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Romance of the high seas strong in shipping industry hearts

“There is nothing more enticing, disenchanting, and enslaving than the life at sea”. So said renowned Polish-British writer Joseph Conrad in his controversial 1900 novel, Lord Jim.
Sailors from decades past said that without shipping half the world would freeze to death, the other half would starve to death.
It is a grand, dramatic statement, I agree, but it is not too far from the truth: according to the International Chamber of Shipping, an astonishing 90% of world trade is carried by the global shipping industry.
Carrying goods by sea has provided employment opportunities – and, not to mention, danger, adventure and escape – to countless restless souls since Prehistory. The romantic in me loves the fact that I report on an industry with an unbroken tradition of millennia.
At sea you could earn a living, but also run away from your problems. You could change your name and start your life anew and become – as Nikos Kavvadias, a wonderful Greek poet and writer, who also happened to be a telegraphist on board commercial ships, put it – “the perfect, unworthy lover of the endless voyage and azure ocean.”
You could also lose your life at sea. Divers will often come across cargo that got lost in a shipwreck: from ancient Greek amphorae in the depths of the Mediterranean, to golden Spanish coins in the Caribbean and French champagne bottles at the bottom of the Baltic Sea.
They are relics of trade from times gone by, testament to the tastes and needs – and to say nothing of the greed – of people long departed.
And let’s not forget there were dark times, not too long ago, when even human beings were considered cargo and shipped from one shore to another to be sold like any other commodity.
Today much of the cargo modern commercial vessels carry does not sound very glamorous – urea and petroleum coke don’t really have the same ring as spices, tea and mastic – but shipping remains an exciting and vibrant business to be involved in.
I talk to people who work in the maritime industry on a daily basis, from charterers to shipbrokers to owners and operators.
Yes, arranging for your cargo to be taken from the US Gulf to the Far East, or mediating between an owner and charterer who are at loggerheads, or trying to find a stem for your vessel in a loading area that has five other ships competing for it, can be as stressful as any other job.
Much of this work is done staring at a screen in an office like any other, with an uninspiring commute to negotiate.
However, any person involved in all this, from Piraeus to Copenhagen, from New York to Singapore, will tell you that there is something wondrous about a business that deals with transporting grain, or oil, or – yes, urea – between two ports that sometimes lie at opposite sides of the world.
The people I talk to in the dry bulk industry are often ex-seafarers – yes, they do swear like seafarers – or are the sons and daughters of brokers and sea captains, or got involved in shipping because it sounded like an interesting industry, only to catch the shipping “bug” and, years later, can no longer imagine working in any other sector.
The vast majority of them are passionate about shipping, which explains why the dry bulk sector’s recent bearishness has left them heavy-hearted. I can tell this from the tone of their voice over the phone.
Granted, dry bulk owners and shipping companies got carried away in recent years, partly because of China’s vast appetite for a variety of commodities this past decade, and ordered too many ships.
Cargoes have been falling well short of supply, which lies at the core of what has been a lackluster performance by the dry bulk freight sector for over a year.
Yes, dry bulk has a long way to go before it returns to some semblance of health.
But while it may take years for a rebalance to be reached, something tells me that those hard-working men and women who work in this thrilling industry will remain faithful to that little bit of romance they harbor in their hearts and that first drew them in. After all, they still have to ensure that half the world gets fed and half the world is kept warm.

Source: http://blogs.platts.com/

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US crude oil markets can seem as befuddling as an elephant

