Posts Tagged ‘Natural Resources’
Monday, May 13th, 2013
Energy and Natural Resources Market Radar (May 11, 2013)
- China consumed a total of 320.54 tons of gold in the first quarter, surging 25.6 percent year-over-year, according to a report released by the China Gold Association Tuesday. In the first quarter, China produced 89.91 tons of gold – an 11.26 percent increase over the same period last year, according to the association. “The big increase shows that Chinese consumers have strong demand for gold products,” Zhang Bingnan, secretary-general of the China Gold Association, told the Global Times Tuesday.
- Recent data showed the strongest monthly US. coal exports since 1973, rising 58 percent in March (24 percent year-over-year) helped by higher shipments to Asia and Europe.
- Commodity-based exchange traded products (ETPs) suffered record outflows of $9.3 billion in April, data showed on Thursday, as institutional investors dumped gold holdings. Leading wealth managers have been switching out of commodities since the start of the year in favor of equities and bonds as they look for yield, a trend which accelerated in April with a major sell-off across the commodities field, led by a collapse in the gold price.
- Chinese steel giant Baoshan Iron & Steel Co has cut product prices for the first time in nine months because of domestic oversupply. The company cut rates of hot-rolled products for June delivery by 180 yuan a ton and of cold-rolled products by 150 yuan. Baosteel had officially kept May prices flat after raising them for five consecutive months, but traders said the mill has been offering discounts for May bookings. Last time Shanghai-based Baoshan cut prices was on August 10, 2012, for September delivery.
- Copper imports by China declined to the lowest level in 22 months in April, raising concern that demand is waning from the biggest user. Inbound shipments of the refined metal, alloy and products were 295,799 metric tons last month, the General Administration of Customs said on its website today. That was the lowest since June 2011, down 7.4 percent from March and 21 percent lower than a year earlier, according to data compiled by Bloomberg. A drop in arrivals may help bring down local stockpiles as both official and private surveys showed China’s manufacturing expanded at a weaker pace in April.
- Mining assets apparently are depressed enough to attract private equity buyers. The Wall Street Journal reported that Carlyle has bid for a Rio Tinto copper mine in Australia. The initial bid is for a majority stake in the Northparkes mine in New South Wales, WSJ said, citing an unidentified person with knowledge of the matter. The bid price was not revealed according to the report. Rio holds an 80 percent stake in the copper and gold mine and the remaining 20 percent is held by Sumitomo Group.
- Is sub-Saharan Africa, in agriculture, the Brazil of the 1970s? Savills, the property consultancy, believes so – although acknowledging that acquiring land in the Dark Continent is “not for the faint-hearted.” “The African model is likely to show a similar, although accelerated, pattern to agricultural investment opportunities in Brazil,” the group said. “Forty years ago, Brazil had limited agriculture potential with poor infrastructure and a weak economy. However, investment in infrastructure, the availability of credit facilities and policy reform to consolidate land has turned around Brazil into a global hub of commercial agriculture”. The company highlighted “significant growth corridors” developing in southern and eastern Africa “that not only unlock the potential for export for investors, but also significantly strengthen local and regional markets.” These include swathes from Beira in Mozambique to Zambia and from Dar es Salaam in Tanzania to the Congo.
- Merger and acquisition opportunities continue in the oilfield equipment industry as Bloomberg reported that Dresser-Rand could be a takeover target for buyers such as Siemens AG, National Oilwell Varco and Cameron International Corp.
- Iron Ore supply growth to top demand, lowering prices, BHP says. Supply growth over the long term will outpace demand growth, Alan Chirgwin, GM of iron ore marketing, told a conference in Singapore. New supply will displace high-cost production, mainly from China, and result in lower prices and recent price volatility was a result of China’s inventory cycle after aggressive destocking in 2012. While the view on China is unchanged, rebalancing of the Chinese economy suggests resource intensity will consolidate at about half of GDP growth, Chirgwin said. China’s demand growth rate for many of company’s core products is expected to remain in the 2- to 4-percent per year range, he said at a gathering in Singapore.
Monday, April 29th, 2013
Energy and Natural Resources Market Radar (April 29, 2013)
- Crude oil prices reversed a three week down trend and gained over 5 percent week-on-week on bullish U.S. inventory data.
- World industrial production, a key driver of commodity prices, rose by 0.5 percent month-on-month in February, according to data released on Thursday by research firm CPB. This was the fastest pace of expansion since the same month of 2012, with growth in all regions except Latin America.
- China imported 32.17 million tons of iron ore from Australia in March, up 12 percent year-on-year and up 27.5 percent from February, according to data released by the General Administration of Customs. Australia remained the top supplier of iron ore to China, accounting for 50 percent of total imports in March, compared with 45 percent in February.
