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

March 10, 2014

2 minute read

Nickel climbed to a nine-month high as the Indonesian export ban begins to impact China’s stockpiles, while Philippine nickel ore (containing 1.8 percent nickel) prices have risen 29 percent since the January ban.
Wheat posted its biggest weekly gain in 19 months amid concern that freezing weather damaged winter crops in the U.S. along with concerns over delayed shipments following unrest in Ukraine.
U.S. corn futures held steady on Friday, but the grain was poised to record its biggest weekly rise in 10 months on potential disruptions to supplies from Ukraine and strong demand for U.S. stocks.

China steel inventories rose for the eleventh-straight week to 20.9 million tonnes at week ending February 28, and 1 percent from the prior week.
Low prices are forcing aluminum smelters in China to shut up to 2 million tonnes of capacity, according to industry sources. Chinese spot aluminum traded below 13,000 yuan per tonne ($2,100 and -9 percent year-to-date) this week, the lowest since mid-2009.
A slackening in demand from Chinese steel mills has pressed down iron ore prices during each of the past six trading days. China buys around 60 percent of the iron ore traded by sea, which it uses to make steel for industries ranging from construction to automobile manufacturing. In recent days, China's steelmakers have been spooked by concerns that credit to property developers is drying up, as that could portend a slump in the real-estate market and a tumble in demand for building materials.

China will allocate $35 billion to environmental protection and energy conservation in 2014 in an attempt to control pollution. 50,000 coal fired furnaces will be shut and 6 million high emission vehicles will be removed from roads, while diesel grades will also be raised.
China plans to phase out 27 million tonnes of steel capacity in 2014 to enhance environmental protection, energy consumption and technology standards. China’s crude steel capacity reached 1,025 million tonnes by the end of 2013, while 30 million tonnes of new capacity will be built in 2014.
China plans to raise city gate prices of natural gas consumed by non-residential users later this year, the National Development and Reform Commission said in its work report issued Wednesday at the start of the annual session of the National People's Congress. This would be the first natural gas price hike since July last year, when the central government increased city gate prices for non-residential gas consumers by an average 15.4 percent across the country, resulting in an average city gate price of yuan 1.95 per cubic meter, or about $8.90 per million British thermal units.

Given the importance of Russian commodity production and exports for world markets, the threat of economic sanctions on Russia could have important implications for commodity markets.
Non-commercial speculative positions in the oil market now stand at the highest level we have on record. If this begins to unwind it could be an additional source of potential downside risk to oil prices near term. Indeed, the share of net long positions held by speculators within the total open interest as reported by the Commodity Futures Trading Commission (CFTC) rose last week to 25 percent.