Energy and Natural Resources Market Radar (February 18, 2014)

February 18, 2014

3 minute read

Commodity imports in China for the month of January set new records in copper and crude oil, partly driven by front-loading ahead of the Chinese New Year. Tight credit conditions and new capacity additions also explain the strength in copper and crude, respectively.
China saw its coal imports grow 17.5 percent year-on-year to 35.91 million tonnes in January, according to statistics released by the General Administration of Customs. The figure for last month was higher than the 35.52 million tonnes realized a month prior. According to the statistics, the import value of coal grew 4.9 percent year-on-year to $2.98 billion in January.
Refined copper supply is tight and is confirmed by backwardation in the futures curve on the London Metals Exchange. Physical premiums for copper have spiked to ~3c per pound as inventories have tumbled 75 percent to 125.7 thousand tonnes since March 2013.

Chinese steel inventories rose for the eighth-straight week. Chinese steel inventories in warehouses totalled 19.9 million tonnes, 11 percent above the prior week and 10 percent higher from only a year ago. This compares to a 52-week high of 22.6 million tonnes in mid-March 2013.
U.S. steel prices declined for a fifth-straight week. The CRU Weekly Price assessment shows U.S. hot-rolled coil (HRC) at $659 per short tonne ($659/st), down $2/st from last week and $11/st from last year.
This week thermal coal prices dropped below $80/t for all three major international benchmarks, a decline of 5 to 10 percent from January highs. The main reason is sluggish demand in both the Atlantic and Pacific basins.

Freeport-McMoRan and state-owned PT Aneka Tambang (Antam) have agreed to study building a copper smelter in Indonesia. According to management, the study will last about three months and cover four different areas, including an area near Freeport’s Grasberg operation, for a potential $2.2 billion, 300k ton smelter.
China’s Ministry of Environment has announced its target for cutting pollution in 2014. The nationwide emission of sulphur dioxide is planned to fall by 2 percent in 2014 according to the Ministry’s plans, and that of nitrogen oxide (NOx) to come down by 5 percent. The reduction in NOx emissions will put more pressure on larger cities and the general truck fleet to move towards increased platinum group metal (PGM) loadings. For now, the reduction in sulphur-based emissions will mean pressure will be maintained on sinter plants to curtail output, playing into increased use of iron-ore lump and pellets.
The steel stock in 29 major cities across China hit a four-year low after the Spring Festival Holiday, news portal yicai.com reported on Wednesday. The news portal cited data from the Beijing Lange Steel Information Research Centre.

Impala Platinum Holdings Ltd. said it is preparing for the strike that has shut South Africa’s biggest mines to last until May, as employers and the largest union made little progress in talks during the first three weeks of the stoppage. The Association of Mineworkers and Construction Union has called more than 70,000 workers out on strike since January 23 at Anglo American Platinum Ltd., Impala and Lonmin Plc, the world’s three largest producers of the metal. The Union is demanding that monthly wages for the lowest-paid underground workers be more than doubled.