Energy and Natural Resources Market Radar (January 16, 2012)

Saturday, January 14th, 2012

Energy and Natural Resources Market Radar (January 16, 2012)

Strengths

• Desjardins highlighted that Chinese December base metal import data is showing that unwrought copper imports reached 508.9 thousand metric tons, up 12.6 percent month-over-month and 47.7 percent year-over-year. Iron ore imports of 64.1 million metric tons were down 0.2 percent month-over-month while up 10.3 percent year-over-year.
• The latest SteelBenchmarker assessment by World Steel Dynamics shows a continuation of the upward trend in U.S. steel prices. The U.S. hot-rolled coil (HRC) assessment topped $800 per ton for the first time since July and scrap prices hit $466 per ton of shredded material, the highest level since August 2008.
• Reuters noted that OPEC’s crude oil production was more than 30 million barrels per day in December 2011, the highest volume since October 2008.
• Preliminary shipping data shows that Brazilian shipments were up 5.6 percent year-over-year. Shipments to China exceeded the 200 million tons per annum mark for the first time last year and iron ore exports reached an all-time high run rate in December.

Weaknesses

• The Global Resources Fund (PSPFX) underperformed its benchmark by a small amount over the last week due to being underweight large capitalization basic materials stocks and being overweight U.S. exploration and production stocks with natural gas exposure.
• Natural gas fell 14 percent this week to $2.64 per British thermal unit (Btu), a decade low. Supply growth in North America from rapid oil and gas shale basin development has created a glut of natural gas that will require a combination of increased industrial and power generation demand as well as a reduction in natural gas well drilling to balance the market.
• Deutsche Bank reported that the dry bulk index has fallen sharply in the beginning of 2012 while iron ore prices remain relatively supported. Deutsch Bank believes the decline in shipping rates is a function of slowing demand from Chinese steel production ahead of its New Year and lower shipments from Australia and northern Brazil due to rainy weather. China steel production has declined for six consecutive months. Deutsche Bank expects spot iron ore and freight rates to face ongoing headwinds in the first and second quarters of 2012. However, an end to the rains and an improvement in global growth during the second half of 2012 could lead to subsequent strength.
• China’s import growth fell to a two-year low in December, underscoring a slowdown in the fastest-growing major economy that deepens risks for the global outlook.
• The Central Dispatch Department of the Fuel and Energy Complex said that Russia’s crude oil exports fell by 3.9 percent year-over-year to 212 million tons in 2011.

Opportunities

• BCA research showed that equity multiples now discount a severe global growth slowdown at a time when mining stocks still offer leverage to the bullish China income convergence story. The unfolding recession in Europe and property slowdown in China have crushed mining share prices.
• Macquarie reports that Vale has now declared force majeure on certain iron ore deliveries, accounting for around 20 percent of January output. They emphasized that this now serves to indicate that the seaborne iron ore market will become fundamentally tighter during the quarter, requiring both destocking in China and a reincentivization of Chinese domestic output through higher prices.
• Deutsche Bank noted that oil production in the state of North Dakota climbed 42 percent (year-over-year) in November to 510,000 barrels per day. Success in developing tight oil plays across the country has created a realistic prospect that U.S. net oil imports as much as a percentage of total usage could fall significantly further. The figure has already fallen from 65 percent in 2005 to 47 percent in 2011.
• The U.S. Energy Information Administration (EIA) released its first Short Term Energy Outlook for 2012, in which the agency revised global oil demand downward by 140,000 barrels per day in 2012. This brings the EIA’s annual growth rate in-line with Barclays’ forecast at 1.27 million barrels per day. However, the key feature of the report was the large downgrade to non-OPEC supply for both 2011 and 2012. Non-OPEC supply growth for 2011 was reduced by a massive 310,000 barrels per day to just 90,000 barrels per day.

