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Morning bid Europe-Markets to the Fed: Please take five more.
Wayne Cole gives us a look at what the future holds for European and global markets. It was good to hear that. The CPI in the U.S. was a little firmer, but not enough to notice. The prices that feed core PCE were surprising benign. This led analysts to reduce their forecasts from +0.2%m/m to a steady 2,9% for the year. The Federal Reserve is set to begin its easing cycle next week with 25 basis point, but the markets only see a 7% probability of a 50bps. The magnitude of the decline in labour market data would lead you to assume that the more aggressive options will be discussed. If the vote is 25 to 50 but one or two voters dissent, this could be enough dovishness to keep the rally going. It is important to provide a dovish outlook, given that futures markets have begun to price in 71bps cuts by Christmas and 125bps cuts by July. Five cuts over five meetings is fine. Oh, and I'd like to make a request to the Fed: please return to a single interest rate, not this range of 4.25-4.50. We are no longer at zero. In the last two weeks, bonds have delivered a quarter point cut in mortgage rates. The yields on 10-year notes are down by 20bps. Investors need Fed Chair Jerome Powell's willingness to ease up on the market, depending of course on the data. The prospect of lower U.S. interest rates has allowed liquidity to flow in Asia, and investors have been able to place bets on everything AI. All three indexes, in Japan and South Korea, have reached record highs. Kospi is alone up nearly 6% in the past week. The blue chips of China are now back at their peaks in early 2022. They have survived Beijing's warnings about capitalist excesses. In the face of falling yields the dollar has held relatively well against the majors while losing ground on less popular crosses. The dollar index has only a slight decline on the week despite the constant talk about the end of exceptionalism. The Australian dollar has finally broken out of its trading range and reached a 10-month high, while the Norwegian crown is now at its highest level since early in 2023. In the last month, both have seen their yield spreads against the USD move in their favor by around 40 basis points. Both are also testing high chart levels. The following are key developments that may influence the markets on Friday. - Appearances of Bank of Spain Governor Jose Luis Escriva, and ECB Policy Maker Olli Reinn - UK manufacturing output and GDP for July. Final CPI readings for the EU - US consumer sentiment for September
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Oil prices continue to fall due to oversupply and US demand concerns
The oil prices dropped on Friday. This was in addition to the big drops in the previous session. Concerns about a possible softening in U.S. Demand and a general oversupply were offset by concerns about disruptions of supply due to conflict in the Middle East or war in Ukraine. Brent crude futures dropped 49 cents or 0.74% to $65.88 per barrel at 0419 GMT. U.S. West Texas Intermediate Crude fell 51 cents or 0.82% to $61.86. The (U.S. inflation) battle is not yet won. This dampens demand for oil in the world's biggest economy. Even geopolitical turmoil is not enough to sustain oil prices. Fundamentals indicate an oversupply of crude and a lacklustre level of demand, said Priyanka Sackdeva, senior analyst at brokerage Phillip Nova. The government reported on Thursday that U.S. consumer price indexes in August rose by the highest in seven months, and a large number of first-time unemployment aid applications were filed last week. This has raised expectations that the Federal Reserve may cut interest rates to boost economic growth next week. This would then increase demand for oil. The oil price rose by up to 2% on Monday, due to the possibility of disruptions in trade or production from war and conflict. However, the benchmarks began falling on Thursday. They have now erased the gains made earlier this week. Losses began when the International Energy Agency, in its monthly report, said that world oil supplies would increase more quickly than expected due to planned production increases by the Organization of the Petroleum Exporting Countries (OPEC+) and its allies such as Russia. OPEC's own report did not change its high growth predictions for global oil demand in 2025 and 2026. It said the world economy maintained a strong growth trend. SDIC Futures reported in a daily update that the crude market is constantly bouncing between concerns over short-term disruptions and surplus supply pressures. However, geopolitical fears are reducing support for prices. OPEC+ announced on Sunday that it would increase its oil production quotas starting in October, as Saudi Arabia, the group's leading member, tries to regain market shares. Saudi Arabian crude oil exports are expected to increase, according to several sources on Thursday. The state-controlled Aramco is shipping 1.65 million barrels of crude oil per day to China in October. This is a sharp rise from the 1.43 million barrels per days allocated to China in September. The IEA reported that in Russia, which is expected to be the second largest producer of crude oil behind the U.S. by 2024, revenues from the sale of crude and petroleum products declined in August, reaching one of their lowest levels since the beginning of the conflict in Ukraine. A report released by the Energy Information Administration on Wednesday showed that U.S. crude oil stocks increased last week, rising by 3.9 millions barrels to 424.6million barrels. (Reporting and editing by Tom Hogue, Lewis Jackson and Sam Li in Beijing)
