Energy and Natural Resources Market Diary (04/18/2010)

Energy and Natural Resources Market Diary (04/18/2010)

Strengths

• China's passenger car sales jumped 63 percent in March from a year earlier as manufacturers scrambled to meet strong demand driven by tax cuts and government subsidies. Passenger car sales rose to 1.26 million vehicles in March, according to the China Association of Automobile Manufacturers.
• Nickel, used to make stainless steel, advanced to the highest level in 23 months on speculation the market will swing into deficit for the first time in four years as a recovering economy boosts demand.
• North American aluminum orders (less can stock which tend to be extremely volatile) increased 12.5 percent sequentially and 25.4 percent on a year-over-year basis.
• Steel mills in Germany produced 3.96 million metric tons of crude steel in the month of March, according to the German Steel Federation. This is the highest level of production since September 2008 and the federation anticipates that production will remain at a high level during the 2Q10.

Weaknesses

• West Texas Intermediate crude oil fell 2.5 percent this week to $82.84 per barrel as the dollar gained on de-risking in the markets.

Opportunities

• Posco, Asia’s third-biggest steelmaker, plans to invest about $5 billion on overseas mines, joining rival mills scouring the globe for supplies in the face of higher raw-material costs. The South Korean steelmaker says it wants to boost its self-sufficiency rate for raw materials to 70 percent from about 18 percent.
• Nucor has indicated that it will increase base prices on hot-rolled, cold-rolled and galvanized products by $40 per short ton and increase plate prices by $60 per short ton.

Threats

• Reuters reported that U.S. officials plan to study oil and natural gas royalty collection systems used in other countries to determine whether the government can boost revenue from energy leases.
• China, the world’s largest consumer of iron ore, said it is investigating the possibility that BHP Billiton Ltd., Vale SA and Rio Tinto Group may be monopolizing supplies.