Energy and Natural Resources Market Diary (August 30, 2010)
Strengths
- Despite concerns over global growth, the price of copper gained 1.7 percent on the week and has consistently traded above the key $3 per pound level during the month.
- The 4-week moving average of chemical railcar loadings increased 5.1 percent in the week ended August 21 following a 5.8 percent increase the prior week.
- Chicago corn futures continued to rise late in the week, extending the previous session’s biggest one-day rally in nearly a month as strong global demand and concerns over the size of the U.S. crop supported the market.
- Ferrous scrap prices into Rotterdam rose 3.4 percent to $365 per metric ton, according to Platts.
Weaknesses
- The price of natural gas fell nearly 10 percent this week, below $4 per million BTU, on amply supply and waning consumption entering the shoulder months for demand.
- Power rationing in China’s Zhejiang province is expected to cut demand from copper fabricators for at least several months, with some fabricators indicating production levels down 30 percent. Zhejiang province accounts for approximately 20 percent of China’s total production of copper-fabricated products.
- China’s coking coal imports fell in July to 3.1 metric tons from 4.9 metric tons in July 2009 and 3.6 metric tons in June this year.
Opportunities
- The Wall Street Journal reported that China's second largest utility is aiming to increase coal self-sufficiency. The executive director of Datang International Power Generation said that the company aims to boost its coal self-sufficiency ratio to 40 percent by 2015 from 20 percent now by seeking to buy mine projects in Inner Mongolia to secure supplies.
- China called for further mergers and consolidation in its massive coal industry to eliminate outdated capacity and improve efficiency, the State Council said on its website.
- According to media reports, state-owned Oil India has $2.5 billion available in cash and is looking to purchase shale-gas assets in the U.S. and Australia. The government has asked Oil India and Oil & Natural Gas Corp. to each make at least one acquisition this year to meet demand in Asia’s second-fastest growing major economy.
Threats
- The combination of slowing Chinese economic growth and expanding refineries means this year’s 51 percent decline in profit margins from turning crude into gasoline, diesel and kerosene is poised to worsen.