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Indonesia seizes Weda Bay Nickel area 148 hectares
Rilke Jeffreyri Huwae, an official from the mining ministry, said that a task force in Indonesia seized a 148 hectare area (366 acres) of PT Weda Bay Nickel because it did not have the necessary forestry permits. The government is targeting illegal mining operations as part of an overall crackdown. Last month, President Prabowo said that the government had identified more than 1,000 illegal mining operations. Rilke stated that PT Weda Bay Nickel holds a mining permit but does not have the forestry licence required to exploit the region. The nickel-rich Halmahera island is home to the Weda Bay Nickel Mine, which is controlled by China's Tsingshan Group, France Eramet SA, and Indonesia Aneka Tambang. Febrie Adriansyah is a senior prosecutor in the Attorney's General Office. She said that the task force also seized a 172.8 hectare mine area owned by PT Tonia Mitra Sejahtera, located in Southeast Sulawesi. He said that the land was part of a total area of about 4.2 million acres which were identified as having no forestry permits. Reporting by Bernadette Cristina Munthe; Writing by Fransiska Naangoy; Editing David Stanway
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JERA Signs MoU with Montenegro on LNG Terminal, Gas Plant
JERA Co. and the Government of Montenegro have signed of a Memorandum of Understanding (MoU), to explore the development of a liquefied natural gas (LNG) terminal and an associated gas-fired plant in the country. Through this strategic partnership, the Government of Montenegro will leverage JERA’s global expertise to enhance its national energy mix, strengthen energy security, support decarbonization goals, and position the country as a major energy hub in the Western Balkans. Under this MoU, JERA and the Montenegro Government will conduct a comprehensive feasibility study covering the technical, commercial, and financial viability of the proposed LNG Terminal and the associated gas-fired power plant development project.The study will also lay the groundwork for potential project implementation agreements.“The planned feasibility study will provide us with concrete data on potential locations and the viability of liquefied natural gas development in Montenegro, thereby creating the basis for making strategic decisions in the interest of our country’s energy security and sustainable development,” said Admir Šahmanović, Minister of Energy and Mining of the Montenegro Government."As a reliable energy partner committed to reliable, sustainable energy development, our extensive experience in LNG infrastructure and proven track record of delivering complex international energy projects, uniquely position us to help Montenegro achieve its strategic energy objectives,” added Steve Winn, Chief Global Strategist, JERA.
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Iron ore to gain for the third week in a row on better China demand and supply problems
Iron ore futures fell on Friday due to higher inventories of ore and metals, but they remained on course for a third weekly gain. This was boosted by improved demand in the top consumer China, and concerns about supply from Guinea-based projects. As of 0320 GMT, the most traded January iron ore contract at China's Dalian Commodity Exchange was down 0.56% to 795.5 Yuan ($111.73), per metric tonne. The contract is up 1.1% this week. As of 0310 GMT the benchmark October iron ore price on the Singapore Exchange had fallen 0.17% to $105.3 per ton but has seen a gain of 0.44% this week. Steelmakers resumed production after a military parade ended on September 3. This helped to support prices. The average daily hot metal production, which is a measure of ore consumption, increased by 5% from week to week, reaching a record high of 2,41 million tons on September 11. Prices rose earlier this week as fears about the supply of ore from the Simandou project, in Guinea, grew after local reports that Rio Tinto wanted to build refineries locally. This could limit the amount of ore that is available for export. The sharp decline in shipments by Brazil, a major supplier in the first weeks of September, further increased bullish sentiment. Prices fell on Friday as steel inventories rose during the peak season of September, which is when demand is highest. According to Mysteel, this, along with an increase of 0.2% in iron ore portside inventories from week to week, limited the weekly price increases. Coke and coking coal were the only two ingredients that increased in value. The Shanghai Futures Exchange has seen a stagnation in the steel benchmarks. Rebar fell by 0.48%. Hot-rolled coils lost 0.21%. Wire rod fell by 0.4%. Stainless steel increased 0.5%.
