Commodity Blog

Archive for May, 2009

Exxon Mobil Corp., the world’s largest refiner, said the transition away from oil-derived fuels is probably 100 years away.

Petroleum-based fuels including gasoline and diesel, as well as hydrocarbons such as coal and natural gas, will remain the dominant sources of energy for factories, offices, homes and cars for decades because there are no viable alternatives, Chief Executive Officer Rex Tillerson told reporters today after Exxon Mobil’s annual shareholders meeting in Dallas.

In the U.S., which burns a quarter of global oil supplies, consumers probably face higher fuel prices if lawmakers impose greenhouse-gas rules that inflate fuel-production costs, Tillerson said. A plan introduced by Democrats this month would allocate a limited number of emission credits to refiners and electricity producers, with the aim of curbing greenhouse gases.

“The oil-gas-refining side of the business received a very, very small amount of the allocations, which means that sector will bear more of the costs more immediately,” Tillerson said. “If we’re going to place a price on carbon, let’s do that in the most efficient way. A carbon tax is more efficient than a tax that’s applied by way of a cap-and-trade mechanism.”

Tillerson, 57, said lawmakers are hurrying to restrict greenhouse gases when many scientific questions surrounding the global warming issue remain unresolved.

Rio Tinto Group, the world’s second- largest iron ore exporter, agreed to a 33 percent cut in contract prices with Japan’s Nippon Steel Corp., the first decline in seven years as the global recession slashes demand.

Nippon Steel, the world’s second-largest steelmaker, agreed to pay Rio 97 cents a dry metric ton unit for its benchmark product in the year started April 1, London-based Rio said today in a statement. That’s about $61 a ton and compares with last year’s record of 144.66 cents for Rio’s Pilbara Blend fines.

The accord, the first major settlement this year, may be resisted by Chinese mills, the biggest producers, who’ve called for price cuts of as much as 50 percent. The worst recession since World War II has slashed demand for autos and building materials, cutting profits for steelmakers and ore producers.

“What looks like a pretty good deal might end up being a bit tougher when they come across the Chinese,” said Mark Pervan, a senior commodity strategist at Australia & New Zealand Banking Group Ltd. in Melbourne. “Historically you could say this is a done deal, when Rio strikes with Nippon, well everyone follows, but I get a feeling maybe the Chinese have got something else in store.”

Copper futures fell in Shanghai after China’s customs said that imports of the industrial metal gained last month, stoking speculation that stockpiles may climb.

Inbound shipments of the refined metal advanced 7 percent from the previous month to 317,947 metric tons, according to final data today from the Beijing-based customs office. The shipments for the month were a record, said Zhao Kai, an analyst at Jinrui Futures Co.

China has boosted imports of the metal used to make pipes and wires as the government ramps up the country’s 4 trillion yuan ($586 billion) stimulus program to counter the impact of the global recession.

The latest shipments will “further damp prices, especially at a time when we feel demand is cooling,” said Edward Fang, an analyst at China International Futures (Shanghai) Co.

August-delivery copper on the Shanghai Futures Exchange fell as much as 0.7 percent to 35,810 yuan a metric ton, and traded at 35,860 yuan at 9:24 a.m. local time.

Gold purchases rose 38 percent in the first quarter, led by investment demand that exceeded usage by jewelers for the first time since at least 2004, according to the World Gold Council.

Global demand increased to 1,015.5 metric tons, from 733.9 tons a year earlier, the London-based council said today in a report based on figures from research company GFMS Ltd. Investment purchases more than tripled to 595.9 tons while jewelry demand fell 24 percent to 339.4 tons.

Gold rose to an 11-month high of $1,006.29 an ounce on Feb. 20 as governments spent trillions of dollars to fight recession, sparking speculation inflation will accelerate. In India, the world?s largest gold buyer last year, jewelry demand was the lowest in at least 20 years and net retail investment turned negative for the first time as holders sold metal for recycling, the council said. Chinese demand was six times that of India.

Copper traded near a one-week high in London as improved sentiment among U.S. builders and rising equity markets increased investor confidence in the demand outlook for industrial metals.

The National Association of Home Builders/Wells Fargo index of builder confidence rose a second month to its highest since September, the Washington-based NAHB said yesterday. The Standard & Poor’s 500 Index jumped 3 percent, its biggest gain in two weeks.

The housing “news and the gain in the U.S. stock market subsequently showed sentiment has further improved and bolstered metals as well,” analysts led by Tan Wentao at HNA Topwin Futures Co. wrote in an e-mailed report today. “We’ll need more concrete data to sustain the positive mood.”