Para leer en español haga clic aquí: Los mercados del crudo de Estados Unidos suscitan variedad de opiniones
Few people are often in complete agreement. Each reaches a conclusion based on their own past experiences and expectations. Disagreements often manifest in descriptions of the same thing, which are presented with supportive information, which all may makes sense to those presenting the subject matter — but for those who may have supportive evidence backing the opposite, contrary views can sometimes be vexing.
Opinions on the future of the crude oil markets are no different.
This was the case at the Platts 5th Annual North American Crude Oil Summit held the first week of March in Houston, where many industry experts presented insights and their views on the direction of the crude oil market. Will crude production continue to fall? How high (or low) will prices go in 2016? What kind of volume of crude exports could we possibly expect?
These are all questions that came up during the conference, but depending on you asked, there were various expectations. It was like the tale of the six blind men who set out to determine what an elephant looked like by feeling different parts of the mammal’s body. And like in the tale, while one’s subjective experience may be true, it may not be the totality of the truth.
battistini-blind-men-elephantIn the tale of the blind men and the elephant, one man feels the elephant’s leg and says the elephant is like a pillar; one who feels the tail describes the elephant as something similar to a rope; one who feels the trunk says it is like a tree branch; one who feels the ear says the elephant is like a hand fan; one who feels the belly says the elephant is like a wall; and the one who feels the tusk says the elephant is like a spear.
Many versions of the story itself exist still today. In some, the disagreeing blind man become extremely violent towards each other. In another, the blind men listen to one another and learn from each other’s perspectives. But it isn’t until the end of the story that the blind men learn that they are, in fact, all blind, when a man who can see the elephant in its totality describes it to them.
During the Platts Crude Oil Summit, presenters from different companies and positions in the market held a wide range of market views. Some expected the crude oil market to recover to levels near $80/b by the end of 2016. Some held the number closer to the $50/b level. Still, most agreed that crude oil prices had reached bottom and didn’t expect it them to fall much further, if at all.
In addition, though disagreements persisted on how much production had fallen, there was a consensus on the fact that it had fallen. Even some forecasts that until recently held that crude oil production in the US would rise in 2016 have now succumbed to the realization that production is unequivocally in decline — down as much 800,000 b/d since the mid-year peak of 9.6 million b/d.
In a way, there’s only a certain amount of deviation that the blind men in the original tale should have derived from their experience. After all, none would describe the elephant as something that was smaller than a dog, otherwise they would not be labeled as just blind but also as incoherent or insane. In addition, the blind men were not deaf so they should have heard the elephant breathe and bellow loudly, so they should have had an idea that the elephant was something large.
Perhaps upon leaving the conference, attendees left with a wide variety of ideas and expectations on the direction of the US crude oil market and the market as a whole. But in the end, attendees trusting their own senses should have reached their own conclusions — perhaps that that shale oil production in the US has fallen and continues to fall, that crude oil prices have most likely already reached a bottom, or that the resilience of shale oil was overstated.

Source: http://blogs.platts.com/

How do you solve a problem like the EU power market?

The hills are alive with the sound of wind turbines, as the push to decarbonize the EU power sector by 2050 starts to bite. The success of renewable electricity — a record €26 billion was invested in new wind power capacity alone in the EU in 2015 — is having profound impacts on the rest of the market.

Wind power is now the EU’s third-largest generation source by installed capacity, with 142 GW or a 15.6% share, overtaking hydropower for the first time, according to the latest figures from the European Wind Energy Association. Gas and coal still dominate for now with 192 GW and 159 GW respectively, but the growth is all in renewables.

The share of renewable energy, including for heat, grew in 24 of the 28 EU countries in 2014, according to the latest figures from Eurostat, the EU’s statistical office, and the EU is on track to meet its binding 2020 target to source 20% of its final energy demand from renewables. That’s likely to mean an estimated 35% share for renewables in electricity, rising to around 50% by 2030, when the EU wants to source at least 27% of its final energy demand from renewables.

This is a success story in that national governments chose to support renewables with national state aid to ensure they would — most of them — meet their binding 2020 national renewables targets. But it also creates a problem for the rest of the market rather more serious than how to handle a young, singing nun called Maria.

That’s because renewables have very low marginal costs to produce. And adding them to an already generally oversupplied European power market has helped push down average wholesale electricity prices to new lows, removing any price signal for long-term investment in any other generation technology.

This makes a lot of EU governments worry that there won’t be any back-up generation available when the sun doesn’t shine or the wind doesn’t blow, or simply to cover winter peak demand. Their solution? Setting up national capacity remuneration mechanisms — another form of state support — to make sure capacity is there when it’s needed. You can hear more on the rise in state aid to electricity markets in this Platts Gas & Power Watch video.