- Central banks bought the most gold since 1964 last year just before the collapse in prices into a bear market underscored investors’ weakening faith in the world’s traditional store of value. Nations from Colombia to Greece to South Africa bought gold as prices rose for an 11th year in 2011, highlighting the reversal of a three-decade-long bout of selling that diminished the world’s biggest bullion hoard by 19 percent. The World Gold Council says they added 534.6 metric tons to reserves in 2012, the most in almost a half century, and expects purchases of 450 to 550 tons this year, valued now at as much as $25.3 billion.
- Natural gas fell 6 percent from a 52-week high last week to settle at $4.15 per mmbtu as milder weather cut demand.
- Base metal prices came under pressure earlier this week as weaker than expected PMI GDP releases weighed on sentiment.
- Diesel prices are surging in the U.S. Midwest as farmers prepare to plant a record amount of crops this season, eating into below-average fuel supplies. Farmers may sow 174.4 million acres of corn and soybeans this year, boosting output by 30 percent, the Agriculture Department forecast. Midwest prices are at the highest seasonal premium to the Gulf Coast since 2007. The Energy Information Administration estimated agricultural distillate fuel use will rise 5.1 percent in 2013 to the most since 2010. Demand for fuel to run tractors and combines is growing as the U.S. attempts to recover from last year’s drought, the worst since the 1930s. At the same time, refinery maintenance may limit local production, pushing prices higher to entice suppliers to ship diesel north by pipeline from the Gulf Coast rather than send it abroad.
- South Africa needs to lure almost 100 billion rand ($11 billion) of investment in new coal mines to meet demand from electricity generators and prevent a repeat of 2008’s blackouts, the nation’s largest power producer said. Eskom Holdings SOC Ltd., supplier of 95 percent of South African power, sees an annual shortfall of as much as 40 million metric tons from 2018 after securing 80 percent of requirements for the next five years, it said in a presentation to lawmakers. “There is enough coal,” Eskom Chief Executive Officer Brian Dames told lawmakers today in Cape Town. Still, “it’s very important that we see new investment happening.”
- Caterpillar cut its 2013 forecast and lowered “significantly” its outlook for demand from commodities producers, Bloomberg reported. “We remain very positive on the mining industry for the long-term but it’s clear 2013 is going be a challenge for our mining business,” CFO Brad Halverson said in a video on the company’s website. The lower 2013 outlook reflects a sales decline of about 50 percent from last year for traditional Caterpillar machines used in mining and a drop of about 15 percent for sales of machines from the Bucyrus acquisition, Oberhelman said in the statement.
- The Financial Times reported that the cost of Japanese energy imports is spiraling higher as the yen weakens, prompting warnings about the consequences of Japan’s war on deflation. Japan relies on imports of crude oil, coal and liquefied natural gas for almost all of its energy needs, a dependency that has become particularly acute since the 2011 Fukushima disaster, which led to the closure of most of its nuclear power plants. With Japanese industry struggling to compete with U.S. rivals that have access to cheap shale gas, the government is looking for ways to secure affordable energy supplies. But Mr. Abe’s unorthodox economic policy, which has resulted in steep falls in the value of the yen, is instead raising the cost of imports. “The increase in energy prices is like a body blow to the economy. You don’t feel the pain until some time later, but then it hurts a great deal,” said Bob Takai, general manager for energy at Sumitomo, one of Japan’s largest commodity trading houses.
Monday, April 22nd, 2013
Energy and Natural Resources Market Radar (April 22, 2013)
- The price of natural gas climbed 4 percent this week, to another 52-week high of $4.40 per Mmbtu, on a less-than-expected storage injection following cold weather last week.
- Japan’s liquid natural gas (LNG) imports rose 4.4 percent year-over-year to 86.87 million metric tons in the fiscal year ended March, the highest level since the government started collecting data in 1981. By value, LNG imports rose 14.9 percent year-over-year to a record 6.2 trillion yen ($63 billion) which in turn helped to push the country’s trade deficit to an all-time high of 8.2 trillion yen.
- Copper reached the lowest level in almost 18 months in London, heading for a bear market, amid concern that slowing growth from China to the U.S. will curb demand for industrial metals. Copper for delivery in three months slumped as much as 4 percent to $6,800 a metric ton on the London Metal Exchange, the lowest since October 20, 2011, and the first time since that month that prices fell below $7,000. A close at the current level would be 20 percent below the February 2012 peak, deemed a bear market by many investors.
- Brent oil has fallen below $100 for the first time since last July and WTI crude has hit its lowest point in four months due to speculation that that U.S. supplies rose.
