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22 February 2014

Press review - 22-02-2014 - Copper in the mainstream

Copper come to prominence in the news-wires this week, pretty much out of the blue, and for different reasons. Science magazine dedicates one of its poppy articles to the matter, with the simple and suggestive title "The Coming Copper Peak". It draws a lot from Stephen Mosher's recent work with raw materials extraction. I had the opportunity to meet Stephen at the last ASPO conference in Viena, in 2012, when his work was already gaining notoriety. The main take away from the article is that a peak of world copper extraction is most certain this side of 2050.

Beyond putting a date to a peak the most important is price. This past decade copper prices advanced 500% while production volumes have merely moved. It might be very possible for production to continue increase for decades to come, but at what price? Is any economy sustainable with copper at, say, 1000 €/t?

The Coming Copper Peak
Richard A. Kerr, 14-02-2014

If electrons are the lifeblood of a modern economy, copper makes up its blood vessels. In cables, wires, and contacts, copper is at the core of the electrical distribution system, from power stations to delicate electronics. As consumption has risen exponentially—reaching 17 million metric tons in 2012—miners have met the world's demand for 10,000 years. But that might soon change. A group of resource specialists has taken the first shot at projecting how much more copper miners will wring from the planet. Results of their model, described this month, show that production peaks by about midcentury even if copper is more abundant than most geologists believe. That would drive prices sky-high, trigger increased recycling, and force inferior substitutes for copper on the marketplace.
For the past twelve months or so, several western exchanges, mostly from the UK and the US, have been flooding the international market with various metals. These sudden flows have depressed prices and threaten many mining operations in the short to mid term. So far there doesn't seem to be any abatement in demand, especially in Asia, where investors are happy to stock up on bargain prices. Of these metals the most significant seems to be copper, the London exchange alone reduced its stocks by two thirds in just six months, with most of the metal ending up in China. Note that the article below refers to militones (mt = kg) whereas it probably meant megatones (Mt).
LME-registered copper stocks possibly shifting off exchange: Goldman

Falling London Metal Exchange-registered copper inventories are the result of metal being taken off exchange and moved elsewhere rather than a sign of actual demand, Goldman Sachs said Monday.

"We continue to believe LME inventory declines reflect stocks shifting off market rather than a deficit market, due to Chinese copper financing deals and the impact of the new LME rules," analyst Max Layton said in a research note.

LME-registered copper stocks fell 3,100 mt Monday to 296,025 mt.

Layton said it was a different story in China. "We estimate that refined inventories in China have increased by [about] 200,000 mt since the beginning of the year. Chinese bonded inventories are up to 700,000 mt from 550,000 mt, and SHFE stocks up to 180,000 mt from 125,000 mt."
China seems to be building strategic stocks of important metals, something I've written could be crucial in the years ahead to tame speculative price events. Meanwhile the west seems happy to void its own stocks for low prices. Any coordinated policy towards raw materials security continues to be largely absent.
China's record copper, iron ore imports are not being put to work
Frik Els, 18-02-2014

[...]Yet, copper imports into China which last year amounted to 44% of the global trade in the red metal, continue to surge.

The 536,000 tonnes of refined copper imported in January constituted a 53% jump over last year's tally and 21% more than in December.

China's electricity grid build-out is responsible for 40% of the country's demand and growth in the sector is expected to be double that of the economy as a whole which could account for the spike.

At the same time inventories in London Metal Exchange warehouses continue to be drawn down.
Shifting gears now to petroleum, Platts notes the continued decline in production from the so called "majors", the once big companies of the west. This is an old trend that is a mere consequence of the concentration of remaining resources in ever fewer countries. Careful, though, forecasting their extinction, lower production may not necessarily mean lower profits, petroleum will endure as a pricey commodity. And of course, expertise and technology will always remain important assets.
'Big oil' getting smaller as production keeps falling
Richard Swann, 14-02-2014

The biggest western oil companies are continuing to see their oil output decline, despite record investment in recent years spurred by sustained crude prices in excess of $100/barrel, according to data released by the companies.

Furthermore, with total world oil output continuing to rise every year, the western majors are seeing their share of the global market fall even faster, with new volumes coming largely from their rivals in places like Russia and a host of smaller companies at the heart of the shale oil boom in the US.