It’s safe to say that national capacity mechanisms are not one of the European Commission’s favorite things. After 18 years of pushing governments to break down national barriers and create a single EU electricity market — still a work in progress — yet another policy with national in the title does not go down well with the EU’s executive body.

But the commission has no plans to say so long, farewell, auf Wiedersehen or adieu yet to its hopes for an integrated EU electricity market. It is working on new market design legislation that it plans to unveil before the end of the year, which is expected to include changes to the EU’s directives on renewable energy and cross-border electricity trading, as well as new rules on electricity supply security.

A few of the commission’s favorite things here include promoting EU-wide intraday and balancing markets, demand side response and regional cooperation. It also plans to propose a European or regional framework for capacity mechanisms, so that they do not lock in higher carbon generation choices, or reinforce dominant incumbents, or exclusively reward national generation, ignoring cross-border options and demand side response.

EU legislation usually takes a couple of years to agree, and often a few more to implement, so it could be 2020 before any of this is in place officially. Meanwhile industry is working on several initiatives that cover similar ground — a much-delayed cross-border intraday market is due to go live finally next year, for example, while EU power grid operators committed late last year to increase their regional coordination to cope with the increasing share of variable renewables.

If the EU fails to make an electricity market dominated by decentralized, variable renewables work, it’s hard to see how it will meet its 2050 goal to decarbonize. New nuclear plants in Europe continue to struggle to be completed — or in the case of the UK’s Hinkley Point C project, even started. And fossil fuel generation can only be zero emission with carbon capture and storage technology — which shows no sign of being commercialized any time soon.

Given how keen the commission is on the EU being a leader on combating global climate change and championing the new UN Paris climate agreement, not to mention commission president Jean-Claude Juncker’s dream of the EU being a global leader in renewables, there’s a lot of pressure to come up with a new market design that works.

Source: http://blogs.platts.com/

No revenue sharing, no expansion of US offshore drilling: Fuel for Thought

The clearest indication yet that the Obama administration has little intention of allowing oil and gas exploration off the coast of Virginia is contained in the president’s proposed 2017 budget.
President Obama is proposing a “Coastal Climate Resilience” program that would help communities “prepare for and adapt to climate change.”
To pay for it, the administration proposes to redirect “roughly half of the savings that result from repealing unnecessary and costly offshore oil and gas revenue sharing payments that are set to be paid to a handful of States under current law.”
That “handful of states” includes Texas, Louisiana, Mississippi and Alabama, which are poised to begin receiving 37.5% of revenue from offshore production in federal waters staring next year. That deal was included in the Gulf of Mexico Energy Security Act (GOMESA), passed in 2006 and the four coastal states have been waiting patiently for that provision—and the roughly $600 million that comes with it—to kick in.
Obama’s proposal to repeal that portion of GOMESA, like the rest of his lame-duck budget, is dead on arrival.
“Depriving the Gulf states of revenue sharing from offshore production is just a nonstarter,” Alaska Senator Lisa Murkowski said during a recent hearing on the Interior Department’s budget.
Murkowski is the chairman of the powerful Senate Energy and Natural Resources Committee.
“It would upend a deal that 71 senators supported and take money away from states that are counting on it to protect their coastline. The effort to repeal revenue sharing is not going to go anywhere.”
It may not go anywhere, but it reveals a fundamental opposition to federal revenue sharing that is almost certain to sink any attempt to expand offshore drilling to Atlantic coast states, including Virginia, which has supported such expansion for years.
In February, Virginia Lt. Governor Ralph Northam, a Democrat, sent a letter to Interior asking that a proposed lease sale off Virginia’s coast be removed from the draft federal five-year leasing plan. That position puts him at odds with the state’s two Democratic senators and Gov. Terry McCauliffe, also a Democrat, all of whom support the lease sale.
Crucial seismic studies are also being delayed
Northam cited environmental reasons and possible interference with military exercises in his letter. But he also noted that, under current law, Virginia would not profit from oil and gas production off its shore.
“Given the uncertainty over how royalties would be disbursed, the concerns I have cited above and the overall risk assumed by the commonwealth, it would be best to take a conservative approach and exclude Virginia from the proposed leasing program,” he wrote.
With California opting out of new federal leasing and Alaska exploration on indefinite hold, the Atlantic is essentially America’s last frontier for oil and gas exploration. The US estimates that the area offshore Virginia alone may contain 130 million barrels of oil and 1.14 trillion cubic feet of natural gas.
Even if Interior decides to include a Virginia sale in the 2017-2022 leasing plan, the administration is under no obligation to hold the sale.
The opposition to sharing federal revenue with the Gulf states is just the latest indication that the Obama administration does not support expanding offshore exploration to the Atlantic coast.
Interior said it would work to issue permits for seismic studies in the area in an effort to update decades-old data on the oil and gas potential. But only one of those permits has actually been issued and none have yet been issued for the kind of detailed 2-D and 3-D seismic studies that would reveal the actual resource potential in the mid- and southern Atlantic.
Those permits are languishing while other agencies weigh in on them, a process that shows no sign of wrapping up anytime soon.
The final version of the 2017-2022 federal offshore leasing program has yet to be issued. But given the Obama administration’s push to make combating climate change an important part of his legacy, it would not be surprising if the Virginia sale, tentatively scheduled for 2021, is removed.
But even if it’s included, without a plan to share federal revenue with the states, that sale is going nowhere.

