WTI Gains on U.S. Supplies as Iraq Fighting Rages; Brent Steady

West Texas Intermediate rose for the first time in four days after a government report showed U.S. crude inventories shrank and as Iraqi forces battled insurgents north of Baghdad. Brent was steady in London.

Futures advanced as much as 0.4 percent in New York. Crude stockpiles fell by 579,000 barrels last week, the Energy Information Administration said yesterday. Islamist militants battled Iraq’s military for control of the Baiji oil refinery, the country’s biggest, as President Barack Obama told top U.S. lawmakers that he won’t need additional congressional approval for the options he’s considering in response to the crisis.

“The crude market is telling us the importance of Iraq,” said Jonathan Barratt, the chief investment officer at Ayers Alliance Securities in Sydney who predicts investors may sell West Texas contracts if prices climb to $107.50 a barrel. “The concerns are smoldering and that keeps oil up. The EIA numbers are in line with what you’d expect this time of year.”

WTI for July delivery, which expires tomorrow, gained as much as 46 cents to $106.43 a barrel in electronic trading on the New York Mercantile Exchange and was at $106.42 at 11:17 a.m. Singapore time. It dropped 39 cents to $105.97 yesterday, the lowest close since June 11. The more-active August contract was up 45 cents at $106.04. The volume of all futures traded was about 16 percent below the 100-day average. Prices have increased 8.1 percent this year.

Brent for August settlement was 22 cents higher at $114.48 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude traded at a premium of $8.46 to WTI for the same month. The spread widened for a third day yesterday to close at $8.67.
Source: Bloomberg

Asian Stocks Climb Amid U.S., China Growth Optimism

Asian stocks rose toward a six-year high after the Federal Reserve said interest rates will remain low for some time as U.S. growth rebounds, and Premier Li Keqiang pledged to sustainChina’s economic expansion forecast.

BHP Billiton Ltd. (BHP), the world’s largest miner, climbed 3.1 percent in Sydney as materials companies led gains. Seiko Epson Corp. surged 8.4 percent after Citigroup Inc. said earnings at the Japanese printer maker are above market estimates. China Overseas Land & Investment Ltd lost 1.9 percent in Hong Kong as UBS AG said it expects more extensive price cuts for property.

The MSCI Asia Pacific Index advanced 1.1 percent to 145.28 as of 11:22 a.m. in Hong Kong, heading for its biggest gain in a month as all 10 industry groups rose. A close at this level would be the highest since June 2008. Fed Chair Janet Yellen said accommodative monetary policy, rising home and equity prices plus an improving global economy should produce an above-trend U.S. expansion.

The Topix jumped 1.5 percent today, climbing for a third day and poised for it highest close in almost five months. Australia’s S&P/ASX 200 Index advanced 1.5 percent and Hong Kong’s Hang Seng Index rose 0.2 percent. New Zealand’s NZX 50 Index and Singapore’s Straits Times Index added 0.1 percent, while Taiwan’s Taiex index gained 0.2 percent. The Shanghai Composite Index declined 0.4 percent and South Korea’s Kospi index (KOSPI) slid 0.1 percent.

China will have “medium to high-level” growth in the long run, Premier Lisaid during a speech in London yesterday, adding that he could promise “honestly and solemnly there won’t be a hard landing.”

“The Chinese government is adjusting its economic operations to ensure the minimum growth rate is 7.5 percent, the level to ensure job creation,” Li said in the speech.

Source: Bloomberg

Iraq crisis may change China's oil suppliers

The security crisis in Iraq will affect oil prices in China and change the mix of the country's overseas oil supply sources in the long run, energy industry experts say.

Iraq is China's fifth-largest crude oil supplier.

Lin Boqiang, director of the China Center for Energy Economic Research at Xiamen University, said on Monday it is almost certain that the situation in Iraq will drive up oil prices in China.

Iraq is the second-largest producer in the Organization of the Petroleum Exporting Countries, after Saudi Arabia.

China depends on the world market for nearly 60 percent of its annual petroleum use.

Lin said the changing picture of Iraqi politics will also affect Chinese oil companies' investment strategies in the Middle East.

Li Li, research and strategy director at ICIS C1 Energy, an energy information consultancy in Shanghai, said China may increase imports from other oil producers such as Russia, Iran and Oman if the Iraqi crisis lingers.

However, Li said the security crisis is unlikely to drastically affect China's supply.

China National Petroleum Corp, the country's largest oil producer, is operating four projects in Iraq, making the company the largest foreign investor there.

In 2013, CNPC produced 40.72 million tons of crude, or 299 million barrels, from Iraq, almost one-third of the company's overseas output.

Li said Chinese investors are concentrated in southern Iraq and their operations may not be affected that soon, because the turmoil is taking place in northern areas of the country.

Han Xiaoping, chief information officer at China Energy Net Consulting Co, said he believes the Iraqi situation will stabilize soon, most probably within the next six months.

Han said the most crucial factor is to protect investment by Chinese oil companies in Iraq.

