the Middle East and Asia, was present at Yoraco's launch.

Once tests of the 60 million euro Yoraco's seaworthiness are completed, the maritime arm of Venezuela state oil company PDVSA plans to send a crew to the Iranian port city of Bushehr to take command of the vessel, one of the sources said.

PDVSA executives also are preparing a chartering contract for a cargo of Iranian fuel components to depart in about 35 days, another source said.

PDVSA and SADRA did not reply to requests for comment.

The tanker, which is temporarily flying Iran's flag, had its transponder on this week showing it floating near Bushehr, on the Persian Gulf, Refinitiv Eikon monitoring data showed.

SADRA in 2014 built another tanker for Venezuela that was originally called Sorocaima. But it took three years before it could commercially navigate after U.S-sanctions on Iran prevented it from obtaining insurance and classification.

Following a lawsuit that got the tanker detained in 2019 and several name and owner changes the vessel, now called Colon, is in Venezuelan waters, according to Refinitiv data.

SADRA plans to build two more tankers for Venezuela through 2024, Iranian and Venezuelans officials said last week after announcing a 20-year cooperation plan in the fields of oil, refining, petrochemicals, defense, agriculture, tourism and culture.

Under late President Hugo Chavez, Venezuela ordered over 40 tankers from shipyards from China to Argentina to replace PDVSA's aging fleet. But only a few were ever delivered, and some were lost due to unpaid bills.

(Reporting by Marianna Parraga in Houston and Mircely Guanipa in Maracay, Venezuela; Editing by Bill Berkrot)

((; +1 713 371 7559; Reuters Messaging: @mariannaparraga))

Unfinished and unwanted 9,000-passenger cruise ship to be scrapped 

What was meant to be one of the world’s largest cruise ships is being prepared for its maiden voyage – to a scrapyard.

Global Dream II, which was designed to hold more than 9,000 passengers, had almost been completed at a shipyard on Germany’s Baltic coast. However, the shipbuilder MV Werften filed for bankruptcy in January 2022 and the administrators cannot find a buyer for Global Dream II.

The German cruise industry magazine An Bord reported that the lower hull of the liner is to be disposed for scrap price.

The administrator Christoph Morgen reportedly told a press conference on Friday that the ship needed to be moved out of MV Werften’s Wismar shipyard by the end of the year because the yard had been sold to Thyssenkrupp’s naval unit, which plans to build military vessels there.

Demand for cruise ships has collapsed since the start of the coronavirus pandemic.

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Global Dream II and its sister ship Global Dream – which is not being scrapped for now – would have been the world’s largest cruise ships by passenger capacity when complete.

At 208,000 tons they would have been jointly the sixth largest cruise ships by size, just behind Royal Caribbean’s five Oasis-class ships.

Monday, June 20, 2022

Tanker Demand to Grow 3.5% - 5.6% as Europe Avoids Russian Oil - Asia Imports More 

European importers have been avoiding crude oil shipped from Russia, as a response to the invasion of Ukraine. This has driven a rather remarkable switch in the direction of Russian crude oil flows towards Asia, mostly India and China. Assuming the Continent will fully avoid Russian seaborne flows at some point, this would affect average monthly flows of 55 million barrels (around 1.8 million b/d), or up to 85 million barrels (2.8 million b/d), if barrels of Kazakhstan are included.

With India already having increased the volumes it absorbs from Russia to more than 900,000 b/d (from just 30,000 b/d last year), it becomes rather probable for the country to be able to import 30 million barrels of Russian crude oil on a monthly basis (or around 1 million b/d). Meanwhile, China could increase its imports from Russia (primarily referring to additions in shipments from Russia's European ports) by 15 million barrels on a monthly basis versus last year's activity, equivalent to additions of half a million b/d.

This scenario would increase global demand for crude oil tankers by 3.5% (1.8% related to India and 1.7% driven by additional flows to China).

A more optimistic scenario, where India increases its flows from Russia to 45 million barrels per month, or 1.5 million b/d, and China to 25 million barrels per month or 830,000 b/d, would cause global demand for crude oil tankers to expand by 5.6% (2.8% related to India and 2.8% to China).