Source: http://blogs.platts.com/

In Babylon, sugar refinery gives hope at the darkest of times

Claudiu Covrig reflects upon his invitation to see the new Etihad sugar refinery in the ancient heart of civilization, and contemplates what it means for the battered and troubled land, and the wider sugar landscape of the Middle East.
Babylon. The land is the stuff of legend; the cradle of civilization and a land of gods and prophets stretching back across the millennia. Today, however, the heart of Iraq is shattered – in a land that hasn’t known peace for almost forty years, hope amidst the desolate, ancient landscape is the most precious commodity.
covrig-etihad-convoyI flew from Turkey into Najaf, some 180 km south of Baghdad, and the host of one of the slender air bridges that is slowly reconnecting the region to the outside world. Described as a ‘safe zone,’ it’s all still relative. My final night in Iraq was marked with a major security scare after a bomb exploded in the nearby town of Hillah. Driving north-northeast for an hour and 40 minutes in an armored convoy brought me to the new Etihad refinery.
The refinery stakes a claim for the biggest private-sector employer in the country, with some 1,200 people based here, including some 300 drivers charged with ensuring the refinery has raw sugar to run on. Within the compound, the machinery glints in the morning sun, all the equipment new and metallic – juxtaposed against the devastation that is all too evident around.
covrig-etihad-sugarStaying connected is no mean feat; a refinery of this size — 1 million mt a year capacity, with plans to move it to 2 million by 2018 — is supplied entirely from the sea, from Um Qasr seven- to eight-hour truck drive away. All that raw sugar has reversed the flow into the country – once a whites importer, the country’s needs are now met from the new facility, which opened around a year ago. All the raw sugar prices against a Platts Brazil price, since the vast majority of the supply comes, unsurprisingly, from Brazil.
While the machinery is built to exacting German standards by Czech and German specialists, the local workforce is a smattering of nationalities, including Iraqi, Syrian, Egyptian, Indian and Pakistani, with most working in three shifts as the facility strives for continuous production. And the refinery boasts capacity to produce sugar of a 16 ICUMSA, although much of the quality will meet 35. It also has the flexibility to bag in a range of sizes, from 1 kg to 1 mt across 14 lines, currently clocking a maximum bagging speed on its 50 kg line of 14 bags in one minute.
covrig-etihad-powerFully standalone, the refinery generates its own steam for 20 MW electricity production, using locally sourced and cheap heavy fuel oil.
Demand is the key element bringing the facility here – Iraq’s population surges at a rate of one million people a year, and key tie-ins with major internationally renowned soft drinks manufacturers and government backing in domestic supply make the venture an attractive one, providing employment and ownership of a key plank in the country’s food supply. And, alongside the new refinery, an edible oil refinery is under construction too, and here the MOT disagrees with Etihad’s appraisal of demand. While the Iraqi government forecasts demand of 1 litre per capita per month, Etihad’s owners place the real consumption at around 2.5 litres per capita per month
Population estimates are patchy — it’s impossible to know how many people live in Iraq at the moment, but it may well be upward of 37 million people, with the Ministry of Trade estimating white sugar consumption at anything from 74,000 to 80,000 mt a year.
That link to the outside world, the long hard road from Basra to the threshold of Baghdad, is bolstered by the location’s storage capacity — two huge warehouses with a capacity of 160,000 mt each gives over a quarter of a million mt of raw storage, while white has a storage capacity of about 180,000 mt across two warehouses.
So, for the sugar world for the time being one thing is certain: Iraq is back in the sugar business and holds the potential to supply white sugar over an extended area beyond its borders, and creating constant demand for global raws.
I left the refinery and then Babylon with hope in my heart; hope that things are finally settling down in this country so hardly tried in recent years; hope that the new generations will find their ways towards peace and development to follow their ancestors and inherit the legacy fit for one of the great civilizations of the past.

