New ownership war threatens Norilsk

A looming new war between the key shareholders in Russian mining giant Norilsk poses short term risks for operations but could also bring unexpected benefits such as share buybacks, analysts have said. Norilsk’s share price have been underperforming the broader Russian market index MCX. and the Russian mining index recently as investors worry about a new conflict over ownership.

Key shareholder UC RUSAL, the world’s gest aluminium firm, boycotted the election of a chairman at Norilsk after winning one fewer seat on the Norilsk board than co-owner Interros. RUSAL said the outcome was “the result of the manipulation of Norilsk Nickel shares”, while Interros and Norilsk’s management said they did not understand the nature of RUSAL’s accusations.

Analysts said the development might signal a new battle for control and management strategy between RUSAL’s core owner Oleg Deripaska and Interros’s Vladimir Potanin. Each company controls slightly more than a quarter of Norilsk. Some investors said the conflict may have a silver lining as the number of independent directors on Norilsk’s board rose to three from two following the vote.

China to withdraw tax rebates on metal exports

China has decided to gradually cancel tax rebates on exports of steel, base metals and products over the next five and a half years to limit production capacity. Over the same time export taxes may be imposed on those metals and products, Fan Jianping, director general of the Economic Forecasting Department of the State Information Center, has said.

Petropavlovsk launches first iron ore mine

Russian mining group Petropavlovsk has launched its first Kuranakh iron ore mine and expects commercial output soon. The London-listed firm, which is considering a Hong Kong listing for its iron ore assets, has started running Kuranakh on low-grade material, said Chairman Peter Hambro. “I think you will see that (mine) in production very, very soon,” he said.

China set to become largest importer of thermal coal

China is set to overtake Japan as the world’s largest importer of thermal coal as early as this year, only three years after China became a net importer of the mineral used to fire power stations, according to an emerging industry consensus. The speed at which Chinese coal imports are growing is surprising mining companies, traders and policymakers, who had previously not expected China to overtake Japan before 2015. China was a net exporter of coal until 2007.
Beijing’s appetite for imported thermal coal bodes well for mining companies but policymakers are concerned about the impact of rising buying on global energy prices and carbon emissions. The increase in coal prices will increase electricity prices and increase the cost of manufacturing. China is already the world’s largest coal producer but domestic supplies can’t meet the growing demand.
The surge in coal imports comes on the back of rising power demand. China relies on coal to produce 80 per cent of its electricity, double the world’s average. China would add 500 gigawatts of new coal-fired electricity generation capacity between now and 2020, almost double Japan’s current total power generation capacity.

Putin unleashes coal mine safety shakeup

Russian Prime Minister Vladimir Putin has called for systemic changes to promote safety in the country’s coal industry, signalling more mine closures and tighter supply in global markets. Addressing a government meeting he chaired after a conversation with widows and colleagues of the dead  in the Kuzbass region in southwestern Siberia, where two blasts at a Raspadskaya mine claimed at least 67 lives in May, Putin said, “An analysis we have carried out has shown a need for systemic changes in the coal industry.”
Putin said Russia’s safety watchdog Rostekhnadzor will now report directly to the government and have the right to shut coal mines for safety violations, as well as remove managers from their posts ahead of court rulings on possible malfeasance. The nation’s gest coal exporters have said  recent safety inspections at all mines were the main reason output and exports have dropped. Russia is one of the world’s top five coal exporters and ships 65-67-million tons a year of thermal coal plus coking coal, most of which is mined in Kuzbass.
Putin said coal mine owners had the potential to increase their spending on safety,  adding that the state would consider tax breaks for imported safety equipment. He also said the industry’s wage payment system, which provides financial incentives for miners to raise output while ignoring safety rules, will be reviewed. The prime minister said new technologies could further the cause, as gas export monopoly Gazprom has developed technology to extract methane from coal beds in working mines.

China acts to settle more deals in yuan

China’s government will expand a trial program for settling trade deals in yuan to most of the country, in an effort to accelerate the internationalization of the Chinese currency after a slow start. Trade deals by companies in China have typically been done in dollars or other foreign currencies. The yuan-settlement program, started last July, allowed companies in Shanghai and the southern province of Guangdong to use yuan instead when trading with companies based in Hong Kong, Macau and a handful of foreign countries.
Recently the State Council, or China’s cabinet, approved a plan to expand that program to a total of 20 provinces and municipalities. The effort to promote the yuan for trade deals is part of China’s push to gradually make its currency more important internationally, and reduce its reliance on the dollar. Chinese officials have said the global economy is too reliant on the dollar, which they say leads to outsize impact from U.S. economic policy on China and other countries. Beijing has expressed particular concern that U.S. deficits could lead to inflation that weakens the value of the dollar, thereby hurting China’s enormous holdings of dollar assets.
Still, the yuan-settlement trial has got off to a slow start, and it’s unclear how significant an impact expanding the number of Chinese regions involved might have. The total value of yuan-based transactions from July 2009 through May this year was 44.55 billion yuan, or about USD6.5 billion. By comparison, the total value of China’s exports and imports in the first five months of this year alone was USD1.1 trillion.
      
China to step up exploring in deep water

The Gulf of Mexico is still under a drilling moratorium after the BP oil spill but plans to step up deep-water exploration on the other side of the world, in the South China Sea, remain largely unchanged. CNOOC, the Chinese state-controlled company with exclusive rights to develop China’s offshore resources, ordered safety checks on all its rigs after the BP disaster. But long-term plans still aim to step up deep-water exploration.
China’s potential offshore reserves account for between a quarter and a third of the country’s hydrocarbon resources. So far, China’s main deep-water discoveries have all been made by a Canadian company, but CNOOC is positioning itself to become more active in the sector. Its first deep-water pipeline-laying ship was launched in May. CNOOC is also acquiring its first deep-water drilling rig, which is under construction in Shanghai and due to be operational by the end of 2010 or beginning of 2011. Several deep-water blocks in the South China Sea are under exploration by foreign companies, but under Chinese law CNOOC has the right to acquire up to a 51 per cent stake in the event of a commercial discovery.
A challenge for China’s deep-water prospects is that the known reserves are mostly natural gas, which must be transported through expensive pipelines on the ocean floor.

En+ to strengthen ties with China

Oleg Deripaska’s En+ holding company has bought 10 per cent of the start-up Hong Kong Mercantile Exchange as the Russian tycoon seeks to strengthen business ties with China. En+ said the acquisition was a strategic investment to help develop alternative trading systems in Asia that could eventually rival traditional exchanges, such as the London Metal Exchange, in the west. The move came a month after the LME, which dominates global trading in metals, opened an office in Singapore – its first such presence in Asia. Metals trading is growing rapidly in the region, especially in China at the Shanghai futures exchange.
“The world has changed. Most of [the] supply and demand for base metals and raw materials is in Asia . . . and the fact that the pricing is set [several timezones] across the globe does not help to create a properly functioning market,” Artyom Volynets, first deputy chief executive of En+, said. “This is a continuation of our strategy.” En+, which spans aluminium, electricity and other raw materials, is focused on Asian markets as the main source of demand while most of its assets, including the aluminium plants of Mr Deripaska’s UC Rusal, are located in east Siberia.
Analysts said the acquisition of the stake in the Chinese state-backed exchange for an undisclosed sum could also help Deripaska gain influence in Asia as he battles to win more investors for his UC Rusal aluminium group. The Hong Kong Mercantile Exchange is yet to start trading. Rusal shares are trading nearly 30 per cent below their offer price.

(These items have been taken from reports, reviews and studies
published by various news services.)