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Sources say that Rio Tinto is considering an asset-for equity swap with Chinalco in order to resolve the governance gridlock.
Rio Tinto has been exploring the possibility of an asset-for equity swap with Chinalco, which would reduce the Chinese investor's stake from 11% to 9%, allowing Rio to resume its buybacks, and pursue new deals. Sources said that the state-owned mining giant Aluminium Corporation of China Limited would exchange a part of its holding in return for partnerships with some of Rio’s mining assets. This would end governance restrictions which have hindered the flexibility of the Anglo Australian company for more than 15 years. The swap could enable Rio to allocate more capital and pursue mergers, acquisitions, and other strategic initiatives. This would align Rio with the broader trends in the industry, where global miners are using consolidation and new projects as a way to attract investors who focus on long-term prospects for supply. RIO ASSETS INTERESTING CHINALCO Beijing's expansion into the copper market is gaining attention as Western governments try to catch up to China's dominance of critical mineral supply chain. Fourth source: The Simandou iron-ore project in Guinea is of particular interest to Chinalco, as it's already 75% Chinese owned and was the target of Chinalco’s failed 2016 purchase attempt. Also, the Oyu Tolgoi Copper Mine in Mongolia would also be of interest. One source said that Rio's Titanium business could be a possible candidate for a swap. The company is currently undergoing restructured as part of the new chief executive Simon Trott's strategic review. China, the top consumer and producer of titanium dioxide (used in paints, cosmetics, and military hardware) in the world, has increased its output in the last decade to dominate more than half the global market. Chinalco declined to respond to our request for comment. Fourth source: The swap could reduce Chinalco's share by 2 to 3 percentages points. This would allow Rio to pursue buybacks and large M&A transactions, as well as restructure capital, without diluting the largest shareholder. GOVERNANCE CONSTRAINTS Chinalco purchased a nearly 15% stake in Rio Tinto Plc in 2008, under Canberra's conditions, which included no increase in stake without approval, and no seat on the board. Its share in the company is approximately 11%. Chinalco then proposed an investment of $19.5 billion to reduce Rio's debt of $39 billion, in exchange for which it would receive minority stakes in the global portfolio. Other shareholders and regulators blocked the deal over concerns that China would control strategic assets. Today, activists are pushing Rio to drop its dual Anglo/Australian listing. They argue that this creates conflicts of governance between UK and Australian investors, and complicates the mergers with firms in states which have restrictions on strategic ownership by Chinese companies. Update on RIO Reorganization is expected soon Trott is pushing for tighter control of costs across the group. After taking over the presidency on August 25, he announced that Rio would reduce its business structure from four to three core units, focusing on profitable assets. Two sources have said that a further update regarding the reorganisation may come in the next two to three weeks, before Rio's Investor Day scheduled for December 4. Two sources say that Trott, in addition to reviewing Rio's borates and iron businesses, is also considering divestments. This includes pausing the early work on the Jadar lithium project, which is located in Serbia. Environmental groups have opposed the project for years, despite it being deemed strategic by the European Union. The sources stated that no further cuts are expected to the leadership team of Rio after Trott reduced its executive committee from 11 to nine members. One source said that the number of managing director is likely to decrease, as each will be asked to outline their department's cost-cutting measures rather than meeting a company-wide fixed target. (Reporting from Clara Denina Melanie Burton Ernest Scheyder. Amy Lv contributed additional reporting. Mark Potter and Veronica Brown edited the article.
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Sources say that the new Japanese PM is planning a large-scale economic stimulus in order to combat inflation.
Sanae Takaichi, the new Japanese Prime Minister, is working on an economic stimulus package which will likely exceed last year's $82 billion in order to help families combat inflation. Government sources familiar with this plan told Reuters that it is expected to be more than double what was spent by households to fight inflation. Takaichi, who advocates big fiscal expenditures, took office Tuesday. This is her first major economic initiative. It reflects her commitment to "responsible fiscal policy". Sources declined to identify themselves because it was a private matter. They said that the plan will be built on three pillars - measures to combat inflation, investments in industries of growth, and national safety. The Nikkei 225 index of Japan's shares reversed its losses on Wednesday after the report and rose. Meanwhile, the yen was unchanged and had only made gains in the morning. The Takaichi government plans to quickly abolish the provisional gas tax rate as part of its core measures for inflation relief. The program also aims at expanding local government grants with an emphasis on small and medium-sized businesses that cannot benefit from the existing tax incentives to increase wages. As the government concentrates on economic development, it will include investments in sectors of growth such as artificial Intelligence and semiconductors. Sources said that the exact size of the package was still being finalised. The announcement could come as soon as next month. In order to fund these measures, the government has begun drafting the supplementary budget that will cover the current fiscal year up until March. It is hoped it will be passed during the next extraordinary session of parliament. If the additional spending exceeds expectations, it may be necessary for the government to issue bonds to cover deficits, which raises questions about how best to balance economic growth and fiscal discipline.
