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.

Iron ore price hits six-month low on plunging China steel margins

iron ore price 

Iron ore extended losses to a sixth session on Friday, marking its steepest weekly slump in six months, as Chinese steel mills opted to reduce output amid weak profits and deteriorating demand prospects.
Benchmark 62% Fe fines imported into Northern China fell 5.76%, to $121.64 per tonne, the lowest since December 17.
iron ore price

The most-traded iron ore contract, for September delivery, on China’s Dalian Commodity Exchange ended daytime trade 5.9% lower at 821.50 yuan ($122.64) a tonne, after earlier tumbling to 815.50 yuan, the lowest since May 26.

Mining stocks also slid, with Vale down almost 8% from the previous week, Rio Tinto down 7% and Fortescue down 12%.

“In recent weeks, an increasing number of mills in (China’s) steelmaking hub of Tangshan are opting to undertake maintenance and cut output amid weak margins,” said ANZ senior commodity strategist Daniel Hynes.

Some regions have also begun to actively curb production, analysts at Sinosteel Futures said.

The rainy season in many parts of China that usually disrupts construction activity and restrictions put in place to contain covid-19 outbreaks have hit demand in the world’s top steel producer, squeezing mills’ margins.

Reflecting such sluggish demand, China’s steel inventory has risen this week by 316,700 tonnes to about 22.2 million tonnes, according to Sinosteel analysts.

(With files from Reuters)

Congo miner threatens to seize cobalt project from Chinese partner

China Moly commits $2.5bn to double Tenke Fungurume copper, cobalt output

Tenke Fungurume (Image courtesy of Freeport-McMoRan. 

A shareholder dispute over one of the world’s biggest copper and cobalt mines is heating up in the Democratic Republic of Congo, after state miner Gecamines threatened to block exports or even take the mine away from its partner, China Molybdenum Co.

Congo’s Gecamines, which owns 20% of the Tenke Fungurume mine’s holding company, has accused CMOC of manipulating the project’s finances and says it owes as much as $5 billion in payments. 
The disagreement has extended to who is actually running the mine: a Congolese court appointed a temporary administrator to manage the holding company while the shareholders sort out their differences, but CMOC insisted nothing has changed. The administrator, Sage Ngoie Mbayo, says he now controls the company’s bank accounts but was blocked from entering the mine site last week by Congolese soldiers.

Things were set to come to a head Thursday at the first meeting between the shareholders and Ngoie at Tenke Fungurume Mining SA’s offices in the Congolese mining hub of Lubumbashi. But while Gecamines’ top two executives were there, CMOC representatives didn’t attend.

Gecamines Chief Executive Officer Bester-Hilaire Ntambwe Ngoy Kabongo and his deputy, Leon Mwine Kabiena, said they are prepared to take more drastic action, including effectively revoking CMOC’s ownership of the project by dissolving the partnership. 

Armed guards

“If it continues like this, we are going to ask for the dissolution,” the CEO said. The two executives became increasingly agitated during the meeting, which lasted two hours in a boardroom surrounded by otherwise-empty company offices, while armed guards stood outside.

“What CMOC is doing now is stealing, it’s cheating, it’s covering-up,” Mwine said, adding that they were “liars,” “pillagers,” “bandits,” and “criminals.”

CMOC did not immediately answer questions on the meeting or Gecamines’ statements. The company previously said the mine is operating as usual without any change in management, and production is beating targets. In its 2021 annual report, CMOC said communication with Gecamines was “complex and dynamic” and they planned to engage an independent third party to verify disagreements over reserve estimates “and resolve the differences through fair and impartial negotiation.”

Any disruption to operations or exports from Tenke Fungurume could send ripples through global metals markets. Congo is one of the world’s top producers of copper and by far the largest supplier of the key battery mineral cobalt. Tenke alone accounts for about 14% of world cobalt production, according to calculations by Bloomberg using figures from Darton Commodities Ltd., and the ore body is expected to last for decades.

