CHINA SOUTH AMERICA HAS MOVED

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Sinopec’s profit soars; announces plans to boost oversea expansion

Sinopec’s (a.k.a China Petroleum & Chemical Corp.) net income rose at least tenfold to 22 billion yuan ($3.22 billion usd) in the second quarter according to this Bloomberg article.

The company has also announced it is planning a “rapid” overseas expansion in order to secure energy supply adequate to feed Chinese demand.

[Sinopec I passed on a bus ride to Shanxi, October – 2006]

The announcement, along with the company’s record gains in profit come as other global giants in the energy industry such as Royal Dutch Shell and Exxon Mobil have seen their earnings decline as prices plummeted and demand waned when the global slowdown ensued at the end of 2008.

According to Bloomberg, Sinopec supplies 80% of China’s fuel needs and is China’s largest refiner of crude oil. The company is looking for new foreign partners, expand its refining capacity and reduce operational costs. The company expects demand will remain strong in China and that oil prices will continue to rise throughout the second half of the year.

Here are a few highlights from the Bloomberg article, “Sinopec to Boost Expansion Abroad After Profit Surges to Record,” which you can access in full by clicking here.

“Sinopec’s main business is refining and it needs to increase its oil reserves and reduce its reliance on other oil producers,” said Larry Grace, an independent oil analyst based in Hong Kong. “There’s a government directive to increase overseas oil and gas assets.”

…

Sinopec gets almost all its revenue from refining and the sale and distribution of fuels. Oil production accounted for just over 2 percent of sales, according to its 2008 annual report. The company imports about 80 percent of the crude it processes.

…

Su said the company will accelerate its “go global” strategy.

Parent company China Petrochemical Corp. said on Aug. 18 it had concluded the C$8.3 billion ($7.7 billion) acquisition of Addax Petroleum Corp. to secure reserves in Iraq and Africa. China Petrochemical has assets in Russia, Angola, Ecuador, Australia, Canada, Kazakhstan and Myanmar.

Sinopec’s parent completed the purchase of Tanganyika Oil Co. for about $1.8 billion in December. Vancouver-based Tanganyika holds stakes in two Syrian production-sharing agreements covering the Oudeh and Tishrine/Sheikh Mansour blocks after expanding from Tanzania in 1996.

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Traveling… In Chicago at the moment, returning Friday Aug 21

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In transit. Will return mid week

My apologies to all readers. En route to Asia — will return, live from Asia later in the week.

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Asian smelters to benefit from Doe Run Peru shutdown

Doe Run Peru shut down its lead and zinc smelter on June 2 after the company ran out of money and credit, therefore rendering it unable to buy the raw materials being produced at near by mines.

According to this Bloomberg article, guess who’s stands poised to benefit from this? You guessed it Asia’s smelters, who despite the global slow down remain hungry for
more.

Alex Emery in Lima down in Lima writes:

Glencore International AG, the world’s biggest commodities trader, and Trafigura Beheer BV are benefiting as suppliers of Doe Run Peru’s shut lead and zinc smelter seek international traders to sell their concentrates.

“We’re looking for more clients abroad, particularly Asian smelters,” to buy the extra production, Glencore’s Peruvian manager Fernando Cafe said in a July 3 interview.

Cia. De Minas Buenaventura SA, Pan American Silver Corp. and about 30 other miners in the central Peruvian Andes have had to seek alternative buyers after the Renco Group Inc. unit smelter ran out of cash and halted all operations on June 2…

To read the complete article please visit the complete Bloomberg article.

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Newswire: Commodities

[Crude Oil] — Oil Falls in New York on Speculation Increased Supplies Will Limit Gains
Crude oil fell on speculation that last week’s 10 percent advance will be undone as U.S. inventories climb and fuel consumption declines.

Oil followed equity markets lower today, reversing gains made last week after the U.S. economy lost fewer jobs than expected. Crude inventories rose to the highest since 1990 in the week ended May 1 as fuel consumption tumbled, an Energy Department report showed last week.

[Natural Gas] — Natural Gas Declines on Speculation 22% Advance Was Excessive
Futures fell for the first time in four days on speculation last week’s 22 percent rally was unjustified.

[Copper] — Copper Futures Decline for Third Straight Session as China’s Demand Eases
Copper prices fell for the third straight session in New York on signs that demand may ease in China, the world’s biggest user of industrial metals.

[Precious Metals] — Gold, Silver Fall in N.Y. as Investment Demand Slips on Signs of Recovery
Gold and silver prices dropped in New York on speculation that investment demand will decline as more signs emerge that the global recession may have touched bottom.

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Weekend Newswire: South-South Cooperation

[Brazil – Argentina] — Brazil, Argentina Working on $1.5 Billion Credit Line
Brazil and Argentina are nearing agreement on a “precautionary” measure to create a $1.5 billion credit line to help boost liquidity amid the global financial slowdown, ministers from the two countries said.

