Energy and Natural Resources Market (July 29, 2013)

July 29, 2013

2 minute read

Strengths

Steel reinforcement-bar futures in Shanghai traded near a three-month high after Chinese Premier Li Keqiang said the nation will accelerate railway construction in central and western regions to spur growth.
U.S. coal production increased by 2 percent from last week and over the past year to an eight-month high of 20 million tons.
China’s natural gas output rose 13.4 percent year-over-year to 9.30 billion cubic meters in June. The country produced 58.80 billion cubic meters of gas in the first six months of the year, according to the National Development and Reform Commission.

The International Copper Study Group (ICSG) released data for the copper market balance through April 2013. According to the data, the refined copper market surplus has persisted in the first four months of 2013, and year-to-date the group estimates that before adjusting for seasonality, the copper market has been in a surplus of 266 kilo tons.
Caterpillar reported lower revenue for its Resource Industries segment due to lower capital expenditures by mining companies. Caterpillar reported a 34 percent year-over-year fall in the second quarter of 2013 in the resource segment. Although production of most mined commodities is near or above a year ago, after several years of increasing capex, miners have reduced spending across the mining industry. While sales for both new equipment and aftermarket parts declined, a majority of the decrease was for new equipment.

More U.S. steelmakers are pushing for further U.S. hot rolled coil (HRC) gains. AK Steel followed Severstal and hiked flat-product prices by $25 per ton, effective immediately. This took HRC prices to $675 per ton versus $565 per ton in early June.
The Eagle Ford Shale play in South Texas has been a big success story over the past few years, where production has risen from 207 million barrels of oil per day (mbbl/d) at the start of 2010 to around 1,031mbbl/d through April 2013. The play also has been responsible for a massive infrastructure build-out and strong associated gas production, and has played a big role in the boom of inland light oil growth that has put the U.S. back towards record output.
More than 1,400 companies must shut down outdated production capacities until the end of September, the Chinese central government announced on Thursday. The companies, representing 19 industries including steel, coke, ferro-alloy, cement and paper-making, should also permanently remove the obsolete production capacities by the end of the year, the Ministry of Industry and Information Technology said in a statement. The firms are on publicized lists and are not allowed to relocate their outdated capacities to other regions.

The Federal Reserve is reviewing the decision that first allowed regulated banks to trade in physical commodity markets in 2003. On July 30, the Senate Banking Committee will be holding its first hearing on the issue.

Activity in China's industrial sector slowed to an 11-month low in July as new orders contracted and the job market weakened, suggesting China's manufacturing sector is still losing momentum. The flash HSBC Purchasing Managers' Index (PMI) fell to 47.7 from June's final reading of 48.2. This makes a third-straight month below the 50 line, which divides expansion from contraction and is the weakest level since August 2012.