The Resources Inventory
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Australia has the potential to become the largest exporter of liquefied natural gas (LNG) in the world in the next five years, according to the country’s federal resource minister.
Seven of the world’s twelve newest LNG projects, says Minister Gary Gray, are being built in Australia. The resource minister predicts an annual production of 90 million tonnes come 2018.
The demand for liquefied natural gas is expected to rapidly match that of coal by 2035. The International Energy Agency estimates that 50% more gas will be needed by that time.
The Asia-Pacific region is fast becoming the heart of the global market for gas. The region accounts for more than two-thirds of LNG production.
At the same time, imports are expected to increase by an average of 7% from 2012 to 2018. Twenty percent will go to China, which is understandably set to become one of the biggest importers of LNG in the world. The rest will go to economies that are expected to emerge within the next 20 years.
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While the price of gold continues to plummet, Barclay reports that copper did better in China. Chinese copper imports registered a 7% increase to 320,000 tons while copper scrap imports rose by 17% month-over-month during March 2013.
Chinese manufacturing imports surpassed expectations by registering a 14% year-over-year increase. This resulted in a marginal rise of base metals prices that had been suffering from months-long lows.
The world’s supply of copper has suffered several significant disruptions as of late. The biggest was the port strike in Chile, where 120,000 tons of copper meant for Asia and Europe got held up for three whole weeks.
On a similar vein, a gas leak closed down the important copper smelter operated by Sterlite in Tuticorin, India, which can potentially affect the supply of copper in the region if it continues into May.
Traders on the London Metals exchange took measures by holding stocks of the commodity.
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The price of iron ore fines continue to rally as the benchmark CFR import price of 62% iron ore fines at China’s Tianjin hit $158 on Tuesday.
China exerted its usual influence on the price of the steelmaking ingredient. Chinese steelmakers are enjoying increased profitability. In addition, the country’s ports are drawing down of their inventories.
Current stockpiles of iron ore have dwindled to 66.8 million tonnes this week. Compare this to 2012’s stockpile of more than 100 million tonnes.
According to senior economist Justin Smirk of Sydney’sWestpac Banking Corp, the prices of iron ore will continue to rise. The sector hopes to hit $170 before the June quarter ends, but the price range is admittedly volatile. On the demand side, countries will be restocking and rebuilding their inventories. Conversely, on the supply side, the Chinese have yet to respond to the climbing prices.
Local authorities in China have recently tightened lending rules for home loans. This is predicted to be the first of a number of controls to be imposed upon the construction and housing sectors.
The aforementioned sectors had previously achieved rampant growth thanks to massive infusions of loans from local governments. However, impulsive over-investment in these sectors have created more than $1.6 trillion worth of debt for China’s local government. A top Chinese bank warned that this debt might become a time bomb for the country’s economy.
China accounts for 60% of the world’s annual consumption of iron ore and more than 40% of the world’s copper ore. It also imports the most amount of coal and is almost a match for the rest of the world in the production of steel. If its massive infrastructure sector slows down, mining and metal companies will be adversely affected.
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Australia-based rare earths miner Lynas Corp announced that it has finally and successfully commissioned the cracking and rare earth extraction units at its plant in Malaysia.
Lynas expects the cracking and extraction units to begin producing commercial rare earth products within January. The Company intends to increase production over the next three months.
The good news raised Lynas’ stock market price by 14% in the Sydney stock exchange.
Other rare earth elements producers also benefited from Lynas’ announcement. One such company is Molycorp, a rare earth element producer based in the US. While it is a favorite of speculators, it is also one of the most volate stocks on the New York Stock Exchange. But Molycorp enjoyed heavy volumes of trade on Monday afternoon and gained 9.8%, which is more than twice its last value.
Similarly, Great Western Minerals gained more than 4%. Great Western is engaged in building its own rare earth separation plant in South Africa near the Steenkampskraal mining project.
Other rare earth elements producers whose stock rose include Rare Element Resources and Avalon Rare Metals (more than 1%,) Quest Rare Minerals (5.5%,) and Frontier Rare Earths (4.1%.)
The trio of Great Western, Lynas, and Molycorp are expected to challenge China’s control of the rare earth elements market. The Asian giant currently produces more than 95% of the world’s supply of rare earths. The valuable commodities are used to build cell phones, wind turbines, and other high-tech devices.
The voracious appetite China possesses for iron ore has recently caused volatile prices for the commodity. In response, the rise of a huge spot market in iron ore derivatives is predicted by iron ore giant Vale SA.
Iron industry players require a derivatives market as a hedge against the ongoing price volatility. Many non-Chinese iron ore clients cannot handle these drastic price fluctuations. These companies want to keep risks to a minimum, and they would welcome the financialization of the market.
Chinese companies consume 65% of production. They thus possess significant risk appetite towards iron ore. In contrast, European and Japanese companies are starting to trend towards a derivatives market.
In previous decades, an annual benchmark price system that determined the prices of iron ore. This system involved contract terms that could reach up to ten to fifteen years in length.
Then the Chinese economy arose. The Asian giant’s economic modernization gave birth to a spot market for iron ore. This new market caused prices to fluctuate wildly. The resulting price volatility spoiled the previous allure of negotiated contracts between suppliers and buyers.
Vale believes the immediate future of iron ore will lie with the spot market. Contracts will only span a few years in comparison to the longer terms prevalent during the older benchmark price system. This new trend is predicted to persist for years.
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