Meanwhile, European importers are expected to gradually avoid supplies of refined products shipped from Russia, which could drive a growth near 4.2% for clean tanker shipping demand.

According to S&P Global Commodities at Sea, Russia was typically shipping around 30 million barrels of refined products to Europe on a monthly basis, based on last year's activity. From these volumes, around 20 million barrels each month referred to gasoil/diesel, equal to up to 700,000 b/d.

The average journey from Russia to Europe lasts 8 days, while those to West Africa and Latin America last 25 days and 30 days respectively, on average.

Assuming 60% of these volumes will be shipped to West Africa and 40% to Latin America, then this would drive an increase in demand for clean tanker shipping by around 2.2% and 2% each, or 4.2% in total versus last year's levels.

MRs have been primarily used for clean flows from Russia to Europe, typically requiring 106 MR voyages each month, with 3 for LR1s and 3 for LR2s.

The switch would provide a boost to flows on LR1s and LR2s instead.

There is no doubt that the change of direction in Russian oil flows, for both crude oil and refined products, will have a significant impact on the demand for tanker shipping. 

The insurance ban adds pressure against Russian shipments

Meanwhile, the tension between the West and Russia, after the invasion of Ukraine, extends into other parameters shaping the operations of the shipping industry.

A major issue to consider has been the recent news on the potential insurance ban, by both the UK and the European Union, on any tankers carrying Russian oil around the world, which could sharply affect the global shipping industry fundamentals.

This ban, which would come into effect half a year after the oil ban, could cause severe pressure against Russian oil exports from the Black Sea and the Baltic, potentially driving a decline in exports, down up to a million b/d.

Without insurance, buyers would not ship the oil, unless governments establish mechanisms to cover insurance domestically, as it happened before with Iranian cargoes.

The alternative observed so far, with Russia shipping mostly to China and India, would have to rely on tonnage controlled or owned domestically.

This justifies the recent decision by Unipec to charter more than 10 tankers so far, to transport more Russian oil to China.

The switch of Russian oil shipped to China and India instead of Europe is estimated to require around 30 Aframaxes (including those employed for lightering), 50 Suezmaxes and most importantly more than 40 VLCCs.

Securing suitable tonnage might prove a difficult task, after the insurance ban. Any of the ships carrying crude oil from Russia would be avoided in most other international oil routes. European shipowners control more than a third of the available tonnage, with Greeks having dominated the transport of Russian cargoes so far.

President Putin recently referred to plans to establish a fully independent and integrated supply chain from production to end customer, including insurance, which would enable Russia to maintain or even expand its exports to Asia.

Russia has been one of the major crude oil suppliers to most European importers, with an average of 53 million barrels shipped to the continent each month in 2021, with activity increased to around 57 million barrels per month, up 7.5% versus last year's average. Most of these volumes were loaded in the Baltic or the Black Sea, with 84% of all these barrels carried on Aframaxes. The rest has been typically carried on Suezmaxes, with only small insignificant volumes loaded on Panamaxes or MRs. Flows including barrels of Kazakhstan shipped from Russian ports to Europe reach 84 million barrels per month.

Russian crude oil shipments to Europe have a rather significant source of demand for crude oil tankers, typically requiring 75 Aframax voyages and around 7 Suezmax voyages on a monthly basis (or 110 and 15 respectively, if barrels of Kazakhstan are included). As some of these voyages refer to cargoes smaller than the typical capacity targeted to be employed by each sizeclass, the average requirement for full cargoes has been estimated around 65 per month for Aframaxes and around 6 for Suezmaxes, or 93 and 14 respectively if barrels of Kazakhstan are included.

Source: Commodities At Sea

An Aframax carrying Russian crude oil to European destinations has been estimated to need 7 days to complete her voyage, for loadings between Jan-21 and Apr-22. However, the average duration is pushed to 8.5 days, if barrels of Kazakhstan are included. This is primarily driven by the slightly longer average haul to be covered for ships carrying CPC Blend.

