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NLMK Q4 shipments rise despite Russia slump

NLMK’s consolidated finished product sales grew 6% on-year in the fourth quarter of 2016 to 2.25 million tonnes, driven by a 43% surge in long product sales to 539,000t, Kallanish learns from the Russian steelmaker.

Consolidated sales in home markets climbed 3% on-year in Q4 to 2.42mt, despite a -3% dip in Russian sales to 1.36mt due to a seasonal demand decline. NLMK’s international divisions increased sales in their home European and US markets.

Consolidated exports declined -12% in Q4 to 1.21mt, comprising 33% of overall sales, due mainly to the increase in home flat steel sales predominantly by NLMK’s international companies.

NLMK’s Russia Flat division saw hot and cold rolled coil shipments decline -13% and -10% respectively on-year in Q4 to 504,000t and 300,000t. However, hot-dip galvanized and pre-painted galvanized coil sales rose 16% and 33% respectively to 162,000t and 112,000t. Merchant pig iron sales, all of which are exported, slumped -54% to 86,000t.

NLMK’s Russia Long division saw merchant billet and rebar sales grow 20% and 42% respectively on-year in Q4 to 141,000t and 413,000t. Wire rod sales surged over 100% to 58,000t. The growth was driven by exports.

In full-year 2016 NLMK Russia Flat reduced merchant slab sales -13% on-year to 2.61mt, and HDG sales fell -4% to 648,000t. However, HRC, CRC and PPGI sales rose 4%, 2% and 23% respectively to 2.6mt, 1.48mt and 459,000t. Merchant pig iron exports fell -36% to 435,000t.

NLMK Russia Long saw merchant billet sales surge over 100% in 2016 to 612,000t, while sections sales also soared over 100% to 35,000t. Wire rod and rebar deliveries rose 53% and 2% respectively to 176,000t and 1.73mt. The division’s exports surged 228% to 1.1mt.

Meanwhile, NLMK Belgium Holdings, which comprises NLMK Clabecq (Belgium), NLMK Verona (Italy), NLMK La Louvière (Belgium) and NLMK Strasbourg (France), saw sales rise 8% in 2016 to 2.14mt. This was on the back of the recovery in demand in Europe from key sectors such as machine building and automotive, as well as weaker competition from rolled product imports.

Source: Kallanish.com
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China's Shanxi announces 2017 steel capacity cuts

China’s Shanxi province aims to cut 1.7 million tonnes/year of steel and 20m t/y of coal capacity in 2017, according to the local people’s congress. Shanxi is the most important province in terms of coal production in China, but the influence of capacity reductions on coking coal supply this year remains uncertain, Kallanish notes.

So far Chinese central and several local governments have announced 2017 coal and steel capacity elimination goals (See table below). This shows that 30.11m t/y of steelmaking capacity cuts are planned so far. In 2016, China reported cuts totalling far more than the 45m t/y steel capacity elimination goal.

Zie verder de PDF gegevens.

Source: Kallanish.com
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Baowu plans steel production increase in 2017

Baowu Group (formerly Baosteel & Wugang) held its 2017 working conference on 18 January, according to Changjiang Daily. It estimates the group’s annual crude steel production in 2017 could reach 63.16 million tonnes, Kallanish notes.

According to the conference, in 2016 Baowu produced 58.62mt of steel (excluding Kungang), achieving CNY 307.2 billion ($44.88 billion) in business revenue and achieving CNY 7.02 billion in profit. Steel business is the main source of profit increase, with CNY 8.03 billion in profits in 2016.

Following the merger Baowu Group now owns 71% of oriented silicon steel’s capacity, as well as 60% of high-end autosheet capacity. Relatively stable demand and strong negotiating power has thus helped pushed up silicon steel prices in China. Wugang and Baosteel have kept increasing offer prices for related products since November last year.

Baowu says that the group will find it difficult to grow by expanding steel capacity any longer so it aims to build an international company around its steel-centred business. It also plans to build several steel-related businesses with annual revenue over CNY 100 billion and annual profits over CNY 10 bilion. In addition, it also intends to create another batch of companies gaining over CNY 10 billion revenue each year with over CNY 1 billion profits.

