LONDON (Reuters) – Iranian oil exports will slide in May as the United States tightens the screws on Tehran’s main source of income, industry sources said, deepening global supply losses caused by U.S. sanctions on Venezuela and OPEC-led cuts.

The United States reimposed sanctions on Iran in November after pulling out of a 2015 nuclear accord between Tehran and six world powers. Those sanctions have already more than halved Iranian oil exports to 1 million barrels per day (bpd) or less.

Washington, aiming to cut Iran’s sales to zero, said all sanctions waivers for those importing Iranian oil would end this week. Iran says this will not happen, although its officials are bracing for a drop in supplies.

One Iranian official familiar with oil policy said exports could drop to 700,000 bpd and as low as 500,000 bpd from May onwards. An OPEC source said Iranian exports would likely continue at about 400,000 to 600,000 bpd.

Iran would likely be able to maintain some shipments for debt repayment to China and India, and into storage in China, and smuggle a limited extra amount as it did under previous sanctions, analyst Sara Vakhshouri said.

“It’s important to note that zero oil sales in May doesn’t mean that there will not be oil deliveries to China or India in the month,” she said.

“In total, Iran could export between 200,000 to 550,000 of oil. of which not all is sold oil.”

Analysts at Energy Aspects expect a drop in Iranian shipments to around 600,000 bpd from May onwards.

Iranian exports have become more opaque since U.S. sanctions returned in November. Tehran no longer reports its production figures to the Organization of the Petroleum Exporting Countries and there is no definitive information on exports.

Some of Iran’s oil exports are already under the radar, making it harder to assess the actual volume.

The OPEC member exported between 1.02 million bpd and 1.30 million bpd of crude and condensate in April, Refinitiv Eikon and Kpler, a company that tracks oil flows, estimate.

OPEC HEADACHE

The dearth of information is a headache for other OPEC members and allies, which meet to set oil supply policy in June. OPEC canceled an April meeting, partly due to this uncertainty.

Saudi Aramco, expected to be the main source of any extra oil to replace Iranian volumes, has been asking around in the market for estimates of Iranian exports, industry sources said.

Iranian oil officials have welcomed this opacity. Tehran insists it will keep selling oil and is examining new ways of doing so, Iranian oil minister, Bijan Zanganeh, was quoted as saying on Wednesday.

Kayrros, a company that tracks oil flows, put Iranian crude exports in March at 1.40 million to 1.65 million bpd.

“The uncertainty band around the decline reflects residual uncertainty about the exact number of Iranian tankers that have been operating under the radar,” Kayrros said in a report.

The oil industry has for some years used tanker-tracking to work out actual supplies in the absence of timely official information. While easier than in the past due to satellite information, tanker tracking is still both art and science.

Tankers loading Iranian crude sometimes switch off their AIS signal, an automatic tracking system used on ships, only to switch it back on at a later stage of their journey, according to oil industry source, making it harder to see actual volumes.

Still, there is general agreement that crude shipments have dropped from at least 2.5 million bpd in April 2018, the month before President Donald Trump withdrew the United States from the nuclear deal with Iran.

Oil investors are losing faith in the crude rally, more moved by the US drilling boom than geopolitical tensions, according to Bloomberg. Money managers slashed optimistic wagers on US oil prices for the first time since February, while boosting wagers on a decline by 14%, data released on Friday show. That pushed overall sentiment to its least bullish in three weeks – just in time for the crude market to falter. After surging to start the year, West Texas Intermediate futures recorded their second straight weekly decline on Friday. Rising US crude production and stockpiles have outweighed concerns that tensions arising in Iran, Venezuela and Libya would limit global supplies.

“The market has priced in an awful lot of bullish news and if you’re going to go higher, you’re going to need some of these tail risks to turn into actual risks,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St Louis. US Production hit a record 12.3mn barrels a day last week, while stockpiles reached their highest levels in more than a year as maintenance and unplanned outages slowed work at refineries.

The net-long WTI position – the diff erence between bets on higher prices and wagers on a drop – dropped 4.2% to 301,343 futures and options contracts in the week ended April 30, the US Commodity Futures Trading Commission said. That was the first decline in 10 weeks. Long positions fell 2.8%. By contrast, the net-long position on Brent crude continued its climb, jumping to the highest level since October. Saudi Arabia began the week by saying Opec and its allies could extend production cuts that have been propping up the global benchmark price in 2019.