Source: Commodities At Sea

A Suezmax employed within the same regional trade routes (Russia to Continent) spent an average of 9 days to complete her voyage, or 12 days if barrels of Kazakhstan are included. All metrics provided have taken into account all international shipments from Russia to the Continent, loaded between Jan-21 and Apr-22.

Crude oil shipments from Russia to the continent have generated 8% of the global demand for Aframaxes carrying crude oil in 2021 (excluding domestic movements) and 9.6% in the period from Jan-22 till Apr-22. If barrels of Kazakhstan are included, the market share is pushed to 14.7% for 2021 and 15.7% for this year so far.

Source: Commodities At Sea

The same routes have been responsible for around 1% of the global demand for Suezmaxes, which is pushed to 2.7% for 2021 and 3.6% for 2022 so far, if barrels of Kazakhstan are included.

The big question has been what the impact for the shipping demand would be if Europe proceeds with its plans to ban Russian crude oil imports, as a response to the invasion of Ukraine.

Russia has so far managed to maintain its seaborne exports, or even to report on-month gains, according to Commodities at Sea, primarily shipping more crude oil from the Baltic Sea and the Black Sea. However, it becomes clear that several European importers have been reducing their exposure to Russian barrels, since early March.

There have never been any VLCCs loading directly from any of Russia's biggest crude oil exporting ports in the Baltic and the Black Sea (Novorossiysk, Primorsk and Ust-Luga), with local port restrictions allowing ships up to Suezmaxes to call at their berths, according to Market Intelligence Network.

Any Russian barrels carried to Asia on VLCCs have been typically loaded their cargoes from other ships (Ship-to-Ship), usually within European waters, such as near the Danish or Dutch coasts.

China and India have been expected to dominate as the destinations for the additional volumes shipped to from Russia's European ports to Asia.

Russian shipments heading for China have approached 1 million b/d, while exports to India have jumped to historical highs, currently exceeding 750,000 b/d. India only absorbed around 30,000 b/d of Russian crude last year.

In parallel to the change in destination of Russian crude oil shipments, the shipping market has been experiencing several other transitions, such as the impact on the employment of the Russian tanker fleet, primarily controlled by state-owned shipping company Sovcomflot, which has been suffering severe pressure, since the employment of its Fleet has been falling sharply since sanctions were introduced.

Nearly 80% of the SCF fleet has remained ballast so far this month, as the sanctioned shipowner faces obstacles in getting vessels deployed.

In early May, 69 of the company's 89 tankers were ballast, with 14 vessels idle in the Far East, 11 in the Mediterranean, and 9 in the Black Sea.

Since the start of the invasion of Ukraine the SCF fleet employment has declined 21%, from nearly 1.4 billion tonne days during week beginning February 20 to 1.1billion tone days for the week beginning April 24.

European sanctions required banks and other financial institutions to cut ties with sanctioned Russian entities by mid-May. Additionally, the International Group of P&I Clubs has rescinded coverage for the sanctioned fleet, further complicating SCF's operations.

In addition, SCF was unable to make the interest payment due against its second tranche of Eurobonds, although it said it has $600 million in cash and is petitioning the Office of Financial Sanctions for a license to facilitate payment.

Reports indicate SCF has begun to liquidate members of its fleet in order to meet financial obligations to western financiers.

Focusing on the ships having recently lifted Russian crude oil, the majority refers to ships controlled by Greek shipowners (51%), Russians (19%) and Chinese (6%).

International relations become clearly crucial, taking into consideration the recent incident of two laden Greek tankers seized by Iranian forces near the Iranian coast.

This is believed to have been made in response to action taken by the Greek authorities in April, after the transfer of an Iranian oil cargo on board of an Iranian-flagged ship, previously controlled by Russian interests, to the US.

Average monthly shipments of purely Russian crude oil grades to China and India stood near 21 million barrels in 2021, but have already exceeded 31 million barrels this year, with April's activity at 45 million. Aframaxes carried 85% of these flows in 2021, but with their market share having fallen to 75% so far this year. Suezmaxes have recently gained in these routes, with their share pushed to 27% in the last couple of months, from just 11% in 2021. As more Russian crude oil from the Baltic and the Black Sea will be shipped to India and China in coming months, Suezmaxes are expected to be even more preferrable against Suezmaxes, while more VLCCs would probably consider lifting cargoes in these routes as well, especially if combined between cargoes from US Gulf to Europe and then Middle East Gulf to the Far East.