Threats

• Italy faces a “significant chance” of a downgrade by Fitch Ratings, which is reviewing all European sovereigns and will make a decision by the end of the month.
• Workers in Nigeria began a national strike, threatening to shut ports and disrupt oil production and exports. Workers are striking in reaction to the government’s decision to lift fuel subsidies, more than doubling gasoline prices. The strike makes Nigeria the third OPEC nation with an ongoing supply threat.
• Vale, the world’s largest iron ore exporter, reported that it had to halt some iron ore shipments from Brazil due to heavy rainfall that has killed dozens of people. Due to the rains that have affected its operations in Brazil, the miner estimates it will lose approximately 2 million tons of iron ore shipments, almost 1 percent of its annual output.

Tags: Basic Materials, Basin Development, British Thermal Unit, Crude Oil Production, Deutsch Bank, Exploration And Production, Global Resources, Hot Rolled Coil, Import Data, Iron Ore Exports, Iron Ore Prices, Market Radar, Million Metric Tons, Natural Gas Exposure, Resources Fund, Reuters, Shipping Data, Steel Dynamics, Steel Prices, World Steel Dynamics
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Energy and Natural Resources Market Cheat Sheet (October 31, 2011)

Monday, October 31st, 2011

Energy and Natural Resources Market Cheat Sheet (October 31, 2011)

Strengths

• The commodities complex, including industrial metals and crude oil, gained across the board as markets welcomed a deal by the eurozone leaders this week. West Texas Intermediate (WTI) crude oil gained nearly 7 percent and copper jumped more than 14 percent this week as investors’ risk appetite exploded. Commodity-related equities also rallied which drove gains in the Global Resources Fund (PSPFX).
• Macquarie Research highlighted that U.S. durable goods orders, excluding transportation equipment, rose 1.7 percent in September. This was greater than the consensus expectation and is the strongest reading in the last six months.
• Scotiabank noted that copper inventories in Asia are falling at a rate of 50,000 tonnes per week, creating upward pressure on the copper price. The rapid decline means there’s potential for zero inventories by Christmas.
• Rising oil prices have led to a rise in corporate earnings for energy companies. Major producers including Exxon Mobil, Royal Dutch Shell and France’s Total reported strong earnings results for the third quarter this week. Both Exxon Mobil and Royal Dutch Shell reported earnings 40 percent greater than a year ago, while Total’s profit rose 13 percent over the same time period, according to Resource Investing News.

Weaknesses

• Despite positive numbers across the board for the week, the Alerian MLP Index and the Baltic Dry Ships Index were laggards in the sector. However, each saw positive gains, up 3.1 percent and 3.8 percent, respectively.
• A Macquarie report this week noted that the latest SteelBenchmarker assessment by World Steel Dynamics has again highlighted the pressures facing the steel industry. The benchmark World Export hot rolled coil (HRC) price fell 4.2 percent over the past 14 days to $656 per tonne, the lowest since December 2010.
• Non-OPEC oil supply outages have been running twice the level seen in 2010. Further evidence of the supply-side deterioration was seen in the extremely poor set of August numbers for U.K. domestic production. At 808,000 barrels per day, total production is at its lowest levels since 1978.