Source: http://blogs.platts.com/

US crude refiners ask for more specifications as shale shifts oil at Cushing

US refiners are once again calling for a domestic crude benchmark that covers more than the standard gravity and sulfur pairing offered by the existing NYMEX contract.

The push is being spurred this time by increasing concentration of shale crudes in the West Texas Intermediate common stream, which have pushed the average API gravity in Cushing – where that contract is delivered – beyond the maximum 42 degrees.

That has forced shippers to blend with heavier crude and bottom-of-the-barrel products in order to meet pipeline specifications, which in turn drives down the value refiners can squeeze out of a barrel, AFPM Senior Director of Refining Technology Jeff Hazle said at a Crude Oil Quality Association meeting earlier this month.

The COQA advocated changing the specifications at the March meeting. It wasn’t the first time. US refiners requested a change in 2010. At the time, CME said the COQA should focus on changing the physical market first, citing the fact that very few barrels of physical crude are delivered against the futures contract.

By 2013, however, CME said it planned to implement additional quality specifications, although that has yet to happen. CME needs backing in the midstream industry, Hazle said.

Technically, the NYMEX contract calls for a light sweet crude deliverable at Cushing, Oklahoma, and specifies several domestic grades, including WTI. The NYMEX contract also allows for the delivery of foreign grades, such as North Sea Brent.

If the CME tightens the contract’s specification, it would need to make sure trading liquidity does not suffer. The CME theoretically could launch a new contract reflecting the tighter specification, although it is unlikely that much volume would shift away from the existing — and very successful — contract.

One thing CME does need is backing in the midstream industry, Hazle said.

Any change to the specifications would have to be supported by the ability to reasonably monitor the relevant qualities of crude coming into the system, and midstream infrastructure isn’t set up for real-time testing beyond gravity and sulfur content yet. Other tests generally involve lab-testing a sample, after which the relevant batch of crude will be long gone into the common stream.

“I think there’s going to be more effort put into getting the midstream companies on board [this time],” Hazle said.

The CME is working on the quality issue with COQA and the refiners, said Dan Brusstar, CME’s senior director of energy research and product development.

“We’re cooperating and working with everybody to try to make the whole transition as smooth as possible,” he said.

If a refiner tried to simply buy crude that meets the further specification, that would mean giving up access to the common WTI stream, which makes it less viable, Hazle said. If they want access to more specific grades of crude, refiners have to set up and operate their own midstream infrastructure, an expensive endeavor, Hazle said.

Still, some refiners have done it, reaching further into basins in order to combat the prevalence of blended or lighter crudes. Western Refining, for instance, uses a fleet of trucks to gather the crude and bring it unblended to its storage tanks, CEO Jeff Stevens said during the company’s fourth-quarter earnings call.

The blending issue has crept further into the refineries lately — not only are they having to buy heavily-blended crudes, but marketers have started buying bottom-of-the-barrel products, like residual fuel and asphalt, to push the crude gravity within spec, Hazle said.

