Energy and Natural Resources Market Diary (August 9, 2010)
Strengths
- Wheat prices continue to climb higher with the September futures price, trading up to $7.85 per bushel, the highest level in 23 months. The price of wheat has rallied as a heat wave in Russia, dry weather in Kazakhstan, Ukraine and the EU; and flooding in Canada has damaged crops.
- The price of crude oil closed above $80 a barrel this week for the first time since early May on improved sentiment for global growth.
- AK Steel announced they are raising prices for carbon steel products by $40/ton effective immediately. The company cited increased demand for carbon steel products and higher costs as the reason for the price increase.
- According to McCloskey, Colombia’s steam coal exports in the first half of 2010 hit 34.02m tons, up 3.04m tons from 30.98m tons in the same period last year.
Weaknesses
- Metal Bulletin reports that the China Iron & Steel Association (CISA) said that steel producers in China will have to cut production in the second half of this year on the back of an oversupply situation.
- China, the biggest driver for global commodity demand, said its manufacturing grew at the slowest pace in 17 months in July as the government clamped down on property speculation and investment in energy-intensive and polluting factories. The Purchasing Managers’ Index fell to 51.2 from 52.1 in June, according to the Federation of Logistics and Purchasing.
Opportunities
- Rio Tinto said Tuesday that it would invest a further $790 million to expand the annual capacity of its iron ore operations in the Pilbara region of Western Australia to 330 million metric tons by 2016 from the current capacity of less than 225 million metric tons.
- China’s equity rally over the last few weeks could be a positive leading indicator for global stock market; China has appeared to reach inflection points prior to other global markets going back several years, according to Bloomberg.
Threats
According to Bloomberg, Codelco, the world’s biggest copper producer, suggested that copper demand in China is likely to decline in the second half of the year due to government actions to tighten lending and control inflation.