Russia pumped more crude last month than agreed under the Opec+ deal, lagging behind Energy Minister Alexander Novak’s pledge to comply with the pact. Russia produced 45.97mn tonnes of crude in April, according to prelimi- nary data from the Energy Ministry’s CDU-TEK unit. This equals 11.233mn bpd, or 185,000 barrels lower than the October daily baseline, according to Bloomberg calculations. Novak said that April would be the fi rst month Russia would fully com- ply with its pledged production cut of 228,000 barrels a day, as part of the agreement with the Organization of Petroleum Exporting Countries and its allies. Despite missing the reduction tar- get Russia has been accelerating the pace of cuts.

In March, the country’s average daily output was 11.303mn barrels. Russia’s average daily oil-output cut in April was 197,000 barrels a day, according to the government. The re- duction, excluding projects operating under its production-sharing agree- ments, or PSAs, reached 213,000 bar- rels a day, the government said. By end-April the production cut had in- creased to 223,000 barrels a day from the October baseline, the Energy Ministry said in a separate statement citing Novak. Excluding output from PSAs, the end-April cut was 229,000 barrels a day, the government said. The Energy Ministry fi rst men- tioned PSAs when assessing the na- tion’s production cuts in March, without clarifying why the output target should be adjusted in this way.

Over the past few months, the En- ergy Ministry has published its own fi gures for average daily production cuts, which diff er from Bloomberg calculations. This may be explained by a divergence in methodology, due to the government using a dif- ferent conversion ratio from tonnes to barrels for each individual fi eld. Bloomberg calculations are based on a ratio of 7.33 barrels per tonne. Russia’s crude production data comes on the day that US waivers for buyers of Iranian oil expire. Saudi Arabia pledged to adjust its produc- tion to make sure that customers remain adequately supplied. Yet the kingdom said it will co-ordinate with its allies in the producer group and will not exceed its quota under the Opec+ deal. President Vladimir Putin said last week that Russia has “the colossal potential” to increase its oil output if needed in response to global demand. Yet he reiterated the country will keep output within pledges made to its partners in Opec+.

By Clyde Russell

LAUNCESTON, Australia, May 1 (Reuters) – Australia’s iron ore exports rebounded in April after being hit by a cyclone the prior month, but the surge in shipments wasn’t enough to offset declining volumes from Brazil in the wake of January’s tailings dam disaster.

Australian exports were about 69.1 million tonnes in April, according to preliminary figures compiled by Refinitiv, based on vessel-tracking and port data.

This was up 20 percent from 57.5 million tonnes in March, when shipments were disrupted by Tropical Cyclone Veronica, which closed ports and impeded mining operations in Western Australia state.

Brazil’s exports volumes have been slipping since top miner Vale was forced to close several mines in the wake of the collapse of a tailings dam at its Brumadinho mine in late January, which left more than 300 people dead or missing.

Brazilian shipments of the steel-making ingredient fell sharply to 24.9 million tonnes in February from 30.1 million tonnes in January, the last month unaffected by the dam burst.

Exports slipped again to 23.5 million tonnes in March, and fell another 20 percent to just 18.7 million tonnes in April, the lowest monthly total since Refinitiv starting compiling data in January 2015.

In the first four months of 2019, Brazilian exports were 97.2 million tonnes, down from 111.9 million in the same period in 2018.

For Australia, exports in the first four months were 259 million tonnes, down from 280 million for the same period a year earlier, hurt mainly by a 13.3 million tonne drop in March.

Taken together, the total drop from the world’s top two shippers of iron ore in the first four months of 2019 is 35.7 million tonnes, a significant hit to global supply.

PRICE BOOM JUSTIFIED

It’s therefore little wonder that spot iron ore prices have surged, and remained at elevated levels in recent weeks.

Ore with 62 percent iron content delivered to China MT-IO-QIN62=ARG, as assessed by Argus Media, was at $94.85 a tonne on Tuesday, the last day of April.

