Reuters Daily Commodities BriefJapan Apr aluminium stocks fall 12.7 pct on exports TOKYO, May 15 (Reuters) - Japan's aluminium stocks fell in April on the month for the second time

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Compiled on Friday, May 15, 2009

Reuters Daily Commodities Brief

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• US Gulf may see pop-up storms - Accuweather • Commodity trend funds need end to mkt volatility • U.S. steelmakers fear burden in climate rules

• OPEC may keep output steady if oil stays firm-Iraq • Aluminium LME stocks may reach 5 mln T on recession • Polish refiners see better results after Q1 losses • Crackdown a boon for exchanges, bane for dealers • Close to 150 mln barrels oil, products stored at sea • Singapore keeps faith in self-regulating oil markets

• Indonesia 2009 coal output revised down-industry

BEYOND THE HEADLINES

MARKET NEWS (Click on the headlines below to jump to the story)

TODAY’S MARKETS (Click below to read the full report if you are a 3000 Xtra or RTC user)

OIL: Oil prices paused below $59 as investors weighed stronger equities, a steady dollar and a gloomy demand forecast by the International Energy Agency. "Equities and currency are most important. The $60 price level is also very important," Tetsu Emori, a fund manager at Tokyo-based Astmax Co Ltd, said. BASE METALS: Shanghai copper rose, after earlier paring some gains as support from an equity rally fizzled, with investors focusing on economic data to assess the health of the global economy. "The overnight stock mar-kets rally was a main boost for copper prices. But since the physical market remains sluggish, copper prices are likely to weaken in the short term," said a trader based in Shanghai. PRECIOUS METALS: Gold was little changed, just off a six-week high hit earlier this week, torn between a soft dollar and firmer equities. "Gold is somewhat following the currency market right now," said Dick Poon, a manager at Heraeus in Hong Kong, referring to firmness in sterling and euro against the dollar. GRAINS: U.S. soybean futures extended gains, carried to a fresh 7-½ month high by a steady flow of exports and tightening global supplies that supported the market. "The yields in South America are not getting any better and apparently the quality is pretty ordinary," said Paul McKay, a director with Commodity Broking Services in Australia. GLOBAL MARKET NEWS: Asian stocks rose as investors bought shares that stood to benefit the most from an expected global recovery, but still looked set to post their biggest weekly decline since March on worries equity mar-kets have risen too far, too fast. "Despite a series of dismal earnings this time around, a sense of relief has spread in the market that nothing worse will likely come out at least until April-June earnings announcements," said Fumiyuki Nakanishi, a manager at SMBC Friend Securities in Tokyo.

ENERGY

• China may -saving goextend energyal to 2020 -paper

• China's Dalian exchange to launch PVC futures on May 25

• China grants subsidies for private hybrid cars-paper

• China power use slump worsens in early May -paper

• Mexico's Pemex lowers natural gas prices for buyers

• Chevron weighs shutting Hawaii refinery

• U.S. Gulf gas hydrate find most promising yet -DOE AGRICULTURE

• Philippine farm output growth slows in Q1

• Canada to help pulp firms in tax credit fight BASE METALS

• S.Korea buys smaller-than-planned 2,000 T copper

• Japan Apr aluminium stocks fall 12.7 pct on exports

• UBS sees POSCO cutting steel price again in Q3

• US senators drop objections to Obama's CFTC nominee

CLICK HERE FOR CROP NEWS

CLICK HERE FOR THE LATEST ON THE FINANCIAL CRISIS

WEEKLY NEWS SPOTLIGHT : CLICK HERE FOR CROP NEWS

Reuters first with news of extension of Nigerian oil force majeure Reuters clients got first news on May 5 that Shell’s Nigerian joint venture company had imposed a force majeure on all scheduled loadings of Forcados crude oil in May. The disruption reduces supplies by as much as 245,000 barrels per day and supported differentials on the West African crude market. Reuters’ energy correspondents’ persistence paid off when they got hold of an official who read a statement that had just been dispatched to the Shell press office for publication that afternoon, saying all liftings for May had been cancelled. Reuters’ story hit the wire at 1313 GMT, more than half an hour before the nearest competitor and a day ahead of some.

FIRST ON REUTERS

MONTH AHEAD (Click here for the events)

Contract (AS OF 06:04 GMT) Price Change Net Change YTD NYMEX light crude $58.70 0.14% $0.08 31.43% NYMEX RBOB gasoline $1.72 -0.06% $0.00 70.97% NYMEX heating oil $1.50 0.15% $0.00 6.33% NYMEX natural gas $4.27 -0.49% -$0.02 -23.66% Spot Gold $926.00 0.07% $0.65 5.37% LME Copper $4,420 -1.45% -$65.00 44.79% LME Aluminium $1,530 -0.65% -$10.00 -0.52% CBOT Corn $4.28 -0.06% $0.00 5.22% CBOT Wheat $5.92 -0.29% -$0.02 -2.87% Malaysia Palm Oil (3M) R2,740 2.09% R56 58.35%

Index (Total Return) Close 14 May Change YTD Change Reuters/Jefferies CRB 240.31 0.40% 5.41% S&P GSCI 3941.155 0.46% -1.36% Rogers International 2759.22 0.00% 13.05% Dow Jones - AIG 119.709 0.41% 2.52% DB Liquid Commods 791.07 12.32% 18.29% Cont Commod Indx

US STOCKS (DJI) 8284.89 0.56% -5.07% US DOLLAR INDEX 82.435 -0.16% 1.58% US BOND INDEX (DJ) 216.9 -0.12% 3.44%

Other Market Performance 399.44 0.10% 10.13%

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Reuters Daily Commodities Brief Friday, 15 May 2009

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MARKET NEWS

S.Korea buys smaller-than-planned 2,000 T copper

SEOUL, May 15 (Reuters) - South Korea has bought a smaller-than-planned 2,000 tonnes of refined copper for July 15 shipping to the port of Gunsan, the state-run Public Procurement Service said on Friday.

The agency, which had sought to buy 6,000 tonnes of the metal, bought 2,000 tonnes of copper cathode from LS-Nikko Copper at a premium of $180 a tonne over London Metal Exchange cash prices.

It also bought 300 tonnes of nickel from Glencore at a premium of $535 a tonne over LME cash prices for shipping by June 10 to the port of Busan.

China may extend energy-saving goal to 2020 -paper

BEIJING, May 15 (Reuters) - China might extend through 2020 its goal of improving energy efficiency, the official China Daily reported on Friday, citing sources involved in a government discussion.

The government failed to meet its yearly reduction tar-get of 4 percent in 2006 but has retained an overall 20 percent reduction goal for the five-year period ending in 2010.

Now that goal of cutting energy intensity -- or energy consumption used in generating each dollar of gross domestic product -- could be extended for another dec-ade, according to a source close to the country's cli-mate change office.

Philippine farm output growth slows in Q1

MANILA, May 15 (Reuters) - Philippine farm output growth slowed in the first quarter as heavy rain hit the corn harvest, the government said on Friday, painting a bleak outlook for the overall economy.