- Brent oil prices have been weak recently but analysts at Deutsche Bank believe that physical oil demand will ramp up and spur a recovery in oil prices in the months ahead. Asia is undergoing an extraordinarily heavy refinery maintenance period, which they estimate should peak in April and ease sharply in June. This could mean up to 2 million barrels per day of capacity restarting which implies a significant pick up in feedstock demand. China’s crude oil demand is also set to increase not only post turnarounds but for restocking purposes following five straight months of draws that have left inventories at the lowest level since March 2012.
- The coal division head of Indonesian state-owned utility PLN said that “Domestic consumption was only 18 percent of the total 2012 output as the rest was exported. But the domestic need for coal will surge in the coming years and we may have to import coal to meet the demand.” He cited research that with only 3 percent of global reserves, Indonesia was the world’s largest exporter. In 2012, Indonesia consumed 67 million tons of coal and exported 305 million tons, but by 2020, the domestic needs are expected to climb to 125.7 million tons according to the Jakarta Post.
- The Democratic Republic of Congo banned exports of copper and cobalt concentrates to force mining companies to add value to minerals before shipping them, Mines Minster Martin Kabwelulu said. Companies have 90 days to clear their inventories of concentrated minerals, he said. “We want companies to export mineral products with great added value,” Kabwelulu said. A separate letter dated April 12, attached to the decree and signed by Kabwelulu, says that companies can still export concentrated minerals for further processing if they receive permission from the mines minister, count the final metal content as coming from Congo, and pay the related taxes and fees to the Treasury.
- China’s GDP rose 7.7 percent year-over-year, the National Bureau of Statistics said. That number missed the consensus estimate of 8 percent and was below the 7.9 percent growth in the fourth quarter 2012. March industrial production gained less than estimated while retail sales growth matched forecasts. China’s industrial output in March rose 8.9 percent, the report showed. That compares with the consensus estimate of 10.1 percent and a 9.9 percent pace in the first two months combined. Retail sales grew 12.6 percent, matching the consensus forecast. Fixed-asset investment excluding rural households in the first quarter increased 20.9 percent, against the consensus estimate of 21.3 percent and a 21.2 percent pace in the first two months.
Sunday, April 14th, 2013
Energy and Natural Resources Market Radar (April 15, 2013)
- Natural gas futures (NYMEX) closed the week at another 52-week high of 4.23 per mmbtu.
- Imports of liquefied natural gas by Japan’s 10 major power utilities in the fiscal year ended March rose to 58.3 million tons from 55.5 million tons in the prior year, the Federation of Electric Power Companies said.
- Chinese car sales continue to boom, rising 15 percent year-over-year in March to 1.46 million vehicles, according to data released by the Chinese Passenger Car Association (CPCA). Over the first quarter they totaled 4.2 million, 19 percent higher year-over-year. This is potentially good news for palladium, as nearly one-sixth of total demand was from Chinese autos in 2012.
- Bloomberg reported that coal miner Xstrata will sell thermal coal to Tohoku Electric Power at $95 per ton, the lowest settlement price since 2009.
- Three high-profile benchmark forecasters have lowered their global oil demand growth forecasts reflecting a more bearish tone to the outlook for this year. The U.S. Energy Department and the Energy Information Administration trimmed their 2013 growth forecast by 50 thousand barrels per day and now see oil demand growth at 960 thousand barrels per day this year. OPEC cut its 2013 forecast by 40 thousand barrels per day and now expects global oil demand to rise by just 800 thousand barrels per day this year. The International Energy Association cut its estimate by 45,000 barrels a day, predicting that world consumption will increase by a “subdued” 795,000 barrels a day, or 0.9 percent, to 90.58 million barrels a day this year.
- The Potential Gas Committee released its annual report this week and suggested that potential U.S. natural gas reserves are 2,354 trillion cubic feet (TCF) up by 486 TCF from last year. This is additional to the proven reserves of 305 TCF. The increase is attributed to a reassessment of the potential of the Marcellus and Utica shale plays. This group is funded in part by the exploration and production companies and the Wall Street Journal suggests that this new study will help lawmakers with decisions on U.S. gas exports.
- The high cost of energy in Chile is threatening the competitiveness of the country’s copper industry and poses a major challenge for new development, industry executives at a copper convention in the Andean nation said this week. Electricity costs in Chile, the world’s top copper producer, have risen 11 percent per year since 2000, making it one of the most expensive places in the world to secure energy for mining projects. With regulatory gaps making it difficult to permit new power infrastructure, the situation could get critical, according to Diego Hernandez, chief executive of Antofagasta Plc. “I think Chile can continue to have a huge advantage in mining,” he said. “We have the deposits, but if we don’t solve, among other things, the fundamental issue of making energy happen at a competitive price, it’s not going to succeed.”