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Malaysia restricts data center growth to China, blocking AI chips
M alaysia is a hotspot of data centres. It has slowed down its expansion, which industry analysts and insiders believe will hamper China's attempts to access powerful chips, crucial for improving artificial intelligence capabilities. In recent years, the Southeast Asian nation has attracted data center investments from U.S. tech giants such as Microsoft, Amazon, Alphabet’s Google, and their Chinese counterparts Tencent Huawei and Alibaba, due to cheap land and electric costs, and robust local AI market prospects. According to DC Byte, more than two thirds of the data center capacity currently under construction in Southeast Asia’s five major growth markets have been committed to Malaysia. Companies have committed to building more data centres in Johor, Malaysia's neighbouring state. This is due to spillover from Singapore which is more expensive. The data centre boom is slowing down as Malaysia struggles with its power grid and water resources. Washington has also put pressure on Malaysia to stop Chinese firms from using the region as an export control backdoor for U.S. AI chips. Malaysia, China's biggest trading partner in Southeast Asia announced in July that it would require permits for all exports and transshipments of high-performance U.S. chips such as those manufactured by Nvidia. Chinese replacements for U.S.-made chips are still inferior alternatives to the development and maintenance of cutting-edge Chinese AI applications and models that can compete with U.S. competitors. The new restrictions allow Chinese data centres to import U.S. chip for use in the country. Experts say that as Malaysia attempts to finalise its trade agreement with the United States, they will be scrutinised more closely. The U.S. Commerce Department is concerned that data centres located outside of China may purchase AI chips in order to train AI models, and even to support military purposes, in China. Collmann Griffin, a former U.S. Government sanctions policy advisor, said this. The U.S. Commerce Department has not responded to a comment request. 'AI BELTS AND ROAD' China's overseas push began shortly after the release of a three-year plan in 2021 for Chinese data centres operators, which called on these firms to expand overseas, particularly in countries that have signed up to Xi Jinping’s Belt and Road Initiative (Xi Jinping’s flagship initiative for overseas development), Malaysia being a signatory. The countries issued a joint declaration at the end of Xi’s visit to Malaysia, in April. They pledged to increase their cooperation in "data links", 5G infrastructure, and AI. This statement referred to the increasing political momentum behind China's expansion of data centres in Malaysia. GDS Holdings is one of China’s largest data centres operators. Two years ago, they began operating an hyperscale campus data centre in Johor. This massive project, which continues to be expanded, was launched. But as the U.S. continues to target China's AI capabilities, GDS has gradually reduced its stake in the Singapore-headquartered subsidiary that managed its overseas data centres and spun it off into an independent entity called DayOne in January. Lee Ting Han said that the "rebranding", by Chinese companies, is likely to diversify their clientele "because they are very aware of what is happening, trade tensions are moving". Jamie Khoo, DayOne's CEO, said at the opening of DayOne Singapore's first data center in July that the company has always planned to separate its business from the Chinese parent because both companies operate under different regulations. Singapore announced last year it would release only 300 megawatts of data center capacity "in a short time" due to its power and water shortages. Knight Frank reported that by December 2024 Johor would have 12 data centres in operation with an estimated combined capacity of 369.9MW. An additional 28 data centers were planned to be developed, which represents an estimated capacity 898.7MW. The state's chief Minister said that Johor is Malaysia's largest data centre investment hub, with 42 projects totaling 164.45 billion Ringgit ($39.08billion) being approved by the second quarter 2025. These projects will contribute 78.6% to the country's operational information technology capacity. Johor's proximity to Singapore allows it to benefit from a lower latency connection to other data centres in the city-state. Lee explained that Johor had begun to slow down. Last year, the state introduced a committee to review data center projects. The committee rejected 30 percent of applications by 2024 because they did not demonstrate sustainable practices in terms of water and energy use. He added that the approval rate is higher as more applicants are familiarized with the process. Vivian Wong is a senior analyst with DC Byte. She said that Southeast Asian countries such as Malaysia are attractive markets for Chinese expansions of data centres due to their geographic proximity, relative lower political friction, and the growing demand for digital infrastructure. She said that, "However as Southeast Asia faces increased tariffs and scrutiny, this could potentially reap less success than in previous years, particularly in markets known to be home to Chinese-backed operations, which are also being targeted by the Trump Administration." $ 1 = 4.2080 ringgit (Reporting from Eduardo Baptista, in Beijing; Ashley Tang, Danial Azhar, and Jun Yuan Yong, in Singapore; Editing done by Miyoung and Jamie Freed).