As many as seven countries, including Argentina and Uruguay, may establish reciprocal credit lines to help boost liquidity in South America, Brazilian Finance Minister Guido Mantega told reporters in Buenos Aires. Argentine Economy Minister Carlos Fernandez said the credit line with Brazil would be for the equivalent of $1.5 billion in local currencies.

[Peru – South Korea] — Peru, S Korea to hold 2nd round of FTA talks
The Second Round of Negotiations for a Free Trade Agreement (FTA) between Peru and the Republic of Korea will be held in the Peruvian capital Lima on May 11-14, the Ministry of Foreign Trade and Tourism (Mincetur) reported Sunday.

On Monday, the negotiating teams will discuss issues such as dispute settlement, trade remedies, temporary entry, investment, sanitary and phytosanitary measures, cooperation, rules of origin and public purchases.

On Tuesday, they will discuss trade in goods, intellectual property, telecommunications and financial services.

On Wednesday, the meeting will focus on institutional and labor matters, financial services and competition policy.

On Thursday, issues to be discussed include customs and trade facilitation, services and investments, as well as environment.

[China – Zambia] — Zambia picks China group to run Luanshya copper mine
Zambia on Friday selected Chinese company NFC Africa as the new investor to run the closed Luanshya Copper Mines (LCM), which is due to restart production at the end of May.

“It is now with great pleasure that I announce the sale of the 85% shares to China Nonferrous Metals Mining, commonly known as NFCA,” Zambia’s President Rupiah Banda told former Luanshya Copper Mines workers at a public meeting.

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Weekend Newswire: Venezuela

*** Venezuela is a difficult subject to report on. Unless you dig, finding reporters/ journalists with integrity who strive to present a story that is unbiased, it is extremely difficult to get accurate perspectives on the country.

Therefore, when reading articles from major media I tend to focus on the hard data from reliable sources and perspectives which come in the form of direct quotations of “experts,” whom represent different points of view. I then disseminate the entire article and form my own opinion.

Hey that’s how I do it, you might have your own system. Regardless, in situations such as this where I am publishing a Newswire post on Venezuela where the posts come mainly from:

1. Bloomberg, a U.S financial news giant that loves capatalism and therefore tends to look down on such things as nationalization of private industry.

2. The Latin America Herald, a publication which does a concise job of reporting on all the major headlines that are worthy (in its opinion) for its fan base of wealthy Miami/Ft. Lautherdale dwelling Latinos.

Ok, here we go. Lets start off with a more feel good story about martial arts in Caracas.

Venezuelans aim to kick crime out
Ask most residents of Caracas what the city’s biggest problem is, and the vast majority will say “crime”. Official figures show a huge increase in violent crime in the Venezuelan capital over the past decade, reaching a total of 130 murders per 100,000 population last year compared to 63 per 100,000 in 1998.

Little wonder then that demand for self-defence classes is at an all-time high. Some martial arts teachers report a five-fold increase in their attendance levels over the past few years.

“My classes have become noticeably larger in the past months,” says Karin Yamur, who teaches taekwondo in different parts of the city.

Venezuela Seizes 60 Oilfield Service Company Assets
Venezuelan President Hugo Chavez seized assets from 60 oilfield services companies including Oklahoma-based Williams Cos., using a law the national assembly passed yesterday.

Chavez’s Oil Seizures May Cause ‘Substantial’ Output Decline
Venezuelan President Hugo Chavez’s seizure of assets at 60 oilfield service companies threatens to reduce the OPEC-member country’s output.

“Petroleos de Venezuela doesn’t have the management and strategic capacity to operate these companies properly,” said Jorge Pinon, a fellow at the Center for Hemispheric Policy at the University of Miami, referring to the state-owned oil company. “You’ll see a substantial drop in oil production.”

Chavez Seizes Farms, Says Land Is People’s Property
Venezuelan President Hugo Chavez said land should be considered the property of the people and ordered the government takeover of a group of farms that he said were being underused.

Arsenal Seized from French Expat in Venezuela
An “arsenal of war” including high-powered rifles, grenades, explosives and a flame-thrower, was seized Friday from the home of a French citizen residing in the Venezuelan capital, authorities said.

Venezuelan Broadcaster Facing Sanctions for Quake Coverage
Conatel, the agency that regulates telecommunications and broadcasting in Venezuela, notified Globovisión television of a suit being filed against it for reporting on this week’s moderate earthquake in the Andean nation before any announcement by officials or state-run media.

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Bank of the South – South American leaders reach a definitive agreement

A definitive agreement for the launching of the Bank of the South was reached in Buenoes Aires on Friday afternoon. Everything seems set to go with one minor change to note, The Bank of the South will begin operations with $7 billion in working capital, not the $10 billion reported previously.