Opportunities

• Data compiled by Bloomberg this month shows that traders have rising bullish expectations for the agriculture sector. Options traders are snatching up protection against declines in agricultural stocks at the fastest rate in four years. Puts to sell the Market Vectors Agribusiness ETF outnumber calls by more than 2-to-1, the largest discrepancy in almost a year. Over the past month, $2.7 million has been invested in the agribusiness ETF, second-most among all U.S.-listed global equity ETFs.
• China will be reporting its October HSBC Manufacturing Purchasing Managers Index (PMI) on Monday, October 31. The flash PMI announced this past Monday showed expansion in the Chinese manufacturing sector for the first time since mid-summer and the country contributed more than half of global incremental oil demand for the month of September, according to the Financial Express. An accelerated PMI could have a meaningful effect on commodities.
• A shortfall in diesel fuel supply is spreading across China. The Xinhau news agency is reporting that private gas stations are scouring the country for diesel supplies and lines are growing longer at filling stations in major cities. Diesel fuel shortages are common in the winter but longer and heavier-than-usual refinery maintenance mixed with a reduction in retail prices could create the perfect recipe for a squeeze once again this year. PetroChina imported 120,000 tonnes of diesel fuel in October to meet the increasing demand while China National Petroleum Corp. (CNPC) is running its refineries at full capacity. Refinery runs have increased 5.7 percent on a year-over-year basis and the company has encouraged refineries to reduce naphtha output to allow for higher diesel production. Further, CNPC has said that it will raise refinery runs to the second-highest level on record next month in order to maximize diesel output.
• Resource Investing News says rising production costs are putting downward pressure on fertilizer profits. Fertilizer production is very energy intensive, with production requiring significant amounts of sulfur, ammonia and natural gas. Analysts worry that rising input costs and shrinking margin profits may negatively impact the entire industry. However, Potash Corporation of Saskatchewan anticipates improving margins over the near future due to “economy of scale” in terms of potash production. According to Potash, “with demand expected to rise, we believe our expanding potash capability provides a unique growth opportunity. The powerful levers of selling more volumes at higher prices, with the potential for lower per tonne operating costs, offer significant gross margin potential in the years ahead. Beyond the opportunity for margin expansion, the potential for lower per-tonne mining taxes and improved earnings from our equity investments provides significant growth potential.”

Threats

• September PMI data across Emerging Europe will be released on November 1. Roubini Global Economics (RGE) is forecasting further weakening in manufacturing conditions, reflecting a decline in export orders and weakening growth outlook in the eurozone.
• On Wednesday, Freeport McMoRan declared force majeure on shipments of copper concentrates from its Grasberg copper mine in Indonesia as an increasingly acrimonious labor strike over pay and conditions continued into its fifth week. Mineweb suggested that this would mean that the company is not anticipating a protracted period of disruption at the mine.
• In the midst of earnings reporting season, Resource Investing News reported that many analysts are skeptical about producers being able to reach their production targets. As an example, Exxon Mobil will need to pump out 5 million barrels a day to reach its 4 percent growth target for 2011. For the September quarter, Exxon Mobil reported producing 4.28 million barrels a day. Analysts have speculated that one problem for the producers is that companies must sign production-sharing contracts with local governments in some countries. This means oil producers receive a smaller output when countries cash in on rising crude prices. Such agreements are prevalent in Africa, which accounts for 20 percent of Exxon Mobil’s crude oil supply.

Tags: agricultural, Alerian Mlp Index, Commodities, Copper Price, Corporate Earnings, Crude Oil, Durable Goods Orders, Earnings Results, Exxon Mobil, Hot Rolled Coil, Industrial Metals, Laggards, Opec Oil, Outlook, Rapid Decline, Resources Fund, Rising Oil Prices, Risk Appetite, Royal Dutch Shell, Same Time Period, Steel Dynamics, West Texas Intermediate, World Steel Dynamics, Wti Crude Oil
Posted in Commodities, ETFs, Markets, Oil and Gas, Outlook | Comments Off

Energy and Natural Resources Market Cheat Sheet (September 19, 2011)

Sunday, September 18th, 2011

Energy and Natural Resources Market Cheat Sheet (September 19, 2011)

Strengths

• The Global Resources Fund gained this week and outperformed its benchmark as energy- and industrial metal-related stocks rallied with major stock indices.
• The latest Steel Benchmarker price assessment by World Steel Dynamics showed further stability in global steel prices, with the majority flat over the past two weeks. The exception was U.S. hot rolled coil, which rose 5.1 percent sequentially to $768 per ton, arresting three months of consecutive falls.
• The Baltic Dry Index of freight costs increased 7 percent this week as shipments of iron ore remain robust. This is the fifth consecutive weekly gain for the Baltic Dry Index.

