Energy and Natural Resources Market Cheat Sheet (May 16, 2011)
Strengths
- Coal prices at Richards Bay Coal Terminal rose to the highest level in almost a month, gaining 0.3 percent to $123.93 a ton last week. The price climbed 45 percent in April from a year earlier and 1.6 percent from March.
- China released its oil trade data this week that implied total oil demand growth for the month of April was up a robust 12 percent year-over-year. China’s crude oil imports increased 1.8 percent year-over-year to 5.26 million barrels per day.
- In Indonesia, tin surveyed for export prior to shipment increased by 23 percent year-over-year to 9,708 tons in April, the highest monthly total recorded in the last two years. It’s the highest figure for April since the export licensing system was first introduced in 2007.
- China Iron and Steel Association said this week that China’s daily crude steel output reached 1.93 million tons in April, up 1 percent month-over-month.
Weaknesses
- Coal sales at South Gobi are being threatened by supply side disruptions as the Russian suppliers, from whom Gobi had been buying its diesel needs, are facing shortages.
- Even after constant tightening efforts by the Chinese government, the statistics bureau reported China’s consumer prices rising 5.3 percent on a year-over-year basis in April. This would exceed the government’s full-year target of 4 percent. The gain was more than consensus estimate of 5.2 percent and producer prices increased 6.8 percent.
- Turkey’s chrome ore exports fell by 13 percent month-over-month and 53 percent year-over-year in April 2011. The main driver was lower shipments to China, which saw a 37 percent decrease from April 2010.
- Imports of unwrought copper and products fell by 14 percent on a month-over-month basis and 40 percent year-over-year basis to 263 kilotons, according to Chinese import data reported this week. The General Administration of Customs reported inbound movements of copper and products down to 262,676 metric tons from 304,299 metric tons in March.
- The U.S. gasoline demand for May was extremely weak, running lower year-over-year by 391 thousand barrels per day. Total U.S. oil demand was lower on a year-over-year basis by a massive 663,000 barrels per day.
Opportunities
- According to the Ministry of Industry and Information Technology, China plans to cut 291,000 metric tons of so-called outdated capacity for copper, close 600,000 tons of outdated aluminium capacity, 585,000 tons of lead-making capacity, and 337,000 tons of zinc production capacity this year.
- The Japanese government reported a likely dip in Japan’s crude steel output in April through June despite the impact of the March earthquake, as higher demand for construction steel will be partially offset by a plunge in demand from the auto sector.
- At least 11 Chinese provinces are now facing varying degrees of power shortages. This year, power tightness has come well ahead of the usual summer months in July and August.
- German Chancellor Angela Merkel recently said that Germany will end its reliance on nuclear energy. She said the only question was how long an overlap will be needed before other power sources can fill the gap. Over 22 percent of Germany’s electricity needs are supplied by nuclear energy, 42 percent by coal, 13.6 percent by natural gas and 16.5 percent by renewables.
- Brazil may become a net importer of aluminum in 2012 as supply lags behind demand fueled by the hosting of the World Cup and the Olympic Games. The country will most likely import 50,000 metric tons of aluminum next year in net terms. Based on that estimate, shipments will rise to 350,000 tons in 2015.
Threats
- Standard and Poor’s warned this week that “Indonesia’s mining industry is undergoing a regulatory overhaul that is likely to weaken the operating and financial performance of domestic mining companies.” S&P highlighted that existing producers are “grandfathered” but the agency remains concerned that new supplies will be impacted.
- The Chinese economic data for April showed signs of slowing momentum, with industrial production at 13.4 percent year-over-year from 14.8 percent year-over-year in March. New loan growth was down 5 percent year-over-year to RMB 740 billion. Power generation was weaker, slowing to 10.5 percent year-over-year, largely due to a sharp year-over-year slowdown in hydro generation, which was up only 1.2 percent.
- Executives from five of the largest oil companies faced questions about tax deductions in U.S. Senate hearings this week.