Source: Kallanish.com
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Hanggang estimates $106.5 million profit in 2016

Eastern China’s Hangzhou Iron & Steel (Hanggang) has published its 2016 annual performance estimate to the Shanghai Stock Exchange, turning losses into gains. Hanggang has closed down all its steel capacity in Hangzhou and transformed into a company running a steel-centred business covering recycling, environmental protection and online metals trading, as well as steelmaking, Kallanish notes.

Hanggang is the biggest steelmaker in Zhejiang province with 6 million tonnes/year of registered steel capacity in Ningbo. It gained majority control in Ningbo Iron and Steel from Baosteel in 2015 as part of a deal which saw it close its Hangzhou plant.

According to the announcement, Hanggang’s 2016 net profit attributable to shareholders will be around CNY 729 million ($106.5m), compared to last year’s CNY 109 million loss. Hanggang says the recovery was mainly due to the steel price recovery and effective cost cutting.

Since 2005, Hanggang’s non-steel sector profits have outperformed those of its steel business. In 2015, Hanggang's environmental protection business posted CNY 4.913 billion in business income, CNY 90.56m in profit and had CNY 3.44 billion in total assets. 

It established the Zhejiang Provincial Environment Protection Group in October 2016, which will focus on waste processing, waste disposal technology development and operating management. It aims to establish a CNY 10 billion industry fund, complete CNY 10 billion in investment and achieve CNY 10 billion in annual sales income by 2020.

Source: Kallanish.com
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Former Wisco chairman faces corruption charges

Deng Qilin, previously chairman of Wuhan Iron & Steel (Wugang), has been charged with bribery at the Guangdong Foshan Intermediate People's Court, according to Xinhua News Agency. Deng worked in Wugang over 2000-2015, Kallanish notes.

According to the public accusation on 18 January, Deng illegally attained over CNY 55.39 million ($8.09 million) by helping others secure promotion, develop their business and win project contracts. Deng pleaded guilty and repented, and the court announced an adjournment. The verdict will be pronounced at a date to be decided.

The former deputy general manager of Hebei Iron & Steel Wang Hongren was also arrested on 19 January on suspicion of bribery, according to Hebei People's Procuratorate.

Source: Kallanish.com
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Uttam Galva seeks investor to ease debt

Uttam Galva Steels (UGSL) is in preliminary discussions with potential strategic investors in a bid to return to profitability, Kallanish learns from the Indian cold roller and coil coater.

Media reports this week have suggested UGSL is in talks with Aion Capital Partners, a joint venture between Apollo Global Management and ICIC Venture, over a restructuring package for the indebted producer. This would also entail a INR 500-1,000 crore ($73.4 million-146.8 million) injection for working capital requirements, according to reports. In return, Aion would take a controlling stake in UGSL.

UGSL did not confirm the talks, but says: “Since the company is under financial stress, lenders and the company are looking at various options for resolution of debt, including initiating discussions with potential strategic partners/investors as per the direction of lenders. However, to the best of our knowledge all such discussions are at a preliminary stage.”

Last May UGSL declared itself a sick industrial company to the Board for Industrial & Financial Reconstruction after accumulated losses exceeded net worth in the fiscal year through March 2016 (see Kallanish 31 May).
UGSL’s income from operations fell -34% on-year in the six months through September 2016 to INR 2,420.71 crores, while total comprehensive loss deepened -728% to INR 307.34 crores.

According to analysts, UGSL faces pressure from weak operating conditions and its inability to refinance its long-term borrowings according to an earlier proposed refinancing scheme.

UGSL sister company Shree Uttam Steel and Power is reported to be carrying out a feasibility study into the construction of a new 3 million tonnes/year hot strip mill in conjunction with Posco.