Agricultural output, which accounts for around a fifth of the Southeast Asian nation's gross domestic product, grew 2.02 percent in January-March from a year earlier, weaker the 3.2 percent rise marked in the fourth quar-ter.

"What the data tells us is that there may be less support from agriculture than has been hoped for," said Vishnu Varathan, economist at Forecast Pte in Singapore.

China's Dalian exchange to launch PVC futures on May 25

BEIJING, May 15 (Reuters) - China's Dalian Commodity Exchange will begin polyvinyl chloride (PVC) futures trading on May 25, an exchange spokesperson told Reuters on Friday.

The exchange received regulatory approval to launch the product on April 16.

The China Securities Regulatory Commission said pro-ducers, consumers and traders needed a hedging tool for the widely used plastic because prices of raw materi-als like coal and crude oil were too volatile.

Japan Apr aluminium stocks fall 12.7 pct on exports

TOKYO, May 15 (Reuters) - Japan's aluminium stocks fell in April on the month for the second time in a row, los-ing 21 percent from February's 10-year high, as fabricators neared the end of a run-down in stocks and exports rose.

Aluminium stocks held at three major Japanese ports amounted to 295,600 tonnes at the end of April, down 43,000 tonnes or 12.7 percent from the previous month, trading house Marubeni said. It is the lowest figure since November.

"Many firms really worked hard on cutting inventories, and I think we are beginning to see the results of that now," said an official with an end-user of aluminium, adding that February or March could have marked the worst of the demand slump.

China grants subsidies for private hybrid cars-paper

SHANGHAI, May 15 (Reuters) - China will give 43,000 yuan ($6,300) in subsidies to buyers of hybrid car buy-ers in the southwestern city of Chongqing, the first state initiative for private cars, the Shanghai Securities News said on Friday.

The subsidy, from the local government, will be given for the Jiexun brand hybrid sedan made by Chongqing Changan Automobile Co, the newspaper said.

According to Reuters calculations, the subsidy, includ-ing exemption on 7,000 yuan of road fees for three years, is equivalent to a 31 percent discount for the hy-brid sedan.

(Continued on page 3)

* Japan machinery orders fall less than expected

* Japanese wholesale price annual fall steepest in 22 years

* Asian stocks rise 2 pct, but head for weekly loss

* Mizuho plans to raise $8.4 billion, faces loss

* U.S. jobless claims jump; Nike, BT slash workforce

TOKYO, May 15 (Reuters) - Japan's machinery orders and price data offered more evidence on Friday that while the global downturn may be easing, recovery is elusive, forcing firms to cut jobs and banks to raise more cash to cover their losses.

Japanese orders fell less than expected in March, showing the world's second-largest economy may be not be in such a dire state as feared, but companies said they had no plans to ramp up spending any time soon.

The sharpest annual drop in Japanese wholesale prices in more than 22 years in April also underscored the persistent weakness of demand in an economy mired in its worst recession since World War Two.

Financial Crisis - 0557 GMT



MARKET NEWS

China power use slump worsens in early May -paper

SHANGHAI, May 15 (Reuters) - The decline in China's power consumption accelerated in the first 10 days of May to 4.3 percent year-on-year, from a drop of 3.6 per-cent in the final 10 days of April, the official Shanghai Securities News reported on Friday.

Nationwide electricity consumption via major grids had fallen 3.6 percent in the first 10 days of April and 4.3 percent in the second 10-day period, the report said, citing data from the National Electricity Dispatching and Communication Centre, a unit of the State Grid.

Electric power use figures have been closely watched for signs of an industrial rebound in the world's third-largest economy, where manufacturing and export fig-ures for April were sluggish despite upbeat data for in-vestment and retail sales.

Mexico's Pemex lowers natural gas prices for buyers

MEXICO CITY, May 14 (Reuters) - Mexico's state-run gas company Pemex will lower natural gas prices for consumers by 10 percent beginning at the end of June this year, the company said on Thursday.

Mexico -- a crude oil exporter -- is a net importer of natural gas despite having sizable resources. Pemex has set a goal to increase output enough to halve gas im-ports, possibly as soon as this year.

Natural gas and electricity prices in the United States have been dropping recently, tracking oil prices and falling demand because of the financial crisis.

Chevron weighs shutting Hawaii refinery

HOUSTON, May 14 (Reuters) - Chevron Corp is consid-ering halting production at its 54,000 barrel per day (bpd) refinery in Honolulu, Hawaii, but plans to con-tinue supplying fuel to the island state, the company said on Thursday.

"Chevron is conducting an internal study to assess op-tions for its refinery in Hawaii," company spokesman Lloyd Avram said in a statement.

"The study is a normal part of our ongoing, global asset review process," Avram said. "We are undertaking the study because the refining industry continues to un-dergo significant changes driven by a variety of factors, including regulations and global market trends."

U.S. Gulf gas hydrate find most promising yet -DOE

HOUSTON, May 14 (Reuters) - A U.S. research team has found the most promising natural gas hydrate deposits yet under the U.S. Gulf of Mexico, improving chances the ice-like formations will become a major energy source, scientists said on Thursday.

"It's very encouraging. We consider this expedition a major shift in our understanding," said Timothy Collett of the U.S. Geological Survey, a leader of the research effort.

"What's unique about the Gulf of Mexico accumula-tions identified is this. It's the first time we've seen highly concentrated hydrates in conventional sand res-ervoirs that could be commercially producible," Collett said.

UBS sees POSCO cutting steel price again in Q3

SEOUL, May 15 (Reuters) - UBS expects South Korea's POSCO to lower steel prices again in the third quarter following its earlier-than-expected price reduction an-nounced on Thursday to further reflect falling raw ma-terial costs.

POSCO, which had refused to cut prices until negotia-tions over raw material imports were settled due to the impact of its move on earnings, unexpectedly cut its domestic steel prices by up to 20 percent, its biggest ever reduction, to narrow a widening price gap with cheaper imports.

Prior to the cut, POSCO products cost over $100 a tonne more than imported steel, and they are still quoted higher than Chinese and Japanese imports even after Thursday's reductions.

US senators drop objections to Obama's CFTC nominee

WASHINGTON, May 14 (Reuters) - Two U.S. senators dropped their objections on Thursday to Gary Gensler becoming chairman of the Commodity Futures Trading Commission, clearing the way for a Senate vote on his long-delayed nomination.

Democratic leaders were likely to move swiftly to con-firm Gensler, who was nominated by President Barack Obama on Dec. 18 to head an agency that will play a key role in administration efforts to tighten financial regula-tion. In the Senate, individual lawmakers may place holds on administration nominees. Gensler, who was U.S. undersecretary of the Treasury from 1999 to 2001 and assistant secretary of the Treasury from 1997 to 1999, had been blocked for months by senators Bernie Sanders and Maria Cantwell.

