Energy and Natural Resources Market

U.S. Global Investors Weekly (03/27/2009)
Strength
  • Crude oil futures gained 2% for the week to close at $52.38 per barrel, the fifth consecutive weekly gain.
  • Base metals were mixed this week with zinc up 7% as inventories remained relatively flat. Copper was next, up 2.4%, as more industry production cuts were announced. Aluminum fell 2.4% for the week on rising inventories and weak demand.
Weakness
  • Aluminum producer Norsk Hydro will cut production by 100,000 tons per year at its Sunndal smelter in Norway by closing the plant's oldest and highest-cost potline while aluminum demand remains subdued. The closure will take around two months to complete. Including this closure, Norsk Hydro has now shut down around 430,000 tons per year of primary aluminum production capacity.
  • Steelmakers in Japan, the world's second-largest producer, will probably cut output 43% next quarter compared with a year earlier, as an economic recession slashes demand, the government said.
  • Iron ore producers have agreed to temporarily cut benchmark contract prices by 40% for Chinese steelmakers, Dow Jones reported.
Opportunity
  • Shanghai copper stockpiles dropped for a third straight week, this time by 20%, the most since the week ended Jan. 15, the Shanghai Futures Exchange said in a report on its website.
  • The People's Bank of China said that macroeconomic stimulus measures have produced preliminary results, and some leading indicators are pointing to a recovery in growth. Based on the government's $585 billion stimulus package, the central bank has cut interest rates five times and lowered bank reserve requirements four times since September to help reinvigorate the economy.
  • Reuters reports that China plans to cap its crude steel output at 460 metric tons in 2009, down 8% from 2008, and at 500 metric tons in 2010. The caps are part of an industry consolidation plan, whereby the top five mills will jointly account for more than 45% of total steel production capacity.

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