CMOC bought control of the project from Phoenix-based Freeport McMoRan Inc. about five years ago in a deal that ultimately cost the company more than $3 billion. The mine produced 209,120 tons of copper and 18,501 tons of cobalt in 2021, according to CMOC.

The dispute between the current partners began around last August, when CMOC announced it would invest another $2.5 billion to more than double production at the mine. Gecamines officials questioned how it could achieve the huge increase without raising its reserve estimates, which would trigger royalty payments of $12 per ton, Ntambwe said.

Within weeks of CMOC’s announcement, Congo President Felix Tshisekedi formed a commission to examine the partnership and Gecamines soon followed with a lawsuit at the Lubumbashi commercial court.

In February, the court decided in Gecamines’ favor, ordering that Tenke Fungurume Mining SA should be run for at least six months by Ngoie, who has a PhD in geohydrology  and previously worked for a number of mines in Congo including TFM.

Broken down

Congo’s government put the appointment on hold while the presidential commission tried to negotiate with CMOC, but talks have broken down again, according to Mwine, who is also coordinator of the commission.

Ngoie said he is neither on the side of CMOC nor of Gecamines, and his concern was the health of the company.

“I am the church in the middle of the village,” he said. In addition to TFM’s bank accounts, Ngoie said he soon will control its exports. “They don’t go by plane, they only go by road. And one way or another, I’ll control that,” he said. “I have the power to do that.”

Mwine says Gecamines has a right as a shareholder to block the project’s exports.

“Tactical arrangements can also be made at road level so that no TFM production can go out,” he said. “We have a lot of options on the table and if they continue with this game, things will get harder.”

(By Michael Kavanagh)

Thursday, June 16, 2022

Wealth shock delays gold bull market as Goldman revises targets

Gold bulls lose steam for now as yields trump inflation bet

Gold bulls are feeling the pressure. Image source: raymondclarkeimages 

Gold has been hit by a large “wealth shock” on the back of a weaker yuan following the economic impact of the lockdowns in China, the world’s largest consumer, according to Goldman Sachs Group Inc., which revised its price targets. Still, the worst may be over, it added.

The ongoing food and energy crisis and rising US rates have also seen other emerging market currencies under pressure, analysts including Mikhail Sprogis said in a June 14 note. This negative wealth effect for bullion has been further compounded by liquidation of short-term-oriented futures and exchange-traded fund positions, which are sensitive to trends in the dollar, they said.

Bullion has dropped more than 6% this quarter on rising bets that the Federal Reserve will be more aggressive in its monetary policy tightening path. Goldman economists expect two 75 basis-point hikes over the summer, which could sap US growth, add to fears of recession risks and boost gold investment demand.

“The wealth shock appears to have peaked, and we expect a rebound in emerging market gold demand in the second half of the year,” the analysts said. “In the absence of a large liquidity shock, we view current gold price weakness as a good entry point.”

The bank kept its upside outlook for the gold price but delayed the path by revising its three- and six-month targets to $2,100 and $2,300, from $2,300 and $2,500, respectively. The 12-month target of $2,500 was unchanged. Spot bullion was at $1,813 on Wednesday.

More from the report:

  • Russian domestic gold production will stay inside the country as it faces a surplus of dollars and its central bank aims to prevent excessive appreciation of the currency.
  • Given limited options for investment in foreign assets, the purchase of domestic gold output seems like one of the easiest ways to prevent excessive ruble strength.
  • Global central bank demand is still on track to meet bank’s forecast for 750 tons in 2022.

(By Ranjeetha Pakiam)

Iron ore price down ahead of China’s central bank rate announcement

iron ore price

China’s central bank. (Stock Image) 

Iron ore prices fell on Tuesday as fresh covid-19 outbreaks in China clouded demand prospects in the world’s top steel producer.