Canada to help pulp firms in tax credit fight

VANCOUVER, British Columbia, May 14 (Reuters) - Ot-tawa will help Canadian pulp pro-ducers struggling with a U.S. tax windfall awarded their American rivals, but has not decided yet what form the aid will take, Natural Re-sources Minister Lisa Raitt said on

Thursday.

Canada also expects the White House will try to end the "black liquor" tax credit for U.S. producers in October, three months earlier than scheduled. But Raitt said Con-gress might fight that and try to extend it into next year.

She said details of the Canadian response were still be-ing worked out, but stressed it would not mirror the U.S. program.



MONTH AHEAD EVENTS CALENDAR

Date GMT Events/Indicator Location Energy

Monday, May 18 Thermal Industry Middle East 2009 (to May 20). Sharjah Tuesday, May 19 NYMEX June Light Sweet Crude Oil futures contract expiry. New York Tuesday, May 19 GasMart 2009 (to May 21). Chicago Tuesday, May 19 2030 A.P.I. issues weekly national petroleum report Washington Wednesday, May 20 Santa Barbara Summit on Energy Efficiency (to May 21) Santa Barbara, CA

Wednesday, May 20 Substitute Natural Gas (SNG) 2009 : Developing Supplemental Substi-tute Natural Gas Supplies Conference. Houston, TX

Wednesday, May 20 1430 E.I.A. issues weekly petroleum stocks and output data Washington

Thursday, May 21 U.S. National Oceanic and Atmospheric Administration (NOAA) issues 2009 Atlantic Hurricane Forecast. Washington

Thursday, May 21 Turkey Energy and Infrastructure Finance Conference (to May 22). Istanbul Thursday, May 21 1430 E.I.A issues weekly U.S. underground natgas stocks Washington

Friday, May 22 0040 China's General Administration of Customs will release detailed trade data for commodities and energy for April 2009 Beijing

Sunday, May 24 G7 Energy ministers meeting (to May 25). Rome Monday, May 25 WSI Corporation updates 2009 Atlantic tropical season Forecast. Andover, MA Tuesday, May 26 6th African Petroleum Week 2009 (to May 28). London Wednesday, May 27 NYMEX June natural gas futures contract expiry. New York Wednesday, May 27 The 9th Annual CIS Oil and Gas Summit (to May 29). Paris Wednesday, May 27 6th African Petroleum Frontiers Conference (to May 28). London

Thursday, May 28 Organisation of the Petroleum Exporting Countries (OPEC) ministerial meeting. Vienna

Thursday, May 28 EU Nuclear Forum 2009 (to May 29). Prague

Tuesday, Jun 02 Colorado State University updates 2009 Atlantic Seasonal Hurricane Forecast. Fort Collins, CO.

Wednesday, Jun 03 Energy Trading Central and South Eastern Europe 2009 (to June 4). Budapest Thursday, Jun 04 Tropical Storm Risk updates 2009 Atlantic Hurricane Activity Forecast. London

Agriculture Monday, May 18 The World Agricultural Forum's Sixth Biennial World Congress (to May 20). St. Louis, MO.

Wednesday, May 20 1000 South African Grain Information Service (SAGIS) monthly bulletin with latest grain stocks and exports data Pretoria

Thrusday, May 21 1230 National Weather Service issues 30-Day Weather Forecast for June Washington Friday, May 22 1900 USDA issues monthly Cattle on Feed, Cold Storage Washington Monday, May 25 Africa-Arab Agro-Investment Summit (to May 27). Zanzibar Monday, May 25 1230 Statistics Canada releases 2006, 2007 and 2008 farm income Ottawa

Metals

Friday, May 22 0040 China's General Administration of Customs will release detailed trade data for commodities and energy for April 2009 Beijing

Monday, June 01 Coaltrans Asia (to June 3). Bali, Indonesia Tuesday, June 02 World Mining Investment Congress (to June 4). London

Macroeconomic

Friday, May 15 European Bank for Reconstruction and Development annual meeting (to May 16) London

Friday, May 15 1300 Treasury International Capital report Washington Tuesday, May 19 0130 Minutes of Monetary Policy Meeting of Reserve Bank Board Sydney Tuesday, May 19 Annual meeting of European Finance Convention (to May 20) Cascais, Portugal

Wednesday, May 20 Bank of England (BoE) to publish minutes of May 6-7 Monetary Policy Committee (MPC) meeting. London

Wednesday, May 20 ECB Governing Council meeting Frankfurt Wednesday, May 20 1800 Federal Reserve issues minutes from its meeting of April 28-29 Washington

Key: Meetings/Conferences; Data/Reports; Expiry of contracts

http://gasmart.com/gasmart2009/index.html

http://www.noaa.gov/

http://www.energytradingcsee.com/Default/Home_4261.aspx



US Gulf may see pop-up storms - Accuweather By Erwin Seba

HOUSTON, May 14 (Reuters) - The Gulf of Mexico may see intense, rapidly developing hurricanes during the 2009 At-lantic hurricane season that appear to pop up without warning, said AccuWeather Chief Hurricane and Long-Range Forecaster Joe Bastardi on Thursday.

"We're not going to see the long-term classic storms crossing the Atlantic and the Caribbean like we saw in 2008," Bastardi told Reuters. "We may see rapidly develop-ing storms like (hurricanes) Humberto and Alicia."

Hurricane Humberto popped up off Port Arthur, Texas, in 2007 before coming ashore to knock out electrical power to three refineries. Hurricane Alicia in 1983 was the last hurricane to hit Houston before 2009's Hurricane Ike.

Offshore production in the Gulf of Mexico provides a quar-ter of U.S. oil and 15 percent of the nation's natural gas. Onshore, 43 percent of U.S. refining capacity stretches from Corpus Christi, Texas, to Pascagoula, Mississippi.

Bastardi also said AccuWeather may cut the number of tropical storms forecast to form in the 2009 hurricane sea-son, which begins June 1, from a prediction of 10 made on Thursday morning.

"I may even drop that a bit further," he said.

The conditions reducing the overall number of storms con-tribute to increased risk of rapid development close to the Gulf Coast.

Bastardi said an El Nino pattern of warm water in the Pa-cific Ocean is forming. An El Nino creates wind shear that can blow apart tropical storms in the Atlantic and Gulf.

Also, sea waters in the tropical Atlantic off the west African coast are cooler than last year, when 16 tropical storms formed, including eight hurricanes, four of which impacted the U.S. coast.

High pressure in Africa is blowing dry air and dust into the tropical Atlantic, which further inhibits storm development.

This year, however, high winds in the stratosphere favor rapid development off the Gulf Coast, he said.

"We're not talking long-developing African waves," Bas-tardi said. "We're talking about in-close development. That's what I'm concerned about."

Commodity trend funds need end to mkt volatil-ity By Barani Krishnan

NEW YORK, May 14 (Reuters) - A steady economic re-bound that sparks a big rally in commodities and stocks, or a deeper recession that pushes prices further down, is what trend-following commodity hedge funds need to reprise last year's heady run.

These funds thrived through most of 2008, buying oil, met-als, grains and equities as they rose and selling them as they plunged. They have not done well lately due to volatil-ity in markets they trade in, including currencies and bonds.