Lin predicts the price of oil will rise to more than $120 a barrel if the Iraqi crisis spreads to the south of the country.

Jin Ting, senior analyst at JYD Online Corp, a bulk commodity consultancy in Beijing, said June and July are the traditional peak season for global crude oil demand, and the Iraqi situation will lead to soaring prices.

She predicts that the next round of China's oil repricing, scheduled for June 23, will result in a slight rise of 70 yuan ($11.27) a ton for refined oil.

In the first four months of the year, China's crude imports from Iraq increased by 31 percent year-on-year to about 600,000 barrels a day, while imports from Iran rose by 55 percent to the same number of barrels a day.

Imports from Russia increased by 28 percent, also to about 600,000 barrels a day.

Source: ChinaDaily USA

Growth concerns rise for Alibaba

Lower first-quarter earnings cast shadow on prospects for IPO

Alibaba Group Holding Ltd, China's e-commerce conglomerate, disclosed in an updated filing on Monday that quarterly revenue growth slipped to its slowest pace in six years, amid concerns that the development may cast a shadow on its highly anticipated initial public offering in the United States.

The Hangzhou-based e-commerce giant reported lower revenue growth of 39 percent year-on-year between January and March in its revised filing to the US Securities and Exchange Commission on Monday. The company's growth rate was 71 percent in the same quarter last year. Operating margins narrowed to 45 percent from 51 percent in the previous year. The group's revenue during the first quarter was 12 billion yuan ($1.92 billion).

A growth rate of 39 percent would be considered robust for most companies, but for Alibaba Group, which owns China's largest customer-to-customer platform, Taobao, and the country's largest business-to-customer platform, Tmall, the slowing momentum has triggered concerns ahead of its much-anticipated initial public offering in the United States.

The reported first-quarter growth of 39 percent also marked the first time that Alibaba Group has posted a quarterly revenue increase of below 40 percent since Yahoo Inc, one of its major shareholders, began disclosing results in 2008.

Zhuo Saijun, an e-commerce analyst with the Beijing-based consulting firm Analysys International, said Alibaba's revenue decline in the first quarter was not surprising.

"Alibaba's Nov 11 shopping festival pushed many merchants to increase their online marketing spends during the fourth quarter of 2013. This has led to overdrawn marketing budgets in the first quarter," he said. Zhuo added that Alibaba still dominates China's e-commerce market, but research has shown that its market share is shrinking. "The shrinking is not that significant, but it shows the general trends of competition," he said.

Source:ChinaDaily USA

Chinese premier's Greece visit to set new milestone in bilateral relations

Chinese Premier Li Keqiang's upcoming official visit to Greece will be a diplomatic feat that will translate traditional friendship into practical cooperation, says China's ambassador to this southern European country.

The two sides will sign more than 20 cooperation agreements and business contracts during Li's visit, covering investment, trade and finance, among others, Zou Xiaoli said in a recent interview, adding that they will also hold their first-ever maritime cooperation forum.

Noting that Li travels to Greece one year after Greek Prime Minister Antonis Samaras' visit to China, Zou said China not only stood by Greece in the throes of the debt crisis, but is willing to work with it for Greece's economic recovery and development.

History has proved that Greece is one of China's most trustworthy friends, he said, recalling that even before the establishment of diplomatic ties, Greek ship-owners broke through blockade and helped China transport goods.

From the Beijing Olympics to the evacuation of Chinese nationals from Libya, Greece always stood ready to extend a helping hand, said the ambassador.

Enjoying a unique geographical advantage, Greece can be a bridge for the export of Chinese commodities and capital, said Zou. "Though limited in scale at the moment, trade and investment between China and Greece have a promising future."

Taking the Piraeus port as an example, he said, "if China-Greece economic and trade cooperation is a giant dragon, then Piraeus is the dragon's head. Once the dragon raises its head high, it will soon fly."

Meanwhile, Zou said that during the visit the two countries will sign an agreement to establish cultural centers in each other so as to provide a concrete vehicle for bilateral cultural exchanges and cooperation.

As a traditional maritime country, Greece has one of the largest merchant fleets in the world, said Zou, adding that China needs to learn from Greece's knowledge, development, management and protection of the oceans along with its experience in cultivating a network in the shipping industry.

China has 3 million square km of blue territory, and the oceans will be an important field for China's development and its contribution to the world in the future, said the ambassador.

"Therefore, strengthening maritime cooperation between China and Greece is a blessing to both countries and peoples as well as the whole world at large," said Zou.

As a return visit to Samaras' China trip last year, Li's visit shows that both sides attach high importance to their relations and hope the bilateral relationship can serve as a model for China's relations with other European countries, the ambassador concluded.

The Chinese premier flies to Athens on Thursday after wrapping up his official visit to Britain.