Source: Commodities At Sea

In terms of demand, flows from Russia to China and India have been typically requiring 30 voyages in 2021, a number pushed to 47 in April, with 19 of them referring to flows from Russia's European ports to the two Asian countries. A similar trend has been observed for Suezmaxes in recent months. It's worth highlighting that ships of both sizeclasses employed in flows from Russian Baltic and Black Sea to India and China have been utilizing most of their capacity.

Source: Commodities At Sea

A typical journey from the Baltic to India would require around 22 days, while a shipment from the Black Sea to India should complete within 30 days on average. The duration of voyages from the same origins to China would require around 37 and 45 days respectively.

Source: Commodities At Sea

Aframaxes carrying Russian crude oil to China and India were responsible for around 5% of the total demand of this sizeclass in 2021, a number pushed to 14% in April. Flows from Russia's European ports typically had no contribution to total demand, but their share reached 10% last month.

This clearly explains the potential benefit for the shipping demand if India and China prove to be a good alternative for Russian exports, expected to be further avoided across Europe in coming months.

Our assumptions on the longer distance to be covered by crude oil tankers refer to 20 days more for flows from the Baltic to India, instead of Europe, and 12 days more for voyages from the Black Sea.

Moreover, the voyage from the Baltic to China instead of Europe lasts 35 more days, while the one from the Black Sea to China instead of Europe requires 27 more days.

Assuming that two thirds of the additional flows to Asia will be loaded in the Baltic and the other third in the Black Sea, the additional voyage is 17.33 days more for ships heading for India and 32.33 more days for those moving to China.

For more insight subscribe to our complimentary commodity analytics newsletter

Posted 13 June 2022 by Fotios Katsoulas, Liquid Bulk Principal Analyst, Maritime, Trade & Supply Chain, S&P Global Market Intelligence and

Rahul Kapoor, Vice President & Head of Commodity Analytics & Research, Maritime, Trade & Supply Chain, S&P Global Market Intelligence

This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.

Glencore trading profit poised for best-ever year

Australia’s Macquarie bank to exit coal by 2024

Prices for most of what Glencore mines, including thermal coal, have reached record highs in recent months. (Image courtesy of Glencore.

Glencore (LON: GLEN) said on Friday that first half-year profit from its commodities trading unit is on track to achieve its annual earnings target in the first six months of 2022, placing it on course for its best-ever year.

The Swiss company said that “unprecedented dislocation” in energy markets has resulted in record pricing differentials between coal benchmarks and quality categories.

Glencore expects adjusted operating profits to exceed $3.2 billion for the first half of the year boosted by soaring commodity prices, supply disruptions and volatility. The figure compares to the record profit of $3.7 billion the company recorded in full-year 2021 and it also beats its long-term guidance range of $2.2 billion to $3.2 billion.

Prices for most of what Glencore mines, including thermal coal, have reached record highs in recent months as a result of market volatility, shortages triggered by covid-related lockdowns and the Russian invasion of Ukraine.

The miner and commodities trader increased its forecast for thermal coal benchmarks in the first half to between $82 and $86 per tonne from a February forecast of $32.8 per tonne for the year.

With costs increasing due to the broad inflationary pressure coming from rocketing diesel and electricity prices, the company expects its average FOB (freight on board) thermal unit cost for the first half to be $75-$78 per tonne, compared to an earlier guidance of $59.3 for 2022.

This reflects higher government royalties and input costs for diesel, explosives, logistics and electricity.

Glencore noted market conditions would probably be closer to normal in the second half of the year, adding it would release its first-half production report on July 29 and half-year financial results on August 4.

The company’s coal mines generated in 2021 adjusted earnings before interest and tax of $3.06 billion, contributing to the $14.5 billion earnings total Glencore posted for the past year.