But the so-called Commodity Trading Advisors, or CTAs, could have big gains again this year if global economic re-covery strengthens and financial and raw materials markets start surging again.

They could profit handsomely too if markets trend sharply the other way, if investors are unconvinced the recession has hit bottom.

"I think commodities could start to trend here...some of the indicators I'm watching are pointing in that direction," said Mark Melin, who oversees CTA programs for clients of Chi-cago broker Alaron Trading.

"I have not recommended to our clients that we move into trend-following programs at this time. But I'm keeping an eye on the trend followers because I think the second half of 2009 could be a big year for them," said Melin, who is also writing a book on CTAs.

Prices of various commodities, including oil, copper, soy-beans, sugar and cocoa have bounced to multi-month highs from last year's recession lows. But the rebound has not been even, with on-off economic worries leading to intermitten selloffs in those markets.

Likewise, U.S. stocks have shown encouraging signs of re-covery but are still down about 5 percent from last year.

"The trend followers get their bang for the buck when a market takes off and continues moving in one direction," Melin said. "When a market is moving sideways, they get mixed signals to buy or sell and ultimately, the market can move against them and they take losses. That's typically how it works."

Investors in CTAs lost more than 2 percent on the average in the first four months of this year, versus the average gain of 14 percent for the whole 2008, data compiled by Bar-clayHedge, an industry database, shows.

Investors in hedge funds have done better.

The average hedge fund returned more than 5 percent year-to-date, after being down more than 20 percent last year as the credit crisis unfolded, BarclayHedge numbers show.

Hedge funds are loosely policed and can trade in any type of market or strategy. The highly regulated CTAs operate only on financial and commodity futures exchanges, and are alternatively known as managed futures firms.

Another difference between the two is that hedge funds usually employ discretion in their search for alpha, or ex-traordinary gains, and will not be long, or bullish, on two markets at the same time if their fundamentals clash. CTAs, in contrast, can be simultaneously long on bonds and com-modities if their computer-plotted trading models tell them to.

Such a fundamentals-free approach, and use of little bor-rowed money except for client funds, helped CTAs miss few market moves in 2008. Some returned as much as 60 per-cent to investors. Dozens of hedge funds went bust, bridled by market fundamentals and the financial crisis which im-peded their heavily geared operations.





But CTAs remain a small part of the hedge fund universe, accounting for only about 5 percent of the $1.3 trillion managed by the industry.

Analysts say this is because the early in-roads hedge funds had made with investors have yet to be conquered by CTAs.

Celent, an international consultancy, said in a recent report that CTAs also need to constantly upgrade their computer-trading models.

"Viable technologies need to be developed to accomodate alternative trading systems," the company said.

Those in the business say they aware of the challenges.

"We're working with people to make sure they understand our strategy and that it has some volatility," said Paul Wigdor, president at Superfund US, a managed futures firm in New York.

Superfund had its third negative month in April and one of its two flagship funds is down almost 27 percent year-to-date.

But Wigdor says the declines aren't worrying as the fund returned about 46 percent in 2008 despite losing 21 per-cent between July and August.

"Drawdowns are normal with trend-following strategies. Our average drawdown period is three months and our av-erage recovery is five months. Since 1996, we've had 14 drawndowns of greater than 10 percent and we've bounced back with 22 percent returns six months after that," Wigdor said.

Despite the equity and commodity markets seeming in bet-ter shape now than six months ago, Superfund is still "short", or betting on lower prices, in some energy, metals, grains contracts as well as stocks.

"We have certainly been reducing our positions as the mar-ket has moved against us," Wigdor said. "If you believe in our strategy, now is a great entry point."

U.S. steelmakers fear burden in climate rules By Steve James

NEW YORK, May 14 (Reuters) - U.S. steel companies are not too happy with President Barack Obama these days.

Industry executives say that in the last 15 years, they have cut their carbon dioxide emissions by one-third. But now, they think the president's cap-and-trade rules, currently in Congress, would punish them for doing what they feel they have already done -- cut pollution.

And they argue that the industry, recognized by the Envi-ronmental Protection Agency for making big strides in cut-ting emissions, is being lumped in with utilities and other heavy industries, which pump out much more pollution.

"Cap and trade? We have not seen one (proposal) we can support right now," said Tom Gibson, president and chief executive of the American Iron and Steel Institute (AISI), a steel industry trade and lobbying group.

"If a cap-and-trade bill addresses competition issues, we might support it."

Under Obama's plan, a company's carbon dioxide emis-sions would be capped. Companies that emit more than the limit would have to buy emissions credits from companies that emit less.

Ward Timken Jr, chairman of Timken Co, which makes spe-cialty steel and industrial bearings, is a vocal opponent of the proposed legislation and has warned politicians to take their time to consider the implications.

"The national policy of cap-and-trade has serious implica-tions for the competitiveness of American manufacturing and I urge Washington legislators to pause in the rush to approve cap-and-trade," he said.

AISI spokeswoman Nancy Gravatt said steelmaking contrib-utes a "relatively modest" portion -- just more than 1 per-cent -- of U.S. carbon dioxide emissions, while transporta-tion and power plants pump much more CO2 into the at-mosphere.

According to data from the Environmental Protection Agency (EPA), iron and steel production emitted 51.3 bil-lion kilograms of carbon dioxide in 2007 -- down from 87.2 billion in 1990. By comparison, electricity generation emit-ted 2.39 trillion kilos in 2007 and vehicle exhaust was 1.89 trillion.

'FEAR OF COMPETITIVE HARM'

Indeed, the EPA acknowledged the steel industry's im-provements when it released its recent data showing an increase in emissions by other industries, such as cement, waste incineration and lime production.

"Despite rising production and product values in the steel industry ... emissions dropped as a result of new steel plant technologies and greater operational and control efficien-cies," said Tom Tyler, EPA's sector leader for iron and steel.

American steelmakers and legislators might look across the pond, where the European Union dealt with this issue last year and is pressing ahead with cap-and-trade while par-tially exempting steelmakers from the costs from 2012.

European steelmakers actually received more than $1 bil-lion of unneeded carbon permits last year under the EU's Emissions Trading Scheme. The permits can either be sold by steelmakers or saved to allow them to pump out more carbon dioxide in future years.

"Steelmakers received a third more permits than they emit-ted," said New Carbon Finance analyst Olivier Lejeune.

Details of the U.S. system are still being worked out, but the measure would give away a large portion of the permits. Obama wanted all the emissions permits sold, generating billions of dollars, but some Democrats fear that selling all the permits would be too burdensome on utilities and heavy industry that are big carbon emitters.

Despite manufacturers' claims they will be hard-hit by cap-and-trade, a recent analysis by the nonprofit, independent Pew Center on Global Climate Change said energy-intensive manufacturers are likely to face only modest impact.

"The analysis shows clearly that, at the price level studied, the potential impacts are very modest and very manage-able," said Pew Center President Eileen Claussen.