Source: Xinhua

Chinese economy should stabilize in the next six months

In June 16 2014, the People's Bank of China (PBOC) formally lowered the reserve requirement ratio for qualified commercial banks by 0.5 percent. On April 25 2014, the PBOC had lowered the reserve requirement ratio of county-level rural commercial banks and county-level rural cooperative banks. This was therefore the second time that the PBOC had used this monetary measure.

In the past two months, China's decision-makers have sent positive signals to the market by moving forward with "microstimulation" policies, which have not only addressed the liquidity problem in the short term, but also laid a foundation for stabilizing the economy in a long term.

According to a rough estimation from Shenyin Wanguo Securities, lowering the reserve requirement ratio released about 60 to 70 billion yuan on this occasion. Combined with 60 to 100 billion yuan released on the previous occasion, this means a total of 120 to 170 billion yuan were released.

In the last few weeks, through lowering the reserve requirement ratio, refinancing and other measures, the PBOC has provided sufficient liquidity to the interbank market. Currently, the interbank market interest rate has fallen to its lowest level since May 2013.

The discount rate and the transfer discount rate, both indicators of company level liquidity, are also lower, which suggests that liquidity in the real economy has improved.

According to some analysts, the PBOC is favoring a moderate sufficiency of liquidity overall through lowering the reserve requirement ratio, which means that the basic orientation of the monetary policy has not changed. The key point of the next step will be lowering the financing cost. Along with the implementation of the "microstimulation" policies, the economy will be given a boost. Domestic demand will stop declining and stabilize. With stable aggregate demand, there is every likelihood that the Chinese economy will stabilize in the coming half year.

Source: Xinhua

China: Home prices in more cities start to fall

China's property sector continued to cool in May, as new home prices in half of a sample of 70 major cities showed month-on-month drops, the National Bureau of Statistics (NBS) said in an online statement on Wednesday.

Thirty-five cities saw month-on-month drops in new home prices last month, contrasted with eight in April. Only 15 cities saw month-on-month increases, substantially down from 44 in April.

The average home price in the 70 cities slipped 0.15 percent from the previous month, marking the first drop in more than a year, according to the NBS.

The average new home price in April increased 0.06 percent month on month.

Of all the 70 cities, prices in Hangzhou of East China's Zhejiang province dropped the most, down by 1.4 percent, followed by 0.7 percent for Shijiazhuang, Wuxi and Xuzhou.

The highest month-on-month price increase was 0.3 percent in central China's Zhengzhou, while the price in Beijing increased 0.2 percent, faster than the growth pace in April, the NBS data showed.

For existing homes, prices declined in 35 cities month on month in May, up from 22 cities in April.

Liu Jianwei, senior statistician for the NBS, said home buyers have started to take a wait-and-see attitude amid uncertain market prospects, prompting developers to cut prices to alleviate pressures from piling inventories.

On a year-on-year basis, however, new home prices in 69 cities of the statistical pool continued to increase, with the highest growth at 11.3 percent.

Source: ChinaDaily USA

U.S. Signals Iraq's Maliki Should Go

       The WSJ reports,"the U.S. administration is indicating it wants Iraq's political parties to form a new government without Mr. Maliki as he tries to assemble a ruling coalition following elections this past April, U.S. officials say.

Such a new government, U.S., officials say, would include the country's Sunni and Kurdish communities and could help to stem Sunni support for the al Qaeda offshoot, the Islamic State of Iraq and al-Sham, or ISIS, that has seized control of Iraqi cities over the past two weeks. That, the officials argue, would help to unify the country and reverse its slide into sectarian division".

On Wednesday, Iraq stepped up efforts on several fronts to blunt the insurgency's progress, deploying counterterrorism units and helicopter gunships to battle them for control of the country's main oil refinery, in Beiji.

A growing number of U.S. lawmakers and Arab allies, particularly Saudi Arabia and the United Arab Emirates, are pressing the White House to pull its support for Mr. Maliki. Some of them are pushing for change in exchange for providing their help in stabilizing Iraq, say U.S. and Arab diplomats.

The chairwoman of the Senate Intelligence Committee, Sen. Dianne Feinstein (D., Calif.) told a congressional hearing Wednesday: "The Maliki government, candidly, has got to go if you want any reconciliation."

Senior administration officials have become increasingly critical of Mr. Maliki in their public statements and question whether he is committed to mending ties with Sunnis.

"There's no question that not enough has been done by the government, including the prime minister, to govern inclusively, and that that has contributed to the situation and the crisis that we have today in Iraq," White House spokesman Jay Carney said Wednesday. "The Iraqi people will have to decide the makeup of the next coalition government and who is the prime minister," he added. "Whether it's the current prime minister or another leader, we will aggressively attempt to impress upon that leader the absolute necessity of rejecting sectarian governance."

The Obama administration has for years warned Mr. Maliki's Shiite-dominant government to be more inclusive and less punitive against the minority Sunnis at the risk of further alienating them.

Mr. Maliki has largely ignored that advice over the past five years, U.S. and Arab officials say, jailing popular Sunni protest leaders, blocking even other Shiite blocs from sharing power and taking most key cabinet positions in government for himself.