Source: Kallanish.com
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Moodys upgrades FMG corporate ratings

Australia’s Fortescue Metals Group (FMG), which analysts had once insisted would imminently be bankrupt, has had its credit rating upgraded by Moody’s, the miner tells Kallanish. This happens after cost cutting, high prices and rapid debt repayment has put the company on a secure footing.
The company notes that the decision has no impact on its debt capital structure. It does mean however that the Fortescue has even greater flexibility in changing that structure as new secured debts hit investment grade.

Moody’s upgraded FMG’s corporate rating from Ba2 to Ba1, its senior secured rating from Ba1 to Baa3, its senior unsecured rating from Ba1 to Ba2 and set a stable outlook for all ratings. “Fortescue has been able to capitalise on higher iron ore prices and utilise the incremental cash flow generated to make sustainable improvements to its balance sheet and debt levels,” the ratings agency explained.

FMG paid down another $1 billion of debt in December, leaving it with just $1.98 billion due in 2019 and $2.64 billion due from 2022. In the twelve months ending June 2017, it expects to see average C1 cash costs of just $12-13/wet metric ton. In 2014 it had debts of close to $10 billion and C1 costs of around $45/wmt.

Source: Kallanish.com
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Turkey's welded pipe exports rise again in November

Turkey's welded pipe imports went up in November, after falling in October, mainly thanks to increased shipments to Europe, Kallanish notes from the latest Turkish Statistical Institute (TUIK) data.

Welded pipe imports in November stood at 137,640 tonnes, up 5.5% year-on-year and 4.9% over October. The total average value/tonne of these imports rose to $601/t from $597/t a year earlier, according to calculations from TUIK data.

Iraq retained its position as Turkey's top welded pipe exports destination as its intake increased 20% on-year to 38,551t. The UK ranked second with a 69% surge in imports to 20,754t. Third was Romania with a 20.4% rise in imports to 11,309t and was closely followed by the US, which procured 10,914t of Turkish welded pipes, down -29% y-o-y.

November's welded pipe exports to France soared to 8,727t from 1,475t a year ago, while those to Germany delcined -15.7% y-o-y to 5,301t. Shipments to Georgia and Greece rose by 14% and 14.3% to 4,847t and 4,750t. 

Exports to Algeria and Israel decreased -59.5% and -11.9% y-o-y to 3,895t and 3,679t. Shipments to the Netherlands surged to 3,715t from 808t, same base, but deliveries to Belgium and Italy went down -29% and -51% to 3,188t and 2,447t.

Shipments to Turkmenistan dropped to 443t in November from 6,264t a year ago.   

Source: Kallanish.com
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Turkey levies additional cast iron pipe import tax

Turkey has implemented a 30% additional customs duty on imports of certain cast iron pipe, Kallanish learns from a notice in the country's Official Gazette.

The products subject to the additional tax fall under HS codes 7303.00.10.00.11, 7303.00.10.00.12, 7303.00.90.00.11, 7303.00.90.00.12, and 7303.00.90.00.19. The regulation is in force from 18 January, which was the day of its announcement in the Official Gazette.

Imports from EU countries and countries that have free trade agreements with Turkey will not be levied with the additional duty.

Turkey's cast iron pipe imports surged 83.6% on-year in January-November to 30,643 tonnes, according to the latest Turkish Statistical Institute (TUIK) data. As much as 78.6% of this volume was supplied by China and Japan.

Procurement from China grew 65.6% to 9,964t in the eleven months, while import from India doubled to 14,128t.

Source: Kallanish.com
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Turkish government bans Asil Celik employees strike

The Turkish government has effectively cancelled a strike planned by employees of alloy steelmaker Asil Celik on the grounds that it would disturb national security, Kallanish learns.

Turkey's Council of Ministers ordered the strike to be deferred by 60 days, according to a notice in the 18 January issue of Turkey's Official Gazette.

"Although legally stated as a postponement, it is known by the public that actually this situation means banning," says United Metalworkers’ Union, the trade union representing Asil Celik's workers.

The strike was planned to start on 18 January, after months of negotiations over the collective labour agreement failed to result in a settlement, the trade union says in a statement.