The analysis used data based on the relationship between energy prices and U.S. production and consumption.

Prices for carbon emission credits have not been set, but the EPA estimates $13 to $17 per ton and congressional pricing models use the average of $15. On that basis, the Pew survey concluded there would be an average produc-tion decline of 1.3 percent for U.S. manufacturing, with a drop in consumption of 0.6 percent, resulting in a shift in production overseas, or a "competitiveness factor," of 0.7 percent.

For the iron and steel industry, the competitiveness impact would be 0.8 percent, the Pew report shows.

But AISI's Gibson blasted the Pew report as "flawed," say-ing it underestimates the competitiveness impact based on data accumulated from 1986 to 1994 -- most of that period happening before the industry boomed on Chinese-led eco-nomic growth and building.

"The steel industry today is fundamentally different in structure, operations and energy use," he said, noting that prior to the economic downturn last September, steel was a hot industry with demand and prices soaring.

Elliot Diringer, the Pew climate center's vice president for international strategies, acknowledged that full data was available only up to 1994. But he argued if the steel indus-try was more efficient now, as it claims, then the competi-tive impact would be even milder than Pew estimates.

UNION SUPPORT

Although the steelmakers oppose current proposals, their workers' union favors them.

"We support cap-and-trade. (But) there are two big issues over and above the broad principles," said United Steel-workers Union spokesman Gary Hubbard. "One is borders. How do you set standards for countries and enforce them?"

The other issue is how to make allocations for steel, based on a carbon footprint, when half the steelmakers don't use coal to make steel.

OPEC may keep output steady if oil stays firm-Iraq By John Irish

AMMAN, May 14 (Reuters) - OPEC could decide to keep production levels unchanged when it meets in Vienna on May 28, provided that oil prices maintain their firmer trend, Iraq's oil minister said on Thursday.

Oil prices have recovered from a low of $32.40 in Decem-ber to a six-month high just above $60 this week -- still below the roughly $70 a barrel many developers of new oil production and the Iraq oil minister ultimately consider necessary.

"If the trend continues and prices improve a bit further, then perhaps OPEC will keep...the current production level," Hussain al-Shahristani said in an interview.

"On the other hand, if they feel there is morecrude in the market to absorb, then OPEC will have to look at other op-tions."

U.S. inventories are near their highest for around 19 years. In addition, an estimated more than 100 million barrels of oil and refined products are held in floating storage.

Demand has dropped compared with last year.

Shahristani said he was worried about the quantity of sur-plus oil. "If the trend continues, there is no point produc-ing ... It would be best to keep it in the ground."

At the Organization of the Petroleum Exporting Countries' last meeting in March, oil stocks were already high and de-mand was weak, but the group said it would limit its action to compliance with existing output levels.

Refraining from a deeper cut to curb supply and drive up the price, it said it would settle for cheaper oil, then just below $50 a barrel, to help nurse the world economy back to health.

Those developing new oil production have cited between $70 and $80 as a good investment price and Shahristani agreed at least $70 a barrel was necessary.

Iraq has other pressing reasons for needing prices above current levels and Shahristani said it would have to use for-eign currency reserves and soft loans unless oil prices rose.

KURDISH EXPORTS

Iraq's Oil Ministry said last week it would finally begin ex-ports from Kurdistan's Tawke and Taq Taq fields, the first official sales from promising fields that officials say may hold at least 40 billion barrels of oil.

Masoud Barzani, president of the largely autonomous Kurd-ish region, on Wednesday hailed the move as a step to-wards resolving a standoff over a vital new energy law for Iraq.

The Shi'ite Arab-led government in Baghdad has barred foreign firms that have signed deals with Kurdistan from pursuing oil deals elsewhere in Iraq and from buying Iraqi oil.

An end to the impasse over national oil and gas laws, which would set out rules for investing in Iraq and decide how to share out revenues, would be a boon as the country seeks to boost output and repair decades of sanctions, war and neglect.

Shahristani said Baghdad's policy remains unchanged.

"The policy at the ministry has been that any oil should be handed over to the Ministry of Oil to be exported and the revenues to be distributed to the Ministry of Finance," he said, adding the revenues would go the Development Fund of Iraq.

The oil legislation was stalled for over three years in parlia-ment; making oil sector investors nervous about sinking billions in Iraq and deterring investment in other sectors.

Shahristani said it was still with parliamentarians.

"Now the KRG (Kurdistan Regional Government) has con-ceded to hand over the crude...however the contracts which have been signed with companies have not been rec-ognised...by the government of Iraq and we will not com-pensate those firms."





Still unclear is how Kurdistan plans to reimburse companies operating in the region, such as DNO and Addax, but Shahristani said 17 percent of the 2009 budget would be allocated to the KRG after deduction of sovereign expendi-ture.

"From these funds they can compensate," he said.

Shahristani said Iraq aimed to award the contract to de-velop its Nassiriya oilfield next month. "For Nassiriya we have asked three companies to submit offers ... we have analysed them and are inviting the companies to discuss their offers."

Iraq has been studying bids from Japan's Nippon Oil, Italy's Eni and Spain's Repsol.

"Our plan is to finish negotiations and sign the contract next month," he said, adding new tenders would come out once the deal was signed.

Aluminium LME stocks may reach 5 mln T on re-cession By Karen Norton and Michael Taylor

LONDON, May 14 (Reuters) - Aluminium stocks in London Metal Exchange (LME) warehouses will soon reach an un-precedented 4.0 million tonnes and could even climb to 5.0 million this year before demand picks up enough to start to chip away at them.

LME stocks began their near-vertical ascent last September, almost doubling to 2.3 million tonnes by the end of 2008 and have climbed another 70 percent since then.

LME aluminium inventories were at an all-time high of almost 3.89 million tonnes on Thursday.

"Five million tonnes is not out of the question," said Eugen Weinberg, commodities analyst at Commerzbank in Frankfurt.

By February, resurgent stocks had pushed aluminium prices to seven-year lows below $1,300 a tonne. Some analysts and traders predict they could surpass that and fall to $1,200 a tonne if China, which has been stockpil-ing metal, turns to seller.

Some analysts think stocks will peak around 4-1/2 million tonnes but even then they do not expect big drawdowns for some time after that unless producers make more cut-backs.

"If we see production cuts of another two million tonnes, or 5 percent of additional capacity, we could see a much quicker turn in inventories, but there's no sign of that at the moment," said Andrew Keen of Bernstein Research.

Crumbling demand from the key car and construction sec-tors due to the global financial crisis have played a big part.

Others see prices dipping over the northern hemisphere summer but rising again as consumption levels improve,

albeit from very weak levels.

At 1335 GMT the LME three-months price was indicated at $1,507/17 a tonne.

Market players have become accustomed to regular, almost daily LME stock rises. They are more concerned by the need for producers to make extra cuts, especially as China re-starts capacity.

"Four million tonnes (of LME stocks) is no more alarming than 3 million was," said Edward Meir, senior analyst at MF Global. "But it shows you that producers are still behind the curve, they are still not cutting it enough."