- BHP Billiton Ltd., the world’s biggest mining company, said Australia’s mining industry needs a new plan as the sector battles costs that are rising faster than its global competitors. “When we talk about capturing the next generation of opportunities in the resources industry, we need a new plan – a plan with national productivity at its core,” Jac Nasser, chairman of the Melbourne-based company, said today in notes for a speech to the Australian British Chamber of Commerce. “The industry has experienced unprecedented growth. At the same time Australia’s costs rose more quickly than our global competitors.” BHP paid $9 billion in taxes and royalties in Australia last year, out of a global total of $11 billion, Nasser said. The company had 52 percent of its long-term assets located in Australia as of the year ended June 30, 2012. “This is an effective tax rate in Australia of 45 percent,” he said.
- Inventories of steel products in China hit a record high in March, the Ministry of Industry and Information Technology (MIIT) revealed, in further bad news for the nation’s steel sector, which has been hit hard amid the economic showdown. The total stockpiles of five major steel products across 22 cities reached a new record of 15.57 million tons during March, up 22.9 percent compared to a month earlier, the ministry said in a statement on its website, citing the latest figures from the China Iron and Steel Association (CISA).
Monday, April 8th, 2013
Energy and Natural Resources Market Radar (April 8, 2013)
- The price of natural gas gained nearly three percent this week to $4.14 following a positive Goldman Sachs report that highlighted tighter supply and demand fundamentals after colder than normal temperatures last month.
- According to OPEC, China is expected to overtake the U.S. as the world’s top crude importer by 2014. China’s crude oil imports may surpass 6 million barrels a day by the end of this year.
- Oil refiners in Europe will shut 10 percent of their plants this decade as fuel demand falls to a 19-year low. Of the region’s 104 facilities, 10 will shut permanently by 2020 from France to Italy to the Czech Republic, a Bloomberg survey of six European refinery executives showed. Oil consumption is headed for a fifth year of declines to the lowest level since 1994, the International Energy Agency estimates. Two-thirds of European refineries lost money in 2011, according to Essar Energy Plc, owner of the U.K.’s second-largest plant.
- The U.S. petrochemicals industry is set to make a spectacular comeback after suffering from low demand and high feedstock costs for most of the previous decade. As per GlobalData, in the middle of the last decade, the discovery of shale gas changed the dynamics of the U.S. petrochemicals industry by leading to the revival of the natural gas industry which improved the ethane supply and created high profit margins at the end of 2011 and 2012.
- China, the world’s number two corn importer, may need to raise corn imports to a record 7 million tonnes this year due to heavy snow this winter that damaged the grain and made it less suitable as animal feed, according to China Daily. The projected import figure is close to the Chinese government’s import quota of 7.2 million tonnes for corn.
- Plans to build a new industry to export liquefied natural gas (LNG) off Canada’s West Coast have become a lot more complicated. Discontent among Asian buyers about high LNG prices has evolved into a standoff between Asian consumers and North American producers that could make it more difficult to get new projects off the ground. The pricing disagreement represents a new hurdle for the five LNG projects planned for British Columbia, which are facing high costs and construction challenges, and have been banking on the so-called “Asian premium” to make their economics work. Japan is paying about US$17 per million British thermal units for its LNG imports, but it is well aware of the shale gas revolution under way in the Western hemisphere and is pushing for prices that are reflective of the cost of supply, plus liquefaction and transportation costs, Mr. Maeda said. The supply cost is around US$6 to US$7 in North America, while the market price is around US$3 to US$4 because of ample supplies from shale discoveries.
- The Chile port strike is set to continue as no accord reached with the union, Bloomberg reports. The strike, which began at Angamos March 16 and spread to other northern and central Chilean ports, is preventing about 9,000 metric tons per day of refined copper from being shipped, or about 60 percent of the country’s 16,000-ton total, Mining Minister Hernan De Solminihac told reporters in Santiago. The port strike is also restricting imports of materials such as sulfuric acid used by mines and may lead to the halting of some operations, he said.
- Gold is likely to be in a bear market by early 2014 as the world economy returns to “normality,” Thomson Reuters GFMS, the research group, said today at the launch of the 2013 edition of its annual gold survey. However, despite the present price weakness, it is premature to say it is there yet, they argued, predicting this year “one last flourish” that will see the gold price rise as high as $1,850 an ounce and average $1,730 an ounce, a nominal record (with a low of $1,530 an ounce). The rationale? A forecast surge in investment demand of 20 percent year-over-year, driven by easy money, sluggish economic growth, rising inflation and the possibility of shocks to the economic system. Otherwise demand is forecast to decline, with jewelry fabrication hit by the high price and sluggish economy, industrial demand suffering from substitution by cheaper alternatives and central bank purchases easing from 2012′s 48-year high. More supportive, however, will be weak supply, with only a modest increase in mine output and scrap supply.