Interfering with the union's strike organisation harms the trade union movement, the union notes, adding that this tactic has been frequently used by the state in recent years.

Turkey is in a state of emergency since the failed coup attempt on 15 July last year. The state of emergency, initially set to expire on 19 January, was extended by another three more months at the beginning of January after the attack in an Istanbul night club.

Asil Celik has 555,000 tonnes/year EAF-based liquid steel production capacity and 450,000 t/y rolling capacity at its steelworks in Bursa. The steelmaker produces hot rolled, heat treated, fully-conditioned alloyed, non-alloyed and high-alloyed round, square, hexagonal, flat and grader blade steel products. These are used in the automotive, equipment manufacturing, machinery and defence industries.

Source: Kallanish.com
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Iran's South Kaveh Steel achieves record billet exports

South Kaveh Steel (SKS) produced 71,240 tonnes of billet in the month through 20 December, a monthly record, according to the Iranian merchant billet producer. The output was driven by exports of billet, which also hit a monthly record of 60,000t.

In the nine months through 20 December SKS exported 158,000t of billet and 23,000t of direct reduced iron. The firm's first DRI export shipment was dispatched last May, a 10,000t cargo to Malaysia (see Kallanish 26 May). Semis or DRI have since been shipped to Jordan, Malaysia, India, Morocco and Thailand. Overall exports have earned SKS $56.69 million. The firm is aiming to surpass $100m in exports in the Iranian year through 20 March 2017.

SKS is located in the southern port city of Bandar Abbas, on the Persian Gulf, which facilitates exports, especially to the Gulf Cooperation Council which is a short distance across the water.

Last year SKS launched its new 1.2 million tonnes/year electric arc furnace-based merchant 130-200mm square billet plant (see Kallanish 4 February). Work to double capacity is scheduled for completion in March 2017. The firm has two 928,000 t/y capacity DRI units that will soon be fed by an iron ore pelletising plant of 8m t/y, currently under construction.

In the meantime SKS affiliate and iron ore producer East Kaveh Company supplies iron ore pellets. Another affiliate, Kaveh Arvand Steel Company, is a long steelmaker that could source billet from SKS.

Source: Kallanish.com
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Sabic performance improves in Q4

Saudi Arabian giant Sabic’s fourth-quarter-2016 revenue was flat on-year at SAR 34.03 billion ($9.07 billion), while full-year-2016 revenue dropped -10% on-year to SAR 132.98 billion. Net profit in 2016 fell -4.6% to SAR 17.91 billion.

Q4 represented a slight rebound for Sabic after poor results at its Saudi Iron and Steel Company (Hadeed) subsidiary dragged down revenue -14% on-year and net profit -15% on-year in the nine months through September.

Hadeed’s nine-month sales dropped -23% to SAR 6.57 billion, while net loss deepened -170% to SAR 890.36 million (see Kallanish 31 October).

Sabic’s demerger of Hadeed into a separate, fully-owned company is likely to be completed by August this year. The move comes as Hadeed has struggled with a weaker financial performance due to a slump in steel prices and lower local demand resulting from reduced state spending.

Sabic's January-November crude steel output rose 1.3% on-year to 5.02 million tonnes, according to worldsteel data.

Source: Kallanish.com
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Evraz NA looks forward to less bumpy year

Resolved maintenance issues and a more positive pricing environment bode well for Evraz North America in the New Year, Kallanish learns from the company’s quarterly earnings review.

Evraz North America’s 2016 production of crude steel and finished steel products fell -23.7% and -26.2%, respectively, compared with 2015. The company attributes this primarily to a downturn in tube and rail demand and 148 days of downtime due to planned maintence. The company recorded 86 days of downtime in 2015.

“In Q1 2017, the combination of major increases in tubular products orders, marginally higher rail and flat-rolled  products orders, and the absence of major planned outages will likely result in higher volumes and a positive pricing trend,” the company says.

Source: Kallanish.com
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Insteel earnings suffer due to constricted margins

Margin compression bit into US wire producer Insteel’s fiscal first-quarter earnings, Kallanish learns from the company’s earnings review.

