Energy and Natural Resources Market Diary (September 20, 2010)
Strengths
- According to data from the U.S. International Trade Commission, July copper imports climbed to 66,008 metric tons from 61,590 metric tons in June. The July figures were the highest since 79,975 metric tons in March 2009.
- Japanese crude steel output rose 7.1 percent year over year in August to 8.9 million metric tons, gaining for the 10th straight month, Japan Iron and Steel Federation said.
- China's Baosteel raised prices for steel production in October by 4 percent to 7 percent following recent strong gains in the domestic spot market. Macquarie’s commodity analysts note that Baosteel's prices tend to lead the market, so similar announcements may come from other steelmakers.
Weaknesses
- Crude oil futures slid 3.8 percent this week as supply from the Enbridge 6A pipeline into the mid-continent U.S. is expected to resume within days.
- Hebei Iron & Steel said it would cut its annual output by 6 percent (1.5 million metric tons) between September and December to help meet China’s target to reduce carbon dioxide emissions by up to 45 percent by 2020.
- AK Steel Holding Corp. revised its third-quarter forecast to an operating loss because of sooner-than-planned maintenance and increasing iron-ore prices.
- Steelmaker Nucor Corp. forecast third-quarter profit that will miss consensus estimates after higher scrap-metal costs hurt margins. Earnings will be 5 cents to 10 cents a share in the quarter, the company said, well down from consensus estimates of 30 cents a share.
Opportunities
- Commodities analysts at Goldman Sachs said energy will be the best performer among commodities in the next 12 months. Goldman forecast a 27 percent rise in energy, 17 percent rise in precious metals and 15 percent gain in industrial metals. At the other end, agriculture is expected to decline 10 percent.
- OAO Magnitogorsk Iron & Steel plans to spend at least $1 billion a year over the next three years to boost its crude-steel output by more than 60 percent by 2014 as demand grows from domestic customers, including automakers. Magnitogorsk expects to raise production to 18.6 million metric tons, compared to a forecast of more than 11 million metric tons this year.
- ArcelorMittal plans to spend $4 billion to increase iron-ore production to 100 million metric tons by 2015 as it seeks to boost its self-sufficiency in raw materials. The company says it will expand projects and build mines in West Africa and develop coal assets through joint ventures.
- Korea Resources Corp. may increase spending on overseas mines by about 83 percent this year to secure the nation’s supplies of uranium, copper and coal. Korea Resources has raised $550 million this year through sales of bonds and a stake in a mine to invest in new and existing projects, its CEO says.
Threats
- Kazatomprom plans to produce about 18,000 metric tons of uranium this year, up from 14,000 metric tons last year. The uranium market is already in surplus due to rising supply from Kazakhstan.
- Russia's Economy Ministry has proposed raising the export duty on nickel from 5 percent to 10 percent and introducing a new export duty on refined copper of 10 percent.