This week, as pressure rose from the U.S. and other allies to work toward a representative government for Iraq, Mr. Maliki participated in a unity meeting with top Sunni, Shiite, Kurdish leaders. The result wasn't hopeful, U.S. and Arab officials say.

mobile WorldLive: while the PC is used mostly in a study, mobile usage is anytime and anywhere

LIVE FROM MOBILE ASIA EXPO 2014: Wang Gaofei, CEO of Chinese microblogging service Sina Weibo, used his keynote to highlight the radical difference he sees between PC and mobile internet users.

Those users who access Weibo and other internet services via a PC – a minority – have seen an alteration to how they spend time in an office or internet cafe but what has happened with the mobile internet impacts everything, he said.

“The PC change affects two hours of daily life but mobile and the internet of things changes all twenty-four hours,” said Gaofei, who added 70 per cent of total daily users access the service with a mobile device.

And domestically, while the PC is used mostly in a study, mobile usage is anytime and anywhere.

“The mobile internet is not an extension of the internet,” he said.

However, Weibo is anxious to carry their old-school PC users with them, even though they represent a minority. “We want them to avoid feelings of confusion when they move from one to another [PC to mobile],” said Gaofei.

“When we launch new services, they go first on mobile and if it’s good then move to PC as well,” he explained.

Since its launch four years ago, Weibo has accumulated a monthly active user base of 144 million.

Among Weibo’s future plans is greater user of location-based services, so that it can offer more targeted services to users, he said.

Modern Dance: Cloud Gate Dance Theater of Taiwan: Moon Light

                                           Another creative Choreography of Master Lin Hwai-Min

After building a Chinese web empire, Qihoo looks to new markets in developing nations

It’s not just Baidu, China’s top search engine company, that’s looking to developing nations for new market opportunities with hundreds of millions of first-time netizens. Now Qihoo (NYSE:QIHU), China’s second biggest search engine, is doing the same thing. The new battleground is software. It’s a battle taking place in countries like Brazil, Indonesia, and Thailand, where the number of web users will double from 2010 to 2015. Baidu (NASDAQ:BIDU) started this a couple of years ago when it began pushing its antivirus software in Southeast Asia – it was treading a path beaten by smaller and more adventurous Chinese companies like UCWeb, maker of the popular mobile browser app. Now Qihoo is doing the same with its own software offerings. Kevin Tellier, business development manager of Qihoo’s relatively new global team, says the company is looking to areas like Southeast Asia and Brazil with four of its Android, iOS, and Windows apps. Three of them are related to antivirus, while the other is the 360 Browser app for PCs. They’re marketed under the 360 Safe brand on an English-language homepage. 360 Browser has already surpassed Internet Explorer in China, and now Qihoo wants to try replicate that elsewhere. The 360 Browser app sells itself on security, and comes with a built-in file download scanner in addition to more conventional safeguards such as anti-phishing tools. However, since many developing nations are going straight to mobile (with cheap Android smartphones) and bypassing PCs, it’s a surprising omission that the company’s 360 Browser for Android app remains limited to the Chinese market.

Tellier says Qihoo wants to be known “first and foremost for security services” in its new markets, pitting it against names such as Avast and Norton. That could extend to Qihoo’s new hardware, which is currently limited to consumers in China. At the Mobile Asia Expo in Shanghai this week, Qihoo is showing off its little gadgets to international visitors to gauge their reactions. There’s a wi-fi dongle, an Android “smart key” that’s a clone of Pressy, and a wearable gizmo for children (pictured below) that allows parents to monitor where their kids are at.

The company has no comment on whether its web empire – which in China covers 360 Search, 360 Answers, an AOL-style web directory, and online advertising – will also venture abroad. Clearly it’s a lot harder to adapt and localize web services than it is a suite of apps. Arch-rival Baidu seems close to launching its search engine in Thailand, Brazil, and Egypt – markets where it has already been active for years with a mix of software offerings and web products such as a simple web links directory. Whatever the extent of Qihoo’s overseas ventures, the company looks set to clash with Baidu on a number of new fronts. But without any web products operating outside of China, Qihoo’s monetization options are limited with its free software. In China, its web browser and antivirus apps are part of a huge ecosystem that prints money out of ad clicks, referrals, and driving search engine traffic – a lot like Google. Outside of China, that’s not yet possible for Qihoo. “Our priority is in users,” adds Tellier. “Monetization [in new markets] is a question to be answered later.”

Source: TECHINASIA

U.S. Steelmaker Nucor now sees U.S. manufacturing OK with some natgas exports

 The United States could export a "reasonable amount" of natural gas while also creating the manufacturing jobs it needs, the chief executive of U.S. steelmaker Nucor Corp told Reuters on Wednesday.

In comments that mark a shift in tone for the U.S. steelmaker, Chief Executive John Ferriola said the government should give natural gas exports "thoughtful, careful consideration."