Insteel posted a net profit of $4.5 million on sales of $93.9m during the quarter, down from a profit of $6.7m on sales of $92.4m in the equivalent quarter last year.

“Insteel's first-quarter results were unfavorably impacted by narrower spreads between selling prices and raw material costs, which were partially offset by the increase in shipments relative to the prior year quarter,” the company says. “The spread compression was driven by competitive pricing pressures together with the consumption of higher cost inventory purchased in prior periods.”

Ceo H.O. Woltz adds that shipments moving forward should gain strength from increased construction activity.

“Looking ahead to the remainder of fiscal 2017, the most recent macro indicators for our construction end-markets point to continued growth in nonresidential construction and the federal funding provided for under the FAST Act should have a greater impact on the infrastructure-related portion of our business in the coming year,” he says. “We also expect to benefit from lower manufacturing costs through our ongoing process improvement initiatives and the cost reductions associated with the expansion of our Houston PC strand facility."

Source: Kallanish.com
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Samarco,Vale, BHPB enter preliminary agreements with prosecutor.

The joint venture partners in Brazil’s Samarco have reached preliminary deals with the Brazilian Federal Prosecutor to settle a civil claim over the 2015 Samarco tailings dam failure. In notices on their respective websites, Australia’s BHPB and Brazil’s Vale both confirmed the newly-negotiated arrangements, Kallanish notes.

Production at the mine has been halted since November 2015, after a tailings dam burst which killed 19 people and flooded areas in two states in southeast Brazil.

The first preliminary agreement outlines the process and timeline for negotiation of a settlement of the BRL 155 billion ($47.5 billion) civil claim relating to the dam failure.  Final settlement arrangement with the Federal Prosecutors is expected by 30 June 2017 or earlier as established in the initial framework agreement in March 2016.

As agreed, Samarco, Vale and BHP will provide, subject to court approval, total security of BRL 2.2 billion. This is the so-called ‘Interim Security’ and will also stay in place until 30 June 2017 or earlier. If a final settlement arrangement is not agreed by 30 June 2017, the Federal Prosecutors may request reinstatement by the court of the BRL 1.2 billion injunction.

The second preliminary agreement requires the companies to advance $60 million, from the funding obligations under the Framework Agreement to programs for the municipalities affected by the dam failure. These are Barra Longa, Rio Doce, Santa Cruz do Escalvado and Ponte Nova. These funds are to be advanced within 90 days after signing of the preliminary agreement.

Source: Kallanish.com
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CAP inaugurates batch galvanizing plant in Peru

CAP, the parent company of Chilean steelmaker Cap Acero has inaugurated a new batch galvanizing plant at its Tupemesa facility, located in the industrial area in Lurin, Kallanish learns from the company. The investment value represented by the new facility is $10 million, CAP says.

The Tupemesa mill has a galvanizing capacity of 2,000 tonnes/month of product. This will improve its supply of road safety system products, such as crash barriers and guard rails, certified under European Standard 1317, the company says in a statement.

Tupemesa is a part of the CAP group’s Novacero subsidiary, and manufactures steel tube, profiles and related products which it supplies to various user markets in Peru.

Elsewhere, last week the parent company announced the retirement of Roberto de Andraca after 57 years as chairman of the CAP group.  The new president will be elected in April, the company says.
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Uttam Galva Steels up 10% on restructuring package talks

Economic Times reported that shares of debt ridden steelmaker Uttam Galva Steels soared nearly 10% in Thursday’s trade amid news that Aion Capital Partners, which is a joint venture between Apollo Global Management and ICICI Venture is in talks with the promoters and lenders of the company for a comprehensive restructuring package. The package would also entail fresh capital infusion of INR 500 crore to INR 1000 crore for working capital requirements and growth.

Official told ET that upon completion, Aion is set to emerge as the largest controlling shareholder in the listed company.

Following the development, the stock surged 9.74% to hit a high of INR 33.8 on BSE. From highs of INR 172 a share in 2010, the stock has crashed over 80% so far.