Market focus has turned to the People’s Bank of China, which could cut the rate on its medium-term lending facility on Wednesday.
iron ore price

The most-traded September iron ore futures contract on China’s Dalian Commodity Exchange ended daytime trading 0.1% lower at 901.50 yuan ($134.11) a tonne, after earlier falling to 882 yuan, the lowest since May 31.

“The risk of further lockdowns remains high while the dynamic-zero covid-19 approach remains in place,” Fitch Ratings said in a statement.

Fitch Ratings cut its economic growth forecast for China this year to 3.7%, from 4.8%, to reflect the impact on the activity of recent lockdown measures.

Still, most research reports remain fairly optimistic about the longer-term outlook for iron ore, despite “headwinds from Shanghai’s partial return to lockdown,” according to analysts in an emailed Morgan Stanley report headed by Marius Van Straaten.

It is projecting a deficit market on a full-year basis, and “a robust recovery in China’s steel production on strong infrastructure spending should drive more price upside” by the third quarter.

(With files from Bloomberg and Reuters)

Lynas awarded $120m DOD contract to build commercial heavy rare earths facility in US

Lynas jumps after winning temporary extension for Malaysia rare earth plant

Rare earth production line at Lynas’ plant in Kuantan, Malaysia. (Image taken from Lynas’ presentation.) 

Australia’s Lynas Rare Earths (ASX: LYC) announced Monday that it has signed a follow-on contract for approximately $120 million with the US Department of Defense to establish a first of its kind commercial heavy rare earths (HRE) separation facility in the United States. The contract enables Lynas to establish an operating footprint in the US, including the production of separated heavy rare earth products.

Lynas is presently processing rare earths at its $800 million Lynas Advance Materials Plant (LAMP) in Kuantan, Malaysia.

The US industry will secure access to domestically produced heavy rare earths, which cannot be sourced today and are essential to the development of a supply chain for future facing industries including electric vehicles, wind turbines and electronics.

Lynas worked with the DoD on the Phase 1 contract for a US-based heavy rare earths separation facility, announced July 2020, and said it has now reached agreement for a full-scale commercial HRE facility.

Lynas plans to co-locate the heavy rare earths separation facility with the proposed light rare earths separation facility, which is sponsored and half funded by the US DoD Title III, Defense Production Act office.

The facility is expected to be located within an existing industrial area on the Gulf Coast of the state of Texas and targeted to be operational in financial year 2025.

Feedstock for the facility will be a mixed rare earths carbonate produced from material sourced at the Lynas mine in Mt Weld, Western Australia. Lynas will also work with potential third-party providers to source other suitable feedstocks as they become available.

“The development of a US heavy rare earths separation facility is an important part of our accelerated growth plan, and we look forward to not only meeting the rare earth needs of the US government but also reinvigorating the local rare earths market,” Lynas CEO Amanda Lacaze said in the media statement.

“This includes working to develop the rare earths supply chain and value added activities.”

“The DoD’s decision to fully fund the construction of the heavy rare earths facility demonstrates the priority that the US government is placing on ensuring that supply chains for these critical materials are resilient and environmentally responsible.”

Wednesday, June 15, 2022

Republican Duke Buckner defeats opponent in SC06 primary race 

NORTH CHARLESTON, S.C. (WCBD) – Republican Duke Buckner has earned his party’s support in the race for U.S. House District 6.

The attorney and former educator defeated challenger A. Sonia Morris during Tuesday’s statewide primary. He will face incumbent Congressman James Clyburn during the November 8, 2022, General Election.

A native of Walterboro, South Carolina, Buckner graduated from Walterboro High School in 1990 and went on to earn a degree from both the University of South Carolina with a degree in English Education in 1994 and Nova Southeastern University Shepard Broad Law Center in Ft. Lauderdale, Florida. 

