Energy and Natural Resources Market
Strengths
- Crude oil futures gained 4.8 percent this week on bullish weekly inventory data reported by the U.S. Dept. of Energy.
- Gerdau Ameristeel has announced that it will increase prices for merchant bar, rebar and wide flange beams by $40-$65 per short ton effective January 11. The company indicated that the move was in-line with recent price increases instituted by its competitors and was necessary because of increasing scrap prices.
- Global automotive production by Japan's seven major automakers rose for the eighth-consecutive month in November (on a three-month moving average basis). Momentum remains strong, with global production now up 58 percent from the March trough. Global production from these automakers is now only 12 percent below peak levels, around where they were during pre-peak times 2-3 years ago.
Weaknesses
- Freight rates continued to fall this week, with the Baltic Dry Freight Index falling 7 percent this short week.
- Global steel production fell slightly in November to 1,308 million tonnes annualized. However, at 24.4 percent above November 2008 levels, the figures highlight the continued recovery outside of China, which is now starting to pressure the raw material supply chain.
Opportunities
- According to the London Telegraph, China may begin stockpiling strategic metals soon. Aluminum, copper, zinc and nickel appear to be the base metals that have been targeted, with the country possibly looking to increase stockpiles in 2010. According to the article, the country would like to build a stockpile of 1 million tons of aluminum, 400,000 tons of copper, 400,000 tons of zinc and 20,000 tons of nickel. They'd also like the equivalent of a 90-day of supply of crude oil.
Threats
- Belarussian Potash Company confirmed it had struck a potash supply deal to China at a rate well below market expectations. The joint Belarusian-Russian trade consortium said it had agreed to supply China's Sinochem and China National Agricultural Means of Production Group with 1.2 million tonnes of potash at $350 a tonne including freight costs. The deal equates to a Vancouver free-on-board price, the benchmark metric which excludes freight charges, of $305 a tonne. Analysts say this is more than $50 a tonne below current market prices. It is also a little over half the $575 per tonne that China paid in July 2008 as the market was peaking.