Nucor made its first foray into gas production in November 2012 to secure supplies for its own operations, forming a joint venture with Encana Corp , which is now on track to produce more fuel than Nucor needs. Drilling was temporarily suspended late last year due to weak gas prices.
"You don't want to export everything and you don't need to export nothing," Ferriola said on the sidelines of the Steel Success Strategies conference in New York.

"I truly believe that you can reach a point where manufacturing would generate the jobs we need in this country, and still export a reasonable amount of natural gas."

Ferriola's predecessor Dan DiMicco has been very critical of plans to export more U.S. natural gas, though he has not called for a complete export ban. Nucor and its rivals see a big opportunity in the low energy costs that have come with the U.S. shale boom that boosted domestic gas supplies.

Ferriola said that under its current drilling plan, within the next decade Nucor would have enough natural gas to supply all its steel mills, its new direct reduction facility in Louisiana, and a second direct reduction plant, with 40 to 50 billion cubic feet of annual production left to sell into the market. He said that plan will likely change.

The government expects the United States to become a net exporter of gas in 2018. The first of what is expected to be several liquefied natural gas export terminals is set to be completed in late 2015.


TSUNAMI OF RUSSIAN STEEL

Ferriola said Nucor is looking at options to address a surge in imports of hot-rolled coil from Russia, including challenging the so-called suspension agreement that has sheltered Russia from steep duties since the Cold War.

Reuters reported on Wednesday that steel industry leaders were considering challenging the trade deal amid mounting tensions over Russia's actions in Ukraine. [ID:nL2N0OZ0GI]

"It's a tsunami, it's out of control, and we will look at every legal remedy and response to that," said Ferriola on Russian imports.


RIGHT OPPORTUNITIES IN IRON ORE

Ferriola said Nucor is considering long-term iron ore supply agreements and could even buy an iron ore mine, though it is less interested in an acquisition now than three years ago, when prices were much higher.

The move to secure more raw materials comes as the company ramps up its new direct reduced iron (DRI) plant in Louisiana.

DRI is made from iron ore and is a substitute for scrap, the company's traditional raw material.

"For the right opportunity under the right circumstances, you know we've go the capital to do it," he said. "If something came along that was perfect for our needs we would consider it."
Source: Reuters

Xiaomi reveals Mi3 sale date and price in the Philippines

Xiaomi VP Hugo Barra’s visit to the Philippines last week signalled the Chinese smartphone maker’s imminent arrival in the country. Now Xiaomi has revealed that 3,000 Mi3 smartphones will be on sale in the country on June 26 at 12 noon. The Mi3 16 GB smartphones will be sold at Php 10,599 (US$241), which is lower than Barra’s earlier estimate of Php 12,000 (US$272). That’s likely due to Xiaomi lowering the cost of the Mi3 in China, where it costs RMB 1,499 (US$240) for the 16GB version. Customers can purchase the phone through Xiaomi’s local partner, Lazada Philippines. This announcement was made through the Mi Philippines Facebook page. Unlike other smartphone brands, Xiaomi is known for its flash sales, in which it sells phones in batches. It even does that in new markets outside China. Devices usually sell out in just a few minutes. In Hong Kong, the startup company sold 10,000 HongMi phones in only 36 seconds – its fastest overseas sale to date. Its slowest sell out is in Malaysia where it sold 4,000 Mi3 phones in 17 minutes.
As the Philippines is the fastest growing nation in smartphone uptake, many expect a quick sell-out for its first batch. Following the Philippines, Xiaomi is also set to expand in Indonesia, Thailand and India.

Source: TECHINASIA

POLL-U.S. natgas EIA stock build seen at 110 bcf, outpacing norm

 U.S. utilities likely put 110 billion cubic feet of natural gas into underground storage caverns last week, continuing the record pace of injection as utilities rebuild depleted heating supplies before next winter, a Reuters poll of analysts showed on Wednesday.

The previous week's addition of 107 bcf marked five consecutive weeks of injections exceeding 100-bcf, only the second such string of injections, according to the U.S. Energy Information Administration.

A 110-bcf injection for the week ended June 13 would surpass

the prior week's 107-bcf build, as well as the 92-bcf build last year and the 87-bcf five-year average. If the forecast is right, it would be the ninth week in a row that injections exceeded the five-year norm.

After a slow start in April, storage builds over the last four weeks have outdistanced the 2013 and five-year norm. Utilities have stockpiled 446 bcf of gas over the last four weeks, compared with 383 bcf in the same period in 2013 and 364 bcf for the five-year average.

Even with a 110-bcf forecast build, overall gas in storage will remain at an 11-year low for mid-June as utilities attempt to replace a record 3 trillion cubic feet of gas withdrawn from storage over the past winter to keep homes and businesses warm.

Analysts polled by Reuters said they expect utilities to add a record 2.6 tcf of gas into storage during the April-October injection season to get stocks up to what several consider a healthy 3.4 tcf before the November-March winter heating season.
That, however, would still be well below the 3.8 tcf five-year norm and would be the lowest amount of gas in storage at the start of a heating season since 2005.