"Outside China, production cuts to date amount to 3.1 mil-lion tonnes, while in China restarts of capacity brought down the amount of curtailed capacity to 2.5 million ton-nes," said Massimo Rossi, a senior analyst at industry con-sultants CRU Group.

CRU estimates that around 1 million tonnes of capacity restarted in China in April.

Stockpiling of the metal in top consumer China could also act as a long-term drag on prices.

Purchases by the China State Reserves Bureau and provi-sional governments, in some cases from high-cost produc-ers, has prevented much-needed closures and this has put the onus on western producers to act.

But higher prices are deterring further sizeable output curbs for now.

OVERSUPPLIED

Highlighting the size of the problem the market faces, Rossi said the closely watched stocks to consumption ratio is

above 100 days on a western basis.

Normally 45-50 days is consid-ered a well-supplied market.

Some analysts estimate global offtake plunged by up to one quarter in the first quarter and predict a double digit decline for the year as a whole.

Aluminium's cause has not been helped by the placement on war-rant of a huge amount of mate-rial previously tied up in deals

which no longer made financial sense.

The fact that this metal became visible as demand was slumping helped to weigh heavily on sentiment.

That trend appears to have more or less run its course.

Referring to the fact that LME stocks could reach 5.0 mil-lion tonnes, Weinberg said that, at current prices, they would have a value of around $7-7.5 billion.

Though a big number when compared with the past, he said it was relatively small when considering planned infra-structure packages and potential spending on aluminium-intensive projects.



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But it will be some time before the benefits are felt.

A fourth quarter improvement in consumption was wishful thinking, according to a trader.

"I'm sure you'll see it better than now, but that's not hard," he said. "We're very busy in China, but if you take that out of the picture, we are completely under-whelmed and there's nothing going on of any consequence."

Polish refiners see better results after Q1 losses By Patryk Wasilewski and Pawel Bernat

WARSAW, May 14 (Reuters) - Poland's two refiners PKN Orlen and Lotos expect an improvement in the second quarter thanks to the recovering zloty and oil prices after posting second consecutive quarterly losses on Thursday.

Both state-controlled companies saw operating margins deteriorate in the first quarter from a year ago and the weaker Polish currency zloty weighed on their financial costs.

Lotos shares were especially hard hit, losing as much as 5.2 percent after it reported a wider than expected net loss of 659 million zlotys. PKN lost 1.1 billion zlotys, roughly in line with forecasts and its shares edged up 0.8 percent.

Both had posted large losses in the fourth quarter, pushing them into the red for all of 2008.

"Conditions change, but assuming an oil price and zloty levels similar to the ones we see now... we should have an operating profit in the second quarter," PKN Chief Financial Officer Slawomir Jedrzejczyk said.

But he added the figure will be worse than a year-ago when PKN posted record-high earnings thanks to surging oil prices.

Mariusz Machajewski, his counterpart at Lotos, said he ex-pected its operating profit in the second quarter to surpass the 1 million zlotys reported in the first three months.

"Operating profit's low quality at Lotos is a disappointment. It was most likely caused by the maintenance," DI BRE ana-lyst Kamil Kliszcz said.

Lotos booked 612 million zlotys in financial costs related to its dollar-denominated loans. PKN's financial costs caused by the weaker zloty reached 842 million zlotys.

PKN and Lotos were also hit by lower refining margins, and lower difference between price of Ural crude oil and Brent oil. PKN was also forced to book losses on the reduced valuation of its required oil reserves.

PKN's Czech arm Unipetrol posted a forecast beating oper-ating loss, but it sounded a more pessimistic note than the two Polish companies, warning the sector would not re-cover until 2011.

Unipetrol plans to reduce costs and investments totalling around 2 billion crowns in 2009. It plans to cut its work-force by 8 percent.

Crackdown a boon for exchanges, bane for deal-ers By Jonathan Spicer

NEW YORK, May 13 (Reuters) - The Obama administra-tion's plan to regulate over-the-counter derivatives, an-nounced on Wednesday, could help exchanges and hurt the dealers who have fought hard to keep the opaque mar-ket private.

The U.S. plan expands growth horizons for exchange opera-tors, particularly those with clearinghouses, which have scrambled over the last eight months to take advantage of new OTC business amid the credit crisis.

So far the exchanges have targeted credit default swaps, or CDS, which regulators quickly identified as problematic.

But Treasury Secretary Timothy Geithner said Wednesday the government will require that "all standardized" OTC contracts run through a central counterparty, or clearing-house. The plan will also push more standardized OTC de-rivatives trading onto the regulated and transparent ex-changes.

Analysts said Chicago-based derivatives exchange CME Group Inc and smaller peer IntercontinentalExchange Inc, of Atlanta, are poised to benefit because they already own and operate U.S. clearinghouses.

CME shares jumped 6 percent on Wednesday, while ICE edged marginally higher. Meanwhile, derivatives dealers could suffer as the customized contracts they have special-ized in are forced into a standardized straight jacket.

"Clearly, there could be a loss of profit for someone like a Goldman Sachs," said James Ellman, president of Seacliff Capital, a San Francisco-based hedge fund focusing on fi-nancial firms. "The exchanges have been trying to get this business to go electronic for a while."

About $193.6 trillion in U.S. OTC derivatives trades OTC, while $6.8 trillion trades on-exchange. CME and, more re-cently, Nasdaq OMX have tried with limited success to clear interest rate swaps, by far the biggest OTC product.

Derivatives, instruments that derive their value from other assets, have been an important revenue stream for broker-dealers that have so far battled successfully to keep the market private. They can make money from trading the se-curities or arranging their sale to institutional clients.

"The spreads were just too good," Marc Groz, managing member of risk management advisory firm Topos LLC, said of dealers' hold on derivatives. "If you could keep all the information to yourself, there were healthy profits."

But now the government wants to drag the shadow market into the light, proposing a "robust regime of prudential supervision and regulation" for dealers in an effort to pro-tect capital markets from a repeat of the current crisis.

"It's not only a push on clearing, but also on central mar-ketplaces and electronic trading, and that's incrementally favorable for exchanges," said Edward Ditmire, analyst at Fox-Pitt Kelton.





While ICE has handled an increasing amount of CDS since it began clearing the default-insurance contracts in March, CME, which also wants to trade CDS, has yet to launch its CDS clearinghouse.

"Maybe this is something that proportionally helps CME because CME hasn't been getting a lot of traction," Ditmire said. "They (CME) seem like someone who could benefit from a stronger government push."

CME shares closed up $15.62 at $274.10, and ICE added 9 cents to $96.59. Analysts said the shares may have reacted to media reports ahead of the government's plan, an-nounced after the close of U.S. markets.

In an email, a CME spokesman said: "We need to look at the technical details of the plan before we can assess the im-pact." An ICE spokeswoman had no comment.

NYSE Euronext, which runs the New York Stock Exchange and has a CDS clearer in Europe, said in a statement it looks forward "to an expansion of this dialogue to other global regulators."