The price has now posted gains for five straight months, but the big kick up came in late January/early February, after the Brazil dam disaster, when prices jumped 20 percent between Jan. 25, the day of the burst, and Feb. 11, when they closed at $90.75 a tonne.

The Singapore Exchange futures curve has also shifted into a steeper backwardation since the Brazil dam collapse, with higher prices for prompt contracts indicating a tighter spot market.

As of the close on April 30, the front-month contract was trading at a 5 percent premium to the third month, up from a 3 percent premium the day of the Brazil incident. Like many major commodities, iron ore usually trades in backwardation.

The data on export volumes from Australia and Brazil, coupled with the price action, speaks to a sudden tightening of the market for seaborne iron ore.

What it doesn’t show is how likely this is to continue.

The rebound in Australian exports in April likely shows that the cyclone disruption is over, and shipments will at least return to the recent monthly average, if not improve slightly, if the major companies are able to run their operations harder to make up for some lost ground.

The bigger question mark is Brazil, where it seems less likely that it can recover the tonnes lost so far.

Vale said on March 28 it expects to sell 75 million tonnes less iron ore and pellets this year, down 20 percent from 2018.

Given there isn’t much spare capacity in Australia, or in number three exporter South Africa, it’s difficult to see where these lost tonnes can be made up, other than at the margins by smaller exporters such as India and Iran, and by the use of port inventories in China.

But there are also some question marks over the strength of demand, particularly in China, which buys about two-thirds of seaborne iron ore and produces about half of the world’s steel.

China’s manufacturing Purchasing Managers’ Index (PMI) fell to 50.1 in April from March’s reading of 50.5, confounding market expectations that it would hold at the prior level.

While still just above the 50-level that separates growth from contraction, the PMI doesn’t provide confidence to hopes that China’s economy is starting to respond to Beijing’s recent stimulus moves.

It still may be the case that the economy will pick up from now on, but there is also a risk that steel demand forecasts may be too optimistic, and that iron ore demand may also moderate.

US Steel Corp’s plan to invest more than $1bn at two of its Pennsylvania plants helps alleviate two key complaints against the once-dominant company: it had under-invested until recently in its facilities and done too little to mitigate its emissions. A new “sustainable” casting and rolling facility will be built at the Edgar Thomson Plant and a co- generation facility at the Clair- ton Plant, the Pittsburgh-based company said on Thursday in a statement. The first investment will improve the “quality and attributes of its downstream products,” while the second facility will be “equipped with state-of-the-art emissions con- trol systems.” The announcement was met with mixed reviews from analysts. The investment will result in “significantly” greater negative free cash flow than fore- cast from 2020-2021, Credit Suisse analysts including Curt Woodworth said in a note. The announcement “is proof positive that US Steel’s competitive posi- tion has weakened over time” and therefore requires substan- tial reinvestment, the analysts said, noting that the Edgar Thomson plant was built in 1872. US Steel fell 5.8% to $14.39 in regular trading on Thursday in New York, bringing its decline this year to 21%. On Monday, PennEnvironment Inc and the Clean Air Council filed a lawsuit alleging the steel company violated its Clean Air Act permit by not resuming use of pollution controls for sulphur dioxide and hydrogen sulphide following a December 24 fire at Clairton. The company said the same day it was reviewing the complaint. The announcement on Thursday “comes in the wake of the Clairton Coke disaster and offers a positive long-term solution to its SO2 emissions variability,” Keybanc Capital analyst Philip Gibbs said in a note. “The co-generation investment is expected to improve environmental efficiency, reduce energy con- sumption costs, and reduce its carbon footprint.” US Steel is one of the American companies that saw significant profit gains after the tariffs on steel and aluminium imports were imposed last year, though the levies have shown mixed results for the industry as a whole. President Donald Trump took the company’s announce- ment on Thursday as a vindi- cation for his tariff policies, congratulating US Steel for its investment in “America’s most INNOVATIVE steel mill.”

