Energy and Natural Resources Market
Strengths
- Russian crude oil production continued to see growth in March, continuing the trend since March 2009. In March 2010 crude oil output rose to 10,082 million barrels per day, up 3.3 percent year-on-year and up 0.4 percent month-on-month.
- Further evidence of an Organisation for Economic Co-operations and Development (OECD) recovery in the steel sector has come from Salzgitter, which plans to restart its 0.65 million tonnes per annum blast furnace C at its Flachstahl works in mid-2010, according to Steel Business Briefing, taking the plant back to full capacity. In addition, AMM reported that ArcelorMittal USA will restart the 1.4 million tonnes per annum #4 blast furnace at its Indiana Harbour facility this week.
- Hyundai Steel Co., South Koreaâs second-biggest steelmaker, plans to build a third blast furnace to meet accelerating demand from builders and automobile makers. The 4 million metric ton capacity expansion, which will lift total capacity 21 percent, comes as its second furnace of the same size nears completion, more than a month ahead of schedule, Hyundai Steel said. The third facility will bring total capacity to 23.5 million tons, it said.
Weaknesses
- Per Deutsche Bank, Saudi Arabia has reportedly told a major term buyer that it will receive full nominated volumes next month after a 10 percent cut on nominated volumes in April. Some traders are interpreting this as a signal the Saudi are now prepared to âtalk the market downâ from recent highs.
Opportunities
- Rio Tinto's head of copper, Andrew Harding, said that he expects to see a "meaningful" deficit in the global supply of copper next year after a balanced market this year. Even if near term demand from China and India doesn't meet expectations, he doesn't believe that global supply can meet demand and thinks that China may have to draw down strategic reserves. Mr. Harding also indicated that although copper prices have more than doubled over the past 15 months, he has not seen any signs of the copper supply chain improving.
- State oil giant Saudi Aramco will drill at least 300 development wells on- and offshore this year, as well as 48 exploration probes, an executive said. Aramco will maintain the level of rigs it is now operating at 96, of which 17 are for exploration and the rest for development wells, Hussain said.
- Small Chinese steel mills with steel blast furnaces less than 400 cubic meters in size are being told by the central government to shut down production by the end of next year. The State Council, China's cabinet, published a document on Tuesday, saying all steel blast furnaces in this size class will be closed to rein in overcapacity and force upgrades in the industry.
- Bloomberg reported that "the U.S., the worldâs largest corn exporter, plans to double overseas sales of a by-product from ethanol distillation in the next five years as demand from animal feed makers in China expands,â according to an industry group. Total U.S. exports of dried distillersâ grains with solubles, or DDGS, a high-nutrient feed used in the livestock industry, may jump to as much as 11 million metric tons a year, from 5 million tons now, U.S. Grains Council President Thomas Dorr said in an interview in Tokyo yesterday.
Threats
- According to Metal Bulletin, Chinese demand for copper from cable and wire producers will fall by 10 percent this year on reduced investment in the state power grid and construction industries.
- Australian Treasurer Wayne Swan may impose a national tax on mining companies like BHP Billiton and Rio Tinto Group to help care for an ageing population estimated to reach 36 million by 2050 from 22 million this year. Swan could release Treasury Secretary Ken Henryâs 10-year plan for a simpler and more efficient tax system within days. It may include a national tax on miners, replacing a web of state levies, to help pay for new hospitals, roads and schools in a country where a quarter of the population will be older than 65 by 2050, Treasury forecasts say.