The administration's move is part of a wider push to re-vamp rules for banks and financial markets, in response to the mortgage market-inspired credit crisis.

"You can almost see potentially how it has a ripple effect because it really puts a kibosh on risk taking," said John Jay, senior analyst at consultancy Aite Group.

"It puts a kibosh on innovation, and you're not letting the private sector go where it wants to go."

Close to 150 mln barrels oil, products stored at sea TOKYO, May 14 (Reuters) - Oil companies are storing close to 150 million barrels of crude oil and petroleum products at sea, a leading shipbroker said on Thursday.

An oil market structure known as contango -- when oil for prompt delivery is cheaper than oil for later delivery -- has made it profitable to buy oil for storage.

"Our view is that there is something like just over 100 mil-lion barrels of crude oil and probably something like 30 to 40 million barrels of (petroleum) products," said Steve Christy, head of research at E A Gibson Shipbrokers.

The forecast for refined products was above some other industry estimates.

Weaker freight rates, helped by an oversupply of vessels in the global economic downturn, have also meant oil compa-nies have resorted to leasing ships to store oil.

Christy said the increase in ships being used for storage had yet to affect the market for Very Large Crude Carriers (VLCCs), but it would likely boost the market in the short term as contango provides an incentive for traders to buy now and sell later.

But he was bearish on the long-term impact of the trading play for shipping companies.

"Ultimately contango doesn't last forever, so it does have to end at some point," he said.

Trading firms and oil companies look set to rake in bumper profits this year by taking advantage of the cheap freight to float storage in the physical oil markets.

Singapore keeps faith in self-regulating oil mar-kets By Ramthan Hussain

SINGAPORE, May 14 (Reuters) - As regulators in the world's top oil trading hubs move to tighten rules and boost transparency in opaque markets, Singapore may gain importance and liquidity as it stands by its pledge to let industry regulate itself.

U.S. President Barack Obama's administration moved on Wednesday to exert more control on over-the-counter (OTC) derivatives markets, proposing measures that could deter some of the oil sector's more lucrative trading prac-tices, such as taking bigger or strategic positions in less liquid markets.

But neither those plans nor a tepid call by Asian and Middle East energy officials for more oversight are likely to shake Singapore's trust in free markets.

Coupled with newly planned oil futures contracts and more OTC swaps clearing mechanisms, the lure of a more lightly regulated physical market could heighten the city-state's draw for investment banks, traders and oil companies who are betting that commodity trade will remain a bright spot, recession or no.

"To the extent that Singapore authorities seek to encour-age liquidity by maintaining open access to the market and supporting clearing mechanisms, we believe this to be a positive step in enhancing the country's position as a com-modity trading hub," said a senior trader with European oil trading firm Trafigura.

Singapore officials say they see little use in following the United States in imposing sterner rules to check specula-tion and volatility, measures meant in part to assuage fears over investment funds' sway on prices when oil spiked last summer.

"In today's economic climate, there is a tendency to over-regulate market behaviour to gain short-term stability," said Chong Lit Cheong, Chief Executive of International Enter-prise (IE), the state agency that manages the oil and com-modities markets in Singapore.

"However, this may not be desirable in the mid- to long term," he told Reuters via email last month.

To an extent this approach reflects an acknowledgement that it would be hard to control a market in which much of the actual trade takes place well beyond Singapore's bor-ders, although most major industry players base their trad-ing teams here.

The latest measures by U.S. federal regulators include sub-jecting all OTC derivatives dealers -- whose trades are not made via an exchange -- to "a robust regime of prudential supervision and regulation", including conservative capital, reporting and margin requirements.





While the growth of clearing houses that all but eliminate counterparty risk in OTC trades is viewed as a positive by most in the oil industry, many traders fret that related ef-forts to boost supervision and tightening up position limits could backfire by curtailing liquidity.

"We believe such actions to restrict trade weaken true price discovery," said the trader from Trafigura, refuting views that limiting the size of positions each company can take, or excluding firms that mainly deal in derivatives, would curb speculation and enhance price le-gitimacy.

CRACKED DOWN BEFORE

The trend is not entirely new: U.S. authorities cracked down on power and gas trade after the California and Enron crises, and on oil trade following sporadic leveraged trad-ing plays in which companies would effectively corner the market in benchmark crude.

While trading practices tamed significantly as regulators began scrutinising these practices, trade in Singapore has continued much as usual, with regular but not high-profile binges or trade strategies that might raise eyebrows in the West.

Reflecting the relatively more moderate views in Asia, Asian consumers nations and Middle East oil producers mustered only a mildly worded call for "further harmonised actions such as (the) introduction of position limits" at their bien-nial meeting in April, despite speculation being a topic of much debate.

Not that Singapore traders are free from trade limits after last autumn's credit crisis drove large volumes of previously bilateral OTC swaps trade onto clearing houses, which IE's Chong said are now processing up to 80-90 percent of all OTC oil swap trades, up from just a small fraction a year ago.

"A lot of counterparties are not willing to trade on bilater-als in view of the worldwide credit problems," said a trader with a Japanese trading house.

New York Mercantile Exchange's ClearPort and AsiaClear, both of which take centralised credit risk with the clearing house rather than individual counterparties, impose posi-tion limits.

Activity in Singapore-based OTC contracts on ClearPort surged fourfold from a year ago to over 6,000 contracts a day in March, down from a high of more than 8,000 in Feb-ruary.

If a proposed SGX fuel oil contract takes off later this year, that could raise its share of the clearing business by traders who want to net out positions.

EXCHANGE ENCOURAGEMENT

Greater liquidity with a viable futures contract would help address lingering concerns about oil prices themselves as some regulators take a greater interest in the process of establishing benchmark prices in opaque physical markets.

"Exchanges and clearing houses provide a relatively better regulated environment for mitigating counterparty credit risks. A liquid exchange is also a more transparent pricing mechanism," Chong said.

In its review of market rules, a task force led by the CFTC and UK's Financial Services Authority concluded regulators must also be able to get more information on OTC and physical markets.

The task force under the ambit of the International Organization of Securities Commissions, said it was not even clear the local regulator in some jurisdictions had the author-ity to demand this information, prompting it to consider bringing oil price agencies Platts and Argus within the regulatory framework.

Shrugging this off, Chong said Platts and Argus are driven by self-interest to ensure integrity of their

methodologies and the trading sector will pressure those who try to manipulate prices.

"These have served markets relatively well and we do not see a need to regulate price assessors in Singapore at the moment."

Indonesia 2009 coal output revised down-industry By Fitri Wulandari

JAKARTA, May 14 (Reuters) - Indonesia's coal output this year may be about 9 percent lower than initially expected due to the global crisis, a top industry official said on Thursday, although Chinese and Indian demand should lift exports in the second half.

Indonesia, the world's top thermal coal exporter, is ex-pected to produce about 240 million tonnes of coal this year, slightly up from 238 million tonnes last year, but down on a forecast of 265 million tonnes early this year, said Bob Kamandanu, head of the Indonesia Coal Association.

