Energy and Natural Resources Market Diary (September 13, 2010)
Strengths
- Steel prices on the Chinese domestic market rose this week, with supply expected to tighten after a large number of steel mills were ordered to cut or shut down production as part of a government efficiency drive.
- Xstrata has commenced thermal coal negotiations with Japanese utilities for Oct-10 to Sept-11 contracts at US$104/ton, compared to current spot prices at US$94/t.
- Preliminary Chinese copper import numbers for August released late this week were up 10.7 percent from the prior month to approximately 380,000 metric tons.
- U.S. corn stocks-to-use of 8.3 percent declined from 9.7 percent in August and are at the lowest level since the 1995/1996 season; globally stocks-to-use fell to 16.3 percent from 16.7 percent last month.
Weaknesses
- According to China’s Customs General Administration preliminary trade data for August, net steel exports decreased 38 percent from the prior month to 2.8 million metric tons. Additionally, imports of iron ore decreased 13 percent sequentially to 44.6 million metric tons.
- The Chinese government is moving to cut power supplies to heavy industry and many other users (including, it seems, traffic lights in some cities) in a last minute attempt to meet the five-year energy consumption target for 2006–2010.
- Crude oil inventories in the pivotal Midwest region of the country are close to their all-time high as demand has been slow to pick up.
Opportunities
- According to research conducted by Deutsche Bank, the S&P 500 Index has rallied in 18 of the past 19 mid-term elections by an average of 18 percent.
- A team from Rio Tinto is reportedly in Russia in order to seek a possible stake in potash producer Uralkali.
- Europe's second largest copper producer KGHM is considering buying another copper deposit in Canada as it continues to look to expand beyond its domestic production, its chief executive said on Thursday.
Threats
- There is concern that President Obama’s proposed $50B stimulus for roads, runways, and rails will not be passed before the midterm elections, and it is suggested the bulk of the positive impact could be late 2011 and 2012.
- Clashes erupted between union workers and company contractors at the massive Cananea copper mine in northern Mexico leaving several people severely injured, the local government said. The mine, owned by major copper producer Grupo Mexico , has been the site of tension after a three-year strike ended this year.
