Energy and Natural Resources Markets Highlights

Energy and Natural Resources Market

Strengths

• Despite a severe recession in 2009, the World Bureau of Metals Statistics estimates that global copper consumption grew 1.8 percent to 18.43 million metric tons.
• U.S. coal stockpiles at utilities declined 2.3 percent this past week, according to Genscape Inc. Inventories are currently at 153.3 million tons versus 156.8 million tons the prior week and up 6.5 percent from a year ago.
• North American potash inventories at the manufacturer level fell sharply in January on strong seasonal dealer re-stocking and growing overseas sales momentum. Inventories have now fallen for a third straight month and are now only 6 percent above the prior 5-year average.
• Severstal is increasing its price for flat-rolled steel by $30 per short ton, in line with moves by AK Steel and Nucor earlier in the week. This increase takes Severstal's price for hot-rolled coil to $640 per short ton.
• Japan’s crude steel output rose 37 percent to 8.72 million metric tons in January from a year earlier, the Japan Iron and Steel Federation said this week.
• China’s iron ore imports from Australia rose 42.9 percent in 2009 to 260 million tons and imports from Brazil rose 41.5 percent to 140 million tons from a year earlier, the official Xinhua News Agency reported, citing Chinese customs figures.
• China's power consumption was strong in January, rising 2.7 percent month-over-month and 40 percent year-over-year.

Weaknesses

• Coal exports from Newcastle port in Australia fell 9 percent in the second week of February, with outbound loading for the month thus far running at 103.4 million metric tons on an annualized basis, slightly below the target of 104.7 million metric tons.
• Macquarie reports that thermal coal stocks at Chinese power stations appear to have returned to non-critical levels, with average days of usage rising to 12 days as of February 10 compared to eight days in mid-January.
• Estimates by the Energy Information Administration (EIA) of the U.S. Department of Energy showed Saudi Arabia's crude exports to the U.S. plummeted to about 837,000 barrels per day in November, the lowest level in 21 years.

Opportunities

• Oil services firm Smith International Inc. is said to be in advanced talks to be acquired by Schlumberger Ltd., the world’s largest oilfield-services provider, in a $9 billion transaction.
• Brazil’s state controlled oil company Petrobras said it is importing gasoline to ensure ample supply to the domestic market after a spike in the demand for motor fuel. This is due in part to falling production of sugar cane ethanol, which is used in Brazil as an alternative fuel for cars.
• China, which has the world's second-largest power capacity after the U.S., plans to add 85 million kilowatts (kW) of new capacity this year, boosting its total capacity to about 950 million kW, according to the latest report by the China Electricity Council. The council said that the newly added capacity this year would include 55 million kW for coal-fired power, 15 million kW for hydropower, 13 million kW for wind power and 1.08 million kW for nuclear power. Power consumption in China is expected to grow 9 percent to 3.97 trillion kWh in 2010, thanks to the economic recovery, according to the report.
• UC Rusal is expected to restart 100,000 metric tons of idled aluminum capacity. The company is in the preparatory stages of restarting the production, based upon strength in the company's backlog, with Rusal indicating that its order book is 150 percent above its 2009 production level.
• Steel prices are expected to jump a further 15 percent to 20 percent after the Chinese New Year as governments in East Asia restart spending on major infrastructure-related projects and restocking activities increase, according to Malaysia Steel Works.
• The U.S. government committed to $8.3 billion of loan guarantees to Southern Co. and its partners in order to commission the construction of the first new nuclear power plant in three decades. Southern plans to add two reactors near Waynesboro, Georgia, in 2016 and 2017.

Threats

• In Niger, a coup attempt is underway against President Mamadou Tandja, according to AFP. Niger is one of the world's top six uranium mining countries, producing 7 percent of the world total in 2008, according to the World Nuclear Association.
• Zimbabwe will reconsider legislation aimed at forcing companies to sell more than half of their assets to black investors after the law frightened off investors, according to the acting prime minister. Under the law, companies operating in the country with assets worth more than $500,000, among them Anglo American Plc and Old Mutual Plc, must sell 51 percent of their local units to black investors within five years. Zimbabwe has the world’s second-largest reserves of platinum and chrome after South Africa, and also has deposits of gold, coal, diamonds and nickel.