Copper for three-month delivery on the London Metal Exchange rose as much as 0.8 percent to $4,556 a ton, the highest intra-day price since May 13. It traded at $4,515 at 9:55 a.m. Shanghai time.

Copper for August delivery on the Shanghai Futures Exchange, the benchmark contract, climbed as much as 2.7 percent to 36,200 yuan ($5,303) a ton, and last traded at 35,910.

Copper consumption by China’s power industry is expected to grow by 6–7% in 2009 from 2.2 million mt consumed in 2008, Beijing Antaike Development, the state-owned nonferrous metals information provider said Friday.
Although Wire & Cable Industries Association of Shanghai predicts copper demand by the Chinese power sector to rise by 10% in 2009 on the government’s spending on the electricity industry, “our prediction for this year is less at just 6–7%,” one commodity analyst with Antaike said.
“Although the Chinese government’s Yuan 4 trillion ($584 billion) stimulus package would surely help raise domestic copper demand in the long run, it would not have a significant impact on copper consumption in the near term,” the Antaike source said.
Meanwhile, although industry experts predicted that total Chinese copper consumption to rise by 6% in 2009 from 5.2 million mt consumed in 2008, “we expect Chinese copper demand to grow by only 2% this year on weak demand by the downstream copper processing industries,” the Antaike source said. Antaike said although demand for copper by the Chinese power sector was still there this year, demand by the air-conditioner and refrigerator industries was still relatively weak. China produced 921,900 mt refined copper during the first quarter of this year, up 8.7% from the corresponding period in 2008, state statistics showed. The rise is due to the completion of new production lines.

China’s refined copper imports will rise by 34% to 1.95 million tonnes this year, said Ma Xiaoxin, vice-gm of Minmetals’ copper division. China imported nearly twice as much copper in the first three months of 2009 compared to a year earlier.
This pace will slow as importers turn again to copper scrap, and arbitrage imports fall, Ma said. “The shortage of copper scrap will ease in the second quarter, as rising [LME and SHFE] prices attract more traders into the recycling business,” she said at the 2009 Copper Industry Supply Chain Summit held by China Nonferrous Metals Industry Association (CNIA) in Beijing on Friday.. “Once the scrap problem is solved, China’s enthusiasm for refined copper will fade,” she added. China imported 748,281 tonnes of refined copper in January-March, up 92% year-on-year, according to Chinese customs.
“Arbitrage buying, replacement of copper scrap, China’s State Reserve Bureau (SRB) buying and infrastructure investment especially in cable and wire industry have been major reasons for rising copper imports this year,” Ma said. “But China’s physical demand has not yet picked up,” she warned.
Officials at the China Nonferrous Metals Industry Association (CNIA) agreed. “The length of time arbitrage window will last is another key factor for China’s refined copper imports this year,” said Shi Lin, analyst from CRU.
“Once the price gap between Shanghai and LME copper disappears, China’s imports will go down and the rebound of copper prices will come to and end,” Shi said. “LME copper is heading towards $5,000 per tonne, but I don’t think it will rally at that level and copper prices will fall back to $4,000 per tonne quite soon,” said Ma.

Gold N.Y. Spot $ 911.05
Silver N.Y. Spot $ 13.87
Lead LME Cash $ 0.6684
Copper LME Cash $ 2.1555
Zinc LME Cash $ 0.6990
Nickel LME Spot $ 6.01
Aluminum LME Spot $ 0.6872
Platinum N.Y. Spot $ 1153.00
Palladium N.Y Spot $ 243.50
Oil WTI Cushing $ 057.60
Natural Gas (Henry Hub)($/MMBtu) $03.96

USD-AUD $ 1.3161
AUD-USD $ 0.7598
CAD-USD $ 0.8537
USD-CAD $ 1.1714
EUR-USD $ 1.3508

Gold N.Y. Spot $ 884.00
Silver N.Y. Spot $ 12.40
Lead LME Cash $ 0.6053
Copper LME Cash $ 2.0416
Zinc LME Cash $ 0.6568
Nickel LME Spot $ 5.26
Aluminum LME Spot $ 0.6718
Platinum N.Y. Spot $ 1076.00
Palladium N.Y Spot $ 213.00
Oil WTI Cushing $ 052.00
Natural Gas (Henry Hub)($/MMBtu) $03.25

USD-AUD $ 1.3755
AUD-USD $ 0.7270
CAD-USD $ 0.8375
USD-CAD $ 1.1940
EUR-USD $ 1.3251