A refinery might sell residual fuel or asphalt to a shipper at a discount to WTI crude, only to see that product blended back into the stream for them to buy at the full crude price — something that happened recently to at least one Midwest AFPM refinery, Hazle said.

US Gulf Coast waterborne 1.0% sulfur resid was assessed by Platts at $23.90/b Wednesday, a $10.78/b discount to Cushing WTI.

When that crude makes it back to the refiner, it will yield the residual fuel blended in on top of whatever ambient resids that were already in the crude, Hazle said. That means the concentration of low-value products keeps increasing, cutting into refinery margins.

“You’re going to end up with more of a low-valued product than you would have expected,” Hazle said.

The stream was indeed seeing WTI deliveries outside of the specification in 2015, and those deliveries have been trending lighter, making blending more common as additional shale crude finds its way into the market, Ashok Anand, the director of petroleum quality at Enbridge Pipelines, said at the COQA meeting.

“The shale oil came into existence in big numbers [in 2015],” Anand said. “We’re getting stuff that’s over 42 API, which really means it’s getting lighter.”

Enbridge owns one of the largest terminals in Cushing, with more than 90 tanks and about 21 million barrels of storage, Anand said.

When a counterparty delivers or takes delivery of out-of-spec crude at a leased Enbridge tank, “it’s really between the buyer and the seller to settle it,” Anand said.

Source: http://blogs.platts.com/

Odds on, odds off: London gold market seemingly confused on best route forward

With Cheltenham races this week, everyone is in betting mood. It would appear that the cards could be stacked in IntercontinentalExchange’s favor, as the operator has come up as an outside favourite to possibly succeed the London Bullion Market Association ‘request for proposal’ to reform the London gold market.

Why? Because the other two rumored exchanges involved in the process — the London Metal Exchange and CME Group — have already been touted, maybe?

“The market is currently built on hearsay, and rumors,” said one source close to the situation.

And guessing. Oh, and lack of interest.

“I have a business to run,” said one senior source.

To recap: Late February CME was suggested to be the best suitor to move the over-the-counter market forward, owing to its dominance in listed gold futures and options products.

CME, which operates the world’s largest gold exchange by volume in the world, declined to comment on market chatter.

Although not officially disclosed, it is widely believed that the five parties in the running for the LBMA RFP are: CME, the LME, ICE, Autilla/Cinnobar and Markit/ABS.

The result of the RFP should create a platform that creates future growth for the London market.

No parties rumored to be involved in the RFP would comment on the matter, or any surrounding market talk, nor would the LBMA.

Ahead of the CME whispers, LME was deemed a front-runner in the proceedings, although that was played down by some camps, as it could be viewed as a submission of the London market to the Chinese. LME is owned by HKEx.

This has been a concern for certain bullion bankers for some time.

However, that was the very reason for the LME being the odds-on favorite, basis the fact China is the world’s number one physical gold consumer.

“The Chinese are buying the gold, why would London want the US to dominate the space?” said one banker.

It is worth noting that CME does have exposure to Asian markets, most recently in the form of news that China Construction Bank Corporation has joined the LBMA Silver Price — operated and administered by CME Group/Thomson Reuters — and is the first Chinese participant to become a member of the benchmark pricing mechanism.

CCB will be the sixth price participant, joining HSBC Bank USA NA, JPMorgan Chase Bank, The Bank of Nova Scotia, The Toronto Dominion Bank and UBS AG.

The LBMA is said to currently be engaging in a beauty pageant, in which the five suggested suitors give details of their proposals.

“I’m not so sure of the LME’s chances,” said one source close to the situation, “personally I think ICE could be the dark horse.”

This isn’t the first time Platts has heard that rumor, but as previously stated, there are plenty of whispers out there, Chinese or otherwise.

“Whatever the outcome, the next few weeks should start to get busy,” said one senior source, suggesting that perhaps the LBMA won’t be the author of the final chapter of the London bullion revolution.

