Energy and Natural Resources Market
Strengths
- U.S. steel mills Nucor and Steel Dynamics announced price increases of $30 and $20 per short ton, respectively, on flat rolled carbon steel products this week. This marks the fourth price hike by these companies in the past three weeks.
- The latest Chinese data shows strong growth in key copper industry end-use data. According to National Bureau of Statistics (NBS) data, production of power cables was up 33.1 percent on a year-over-year basis in November and 26.9 percent year-over-year during the first 11 months of 2010.
- China’s crude oil processing hit a record 8.9 million barrels per day in November as refiners reduced output of other products to raise diesel production by 4.2 percent from October, the NBS showed.
Weaknesses
- Finnish stainless producer Outokumpu issued a profit warning this week, highlighting recent weakness in European stainless steel orders and prices.
- South African gold production fell 4.1 percent from a year earlier to 50,504.3 kilograms during the third quarter.
Opportunities
- Macquarie Capital highlighted data from research firm SXcoal illustrating that power plant coal inventories in China have fallen to 16 days of consumption. This is down from 21 days at the end of October. With inclement weather causing over 60 hours of downtime at Bohai Bay ports since December 1, coastal freight shipments have been adversely affected and power plants in Southeast China are down to 13 days of consumption in stock. This is likely to support firm domestic spot prices for thermal coal in the coming weeks.
- The International Energy Agency (IEA) raised its 2011 global crude oil demand forecast for a third month on consumption gains in North America and China. The Paris-based advisor said worldwide crude oil use will average 88.8 million barrels per day next year, about 260,000 barrels more than its previous forecast.
- Global aluminum demand will rise 8 percent in 2011, while China demand will rise 12 percent followed by U.S at 4.5 percent, Japan at 4 percent and Europe at 2 percent, United Company Rusal said. Aluminum may sell for $2,400-$2,500 a ton next year, supported in part by a weakening dollar and the start-up of funds for investment purposes. China’s aluminum imports will rise to 3–4 million metric tons a year by 2015, as it restricts the use of outdated plants and the country’s currency gains, according to Rusal.
- South Korea said it will nearly double its production of rare earths and lithium next year. The government aims to boost supplies of the two resources from Korean-owned mines to 10 percent of annual requirements next year, the country’s Ministry of Knowledge Economy said. This is up from 5.5 percent this year.
Threats
- The local government of Shanghai has told locally incorporated banks to stop fixed-asset lending for the remainder of the month. China's urban fixed-asset investment through November is up 24.9 percent year-over-year, and new loans for the year are on pace to exceed the 7.5 trillion yuan target. China is expected to set a target of 7-7.5 trillion yuan for 2011.
