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.