Saturday, March 30th, 2013
Energy and Natural Resources Market Radar (April 1. 2013)
- Oil production in Texas’ Eagle Ford shale formation climbed 50 percent in January versus a year earlier. Growing production out of Eagle Ford is helping fuel a renaissance in Texas crude. The state produced 2.22 million barrels a day in December, the highest monthly level since June 1986, according to the U.S. Energy Department’s Energy Information Administration.
- Front-month natural gas futures settled at $4.07 mmbtu, their highest level in 18 months, amid expectations that elevated demand could wipe out the longstanding glut in natural-gas inventories. The upswing in demand caused by a blast of unseasonably cold weather has led to several weeks of unusually large withdrawals from inventories. That has caused inventory levels, which have been well above normal for more than a year, to approach seasonal norms again.
- Platinum rallied after Russian Natural Resources Minister Sergey Donskoy raised the possibility of South Africa and Russia acting together in the platinum group metals markets, where they have a combined 80 percent of mine output. Speaking to Bloomberg at the BRICS summit in Durban, he said “our goal is to coordinate our actions accordingly to expand the markets for realization of these metals.” No details were given on how such coordination would work given the importance of private mining companies in PGM production, or the reaction of major consumers.
- In an analysis report on the iron ore market, the National Development and Reform Commission said a supply glut in the iron ore market has been formed, as demands in China and other economies cannot digest the increasing supply at home and abroad. As China’s strong demand for steel begins to ease after the fade-out of the massive stimulus plan during the international financial crisis, combined with slower consumption in developed economies and a limited boost from emerging markets, momentum on the demand side is giving way to supplies. “Given the trend, an oversupply situation is inevitable,” the report said.
- Copper eased down 1.4 percent this week to close just above $3.40 per pound as warehouse inventories of the metal rise to multi-year highs.
- According to news on plastemart.com, the U.S. has overtaken the Middle East as the region with the cheapest petrochemicals feedstock, for the first time since the Gulf’s industry was established. The boom in shale gas production has created a wealth of cheap gas feedstock in North America, driving a new generation of petrochemicals expansion in the U.S. “The cash cost per ton of ethylene in the U.S. in Q4-2012 was lower than the cash cost in Saudi Arabia,” said Nexant vice president Graham Hoar, speaking at the MEED Middle East Petrochemicals 2013 conference. “It is a dramatic change in economics in the U.S.”
- The U.S. Department of Interior is cutting federal mineral payments to 35 states by about $110 million this fiscal year as part of the automatic federal spending cuts that started this month. Wyoming Governor Matt Mead announced this week that his state faces the biggest cut; at least $53 million over the next five months. Wyoming is the nation’s leading coal-producing state and last year received nearly $1 billion in federal mineral payments. Texas is losing only $324,742. The federal government paid a total of $2.1 billion last year to the states, representing their share of revenue from energy and mineral production that occurred on federal land within the states, as well as offshore.
- WSJ’s “Heard on the Street” column speculates that oil prices could head lower in the medium term as demand trends move lower due to fuel-efficient vehicles and environmental concerns. The article deduces that lower demand will lead to lower prices.
- Researchers at the University of Oklahoma, Columbia University and the U.S. Geological Survey published a report linking Oklahoma’s largest recorded earthquake to waste water disposal from oil production. Oklahoma’s geological office said this week that the 2011 earthquake was likely, “the result of natural causes.” The waste water blamed for the earthquake was from conventional wells in the Hunton formation.
- Stockpiles of steel products at large Chinese producers surged to a record, near 15 million tons as of mid-March, according to industry data on Wednesday; reflecting tepid demand that has forced mills to cut output.
Monday, March 25th, 2013
Energy and Natural Resources Market Radar (March 25, 2013)
- Natural gas futures climbed to an 18-month high in New York as an unusually cold start to spring in the U.S. may bolster demand for the heating fuel.
- The Baltic Exchange’s main sea freight index, which tracks rates for ships carrying dry bulk commodities, continued its upward trend this week for the 17th consecutive day, pushed up by rates across all shipping segments.
- World steel production for February 2013 at 123 million tonnes was up 1.2 percent year-over-year driven by China, where production at 61.8 million tonnes was up 9.8 percent year-over-year.
- Rallies in industrial metals led by stronger than expected HSBC China flash PMI were short lived with copper reversing its gains to reach a four-month low this week.
- U.S. raw steel production last week was 1.62 million tonnes, which is a fall of 2.35 percent week-on-week and means that capacity utilization is down to 74.5 percent, the second lowest level year to date. In addition, overall steel output in the first 11 weeks of this year is over 5 percent lower than the same period in 2012.