Source: http://blogs.platts.com/

Times a-changing for China’s thermal coal market on increased hydro flow

China’s huge investment in hydro-electric power, including such schemes as the massive Three Gorges project on the Yangtze river in Hubei province, is starting to pay off. But at the same time, it is adding to the woes of an already depressed thermal coal seaborne market.
Already reeling from plummeting prices, stagnating demand and chronic oversupply, the thermal coal market for China now has to contend with a rival: a low-cost source of power generation that is growing each year.
Hydro power generation for China leapt 24% year-on-year in the January-February 2016 period to 129 billion kWh from 104 billion kWh in the same period last year, according to China’s National Bureau of Statistics, March 15.
China Power GenerationChina Power GenerationChina’s hydro-electric dams are generating approximately 20% of China’s annual electricity output, compared with a share of around 70% for coal-fired generation. At the same time, China is investing heavily in alternative energy sources such as nuclear, solar and wind turbine generation, albeit starting from a very low base.
This winter season in China actually witnessed a decline in coal-fired power generation, with the Asian country’s coal plants output falling 4.3% year-on-year in the January-February 2016 period to 678 billion kWh, said China’s statistics bureau.
In fact, China’s coal-fired electricity generation has recorded negative growth for most of 2015. As a result, prices for thermal coal imports failed to produce their traditional November to February rally.
China thermal coal pricesAt China’s southern ports, the main intake point for imported thermal coal from countries including Australia and Indonesia, delivered prices have traded in a sideways fashion between $43-$45/mt CFR basis for 5,500 kcal/kg NAR coal from the middle of November 2015 to mid-March 2016, according to Platts prices.
China thermal coal price spreadChina’s almost silent revolution in diversifying its energy economy to reduce its dependence on coal-fired electricity is likely to prompt a re-think for energy suppliers, including thermal coal shippers. Coal does continue to dominate China’s energy generation mix, but the times they are a-changing, as Bob Dylan once said.

Source: http://blogs.platts.com/

Congestion reverses power price trends in New York ISO

New York ISO Zone A West day-ahead wholesale power prices have bounced around this March as maintenance and generation outages have increased congestion in the region. This price volatility appears to have spilled onto the prompt-month forward power contract as the spread between West and other New York zones has widened.
NYISO Zone A day-ahead prices have ranged from $5.23/MWh to $54.62/MWh since the start of the year, with the highest prices seen in March, when the month-to-date average is about $27.50/MWh, compared to $21.25/MWh for January and February combined.
“Congested conditions in the west have been exacerbated by the retirement of the Dunkirk and Huntley units as well as scheduled maintenance outages,” NYISO Spokesman Ken Klapp said.
micek-nyiso-zone-a-day-aheadNRG had plans to convert the 530-MW Dunkirk plant to burn natural gas, but those plans were put on hold and the plant was mothballed January 1, although NRG has filed for new interconnections, NRG Spokesman David Gaier said.
NRG permanently retired the two-unit, 380-MW Huntley coal-fired plant March 1.
For the prompt-month package, Zone A on-peak prices have jumped to a range of $26.55/MWh to $38.10/MWh since Dec. 31, 2015, forcing the spread between Zones A and G to blow out.
micek-northeast-april-on-peak-2016
Typically, Zone G is at a premium to Zone A. However, things have flipped this year with Zone A priced as much as $7.60 above with the gap the widest in March and showing an upward trend.
Further, in early March Zone A started climbing above ISO-NE’s Mass Hub April on-peak package, which typically is at a premium in the Northeast. Mass Hub April on-peak has ranged from $28.50/MWh to $45.50/MWh since December 31 and has been as much as $3.60 below Zone A in recent days.
Looking at 2015 prices, Zone A and G April on-peak packages had a spread range of $2.10 to $5.25 with Zone G being the premium package in NYISO.
micek-northeast-april-on-peak-2015
NYISO expects up to 8,900 MW to be offline throughout the end of March due to scheduled maintenance and as much as 11,250 MW to be offline through mid-April.
Other Northeast generation outages could also be coming into play in the prompt-month price shifting.
micek-nyiso-fuel-mix
Based on historical outage trends and engineer/plant manager input on a nuke industry message board, Platts’ unit Bentek Energy is currently expecting 3,260 MW of upcoming nuclear outages for the Northeast in April. Those outages include Constellation Energy’s 1,155 MW Nine Mile Point-2 in Oswego, N.Y., which is expected to start maintenance around April 11 with an estimated finish date of May 6 for an overall duration of 25 days, according to Bentek.
And looking down the road, Morningstar energy analyst Jordan Grimes sees transmission upgrades as a key part to helping solve congestion issues.
“We are bearish Zone A constraints throughout the curve even in the face of the Huntley retirement in March,” Grimes wrote in a NYISO term outlook last month. “We believe National Grid transmission upgrades and flows from PJM will eventually solve constraints.”
National Grid’s Western Reinforcement transmission project will help relieve Zone A congestion; the market is overstating the impact of the Huntley retirement, given current dispatch rates, Grimes wrote.
“Zone A is certainly going to be volatile in April and May and as of now it certainly doesn’t looked solved as the congestion is worse than expected,” Grimes told Platts Wednesday. “But transmission upgrades will solve the constraint eventually, the impact of the June upgrades will be important. NYISO could also re-rate the 230kV lines to its emergency max in the short term to help alleviate congestion.”
National Grid has proposed adding series reactors to the most constraining 230 kV lines north of Huntley, with a planned in-service date of June 1 to improve the total Niagara Power Project and Ontario import energy deliverability, NYISO Executive Vice President Richard Dewey wrote in a letter to the State of New York Department of Public Service. The series reactors would improve the total Niagara Power Project and Ontario import energy deliverability, but there would still be a reduction compared to the levels of energy deliverability that existed when the Dunkirk and Huntley plants were available.
This reduction in energy deliverability will persist until permanent solutions are in place, Dewey wrote. In the interim, the NYISO and National Grid are considering a temporary operating procedure to allow the constraining National Grid 230 kV lines to be secured to the higher short-term emergency ratings to improve Niagara Power Project and Ontario import energy deliverability.