Combined output of crude and other liquids by the seven biggest western majors -- ExxonMobil, Shell, BP, Chevron, Total, ConocoPhillips and Eni -- amounted to 9.517 million b/d last year, down 2.2% from 2012 and marking the fourth consecutive year of decline.

Liquids output from the same group has been falling every year of late, having been as high as 10.865 million b/d in 2009.
Petroleum production in Libya continues to fall as the country crumbles. The figures for January equate to only 15% of what Libya was producing right before al-Gaddafi was ousted by Al Qaeda.
Libya Oil Output Falls to 375,000 Bopd, Protest Affects El Sharara Pipeline

Libya's oil output was down at 375,000 barrels per day (bpd) on Tuesday with protests continuing to affect a pipeline from the major El Sharara field, a National Oil Corporation (NOC) spokesman said.

Protesters last week had obstructed two pipelines coming from the Al Wafa field, which usually supplies around 30,000 bpd of light oil condensate, and also partially blocked a pipeline from the 340,000-bpd El Sharara field.
The war in Iraq rages on, with the Sunni clearly on the upper hand at the moment. As organisations such as the ISIL gain territory we get fewer and fewer information here in the west. It is hard to see where this will lead, and how can world powers remain disengaged from such crucial battle ground.
Middle East Online
Army loses more ground to Sunni militants in northern Iraq

Gunmen seized part of Sulaiman Bek town and nearby villages in northern Iraq on Thursday, local officials said, the latest instance of authorities losing ground to militants.

Sulaiman Bek has been previously targeted by Sunni militants, who last year executed 14 Shiite truck drivers on a nearby highway and also temporarily held territory.

The latest flareup began with attacks by militants armed with light and medium weapons on army positions before they overran the town centre early Thursday, local official Talib al-Bayati said.
Euan Mearns has published an important article putting in perspective the source rock natural gas estimates in Britain. Mind that there hasn't been any substantial drilling to confirm the existence and feasibility of these resources, which for all matters and purposes remain merely speculative. In case these expectations are confirmed the UK will get much needed relief from declining production in the North Sea, but the débâcle with source rock gas in Poland calls for a cautious note.
Energy Matters
UK Shale Gas Potential and Perspectives
Euan Mearns, 12-02-2014

The British Geological Survey have published a detailed and competent report on the potential of the Bowland-Hodder shale, the highlights of which are summarised below [1]. It needs to be stressed that without test data from at least 10 to 20 exploration wells it is impossible to assess the potential with any certainty. It may turn out that Bowland is a super rich shale to rival the Marcellus of the USA, or it may turn out to be a dud like the recent Polish experience. Shale plays are also non-uniform and tend to have sweet spots that can only be identified through quite extensive exploration drilling. The main focus of this post is to try and place the uncertain potential into a perspective for what this may mean for the UK in terms or providing energy security and the potential for environmental and social disruption.
I have been recently calling attention to the tightness brewing up in the Asian coal market, that mimics somewhat the constraints of 2007/2008. OilPrice.com notes that Vietnam has just turned a net coal importer, hiking the pressure one notch up.
Another Nation Goes Coal Critical
Dave Forest, 18-02-2014

The thermal coal story in Asia just keeps looking better. With another data point last week suggesting that supply continues to tighten.

Vietnam became the latest country to say it is seeking coal imports. Officials stated they are trying to secure about 10 million tonnes of thermal coal yearly--starting in 2017.

That's of course a little ways out. But it appears even now Vietnam's changing supply-demand dynamics are beginning to impact the regional market.

Traditionally, Vietnam has been a coal exporter. But those shipments have been on the decline of late. With 2013 exports totalling just 12.8 million tonnes--down almost 16% from 2012 levels.
And the ending note on technology highlights the announcement of the first Ubuntu handsets by Canonical. These do not seem yet to be the products to enable the much sought Convergence of computing into hand held hardware, that should greatly reduce the amount of raw materials required by this industry. But they might be an important step in that direction.
OMG! Ubuntu!
Two Ubuntu Phones Coming This Year, Here’s Who’s Making Them
Joey-Elijah Sneddon, 19-02-2014

The first Ubuntu smartphones will launch later this year, Mark Shuttleworth has confirmed.

Two manufacturers, China based Meizu and Spanish OEM BQ Readers, are both set to release Ubuntu-powered handsets at some point ‘within 2014′.

Devices made by more established manufacturers with ‘household names’ are, we’re told, expected to follow 2015.
Have a pleasent weekend.

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