Roundup: Energy and Natural Resources

Energy and Natural Resources Market

Strengths

• Copper rose to a 16-month high this week on speculation that demand may revive as the U.S. economy improves. Aluminum also climbed to the highest level since October 2008 on concern that snowstorms in China might disrupt production.
• The cash price of iron ore delivered to China, the world’s biggest buyer, rose to the highest in more than a year amid what Goldman Sachs called “panic buying” by steel mills. Chinese mills have stepped up iron ore purchases to meet rising steel demand fueled by the nation’s stimulus spending.
• Reported spot iron ore vessel bookings to China from the world's three biggest exporters (Australia, Brazil and India) rose by a third in December after falling 50 percent in the previous month.
• U.S. light vehicle sales rose 2.9 percent month-over-month to a seasonally-adjusted 11.25 million in December. Sales of U.S.-produced cars were particularly strong, rising 9.1 percent month-over-month.
• Heavy steel plate price offers for the European market have risen 10.5 percent for February delivery to 420 euros per metric ton in order to cover increased raw material costs.
• China's power consumption in December increased about 30 percent from a year earlier, the official People's Daily reported, citing data from State Grid Corp of China.
• Spot prices for thermal coal in Qinhuangdao rose slightly from a week earlier, as harsh weather in parts of China tightened coal and power supplies at the same time that demand rose on dropping temperatures. A cold snap hit parts of northern China over the last week, bringing the heaviest snow and lowest temperatures in decades for some areas, including Beijing.
• Prices of thermal coal in Australia, a benchmark for Asia, hit a 14-month high of above $90 per metric ton in the first week of 2010, jumping more than 7 percent from a week earlier due to robust Chinese demand.

Weaknesses

• Brazilian industrial production fell 0.2 percent month-over-month in November. It was still up 5.1 percent year-over-year.
• Global stainless steel production for the first nine months of 2009 fell 15 percent from the prior year to 17.9 million metric tons, according to the International Stainless Steel Forum.

Opportunities

• China, the world’s second-largest energy consumer, said it will “actively” participate in the global competition for oil, natural gas and mineral resources as domestic demand rises. The country will intensify development of overseas resources to ensure “stable” energy supplies for economic growth, the vice chairman of the National Development and Reform Commission said in a speech.
• Oil producers will need to add 45 million barrels worth of daily crude output capacity in the next 20 years to meet rising demand and offset a steady decline in major fields, the International Energy Agency said this week.

Threats

• China's central bank raised a key interest rate for the first time in five months, causing the broader Chinese market and base metal prices to decline. While the move in interest rates was a relatively small 0.05 percent, many economists believe that this may be the first move in a broader interest rate tightening campaign.