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Oil prices continue to fall due to oversupply and US demand concerns
After a big drop in the previous session, oil prices dipped on Friday due to concerns over a possible softening in U.S. consumer demand. This was offset by worries about disruptions in supply from the conflict in the Middle East. Brent crude futures dropped 30 cents or 0.45% to $66.07 per barrel at 0114 GMT. U.S. West Texas Intermediate Crude fell 31 cents or 0.5% to $62.06. In the last trading day, benchmarks fell by 1,7% and 2% respectively. The International Energy Agency, in its latest monthly report, said that the world's oil supply will rise faster than expected due to the planned production increases by the Organization of Petroleum Exporting Countries (OPEC+), a grouping of countries including Russia. OPEC's own report did not change its high growth predictions for global oil demand in 2025 and 2026. It said that the world economy is still on a steady growth path. OPEC+ announced on Sunday that it would increase its oil production quotas starting in October, as Saudi Arabia, the group's leading member, tries to regain market shares. Saudi Arabian crude oil exports are expected to increase, according to several sources on Thursday. The state-owned energy company Aramco shipped about 1.65 millions barrels of crude oil per day to China in October. This is a sharp rise from the 1.43 million barrels of crude oil per day allocated to China in September. Analyst Giovanni Staunovo at UBS said that the market was questioning for how long China could continue to absorb barrels and maintain low Organization for Economic Co-operation and Development inventories (OECD). Investors were also keeping an eye on any further sanctions affecting Russian crude oil. The IEA reported that in Russia, which is expected to be the second largest producer of crude oil behind the U.S. by 2024, revenues from the sale of crude and petroleum products declined in August, reaching one of their lowest levels since the beginning of the conflict in Ukraine. Two sources familiar with the plans said that Russia intends to reduce ESPO Blend oil loads from its Far East Kozmino Port in September from 4.2 millions tons to 4 million metric tonnes (about one-million barrels per day), from 4.2million tons in August. The U.S. consumer price index in August rose by the highest rate in seven months. A surge in the number of first-time unemployment aid applications last week raised expectations that the Federal Reserve would cut interest rates in the coming week. This could increase economic growth and the demand for oil. A report released by the Energy Information Administration on Wednesday showed that U.S. crude oil stocks increased last week, rising by 3.9 millions barrels to 424.6million barrels. Reporting by Sam Li in Beijing and Lewis Jackson in New York, with editing by Tom Hogue.
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Sources say Valero is overhauling the FCCU at Tennessee refinery.
Valero Energy Corporation is overhauling its gasoline-producing Fluidic Catalytic Cracking Unit (FCCU) in Memphis, Tennessee, according to people familiar with the plant's operations. Valero's spokesperson was unavailable to comment on the refinery operation Thursday. Sources said that the 65,000 bpd FCCU and the 12,000 bpd unit of alkylation were shut down over the weekend for an overhaul. Sources said that the overhaul should be completed by November 1. Sources claim that the refinery's flaring gas recovery unit and hydrotreater were also taken off production to change a catalyst. The FCCU converts gas oil to unfinished gasoline using a fine powder silica catalyst. Alkylation units are used to convert refinery byproducts into liquids that boost the octane of unfinished gasoline. The flare gas collection unit collects the gases that would have been burned in the refinery’s safety flare system and uses them as fuel for boilers. In order to comply with U.S. Environmental Rules, hydrotreaters remove sulfur from motor gasoline using catalysts and hydrogen. (Reporting and editing by Himani Sarkar, Chris Reese, and Erwin Seba)
Western miners push for greater metals costs to fend off Chinese rivals
CHALLIS NATIONAL FOREST, Idaho, July 22 (). T he just U.S. cobalt mine sits fallow in the northern Idaho. woods, a mothballed hunk of steel and dirt that is too expensive. for its owner to run because Chinese rivals have flooded. worldwide markets with cheap materials of the bluish metal used in. electrical lorry batteries and electronics.