Weaknesses

• Seaborne iron ore prices ended the week lower for the first time in 5 weeks on weakening steel prices. After hitting 3-month highs of $181 per ton last week, the TSI reference price has fallen nearly 2 percent to trade below $178 per ton. Per analysts at Citigroup, sentiment in the Chinese steel market is still deteriorating and buyers remain inactive owing to the lack of any clear direction.
• Corn prices fell 4 percent this week on a government report that corn crop conditions have improved recently.
• Despite news of additional supply constraints, copper prices slipped 1 percent this week on concerns of slowing demand in Europe and Asia.
• Southern Copper cut its production forecast by 8 percent for the year. Output will fall to 600,000 tons, from an earlier estimate of 650,000 tons, CEO Oscar Gonzalez Rocha said.
• The International Energy Agency released its Oil Market Report this week, revising its global oil demand growth forecast lower for 2011 by 160 thousand barrels per day to 1.04 million barrels per day, and for 2012 by 200 thousand barrels per day to 1.41 million barrels per day. The IEA attributes lower non-OECD readings and reduced economic growth expectations as the prime reason for its downward revision.

Opportunities

• Reuters reported that power rationing in China will likely persist in the first half of 2012, and the deficit should be between 10 gigawatts and 15 gigawatts in the first half of 2012. Other than low water levels impacting hydropower supply, power output has been hampered by insufficient coal production, low coal quality and a mismatch between coal and power prices. The grid has asked the local government to subsidize additional power generation.
• According to Alberta’s Energy Minister Ron Liepert, Canada’s oil sands producers need to build at least two more pipelines the size of the controversial Keystone XL project if they are to meet their ambitious plans for growth. “As we move forward, there will be a need for other pipelines … By 2020, we may need three Keystones,” he said.
• Peru’s Finance Minister Miguel Castilla commented that the country’s overhaul of its mining tax system will maximize government revenue while ensuring companies proceed with more than $40 billion of investment in new mines. Castilla also stated that companies won’t pay more than 50 percent of their operating profits under the new tax regime. Under Peru’s existing system, royalties are based on sales. He said that the new system will be fairer because it levies taxes on operating profits instead of revenue, and companies with contracts that protect them from higher taxes will be subject to a separate levy on profits.
• Australia’s Bureau of Meteorology sees La Niña conditions developing in Q4 this year. Historically this would mean cold winters in the U.S. northeast and stronger demand for heating fuels.

Threats

• Workers at Freeport MacMoRan’s Cerro Verde mine in Peru launched an indefinite strike today after discussions with the government failed to reach an agreement on wages and working conditions. The mine represents roughly 2 percent of the world’s mined copper production.

Tags: Baltic Dry Index, Canadian Market, Copper Prices, Corn Crop, Corn Prices, Crop Conditions, Global Steel, Growth Expectations, Hot Rolled Coil, International Energy Agency, Iron Ore Prices, Major Stock Indices, Oil Market Report, Oscar Gonzalez Rocha, Prime Reason, Resources Fund, Southern Copper, Steel Dynamics, Steel Market, Supply Constraints, World Steel Dynamics
Posted in Canadian Market, Markets | Comments Off

Energy and Natural Resources Market Diary (July 19, 2010)

Monday, July 19th, 2010

Energy and Natural Resources Market Diary (July 19, 2010)

Strengths

• China’s crude oil imports reached a monthly record of 22.3 million metric tons in June, equivalent to a daily import volume of 5.4 million barrels per day.
• U.S. aluminum orders (ex-can stock) continued to improve in June, rising 6 percent month over month and 16 percent year over year in June.
• BP said that it has stopped the flow of oil into the Gulf of Mexico from its damaged Macondo well. BP said that results in the early test showed that the cap had completely contained the flow of oil, but the Coast Guard said that BP will likely release the flow of oil again after the current test is done.
• Copper output in China rose 26 percent to 422,000 metric tons in June, a new record.