This week's injection forecast would bring total gas in storage to 1.716 tcf, slightly narrowing the storage deficit to

29 percent below the 2013 level and 33 percent below the five-year average for this time of year.

Some analysts warn that even 2014's strong injection pace will not be enough to avoid price spikes next winter. Other analysts argue that record U.S. gas production will make utilities less reliant on stored gas than in previous winters.

The EIA will release the gas storage data on Thursday at 10:30 a.m. EDT (1430 GMT).

The Reuters poll had 22 participants, with injection estimates ranging from 101 bcf to 115 bcf. The median estimate and the average were both 110 bcf.

Early estimates for injections in the next storage report ranged between 75 and 97 bcf, with an average build of 89 bcf, surpassing the 94-bcf increase seen a year ago and the five-year average of 81 bcf.

Source: Reuters

Pretenders vie for Chile's copper crown but can't replicate boom

 As top copper producer Chile starts to lose market share, players are betting on fledging suppliers to help feed hunger for the red metal, but no single country is likely to replicate the South American nation's boom of the last century.

Chile produces about a third of the global supply of copper, a key raw material for construction and power that is vital for industrialisation. With consumption rising 4 percent yearly, the country's output growth is not enough to meet additional demand.

Its market share is being eroded by spiralling costs at ageing deposits, with neighbouring Peru and Africa's Democratic Republic of Congo (DRC) and Zambia gaining ground.

While those countries are poised to become large suppliers in a more fragmented market, the emergence of a single, giant challenger to Chile is unlikely in the foreseeable future due to geological, political and infrastructure constraints.

"Is there ever going to be another source of supply as good as Chile? No," Bernstein Research analyst Paul Gait said.

"Collectively Peru, the DRC and Zambia have half the geological endowment of Chile. They are great copper locations but they won't be able to do what Chile did to the copper market in the 20th century."

Chile accounted for almost 34 percent of global output of the metal in 2010 but its share fell to less than 32 percent in 2013, according to data from Cochilco, a body that advises Santiago on matters concerning copper.

Thomson Reuters GFMS forecasts Chile's contribution will decline to less than 30 percent in 2016.


CHILE ENDOWMENT

Riven along its length by a crack in the Earth's crust that makes it one of the world's most seismic zones and creates the perfect conditions for large porphyry copper deposits, Chile became the top copper supplier in the 1980s, after the closure of high-cost mines in previous No.1 the United States.

The discovery in the 1980s of deposits such as Escondida, now the world's largest copper mine, proved the country was rich in the metal that it could produce cheaply and export quickly.

However, ore grades are falling, mines are getting deeper, water availability is scarce and energy is expensive.

Even replacing existing supply is extremely costly.

To increase capacity from 2012's 1.7 million tonnes to 2 million tonnes by 2021, state-owned Codelco, the world's No.1 copper producer, needs to invest some $30 billion.

A seawater desalination plant to provide Escondida a steady water supply, necessary to process the metal, will cost global miner BHP Billiton $3.4 billion.

Some costly expansion projects have been delayed after a 30 percent drop in copper prices in the past three years due to slowing economic growth in top consumer China.

"The outlook for Chilean mining has become much more complicated in recent years. Probably not all the projections for the increases in production will come about," said Juan Carlos Guajardo, head of Chilean mining think tank CESCO.

Global markets' sanguine reaction to the insurgency in Iraq looks complacent

 Global markets' sanguine reaction to the insurgency in Iraq looks complacent. The recent intensification of fighting has nudged crude oil prices to a nine-month high while stock and bond markets have barely moved. That overlooks the stagflationary risks.

Brent crude hovered above $113 per barrel on June 18 amid reports that insurgents had targeted the Baiji oil refinery in the north, the largest in Iraq. The fear is of sustained high prices, or even a spike to the $140 per barrel levels that assailed the global economy in 2008.

The risks are there because Iraqi supply matters. With Libyan exports currently reduced to minimal levels, the International Energy Agency is expecting increased Iraqi oil output to supply 60 percent of the overall rise in OPEC output for most of the rest of the decade. Most of Iraq’s infrastructure is in the south of the country and still far from the current fighting. Last week, the IEA suggested the threat to oil output remains small for now.

Markets nonetheless have cause to be uneasy. The roughly 3 percent rise in the oil price that has occurred this month is already bad for a less-than-robust global economy, and has proved a shock for India. The rupee has fallen to a two-month low, putting pressure on the central bank to intervene. Inflation in India is already a high 6 percent. With the government providing subsidies on diesel and cooking fuel, a rising oil price worsens its budgetary position.

The global economy stands to suffer from even a small increase in the oil price if any rise is sustained. In China, every $10 increase in the crude oil price will reduce growth by 0.2 percentage points, Barclays estimates.

Then there is the global inflationary impact of pricier oil. In the United States, consumer price inflation has risen to 2.1 percent and investors are already watching for a change in the stance of the Federal Reserve. A more hawkish shift would tend to push up U.S. rates and the dollar. That would worry equity investors and weaken sentiment on emerging economies. Yet right now, markets are priced for little to go wrong.

