Energy and Natural Resources Market
Strengths
- In a preliminary update to its Medium Term Oil Market Report, the International Energy Agency raised its oil demand forecast for 2009 to 2014 by around 1.9 million barrels per day, compared to June's report, on the basis of stronger assumed growth in gross domestic product.
- Chinese November power generation rose at the fastest pace in almost five years. Electricity output climbed by 26.9 percent year-over-year to 323.4 billion kilowatt-hours last month according to the National Bureau of Statistics.
- Cold weather led to a larger than expected storage draw in the U.S. pushing natural gas prices to $5.30 per million BTUs - their highest levels since the beginning of the year.
- Aluminum closed at a 14-month high in Friday trading, breaching the $1/lb mark to close 3.4 percent up at $2,240 per tonne.
- Iron ore shipments on the Great Lakes in November reached their highest level in 2010, as U.S. blast furnace utilization rates have risen. Shipments were up 27 percent to 4.15 million tonnes, according to the latest data from the Lake Carriers' Association.
Weaknesses
- Chinese crude steel production fell 5.6 percent month-on-month in November to an annualized rate of 575 million tonnes per year, the lowest rate since June, according to NBS data.
- The Baltic Dry Index fell 11 percent this week.
- Crude oil fell 8 percent this week on a rising dollar and weak products inventory report from the U.S. Department of Energy.
Opportunities
- Industry publications are indicating that AK Steel has levied a 2nd price increase for steel products purchased in January. The company indicated that the price increase is in response to increased demand for carbon steel products, as well as the need to recover higher costs for steelmaking inputs.
- First Quantum Minerals purchased BHP Billiton's Ravensthorpe nickel mine in Queensland, Australia for $340 million. BHP Billiton had closed the operation in January 2009 due to nickel prices, and had previously indicated that the asset was available for purchase.
- Russia is considering an easing of mining laws designed to protect domestic producers because they’re deterring foreign investors and curbing development, Deputy Minister of Natural Resources Sergei Donskoy said. The government may streamline the approval process for foreign investors, give them tax breaks and increase compensation should the state decide to take back assets. The laws, which came into force in May 2008, cover deposits deemed to be “strategic.” They include resources of more than 50 metric tons of gold, 70m tons of oil and 500Kt of copper.
Threats
- China will impose provisional duties on some U.S. and Russian imports following anti-dumping and subsidy investigations, escalating a trade spat started in September. Flat-rolled electrical steel products from steelmakers including AK Steel, Novolipetsk Steel and Allegheny Ludlum, would attract duties of up to 25 percent, China’s commerce ministry said. The steel is used to make power transformers.
