Energy and Natural Resources Market Diary (August 16, 2010)
Strengths
- The Baltic Dry Index of freight rates jumped 20 percent this week on improving charter activity.
- Chinaâs copper imports climbed for the first time in four months as arbitrage traders sought profits by buying the metal in London and selling it in Shanghai. Shipments of copper and products gained 4.5 percent month-over-month in July, the customs office said. Buyers have reduced shipments since April as they drained domestic inventories. Stockpiles dropped to the lowest level in six months as of July 30, according to warehouses monitored by the Shanghai Futures Exchange.
- The Brazilian automotive sector continued to grow in July with auto sales increasing by 15.1 percent (up 302,300 units) over last month and up 5.9 percent versus a year ago. Analysts estimate that auto sales in Brazil will approach 3.4 million units in 2010.
- China's power output rose to a record 377.6 billion kilowatt-hours in July, up 11.5 percent from a year ago, the National Bureau of Statistics said.
Weaknesses
- Latest U.S. trade data show that coking coal exports fell 10 percent from the previous month in June. This reflects weakness in European demand which is down 23 percent, ahead of scheduled blast furnace closures.
- Unofficial port data from India shows a collapse in iron ore exports in July, according to Analysts at Macquarie Securities. This could partly explain the recent sharp rally in iron ore prices. Indian exports were just under 4.5 million tonnes in July, the lowest July figure in over six years, reflecting the impact of the Indian monsoon season and a temporary ban on exports of iron ore from 10 ports.
Opportunities
- The Organization of Petroleum Exporting Countries (OPEC) raised its global oil demand outlook for 2010 and 2011 by 140,000 barrels per day in its monthly report despite growing concerns of an economic slowdown. The organization highlights that oil demand growth will remain moderate due to uncertainties regarding the recovery.
- The U.S. Energy Information Administration (EIA) trimmed its estimates for domestic natural gas output growth to 1.9 percent year-over-year in 2010 but raised the year-over-year demand forecast to 3.8 percent.
- China Railway Construction and Tongling Nonferrous Metals Group Holdings have indicated that they will invest $3 billion in a copper project in Ecuador. Initial production of 30,000 metric tons is expected to begin in 2013 and is eventually expected to approach 250,000 metric tons. A company official indicated that the ore from the mine will be shipped back to China.
Threats
- Anti-government protests are negatively impacting several zinc, silver, tin and lead mines in Bolivia. Production from San Cristobal, which accounts for nearly 3 percent of global zinc supply, has come to a halt. San Cristobal was the sixth-ranked zinc and fifth-ranked lead mine in the world output league in 2009.