Source: Reuters

TheGuardian: Isis insurgents attack Iraq's biggest oil refinery

   Islamist militants have attacked Iraq's largest oil refinery in the city of Baiji, 155 miles north of Baghdad, as Iran raised the prospect of direct military intervention to protect Shia holy sites.

A top security official told the Associated Press that fighters of the Islamic State in Iraq and the Levant (Isis) had begun their attack on the refinery late on Tuesday night. The attack continued into Wednesday morning, with militants targeting it with mortar shells, starting a small fire on the periphery.

The refinery accounts for more than a quarter of the country's entire refining capacity, all of which goes toward domestic consumption – petrol, cooking oil and fuel for power stations. At the height of the insurgency from 2004 to late 2007, the Baiji refinery was under the control of Sunni militants who used to siphon off crude and petroleum products to finance their operations. Isis has used its control of oilfields in Syria to boost its coffers.

Any lengthy disruption at Baiji risks long lines at the petrol pump and electricity shortages, putting further pressure on the Shia-led government of the prime minister, Nouri al-Maliki. Iraq's beleaguered prime minister has fired several top security commanders after Iraqi troops melted away before Isis militants as they captured the Mosul in the north, Iraq's second largest city.

Jihadi rebel forces have reached Baquba, less than 40 miles north of Baghdad, while fighting continues to rage further north in the city of Tal Afar. State television late on Tuesday aired footage of army troops and armed volunteers disembarking from a transport C-130 aircraft at an airstrip near the city.

Isis and disaffected Sunnis have threatened to march to Baghdad, the capital, and the Shia holy cities of Kerbala and Najaf in the worst threat to Iraq's stability since US troops left. The three cities are home to some of the most revered Shia sites. Isis has tried to capture Samarra, north of Baghdad, home to another major Shia shrine.

Hassan Rouhani, the Iranian president, warned that Iran would do whatever it took to protect the shrines.

"Dear Kerbala, Dear Najaf, Dear Kadhimiya and Dear Samarra, we warn the great powers and their lackeys and the terrorists, the great Iranian people will do everything to protect them," he said, in a speech on Wednesday in Khoramabad, near the Iraqi border.

On Tuesday Rouhani mentioned petitions signed by Iranians who said they were willing to fight in Iraq "to destroy the terrorists and protect the holy sites", which are visited by hundreds of thousands of Iranian pilgrims annually.

"Thank God there are enough volunteer Shias, Sunnis and Kurds in Iraq to fight the terrorists," he added.

Thousands of Iranians have volunteered to defend the shrines. Iran is 90% Shia, a group considered to be apostates by Isis and Sunni extremists. Rouhani said on Saturday that Iran had never dispatched any forces to Iraq and it was very unlikely it ever would, but Qassem Suleimani, commander of the Quds force of the Iranian Revolutionary Guard Corps (IRGC), was in Baghdad last week to give advice to Maliki.

Amid the fighting, the plight of foreign oil workers has become a concern. The Turkish embassy in Baghdad is investigating reports that a group of Turkish construction workers were among 60 people abducted by militants near Kirkuk. Isis seized 15 Turks who were building a hospital near the town of Dour, in Salahuddin province near Kirkuk.

The reported abduction came a week after 80 other Turkish nationals were seized by insurgents in Mosul, 49 of them from the Turkish consulate, including special forces soldiers, diplomats and children.

The Indian government has not been able to make contact with 40 Indian construction workers in Mosul, with the Times of India reporting that they have been kidnapped.

The foreign ministry spokesman, Syed Akbaruddin, said dozens of Indian workers were living in areas overrun by Isis and India was in contact with many of them, including 46 nurses. The nurses are stranded in Tikrit, which is under militant control, with many of them holed up in the hospital where they work. Nurses who spoke to the Indian media said they had been treating people injured in fierce street fighting.

The White House has indicated that it may be some days away from a decision on any US military intervention as senior Democrats expressed growing caution about the risks of being sucked back in to conflict in the country.

Amid signs that Barack Obama is treading warily over calls for air strikes, the administration spokesman, Jay Carney, said the president would "continue to consult with his national security team in the days to come", and there would also be further consultations with members of Congress, including some closed briefings later this week.

Kirkuk the elephant in the room as Kurds, Iraqis talk pipelines

 Barely a week after Iraqi Kurdistan took over the Kirkuk oil field, Iraqi oil officials seemed resigned to its loss when they joined their Kurdish counterparts at a London industry conference.

Instead of tough messages over ownership of the prized giant field, the Iraqis sparred with the Kurds over pipeline logistics, as though the change of affairs was now the status quo.