Jervois Global, which dug the mine into the side of. an almost 8,000-foot (2,400-meter) mountain, watched helplessly. in 2015 as cobalt prices plunged after China's CMOC. Group opened the Kisanfu mine in the Democratic. Republic of Congo, pushing international production of the metal to an. all-time high.
The Idaho website, which Jervois bought in 2019, was idled in. June 2023 just weeks before it was set to open. More than 250. workers lost their tasks. A skeleton team now rotates unused rock. crushing devices weekly to keep it from flattening under its. own weight.
We were simple with our staff and told them: 'This. is everything about the price of cobalt,' website manager Matthew. Lengerich told throughout a see to the center. Jervois. says cobalt rates require to reach a minimum of $20 per pound for the. website to open. However prices sat near $12.17 in July.
A similar predicament faces BHP, Albemarle and. other Western mining companies attempting to take on metals. produced by Chinese-linked companies, a few of which usage. coal-generated electrical energy, kid labor or other practices not. meeting the standards set by lots of governments and makers.
Western miners state their rivals have intrinsic cost. benefits that make it possible for rapid production expansions even as. costs for cobalt, lithium and nickel have plunged more than a. 3rd in the past 18 months. Functional expenses for a lot of these. Western business have, as a result, been surpassing what market. prices will cover.
That has sustained growing calls from some policymakers and. miners, consisting of Jervois and Albemarle, for a two-tier prices. system with a premium for sustainably produced metals, according. to interviews with more than 3 lots traders, financiers,. executives, acquiring representatives, and prices firms.
The strategy is to charge more for a metal that is produced. sustainably, whether that is through direct transactions or through. multiple rates for a metal listed through futures exchanges,. depending upon production methods. For instance, there would be one. rate for standard nickel and another for green nickel.
Western miners merely can't compete with China, and China. has revealed the willingness to drive market value way, way down,. stated Morgan Bazilian, director of the Payne Institute for Public. Policy at the Colorado School of Mines.
Two-tier pricing could significantly move how metals required for. energy transition have actually been purchased and offered for centuries yet. also minimize market openness as miners might bypass metals. exchanges to work out directly with consumers.
It might also, two analysts told , cause several. definitions of just what constitutes green metal.
' COMMITMENTS HAVE An EXPENSE'
Market leaders have actually pushed for two rates structures for. a number of years, however the call for change began gaining more. attention from financiers, policymakers and clients last fall. as Western governments grew more concerned about Chinese. competitors.
In conferences throughout Washington and Brussels, mining. executives have been pleading with governments for some kind of. intervention till two-tiered prices is more extensively welcomed,. suggesting that tariffs, supply chain transparency requirements,. or government insurance for mines could be possible solutions,. three market sources said.
U.S. and E.U. officials have actually independently expressed sympathy. with the mining industry, according to two of the sources, but. have actually up until now been loath to inject themselves into the mechanics. of how costs are set by exchanges and others.
I do not wish to state what the markets should or shouldn't do. to guarantee strong ESG practices, said the U.S. State. Department's Jose Fernandez, who oversees a program designed to. facilitate metals supply offers. But it is true that all of. those dedications have a cost.
As a result, mining industry customers such as car manufacturers. remain in the unpleasant position of attempting to keep their expenses. low while preserving secure and varied metals supplies. Some. deals are taking shape, prodded in part by policies tied to. emissions.
The European Union by 2027 will need EV manufacturers to. show where they procure metals and the carbon footprint for. their production. Refusal to comply would suggest an EV can't be. sold in the region, an action not yet taken by the United States. however one extensively seen as the most aggressive worldwide to enhance. supply chain transparency and most likely to sustain premium metals. agreements.
In Canada last year, Northern Graphite started. effectively requiring a premium from clients desiring. guaranteed North American products of the battery metal.
Teck Resources previously this year started selling. a gently processed type of copper known as concentrate to. Aurubis, a source with direct knowledge said. The. deal does not rely on exchange prices and guarantees. Aurubis a consistent supply of ESG-compliant concentrate that it. turns into copper for sale to the automobile market.
Teck declined to comment. Aurubis said it sees the method to a. green-friendly copper industry as a joint task for the entire. worth chain, which requires to be honored from the raw material. provider to the end consumer.
Consumers in the meantime do not deal with a charge if they do not. source sustainable metals, however they increasingly face a. reputational risk.
