Energy and Natural Resources Market Radar (May 6, 2013)

Energy and Natural Resources Market Radar (May 6, 2013)

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Strengths

• Crude oil prices (West Texas Intermediate) gained approximately 3 percent to close at a multi-week high price near $95.61 per barrel as stronger than expected payroll numbers and positive revisions for prior months drove oil and other commodity prices much higher on Friday.
• In agriculture, corn gained 1 percent this week and closed over $7 per bushel for the first time in several weeks as increasing concerns that some acreage will shift toward soybeans or even remain unplanted as weather remains challenging for planting.
• China saw its crude steel output increase 9.1 percent year-on-year to 191.89 million tonnes in the first quarter of this year, according to the latest statistics released by the National Development and Reform Commission.  The commission said that the country's output of steel products rose 12.3 percent year-on-year to 245.51 million tonnes in the first three months.

Weaknesses

• Natural gas fell another 3 percent this week following a larger than expected build in weekly inventory data and closed at nearly $4.04/mmbtu.
• The PMI released by National Bureau of Statistics for month April was 50.6 compared to March number of 50.9. The April PMI figure released today by HSBC and Markit was also down to 50.4 from 51.6 in March. Index figures for new orders in manufacturing, new export orders and inventories for finished goods were also weak.

Opportunities

• Alcoa will expand a plant in Tennessee to meet increasing demand for aluminum in cars and trucks. Alcoa will spend $275 million in the next three years at its rolling mill in Alcoa, Tennessee, the company said in a statement. The expansion will create 200 jobs at the plant, the company said.
• The second largest power generator in India is seeking coal assets in the U.S., Canada and Colombia amid low coal prices due to the shale boom and is said to be in talks with several mines. Tata lost interest in South Africa assets due to infrastructure constraints and its purchase of mines in Indonesia turned unsuccessful as the country pegged its prices to global benchmarks, according to a news report from Bloomberg.

Threats

• Steel demand won’t rebound before next year after reduced European spending on cars and railways contributed to oversupply, said Wolfgang Eder, CEO at Voestalpine. “It’s hard to see at the moment any major upturn in the second half,” Eder said in an interview. “I would not be surprised if we would have to postpone a more optimistic scenario to the first half of 2014.” While Voestalpine had foreseen a recovery in steel demand starting in July, those expectations have been delayed by European budget cuts that won’t be reversed for at least a decade, according to Eder.
• Copper output will exceed demand by 681,000 metric tons next year after a surplus of 417,000 tons this year, the International Copper Study Group said. Refined copper usage will grow 0.3 percent this year, the group said in a statement. “Although underlying industrial demand for copper in China is expected to increase by about 5 percent in 2013, apparent demand in China is expected to decrease as a result of much lower net refined imports,” it said. Usage outside of China is forecast to grow by 1.9 percent, it said. Demand will climb 3.9 percent next year as refined production expands by 5.1 percent, up from 4.3 percent this year, according to the report.