- Colombia exported 2.9 million tonnes of coal in February, the lowest monthly figure for the past 10 years and just 11 percent higher than the 2.6 million tonnes shipped during February 2003. Striking miners, port delays, and rail logistical problems all contributed to the weak exports.
- Later this year, U.S. oil production is set to surpass the amount of crude the country imports for the first time since 1995, the U.S. Energy Information Administration (EIA) said this week. The boom in U.S. shale or tight oil production unleashed by advances in horizontal drilling and hydraulic fracturing, known as “fracking,” is expected to see U.S. output top 8 million barrels per day by the end of 2014, the EIA said. That would be the highest level since 1988.
- China may have 20-30 million tons of annual shortage in feed grain supply in 2-3 years, boosting needs for imports, Yi Ganfeng, vice president of Beijing Dabeinong Technology Group, the country’s second-biggest feed miller, said on the sideline of the JCI grain conference in Kunming. As China’s livestock industry matures, feed mills will prefer to use bulk-commodity grain, including corn and dried distillers’ grains, in place of traditional materials such as oilseed meal, used by smaller farms now. China’s meat demand may expand about 25 percent from current levels in about 5 years, spurring consumption of feed grain. China would import 10 million tons of corn a year now if there were no policies restricting imports.
- U.S. drivers may face a $13 billion increase in the cost of gasoline this year as the price of federally mandated ethanol credits has risen 10-fold for oil refiners. Oil refiners such as Valero, the world’s largest independent refiner, and Exxon Mobil are pushing the U.S. Environmental Protection Agency to reduce the amount of ethanol they’re required to add to gasoline to avoid what they say will be a sharp spike in prices at the pump just as the summer driving season begins.
- Refiners buy biofuel credits, known as RINs, which are available as an alternative to actually blending ethanol into gasoline. The cost of those credits has ballooned from seven cents at the start of the year to more than $1 as the 2013 federal mandate for biofuel exceeds 10 percent of gasoline sales, the maximum that refiners say the market can absorb.
- At the annual gathering of the American Fuel and Petrochemical Manufacturers in San Antonio yesterday, Michael Jennings, chairman and chief executive officer of Dallas-based refiner HollyFrontier Corp., said energy traders and hedge funds are treating ethanol credits like a casino, which “will drive, in its current form, higher prices at the pump.” Consumers are at risk of paying 10 cents a gallon more for gasoline this year if the ethanol credits continue to sell at a price of more than $1.
- The Wall Street Journal is cautious on iron ore miners. A “Heard on the Street” column says with most forecasters seeing a drop in iron ore prices, miners should proceed with care and maintain a healthy price to uphold profitability.
Sunday, March 10th, 2013
Energy and Natural Resources Market Radar (March 11, 2013)
- The price of natural gas gained nearly 5 percent this week to $3.62 per Mmbtu, its third weekly gain, as late winter storms increased demand for the fuel. Additionally, MDA Weather Service predicted another round of below-normal temperatures for the Eastern region of the country next week.
- The Energy Information Administration (EIA) said U.S. crude oil production reached 7 million barrels per day in February due to increase in the crude production from the Bakken oil field in North Dakota.
- TheFinancial Times notes that China has overtaken the U.S. as the world’s largest net importer of oil. U.S. net oil imports dropped to 5.98 million barrels a day in December, the lowest since February 1992, according to figures from the EIA. In the same month, China’s net oil imports surged to 6.12 million barrels a day. The U.S. has been the world’s largest net importer of oil since the mid-1970s. U.S. domestic oil production is booming on the back of the oil shale revolution, reducing the need for crude oil imports.
- China’s daily crude steel output rose 1.4 percent to 2.03 million tons in late February, the China Iron & Steel Association said.
- According to copper miner Teck Resources Inc., investors continue to underestimate the true copper cost curve. TCK management believes costs are tracking 20 percent above current long term estimates of $2.50 to $2.75 per pound, and once you include sustaining capital of $0.25 per pound, you actually end up with a price closer to $3.50 per pound. As such, TCK expects additional projects to be shelved or curtailed. However copper has the best 10 year supply-demand fundamentals in their commodity universe.
- Rusal PLC , the world’s largest aluminum producer, will cut annual output by around 7 percent this year, the company said Monday, paring excess global supply at a time of lackluster demand, depressed prices and rising output in China and the Persian Gulf.
- Texas is poised to more than double daily oil production by 2020, surpassing a 1972 record with surging output from the Eagle Ford shale and Permian Basin, the state’s petroleum regulator said.
- Oil production may rise to as much as 1.75 million barrels a day in 2013 from about 1.5 million barrels a day last year, Barry Smitherman, chairman of the Railroad Commission of Texas, said in an interview at the IHS CERAWeek conference in Houston today. The commission oversees oil and gas drilling and production in the state.
