Energy and Natural Resources Market Diary (July 26, 2010)
Strengths
- Crude oil gained 4 percent this week to $79 a barrel on the heels of strong corporate earnings and a general improvement in economic and equity market sentiment.
- According to the American Iron & Steel Institute, U.S. steel mills shipped 7.34 million metric tons in May, a 4.1 percent sequential increase and 71.5 percent higher than in May 2009.
- Nucor Steel Corp executives say the company’s scrap business has recently been picking up due to stronger exports that have been added by a weaker dollar.
- Consumer demand for gold in Saudi Arabia grew 35 percent from a year ago in the first quarter to 21.1 metric tons, according to the World Gold Council.
Weaknesses
- Global steel production for the month of June decreased to 1.44 billion metric tons on an annualized basis versus 1.46 billion metric tons on an annualized basis for the month of May. Production was lower in nearly every region of the world, except for North America and South America. However, production is up 18 percent versus a year ago.
- The global copper market was in a surplus of 73,000 metric tons this year through May versus a surplus of 56,200 metric tons in the same period in 2009, according to the World Bureau of Metal Statistics.
Opportunities
- According to the International Energy Agency (IEA), China consumed more energy than any other country last year, totaling 2,252 million tons of oil equivalent. However on a per capita basis, the U.S. still uses more energy than China and is less efficient than Europe. China's thermal coal imports for 2010 are expected to reach 105-115 million tons.
- The Chhattisgarh region of India, which maintains 20 percent of the country’s iron ore reserves, is seeking to ban all exports of iron ore. The call for Theban from the region’s Chief Minister is in addition to comments made last week by India’s Steel Minister indicating a 20 percent duty should be levied on all Indian iron ore exports. The current duty is 5 percent for iron ore fines and 15 percent for iron ore lumps, which are larger size deposits. India produced 226 million metric tons of iron ore in the 2009-2010 fiscal year and 50 percent of this material was exported. The vast majority of these exports went to China.
- China may spend as much as $738 billion on clean energy projects in the next decade. The investment is expected to go toward cleaner energy sources, which include nuclear power and gas from unconventional sources. According to a report by China's National Energy Administration, China will fulfill more than 11 percent of its energy requirements from non-fossil fuels by 2015. Over the same time, China hopes to reduce coal’s contribution towards nation's energy demands will decrease from 70 percent to 63 percent, according the Bloomberg.
Threats
- Government sources said Russia may raise its mineral extraction tax on natural gas 10-15 percent from January 1, 2011, the first increase since 2005.
