Energy and Natural Resources Market Radar (December 9, 2013)

December 9, 2013

2 minute read

The price of natural gas gained 4 percent this week, breeching $4 per Mmbtu for the first time in six months, as colder temperatures across the country increased demand for the heating fuel.
West Texas crude oil made its biggest weekly advance since this summer, as the U.S. jobless rate dropped to a five-year low and consumer confidence rose the most in five months, signaling a brighter economic outlook and stronger demand growth.
November’s manufacturing PMIs, indicators of manufacturing output growth, painted a picture of accelerating expansion in most developed economies and stable but solid growth in China. Some other emerging markets were less positive, but on the whole the global manufacturing rally continues.
Coal exports from South Africa’s Richards Bay Coal Terminal were relatively strong in November, at 75.7mt annualized, of which shipments to Europe were at their highest level since January 2010.

BHP Billiton reportedly is offering January pricing for coking coal at $143 per metric ton, $7 lower than the prior month. This figure compares to the 2013 fourth quarter benchmark price of $152 per ton and a current spot quote of $136/t fob.
U.S. raw steel production fell 2.1 percent to 1.812 million tonnes in the week ended November 30, according to the American Iron and Steel Institute.

Barrick Gold’s new Chairman, John Thornton, is considering revisiting the company’s gold hedging strategy, stunning some investors who are invested in the company as they see a bright future for gold prices. Also, his plan for more diversification into other commodities drew criticism from some investors.
There is further support for domestic steel pricing as U.S. steel import permits fell 17 percent in November. Steel import applications fell 17 percent month-over-month to 2.54 million tons in November, compared to October imports of 3.06 million tons.
Vale said the global iron-ore supply capacity is expected to be at 1.7 billion tones by 2020 and iron ore shipments are likely to be 321 million tones next year.

Chinese steel profitability over the past two months has gone negative while iron ore prices have held steady. Optimism about the Chinese New Year restocking on stronger steel demand over the next two months is probably the key reason. However, even in a scenario where this happens, it sets up for price weakness once the New Year is over.
Indonesia’s domestic mining industry could be dead if the government goes ahead with the proposed ban on ore exports from 2014, said a domestic miners' association, arguing the ban favors foreign firms like Freeport-McMoRan and Newmont Mining that can more easily adapt to the new rules.