Energy and Natural Resources Market Radar (January 21, 2013)
Strengths
- Natural gas climbed to a six-week high on Friday, as colder temperatures in the Eastern U.S. boosted home-heating demand and reduced inventories by greater-than-expected levels. Stockpiles declined by 148 billion cubic feet (bcf) last week, a bigger drop than analysts' expectations of 137 bcf.
- The China State Electricity Regulatory Commission said that power consumption grew 7.45 percent in the fourth quarter, up from 3.9 percent in the third quarter, and that it is expected to grow more than 9.9 percent in 2013, up from the 5.5 percent increase in 2012, but below the 12 percent seen in 2011. This would be in line with a forecast of improving GDP growth, but not a dramatic re-acceleration.
- Coal exports from Queensland's four largest coal terminals were 17.1 million tons in December, up 15 percent from the prior month, 13 percent year-over-year, and the highest since August 2010.
- China’s December coal imports hit a new record of 36.3 million tons, up 25.3 percent month-over-month, and up 35.5 percent from the prior year, and, as a result, imports for all of 2012 jumped to 290 million tons (+30.4 percent from 2011).
Weaknesses
- The CRU Weekly assessment shows the benchmark steel price at $624 per short ton, down $11 per ton for week ending January 16, and following a $4 per ton drop last week. This is compared to fourth quarter and third quarter averages of $615 per ton and $638 per ton.
- Rio Tinto replaced CEO Tom Albanese after the company reported a $14 billion impairment charge for 2012. The impairment charges include approximately $3 billion relating to Mozambique coal operations, and a $10-11 billion reduction in the carrying value of aluminum assets.
- Very large crude carriers from the Middle East-to-Asia route fell the most since November 28, sliding 12 percent to $11,595. Rates are down 30 percent since the start of the year and resumed a decline after gaining yesterday for the first time since December 19.
Opportunities
- BP's Energy Outlook highlights the importance of emerging markets as non-OECD economies constitute 90 percent of population growth, 70 percent of GDP growth, and 93 percent of energy consumption growth to 2030. While non-OECD energy consumption is expected to grow by 61 percent from 2011 to 2030 and rise on a per capita basis by 1.5 percent per year, OECD energy consumption is expected to grow by only 6 percent and fall on a per-capita basis by 0.2 percent per year.
- Chile’s copper output is expected to reach 5.8 million tons in 2013 versus 5.4 million tons last year and 5.2 million tons in 2011, according to Sonami Mining Association. The country is seen attracting $100 billion in mining investment in the next 10 to 12 years.
Threats
- Europe continues to threaten global growth as the Bank of Italy slashed its forecast for the country's shrinking economy on Friday. The central bank said it now expects GDP to slump by 1.0 percent this year rather than the 0.2 percent contraction it forecast in July.
