Energy and Natural Resources Market Radar (February 10, 2014)

February 10, 2014

2 minute read

The price of coffee futures rallied to an eight-month high on Monday as unusually dry weather in Brazil sparked worries about possible crop damage for the world's biggest coffee producer. Coffee prices hit seven-year lows of nearly $1 a pound in early November. Recently the prices on ICE Futures U.S. were around $1.34 a pound, up 7 percent on the day and 21 percent so far in 2014.
Spot crude from Alberta strengthened against the U.S. oil benchmark West Texas Intermediate (WTI). This happened as California, the third-largest oil refining state in the U.S., takes a record volume of oil (709,000) from Canada by rail.
WTI crude oil rose to $100 a barrel this week for the first time since December 30, due in part to colder-than-normal weather across much of the nation.

The Baker Hughes International Rig Count for January fell by 10 rigs to 1,325, while the U.S. rig count declined by 2 rigs to 1,769. Both measures, though, are up comfortably year-over-year.
Australia’s iron ore exports to China from Port Headland, which is 20 percent of the global seaborne iron ore market, fell 3.5 percent in January to 23.3 million metric tonnes. This came on weaker Chinese demand and a three-day closure of ports because of a cyclone threat.
The benchmark hot rolled coil (HRC) price declined for a fourth consecutive week. The CRU Weekly Price assessment shows U.S. HRC at $670 per short tonne for the week ending February 5, following a decline of $3 a short tonne the week prior.

The world’s mining assets may be the target of mergers and acquisitions (M&As) as an $8 billion pool of private-equity money, that has lain dormant, is stirred this year by attractive valuations and predictions of resilient demand for raw materials.
According to Citigroup Research, a mid-$5 natural gas price should be the long-term U.S. gas price range. This price is above marginal production costs and stands at 20 to 25 percent above current forward prices to 2020, as demand surges between now and then. Short-term production costs should set a soft price floor at roughly $4; power generation/exports economics put a soft price ceiling at roughly $6 to $7.
Mine closures are pointing to future inflection points for uranium prices, as Paladin has announced that it is putting on care and maintenance for one of its two operational uranium mines, Kayalekera in Malawi. The mine was responsible for 2.94Mlbs (million pounds) of U3O8 production in 2013, or around 2 percent of global mine supply.

Global manufacturing confidence dropped in January, implying a softening short-term outlook for base metals demand growth, although there could be a seasonal pick-up in early March.
Indonesia will be consistent in applying the ore export ban, per the Deputy of Energy and Mineral Resources Minister. The Minister adds that companies can, if they want to, go ahead with seeking arbitration or shutting down operations. Newmont Mining and Freeport McMoRan are in talks with the government as they claim that Contracts of Work protect them from the new export tax rules.