Uttam Galva Steels has around INR 5,500 crore of bank debt, while another INR 5,000 crore is spread across other group companies. SBI is the lead in the consortium along with a clutch of banks including, PNB, Canara and Bank of Baroda and others. Of the total promoter holding of 60.87%, Arcelor Mittal still owns around 30% while the rest is held by the Miglani family.

Source : Economic Times
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Iranian buyers prefer domestic flat steel - Report

Financial Tribune reported that Iranian buyers now prefer locally produced flats, as their prices are more competitive compared to those of imported material. A trader told Metal Expert that “When domestic quotes rose, we bought large volumes of imported products. Now the situation has changed and it is no longer profitable to buy from foreign suppliers.”

Besides, the December rial depreciation affected imports Iran bought over the month. Russian steelmaker MMK has reduced prices for HR coils with March shipment by USD 10 to USD 20 per tonne over the month to USD 510 to USD 520 per tonne CFR Anzali.

Another trader said that “ArcelorMittal is ready to ship its material to Iran at USD 510 per tonne FOB, but the local material is now much more popular. So, the producer is selling products to alternative buyers at USD 10 to USD 20 per tonne higher.”

Source : Financial Tribune
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Vedanta makes counter offer to government for HZL

Financial Express reported that after the government sought a whopping Rs 15,000 crore as dividend in 2016-17 from the cash-rich Hindustan Zinc in which it has 29.5% stake, billionaire Anil Agarwal-led Vedanta Resources, the majority owner in the company with management control, has suggested that, instead, the company could buy back a portion of its own shares.

The Centre could raise about Rs 2,200 crore from the buyback, the total size of which is pegged at Rs 7,477 crore, or about 20% of the company’s paid-up capital and free reserves.

Mines secretary Balvinder Kumar, however, told FE that the company is yet to respond, though over a month has gone by since the dividend request was made by the mines ministry orally. He said “The company is yet to respond. However, they have promised us to look into the matter. A discussion on this might happen during the next board meeting of the company.”

The company reported Rs 1,902-crore net profit in the July-September quarter of the current fiscal. For the April-September period, its net profit had stood at Rs 2,939 crore. HZL’s total net profit for the entire 2015-16 fiscal was Rs 8,167 crore. As on September 30, 2016, HZL’s net cash and cash equivalents was to the tune of Rs 25,166 crore. A lion’s share of the reserves has been invested in mutual funds.

Source : Financial Express
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Rio Tinto and Chinalco end joint search for copper deposits in China

Rio Tinto Group and its largest shareholder Aluminum Corp of China have terminated their joint venture established to find copper deposits, as global mining companies tighten exploration budgets. Chinalco Rio Tinto Exploration Co, a joint venture between Rio and Aluminum Corp, also known as Chinalco, was launched in 2011 to seek out deposits in China and had plans to expand its search to coal and potash.

Chinalco said in an statement said that "The joint venture exploration company has ceased operation and entered the liquidation phase.

The venture, 51% owned by the Chinese company, had concentrated on the northern Xinjiang, Inner Mongolia and Heilongjiang provinces, according to Rio filings. The JV had about 30 full-team staff, led by an executive based in Beijing, according to details on Rio's website.

By partnering on exploration, and jointly developing the Simandou iron ore project in Guinea, Rio had sought to strengthen its ties with China, its top customer, after the London-based producer rejected state-backed Chinalco's proposed USD 19.5 billion investment in 2009.

Rio in October agreed to sell its stake in the African project to Chinalco, a partner in the asset. Chinalco holds about 10 per cent of Rio, according to the producer's annual report.

The report said that spending on exploration by miners has plunged to the lowest in a decade as the industry has focused on slashing costs and bolstering balance sheets. The combined budget in 2016 of more than 1500 companies fell 21% on the previous year to about USD 6.9 billion, according to a report this month by S&P Global Market Intelligence. Exploration spending in China fell 27% to about USD 394 million in 2016.

Source : WA Today
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