Coal production in the first quarter fell 1.39 percent to 58.07 million tonnes, compared to 58.90 million tonnes in the same period of 2008.

"There were no cancellation from buyers, but they reduced the shipment volumes," Kamandanu, the association's newly-elected chairman, said in an interview.

"With the situation, production is most likely to hit 240 million tonnes. If demand improves in the second half, it could be much higher but it will not reach 265 million," he said.

Indonesia exported 44.79 million tonnes of coal in the first quarter, down 11.2 percent from 50.49 million tonnes in the January-March period last year, Kamandanu said.

Coal is the cheapest source of thermal energy used in the industrial sector, with the cement and steel industry among the largest buyers.



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But demand has stuttered as the downturn has forced fac-tories from Europe to China to halt production as exports slump.

However, Indonesia's overall coal exports for 2009 should still top the 206 million tonnes shipped in 2008 as coal demand was expected to recover in the second half helped by Chinese and Indian demand, Kamandanu said.

"We see demand from China is picking up and there's more demand from India. I see there will be improvement in the second semester," he said.

Asian coal prices have recovered from a near 6-month low of $58 a tonne in February to hover above $60 in the past two months aided by Chinese demand for coal from Austra-lia and Indonesia.

India's demand for coal is growing by around 8-9 percent a year, outpacing production that is growing by 6 percent as the power sector has not been hit by the credit crunch.

Kamandanu said coal prices were likely to hover between $65-$70 until the end of the year.

"I don't think there will be a significant jump in prices like last year. Players learned a lesson from last year," he said.

Coal prices have fallen from a record peak of $201 a tonne hit in July last year. Thermal coal prices at the globalCOAL Newcastle weekly index stood at $63.46 a tonne late Wednesday.

Despite lower exports in the first quarter, domestic coal demand jumped nearly 60 percent to 13.28 million tonnes, from 8.39 million tonnes in the same period as many do-mestic users had locked in contracts early this year.

"Last year, their stockpiles were nearly empty because rains disrupted production and shipments. So this year, they lock in contracts earlier to avoid that problem," he said.

The association said it planned, by targeting smaller firms, to expand its membership to 100 coal firms from 54 now to boost marketing of Indonesian coal.




Argentina's new wheat crop in doubt despite rains BUENOS AIRES, May 14 (Reuters) - Rains this week in Argentina improved soil moisture in some areas but were not enough to brighten the overall outlook for 2009/10 wheat seedings, a weather specialist said on Thursday.

Argentina is one of the world's top wheat exporters but a prolonged drought devastated the 2008/09 harvest and could hurt new-crop plantings, which have just got-ten started.

El Salvador sees smaller 08/09 coffee crop SAN SALVADOR, May 14 (Reuters) - El Salvador will harvest 1.385 million 60-kg bags of coffee in the 2008/09 season, 8 percent fewer than in the year-ago cycle, said the head of the national council on Thursday.

El Salvador harvested 1.505 million 60-kg bags of coffee in in the 2007/08 coffee year, council head Tomas Bonilla told Reuters.

Spain's wheat crop seen 45 pct down in grainbelt MADRID, May 14 (Reuters) - Spanish farmers in a re-gion which usually produces half the import-needy country's winter grain are expected to harvest 45 per-cent less wheat and 47 percent less barley than last year, official data shows.

A crop progress report from the regional government in northern Castilla-Leon, obtained by Reuters, matched farmers' predictions that production would fall sharply because low prices had discouraged planting and forced farmers to cut back on costly fertiliser.

Analyst cuts Ukraine '09 grain crop forecast KIEV, May 14 (Reuters) - Ukraine's UkrAgroConsult agriculture consultancy cut its 2009 grain crop forecast on Thursday to 38.726 million tonnes from a previous 39.975 million due to poor weather.

The consultancy said in a statement it had reduced crop forecasts for barley, rye, oats, peas, millet and buck-wheat.

Ukraine 2009 rapeseed crop seen down KIEV, May 14 (Reuters) - UkrAgroConsult agriculture consultancy on Thursday cut its 2009 rapeseed crop forecast to 2.2 million tonnes from the previous esti-mate of 2.6 million tonnes.

The consultancy said poor weather could reduce rape-seed yields to 1.54 tonne per hectare from 1.62 tonne a month earlier and compared with 1.79 tonne in 2008.

French analyst cuts EU 2009 grain crop est by 4.5 MT PARIS, May 14 (Reuters) - French analyst Strategie Grains cut its forecast for the European Union's 2009 total grains harvest by 4.5 million tonnes on Thursday to 289.7 million tonnes after dry weather cut yield po-tentials in eastern Europe.

The EU cereals crop, sown on a 3 percent smaller area than in 2008, was now expected to fall 7 percent on the year, the analyst said in a monthly report, stressing that its estimates could vary widely depending on weather in the next weeks.

US projects record soy crop to refresh stockpile WASHINGTON, May 12 (Reuters) - U.S. farmers will grow a record 3.2 billion bushels of soybeans this year, replenishing a stockpile forecast to shrink to a scant two-week supply before the new crop is ready for har-vest, the government projected on Tuesday.

Soybeans are used in livestock rations, as an ingredient in foods ranging from salad dressing to cookies and pies, and to make biodiesel motor fuel.

USDA forecasts record world rice crop for 2009/10 WASHINGTON, May 12 (Reuters) - Global rice produc-tion will hit a record 448.1 million tonnes in 2009/10, up 4.5 million tonnes from the current marketing year, the U.S. Agriculture Department said on Tuesday.

Large crops are projected for most of Asia, and records are projected for Bangladesh, Cambodia, India, Indone-sia, the Philippines and Thailand, the USDA said.

Global 2009/10 rapeseed crop below usage-Oil World HAMBURG, May 12 (Reuters) - The Global 2009/10 rapeseed crop is likely to be below demand compelling stocks to be reduced and supporting prices, Hamburg-based oilseeds analysts Oil World forecast on Tuesday.

It estimates the 2009/10 season global rapeseed har-vest at 55.0 million tonnes from 58.28 million tonnes last season. This would be below estimated 2009/10 world rapeseed demand of 57.70 million tonnes, up from 55.11 million tonnes last season.

Heavy rain threatens Ivorian cocoa mid crop ABIDJAN, May 12 (Reuters) - Persistent heavy rainfall in some Ivorian cocoa growing regions last week, after several weeks of humid conditions, increased the risk of black pod disease outbreaks in cocoa plantations, farm-ers and analysts said on Tuesday.

Black pod disease, which thrives in the wet, blighted the October-March main crop in the world's biggest grower.

WEEKLY NEWS SPOTLIGHT: CROP NEWS

(Compiled by Commodities and Energy team in Bangalore; email:[email protected]; +91 80 6677 3545)



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Documents

Reuters Daily Commodities BriefJapan Apr aluminium stocks fall 12.7 pct on exports TOKYO, May 15 (Reuters) - Japan's aluminium stocks fell in April on the month for the second time