Weaknesses

• Chinese iron ore imports fell for a third consecutive month, declining 9.1 percent to 47.2 million metric tons in May.
• The price of iron ore delivered to China fell to its lowest level this year as steel production has slowed. The price for iron ore dropped for the 15th consecutive day to $118 a metric ton.
• China’s unwrought copper and semi-finished product imports continued to moderate, decreasing 17.3 percent month over month to 328,231 metric tons in June.
• The latest World Steel Dynamics SteelBenchmarker assessment highlighted a further sharp fall in global steel prices. U.S. domestic hot-rolled coil (HRC) dropped about 5 percent in the past two weeks to $674 per metric ton, while Chinese domestic HRC was down nearly 6 percent to $482 per metric ton.

Opportunities

• In its latest market analysis, OPEC forecasts 2011 global oil demand will rise 1.05 million barrels per day, following growth of 950,000 barrels per day in 2010. Supply from OPEC continues to rise as its compliance with announced supply cuts slipped to 52 percent in June.
• Indian power utility NTPC is looking to buy coal mines outside India to ensure supply. The company’s chairman said it will use part of its $3 billion cash reserve and will take on debt to acquire assets in Australia, Indonesia and Mozambique to import as much as 10 million metric tons per year.
• Australia’s Energy Resources (majority-owned by Rio Tinto) reported a 44 percent fall in uranium output in the second quarter of 2010. The company will need to buy uranium in order to meet sales commitments.
• BP may reach an agreement by early next week to sell assets, including half of its stake in Alaska’s Prudhoe Bay field, to Apache for an estimated $10 to $11 billion in cash. Neither BP nor Apache confirmed news reports.

Threats

• The Australian Financial Review reported that BHP Billiton’s $20 billion Olympic Dam copper-uranium-gold expansion project may be delayed due to a protracted environmental assessment and increasing costs.

Tags: Coal Mines, Commodities, Copper Output, Crude Oil Imports, energy, Global Oil, Global Steel, Gold, Gulf Of Mexico, Hot Rolled Coil, Import Volume, India, Iron Ore, Macondo, Market Diary, Metric Ton, Million Metric Tons, Natural Resources, Ntpc, oil, Oil Demand, Opec, Steel Dynamics, Steel Prices, Steel Production, World Steel Dynamics
Posted in China, Energy & Natural Resources, Gold, India, Markets, Oil and Gas | Comments Off

Energy and Natural Resources Market Diary (July 5, 2010)

Sunday, July 4th, 2010

Energy and Natural Resources Market Diary (July 5, 2010)

Strengths

• Weekly data released from the U.S. Energy Information Association (EIA) indicates that distillate fuel demand is running 10.9 percent above last year based on the 4-week average.
• A monthly EIA natural gas production survey released this week showed a 2.6 percent year-over-year gain in April.
• Import prices into Turkey have started to increase as Turkish mills look to replenish stocks before Ramadan, analysts at Dahlman Rose report. Heavy melt scrap in Turkey is currently priced at $320-330 per long ton, up $7-15 from last year. We understand that domestic scrap prices in the U.S. are set to decrease $20-40 per long ton in July but Turkish buyers returning to the market may put a floor on how far prices fall. This could in turn be supportive of carbon steel prices.

Weaknesses

• The latest World Steel Dynamics Steel Benchmarker assessment has shown another fall in steel prices across the globe. In terms of hot rolled coil, the world export price showed the largest drop, down 5.1 percent to $593 per tonne. This is now down 17.4 percent from late April highs.
• Purchasing Manager’s Index (PMI) data released by the Institute for Supply Management this week showed that manufacturing activity in the U.S. slowed in June, with the headline number moving lower to 56.2 from 59.7 in May. Survey respondents expect a slowdown in growth during the second half of the year.
• According to trade data, coal imports into South Korea fell to an 11-month low of 8.5 million tonnes in May after hitting a record monthly volume of 10.3 million tonnes in April.