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Morning bid Europe-Inflation will wipe out UK's rate-cutting bets
Rae Wee gives us a look at what the European and global markets will be like tomorrow. The Bank of England's (BoE), which is expected to cut rates again this year, will likely be disappointed if the consumer prices in Britain are higher than expected. The BoE expects the inflation rate in September to be 4%, which is the highest of all the big economies around the world and twice the BoE target. The markets currently price in a chance of nearly 15% that the central banks will ease rates by 25 basis point at their November meeting. A positive surprise in the Wednesday figures will almost certainly wipe out these bets. This would also cloud the central bank's rate outlook into the end of the year, as policymakers are divided between those who wish to take aggressive action in order to counter the slowing down of the job market and others who are concerned about the persistent inflation pressure. A majority, however, is in favour a gradual rate cut. The rapid pace of UK price increases, which continue to put pressure on households and raise borrowing costs, adds to the challenges facing Finance Minister Rachel Reeves. She has promised to ease cost-of living pressures and accelerate economic growth. Reeves, who is trying to reach her fiscal goals and avoid disappointing investors that have already driven up borrowing costs in Britain sharply, has indicated she will increase taxes and reduce spending as part of her budget plan for November 26. Investors were also reeling in other markets from the sudden drop in gold prices that has stopped the metal's explosive rally, despite the lack of an obvious cause. Asian shares also declined, but Japan's Nikkei recovered from its early losses and traded higher following a report that Sanae Takaichi is preparing a stimulus package for the economy that will likely exceed last year’s 13.9 trillion ($92.19) billion yen to help consumers tackle inflation. Money managers from around the world are returning to Japan's debt and stock markets because of its reflationist promises and to diversify away from more expensive U.S. or European markets. The following are key developments that may influence the markets on Wednesday. UK Inflation (September) - Barclays, Tesla earnings
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Oil prices rise more than 1% due to supply risks and US-China trade negotiations
The oil prices rose for the second day in a row on Wednesday. They increased by more than 1 percent, boosted by supply risks related to sanctions and hopes of a U.S. China trade agreement. Investors also took note of news that the U.S. was seeking oil deliveries for its strategic reserves. Brent crude futures were up 94 cents or 1.5% to $62.26 a barrel as of 0400 GMT. U.S. West Texas intermediate crude futures were up 92 cents or 1.6% to $58.16. Oil prices have recovered from a five-month low, which was reached on Monday. Producers increased supply and trade tensions dampened demand. News that the summit between U.S. president Donald Trump and Russian president Vladimir Putin had been put on hold, as well as fears of disruption fuelled by Western pressures on Asian oil purchases from Russia, led to a supply risk. Mukesh S. Sahdev, CEO and founder of energy market consulting firm XAnalysts, said that despite the general bearish sentiment, a glut of oil and weak demand in the Middle East, Venezuela, Colombia, and Russia still prevents the oil price from falling below $60. Investors monitored the tension between Venezuela, an important oil producer and the U.S. The U.S. attacks against Venezuela in international water are a dangerous escalation, and they amount to "extrajudicial killings", a group independent United Nations experts stated on Tuesday. As part of the campaign to combat a "narcoterrorist threat" emanating from Venezuela, U.S. president Donald Trump ordered strikes against at least six vessels that were suspected by the U.S. of transporting drugs in the Caribbean. Investors will also be closely monitoring the progress of U.S. China trade talks, as officials from both nations are due to meet in Malaysia this week. Trump said Monday he expected to negotiate a fair deal with Chinese President Xi Jinping whom he intends to meet next week in South Korea. Trump's comments on trade negotiations are likely to provide some support for the market. The cancellation of the Trump and Putin summit is also likely to provide some support, said ING commodities analysts on Wednesday. Market sources cited American Petroleum Institute data on Tuesday to confirm that U.S. crude oil, gasoline, and distillate stock levels fell in the last week. In a note to clients on Wednesday, ANZ analysts found that oil was also in favor of a U.S. strategy for replenishing strategic reserves. The U.S. Department of Energy announced on Tuesday that it plans to purchase 1 million barrels of oil to replenish its Strategic Petroleum Reserve. It is hoping to benefit from the relatively low prices of oil to do so. (Reporting and editing by Muralikumar Anantharaman in Singapore and Christopher Cushing; Siyi Liu, Jeslyn Lerh)
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Vard Picks SMST to Supply Equipment for North Star’s New SOVs
Dutch offshore equipment supplier SMST has secured a new contract from Norwegian shipbuilder Vard for the delivery of two sets of mission equipment to be installed on an additional two of North Star’s newbuild Service Operation Vessels (SOVs).These vessels are part of a long-term charter agreement between shipowner and operator North Star and energy company RWE.SMST previously supplied similar equipment for the first two CSOVs, the Grampian Eagle and Grampian Kestrel, which are also set to operate for RWE.RWE, North Star Ink Long-Term SOV Charter AgreementsFor these new hybrid-powered SOVs, safe and efficient transfer of technicians working offshore is ensured through the integration of SMST’s Telescopic Access Bridge (TAB) L2, a motion compensated gangway equipped with advanced automation packages.Additionally, the inclusion of a 5t Motion Compensated Crane will enable streamlined and reliable cargo handling operations.“We are proud to contribute to such a significant collaboration between two leading industry players. Above all, we value the continued partnership with North Star and VARD’s ongoing trust in SMST, now reflected in the selection of our equipment for a fifth and sixth vessel,” said Jochem Tuinstra, Sales Manager at SMST.
