Two important developments overnight for key Australian commodities, LNG (a big earthquake in Papua New Guinea) and iron ore (new production curbs).
Chinese iron ore and steel prices hit their 2018 highs yesterday after production curbs were extended until November in a key steel production region.
The local government in Tangshan, China’s biggest steelmaking city, said on Friday that it would maintain production limits scheduled to expire when the winter heating season ends next month.
Tangshan said that the production curbs, scheduled to end on March 14, will now run until November 14, idling 9.9 million tonnes of capacity. Mills in and around the city were forced to cut production by 50% as part of the campaign against winter air pollution.
The news saw iron ore and steel futures leap. Iron ore futures added $US22 a tonne at one stage on the news.
Singapore-traded futures for March delivery of 62% iron-ore hit its highest level since last April on Monday, rising by as much as 1.5% to $US79.15 per tonne. The Metal Bulletin index price rose to $US79.36, up 54 US cents a tonne. That’s a high for 2018.
Shanghai-traded steel reinforcement bar for May delivery was up by as much as 3.8% to $US641 a tonne, the highest since early December.
Meanwhile LNG prices in the Asia basin will rise (and the prices of Oil Search and Santos could fall, and Woodside and Origin rise) as more news emerges from PNG after yesterday’s 7.5 magnitude quake hit the country’s oil and gas province.
LNG prices in the Asian basin have already been boosted by the surge in Chinese demand in late 2017 that has continue4d into 2018. Now nervy buyers and exporters will be anxiously watching to see if output from the $US20 billion PNG LNG project has been affected by the quake, and if so, for how long.
The quake caused numerous landslides, damaged buildings and forced the closure of oil and gas operations, especially the huge PNF LNG project led by Exxon, but involving Oil Search and Santos.
As a precautionary measure and in order to assess any damage to facilities, Oil Search’s production operations in the PNG Highlands are in the process of being shut-down. ExxonMobil PNG Ltd has confirmed that the PNG LNG facility at Hides has also been safely shut down,” Oil Search said in a statement on Monday.
Government teams are rushing to the region to check on damage and possible casualties, while oil and gas companies have halted production and exploration activities in the region to assess damage, especially to the huge Hides oil and gas project which provides gas for the PNG LNG project.
The tremor hit the rugged Southern Highlands about 560 kilometres northwest of Port Moresby according to the US Geological Survey (USGS). At least 13 aftershocks with a magnitude of 5.0 or more were felt in the area on Monday.
ExxonMobil said it had shut its Hides gas conditioning plant and that it believed administration buildings, living quarters and a mess hall had been damaged. It also said it had suspended flights into the nearby Komo airfield until the runway could be surveyed.
“Due to the damage to the Hides camp quarters and continuing aftershocks, ExxonMobil PNG is putting plans in place to evacuate non-essential staff,” the company said in an statement reported by Reuters.
Gas is processed at Hides and transported along a 700 kilometre line that feeds the project’s LNG processing plant near Port Moresby for export.