Opportunities

• The Australian government and miners reached an agreement on the mining tax last night. The tax, which is expected to kick-in on July 1, 2012, will cover coal, iron ore, onshore petroleum & gas, with coal and iron ore taxed at 30 percent. As expected based on prior news reports, the tax profit threshold will be the 10-year government bond rate (currently at around 5 percent), plus 7 percent and miners will be able to depreciate existing assets at market value over the life of the asset for a maximum of 25 years. Further, any new capital expenditures can be fully deducted up front.
• China may face a shortfall of 200 million metric tons of coal per annum by 2015, according to China Oil, Gas & Petrochemicals published by the Xinhua News Agency. Coal demand may rise to a record 3.8 billion tons by 2015 as domestic coal output reaches 3.6 billion tons, according to estimates in the latest issue.
• Coal demand in India may increase more than 500 million tonnes between 2008 and 2015, according to Wood Mackenzie. Demand may reach 1.5 billion tonnes a year by 2025.
• China’s new government-backed coal price benchmark, called the Bohai Rim Coal Price Index, will incorporate spot coal prices from the ports of Qinhuangdao, Jingtang, Caofeidian and Huanghua, according to Reuters. The index is aimed at bringing more transparency to spot coal pricing out of northern China, although this index may not be significantly different from current Qinhuangdao pricing, with Qinhuangdao accounting for approximately 55 percent of shipments from the four ports.

Threats

• Growing nuclear power supply will see Japan use less liquefied natural gas (LNG) in the coming years, even though stiff carbon-cutting and new technology favor nuclear over oil and coal for thermal power plants.
• Kazakhstan may impose export duties on copper, iron ore, ferroalloy, zinc and lead, produced in the country by companies including ENRC, Glencore International and Kazakhmys, a mine lobby said. “We hope that the government will have enough wisdom to stop” its plans for taxes of 5-10 percent on metals,” Nikolai Radostovets, Director of Kazakhstan’s Association of Mining and Metallurgical Enterprises, said in an interview in Astana. He said the proposed duties may affect plans for development projects in the country.

Tags: China, Coal Imports, Commodities, energy, Export Price, Fuel Demand, Headline Number, Hot Rolled Coil, Import Prices, India, Information Association, Institute For Supply Management, Iron Ore, Long Ton, Market Diary, Natural Gas, Natural Resources, Prior News, Production Survey, Purchasing Manager, Steel Dynamics, Steel Prices, Survey Respondents, Tax Profit, U S Energy, World Steel Dynamics
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Energy and Natural Resources Market Diary (3/29/2010)

Sunday, March 28th, 2010

Energy and Natural Resources Market Diary (3/29/2010)

The China automobile market has been booming while the rest of the world has struggled during the crisis. After an extended period of production cuts, we should see a bounce in production in these regions.

Strengths

• U.S. domestic steel mill utilization increased to 71.1 percent for the week ending March 20 versus 70.9 percent in the previous week. Quarter to date utilization has averaged 67.3 percent versus 62.8 percent in the 4Q09.
• Finished steel prices continue to rise strongly, with World Steel Dynamics’s latest Steel Benchmarker bi-weekly price report showing increases in all regional product markets covered – hot-rolled coil, cold-rolled coil, plate and rebar in China, Europe and the U.S. – ranging from 7 percent to 12 percent over the last month. The world export prices for hot-rolled coil is now reported at US$635 per tonne free-on-board port, from less than US$600 per tonne in late February.

Weaknesses

• Japan’s crude oil imports fell 5.7 percent to 17.87 million kiloliters in February from a year earlier, according to a preliminary trade report released by the finance ministry.
• China’s February copper imports fell 12 percent compared with the previous month.

