Energy and Natural Resources Market Diary (December 6, 2010)
Strengths
- The uranium spot price has continued climbing in recent weeks, and is now trading at $61/lb, up by 50 percent since its mid-2010 trough of $40/lb.
- ICE Brent contracts for earliest delivery or settlement are now trading at a premium to later contracts for the first time since May 2008, according to Barclays Capital.
- Nucor has increased the price of hot rolled coil (HRC) to $640/ton for all new orders effective immediately, the third price increase in the past 30 days.
- BHP has settled coking coal contracts for the first quarter of 2011 at $225/ton for prime brands with Japanese steel mills, up from $209/ton in the prior quarter.
- U.S. wheat futures added more than 1 percent, rising for the third straight session and taking the weekly gains to 10 percent as rains in Australia and dry weather in the United States continued to raise supply concerns and buoy prices.
- Copper premiums in Rotterdam hit the highest level in more than four years this week due to market tightness.
Weaknesses
- Brazilian iron ore exports for the month of November came in at 24.7 million tonnes, down 15.4 percent sequentially on a daily average basis.
- According to Japan Iron & Steel Federation (JISF), Japan's steel exports in October decreased by 0.6 percent year-over-year and by 8.8 percent month-over-month from September to 3.41million tons.
- China's National Development and Reform Commission ordered a freeze in 2011 contract prices for coal used in power plants, according to Xinhua News Agency.
Opportunities
- Rio Tinto Alcan is making plans to spend $3.5 billion to develop an aluminum smelter in Paraguay that will produce 670,000 metric tons a year. Construction is set to start in 2014 and is expected to take 2.5 years.
- Russia's Norilsk Nickel plans to sell off most of its majority stake in the platinum and palladium company Stillwater Mining Co. in a public offering, driving down the U.S. miner's shares by 7.4 percent.
- Supply of scrap in the world's top copper consumer has fallen in the past two weeks, driving up prices of scrap, an alternative to refined copper in making semi-finished products, and spurring fabricators to buy more refined metal.
- Iron ore contract prices for the first quarter of 2011 will be 8.3 percent higher than the fourth quarter of 2010, as global supplies tighten, according to industry consultant The Steel Index.
Threats
- The White House oil spill commission challenged offshore drillers this week to boost safety standards, detailing proposals for the creation of an independent, self-regulating industry group and reform of government oversight.
- The U.S. futures regulator unveiled a key piece of its plan to toughen rules on trading in the vast swaps market, making clearer which firms will have to set aside more funds to cover their deals.