- By 2020, Texas’ crude output may exceed the 3.45 million barrels a day seen in 1972 if prices stay high enough to make drilling economic, he said.
- “The Eagle Ford really continues to ramp up, especially the liquids and crude portion,” Smitherman said. The Eagle Ford, which includes an area south of San Antonio, may reach 800,000 to 900,000 barrels a day by 2016, while the Permian in West Texas may reach one million barrels a day, he said
- The Los Angeles Times writes that the Mexican government has passed a reform that allows foreign investment in Pemex. The article goes on to say that this could eventually allow U.S. oil firms to drill in the region.
- According to the U.S. Department of Agriculture, China is poised to become the world’s largest wheat producer in the next 10 years.
- Following the death of Venezuelan President Hugo Chavez this week, Bloomberg reported that China is taking a look at the risks Chavez’s death poses to China’s investments in the country that total around $50 billion after 14 years of close ties with the leader that have led to contracts to build railroads, housing and power stations. One analyst at Mirae Asset Securities said “the death of Chavez could lead to oil supply uncertainties from Venezuela and could jeopardize Venezuela’s oil exports to China in the short term.”
Sunday, February 24th, 2013
Energy and Natural Resources Market Radar (February 24, 2013)
- U.S. existing home sales increased 0.4 percent month-over-month to 4.92 million units at an annualized rate in January, and the number of unsold properties declined to the lowest level since 1999. For comparison, total sales last year were 4.66 million units, the highest number since 2007. According to Macquarie, this data suggests the U.S. housing market recovery continues to progress, and further positives can be drawn from the fact that distressed sales continued to decline as a proportion of existing home sales, accounting for 23 percent of the total last month, compared with 35 percent in January 2011.
- World industrial production, a key determinant of metals demand, rose a seasonally adjusted 0.6 percent month-over-month in December 2012, according to research group CPB. On a year-over-year basis output was 2.8 percent higher, a relatively modest increase, with production in the advanced economies down 0.8 percent year-over-year and in emerging economies up 5.9 percent year-over-year. The data underlines the contrasting fortunes in industrial production seen in the last decade, with output in the advanced economies in 2012 as a whole just 1 percent higher than it was in 2000; over the same period it has risen by 141 percent in the emerging economies.
- Oil prices fell this week as the NYMEX crude oil contract settled at $92.84 on Thursday, the lowest settlement this year on continued weakness following the Department of Energy weekly supply report showing that crude inventory climbed to the highest level since July. Selling pressure also weighed on crude as indications that Saudi Arabia would raise production in the second quarter after making sizable cuts to supply since late last year.
- Commodities endured a broad-based sell-off this week as the U.S. Dollar strengthened after the Federal Open Market Committee minutes revealed concerns about costs and risks of further asset purchasing plans. Tighter policy aimed at property speculation in China and liquidity withdraw by the People’s Bank of China (PBOC) also exacerbated market fears. Most industrial metals have given up their gains year to date and moved into negative-return territory.
- China has a “structural shortage” in its grain supply because demand continues to rise, Minister of Agriculture Han Changfu said in a statement posted on the central government website. For the second year, China has been a net importer of rice, wheat and corn, Han said. China faces a “very difficult task” balancing its grain demand and supply, according to the statement, which summarized the minister’s speech at a February 17 national conference on this year’s planting.
- Japanese Prime Minister Shinzo Abe will ask President Barack Obama to allow shale gas exports as the world’s third-largest economy grapples with soaring energy costs after 2011’s nuclear disaster closed reactors. The request will be made at a meeting Saturday between Abe and Obama in Washington, said three Japanese officials, who declined to be identified because the information isn’t public. The bill for importing liquefied natural gas (LNG), combined with a weaker yen, prompted Japan to post a record trade deficit in January of 1.63 trillion yen ($17.4 billion), the Finance Ministry said yesterday. The switch from nuclear to gas-fired generation after the accident at Fukushima forced Japan to increase LNG imports 11 percent last year. Abe wants Obama to share the benefit of surging output from shale fields, which has depressed the cost of U.S. gas to about 20 percent of Asian prices, by approving export terminals. Some U.S. politicians oppose shipments overseas because the lower energy costs are making manufacturers more competitive, helping to create factory jobs.
- Grain prices will fall “significantly” in 2013 due to strong corn and soybean production in 2013, U.S. Department of Agriculture’s chief economist predicted this week at the agency’s annual Agricultural Outlook Conference in Arlington, Virginia. Joe Glauber predicted that corn prices will average $4.80 a bushel in 2013-2014, down 33 percent from the marketing year before. Soybean prices, he estimated, would fall 27 percent to $10.50 per bushel. A return to normal weather conditions, he predicted, will result in higher production that will depress prices.