The concern is really for automobile companies: Are you okay with. something that may be priced lower or are you willing to pay. premiums understanding that this is sourced sustainably in the right. way? said Michael Scherb, CEO of Appian Capital Advisory, a. private equity firm that buys mining companies.
' WEATHER THE STORM'
BHP, the world's biggest mining business, said this month it. would suspend operations at its Australia nickel mines due to. the substantial economic challenges driven by a worldwide. oversupply of nickel.
The move was a blow to a company that had unsuccessfully bet. its customers would want to pay a premium for nickel. produced in a country that mines sustainably.
BHP alerted that almost two-thirds of Australia's nickel. market remains in threat of closing amid low market value sustained by. a 153% boost in Indonesia's nickel from 2020 through the end. of in 2015 due to Huayou Cobalt and others -. production that environmentalists say has actually partly come by tearing. up the country's huge jungles.
U.S. officials are motivating Jakarta to improve the. nation's mining requirements. Huayou Cobalt did not respond to a. ask for remark.
Australia's nickel industry is among the cleanest in the. world mainly due to how it manages carbon emissions, according. to data from ESG consultancy Skarn Associates. Nickel processed. in Indonesia gives off more than 5 times the amount of carbon as. production in Australia, the data reveal, with emissions from. China's nickel industry nearly 7 times worse than Australia.
Albemarle, the top international producer of lithium, laid off. staff in January in the middle of low costs triggered in part by increase. production from Yongxing Special Materials Technology. and others in China.
If there isn't an incentive above current costs, you're. not going to get the financial investment you need to build the domestic. ( U.S.) supply chain, stated Eric Norris, who oversees Albemarle's. lithium operations.
Fernandez, the U.S. State official, anticipates increasing minerals. demand to offset present international oversupplies, however acknowledged. that miners, in the meantime, remain in a bind.
We need to find methods to weather the storm, Fernandez stated.
TRANSPARENCY
Since January, world leaders have taken a series of steps to. offset China's market control.
President Joe Biden imposed tariffs in May on critical. minerals produced in China, stating ( metals) rates are unjustly. low since Chinese business don't require to worry about a. revenue.
Jim Chalmers, Australia's treasurer, in February said. federal governments should consider support for a distinguished. global trading market for resources produced to higher. ESG requirements.
Chrystia Freeland, Canada's deputy prime minister, in April. stated Ottawa would fight the discarding of crucial minerals by. China, Indonesia and others.
The Chinese mission to the United Nations did not respond to. a request for comment. China has in the in 2015 prohibited exports. of graphite and other metals.
Numerous U.S. senators from both parties have said they are. considering legislation to offer rate insurance for metals,. comparable to a government insurance coverage program for crops, according. to Senate aides. Such a relocation would guarantee miners a cost for. their metals, despite market conditions.
Car manufacturers have been moving very carefully as this pattern for. green prices premiums progresses, conscious that consumers are. hesitant to pay more for EVs.
General Motors, the biggest U.S. car manufacturer, thinks. important minerals should be produced sustainably however does not. want to pay a premium out of concern that it will be unable to. take on Chinese competitors, according to a source straight. involved in the business's minerals procurement.
GM informed it needs providers to adhere to high. requirements, a stance echoed by Volkswagen, BMW and Stellantis.
Tesla and Ford, which is developing an. Indonesian nickel processing plant with Huayou Cobalt and PT. Vale Indonesia, did not respond to ask for. remark.
EXCHANGES
The London Metal Exchange (LME) stated it has actually gotten. positive market feedback regarding its move to price. sustainable nickel. Its partner Metalshub, a German online. metals auction platform, sold 144 metric lots of low-carbon. nickel in May and prepares to publish a matching price when. there are more deals.
Benchmark Mineral Intelligence, a UK-based service provider of. critical minerals pricing and data, has launched green metals. pricing contracts, with each rate derived from how a mining. business complies with 79 requirement that Criteria stated reflect high. production requirements.
You will not have the ability to ensure by any stretch of the. creativity a non-China supply of particular metals unless you're. happy to pay some degree of a premium for that product, stated. Criteria's Daniel Fletcher-Manuel.
That's the message that Jervois has actually been pressing,. unsuccessfully.
Eventually, ESG has an expense, said Bryce Crocker, the. business's CEO. It's a beneficial cost..
(source: Reuters)