Energy and Natural Resources Market Highlights (week ending 02/07/10)

Energy and Natural Resources Market

Despite Concerns over the Global Economy, Leading Indicators & Global Industrial Production are Improving

Strengths

• The American Iron & Steel Institute reports that for the week ending January 30, steel utilization rates increased to 66.9 percent versus the prior week of 65.6 percent and 42.4 percent last year.
• Prices for Indian iron ore shipments to China jumped $1-2 per metric ton to a range of $127-130 per ton after news broke that India may increase export duties to 15 percent.
• The U.S. Rig Count is up 18 from last week to 1,335 but is still down 64 year-over-year.

Weaknesses

• Commodities such as crude oil and copper declined by 1.3 and 6 percent, respectively, in response to fears that some European nations could default on their debt as budget deficits widen due to the global recession.
• Chinese steelmakers are “almost not profitable” in their main business because of overcapacity and high raw material costs, Nanjing Iron & Steel United Co. said.

Opportunities

• According to the International Copper Study Group, global copper mine capacity will expand to 20.04 metric tons in 2010, versus 19.51 metric tons in 2009.
• An article from Reuters states that Transocean is nearing a deal with Exxon to build a $1 billion arctic drillship. The article mentioned the new rig could be deployed to places such as Greenland, Iceland or offshore Alaska at a rig rate in the range of $650,000 per day.
• Zimbabwe’s platinum exports are set to double after Impala Platinum Holdings Ltd. completed an expansion project in the country during the last quarter of 2009, according to Mines Minister Obert Mpofu.
• Indonesia’s Department of Energy and Natural Resources expects coal exports from the country to fall 1.5 percent in 2010 despite a predicted production rise of 6.3 percent to 270 metric tons. The department expects domestic demand, led by the electricity generation sector, to rise by 34 percent.

Threats

• U.S. Interior Secretary Ken Salazar said that drilling for oil and natural gas on government land will face increased environmental scrutiny and slower approvals under new requirements currently being debated in Congress.