The Kurdish Minister of Natural Resources, Ashti Hawrami, announced the completion of a new pipeline link on Tuesday, which could be used to export Iraq's Kirkuk oil through its territory. [ID:nL5N0OY2PI]

In response, Iraqi officials cast doubt over the existence of the link and stuck to their line that the Kurds of the semi-autonomous region had no right to export oil independently. But their legal threats have been falling on deaf ears as refiners have already brought Kurdish oil, which has been trucked through Turkey.

"Kurdistan of Iraq is already on its national desired border and I don't think it will be easy to push back," Adnan al-Janabi, a senior Sunni politician and head of Iraq's oil and gas committee said on the first day of the conference.

The Kurds see Kirkuk as their historic capital.

"The Peshmerga is on Kurdish territory and there is no reason to get them back," Taha Zanghana, deputy minister of natural resources of Iraqi Kurdistan, told reporters on Wednesday, speaking of Kurdish forces around Kirkuk.

Kirkuk oil has been largely trapped in Iraq after its export pipeline to Turkey was sabotaged in March and the Sunni extremist onslaught makes repairs hazardous.

The Kurdistan Regional Government (KRG) still needs Baghdad.

Its small oil sales by truck and its pipeline exports from its own pipeline, which began in May, will not cover its financial needs for a while.

After the KRG completed the pipeline to Turkey by-passing the federal system, Baghdad cut the Kurds out of the budget for the last five months, forcing the northern region to take out large loans to stay afloat.

Ashti Hawrami, the Kurdish minister of natural resources, said the KRG had already borrowed $1 billion internationally against future oil sales and another $2 billion locally.


BAIJI REFINERY ATTACK

The Kurds said the new pipeline announced on Tuesday was built with the cooperation of Iraq's North Oil Company, which runs the field, and once operational it would allow oil flows to link up with the Kurdish pipeline to Turkey.

But it still needed to be tested, Zanghana said.

Kurdish officials at the conference were unable to comment on capacity or give greater detail on the connection to its pipeline to Turkey.

The pipeline could start quickly, Zanghana added, but the region was waiting for an agreement with Baghdad.

Thamir Ghadhban, the chairman of the advisory commission to the prime minister, said that the Kurdish energy minister's announcement was the first he had heard of such plans.

Early on Wednesday, Sunni Muslim militants began attacking Iraq's largest refining complex at Baiji and now control 75 percent of the complex. The plant was shut down on Tuesday.
Some output from the refinery was sent to the Kurdish region, which will now have to make up for the loss.

"We were expecting that case, and we made all the preparations to supply our local demand ... It's not the first time it has been shut down or they cut our supplies," Zanghana said.

"We are importing products and we are swapping products for diesel and fuel oil. I think it will not be easy for us, I got calls from our distribution centres...but I'm confident that we will tackle that case."

Source: Reuters

US STOCKS-Wall St on track to end at a new record after Fed comments

 U.S. stocks rose, with the S&P 500 on track to close at a new record, after the Federal Reserve hinted at a slightly faster pace of interest rate increases starting next year but suggested rates in the long-run would be lower than it had indicated previously.

After a two-day policy meeting, the Fed cut the 2014 economic growth forecast to a range of between 2.1 percent and 2.3 percent from around 2.9 percent.

The Fed also cut its monthly bond purchases to $35 billion a month, a reduction of $10 billion, as widely expected, in connection with its plans to wind down one of its main stimulus programs by the end of the year. 

"The decision confirms that a steady-as-she-goes Federal Reserve will complete its quantitative easing exit later this year, but still have to rely more on forward policy guidance due to remaining growth and jobs challenges," said Mohamed El-Erian, chief economic adviser at Allianz SE in Newport Beach, California.

"Remaining growth and jobs challenges involve achieving economic lift-off that materially reduces long-term unemployment," El-Erian added.

The Dow Jones industrial average <.DJI> rose 60.05 points or 0.36 percent, to 16,868.54, the S&P 500 <.SPX> gained 9.8 points or 0.5 percent, to 1,951.79 and the Nasdaq Composite <.IXIC> added 14.32 points or 0.33 percent, to 4,351.55.

The benchmark S&P 500 was already above its record close of 1,951.27 set on June 9. The index is now up 0.8 percent for the week as investors largely shrugged off mounting tensions in Iraq and focused on a flurry of merger and acquisition activity and better-than-anticipated manufacturing data.

Among the biggest gainers was FedEx Corp , which rose 5.9 percent to $148.52 after hitting an all-time intraday high of $148.58. The world's No. 2 package delivery company reported better-than-expected quarterly revenue. Its gains helped push the Dow Jones Transportation average up 1.3 percent. 

Amazon.com Inc <AMZN.O> shares jumped 2.9 percent to $334.93 after Chief Executive Officer Jeff Bezos unveiled a "Fire" smartphone with free, unlimited photo storage, jumping into a crowded field dominated by Apple Inc <AAPL.O> and Samsung Electronics 

Adobe Systems <ADBE.O> shares shot up 8.1 percent to $73.03. Adobe was the S&P 500's best performer a day after the maker of Photoshop and Acrobat software reported better-than-expected quarterly profit and revenue. 

Source: Reuters