South-South Cooperation is a term historically associated with the exchange of resources, technology and knowledge between developing countries. This latest initiative by the countries of Argentina, Brazil, Bolivia, Ecuador, Paraguay, Uruguay and Venezuela is especially exciting for the region as it:

a) Involves seven South American countries
b) Includes countries with very different political and economic ideologies
c) Includes the regional powerhouse of Brazil
d) Is not dominated by one power, but rather uses a fair system to calculate member country donations
e) Sends a message to member countries that what is good for the region is good me

What is mysterious, and surely politically motivated, is the fact the most staunch US allies in the region; Colombia, Peru and Chile, have not been included…

Here’s the scoop from what went down over in Buenos Aires on Friday, courtesy of MercoPress.

“We’ve closed all pending issues and therefore this is the last ministerial meeting on the subject, said Argentine Finance minister Carlos Fernández who nevertheless added that the final stitch is “the technical review of statutes” of the new bank and the “parliamentary approval by the seven founding countries”.

[Arg Finance Minister, Carlos Fenandez]

The Bank of the South, started at the end of 2007 (and the brainchild of Venezuela’s Hugo Chavez), will have an initial capital of 7 billion US dollars (originally it was planned 10 billion), of which Argentina, Brazil and Venezuela will supply 2 billion US dollars each; Ecuador and Uruguay 400 million US dollars each and Bolivia 200 million.

“The terms of the agreement are acceptable, so the statutes should be easily approved without much discussion”, said Brazil’s Finance minister Guido Mantega. “This is the missing step for financial integration”, he added.

“Given the current international context the bank should be operational as soon as possible” added Argentina’s Fernandez. “It’s not easy to create a financial institution of this kind in the midst of an international crisis”.

According to the statutes each country member will have “one vote” in the board but for approval of loans 70 million US dollars plus, support from votes representing two thirds of capital subscription will be needed, explained Fernandez.

At the same meeting Argentina and Brazil also agreed to a 1.5 billion US dollars swap to reinforce their international reserves. The operation is similar to that recently agreed between Argentina and China and the one signed by the Federal Reserve and fifteen other countries, including Brazil.

The swap is “preventive” and enables each country access to a credit in Brazilian Reales or Argentine Pesos equivalent to 1.5 billion US dollars and valid for three years.

Brazilian minister Mantega said that when Brazil signed the agreement with the FED he advanced that the scheme would be expanded to the region, with Argentina and Uruguay as first interested parties.

“It’s a precaution mechanism to reinforce international reserves. Let’s hope this becomes available as soon as possible and operational for the two central banks”, said Fernandez.

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Weekend Newswire: Asia, Oceania

[China-Kuwait] — Sinopec, Kuwait to Build $9 Billion Plant in China
China Petroleum & Chemical Corp., Kuwait Petroleum Corp. and an overseas oil producer plan to build a $9 billion refining and petrochemical plant in southern China’s Guangdong province, according to the head of China’s energy authority.

[China-Brazil] — Vale ships record iron ore to China in Q1
Brazil’s Vale, the world’s largest iron ore producer, shipped 34.63 million tons of iron ore to China in the first quarter of 2009, which marks a quarterly record, the company announced on May 6.

[China] — China’s Investment Growth May Quicken as Export Slump Eases
China’s investment growth probably accelerated as a decline in exports moderated, strengthening a fledgling recovery in the world’s third-biggest economy.

[China] — China launches campaign to counter disasters
China needs stronger steps to promote public preparedness and early warning systems for natural disasters, experts said ahead of the one-year anniversary of the Wenchuan earthquake.

[South Korea] — Korean lenders hit by 75% drop in profit
South Korean banks are grappling with deteriorating asset quality amid the economic downturn, which according to the country’s financial regulator led to a 75 per cent drop in combined profits in the first quarter.

[South Korea] — SKorea to set up US$802m resources development fund
SEOUL: South Korea Sunday unveiled plans to establish an 802 million dollar fund for investment in overseas mineral mines, oil fields and gas wells.

[India] — State Bank of India Profit Exceeds Analyst Estimates
State Bank of India reported fourth- quarter profit rose 46 percent to a record, exceeding analysts’ estimates, as lower lending rates lured borrowers and gains from trading grew more than fivefold.

Net income rose to 27.4 billion rupees ($556 million), from 18.8 billion rupees a year earlier, the nation’s largest bank said in a statement to the Bombay Stock Exchange today. That beat the 21.7 billion rupee median estimate of five analysts surveyed by Bloomberg.

[Australia] — Australia May Face Debt Crisis From Grants to Young Home Buyers
Australian Prime Minister Kevin Rudd’s bid to ensure his housing market avoids the global property slump may push a generation of buyers into a debt crisis.

Grants of as much as A$21,000 ($16,142) to first-time buyers and the lowest interest rates in 49 years have emboldened more than 40,000 young Australians to take out home loans since October, stoking demand for properties that cost less than A$500,000.

[New Zealand] — NZ Crown Minerals Boosts Funding for Oil, Gas Exploration
Energy and Resources Minister Gerry Brownlee has announced a renewed seismic survey program to encourage New Zealand oil and gas exploration.

As part of Budget 2009 a total of $20 million over three years will be allocated to the seismic data acquisition program run by Crown Minerals, which is responsible for the administration and promotion of New Zealand’s oil and gas.

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