- Bloomberg news reported that a tax break used by oil and gas pipeline companies such as Kinder Morgan Energy Partners LP will cost the U.S. government $7 billion through 2016, about four times more than previously estimated, Congress’s tax scorekeepers said this month. The nonpartisan Joint Committee on Taxation quadrupled its cost estimate for exempting the fast-growing “master limited partnerships” from corporate income tax in the year ended in September to $1.2 billion from $300 million. The annual cost will rise to $1.6 billion by fiscal 2016, the committee said. The revision reflects the growth of tax-free publicly traded partnerships. They have taken over the U.S. pipeline business and are expanding into the rest of the oil and gas industry, partly by gobbling up dozens of tax-paying companies. With President Obama and congressional Republicans calling for a tax overhaul, the higher cost estimate may make it harder for industry to protect the MLP subsidy, said John Buckley, a tax professor at Georgetown University Law Center.
Saturday, February 16th, 2013
Energy and Natural Resources Market Radar (February 18, 2013)
- Global oil price benchmark Brent has climbed 7 percent since the start of the year and, according to Deutsche Bank commodity analysts, it has been propelled by positive economic data that has renewed optimism about global growth and consequently global oil demand, including: January oil data for China confirming a strong start to the year with near-record crude oil imports, driven less by stockpiling and more by demand; indications that Saudi Arabia has cut production to around 9 million barrels per day, more than 1 million barrels per day below peak levels in the prior summer which has tightened global supply; and geopolitical tensions in Middle East/North Africa.
- According to Macquarie research, Indian thermal coal imports reached a record high of 140 million tons on an annualized basis in December 2012, overtaking Japan to make the country the second-largest consumer of seaborne coal in gross weight terms (behind China).
- Also in coal, the U.S. exported 10 million tons in December, the highest since September, which brought full-year coal exports to a record 124.4 million tons, an 18 percent year-over-year increase.
- The spot gold price fell to a six-month low this week, dragging gold mining equities down to nine-month lows as well.
- Natural gas fell 4 percent this week to a one-month low price on weaker demand, per weekly Energy Information Administration inventory data.
- Colombia, the world’s fourth-largest coal exporter, produced 89.2 million tons of coal last year, missing its full-year target after problems with strikes and environmental permits bit into output, the government said on Thursday. Colombia’s mining sector has been hit over the last year by a spate of labor disputes, including a strike at the main coal railway and a walkout at a Glencore-owned mine, as well as delays in environmental permits and a rise in guerrilla attacks. Coal production last year missed the 2012 target by nearly 9 million tons, according to the National Mining Agency, a new government body created to handle increasing demands on public institutions from a boom in the mining sector.
- China’s demand for commodities will grow “strongly” for some time, albeit at a slower pace, Reserve Bank of Australia Assistant Governor Christopher Kent said, “Because the Chinese economy is so much larger now, even a somewhat slower rate of growth represents a large quantity of new demand for raw materials.” Kent told the Committee for Economic Development of Australia forum, “For much of the past year we have been looking for signs that China’s growth might stabilize…. A broad range of indicators suggests that this has now occurred, with economic conditions improving through the second half of 2012.”
- PwC has issued a report that claims that “The global impact of shale oil could revolutionise the world’s energy markets over the next couple of decades, resulting in significantly lower oil prices, higher global GDP, changing geopolitics and shifting business models for oil and gas companies.”
- Australia’s long boom in mining investment is likely to peak sometime this year, creating much uncertainty about whether the rest of the economy can take up the slack, a top central banker said on Friday. Reserve Bank of Australia (RBA) Assistant Governor Christopher Kent said the long-term outlook for the country’s resources sector remained strong thanks to demand from an urbanizing China. But there were risks near-term. “Our expectation is that growth of economic activity will be a little below trend over 2013 before picking up a little in 2014,” said Kent, who heads the central bank’s economics unit.
- U.S. copper makers Southwire and Encore Wire are launching a legal challenge against the U.S. Securities and Exchange Commission (SEC) approval of JPMorgan Chase’s physically-backed copper exchange traded fund (ETF). The companies, which say the copper ETF will inflate prices for the metal and distort supplies, filed a notice of appeal on Tuesday asking the U.S. Court of Appeals in Washington, D.C. to review the SEC’s December 14 ruling that gave the green light for the copper ETF.
- Moody’s Investor Service warned that environmental factors, such as water scarcity, could adversely impact the ratings of global mining companies if they failed to proactively manage the accompanying operational and political risks to their businesses. In its “Global Mining Industry: Water Scarcity to Raise Capex and Operating Costs, Heighten Operational Risks,” Moody’s highlighted that mining projects were already competing with local communities for limited water resources, while having to comply with stringent environmental rules that could add to the capital expenditure (capex) budgets for new mines.