Opportunities

• Teck Resources Ltd., the second-largest seaborne exporter of steelmaking coal, said global supplies will be crimped this year as Chinese imports may be near a 2009 record and exceed 30 million metric tons. “The seaborne market looks very tight for 2010 and probably beyond because it will take some time for the major producers, including ourselves, to increase production,” Teck CEO Don Lindsay said. Chinese imports of coking coal touched a record 34 million tons last year, he said.
• Temasek Holdings Pte., Singapore’s state-owned investment company, is “fairly bullish” about mining investments and is seeking opportunities in Africa, Mongolia and in the rest of the world. The company, which manages about S$172 billion ($123 bn) worth of investments, will work with “strategic” partners, including companies and private equity investors, Nagi Hamiyeh, managing director of investments, said today in Singapore.
• Chinese aluminum demand is expected to increase by 20 percent in 2010 to 17 million metric tons, according to Chinalco vice president Liu Xiangmin.
• China’s molybdenum consumption may grow 13 percent to 61,200 tonnes and production may each 90,000 tonnes according to China Molybdenum Co.
• BHP has announced that its key Hay Point metallurgical coal terminal will be closed for a further 3 to 6 weeks following damage from cyclone Ului. Adding this to the recent supply issues, the met coal market looks even tighter, with great potential for spot prices to rise strongly in the near term.

Threats

The New York Times reported that the United Mine Workers of America is calling for a boycott of BP PLC’s gas stations after the oil giant’s CEO called it unwise for U.S. policymakers to try to save coal jobs. In an interview the CEO said, referring to House climate legislation, “the coal sector was disproportionately favored in the first go at this. It’s about creating jobs. We’ve got to find a better way to create jobs than preserving coal jobs.”

Tags: Automobile Market, Chinese Imports, Commodities, commodities update, Crude Oil Imports, Domestic Steel, Don Lindsay, energy, Export Prices, Finance Ministry, Hot Rolled Coil, Kiloliters, Market Diary, Million Metric Tons, Natural Gas, Natural Resources, Product Markets, Regional Product, Steel Dynamics, Steel Mill, Steel Prices, Steelmaking, Temasek Holdings, Will Take Some Time, World Steel Dynamics
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Roundup: Energy and Natural Resources

Monday, January 4th, 2010

Energy and Natural Resources Market

Strengths

• The latest Steel Benchmarker assessments from World Steel Dynamics have shown a further surge in U.S. steel prices, with hot rolled coil up 2.6 percent to $590 per tonne from the previous assessment on December 14. The world export hot rolled coil price rose 3.4 percent to $534 per tonne, while #1 heavy melt scrap was up 4.7 percent to $261 per tonne. Western European prices bucked the general trend, with hot rolled coil falling 0.5 percent to $574 per tonne.

Weaknesses

• Natural gas futures fell 2 percent this week on a weaker than expected inventory report released by the U.S. Department of Energy.

Opportunities

• Over 50 percent of Codelco’s Chuquicamata mine workers voted to strike after a contentious contract negotiation, where Codelco ended up offering a 3.8 percent (started at 1 percent) salary increase over a 36-month period, plus bonuses in excess of Chilean Peso (CHP) 14 million or US$28,000 (started at CHP 10 million). The current contract expires on December 31, thus a strike at the Codelco Norte mine is expected to start on January 1, 2010.

Threats

• The U.S. Deptartment of Energy released EIA-914 production data for October 2009 which indicated a +1.1 billion cubic feet (Bcf) per day sequential increase in monthly production growth. With natural gas storage levels at 3,276 Bcf, 14 percent above the five-year average of 2,885 Bcf and 13 percent above last year’s level of 2,897 Bcf, the market is already oversupplied and sequential production growth remains an overhang to the price of natural gas.

Tags: Chilean Peso, Chuquicamata, Codelco, Commodities, Contract Negotiation, Cubic Feet, energy, Hot Rolled Coil, Inventory Report, Market Strengths, Natural Gas, Natural Gas Futures, Natural Gas Storage, Natural Resources, oil, Overhang, Price Of Natural Gas, Rsquo, Salary Increase, Sequential Increase, Steel Dynamics, Steel Prices, Storage Levels, World Export, World Steel Dynamics
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