Reuters
Tesla Inc on Friday was set to raise up to $2.7 billion in a record-setting capital raising for the electric carmaker, as investors scooped up a mix of new stock and convertible notes that will recharge the company’s cash-depleted balance sheet.
The company said in a filing that it had raised its offer to 3.1 million shares, rising to 3.5 million including a tranche for underwriting banks, from an initially planned 2.7 million, priced at $243 per share.
The filing also showed it would place convertible debt worth $1.6 billion, up from an initial planned $1.35 billion.
That all pointed to buoyant interest in the offering and shares in the company rose 1.5 percent in trading before the bell.
The company did, however, set the coupon for the debt offering at 2.0 percent — the top of its indicated range — showing it had to concede ground to investors.
The conversion premium of 27.5 percent over the reference price for Tesla shares, at which the bonds can be converted to stock in future, was at the low end of an initial range of between 27.5 percent and 32.5 percent.
Tesla’s launch of a capital raise was greeted with relief by Wall Street on Thursday after a tumultuous year which has seen analysts and investors cast doubt on its ability to produce, sell and deliver enough cars to make a sustainable profit.
The company faces expensive challenges, including launching production in China, overhauling its U.S. retail and service operations and developing new models, including the high-volume Model Y SUV and a Semi commercial truck.
Many analysts had calculated that without new cash Tesla — which burned through $1.5 billion in the first quarter and has seen demand for its cars soften — would not be able to carry out its plans.
The company said that after all costs had been deducted it could now get up to $2.7 billion in new capital from the offer. That compared to the $2.2 billion in cash reserves the company held at the end of March.
Billionaire Musk, whose fortune centers around a 20 percent stake in the $42-billion company, has also doubled his initial commitment for buying shares and will now buy stock worth up to $25 million, the company said.
Including the option for underwriters to buy 15 percent in each offering, Tesla will sell about $860 million in new shares and $1.84 billion in debt.
Tesla had said on Thursday it would raise up to $2.3 billion in new capital through shares and debt. That included an offering of 2.7 billion shares worth around $650 million and $1.35 billion in debt, before issues to underwriters.

Global production of batteries for electric cars is concentrated in Asia, with Chinese, Japanese and South Korean firms dominating the sector and building factories in Europe to conserve their supremacy.

However Europe is looking to strike back, with France and Germany saying on Thursday they would form an alliance to develop next-generation batteries in a bid to counteract Asia’s dominance.

Lithium-ion batteries are a — if not the — crucial component of electric vehicles, but few companies have ventured into actually making them given the huge cost of setting up manufacturing facilities and the still limited demand.

Car manufacturers have prefered to have a choice of several specialised suppliers, especially as battery technology is rapidly evolving.

China, where half of electric cars are currently being sold, requires car manufacturers to use locally-built batteries and is calling the shots in the industry with two-thirds of the world’s production capacity of lithium-ion cells fo batteries.

Only Asian firms appear in the top 10 of the industry: China’s Contemporary Amperex Technology (CATL) accounted for 23 percent of global production last year, edging out Japan’s Panasonic at 22 percent.

China’s BYD followed at 13 percent and is the only car manufacturer to have prospered in making batteries.

South Korea’s LG Chem came in at 10 percent while Samsung SDI had 5.5 percent, according to the US-based Center for Automotive Research (CAR).

Europe accounts for only one percent of global production.

The United States also remains marginal on a global scale despite the Gigafactory that Tesla developed with Panasonic.

– China controls raw materials –

Another key factor in China’s supremacy: control over the raw materials needed to manufacture the batteries: lithium and cobalt.

According to Bloomberg, the Chinese firms Ganfeng and Tianqi control 17 and 12 percent respectively of the world production of lithium thanks to their investments in mines in Australia and South America.

Tianqi bought a 24 percent stake in Chilean miner SQM for $4.1 billion in December. Together with the US firm Albemarle it also controls the huge Greenbushes mine in Australia.

Meanwhile, Chinese firms control at least half of the cobalt extracted in the Democratic Republic of Congo, where 70 percent of global output comes from, according to estimates cited by Bloomberg.

China Molybdenum bought a major site from the US firm Freeport-McMoran for $2.65 billion in 2016.

China also has 80 percent of the world’s capacity to produce refined cobalt using chemical processes.

Concerned over their access to supplies, several carmakers have concluded long-term deals with Chinese firms: Volkswagen announced at the beginning of April a 10-year deal with Ganfeng for lithium that it can provide to battery manufacturers of its choice.

