Energy and Natural Resources Market Cheat Sheet (June 13, 2011)
Strengths
- BP published its June 2011 Statistical Review of World Energy this week, which recorded a 5.6 percent increase in global primary energy consumption, the largest since 1973. China’s energy consumption grew by 11.2 percent to make up 20.3 percent of the world total, eclipsing the U.S. for the first time.
- Mexican mining production rose 15 percent year-over-year in April and 66 percent month-over-month to 31,893 tonnes and reportedly includes full production at the Buenavista del Cobre mine.
- The latest European stockholder steel shipment data highlights the positive demand conditions for the regional steel sector in late first quarter. Flat product steel sales were up more than 10 percent year-over-year, exceeding the 2007 record annual average for the first time since the global financial crisis.
- Ukraine’s coal production rose 9.9 percent to 33.9 million tonnes in the first five months of the year from a year earlier, reported the Energy and Coal Industry Ministry.
- The latest data marks total U.S. oil demand at a strong 19.13 million barrels per day, up 0.22 million barrels per day week-over-week, continuing with an upward trend of the weekly reading which began the month of May at 18.16 million barrels per day. The data shows that the weakness earlier in the month pertained primarily to refinery and petrochemical plant outages rather than the falling away of underlying demand in the U.S.
Weaknesses
- According to the China Iron and Steel Association, daily output of crude steel in China during the last week of May fell 3.46 percent week-over-week reaching 1.915 million tonnes.
- The China Association of Automobile Manufactures reported that vehicles sales in China shed 13.95 percent month-over-month to 1.19 million in May 2011. China’s automobile sales dropped for the second month in a row pointing to slowing demand after Beijing stopped offering incentives and introducing new limits on car purchases earlier this year.
- Preliminary data suggest that total oil products demand in April in the three largest European markets (France, Germany and Italy) fell by 3 percent year-over-year, similar to the decline seen in March, with most of the decrease due to very low sales of heating oil (down 29 percent year-over-year) resulting from very warm weather.
Opportunities
- The president of Baosteel’s stainless steel unit reported this week that he expects stainless steel consumption in China to grow 5 to 7 percent annually over the next five to ten years.
- Global natural gas use may rise more than 50 percent by 2035 from 2010 levels and meet more than a quarter of global energy demand, according to the International Energy Agency.
- The U.S. Department of Agriculture estimated corn plantings at 94 percent complete, below the five-year average pace of 98 percent, leaving about 5.5 million acres (2.2 million hectares) of the projected 92.2 million yet to be seeded.
Threats
- China’s National Development and Reform Commission (NDRC) warned thermal coal producers against price increases, and indicated fines of up to five times the revenue generated. The NDRC has been trying to stabilize the coal market but rising international prices is leading to discontent among miners, according to Bloomberg News.
- Allegations of serious malpractice from a short selling specialist sent shares in Sino-Forest plunging by two-thirds, despite strong denials of the claims by the Toronto-listed timber group. The shares shed 70 percent in two sessions after the allegations, wiping about $3 billion off the company’s stock market value.
