Energy and Natural Resources Market Radar (November 19, 2012)

Energy and Natural Resources Market Radar (November 19, 2012)

Strengths

• The price of natural gas made a new 52-week high to $3.78 per Mmbtu on expectations of colder temperatures in the northeast later this month.
• According to Reuters, China's SRB bought 100Kt each of aluminum and zinc from domestic smelters yesterday.
• South African striking miners accepted Amplats’ latest offer and returned to work, ending a nearly two-month long illegal labor unrest in the country.
• China’s apparent oil demand rose 7.45 percent in October from a year earlier, to 9.76 million barrels per day, according to the data compiled by Bloomberg.
• The National Energy Administration said China's power consumption reached 399.8 terawatt hours (TWh) in October this year, up 6.1 percent compared to the same period last year.

Weaknesses

• Master Limited Partnerships declined nearly 3 percent this week, and 6 percent for the month, as investor concerns mount over future dividend taxation and fund repositioning.
• Wood MacKenzie reported that only 36 percent of proposed replacement/growth projects for coking coal used in steel production will generate a sufficient return at a current HCC benchmark price of $170 a ton. As a result, more project delays are expected.
• According to the agriculture ministry of Russia, the country’s grain exports fell to 10.7 million metric tons from 15.1 million tons a year earlier.

Opportunities

• The U.S. is set to become the world’s largest energy producer according to the new IEA World Energy Outlook. By around 2020, the U.S. is projected to become the largest global oil producer (overtaking Saudi Arabia until the mid 2020s) and to start seeing the impact of new fuel efficiency measures in transport. The result is a continued fall in U.S. oil imports, to the extent that North America becomes a net oil exporter around 2030.
• Rio Tinto said that Australia's mining industry grew complacent in its race to cash in on an overheated commodity market, and the global miner predicted the industry faces widespread cost-cuts now that prices have cooled.
• Goldcorp expects to receive a new permit for the $3.9 billion El Morro copper-gold mine in Chile within the next year, according to management. The mine is expected to produce about 200 million pounds of copper and more than 210,000 ounces of gold per annum for Goldcorp.

Threats

• China's incoming leadership change is unlikely to spur fresh economic stimulus measures anytime soon, according to global miner Rio Tinto, which sells tens-of-millions of tons of iron ore, copper and coal to China annually. Earlier rounds of stimulus helped drive global iron ore and coal prices to record highs.