– Asian assault on Europe –

According to the BCG consultancy, the global auto battery market could reach 45 billion euros in value in 2027, with Europe accounting for 20 to 30 percent, but Asian firms are expected to benefit most.

CATL is investing some 240 million euros to build a factory in the central German city of Erfurt that will supply BMW from 2022. The luxury carmaker has concluded a contract worth four billion euros with CATL, including 1.5 billion from the Erfurt site.

LG Chem has been manufacturing batteries for Daimler, Volvo, Audi and Renault from a site in Poland since last year.

Samsung SDI has a factory in Hungary, where fellow South Korean firm SK Innovation is investing $1.5 billion into two factories that could end up serving Volkswagen.

– Swedish and Dutch pioneers –

One of the rare European specialists in batteries is Swedish firm Northvolt. It is currently building what will be Europe’s largest facility in Sweden together with Germany’s Siemens.

Expected to cost at least 1.6 billion euros, the facility is to begin turning out batteries in 2020 and when it reaches capacity in 2023, it should be double the volume of CATL’s German factory.

Founded by two former Tesla employees, Northvolt joined forces with Volkswagen in March to create a “European Battery Union” to promote research. Northvolt also collaborates with BMW.

Meanwhile the Dutch firm Lithium Werks, which has already built a massive factory in China, has been in talks to build a billion-euro facility in Poland.

Iran’s oil minister warned that Opec is in danger of collapse as some nations seek to undermine their fellow members, an apparent reference to Saudi Arabia’s pledge to fill the supply gap created by US sanctions on Iranian exports.
“Iran is a member of Opec for its interests and any threat from member states won’t go unanswered,” Bijan Namdar Zanganeh said after a meeting with Opec secretary-general Mohammad Barkindo in Tehran on Thursday, according to the oil ministry’s Shana news agency.
His comments come as US President Donald Trump tries to cut the Islamic Republic’s oil exports to zero, backed by a promise from Saudi Arabia and its Gulf allies to increase production to ensure the squeeze doesn’t create a supply shortage.
Those countries boosted production last year as the first round of American sanctions hit Iran, without splitting the Organisation of Petroleum Exporting Countries. This year, however, Iran is under even greater pressure, with fewer options to keep its economy afloat.
Zanganeh had already censured “two neighbouring states” for voicing readiness to fill the gap of Iranian barrels in the market. “I told Mr Barkindo that Opec is in danger by the unilateralism of some members and the organisation faces the risk of collapse,” he said on Thursday, stopping short of naming names.
The lost barrels, along with supply disruptions in Venezuela and elsewhere, have raised the question of whether Opec’s biggest producers have a big enough supply buffer to keep the market in balance. Zanganeh last month accused Saudi Arabia and the United Arab Emirates of exaggerating their surplus oil capacity.
Discord between Opec’s Gulf members has shaken the organisation in the past year. Qatar announced its exit in December after more than five decades of membership after neighbour Saudi Arabia targeted the nation with an unjust economic blockade.
“Qatar’s departure broke the seal. Iran’s would be much more serious, but no longer unthinkable,” said Derek Brower, an analyst at RS Energy Group. “Iran thinks two members are conspiring with the US against it — a good enough reason for Tehran to consider it’s position.”
Opec negotiations in December initially ran into difficulties because of disagreement between the Saudis and Iran, but in the end there was a deal. Yet setting aside Qatar’s departure, the group has held together for almost sixty years despite a range of political quarrels and conflicts, such as the Iran-Iraq war in the 1980s and Saddam Hussein’s invasion of Kuwait the following decade.

Oil major Royal Dutch Shell Plc has asked the UK government for taxpayer subsidies for the development of underground carbon
dioxide storage, the Sunday Times reported. The support for carbon capture and storage projects would be lower than incentives
previously granted to renewable technologies, the paper cited Maarten Wetselaar (pictured), head of integrated gas and new
energies, as saying. Energy Minister Claire Perry announced a £35mn ($45mn) pledge in November to support carbon capture
technologies in the UK, the Sunday Times said last week.

The world’s leading scientists will warn the planet’s life-support systems are approaching a danger zone for humanity when they release the results of the most comprehensive study of life on Earth ever undertaken.

Up to 1m species are at risk of annihilation, many within decades, according to a leaked draft of the global assessment report, which has been compiled over three years by the UN’s leading research body on nature.

