Energy and Natural Resources Market Diary (November 22, 2010)

Energy and Natural Resources Market Diary (November 22, 2010)

Strengths

• PetroChina has booked 35,000 tonnes of diesel from the international market to help ease domestic shortages, the official Xinhua news agency reported on Thursday. It will consider importing more while keeping its refineries running at full capacity in December, the report added.
• The value of minerals and energy projects being developed in Australia rose 21 percent in the past six months to a record $130.3 billion at October 31, per the Australian Bureau of Agricultural & Resource Economics-Bureau of Rural Sciences. “The increase in planned capital expenditure reflects expectations of growing demand for mineral and energy commodities in the medium and long term,” Bureau Deputy Executive Director Paul Morris said.

Weaknesses

• China imported 12.32 million tonnes of coal in October, down 19.6 percent from the previous month, customs data supplied by China Customs Statistics (CCS) Information Center showed this week. The steep decline was due to the unusually high imports recorded in September, where the 15.32 million tonnes shipped was the second-highest on record.
• Copper wire and cable shipments in Japan declined 3.9 percent year-over-year in October, declining for the first time in 10 months as the economy slowed, the Japanese Electric Wire and Cable Makers’ Association said.

Opportunities

• Walters Energy made a $3.2 billion bid for Western Canadian Coal this week . This is another indication of consolidation in the North American coal industry.
• Vallar Resources, a London listed company founded by Nathaniel Rothschild, is pursuing a three-way reverse takeover of Indonesia's largest coal producer, PT Bumi Resources, and fifth-largest producer, PT Berau Coal. The deal is valued at $3 billion, under which Aburizal Bakrie will swap his 25% stake in Bumi for new shares in the new company, which will be listed in London as Bumi. Mr. Rothschild said, “In one swoop we are buying control of the number one and number five coal companies in Indonesia and we are combining them to create the most dominant supplier of coal to China.”
• Bloomberg reported that Massey Energy’s chief Don Blankenship admitted at a conference this week that the company is seriously looking at acquisition offers. Many contenders have expressed their interest in the company and its assets. According to sources, ANR has already made a bid for the company. Arcelor has shown interest in the company and Indian coal producers have shown interest in some of its assets according to press reports.
• Silver probably will top $30 an ounce in 2011, a gain of at least 17 percent, on demand by investors seeking a store of value, GFMS Ltd. said. The main driver of the price remains investment demand, GFMS said. Silver supplies will rise 5 percent this year, and investors will be of a mood to absorb the resultant, growing surplus as key supports such as ultra-low interest rates, a weakening dollar and a buoyant gold market should remain with us, according to GFMS.
• At its oil and gas seminar, Statoil highlighted the potential for a significant tightening of the global gas market over the next years. The reason is a slowdown in the growth in LNG liquefaction capacity after 2011, coupled with increasing demand for LNG in Asia and Europe.

Threats

• The nickel market is heading for oversupply by 2013 on current projections, prompting a decline in prices, said research firm Brook Hunt. The oversupply won’t be anywhere near as much as expected because of the potential for project delays, Brook Hunt told the New Caledonia Nickel Conference. Prices may drop to $6 to $7 per pound by 2013.