Congrats & God Bless! MJS & JC

Larry Kudlow: Biden shouldn't be blaming Putin for this

Tuesday, June 14, 2022

Duke Buckner / South Carolina's Candidate, U.S. House South Carolina District 6 

Duke Buckner was born in Walterboro, South Carolina. He earned a bachelor's degree in English education from South Carolina State University in 1994. He earned a J.D. from Nova Southeastern University in 2007. Buckner's career experience includes working as an attorney at law, public school teacher, real estate broker, and certified mediator. He has been affiliated with the Florida State Bar Association, the South Carolina State Bar Association, and with Rotary International in Hampton County. Buckner has also been a member of St. Peter's African Methodist Episcopal Church. GBD!

CEOs of GM, Ford and other automakers urge Congress to lift electric vehicle tax credit cap

The all-electric Chevrolet Silverado at the New York Auto Show, April 13, 2022.

The all-electric Chevrolet Silverado at the New York Auto Show, April 13, 2022.
Scott Mlyn | CNBC 

  • The CEOs of GM, Ford, Stellantis and Toyota North America are urging Congress to lift a sales cap on the federal government’s $7,500 electric vehicle tax credit.
  • The executives contend the credit is critical for affordability of the vehicles amid increases in production and commodity costs.
  • GM and Tesla are the only automakers to have exceeded the limit thus far.

DETROIT – The CEOs of General Motors, Ford Motor, Chrysler parent Stellantis and Toyota Motor North America are urging Congress to lift the federal government’s cap on the number of vehicles that are eligible for a tax credit of up to $7,500, a move they say will encourage consumer adoption of the cars and trucks.

In a joint letter Monday to congressional leaders, the executives say the credit, which begins phasing out once a company sells 200,000 plug-in electric vehicles, is essential to keep the vehicles affordable as production and commodity costs rise.

“Eliminating the cap will incentivize consumer adoption of future electrified options,” the letter states.

GM and Tesla, the industry leader in electric vehicles, are the only companies that have exceeded the limit so far. But other automakers are also expected to near the 200,000 mark as they release an array of new electric products.

The letter, which was first reported by Reuters, instead recommends a sunset date for the tax once the EV market is more mature.

“The coming years are critical to the growth of the electric vehicle market and as China and the EU continue to invest heavily in electrification, our domestic policies must work to solidify our global leadership in the automotive industry,” the letter states.

The letter also notes that the four companies have pledged to invest more than $170 billion through 2030 to bolster EV development, production and sales, including near-term investments of more than $20 billion in the U.S.

For years, GM CEO Mary Barra and other executives with the Detroit automaker have urged that the cap to be lifted to create a level playing field. They say the current policy penalizes early adopters of the technologies.

The letter was addressed to Senate Majority Leader Chuck Schumer, Senate Minority Leader Mitch McConnell, House Minority Leader Kevin McCarthy and Speaker of the House Nancy Pelosi. It was signed by Barra, Ford CEO Jim Farley, Stellantis CEO Carlos Tavares and Toyota North America CEO Tetsuo “Ted” Ogawa.

Correction: Kevin McCarthy is House minority leader and Nancy Pelosi is speaker of the House. An earlier version misstated their titles.

Bloodbath On Wall Street As Stock Market Plunges Into Bear Territory

Michael Nagle/Bloomberg via Getty Images 

A plethora of poor economic news caused a massive stock market selloff on Monday morning.

Within an hour and a half of trading, the Dow Jones Industrial Average fell over 2.5%, the S&P 500 fell over 3.5%, and the Nasdaq fell nearly 4%.

“Markets around the world tumbled, as higher-than-expected inflation and lower-than-expected economic growth upend the outlook for interest rates and corporate profits,” The New York Times reported. “Stocks in Asia and Europe fell, investors dumped government bonds, oil prices slipped and cryptocurrencies crashed.”

Headlining the bad news in the United States is runaway inflation, which hit 8.6% last month for a fresh four-decade high. Even as wages nominally grew between May 2021 and May 2022, real wages dropped by 3% due to the faster rate of inflation. High energy prices continue to plague American consumers as prices at the pump reached a national average of $5 per gallon.