Source: http://blogs.platts.com/

Another riveting week ahead in steel markets?

Last week was a week of two halves for the global ferrous supply chain. From early-to-mid week prices were under pressure, but as the period progressed iron ore kicked up and steel in China and elsewhere followed suit.

One school of thought suggested Chinese production ramping up slower than anticipated — to cash in on the price uptick — was the cause for some of the bullishness. “Because of their losses, Chinese mills are generally not eager to boost their production, and therefore steel output, despite some recovery, has stayed low compared with early last year,” one steelmaker said.

Two other steelmakers in northern and western China said their mills had idled blast furnaces late last year and would not be relighting them despite the uptick.

Despite the rises toward the end of the week, the general feeling across most markets appeared to be anxiety and a lack of visibility. Across many markets Platts frontline reporters were told “I don’t know the price today” by a variety of buy- and sell-side sources. “Yo-yo” was a favored way of describing the volatile movements.

The Chinese billet market was particularly confused, with mills reportedly defaulting on contracts when prices rose and buyers following suit as they collapsed. Some sources said buyers were rebooking the same material at much higher prices, impacting as much as 1 million mt. Prices from CIS slab suppliers were also seesawing throughout the week following the developments in China.

Global slab supply seemed tighter. Several Black Sea-based mills left the slab merchant market suggesting they had been sold out for some time. Some buyers tried Brazilian mills, which said their production was fully booked until June. Iranian mills also had limited tonnage to export, sources said.

In markets such as Turkey — a large recipient of Chinese and CIS semis in recent months — all this filtered into much stronger scrap pricing as there was a lack of suitable alternatives, and mills looked to take advantage of brisk domestic rebar demand, although some said the market was cooling a touch.

European and UK coil producers were going gung-ho for rises amid a lack of import competition; the presence of seemingly cheap Chinese forward offers has weighed heavy on domestic mills in recent years, but cheaper forward prices were not seemingly available. UK mills were being aided by the weak sterling, as “Brexit” uncertainty continued to beat the currency down.

Source: http://blogs.platts.com/