Energy and Natural Resources Market Diary (August 23, 2010)
Strengths
- According to China's ministry of industry and information technology, 159 metric tons of gold was produced in the first half of 2010, up 8.69 percent compared to last year.
- Japanese crude steel output rose 20 percent year-over-year to 9.22 million metric tons in July, the Japan Iron and Steel Federation said.
- The Baltic Index jumped 12 percent as a surge in iron-ore transportation costs led rents higher.
- Chinese coal imports gained 8 percent month-over-month in July, rising to 13.7 million metric tons.
Weaknesses
- China Steel Corp. may cut domestic prices by as much as US $40 per metric ton in October and November, the Economic Daily News reported.
- Macquarie Research noted that major suppliers of seaborne iron ore are reportedly reducing deliveries to some small steel mills in China that have still not formally settled pricing terms, according to Metal Bulletin.
Opportunities
- Glencore International and Credit Suisse plan to launch a physically-backed aluminum exchange-traded product on a Swiss exchange.
- BHP Billiton Ltd. made a $39 billion bid for Potash Corp of Saskatchewan Inc. this week as the global mining giant attempts to consolidate the fertilizer market.
- Rio Tinto Group's CEO sees economic expansion in China slowing to as low as 6 percent annually this decade after a 30-year run averaging 10 percent growth. This would still be robust compared to mature economies and still represents very large absolute levels of growth.
- In a comprehensive article studying the copper market, The Financial Times highlighted that consultancy Brook Hunt has calculated that the copper mining industry has undershot production expectations by an average of 6 percent per year in the past five years.
- China Petroleum & Chemical Corp., the country's largest oil refiner, plans to install electric car chargers at its 41 filling stations in Jiangxi province as the nation seeks to promote the technology. Sinopec, as the Beijing-based company is known, has won approval from the city government in Xinyu to provide electric charging and battery replacement services.
- Royal Dutch Shell Plc plans to spend as much as $50 billion in Australia over the next decade, more than in any other region, as Europe's largest oil company continues a shift to gas production.
- State-run Oil India Ltd. is planning to buy shale gas assets in the United States in partnership with GAIL India, the DNA newspaper reported this week quoting an unidentified official in the firm.
Threats
- Devon Energy has seen service costs surge in the first half of the year and expects further increases through this year and into next. John Richels, who heads the U.S. independent, said service costs had risen 13 percent so far this year and he expected them to increase another 5 percent. Though he has seen particular price increases for pressure pumping services, the increases have come "across the board" and covered both unconventional natural gas and oil plays and oil sands projects.
