Energy and Natural Resources Market Radar (March 18, 2013)
Strengths
- The price of natural gas rose to a 16-week high of $3.85 per Mmbtu this week. This is a fourth-straight weekly gain on speculation of further late winter cold weather.
- U.S. crude oil output rose 0.9 percent to 7.159 million barrels a day in the week ended March 8, which is the highest level since July 1992, due to improvements in hydraulic fracturing and horizontal drilling, the Energy Information Administration (EIA) said.
- Chinese steel output soared in January-February 2013. Reported crude steel output for January and February combined was 125.452 million tons, up 10.6 percent year-over-year. Over the same period, reported pig iron production rose 7.8 percent year-over-year to 115.792 million tons and coke production was up 9.8 percent year-over-year to 73.607 million tons.
Weaknesses
- Nickel stockpiles at the London Metal Exchange rose 0.4 percent to 161,646 metric tons, which is the highest since March 3, 2010.
- BHP Billiton reportedly settled April pricing for coking coal at $172-173 per ton FOB (HCC Peak Downs) as quarterly contract discussions dragged on. This price represents no month-over-month change and reflects weaker sentiment in recent weeks as HCC indices have declined about $12 (7 percent) since late-February.
- Brazilian iron-ore miner MMX scrapped a mining project in Chile over costs (write down of $114 million); walking away from investments it has already made to focus on primary projects at home.
- Vale suspended a $6 billion Argentine potash project on deteriorating economics. The company has shelved its Rio Colorado potash project (4.3 million tons per year of potash) in Argentina’s Mendoza; however, Vale left the door open to restarting the project if terms were to improve. The company has invested $2.2 billion in the project to date.
Opportunities
- Port data from Queensland shows minimal impact from the weather-related disruptions which took place in February. According to DTC, February exports from the main coking coal exporting ports of Queensland were 12.86 million in February and 26.66 million in the first two months of the year, up 11.3 percent and 6.4 percent year-over-year, respectively.
- Wilbur Ross is seeking funds for a new private equity fund that will buy distressed shipping and other transportation assets, according to three people familiar with the situation. WL Ross is teaming up with Oslo-based Astrup Fearnley AS to make investments in distressed assets tied to transportation.
Threats
- Peru’s mining sector will likely continue to see rising costs, making it more expensive for companies to develop projects, reports National Mining, Oil and Energy Society. Also opposition from rural communities that are worried about the environmental impact of new projects is another major challenge for firms, which have lined up a pipeline of projects that will require investments worth about $53 billion this decade, as per industry and government figures.
