Energy and Natural Resources Market Diary (5/31/2010)
Strengths
- The price of crude oil gained nearly 6 percent to $74 a barrel this week in response to global equity markets improving from the prior week and concerns over further drilling restrictions in the Gulf of Mexico.
- The price of natural gas gained 7.7 percent to $4.34 per Mmbtu on speculation that hot weather will boost demand for gas-fired electricity.
- Bloomberg reports BHP Billiton is asking Sumitomo Metal Industries for $225 per metric ton for met coal for the second quarter vs. $200 per ton for the first quarter.
- Power generation in China was up 22 percent year-over-year in April.
Weaknesses
- In response to the oil spill in the Gulf of Mexico, President Obama announced new regulations on deepwater oil production that will ban new drilling permits in water depths below 1,000 feet.
- ArcelorMittal USA will temporarily idle several blast furnaces and has put on hold some furnace construction work in response to weakening market conditions.
- The price of iron ore fines (62%Fe) into China fell for the 13th day in a row according to Platts. Prices fell $1.00/dmt to $144.50/dmt and prices are now down 22 percent since their most recent peak on April 20.
Opportunities
- The Chinese Government has approved the merger of Angang and Pangang Groups, which will create China's largest steelmaker with capacity of possibly 56 metric tons per year.
- Shanghai Securities News reports that China may start a trial program this month to subsidize cars powered by alternative energy.
- ArcelorMittal, the world’s largest steelmaker, said it will invest $1.2 billion in Brazil to boost output of steel products for the burgeoning construction industry.
Threats
- Rio Tinto Plc Chief Executive Tom Albanese said this week that the Australian government's planned new mining tax has already damaged the country's reputation and is the biggest sovereign risk issue the miner faces across its global portfolio of assets.