The 1,800-page study will show people living today, as well as wildlife and future generations, are at risk unless urgent action is taken to reverse the loss of plants, insects and other creatures on which humanity depends for food, pollination, clean water and a stable climate.

The final wording of the summary for policymakers is being finalised in Paris by a gathering of experts and government representatives before the launch on Monday, but the overall message is already clear, according to Robert Watson, the chair of the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES).

“There is no question we are losing biodiversity at a truly unsustainable rate that will affect human wellbeing both for current and future generations,” he said. “We are in trouble if we don’t act, but there are a range of actions that can be taken to protect nature and meet human goals for health and development.”

The authors hope the first global assessment of biodiversity in almost 15 years will push the nature crisis into the global spotlight in the same way climate breakdown has surged up the political agenda since the 1.5C report last year by the UN Intergovernmental Panel on Climate Change.

Like its predecessor, the report is a compilation of reams of academic studies, in this case on subjects ranging from ocean plankton and subterranean bacteria to honey bees and Amazonian botany. Following previous findings on the decimation of wildlife, the overview of the state of the world’s nature is expected to provide evidence that the world is facing a sixth wave of extinction. Unlike the past five, this one is human-driven.

Mike Barrett, WWF’s executive director of conservation and science, said: “All of our ecosystems are in trouble. This is the most comprehensive report on the state of the environment. It irrefutably confirms that nature is in steep decline.”

Barrett said this posed an environmental emergency for humanity, which is threatened by a triple challenge of climate, nature and food production. “There is no time to despair,” he said. “We should be hopeful that we have a window of opportunity to do something about it over these two years.”

The report will sketch out possible future scenarios that will vary depending on the decisions taken by governments, businesses and individuals. The next year and a half is likely to be crucial because world leaders will agree rescue plans for nature and the climate at two big conferences at the end of 2020.

That is when China will host the UN framework convention on biodiversity gathering in Kunming, which will establish new 20-year targets to replace those agreed in Aichi, Japan, in 2010. Soon after, the UN framework convention on climate change will revise Paris agreement commitments at a meeting in either the UK, Italy, Belgium or Turkey.

Watson, a British professor who has headed both of the UN’s leading scientific panels, said the forthcoming report will delve more deeply than anything before into the causes of nature collapse, chief among which is the conversion of forests, wetlands and other wild landscapes into ploughed fields, dam reservoirs and concrete cities. Three-quarters of the world’s land surface has been severely altered, according to the leaked draft. Humanity is also decimating the living systems on which we depend by emitting carbon dioxide and spreading invasive species.

Watson said the authors have learned from attribution science, which has transformed the debate on the climate crisis by showing how much more likely hurricanes, droughts and floods have become as a result of global heating.

The goal is to persuade an audience beyond the usual green NGOs and government departments. “We need to appeal not just to environment ministers, but to those in charge of agriculture, transport and energy because they are the ones responsible for the drivers of biodiversity loss,” he said.

A focus will be to move away from protection of individual species and areas, and to look at systemic drivers of change, including consumption and trade.

The political environment is changing in some countries due to overwhelming scientific evidence and increasing public concern about the twin crises of nature and climate, which have prompted more than 1 million students to strike from school and led to street protests by Extinction Rebellion activists in more than a dozen countries.

The UK parliament declared a climate emergency this week and the government’s chief climate advisory body recommended an accelerated plan to cut carbon emissions to zero by 2050. Until now, however, the nature crisis has been treated as far less of a priority. “Where are the headlines? Where are the emergency meetings?” asked the school strike founder, Greta Thunberg, in a recent tweet on the subject.

Extinction Rebellion activists said protests that blocked several London streets last month were as much aimed at the defence of nature as stabilising the climate. “They are two sides of the same destructive coin,” said Farhana Yamin, a coordinator of the movement who is also an environmental lawyer and formerly a lead author of the IPCC report.

“The work of IPBES is as crucial as the work done by the IPCC on the 1.5-degree report. That is why Extinction Rebellion is demanding an end [to] biodiversity loss and a net-zero phaseout by 2020. We can’t save humanity by only tackling climate change or only caring about biodiversity.”