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Offshore Industry Majors Join Forces for Next-Gen Subsea Flowline Tech
A consortium of offshore energy companies including TotalEnergies, Equinor, Aker BP, DeepOcean, Tenaris, and LS Cable & System has launched a joint industry project to commercialize a new subsea flowline heating technology designed to cut costs and carbon emissions related to deepwater oil and gas subsea tie-back projects.The system, named FlowHeat, aims to lower manufacturing and installation costs by up to 35% and reduce carbon emissions by 30% through separating pipeline and heating installation processes.Subsea tiebacks are key to connecting remote wells to processing facilities, but cold, deepwater environments pose challenges such as wax and hydrate formation. FlowHeat simplifies the heating process by allowing the installation of power cables after the pipeline is laid, or as an alternative, integrating them into a reeled pipeline.“The patented design represents a breakthrough in subsea pipeline heating, offering significant cost savings, improved efficiency, and environmental benefits. The key advantages include reduced topside weight, lower power consumption, and less complex installation. The cable is also repairable and enables real-time monitoring via optical fiber,” said Andries Ferla, DeepOcean’s Technology Director and project owner.The system can be deployed after pipeline installation and is suitable for tiebacks of up to 30 km, potentially extending to 50 km, and water depths reaching 3,000 meters. It allows heating installation using smaller remotely operated vehicles (ROVs), reducing project complexity and vessel requirements.“After a very important phase progressing from idea to proof-of-concept, TotalEnergies is very enthusiastic to enter in a full-scale validation with this group of highly skilled specialists, for qualification of the technology. Together, we believe we can unlock longer tiebacks and access to remote reserves,” added Florent Boemare, Offshore Solutions and Technology Research Manager at TotalEnergies.Initial trials have demonstrated the system’s electrical efficiency and reliable cable installation over obstacles and long distances. FlowHeat can be deployed from various vessel types, supporting a 30% emissions reduction by optimizing pipeline use, cutting installation days, and allowing smaller vessels to be used.Industry participants see strong market potential on the Norwegian Continental Shelf and globally, with more than 300 potential electrically heated flowline projects identified by 2030 in regions such as Brazil, the United States, and Africa.Each company brings distinct expertise - DeepOcean leads project management and subsea integration; Tenaris provides advanced thermal insulation coating solutions; LS Cable & System contributes its experience in power and fiber-optic cables; and TotalEnergies, Equinor, and Aker BP offer operator-level support, infrastructure, and validation capacity.The project has received funding from the Research Council of Norway to conduct pilot testing under real operating conditions, supporting the technology’s qualification and eventual commercialization.
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Shanghai copper prices fall on weak China demand and strong dollar
Shanghai copper fell on Wednesday. The gains made in the previous session were lost due to a weakening of Chinese demand, resulting from high prices, and a stronger US dollar. As of 0302 GMT, the most active contract for copper on Shanghai Futures Exchange had fallen 0.63% to 84,990 Yuan ($11,931.77) a metric ton. The two sessions of gains were halted by the strong industrial production in China and new attempts to ease Sino U.S. trade tensions. The benchmark three-month futures for copper fell 0.15%, to $10608 per ton. The red metal's demand is muted by the low acceptance of high prices from downstream buyers. It's a good thing the copper price was corrected, because it might encourage some real consumption by downstream buyers. "They were not buying anything before," said a Shanghai copper trader, who requested anonymity because the person was not authorized to talk to the media. The copper price was also affected by the stronger dollar, despite Wednesday's slight decline. The price of commodities in greenbacks is weakened by a strong dollar, as buyers who use other currencies are forced to pay more. Traders also closely followed the China-U.S. Trade Conflict in the lead-up to a meeting planned between U.S. president Donald Trump and his Chinese equivalent Xi Jinping in South Korea next week. Copper prices are still held at a minimum by the supply shortage caused by mine disruptions. Any decline is therefore limited. Nickel was the only metal to lose 0.30%. Zinc and lead also remained unchanged. Zinc and lead, among other LME metals gained 0.23% while aluminium and nickel were barely changed.