Last week on Wall Street was also marked by investors jettisoning their assets. The Dow had fallen 2.73%, the Nasdaq had dropped 3.52%, and the S&P 500 had fallen 2.91% by Friday afternoon.

Many economists are watching the Federal Reserve as it considers a faster rollback of its aggressive monetary stimulus. Although the central bank already introduced two interest rate hikes this year — 0.25% in March and 0.5% in May — a 0.75% rate hike may now be on the table.

Polls consistently indicate that Americans are overwhelmingly worried about rising price levels. In a Harvard survey last month, 95% of respondents said inflation is “very serious” or “somewhat serious.” A plurality — 47% — said that the Biden administration is responsible.

An early May poll from The Washington Post and ABC News revealed that 94% of Americans were either “upset” or “concerned” about the impact of skyrocketing prices. President Joe Biden’s approval rating was underwater, with 42% of respondents approving of his work and 52% disapproving.

Biden, however, attributed the dismal inflation news to “Putin’s Price Hike” — a reference to the Russian invasion of Ukraine. He also pinned the blame on purported corporate price-gouging and wealthy Americans failing to pay higher taxes.

“Prices at the pump are a major part of inflation, and the war in Ukraine is a major cause of that. The United States is on track to produce a record amount of oil next year, and I am working with the industry to accelerate this output,” Biden said in a statement. “But it is also important that the oil and gas and refining industries in this country not use the challenge created by the war in Ukraine as a reason to make things worse for families with excessive profit taking or price hikes.”

As the United States and other leading economies continued to face economic headwinds, the World Bank cut its 2022 global growth forecasts from 4.1% to 2.9% and warned of the “sharpest slowdown in 80 years.”

“Global inflation is expected to moderate next year but it will likely remain above inflation targets in many economies,” the World Bank said. “If inflation remains elevated, a repeat of the resolution of the earlier stagflation episode could translate into a sharp global downturn along with financial crises in some emerging market and developing economies.”

Monday, June 13, 2022

Copper more effective than silver in killing covid virus

 Copper more effective than silver in killing covid virus

The material a surface is made of affects how long viruses and bacteria can remain contagious on it. (Image courtesy of Ruhr-University Bochum)

Researchers at Ruhr-University Bochum investigated ways to make copper and silver release even more ions than they normally would as a result of corrosion, a process that helps prevent the growth of bacteria or kill them completely.

In a paper published in the journal Scientific Reports, the scientists describe the use of a so-called sputtering system with which the thinnest layers or tiny nanopatches of the metals can be applied to a carrier material. Depending on the sequence or quantity in which the individual metals are applied, different surface textures are created. If a precious metal such as platinum is also applied, silver corrodes even faster and releases more antibacterial ions.
“In the presence of a more noble metal, the baser metal sacrifices itself, so to speak,” researcher Alfred Ludwig said in a media statement. This phenomenon is called the principle of the sacrificial anode.

The effectiveness of such sacrificial anode systems against bacteria has already been demonstrated. However, whether viruses can also be rendered harmless in this way has not yet been investigated in detail.

“This is why we analysed the antiviral properties of surfaces coated with copper or silver as well as various silver-based sacrificial anodes, and also examined combinations of copper and silver with regard to possible synergistic effects,” virologist Stephanie Pfänder said.

The team compared the effectiveness of these surfaces against bacteria with the effectiveness against viruses.

Surfaces with sacrificial anode effect, especially nanopatches consisting of silver and platinum as well as the combination of silver and copper, efficiently stopped bacterial growth.

Yet, a different picture emerged with SARS-CoV-2: thin copper layers significantly reduced the viral load after only one hour. On the other hand, sputtered silver surfaces had only a marginal effect, and silver nanopatches did not impress the virus either.

“In conclusion, we demonstrated a clear antiviral effect of copper-coated surfaces against SARS-CoV-2 within one hour, while silver-coated surfaces had no effect on viral infectivity,” Pfänder said.