Energy and Natural Resources Market
Increased demand from China and congestion at the Newcastle export terminal in Australia continue to put upward pressure on thermal spot prices in the Asia-Pacific region.
Strengths
- Chinese thermal coal imports were staggeringly strong in December at 12.1 million tonnes, implying that fourth quarter imports were up 32.5 percent year-over-year.
- The latest release from the American Iron and Steel Institute shows U.S. steel capacity utilization rose to 64.7 percent for the week ended January 16. So far in 2010, production levels are roughly double that in the equivalent 2009 period, but are still 25 percent below 2008 peak levels.
- Minor metals remain bullish. The U.S. molybdenum price moved up 11.3 percent to $14.75 per pound as its upward trend remains intact. Over the past month, the U.S. molybdenum price is now up 32.9 percent. Also, cobalt is also currently at a 52-week high of $23.25 per pound.
Weaknesses
- Base metals prices fell this week, as a much stronger dollar and further reports of curbs on lending in China prompted a major sell-off.
- Chinese construction activity in December was weaker than expected. Housing starts fell back from the stratospheric 200 percent year-over-year gain in November to 35 percent year-over-year in December. Total area under construction rose 8 percent year-over-year, which comes after 45-50 percent year-over-year growth in October and November.
Opportunities
- India has fast tracked a Posco project before the South Korean president visits the country this weekend. The project is slated to cost $12 billion and will be built in the Orissa district of India. ArcelorMittal also has a sizeable project planned for the iron-ore-rich Orissa district. These projects will not be fully operational until 2015, but they both will be significant consumers of Indian iron ore, which may further decrease exports of this material to China, causing the country to seek additional material from the seaborne market.
- World nickel consumption was 107,000 tonnes in November, outpacing primary nickel production of 104,100 tonnes, the International Nickel Study Group said.
Threats
- U.S. inventories of carbon flat-rolled steel at service centers slightly increased for the month of December to 2.2 months of supply on a seasonally adjusted basis, versus 2.1 months of supply for the month of November.
- LME aluminum inventories reached a new all time high of 4,640,750 tonnes and inventories of nickel, copper, and zinc all continue to hover around their 52-week highs.