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Iron ore prices rise on signs of eased US-China trade tension
Iron ore prices rose on Wednesday as signs of easing U.S. China trade tensions, and the expectation that Beijing will unveil more stimulus measures to boost economic growth, outweighed worries about a rising ore supply or a decreasing steel demand. After U.S. president Donald Trump stated on Monday that he expects to reach a fair deal with Chinese President Xi Jinping, hopes grew of a deescalation in the trade spat. Trump said that he will visit China in early 2019, at Beijing's request. By 0207 GMT, the most-traded iron ore contract for January on China's Dalian Commodity Exchange rose by 0.78% to $775 yuan (US$108.80) a metric ton. As of 0157 GMT, the benchmark November iron ore traded on Singapore Exchange was up 0.42% at $104 per ton. Analyst Zhuo Guiqiu at Jinrui Futures said that the rise was driven by a macroeconomic factor, as a reduction in U.S. - China trade tensions is expected. This has sparked heightened risk-on sentiment. Investors also bet on more China stimulus after a series of disappointing data. The Communist Party's four-day meeting behind closed doors that began Monday will culminate in an outline of the next five-year strategy. The price increases were tempered by the expectation of a growing supply in the remainder of the year and the seasonal slowdown of steel demand. Vale, the largest iron ore miner in the world, produced 94.4 millions metric tons (the equivalent of steelmaking material) during the third quarter. This is a 3.8% increase on an annual basis and the highest production since the final three months of 2018 Rio Tinto (RIO.L) has also stocked up 2 million tonnes of high-grade ore in Guinea at its Simandou Project for a shipment scheduled to take place mid-November. Both coke and coal, which are used in the production of steel, grew by 0.59%. The benchmarks for steel on the Shanghai Futures Exchange have gained ground. Rebar gained 0.33%. Hot-rolled coil increased by 0.47%. Wire rod gained 0.21%. Stainless steel gained 0.28%. $1 = 7.1230 Chinese Yuan (Reporting and editing by Amy Lv, Colleen Waye)
Gold continues to fall from its record high due to profit-booking and trade optimism
Gold prices continued to fall on Wednesday as investors took profits from the recent bullion rally, while they awaited U.S. inflation figures due later in the week.
As of 0236 GMT, spot gold was down by 0.4%, at $4,109.19 an ounce. Bullion dropped more than 5% Tuesday, its steepest drop since August 2020.
U.S. Gold Futures for December Delivery climbed 0.4%, to $4124.10 an ounce.
Matt Simpson, senior analyst at StoneX, said that the "simmering" tensions in trade between the U.S.
This is a simple technical repositioning of a market which clearly needed a pullback following an extended move over $4,000. I believe we have seen the worst day-to-day fluctuations as dips are still likely to be purchased."
U.S. president Donald Trump said he expects to reach a fair deal with Chinese president Xi Jinping next week when they meet in South Korea. He also played down the risk of a conflict over Taiwan.
The Mint newspaper in India reported that New Delhi and Washington were close to a long-stalled agreement which would reduce U.S. import tariffs from 50% to 15% or 16%.
The gold price has risen by 56% in the past year. It reached a record high of $4,381.21 yesterday, thanks to geopolitical, economic and rate-cutting bets, as well as sustained central bank purchases.
Investors are now looking forward to Friday's release of the U.S. Consumer Price Index report for September. This will provide more clues about the Federal Reserve’s path towards interest rate cuts. Due to the U.S. shutdown, this report was delayed.
According to a survey of economists, the Fed will cut its key interest rate next week by 25 basis points and again in December. However, opinions are still divided about where rates will end up by next year.
Silver spot edged up 0.1% to $48,82 an ounce. Platinum fell 1.5% to 1,528.15 while palladium rose 0.7% to $1418.09. (Reporting by Brijesh Patel in Bengaluru; Editing by Subhranshu Sahu)
(source: Reuters)